FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2016

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of June 30, 2016 (Successor Company):



	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	1,941,681	$	3	$	1,941,684
Commercial mortgage-backed securities	—		1,596,760		—		1,596,760
Other asset-backed securities	—		587,501		533,141		1,120,642
U.S. government-related securities	1,108,503		263,293		—		1,371,796
State, municipalities, and political subdivisions	—		1,737,499		—		1,737,499
Other government-related securities	—		18,680		—		18,680
Corporate securities	—		27,427,803		783,143		28,210,946
Preferred stock	45,155		19,272		—		64,427
Total fixed maturity securities - available-for-sale	1,153,658		33,592,489		1,316,287		36,062,434
Fixed maturity securities - trading
Residential mortgage-backed securities	—		271,994		—		271,994
Commercial mortgage-backed securities	—		157,176		—		157,176
Other asset-backed securities	—		123,076		151,964		275,040
U.S. government-related securities	41,639		4,868		—		46,507
State, municipalities, and political subdivisions	—		362,504		—		362,504
Other government-related securities	—		60,261		—		60,261
Corporate securities	—		1,595,943		16,587		1,612,530
Preferred stock	3,432		147		—		3,579
Total fixed maturity securities - trading	45,071		2,575,969		168,551		2,789,591
Total fixed maturity securities	1,198,729		36,168,458		1,484,838		38,852,025
Equity securities	669,924		35		69,750		739,709
Other long-term investments(1)	311,141		266,478		48,999		626,618
Short-term investments	279,453		6,748		—		286,201
Total investments	2,459,247		36,441,719		1,603,587		40,504,553
Cash	428,519		—		—		428,519
Other assets	19,171		—		—		19,171
Assets related to separate accounts
Variable annuity	12,891,214		—		—		12,891,214
Variable universal life	831,818		—		—		831,818
Total assets measured at fair value on a recurring basis	$	16,629,969	$	36,441,719	$	1,603,587	$	54,675,275
Liabilities:
Annuity account balances(2)	$	—	$	—	$	88,820	$	88,820
Other liabilities (1)	59,711		13,321		972,084		1,045,116
Total liabilities measured at fair value on a recurring basis	$	59,711	$	13,321	$	1,060,904	$	1,133,936

(1)Includes certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2015 (Successor Company):



	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	1,765,270	$	3	$	1,765,273
Commercial mortgage-backed securities	—		1,286,887		—		1,286,887
Other asset-backed securities	—		210,020		587,031		797,051
U.S. government-related securities	1,054,353		477,824		—		1,532,177
State, municipalities, and political subdivisions	—		1,603,600		—		1,603,600
Other government-related securities	—		17,740		—		17,740
Corporate securities	83		24,941,584		902,119		25,843,786
Preferred stock	43,073		19,614		—		62,687
Total fixed maturity securities - available-for-sale	1,097,509		30,322,539		1,489,153		32,909,201
Fixed maturity securities - trading
Residential mortgage-backed securities	—		286,658		—		286,658
Commercial mortgage-backed securities	—		146,743		—		146,743
Other asset-backed securities	—		122,511		152,912		275,423
U.S. government-related securities	233,592		4,755		—		238,347
State, municipalities, and political subdivisions	—		313,354		—		313,354
Other government-related securities	—		58,827		—		58,827
Corporate securities	—		1,322,276		18,225		1,340,501
Preferred stock	2,794		1,402		—		4,196
Total fixed maturity securities - trading	236,386		2,256,526		171,137		2,664,049
Total fixed maturity securities	1,333,895		32,579,065		1,660,290		35,573,250
Equity securities	656,437		13,063		69,763		739,263
Other long-term investments ⁽¹⁾	113,699		141,487		96,830		352,016
Short-term investments	261,947		6,771		—		268,718
Total investments	2,365,978		32,740,386		1,826,883		36,933,247
Cash	396,072		—		—		396,072
Other assets	19,099		—		—		19,099
Assets related to separate accounts
Variable annuity	12,829,188		—		—		12,829,188
Variable universal life	827,610		—		—		827,610
Total assets measured at fair value on a recurring basis	$	16,437,947	$	32,740,386	$	1,826,883	$	51,005,216
Liabilities:
Annuity account balances ⁽²⁾	$	—	$	—	$	92,512	$	92,512
Other liabilities ⁽¹⁾	40,067		3,932		585,556		629,555
Total liabilities measured at fair value on a recurring basis	$	40,067	$	3,932	$	678,068	$	722,067

(1)Includes certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

Schedule of the Valuation Method for Material Financial Instruments Included in Level 3, as well as the Unobservable Inputs Used in the Valuation of the Financial Instruments

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:



	Successor Company
	Fair Value As of December 31, 2015		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	587,031	Discounted cash flow	Liquidity premium	0.27% - 1.49% (0.42%)
				Paydown rate	10.20% - 14.72% (13.11%)
Corporate securities	875,810		Discounted cash flow	Spread over	0.10% - 19.00% (2.61%)
				treasury
Liabilities:
Embedded derivatives - GMWB(1)	$	181,612	Actuarial cash flow model	Mortality	1994 MGDB table with company
					experience
				Lapse	0.3% - 15%, depending on
					product/duration/funded
					status of guarantee
				Utilization	99%. 10% of policies have a one-time over-utilization of 400%
				Nonperformance risk	0.18% - 1.04%
Annuity account balances(2)	92,512		Actuarial cash flow model	Asset earned rate	4.53% - 5.67%
				Expenses	$81 per policy
				Withdrawal rate	2.20%
				Mortality	1994 MGDB table with company
					experience
				Lapse	2.2% - 33.0%, depending
					on duration/surrender
					charge period
				Return on assets	1.50% - 1.85% depending on
					surrender charge period
				Nonperformance risk	0.18% - 1.04%
Embedded derivative - FIA	100,329		Actuarial cash flow model	Expenses	$81.50 per policy
				Withdrawal rate	1.1% - 4.5% depending on
					duration and tax qualification
				Mortality	1994 MGDB table with company
					experience
				Lapse	2.5% - 40.0%, depending
					on duration/surrender
					charge period
				Nonperformance risk	0.18% - 1.04%
Embedded derivative - IUL	29,629		Actuarial cash flow model	Mortality	38% - 153% of 2015
					VBT Primary Tables
				Lapse	0.5% - 10.0%, depending
					on duration/distribution
					channel and smoking class
				Nonperformance risk	0.18% - 1.04%

(1)The fair value for the GMWB embedded derivative is presented as a net liability for the purposes of this chart. Excludes modified coinsurance arrangements.

(2)Represents liabilities related to fixed indexed annuities.

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:



	Successor Company
	Fair Value As of June 30, 2016		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	524,166	Discounted cash flow	Liquidity premium	0.24% - 1.14% (0.55%)
				Paydown rate	9.37% - 11.91% (10.16%)
Corporate securities	758,312		Discounted cash flow	Spread over Treasury	0.70% - 6.25% (2.45%)
Liabilities:
Embedded derivatives - GMWB(1)	$	518,871	Actuarial cash flow model	Mortality	1994 MGDB table with
					company experience
				Lapse	0.3% - 15%, depending on
					product/duration/funded
					status of guarantee
				Utilization	99%. 10% of policies have a
					one-time over-utilization of
					400%
				Nonperformance risk	0.22% - 1.20%
Annuity account balances(2)	88,820		Actuarial cash flow model	Asset earned rate	4.53% - 5.67%
				Expenses	$83 per policy
				Withdrawal rate	2.20%
				Mortality	1994 MGDB table with
					company experience
				Lapse	2.2% - 33.0%, depending
					on duration/surrender
					charge period
				Return on assets	1.50% - 1.85% depending on
					duration/surrender
					charge period
				Nonperformance risk	0.22% - 1.20%
Embedded derivative - FIA	119,997		Actuarial cash flow model	Expenses	$83 per policy
				Withdrawal rate	1.1% - 4.5% depending on
					duration and tax qualification
				Mortality	1994 MGDB table with
					company experience
				Lapse	2.5% - 40.0%, depending
					on duration/surrender
					charge period
				Nonperformance risk	0.22% - 1.20%
Embedded derivative - IUL	46,711		Actuarial cash flow model	Mortality	38% — 153% of 2015
					VBT Primary Tables
				Lapse	0.5% - 10.0%, depending on
					duration/distribution channel
					and smoking class
				Nonperformance risk	0.22% - 1.20%

(1)The fair value for the GMWB embedded derivative is presented as a net liability for the purposes of this chart. Excludes modified coinsurance arrangements.

(2)Represents liabilities related to fixed indexed annuities.

Schedule of Reconciliation of the Beginning and Ending Balances for Fair Value Measurements, for which the Company has Used Significant Unobservable Inputs (Level 3)

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the period of February 1, 2015 to June 30, 2015 (Successor Company), for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																							Total Gains (losses) included in
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance		Earnings related to Instruments still held at the Reporting Date
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—		$	—		$	3	$	—
Other asset-backed securities	603,646		—		165		(92		)	(12,891		)	—		(127		)	—		—		—			184			590,885		—
States, municipals, and political subdivisions	3,675		—		—		—			—			—		(3,675		)	—		—		—			—			—		—
Corporate securities	1,307,259		4,291		15,619		(687		)	(24,247		)	111,929		(254,935		)	—		—		(41,853		)	(5,945		)	1,111,431		—
Total fixed maturity securities - available-for-sale	1,914,583		4,291		15,784		(779		)	(37,138		)	111,929		(258,737		)	—		—		(41,853		)	(5,761		)	1,702,319		—
Fixed maturity securities - trading
Other asset-backed securities	169,473		3,949		—		(5,173		)	—			—		(7,876		)	—		—		—			221			160,594		(5,829		)
Corporate securities	25,130		174		—		(299		)	—			—		(5,584		)	—		—		—			(105		)	19,316		(1,180		)
Total fixed maturity securities - trading	194,603		4,123		—		(5,472		)	—			—		(13,460		)	—		—		—			116			179,910		(7,009		)
Total fixed maturity securities	2,109,186		8,414		15,784		(6,251		)	(37,138		)	111,929		(272,197		)	—		—		(41,853		)	(5,645		)	1,882,229		(7,009		)
Equity securities	73,044		—		—		—			—			—		(231		)	—		—		—			(3,093		)	69,720		—
Other long-term investments⁽¹⁾	93,274		76,342		—		(20		)	—			—		—			—		—		—			—			169,596		76,322
Total investments	2,275,504		84,756		15,784		(6,271		)	(37,138		)	111,929		(272,428		)	—		—		(41,853		)	(8,738		)	2,121,545		69,313
Total assets measured at fair value on a recurring basis	$	2,275,504	$	84,756	$	15,784	$	(6,271	)	$	(37,138	)	$	111,929	$	(272,428	)	$	—	$	—	$	(41,853	)	$	(8,738	)	$	2,121,545	$	69,313
Liabilities:
Annuity account balances⁽²⁾	$	98,279	$	—	$	—	$	(1,544	)	$	—		$	—	$	—		$	86	$	4,731	$	—		$	—		$	95,178	$	—
Other liabilities⁽¹⁾	742,130		358,811		—		(44,446		)	—			—		—			—		—		—			—			427,765		314,365
Total liabilities measured at fair value on a recurring basis	$	840,409	$	358,811	$	—	$	(45,990	)	$	—		$	—	$	—		$	86	$	4,731	$	—		$	—		$	522,943	$	314,365

(1)Represents certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended June 30, 2016 (Successor Company), for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																							Total Gains (losses) included in
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance		Earnings related to Instruments still held at the Reporting Date
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—		$	—		$	3	$	—
Other asset-backed securities	537,831		—		769		—			(8,350		)	9,597		(7,629		)	—		—		—			923			533,141		—
Corporate securities	833,737		925		16,189		—			(694		)	9,558		(57,123		)	—		—		(16,773		)	(2,676		)	783,143		—
Total fixed maturity securities - available-for-sale	1,371,571		925		16,958		—			(9,044		)	19,155		(64,752		)	—		—		(16,773		)	(1,753		)	1,316,287		—
Fixed maturity securities - trading
Other asset-backed securities	150,683		1,822		—		(8		)	—			—		(609		)	—		—		—			76			151,964		1,814
Corporate securities	5,677		24		—		—			—			10,908		1			—		—		—			(23		)	16,587		25
Total fixed maturity securities - trading	156,360		1,846		—		(8		)	—			10,908		(608		)	—		—		—			53			168,551		1,839
Total fixed maturity securities	1,527,931		2,771		16,958		(8		)	(9,044		)	30,063		(65,360		)	—		—		(16,773		)	(1,700		)	1,484,838		1,839
Equity securities	69,728		—		—		—			—			22		—			—		—		—			—			69,750		—
Other long-term investments⁽¹⁾	66,696		1,568		—		(19,265		)	—			—		—			—		—		—			—			48,999		(17,697		)
Total investments	1,664,355		4,339		16,958		(19,273		)	(9,044		)	30,085		(65,360		)	—		—		(16,773		)	(1,700		)	1,603,587		(15,858		)
Total assets measured at fair value on a recurring basis	$	1,664,355	$	4,339	$	16,958	$	(19,273	)	$	(9,044	)	$	30,085	$	(65,360	)	$	—	$	—	$	(16,773	)	$	(1,700	)	$	1,603,587	$	(15,858	)
Liabilities:
Annuity account balances⁽²⁾	$	90,123	$	—	$	—	$	(530	)	$	—		$	—	$	—		$	63	$	1,896	$	—		$	—		$	88,820	$	—
Other liabilities⁽¹⁾	801,781		15,217		—		(185,520		)	—			—		—			—		—		—			—			972,084		(170,303		)
Total liabilities measured at fair value on a recurring basis	$	891,904	$	15,217	$	—	$	(186,050	)	$	—		$	—	$	—		$	63	$	1,896	$	—		$	—		$	1,060,904	$	(170,303	)

(1)Represents certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for period of January 1, 2015 to January 31, 2015 (Predecessor Company), for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																						Total Gains (losses) included in
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3		Other			Ending Balance		Earnings related to Instruments still held at the Reporting Date
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—	$	—		$	3	$	—
Other asset-backed securities	563,961		—		—		—			(3,867		)	—		(32		)	—		—		43,205		379			603,646		—
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
States, municipals, and political subdivisions	3,675		—		—		—			—			—		—			—		—		—		—			3,675		—
Corporate securities	1,325,683		—		12,282		—			(23,029		)	—		(7,062		)	—		—		—		(615		)	1,307,259		—
Total fixed maturity securities - available-for-sale	1,893,322		—		12,282		—			(26,896		)	—		(7,094		)	—		—		43,205		(236		)	1,914,583		—
Fixed maturity securities - trading
Other asset-backed securities	169,461		586		—		(139		)	—			—		(472		)	—		—		—		37			169,473		447
Corporate securities	24,744		602		—		(196		)	—			—		(20		)	—		—		—		—			25,130		406
Total fixed maturity securities - trading	194,205		1,188		—		(335		)	—			—		(492		)	—		—		—		37			194,603		853
Total fixed maturity securities	2,087,527		1,188		12,282		(335		)	(26,896		)	—		(7,586		)	—		—		43,205		(199		)	2,109,186		853
Equity securities	73,054		—		—		—			(10		)	—		—			—		—		—		—			73,044		—
Other long-term investments(1)	67,894		753		—		(25,902		)	—			—		—			—		—		—		—			42,745		(25,149		)
Short-term investments	—		—		—		—			—			—		—			—		—		—		—			—		—
Total investments	2,228,475		1,941		12,282		(26,237		)	(26,906		)	—		(7,586		)	—		—		43,205		(199		)	2,224,975		(24,296		)
Total assets measured at fair value on a recurring basis	$	2,228,475	$	1,941	$	12,282	$	(26,237	)	$	(26,906	)	$	—	$	(7,586	)	$	—	$	—	$	43,205	$	(199	)	$	2,224,975	$	(24,296	)
Liabilities:
Annuity account balances(2)	$	97,825	$	—	$	—	$	(536	)	$	—		$	—	$	—		$	7	$	419	$	—	$	—		$	97,949	$	—
Other liabilities(1)	754,852		61		—		(253,773		)	—			—		—			—		—		—		—			1,008,564		(253,712		)
Total liabilities measured at fair value on a recurring basis	$	852,677	$	61	$	—	$	(254,309	)	$	—		$	—	$	—		$	7	$	419	$	—	$	—		$	1,106,513	$	(253,712	)

(1)Represents certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

Schedule of the Carrying Amounts and Estimated Fair Value of the Company's Financial Instruments

The carrying amounts and estimated fair values of the Company’s financial instruments as of the periods shown below are as follows:



		Successor Company
		As of June 30, 2016				As of December 31, 2015
	Fair Value Level	Carrying Amounts		Fair Values		Carrying Amounts		Fair Values
		(Dollars In Thousands)
Assets:
Mortgage loans on real estate	3	$	5,748,675	$	5,735,650	$	5,662,812	$	5,529,803
Policy loans	3	1,670,218		1,670,218		1,699,508		1,699,508
Fixed maturities, held-to-maturity ⁽¹⁾	3	2,779,280		2,853,788		593,314		515,000
Liabilities:
Stable value product account balances	3	$	2,838,674	$	2,855,064	$	2,131,822	$	2,124,712
Annuity account balances	3	10,678,701		10,221,680		10,719,862		10,274,571
Debt:
Bank borrowings	3	$	360,000	$	360,000	$	485,000	$	485,000
Senior Notes	2	1,037,236		996,213		1,103,806		1,020,025
Subordinated debt securities	2	445,023		466,385		448,763		457,275
Non-recourse funding obligations ⁽²⁾	3	2,863,409		2,938,559		685,684		614,380

Except as noted below, fair values were estimated using quoted market prices.

(1) Securities purchased from unconsolidated affiliates, Red Mountain LLC and Steel City LLC.

(2) Of this carrying amount, $2.8 billion, fair value of $2.8 billion, as of June 30, 2016 (Successor Company) and $500.0 million, fair value of $495.5 million, as of December 31, 2015 (Successor Company), relates to non-recourse funding obligations issued by Golden Gate and Golden Gate V.