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 6.

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. 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, 2021, the Company had $6.6 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 primarily highly rated reinsurers. The Company analyzes recent trends in arbitration and litigation outcomes in disputes, if any, with its reinsurers and monitors ratings and the financial strength of its reinsurers. In addition, the reinsurance recoverable balance due from each reinsurer and the recoverability of such balance is evaluated as part of this overall monitoring process.

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, 2021 and 2020, were not significant. The Company had $5.8 billion and $5.7 billion of unsecured reinsurance recoverable balances with third-party reinsurers at December 31, 2021 and 2020, respectively.

The Company records an allowance for credit losses which is a valuation account that reduces reinsurance recoverable balances to present the net amount expected to be collected from reinsurers. When assessing the creditworthiness of the Company’s reinsurance recoverable balances, beyond the analysis of individual claims disputes, the Company considers the financial strength of its reinsurers using public ratings and ratings reports, current existing credit enhancements to reinsurance agreements and the statutory and GAAP financial statements of the reinsurers. Impairments are then determined based on probable and estimable defaults. At both December 31, 2021 and 2020, the Company had an allowance for credit losses of $10 million on its reinsurance recoverable balances.

At December 31, 2021, the Company had $14.9 billion of net ceded reinsurance recoverables with third-party reinsurers. Of this total, $12.9 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, 2020, the Company had $14.8 billion of net ceded reinsurance recoverables with third-party reinsurers. Of this total, $12.8 billion, or 86%, 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,
	2021		2020		2019
	(In millions)
Premiums
Direct premiums	$	1,398	$	1,466	$	1,597
Reinsurance assumed	(10)		12		15
Reinsurance ceded	(701)		(742)		(765)
Net premiums	$	687	$	736	$	847
Universal life and investment-type product policy fees
Direct universal life and investment-type product policy fees	$	3,533	$	3,376	$	3,432
Reinsurance assumed	50		55		79
Reinsurance ceded	(597)		(592)		(529)
Net universal life and investment-type product policy fees	$	2,986	$	2,839	$	2,982
Other revenues
Direct other revenues	$	262	$	239	$	244
Reinsurance assumed	6		18		3
Reinsurance ceded	66		45		19
Net other revenues	$	334	$	302	$	266
Policyholder benefits and claims
Direct policyholder benefits and claims	$	4,677	$	7,445	$	5,267
Reinsurance assumed	125		158		70
Reinsurance ceded	(1,589)		(1,914)		(1,799)
Net policyholder benefits and claims	$	3,213	$	5,689	$	3,538
Other expenses
Direct other expenses	$	1,815	$	1,851	$	1,839
Reinsurance assumed	(5)		2		(10)
Reinsurance ceded	(10)		(9)		(20)
Net other expenses	$	1,800	$	1,844	$	1,809


	December 31,
	2021								2020
	Direct		Assumed		Ceded		Total Balance Sheet		Direct		Assumed		Ceded		Total Balance Sheet
	(In millions)
Assets
Premiums, reinsurance and other receivables (net of allowance for credit losses)	$	434	$	17	$	15,198	$	15,649	$	519	$	30	$	15,172	$	15,721
Liabilities
Future policy benefits	$	43,346	$	243	$	—	$	43,589	$	44,027	$	239	$	—	$	44,266
Policyholder account balances	$	62,080	$	4,115	$	—	$	66,195	$	50,292	$	3,654	$	—	$	53,946
Other policy-related balances	$	1,500	$	1,653	$	—	$	3,153	$	1,416	$	1,698	$	—	$	3,114
Other liabilities	$	2,618	$	58	$	1,174	$	3,850	$	3,066	$	40	$	1,104	$	4,210


	Years Ended December 31,
	2021		2020		2019
	(In millions)
Premiums	$	2	$	2	$	5
Universal life and investment-type product policy fees	$	6	$	7	$	6
Other revenues	$	2	$	2	$	3
Policyholder benefits and claims	$	25	$	55	$	34
Other expenses	$	(28)	$	(21)	$	(32)


	December 31,
	2021		2020
	(In millions)
Assets
Premiums, reinsurance and other receivables (net of allowance for credit losses)	$	26	$	24
Liabilities
Future policy benefits	$	119	$	120
Policyholder account balances	$	427	$	596
Other policy-related balances	$	9	$	10
Other liabilities	$	26	$	9

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 $427 million and $596 million at December 31, 2021 and 2020, respectively. Net derivative gains (losses) associated with the embedded derivatives were $172 million, ($151) million and ($53) million for the years ended December 31, 2021, 2020 and 2019, respectively.

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, 2021 and 2020. The deposit liabilities on related party reinsurance were $157 million and $167 million at December 31, 2021 and 2020, respectively.