19 unchanged sentences
The FVL calculation is directly affected by market factors, including equity levels, interest rate levels, credit risk, and implied volatilities, as well as policyholder behaviors, such as annuitization and lapse rates, and policyholder mortality.
−Removed: The tables below are estimates of the sensitivities to instantaneous changes in economic inputs (e.g., equity shock, interest rate shock etc.) or actuarial assumptions at September 30, 2021 of the FVL and of the fair value of specific derivative instruments held (hedge value) to partially offset the risk in the variable annuity guarantee reinsurance portfolio.
+Added: The tables below are estimates of the sensitivities to instantaneous changes in economic inputs (e.g., equity shock, interest rate shock etc.) at March 31, 2022 of the FVL and of the fair value of specific derivative instruments held (hedge value) to partially offset the risk in the variable annuity guarantee reinsurance portfolio.
The following assumptions should be considered when using the below tables:
13 unchanged sentences
AA-rated credit spreads are a proxy for both our own credit spreads and the credit spreads of the ceding insurers.
−Removed: • The hedge sensitivity is from September 30, 2021 market levels and only applicable to the equity and interest rate sensitivities table below.
−Removed: • The sensitivities are not directly additive because changes in one factor will affect the sensitivity to changes in other factors.
+Added: • The hedge sensitivity is from March 31, 2022 market levels and only applicable to the equity and interest rate sensitivities table below.
• The sensitivities do not scale linearly and may be proportionally greater for larger movements in the market factors.
−Removed: The sensitivities may also vary due to foreign exchange rate fluctuations.
−Removed: The calculation of the FVL is based on internal models that include assumptions regarding future policyholder behavior, including lapse, annuitization, and asset allocation.
−Removed: These assumptions impact both the absolute level of the FVL as well as the sensitivities to changes in market factors shown below.
Actual sensitivity of our net income may differ from those disclosed in the tables below due to fluctuations in short-term market movements.
−Removed: • In addition, the tables below do not reflect the expected quarterly run rate of net income generated by the variable annuity guarantee reinsurance portfolio if markets remain unchanged during the period.
−Removed: All else equal, if markets remain unchanged during the period, the FVL will increase, resulting in a realized loss.
−Removed: This realized loss occurs primarily because the guarantees provided in the underlying contracts continue to become more valuable even when markets remain unchanged.
−Removed: We refer to this increase in FVL as “timing effect”.
−Removed: The unfavorable impact of timing effect on our FVL in a quarter is not reflected in the sensitivity tables below.
−Removed: For this reason, when using the tables below to estimate the sensitivity of FVL in the fourth quarter of 2021 to various changes, it is necessary to assume an additional $5 million to $45 million increase in FVL and realized losses.
−Removed: Note that both the timing effect and the quarterly run rate impact to net income change over time as the book ages.
Sensitivities to equity and interest rate movements
16 unchanged sentences
Increase/(decrease) in net income $ 58 $ (66) $ (2) $ 2 $ (20) $ 19
−Removed: Sensitivities to Actuarial Assumptions Mortality
−Removed: (in millions of U.S.
−Removed: dollars) +20% +10% -10% -20%
−Removed: (Increase)/decrease in FVL $ 19 $ 9 $ (10) $ (19)
−Removed: Increase/(decrease) in net income $ 19 $ 9 $ (10) $ (19)
−Removed: (in millions of U.S.
−Removed: dollars) +50% +25% -25% -50%
−Removed: (Increase)/decrease in FVL $ 95 $ 50 $ (56) $ (118)
−Removed: Increase/(decrease) in net income $ 95 $ 50 $ (56) $ (118)
−Removed: Annuitization
−Removed: (in millions of U.S.
−Removed: dollars) +50% +25% -25% -50%
−Removed: (Increase)/decrease in FVL $ (397) $ (211) $ 235 $ 489
−Removed: Increase/(decrease) in net income $ (397) $ (211) $ 235 $ 489
−Removed: Variable Annuity Net Amount at Risk
−Removed: All our VA reinsurance treaties include annual or aggregate claim limits and many include an aggregate deductible which limit the net amount at risk under these programs.
−Removed: The tables below present the net amount at risk at September 30, 2021 following an immediate change in equity market levels, assuming all global equity markets are impacted equally.
−Removed: a) Reinsurance covering the GMDB risk only
−Removed: (in millions of U.S.
−Removed: dollars) +20 % Flat -20 % -40 % -60 % -80 %
−Removed: GMDB net amount at risk $ 298 $ 291 $ 496 $ 856 $ 908 $ 763
−Removed: Claims at 100% immediate mortality 152 174 175 164 147 128
−Removed: The treaty claim limits function as a ceiling as equity markets fall.
−Removed: As the shocks in the table above become incrementally more negative, the impact on the NAR and claims at 100 percent mortality begin to drop due to the specific nature of these claim limits, many of which are annual claim limits calculated as a percentage of the reinsured account value.
−Removed: There is also some
−Removed: impact due to a small portion of the GMDB reinsurance under which claims are positively correlated to equity markets (claims decrease as equity markets fall).
−Removed: b) Reinsurance covering the GLB risk only
−Removed: (in millions of U.S.
−Removed: dollars) +20 % Flat -20 % -40 % -60 % -80 %
−Removed: GLB net amount at risk $ 813 $ 1,139 $ 1,723 $ 2,462 $ 2,996 $ 3,361
−Removed: The treaty claim limits cause the net amount at risk to increase at a declining rate as equity markets fall.
−Removed: c) Reinsurance covering both the GMDB and GLB risks on the same underlying policyholders
−Removed: (in millions of U.S.
−Removed: dollars) +20 % Flat -20 % -40 % -60 % -80 %
−Removed: GMDB net amount at risk $ 39 $ 46 $ 59 $ 74 $ 88 $ 98
−Removed: GLB net amount at risk 305 400 532 704 883 1,006
−Removed: Claims at 100% immediate mortality 37 36 35 35 35 35
−Removed: The treaty limits control the increase in the GMDB net amount at risk as equity markets fall.
−Removed: The GMDB net amount at risk continues to increase as equity markets fall because most of these reinsurance treaties do not have annual claim limits calculated as a percentage of the underlying account value.
−Removed: The treaty limits cause the GLB net amount at risk to increase at a declining rate as equity markets fall.
+Added: All our variable annuity reinsurance treaties include annual or aggregate claim limits and many include an aggregate deductible which limit the net amount at risk under these programs.
+Added: For an estimated impact on the variable annuity net amount at risk from changes in equity market levels, refer to Item 7A in our 2021 Form 10-K.
+Added: This information will be updated and disclosed in interim filings if the sensitivities change materially from the tables disclosed in the 2021 Form 10-K.
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.