Reinsurance ceded contracts do not relieve the Company from its obligations to policyholders. The Company remains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not meet the obligations assumed under the reinsurance agreement. To minimize its exposure to significant losses from reinsurer insolvencies, the Company regularly evaluates the financial position of its reinsurers and monitors concentrations of credit risk. Management believes that any liability from this contingency is unlikely. A brief discussion of the Company's significant reinsurance agreements by business segment follows. Refer to Note 3 for additional information on the Company's operating segments.

The Wealth Management segment manages a closed block of single premium whole life (“SPWL”) insurance policies, a retirement-oriented tax-advantaged life insurance product. The Company discontinued sales of the SPWL product in response to certain tax law changes in the 1980s. The Company had SPWL policyholder balances of $1.3 billion and $1.5 billion at June 30, 2011 and December 31, 2010, respectively. This entire block of business is reinsured on a funds-withheld basis with SLOC, an affiliate. Pursuant to this reinsurance agreement, the Company held the following assets and liabilities (in 000's) at:

	June 30,		December 31,
	2011		2010
Assets
Reinsurance receivable	$	1,325,155	$	1,466,247

Liabilities
Contractholder deposit funds and other policy liabilities		1,348,846		1,478,459
Future contract and policy benefits		1,823		1,823
Reinsurance payable	$	1,410,618	$	1,555,336

The Company manages the investments of the funds-withheld assets, valued at $1.4 billion and $1.6 billion at June 30, 2011 and December 31, 2010, respectively. The funds-withheld assets are comprised of bonds, mortgage loans, policy loans, derivative instruments, real estate and cash and cash equivalents. The coinsurance treaty with funds withheld gives rise to an embedded derivative with is required to be separated from the host reinsurance contract. The change in the fair value of this embedded derivative decreased derivative income by $11.5 million for the three and six-month periods ended June 30, 2011, and by $13.5 million and $23.9 million for the three and six-month periods ended June 30, 2010, respectively.

By reinsuring the SPWL product, the Company (decreased) increased net investment income by $(102.0) million and $(80.6) million for the three and six-month periods ended June 30, 2011, respectively, and by $15.0 million and $ (2.6) million for the three and six-month periods ended June 30, 2010, respectively. The Company also reduced interest credited by $101.9 million and $84.7 million for the three and six-month periods ended June 30, 2011, respectively, and by $17.9 million and $35.4 million for the three and six-month periods ended June 30, 2010, respectively. The net investment income and interest credited ceded for the three and six-month periods ended June 30, 2011 were decreased by $121.1 million due to an interest rate adjustment processed during the period ended June 30, 2011. The adjustment was recorded to correct the Company's prior year policy loan balances that were overstated by $113.3 million due to an inaccurate interest rates on certain loan balances related to SPWL polices. The adjustment did not have any impact on the interest credited and net investment income, net of reinsurances, reported in the Company's condensed consolidated statement of operations due to the 100% funds-withheld reinsurance agreement with SLOC noted above. The adjustment also resulted in a $113.3 million decrease in policy loans, contractholder deposit funds and other policy liabilities, reinsurance receivable, and reinsurance payable in the Company's condensed consolidated balance sheet at June 30, 2011.

The following are the Company's significant reinsurance agreements that pertain to the Individual Protection segment:

On February 11, 2009, the Company received regulatory approval and entered into a reinsurance agreement with Sun Life Reinsurance (Barbados) No. 3 Corp. (“BarbCo 3”), an affiliate, to cede all of the risks associated with certain corporate and bank-owned variable universal life and private placement variable universal life business on a combination coinsurance, coinsurance with funds-withheld and a modified coinsurance basis. Future new business will be ceded under this agreement.

Effective January 1, 2010, the Company and BarbCo 3 amended the agreement to include coverage of certain corporate and bank-owned variable universal life and private placement variable universal life insurance cases sold between December 31, 2009 and March 31, 2010, inclusive. Reinsurance coverage continued for all cases sold prior to April 1, 2010. However, cases sold on or after April 1, 2010 have not been reinsured. This amendment also enabled the Company to discontinue reinsuring a portion of the covered business that was previously reinsured on a modified coinsurance basis, effective April 1, 2010. The discontinuance of the business reinsured on a modified coinsurance basis did not have a material impact on the Company's condensed consolidated financial statements.

At the inception of the transaction, BarbCo 3 paid an initial ceding commission to the Company of $41.5 million and the Company recorded a reinsurance payable and related reinsurance receivable of $370.7 million and $329.2 million, respectively. The reinsurance payable included a funds-withheld liability of $247.9 million and a deferred gain of $122.8 million. Pursuant to this agreement, the Company held the following assets and liabilities (in 000's) at:

		June 30,		December 31,
		2011		2010
Assets
Reinsurance receivable	$	453953	$	419684

Liabilities
Contractholder deposit funds and other policy liabilities		493292		465035
Reinsurance payable	$	464753	$	432160

At June 30, 2011 and December 31, 2010, reinsurance payable includes a funds-withheld liability of $359.6 million and $326.9 million, respectively, and a deferred gain of $105.2 million and $105.3 million, respectively. The funds-withheld assets are managed by the Company and are comprised of bonds, policy loans, stocks, cash and cash equivalents and related accrued income, totaling $359.8 million and $357.2 million as of June 30, 2011 and December 31, 2010, respectively. The funds-withheld coinsurance agreement gives rise to an embedded derivative which is required to be separated from the host reinsurance contract. At June 30, 2011 and December 31, 2010, the fair value of the embedded derivative increased contractholder deposit funds and other policy liabilities by $22.8 million and $24.1 million, respectively.

The change in fair value of the embedded derivative (decreased) increase derivative income by $(2.4) million and $1.2 million for the three and six-month periods ended June 30, 2011, respectively, and by the $0.5 million and $3.2 million for the three and six-month periods ended June 30, 2010, respectively. In addition, during the three and six-month periods ended June 30, 2011, the reinsurance agreement reduced revenues by $13.7 million and $20.0 million, respectively, and decreased expenses by $7.6 million and $16.7 million, respectively. During the three and six-month periods ended June 30, 2010, the reinsurance agreement decreased revenues by $7.9 million and $16.3 million, respectively, and decreased expenses by $12.4 million and $22.7 million, respectively.

Effective December 31, 2007, the Company's subsidiary, SLNY, entered into a reinsurance agreement with SLOC pursuant to which SLOC funds a portion of the statutory reserves (“AXXX reserves”) required by New York Regulation 147, which is substantially similar to Actuarial Guideline 38, as adopted by the NAIC, attributable to certain individual universal life (“UL”) policies sold by SLNY. Under this agreement, SLNY ceded, and SLOC assumed, on a funds-withheld 90% coinsurance basis certain in-force policies at December 31, 2007. Future new business also will be reinsured under this agreement. Pursuant to this agreement, SLNY held the following assets and liabilities at (in 000's):

		June 30,		December 31,
		2011		2010
Assets
Reinsurance receivable	$	144,895	$	133,088

Liabilities
Contractholder deposit funds and other policy liabilities		109,664		104,795
Future contract and policy benefits		21,463		21,662
Reinsurance payable	$	236,949	$	225,387

Reinsurance payable includes a funds-withheld liability of $184.1million and $172.8 million at June 30, 2011 and December 31, 2010, respectively, and a deferred gain of $52.3 million and $52.6 million at June 30, 2011 and December 31, 2010, respectively. The funds-withheld assets are managed by the Company and are comprised of trading fixed maturity securities, policy loans, stocks, mortgage loans and related accrued income, totaling $182.6 million and $176.7 million as of June 30, 2011 and December 31, 2010, respectively. The coinsurance treaty with funds withheld gives rise to an embedded derivative which is requiring to be separated from the host reinsurance contract. The fair value of the embedded derivative increased contractholder deposit funds and other policy liabilities by $2.7million and $3.2 million at June 30, 2011 and December 31, 2010, respectively.

The change in fair value of this embedded derivative (decreased) increased derivative income by $(3.2) million and $0.5 million for the three and six-month periods ended six-month periods ended June 30, 2011 respectively, and $7.5 million and $8.9 million for the three and six-month periods ended 2010, respectively. In addition, the activities related to the reinsurance agreement have decreased revenues by $8.6 million and $11.6.million for the three and six-month periods ended June 30, 2011, respectively, and $13.3 million and $20.2 million for the three and six-month periods ended June 30, 2010, respectively. This agreement also decreased benefits and expenses by $5.5 million and $5.7 million for the three and six-month periods ended six-month periods ended June 30, 2011 , respectively, and $9.2 million and $13.8 million for the three and six-month periods ended 2010, respectively.

The Company has other reinsurance agreements with SLOC and several unrelated companies, which provide reinsurance for portions of the net-amount-at-risk under certain individual variable universal life, individual private placement variable universal life, bank-owned life insurance (“BOLI”) and corporate-owned life insurance (“COLI”) policies. These amounts are reinsured on a monthly renewable term, a yearly renewable term or a modified coinsurance basis. These other agreements decreased revenues by $16.9 million and $42.4 million for the three and six-month periods ended six-month periods ended June 30, 2011, respectively, and $41.3 million and $80.3 million for the three and six-month periods ended 2010, respectively. These agreements also decreased expenses by $14.4 million and $37.1 million for the three and six-month periods ended six-month periods ended June 30, 2011, respectively, and $39.7 million and $81.3 million for the three and six-month periods ended 2010, respectively.

SLNY has several reinsurance agreements with unrelated companies whereby the unrelated companies reinsure the mortality and morbidity risks of certain of the SLNY's group insurance contracts.

SLNY also has a reinsurance agreement, effective May 31, 2007, to assume the net risks of the New York issued contracts of Sun Life and Health Insurance Company (U.S.) (“SLHIC”), an affiliate. At June 30, 2011 and December 31, 2010, SLNY held policyholder liabilities related to this agreement of $28.6 million. In addition, the reinsurance agreement increased revenues by $10.6 million and $21.5 million for the three and six-month periods ended June 30, 2011, respectively, and by $12.2 million and $24.6 million for the three and six-month periods ended June 30, 2010, respectively. This agreement also increased benefits and expenses by $8.5 million and $17.1 million for the three and six-month periods ended June 30, 2011, respectively, and by $12.0 million and $22.6 million for the three and six-month periods ended June 30, 2011, respectively.