The Company's insurance subsidiaries enter into agreements with other insurance companies to assume and cede reinsurance. Reinsurance is ceded primarily to limit losses from large exposures and to permit recovery of a portion of direct or assumed losses. Reinsurance is also used in acquisition and disposition transactions when the underwriting company is not being acquired. Reinsurance does not relieve the originating insurer of liability. Therefore, reinsured liabilities must continue to be reported along with the related reinsurance recoverables. The Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of its credit risk.

The majority of the Company's reinsurance recoverables resulted from acquisition and disposition transactions in which the underwriting company was not acquired. Components of the Company's reinsurance recoverables are presented below:

(In millions)
	Line of Business	Reinsurer(s)	December 31, 2016		December 31, 2015		Collateral and Other Terms at December 31, 2016

	Ongoing Operations:

	Global Health Care, Global Supplemental Benefits, Group Disability and Life	Various	$	478	$	553	Recoverables from approximately 80 reinsurers, including the U.S. Government, used in the ordinary course of business. Current balances range from less than $1 million up to $96 million. Excluding the recoverable from the U.S. Government of $63 million, 13% is secured by assets in trusts or letters of credit.
	Total recoverables related to ongoing operations			478		553

	Acquisition, disposition or runoff activities:

	Individual Life and Annuity (sold in 1998)	Lincoln National Life and Lincoln Life & Annuity of New York		3,586		3,705	Both companies' ratings were sufficient to avoid triggering a contractual obligation to fully secure the outstanding balance.

	GMDB (effectively exited in 2013)	Berkshire		1,085		1,123	100% secured by assets in a trust.

		Other		44		41	100% secured by assets in a trust or letters of credit.

	Retirement Benefits Business (sold in 2004)	Prudential Retirement Insurance and Annuity		921		995	100% secured by assets in a trust.

	Supplemental Benefits Business (2012 acquisition)	Great American Life		297		315	99% secured by assets in a trust.

	Other run-off reinsurance	Various		67		81	99% secured by assets in a trust or other deposits.
	Total recoverables related to acquisition, disposition or runoff activities			6,000		6,260

	Total reinsurance recoverables		$	6,478	$	6,813

The Company bears the risk of loss if its reinsurers and retrocessionaires do not meet or are unable to meet their reinsurance obligations to the Company. Over 90% of the Company's reinsurance recoverables were from companies rated A or higher by Standard & Poors at December 31, 2016. The Company reviews its reinsurance arrangements and establishes reserves against the recoverables if recovery is not considered probable. As of December 31, 2016 and December 31, 2015, the Company's recoverables were net of a reserve of $3 million.

The following table presents direct, assumed and ceded premiums for both short-duration and long-duration insurance contracts. It also presents reinsurance recoveries that have been netted against benefits and expenses in the Company's Consolidated Statements of Income.

(In millions)	2016		2015		2014
Premiums
Short-duration contracts:
Direct	$	27,496	$	26,751	$	24,294
Assumed		247		289		429
Ceded		(229)		(254)		(226)
Total short-duration contract premiums		27,514		26,786		24,497
Long-duration contracts:
Direct		3,259		3,061		2,921
Assumed		137		111		173
Ceded:
Individual life insurance and annuity business sold		(153)		(158)		(254)
Other		(131)		(158)		(123)
Total long-duration contract premiums		3,112		2,856		2,717
Total premiums	$	30,626	$	29,642	$	27,214
Reinsurance recoveries
Individual life insurance and annuity business sold	$	279	$	301	$	366
Other		261		436		292
Total reinsurance recoveries	$	540	$	737	$	658

The effects of reinsurance on written premiums for short-duration contracts were not materially different from the recognized premium amounts shown in the table above

In 2013, the Company entered into an agreement with Berkshire to effectively exit the GMDB and GMIB business via a reinsurance transaction for a payment of $2.2 billion. Berkshire reinsured 100% of the Company's future claim payments in this business, net of retrocessional arrangements existing at that time. The reinsurance agreement is subject to an overall limit with approximately $3.5 billion remaining at December 31, 2016.

A discussion of each of these businesses follows. While GMDB is accounted for as reinsurance, GMIB assets and liabilities are reported as derivatives at fair value as discussed below. Accordingly, GMIB assets are reported in other assets, including intangibles, and GMIB liabilities are reported in accounts payable, accrued expenses and other liabilities.

The majority of the GMDB exposure arises under annuities written by ceding companies that guarantee the benefit received at death will be no less than the highest historical account value of the related mutual fund investments on a contractholder's anniversary date. Under this type of death benefit, the Company's exposure arises when the highest anniversary account value exceeds the fair value of the related mutual fund investments at the time of a contractholder's death.

Accounting policy. The Company estimates the gross liability and reinsurance recoverable with an internal model based on the Company's experience and future expectations over an extended period, consistent with the long-term nature of this product. As a result of the reinsurance transaction, reserve increases have a corresponding increase in the recorded reinsurance recoverable, provided the increased recoverable remains within the overall Berkshire limit (including the GMIB asset presented below). The ending net retained reserve covers ongoing administrative expenses, as well as minor claim exposure retained by the Company.

Because the product is premium deficient, the Company records an increase to the net retained reserve if it is inadequate based on the model.

Activity in future policy benefit reserves for the GMDB business was as follows:

(In millions)	2016		2015		2014
Balance at January 1,	$	1,252	$	1,270	$	1,396
Add: Unpaid claims		18		16		18
Less: Reinsurance and other amounts recoverable		1,164		1,186		1,317
Balance at January 1, net		106		100		97
Add: Incurred benefits		4		3		3
Less: Paid benefits / (recoveries)		(1)		(3)		-
Ending balance, net		111		106		100
Less: Unpaid claims		16		18		16
Add: Reinsurance and other amounts recoverable		1,129		1,164		1,186
Balance at December 31,	$	1,224	$	1,252	$	1,270

The table below presents the account value, net amount at risk and average attained age of underlying contractholders for guarantees assumed by the Company in the event of death. The net amount at risk is the amount that the Company would have to pay if all contractholders died as of the specified date. Unless the Berkshire reinsurance limit is exceeded, the Company should be reimbursed in full for these payments.

In this business, the Company reinsured contracts with issuers of GMIB products. The Company's exposure represents the excess of a contractually guaranteed amount over the level of variable annuity account values. Payment by the Company depends on the actual account value in the underlying mutual funds and the level of interest rates when the contractholders elect to receive minimum income payments that must occur within 30 days of a policy anniversary after the appropriate waiting period. The Company has purchased retrocessional coverage (“GMIB assets”) for these contracts.

Accounting policy. The Company reports GMIB liabilities and assets as derivatives at fair value because cash flows of these liabilities and assets are affected by equity markets and interest rates, but are without significant life insurance risk and are settled in lump sum payments. Periodically, the Company receives and pays fees based on either contractholders' account values or deposits increased at a contractual rate. The Company will also pay and receive cash depending on changes in account values and interest rates when contractholders first elect to receive minimum income payments. Cash flows on these contracts are reported in operating activities.

(In millions)
	Line of Business	Reinsurer(s)	December 31, 2016		December 31, 2015		Collateral and Other Terms at December 31, 2016

	GMIB	Berkshire	$	370	$	420	100% were secured by assets in a trust.

		Sun Life Assurance Company of Canada		227		257

		Liberty Re (Bermuda) Ltd.		202		230	100% were secured by assets in a trust.

	Total GMIB recoverables reported in other assets		$	799	$	907

Assumptions used in fair value measurement. The Company estimates the fair value of the assets and liabilities for GMIB contracts by calculating the results for many scenarios run through a model utilizing various assumptions. The only assumption expected to impact future shareholders' net income is non-performance risk. The non-performance risk adjustment reflects a market participant's view of nonpayment risk by adding an additional spread to the discount rate in the calculation of both (a) the GMIB liabilities to be paid by the Company, and (b) the GMIB assets to be paid by the reinsurers, after considering collateral.

Other assumptions that affect GMIB assets and liabilities include capital market assumptions (including market returns, interest rates and market volatilities of the underlying equity and bond mutual fund investments) and future annuitant behavior (including mortality, lapse, and annuity election rates). As certain assumptions used to estimate fair values for these contracts are largely unobservable (primarily related to future annuitant behavior), the Company classifies GMIB assets and liabilities in Level 3 in the fair value hierarchy presented in Note 10.

The Company regularly evaluates each of the assumptions used in establishing these assets and liabilities. Significant decreases in assumed lapse rates or spreads used to calculate non-performance risk of the Company, or significant increases in assumed annuity election rates or spreads used to calculate the non-performance risk of the reinsurers, would result in higher fair value measurements. A change in one of these assumptions is not necessarily accompanied by a change in another assumption.

GMIB guarantees. Future payments are not fixed and determinable under the terms of these contracts. Accordingly, the Company calculated exposure, without considering any reinsurance coverage, using the following hypothetical assumptions:

The Company has reinsurance coverage in place that covers the exposures on these contracts. Using these hypothetical assumptions, GMIB exposure is $703 million, which is lower than the recorded liability for GMIB calculated using fair value assumptions.