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REINSURANCE
6 Months Ended
Jun. 30, 2022
Insurance [Abstract]  
REINSURANCE REINSURANCE
Global Atlantic maintains a number of reinsurance treaties with third parties whereby Global Atlantic assumes fixed annuity, variable annuity, payout annuity, universal life, variable universal life and term life insurance policies on a coinsurance, modified coinsurance and funds withheld basis. Global Atlantic also maintains other reinsurance treaties including the cession of certain fixed annuity, variable annuity, payout annuity, universal life policies, individual disability income policies and discontinued accident and health insurance.

The effects of all reinsurance agreements on the consolidated statements of financial condition were as follows:

June 30, 2022December 31, 2021
Policy liabilities:
Direct$69,934,164 $67,131,818 
Assumed63,813,316 59,388,226 
Total policy liabilities133,747,480 126,520,044 
Ceded(1)
(26,253,113)(25,035,228)
Net policy liabilities$107,494,367 $101,484,816 

(1)Reported within reinsurance recoverable within the consolidated statements of financial condition.

A key credit quality indicator is a counterparty’s A.M. Best financial strength rating. A.M. Best ratings are an independent opinion of a reinsurer’s ability to meet ongoing obligations to policyholders. Global Atlantic mitigates counterparty credit risk by requiring collateral and credit enhancements in various forms including engaging in funds withheld at interest and modified coinsurance transactions. The following shows the amortized cost basis of Global Atlantic’s reinsurance recoverable and funds withheld receivable at interest by credit quality indicator and any associated credit enhancements Global Atlantic has obtained to mitigate counterparty credit risk:

As of June 30, 2022 As of December 31, 2021
A.M. Best Rating(1)
Reinsurance recoverable and funds withheld receivable at interest(2)
Credit enhancements(3)
Net reinsurance credit exposure(4)
Reinsurance recoverable and funds withheld receivable at interest(2)
Credit enhancements(3)
Net reinsurance credit exposure(4)
A++$22,380 $— $22,380 $7,911 $— $7,911 
A+1,960,879 — 1,960,879 1,989,426 — 1,989,426 
A2,414,334 — 2,414,334 2,652,286 — 2,652,286 
A-5,527,655 4,542,105 985,550 5,645,633 5,166,559 479,074 
B++39,564 — 39,564 33,410 — 33,410 
B+1,383 — 1,383 1,122 — 1,122 
B7,618 — 7,618 9,227 — 9,227 
B-1,509 — 1,509 1,274 — 1,274 
Not rated(5)
19,264,999 17,526,811 1,738,188 17,698,613 18,323,795 — 
Total$29,240,321 $22,068,916 $7,171,405 $28,038,902 $23,490,354 $5,173,730 

(1)Ratings are periodically updated (at least annually) as A.M. Best issues new ratings.
(2)At amortized cost, excluding any associated embedded derivative assets and liabilities.
(3)Includes funds withheld payable at interest and deferred intangible reinsurance assets and liabilities.
(4)Includes credit loss allowance of $79.0 million and $8.4 million as of June 30, 2022 and December 31, 2021, respectively, held against reinsurance recoverable.
(5)Includes $19.2 billion and $17.7 billion as of June 30, 2022 and December 31, 2021, respectively, associated with cessions to Ivy Re Limited and Ivy Re II Limited (the “Ivy Vehicles”), which are unaffiliated co-investment vehicles that participate in qualifying reinsurance transactions sourced by Global Atlantic.

As of June 30, 2022 and December 31, 2021, Global Atlantic had $2.9 billion and $3.0 billion of funds withheld receivable at interest, with six counterparties related to modified coinsurance and funds withheld contracts, respectively. The assets supporting these receivables were held in trusts and not part of the respective counterparty’s general accounts.
The effects of reinsurance on the consolidated statements of operations were as follows:

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net premiums:
Direct$28,033 $32,275 $64,606 $46,450 
Assumed(1)
302,359 589,443 703,874 1,870,196 
Ceded(555,894)(1,073,851)(621,838)(1,192,637)
Net premiums$(225,502)$(452,133)$146,642 $724,009 

(1)Includes related party activity of $6.1 million and $8.7 million for the three and six months ended June 30, 2021, respectively.

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Policy fees:
Direct$244,844 $232,881 $485,835 $381,881 
Assumed(1)
91,737 79,762 169,515 132,717 
Ceded(10,874)(381)(11,207)(653)
Net policy fees$325,707 $312,262 $644,143 $513,945 

(1)Includes related party activity of $4.1 million and $6.2 million for the three and six months ended June 30, 2021, respectively.

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net policy benefits and claims:
Direct$30,428 $1,259,707 $266,032 $1,442,508 
Assumed(1)
429,343 265,392 1,033,576 1,732,519 
Ceded(505,178)(1,113,900)(618,955)(1,278,510)
Net policy benefits and claims$(45,407)$411,199 $680,653 $1,896,517 

(1)Includes related party activity of $53.2 million and $76.2 million for the three and six months ended June 30, 2021, respectively.

Global Atlantic holds collateral for and provides collateral to our reinsurance clients. Global Atlantic held $24.5 billion and $23.4 billion of collateral in the form of funds withheld payable on behalf of our reinsurers as of June 30, 2022 and December 31, 2021, respectively. As of June 30, 2022 and December 31, 2021, reinsurers held collateral of $1.4 billion and $1.3 billion on behalf of Global Atlantic, respectively. A significant portion of the collateral that Global Atlantic provides to its reinsurance clients is provided in the form of assets held in a trust for the benefit of the counterparty. As of June 30, 2022 and December 31, 2021, these trusts held in excess of the $60.0 billion and $55.2 billion of assets it is required to hold in order to support reserves of $60.2 billion and $55.8 billion, respectively. Of the cash held in trust, Global Atlantic classified $63.8 million and $149.3 million as restricted as of June 30, 2022 and December 31, 2021, respectively.