UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-Q
_________________
(Mark One)
☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2019
OR
☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to .
Commission File Number: 000-55871
_________________
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(Exact name of registrant as specified in its charter)
_________________
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Indiana |
35-0472300 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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1300 South Clinton Street, Fort Wayne, Indiana |
46802 |
(Address of principal executive offices) |
(Zip Code) |
(260) 455-2000
(Registrant’s telephone number, including area code)
_________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act: None
As of May 1, 2019, 10,000,000 shares of common stock of the registrant ($2.50 par value) were outstanding, all of which were directly owned by Lincoln National Corporation.
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(a) AND (b) OF
FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.
The Lincoln National Life Insurance Company
Table of Contents
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PART I |
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1. |
1 | ||||
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2. |
Management’s Narrative Analysis of the Results of Operations |
46 | |||
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46 | ||||
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47 | ||||
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48 | ||||
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49 | ||||
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51 | ||||
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52 | ||||
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53 | ||||
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55 | ||||
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56 | ||||
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56 | ||||
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3. |
58 | ||||
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4. |
58 | ||||
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PART II |
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1. |
59 | ||||
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1A. |
59 | ||||
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2. |
59 | ||||
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6. |
59 | ||||
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60 | ||||
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61 | ||||
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(in millions, except share data)
|
As of |
As of |
||||||
March 31, |
December 31, |
|||||||
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2019 |
2018 |
||||||
|
(Unaudited) |
|||||||
ASSETS |
||||||||
Investments: |
||||||||
Fixed maturity available-for-sale securities, at fair value |
||||||||
(amortized cost: 2019 – $91,669; 2018 – $91,219) |
$ |
96,648 |
$ |
92,787 | ||||
Trading securities |
3,231 | 1,869 | ||||||
Equity securities |
153 | 99 | ||||||
Mortgage loans on real estate |
13,925 | 13,190 | ||||||
Policy loans |
2,481 | 2,491 | ||||||
Derivative investments |
974 | 1,081 | ||||||
Other investments |
2,372 | 1,962 | ||||||
Total investments |
119,784 | 113,479 | ||||||
Cash and invested cash |
1,320 | 1,848 | ||||||
Deferred acquisition costs and value of business acquired |
9,456 | 10,308 | ||||||
Premiums and fees receivable |
606 | 568 | ||||||
Accrued investment income |
1,158 | 1,087 | ||||||
Reinsurance recoverables |
19,628 | 19,826 | ||||||
Reinsurance related embedded derivatives |
- |
188 | ||||||
Funds withheld reinsurance assets |
555 | 563 | ||||||
Goodwill |
1,778 | 1,782 | ||||||
Other assets |
17,273 | 16,663 | ||||||
Separate account assets |
143,369 | 132,833 | ||||||
Total assets |
$ |
314,927 |
$ |
299,145 | ||||
|
||||||||
LIABILITIES AND STOCKHOLDER’S EQUITY |
||||||||
Liabilities |
||||||||
Future contract benefits |
$ |
33,268 |
$ |
33,884 | ||||
Other contract holder funds |
93,311 | 90,573 | ||||||
Short-term debt |
686 | 288 | ||||||
Long-term debt |
2,387 | 2,401 | ||||||
Reinsurance related embedded derivatives |
80 |
- |
||||||
Funds withheld reinsurance liabilities |
4,677 | 4,860 | ||||||
Payables for collateral on investments |
5,361 | 4,786 | ||||||
Other liabilities |
13,538 | 13,201 | ||||||
Separate account liabilities |
143,369 | 132,833 | ||||||
Total liabilities |
296,677 | 282,826 | ||||||
|
||||||||
Contingencies and Commitments (See Note 11) |
||||||||
|
||||||||
Stockholder’s Equity |
||||||||
Common stock – 10,000,000 shares authorized, issued and outstanding |
11,240 | 11,237 | ||||||
Retained earnings |
4,356 | 4,423 | ||||||
Accumulated other comprehensive income (loss) |
2,654 | 659 | ||||||
Total stockholder’s equity |
18,250 | 16,319 | ||||||
Total liabilities and stockholder’s equity |
$ |
314,927 |
$ |
299,145 |
See accompanying Notes to Consolidated Financial Statements
1
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in millions)
|
||||||
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For the Three |
|||||
|
Months Ended |
|||||
|
March 31, |
|||||
2019 |
2018 |
|||||
Revenues |
||||||
Insurance premiums |
$ |
1,378 |
$ |
709 | ||
Fee income |
1,413 | 1,391 | ||||
Net investment income |
1,191 | 1,176 | ||||
Realized gain (loss): |
||||||
Total other-than-temporary impairment losses on securities |
(21 |
) |
(2 |
) |
||
Portion of loss recognized in other comprehensive income |
13 |
- |
||||
Net other-than-temporary impairment losses on securities recognized in earnings |
(8 |
) |
(2 |
) |
||
Realized gain (loss), excluding other-than-temporary impairment losses on securities |
(343 |
) |
24 | |||
Total realized gain (loss) |
(351 |
) |
22 | |||
Amortization of deferred gain on business sold through reinsurance |
7 | (1 |
) |
|||
Other revenues |
126 | 107 | ||||
Total revenues |
3,764 | 3,404 | ||||
Expenses |
||||||
Interest credited |
671 | 645 | ||||
Benefits |
1,798 | 1,219 | ||||
Commissions and other expenses |
1,124 | 1,010 | ||||
Interest and debt expense |
38 | 32 | ||||
Strategic digitization expense |
15 | 15 | ||||
Total expenses |
3,646 | 2,921 | ||||
Income (loss) before taxes |
118 | 483 | ||||
Federal income tax expense (benefit) |
(15 |
) |
76 | |||
Net income (loss) |
133 | 407 | ||||
Other comprehensive income (loss), net of tax: |
1,995 | (1,614 |
) |
|||
Comprehensive income (loss) |
$ |
2,128 |
$ |
(1,207 |
) |
|
|
See accompanying Notes to Consolidated Financial Statements
2
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY
(Unaudited, in millions)
|
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For the Three |
|||||
|
Months Ended |
|||||
|
March 31, |
|||||
|
2019 |
2018 |
||||
Common Stock |
||||||
Balance as of beginning-of-year |
$ |
11,237 |
$ |
10,713 | ||
Stock compensation/issued for benefit plans |
3 | (1 |
) |
|||
Balance as of end-of-period |
11,240 | 10,712 | ||||
|
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Retained Earnings |
||||||
Balance as of beginning-of-year |
4,423 | 4,405 | ||||
Cumulative effect from adoption of new accounting standards |
- |
(644 |
) |
|||
Net income (loss) |
133 | 407 | ||||
Dividends declared |
(200 |
) |
- |
|||
Balance as of end-of-period |
4,356 | 4,168 | ||||
|
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Accumulated Other Comprehensive Income (Loss) |
||||||
Balance as of beginning-of-year |
659 | 3,327 | ||||
Cumulative effect from adoption of new accounting standards |
- |
644 | ||||
Other comprehensive income (loss), net of tax |
1,995 | (1,614 |
) |
|||
Balance as of end-of-period |
2,654 | 2,357 | ||||
Total stockholder’s equity as of end-of-period |
$ |
18,250 |
$ |
17,237 |
See accompanying Notes to Consolidated Financial Statements
3
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
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For the Three |
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Months Ended |
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March 31, |
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2019 |
2018 |
||||
Cash Flows from Operating Activities |
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Net income (loss) |
$ |
133 |
$ |
407 | ||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||
Deferred acquisition costs, value of business acquired, deferred sales inducements |
||||||
and deferred front-end loads deferrals and interest, net of amortization |
(78 |
) |
(5 |
) |
||
Trading securities purchases, sales and maturities, net |
(1,210 |
) |
38 | |||
Change in premiums and fees receivable |
(38 |
) |
(85 |
) |
||
Change in accrued investment income |
(54 |
) |
(43 |
) |
||
Change in future contract benefits and other contract holder funds |
(397 |
) |
365 | |||
Change in reinsurance related assets and liabilities |
(330 |
) |
(520 |
) |
||
Change in accrued expenses |
(71 |
) |
(111 |
) |
||
Change in federal income tax accruals |
(15 |
) |
76 | |||
Realized (gain) loss |
351 | (22 |
) |
|||
Amortization of deferred (gain) loss on business sold through reinsurance |
(7 |
) |
1 | |||
Change in cash management agreement |
(12 |
) |
128 | |||
Other |
91 | 141 | ||||
Net cash provided by (used in) operating activities |
(1,637 |
) |
370 | |||
|
||||||
Cash Flows from Investing Activities |
||||||
Purchases of available-for-sale securities and equity securities |
(4,353 |
) |
(2,005 |
) |
||
Sales of available-for-sale securities and equity securities |
2,371 | 430 | ||||
Maturities of available-for-sale securities |
1,427 | 1,353 | ||||
Purchases of alternative investments |
(174 |
) |
(63 |
) |
||
Sales and repayments of alternative investments |
32 | 31 | ||||
Issuance of mortgage loans on real estate |
(1,099 |
) |
(546 |
) |
||
Repayment and maturities of mortgage loans on real estate |
240 | 253 | ||||
Issuance and repayment of policy loans, net |
10 | 11 | ||||
Net change in collateral on investments, derivatives and related settlements |
567 | (108 |
) |
|||
Other |
(64 |
) |
(33 |
) |
||
Net cash provided by (used in) investing activities |
(1,043 |
) |
(677 |
) |
||
|
||||||
Cash Flows from Financing Activities |
||||||
Issuance (payment) of short-term debt |
398 | 29 | ||||
Deposits of fixed account values, including the fixed portion of variable |
4,037 | 2,759 | ||||
Withdrawals of fixed account values, including the fixed portion of variable |
(1,559 |
) |
(1,486 |
) |
||
Transfers to and from separate accounts, net |
(507 |
) |
(686 |
) |
||
Common stock issued for benefit plans |
(17 |
) |
(17 |
) |
||
Dividends paid |
(200 |
) |
- |
|||
Net cash provided by (used in) financing activities |
2,152 | 599 | ||||
|
||||||
Net increase (decrease) in cash, invested cash and restricted cash |
(528 |
) |
292 | |||
Cash, invested cash and restricted cash as of beginning-of-year |
1,848 | 947 | ||||
Cash, invested cash and restricted cash as of end-of-period |
$ |
1,320 |
$ |
1,239 |
See accompanying Notes to Consolidated Financial Statements
4
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of Operations and Basis of Presentation
Nature of Operations
The Lincoln National Life Insurance Company (“LNL” or the “Company,” which also may be referred to as “we,” “our” or “us”), a wholly-owned subsidiary of Lincoln National Corporation (“LNC” or the “Parent Company”), is domiciled in the state of Indiana. We own 100% of the outstanding common stock of two insurance company subsidiaries, Lincoln Life & Annuity Company of New York (“LLANY”) and Liberty Life Assurance Company of Boston (“Liberty Life”). We also own several non-insurance companies, including Lincoln Financial Distributors, our wholesale distributors, and Lincoln Financial Advisors Corporation, part of LNC’s retail distributor, Lincoln Financial Network. Through our business segments, we sell a wide range of wealth protection, accumulation and retirement income products and solutions. These products primarily include fixed and indexed annuities, variable annuities, universal life insurance (“UL”), variable universal life insurance (“VUL”), linked-benefit UL, indexed universal life insurance (“IUL”), term life insurance, employer-sponsored retirement plans and services, and group life, disability and dental. LNL is licensed and sells its products throughout the U.S. and several U.S. territories. See Note 14 for additional information.
Basis of Presentation
The accompanying unaudited consolidated financial statements are prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for the Securities and Exchange Commission (“SEC”) Quarterly Report on Form 10-Q, including Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. As discussed in Note 3, on May 1, 2018, LNC and LNL completed the acquisition of Liberty Life. The information contained in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”), should be read in connection with the reading of these interim unaudited consolidated financial statements.
Certain GAAP policies, which significantly affect the determination of financial condition, results of operations and cash flows, are summarized in our 2018 Form 10-K.
In the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Operating results for the three months ended March 31, 2019, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019. All material inter-company accounts and transactions have been eliminated in consolidation.
5
2. New Accounting Standards
Adoption of New Accounting Standards
The following table provides a description of our adoption of new Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”) and the impact of the adoption on our financial statements. ASUs not listed below were assessed and determined to be either not applicable or insignificant in presentation or amount.
|
|
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Standard |
Description |
Date of Adoption |
Effect on Financial Statements or Other Significant Matters |
ASU 2016-02, Leases and all related amendments |
This standard establishes a new accounting model for leases. Lessees will recognize most leases on the balance sheet as a right-of-use (“ROU”) asset and a related lease liability. The lease liability is measured as the present value of the lease payments over the lease term with the ROU asset measured at the lease liability amount and including adjustments for certain lease incentives and initial direct costs. Lease expense recognition will continue to differentiate between finance leases and operating leases resulting in a similar pattern of lease expense recognition as under current GAAP. This ASU permits a modified retrospective adoption approach that includes a number of optional practical expedients that entities may elect upon adoption. Early adoption is permitted. |
January 1, 2019 |
We adopted this standard and all related amendments, which resulted in the recognition of $171 million in ROU assets and $176 million in operating lease liabilities reported in other assets and other liabilities, respectively, on our Consolidated Balance Sheets as of January 1, 2019. Comparative periods continue to be measured and presented under historical guidance, and only the period of adoption is subject to this ASU. Also, on transition, we have elected not to reassess: 1) whether expired or existing contracts contain a lease under the new definition of a lease; 2) lease classification for expired or existing leases; and 3) whether previously capitalized initial direct costs would qualify for capitalization under this ASU. Additionally, there is not a significant difference in our pattern of lease expense recognition under this ASU, and there is no impact on cash flows. For more information, see Note 11. |
ASU 2017-08, Premium Amortization on Purchased Callable Debt Securities |
These amendments require an entity to shorten the amortization period for certain callable debt securities held at a premium so that the premium is amortized to the earliest call date. Early adoption is permitted, and the ASU requires adoption under a modified retrospective basis through a cumulative effect adjustment to the beginning balance of retained earnings. |
January 1, 2019 |
We adopted the provisions of this ASU, which did not result in a change to our existing practices; therefore, no cumulative effect adjustment was recorded. As such, there was no impact on our consolidated financial condition and results of operations. |
ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities |
These amendments change both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. These amendments retain the threshold of highly effective for hedging relationships, remove the requirement to bifurcate between the portions of the hedging relationship that are effective and ineffective, record hedge item and hedging instrument results in the same financial statement line item, require quantitative assessment initially for all hedging relationships unless the hedging relationship meets the definition of either the shortcut method or critical terms match method and allow the contractual specified index rate to be designated as the hedged risk in a cash flow hedge of interest rate risk of a variable rate financial instrument. These amendments also eliminate the benchmark interest rate concept for variable rate instruments. Early adoption is permitted. |
January 1, 2019 |
We adopted the provisions of this ASU, which did not have an impact on our consolidated financial condition and results of operations. This ASU does result in our modification of certain hedge documentation and effectiveness methods, which we have reflected in applicable disclosures in Note 6. |
6
Future Adoption of New Accounting Standards
The following table provides a description of future adoptions of new accounting standards that may have an impact on our financial statements when adopted:
|
|
|
|
Standard |
Description |
Projected Date of Adoption |
Effect on Financial Statements or Other Significant Matters |
ASU 2016-13, Measurement of Credit Losses on Financial Instruments |
These amendments adopt a new model to measure and recognize credit losses for most financial assets. The method used to measure estimated credit losses for available-for-sale (“AFS”) debt securities will be unchanged from current GAAP; however, the amendments require credit losses to be recognized through an allowance rather than as a reduction to the amortized cost of those debt securities. The amendments will permit entities to recognize improvements in credit loss estimates on AFS debt securities by reducing the allowance account immediately through earnings. The amendments will be adopted through a cumulative effect adjustment to the beginning balance of retained earnings as of the first reporting period in which the amendments are effective. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods therein. |
January 1, 2020 |
We are currently evaluating the impact of adopting this ASU on our consolidated financial condition and results of operations, with a primary focus on our fixed maturity securities, mortgage loans and reinsurance recoverables. |
ASU 2018-12, Targeted Improvements to the Accounting for Long-Duration Contracts |
These amendments make changes to the accounting and reporting for long-duration contracts issued by an insurance entity that will significantly change how insurers account for long-duration contracts, including how they measure, recognize and make disclosures about insurance liabilities and deferred acquisition costs (“DAC”). Under this ASU, insurers will be required to review cash flow assumptions at least annually and update them if necessary. They also will have to make quarterly updates to the discount rate assumptions they use to measure the liability for future policyholder benefits. The ASU creates a new category of market risk benefits (i.e., features that protect the contract holder from capital market risk and expose the insurer to that risk) that insurers will have to measure at fair value. The ASU provides various transition methods by topic that entities may elect upon adoption. Early adoption is permitted. |
January 1, 2021 |
We are currently evaluating the impact of adopting this ASU on our consolidated financial condition and results of operations. |
On May 1, 2018, we completed the acquisition of 100% of the capital stock of Liberty Life, which operates a group benefits business (“Liberty Group Business”) and individual life and individual and group annuity business (the “Liberty Life Business”), from Liberty Mutual Insurance Company in a transaction accounted for under the acquisition method of accounting pursuant to Business Combinations Topic 805 (“Topic 805”). The acquisition expanded the scale and capabilities of the Group Protection business while further diversifying the Company’s sources of earnings.
In connection with the acquisition and pursuant to the Master Transaction Agreement (“MTA”), dated January 18, 2018, which was attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on January 22, 2018, Liberty Life sold the Liberty Life Business on May 1, 2018, by entering into reinsurance agreements and related ancillary documents (including administrative services agreements and transition services agreements) with Protective Life Insurance Company and its wholly-owned subsidiary, Protective Life and Annuity Insurance Company (together with Protective Life Insurance Company, “Protective”), providing for the reinsurance and administration of the Liberty Life Business.
The acquisition date fair values of certain assets and liabilities, including future contract benefits, intangible assets and related weighted average expected lives, commercial mortgage loans, reinsurance recoverables and deferred income taxes, are provisional and subject to revision within one year of the acquisition date. Since the May 1, 2018 acquisition date, we have adjusted provisional assets acquired by
7
$(5) million and provisional liabilities acquired by $23 million for an increase in provisional goodwill of $28 million. Under the terms of the MTA, a final balance sheet will be agreed upon at a later date. As such, our estimates of fair values are pending finalization, which may result in adjustments to goodwill. The following table presents the preliminary fair values (in millions) of the net assets acquired related to the Liberty Group Business as of March 31, 2019:
|
|||
|
Preliminary |
||
|
Fair Value |
||
Assets |
|||
Investments |
$ |
2,493 | |
Mortgage loans on real estate |
658 | ||
Cash and invested cash |
107 | ||
Reinsurance recoverables |
76 | ||
Premiums and fees receivable |
83 | ||
Accrued investment income |
24 | ||
Other intangible assets acquired |
640 | ||
Other assets acquired |
142 | ||
Separate account assets |
99 | ||
Total assets acquired |
$ |
4,322 | |
|
|||
Liabilities |
|||
Future contract benefits |
$ |
2,930 | |
Other contract holder funds |
46 | ||
Other liabilities acquired |
140 | ||
Separate account liabilities |
99 | ||
Total liabilities assumed |
$ |
3,215 | |
|
|||
Net identifiable assets acquired |
$ |
1,107 | |
Goodwill |
410 | ||
Net assets acquired |
$ |
1,517 |
Financial Information
The following unaudited pro forma condensed consolidated results of operations of the Company assume that the acquisition of Liberty Life was completed on January 1, 2017 (in millions):
|
|||||
|
For the Three |
||||
|
Months Ended |
||||
|
March 31, |
||||
|
2018 |
||||
Revenue |
$ |
3,959 | |||
Net income |
422 |
Pro forma adjustments include the revenue and net income of the acquired business for each period as well as amortization of identifiable intangible assets acquired and the fair value adjustment to acquired insurance reserves and investments. Other pro forma adjustments include the impact of reflecting acquisition and integration costs and investment expenses directly attributable to the business combination in 2017 instead of in 2018. Pro forma adjustments do not include retrospective adjustments to defer and amortize acquisition costs as would be recorded under our accounting policy.
8
4. Variable Interest Entities
Unconsolidated VIEs
Structured Securities
Through our investment activities, we make passive investments in structured securities issued by variable interest entities (“VIEs”) for which we are not the manager. These structured securities include our asset-backed securities (“ABS”), residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and collateralized loan obligations (“CLOs”). We have not provided financial or other support with respect to these VIEs other than our original investment. We have determined that we are not the primary beneficiary of these VIEs due to the relative size of our investment in comparison to the principal amount of the structured securities issued by the VIEs and the level of credit subordination that reduces our obligation to absorb losses or right to receive benefits. Our maximum exposure to loss on these structured securities is limited to the amortized cost for these investments. We recognize our variable interest in these VIEs at fair value on our Consolidated Balance Sheets. For information about these structured securities, see Note 5.
Limited Partnerships and Limited Liability Companies
We invest in certain limited partnerships (“LPs”) and limited liability companies (“LLCs”), including qualified affordable housing projects, that we have concluded are VIEs. We do not hold any substantive kick-out or participation rights in the LPs and LLCs, and we do not receive any performance fees or decision maker fees from the LPs and LLCs. Based on our analysis of the LPs and LLCs, we are not the primary beneficiary of the VIEs as we do not have the power to direct the most significant activities of the LPs and LLCs.
The carrying amounts of our investments in the LPs and LLCs are recognized in other investments on our Consolidated Balance Sheets and were $1.7 billion as of March 31, 2019, and December 31, 2018. Included in these carrying amounts are our investments in qualified affordable housing projects, which were $18 million and $20 million as of March 31, 2019, and December 31, 2018, respectively. We do not have any contingent commitments to provide additional capital funding to these qualified affordable housing projects. We received returns from these qualified affordable housing projects in the form of income tax credits and other tax benefits of less than $1 million for the three months ended March 31, 2019 and 2018, which were recognized in federal income tax expense (benefit) on our Consolidated Statements of Comprehensive Income (Loss).
Our exposure to loss is limited to the capital we invest in the LPs and LLCs, and there have been no indicators of impairment that would require us to recognize an impairment loss related to the LPs and LLCs as of March 31, 2019.
9
5. Investments
Fixed Maturity AFS Securities
The amortized cost, gross unrealized gains, losses and other-than-temporary impairment (“OTTI”) and fair value of fixed maturity AFS securities (in millions) were as follows:
|
|||||||||||||||
|
As of March 31, 2019 |
||||||||||||||
|
Amortized |
Gross Unrealized |
Fair |
||||||||||||
|
Cost |
Gains |
Losses |
OTTI (1) |
Value |
||||||||||
Fixed maturity AFS securities: |
|||||||||||||||
Corporate bonds |
$ |
78,450 |
$ |
4,625 |
$ |
802 |
$ |
9 |
$ |
82,264 | |||||
ABS |
973 | 45 | 5 | (17 |
) |
1,030 | |||||||||
U.S. government bonds |
358 | 34 | 1 |
- |
391 | ||||||||||
Foreign government bonds |
399 | 50 |
- |
- |
449 | ||||||||||
RMBS |
3,078 | 135 | 38 | (17 |
) |
3,192 | |||||||||
CMBS |
867 | 16 | 3 | (4 |
) |
884 | |||||||||
CLOs |
2,439 | 4 | 11 | (5 |
) |
2,437 | |||||||||
State and municipal bonds |
4,538 | 871 | 7 |
- |
5,402 | ||||||||||
Hybrid and redeemable preferred securities |
567 | 55 | 23 |
- |
599 | ||||||||||
Total fixed maturity AFS securities |
$ |
91,669 |
$ |
5,835 |
$ |
890 |
$ |
(34 |
) |
$ |
96,648 |
|
|||||||||||||||
|
As of December 31, 2018 |
||||||||||||||
|
Amortized |
Gross Unrealized |
Fair |
||||||||||||
|
Cost |
Gains |
Losses |
OTTI (1) |
Value |
||||||||||
Fixed maturity AFS securities: |
|||||||||||||||
Corporate bonds |
$ |
78,837 |
$ |
2,871 |
$ |
2,167 |
$ |
(8 |
) |
$ |
79,549 | ||||
ABS |
898 | 42 | 6 | (14 |
) |
948 | |||||||||
U.S. government bonds |
361 | 27 | 2 |
- |
386 | ||||||||||
Foreign government bonds |
402 | 42 |
- |
- |
444 | ||||||||||
RMBS |
3,099 | 113 | 61 | (13 |
) |
3,164 | |||||||||
CMBS |
810 | 6 | 16 | (3 |
) |
803 | |||||||||
CLOs |
1,746 | 3 | 24 | (5 |
) |
1,730 | |||||||||
State and municipal bonds |
4,498 | 703 | 17 |
- |
5,184 | ||||||||||
Hybrid and redeemable preferred securities |
568 | 44 | 33 |
- |
579 | ||||||||||
Total fixed maturity AFS securities |
$ |
91,219 |
$ |
3,851 |
$ |
2,326 |
$ |
(43 |
) |
$ |
92,787 |
(1) |
Includes unrealized (gains) and losses on credit-impaired securities related to changes in the fair value of such securities subsequent to the impairment measurement date. |
The amortized cost and fair value of fixed maturity AFS securities by contractual maturities (in millions) as of March 31, 2019, were as follows:
|
||||||
|
Amortized |
Fair |
||||
|
Cost |
Value |
||||
Due in one year or less |
$ |
3,497 |
$ |
3,500 | ||
Due after one year through five years |
15,647 | 15,945 | ||||
Due after five years through ten years |
18,848 | 19,428 | ||||
Due after ten years |
46,320 | 50,232 | ||||
Subtotal |
84,312 | 89,105 | ||||
Structured securities (ABS, MBS, CLOs) |
7,357 | 7,543 | ||||
Total fixed maturity AFS securities |
$ |
91,669 |
$ |
96,648 |
Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations.
10
The fair value and gross unrealized losses, including the portion of OTTI recognized in other comprehensive income (loss) (“OCI”), of fixed maturity AFS securities (dollars in millions), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:
|
|||||||||||||||||||
|
As of March 31, 2019 |
||||||||||||||||||
Less Than or Equal |
Greater Than |
||||||||||||||||||
|
to Twelve Months |
Twelve Months |
Total |
||||||||||||||||
|
Gross |
Gross |
Gross |
||||||||||||||||
Unrealized |
Unrealized |
Unrealized |
|||||||||||||||||
|
Fair |
Losses and |
Fair |
Losses and |
Fair |
Losses and |
|||||||||||||
|
Value |
OTTI |
Value |
OTTI |
Value |
OTTI |
|||||||||||||
Fixed maturity AFS securities: |
|||||||||||||||||||
Corporate bonds |
$ |
4,619 |
$ |
158 |
$ |
14,037 |
$ |
661 |
$ |
18,656 |
$ |
819 | |||||||
ABS |
73 | 1 | 165 | 12 | 238 | 13 | |||||||||||||
U.S. government bonds |
6 |
- |
28 | 1 | 34 | 1 | |||||||||||||
RMBS |
52 | 1 | 847 | 38 | 899 | 39 | |||||||||||||
CMBS |
9 |
- |
297 | 3 | 306 | 3 | |||||||||||||
CLOs |
771 | 5 | 281 | 6 | 1,052 | 11 | |||||||||||||
State and municipal bonds |
153 | 1 | 125 | 6 | 278 | 7 | |||||||||||||
Hybrid and redeemable |
|||||||||||||||||||
preferred securities |
10 | 2 | 149 | 21 | 159 | 23 | |||||||||||||
Total fixed maturity AFS securities |
$ |
5,693 |
$ |
168 |
$ |
15,929 |
$ |
748 |
$ |
21,622 |
$ |
916 | |||||||
|
|||||||||||||||||||
Total number of fixed maturity AFS securities in an unrealized loss position |
1,847 |
|
|||||||||||||||||||
|
As of December 31, 2018 |
||||||||||||||||||
Less Than or Equal |
Greater Than |
||||||||||||||||||
|
to Twelve Months |
Twelve Months |
Total |
||||||||||||||||
|
Gross |
Gross |
Gross |
||||||||||||||||
Unrealized |
Unrealized |
Unrealized |
|||||||||||||||||
|
Fair |
Losses and |
Fair |
Losses and |
Fair |
Losses and |
|||||||||||||
|
Value |
OTTI |
Value |
OTTI |
Value |
OTTI |
|||||||||||||
Fixed maturity AFS securities: |
|||||||||||||||||||
Corporate bonds |
$ |
30,947 |
$ |
1,464 |
$ |
7,023 |
$ |
704 |
$ |
37,970 |
$ |
2,168 | |||||||
ABS |
113 | 2 | 136 | 13 | 249 | 15 | |||||||||||||
U.S. government bonds |
70 | 1 | 23 | 1 | 93 | 2 | |||||||||||||
RMBS |
436 | 9 | 796 | 55 | 1,232 | 64 | |||||||||||||
CMBS |
470 | 11 | 82 | 5 | 552 | 16 | |||||||||||||
CLOs |
1,124 | 21 | 103 | 3 | 1,227 | 24 | |||||||||||||
State and municipal bonds |
376 | 7 | 92 | 10 | 468 | 17 | |||||||||||||
Hybrid and redeemable |
|||||||||||||||||||
preferred securities |
94 | 6 | 131 | 27 | 225 | 33 | |||||||||||||
Total fixed maturity AFS securities |
$ |
33,630 |
$ |
1,521 |
$ |
8,386 |
$ |
818 |
$ |
42,016 |
$ |
2,339 | |||||||
|
|||||||||||||||||||
Total number of fixed maturity AFS securities in an unrealized loss position |
3,360 |
11
The fair value, gross unrealized losses, the portion of OTTI recognized in OCI (in millions) and number of fixed maturity AFS securities where the fair value had declined and remained below amortized cost by greater than 20% were as follows:
|
|||||||||||||
|
As of March 31, 2019 |
||||||||||||
|
Number |
||||||||||||
|
Fair |
Gross Unrealized |
of |
||||||||||
|
Value |
Losses |
OTTI |
Securities (1) |
|||||||||
Less than six months |
$ |
23 |
$ |
8 |
$ |
1 | 7 | ||||||
Six months or greater, but less than nine months |
20 | 6 |
- |
4 | |||||||||
Nine months or greater, but less than twelve months |
98 | 42 |
- |
10 | |||||||||
Twelve months or greater |
147 | 50 | 20 | 32 | |||||||||
Total |
$ |
288 |
$ |
106 |
$ |
21 | 53 |
|
|||||||||||||
|
As of December 31, 2018 |
||||||||||||
|
Number |
||||||||||||
|
Fair |
Gross Unrealized |
of |
||||||||||
|
Value |
Losses |
OTTI |
Securities (1) |
|||||||||
Less than six months |
$ |
389 |
$ |
122 |
$ |
1 | 44 | ||||||
Six months or greater, but less than nine months |
96 | 49 |
- |
11 | |||||||||
Nine months or greater, but less than twelve months |
11 | 8 |
- |
2 | |||||||||
Twelve months or greater |
138 | 70 | 8 | 32 | |||||||||
Total |
$ |
634 |
$ |
249 |
$ |
9 | 89 | ||||||
|
(1) |
We may reflect a security in more than one aging category based on various purchase dates. |
We regularly review our investment holdings for OTTI. Our gross unrealized losses, including the portion of OTTI recognized in OCI, on fixed maturity AFS securities decreased by $1.4 billion for the three months ended March 31, 2019. As discussed further below, we believe the unrealized loss position as of March 31, 2019, did not represent OTTI as (i) we did not intend to sell these fixed maturity AFS securities; (ii) it is not more likely than not that we will be required to sell the fixed maturity AFS securities before recovery of their amortized cost basis; and (iii) the estimated future cash flows were equal to or greater than the amortized cost basis of the debt securities.
Based upon this evaluation as of March 31, 2019, management believes we have the ability to generate adequate amounts of cash from our normal operations (e.g., insurance premiums and fees and investment income) to meet cash requirements with a prudent margin of safety without requiring the sale of our temporarily-impaired securities.
As of March 31, 2019, the unrealized losses associated with our corporate bond securities were attributable primarily to widening credit spreads and rising interest rates since purchase. We performed a detailed analysis of the financial performance of the underlying issuers and determined that we expected to recover the entire amortized cost of each temporarily-impaired security.
As of March 31, 2019, the unrealized losses associated with our mortgage-backed securities (“MBS”) and ABS were attributable primarily to widening credit spreads and rising interest rates since purchase. We assessed for credit impairment using a cash flow model that incorporates key assumptions including default rates, severities and prepayment rates. We estimated losses for a security by forecasting the underlying loans in each transaction. The forecasted loan performance was used to project cash flows to the various tranches in the structure, as applicable. Our forecasted cash flows also considered, as applicable, independent industry analyst reports and forecasts and other independent market data. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared to our subordination or other credit enhancement, we expected to recover the entire amortized cost of each temporarily-impaired security.
As of March 31, 2019, the unrealized losses associated with our hybrid and redeemable preferred securities were attributable primarily to wider credit spreads caused by illiquidity in the market and subordination within the capital structure, as well as credit risk of underlying issuers. For our hybrid and redeemable preferred securities, we evaluated the financial performance of the underlying issuers based upon credit performance and investment ratings and determined that we expected to recover the entire amortized cost of each temporarily-impaired security.
12
Changes in the amount of credit loss of OTTI recognized in net income (loss) where the portion related to other factors was recognized in OCI (in millions) on fixed maturity AFS securities were as follows:
|
||||||
|
For the Three |
|||||
|
Months Ended |
|||||
|
March 31, |
|||||
|
2019 |
2018 |
||||
Balance as of beginning-of-year |
$ |
337 |
$ |
358 | ||
Increases attributable to: |
||||||
Credit losses on securities for which an |
||||||
OTTI was not previously recognized |
6 | 2 | ||||
Credit losses on securities for which an |
||||||
OTTI was previously recognized |
2 |
- |
||||
Decreases attributable to: |
||||||
Securities sold, paid down or matured |
(5 |
) |
(1 |
) |
||
Balance as of end-of-period |
$ |
340 |
$ |
359 |
During the three months ended March 31, 2019 and 2018, we recorded credit losses on securities for which an OTTI was not previously recognized as we determined the cash flows expected to be collected would not be sufficient to recover the entire amortized cost basis of the debt security. The credit losses we recorded on securities for which an OTTI was not previously recognized were attributable primarily to one or a combination of the following reasons:
· |
Failure of the issuer of the security to make scheduled payments; |
· |
Deterioration of creditworthiness of the issuer; |
· |
Deterioration of conditions specifically related to the security; |
· |
Deterioration of fundamentals of the industry in which the issuer operates; and |
· |
Deterioration of the rating of the security by a rating agency. |
We recognize the OTTI attributed to the noncredit portion as a separate component in OCI referred to as unrealized OTTI on fixed maturity AFS securities.
Determination of Credit Losses on Corporate Bonds
As of March 31, 2019, and December 31, 2018, we reviewed our corporate bond portfolio for potential shortfalls in contractual principal and interest based on numerous subjective and objective inputs. The factors used to determine the amount of credit loss for each individual security, include, but are not limited to, near-term risk, substantial discrepancy between book and market value, sector or company-specific volatility, negative operating trends and trading levels wider than peers.
Credit ratings express opinions about the credit quality of a security. Securities rated investment grade, those rated BBB- or higher by Standard & Poor’s (“S&P”) Rating Services or Baa3 or higher by Moody’s Investors Service (“Moody’s”), are generally considered by the rating agencies and market participants to be low credit risk. As of March 31, 2019, and December 31, 2018, 96% of the fair value of our corporate bond portfolio was rated investment grade. As of March 31, 2019, and December 31, 2018, the portion of our corporate bond portfolio rated below investment grade had an amortized cost of $3.2 billion and $3.1 billion, respectively, and a fair value of $3.1 billion and $2.9 billion, respectively. Based upon the analysis discussed above, we believe as of March 31, 2019, and December 31, 2018, that we would recover the amortized cost of each corporate bond.
Determination of Credit Losses on MBS and ABS
As of March 31, 2019, and December 31, 2018, default rates were projected by considering underlying MBS and ABS loan performance and collateral type. Projected default rates on existing delinquencies vary depending on loan type and severity of delinquency status. In addition, we estimate the potential contributions of currently performing loans that may become delinquent in the future based on the change in delinquencies and loan liquidations experienced in the recent history. Finally, we develop a default rate timing curve by aggregating the defaults for all loans in the pool (delinquent loans, foreclosure and real estate owned and new delinquencies from currently performing loans) and the associated loan-level loss severities.
We use certain available loan characteristics such as lien status, loan sizes and occupancy to estimate the loss severity of loans. Second lien loans are assigned 100% severity, if defaulted. For first lien loans, we assume a minimum of 30% severity with higher severity assumed for investor properties and further adjusted by housing price assumptions. With the default rate timing curve and loan-level loss severity, we derive the future expected credit losses.
13
Mortgage Loans on Real Estate
The following provides the current and past due composition of our mortgage loans on real estate (in millions):
|
||||||||||||||||||
|
As of March 31, 2019 |
As of December 31, 2018 |
||||||||||||||||
|
Commercial |
Residential |
Total |
Commercial |
Residential |
Total |
||||||||||||
Current |
$ |
13,526 |
$ |
401 |
$ |
13,927 |
$ |
12,959 |
$ |
239 |
$ |
13,198 | ||||||
60 to 90 days past due |
- |
1 | 1 |
- |
1 | 1 | ||||||||||||
Greater than 90 days past due |
- |
1 | 1 |
- |
- |
- |
||||||||||||
Valuation allowance |
- |
(1 |
) |
(1 |
) |
- |
- |
- |
||||||||||
Unamortized premium (discount) |
(16 |
) |
13 | (3 |
) |
(17 |
) |
8 | (9 |
) |
||||||||
Total carrying value |
$ |
13,510 |
$ |
415 |
$ |
13,925 |
$ |
12,942 |
$ |
248 |
$ |
13,190 |
We establish a valuation allowance to provide for the risk of credit losses inherent in our portfolio. The valuation allowance includes specific valuation allowances for loans that are deemed to be impaired as well as general valuation allowances for pools of loans with similar risk characteristics where a property risk or market specific risk has not been identified but for which we anticipate a loss has occurred.
For our commercial mortgage loans, no specifically identified loans were impaired as of March 31, 2019, or December 31, 2018.
For our residential mortgage loans, no specifically identified loans were impaired as of March 31, 2019, or December 31, 2018. The general allowance established on residential mortgage loans as of March 31, 2019, was $1 million. As of December 31, 2018, the general allowance established on residential mortgage loans was less than $1 million.
The changes in the valuation allowance associated with impaired commercial mortgage loans on real estate (in millions) were as follows:
|
|||||||
|
For the Three |
||||||
|
Months Ended |
||||||
|
March 31, |
||||||
|
2019 |
2018 |
|||||
|
|||||||
Balance as of beginning-of-year |
$ |
- |
$ |
3 | |||
Additions |
- |
- |
|||||
Charge-offs, net of recoveries |
- |
- |
|||||
Balance as of end-of-period |
$ |
- |
$ |
3 |
Additional information related to impaired commercial mortgage loans on real estate (in millions) was as follows:
|
|||||||
|
For the Three |
||||||
|
Months Ended |
||||||
|
March 31, |
||||||
|
2019 |
2018 |
|||||
Average carrying value for impaired commercial mortgage loans on real estate |
$ |
- |
$ |
8 | |||
Interest income recognized on impaired commercial mortgage loans on real estate |
- |
- |
|||||
Interest income collected on impaired commercial mortgage loans on real estate |
- |
- |
We use the loan-to-value and debt-service coverage ratios as credit quality indicators for our commercial mortgage loans on real estate (dollars in millions) as follows:
|
||||||||||||||
|
||||||||||||||
|
As of March 31, 2019 |
As of December 31, 2018 |
||||||||||||
|
Debt- |
Debt- |
||||||||||||
|
Service |
Service |
||||||||||||
|
Carrying |
% of |
Coverage |
Carrying |
% of |
Coverage |
||||||||
Loan-to-Value Ratio |
Value |
Total |
Ratio |
Value |
Total |
Ratio |
||||||||
Less than 65% |
$ |
12,307 | 91.1% |
2.27 |
$ |
11,656 | 90.1% |
2.30 |
||||||
65% to 74% |
1,165 | 8.6% |
1.75 |
1,234 | 9.5% |
1.76 |
||||||||
75% to 100% |
38 | 0.3% |
1.20 |
52 | 0.4% |
1.03 |
||||||||
Total |
$ |
13,510 | 100.0% |
$ |
12,942 | 100.0% |
14
We use loan performance status as the primary credit quality indicator for our residential mortgage loans on real estate (dollars in millions) as follows:
|
||||||||||
|
As of March 31, 2019 |
As of December 31, 2018 |
||||||||
|
Carrying |
% of |
Carrying |
% of |
||||||
Performance Indicator |
Value |
Total |
Value |
Total |
||||||
Performing |
$ |
414 | 99.5% |
$ |
247 | 99.6% | ||||
Nonperforming |
2 | 0.5% | 1 | 0.4% | ||||||
Total |
$ |
416 | 100.0% |
$ |
248 | 100.0% | ||||
|
Our commercial mortgage loan portfolio is geographically diversified throughout the U.S. with the largest concentrations in California, which accounted for 23% of commercial mortgage loans on real estate as of March 31, 2019, and December 31, 2018, and Texas, which accounted for 12% of commercial mortgage loans on real estate as of March 31, 2019, and December 31, 2018.
Our residential mortgage loan portfolio is geographically diversified throughout the U.S. with the largest concentrations in California, which accounted for 30% and 34% of residential mortgage loans on real estate as of March 31, 2019, and December 31, 2018, respectively, and Florida, which accounted for 19% of residential mortgage loans on real estate as of March 31, 2019, and December 31, 2018.
Alternative Investments
As of March 31, 2019, and December 31, 2018, alternative investments included investments in 243 and 234 different partnerships, respectively, and the portfolio represented approximately 2% and 1% of our overall invested assets, respectively.
15
Realized Gain (Loss)
Details underlying realized gain (loss) (in millions) reported on our Consolidated Statements of Comprehensive Income (Loss) were as follows:
|
For the Three |
|||||
|
Months Ended |
|||||
|
March 31, |
|||||
|
2019 |
2018 |
||||
Fixed maturity AFS securities: |
||||||
Gross gains |
$ |
12 |
$ |
13 | ||
Gross losses |
(26 |
) |
(30 |
) |
||
Gross OTTI |
(8 |
) |
(2 |
) |
||
Gain (loss) on other investments (1) |
5 | (1 |
) |
|||
Associated amortization of DAC, VOBA, DSI and DFEL |
||||||
and changes in other contract holder funds |
(2 |
) |
(5 |
) |
||
Total realized gain (loss) related to certain investments |
(19 |
) |
(25 |
) |
||
Realized gain (loss) on the mark-to-market on certain instruments (2) |
(236 |
) |
106 | |||
Indexed annuity and IUL contracts net derivatives results: (3) |
||||||
Gross gain (loss) |
(35 |
) |
(1 |
) |
||
Associated amortization of DAC, VOBA, DSI and DFEL |
1 |
- |
||||
Variable annuity net derivatives results: (4) |
||||||
Gross gain (loss) |
(54 |
) |
(50 |
) |
||
Associated amortization of DAC, VOBA, DSI and DFEL |
(8 |
) |
(8 |
) |
||
Total realized gain (loss) |
$ |
(351 |
) |
$ |
22 |
(1) |
Includes market adjustments on equity securities still held of $6 million and less than $1 million for the three months ended March 31, 2019 and 2018, respectively. |
(2) |
Represents changes in the fair values of certain derivative investments (not including those associated with our variable and indexed annuity and IUL contracts net derivative results), reinsurance related embedded derivatives and trading securities. See Note 8 for information regarding modified coinsurance. |
(3) |
Represents the net difference between the change in the fair value of the S&P 500 Index ® (“S&P 500”) call options that we hold and the change in the fair value of the embedded derivative liabilities of our indexed annuity and IUL contracts along with changes in the fair value of embedded derivative liabilities related to index call options we may purchase in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products. |
(4) |
Includes the net difference in the change in embedded derivative reserves of our guaranteed living benefit (“GLB”) riders and the change in the fair value of the derivative instruments we own to hedge the change in embedded derivative reserves on our GLB riders and the benefit ratio unlocking on our GLB and GDB riders, including the cost of purchasing the hedging instruments. |
Details underlying write-downs taken as a result of OTTI that were recognized in net income (loss) and included in realized gain (loss) on fixed maturity AFS securities above and the portion of OTTI recognized in OCI (in millions) were as follows:
|
||||||
|
For the Three |
|||||
|
Months Ended |
|||||
|
March 31, |
|||||
|
2019 |
2018 |
||||
OTTI Recognized in Net Income (Loss) |
||||||
Fixed maturity AFS securities: |
||||||
Corporate bonds |
$ |
(6 |
) |
$ |
(2 |
) |
ABS |
(1 |
) |
- |
|||
RMBS |
(1 |
) |
- |
|||
Gross OTTI recognized in net income (loss) |
(8 |
) |
(2 |
) |
||
Associated amortization of DAC, VOBA, DSI and DFEL |
- |
- |
||||
Net OTTI recognized in net income (loss) |
$ |
(8 |
) |
$ |
(2 |
) |
|
||||||
Portion of OTTI Recognized in OCI |
||||||
Gross OTTI recognized in OCI |
$ |
14 |
$ |
- |
||
Change in DAC, VOBA, DSI and DFEL |
(1 |
) |
- |
|||
Net portion of OTTI recognized in OCI |
$ |
13 |
$ |
- |
16
Payables for Collateral on Investments
The carrying value of the payables for collateral on investments included on our Consolidated Balance Sheets and the fair value of the related investments or collateral (in millions) consisted of the following:
|
||||||||||||
|
As of March 31, 2019 |
As of December 31, 2018 |
||||||||||
|
Carrying |
Fair |
Carrying |
Fair |
||||||||
|
Value |
Value |
Value |
Value |
||||||||
Collateral payable for derivative investments (1) |
$ |
695 |
$ |
695 |
$ |
616 |
$ |
616 | ||||
Securities pledged under securities lending agreements (2) |
136 | 131 | 88 | 85 | ||||||||
Securities pledged under repurchase agreements (3) |
150 | 157 | 152 | 157 | ||||||||
Investments pledged for Federal Home Loan Bank of |
||||||||||||
Indianapolis (“FHLBI”) (4) |
4,380 | 6,570 | 3,930 | 5,923 | ||||||||
Total payables for collateral on investments |
$ |
5,361 |
$ |
7,553 |
$ |
4,786 |
$ |
6,781 |
(1) |
We obtain collateral based upon contractual provisions with our counterparties. These agreements take into consideration the counterparties’ credit rating as compared to ours, the fair value of the derivative investments and specified thresholds that if exceeded result in the receipt of cash that is typically invested in cash and invested cash. See Note 6 for additional information. |
(2) |
Our pledged securities under securities lending agreements are included in fixed maturity AFS securities on our Consolidated Balance Sheets. We generally obtain collateral in an amount equal to 102% and 105% of the fair value of the domestic and foreign securities, respectively. We value collateral daily and obtain additional collateral when deemed appropriate. The cash received in our securities lending program is typically invested in cash and invested cash or fixed maturity AFS securities. |
(3) |
Our pledged securities under repurchase agreements are included in fixed maturity AFS securities on our Consolidated Balance Sheets. The collateral requirements are generally 80% to 95% of the fair value of the securities, and our agreements with third parties contain contractual provisions to allow for additional collateral to be obtained when necessary. The cash received in our repurchase program is typically invested in fixed maturity AFS securities. |
(4) |
Our pledged investments for FHLBI are included in fixed maturity AFS securities and mortgage loans on real estate on our Consolidated Balance Sheets. The collateral requirements are generally 105% to 115% of the fair value for fixed maturity AFS securities and 155% to 175% of the fair value for mortgage loans on real estate. The cash received in these transactions is primarily invested in cash and invested cash or fixed maturity AFS securities. |
Increase (decrease) in payables for collateral on investments (in millions) consisted of the following:
|
||||||
|
For the Three |
|||||
|
Months Ended |
|||||
|
March 31, |
|||||
|
2019 |
2018 |
||||
Collateral payable for derivative investments |
$ |
79 |
$ |
(114 |
) |
|
Securities pledged under securities lending agreements |
48 | (68 |
) |
|||
Securities pledged under repurchase agreements |
(2 |
) |
- |
|||
Investments pledged for FHLBI |
450 |
- |
||||
Total increase (decrease) in payables for collateral on investments |
$ |
575 |
$ |
(182 |
) |
17
We have elected not to offset our repurchase agreements and securities lending transactions in our financial statements. The remaining contractual maturities of repurchase agreements and securities lending transactions accounted for as secured borrowings (in millions) were as follows:
|
|||||||||||||||
|
|||||||||||||||
|
As of March 31, 2019 |
||||||||||||||
|
Overnight and Continuous |
Up to 30 Days |
30 - 90 Days |
Greater Than 90 Days |
Total |
||||||||||
Repurchase Agreements |
|||||||||||||||
Corporate bonds |
$ |
- |
$ |
- |
$ |
- |
$ |
150 |
$ |
150 | |||||
Securities Lending |
|||||||||||||||
Corporate bonds |
136 |
- |
- |
- |
136 | ||||||||||
Total gross secured borrowings |
$ |
136 |
$ |
- |
$ |
- |
$ |
150 |
$ |
286 |
|
|||||||||||||||
|
|||||||||||||||
|
As of December 31, 2018 |
||||||||||||||
|
Overnight and Continuous |
Up to 30 Days |
30 -90 Days |
Greater Than 90 Days |
Total |
||||||||||
Repurchase Agreements |
|||||||||||||||
Corporate bonds |
$ |
- |
$ |
- |
$ |
- |
$ |
152 |
$ |
152 | |||||
Securities Lending |
|||||||||||||||
Corporate bonds |
88 |
- |
- |
- |
88 | ||||||||||
Total gross secured borrowings |
$ |
88 |
$ |
- |
$ |
- |
$ |
152 |
$ |
240 |
We accept collateral in the form of securities in connection with repurchase agreements. In instances where we are permitted to sell or re-pledge the securities received, we report the fair value of the collateral received and a related obligation to return the collateral in the financial statements. In addition, we receive securities in connection with securities borrowing agreements, which we are permitted to sell or re-pledge. As of March 31, 2019, the fair value of all collateral received that we are permitted to sell or re-pledge was $548 million. As of March 31, 2019, we have re-pledged $536 million of this collateral to cover initial margin and over-the-counter collateral requirements on certain derivative investments.
Investment Commitments
As of March 31, 2019, our investment commitments were $2.0 billion, which included $823 million of LPs, $661 million of mortgage loans on real estate and $528 million of private placement securities.
Concentrations of Financial Instruments
As of March 31, 2019, and December 31, 2018, our most significant investments in one issuer were our investments in securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $1.3 billion and $1.4 billion, respectively, or 1% of our invested assets portfolio, and our investments in securities issued by the Federal National Mortgage Association with a fair value of $1.3 billion and $1.2 billion, respectively, or 1% of our invested assets portfolio. These concentrations include fixed maturity AFS, trading and equity securities.
As of March 31, 2019, and December 31, 2018, our most significant investments in one industry were our investments in securities in the financial services industry with a fair value of $17.1 billion and $16.0 billion, respectively, or 14% of our invested assets portfolio, and our investments in securities in the consumer non-cyclical industry with a fair value of $14.3 billion and $13.8 billion, respectively, or 12% of our invested assets portfolio. These concentrations include fixed maturity AFS, trading and equity securities.
18
6. Derivative Instruments
We maintain an overall risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings that are caused by interest rate risk, foreign currency exchange risk, equity market risk, basis risk and credit risk. We assess these risks by continually identifying and monitoring changes in our exposures that may adversely affect expected future cash flows and by evaluating hedging opportunities.
Derivative activities are monitored by various management committees. The committees are responsible for overseeing the implementation of various hedging strategies that are developed through the analysis of financial simulation models and other internal and industry sources. The resulting hedging strategies are incorporated into our overall risk management strategies.
See Note 13 for additional disclosures related to the fair value of our derivative instruments and Note 4 for derivative instruments related to our consolidated VIEs.
We adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, in 2019. See Note 2 for additional information.
Interest Rate Contracts
We use derivative instruments as part of our interest rate risk management strategy. These instruments are economic hedges unless otherwise noted and include:
Forward-Starting Interest Rate Swaps
We use forward-starting interest rate swaps designated and qualifying as cash flow hedges to hedge our exposure to interest rate fluctuations related to the forecasted purchases of certain assets.
We also use forward-starting interest rate swaps to hedge the interest rate exposure within our life products related to the forecasted purchases of certain assets.
Interest Rate Cap Corridors
We use interest rate cap corridors to provide a level of protection from the effect of rising interest rates for certain life insurance products and annuity contracts. Interest rate cap corridors involve purchasing an interest rate cap at a specific cap rate and selling an interest rate cap with a higher cap rate. For each corridor, the amount of quarterly payments, if any, is determined by the rate at which the underlying index rate resets above the original capped rate. The corridor limits the benefit the purchaser can receive as the related interest rate index rises above the higher capped rate. There is no additional liability to us other than the purchase price associated with the interest rate cap corridor.
Interest Rate Futures
We use interest rate futures contracts to hedge the liability exposure on certain options in variable annuity products. These futures contracts require payment between our counterparty and us on a daily basis for changes in the futures index price.
Interest Rate Swap Agreements
We use interest rate swap agreements to hedge the liability exposure on certain options in variable annuity products.
We also use interest rate swap agreements designated and qualifying as cash flow hedges to hedge the interest rate risk of floating-rate bond coupon payments by replicating a fixed-rate bond.
Finally, we use interest rate swap agreements designated and qualifying as fair value hedges to hedge against changes in the fair value of certain fixed maturity securities due to interest rate risks.
Reverse Treasury Locks
We use reverse treasury locks designated and qualifying as cash flow hedges to hedge the interest rate exposure related to the anticipated purchase of fixed-rate securities or the anticipated future cash flows of floating-rate fixed maturity securities due to changes in interest rates. These derivatives are primarily structured to hedge interest rate risk inherent in the assumptions used to price certain liabilities.
Foreign Currency Contracts
We use derivative instruments as part of our foreign currency risk management strategy. These instruments are economic hedges unless otherwise noted and include:
19
Currency Futures
We use currency futures to hedge foreign exchange risk associated with certain options in variable annuity products. Currency futures exchange one currency for another at a specified date in the future at a specified exchange rate.
Foreign Currency Swaps
We use foreign currency swaps designated and qualifying as cash flow hedges, to hedge foreign exchange risk of investments in fixed maturity securities denominated in foreign currencies. A foreign currency swap is a contractual agreement to exchange one currency for another at specified dates in the future at a specified exchange rate.
Equity Market Contracts
We use derivative instruments as part of our equity market risk management strategy that are economic hedges and include:
Call Options Based on the S&P 500
We use call options to hedge the liability exposure on certain options in variable annuity products.
Our indexed annuity and IUL contracts permit the holder to elect an interest rate return or an equity market component, where interest credited to the contracts is linked to the performance of the S&P 500. Contract holders may elect to rebalance index options at renewal dates, either annually or biannually. As of each renewal date, we have the opportunity to re-price the indexed component by establishing participation rates, caps, spreads and specified rates, subject to contractual guarantees. We purchase call options that are highly correlated to the portfolio allocation decisions of our contract holders, such that we are economically hedged with respect to equity returns for the current reset period.
Consumer Price Index Swaps
We use consumer price index swaps to hedge the liability exposure on certain options in fixed annuity products. Consumer price index swaps are contracts entered into at no cost and whose payoff is the difference between the consumer price index inflation rate and the fixed-rate determined as of inception.
Equity Futures
We use equity futures contracts to hedge the liability exposure on certain options in variable annuity products. These futures contracts require payment between our counterparty and us on a daily basis for changes in the futures index price.
Put Options
We use put options to hedge the liability exposure on certain options in variable annuity products. Put options are contracts that require counterparties to pay us at a specified future date the amount, if any, by which a specified equity index is less than the strike rate stated in the agreement, applied to a notional amount.
Total Return Swaps
We use total return swaps to hedge the liability exposure on certain options in variable annuity products.
In addition, we use total return swaps to hedge a portion of the liability related to our deferred compensation plans. We receive the total return on a portfolio of indexes and pay a floating-rate of interest.
Variance Swaps
We use variance swaps to hedge the liability exposure on certain options in variable annuity products. Variance swaps are contracts entered into at no cost whose payoff is the difference between the realized variance rate of an underlying index and the fixed variance rate determined as of inception of the contract.
Credit Contracts
We use derivative instruments as part of our credit risk management strategy that are economic hedges and include:
Credit Default Swaps – Buying Protection
We use credit default swaps to hedge the liability exposure on certain options in variable annuity products.
20
We buy credit default swaps to hedge against a drop in bond prices due to credit concerns of certain bond issuers. A credit default swap allows us to put the bond back to the counterparty at par upon a default event by the bond issuer. A default event is defined as bankruptcy, failure to pay, obligation acceleration or restructuring.
Credit Default Swaps – Selling Protection
We use credit default swaps to hedge the liability exposure on certain options in variable annuity products.
We sell credit default swaps to offer credit protection to contract holders and investors. The credit default swaps hedge the contract holders and investors against a drop in bond prices due to credit concerns of certain bond issuers. A credit default swap allows the investor to put the bond back to us at par upon a default event by the bond issuer. A default event is defined as bankruptcy, failure to pay, obligation acceleration or restructuring.
Embedded Derivatives
We have embedded derivatives that include:
GLB Reserves Embedded Derivatives
We use a hedging strategy designed to mitigate the risk and income statement volatility caused by changes in the equity markets, interest rates and volatility associated with GLBs offered in our variable annuity products, including products with GWB and GIB features. These GLB features are reinsured among various reinsurance counterparties on either a modified coinsurance (“Modco”) or coinsurance basis. We cede a portion of the GLB features to Lincoln National Reinsurance Company (Barbados) Limited (“LNBAR”), a wholly-owned subsidiary of LNC on a funds withheld coinsurance basis. The funds withheld arrangement includes a dynamic hedging strategy designed to mitigate selected risks. Changes in the value of the hedge contracts due to changes in equity markets, interest rates and implied volatilities hedge the income statement effect of changes in embedded derivative GLB reserves assumed by LNBAR caused by those same factors. We rebalance our hedge positions based upon changes in these factors as needed. While we actively manage our hedge positions, these hedge positions may not be totally effective in offsetting changes in the embedded derivative reserve assumed by LNBAR due to, among other things, differences in timing between when a market exposure changes and corresponding changes to the hedge positions, extreme swings in the equity markets and interest rates, market volatility, contract holder behavior, divergence between the performance of the underlying funds and the hedging indices, divergence between the actual and expected performance of the hedge instruments and our ability to purchase hedging instruments at prices consistent with our desired risk and return trade-off. However, the hedging results do not impact LNL due to a funds withheld agreement with LNBAR, which causes the financial impact of the derivatives, as well as the cash flow activity, to be reflected on LNBAR.
Certain features of these guarantees have elements of both insurance benefits accounted for under the Financial Services – Insurance – Claim Costs and Liabilities for Future Policy Benefits Subtopic of the FASB ASC (“benefit reserves”) and embedded derivatives accounted for under the Derivatives and Hedging and the Fair Value Measurements and Disclosures Topics of the FASB ASC (“embedded derivative reserves”). We calculate the value of the benefit reserves and the embedded derivative reserves based on the specific characteristics of each GLB feature.
Indexed Annuity and IUL Contracts Embedded Derivatives
Our indexed annuity and IUL contracts permit the holder to elect an interest rate return or an equity market component, where interest credited to the contracts is linked to the performance of the S&P 500. Contract holders may elect to rebalance index options at renewal dates, either annually or biannually. As of each renewal date, we have the opportunity to re-price the indexed component by establishing participation rates, caps, spreads and specified rates, subject to contractual guarantees. We purchase S&P 500 call options that are highly correlated to the portfolio allocation decisions of our contract holders, such that we are economically hedged with respect to equity returns for the current reset period.
Reinsurance Related Embedded Derivatives
We have certain Modco arrangements and coinsurance with funds withheld reinsurance arrangements with embedded derivatives related to the withheld assets of the related funds. These derivatives are considered total return swaps with contractual returns that are attributable to various assets and liabilities associated with these reinsurance arrangements.
21
We have derivative instruments with off-balance-sheet risks whose notional or contract amounts exceed the related credit exposure. Outstanding derivative instruments with off-balance-sheet risks (in millions) were as follows:
|
||||||||||||||||||
|
As of March 31, 2019 |
As of December 31, 2018 |
||||||||||||||||
|
Notional |
Fair Value |
Notional |
Fair Value |
||||||||||||||
|
Amounts |
Asset |
Liability |
Amounts |
Asset |
Liability |
||||||||||||
Qualifying Hedges |
||||||||||||||||||
Cash flow hedges: |
||||||||||||||||||
Interest rate contracts (1) |
$ |
1,354 |
$ |
64 |
$ |
- |
$ |
1,528 |
$ |
33 |
$ |
9 | ||||||
Foreign currency contracts (1) |
2,442 | 153 | 36 | 2,326 | 167 | 39 | ||||||||||||
Total cash flow hedges |
3,796 | 217 | 36 | 3,854 | 200 | 48 | ||||||||||||
Fair value hedges: |
||||||||||||||||||
Interest rate contracts (1) |
546 |
- |
160 | 553 |
- |
137 | ||||||||||||
Non-Qualifying Hedges |
||||||||||||||||||
Interest rate contracts (1) |
95,308 | 588 | 105 | 100,628 | 464 | 138 | ||||||||||||
Foreign currency contracts (1) |
11 |
- |
- |
47 |
- |
- |
||||||||||||
Equity market contracts (1) |
32,598 | 613 | 404 | 30,273 | 676 | 162 | ||||||||||||
Credit contracts (1) |
60 |
- |
- |
- |
- |
- |
||||||||||||
Embedded derivatives: |
||||||||||||||||||
GLB direct (2) |
- |
439 |
- |
- |
123 |
- |
||||||||||||
GLB ceded (2) (3) |
- |
50 | 489 |
- |
72 | 196 | ||||||||||||
Reinsurance related (4) |
- |
- |
80 |
- |
188 |
- |
||||||||||||
Indexed annuity and IUL contracts (2) (5) |
- |
872 | 1,730 |
- |
902 | 1,305 | ||||||||||||
Total derivative instruments |
$ |
132,319 |
$ |
2,779 |
$ |
3,004 |
$ |
135,355 |
$ |
2,625 |
$ |
1,986 |
(1) |
Reported in derivative investments and other liabilities on our Consolidated Balance Sheets. |
(2) |
Reported in other assets on our Consolidated Balance Sheets. |
(3) |
Reported in other liabilities on our Consolidated Balance Sheets. |
(4) |
Reported in reinsurance related embedded derivatives on our Consolidated Balance Sheets. |
(5) |
Reported in future contract benefits on our Consolidated Balance Sheets. |
The maturity of the notional amounts of derivative instruments (in millions) was as follows:
|
||||||||||||||||||
|
Remaining Life as of March 31, 2019 |
|||||||||||||||||
|
Less Than |
1 – 5 |
6 – 10 |
11 – 30 |
Over 30 |
|||||||||||||
|
1 Year |
Years |
Years |
Years |
Years |
Total |
||||||||||||
Interest rate contracts (1) |
$ |
11,465 |
$ |
9,727 |
$ |
51,648 |
$ |
23,868 |
$ |
500 |
$ |
97,208 | ||||||
Foreign currency contracts (2) |
66 | 264 | 764 | 1,278 | 81 | 2,453 | ||||||||||||
Equity market contracts |
22,440 | 5,001 | 1,996 | 13 | 3,148 | 32,598 | ||||||||||||
Credit contracts |
- |
- |
60 |
- |
- |
60 | ||||||||||||
Total derivative instruments |
||||||||||||||||||
with notional amounts |
$ |
33,971 |
$ |
14,992 |
$ |
54,468 |
$ |
25,159 |
$ |
3,729 |
$ |
132,319 |
(1) |
As of March 31, 2019, the latest maturity date for which we were hedging our exposure to the variability in future cash flows for these instruments was July 2026. |
(2) |
As of March 31, 2019, the latest maturity date for which we were hedging our exposure to the variability in future cash flows for these instruments was September 2049. |
The following amounts (in millions) were recorded on the Consolidated Balance Sheets related to cumulative basis adjustments for fair
value hedges:
|
As of March 31, 2019 |
|||||||
|
||||||||
|
Cumulative |
|||||||
|
Fair Value Hedging |
|||||||
|
Adjustment Included |
|||||||
|
Amortized Cost |
in the Amortized |
||||||
|
of the Hedged |
Cost of the Hedged |
||||||
|
Assets (Liabilities) |
Assets (Liabilities) |
||||||
Line Items in which the Hedged Items are Recorded |
||||||||
Fixed maturity AFS securities, at fair value |
$ |
457 |
$ |
161 |
22
The change in our unrealized gain (loss) on derivative instruments within accumulated other comprehensive income (loss) (“AOCI”) (in millions) was as follows:
|
||||||
|
For the Three |
|||||
|
Months Ended |
|||||
|
March 31, |
|||||
|
2019 |
2018 |
||||
Unrealized Gain (Loss) on Derivative Instruments |
||||||
Balance as of beginning-of-year |
$ |
119 |
$ |
27 | ||
Other comprehensive income (loss): |
||||||
Unrealized holding gains (losses) arising during the period: |
||||||
Cumulative effect from adoption of |
||||||
new accounting standard |
- |
6 | ||||
Cash flow hedges: |
||||||
Interest rate contracts |
42 | (46 |
) |
|||
Foreign currency contracts |
11 | (37 |
) |
|||
Change in foreign currency exchange rate adjustment |
(14 |
) |
(50 |
) |
||
Change in DAC, VOBA, DSI and DFEL |
4 | 4 | ||||
Income tax benefit (expense) |
(9 |
) |
28 | |||
Less: |
||||||
Reclassification adjustment for gains (losses) |
||||||
included in net income (loss): |
||||||
Cash flow hedges: |
||||||
Interest rate contracts (1) |
1 | 1 | ||||
Foreign currency contracts (1) |
7 | 5 | ||||
Foreign currency contracts (2) |
1 |
- |
||||
Associated amortization of DAC, VOBA, DSI and DFEL |
(3 |
) |
(1 |
) |
||
Income tax benefit (expense) |
(1 |
) |
(1 |
) |
||
Balance as of end-of-period |
$ |
148 |
$ |
(72 |
) |
(1) |
The OCI offset is reported within net investment income on our Consolidated Statements of Comprehensive Income (Loss). |
(2) |
The OCI offset is reported within realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). |
23
The effects of qualifying and non-qualifying hedges (in millions) on the Consolidated Statements of Comprehensive Income (Loss) were as follows:
|
||||||||||
|
||||||||||
|
Gain (Loss) Recognized in Income |
|||||||||
|
For the Three Months Ended |
|||||||||
|
March 31, 2019 |
|||||||||
|
Realized |
Net |
Commissions |
|||||||
|
Gain |
Investment |
and Other |
|||||||
|
(Loss) |
Income |
Expenses |
|||||||
Total Line Items in which the Effects of Fair Value |
||||||||||
or Cash Flow Hedges are Recorded |
$ |
(351 |
) |
$ |
1,191 |
$ |
1,124 | |||
|
||||||||||
Qualifying Hedges |
||||||||||
Gain or (loss) on fair value hedging relationships: |
||||||||||
Interest rate contracts: |
||||||||||
Hedged items |
- |
24 |
- |
|||||||
Derivatives designated as hedging instruments |
- |
(24 |
) |
- |
||||||
Gain or (loss) on cash flow hedging relationships: |
||||||||||
Interest rate contracts: |
||||||||||
Amount of gain or (loss) reclassified from AOCI into income |
- |
1 |
- |
|||||||
Foreign currency contracts |
||||||||||
Amount of gain or (loss) reclassified from AOCI into income |
1 | 7 |
- |
|||||||
|
||||||||||
Non-Qualifying Hedges |
||||||||||
Interest rate contracts |
357 |
- |
- |
|||||||
Equity market contracts |
(458 |
) |
- |
- |
||||||
Embedded derivatives: |
||||||||||
GLB |
1 |
- |
- |
|||||||
Reinsurance related |
(289 |
) |
- |
- |
||||||
Indexed annuity and IUL contracts |
(239 |
) |
- |
- |
The gains (losses) on derivative instruments (in millions) recorded within income (loss) from continuing operations on our Consolidated Statements of Comprehensive Income (Loss) were as follows:
|
|||||
|
For the Three |
||||
|
Months Ended |
||||
|
March 31, |
||||
|
2018 |
||||
Qualifying Hedges |
|||||
Cash flow hedges: |
|||||
Interest rate contracts (1) |
$ |
1 | |||
Foreign currency contracts (1) |
5 | ||||
Total cash flow hedges |
6 | ||||
Fair value hedges: |
|||||
Interest rate contracts (1) |
(4 |
) |
|||
Interest rate contracts (2) |
33 | ||||
Total fair value hedges |
29 | ||||
Non-Qualifying Hedges |
|||||
Interest rate contracts (2) |
(312 |
) |
|||
Foreign currency contracts (2) |
2 | ||||
Equity market contracts (2) |
7 | ||||
Equity market contracts (3) |
(2 |
) |
|||
Embedded derivatives: |
|||||
Reinsurance related (2) |
125 | ||||
Indexed annuity and IUL contracts (2) |
52 | ||||
Total derivative instruments |
$ |
(93 |
) |
(1) |
Reported in net investment income on our Consolidated Statements of Comprehensive Income (Loss). |
(2) |
Reported in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). |
(3) |
Reported in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss). |
24
Gains (losses) recognized as a component of OCI (in millions) on derivative instruments designated and qualifying as cash flow hedges were as follows:
|
|||||
|
For the Three |
||||
|
Months Ended |
||||
|
March 31, |
||||
|
2018 |
||||
Offset to net investment income |
$ |
6 | |||
|
As of March 31, 2019, $39 million of the deferred net gains (losses) on derivative instruments in AOCI were expected to be reclassified to earnings during the next 12 months. This reclassification would be due primarily to interest rate variances related to our interest rate swap agreements.
For the three months ended March 31, 2019 and 2018, there were no material reclassifications to earnings due to hedged firm commitments no longer deemed probable or due to hedged forecasted transactions that had not occurred by the end of the originally specified time period.
As of March 31, 2019, and December 31, 2018, we did not have any exposure related to credit default swaps for which we are the seller.
Credit Risk
We are exposed to credit losses in the event of non-performance by our counterparties on various derivative contracts and reflect assumptions regarding the credit or non-performance risk (“NPR”). The NPR is based upon assumptions for each counterparty’s credit spread over the estimated weighted average life of the counterparty exposure less collateral held. As of March 31, 2019, the NPR adjustment was zero. The credit risk associated with such agreements is minimized by entering into agreements with financial institutions with long-standing, superior performance records. Additionally, we maintain a policy of requiring derivative contracts to be governed by an International Swaps and Derivatives Association (“ISDA”) Master Agreement. We are required to maintain minimum ratings as a matter of routine practice in negotiating ISDA agreements. Under some ISDA agreements, we and LLANY have agreed to maintain certain financial strength or claims-paying ratings. A downgrade below these levels could result in termination of derivative contracts, at which time any amounts payable by us would be dependent on the market value of the underlying derivative contracts. In certain transactions, we and the counterparty have entered into a credit support annex requiring either party to post collateral when net exposures exceed pre-determined thresholds. These thresholds vary by counterparty and credit rating. The amount of such exposure is essentially the net replacement cost or market value less collateral held for such agreements with each counterparty if the net market value is in our favor. As of March 31, 2019 and December 31, 2018, our exposure was zero.
The amounts recognized (in millions) by S&P credit rating of counterparty, for which we had the right to reclaim cash collateral or were obligated to return cash collateral, were as follows:
|
|||||||||||||
|
As of March 31, 2019 |
As of December 31, 2018 |
|||||||||||
|
Collateral |
Collateral |
Collateral |
Collateral |
|||||||||
|
Posted by |
Posted by |
Posted by |
Posted by |
|||||||||
S&P |
Counter- |
LNL |
Counter- |
LNL |
|||||||||
Credit |
Party |
(Held by |
Party |
(Held by |
|||||||||
Rating of |
(Held by |
Counter- |
(Held by |
Counter- |
|||||||||
Counterparty |
LNL) |
Party) |
LNL) |
Party) |
|||||||||
|
|||||||||||||
AA- |
$ |
56 |
$ |
(3 |
) |
$ |
33 |
$ |
(4 |
) |
|||
A+ |
389 | (113 |
) |
296 | (26 |
) |
|||||||
A |
5 |
- |
106 | (36 |
) |
||||||||
A- |
244 |
- |
4 |
- |
|||||||||
BBB+ |
- |
- |
177 |
- |
|||||||||
|
$ |
694 |
$ |
(116 |
) |
$ |
616 |
$ |
(66 |
) |
25
Balance Sheet Offsetting
Information related to the effects of offsetting (in millions) was as follows:
|
||||||||||||
|
As of March 31, 2019 |
|||||||||||
|
Embedded |
|||||||||||
|
Derivative |
Derivative |
||||||||||
|
Instruments |
Instruments |
Total |
|||||||||
|
||||||||||||
Financial Assets |
||||||||||||
Gross amount of recognized assets |
$ |
1,302 |
$ |
1,361 |
$ |
2,663 | ||||||
Gross amounts offset |
(328 |
) |
- |
(328 |
) |
|||||||
Net amount of assets |
974 | 1,361 | 2,335 | |||||||||
Gross amounts not offset: |
||||||||||||
Cash collateral |
(694 |
) |
- |
(694 |
) |
|||||||
Non-cash collateral |
(116 |
) |
- |
(116 |
) |
|||||||
Net amount |
$ |
164 |
$ |
1,361 |
$ |
1,525 | ||||||
|
||||||||||||
Financial Liabilities |
||||||||||||
Gross amount of recognized liabilities |
$ |
896 |
$ |
2,299 |
$ |
3,195 | ||||||
Gross amounts offset |
(115 |
) |
- |
(115 |
) |
|||||||
Net amount of liabilities |
781 | 2,299 | 3,080 | |||||||||
Gross amounts not offset: |
||||||||||||
Cash collateral |
(116 |
) |
- |
(116 |
) |
|||||||
Non-cash collateral |
(346 |
) |
- |
(346 |
) |
|||||||
Net amount |
$ |
319 |
$ |
2,299 |
$ |
2,618 |
|
||||||||||||
|
As of December 31, 2018 |
|||||||||||
|
Embedded |
|||||||||||
|
Derivative |
Derivative |
||||||||||
|
Instruments |
Instruments |
Total |
|||||||||
|
||||||||||||
Financial Assets |
||||||||||||
Gross amount of recognized assets |
$ |
1,282 |
$ |
1,285 |
$ |
2,567 | ||||||
Gross amounts offset |
(201 |
) |
- |
(201 |
) |
|||||||
Net amount of assets |
1,081 | 1,285 | 2,366 | |||||||||
Gross amounts not offset: |
||||||||||||
Cash collateral |
(616 |
) |
- |
(616 |
) |
|||||||
Non-cash collateral |
(58 |
) |
- |
(58 |
) |
|||||||
Net amount |
$ |
407 |
$ |
1,285 |
$ |
1,692 | ||||||
|
||||||||||||
Financial Liabilities |
||||||||||||
Gross amount of recognized liabilities |
$ |
806 |
$ |
1,501 |
$ |
2,307 | ||||||
Gross amounts offset |
(59 |
) |
- |
(59 |
) |
|||||||
Net amount of liabilities |
747 | 1,501 | 2,248 | |||||||||
Gross amounts not offset: |
||||||||||||
Cash collateral |
(66 |
) |
- |
(66 |
) |
|||||||
Non-cash collateral |
(190 |
) |
- |
(190 |
) |
|||||||
Net amount |
$ |
491 |
$ |
1,501 |
$ |
1,992 |
7. Federal Income Taxes
The effective tax rate is the ratio of tax expense over pre-tax income (loss). The effective tax rate was (13)% and 16% for the three months ended March 31, 2019 and 2018, respectively. The effective tax rate on pre-tax income was lower than the prevailing corporate federal income tax rate of 21%. Differences between the effective rates and the corporate federal income tax rate were primarily the result of the separate account dividends-received deduction, certain tax preferred investment income, foreign tax credits and other tax preference items. The current quarter’s effective tax rate is lower than the comparable quarter in the prior year primarily as a result of an increased level of realized losses and the associated tax benefit resulting from the application of the corporate federal income tax rate of 21%.
26
8. Reinsurance
Modified Coinsurance Reinsurance Transaction
Some portions of our annuity business have been reinsured on a modified coinsurance (“Modco”) basis with other companies. In a Modco program, we as the ceding company retain the reserves, as well as the assets backing those reserves, and the reinsurer shares proportionally in all financial terms of the reinsured policies based on their respective percentage of the risk. Effective October 1, 2018, we entered into one such Modco agreement with Athene Holding Ltd. (“Athene”) to reinsure fixed and fixed indexed annuity products. We hold assets in support of reserves associated with the transaction in a Modco investment portfolio that included fixed maturity AFS securities, trading securities, equity securities, commercial mortgage loans, derivative investments, other investments and cash that had carrying values of $5.1 billion, $1.9 billion, $49 million, $186 million, $120 million, $85 million and $78 million, respectively, as of March 31, 2019. In addition, the portfolio was supported by $237 million of over-collateralization and a $219 million letter of credit as of March 31, 2019.
In repositioning the Modco investment portfolio, purchases of securities classified as trading during the first quarter of 2019 primarily resulted in negative cash flows from operating activities that were largely offset by sales of securities classified as AFS within investing activities in our Consolidated Statements of Cash Flows.
See “Realized Gain (Loss)” in Note 5 for information on reinsurance related embedded derivatives.
9. Guaranteed Benefit Features
Information on the guaranteed death benefit (“GDB”) features outstanding (dollars in millions) was as follows:
|
As of |
As of |
|||||||
|
March 31, |
December 31, |
|||||||
|
2019 (1) |
2018 (1) |
|||||||
Return of Net Deposits |
|||||||||
Total account value |
$ |
95,670 |
$ |
89,783 | |||||
Net amount at risk (2) |
209 | 1,002 | |||||||
Average attained age of contract holders |
65 years |
65 years |
|||||||
|
|||||||||
Minimum Return |
|||||||||
Total account value |
$ |
95 |
$ |
88 | |||||
Net amount at risk (2) |
16 | 18 | |||||||
Average attained age of contract holders |
77 years |
77 years |
|||||||
Guaranteed minimum return |
5% | 5% | |||||||
|
|||||||||
Anniversary Contract Value |
|||||||||
Total account value |
$ |
25,031 |
$ |
23,365 | |||||
Net amount at risk (2) |
596 | 2,007 | |||||||
Average attained age of contract holders |
71 years |
71 years |
(1) |
Our variable contracts with guarantees may offer more than one type of guarantee in each contract; therefore, the amounts listed are not mutually exclusive. |
(2) |
Represents the amount of death benefit in excess of the account balance that is subject to market fluctuations. |
The determination of GDB liabilities is based on models that involve a range of scenarios and assumptions, including those regarding expected market rates of return and volatility, contract surrender rates and mortality experience. The following summarizes the balances of and changes in the liabilities for GDBs (in millions), which were recorded in future contract benefits on our Consolidated Balance Sheets:
27
|
For the Three |
||||||
|
Months Ended |
||||||
|
March 31, |
||||||
|
2019 |
2018 |
|||||
Balance as of beginning-of-year |
$ |
161 |
$ |
100 | |||
Changes in reserves |
(36 |
) |
11 | ||||
Benefits paid |
(6 |
) |
(3 |
) |
|||
Balance as of end-of-period |
$ |
119 |
$ |
108 | |||
|
Variable Annuity Contracts
Account balances of variable annuity contracts, including those with guarantees, (in millions) were invested in separate account investment options as follows:
|
As of |
As of |
|||||||
|
March 31, |
December 31, |
|||||||
|
2019 |
2018 |
|||||||
Asset Type |
|||||||||
Domestic equity |
$ |
59,205 |
$ |
54,060 | |||||
International equity |
19,865 | 18,359 | |||||||
Fixed income |
39,351 | 37,942 | |||||||
Total |
$ |
118,421 |
$ |
110,361 | |||||
|
|||||||||
Percent of total variable annuity separate account values |
98% | 99% |
Secondary Guarantee Products
Future contract benefits and other contract holder funds include reserves for our secondary guarantee products sold through our Life Insurance segment. Reserves on UL and VUL products with secondary guarantees represented 35% and 33% of total life insurance in-force reserves as of March 31, 2019, and December 31, 2018, respectively. UL and VUL products with secondary guarantees represented 29% and 35% of total life insurance sales for the three months ended March 31, 2019 and 2018, respectively.
28
10. Liability for Unpaid Claims
The liability for unpaid claims consists primarily of long-term disability claims and are reported in future contract benefits on our Consolidated Balance Sheets. Changes in the liability for unpaid claims (in millions) were as follows:
|
||||||
|
For the Three |
|||||
|
Months Ended |
|||||
|
March 31, |
|||||
|
2019 |
2018 |
||||
Balance as of beginning-of-year |
$ |
5,335 |
$ |
2,222 | ||
Reinsurance recoverable |
143 | 57 | ||||
Net balance as of beginning-of-year |
5,192 | 2,165 | ||||
Incurred related to: |
||||||
Current year |
803 | 364 | ||||
Prior years: |
||||||
Interest |
41 | 19 | ||||
All other incurred (1) |
(85 |
) |
(58 |
) |
||
Total incurred |
759 | 325 | ||||
Paid related to: |
||||||
Current year |
(215 |
) |
(126 |
) |
||
Prior years |
(482 |
) |
(213 |
) |
||
Total paid |
(697 |
) |
(339 |
) |
||
Net balance as of end-of-period |
5,254 | 2,151 | ||||
Reinsurance recoverable |
143 | 56 | ||||
Balance as of end-of-period |
$ |
5,397 |
$ |
2,207 |
(1) |
All other incurred is primarily impacted by the level of claim resolutions in the period compared to that which is expected by the reserve assumption. A negative number implies a favorable result where claim resolutions were more favorable than assumed. Our claim resolution rate assumption used in determining reserves is our expectation of the resolution rate we will experience over the long-term life of the block of claims. It will vary from actual experience in any one period, both favorably and unfavorably. |
The interest rate assumption used for discounting long-term claim reserves is an important part of the reserving process due to the long benefit period for these claims. Interest accrued on prior years’ reserves has been calculated on the opening reserve balance less one-half of the prior years’ incurred claim payments at our average reserve discount rate.
Long-term disability benefits may extend for many years, and claim development schedules do not reflect these longer benefit periods. As a result, we use longer term retrospective runoff studies, experience studies and prospective studies to develop our liability estimates.
11. Contingencies and Commitments
Contingencies
Regulatory and Litigation Matters
Regulatory bodies, such as state insurance departments, the SEC, Financial Industry Regulatory Authority and other regulatory bodies regularly make inquiries and conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, laws governing the activities of broker-dealers, registered investment advisers and unclaimed property laws.
LNL and its affiliates are involved in various pending or threatened legal or regulatory proceedings, including purported class actions, arising from the conduct of business both in the ordinary course and otherwise. In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding verdicts obtained in the jurisdiction for similar matters. This variability in pleadings, together with the actual experiences of LNL in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value.
Due to the unpredictable nature of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time is normally difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law.
29
We establish liabilities for litigation and regulatory loss contingencies when information related to the loss contingencies shows both that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some matters could require us to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of March 31, 2019. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known by management, management does not believe any such charges are likely to have a material adverse effect on LNL’s financial condition.
For some matters, the Company is able to estimate a reasonably possible range of loss. For such matters in which a loss is probable, an accrual has been made. For such matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made. Accordingly, the estimate contained in this paragraph reflects two types of matters. For some matters included within this estimate, an accrual has been made, but there is a reasonable possibility that an exposure exists in excess of the amount accrued. In these cases, the estimate reflects the reasonably possible range of loss in excess of the accrued amount. For other matters included within this estimation, no accrual has been made because a loss, while potentially estimable, is believed to be reasonably possible but not probable. In these cases, the estimate reflects the reasonably possible loss or range of loss. As of March 31, 2019, we estimate the aggregate range of reasonably possible losses to be up to approximately $50 million.
For other matters, we are not currently able to estimate the reasonably possible loss or range of loss. We are often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts and the progress of settlement negotiations. On a quarterly and annual basis, we review relevant information with respect to litigation contingencies and update our accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews.
Certain reinsurers have sought rate increases on certain yearly renewable term treaties. We are disputing the requested rate increases under these treaties. We have initiated and will initiate arbitration proceedings, as necessary, under these treaties in order to protect our contractual rights. Additionally, reinsurers may initiate arbitration proceedings against us. We believe it is unlikely the outcome of these disputes will have a material adverse effect on our financial condition.
Cost of Insurance Litigation
Glover v. Connecticut General Life Insurance Company and The Lincoln National Life Insurance Company, filed in the U.S. District Court for the District of Connecticut, No. 3:16-cv-00827, is a putative class action that was served on LNL on June 8, 2016. Plaintiff is the owner of a universal life insurance policy who alleges that LNL charged more for non-guaranteed cost of insurance than permitted by the policy. Plaintiff seeks to represent all universal life and variable universal life policyholders who owned policies containing non-guaranteed cost of insurance provisions that are similar to those of Plaintiff’s policy and seeks damages on behalf of all such policyholders. On January 11, 2019, the court dismissed Plaintiff’s complaint in its entirety. In response, Plaintiff filed a motion for leave to amend the complaint, which we have opposed.
Hanks v. The Lincoln Life and Annuity Company of New York (“LLANY”) and Voya Retirement Insurance and Annuity Company (“Voya”), filed in the U.S. District Court for the Southern District of New York, No. 1:16-cv-6399, is a putative class action that was served on LLANY on August 12, 2016. Plaintiff owns a universal life policy originally issued by Aetna (now Voya) and alleges that (i) Voya breached the terms of the policy when it increased non-guaranteed cost of insurance rates on Plaintiff’s policy; and (ii) LLANY, as reinsurer and administrator of Plaintiff’s policy, engaged in wrongful conduct related to the cost of insurance increase and was unjustly enriched as a result. Plaintiff seeks to represent all owners of Aetna life insurance policies that were subject to non-guaranteed cost of insurance rate increases in 2016 and seeks damages on their behalf. We are vigorously defending this matter.
EFG Bank AG, Cayman Branch, et al. v. The Lincoln National Life Insurance Company, pending in the U.S. District Court for the Eastern District of Pennsylvania, No. 2:17-cv-02592, is a civil action filed on February 1, 2017. Plaintiffs own Legend Series universal life insurance policies originally issued by Jefferson-Pilot (now LNL). Plaintiffs allege that LNL breached the terms of policyholders’ contracts when it increased cost of insurance rates beginning in 2016. We are vigorously defending this matter.
In re: Lincoln National COI Litigation, pending in the U.S. District Court for the Eastern District of Pennsylvania, Master File No. 2:16-cv-06605-GJP, is a consolidated litigation matter related to multiple putative class action filings that were consolidated by an order dated March 20, 2017. In addition to consolidating a number of existing matters, the order also covers any future cases filed in the same district related to the same subject matter. Plaintiffs own universal life insurance policies originally issued by Jefferson-Pilot (now LNL). Plaintiffs allege that LNL and LNC breached the terms of policyholders’ contracts by increasing non-guaranteed cost of insurance rates beginning in 2016. Plaintiffs seek to represent classes of policyowners and seek damages on their behalf. We are vigorously defending this matter.
In re: Lincoln National 2017 COI Rate Litigation, Master File No. 2:17-cv-04150 is a consolidated litigation matter related to multiple putative class action filings that were consolidated by an order of the court in March 2018. Plaintiffs own universal life insurance policies originally issued by former Jefferson-Pilot (now LNL). Plaintiffs allege that LNL and LNC breached the terms of policyholders’ contracts by increasing non-guaranteed cost of insurance rates beginning in 2017. Plaintiffs seek to represent classes of policyholders and seek damages on their behalf. We are vigorously defending this matter.
30
TVPX ARS INC., as Securities Intermediary for Consolidated Wealth Management, LTD. v. The Lincoln National Life Insurance Company, filed in the U.S. District Court for the Eastern District of Pennsylvania, No. 2:18-cv-02989, is a putative class action that was filed on July 17, 2018. Plaintiff alleges that LNL charged more for non-guaranteed cost of insurance than permitted by the policy. Plaintiff seeks to represent all universal life and variable universal life policyholders who own policies issued by LNL or its predecessors containing non-guaranteed cost of insurance provisions that are similar to those of Plaintiff’s policy and seeks damages on behalf of all such policyholders. We are vigorously defending this matter.
LSH Co. and Wells Fargo Bank, National Association, as securities intermediary for LSH Co. v. Lincoln National Corporation and The Lincoln National Life Insurance Company, pending in the U.S. District Court for the Eastern District of Pennsylvania, No. 2:18-cv-05529, is a civil action filed on December 21, 2018. Plaintiffs own universal life insurance policies originally issued by Jefferson-Pilot (now LNL). Plaintiffs allege that LNL breached the terms of policyholders’ contracts when it increased non-guaranteed cost of insurance rates in 2016 and 2017. Because the majority of policies at issue experienced a rate change in 2016, we expect the case will be consolidated with the In re: Lincoln National COI Litigation and EFG Bank cases, discussed above. We are vigorously defending this matter.
Commitments
Leases
Effective January 1, 2019, we adopted ASU 2016-02, which resulted in a new measurement and recognition of our long-term operating leases on our Consolidated Balance Sheets. See Note 2 for additional information.
We lease office space and certain equipment under various long-term lease agreements, and we also enter into sale-leaseback transactions. We determine if an arrangement is a lease at inception. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Our leases do not provide an implicit rate; therefore, we use our incremental borrowing rate at the commencement date in determining the present value of future payments. The ROU asset is calculated using the initial lease liability amount, plus any lease payments made at or before the commencement date, minus any lease incentives received, plus any initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Our lease agreements may contain both lease and non-lease components, which are accounted for separately. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.
We recognized operating lease ROU assets of $161 million and associated lease liabilities of $168 million as of March 31, 2019. We classified the operating lease ROU assets within other assets and the lease liabilities within other liabilities on our Consolidated Balance Sheets. The weighted-average discount rate and remaining lease term on our operating leases was 3.4% and 7 years, respectively, as of March 31, 2019. Operating lease expense for the three months ended March 31, 2019, was $12 million and reported in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss).
As of March 31, 2019, the net book value of assets recorded as finance leases under sale-leaseback transactions was $177 million, and the associated accumulated amortization was $300 million. These transactions have been classified as other assets on our Consolidated Balance Sheets. These assets will continue to be amortized on a straight-line basis over the assets’ remaining lives. The weighted-average discount rate and remaining lease term on our sale-leaseback transactions was 2.5% and 3 years, respectively, as of March 31, 2019.
Finance lease expense (in millions) was as follows:
|
For the Three |
||||
|
Months Ended |
||||
|
March 31, |
||||
|
2019 |
||||
Amortization of ROU assets (1) |
$ |
18 | |||
Interest on lease liabilities (2) |
3 | ||||
Total |
$ |
21 | |||
|
(1) |
Amortization of ROU assets is reported in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss). |
(2) |
Interest on lease liabilities is reported in interest and debt expense on our Consolidated Statements of Comprehensive Income (Loss). |
31
The table below presents cash flow information (in millions) related to leases:
|
For the Three |
||||
|
Months Ended |
||||
|
March 31, |
||||
|
2019 |
||||
Supplemental Cash Flow Information |
|||||
Cash paid for amounts included in the measurement of lease liabilities: |
|||||
Operating cash flows from operating leases |
$ |
13 | |||
Financing cash flows from finance leases |
3 | ||||
|
|||||
Supplemental Non-cash Information |
|||||
ROU assets obtained in exchange for new lease obligations: |
|||||
Operating leases |
$ |
10 | |||
|
Our future minimum lease payments (in millions) under non-cancellable leases as of March 31, 2019, were as follows:
|
Operating |
Finance |
||||||
|
Leases |
Leases |
||||||
2019 |
$ |
26 |
$ |
93 | ||||
2020 |
32 | 57 | ||||||
2021 |
28 | 67 | ||||||
2022 |
23 | 67 | ||||||
2023 |
20 | 91 | ||||||
Thereafter |
64 | 28 | ||||||
Total future minimum lease payments |
193 | 403 | ||||||
Less: Amount representing interest |
25 | 39 | ||||||
Present value of minimum lease payments |
$ |
168 |
$ |
364 |
As of March 31, 2019, we had additional office space leases that had not yet commenced totaling $37 million. These leases will commence between the second and fourth quarters of 2019 and have lease terms of 4 to 11 years.
32
12. Shares and Stockholder’s Equity
All authorized and issued shares of LNL are owned by LNC.
AOCI
The following summarizes the components and changes in AOCI (in millions):
|
||||||
|
For the Three |
|||||
|
Months Ended |
|||||
|
March 31, |
|||||
|
2019 |
2018 |
||||
Unrealized Gain (Loss) on AFS Securities |
||||||
Balance as of beginning-of-year |
$ |
536 |
$ |
3,283 | ||
Cumulative effect from adoption of new accounting standards |
- |
634 | ||||
Unrealized holding gains (losses) arising during the period |
3,406 | (2,924 |
) |
|||
Change in foreign currency exchange rate adjustment |
13 | 53 | ||||
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds |
(925 |
) |
957 | |||
Income tax benefit (expense) |
(531 |
) |
403 | |||
Less: |
||||||
Reclassification adjustment for gains (losses) included in net income (loss) |
(14 |
) |
(19 |
) |
||
Associated amortization of DAC, VOBA, DSI and DFEL |
1 | (4 |
) |
|||
Income tax benefit (expense) |
3 | 5 | ||||
Balance as of end-of-period |
$ |
2,509 |
$ |
2,424 | ||
Unrealized OTTI on AFS Securities |
||||||
Balance as of beginning-of-year |
$ |
29 |
$ |
39 | ||
(Increases) attributable to: |
||||||
Cumulative effect from adoption of new accounting standards |
- |
9 | ||||
Gross OTTI recognized in OCI during the period |
(14 |
) |
- |
|||
Change in DAC, VOBA, DSI and DFEL |
1 |
- |
||||
Income tax benefit (expense) |
4 | (1 |
) |
|||
Decreases attributable to: |
||||||
Changes in fair value, sales, maturities or other settlements of AFS securities |
5 | (9 |
) |
|||
Change in DAC, VOBA, DSI and DFEL |
(2 |
) |
(10 |
) |
||
Income tax benefit (expense) |
(1 |
) |
4 | |||
Balance as of end-of-period |
$ |
22 |
$ |
32 | ||
Unrealized Gain (Loss) on Derivative Instruments |
||||||
Balance as of beginning-of-year |
$ |
119 |
$ |
27 | ||
Cumulative effect from adoption of new accounting standard |
- |
6 | ||||
Unrealized holding gains (losses) arising during the period |
53 | (83 |
) |
|||
Change in foreign currency exchange rate adjustment |
(14 |
) |
(50 |
) |
||
Change in DAC, VOBA, DSI and DFEL |
4 | 4 | ||||
Income tax benefit (expense) |
(9 |
) |
28 | |||
Less: |
||||||
Reclassification adjustment for gains (losses) included in net income (loss) |
9 | 6 | ||||
Associated amortization of DAC, VOBA, DSI and DFEL |
(3 |
) |
(1 |
) |
||
Income tax benefit (expense) |
(1 |
) |
(1 |
) |
||
Balance as of end-of-period |
$ |
148 |
$ |
(72 |
) |
|
Funded Status of Employee Benefit Plans |
||||||
Balance as of beginning-of-year |
$ |
(25 |
) |
$ |
(22 |
) |
Cumulative effect from adoption of new accounting standard |
- |
(5 |
) |
|||
Balance as of end-of-period |
$ |
(25 |
) |
$ |
(27 |
) |
33
The following summarizes the reclassifications out of AOCI (in millions) and the associated line item in the Consolidated Statements of Comprehensive Income (Loss):
|
||||||||
|
For the Three |
|||||||
|
Months Ended |
|||||||
|
March 31, |
|||||||
|
2019 |
2018 |
||||||
Unrealized Gain (Loss) on AFS Securities |
||||||||
Gross reclassification |
$ |
(14 |
) |
$ |
(19 |
) |
Total realized gain (loss) |
|
Associated amortization of DAC, |
||||||||
VOBA, DSI and DFEL |
1 | (4 |
) |
Total realized gain (loss) |
||||
Reclassification before income |
Income (loss) from continuing |
|||||||
tax benefit (expense) |
(13 |
) |
(23 |
) |
operations before taxes |
|||
Income tax benefit (expense) |
3 | 5 |
Federal income tax expense (benefit) |
|||||
Reclassification, net of income tax |
$ |
(10 |
) |
$ |
(18 |
) |
Net income (loss) |
|
|
||||||||
Unrealized OTTI on AFS Securities |
||||||||
Gross reclassification |
$ |
- |
$ |
- |
Total realized gain (loss) |
|||
Change in DAC, VOBA, DSI and DFEL |
- |
- |
Total realized gain (loss) |
|||||
Reclassification before income |
Income (loss) from continuing |
|||||||
tax benefit (expense) |
- |
- |
operations before taxes |
|||||
Income tax benefit (expense) |
- |
- |
Federal income tax expense (benefit) |
|||||
Reclassification, net of income tax |
$ |
- |
$ |
- |
Net income (loss) |
|||
|
||||||||
Unrealized Gain (Loss) on Derivative Instruments |
||||||||
Gross reclassifications: |
||||||||
Interest rate contracts |
$ |
1 |
$ |
1 |
Net investment income |
|||
Foreign currency contracts |
7 | 5 |
Net investment income |
|||||
Foreign currency contracts |
1 |
- |
Total realized gain (loss) |
|||||
Total gross reclassifications |
9 | 6 | ||||||
Associated amortization of DAC, |
||||||||
VOBA, DSI and DFEL |
(3 |
) |
(1 |
) |
Commissions and other expenses |
|||
Reclassifications before income |
Income (loss) from continuing |
|||||||
tax benefit (expense) |
6 | 5 |
operations before taxes |
|||||
Income tax benefit (expense) |
(1 |
) |
(1 |
) |
Federal income tax expense (benefit) |
|||
Reclassifications, net of income tax |
$ |
5 |
$ |
4 |
Net income (loss) |
34
13. Fair Value of Financial Instruments
The carrying values and estimated fair values of our financial instruments (in millions) were as follows:
|
||||||||||||
|
As of March 31, 2019 |
As of December 31, 2018 |
||||||||||
|
Carrying |
Fair |
Carrying |
Fair |
||||||||
|
Value |
Value |
Value |
Value |
||||||||
Assets |
||||||||||||
Fixed maturity AFS securities |
$ |
96,648 |
$ |
96,648 |
$ |
92,787 |
$ |
92,787 | ||||
Trading securities |
3,231 | 3,231 | 1,869 | 1,869 | ||||||||
Equity securities |
153 | 153 | 99 | 99 | ||||||||
Mortgage loans on real estate |
13,925 | 13,890 | 13,190 | 13,020 | ||||||||
Derivative investments (1) |
974 | 974 | 1,081 | 1,081 | ||||||||
Other investments |
2,362 | 2,362 | 1,951 | 1,951 | ||||||||
Cash and invested cash |
1,320 | 1,320 | 1,848 | 1,848 | ||||||||
Reinsurance related embedded derivatives |
- |
- |
188 | 188 | ||||||||
Other assets: |
||||||||||||
GLB direct embedded derivatives |
439 | 439 | 123 | 123 | ||||||||
GLB ceded embedded derivatives |
50 | 50 | 72 | 72 | ||||||||
Indexed annuity ceded embedded derivatives |
872 | 872 | 902 | 902 | ||||||||
Separate account assets |
143,369 | 143,369 | 132,833 | 132,833 | ||||||||
|
||||||||||||
Liabilities |
||||||||||||
Future contract benefits – indexed annuity |
||||||||||||
and IUL contracts embedded derivatives |
(1,730 |
) |
(1,730 |
) |
(1,305 |
) |
(1,305 |
) |
||||
Other contract holder funds: |
||||||||||||
Remaining guaranteed interest and similar contracts |
(1,948 |
) |
(1,948 |
) |
(542 |
) |
(542 |
) |
||||
Account values of certain investment contracts |
(35,737 |
) |
(38,752 |
) |
(34,500 |
) |
(36,321 |
) |
||||
Short-term debt |
(686 |
) |
(686 |
) |
(288 |
) |
(288 |
) |
||||
Long-term debt |
(2,387 |
) |
(2,615 |
) |
(2,401 |
) |
(2,519 |
) |
||||
Reinsurance related embedded derivatives |
(80 |
) |
(80 |
) |
- |
- |
||||||
Other liabilities: |
||||||||||||
Derivative liabilities (1) |
(261 |
) |
(261 |
) |
(226 |
) |
(226 |
) |
||||
GLB ceded embedded derivatives |
(489 |
) |
(489 |
) |
(196 |
) |
(196 |
) |
(1) |
We have master netting agreements with each of our derivative counterparties, which allow for the netting of our derivative asset and liability positions by counterparty. |
Valuation Methodologies and Associated Inputs for Financial Instruments Not Carried at Fair Value
The following discussion outlines the methodologies and assumptions used to determine the fair value of our financial instruments not carried at fair value on our Consolidated Balance Sheets. Considerable judgment is required to develop these assumptions used to measure fair value. Accordingly, the estimates shown are not necessarily indicative of the amounts that would be realized in a one-time, current market exchange of all of our financial instruments.
Mortgage Loans on Real Estate
The fair value of mortgage loans on real estate is established using a discounted cash flow method based on credit rating, maturity and future income. The ratings for mortgages in good standing are based on property type, location, market conditions, occupancy, debt-service coverage, loan-to-value, quality of tenancy, borrower and payment record. The fair value for impaired mortgage loans is based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s market price or the fair value of the collateral if the loan is collateral dependent. The inputs used to measure the fair value of our mortgage loans on real estate are classified as Level 2 within the fair value hierarchy.
35
Other Investments
The carrying value of our assets classified as other investments approximates fair value. Other investments includes primarily LPs and other privately held investments that are accounted for using the equity method of accounting and the carrying value is based on our proportional share of the net assets of the LPs. Other investments also includes Federal Home Loan Bank (“FHLB”) stock carried at cost and periodically evaluated for impairment based on ultimate recovery of par value. The inputs used to measure the fair value of our LPs, other privately held investments and FHLB stock are classified as Level 3 within the fair value hierarchy. The remaining assets in other investments include cash collateral receivables and securities that are not LPs or other privately held investments. The inputs used to measure the fair value of these assets are classified as Level 1 within the fair value hierarchy.
Separate Account Assets
Separate account assets are primarily carried at fair value. A portion of our separate account assets includes LPs, which are accounted for using the equity method of accounting. The carrying value is based on our proportional share of the net assets of the LPs and approximates fair value. The inputs used to measure the fair value of the separate account asset LPs are classified as Level 3 within the fair value hierarchy.
Other Contract Holder Funds
Other contract holder funds include remaining guaranteed interest and similar contracts and account values of certain investment contracts. The fair value for the remaining guaranteed interest and similar contracts is estimated using discounted cash flow calculations as of the balance sheet date. These calculations are based on interest rates currently offered on similar contracts with maturities that are consistent with those remaining for the contracts being valued. As of March 31, 2019, and December 31, 2018, the remaining guaranteed interest and similar contracts carrying value approximated fair value. The fair value of the account values of certain investment contracts is based on their approximate surrender value as of the balance sheet date. The inputs used to measure the fair value of our other contract holder funds are classified as Level 3 within the fair value hierarchy.
Short-Term and Long-Term Debt
The fair value of short-term and long-term debt is based on quoted market prices. The inputs used to measure the fair value of our short-term and long-term debt are classified as Level 2 within the fair value hierarchy.
Financial Instruments Carried at Fair Value
We did not have any assets or liabilities measured at fair value on a nonrecurring basis as of March 31, 2019, or December 31, 2018, and we noted no changes in our valuation methodologies between these periods.
36
The following summarizes our financial instruments carried at fair value (in millions) on a recurring basis by the fair value hierarchy levels:
|
||||||||||||||||
|
As of March 31, 2019 |
|||||||||||||||
|
Quoted |
|||||||||||||||
|
Prices |
|||||||||||||||
|
in Active |
|||||||||||||||
|
Markets for |
Significant |
Significant |
|||||||||||||
|
Identical |
Observable |
Unobservable |
Total |
||||||||||||
|
Assets |
Inputs |
Inputs |
Fair |
||||||||||||
|
(Level 1) |
(Level 2) |
(Level 3) |
Value |
||||||||||||
Assets |
||||||||||||||||
Investments: |
||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||
Corporate bonds |
$ |
- |
$ |
76,353 |
$ |
5,911 |
$ |
82,264 | ||||||||
ABS |
- |
949 | 81 | 1,030 | ||||||||||||
U.S. government bonds |
374 | 17 |
- |
391 | ||||||||||||
Foreign government bonds |
- |
339 | 110 | 449 | ||||||||||||
RMBS |
- |
3,192 |
- |
3,192 | ||||||||||||
CMBS |
- |
882 | 2 | 884 | ||||||||||||
CLOs |
- |
2,340 | 97 | 2,437 | ||||||||||||
State and municipal bonds |
- |
5,402 |
- |
5,402 | ||||||||||||
Hybrid and redeemable preferred securities |
70 | 451 | 78 | 599 | ||||||||||||
Trading securities |
44 | 2,951 | 236 | 3,231 | ||||||||||||
Equity securities |
67 | 61 | 25 | 153 | ||||||||||||
Derivative investments (1) |
- |
746 | 672 | 1,418 | ||||||||||||
Cash and invested cash |
- |
1,320 |
- |
1,320 | ||||||||||||
Other assets: |
||||||||||||||||
GLB direct embedded derivatives |
- |
- |
439 | 439 | ||||||||||||
GLB ceded embedded derivatives |
- |
- |
50 | 50 | ||||||||||||
Indexed annuity ceded embedded derivatives |
- |
- |
872 | 872 | ||||||||||||
Separate account assets |
696 | 142,657 |
- |
143,353 | ||||||||||||
Total assets |
$ |
1,251 |
$ |
237,660 |
$ |
8,573 |
$ |
247,484 | ||||||||
|
||||||||||||||||
Liabilities |
||||||||||||||||
Future contract benefits – indexed annuity |
||||||||||||||||
and IUL contracts embedded derivatives |
$ |
- |
$ |
- |
$ |
(1,730 |
) |
$ |
(1,730 |
) |
||||||
Reinsurance related embedded derivatives |
- |
(80 |
) |
- |
(80 |
) |
||||||||||
Other liabilities: |
||||||||||||||||
Derivative liabilities (1) |
- |
(300 |
) |
(405 |
) |
(705 |
) |
|||||||||
GLB ceded embedded derivatives |
- |
- |
(489 |
) |
(489 |
) |
||||||||||
Total liabilities |
$ |
- |
$ |
(380 |
) |
$ |
(2,624 |
) |
$ |
(3,004 |
) |
37
|
||||||||||||||||
|
As of December 31, 2018 |
|||||||||||||||
|
Quoted |
|||||||||||||||
|
Prices |
|||||||||||||||
|
in Active |
|||||||||||||||
|
Markets for |
Significant |
Significant |
|||||||||||||
|
Identical |
Observable |
Unobservable |
Total |
||||||||||||
|
Assets |
Inputs |
Inputs |
Fair |
||||||||||||
|
(Level 1) |
(Level 2) |
(Level 3) |
Value |
||||||||||||
Assets |
||||||||||||||||
Investments: |
||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||
Corporate bonds |
$ |
- |
$ |
73,897 |
$ |
5,652 |
$ |
79,549 | ||||||||
ABS |
- |
919 | 29 | 948 | ||||||||||||
U.S. government bonds |
368 | 18 |
- |
386 | ||||||||||||
Foreign government bonds |
- |
335 | 109 | 444 | ||||||||||||
RMBS |
- |
3,157 | 7 | 3,164 | ||||||||||||
CMBS |
- |
801 | 2 | 803 | ||||||||||||
CLOs |
- |
1,625 | 105 | 1,730 | ||||||||||||
State and municipal bonds |
- |
5,184 |
- |
5,184 | ||||||||||||
Hybrid and redeemable preferred securities |
66 | 438 | 75 | 579 | ||||||||||||
Trading securities |
43 | 1,759 | 67 | 1,869 | ||||||||||||
Equity securities |
16 | 58 | 25 | 99 | ||||||||||||
Derivative investments (1) |
- |
636 | 704 | 1,340 | ||||||||||||
Cash and invested cash |
- |
1,848 |
- |
1,848 | ||||||||||||
Reinsurance related embedded derivatives |
- |
188 |
- |
188 | ||||||||||||
Other assets: |
||||||||||||||||
GLB direct embedded derivatives |
- |
- |
123 | 123 | ||||||||||||
GLB ceded embedded derivatives |
- |
- |
72 | 72 | ||||||||||||
Indexed annuity ceded embedded derivatives |
- |
- |
902 | 902 | ||||||||||||
Separate account assets |
665 | 132,135 |
- |
132,800 | ||||||||||||
Total assets |
$ |
1,158 |
$ |
222,998 |
$ |
7,872 |
$ |
232,028 | ||||||||
|
||||||||||||||||
Liabilities |
||||||||||||||||
Future contract benefits – indexed annuity |
||||||||||||||||
and IUL contracts embedded derivatives |
$ |
- |
$ |
- |
$ |
(1,305 |
) |
$ |
(1,305 |
) |
||||||
Other liabilities: |
||||||||||||||||
Derivative liabilities (1) |
- |
(314 |
) |
(171 |
) |
(485 |
) |
|||||||||
GLB ceded embedded derivatives |
- |
- |
(196 |
) |
(196 |
) |
||||||||||
Total liabilities |
$ |
- |
$ |
(314 |
) |
$ |
(1,672 |
) |
$ |
(1,986 |
) |
(1) |
Derivative investment assets and liabilities are presented within the fair value hierarchy on a gross basis by derivative type and not on a master netting basis by counterparty. |
38
The following summarizes changes to our financial instruments carried at fair value (in millions) and classified within Level 3 of the fair value hierarchy. This summary excludes any effect of amortization of DAC, VOBA, deferred sales inducements (“DSI”) and deferred front-end loads (“DFEL”). The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.
|
||||||||||||||||||
|
For the Three Months Ended March 31, 2019 |
|||||||||||||||||
|
Gains |
Issuances, |
Transfers |
|||||||||||||||
|
Items |
(Losses) |
Sales, |
Into or |
||||||||||||||
|
Included |
in |
Maturities, |
Out |
||||||||||||||
|
Beginning |
in |
OCI |
Settlements, |
of |
Ending |
||||||||||||
|
Fair |
Net |
and |
Calls, |
Level 3, |
Fair |
||||||||||||
|
Value |
Income |
Other (1) |
Net |
Net (2) |
Value |
||||||||||||
Investments: (4) |
||||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||||
Corporate bonds |
$ |
5,652 |
$ |
(1 |
) |
$ |
69 |
$ |
208 |
$ |
(17 |
) |
$ |
5,911 | ||||
ABS |
29 |
- |
- |
52 |
- |
81 | ||||||||||||
Foreign government bonds |
109 |
- |
1 |
- |
- |
110 | ||||||||||||
RMBS |
7 |
- |
- |
- |
(7 |
) |
- |
|||||||||||
CMBS |
2 |
- |
- |
- |
- |
2 | ||||||||||||
CLOs |
105 |
- |
- |
97 | (105 |
) |
97 | |||||||||||
Hybrid and redeemable |
||||||||||||||||||
preferred securities |
75 |
- |
3 |
- |
- |
78 | ||||||||||||
Trading securities |
67 |
- |
- |
206 | (37 |
) |
236 | |||||||||||
Equity securities |
25 |
- |
- |
- |
- |
25 | ||||||||||||
Derivative investments |
533 | (382 |
) |
46 | 70 |
- |
267 | |||||||||||
Other assets: (5) |
||||||||||||||||||
GLB direct embedded derivatives |
123 | 316 |
- |
- |
- |
439 | ||||||||||||
GLB ceded embedded derivatives |
72 | (22 |
) |
- |
- |
- |
50 | |||||||||||
Indexed annuity ceded embedded derivatives |
902 | 77 |
- |
(107 |
) |
- |
872 | |||||||||||
Future contract benefits – indexed annuity |
||||||||||||||||||
and IUL contracts embedded derivatives (5) |
(1,305 |
) |
(316 |
) |
- |
(109 |
) |
- |
(1,730 |
) |
||||||||
Other liabilities – GLB ceded embedded |
||||||||||||||||||
derivatives (5) |
(196 |
) |
(293 |
) |
- |
- |
- |
(489 |
) |
|||||||||
Total, net |
$ |
6,200 |
$ |
(621 |
) |
$ |
119 |
$ |
417 |
$ |
(166 |
) |
$ |
5,949 |
39
|
||||||||||||||||||
|
For the Three Months Ended March 31, 2018 |
|||||||||||||||||
|
Gains |
Issuances, |
Transfers |
|||||||||||||||
|
Items |
(Losses) |
Sales |
Into or |
||||||||||||||
|
Included |
in |
Maturities, |
Out |
||||||||||||||
|
Beginning |
in |
OCI |
Settlements, |
of |
Ending |
||||||||||||
|
Fair |
Net |
and |
Calls, |
Level 3, |
Fair |
||||||||||||
|
Value |
Income |
Other (1) |
Net |
Net (2)(3) |
Value |
||||||||||||
Investments: (4) |
||||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||||
Corporate bonds |
$ |
5,350 |
$ |
3 |
$ |
18 |
$ |
97 |
$ |
17 |
$ |
5,485 | ||||||
ABS |
26 |
- |
- |
- |
- |
26 | ||||||||||||
U.S. government bonds |
5 |
- |
- |
- |
- |
5 | ||||||||||||
Foreign government bonds |
110 |
- |
(2 |
) |
- |
- |
108 | |||||||||||
RMBS |
12 |
- |
- |
- |
(12 |
) |
- |
|||||||||||
CMBS |
6 | 1 |
- |
20 |
- |
27 | ||||||||||||
CLOs |
91 |
- |
- |
2 | (91 |
) |
2 | |||||||||||
Hybrid and redeemable |
||||||||||||||||||
preferred securities |
76 |
- |
1 |
- |
- |
77 | ||||||||||||
Equity AFS securities |
161 |
- |
- |
- |
(161 |
) |
- |
|||||||||||
Trading securities |
49 | (2 |
) |
- |
- |
- |
47 | |||||||||||
Equity securities |
- |
- |
- |
1 | 26 | 27 | ||||||||||||
Derivative investments |
30 | 330 | (25 |
) |
(56 |
) |
- |
279 | ||||||||||
Other assets: (5) |
||||||||||||||||||
GLB direct embedded derivatives |
903 | 207 |
- |
- |
- |
1,110 | ||||||||||||
GLB ceded embedded derivatives |
51 | (6 |
) |
- |
- |
- |
45 | |||||||||||
Indexed annuity ceded embedded derivatives |
11 |
- |
- |
6 |
- |
17 | ||||||||||||
Future contract benefits – indexed annuity |
||||||||||||||||||
and IUL contracts embedded derivatives (5) |
(1,418 |
) |
52 |
- |
20 |
- |
(1,346 |
) |
||||||||||
Other liabilities – GLB ceded embedded |
||||||||||||||||||
derivatives (5) |
(954 |
) |
(201 |
) |
- |
- |
- |
(1,155 |
) |
|||||||||
Total, net |
$ |
4,509 |
$ |
384 |
$ |
(8 |
) |
$ |
90 |
$ |
(221 |
) |
$ |
4,754 |
(1) |
The changes in fair value of the interest rate swaps are offset by an adjustment to derivative investments (see Note 6). |
(2) |
Transfers into or out of Level 3 for AFS and trading securities are reported at amortized cost as of the beginning-of-year. For AFS and trading securities, the difference between beginning-of-year amortized cost and beginning-of-year fair value was included in OCI and earnings, respectively, in the prior period. |
(3) |
Transfers into or out of Level 3 for FHLB stock between equity securities and other investments are reported at cost on our Consolidated Balance Sheets. |
(4) |
Amortization and accretion of premiums and discounts are included in net investment income on our Consolidated Statements of Comprehensive Income (Loss). Gains (losses) from sales, maturities, settlements and calls and OTTI are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). |
(5) |
Gains (losses) from sales, maturities, settlements and calls are included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). |
40
The following provides the components of the items included in issuances, sales, maturities, settlements and calls, net, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, (in millions) as reported above:
|
||||||||||||||||||
|
For the Three Months Ended March 31, 2019 |
|||||||||||||||||
|
Issuances |
Sales |
Maturities |
Settlements |
Calls |
Total |
||||||||||||
Investments: |
||||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||||
Corporate bonds |
$ |
287 |
$ |
(15 |
) |
$ |
(7 |
) |
$ |
(50 |
) |
$ |
(7 |
) |
$ |
208 | ||
ABS |
52 |
- |
- |
- |
- |
52 | ||||||||||||
CLOs |
97 |
- |
- |
- |
- |
97 | ||||||||||||
Trading securities |
207 |
- |
- |
(1 |
) |
- |
206 | |||||||||||
Derivative investments |
131 | (15 |
) |
(46 |
) |
- |
- |
70 | ||||||||||
Other assets – indexed annuity ceded |
||||||||||||||||||
embedded derivatives |
19 |
- |
- |
(126 |
) |
- |
(107 |
) |
||||||||||
Future contract benefits – indexed annuity |
||||||||||||||||||
and IUL contracts embedded derivatives |
(148 |
) |
- |
- |
39 |
- |
(109 |
) |
||||||||||
Total, net |
$ |
645 |
$ |
(30 |
) |
$ |
(53 |
) |
$ |
(138 |
) |
$ |
(7 |
) |
$ |
417 |
|
||||||||||||||||||
|
For the Three Months Ended March 31, 2018 |
|||||||||||||||||
|
Issuances |
Sales |
Maturities |
Settlements |
Calls |
Total |
||||||||||||
Investments: |
||||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||||
Corporate bonds |
$ |
248 |
$ |
(57 |
) |
$ |
(2 |
) |
$ |
(92 |
) |
$ |
- |
$ |
97 | |||
CMBS |
21 |
- |
- |
(1 |
) |
- |
20 | |||||||||||
CLOs |
2 |
- |
- |
- |
- |
2 | ||||||||||||
Equity securities |
1 |
- |
- |
- |
- |
1 | ||||||||||||
Derivative investments |
67 | (6 |
) |
(117 |
) |
- |
- |
(56 |
) |
|||||||||
Other assets – indexed annuity ceded |
||||||||||||||||||
embedded derivatives |
6 |
- |
- |
- |
- |
6 | ||||||||||||
Future contract benefits – indexed annuity |
||||||||||||||||||
and IUL contracts embedded derivatives |
(27 |
) |
- |
- |
47 |
- |
20 | |||||||||||
Total, net |
$ |
318 |
$ |
(63 |
) |
$ |
(119 |
) |
$ |
(46 |
) |
$ |
- |
$ |
90 |
41
The following summarizes changes in unrealized gains (losses) included in net income, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, related to financial instruments carried at fair value classified within Level 3 that we still held (in millions):
|
|||||||
|
For the Three |
||||||
|
Months Ended |
||||||
|
March 31, |
||||||
|
2019 |
2018 |
|||||
Derivative investments |
$ |
(287 |
) |
$ |
281 | ||
Embedded derivatives: |
|||||||
Indexed annuity and IUL contracts |
(32 |
) |
(4 |
) |
|||
Other assets – GLB direct and ceded |
481 | 376 | |||||
Other liabilities – GLB ceded |
(481 |
) |
(376 |
) |
|||
Total, net (1) |
$ |
(319 |
) |
$ |
277 |
(1) |
Included in realized gain (loss) on our Consolidated Statements of Comprehensive Income (Loss). |
The following provides the components of the transfers into and out of Level 3 (in millions) as reported above:
|
||||||||||||||||||
|
For the Three |
For the Three |
||||||||||||||||
|
Months Ended |
Months Ended |
||||||||||||||||
|
March 31, 2019 |
March 31, 2018 |
||||||||||||||||
|
Transfers |
Transfers |
Transfers |
Transfers |
||||||||||||||
|
Into |
Out of |
Into |
Out of |
||||||||||||||
|
Level 3 |
Level 3 |
Total |
Level 3 |
Level 3 |
Total |
||||||||||||
Investments: |
||||||||||||||||||
Fixed maturity AFS securities: |
||||||||||||||||||
Corporate bonds |
$ |
83 |
$ |
(100 |
) |
$ |
(17 |
) |
$ |
40 |
$ |
(23 |
) |
$ |
17 | |||
RMBS |
- |
(7 |
) |
(7 |
) |
- |
(12 |
) |
(12 |
) |
||||||||
CLOs |
- |
(105 |
) |
(105 |
) |
- |
(91 |
) |
(91 |
) |
||||||||
Equity AFS securities |
- |
- |
- |
- |
(161 |
) |
(161 |
) |
||||||||||
Trading securities |
- |
(37 |
) |
(37 |
) |
- |
- |
- |
||||||||||
Equity securities |
- |
- |
- |
26 |
- |
26 | ||||||||||||
Total, net |
$ |
83 |
$ |
(249 |
) |
$ |
(166 |
) |
$ |
66 |
$ |
(287 |
) |
$ |
(221 |
) |
Transfers into and out of Level 3 are generally the result of observable market information on a security no longer being available or becoming available to our pricing vendors. For the three months ended March 31, 2019 and 2018, transfers in and out of Level 3 were attributable primarily to the securities’ observable market information no longer being available or becoming available. In 2018, transfers into or out of Level 3 also included FHLB stock between equity securities and other investments at cost on our Consolidated Balance Sheets. Transfers into and out of Levels 1 and 2 are generally the result of a change in the type of input used to measure the fair value of an asset or liability at the end of the reporting period. When quoted prices in active markets become available, transfers from Level 2 to Level 1 will result. When quoted prices in active markets become unavailable, but we are able to employ a valuation methodology using significant observable inputs, transfers from Level 1 to Level 2 will result. For the three months ended March 31, 2019 and 2018, the transfers between Levels 1 and 2 of the fair value hierarchy were less than $1 million for our financial instruments carried at fair value.
42
The following summarizes the fair value (in millions), valuation techniques and significant unobservable inputs of the Level 3 fair value measurements as of March 31, 2019:
|
||||||||||||||||
|
Fair |
Valuation |
Significant |
Assumption or |
||||||||||||
|
Value |
Technique |
Unobservable Inputs |
Input Ranges |
||||||||||||
Assets |
||||||||||||||||
Investments: |
||||||||||||||||
Fixed maturity AFS and trading |
||||||||||||||||
securities: |
||||||||||||||||
Corporate bonds |
$ |
2,604 |
Discounted cash flow |
Liquidity/duration adjustment (1) |
0.6 |
% |
- |
30.0 |
% |
|||||||
ABS |
23 |
Discounted cash flow |
Liquidity/duration adjustment (1) |
3.0 |
% |
- |
3.0 |
% |
||||||||
Foreign government bonds |
77 |
Discounted cash flow |
Liquidity/duration adjustment (1) |
1.4 |
% |
- |
3.1 |
% |
||||||||
Hybrid and redeemable |
||||||||||||||||
preferred securities |
4 |
Discounted cash flow |
Liquidity/duration adjustment (1) |
1.6 |
% |
- |
1.6 |
% |
||||||||
Equity securities |
21 |
Discounted cash flow |
Liquidity/duration adjustment (1) |
4.5 |
% |
- |
5.2 |
% |
||||||||
Other assets: |
||||||||||||||||
GLB direct and ceded |
||||||||||||||||
embedded derivatives |
489 |
Discounted cash flow |
Long-term lapse rate (2) |
1 |
% |
- |
30 |
% |
||||||||
|
Utilization of guaranteed withdrawals (3) |
85 |
% |
- |
100 |
% |
||||||||||
|
Claims utilization factor (4) |
60 |
% |
- |
100 |
% |
||||||||||
|
Premiums utilization factor (4) |
80 |
% |
- |
115 |
% |
||||||||||
|
NPR (5) |
0.02 |
% |
- |
0.32 |
% |
||||||||||
|
Mortality rate (6) |
(8) |
||||||||||||||
|
Volatility (7) |
1 |
% |
- |
29 |
% |
||||||||||
|
||||||||||||||||
Indexed annuity ceded |
||||||||||||||||
embedded derivatives |
872 |
Discounted cash flow |
Lapse rate (2) |
1 |
% |
- |
9 |
% |
||||||||
|
Mortality rate (6) |
(8) |
||||||||||||||
Liabilities |
||||||||||||||||
Future contract benefits – indexed |
||||||||||||||||
annuity and IUL contracts |
||||||||||||||||
embedded derivatives |
$ |
(1,730 |
) |
Discounted cash flow |
Lapse rate (2) |
1 |
% |
- |
9 |
% |
||||||
|
Mortality rate (6) |
(8) |
||||||||||||||
Other liabilities – GLB ceded |
||||||||||||||||
embedded derivatives |
(489 |
) |
Discounted cash flow |
Long-term lapse rate (2) |
1 |
% |
- |
30 |
% |
|||||||
|
Utilization of guaranteed withdrawals (3) |
85 |
% |
- |
100 |
% |
||||||||||
|
Claims utilization factor (4) |
60 |
% |
- |
100 |
% |
||||||||||
|
Premiums utilization factor (4) |
80 |
% |
- |
115 |
% |
||||||||||
|
NPR (5) |
0.02 |
% |
- |
0.32 |
% |
||||||||||
|
Mortality rate (6) |
(8) |
||||||||||||||
|
Volatility (7) |
1 |
% |
- |
29 |
% |
(1) |
The liquidity/duration adjustment input represents an estimated market participant composite of adjustments attributable to liquidity premiums, expected durations, structures and credit quality that would be applied to the market observable information of an investment. |
(2) |
The lapse rate input represents the estimated probability of a contract surrendering during a year, and thereby forgoing any future benefits. The range for indexed annuity and IUL contracts represents the lapse rates during the surrender charge period. |
(3) |
The utilization of guaranteed withdrawals input represents the estimated percentage of contract holders that utilize the guaranteed withdrawal feature. |
(4) |
The utilization factors are applied to the present value of claims or premiums, as appropriate, in the GLB reserve calculation to estimate the impact of inefficient withdrawal behavior, including taking less than or more than the maximum guaranteed withdrawal. |
(5) |
The NPR input represents the estimated additional credit spread that market participants would apply to the market observable discount rate when pricing a contract. |
(6) |
The mortality rate input represents the estimated probability of when an individual belonging to a particular group, categorized according to age or some other factor such as gender, will die. |
(7) |
The volatility input represents overall volatilities assumed for the underlying variable annuity funds, which include a mixture of equity and fixed-income assets. Fair value of the variable annuity GLB embedded derivatives would increase if higher volatilities were used for valuation. |
(8) |
The mortality rate is based on a combination of company and industry experience, adjusted for improvement factors. |
43
From the table above, we have excluded Level 3 fair value measurements obtained from independent, third-party pricing sources. We do not develop the significant inputs used to measure the fair value of these assets and liabilities, and the information regarding the significant inputs is not readily available to us. Independent broker-quoted fair values are non-binding quotes developed by market makers or broker-dealers obtained from third-party sources recognized as market participants. The fair value of a broker-quoted asset or liability is based solely on the receipt of an updated quote from a single market maker or a broker-dealer recognized as a market participant as we do not adjust broker quotes when used as the fair value measurement for an asset or liability. Significant increases or decreases in any of the quotes received from a third-party broker-dealer may result in a significantly higher or lower fair value measurement.
Changes in any of the significant inputs presented in the table above may result in a significant change in the fair value measurement of the asset or liability as follows:
· |
Investments – An increase in the liquidity/duration adjustment input would result in a decrease in the fair value measurement. |
· |
Indexed annuity and IUL contracts embedded derivatives – For direct embedded derivatives, an increase in the lapse rate or mortality rate inputs would result in a decrease in the fair value measurement. |
· |
GLB embedded derivatives – Assuming our GLB direct embedded derivatives are in a liability position: an increase in our lapse rate, NPR or mortality rate inputs would result in a decrease in the fair value measurement; and an increase in the utilization of guaranteed withdrawal or volatility inputs would result in an increase in the fair value measurement. |
For each category discussed above, the unobservable inputs are not inter-related; therefore, a directional change in one input will not affect the other inputs.
As part of our ongoing valuation process, we assess the reasonableness of our valuation techniques or models and make adjustments as necessary.
14. Segment Information
We provide products and services and report results through our Annuities, Retirement Plan Services, Life Insurance and Group Protection segments. As discussed in Note 3, we completed the acquisition of Liberty Life during the second quarter of 2018. Related results are included within the Group Protection segment. We also have Other Operations, which includes the financial data for operations that are not directly related to the business segments. Our reporting segments reflect the manner by which our chief operating decision makers view and manage the business. A discussion of these segments and Other Operations is found in Note 21 of our 2018 Form 10-K.
Segment operating revenues and income (loss) from operations are internal measures used by our management and Board of Directors to evaluate and assess the results of our segments. Income (loss) from operations is GAAP net income excluding the after-tax effects of the following items, as applicable:
· |
Realized gains and losses associated with the following (“excluded realized gain (loss)”): |
§ |
Sales or disposals and impairments of securities; |
§ |
Changes in the fair value of derivatives, embedded derivatives within certain reinsurance arrangements and trading securities (“gain (loss) on the mark-to-market on certain instruments”); |
§ |
GLB rider fees ceded to Lincoln National Reinsurance Company (Barbados) Limited (“LNBAR”); |
§ |
The net valuation premium of the GLB attributed rider fees; |
§ |
Changes in the fair value of the embedded derivative liabilities related to index call options we may purchase in the future to hedge contract holder index allocations applicable to future reset periods for our indexed annuity products accounted for at fair value (“indexed annuity forward-starting option”); and |
§ |
Changes in the fair value of equity securities; |
· |
Income (loss) from reserve changes, net of related amortization, on business sold through reinsurance; |
· |
Gains (losses) on early extinguishment of debt; |
· |
Losses from the impairment of intangible assets; |
· |
Income (loss) from discontinued operations; |
· |
Acquisition and integration costs related to mergers and acquisitions; and |
· |
Income (loss) from the initial adoption of new accounting standards, regulations, and policy changes including the net impact from the Tax Cuts and Jobs Act. |
Operating revenues represent GAAP revenues excluding the pre-tax effects of the following items, as applicable:
· |
Excluded realized gain (loss); |
· |
Revenue adjustments from the initial adoption of new accounting standards; |
· |
Amortization of DFEL arising from changes in GDB and GLB benefit ratio unlocking; and |
· |
Amortization of deferred gains arising from reserve changes on business sold through reinsurance. |
44
The tables below reconcile our segment measures of performance to the GAAP measures presented in our Consolidated Statements of Comprehensive Income (Loss) (in millions):
|
||||||
|
For the Three |
|||||
|
Months Ended |
|||||
|
March 31, |
|||||
|
2019 |
2018 |
||||
Revenues |
||||||
Operating revenues: |
||||||
Annuities |
$ |
1,088 |
$ |
984 | ||
Retirement Plan Services |
289 | 288 | ||||
Life Insurance |
1,584 | 1,549 | ||||
Group Protection |
1,138 | 552 | ||||
Other Operations |
56 | 58 | ||||
Excluded realized gain (loss), pre-tax |
(391 |
) |
(27 |
) |
||
Total revenues |
$ |
3,764 |
$ |
3,404 |
|
||||||
|
For the Three |
|||||
|
Months Ended |
|||||
|
March 31, |
|||||
|
2019 |
2018 |
||||
Net Income (Loss) |
||||||
Income (loss) from operations: |
||||||
Annuities |
$ |
239 |
$ |
272 | ||
Retirement Plan Services |
37 | 40 | ||||
Life Insurance |
159 | 122 | ||||
Group Protection |
55 | 29 | ||||
Other Operations |
(33 |
) |
(18 |
) |
||
Excluded realized gain (loss), after-tax |
(309 |
) |
(22 |
) |
||
Net impact from the Tax Cuts and Jobs Act |
- |
(12 |
) |
|||
Acquisition and integration costs related to |
||||||
mergers and acquisitions, after-tax |
(15 |
) |
(4 |
) |
||
Net income (loss) |
$ |
133 |
$ |
407 |
45
Item 2. Management’s Narrative Analysis of the Results of Operations
The Lincoln National Life Insurance Company (“LNL”) and its subsidiaries are referred to collectively in this Form 10-Q as the “Company,” “we,” “our” and “us.” LNL is a wholly-owned subsidiary of Lincoln National Corporation (“LNC”). Beginning on May 1, 2018, the results of operations and financial condition of Liberty Life Assurance Company of Boston (“Liberty Life”), were consolidated with LNL. Accordingly, all financial information presented herein for the three months ended March 31, 2019, includes the accounts of LNL and the accounts of Liberty Life.
Management’s narrative analysis (“MNA”) of the results of operations for the three months ended March 31, 2019, compared with the corresponding period in 2018 of LNL and its consolidated subsidiaries should be read in conjunction with our consolidated financial statements and the accompanying notes to the consolidated financial statements (“Notes”) presented in “Part I – Item 1. Financial Statements,” as well as “Forward-Looking Statements – Cautionary Language,” the Company’s consolidated financial statements included elsewhere herein and our Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”), including the sections entitled “Part I – Item 1A. Risk Factors,” “Part II – Item 7. Management’s Narrative Analysis of the Results of Operations,” “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk” and “Part II – Item 8. Financial Statements and Supplementary Data.”
In this report, in addition to providing consolidated revenues and net income (loss), we also provide segment operating revenues and income (loss) from operations because we believe they are meaningful measures of revenues and the profitability of our operating segments. Financial information that follows is presented in accordance with United States of America generally accepted accounting principles (“GAAP”), unless otherwise indicated. See Note 1 for a discussion of GAAP.
Operating revenues and income (loss) from operations are the financial performance measures we use to evaluate and assess the results of our segments. Accordingly, we define and report operating revenues and income (loss) from operations by segment in Note 14. Our management believes that operating revenues and income (loss) from operations explain the results of our ongoing businesses in a manner that allows for a better understanding of the underlying trends in our current businesses because the excluded items are unpredictable and not necessarily indicative of current operating fundamentals or future performance of the business segments, and, in many instances, decisions regarding these items do not necessarily relate to the operations of the individual segments. In addition, we believe that our definitions of operating revenues and income (loss) from operations will provide readers with a more valuable measure of our performance because it better reveals trends in our business.
Management’s narrative analysis is presented pursuant to General Instructions H(2) (a) of Form 10-Q in lieu of Management’s Discussion and Analysis of Financial Condition and Results of Operations.
See “Part I – Item 1. Business” and Note 1 in our 2018 Form 10-K for a description of the business.
FORWARD-LOOKING STATEMENTS – CAUTIONARY LANGUAGE
This Quarterly Report on Form 10-Q, including “Risk Factors” and “Management’s Narrative Analysis of the Results of Operations,” contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). A forward-looking statement is a statement that is not a historical fact and, without limitation, includes any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like: “believe,” “anticipate,” “expect,” “estimate,” “project,” “will,” “shall” and other words or phrases with similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, trends in our businesses, prospective services or products, future performance or financial results and the outcome of contingencies, such as legal proceedings. We claim the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.
Forward-looking statements are subject to risks and uncertainties. Actual results could differ materially from those expressed in or implied by such forward-looking statements due to a variety of factors, including:
· |
Deterioration in general economic and business conditions that may affect account values, investment results and claims experience; |
· |
Adverse capital and credit market conditions could affect our ability to raise capital, if necessary, and may cause us to realize impairments on investments; |
· |
Actions taken by reinsurers to raise rates on in-force business; |
· |
Declines in or sustained low interest rates causing a reduction in investment income, the interest margins of our businesses, and demand for our products; |
· |
Rapidly increasing interest rates causing contract holders to surrender life insurance and annuity policies, thereby causing realized investment losses, and reduced hedge performance related to variable annuities; |
· |
The initiation of legal or regulatory proceedings against us, and the outcome of any legal or regulatory proceedings, such as: adverse actions related to present or past business practices common in businesses in which we compete; adverse decisions in
46 |
significant actions including, but not limited to, actions brought by federal and state authorities and class action cases; new decisions that result in changes in law; and unexpected trial court rulings; |
· |
A decline in the equity markets causing a reduction in the sales of our products; a reduction of asset-based fees that we charge on various investment and insurance products; and an increase in liabilities related to guaranteed benefit features of our variable annuity products; |
· |
Changes in our assumptions related to deferred acquisition costs (“DAC”) or value of business acquired (“VOBA”); |
· |
Ineffectiveness of our risk management policies and procedures; |
· |
A deviation in actual experience regarding future persistency, mortality, morbidity, interest rates or equity market returns from the assumptions used in pricing our products; |
· |
Changes in accounting principles that may affect our financial statements; |
· |
Lowering of one or more of our financial strength ratings; |
· |
Inability to protect our intellectual property rights or claims of infringement of the intellectual property rights of others; |
· |
Interruption in telecommunication, information technology or other operational systems or failure to safeguard the confidentiality or privacy of sensitive data on such systems from cyberattacks or other breaches of our data security systems; |
· |
The adequacy and collectability of reinsurance that we have purchased; |
· |
Acts of terrorism, a pandemic, war or other man-made and natural catastrophes that may adversely affect our businesses and the cost and availability of reinsurance; |
· |
Competitive conditions, including pricing pressures, new product offerings and the emergence of new competitors, that may affect the level of premiums and fees that our subsidiaries can charge for their products; |
· |
The unknown effect on our businesses resulting from evolving market preferences and the changing demographics of our client base; |
· |
Possible difficulties in executing, integrating and realizing projected results of acquisitions, divestitures and restructurings; and |
· |
The unanticipated loss of key management, financial planners or wholesalers. |
The risks included here are not exhaustive. Our annual report on Form 10-K and other documents filed with the SEC include additional factors that could affect our businesses and financial performance. Moreover, we operate in a rapidly changing and competitive environment. New risk factors emerge from time to time, and it is not possible for management to predict all such risk factors.
We do not intend, and are under no obligation, to update any particular forward-looking statement included in this document. See “Risk Factors” included in “Part I – Item 1A. Risk Factors” in our 2018 Form 10-K for a discussion of certain risks relating to our business.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The MNA included in our 2018 Form 10-K contains a detailed discussion of our critical accounting policies and estimates. The following information updates the “Critical Accounting Policies and Estimates” provided in our 2018 Form 10-K, and therefore, should be read in conjunction with that disclosure.
DAC, VOBA, DSI and DFEL
Reversion to the Mean
As variable fund returns do not move in a systematic manner, we reset the baseline of account values from which estimated gross profits are projected, which we refer to as our reversion to the mean (“RTM”) process, as discussed in our 2018 Form 10-K.
If we had unlocked our RTM assumption as of March 31, 2019, we would have recorded a favorable unlocking of approximately $105 million, pre-tax, for Annuities and approximately $20 million, pre-tax, for both Retirement Plan Services and Life Insurance.
Investments
Investment Valuation
For more information about the valuation of our financial instruments carried at fair value, see “Part II – Item 7. Management’s Narrative Analysis of the Results of Operations – Critical Accounting Policies and Estimates – Investments – Investment Valuation” in our 2018 Form 10-K and Note 13 herein.
Derivatives
Our accounting policies for derivatives and the potential effect on interest spreads in a falling rate environment are discussed in Note 6 of this report and “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our 2018 Form 10-K.
For information about acquisitions and divestitures, see Note 3 in our 2018 Form 10-K and Note 3 herein.
47
RESULTS OF CONSOLIDATED OPERATIONS
Details underlying the consolidated results (in millions) were as follows:
|
|||||||
|
For the Three |
||||||
|
Months Ended |
||||||
|
March 31, |
||||||
|
2019 |
2018 |
|||||
Net Income (Loss) |
|||||||
Income (loss) from operations: |
|||||||
Annuities |
$ |
239 |
$ |
272 | |||
Retirement Plan Services |
37 | 40 | |||||
Life Insurance |
159 | 122 | |||||
Group Protection |
55 | 29 | |||||
Other Operations |
(33 |
) |
(18 |
) |
|||
Excluded realized gain (loss), after-tax |
(309 |
) |
(22 |
) |
|||
Net impact from the Tax Cuts and Jobs Act |
- |
(12 |
) |
||||
Acquisition and integration costs related to |
|||||||
mergers and acquisitions, after-tax |
(15 |
) |
(4 |
) |
|||
Net income (loss) |
$ |
133 |
$ |
407 |
Comparison of the Three Months Ended March 31, 2019 to 2018
Net income decreased due primarily to the following:
· |
Realized losses as compared to realized gains in 2018. |
· |
Less favorable investment income on alternative investments. |
· |
Higher acquisition and integration costs incurred as part of our acquisition. |
· |
The effect of the modified coinsurance (“Modco”) reinsurance transaction in the Annuities segment. |
· |
Spread compression due to average new money rates trailing our current portfolio yields, partially offset by actions implemented to reduce interest crediting rates. |
The decrease in net income was partially offset by the following:
· |
Federal income tax benefit as compared to federal income tax expense in 2018. |
· |
The inclusion of the results of the Liberty Group Business. |
· |
Growth in business in force and group earned premiums. |
We provide information about our segments’ and Other Operations’ operating revenue and expense line items and realized gain (loss), key drivers of changes and historical details underlying the line items below. As discussed in Note 3, on May 1, 2018, we completed our acquisition of 100% of the capital stock of Liberty Life, which operates a group benefits business (the “Liberty Group Business”) and individual life and individual and group annuity business, in a transaction accounted for under the acquisition method of accounting. We ceded insurance policies relating to the individual life and individual and group annuity business to third-party reinsurers. The operating results of the Liberty Group Business are included in our Group Protection segment beginning on May 1, 2018. The acquisition expanded the scale and capabilities of the Group Protection business while further diversifying the Company’s sources of earnings. For factors that could cause actual results to differ materially, see “Forward-Looking Statements – Cautionary Language” above and “Part I – Item 1A. Risk Factors” in our 2018 Form 10-K.
48
Details underlying the results for Annuities (in millions) were as follows:
|
|||||||
|
For the Three |
||||||
|
Months Ended |
||||||
|
March 31, |
||||||
|
2019 |
2018 |
|||||
Operating Revenues |
|||||||
Insurance premiums (1) |
$ |
208 |
$ |
70 | |||
Fee income |
525 | 538 | |||||
Net investment income |
238 | 237 | |||||
Operating realized gain (loss) (2) |
41 | 48 | |||||
Amortization of deferred gain on |
|||||||
business sold through reinsurance |
8 |
- |
|||||
Other revenues (3) |
68 | 91 | |||||
Total operating revenues |
1,088 | 984 | |||||
Operating Expenses |
|||||||
Interest credited |
162 | 146 | |||||
Benefits (1) |
220 | 91 | |||||
Commissions and other expenses |
433 | 428 | |||||
Total operating expenses |
815 | 665 | |||||
Income (loss) from operations before taxes |
273 | 319 | |||||
Federal income tax expense (benefit) |
34 | 47 | |||||
Income (loss) from operations |
$ |
239 |
$ |
272 |
(1) |
Insurance premiums include primarily our income annuities that have a corresponding offset in benefits. Benefits include changes in income annuity reserves driven by premiums. |
(2) |
See “Realized Gain (Loss)” below. |
(3) |
Consists primarily of revenues attributable to broker-dealer services that are subject to market volatility and the net settlement related to the Modco reinsurance transaction. |
Comparison of the Three Months Ended March 31, 2019 to 2018
Income from operations for this segment decreased due primarily to the following:
· |
Lower other revenues attributable to the Modco reinsurance transaction. |
· |
Lower fee income driven by lower average daily variable account values. |
· |
Lower net investment income, net of interest credited, driven by less favorable investment income on alternative investments within our surplus portfolio. |
The decrease in income from operations was partially offset by the amortization of deferred gain on business sold through reinsurance as a result of the Modco reinsurance transaction.
See “Additional Information” below for more information about the Modco reinsurance transaction.
Additional Information
Effective October 1, 2018, we entered into an agreement with Athene Holding Ltd. (“Athene”) to reinsure approximately $7.7 billion of in-force fixed and fixed indexed annuity products on a Modco basis. The capital generated from this transaction was primarily used to fund LNC’s December 2018 accelerated share repurchase program of $450 million. We expect an ongoing reduction in income from operations in future periods as a result of this Modco reinsurance transaction. We continue to remain focused on the continued growth of both our fixed and variable annuity business. For additional information on our annuity reinsurance agreement, see Note 8 herein.
New deposits are an important component of net flows and key to our efforts to grow our business. Although deposits do not significantly affect current period income from operations, they can significantly impact future income from operations.
The other component of net flows relates to the retention of the business. An important measure of retention is the reduction in account values caused by full surrenders, deaths and other contract benefits. These outflows as a percentage of average account values were 8% and 9% for the three months ended March 31, 2019 and 2018, respectively.
49
Our fixed annuity business includes products with discretionary crediting rates that are reset on an annual basis and are not subject to surrender charges. Our ability to retain annual reset annuities will be subject to current competitive conditions at the time interest rates for these products reset. We expect to manage the effects of spreads on near-term income from operations through portfolio management and, to a lesser extent, crediting rate actions, which assumes no significant changes in net flows into or out of our fixed accounts or other changes that may cause interest rate spreads to differ from our expectations. For information on interest rate spreads and interest rate risk, see “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk – Interest Rate Risk on Fixed Insurance Businesses – Falling Rates” and “Part I – Item 1A. Risk Factors – Market Conditions – Changes in interest rates and sustained low interest rates may cause interest rate spreads to decrease and changes in interest rates may also result in increased contract withdrawals” in our 2018 Form 10-K.
50
RESULTS OF RETIREMENT PLAN SERVICES
Details underlying the results for Retirement Plan Services (in millions) were as follows:
|
|||||||
|
For the Three |
||||||
|
Months Ended |
||||||
|
March 31, |
||||||
|
2019 |
2018 |
|||||
Operating Revenues |
|||||||
Insurance premiums and fee income (1) |
$ |
59 |
$ |
62 | |||
Net investment income |
224 | 220 | |||||
Other revenues (2) |
6 | 6 | |||||
Total operating revenues |
289 | 288 | |||||
Operating Expenses |
|||||||
Interest credited |
145 | 137 | |||||
Commissions and other expenses |
104 | 106 | |||||
Total operating expenses |
249 | 243 | |||||
Income (loss) from operations before taxes |
40 | 45 | |||||
Federal income tax expense (benefit) |
3 | 5 | |||||
Income (loss) from operations |
$ |
37 |
$ |
40 |
(1) |
Includes amounts ceded to Lincoln National Reinsurance Company (Barbados) Limited (“LNBAR”). |
(2) |
Consists primarily of mutual fund account program revenues from mid to large employers. |
Comparison of the Three Months Ended March 31, 2019 to 2018
Income from operations for this segment decreased due primarily to the following:
· |
Lower net investment income, net of interest credited, driven by less favorable investment income on alternative investments and spread compression due to average new money rates trailing our current portfolio yields. |
· |
Lower insurance premiums and fee income driven by lower average daily variable account values. |
Additional Information
Net flows in this business fluctuate based on the timing of larger plans being implemented on our platform and terminating over the course of the year.
New deposits are an important component of net flows and key to our efforts to grow our business. Although deposits do not significantly affect current period income from operations, they can significantly impact future income from operations. The other component of net flows relates to the retention of the business. An important measure of retention is the reduction in account values caused primarily by plan sponsor terminations and participant withdrawals. These outflows as a percentage of average account values were 16% and 11% for the three months ended March 31, 2019 and 2018, respectively.
Our net flows are negatively affected by the continued net outflows from our oldest blocks of annuities business, which are among our higher margin product lines in this segment, due to the fact that they are mature blocks with low distribution and servicing costs. The proportion of these products to our total account values was 23% and 25% as of March 31, 2019 and 2018, respectively. Due to this expected overall shift in business mix toward products with lower returns, new deposit production continues to be necessary to maintain earnings at current levels.
Our fixed annuity business includes products with discretionary and index-based crediting rates that are reset on either a quarterly or semi-annual basis. Our ability to retain quarterly or semi-annual reset annuities will be subject to current competitive conditions at the time interest rates for these products reset. We expect to manage the effects of spreads on near-term income from operations through portfolio management and, to a lesser extent, crediting rate actions, which assumes no significant changes in net flows into or out of our fixed accounts or other changes that may cause interest rate spreads to differ from our expectations. For information on interest rate spreads and interest rate risk, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk – Interest Rate Risk on Fixed Insurance Businesses – Falling Rates” and “Part I – Item 1A. Risk Factors – Market Conditions – Changes in interest rates and sustained low interest rates may cause interest rate spreads to decrease and changes in interest rates may also result in increased contract withdrawals” in our 2018 Form 10-K.
51
Details underlying the results for Life Insurance (in millions) were as follows:
|
|||||||
|
For the Three |
||||||
|
Months Ended |
||||||
|
March 31, |
||||||
|
2019 |
2018 |
|||||
Operating Revenues |
|||||||
Insurance premiums (1) |
$ |
147 |
$ |
131 | |||
Fee income |
829 | 791 | |||||
Net investment income |
607 | 625 | |||||
Operating realized gain (loss) (2) |
(1 |
) |
1 | ||||
Amortization of deferred gain on |
|||||||
business sold through reinsurance |
(1 |
) |
(1 |
) |
|||
Other revenues |
3 | 2 | |||||
Total operating revenues |
1,584 | 1,549 | |||||
Operating Expenses |
|||||||
Interest credited |
348 | 346 | |||||
Benefits |
805 | 785 | |||||
Commissions and other expenses |
234 | 274 | |||||
Total operating expenses |
1,387 | 1,405 | |||||
Income (loss) from operations before taxes |
197 | 144 | |||||
Federal income tax expense (benefit) |
38 | 22 | |||||
Income (loss) from operations |
$ |
159 |
$ |
122 |
(1) |
Includes term insurance premiums, which have a corresponding partial offset in benefits for changes in reserves. |
(2) |
See “Realized Gain (Loss)” below. |
Comparison of the Three Months Ended March 31, 2019 to 2018
Income from operations for this segment increased due primarily to the following:
· |
Lower commissions and other expenses driven by lower margins and amortization rates. |
· |
Higher fee income due to growth in business in force. |
The increase in income from operations was partially offset by the following:
· |
Higher benefits due to growth in business in force, partially offset by more favorable mortality. |
· |
Lower net investment income, net of interest credited, driven by less favorable investment income on alternative investments and spread compression due to average new money rates trailing our current portfolio yields. |
Strategies to Address Statutory Reserve Strain
We and our insurance subsidiaries have statutory surplus and risk-based capital levels above current regulatory required levels. Term products and UL products containing secondary guarantees require reserves calculated pursuant to the Valuation of Life Insurance Policies Model Regulation (“XXX”) and Actuarial Guideline 38 (“AG38”). For information on strategies we use to reduce the statutory reserve strain caused by XXX and AG38, see “Review of Consolidated Financial Condition – Liquidity and Capital Resources – Sources of Liquidity and Cash Flow – Statutory Capital and Surplus” below.
Additional Information
During the first quarter of 2019, we experienced favorable mortality relative to our expectations for claims seasonality. Generally, we have higher mortality in the first quarter of the year due to the seasonality of claims.
Generally, we have higher sales during the second half of the year with the fourth quarter being our strongest.
For information on interest rate spreads and interest rate risk, see “Part II – Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk – Interest Rate Risk on Fixed Insurance Businesses – Falling Rates” and “Part I – Item 1A. Risk Factors – Market Conditions – Changes in interest rates and sustained low interest rates may cause interest rate spreads to decrease and changes in interest rates may also result in increased contract withdrawals” in our 2018 Form 10-K.
52
Details underlying the results for Group Protection (in millions) were as follows:
|
|||||||
|
For the Three |
||||||
|
Months Ended |
||||||
|
March 31, |
||||||
|
2019 |
2018 |
|||||
Operating Revenues |
|||||||
Insurance premiums |
$ |
1,023 |
$ |
508 | |||
Net investment income |
74 | 40 | |||||
Other revenues (1) |
41 | 5 | |||||
Total operating revenues |
1,138 | 553 | |||||
Operating Expenses |
|||||||
Interest credited |
1 | 1 | |||||
Benefits |
753 | 326 | |||||
Commissions and other expenses |
314 | 189 | |||||
Total operating expenses |
1,068 | 516 | |||||
Income (loss) from operations before taxes |
70 | 37 | |||||
Federal income tax expense (benefit) |
15 | 8 | |||||
Income (loss) from operations |
$ |
55 |
$ |
29 |
(1) |
Consists of revenue from third parties for administrative services performed, which has a corresponding partial offset in commissions and other expenses. |
Comparison of the Three Months Ended March 31, 2019 to 2018
Income from operations for this segment increased due primarily to the inclusion of the results of the Liberty Group Business (see “Additional Information” below for more information).
Additional Information
Income from operations for the three months ended March 31, 2019, includes activity from the Liberty Group Business acquired on May 1, 2018. The acquisition resulted in increases in all pre-tax line items presented in the table above. For more information about our acquisition, see Note 3 in our 2018 Form 10-K and Note 3 herein.
For information about the effect of the loss ratio sensitivity on our income (loss) from operations, see “Part II – Item 7. Management’s Narrative Analysis of the Results of Operations – Results of Group Protection – Additional Information” in our 2018 Form 10-K.
Our life and disability loss ratios for the three months ended March 31, 2019, were 71.4% and 75.4%, respectively, and 63.2% and 61.9%, respectively, for the three months ended March 31, 2018. When comparing our life and disability loss ratios for the three months ended March 31, 2019 and 2018, the increase in 2019 was driven primarily by the inclusion of the Liberty Group Business as we combined two blocks of business with different loss characteristics.
Generally, we experience higher mortality in the first quarter of the year and higher disability claims in the fourth quarter of the year due to the seasonality of claims.
Generally, we have higher DAC and VOBA amortization in the first quarter of the year due to a significant number of policies renewing in the quarter.
For information on the effects of current interest rates on our long-term disability claim reserves, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk – Interest Rate Risk – Effect of Interest Rate Sensitivity” in our 2018 Form 10-K.
53
Details underlying the results for Other Operations (in millions) were as follows:
|
|||||||
|
For the Three |
||||||
|
Months Ended |
||||||
|
March 31, |
||||||
|
2019 |
2018 |
|||||
Operating Revenues |
|||||||
Net investment income |
48 | 54 | |||||
Other revenues |
8 | 3 | |||||
Total operating revenues |
56 | 57 | |||||
Operating Expenses |
|||||||
Interest credited |
15 | 15 | |||||
Benefits |
20 | 17 | |||||
Other expenses |
20 | 7 | |||||
Interest and debt expense |
38 | 32 | |||||
Strategic digitization expense |
15 | 15 | |||||
Total operating expenses |
108 | 86 | |||||
Income (loss) from operations before taxes |
(52 |
) |
(29 |
) |
|||
Federal income tax expense (benefit) |
(19 |
) |
(11 |
) |
|||
Income (loss) from operations |
$ |
(33 |
) |
$ |
(18 |
) |
Comparison of the Three Months Ended March 31, 2019 to 2018
Loss from operations for Other Operations increased due primarily to the following:
· |
Higher other expenses due to the effect of changes in LNC’s stock price on our deferred compensation plans, as the stock price significantly increased during the first quarter of 2019 compared to a decrease during the first quarter of 2018. |
· |
Lower net investment income, net of interest credited, related to lower average invested assets driven by a decline in excess capital retained by Other Operations. |
· |
Higher interest and debt expense due to an increase in both average balances of outstanding debt and rates. |
The increase in loss from operations was partially offset by more favorable federal income tax benefits driven by excess tax benefits associated with stock-based compensation.
Additional Information
For information on our strategic digitization initiative, see “Part II – Item 7. Management’s Narrative Analysis of the Results of Operations – Results of Consolidated Operations – Additional Information” in our 2018 Form 10-K.
54
Details underlying realized gain (loss), after-DAC(1) (in millions) were as follows:
|
|||||||
|
For the Three |
||||||
|
Months Ended |
||||||
|
March 31, |
||||||
|
2019 |
2018 |
|||||
Components of Realized Gain (Loss), Pre-Tax |
|||||||
Total operating realized gain (loss) |
$ |
40 |
$ |
49 | |||
Total excluded realized gain (loss) |
(391 |
) |
(27 |
) |
|||
Total realized gain (loss), pre-tax |
$ |
(351 |
) |
$ |
22 | ||
|
|||||||
Components of Excluded Realized Gain (Loss), |
|||||||
After-Tax |
|||||||
Realized gain (loss) related to certain investments |
$ |
(15 |
) |
$ |
(21 |
) |
|
Gain (loss) on the mark-to-market on certain instruments (2) |
(187 |
) |
84 | ||||
GLB fees ceded to LNBAR and attributed fees |
(85 |
) |
(82 |
) |
|||
Indexed annuity forward-starting option |
(22 |
) |
(3 |
) |
|||
Total excluded realized gain (loss), after-tax |
$ |
(309 |
) |
$ |
(22 |
) |
(1) |
DAC refers to the associated amortization of DAC, VOBA, DSI and DFEL and changes in other contract holder funds and funds withheld reinsurance assets and liabilities. |
(2) |
Includes activity with LNBAR. As of March 31, 2019, the Modco investment portfolio consisted primarily of fixed maturity securities classified as AFS with changes in fair value recorded in OCI. Since the corresponding and offsetting changes in fair value of the embedded derivatives related to the Modco investment portfolio are recorded in realized gain (loss), volatility can occur within net income (loss). We expect the Modco investments classified as AFS will be sold and replaced with securities classified as trading securities, with changes in fair value recorded in realized gain (loss), consistent with the recorded fair value changes in the Modco embedded derivatives. See Note 8 for more information. |
Comparison of the Three Months Ended March 31, 2019 to 2018
We had higher realized losses due primarily to unfavorable changes in the fair value of embedded derivatives related to certain Modco arrangements.
For factors that could cause actual results to differ materially from those set forth in this section, see “Forward-Looking Statements – Cautionary Language” above and “Part I – Item 1A. Risk Factors” in our 2018 Form 10-K.
Operating Realized Gain (Loss)
See “Part II – Item 7. Management’s Narrative Analysis of the Results of Operations – Realized Gain (Loss) – Operating Realized Gain (Loss)” in our 2018 Form 10-K for a discussion of our operating realized gain (loss).
Realized Gain (Loss) Related to Certain Investments
See “Part II – Item 7. Management’s Narrative Analysis of the Results of Operations – Realized Gain (Loss) – Realized Gain (Loss) Related to Certain Investments” in our 2018 Form 10-K for a discussion of our realized gain (loss) related to certain investments.
Gain (Loss) on the Mark-to-Market on Certain Instruments
See “Part II – Item 7. Management’s Narrative Analysis of the Results of Operations – Realized Gain (Loss) – Gain (Loss) on the Mark-to-Market on Certain Instruments” in our 2018 Form 10-K for a discussion of the mark-to-market on certain instruments.
GLB Fees Ceded to LNBAR and Attributed Fees
See “Part II – Item 7. Management’s Narrative Analysis of the Results of Operations – Realized Gain (Loss) – GLB Fees Ceded to LNBAR and Attributed Fees” in our 2018 Form 10-K for a discussion of our guaranteed living benefit (“GLB”) fees ceded to LNBAR and attributed fees.
55
Indexed Annuity Forward-Starting Option
See “Part II – Item 7. Management’s Narrative Analysis of the Results of Operations – Realized Gain (Loss) – Indexed Annuity Forward-Starting Option” in our 2018 Form 10-K for a discussion of our indexed annuity forward-starting option.
REVIEW OF CONSOLIDATED FINANCIAL CONDITION
Liquidity and Capital Resources
Sources of Liquidity and Cash Flow
Liquidity refers to the ability of an enterprise to generate adequate amounts of cash from its normal operations to meet cash requirements with a prudent margin of safety. Our principal sources of cash flow from operating activities are insurance premiums and fees and investment income, while sources of cash flows from investing activities result from maturities and sales of invested assets. Our operating activities (used) provided cash of $(1.6) billion and $370 million for the three months ended March 31, 2019 and 2018, respectively. The use of cash flows from operating activities for the three months ended March 31, 2019, was primarily driven by purchases of trading securities in repositioning a portion of a Modco investment portfolio from AFS securities to trading securities. As a result, the cash outflows from operating activities were largely offset by sales of AFS securities within investing activities. See Note 8 for more information. When considering our liquidity and cash flow, it is important to distinguish between our needs, the needs of our insurance subsidiaries and the needs of the holding company, LNC. As a holding company with no operations of its own, LNC derives its cash primarily from its operating subsidiaries.
Statutory Capital and Surplus
Our regulatory capital levels are also affected by statutory accounting rules, which are subject to change by each applicable insurance regulator. Our term products and UL products containing secondary guarantees require reserves calculated pursuant to XXX and AG38, respectively. As discussed in “Part I – Item 1A. Risk Factors – Legislative, Regulatory, and Tax – Attempts to mitigate the impact of Regulation XXX and Actuarial Guideline 38 may fail in whole or in part resulting in an adverse effect on our financial condition and result of operations” in our 2018 Form 10-K, we employ strategies to reduce the strain caused by XXX and AG38 by reinsuring the business to reinsurance captives. Our captive reinsurance subsidiaries and LNBAR provide a mechanism for financing a portion of the excess reserve amounts in a more efficient manner. We use long-dated letters of credit (“LOCs”) and debt financing as well as other financing strategies to finance those reserves. Included in the LOCs issued as of March 31, 2019, was approximately $2.3 billion of long-dated LOCs issued to support inter-company and affiliate reinsurance arrangements for UL products containing secondary guarantees ($350 million will expire in 2019 and $1.9 billion relates to arrangements that will expire by 2031). For information on the LOCs, see the credit facilities table in Note 13 in our 2018 Form 10-K. Our captive reinsurance subsidiaries and LNBAR have also issued long-term notes of $3.1 billion to finance a portion of the excess reserves as of March 31, 2019; of this amount, $632 million involve exposure to VIEs. For information on these long-term notes issued by our captive reinsurance subsidiaries, see Note 4 in our 2018 Form 10-K. We have also used the proceeds from LNC’s senior note issuances of $875 million to execute long-term structured solutions primarily supporting reinsurance of UL products containing secondary guarantees. LOCs and related capital market solutions lower the capital effect of term products and UL products containing secondary guarantees. While we believe we have sufficient capital to support the statutory reserves on this business, an inability to obtain efficient capital market solutions could affect our returns on these types of products.
Our captive reinsurance subsidiaries and LNBAR free up capital we can use for any number of purposes, including paying dividends to LNC, our Parent Company. The National Association of Insurance Commissioners’ (“NAIC”) adoption of the Valuation Manual that defines a principles-based reserving framework for newly issued life insurance policies was effective January 1, 2017. Principles-based reserving places a greater weight on our past experience and anticipated future experience as well as considers current economic conditions in calculating life insurance product reserves in accordance with statutory accounting principles. We adopted the framework for our newly issued term business in 2017 and will phase in the framework by January 1, 2020, for all other newly issued life insurance products. We believe that these changes may reduce our future use of captive reinsurance subsidiaries and LNBAR for reserve financing transactions for our life insurance business. For more information on principles-based reserving, see “Part I – Item 1. Business – Regulatory – Insurance Regulation” in our 2018 Form 10-K.
Statutory reserves established for variable annuity contracts and riders are sensitive to changes in the equity markets and are affected by the level of account values relative to the level of any guarantees, product design and reinsurance arrangements. As a result, the relationship between reserve changes and equity market performance is non-linear during any given reporting period. Market conditions greatly influence the ultimate capital required due to its effect on the valuation of reserves and derivative assets hedging these reserves. We also utilize inter-company reinsurance arrangements to manage our hedge program for variable annuity guarantees. The NAIC is currently in the process of implementing changes to the statutory reserving, capital and accounting framework for variable annuities that will go into effect as of January 1, 2020. The NAIC is also considering modifications to the NAIC RBC C-1 capital charges for bonds, which may impact the level of the C-1 related RBC we are required to hold. For more information, see “Part I – Item 1A. Risk Factors – Federal Regulation – Changes in accounting standards issued by the Financial Accounting Standards Board or other standard-setting bodies may adversely affect our financial statements” in our 2018 Form 10-K.
56
We continue to analyze the use of our existing captive reinsurance structures, as well as additional third-party reinsurance arrangements, and our current hedging strategies relative to managing the effects of equity markets and interest rates on the statutory reserves, statutory capital and the dividend capacity of LNL and LLANY.
Financing Activities
For information about our short-term and long-term debt and our credit facilities and LOCs, see Note 13 in our 2018 Form 10-K.
We have not accounted for repurchase agreements, securities lending transactions, or other transactions involving the transfer of financial assets with an obligation to repurchase the transferred assets as sales. For information about our collateralized financing transactions on our investments, see “Payables for Collateral on Investments” in Note 5.
If current claims-paying ratings were downgraded in the future, terms in our derivative agreements may be triggered, which could negatively affect overall liquidity. For the majority of our counterparties, there is a termination event if our financial strength ratings drop below BBB-/Baa3 (Standard & Poor’s/Moody’s Investors Service). In addition, contractual selling agreements with intermediaries could be negatively affected, which could have an adverse effect on overall sales of annuities, life insurance and investment products. See “Part I – Item 1A. Risk Factors – Liquidity and Capital Position – A decrease in our capital and surplus may result in a downgrade to our insurer financial strength ratings” and “Part I – Item 1A. Risk Factors – Covenants and Ratings – A downgrade in our financial strength ratings could limit our ability to market products, increase the number or value of policies being surrendered and/or hurt our relationships with creditors” in our 2018 Form 10-K for more information. See “Part I – Item 1. Business – Financial Strength Ratings” in our 2018 Form 10-K for additional information on our current financial strength ratings.
Alternative Sources of Liquidity
In order to manage our capital more efficiently, we participate in an inter-company cash management program where LNL, and certain of our subsidiaries and certain affiliates, can lend to or borrow from the holding company to meet short-term borrowing needs. The cash management program is essentially a series of demand loans between LNC and participating subsidiaries that reduces overall borrowing costs by allowing LNC and its subsidiaries to access internal resources instead of incurring third-party transaction costs. As of March 31, 2019, we had a net outstanding receivable (payable) of $(561) million from (to) certain subsidiaries and affiliates in the inter-company cash management program. Loans under the cash management program are permitted under applicable insurance laws subject to certain restrictions. We and our New Hampshire-domiciled insurance subsidiary are subject to a borrowing and lending limit of, currently, 3% of the insurance company’s admitted assets as of its most recent year end. For our New York-domiciled insurance subsidiary, it may borrow from LNC less than 2% of its admitted assets as of the last year end but may not lend any amounts to LNC.
We, by virtue of our general account fixed-income investment holdings, can access liquidity through securities lending programs and repurchase agreements. We are a member of the Federal Home Loan Bank of Indianapolis (“FHLBI”). Membership allows us access to the FHLBI’s financial services, including the ability to obtain loans and to issue funding agreements as an alternative source of liquidity that are collateralized by qualifying mortgage-related assets, agency securities or U.S. Treasury securities. We had an estimated maximum borrowing capacity of $5.0 billion under the FHLBI facility as of March 31, 2019. Borrowings under this facility are subject to the FHLBI’s discretion and require the availability of qualifying assets at LNL. As of March 31, 2019, we had investments with a carrying value of $4.7 billion out on loan or subject to repurchase agreements. The cash received in our securities lending programs and repurchase agreements is typically invested in cash equivalents, short-term investments or fixed maturity securities. For additional details, see “Payables for Collateral on Investments” in Note 5.
Cash Flows from Collateral on Derivatives
Our cash flows associated with collateral received from and posted with counterparties change as the market value of the underlying derivative contract changes. As the value of a derivative asset decreases (or increases), the collateral required to be posted by our counterparties would also decrease (or increase). Likewise, when the value of a derivative liability decreases (or increases), the collateral we are required to post to our counterparties would also decrease (or increase). For the three months ended March 31, 2019, our collateral payable for derivative investments increased due primarily to decreasing interest rates that increased the fair values of our associated over-the-counter derivative investments. In the event of adverse changes in fair value of our derivative instruments, we may need to post collateral with a counterparty if our net derivative liability position reaches certain contractual levels. If we do not have sufficient high quality securities or cash and invested cash to provide as collateral, we have liquidity sources, as discussed above, to leverage that would be eligible for collateral posting. For additional information, see “Credit Risk” in Note 6.
Uses of Capital
Our principal uses of cash are to pay policy claims and benefits, operating expenses, commissions and taxes, to purchase new investments, to purchase reinsurance, to fund policy surrenders and withdrawals, to pay dividends to LNC and to repay debt.
57
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We analyze and manage the risks arising from market exposures of financial instruments, as well as other risks, in an integrated asset-liability management process that considers diversification. We have exposures to several market risks including interest rate risk, equity market risk, credit risk and, to a lesser extent, foreign currency exchange risk. As of March 31, 2019, there have been no material changes in our economic exposure to these market risks since December 31, 2018. For information on these market risks, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in our 2018 Form 10-K.
Item 4. Controls and Procedures
Conclusions Regarding Disclosure Controls and Procedures
We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including our President (the principal executive officer) and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. As of the end of the period required by this report, we, under the supervision and with the participation of our President and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based on that evaluation, our President and Chief Financial Officer have concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to us and our consolidated subsidiaries required to be disclosed in our periodic reports under the Exchange Act. We acquired Liberty Life Assurance Company of Boston (“Liberty Life”) on May 1, 2018, and have not yet included Liberty Life in our assessment of the effectiveness of our internal control over financial reporting. Accordingly, pursuant to the SEC’s general guidance that an assessment of a recently acquired business may be omitted from the scope of an assessment for one year from the date of acquisition, the scope of our assessment of the effectiveness of our disclosure controls and procedures for the quarter ended March 31, 2019, did not include an assessment of those disclosure controls and procedures that are included within internal control over financial reporting as it relates to Liberty Life. See Note 3 for additional information.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2019, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
A control system, no matter how well designed and operated, can provide only reasonable assurance that the control system’s objectives will be met. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
58
Cost of Insurance Litigation
Reference is made to Glover v. Connecticut General Life Insurance Company and The Lincoln National Life Insurance Company previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018. In response to the January 11, 2019, dismissal by the court of Plaintiff’s complaint in its entirety, Plaintiff filed a motion for leave to amend the complaint, which we have opposed.
See Note 11 in “Part I – Item 1” above for further discussion regarding this and other contingencies.
In addition to the factors set forth in “Part I – Item 2. Management’s Narrative Analysis of the Results of Operations – Forward-Looking Statements – Cautionary Language” above, you should carefully consider the risks described under “Part I – Item 1A. Risk Factors” in our Form 10-K for the year ended December 31, 2018. Such risks and uncertainties are not the only ones facing our Company. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of these risks actually occur, our business, financial condition and results of operations could be materially affected. In that case, the value of our securities could decline substantially.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
The Exhibits included in this report are listed in the Exhibit Index beginning on page 60, which is incorporated herein by reference.
59
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Exhibit Index for the Report on Form 10-Q
For the Quarter Ended March 31, 2019
31.1 |
Certification of the President pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2 |
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32.1 |
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32.2 |
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101.INS |
XBRL Instance Document. |
101.SCH |
XBRL Taxonomy Extension Schema Document. |
101.CAL |
XBRL Taxonomy Extension Calculation Linkbase Document. |
101.LAB |
XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE |
XBRL Taxonomy Extension Presentation Linkbase Document. |
101.DEF |
XBRL Taxonomy Extension Definition Linkbase Document. |
60
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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THE LINCOLN NATIONAL LIFE INSURANCE COMPANY |
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Dated: May 6, 2019 |
By: |
/s/ Christine A. Janofsky |
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Christine A. Janofsky |
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Senior Vice President and Controller |
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(Authorized Signatory and Principal Accounting Officer) |
61
Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Dennis R. Glass, President, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q of The Lincoln National Life Insurance Company; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Dated: May 6, 2019 |
/s/ Dennis R. Glass |
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Name: Dennis R. Glass |
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Title: President |
Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
I, Randal J. Freitag, Executive Vice President and Chief Financial Officer, certify that:
1.I have reviewed this quarterly report on Form 10-Q of The Lincoln National Life Insurance Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Dated: May 6, 2019 |
/s/ Randal J. Freitag |
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Name: Randal J. Freitag |
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Title: Executive Vice President and Chief Financial Officer |
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, the undersigned officer of The Lincoln National Life Insurance Company (the “Company”), hereby certifies that the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Dated: May 6, 2019 |
/s/ Dennis R. Glass |
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Name: Dennis R. Glass |
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Title: President |
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.
A signed original of this written statement required under Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Certification Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
Pursuant to 18 U.S.C. § 1350, the undersigned officer of The Lincoln National Life Insurance Company (the “Company”), hereby certifies that the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, (the “Report”) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Dated: May 6, 2019 |
/s/ Randal J. Freitag |
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Name: Randal J. Freitag |
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Title: Executive Vice President and Chief Financial Officer |
The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Report or as a separate disclosure document.
A signed original of this written statement required under Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Document And Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2019 |
May 01, 2019 |
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Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2019 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2019 | |
Entity Registrant Name | LINCOLN NATIONAL LIFE INSURANCE CO /IN/ | |
Entity Central Index Key | 0000726865 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding | 10,000,000 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Available-for-sale securities, at fair value: | ||
Fixed maturity securities (amortized cost) | $ 91,669 | $ 91,219 |
Stockholder’s Equity | ||
Common stock - shares authorized (in shares) | 10,000,000 | 10,000,000 |
Common stock - shares issued (in shares) | 10,000,000 | 10,000,000 |
Common stock - shares outstanding (in shares) | 10,000,000 | 10,000,000 |
Consolidated Statements Of Stockholders' Equity - USD ($) $ in Millions |
Common Stock [Member] |
Retained Earnings [Member] |
Accumulated Other Comprehensive Income (Loss) [Member] |
Total |
---|---|---|---|---|
Balance as of beginning-of-year at Dec. 31, 2017 | $ 10,713 | $ 4,405 | $ 3,327 | |
Cumulative effect from adoption of new accounting standards at Dec. 31, 2017 | (644) | 644 | ||
Stock compensation/issued for benefit plans | (1) | |||
Net income (loss) | 407 | $ 407 | ||
Other comprehensive income (loss), net of tax | (1,614) | (1,614) | ||
Balance as of end-of-period at Mar. 31, 2018 | 10,712 | 4,168 | 2,357 | 17,237 |
Balance as of beginning-of-year at Dec. 31, 2018 | 11,237 | 4,423 | 659 | 16,319 |
Stock compensation/issued for benefit plans | 3 | |||
Net income (loss) | 133 | 133 | ||
Dividends declared | (200) | |||
Other comprehensive income (loss), net of tax | 1,995 | 1,995 | ||
Balance as of end-of-period at Mar. 31, 2019 | $ 11,240 | $ 4,356 | $ 2,654 | $ 18,250 |
Nature of Operations and Basis of Presentation |
3 Months Ended |
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Mar. 31, 2019 | |
Nature of Operations and Basis of Presentation [Abstract] | |
Nature of Operations and Basis of Presentation | THE LINCOLN NATIONAL LIFE INSURANCE COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Nature of Operations and Basis of Presentation Nature of Operations The Lincoln National Life Insurance Company (“LNL” or the “Company,” which also may be referred to as “we,” “our” or “us”), a wholly-owned subsidiary of Lincoln National Corporation (“LNC” or the “Parent Company”), is domiciled in the state of Indiana. We own 100% of the outstanding common stock of two insurance company subsidiaries, Lincoln Life & Annuity Company of New York (“LLANY”) and Liberty Life Assurance Company of Boston (“Liberty Life”). We also own several non-insurance companies, including Lincoln Financial Distributors, our wholesale distributors, and Lincoln Financial Advisors Corporation, part of LNC’s retail distributor, Lincoln Financial Network. Through our business segments, we sell a wide range of wealth protection, accumulation and retirement income products and solutions. These products primarily include fixed and indexed annuities, variable annuities, universal life insurance (“UL”), variable universal life insurance (“VUL”), linked-benefit UL, indexed universal life insurance (“IUL”), term life insurance, employer-sponsored retirement plans and services, and group life, disability and dental. LNL is licensed and sells its products throughout the U.S. and several U.S. territories. See Note 14 for additional information. Basis of Presentation The accompanying unaudited consolidated financial statements are prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for the Securities and Exchange Commission (“SEC”) Quarterly Report on Form 10-Q, including Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. As discussed in Note 3, on May 1, 2018, LNC and LNL completed the acquisition of Liberty Life. The information contained in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”), should be read in connection with the reading of these interim unaudited consolidated financial statements. Certain GAAP policies, which significantly affect the determination of financial condition, results of operations and cash flows, are summarized in our 2018 Form 10-K. In the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Operating results for the three months ended March 31, 2019, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019. All material inter-company accounts and transactions have been eliminated in consolidation.
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New Accounting Standards |
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New Accounting Standards [Abstract] | |||||||||||||||||||||||||||||||||||||
New Accounting Standards |
2. New Accounting Standards Adoption of New Accounting Standards The following table provides a description of our adoption of new Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”) and the impact of the adoption on our financial statements. ASUs not listed below were assessed and determined to be either not applicable or insignificant in presentation or amount.
Future Adoption of New Accounting Standards The following table provides a description of future adoptions of new accounting standards that may have an impact on our financial statements when adopted:
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Acquisition |
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Acquisition | On May 1, 2018, we completed the acquisition of 100% of the capital stock of Liberty Life, which operates a group benefits business (“Liberty Group Business”) and individual life and individual and group annuity business (the “Liberty Life Business”), from Liberty Mutual Insurance Company in a transaction accounted for under the acquisition method of accounting pursuant to Business Combinations Topic 805 (“Topic 805”). The acquisition expanded the scale and capabilities of the Group Protection business while further diversifying the Company’s sources of earnings. In connection with the acquisition and pursuant to the Master Transaction Agreement (“MTA”), dated January 18, 2018, which was attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed on January 22, 2018, Liberty Life sold the Liberty Life Business on May 1, 2018, by entering into reinsurance agreements and related ancillary documents (including administrative services agreements and transition services agreements) with Protective Life Insurance Company and its wholly-owned subsidiary, Protective Life and Annuity Insurance Company (together with Protective Life Insurance Company, “Protective”), providing for the reinsurance and administration of the Liberty Life Business. The acquisition date fair values of certain assets and liabilities, including future contract benefits, intangible assets and related weighted average expected lives, commercial mortgage loans, reinsurance recoverables and deferred income taxes, are provisional and subject to revision within one year of the acquisition date. Since the May 1, 2018 acquisition date, we have adjusted provisional assets acquired by $(5) million and provisional liabilities acquired by $23 million for an increase in provisional goodwill of $28 million. Under the terms of the MTA, a final balance sheet will be agreed upon at a later date. As such, our estimates of fair values are pending finalization, which may result in adjustments to goodwill. The following table presents the preliminary fair values (in millions) of the net assets acquired related to the Liberty Group Business as of March 31, 2019:
Financial Information The following unaudited pro forma condensed consolidated results of operations of the Company assume that the acquisition of Liberty Life was completed on January 1, 2017 (in millions):
Pro forma adjustments include the revenue and net income of the acquired business for each period as well as amortization of identifiable intangible assets acquired and the fair value adjustment to acquired insurance reserves and investments. Other pro forma adjustments include the impact of reflecting acquisition and integration costs and investment expenses directly attributable to the business combination in 2017 instead of in 2018. Pro forma adjustments do not include retrospective adjustments to defer and amortize acquisition costs as would be recorded under our accounting policy.
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Variable Interest Entities |
3 Months Ended |
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Mar. 31, 2019 | |
Variable Interest Entities [Abstract] | |
Variable Interest Entities |
4. Variable Interest Entities Unconsolidated VIEs Structured Securities Through our investment activities, we make passive investments in structured securities issued by variable interest entities (“VIEs”) for which we are not the manager. These structured securities include our asset-backed securities (“ABS”), residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”) and collateralized loan obligations (“CLOs”). We have not provided financial or other support with respect to these VIEs other than our original investment. We have determined that we are not the primary beneficiary of these VIEs due to the relative size of our investment in comparison to the principal amount of the structured securities issued by the VIEs and the level of credit subordination that reduces our obligation to absorb losses or right to receive benefits. Our maximum exposure to loss on these structured securities is limited to the amortized cost for these investments. We recognize our variable interest in these VIEs at fair value on our Consolidated Balance Sheets. For information about these structured securities, see Note 5. Limited Partnerships and Limited Liability Companies We invest in certain limited partnerships (“LPs”) and limited liability companies (“LLCs”), including qualified affordable housing projects, that we have concluded are VIEs. We do not hold any substantive kick-out or participation rights in the LPs and LLCs, and we do not receive any performance fees or decision maker fees from the LPs and LLCs. Based on our analysis of the LPs and LLCs, we are not the primary beneficiary of the VIEs as we do not have the power to direct the most significant activities of the LPs and LLCs. The carrying amounts of our investments in the LPs and LLCs are recognized in other investments on our Consolidated Balance Sheets and were $1.7 billion as of March 31, 2019, and December 31, 2018. Included in these carrying amounts are our investments in qualified affordable housing projects, which were $18 million and $20 million as of March 31, 2019, and December 31, 2018, respectively. We do not have any contingent commitments to provide additional capital funding to these qualified affordable housing projects. We received returns from these qualified affordable housing projects in the form of income tax credits and other tax benefits of less than $1 million for the three months ended March 31, 2019 and 2018, which were recognized in federal income tax expense (benefit) on our Consolidated Statements of Comprehensive Income (Loss). Our exposure to loss is limited to the capital we invest in the LPs and LLCs, and there have been no indicators of impairment that would require us to recognize an impairment loss related to the LPs and LLCs as of March 31, 2019.
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Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments |
5. Investments Fixed Maturity AFS Securities The amortized cost, gross unrealized gains, losses and other-than-temporary impairment (“OTTI”) and fair value of fixed maturity AFS securities (in millions) were as follows:
The amortized cost and fair value of fixed maturity AFS securities by contractual maturities (in millions) as of March 31, 2019, were as follows:
Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations. The fair value and gross unrealized losses, including the portion of OTTI recognized in other comprehensive income (loss) (“OCI”), of fixed maturity AFS securities (dollars in millions), aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were as follows:
The fair value, gross unrealized losses, the portion of OTTI recognized in OCI (in millions) and number of fixed maturity AFS securities where the fair value had declined and remained below amortized cost by greater than 20% were as follows:
We regularly review our investment holdings for OTTI. Our gross unrealized losses, including the portion of OTTI recognized in OCI, on fixed maturity AFS securities decreased by $1.4 billion for the three months ended March 31, 2019. As discussed further below, we believe the unrealized loss position as of March 31, 2019, did not represent OTTI as (i) we did not intend to sell these fixed maturity AFS securities; (ii) it is not more likely than not that we will be required to sell the fixed maturity AFS securities before recovery of their amortized cost basis; and (iii) the estimated future cash flows were equal to or greater than the amortized cost basis of the debt securities. Based upon this evaluation as of March 31, 2019, management believes we have the ability to generate adequate amounts of cash from our normal operations (e.g., insurance premiums and fees and investment income) to meet cash requirements with a prudent margin of safety without requiring the sale of our temporarily-impaired securities. As of March 31, 2019, the unrealized losses associated with our corporate bond securities were attributable primarily to widening credit spreads and rising interest rates since purchase. We performed a detailed analysis of the financial performance of the underlying issuers and determined that we expected to recover the entire amortized cost of each temporarily-impaired security. As of March 31, 2019, the unrealized losses associated with our mortgage-backed securities (“MBS”) and ABS were attributable primarily to widening credit spreads and rising interest rates since purchase. We assessed for credit impairment using a cash flow model that incorporates key assumptions including default rates, severities and prepayment rates. We estimated losses for a security by forecasting the underlying loans in each transaction. The forecasted loan performance was used to project cash flows to the various tranches in the structure, as applicable. Our forecasted cash flows also considered, as applicable, independent industry analyst reports and forecasts and other independent market data. Based upon our assessment of the expected credit losses of the security given the performance of the underlying collateral compared to our subordination or other credit enhancement, we expected to recover the entire amortized cost of each temporarily-impaired security. As of March 31, 2019, the unrealized losses associated with our hybrid and redeemable preferred securities were attributable primarily to wider credit spreads caused by illiquidity in the market and subordination within the capital structure, as well as credit risk of underlying issuers. For our hybrid and redeemable preferred securities, we evaluated the financial performance of the underlying issuers based upon credit performance and investment ratings and determined that we expected to recover the entire amortized cost of each temporarily-impaired security. Changes in the amount of credit loss of OTTI recognized in net income (loss) where the portion related to other factors was recognized in OCI (in millions) on fixed maturity AFS securities were as follows:
During the three months ended March 31, 2019 and 2018, we recorded credit losses on securities for which an OTTI was not previously recognized as we determined the cash flows expected to be collected would not be sufficient to recover the entire amortized cost basis of the debt security. The credit losses we recorded on securities for which an OTTI was not previously recognized were attributable primarily to one or a combination of the following reasons:
We recognize the OTTI attributed to the noncredit portion as a separate component in OCI referred to as unrealized OTTI on fixed maturity AFS securities. Determination of Credit Losses on Corporate Bonds As of March 31, 2019, and December 31, 2018, we reviewed our corporate bond portfolio for potential shortfalls in contractual principal and interest based on numerous subjective and objective inputs. The factors used to determine the amount of credit loss for each individual security, include, but are not limited to, near-term risk, substantial discrepancy between book and market value, sector or company-specific volatility, negative operating trends and trading levels wider than peers. Credit ratings express opinions about the credit quality of a security. Securities rated investment grade, those rated BBB- or higher by Standard & Poor’s (“S&P”) Rating Services or Baa3 or higher by Moody’s Investors Service (“Moody’s”), are generally considered by the rating agencies and market participants to be low credit risk. As of March 31, 2019, and December 31, 2018, 96% of the fair value of our corporate bond portfolio was rated investment grade. As of March 31, 2019, and December 31, 2018, the portion of our corporate bond portfolio rated below investment grade had an amortized cost of $3.2 billion and $3.1 billion, respectively, and a fair value of $3.1 billion and $2.9 billion, respectively. Based upon the analysis discussed above, we believe as of March 31, 2019, and December 31, 2018, that we would recover the amortized cost of each corporate bond. Determination of Credit Losses on MBS and ABS As of March 31, 2019, and December 31, 2018, default rates were projected by considering underlying MBS and ABS loan performance and collateral type. Projected default rates on existing delinquencies vary depending on loan type and severity of delinquency status. In addition, we estimate the potential contributions of currently performing loans that may become delinquent in the future based on the change in delinquencies and loan liquidations experienced in the recent history. Finally, we develop a default rate timing curve by aggregating the defaults for all loans in the pool (delinquent loans, foreclosure and real estate owned and new delinquencies from currently performing loans) and the associated loan-level loss severities. We use certain available loan characteristics such as lien status, loan sizes and occupancy to estimate the loss severity of loans. Second lien loans are assigned 100% severity, if defaulted. For first lien loans, we assume a minimum of 30% severity with higher severity assumed for investor properties and further adjusted by housing price assumptions. With the default rate timing curve and loan-level loss severity, we derive the future expected credit losses. Mortgage Loans on Real Estate The following provides the current and past due composition of our mortgage loans on real estate (in millions):
We establish a valuation allowance to provide for the risk of credit losses inherent in our portfolio. The valuation allowance includes specific valuation allowances for loans that are deemed to be impaired as well as general valuation allowances for pools of loans with similar risk characteristics where a property risk or market specific risk has not been identified but for which we anticipate a loss has occurred. For our commercial mortgage loans, no specifically identified loans were impaired as of March 31, 2019, or December 31, 2018. For our residential mortgage loans, no specifically identified loans were impaired as of March 31, 2019, or December 31, 2018. The general allowance established on residential mortgage loans as of March 31, 2019, was $1 million. As of December 31, 2018, the general allowance established on residential mortgage loans was less than $1 million. The changes in the valuation allowance associated with impaired commercial mortgage loans on real estate (in millions) were as follows:
Additional information related to impaired commercial mortgage loans on real estate (in millions) was as follows:
We use the loan-to-value and debt-service coverage ratios as credit quality indicators for our commercial mortgage loans on real estate (dollars in millions) as follows:
We use loan performance status as the primary credit quality indicator for our residential mortgage loans on real estate (dollars in millions) as follows:
Our commercial mortgage loan portfolio is geographically diversified throughout the U.S. with the largest concentrations in California, which accounted for 23% of commercial mortgage loans on real estate as of March 31, 2019, and December 31, 2018, and Texas, which accounted for 12% of commercial mortgage loans on real estate as of March 31, 2019, and December 31, 2018. Our residential mortgage loan portfolio is geographically diversified throughout the U.S. with the largest concentrations in California, which accounted for 30% and 34% of residential mortgage loans on real estate as of March 31, 2019, and December 31, 2018, respectively, and Florida, which accounted for 19% of residential mortgage loans on real estate as of March 31, 2019, and December 31, 2018. Alternative Investments As of March 31, 2019, and December 31, 2018, alternative investments included investments in 243 and 234 different partnerships, respectively, and the portfolio represented approximately 2% and 1% of our overall invested assets, respectively.
Realized Gain (Loss) Details underlying realized gain (loss) (in millions) reported on our Consolidated Statements of Comprehensive Income (Loss) were as follows:
Details underlying write-downs taken as a result of OTTI that were recognized in net income (loss) and included in realized gain (loss) on fixed maturity AFS securities above and the portion of OTTI recognized in OCI (in millions) were as follows:
Payables for Collateral on Investments The carrying value of the payables for collateral on investments included on our Consolidated Balance Sheets and the fair value of the related investments or collateral (in millions) consisted of the following:
Increase (decrease) in payables for collateral on investments (in millions) consisted of the following:
We have elected not to offset our repurchase agreements and securities lending transactions in our financial statements. The remaining contractual maturities of repurchase agreements and securities lending transactions accounted for as secured borrowings (in millions) were as follows:
We accept collateral in the form of securities in connection with repurchase agreements. In instances where we are permitted to sell or re-pledge the securities received, we report the fair value of the collateral received and a related obligation to return the collateral in the financial statements. In addition, we receive securities in connection with securities borrowing agreements, which we are permitted to sell or re-pledge. As of March 31, 2019, the fair value of all collateral received that we are permitted to sell or re-pledge was $548 million. As of March 31, 2019, we have re-pledged $536 million of this collateral to cover initial margin and over-the-counter collateral requirements on certain derivative investments. Investment Commitments As of March 31, 2019, our investment commitments were $2.0 billion, which included $823 million of LPs, $661 million of mortgage loans on real estate and $528 million of private placement securities. Concentrations of Financial Instruments As of March 31, 2019, and December 31, 2018, our most significant investments in one issuer were our investments in securities issued by the Federal Home Loan Mortgage Corporation with a fair value of $1.3 billion and $1.4 billion, respectively, or 1% of our invested assets portfolio, and our investments in securities issued by the Federal National Mortgage Association with a fair value of $1.3 billion and $1.2 billion, respectively, or 1% of our invested assets portfolio. These concentrations include fixed maturity AFS, trading and equity securities. As of March 31, 2019, and December 31, 2018, our most significant investments in one industry were our investments in securities in the financial services industry with a fair value of $17.1 billion and $16.0 billion, respectively, or 14% of our invested assets portfolio, and our investments in securities in the consumer non-cyclical industry with a fair value of $14.3 billion and $13.8 billion, respectively, or 12% of our invested assets portfolio. These concentrations include fixed maturity AFS, trading and equity securities.
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Derivative Instruments |
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Derivative Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments |
6. Derivative Instruments
We maintain an overall risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings that are caused by interest rate risk, foreign currency exchange risk, equity market risk, basis risk and credit risk. We assess these risks by continually identifying and monitoring changes in our exposures that may adversely affect expected future cash flows and by evaluating hedging opportunities. Derivative activities are monitored by various management committees. The committees are responsible for overseeing the implementation of various hedging strategies that are developed through the analysis of financial simulation models and other internal and industry sources. The resulting hedging strategies are incorporated into our overall risk management strategies. See Note 13 for additional disclosures related to the fair value of our derivative instruments and Note 4 for derivative instruments related to our consolidated VIEs. We adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, in 2019. See Note 2 for additional information. Interest Rate Contracts We use derivative instruments as part of our interest rate risk management strategy. These instruments are economic hedges unless otherwise noted and include: Forward-Starting Interest Rate Swaps We use forward-starting interest rate swaps designated and qualifying as cash flow hedges to hedge our exposure to interest rate fluctuations related to the forecasted purchases of certain assets. We also use forward-starting interest rate swaps to hedge the interest rate exposure within our life products related to the forecasted purchases of certain assets. Interest Rate Cap Corridors We use interest rate cap corridors to provide a level of protection from the effect of rising interest rates for certain life insurance products and annuity contracts. Interest rate cap corridors involve purchasing an interest rate cap at a specific cap rate and selling an interest rate cap with a higher cap rate. For each corridor, the amount of quarterly payments, if any, is determined by the rate at which the underlying index rate resets above the original capped rate. The corridor limits the benefit the purchaser can receive as the related interest rate index rises above the higher capped rate. There is no additional liability to us other than the purchase price associated with the interest rate cap corridor. Interest Rate Futures We use interest rate futures contracts to hedge the liability exposure on certain options in variable annuity products. These futures contracts require payment between our counterparty and us on a daily basis for changes in the futures index price. Interest Rate Swap Agreements We use interest rate swap agreements to hedge the liability exposure on certain options in variable annuity products. We also use interest rate swap agreements designated and qualifying as cash flow hedges to hedge the interest rate risk of floating-rate bond coupon payments by replicating a fixed-rate bond. Finally, we use interest rate swap agreements designated and qualifying as fair value hedges to hedge against changes in the fair value of certain fixed maturity securities due to interest rate risks. Reverse Treasury Locks We use reverse treasury locks designated and qualifying as cash flow hedges to hedge the interest rate exposure related to the anticipated purchase of fixed-rate securities or the anticipated future cash flows of floating-rate fixed maturity securities due to changes in interest rates. These derivatives are primarily structured to hedge interest rate risk inherent in the assumptions used to price certain liabilities. Foreign Currency Contracts We use derivative instruments as part of our foreign currency risk management strategy. These instruments are economic hedges unless otherwise noted and include: Currency Futures We use currency futures to hedge foreign exchange risk associated with certain options in variable annuity products. Currency futures exchange one currency for another at a specified date in the future at a specified exchange rate. Foreign Currency Swaps We use foreign currency swaps designated and qualifying as cash flow hedges, to hedge foreign exchange risk of investments in fixed maturity securities denominated in foreign currencies. A foreign currency swap is a contractual agreement to exchange one currency for another at specified dates in the future at a specified exchange rate. Equity Market Contracts We use derivative instruments as part of our equity market risk management strategy that are economic hedges and include: Call Options Based on the S&P 500 We use call options to hedge the liability exposure on certain options in variable annuity products. Our indexed annuity and IUL contracts permit the holder to elect an interest rate return or an equity market component, where interest credited to the contracts is linked to the performance of the S&P 500. Contract holders may elect to rebalance index options at renewal dates, either annually or biannually. As of each renewal date, we have the opportunity to re-price the indexed component by establishing participation rates, caps, spreads and specified rates, subject to contractual guarantees. We purchase call options that are highly correlated to the portfolio allocation decisions of our contract holders, such that we are economically hedged with respect to equity returns for the current reset period. Consumer Price Index Swaps We use consumer price index swaps to hedge the liability exposure on certain options in fixed annuity products. Consumer price index swaps are contracts entered into at no cost and whose payoff is the difference between the consumer price index inflation rate and the fixed-rate determined as of inception. Equity Futures We use equity futures contracts to hedge the liability exposure on certain options in variable annuity products. These futures contracts require payment between our counterparty and us on a daily basis for changes in the futures index price. Put Options We use put options to hedge the liability exposure on certain options in variable annuity products. Put options are contracts that require counterparties to pay us at a specified future date the amount, if any, by which a specified equity index is less than the strike rate stated in the agreement, applied to a notional amount. Total Return Swaps We use total return swaps to hedge the liability exposure on certain options in variable annuity products. In addition, we use total return swaps to hedge a portion of the liability related to our deferred compensation plans. We receive the total return on a portfolio of indexes and pay a floating-rate of interest. Variance Swaps We use variance swaps to hedge the liability exposure on certain options in variable annuity products. Variance swaps are contracts entered into at no cost whose payoff is the difference between the realized variance rate of an underlying index and the fixed variance rate determined as of inception of the contract. Credit Contracts We use derivative instruments as part of our credit risk management strategy that are economic hedges and include: Credit Default Swaps – Buying Protection We use credit default swaps to hedge the liability exposure on certain options in variable annuity products. We buy credit default swaps to hedge against a drop in bond prices due to credit concerns of certain bond issuers. A credit default swap allows us to put the bond back to the counterparty at par upon a default event by the bond issuer. A default event is defined as bankruptcy, failure to pay, obligation acceleration or restructuring. Credit Default Swaps – Selling Protection We use credit default swaps to hedge the liability exposure on certain options in variable annuity products. We sell credit default swaps to offer credit protection to contract holders and investors. The credit default swaps hedge the contract holders and investors against a drop in bond prices due to credit concerns of certain bond issuers. A credit default swap allows the investor to put the bond back to us at par upon a default event by the bond issuer. A default event is defined as bankruptcy, failure to pay, obligation acceleration or restructuring. Embedded Derivatives We have embedded derivatives that include: GLB Reserves Embedded Derivatives We use a hedging strategy designed to mitigate the risk and income statement volatility caused by changes in the equity markets, interest rates and volatility associated with GLBs offered in our variable annuity products, including products with GWB and GIB features. These GLB features are reinsured among various reinsurance counterparties on either a modified coinsurance (“Modco”) or coinsurance basis. We cede a portion of the GLB features to Lincoln National Reinsurance Company (Barbados) Limited (“LNBAR”), a wholly-owned subsidiary of LNC on a funds withheld coinsurance basis. The funds withheld arrangement includes a dynamic hedging strategy designed to mitigate selected risks. Changes in the value of the hedge contracts due to changes in equity markets, interest rates and implied volatilities hedge the income statement effect of changes in embedded derivative GLB reserves assumed by LNBAR caused by those same factors. We rebalance our hedge positions based upon changes in these factors as needed. While we actively manage our hedge positions, these hedge positions may not be totally effective in offsetting changes in the embedded derivative reserve assumed by LNBAR due to, among other things, differences in timing between when a market exposure changes and corresponding changes to the hedge positions, extreme swings in the equity markets and interest rates, market volatility, contract holder behavior, divergence between the performance of the underlying funds and the hedging indices, divergence between the actual and expected performance of the hedge instruments and our ability to purchase hedging instruments at prices consistent with our desired risk and return trade-off. However, the hedging results do not impact LNL due to a funds withheld agreement with LNBAR, which causes the financial impact of the derivatives, as well as the cash flow activity, to be reflected on LNBAR. Certain features of these guarantees have elements of both insurance benefits accounted for under the Financial Services – Insurance – Claim Costs and Liabilities for Future Policy Benefits Subtopic of the FASB ASC (“benefit reserves”) and embedded derivatives accounted for under the Derivatives and Hedging and the Fair Value Measurements and Disclosures Topics of the FASB ASC (“embedded derivative reserves”). We calculate the value of the benefit reserves and the embedded derivative reserves based on the specific characteristics of each GLB feature. Indexed Annuity and IUL Contracts Embedded Derivatives Our indexed annuity and IUL contracts permit the holder to elect an interest rate return or an equity market component, where interest credited to the contracts is linked to the performance of the S&P 500. Contract holders may elect to rebalance index options at renewal dates, either annually or biannually. As of each renewal date, we have the opportunity to re-price the indexed component by establishing participation rates, caps, spreads and specified rates, subject to contractual guarantees. We purchase S&P 500 call options that are highly correlated to the portfolio allocation decisions of our contract holders, such that we are economically hedged with respect to equity returns for the current reset period. Reinsurance Related Embedded Derivatives We have certain Modco arrangements and coinsurance with funds withheld reinsurance arrangements with embedded derivatives related to the withheld assets of the related funds. These derivatives are considered total return swaps with contractual returns that are attributable to various assets and liabilities associated with these reinsurance arrangements. We have derivative instruments with off-balance-sheet risks whose notional or contract amounts exceed the related credit exposure. Outstanding derivative instruments with off-balance-sheet risks (in millions) were as follows:
The maturity of the notional amounts of derivative instruments (in millions) was as follows:
The following amounts (in millions) were recorded on the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges:
The change in our unrealized gain (loss) on derivative instruments within accumulated other comprehensive income (loss) (“AOCI”) (in millions) was as follows:
The effects of qualifying and non-qualifying hedges (in millions) on the Consolidated Statements of Comprehensive Income (Loss) were as follows:
The gains (losses) on derivative instruments (in millions) recorded within income (loss) from continuing operations on our Consolidated Statements of Comprehensive Income (Loss) were as follows:
Gains (losses) recognized as a component of OCI (in millions) on derivative instruments designated and qualifying as cash flow hedges were as follows:
As of March 31, 2019, $39 million of the deferred net gains (losses) on derivative instruments in AOCI were expected to be reclassified to earnings during the next 12 months. This reclassification would be due primarily to interest rate variances related to our interest rate swap agreements. For the three months ended March 31, 2019 and 2018, there were no material reclassifications to earnings due to hedged firm commitments no longer deemed probable or due to hedged forecasted transactions that had not occurred by the end of the originally specified time period. As of March 31, 2019, and December 31, 2018, we did not have any exposure related to credit default swaps for which we are the seller. Credit Risk We are exposed to credit losses in the event of non-performance by our counterparties on various derivative contracts and reflect assumptions regarding the credit or non-performance risk (“NPR”). The NPR is based upon assumptions for each counterparty’s credit spread over the estimated weighted average life of the counterparty exposure less collateral held. As of March 31, 2019, the NPR adjustment was zero. The credit risk associated with such agreements is minimized by entering into agreements with financial institutions with long-standing, superior performance records. Additionally, we maintain a policy of requiring derivative contracts to be governed by an International Swaps and Derivatives Association (“ISDA”) Master Agreement. We are required to maintain minimum ratings as a matter of routine practice in negotiating ISDA agreements. Under some ISDA agreements, we and LLANY have agreed to maintain certain financial strength or claims-paying ratings. A downgrade below these levels could result in termination of derivative contracts, at which time any amounts payable by us would be dependent on the market value of the underlying derivative contracts. In certain transactions, we and the counterparty have entered into a credit support annex requiring either party to post collateral when net exposures exceed pre-determined thresholds. These thresholds vary by counterparty and credit rating. The amount of such exposure is essentially the net replacement cost or market value less collateral held for such agreements with each counterparty if the net market value is in our favor. As of March 31, 2019 and December 31, 2018, our exposure was zero. The amounts recognized (in millions) by S&P credit rating of counterparty, for which we had the right to reclaim cash collateral or were obligated to return cash collateral, were as follows:
Balance Sheet Offsetting Information related to the effects of offsetting (in millions) was as follows:
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Federal Income Taxes | 7. Federal Income Taxes The effective tax rate is the ratio of tax expense over pre-tax income (loss). The effective tax rate was (13)% and 16% for the three months ended March 31, 2019 and 2018, respectively. The effective tax rate on pre-tax income was lower than the prevailing corporate federal income tax rate of 21%. Differences between the effective rates and the corporate federal income tax rate were primarily the result of the separate account dividends-received deduction, certain tax preferred investment income, foreign tax credits and other tax preference items. The current quarter’s effective tax rate is lower than the comparable quarter in the prior year primarily as a result of an increased level of realized losses and the associated tax benefit resulting from the application of the corporate federal income tax rate of 21%.
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Reinsurance | 8. Reinsurance Modified Coinsurance Reinsurance Transaction Some portions of our annuity business have been reinsured on a modified coinsurance (“Modco”) basis with other companies. In a Modco program, we as the ceding company retain the reserves, as well as the assets backing those reserves, and the reinsurer shares proportionally in all financial terms of the reinsured policies based on their respective percentage of the risk. Effective October 1, 2018, we entered into one such Modco agreement with Athene Holding Ltd. (“Athene”) to reinsure fixed and fixed indexed annuity products. We hold assets in support of reserves associated with the transaction in a Modco investment portfolio that included fixed maturity AFS securities, trading securities, equity securities, commercial mortgage loans, derivative investments, other investments and cash that had carrying values of $5.1 billion, $1.9 billion, $49 million, $186 million, $120 million, $85 million and $78 million, respectively, as of March 31, 2019. In addition, the portfolio was supported by $237 million of over-collateralization and a $219 million letter of credit as of March 31, 2019. In repositioning the Modco investment portfolio, purchases of securities classified as trading during the first quarter of 2019 primarily resulted in negative cash flows from operating activities that were largely offset by sales of securities classified as AFS within investing activities in our Consolidated Statements of Cash Flows. See “Realized Gain (Loss)” in Note 5 for information on reinsurance related embedded derivatives.
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Guaranteed Benefit Features | 9. Guaranteed Benefit Features Information on the guaranteed death benefit (“GDB”) features outstanding (dollars in millions) was as follows:
The determination of GDB liabilities is based on models that involve a range of scenarios and assumptions, including those regarding expected market rates of return and volatility, contract surrender rates and mortality experience. The following summarizes the balances of and changes in the liabilities for GDBs (in millions), which were recorded in future contract benefits on our Consolidated Balance Sheets:
Variable Annuity Contracts Account balances of variable annuity contracts, including those with guarantees, (in millions) were invested in separate account investment options as follows:
Secondary Guarantee Products Future contract benefits and other contract holder funds include reserves for our secondary guarantee products sold through our Life Insurance segment. Reserves on UL and VUL products with secondary guarantees represented 35% and 33% of total life insurance in-force reserves as of March 31, 2019, and December 31, 2018, respectively. UL and VUL products with secondary guarantees represented 29% and 35% of total life insurance sales for the three months ended March 31, 2019 and 2018, respectively.
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Liability For Unpaid Claims |
10. Liability for Unpaid Claims The liability for unpaid claims consists primarily of long-term disability claims and are reported in future contract benefits on our Consolidated Balance Sheets. Changes in the liability for unpaid claims (in millions) were as follows:
The interest rate assumption used for discounting long-term claim reserves is an important part of the reserving process due to the long benefit period for these claims. Interest accrued on prior years’ reserves has been calculated on the opening reserve balance less one-half of the prior years’ incurred claim payments at our average reserve discount rate. Long-term disability benefits may extend for many years, and claim development schedules do not reflect these longer benefit periods. As a result, we use longer term retrospective runoff studies, experience studies and prospective studies to develop our liability estimates.
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Contingencies and Commitments | 11. Contingencies and Commitments Contingencies Regulatory and Litigation Matters Regulatory bodies, such as state insurance departments, the SEC, Financial Industry Regulatory Authority and other regulatory bodies regularly make inquiries and conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, laws governing the activities of broker-dealers, registered investment advisers and unclaimed property laws.
LNL and its affiliates are involved in various pending or threatened legal or regulatory proceedings, including purported class actions, arising from the conduct of business both in the ordinary course and otherwise. In some of the matters, very large and/or indeterminate amounts, including punitive and treble damages, are sought. Modern pleading practice in the U.S. permits considerable variation in the assertion of monetary damages or other relief. Jurisdictions may permit claimants not to specify the monetary damages sought or may permit claimants to state only that the amount sought is sufficient to invoke the jurisdiction of the trial court. In addition, jurisdictions may permit plaintiffs to allege monetary damages in amounts well exceeding verdicts obtained in the jurisdiction for similar matters. This variability in pleadings, together with the actual experiences of LNL in litigating or resolving through settlement numerous claims over an extended period of time, demonstrates to management that the monetary relief which may be specified in a lawsuit or claim bears little relevance to its merits or disposition value.
Due to the unpredictable nature of litigation, the outcome of a litigation matter and the amount or range of potential loss at particular points in time is normally difficult to ascertain. Uncertainties can include how fact finders will evaluate documentary evidence and the credibility and effectiveness of witness testimony, and how trial and appellate courts will apply the law in the context of the pleadings or evidence presented, whether by motion practice, or at trial or on appeal. Disposition valuations are also subject to the uncertainty of how opposing parties and their counsel will themselves view the relevant evidence and applicable law. We establish liabilities for litigation and regulatory loss contingencies when information related to the loss contingencies shows both that it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. It is possible that some matters could require us to pay damages or make other expenditures or establish accruals in amounts that could not be estimated as of March 31, 2019. While the potential future charges could be material in the particular quarterly or annual periods in which they are recorded, based on information currently known by management, management does not believe any such charges are likely to have a material adverse effect on LNL’s financial condition. For some matters, the Company is able to estimate a reasonably possible range of loss. For such matters in which a loss is probable, an accrual has been made. For such matters where a loss is believed to be reasonably possible, but not probable, no accrual has been made. Accordingly, the estimate contained in this paragraph reflects two types of matters. For some matters included within this estimate, an accrual has been made, but there is a reasonable possibility that an exposure exists in excess of the amount accrued. In these cases, the estimate reflects the reasonably possible range of loss in excess of the accrued amount. For other matters included within this estimation, no accrual has been made because a loss, while potentially estimable, is believed to be reasonably possible but not probable. In these cases, the estimate reflects the reasonably possible loss or range of loss. As of March 31, 2019, we estimate the aggregate range of reasonably possible losses to be up to approximately $50 million. For other matters, we are not currently able to estimate the reasonably possible loss or range of loss. We are often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from other parties and investigation of factual allegations, rulings by the court on motions or appeals, analysis by experts and the progress of settlement negotiations. On a quarterly and annual basis, we review relevant information with respect to litigation contingencies and update our accruals, disclosures and estimates of reasonably possible losses or ranges of loss based on such reviews. Certain reinsurers have sought rate increases on certain yearly renewable term treaties. We are disputing the requested rate increases under these treaties. We have initiated and will initiate arbitration proceedings, as necessary, under these treaties in order to protect our contractual rights. Additionally, reinsurers may initiate arbitration proceedings against us. We believe it is unlikely the outcome of these disputes will have a material adverse effect on our financial condition. Cost of Insurance Litigation Glover v. Connecticut General Life Insurance Company and The Lincoln National Life Insurance Company, filed in the U.S. District Court for the District of Connecticut, No. 3:16-cv-00827, is a putative class action that was served on LNL on June 8, 2016. Plaintiff is the owner of a universal life insurance policy who alleges that LNL charged more for non-guaranteed cost of insurance than permitted by the policy. Plaintiff seeks to represent all universal life and variable universal life policyholders who owned policies containing non-guaranteed cost of insurance provisions that are similar to those of Plaintiff’s policy and seeks damages on behalf of all such policyholders. On January 11, 2019, the court dismissed Plaintiff’s complaint in its entirety. In response, Plaintiff filed a motion for leave to amend the complaint, which we have opposed.
Hanks v. The Lincoln Life and Annuity Company of New York (“LLANY”) and Voya Retirement Insurance and Annuity Company (“Voya”), filed in the U.S. District Court for the Southern District of New York, No. 1:16-cv-6399, is a putative class action that was served on LLANY on August 12, 2016. Plaintiff owns a universal life policy originally issued by Aetna (now Voya) and alleges that (i) Voya breached the terms of the policy when it increased non-guaranteed cost of insurance rates on Plaintiff’s policy; and (ii) LLANY, as reinsurer and administrator of Plaintiff’s policy, engaged in wrongful conduct related to the cost of insurance increase and was unjustly enriched as a result. Plaintiff seeks to represent all owners of Aetna life insurance policies that were subject to non-guaranteed cost of insurance rate increases in 2016 and seeks damages on their behalf. We are vigorously defending this matter.
EFG Bank AG, Cayman Branch, et al. v. The Lincoln National Life Insurance Company, pending in the U.S. District Court for the Eastern District of Pennsylvania, No. 2:17-cv-02592, is a civil action filed on February 1, 2017. Plaintiffs own Legend Series universal life insurance policies originally issued by Jefferson-Pilot (now LNL). Plaintiffs allege that LNL breached the terms of policyholders’ contracts when it increased cost of insurance rates beginning in 2016. We are vigorously defending this matter.
In re: Lincoln National COI Litigation, pending in the U.S. District Court for the Eastern District of Pennsylvania, Master File No. 2:16-cv-06605-GJP, is a consolidated litigation matter related to multiple putative class action filings that were consolidated by an order dated March 20, 2017. In addition to consolidating a number of existing matters, the order also covers any future cases filed in the same district related to the same subject matter. Plaintiffs own universal life insurance policies originally issued by Jefferson-Pilot (now LNL). Plaintiffs allege that LNL and LNC breached the terms of policyholders’ contracts by increasing non-guaranteed cost of insurance rates beginning in 2016. Plaintiffs seek to represent classes of policyowners and seek damages on their behalf. We are vigorously defending this matter.
In re: Lincoln National 2017 COI Rate Litigation, Master File No. 2:17-cv-04150 is a consolidated litigation matter related to multiple putative class action filings that were consolidated by an order of the court in March 2018. Plaintiffs own universal life insurance policies originally issued by former Jefferson-Pilot (now LNL). Plaintiffs allege that LNL and LNC breached the terms of policyholders’ contracts by increasing non-guaranteed cost of insurance rates beginning in 2017. Plaintiffs seek to represent classes of policyholders and seek damages on their behalf. We are vigorously defending this matter.
TVPX ARS INC., as Securities Intermediary for Consolidated Wealth Management, LTD. v. The Lincoln National Life Insurance Company, filed in the U.S. District Court for the Eastern District of Pennsylvania, No. 2:18-cv-02989, is a putative class action that was filed on July 17, 2018. Plaintiff alleges that LNL charged more for non-guaranteed cost of insurance than permitted by the policy. Plaintiff seeks to represent all universal life and variable universal life policyholders who own policies issued by LNL or its predecessors containing non-guaranteed cost of insurance provisions that are similar to those of Plaintiff’s policy and seeks damages on behalf of all such policyholders. We are vigorously defending this matter.
LSH Co. and Wells Fargo Bank, National Association, as securities intermediary for LSH Co. v. Lincoln National Corporation and The Lincoln National Life Insurance Company, pending in the U.S. District Court for the Eastern District of Pennsylvania, No. 2:18-cv-05529, is a civil action filed on December 21, 2018. Plaintiffs own universal life insurance policies originally issued by Jefferson-Pilot (now LNL). Plaintiffs allege that LNL breached the terms of policyholders’ contracts when it increased non-guaranteed cost of insurance rates in 2016 and 2017. Because the majority of policies at issue experienced a rate change in 2016, we expect the case will be consolidated with the In re: Lincoln National COI Litigation and EFG Bank cases, discussed above. We are vigorously defending this matter. Commitments Leases Effective January 1, 2019, we adopted ASU 2016-02, which resulted in a new measurement and recognition of our long-term operating leases on our Consolidated Balance Sheets. See Note 2 for additional information. We lease office space and certain equipment under various long-term lease agreements, and we also enter into sale-leaseback transactions. We determine if an arrangement is a lease at inception. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. Our leases do not provide an implicit rate; therefore, we use our incremental borrowing rate at the commencement date in determining the present value of future payments. The ROU asset is calculated using the initial lease liability amount, plus any lease payments made at or before the commencement date, minus any lease incentives received, plus any initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Our lease agreements may contain both lease and non-lease components, which are accounted for separately. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. We recognized operating lease ROU assets of $161 million and associated lease liabilities of $168 million as of March 31, 2019. We classified the operating lease ROU assets within other assets and the lease liabilities within other liabilities on our Consolidated Balance Sheets. The weighted-average discount rate and remaining lease term on our operating leases was 3.4% and 7 years, respectively, as of March 31, 2019. Operating lease expense for the three months ended March 31, 2019, was $12 million and reported in commissions and other expenses on our Consolidated Statements of Comprehensive Income (Loss). As of March 31, 2019, the net book value of assets recorded as finance leases under sale-leaseback transactions was $177 million, and the associated accumulated amortization was $300 million. These transactions have been classified as other assets on our Consolidated Balance Sheets. These assets will continue to be amortized on a straight-line basis over the assets’ remaining lives. The weighted-average discount rate and remaining lease term on our sale-leaseback transactions was 2.5% and 3 years, respectively, as of March 31, 2019. Finance lease expense (in millions) was as follows:
The table below presents cash flow information (in millions) related to leases:
Our future minimum lease payments (in millions) under non-cancellable leases as of March 31, 2019, were as follows:
As of March 31, 2019, we had additional office space leases that had not yet commenced totaling $37 million. These leases will commence between the second and fourth quarters of 2019 and have lease terms of 4 to 11 years.
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Shares and Stockholders' Equity |
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Shares and Stockholders' Equity | 12. Shares and Stockholder’s Equity All authorized and issued shares of LNL are owned by LNC. AOCI The following summarizes the components and changes in AOCI (in millions):
The following summarizes the reclassifications out of AOCI (in millions) and the associated line item in the Consolidated Statements of Comprehensive Income (Loss):
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Fair Value of Financial Instruments |
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Fair Value of Financial Instruments | 13. Fair Value of Financial Instruments The carrying values and estimated fair values of our financial instruments (in millions) were as follows:
Valuation Methodologies and Associated Inputs for Financial Instruments Not Carried at Fair Value The following discussion outlines the methodologies and assumptions used to determine the fair value of our financial instruments not carried at fair value on our Consolidated Balance Sheets. Considerable judgment is required to develop these assumptions used to measure fair value. Accordingly, the estimates shown are not necessarily indicative of the amounts that would be realized in a one-time, current market exchange of all of our financial instruments. Mortgage Loans on Real Estate The fair value of mortgage loans on real estate is established using a discounted cash flow method based on credit rating, maturity and future income. The ratings for mortgages in good standing are based on property type, location, market conditions, occupancy, debt-service coverage, loan-to-value, quality of tenancy, borrower and payment record. The fair value for impaired mortgage loans is based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s market price or the fair value of the collateral if the loan is collateral dependent. The inputs used to measure the fair value of our mortgage loans on real estate are classified as Level 2 within the fair value hierarchy.
Other Investments The carrying value of our assets classified as other investments approximates fair value. Other investments includes primarily LPs and other privately held investments that are accounted for using the equity method of accounting and the carrying value is based on our proportional share of the net assets of the LPs. Other investments also includes Federal Home Loan Bank (“FHLB”) stock carried at cost and periodically evaluated for impairment based on ultimate recovery of par value. The inputs used to measure the fair value of our LPs, other privately held investments and FHLB stock are classified as Level 3 within the fair value hierarchy. The remaining assets in other investments include cash collateral receivables and securities that are not LPs or other privately held investments. The inputs used to measure the fair value of these assets are classified as Level 1 within the fair value hierarchy. Separate Account Assets Separate account assets are primarily carried at fair value. A portion of our separate account assets includes LPs, which are accounted for using the equity method of accounting. The carrying value is based on our proportional share of the net assets of the LPs and approximates fair value. The inputs used to measure the fair value of the separate account asset LPs are classified as Level 3 within the fair value hierarchy. Other Contract Holder Funds Other contract holder funds include remaining guaranteed interest and similar contracts and account values of certain investment contracts. The fair value for the remaining guaranteed interest and similar contracts is estimated using discounted cash flow calculations as of the balance sheet date. These calculations are based on interest rates currently offered on similar contracts with maturities that are consistent with those remaining for the contracts being valued. As of March 31, 2019, and December 31, 2018, the remaining guaranteed interest and similar contracts carrying value approximated fair value. The fair value of the account values of certain investment contracts is based on their approximate surrender value as of the balance sheet date. The inputs used to measure the fair value of our other contract holder funds are classified as Level 3 within the fair value hierarchy. Short-Term and Long-Term Debt The fair value of short-term and long-term debt is based on quoted market prices. The inputs used to measure the fair value of our short-term and long-term debt are classified as Level 2 within the fair value hierarchy. Financial Instruments Carried at Fair Value We did not have any assets or liabilities measured at fair value on a nonrecurring basis as of March 31, 2019, or December 31, 2018, and we noted no changes in our valuation methodologies between these periods. The following summarizes our financial instruments carried at fair value (in millions) on a recurring basis by the fair value hierarchy levels:
The following summarizes changes to our financial instruments carried at fair value (in millions) and classified within Level 3 of the fair value hierarchy. This summary excludes any effect of amortization of DAC, VOBA, deferred sales inducements (“DSI”) and deferred front-end loads (“DFEL”). The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.
The following provides the components of the items included in issuances, sales, maturities, settlements and calls, net, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, (in millions) as reported above:
The following summarizes changes in unrealized gains (losses) included in net income, excluding any effect of amortization of DAC, VOBA, DSI and DFEL and changes in future contract benefits, related to financial instruments carried at fair value classified within Level 3 that we still held (in millions):
The following provides the components of the transfers into and out of Level 3 (in millions) as reported above:
Transfers into and out of Level 3 are generally the result of observable market information on a security no longer being available or becoming available to our pricing vendors. For the three months ended March 31, 2019 and 2018, transfers in and out of Level 3 were attributable primarily to the securities’ observable market information no longer being available or becoming available. In 2018, transfers into or out of Level 3 also included FHLB stock between equity securities and other investments at cost on our Consolidated Balance Sheets. Transfers into and out of Levels 1 and 2 are generally the result of a change in the type of input used to measure the fair value of an asset or liability at the end of the reporting period. When quoted prices in active markets become available, transfers from Level 2 to Level 1 will result. When quoted prices in active markets become unavailable, but we are able to employ a valuation methodology using significant observable inputs, transfers from Level 1 to Level 2 will result. For the three months ended March 31, 2019 and 2018, the transfers between Levels 1 and 2 of the fair value hierarchy were less than $1 million for our financial instruments carried at fair value.
The following summarizes the fair value (in millions), valuation techniques and significant unobservable inputs of the Level 3 fair value measurements as of March 31, 2019:
From the table above, we have excluded Level 3 fair value measurements obtained from independent, third-party pricing sources. We do not develop the significant inputs used to measure the fair value of these assets and liabilities, and the information regarding the significant inputs is not readily available to us. Independent broker-quoted fair values are non-binding quotes developed by market makers or broker-dealers obtained from third-party sources recognized as market participants. The fair value of a broker-quoted asset or liability is based solely on the receipt of an updated quote from a single market maker or a broker-dealer recognized as a market participant as we do not adjust broker quotes when used as the fair value measurement for an asset or liability. Significant increases or decreases in any of the quotes received from a third-party broker-dealer may result in a significantly higher or lower fair value measurement. Changes in any of the significant inputs presented in the table above may result in a significant change in the fair value measurement of the asset or liability as follows:
For each category discussed above, the unobservable inputs are not inter-related; therefore, a directional change in one input will not affect the other inputs. As part of our ongoing valuation process, we assess the reasonableness of our valuation techniques or models and make adjustments as necessary.
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Segment Information | 14. Segment Information We provide products and services and report results through our Annuities, Retirement Plan Services, Life Insurance and Group Protection segments. As discussed in Note 3, we completed the acquisition of Liberty Life during the second quarter of 2018. Related results are included within the Group Protection segment. We also have Other Operations, which includes the financial data for operations that are not directly related to the business segments. Our reporting segments reflect the manner by which our chief operating decision makers view and manage the business. A discussion of these segments and Other Operations is found in Note 21 of our 2018 Form 10-K. Segment operating revenues and income (loss) from operations are internal measures used by our management and Board of Directors to evaluate and assess the results of our segments. Income (loss) from operations is GAAP net income excluding the after-tax effects of the following items, as applicable:
Operating revenues represent GAAP revenues excluding the pre-tax effects of the following items, as applicable:
The tables below reconcile our segment measures of performance to the GAAP measures presented in our Consolidated Statements of Comprehensive Income (Loss) (in millions):
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Nature of Operations and Basis of Presentation (Policy) |
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Mar. 31, 2019 | |
Nature of Operations and Basis of Presentation [Abstract] | |
Nature Of Operations | Nature of Operations The Lincoln National Life Insurance Company (“LNL” or the “Company,” which also may be referred to as “we,” “our” or “us”), a wholly-owned subsidiary of Lincoln National Corporation (“LNC” or the “Parent Company”), is domiciled in the state of Indiana. We own 100% of the outstanding common stock of two insurance company subsidiaries, Lincoln Life & Annuity Company of New York (“LLANY”) and Liberty Life Assurance Company of Boston (“Liberty Life”). We also own several non-insurance companies, including Lincoln Financial Distributors, our wholesale distributors, and Lincoln Financial Advisors Corporation, part of LNC’s retail distributor, Lincoln Financial Network. Through our business segments, we sell a wide range of wealth protection, accumulation and retirement income products and solutions. These products primarily include fixed and indexed annuities, variable annuities, universal life insurance (“UL”), variable universal life insurance (“VUL”), linked-benefit UL, indexed universal life insurance (“IUL”), term life insurance, employer-sponsored retirement plans and services, and group life, disability and dental. LNL is licensed and sells its products throughout the U.S. and several U.S. territories. See Note 14 for additional information.
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Basis Of Presentation | Basis of Presentation The accompanying unaudited consolidated financial statements are prepared in accordance with United States of America generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for the Securities and Exchange Commission (“SEC”) Quarterly Report on Form 10-Q, including Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. As discussed in Note 3, on May 1, 2018, LNC and LNL completed the acquisition of Liberty Life. The information contained in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”), should be read in connection with the reading of these interim unaudited consolidated financial statements. Certain GAAP policies, which significantly affect the determination of financial condition, results of operations and cash flows, are summarized in our 2018 Form 10-K. In the opinion of management, these statements include all normal recurring adjustments necessary for a fair presentation of the Company’s results. Operating results for the three months ended March 31, 2019, are not necessarily indicative of the results that may be expected for the full year ending December 31, 2019. All material inter-company accounts and transactions have been eliminated in consolidation.
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Acquisition (Tables) |
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Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Fair Value Of Net Assets Acquired |
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Schedule Of Pro Forma Information |
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Investments (Tables) |
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Reconciliation Of Available-For-Sale Securities From Cost Basis To Fair Value |
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Available-For-Sale Securities By Contractual Maturities |
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Fair Value And Gross Unrealized Losses In A Continuous Unrealized Loss Position |
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Schedule Of Available-For-Sale Securities Whose Value Is Below Amortized Cost |
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Schedule Of Changes In Amount Of Credit Losses Of OTTI Recognized In Net Income (Loss) |
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Composition Of Current And Past Due Mortgage Loans On Real Estate |
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Schedule Of Realized Gain (Loss) |
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OTTI Recognized In Net Income (Loss) And OCI |
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Payables For Collateral On Investments |
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Schedule Of Increase (Decrease) In Payables For Collateral On Investments |
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Schedule Of Securities Pledged By Contractual Maturity |
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Commercial [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes In The Valuation Allowance Of Impaired Mortgage Loans On Real Estate |
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Schedule Of Average Carrying Value Of Impaired Mortgage Loans On Real Estate |
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Credit Quality Indicators For Mortgage Loans |
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Residential [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financing Receivable, Recorded Investment [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Quality Indicators For Mortgage Loans |
|
Derivative Instruments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Derivative Instruments With Off-Balance-Sheet Risks |
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Maturity Of The Notional Amounts Of Derivative Financial Instruments |
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Cumulative Basis Adjustments For Fair Value Hedges |
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Change In Unrealized Gain On Derivative Instruments In Accumulated OCI |
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Effects Of Qualifying And Non-Qualifying Hedges |
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Gains (Losses) On Derivative Instruments Recorded Within Income (Loss) From Continuing Operations |
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Gains (Losses) On Derivative Instruments Designated As Cash Flow Hedges |
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Schedule Of Collateral Amounts With Rights To Reclaim Or Obligation To Return Cash |
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Schedule Of Offsetting Assets And Liabilities |
|
Guaranteed Benefit Features (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Guaranteed Benefit Features [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information On Guaranteed Death Benefit Features |
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Summary Of Guaranteed Death Benefit Liabilities |
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Account Balances Of Variable Annuity Contracts With Guarantees Invested In Separate Accounts |
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Liability For Unpaid Claims (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability For Unpaid Claims [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes In Liability For Unpaid Claims | The liability for unpaid claims consists primarily of long-term disability claims and are reported in future contract benefits on our Consolidated Balance Sheets. Changes in the liability for unpaid claims (in millions) were as follows:
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Contingencies and Commitments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contingencies and Commitments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finance Lease Expense |
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Cash Flow Infromation Related To Leases |
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Future Minimum Lease Payments |
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Shares and Stockholders' Equity (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares and Stockholders' Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components And Changes In Accumulated OCI |
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Schedule of Reclassifications Out Of AOCI |
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Fair Value of Financial Instruments (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value of Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Carrying And Estimated Fair Values Of Financial Instruments |
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Fair Value Of Assets And Liabilities On A Recurring Basis |
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Fair Value Measured On A Recurring Basis Reconciliation |
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Schedule Of Investment Holdings Movements |
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Changes In Unrealized Gains (Losses) Within Level 3 Financial Instruments Carried At Fair Value And Still Held |
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Components Of The Transfers In And Out Of Level 3 |
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Fair Value Inputs Quantitative Information |
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Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation Of Revenue From Segments To Consolidated |
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Reconciliation Of Income (Loss) From Operations By Segment To Consolidated Net Income (Loss) |
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Nature of Operations and Basis of Presentation (Details) |
3 Months Ended |
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Mar. 31, 2019 | |
Lincoln Life & Annuity Company of New York [Member] | |
Product Information [Line Items] | |
Ownership percent | 100.00% |
New Accounting Standards (Narrative) (Details) $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Operating lease ROU asset | $ 161 |
Operating lease liability | 168 |
Accounting Standards Update 2016-02 [Member] | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Operating lease ROU asset | 171 |
Operating lease liability | $ 176 |
Acquisition (Narrative) (Details) - Liberty Transaction [Member] $ in Millions |
3 Months Ended | 11 Months Ended |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2019
USD ($)
|
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Business Acquisition [Line Items] | ||
Acquisition agreement date | May 01, 2018 | |
Capital stock acquired, percent | 100.00% | 100.00% |
Provisional assets | $ (5) | |
Provisional liabilities | 23 | |
Provisional goodwill | $ 28 |
Acquisition (Schedule Of Fair Value Of Net Assets Acquired) (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Business Acquisition [Line Items] | ||
Goodwill | $ 1,778 | $ 1,782 |
Liberty Transaction [Member] | ||
Business Acquisition [Line Items] | ||
Investments | 2,493 | |
Mortgage loans on real estate | 658 | |
Cash and invested cash | 107 | |
Reinsurance recoverables | 76 | |
Premiums and fees receivable | 83 | |
Accrued investment income | 24 | |
Other intangible assets acquired | 640 | |
Other assets acquired | 142 | |
Separate account assets | 99 | |
Total assets acquired | 4,322 | |
Future contract benefits | 2,930 | |
Other contract holder funds | 46 | |
Other liabilities acquired | 140 | |
Separate account liabilities | 99 | |
Total liabilities assumed | 3,215 | |
Net identifiable assets acquired | 1,107 | |
Goodwill | 410 | |
Net assets acquired | $ 1,517 |
Acquisition (Schedule Of Pro Forma Information) (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Acquisition [Abstract] | |
Revenue | $ 3,959 |
Net income | $ 422 |
Variable Interest Entities (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
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Variable Interest Entity [Line Items] | |||
Carrying Amounts of our Investments in LPs and LLCs, As Recognized In Other Investments on our Consolidated Balance Sheets | $ 2,372 | $ 1,962 | |
Maximum [Member] | |||
Variable Interest Entity [Line Items] | |||
Income Tax Credits And Other Tax Benefits From Qualified Affordable Housing Projects | 1 | $ 1 | |
Limited Partnerships and Limited Liability Companies [Member] | |||
Variable Interest Entity [Line Items] | |||
Carrying Amounts of our Investments in LPs and LLCs, As Recognized In Other Investments on our Consolidated Balance Sheets | 1,700 | 1,700 | |
Carrying Amount Of Investments In Qualified Affordable Housing Projects | 18 | $ 20 | |
Maximum exposure to loss related to unconsolidated VIE's | $ 0 |
Investments (Available-For-Sale Securities By Contractual Maturities) (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Available-for-sale Securities, Debt Maturities, Amortized Cost | ||
Amortized cost | $ 91,669 | $ 91,219 |
Available-for-sale Securities, Debt Maturities, Fair Value | ||
Fair Value | 96,648 | $ 92,787 |
Fixed Maturity Securities [Member] | ||
Available-for-sale Securities, Debt Maturities, Amortized Cost | ||
Amortized cost | 91,669 | |
Available-for-sale Securities, Debt Maturities, Fair Value | ||
Fair Value | 96,648 | |
Fixed Maturity AFS Securities Excluding Structured Securities [Member] | Fixed Maturity Securities [Member] | ||
Available-for-sale Securities, Debt Maturities, Amortized Cost | ||
Due in one year or less | 3,497 | |
Due after one year through five years | 15,647 | |
Due after five years through ten years | 18,848 | |
Due after ten years | 46,320 | |
Amortized cost | 84,312 | |
Available-for-sale Securities, Debt Maturities, Fair Value | ||
Due in one year or less | 3,500 | |
Due after one year through five years | 15,945 | |
Due after five years through ten years | 19,428 | |
Due after ten years | 50,232 | |
Fair Value | 89,105 | |
Structured Securities [Member] | Fixed Maturity Securities [Member] | ||
Available-for-sale Securities, Debt Maturities, Amortized Cost | ||
Amortized cost | 7,357 | |
Available-for-sale Securities, Debt Maturities, Fair Value | ||
Fair Value | $ 7,543 |
Investments (Fair Value And Gross Unrealized Losses In A Continuous Unrealized Loss Position) (Details) $ in Millions |
Mar. 31, 2019
USD ($)
security
|
Dec. 31, 2018
USD ($)
security
|
---|---|---|
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | ||
Less Than or Equal to Twelve Months | $ 5,693 | $ 33,630 |
Greater Than Twelve Months | 15,929 | 8,386 |
Fair Value - Total | 21,622 | 42,016 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Gross Unrealized Losses and OTTI | ||
Less Than or Equal to Twelve Months | 168 | 1,521 |
Greater Than Twelve Months | 748 | 818 |
Gross Unrealized Losses - Total | $ 916 | $ 2,339 |
Total number of AFS securities in an unrealized loss position | security | 1,847 | 3,360 |
Corporate Bonds [Member] | Fixed Maturity Securities [Member] | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | ||
Less Than or Equal to Twelve Months | $ 4,619 | $ 30,947 |
Greater Than Twelve Months | 14,037 | 7,023 |
Fair Value - Total | 18,656 | 37,970 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Gross Unrealized Losses and OTTI | ||
Less Than or Equal to Twelve Months | 158 | 1,464 |
Greater Than Twelve Months | 661 | 704 |
Gross Unrealized Losses - Total | 819 | 2,168 |
ABS [Member] | Fixed Maturity Securities [Member] | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | ||
Less Than or Equal to Twelve Months | 73 | 113 |
Greater Than Twelve Months | 165 | 136 |
Fair Value - Total | 238 | 249 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Gross Unrealized Losses and OTTI | ||
Less Than or Equal to Twelve Months | 1 | 2 |
Greater Than Twelve Months | 12 | 13 |
Gross Unrealized Losses - Total | 13 | 15 |
U.S. Government Bonds [Member] | Fixed Maturity Securities [Member] | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | ||
Less Than or Equal to Twelve Months | 6 | 70 |
Greater Than Twelve Months | 28 | 23 |
Fair Value - Total | 34 | 93 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Gross Unrealized Losses and OTTI | ||
Less Than or Equal to Twelve Months | 1 | |
Greater Than Twelve Months | 1 | 1 |
Gross Unrealized Losses - Total | 1 | 2 |
RMBS [Member] | Fixed Maturity Securities [Member] | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | ||
Less Than or Equal to Twelve Months | 52 | 436 |
Greater Than Twelve Months | 847 | 796 |
Fair Value - Total | 899 | 1,232 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Gross Unrealized Losses and OTTI | ||
Less Than or Equal to Twelve Months | 1 | 9 |
Greater Than Twelve Months | 38 | 55 |
Gross Unrealized Losses - Total | 39 | 64 |
CMBS [Member] | Fixed Maturity Securities [Member] | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | ||
Less Than or Equal to Twelve Months | 9 | 470 |
Greater Than Twelve Months | 297 | 82 |
Fair Value - Total | 306 | 552 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Gross Unrealized Losses and OTTI | ||
Less Than or Equal to Twelve Months | 11 | |
Greater Than Twelve Months | 3 | 5 |
Gross Unrealized Losses - Total | 3 | 16 |
CLOs [Member] | Fixed Maturity Securities [Member] | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | ||
Less Than or Equal to Twelve Months | 771 | 1,124 |
Greater Than Twelve Months | 281 | 103 |
Fair Value - Total | 1,052 | 1,227 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Gross Unrealized Losses and OTTI | ||
Less Than or Equal to Twelve Months | 5 | 21 |
Greater Than Twelve Months | 6 | 3 |
Gross Unrealized Losses - Total | 11 | 24 |
State And Municipal Bonds [Member] | Fixed Maturity Securities [Member] | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | ||
Less Than or Equal to Twelve Months | 153 | 376 |
Greater Than Twelve Months | 125 | 92 |
Fair Value - Total | 278 | 468 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Gross Unrealized Losses and OTTI | ||
Less Than or Equal to Twelve Months | 1 | 7 |
Greater Than Twelve Months | 6 | 10 |
Gross Unrealized Losses - Total | 7 | 17 |
Hybrid And Redeemable Preferred Securities [Member] | Fixed Maturity Securities [Member] | ||
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value | ||
Less Than or Equal to Twelve Months | 10 | 94 |
Greater Than Twelve Months | 149 | 131 |
Fair Value - Total | 159 | 225 |
Available-for-sale Securities, Continuous Unrealized Loss Position, Gross Unrealized Losses and OTTI | ||
Less Than or Equal to Twelve Months | 2 | 6 |
Greater Than Twelve Months | 21 | 27 |
Gross Unrealized Losses - Total | $ 23 | $ 33 |
Investments (Schedule Of Available-For-Sale Securities Whose Value Is Below Amortized Cost) (Details) $ in Millions |
Mar. 31, 2019
USD ($)
security
|
Dec. 31, 2018
USD ($)
security
|
|||
---|---|---|---|---|---|
Schedule of Available-for-sale Securities [Line Items] | |||||
Fair Value - Nine months or greater, but less than twelve months | $ 5,693 | $ 33,630 | |||
Fair Value - Twelve months or greater | 15,929 | 8,386 | |||
Fair Value - Total | 21,622 | 42,016 | |||
Losses - Nine months or greater, but less than twelve months | 168 | 1,521 | |||
Losses - Twelve months or greater | 748 | 818 | |||
Gross Unrealized Losses - Total | $ 916 | $ 2,339 | |||
Number of Securities - Total | security | 1,847 | 3,360 | |||
Fair Value Decline, Greater Than 20% [Member] | |||||
Schedule of Available-for-sale Securities [Line Items] | |||||
Fair Value - Less than six months | $ 23 | $ 389 | |||
Fair Value - Six months or greater, but less than nine months | 20 | 96 | |||
Fair Value - Nine months or greater, but less than twelve months | 98 | 11 | |||
Fair Value - Twelve months or greater | 147 | 138 | |||
Fair Value - Total | 288 | 634 | |||
Losses - Less than six months | 8 | 122 | |||
Losses - Six months or greater, but less than nine months | 6 | 49 | |||
Losses - Nine months or greater, but less than twelve months | 42 | 8 | |||
Losses - Twelve months or greater | 50 | 70 | |||
Gross Unrealized Losses - Total | 106 | 249 | |||
OTTI - Less than six months | 1 | 1 | |||
OTTI - Twelve months or greater | 20 | 8 | |||
OTTI - Total | $ 21 | $ 9 | |||
Number of Securities - Less than six months | security | [1] | 7 | 44 | ||
Number of Securities - Six months or greater, but less than nine months | security | [1] | 4 | 11 | ||
Number of Securities - Nine months or greater, but less than twelve months | security | [1] | 10 | 2 | ||
Number of Securities - Twelve months or greater | security | [1] | 32 | 32 | ||
Number of Securities - Total | security | [1] | 53 | 89 | ||
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Investments (Schedule Of Changes in Amount Of Credit Losses Of OTTI Recognized In Net Income (Loss)) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
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Investments [Abstract] | ||
Balance as of beginning-of-year | $ 337 | $ 358 |
Increases attributable to: | ||
Credit losses on securities for which an OTTI was not previously recognized | 6 | 2 |
Credit losses on securities for which an OTTI was previously recognized | 2 | |
Decreases attributable to: | ||
Securities sold, paid down or matured | (5) | (1) |
Balance as of end-of-period | $ 340 | $ 359 |
Investments (Composition Of Current And Past Due Mortgage Loans On Real Estate) (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Mortgage Loans On Real Estate Aging [Abstract] | ||||
Current | $ 13,927 | $ 13,198 | ||
60 to 90 days past due | 1 | 1 | ||
Greater than 90 days past due | 1 | |||
Valuation allowance | (1) | |||
Unamortized premium (discount) | (3) | (9) | ||
Total carrying value | 13,925 | 13,190 | ||
Commercial [Member] | ||||
Mortgage Loans On Real Estate Aging [Abstract] | ||||
Current | 13,526 | 12,959 | ||
Greater than 90 days past due | ||||
Valuation allowance | $ (3) | $ (3) | ||
Unamortized premium (discount) | (16) | (17) | ||
Total carrying value | 13,510 | 12,942 | ||
Residential [Member] | ||||
Mortgage Loans On Real Estate Aging [Abstract] | ||||
Current | 401 | 239 | ||
60 to 90 days past due | 1 | 1 | ||
Greater than 90 days past due | 1 | |||
Valuation allowance | (1) | |||
Unamortized premium (discount) | 13 | 8 | ||
Total carrying value | $ 415 | $ 248 |
Investments (Changes In The Valuation Allowance Of Impaired Mortgage Loans On Real Estate (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
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Allowance for Losses | ||
Balance as of end-of-period | $ 1 | |
Commercial [Member] | ||
Allowance for Losses | ||
Balance as of beginning-of-year | $ 3 | |
Additions | ||
Charge-offs, net of recoveries | ||
Balance as of end-of-period | $ 3 | |
Residential [Member] | ||
Allowance for Losses | ||
Balance as of end-of-period | $ 1 |
Investments (Schedule Of Average Carrying Value Of Impaired Mortgage Loans On Real Estate) (Details) - Commercial [Member] - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Information about impaired mortgage loans on real estate | ||
Average carrying value for impaired commercial mortgage loans on real estate | $ 8 | |
Interest income recognized on impaired commercial mortgage loans on real estate | ||
Interest income collected on impaired commercial mortgage loans on real estate |
Investments (Credit Quality Indicators For Commercial Mortgage Loans) (Details) - Commercial [Member] $ in Millions |
Mar. 31, 2019
USD ($)
|
Dec. 31, 2018
USD ($)
|
---|---|---|
Mortgage Loans Credit Quality [Line Items] | ||
Carrying value of total mortgage loans on real estate | $ 13,510 | $ 12,942 |
Percentage of total mortgage loans on real estate | 100.00% | 100.00% |
Loan-to-value ratio, less than 65% [Member] | ||
Mortgage Loans Credit Quality [Line Items] | ||
Carrying value of total mortgage loans on real estate | $ 12,307 | $ 11,656 |
Percentage of total mortgage loans on real estate | 91.10% | 90.10% |
Debt-service coverage ratio | 2.27 | 2.30 |
Loan-to-value ratio, 65% to 74% [Member] | ||
Mortgage Loans Credit Quality [Line Items] | ||
Carrying value of total mortgage loans on real estate | $ 1,165 | $ 1,234 |
Percentage of total mortgage loans on real estate | 8.60% | 9.50% |
Debt-service coverage ratio | 1.75 | 1.76 |
Loan-to-value ratio, 75% to 100% [Member] | ||
Mortgage Loans Credit Quality [Line Items] | ||
Carrying value of total mortgage loans on real estate | $ 38 | $ 52 |
Percentage of total mortgage loans on real estate | 0.30% | 0.40% |
Debt-service coverage ratio | 1.20 | 1.03 |
Investments (Credit Quality Indicators For Residential Mortgage Loans) (Details) - Residential [Member] - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Financing Receivable, Recorded Investment [Line Items] | ||
Carrying value of total mortgage loans on real estate | $ 416 | $ 248 |
Percentage of total mortgage loans on real estate | 100.00% | 100.00% |
Performing [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Carrying value of total mortgage loans on real estate | $ 414 | $ 247 |
Percentage of total mortgage loans on real estate | 99.50% | 99.60% |
Nonperforming [Member] | ||
Financing Receivable, Recorded Investment [Line Items] | ||
Carrying value of total mortgage loans on real estate | $ 2 | $ 1 |
Percentage of total mortgage loans on real estate | 0.50% | 0.40% |
Investments (Realized Gain (Loss) Related To Certain Investments) (Details) - USD ($) $ in Millions |
3 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
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Realized gain (loss) related to certain investments | |||||||||||
Gain (loss) on other investments | [1] | $ 5 | $ (1) | ||||||||
Associated amortization of DAC, VOBA, DSI and DFEL and changes in other contract holder funds | (2) | (5) | |||||||||
Total realized gain (loss) related to certain investments | (19) | (25) | |||||||||
Realized gain (loss) on the mark-to-market on certain instruments | [2] | (236) | 106 | ||||||||
Indexed annuity and IUL contracts net derivatives results: | |||||||||||
Gross gain (loss) | [3] | (35) | (1) | ||||||||
Associated amortization of DAC, VOBA, DSI, and DFEL | [3] | 1 | |||||||||
Variable annuity net derivatives results: | |||||||||||
Gross gain (loss) | [4] | (54) | (50) | ||||||||
Associated amortization of DAC, VOBA, DSI, and DFEL | [4] | (8) | (8) | ||||||||
Total realized gain (loss) | (351) | 22 | |||||||||
Fixed Maturity Securities [Member] | |||||||||||
Realized gain (loss) related to certain investments | |||||||||||
AFS securities. Gross gains | 12 | 13 | |||||||||
AFS securities. Gross losses | (26) | (30) | |||||||||
AFS securities. Gross OTTI | (8) | (2) | |||||||||
Equity Securities [Member] | |||||||||||
Realized gain (loss) related to certain investments | |||||||||||
Gain (loss) on other investments | $ 6 | $ 1 | |||||||||
|
Investments (OTTI Recognized In Net Income (Loss) And OCI) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
OTTI Recognized in Net Income (Loss) | ||
Associated amortization of DAC, VOBA, DSI and DFEL | ||
Net OTTI recognized in net income (loss) | (8) | (2) |
Portion of OTTI Recognized in OCI | ||
Gross OTTI recognized in OCI | 14 | |
Change in DAC, VOBA, DSI and DFEL | (1) | |
Net portion of OTTI recognized in OCI | 13 | |
Fixed Maturity Securities [Member] | ||
OTTI Recognized in Net Income (Loss) | ||
Gross OTTI recognized in net income (loss) | (8) | (2) |
Fixed Maturity Securities [Member] | Corporate Bonds [Member] | ||
OTTI Recognized in Net Income (Loss) | ||
Gross OTTI recognized in net income (loss) | (6) | $ (2) |
Fixed Maturity Securities [Member] | ABS [Member] | ||
OTTI Recognized in Net Income (Loss) | ||
Gross OTTI recognized in net income (loss) | (1) | |
Fixed Maturity Securities [Member] | RMBS [Member] | ||
OTTI Recognized in Net Income (Loss) | ||
Gross OTTI recognized in net income (loss) | $ (1) |
Investments (Payables For Collateral On Investments) (Details) - USD ($) $ in Millions |
3 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
||||||||||
Carrying Value Of Payables For Collateral On Investments [Abstract] | |||||||||||
Collateral payable for derivative investments | [1] | $ 695 | $ 616 | ||||||||
Securities pledged under securities lending agreements | [2] | 136 | 88 | ||||||||
Securities pledged under repurchase agreements | [3] | 150 | 152 | ||||||||
Investments pledged for Federal Home Loan Bank of Indianapolis ('FHLBI') | [4] | 4,380 | 3,930 | ||||||||
Total payables for collateral on investments | 5,361 | 4,786 | |||||||||
Fair Value Of Related Investments Or Collateral [Abstract] | |||||||||||
Collateral payable for derivative investments | [1] | 695 | 616 | ||||||||
Securities pledged under securities lending agreements | [2] | 131 | 85 | ||||||||
Securities pledged under repurchase agreements | [3] | 157 | 157 | ||||||||
Investments pledged for Federal Home Loan Bank of Indianapolis('FHLBI') | [4] | 6,570 | 5,923 | ||||||||
Total payables for collateral on investments | $ 7,553 | $ 6,781 | |||||||||
Percentage of the fair value of domestic securities obtained as collateral under securities lending agreements. | 102.00% | ||||||||||
Percentage of the fair value of foreign securities obtained as collateral under securities lending agreements. | 105.00% | ||||||||||
Maximum [Member] | |||||||||||
Fair Value Of Related Investments Or Collateral [Abstract] | |||||||||||
Percentage of the fair value of securities obtained as collateral under reverse repurchase agreements. | 95.00% | ||||||||||
Percentage of the fair value of FHLBI securities obtained as collateral under securities pledged for FHLBI for AFS Securities | 115.00% | ||||||||||
Percentage of the fair value of FHLBI securities obtained as collateral under securities pledged for FHLBI for mortgage loan | 175.00% | ||||||||||
Minimum [Member] | |||||||||||
Fair Value Of Related Investments Or Collateral [Abstract] | |||||||||||
Percentage of the fair value of securities obtained as collateral under reverse repurchase agreements. | 80.00% | ||||||||||
Percentage of the fair value of FHLBI securities obtained as collateral under securities pledged for FHLBI for AFS Securities | 105.00% | ||||||||||
Percentage of the fair value of FHLBI securities obtained as collateral under securities pledged for FHLBI for mortgage loan | 155.00% | ||||||||||
|
Investments (Schedule Of Increase (Decrease) In Payables For Collateral On Investments) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Increase (decrease) in payables for collateral on investments | ||
Collateral payable for derivative investments | $ 79 | $ (114) |
Securities pledged under securities lending agreements | 48 | (68) |
Securities pledged under repurchase agreements | (2) | |
Investments pledged for FHLBI | 450 | |
Total increase (decrease) in payables for collateral on investments | $ 575 | $ (182) |
Investments (Schedule of Securities Pledged by Contractual Maturity) (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||||
Securities Lending | [1] | $ 136 | $ 88 | |
Total gross secured borrowings | 286 | 240 | ||
Corporate Bonds [Member] | ||||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||||
Repurchase Agreements | 150 | 152 | ||
Securities Lending | 136 | 88 | ||
Overnight and Continuous [Member] | ||||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||||
Total gross secured borrowings | 136 | 88 | ||
Overnight and Continuous [Member] | Corporate Bonds [Member] | ||||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||||
Securities Lending | 136 | 88 | ||
Greater than 90 days [Member] | ||||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||||
Total gross secured borrowings | 150 | 152 | ||
Greater than 90 days [Member] | Corporate Bonds [Member] | ||||
Transfer of Certain Financial Assets Accounted for as Secured Borrowings [Line Items] | ||||
Repurchase Agreements | $ 150 | $ 152 | ||
|
Derivative Instruments (Narrative) (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Credit Derivatives [Line Items] | |||
Cash Flow Hedge Gain (Loss) to be Reclassified within Twelve Months | $ 39,000,000 | ||
Cash flow hedge, reclassified to earnings, net | 0 | $ 0 | |
Non-performance Risk Adjustment | 0 | ||
Exposure Associated With Collateralization Events | 0 | $ 0 | |
Credit Default Swaps [Member] | |||
Credit Derivatives [Line Items] | |||
Exposure | $ 0 | $ 0 |
Derivative Instruments (Outstanding Derivative Instruments With Off-Balance-Sheet Risks) (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | $ 132,319 | ||||||||||||||||
Interest rate contracts [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | [1] | 97,208 | |||||||||||||||
Foreign currency contracts [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | [2] | 2,453 | |||||||||||||||
Equity market contracts [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | 32,598 | ||||||||||||||||
Credit contracts [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | 60 | ||||||||||||||||
Total Derivative Instruments [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | 132,319 | $ 135,355 | |||||||||||||||
Asset Fair Value | 2,779 | 2,625 | |||||||||||||||
Liability Fair Value | 3,004 | 1,986 | |||||||||||||||
Derivative investments [Member] | Interest rate contracts [Member] | Non-Qualifying Hedging [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | [3] | 95,308 | 100,628 | ||||||||||||||
Asset Fair Value | [3] | 588 | 464 | ||||||||||||||
Liability Fair Value | [3] | 105 | 138 | ||||||||||||||
Derivative investments [Member] | Foreign currency contracts [Member] | Non-Qualifying Hedging [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | [3] | 11 | 47 | ||||||||||||||
Derivative investments [Member] | Equity market contracts [Member] | Non-Qualifying Hedging [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | [3] | 32,598 | 30,273 | ||||||||||||||
Asset Fair Value | [3] | 613 | 676 | ||||||||||||||
Liability Fair Value | [3] | 404 | 162 | ||||||||||||||
Derivative investments [Member] | Credit contracts [Member] | Non-Qualifying Hedging [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | [3] | 60 | |||||||||||||||
Derivative investments [Member] | Cash Flow Hedges [Member] | Qualifying Hedges [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | 3,796 | 3,854 | |||||||||||||||
Asset Fair Value | 217 | 200 | |||||||||||||||
Liability Fair Value | 36 | 48 | |||||||||||||||
Derivative investments [Member] | Cash Flow Hedges [Member] | Interest rate contracts [Member] | Qualifying Hedges [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | [3] | 1,354 | 1,528 | ||||||||||||||
Asset Fair Value | [3] | 64 | 33 | ||||||||||||||
Liability Fair Value | [3] | 9 | |||||||||||||||
Derivative investments [Member] | Cash Flow Hedges [Member] | Foreign currency contracts [Member] | Qualifying Hedges [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | [3] | 2,442 | 2,326 | ||||||||||||||
Asset Fair Value | [3] | 153 | 167 | ||||||||||||||
Liability Fair Value | [3] | 36 | 39 | ||||||||||||||
Derivative investments [Member] | Fair Value Hedges [Member] | Interest rate contracts [Member] | Qualifying Hedges [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Notional Amounts | [3] | 546 | 553 | ||||||||||||||
Liability Fair Value | [3] | 160 | 137 | ||||||||||||||
Other Assets [Member] | GLB Direct Embedded Derivatives [Member] | Non-Qualifying Hedging [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Asset Fair Value | [4] | 439 | 123 | ||||||||||||||
Other Liabilities [Member] | GLB Ceded Embedded Derivatives [Member] | Non-Qualifying Hedging [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Asset Fair Value | [4],[5] | 50 | 72 | ||||||||||||||
Liability Fair Value | [4],[5] | 489 | 196 | ||||||||||||||
Reinsurance Related Embedded Derivatives [Member] | Embedded derivatives - Reinsurance related [Member] | Non-Qualifying Hedging [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Asset Fair Value | [6] | 188 | |||||||||||||||
Liability Fair Value | [6] | 80 | |||||||||||||||
Future Contract Benefits [Member] | Indexed Annuity And IUL Contracts [Member] | Non-Qualifying Hedging [Member] | |||||||||||||||||
Outstanding derivative instruments with off-balance-sheet risks | |||||||||||||||||
Asset Fair Value | [4],[7] | 872 | 902 | ||||||||||||||
Liability Fair Value | [4],[7] | $ 1,730 | $ 1,305 | ||||||||||||||
|
Derivative Instruments (Maturity Of The Notional Amounts Of Derivative Financial Instruments) (Details) $ in Millions |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Mar. 31, 2019
USD ($)
| ||||||
Maturity of the notional amounts of derivative financial instruments | ||||||
Remaining Life Less Than 1 Year | $ 33,971 | |||||
Remaining Life - 1 - 5 Years | 14,992 | |||||
Remaining Life - 6 - 10 Years | 54,468 | |||||
Remaining Life - 11 - 30 Years | 25,159 | |||||
Remaining Life Over - 30 Years | 3,729 | |||||
Remaining Life - Total Years | 132,319 | |||||
Interest rate contracts [Member] | ||||||
Maturity of the notional amounts of derivative financial instruments | ||||||
Remaining Life Less Than 1 Year | 11,465 | [1] | ||||
Remaining Life - 1 - 5 Years | 9,727 | [1] | ||||
Remaining Life - 6 - 10 Years | 51,648 | [1] | ||||
Remaining Life - 11 - 30 Years | 23,868 | [1] | ||||
Remaining Life Over - 30 Years | 500 | [1] | ||||
Remaining Life - Total Years | $ 97,208 | [1] | ||||
Derivative maturity date | Jul. 31, 2026 | |||||
Foreign currency contracts [Member] | ||||||
Maturity of the notional amounts of derivative financial instruments | ||||||
Remaining Life Less Than 1 Year | $ 66 | [2] | ||||
Remaining Life - 1 - 5 Years | 264 | [2] | ||||
Remaining Life - 6 - 10 Years | 764 | [2] | ||||
Remaining Life - 11 - 30 Years | 1,278 | [2] | ||||
Remaining Life Over - 30 Years | 81 | [2] | ||||
Remaining Life - Total Years | $ 2,453 | [2] | ||||
Derivative maturity date | Sep. 01, 2049 | |||||
Equity market contracts [Member] | ||||||
Maturity of the notional amounts of derivative financial instruments | ||||||
Remaining Life Less Than 1 Year | $ 22,440 | |||||
Remaining Life - 1 - 5 Years | 5,001 | |||||
Remaining Life - 6 - 10 Years | 1,996 | |||||
Remaining Life - 11 - 30 Years | 13 | |||||
Remaining Life Over - 30 Years | 3,148 | |||||
Remaining Life - Total Years | 32,598 | |||||
Credit contracts [Member] | ||||||
Maturity of the notional amounts of derivative financial instruments | ||||||
Remaining Life - 6 - 10 Years | 60 | |||||
Remaining Life - Total Years | $ 60 | |||||
|
Derivative Instruments (Cumulative Basis Adjustments For Fair Value Hedges) (Details) - Fixed Maturity Securities [Member] $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Derivatives, Fair Value [Line Items] | |
Amortized cost of hedged asset | $ 457 |
Cumulative amount of fair value hedging adjustmentst included in the amortized cost of hedged assets | $ 161 |
Derivative Instruments (Change In Unrealized Gain On Derivative Instruments In Accumulated OCI) (Details) - USD ($) $ in Millions |
3 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2017 |
||||||
Change in our unrealized gain on derivative instruments in accumulated OCI | ||||||||
Balance as of beginning-of-year | $ 659 | |||||||
Income tax expense (benefit) | (15) | $ 76 | ||||||
Balance as of end-of-period | 2,654 | |||||||
Unrealized Gain (Loss) on Derivative Instruments [Member] | ||||||||
Change in our unrealized gain on derivative instruments in accumulated OCI | ||||||||
Balance as of beginning-of-year | 119 | 27 | ||||||
Cumulative effect from adoption of new accounting standard | $ 6 | |||||||
Change in foreign currency exchange rate adjustment | (14) | (50) | ||||||
Change in DAC, VOBA, DSI and DFEL | 4 | 4 | ||||||
Income tax benefit (expense) | (9) | 28 | ||||||
Associated amortization of DAC, VOBA, DSI and DFEL | (3) | (1) | ||||||
Income tax expense (benefit) | (1) | (1) | ||||||
Balance as of end-of-period | 148 | (72) | ||||||
Unrealized Gain (Loss) on Derivative Instruments [Member] | Cash Flow Hedges [Member] | Interest rate contracts [Member] | ||||||||
Change in our unrealized gain on derivative instruments in accumulated OCI | ||||||||
Unrealized holding gains (losses) arising during the period | 42 | (46) | ||||||
Unrealized Gain (Loss) on Derivative Instruments [Member] | Cash Flow Hedges [Member] | Interest rate contracts [Member] | Net Investment Income [Member] | ||||||||
Change in our unrealized gain on derivative instruments in accumulated OCI | ||||||||
Transfers from derivative instruments to bonds through basis adjustment | [1] | 1 | 1 | |||||
Unrealized Gain (Loss) on Derivative Instruments [Member] | Cash Flow Hedges [Member] | Foreign currency contracts [Member] | ||||||||
Change in our unrealized gain on derivative instruments in accumulated OCI | ||||||||
Unrealized holding gains (losses) arising during the period | 11 | (37) | ||||||
Unrealized Gain (Loss) on Derivative Instruments [Member] | Cash Flow Hedges [Member] | Foreign currency contracts [Member] | Net Investment Income [Member] | ||||||||
Change in our unrealized gain on derivative instruments in accumulated OCI | ||||||||
Transfers from derivative instruments to bonds through basis adjustment | [1] | 7 | $ 5 | |||||
Unrealized Gain (Loss) on Derivative Instruments [Member] | Cash Flow Hedges [Member] | Foreign currency contracts [Member] | Realized Gain (Loss) [Member] | ||||||||
Change in our unrealized gain on derivative instruments in accumulated OCI | ||||||||
Transfers from derivative instruments to bonds through basis adjustment | [2] | $ 1 | ||||||
|
Derivative Instruments (Effects Of Qualifying And Non-Qualifying Hedges) (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Realized Gain (Loss) [Member] | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Total line items in which the effects of fair value or cash flow hedges are recorded | $ (351) |
Net Investment Income [Member] | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Total line items in which the effects of fair value or cash flow hedges are recorded | 1,191 |
Commissions And Other Expenses [Member] | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Total line items in which the effects of fair value or cash flow hedges are recorded | 1,124 |
Interest rate contracts [Member] | Realized Gain (Loss) [Member] | Non-Qualifying Hedging [Member] | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Non-qualifying hedges gain (loss) | 357 |
Equity market contracts [Member] | Realized Gain (Loss) [Member] | Non-Qualifying Hedging [Member] | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Non-qualifying hedges gain (loss) | (458) |
GLB Direct And Ceded Embedded Derivative [Member] | Realized Gain (Loss) [Member] | Non-Qualifying Hedging [Member] | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Non-qualifying hedges gain (loss) | 1 |
Embedded derivatives - Reinsurance related [Member] | Realized Gain (Loss) [Member] | Non-Qualifying Hedging [Member] | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Non-qualifying hedges gain (loss) | (289) |
Indexed Annuity And IUL Contracts [Member] | Realized Gain (Loss) [Member] | Non-Qualifying Hedging [Member] | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Non-qualifying hedges gain (loss) | (239) |
Cash Flow Hedges [Member] | Interest rate contracts [Member] | Net Investment Income [Member] | Qualifying Hedges [Member] | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Amount of gain or (loss) reclassified from AOCI into income | 1 |
Cash Flow Hedges [Member] | Foreign currency contracts [Member] | Realized Gain (Loss) [Member] | Qualifying Hedges [Member] | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Amount of gain or (loss) reclassified from AOCI into income | 1 |
Cash Flow Hedges [Member] | Foreign currency contracts [Member] | Net Investment Income [Member] | Qualifying Hedges [Member] | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Amount of gain or (loss) reclassified from AOCI into income | 7 |
Fair Value Hedges [Member] | Interest rate contracts [Member] | Net Investment Income [Member] | Qualifying Hedges [Member] | |
Derivative Instruments, Gain (Loss) [Line Items] | |
Hedged items | 24 |
Derivatives designated as hedging instruments | $ (24) |
Derivative Instruments (Gains (Losses) On Derivative Instruments Recorded Within Income (Loss) From Continuing Operations) (Details) $ in Millions |
3 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Mar. 31, 2018
USD ($)
| ||||||||
Gains (losses) | ||||||||
Gains (losses) | $ (93) | |||||||
Qualifying Hedges [Member] | Cash Flow Hedges [Member] | ||||||||
Gains (losses) | ||||||||
Gains (losses) | 6 | |||||||
Qualifying Hedges [Member] | Fair Value Hedges [Member] | ||||||||
Gains (losses) | ||||||||
Gains (losses) | 29 | |||||||
Qualifying Hedges [Member] | Net Investment Income [Member] | Cash Flow Hedges [Member] | Interest rate contracts [Member] | ||||||||
Gains (losses) | ||||||||
Gains (losses) | 1 | [1] | ||||||
Qualifying Hedges [Member] | Net Investment Income [Member] | Cash Flow Hedges [Member] | Foreign currency contracts [Member] | ||||||||
Gains (losses) | ||||||||
Gains (losses) | 5 | [1] | ||||||
Qualifying Hedges [Member] | Net Investment Income [Member] | Fair Value Hedges [Member] | Interest rate contracts [Member] | ||||||||
Gains (losses) | ||||||||
Gains (losses) | (4) | [1] | ||||||
Qualifying Hedges [Member] | Realized Gain (Loss) [Member] | Fair Value Hedges [Member] | Interest rate contracts [Member] | ||||||||
Gains (losses) | ||||||||
Gains (losses) | 33 | [2] | ||||||
Non-Qualifying Hedging [Member] | Realized Gain (Loss) [Member] | Interest rate contracts [Member] | ||||||||
Gains (losses) | ||||||||
Gains (losses) | (312) | [2] | ||||||
Non-Qualifying Hedging [Member] | Realized Gain (Loss) [Member] | Foreign currency contracts [Member] | ||||||||
Gains (losses) | ||||||||
Gains (losses) | 2 | [2] | ||||||
Non-Qualifying Hedging [Member] | Realized Gain (Loss) [Member] | Equity market contracts [Member] | ||||||||
Gains (losses) | ||||||||
Gains (losses) | 7 | [2] | ||||||
Non-Qualifying Hedging [Member] | Realized Gain (Loss) [Member] | Embedded derivatives - Reinsurance related [Member] | ||||||||
Gains (losses) | ||||||||
Gains (losses) | 125 | [2] | ||||||
Non-Qualifying Hedging [Member] | Realized Gain (Loss) [Member] | Indexed Annuity And IUL Contracts [Member] | ||||||||
Gains (losses) | ||||||||
Gains (losses) | 52 | [2] | ||||||
Non-Qualifying Hedging [Member] | Commissions And Other Expenses [Member] | Equity market contracts [Member] | ||||||||
Gains (losses) | ||||||||
Gains (losses) | $ (2) | [3] | ||||||
|
Derivative Instruments (Gains (Losses) On Derivative Instruments Designated As Cash Flow Hedges) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Gains (losses) on derivative instruments designated and qualifying as cash flow hedges | ||
Offset to net investment income | $ 1,191 | $ 1,176 |
Qualifying Hedges [Member] | Cash Flow Hedges [Member] | Other Comprehensive Income (Loss) [Member] | ||
Gains (losses) on derivative instruments designated and qualifying as cash flow hedges | ||
Offset to net investment income | $ 6 |
Derivative Instruments (Schedule Of Collateral Amounts With Rights To Reclaim Or Obligation To Return Cash) (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Credit Derivatives [Line Items] | ||
Collateral Posted by Counter-Party (Held by LNL) | $ 694 | $ 616 |
Collateral Posted by LNL (Held by Counter-Party) | (116) | (66) |
AA- [Member] | ||
Credit Derivatives [Line Items] | ||
Collateral Posted by Counter-Party (Held by LNL) | 56 | 33 |
Collateral Posted by LNL (Held by Counter-Party) | (3) | (4) |
A+ [Member] | ||
Credit Derivatives [Line Items] | ||
Collateral Posted by Counter-Party (Held by LNL) | 389 | 296 |
Collateral Posted by LNL (Held by Counter-Party) | (113) | (26) |
A [Member] | ||
Credit Derivatives [Line Items] | ||
Collateral Posted by Counter-Party (Held by LNL) | 5 | 106 |
Collateral Posted by LNL (Held by Counter-Party) | (36) | |
A- [Member] | ||
Credit Derivatives [Line Items] | ||
Collateral Posted by Counter-Party (Held by LNL) | 244 | 4 |
Collateral Posted by LNL (Held by Counter-Party) | ||
BBB+ [Member] | ||
Credit Derivatives [Line Items] | ||
Collateral Posted by Counter-Party (Held by LNL) | 177 | |
Collateral Posted by LNL (Held by Counter-Party) |
Derivative Instruments (Schedule Of Offsetting Assets And Liabilities) (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Financial Assets | ||
Derivative Instruments, Gross amount of recognized assets | $ 1,302 | $ 1,282 |
Derivative Instruments, Gross amounts offset | (328) | (201) |
Derivative Instruments, Net amount of assets | 974 | 1,081 |
Derivative Instruments, Cash collateral | (694) | (616) |
Derivative Instruments, Non-cash collateral | (116) | (58) |
Derivative Instruments, Net amount | 164 | 407 |
Embedded Derivative Instruments, Gross amount of recognized assets | 1,361 | 1,285 |
Embedded Derivative Instruments, Gross amounts offset | ||
Embedded Derivative Instruments, Net amount of assets | 1,361 | 1,285 |
Embedded Derivative Instruments, Cash collateral | ||
Embedded Derivative Instruments, Non-cash collateral | ||
Embedded Derivative Instruments, Net amount | 1,361 | 1,285 |
Total, Gross amount of recognized assets | 2,663 | 2,567 |
Total, Gross amounts offset | (328) | (201) |
Total, Net amount of assets | 2,335 | 2,366 |
Total, Cash collateral | (694) | (616) |
Total, Non-cash collateral | (116) | (58) |
Total, Net amount | 1,525 | 1,692 |
Financial Liabilities | ||
Derivative Instruments, Gross amount of recognized liabilities | 896 | 806 |
Derivative Instruments, Gross amounts offset | (115) | (59) |
Derivative Instruments, Net amount of liabilities | 781 | 747 |
Derivative Instruments, Cash collateral | (116) | (66) |
Derivative Instruments, Non-cash collateral | (346) | (190) |
Derivative Instruments, Net amount | 319 | 491 |
Embedded Derivative Instruments, Gross amount of recognized liabilities | 2,299 | 1,501 |
Embedded Derivative Instruments, Gross amounts offset | ||
Embedded Derivative Instruments, Net amount of liabilities | 2,299 | 1,501 |
Embedded Derivative Instruments, Cash collateral | ||
Embedded Derivative Instruments, Non-cash collateral | ||
Embedded Derivative Instruments, Net amount | 2,299 | 1,501 |
Total, Gross amount of recognized liabilities | 3,195 | 2,307 |
Total, Gross amounts offset | (115) | (59) |
Total, Net amount of liabilities | 3,080 | 2,248 |
Total, Cash collateral | (116) | (66) |
Total, Non-cash collateral | (346) | (190) |
Total, Net amount | $ 2,618 | $ 1,992 |
Federal Income Taxes (Narrative) (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Federal Income Taxes [Abstract] | ||
Effective tax rate | (13.00%) | 16.00% |
Federal rate | 21.00% | 21.00% |
Reinsurance (Narrative) (Details) - Athene Holding Ltd. [Member] $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Athene Holding Ltd. [Member] | |
Ceded Credit Risk [Line Items] | |
Reserves associated with modified coinsurance reinsurance arrangements | $ 237 |
Letter of credit | 219 |
AFS Securities [Member] | |
Ceded Credit Risk [Line Items] | |
Deposit assets | 5,100 |
Trading Securities [Member] | |
Ceded Credit Risk [Line Items] | |
Deposit assets | 1,900 |
Equity Securities [Member] | |
Ceded Credit Risk [Line Items] | |
Deposit assets | 49 |
Commercial Loan [Member] | |
Ceded Credit Risk [Line Items] | |
Deposit assets | 186 |
Derivative Instruments [Member] | |
Ceded Credit Risk [Line Items] | |
Deposit assets | 120 |
Other Investments [Member] | |
Ceded Credit Risk [Line Items] | |
Deposit assets | 85 |
Cash [Member] | |
Ceded Credit Risk [Line Items] | |
Deposit assets | $ 78 |
Guaranteed Benefit Features (Narrative) (Details) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2018 |
|
Guaranteed Benefit Features [Abstract] | |||
Percent of permanent life insurance in force | 35.00% | 33.00% | |
Percent of permanent life insurance sales | 29.00% | 35.00% |
Guaranteed Benefit Features (Information On Guaranteed Death Benefit Features) (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
[1] | ||||||
Return of Net Deposits [Member] | ||||||||
Net Amount at Risk by Product and Guarantee [Line Items] | ||||||||
Total account value | $ 95,670 | $ 89,783 | ||||||
Net amount at risk | [2] | $ 209 | $ 1,002 | |||||
Average attained age of contract holders | 65 years | 65 years | ||||||
Minimum Return [Member] | ||||||||
Net Amount at Risk by Product and Guarantee [Line Items] | ||||||||
Total account value | $ 95 | $ 88 | ||||||
Net amount at risk | [2] | $ 16 | $ 18 | |||||
Average attained age of contract holders | 77 years | 77 years | ||||||
Guaranteed minimum return | 5.00% | 5.00% | ||||||
Anniversary Contract Value [Member] | ||||||||
Net Amount at Risk by Product and Guarantee [Line Items] | ||||||||
Total account value | $ 25,031 | $ 23,365 | ||||||
Net amount at risk | [2] | $ 596 | $ 2,007 | |||||
Average attained age of contract holders | 71 years | 71 years | ||||||
|
Guaranteed Benefit Features (Summary Of Guaranteed Death Benefit Liabilities) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Guaranteed Benefit Features [Abstract] | ||
Balance as of beginning-of-year | $ 161 | $ 100 |
Changes in reserves | (36) | 11 |
Benefits paid | (6) | (3) |
Balance as of end-of-period | $ 119 | $ 108 |
Guaranteed Benefit Features (Account Balances Of Variable Annuity Contracts With Guarantees Invested In Separate Accounts) (Details) - Variable Annuity [Member] - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Account Balances Of Variable Annuity Contracts With Guarantees Invested In Separate Accounts [Line Items] | ||
Total | $ 118,421 | $ 110,361 |
Percent of total variable annuity separate account values | 98.00% | 99.00% |
Domestic Equity [Member] | ||
Account Balances Of Variable Annuity Contracts With Guarantees Invested In Separate Accounts [Line Items] | ||
Total | $ 59,205 | $ 54,060 |
International Equity [Member] | ||
Account Balances Of Variable Annuity Contracts With Guarantees Invested In Separate Accounts [Line Items] | ||
Total | 19,865 | 18,359 |
Fixed Income [Member] | ||
Account Balances Of Variable Annuity Contracts With Guarantees Invested In Separate Accounts [Line Items] | ||
Total | $ 39,351 | $ 37,942 |
Liability For Unpaid Claims (Changes In Liability For Unpaid Claims) (Details) - USD ($) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|||
Liability For Unpaid Claims [Abstract] | ||||
Balance as of beginning-of-year | $ 5,335 | $ 2,222 | ||
Reinsurance recoverable | 143 | 57 | ||
Net balance as of beginning-of-year | 5,192 | 2,165 | ||
Incurred related to: | ||||
Current year | 803 | 364 | ||
Interest | 41 | 19 | ||
All other incurred | [1] | (85) | (58) | |
Total incurred | 759 | 325 | ||
Paid related to: | ||||
Current year | (215) | (126) | ||
Prior years | (482) | (213) | ||
Total paid | (697) | (339) | ||
Net balance as of end-of-period | 5,254 | 2,151 | ||
Reinsurance recoverable | 143 | 56 | ||
Balance as of end-of-period | $ 5,397 | $ 2,207 | ||
|
Contingencies And Commitments (Narrative) (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Loss Contingencies [Line Items] | |
Operating lease ROU asset | $ 161 |
Operating lease liability | $ 168 |
Weighted average discount rate, operating lease | 3.40% |
Weighted average remaining operating lease term | 7 years |
Operating lease expense | $ 12 |
Sale-leaseback transactions, net | 177 |
Total accumulated amortization related to sales leaseback transaction | $ 300 |
Weighted average discount rate, finance lease | 2.50% |
Weighted average remaining finance lease term | 3 years |
Additional office space leases | $ 37 |
Pending Litigation [Member] | |
Loss Contingencies [Line Items] | |
Loss contingency, estimate | $ 50 |
Maximum [Member] | |
Loss Contingencies [Line Items] | |
Lease term | 11 years |
Minimum [Member] | |
Loss Contingencies [Line Items] | |
Lease term | 4 years |
Contingencies And Commitments (Finance Lease Expense) (Details) $ in Millions |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Mar. 31, 2019
USD ($)
| ||||||
Contingencies and Commitments [Abstract] | ||||||
Amortization of ROU assets | $ 18 | [1] | ||||
Interest on lease liabilities | 3 | [2] | ||||
Total | $ 21 | |||||
|
Contingencies And Commitments (Cash Flow Information Related To Leases) (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Contingencies and Commitments [Abstract] | |
Operating cash flows from operating leases | $ 13 |
Financing cash flows from finance leases | 3 |
Operating leases | $ 10 |
Contingencies And Commitments (Future Minimum Lease Payments) (Details) $ in Millions |
Mar. 31, 2019
USD ($)
|
---|---|
Operating Leases | |
2019 | $ 26 |
2020 | 32 |
2021 | 28 |
2022 | 23 |
2023 | 20 |
Thereafter | 64 |
Total future minimum lease payments | 193 |
Less: Amount representing interest | 25 |
Present value of minimum lease payments | 168 |
Finance Leases | |
2019 | 93 |
2020 | 57 |
2021 | 67 |
2022 | 67 |
2023 | 91 |
Thereafter | 28 |
Total future minimum lease payments | 403 |
Less: Amount representing interest | 39 |
Present value of minimum lease payments | $ 364 |
Shares and Stockholders' Equity (Components And Changes In Accumulated OCI) (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
Dec. 31, 2017 |
|
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Balance as of beginning-of-year | $ 659 | ||
(Increases) attributable to: | |||
Change in DAC, VOBA, DSI and DFEL | (1) | ||
Less: | |||
Balance as of end-of-period | 2,654 | ||
Unrealized Gain (Loss) on AFS Securities [Member] | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Balance as of beginning-of-year | 536 | $ 3,283 | |
Cumulative effect from adoption of new accounting standard | $ 634 | ||
Unrealized holding gains (losses) arising during the period | 3,406 | (2,924) | |
Change in foreign currency exchange rate adjustment | 13 | 53 | |
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds | (925) | 957 | |
Income tax benefit (expense) | (531) | 403 | |
Less: | |||
Reclassification adjustment for gains (losses) included in net income (loss) | (14) | (19) | |
Associated amortization of DAC, VOBA, DSI, and DFEL | 1 | (4) | |
Income tax benefit (expense) | 3 | 5 | |
Less: | |||
Balance as of end-of-period | 2,509 | 2,424 | |
Unrealized OTTI on AFS Securities [Member] | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Balance as of beginning-of-year | 29 | 39 | |
Cumulative effect from adoption of new accounting standard | 9 | ||
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds | 1 | ||
Income tax benefit (expense) | 4 | (1) | |
(Increases) attributable to: | |||
Gross OTTI recognized in OCI during the period | (14) | ||
Decreases attributable to | |||
Changes in fair value, sales, maturities or other settlements of AFS securities | 5 | (9) | |
Change in DAC, VOBA, DSI, and DFEL | (2) | (10) | |
Income tax benefit (expense) | (1) | 4 | |
Less: | |||
Balance as of end-of-period | 22 | 32 | |
Unrealized Gain (Loss) on Derivative Instruments [Member] | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Balance as of beginning-of-year | 119 | 27 | |
Cumulative effect from adoption of new accounting standard | 6 | ||
Unrealized holding gains (losses) arising during the period | 53 | (83) | |
Change in foreign currency exchange rate adjustment | (14) | (50) | |
Decreases attributable to | |||
Change in DAC, VOBA, DSI and DFEL | 4 | 4 | |
Income tax benefit (expense) | (9) | 28 | |
Less: | |||
Reclassification adjustment for gains (losses) included in net income (loss) | 9 | 6 | |
Associated amortization of DAC, VOBA, DSI and DFEL | (3) | (1) | |
Income tax benefit (expense) | (1) | (1) | |
Balance as of end-of-period | 148 | (72) | |
Funded Status of Employee Benefit Plans | |||
Accumulated Other Comprehensive Income (Loss) [Line Items] | |||
Balance as of beginning-of-year | (25) | (22) | |
Cumulative effect from adoption of new accounting standard | $ (5) | ||
Less: | |||
Balance as of end-of-period | $ (25) | $ (27) |
Shares And Stockholders' Equity (Schedule of Reclassifications Out Of AOCI) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Net investment income | $ 1,191 | $ 1,176 |
Total realized gain (loss) | (351) | 22 |
Interest and debt expense | (38) | (32) |
Commissions and other expenses | (1,124) | (1,010) |
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gain (Loss) on AFS Securities [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Total realized gain (loss) | (14) | (19) |
Reclassifications before income tax benefit (expense) | (13) | (23) |
Income tax benefit (expense) | 3 | 5 |
Reclassifications, net of income tax | (10) | (18) |
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gain (Loss) on AFS Securities [Member] | Associated amortization of DAC, VOBA, DSI and DFEL [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Total realized gain (loss) | 1 | (4) |
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gain (Loss) on Derivative Instruments [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Total gross reclassifications | 9 | 6 |
Reclassifications before income tax benefit (expense) | 6 | 5 |
Income tax benefit (expense) | (1) | (1) |
Reclassifications, net of income tax | 5 | 4 |
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gain (Loss) on Derivative Instruments [Member] | Interest rate contracts [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Net investment income | 1 | 1 |
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gain (Loss) on Derivative Instruments [Member] | Foreign currency contracts [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Net investment income | 7 | 5 |
Total realized gain (loss) | 1 | |
Reclassification out of Accumulated Other Comprehensive Income [Member] | Unrealized Gain (Loss) on Derivative Instruments [Member] | Associated amortization of DAC, VOBA, DSI and DFEL [Member] | ||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | ||
Commissions and other expenses | $ (3) | $ (1) |
Fair Value of Financial Instruments (Narrative) (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
---|---|---|---|
Fair Value, Measurements, Nonrecurring [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Assets measured at fair value | $ 0 | $ 0 | |
Liabilities measured at fair value | 0 | $ 0 | |
Maximum [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount | 1 | $ 1 | |
Fair Value, Assets, Level 2 to Level 1 Transfers, Amount | 1 | 1 | |
Fair Value, Liabilities, Level 1 to Level 2 Transfers, Amount | 1 | 1 | |
Fair Value, Liabilities, Level 2 to Level 1 Transfers, Amount | $ 1 | $ 1 |
Fair Value of Financial Instruments (Carrying and Estimated Fair Values of Financial Instruments) (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
|||
---|---|---|---|---|---|
Assets | |||||
AFS Fixed Maturity Securities | $ 96,648 | $ 92,787 | |||
Trading securities | 3,231 | 1,869 | |||
Equity securities | 153 | 99 | |||
Mortgage loans on real estate | 13,925 | 13,190 | |||
Derivative investments | 974 | 1,081 | |||
Other investments | 2,372 | 1,962 | |||
Carrying Value [Member] | |||||
Assets | |||||
Trading securities | 3,231 | 1,869 | |||
Equity securities | 153 | 99 | |||
Mortgage loans on real estate | 13,925 | 13,190 | |||
Derivative investments | [1] | 974 | 1,081 | ||
Other investments | 2,362 | 1,951 | |||
Cash and invested cash | 1,320 | 1,848 | |||
Reinsurance related embedded derivatives | 188 | ||||
Indexed annuity ceded embedded derivatives | 872 | 902 | |||
Separate account assets | 143,369 | 132,833 | |||
Future contract benefits: | |||||
Indexed annuity and IUL contracts embedded derivatives | (1,730) | (1,305) | |||
Other contract holder funds: | |||||
Remaining guaranteed interest and similar contracts | (1,948) | (542) | |||
Account values of certain investment contracts | (35,737) | (34,500) | |||
Short-term debt | (686) | (288) | |||
Long-term debt | (2,387) | (2,401) | |||
Reinsurance related embedded derivatives | (80) | ||||
Other liabilities - derivative liabilities | [1] | (261) | (226) | ||
Other liabilities - GLB ceded embedded derivatives | (489) | (196) | |||
Fair Value [Member] | |||||
Assets | |||||
Trading securities | 3,231 | 1,869 | |||
Equity securities | 153 | 99 | |||
Mortgage loans on real estate | 13,890 | 13,020 | |||
Derivative investments | [1] | 974 | 1,081 | ||
Other investments | 2,362 | 1,951 | |||
Cash and invested cash | 1,320 | 1,848 | |||
Reinsurance related embedded derivatives | 188 | ||||
Indexed annuity ceded embedded derivatives | 872 | 902 | |||
Separate account assets | 143,369 | 132,833 | |||
Future contract benefits: | |||||
Indexed annuity and IUL contracts embedded derivatives | (1,730) | (1,305) | |||
Other contract holder funds: | |||||
Remaining guaranteed interest and similar contracts | (1,948) | (542) | |||
Account values of certain investment contracts | (38,752) | (36,321) | |||
Short-term debt | (686) | (288) | |||
Long-term debt | (2,615) | (2,519) | |||
Reinsurance related embedded derivatives | (80) | ||||
Other liabilities - derivative liabilities | [1] | (261) | (226) | ||
Other liabilities - GLB ceded embedded derivatives | (489) | (196) | |||
Fixed Maturity Securities [Member] | Carrying Value [Member] | |||||
Assets | |||||
AFS Fixed Maturity Securities | 96,648 | 92,787 | |||
Fixed Maturity Securities [Member] | Fair Value [Member] | |||||
Assets | |||||
AFS Fixed Maturity Securities | 96,648 | 92,787 | |||
GLB Direct Embedded Derivatives [Member] | Carrying Value [Member] | |||||
Assets | |||||
Other assets - GLB embedded derivatives | 439 | 123 | |||
GLB Direct Embedded Derivatives [Member] | Fair Value [Member] | |||||
Assets | |||||
Other assets - GLB embedded derivatives | 439 | 123 | |||
GLB Ceded Embedded Derivatives [Member] | Carrying Value [Member] | |||||
Assets | |||||
Other assets - GLB embedded derivatives | 50 | 72 | |||
GLB Ceded Embedded Derivatives [Member] | Fair Value [Member] | |||||
Assets | |||||
Other assets - GLB embedded derivatives | $ 50 | $ 72 | |||
|
Fair Value of Financial Instruments (Fair Value Of Assets And Liabilities On A Recurring Basis) (Details) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
|||
---|---|---|---|---|---|
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | $ 247,484 | $ 232,028 | |||
Liabilities measured at fair value | (3,004) | (1,986) | |||
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 1,251 | 1,158 | |||
Significant Observable Inputs (Level 2) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 237,660 | 222,998 | |||
Liabilities measured at fair value | (380) | (314) | |||
Significant Unobservable Inputs (Level 3) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 8,573 | 7,872 | |||
Liabilities measured at fair value | (2,624) | (1,672) | |||
Corporate Bonds [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 82,264 | 79,549 | |||
Corporate Bonds [Member] | Significant Observable Inputs (Level 2) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 76,353 | 73,897 | |||
Corporate Bonds [Member] | Significant Unobservable Inputs (Level 3) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 5,911 | 5,652 | |||
ABS [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 1,030 | 948 | |||
ABS [Member] | Significant Observable Inputs (Level 2) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 949 | 919 | |||
ABS [Member] | Significant Unobservable Inputs (Level 3) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 81 | 29 | |||
U.S. Government Bonds [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 391 | 386 | |||
U.S. Government Bonds [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 374 | 368 | |||
U.S. Government Bonds [Member] | Significant Observable Inputs (Level 2) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 17 | 18 | |||
Foreign Government Bonds [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 449 | 444 | |||
Foreign Government Bonds [Member] | Significant Observable Inputs (Level 2) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 339 | 335 | |||
Foreign Government Bonds [Member] | Significant Unobservable Inputs (Level 3) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 110 | 109 | |||
RMBS [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 3,192 | 3,164 | |||
RMBS [Member] | Significant Observable Inputs (Level 2) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 3,192 | 3,157 | |||
RMBS [Member] | Significant Unobservable Inputs (Level 3) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 7 | ||||
CMBS [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 884 | 803 | |||
CMBS [Member] | Significant Observable Inputs (Level 2) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 882 | 801 | |||
CMBS [Member] | Significant Unobservable Inputs (Level 3) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 2 | 2 | |||
CLOs [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 2,437 | 1,730 | |||
CLOs [Member] | Significant Observable Inputs (Level 2) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 2,340 | 1,625 | |||
CLOs [Member] | Significant Unobservable Inputs (Level 3) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 97 | 105 | |||
State And Municipal Bonds [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 5,402 | 5,184 | |||
State And Municipal Bonds [Member] | Significant Observable Inputs (Level 2) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 5,402 | 5,184 | |||
Hybrid And Redeemable Preferred Securities [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 599 | 579 | |||
Hybrid And Redeemable Preferred Securities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 70 | 66 | |||
Hybrid And Redeemable Preferred Securities [Member] | Significant Observable Inputs (Level 2) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 451 | 438 | |||
Hybrid And Redeemable Preferred Securities [Member] | Significant Unobservable Inputs (Level 3) [Member] | Fixed Maturity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 78 | 75 | |||
Trading Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 3,231 | 1,869 | |||
Trading Securities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 44 | 43 | |||
Trading Securities [Member] | Significant Observable Inputs (Level 2) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 2,951 | 1,759 | |||
Trading Securities [Member] | Significant Unobservable Inputs (Level 3) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 236 | 67 | |||
Equity Securities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 153 | 99 | |||
Equity Securities [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 67 | 16 | |||
Equity Securities [Member] | Significant Observable Inputs (Level 2) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 61 | 58 | |||
Equity Securities [Member] | Significant Unobservable Inputs (Level 3) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 25 | 25 | |||
Derivative Investments [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | [1] | 1,418 | 1,340 | ||
Derivative Investments [Member] | Significant Observable Inputs (Level 2) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | [1] | 746 | 636 | ||
Derivative Investments [Member] | Significant Unobservable Inputs (Level 3) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | [1] | 672 | 704 | ||
Invested Cash [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 1,320 | 1,848 | |||
Invested Cash [Member] | Significant Observable Inputs (Level 2) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 1,320 | 1,848 | |||
GLB Direct Embedded Derivatives [Member] | Other Assets [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 439 | 123 | |||
GLB Direct Embedded Derivatives [Member] | Significant Unobservable Inputs (Level 3) [Member] | Other Assets [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 439 | 123 | |||
GLB Ceded Embedded Derivatives [Member] | Other Assets [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 50 | 72 | |||
GLB Ceded Embedded Derivatives [Member] | Other Liabilities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Liabilities measured at fair value | (489) | (196) | |||
GLB Ceded Embedded Derivatives [Member] | Significant Unobservable Inputs (Level 3) [Member] | Other Assets [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 50 | 72 | |||
GLB Ceded Embedded Derivatives [Member] | Significant Unobservable Inputs (Level 3) [Member] | Other Liabilities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Liabilities measured at fair value | (489) | (196) | |||
Indexed Annuity And IUL Contracts [Member] | Other Assets [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 872 | 902 | |||
Indexed Annuity And IUL Contracts [Member] | Future Contract Benefits [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Liabilities measured at fair value | (1,730) | (1,305) | |||
Indexed Annuity And IUL Contracts [Member] | Significant Unobservable Inputs (Level 3) [Member] | Other Assets [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 872 | 902 | |||
Indexed Annuity And IUL Contracts [Member] | Significant Unobservable Inputs (Level 3) [Member] | Future Contract Benefits [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Liabilities measured at fair value | (1,730) | (1,305) | |||
Separate Account Assets [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 143,353 | 132,800 | |||
Separate Account Assets [Member] | Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 696 | 665 | |||
Separate Account Assets [Member] | Significant Observable Inputs (Level 2) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 142,657 | 132,135 | |||
Reinsurance Related Embedded Derivatives [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 188 | ||||
Liabilities measured at fair value | (80) | ||||
Reinsurance Related Embedded Derivatives [Member] | Significant Observable Inputs (Level 2) [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Assets measured at fair value | 188 | ||||
Liabilities measured at fair value | (80) | ||||
Derivative Financial Instruments, Liabilities [Member] | Other Liabilities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Liabilities measured at fair value | [1] | (705) | (485) | ||
Derivative Financial Instruments, Liabilities [Member] | Significant Observable Inputs (Level 2) [Member] | Other Liabilities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Liabilities measured at fair value | [1] | (300) | (314) | ||
Derivative Financial Instruments, Liabilities [Member] | Significant Unobservable Inputs (Level 3) [Member] | Other Liabilities [Member] | |||||
Fair Value Assets And Liabilities Measured On Recurring Basis [Line Items] | |||||
Liabilities measured at fair value | [1] | $ (405) | $ (171) | ||
|
Fair Value of Financial Instruments (Fair Value Measured On A Recurring Basis Reconciliation) (Details) - USD ($) $ in Millions |
3 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | $ 6,200 | $ 4,509 | |||||||||||||
Items Included in Net Income | (621) | 384 | |||||||||||||
Gains (Losses) in OCI and Other | [1] | 119 | (8) | ||||||||||||
Issuances, Sales, Maturities, Settlements, Calls, Net | 417 | 90 | |||||||||||||
Transfers Into or Out of Level 3, Net | [2] | (166) | (221) | [3] | |||||||||||
Ending Fair Value | 5,949 | 4,754 | |||||||||||||
Corporate Bonds [Member] | Fixed Maturity Securities [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [4] | 5,652 | 5,350 | ||||||||||||
Items Included in Net Income | [4] | (1) | 3 | ||||||||||||
Gains (Losses) in OCI and Other | [1],[4] | 69 | 18 | ||||||||||||
Issuances, Sales, Maturities, Settlements, Calls, Net | [4] | 208 | 97 | ||||||||||||
Transfers Into or Out of Level 3, Net | [2],[4] | (17) | 17 | [3] | |||||||||||
Ending Fair Value | [4] | 5,911 | 5,485 | ||||||||||||
ABS [Member] | Fixed Maturity Securities [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [4] | 29 | 26 | ||||||||||||
Issuances, Sales, Maturities, Settlements, Calls, Net | [4] | 52 | |||||||||||||
Ending Fair Value | [4] | 81 | 26 | ||||||||||||
U.S. Government Bonds [Member] | Fixed Maturity Securities [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [4] | 5 | |||||||||||||
Ending Fair Value | [4] | 5 | |||||||||||||
Foreign Government Bonds [Member] | Fixed Maturity Securities [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [4] | 109 | 110 | ||||||||||||
Gains (Losses) in OCI and Other | [1],[4] | 1 | (2) | ||||||||||||
Ending Fair Value | [4] | 110 | 108 | ||||||||||||
RMBS [Member] | Fixed Maturity Securities [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [4] | 7 | 12 | ||||||||||||
Transfers Into or Out of Level 3, Net | [2],[4] | (7) | (12) | [3] | |||||||||||
CMBS [Member] | Fixed Maturity Securities [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [4] | 2 | 6 | ||||||||||||
Items Included in Net Income | [4] | 1 | |||||||||||||
Issuances, Sales, Maturities, Settlements, Calls, Net | [4] | 20 | |||||||||||||
Ending Fair Value | [4] | 2 | 27 | ||||||||||||
CLOs [Member] | Fixed Maturity Securities [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [4] | 105 | 91 | ||||||||||||
Issuances, Sales, Maturities, Settlements, Calls, Net | [4] | 97 | 2 | ||||||||||||
Transfers Into or Out of Level 3, Net | [2],[4] | (105) | (91) | [3] | |||||||||||
Ending Fair Value | [4] | 97 | 2 | ||||||||||||
Hybrid And Redeemable Preferred Securities [Member] | Fixed Maturity Securities [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [4] | 75 | 76 | ||||||||||||
Gains (Losses) in OCI and Other | [1],[4] | 3 | 1 | ||||||||||||
Ending Fair Value | [4] | 78 | 77 | ||||||||||||
Equity AFS Securities [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [4] | 161 | |||||||||||||
Transfers Into or Out of Level 3, Net | [2],[3],[4] | (161) | |||||||||||||
Trading Securities [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [4] | 67 | 49 | ||||||||||||
Items Included in Net Income | [4] | (2) | |||||||||||||
Issuances, Sales, Maturities, Settlements, Calls, Net | [4] | 206 | |||||||||||||
Transfers Into or Out of Level 3, Net | [2],[4] | (37) | |||||||||||||
Ending Fair Value | [4] | 236 | 47 | ||||||||||||
Equity Securities [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [4] | 25 | |||||||||||||
Issuances, Sales, Maturities, Settlements, Calls, Net | 1 | ||||||||||||||
Transfers Into or Out of Level 3, Net | [2],[3] | 26 | |||||||||||||
Ending Fair Value | 25 | [4] | 27 | ||||||||||||
Derivative Investments [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [4] | 533 | 30 | ||||||||||||
Items Included in Net Income | [4] | (382) | 330 | ||||||||||||
Gains (Losses) in OCI and Other | [1],[4] | 46 | (25) | ||||||||||||
Issuances, Sales, Maturities, Settlements, Calls, Net | [4] | 70 | (56) | ||||||||||||
Ending Fair Value | [4] | 267 | 279 | ||||||||||||
GLB Direct Embedded Derivatives [Member] | Other Assets [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [5] | 123 | 903 | ||||||||||||
Items Included in Net Income | [5] | 316 | 207 | ||||||||||||
Ending Fair Value | [5] | 439 | 1,110 | ||||||||||||
GLB Ceded Embedded Derivatives [Member] | Other Assets [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [5] | 72 | 51 | ||||||||||||
Items Included in Net Income | [5] | (22) | (6) | ||||||||||||
Ending Fair Value | [5] | 50 | 45 | ||||||||||||
GLB Ceded Embedded Derivatives [Member] | Other Liabilities [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [5] | (196) | (954) | ||||||||||||
Items Included in Net Income | [5] | (293) | (201) | ||||||||||||
Ending Fair Value | [5] | (489) | (1,155) | ||||||||||||
Indexed Annuity And IUL Contracts [Member] | Other Assets [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [5] | 902 | 11 | ||||||||||||
Items Included in Net Income | [5] | 77 | |||||||||||||
Issuances, Sales, Maturities, Settlements, Calls, Net | [5] | (107) | 6 | ||||||||||||
Ending Fair Value | [5] | 872 | 17 | ||||||||||||
Indexed Annuity And IUL Contracts [Member] | Future Contract Benefits [Member] | |||||||||||||||
Level 3 Unobservable Input Reconciliation | |||||||||||||||
Beginning Fair Value | [5] | (1,305) | (1,418) | ||||||||||||
Items Included in Net Income | [5] | (316) | 52 | ||||||||||||
Issuances, Sales, Maturities, Settlements, Calls, Net | [5] | (109) | 20 | ||||||||||||
Ending Fair Value | [5] | $ (1,730) | $ (1,346) | ||||||||||||
|
Fair Value of Financial Instruments (Schedule Of Investment Holdings Movements) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Fair Value Investments Entities That Calculate Net Asset Value Per Share Unobservable Input Investment Holdings Movements [Abstract] | ||
Issuances | $ 645 | $ 318 |
Sales | (30) | (63) |
Maturities | (53) | (119) |
Settlements | (138) | (46) |
Calls | (7) | |
Total | 417 | 90 |
Corporate Bonds [Member] | Fixed Maturity Securities [Member] | ||
Fair Value Investments Entities That Calculate Net Asset Value Per Share Unobservable Input Investment Holdings Movements [Abstract] | ||
Issuances | 287 | 248 |
Sales | (15) | (57) |
Maturities | (7) | (2) |
Settlements | (50) | (92) |
Calls | (7) | |
Total | 208 | 97 |
ABS [Member] | Fixed Maturity Securities [Member] | ||
Fair Value Investments Entities That Calculate Net Asset Value Per Share Unobservable Input Investment Holdings Movements [Abstract] | ||
Issuances | 52 | |
Total | 52 | |
CMBS [Member] | Fixed Maturity Securities [Member] | ||
Fair Value Investments Entities That Calculate Net Asset Value Per Share Unobservable Input Investment Holdings Movements [Abstract] | ||
Issuances | 21 | |
Settlements | (1) | |
Total | 20 | |
CLOs [Member] | Fixed Maturity Securities [Member] | ||
Fair Value Investments Entities That Calculate Net Asset Value Per Share Unobservable Input Investment Holdings Movements [Abstract] | ||
Issuances | 97 | 2 |
Total | 97 | 2 |
Trading Securities [Member] | ||
Fair Value Investments Entities That Calculate Net Asset Value Per Share Unobservable Input Investment Holdings Movements [Abstract] | ||
Issuances | 207 | |
Settlements | (1) | |
Total | 206 | |
Equity Securities [Member] | ||
Fair Value Investments Entities That Calculate Net Asset Value Per Share Unobservable Input Investment Holdings Movements [Abstract] | ||
Issuances | 1 | |
Total | 1 | |
Derivative Investments [Member] | ||
Fair Value Investments Entities That Calculate Net Asset Value Per Share Unobservable Input Investment Holdings Movements [Abstract] | ||
Issuances | 131 | 67 |
Sales | (15) | (6) |
Maturities | (46) | (117) |
Total | 70 | (56) |
Indexed Annuity And IUL Contracts [Member] | Other Assets [Member] | ||
Fair Value Investments Entities That Calculate Net Asset Value Per Share Unobservable Input Investment Holdings Movements [Abstract] | ||
Issuances | 19 | 6 |
Settlements | (126) | |
Total | (107) | 6 |
Indexed Annuity And IUL Contracts [Member] | Future Contract Benefits [Member] | ||
Fair Value Investments Entities That Calculate Net Asset Value Per Share Unobservable Input Investment Holdings Movements [Abstract] | ||
Issuances | (148) | (27) |
Settlements | 39 | 47 |
Total | $ (109) | $ 20 |
Fair Value of Financial Instruments (Changes In Unrealized Gains (Losses) Within Level 3 Financial Instruments Carried At Fair Value And Still Held) (Details) - USD ($) $ in Millions |
3 Months Ended | |||
---|---|---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|||
Changes in unrealized gains (losses) within Level 3 financial instruments carried at fair value and still held | ||||
Change in unrealized gains (losses) included in net income | [1] | $ (319) | $ 277 | |
Derivative Investments [Member] | ||||
Changes in unrealized gains (losses) within Level 3 financial instruments carried at fair value and still held | ||||
Change in unrealized gains (losses) included in net income | (287) | 281 | ||
Indexed Annuity And IUL Contracts [Member] | ||||
Changes in unrealized gains (losses) within Level 3 financial instruments carried at fair value and still held | ||||
Change in unrealized gains (losses) included in net income | (32) | (4) | ||
GLB Direct And Ceded Embedded Derivative [Member] | ||||
Changes in unrealized gains (losses) within Level 3 financial instruments carried at fair value and still held | ||||
Change in unrealized gains (losses) included in net income | 481 | 376 | ||
GLB Ceded Embedded Derivatives [Member] | ||||
Changes in unrealized gains (losses) within Level 3 financial instruments carried at fair value and still held | ||||
Change in unrealized gains (losses) included in net income | $ (481) | $ (376) | ||
|
Fair Value of Financial Instruments (Components Of The Transfers In And Out Of Level 3) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Transfers, Net [Abstract] | ||
Transfers In to Level 3 | $ 83 | $ 66 |
Transfers Out of Level 3 | (249) | (287) |
Total Transfers Into or (Out) of Level 3 | (166) | (221) |
Corporate Bonds [Member] | Fixed Maturity Securities [Member] | ||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Transfers, Net [Abstract] | ||
Transfers In to Level 3 | 83 | 40 |
Transfers Out of Level 3 | (100) | (23) |
Total Transfers Into or (Out) of Level 3 | (17) | 17 |
RMBS [Member] | Fixed Maturity Securities [Member] | ||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Transfers, Net [Abstract] | ||
Transfers Out of Level 3 | (7) | (12) |
Total Transfers Into or (Out) of Level 3 | (7) | (12) |
CLOs [Member] | Fixed Maturity Securities [Member] | ||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Transfers, Net [Abstract] | ||
Transfers Out of Level 3 | (105) | (91) |
Total Transfers Into or (Out) of Level 3 | (105) | (91) |
Equity AFS Securities [Member] | ||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Transfers, Net [Abstract] | ||
Transfers Out of Level 3 | (161) | |
Total Transfers Into or (Out) of Level 3 | (161) | |
Trading Securities [Member] | ||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Transfers, Net [Abstract] | ||
Transfers Out of Level 3 | (37) | |
Total Transfers Into or (Out) of Level 3 | $ (37) | |
Equity Securities [Member] | ||
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset, Transfers, Net [Abstract] | ||
Transfers In to Level 3 | 26 | |
Total Transfers Into or (Out) of Level 3 | $ 26 |
Fair Value of Financial Instruments (Fair Value Inputs Quantitative Information) (Details) - Significant Unobservable Inputs (Level 3) [Member] - Discounted Cash Flow Valuation Technique [Member] |
Mar. 31, 2019
USD ($)
|
---|---|
Corporate Bonds [Member] | Fixed Maturity Securities [Member] | |
Assets Fair Value Disclosure [Abstract] | |
Assets Fair Value Disclosure | $ 2,604,000,000 |
Corporate Bonds [Member] | Maximum [Member] | Fixed Maturity Securities [Member] | Liquidity/Duration Adjustment [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Fixed maturity AFS and trading securities, measurement input | 0.300 |
Corporate Bonds [Member] | Minimum [Member] | Fixed Maturity Securities [Member] | Liquidity/Duration Adjustment [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Fixed maturity AFS and trading securities, measurement input | 0.006 |
ABS [Member] | Fixed Maturity Securities [Member] | |
Assets Fair Value Disclosure [Abstract] | |
Assets Fair Value Disclosure | $ 23,000,000 |
ABS [Member] | Maximum [Member] | Fixed Maturity Securities [Member] | Liquidity/Duration Adjustment [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Fixed maturity AFS and trading securities, measurement input | 0.030 |
ABS [Member] | Minimum [Member] | Fixed Maturity Securities [Member] | Liquidity/Duration Adjustment [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Fixed maturity AFS and trading securities, measurement input | 0.030 |
Foreign Government Bonds [Member] | Fixed Maturity Securities [Member] | |
Assets Fair Value Disclosure [Abstract] | |
Assets Fair Value Disclosure | $ 77,000,000 |
Foreign Government Bonds [Member] | Maximum [Member] | Fixed Maturity Securities [Member] | Liquidity/Duration Adjustment [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Fixed maturity AFS and trading securities, measurement input | 0.031 |
Foreign Government Bonds [Member] | Minimum [Member] | Fixed Maturity Securities [Member] | Liquidity/Duration Adjustment [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Fixed maturity AFS and trading securities, measurement input | 0.014 |
Hybrid And Redeemable Preferred Securities [Member] | Fixed Maturity Securities [Member] | |
Assets Fair Value Disclosure [Abstract] | |
Assets Fair Value Disclosure | $ 4,000,000 |
Hybrid And Redeemable Preferred Securities [Member] | Maximum [Member] | Fixed Maturity Securities [Member] | Liquidity/Duration Adjustment [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Fixed maturity AFS and trading securities, measurement input | 0.016 |
Hybrid And Redeemable Preferred Securities [Member] | Minimum [Member] | Fixed Maturity Securities [Member] | Liquidity/Duration Adjustment [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Fixed maturity AFS and trading securities, measurement input | 0.016 |
Equity Securities [Member] | Fixed Maturity Securities [Member] | |
Assets Fair Value Disclosure [Abstract] | |
Assets Fair Value Disclosure | $ 21,000,000 |
Equity Securities [Member] | Maximum [Member] | Fixed Maturity Securities [Member] | Liquidity/Duration Adjustment [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Equity securities, measurement input | 0.052 |
Equity Securities [Member] | Minimum [Member] | Fixed Maturity Securities [Member] | Liquidity/Duration Adjustment [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Equity securities, measurement input | 0.045 |
GLB Direct And Ceded Embedded Derivative [Member] | Other Assets [Member] | |
Assets Fair Value Disclosure [Abstract] | |
Assets Fair Value Disclosure | $ 489,000,000 |
GLB Direct And Ceded Embedded Derivative [Member] | Maximum [Member] | Other Assets [Member] | Lapse Rate [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 0.30 |
GLB Direct And Ceded Embedded Derivative [Member] | Maximum [Member] | Other Assets [Member] | Utilization Of Guaranteed Withdrawls [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 1.00 |
GLB Direct And Ceded Embedded Derivative [Member] | Maximum [Member] | Other Assets [Member] | Claims Utilization Factor [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 1.00 |
GLB Direct And Ceded Embedded Derivative [Member] | Maximum [Member] | Other Assets [Member] | Premiums Utilization Factor [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 1.15 |
GLB Direct And Ceded Embedded Derivative [Member] | Maximum [Member] | Other Assets [Member] | NPR [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 0.0032 |
GLB Direct And Ceded Embedded Derivative [Member] | Maximum [Member] | Other Assets [Member] | Volatility [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 0.29 |
GLB Direct And Ceded Embedded Derivative [Member] | Minimum [Member] | Other Assets [Member] | Lapse Rate [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 0.01 |
GLB Direct And Ceded Embedded Derivative [Member] | Minimum [Member] | Other Assets [Member] | Utilization Of Guaranteed Withdrawls [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 0.85 |
GLB Direct And Ceded Embedded Derivative [Member] | Minimum [Member] | Other Assets [Member] | Claims Utilization Factor [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 0.60 |
GLB Direct And Ceded Embedded Derivative [Member] | Minimum [Member] | Other Assets [Member] | Premiums Utilization Factor [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 0.80 |
GLB Direct And Ceded Embedded Derivative [Member] | Minimum [Member] | Other Assets [Member] | NPR [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 0.0002 |
GLB Direct And Ceded Embedded Derivative [Member] | Minimum [Member] | Other Assets [Member] | Volatility [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 0.01 |
Indexed Annuity And IUL Contracts [Member] | Other Assets [Member] | |
Assets Fair Value Disclosure [Abstract] | |
Assets Fair Value Disclosure | $ 872,000,000 |
Indexed Annuity And IUL Contracts [Member] | Maximum [Member] | Other Assets [Member] | Lapse Rate [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 0.09 |
Indexed Annuity And IUL Contracts [Member] | Minimum [Member] | Other Assets [Member] | Lapse Rate [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative assets, measurement input | 0.01 |
Future contract benefits - indexed annuity and IUL contracts embedded derivatives | Future Contract Benefits [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Liabilities measured at fair value | $ (1,730,000,000) |
Future contract benefits - indexed annuity and IUL contracts embedded derivatives | Maximum [Member] | Future Contract Benefits [Member] | Lapse Rate [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 0.09 |
Future contract benefits - indexed annuity and IUL contracts embedded derivatives | Minimum [Member] | Future Contract Benefits [Member] | Lapse Rate [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 0.01 |
GLB Ceded Embedded Derivatives [Member] | Other Liabilities [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Liabilities measured at fair value | $ (489,000,000) |
GLB Ceded Embedded Derivatives [Member] | Maximum [Member] | Other Liabilities [Member] | Lapse Rate [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 0.30 |
GLB Ceded Embedded Derivatives [Member] | Maximum [Member] | Other Liabilities [Member] | Utilization Of Guaranteed Withdrawls [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 1.00 |
GLB Ceded Embedded Derivatives [Member] | Maximum [Member] | Other Liabilities [Member] | Claims Utilization Factor [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 1.00 |
GLB Ceded Embedded Derivatives [Member] | Maximum [Member] | Other Liabilities [Member] | Premiums Utilization Factor [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 1.15 |
GLB Ceded Embedded Derivatives [Member] | Maximum [Member] | Other Liabilities [Member] | NPR [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 0.0032 |
GLB Ceded Embedded Derivatives [Member] | Maximum [Member] | Other Liabilities [Member] | Volatility [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 0.29 |
GLB Ceded Embedded Derivatives [Member] | Minimum [Member] | Other Liabilities [Member] | Lapse Rate [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 0.01 |
GLB Ceded Embedded Derivatives [Member] | Minimum [Member] | Other Liabilities [Member] | Utilization Of Guaranteed Withdrawls [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 0.85 |
GLB Ceded Embedded Derivatives [Member] | Minimum [Member] | Other Liabilities [Member] | Claims Utilization Factor [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 0.60 |
GLB Ceded Embedded Derivatives [Member] | Minimum [Member] | Other Liabilities [Member] | Premiums Utilization Factor [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 0.80 |
GLB Ceded Embedded Derivatives [Member] | Minimum [Member] | Other Liabilities [Member] | NPR [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 0.0002 |
GLB Ceded Embedded Derivatives [Member] | Minimum [Member] | Other Liabilities [Member] | Volatility [Member] | |
Liabilities Fair Value Disclosure [Abstract] | |
Derivative liability, measurement input | 0.01 |
Segment Information (Reconciliation Of Revenue From Segments To Consolidated) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Segment Reporting Information [Line Items] | ||
Excluded realized gain (loss), pre-tax | $ (391) | $ (27) |
Total revenues | 3,764 | 3,404 |
Annuities Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 1,088 | 984 |
Retirement Plan Services Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 289 | 288 |
Life Insurance Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 1,584 | 1,549 |
Group Protection Segment [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | 1,138 | 552 |
Other Operations [Member] | ||
Segment Reporting Information [Line Items] | ||
Total revenues | $ 56 | $ 58 |
Segment Information (Reconciliation Of Income (Loss) From Operations By Segment To Consolidated Net Income (Loss)) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Reconciliation of Net Income (Loss) from Segments to Consolidated [Abstract] | ||
Excluded realized gain (loss), after-tax | $ (309) | $ (22) |
Net impact from the Tax Cuts and Jobs Act | (12) | |
Acquisition and integration costs related to mergers and acquisitions, after-tax | (15) | (4) |
Net income (loss) | 133 | 407 |
Annuities Segment [Member] | ||
Reconciliation of Net Income (Loss) from Segments to Consolidated [Abstract] | ||
Net income (loss) | 239 | 272 |
Retirement Plan Services Segment [Member] | ||
Reconciliation of Net Income (Loss) from Segments to Consolidated [Abstract] | ||
Net income (loss) | 37 | 40 |
Life Insurance Segment [Member] | ||
Reconciliation of Net Income (Loss) from Segments to Consolidated [Abstract] | ||
Net income (loss) | 159 | 122 |
Group Protection Segment [Member] | ||
Reconciliation of Net Income (Loss) from Segments to Consolidated [Abstract] | ||
Net income (loss) | 55 | 29 |
Other Operations [Member] | ||
Reconciliation of Net Income (Loss) from Segments to Consolidated [Abstract] | ||
Net income (loss) | $ (33) | $ (18) |
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