11. Reinsurance

We reinsure a portion of the insurance risks associated with our individual disability, traditional life, universal life, medical and long-term care insurance as well as retail fixed annuity contracts with significant life insurance risk through reinsurance agreements with unaffiliated reinsurance companies, primarily on a quota share, excess loss, yearly renewable term (“YRT”) or coinsurance basis. We have coinsurance with funds withheld reinsurance agreements in which we cede our U.S. retail fixed annuity and ULSG blocks of business using both the reinsurance and deposit methods of accounting.

We are contingently liable with respect to reinsurance ceded to other companies in the event the reinsurer is unable to meet the obligations it has assumed. As of June 30, 2025, and December 31, 2024, we had $14,855.4 million and $14,592.6 million of reinsurance recoverable assets, respectively, included in reinsurance recoverable and deposit receivable on the consolidated statements of financial position, which does not reflect potentially offsetting impacts of collateral. As of June 30, 2025, and December 31, 2024, we had $68.0 million and $60.3 million of reinsurance recoverable liabilities, respectively, included in future policy benefits and claims on the consolidated statements of financial position.

The effects of reinsurance on premiums and other considerations and policy and contract benefits were as follows:

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As of June 30, 2025 and December 31, 2024, we had a $4,480.5 million and $4,897.5 million reinsurance deposit receivable, respectively.

Refer to Note 4, Investments, for information on our financing receivables valuation allowance related to the reinsurance recoverable and deposit receivable.

Cost of Reinsurance

A reinsurance asset or liability is established to spread the expected net reinsurance costs or profits over the expected term of the contracts. The cost of reinsurance asset and liability are reported in premiums due and other receivables and liability for future policy benefits and claims, respectively, on the consolidated statements of financial position. The cost of reinsurance asset and liability included on the consolidated statements of financial position were as follows:

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Cost of reinsurance amortization, including the impacts of remeasurement, of $24.6 million and $453.6 million for the three months ended June 30, 2025 and 2024, and $44.6 million and $459.1 million for the six months ended June 30, 2025 and 2024, respectively, was reported in benefits, claims and settlement expenses and liability for future policy benefits remeasurement (gain) loss on the consolidated statements of operations. The 2024 impacts of remeasurement include the one-time impact of YRT reinsurance transactions.

Funds Withheld

The following assets were held in support of our reserves associated with our coinsurance with funds withheld agreements and are reported in the line items shown on the consolidated statements of financial position.

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Certain assets are reported at amortized cost while the fair value of those assets is reflected in the funds withheld payable. As of June 30, 2025 and December 31, 2024, we had a $18,010.9 million and $18,103.7 million funds withheld payable, which was net of a $2,825.2 million and $3,014.5 million embedded derivative asset, respectively. The change in fair value of the embedded derivative was a gain (loss) of $20.3 million and $232.9 million for the three months ended June 30, 2025 and 2024, respectively, and $(189.4) million and $429.9 million for the six months ended June 30, 2025 and 2024, respectively.

While the economic benefits of the funds withheld assets flow to the reinsurer, we retain legal ownership of the assets within the funds withheld account. Guidelines are in place to ensure the investment risk is appropriately managed. Net investment income and net realized capital gains (losses) related to the assets on the consolidated statements of operations is reported net of the amounts that flow to the reinsurer. The realized gains and losses that do not flow to the reinsurer are reported in net realized capital gains (losses) on funds withheld assets on the consolidated statements of operations.

Following are the components of net realized capital gains (losses) on the funds withheld assets that were passed to the reinsurer.

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