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Assumed life reinsurance programs involving minimum benefit guarantees under annuity contracts | 9 Months Ended
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Sep. 30, 2014
Reinsurance Disclosures [Abstract] |
Assumed life reinsurance programs involving minimum benefit guarantees under annuity contracts | Assumed life reinsurance programs involving minimum benefit guarantees under annuity contracts The following table presents income and expenses relating to GMDB and GLB reinsurance. GLBs include GMIBs as well as some GMABs originating in Japan.
| Three Months Ended |  |  | Nine Months Ended |
| September 30 |  |  | September 30 |
(in millions of U.S. dollars) | 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
GMDB |  |  |  |  |  |  |
Net premiums earned | $ | 17 |  |  | $ | 19 |  |  | $ | 54 |  |  | $ | 59 |
Policy benefits and other reserve adjustments | $ | 12 |  |  | $ | 14 |  |  | $ | 40 |  |  | $ | 58 |
GLB |  |  |  |  |  |  |
Net premiums earned | $ | 35 |  |  | $ | 36 |  |  | $ | 105 |  |  | $ | 112 |
Policy benefits and other reserve adjustments | 8 |  |  | 9 |  |  | 27 |  |  | 20 |
Net realized gains (losses) | (76 | ) |  | 138 |  |  | (124 | ) |  | 608 |
Gain (loss) recognized in income | $ | (49 | ) |  | $ | 165 |  |  | $ | (46 | ) |  | $ | 700 |
Net cash received | $ | 31 |  |  | $ | 31 |  |  | $ | 93 |  |  | $ | 94 |
Net (increase) decrease in liability | $ | (80 | ) |  | $ | 134 |  |  | $ | (139 | ) |  | $ | 606 |
Net realized gains (losses) in the table above include gains (losses) related to foreign exchange and fair value adjustments on insurance derivatives and exclude gains (losses) on S&P put options and futures held to partially offset the risk in the GLB reinsurance portfolio. Refer to Note 7 for additional information. At September 30, 2014, reported liabilities for GMDB and GLB reinsurance were $108 million and $566 million, respectively, compared with $100 million and $427 million, respectively, at December 31, 2013. The reported liability for GLB reinsurance of $566 million at September 30, 2014, and $427 million at December 31, 2013, includes a fair value derivative adjustment of $317 million and $193 million, respectively. Reported liabilities for both GMDB and GLB reinsurance are determined using internal valuation models. Such valuations require considerable judgment and are subject to significant uncertainty. The valuation of these products is subject to fluctuations arising from, among other factors, changes in interest rates, changes in equity markets, changes in credit markets, changes in the allocation of the investments underlying annuitants’ account values, and assumptions regarding future policyholder behavior. These models and the related assumptions are continually reviewed by management and enhanced, as appropriate, based upon improvements in modeling assumptions and availability of more information, such as market conditions and demographics of in-force annuities. Variable Annuity Net Amount at Risk (i) Reinsurance covering the GMDB risk only At September 30, 2014 and December 31, 2013, the net amount at risk from reinsurance programs covering the GMDB risk only was $520 million and $586 million, respectively. For reinsurance programs covering the GMDB risk only, the net amount at risk is defined as the present value of future claim payments under the following assumptions:
• | policy account values and guaranteed values are fixed at the valuation date (September 30, 2014 and December 31, 2013, respectively);
• | there are no lapses or withdrawals;
• | mortality according to 100 percent of the Annuity 2000 mortality table;
• | future claims are discounted in line with the discounting assumption used in the calculation of the benefit reserve averaging between 2.0 percent and 3.0 percent; and
• | reinsurance coverage ends at the earlier of the maturity of the underlying variable annuity policy or the reinsurance treaty.
The total claim amount payable on reinsurance programs covering the GMDB risk only, if all the cedants’ policyholders were to die immediately at September 30, 2014 was approximately $629 million. This takes into account all applicable reinsurance treaty claim limits. (ii) Reinsurance covering the GLB risk only At September 30, 2014 and December 31, 2013, the net amount at risk from reinsurance programs covering the GLB risk only was $241 million and $136 million, respectively. For reinsurance programs covering the GLB risk only, the net amount at risk is defined as the present value of future claim payments under the following assumptions:
• | policy account values and guaranteed values are fixed at the valuation date (September 30, 2014 and December 31, 2013, respectively);
• | there are no deaths, lapses, or withdrawals;
• | policyholders annuitize at a frequency most disadvantageous to ACE (in other words, annuitization at a level that maximizes claims taking into account the treaty limits) under the terms of the reinsurance contracts;
• | for annuitizing policyholders, the GMIB claim is calculated using interest rates in line with those used in calculating the reserve;
• | future claims are discounted in line with the discounting assumption used in the calculation of the benefit reserve averaging between 3.5 percent and 4.5 percent; and
• | reinsurance coverage ends at the earlier of the maturity of the underlying variable annuity policy or the reinsurance treaty.
(iii) Reinsurance covering both the GMDB and GLB risks on the same underlying policyholders At September 30, 2014 and December 31, 2013, the GMDB net amount at risk from reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders was $75 million and $73 million, respectively. At September 30, 2014 and December 31, 2013, the GLB net amount at risk from reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders was $168 million and $141 million, respectively. These net amounts at risk reflect the interaction between the two types of benefits on any single policyholder (eliminating double-counting), and therefore the net amounts at risk should be considered additive. For reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders, the net amount at risk is defined as the present value of future claim payments under the following assumptions:
• | policy account values and guaranteed values are fixed at the valuation date (September 30, 2014 and December 31, 2013, respectively);
• | there are no lapses or withdrawals;
• | mortality according to 100 percent of the Annuity 2000 mortality table;
• | policyholders annuitize at a frequency most disadvantageous to ACE (in other words, annuitization at a level that maximizes claims taking into account the treaty limits) under the terms of the reinsurance contracts;
• | for annuitizing policyholders, the GMIB claim is calculated using interest rates in line with those used in calculating the reserve;
• | future claims are discounted in line with the discounting assumption used in the calculation of the benefit reserve averaging between 3.5 percent and 4.5 percent; and
• | reinsurance coverage ends at the earlier of the maturity of the underlying variable annuity policy or the reinsurance treaty.
The total claim amount payable on reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders, if all of the cedants’ policyholders were to die immediately at September 30, 2014 was approximately $39 million. This takes into account all applicable reinsurance treaty claim limits. Although there would be an increase in death claims resulting from 100 percent immediate mortality of all policyholders, the GLB claims would be zero. The average attained age of all policyholders under sections i), ii), and iii) above, weighted by the guaranteed value of each reinsured policy, is approximately 69 years.

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- Definition The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 310 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6485557&loc=d3e21549-158491 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 13 -Article 7 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27261-158547 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27374-158547 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6811-158387 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6816-158387 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 03 -Paragraph 6 -Article 7 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.7-03.6,13) -URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 55 -Paragraph 13 -URI http://asc.fasb.org/extlink&oid=34714010&loc=d3e27795-158548 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 55 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=34714010&loc=d3e27703-158548 + Details
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