19.OPERATING SEGMENTS

The Company has several operating segments, each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. The Company periodically evaluates its operating segments, as prescribed in the ASC Segment Reporting Topic, and makes adjustments to its segment reporting as needed. There were no changes to the Company’s operating segments made or required to be made as a result of the Merger on February 1, 2015. A brief description of each segment follows.

The Life Marketing segment markets fixed universal life (“UL”), indexed universal life, variable universal life (“VUL”), bank-owned life insurance (“BOLI”), and level premium term insurance (“traditional”) products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, and independent marketing organizations.

The Acquisitions segment focuses on acquiring, converting, and servicing policies acquired from other companies. The segment’s primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the segment’s acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. Policies acquired through the Acquisitions segment are typically blocks of business where no new policies are being marketed. Therefore earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage unless new acquisitions are made.

The Annuities segment markets fixed and VA products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.

The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. The segment also issues funding agreements to the FHLB, and markets guaranteed investment contracts (“GICs”) to 401(k) and other qualified retirement savings plans. The Company recently terminated its funding agreement-backed notes program registered with the United States Securities and Exchange Commission (the “SEC”) and, on October 2, 2015, established an unregistered funding agreement-backed notes program. No offers, sales or issuances under this program have been made to date.

The Asset Protection segment markets extended service contracts and credit life and disability insurance to protect consumers’ investments in automobiles, watercraft, and recreational vehicles. In addition, the segment markets a guaranteed asset protection (“GAP”) product. GAP coverage covers the difference between the loan pay-off amount and an asset’s actual cash value in the case of a total loss.

The Corporate and Other segment primarily consists of net investment income not assigned to the segments above (including the impact of carrying liquidity) and expenses not attributable to the segments above (including interest on certain corporate debt). This segment includes earnings from several non-strategic or runoff lines of business, various investment-related transactions, the operations of several small subsidiaries, and the repurchase of non-recourse funding obligations.

The Company uses the same accounting policies and procedures to measure segment operating income (loss) and assets as it uses to measure consolidated net income and assets. Segment operating income (loss) is income before income tax, excluding realized gains and losses on investments and derivatives net of the amortization related to DAC, VOBA, and benefits and settlement expenses. Operating earnings exclude changes in the GMWB embedded derivatives (excluding the portion attributed to economic cost), actual GMWB incurred claims and the related amortization of DAC/VOBA attributed to each of these items.

Segment operating income (loss) represents the basis on which the performance of the Company’s business is internally assessed by management. Premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC/VOBA are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Realized investment gains (losses) and other operating expenses are allocated to the segments in a manner that most appropriately reflects the operations of that segment. Investments and other assets are allocated based on statutory policy liabilities net of associated statutory policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable. The goodwill as of September 30, 2015 (Successor Company) was the result of the Dai-ichi Merger. The purchase price was allocated to the segments in proportion to the segment’s respective fair value. The allocated purchase price in excess of the fair value of assets and liabilities of each segment resulted in the establishment of that segment’s goodwill as of the date of the Merger.

There were no significant intersegment transactions during the three months ended September 30, 2015 (Successor Company), the period of February 1, 2015 to September 30, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the three and nine months ended September 30, 2014 (Predecessor Company).

The following tables summarize financial information for the Company’s segments (Predecessor and Successor periods are not comparable):

	Successor						Predecessor
	Company						Company
	For The Three			February 1, 2015			January 1, 2015			For The Three			For The Nine
	Months Ended			to			to			Months Ended			Months Ended
	September 30, 2015			September 30, 2015			January 31, 2015			September 30, 2014			September 30, 2014
	(Dollars In Thousands)						(Dollars In Thousands)
Revenues
Life Marketing	$	388,768		$	1,040,066		$	145,595		$	400,706		$	1,192,504
Acquisitions	352,141			974,915			139,761			408,522			1,273,714
Annuities	92,773			341,227			7,884			182,239			482,313
Stable Value Products	17,065			44,063			8,181			38,713			93,641
Asset Protection	68,949			182,656			21,953			70,584			207,837
Corporate and Other	40,897			118,754			17,535			47,322			143,978

Total revenues	$	960,593		$	2,701,681		$	340,909		$	1,148,086		$	3,393,987

Segment Operating Income (Loss)
Life Marketing	$	19,535		$	29,611		$	(1,618	)	$	32,820		$	82,654
Acquisitions	59,016			132,962			20,134			72,929			198,807
Annuities	46,003			133,377			13,164			49,335			156,236
Stable Value Products	12,785			28,249			4,529			19,506			54,190
Asset Protection	5,322			15,266			2,420			8,530			23,433
Corporate and Other	(8,854		)	(16,850		)	(10,144		)	(15,110		)	(42,520		)

Total segment operating income	133,807			322,615			28,485			168,010			472,800
Realized investment (losses) gains - investments(1)	8,625			(150,014		)	89,815			(4,836		)	138,617
Realized investment (losses) gains - derivatives	(55,172		)	104,396			(117,118		)	21,709			(139,119		)
Income tax (expense) benefit	(26,853		)	(89,889		)	327			(65,974		)	(161,773		)

Net income	$	60,407		$	187,108		$	1,509		$	118,909		$	310,525


Investment gains (losses)(2)	$	(4,716	)	$	(147,843	)	$	80,672		$	(1,160	)	$	148,051
Less: amortization related to DAC/VOBA and benefits and settlement expenses	(13,341		)	2,171			(9,143		)	3,676			9,434

Realized investment gains (losses) - investments	$	8,625		$	(150,014	)	$	89,815		$	(4,836	)	$	138,617


Derivative gains (losses)(3)	$	(74,590	)	$	53,654		$	(123,274	)	$	3,781		$	(191,495	)
Less: VA GMWB economic cost	(19,418		)	(50,742		)	(6,156		)	(17,928		)	(52,376		)

Realized investment gains (losses) - derivatives	$	(55,172	)	$	104,396		$	(117,118	)	$	21,709		$	(139,119	)

(1) Includes credit related other-than-temporary impairments of $10.1 million and $15.8 million for the three months ended September 30, 2015 (Successor Company) and for the period of February 1, 2015 to September 30, 2015 (Successor Company), respectively. Includes $0.5 million, $2.3 million, and $5.4 million of credit related other-than-temporary impairments for the period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the three and nine months ended September 30, 2014 (Predecessor Company), respectively.

(2)Includes realized investment gains (losses) before related amortization.

(3)Includes realized gains (losses) on derivatives before the VA GMWB economic cost.

	Operating Segment Assets
	As of September 30, 2015 (Successor Company)
	(Dollars In Thousands)
	Life							Stable Value
	Marketing		Acquisitions			Annuities		Products
Investments and other assets	$	13,223,607	$	20,014,577		$	19,776,706	$	1,790,724
Deferred policy acquisition costs and value of business acquired	1,078,408		(182,038		)	531,735		—
Other intangibles	324,362		40,297			200,112		9,556
Goodwill	203,543		14,524			336,677		113,813

Total assets	$	14,829,920	$	19,887,360		$	20,845,230	$	1,914,093

	Asset		Corporate				Total
	Protection		and Other		Adjustments		Consolidated
Investments and other assets	$	905,660	$	10,050,619	$	10,719	$	65,772,612
Deferred policy acquisition costs and value of business acquired	38,237		—		—		1,466,342
Other intangibles	81,132		—		—		655,459
Goodwill	67,155		—		—		735,712

Total assets	$	1,092,184	$	10,050,619	$	10,719	$	68,630,125

	Operating Segment Assets
	As of December 31, 2014 (Predecessor Company)
	(Dollars In Thousands)
	Life						Stable Value
	Marketing		Acquisitions		Annuities		Products
Investments and other assets	$	13,858,491	$	19,858,284	$	20,783,373	$	1,958,867
Deferred policy acquisition costs and value of business acquired	1,973,156		600,482		684,574		621
Goodwill	10,192		29,419		—		—

Total assets	$	15,841,839	$	20,488,185	$	21,467,947	$	1,959,488

	Asset		Corporate				Total
	Protection		and Other		Adjustments		Consolidated
Investments and other assets	$	927,202	$	9,682,362	$	14,792	$	67,083,371
Deferred policy acquisition costs and value of business acquired	35,418		319		—		3,294,570
Goodwill	62,671		83		—		102,365
Total assets	$	1,025,291	$	9,682,764	$	14,792	$	70,480,306