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CONDENSED CONSOLIDATING FINANCIAL INFORMATION
 6 Months Ended
Jun. 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 six-month period ended June 30, 2011

 

 

 SLUS as Parent SLNY Other Subs Eliminations Consolidated Company
               
Revenues              
               
Premiums and annuity considerations$11,645 $58,902 $- $- $70,547
Net investment income (1) 477,741  57,016  1,973  -  536,730
Net derivative (loss) income (110,048)  2,049  -  -  (107,999)
Net realized investment gains (losses), excluding impairment losses on available-for-sale securities 24,541  (1,383)  (84)  -  23,074
Other-than-temporary impairment losses (71)  -  -  -  (71)
Fee and other income 282,079  16,415  6,679  -  305,173
               
Total revenues 685,887  132,999  8,568  -  827,454
               
Benefits and Expenses              
               
Interest credited 157,021  26,611  523  -  184,155
Interest expense 22,601  -  -  -  22,601
Policyowner benefits 37,002  42,327  162  -  79,491
Amortization of DAC, VOBA and VOCRA 227,933  9,532  -  -  237,465
Other operating expenses 146,453  23,284  6,457  -  176,194
               
Total benefits and expenses 591,010  101,754  7,142  -  699,906
               
Income before income tax expense  94,877  31,245  1,426  -  127,548
               
Income tax expense  24,730  10,593  426  -  35,749
Equity in the net income of subsidiaries 21,652  -  -  (21,652)  -
               
Net income $91,799 $20,652 $1,000 $(21,652) $91,799

(1)       SLUS', SLNY's and Other Subs' net investment income includes an increase (decrease) in market value of trading fixed maturity securities of $196.7 million, $13.9 million and $0.0 million, respectively, for the six-month period ended June 30, 2011.

 

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 
Condensed Consolidating Statements of Operations
For the six-month period ended June 30, 2010

 

 

 SLUS as Parent SLNY Other Subs Eliminations Consolidated Company
               
Revenues              
               
Premiums and annuity considerations$8,307 $59,935 $- $- $68,242
Net investment income (1) 771,636  78,304  1,507  -  851,447
Net derivative loss (520,184)  (46,981)  -  -  (567,165)
Net realized investment gains (losses), excluding impairment losses on available-for-sale securities 16,382  600  (643)  -  16,339
Other-than-temporary impairment losses (735)  (150)  -  -  (885)
Fee and other income 218,342  13,499  4,387  -  236,228
               
Total revenues 493,748  105,207  5,251  -  604,206
               
Benefits and Expenses              
               
Interest credited 151,353  25,011  447  -  176,811
Interest expense 26,495  (43)  -  -  26,452
Policyowner benefits 71,083  45,374  120  -  116,577
Amortization of DAC, VOBA and VOCRA (294,707)  41,475  -  -  (253,232)
Other operating expenses 136,147  19,509  4,137  -  159,793
               
Total benefits and expenses 90,371  131,326  4,704  -  226,401
               
Income (loss) before income tax expense (benefit) 403,377  (26,119)  547  -  377,805
               
Income tax expense (benefit) 130,618  (9,411)  147  -  121,354
Equity in the net loss of subsidiaries (16,308)  -  -  16,308  -
               
Net income (loss)$256,451 $(16,708) $400 $16,308 $256,451

(1)       SLUS', SLNY's and Other Subs' net investment income includes an increase in market value of trading fixed maturity securities of $415.0 million, $34.9 million and $0.0 million, respectively, for the six-month period ended June 30, 2010.

 

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 

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

  SLUS as Parent SLNY Other Subs Eliminations Consolidated Company
           
Revenues          
           
Premiums and annuity considerations$6,641$29,629$-$-$36,270
Net investment income (1) 209,643 33,594 1,495 - 244,732
Net derivative loss (122,639) (13,130) - - (135,769)
Net realized investment gains (losses), excluding impairment losses on available-for-sale securities 20,091 (930) (170) - 18,991
Other-than-temporary impairment losses - - - -  -
Fee and other income 143,766 9,941 3,445 - 157,152
           
Total revenues 257,502 59,104 4,770 - 321,376
           
Benefits and Expenses          
           
Interest credited 82,569 13,421 289 - 96,279
Interest expense 11,509 0 - - 11,509
Policyowner benefits 15,608 18,809 107 - 34,524
Amortization of DAC, VOBA and VOCRA (10,769) 120 - - (10,649)
Other operating expenses 71,807 11,568 3,334 - 86,709
           
Total benefits and expenses 170,724 43,918 3,730 - 218,372
           
Income before income tax expense  86,778 15,186 1,040 - 103,004
           
Income tax expense  26,196 5,140 254 - 31,590
Equity in the net income of subsidiaries 10,832 - - (10,832) -
           
Net income $71,414$10,046$786$(10,832)$71,414

) SLUS as parent's, SLNY's and Other Subs' net investment income includes an increase in the market value of trading fixed maturity securities of $74.4 million, $14.8 million and $0.0 million, respectively, for three-month period ended June 30, 2011.

 

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 

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

  SLUS as Parent SLNY Other Subs Eliminations Consolidated Company
           
Revenues          
           
Premiums and annuity considerations$3,216$29,962$-$-$33,178
Net investment income (1) 367,226 40,005 387 - 407,618
Net derivative loss (472,235) (53,480) - - (525,715)
Net realized investment gains (losses), excluding impairment losses on available-for-sale securities 12,012 204 (1,042) - 11,174
Other-than-temporary impairment losses - - - -  -
Fee and other income 109,625 8,492 2,358 - 120,475
           
Total revenues 19,844 25,183 1,703 - 46,730
           
Benefits and Expenses          
           
Interest credited 74,697 12,478 253 - 87,428
Interest expense 9,383 (28) - - 9,355
Policyowner benefits 60,497 21,390 87 - 81,974
Amortization of DAC, VOBA and VOCRA (430,028) 5,087 - - (424,941)
Other operating expenses 66,161 10,527 2,195 - 78,883
           
Total benefits and expenses (219,290) 49,454 2,535 - (167,301)
           
           
Income (loss) before income tax expense (benefit) 239,134 (24,271) (832) - 214,031
           
Income tax expense (benefit) 78,133 (8,628) (274) - 69,231
Equity in the net loss of subsidiaries (16,201) - - 16,201 -
           
Net income (loss)$144,800$(15,643)$(558)$16,201$144,800

(1) SLUS as parent's, SLNY's and Other Subs' net investment income includes an increase in the market value of trading fixed maturity securities of $161.7 million, $17.8 million and $0.0 million, respectively, for the three-month period ended June 30, 2010.

 

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 

Condensed Consolidating Balance Sheets at June 30, 2011

 

 

 SLUS as Parent SLNY Other Subs  Elimination Consolidated Company
ASSETS              
               
Investments              
Available-for-sale fixed maturity securities at fair value$1,328,010 $254,261 $60,660 $- $1,642,931
Trading fixed maturity securities at fair value  9,178,799  1,549,535  -  -  10,728,334
Mortgage loans 1,409,766  164,645  31,509  0  1,605,920
Derivative instruments – receivable 220,844  0  0  -  220,844
Limited partnerships 39,286  -  -  -  39,286
Real estate 190,848  -  31,915  -  222,763
Policy loans 585,517  1,010  20,819  -  607,346
Other invested assets 32,456  7,336  1,877  -  41,669
Short-term investments 12,997  0  -  -  12,997
Cash and cash equivalents 1,861,118  102,129  14,878  -  1,978,125
Investment in subsidiaries 577,805  0  0  (577,805)  0
Total investments and cash 15,437,446  2,078,916  161,658  (577,805)  17,100,215
               
Accrued investment income 160,177  21,388  1,398  -  182,963
Deferred policy acquisition costs and sales inducement asset 1,484,823  111,006  -  -  1,595,829
Value of business and customer renewals acquired 99,059  3,895  -  -  102,954
Net deferred tax asset 318,264  6,988  3,585  -  328,837
Goodwill -  7,299  -  -  7,299
Receivable for investments sold 5,474  2,213  0  -  7,687
Reinsurance receivable  2,077,247  158,428  94  -  2,235,769
Other assets 107,765  34,553  1,226  (1,106)  142,438
Separate account assets 26,881,371  1,378,582  41,319  -  28,301,272
               
Total assets$46,571,626 $3,803,268 $209,280 $(578,911) $50,005,263
               
LIABILITIES              
               
Contractholder deposit funds and other policy liabilities$12,466,431 $1,536,963 $24,483 $- $14,027,877
Future contract and policy benefits 710,952  120,667  278  -  831,897
Payable for investments purchased 38,964  4,440  -  -  43,404
Accrued expenses and taxes 40,253  5,442  1,434  (1,106)  46,023
Debt payable to affiliates 783,000  -  -  -  783,000
Reinsurance payable  1,883,098  248,381  35  -  2,131,514
Derivative instruments – payable 335,495  -  -  -  335,495
Other liabilities  197,007  58,656  14,063  -  269,726
Separate account liabilities 26,881,371  1,378,582  41,319  -  28,301,272
               
Total liabilities$43,336,571 $3,353,131 $81,612 $(1,106) $46,770,208
               
STOCKHOLDER’S EQUITY              
               
Common stock $6,437 $2,100 $2,542 $(4,642) $6,437
Additional paid-in capital 3,929,192  389,963  104,489  (494,452)  3,929,192
Accumulated other comprehensive income  36,259  3,035  2,199  (5,234)  36,259
(Accumulated deficit) retained earnings (736,833)  55,039  18,438  (73,477)  (736,833)
               
Total stockholder’s equity 3,235,055  450,137  127,668  (577,805)  3,235,055
               
Total liabilities and stockholder’s equity$46,571,626 $3,803,268 $209,280 $(578,911) $50,005,263

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 

Consolidating Balance Sheets at December 31, 2010

 

 

 SLUS as Parent SLNY Other Subs  Elimination 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 six-month period ended June 30, 2011

 

 

 SLUS as Parent SLNY Other Subs  Elimination Consolidated Company
               
Cash Flows From Operating Activities:              
Net income $ 91,799 $ 20,652 $ 1,000 $ (21,652) $ 91,799
Adjustments to reconcile net income to net cash provided by (used in) operating activities:              
Net amortization of premiums on investments  18,280   3,296   553   -   22,129
Amortization of DAC, VOBA and VOCRA  227,933   9,532   -   -   237,465
Depreciation and amortization  5,995   156   490   -   6,641
Net losses (gains) on derivatives  84,131   (2,049)   -   -   82,082
Net realized (gains) losses and OTTI credit losses on available-for-sale investments  (24,470)   1,383   84   -   (23,003)
Net increase in fair value of trading investments  (196,691)   (13,909)   -   -   (210,600)
Net realized losses (gains) on trading investments  11,200   (5,101)   -   -   6,099
Undistributed gains on private equity limited partnerships  (3,994)   -   -   -   (3,994)
Interest credited to contractholder deposits  157,021   26,611   523   -   184,155
Deferred federal income taxes   66,191   4,499   313   -   71,003
Equity in net income of subsidiaries  (21,652)   -   -   21,652   -
Changes in assets and liabilities:              
Additions to DAC, SIA, VOBA and VOCRA  (102,601)   (9,204)   -   -   (111,805)
Accrued investment income  5,664   (258)   417   -   5,823
Net change in reinsurance receivable/payable  42,315   18,188   (16)   -   60,487
Future contract and policy benefits  (21,416)   3,721   78   -   (17,617)
Other, net  (12,456)   (261)   (10,051)   -   (22,768)
               
Net cash provided by (used in) operating activities  327,249   57,256   (6,609)   -   377,896
               
Cash Flows From Investing Activities:              
Sales, maturities and repayments of:              
Available-for-sale fixed maturity securities   165,844   35,342   12,583   -   213,769
Trading fixed maturity securities  1,863,404   204,146   -   -   2,067,550
Mortgage loans  116,163   11,182   3,039   (14,833)   115,551
Real Estate transfer to (from) Subs  (27,388)   -   27,388   -   -
Other invested assets  (73,074)   1,444   -   -   (71,630)
Purchases of:              
Available-for-sale fixed maturity securities  (292,156)   (43,265)   (16,764)   -   (352,185)
Trading fixed maturity securities  (978,879)   (178,355)   -   -   (1,157,234)
Mortgage loans  (14)   (549)   (13,556)   12,624   (1,495)
Real estate  (8,678)   -   (1,587)   2,209   (8,056)
Other invested assets (2)  (44,271)   -   0   -   (44,271)
Net change in other investments  -   -   -   -   -
Net change in policy loans   (11,248)   207   (235)   -   (11,276)
Net change in short-term investments   800,748   18,994   -   -   819,742
               
Net cash provided by investing activities$ 1,510,451 $ 49,146 $ 10,868 $ - $ 1,570,465

Continued on next page

 

(1)       SLUS as parent's sale of other invested assets includes $(84.6) million related to settlement of derivative instruments during the six-month period ended June 30, 2011.

(2)       SLUS as parent's purchase of other invested assets include $43.2 million related to issuances of derivative instruments during the six-month period ended June 30, 2011.

 

 

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

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

 

 

 SLUS as Parent SLNY Other Subs  Elimination Consolidated Company
               
Cash Flows From Financing Activities:              
Additions to contractholder deposit funds$ 481,944 $ 60,849 $ - $ - $ 542,793
Withdrawals from contractholder deposit funds  (1,102,115)   (128,433)   (406)   -   (1,230,954)
Additional capital contributed to subsidiaries  (23,888)   -   -   23,888   -
Return of capital from Subsidiaries  28,629   -   -   (28,629)   -
Capital contribution from Parent  -   -   23,888   (23,888)   -
Return of capital to Parent  -   -   (28,629)   28,629   -
Other, net  (8,731)   (9,667)   -   -   (18,398)
               
Net cash used in financing activities  (624,161)   (77,251)   (5,147)   -   (706,559)
               
Net change in cash and cash equivalents  1,213,539   29,151   (888)   -   1,241,802
               
Cash and cash equivalents, beginning of period  647,579   72,978   15,766   -   736,323
               
Cash and cash equivalents, end of period$ 1,861,118 $ 102,129 $ 14,878 $ - $ 1,978,125
               
               

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

 
Condensed Consolidating Statements of Cash Flow
For the six-month period ended June 30, 2010

 SLUS as Parent SLNY Other Subs  Elimination Consolidated Company
               
Cash Flows From Operating Activities:              
Net income (loss)$256,451 $(16,708) $400 $16,308 $256,451
Adjustments to reconcile net income (loss) to net cash provided by operating activities:              
Net amortization of premiums on investments 8,356  1,597  412  -  10,365
Amortization of DAC, VOBA and VOCRA (294,707)  41,475  -  -  (253,232)
Depreciation and amortization 1,858  156  416  -  2,430
Net losses on derivatives 462,688  46,981  -  -  509,669
Net realized (gains) losses and OTTI credit losses on available-for-sale investments (15,647)  (450)  643  -  (15,454)
Net increase in fair value of trading investments (414,928)  (34,926)  -  -  (449,854)
Net realized losses (gains) on trading investments 37,643  (6,821)  -  -  30,822
Undistributed loss on private equity limited partnerships 492  -  -  -  492
Interest credited to contractholder deposits 151,353  25,011  447  -  176,811
Deferred federal income taxes  152,706  (8,684)  (266)   -   143,756
Equity in net loss of subsidiaries 16,308  0  0   (16,308)   -
Changes in assets and liabilities:              
Additions to DAC, SIA, VOBA and VOCRA (104,733)  (13,213)  -  -  (117,946)
Accrued investment income 7,446  (2,792)  69  -  4,723
Net change in reinsurance receivable/payable 32,707  4,023  59  -  36,789
Future contract and policy benefits 6,552  5,155  -  -  11,707
Other, net 110,812  27,657  (441)  -  138,028
               
Net cash provided by operating activities 415,357  68,461  1,739  -  485,557
               
Cash Flows From Investing Activities:              
Sales, maturities and repayments of:              
Available-for-sale fixed maturity securities  263,284  15,673  5,695  -  284,652
Trading fixed maturity securities 1,085,123  403,321  -  -  1,488,444
Mortgage loans 103,022  5,428  178  (16,208)  92,420
Real estate -  1,000  -  (1,000)  -
Other invested assets (1) 151,609  790  501  -  152,900
Purchases of:              
Available-for-sale fixed maturity securities (519,345)  (79,282)  (3,665)  -  (602,292)
Trading fixed maturity securities (2,050,758)  (421,351)  -  -  (2,472,109)
Mortgage loans (43)  (28,440)  (16,276)  16,208  (28,551)
Real estate (2,627)  -  (347)  1,000  (1,974)
Other invested assets (2) (27,963)  (292)  -  -  (28,255)
Net change in policy loans  9,680  (1,229)  305  -  8,756
Net change in short-term investments  1,133,234  58,991  0  -  1,192,225
               
Net cash provided by (used in) investing activities$145,216 $(45,391) $(13,609) $- $86,216

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(1)       SLUS as parent's sale of other invested assets includes $100.5 million related to settlement of derivative instruments during the six-month period ended June 30, 2010.

(2)       SLUS as parent's purchase of other invested assets includes $27.4 million related to issuances of derivative instruments during the six-month period ended June 30, 2010.

 

 

10. CONDENSED CONSOLIDATING FINANCIAL INFORMATION (CONTINUED)

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

 

 

 SLUS as Parent SLNY Other Subs  Elimination Consolidated Company
               
Cash Flows From Financing Activities:              
Additions to contractholder deposit funds$552,828 $95,073 $- $- $647,901
Withdrawals from contractholder deposit funds (1,210,817)  (123,089)  (2,216)  -  (1,336,122)
Additonal capital contributed to subsidiaries (17,520)  -  -  17,520   -
Capital contribution from Parent 400,000  -  17,520  (17,520)  400,000
Other, net (9,086)  (3,610)  (65)  -  (12,761)
               
Net cash (used in) provided by financing activities (284,595)  (31,626)  15,239  -  (300,982)
               
Net change in cash and cash equivalents 275,978  (8,556)  3,369  -  270,791
               
Cash and cash equivalents, beginning of period 1,616,991  175,322  11,895  -  1,804,208
               
Cash and cash equivalents, end of period$1,892,969 $166,766 $15,264 $- $2,074,999