Reinsurance

12 Months Ended

Dec. 31, 2020

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. Effective April 1, 2016, the Company recaptured the risks related to its variable annuity living benefit guarantees that were previously reinsured to affiliates. 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. As of December 31, 2020, Pruco Life discontinued the sales of traditional variable annuities with guaranteed living benefit riders. This discontinuation has no impact on the reinsurance agreement between Pruco Life and the Company.

Effective December 31, 2015, the Company surrendered its New York license 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. Reinsurance ceded arrangements do not discharge the Company as the primary insurer. Ceded balances would represent a liability of the Company in the event the reinsurers were unable to meet their obligations to the Company under the terms of the reinsurance agreements. The Company believes a material reinsurance liability resulting from such inability of reinsurers to meet their obligations is unlikely.

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". See Note 4 for additional information related to the accounting for embedded derivatives.

Reinsurance amounts included in the Company's Statements of Financial Position as of December 31, were as follows:


	2020		2019
	(in thousands)
Reinsurance recoverables	$	694,040	$	621,510
Deferred policy acquisition costs	3,414,620		3,725,719
Deferred sales inducements	374,631		437,594
Value of business acquired	(2,124)		(2,275)
Other assets	61,471		65,819
Policyholders’ account balances	3,273,863		3,253,474
Future policy benefits	12,610,942		8,328,777
Reinsurance payables(1)	178,860		235,318
Other liabilities	262,462		337,909

(1)Includes $2.3 million and $0.1 million of unaffiliated activity at December 31, 2020 and December 31, 2019, respectively.

The reinsurance recoverables by counterparty are broken out below:


	December 31, 2020		December 31, 2019
	(in thousands)
Prudential Insurance	$	494,611	$	387,355
Pruco Life	198,547		233,933
Unaffiliated	882		222
Total reinsurance recoverables	$	694,040	$	621,510

Reinsurance amounts, included in the Company’s Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, were as follows:


	2020		2019		2018
	(in thousands)
Premiums:
Direct	$	26,272	$	29,022	$	37,895
Assumed	37,806		31,570		31,989
Ceded	(3,493)		(1,042)		(2,619)
Net premiums	60,585		59,550		67,265
Policy charges and fee income:
Direct	409,331		477,478		549,500
Assumed	1,564,776		1,638,023		1,661,484
Ceded(1)	(30,508)		(34,455)		(39,706)
Net policy charges and fee income	1,943,599		2,081,046		2,171,278
Asset administration fees and other income:
Direct	151,887		141,884		96,743
Assumed	308,187		306,945		301,549
Ceded	(8,003)		(8,346)		(9,136)
Net asset administration fees and other income	452,071		440,483		389,156
Realized investment gains (losses), net:
Direct	(2,208,057)		(1,137,422)		81,120
Assumed	(3,131,107)		(1,584,764)		823,129
Ceded	78,224		40,866		(20,176)
Realized investment gains (losses), net	(5,260,940)		(2,681,320)		884,073
Policyholders' benefits (including change in reserves):
Direct	72,467		58,308		81,045
Assumed	156,320		89,284		110,358
Ceded(2)	(6,175)		(3,667)		(4,315)
Net policyholders' benefits (including change in reserves)	222,612		143,925		187,088
Interest credited to policyholders’ account balances:
Direct	85,454		82,444		127,018
Assumed	97,373		84,182		132,324
Ceded	(2,667)		(5,417)		(10,167)
Net interest credited to policyholders’ account balances	180,160		161,209		249,175
Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization	1,036,119		988,951		1,131,351

(1)Includes $(2.6) million, $(1.0) million and $(1.0) million of unaffiliated activity for the years ended December 31, 2020, 2019 and 2018, respectively.

(2)Includes $0.1 million, $(0.1) million and $(0.3) million of unaffiliated activity for the years ended December 31, 2020, 2019 and 2018, respectively.