QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number) |
Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||
Not Applicable | Not Applicable | Not Applicable |
Large Accelerated Filer | ☐ | Accelerated Filer | ☐ | ||||||||
☒ | Smaller Reporting Company | ||||||||||
Emerging Growth Company |
Page | |||||||||||
Item 1. | |||||||||||
Item 2. | |||||||||||
Item 3. | |||||||||||
Item 4. | |||||||||||
Item 1. | |||||||||||
Item 1A. | |||||||||||
Item 6. | |||||||||||
Successor Company | |||||||||||
March 31, 2023 | December 31, 2022 | ||||||||||
(Unaudited) | |||||||||||
ASSETS | |||||||||||
Fixed maturity securities, at fair value | $ | $ | |||||||||
Equity securities, at fair value (cost - March 31, 2023 - $ | |||||||||||
Mortgage and other loans, at fair value | |||||||||||
Short-term investments | |||||||||||
Other invested assets (includes $ | |||||||||||
Total investments | |||||||||||
Cash and cash equivalents | |||||||||||
Accrued investment income | |||||||||||
Reinsurance recoverables, at fair value | |||||||||||
Net modified coinsurance receivable, at fair value | |||||||||||
Deposit asset, at fair value | |||||||||||
Goodwill | |||||||||||
Income tax | |||||||||||
Other assets (Receivables from parent and affiliates: March 31, 2023 - $ | |||||||||||
Separate account assets, at fair value | |||||||||||
TOTAL ASSETS | $ | $ | |||||||||
LIABILITIES AND EQUITY | |||||||||||
LIABILITIES | |||||||||||
Insurance liabilities, at fair value | $ | $ | |||||||||
Net modified coinsurance payable, at fair value | |||||||||||
Other liabilities (Payables to parent and affiliates: March 31, 2023 - $ | |||||||||||
Separate account liabilities, at fair value | |||||||||||
Total liabilities | |||||||||||
COMMITMENTS AND CONTINGENT LIABILITIES (See Note 9) | |||||||||||
EQUITY | |||||||||||
Common stock, $ | |||||||||||
Additional paid-in capital | |||||||||||
Retained deficit | ( | ( | |||||||||
Accumulated other comprehensive income | |||||||||||
Total equity | |||||||||||
TOTAL LIABILITIES AND EQUITY | $ | $ |
Successor Company | Predecessor Company | ||||||||||
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
REVENUES | |||||||||||
Premiums | $ | $ | |||||||||
Policy charges and fee income | |||||||||||
Net investment income | |||||||||||
Asset management and service fees | |||||||||||
Other income (loss) | ( | ||||||||||
Investment gains, net | |||||||||||
TOTAL REVENUES | |||||||||||
BENEFITS AND EXPENSES | |||||||||||
Policyholder benefits and changes in fair value of insurance liabilities | — | ||||||||||
Policyholder benefits | — | ||||||||||
Interest credited to policyholders’ account balances | |||||||||||
Amortization of deferred policy acquisition costs | |||||||||||
Commission expense | |||||||||||
General, administrative and other expenses | |||||||||||
TOTAL BENEFITS AND EXPENSES | |||||||||||
INCOME FROM OPERATIONS BEFORE INCOME TAXES | |||||||||||
Income tax expense | |||||||||||
NET INCOME | $ | $ | |||||||||
Other comprehensive income (loss), before tax: | |||||||||||
Changes in own-credit risk related to insurance liabilities | |||||||||||
Net unrealized investment losses | ( | ||||||||||
Total | ( | ||||||||||
Less: Income tax expense (benefit) related to other comprehensive income (loss) | ( | ||||||||||
Other comprehensive income (loss), net of taxes | ( | ||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | $ | ( |
Successor Company | |||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Deficit | Accumulated Other Comprehensive Income | Total Equity | |||||||||||||||||||||||||
Balance, December 31, 2022 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Distribution payable to parent | — | ( | — | — | ( | ||||||||||||||||||||||||
Comprehensive income: | |||||||||||||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||
Other comprehensive income, net of tax | — | — | — | ||||||||||||||||||||||||||
Total comprehensive income | |||||||||||||||||||||||||||||
Balance, March 31, 2023 | $ | $ | $ | ( | $ | $ | |||||||||||||||||||||||
Predecessor Company | |||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Equity | |||||||||||||||||||||||||
Balance, December 31, 2021 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Return of capital | — | ( | — | — | ( | ||||||||||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||
Net income | — | — | — | ||||||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | ( | ( | ||||||||||||||||||||||||
Total comprehensive loss | ( | ||||||||||||||||||||||||||||
Balance, March 31, 2022 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
Successor Company | Predecessor Company | ||||||||||
Three Months Ended March 31 | |||||||||||
2023 | 2022 | ||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
Net income | $ | $ | |||||||||
Adjustments to reconcile net income to net cash from (used in) operating activities: | |||||||||||
Investment gains, net | ( | ( | |||||||||
Interest credited to policyholders’ account balances | |||||||||||
Other, net | ( | ||||||||||
Change in: | |||||||||||
Insurance liabilities, at fair value | |||||||||||
Deposit asset, at fair value | ( | ||||||||||
Net modified coinsurance receivable/payable, at fair value | |||||||||||
Future policy benefits | |||||||||||
Accrued investment income | ( | ||||||||||
Net receivables from/payables to parent and affiliates | ( | ||||||||||
Deferred policy acquisition costs | |||||||||||
Income taxes | |||||||||||
Reinsurance recoverables, net | ( | ( | |||||||||
Derivatives, net | ( | ( | |||||||||
Other, net | ( | ||||||||||
Cash flows from (used in) operating activities | ( | ||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
Proceeds from the sale/maturity/prepayment of: | |||||||||||
Fixed maturity securities, at fair value | |||||||||||
Fixed maturity securities, available-for-sale | |||||||||||
Equity securities | |||||||||||
Mortgage and other loans | |||||||||||
Other invested assets | |||||||||||
Short-term investments | |||||||||||
Payments for the purchase/origination of: | |||||||||||
Fixed maturity securities, at fair value | ( | ||||||||||
Fixed maturity securities, available-for-sale | ( | ||||||||||
Mortgage and other loans | ( | ( | |||||||||
Other invested assets | ( | ||||||||||
Short-term investments | ( | ( | |||||||||
Derivatives, net | |||||||||||
Other, net | ( | ||||||||||
Cash flows from (used in) investing activities | ( | ||||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
Net policyholder's account deposits (withdrawals) | ( | ||||||||||
Cash collateral for loaned securities | |||||||||||
Drafts outstanding | ( | ||||||||||
Distribution to parent | ( | ||||||||||
Cash flows from (used in) financing activities | ( | ||||||||||
NET DECREASE IN CASH AND CASH EQUIVALENTS | ( | ( | |||||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | |||||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ |
March 31, 2023 | |||||||||||||||||
Retained Business | Ceded Business | Total | |||||||||||||||
(in millions) | |||||||||||||||||
ASSETS | |||||||||||||||||
Total investments | $ | $ | $ | ||||||||||||||
Cash and cash equivalents | |||||||||||||||||
Accrued investment income | |||||||||||||||||
Reinsurance recoverables | |||||||||||||||||
Deposit asset | |||||||||||||||||
Goodwill | |||||||||||||||||
Income tax | |||||||||||||||||
Other assets | |||||||||||||||||
Separate account assets | |||||||||||||||||
TOTAL ASSETS | $ | $ | $ | ||||||||||||||
LIABILITIES AND EQUITY | |||||||||||||||||
LIABILITIES | |||||||||||||||||
Insurance liabilities | $ | $ | $ | ||||||||||||||
Net modified coinsurance payable | |||||||||||||||||
Other liabilities | |||||||||||||||||
Separate account liabilities | |||||||||||||||||
TOTAL LIABILITIES | |||||||||||||||||
EQUITY | |||||||||||||||||
TOTAL LIABILITIES AND EQUITY | $ | $ | $ |
December 31, 2022 | |||||||||||||||||
Retained Business | Ceded Business | Total | |||||||||||||||
(in millions) | |||||||||||||||||
ASSETS | |||||||||||||||||
Total investments | $ | $ | $ | ||||||||||||||
Cash and cash equivalents | |||||||||||||||||
Accrued investment income | |||||||||||||||||
Reinsurance recoverables | |||||||||||||||||
Net modified coinsurance receivable | |||||||||||||||||
Deposit asset | |||||||||||||||||
Goodwill | |||||||||||||||||
Income tax | |||||||||||||||||
Other assets | |||||||||||||||||
Separate account assets | |||||||||||||||||
TOTAL ASSETS | $ | $ | $ | ||||||||||||||
LIABILITIES AND EQUITY | |||||||||||||||||
LIABILITIES | |||||||||||||||||
Insurance liabilities | $ | $ | $ | ||||||||||||||
Other liabilities | |||||||||||||||||
Separate account liabilities | |||||||||||||||||
TOTAL LIABILITIES | |||||||||||||||||
EQUITY | |||||||||||||||||
TOTAL LIABILITIES AND EQUITY | $ | $ | $ |
Three Months Ended March 31, 2023 | |||||||||||||||||
Retained Business | Ceded Business | Total | |||||||||||||||
(in millions) | |||||||||||||||||
REVENUES | |||||||||||||||||
Premiums | $ | $ | $ | ||||||||||||||
Policy charges and fee income | |||||||||||||||||
Net investment income | |||||||||||||||||
Asset management and service fees | |||||||||||||||||
Other income | |||||||||||||||||
Investment gains, net | |||||||||||||||||
TOTAL REVENUES | |||||||||||||||||
BENEFITS AND EXPENSES | |||||||||||||||||
Policyholder benefits and changes in fair value of insurance liabilities | |||||||||||||||||
Commission expense | |||||||||||||||||
General, administrative and other expenses | |||||||||||||||||
TOTAL BENEFITS AND EXPENSES | |||||||||||||||||
INCOME FROM OPERATIONS BEFORE INCOME TAXES | |||||||||||||||||
Income tax expense | |||||||||||||||||
NET INCOME | $ | $ | $ | ||||||||||||||
Other comprehensive income, before tax: | |||||||||||||||||
Changes in own-credit risk related to insurance liabilities | |||||||||||||||||
Less: Income tax expense | |||||||||||||||||
Other comprehensive income, net of taxes | |||||||||||||||||
COMPREHENSIVE INCOME | $ | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||
Retained Business | Ceded Business | Total | Retained Business | Ceded Business | Total | ||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
LPs/LLCs: | |||||||||||||||||||||||||||||||||||
Equity method: | |||||||||||||||||||||||||||||||||||
Private equity | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Real estate-related | |||||||||||||||||||||||||||||||||||
Subtotal equity method | |||||||||||||||||||||||||||||||||||
Fair value: | |||||||||||||||||||||||||||||||||||
Private equity | |||||||||||||||||||||||||||||||||||
Total LPs/LLCs | |||||||||||||||||||||||||||||||||||
Derivative instruments | |||||||||||||||||||||||||||||||||||
Policy loans | |||||||||||||||||||||||||||||||||||
Total other invested assets | $ | $ | $ | $ | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||
Retained Business | Ceded Business | Total | Retained Business | Ceded Business | Total | ||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Fixed maturity securities | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Mortgage and other loans | |||||||||||||||||||||||||||||||||||
Short-term investments and cash equivalents | |||||||||||||||||||||||||||||||||||
Total accrued investment income | $ | $ | $ | $ | $ | $ |
Three Months Ended March 31, 2023 | |||||||||||||||||
Retained Business | Ceded Business | Total | |||||||||||||||
(in millions) | |||||||||||||||||
Fixed maturities securities | $ | $ | $ | ||||||||||||||
Equity securities | |||||||||||||||||
Mortgage and other loans | |||||||||||||||||
Other invested assets | |||||||||||||||||
Short-term investments and cash equivalents | |||||||||||||||||
Gross investment income | |||||||||||||||||
Less: investment expenses | ( | ( | ( | ||||||||||||||
Net investment income | $ | $ | $ |
Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||
Retained Business | Ceded Business | Total Business | |||||||||||||||||||||||||||||||||
Unrealized | Realized | Total | Unrealized | Realized | Total | Unrealized | Realized | Total | |||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Fixed maturity securities | $ | $ | ( | $ | $ | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||
Equity securities | |||||||||||||||||||||||||||||||||||
Derivatives | ( | ( | |||||||||||||||||||||||||||||||||
Total | $ | $ | ( | $ | $ | $ | $ | $ | $ | ( | $ |
March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||
Remaining Contractual Maturities of the Agreements | |||||||||||||||||||||||||||||
Overnight & Continuous | Up to 30 days | 30-90 days | Total | Overnight & Continuous | Up to 30 days | 30-90 days | Total | ||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
U.S. corporate public securities | $ | $ | $ | $ | $ | $ | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||
Remaining Contractual Maturities of the Agreements | |||||||||||||||||||||||||||||
Overnight & Continuous | Up to 30 days | 30-90 days | Total | Overnight & Continuous | Up to 30 days | 30-90 days | Total | ||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Equity securities | $ | $ | $ | $ | $ | $ | $ | $ |
Three months ended March 31 | |||||
2022 | |||||
(in millions) | |||||
Fixed maturities, available-for-sale: | |||||
Proceeds from sales(1) | $ | ||||
Proceeds from maturities/prepayments | |||||
Gross investment losses on sales and maturities | ( |
Three Months Ended | |||||
March 31, 2022 | |||||
(in millions) | |||||
Fixed maturities securities (1) | $ | ||||
Equity securities | |||||
Mortgage and other loans | |||||
Other invested assets | |||||
Short-term investments and cash equivalents | |||||
Gross investment income | |||||
Less: investment expenses | ( | ||||
Net investment income | $ |
Three Months Ended March 31, 2022 | |||||
(in millions) | |||||
Fixed maturity securities (1) | $ | ( | |||
Derivatives | |||||
Total | $ |
March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||
Primary Underlying Risk/Instrument Type | Gross Notional Values/Units | Fair Value | Gross Notional Values/Units | Fair Value | |||||||||||||||||||||||||||||||
Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Retained Business | |||||||||||||||||||||||||||||||||||
Interest Rate | |||||||||||||||||||||||||||||||||||
Interest Rate Swaps | $ | $ | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||||||||
Currency/Interest Rate | |||||||||||||||||||||||||||||||||||
Foreign Currency Swaps | |||||||||||||||||||||||||||||||||||
Credit | |||||||||||||||||||||||||||||||||||
Credit Default Swaps | |||||||||||||||||||||||||||||||||||
Equity | |||||||||||||||||||||||||||||||||||
Equity Futures | ( | ( | ( | ||||||||||||||||||||||||||||||||
Total Return Swaps | ( | ( | |||||||||||||||||||||||||||||||||
Equity Options | |||||||||||||||||||||||||||||||||||
Total Derivatives, Retained Business | ( | ( | |||||||||||||||||||||||||||||||||
Ceded Business | |||||||||||||||||||||||||||||||||||
Interest Rate | |||||||||||||||||||||||||||||||||||
Interest Rate Swaps | ( | ( | |||||||||||||||||||||||||||||||||
Currency/Interest Rate | |||||||||||||||||||||||||||||||||||
Foreign Currency Swaps | |||||||||||||||||||||||||||||||||||
Credit | |||||||||||||||||||||||||||||||||||
Credit Default Swaps | |||||||||||||||||||||||||||||||||||
Equity | |||||||||||||||||||||||||||||||||||
Total Return Swaps | |||||||||||||||||||||||||||||||||||
Equity Options | ( | ( | |||||||||||||||||||||||||||||||||
Total Derivatives, Ceded Business | ( | ( | |||||||||||||||||||||||||||||||||
Total Derivatives (1) | $ | $ | $ | ( | $ | $ | $ | ( |
March 31, 2023 | |||||||||||||||||||||||||||||
Gross Amounts of Recognized Financial Instruments | Gross Amounts Offset in the Statements of Financial Position | Net Amounts Presented in the Statements of Financial Position | Financial Instruments/ Collateral(1) | Net Amount | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Offsetting of Financial Assets: | |||||||||||||||||||||||||||||
Derivatives | |||||||||||||||||||||||||||||
Retained Business | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||
Ceded Business | ( | ||||||||||||||||||||||||||||
Total | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||
Offsetting of Financial Liabilities: | |||||||||||||||||||||||||||||
Derivatives | |||||||||||||||||||||||||||||
Retained Business | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||
Ceded Business | ( | ||||||||||||||||||||||||||||
Total | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||
Repurchase agreements | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
Securities lending transactions | $ | $ | $ | $ | ( | $ |
December 31, 2022 | |||||||||||||||||||||||||||||
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 millions) | |||||||||||||||||||||||||||||
Offsetting of Financial Assets: | |||||||||||||||||||||||||||||
Derivatives | |||||||||||||||||||||||||||||
Retained Business | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||
Ceded Business | ( | ||||||||||||||||||||||||||||
Total | $ | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||
Offsetting of Financial Liabilities: | |||||||||||||||||||||||||||||
Derivatives | |||||||||||||||||||||||||||||
Retained Business | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||
Ceded Business | ( | ||||||||||||||||||||||||||||
Total | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||
Repurchase agreements | ( | ||||||||||||||||||||||||||||
Securities lending transactions | ( |
Successor Company | |||||
Three Months Ended March 31, 2023 | |||||
(in millions) | |||||
Retained Business | |||||
Interest Rate | $ | ||||
Equity | ( | ||||
Total, Retained Business | ( | ||||
Ceded Business | |||||
Interest Rate | |||||
Equity | |||||
Total, Ceded Business | |||||
Total | $ |
Predecessor Company | |||||||||||||||||||||||
Three Months Ended March 31, 2022 | |||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Derivatives Designated as Hedge Accounting Instruments: | |||||||||||||||||||||||
Cash flow hedges | |||||||||||||||||||||||
Currency/Interest Rate | $ | $ | $ | $ | |||||||||||||||||||
Derivatives Not Qualifying as Hedge Accounting Instruments: | |||||||||||||||||||||||
Interest Rate | ( | ||||||||||||||||||||||
Currency/Interest Rate | ( | ||||||||||||||||||||||
Credit | ( | ||||||||||||||||||||||
Equity | |||||||||||||||||||||||
Embedded Derivatives | |||||||||||||||||||||||
Total Derivatives Not Qualifying as Hedge Accounting Instruments | |||||||||||||||||||||||
Total | $ | $ | $ | $ |
Successor Company | |||||||||||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Netting (1) | Total | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Total Business | |||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||
Fixed maturity securities | |||||||||||||||||||||||||||||
U.S Treasury securities and obligations of U.S. government authorities and agencies | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Obligations of U.S. states and their political subdivisions | — | ||||||||||||||||||||||||||||
Foreign government bonds | — | ||||||||||||||||||||||||||||
U.S. corporate public securities | — | ||||||||||||||||||||||||||||
U.S. corporate private securities | — | ||||||||||||||||||||||||||||
Foreign corporate public securities | — | ||||||||||||||||||||||||||||
Foreign corporate private securities | — | ||||||||||||||||||||||||||||
Asset-backed securities(2) | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | ||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | ||||||||||||||||||||||||||||
Total fixed maturity securities | — | ||||||||||||||||||||||||||||
Equity securities | — | ||||||||||||||||||||||||||||
Mortgage and other loans (3) | — | ||||||||||||||||||||||||||||
Short-term investments | — | ||||||||||||||||||||||||||||
Cash and cash equivalents | — | ||||||||||||||||||||||||||||
Other invested assets(4) | ( | ||||||||||||||||||||||||||||
Deposit asset | — | ||||||||||||||||||||||||||||
Reinsurance recoverables | — | ||||||||||||||||||||||||||||
Subtotal excluding separate account assets | ( | ||||||||||||||||||||||||||||
Separate account assets | — | ||||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||
Insurance liabilities | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Other liabilities - derivatives | ( | ||||||||||||||||||||||||||||
Net modified coinsurance payable | — | ||||||||||||||||||||||||||||
Separate account liabilities | — | ||||||||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ | ( | $ |
Successor Company | |||||||||||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Netting (1) | Total | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Retained Business | |||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||
Fixed maturity securities | |||||||||||||||||||||||||||||
U.S Treasury securities and obligations of U.S. government authorities and agencies | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Obligations of U.S. states and their political subdivisions | — | ||||||||||||||||||||||||||||
U.S. corporate public securities | — | ||||||||||||||||||||||||||||
U.S. corporate private securities | — | ||||||||||||||||||||||||||||
Foreign corporate public securities | — | ||||||||||||||||||||||||||||
Foreign corporate private securities | — | ||||||||||||||||||||||||||||
Asset-backed securities(2) | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | ||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | ||||||||||||||||||||||||||||
Total fixed maturity securities | — | ||||||||||||||||||||||||||||
Mortgage and other loans | — | ||||||||||||||||||||||||||||
Short-term investments | — | ||||||||||||||||||||||||||||
Cash and cash equivalents | — | ||||||||||||||||||||||||||||
Other invested assets(3) | ( | ||||||||||||||||||||||||||||
Subtotal excluding separate account assets | ( | ||||||||||||||||||||||||||||
Separate account assets | — | ||||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||
Insurance liabilities | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Other liabilities - derivatives | ( | ||||||||||||||||||||||||||||
Separate account liabilities | — | ||||||||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ | ( | $ |
Successor Company | |||||||||||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Netting (1) | Total | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Ceded Business | |||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||
Fixed maturity securities | |||||||||||||||||||||||||||||
U.S Treasury securities and obligations of U.S. government authorities and agencies | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Obligations of U.S. states and their political subdivisions | — | ||||||||||||||||||||||||||||
Foreign government bonds | — | ||||||||||||||||||||||||||||
U.S. corporate public securities | — | ||||||||||||||||||||||||||||
U.S. corporate private securities | — | ||||||||||||||||||||||||||||
Foreign corporate public securities | — | ||||||||||||||||||||||||||||
Foreign corporate private securities | — | ||||||||||||||||||||||||||||
Asset-backed securities(2) | — | ||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | ||||||||||||||||||||||||||||
Total fixed maturity securities | — | ||||||||||||||||||||||||||||
Equity securities | — | ||||||||||||||||||||||||||||
Short-term investments | — | ||||||||||||||||||||||||||||
Cash and cash equivalents | — | ||||||||||||||||||||||||||||
Other invested assets(3) | ( | ||||||||||||||||||||||||||||
Deposit asset | — | ||||||||||||||||||||||||||||
Reinsurance recoverables | — | ||||||||||||||||||||||||||||
Subtotal excluding separate account assets | ( | ||||||||||||||||||||||||||||
Separate account assets | — | ||||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||
Insurance liabilities | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Other liabilities - derivatives | ( | ||||||||||||||||||||||||||||
Net modified coinsurance payable | — | ||||||||||||||||||||||||||||
Separate account liabilities | — | ||||||||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ | ( | $ |
Successor Company | |||||||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Netting(1) | Total | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Total Business | |||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||
Fixed Maturity Securities | |||||||||||||||||||||||||||||
U.S Treasury securities and obligations of U.S. government authorities and agencies | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Obligations of U.S. states and their political subdivisions | — | ||||||||||||||||||||||||||||
Foreign government bonds | — | ||||||||||||||||||||||||||||
U.S. corporate public securities | — | ||||||||||||||||||||||||||||
U.S. corporate private securities | — | ||||||||||||||||||||||||||||
Foreign corporate public securities | — | ||||||||||||||||||||||||||||
Foreign corporate private securities | — | ||||||||||||||||||||||||||||
Asset-backed securities(2) | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | ||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | ||||||||||||||||||||||||||||
Total Fixed Maturity Securities | — | ||||||||||||||||||||||||||||
Equity securities | |||||||||||||||||||||||||||||
Mortgage and other loans (3) | — | ||||||||||||||||||||||||||||
Short-term investments | — | ||||||||||||||||||||||||||||
Cash and cash equivalents | — | ||||||||||||||||||||||||||||
Other invested assets(4) | ( | ||||||||||||||||||||||||||||
Deposit asset | — | ||||||||||||||||||||||||||||
Reinsurance recoverables | — | ||||||||||||||||||||||||||||
Net modified coinsurance receivable | — | ||||||||||||||||||||||||||||
Subtotal excluding separate account assets | ( | ||||||||||||||||||||||||||||
Separate account assets | — | ||||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||
Insurance liabilities | — | ||||||||||||||||||||||||||||
Other liabilities - derivatives | ( | ||||||||||||||||||||||||||||
Separate account liabilities | — | ||||||||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ | ( | $ |
Successor Company | |||||||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Netting(1) | Total | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Retained Business | |||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||
Fixed Maturity Securities | |||||||||||||||||||||||||||||
U.S Treasury securities and obligations of U.S. government authorities and agencies | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Obligations of U.S. states and their political subdivisions | — | ||||||||||||||||||||||||||||
U.S. corporate public securities | — | ||||||||||||||||||||||||||||
U.S. corporate private securities | — | ||||||||||||||||||||||||||||
Foreign corporate public securities | — | ||||||||||||||||||||||||||||
Foreign corporate private securities | — | ||||||||||||||||||||||||||||
Asset-backed securities(2) | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | ||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | ||||||||||||||||||||||||||||
Total Fixed Maturity Securities | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Mortgage and other loans | — | ||||||||||||||||||||||||||||
Short-term investments | — | ||||||||||||||||||||||||||||
Cash and cash equivalents | — | ||||||||||||||||||||||||||||
Other invested assets(3) | ( | ||||||||||||||||||||||||||||
Subtotal excluding separate account assets | ( | ||||||||||||||||||||||||||||
Separate account assets | — | ||||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||
Insurance liabilities | — | ||||||||||||||||||||||||||||
Other liabilities - derivatives | ( | ||||||||||||||||||||||||||||
Separate account liabilities | — | ||||||||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ | ( | $ |
Successor Company | |||||||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Netting(1) | Total | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Ceded Business | |||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||
Fixed maturity securities | |||||||||||||||||||||||||||||
U.S Treasury securities and obligations of U.S. government authorities and agencies | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Obligations of U.S. states and their political subdivisions | — | ||||||||||||||||||||||||||||
Foreign government bonds | — | ||||||||||||||||||||||||||||
U.S. corporate public securities | — | ||||||||||||||||||||||||||||
U.S. corporate private securities | — | ||||||||||||||||||||||||||||
Foreign corporate public securities | — | ||||||||||||||||||||||||||||
Foreign corporate private securities | — | ||||||||||||||||||||||||||||
Asset-backed securities(2) | — | ||||||||||||||||||||||||||||
Commercial mortgage-backed securities | — | ||||||||||||||||||||||||||||
Residential mortgage-backed securities | — | ||||||||||||||||||||||||||||
Total fixed maturity securities | $ | $ | $ | $ | — | $ | |||||||||||||||||||||||
Equity securities | — | ||||||||||||||||||||||||||||
Short-term investments | — | ||||||||||||||||||||||||||||
Cash and cash equivalents | — | ||||||||||||||||||||||||||||
Other invested assets(3) | ( | ||||||||||||||||||||||||||||
Deposit asset | — | ||||||||||||||||||||||||||||
Reinsurance recoverables | — | ||||||||||||||||||||||||||||
Net modified coinsurance receivable | — | ||||||||||||||||||||||||||||
Subtotal excluding separate account assets | ( | ||||||||||||||||||||||||||||
Separate account assets | — | ||||||||||||||||||||||||||||
Total assets | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||
Insurance liabilities | — | ||||||||||||||||||||||||||||
Other liabilities - derivatives | ( | ||||||||||||||||||||||||||||
Separate account liabilities | |||||||||||||||||||||||||||||
Total liabilities | $ | $ | $ | $ | ( | $ |
Successor Company | |||||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||
Fair Value | Valuation Techniques | Unobservable Inputs | Minimum | Maximum | Weighted Average | Impact of Increase in Input on Fair Value(1) | |||||||||||||||||
(in millions) | |||||||||||||||||||||||
Assets: | |||||||||||||||||||||||
Retained business | |||||||||||||||||||||||
Fixed maturity securities | |||||||||||||||||||||||
U.S. corporate private securities | $ | Discounted cash flow | Discount rate | % | % | % | Decrease | ||||||||||||||||
Trade price | Trade price | N/A | N/A | N/A | Increase | ||||||||||||||||||
Total U.S. corporate private securities | |||||||||||||||||||||||
Foreign corporate private securities | Discounted cash flow | Discount rate | % | % | % | Decrease | |||||||||||||||||
Asset-backed securities | Discounted cash flow | Discount rate | % | % | % | Decrease | |||||||||||||||||
Trade price | Trade price | N/A | N/A | N/A | Increase | ||||||||||||||||||
Total asset-backed securities | |||||||||||||||||||||||
Mortgage and other loans | |||||||||||||||||||||||
Residential mortgage loans | Level yield | Market yield | % | % | % | Decrease | |||||||||||||||||
Commercial mortgage loans | Trade price | Trade price | N/A | N/A | N/A | Increase | |||||||||||||||||
Total Mortgage and other loans | |||||||||||||||||||||||
Ceded business | |||||||||||||||||||||||
Deposit asset | Fair values are determined using the same unobservable inputs as insurance liabilities. | ||||||||||||||||||||||
Reinsurance recoverables | Fair values are determined using the same unobservable inputs as insurance liabilities. | ||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||
Insurance liabilities | |||||||||||||||||||||||
Retained business | $ | Discounted cash flow | Equity volatility curve (2) | % | % | Increase | |||||||||||||||||
Lapse rate(3) | % | % | Decrease | ||||||||||||||||||||
Spread over risk free (4) | % | % | Decrease | ||||||||||||||||||||
Utilization rate(5) | % | % | Increase | ||||||||||||||||||||
Withdrawal rate (6) | See table footnote (6) below. | ||||||||||||||||||||||
Mortality rate(7) | % | % | Decrease | ||||||||||||||||||||
Ceded business | Discounted cash flow | Equity volatility curve (2) | % | % | Increase | ||||||||||||||||||
Lapse rate(3) | % | % | Decrease | ||||||||||||||||||||
Spread over risk free (4) | % | % | Decrease | ||||||||||||||||||||
Utilization rate(5) | % | % | Increase | ||||||||||||||||||||
Withdrawal rate (6) | See table footnote (6) below. | ||||||||||||||||||||||
Mortality rate(7) | % | % | Decrease | ||||||||||||||||||||
Net modified coinsurance payable | Fair values are determined using the same unobservable inputs as insurance liabilities. |
Successor Company | ||||||||||||||||||||||||||||||||
December 31, 2022 | ||||||||||||||||||||||||||||||||
Fair Value | Valuation Techniques | Unobservable Inputs | Minimum | Maximum | Weighted Average | Impact of Increase in Input on Fair Value(1) | ||||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||||||||
Assets: | ||||||||||||||||||||||||||||||||
Retained business | ||||||||||||||||||||||||||||||||
U.S. corporate private securities | $ | Discounted cash flow | Discount rate | % | % | % | Decrease | |||||||||||||||||||||||||
Foreign corporate public securities | Discounted cash flow | Discount rate | % | % | % | Decrease | ||||||||||||||||||||||||||
Asset-backed securities | Discounted cash flow | Discount rate | % | % | % | Decrease | ||||||||||||||||||||||||||
Mortgage and other loans | ||||||||||||||||||||||||||||||||
Residential mortgage loans | Level yield | Market yield | % | % | % | Increase | ||||||||||||||||||||||||||
Commercial mortgage loans | Trade price | Trade price | N/A | N/A | N/A | Increase | ||||||||||||||||||||||||||
Total Mortgage and other loans | ||||||||||||||||||||||||||||||||
Ceded business | ||||||||||||||||||||||||||||||||
Deposit asset | Fair values are determined using the same unobservable inputs as insurance liabilities. | |||||||||||||||||||||||||||||||
Reinsurance recoverables | Fair values are determined using the same unobservable inputs as insurance liabilities. | |||||||||||||||||||||||||||||||
Net modified coinsurance receivable | Fair values are determined using the same unobservable inputs as insurance liabilities. | |||||||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||||||||
Retained business | ||||||||||||||||||||||||||||||||
Insurance liabilities | $ | Discounted cash flow | Equity volatility curve (2) | % | % | Increase | ||||||||||||||||||||||||||
Lapse rate(3) | % | % | Decrease | |||||||||||||||||||||||||||||
Spread over risk free (4) | % | % | Decrease | |||||||||||||||||||||||||||||
Utilization rate(5) | % | % | Increase | |||||||||||||||||||||||||||||
Withdrawal rate (6) | See table footnote (6) below. | |||||||||||||||||||||||||||||||
Mortality rate(7) | % | % | Decrease | |||||||||||||||||||||||||||||
Ceded business | ||||||||||||||||||||||||||||||||
Insurance liabilities | $ | Discounted cash flow | Equity volatility curve (2) | % | % | Increase | ||||||||||||||||||||||||||
Lapse rate(3) | % | % | Decrease | |||||||||||||||||||||||||||||
Spread over risk free (4) | % | % | Decrease | |||||||||||||||||||||||||||||
Utilization rate(5) | % | % | Increase | |||||||||||||||||||||||||||||
Withdrawal rate (6) | See table footnote (6) below. | |||||||||||||||||||||||||||||||
Mortality rate(7) | % | % | Decrease |
Successor Company | |||||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||
Fair Value, beginning of period | Total realized and unrealized gains (losses) | Purchases | Sales | Issuances | Settlements | Other | Transfers into Level 3 | Transfers out of Level 3 | Fair Value, end of period | Unrealized gains (losses) for assets still held(2) | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Retained Business | |||||||||||||||||||||||||||||||||||
Fixed maturity securities | |||||||||||||||||||||||||||||||||||
U.S. corporate private securities | $ | $ | $ | $ | $ | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||
Foreign corporate private securities | |||||||||||||||||||||||||||||||||||
Asset-backed securities | ( | ( | |||||||||||||||||||||||||||||||||
Mortgage and other loans | |||||||||||||||||||||||||||||||||||
Residential mortgage loans | ( | ||||||||||||||||||||||||||||||||||
Commercial mortgage loans | |||||||||||||||||||||||||||||||||||
Ceded Business | |||||||||||||||||||||||||||||||||||
Deposit asset | |||||||||||||||||||||||||||||||||||
Reinsurance recoverables | |||||||||||||||||||||||||||||||||||
Net modified coinsurance receivable (payable) | ( | ( |
Successor Company | |||||||||||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||
Incurred losses | |||||||||||||||||||||||||||||||||||||||||
Fair Value, beginning of period | Reduction in estimates of ultimate losses | Increase in estimates of ultimate losses | Change in fair value (discount rate) | Paid losses | Other | Fair Value, end of period | |||||||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||||||||
Insurance Liabilities | |||||||||||||||||||||||||||||||||||||||||
Retained Business | $ | $ | ( | $ | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||
Ceded Business | ( |
Predecessor Company | |||||||||||||||||||||||||||||||||||
Three Months Ended March 31, 2022 | |||||||||||||||||||||||||||||||||||
Fair Value, beginning of period | Total realized and unrealized gains (losses)(1) | Purchases | Sales | Issuances | Settlements | Other | Transfers into Level 3 | Transfers out of Level 3 | Fair Value, end of period | Unrealized gains (losses) for assets still held(2) | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Fixed maturities, available-for-sale: | |||||||||||||||||||||||||||||||||||
U.S. government | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Corporate securities(3) | ( | ( | ( | ( | |||||||||||||||||||||||||||||||
Structured securities(4) | ( | ( | ( | ( | ( | ||||||||||||||||||||||||||||||
Other assets: | |||||||||||||||||||||||||||||||||||
Equity securities | |||||||||||||||||||||||||||||||||||
Short term investments | ( | ||||||||||||||||||||||||||||||||||
Cash equivalents | ( | ||||||||||||||||||||||||||||||||||
Other assets | ( | ( | ( | ||||||||||||||||||||||||||||||||
Reinsurance recoverables | ( | ||||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||
Future policy benefits | ( | ( | ( | ||||||||||||||||||||||||||||||||
Policyholders' account balances(5) | ( | ( | ( | ||||||||||||||||||||||||||||||||
Predecessor Company | ||||||||||||||||||||||||||
Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||
Total realized and unrealized gains (losses) | Unrealized gains (losses) for assets still held(2) | |||||||||||||||||||||||||
Realized investment gains (losses), net(1) | Other income (loss) | Included in other comprehensive income (loss) | Net investment income | Realized investment gains (losses), net | Other income (loss) | Included in other comprehensive income (loss) | ||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||
Fixed maturities, available-for-sale | $ | $ | $ | ( | $ | $ | $ | $ | ( | |||||||||||||||||
Other assets: | ||||||||||||||||||||||||||
Other assets | ( | ( | ||||||||||||||||||||||||
Reinsurance recoverables | ||||||||||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||||
Future policy benefits | ||||||||||||||||||||||||||
Policyholders' account balances | ||||||||||||||||||||||||||
Successor Company | |||||||||||||||||||||||||||||||||||
March 31, 2023 | December 31, 2022 | ||||||||||||||||||||||||||||||||||
Retained Business | Ceded Business | Total | Retained Business | Ceded Business | Total | ||||||||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||||||||
Reinsurance recoverables | $ | $ | $ | $ | $ | ( | $ | ( | |||||||||||||||||||||||||||
Modified coinsurance receivable | ( | ( | |||||||||||||||||||||||||||||||||
Deposit asset | ( | ( | |||||||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||||||||
Insurance liabilities | $ | $ | $ | $ | ( | $ | ( | $ | ( |
Successor Company | |||||||||||||||||||||||||||||
March 31, 2023 | |||||||||||||||||||||||||||||
Fair Value | Carrying Amount | ||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Total | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||
Accrued investment income | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Other invested assets - Policy loans | |||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||
Repurchase agreements | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Cash collateral for loaned securities |
Successor Company | |||||||||||||||||||||||||||||
December 31, 2022 | |||||||||||||||||||||||||||||
Fair Value | Carrying Amount | ||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Total | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||
Accrued investment income | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Other invested assets - Policy loans | |||||||||||||||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||
Repurchase agreements | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Cash collateral for loaned securities |
Successor Company | |||||
Changes in Own-Credit Risk Related to Insurance Liabilities | |||||
(in millions) | |||||
Balance, December 31, 2022 | $ | ||||
Change in OCI | |||||
Less: Income tax expense | |||||
Balance, March 31, 2023 | $ | ||||
Predecessor Company | |||||||||||||||||
Accumulated Other Comprehensive Income (Loss) | |||||||||||||||||
Foreign Currency Translation Adjustment | Net Unrealized Investment Losses(1) | Total Accumulated Other Comprehensive Income (Loss) | |||||||||||||||
(in millions) | |||||||||||||||||
Balance, December 31, 2021 | $ | ( | $ | $ | |||||||||||||
Change in OCI before reclassifications | ( | ( | |||||||||||||||
Amounts reclassified from AOCI | |||||||||||||||||
Income tax benefit | |||||||||||||||||
Balance, March 31, 2022 | $ | ( | $ | ( | $ | ( |
Predecessor Company | |||||
Three Months Ended March 31, 2022 | |||||
(in millions) | |||||
Amounts reclassified from AOCI(1)(2): | |||||
Net unrealized investment gains (losses): | |||||
Cash flow hedges—Currency/ Interest rate(3) | $ | ||||
Net unrealized investment losses on available-for-sale securities | ( | ||||
Total net unrealized investment gains (losses)(4) | ( | ||||
Total reclassifications for the period | $ | ( |
Predecessor Company | |||||||||||||||||||||||||||||
Net Unrealized Gains (Losses) on All Other Investments(1) | DAC and Other Costs(2) | Future Policy Benefits and Other Liabilities(3) | Income Tax Benefit (Expense) | Accumulated Other Comprehensive Income (Loss) Related To Net Unrealized Investment Gains (Losses) | |||||||||||||||||||||||||
(in millions) | |||||||||||||||||||||||||||||
Balance, December 31, 2021 | $ | $ | ( | $ | ( | $ | ( | $ | |||||||||||||||||||||
Net investment gains (losses) on investments arising during the period | ( | ( | |||||||||||||||||||||||||||
Reclassification adjustment for (gains) losses included in net income | ( | ||||||||||||||||||||||||||||
Impact of net unrealized investment (gains) losses | ( | ||||||||||||||||||||||||||||
Balance, March 31, 2022 | $ | ( | $ | ( | $ | ( | $ | $ | ( |
Affiliate | Date | Transaction | Security Type | Fair Value | Book Value | Realized Investment Gain (Loss) | ||||||||||||||
(in millions) | ||||||||||||||||||||
Pruco Life | January 2022 | Sale | Fixed Maturity Securities | ( | ||||||||||||||||
Prudential Financial | January 2022 | Sale | Commercial Mortgage Loan | ( | ||||||||||||||||
Pruco Life | January 2022 | Sale | Derivatives | |||||||||||||||||
Pruco Life | February 2022 | Sale | Fixed Maturity Securities | ( | ||||||||||||||||
Prudential Financial | March 2022 | Sale | Fixed Maturity Securities | $ | $ | $ |
Three Months Ended March 31 | |||||
2022 | |||||
(in millions) | |||||
Premiums: | |||||
Direct | $ | ||||
Ceded | ( | ||||
Net premiums | |||||
Policy charges and fee income: | |||||
Direct | |||||
Ceded | ( | ||||
Net policy charges and fee income | |||||
Asset management and service fees: | |||||
Direct | |||||
Ceded | ( | ||||
Net asset management and service fees | |||||
Realized investment gains (losses), net: | |||||
Direct | |||||
Ceded | |||||
Realized investment gains (losses), net | |||||
Policyholders' benefits (including change in reserves): | |||||
Direct | |||||
Ceded | ( | ||||
Net policyholders' benefits (including change in reserves) | |||||
Interest credited to policyholders’ account balances: | |||||
Direct | |||||
Ceded | ( | ||||
Net interest credited to policyholders’ account balances | |||||
Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization | ( |
Three Months Ended March 31 | |||||
2022 | |||||
(in millions) (1) | |||||
U.S. GAAP embedded derivative and hedging positions | |||||
Change in value of U.S.GAAP liability, pre-NPR(2) | $ | 459 | |||
Change in the NPR adjustment | 156 | ||||
Change in fair value of hedge assets, excluding capital hedges(3) | (392) | ||||
Change in fair value of capital hedges(4) | 39 | ||||
Other | 218 | ||||
Realized investment gains (losses), net, and related adjustments | 480 | ||||
Market experience updates(5) | (57) | ||||
Charges related to realized investments gains (losses), net | (97) | ||||
Net impact from changes in the U.S. GAAP embedded derivative and hedge positions, after the impact of NPR, DAC and other costs(6) | $ | 326 |
EXHIBIT INDEX | ||
101.INS - XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 | ||
104.Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
FORTITUDE LIFE INSURANCE & ANNUITY COMPANY | ||||||||
By: | /s/ Kai Talarek | |||||||
Name | Kai Talarek | |||||||
Senior Vice President and Chief Financial Officer | ||||||||
(Authorized Signatory and Principal Financial Officer) |
/s/ Alon Neches | ||||||||||||||
Alon Neches | ||||||||||||||
President and Chief Executive Officer |
/s/ Kai Talarek | ||||||||||||||
Kai Talarek | ||||||||||||||
Senior Vice President and Chief Financial Officer |
/s/ Alon Neches | ||||||||||||||
Alon Neches | ||||||||||||||
President and Chief Executive Officer |
/s/ Kai Talarek | ||||||||||||||
Kai Talarek | ||||||||||||||
Senior Vice President and Chief Financial Officer |
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Parenthetical) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Equity securities, cost | $ 201 | $ 201 |
Other invested assets, fair value | 427 | 430 |
Due from parent and affiliates | 0 | 40 |
Payables to parent and affiliates | $ 54 | $ 3 |
Common stock, par value (in dollars per share) | $ 100 | $ 100 |
Common stock authorized (in shares) | 25,000 | 25,000 |
Common stock issued (in shares) | 25,000 | 25,000 |
Common stock outstanding (in shares) | 25,000 | 25,000 |
UNAUDITED INTERIM CONSOLIDATED STATEMENTS OF EQUITY - USD ($) $ in Millions |
Total |
Common Stock |
Additional Paid-in Capital |
Retained Deficit |
Accumulated Other Comprehensive Income |
---|---|---|---|---|---|
Beginning Balance at Dec. 31, 2021 | $ 1,682 | $ 3 | $ 592 | $ 917 | $ 170 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Return of capital | (306) | (306) | |||
Comprehensive income (loss): | |||||
Net income | 356 | 356 | |||
Other comprehensive income (loss), net of taxes | (443) | (443) | |||
Total comprehensive income (loss) | (87) | ||||
Ending Balance at Mar. 31, 2022 | 1,289 | 3 | 286 | 1,273 | (273) |
Beginning Balance at Dec. 31, 2022 | 1,587 | 3 | 1,759 | (286) | 111 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Distribution payable to parent | (45) | (45) | |||
Comprehensive income (loss): | |||||
Net income | 7 | 7 | |||
Other comprehensive income (loss), net of taxes | 17 | 17 | |||
Total comprehensive income (loss) | 24 | ||||
Ending Balance at Mar. 31, 2023 | $ 1,566 | $ 3 | $ 1,714 | $ (279) | $ 128 |
BUSINESS AND BASIS OF PRESENTATION |
3 Months Ended |
---|---|
Mar. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
BUSINESS AND BASIS OF PRESENTATION | BUSINESS AND BASIS OF PRESENTATION Fortitude Life Insurance & Annuity Company and its wholly-owned subsidiary (collectively, “FLIAC” or the “Company”), with its principal offices in Jersey City, New Jersey, is a wholly-owned subsidiary of Fortitude Group Holdings, LLC (“FGH”). Prior to April 1, 2022, the Company (previously named Prudential Annuities Life Assurance Corporation ("PALAC")) was a wholly-owned subsidiary of Prudential Annuities, Inc ("PAI"), an indirect wholly-owned subsidiary of Prudential Financial, Inc. ("Prudential Financial"), a New Jersey Corporation. On April 1, 2022, PAI completed the sale of its equity interest in the Company to FGH. As a result, the Company is no longer an affiliate of Prudential Financial or any of its affiliates. See Basis of Presentation below and Note 1 in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for further information regarding the acquisition. Basis of Presentation The Unaudited Interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). The accompanying Unaudited Consolidated Financial Statements present the consolidated results of operations, financial condition, and cash flows of the Successor Company and a variable interest entity ("VIE") that meets the requirements for consolidation. All intercompany transactions have been eliminated in consolidation. The financial statements of the Predecessor Company were not consolidated as it was a single entity prior to acquisition. Following the acquisition of FLIAC, purchase accounting was applied to FGH's financial statements and we have elected to "push down" the basis to FLIAC in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations. The application of push-down accounting created a new basis of accounting for all assets and liabilities based on fair value at the date of acquisition. As a result, FLIAC's financial position, results of operations, and cash flows subsequent to the acquisition are not comparable with those prior to April 1, 2022, and therefore have been segregated to indicate pre-acquisition and post-acquisition periods. The pre-acquisition period through March 31, 2022 is referred to as the Predecessor Company. The post-acquisition period, April 1, 2022 and forward, includes the impact of push-down accounting and is referred to as the Successor Company. See Notes 1 and 2 in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for further information regarding the acquisition and our application of push-down accounting. In the opinion of management, all adjustments necessary for a fair statement of the financial position and results of operations have been made. All such adjustments are of a normal, recurring nature. Interim results are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company’s Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Novation of Ceded Business In 2022, in accordance with applicable state law, a program was instituted to novate a significant portion of the Ceded Business policies from FLIAC to Pruco Life Insurance Company ("Pruco Life"). The program does not have an impact on net equity or net income but has resulted in the reduction of certain activity/balances associated with these policies. During the three months ended March 31, 2023, approximately $7 million of account value, which generally approximates fair values of insurance liabilities, was transferred out of the Company as a result of the novation program. Approximately 66 percent of account value in the Ceded Business has been novated since the acquisition of the Company on April 1, 2022. Reclassifications Certain amounts in prior periods have been reclassified to conform to the current period presentation.
|
SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS |
3 Months Ended |
---|---|
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS | SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS Accounting Policy Election Fair Value Option We have elected to prospectively apply the fair value option to several of FLIAC's assets and liabilities. We have made this election as it improves our operational efficiency and better aligns the recognition and measurement of our investments, insurance liabilities, and associated reinsurance activity with how we expect to manage the business. See Note 6 herein and Notes 2 and 6 in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for further information. Recent Accounting Pronouncements Changes to U.S. GAAP are established by the Financial Accounting Standards Board ("FASB") in the form of an Accounting Standards Update ("ASU") to the ASC. We consider the applicability and impact of all ASUs. ASUs listed below include those that have been adopted during the current fiscal year and/or those that have been issued but not yet adopted as of the date of this filing. ASUs not listed below were assessed and determined to be either not applicable or not material. Effective ASUs - March 31, 2023 ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, was issued by the FASB. This update became effective January 1, 2023 but is not applicable due to our election to adopt the fair value option on all of our insurance liabilities, which includes our separate account liabilities. ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt restructurings and Vintage Disclosures, was issued by the FASB. This update became effective January 1, 2023 but is not applicable due to our election to adopt the fair value option on financial instruments that are within the scope of this update.
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SEGMENT INFORMATION |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT INFORMATION | SEGMENT INFORMATION FLIAC has two reportable segments, which we refer to as the "Retained Business" and the "Ceded Business." The Retained Business consists of variable annuity products with guaranteed lifetime withdrawal benefit features as well as smaller blocks of variable annuity products with certain other living benefit and death benefit features. The Retained Business also includes variable universal life and fixed payout annuity products. The Retained Business is actively managed by FLIAC management and the Successor Company retains the full economic benefits and risks. The Ceded Business represents certain business (primarily registered index-linked annuities and fixed annuities, which includes fixed indexed and fixed deferred annuities, and other variable annuities) where 100 percent of the assets and liabilities have been fully ceded to Prudential Insurance and Pruco Life under existing coinsurance and modified coinsurance agreements. At March 31, 2023 and December 31, 2022, we had a modified coinsurance payable of $1,886 million and $1,745 million, respectively, equal to the assets held in the Ceded Business, which is included in the net modified coinsurance receivable/payable. Historical information has not been revised for the segment presentation and is not comparable following the election of push-down accounting as of April 1, 2022. The following is the Consolidated Statement of Financial Position by segment:
The following is comprehensive income by segment:
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INVESTMENTS |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INVESTMENTS | INVESTMENTS We have elected to apply the fair value option for FLIAC's entire portfolio of fixed maturity and equity securities and mortgage and other loans. The impact of the election has resulted in the following changes: •Elimination of the "available-for-sale" designation on all fixed maturity securities, resulting in a change in the recording of unrealized gains and losses through "Investment gains, net" in the consolidated statement of income rather than in "Accumulated other comprehensive income" ("AOCI") as a component of equity in the consolidated statements of financial position; •Elimination of the required allowance for current expected credit losses on applicable financial assets under ASC 326 - Financial Instruments - Credit Losses, which include fixed maturity securities designated as "available-for-sale" and mortgage and other loans; and •Elimination of a significant portion of the required disclosures for available-for-sale securities and mortgage and other loans. These disclosures primarily relate to the amortized cost and unrealized gains and losses on available-for-sale securities. Disclosures for historical periods under the Predecessor Company are retained at the end of this note under "Predecessor Company". SUCCESSOR COMPANY Other Invested Assets The following table sets forth the composition of “Other invested assets,” as of the dates indicated.
Accrued Investment Income The following table sets forth the composition of “Accrued investment income,” as of the dates indicated:
There were no write-downs on accrued investment income for the three months ended March 31, 2023. Net Investment Income The following table sets forth “Net investment income” by investment type, for the periods indicated:
The activity above includes interest income related to fair value option investments, where applicable. Investment Gains, Net The following table sets forth “Investment gains, net” by investment type, for the periods indicated:
Repurchase Agreements and Securities Lending In the normal course of business, FLIAC sells securities under agreements to repurchase and enters into securities lending transactions. These balances are recorded within Other liabilities in the unaudited interim consolidated statements of financial position. The following table sets forth, by type, the securities that we have agreed to repurchase, all of which are contained in the Retained Business. The below amounts represent the cash received under the outstanding repurchase agreements.
The market value of the securities posted as collateral under the repurchase agreements was $318 million and $326 million as of March 31, 2023 and December 31, 2022, respectively. The following table sets forth the remaining contractual maturities of the Successor Company's securities lending transactions by the security type that was loaned, all of which are contained in the Ceded Business. The amounts below represent the cash collateral received for the loaned securities.
The market value of the securities loaned was $162 million and $103 million as of March 31, 2023 and December 31, 2022, respectively. PREDECESSOR COMPANY The following table sets forth the sources of proceeds and related investment losses for available-for-sale fixed maturity securities:
(1)Excludes activity from non-cash related proceeds due to the timing of trade settlements of $20 million for three months ended March 31, 2022. Allowance for credit losses The activity in the allowance for credit losses for fixed maturity securities, available-for-sale, was de minimis for the three months ended March 31, 2022. The allowance for credit losses for mortgage and other loans declined by $1 million for the three months ended March 31, 2022. The decrease related to the improving credit environment. See Note 2 to the Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 for additional information about the Predecessor Company’s methodology for developing the allowance for credit losses. Net Investment Income The following table sets forth “Net investment income” by investment type, for the periods indicated:
(1)Includes fixed maturity securities classified as available-for-sale and trading. Investment Gains, Net The following table sets forth “Investment gains, net” by investment type, for the periods indicated:
(1)Includes fixed maturity securities classified as available-for-sale and excludes fixed maturity securities classified as trading.
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DERIVATIVES AND HEDGING |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVES AND HEDGING | DERIVATIVES AND HEDGING Types of Derivative Instruments and Derivative Strategies The Company utilizes various derivative instruments and strategies to manage its risk. Commonly used derivative instruments include but are not necessarily limited to: •Interest rate contracts: futures, swaps, forwards, options, caps and floors •Equity contracts: futures, options and total return swaps •Foreign exchange contracts: futures, options, forwards and swaps •Credit contracts: single and index reference credit default swaps See below for information on these contracts and the related strategies. Interest Rate Contracts Interest rate swaps and futures are used by the Company to reduce risks from changes in interest rates, manage interest rate exposures arising from mismatches between assets and liabilities and to hedge against changes in their values it owns or anticipates acquiring or selling. 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. 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 Contracts Equity options, total return swaps, and futures are used by the Company to manage its exposure to the equity markets which impacts the value of assets and liabilities it owns or anticipates acquiring or selling. 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 Secured Overnight Financing Rate ("SOFR") 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. Foreign Exchange Contracts Currency derivatives, including currency swaps and forwards, are used by the Company to reduce risks from changes in currency exchange rates with respect to investments denominated in foreign currencies that the Company either holds or intends to acquire or sell. 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. Credit Contracts The Company purchases credit protection using credit derivatives in order to hedge specific credit exposures in the Company’s investment portfolio. The Company also sells credit protection using credit derivatives in order to generate a credit spread for the benefit of the Company’s investment portfolio. Primary Risks Managed by Derivatives The tables below provide a summary, by operating segment, of the gross notional amount and fair value of derivative contracts, by the primary underlying risks. 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.
(1) Recorded in “Other invested assets” and “Other liabilities” in the Consolidated Statements of Financial Position. Offsetting Assets and Liabilities The following table presents recognized derivative instruments that are offset in the Consolidated 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 Consolidated Statements of Financial Position.
(1)Amounts exclude the excess of collateral received/pledged from/to the counterparty. The Company is exposed to credit-related losses in the event of non-performance by counterparties to financial derivative transactions with a positive fair value. FLIAC manages credit risk by (i) entering into derivative transactions with highly rated major international financial institutions and other creditworthy counterparties governed by master netting agreement, as applicable; (ii) trading through central clearing and OTC parties; (iii) obtaining collateral, such as cash and securities, when appropriate; and (iv) setting limits on single-party credit exposures which are subject to periodic management review. Substantially all of the Company’s derivative agreements have zero thresholds which require daily full collateralization by the party in a liability position. 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 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Classification of Derivatives Activity As part of our application of push-down accounting in connection with the acquisition of the Company, we have de-designated the Predecessor Company's hedging relationships for all of our derivative instruments, and accordingly, any related accumulated unrealized gains and losses that were previously recorded in AOCI were reset to zero at the acquisition date. Historical information has not been restated under the updated segmentation and is not comparable following the change in ownership on April 1, 2022. The following tables provide the financial statement classification and impact of derivatives, by segment.
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FAIR VALUE OF ASSETS AND LIABILITIES |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE OF ASSETS AND LIABILITIES | FAIR VALUE OF ASSETS AND LIABILITIES Fair Value Measurement – Fair value represents the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The authoritative fair value guidance establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows: Level 1 - Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. Level 2 - Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities, and other market observable inputs. Level 3 - Fair value is based on at least one significant unobservable input for the asset or liability. The assets and liabilities in this category may require significant judgment or estimation in determining the fair value. For a discussion of the Company's valuation methodologies for assets and liabilities measured at fair value and the fair value hierarchy, see Note 6 to the Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. Fair Value Option Election We have elected to adopt the fair value option for several of our financial assets and liabilities. The following are the financial assets and liabilities for which we have elected the fair value option. See Notes 2 and 6 to the Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for further information. •Fixed maturity securities •Equity securities •Mortgage and other loans •Reinsurance recoverable •Separate account assets and liabilities •Net modified coinsurance receivable/payable •Deposit asset •Insurance liabilities Assets and Liabilities by Hierarchy Level – The tables below present the balances of assets and liabilities reported at fair value on a recurring basis, as of the dates indicated.
(1)“Netting” amounts represent offsetting considerations as disclosed in Note 5. (2)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types. (3)As of March 31, 2023, the difference between the aggregate fair value and the aggregate unpaid principal of mortgage and other loans was de minimis. There were no mortgage and other loans that were 90 days or more past due or in non-accrual status. (4)Other invested assets within the above chart are comprised of derivatives. Excluded from the above chart are private equity funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. At March 31, 2023 the fair values of such investments were $353 million. See Note 4 for further details.
(1)“Netting” amounts represent offsetting considerations as disclosed in Note 5. (2)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types. (3)Other invested assets within the above chart are comprised of derivatives. Excluded from the above chart are private equity funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. At March 31, 2023 the fair values of such investments were $352 million. See Note 4 for further details.
(1)“Netting” amounts represent offsetting considerations as disclosed in Note 5. (2)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types. (3)Other invested assets within the above chart are comprised of derivatives. Excluded from the above chart are private equity funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. At March 31, 2023 the fair values of such investments were $1 million. See Note 4 for further details.
(1)“Netting” amounts represent offsetting considerations as disclosed in Note 5. (2)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types. (3)As of December 31, 2022, the difference between the aggregate fair value and the aggregate unpaid principal of mortgage and other loans was de minimis. There were no mortgage and other loans that were 90 days or more past due or in non-accrual status. (4)Other invested assets within the above chart are comprised of derivatives. Excluded from the above chart are private equity funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. At December 31, 2022 the fair values of such investments were $345 million, respectively. See Note 4 for further details.
(1)“Netting” amounts represent offsetting considerations as disclosed in Note 5. (2)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types. (3)Other invested assets within the above chart are comprised of derivatives. Excluded from the above chart are private equity funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. At December 31, 2022, the fair values of such investments were $344 million. See Note 4 for further details.
(1)“Netting” amounts represent offsetting considerations as disclosed in Note 5. (2)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types. (3)Other invested assets within the above chart are comprised of derivatives. Excluded from the above chart are private equity funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. At December 31, 2022, the fair values of such investments were $1 million. See Note 4 for further details. Quantitative Information Regarding Internally Priced Level 3 Assets and Liabilities – The tables below present quantitative information on significant internally-priced Level 3 assets and liabilities.
(1)Conversely, the impact of a decrease in input would have the opposite impact on fair value as that presented in the table. (2) The equity volatility curve assumption is based on 1 year and 2 year index-specific at-the-money implied volatilities grading to 10 year total variance. Increased volatility increases the fair value of the liability. (3) Lapse rates for contracts with living benefit guarantees are adjusted at the contract level based on the in-the-moneyness of the living benefit and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. Lapse rates for contracts with index-linked crediting guarantees may be adjusted at the contract level based on the applicability of any surrender charges, product type, and market related factors such as interest rates. Lapse rates are also generally assumed to be lower for the period where surrender charges apply. (4) The spread over the risk-free rate (SOFR and LIBOR) swap curve represents the premium added to the proxy for the risk-free rate to reflect the Company's estimates of rates that a market participant would use to value the living benefits in both the accumulation and payout phases and index-linked interest crediting guarantees. This spread includes an estimate of NPR, which is the risk that the obligation will not be fulfilled by the Company. NPR is primarily estimated by utilizing the credit spreads associated with issuing funding agreements, adjusted for any illiquidity risk premium. In order to reflect the financial strength ratings of the Company, credit spreads associated with funding agreements, as opposed to credit spread associated with debt, are utilized in developing this estimate because funding agreements, living benefit guarantees, and index-linked interest crediting guarantees are insurance liabilities and are therefore senior to debt. (5) The utilization rate assumption estimates the percentage of contracts that will utilize the benefit during the contract duration and begin lifetime withdrawals at various time intervals from contract inception. Utilization assumptions may vary by product type, tax status and age. The impact of changes in these assumptions is highly dependent on the product type, the age of the contractholder at the time of the sale, and the timing of the first lifetime income withdrawal. (6) The withdrawal rate assumption estimates the magnitude of annual contractholder withdrawals relative to the maximum allowable amount under the contract. These assumptions vary based on the age of the contractholder, the tax status of the contract and the duration since the contractholder began lifetime withdrawals. As of March 31, 2023 and December 31, 2022, the minimum withdrawal rate assumption is 77% and the maximum withdrawal rate assumption may be greater than 100%. The fair value of the liability will generally increase the closer the withdrawal rate is to 100% and decrease as the withdrawal rate moves further away from 100%. (7) The range reflects the mortality rates for the vast majority of business with living benefits, with policyholders ranging from 45 to 90 years old. While the majority of living benefits have a minimum age requirement, certain other contracts do not have an age restriction. This results in contractholders with mortality rates approaching 0% for certain benefits. Interrelationships Between Unobservable Inputs – In addition to the sensitivities of fair value measurements to changes in each unobservable input in isolation, as reflected in the table above, interrelationships between these inputs may also exist, such that a change in one unobservable input may give rise to a change in another, or multiple, inputs. Examples of such interrelationships for significant internally-priced Level 3 assets and liabilities are as follows: Corporate Securities – The rate used to discount future cash flows reflects current risk-free rates plus credit and liquidity spread requirements that market participants would use to value an asset. The discount rate may be influenced by many factors, including market cycles, expectations of default, collateral, term and asset complexity. Each of these factors can influence discount rates, either in isolation, or in response to other factors. During weaker economic cycles, as the expectations of default increases, credit spreads widen, which results in a decrease in fair value. Insurance Liabilities, at fair value – The Company expects efficient benefit utilization and withdrawal rates to generally be correlated with lapse rates. However, behavior is highly dependent on the facts and circumstances surrounding the individual contractholder, such as their liquidity needs or tax situation, which could drive lapse behavior independent of other contractholder behavior assumptions. To the extent that more efficient contractholder behavior results in greater in-the-moneyness at the contract level, lapse rates may decline for those contracts. Similarly, to the extent that increases in equity volatility are correlated with overall declines in the capital markets, lapse rates may decline as contracts become more in-the-money. Changes in Level 3 Assets and Liabilities – The following tables describe changes in fair values of Level 3 assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods. When a determination is made to classify assets and liabilities within Level 3, the determination is based on significance of the unobservable inputs in the overall fair value measurement. All transfers are based on changes in the observability of the valuation inputs, including the availability of pricing service information that the Company can validate. Transfers into Level 3 are generally the result of unobservable inputs utilized within valuation methodologies and the use of indicative broker quotes for assets that were previously valued using observable inputs. Transfers out of Level 3 are generally due to the use of observable inputs in valuation methodologies as well as the availability of pricing service information for certain assets that the Company can validate.
"Total realized and unrealized gains (losses)" related to our level 3 assets are included in earnings in Investment gains (losses). Activity related to our level 3 liabilities is primarily recognized in earnings within change in Policyholder benefits and changes in fair value of insurance liabilities with the exception of changes related to the Company's own-credit risk, which are included in "Change in fair value (discount rate)" above and recorded in other comprehensive income (loss).
(1)Realized investment gains (losses) on future policy benefits and reinsurance recoverables primarily represent the change in the fair value of the Company's living benefit guarantees on certain of its variable annuity contracts. (2)Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts. (3)Includes U.S. corporate public, U.S. corporate private, foreign corporate public and foreign corporate private securities. (4)Includes asset-backed and residential mortgage-backed securities. (5)Issuances and settlements for Policyholders' account balances are presented net in the rollforward. Change in Fair Value of Insurance Contracts The components of the change in fair value of our insurance contracts are reported in several line items within Revenues and Benefits and expenses in our consolidated statements of income and comprehensive income (loss). The revenue items include Premiums, Policy charges and fee income, and Asset management and service fees. The Benefits and expenses items include Policyholders' benefits and changes in fair value of insurance liabilities and commission expense. Policyholder benefits and changes in fair value of insurance liabilities includes the following changes in fair value of the assets and liabilities for which we have elected the fair value option:
Changes in insurance liabilities attributable to the Company's own-credit risk are recorded in other comprehensive income (loss). Changes in the modified coinsurance payable are reported in Policyholder benefits and changes in fair value of insurance liabilities, however, they are not included in the above chart as they relate to the investment portfolio within the modified coinsurance agreement. Fair Value of Financial Instruments The table below presents the carrying amount and fair value by fair value hierarchy level of certain financial instruments that are not reported at fair value. The financial instruments presented below are reported at carrying value on the Company’s Consolidated Statements of Financial Position. In some cases the carrying amount equals or approximates fair value.
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INCOME TAXES |
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Mar. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES The Company uses a full year projected effective tax rate approach to calculate taxes. In addition, certain items impacting total income tax expense are recorded in the periods in which they occur. The projected effective tax rate is the ratio of projected “Income tax expense (benefit)” divided by projected “Income (loss) from operations before income taxes”. For the three months ended March 31, 2023, the Successor Company's income tax provision amounted to an income tax expense of approximately $0.3 million or 4.3 percent of income from operations before income taxes, respectively. The effective tax rate for the Successor Company differed from the U.S. statutory tax rate of 21 percent primarily due to non-taxable investment income. The Predecessor Company's income tax provision amounted to an income tax expense of $77 million or 17.8 percent of income from operations before income tax, for three months ended March 31, 2022, respectively. The effective tax rate for the Predecessor Company differed from the U.S. statutory tax rate of 21 percent primarily due to non-taxable investment income and tax credits. Valuation Allowance on Deferred Tax Assets The application of U.S. GAAP requires the evaluation of the recoverability of deferred tax assets and establishment of a valuation allowance, if necessary, to reduce the deferred tax asset to an amount that is more likely than not expected to be realized, including an assessment of the character of future income necessary to realize a deferred tax asset. As of both March 31, 2023 and December 31, 2022, the Company had a valuation allowance of $37 million regarding realized and unrealized capital losses on our fixed maturity securities portfolio. A portion of the deferred tax asset relates to unrealized capital losses for which the carryforward period has not yet begun, and as such, when assessing its recoverability, we consider our ability and intent to hold the underlying securities to recovery. The amount of the deferred tax asset considered realizable may be adjusted if projections of future taxable income, including the character of that taxable income during the requisite carryforward period, are updated or if objective negative evidence exists that outweighs the positive evidence.
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EQUITY |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
EQUITY | EQUITY Additional Paid-in Capital During the three months ended March 31, 2023, the Company established a $45 million distribution payable to its parent company, FGH, as a result of updated information regarding certain tax assets related to the acquisition of FLIAC, which resulted in an offsetting reduction to "Additional paid-in capital". Accumulated Other Comprehensive Income (Loss) AOCI represents the cumulative OCI items that are reported separate from net income and detailed on the Consolidated Statements of Income and Comprehensive Income (Loss). As discussed in Note 1, we have elected to apply push-down accounting to FLIAC at the acquisition date, April 1, 2022. As part of this election, accumulated unrealized gains and losses that were previously recorded in AOCI were reset to zero at the acquisition date. In addition, as discussed in Note 2, we have elected to apply the fair value option on our entire portfolio of fixed maturity securities. As a result, all unrealized gains and losses related to our fixed maturity securities are recorded through earnings rather than AOCI. As discussed in Note 5, we have de-designated the hedging relationship for all of our derivative instruments. Accordingly, all changes in our derivative instruments are recorded through earnings. The balance of and changes in each component of AOCI are as follows:
(1)Includes cash flow hedges of $29 million as of March 31, 2022. Reclassifications out of Accumulated Other Comprehensive Income (Loss)
(1)All amounts are shown before tax. (2)Positive amounts indicate gains/benefits reclassified out of AOCI. Negative amounts indicate losses/costs reclassified out of AOCI. (3)See Note 5 for additional information on cash flow hedges. (4)See table below for additional information on unrealized investment gains (losses), including the impact on DAC and other costs and future policy benefits and other liabilities. Net Unrealized Investment Losses Net unrealized investment losses on available-for-sale fixed maturity securities and certain other invested assets and other assets were included in the Predecessor Company’s Statements of Financial Position as a component of AOCI. Changes in these amounts included reclassification adjustments to exclude from OCI those items that were included as part of “Net income” for a period that had been part of OCI in earlier periods. The amounts indicated below, split between amounts related to net unrealized investment losses on available-for-sale fixed maturity securities on which an allowance for credit losses has been recognized, and all other net unrealized investment gains (losses), are as follows:
(1)Includes cash flow hedges. See Note 5 for information on cash flow hedges. (2)"Other costs" primarily includes reinsurance recoverables, DSI and VOBA. (3)"Other liabilities" primarily includes reinsurance payables and deferred reinsurance gains.
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COMMITMENTS AND CONTINGENT LIABILITIES |
3 Months Ended |
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Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENT LIABILITIES | COMMITMENTS AND CONTINGENT LIABILITIES Commitments As of March 31, 2023, the outstanding balance on commitments for mortgage and other loans was $128 million. These amounts include unfunded commitments that are not unconditionally cancellable. The Company also made commitments to purchase or fund investments, mostly private fixed maturity securities and alternative investments. As of March 31, 2023, $478 million of these commitments were outstanding. These amounts include unfunded commitments that are not unconditionally cancellable. See Note 10 for further information regarding certain commitments to related parties. Contingent Liabilities On an ongoing basis, the Company and its regulators review its operations including, but not limited to, sales and other customer interface procedures and practices, and procedures for meeting obligations to its customers and other parties. These reviews may result in the modification or enhancement of processes or the imposition of other action plans, including concerning management oversight, sales and other customer interface procedures and practices, and the timing or computation of payments to customers and other parties. In certain cases, if appropriate, the Company may offer customers or other parties remediation and may incur charges, including the cost of such remediation, administrative costs and regulatory fines. The Company is subject to the laws and regulations of states and other jurisdictions concerning the identification, reporting and escheatment of unclaimed or abandoned funds, and is subject to audit and examination for compliance with these requirements. For additional discussion of these matters, see “Litigation and Regulatory Matters” below. It is possible that the results of operations or the cash flows of the Company in a particular quarterly or annual period could be materially affected as a result of payments in connection with the matters discussed above or other matters depending, in part, upon the results of operations or cash flows for such period. Management believes, however, that ultimate payments in connection with these matters, after consideration of applicable reserves and rights to indemnification, should not have a material adverse effect on the Company’s financial position. Litigation and Regulatory Matters The Company is subject to legal and regulatory actions in the ordinary course of its business. Pending legal and regulatory actions include proceedings specific to the Company and proceedings generally applicable to business practices in the industry in which it operates. The Company is subject to class action lawsuits and other litigation involving a variety of issues and allegations involving sales practices, claims payments and procedures, premium charges, policy servicing and breach of fiduciary duty to customers. The Company is also subject to litigation arising out of its general business activities, such as its investments, contracts, leases and labor and employment relationships, including claims of discrimination and harassment, and could be exposed to claims or litigation concerning certain business or process patents. In addition, the Company, along with other participants in the businesses in which it engages, may be subject from time to time to investigations, examinations and inquiries, in some cases industry-wide, concerning issues or matters upon which such regulators have determined to focus. In some of the Company’s pending legal and regulatory actions, parties are seeking large and/or indeterminate amounts, including punitive or exemplary damages. The outcome of litigation or a regulatory matter, and the amount or range of potential loss at any particular time, is often inherently uncertain. The Company establishes accruals for litigation and regulatory matters when it is probable that a loss has been incurred and the amount of that loss can be reasonably estimated. For litigation and regulatory matters where a loss may be reasonably possible, but not probable, or is probable but not reasonably estimable, no accrual is established, but the matter, if material, is disclosed. The Company estimates that as of March 31, 2023, the aggregate range of reasonably possible losses in excess of accruals and recoveries from unaffiliated indemnitors established for those litigation and regulatory matters for which such an estimate currently can be made is not considered to be material. This estimate is not an indication of expected loss, if any, or the Company’s maximum possible loss exposure on such matters. The Company reviews relevant information with respect to its litigation and regulatory matters on a quarterly and annual basis and updates its accruals, disclosures and estimates of reasonably possible loss based on such reviews. Regulatory Variable Products Prior to its acquisition by FGH on April 1, 2022, the Company has received regulatory inquiries and requests for information from state and federal regulators, including a subpoena from the U.S. Securities and Exchange Commission, concerning the appropriateness of variable product sales and replacement activity. The Company is cooperating with regulators and may become subject to additional regulatory inquiries and other actions related to this matter. Summary The Company’s litigation and regulatory matters are subject to many uncertainties, and given their complexity and scope, their outcome cannot be predicted. It is possible that the Company’s results of operations or cash flows in a particular quarterly or annual period could be materially affected by an ultimate unfavorable resolution of pending litigation and regulatory matters depending, in part, upon the results of operations or cash flows for such period. In light of the unpredictability of the Company’s litigation and regulatory matters, it is also possible that in certain cases an ultimate unfavorable resolution of one or more pending litigation or regulatory matters could have a material adverse effect on the Company’s financial statements. Management believes, however, that, based on information currently known to it, the ultimate outcome of all pending litigation and regulatory matters, after consideration of applicable reserves and rights to indemnification, is not likely to have a material adverse effect on the Company’s financial statements.
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RELATED PARTY TRANSACTIONS |
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RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONS Successor Company The Successor Company has transactions and relationships with affiliates. Although we seek to ensure that these transactions and relationships are fair and reasonable, it is possible that the terms of these transactions are not the same as those that would result from transactions among unrelated parties. Expense Charges and Allocations The majority of the Successor Company’s expenses are allocations or charges from FGH. These expenses primarily relate to general and administrative expenses which include accounting, actuarial, risk management, and data processing services. FGH also provides the Company with personnel and certain other services. The allocation of costs for other services are based on estimated level of usage, transactions or time incurred in providing the respective services. During the three month ended March 31, 2023, FLIAC was allocated $8 million of costs for these services. Intercompany Liquidity Agreement FLIAC entered into an intercompany liquidity agreement with FGH that allows the Successor Company to borrow funds of up to $300 million to meet its short-term liquidity and other capital needs. During the three months ended March 31, 2023, the Company borrowed $120 million of funds under the agreement, which was repaid in full, plus interest during the same period. As of March 31, 2023, there were no outstanding borrowings under the agreement. Affiliated Investment and Advisory Activities As of April 1, 2022, FLIAC became affiliated with The Carlyle Group Inc. (“Carlyle”), whereby Carlyle, through an affiliated investment fund has a 71.3% equity investment in its parent, FGH. In addition, FLIAC entered into an investment management and consulting services agreement with an affiliate of Carlyle. Certain of Carlyle's affiliates also provide investment management services for FLIAC pursuant to investment management agreements. Investment management fees are charged based on a percentage of assets under management. As of March 31, 2023 and December 31, 2022, assets under management had a market value of $754 million and $732 million, respectively, and were comprised primarily of private credit fixed income assets and limited partnership interests or investments in limited partnerships. FLIAC recognized $5 million of investment income on such assets during the three months ended March 31, 2023. In connection with the investment management agreements, as of March 31, 2023, FLIAC has unfunded commitments of $249 million to fund private investments where one or more Carlyle entities serves as general partner to the fund. Predecessor Company The Predecessor Company had extensive transactions and relationships with Prudential Insurance and other former affiliates. Although the Predecessor Company sought to ensure that these transactions and relationships were fair and reasonable, it is possible that the terms of these transactions were not the same as those that would result from transactions among unrelated parties. Expense Charges and Allocations The Predecessor Company’s expenses were allocations or charges from Prudential Insurance or other affiliates. These expenses were grouped into general and administrative expenses and agency distribution expenses. The Predecessor Company’s general and administrative expenses were charged using allocation methodologies based on business production processes. The Predecessor Company operated under service and lease agreements whereby services of officers and employees, supplies, use of equipment and office space were provided by Prudential Insurance. The Predecessor Company reviewed its allocation methodology periodically and made adjustments accordingly. The Predecessor Company paid commissions and certain other fees to Prudential Annuities Distributors, Inc ("PAD"), an affiliate of the Predecessor Company, in consideration for PAD’s marketing and underwriting of the Company’s products. Commissions and fees were paid by PAD to broker-dealers who sold the Predecessor Company’s products. Commissions and fees paid by the Predecessor Company to PAD were $29 million for the three months ended March 31, 2022. The Predecessor Company was charged for its share of corporate expenses incurred by Prudential Financial to benefit its businesses, such as advertising, executive oversight, external affairs and philanthropic activity. The Predecessor Company’s share of corporate expenses was $9 million for three months ended March 31, 2022. Affiliated Investment Management Expenses The Predecessor Company paid investments management expenses in accordance with an agreement with PGIM, Inc. (“PGIM”), an affiliate of the Predecessor Company and investment manager to certain Predecessor Company general account and separate account assets. Investment management expenses paid to PGIM related to this agreement were $4 million for the three months ended March 31, 2022. These expenses were recorded as “Net investment income” in the Company's Unaudited Consolidated Interim Statements of Operations and Comprehensive Income (Loss). Affiliated Asset Management and Service Fees The Predecessor Company had a revenue sharing agreement with AST Investment Services, Inc. (“ASTISI”) and PGIM Investments LLC (“PGIM Investments”) whereby the Predecessor Company received fee income based on policyholders' separate account balances invested in the Advanced Series Trust and The Prudential Series Fund. Income received from ASTISI and PGIM Investments related to this agreement was $22 million for the three months ended March 31, 2022. These revenues were recorded as “Asset management and service fees” in the Company's Unaudited Consolidated Interim Statements of Operations and Comprehensive Income (Loss). Derivative Trades In its ordinary course of business, the Predecessor Company entered into OTC derivative contracts with an affiliate, Provident Global Funding, LLC (“PGF”). For these OTC derivative contracts, PGF had a substantially equal and offsetting position with an external counterparty. See Note 5 for additional information. Affiliated Asset Transfers The Predecessor Company participated in affiliated asset trades with former parent and sister companies. Book and market value differences for trades with a parent and sister were recognized within "Investment gains (losses), net". The table below shows affiliated asset trades for the three months ended March 31, 2022.
Contributed Capital and Dividends Through March 31, 2022, the Predecessor Company did not receive any capital contributions. In March 2022, the Predecessor Company had a return of capital in the amount of $306 million to PAI. Reinsurance with Affiliates of Predecessor Company Reinsurance amounts, included in the Predecessor Company’s Unaudited Interim Statements of Operations and Comprehensive Income (Loss), were as follows:
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SIGNIFICANT ACCOUNTING POLICIES AND PRONOUNCEMENTS (Policies) |
3 Months Ended |
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Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation The Unaudited Interim Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). The accompanying Unaudited Consolidated Financial Statements present the consolidated results of operations, financial condition, and cash flows of the Successor Company and a variable interest entity ("VIE") that meets the requirements for consolidation. All intercompany transactions have been eliminated in consolidation. The financial statements of the Predecessor Company were not consolidated as it was a single entity prior to acquisition. Following the acquisition of FLIAC, purchase accounting was applied to FGH's financial statements and we have elected to "push down" the basis to FLIAC in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations. The application of push-down accounting created a new basis of accounting for all assets and liabilities based on fair value at the date of acquisition. As a result, FLIAC's financial position, results of operations, and cash flows subsequent to the acquisition are not comparable with those prior to April 1, 2022, and therefore have been segregated to indicate pre-acquisition and post-acquisition periods. The pre-acquisition period through March 31, 2022 is referred to as the Predecessor Company. The post-acquisition period, April 1, 2022 and forward, includes the impact of push-down accounting and is referred to as the Successor Company. See Notes 1 and 2 in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for further information regarding the acquisition and our application of push-down accounting. In the opinion of management, all adjustments necessary for a fair statement of the financial position and results of operations have been made. All such adjustments are of a normal, recurring nature. Interim results are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company’s Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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Reclassifications | Reclassifications Certain amounts in prior periods have been reclassified to conform to the current period presentation. |
Fair Value Option | Fair Value Option We have elected to prospectively apply the fair value option to several of FLIAC's assets and liabilities. We have made this election as it improves our operational efficiency and better aligns the recognition and measurement of our investments, insurance liabilities, and associated reinsurance activity with how we expect to manage the business. See Note 6 herein and Notes 2 and 6 in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for further information.
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Recent Accounting Pronouncements | Recent Accounting Pronouncements Changes to U.S. GAAP are established by the Financial Accounting Standards Board ("FASB") in the form of an Accounting Standards Update ("ASU") to the ASC. We consider the applicability and impact of all ASUs. ASUs listed below include those that have been adopted during the current fiscal year and/or those that have been issued but not yet adopted as of the date of this filing. ASUs not listed below were assessed and determined to be either not applicable or not material. Effective ASUs - March 31, 2023 ASU 2018-12, Financial Services - Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts, was issued by the FASB. This update became effective January 1, 2023 but is not applicable due to our election to adopt the fair value option on all of our insurance liabilities, which includes our separate account liabilities. ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): Troubled Debt restructurings and Vintage Disclosures, was issued by the FASB. This update became effective January 1, 2023 but is not applicable due to our election to adopt the fair value option on financial instruments that are within the scope of this update.
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SEGMENT INFORMATION (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | The following is the Consolidated Statement of Financial Position by segment:
The following is comprehensive income by segment:
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Reconciliation of Assets from Segment to Consolidated | The following is the Consolidated Statement of Financial Position by segment:
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INVESTMENTS (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Invested Assets | The following table sets forth the composition of “Other invested assets,” as of the dates indicated.
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Accrued Investment Income | The following table sets forth the composition of “Accrued investment income,” as of the dates indicated:
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Net Investment Income | The following table sets forth “Net investment income” by investment type, for the periods indicated:
Net Investment Income The following table sets forth “Net investment income” by investment type, for the periods indicated:
(1)Includes fixed maturity securities classified as available-for-sale and trading.
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Schedule of Realized Gain (Loss) | The following table sets forth “Investment gains, net” by investment type, for the periods indicated:
The following table sets forth “Investment gains, net” by investment type, for the periods indicated:
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Repurchase Agreements and Securities Lending |
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Sources of Fixed Maturity Proceeds, Realized Investment Gains (Losses), and Losses on Impairments | The following table sets forth the sources of proceeds and related investment losses for available-for-sale fixed maturity securities:
(1)Excludes activity from non-cash related proceeds due to the timing of trade settlements of $20 million for three months ended March 31, 2022.
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DERIVATIVES AND HEDGING (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Derivative Instruments in Statement of Financial Position, Fair Value |
(1) Recorded in “Other invested assets” and “Other liabilities” in the Consolidated Statements of Financial Position.
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Offsetting Assets | The following table presents recognized derivative instruments that are offset in the Consolidated 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 Consolidated Statements of Financial Position.
(1)Amounts exclude the excess of collateral received/pledged from/to the counterparty.
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Offsetting Liabilities | The following table presents recognized derivative instruments that are offset in the Consolidated 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 Consolidated Statements of Financial Position.
(1)Amounts exclude the excess of collateral received/pledged from/to the counterparty.
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Derivative Instruments, Gain (Loss) | The following tables provide the financial statement classification and impact of derivatives, by segment.
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FAIR VALUE OF ASSETS AND LIABILITIES (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis | The tables below present the balances of assets and liabilities reported at fair value on a recurring basis, as of the dates indicated.
(1)“Netting” amounts represent offsetting considerations as disclosed in Note 5. (2)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types. (3)As of March 31, 2023, the difference between the aggregate fair value and the aggregate unpaid principal of mortgage and other loans was de minimis. There were no mortgage and other loans that were 90 days or more past due or in non-accrual status. (4)Other invested assets within the above chart are comprised of derivatives. Excluded from the above chart are private equity funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. At March 31, 2023 the fair values of such investments were $353 million. See Note 4 for further details.
(1)“Netting” amounts represent offsetting considerations as disclosed in Note 5. (2)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types. (3)Other invested assets within the above chart are comprised of derivatives. Excluded from the above chart are private equity funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. At March 31, 2023 the fair values of such investments were $352 million. See Note 4 for further details.
(1)“Netting” amounts represent offsetting considerations as disclosed in Note 5. (2)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types. (3)Other invested assets within the above chart are comprised of derivatives. Excluded from the above chart are private equity funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. At March 31, 2023 the fair values of such investments were $1 million. See Note 4 for further details.
(1)“Netting” amounts represent offsetting considerations as disclosed in Note 5. (2)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types. (3)As of December 31, 2022, the difference between the aggregate fair value and the aggregate unpaid principal of mortgage and other loans was de minimis. There were no mortgage and other loans that were 90 days or more past due or in non-accrual status. (4)Other invested assets within the above chart are comprised of derivatives. Excluded from the above chart are private equity funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. At December 31, 2022 the fair values of such investments were $345 million, respectively. See Note 4 for further details.
(1)“Netting” amounts represent offsetting considerations as disclosed in Note 5. (2)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types. (3)Other invested assets within the above chart are comprised of derivatives. Excluded from the above chart are private equity funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. At December 31, 2022, the fair values of such investments were $344 million. See Note 4 for further details.
(1)“Netting” amounts represent offsetting considerations as disclosed in Note 5. (2)Includes credit-tranched securities collateralized by syndicated bank loans, sub-prime mortgages, auto loans, credit cards, education loans and other asset types. (3)Other invested assets within the above chart are comprised of derivatives. Excluded from the above chart are private equity funds for which fair value is measured at net asset value (“NAV”) per share (or its equivalent) as a practical expedient. At December 31, 2022, the fair values of such investments were $1 million. See Note 4 for further details. Policyholder benefits and changes in fair value of insurance liabilities includes the following changes in fair value of the assets and liabilities for which we have elected the fair value option:
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Schedule of Assumptions for Fair Value as of Balance Sheet Date of Assets or Liabilities that relate to Transferor's Continuing Involvement | The tables below present quantitative information on significant internally-priced Level 3 assets and liabilities.
(1)Conversely, the impact of a decrease in input would have the opposite impact on fair value as that presented in the table. (2) The equity volatility curve assumption is based on 1 year and 2 year index-specific at-the-money implied volatilities grading to 10 year total variance. Increased volatility increases the fair value of the liability. (3) Lapse rates for contracts with living benefit guarantees are adjusted at the contract level based on the in-the-moneyness of the living benefit and reflect other factors, such as the applicability of any surrender charges. Lapse rates are reduced when contracts are more in-the-money. Lapse rates for contracts with index-linked crediting guarantees may be adjusted at the contract level based on the applicability of any surrender charges, product type, and market related factors such as interest rates. Lapse rates are also generally assumed to be lower for the period where surrender charges apply. (4) The spread over the risk-free rate (SOFR and LIBOR) swap curve represents the premium added to the proxy for the risk-free rate to reflect the Company's estimates of rates that a market participant would use to value the living benefits in both the accumulation and payout phases and index-linked interest crediting guarantees. This spread includes an estimate of NPR, which is the risk that the obligation will not be fulfilled by the Company. NPR is primarily estimated by utilizing the credit spreads associated with issuing funding agreements, adjusted for any illiquidity risk premium. In order to reflect the financial strength ratings of the Company, credit spreads associated with funding agreements, as opposed to credit spread associated with debt, are utilized in developing this estimate because funding agreements, living benefit guarantees, and index-linked interest crediting guarantees are insurance liabilities and are therefore senior to debt. (5) The utilization rate assumption estimates the percentage of contracts that will utilize the benefit during the contract duration and begin lifetime withdrawals at various time intervals from contract inception. Utilization assumptions may vary by product type, tax status and age. The impact of changes in these assumptions is highly dependent on the product type, the age of the contractholder at the time of the sale, and the timing of the first lifetime income withdrawal. (6) The withdrawal rate assumption estimates the magnitude of annual contractholder withdrawals relative to the maximum allowable amount under the contract. These assumptions vary based on the age of the contractholder, the tax status of the contract and the duration since the contractholder began lifetime withdrawals. As of March 31, 2023 and December 31, 2022, the minimum withdrawal rate assumption is 77% and the maximum withdrawal rate assumption may be greater than 100%. The fair value of the liability will generally increase the closer the withdrawal rate is to 100% and decrease as the withdrawal rate moves further away from 100%. (7) The range reflects the mortality rates for the vast majority of business with living benefits, with policyholders ranging from 45 to 90 years old. While the majority of living benefits have a minimum age requirement, certain other contracts do not have an age restriction. This results in contractholders with mortality rates approaching 0% for certain benefits.
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Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation | The following tables describe changes in fair values of Level 3 assets and liabilities as of the dates indicated, as well as the portion of gains or losses included in income attributable to unrealized gains or losses related to those assets and liabilities still held at the end of their respective periods. When a determination is made to classify assets and liabilities within Level 3, the determination is based on significance of the unobservable inputs in the overall fair value measurement. All transfers are based on changes in the observability of the valuation inputs, including the availability of pricing service information that the Company can validate. Transfers into Level 3 are generally the result of unobservable inputs utilized within valuation methodologies and the use of indicative broker quotes for assets that were previously valued using observable inputs. Transfers out of Level 3 are generally due to the use of observable inputs in valuation methodologies as well as the availability of pricing service information for certain assets that the Company can validate.
"Total realized and unrealized gains (losses)" related to our level 3 assets are included in earnings in Investment gains (losses). Activity related to our level 3 liabilities is primarily recognized in earnings within change in Policyholder benefits and changes in fair value of insurance liabilities with the exception of changes related to the Company's own-credit risk, which are included in "Change in fair value (discount rate)" above and recorded in other comprehensive income (loss).
(1)Realized investment gains (losses) on future policy benefits and reinsurance recoverables primarily represent the change in the fair value of the Company's living benefit guarantees on certain of its variable annuity contracts. (2)Unrealized gains or losses related to assets still held at the end of the period do not include amortization or accretion of premiums and discounts. (3)Includes U.S. corporate public, U.S. corporate private, foreign corporate public and foreign corporate private securities. (4)Includes asset-backed and residential mortgage-backed securities. (5)Issuances and settlements for Policyholders' account balances are presented net in the rollforward.
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Fair Value, by Balance Sheet Grouping | The table below presents the carrying amount and fair value by fair value hierarchy level of certain financial instruments that are not reported at fair value. The financial instruments presented below are reported at carrying value on the Company’s Consolidated Statements of Financial Position. In some cases the carrying amount equals or approximates fair value.
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EQUITY (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stockholders Equity | The balance of and changes in each component of AOCI are as follows:
(1)Includes cash flow hedges of $29 million as of March 31, 2022.
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Reclassification out of Accumulated Other Comprehensive Income | Reclassifications out of Accumulated Other Comprehensive Income (Loss)
(1)All amounts are shown before tax. (2)Positive amounts indicate gains/benefits reclassified out of AOCI. Negative amounts indicate losses/costs reclassified out of AOCI. (3)See Note 5 for additional information on cash flow hedges. (4)See table below for additional information on unrealized investment gains (losses), including the impact on DAC and other costs and future policy benefits and other liabilities.
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Other Net Unrealized Investment Gain Loss AOCI Roll Forward | The amounts indicated below, split between amounts related to net unrealized investment losses on available-for-sale fixed maturity securities on which an allowance for credit losses has been recognized, and all other net unrealized investment gains (losses), are as follows:
(1)Includes cash flow hedges. See Note 5 for information on cash flow hedges. (2)"Other costs" primarily includes reinsurance recoverables, DSI and VOBA. (3)"Other liabilities" primarily includes reinsurance payables and deferred reinsurance gains.
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RELATED PARTY TRANSACTIONS (Tables) |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Affiliated Asset Transfer | The table below shows affiliated asset trades for the three months ended March 31, 2022.
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Reinsurance Impact On Income Statement | Reinsurance amounts, included in the Predecessor Company’s Unaudited Interim Statements of Operations and Comprehensive Income (Loss), were as follows:
|
BUSINESS AND BASIS OF PRESENTATION - Narrative (Details) $ in Millions |
12 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Contracts novated | $ 7 |
Contracts novated, since acquisition | 66.00% |
SEGMENT INFORMATION - Narrative (Details) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023
USD ($)
segment
|
Dec. 31, 2022
USD ($)
|
|
Segment Reporting [Abstract] | ||
Number of reportable segments | segment | 2 | |
Amount of assets and labilities fully ceded | 1 | |
Modco payable | $ | $ 1,886 | $ 1,745 |
INVESTMENTS - Narrative (Details) - USD ($) $ in Millions |
Mar. 31, 2023 |
Dec. 31, 2022 |
Mar. 31, 2022 |
---|---|---|---|
U.S. corporate public securities | |||
Debt Securities, Available-for-Sale [Line Items] | |||
Securities | $ 301 | $ 311 | |
U.S. corporate public securities | Fair Value | |||
Debt Securities, Available-for-Sale [Line Items] | |||
Securities | 318 | 326 | |
Equity securities | |||
Debt Securities, Available-for-Sale [Line Items] | |||
Securities | 164 | 106 | |
Equity securities | Fair Value | |||
Debt Securities, Available-for-Sale [Line Items] | |||
Securities | $ 162 | $ 103 | |
Mortgage and other loans | |||
Debt Securities, Available-for-Sale [Line Items] | |||
Commercial mortgage and other loans, allowance for credit losses | $ 1 |
INVESTMENTS - Fixed Maturity Proceeds and Investment Income (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Net Investment Income [Line Items] | ||
Fixed maturity securities, available-for-sale | $ 0 | $ 422 |
Fixed Maturities | ||
Net Investment Income [Line Items] | ||
Proceeds from sales | 294 | |
Fixed maturity securities, available-for-sale | 108 | |
Gross investment losses on sales and maturities | (21) | |
Noncash related proceeds | $ 20 |
INCOME TAXES (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
Mar. 31, 2022 |
|
Income Tax Disclosure [Abstract] | |||
Income tax expense | $ 0.3 | $ 77.0 | $ 77.0 |
Effective income tax rate reconciliation | 4.30% | 17.80% | |
Deferred tax assets, valuation allowance | $ 37.0 |
EQUITY - Narrative (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
Apr. 01, 2022 |
|
Equity [Abstract] | |||
Distribution payable to parent | $ 45,000,000 | ||
Accumulated other comprehensive income | $ 128,000,000 | $ 111,000,000 | $ 0 |
EQUITY - Components of AOCI (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
Mar. 31, 2022 |
|
AOCI | |||
Beginning Balance | $ 1,587 | $ 1,682 | |
Less: Income tax expense | (5) | $ 118 | |
Ending Balance | 1,566 | 1,289 | |
Changes in Own-Credit Risk Related to Insurance Liabilities | |||
AOCI | |||
Beginning Balance | 111 | ||
Change in OCI | 22 | ||
Less: Income tax expense | 5 | ||
Ending Balance | $ 128 | ||
Foreign Currency Translation Adjustment | |||
AOCI | |||
Beginning Balance | (1) | ||
Change in OCI | 0 | ||
Amounts reclassified from AOCI | 0 | ||
Less: Income tax expense | 0 | ||
Ending Balance | (1) | ||
Net Unrealized Investment Gains (Losses) | |||
AOCI | |||
Beginning Balance | 171 | ||
Change in OCI | (576) | ||
Amounts reclassified from AOCI | 15 | ||
Less: Income tax expense | 118 | ||
Ending Balance | (272) | ||
Total Accumulated Other Comprehensive Income (Loss) | |||
AOCI | |||
Beginning Balance | 170 | ||
Change in OCI | (576) | ||
Amounts reclassified from AOCI | 15 | ||
Less: Income tax expense | 118 | ||
Ending Balance | (273) | ||
Accumulated Gain (Loss), Cash Flow Hedge, Including Noncontrolling Interest | |||
AOCI | |||
Ending Balance | $ 29 |
COMMITMENTS AND CONTINGENT LIABILITIES (Details) - Commitments $ in Millions |
Mar. 31, 2023
USD ($)
|
---|---|
Mortgage and other loans | |
Other Commitments [Line Items] | |
Commitments to fund underlying commercial mortgage loans | $ 128 |
Investments | |
Other Commitments [Line Items] | |
Purchase obligation | $ 478 |
RELATED PARTY TRANSACTIONS - Successor Company (Details) - USD ($) $ in Millions |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
Mar. 31, 2022 |
Dec. 31, 2022 |
Apr. 01, 2022 |
|
Related Party Transaction [Line Items] | |||||
Intercompany liquidity agreement, maximum borrowing capacity | $ 300 | ||||
Intercompany liquidity agreement, outstanding | 120 | ||||
Net investment income | 76 | $ 99 | $ 99 | ||
Funding commitment | 249 | ||||
Fortitude Group Holdings | |||||
Related Party Transaction [Line Items] | |||||
Allocation of costs | 8 | ||||
Carlyle Investment Management L.L.C. | |||||
Related Party Transaction [Line Items] | |||||
Assets under management, market value | 754 | $ 732 | |||
Net investment income | $ 5 | ||||
Fortitude Group Holdings | Carlyle Investment Management L.L.C. | |||||
Related Party Transaction [Line Items] | |||||
Ownership | 71.30% |
RELATED PARTY TRANSACTIONS - Predecessor Company (Details) - USD ($) $ in Millions |
1 Months Ended | 3 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2022 |
Mar. 31, 2023 |
Sep. 30, 2022 |
Mar. 31, 2022 |
|
Related Party Transaction [Line Items] | ||||
Policy charges and fee income | $ 117 | $ 97 | $ 97 | |
Investment management expenses | $ 11 | 4 | ||
Income | 20 | |||
Prudential Annuities Inc. | ||||
Related Party Transaction [Line Items] | ||||
Return of capital | $ 306 | |||
Affiliated Entity | Prudential Annuities Distributors | ||||
Related Party Transaction [Line Items] | ||||
Policy charges and fee income | 29 | |||
Affiliated Entity | P G I M | ||||
Related Party Transaction [Line Items] | ||||
Investment management expenses | 4 | |||
Affiliated Entity | ASTISI And PGIM Investments | ||||
Related Party Transaction [Line Items] | ||||
Income | 22 | |||
Parent Company | ||||
Related Party Transaction [Line Items] | ||||
Corporate expenses | $ 9 |
RELATED PARTY TRANSACTIONS - Schedule of Reinsurance Impact on Statement of Operations and Comprehensive Income (Loss) (Details) - USD ($) $ in Millions |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Sep. 30, 2022 |
Mar. 31, 2022 |
|
Premiums: | |||
Direct | $ 9 | ||
Ceded | (1) | ||
Net premiums | $ 7 | $ 8 | 8 |
Policy charges and fee income: | |||
Direct | 102 | ||
Ceded | (5) | ||
Policy charges and fee income | 117 | 97 | 97 |
Asset management and service fees: | |||
Direct | 22 | ||
Ceded | (2) | ||
Net asset management and service fees | 20 | ||
Realized investment gains (losses), net: | |||
Direct | 312 | ||
Ceded | 169 | ||
Investment gains, net | 165 | 481 | 481 |
Policyholders' benefits (including change in reserves): | |||
Direct | 31 | ||
Ceded | (5) | ||
Policyholder benefits | 26 | 26 | |
Interest credited to policyholders’ account balances: | |||
Direct | 91 | ||
Ceded | (6) | ||
Interest credited to policyholders’ account balances | $ 0 | $ 85 | 85 |
Net interest credited to policyholders’ account balances | $ (41) |
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