Related Party Transactions

9 Months Ended

Sep. 30, 2019

11. Related Party Transactions

The Company has various existing arrangements with its Brighthouse affiliates and had previous arrangements with MetLife for services necessary to conduct its activities. Certain of the MetLife services have continued, however, MetLife was no longer considered a related party upon the completion of the MetLife Divestiture on June 14, 2018 (see Note 1). The Company has related party investment and debt transactions (see Notes 4 and 7). Other material arrangements between the Company and its related parties not disclosed elsewhere are as follows:

Reinsurance Agreements

The Company enters into reinsurance agreements primarily as a purchaser of reinsurance for its various insurance products and also as a provider of reinsurance for some insurance products issued by related parties. The Company participates in reinsurance activities in order to limit losses, minimize exposure to significant risks and provide additional capacity for future growth.

Information regarding the significant effects of reinsurance with New England Life Insurance Company (“NELICO”) and former MetLife affiliates included on the interim condensed consolidated statements of operations and comprehensive income (loss) was as follows:



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019			2018		2019		2018
	(In millions)
Premiums
Reinsurance assumed	$	(1	)	$	1	$	—	$	8
Reinsurance ceded	—			—		—		(201		)
Net premiums	$	(1	)	$	1	$	—	$	(193	)
Universal life and investment-type product policy fees
Reinsurance assumed	$	2		$	2	$	5	$	49
Reinsurance ceded	—			—		—		1
Net universal life and investment-type product policy fees	$	2		$	2	$	5	$	50
Other revenues
Reinsurance assumed	$	1		$	—	$	2	$	1
Reinsurance ceded	—			—		—		18
Net other revenues	$	1		$	—	$	2	$	19
Policyholder benefits and claims
Reinsurance assumed	$	8		$	8	$	25	$	38
Reinsurance ceded	—			—		—		(177		)
Net policyholder benefits and claims	$	8		$	8	$	25	$	(139	)

Information regarding the significant effects of reinsurance with NELICO and former MetLife affiliates included on the interim condensed consolidated balance sheets was as follows at:



	September 30, 2019					December 31, 2018
	Assumed			Ceded		Assumed			Ceded
	(In millions)
Assets
Premiums, reinsurance and other receivables	$	21		$	—	$	21		$	—
Liabilities
Policyholder account balances	$	542		$	—	$	386		$	—
Other policy-related balances	$	10		$	—	$	14		$	—
Other liabilities	$	(26	)	$	—	$	(38	)	$	—

The Company assumes risks from NELICO related to guaranteed minimum benefits written directly by the cedent. The assumed reinsurance agreements contain embedded derivatives and changes in the estimated fair value are included within net derivative gains (losses). The embedded derivatives associated with these agreements are included within policyholder account balances and were $542 million and $386 million at September 30, 2019 and December 31, 2018, respectively. Net derivative gains (losses) associated with the embedded derivatives were ($106) million and ($154) million for the three months and nine months ended September 30, 2019, respectively, and $33 million and $150 million for the three months and nine months ended September 30, 2018, respectively.

Shared Services and Overhead Allocations

Brighthouse affiliates currently provide and previously MetLife provided the Company certain services, which include, but are not limited to, treasury, financial planning and analysis, legal, human resources, tax planning, internal audit, financial reporting and information technology. Costs incurred under these arrangements with Brighthouse affiliates, as well as with MetLife prior to the MetLife Divestiture, were $274 million and $846 million for the three months and nine months ended September 30, 2019, respectively, and $386 million and $887 million for the three months and nine months ended September 30, 2018, respectively, and were recorded in other expenses. Revenues received from affiliates related to these agreements, recorded in universal life and investment-type product policy fees, were $56 million and $165 million for the three months and nine months ended September 30, 2019, respectively, and $59 million and $179 million for the three months and nine months ended September 30, 2018, respectively.

The Company had net receivables (payables) from/to affiliates, related to the items discussed above, of ($93) million and ($50) million at September 30, 2019 and December 31, 2018, respectively.

Brighthouse affiliates incur costs related to the establishment of services and infrastructure to replace those previously provided by MetLife. The Company is charged a fee to reflect the value of the available infrastructure and services provided by these costs. While management believes the method used to allocate expenses under this arrangement is reasonable, the allocated expenses may not be indicative of those of a stand-alone entity. If expenses were allocated to the Company under this arrangement as incurred by Brighthouse affiliates, the Company would not have incurred additional expenses for the three months and nine months ended September 30, 2019. The Company would have incurred additional expenses of $27 million and $56 million under this arrangement for the three months and nine months ended September 30, 2018, respectively.

Broker-Dealer Transactions

The related party expense for the Company was commissions paid on the sale of variable products and passed through to the broker-dealer affiliate. The related party revenue for the Company was fee income passed through the broker-dealer affiliate from trusts and mutual funds whose shares serve as investment options of policyholders of the Company. Fee income received related to these transactions and recorded in other revenues was $52 million and $153 million for the three months and nine months ended September 30, 2019, respectively, $55 million and $166 million for the three months and nine months ended September 30, 2018, respectively. Commission expenses incurred related to these transactions and recorded in other expenses was $397 million and $603 million for the three months and nine months ended September 30, 2019, respectively, and $214 million and $540 million for the three months and nine months ended September 30, 2018, respectively. The Company also had related party fee income receivables of $17 million at both September 30, 2019 and December 31, 2018.