Swaps may be attributed to specific assets or liabilities or to a portfolio of assets or liabilities. Under interest rate swaps, the Company agrees with counterparties to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts calculated by reference to an agreed upon notional principal amount.

The Company also uses interest rate swaptions, caps and floors to manage interest rate risk. A swaption is an option to enter into a swap with a forward starting effective date. The Company pays a premium for purchased swaptions and receives a premium for written swaptions. In an interest rate cap, the buyer receives payments at the end of each period in which the interest rate exceeds the agreed strike price. Similarly, in an interest rate floor, the buyer receives payments at the end of each period in which the interest rate is below the agreed strike price. Swaptions, caps and floors are included in interest rate options.

In standardized exchange-traded interest rate futures transactions, the Company purchases or sells a specified number of contracts, the values of which are determined by the daily market values of underlying referenced investments. The Company enters into exchange-traded futures with regulated futures commission's merchants who are members of a trading exchange.

Equity index options are contracts which will settle in cash based on differentials in the underlying indices at the time of exercise and the strike price. The Company uses combinations of purchases and sales of equity index options to hedge the effects of adverse changes in equity indices within a predetermined range.

Total return swaps are contracts whereby the Company agrees with counterparties to exchange, at specified intervals, the difference between the return on an asset (or market index) and London Inter-Bank Offered Rate ("LIBOR") plus an associated funding spread based on a notional amount. The Company generally uses total return swaps to hedge the effect of adverse changes in equity indices.

In standardized exchange-traded equity futures transactions, the Company purchases or sells a specified number of contracts, the values of which are determined by the daily market values underlying referenced equity indices. The Company enters into exchange-traded futures with regulated futures commission's merchants who are members of a trading exchange.

Under currency forwards, the Company agrees with counterparties to deliver a specified amount of an identified currency at a specified future date. Typically, the price is agreed upon at the time of the contract and payment for such a contract is made at the specified future date. The Company executes forward sales of the hedged currency in exchange for U.S. dollars at a specified exchange rate. The maturities of these forwards correspond with the future periods in which the non-U.S. dollar-denominated earnings are expected to be generated.

Under currency swaps, the Company agrees with counterparties to exchange, at specified intervals, the difference between one currency and another at an exchange rate and calculated by reference to an agreed principal amount. Generally, the principal amount of each currency is exchanged at the beginning and termination of the currency swap by each party.

The Company writes credit protection to gain exposure similar to investment in public fixed maturity cash instruments. With these credit derivatives the Company sells credit protection on a single name reference, or certain index reference, and in return receives a quarterly premium. This premium or credit spread generally corresponds to the difference between the yield on the referenced name (or an index's referenced names) public fixed maturity cash instruments and swap rates, at the time the agreement is executed. If there is an event of default by the referenced name or one of the referenced names in the index, as defined by the agreement, then the Company is obligated to pay the referenced amount of the contract to the counterparty and receive in return the referenced defaulted security or similar security or (in the case of a credit default index) pay the referenced amount less the auction recovery rate.

The Company offers certain products (for example, variable annuities and indexed annuities) which may include features that are accounted for as embedded derivatives. Effective April 1, 2016, the Company, through a reinsurance arrangement, assumed variable annuities living benefit guarantees from Pruco Life, excluding PLNJ business. This reinsurance arrangement was recaptured by Pruco Life on July 1, 2021. See Note 1 for additional information on the change to the reinsurance agreements.

These embedded derivatives and certain elements of the associated reinsurance agreements, also accounted for as derivatives, are carried at fair value and marked to market through “Realized investment gains (losses), net” based on the change in value of the underlying contractual guarantees, which are determined using valuation models, as described in Note 5.

The table below provides a summary of the gross notional amount and fair value of derivative contracts by the primary underlying risks, excluding embedded derivatives and associated reinsurance recoverables. Many derivative instruments contain multiple underlying risks. The fair value amounts below represent the value of derivative contracts prior to taking into account the netting effects of master netting agreements and cash collateral.


	December 31, 2021						December 31, 2020
Primary Underlying Risk/Instrument Type	Gross Notional		Fair Value				Gross Notional		Fair Value
			Assets		Liabilities				Assets		Liabilities
	(in thousands)
Derivatives Designated as Hedge Accounting Instruments:
Currency/Interest Rate
Foreign Currency Swaps	$	637,001	$	29,028	$	(1,372)	$	1,376,290	$	23,167	$	(82,625)
Total Derivatives Designated as Hedge Accounting Instruments	$	637,001	$	29,028	$	(1,372)	$	1,376,290	$	23,167	$	(82,625)
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate
Interest Rate Futures	$	55,000	$	34	$	0	$	4,597,200	$	2,755	$	(1,621)
Interest Rate Swaps	10,520,230		338,731		(255,434)		131,129,200		12,448,036		(9,540,941)
Interest Rate Options	0		0		0		10,198,000		608,538		(178,563)
Interest Rate Forwards	0		0		0		75,000		464		0
Foreign Currency
Foreign Currency Forwards	50,346		370		(536)		34,988		4		(557)
Currency/Interest Rate
Foreign Currency Swaps	208,153		9,711		(826)		228,117		7,939		(8,440)
Credit
Credit Default Swaps	1,745,550		48,147		0		1,574,173		38,875		(52)
Equity
Equity Futures	855,432		892		(1,016)		5,558,882		9,424		(24,688)
Total Return Swaps	4,802,777		87,832		(80,808)		22,121,729		62,362		(1,162,907)
Equity Options	20,581,951		963,164		(1,028,221)		23,856,379		1,617,672		(952,452)
Total Derivatives Not Qualifying as Hedge Accounting Instruments	$	38,819,439	$	1,448,881	$	(1,366,841)	$	199,373,668	$	14,796,069	$	(11,870,221)
Total Derivatives(1)(2)	$	39,456,440	$	1,477,909	$	(1,368,213)	$	200,749,958	$	14,819,236	$	(11,952,846)

(1)Excludes embedded derivatives and associated reinsurance recoverables which contain multiple underlying risks. The fair value of these embedded derivatives was a net liability of $4,060 million and $17,314 million as of December 31, 2021 and 2020, respectively included in “Future policy benefits” and $2,041 million and $580 million as of December 31, 2021 and 2020, respectively included in “Policyholders’ account balances". Other assets included $400 million and $54 million as of December 31, 2021 and 2020, respectively. Other liabilities included $0 million and $35 million as of December 31, 2021 and 2020, respectively. The fair value of the related reinsurance, included in "Reinsurance recoverables" and/or "Reinsurance payables" was an asset of $1,881 million and $471 million as of December 31, 2021 and 2020, respectively.

The following table presents recognized derivative instruments (excluding embedded derivatives and associated reinsurance recoverables), and repurchase and reverse repurchase agreement that are offset in the Statements of Financial Position, and/or are subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset in the Statements of Financial Position.


	December 31, 2021
	Gross Amounts of Recognized Financial Instruments		Gross Amounts Offset in the Statement of Financial Position		Net Amounts Presented in the Statement of Financial Position		Financial Instruments/ Collateral(1)		Net Amount
	(in thousands)
Offsetting of Financial Assets:
Derivatives	$	1,477,909	$	(1,474,780)	$	3,129	$	0	$	3,129
Securities purchased under agreements to resell	0		0		0		0		0
Total Assets	$	1,477,909	$	(1,474,780)	$	3,129	$	0	$	3,129
Offsetting of Financial Liabilities:
Derivatives	$	1,368,213	$	(1,153,610)	$	214,603	$	(214,603)	$	0
Securities sold under agreements to repurchase	0		0		0		0		0
Total Liabilities	$	1,368,213	$	(1,153,610)	$	214,603	$	(214,603)	$	0

	December 31, 2020
	Gross Amounts of Recognized Financial Instruments		Gross Amounts Offset in the Statement of Financial Position		Net Amounts Presented in the Statement of Financial Position		Financial Instruments/ Collateral(1)		Net Amount
	(in thousands)
Offsetting of Financial Assets:
Derivatives	$	14,819,236	$	(14,624,985)	$	194,251	$	0	$	194,251
Securities purchased under agreements to resell	150,000		0		150,000		(150,000)		0
Total Assets	$	14,969,236	$	(14,624,985)	$	344,251	$	(150,000)	$	194,251
Offsetting of Financial Liabilities:
Derivatives	$	11,952,846	$	(11,936,059)	$	16,787	$	(16,787)	$	0
Securities sold under agreements to repurchase	0		0		0		0		0
Total Liabilities	$	11,952,846	$	(11,936,059)	$	16,787	$	(16,787)	$	0

For information regarding the rights of offset associated with the derivative assets and liabilities in the table above see “Credit Risk” below and Note 14. For securities purchased under agreements to resell and securities sold under agreements to repurchase, the Company monitors the value of the securities and maintains collateral, as appropriate, to protect against credit exposure. Where the Company has entered into repurchase and resale agreements with the same counterparty, in the event of default, the Company would generally be permitted to exercise rights of offset. For additional information on the Company’s accounting policy for securities repurchase and resale agreements, see Note 2 to the Financial Statements.

The primary derivative instruments used by the Company in its cash flow hedge accounting relationships are currency swaps. These instruments are only designated for hedge accounting in instances where the appropriate criteria are met. The Company does not use futures, options, credit, or equity derivatives in any of its cash flow hedge accounting relationships.


	Year Ended December 31, 2021
	Realized Investment Gains (Losses)		Net Investment Income		Other Income (loss)		Change in AOCI
	(in thousands)
Derivatives Designated as Hedge Accounting Instruments:
Cash flow hedges
Currency/Interest Rate	$	7,379	$	12,642	$	14,450	$	67,543
Total cash flow hedges	7,379		12,642		14,450		67,543
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	(1,749,497)		0		0		0
Currency	1,577		0		0		0
Currency/Interest Rate	12,003		0		(21)		0
Credit	17,186		0		0		0
Equity	(1,464,947)		0		0		0
Embedded Derivatives(1)	9,300,564		0		0		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments	6,116,886		0		(21)		0
Total	$	6,124,265	$	12,642	$	14,429	$	67,543

	Year Ended December 31, 2020
	Realized Investment Gains (Losses)		Net Investment Income		Other Income (loss)		Change in AOCI
	(in thousands)
Derivatives Designated as Hedge Accounting Instruments:
Cash flow hedges
Currency/Interest Rate	$	1,882	$	17,871	$	(24,519)	$	(42,713)
Total cash flow hedges	1,882		17,871		(24,519)		(42,713)
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	4,452,097		0		0		0
Currency	(809)		0		0		0
Currency/Interest Rate	(14,604)		0		(141)		0
Credit	(303)		0		0		0
Equity	(5,289,510)		0		0		0
Embedded Derivatives	(4,410,696)		0		0		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments	(5,263,825)		0		(141)		0
Total	$	(5,261,943)	$	17,871	$	(24,660)	$	(42,713)


	Year Ended December 31, 2019
	Realized Investment Gains (Losses)		Net Investment Income		Other Income (loss)		Change in AOCI
	(in thousands)
Derivatives Designated as Hedge Accounting Instruments:
Cash flow hedges
Currency/Interest Rate	$	(1,257)	$	12,104	$	(3,793)	$	3,520
Total cash flow hedges	(1,257)		12,104		(3,793)		3,520
Derivatives Not Qualifying as Hedge Accounting Instruments:
Interest Rate	3,309,573		0		0		0
Currency	(153)		0		0		0
Currency/Interest Rate	11,964		0		15		0
Credit	1,775		0		0		0
Equity	(3,730,006)		0		0		0
Embedded Derivatives	(2,269,455)		0		0		0
Total Derivatives Not Qualifying as Hedge Accounting Instruments	(2,676,302)		0		15		0
Total	$	(2,677,559)	$	12,104	$	(3,778)	$	3,520


	(in thousands)
Balance, December 31, 2018	$	(3,849)
Cumulative-effect adjustment from the adoption of ASU 2017-12	42
Amount recorded in AOCI


Currency/Interest Rate	10,574
Total amount recorded in AOCI	10,574
Amount reclassified from AOCI to income


Currency/Interest Rate	(7,054)
Total amount reclassified from AOCI to income	(7,054)
Balance, December 31, 2019	$	(287)

Amount recorded in AOCI


Currency/Interest Rate	(47,479)
Total amount recorded in AOCI	(47,479)
Amount reclassified from AOCI to income


Currency/Interest Rate	4,766
Total amount reclassified from AOCI to income	4,766
Balance, December 31, 2020	$	(43,000)
Amount recorded in AOCI


Currency/Interest Rate	102,014
Total amount recorded in AOCI	102,014
Amount reclassified from AOCI to income


Currency/Interest Rate	(34,471)
Total amount reclassified from AOCI to income	(34,471)
Balance, December 31, 2021	$	24,543

The changes in fair value of cash flow hedges are deferred in AOCI and are included in “Net unrealized investment gains (losses)” in the Statements of Operations and Comprehensive Income (Loss); these amounts are then reclassified to earnings when the hedged item affects earnings. Using December 31, 2021 values, it is estimated that a pre-tax gain of $6 million is expected to be reclassified from AOCI to earnings during the subsequent twelve months ending December 31, 2022.

There were no material amounts reclassified from AOCI into earnings relating to instances in which the Company discontinued cash flow hedge accounting because the forecasted transaction did not occur by the anticipated date or within the additional time period permitted by the authoritative guidance for the accounting for derivatives and hedging.

Credit derivatives, where the Company has written credit protection on certain index references, had outstanding notional amounts of $1,746 million and $1,568 million as of December 31, 2021 and December 31, 2020, respectively. These credit derivatives are reported at fair value as an asset of $48 million and $39 million as of December 31, 2021 and December 31, 2020, respectively. As of December 31, 2021, the notional amount of these credit derivatives had the following NAIC rating: $1,671 million in NAIC 3 and $75 million in NAIC 6.

The Company has purchased credit protection using credit derivatives in order to hedge specific credit exposures in the Company’s investment portfolio. The Company has outstanding notional amounts of $0 million and $6 million reported as of December 31, 2021 and 2020, respectively with a fair value of $0 million for both periods.