Reinsurance

12 Months Ended

Dec. 31, 2015

Reinsurance Disclosures [Abstract]

Reinsurance

Note 7– Reinsurance

The Company's insurance subsidiaries enter into agreements with other insurance companies to assume and cede reinsurance.  Reinsurance is ceded primarily to limit losses from large exposures and to permit recovery of a portion of direct or assumed losses.  Reinsurance is also used in acquisition and disposition transactions when the underwriting company is not being acquired. Reinsurancedoes not relieve the originating insurer of liability.  Therefore, reinsured liabilities must continue to be reported along with the related reinsurance recoverables. The Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of its credit risk.

Effective Exit of GMDB and GMIB Business

In 2013, the Company entered into an agreement with Berkshire Hathaway Life Insurance Company of Nebraska (“Berkshire”) to effectively exit the GMDB and GMIB business via a reinsurance transaction. Berkshire reinsured 100% of the Company's future claim payments in this business, net of retrocessional arrangements existing at that time. The reinsurance agreement is subject to an overall limit with approximately $3.6 billion remaining at December 31, 2015.

This transaction resulted in an after-tax charge to shareholders' net income in the first quarter of 2013 of $507 million ($781 million pre-tax reported as follows: $727 million in other benefit expenses; $54 million in other operating expenses, including $45 million of GMIB fair value loss). The payment to Berkshire under the agreement was $2.2 billion and was funded from the sale of investment assets, tax benefits related to the transaction and available parent cash.

GMDB

The Company estimates this liability with an internal model based on the Company's experience and future expectations over anextended period, consistent with the long-term nature of this product. Because the product is premium deficient, the Company recordsincreases to the reserve if it is inadequate based on the model. As a result of the reinsurance transaction, reserve increases have acorresponding increase in the recorded reinsurance recoverable, provided the increased recoverable remains within the overall

Berkshire limit (including the GMIB assets).

Activity in future policy benefit reserves for the GMDB business was as follows:

(In millions)	2015		2014		2013
Balance at January 1,	$	1,270	$	1,396	$	1,090
Add: Unpaid claims		16		18		24
Less: Reinsurance and other amounts recoverable		1,186		1,317		42
Balance at January 1, net		100		97		1,072
Add: Incurred benefits		3		3		699
Less: Paid benefits (including the $1,647 payment for Berkshire reinsurance transaction)		(3)		-		1,674
Ending balance, net		106		100		97
Less: Unpaid claims		18		16		18
Add: Reinsurance and other amounts recoverable		1,164		1,186		1,317
Balance at December 31,	$	1,252	$	1,270	$	1,396

Benefits paid and incurred are net of ceded amounts, including the impact of the 2013 reinsurance transaction with Berkshire. The ending net retained reserve as of December 31, 2015and December 31, 2014covers ongoing administrative expenses, as well as the minorclaim exposure retained by the Company.

The majority of the exposure arises under annuities that guarantee that the benefit received at death will be no less than the highest historical account value of the related mutual fund investments on a contractholder's anniversary date. Under this type of death benefit, the Company is liable to the extent the highest historical anniversary account value exceeds the fair value of the related mutual fund investments at the time of a contractholder's death.

The table below presents the account value, net amount at risk and average attained age of underlying contractholders for guarantees assumed by the Company in the event of death.The net amount at risk is the amount that the Company would have to pay if all contractholders died as of the specified date. Unless the Berkshire reinsurance limit is exceeded, the Company should be reimbursed in full for these payments.

(Dollars in millions, excludes impact of reinsurance ceded)	2015		2014
Account value	$	11,355	$	13,078
Net amount at risk	$	2,870	$	2,763
Average attained age of contractholders (weighted by exposure)		74		73
Number of contractholders		324,000		354,000

Effects of Reinsurance

The following table presents direct, assumed and ceded premiums for both short-duration and long-duration insurance contracts. It also presents reinsurance recoveries that have been netted against benefits and expenses in the Company's Consolidated Statements of Income.

(In millions)	2015		2014		2013
Premiums
Short-duration contracts:
Direct	$	26,751	$	24,294	$	23,056
Assumed		289		429		394
Ceded		(254)		(226)		(252)
		26,786		24,497		23,198
Long-duration contracts:
Direct		3,061		2,921		2,485
Assumed		111		173		183
Ceded:
Individual life insurance and annuity business sold		(158)		(254)		(176)
Other		(158)		(123)		(115)
		2,856		2,717		2,377
Total	$	29,642	$	27,214	$	25,575
Reinsurance recoveries
Individual life insurance and annuity business sold	$	301	$	366	$	335
Other		436		292		(18)
Total	$	737	$	658	$	317

Recoveries were lower in 2013 primarily due toactivity related to the Berkshire transaction.

The effects of reinsurance on written premiums for short-duration contracts were not materially different from the recognized premium amounts shown in the table above

Reinsurance Recoverables

The majority of the Company's reinsurance recoverables balance resulted from acquisition and disposition transactions in which the underwriting company was not acquired. Components of the Company's reinsurance recoverables are presented below:

(In millions)
	Line of Business	Reinsurer(s)	December 31, 2015		December 31, 2014		Collateral and Other Terms at December 31, 2015
	GMDB	Berkshire	$	1,123	$	1,147	100% were secured by assets in a trust.
		Other		41		39	100% were secured by assets in a letter of credit or a trust.
	Individual Life and Annuity (sold in 1998)	Lincoln National Life and Lincoln Life & Annuity of New York		3,705		3,817	Both companies' ratings were sufficient to avoid triggering a contractual obligation to fully secure the outstanding balance.
	Retirement Benefits Business (sold in 2004)	Prudential Retirement Insurance and Annuity		995		1,092	100% were secured by assets in a trust.
	Supplemental Benefits Business (2012 acquisition)	Great American Life		315		336	99% were secured by assets in a trust.
	Global Health Care, Global Supplemental Benefits, Group Disability and Life	Various		553		561	Recoverables from approximately 75 reinsurers, including the U.S. Government, used in the ordinary course of business. Excluding the recoverable from the U.S. Government of approximately $160 million, current balances range from less than $1 million up to $88 million, with 18% secured by assets in trusts or letters of credit.
	Other run-off reinsurance	Various		81		88	100% of this balance was secured by assets in a trust and other deposits.
	Total reinsurance recoverables		$	6,813	$	7,080

Over 90% of the Company's reinsurance recoverables were from companies that are rated Aor higher by Standard & Poors at December 31, 2015.The Company reviews its reinsurance arrangements and establishes reserves against the recoverables in the event that recovery is not considered probable. As of December 31, 2015, the Company's recoverables were net of a reserve of$3million.

The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable to meet their reinsurance obligations to the Company.