Reinsurance

The Company reinsures certain of its risks to other insurers primarily under yearly renewable term, coinsurance and modified coinsurance agreements. These agreements result in a passing of the agreed-upon percentage of risk to the reinsurer in exchange for negotiated reinsurance premium payments. Modified coinsurance is similar to coinsurance, except that the cash and investments that support the liability for contract benefits are not transferred to the assuming company and settlements are made on a net basis between the companies.

For certain term life insurance policies issued prior to October 2009, the Company ceded up to 90% of the mortality risk depending on the year of policy issuance under coinsurance agreements to a pool of fourteen unaffiliated reinsurers. Effective October 2009, mortality risk on term business is ceded under yearly renewable term agreements under which the Company cedes mortality in excess of its retention, which is consistent with how the Company generally reinsures its permanent life insurance business. The following table summarizes those retention limits by period of policy issuance.



Period		Retention limits
April 2011 through current		Single life: $5 million per life, $3 million age 70 and over, and $10 million for contracts that meet specific criteria Joint life: $8 million per life, and $10 million for contracts that meet specific criteria

July 2007 through March 2011		$5 million per life, $3 million age 70 and over, and $10 million for contracts that meet specific criteria

September 1998 through June 2007		$2 million per life, in 2006 the limit was increased to $5 million for instances when specific criteria were met

August 1998 and prior		Up to $1 million per life

In addition, the Company has used reinsurance to effect the disposition of certain blocks of business. The Company had reinsurance recoverables of $1.46 billion and $1.51 billion as of December 31, 2014 and 2013, respectively, due from Prudential related to the disposal of substantially all of its variable annuity business that was effected through reinsurance agreements. In 2014, premiums and contract charges of $109 million, contract benefits of $36 million, interest credited to contractholder funds of $21 million, and operating costs and expenses of $20 million were ceded to Prudential. In 2013, premiums and contract charges of $120 million, contract benefits of $139 million, interest credited to contractholder funds of $22 million, and operating costs and expenses of $23 million were ceded to Prudential. In 2012, premiums and contract charges of $128 million, contract benefits of $91 million, interest credited to contractholder funds of $23 million, and operating costs and expenses of $25 million were ceded to Prudential. In addition, as of December 31, 2014 and 2013 the Company had reinsurance recoverables of $157 million and $156 million, respectively, due from subsidiaries of Citigroup (Triton Insurance and American Health and Life Insurance) and Scottish Re (U.S.) Inc. in connection with the disposition of substantially all of the direct response distribution business in 2003.

As of December 31, 2014, the gross life insurance in force was $424.34 billion of which $97.57 billion was ceded to the unaffiliated reinsurers.

The effects of reinsurance on premiums and contract charges for the years ended December 31 are as follows:



($ in millions)	2014			2013			2012
Direct	$	1,084		$	2,093		$	2,121
Assumed
Affiliate	130			124			115
Non-affiliate	614			68			40
Ceded-non-affiliate	(392		)	(618		)	(654		)
Premiums and contract charges, net of reinsurance	$	1,436		$	1,667		$	1,622

The effects of reinsurance on contract benefits for the years ended December 31 are as follows:



($ in millions)	2014			2013			2012
Direct	$	1,295		$	1,805		$	2,051
Assumed
Affiliate	88			82			80
Non-affiliate	398			50			34
Ceded-non-affiliate	(329		)	(331		)	(644		)
Contract benefits, net of reinsurance	$	1,452		$	1,606		$	1,521

The effects of reinsurance on interest credited to contractholder funds for the years ended December 31 are as follows:



($ in millions)	2014			2013			2012
Direct	$	827		$	1,240		$	1,288
Assumed
Affiliate	9			9			10
Non-affiliate	82			29			19
Ceded-non-affiliate	(27		)	(27		)	(28		)
Interest credited to contractholder funds, net of reinsurance	$	891		$	1,251		$	1,289

Reinsurance recoverables on paid and unpaid benefits as of December 31 are summarized in the following table.



($ in millions)	2014		2013
Annuities	$	1,594	$	1,648
Life insurance	910		1,025
Long-term care insurance	80		78
Other	2		3
Total	$	2,586	$	2,754

As of December 31, 2014 and 2013, approximately 92% and 92%, respectively, of the Company’s reinsurance recoverables are due from companies rated A- or better by S&P.