Reinsurance

The Company has reinsurance treaties covering a portion of the mortality risks and guaranteed death and living benefits under its life insurance contracts. The Company remains liable to the extent its reinsurers do not meet their obligations under the reinsurance agreements.

The Company reinsures its business through a diversified group of reinsurers. The Company monitors trends in arbitration and any litigation outcomes with its reinsurers. Collectability of reinsurance balances are evaluated by monitoring ratings and evaluating the financial strength of its reinsurers. Large reinsurance recoverable balances with offshore or other non-accredited reinsurers are secured through various forms of collateral, including secured trusts, funds withheld accounts and irrevocable letters of credit ("LOC").

Information regarding the effect of reinsurance on the Consolidated Balance Sheets is as follows as of the periods indicated:



	December 31, 2017
	Direct		Assumed		Ceded			Total, Net of Reinsurance
Assets
Premiums receivable	$	110	$	405	$	(449	)	$	66
Reinsurance recoverable	—		—		7,566			7,566
Total	$	110	$	405	$	7,117		$	7,632

Liabilities
Future policy benefits and contract owner account balances	$	62,005	$	3,800	$	(7,566	)	$	58,239
Liability for funds withheld under reinsurance agreements	791		—		—			791
Total	$	62,796	$	3,800	$	(7,566	)	$	59,030

	December 31, 2016
	Direct		Assumed		Ceded			Total, Net of Reinsurance
Assets
Premiums receivable	$	105	$	358	$	(404	)	$	59
Reinsurance recoverable	—		—		7,228			7,228
Total	$	105	$	358	$	6,824		$	7,287

Liabilities
Future policy benefits and contract owner account balances	$	61,566	$	3,282	$	(7,228	)	$	57,620
Liability for funds withheld under reinsurance agreements	729		—		—			729
Total	$	62,295	$	3,282	$	(7,228	)	$	58,349

Information regarding the effect of reinsurance on the Consolidated Statement of Operations is as follows for the periods indicated:



	Year ended December 31,
	2017			2016			2015
Premiums:
Direct premiums	$	2,606		$	3,284		$	2,975
Reinsurance assumed	1,192			1,222			1,191
Reinsurance ceded	(1,677		)	(1,711		)	(1,612		)
Net premiums	$	2,121		$	2,795		$	2,554

Fee income:
Gross fee income	$	2,628		$	2,472		$	2,471
Reinsurance ceded	(1		)	(1		)	(1		)
Net fee income	$	2,627		$	2,471		$	2,470

Interest credited and other benefits to contract owners / policyholders:
Direct interest credited and other benefits to contract owners / policyholders	$	5,124		$	5,859		$	5,399
Reinsurance assumed	1,929			1,213			1,068
Reinsurance ceded⁽¹⁾	(2,417		)	(1,758		)	(1,769		)
Net interest credited and other benefits to contract owners / policyholders	$	4,636		$	5,314		$	4,698

⁽¹⁾ Includes $491, $482 and $453 for amounts paid to reinsurers in connection with the Company's UL contracts for the years ended December 31, 2017, 2016 and 2015, respectively.

Effective October 1, 1998, the Company disposed of a block of its individual life insurance business under an indemnity reinsurance arrangement with a subsidiary of Lincoln National Corporation ("Lincoln") for $1.0 billion. Under the agreement, Lincoln contractually assumed from the Company certain policyholder liabilities and obligations, although the Company remains obligated to contract owners. The Lincoln subsidiary established a trust to secure its obligations to the Company under the reinsurance transaction. Of the Premium receivable and reinsurance recoverable on the Consolidated Balance Sheets, $1.5 billion and $1.6 billion as of December 31, 2017 and 2016, respectively, is related to the reinsurance recoverable from the subsidiary of Lincoln under this reinsurance agreement.

Effective January 1, 2009, the Company executed a Master Asset Purchase Agreement (the "MPA") with respect to its individual reinsurance business whereby the Company recaptured business then-reinsured to Scottish Re (U.S.), Inc., Scottish Re Life (Bermuda) Limited and Scottish Re (Dublin) Limited and immediately ceded 100% of such business to Hannover Re on a modified coinsurance, funds withheld, and coinsurance basis. Prior to September 24, 2015 the Company was obligated to maintain collateral for the statutory reserve requirements on the business transferred from the Company to Hannover Re or until Hannover Re elected the option to implement its own facility providing collateral for reinsurance between Security Life of Denver Insurance Company ("SLD") and Security Life of Denver International Limited ("SLDI") ("Hannover Re Buyer Facility Agreement"). Hannover Re exercised this election and consequently, on September 24, 2015, the Company entered into a Hannover Re Buyer Facility Agreement with Hannover Life Reassurance Company of America, Hannover Re (Ireland) Limited, Hannover Ruck SE and SLDI ("Buyer Facility Agreement"). Under the Buyer Facility Agreement, the existing collateral, provided by SLDI through LOCs and a collateral note supporting the reserves on the Hannover Re block, was replaced by a $2.9 billion senior unsecured floating rate note issued by Hannover Ruck SE and deposited into a reserve credit trust established by SLDI for the benefit of SLD. Consequently, the Company has no remaining collateral requirement as of December 31, 2017 and December 31, 2016 with respect to collateral provided by SLDI for the benefit of SLD. Of the Premium receivable and reinsurance recoverable on the Consolidated Balance Sheets, $2.9 billion and $1.9 billion as of December 31, 2017 and 2016, respectively, is related to the reinsurance recoverable from Hannover Re under the MPA.

Effective October 1, 2014, the Company disposed of an in-force block of term life insurance policies to RGA Reinsurance Company, a subsidiary of Reinsurance Group of America, Inc., ("RGA") under an indemnity reinsurance arrangement for $448. Under the agreement, RGA contractually assumed from the Company the policyholder liabilities and obligations related to the policies, although the Company remains obligated to policyholders. As of December 31, 2017 and 2016, the reinsurance recoverable within Premium receivable and reinsurance recoverable on the Consolidated Balance Sheets related to the Term Life Coinsurance Agreement was $542 and $499, respectively.

Effective April 1, 2015, the Company disposed of, via reinsurance, retained group reinsurance policies to Enstar Group Ltd. for $305. In connection with this transaction, the Company recognized a loss of $39, primarily related to intent impairments of assets included in the transaction and other transactions costs. As of December 31, 2017 and 2016, the reinsurance recoverable within Premium receivable and reinsurance recoverable on the Consolidated Balance Sheets related to this transaction was $164 and $198, respectively.

Effective October 1, 2015, the Company disposed of, via reinsurance, an in-force block of term life insurance policies to RGA Reinsurance Company for $419. Under the terms of the agreement, RGA Reinsurance Company contractually assumed from the Company the policyholder liabilities and obligations related to the policies, although the Company remains obligated to policyholders. The Company recognized a loss of $110, composed of $14 in Net realized capital gains on assets included in the transaction, $4 in Other-than-temporary impairments related to intent and $120 of transaction and ongoing expenses recorded in Operating expenses in the Consolidated Statements of Operations for the year ended December 31, 2015. As of December 31, 2017 and 2016, the reinsurance recoverable within Premium receivable and reinsurance recoverable on the Consolidated Balance Sheets related to this agreement was $458 and $452, respectively.