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Reinsurance
 6 Months Ended
Jun. 30, 2020
Reinsurance Disclosures [Abstract]  
Reinsurance REINSURANCE

The Company uses reinsurance as part of its risk management and capital management strategies for certain of its living benefit guarantees and variable annuity base contracts. Effective April 1, 2016, the Company recaptured the risks related to its variable annuity living benefit guarantees that were previously reinsured to affiliates. In addition, the Company reinsured variable annuity base contracts, along with the living benefit guarantees, from Pruco Life, excluding the PLNJ business which was reinsured to Prudential Insurance. This reinsurance covers new and in force business and excludes business reinsured externally.

Effective December 31, 2015, the Company surrendered its New York license and reinsured the majority of its New York business, both the living benefit guarantees and base contracts, to Prudential Insurance. Reinsurance ceded arrangements do not discharge the Company as the primary insurer. Ceded balances would represent a liability of the Company in the event the reinsurers were unable to meet their obligations to the Company under the terms of the reinsurance agreements. The Company believes a material reinsurance liability resulting from such inability of reinsurers to meet their obligations is unlikely.
 
Realized investment gains and losses include the impact of reinsurance agreements, particularly reinsurance agreements involving living benefit guarantees. These reinsurance agreements are derivatives and have been accounted for in the same manner as embedded derivatives and the changes in the fair value of these derivatives are recognized through "Realized investment gains (losses), net". See Note 4 for additional information related to the accounting for embedded derivatives.

Reinsurance amounts included in the Company's Unaudited Interim Statements of Financial Position as of June 30, 2020 and December 31, 2019 were as follows:

 
June 30, 2020
 
December 31, 2019
 
(in thousands)
Reinsurance recoverables(1)
$
860,518

 
$
621,510

Deferred policy acquisition costs
3,530,644

 
3,725,719

Deferred sales inducements
397,925

 
437,594

Value of business acquired
(2,135
)
 
(2,275
)
Other assets(2)
52,143

 
65,819

Policyholders’ account balances
3,322,132

 
3,253,474

Future policy benefits
17,724,091

 
8,328,777

Reinsurance payables(3)
210,579

 
235,318

Other liabilities(4)
489,594

 
337,909



(1)
Includes $0.5 million and $0.2 million of unaffiliated activity as of June 30, 2020 and December 31, 2019, respectively.
(2)
Includes $(13.3) million and $(3.9) million of unaffiliated activity as of June 30, 2020 and December 31, 2019, respectively.
(3)
Includes $0.1 million of unaffiliated activity at both June 30, 2020 and December 31, 2019.
(4)
Includes $214.3 million and $60.4 million of unaffiliated activity as of June 30, 2020 and December 31, 2019, respectively.

Reinsurance recoverables by counterparty are broken out below:
 
June 30, 2020
 
December 31, 2019
 
(in thousands)
Prudential Insurance
$
634,470

 
$
387,355

Pruco Life
225,566

 
233,933

Unaffiliated
482

 
222

Total reinsurance recoverables
$
860,518

 
$
621,510


Reinsurance amounts, included in the Company’s Unaudited Interim Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, were as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
 
(in thousands)
Premiums:
 
 
 
 
 
 
 
Direct
$
7,717

 
$
8,381

 
$
14,215

 
$
16,435

Assumed
8,003

 
10,398

 
18,430

 
19,493

Ceded
(707
)
 
(308
)
 
(1,053
)
 
(192
)
Net premiums
15,013

 
18,471

 
31,592

 
35,736

Policy charges and fee income:
 
 
 
 
 
 
 
Direct
95,670

 
122,420

 
201,924

 
244,031

Assumed
367,194

 
411,058

 
765,855

 
806,146

Ceded(1)
(7,182
)
 
(8,690
)
 
(15,228
)
 
(17,455
)
Net policy charges and fee income
455,682

 
524,788

 
952,551

 
1,032,722

Asset administration fees and other income:
 
 
 
 
 
 
 
Direct
35,964

 
41,226

 
105,837

 
79,971

Assumed
71,725

 
76,079

 
148,964

 
148,774

Ceded
(1,840
)
 
(2,100
)
 
(3,819
)
 
(4,152
)
Net asset administration fees and other income
105,849

 
115,205

 
250,982

 
224,593

Realized investment gains (losses), net:
 
 
 
 
 
 
 
Direct
(4,643,352
)
 
593,738

 
4,399,638

 
(240,470
)
Assumed
1,305,763

 
(1,530,524
)
 
(8,754,691
)
 
(2,046,233
)
Ceded
(38,175
)
 
42,571

 
221,598

 
50,269

Realized investment gains (losses), net
(3,375,764
)
 
(894,215
)
 
(4,133,455
)
 
(2,236,434
)
Policyholders' benefits (including change in reserves):
 
 
 
 
 
 
 
Direct
467

 
17,616

 
59,633

 
24,719

Assumed
(38,289
)
 
31,619

 
150,235

 
33,976

Ceded(2)
54

 
(1,345
)
 
(5,107
)
 
(2,855
)
Net policyholders' benefits (including change in reserves)
(37,768
)
 
47,890

 
204,761

 
55,840

Interest credited to policyholders’ account balances:
 
 
 
 
 
 
 
Direct
(12,284
)
 
15,335

 
33,555

 
21,345

Assumed
(22,561
)
 
19,283

 
45,854

 
24,094

Ceded
1,591

 
(1,263
)
 
307

 
(1,657
)
Net interest credited to policyholders’ account balances
(33,254
)
 
33,355

 
79,716

 
43,782

Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization
38,342

 
240,225

 
583,806

 
439,480



(1)
Includes $(0.4) million and $(1.0) million of unaffiliated activity for the three months ended June 30, 2020 and 2019, respectively, and $(0.7) million and $(1.0) million for the six months ended June 30, 2020 and 2019, respectively.
(2)
Includes $(0.5) million and $(0.1) million of unaffiliated activity for the three months ended June 30, 2020 and 2019, respectively, and $(0.4) million and $(0.1) million for the six months ended June 30, 2020 and 2019, respectively.