REINSURANCE

3 Months Ended

Mar. 31, 2024

The Company periodically enters into fixed quota-share coinsurance agreements in the normal course of business, primarily to provide additional capacity for future growth, optimize capital, limit losses, and minimize exposure to significant risks. For each of its reinsurance agreements, the Company determines whether the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. For additional information on reinsurance, see Notes 1 and 8 of the Notes to the Consolidated Financial Statements in the 2023 Annual Report.

The following table reconciles direct earned premiums, direct benefits and claims, excluding reserve remeasurement gains and losses, and reserve remeasurement gains and losses to net amounts after the effect of reinsurance.


	Three Months Ended March 31,
(In millions)		2024	2023
Direct earned premiums				$	3,482	$	3,738
Ceded to other companies:
Ceded Aflac Japan closed blocks				(34)		(82)
Other				(35)		(25)
Assumed from other companies:
Retrocession activities				29		34
Other				14		23
Net earned premiums				$	3,456	$	3,688

Direct benefits and claims, excluding reserve remeasurement				$	2,082	$	2,256
Ceded benefits and change in reserves for future benefits:
Ceded Aflac Japan closed blocks				(18)		(77)
Other				(15)		(27)
Assumed from other companies:
Retrocession activities				13		41
Other				4		10
Benefits and claims, excluding reserve remeasurement				$	2,066	$	2,203

Direct reserve remeasurement (gains) losses				$	(57)	$	(53)
Ceded reserve remeasurement gains (losses)				1		0
Assumed reserve remeasurement (gains) losses				0		0
Reserve remeasurement (gains) losses				$	(56)	$	(53)
Total benefits and claims, net				$	2,010	$	2,150

The Company has recorded a deferred reinsurance gain liability related to reinsurance transactions which represents ceded reserves in excess of consideration paid, or consideration received in excess of assumed reserves. The remaining deferred reinsurance gain liability of $161 million and $175 million as of March 31, 2024 and December 31, 2023, respectively, is included in future policy benefits in the consolidated balance sheets and is being amortized into income over the expected lives of the policies.

The Company has also recorded a reinsurance recoverable for reinsurance transactions. The reinsurance recoverable, which is included in other assets in the consolidated balance sheets, is reported net of allowance for credit losses and had a remaining balance of $178 million and $183 million as of March 31, 2024 and December 31, 2023, respectively. The allowance for credit losses related to the Company's reinsurance recoverable balance was $4 million and $10 million as of March 31, 2024 and December 31, 2023, respectively. The credit allowance for the reinsurance recoverable balance is estimated using a PD / LGD method and the key credit quality indicator is the credit rating of the Company’s reinsurance counterparty. The Company uses external credit ratings focused on the reinsurer’s financial strength and credit worthiness. As of March 31, 2024, the Company's reinsurance counterparties were rated A+. The Company monitors the credit ratings periodically, but not less frequently than quarterly.

These reinsurance transactions are indemnity reinsurance that do not relieve the Company from its obligations to policyholders. In the event that the reinsurer is unable to meet its obligations, the Company remains liable for the reinsured claims.

Internal Reinsurance Transactions

Aflac Re is a Bermuda domiciled insurer that reinsures certain policies issued by ALIJ. The inter-segment amounts associated with these internal reinsurance transactions are eliminated in consolidation.