Quantitative and Qualitative Disclosures About Market Risk
−Removed: The quantitative and qualitative disclosures about Market Risk reflect the impact of the adoption of LDTI, including the requirement that all variable annuity guarantees are classified as MRBs and measured at fair value.
Risk Management
12 unchanged sentences
Where a liability cash flow may exceed the maturity of available assets, as is the case with certain life insurance and annuity products, we may support such liabilities with equity investments, derivatives or other mismatch mitigation strategies.
−Removed: Although we take measures to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate completely
−Removed: the interest rate or other mismatch risk of our fixed income investments relative to our interest rate sensitive liabilities.
+Added: Although we take measures to manage the economic risks of investing in a changing interest rate environment, we may not be able to mitigate completely the interest rate or other mismatch risk of our fixed income investments relative to our interest rate sensitive liabilities.
The level of interest rates also affects our liabilities for benefits under our annuity contracts.
−Removed: As interest rates decline, we may need to increase our reserves for future benefits under our annuity contracts, which would adversely affect our financial condition and results of operations.
+Added: If interest rates continue to decline, we may need to increase our reserves for future benefits under our annuity contracts, which would adversely affect our financial condition and results of operations.
We also employ product design and pricing strategies to mitigate the potential effects of interest rate movements.
11 unchanged sentences
We manage equity market risk in a coordinated process across our Risk Management, Investment and Finance Departments primarily by (i) holding sufficient capital to permit us to absorb modest losses, which may be temporary, from changes in equity markets and interest rates, and (ii) through the use of derivatives.
−Removed: We also employ product design strategies to mitigate the effect of changes in equity markets such as prioritizing products that provide a risk offset and diversification to our legacy variable products.
+Added: We also employ product design strategies to mitigate the effect of changes in equity markets such as prioritizing products that provide a risk offset and diversification to our variable annuity products.
Key management objectives include limiting losses, minimizing exposures to significant risks and providing additional capital capacity for future growth.
4 unchanged sentences
As a result of that analysis, we have determined that the estimated fair values of certain assets and liabilities are significantly exposed to changes in interest rates, and to a lesser extent, to changes in equity market prices and foreign currency exchange rates.
−Removed: We have exposure to market risk through our insurance operations and general account investment activities.
+Added: We have exposure to market risk through our insurance operations and investment activities.
For purposes of this discussion, “market risk” is defined as changes in estimated fair value resulting from changes in interest rates, equity market prices, credit spreads and foreign currency exchange rates.
31 unchanged sentences
Limitations related to this sensitivity analysis include:
−Removed: • interest sensitive liabilities do not include $36.4 billion of insurance contract liabilities at December 31, 2023.
+Added: • interest sensitive liabilities do not include a significant portion of our insurance contract liabilities.
Management believes that the changes in the economic value of those contracts under changing interest rates would offset a significant portion of the fair value changes of interest sensitive assets;
33 unchanged sentences
Management believes that the changes in the economic value of those contracts under changing interest rates would offset a significant portion of the fair value changes of interest rate sensitive assets.
−Removed: (3) Embedded derivatives on index-linked annuities are recognized on the consolidated balance sheet in the same caption as the host contract.
+Added: (3) Embedded derivatives on index-linked annuities are recognized on the consolidated balance sheet in Policyholder account balances.
Sensitivity Summary
−Removed: Sensitivity to a 100 basis point rise in interest rates was $4.8 billion at December 31, 2023.
−Removed: Sensitivity to a 10% decrease in equity prices was $89 million at December 31, 2023.
+Added: Sensitivity to a 100 basis point rise in interest rates decreased by $390 million, or 8% to $4.4 billion at December 31, 2024 from $4.8 billion at December 31, 2023, primarily as a result of a decrease in the estimated fair value of our fixed maturity securities due to higher interest rates, in line with management expectation.
+Added: Sensitivity to a 10% decrease in equity prices increased by $233 million, or 262% to $322 million at December 31, 2024 from $89 million at December 31, 2023, primarily as a result of increase sales of index-linked annuities.
As discussed above, we economically hedge substantially all of our foreign currency exposure such that sensitivity to changes in foreign currencies is minimal.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.