Reinsurance

12 Months Ended

Dec. 31, 2024

Reinsurance activity related to our premium income, policy benefits, and policy benefits remeasurement gain are as follows:


	Year Ended December 31
	2024		2023		2022
	(in millions of dollars)
Direct Premium Income	$	10,732.1	$	10,286.8	$	9,893.6
Reinsurance Assumed	69.8		80.4		78.7
Reinsurance Ceded	(304.5)		(321.2)		(355.8)
Net Premium Income	$	10,497.4	$	10,046.0	$	9,616.5

Direct Policy Benefits	$	8,027.9	$	8,001.8	$	8,205.3
Reinsurance Assumed	152.5		138.7		135.1
Reinsurance Ceded	(700.2)		(828.6)		(798.3)
Net Policy Benefits	$	7,480.2	$	7,311.9	$	7,542.1

Direct Policy Benefits - Remeasurement Gain	$	(546.8)	$	(49.2)	$	(372.5)
Reinsurance Assumed	2.2		(0.1)		36.4
Reinsurance Ceded	(17.7)		(5.5)		(211.4)
Net Policy Benefits - Remeasurement Gain	$	(562.3)	$	(54.8)	$	(547.5)

We exited a substantial portion of our Closed Block individual disability product line through two phases of a coinsurance and modified coinsurance reinsurance transaction with Commonwealth Annuity and Life Insurance Company (Commonwealth) that were executed in December 2020 and March 2021. In addition, we also entered into an agreement with Commonwealth whereby we will provide a 12-year volatility cover to Commonwealth for the active life cohort (ALR cohort) ceded as a part of the reinsurance transaction described above. At the end of the 12-year coverage period, Commonwealth will retain the risk for the remaining incidence and claims risk on the ALR cohort of the ceded business. Due to the nature of the volatility cover, the ALR cohort is accounted for under the deposit method on a GAAP basis. Reserves ceded to Commonwealth were $4,698.4 million and $5,143.4 million at December 31, 2024 and 2023, respectively. The deposit asset as of December 31, 2024 and 2023 was $282.3 million and $296.5 million, respectively. The unamortized cost of reinsurance related to the reinsurance transaction with Commonwealth was $508.1 million and $549.5 million at December 31, 2024 and 2023, respectively. We amortized the cost of reinsurance related to this transaction of $41.4 million, $44.1 million, and $50.3 million in 2024, 2023, and 2022, respectively.

As of December 31, 2024, Commonwealth accounted for 56 percent of the total reinsurance recoverable and the majority of our total cost of reinsurance. Commonwealth has an A rating by A.M. Best Company (AM Best) and has also established collateralized trust accounts for our benefit to secure its obligations. In addition, nine other major companies, which account for approximately 39 percent of our reinsurance recoverable, are also rated A or better by either AM Best or Standard & Poor's Ratings Services (S&P), or are fully securitized by letters of credit or investment-grade fixed maturity securities held in trust. Approximately 4 percent of our reinsurance recoverable is primarily related to business reinsured with other companies also rated A- or better by AM Best or S&P, with overseas entities with equivalent ratings, or backed by letters of credit or trust agreements, or through reinsurance arrangements wherein we retain the assets in our general account. Less than one percent of our reinsurance recoverable is held by companies either rated below A- by AM Best or S&P, or not rated.

Subsequent Events

Closed Block Long-Term Care and Unum US Individual Disability Reinsurance Transaction

On February 26, 2025, Unum America entered into a master transaction agreement with Fortitude Reinsurance Company Ltd. (Fortitude Re) which, subject to receipt of regulatory approvals and the satisfaction or waiver of other customary closing conditions, is expected to result in the execution of a coinsurance agreement (anticipated reinsurance agreement) during 2025.

This anticipated reinsurance agreement is to reinsure a portion of our Closed Block long-term care insurance business and a portion of our Unum US individual disability business on a coinsurance basis to Fortitude Re. The anticipated reinsurance agreement represents approximately 21 percent of total Closed Block long-term care future policy benefits and approximately 15 percent of Unum US individual disability future policy benefits as of December 31, 2024. The transaction is expected to result in approximately $430 million pre-tax ceding commission paid to Fortitude Re. Fortitude Re will establish and maintain a collateralized trust account for the benefit of Unum America to secure its obligations under the anticipated reinsurance agreement.

Immediately prior to entering into the anticipated reinsurance agreement with Fortitude Re, Unum America will recapture the aforementioned Closed Block long-term care business from Fairwind Reinsurance Company (Fairwind), an affiliated captive reinsurer, and assume the aforementioned Unum US individual disability business from Provident, an affiliate.