Insurance Subsidiary - Financial Information

12 Months Ended

Sep. 30, 2011

Insurance Subsidiary - Financial Information [Abstract]

Insurance Subsidiary - Financial Information


(21)	Insurance Subsidiary — Financial Information

The Company’s insurance subsidiaries file financial statements with state insurance regulatory authorities and the National Association of Insurance Commissioners (“NAIC”) that are prepared in accordance with Statutory Accounting Principles (“SAP”) prescribed or permitted by such authorities, which may vary materially from US GAAP. Prescribed SAP includes the Accounting Practices and Procedures Manual of the NAIC as well as state laws, regulations and administrative rules. Permitted SAP encompasses all accounting practices not so prescribed. The principal differences between statutory financial statements and financial statements prepared in accordance with US GAAP are that statutory financial statements do not reflect VOBA and DAC, some bond portfolios may be carried at amortized cost, assets and liabilities are presented net of reinsurance, contractholder liabilities are generally valued using more conservative assumptions and certain assets are non-admitted. Accordingly, statutory operating results and statutory capital and surplus may differ substantially from amounts reported in the US GAAP basis financial statements for comparable items. For example, in accordance with the US GAAP acquisition method of accounting, the amortized cost of FGL’s invested assets was adjusted to fair value as of the FGL Acquisition Date while it was not adjusted for statutory reporting. Thus, the net unrealized gains on a statutory basis were $697,825 (unaudited) as of September 30, 2011 compared to net unrealized gains of $418,210 on a US GAAP basis, as reported in Note 5.

The Company’s insurance subsidiaries’ statutory financial statements are based on a December 31 year end. The total statutory capital and surplus of FGL Insurance was $801,945 (unaudited) and $902,118 as of September 30, 2011 and December 31, 2010, respectively. The total adjusted statutory capital of FGL Insurance was $830,225 (unaudited) and $902,118 at September 30, 2011 and December 31, 2010, respectively. FGL Insurance had statutory net income of $22,094 (unaudited) and $245,849 for the nine months ended September 30, 2011 and the year ended December 31, 2010, respectively.

Life insurance companies are subject to certain Risk-Based Capital (“RBC”) requirements as specified by the NAIC. The RBC is used to evaluate the adequacy of capital and surplus maintained by an insurance company in relation to risks associated with: (i) asset risk, (ii) insurance risk, (iii) interest rate risk and (iv) business risk. FGL monitors the RBC of the Company’s insurance subsidiaries. As of September 30, 2011, each of FGL’s insurance subsidiaries has exceeded the minimum RBC requirements.

The Company’s insurance subsidiaries are restricted by state laws and regulations as to the amount of dividends they may pay to their parent without regulatory approval in any year, the purpose of which is to protect affected insurance policyholders, depositors or investors. Any dividends in excess of limits are deemed “extraordinary” and require approval. Based on statutory results as of December 31, 2010, in accordance with applicable dividend restrictions, FGL’s subsidiaries could pay “ordinary” dividends of $90,212 to FGL in 2011. On December 20, 2010, FGL Insurance paid a dividend to OMGUK (through FGL) in the amount of $59,000, with respect to its 2009 results. Based on its 2010 fiscal year results, FGL Insurance is able to declare an ordinary dividend up to $31,212 through December 20, 2011 (taking into account the December 20, 2010 dividend payment of $59,000). In addition, between December 21, 2011 and December 31, 2011, FGL Insurance may be able to declare an additional ordinary dividend in the amount of 2011 eligible dividends of $90,212, less any dividends paid in the previous twelve months. On September 29, 2011, FGL Insurance paid a dividend to FGL in the amount of $20,000, with respect to its 2011 results, thus reducing the amount of cumulative dividends payable to FGL without regulatory approval after September 30, 2011 to $11,212 through December 20, 2011 and to $70,212 thereafter through December 31, 2011.

- Definition

The entire disclosure for required supplementary insurance information giving segment detail in support of various balance sheet and income statement captions. The balance sheet information generally is presented as of the date of each audited balance sheet filed, and the income statement information generally is presented for each period for which an audited income statement is required to be filed. Supplementary insurance information table includes segment name; deferred policy acquisition costs; future policy benefits, losses, claims and loss expenses; unearned premiums; other policy claims and benefits payable; premium revenue; net investment income; benefits, claims, losses and settlement expenses; amortization of deferred policy acquisition costs; other operating expenses; and premiums written.

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