24. Transactions with Affiliates

The following summarizes transactions with affiliates (in millions) and the associated line item on our Consolidated Balance Sheets:


	As of December 31,
	2018			2017
Assets with affiliates:
Inter-company notes	$	1,512		$	1,444		Fixed maturity AFS securities
Limited partnerships		-			(66	)	Other investments
Ceded reinsurance contracts		(188	)		(188	)	Deferred acquisition costs and value of
							business acquired
Accrued inter-company interest receivable		11			8		Accrued investment income
Ceded reinsurance contracts		2,574			2,152		Reinsurance recoverables
Ceded reinsurance contracts		191			8		Reinsurance related embedded derivatives
Ceded reinsurance contracts		235			244		Other assets
Cash management agreement		112			441		Other assets
Service agreement receivable		5			15		Other assets

Liabilities with affiliates:
Assumed reinsurance contracts		29			32		Future contract benefits
Assumed reinsurance contracts		400			400		Other contract holder funds
Ceded reinsurance contracts		(46	)		(47	)	Other contract holder funds
Inter-company short-term debt		288			10		Short-term debt
Inter-company long-term debt		2,401			2,374		Long-term debt
Ceded reinsurance contracts		3,120			2,587		Funds withheld reinsurance liabilities
Ceded reinsurance contracts		325			1,023		Other liabilities
Accrued inter-company interest payable		13			29		Other liabilities
Service agreement payable		56			8		Other liabilities

The following summarizes transactions with affiliates (in millions) and the associated line item on our Consolidated Statements of Comprehensive Income (Loss):


	For the Years Ended
	December 31,
	2018			2017			2016
Revenues with affiliates:
Premiums received on assumed (paid on ceded)	$	(404	)	$	(393	)	$	(389	)	Insurance premiums
reinsurance contracts
Fees for management of general account		(106	)		(100	)		(117	)	Net investment income
Net investment income on ceded funds withheld treaties		(123	)		(84	)		(69	)	Net investment income
Net investment income on inter-company notes		49			42			38		Net investment income
Realized gains (losses) on ceded reinsurance contracts:
GLB reserves embedded derivatives		709			(1,055	)		(516	)	Realized gain (loss)
Other gains (losses)		237			(150	)		(93	)	Realized gain (loss)
Reinsurance related settlements		(1,189	)		951			488		Realized gain (loss)
Amortization of deferred gain on reinsurance contracts		(5	)		(5	)		(5	)	Amortization of deferred gain
										on business sold through
										reinsurance
Benefits and expenses with affiliates:
Interest credited on assumed reinsurance contracts		57			67			61		Interest credited
Reinsurance (recoveries) benefits on ceded reinsurance		(610	)		(299	)		(424	)	Benefits
Ceded reinsurance contracts		(8	)		(12	)		(14	)	Commissions and other
										expenses
Service agreement payments		3			3			76		Commissions and other
										expenses
Interest expense on inter-company debt		126			120			111		Interest and debt expense

Inter-Company Notes

LNC issues inter-company notes to us for a predetermined face value to be repaid by LNC at a predetermined maturity with a specified interest rate.

Cash Management Agreement

In order to manage our capital more efficiently, we participate in an inter-company cash management program where LNC can lend to or borrow from us to meet short-term borrowing needs. The cash management program is essentially a series of demand loans, which are permitted under applicable insurance laws, among LNC and its affiliates that reduces overall borrowing costs by allowing LNC and its subsidiaries to access internal resources instead of incurring third-party transaction costs. The borrowing and lending limit is currently 3% of our admitted assets as of December 31, 2018.

Service Agreement

In accordance with service agreements with LNC and other subsidiaries of LNC for personnel and facilities usage, general management services and investment management services, we receive services from and provide services to affiliated companies and receive an allocation of corporate overhead. Corporate overhead expenses are allocated based on specific methodologies for each function. The majority of the expenses are allocated based on the following methodologies: headcount, capital, investments by product, assets under management, weighted policies in force and sales.

Ceded Reinsurance Contracts

As discussed in Note 9, we cede insurance contracts to LNBAR. We cede certain guaranteed benefit risks (including certain GDB and GWB benefits) to LNBAR. As discussed in Note 6, we cede the GLB reserves embedded derivatives and the related hedge results to LNBAR.

Substantially all reinsurance ceded to affiliated companies is with unauthorized companies. To take reserve credit for such reinsurance, we hold assets from the reinsurer, including funds held under reinsurance treaties, and are the beneficiary of LOCs aggregating to $1.2 billion and $610 million as of December 31, 2018 and 2017, respectively. The LOCs are obtained by the affiliate reinsurer and issued by banks in order for the Company to recognize the reserve credit.