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Reinsurance
 12 Months Ended
Dec. 31, 2022
Reinsurance Disclosures [Abstract]  
Reinsurance
Note 10 – Reinsurance
The Company's insurance subsidiaries enter into agreements with other insurance companies to limit losses from large exposures and to permit recovery of a portion of incurred losses. Reinsurance is ceded primarily in acquisition and disposition transactions when the underwriting company is not being acquired. Reinsurance does not relieve the originating insurer of liability. Therefore, reinsured liabilities must continue to be reported along with the related reinsurance recoverables. The Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of its credit risk.
Reinsurance RecoverablesAccounting policy. Reinsurance recoverables represent amounts due from reinsurers for both paid and unpaid claims of the Company's insurance businesses. 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. 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, consisting primarily of an allowance for expected credit losses which is recognized on reinsurance recoverable balances each period and adjusted through Medical costs and other benefit expenses. 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 majority of the Company's reinsurance recoverables resulted from acquisition and disposition transactions in which the underwriting company was not acquired. The Company reviews its reinsurance arrangements and establishes reserves against the recoverables.
The Company's reinsurance recoverables as of December 31, 2022 are presented in the following table by range of external credit rating and collateral level:
(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 collateralTotal
Ongoing Operations
A- equivalent and higher current ratings (1)
$— $— $87 $87 
BBB- to BBB+ equivalent current credit ratings (1)
— — 58 58 
Not rated139 4 43 186 
Total recoverables related to ongoing operations (2)
139 4 188 331 
Acquisition, disposition or run-off activities
BBB+ equivalent and higher current ratings (1)
Lincoln National Life and Lincoln Life & Annuity of New York— 2,795 — 2,795 
Berkshire Hathaway Life Insurance Company of Nebraska248 432 — 680 
Empower Annuity Insurance Company— — 133 133 
Prudential Insurance Company of America375 — — 375 
Life Insurance Company of North America— 387 — 387 
Other203 19 16 238 
Not rated— 12 3 15 
Total recoverables related to acquisition, disposition or run-off activities826 3,645 152 4,623 
Total$965 $3,649 $340 $4,954 
Allowance for uncollectible reinsurance(37)
Total reinsurance recoverables (2)
$4,917 
(1) Certified by a Nationally Recognized Statistical Rating Organization ("NRSRO").
(2) Includes $174 million of current reinsurance recoverables that are reported in Other current assets.
(3) Includes collateral provisions requiring the reinsurer to fully collateralize its obligation if its external credit rating is downgraded to a specified level.
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.
Effects of ReinsuranceThe 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 Medical costs and other benefit expenses in the Company's Consolidated Statements of Income.
For the Years Ended December 31,
(In millions)202220212020
Premiums
Short-duration contracts
Direct$36,746 $36,513 $38,425 
Assumed416 335 85 
Ceded(265)(148)(230)
Total short-duration contract premiums36,897 36,700 38,280 
Long-duration contracts
Direct3,219 4,753 4,517 
Assumed85 99 99 
Ceded(286)(398)(269)
Total long-duration contract premiums3,018 4,454 4,347 
Total premiums$39,915 $41,154 $42,627 
Total reinsurance recoveries$702 $552 $431 
Effective Exit of GMDB and GMIB BusinessThe 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 $3.1 billion remaining at December 31, 2022.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.
GMDB
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. As of December 31, 2022, the account value decreased primarily due to unfavorable equity market performance, which resulted in an increase to the net amount at risk. 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, 2022December 31, 2021
Account value$7,436 $9,795 
Net amount at risk$2,114 $1,392 
Average attained age of contractholders (weighted by exposure)7577
Number of contractholders (estimated)150,000 170,000 
GMIB
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.
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, 2022 and December 31, 2021.
GMIB liabilities totaled $404 million as of December 31, 2022 and $572 million as of December 31, 2021. The GMIB liabilities reflect the Company's credit risk, while the reinsurance recoverable reflects the credit risk of the reinsurers. There were three reinsurers covering 100% of the GMIB exposures as of December 31, 2022 and December 31, 2021 as follows:
(In millions)
Line of BusinessReinsurerDecember 31, 2022December 31, 2021
Collateral and Other Terms at December 31, 2022
GMIBBerkshire$203 $283 
100% were secured by assets in a trust.
Sun Life Assurance Company of Canada119 167 
Liberty Re (Bermuda) Ltd.108 151 
100% were secured by assets in a trust.
Total GMIB recoverables reported in Other current assets and Other assets
$430 $601 
All reinsurers are rated A- equivalent and higher by an NRSRO.