Transactions With Affiliates

12 Months Ended

Dec. 31, 2019

Transactions With Affiliates [Abstract]

Transactions With Affiliates

 

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,
	2019			2018
Assets with affiliates:
Inter-company notes	$	1,557		$	1,512		Fixed maturity AFS securities
Ceded reinsurance contracts		(115	)		(188	)	Deferred acquisition costs and value of
							business acquired
Accrued inter-company interest receivable		6			11		Accrued investment income
Ceded reinsurance contracts		2,473			2,574		Reinsurance recoverables
Ceded reinsurance contracts		-			191		Reinsurance related embedded derivatives
Ceded reinsurance contracts		228			235		Other assets
Cash management agreement		1,227			112		Other assets
Service agreement receivable		6			5		Other assets
Liabilities with affiliates:
Assumed reinsurance contracts		26			29		Future contract benefits
Assumed reinsurance contracts		390			400		Other contract holder funds
Ceded reinsurance contracts		(38	)		(46	)	Other contract holder funds
Inter-company short-term debt		609			288		Short-term debt
Inter-company long-term debt		2,414			2,401		Long-term debt
Ceded reinsurance contracts		46			-		Reinsurance related embedded derivatives
Ceded reinsurance contracts		3,757			3,120		Funds withheld reinsurance liabilities
Ceded reinsurance contracts		497			325		Other liabilities
Accrued inter-company interest payable		5			13		Other liabilities
Service agreement payable		22			56		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,
	2019			2018			2017
Revenues with affiliates:
Premiums received on assumed (paid on ceded)	$
reinsurance contracts		(407	)	$	(404	)	$	(393	)	Insurance premiums
Fees for management of general account		(133	)		(106	)		(100	)	Net investment income
Net investment income on ceded funds withheld treaties		(139	)		(123	)		(84	)	Net investment income
Net investment income on inter-company notes		53			49			42		Net investment income
Realized gains (losses) on ceded reinsurance contracts:
GLB reserves embedded derivatives		(305	)		709			(1,055	)	Realized gain (loss)
Other gains (losses)		(301	)		237			(150	)	Realized gain (loss)
Reinsurance related settlements		472			(1,189	)		951		Realized gain (loss)
Amortization of deferred gain (loss) on reinsurance
contracts		(4	)		(5	)		(5	)	Amortization of deferred gain
										on business sold through
										reinsurance
Benefits and expenses with affiliates:
Interest credited on assumed reinsurance contracts		60			57			67		Interest credited
Reinsurance (recoveries) benefits on ceded reinsurance		(254	)		(610	)		(299	)	Benefits
Ceded reinsurance contracts		(19	)		(8	)		(12	)	Commissions and other
										expenses
Service agreement payments		15			3			3		Commissions and other
										expenses
Interest expense on inter-company debt		130			126			120		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, 2019.

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 $115 million and $1.2 billion as of December 31, 2019 and 2018, respectively. The LOCs are obtained by the affiliate reinsurer and issued by banks in order for the Company to recognize the reserve credit.