Reinsurance

12 Months Ended

Dec. 31, 2019

8. REINSURANCE

The Company cedes insurance risk to reinsurers to enable the Company to manage capital and risk exposure. Such arrangements do not relieve the Company of its primary liability to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company's procedures include carefully selecting its reinsurers, structuring agreements to provide collateral funds where necessary, and regularly monitoring the financial condition and ratings of its reinsurers.

The Company has two adverse development cover (“ADC”) reinsurance agreements in place, both of which are accounted for as retroactive reinsurance. One agreement covers substantially all asbestos and environmental ("A&E") reserve development for 2016 and prior accident years ("A&E ADC") and the Navigators ADC covers substantially all reserve development of Navigators Insurance Company and certain of its affiliates for 2018 and prior accident years. For more information on ADC agreements, see Note 1 -Basis of Presentation and Significant Accounting Policies, and Note 11 -Reserve for Unpaid Losses and Loss Adjustment Expenses.

Property and Casualty ceded losses, which reduce losses and loss adjustment expenses incurred, were $826, $661 and $901 for the years ended December 31, 2019, 2018 and 2017, respectively.

Group Benefits ceded losses, which reduce losses and loss adjustment expenses incurred, were $73, $116 and $120 for the years ended December 31, 2019, 2018 and 2017, respectively.

Reinsurance Recoverables

Reinsurance recoverables include balances due from reinsurance companies and are presented net of an allowance for uncollectible reinsurance. Reinsurance recoverables include an estimate of the amount of gross losses and loss adjustment expense reserves that may be ceded under the terms of the reinsurance agreements, including incurred but not reported unpaid losses. The Company’s estimate of losses and loss adjustment expense reserves ceded to reinsurers is based on assumptions that are consistent with those used in establishing the gross reserves for amounts the Company owes to its claimants. The Company estimates its ceded reinsurance recoverables based on the terms of any applicable facultative and treaty reinsurance, including an estimate of how incurred but not reported losses will ultimately be ceded under reinsurance agreements. Accordingly, the Company’s estimate of reinsurance recoverables is subject to similar risks and uncertainties as the estimate of the gross reserve for unpaid losses and loss adjustment expenses.

Reinsurance Recoverables



	As of
	December 31, 2019			December 31, 2018
Property and Casualty Insurance Products
Paid loss and loss adjustment expenses	$	249		$	127
Unpaid loss and loss adjustment expenses	4,819			3,773
Gross reinsurance recoverables	5,068			3,900
Allowance for uncollectible reinsurance	(114		)	(126		)
Net P&C reinsurance recoverables	4,954			3,774
Group Benefits net reinsurance recoverables [1]	253			251
Recoverable related to reserves in Corporate [1]	320			332
Reinsurance recoverables, net	$	5,527		$	4,357


[1]	No allowance for uncollectible reinsurance was required as of December 31, 2019 and 2018.

The allowance for uncollectible reinsurance reflects management’s best estimate of reinsurance cessions that may be uncollectible in the future due to reinsurers’ unwillingness or inability to pay. The Company analyzes recent developments in commutation activity between reinsurers and cedants, recent trends in arbitration and litigation outcomes in disputes between reinsurers and cedants and the overall credit quality of the Company’s reinsurers. Based on this analysis, the Company may adjust the allowance for uncollectible reinsurance or charge off reinsurer balances that are determined to be uncollectible. Where its contracts permit, the Company secures future claim

obligations with various forms of collateral, including irrevocable letters of credit, secured trusts, funds held accounts and group-wide offsets.

Due to the inherent uncertainties as to collection and the length of time before reinsurance recoverables become due, it is possible that future adjustments to the Company’s reinsurance recoverables, net of the allowance, could be required, which could have a material adverse effect on the Company’s consolidated results of operations or cash flows in a particular quarter or annual period.

Insurance Revenues

Property and Casualty Insurance Revenue



	For the years ended December 31,
Premiums Written	2019			2018			2017
Direct	$	12,190		$	10,784		$	10,865
Assumed	371			217			223
Ceded	(978		)	(593		)	(571		)
Net	$	11,583		$	10,408		$	10,517
Premiums Earned
Direct	$	12,010		$	10,824		$	10,923
Assumed	416			221			232
Ceded	(936		)	(599		)	(600		)
Net	$	11,490		$	10,446		$	10,555

Group Benefits Revenue



	For the years ended December 31,
	2019			2018			2017
Gross earned premiums, fees and other considerations	$	4,122		$	3,615		$	3,281
Reinsurance assumed	1,572			2,044			446
Reinsurance ceded	(91		)	(61		)	(50		)
Net earned premiums, fees and other considerations	$	5,603		$	5,598		$	3,677

For its group benefits products, the Company reinsures certain of its risks to other reinsurers under yearly renewable term and coinsurance arrangements and variations thereto. Yearly renewable term and coinsurance arrangements result in passing a portion of the risk to the reinsurer. Generally, the reinsurer receives a proportionate amount of the premiums less an allowance for commissions and expenses and is liable for a corresponding proportionate amount of all benefit payments. The increase in premiums assumed from 2017 to 2018 was primarily

due to premiums related to Aetna's U.S. group life and disability business acquired by the Company effective November 1, 2017 whereby Aetna is fronting the business for a period of time. As that business is re-written through Hartford writing companies, the amount of assumed reinsurance for Group Benefits will decrease and gross premium written on a direct basis will increase.