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REINSURANCE
 9 Months Ended
Sep. 30, 2016
Reinsurance Disclosures [Abstract]  
REINSURANCE
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.

We have recorded a deferred profit liability related to reinsurance transactions. The remaining deferred profit liability of $986 million, as of September 30, 2016, 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 $984 million and $805 million as of September 30, 2016 and December 31, 2015, respectively. The increase in the reinsurance recoverable balance was driven by two aggregating factors: yen strengthening and the growth in reserves related to the business that has been reinsured as the policies age. The spot yen/dollar exchange rate strengthened by approximately 19% and ceded reserves increased approximately 3% from December 31, 2015 to September 30, 2016.

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)
2016
 
2015
 
2016
 
2015
Direct premium income
 
$
5,119

 
 
 
$
4,464

 
 
 
$
14,724

 
 
 
$
13,426

 
Ceded to other companies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Ceded Aflac Japan closed blocks
 
(148
)
 
 
 
(130
)
 
 
 
(423
)
 
 
 
(352
)
 
    Other
 
(13
)
 
 
 
(10
)
 
 
 
(37
)
 
 
 
(28
)
 
Assumed from other companies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Retrocession activities
 
62

 
 
 
54

 
 
 
177

 
 
 
124

 
    Other
 
2

 
 
 
2

 
 
 
6

 
 
 
6

 
Net premium income
 
$
5,022

 
 
 
$
4,380

 
 
 
$
14,447

 
 
 
$
13,176

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct benefits and claims
 
$
3,463

 
 
 
$
3,000

 
 
 
$
9,898

 
 
 
$
9,037

 
Ceded benefits and change in reserves for future benefits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Ceded Aflac Japan closed blocks
 
(135
)
 
 
 
(119
)
 
 
 
(385
)
 
 
 
(320
)
 
    Eliminations
 
16

 
 
 
14

 
 
 
44

 
 
 
32

 
    Other
 
(10
)
 
 
 
(6
)
 
 
 
(26
)
 
 
 
(20
)
 
Assumed from other companies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
    Retrocession activities
 
59

 
 
 
50

 
 
 
168

 
 
 
116

 
    Eliminations
 
(16
)
 
 
 
(14
)
 
 
 
(44
)
 
 
 
(32
)
 
    Other
 
1

 
 
 
2

 
 
 
2

 
 
 
3

 
Benefits and claims, net
 
$
3,378

 
 
 
$
2,927

 
 
 
$
9,657

 
 
 
$
8,816

 

These reinsurance transactions are 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.

As a part of our capital contingency plan, we entered into a committed reinsurance facility agreement on December 1, 2015 in the amount of approximately 110 billion yen. This reinsurance facility agreement is effective from December 1, 2015 until December 31, 2016. There are also additional commitment periods of a one-year duration each which are automatically extended unless notification is received from the reinsurer within 60 days prior to the expiration. The reinsurer can withdraw from the committed facility if Aflac‘s Standard and Poor's (S&P) rating drops below BBB-. As of September 30, 2016, we have not executed a reinsurance treaty under this committed reinsurance facility.