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Reinsurance
 6 Months Ended
Jun. 30, 2018
Reinsurance Disclosures [Abstract]  
Reinsurance
REINSURANCE

The Company uses reinsurance as part of its risk management and capital management strategies for certain of its living benefit guarantees and variable annuity base contracts. Through March 31, 2016 the Company reinsured its living benefit guarantees on certain variable annuity products to Pruco Re and Prudential Insurance, which are the legal entities in which the Company previously executed its living benefit hedging program. Effective April 1, 2016, the Company recaptured the risks related to its variable annuity living benefit guarantees that were previously reinsured to Pruco Re and Prudential Insurance, as discussed further in Note 1. In addition, the Company reinsured variable annuity base contracts, along with the living benefit guarantees, from Pruco Life, excluding the PLNJ business which was reinsured to Prudential Insurance. This reinsurance covers new and in force business and excludes business reinsured externally.

In the fourth quarter of 2015, the Company surrendered its New York License. The Company recaptured the New York living benefits previously ceded to Pruco Re, and reinsured the majority of its New York business, both the living benefit guarantees and base contracts, to Prudential Insurance. See Note 1 for additional information.
 
Realized investment gains and losses include the impact of reinsurance agreements, particularly reinsurance agreements involving living benefit guarantees. These reinsurance agreements are derivatives and have been accounted for in the same manner as embedded derivatives and the changes in the fair value of these derivatives are recognized through "Realized investment gains (losses), net". For additional information related to the accounting for embedded derivatives, see Note 11 to the Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

Reinsurance amounts included in the Company's Unaudited Interim Consolidated Statements of Financial Position as of June 30, 2018 and December 31, 2017 were as follows:
 
June 30, 2018
 
December 31, 2017
 
(in thousands)
Reinsurance recoverables(1)
$
520,111

 
$
563,428

Deferred policy acquisition costs
3,730,602

 
3,766,066

Deferred sales inducements
510,603

 
540,389

Value of business acquired
(2,637
)
 
(2,702
)
Other assets
94,406

 
105,167

Policyholders’ account balances
2,965,892

 
2,825,030

Future policy benefits
4,144,754

 
5,511,496

Reinsurance payables(2)
247,971

 
262,588

Other liabilities
307,582

 
329,019



(1)
"Reinsurance recoverables" includes $0.0 million and $0.3 million of unaffiliated activity as of June 30, 2018 and December 31, 2017, respectively.
(2)
"Reinsurance payables" includes $0.1 million of unaffiliated activity as of both June 30, 2018 and December 31, 2017.

The reinsurance recoverables by counterparty are broken out below:
 
June 30, 2018
 
December 31, 2017
 
(in thousands)
Prudential Insurance
$
277,930

 
$
310,758

Pruco Life
242,144

 
252,383

Unaffiliated
37

 
287

Total reinsurance recoverables
$
520,111

 
$
563,428



Reinsurance amounts, included in the Company’s Unaudited Interim Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and six months ended June 30, were as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Premiums:
 
 
 
 
 
 
 
Direct
$
7,824

 
$
8,763

 
$
19,937

 
$
18,188

Assumed
5,965

 
9,918

 
16,146

 
19,553

Ceded
(494
)
 
(1,347
)
 
(1,754
)
 
(1,580
)
Net premiums
13,295

 
17,334

 
34,329

 
36,161

Policy charges and fee income:
 
 
 
 
 
 
 
Direct
139,738

 
159,622

 
285,451

 
315,293

Assumed
417,636

 
404,487

 
837,662

 
797,389

Ceded(1)
(10,031
)
 
(11,012
)
 
(20,480
)
 
(22,279
)
Net policy charges and fee income
547,343

 
553,097

 
1,102,633

 
1,090,403

Asset administration fees and other income:
 
 
 
 
 
 
 
Direct
25,660

 
35,984

 
51,693

 
67,399

Assumed
75,255

 
72,308

 
151,147

 
142,111

Ceded
(2,312
)
 
(2,423
)
 
(4,700
)
 
(4,839
)
Net asset administration fees and other income
98,603

 
105,869

 
198,140

 
204,671

Realized investment gains (losses), net:
 
 
 
 
 
 
 
Direct
(457,927
)
 
(187,273
)
 
(1,206,252
)
 
(746,836
)
Assumed
483,344

 
(1,358,844
)
 
1,832,448

 
(767,422
)
Ceded
(15,558
)
 
39,043

 
(57,647
)
 
16,669

Realized investment gains (losses), net
9,859

 
(1,507,074
)
 
568,549

 
(1,497,589
)
Policyholders' benefits (including change in reserves):
 
 
 
 
 
 
 
Direct
12,353

 
11,359

 
30,517

 
26,566

Assumed
16,766

 
11,430

 
34,658

 
22,391

Ceded(2)
(452
)
 
26,633

 
(1,482
)
 
17,238

Net policyholders' benefits (including change in reserves)
28,667

 
49,422

 
63,693

 
66,195

Interest credited to policyholders’ account balances:
 
 
 
 
 
 
 
Direct
35,185

 
(64,046
)
 
71,573

 
(47,822
)
Assumed
29,757

 
(63,405
)
 
65,548

 
(43,451
)
Ceded
(2,922
)
 
2,136

 
(5,531
)
 
1,341

Net interest credited to policyholders’ account balances
62,020

 
(125,315
)
 
131,590

 
(89,932
)
Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization
295,556

 
(62,356
)
 
591,753

 
172,847



(1)
"Policy charges and fee income ceded" includes $(0.4) million and $0.5 million of unaffiliated activity for the three months ended June 30, 2018 and 2017, respectively, and $(0.6) million and $1 million for the six months ended June 30, 2018 and 2017, respectively.
(2)
"Policyholders' benefits (including change in reserves) ceded" includes $0.0 million of unaffiliated activity for both the three months ended June 30, 2018 and 2017, and $(0.2) million and $0.0 million for the six months ended June 30, 2018 and 2017, respectively.