REINSURANCE

We enter into fixed quota-share coinsurance agreements with other companies in the normal course of business. For each of our reinsurance agreements, we determine whether the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and benefits are reported net of insurance ceded.

Effective March 31, 2015, we entered into a coinsurance transaction whereby we ceded 30.0% of the sickness hospital benefit of one of Aflac Japan’s closed in-force blocks of business. Effective April 1, 2015, we entered into a retrocession coinsurance transaction whereby we assumed 27.0% of the sickness hospital benefit of one of Aflac Japan’s closed in-force blocks of business through our subsidiary CAIC.

For our reinsurance transactions to date, we have recorded a deferred profit liability related to the reinsurance transactions. The remaining deferred profit liability of $776 million, as of September 30, 2015, included in future policy benefits in the consolidated balance sheet, is being amortized into income over the expected lives of the policies. We also have recorded a reinsurance recoverable for reinsurance transactions, which is included in other assets in the consolidated balance sheet and had a remaining balance of $803 million as of September 30, 2015.

The following table reconciles direct premium income and direct benefits and claims to net amounts after the effect of reinsurance.



	Three Months Ended September 30,								Nine Months Ended September 30,
(In millions)	2015				2014				2015				2014
Direct premium income		$	4,464			$	4,918			$	13,426			$	14,820
Ceded to other companies:
Ceded Aflac Japan closed blocks		(130		)		(70		)		(352		)		(215		)
Other		(10		)		(10		)		(28		)		(30		)
Assumed from other companies:
Retrocession activities		54				0				124				0
Other		2				3				6				8
Net premium income		$	4,380			$	4,841			$	13,176			$	14,583

Direct benefits and claims		$	3,000			$	3,425			$	9,037			$	10,075
Ceded benefits and change in reserves for future benefits:
Ceded Aflac Japan closed blocks		(119		)		(63		)		(320		)		(192		)
Other		8				(9		)		12				(22		)
Assumed from other companies:
Retrocession activities		50				0				116				0
Other		(12		)		2				(29		)		7
Benefits and claims, net		$	2,927			$	3,355			$	8,816			$	9,868

These reinsurance transactions are considered indemnity reinsurance that do not relieve us from our obligations to policyholders. In the event that the reinsurer is unable to meet their obligations, we remain liable for the reinsured claims.