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 2015 through current		Single life: $2 million per life Joint life: no longer offered
April 2011 through March 2015		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 $1.41 billion and $1.44 billion as of December 31, 2016 and 2015, respectively, due from Prudential related to the disposal of substantially all of its variable annuity business that was effected through reinsurance agreements. In 2016, premiums and contract charges of $78 million, contract benefits of $21 million, interest credited to contractholder funds of $20 million, and operating costs and expenses of $15 million were ceded to Prudential. In 2015, premiums and contract charges of $94 million, contract benefits of $40 million, interest credited to contractholder funds of $21 million, and operating costs and expenses of $18 million were ceded to Prudential. 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 addition, as of December 31, 2016 and 2015 the Company had reinsurance recoverables of $144 million and $148 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.

The Company is the assuming reinsurer for LBL’s life insurance business sold through the Allstate agency channel and LBL’s payout annuity business in force prior to the sale of LBL on April 1, 2014. Under the terms of the reinsurance agreement, the Company is required to have a trust with assets greater than or equal to the statutory reserves ceded by LBL to the Company, measured on a monthly basis. As of December 31, 2016, the trust held $5.94 billion of investments, which are reported in the Consolidated Statement of Financial Position.

As of December 31, 2016, the gross life insurance in force was $406.29 billion of which $5.53 billion and $88.51 billion was ceded to the affiliated and unaffiliated reinsurers, respectively.

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



($ in millions)	2016			2015			2014
Direct	$	715		$	728		$	1,084
Assumed
Affiliate	138			131			130
Non-affiliate	803			835			614
Ceded
Affiliate	(53		)	(41		)	—
Non-affiliate	(294		)	(315		)	(392		)
Premiums and contract charges, net of reinsurance	$	1,309		$	1,338		$	1,436

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



($ in millions)	2016			2015			2014
Direct	$	999		$	1,023		$	1,295
Assumed
Affiliate	90			79			88
Non-affiliate	522			541			398
Ceded
Affiliate	(36		)	(32		)	—
Non-affiliate	(188		)	(205		)	(329		)
Contract benefits, net of reinsurance	$	1,387		$	1,406		$	1,452

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



($ in millions)	2016			2015			2014
Direct	$	598		$	636		$	827
Assumed
Affiliate	9			10			9
Non-affiliate	116			111			82
Ceded
Affiliate	(21		)	(16		)	—
Non-affiliate	(25		)	(24		)	(27		)
Interest credited to contractholder funds, net of reinsurance	$	677		$	717		$	891

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



($ in millions)	2016		2015
Annuities	$	1,411	$	1,443
Life insurance	1,299		1,348
Other	81		80
Total	$	2,791	$	2,871

As of both December 31, 2016 and 2015, approximately 77% of the Company’s reinsurance recoverables are due from companies rated A- or better by S&P.