XML 43 R26.htm IDEA: XBRL DOCUMENT v3.22.4
Insurance
 12 Months Ended
Dec. 31, 2022
Insurance [Abstract]  
Insurance
10. Insurance

Our insurance business is conducted through our wholly owned insurance subsidiaries, American Health and Life Insurance Company (“AHL”) and Triton Insurance Company (“Triton”). AHL is a life and health insurance company licensed in 49 states, the District of Columbia, and Canada to write credit life, credit disability, and non-credit insurance products. Triton is a property and casualty insurance company licensed in 50 states, the District of Columbia, and Canada to write credit involuntary unemployment, credit disability, and collateral protection insurance.

INSURANCE RESERVES

Components of our insurance reserves were as follows:
(dollars in millions)
December 31,20222021
Finance receivable related:
Payable to OMH:
Unearned premium reserves$672 $677 
Claim reserves77 84 
Subtotal (a)749 761 
Payable to third-party beneficiaries (b)257 256 
Non-finance receivable related (b)345 365 
Total$1,351 $1,382 
(a) Reported in Unearned insurance premium and clam reserves in our consolidated balance sheets.
(b) Reported in Insurance claims and policyholder liabilities in our consolidated balance sheets.

Our insurance subsidiaries enter into reinsurance agreements with other insurers. Reserves related to unearned premiums, claims and benefits assumed from non-affiliated insurance companies totaled $305 million and $322 million at December 31, 2022 and 2021, respectively.

Reserves related to unearned premiums, claims and benefits ceded to non-affiliated insurance companies totaled $60 million and $62 million at December 31, 2022 and 2021, respectively.
Changes in the reserve for unpaid claims and loss adjustment expenses (net of reinsurance recoverables):
(dollars in millions)
At or for the Years Ended December 31,202220212020
Balance at beginning of period$118 $148 $117 
Less reinsurance recoverables(3)(3)(4)
Net balance at beginning of period115 145 113 
Additions for losses and loss adjustment expenses incurred to:
Current year177 212 272 
Prior years *(11)(18)(11)
Total166 194 261 
Reductions for losses and loss adjustment expenses paid related to:
Current year(108)(135)(161)
Prior years(72)(89)(67)
Total(180)(224)(228)
Foreign currency translation adjustment1 — (1)
Net balance at end of period102 115 145 
Plus reinsurance recoverables3 3 3 
Balance at end of period$105 $118 $148 
* At December 31, 2022, $11 million reflected a redundancy in the prior years’ net reserves, primarily due to net favorable developments of credit life, credit disability, and term life claims. At December 31, 2021, $18 million reflected a redundancy in the prior years’ net reserves, primarily due to net favorable developments of credit disability and unemployment claims. At December 31, 2020, $11 million reflected a redundancy in the prior years’ net reserves, primarily due to net favorable developments of credit life, credit disability, and term life claims.

Incurred claims and allocated claim adjustment expenses, net of reinsurance, as of December 31, 2022, were as follows:
Years Ended December 31,At December 31, 2022
(dollars in millions)2018 (a)2019 (a)2020 (a)2021 (a)2022Incurred-but-
not-reported Liabilities (b)		Cumulative Number of Reported ClaimsCumulative
Frequency (c)
Credit Insurance
Accident Year
2018$146 $135 $134 $132 $131 $— 42,897 2.2 %
2019— 155 150 150 147 3 45,492 2.0 %
2020— — 226 209 205 8 68,766 3.1 %
2021— — — 162 156 19 37,845 1.7 %
2022— — — — 140 58 27,284 1.2 %
Total$779 
(a) Unaudited.
(b) Includes expected development on reported claims.
(c) Frequency for each accident year is calculated as the ratio of all reported claims incurred to the total exposures in force.
Cumulative paid claims and allocated claim adjustment expenses, net of reinsurance, as of December 31, 2022, were as follows:
Years Ended December 31,
(dollars in millions)2018 *2019 *2020 *2021 *2022
Credit Insurance
Accident Year
2018$81 $115 $124 $129 $130 
2019— 88 128 139 144 
2020— — 128 186 197 
2021— — — 99 137 
2022— — — — 83 
Total$691 
All outstanding liabilities before 2018, net of reinsurance
— 
Liabilities for claims and claim adjustment expenses, net of reinsurance$88 
* Unaudited.

The reconciliations of the net incurred and paid claims development to the liability for claims and claim adjustment expenses were as follows:
(dollars in millions)
December 31,2022
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance:
Credit insurance
$88 
Other short-duration insurance lines
2 
Total90 
Insurance lines other than short-duration15 
Total gross liability for unpaid claims and claim adjustment expense$105 

We use completion factors to estimate the unpaid claim liability for credit insurance and most other short-duration products. For some products, the unpaid claim liability is estimated as a percent of exposure.

There have been no significant changes in methodologies or assumptions during 2022.

Our average annual percentage payout of incurred claims by age, net of reinsurance, as of December 31, 2022, were as follows:
Years12345
Credit insurance*61.5 %26.5 %6.5 %3.6 %1.3 %
* Unaudited.
STATUTORY ACCOUNTING

Our insurance subsidiaries file financial statements prepared using statutory accounting practices prescribed or permitted by the Department of Insurance (“DOI”) which is a comprehensive basis of accounting other than GAAP. The primary differences between statutory accounting practices and GAAP are that under statutory accounting, policy acquisition costs are expensed as incurred, policyholder liabilities are generally valued using prescribed actuarial assumptions, and certain investment securities are reported at amortized cost. We are not required and did not apply purchase accounting to the insurance subsidiaries on a statutory basis.

Statutory net income (loss) for our insurance companies by type of insurance was as follows:
(dollars in millions)
Years Ended December 31,202220212020
Property and casualty:
Triton$58 $66 $(7)
Life and health:
AHL$98 $79 $114 

Statutory capital and surplus for our insurance companies by type of insurance were as follows:
(dollars in millions)
December 31,20222021
Property and casualty:
Triton$210 $210 
Life and health:
AHL$387 $292 

Our insurance companies are also subject to risk-based capital requirements adopted by the Texas DOI. Minimum statutory capital and surplus is the risk-based capital level that would trigger regulatory action. At December 31, 2022 and 2021, our insurance subsidiaries’ statutory capital and surplus exceeded the risk-based capital minimum required levels.

DIVIDEND RESTRICTIONS

Our insurance subsidiaries are subject to domiciliary state regulations that limit their ability to pay dividends. AHL and Triton are domiciled in Texas. State law restricts the amounts that our insurance subsidiaries may pay as dividends without prior notice to the state of domicile DOI. The maximum amount of dividends, referred to as “ordinary dividends,” for a Texas domiciled life insurance company that can be paid without prior approval in a 12 month period (measured retrospectively from the date of payment) is the greater of: (i) 10% of policyholders’ surplus as of the prior year-end or (ii) the statutory net gain from operations as of the prior year-end. Any amount greater must be approved by the state of domicile DOI. The maximum ordinary dividends for a Texas domiciled property and casualty insurance company that can be paid without prior approval in a 12 month period (measured retrospectively from the date of payment) is the greater of: (i) 10% of policyholders’ surplus as of the prior year-end or (ii) the statutory net income. Any amount greater must be approved by the state of domicile DOI. These approved dividends are called “extraordinary dividends.”
Ordinary dividends paid were as follows:
(dollars in millions)
Years Ended December 31,202220212020
Property and casualty:
Triton$50 $— $— 
Life and health:
AHL$— $50 $48 

No extraordinary dividends were paid during 2022, 2021, or 2020.