Reinsurance

3 Months Ended

Mar. 31, 2024

Insurance [Abstract]

Reinsurance

Reinsurance

F&G reinsures portions of its policy risks with other insurance companies. The use of indemnity reinsurance does not discharge an insurer from liability on the insurance ceded. The insurer is required to pay in full the amount of its insurance liability regardless of whether it is entitled to or able to receive payment from the reinsurer. The portion of risks exceeding F&G's retention limit is reinsured. F&G primarily seeks reinsurance coverage in order to manage loss exposures, to enhance our capital position, to diversify risks and earnings, and to manage new business volume. F&G follows reinsurance accounting when the treaty adequately transfers insurance risk. Otherwise, F&G follows deposit accounting if there is inadequate transfer of insurance risk or if the underlying policy for which risk is being transferred is an investment contract that does not contain insurance risk.

The effects of reinsurance on net premiums earned and net benefits incurred (benefits paid and reserve changes) for the three months ended March 31, 2024 and March 31, 2023 were as follows (in millions):

	Three months ended
	March 31, 2024				March 31, 2023
	Net Premiums Earned		Net Benefits Incurred		Net Premiums Earned		Net Benefits Incurred
Direct	$	620	$	1,213	$	301	$	872
Ceded	(24)		(52)		(26)		(60)
Net	$	596	$	1,161	$	275	$	812

Amounts payable or recoverable for reinsurance on paid and unpaid claims are not subject to periodic or maximum limits. No policies issued by F&G have been reinsured with any foreign company, which is controlled, either directly or indirectly, by a party not primarily engaged in the business of insurance. F&G has not entered into any reinsurance agreements in which the reinsurer may unilaterally cancel any reinsurance for reasons other than non-payment of premiums or other similar credit issues. There have been no significant changes to reinsurance contracts for the three months ended March 31, 2024.

The following summarizes our reinsurance recoverable (in millions) as of March 31, 2024 and December 31, 2023:

Parent Company/ Principal Reinsurers	Reinsurance Recoverable (a)				Agreement Type	Products Covered	Accounting
	March 31, 2024		December 31, 2023
Aspida Life Re Ltd	$	6,489	$	6,128	Coinsurance Funds Withheld	Certain MYGA (b)	Deposit
Somerset Reinsurance Ltd	1,250		716		Coinsurance Funds Withheld	Certain MYGA (b) and DA	Deposit
Wilton Reassurance Company	1,085		1,092		Coinsurance	Block of traditional, IUL and UL (c)	Reinsurance
Everlake Life Insurance Company	791		509		Coinsurance (d)	Certain MYGA (b) (d)	Deposit
Other (e)	518		536
Reinsurance recoverable, gross of allowance for credit losses	10,133		8,981
Allowance for expected credit loss	(21)		(21)
Reinsurance recoverable, net of allowance for credit losses	$	10,112	$	8,960
(a) Reinsurance recoverables do not include unearned ceded premiums that would be recovered in the event of early termination of certain traditional life policies.
(b) As of March 31, 2024 and December 31, 2023, the combined quota share flow reinsurance amongst all reinsurers was 90% .
(c) Also includes certain FGL Insurance life insurance policies that are subject to redundant reserves, reported on a statutory basis, under Regulation XXX and Guideline AXXX.
(d) Reinsurance recoverable is collateralized by assets placed in a statutory comfort trust by the reinsurer and maintained for our sole benefit.
(e) Represents all other reinsurers, with no single reinsurer having a carrying value in excess of 5% of total reinsurance recoverable.

F&G incurred risk charge fees of $10 million during the three months ended March 31, 2024, and 2023 in relation to reinsurance agreements.

Credit Losses

F&G estimates expected credit losses on reinsurance recoverables using a probability of default/loss given default model. Significant inputs to the model include the reinsurer's credit risk, expected timing of recovery, industry-wide historical default experience, senior unsecured bond recovery rates, and credit enhancement features.

The expected credit loss reserves were as follows (in millions):

	Three months ended
	March 31, 2024		March 31, 2023
Balance at beginning of period	$	(21)	$	(10)
Changes in the expected credit loss reserve	—		1
Balance at end of period	$	(21)	$	(9)

Concentration of Reinsurance Risk

As indicated above, F&G has a significant concentration of reinsurance risk with third party reinsurers, ASPIDA Life Re Ltd. (“Aspida Re”), Somerset Reinsurance Ltd. (“Somerset”), Wilton Reinsurance (“Wilton Re”) and Everlake Life Insurance Company (“Everlake”) that could have a material impact on our financial position in the event that any of these reinsurers fails to perform its obligations under the various reinsurance treaties. We monitor the financial condition and financial strength of individual reinsurers using public ratings (refer to table below) and ratings reports of individual reinsurers to attempt to reduce the risk of default by such reinsurers. In addition, the risk of non-performance is further mitigated with various forms of collateral or collateral arrangements, including secured trusts, funds withheld accounts and irrevocable letters of credit. We believe that all amounts due from Aspida Re, Somerset, Wilton Re, and Everlake for periodic treaty settlements, net of any applicable credit loss

reserves, are collectible as of March 31, 2024. The following table presents financial strength ratings as of March 31, 2024:

Parent Company/Principal Reinsurers	Financial Strength Rating
	AM Best	S&P	Fitch	Moody's
Aspida Re	A-	—	—	—
Somerset	A-	BBB+	—	—
Wilton Re	A+	—	A	—
Everlake	A+	—	—	—

“-” indicates not rated