Reinsurance

12 Months Ended

Dec. 31, 2023

8. Reinsurance

The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products and also as a provider of reinsurance for some insurance products issued by former affiliated and unaffiliated companies. The Company participates in reinsurance activities in order to limit losses, minimize exposure to significant risks and provide additional capacity for future growth.

Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed in Note 9.

Annuities and Life

For annuities, the Company reinsures portions of the living and death benefit guarantees issued in connection with certain variable annuities to unaffiliated reinsurers. Under these reinsurance agreements, the Company pays a reinsurance premium generally based on fees associated with the guarantees collected from policyholders and receives reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations. The value of MRBs on the ceded risk is determined using a methodology consistent with the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer. The Company cedes certain fixed rate annuities to unaffiliated third-party reinsurers and assumes certain index-linked annuities from an unaffiliated third-party insurer. These reinsurance arrangements are structured on a coinsurance basis and are reported as deposit accounting.

For its life products, the Company has historically reinsured the mortality risk primarily on an excess of retention basis or on a quota share basis. In addition to reinsuring mortality risk as described above, the Company reinsures other risks, as well as specific coverages. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specified characteristics. On a case-by-case basis, the Company may retain up to $20 million per life and reinsure 100% of amounts in excess of the amount the Company retains. The Company also reinsures 90% of the risk associated with participating whole life policies to a former affiliate and assumes certain term life policies and universal life policies with secondary death benefit guarantees issued by a former affiliate. The Company evaluates its reinsurance programs routinely and may increase or decrease its retention at any time.

Corporate & Other

The Company reinsures, through 100% quota share reinsurance agreements, certain run-off long-term care and workers’ compensation business written by the Company. At December 31, 2023, the Company had $5.8 billion of reinsurance recoverables associated with its reinsured long-term care business. The reinsurer has established trust accounts for the Company’s benefit to secure their obligations under the reinsurance agreements. Additionally, the Company is indemnified for losses and certain other payment obligations it might incur with respect to such reinsured long-term care insurance business.

Catastrophe Coverage

The Company has exposure to catastrophes which could contribute to significant fluctuations in the Company’s results of operations. The Company uses excess of retention and quota share reinsurance agreements to provide greater diversification of risk and minimize exposure to larger risks.

Reinsurance Recoverables

The Company reinsures its business through a diversified group of primarily highly rated reinsurers. The Company analyzes recent trends in arbitration and litigation outcomes in disputes, if any, with its reinsurers and monitors ratings and the financial strength of its reinsurers. In addition, the reinsurance recoverable balance due from each reinsurer and the recoverability of such balance is evaluated as part of this overall monitoring process.

The Company generally secures large reinsurance recoverable balances with various forms of collateral, including secured trusts, funds withheld accounts and irrevocable letters of credit. These reinsurance recoverable balances are stated net of allowances for uncollectible reinsurance, which at both December 31, 2023 and 2022 were not significant. The Company had $6.1 billion and $6.2 billion of unsecured reinsurance recoverable balances with third-party reinsurers at December 31, 2023 and 2022, respectively.

The Company records an allowance for credit losses which is a valuation account that reduces reinsurance recoverable balances to present the net amount expected to be collected from reinsurers. When assessing the creditworthiness of the Company’s reinsurance recoverable balances, beyond the analysis of individual claims disputes, the Company considers the financial strength of its reinsurers using public ratings and ratings reports, current existing credit enhancements to reinsurance agreements and the statutory and GAAP financial statements of the reinsurers. Impairments are then determined based on probable and estimable defaults. The Company had an allowance for credit losses of $3 million and $10 million on its reinsurance recoverable balances at December 31, 2023 and 2022, respectively. In 2023, the Company had $3 million of additions to the allowance and $10 million of impairments charged against the allowance.

At December 31, 2023, the Company had $18.9 billion of net ceded reinsurance recoverables with third-party reinsurers. Of this total, $16.8 billion, or 89%, were with the Company’s five largest ceded reinsurers, including $4.3 billion of net ceded reinsurance recoverables which were unsecured. At December 31, 2022, the Company had $17.6 billion of net ceded reinsurance recoverables with third-party reinsurers. Of this total, $15.4 billion, or 88%, were with the Company’s five largest ceded reinsurers, including $4.3 billion of net ceded reinsurance recoverables which were unsecured.

The amounts on the consolidated statements of operations include the impact of reinsurance. Information regarding the significant effects of reinsurance was as follows:


	Years Ended December 31,
	2023		2022		2021
	(In millions)
Premiums
Direct premiums	$	1,499	$	1,359	$	1,440
Reinsurance assumed	14		6		(12)
Reinsurance ceded	(685)		(703)		(721)
Net premiums	$	828	$	662	$	707
Universal life and investment-type product policy fees
Direct universal life and investment-type product policy fees	$	2,941	$	3,107	$	3,554
Reinsurance assumed	49		45		41
Reinsurance ceded	(695)		(717)		(615)
Net universal life and investment-type product policy fees	$	2,295	$	2,435	$	2,980
Other revenues
Direct other revenues	$	269	$	292	$	373
Reinsurance assumed	2		2		4
Reinsurance ceded	212		184		73
Net other revenues	$	483	$	478	$	450
Policyholder benefits and claims
Direct policyholder benefits and claims	$	3,946	$	3,863	$	4,197
Reinsurance assumed	84		112		85
Reinsurance ceded	(1,354)		(1,782)		(1,536)
Net policyholder benefits and claims	$	2,676	$	2,193	$	2,746
Change in market risk benefits
Direct change in market risk benefits	$	(1,537)	$	(4,154)	$	(4,192)
Reinsurance assumed	(1)		(1)		1
Reinsurance ceded	31		51		57
Net change in market risk benefits	$	(1,507)	$	(4,104)	$	(4,134)

The amounts on the consolidated balance sheets include the impact of reinsurance. Information regarding the significant effects of reinsurance was as follows at:


	December 31,
	2023								2022
	Direct		Assumed		Ceded		Total Balance Sheet		Direct		Assumed		Ceded		Total Balance Sheet
	(In millions)
Assets
Premiums, reinsurance and other receivables (net of allowance for credit losses)	$	463	$	4	$	19,294	$	19,761	$	417	$	—	$	18,131	$	18,548
Market risk benefit assets	$	613	$	—	$	43	$	656	$	412	$	—	$	71	$	483
Liabilities
Future policy benefits	$	32,456	$	113	$	—	$	32,569	$	31,402	$	95	$	—	$	31,497
Policyholder account balances	$	76,768	$	4,300	$	—	$	81,068	$	69,334	$	4,193	$	—	$	73,527
Market risk benefit liabilities	$	10,318	$	5	$	—	$	10,323	$	10,386	$	3	$	—	$	10,389
Other policy-related balances	$	2,253	$	1,583	$	—	$	3,836	$	2,477	$	1,621	$	—	$	4,098
Other liabilities	$	7,138	$	15	$	1,286	$	8,439	$	5,568	$	10	$	1,479	$	7,057

Reinsurance agreements that do not expose the Company to a reasonable possibility of a significant loss from insurance risk are recorded using the deposit method of accounting. The deposit assets on reinsurance were $7.5 billion and $6.0 billion at December 31, 2023 and 2022, respectively. The deposit liabilities on reinsurance were $3.9 billion and $3.8 billion at December 31, 2023 and 2022, respectively.