REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

3 Months Ended

Mar. 31, 2023

Accounting Changes and Error Corrections [Abstract]

REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTSDuring the quarter ended September 30, 2022, the Company identified errors primarily related to the calculation of the deferred cost of reinsurance amortization. Specifically, the deferred cost of reinsurance as reflected on the balance sheet was overstated and operating expenses (deferred cost amortization) was understated commencing in the quarter ended December 31, 2019 with a cumulative impact of $14 million pre-tax. In accordance with SAB No. 108, management evaluated the impact of this error and concluded that previously issued financial statements were not materially misstated; however, the cumulative impact would be material to the quarter ended September 30, 2022 and annual period ending December 31, 2022 and accordingly, determined to revise previously reported financial statements for years ended December 31, 2021, 2020 and 2019 and for the three-month periods ended March 31, 2022 and 2021 and June 30, 2022 and 2021 and for the six-months periods ended June 30, 2022 and June 2021. As a result of the determination to revise previously issued financial statements for the amortization matter discussed above, management also has corrected other previously identified but uncorrected errors and errors recorded in incorrect periods including, (a) balance sheet gross up errors resulting from incorrectly calculating reserves relating to business which has been 100% ceded to reinsurers resulting in corrections to Future policy benefits and other policyholders’ liabilities and Amounts due from reinsurers; (b) the classification of a preferred stock investment of $25 million from

available for sale debt securities to equity securities and present previously recorded unrealized losses as net investment income (loss) rather than as a component of other comprehensive income in the amount of $2 million; and, (c) other immaterial errors.

The following tables present line items for prior period impacted financial statements that have been affected by the errors discussed above as well as the impact of the adoption of ASU 2018-12:

	Three Months Ended March 31, 2022
	As Previously Reported		ASU 2018-12 Impact		As Adjusted		Impact of Revisions		As Revised
	(in millions)
Statements of Income (Loss):
Other operating costs and expenses	$	21	$	1	$	22	$	1	$	23
Total benefits and deductions	161		(15)		146		1		147
Income (loss) from continuing operations, before income taxes	(22)		(3)		(25)		(1)		(26)
Net income (loss) from continuing operations	(19)		—		(19)		(1)		(20)
Net income (loss)	$	(19)	$	—	$	(19)	$	(1)	$	(20)

	Three Months Ended March 31, 2022
	As Previously Reported		ASU 2018-12 Impact		As Adjusted		Impact of Revisions		As Revised
	(in millions)
Statements of Comprehensive Income (Loss):
Net income (loss)	$	(19)	$	—	$	(19)	$	(1)	$	(20)
Comprehensive income (loss)	$	(169)	$	(16)	$	(185)	$	(1)	$	(186)

	Three Months Ended March 31, 2022
Statements of Equity:	As Previously Reported			ASU 2018-12 Impact			As Adjusted			Impact of Revision			As Revised
	(in millions)
Additional paid-in capital, beginning of year	$	679		$	—		$	679		$	1		$	680
Additional paid-in capital, end of period	680		—	—		—	680		—	1		—	681
Accumulated Deficit, beginning of year	(60)			(64)			(124)			(10)			(134)
Net income (loss)	(19)			—			(19)			(1)			(20)
Accumulated Deficit, end of period	(79)		—	(64)		—	(143)			(11)			(154)
Total equity, end of period	$	540		$	(68)		$	472		$	(10)		$	462

	Three Months March 31, 2022
	As Reported		ASU 2018-12 Impact		As Adjusted		Impact of Revision		As Revised
	(in millions)
Statement of Cash Flows:
Cash flow from operating activities:
Net income (loss)	$	(19)	$	—	$	(19)	$	(1)	$	(20)
Future policy benefits	(4)		—		(4)		13		9
Reinsurance recoverable	14		—		14		(13)		1
Other, net	73		—		73		1		74