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F&G Reinsurance | 6 Months Ended
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Jun. 30, 2024
Reinsurance Disclosures [Abstract] |
F&G Reinsurance | F&G Reinsurance The Company 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 manage loss exposures, to enhance our capital position, to diversify risks and earnings, and to manage new business volume. The Company follows reinsurance accounting when the treaty adequately transfers insurance risk. Otherwise, the Company follows deposit accounting if there is inadequate transfer of insurance risk or if the underlying policy for which risk is being transferred is an investment contract that does not contain insurance risk. The effects of reinsurance on net premiums earned and net benefits incurred (benefits paid and reserve changes) for the three and six months ended June 30, 2024 and June 30, 2023 were as follows:
| Three months ended June 30, |  | Six months ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
| 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 | $ | 357 |  |  | $ | 659 |  |  | $ | 510 |  |  | $ | 862 |  |  | $ | 977 |  |  | $ | 1,872 |  |  | $ | 811 |  |  | $ | 1,734 |
Ceded | (24) |  |  | (51) |  |  | (27) |  |  | (45) |  |  | (48) |  |  | (103) |  |  | (53) |  |  | (105) |
Net | $ | 333 |  |  | $ | 608 |  |  | $ | 483 |  |  | $ | 817 |  |  | $ | 929 |  |  | $ | 1,769 |  |  | $ | 758 |  |  | $ | 1,629 |
Amounts payable or recoverable for reinsurance on paid and unpaid claims are not subject to periodic or maximum limits. No policies issued by the Company 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. The Company 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. There have been no significant changes to reinsurance contracts for the three and six months ended June 30, 2024. The following summarizes our reinsurance recoverable (in millions) as of June 30, 2024 and December 31, 2023:
Parent Company/ Principal Reinsurers |  | Reinsurance Recoverable (a) |  | Agreement Type |  | Products Covered |  | Accounting
|  | June 30, 2024 |  | December 31, 2023 |  |  |  |  |  |
Aspida Life Re Ltd |  | $ | 6,845 |  |  | $ | 6,128 |  |  | Coinsurance Funds Withheld |  | Certain MYGA (b) |  | Deposit
Somerset Reinsurance Ltd |  | 1,522 |  |  | 716 |  |  | Coinsurance Funds Withheld |  | Certain MYGA (b) and DA |  | Deposit
Everlake Life Insurance Company |  | 1,107 |  |  | 509 |  |  | Coinsurance (c) |  | Certain MYGA (b) (c) |  | Deposit
Wilton Reassurance Company |  | 1,069 |  |  | 1,092 |  |  | Coinsurance |  | Block of traditional, IUL and UL (d) |  | Reinsurance
Other (e) |  | 509 |  |  | 536 |  |  |  |  |  |  |
Reinsurance recoverable, gross of allowance for credit losses |  | 11,052 |  |  | 8,981 |  |  |  |  |  |  |
Allowance for expected credit loss |  | (21) |  |  | (21) |  |  |  |  |  |  |
Reinsurance recoverable, net of allowance for credit losses |  | $ | 11,031 |  |  | $ | 8,960 |  |  |  |  |  |  |
(a) Reinsurance recoverables do not include unearned ceded premiums that would be recovered in the event of early termination of certain traditional life policies.
(b) The combined quota share flow reinsurance amongst all reinsurers for 2024 was 90% through May 31, 2024 and decreased to 30% in June, 2024. As of December 31, 2023, the combined quota share flow reinsurance amongst all reinsurers was 90%.
(c) Reinsurance recoverable is collateralized by assets placed in a statutory comfort trust by the reinsurer and maintained for our sole benefit.
(d) Also includes certain FGL Insurance life insurance policies that are subject to redundant reserves, reported on a statutory basis, under Regulation XXX and Guideline AXXX.
(e) Represents all other reinsurers, with no single reinsurer having a carrying value in excess of 5% of total reinsurance recoverable.
The Company incurred risk charge fees of $12 million and $10 million during the three months ended June 30, 2024 and 2023, respectively, and $22 million and $20 million during the six months ended June 30, 2024, and 2023, respectively, in relation to reinsurance agreements. Credit Losses The Company 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 June 30, |  | Six months ended June 30,
| 2024 |  | 2023 |  | 2024 |  | 2023
| (In millions)
Balance at beginning of period | $ | (21) |  |  | $ | (9) |  |  | $ | (21) |  |  | $ | (10) |
Changes in the expected credit loss reserve | — |  |  | — |  |  | — |  |  | 1 |
Balance at end of period | $ | (21) |  |  | $ | (9) |  |  | $ | (21) |  |  | $ | (9) |
Concentration of Reinsurance Risk As indicated above, F&G has a significant concentration of reinsurance risk with third party reinsurers, ASPIDA Life Re Ltd. (“Aspida Re”), Somerset Reinsurance Ltd. (“Somerset”), Everlake Life Insurance Company (“Everlake”), and Wilton Reinsurance (“Wilton Re”) 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. We monitor the financial condition and financial strength of individual reinsurers using public ratings (refer to table below) and ratings reports of individual reinsurers to attempt to reduce the risk of default by such reinsurers. In addition, the risk of non-performance is further mitigated with various forms of collateral or collateral arrangements, including secured trusts, funds withheld accounts and irrevocable letters of credit. We believe that all amounts due from Aspida Re, Somerset, Everlake, and Wilton Re for periodic treaty settlements, net of any applicable credit loss reserves, are collectible as of June 30, 2024. The following table presents financial strength ratings as of June 30, 2024:
Parent Company/Principal Reinsurers | Financial Strength Rating
| AM Best |  | S&P |  | Fitch |  | Moody's
Aspida Re | A- |  | — |  | — |  | —
Somerset | A- |  | BBB+ |  | — |  | —
Everlake | A |  | — |  | — |  | —
Wilton Re | A+ |  | — |  | A |  | —
“—” indicates not rated

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