Insurance

12 Months Ended

Dec. 31, 2024

We conduct insurance underwriting operations primarily through The American Road Insurance Company (“TARIC”). TARIC is a wholly owned subsidiary of Ford Credit operating in the United States and Canada. TARIC provides physical damage insurance coverage for Ford Credit financed vehicles at dealer locations and Ford and Lincoln vehicles in transit between final assembly plants and dealer locations. TARIC also provides physical damage insurance coverage for non-affiliated company financed vehicles, serviced by Ford Credit, at dealer locations. In addition, TARIC provides a variety of other insurance products and services to Ford and its affiliates, including contractual liability insurance on extended service contracts. TARIC provides commercial automobile insurance for Ford and third parties and general liability insurance and surety bonds for Ford in the United States.

Insurance premiums earned are reported net of reinsurance as Insurance premiums earned. These premiums are earned over their respective policy periods. Physical damage insurance premiums, including premiums on vehicles financed at wholesale by us, are recognized as income on a monthly basis. Premiums from extended service plan contracts and other contractual liability coverages are earned over the life of the policy based on historical loss experience. Commissions and premium taxes are deferred and amortized over the term of the related policies on the same basis on which premiums are earned.

Reserves for insurance losses and loss adjustment expenses are established based on actuarial estimates and historical loss development patterns, which represents management’s best estimate. If management believes the reserves do not reflect all losses due to changes in conditions, or other relevant factors, an adjustment is made based on management judgment.

Reinsurance activity primarily consists of ceding a majority of the contractual liability insurance business related to automotive extended service plan contracts for a ceding commission. Commissions on ceded amounts are earned on the same basis as related premiums. Reinsurance contracts do not relieve TARIC from its obligations to its policyholders. Failure of reinsurers to honor their obligations could result in losses to TARIC. Therefore, TARIC requires nearly all of its reinsurers to hold collateral and monitors the underlying business and financial performance of its reinsurers to mitigate risk.

Insurance Assets

Cash, cash equivalents, and marketable securities related to insurance activities at December 31 were as follows (in millions):


	2023		2024
Cash and cash equivalents	$	82	$	85
Marketable securities	649		644
Total cash, cash equivalents, and marketable securities	$	731	$	729

TARIC is required by law to maintain deposits with regulatory authorities. These deposited securities totaled $10 million and $11 million at December 31, 2023 and 2024, respectively, and were included in Marketable securities.

NOTE 11. INSURANCE (Continued)

Amounts paid to reinsurers relating to the unexpired portion of the underlying automotive service contracts, and amounts recoverable from reinsurers on unpaid losses, including incurred but not reported losses are reported in Other assets. Prepaid reinsurance premiums and other reinsurance recoverables were $818 million and $876 million at December 31, 2023 and 2024, respectively. This includes amounts ceded to Ford affiliates of $98 million at both December 31, 2023 and 2024.

Insurance Liabilities

Other liabilities and deferred revenue includes unearned insurance premiums and fees of $930 million and $995 million at December 31, 2023 and 2024, respectively. This includes amounts from Ford and its affiliates of $808 million and $863 million at December 31, 2023 and 2024, respectively.

The reserve for reported insurance losses and an estimate of unreported insurance losses, based on past experience, was $26 million and $35 million at December 31, 2023 and 2024, respectively, and was included in Other liabilities and deferred revenue.

Insurance Premiums

Insurance premiums written and earned for the years ended December 31 were as follows (in millions):


	2022				2023				2024
	Written		Earned		Written		Earned		Written		Earned
Direct	$	337	$	306	$	394	$	359	$	472	$	415
Assumed	—		—		—		—		—		—
Ceded	(264)		(231)		(275)		(240)		(300)		(244)
Net premiums	$	73	$	75	$	119	$	119	$	172	$	171

The direct premiums earned from Ford and its affiliates were $241 million, $249 million, and $259 million for the years ended December 31, 2022, 2023, and 2024, respectively.

Insurance Expenses

Insurance underwriting losses and expenses are reported as Insurance expenses. The components of insurance expenses for the years ended December 31 were as follows (in millions):


	2022		2023		2024
Insurance losses	$	34	$	90	$	181
Loss adjustment expenses	2		4		5
Reinsurance income and other expenses, net	(40)		(41)		(40)
Insurance expenses	$	(4)	$	53	$	146

Insurance expenses with Ford and its affiliates were $107 million, $161 million, and $224 million for the years ended December 31, 2022, 2023, and 2024, respectively.

Insurance expenses were reduced by ceded insurance expenses of $156 million, $198 million, and $233 million for the years ended December 31, 2022, 2023, and 2024, respectively.