Reinsurance

12 Months Ended

Dec. 31, 2023

Insurance [Abstract]

Reinsurance

8. Reinsurance

In the ordinary course of business, our insurance companies purchase both treaty and facultative reinsurance to limit potential losses, provide additional capacity for growth, minimize exposure to significant risks or to facilitate greater diversification of our businesses. In addition, certain of our General Insurance subsidiaries sell reinsurance to other insurance companies. We determine the portion of our ultimate net loss that will be recoverable under our reinsurance contracts by reference to the terms of the reinsurance protection purchased. This determination involves an estimate of incurred but not reported (IBNR) loss. Reinsurance recoverables for contracts which are accounted for as deposits are subject to similar judgments and uncertainties and reported in Other assets.

Reinsurance assets include the balances due for paid losses and expenses, reserves for losses and expenses reported and outstanding, reserves for IBNR, ceded unearned premiums and ceded future policy benefits for life and accident and health insurance contracts and benefits paid and unpaid. Amounts related to paid and reserved losses and expenses and benefits with respect to these reinsurance agreements are sometimes collateralized. We remain liable to our policyholders regardless of whether our reinsurers meet their obligations under the reinsurance contracts, and as such, we regularly evaluate the financial condition of our reinsurers and monitor concentration of our credit risk. The estimation of the allowance for unrecoverable reinsurance from reinsurers who are unwilling and/or unable to pay amounts due to us requires judgment for which key inputs typically include historical collection rates when amounts due are in dispute or where the reinsurer has suffered a credit event as well as specific reviews of balances in dispute or subject to credit impairment. The allowance for credit losses and disputes on reinsurance assets was $236 million and $295 million at December 31, 2023 and 2022, respectively. Changes in the allowance for credit losses and disputes on reinsurance assets are reflected in Policyholder benefits and losses incurred within the Consolidated Statements of Income (Loss).

Reinsurance recoverables are recognized in a manner consistent with the liabilities relating to the underlying reinsured contracts.

The reinsurance recoverables for coinsurance and modco contracts, along with amounts recoverable on YRT treaties are determined based on updated net premium ratios, reflecting updated actuarial assumptions using locked-in upper-medium investment instrument yield discount rates with changes recognized as remeasurement gains and losses reported in income. In addition, reinsurance recoverables are remeasured at the balance sheet date using current upper-medium grade discount rates with changes reported in OCI. For reinsurance agreements that reinsure existing, or non-contemporaneous (in-force) traditional and limited payment long-duration insurance contracts, the reinsurance recoverable is measured using the upper-medium grade fixed-income instrument yield discount rate assumption related to the effective date of the reinsurance contract. Therefore, for non-contemporaneous reinsurance agreements executed after January 1, 2021, the locked-in rate to accrete interest into the income statement related to the reinsurance recoverable would be different from the locked-in rate used for accreting interest on the direct reserve for future policy benefits. Certain reinsured guaranteed benefits previously reported as reinsurance recoverables are classified as Market risk benefit assets in the Consolidated Balance Sheets and are measured at fair value.

The following tables present the transition rollforward for Reinsurance assets:

(in millions)	Individual Retirement		Life Insurance		Institutional Markets		Total
Reinsurance assets - other, net of allowance for credit losses and disputes(a)
Pre-adoption, December 31, 2020	$	309	$	2,370	$	28	$	2,707
Reclassification of Cost of Reinsurance(b)	—		416		—		416
Reclassification to Market risk benefits	(35)		—		—		(35)
Change in cash flow assumptions and effect of net premiums exceeding gross premiums	—		9		—		9
Change due to the current upper-medium grade discount rate	—		74		5		79
Post-adoption January 1, 2021	$	274	$	2,869	$	33	$	3,176

(in millions)	Total
Reinsurance assets - Fortitude Re, net of allowance for credit losses and disputes(c)
Pre-adoption, December 31, 2020	$	29,135
Change in cash flow assumptions and effect of net premiums exceeding gross premiums	55
Change due to the current upper-medium grade discount rate	7,611
Post-adoption January 1, 2021	$	36,801

(a)Excludes $36.3 billion of Reinsurance assets - other, net of allowance for credit losses and disputes in General Insurance and Other Operations.

(b)Cost of reinsurance is reported in Other liabilities in the Consolidated Balance sheets.

(c)Represents Life and Retirement legacy insurance lines ceded to Fortitude Re. Excludes $5.4 billion of Reinsurance assets - Fortitude Re, net of allowance for credit losses and disputes in General Insurance and Other Operations.

The remeasurement of the reinsurance assets using the current upper-medium grade discount rate is offset in AOCI.

The following table provides supplemental information for loss and benefit reserves, gross and net of ceded reinsurance:

At December 31,	2023				2022
(in millions)		As Reported		Net of Reinsurance		As Reported		Net of Reinsurance
Liability for unpaid losses and loss adjustment expenses	$	(70,393)	$	(39,994)	$	(75,167)	$	(42,955)
Future policy benefits for life and accident and health insurance contracts		(58,576)		(35,005)		(51,914)		(27,836)
Policyholder contract deposits		(161,979)		(158,171)		(155,984)		(152,375)
Reserve for unearned premiums		(17,387)		(13,117)		(18,338)		(13,992)
Other policyholder funds		(3,356)		(2,817)		(3,463)		(2,898)
Reinsurance assets*		62,587				64,810

*Reinsurance assets excludes (i) allowance for credit losses and disputes of $236 million and $295 million (of which $110 million and $110 million pertains to CECL reserve for Liability for unpaid losses and loss adjustment expenses) for the years ended December 31, 2023 and 2022, respectively, (ii) paid loss recoveries of $4,879 million and $4,662 million for the years ended December 31, 2023 and 2022, respectively, and (iii) policy and contract claims recoverable of $296 million and $545 million for the years ended December 31, 2023 and 2022, respectively.

SHORT-DURATION REINSURANCE

Short-duration reinsurance is effected under reinsurance treaties and by negotiation on individual risks. Certain of these reinsurance arrangements consist of excess of loss contracts that protect us against losses above stipulated amounts. Ceded premiums are considered prepaid reinsurance premiums and are recognized as a reduction of premiums earned over the contract period in proportion to the protection received. Amounts recoverable from reinsurers on short-duration contracts are estimated in a manner consistent with the claims liabilities associated with the reinsurance and presented as a component of Reinsurance assets. Reinsurance premiums for assumed business are estimated based on information received from brokers, ceding companies and reinsurers. Any subsequent differences arising on such estimates are recorded in the periods in which they are determined. Assumed reinsurance premiums are earned primarily on a pro-rata basis over the terms of the reinsurance contracts and the portion of premiums relating to the unexpired terms of coverage is included in the reserve for unearned premiums. Reinsurance premiums for assumed business are estimated based on information received from brokers, ceding companies and reinsureds. Any subsequent differences arising on such estimates are recorded in the periods in which they are determined. For both ceded and assumed reinsurance, risk transfer requirements must be met for reinsurance accounting to apply. If risk transfer requirements are not met, the contract is accounted for as a deposit, resulting in the recognition of cash flows under the contract through a deposit asset or liability and not as revenue or expense. To meet risk transfer requirements, a reinsurance contract must include both insurance risk, consisting of both underwriting and timing risk, and a reasonable possibility of a significant loss for the assuming entity. Similar risk transfer criteria are used to determine whether directly written insurance contracts should be accounted for as insurance or as a deposit.

The following table presents short-duration insurance premiums written and earned:

	Years Ended December 31,
(in millions)		2023		2022		2021
Premiums written:
Direct	$	31,445	$	32,025	$	30,910
Assumed		7,951		7,385		7,209
Ceded		(12,190)		(12,650)		(11,702)
Net	$	27,206	$	26,760	$	26,417
Premiums earned:
Direct	$	30,781	$	32,053	$	30,279
Assumed		7,050		7,137		6,640
Ceded		(12,268)		(12,425)		(11,301)
Net	$	25,563	$	26,765	$	25,618

For the years ended December 31, 2023, 2022 and 2021, reinsurance recoveries, which reduced losses and loss adjustment expenses incurred, amounted to $8.1 billion, $7.1 billion and $7.2 billion, respectively.

Retroactive reinsurance agreements are reinsurance agreements under which our reinsurer agrees to reimburse us as a result of past insurable events. For these agreements, the excess of the amounts ultimately collectible under the agreement over the consideration paid is recognized as a deferred gain liability and amortized into income over the settlement period of the ceded reserves. The amount of the deferral is recalculated each period based on loss payments and updated estimates. If the consideration paid exceeds the ultimate losses collectible under the agreement, the net loss on the agreement is recognized in income immediately. Ceded loss reserves under retroactive agreements were $12.4 billion and $14.3 billion, and the deferred gain liability was $585 million and $661 million, as of December 31, 2023 and 2022, respectively. The effect on income from amortization of the deferred gain was $82 million, $252 million and $191 million for the years ended December 31, 2023, 2022 and 2021, respectively.

In the first quarter of 2017, we entered into an adverse development reinsurance agreement with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc., under which we transferred to NICO 80 percent of the reserve risk on substantially all of our U.S. Commercial long-tail exposures for accident years 2015 and prior. Under this agreement, we ceded to NICO 80 percent of the losses on subject business paid on or after January 1, 2016 in excess of $25 billion of net paid losses, up to an aggregate limit of $25 billion. We account for this transaction as retroactive reinsurance. This transaction resulted in a gain, which under U.S. GAAP retroactive reinsurance accounting is deferred and amortized into income over the settlement period. NICO created a collateral trust account as security for their claim payment obligations to us, into which they deposited the consideration paid under the agreement, and Berkshire Hathaway Inc. has provided a parental guarantee to secure NICO’s obligations under the agreement.

LONG-DURATION REINSURANCE

Long-duration reinsurance is principally under YRT treaties, along with a large modco treaty reinsuring the majority of our legacy business to a former affiliate, Fortitude Re. Reinsurance premiums ceded are recognized when due, along with corresponding benefits. Amounts recoverable from reinsurers are presented as a component of Reinsurance assets.

The following table presents premiums earned and policy fees for our long-duration life insurance and annuity operations:

Years Ended December 31,
(in millions)		2023		2022		2021
Premiums earned:
Direct	$	4,706	$	4,739	$	4,604
Assumed		4,111		1,318		2,265
Ceded		(1,126)		(966)		(1,202)
Net	$	7,691	$	5,091	$	5,667
Policy Fees:
Direct	$	2,873	$	2,991	$	3,090
Assumed		—		—		—
Ceded		(76)		(78)		(85)
Net	$	2,797	$	2,913	$	3,005

Long-duration reinsurance recoveries, which reduced Policyholder benefits and losses incurred, was approximately $1.1 billion, $0.9 billion and $1.3 billion for the years ended December 31, 2023, 2022 and 2021 respectively.

The following table presents long-duration insurance in-force ceded to other insurance companies:

At December 31,
(in millions)	2023		2022		2021
Long-duration insurance in force ceded	$	363,471	$	346,879	$	363,008

Long-duration insurance in-force assumed as a percentage of gross long-duration insurance in-force was 0.01 percent, 0.01 percent, and 0.01 percent at December 31, 2023, 2022 and 2021, respectively; and premiums assumed represented 46.6 percent, 21.8 percent and 33.0 percent of gross premiums for the years ended December 31, 2023, 2022 and 2021, respectively.

The U.S. Life and Retirement companies manage the capital impact of their statutory reserve requirements for certain whole life and universal life policies through unaffiliated and affiliated reinsurance transactions. An evaluation is performed to determine whether these reinsurance transactions meet the requirements of risk transfer under U.S. GAAP. If risk transfer requirements are not met, deposit accounting is used for these reinsurance transactions with a reinsurance risk charge recorded in income. Under one affiliated reinsurance arrangement, one of the U.S. Life and Retirement subsidiaries had one bilateral letter of credit currently in the amount of $125 million, which was issued on May 9, 2022 and expires on February 7, 2027. As of May 12, 2022, this letter of credit is subject to reimbursement by Corebridge Parent in the event of a drawdown.

For additional information on the use of reinsurance, see Note 20.

FORTITUDE RE

Fortitude Re is the reinsurer of the majority of AIG’s run-off operations. The reinsurance transactions are structured as modco and loss portfolio transfer arrangements with funds withheld (funds withheld). In modco and funds withheld arrangements, the investments supporting the reinsurance agreements, and which reflect the majority of the consideration that would be paid to the reinsurer for entering into the transaction, are withheld by, and therefore continue to reside on the balance sheet of, the ceding company (i.e., AIG) thereby creating an obligation for the ceding company to pay the reinsurer (i.e., Fortitude Re) at a later date. Additionally, as AIG maintains ownership of these investments, AIG will maintain its existing accounting for these assets (e.g., the changes in fair value of available for sale securities will be recognized within OCI). AIG has established a funds withheld payable to Fortitude Re while simultaneously establishing a reinsurance asset representing reserves for the insurance coverage that Fortitude Re has assumed. The funds withheld payable contains an embedded derivative and changes in fair value of the embedded derivative related to the funds withheld payable are recognized in earnings through Net realized gains (losses). This embedded derivative is considered a total return swap with contractual returns that are attributable to various assets and liabilities associated with these reinsurance agreements.

As of December 31, 2023, approximately $27.6 billion of reserves from our Life and Retirement Run-Off Lines and approximately $3.0 billion of reserves from our General Insurance Run-Off Lines related to business written by multiple wholly-owned AIG subsidiaries, had been ceded to Fortitude Re under these reinsurance transactions.

There is a diverse pool of assets supporting the funds withheld arrangements with Fortitude Re. The following summarizes the composition of the pool of assets:

	December 31, 2023				December 31, 2022
(in millions)	Carrying Value			Fair Value	Carrying Value			Fair Value	Corresponding Accounting Policy
Fixed maturity securities - available for sale(a)	$	17,384	$	17,384	$	18,821	$	18,821	Fair value through other comprehensive income (loss)
Fixed maturity securities - fair value option		4,867		4,867		4,182		4,182	Fair value through net investment income
Commercial mortgage loans		3,921		3,685		4,107		3,837	Amortized cost
Real estate investments		184		329		133		348	Amortized cost
Private equity funds / hedge funds		1,910		1,910		1,893		1,893	Fair value through net investment income
Policy loans		330		330		355		355	Amortized cost
Short-term investments		176		176		75		75	Fair value through net investment income
Funds withheld investment assets		28,772		28,681		29,566		29,511
Derivative assets, net(b)		45		45		90		90	Fair value through net realized gains (losses)
Other(c)		758		758		782		782	Amortized cost
Total	$	29,575	$	29,484	$	30,438	$	30,383

(a)The change in the net unrealized gains (losses) on available for sale securities related to the Fortitude Re funds withheld assets was $734 million ($580 million after-tax) and $(7.5) billion ($(5.9) billion after-tax), respectively for the years ended December 31, 2023 and 2022.

(b)The derivative assets and liabilities have been presented net of cash collateral. The derivative assets and liabilities supporting the Fortitude Re funds withheld arrangements had a fair market value of $63 million and $34 million, respectively, as of December 31, 2023. The derivative assets and liabilities supporting the Fortitude Re funds withheld arrangements had a fair market value of $192 million and $28 million, respectively, as of December 31, 2022. These derivative assets and liabilities are fully collateralized either by cash or securities.

(c)Primarily comprised of Cash and Accrued investment income.

The impact of the funds withheld arrangements with Fortitude Re was as follows:

Years Ended December 31,
(in millions)		2023		2022		2021
Net investment income - Fortitude Re funds withheld assets	$	1,544	$	943	$	1,971
Net realized gains (losses) on Fortitude Re funds withheld assets:
Net realized gains (losses) - Fortitude Re funds withheld assets		(295)		(486)		1,003
Net realized gains (losses) - Fortitude Re funds withheld embedded derivative		(2,007)		7,481		(603)
Net realized gains (losses) on Fortitude Re funds withheld assets		(2,302)		6,995		400
Income (loss) from continuing operations before income tax expense (benefit)		(758)		7,938		2,371
Income tax expense (benefit)(a)		(159)		1,667		499
Net income (loss)		(599)		6,271		1,872
Change in unrealized appreciation (depreciation) of all other investments(a)		580		(5,900)		(1,760)
Comprehensive income (loss)	$	(19)	$	371	$	112

(a)The income tax expense (benefit) and the tax impact in AOCI was computed using AIG’s U.S. statutory tax rate of 21 percent.

Various assets supporting the Fortitude Re funds withheld arrangements are reported at amortized cost, and as such, changes in the fair value of these assets are not reflected in the financial statements. However, changes in the fair value of these assets are included in the embedded derivative in the Fortitude Re funds withheld arrangement and the appreciation (depreciation) of the asset is the primary driver of the comprehensive income (loss) reflected above.

Reinsurance Security

Our third-party reinsurance arrangements do not relieve us from our direct obligations to our beneficiaries. Thus, a credit exposure exists with respect to both short-duration and long-duration reinsurance ceded to the extent that any reinsurer fails to meet the obligations assumed under any reinsurance agreement. We hold substantial collateral as security under related reinsurance agreements in the form of funds, securities, and/or letters of credit. A provision has been recorded for estimated unrecoverable reinsurance. In light of collateral held, we believe that no exposure to a single reinsurer represents an inappropriate concentration of credit risk to AIG. Gross reinsurance assets due from reinsurers exceeding 5 percent of our total reinsurance assets were approximately $46.3 billion and $48.4 billion at December 31, 2023 and 2022, respectively, of which approximately $3.2 billion and $3.6 billion at December 31, 2023 and 2022, respectively, was not secured by collateral.

REINSURANCE – CREDIT LOSSES

The estimation of reinsurance recoverables involves a significant amount of judgment, particularly for latent exposures, such as asbestos, due to their long-tail nature. We assess the collectability of reinsurance recoverable balances in each reporting period, through either historical trends of disputes and credit events or financial analysis of the credit quality of the reinsurer. We record adjustments to reflect the results of these assessments through an allowance for credit losses and disputes on uncollectible reinsurance that reduces the carrying amount of reinsurance and other assets on the consolidated balance sheets (collectively, reinsurance recoverables). This estimate requires significant judgment for which key considerations include:

•paid and unpaid amounts recoverable;

•whether the balance is in dispute or subject to legal collection;

•the relative financial health of the reinsurer as classified by the Obligor Risk Ratings (ORRs) we assign to each reinsurer based upon our financial reviews; reinsurers that are financially troubled (i.e., in run-off, have voluntarily or involuntarily been placed in receivership, are insolvent, are in the process of liquidation or otherwise subject to formal or informal regulatory restriction) are assigned ORRs that will generate a significant allowance; and

•whether collateral and collateral arrangements exist.

An estimate of the reinsurance recoverable's lifetime expected credit losses is established utilizing a probability of default and loss given default method, which reflects the reinsurer’s ORR. The allowance for credit losses excludes disputed amounts. An allowance for disputes is established for a reinsurance recoverable using the losses incurred model for contingencies.

The total reinsurance recoverables as of December 31, 2023 were $69.8 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 90 percent of the reinsurance recoverables were investment grade, of which 51 percent related to General Insurance and 39 percent related to Life and Retirement; (ii) approximately 9 percent of the reinsurance recoverables were non-investment grade, the majority of which related to General Insurance and (iii) approximately one percent of the reinsurance recoverables related to entities that were not rated by AIG.

The total reinsurance recoverables as of December 31, 2022 were $71.8 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 92 percent of the reinsurance recoverables were investment grade, of which 53 percent related to General Insurance and 39 percent related to Life and Retirement; (ii) approximately 7 percent of the reinsurance recoverables were non-investment grade, the majority of which related to General Insurance; (iii) less than one percent of the non-investment grade reinsurance recoverables related to Life and Retirement and (iv) approximately one percent of the reinsurance recoverables related to entities that were not rated by AIG.

As of December 31, 2023 and December 31, 2022, approximately 83 percent and 77 percent, respectively, of our non-investment grade reinsurance exposure related to captive insurers. These arrangements are typically collateralized by letters of credit, funds withheld or trust agreements.

Reinsurance Recoverable Allowance

The following table presents a rollforward of the reinsurance recoverable allowance:

Years Ended December 31,		2023						2022						2021
(in millions)	General Insurance		Life and Retirement			Total	General Insurance		Life and Retirement			Total	General Insurance		Life and Retirement			Total
Balance, beginning of year	$	260	$	84	$	344	$	281	$	101	$	382	$	292	$	83	$	375
Addition to (release of) allowance for expected credit losses and disputes, net		(5)		(5)		(10)		(22)		(17)		(39)		6		18		24
Write-offs charged against the allowance for credit losses and disputes		—		(49)		(49)		(5)		—		(5)		(17)		—		(17)
Recoveries of amounts previously written off		—		—		—		2		—		2		—		—		—
Other changes		—		—		—		4		—		4		—		—		—
Balance, end of year	$	255	$	30	$	285	$	260	$	84	$	344	$	281	$	101	$	382

Past-Due Status

We consider a reinsurance asset to be past due when it is 90 days past due. The allowance for credit losses is estimated excluding disputed amounts. An allowance for disputes is established using the losses incurred method for contingencies. Past due balances on claims that are not in dispute were not material for any of the periods presented.