Reinsurance

3 Months Ended

Mar. 31, 2024

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 Recoverables

The majority of the Company's reinsurance recoverables resulted from acquisition and disposition transactions in which the underwriting company was not acquired. 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 primarily for expected credit losses.

The Company's reinsurance recoverables as of March 31, 2024 are presented at amount due by range of external credit rating and collateral level in the following table, with reinsurance recoverables that are market risk benefits separately presented at fair value:


(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 (1)		No collateral		Total
Ongoing Operations
A- equivalent and higher current ratings (2)	$	—	$	—	$	85	$	85
BBB- to BBB+ equivalent current credit ratings (2)	—		—		60		60
Not rated	145		7		188		340
Total recoverables related to ongoing operations	145		7		333		485
Acquisition, disposition or run-off activities
BBB+ equivalent and higher current ratings (2)
Lincoln National Life and Lincoln Life & Annuity of New York	—		2,619		—		2,619
Empower Annuity Insurance Company	—		—		128		128
Prudential Insurance Company of America	351		—		—		351
Life Insurance Company of North America	—		334		—		334
Other	167		23		14		204

Not rated	—		6		4		10
Total recoverables related to acquisition, disposition or run-off activities	518		2,982		146		3,646
Total reinsurance recoverables before market risk benefits	$	663	$	2,989	$	479	$	4,131
Allowance for uncollectible reinsurance							(35)
Market risk benefits							951
Total reinsurance recoverables (3)							$	5,047

(1)Includes collateral provisions requiring the reinsurer to fully collateralize its obligation if its external credit rating is downgraded to a specified level.

(2)Certified by an NRSRO.

(3)Includes $166 million of current reinsurance recoverables that are reported in Other current assets and $209 million of reinsurance recoverables classified as assets of businesses held for sale.

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.

Effective Exit of Variable Annuity Reinsurance Business

The Company entered into an agreement with Berkshire to effectively exit the variable annuity reinsurance business via a reinsurance transaction in 2013. Variable annuity contracts are accounted for as assumed and ceded reinsurance and categorized as market risk benefits as discussed in Note 9 to the Consolidated Financial Statements. Berkshire reinsured 100% of the Company's future cash flows 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 March 31, 2024. As a result of the reinsurance transaction, amounts payable are offset by a corresponding reinsurance recoverable, provided the increased recoverable remains within the overall Berkshire limit.


(In millions)
Reinsurer (1)	March 31, 2024		December 31, 2023		Collateral and Other Terms at March 31, 2024
Berkshire	$	777	$	873	100% were secured by assets in a trust.
Sun Life Assurance Company of Canada	79		92
Liberty Re (Bermuda) Ltd.	91		104		100% were secured by assets in a trust.
SCOR SE	27		31		75% were secured by a letter of credit.
Market risk benefits (2)	$	974	$	1,100

(1)All reinsurers are rated A- equivalent and higher by an NRSRO.

(2)Includes incurred but not reported ("IBNR") and outstanding claims of $23 million as of March 31, 2024 and $19 million as of December 31, 2023. These amounts are excluded from market risk benefits at of March 31, 2024 in Note 9 and Note 10A to the Consolidated Financial Statements.

The impact of nonperformance risk (i.e., the risk that a counterparty might default) on the variable annuity reinsurance asset was immaterial for the three months ended March 31, 2024 and March 31, 2023.