Related Party Transactions

9 Months Ended

Sep. 30, 2020

13. Related Party Transactions

Service Agreements

The Company has entered into various agreements with affiliates for services necessary to conduct its activities. Typical services provided under these agreements include personnel, policy administrative functions and distribution services. The bases for such charges are modified and adjusted by management when necessary or appropriate to reflect fairly and equitably the actual cost incurred by the Company and/or its affiliate. Expenses and fees incurred with affiliates related to these agreements, recorded in other expenses, were $577 million and $1.8 billion for the three months and nine months ended September 30, 2020, respectively, and $694 million and $2.1 billion for the three months and nine months ended September 30, 2019, respectively. Total revenues received from affiliates related to these agreements were $11 million and $30 million for the three months and nine months ended September 30, 2020, respectively, and $7 million and $21 million for the three months and nine months ended September 30, 2019, respectively.

The Company had net payables to affiliates, related to the items discussed above, of $136 million and $250 million at September 30, 2020 and December 31, 2019, respectively.

See Notes 5 and 10 for additional information on related party transactions.

Related Party Reinsurance Transactions

The Company has reinsurance agreements with certain of MetLife, Inc.’s subsidiaries, including MetLife Reinsurance Company of Charleston (“MRC”), MetLife Reinsurance Company of Vermont, and Metropolitan Tower Life Insurance Company, all of which are related parties.

Information regarding the significant effects of affiliated reinsurance 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,
	2020		2019		2020		2019
	(In millions)
Premiums
Reinsurance assumed	$	2	$	2	$	6	$	7
Reinsurance ceded	(26)		(27)		(84)		(86)
Net premiums	$	(24)	$	(25)	$	(78)	$	(79)
Universal life and investment-type product policy fees
Reinsurance assumed	$	—	$	—	$	—	$	—
Reinsurance ceded	(1)		(3)		(3)		(12)
Net universal life and investment-type product policy fees	$	(1)	$	(3)	$	(3)	$	(12)
Other revenues
Reinsurance assumed	$	(3)	$	(7)	$	(12)	$	(16)
Reinsurance ceded	143		136		394		402
Net other revenues	$	140	$	129	$	382	$	386
Policyholder benefits and claims
Reinsurance assumed	$	—	$	1	$	1	$	3
Reinsurance ceded	(45)		(60)		(114)		(118)
Net policyholder benefits and claims	$	(45)	$	(59)	$	(113)	$	(115)
Interest credited to policyholder account balances
Reinsurance assumed	$	7	$	7	$	21	$	22
Reinsurance ceded	(3)		(2)		(9)		(8)
Net interest credited to policyholder account balances	$	4	$	5	$	12	$	14
Other expenses
Reinsurance assumed	$	—	$	—	$	—	$	—
Reinsurance ceded	128		138		382		402
Net other expenses	$	128	$	138	$	382	$	402

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


	September 30, 2020				December 31, 2019
	Assumed		Ceded		Assumed		Ceded
	(In millions)
Assets
Premiums, reinsurance and other receivables	$	1	$	12,495	$	—	$	12,584
Deferred policy acquisition costs and value of business acquired	—		(149)		—		(160)
Total assets	$	1	$	12,346	$	—	$	12,424
Liabilities
Future policy benefits	$	51	$	(15)	$	55	$	(6)
Policyholder account balances	125		—		131		—
Other policy-related balances	1		5		1		9
Other liabilities	860		12,876		824		12,695
Total liabilities	$	1,037	$	12,866	$	1,011	$	12,698

The Company ceded two blocks of business to an affiliate on a 75% coinsurance with funds withheld basis. Certain contractual features of these agreements qualify as embedded derivatives, which are separately accounted for at estimated fair value on the Company’s consolidated balance sheets. The embedded derivatives related to the funds withheld associated with these reinsurance agreements are included within other liabilities and were $47 million and $21 million at September 30, 2020 and December 31, 2019, respectively. Net derivative gains (losses) associated with these embedded derivatives were $1 million and ($26) million for the three months and nine months ended September 30, 2020, respectively, and ($8) million and ($25) million for the three months and nine months ended September 30, 2019, respectively.

Certain contractual features of the closed block agreement with MRC create an embedded derivative, which is separately accounted for at estimated fair value on the Company’s consolidated balance sheets. The embedded derivative related to the funds withheld associated with this reinsurance agreement was included within other liabilities and was $1.3 billion and $996 million at September 30, 2020 and December 31, 2019, respectively. Net derivative gains (losses) associated with the embedded derivative were ($47) million and ($337) million for the three months and nine months ended September 30, 2020, respectively, and ($170) million and ($618) million for the three months and nine months ended September 30, 2019, respectively.