Segment Information

12 Months Ended

Dec. 31, 2014

Segment Information

(23) Segment Information

The Company has organized its principal operations into the following segments: Individual Annuities, Life, Questar, and Legacy products.

The Individual Annuities segment consists of fixed, fixed-indexed, and variable annuities that are provided through independent distribution channels made up of agents and registered representatives. Revenues for the Company’s fixed annuity products are primarily earned as net investment income on invested assets supporting fixed account balances, with profitability driven by the spread between net investment income earned and interest credited to account balances. Revenues for the Company’s variable annuity products are primarily earned as management and expense fees charged on underlying account balances.

The Life segment issues fixed-indexed universal life insurance products, as well as maintains term and whole life in-force blocks that the Company no longer sells or distributes. In 2013, the Company identified this segment as an emerging focus. The primary sources for revenue for this segment are premiums, fees, and charges that the Company receives to assume insurance related risk, in addition to earning a spread on net investment income on invested assets.

The Questar segment consists of two wholly owned subsidiaries, Questar Capital Corporation (Questar Capital) and Questar Asset Management, Inc. (QAM). Questar Capital is registered as a broker-dealer under the Securities Exchange Act of 1934 and operates as a retail broker-dealer. QAM provides portfolio management for clients and revenue is driven by fees received based on assets under management. Questar Capital distributes a full range of securities products, including mutual funds and variable life insurance and annuity contracts. Questar Capital also processes general securities transactions through a clearing arrangement with Pershing, LLC.

The Legacy business consists of closed blocks of LTC and Special Markets products. The Special Markets products include individual and group annuity and life products, including universal life and term life insurance. Although Legacy products are part of the consolidated results, the Company does not allocate additional resources to these areas other than to maintain the operational support to its current customers.

The Company does not maintain segregated investment portfolios for each segment. All interest and similar income, net and realized investment gains, net are allocated to the segments. Assets are only monitored at the individual company level, and as such, asset disclosures by segment are not included herein.

Income and expense related to assets backing policyholder reserves are allocated to the segments based on policyholder reserve levels. The results of the Individual Annuity, Life, and Legacy segments also reflect allocation of income and expense related to assets backing surplus. Income and expense related to assets backing surplus are allocated to the segments based on required capital levels for each segment and are excluded from EGP used in reserve and DAC model projections. Unconsolidated segment results are reconciled to consolidated statement of operations amounts in the tables below:

				Year ended December 31, 2014
	Individual									Legacy
	annuities			Life			Questar			products			Eliminations			Consolidated
Revenue:
Net premiums and policy fees	$	1,148,803			117,950			—			141,344			—			1,408,097
Interest and similar income, net		3,799,849			90,088			(17	)		67,378			—			3,957,298
Change in fair value of assets and liabilities		1,805,611			41,292			—			(4,914	)		—			1,841,989
Realized investment gains, net		74,926			1,579			1			1,256			—			77,762
Fee, commission, and other revenue		246,021			474			102,234			6,217			(43,126	)		311,820
Total revenue (loss)		7,075,210			251,383			102,218			211,281			(43,126	)		7,596,966
Benefits and expenses:
Net benefits and expenses		5,582,740			147,348			—			145,737			—			5,875,825
General and administrative and commission		1,964,597			162,973			111,967			17,628			(43,126	)		2,214,039
Change in deferred acquisition costs, net		(615,902	)		(72,109	)		—			14,925			—			(673,086	)
Total benefits and expenses		6,931,435			238,212			111,967			178,290			(43,126	)		7,416,778
Pretax income (loss)	$	143,775			13,171			(9,749	)		32,991			—			180,188

				Year ended December 31, 2013
	Individual									Legacy
	annuities			Life			Questar			products			Eliminations			Consolidated
Revenue:
Net premiums and policy fees	$	1,050,072			104,715			—			133,586			—			1,288,373
Interest and similar income, net		3,464,951			71,125			(16	)		56,057			—			3,592,117
Change in fair value of assets and liabilities		843,121			77,920			—			224			—			921,265
Realized investment gains, net		172,940			2,227			8			13,122			—			188,297
Fee, commission, and other revenue		239,692			583			93,485			6,207			(33,188	)		306,779
Total revenue (loss)		5,770,776			256,570			93,477			209,196			(33,188	)		6,296,831
Benefits and expenses:
Net benefits and expenses		3,378,366			180,923			—			144,730			—			3,704,019
General and administrative and commission		1,408,107			136,417			110,633			19,666			(33,188	)		1,641,635
Change in deferred acquisition costs, net		264,068			(71,632	)		—			14,263			—			206,699
Total benefits and expenses		5,050,541			245,708			110,633			178,659			(33,188	)		5,552,353
Pretax income (loss)	$	720,235			10,862			(17,156	)		30,537			—			744,478
				Year ended December 31, 2012
	Individual									Legacy
	annuities			Life			Questar			products			Eliminations			Consolidated
Revenue:
Net premiums and policy fees	$	821,192			93,795			—			134,170			—			1,049,157
Interest and similar income, net		3,514,953			67,509			(20	)		49,964			—			3,632,406
Change in fair value of assets and liabilities		(169,234	)		12,125			—			(170	)		—			(157,279	)
Realized investment gains, net		225,246			1,387			—			1,068			—			227,701
Fee, commission, and other revenue		189,120			295			72,917			7,594			(29,220	)		240,706
Total revenue (loss)		4,581,277			175,111			72,897			192,626			(29,220	)		4,992,691
Benefits and expenses:
Net benefits and expenses		2,656,502			92,872			—			140,829			—			2,890,203
General and administrative and commission		1,300,668			118,602			90,580			24,849			(29,220	)		1,505,479
Change in deferred acquisition costs, net		729,277			(58,368	)		—			13,441			—			684,350
Total benefits and expenses		4,686,447			153,106			90,580			179,119			(29,220	)		5,080,032
Pretax (loss) income	$	(105,170	)		22,005			(17,683	)		13,507			—			(87,341	)