Reinsurance

Reinsurance recoverable includes balances due from reinsurers for paid and unpaid losses and is presented net of an allowance for uncollectable reinsurance. The reinsurance recoverable balance is $467.9 million and $464.6 million as of June 30, 2015 and December 31, 2014, respectively. Other reinsurance activity is shown below.



Direct Business and Reinsurance:	Three Months Ended June 30,						Six Months Ended June 30,
($ in millions)	2015			2014			2015			2014

Direct premiums	$	17.8		$	18.1		$	34.8		$	35.6
Premiums ceded to non-affiliates [1]	(12.3		)	(13.4		)	(26.3		)	(28.1		)
Premiums	$	5.5		$	4.7		$	8.5		$	7.5

Direct policy benefits incurred	$	72.7		$	41.9		$	194.0		$	79.8
Policy benefits assumed from non-affiliates	—			—			0.2			0.1
Policy benefits ceded to:
Affiliates	(12.0		)	(5.0		)	(26.9		)	(5.0		)
Non-affiliates	(10.2		)	(21.4		)	(51.5		)	(40.7		)
Policy benefits ceded	(22.2		)	(26.4		)	(78.4		)	(45.7		)
Premiums paid to:
Affiliates	6.0			5.9			12.1			12.1
Non-affiliates	9.3			8.3			23.8			21.8
Premiums paid [2]	15.3			14.2			35.9			33.9
Policy benefits [3]	$	65.8		$	29.7		$	151.7		$	68.1

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[1]	Primarily represents premiums ceded to reinsurers related to term insurance policies.


[2]	For universal life and variable universal life contracts, premiums paid to reinsurers are reflected within policy benefits. See Note 2 to these interim unaudited financial statements for additional information regarding significant accounting policies.


[3]	Policy benefit amounts above exclude changes in reserves, interest credited to policyholders and other items, which total $48.9 million and $55.2 million, net of reinsurance, for the three months ended June 30, 2015 and 2014, respectively, and $62.7 million and $88.9 million, net of reinsurance, for the six months ended June 30, 2015 and 2014, respectively.

We remain liable to the extent that reinsuring companies may not be able to meet their obligations under reinsurance agreements in effect. Failure of the reinsurers to honor their obligations could result in losses to the Company. Since we bear the risk of nonpayment, on a quarterly basis we evaluate the financial condition of our reinsurers and monitor concentrations of credit risk. Based on our review of their financial statements, reputation in the reinsurance marketplace and other relevant information, we believe that we have no material exposure to uncollectible life reinsurance. At June 30, 2015, five major reinsurance companies, including our affiliate, Phoenix Life, account for approximately 73% of the reinsurance recoverable. Phoenix Life comprised approximately 17%, or $78.5 million, of this total reinsurance recoverable.

Additionally, the Company entered into a modified coinsurance (“modco”) reinsurance agreement with Phoenix Life on June 30, 2015. Under the agreement Phoenix Life retroceded 80% of its assumed inforce Group Executive Ordinary (“GEO”) corporate-owned whole life insurance policies to the Company. See Note 11 to these interim unaudited financial statements for additional information regarding related party transactions.