Reserve for Future Policy Benefits and Contractholder Funds

12 Months Ended

Dec. 31, 2023

Reserve for Future Policy Benefits and Contractholder Funds

Reserve for Future Policy Benefits and Contractholder Funds

Note 10 Reserve for Future Policy Benefits and Contractholder Funds

Rollforward of reserve for future policy benefits (1)
	For the years ended December 31,
	Accident and health						Traditional life						Total
($ in millions)	2023		2022		2021		2023		2022		2021		2023		2022		2021
Present value of expected net premiums
Beginning balance	$	1,464	$	1,785	$	1,575	$	238	$	254	$	204	$	1,702	$	2,039	$	1,779
Beginning balance at original discount rate	1,549		1,604		1,307		246		215		154		1,795		1,819		1,461
Effect of changes in cash flow assumptions	(12)		—		—		34		—		—		22		—		—
Effect of actual variances from expected experience	(10)		(137)		(32)		2		36		(5)		(8)		(101)		(37)
Adjusted beginning balance	1,527		1,467		1,275		282		251		149		1,809		1,718		1,424
Issuances (1)	501		371		620		89		34		83		590		405		703
Interest accrual	69		48		52		11		4		7		80		52		59
Net premiums collected	(360)		(337)		(343)		(52)		(43)		(24)		(412)		(380)		(367)
Ending balance at original discount rate	1,737		1,549		1,604		330		246		215		2,067		1,795		1,819
Effect of changes in discount rate assumptions	(49)		(85)		181		(5)		(8)		39		(54)		(93)		220
Ending balance	1,688		1,464		1,785		325		238		254		2,013		1,702		2,039
Present value of expected future policy benefits
Beginning balance	2,229		2,796		2,577		524		673		629		2,753		3,469		3,206
Beginning balance at original discount rate	2,316		2,426		2,070		534		511		426		2,850		2,937		2,496
Effect of changes in cash flow assumptions	21		(44)		(2)		30		—		—		51		(44)		(2)
Effect of actual variances from expected experience	(33)		(116)		(5)		1		24		4		(32)		(92)		(1)
Adjusted beginning balance	2,304		2,266		2,063		565		535		430		2,869		2,801		2,493
Issuances (1)	486		360		664		102		42		94		588		402		758
Interest accrual	103		76		80		25		12		21		128		88		101
Benefit payments	(398)		(386)		(381)		(36)		(55)		(34)		(434)		(441)		(415)
Ending balance at original discount rate	2,495		2,316		2,426		656		534		511		3,151		2,850		2,937
Effect of changes in discount rate assumptions	(42)		(87)		370		1		(10)		162		(41)		(97)		532
Ending balance	$	2,453	$	2,229	$	2,796	$	657	$	524	$	673	$	3,110	$	2,753	$	3,469
Net reserve for future policy benefits (2)	$	765	$	765	$	1,011	$	332	$	286	$	419	$	1,097	$	1,051	$	1,430
Less: reinsurance recoverables	81		76		149		2		1		2		83		77		151
Net reserve for future policy benefits, after reinsurance recoverables	$	684	$	689	$	862	$	330	$	285	$	417	$	1,014	$	974	$	1,279

(1)2021 includes assumed business from ALNY and business acquired from National General.

(2)Excludes $250 million, $271 million, and $265 million of reserves related to short-duration and other contracts as of December 31, 2023, 2022 and 2021, respectively.

Revenue and interest recognized in the consolidated statements of operations
($ in millions)	For the years ended December 31,
	2023		2022		2021
Revenues (1)
Accident and health	$	814	$	838	$	872
Traditional life	106		94		55
Total	$	920	$	932	$	927
Interest expense (2)
Accident and health	$	34	$	28	$	28
Traditional life	14		8		14
Total	$	48	$	36	$	42

(1)Total revenues reflects gross premiums used in the calculation for reserve for future policy benefits. Revenues included in Accident and health insurance premiums and contract charges on the Consolidated Statements of Operations reflect premium revenue recognized for traditional life insurance and long-duration and short-duration accident and health insurance contracts.

(2)Total interest expense presented as part of Accident, health and other policy benefits on the Consolidated Statements of Operations.

The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefits and expenses for nonparticipating traditional and limited-payment contracts.

	As of December 31,
	2023				2022				2021
($ in millions)	Undiscounted		Discounted		Undiscounted		Discounted		Undiscounted		Discounted
Accident and health
Expected future gross premiums	$	5,339	$	3,744	$	4,919	$	3,517	$	5,166	$	4,369
Expected future benefits and expenses	3,578		2,453		3,243		2,229		3,426		2,796
Traditional life
Expected future gross premiums	896		623		679		465		614		505
Expected future benefits and expenses	1,301		657		978		524		940		673

Key assumptions used in calculating the reserve for future policy benefits
	As of December 31,
	Accident and health				Traditional life
	2023		2022		2023		2022
Weighted-average duration (in years)	4.0		3.6		15.0		13.8
Weighted-average interest rates
Interest accretion rate (discount rate at contract issuance)	5.83	%	4.97	%	5.41	%	5.56	%
Current discount rate (upper-medium grade fixed income yield)	4.77		4.72		4.97		5.23

Significant assumptions To determine mortality and morbidity assumptions, the Company uses a combination of its historical experience and industry data. Mortality and morbidity are monitored throughout the year. Historical experience is obtained through annual Company experience studies in the third quarter that consider its historical claim patterns. The lapse assumption is determined based on historical lapses of the Company’s insurance contracts.

The Company’s annual review of the mortality, morbidity and lapse experience assumptions in 2023, 2022, and 2021 resulted in an increase of less than $1 million, a decrease of $4 million and a decrease of $11 million respectively, to the reserve for future policy benefits.

The following table summarizes the ratio of actual to expected experience used in the determination of the reserve for future policy benefits.

	As of December 31,
	Accident and health				Traditional life
	2023		2022		2023		2022
Actual to expected experience
Mortality	n/a		n/a		95	%	238	%
Morbidity	92	%	94	%	n/a		n/a
Lapses	110	%	112	%	78	%	61	%

n/a = not applicable

Contractholder funds

Contractholder funds activity
	For the years ended December 31,
($ in millions)	2023			2022			2021
Beginning balance	$	879		$	890		$	857
Deposits	130			133			118
Interest credited	34			32			34
Benefits	(14)			(21)			(41)
Surrenders and partial withdrawals	(21)			(28)			(23)
Contract charges	(119)			(117)			(111)
Other adjustments	(1)			(10)			56
Ending balance	$	888		$	879		$	890
Components of contractholder funds
Interest-sensitive life insurance	$	842		$	829		$	835
Fixed annuities	46			50			55
Total	$	888		$	879		$	890
Weighted-average crediting rate	4.21		%	4.28		%	4.29		%
Net amount at risk (1)	$	11,359		$	11,610		$	11,682
Cash surrender value	726			719			725

(1)Guaranteed benefit amounts in excess of the current account balances.

Account values: comparison of current crediting rate to guaranteed minimum crediting rate (1)
($ in millions) Range of guaranteed minimum crediting rates	At guaranteed minimum		1-50 basis points above		Total
December 31, 2023
Less than 3.00%	$	—	$	—	$	—
3.00% - 3.49%	—		30		30
3.50% - 3.99%	11		—		11
4.00% - 4.49%	434		—		434
4.50% - 4.99%	262		—		262
5.00% or greater	67		—		67
Non-account balances (2)					84
Total	$	774	$	30	$	888
December 31, 2022
Less than 3.00%	$	—	$	—	$	—
3.00% - 3.49%	—		16		16
3.50% - 3.99%	12		—		12
4.00% - 4.49%	429		—		429
4.50% - 4.99%	267		—		267
5.00% or greater	69		—		69
Non-account balances (2)					86
Total	$	777	$	16	$	879

(1)Difference, in basis points, between rates being credited to contractholders and the respective guaranteed minimum crediting rates.

(2)Non-account balances include unearned revenue and amounts related to policies where a claim is either in the course of settlement or IBNR. A claim on a life insurance policy results in the accrual of interest at a rate and over a period of time that is specified by state insurance regulations.

Accident and health short-duration contracts

The following presents information about incurred and paid claims development as of December 31, 2023, net of recoverables, as well as the cumulative number of reported claims and the total of IBNR reserves plus expected development on reported claims included in the net incurred claims amounts. See Note 2 for the accounting policy and methodology for determining reserves for future policy benefits, including both reported and IBNR claims. The Company’s accident and health claims are counted by claim number assigned to each claimant per illness, injury or death, regardless of number of services rendered for each incident. Claims closed without payment are not included in the cumulative number of reported accident and health claims. The information about incurred and paid claims development for the 2019 to 2023 years, and the average annual percentage payout of incurred claims by age as of December 31, 2023, is presented as required supplementary information.

Group and individual accident and health

($ in millions, except number of reported claims)	Incurred claims and allocated claim adjustment expenses, net of recoverables										IBNR reserves plus expected development on reported claims		Cumulative number of reported claims
	For the years ended December 31,										As of December 31, 2023
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2019		2020		2021		2022		2023
2019	$	257	$	239	$	242	$	242	$	242	$	—	313,017
2020	—		297		293		294		291		1		415,364
2021	—		—		424		420		415		2		677,649
2022	—		—		—		437		402		8		587,462
2023	—		—		—		—		476		164		413,651
							Total		$	1,826
	Cumulative paid claims and allocated claims adjustment expenses, net of recoverables
	For the years ended December 31,
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Accident year	2019		2020		2021		2022		2023
2019	$	158	$	234	$	242	$	242	$	242
2020	—		184		284		290		290
2021	—				272		408		414
2022	—		—		—		275		393
2023	—		—		—		—		312
							Total		$	1,651
All outstanding liabilities before 2019, net of recoverables									—
Liabilities for claims and claim adjustment expenses, net of recoverables									$	175

Reconciliation of the net incurred and paid claims development tables above to the reserve for future policy benefits
($ in millions)	As of December 31, 2023
Net outstanding liabilities
Group and individual accident and health short-duration contracts	$	175
Long-duration accident and health insurance	684
Long-duration traditional life insurance	330
Other contracts (1)	29
ULAE	9
Net reserve for future policy benefits	1,227
Recoverables
Group and individual accident and health short-duration contracts	37
Other accident and health short-duration contracts	—
Insurance lines other than short-duration	83
ULAE	—
Gross reserve for future policy benefits	$	1,347

(1)Other includes short-duration contracts related to employer voluntary benefits and other contracts.

Average annual percentage payout of incurred claims by age, net of recoverables, as of December 31, 2023
	1 year		2 years		3 years		4 years		5 years
Group and individual accident and health	64.2	%	33.1	%	2.0	%	0.5	%	0.2	%