7. Reinsurance

The following summarizes the effect of reinsurance on premiums and future policy and other policy benefits on the consolidated statements of income:



	Years ended December 31,
(In millions)	2018			2017			2016
Premiums
Direct	$	2,772		$	2,639		$	448
Reinsurance assumed	1,001			21			20
Reinsurance ceded	(405		)	(195		)	(228		)
Total premiums	$	3,368		$	2,465		$	240

Future policy and other policy benefits
Direct	$	3,698		$	3,476		$	1,421
Reinsurance assumed	1,028			37			82
Reinsurance ceded	(539		)	(313		)	(473		)
Total future policy and other policy benefits	$	4,187		$	3,200		$	1,030

Reinsurance typically provides for recapture rights on the part of the ceding company for certain events of default. Additionally, some agreements require us to place assets in trust accounts for the benefit of the ceding entity. The required minimum assets are equal to or greater than statutory reserves, as defined by the agreement, and were $5,719 million and $1,123 million as of December 31, 2018 and 2017, respectively. Although we own the assets placed in trust, their use is restricted based on the trust agreement terms. If the statutory book value of the assets, or in certain cases fair value, in a trust declines because of impairments or other reasons, we may be required to contribute additional assets to the trust. In addition, the assets within a trust may be subject to a pledge in favor of the applicable reinsurance company.

Reinsurance transactions

Voya Financial, Inc. (Voya) – On June 1, 2018, we entered into coinsurance and modco agreements with Voya Insurance and Annuity Company (VIAC) to reinsure a block of fixed and fixed indexed annuities. VIAC is a related party pursuant to GAAP due to our minority equity investment in its holding company’s parent, VA Capital Company LLC (VA Capital), as discussed further in Note 17 – Related Parties. Additionally, we entered into modco agreements with ReliaStar Life Insurance Company (RLI), a subsidiary of Voya, to reinsure a block of fixed and fixed indexed annuities. The following summarizes these reinsurance transactions (collectively, Voya reinsurance transactions):



	VIAC						RLI
(In millions)	Coinsurance			Modco			Modco			Total
Liabilities assumed	$	3,667		$	14,911		$	457		$	19,035
Less: Assets received	3,478			14,332			445			18,255
Ceding commission (paid) received	(86		)	(320		)	12			(394		)
Net cost of reinsurance	$	275		$	899		$	—		$	1,174

DAC	$	293		$	999		$	4		$	1,296
Unearned revenue reserve¹	(8		)	(57		)	(4		)	(69		)
Deferred profit liability²	(10		)	(43		)	—			(53		)
Net cost of reinsurance	$	275		$	899		$	—		$	1,174

¹Included within interest sensitive contract liabilities on the consolidated balance sheets.
²Included within future policy benefits on the consolidated balance sheets.

DAC and unearned revenue reserve balances are amortized over the life of the reinsurance agreements on a basis consistent with our DAC amortization policy. The deferred profit liability balance is amortized over the life of the reinsurance agreement on a constant relationship to the benefit reserves.

The Lincoln National Life Insurance Company (Lincoln) – On December 7, 2018, we entered into a modco agreement with Lincoln, effective as of October 1, 2018, to reinsure an 80% quota share block of fixed deferred and fixed indexed annuities. The following summarizes this reinsurance transaction:



(In millions)	Modco
Liabilities assumed	$	7,878
Less: Assets received	7,663
Ceding commission (paid) received	(266		)
Net cost of reinsurance	$	481

Net cost of reinsurance – DAC	$	481

Athora – During the fourth quarter of 2018, we entered into a coinsurance agreement with Athora Lebensversicherung AG (ALV) to reinsure endowment contracts and annuities. We then retroceded these endowment contracts and annuities through a modco agreement to Athora Life Re Ltd. (ARE). These transactions will serve as a model for future transactions for Athora within the European market. We will earn a commission of 0.2% of reserves on the retrocession to ARE. See Note 17 – Related Parties for further information on other Athora transactions. The following summarizes these reinsurance transactions:



	ALV			ARE
(In millions)	Coinsurance			Modco		Total
Liabilities assumed/funds withheld liability recorded	$	325		$	337	$	662
Less: Assets recorded¹	337			337		674
Deferred profit liability²	$	(12	)	$	—	$	(12	)

¹ALV coinsurance assets recorded as receivable in other assets on the consolidated balance sheets, as the assets were not received prior to December 31, 2018. ARE modco assets recorded as reinsurance recoverable on the consolidated balance sheets.
²Included within future policy and other policy benefits on the consolidated balance sheets.

Global Atlantic – We have a 100% coinsurance and assumption agreement with Global Atlantic. The agreement ceded all existing open block life insurance business issued by Athene Annuity and Life Company (AAIA), with the exception of enhanced guarantee universal life insurance products. We also entered into a 100% coinsurance agreement with Global Atlantic to cede all policy liabilities of the ILICO Closed Block. The ILICO Closed Block consists primarily of participating whole life insurance policies. We also have an excess of loss arrangement with Global Atlantic to reimburse us for any payments required from our general assets to meet the contractual obligations of the AmerUs Closed Block not covered by existing reinsurance through Athene Re USA IV. The AmerUs Closed Block consists primarily of participating whole life insurance policies. Since all liabilities were covered by the existing reinsurance at close, no reinsurance premiums were ceded. The assets backing the AmerUs Closed Block are managed, on AAIA’s behalf, by Goldman Sachs Asset Management, an affiliate of Global Atlantic.

We have novated certain open blocks of business ceded to Global Atlantic, in accordance with the terms of the coinsurance and assumption agreement. The below table summarizes the decreases in amounts on the consolidated balance sheets as a result of the novations. Novations during the year ended December 31, 2018 did not have a material effect on the consolidated balance sheets.



(In millions)	Year ended December 31, 2017
Interest sensitive contract liabilities	$	653
Future policy benefits	116
Policy loans	22
Reinsurance recoverable	747

As of December 31, 2018 and 2017, Global Atlantic maintained a series of trust and custody accounts under the terms of these agreements with assets equal to or greater than a required aggregate statutory balance of $3,967 million and $3,350 million, respectively.

Protective Life Insurance Company (Protective) – We reinsured substantially all of the existing life and health business of Athene Annuity & Life Assurance Company (AADE) to Protective under a coinsurance agreement in 2011. As of December 31, 2018 and 2017, Protective maintained a trust for our benefit with assets having a fair value of $1,525 million and $1,688 million, respectively.

Reinsurance Recoverables—The following summarizes our reinsurance recoverable from the following:



	December 31,
(In millions)	2018		2017
Global Atlantic	$	3,166	$	3,482
Protective	1,652		1,699
ARE	337		—
Other¹	379		151
Reinsurance recoverable	$	5,534	$	5,332

¹Represents all other reinsurers, with no single reinsurer having a carrying value in excess of 5% of total recoverable.