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CONDENSED CONSOLIDATING FINANCIAL INFORMATION
9 Months Ended
Sep. 30, 2011
Condensed Consolidating Financial Information [Abstract] 
Condensed Consolidating Financial Information [Text Block]

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION

 

The following condensed consolidating financial statements are provided in compliance with Regulation S-X of the U.S. Securities and Exchange Commission (the “SEC”) and in accordance with SEC Rule 12h-5.

 

The Company's wholly-owned subsidiary, SLNY, sells, among other products, combination fixed and variable annuity contracts (the “Contracts”) in the State of New York. The Contracts contain a fixed investment option, where interest is paid at a guaranteed rate for a specified period of time, and withdrawals made before the end of the specified period may be subject to a market value adjustment that can increase or decrease the amount of the withdrawal proceeds (the “fixed investment option period”). Effective September 27, 2007, the Company provided a full and unconditional guarantee (the “guarantee”) of SLNY's obligation related to the fixed investment option period related to Contracts currently in-force or sold on or after that date. The guarantee relieves SLNY of its obligation to file annual, quarterly, and current reports with the SEC on Form 10-K, Form 10-Q, and Form 8-K.

 

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 

In the following presentation of condensed consolidating financial statements, the term “SLUS as Parent” is used to denote the Company as a stand alone entity, isolated from its subsidiaries, and the term “Other Subs” is used to denote the Company's other subsidiaries, with the exception of SLNY. All condensed consolidating financial statements are presented in thousands.

 
Condensed Consolidating Statements of Operations
For the nine-month period ended September 30, 2011

 

 

 SLUS as Parent SLNY Other Subs Eliminations & Reclassification Consolidated Company
               
Revenues              
               
Premiums and annuity considerations$15,205 $88,815 $- $- $104,020
Net investment income (1) 518,152  89,986  2,525  -  610,663
Net derivative loss (563,342)  (105,723)  -  -  (669,065)
Net realized investment gains (losses), excluding impairment losses on available-for-sale securities 15,703  (334)  (793)  -  14,576
Other-than-temporary impairment losses (71)  -  -  -  (71)
Fee and other income 421,761  36,769  10,259  -  468,789
               
Total revenues 407,408  109,513  11,991  -  528,912
               
Benefits and Expenses              
               
Interest credited 222,622  40,020  765  -  263,407
Interest expense 33,275  -  -  -  33,275
Policyowner benefits 9,019  48,205  231  -  57,455
Amortization of DAC, VOBA and VOCRA (655,537)  (28,464)  -  -  (684,001)
Other operating expenses 216,430  34,954  9,900  -  261,284
               
Total benefits and expenses (174,191)  94,715  10,896  -  (68,580)
               
Income before income tax expense  581,599  14,798  1,095  -  597,492
               
Income tax expense 190,391  4,212  217  -  194,820
Equity in the net income of subsidiaries 11,464  -  -  (11,464)  -
               
Net income$402,672 $10,586 $878 $(11,464) $402,672

(1)       SLUS as Parent's, SLNY's and Other Subs' net investment income includes an increase in market value of trading investments of $116.6 million, $28.1 million and $0.0 million, respectively, for the nine-month period ended September 30, 2011for securities still held at the reporting date.

 

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 
Condensed Consolidating Statements of Operations
For the nine-month period ended September 30, 2010

 

 

 SLUS as Parent SLNY Other Subs Eliminations & Reclassification Consolidated Company
               
Revenues              
               
Premiums and annuity considerations$12,401 $87,986 $- $- $100,387
Net investment income (1) 1,202,835  128,179  2,973  -  1,333,987
Net derivative loss (580,666)  (42,398)  -  -  (623,064)
Net realized investment gains (losses), excluding impairment losses on available-for-sale securities 17,468  (279)  (330)  -  16,859
Other-than-temporary impairment losses (735)  (150)  -  -  (885)
Fee and other income 342,657  11,866  7,001  -  361,524
               
Total revenues 993,960  185,204  9,644  -  1,188,808
               
Benefits and Expenses              
               
Interest credited 263,861  44,133  699  -  308,693
Interest expense 39,589  (72)  -  -  39,517
Policyowner benefits 80,136  63,363  174  -  143,673
Amortization of DAC, VOBA and VOCRA 119,133  58,301  -  -  177,434
Other operating expenses 199,652  30,028  6,667  -  236,347
               
Total benefits and expenses 702,371  195,753  7,540  -  905,664
               
Income (loss) before income tax expense (benefit) 291,589  (10,549)  2,104  -  283,144
               
Income tax expense (benefit) 94,867  (4,391)  612  -  91,088
Equity in the net loss of subsidiaries (4,666)  -  -  4,666  -
               
Net income (loss)$192,056 $(6,158) $1,492 $4,666 $192,056

(1)       SLUS as Parent's, SLNY's and Other Subs' net investment income includes an increase in market value of trading investments of $686.5 million, $62.3 million and $0.0 million, respectively, for the nine-month period ended September 30, 2010, for securities still held at the reporting date.

 

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 

Condensed Consolidating Statements of Operations
For the three-month period ended September 30, 2011

  SLUS as Parent  SLNY  Other Subs  Eliminations & Reclassification  Consolidated Company
               
Revenues              
               
Premiums and annuity considerations$3,560 $29,913 $- $- $33,473
Net investment income (1) 40,411  32,970  552  -  73,933
Net derivative loss (453,294)  (107,772)  -  -  (561,066)
Net realized investment (losses) gains, excluding impairment losses on available-for-sale securities (8,838)  1,049  (709)  -  (8,498)
Other-than-temporary impairment losses -  -  -  -   -
Fee and other income 139,682  20,354  3,580  -  163,616
               
Total revenues (278,479)  (23,486)  3,423  -  (298,542)
               
Benefits and Expenses              
               
Interest credited 65,601  13,409  242  -  79,252
Interest expense 10,674  0  -  -  10,674
Policyowner benefits (27,983)  5,878  69  -  (22,036)
Amortization of DAC, VOBA and VOCRA (883,470)  (37,996)  -  -  (921,466)
Other operating expenses 69,977  11,670  3,443  -  85,090
               
Total benefits and expenses (765,201)  (7,039)  3,754  -  (768,486)
               
Income (loss) before income tax expense (benefit) 486,722  (16,447)  (331)  -  469,944
               
Income tax expense (benefit) 165,661  (6,381)  (209)  -  159,071
Equity in the net loss of subsidiaries (10,188)  -  -  10,188  -
               
Net income (loss)$310,873 $(10,066) $(122) $10,188 $310,873

) SLUS as parent's, SLNY's and Other Subs' net investment income includes a (decrease) increase in the market value of trading investments of $(80.1) million, $14.2 million and $0.0 million, respectively, for the three-month period ended September 30, 2011, for securities still held at the reporting date.

 

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 

Condensed Consolidating Statements of Operations
For the three-month period ended September 30, 2010
 

  SLUS as Parent  SLNY  Other Subs  Eliminations & Reclassification  Consolidated Company
               
Revenues              
               
Premiums and annuity considerations$4,094 $28,051 $- $- $32,145
Net investment income (1) 431,199  49,875  1,466  -  482,540
Net derivative (loss) income (60,482)  4,583  -  -  (55,899)
Net realized investment gains (losses), excluding impairment losses on available-for-sale securities 1,086  (879)  313  -  520
Other-than-temporary impairment losses -  -  -  -   -
Fee and other income 124,315  (1,633)  2,614  -  125,296
               
Total revenues 500,212  79,997  4,393  -  584,602
               
Benefits and Expenses              
               
Interest credited 112,508  19,122  252  -  131,882
Interest expense 13,094  (29)  -  -  13,065
Policyowner benefits 9,053  17,989  54  -  27,096
Amortization of DAC, VOBA and VOCRA 413,840  16,826  -  -  430,666
Other operating expenses 63,505  10,519  2,530  -  76,554
               
Total benefits and expenses 612,000  64,427  2,836  -  679,263
               
(Loss) income before income tax (benefit) expense (111,788)  15,570  1,557  -  (94,661)
               
Income tax (benefit) expense (35,751)  5,020  465  -  (30,266)
Equity in the net income of subsidiaries 11,642  -  -  (11,642)  -
               
Net (loss) income$(64,395) $10,550 $1,092 $(11,642) $(64,395)

(1) SLUS as parent's, SLNY's and Other Subs' net investment income includes an increase in the market value of trading investments of $271.4 million, $27.4 million and $0.0 million, respectively, for the three-month period ended September 30, 2010, for securities still held at the reporting date.

 

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 

Condensed Consolidating Balance Sheets at September 30, 2011

 

 

 SLUS as Parent SLNY Other Subs Eliminations & Reclassification Consolidated Company
ASSETS              
               
Investments              
Available-for-sale fixed maturity securities at fair value$ 1,317,351 $ 271,119 $ 69,721 $ - $1,658,191
Trading fixed maturity securities at fair value   8,960,301   1,595,651  -   -  10,555,952
Mortgage loans  1,331,988   158,340   24,111   -  1,514,439
Derivative instruments – receivable  527,209   -   -   -  527,209
Limited partnerships  39,384   -   -   -  39,384
Real estate  193,538   -   31,786   -  225,324
Policy loans  587,571   1,106   19,858   -  608,535
Other invested assets  24,823   4,795   -   -  29,618
Short-term investments  135,121   1,999  -   -  137,120
Cash and cash equivalents  866,847   55,549   14,950   -  937,346
Investment in subsidiaries  573,799   -   -   (573,799)  0
Total investments and cash 14,557,932  2,088,559  160,426  (573,799)  16,233,118
               
Accrued investment income 159,015  22,461   1,487   -  182,963
Deferred policy acquisition costs and sales inducement asset 2,493,061  159,296   -   -  2,652,357
Value of business and customer renewals acquired 118,647  3,648   -   -  122,295
Net deferred tax asset 135,725  11,188   4,451   -  151,364
Goodwill -  7,299   -   -  7,299
Receivable for investments sold 5,407  196   13   -  5,616
Reinsurance receivable  2,088,134  162,433   127   -  2,250,694
Other assets 109,346  33,827   1,593   (4,201)  140,565
Separate account assets 25,023,446  1,278,632   35,713   -  26,337,791
               
Total assets$44,690,713 $3,767,539 $203,810 $(578,000) $48,084,062
               
LIABILITIES              
               
Contractholder deposit funds and other policy liabilities$12,109,176 $1,620,182 $23,620 $ - $13,752,978
Future contract and policy benefits 745,056  127,110  278   -  872,444
Payable for investments purchased 19,274  44  -   -  19,318
Accrued expenses and taxes 38,205  5,283  2,776   (4,201)  42,063
Debt payable to affiliates 683,000  -  -   -  683,000
Reinsurance payable  1,856,419  239,555  37   -  2,096,011
Derivative instruments – payable 348,734  -  -   -  348,734
Other liabilities  305,272  49,608  14,713   (1)  369,592
Separate account liabilities 25,023,446  1,278,632  35,713   -  26,337,791
               
Total liabilities$41,128,582 $3,320,414 $77,137 $(4,202) $44,521,931
               
STOCKHOLDER’S EQUITY              
               
Common stock $6,437 $2,100 $2,542 $(4,642) $6,437
Additional paid-in capital 3,929,210  389,963  102,620  (492,583)  3,929,210
Accumulated other comprehensive income  52,444  10,088  3,166  (13,254)  52,444
(Accumulated deficit) retained earnings (425,960)  44,974  18,345  (63,319)  (425,960)
               
Total stockholder’s equity 3,562,131  447,125  126,673  (573,798)  3,562,131
               
Total liabilities and stockholder’s equity$44,690,713 $3,767,539 $203,810 $(578,000) $48,084,062

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 

Consolidating Balance Sheets at December 31, 2010

 

 

 SLUS as Parent SLNY Other Subs Eliminations & Reclassification Consolidated Company
ASSETS              
               
Investments              
Available-for-sale fixed maturity securities at fair value$1,193,875 $246,944 $55,104 $- $1,495,923
Trading fixed maturity securities at fair value  9,911,284  1,555,834  -  -  11,467,118
Mortgage loans 1,531,545  176,518  29,465  0  1,737,528
Derivative instruments – receivable 198,064  0  0  -  198,064
Limited partnerships 41,622  -  -  -  41,622
Real estate 161,800  -  52,865  -  214,665
Policy loans 695,607  1,217  20,584  -  717,408
Other invested assets 19,588  7,868  0  -  27,456
Short-term investments 813,745  18,994  -  -  832,739
Cash and cash equivalents 647,579  72,978  15,766  -  736,323
Investment in subsidiaries 559,344  0  0  (559,344)  0
Total investments and cash 15,774,053  2,080,353  173,784  (559,344)  17,468,846
               
Accrued investment income 165,841  21,130  1,815  -  188,786
Deferred policy acquisition costs and sales inducement asset 1,571,768  110,791  -  -  1,682,559
Value of business and customer renewals acquired 130,546  4,439  -  -  134,985
Net deferred tax asset 378,078  12,057  4,162  -  394,297
Goodwill -  7,299  -  -  7,299
Receivable for investments sold 5,166  162  -  -  5,328
Reinsurance receivable  2,184,487  162,522  77  -  2,347,086
Other assets 93,755  31,729  2,918  (2,873)  125,529
Separate account assets 25,573,382  1,265,464  41,575  -  26,880,421
               
Total assets$45,877,076 $3,695,946 $224,331 $(562,217) $49,235,136
               
LIABILITIES              
               
Contractholder deposit funds and other policy liabilities$12,991,306 $1,577,556 $24,366 $- $14,593,228
Future contract and policy benefits 732,368  116,946  200  -  849,514
Payable for investments purchased 44,723  104  -  -  44,827
Accrued expenses and taxes 49,224  4,612  1,665  (2,873)  52,628
Debt payable to affiliates 783,000  -  -  -  783,000
Reinsurance payable  1,995,083  236,718  34  -  2,231,835
Derivative instruments – payable 362,023  -  -  -  362,023
Other liabilities  193,363  66,118  25,575  -  285,056
Separate account liabilities 25,573,382  1,265,464  41,575  -  26,880,421
               
Total liabilities 42,724,472  3,267,518  93,415  (2,873)  46,082,532
               
STOCKHOLDER’S EQUITY              
               
Common stock $6,437 $2,100 $2,542 $(4,642) $6,437
Additional paid-in capital 3,928,246  389,963  108,450  (498,413)  3,928,246
Accumulated other comprehensive income  46,553  1,977  1,707  (3,684)  46,553
(Accumulated deficit) retained earnings (828,632)  34,388  18,217  (52,605)  (828,632)
               
Total stockholder’s equity 3,152,604  428,428  130,916  (559,344)  3,152,604
               
Total liabilities and stockholder’s equity$45,877,076 $3,695,946 $224,331 $(562,217) $49,235,136

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 
Condensed Consolidating Statements of Cash Flow
For the nine-month period ended September 30, 2011

 

 

 SLUS as Parent SLNY Other Subs Eliminations & Reclassification Consolidated Company
               
Cash Flows From Operating Activities:              
Net income $ 402,672 $ 10,586 $ 878 $ (11,464) $ 402,672
Adjustments to reconcile net income to net cash provided by (used in) operating activities:              
Net amortization of premiums on investments  27,892   5,176   782   -   33,850
Amortization of DAC, VOBA and VOCRA  (655,537)   (28,464)   -   -   (684,001)
Depreciation and amortization  7,396   233   772   -   8,401
Net losses on derivatives  533,354   105,723   -   -   639,077
Net realized (gains) losses and OTTI credit losses on available-for-sale investments  (15,632)   334   793   -   (14,505)
Net increase in fair value of trading investments  (116,572)   (28,131)   -   -   (144,703)
Net realized losses (gains) on trading investments  30,960   (4,990)   -   -   25,970
Undistributed gains on private equity limited partnerships  (5,597)   -   -   -   (5,597)
Interest credited to contractholder deposits  222,622   40,020   765   -   263,407
Deferred federal income taxes   244,334   (3,498)   (1,075)   -   239,761
Equity in net income of subsidiaries  (11,464)   -   -   11,464   -
Changes in assets and liabilities:              
Additions to DAC, SIA, VOBA and VOCRA  (243,870)   (19,250)   -   -   (263,120)
Accrued investment income  6,826   (1,331)   328   -   5,823
Net change in reinsurance receivable/payable  21,544   6,613   (47)   -   28,110
Future contract and policy benefits  12,688   10,164   78   -   22,930
Other, net  94,256   (8,035)   (8,489)   -   77,732
               
Net cash provided by (used in) operating activities  555,872   85,150   (5,215)   -   635,807
               
Cash Flows From Investing Activities:              
Sales, maturities and repayments of:              
Available-for-sale fixed maturity securities   335,437   47,588   25,494   -   408,519
Trading fixed maturity securities  2,213,176   303,657   -   -   2,516,833
Mortgage loans  181,898   18,096   7,853   (14,937)   192,910
Real Estate transfer to Parent from Subs  (29,210)   -   29,210   -   -
Other invested assets (1)  293,267   1,447   -   -   294,714
Purchases of:              
Available-for-sale fixed maturity securities  (429,991)   (58,450)   (35,499)   -   (523,940)
Trading fixed maturity securities  (1,236,827)   (314,182)   -   -   (1,551,009)
Mortgage loans  (3,538)   (550)   (13,556)   12,624   (5,020)
Real estate  (9,599)   -   (1,789)   2,313   (9,075)
Other invested assets (2)  (48,356)   -   -   -   (48,356)
Net change in other investments  -   -   -   -   -
Net change in policy loans   (3,832)   111   726   -   (2,995)
Net change in short-term investments   678,624   16,995   -   -   695,619
               
Net cash provided by investing activities$ 1,941,049 $ 14,712 $ 12,439 $ - $ 1,968,200

Continued on next page

 

(1)       SLUS as parent's sale of other invested assets includes $278.7 million related to settlement of derivative instruments during the nine-month period ended September 30, 2011.

(2)       SLUS as parent's purchase of other invested assets include $(47.3) million related to issuances of derivative instruments during the nine-month period ended September 30, 2011.

 

 

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 
Condensed Consolidating Statements of Cash Flow (continued)
For the nine-month period ended September 30, 2011

 

 

 SLUS as Parent SLNY Other Subs Eliminations & Reclassification Consolidated Company
               
Cash Flows From Financing Activities:              
Additions to contractholder deposit funds$ 689,997 $ 83,440 $ - $ - $ 773,437
Withdrawals from contractholder deposit funds  (2,863,912)   (190,244)   (1,511)   -   (3,055,667)
Repayment of debt  (100,000)   -   -   -   (100,000)
Additional capital contributed to subsidiaries  (23,888)   -   -   23,888   -
Return of capital from Subsidiaries  30,467   -   -   (30,467)   -
Capital contribution from Parent  -   -   23,888   (23,888)   -
Return of capital to Parent  -   -   (30,467)   30,467   -
Other, net  (10,317)   (10,487)   50   -   (20,754)
               
Net cash used in financing activities  (2,277,653)   (117,291)   (8,040)   -   (2,402,984)
               
Net change in cash and cash equivalents  219,268   (17,429)   (816)   -   201,023
               
Cash and cash equivalents, beginning of period  647,579   72,978   15,766   -   736,323
               
Cash and cash equivalents, end of period$ 866,847 $ 55,549 $ 14,950 $ - $ 937,346
               
               

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 
Condensed Consolidating Statements of Cash Flow
For the nine-month period ended September 30, 2010

 SLUS as ParentSLNY Other Subs Eliminations & Reclassification Consolidated Company
              
Cash Flows From Operating Activities:             
Net income (loss)$192,056$(6,158) $1,492 $4,666 $192,056
Adjustments to reconcile net income (loss) to net cash provided by operating activities:             
Net amortization of premiums on investments 16,146 2,996  578  -  19,720
Amortization of DAC, VOBA and VOCRA 119,133 58,301  -  -  177,434
Depreciation and amortization 1,546 234  616  -  2,396
Net losses on derivatives 483,308 42,398  -  -  525,706
Net realized (gains) losses and OTTI credit losses on available-for-sale investments (16,733) 429  330  -  (15,974)
Net increase in fair value of trading investments (686,458) (62,265)  -  -  (748,723)
Net realized losses (gains) on trading investments 44,220 (11,766)  -  -  32,454
Undistributed loss on private equity limited partnerships 399 -  -  -  399
Interest credited to contractholder deposits 263,861 44,133  699  -  308,693
Deferred federal income taxes  136,574 182  200   -   136,956
Equity in net loss of subsidiaries 4,666 0  0   (4,666)   -
Changes in assets and liabilities:             
Additions to DAC, SIA, VOBA and VOCRA (175,325) (15,700)  -  -  (191,025)
Accrued investment income 28,690 (4,247)  112  -  24,555
Net change in reinsurance receivable/payable 87,991 2,716  25  -  90,732
Future contract and policy benefits 26,324 14,716  (1)  -  41,039
Other, net 77,619 39,274  (1,319)  -  115,574
              
Net cash provided by operating activities 604,017 105,243  2,732  -  711,992
              
Cash Flows From Investing Activities:             
Sales, maturities and repayments of:             
Available-for-sale fixed maturity securities  330,126 38,937  13,737  -  382,800
Trading fixed maturity securities 2,492,639 612,870  (560)  -  3,104,949
Mortgage loans 138,734 8,036  2,683  (30,042)  119,411
Real estate - 1,000  1,170  (2,170)  -
Other invested assets (1) (104,102) 815  501  -  (102,786)
Purchases of:             
Available-for-sale fixed maturity securities (557,511) (102,654)  (15,382)  -  (675,547)
Trading fixed maturity securities (2,747,460) (712,640)  -  -  (3,460,100)
Mortgage loans (43) (28,441)  (31,171)  30,042  (29,613)
Real estate (5,293) -  (379)  2,170  (3,502)
Other invested assets (2) (47,191) (333)  -  -  (47,524)
Net change in policy loans  13,580 (1,570)  520  -  12,530
Net change in short-term investments  1,193,277 58,991  0  -  1,252,268
              
Net cash provided by (used in) investing activities$706,756$(124,989) $(28,881) $- $552,886

Continued on next page

 

(1)       SLUS as parent's sale of other invested assets includes $(157.2) million related to settlement of derivative instruments during the nine-month period ended September 30, 2010.

(2)       SLUS as parent's purchase of other invested assets includes $(46.3) million related to issuances of derivative instruments during the nine-month period ended September 30, 2010.

 

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 
Condensed Consolidating Statements of Cash Flow (continued)
For the nine-month period ended September 30, 2010

 

 

 SLUS as Parent SLNY Other Subs Eliminations & Reclassification Consolidated Company
               
Cash Flows From Financing Activities:              
Additions to contractholder deposit funds$826,639 $136,151 $- $- $ 962,790
Withdrawals from contractholder deposit funds (2,730,167)  (185,396)   (1,869)  -   (2,917,432)
Repayment of debt (100,000)  -  -   -   (100,000)
Additional capital contributed to subsidiaries (30,185)  -   -   30,185   -
Capital contribution from Parent 400,000  -   30,185   (30,185)   400,000
Other, net (16,610)  (3,363)   206  -   (19,767)
               
Net cash (used in) provided by financing activities (1,650,323)  (52,608)  28,522  -  (1,674,409)
               
Net change in cash and cash equivalents (339,550)  (72,354)  2,373  -  (409,531)
               
Cash and cash equivalents, beginning of period 1,616,991  175,322  11,895  -  1,804,208
               
Cash and cash equivalents, end of period$1,277,441 $102,968 $14,268 $- $1,394,677