In the ordinary course of business, the Company is involved in both the assumption and cession of reinsurance with non-affiliated companies. The following table provides details of the reinsurance recoverables balance for the years ended December 31:



	2017		2016
Ceded future policyholder benefits and expense	$	4,440.9	$	4,523.3
Ceded unearned premium	2,014.5		1,836.6
Ceded claims and benefits payable	3,183.0		2,643.2
Ceded paid losses	151.8		80.1
Total	$	9,790.2	$	9,083.2

A key credit quality indicator for reinsurance is the A.M. Best financial strength ratings of the reinsurer. The A.M. Best ratings are an independent opinion of a reinsurer’s ability to meet ongoing obligations to policyholders. The A.M. Best ratings for new reinsurance agreements where there is material credit exposure are reviewed at the time of execution. The A.M. Best ratings for existing reinsurance agreements are reviewed on a periodic basis, at least annually. The following table provides the reinsurance recoverable as of December 31, 2017 grouped by A.M. Best rating:



Best Ratings of Reinsurer_____	Ceded future policyholder benefits and expense		Ceded unearned premiums		Ceded claims and benefits payable		Ceded paid losses			Total
A++ or A+	$	3,022.4	$	44.1	$	2,111.0	$	32.6		$	5,210.1
A or A-	425.6		46.9		335.1		105.8			913.4
B++ or B+	987.2		20.9		35.7		0.5			1,044.3
B or B-	0.2		—		—		—			0.2
Not Rated (1)	5.5		1,902.6		701.2		13.2			2,622.5
Total	4,440.9		2,014.5		3,183.0		152.1			9,790.5
Less: Allowance	—		—		—		(0.3		)	(0.3		)
Net reinsurance recoverable	$	4,440.9	$	2,014.5	$	3,183.0	$	151.8		$	9,790.2

The A.M. Best financial strength ratings for Sun Life, John Hancock and The Hartford, the reinsurers with the largest reinsurance recoverable balances, are A+ and A+ and B++, respectively. A.M. Best currently maintains a stable outlook on the financial strength ratings of Sun Life and John Hancock. The A.M. Best ratings of The Hartford are currently under review with developing implications. The total amount of recoverable for these three reinsurers is $6.09 billion as of December 31, 2017. Most of the assets backing reserves relating to reinsurance recoverables from these counterparties are held in trust.

A substantial portion of the Not Rated category is related to Global Lifestyle's and Global Housing’s agreements to reinsure premiums and risks related to business generated by certain clients to the clients’ own captive insurance companies or to reinsurance subsidiaries in which the clients have an ownership interest. To mitigate exposure to credit risk for these reinsurers, the Company evaluates the financial condition of the reinsurer and holds substantial collateral (in the form of funds withheld, trusts, and letters of credit) as security. The Not Rated category also includes recoverables from the National Flood Insurance Program and the Florida Hurricane Catastrophe Fund.

An allowance for doubtful accounts related to reinsurance recoverables is recorded on the basis of periodic evaluations of balances due from reinsurers (net of collateral), reinsurer solvency, management’s experience and current economic conditions. The allowance for doubtful accounts was $0.3 million at both December 31, 2017 and 2016. There were no additions or write-downs charged against the allowance during 2017 or 2016.



	Years Ended December 31,
	2017									2016									2015
	Long Duration			Short Duration			Total			Long Duration			Short Duration			Total			Long Duration			Short Duration			Total
Direct earned premiums	$	440.3		$	9,090.5		$	9,530.8		$	472.1		$	9,202.7		$	9,674.8		$	509.1		$	11,091.6		$	11,600.7
Premiums assumed	3.7			150.2			153.9			4.6			365.3			369.9			8.4			517.6			526.0
Premiums ceded	(372.1		)	(4,908.5		)	(5,280.6		)	(385.5		)	(4,651.9		)	(5,037.4		)	(289.0		)	(3,486.7		)	(3,775.7		)
Net earned premiums	$	71.9		$	4,332.2		$	4,404.1		$	91.2		$	4,916.1		$	5,007.3		$	228.5		$	8,122.5		$	8,351.0
Direct policyholder benefits	$	918.2		$	5,521.3		$	6,439.5		$	1,517.9		$	4,203.3		$	5,721.2		$	937.9		$	6,024.4		$	6,962.3
Policyholder benefits assumed	14.6			213.5			228.1			15.1			154.2			169.3			20.0			290.9			310.9
Policyholder benefits ceded	(668.8		)	(4,128.2		)	(4,797.0		)	(1,272.3		)	(2,809.7		)	(4,082.0		)	(647.9		)	(1,882.8		)	(2,530.7		)
Net policyholder benefits	$	264.0		$	1,606.6		$	1,870.6		$	260.7		$	1,547.8		$	1,808.5		$	310.0		$	4,432.5		$	4,742.5

The Company had $596.5 million and $635.4 million, respectively, of invested assets held in trusts or by custodians as of December 31, 2017 and 2016, respectively, for the benefit of others related to certain reinsurance arrangements.

As part of the Company’s overall risk and capacity management strategy, the Company purchases reinsurance for certain risks underwritten by the Company’s various segments, including significant individual or catastrophic claims.

For those product lines where there is exposure to losses from catastrophe events, the Company closely monitors and manages its aggregate risk exposure by geographic area. The Company has entered into reinsurance treaties to manage exposure to these types of events.

The Company has used reinsurance to exit certain businesses, such as the disposals of AEB, FFG and LTC. Reinsurance was used in these cases to facilitate the transactions because the businesses shared legal entities with operating segments that the Company retained. Assets supporting liabilities ceded relating to these businesses are mainly held in trusts and the separate accounts relating to FFG are still reflected in the Company’s balance sheet.

If the reinsurers became insolvent, we would be exposed to the risk that the assets in the trusts and/or the separate accounts would be insufficient to support the liabilities that would revert back to us. The reinsurance recoverable from Sun Life was $889.8 million and $1.08 billion as of December 31, 2017 and 2016, respectively. The reinsurance recoverable from The Hartford was $1.01 billion and $1.03 billion as of December 31, 2017 and 2016, respectively. The reinsurance recoverable from John Hancock was $4.19 billion and $4.18 billion as of December 31, 2017 and 2016, respectively.

The reinsurance agreement associated with the FFG sale also stipulates that The Hartford contribute funds to increase the value of the separate account assets relating to Modified Guaranteed Annuity business sold if such value declines below the value of the associated liabilities. If The Hartford fails to fulfill these obligations, the Company will be obligated to make these payments.

In addition, the Company would be responsible for administering this business in the event of reinsurer insolvency. We do not currently have the administrative systems and capabilities to process this business. Accordingly, we would need to obtain those capabilities in the event of an insolvency of one or more of the reinsurers of these businesses. We might be forced to obtain such capabilities on unfavorable terms with a resulting material adverse effect on our results of operations and financial condition.

As of December 31, 2017, we were not aware of any regulatory actions taken with respect to the solvency of the insurance subsidiaries of Sun Life, The Hartford or John Hancock that reinsure the AEB, FFG and LTC businesses, and the Company has not been obligated to fulfill any of such reinsurers’ obligations.

The Global Lifestyle and Global Housing segments write business produced by their clients, such as mobile providers, mortgage lenders and servicers, and financial institutions and reinsures all or a portion of such business to insurance subsidiaries of some clients. Such arrangements allow significant flexibility in structuring the sharing of risks and profits on the underlying business.

A substantial portion of Global Lifestyle and Global Housing’s reinsurance activities are related to agreements to reinsure premiums and risks related to business generated by certain clients to the clients’ own captive insurance companies or to reinsurance subsidiaries in which the clients have an ownership interest. Through these arrangements, our insurance subsidiaries share some of the premiums and risk related to client-generated business with these clients. When the reinsurance companies are not authorized to do business in our insurance subsidiary’s domiciliary state, the Company’s insurance subsidiary generally obtains collateral, such as a trust or a letter of credit, from the reinsurance company or its affiliate in an amount equal to the outstanding reserves to obtain full statutory financial credit in the domiciliary state for the reinsurance.