Reinsurance

12 Months Ended

Dec. 31, 2023

The Company assumes reinsurance from unaffiliated insurers to provide our counterparties with risk management solutions. In addition, the Company cedes reinsurance to affiliated and unaffiliated insurers to enable the Company to manage capital and risk exposure. The Company's historical reinsurance cessions provided a level of risk mitigation desired by prior ownership. Such arrangements do not relieve the Company of its primary liability to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company regularly monitors the financial condition and ratings of its reinsurers and structures agreements to provide collateral funds where necessary.

The following summarizes premiums, policy charges and fee income by direct, assumed and ceded insurance types, in the consolidated statements of operations:


	Successor Company						Predecessor Company
	For the Years Ended December 31,				For the Period of July 1, 2021 to December 31, 2021		For the Six Months Ended June 30, 2021
	2023		2022
Premiums, policy charges and fee income
Direct	$	2,212	$	2,283	$	1,197	$	1,210
Reinsurance assumed	413		210		69		64
Reinsurance ceded	(1,891)		(1,885)		(806)		(812)
Total premiums, policy charges and fee income	$	734	$	608	$	460	$	462

Insurance recoveries on ceded reinsurance agreements, which reduce death and other benefits, were $1,670 and $1,648 for the years ended December 31, 2023 and 2022 (Successor Company), $782 for the period of July 1, 2021 to December 31, 2021 (Successor Company) and $958 for the six months ended June 30, 2021 (Predecessor Company). In addition, the Company has reinsured a portion of the risk associated with VA and the associated GMDB and GMWB risks.

Assumed Reinsurance

Guardian

On November 1, 2022, the Company entered into a reinsurance agreement with Guardian to reinsure $7.1 billion in VA reserves, primarily comprised of contracts with living withdrawal benefit and death benefit riders. The Company assumed 100% of $439 in general account reserves on a coinsurance basis and 100% of $6.7 billion in separate account assets and liabilities, as well as the associated MRB on a modified coinsurance basis. The Company acquired general account assets to support the assumed reserves and received $121 in cash from Guardian upon closing, relating to a ceding commission of $65 and cash settlements. As part of this transaction, the Company entered into an administration services agreement for the reinsured block and will ultimately administer the reinsured block within two years following the close of the transaction. The separate account assets and liabilities are reported on a net basis on the Company's balance sheets and the Company earns income on the assumed separate account assets.

The following table summarizes the impacts of the Guardian transaction at inception:


Liabilities assumed	$	481
Less: ceding commission received and other settlements	(65)
Less: assets received	(464)
Net gain on reinsurance	$	(48)

Unearned revenue reserve	48

Allianz

On December 30, 2021, the Company entered into a reinsurance agreement with Allianz to assume approximately $8 billion of FIA reserves. Certain of the FIA contracts included living withdrawal benefits. The Company paid $693 to Allianz upon closing, primarily relating to a ceding commission of $866, offset by cash settlements. The Company will participate in an aggregated hedging pool administered by Allianz, whereby the Company will pay Allianz a fee in order to participate in the pool and will receive an index credit payout based on the level of participation in the pool. Allianz will continue to service and administer the policies reinsured under the agreement as the direct insurer of the business.

The following table summarizes the impacts of the Allianz transaction on the Successor Company:


Liabilities assumed [1]	$	7,355
Net ceding commission paid	866
Less: assets received	(8,849)
Net gain on reinsurance	$	(628)

Unearned revenue reserve	628

[1]Includes certain adjustments to FIA MRBs of approximately $0.8 billion.

As part of the Allianz reinsurance transaction, the Company maintains a coinsurance trust for the benefit of Allianz. As of

December 31, 2023, there was $6.4 billion of fixed income securities, $58 of short-term investments and $202 of cash in the coinsurance trust. As of December 31, 2022, there were $6.2 billion of fixed income securities, $199 of short-term

investments and $130 of cash in the coinsurance trust.

Other Assumed Reinsurance

On July 29, 2022, the Company executed a flow reinsurance agreement with Allianz. Under the terms of the transaction, the Company assumes certain FIA contracts issued by Allianz after August 2, 2022 on a coinsurance basis. Allianz will continue to service and administer the policies reinsured under the agreement as the direct insurer of the business.

Ceded Reinsurance

Reinsurance recoverables include balances due from reinsurance companies and are presented net of ACL. The ACL represents an estimate of expected credit losses over the lifetime of the contracts that reflect management’s best estimate of reinsurance cessions that may be uncollectible in the future due to reinsurers’ inability to pay. Reinsurance recoverables include an estimate of the amount of policyholder benefits that may be ceded under the terms of the reinsurance agreements. Amounts recoverable from reinsurers are estimated in a manner consistent with assumptions used for the underlying policy benefits. Accordingly, the Company’s estimate of reinsurance recoverables is subject to similar risks and uncertainties as the estimate of the gross reserve for future policy benefits.

The following summarizes reinsurance recoverables by reinsurer for the Successor Company:


	As of December 31,
	2023		2022
Prudential Financial, Inc. [1]	$	14,383	$	14,313
Massachusetts Mutual Life Insurance Company [1]	5,967		6,672
Commonwealth Annuity and Life Insurance Company [1]	6,531		7,243
TR Re [2]	9,468		9,613
Other reinsurers	1,375		1,403
Gross reinsurance recoverables	37,724		39,244

Allowance for credit losses	(18)		(21)
Reinsurance recoverables, net	$	37,706	$	39,223

[1]The Company's obligations to its direct policyholders that have been reinsured are primarily secured by invested assets held in trust.

[2]The Company's obligations to its direct policyholders reinsured to TR Re are secured by invested assets held by the Company in segregated portfolios.

Allowance for Credit Losses

The Company closely monitors the financial condition, ratings and current market information of all its counterparty reinsurers and records an ACL considering the credit quality of the reinsurer, the invested assets in trust, and the period over which the recoverable balances are expected to be collected. Counterparty risk is assessed on a pooled basis in cases of shared risk characteristics, and separately for individual reinsurers when it is more relevant. The Company evaluates historical events, current conditions, and reasonable and supportable forecasts in developing its ACL estimate. Where its contracts permit, the Company secures future claim obligations with various forms of collateral, including irrevocable letters of credit, secured trusts and funds held accounts. The ACL is estimated using a probability of default and loss given default model applied to the amount of reinsurance recoverables, net of collateral, exposed to loss. The probability of default factor is assigned based on each reinsurer's credit rating. The Company reassesses and updates credit ratings on a quarterly basis. The probability of default factors encompass historical industry defaults for liabilities with similar durations to the reinsured liabilities as estimated through multiple economic cycles. The loss given default factors are based on a study of historical recovery rates for general creditors of corporations through multiple economic cycles.

Affiliated Reinsurance

On December 31, 2022 (Successor Company), the Company retroceded 75% of the business assumed from Allianz to TR Re on a modified coinsurance basis. As a result of the retrocession, the Company recorded a deferred gain of $511.

On December 31, 2021 (Successor Company), the Company reinsured certain payout and VA business to TR Re on a modified coinsurance and coinsurance funds withheld basis. As a result of the reinsurance agreement, the Company recorded a deferred loss of $129.

The following presents the impacts from affiliated reinsurance on the Successor Company's statements of operations:


	Years Ended December 31,
	2023		2022
Revenues
Premiums	$	(56)	$	(27)
Policy charges and fee income	(304)		(320)
Net investment income	(380)		(136)
Investment related gains	361		696
Total revenues	(379)		213

Benefits, Losses, and Expenses
Benefits and losses	(276)		(117)
Change in market risk benefits	77		4
Amortization of deferred acquisition costs	14		19
Insurance operating costs and other expenses	(136)		(119)
Total benefits, losses and expenses	(321)		(213)

Income (loss) before income taxes	(58)		426

Income tax expense (benefit)	(12)		90
Net income (loss)	$	(46)	$	336

For the period of July 1, 2021 through December 31, 2021 (Successor Company), there was not a material impact on the statements of operations from the Company's affiliated reinsurance arrangement entered into in 2021.