REINSURANCE

We periodically enter into fixed quota-share coinsurance agreements with other companies in the normal course of business. For each of our reinsurance agreements, we determine whether the agreement provides indemnification against loss or liability relating to insurance risk in accordance with applicable accounting standards. Reinsurance premiums and benefits paid or provided are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and benefits are reported net of insurance ceded.

We have recorded a deferred profit liability related to reinsurance transactions. The remaining deferred profit liability of $934 million, as of June 30, 2017, is included in future policy benefits in the consolidated balance sheet and is being amortized into income over the expected lives of the policies. We also have recorded a reinsurance recoverable for reinsurance transactions, which is included in other assets in the consolidated balance sheet and had a remaining balance of $906 million and $860 million as of June 30, 2017 and December 31, 2016, respectively. The increase in the reinsurance recoverable balance was driven by two aggregating factors: yen strengthening and the growth in reserves related to the business that has been reinsured as the policies age. The spot yen/dollar exchange rate strengthened by approximately 4% and ceded reserves increased approximately 1% from December 31, 2016 to June 30, 2017.

The following table reconciles direct premium income and direct benefits and claims to net amounts after the effect of reinsurance.



	Three Months Ended June 30,								Six Months Ended June 30,
(In millions)	2017				2016				2017				2016
Direct premium income		$	4,752			$	4,915			$	9,476			$	9,605
Ceded to other companies:
Ceded Aflac Japan closed blocks		(130		)		(141		)		(260		)		(275		)
Other		(13		)		(12		)		(25		)		(24		)
Assumed from other companies:
Retrocession activities		55				59				109				115
Other		1				2				3				4
Net premium income		$	4,665			$	4,823			$	9,303			$	9,425

Direct benefits and claims		$	3,117			$	3,332			$	6,246			$	6,435
Ceded benefits and change in reserves for future benefits:
Ceded Aflac Japan closed blocks		(119		)		(129		)		(241		)		(250		)
Eliminations		13				15				26				29
Other		(11		)		(7		)		(22		)		(17		)
Assumed from other companies:
Retrocession activities		52				56				106				109
Eliminations		(13		)		(15		)		(26		)		(29		)
Other		0				2				2				2
Benefits and claims, net		$	3,039			$	3,254			$	6,091			$	6,279

These reinsurance transactions are indemnity reinsurance that do not relieve us from our obligations to policyholders. In the event that the reinsurer is unable to meet their obligations, we remain liable for the reinsured claims.

As a part of our capital contingency plan, we entered into a committed reinsurance facility agreement on December 1, 2015 in the amount of approximately 110 billion yen. This reinsurance facility agreement was renewed in 2016 and is effective until December 31, 2017. There are also additional commitment periods of a one-year duration each which are automatically extended unless notification is received from the reinsurer within 60 days prior to the expiration. The reinsurer can withdraw from the committed facility if Aflac‘s Standard and Poor's (S&P) rating drops below BBB-. As of June 30, 2017, we have not executed a reinsurance treaty under this committed reinsurance facility.