11.REINSURANCE

The Company reinsures certain of its risks with (cedes), and assumes risks from, other insurers under yearly renewable term, coinsurance, and modified coinsurance agreements. Under yearly renewable term agreements, the Company reinsures only the mortality risk, while under coinsurance the Company reinsures a proportionate share of all risks arising under the reinsured policy. Under coinsurance, the reinsurer receives a proportionate share of the premiums less commissions and is liable for a corresponding share of all benefit payments. Modified coinsurance is accounted for in a manner similar to coinsurance except that the liability for future policy benefits is held by the ceding company, and settlements are made on a net basis between the companies.

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 us under the terms of the reinsurance agreements. The Company monitors the concentration of credit risk the Company has with any reinsurer, as well as the financial condition of its reinsurers. As of December 31, 2014, the Company had reinsured approximately 51% of the face value of its life insurance in-force. The Company has reinsured approximately 22% of the face value of its life insurance in-force with the following three reinsurers:

Security Life of Denver Insurance Co. (currently administered by Hanover Re)

Swiss Re Life & Health America Inc.

The Lincoln National Life Insurance Co. (currently administered by Swiss Re Life & Health America Inc.)

The Company has not experienced any credit losses for the years ended December 31, 2014, 2013, or 2012 related to these reinsurers. The Company has set limits on the amount of insurance retained on the life of any one person. In 2005, the Company increased its retention for certain newly issued traditional life products from $500,000 to $1,000,000 on any one life. During 2008, the Company increased its retention limit to $2,000,000 on certain of its traditional and universal life products.

Reinsurance premiums, commissions, expense reimbursements, benefits, and reserves related to reinsured long-duration contracts are accounted for over the life of the underlying reinsured contracts using assumptions consistent with those used to account for the underlying contracts. The cost of reinsurance related to short-duration contracts is accounted for over the reinsurance contract period. Amounts recoverable from reinsurers, for both short-and long-duration reinsurance arrangements, are estimated in a manner consistent with the claim liabilities and policy benefits associated with reinsured policies.

The following table presents the net life insurance in-force:

	For The Year Ended December 31,
	2014			2013			2012
	(Dollars In Millions)
Direct life insurance in-force	$	721,036		$	726,697		$	706,416
Amounts assumed from other companies	43,237			46,752			30,470
Amounts ceded to other companies	(388,890		)	(416,809		)	(444,951		)
Net life insurance in-force	$	375,383		$	356,640		$	291,935

Percentage of amount assumed to net	12		%	13		%	10		%

The following table reflects the effect of reinsurance on life, accident/health, and property and liability insurance premiums written and earned:

					Assumed					Percentage of
			Ceded to		from					Amount
	Gross		Other		Other		Net			Assumed to
	Amount		Companies		Companies		Amount			Net
	(Dollars In Thousands)
For The Year Ended December 31, 2014:
Premiums and policy fees:
Life insurance	$	2,603,956	$	1,279,908	$	349,934	$	1,673,982	(1)	20.9
Accident/health insurance	81,037		42,741		20,804		59,100			35.2
Property and liability insurance	218,663		73,094		8,675		154,244			5.6
Total	$	2,903,656	$	1,395,743	$	379,413	$	1,887,326
For The Year Ended December 31, 2013:
Premiums and policy fees:
Life insurance	$	2,371,871	$	1,299,631	$	306,921	$	1,379,161	(1)	22.3
Accident/health insurance	45,262		20,011		24,291		49,542			49.0
Property and liability insurance	211,000		67,795		7,977		151,182			5.3
Total	$	2,628,133	$	1,387,437	$	339,189	$	1,579,885
For The Year Ended December 31, 2012
Premiums and policy fees:
Life insurance	$	2,226,614	$	1,228,444	$	281,711	$	1,279,881	(1)	22.0
Accident/health insurance	38,873		12,065		29,413		56,221			52.3
Property and liability insurance	216,014		69,588		6,765		153,191			4.4
Total	$	2,481,501	$	1,310,097	$	317,889	$	1,489,293

(1)

Includes annuity policy fees of $92.8 million, $88.7 million, and $103.8 million for the years ended December 31, 2014, 2013, and 2012, respectively.

As of December 31, 2014 and 2013, policy and claim reserves relating to insurance ceded of $5.9 billion and $6.0 billion, respectively, are included in reinsurance receivables. Should any of the reinsurers be unable to meet its obligation at the time of the claim, the Company would be obligated to pay such claims. As of December 31, 2014 and 2013, the Company had paid $120.5 million and $79.7 million, respectively, of ceded benefits which are recoverable from reinsurers. In addition, as of December 31, 2014 and 2013, the Company had receivables of $65.8 million and $66.1 million, respectively, related to insurance assumed.

The Company’s third party reinsurance receivables amounted to $5.9 billion and $6.0 billion as of December 31, 2014 and 2013, respectively. These amounts include ceded reserve balances and ceded benefit payments. The ceded benefit payments are recoverable from reinsurers. The following table sets forth the receivables attributable to our more significant reinsurance partners:

	As of December 31,
	2014			2013
	Reinsurance		A.M. Best	Reinsurance		A.M. Best
	Receivable		Rating	Receivable		Rating
	(Dollars In Millions)
Security Life of Denver Insurance Company	$	842.1	A	$	819.3	A
Swiss Re Life & Health America, Inc.	820.9		A+	823.0		A+
Lincoln National Life Insurance Co.	556.3		A+	553.7		A+
Transamerica Life Insurance Co.	497.7		A+	531.1		A+
RGA Reinsurance Company	412.4		A+	419.1		A+
SCOR Global Life USA Reinsurance Company	411.8		A	402.7		A
American United Life Insurance Company	336.1		A+	342.2		A+
Scottish Re (U.S.), Inc.	298.0		NR	305.1		NR
Centre Reinsurance (Bermuda) Ltd	260.9		NR	281.6		NR
Employers Reassurance Corporation	254.3		A-	289.2		A-

The Company’s reinsurance contracts typically do not have a fixed term. In general, the reinsurers’ ability to terminate coverage for existing cessions is limited to such circumstances as material breach of contract or non-payment of premiums by the ceding company. The reinsurance contracts generally contain provisions intended to provide the ceding company with the ability to cede future business on a basis consistent with historical terms. However, either party may terminate any of the contracts with respect to future business upon appropriate notice to the other party.

Generally, the reinsurance contracts do not limit the overall amount of the loss that can be incurred by the reinsurer. The amount of liabilities ceded under contracts that provide for the payment of experience refunds is immaterial.