Related Party Transactions

12 Months Ended

Dec. 31, 2011

Note 11. Related Party Transactions

Affiliate Lending

Prior to the FCFI Transaction, SLFC made loans to AIG under demand note agreements as a short-term investment source for cash. Interest revenue on these notes receivable from AIG totaled $11.2 million for the eleven months ended November 30, 2010 and $6.6 million in 2009.

In April 2010, Springleaf Financial Funding Company, a wholly-owned subsidiary of SLFC, entered into and fully drew down a $3.0 billion, five-year term loan pursuant to a Credit Agreement among Springleaf Financial Funding Company, SLFC, and most of the consumer finance operating subsidiaries of SLFC (collectively, the Subsidiary Guarantors), and a syndicate of lenders, various agents, and Bank of America, N.A, as administrative agent. In May 2011, the $3.0 billion term loan was refinanced to increase total borrowing to $3.75 billion with a new six-year term, significantly improved advance rates, and lower borrowing costs. Any portion of the term loan that is repaid (whether at or prior to maturity) will permanently reduce the principal amount outstanding and may not be reborrowed. Affiliates of Fortress and affiliates of AIG owned or managed lending positions in the syndicate of lenders and had contributed approximately $105.5 million and $93.0 million, respectively, at December 31, 2011 and 2010.

Pension Plan

In January 2011, $216.0 million of plan assets were transferred from the AIG Retirement Plan to our tax-qualified defined benefit retirement plan (Retirement Plan). At December 31, 2011, $59.9 million of plan assets had not been transferred, but were included in our total plan assets. The remaining $59.9 million of plan assets will be transferred no later than May 1, 2012.

Reinsurance Agreements

Merit, a wholly-owned subsidiary of SLFC, enters into reinsurance agreements with subsidiaries of AIG, for reinsurance of various group annuity, credit life, and credit accident and health insurance where Merit reinsures the risk of loss. The reserves for this business fluctuate over time and in some instances are subject to recapture by the insurer. Reserves on the books of Merit for reinsurance agreements with subsidiaries of AIG totaled $49.7 million at December 31, 2011 and $51.2 million at December 31, 2010.

Derivatives

At December 31, 2011, all of our derivative financial instruments were with AIG Financial Products Corp. (AIGFP), a subsidiary of AIG. At December 31, 2010, all but one of our derivative financial instruments were with AIGFP. The derivative financial instrument that was not with AIGFP was terminated in March 2011 due to the sale of the related note receivable from AIG. See Note 16 for further information on our derivatives.

Subservicing and Refinance Agreements

Nationstar subservices the centralized real estate loans of MorEquity and two other subsidiaries of SLFC (collectively, the Owners), including certain securitized real estate loans. During 2011, the Owners paid Nationstar $9.9 million in fees for its subservicing and $6.6 million to facilitate the repayment of our centralized real estate loans through refinancings with other lenders.

Investment Management Agreement

Logan Circle Partners, L.P. (Logan Circle), a non-subsidiary affiliate of SLFI, provides investment management services for $300.0 million of higher yielding bonds purchased in fourth quarter 2011. At December 31, 2011, fees of $0.1 million were due for these investment management services.

Contribution of Subsidiaries to SLFC

Effective January 1, 2010, SLFI contributed two of its wholly-owned subsidiaries to SLFC. The contribution included $300.3 million of finance receivables. At December 31, 2009, these subsidiaries owed an aggregate total of $278.9 million to SLFI under intercompany notes. As part of the January 1, 2010 transaction, SLFC established direct notes to the subsidiaries in the same amount and as a result, SLFI then reduced its intercompany borrowings from SLFC. Because the transaction was between entities under common control, we recorded the transaction by transferring the assets, liability, and equity from SLFI to SLFC at the carrying value that existed as of January 1, 2010.

- Definition

The entire disclosure for related party transactions, including the nature of the relationship(s), a description of the transactions, the amount of the transactions, the effects of any change in the method of establishing the terms of the transaction from the previous period, stated interest rate, expiration date, terms and manner of settlement per the agreement with the related party, and amounts due to or from related parties. If the entity and one or more other entities are under common ownership or management control and this control affects the operating results or financial position, disclosure includes the nature of the control relationship even if there are no transactions between the entities. Disclosure may also include the aggregate amount of current and deferred tax expense for each statement of earnings presented where the entity is a member of a group that files a consolidated tax return, the amount of any tax related balances due to or from affiliates as of the date of each statement of financial position presented, the principal provisions of the method by which the consolidated amount of current and deferred tax expense is allocated to the members of the group and the nature and effect of any changes in that method. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.

+ References

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+ Details

SPRINGLEAF FINANCE INC 10-K