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As Of Filer Filing For·On·As Docs:Size 8/06/20 Reinsurance Group of America Inc. 10-Q 6/30/20 110:26M |
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Document |
i Missouri | i 43-1627032 | |
(State
or other jurisdiction | (IRS employer | |
of incorporation or organization) | identification number) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
i Common
Stock, par value $0.01 | i RGA | i New York Stock
Exchange | ||
i 6.20% Fixed-To-Floating Rate Subordinated Debentures due 2042 | i RZA | i New
York Stock Exchange | ||
i 5.75% Fixed-To-Floating Rate Subordinated Debentures due 2056 | i RZB | i New
York Stock Exchange |
Item | Page | |||
PART
I – FINANCIAL INFORMATION | ||||
1 | ||||
2 | ||||
3 | ||||
4 | ||||
PART II – OTHER INFORMATION | ||||
1 | ||||
1A | ||||
2 | ||||
6 | ||||
(Dollars in millions, except share data) | ||||||||
Assets | ||||||||
Fixed maturity securities
available-for-sale, at fair value (amortized cost $46,903 and $46,753; allowance for credit losses of $33 at June 30, 2020) | $ | i 52,346 | $ | i 51,121 | ||||
Equity
securities, at fair value | i 130 | i 320 | ||||||
Mortgage
loans on real estate (net of allowances of $56 and $12) | i 5,974 | i 5,706 | ||||||
Policy
loans | i 1,310 | i 1,319 | ||||||
Funds
withheld at interest | i 5,250 | i 5,662 | ||||||
Short-term
investments | i 84 | i 64 | ||||||
Other
invested assets | i 2,547 | i 2,363 | ||||||
Total
investments | i 67,641 | i 66,555 | ||||||
Cash
and cash equivalents | i 4,313 | i 1,449 | ||||||
Accrued
investment income | i 494 | i 493 | ||||||
Premiums
receivable and other reinsurance balances | i 2,852 | i 2,940 | ||||||
Reinsurance
ceded receivables | i 945 | i 904 | ||||||
Deferred
policy acquisition costs | i 3,565 | i 3,512 | ||||||
Other
assets | i 919 | i 878 | ||||||
Total
assets | $ | i 80,729 | $ | i 76,731 | ||||
Liabilities
and Stockholders’ Equity | ||||||||
Future policy benefits | $ | i 29,897 | $ | i 28,672 | ||||
Interest-sensitive
contract liabilities | i 23,118 | i 22,711 | ||||||
Other
policy claims and benefits | i 6,232 | i 5,711 | ||||||
Other
reinsurance balances | i 510 | i 557 | ||||||
Deferred
income taxes | i 2,856 | i 2,712 | ||||||
Other
liabilities | i 1,557 | i 1,188 | ||||||
Long-term
debt | i 3,573 | i 2,981 | ||||||
Collateral
finance and securitization notes | i 433 | i 598 | ||||||
Total
liabilities | i 68,176 | i 65,130 | ||||||
Commitments
and contingent liabilities (See Note 8) | i | i | ||||||
Stockholders’
Equity: | ||||||||
Preferred stock – par value $.01 per share, 10,000,000 shares authorized, no shares issued or outstanding | i — | i — | ||||||
Common
stock – par value $.01 per share, 140,000,000 shares authorized, 85,310,598 shares issued at June 30, 2020 and 79,137,758 shares issued at December 31, 2019 | i 1 | i 1 | ||||||
Additional
paid-in capital | i 2,413 | i 1,937 | ||||||
Retained
earnings | i 7,901 | i 7,952 | ||||||
Treasury
stock, at cost – 17,374,739 and 16,481,656 shares | ( i 1,563 | ) | ( i 1,426 | ) | ||||
Accumulated
other comprehensive income | i 3,801 | i 3,137 | ||||||
Total
stockholders’ equity | i 12,553 | i 11,601 | ||||||
Total
liabilities and stockholders’ equity | $ | i 80,729 | $ | i 76,731 |
Three
months ended June 30, | Six months ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues: | (Dollars in millions, except per share data) | |||||||||||||||
Net
premiums | $ | i 2,790 | $ | i 2,764 | $ | i 5,609 | $ | i 5,502 | ||||||||
Investment
income, net of related expenses | i 645 | i 584 | i 1,239 | i 1,164 | ||||||||||||
Investment
related gains (losses), net: | ||||||||||||||||
Impairments and change in allowance for credit losses on fixed maturity securities | i — | i — | ( i 34 | ) | ( i 9 | ) | ||||||||||
Other
investment related gains (losses), net | i 81 | i 12 | ( i 170 | ) | i 29 | |||||||||||
Total
investment related gains (losses), net | i 81 | i 12 | ( i 204 | ) | i 20 | |||||||||||
Other
revenues | i 90 | i 107 | i 166 | i 201 | ||||||||||||
Total
revenues | i 3,606 | i 3,467 | i 6,810 | i 6,887 | ||||||||||||
Benefits
and Expenses: | ||||||||||||||||
Claims and other policy benefits | i 2,700 | i 2,516 | i 5,364 | i 5,024 | ||||||||||||
Interest
credited | i 187 | i 158 | i 333 | i 291 | ||||||||||||
Policy
acquisition costs and other insurance expenses | i 290 | i 260 | i 538 | i 572 | ||||||||||||
Other
operating expenses | i 188 | i 222 | i 383 | i 424 | ||||||||||||
Interest
expense | i 42 | i 43 | i 83 | i 83 | ||||||||||||
Collateral
finance and securitization expense | i 4 | i 8 | i 10 | i 16 | ||||||||||||
Total
benefits and expenses | i 3,411 | i 3,207 | i 6,711 | i 6,410 | ||||||||||||
Income
before income taxes | i 195 | i 260 | i 99 | i 477 | ||||||||||||
Provision
for income taxes | i 37 | i 58 | i 29 | i 105 | ||||||||||||
Net
income | $ | i 158 | $ | i 202 | $ | i 70 | $ | i 372 | ||||||||
Earnings
per share: | ||||||||||||||||
Basic earnings per share | $ | i 2.49 | $ | i 3.23 | $ | i 1.12 | $ | i 5.93 | ||||||||
Diluted
earnings per share | $ | i 2.48 | $ | i 3.18 | $ | i 1.11 | $ | i 5.83 |
Three
months ended June 30, | Six months ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Comprehensive income (loss) | (Dollars
in millions) | |||||||||||||||
Net income | $ | i 158 | $ | i 202 | $ | i 70 | $ | i 372 | ||||||||
Other
comprehensive income (loss), net of tax: | ||||||||||||||||
Foreign currency translation adjustments | i 13 | i 25 | ( i 118 | ) | i 46 | |||||||||||
Net
unrealized investment gains (losses) | i 2,663 | i 851 | i 790 | i 1,960 | ||||||||||||
Defined
benefit pension and postretirement plan adjustments | ( i 5 | ) | i — | ( i 8 | ) | i — | ||||||||||
Total
other comprehensive income (loss), net of tax | i 2,671 | i 876 | i 664 | i 2,006 | ||||||||||||
Total
comprehensive income (loss) | $ | i 2,829 | $ | i 1,078 | $ | i 734 | $ | i 2,378 |
Three
months ended June 30, 2020 and 2019 | |||||||||||||||||||||||
Common Stock | Additional Paid In Capital | Retained Earnings | Treasury Stock | Accumulated
Other Comprehensive Income | Total | ||||||||||||||||||
Balance, March 31, 2020 | $ | i 1 | $ | i 1,942 | $ | i 7,802 | $ | ( i 1,574 | ) | $ | i 1,130 | i 9,301 | |||||||||||
Net
income | i 158 | i 158 | |||||||||||||||||||||
Total
other comprehensive income (loss) | i 2,671 | i 2,671 | |||||||||||||||||||||
Dividends
to stockholders, $0.70 per share | ( i 43 | ) | ( i 43 | ) | |||||||||||||||||||
Issuance
of common stock, net of expenses | i 481 | i 481 | |||||||||||||||||||||
Purchase
of treasury stock | ( i 6 | ) | ( i 6 | ) | |||||||||||||||||||
Reissuance
of treasury stock | ( i 10 | ) | ( i 16 | ) | i 17 | ( i 9 | ) | ||||||||||||||||
Balance,
June 30, 2020 | $ | i 1 | $ | i 2,413 | $ | i 7,901 | $ | ( i 1,563 | ) | $ | i 3,801 | $ | i 12,553 |
Balance,
March 31, 2019 | $ | i 1 | $ | i 1,906 | $ | i 7,412 | $ | ( i 1,415 | ) | $ | i 1,766 | i 9,670 | |||||||||||
Net
income | i 202 | i 202 | |||||||||||||||||||||
Total
other comprehensive income (loss) | i 876 | i 876 | |||||||||||||||||||||
Dividends
to stockholders, $0.60 per share | ( i 38 | ) | ( i 38 | ) | |||||||||||||||||||
Purchase
of treasury stock | ( i 19 | ) | ( i 19 | ) | |||||||||||||||||||
Reissuance
of treasury stock | i 14 | ( i 26 | ) | i 30 | i 18 | ||||||||||||||||||
Balance,
June 30, 2019 | $ | i 1 | $ | i 1,920 | $ | i 7,550 | $ | ( i 1,404 | ) | $ | i 2,642 | $ | i 10,709 |
Six
months ended June 30, 2020 and 2019 | |||||||||||||||||||||||
Common Stock | Additional Paid In Capital | Retained Earnings | Treasury Stock | Accumulated
Other Comprehensive Income | Total | ||||||||||||||||||
Balance, December 31, 2019 | $ | i 1 | $ | i 1,937 | $ | i 7,952 | $ | ( i 1,426 | ) | $ | i 3,137 | i 11,601 | |||||||||||
Adoption
of new accounting standards | ( i 12 | ) | ( i 12 | ) | |||||||||||||||||||
Net
income | i 70 | i 70 | |||||||||||||||||||||
Total
other comprehensive income (loss) | i 664 | i 664 | |||||||||||||||||||||
Dividends
to stockholders, $1.40 per share | ( i 87 | ) | ( i 87 | ) | |||||||||||||||||||
Issuance
of common stock, net of expenses | i 481 | i 481 | |||||||||||||||||||||
Purchase
of treasury stock | ( i 162 | ) | ( i 162 | ) | |||||||||||||||||||
Reissuance
of treasury stock | ( i 5 | ) | ( i 22 | ) | i 25 | ( i 2 | ) | ||||||||||||||||
Balance,
June 30, 2020 | $ | i 1 | $ | i 2,413 | $ | i 7,901 | $ | ( i 1,563 | ) | $ | i 3,801 | $ | i 12,553 |
Balance,
December 31, 2018 | $ | i 1 | $ | i 1,899 | $ | i 7,285 | $ | ( i 1,371 | ) | $ | i 636 | $ | i 8,450 | ||||||||||
Adoption
of new accounting standards | i — | ||||||||||||||||||||||
Net
income | i 372 | i 372 | |||||||||||||||||||||
Total
other comprehensive income (loss) | i 2,006 | i 2,006 | |||||||||||||||||||||
Dividends
to stockholders, $1.20 per share | ( i 75 | ) | ( i 75 | ) | |||||||||||||||||||
Purchase
of treasury stock | ( i 68 | ) | ( i 68 | ) | |||||||||||||||||||
Reissuance
of treasury stock | i 21 | ( i 32 | ) | i 35 | i 24 | ||||||||||||||||||
Balance,
June 30, 2019 | $ | i 1 | $ | i 1,920 | $ | i 7,550 | $ | ( i 1,404 | ) | $ | i 2,642 | $ | i 10,709 |
Six
months ended June 30, | ||||||||
2020 | 2019 | |||||||
(Dollars in millions) | ||||||||
Cash Flows from Operating Activities: | ||||||||
Net
income | $ | i 70 | $ | i 372 | ||||
Adjustments
to reconcile net income to net cash provided by operating activities: | ||||||||
Change in operating assets and liabilities: | ||||||||
Accrued investment income | ( i 9 | ) | ( i 12 | ) | ||||
Premiums
receivable and other reinsurance balances | i 24 | i 85 | ||||||
Deferred
policy acquisition costs | ( i 107 | ) | ( i 115 | ) | ||||
Reinsurance
ceded receivable balances | ( i 32 | ) | ( i 109 | ) | ||||
Future
policy benefits, other policy claims and benefits, and other reinsurance balances | i 2,360 | i 736 | ||||||
Deferred
income taxes | ( i 88 | ) | i 92 | |||||
Other
assets and other liabilities, net | i 38 | ( i 122 | ) | |||||
Amortization
of net investment premiums, discounts and other | ( i 24 | ) | ( i 34 | ) | ||||
Depreciation
and amortization expense | i 23 | i 22 | ||||||
Investment
related (gains) losses, net | i 204 | ( i 20 | ) | |||||
Other,
net | i 120 | i 75 | ||||||
Net
cash provided by operating activities | i 2,579 | i 970 | ||||||
Cash
Flows from Investing Activities: | ||||||||
Sales of fixed maturity securities available-for-sale | i 3,835 | i 5,097 | ||||||
Maturities
of fixed maturity securities available-for-sale | i 406 | i 439 | ||||||
Sales
of equity securities | i 180 | i — | ||||||
Principal
payments and sales of mortgage loans on real estate | i 283 | i 166 | ||||||
Principal
payments on policy loans | i 15 | i 44 | ||||||
Purchases
of fixed maturity securities available-for-sale | ( i 4,875 | ) | ( i 5,689 | ) | ||||
Purchases
of equity securities | ( i 21 | ) | ( i 57 | ) | ||||
Cash
invested in mortgage loans on real estate | ( i 604 | ) | ( i 598 | ) | ||||
Cash
invested in policy loans | ( i 6 | ) | ( i 5 | ) | ||||
Cash
invested in funds withheld at interest | ( i 49 | ) | ( i 54 | ) | ||||
Purchase
of businesses, net of cash acquired of $27 | i — | i 4 | ||||||
Purchases
of property and equipment | ( i 11 | ) | ( i 18 | ) | ||||
Change
in short-term investments | ( i 19 | ) | i 67 | |||||
Change
in other invested assets | ( i 158 | ) | ( i 160 | ) | ||||
Net
cash used in investing activities | ( i 1,024 | ) | ( i 764 | ) | ||||
Cash
Flows from Financing Activities: | ||||||||
Dividends to stockholders | ( i 87 | ) | ( i 75 | ) | ||||
Proceeds
from issuance of common stock, net | i 481 | i — | ||||||
Repayment
of collateral finance and securitization notes | ( i 160 | ) | ( i 53 | ) | ||||
Proceeds
from long-term debt issuance | i 598 | i 599 | ||||||
Debt
issuance costs | ( i 5 | ) | ( i 5 | ) | ||||
Principal
payments of long-term debt | ( i 1 | ) | ( i 1 | ) | ||||
Purchases
of treasury stock | ( i 162 | ) | ( i 68 | ) | ||||
Exercise
of stock options, net | i 1 | i 2 | ||||||
Change
in cash collateral for derivative positions and other arrangements | i 93 | ( i 80 | ) | |||||
Deposits
on universal life and other investment type policies and contracts | i 1,004 | i 256 | ||||||
Withdrawals
on universal life and other investment type policies and contracts | ( i 429 | ) | ( i 390 | ) | ||||
Net
cash provided by financing activities | i 1,333 | i 185 | ||||||
Effect
of exchange rate changes on cash | ( i 24 | ) | i 7 | |||||
Change
in cash and cash equivalents | i 2,864 | i 398 | ||||||
Cash
and cash equivalents, beginning of period | i 1,449 | i 1,890 | ||||||
Cash
and cash equivalents, end of period | $ | i 4,313 | $ | i 2,288 | ||||
Supplemental
disclosures of cash flow information: | ||||||||
Interest paid | $ | i 80 | $ | i 86 | ||||
Income
taxes (received) paid, net of refunds | $ | ( i 12 | ) | $ | i 23 | |||
Non-cash
investing activities: | ||||||||
Transfer of invested assets | $ | i — | $ | i 3,421 | ||||
Right-of-use
assets acquired through operating leases | $ | i — | $ | i 1 | ||||
Purchase
of businesses: | ||||||||
Assets acquired, excluding cash acquired | $ | i — | $ | i 8 | ||||
Liabilities
assumed | i — | ( i 12 | ) | |||||
Net
cash received on purchase | $ | i — | $ | ( i 4 | ) |
1. | i Business
and Basis of Presentation |
2. | i Earnings Per Share |
Three months ended June 30, | Six months ended
June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Earnings: | ||||||||||||||||
Net
income | $ | i 158 | $ | i 202 | $ | i 70 | $ | i 372 | ||||||||
Shares: | ||||||||||||||||
Weighted
average outstanding shares | i 63 | i 63 | i 63 | i 63 | ||||||||||||
Equivalent
shares from outstanding stock options | i 1 | i 1 | i 1 | i 1 | ||||||||||||
Denominator
for diluted calculation | i 64 | i 64 | i 64 | i 64 | ||||||||||||
Earnings
per share: | ||||||||||||||||
Basic | $ | i 2.49 | $ | i 3.23 | $ | i 1.12 | $ | i 5.93 | ||||||||
Diluted | $ | i 2.48 | $ | i 3.18 | $ | i 1.11 | $ | i 5.83 |
Three months ended June 30, | Six months ended June 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Excluded
from common equivalent shares: | ||||||||||||
Stock options | i 1,638 | i 250 | i 1,200 | i 420 | ||||||||
Performance
contingent shares | i 96 | i 242 | i 130 | i 171 |
3. | i Equity |
Issued | Held
In Treasury | Outstanding | |||||||
Balance, December 31, 2019 | i 79,137,758 | i 16,481,656 | i 62,656,102 | ||||||
Issuance
of common stock | i 6,172,840 | i — | i 6,172,840 | ||||||
Common
stock acquired | i — | i 1,074,413 | ( i 1,074,413 | ) | |||||
Stock-based
compensation (1) | i — | ( i 181,330 | ) | i 181,330 | |||||
Balance,
June 30, 2020 | i 85,310,598 | i 17,374,739 | i 67,935,859 |
Issued | Held
In Treasury | Outstanding | |||||||
Balance, December 31, 2018 | i 79,137,758 | i 16,323,390 | i 62,814,368 | ||||||
Common
stock acquired | i — | i 344,237 | ( i 344,237 | ) | |||||
Stock-based
compensation (1) | i — | ( i 288,360 | ) | i 288,360 | |||||
Balance,
June 30, 2019 | i 79,137,758 | i 16,379,267 | i 62,758,491 |
(1) | Represents
net shares issued from treasury pursuant to the Company’s equity-based compensation programs. |
Accumulated
Currency Translation Adjustments | Unrealized Appreciation (Depreciation) of Investments(1) | Pension and Postretirement Benefits | Total | |||||||||||||
Balance,
December 31, 2019 | $ | ( i 92 | ) | $ | i 3,299 | $ | ( i 70 | ) | $ | i 3,137 | ||||||
Other
comprehensive income (loss) before reclassifications | ( i 116 | ) | i 1,034 | ( i 12 | ) | i 906 | ||||||||||
Amounts
reclassified to (from) AOCI | i — | i — | i 2 | i 2 | ||||||||||||
Deferred
income tax benefit (expense) | ( i 2 | ) | ( i 244 | ) | i 2 | ( i 244 | ) | |||||||||
Balance,
June 30, 2020 | $ | ( i 210 | ) | $ | i 4,089 | $ | ( i 78 | ) | $ | i 3,801 |
Accumulated
Currency Translation Adjustments | Unrealized Appreciation (Depreciation) of Investments(1) | Pension and Postretirement Benefits | Total | |||||||||||||
Balance,
December 31, 2018 | $ | ( i 169 | ) | $ | i 856 | $ | ( i 51 | ) | $ | i 636 | ||||||
Other
comprehensive income (loss) before reclassifications | i 44 | i 2,617 | ( i 3 | ) | i 2,658 | |||||||||||
Amounts
reclassified to (from) AOCI | i — | ( i 98 | ) | i 3 | ( i 95 | ) | ||||||||||
Deferred
income tax benefit (expense) | i 2 | ( i 559 | ) | i — | ( i 557 | ) | ||||||||||
Balance,
June 30, 2019 | $ | ( i 123 | ) | $ | i 2,816 | $ | ( i 51 | ) | $ | i 2,642 |
(1) | Includes
cash flow hedges of $( i 74) and $( i 26)
as of June 30, 2020 and December 31, 2019, respectively, and $( i 15) and $ i 9
as of June 30, 2019 and December 31, 2018, respectively. See Note 5 – “Derivative Instruments” for additional information on cash flow hedges. |
Amount
Reclassified from AOCI | ||||||||||||||||||
Three months ended June 30, | Six months ended June 30, | |||||||||||||||||
Details about AOCI Components | 2020 | 2019 | 2020 | 2019 | Affected Line Item in Statements of Income | |||||||||||||
Net
unrealized investment gains (losses): | ||||||||||||||||||
Net unrealized gains (losses) on available-for-sale securities | $ | i 11 | $ | i 20 | $ | ( i 28 | ) | $ | i 20 | Investment
related gains (losses), net | ||||||||
Cash flow hedges – Interest rate | ( i 1 | ) | i — | ( i 1 | ) | i 1 | (1) | |||||||||||
Cash
flow hedges – Currency/Interest rate | i — | i — | i — | i — | (1) | |||||||||||||
Deferred
policy acquisition costs attributed to unrealized gains and losses | i 131 | i 63 | i 29 | i 77 | (2) | |||||||||||||
Total | i 141 | i 83 | i — | i 98 | ||||||||||||||
Provision
for income taxes | ( i 29 | ) | ( i 17 | ) | ( i 2 | ) | ( i 20 | ) | ||||||||||
Net
unrealized gains (losses), net of tax | $ | i 112 | $ | i 66 | $ | ( i 2 | ) | $ | i 78 | |||||||||
Amortization
of defined benefit plan items: | ||||||||||||||||||
Prior service (cost) credit | $ | i 1 | $ | i 1 | $ | i 1 | $ | i 1 | (3) | |||||||||
Actuarial
gains (losses) | ( i 2 | ) | ( i 1 | ) | ( i 3 | ) | ( i 3 | ) | (3) | |||||||||
Total | ( i 1 | ) | i — | ( i 2 | ) | ( i 2 | ) | |||||||||||
Provision
for income taxes | — | — | — | i 1 | ||||||||||||||
Amortization
of defined benefit plans, net of tax | $ | ( i 1 | ) | $ | i — | $ | ( i 2 | ) | $ | ( i 1 | ) | |||||||
Total
reclassifications for the period | $ | i 111 | $ | i 66 | $ | ( i 4 | ) | $ | i 77 |
(1) | See
Note 5 – “Derivative Instruments” for additional information on cash flow hedges. |
(2) | This AOCI component is included in the computation of the deferred policy acquisition cost. See Note 8 – “Deferred Policy Acquisition Costs” of the 2019 Annual Report for additional details. |
(3) | This AOCI component is included in the computation
of the net periodic benefit cost. See Note 10 – “Employee Benefit Plans” for additional details. |
4. | i Investments |
Amortized Cost | Allowance for Credit Losses | Unrealized Gains | Unrealized Losses | Estimated Fair Value | % of Total | Impairments
in AOCI | |||||||||||||||||||||
Available-for-sale: | |||||||||||||||||||||||||||
Corporate | $ | i 29,785 | $ | i 32 | $ | i 3,071 | $ | i 254 | $ | i 32,570 | i 62.3 | % | $ | i — | |||||||||||||
Canadian
government | i 2,917 | i — | i 1,941 | i — | i 4,858 | i 9.3 | i — | ||||||||||||||||||||
RMBS | i 1,962 | i — | i 104 | i 1 | i 2,065 | i 3.9 | i — | ||||||||||||||||||||
ABS | i 2,798 | i — | i 20 | i 87 | i 2,731 | i 5.2 | i — | ||||||||||||||||||||
CMBS | i 1,850 | i — | i 42 | i 41 | i 1,851 | i 3.5 | i — | ||||||||||||||||||||
U.S.
government | i 1,395 | i — | i 244 | i — | i 1,639 | i 3.1 | i — | ||||||||||||||||||||
State
and political subdivisions | i 1,056 | i — | i 135 | i 7 | i 1,184 | i 2.3 | i — | ||||||||||||||||||||
Other
foreign government | i 5,140 | i 1 | i 367 | i 58 | i 5,448 | i 10.4 | i — | ||||||||||||||||||||
Total
fixed maturity securities | $ | i 46,903 | $ | i 33 | $ | i 5,924 | $ | i 448 | $ | i 52,346 | i 100.0 | % | $ | i — |
Amortized Cost | Unrealized Gains | Unrealized Losses | Estimated Fair Value | % of Total | Impairments in AOCI | ||||||||||||||||||
Available-for-sale: | |||||||||||||||||||||||
Corporate | $ | i 29,205 | $ | i 2,269 | $ | i 81 | $ | i 31,393 | i 61.4 | % | $ | i — | |||||||||||
Canadian
government | i 3,016 | i 1,596 | i — | i 4,612 | i 9.0 | i — | |||||||||||||||||
RMBS | i 2,339 | i 62 | i 3 | i 2,398 | i 4.7 | i — | |||||||||||||||||
ABS | i 2,973 | i 19 | i 14 | i 2,978 | i 5.8 | i — | |||||||||||||||||
CMBS | i 1,841 | i 61 | i 3 | i 1,899 | i 3.7 | i — | |||||||||||||||||
U.S.
government | i 2,096 | i 57 | i 1 | i 2,152 | i 4.2 | i — | |||||||||||||||||
State
and political subdivisions | i 1,074 | i 93 | i 3 | i 1,164 | i 2.3 | i — | |||||||||||||||||
Other
foreign government | i 4,209 | i 321 | i 5 | i 4,525 | i 8.9 | i — | |||||||||||||||||
Total
fixed maturity securities | $ | i 46,753 | $ | i 4,478 | $ | i 110 | $ | i 51,121 | i 100.0 | % | $ | i — |
Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated Fair Value | ||||||||||||
Fixed maturity securities pledged as collateral | $ | i 136 | $ | i 148 | $ | i 113 | $ | i 116 | |||||||
Fixed
maturity securities received as collateral | n/a | i 1,206 | n/a | i 727 | |||||||||||
Assets
in trust held to satisfy collateral requirements | i 27,353 | i 29,726 | i 27,290 | i 29,239 |
Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated
Fair Value | ||||||||||||
Fixed maturity securities guaranteed or issued by: | |||||||||||||||
$ | i 1,566 | $ | i 1,555 | $ | i 813 | $ | i 852 | ||||||||
Canadian
province of Quebec | i 1,187 | i 2,332 | i 1,205 | i 2,163 | |||||||||||
Canadian
province of Ontario | i 980 | i 1,436 | i 1,014 | i 1,379 |
Amortized
Cost | Estimated Fair Value | |||||||
Available-for-sale: | ||||||||
Due in one year or less | $ | i 1,453 | $ | i 1,454 | ||||
Due
after one year through five years | i 8,028 | i 8,412 | ||||||
Due
after five years through ten years | i 10,013 | i 10,979 | ||||||
Due
after ten years | i 20,799 | i 24,854 | ||||||
Structured
securities | i 6,610 | i 6,647 | ||||||
Total | $ | i 46,903 | $ | i 52,346 |
Estimated | |||||||||||
Amortized Cost | Fair Value | % of Total | |||||||||
Finance | $ | i 11,189 | $ | i 12,127 | i 37.2 | % | |||||
Industrial | i 14,962 | i 16,316 | i 50.1 | ||||||||
Utility | i 3,634 | i 4,127 | i 12.7 | ||||||||
Total | $ | i 29,785 | $ | i 32,570 | i 100.0 | % | |||||
Estimated | |||||||||||
Amortized Cost | Fair Value | % of Total | |||||||||
Finance | $ | i 10,896 | $ | i 11,653 | i 37.2 | % | |||||
Industrial | i 14,692 | i 15,803 | i 50.3 | ||||||||
Utility | i 3,617 | i 3,937 | i 12.5 | ||||||||
Total | $ | i 29,205 | $ | i 31,393 | i 100.0 | % |
Corporate | Other Foreign Government | Total | |||||||||
Balance,
beginning of period | $ | i — | $ | i — | $ | i — | |||||
Credit
losses recognized on securities for which credit losses were not previously recorded | i 40 | i 2 | i 42 | ||||||||
Reductions
for securities sold during the period | ( i 8 | ) | ( i 1 | ) | ( i 9 | ) | |||||
Balance,
end of period | $ | i 32 | $ | i 1 | $ | i 33 |
Gross Unrealized Losses | % of Total | Gross Unrealized Losses | % of Total | |||||||||||
Less
than 20% | $ | i 348 | i 77.7 | % | $ | i 76 | i 69.1 | % | ||||||
20%
or more for less than six months | i 91 | i 20.3 | i 20 | i 18.2 | ||||||||||
20%
or more for six months or greater | i 9 | i 2.0 | i 14 | i 12.7 | ||||||||||
Total | $ | i 448 | i 100.0 | % | $ | i 110 | i 100.0 | % |
Less
than 12 months | 12 months or greater | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Estimated | Unrealized | Estimated | Unrealized | Estimated | Unrealized | |||||||||||||||||||
Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | |||||||||||||||||||
Investment
grade securities: | ||||||||||||||||||||||||
Corporate | $ | i 2,359 | $ | i 125 | $ | i 67 | $ | i 9 | $ | i 2,426 | $ | i 134 | ||||||||||||
RMBS | i — | i — | i 28 | i 1 | i 28 | i 1 | ||||||||||||||||||
ABS | i 1,425 | i 53 | i 558 | i 29 | i 1,983 | i 82 | ||||||||||||||||||
CMBS | i 690 | i 37 | i 13 | i 1 | i 703 | i 38 | ||||||||||||||||||
U.S.
government | i — | i — | i — | i — | i — | i — | ||||||||||||||||||
State
and political subdivisions | i 59 | i 5 | i 12 | i 2 | i 71 | i 7 | ||||||||||||||||||
Other
foreign government | i 1,073 | i 47 | i — | i — | i 1,073 | i 47 | ||||||||||||||||||
Total
investment grade securities | i 5,606 | i 267 | i 678 | i 42 | i 6,284 | i 309 | ||||||||||||||||||
Below
investment grade securities: | ||||||||||||||||||||||||
Corporate | i 780 | i 114 | i 53 | i 6 | i 833 | i 120 | ||||||||||||||||||
ABS | i 20 | i 5 | i — | i — | i 20 | i 5 | ||||||||||||||||||
CMBS | i 23 | i 3 | i — | i — | i 23 | i 3 | ||||||||||||||||||
Other
foreign government | i 103 | i 8 | i 12 | i 3 | i 115 | i 11 | ||||||||||||||||||
Total
below investment grade securities | i 926 | i 130 | i 65 | i 9 | i 991 | i 139 | ||||||||||||||||||
Total
fixed maturity securities | $ | i 6,532 | $ | i 397 | $ | i 743 | $ | i 51 | $ | i 7,275 | $ | i 448 |
Less
than 12 months | 12 months or greater | Total | ||||||||||||||||||||||
Gross | Gross | Gross | ||||||||||||||||||||||
Estimated | Unrealized | Estimated | Unrealized | Estimated | Unrealized | |||||||||||||||||||
Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | |||||||||||||||||||
Investment
grade securities: | ||||||||||||||||||||||||
Corporate | $ | i 1,936 | $ | i 29 | $ | i 293 | $ | i 7 | $ | i 2,229 | $ | i 36 | ||||||||||||
RMBS | i 367 | i 2 | i 84 | i 1 | i 451 | i 3 | ||||||||||||||||||
ABS | i 773 | i 5 | i 739 | i 9 | i 1,512 | i 14 | ||||||||||||||||||
CMBS | i 253 | i 3 | i — | i — | i 253 | i 3 | ||||||||||||||||||
U.S.
government | i 49 | i 1 | i — | i — | i 49 | i 1 | ||||||||||||||||||
State
and political subdivisions | i 103 | i 2 | i 12 | i 1 | i 115 | i 3 | ||||||||||||||||||
Other
foreign government | i 278 | i 4 | i — | i — | i 278 | i 4 | ||||||||||||||||||
Total
investment grade securities | i 3,759 | i 46 | i 1,128 | i 18 | i 4,887 | i 64 | ||||||||||||||||||
Below
investment grade securities: | ||||||||||||||||||||||||
Corporate | i 220 | i 38 | i 100 | i 7 | i 320 | i 45 | ||||||||||||||||||
ABS | i — | i — | i — | i — | i — | i — | ||||||||||||||||||
CMBS | i — | i — | i — | i — | i — | i — | ||||||||||||||||||
Other
foreign government | i — | i — | i 10 | i 1 | i 10 | i 1 | ||||||||||||||||||
Total
below investment grade securities | i 220 | i 38 | i 110 | i 8 | i 330 | i 46 | ||||||||||||||||||
Total
fixed maturity securities | $ | i 3,979 | $ | i 84 | $ | i 1,238 | $ | i 26 | $ | i 5,217 | $ | i 110 |
Three
months ended June 30, | Six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Fixed maturity securities available-for-sale | $ | i 474 | $ | i 428 | $ | i 954 | $ | i 843 | |||||||
Equity
securities | i 1 | i 1 | i 3 | i 2 | |||||||||||
Mortgage
loans on real estate | i 66 | i 61 | i 133 | i 120 | |||||||||||
Policy
loans | i 14 | i 14 | i 29 | i 29 | |||||||||||
Funds
withheld at interest | i 69 | i 66 | i 122 | i 128 | |||||||||||
Short-term
investments and cash and cash equivalents | i 2 | i 7 | i 6 | i 14 | |||||||||||
Other
invested assets | i 41 | i 32 | i 36 | i 74 | |||||||||||
Investment
income | i 667 | i 609 | i 1,283 | i 1,210 | |||||||||||
Investment
expense | ( i 22 | ) | ( i 25 | ) | ( i 44 | ) | ( i 46 | ) | |||||||
Investment
income, net of related expenses | $ | i 645 | $ | i 584 | $ | i 1,239 | $ | i 1,164 |
Three
months ended June 30, | Six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Fixed maturity securities available-for-sale: | |||||||||||||||
Impairment
losses and change in allowance for credit losses | $ | i — | $ | i — | $ | ( i 34 | ) | $ | ( i 9 | ) | |||||
Gain
on investment activity | i 46 | i 20 | i 73 | i 48 | |||||||||||
Loss
on investment activity | ( i 46 | ) | ( i 7 | ) | ( i 54 | ) | ( i 26 | ) | |||||||
Net
gains (losses) on equity securities | i 8 | i 3 | ( i 15 | ) | i 7 | ||||||||||
Other
impairment losses and change in mortgage loan provision | ( i 22 | ) | ( i 6 | ) | ( i 35 | ) | ( i 8 | ) | |||||||
Derivatives
and other, net | i 95 | i 2 | ( i 139 | ) | i 8 | ||||||||||
Total
investment related gains (losses), net | $ | i 81 | $ | i 12 | $ | ( i 204 | ) | $ | i 20 |
Amortized Cost | Estimated Fair Value | Amortized Cost | Estimated
Fair Value | ||||||||||||
Borrowed securities | $ | i 270 | $ | i 300 | $ | i 339 | $ | i 369 | |||||||
Securities
lending: | |||||||||||||||
Securities loaned | i 102 | i 105 | i 98 | i 104 | |||||||||||
Securities
received | n/a | i 107 | n/a | i 107 | |||||||||||
Repurchase
program/reverse repurchase program: | |||||||||||||||
Securities pledged | i 449 | i 481 | i 356 | i 384 | |||||||||||
Securities
received | n/a | i 372 | n/a | i 370 |
Remaining Contractual Maturity of the Agreements | |||||||||||||||||||
Overnight and Continuous | Up to 30 Days | 30-90 Days | Greater than 90 Days | Total | |||||||||||||||
Securities
lending transactions: | |||||||||||||||||||
Corporate | $ | i — | $ | i — | $ | i — | $ | i 105 | $ | i 105 | |||||||||
Total | i — | i — | i — | i 105 | i 105 | ||||||||||||||
Repurchase/reverse
repurchase transactions: | |||||||||||||||||||
Corporate | i — | i — | i — | i 353 | i 353 | ||||||||||||||
Other
foreign government | i — | i — | i — | i 128 | i 128 | ||||||||||||||
Total | i — | i — | i — | i 481 | i 481 | ||||||||||||||
Total
transactions | $ | i — | $ | i — | $ | i — | $ | i 586 | $ | i 586 | |||||||||
Gross
amount of recognized liabilities for securities lending and repurchase/reverse repurchase transactions in preceding table | $ | i 533 | |||||||||||||||||
Amounts
related to agreements not included in offsetting disclosure | $ | i 53 |
Remaining Contractual Maturity
of the Agreements | |||||||||||||||||||
Overnight and Continuous | Up to 30 Days | 30-90 Days | Greater than 90 Days | Total | |||||||||||||||
Securities lending transactions: | |||||||||||||||||||
Corporate | $ | i — | $ | i — | $ | i — | $ | i 104 | $ | i 104 | |||||||||
Total | i — | i — | i — | i 104 | i 104 | ||||||||||||||
Repurchase/reverse
repurchase transactions: | |||||||||||||||||||
Corporate | i — | i — | i — | i 286 | i 286 | ||||||||||||||
Other
foreign government | i — | i — | i — | i 98 | i 98 | ||||||||||||||
Total | i — | i — | i — | i 384 | i 384 | ||||||||||||||
Total
borrowings | $ | i — | $ | i — | $ | i — | $ | i 488 | $ | i 488 | |||||||||
Gross
amount of recognized liabilities for securities lending and repurchase/reverse repurchase transactions in preceding table | $ | i 478 | |||||||||||||||||
Amounts
related to agreements not included in offsetting disclosure | $ | i 10 |
Property type: | Carrying Value | % of Total | Carrying Value | % of Total | ||||||||||
Office
| $ | i 1,773 | i 29.4 | % | $ | i 1,771 | i 31.0 | % | ||||||
Retail | i 1,705 | i 28.2 | i 1,686 | i 29.4 | ||||||||||
Industrial | i 1,253 | i 20.7 | i 1,169 | i 20.4 | ||||||||||
Apartment | i 868 | i 14.4 | i 766 | i 13.4 | ||||||||||
Other
commercial | i 441 | i 7.3 | i 335 | i 5.8 | ||||||||||
Recorded
investment | i 6,040 | i 100.0 | % | i 5,727 | i 100.0 | % | ||||||||
Unamortized
balance of loan origination fees and expenses | ( i 10 | ) | ( i 9 | ) | ||||||||||
Valuation
allowances | ( i 56 | ) | ( i 12 | ) | ||||||||||
Total
mortgage loans on real estate | $ | i 5,974 | $ | i 5,706 |
Recorded Investment | % of Total | Recorded Investment | %
of Total | |||||||||||
Due within five years | $ | i 2,257 | i 37.3 | % | $ | i 1,841 | i 32.2 | % | ||||||
Due
after five years through ten years | i 2,854 | i 47.3 | i 2,944 | i 51.4 | ||||||||||
Due
after ten years | i 929 | i 15.4 | i 942 | i 16.4 | ||||||||||
Total | $ | i 6,040 | i 100.0 | % | $ | i 5,727 | i 100.0 | % |
Recorded
Investment | ||||||||||||||||||||||
Debt Service Ratios | Construction Loans | |||||||||||||||||||||
>1.20x | 1.00x - 1.20x | <1.00x | Total | %
of Total | ||||||||||||||||||
Loan-to-Value
Ratio | ||||||||||||||||||||||
0% - 59.99% | $ | i 3,074 | $ | i 114 | $ | i 9 | $ | i 1 | $ | i 3,198 | i 53.0 | % | ||||||||||
60%
- 69.99% | i 1,923 | i 78 | i 30 | i — | i 2,031 | i 33.6 | ||||||||||||||||
70%
- 79.99% | i 559 | i 60 | i 4 | i — | i 623 | i 10.3 | ||||||||||||||||
80%
or greater | i 101 | i 61 | i 26 | i — | i 188 | i 3.1 | ||||||||||||||||
Total | $ | i 5,657 | $ | i 313 | $ | i 69 | $ | i 1 | $ | i 6,040 | i 100.0 | % |
Recorded
Investment | ||||||||||||||||||||||
Debt Service Ratios | Construction Loans | |||||||||||||||||||||
>1.20x | 1.00x - 1.20x | <1.00x | Total | %
of Total | ||||||||||||||||||
Loan-to-Value
Ratio | ||||||||||||||||||||||
0% - 59.99% | $ | i 3,025 | $ | i 52 | $ | i 7 | $ | i — | $ | i 3,084 | i 53.8 | % | ||||||||||
60%
- 69.99% | i 1,841 | i 53 | i 11 | i — | i 1,905 | i 33.3 | ||||||||||||||||
70%
- 79.99% | i 492 | i 13 | i 39 | i — | i 544 | i 9.5 | ||||||||||||||||
80%
or greater | i 96 | i 61 | i 37 | i — | i 194 | i 3.4 | ||||||||||||||||
Total | $ | i 5,454 | $ | i 179 | $ | i 94 | $ | i — | $ | i 5,727 | i 100.0 | % |
Recorded
Investment | |||||||||||||||||||||||||||
Year of Origination | |||||||||||||||||||||||||||
2020 | 2019 | 2018 | 2017 | 2016 | Prior | Total | |||||||||||||||||||||
Internal
credit quality grade: | |||||||||||||||||||||||||||
High
investment grade | $ | i 332 | $ | i 674 | $ | i 622 | $ | i 401 | $ | i 601 | $ | i 1,115 | $ | i 3,745 | |||||||||||||
Investment
grade | i 263 | i 517 | i 317 | i 342 | i 271 | i 409 | i 2,119 | ||||||||||||||||||||
Average | i — | i — | i 9 | i 25 | i 27 | i 94 | i 155 | ||||||||||||||||||||
Watch
list | i — | i — | i — | i — | i — | i 4 | i 4 | ||||||||||||||||||||
In
or near default | i — | i — | i — | i — | i — | i 17 | i 17 | ||||||||||||||||||||
Total | $ | i 595 | $ | i 1,191 | $ | i 948 | $ | i 768 | $ | i 899 | $ | i 1,639 | $ | i 6,040 |
31-60 days past due | $ | i 63 | $ | i — | ||||
61-90
days past due | i 9 | i — | ||||||
Greater
than 90 days | i 15 | i — | ||||||
Total
past due | i 87 | i — | ||||||
Current | i 5,953 | i 5,727 | ||||||
Total | $ | i 6,040 | $ | i 5,727 |
Mortgage loans: | ||||||||
Individually measured for impairment | $ | i 17 | $ | i 17 | ||||
Collectively
measured for impairment | i 6,023 | i 5,710 | ||||||
Recorded
investment | $ | i 6,040 | $ | i 5,727 | ||||
Valuation
allowances: | ||||||||
Individually measured for impairment | $ | i — | $ | i — | ||||
Collectively
measured for impairment | i 56 | i 12 | ||||||
Total
valuation allowances | $ | i 56 | $ | i 12 |
Six
months ended June 30, | |||||||||
2020 | 2019 | ||||||||
Balance, beginning of period | $ | i 12 | $ | i 11 | |||||
Adoption
of new accounting standard, see Note 13 | i 14 | i — | |||||||
Provision
(release) | i 30 | i 1 | |||||||
Balance,
end of period | $ | i 56 | $ | i 12 |
Unpaid
Principal Balance | Recorded Investment | Related Allowance | Carrying Value | |||||||||||||
Impaired
mortgage loans with no valuation allowance recorded | $ | i 17 | $ | i 17 | $ | i — | $ | i 17 | ||||||||
Impaired
mortgage loans with valuation allowance recorded | i — | i — | i — | i — | ||||||||||||
Total
impaired mortgage loans | $ | i 17 | $ | i 17 | $ | i — | $ | i 17 | ||||||||
Impaired mortgage loans with no valuation allowance recorded | $ | i 17 | $ | i 17 | $ | i — | $ | i 17 | ||||||||
Impaired
mortgage loans with valuation allowance recorded | i — | i — | i — | i — | ||||||||||||
Total
impaired mortgage loans | $ | i 17 | $ | i 17 | $ | i — | $ | i 17 | ||||||||
The
Company’s average investment balance of impaired mortgage loans and the related interest income are reflected in the table below for the periods indicated (dollars in millions): | ||||||||||||||||
Three months ended June 30, | ||||||||||||||||
2020 | 2019 | |||||||||||||||
Average
Recorded Investment(1) | Interest Income | Average Recorded Investment(1) | Interest Income | |||||||||||||
Impaired mortgage loans with no valuation allowance recorded | $ | i 17 | $ | i — | $ | i 17 | $ | i — | ||||||||
Impaired
mortgage loans with valuation allowance recorded | i — | i — | i — | i — | ||||||||||||
Total
impaired mortgage loans | $ | i 17 | $ | i — | $ | i 17 | $ | i — | ||||||||
Six
months ended June 30, | ||||||||||||||||
2020 | 2019 | |||||||||||||||
Average Recorded Investment(1) | Interest Income | Average
Recorded Investment(1) | Interest Income | |||||||||||||
Impaired mortgage loans with no valuation allowance recorded | $ | i 17 | $ | i — | $ | i 22 | $ | i — | ||||||||
Impaired
mortgage loans with valuation allowance recorded | i — | i — | i — | i — | ||||||||||||
Total
impaired mortgage loans | $ | i 17 | $ | i — | $ | i 22 | $ | i — |
Limited partnership interests and real estate joint ventures | $ | i 1,204 | $ | i 1,134 | ||||
Lifetime
mortgages | i 787 | i 775 | ||||||
Derivatives | i 205 | i 117 | ||||||
FVO
contractholder-directed unit-linked investments | i 250 | i 260 | ||||||
Other | i 101 | i 77 | ||||||
Total
other invested assets | $ | i 2,547 | $ | i 2,363 |
Primary Underlying Risk | Notional | Carrying Value/Fair Value | Notional | Carrying
Value/Fair Value | ||||||||||||||||||||||
Amount | Assets | Liabilities | Amount | Assets | Liabilities | |||||||||||||||||||||
Derivatives
not designated as hedging instruments: | ||||||||||||||||||||||||||
Interest
rate swaps | Interest rate | $ | i 1,086 | $ | i 105 | $ | i 3 | $ | i 909 | $ | i 70 | $ | i 3 | |||||||||||||
Financial
futures | Equity | i 342 | i — | i — | i 307 | i — | i — | |||||||||||||||||||
Foreign
currency swaps | Foreign currency | i 150 | i — | i 21 | i 150 | i — | i 9 | |||||||||||||||||||
Foreign
currency forwards | Foreign currency | i 252 | i 1 | i — | i 175 | i 1 | i — | |||||||||||||||||||
CPI
swaps | CPI | i 569 | i 9 | i 52 | i 441 | i — | i 28 | |||||||||||||||||||
Credit
default swaps | Credit | i 1,327 | i 3 | i 1 | i 1,306 | i 5 | i — | |||||||||||||||||||
Equity
options | Equity | i 366 | i 38 | i — | i 364 | i 15 | i — | |||||||||||||||||||
Synthetic
GICs | Interest rate | i 14,888 | i — | i — | i 13,823 | i — | i — | |||||||||||||||||||
Embedded
derivatives in: | ||||||||||||||||||||||||||
Modco
or funds withheld arrangements | i — | i — | i 108 | i — | i 121 | i — | ||||||||||||||||||||
Indexed
annuity products | i — | i — | i 746 | i — | i — | i 767 | ||||||||||||||||||||
Variable
annuity products | i — | i — | i 184 | i — | i — | i 163 | ||||||||||||||||||||
Total
non-hedging derivatives | i 18,980 | i 156 | i 1,115 | i 17,475 | i 212 | i 970 | ||||||||||||||||||||
Derivatives
designated as hedging instruments: | ||||||||||||||||||||||||||
Interest
rate swaps | Foreign currency/Interest rate | i 489 | i 1 | i 41 | i 535 | i 1 | i 29 | |||||||||||||||||||
Foreign
currency swaps | Foreign currency | i 302 | i 23 | i 10 | i 342 | i 17 | i 2 | |||||||||||||||||||
Foreign
currency forwards | Foreign currency | i 1,092 | i 68 | i — | i 1,094 | i 28 | i 2 | |||||||||||||||||||
Total
hedging derivatives | i 1,883 | i 92 | i 51 | i 1,971 | i 46 | i 33 | ||||||||||||||||||||
Total
derivatives | $ | i 20,863 | $ | i 248 | $ | i 1,166 | $ | i 19,446 | $ | i 258 | $ | i 1,003 |
Type of Fair Value Hedge | Hedged Item | Gains
(Losses) Recognized for Derivatives | Gains (Losses) Recognized for Hedged Items | |||||||
Investment Related Gains (Losses) | ||||||||||
For the three months ended June 30, 2020: | ||||||||||
Foreign
currency swaps | Foreign-denominated fixed maturity securities | $ | i 15 | $ | ( i 13 | ) | ||||
For
the three months ended June 30, 2019: | ||||||||||
Foreign currency swaps | Foreign-denominated fixed maturity securities | $ | ( i 4 | ) | $ | i 1 | ||||
For
the six months ended June 30, 2020: | ||||||||||
Foreign currency swaps | Foreign-denominated fixed maturity securities | $ | ( i 8 | ) | $ | i 2 | ||||
For
the six months ended June 30, 2019: | ||||||||||
Foreign currency swaps | Foreign-denominated fixed maturity securities | $ | ( i 4 | ) | $ | i — |
Three months ended June
30, | ||||||||
2020 | 2019 | |||||||
Balance, beginning of period | $ | ( i 87 | ) | $ | ( i 2 | ) | ||
Gains
(losses) deferred in other comprehensive income (loss) | i 12 | ( i 13 | ) | |||||
Amounts
reclassified to investment income | i — | i — | ||||||
Amounts
reclassified to interest expense | i 1 | i — | ||||||
Balance,
end of period | $ | ( i 74 | ) | $ | ( i 15 | ) | ||
Six
months ended June 30, | ||||||||
2020 | 2019 | |||||||
Balance, beginning of period | $ | ( i 26 | ) | $ | i 9 | |||
Gains
(losses) deferred in other comprehensive income (loss) | ( i 49 | ) | ( i 23 | ) | ||||
Amounts
reclassified to investment income | i — | i — | ||||||
Amounts
reclassified to interest expense | i 1 | ( i 1 | ) | |||||
Balance,
end of period | $ | ( i 74 | ) | $ | ( i 15 | ) |
Derivative Type | Gain (Loss) Deferred in AOCI | Gain (Loss) Reclassified into Income from AOCI | ||||||||||
Investment
Income | Interest Expense | |||||||||||
For the three months ended June 30, 2020: | ||||||||||||
Interest rate | $ | ( i 1 | ) | $ | i — | $ | ( i 1 | ) | ||||
Currency/Interest
rate | i 13 | i — | i — | |||||||||
Total | $ | i 12 | $ | i — | $ | ( i 1 | ) | |||||
For
the three months ended June 30, 2019: | ||||||||||||
Interest rate | $ | ( i 10 | ) | $ | i — | $ | i — | |||||
Currency/Interest
rate | ( i 3 | ) | i — | i — | ||||||||
Total | $ | ( i 13 | ) | $ | i — | $ | i — | |||||
For
the six months ended June 30, 2020: | ||||||||||||
Interest rate | $ | ( i 36 | ) | $ | i — | $ | ( i 1 | ) | ||||
Currency/Interest
rate | ( i 13 | ) | i — | i — | ||||||||
Total | $ | ( i 49 | ) | $ | i — | $ | ( i 1 | ) | ||||
For
the six months ended June 30, 2019: | ||||||||||||
Interest rate | $ | ( i 22 | ) | $ | i — | $ | i 1 | |||||
Currency/Interest
rate | ( i 1 | ) | i — | i — | ||||||||
Total | $ | ( i 23 | ) | $ | i — | $ | i 1 |
Derivative Gains (Losses) Deferred in AOCI
| ||||||||||||||||
For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
Type of NIFO Hedge | 2020 | 2019 | 2020 | 2019 | ||||||||||||
Foreign
currency swaps | $ | ( i 6 | ) | $ | ( i 2 | ) | $ | i 9 | $ | ( i 10 | ) | |||||
Foreign
currency forwards | ( i 34 | ) | ( i 6 | ) | i 46 | ( i 24 | ) | |||||||||
Total | $ | ( i 40 | ) | $ | ( i 8 | ) | $ | i 55 | $ | ( i 34 | ) |
Gain (Loss) for the three months ended
June 30, | ||||||||||
Type of Non-hedging Derivative | Income Statement Location of Gain (Loss) | 2020 | 2019 | |||||||
Interest rate swaps | Investment related gains (losses), net | $ | i 3 | $ | i 34 | |||||
Financial
futures | Investment related gains (losses), net | ( i 48 | ) | ( i 8 | ) | |||||
Foreign
currency swaps | Investment related gains (losses), net | i 3 | ( i 6 | ) | ||||||
Foreign
currency forwards | Investment related gains (losses), net | i 1 | i — | |||||||
CPI
swaps | Investment related gains (losses), net | i 26 | ( i 7 | ) | ||||||
Credit
default swaps | Investment related gains (losses), net | i 17 | i 5 | |||||||
Equity
options | Investment related gains (losses), net | ( i 25 | ) | ( i 5 | ) | |||||
Longevity
swaps | Other revenues | i — | i 2 | |||||||
Mortality
swaps | Other revenues | i — | ( i 1 | ) | ||||||
Subtotal | ( i 23 | ) | i 14 | |||||||
Embedded
derivatives in: | ||||||||||
Modco or funds withheld arrangements | Investment related gains (losses), net | i 1 | i 5 | |||||||
Indexed
annuity products | Interest credited | ( i 7 | ) | ( i 8 | ) | |||||
Variable
annuity products | Investment related gains (losses), net | i 107 | ( i 18 | ) | ||||||
Total
non-hedging derivatives | $ | i 78 | $ | ( i 7 | ) | |||||
Gain (Loss) for the
six months ended June 30, | ||||||||||
Type of Non-hedging Derivative | Income Statement Location of Gain (Loss) | 2020 | 2019 | |||||||
Interest rate swaps | Investment related gains (losses), net | $ | i 109 | $ | i 58 | |||||
Financial
futures | Investment related gains (losses), net | ( i 4 | ) | ( i 30 | ) | |||||
Foreign
currency swaps | Investment related gains (losses), net | ( i 10 | ) | ( i 5 | ) | |||||
Foreign
currency forwards | Investment related gains (losses), net | ( i 2 | ) | i — | ||||||
CPI
swaps | Investment related gains (losses), net | ( i 14 | ) | ( i 16 | ) | |||||
Credit
default swaps | Investment related gains (losses), net | ( i 7 | ) | i 20 | ||||||
Equity
options | Investment related gains (losses), net | i 28 | ( i 28 | ) | ||||||
Longevity
swaps | Other revenues | i — | i 4 | |||||||
Mortality
swaps | Other revenues | i — | i — | |||||||
Subtotal | i 100 | i 3 | ||||||||
Embedded
derivatives in: | ||||||||||
Modco or funds withheld arrangements | Investment related gains (losses), net | ( i 229 | ) | i 3 | ||||||
Indexed
annuity products | Interest credited | ( i 1 | ) | ( i 5 | ) | |||||
Variable
annuity products | Investment related gains (losses), net | ( i 21 | ) | i — | ||||||
Total
non-hedging derivatives | $ | ( i 151 | ) | $ | i 1 |
Rating Agency Designation of Referenced Credit Obligations(1) | Estimated Fair Value of Credit Default Swaps | Maximum Amount of Future Payments under Credit Default Swaps(2) | Weighted Average Years to Maturity(3) | Estimated Fair Value of Credit Default
Swaps | Maximum Amount of Future Payments under Credit Default Swaps(2) | Weighted Average Years to Maturity(3) | ||||||||||||||
AAA/AA+/AA/AA-/A+/A/A- | ||||||||||||||||||||
Single
name credit default swaps | $ | i 1 | $ | i 87 | i 1.7 | $ | i 2 | $ | i 142 | i 1.7 | ||||||||||
Subtotal | i 1 | i 87 | i 1.7 | i 2 | i 142 | i 1.7 | ||||||||||||||
BBB+/BBB/BBB- | ||||||||||||||||||||
Single
name credit default swaps | i — | i 252 | i 1.8 | i 3 | i 291 | i 1.9 | ||||||||||||||
Credit
default swaps referencing indices | i 1 | i 988 | i 4.4 | i — | i 873 | i 4.7 | ||||||||||||||
Subtotal | i 1 | i 1,240 | i 3.9 | i 3 | i 1,164 | i 4.0 | ||||||||||||||
Total | $ | i 2 | $ | i 1,327 | i 3.7 | $ | i 5 | $ | i 1,306 | i 3.7 |
(1) | The
rating agency designations are based on ratings from Standard and Poor’s (“S&P”). |
(2) | Assumes the value of the referenced credit obligations is zero. |
(3) | The weighted average years to maturity of the credit default swaps is calculated based on weighted average notional amounts. |
Gross
Amounts Not Offset in the Balance Sheet | ||||||||||||||||||||||||
Gross Amounts Recognized | Gross Amounts Offset in the Balance Sheet | Net Amounts Presented in the Balance Sheet | Financial
Instruments (1) | Cash Collateral Pledged/ Received | Net Amount | |||||||||||||||||||
Derivative
assets | $ | i 248 | $ | ( i 43 | ) | $ | i 205 | $ | i — | $ | ( i 205 | ) | $ | i — | ||||||||||
Derivative
liabilities | i 128 | ( i 43 | ) | i 85 | ( i 128 | ) | ( i 89 | ) | ( i 132 | ) | ||||||||||||||
Derivative assets | $ | i 137 | $ | ( i 20 | ) | $ | i 117 | $ | i — | $ | ( i 119 | ) | $ | ( i 2 | ) | |||||||||
Derivative
liabilities | i 73 | ( i 20 | ) | i 53 | ( i 92 | ) | ( i 52 | ) | ( i 91 | ) |
(1) | Includes
initial margin posted to a central clearing partner. |
Fair Value Measurements Using: | ||||||||||||||||
Total | Level 1 | Level 2 | Level
3 | |||||||||||||
Assets: | ||||||||||||||||
Fixed maturity securities – available-for-sale: | ||||||||||||||||
Corporate | $ | i 32,570 | $ | i — | $ | i 30,262 | $ | i 2,308 | ||||||||
Canadian
government | i 4,858 | i — | i 4,858 | i — | ||||||||||||
RMBS | i 2,065 | i — | i 2,061 | i 4 | ||||||||||||
ABS | i 2,731 | i — | i 2,623 | i 108 | ||||||||||||
CMBS | i 1,851 | i — | i 1,810 | i 41 | ||||||||||||
U.S.
government | i 1,639 | i 1,528 | i 96 | i 15 | ||||||||||||
State
and political subdivisions | i 1,184 | i — | i 1,175 | i 9 | ||||||||||||
Other
foreign government | i 5,448 | i — | i 5,431 | i 17 | ||||||||||||
Total
fixed maturity securities – available-for-sale | i 52,346 | i 1,528 | i 48,316 | i 2,502 | ||||||||||||
Equity
securities | i 130 | i 68 | i — | i 62 | ||||||||||||
Funds
withheld at interest – embedded derivatives | ( i 108 | ) | i — | i — | ( i 108 | ) | ||||||||||
Cash
equivalents | i 2,945 | i 2,945 | i — | i — | ||||||||||||
Short-term
investments | i 35 | i 17 | i 13 | i 5 | ||||||||||||
Other
invested assets: | ||||||||||||||||
Derivatives | i 205 | i — | i 205 | i — | ||||||||||||
FVO
contractholder-directed unit-linked investments | i 250 | i 192 | i 58 | i — | ||||||||||||
Other | i 2 | i — | i 2 | i — | ||||||||||||
Total
other invested assets | i 457 | i 192 | i 265 | i — | ||||||||||||
Total | $ | i 55,805 | $ | i 4,750 | $ | i 48,594 | $ | i 2,461 | ||||||||
Liabilities: | ||||||||||||||||
Interest-sensitive
contract liabilities – embedded derivatives | $ | i 930 | $ | i — | $ | i — | $ | i 930 | ||||||||
Other
liabilities: | ||||||||||||||||
Derivatives | i 85 | i — | i 85 | i — | ||||||||||||
Total | $ | i 1,015 | $ | i — | $ | i 85 | $ | i 930 |
Fair Value Measurements Using: | ||||||||||||||||
Total | Level
1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Fixed
maturity securities – available-for-sale: | ||||||||||||||||
Corporate | $ | i 31,393 | $ | i — | $ | i 29,207 | $ | i 2,186 | ||||||||
Canadian
government | i 4,612 | i — | i 3,908 | i 704 | ||||||||||||
RMBS | i 2,398 | i — | i 2,349 | i 49 | ||||||||||||
ABS | i 2,978 | i — | i 2,865 | i 113 | ||||||||||||
CMBS | i 1,899 | i — | i 1,853 | i 46 | ||||||||||||
U.S.
government | i 2,152 | i 2,030 | i 106 | i 16 | ||||||||||||
State
and political subdivisions | i 1,164 | i — | i 1,155 | i 9 | ||||||||||||
Other
foreign government | i 4,525 | i — | i 4,509 | i 16 | ||||||||||||
Total
fixed maturity securities – available-for-sale | i 51,121 | i 2,030 | i 45,952 | i 3,139 | ||||||||||||
Equity
securities | i 320 | i 243 | i — | i 77 | ||||||||||||
Funds
withheld at interest – embedded derivatives | i 121 | i — | i — | i 121 | ||||||||||||
Cash
equivalents | i 274 | i 274 | i — | i — | ||||||||||||
Short-term
investments | i 32 | i 4 | i 26 | i 2 | ||||||||||||
Other
invested assets: | ||||||||||||||||
Derivatives | i 117 | i — | i 117 | i — | ||||||||||||
FVO
contractholder-directed unit-linked investments | i 260 | i 207 | i 53 | i — | ||||||||||||
Other | i — | i — | i — | i — | ||||||||||||
Total
other invested assets | i 377 | i 207 | i 170 | i — | ||||||||||||
Total | $ | i 52,245 | $ | i 2,758 | $ | i 46,148 | $ | i 3,339 | ||||||||
Liabilities: | ||||||||||||||||
Interest-sensitive
contract liabilities – embedded derivatives | $ | i 930 | $ | i — | $ | i — | $ | i 930 | ||||||||
Other
liabilities: | ||||||||||||||||
Derivatives | i 53 | i — | i 53 | i — | ||||||||||||
Total | $ | i 983 | $ | i — | $ | i 53 | $ | i 930 |
Estimated Fair Value | Valuation Technique | Unobservable
Inputs | Range (Weighted Average) | ||||||||||||||
Assets: | |||||||||||||||||
Corporate | $ | i 1,155 | $ | i 1,070 | Market
comparable securities | Liquidity premium | 0-2% (1%) | 0-2% (1%) | |||||||||
EBITDA
Multiple | 5.2x-8.0x (6.9x) | 5.2x-7.1x (6.5x) | |||||||||||||||
ABS | i 88 | i 101 | Market
comparable securities | Liquidity premium | 1-18% (3%) | 0-4% (1%) | |||||||||||
U.S. government | i 15 | i 16 | Market
comparable securities | Liquidity premium | 0-1% (1%) | 0-1% (1%) | |||||||||||
Other foreign government | i 17 | i 16 | Market
comparable securities | Liquidity premium | 0-1% (1%) | 0-1% (1%) | |||||||||||
Equity securities | i 32 | i 32 | Market
comparable securities | Liquidity premium | 4 | % | 4 | % | |||||||||
EBITDA
Multiple | 6.9x-10.6x (8.0x) | 6.9x-9.3x (7.8x) | |||||||||||||||
Funds
withheld at interest – embedded derivatives | ( i 108 | ) | i 121 | Total
return swap | Mortality | 0-100% (2%) | 0-100% (2%) | ||||||||||
Lapse | 0-35% (14%) | 0-35% (13%) | |||||||||||||||
Withdrawal | 0-5% (3%) | 0-5% (3%) | |||||||||||||||
CVA | 0-5% (2%) | 0-5% (1%) | |||||||||||||||
Crediting
rate | 2-4% (2%) | 2-4% (2%) | |||||||||||||||
Liabilities: | |||||||||||||||||
Interest-sensitive
contract liabilities – embedded derivatives – indexed annuities | i 746 | i 768 | Discounted
cash flow | Mortality | 0-100% (2%) | 0-100% (2%) | |||||||||||
Lapse | 0-35%
(14%) | 0-35% (10%) | |||||||||||||||
Withdrawal | 0-5% (3%) | 0-5%
(3%) | |||||||||||||||
Option budget projection | 2-4% (2%) | 2-4%
(2%) | |||||||||||||||
Interest-sensitive contract liabilities – embedded derivatives – variable annuities | i 184 | i 163 | Discounted cash flow | Mortality | 0-100% (2%) | 0-100%
(1%) | |||||||||||
Lapse | 0-25% (5%) | 0-25%
(5%) | |||||||||||||||
Withdrawal | 0-7% (5%) | 0-7% (5%) | |||||||||||||||
CVA | 0-5% (2%) | 0-5%
(1%) | |||||||||||||||
Long-term volatility | 0-27% (12%) | 0-27%
(12%) |
For
the three months ended June 30, 2020: | Fixed maturity securities - available-for-sale | Funds withheld at interest – embedded derivatives | Other assets and liabilities, net
– longevity and mortality swaps | Interest-sensitive contract liabilities – embedded derivatives | ||||||||||||||||||||||||||||||||
Corporate | Foreign govt | Structured securities | U.S.
and local govt | Equity securities | Short-term investments | |||||||||||||||||||||||||||||||
Fair value, beginning of period | $ | i 2,197 | $ | i 15 | $ | i 144 | $ | i 25 | $ | i 56 | $ | i 1 | $ | ( i 109 | ) | $ | i — | $ | ( i 1,042 | ) | ||||||||||||||||
Total
gains/losses (realized/unrealized) | ||||||||||||||||||||||||||||||||||||
Included
in earnings, net: | ||||||||||||||||||||||||||||||||||||
Investment
income, net of related expenses | i — | i — | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Investment
related gains (losses), net | ( i 14 | ) | i — | i — | i — | i 3 | i — | i 1 | i — | i 106 | ||||||||||||||||||||||||||
Interest
credited | i — | i — | i — | i — | i — | i — | i — | i — | ( i 7 | ) | ||||||||||||||||||||||||||
Included
in other comprehensive income | i 112 | i 2 | i 17 | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Other
revenues | i — | i — | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Purchases(1) | i 79 | i — | i 15 | i — | i 3 | i 5 | i — | i — | ( i 8 | ) | ||||||||||||||||||||||||||
Sales(1) | ( i 18 | ) | i — | ( i 3 | ) | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||
Settlements(1) | ( i 44 | ) | i — | ( i 18 | ) | ( i 1 | ) | i — | ( i 1 | ) | i — | i — | i 21 | |||||||||||||||||||||||
Transfers
into Level 3 | i — | i — | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Transfers
out of Level 3 | ( i 4 | ) | i — | ( i 2 | ) | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||
Fair
value, end of period | $ | i 2,308 | $ | i 17 | $ | i 153 | $ | i 24 | $ | i 62 | $ | i 5 | $ | ( i 108 | ) | $ | i — | $ | ( i 930 | ) | ||||||||||||||||
Unrealized
gains and losses recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period | ||||||||||||||||||||||||||||||||||||
Included in earnings, net: | ||||||||||||||||||||||||||||||||||||
Investment
income, net of related expenses | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | ||||||||||||||||||
Investment
related gains (losses), net | ( i 15 | ) | i — | i — | i — | i 3 | i — | i 1 | i — | i 103 | ||||||||||||||||||||||||||
Other
revenues | i — | i — | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Interest
credited | i — | i — | i — | i — | i — | i — | i — | i — | ( i 27 | ) | ||||||||||||||||||||||||||
Included
in other comprehensive income | i 111 | i 2 | i 16 | i — | i — | i — | i — | i — | i — |
For
the six months ended June 30, 2020: | Fixed maturity securities - available-for-sale | Funds withheld at interest – embedded derivatives | Other assets and liabilities, net –
longevity and mortality swaps | Interest-sensitive contract liabilities – embedded derivatives | ||||||||||||||||||||||||||||||||
Corporate | Foreign govt | Structured securities | U.S.
and local govt | Equity securities | Short-term investments | |||||||||||||||||||||||||||||||
Fair value, beginning of period | $ | i 2,186 | $ | i 720 | $ | i 208 | $ | i 25 | $ | i 77 | $ | i 2 | $ | i 121 | $ | i — | $ | ( i 930 | ) | |||||||||||||||||
Total
gains/losses (realized/unrealized) | ||||||||||||||||||||||||||||||||||||
Included
in earnings, net: | ||||||||||||||||||||||||||||||||||||
Investment
income, net of related expenses | i 1 | i — | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Investment
related gains (losses), net | ( i 25 | ) | i — | i — | i — | ( i 4 | ) | i — | ( i 229 | ) | i — | ( i 22 | ) | |||||||||||||||||||||||
Interest
credited | i — | i — | i — | i — | i — | i — | i — | i — | ( i 1 | ) | ||||||||||||||||||||||||||
Included
in other comprehensive income | ( i 3 | ) | i 1 | ( i 10 | ) | i 1 | i — | i — | i — | i — | i — | |||||||||||||||||||||||||
Other
revenues | i — | i — | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Purchases(1) | i 310 | i — | i 24 | i — | i 3 | i 5 | i — | i — | ( i 19 | ) | ||||||||||||||||||||||||||
Sales(1) | ( i 62 | ) | i — | ( i 4 | ) | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||
Settlements(1) | ( i 96 | ) | i — | ( i 31 | ) | ( i 2 | ) | i — | ( i 1 | ) | i — | i — | i 42 | |||||||||||||||||||||||
Transfers
into Level 3 | i 1 | i — | i 21 | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Transfers
out of Level 3 | ( i 4 | ) | ( i 704 | ) | ( i 55 | ) | i — | ( i 14 | ) | ( i 1 | ) | i — | i — | i — | ||||||||||||||||||||||
Fair
value, end of period | $ | i 2,308 | $ | i 17 | $ | i 153 | $ | i 24 | $ | i 62 | $ | i 5 | $ | ( i 108 | ) | $ | i — | $ | ( i 930 | ) | ||||||||||||||||
Unrealized
gains and losses recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period | ||||||||||||||||||||||||||||||||||||
Included in earnings, net: | ||||||||||||||||||||||||||||||||||||
Investment
income, net of related expenses | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | ||||||||||||||||||
Investment
related gains (losses), net | ( i 26 | ) | i — | i — | i — | ( i 4 | ) | i — | ( i 229 | ) | i — | ( i 27 | ) | |||||||||||||||||||||||
Other
revenues | i — | i — | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Claims
& other policy benefits | i — | i — | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Interest
credited | i — | i — | i — | i — | i — | i — | i — | i — | ( i 43 | ) | ||||||||||||||||||||||||||
Included
in other comprehensive income | ( i 29 | ) | i 1 | ( i 11 | ) | i 1 | i — | i — | i — | i — | i — |
For
the three months ended June 30, 2019: | Fixed maturity securities - available-for-sale | Funds withheld at interest – embedded derivatives | Other assets and liabilities, net
– longevity and mortality swaps | Interest-sensitive contract liabilities – embedded derivatives | ||||||||||||||||||||||||||||||||
Corporate | Foreign govt | Structured securities | U.S.
and local govt | Equity securities | Short-term investments | |||||||||||||||||||||||||||||||
Fair value, beginning of period | $ | i 1,531 | $ | i 613 | $ | i 120 | $ | i 27 | $ | i 40 | $ | i 29 | $ | i 108 | $ | i 49 | $ | ( i 904 | ) | |||||||||||||||||
Total
gains/losses (realized/unrealized) | ||||||||||||||||||||||||||||||||||||
Included
in earnings, net: | ||||||||||||||||||||||||||||||||||||
Investment
income, net of related expenses | i — | i 3 | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Investment
related gains (losses), net | i — | i — | i — | i — | i 2 | i — | i 5 | i — | ( i 18 | ) | ||||||||||||||||||||||||||
Interest
credited | i — | i — | i — | i — | i — | i — | i — | i — | ( i 8 | ) | ||||||||||||||||||||||||||
Included
in other comprehensive income | i 17 | i 61 | i 1 | i 1 | i — | i — | i — | i 1 | i — | |||||||||||||||||||||||||||
Other
revenues | i — | i — | i — | i — | i — | i — | i — | i 1 | i 3 | |||||||||||||||||||||||||||
Purchases(1) | i 176 | i 10 | i 12 | i — | i 3 | i 1 | i — | i — | i — | |||||||||||||||||||||||||||
Sales(1) | ( i 14 | ) | i — | i — | i — | i — | ( i 1 | ) | i — | i — | i — | |||||||||||||||||||||||||
Settlements(1) | ( i 81 | ) | i — | ( i 14 | ) | ( i 1 | ) | i — | ( i 1 | ) | i — | i — | i 19 | |||||||||||||||||||||||
Transfers
into Level 3 | i 16 | i — | i 7 | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Transfers
out of Level 3 | ( i 1 | ) | i — | i — | i — | i — | i — | i — | i — | i — | ||||||||||||||||||||||||||
Fair
value, end of period | $ | i 1,644 | $ | i 687 | $ | i 126 | $ | i 27 | $ | i 45 | $ | i 28 | $ | i 113 | $ | i 51 | $ | ( i 908 | ) | |||||||||||||||||
Unrealized
gains and losses recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period | ||||||||||||||||||||||||||||||||||||
Included in earnings, net: | ||||||||||||||||||||||||||||||||||||
Investment
income, net of related expenses | $ | i — | $ | i 4 | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | ||||||||||||||||||
Investment
related gains (losses), net | i — | i — | i — | i — | i 2 | i — | i 5 | i — | ( i 20 | ) | ||||||||||||||||||||||||||
Other
revenues | i — | i — | i — | i — | i — | i — | i — | i 1 | i — | |||||||||||||||||||||||||||
Interest
credited | i — | i — | i — | i — | i — | i — | i — | i — | ( i 28 | ) |
For
the six months ended June 30, 2019: | Fixed maturity securities - available-for-sale | Funds withheld at interest – embedded derivatives | Other assets and liabilities, net –
longevity and mortality swaps | Interest-sensitive contract liabilities – embedded derivatives | ||||||||||||||||||||||||||||||||
Corporate | Foreign govt | Structured securities | U.S.
and local govt | Equity securities | Short-term investments | |||||||||||||||||||||||||||||||
Fair value, beginning of period | $ | i 1,331 | $ | i 533 | $ | i 103 | $ | i 28 | $ | i 33 | $ | i 2 | $ | i 110 | $ | i 47 | $ | ( i 945 | ) | |||||||||||||||||
Total
gains/losses (realized/unrealized) | ||||||||||||||||||||||||||||||||||||
Included
in earnings, net: | ||||||||||||||||||||||||||||||||||||
Investment
income, net of related expenses | i — | i 7 | i — | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Investment
related gains (losses), net | i — | i — | i — | i — | i 6 | i — | i 3 | i — | i — | |||||||||||||||||||||||||||
Interest
credited | i — | i — | i — | i — | i — | i — | i — | i — | ( i 5 | ) | ||||||||||||||||||||||||||
Included
in other comprehensive income | i 36 | i 137 | i 2 | i 1 | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Other
revenues | i — | i — | i — | i — | i — | i — | i — | i 4 | i — | |||||||||||||||||||||||||||
Purchases(1) | i 391 | i 10 | i 43 | i — | i 6 | i 28 | i — | i — | i 4 | |||||||||||||||||||||||||||
Sales(1) | ( i 25 | ) | i — | i — | i — | i — | ( i 1 | ) | i — | i — | i — | |||||||||||||||||||||||||
Settlements(1) | ( i 104 | ) | i — | ( i 29 | ) | ( i 2 | ) | i — | ( i 1 | ) | i — | i — | i 38 | |||||||||||||||||||||||
Transfers
into Level 3 | i 16 | i — | i 7 | i — | i — | i — | i — | i — | i — | |||||||||||||||||||||||||||
Transfers
out of Level 3 | ( i 1 | ) | i — | i — | i — | i — | i — | i — | i — | i — | ||||||||||||||||||||||||||
Fair
value, end of period | $ | i 1,644 | $ | i 687 | $ | i 126 | $ | i 27 | $ | i 45 | $ | i 28 | $ | i 113 | $ | i 51 | $ | ( i 908 | ) | |||||||||||||||||
Unrealized
gains and losses recorded for the period relating to those Level 3 assets and liabilities that were still held at the end of the period | ||||||||||||||||||||||||||||||||||||
Included in earnings, net: | ||||||||||||||||||||||||||||||||||||
Investment
income, net of related expenses | $ | i — | $ | i 7 | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | $ | i — | ||||||||||||||||||
Investment
related gains (losses), net | i — | i — | i — | i — | i 6 | i — | i 3 | i — | ( i 3 | ) | ||||||||||||||||||||||||||
Other
revenues | i — | i — | i — | i — | i — | i — | i — | i 4 | i — | |||||||||||||||||||||||||||
Interest
credited | i — | i — | i — | i — | i — | i — | i — | i — | ( i 3 | ) |
(1) | The
amount reported within purchases, sales and settlements is the purchase price (for purchases) and the sales/settlement proceeds (for sales and settlements) based upon the actual date purchased or sold/settled. Items purchased and sold/settled in the same period are excluded from the rollforward. The Company had no issuances during the period. |
Carrying Value (1) | Estimated Fair Value | Fair Value Measurement Using: | ||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | NAV | |||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Mortgage
loans on real estate | $ | i 5,974 | $ | i 6,225 | $ | i — | $ | i — | $ | i 6,225 | $ | i — | ||||||||||||
Policy
loans | i 1,310 | i 1,310 | i — | i 1,310 | i — | i — | ||||||||||||||||||
Funds
withheld at interest | i 5,344 | i 5,605 | i — | i — | i 5,605 | i — | ||||||||||||||||||
Cash
and cash equivalents | i 1,368 | i 1,368 | i 1,368 | i — | i — | i — | ||||||||||||||||||
Short-term
investments | i 49 | i 49 | i 49 | i — | i — | i — | ||||||||||||||||||
Other
invested assets | i 1,300 | i 1,385 | i 4 | i 91 | i 896 | i 394 | ||||||||||||||||||
Accrued
investment income | i 494 | i 494 | i — | i 494 | i — | i — | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Interest-sensitive
contract liabilities | $ | i 17,945 | $ | i 18,659 | $ | i — | $ | i — | $ | i 18,659 | $ | i — | ||||||||||||
Long-term
debt | i 3,573 | i 3,661 | i — | i — | i 3,661 | i — | ||||||||||||||||||
Collateral
finance and securitization notes | i 433 | i 391 | i — | i — | i 391 | i — | ||||||||||||||||||
Carrying Value (1) | Estimated Fair Value | Fair Value Measurement Using: | ||||||||||||||||||||||
Level 1 | Level 2 | Level
3 | NAV | |||||||||||||||||||||
Assets: | ||||||||||||||||||||||||
Mortgage
loans on real estate | $ | i 5,706 | $ | i 5,935 | $ | i — | $ | i — | $ | i 5,935 | $ | i — | ||||||||||||
Policy
loans | i 1,319 | i 1,319 | i — | i 1,319 | i — | i — | ||||||||||||||||||
Funds
withheld at interest | i 5,526 | i 5,870 | i — | i — | i 5,870 | i — | ||||||||||||||||||
Cash
and cash equivalents | i 1,175 | i 1,175 | i 1,175 | i — | i — | i — | ||||||||||||||||||
Short-term
investments | i 32 | i 32 | i 32 | i — | i — | i — | ||||||||||||||||||
Other
invested assets | i 1,259 | i 1,278 | i 5 | i 68 | i 803 | i 402 | ||||||||||||||||||
Accrued
investment income | i 493 | i 493 | i — | i 493 | i — | i — | ||||||||||||||||||
Liabilities: | ||||||||||||||||||||||||
Interest-sensitive
contract liabilities | $ | i 19,163 | $ | i 21,542 | $ | i — | $ | i — | $ | i 21,542 | $ | i — | ||||||||||||
Long-term
debt | i 2,981 | i 3,179 | i — | i — | i 3,179 | i — | ||||||||||||||||||
Collateral
finance and securitization notes | i 598 | i 551 | i — | i — | i 551 | i — |
(1) | Carrying
values presented herein may differ from those in the Company’s condensed consolidated balance sheets because certain items within the respective financial statement captions may be measured at fair value on a recurring basis. |
7. | i Segment
Information |
Three
months ended June 30, | Six months ended June 30, | |||||||||||||||
Revenues: | 2020 | 2019 | 2020 | 2019 | ||||||||||||
U.S. and Latin America: | ||||||||||||||||
Traditional | $ | i 1,642 | $ | i 1,584 | $ | i 3,175 | $ | i 3,125 | ||||||||
Financial
Solutions | i 323 | i 302 | i 462 | i 556 | ||||||||||||
Total | i 1,965 | i 1,886 | i 3,637 | i 3,681 | ||||||||||||
Canada: | ||||||||||||||||
Traditional | i 311 | i 318 | i 607 | i 630 | ||||||||||||
Financial
Solutions | i 22 | i 24 | i 46 | i 48 | ||||||||||||
Total | i 333 | i 342 | i 653 | i 678 | ||||||||||||
Europe,
Middle East and Africa: | ||||||||||||||||
Traditional | i 371 | i 370 | i 778 | i 754 | ||||||||||||
Financial
Solutions | i 136 | i 114 | i 214 | i 223 | ||||||||||||
Total | i 507 | i 484 | i 992 | i 977 | ||||||||||||
Asia
Pacific: | ||||||||||||||||
Traditional | i 636 | i 634 | i 1,303 | i 1,307 | ||||||||||||
Financial
Solutions | i 75 | i 59 | i 143 | i 114 | ||||||||||||
Total | i 711 | i 693 | i 1,446 | i 1,421 | ||||||||||||
Corporate
and Other | i 90 | i 62 | i 82 | i 130 | ||||||||||||
Total | $ | i 3,606 | $ | i 3,467 | $ | i 6,810 | $ | i 6,887 |
Three
months ended June 30, | Six months ended June 30, | |||||||||||||||
Income (loss) before income taxes: | 2020 | 2019 | 2020 | 2019 | ||||||||||||
U.S. and Latin America: | ||||||||||||||||
Traditional | $ | ( i 158 | ) | $ | i 55 | $ | ( i 220 | ) | $ | i 67 | ||||||
Financial
Solutions | i 117 | i 92 | i 102 | i 175 | ||||||||||||
Total | ( i 41 | ) | i 147 | ( i 118 | ) | i 242 | ||||||||||
Canada: | ||||||||||||||||
Traditional | i 44 | i 46 | i 67 | i 97 | ||||||||||||
Financial
Solutions | i 4 | i 4 | i 7 | i 5 | ||||||||||||
Total | i 48 | i 50 | i 74 | i 102 | ||||||||||||
Europe,
Middle East and Africa: | ||||||||||||||||
Traditional | i 16 | i 16 | i 33 | i 32 | ||||||||||||
Financial
Solutions | i 98 | i 52 | i 128 | i 90 | ||||||||||||
Total | i 114 | i 68 | i 161 | i 122 | ||||||||||||
Asia
Pacific: | ||||||||||||||||
Traditional | i 47 | i 34 | i 71 | i 71 | ||||||||||||
Financial
Solutions | i 26 | i 2 | i 1 | i 8 | ||||||||||||
Total | i 73 | i 36 | i 72 | i 79 | ||||||||||||
Corporate
and Other | i 1 | ( i 41 | ) | ( i 90 | ) | ( i 68 | ) | |||||||||
Total | $ | i 195 | $ | i 260 | $ | i 99 | $ | i 477 |
Assets: | ||||||||
U.S. and Latin America: | ||||||||
Traditional | $ | i 19,867 | $ | i 19,353 | ||||
Financial
Solutions | i 24,832 | i 25,117 | ||||||
Total | i 44,699 | i 44,470 | ||||||
Canada: | ||||||||
Traditional | i 4,282 | i 4,361 | ||||||
Financial
Solutions | i 19 | i 64 | ||||||
Total | i 4,301 | i 4,425 | ||||||
Europe,
Middle East and Africa: | ||||||||
Traditional | i 4,087 | i 4,032 | ||||||
Financial
Solutions | i 6,449 | i 6,502 | ||||||
Total | i 10,536 | i 10,534 | ||||||
Asia
Pacific: | ||||||||
Traditional | i 7,559 | i 6,800 | ||||||
Financial
Solutions | i 3,829 | i 2,557 | ||||||
Total | i 11,388 | i 9,357 | ||||||
Corporate
and Other | i 9,805 | i 7,945 | ||||||
Total | $ | i 80,729 | $ | i 76,731 |
Limited partnership interests and joint ventures | $ | i 656 | $ | i 685 | |||
Commercial
mortgage loans | i 70 | i 243 | |||||
Bank
loans and private placements | i 141 | i 181 | |||||
Lifetime
mortgages | i 69 | i 87 |
Commitment Period: | Maximum Potential Obligation | |
2035 | i 2,627 | |
2036 | i 3,408 | |
2037 | i 2,850 | |
2038 | i 2,300 | |
2039 | i 11,350 |
Treaty guarantees | $ | i 1,719 | $ | i 1,821 | |||
Treaty
guarantees, net of assets in trust | i 829 | i 891 | |||||
Securities
borrowing and repurchase arrangements | i 271 | i 275 | |||||
Financing
arrangements | i 24 | i 42 |
9. | i Income Tax |
Three
months ended June 30, | Six months ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Tax provision at U.S.
statutory rate | $ | i 41 | $ | i 55 | $ | i 21 | $ | i 100 | ||||||||
Increase
(decrease) in income taxes resulting from: | ||||||||||||||||
Tax rate differences on income in other jurisdictions | i 8 | i 1 | i 13 | i 1 | ||||||||||||
Differences
in tax bases in foreign jurisdictions | ( i 17 | ) | ( i 6 | ) | ( i 13 | ) | ( i 21 | ) | ||||||||
Deferred
tax valuation allowance | i 8 | i 5 | i 3 | i 23 | ||||||||||||
Amounts
related to uncertain tax positions | i 1 | i 2 | i 7 | i 3 | ||||||||||||
Corporate
rate changes | i — | i — | i — | ( i 2 | ) | |||||||||||
Equity
based compensation | i 1 | ( i 4 | ) | i — | ( i 5 | ) | ||||||||||
Return
to provision adjustments | ( i 2 | ) | i 3 | ( i 1 | ) | i 4 | ||||||||||
Accrued
Expenses | ( i 4 | ) | i 1 | ( i 1 | ) | i 1 | ||||||||||
Other,
net | i 1 | i 1 | i — | i 1 | ||||||||||||
Total
provision for income taxes | $ | i 37 | $ | i 58 | $ | i 29 | $ | i 105 | ||||||||
Effective
tax rate | i 18.9 | % | i 22.1 | % | i 28.6 | % | i 21.9 | % |
Pension
Benefits | Other Benefits | |||||||||||||||
Three months ended June 30, | Three months ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Service
cost | $ | i 4 | $ | i 3 | $ | i 1 | $ | i 1 | ||||||||
Interest
cost | i 1 | i 2 | i 1 | i 1 | ||||||||||||
Expected
return on plan assets | ( i 3 | ) | ( i 1 | ) | i — | i — | ||||||||||
Amortization
of prior service cost (credit) | i — | i — | ( i 1 | ) | ( i 1 | ) | ||||||||||
Amortization
of prior actuarial losses | i 1 | i 1 | i 1 | i — | ||||||||||||
Net
periodic benefit cost | $ | i 3 | $ | i 5 | $ | i 2 | $ | i 1 |
Pension
Benefits | Other Benefits | |||||||||||||||
Six months ended June 30, | Six months ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Service
cost | $ | i 7 | $ | i 6 | $ | i 1 | $ | i 2 | ||||||||
Interest
cost | i 3 | i 3 | i 2 | i 1 | ||||||||||||
Expected
return on plan assets | ( i 5 | ) | ( i 3 | ) | i — | i — | ||||||||||
Amortization
of prior service cost (credit) | i — | i — | ( i 1 | ) | ( i 1 | ) | ||||||||||
Amortization
of prior actuarial losses | i 2 | i 2 | i 1 | i 1 | ||||||||||||
Net
periodic benefit cost | $ | i 7 | $ | i 8 | $ | i 3 | $ | i 3 |
11. | i Reinsurance |
Reinsurer | A.M. Best Rating | Amount | % of Total | Amount | %
of Total | |||||||||||
Reinsurer A | A+ | $ | i 400 | i 42.3 | % | $ | i 367 | i 40.6 | % | |||||||
Reinsurer
B | A+ | i 201 | i 21.3 | i 208 | i 23.0 | |||||||||||
Reinsurer
C | A | i 70 | i 7.4 | i 84 | i 9.3 | |||||||||||
Reinsurer
D | A++ | i 49 | i 5.2 | i 53 | i 5.9 | |||||||||||
Reinsurer
E | A+ | i 46 | i 4.9 | i 43 | i 4.8 | |||||||||||
Other
reinsurers | i 179 | i 18.9 | i 149 | i 16.4 | ||||||||||||
Total | $ | i 945 | i 100.0 | % | $ | i 904 | i 100.0 | % |
12. | i Policy
Claims and Benefits |
Six
months ended June 30, | ||||||||
2020 | 2019 | |||||||
Balance at beginning of year | $ | i 6,786 | $ | i 6,585 | ||||
Less:
reinsurance recoverable | ( i 564 | ) | ( i 433 | ) | ||||
Net
balance at beginning of year | i 6,222 | i 6,152 | ||||||
Incurred: | ||||||||
Current
year | i 5,740 | i 5,457 | ||||||
Prior
years | i 59 | i 58 | ||||||
Total
incurred | i 5,799 | i 5,515 | ||||||
Payments: | ||||||||
Current
year | ( i 1,332 | ) | ( i 1,063 | ) | ||||
Prior
years | ( i 3,903 | ) | ( i 3,979 | ) | ||||
Total
payments | ( i 5,235 | ) | ( i 5,042 | ) | ||||
Other
changes: | ||||||||
Interest accretion | i 18 | i 13 | ||||||
Foreign
exchange adjustments | ( i 142 | ) | i 3 | |||||
Total
other changes | ( i 124 | ) | i 16 | |||||
Net
balance at end the period | i 6,662 | i 6,641 | ||||||
Plus:
reinsurance recoverable | i 633 | i 525 | ||||||
Balance
at end of the period | $ | i 7,295 | $ | i 7,166 |
13. | i Financing
Activities |
14. | i New Accounting Standards |
Description | Date
of Adoption | Effect on the Consolidated Financial Statements |
Standards adopted: | ||
Leases This new standard, based on the principle that entities should recognize assets and liabilities arising from leases, does not significantly change the lessees’ recognition, measurement and presentation of expenses and cash flows from the previous accounting standard. Leases are classified as finance or operating. The new standard’s primary change is the requirement for entities to recognize a lease liability for payments and a right of use asset representing the right to use the leased asset during the term
of operating lease arrangements. Lessees are permitted to make an accounting policy election to not recognize the asset and liability for leases with a term of twelve months or less. Lessors’ accounting is largely unchanged from the previous accounting standard. In addition, the new standard expands the disclosure requirements of lease arrangements. Early adoption is permitted. | This guidance was adopted by applying the optional transition method. The adoption of the standard did not have a material impact on the Company’s results of operations or financial position. The adoption of the updated guidance
resulted in the Company recognizing a right-to-use asset and lease liability of $55 million included in other assets and other liabilities, respectively, in the condensed consolidated balance sheets. | |
Derivatives and Hedging This updated guidance improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and make certain targeted improvements to simplify the application of the hedge accounting in current GAAP related to the assessment of hedge effectiveness. Early adoption is permitted. | This
guidance was adopted by applying a modified retrospective approach to existing hedging relationships as of the date of adoption. The adoption of the new standard did not have a material impact on the Company’s results of operations or financial position. Upon adoption of the guidance, the Company recorded an immaterial adjustment to retained earnings as of the beginning of the first reporting period in which the guidance was effective and modified some disclosures. | |
Financial Instruments – Credit Losses This guidance adds to U.S. GAAP an impairment model, known as current expected credit loss (“CECL”) model that is based on expected
losses rather than incurred losses. For traditional and other receivables, held-to-maturity debt securities, loans and other instruments entities will be required to use the new forward-looking “expected loss” model that generally will result in earlier recognition of allowance for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses similar to what they do today, except the losses will be recognized through an allowance for credit losses and adjusted each period for changes in credit risks. Early adoption is permitted. | For asset classes within the scope of the CECL model,
this guidance was adopted through a cumulative-effect adjustment to retained earnings (that is, a modified-retrospective approach). For available-for-sale debt securities, this guidance was applied prospectively. The allowance for credit losses increased when this guidance was adopted to include expected losses over the lifetime of commercial mortgages and other loans, including reasonable and supportable forecasts and expected changes in future economic conditions. The overall impact was an approximate $15 million increase in the allowance for credit losses. This increase was reflected as a decrease to opening retained earnings, net of income taxes, as of January 1, 2020. See Note 1 – “Business and Basis of Presentation” for more information. | |
Fair Value Measurement This guidance is part of
the FASB’s disclosure framework project and eliminates certain disclosure requirements for fair value measurement, requires entities to disclose new information and modifies existing disclosure requirements. Early adoption is permitted. | Certain disclosure changes in the new guidance were applied prospectively in the year of adoption. The remaining changes in the new guidance were applied retrospectively to all periods presented in the year of adoption. As of December 31, 2019, the
Company early adopted the guidance that removed the requirements relating to transfers between fair value hierarchy levels and certain disclosures about valuation processes for Level 3 fair value measurements. The Company adopted the remainder of the guidance on January 1, 2020. The adoption of the new guidance was not material to the Company’s financial position. | |
Reference Rate Reform On July 27, 2017, the Financial Conduct Authority (the “FCA”) announced that it intends to stop persuading or compelling banks to submit London Interbank Offered Rates (“LIBOR”) after December
31, 2021. In addition, separate workstreams are underway in Europe and the U.S. to reform existing reference rates and provide a fall back rate upon discontinuation of LIBOR. During 2019, the Alternative Rates Committee of the Federal Reserve Board proposed the Secured Overnight Financing Rate (“SOFR”) as an alternative rate to replace U.S. Dollar LIBOR, and the European Central Bank recommended the Euro Short-term Rate (“ESTER”) as the new risk-free rate. Other jurisdictions are conducting similar exercises as well. This new guidance eases the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. The ASU provides optional expedients and exceptions for applying GAAP modification to contracts and hedge accounting
relationships affected by reference rate reform on financial reporting. Under the new guidance, a change in the reference rate for a contract that meets certain criteria will be accounted for as a continuation of that contract rather than the creation of a new contract. The new guidance applies to debt, insurance contracts, leases, derivative contracts and other arrangements. | This guidance does not have any accounting consequences. The Company has put together a team that is currently assessing the effects of the discontinuation of LIBOR on existing contracts that extend beyond 2021, by analyzing contractual fallback provisions, evaluating alternative rate ramifications, and assessing the effects on current hedging strategies. |
Description | Anticipated Date of Adoption | Effect on the Consolidated Financial Statements |
Standards not yet adopted: | ||
Financial Services – Insurance This guidance
significantly changes how insurers account for long-duration insurance contracts. The new guidance also significantly expands the disclosure requirements of long-duration insurance contracts. The new guidance is currently effective for annual and interim reporting periods beginning January 1, 2022. The FASB has tentatively agreed to defer the effective date by one year. Upon issuance of a final standard, the new guidance will be effective for annual and interim periods beginning January 1, 2023. Below are the most significant areas of change: | See each significant area of change below for the method of adoption and expected impact to the Company’s results of operations and financial position. | |
Cash flow assumptions for measuring liability for future policy benefits The new guidance requires insurers to review, and if necessary, update the cash flow assumptions used to measure liabilities for future policy benefits periodically. The change in the liability estimate as a result of updating cash flow assumptions will be recognized in net income. | Cash flow assumptions for measuring
liability for future policy benefits The Company will likely adopt this guidance on a modified retrospective basis as of the earliest period presented in the year of adoption. The Company is currently evaluating the impact of this amendment on its results of operations and financial position but anticipates the updated guidance will likely have a material impact. | |
Discount rate assumption for measuring liability for future policy benefits The new guidance requires insurers to update the discount rate assumption used to measure liabilities for future policy benefits at each reporting period, and the discount rate utilized must be based on an upper-medium grade fixed income instrument
yield. The change in the liability estimate as a result of updating the discount rate assumption will be recognized in other comprehensive income. | Discount rate assumption for measuring liability for future policy benefits The Company will likely adopt this guidance on a modified retrospective basis as of the earliest period presented in the year of adoption. The Company is currently evaluating the impact of this amendment on its results of operations and financial position but anticipates the updated guidance will likely have a material impact. | |
Market risk benefits The
new guidance created a new category of benefit features called market risk benefits that will be measured at fair value with changes in fair value attributable to a change in the instrument-specific credit risk recognized in other comprehensive income. | Market risk benefits The Company will adopt this guidance on a retrospective basis as of the earliest period presented in the year of adoption. The Company is currently evaluating the impact of this amendment on its results of operations and financial position but anticipates the updated guidance will likely have a material impact. | |
Amortization
of deferred acquisition costs (“DAC”) and other balances The new guidance requires DAC and other balances to be amortized on a constant level basis over the expected term of the related contracts. | Amortization of deferred acquisition costs (“DAC”) and other balances The Company will likely adopt this guidance on a modified retrospective basis as of the earliest period presented in the year of adoption. The Company is currently evaluating the impact of this amendment on its results of operations and financial
position but anticipates the updated guidance will likely have a material impact. |
• | Holdings of cash and cash equivalents of $4.3 billion as of June 30, 2020, |
• | Cash
flows from investments, which is approximately $2 billion per year, |
• | Access to $850 million of cash through the Company’s committed syndicated credit facility, and |
• | Access to over $500 million of cash through the membership in the Federal Home Loan Bank of Des Moines. |
Three
months ended June 30, | Six months ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues: | (Dollars in
millions, except per share data) | |||||||||||||||
Net premiums | $ | 2,790 | $ | 2,764 | $ | 5,609 | $ | 5,502 | ||||||||
Investment
income, net of related expenses | 645 | 584 | 1,239 | 1,164 | ||||||||||||
Investment related gains
(losses), net: | ||||||||||||||||
Impairments and change in allowance for credit losses on fixed maturity securities | — | — | (34 | ) | (9 | ) | ||||||||||
Other
investment related gains (losses), net | 81 | 12 | (170 | ) | 29 | |||||||||||
Investment related gains
(losses), net | 81 | 12 | (204 | ) | 20 | |||||||||||
Other revenues | 90 | 107 | 166 | 201 | ||||||||||||
Total
revenues | 3,606 | 3,467 | 6,810 | 6,887 | ||||||||||||
Benefits and Expenses: | ||||||||||||||||
Claims
and other policy benefits | 2,700 | 2,516 | 5,364 | 5,024 | ||||||||||||
Interest credited | 187 | 158 | 333 | 291 | ||||||||||||
Policy
acquisition costs and other insurance expenses | 290 | 260 | 538 | 572 | ||||||||||||
Other operating
expenses | 188 | 222 | 383 | 424 | ||||||||||||
Interest expense | 42 | 43 | 83 | 83 | ||||||||||||
Collateral
finance and securitization expense | 4 | 8 | 10 | 16 | ||||||||||||
Total benefits and expenses | 3,411 | 3,207 | 6,711 | 6,410 | ||||||||||||
Income
before income taxes | 195 | 260 | 99 | 477 | ||||||||||||
Provision for income taxes | 37 | 58 | 29 | 105 | ||||||||||||
Net
income | $ | 158 | $ | 202 | $ | 70 | $ | 372 | ||||||||
Earnings
per share: | ||||||||||||||||
Basic earnings per share | $ | 2.49 | $ | 3.23 | $ | 1.12 | $ | 5.93 | ||||||||
Diluted
earnings per share | $ | 2.48 | $ | 3.18 | $ | 1.11 | $ | 5.83 |
Three
months ended June 30, | Six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Modco/Funds withheld: | |||||||||||||||
Unrealized
gains (losses) | $ | 1 | $ | 5 | $ | (229 | ) | $ | 3 | ||||||
Deferred
acquisition costs/retrocession | 2 | (5 | ) | 115 | (8 | ) | |||||||||
Net effect | 3 | — | (114 | ) | (5 | ) | |||||||||
EIAs: | |||||||||||||||
Unrealized
gains (losses) | (7 | ) | (19 | ) | (19 | ) | (20 | ) | |||||||
Deferred acquisition costs/retrocession | 2 | 10 | 10 | 10 | |||||||||||
Net
effect | (5 | ) | (9 | ) | (9 | ) | (10 | ) | |||||||
Guaranteed minimum benefit riders: | |||||||||||||||
Unrealized
gains (losses) | 107 | (18 | ) | (21 | ) | — | |||||||||
Related freestanding derivatives, net of deferred acquisition costs/retrocession | (70 | ) | 21 | 94 | 2 | ||||||||||
Net
effect | 37 | 3 | 73 | 2 | |||||||||||
Total net effect after freestanding derivatives | $ | 35 | $ | (6 | ) | $ | (50 | ) | $ | (13 | ) |
For
the three months ended June 30, 2020: | Financial Solutions | |||||||||||||||
(dollars in millions) | Asset-Intensive | Capital
Solutions | Total U.S. and Latin America | |||||||||||||
Traditional | ||||||||||||||||
Revenues: | ||||||||||||||||
Net
premiums | $ | 1,454 | $ | 15 | $ | — | $ | 1,469 | ||||||||
Investment
income, net of related expenses | 177 | 241 | 2 | 420 | ||||||||||||
Investment related gains
(losses), net | 7 | 15 | — | 22 | ||||||||||||
Other revenues | 4 | 24 | 26 | 54 | ||||||||||||
Total
revenues | 1,642 | 295 | 28 | 1,965 | ||||||||||||
Benefits and expenses: | ||||||||||||||||
Claims
and other policy benefits | 1,558 | 49 | — | 1,607 | ||||||||||||
Interest credited | 18 | 139 | — | 157 | ||||||||||||
Policy
acquisition costs and other insurance expenses | 195 | 7 | 2 | 204 | ||||||||||||
Other operating
expenses | 29 | 7 | 2 | 38 | ||||||||||||
Total benefits and expenses | 1,800 | 202 | 4 | 2,006 | ||||||||||||
Income
before income taxes | $ | (158 | ) | $ | 93 | $ | 24 | $ | (41 | ) | ||||||
For
the three months ended June 30, 2019: | Financial Solutions | |||||||||||||||
(dollars in millions) | Asset-Intensive | Capital
Solutions | Total U.S. and Latin America | |||||||||||||
Traditional | ||||||||||||||||
Revenues: | ||||||||||||||||
Net
premiums | $ | 1,410 | $ | 9 | $ | — | $ | 1,419 | ||||||||
Investment
income, net of related expenses | 173 | 204 | 1 | 378 | ||||||||||||
Investment related gains
(losses), net | (4 | ) | 17 | — | 13 | |||||||||||
Other revenues | 5 | 50 | 21 | 76 | ||||||||||||
Total
revenues | 1,584 | 280 | 22 | 1,886 | ||||||||||||
Benefits and expenses: | ||||||||||||||||
Claims
and other policy benefits | 1,293 | 49 | — | 1,342 | ||||||||||||
Interest credited | 19 | 124 | — | 143 | ||||||||||||
Policy
acquisition costs and other insurance expenses | 180 | 25 | (1 | ) | 204 | |||||||||||
Other operating expenses | 37 | 10 | 3 | 50 | ||||||||||||
Total
benefits and expenses | 1,529 | 208 | 2 | 1,739 | ||||||||||||
Income before income taxes | $ | 55 | $ | 72 | $ | 20 | $ | 147 |
For the six months ended June 30, 2020: | Financial Solutions | |||||||||||||||
(dollars
in millions) | Asset-Intensive | Capital Solutions | Total U.S. and Latin America | |||||||||||||
Traditional | ||||||||||||||||
Revenues: | ||||||||||||||||
Net
premiums | $ | 2,827 | $ | 27 | $ | — | $ | 2,854 | ||||||||
Investment
income, net of related expenses | 338 | 474 | 3 | 815 | ||||||||||||
Investment related gains
(losses), net | — | (145 | ) | — | (145 | ) | ||||||||||
Other revenues | 10 | 52 | 51 | 113 | ||||||||||||
Total
revenues | 3,175 | 408 | 54 | 3,637 | ||||||||||||
Benefits and expenses: | ||||||||||||||||
Claims
and other policy benefits | 2,925 | 102 | — | 3,027 | ||||||||||||
Interest credited | 37 | 268 | — | 305 | ||||||||||||
Policy
acquisition costs and other insurance expenses | 370 | (31 | ) | 2 | 341 | |||||||||||
Other operating expenses | 63 | 14 | 5 | 82 | ||||||||||||
Total
benefits and expenses | 3,395 | 353 | 7 | 3,755 | ||||||||||||
Income before income taxes | $ | (220 | ) | $ | 55 | $ | 47 | $ | (118 | ) | ||||||
For
the six months ended June 30, 2019: | Financial Solutions | |||||||||||||||
(dollars in millions) | Asset-Intensive | Capital
Solutions | Total U.S. and Latin America | |||||||||||||
Traditional | ||||||||||||||||
Revenues: | ||||||||||||||||
Net
premiums | $ | 2,767 | $ | 16 | $ | — | $ | 2,783 | ||||||||
Investment
income, net of related expenses | 359 | 401 | 2 | 762 | ||||||||||||
Investment related gains
(losses), net | (10 | ) | 18 | — | 8 | |||||||||||
Other revenues | 9 | 73 | 46 | 128 | ||||||||||||
Total
revenues | 3,125 | 508 | 48 | 3,681 | ||||||||||||
Benefits and expenses: | ||||||||||||||||
Claims
and other policy benefits | 2,593 | 97 | — | 2,690 | ||||||||||||
Interest credited | 39 | 213 | — | 252 | ||||||||||||
Policy
acquisition costs and other insurance expenses | 356 | 44 | 5 | 405 | ||||||||||||
Other operating
expenses | 70 | 17 | 5 | 92 | ||||||||||||
Total benefits and expenses | 3,058 | 371 | 10 | 3,439 | ||||||||||||
Income
before income taxes | $ | 67 | $ | 137 | $ | 38 | $ | 242 |
(dollars in millions) | Three months ended June 30, | Six months ended June
30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues: | ||||||||||||||||
Total
revenues | $ | 295 | $ | 280 | $ | 408 | $ | 508 | ||||||||
Less: | ||||||||||||||||
Embedded
derivatives – modco/funds withheld treaties | (7 | ) | 9 | (230 | ) | 14 | ||||||||||
Guaranteed minimum benefit
riders and related free standing derivatives | 39 | 4 | 113 | 1 | ||||||||||||
Revenues before
certain derivatives | 263 | 267 | 525 | 493 | ||||||||||||
Benefits and expenses: | ||||||||||||||||
Total
benefits and expenses | 202 | 208 | 353 | 371 | ||||||||||||
Less: | ||||||||||||||||
Embedded
derivatives – modco/funds withheld treaties | (2 | ) | 6 | (115 | ) | 8 | ||||||||||
Guaranteed minimum benefit
riders and related free standing derivatives | 2 | 1 | 40 | (1 | ) | |||||||||||
Equity-indexed annuities | 5 | 9 | 9 | 10 | ||||||||||||
Benefits
and expenses before certain derivatives | 197 | 192 | 419 | 354 | ||||||||||||
Income before
income taxes: | ||||||||||||||||
Income before income taxes | 93 | 72 | 55 | 137 | ||||||||||||
Less: | ||||||||||||||||
Embedded
derivatives – modco/funds withheld treaties | (5 | ) | 3 | (115 | ) | 6 | ||||||||||
Guaranteed minimum benefit
riders and related free standing derivatives | 37 | 3 | 73 | 2 | ||||||||||||
Equity-indexed annuities | (5 | ) | (9 | ) | (9 | ) | (10 | ) | ||||||||
Income
before income taxes and certain derivatives | $ | 66 | $ | 75 | $ | 106 | $ | 139 |
(dollars
in millions) | Three months ended June 30, | ||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||
Revenues: | Traditional | Financial Solutions | Total Canada | Traditional | Financial
Solutions | Total Canada | |||||||||||||||||
Net premiums | $ | 254 | $ | 20 | $ | 274 | $ | 264 | $ | 23 | $ | 287 | |||||||||||
Investment
income, net of related expenses | 50 | — | 50 | 51 | — | 51 | |||||||||||||||||
Investment
related gains (losses), net | 6 | — | 6 | 3 | — | 3 | |||||||||||||||||
Other
revenues | 1 | 2 | 3 | — | 1 | 1 | |||||||||||||||||
Total
revenues | 311 | 22 | 333 | 318 | 24 | 342 | |||||||||||||||||
Benefits
and expenses: | |||||||||||||||||||||||
Claims and other policy benefits | 216 | 17 | 233 | 206 | 20 | 226 | |||||||||||||||||
Interest
credited | — | — | — | — | — | — | |||||||||||||||||
Policy
acquisition costs and other insurance expenses | 42 | 1 | 43 | 57 | 1 | 58 | |||||||||||||||||
Other
operating expenses | 9 | — | 9 | 9 | (1 | ) | 8 | ||||||||||||||||
Total
benefits and expenses | 267 | 18 | 285 | 272 | 20 | 292 | |||||||||||||||||
Income
before income taxes | $ | 44 | $ | 4 | $ | 48 | $ | 46 | $ | 4 | $ | 50 |
(dollars
in millions) | Six months ended June 30, | ||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||
Revenues: | Traditional | Financial Solutions | Total Canada | Traditional | Financial
Solutions | Total Canada | |||||||||||||||||
Net premiums | $ | 514 | $ | 41 | $ | 555 | $ | 519 | $ | 45 | $ | 564 | |||||||||||
Investment
income, net of related expenses | 99 | 1 | 100 | 100 | 1 | 101 | |||||||||||||||||
Investment
related gains (losses), net | (6 | ) | — | (6 | ) | 10 | — | 10 | |||||||||||||||
Other
revenues | — | 4 | 4 | 1 | 2 | 3 | |||||||||||||||||
Total
revenues | 607 | 46 | 653 | 630 | 48 | 678 | |||||||||||||||||
Benefits
and expenses: | |||||||||||||||||||||||
Claims and other policy benefits | 436 | 37 | 473 | 406 | 41 | 447 | |||||||||||||||||
Interest
credited | — | — | — | — | — | — | |||||||||||||||||
Policy
acquisition costs and other insurance expenses | 87 | 1 | 88 | 111 | 1 | 112 | |||||||||||||||||
Other
operating expenses | 17 | 1 | 18 | 16 | 1 | 17 | |||||||||||||||||
Total
benefits and expenses | 540 | 39 | 579 | 533 | 43 | 576 | |||||||||||||||||
Income
before income taxes | $ | 67 | $ | 7 | $ | 74 | $ | 97 | $ | 5 | $ | 102 |
(dollars
in millions) | Three months ended June 30, | ||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||
Revenues: | Traditional | Financial Solutions | Total EMEA | Traditional | Financial
Solutions | Total EMEA | |||||||||||||||||
Net premiums | $ | 352 | $ | 57 | $ | 409 | $ | 351 | $ | 57 | $ | 408 | |||||||||||
Investment
income, net of related expenses | 18 | 61 | 79 | 18 | 47 | 65 | |||||||||||||||||
Investment
related gains (losses), net | — | 16 | 16 | — | 3 | 3 | |||||||||||||||||
Other
revenues | 1 | 2 | 3 | 1 | 7 | 8 | |||||||||||||||||
Total
revenues | 371 | 136 | 507 | 370 | 114 | 484 | |||||||||||||||||
Benefits
and expenses: | |||||||||||||||||||||||
Claims and other policy benefits | 301 | 13 | 314 | 296 | 47 | 343 | |||||||||||||||||
Interest
credited | — | 16 | 16 | — | 3 | 3 | |||||||||||||||||
Policy
acquisition costs and other insurance expenses | 32 | 1 | 33 | 28 | 1 | 29 | |||||||||||||||||
Other
operating expenses | 22 | 8 | 30 | 30 | 11 | 41 | |||||||||||||||||
Total
benefits and expenses | 355 | 38 | 393 | 354 | 62 | 416 | |||||||||||||||||
Income
before income taxes | $ | 16 | $ | 98 | $ | 114 | $ | 16 | $ | 52 | $ | 68 |
(dollars
in millions) | Six months ended June 30, | ||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||
Revenues: | Traditional | Financial Solutions | Total EMEA | Traditional | Financial
Solutions | Total EMEA | |||||||||||||||||
Net premiums | $ | 742 | $ | 110 | $ | 852 | $ | 715 | $ | 109 | $ | 824 | |||||||||||
Investment
income, net of related expenses | 37 | 89 | 126 | 37 | 95 | 132 | |||||||||||||||||
Investment
related gains (losses), net | — | 10 | 10 | — | 6 | 6 | |||||||||||||||||
Other
revenues | (1 | ) | 5 | 4 | 2 | 13 | 15 | ||||||||||||||||
Total
revenues | 778 | 214 | 992 | 754 | 223 | 977 | |||||||||||||||||
Benefits
and expenses: | |||||||||||||||||||||||
Claims and other policy benefits | 635 | 66 | 701 | 608 | 96 | 704 | |||||||||||||||||
Interest
credited | — | (1 | ) | (1 | ) | — | 15 | 15 | |||||||||||||||
Policy
acquisition costs and other insurance expenses | 62 | 2 | 64 | 57 | 2 | 59 | |||||||||||||||||
Other
operating expenses | 48 | 19 | 67 | 57 | 20 | 77 | |||||||||||||||||
Total
benefits and expenses | 745 | 86 | 831 | 722 | 133 | 855 | |||||||||||||||||
Income
before income taxes | $ | 33 | $ | 128 | $ | 161 | $ | 32 | $ | 90 | $ | 122 |
(dollars
in millions) | Three months ended June 30, | ||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||
Revenues: | Traditional | Financial Solutions | Total Asia Pacific | Traditional | Financial
Solutions | Total Asia Pacific | |||||||||||||||||
Net premiums | $ | 607 | $ | 31 | $ | 638 | $ | 606 | $ | 44 | $ | 650 | |||||||||||
Investment
income, net of related expenses | 27 | 21 | 48 | 24 | 11 | 35 | |||||||||||||||||
Investment
related gains (losses), net | — | 15 | 15 | — | (1 | ) | (1 | ) | |||||||||||||||
Other
revenues | 2 | 8 | 10 | 4 | 5 | 9 | |||||||||||||||||
Total
revenues | 636 | 75 | 711 | 634 | 59 | 693 | |||||||||||||||||
Benefits
and expenses: | |||||||||||||||||||||||
Claims and other policy benefits | 514 | 32 | 546 | 568 | 37 | 605 | |||||||||||||||||
Interest
credited | — | 11 | 11 | — | 6 | 6 | |||||||||||||||||
Policy
acquisition costs and other insurance expenses | 34 | 5 | 39 | (12 | ) | 10 | (2 | ) | |||||||||||||||
Other
operating expenses | 41 | 1 | 42 | 44 | 4 | 48 | |||||||||||||||||
Total
benefits and expenses | 589 | 49 | 638 | 600 | 57 | 657 | |||||||||||||||||
Income
(loss) before income taxes | $ | 47 | $ | 26 | $ | 73 | $ | 34 | $ | 2 | $ | 36 |
(dollars in millions) | Six months ended June 30, | ||||||||||||||||||||||
2020 | 2019 | ||||||||||||||||||||||
Revenues: | Traditional | Financial
Solutions | Total Asia Pacific | Traditional | Financial Solutions | Total Asia Pacific | |||||||||||||||||
Net premiums | $ | 1,243 | $ | 105 | $ | 1,348 | $ | 1,253 | $ | 78 | $ | 1,331 | |||||||||||
Investment
income, net of related expenses | 54 | 38 | 92 | 50 | 21 | 71 | |||||||||||||||||
Investment
related gains (losses), net | — | (18 | ) | (18 | ) | — | 3 | 3 | |||||||||||||||
Other
revenues | 6 | 18 | 24 | 4 | 12 | 16 | |||||||||||||||||
Total
revenues | 1,303 | 143 | 1,446 | 1,307 | 114 | 1,421 | |||||||||||||||||
Benefits
and expenses: | |||||||||||||||||||||||
Claims and other policy benefits | 1,069 | 94 | 1,163 | 1,114 | 69 | 1,183 | |||||||||||||||||
Interest
credited | — | 24 | 24 | — | 13 | 13 | |||||||||||||||||
Policy
acquisition costs and other insurance expenses | 83 | 19 | 102 | 39 | 15 | 54 | |||||||||||||||||
Other
operating expenses | 80 | 5 | 85 | 83 | 9 | 92 | |||||||||||||||||
Total
benefits and expenses | 1,232 | 142 | 1,374 | 1,236 | 106 | 1,342 | |||||||||||||||||
Income
before income taxes | $ | 71 | $ | 1 | $ | 72 | $ | 71 | $ | 8 | $ | 79 |
(dollars
in millions) | Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenues: | ||||||||||||||||
Net
premiums | $ | — | $ | — | $ | — | $ | — | ||||||||
Investment
income, net of related expenses | 48 | 55 | 106 | 98 | ||||||||||||
Investment related gains
(losses), net | 22 | (6 | ) | (45 | ) | (7 | ) | |||||||||
Other revenues | 20 | 13 | 21 | 39 | ||||||||||||
Total
revenues | 90 | 62 | 82 | 130 | ||||||||||||
Benefits and expenses: | ||||||||||||||||
Claims
and other policy benefits | — | — | — | — | ||||||||||||
Interest credited | 3 | 6 | 5 | 11 | ||||||||||||
Policy
acquisition costs and other insurance income | (29 | ) | (29 | ) | (57 | ) | (58 | ) | ||||||||
Other operating expenses | 69 | 75 | 131 | 146 | ||||||||||||
Interest
expense | 42 | 43 | 83 | 83 | ||||||||||||
Collateral finance and securitization expense | 4 | 8 | 10 | 16 | ||||||||||||
Total
benefits and expenses | 89 | 103 | 172 | 198 | ||||||||||||
Income (loss) before income taxes | $ | 1 | $ | (41 | ) | $ | (90 | ) | $ | (68 | ) |
Three months ended June 30, | Six
months ended June 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Interest and dividend income | $ | 183 | $ | 36 | $ | 408 | $ | 66 | ||||||||
Interest
expense | 50 | 52 | 100 | 100 | ||||||||||||
Capital contributions to subsidiaries | 18 | 18 | 33 | 39 | ||||||||||||
Issuance
of unaffiliated debt | 598 | 599 | 598 | 599 | ||||||||||||
Dividends to shareholders | 43 | 38 | 87 | 75 | ||||||||||||
Issuance
of common stock, net of expenses | 481 | — | 481 | — | ||||||||||||
Repurchases of treasury stock | — | — | 153 | 50 |
Cash and invested assets | $ | 1,513 | $ | 554 |
Six months ended June
30, | |||||||
2020 | 2019 | ||||||
Dividends to shareholders | $ | 87 | $ | 75 | |||
Repurchases of treasury stock | 153 | 50 | |||||
Total
amount paid to shareholders | $ | 240 | $ | 125 | |||
Number of shares repurchased | 1,074,413 | 344,237 | |||||
Average
price per share | $ | 142.05 | $ | 145.25 |
For the six months ended
June 30, | ||||||||
2020 | 2019 | |||||||
(Dollars in millions) | ||||||||
Sources: | ||||||||
Net
cash provided by operating activities | $ | 2,579 | $ | 970 | ||||
Proceeds from issuance of common stock, net | 481 | — | ||||||
Proceeds
from long-term debt issuance | 598 | 599 | ||||||
Exercise of stock options, net | 1 | 2 | ||||||
Change
in cash collateral for derivative positions and other arrangements | 93 | — | ||||||
Cash provided by changes in universal life and other | ||||||||
investment type
policies and contracts | 575 | — | ||||||
Effect of exchange rate changes on cash | — | 7 | ||||||
Total
sources | 4,327 | 1,578 | ||||||
Uses: | ||||||||
Net
cash used in investing activities | 1,024 | 764 | ||||||
Dividends to stockholders | 87 | 75 | ||||||
Repayment
of collateral finance and securitization notes | 160 | 53 | ||||||
Debt issuance costs | 5 | 5 | ||||||
Principal
payments of long-term debt | 1 | 1 | ||||||
Purchases of treasury stock | 162 | 68 | ||||||
Change
in cash collateral for derivatives and other arrangements | — | 80 | ||||||
Cash used for changes in universal life and other | ||||||||
investment type policies
and contracts | — | 134 | ||||||
Effect of exchange rate changes on cash | 24 | — | ||||||
Total
uses | 1,463 | 1,180 | ||||||
Net change in cash and cash equivalents | $ | 2,864 | $ | 398 |
% of Total | % of Total | |||||||||||||
Fixed maturity securities, available-for-sale | $ | 52,346 | 72.8 | % | $ | 51,121 | 75.3 | % | ||||||
Equity
securities | 130 | 0.2 | 320 | 0.5 | ||||||||||
Mortgage loans on real estate | 5,974 | 8.3 | 5,706 | 8.3 | ||||||||||
Policy
loans | 1,310 | 1.8 | 1,319 | 1.9 | ||||||||||
Funds withheld at interest | 5,250 | 7.3 | 5,662 | 8.3 | ||||||||||
Short-term
investments | 84 | 0.1 | 64 | 0.1 | ||||||||||
Other invested assets | 2,547 | 3.5 | 2,363 | 3.5 | ||||||||||
Cash
and cash equivalents | 4,313 | 6.0 | 1,449 | 2.1 | ||||||||||
Total cash and invested assets | $ | 71,954 | 100.0 | % | $ | 68,004 | 100.0 | % |
Three
months ended June 30, | Six months ended June 30, | ||||||||||||||||||||
2020 | 2019 | Increase/ (Decrease) | 2020 | 2019 | Increase/ (Decrease) | ||||||||||||||||
Average
invested assets at amortized cost | $ | 30,420 | $ | 28,487 | 6.8 | % | $ | 29,923 | $ | 28,138 | 6.3 | % | |||||||||
Net
investment income | 305 | 307 | (0.7 | )% | 604 | 617 | (2.1 | )% | |||||||||||||
Investment
yield (ratio of net investment income to average invested assets) | 4.07 | % | 4.38 | % | (31) bps | 4.07 | % | 4.43 | % | (36)
bps |
NAIC Designation | Rating Agency Designation | Amortized Cost | Estimated Fair Value | % of Total | Amortized
Cost | Estimated Fair Value | % of Total | |||||||||||||||||
1 | AAA/AA/A | $ | 29,018 | $ | 33,246 | 63.5 | % | $ | 30,100 | $ | 33,284 | 65.2 | % | |||||||||||
2 | BBB | 15,222 | 16,555 | 31.6 | 14,366 | 15,514 | 30.3 | |||||||||||||||||
3 | BB | 1,987 | 1,963 | 3.8 | 1,706 | 1,748 | 3.4 | |||||||||||||||||
4 | B | 560 | 515 | 1.0 | 514 | 518 | 1.0 | |||||||||||||||||
5 | CCC
and lower | 91 | 46 | 0.1 | 36 | 23 | — | |||||||||||||||||
6 | In
or near default | 25 | 21 | — | 31 | 34 | 0.1 | |||||||||||||||||
Total | $ | 46,903 | $ | 52,346 | 100.0 | % | $ | 46,753 | $ | 51,121 | 100.0 | % |
Amortized Cost | Estimated Fair Value | % of Total | Amortized Cost | Estimated Fair Value | %
of Total | |||||||||||||||||
RMBS: | ||||||||||||||||||||||
Agency | $ | 708 | $ | 776 | 11.8 | % | $ | 742 | $ | 777 | 10.6 | % | ||||||||||
Non-agency | 1,254 | 1,289 | 19.4 | 1,597 | 1,621 | 22.3 | ||||||||||||||||
Total
RMBS | 1,962 | 2,065 | 31.2 | 2,339 | 2,398 | 32.9 | ||||||||||||||||
ABS: | ||||||||||||||||||||||
Collateralized
loan obligations (“CLOs”) | 1,612 | 1,558 | 23.4 | 1,750 | 1,743 | 24.0 | ||||||||||||||||
ABS,
excluding CLOs | 1,186 | 1,173 | 17.6 | 1,223 | 1,235 | 17.0 | ||||||||||||||||
Total
ABS | 2,798 | 2,731 | 41.0 | 2,973 | 2,978 | 41.0 | ||||||||||||||||
CMBS | 1,850 | 1,851 | 27.8 | 1,841 | 1,899 | 26.1 | ||||||||||||||||
Total | $ | 6,610 | $ | 6,647 | 100.0 | % | $ | 7,153 | $ | 7,275 | 100.0 | % |
Three
months ended June 30, | Six months ended June 30, | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Impairment
losses and change in allowance for credit losses on fixed maturity securities | $ | — | $ | — | $ | 34 | $ | 9 | |||||||
Other
impairment losses | 5 | 5 | 5 | 7 | |||||||||||
Change in mortgage loan provision | 17 | 1 | 30 | 1 | |||||||||||
Total | $ | 22 | $ | 6 | $ | 69 | $ | 17 |
Recorded Investment | % of Total | Recorded Investment | %
of Total | |||||||||||
U.S. Region: | ||||||||||||||
West | $ | 2,349 | 38.8 | % | $ | 2,302 | 40.2 | % | ||||||
South | 2,111 | 34.9 | 1,929 | 33.6 | ||||||||||
Midwest | 1,074 | 17.8 | 996 | 17.4 | ||||||||||
Northeast | 275 | 4.6 | 262 | 4.6 | ||||||||||
Subtotal
- U.S. | 5,809 | 96.1 | 5,489 | 95.8 | ||||||||||
Canada | 179 | 3.0 | 182 | 3.2 | ||||||||||
United
Kingdom | 52 | 0.9 | 56 | 1.0 | ||||||||||
Total | $ | 6,040 | 100.0 | % | $ | 5,727 | 100.0 | % |
• | Degradation
of general economic conditions; |
• | Investment results; |
• | Capital, liquidity and collateral; |
• | Insurance risks, including mortality and morbidity claims; |
• | Possible
ratings downgrade; |
• | Adverse legislative or regulatory action; |
• | Operations; and |
• | Premiums and other income. |
Total Number of Shares Purchased (1) | Average Price
Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1) | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Program | |||||||||||
655 | $ | 106.16 | — | $ | 167,573,148 | |||||||||
63,935 | $ | 86.57 | — | $ | 167,573,148 | |||||||||
132 | $ | 103.00 | — | $ | 167,573,148 |
(1) | RGA
had no repurchases of common stock under its share repurchase program for April, May and June 2020. The Company net settled - issuing 2,447, 168,622 and 420 shares from treasury and repurchased from recipients 655, 63,935 and 132 shares in April, May and June 2020, respectively, in settlement of income tax withholding requirements incurred by the recipients of equity incentive awards. |
Exhibit Number | Description | |
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 | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibits 101). |
Reinsurance
Group of America, Incorporated | |||
Date: August 6, 2020 | By: | /s/ Anna Manning | |
President
& Chief Executive Officer | |||
(Principal Executive Officer) | |||
Date: August 6, 2020 | By: | /s/ Todd C. Larson | |
Senior Executive Vice President & Chief Financial Officer | |||
(Principal Financial and Accounting Officer) |
This ‘10-Q’ Filing | Date | Other Filings | ||
---|---|---|---|---|
6/15/30 | ||||
5/15/29 | ||||
1/1/23 | ||||
1/1/22 | ||||
12/31/21 | ||||
12/31/20 | 10-K | |||
Filed on: | 8/6/20 | |||
7/31/20 | ||||
7/2/20 | ||||
For Period end: | 6/30/20 | |||
6/9/20 | 8-K | |||
6/5/20 | 424B2, 8-K | |||
6/2/20 | 424B5, 8-K | |||
6/1/20 | ||||
5/31/20 | ||||
5/6/20 | ||||
5/1/20 | ||||
4/30/20 | ||||
4/1/20 | ||||
3/31/20 | 10-Q | |||
3/11/20 | 4 | |||
2/27/20 | 10-K | |||
1/1/20 | ||||
12/31/19 | 10-K, 8-K | |||
6/30/19 | 10-Q | |||
5/15/19 | 8-K | |||
3/31/19 | 10-Q | |||
1/24/19 | ||||
1/1/19 | ||||
12/31/18 | 10-K, 4 | |||
7/27/17 | 8-K | |||
12/31/92 | ||||
List all Filings |
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 6/09/20 Reinsurance Group of America Inc. 8-K:1,2,8,9 6/04/20 14:624K Donnelley … Solutions/FA 5/22/20 Reinsurance Group of America Inc. 8-K:5,9 5/20/20 13:287K Donnelley … Solutions/FA 5/24/18 Reinsurance Group of America Inc. 8-K:5,9 5/23/18 3:193K Donnelley … Solutions/FA |