Accounting policy. Reinsurance recoverables represent amounts due from reinsurers for both paid and unpaid claims of the Company’s insurance businesses. Most reinsurance recoverables are classified as non-current assets. The current portion of reinsurance recoverables is reported in Other current assets and consists primarily of recoverables on paid claims expected to be settled within one year. Reinsurance recoverables are presented net of allowances for uncollectible reinsurance that, effective with adopting ASU 2016-13 on January 1, 2020, consists primarily of an allowance for expected credit losses. $31 million was recorded as a cumulative effect adjustment to retained earnings at adoption. Estimates of the allowance for expected credit losses are based on internal and external data used to develop expected loss rates over the anticipated duration of the recoverable asset that vary by external credit rating and collateral level. The Company's allowance for credit losses on reinsurance recoverables was $32 million as of December 31, 2020, of which $31 million was recorded as a cumulative effect adjustment to retained earnings at adoption.

The majority of the Company’s reinsurance recoverables resulted from acquisition and disposition transactions in which the underwriting company was not acquired. Included in the table below is $217 million of current reinsurance recoverables that are reported in Other current assets as of December 31, 2020; as of December 31, 2019 there was $222 million of current reinsurance recoverables reported in Other current assets. The Company’s reinsurance recoverables are presented in the following table by range of external credit rating and collateral level.


(Dollars in millions)	Fair value of collateral contractually required to meet or exceed carrying value of recoverable		Collateral provisions exist that may mitigate risk of credit loss(3)		No collateral		Total
Ongoing Operations
Upper-medium grade and higher (1)	$	—	$	—	$	173	$	173
Lower-medium grade (2)	—		—		64		64
Not rated	92		—		29		121
Total recoverables related to ongoing operations	92		—		266		358
Acquisition, disposition or runoff activities
Upper-medium grade and higher (1)
Lincoln National Life and Lincoln Life & Annuity of New York	—		3,033		—		3,033
Berkshire	309		409		—		718
Prudential Retirement Insurance and Annuity	625		—		—		625
Life Insurance Company of North America	—		424		—		424
Other	232		18		20		270

Not rated	—		17		4		21
Total recoverables related to acquisition, disposition or runoff activities	1,166		3,901		24		5,091
Total	$	1,258	$	3,901	$	290	$	5,449
Allowance for uncollectible reinsurance							(32)
Total reinsurance recoverables							$	5,417

Collateral levels are defined internally based on the fair value of the collateral relative to the carrying amount of the reinsurance recoverable, the frequency at which collateral is required to be replenished and the potential for volatility in the collateral’s fair value.

The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable to meet their reinsurance obligations to the Company. The Company reviews its reinsurance arrangements and establishes reserves against the recoverables, as further described above.

The following table presents direct, assumed and ceded premiums for both short-duration and long-duration insurance contracts. It also presents reinsurance recoveries that have been netted against benefit expenses in the Company’s Consolidated Statements of Income.


(In millions)	2020		2019		2018
Premiums
Short-duration contracts
Direct	$	38,425	$	35,690	$	32,148
Assumed	85		64		77
Ceded	(230)		(203)		(182)
Total short-duration contract premiums	38,280		35,551		32,043
Long-duration contracts
Direct	4,517		4,352		4,268
Assumed	99		105		116
Ceded
Individual life insurance and annuity business sold	(119)		(126)		(133)
Other	(150)		(168)		(181)
Total long-duration contract premiums	4,347		4,163		4,070
Total premiums	$	42,627	$	39,714	$	36,113
Reinsurance recoveries
Individual life insurance and annuity business sold	$	240	$	238	$	249
Other	191		157		203
Total reinsurance recoveries	$	431	$	395	$	452

The Company entered into an agreement with Berkshire to effectively exit the GMDB and GMIB business via a reinsurance transaction in 2013. Berkshire reinsured 100% of the Company’s future claim payments in this business, net of other reinsurance arrangements existing at that time. The reinsurance agreement is subject to an overall limit with approximately $3.2 billion remaining at December 31, 2020.

GMDB is accounted for as assumed and ceded reinsurance and GMIB assets and liabilities are reported as derivatives at fair value as discussed below. GMIB assets are reported in Other current assets and Other assets, and GMIB liabilities are reported in Accrued expenses and other liabilities and Other non-current liabilities.

The GMDB exposure arises under annuities written by ceding companies that guarantee the benefit received at death. The Company’s exposure arises when the guaranteed minimum death benefit exceeds the fair value of the related mutual fund investments at the time of a contractholder’s death.

Accounting policy. The Company estimates the gross liability and reinsurance recoverable with an internal model based on the Company’s experience and future expectations over an extended period, consistent with the long-term nature of this product. As a result of the reinsurance transaction, reserve increases have a corresponding increase in the recorded reinsurance recoverable, provided the increased recoverable remains within the overall Berkshire limit (including the GMIB asset presented below).

The following table presents the account value, net amount at risk and the number of contractholders for guarantees assumed by the Company in the event of death. The net amount at risk is the amount that the Company would have to pay if all contractholders died as of the specified date. The Company should be reimbursed in full for these payments unless the Berkshire reinsurance limit is exceeded.


(Dollars in millions, excludes impact of reinsurance ceded)	December 31, 2020		December 31, 2019
Account value	$	9,523	$	9,110
Net amount at risk	$	1,570	$	1,764
Average attained age of contractholders (weighted by exposure)	77		76
Number of contractholders (estimated)	185,000		200,000

The Company reinsured contracts with issuers of GMIB products. The Company’s exposure represents the excess of a contractually guaranteed amount over the level of variable annuity account values. Payment by the Company depends on the actual account value in the related underlying mutual funds and the level of interest rates when the contractholders elect to receive minimum income payments that can only occur within 30 days of a policy anniversary after the appropriate waiting period. The Company has purchased retrocessional coverage (“GMIB assets”) for these contracts including retrocessional coverage from Berkshire.

Accounting policy. The Company reports GMIB liabilities and assets as derivatives at fair value because cash flows of these liabilities and assets are affected by equity markets and interest rates, but are without significant life insurance risk and are settled in lump sum payments. The Company receives and pays fees periodically based on either contractholders’ account values or deposits increased at a contractual rate. The Company will also pay and receive cash depending on changes in account values and interest rates when contractholders first elect to receive minimum income payments. Cash flows on these contracts are reported in operating activities.

Assumptions used in fair value measurement. GMIB assets and liabilities are established using capital market assumptions and assumptions related to future annuitant behavior (including mortality, lapse and annuity election rates). The Company classifies GMIB assets and liabilities in Level 3 of the fair value hierarchy described in Note 12 because assumptions related to future annuitant behavior are largely unobservable.

The only assumption expected to impact future shareholders’ net income is non-performance risk. The non-performance risk adjustment reflects a market participant’s view of nonpayment risk by adding an additional spread to the discount rate in the calculation of both (a) the GMIB liabilities to be paid by the Company, and (b) the GMIB assets to be paid by the reinsurers, after considering collateral. The impact of non-performance risk was immaterial for the years ended December 31, 2020 and December 31, 2019.

GMIB liabilities totaling $729 million as of December 31, 2020 and $688 million as of December 31, 2019 were reported in Accrued expenses and other liabilities and Other non-current liabilities. There were three reinsurers covering 100% of the GMIB exposures as of December 31, 2020 and December 31, 2019 as follows:


(In millions)
Line of Business	Reinsurer	December 31, 2020		December 31, 2019		Collateral and Other Terms at December 31, 2020
GMIB	Berkshire	$	353	$	332	100% were secured by assets in a trust.
	Sun Life Assurance Company of Canada	215		202
	Liberty Re (Bermuda) Ltd.	190		179		100% were secured by assets in a trust.
Total GMIB recoverables reported in Other current assets and Other assets		$	758	$	713