Related Party Transactions

In the normal course of its business, the Company enters into reinsurance agreements with related parties. Included in the consolidated balance sheets are the following amounts related to reinsurance ceded to and assumed from related parties:



	December 31,
	2017		2016
Reinsurance recoverable	$	515,417	$	522,950
Future policy benefits	1,513,311		1,608,884

Included in the consolidated statements of income are the following related party amounts:



	Year Ended December 31,
	2017			2016			2015
Premium income, net of related party premiums ceded of $20,033, $17,774, and $15,731	$	61,368		$	66,928		$	68,722
Life and other policy benefits, net of reinsurance recoveries of $10,313, $8,862, and $6,494	179,748			189,125			193,215
Decrease in future policy benefits	(70,654		)	(88,639		)	(52,842		)

In the normal course of business the Company enters into agreements with related parties whereby it provides and/or receives recordkeeping services, investment advisory services, and tax-related services, as well as corporate support services which include general and administrative services, information technology services, and marketing services. The following table presents revenue, expenses incurred and expense reimbursement from related parties for services provided and/or received pursuant to these service agreements. These amounts, in accordance with the terms of the contracts, are based upon market price, estimated costs incurred or resources expended as determined by number of policies, number of participants, certificates in-force, administered assets, or other similar drivers.



		Year Ended December 31,						Financial statement line
Description	Related party	2017		2016		2015		Financial statement line
Receives corporate support services	The Canada Life Assurance Company (“CLAC”)⁽¹⁾, Great-West Life⁽¹⁾, Great West Global⁽³⁾, and Putnam⁽²⁾	$	22,400	$	18,763	$	12,609	General insurance expense
Provides shareholder services	Putnam⁽²⁾	16,598		15,852		5,531		Fee income
Receives reimbursement from tax sharing indemnification related to state and local tax liabilities	Putnam⁽²⁾	9,611		12,261		13,563		Other revenue
Provides advisory, trustee, recordkeeping and administrative services	Great-West Funds and Collective Income Trusts ⁽⁴⁾	150,441		140,455		138,936		Fee income

⁽¹⁾ An indirect wholly-owned subsidiary of Lifeco

⁽²⁾ A wholly-owned subsidiary of Lifeco U.S.

⁽³⁾ An indirect wholly-owned subsidiary of Lifeco U.S.

⁽⁴⁾Great-West Capital Management, LLC, a subsidiary of the Company, serves as a Registered Investment Advisor to Great-West Funds, an open-end management investment company, which is an affiliate of GWL&A and to Great-West Trust Company, LLC, an affiliated trust company. Great-West Trust Company, LLC, serves as trustee to several collective investment trusts. The Company provides Great-West Funds, Inc. recordkeeping and administrative services to shareholders and account owners.

The following table summarizes amounts due from parent and affiliates:



			December 31,
Related party	Indebtedness	Due date	2017		2016
GWL&A Financial	On account	On demand	$	52,646	$	45,190
Lifeco U.S.	On account	On demand	41,966		34,992
CLAC	On account	On demand	19,503		—
Other related party receivables	On account	On demand	18		1,813
Total			$	114,133	$	81,995

The following table summarizes amounts due to parent and affiliates:



			December 31,
Related party	Indebtedness	Due date	2017		2016
GWL&A Financial ⁽¹⁾	Surplus note	November 2034	$	194,532	$	194,502
GWL&A Financial ⁽²⁾	Surplus note	May 2046	333,400		333,400
GWL&A Financial ⁽³⁾	Surplus note	December 2027	12,000		—
GWL&A Financial	Note interest	May 2018	3,409		3,190
Other related party payables	On account	On demand	10,560		6,898
Total			$	553,901	$	537,990

⁽¹⁾ A note payable to GWL&A Financial was issued as a surplus note on November 15, 2004, with a face amount of $195,000 and carrying amounts of $194,532 and $194,502 at December 31, 2017, and 2016, respectively. The surplus note bears interest at the rate of 6.675% per annum, payable in arrears each May and November. The note matures on November 15, 2034.

⁽²⁾ A note payable to GWL&A Financial was issued as a surplus note on May 19, 2006, with a face amount and carrying amount of $333,400. The surplus note bears an interest rate of 2.588% plus the then-current three-month London Interbank Offering Rate (“LIBOR”). The surplus note became redeemable by the Company at the principal amount plus any accrued and unpaid interest after May 16, 2016. The note matures on May 16, 2046.

⁽³⁾ A note payable to GWL&A Financial was issued as a surplus note on December 29, 2017, with a face amount and carrying amount of $12,000. The surplus note bears an interest rate of 3.5% per annum. The note matures on December 29, 2027.

Payments of principal and interest under the surplus notes shall be made only out of surplus funds of the Company and only with prior written approval of the Commissioner of Insurance of the State of Colorado when the Commissioner of Insurance is satisfied that the financial condition of the Company warrants such action pursuant to applicable Colorado law. Payments of principal and interest on the surplus notes are payable only if at the time of such payment and after giving effect to the making thereof, the Company’s surplus would not fall below 2.5 times the authorized control level as required by the most recent risk-based capital calculations.

Interest expense attributable to these related party debt obligations was $25,773, $29,185 and $37,059 for the years ended December 31, 2017, 2016, and 2015, respectively. Included in other liabilities on the consolidated balance sheets is $3,409 and $3,190 of interest payable attributable to these related party debt obligations for the years ended December 31, 2017, and 2016, respectively.

GWL&A Financial has a letter of credit for the benefit of GWSC for capital support in the amount of $70 million and which renews annually until the Company terminates it under the provisions specified in the agreement. Additionally, GWL&A Financial terminated a letter of credit on December 21, 2017 in the amount of $1,141 million which was for the benefit of the Company as collateral under the GWSC and CLAC reinsurance agreement for policy liabilities. This letter of credit was replaced with an excess of loss reinsurance agreement with a third party reinsurer. At December 31, 2017 and 2016, there were no outstanding amounts related to the letters of credit.

Included within reinsurance recoverable in the consolidated balance sheets are $503,258 and $511,575 of funds withheld assets as of December 31, 2017, and 2016, respectively. This reinsurance agreement is related to term life insurance policies assumed by GWSC from CLAC. CLAC pays the Company, on a quarterly basis, interest on the funds withheld balance at a rate of 4.55% per annum. The interest income, in the amount of $21,813, $22,045, and $22,165, is included in net investment income for the years ended December 31, 2017, 2016, and 2015, respectively.

The Company’s separate accounts invest in shares of Great-West Funds and Putnam Funds, which are related parties of the Company and shares of other non-affiliated mutual funds and government and corporate bonds. The Company’s separate accounts include mutual funds or other investment options that purchase guaranteed interest annuity contracts issued by the Company. During the years ended December 31, 2017, 2016, and 2015, these purchases totaled $292,774, $183,365, and $146,547, respectively. As these general account investment contracts are also included in the separate account balances in the accompanying consolidated balance sheets, the Company has reduced the separate account assets and liabilities by $335,311 and $302,898 at December 31, 2017, and 2016, respectively, to eliminate these amounts in its consolidated balance sheets at those dates.