Related Party Transactions

9 Months Ended

Sep. 30, 2013

Related Party Transactions

Related Party Transactions

5.  Related Party Transactions

On January 1, 2013, the Company terminated its reinsurance agreement with an affiliate, The Canada Life Assurance Company (“CLAC”), pursuant to which it had ceded certain participating life business on a coinsurance basis.

Participating policyholders share in the financial results of the participating business in the form of policyholder dividends.  The policyholder dividends can be distributed directly to the policyholders in the form of cash or through an increase in benefits such as paid-up additions.  The participating policyholder earnings that cannot be distributed to the shareholder are not included in the Company’s condensed consolidated net income and are reflected in liabilities in undistributed earnings on participating business in the Company’s condensed consolidated balance sheets.

The Company recorded, at fair value, the following on January 1, 2013, in its condensed consolidated balance sheet in connection with the termination of the reinsurance agreement:

Assets

Fixed maturities, available-for-sale	$	44,104
Policy loans	6,468
Reinsurance receivable	(42,297		)
Investment income due and accrued	347
Total	$	8,622

Liabilities

Undistributed earnings on participating business	$	4,781
Due to parent and affiliates	3,841
Total	$	8,622

The Company recorded the following on January 1, 2013, in its condensed consolidated statement of income in connection with the termination of the reinsurance agreement:

Premium income	$	42,297
Other revenue	7,355
Total	49,652
Increase (decrease) in future policy benefits	41,297
Dividends to policyholders	1,000
Total	42,297
Participating policyholders’ net income before income taxes	7,355
Income tax expense	2,574
Participating policyholders’ income	4,781
Provision for policyholders’ share of earnings on participating business	4,781
Net income available to shareholder	$	—