Reinsurance (Notes)

9 Months Ended

Sep. 30, 2016

(5) Reinsurance

We use reinsurance extensively, which has a significant effect on our results of operations. Reinsurance arrangements do not relieve us of our primary obligation to the policyholder. We monitor the concentration of credit risk we have with any reinsurer, as well as the financial condition of the reinsurers.

Details on in-force life insurance follow:

	September 30, 2016			December 31, 2015
	(Dollars in thousands)
Direct life insurance in force	$	725,613,934		$	696,884,429
Amounts ceded to other companies		(638,417,864	)		(616,252,839	)
Net life insurance in force	$	87,196,070		$	80,631,590
Percentage of reinsured life insurance in force		88	%		88	%

Due from reinsurers includes ceded reserve balances and ceded claim liabilities. Reinsurance receivable and financial strength ratings by reinsurer were as follows:

	September 30, 2016			December 31, 2015
	Reinsurance receivable		A.M. Best rating	Reinsurance receivable		A.M. Best rating
	(In thousands)
Pecan Re Inc.^{(1) (2)}	$	2,718,356	NR	$	-	-
Prime Reinsurance Company⁽²⁾		-	-		2,692,721	NR
SCOR Global Life Reinsurance Companies⁽³⁾		358,815	A		362,195	A
Munich Re Life Insurance Company of Vermont^{(2) (5)}		290,384	NR		270,306	NR
Swiss Re Life & Health America Inc.⁽⁴⁾		246,036	A+		254,461	A+
American Health and Life Insurance Company⁽²⁾		177,295	B		176,790	B
Munich American Reassurance Company		106,446	A+		101,466	A+
Korean Reinsurance Company		96,066	A		91,605	A
RGA Reinsurance Company		83,313	A+		81,217	A+
TOA Reinsurance Company		22,339	A+		22,242	A+
Hannover Life Reassurance Company		22,606	A+		20,650	A+
All other reinsurers		39,881	-		36,975	-
Due from reinsurers	$	4,161,537		$	4,110,628

NR – not rated

⁽¹⁾	Pecan Re Inc. is a wholly owned subsidiary of Swiss Re Life & Health America Inc.

⁽²⁾	Includes balances ceded under coinsurance transactions of term life insurance policies that were in force as of December 31, 2009. Amounts shown are net of their share of the reinsurance receivable from other reinsurers.

⁽³⁾	Includes amounts ceded to Transamerica Reinsurance Companies and fully retroceded to SCOR Global Life Reinsurance Companies.

⁽⁴⁾	Includes amounts ceded to Lincoln National Life Insurance and fully retroceded to Swiss Re Life & Health America Inc.

⁽⁵⁾	Previously known as Financial Reassurance Company 2010, Ltd. This entity was acquired by Munich American Reassurance Company from Citigroup Inc. (“Citigroup”) as of September 23, 2016 and was subsequently renamed Munich Re Life Insurance Company of Vermont.

Prior to January 1, 2016, Primerica Life had a coinsurance agreement in place with Prime Reinsurance Company (“Prime Re”), an insurance company owned by Citigroup, under which we ceded 80% of the risks and rewards of our U.S. (except New York) term life insurance policies that were in force as of December 31, 2009 (the “80% Coinsurance Agreement”). Beginning on January 1, 2016, Pecan Re Inc. (“Pecan Re”), an insurance company owned by Swiss Re Life & Health America Inc. (“Swiss Re”), assumed Prime Re’s obligations under the 80% Coinsurance Agreement through a novation agreement (the “Novation Agreement”). In addition, the counterparties to the related trust and capital maintenance agreements that provide Primerica Life with statutory reinsurance credit for the 80% Coinsurance Agreement were replaced by Pecan Re and Swiss Re, respectively. No material terms and conditions of the 80% Coinsurance Agreement and the related trust and capital maintenance agreements were modified.

A separate 10% coinsurance agreement remains in place between Primerica Life and Prime Re (the “10% Coinsurance Agreement”) that includes an experience refund provision and does not satisfy U.S. GAAP risk transfer rules. In exchange for our consent to the Novation Agreement, the finance charge on the statutory reserves in excess of economic reserves funded by Prime Re in support of the 10% Coinsurance Agreement was reduced from 3.0% to 2.0% beginning on July 1, 2015 and then from 2.0% to 0.5% beginning on January 1, 2016.

- 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.

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