REINSURANCE

9 Months Ended

Sep. 30, 2023

The Company assumes and cedes reinsurance with other insurance companies. The Company evaluates the financial condition of its reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. Ceded reinsurance does not relieve the originating insurer of liability.

The following table summarizes the effect of reinsurance. The impact of the reinsurance transaction described below results in an increase in reinsurance ceded:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(in millions)
Direct charges and fee income	$	681	$	683	$	2,033	$	2,117
Reinsurance assumed	4		5		8		8
Reinsurance ceded - Equitable America	(340)		—		(685)		—
Reinsurance ceded - third party	(152)		(139)		(456)		(423)
Policy charges and fee income	$	193	$	549	$	900	$	1,702

Direct premiums	$	199	$	194	$	607	$	572
Reinsurance assumed	40		51		136		138
Reinsurance ceded - Equitable America	(78)		—		(118)		—
Reinsurance ceded - third party	(59)		(52)		(170)		(162)
Premiums	$	102	$	193	$	455	$	548

Direct policyholders’ benefits	$	673	$	674	$	2,122	$	2,046
Reinsurance assumed	29		46		106		151
Reinsurance ceded - Equitable America	(146)		—		(410)		—
Reinsurance ceded - third party	(138)		(197)		(447)		(469)
Policyholders’ benefits	$	418	$	523	$	1,371	$	1,728

Direct Interest credited to policyholders’ account balances	$	505	$	352	$	1,458	$	944
Reinsurance assumed	—		—		—		—
Reinsurance ceded - Equitable America	(155)		—		(306)		—
Reinsurance ceded - third party	(27)		—		(82)		(17)
Interest credited to policyholders’ account balances	$	323	$	352	$	1,070	$	927

Ceded Reinsurance

The Company reinsures most of its new variable life, UL and term life policies on an excess of retention basis. The Company generally retains on a per life basis up to $25 million for single lives and $30 million for joint lives with the excess 100% reinsured. The Company also reinsures risk on certain substandard underwriting risks and in certain other cases.

On October 3, 2022, as part of the Global Atlantic Transaction, Equitable Financial ceded to First Allmerica Financial Life Insurance Company on a combined coinsurance and modified coinsurance basis, a 50% quota share of approximately 360,000 legacy Group EQUI-VEST deferred variable annuity contracts issued by Equitable Financial between 1980 and 2008.

In addition to the above, the Company cedes a portion of its group health, extended term insurance, and paid-up life insurance and substantially all of its individual disability income business through various coinsurance agreements.

On May 17, 2023, Equitable Financial entered into a reinsurance agreement with Equitable America, effective April 1, 2023. Pursuant to the Reinsurance Treaty, virtually all of Equitable Financial’s net retained General Account liabilities, including all of its net retained liabilities relating to the living benefit and death riders related to (i) its variable annuity contracts issued outside the State of New York prior to October 1, 2022 (and with respect to its EQUI-VEST variable annuity contracts, issued outside the State of New York prior to February 1, 2023) and (ii) certain universal life insurance policies issued outside the State of New York prior to October 1, 2022, were reinsured to Equitable America on a coinsurance funds withheld basis. See Note 1 to these Consolidated Financial Statements for further details on the transaction.

There is a diverse pool of assets supporting the funds withheld and NI modco arrangement with Equitable America. The following table summarizes the composition of the pool of assets:



	September 30, 2023
	Carrying Value		Fair Value
	(in millions)
Fixed maturities	$	23,958	$	23,958
Mortgage loans on real estate	8,476		7,171
Policy loans	241		241
Other equity investments	227		227
Other invested assets	6,290		6,290
Total assets supporting funds withheld	$	39,192	$	37,887

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(1)Other invested assets includes derivatives and cash and cash equivalents.

The impact of the funds withheld and NI modco arrangement with Equitable America was as follows:


	Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
	(in millions)
Net derivative gains (losses):
Freestanding derivatives	$	(157)	$	1,208
Embedded derivatives	1,051		(279)
Net derivative gains (losses)	894		929
Net investment income (loss)	345		640
Investment gains (losses), net	(143)		(179)
Income (loss) from continuing operations, before income taxes	1,096		1,390
Income tax (expense) benefit	(96)		(149)
Net income (loss)	1,000		1,241

Change in unrealized gains (losses), net of income taxes	(843)		(1,016)
Comprehensive income (loss)	$	157	$	225

Various assets supporting the Equitable America funds withheld and NI modco arrangement are reported at amortized cost, and as such, changes in fair value of these assets are not reflected in the consolidated financial statements. However, changes in the fair value of these assets are included in the embedded derivative in the Equitable America funds withheld arrangement and the appreciation of the assets is the primary driver of the comprehensive income (loss) reflected above.

Assumed Reinsurance

In addition to the sale of insurance products, the Company currently acts as a professional retrocessionaire by assuming risk from professional reinsurers. The Company assumes accident, life, health, aviation, special risk and space risks by participating in or reinsuring various reinsurance pools and arrangements.

The following table summarizes the ceded purchased market risk benefits, internal reinsurance recoverable and third-party recoverables including amount due to reinsurance and assumed reserves:



	September 30, 2023		December 31, 2022
	(in millions)
Ceded Reinsurance:
Estimated net fair values of purchased market risk benefits	$	15,490	$	10,490
Reinsurance recoverables related to insurance contracts	21,512		7,131
Related party - Equitable America (1)	14,466		—
Third parties	7,046		7,131
Top reinsurers:
First Allmerica-GAF	3,735		4,005
Venerable Insurance and Annuity Company (A- KBRA (IFRS) rating)	862		543
Ceded group health reserves	13		14
Amount due to reinsurers	199		282
Top reinsurers:
First Allmerica-GAF	71		147

Assumed Reinsurance:
Reinsurance assumed reserves	689		701

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(1)Includes ceded PAB on NI Modco portion of the Reinsurance Treaty of $32.2 billion offset by $(28.2) billion of modco payable for the same portion of the Reinsurance Treaty.