Fair Value of Financial Instruments (Tables)

12 Months Ended

Sep. 30, 2012

Assets and Liabilities Carrying at Fair Value on Recurring Basis

The carrying amounts and estimated fair values of the Company’s consolidated financial instruments for which the disclosure of fair values is required, including financial assets and liabilities measured and carried at fair value on a recurring basis, with the exception of investment contracts, are summarized according to the hierarchy previously described as follows:

	September 30, 2012
	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets
Consumer Products and Other
Cash and cash equivalents	$	408,889	$	—	$	—	$	408,889	$	408,889
Contingent purchase price reduction receivable		—		—		41,000		41,000		41,000
Short-term investments (including related interest receivable of $5)
Equity securities — trading		146,842		—		—		146,842		146,842
Fixed maturity securities — held-to-maturity		—		35,000		—		35,000		34,991
Derivatives:
Foreign exchange forward agreements		—		1,235		—		1,235		1,235
Commodity swap and option agreements		—		2,002		—		2,002		2,002
Insurance and Financial Services
Cash and cash equivalents		1,059,572		2,250		—		1,061,822		1,061,822
Fixed maturity securities, available-for-sale:
Asset-backed securities		—		1,012,027		15,855		1,027,882		1,027,882
Commercial mortgage-backed securities		—		548,791		5,023		553,814		553,814
Corporates		—		10,873,715		135,296		11,009,011		11,009,011
Hybrids		—		519,422		8,873		528,295		528,295
Municipals		—		1,223,995		—		1,223,995		1,223,995
Agency residential mortgage-backed securities		—		154,890		—		154,890		154,890
Non-agency residential mortgage-backed securities		—		660,659		—		660,659		660,659
U.S. Government		930,367		—		—		930,367		930,367
Equity securities — available-for-sale		—		248,087		—		248,087		248,087
Derivative financial instruments		—		200,667		—		200,667		200,667
Asset-backed loans and other invested assets		—		—		198,868		198,868		198,868
Total financial assets	$	2,545,670	$	15,482,740	$	404,915	$	18,433,325	$	18,433,316
Liabilities
Consumer Products and Other
Total debt	$	524,000	$	1,804,831	$	—	$	2,328,831	$	2,167,039
Derivatives:
Foreign exchange forward agreements		—		9,956		—		9,956		9,956
Commodity swap and option agreements		—		9		—		9		9
Equity conversion feature of preferred stock		—		—		231,950		231,950		231,950
Redeemable preferred stock, excluding equity conversion feature		—		—		368,880		368,880		319,225
Insurance and Financial Services
Derivatives:
FIA embedded derivatives, included in contractholder funds		—		—		1,550,805		1,550,805		1,550,805
Futures contracts		—		928		—		928		928
Investment contracts, included in contractholder funds		—		—		12,271,882		12,271,882		13,739,670
Total financial liabilities	$	524,000	$	1,815,724	$	14,423,517	$	16,763,241	$	18,019,582

	September 30, 2011
	Level 1		Level 2		Level 3		Fair Value		Carrying Amount
Assets
Consumer Products and Other
Cash and cash equivalents	$	321,352	$	—	$	—	$	321,352	$	321,352
Short-term investments (including related interest receivable of $9)
Equity securities — trading		238,062		24,023		—		262,085		262,085
Fixed maturity securities — held to maturity		—		75,899		—		75,899		75,897
Fixed maturity securities — trading		—		12,665		—		12,665		12,665
Derivatives:
Foreign exchange forward agreements		—		3,189		—		3,189		3,189
Commodity swap and option agreements		—		274		—		274		274
Insurance and Financial Services
Cash and cash equivalents		813,239		2,768		—		816,007		816,007
Fixed maturity securities, available-for-sale:
Asset-backed securities		—		125,966		374,518		500,484		500,484
Commercial mortgage-backed securities		—		565,577		—		565,577		565,577
Corporates		—		11,696,090		159,684		11,855,774		11,855,774
Hybrids		—		654,084		5,205		659,289		659,289
Municipals		—		936,484		—		936,484		936,484
Agency residential mortgage-backed securities		—		218,713		3,312		222,025		222,025
Non-agency residential mortgage-backed securities		—		440,758		3,759		444,517		444,517
U.S. Government		183,324		—		—		183,324		183,324
Equity securities — available-for-sale		—		287,043		—		287,043		287,043
Derivative financial instruments		—		52,335		—		52,335		52,335
Other invested assets		—		—		44,279		44,279		44,279
Total financial assets	$	1,555,977	$	15,095,868	$	590,757	$	17,242,602	$	17,242,600
Liabilities
Consumer Products and Other
Total debt	$	500,000	$	1,635,528	$	—	$	2,135,528	$	2,048,780
Derivatives:
Foreign exchange forward agreements		—		25,679		—		25,679		25,679
Interest rate swap agreements		—		1,954		—		1,954		1,954
Commodity swap and option agreements		—		1,232		—		1,232		1,232
Equity conversion feature of preferred stock		—		—		75,350		75,350		75,350
Redeemable preferred stock, excluding equity conversion feature		—		—		337,060		337,060		292,437
Insurance and Financial Services
Derivatives:
FIA embedded derivatives, included in contractholder funds		—		—		1,396,340		1,396,340		1,396,340
Futures contracts		—		3,828		—		3,828		3,828
Available-for-sale embedded derivative		—		—		400		400		400
Investment contracts, included in contractholder funds		—		—		11,992,013		11,992,013		13,153,630
Note payable		—		95,000		—		95,000		95,000
Total financial liabilities	$	500,000	$	1,763,221	$	13,801,163	$	16,064,384	$	17,094,630

Schedule of Unobservable Inputs Used for Level Three Fair Value Measurements of Financial Instruments on Recurring Basis

Quantitative information regarding significant unobservable inputs used for recurring Level 3 fair value measurements of financial instruments carried at fair value as of September 30, 2012 is as follows:

	Fair Value at September 30, 2012		Valuation technique	Unobservable input(s)	Range (Weighted average)
Assets
Contingent purchase price reduction receivable	$	41,000	Discounted cash flow	Probability of collection Expected term Discount rate Credit insurance risk premium	88% - 96% (92%) 9 months 0.72% 11.7%
Asset-backed securities		15,855	Broker-quoted	Offered quotes	100% - 109.73% (103.09%)
Corporates		103,319	Broker-quoted	Offered quotes	0% - 140.61% (68.47%)
Corporates		31,977	Market pricing	Quoted prices	87.50% - 158.11% (97.89%)
Hybrids		8,873	Broker-quoted	Offered quotes	0% - 103% (25.35%)
Commercial mortgage-backed securities		5,023	Broker-quoted	Offered quotes	100.69%
Total	$	206,047
Liabilities
FIA embedded derivatives, included in contractholder funds	$	1,550,805	Discounted cash flow	Market value of option SWAP rates Mortality multiplier Surrender rates Non-performance spread	0% - 31.05% (3.55%) 0.76% - 1.7% (1.22%) 70% - 70% (70%) 2% - 50% (7%) 0.25% - 0.25% (0.25%)
Equity conversion feature of preferred stock		231,950	Monte Carlo simulation / Option model	Annualized volatility of equity Discount yield Non-cash accretion rate Calibration adjustment	41% 11.5% - 12.7% (11.9%) 0% 10% - 13% (10.9%)
Total	$	1,782,755

Changes in Fair Value of Financial Instruments

The following tables summarize changes to the Company’s financial instruments carried at fair value and classified within Level 3 of the fair value hierarchy for the years ended September 30, 2012 and 2011 (none in Fiscal 2010). This summary excludes any impact of amortization of VOBA and DAC. The gains and losses below may include changes in fair value due in part to observable inputs that are a component of the valuation methodology.

	Year Ended September 30, 2012
	Balance at Beginning of Period			Total Gains (Losses)						Net Purchases, Sales & Settlements			Net Transfer In (Out) of Level 3 (a)			Balance at End of Period
				Included in Earnings			Included in AOCI
Assets
Contingent purchase price reduction receivable	$	—		$	41,000		$	—		$	—		$	—		$	41,000
Fixed maturity securities, available-for-sale:
Asset-backed securities		374,518			—			7,355			371,896			(737,914	)		15,855
Commercial mortgage-backed securities		—			—			24			4,999			—			5,023
Corporates		159,684			28			(3,662	)		(39,686	)		18,932			135,296
Hybrids		5,205			—			(44	)		—			3,712			8,873
Municipals		—			(2	)		72			10,177			(10,247	)		—
Agency residential mortgage-backed securities		3,312			—			18			—			(3,330	)		—
Non-agency residential mortgage-backed securities		3,759			(126	)		4			(777	)		(2,860	)		—
Total assets at Level 3 fair value	$	546,478		$	40,900		$	3,767		$	346,609		$	(731,707	)	$	206,047
Liabilities
FIA embedded derivatives, included in contractholder funds	$	(1,396,340	)	$	(154,465	)	$	—		$	—		$	—		$	(1,550,805	)
Available-for-sale embedded derivatives		(400	)		400			—			—			—			—
Equity conversion feature of preferred stock		(75,350	)		(156,600	)		—			—			—			(231,950	)
Total liabilities at Level 3 fair value	$	(1,472,090	)	$	(310,665	)	$	—		$	—		$	—		$	(1,782,755	)

(a) The net transfers in and out of Level 3 during the year ended September 30, 2012 were exclusively to or from Level 2.

	Year Ended to September 30, 2011
	Balance at FGL Acquisition Date			Total Gains (Losses)					Net Purchases, Sales & Settlements			Net Transfer In (Out) of Level 3 (a)			Balance at End of Period
				Included in Earnings		Included in AOCI
Assets
Fixed maturity securities, available-for-sale:
Asset-backed securities	$	399,967		$	—	$	863		$	(11,709	)	$	(14,603	)	$	374,518
Corporates		197,573			1,993		5,408			(45,229	)		(61	)		159,684
Hybrids		8,305			—		(61	)		—			(3,039	)		5,205
Agency residential mortgage-backed securities		3,271			—		41			—			—			3,312
Non-agency residential mortgage-backed securities		18,519			2,364		379			(17,503	)		—			3,759
Total assets at Level 3 fair value	$	627,635		$	4,357	$	6,630		$	(74,441	)	$	(17,703	)	$	546,478
Liabilities
FIA embedded derivatives, included in contractholder funds	$	(1,466,308	)	$	69,968	$	—		$	—		$	—		$	(1,396,340	)
Available-for-sale embedded derivatives		(419	)		19		—			—			—			(400	)
Equity conversion feature of preferred stock		—			27,910		—			(103,260	)		—			(75,350	)
Total liabilities at Level 3 fair value	$	(1,466,727	)	$	97,897	$	—		$	(103,260	)	$	—		$	(1,472,090	)

(a) The net transfers in and out of Level 3 during the year ended September 30, 2011 were exclusively to or from Level 2.

Gross Components of Purchases, Sales, and Settlements, Net, of Level 3 Financial Instruments

The following tables present the gross components of purchases, sales, and settlements, net, of Level 3 financial instruments for the years ended September 30, 2012 and 2011. There were no issuances during these periods.

	Year Ended September 30, 2012
	Purchases		Sales			Settlements			Net Purchases, Sales & Settlements
Assets
Fixed maturity, securities available-for-sale:
Asset-backed securities	$	410,707	$	—		$	(38,811	)	$	371,896
Commercial mortgage-backed securities		4,999		—			—			4,999
Corporates		1,326		(26,788	)		(14,224	)		(39,686	)
Municipals		10,197		—			(20	)		10,177
Non-agency residential mortgage-backed securities		—		(475	)		(302	)		(777	)
Total assets at Level 3 fair value	$	427,229	$	(27,263	)	$	(53,357	)	$	346,609

	Year Ended September 30, 2011
	Purchases		Sales			Settlements			Net Purchases, Sales & Settlements
Assets
Fixed maturity, securities available-for-sale:
Asset-backed securities	$	2,007	$	—		$	(13,716	)	$	(11,709	)
Corporates		10,365		(48,898	)		(6,696	)		(45,229	)
Non-agency residential mortgage-backed securities		—		(15,729	)		(1,774	)		(17,503	)
Total assets at Level 3 fair value	$	12,372	$	(64,627	)	$	(22,186	)	$	(74,441	)
Liabilities
Equity conversion option of preferred stock	$	—	$	(103,260	)	$	—		$	(103,260	)