Derivative instruments enable the Company to manage its exposure to various market risks. The value of such instruments is derived from an underlying variable or multiple variables, including equity, foreign exchange and interest rate indices or prices. The Company primarily enters into derivative agreements for risk management purposes related to the Company’s products and operations.

Certain of the Company’s freestanding derivative instruments are subject to master netting arrangements. The Company’s policy on the recognition of derivatives on the Consolidated Balance Sheets is to not offset fair value amounts recognized for derivatives and collateral arrangements executed with the same counterparty under the same master netting arrangement. See Note 14 for additional information regarding the estimated fair value of the Company’s freestanding derivatives after considering the effect of master netting arrangements and collateral.


	June 30, 2023						December 31, 2022
	Notional		Gross Fair Value				Notional		Gross Fair Value
			Assets (1)		Liabilities (2)				Assets (1)		Liabilities (2)
	(in millions)
Derivatives designated as hedging instruments

Equity contracts - cash flow hedges	$	3	$	—	$	—	$	6	$	—	$	1
Foreign exchange contracts – net investment hedges	62		—		2		85		—		—
Total qualifying hedges	65		—		2		91		—		1

Derivatives not designated as hedging instruments
Interest rate contracts	65,092		263		375		101,307		267		355
Equity contracts	81,894		4,188		3,094		68,493		2,704		2,376
Credit contracts	3,701		23		1		1,857		13		2
Foreign exchange contracts	2,986		19		10		3,171		36		14

Total non-designated hedges	153,673		4,493		3,480		174,828		3,020		2,747

Embedded derivatives

IUL	N/A		—		809		N/A		—		739
Fixed deferred indexed annuities and deposit receivables	N/A		49		50		N/A		48		47
Structured variable annuities (3)	N/A		—		557		N/A		—		(137)
SMC	N/A		—		9		N/A		—		4
Total embedded derivatives	N/A		49		1,425		N/A		48		653
Total derivatives	$	153,738	$	4,542	$	4,907	$	174,919	$	3,068	$	3,401

(2) The fair value of freestanding derivative liabilities is included in Other liabilities. The fair value of IUL, fixed deferred indexed annuity and structured variable annuity embedded derivatives is included in Policyholder account balances, future policy benefits and claims. The fair value of the SMC embedded derivative liability is included in Customer deposits.

(3) The fair value of the structured variable annuity embedded derivatives as of June 30, 2023 included $617 million of individual contracts in a liability position and $60 million of individual contracts in an asset position. The fair value of the structured variable annuity embedded derivatives as of December 31, 2022 included $194 million of individual contracts in a liability position and $331 million of individual contracts in an asset position.

As of June 30, 2023 and December 31, 2022, investment securities with a fair value of $1.6 billion and $1.7 billion, respectively, were pledged to meet contractual obligations under derivative contracts, of which $227 million and $302 million, respectively, may be sold, pledged or rehypothecated by the counterparty. As of June 30, 2023 and December 31, 2022, investment securities with a fair value of $290 million and $14 million, respectively, were received as collateral to meet contractual obligations under derivative contracts, of which $279 million and $5 million, respectively, may be sold, pledged or rehypothecated by the Company. As of both June 30, 2023 and December 31, 2022, the Company had sold, pledged or rehypothecated none of these securities. In addition, as of both June 30, 2023 and December 31, 2022, non-cash collateral accepted was held in separate custodial accounts and was not included in the Company’s Consolidated Balance Sheets.



	Net Investment Income		Banking and Deposit Interest Expense		Distribution Expenses		Interest Credited to Fixed Accounts		Benefits, Claims, Losses and Settlement Expenses		Change in Fair Value of Market Risk Benefits		Interest and Debt Expense		General and Administrative Expense
	(in millions)
Three Months Ended June 30, 2023
Interest rate contracts	$	—	$	—	$	—	$	—	$	(14)	$	(481)	$	—	$	—
Equity contracts	(1)		2		45		35		346		(438)		—		5
Credit contracts	—		—		—		—		—		66		—		—
Foreign exchange contracts	—		—		—		—		—		20		—		3


IUL embedded derivatives	—		—		—		(22)		—		—		—		—
Fixed deferred indexed annuity and deposit receivables embedded derivatives	—		—		—		(1)		—		—		—		—
Structured variable annuity embedded derivatives	—		—		—		—		(426)		—		—		—
SMC embedded derivatives	—		(2)		—		—		—		—		—		—
Total gain (loss)	$	(1)	$	—	$	45	$	12	$	(94)	$	(833)	$	—	$	8

Three Months Ended June 30, 2022
Interest rate contracts	$	1	$	—	$	(3)	$	—	$	(1)	$	(943)	$	(1)	$	—
Equity contracts	(1)		—		(122)		(96)		(297)		798		—		(17)
Credit contracts	—		—		(2)		—		—		99		—		—
Foreign exchange contracts	2		—		—		—		—		76		—		(5)


IUL embedded derivatives	—		—		—		137		—		—		—		—
Fixed deferred indexed annuity and deposit receivables embedded derivatives	—		—		—		2		—		—		—		—
Structured variable annuity embedded derivatives	—		—		—		—		643		—		—		—

Total gain (loss)	$	2	$	—	$	(127)	$	43	$	345	$	30	$	(1)	$	(22)


	Net Investment Income		Banking and Deposit Interest Expense		Distribution Expenses		Interest Credited to Fixed Accounts		Benefits, Claims, Losses and Settlement Expenses		Change in Fair Value of Market Risk Benefits		Interest and Debt Expense		General and Administrative Expense
	(in millions)
Six Months Ended June 30, 2023
Interest rate contracts	$	—	$	—	$	—	$	—	$	(8)	$	(234)	$	—	$	—
Equity contracts	(2)		3		88		54		510		(900)		—		8
Credit contracts	—		—		1		—		—		33		—		—
Foreign exchange contracts	—		—		—		—		—		12		—		6


IUL embedded derivatives	—		—		—		(30)		—		—		—		—
Fixed deferred indexed annuity and deposit receivables embedded derivatives	—		—		—		(2)		—		—		—		—
Structured variable annuity embedded derivatives	—		—		—		—		(689)		—		—		—
SMC embedded derivatives	—		(4)		—		—		—		—		—		—
Total gain (loss)	$	(2)	$	(1)	$	89	$	22	$	(187)	$	(1,089)	$	—	$	14

Six Months Ended June 30, 2022
Interest rate contracts	$	1	$	—	$	(3)	$	—	$	(1)	$	(2,061)	$	(1)	$	—
Equity contracts	7		—		(183)		(112)		(289)		1,014		—		(24)
Credit contracts	—		—		(3)		—		—		196		—		—
Foreign exchange contracts	1		—		—		—		—		107		—		(5)


IUL embedded derivatives	—		—		—		194		—		—		—		—
Fixed deferred indexed annuity and deposit receivables embedded derivatives	—		—		—		3		—		—		—		—
Structured variable annuity embedded derivatives	—		—		—		—		766		—		—		—

Total gain (loss)	$	9	$	—	$	(189)	$	85	$	476	$	(744)	$	(1)	$	(29)

The Company holds derivative instruments that either do not qualify or are not designated for hedge accounting treatment. These derivative instruments are used as economic hedges of equity, interest rate, credit and foreign currency exchange rate risk related to various products and transactions of the Company.

Structured variable annuity, IUL and stock market certificate products have returns tied to the performance of equity markets. As a result of fluctuations in equity markets, the obligation incurred by the Company related to structured variable annuity, IUL and stock market certificate products will positively or negatively impact earnings over the life of these products. The equity component of structured variable annuity, IUL and stock market certificate product obligations are considered embedded derivatives, which are bifurcated from their host contracts for valuation purposes and reported on the Consolidated Balance Sheets at fair value with changes in fair value reported in earnings. As a means of economically hedging its obligations under the provisions of these products, the Company enters into interest rate swaps, index options and futures contracts.

As discussed in Note 11, the Company issues variable annuity contracts that provide protection to contractholders from other-than-nominal capital market risk and expose the Company to other-than-nominal capital market risk. The Company economically hedges its obligations under these market risk benefits using options, swaptions, swaps and futures.

The Company enters into futures, credit default swaps, commodity swaps, total return swaps and foreign currency forwards to manage its exposure to price risk arising from seed money investments in proprietary investment products. The Company enters into foreign currency forward contracts to economically hedge its exposure to certain foreign transactions. The Company enters into futures contracts, total return swaps and foreign currency forwards to economically hedge its exposure related to compensation plans. The Company enters into interest rate swaps to offset interest rate changes on unrealized gains or losses for certain investments.

The Company has designated derivative instruments as a cash flow hedge for equity exposure of certain compensation-related liabilities and interest rate exposure on forecasted debt interest payments. For derivative instruments that qualify as cash flow hedges, the gains or losses on the derivative instruments are reported in AOCI and reclassified into earnings when the hedged item or transaction impacts earnings. The amount that is reclassified into earnings is presented within the same line item as the earnings impact of the hedged item in Interest and debt expense.

For both the three and six months ended June 30, 2023 and 2022, the amounts reclassified from AOCI to earnings related to cash flow hedges were immaterial. The estimated net amount recorded in AOCI as of June 30, 2023 that the Company expects to reclassify to earnings as a reduction to Interest and debt expense within the next twelve months is $0.8 million and as an increase to General and administrative expense is $0.6 million. Currently, the longest period of time over which the Company is hedging exposure to the variability in future cash flows is 12 years and relates to forecasted debt interest payments. See Note 16 for a rollforward of net unrealized gains (losses) on derivatives included in AOCI related to cash flow hedges.

The Company entered into, and designated as net investment hedges in foreign operations, forward contracts to hedge a portion of the Company’s foreign currency exchange rate risk associated with its investment in Threadneedle. As the Company determined that the forward contracts are effective, the change in fair value of the derivatives is recognized in AOCI as part of the foreign currency translation adjustment. For the three months ended June 30, 2023 and 2022, the Company recognized a loss of $1 million and a gain of $10 million, respectively, in OCI. For the six months ended June 30, 2023 and 2022, the Company recognized a loss of $3 million and a gain of $14 million, respectively, in OCI.

Credit risk associated with the Company’s derivatives is the risk that a derivative counterparty will not perform in accordance with the terms of the applicable derivative contract. To mitigate such risk, the Company has established guidelines and oversight of credit risk through a comprehensive enterprise risk management program that includes members of senior management. Key components of this program are to require preapproval of counterparties and the use of master netting and collateral arrangements whenever practical. See Note 14 for additional information on the Company’s credit exposure related to derivative assets.