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F&G Reinsurance | 9 Months Ended
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Sep. 30, 2023
Reinsurance Disclosures [Abstract] |
F&G Reinsurance | F&G Reinsurance F&G reinsures portions of its policy risks with other insurance companies. The use of indemnity reinsurance does not discharge an insurer from liability on the insurance ceded. The insurer is required to pay in full the amount of its insurance liability regardless of whether it is entitled to or able to receive payment from the reinsurer. The portion of risks exceeding the Company's retention limit is reinsured. The Company primarily seeks reinsurance coverage in order to limit its exposure to mortality losses and enhance capital management. The Company follows reinsurance accounting when there is adequate risk transfer or deposit accounting if there is inadequate risk transfer. If the underlying policy being reinsured is an investment contract, the effects of the agreement are accounted for as a separate investment contract. The effects of reinsurance on net premiums earned and net benefits incurred (benefits paid and reserve changes) for the three and nine months ended September 30, 2023 and September 30, 2022 were as follows:
| Three months ended |  | Nine months ended
| September 30, 2023 |  | September 30, 2022 |  | September 30, 2023 |  | September 30, 2022
| Net Premiums Earned |  | Net Benefits Incurred |  | Net Premiums Earned |  | Net Benefits Incurred |  | Net Premiums Earned |  | Net Benefits Incurred |  | Net Premiums Earned |  | Net Benefits Incurred
| (In millions)
Direct | $ | 508 |  |  | $ | 323 |  |  | $ | 642 |  |  | $ | 1,287 |  |  | $ | 1,319 |  |  | $ | 2,057 |  |  | $ | 1,248 |  |  | $ | 1,996 |
Ceded | (26) |  |  | (31) |  |  | (31) |  |  | (717) |  |  | (79) |  |  | (136) |  |  | (98) |  |  | (1,600) |
Net | $ | 482 |  |  | $ | 292 |  |  | $ | 611 |  |  | $ | 570 |  |  | $ | 1,240 |  |  | $ | 1,921 |  |  | $ | 1,150 |  |  | $ | 396 |
Amounts payable or recoverable for reinsurance on paid and unpaid claims are not subject to periodic or maximum limits. F&G did not write off any significant reinsurance balances during the three and nine months ended September 30, 2023 and September 30, 2022. F&G did not commute any ceded reinsurance treaties during the three and nine months ended September 30, 2023 and September 30, 2022. F&G estimates expected credit losses on reinsurance recoverables using a probability of default/loss given default model. Significant inputs to the model include the reinsurer's credit risk, expected timing of recovery, industry-wide historical default experience, senior unsecured bond recovery rates, and credit enhancement features. The expected credit loss reserves were as follows:
| Three months ended |  | Nine months ended
| September 30, 2023 |  | September 30, 2022 |  | September 30, 2023 |  | September 30, 2022
| (In millions)
Balance at Beginning of Period | $ | (9) |  |  | $ | (19) |  |  | $ | (10) |  |  | $ | (20) |
Changes in the expected credit loss reserve | (1) |  |  | — |  |  | — |  |  | 1 |
Balance at End of Period | $ | (10) |  |  | $ | (19) |  |  | $ | (10) |  |  | $ | (19) |
No policies issued by F&G have been reinsured with any foreign company, which is controlled, either directly or indirectly, by a party not primarily engaged in the business of insurance. F&G has not entered into any reinsurance agreements in which the reinsurer may unilaterally cancel any reinsurance for reasons other than non-payment of premiums or other similar credit issues. Everlake Reinsurance Transaction. Effective September 1, 2023, F&G executed a Coinsurance Agreement with Everlake Life Insurance Company (“ELIC”), a third party reinsurer. In accordance with the terms of this agreement, F&G cedes to the reinsurer, on a coinsurance basis, certain MYGA business written effective September 1, 2023. The policies are ceded on a thirty percent (30%) quota share basis. As the policies ceded to ELIC are investment contracts, there is no significant insurance risk present and therefore the effects of this agreement are accounted for as a separate investment contract. Aspida Reinsurance Transaction. F&G executed a Funds Withheld Coinsurance Agreement with Aspida Re, a Bermuda reinsurer. In accordance with the terms of this agreement, F&G cedes to the reinsurer, on a funds withheld coinsurance basis, certain MYGA business written effective January 1, 2021. For reinsured policies issued prior to September 1, 2022, the policies are ceded on a fifty percent (50%) quota share basis. For reinsured policies issued from September 1, 2022 through June 30, 2023, the policies are ceded on a seventy-five percent (75%) quota share basis, capped at $350 million cession per month. For the month of March 2023 only, the premiums cap increased to $450 million. Effective July 1, 2023, the agreement was amended to provide that reinsured policies issued on or after July 1, 2023 are ceded on a sixty percent (60%) quota share basis, capped at $230 million cession per month. As the policies ceded to Aspida are investment contracts, there is no significant insurance risk present and therefore the effects of this agreement are accounted for as a separate investment contract. New Reinsurance Transaction. Effective December 31, 2022, F&G entered into an indemnity reinsurance agreement with New Reinsurance Company Ltd. (“New Re”), a third-party reinsurer, to cede a quota share of certain FIA policies and related waiver of surrender charges, issued after January 1, 2022, on a coinsurance and yearly renewable term basis. Effective July 1, 2023, the agreement was amended to reinsure additional FIA products. The coinsurance quota share is only applicable to the base contract benefits under the FIA policies. The yearly renewable term is applicable to the waiver of surrender charges and return of premium. The effects of this agreement are not accounted for as reinsurance as it does not satisfy the risk transfer requirements for GAAP; therefore, deposit accounting is applied. There have been no other significant changes to reinsurance contracts for the three and nine months ended September 30, 2023. Concentration of Reinsurance Risk The Company has a significant concentration of reinsurance risk with third party reinsurers, Aspida Re, Wilton Reassurance Company (“Wilton Re”), and Somerset that could have a material impact on our financial position in the event that any of these reinsurers fails to perform its obligations under the various reinsurance treaties. Aspida Re has an A- issuer credit rating from AM Best as of September 30, 2023, and the risk of non-performance is further mitigated through the funds withheld arrangement. Wilton Re has an A+ issuer credit rating from AM Best and an A issuer credit rating from Fitch as of September 30, 2023. Somerset has an A- issuer credit rating from AM Best and a BBB+ issuer credit rating from S&P as of September 30, 2023, and the risk of non-performance is further mitigated through the funds withheld arrangement. On September 30, 2023, the net amounts recoverable from Aspida Re, Wilton Re, and Somerset were $5,326 million, $1,126 million, and $535 million, respectively. We monitor both the financial condition of individual reinsurers and risk concentration arising from similar activities and economic characteristics of reinsurers to attempt to reduce the risk of default by such reinsurers. We believe that all amounts due from Aspida Re, Wilton Re, and Somerset for periodic treaty settlements are collectible as of September 30, 2023. There have been no other material changes in the reinsurance and the intercompany reinsurance agreements described in our Form 10-K for the year ended December 31, 2022.

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- Definition The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479838/944-20-50-3 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 4 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479838/944-20-50-4 Reference 3: http://www.xbrl.org/2003/role/exampleRef -Topic 944 -SubTopic 605 -Name Accounting Standards Codification -Section 55 -Paragraph 12 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479629/944-605-55-12 Reference 4: http://www.xbrl.org/2003/role/exampleRef -Topic 944 -SubTopic 605 -Name Accounting Standards Codification -Section 55 -Paragraph 15 -Publisher FASB -URI https://asc.fasb.org//1943274/2147479629/944-605-55-15 + Details
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