The policy was purchased with "after tax" funds.
That does not mean none of the payout is taxable. If any portion of your past premium payments added "cash value" to the policy for example, then the earnings on that portion invested for cash value "are" taxable income to you when you cash out the policy. But still, unless you only requested to cash out the earnings, I'm confident the entire cash out amount was not included in box 1 of the 1099-R. Only the taxable earnings were reported in box 1, since box 2 is checked for "taxable amount not determined".
The 7D in box 7 is actually two codes. "7" indicates a normal distribution and "D" indicates the distribution is from a "non" qualified annuity - meaning most likely the entire amount reported in box 1 is taxable.
