The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products and also as a provider of reinsurance for some insurance products issued by NELICO, former affiliated and unaffiliated companies. The Company participates in reinsurance activities in order to limit losses, minimize exposure to significant risks and provide additional capacity for future growth.

Accounting for reinsurance requires extensive use of assumptions and estimates, particularly related to the future performance of the underlying business and the potential impact of counterparty credit risks. The Company periodically reviews actual and anticipated experience compared to the aforementioned assumptions used to establish assets and liabilities relating to ceded and assumed reinsurance and evaluates the financial strength of counterparties to its reinsurance agreements using criteria similar to that evaluated in the security impairment process discussed in Note 7.

For annuities, the Company reinsures portions of the living and death benefit guarantees issued in connection with certain variable annuities to unaffiliated reinsurers. Under these reinsurance agreements, the Company pays a reinsurance premium generally based on fees associated with the guarantees collected from policyholders and receives reimbursement for benefits paid or accrued in excess of account values, subject to certain limitations. The value of embedded derivatives on the ceded risk is determined using a methodology consistent with the guarantees directly written by the Company with the exception of the input for nonperformance risk that reflects the credit of the reinsurer. The Company also assumes 100% of the living and death benefit guarantees issued in connection with certain variable annuities issued by NELICO. The Company cedes certain fixed rate annuities to unaffiliated third party reinsurers, and assumes certain index-linked annuities from an unaffiliated third party insurer. These reinsurance arrangements are structured on a coinsurance basis and are reported as deposit accounting.

For its life products, the Company has historically reinsured the mortality risk primarily on an excess of retention basis or on a quota share basis. The Company currently reinsures 90% of the mortality risk in excess of $2 million for most products. In addition to reinsuring mortality risk as described above, the Company reinsures other risks, as well as specific coverages. Placement of reinsurance is done primarily on an automatic basis and also on a facultative basis for risks with specified characteristics. On a case-by-case basis, the Company may retain up to $20 million per life and reinsure 100% of amounts in excess of the amount the Company retains. The Company also reinsures 90% of the risk associated with participating whole life policies to a former affiliate and assumes certain term life policies and universal life policies with secondary death benefit guarantees issued by a former affiliate. The Company evaluates its reinsurance programs routinely and may increase or decrease its retention at any time.

The Company reinsures, through 100% quota share reinsurance agreements certain run-off long-term care and workers’ compensation business written by the Company. At December 31, 2019, the Company had $6.7 billion of reinsurance recoverables associated with its reinsured long-term care business. The reinsurer has established trust accounts for the Company’s benefit to secure their obligations under the reinsurance agreements. Additionally, the Company is indemnified for losses and certain other payment obligations it might incur with respect to such reinsured long-term care insurance business.

The Company has exposure to catastrophes which could contribute to significant fluctuations in the Company’s results of operations. The Company uses excess of retention and quota share reinsurance agreements to provide greater diversification of risk and minimize exposure to larger risks.

The Company reinsures its business through a diversified group of reinsurers. The Company analyzes recent trends in arbitration and litigation outcomes in disputes, if any, with its reinsurers. The Company monitors ratings and evaluates the financial strength of its reinsurers by analyzing their financial statements. In addition, the reinsurance recoverable balance due from each reinsurer is evaluated as part of the overall monitoring process. Recoverability of reinsurance recoverable balances is evaluated based on these analyses. The Company generally secures large reinsurance recoverable balances with various forms of collateral, including secured trusts, funds withheld accounts and irrevocable letters of credit. These reinsurance recoverable balances are stated net of allowances for uncollectible reinsurance, which at both December 31, 2019 and 2018, were not significant.

The Company has secured certain reinsurance recoverable balances with various forms of collateral, including secured trusts, funds withheld accounts and irrevocable letters of credit. The Company had $5.4 billion and $5.0 billion of unsecured reinsurance recoverable balances with third-party reinsurers at December 31, 2019 and 2018, respectively.

At December 31, 2019, the Company had $13.5 billion of net ceded reinsurance recoverables with third-parties. Of this total, $11.7 billion, or 87%, were with the Company’s five largest ceded reinsurers, including $4.0 billion of net ceded reinsurance recoverables which were unsecured. At December 31, 2018, the Company had $12.3 billion of net ceded reinsurance recoverables with third-parties. Of this total, $10.9 billion, or 89%, were with the Company’s five largest ceded reinsurers, including $3.8 billion of net ceded reinsurance recoverables which were unsecured.



	Years Ended December 31,
	2019			2018			2017
	(In millions)
Premiums
Direct premiums	$	1,597		$	1,640		$	1,731
Reinsurance assumed	15			12			13
Reinsurance ceded	(765		)	(783		)	(916		)
Net premiums	$	847		$	869		$	828
Universal life and investment-type product policy fees
Direct universal life and investment-type product policy fees	$	3,432		$	3,617		$	3,653
Reinsurance assumed	79			101			103
Reinsurance ceded	(529		)	(528		)	(600		)
Net universal life and investment-type product policy fees	$	2,982		$	3,190		$	3,156
Other revenues
Direct other revenues	$	244		$	262		$	260
Reinsurance assumed	3			2			29
Reinsurance ceded	19			23			47
Net other revenues	$	266		$	287		$	336
Policyholder benefits and claims
Direct policyholder benefits and claims	$	5,267		$	4,724		$	5,080
Reinsurance assumed	70			75			89
Reinsurance ceded	(1,799		)	(1,619		)	(1,575		)
Net policyholder benefits and claims	$	3,538		$	3,180		$	3,594
Other expenses
Direct other expenses	$	1,839		$	1,812		$	1,835
Reinsurance assumed	(10		)	(4		)	19
Reinsurance ceded	(20		)	(45		)	(21		)
Net other expenses	$	1,809		$	1,763		$	1,833



	December 31,
	2019								2018
	Direct		Assumed		Ceded		Total Balance Sheet		Direct		Assumed			Ceded		Total Balance Sheet
	(In millions)
Assets
Premiums, reinsurance and other receivables	$	420	$	39	$	13,828	$	14,287	$	384	$	60		$	12,669	$	13,113
Liabilities
Policyholder account balances	$	42,062	$	3,059	$	—	$	45,121	$	37,586	$	1,744		$	—	$	39,330
Other policy-related balances	$	1,126	$	1,675	$	—	$	2,801	$	1,051	$	1,677		$	—	$	2,728
Other liabilities	$	3,410	$	11	$	1,063	$	4,484	$	2,804	$	(4	)	$	655	$	3,455

Reinsurance agreements that do not expose the Company to a reasonable possibility of a significant loss from insurance risk are recorded using the deposit method of accounting. The deposit assets on reinsurance were $2.0 billion and $1.4 billion at December 31, 2019 and 2018, respectively. The deposit liabilities on reinsurance were $2.4 billion and $1.4 billion at December 31, 2019 and 2018, respectively.

The Company has reinsurance agreements with its affiliate NELICO and certain MetLife, Inc. subsidiaries, including Metropolitan Life Insurance Company (“MLIC”), Metropolitan Tower Life Insurance Company, MetLife Reinsurance Company of Vermont and American Life Insurance Company, all of which were related parties until the completion of the MetLife Divestiture.



	Years Ended December 31,
	2019			2018			2017
	(In millions)
Premiums
Reinsurance assumed	$	5		$	7		$	13
Reinsurance ceded	—			(201		)	(537		)
Net premiums	$	5		$	(194	)	$	(524	)
Universal life and investment-type product policy fees
Reinsurance assumed	$	6		$	51		$	103
Reinsurance ceded	—			1			(14		)
Net universal life and investment-type product policy fees	$	6		$	52		$	89
Other revenues
Reinsurance assumed	$	3		$	2		$	29
Reinsurance ceded	—			18			44
Net other revenues	$	3		$	20		$	73
Policyholder benefits and claims
Reinsurance assumed	$	34		$	52		$	87
Reinsurance ceded	—			(178		)	(420		)
Net policyholder benefits and claims	$	34		$	(126	)	$	(333	)
Other expenses
Reinsurance assumed	$	(32	)	$	(13	)	$	18
Reinsurance ceded	—			(5		)	—
Net other expenses	$	(32	)	$	(18	)	$	18



	December 31,
	2019					2018
	Assumed			Ceded		Assumed			Ceded
	(In millions)
Assets
Premiums, reinsurance and other receivables	$	26		$	—	$	21		$	—
Liabilities
Policyholder account balances	$	443		$	—	$	386		$	—
Other policy-related balances	$	11		$	—	$	14		$	—
Other liabilities	$	(21	)	$	—	$	(38	)	$	—

The Company assumes risks from NELICO related to guaranteed minimum benefits written directly by the cedent. The assumed reinsurance agreements contain embedded derivatives and changes in their estimated fair value are also included within net derivative gains (losses). The embedded derivatives associated with the agreements are included within policyholder account balances and were $443 million and $386 million at December 31, 2019 and 2018, respectively. Net derivative gains (losses) associated with the embedded derivatives were ($53) million, $53 million and $67 million for the years ended December 31, 2019, 2018 and 2017, respectively. In January 2017, the Company executed a novation and assignment agreement whereby it replaced MLIC as the reinsurer of certain variable annuities, including guaranteed minimum benefits, issued by NELICO. At the time of the novation and assignment, the transaction resulted in an increase in cash and cash equivalents of $184 million, an increase in future policy benefits of $34 million, an increase in policyholder account balances of $219 million and a decrease in other liabilities of $68 million. The Company recognized no gain or loss as a result of this transaction.

The Company cedes risks to MLIC related to guaranteed minimum benefits written directly by the Company. The ceded reinsurance agreement contains embedded derivatives and changes in the estimated fair value are also included within net derivative gains (losses). Net derivative gains (losses) associated with the embedded derivatives were less than $1 million and ($126) million for the years ended December 31, 2018 and 2017, respectively.

In May 2017, the Company recaptured from MLIC risks related to multiple life products ceded under yearly renewable term and coinsurance agreements. This recapture resulted in an increase in cash and cash equivalents of $214 million and a decrease in premiums, reinsurance and other receivables of $189 million. The Company recognized a gain of $17 million, net of income tax, as a result of this reinsurance termination.

The Company previously assumed risks from MLIC related to guaranteed minimum benefits written directly by MLIC. The assumed reinsurance agreement contained embedded derivatives and changes in their estimated fair value are included within net derivative gains (losses). Net derivative gains (losses) associated with the embedded derivatives were $110 million for the year ended December 31, 2017. In January 2017, MLIC recaptured these risks which resulted in a decrease in investments and cash and cash equivalents of $568 million, a decrease in future policy benefits of $106 million, and a decrease in policyholder account balances of $460 million. In June 2017, there was an adjustment to the recapture amounts of this transaction, which resulted in an increase in premiums, reinsurance and other receivables of $140 million at June 30, 2017. The Company recognized a gain of $89 million, net of income tax, as a result of this transaction.

In January 2017, the Company recaptured risks related to certain variable annuities, including guaranteed minimum benefits, issued by BHNY ceded to MLIC. This recapture resulted in a decrease in cash and cash equivalents of $150 million, an increase in future policy benefits of $45 million, an increase in policyholder account balances of $168 million and a decrease in other liabilities of $359 million. The Company recognized no gain or loss as a result of this transaction.

Related party reinsurance agreements that do not expose the Company to a reasonable possibility of a significant loss from insurance risk are recorded using the deposit method of accounting. There were no deposit assets on related party reinsurance at both December 31, 2019 and 2018. The deposit liabilities on related party reinsurance were $164 million and $174 million at December 31, 2019 and 2018, respectively.