REINSURANCE

9 Months Ended

Sep. 30, 2024

The Company periodically enters into fixed quota-share coinsurance agreements in the normal course of business, primarily to provide additional capacity for future growth, optimize capital, limit losses, and minimize exposure to significant risks. For each of its reinsurance agreements, the Company determines whether the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. For additional information on reinsurance, see Notes 1 and 8 of the Notes to the Consolidated Financial Statements in the 2023 Annual Report.

The following table reconciles direct earned premiums, direct benefits and claims, excluding reserve remeasurement gains and losses, and reserve remeasurement gains and losses to net amounts after the effect of reinsurance.


	Three Months Ended September 30,						Nine Months Ended September 30,
(In millions)	2024			2023			2024			2023
Direct earned premiums		$	3,360		$	3,524		$	10,194		$	10,885
Ceded to other companies:
Ceded Aflac Japan closed blocks		(32)			(75)			(97)			(240)
Other		(39)			(24)			(109)			(69)
Assumed from other companies:
Retrocession activities		28			33			84			96
Other		11			18			37			65
Net earned premiums		$	3,328		$	3,476		$	10,109		$	10,737

Direct benefits and claims, excluding reserve remeasurement		$	2,024		$	2,106		$	6,101		$	6,545
Ceded benefits and change in reserves for future benefits:
Ceded Aflac Japan closed blocks		(16)			(71)			(51)			(222)
Other		(20)			(7)			(53)			(29)
Assumed from other companies:
Retrocession activities		17			29			42			90
Other		(2)			8			3			36
Benefits and claims, excluding reserve remeasurement		$	2,003		$	2,065		$	6,042		$	6,420

Direct reserve remeasurement (gains) losses		$	(407)		$	(219)		$	(515)		$	(327)
Ceded reserve remeasurement gains (losses)		(1)			14			0			15

Reserve remeasurement (gains) losses		$	(408)		$	(205)		$	(515)		$	(312)
Total benefits and claims, net		$	1,595		$	1,860		$	5,527		$	6,108

The Company has recorded a deferred reinsurance gain liability related to reinsurance transactions which represents ceded reserves in excess of consideration paid, or consideration received in excess of assumed reserves. The remaining consolidated deferred reinsurance gain liability of $165 million and $175 million as of September 30, 2024 and December 31, 2023, respectively, is included in future policy benefits in the consolidated balance sheets and is being amortized into income over the expected lives of the policies.

The Company has also recorded a reinsurance recoverable for reinsurance transactions. The reinsurance recoverable, which is included in other assets in the consolidated balance sheets, is reported net of allowance for credit losses and had a remaining balance of $183 million as of September 30, 2024 and December 31, 2023. The allowance for credit losses related to the Company's reinsurance recoverable balance was $4 million and $10 million as of September 30, 2024 and December 31, 2023, respectively. The credit allowance for the reinsurance recoverable balance is estimated using a PD / LGD method and the key credit quality indicator is the credit rating of the Company’s reinsurance counterparty. The Company uses external credit ratings focused on the reinsurer’s financial strength and credit worthiness. As of September 30, 2024, the Company's reinsurance counterparties were rated A+. The Company monitors the credit ratings periodically, but not less frequently than quarterly.

These reinsurance transactions are indemnity reinsurance that do not relieve the Company from its obligations to policyholders. In the event that the reinsurer is unable to meet its obligations, the Company remains liable for the reinsured claims.

Internal Reinsurance Transactions

Aflac Re is a Bermuda domiciled insurer that reinsures certain policies issued by ALIJ. The inter-segment amounts associated with these internal reinsurance transactions are eliminated in consolidation.