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Reinsurance
12 Months Ended
Dec. 31, 2021
Reinsurance Disclosures [Abstract]  
Reinsurance Reinsurance
In the ordinary course of business, the Company is involved in both the assumption and cession of reinsurance with non-affiliated companies. The following table provides details of the reinsurance recoverables balance as of the dates indicated:
December 31,
20212020
Ceded future policyholder benefits and expense$338.4 $1,133.8 
Ceded unearned premium4,950.0 4,565.4 
Ceded claims and benefits payable821.8 846.2 
Ceded paid losses68.7 60.0 
Total$6,178.9 $6,605.4 

A key credit quality indicator for reinsurance is the A.M. Best Company (“A.M. Best”) financial strength ratings of the reinsurer. A.M. Best financial strength ratings are an independent opinion of a reinsurer’s ability to meet ongoing obligations to policyholders. The A.M. Best ratings for the reinsurers in new reinsurance agreements where there is material credit exposure are reviewed at the time of execution. The A.M. Best ratings for existing reinsurance agreements are reviewed on a quarterly basis, or sooner based on developments. The following table provides the reinsurance recoverable as of December 31, 2021 grouped by A.M. Best financial strength ratings:
A.M. Best Rating of
Reinsurer
Ceded future
policyholder
benefits and
expense
Ceded
unearned
premiums
Ceded claims
and benefits
payable
Ceded paid
losses
Total
A++ or A+$328.5 $82.5 $287.6 $10.7 $709.3 
A or A-4.4 117.8 61.5 13.0 196.7 
B++ or B+5.5 17.9 2.3 0.1 25.8 
Not Rated (1)0.4 4,735.1 471.6 45.0 5,252.1 
Total338.8 4,953.3 823.0 68.8 6,183.9 
Less: Allowance(0.4)(3.3)(1.2)(0.1)(5.0)
Net reinsurance recoverable$338.4 $4,950.0 $821.8 $68.7 $6,178.9 
(1)Not Rated ceded claims and benefits payable included reinsurance recoverables of $143.8 million as of December 31, 2021 which were ceded to the U.S. government. The Company acts as an administrator for the U.S. government under the voluntary National Flood Insurance Program.

A substantial portion of the Not Rated category is related to Global Lifestyle’s and Global Housing’s agreements to reinsure premiums and risks related to business generated by certain clients to the clients’ own captive insurance companies or to reinsurance subsidiaries in which the clients have an ownership interest. To mitigate exposure to credit risk for these reinsurers, the Company evaluates the financial condition of the reinsurer and typically holds substantial collateral (in the form of funds withheld, trusts and letters of credit) as security.
The effect of reinsurance on premiums earned and benefits incurred was as follows for the periods indicated: 
  
Years Ended December 31,
  
202120202019
  
Long
Duration
Short
Duration
TotalLong
Duration
Short
Duration
TotalLong
Duration
Short
Duration
Total
Direct earned premiums$96.6 $15,813.5 $15,910.1 $35.5 $14,876.5 $14,912.0 $38.4 $13,982.8 $14,021.2 
Premiums assumed— 168.5 168.5 — 133.3 133.3 — 212.8 212.8 
Premiums ceded(88.5)(7,418.0)(7,506.5)(26.4)(6,743.1)(6,769.5)(27.6)(6,247.6)(6,275.2)
Net earned premiums$8.1 $8,564.0 $8,572.1 $9.1 $8,266.7 $8,275.8 $10.8 $7,948.0 $7,958.8 
Direct policyholder benefits$322.2 $5,949.2 $6,271.4 $91.3 $5,581.6 $5,672.9 $198.8 $5,336.1 $5,534.9 
Policyholder benefits assumed— 139.1 139.1 — 122.3 122.3 — 212.9 212.9 
Policyholder benefits ceded(315.0)(3,899.8)(4,214.8)(84.9)(3,445.4)(3,530.3)(190.3)(3,171.8)(3,362.1)
Net policyholder benefits$7.2 $2,188.5 $2,195.7 $6.4 $2,258.5 $2,264.9 $8.5 $2,377.2 $2,385.7 
 
The Company had zero and $168.4 million of invested assets held in trusts or by custodians as of December 31, 2021 and 2020, respectively, for the benefit of others related to certain reinsurance arrangements.
The Company utilizes ceded reinsurance for loss protection and capital management, client risk and profit sharing and business divestitures.
Loss Protection and Capital Management
As part of the Company’s overall risk and capacity management strategy, the Company purchases reinsurance for certain risks underwritten by the Company’s various segments, including significant individual or catastrophic claims.
For those product lines where there is exposure to losses from catastrophe events, the Company closely monitors and manages its aggregate risk exposure by geographic area. The Company has entered into reinsurance treaties to manage exposure to these types of events.
Segment Client Risk and Profit Sharing
The Global Lifestyle and Global Housing segments write business produced by their clients, such as mobile providers, mortgage lenders and servicers, and financial institutions, and reinsure all or a portion of such business to insurance subsidiaries of some clients. Such arrangements allow significant flexibility in structuring the sharing of risks and profits on the underlying business.
A substantial portion of Global Lifestyle’s and Global Housing’s reinsurance activities are related to agreements to reinsure premiums and risks related to business generated by certain clients to the clients’ own captive insurance companies or to reinsurance subsidiaries in which the clients have an ownership interest. Through these arrangements, the Company’s insurance subsidiaries share some of the premiums and risk related to client-generated business. When the reinsurance companies are not authorized to do business in the state of domicile of the Company’s insurance subsidiary, the Company’s insurance subsidiary generally obtains collateral, such as a trust or a letter of credit, from the reinsurance company or its affiliate in an amount equal to the outstanding reserves to obtain full statutory financial credit in the domiciliary state for the reinsurance.
The Company’s reinsurance agreements do not relieve the Company from its direct obligation to its insureds. Thus, a credit exposure exists to the extent that any reinsurer is unable to meet the obligations assumed in the reinsurance agreements. To mitigate its exposure to reinsurance insolvencies, the Company evaluates the financial condition of its reinsurers and typically holds substantial collateral (in the form of funds withheld, trusts and letters of credit) as security under the reinsurance agreements.
Business Divestitures
The Company has used reinsurance to sell certain businesses in the past because the businesses shared legal entities with operating segments that the Company retained. Assets supporting liabilities ceded relating to these businesses are mainly held in trusts. If the reinsurers became insolvent, the Company would be exposed to the risk that the assets in the trusts and/or the separate accounts, if any, would be insufficient to support the liabilities that would revert back to the Company. The reinsurance recoverables relating to these divestitures amounted to $625.7 million as of December 31, 2021, of which $410.2 million was attributable to John Hancock, which reinsures the long-term care business and has an A.M. Best financial strength rating of A+ with a stable outlook.
In addition, the Company would be responsible for administering this business in the event of reinsurer insolvency. The Company does not currently have the administrative systems and capabilities to process this business. Accordingly, the Company would need to obtain those capabilities in the event of an insolvency of one or more of the reinsurers of these businesses. The Company might be forced to obtain such capabilities on unfavorable terms with a resulting material adverse effect on our results of operations and financial condition.
As of December 31, 2021, the Company was not aware of any regulatory actions taken with respect to the solvency of the insurance subsidiaries of John Hancock and the Company has not been obligated to fulfill any of its obligations. John Hancock has paid its obligations when due and there have been no disputes.
JALIC Reinsurance Recoverables
Most of the $881.6 million reinsurance recoverables balance for JALIC, which is included in assets held for sale as of December 31, 2021 as described in Note 4, is reinsured with Employers Reassurance Corporation (“ERAC”), which is uncollateralized. A.M. Best withdrew its rating for ERAC in 2019. General Electric Company, the ultimate parent of ERAC, has a capital maintenance agreement in place to maintain ERAC’s risk-based capital (“RBC”) ratios at an acceptable regulatory level, which has been maintained in recent years through capital infusions into ERAC.