v3.26.1
Derivative Financial Instruments
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Financial Instruments Derivative Financial Instruments
Refer to Note C Fair Value of Financial Instruments for descriptions of the fair value methodologies used for derivative financial instruments.
The notional and carrying amounts of derivative financial instruments, including derivative instruments embedded in indexed annuities and IUL contracts, and reinsurance are as follows:
March 31, 2026December 31, 2025
Gross NotionalAssets LiabilitiesGross NotionalAssetsLiabilities
(In millions)
Derivatives designated as hedging instruments
Interest rate swaps (a)$1,600 $— $— $850 $11 $1 
Foreign currency swaps (a)— — — 21 — 3 
Total derivatives designated as hedging instruments1,600 — — 871 11 4 
Derivatives not designated as hedging instruments
Equity options (a)30,812 837 — 29,651 1,062 — 
Interest rate swaps (a)6,734 52 7 6,453 83 3 
Foreign currency swaps (a)687 6 2 503 — 6 
Futures contracts (a)76 2 — 68 — 1 
Other derivative investments (a)90 — — 93 — — 
Other embedded derivatives (b)— 39 — — 41 — 
Indexed annuities/IUL embedded derivatives (c)— 630 6,380 — 399 6,542 
Reinsurance related embedded derivatives (d)— — (122)— — 75 
Total derivatives not designated as hedging instruments38,399 1,566 6,267 36,768 1,585 6,627 
Total derivatives $39,999 $1,566 $6,267 $37,639 $1,596 $6,631 
(a)The fair value of derivative assets is reported in Derivative investments, and the fair value of derivative liabilities is reported in Accounts payable and accrued liabilities on the unaudited Condensed Consolidated Balance Sheets.
(b)The fair value is included in Other long term investments on the unaudited Condensed Consolidated Balance Sheets.
(c)The fair value of the liability is included in Contractholder funds and the ceded portion is included in Reinsurance recoverable on the unaudited Condensed Consolidated Balance Sheets.
(d)The fair value of the reinsurance related embedded derivative is included in Funds withheld for reinsurance liabilities on the unaudited Condensed Consolidated Balance Sheets, irrespective if in a net asset or net liability position.
The amounts and locations of gains losses, net recognized for derivatives and gains losses, net recognized for hedged items included in the unaudited Condensed Consolidated Statements of Earnings are as follows:
Three Months Ended March 31, 2026Three Months Ended March 31, 2025
Recognized gains (losses), net for derivativesRecognized gains (losses), net for hedged itemBenefits and other changes in policy reserves for derivativesBenefits and other changes in policy reserves for hedged itemRecognized gains (losses), net for derivativesRecognized gains (losses), net for hedged itemBenefits and other changes in policy reserves for derivativesBenefits and other changes in policy reserves for hedged item
(In millions)
Derivatives designated as hedging instruments
Interest rate swaps$— $— $(11)$11 $— $— $9 $(10)
Foreign currency swaps(1)1 — — (1)1 — — 
Total derivatives designated as hedging instruments(1)1 (11)11 (1)1 9 (10)
Derivatives not designated as hedging instruments
Equity options(247)— — — (234)— — — 
Interest rate swaps(28)— — — 52 — — — 
Foreign currency swaps12 — — — — — — — 
Futures contracts3 — — — 5 — — — 
Other derivative investments2 — — — (4)— — — 
Other embedded derivatives(1)— — — — — — — 
Indexed annuities/IUL embedded derivatives— — (260)— — — (62)— 
Reinsurance related embedded derivatives261 — — — (41)— — — 
Total derivatives not designated as hedging instruments2 — (260)— (222)— (62)— 
Total derivatives $1 $1 $(271)$11 $(223)$1 $(53)$(10)
The following amounts are recorded in the unaudited Condensed Consolidated Balance Sheets related to the carrying amount of hedged assets and (liabilities) and the cumulative basis adjustment included in the carrying amount for fair value hedges:
March 31, 2026December 31, 2025
Line Item in the unaudited Condensed Consolidated Balance Sheets that includes hedged item Carrying Amount of Hedged Assets (Liabilities)Cumulative Amount of Fair Value Hedging Adjustment included in the Carrying Amount of the Hedged Assets (Liabilities)Carrying Amount of Hedged Assets (Liabilities)Cumulative Amount of Fair Value Hedging Adjustment included in the Carrying Amount of the Hedged Assets (Liabilities)
(In millions)
Fixed maturity securities, AFS, at amortized cost$— $— $21 $— 
Contractholder funds (1,611)— (862)(11)
For the three months ended March 31, 2026 and 2025, the derivative instruments’ gains losses, net excluded from the assessment of hedge effectiveness was immaterial.
During the three months ended March 31, 2026, the foreign currency swap designated as a fair value hedge of foreign fixed maturity AFS securities matured and fair value hedge accounting was discontinued. There were no significant impacts associated with the discontinuation and no cumulative fair value hedging adjustments remain as of March 31, 2026. There were no cumulative fair value hedging adjustments for hedged assets and liabilities for which hedge accounting was discontinued as of March 31, 2026 and December 31, 2025.
Derivatives designated as hedging instruments
We utilize interest rate swaps and foreign currency swaps that are designated and accounted for as fair value hedges to reduce interest rate risk for certain funding agreements and to reduce the risk of certain exposures to foreign currency risk for foreign AFS fixed maturity securities. For fair value hedges of funding agreements, changes in fair value are reported in Benefits and other changes in policy reserves. For fair value hedges of AFS fixed maturity securities, changes in fair value included in the assessment of effectiveness are reported in Recognized gains and losses, net in the unaudited Condensed Consolidated Statement of Earnings. The change in the fair value of components excluded from the assessment of hedge effectiveness is recorded in OCI and is recognized in net income through periodic settlements.
Derivatives not designated as hedging instruments
Indexed Annuities/IUL Embedded Derivative, Equity Options and Futures
We have indexed annuities and IUL contracts that permit the holder to elect an interest rate return or an equity index linked component, where interest credited to the contracts is linked to the performance of various equity indices, such as the S&P 500 Index. This feature represents an embedded derivative under GAAP. The indexed annuities/IUL embedded derivatives are valued at fair value and included in the liability for Contractholder funds in the unaudited Condensed Consolidated Balance Sheets with the ceded portion of the reinsured indexed crediting feature embedded derivatives, recorded as a component of the Reinsurance recoverable in the unaudited Condensed Consolidated Balance Sheets. Changes in fair value are included as a component of Benefits and other changes in policy reserves in the unaudited Condensed Consolidated Statements of Earnings.
We purchase derivatives consisting of a combination of equity options and futures contracts (specifically for indexed annuity contracts) on the applicable market indices to fund the index credits due to indexed annuity/IUL contractholders. The equity options are one, two, three, five and six year options purchased to match the funding requirements of the underlying policies. On the respective anniversary dates of the indexed policies, the index used to compute the interest credit is reset and we purchase new equity options to fund the next index credit. We manage the cost of these purchases through the terms of our indexed annuities/IUL contracts, which permit us to change caps, spreads or participation rates, subject to guaranteed minimums, on each contract’s anniversary date. The change in the fair value of the equity options and futures contracts is generally designed to offset the portion of the change in the fair value of the indexed annuities/IUL embedded derivatives related to index performance through the current credit period. The equity options and futures contracts are marked to fair value with the change in fair value included as a component of Recognized gains and losses, net, in the unaudited Condensed Consolidated Statements of Earnings. The change in fair value of the equity options and futures contracts includes the gains and losses recognized at the expiration of the instrument term or upon early termination and the changes in fair value of open positions.
Other market exposures are hedged periodically depending on market conditions and our risk tolerance. Our indexed annuities/IUL hedging strategy economically hedges the equity returns and exposes us to the risk that unhedged market exposures result in divergence between changes in the fair value of the liabilities and the hedging assets. We use a variety of techniques, including direct estimation of market sensitivities, to monitor this risk daily. We intend to continue to adjust the hedging strategy as market conditions and our risk tolerance changes.
Interest Rate Swaps
We utilize interest rate swaps to reduce market risks from interest rate changes on our earnings associated with our floating rate investments. With an interest rate swap, we agree with another party to exchange, at specified intervals, the difference between fixed-rate and floating-rate interest amounts tied to an agreed upon notional principal.
The interest rate swaps are marked to fair value with the change in fair value, including accrued interest and related periodic cash flows received or paid, included as a component of Recognized gains and losses, net, in the unaudited Condensed Consolidated Statements of Earnings.
Foreign Currency Swaps
We utilize foreign currency swaps to reduce market risks from fluctuations in foreign exchange rates that impact earnings associated with our foreign currency denominated investments. Through a foreign currency swap, we agree with another party to exchange, at specified intervals, principal and interest payments in one currency for principal and interest payments in another currency, based on an agreed-upon notional amount.

The foreign currency swaps are marked to fair value with the change in fair value, including accrued interest and related periodic cash flows received or paid, included as a component of Recognized gains and losses, net, in the unaudited Condensed Consolidated Statements of Earnings.
Reinsurance Related Embedded Derivatives
F&G cedes certain business on a coinsurance funds withheld basis. Investment results for the assets that support the coinsurance are segregated within the funds withheld account and are passed directly to the reinsurer pursuant to the contractual terms of the reinsurance agreement, which creates embedded derivatives considered to be total return swaps. These total return swaps are not clearly and closely related to the underlying reinsurance agreement and thus require bifurcation. For arrangements reinsuring indexed annuities products, the funds withheld account additionally contains an embedded derivative representing the index credit obligation due the reinsurer, resulting in a compound embedded derivative. These embedded derivatives are reported in Funds withheld for reinsurance liabilities, irrespective if in a net asset position or a net liability position, on the unaudited Condensed Consolidated Balance Sheets. The related gains or losses are reported in Recognized gains and losses, net, on the unaudited Condensed Consolidated Statements of Earnings.
Credit Risk
We are exposed to credit loss in the event of non-performance by our counterparties and reflect assumptions regarding this non-performance risk in the fair value of our derivatives. The non-performance risk is the net counterparty exposure based on the fair value of the open contracts less collateral held. We maintain a policy of requiring all derivative contracts to be governed by an International Swaps and Derivatives Association (“ISDA”) Master Agreement.
We manage credit risk related to non-performance by our counterparties by (i) entering into derivative transactions with creditworthy counterparties; (ii) obtaining collateral, such as cash and securities when appropriate; and (iii) establishing counterparty exposure limits, which are subject to periodic management review.
Net credit risk at any balance sheet date may reflect the timing of collateral settlements, as collateral calls issued or received near the balance sheet date may not be fully reflected in collateral balances until the subsequent settlement date. Information regarding our exposure to credit loss on the derivative instruments we hold, excluding futures contracts, is presented below:
Fair ValueCollateral (a)Net Credit Risk (a)
(In millions)
March 31, 2026$879 $737 $142 
December 31, 20251,137 1,185 34 
(a)Approximately $110 million of additional collateral was received on April 1, 2026.

Collateral Agreements
We are required to maintain minimum ratings as a matter of routine practice as part of our over-the-counter derivative agreements on ISDA forms. Under some ISDA agreements, we have agreed to maintain certain financial strength ratings. A downgrade below these levels provides the counterparty under the agreement the right to terminate the open derivative contracts between the parties, at which time any amounts payable by us or the counterparty would be dependent on the market value of the underlying contracts. Our current rating does not allow any counterparty the right to terminate ISDA agreements. In certain transactions, both us and the counterparty have entered into a collateral support agreement requiring either party to post collateral when the net exposures exceed pre-determined thresholds. For all counterparties, except one, the threshold is set to zero. As of March 31, 2026 and December 31, 2025, counterparties posted collateral of $737 million and $1,185 million, respectively. This included cash collateral of $533 million and $928 million, respectively, for which we record an associated payable included in Accounts payable and accrued liabilities on the unaudited Condensed Consolidated Balance Sheets. Cash collateral received is not legally segregated and may be used by the Company in the normal course of business. The Company is obligated to return an equivalent amount of collateral upon settlement or termination of the related derivative contracts, or otherwise in accordance with the collateral provisions of such agreements, including in circumstances where changes in market conditions cause the Company’s mark-to-market position to decline. The remaining collateral represents securities collateral received that is not reported on the unaudited Condensed Consolidated Balance Sheets. Accordingly, the maximum amount of loss due to credit risk that we would incur if parties to the derivatives failed completely to perform according to the terms of the contracts, after giving effect to cash and securities collateral held,was $142 million and $34 million as of March 31, 2026 and December 31, 2025, respectively.
We are required to pay our counterparties the effective federal funds interest rate each day for cash collateral posted to us. Cash collateral is reinvested in overnight investment sweep products, which are included in Cash and cash equivalents on the unaudited Condensed Consolidated Balance Sheets, to reduce the interest cost. Changes in cash collateral are included in the Change in derivative collateral liabilities in the unaudited Condensed Consolidated Statements of Cash Flows.
We held 182 and 172 futures contracts as of March 31, 2026 and December 31, 2025, respectively. The fair value of the futures contracts represents the cumulative unsettled variation margin (open trade equity, net of cash settlements). We provide cash collateral to the counterparties for the initial and variation margin on the futures contracts, which is included in Cash and cash equivalents in the unaudited Condensed Consolidated Balance Sheets. The amount of cash collateral held by the counterparties for such contracts was $6 million and $4 million as of March 31, 2026 and December 31, 2025, respectively.