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Reinsurance | 6 Months Ended
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Jun. 30, 2022
Reinsurance Disclosures [Abstract] |
Reinsurance | (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. Details on in-force life insurance were as follows:
|  | June 30, 2022 |  |  | December 31, 2021 |
|  | (Dollars in thousands) |
Direct life insurance in-force |  | $ | 916,778,660 |  |  | $ | 905,819,671 |
Amounts ceded to other companies |  |  | (785,290,868 | ) |  |  | (777,826,233 | )
Net life insurance in-force |  | $ | 131,487,792 |  |  | $ | 127,993,438 |
Percentage of reinsured life insurance in-force |  |  | 86 | % |  |  | 86 | %
Benefits and claims ceded to reinsurers during the three and six months ended June 30, 2022 were $339.1 million and $842.9 million, respectively, compared to $435.3 million and $987.9 million, respectively, for the three and six months ended June 30, 2021. Reinsurance recoverables as of June 30, 2022 and December 31, 2021 include ceded reserve balances, ceded claim liabilities, and ceded claims paid. Reinsurance recoverables and financial strength ratings by reinsurer were as follows:
|  | June 30, 2022 |  | December 31, 2021
|  | Reinsurance recoverables |  |  | A.M. Best rating |  | Reinsurance recoverables |  |  | A.M. Best rating
|  | (In thousands)
Swiss Re Life & Health America Inc. (Novated from Pecan Re Inc.) (1) (2) |  | $ | 2,490,426 |  |  | A+ |  | $ | - |  |  | -
Pecan Re Inc. (1)(2) |  | - |  |  | - |  |  | 2,567,602 |  |  | NR
SCOR Global Life Reinsurance Companies (3) |  |  | 397,858 |  |  | A+ |  |  | 426,634 |  |  | A+
Munich Re of Malta (2) (5) |  |  | 268,535 |  |  | NR |  |  | 278,591 |  |  | NR
Swiss Re Life & Health America Inc. (4) |  |  | 236,628 |  |  | A+ |  |  | 259,239 |  |  | A+
American Health and Life Insurance Company (2) |  |  | 153,552 |  |  | B++ |  |  | 157,837 |  |  | B++
Munich American Reassurance Company |  |  | 132,432 |  |  | A+ |  |  | 142,705 |  |  | A+
RGA Reinsurance |  |  | 124,265 |  |  | A+ |  |  | 140,953 |  |  | A+
Korean Reinsurance Company |  |  | 117,967 |  |  | A |  |  | 134,048 |  |  | A
Hannover Life Reassurance Company |  |  | 44,657 |  |  | A+ |  |  | 49,749 |  |  | A+
TOA Reinsurance Company |  |  | 34,487 |  |  | A |  |  | 38,909 |  |  | A
All other reinsurers |  |  | 71,196 |  |  | - |  |  | 75,094 |  |  | -
Allowance for credit losses |  |  | (2,964 | ) |  |  |  |  | (2,942 | ) |  |
Reinsurance recoverables |  | $ | 4,069,039 |  |  |  |  | $ | 4,268,419 |  |  |
NR – not rated
(1) | Effective April 1, 2022, the coinsurance agreement with Pecan Re Inc. was novated and replaced by an agreement with Swiss Re Life and Health America, Inc.
(2) | Reinsurance recoverables 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 recoverables from other reinsurers. Arrangements with these reinsurers include collateral trust agreements held in support of reinsurance recoverables.
(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) | Entity is rated AA- by S&P.
We estimate and recognize lifetime expected credit losses for reinsurance recoverables. In estimating the allowance for expected credit losses for reinsurance recoverables, we factor in the underlying collateral for reinsurance agreements where available. Specifically, for reinsurers with underlying trust assets, we compare the reinsurance recoverables balance to the underlying trust assets that mitigate the potential exposure to credit losses. We also analyze the financial condition of the reinsurers, as determined by third-party rating agencies, to determine the probability of default for the reinsurers. We then utilize a third-party credit default study to calculate an expected credit loss given default rate or recovery rate. The probability of default and loss given default rates are then applied to the reinsurers’ recoverable balance, while also factoring in any third-party letters of credit that support the reinsurance agreement, in order to calculate our current expected credit loss allowance. The rollforward of the allowance for credit losses on reinsurance recoverables were as follows:
|  | Three months ended June 30, |  |  | Six months ended June 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
|  | (In thousands) |
Balance, beginning of period |  | $ | 3,083 |  |  | $ | 7,363 |  |  | $ | 2,942 |  |  | $ | 7,144 |
Current period provision for expected credit losses |  |  | 51 |  |  |  | 291 |  |  |  | 192 |  |  |  | 510 |
Less: Recoveries from expected credit losses previously recorded |  |  | (170 | ) |  |  | - |  |  |  | (170 | ) |  |  | - |
Balance, at the end of period |  | $ | 2,964 |  |  | $ | 7,654 |  |  | $ | 2,964 |  |  | $ | 7,654 |

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