Related Party Transactions

3 Months Ended

Mar. 31, 2020

11. Related Party Transactions

The Company has various existing arrangements with its Brighthouse affiliates and had previous arrangements with MetLife, Inc. (together with its subsidiaries and affiliates, “MetLife”) for services necessary to conduct its activities. Certain of the MetLife services have continued, however, MetLife ceased to be a related party in June 2018. See Note 9 for amounts related to continuing transition services. The Company also has related party debt and equity transactions (see Notes 7 and 8). 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”), an affiliate, included on the interim condensed consolidated statements of operations and comprehensive income (loss) was as follows:



	Three Months Ended March 31,
	2020			2019
	(In millions)
Premiums
Reinsurance assumed	$	—		$	—
Universal life and investment-type product policy fees
Reinsurance assumed	$	2		$	1
Other revenues
Reinsurance assumed	$	—		$	1
Policyholder benefits and claims
Reinsurance assumed	$	17		$	7
Other expenses
Reinsurance assumed	$	(5	)	$	(7	)

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



	March 31, 2020			December 31, 2019
	Assumed			Assumed
	(In millions)
Assets
Premiums, reinsurance and other receivables	$	25		$	26
Liabilities
Future policy benefits	$	105		$	97
Policyholder account balances	$	709		$	443
Other policy-related balances	$	8		$	11
Other liabilities	$	(10	)	$	(21	)

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 $709 million and $443 million at March 31, 2020 and December 31, 2019, respectively. Net derivative gains (losses) associated with the embedded derivatives were ($266) million and $6 million for the three months ended March 31, 2020 and 2019, respectively.

Shared Services and Overhead Allocations

Brighthouse Services, LLC, an affiliate, currently provides 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. Revenues received from an affiliate related to these agreements, recorded in universal life and investment-type product policy fees, were $53 million and $54 million for the three months ended March 31, 2020 and 2019, respectively. Costs incurred under these arrangements were $256 million and $289 million for the three months ended March 31, 2020 and 2019, respectively, and were recorded in other expenses.

Included in these costs are those incurred related to the establishment of services and infrastructure to replace those previously provided by MetLife. The Company incurred costs of $22 million and ($6) million for the three months ended March 31, 2020 and 2019, respectively. 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.

The Company had net receivables (payables) from/to affiliates, related to the items discussed above, of ($47) million and ($43) million at March 31, 2020 and December 31, 2019, 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 $50 million for both of the three months ended March 31, 2020 and 2019. Commission expenses incurred related to these transactions and recorded in other expenses was $204 million and $194 million for the three months ended March 31, 2020 and 2019, respectively. The Company also had related party fee income receivables of $15 million and $18 million at March 31, 2020 and December 31, 2019, respectively.