RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2023

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Successor Company

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.

Expense Charges and Allocations

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 and nine months ended September 30, 2023, FLIAC was allocated $8 million and $25 million of costs for these services. During the three and six months ended September 30, 2022, FLIAC was allocated $8 million and $15 million, respectively, of costs for these services.

Intercompany Liquidity Agreement

FLIAC entered into an intercompany liquidity agreement with FGH that allows the Successor Company to borrow funds of up to $300 million to meet its short-term liquidity and other capital needs. During the three months ended September 30, 2023, the Company borrowed and repaid $82 million of funds under the agreement. In October 2023, the Successor Company borrowed an additional $75 million of funds under the agreement, all of which was also repaid in October 2023. Including the activity in October 2023, the Company has borrowed a total of $357 million of funds under the agreement during 2023, all of which has been repaid with interest.

Affiliated Investment and Advisory Activities

As of April 1, 2022, FLIAC became affiliated with The Carlyle Group Inc. (“Carlyle”), whereby Carlyle, through an affiliated investment fund has a 71.3% 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 three months 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 September 30, 2023 and December 31, 2022, assets under management had a market value of $773 million and $732 million, respectively, and were comprised primarily of private credit fixed income assets and limited partnership interests or investments in limited partnerships. FLIAC recognized $12 million and $23 million of investment income on such assets during the three and nine months ended September 30, 2023, respectively. FLIAC recognized $2 million and $3 million of investment income on such assets during the three and six months ended September 30, 2022, respectively.

In connection with the investment management agreements, as of September 30, 2023, FLIAC has unfunded commitments of $162 million to fund private investments where one or more Carlyle entities serves as general partner to the fund.

Affiliated Asset Transfers

The Successor Company may participate in affiliated asset transfers with its parent and affiliates. Book and market value differences for trades with its parent and affiliates are recognized within "Investment gains (losses), net". The table below shows affiliated asset trades for the nine months ended September 30, 2023.

Affiliate	Date	Transaction	Security Type	Fair Value		Book Value		Investment Gains (Losses), Net
				(in millions)
Fortitude Re Investments, LLC	May 2023	Sale	Limited Partnership	$	12	$	12	$	—
Fortitude Re Investments, LLC	May 2023	Sale	Limited Partnership	7		7		—

Distribution to Parent

During the three months ended March 31, 2023, the Company established a $45 million distribution payable to its parent company, FGH, as a result of updated information regarding certain tax assets related to the acquisition of FLIAC, which resulted in an offsetting reduction to "Additional paid-in capital". The distribution payable was settled during the second quarter of 2023.

Predecessor Company

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.

Expense Charges and Allocations

The Predecessor Company’s expenses were allocations or charges from Prudential Insurance or other affiliates. These expenses were grouped into general and administrative expenses and agency distribution expenses.

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.

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.

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.

Affiliated Investment Management Expenses

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. These expenses were recorded as “Net investment income” in the Company's Unaudited Consolidated Interim Statements of Operations and Comprehensive Income (Loss).

Affiliated Asset Management and Service Fees

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. These revenues were recorded as “Asset management and service fees” in the Company's Unaudited Consolidated Interim Statements of Operations and Comprehensive Income (Loss).

Derivative Trades

In its ordinary course of business, the Predecessor Company entered into OTC derivative contracts with an affiliate, Provident Global Funding, LLC (“PGF”). For these OTC derivative contracts, PGF had a substantially equal and offsetting position with an external counterparty. See Note 5 for additional information.

Affiliated Asset Transfers

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 "Investment gains (losses), net". The table below shows affiliated asset trades for the three months ended March 31, 2022.

Affiliate	Date	Transaction	Security Type	Fair Value		Book Value		Realized Investment Gain (Loss)
				(in millions)
Pruco Life	January 2022	Sale	Fixed Maturity Securities	4		5		(1)
Prudential Financial	January 2022	Sale	Commercial Mortgage Loan	29		30		(1)
Pruco Life	January 2022	Sale	Derivatives	—		—		—
Pruco Life	February 2022	Sale	Fixed Maturity Securities	129		138		(9)
Prudential Financial	March 2022	Sale	Fixed Maturity Securities	$	33	$	33	$	—

Contributed Capital and Dividends

Through March 31, 2022, the Predecessor Company did not receive any capital contributions.

In March 2022, the Predecessor Company had a return of capital in the amount of $306 million to PAI.

Reinsurance with Affiliates of Predecessor Company

Reinsurance amounts, included in the Predecessor Company’s Unaudited Interim Statements of Operations and Comprehensive Income (Loss), were as follows:

	Three Months Ended March 31
	2022
	(in millions)
Premiums:
Direct	$	9
Ceded	(1)
Net premiums	8
Policy charges and fee income:
Direct	102
Ceded	(5)
Net policy charges and fee income	97
Asset management and service fees:
Direct	22
Ceded	(2)
Net asset management and service fees	20
Realized investment gains (losses), net:
Direct	312
Ceded	169
Realized investment gains (losses), net	481
Policyholders' benefits (including change in reserves):
Direct	31
Ceded	(5)
Net policyholders' benefits (including change in reserves)	26
Interest credited to policyholders’ account balances:
Direct	91
Ceded	(6)
Net interest credited to policyholders’ account balances	85
Reinsurance expense allowances and general and administrative expenses, net of capitalization and amortization	(41)