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Market Risk Benefits (Tables)

3 Months Ended

Mar. 31, 2023

Balances of and changes in market risk benefits

The following tables summarize the balances of and changes in market risk benefits, including the January 1, 2021 adoption of ASU 2018-12:


Pre-adoption balance at December 31, 2020	$	3,084
Effect of shadow reserve adjustments	(3)
Adjustments for the cumulative effect of the changes in instrument-specific credit risk on market risk benefits between the original contract issuance date and the transition date	670
Adjustments to the host contract for differences between previous carrying amount and fair value measurement for the market risk benefits under the option-based method of valuation	20
Adjustments for the remaining difference (exclusive of the instrument-specific credit risk change and host contract adjustments) between previous carrying amount and fair value measurements for the market risk benefits	1,058
Post-adoption balance at January 1, 2021	$	4,829


	Years Ended December 31,
	2022		2021
	(in millions, except age)





Balance at beginning of period	$	2,901	$	4,829
Issuances	27		45
Interest accrual and time decay	(237)		(294)
Reserve increase from attributed fees collected	810		819
Reserve release for benefit payments and derecognition	(29)		(8)
Effect of changes in interest rates and bond markets	(4,193)		(1,053)
Effect of changes in equity markets and subaccount performance	2,258		(1,558)
Effect of changes in equity index volatility	205		73
Actual policyholder behavior different from expected behavior	17		52
Effect of changes in other future expected assumptions	(139)		123

Effect of changes in the instrument-specific credit risk on market risk benefits	(517)		(127)
Balance at end of period	$	1,103	$	2,901

Reconciliation of the gross balances in an asset or liability position:
Asset position	$	1,015	$	539
Liability position	(2,118)		(3,440)
Net asset (liability) position	$	(1,103)	$	(2,901)

Guaranteed benefit amount in excess of current account balances (net amount at risk):
Death benefits	$	2,781	$	251
Living benefits	$	3,364	$	195
Composite (greater of)	$	5,830	$	441

Weighted average attained age of contractholders	68		68

Changes in unrealized (gains) losses in net income relating to liabilities held at end of period	$	(2,044)	$	(2,502)
Changes in unrealized (gains) losses in other comprehensive income relating to liabilities held at end of period	$	(505)	$	(102)


	Three Months Ended March 31,
		2023		2022
	(in millions, except age)
Balance at beginning of period		$	1,103	$	2,901
Issuances		4		8
Interest accrual and time decay		(26)		(86)
Reserve increase from attributed fees collected		189		199
Reserve release for benefit payments and derecognition		(9)		(3)
Effect of changes in interest rates and bond markets		504		(1,454)
Effect of changes in equity markets and subaccount performance		(392)		586
Effect of changes in equity index volatility		(43)		55
Actual policyholder behavior different from expected behavior		7		20
Effect of changes in other future expected assumptions		—		—

Effect of changes in the instrument-specific credit risk on market risk benefits		(204)		(385)
Balance at end of period		$	1,133	$	1,841

Reconciliation of the gross balances in an asset or liability position:
Asset position		$	990	$	742
Liability position		(2,123)		(2,583)
Net asset (liability) position		$	(1,133)	$	(1,841)

Guaranteed benefit amount in excess of current account balances (net amount at risk):
Death benefits		$	1,956	$	714
Living benefits		$	2,836	$	586
Composite (greater of)		$	4,596	$	1,274

Weighted average attained age of contractholders		68		68

Changes in unrealized (gains) losses in net income relating to liabilities held at end of period		$	59	$	(868)
Changes in unrealized (gains) losses in other comprehensive income relating to liabilities held at end of period		$	(204)	$	(382)

Significant inputs and assumptions used in the fair value measurements

The following tables provide a summary of the significant inputs and assumptions used in the fair value measurements developed by the Company or reasonably available to the Company of market risk benefits:


	March 31, 2023
	Fair Value		Valuation Technique	Significant Inputs and Assumptions	Range			Weighted Average
	(in millions)










Market risk benefits	$	1,133	Discounted cash flow	Utilization of guaranteed withdrawals (1)	0.0%	–	48.0%	11.1%
				Surrender rate (2)	0.2%	–	45.6%	3.6%
				Market volatility (3)	0.0%	–	25.1%	11.1%
				Nonperformance risk (4)	115 bps			115 bps
				Mortality rate (5)	0.0%	–	41.6%	1.5%


	December 31, 2022
	Fair Value		Valuation Technique	Significant Inputs and Assumptions	Range			Weighted Average
	(in millions)










Market risk benefits	$	1,103	Discounted cash flow	Utilization of guaranteed withdrawals (1)	0.0%	–	48.0%	11.0%
				Surrender rate (2)	0.2%	–	45.6%	3.6%
				Market volatility (3)	0.0%	–	26.6%	12.1%
				Nonperformance risk (4)	95 bps			95 bps
				Mortality rate (5)	0.0%	–	41.6%	1.5%

(1) The utilization of guaranteed withdrawals represents the percentage of contractholders that will begin withdrawing in any given year. The weighted average utilization rate represents the average assumption, weighted based on the benefit base. The calculation excludes policies that have already started taking withdrawals.

(2) The weighted average surrender rate represents the average assumption weighted based on the account value of each contract.

(3) Market volatility represents the implied volatility of each contractholder’s mix of funds. The weighted average market volatility represents the average volatility across all contracts, weighted by the size of the guaranteed benefit.

(4) The nonperformance risk is the spread added to the U.S. Treasury curve.

(5) The weighted average mortality rate represents the average assumption weighted based on the account value of each contract.

The following tables provide a summary of the significant unobservable inputs used in the fair value measurements developed by the Company or reasonably available to the Company of Level 3 assets and liabilities:


	March 31, 2023
	Fair Value		Valuation Technique	Unobservable Input	Range			Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	439	Discounted cash flow	Yield/spread to U.S. Treasuries (1)	1.0%	–	2.8%	1.4%
Asset backed securities	$	1	Discounted cash flow	Annual short-term default rate (2)	1.3%			1.3%
				Annual long-term default rate (2)	3.5%			3.5%
				Discount rate	27.0%			27.0%
				Constant prepayment rate	10.0%			10.0%
				Loss recovery	63.6%			63.6%
Fixed deferred indexed annuity ceded embedded derivatives	$	48	Discounted cash flow	Surrender rate (3)	0.0%	–	66.8%	1.4%
Fixed deferred indexed annuity embedded derivatives	$	44	Discounted cash flow	Surrender rate (3)	0.0%	–	66.8%	1.4%
				Nonperformance risk (4)	115 bps			115 bps
IUL embedded derivatives	$	771	Discounted cash flow	Nonperformance risk (4)	115 bps			115 bps




Structured variable annuity embedded derivatives	$	142	Discounted cash flow	Surrender rate (3)	2.4%	–	49.5%	2.8%
				Nonperformance risk (4)	115 bps			115 bps
Contingent consideration liabilities	$	70	Discounted cash flow	Discount rate (5)	0.0%	–	10.5%	2.9%


	December 31, 2022
	Fair Value			Valuation Technique	Unobservable Input	Range			Weighted Average
	(in millions)
Corporate debt securities (private placements)	$	404		Discounted cash flow	Yield/spread to U.S. Treasuries (1)	1.1%	–	2.3%	1.4%
Asset backed securities	$	1		Discounted cash flow	Annual short-term default rate (2)	0.8%			0.8%
					Annual long-term default rate (2)	3.5%			3.5%
					Discount rate	27.0%			27.0%
					Constant prepayment rate	10.0%			10.0%
					Loss recovery	63.6%			63.6%
Fixed deferred indexed annuity ceded embedded derivatives	$	48		Discounted cash flow	Surrender rate (3)	0.0%	–	66.8%	1.4%
Fixed deferred indexed annuity embedded derivatives	$	44		Discounted cash flow	Surrender rate (3)	0.0%	–	66.8%	1.4%
					Nonperformance risk (4)	95 bps			95 bps
IUL embedded derivatives	$	739		Discounted cash flow	Nonperformance risk (4)	95 bps			95 bps




Structured variable annuity embedded derivatives	$	(137)	(6)	Discounted cash flow	Surrender rate (3)	0.8%	–	40.0%	0.9%
					Nonperformance risk (4)	95 bps			95 bps
Contingent consideration liabilities	$	62		Discounted cash flow	Discount rate (5)	0.0%	–	10.5%	3.3%

(1) The weighted average for the yield/spread to U.S. Treasuries for corporate debt securities (private placements) is weighted based on the security’s market value as a percentage of the aggregate market value of the securities.

(2) The weighted average annual default rates of asset backed securities is weighted based on the security’s market value as a percentage of the aggregate market value of the securities.

(3) The weighted average surrender rate represents the average assumption weighted based on the account value of each contract.

(4) The nonperformance risk is the spread added to the U.S. Treasury curve.

(5) The weighted average discount rate represents the average discount rate across all contingent consideration liabilities, weighted based on the size of the contingent consideration liability.

(6) The fair value of the structured variable annuity embedded derivatives was a net asset as of December 31, 2022 and the amount is presented as a contra liability.