2. Restatement of Previously Issued Condensed Consolidated Financial Statements

The Company determined that its unaudited condensed consolidated financial statements for the three and six months ended June 30, 2013 and 2012 and as of June 30, 2013 contained misstatements with respect to the accounting for forward settling to be announced (“TBA”) security transactions, plan sponsor expense accounts, and deferred acquisition costs (“DAC”).

As a result, the Company has restated the Company’s previously reported unaudited condensed consolidated financial statements for the three and six months ended June 30, 2013 and 2012 and as of June 30, 2013 to reflect the following:

· Management has determined that certain of its forward settling TBA security transactions should be accounted for as derivative instruments as the Company did not regularly accept delivery of such securities when issued. The Company has previously accounted for the forward settling TBA security transactions as secured borrowings. As a result, the Company has restated its condensed consolidated balance sheet to reflect the value at period end as the value of the forward derivative rather than the acquisition cost of the security as previously reported. The Company has also restated its condensed consolidated statements of income to record the mark-to-market adjustment through net income rather than through other comprehensive income. The Company also restated its condensed consolidated statements of cash flows to conform to the changes made in the condensed consolidated balance sheets and condensed consolidated statements of income. As a result of this misstatement, stockholder’s equity was overstated by $43,986 as of June 30, 2013. Net income was overstated by $47,467 and $54,860 for the three and six months ended June 30, 2013, respectively. Net income was understated by $4,977 and $3,906 for the three and six months ended June 30, 2012, respectively.

· As part of its recordkeeping services, the Company funds certain plan sponsor expense accounts from which the plan can pay for qualified expenses. Management has determined that payment made to fund these plan sponsor expense accounts should be accounted for as customer payments. As such, the Company has restated its condensed consolidated statements of income to record the payment as a reduction of fee income rather than as general insurance expense. As a result of this misstatement, fee income and general insurance expense were overstated by $9,024 and $17,970 for the three and six months ended June 30, 2013, respectively.

· Management has reviewed its practices related to the accounting for certain fees paid by customers at the onset of an insurance contract and the related acquisition costs incurred by the Company on the sale of the insurance contract in the Company’s executive benefits market. Management has concluded that the fees paid by the customers should be deferred as unearned revenue liability and the acquisition costs should be deferred as deferred acquisition costs asset in the condensed consolidated balance sheet. The Company has previously accounted for the fees paid by customers as a reduction of the deferred acquisition costs asset in the condensed consolidated balance sheet. As a result of this misstatement, deferred acquisition cost and value of business acquired asset and future policy benefits liability were understated by $42,803 as of June 30, 2013.

The following table summarizes the effects of the restatement adjustments, previously discussed, on the unaudited condensed consolidated balance sheet as of June 30, 2013:

	As previously
	reported		Adjustments			As restated

Fixed maturities, available-for-sale, at fair value (1)	$	18,209,545	$	(1,927,986	)	$	16,281,559
Total investments	27,767,018		(1,927,986		)	25,839,032
Deferred acquisition costs and value of business acquired	272,466		41,902			314,368
Investment income due and accrued	241,889		(779		)	241,110
Due from parent and affiliates	71,491		19,512			91,003
Other assets	654,493		4,686			659,179
Total assets	55,217,846		(1,862,665		)	53,355,181
Future policy benefits	23,749,694		42,803			23,792,497
Total policy benefit liabilities	24,519,529		42,803			24,562,332
Repurchase agreements	1,894,338		(1,894,338		)	—
Deferred income tax liabilities, net	124,047		(2,890		)	121,157
Other liabilities	710,799		35,746			746,545
Total liabilities	53,343,916		(1,818,679		)	51,525,237
Accumulated other comprehensive income (loss)	300,808		10,874			311,682
Retained earnings	793,730		(54,860		)	738,870
Total stockholder’s equity	1,873,930		(43,986		)	1,829,944
Total liabilities and stockholder’s equity	55,217,846		(1,862,665		)	53,355,181

(1) Fixed maturities, available-for-sale, amortized cost

17,457,961

(1,948,194

)

15,509,767

The following table summarizes the effects of the restatement adjustments, previously discussed, on the unaudited condensed consolidated statement of income for the three months ended June 30, 2013:

	As previously
	reported			Adjustments			As restated

Fee income	$	163,331		$	(9,024	)	$	154,307
Net investment income	299,179			(50,576		)	248,603
Other realized investment (losses), net	(1,353		)	(23,320		)	(24,673		)
Total realized investment gains (losses), net	(994		)	(23,320		)	(24,314		)
Total revenues	527,873			(82,920		)	444,953
General insurance expenses	172,728			(9,024		)	163,704
Amortization of deferred acquisition costs and value of business acquired	16,783			(1,986		)	14,797
Total benefits and expenses, net	464,086			(11,010		)	453,076
Income (loss) before income taxes	63,787			(71,910		)	(8,123		)
Income tax expense (benefit)	20,374			(24,443		)	(4,069		)
Net income (loss)	43,413			(47,467		)	(4,054		)

The following table summarizes the effects of the restatement adjustments, previously discussed, on the unaudited condensed consolidated statement of income for the six months ended June 30, 2013:

	As previously
	reported		Adjustments			As restated

Fee income	$	319,223	$	(17,970	)	$	301,253
Net investment income	589,581		(55,616		)	533,965
Other realized investment gains, net	20,998		(30,078		)	(9,080		)
Total realized investment gains (losses), net	20,503		(30,078		)	(9,575		)
Total revenues	1,181,340		(103,664		)	1,077,676
General insurance expenses	340,152		(17,970		)	322,182
Amortization of deferred acquisition costs and value of business acquired	32,881		(2,577		)	30,304
Total benefits and expenses, net	1,001,571		(20,547		)	981,024
Income before income taxes	179,769		(83,117		)	96,652
Income tax expense	62,129		(28,257		)	33,872
Net income	117,640		(54,860		)	62,780

The following table summarizes the effects of the restatement adjustments, previously discussed, on the unaudited condensed consolidated statement of income for the three months ended June 30, 2012:

	As previously
	reported		Adjustments			As restated

Net investment income	$	299,792	$	(3,706	)	$	296,086
Other realized investment gains, net	24,919		11,934			36,853
Total realized investment gains (losses), net	24,919		11,934			36,853
Total revenues	535,262		8,228			543,490
Amortization of deferred acquisition costs and value of business acquired	15,789		812			16,601
Total benefits and expenses, net	441,619		812			442,431
Income before income taxes	93,643		7,416			101,059
Income tax expense	32,595		2,439			35,034
Net income	61,048		4,977			66,025

The following table summarizes the effects of the restatement adjustments, previously discussed, on the unaudited condensed consolidated statement of income for the six months ended June 30, 2012:

	As previously
	reported		Adjustments			As restated

Net investment income	$	602,921	$	(9,654	)	$	593,267
Other realized investment gains, net	37,053		16,741			53,794
Total realized investment gains (losses), net	36,799		16,741			53,540
Total revenues	1,105,301		7,087			1,112,388
Amortization of deferred acquisition costs and value of business acquired	31,231		1,260			32,491
Total benefits and expenses, net	936,304		1,260			937,564
Income before income taxes	168,997		5,827			174,824
Income tax expense	56,955		1,921			58,876
Net income	112,042		3,906			115,948

The following table summarizes the effects of the restatement adjustments, previously discussed, on the unaudited condensed consolidated statement of comprehensive income for the three months ended June 30, 2013:

	As previously
	reported			Adjustments			As restated

Net income (loss)	$	43,413		$	(47,467	)	$	(4,054	)
Unrealized gains (losses) arising on fixed maturities, available-for-sale	(612,083		)	23,390			(588,693		)
Reclassification adjustment for (gains) losses realized in net income	2,251			273			2,524
Net unrealized (gains) losses related to investments	(616,872		)	23,663			(593,209		)
Future policy benefits, deferred acquisition costs and value of business acquired adjustments	125,324			(4,150		)	121,174
Other comprehensive income (loss) before income taxes	(491,548		)	19,513			(472,035		)
Income tax (benefit) expense related to items of other comprehensive income (loss)	(172,042		)	6,829			(165,213		)
Other comprehensive income (loss)	(319,506		)	12,684			(306,822		)
Comprehensive income (loss)	(276,093		)	(34,783		)	(310,876		)

	As previously
	reported			Adjustments			As restated

Net income	$	117,640		$	(54,860	)	$	62,780
Unrealized gains (losses) arising on fixed maturities, available-for-sale	(652,701		)	22,828			(629,873		)
Reclassification adjustment for (gains) losses realized in net income	(19,436		)	(2,620		)	(22,056		)
Net unrealized (gains) losses related to investments	(655,229		)	20,208			(635,021		)
Future policy benefits, deferred acquisition costs and value of business acquired adjustments	140,011			(3,479		)	136,532
Other comprehensive income (loss) before income taxes	(515,218		)	16,729			(498,489		)
Income tax (benefit) expense related to items of other comprehensive income (loss)	(180,327		)	5,855			(174,472		)
Other comprehensive income (loss)	(334,891		)	10,874			(324,017		)
Comprehensive income (loss)	(217,251		)	(43,986		)	(261,237		)

	As previously
	reported			Adjustments			As restated

Net income	$	61,048		$	4,977		$	66,025
Unrealized gains (losses) arising on fixed maturities, available-for-sale	177,624			(5,299		)	172,325
Reclassification adjustment for (gains) losses realized in net income	(27,290		)	2,414			(24,876		)
Net unrealized (gains) losses related to investments	161,919			(2,885		)	159,034
Future policy benefits, deferred acquisition costs and value of business acquired adjustments	(41,214		)	482			(40,732		)
Other comprehensive income (loss) before income taxes	120,705			(2,403		)	118,302
Income tax (benefit) expense related to items of other comprehensive income (loss)	42,247			(841		)	41,406
Other comprehensive income (loss)	78,458			(1,562		)	76,896
Comprehensive income (loss)	139,506			3,415			142,921

	As previously
	reported			Adjustments			As restated

Net income	$	112,042		$	3,906		$	115,948
Unrealized gains (losses) arising on fixed maturities, available-for-sale	211,734			(4,676		)	207,058
Reclassification adjustment for (gains) losses realized in net income	(44,681		)	1,914			(42,767		)
Net unrealized (gains) losses related to investments	174,092			(2,762		)	171,330
Future policy benefits, deferred acquisition costs and value of business acquired adjustments	(29,063		)	439			(28,624		)
Other comprehensive income (loss) before income taxes	145,029			(2,323		)	142,706
Income tax (benefit) expense related to items of other comprehensive income (loss)	50,760			(813		)	49,947
Other comprehensive income (loss)	94,269			(1,510		)	92,759
Comprehensive income (loss)	206,311			2,396			208,707

The following table summarizes the effects of the restatement adjustments, previously discussed, on the unaudited condensed consolidated statement of stockholder’s equity for the six months ended June 30, 2013:

	As previously
	reported			Adjustments			As restated

Net income	$	117,640		$	(54,860	)	$	62,780
Other comprehensive income (loss), net of income taxes	(334,891		)	10,874			(324,017		)
Accumulated other comprehensive income (loss)	300,808			10,874			311,682
Retained earnings	793,730			(54,860		)	738,870
Total	1,873,930			(43,986		)	1,829,944

	As previously
	reported		Adjustments			As restated

Net income	$	112,042	$	3,906		$	115,948
Other comprehensive income (loss), net of income taxes	94,269		(1,510		)	92,759
Accumulated other comprehensive income (loss)	564,251		(1,510		)	562,741
Retained earnings	677,654		3,906			681,560
Total	2,018,351		2,396			2,020,747

The following table summarizes the effects of the restatement adjustments, previously discussed, on the unaudited condensed consolidated statement of cash flows items for the six months ended June 30, 2013:

	As previously
	reported			Adjustments			As restated

Net cash provided by operating activities	$	581,270		$	(36,964	)	$	544,306
Net change in short-term investments	(3,682,162		)	1,950,814			(1,731,348		)
Net change in repurchase agreements	1,894,338			(1,894,338		)	—
Net cash used in investing activities	(698,175		)	56,476			(641,699		)
Change in due to parent and affiliates	499			(19,512		)	(19,013		)
Net cash provided by financing activities	111,076			(19,512		)	91,564

	As previously
	reported			Adjustments			As restated

Net cash provided by operating activities	$	226,115		$	5,249		$	231,364
Net change in short-term investments	(2,115,747		)	1,091,967			(1,023,780		)
Net change in repurchase agreements	1,098,522			(1,098,522		)	—
Net cash used in investing activities	(466,925		)	(6,555		)	(473,480		)
Change in due to parent and affiliates	(10,279		)	1,306			(8,973		)
Net cash provided by financing activities	242,377			1,306			243,683