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Reinsurance
 9 Months Ended
Sep. 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 September 30, 2018 and December 31, 2017 were as follows:

 
September 30, 2018
 
December 31, 2017
 
(in thousands)
Reinsurance recoverables(1)
$
487,748

 
$
563,428

Deferred policy acquisition costs
3,684,641

 
3,766,066

Deferred sales inducements
484,204

 
540,389

Value of business acquired
(2,561
)
 
(2,702
)
Other assets
100,053

 
105,167

Policyholders’ account balances
3,029,531

 
2,825,030

Future policy benefits
3,269,692

 
5,511,496

Reinsurance payables(2)
214,420

 
262,588

Other liabilities
296,686

 
329,019



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

The reinsurance recoverables by counterparty are broken out below:
 
September 30, 2018
 
December 31, 2017
 
(in thousands)
Prudential Insurance
$
246,217

 
$
310,758

Pruco Life
241,494

 
252,383

Unaffiliated
37

 
287

Total reinsurance recoverables
$
487,748

 
$
563,428



Reinsurance amounts, included in the Company’s Unaudited Interim Consolidated Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, were as follows:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands)
Premiums:
 
 
 
 
 
 
 
Direct
$
7,582

 
$
8,028

 
$
27,519

 
$
26,216

Assumed
6,568

 
5,849

 
22,714

 
25,402

Ceded
(471
)
 
(1,372
)
 
(2,225
)
 
(2,952
)
Net premiums
13,679

 
12,505

 
48,008

 
48,666

Policy charges and fee income:
 
 
 
 
 
 
 
Direct
137,719

 
153,835

 
423,170

 
469,128

Assumed
422,888

 
413,400

 
1,260,550

 
1,210,789

Ceded(1)
(10,015
)
 
(11,328
)
 
(30,495
)
 
(33,607
)
Net policy charges and fee income
550,592

 
555,907

 
1,653,225

 
1,646,310

Asset administration fees and other income:
 
 
 
 
 
 
 
Direct
18,360

 
30,573

 
70,053

 
97,972

Assumed
77,276

 
74,586

 
228,423

 
216,697

Ceded
(2,316
)
 
(2,446
)
 
(7,016
)
 
(7,285
)
Net asset administration fees and other income
93,320

 
102,713

 
291,460

 
307,384

Realized investment gains (losses), net:
 
 
 
 
 
 
 
Direct
(1,033,002
)
 
(32,663
)
 
(2,239,254
)
 
(779,499
)
Assumed
1,133,110

 
1,237,967

 
2,965,558

 
470,545

Ceded
(34,835
)
 
(35,227
)
 
(92,482
)
 
(18,558
)
Realized investment gains (losses), net
65,273

 
1,170,077

 
633,822

 
(327,512
)
Policyholders' benefits (including change in reserves):
 
 
 
 
 
 
 
Direct
20,847

 
10,061

 
51,364

 
36,627

Assumed
29,743

 
6,114

 
64,401

 
28,505

Ceded(2)
(659
)
 
(2,119
)
 
(2,141
)
 
15,119

Net policyholders' benefits (including change in reserves)
49,931

 
14,056

 
113,624

 
80,251

Interest credited to policyholders’ account balances:
 
 
 
 
 
 
 
Direct
41,949

 
42,401

 
113,522

 
(5,421
)
Assumed
43,662

 
52,559

 
109,210

 
9,108

Ceded
(3,298
)
 
(4,461
)
 
(8,829
)
 
(3,120
)
Net interest credited to policyholders’ account balances
82,313

 
90,499

 
213,903

 
567

Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization
283,512

 
352,114

 
875,265

 
524,961



(1)
"Policy charges and fee income ceded" includes $(0.4) million and $(0.6) million of unaffiliated activity for the three months ended September 30, 2018 and 2017, respectively, and $(1) million and $(2) million for the nine months ended September 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 September 30, 2018 and 2017, and $(0.2) million and $0.0 million for the nine months ended September 30, 2018 and 2017, respectively.