v3.26.1
Derivative Instruments
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments
9. Derivative Instruments
The Company manages risks associated with certain assets and liabilities by using derivative financial instruments. Derivative financial instruments are financial contracts whose value is derived from underlying interest rates, exchange rates or other financial instruments. The Company does not invest in derivatives for speculative purposes.
Foreign exchange forwards, cross currency and interest rate swaps, and equity-indexed options are over-the-counter contractual agreements negotiated between counterparties. The Company purchases equity-indexed options as economic hedges against fluctuations in the equity markets to which equity-indexed products are exposed. Equity-indexed contracts include a fixed host universal-life insurance or annuity contract and an equity-indexed embedded derivative. Foreign exchange forwards, cross currency swaps, and interest rate swaps are used to manage our exposure to foreign currency risk, interest rate risk or both.
The notional principal represents the amount to which a rate or price is applied to determine the cash flows to be exchanged periodically and does not represent credit exposure. Maximum credit risk is the estimated cost of replacing derivative financial instruments which have a positive value, should the counterparty default.
Derivatives, except for embedded derivatives, are included in “Other invested assets” or “Other liabilities”, at fair value in the Condensed Consolidated Statements of Financial Position. Embedded derivative liabilities on funds withheld and modified coinsurance (“Modco”) arrangements and embedded derivative liabilities on indexed annuity products are included in the Condensed Consolidated Statements of Financial Position within the “Funds withheld for reinsurance liabilities” and “Policyholders’ account balances” lines respectively, at fair value.
The notional and fair values of derivative instruments, presented in the Condensed Consolidated Statements of Financial Position, are shown below:
Primary
Underlying
Risk		Location in the Condensed
Consolidated Statements of
Financial Position		June 30, 2026December 31, 2025
Notional
Amount		Carrying Value / Fair Value (1)Notional
Amount		Carrying Value / Fair Value (1)
AssetsLiabilitiesAssetsLiabilities
(Dollars in millions)
Derivatives Designated as Hedging Instruments:
Foreign exchange forwardsForeign currencyOther invested assets, Other liabilities$751 $9 $5 $656 $— $11 
Interest rate swapsInterest rateOther invested assets, Other liabilities2,914 6 35 1,797 12 — 
Derivatives Not Designated as Hedging Instruments:
Equity-indexed optionsEquityOther invested assets, Other liabilities47,200 1,601 — 46,883 1,570 — 
Foreign exchange forwardsForeign currencyOther invested assets, Other liabilities4,149 57 13 3,218 4 24 
Cross currency swapsForeign currencyOther invested assets, Other liabilities1,036 7 18 949 35 14 
Embedded Derivatives:
Indexed annuity productsInterest ratePolicyholders’ account balances— — 6,625 — — 6,414 
Funds withheld and Modco arrangementsInterest rateFunds withheld for reinsurance liabilities— — 20 — — 74 
$56,050 $1,680 $6,716 $53,503 $1,621 $6,537 
(1)The asset and liability balances are presented on a gross basis. Amounts are reported as “Other invested assets” and “Other liabilities” in the Condensed Consolidated Statements of Financial Position after the evaluation for rights of offset. See “Derivative Exposure” section of this note for further details.
Derivatives Designated as Hedging Instruments
The Company has designated and accounted for certain foreign exchange forwards (“foreign currency derivatives”) as fair value hedges to protect a portion of the available-for-sale fixed maturity securities against changes in fair value due to changes in exchange rates. The Company has also designated and accounted for certain interest rate swaps (“interest rate derivatives”) as fair value hedges to convert a portion of PAB from a fixed rate liability to a floating rate liability.
For derivative financial instruments that were designated and qualified as fair value hedges, the gain or loss on the portion of the derivative instrument included in the assessment of hedge effectiveness and the offsetting gain or loss on the hedged item attributable to the hedged risk were recognized in the same line item in the Condensed Consolidated Statements of Operations. The unrealized gain or loss attributable to changes in exchange rates on the available-for-sale fixed maturity securities that were designated as part of the hedge were reclassified out of other comprehensive income (“OCI”) into “Investment related gains (losses)” in the Condensed Consolidated Statements of Operations. The remaining change in unrealized gain or loss on the hedged item not associated with the risk being hedged remained as a component of OCI. The gains (losses) on interest rate derivatives designated as hedging instruments for certain PAB are included in “Interest sensitive contract benefits” in the Condensed Consolidated Statements of Operations.
The following represents the amount of gains (losses) related to the derivatives and hedged items that qualify for fair value hedges:
Three Months Ended
June 30,		Six Months Ended
June 30,
2026202520262025
(Dollars in millions)
Foreign currency derivatives:
Hedged items$(12)$45 $(30)$72 
Derivatives designated as hedging instruments12 (45)30 (72)
Interest rate derivatives:
Hedged items29 8 42 18 
Derivatives designated as hedging instruments(29)(8)(42)(18)
Gains (losses) on fair value hedges$— $— $— $— 
The amortized cost of available-for-sale fixed maturity securities designated and qualifying as hedged items in fair value hedges in relation to foreign currency derivatives was $540 million and $593 million as of June 30, 2026 and December 31, 2025, respectively.
The following table presents the carrying amount and cumulative fair value hedging adjustments for a portion of PAB designated and qualifying as hedged items in fair value hedges in relation to interest rate derivatives:
Carrying Amount of the
Hedged Assets (Liabilities)
Cumulative Amount of Fair
Value Hedging Adjustments Included
in the Carrying Amount of
Hedge Assets (Liabilities)
June 30, 2026December 31, 2025June 30, 2026December 31, 2025
(Dollars in millions)
Location in the Condensed Consolidated
Statements of Financial Position:
Policyholders’ account balances$(3,307)$(2,224)$35 $(11)
Derivatives Not Designated as Hedging Instruments
The following represents the financial statement location and amount of gains (losses) related to derivatives not designated as hedging instruments:
Location in the Condensed Consolidated
Statements of Operations		Derivative Gains (Losses) Recognized in Income
Three Months Ended
June 30,		Six Months Ended
June 30,
2026202520262025
(Dollars in millions)
Equity-indexed optionsChange in fair value of insurance-related derivatives and embedded derivatives$694 $232 $258 $(102)
Foreign exchange forwardsInvestment related gains (losses)15 (124)57 (189)
Cross currency swapsInvestment related gains (losses)8 15 (30)15 
Embedded derivatives:
Indexed annuity productsChange in fair value of insurance-related derivatives and embedded derivatives(483)(354)(218)(199)
Funds withheld and Modco arrangementsChange in fair value of insurance-related derivatives and embedded derivatives21 (9)54 (29)
$255 $(240)$121 $(504)
Derivative Exposure
The Company’s use of derivative instruments exposes it to credit risk in the event of non-performance by counterparties. The Company has a policy of only dealing with counterparties it believes are creditworthy and obtaining sufficient collateral where appropriate, as a means of mitigating the financial loss from defaults. The minimum credit rating of our counterparties is A- as of June 30, 2026 and A- as of December 31, 2025, and all derivatives have been appropriately collateralized by the Company and the counterparties in accordance with the terms of the derivative agreements. The Company holds collateral in cash and notes secured by U.S. government-backed assets. The non-performance risk is the net counterparty exposure based on fair value of open contracts less fair value of collateral held. The Company maintains master netting agreements with its current active trading partners. A right of offset has been applied to collateral that supports credit risk and has been recorded in the Condensed Consolidated Statements of Financial Position as an offset to “Other invested assets” with an associated payable to “Other liabilities” for excess collateral. A right of offset has also been applied to derivative assets and liabilities with the same counterparty under the same master netting agreement, and such derivative instruments are presented on a net basis in the Condensed Consolidated Statements of Financial Position.
Information regarding the Company’s exposure to credit loss on the derivatives it holds, including the effect of rights of offset, is presented below:
Gross Amounts Offset
in the Condensed
Consolidated Statements
of Financial Position
Gross Amount
of Derivative
Instruments
(1)		Counterparty Netting
(2)		Cash
Collateral
(3)		Net Amount
Presented in the
Consolidated
Statements of
Financial Position		Collateral
(Received)
Pledged in
Invested Assets
(3)		Net
Amount
After
Collateral
(Dollars in millions)
As of June 30, 2026
Total derivative assets$1,680 $(56)$(1,554)$70 $— $70 
Total derivative liabilities(71)56 — (15)1 (14)
As of December 31, 2025
Total derivative assets$1,621 $(35)$(1,548)$38 $(28)$10 
Total derivative liabilities(49)35 — (14)— (14)
(1)Represents derivative assets and liabilities on a gross basis, which are not offset under enforceable master netting agreements that meet all offsetting criteria.
(2)Represents netting of derivative exposures covered by qualifying master netting agreements.
(3)Excludes a portion of collateral held in cash and invested assets that are excess collateral. As of June 30, 2026 and December 31, 2025, the Company held excess collateral of $5 million and $115 million, respectively.