XML 174 R13.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Reinsurance
 12 Months Ended
Dec. 31, 2019
Reinsurance Disclosures [Abstract]  
Reinsurance
6. 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 third parties. The Company participates in reinsurance activities in order to limit losses, minimize exposure to significant risks and provide additional capacity for future growth.
Under the terms of the reinsurance agreements, the reinsurer agrees to reimburse the Company for the ceded amount in the event a claim is paid. Cessions under reinsurance agreements do not discharge the Company’s obligation as the primary insurer. In the event that reinsurers do not meet their obligations under the terms of the reinsurance agreements, reinsurance recoverable balances could become uncollectible.
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 8.
U.S.
For its Group Benefits business, the Company generally retains most of the risk and only cedes particular risk on certain client arrangements. The majority of the Company’s reinsurance activity within this business relates to client agreements for employer sponsored captive programs, risk-sharing agreements and multinational pooling. The risks ceded under these agreements are generally quota shares of group life and disability policies. The cessions vary from 50% to 100% of all the risks of the policies.
The Company, through its Property & Casualty business, purchases reinsurance to manage its exposure to large losses (primarily catastrophe losses) and to protect statutory surplus. The Company cedes losses and premiums based upon the exposure of the policies subject to reinsurance. To manage exposure to large property & casualty losses, the Company purchases property catastrophe, casualty and property per risk excess of loss reinsurance protection.
The Company’s RIS business has periodically engaged in reinsurance activities on an opportunistic basis. There were no such transactions during the periods presented.
Asia, Latin America and EMEA
For selected large corporate clients, the Company reinsures group employee benefits or credit insurance business with various client-affiliated reinsurance companies, covering policies issued to the employees or customers of the clients. Additionally, the Company cedes and assumes risk with other insurance companies when either company requires a business partner with the appropriate local licensing to issue certain types of policies in certain jurisdictions. In these cases, the assuming company typically underwrites the risks, develops the products and assumes most or all of the risk. The Company also has reinsurance agreements in-force that reinsure a portion of the living and death benefit guarantees issued in connection with variable annuity products. Under these agreements, the Company pays reinsurance 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 Company may also reinsure certain risks with external reinsurers depending upon the nature of the risk and local regulatory requirements.
MetLife Holdings
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. The Company also assumes portions of the risk associated with certain whole life policies issued by a former affiliate and reinsures certain term life policies and universal life policies with secondary death benefit guarantees to such former affiliate.
For its other products, the Company has a reinsurance agreement in-force to reinsure the living and death benefit guarantees issued in connection with certain variable annuity guarantees from the Company’s former operating joint venture in Japan. Under this agreement, the Company receives reinsurance fees associated with the guarantees collected from policyholders, and provides reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations.
Catastrophe Coverage
The Company has exposure to catastrophes which could contribute to significant fluctuations in the Company’s results of operations. For the U.S. and EMEA, the Company purchases catastrophe coverage to reinsure risks issued within territories that the Company believes are subject to the greatest catastrophic risks. For its other segments, the Company uses excess of retention and quota share reinsurance agreements to provide greater diversification of risk and minimize exposure to larger risks. Excess of retention reinsurance agreements provide for a portion of a risk to remain with the direct writing company and quota share reinsurance agreements provide for the direct writing company to transfer a fixed percentage of all risks of a class of policies.
Reinsurance Recoverables
The Company reinsures its business through a diversified group of well-capitalized reinsurers. The Company analyzes recent trends in arbitration and litigation outcomes in disputes, if any, with its reinsurers. The Company monitors ratings and evaluates the financial strength of its reinsurers by analyzing their financial statements. In addition, the reinsurance recoverable balance due from each reinsurer is evaluated as part of the overall monitoring process. Recoverability of reinsurance recoverable balances is evaluated based on these analyses. 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 December 31, 2019 and 2018, were not significant.
The Company has secured certain reinsurance recoverable balances with various forms of collateral, including secured trusts, funds withheld accounts and irrevocable letters of credit. The Company had $3.6 billion and $3.4 billion of unsecured reinsurance recoverable balances at December 31, 2019 and 2018, respectively.
At December 31, 2019, the Company had $6.7 billion of net ceded reinsurance recoverables. Of this total, $4.3 billion, or 64%, were with the Company’s five largest ceded reinsurers, including $1.7 billion of net ceded reinsurance recoverables which were unsecured. At December 31, 2018, the Company had $7.5 billion of net ceded reinsurance recoverables. Of this total, $4.5 billion, or 60%, were with the Company’s five largest ceded reinsurers, including $1.1 billion of net ceded reinsurance recoverables which were unsecured.
The Company has reinsured with an unaffiliated third-party reinsurer, 59.25% of the closed block through a modified coinsurance agreement. The Company accounts for this agreement under the deposit method of accounting. The Company, having the right of offset, has offset the modified coinsurance deposit with the deposit recoverable.
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,
 
 
2019
 
2018
 
2017
 
 
(In millions)
Premiums
 
 
 
 
 
 
Direct premiums
 
$
42,513

 
$
44,199

 
$
39,595

Reinsurance assumed
 
2,020

 
2,021

 
1,773

Reinsurance ceded
 
(2,298
)
 
(2,380
)
 
(2,376
)
Net premiums
 
$
42,235

 
$
43,840

 
$
38,992

Universal life and investment-type product policy fees
 
 
 
 
 
 
Direct universal life and investment-type product policy fees
 
$
6,109

 
$
6,008

 
$
5,978

Reinsurance assumed
 
56

 
86

 
83

Reinsurance ceded
 
(562
)
 
(592
)
 
(551
)
Net universal life and investment-type product policy fees
 
$
5,603

 
$
5,502

 
$
5,510

Policyholder benefits and claims
 
 
 
 
 
 
Direct policyholder benefits and claims
 
$
42,094

 
$
43,456

 
$
39,354

Reinsurance assumed
 
1,584

 
1,583

 
1,388

Reinsurance ceded
 
(2,217
)
 
(2,383
)
 
(2,429
)
Net policyholder benefits and claims
 
$
41,461

 
$
42,656

 
$
38,313

Other expenses
 
 
 
 
 
 
Direct other expenses
 
$
13,559

 
$
13,704

 
$
13,610

Reinsurance assumed
 
382

 
321

 
246

Reinsurance ceded
 
(252
)
 
(311
)
 
(235
)
Net other expenses
 
$
13,689

 
$
13,714

 
$
13,621


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,
 
 
2019
 
2018
 
 
Direct
 
Assumed
 
Ceded
 
Total
Balance
Sheet
 
Direct
 
Assumed
 
Ceded
 
Total
Balance
Sheet
 
 
(In millions)
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Premiums, reinsurance and other receivables
 
$
6,814

 
$
2,190

 
$
11,439

 
$
20,443

 
$
5,988

 
$
1,603

 
$
12,053

 
$
19,644

Deferred policy acquisition costs and value of business acquired
 
17,822

 
301

 
(290
)
 
17,833

 
18,812

 
385

 
(302
)
 
18,895

Total assets
 
$
24,636

 
$
2,491

 
$
11,149

 
$
38,276

 
$
24,800

 
$
1,988

 
$
11,751

 
$
38,539

Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future policy benefits
 
$
191,403

 
$
3,506

 
$
—

 
$
194,909

 
$
183,367

 
$
3,413

 
$
—

 
$
186,780

Policyholder account balances
 
192,328

 
299

 
—

 
192,627

 
183,207

 
488

 
(2
)
 
183,693

Other policy-related balances
 
15,806

 
1,351

 
14

 
17,171

 
15,519

 
986

 
24

 
16,529

Other liabilities
 
16,165

 
2,402

 
5,612

 
24,179

 
14,848

 
2,131

 
5,985

 
22,964

Total liabilities
 
$
415,702

 
$
7,558

 
$
5,626

 
$
428,886

 
$
396,941

 
$
7,018

 
$
6,007

 
$
409,966


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 $2.5 billion and $2.7 billion at December 31, 2019 and 2018, respectively. The deposit liabilities on reinsurance were $1.4 billion at both December 31, 2019 and 2018.