The Successor Company has transactions and relationships with affiliates. Although we seek to ensure that these transactions and relationships are fair and reasonable, it is possible that the terms of these transactions are not the same as those that would result from transactions among unrelated parties.

The majority of the Successor Company’s expenses are allocations or charges from FGH. These expenses primarily relate to general and administrative expenses which include accounting, actuarial, risk management, and data processing services. FGH also provides the Company with personnel and certain other services. The allocation of costs for other services are based on estimated level of usage, transactions or time incurred in providing the respective services. During the three months ended June 30, 2022, FLIAC was allocated $7 million of costs for these services.

Effective April 1, 2022 FLIAC entered into an intercompany liquidity agreement with FGH that allows the Successor Company to borrow funds of up to $50 million to meet its short-term liquidity and other capital needs. As of June 30, 2022, there were no borrowings under the agreement.

As of April 1, 2022, FLIAC became affiliated with The Carlyle Group Inc. (“Carlyle”), whereby Carlyle, through an affiliated investment fund has a 71.5% equity investment in its parent, FGH. In addition, FLIAC entered into an investment management and consulting services agreement with an affiliate of Carlyle. During the quarter ended June 30, 2022, FLIAC incurred $10 million of costs from this Carlyle affiliate for services provided to the Successor Company in connection with FGH's purchase of the Company from Prudential Financial.

Certain of Carlyle's affiliates also provide investment management services for FLIAC pursuant to investment management agreements. Investment management fees are charged based on a percentage of assets under management. As of June 30, 2022, assets under management had a market value of $286 million and were comprised primarily of private credit fixed income assets. FLIAC recognized $1 million of net investment income on such assets during the three months ended June 30, 2022.

The Predecessor Company had extensive transactions and relationships with Prudential Insurance and other former affiliates. Although the Predecessor Company sought to ensure that these transactions and relationships were fair and reasonable, it is possible that the terms of these transactions were not the same as those that would result from transactions among unrelated parties.

The Predecessor Company’s general and administrative expenses were charged using allocation methodologies based on business production processes. The Predecessor Company operated under service and lease agreements whereby services of officers and employees, supplies, use of equipment and office space were provided by Prudential Insurance. The Predecessor Company reviewed its allocation methodology periodically and made adjustments accordingly. General and administrative expenses included allocations of stock compensation expenses related to a stock-based awards program and a deferred compensation program issued by Prudential Financial. The expense charged to the Predecessor Company for the stock-based awards program was $0.3 million for both the three and six months ended June 30, 2021. The expense charged to the Predecessor Company for the deferred compensation program was $0.5 million and $1.2 million for the three and six months ended June 30, 2021, respectively.

The Predecessor Company was charged for its share of employee benefit expenses. These expenses included costs for funded and non-funded, non-contributory defined benefit pension plans. Some of these benefits were based on final earnings and length of service while others were based on an account balance, which takes into consideration age, service and earnings during a career. The Predecessor Company’s share of net expense for the pension plans was $0.0 million for the three months ended March 31, 2022 and $2.4 million and $4.7 million for the three and six months ended June 30, 2021, respectively.

The Predecessor Company was also charged for its share of the costs associated with welfare plans issued by Prudential Insurance. These expenses included costs related to medical, dental, life insurance and disability. The Predecessor Company's share of net expense for the welfare plans was $0.0 million for the three months ended March 31, 2022 and $0.9 million and $2.0 million for the three and six months ended June 30, 2021, respectively.

Prudential Insurance sponsors voluntary savings plans for its employee 401(k) plans. The plans provided for salary reduction contributions by employees and matching contributions by the Predecessor Company of up to 4% of annual salary. The Predecessor Company's expense for its share of the voluntary savings plan was $0.0 million for the three months ended March 31, 2022 and $0.9 million and $1.8 million for the three and six months ended June 30, 2021, respectively.

The Predecessor Company paid commissions and certain other fees to Prudential Annuities Distributors, Inc ("PAD"), an affiliate of the Predecessor Company, in consideration for PAD’s marketing and underwriting of the Company’s products. Commissions and fees were paid by PAD to broker-dealers who sold the Predecessor Company’s products. Commissions and fees paid by the Predecessor Company to PAD were $29 million for the three months ended March 31, 2022 and $117 million and $236 million for the three and six months ended June 30, 2021, respectively.

The Predecessor Company was charged for its share of corporate expenses incurred by Prudential Financial to benefit its businesses, such as advertising, executive oversight, external affairs and philanthropic activity. The Predecessor Company’s share of corporate expenses was $9 million for three months ended March 31, 2022 and $6 million and $13 million for the three and six months ended June 30, 2021, respectively.

The Predecessor Company paid investments management expenses in accordance with an agreement with PGIM, Inc. (“PGIM”), an affiliate of the Predecessor Company and investment manager to certain Predecessor Company general account and separate account assets. Investment management expenses paid to PGIM related to this agreement were $4 million for the three months ended March 31, 2022 and $6 million and $12 million for the three and six months ended June 30, 2021. These expenses were recorded as “Net investment income” in the Company's Unaudited Interim Statements of Operations and Comprehensive Income (Loss).

In its ordinary course of business, the Predecessor Company entered into OTC derivative contracts with an affiliate, PGF. For these OTC derivative contracts, PGF had a substantially equal and offsetting position with an external counterparty. See Note 6 for additional information.

The Predecessor Company previously made investments in joint ventures with certain subsidiaries of Prudential Financial. "Other invested assets" included $0 million at March 31, 2022 and December 31, 2021, respectively. "Net investment income" related to these ventures included no gain or loss the three months ended March 31, 2022 and gains of $14 million and $18 million for the three and six months ended June 30, 2021, respectively.

The Predecessor Company had a revenue sharing agreement with AST Investment Services, Inc. (“ASTISI”) and PGIM Investments LLC (“PGIM Investments”) whereby the Predecessor Company received fee income based on policyholders' separate account balances invested in the Advanced Series Trust and The Prudential Series Fund. Income received from ASTISI and PGIM Investments related to this agreement was $22 million for the three months ended March 31, 2022 and $24 million and $47 million for the three and six months ended June 30, 2021, respectively. These revenues were recorded as “Asset management and service fees” in the Company's Unaudited Interim Statements of Operations and Comprehensive Income (Loss).

The Predecessor Company participated in affiliated asset trades with former parent and sister companies. Book and market value differences for trades with a parent and sister were recognized within "Realized investment gains (losses), net". The table below shows affiliated asset trades for the three months ended March 31, 2022 and for the year ended December 31, 2021.


Affiliate	Date	Transaction	Security Type	Fair Value		Book Value		Realized Investment Gain (Loss)
				(in millions)
Prudential Insurance	April 2021	Purchase	Fixed Maturities	$	201	$	201	$	—
Prudential Insurance	April 2021	Purchase	Commercial Mortgage Loan	$	177	$	177	$	—
Vantage Casualty Insurance Co.	June 2021	Purchase	Fixed Maturities	$	15	$	15	$	—
Prudential Insurance	June 2021	Sale	Equities	$	3	$	3	$	—
Pruco Life	June 2021	Sale	Equities	$	40	$	38	$	2
Passaic Fund LLC	June 2021	Transfer Out	Other Invested Assets	$	12	$	12	$	—
Passaic Fund LLC	July 2021	Transfer Out	Other Invested Assets	$	196	$	196	$	—
Prudential Insurance	September 2021	Purchase	Fixed Maturities	$	2	$	2	$	—
Prudential Insurance	September 2021	Sale	Fixed Maturities	$	12	$	11	$	1
Prudential Retirement Insurance and Annuity Company	September 2021	Sale	Fixed Maturities	$	26	$	24	$	2
Prudential Retirement Insurance and Annuity Company	September 2021	Purchase	Fixed Maturities	$	35	$	35	$	—
Prudential Insurance	September 2021	Purchase	Derivatives	$	—	$	—	$	—
Prudential Retirement Insurance and Annuity Company	September 2021	Purchase	Derivatives	$	(1)	$	(1)	$	—
Prudential Financial	October 2021	Sale	Equities	$	10	$	10	$	—
Pruco Life	November 2021	Sale	Derivatives	$	1	$	—	$	1


Affiliate	Date	Transaction	Security Type	Fair Value		Book Value		Realized Investment Gain (Loss)
				(in millions)
Prudential Arizona Reinsurance	November 2021	Purchase	Fixed Maturities	$	55	$	55	$	—
Pruco Life	December 2021	Transfer Out	Fixed Maturities	$	2,038	$	1,934	$	104
Pruco Life	December 2021	Sale	Fixed Maturities	$	57	$	57	$	—
Prudential Financial	December 2021	Dividend	Fixed Maturities	$	167	$	167	$	—
Prudential Financial	December 2021	Sale	Fixed Maturities	$	144	$	138	$	6
Prudential Financial	December 2021	Purchase	Commercial Mortgage Loan	$	185	$	185	$	—
Pruco Life	December 2021	Transfer Out	Commercial Mortgage Loan	$	538	$	517	$	21
Pruco Life	December 2021	Sale	Derivatives	$	8	$	2	$	6
Pruco Life	January 2022	Sale	Fixed Maturities	$	4	$	5	$	(1)
Prudential Financial	January 2022	Sale	Commercial Mortgage Loan	$	29	$	30	$	—
Pruco Life	January 2022	Sale	Derivatives	$	—	$	—	$	—
Pruco Life	February 2022	Sale	Fixed Maturities	$	129	$	138	$	(10)
Prudential Financial	March 2022	Sale	Fixed Maturities	$	33	$	33	$	(1)

The total interest expense incurred by the Predecessor Company related to affiliated loans and cash collateral with PGF was $0 million for the three months ended March 31, 2022 and $4 million and $8 million for the three and six months ended 2021, respectively.

Effective April 1, 2016, the Predecessor Company reinsured the variable annuity base contracts, along with the living benefit guarantees, from Pruco Life Insurance Company ("Pruco Life"), excluding the Pruco Life Insurance Company of New Jersey ("PLNJ") business which was reinsured to The Prudential Insurance Company of America (“Prudential Insurance”), in each case under a coinsurance and modified coinsurance agreement. This reinsurance agreement covers new and in force business and excludes business reinsured externally. As of December 31, 2020, Pruco Life discontinued the sales of traditional variable annuities with guaranteed living benefit riders. The discontinuation has no impact on the reinsurance agreement between Pruco Life and the Company.

Effective July 1, 2021, Pruco Life recaptured the risks related to its business, as discussed above, that had previously been reinsured to the Company from April 1, 2016 through June 30, 2021. The product risks related to the previously reinsured business that were being managed in the Predecessor Company, were transferred to Pruco Life. In addition, the living benefit hedging program related to the previously reinsured living benefit riders will be managed within Pruco Life after the recapture. This transaction is referred to as the "2021 Variable Annuities Recapture". See Note 1 to the Financial Statements included in the Predecessor Company's Annual Report on Form 10-K for the year ended December 31, 2021, for more details.

Effective December 1, 2021, the Company entered into a reinsurance agreement with Pruco Life under which the Company reinsured certain of its variable and fixed indexed annuities and fixed annuities with a guaranteed lifetime withdrawal income feature to Pruco Life.

Effective December 31, 2015, the Company surrendered its New York license and reinsured the majority of its New York business, both the living benefit guarantees and base contracts, to Prudential Insurance. Reinsurance ceded arrangements do not discharge the Company as the primary insurer. Ceded balances would represent a liability of the Company in the event the reinsurers were unable to meet their obligations to the Company under the terms of the reinsurance agreements. The Company believes a material reinsurance liability resulting from such inability of reinsurers to meet their obligations is unlikely.


	Predecessor Company
	Three Months Ended March 31		Three Months Ended June 30		Six Months Ended June 30
	2022		2021
	(in millions)
Premiums:
Direct	$	9	$	6	$	13
Assumed	—		6		16
Ceded	(1)		(1)		(2)
Net premiums	8		11		27
Policy charges and fee income:
Direct	102		109		216
Assumed	—		412		819
Ceded(1)	(5)		(7)		(13)
Net policy charges and fee income	97		514		1,022
Asset management and service fees:
Direct	22		25		48
Assumed	—		84		165
Ceded	(2)		(2)		(4)
Net asset management and service fees	20		107		209
Realized investment gains (losses), net:
Direct	312		493		(1,613)
Assumed	—		(1,356)		4,022
Ceded	169		26		(117)
Realized investment gains (losses), net	481		(837)		2,292
Policyholders' benefits (including change in reserves):
Direct	31		7		24
Assumed	—		(10)		3
Ceded(2)	(5)		(1)		(1)
Net policyholders' benefits (including change in reserves)	26		(4)		26
Interest credited to policyholders’ account balances:
Direct	91		15		96
Assumed	—		6		77
Ceded	(6)		—		(4)
Net interest credited to policyholders’ account balances	85		21		169
Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization	(41)		175		514

(1)Includes $0.0 million, $(0.1) million and $(0.4) million of unaffiliated activity (with respect to the Predecessor Company) for the three months ended March 31, 2022 the three months ended June 30, 2021 and the six months ended June 30, 2021, respectively.

(2) Includes $0.0 million and $(0.3) million, and $0.4 million of unaffiliated activity (with respect to the Predecessor Company) for the three months ended March 31, 2022, the three months ended June 30, 2021, and the six months ended June 30, 2021, respectively.