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Future Policy Benefits

3 Months Ended

Mar. 31, 2024

Liability for Future Policy Benefits and Unpaid Claims Disclosure

FUTURE POLICY BENEFITS

Liability for Future Policy Benefits – Traditional Business

The Company reviews actual and anticipated experience compared to the assumptions used to establish policy benefits on a quarterly basis and will update those assumptions if evidence suggests that they should be revised. The Company expects to complete its annual review and any necessary updates of cash flow assumptions used to calculate the liability for future policy benefits during the third quarter of each year. Updates may occur in other quarters if information becomes available during the quarter that indicates an assumption update is necessary.

The following tables provide the balances of and changes in the Company’s liability for future policy benefits for long-duration reinsurance contracts for its Traditional business, which primarily consists of individual life, group life and critical illness reinsurance for the three months ended March 31, 2024 and 2023 (dollars in millions):


For the three months ended March 31, 2024:	U.S. and Latin America – Traditional		Canada – Traditional		Europe, Middle East and Africa – Traditional		Asia Pacific – Traditional
Present Value of Expected Net Premiums
Beginning of year balance at original discount rate	$	76,943	$	22,689	$	15,328	$	42,741
Effect of changes in cash flow assumptions	—		—		—		—
Effect of actual variances from expected experience	(347)		52		81		(103)
Adjusted balance, beginning of year	76,596		22,741		15,409		42,638
Issuances (1)	884		124		294		1,131
Interest accrual (2)	872		188		127		272
Net premiums collected (3)	(1,271)		(246)		(354)		(533)
Derecognition (4)	(67)		—		—		—
Foreign currency translation	—		(496)		(183)		(1,123)
Ending balance at original discount rate	77,014		22,311		15,293		42,385
Effect of changes in discount rate assumptions	(6,474)		(4,815)		(2,668)		(12,184)
Balance, end of period	$	70,540	$	17,496	$	12,625	$	30,201

Present Value of Expected Future Policy Benefits
Beginning of year balance at original discount rate	$	89,036	$	26,275	$	16,756	$	47,370
Effect of changes in cash flow assumptions	—		—		—		—
Effect of actual variances from expected experience	(378)		49		79		(104)
Adjusted balance, beginning of year	88,658		26,324		16,835		47,266
Issuances (1)	884		124		296		1,131
Interest accrual (2)	1,016		242		137		312
Benefit payments (5)	(1,348)		(263)		(372)		(485)
Derecognition (4)	(74)		—		—		—
Foreign currency translation	(1)		(574)		(202)		(1,194)
Ending balance at original discount rate	89,135		25,853		16,694		47,030
Effect of changes in discount rate assumptions	(8,048)		(4,183)		(2,920)		(14,206)
Balance, end of period	$	81,087	$	21,670	$	13,774	$	32,824

Liability for future policy benefits	$	10,547	$	4,174	$	1,149	$	2,623
Less: reinsurance recoverable	(753)		(283)		(32)		(111)
Net liability for future policy benefits	$	9,794	$	3,891	$	1,117	$	2,512


Weighted average duration of the liability (in years)	12		15		8		15
Weighted average interest accretion rate	4.6	%	3.6	%	3.3	%	2.6	%
Weighted average current discount rate	5.3	%	5.0	%	5.5	%	4.6	%

(1)Issuances: The present value, using the original discount rate, of the expected net premiums or the expected future policy benefits related to new reinsurance contracts that became effective during the current period and new policies assumed on existing contracts.

(2)Interest accrual: The interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.

(3)Net premiums collected: The portion of gross premiums collected from the ceding company that is used to fund expected benefit payments.

(4)Derecognition: Includes the effects of treaty recaptures and treaty amendments that resulted in the termination of an existing treaty and the issuance of a new treaty under the internal replacement model.

(5)Benefit payments: The release of the present value, using the original discount rate, of the expected future policy benefits due to death, lapse/withdrawal and other benefit payments based on current assumptions.


For the three months ended March 31, 2023:	U.S. and Latin America – Traditional		Canada – Traditional		Europe, Middle East and Africa – Traditional		Asia Pacific – Traditional
Present Value of Expected Net Premiums
Beginning of year balance at original discount rate	$	74,207	$	21,330	$	14,244	$	40,506
Effect of changes in cash flow assumptions	—		—		—		(8)
Effect of actual variances from expected experience	(103)		97		(256)		128
Adjusted balance, beginning of year	74,104		21,427		13,988		40,626
Issuances (1)	1,016		110		382		619
Interest accrual (2)	851		182		119		256
Net premiums collected (3)	(1,229)		(231)		(344)		(490)
Derecognition (4)	(35)		—		—		—
Foreign currency translation	—		46		184		(113)
Ending balance at original discount rate	74,707		21,534		14,329		40,898
Effect of changes in discount rate assumptions	(4,074)		(4,376)		(2,515)		(11,029)
Balance, end of period	$	70,633	$	17,158	$	11,814	$	29,869

Present Value of Expected Future Policy Benefits
Beginning of year balance at original discount rate	$	85,285	$	24,655	$	15,454	$	44,785
Effect of changes in cash flow assumptions	—		—		—		(8)
Effect of actual variances from expected experience	(79)		98		(258)		121
Adjusted balance, beginning of year	85,206		24,753		15,196		44,898
Issuances (1)	1,018		110		382		619
Interest accrual (2)	981		233		127		293
Benefit payments (5)	(1,486)		(256)		(331)		(458)
Derecognition (4)	(54)		—		—		—
Foreign currency translation	1		56		201		(125)
Ending balance at original discount rate	85,666		24,896		15,575		45,227
Effect of changes in discount rate assumptions	(5,188)		(3,607)		(2,686)		(12,914)
Balance, end of period	$	80,478	$	21,289	$	12,889	$	32,313

Liability for future policy benefits	$	9,845	$	4,131	$	1,075	$	2,444
Less: reinsurance recoverable	(417)		(227)		(37)		(99)
Net liability for future policy benefits	$	9,428	$	3,904	$	1,038	$	2,345


Weighted average duration of the liability (in years)	12		15		8		16
Weighted average interest accretion rate	4.7	%	3.6	%	3.4	%	2.6	%
Weighted average current discount rate	4.9	%	4.7	%	3.4	%	4.3	%

(2)Interest accrual: The interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.

(3)Net premiums collected: The portion of gross premiums collected from the ceding company that is used to fund expected benefit payments.

Significant assumptions used to compute the liability for future policy benefits for the Traditional business include mortality, morbidity, lapse rates and discount rates (both accretion and current). The Company updates the underlying market data used to determine the current discount rate resulting in changes to the discount rate assumptions used to measure the liability for future policy benefits each period.

The Company’s Traditional business actual-to-expected variances and the effects of changes in cash flow and discount rate assumptions for the three months ended March 31, 2024 and 2023 are summarized in the tables below:

For the three months ended March 31, 2024:

Segment

Liability for future policy benefits at original discount rate

Changes in cash flow assumptions

Actual-to-expected variance

Impact of updating discount rate recognized in OCI

U.S. and Latin America – Traditional

$12.1 billion

None

$(31) million

$(428) million

0.3% decrease

3.5% decrease

Canada – Traditional

$3.5 billion

None

$(3) million

$(239) million

0.1% decrease

6.7% decrease

Europe, Middle East and Africa – Traditional

$1.4 billion

None

$(2) million

$(33) million

0.1% decrease

2.3% decrease

Asia Pacific – Traditional

$4.7 billion

None

$(1) million

$(57) million

None

1.2% decrease

For the three months ended March 31, 2023:

Segment

Liability for future policy benefits at original discount rate

Change in cash flow assumptions

Actual-to-expected variance

Impact of updating discount rate recognized in OCI

U.S. and Latin America – Traditional

$11 billion

None

$24 million

$490 million

0.2% increase

4.4% increase

Canada – Traditional

$3.4 billion

None

$1 million

$143 million

None

4.3% increase

Europe, Middle East and Africa – Traditional

$1.2 billion

None

$(2) million

0.2% decrease

Asia Pacific – Traditional

$4.3 billion

None

$(7) million

$46 million

0.2% decrease

1.1% increase

Liability for Future Policy Benefits – Financial Solutions Business

The following tables provide the balances of and changes in the Company’s liability for future policy benefits, including the deferred profit liability related to the longevity business, for its Financial Solutions business, which primarily consists of longevity reinsurance, asset-intensive products, primarily annuities and financial reinsurance for the three months ended March 31, 2024 and 2023 (dollars in millions):


For the three months ended March 31, 2024:	U.S. and Latin America – Financial Solutions		Canada – Financial Solutions		Europe, Middle East and Africa – Financial Solutions		Asia Pacific – Financial Solutions
Present Value of Expected Net Premiums
Beginning of year balance at original discount rate	$	1,455	$	3,184	$	54,832	$	2,057
Effect of changes in cash flow assumptions	—		—		—		—
Effect of actual variances from expected experience	—		(7)		338		1
Adjusted balance, beginning of year	1,455		3,177		55,170		2,058
Issuances (1)	1,893		—		4,963		4,760
Interest accrual (2)	11		25		418		7
Net premiums collected (3)	(1,928)		(79)		(1,388)		(4,912)
Derecognition (4)	—		—		—		—
Foreign currency translation	—		(69)		(702)		(143)
Ending balance at original discount rate	1,431		3,054		58,461		1,770
Effect of changes in discount rate assumptions	(240)		(342)		(7,802)		(121)
Balance, end of period	$	1,191	$	2,712	$	50,659	$	1,649

Present Value of Expected Future Policy Benefits
Beginning of year balance at original discount rate	$	6,843	$	3,210	$	60,938	$	8,019
Effect of changes in cash flow assumptions	—		—		—		—
Effect of actual variances from expected experience	2		(7)		340		1
Adjusted balance, beginning of year	6,845		3,203		61,278		8,020
Issuances (1)	2,021		—		4,963		4,909
Interest accrual (2)	79		25		471		24
Benefit payments (5)	(165)		(80)		(1,125)		(77)
Derecognition (4)	—		—		—		—
Foreign currency translation	—		(69)		(764)		(581)
Ending balance at original discount rate	8,780		3,079		64,823		12,295
Effect of changes in discount rate assumptions	(484)		(341)		(8,609)		(796)
Balance, end of period	$	8,296	$	2,738	$	56,214	$	11,499

Liability for future policy benefits	$	7,105	$	26	$	5,555	$	9,850
Less: reinsurance recoverable	(878)		—		—		—
Net liability for future policy benefits	$	6,227	$	26	$	5,555	$	9,850


Weighted average duration of the liability (in years)	8		7		9		15
Weighted average interest accretion rate	3.6	%	3.2	%	3.0	%	1.2	%
Weighted average current discount rate	5.3	%	4.9	%	4.9	%	2.2	%

(2)Interest accrual: The interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.

(3)Net premiums collected: The portion of gross premiums collected from the ceding company that is used to fund expected benefit payments.


For the three months ended March 31, 2023:	U.S. and Latin America – Financial Solutions		Canada – Financial Solutions		Europe, Middle East and Africa – Financial Solutions		Asia Pacific – Financial Solutions
Present Value of Expected Net Premiums
Beginning of year balance at original discount rate	$	1,671	$	3,394	$	38,782	$	1,605
Effect of changes in cash flow assumptions	—		—		—		—
Effect of actual variances from expected experience	(7)		(2)		42		—
Adjusted balance, beginning of year	1,664		3,392		38,824		1,605
Issuances (1)	146		—		3,681		1,244
Interest accrual (2)	13		27		185		6
Net premiums collected (3)	(186)		(84)		(764)		(1,260)
Derecognition (4)	—		—		—		—
Foreign currency translation	—		9		742		(21)
Ending balance at original discount rate	1,637		3,344		42,668		1,574
Effect of changes in discount rate assumptions	(223)		(336)		(8,323)		74
Balance, end of period	$	1,414	$	3,008	$	34,345	$	1,648

Present Value of Expected Future Policy Benefits
Beginning of year balance at original discount rate	$	5,823	$	3,447	$	44,330	$	6,561
Effect of changes in cash flow assumptions	—		—		—		—
Effect of actual variances from expected experience	(11)		(6)		31		(1)
Adjusted balance, beginning of year	5,812		3,441		44,361		6,560
Issuances (1)	154		—		3,681		1,289
Interest accrual (2)	56		28		225		18
Benefit payments (5)	(138)		(83)		(858)		(68)
Derecognition (4)	—		—		—		—
Foreign currency translation	(16)		8		852		(77)
Ending balance at original discount rate	5,868		3,394		48,261		7,722
Effect of changes in discount rate assumptions	(460)		(332)		(9,191)		(250)
Balance, end of period	$	5,408	$	3,062	$	39,070	$	7,472

Liability for future policy benefits	$	3,994	$	54	$	4,725	$	5,824
Less: reinsurance recoverable	—		—		—		—
Net liability for future policy benefits	$	3,994	$	54	$	4,725	$	5,824


Weighted average duration of the liability (in years)	8		7		9		15
Weighted average interest accretion rate	3.5	%	3.3	%	1.9	%	1.3	%
Weighted average current discount rate	5.0	%	4.7	%	4.7	%	1.5	%

(2)Interest accrual: The interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the original interest rate.

(3)Net premiums collected: The portion of gross premiums collected from the ceding company that is used to fund expected benefit payments.

Significant assumptions used to compute the liability for future policy benefits for the Financial Solutions business include mortality, morbidity, lapse rates and discount rates (both accretion and current). The Company updates the underlying market data used to determine the current discount rate resulting in changes to the discount rate assumptions used to measure the liability for future policy benefits.

The Company’s Financial Solutions business actual-to-expected variances (including the effects of model updates) and the effects of changes in cash flow and discount rate assumptions for the three months ended March 31, 2024 and 2023 are summarized in the tables below:

For the three months ended March 31, 2024:

Segment

Liability for future policy benefits at original discount rate

Changes in cash flow assumptions

Actual-to-expected variance

Impact of updating discount rate recognized in OCI

U.S. and Latin America – Financial Solutions

$7.4 billion

None

$2 million

$(84) million

None

1.6% decrease

Canada – Financial Solutions

$25 million

None

$—

$(2) million

None

7.7% decrease

Europe, Middle East and Africa – Financial Solutions

$6.3 billion

None

$2 million

$(154) million

None

2.5% decrease

Asia Pacific – Financial Solutions

$10.5 billion

None

$—

$97 million

None

1.6% increase

For the three months ended March 31, 2023:

Segment

Liability for future policy benefits at original discount rate

Changes in cash flow assumptions

Actual-to-expected variance

Impact of updating discount rate recognized in OCI

U.S. and Latin America – Financial Solutions

$4.2 billion

None

$(4) million

$96 million

0.1% decrease

2.3% increase

Canada – Financial Solutions

$50 million

None

$(4) million

$3 million

7.5% decrease

5.7% increase

Europe, Middle East and Africa – Financial Solutions

$5.6 billion

None

$(11) million

$46 million

0.2% decrease

0.8% increase

Asia Pacific – Financial Solutions

$6.1 billion

None

$(1) million

$136 million

None

2.7% increase

Reconciliation and Other Disclosures

The reconciliation of the rollforward of the liability for future policy benefits to the condensed consolidated balance sheets as of March 31, 2024 and 2023 is as follows (dollars in millions):


	March 31,
	2024		2023
Liability for future policy benefits included in the rollforwards:
Traditional:
U.S. and Latin America	$	10,547	$	9,845
Canada	4,174		4,131
Europe, Middle East and Africa	1,149		1,075
Asia Pacific	2,623		2,444
Financial Solutions:
U.S. and Latin America	7,105		3,994
Canada	26		54
Europe, Middle East and Africa	5,555		4,725
Asia Pacific	9,850		5,824
Other long-duration contracts	117		181
Claims liability and incurred but not reported claims	5,439		5,417
Unearned revenue liability	482		532
Total liability for future policy benefits	$	47,067	$	38,222

The amount of undiscounted and discounted expected future gross premiums and expected future benefit payments for the liability for future policy benefits included in the rollforwards as of March 31, 2024 and 2023 is as follows (dollars in millions):


	March 31,
	2024				2023
	Undiscounted		Discounted		Undiscounted		Discounted
Expected future gross premiums
Traditional:
U.S. and Latin America	$	179,131	$	82,691	$	172,081	$	82,288
Canada	55,118		21,591		53,244		21,317
Europe, Middle East and Africa	25,928		14,388		24,591		13,611
Asia Pacific	94,316		38,412		92,305		37,986
Financial Solutions:
U.S. and Latin America	2,914		1,829		3,112		1,975
Canada	4,390		2,900		4,738		3,149
Europe, Middle East and Africa	98,292		55,187		64,424		37,636
Asia Pacific	3,743		2,840		2,977		2,478

Expected future benefit payments
Traditional:
U.S. and Latin America	$	189,341	$	81,087	$	181,123	$	80,478
Canada	56,998		21,670		56,223		21,289
Europe, Middle East and Africa	25,709		13,774		24,150		12,889
Asia Pacific	90,670		32,824		88,496		32,313
Financial Solutions:
U.S. and Latin America	14,071		8,296		9,214		5,408
Canada	4,128		2,738		4,602		3,062
Europe, Middle East and Africa	100,423		56,214		66,775		39,070
Asia Pacific	17,399		11,499		10,144		7,472

The amount of gross premiums and interest expense recognized in the condensed consolidated statements of income for the liability for future policy benefits included in the rollforwards for the three months ended March 31, 2024 and 2023 is as follows (dollars in millions):


	Gross Premiums				Interest Expense
	March 31,				March 31,
	2024		2023		2024		2023
Traditional:
U.S. and Latin America	$	1,473	$	1,422	$	144	$	130
Canada	271		262		54		51
Europe, Middle East and Africa	371		355		10		8
Asia Pacific	688		620		40		37
Financial Solutions:
U.S. and Latin America	1,912		156		68		43
Canada	23		23		—		1
Europe, Middle East and Africa	207		161		53		40
Asia Pacific	46		63		17		12
Total	$	4,991	$	3,062	$	386	$	322

During the three months ended March 31, 2024 and 2023, no material charges were incurred resulting from net premiums exceeding gross premiums.