10. 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 acquisition or disposition of certain blocks of business. The Company had reinsurance recoverables of $1.51 billion and $1.69 billion as of December 31, 2013 and 2012, respectively, due from Prudential related to the disposal of substantially all of its variable annuity business that was effected through reinsurance agreements. 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 2011, premiums and contract charges of $152 million, contract benefits of $121 million, interest credited to contractholder funds of $20 million, and operating costs and expenses of $27 million were ceded to Prudential. In addition, as of December 31, 2013 and 2012 the Company had reinsurance recoverables of $156 million and $160 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, 2013, the gross life insurance in force was $540.16 billion of which $195.41 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)		2013			2012			2011
Direct	$	2,093		$	2,121		$	2,229
Assumed
Affiliate		124			115			113
Non-affiliate		68			40			20
Ceded-non-affiliate		(618	)		(654	)		(730	)
Premiums and contract charges, net of reinsurance	$	1,667		$	1,622		$	1,632

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

($ in millions)		2013		2012		2011
Direct	$	1,805	$	2,051	$	2,036
Assumed
Affiliate		82		80		78
Non-affiliate		50		34		19
Ceded-non-affiliate		(331)		(644)		(631)
Contract benefits, net of reinsurance	$	1,606	$	1,521	$	1,502

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

($ in millions)		2013		2012		2011
Direct	$	1,240	$	1,288	$	1,614
Assumed
Affiliate		9		10		10
Non-affiliate		29		19		11
Ceded-non-affiliate		(27)		(28)		(27)
Interest credited to contractholder funds, net of reinsurance	$	1,251	$	1,289	$	1,608

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

($ in millions)		2013		2012
Annuities	$	1,648	$	1,831
Life insurance		1,025		1,606
Long-term care insurance		78		1,049
Other		3		84
Total	$	2,754	$	4,570

As of December 31, 2013 and 2012, approximately 92% and 95%, respectively, of the Company’s reinsurance recoverables are due from companies rated A- or better by S&P.