Business Held for Sale and Discontinued Operations

As noted in the Business, Basis of Presentation and Significant Accounting Policies Note, on December 20, 2017, the Company entered into a MTA with VA Capital and Athene (the "Buyers") pursuant to which Venerable will acquire two of the Company’s subsidiaries, VIAC and DSL. The Transaction is expected to close during the second or third quarter of 2018, subject to conditions specified in the MTA, including the receipt of required regulatory approvals, and other conditions. In addition, this transaction will result in the disposition of substantially all of the Company’s CBVA and Annuities businesses.

The purchase price in the transaction will be equal to the difference between the Required Adjusted Book Value (as defined in the MTA) and the Statutory capital in VIAC at closing, after giving effect to certain restructuring and other pre-sale transactions, including the reinsurance of the fixed and fixed indexed annuity business of VIAC. The purchase price for DSL is expected to approximate its carrying value. After the closing, the Company, through its other insurance subsidiaries, will continue to own surplus notes issued by VIAC in an aggregate principal amount of $350 and will acquire a 9.99% equity interest in VA Capital. The receivable for the surplus notes and VIAC's corresponding liability are included in Other assets and Liabilities held for sale, respectively, on the Company's Consolidated Balance Sheets. In the summary of major categories of assets and liabilities held for sale below, VIAC's corresponding liability for the surplus notes is included in Notes payable.

Under the terms of the Transaction, VIAC will, prior to the closing of the transaction, undertake certain restructuring transactions with several current affiliates in order to transfer businesses and assets into and out of VIAC.

In connection with the closing, Voya Investment Management Co., LLC ("Voya IM") or its affiliated advisors, will enter into one or more agreements to perform asset management services for Venerable as part of the transaction. As part of the agreements, Voya IM will serve as the preferred asset management partner for Venerable. Under the agreements, subject to certain criteria, Voya IM will manage certain assets, including, for at least five years following the closing of the transaction, certain general account assets. The Company has also agreed to provide certain transitional services to Venerable for up to 24 months after the closing of the Transaction.

The MTA provides for a $105 reverse termination fee that would be payable by VA Capital to the Company if the MTA is terminated in certain circumstances.

The MTA contains limits on the amount of additional capital we could be required to contribute to meet any increases in the Required Adjusted Book Value and on the amount of capital in excess of such amount that VA Capital could be required to compensate us for if such excess capital were to become trapped in VIAC prior to Transaction closing, in each case subject to certain termination rights.

The Company has determined that the CBVA and Annuities businesses to be disposed of meet the criteria to be classified as held for sale and that the sale represents a strategic shift that will have a major effect on the Company’s operations. Accordingly, the results of operations of the businesses to be sold have been presented as discontinued operations in the accompanying Consolidated Statements of Operations and Consolidated Statements of Cash Flows, and the assets and liabilities of the businesses have been classified as held for sale and segregated for all periods presented in the Consolidated Balance Sheets. A business classified as held for sale is recorded at the lower of its carrying value or estimated fair value less cost to sell. If the carrying value exceeds its estimated fair value less cost to sell, a loss is recognized. Transactions between the businesses held for sale and businesses in continuing operations that are expected to continue to exist after the disposal are not eliminated to appropriately reflect the continuing operations and the assets, liabilities and results of the businesses held for sale.

The results of discontinued operations are reported in "Income (loss) from discontinued operations, net of tax" in the accompanying Consolidated Statements of Operations for all periods presented. In addition, Income (loss) from discontinued operations, net of tax, for the year ended December 31, 2017 includes the estimated loss on sale, net of tax of $2,423. The estimated loss on sale includes estimated transaction costs of $31 that are expected to be incurred through and upon closing of the Transaction as well as the loss of $692 of deferred tax assets. The estimated loss on sale represents the excess of the estimated carrying value of the businesses held for sale over the estimated purchase price, which approximates fair value, less cost to sell. As noted above, the purchase price in the transaction is equal to the difference between the Required Adjusted Book Value and the Statutory capital in VIAC at closing. The Required Adjusted Book Value is based on, subject to certain adjustments, the Conditional Trail Expectation ("CTE") 95 standard which is a statistical tail risk measure under the Standard & Poor’s ("S&P") model which follows the Risk Based capital C-3 Phase II guidelines as stipulated by the National Association of Insurance Commissioners ("NAIC").

The estimated purchase price and estimated carrying value of VIAC as of the future date of closing, and therefore the estimated loss on sale related to the Transaction are subject to adjustment in future quarters until closing, and may be influenced by, but not limited to the following factors:


•	Market fluctuations related to equity securities, interest rates, volatility, credit spreads and foreign exchange rates;


•	The performance of the businesses held for sale and the impact of interest and equity market changes on the Variable Annuity Hedge Program and any other hedging activity the Company may engage in within VIAC;


•	Changes in the terms of the Transaction, including as the result of subsequent negotiations or as necessary to obtain regulatory approval;


•	Other changes in the terms of the Transaction due to unanticipated developments; and


•	Changes in key customers and policyholder behavior as a result of the Transaction or other factors.

The Company is required to remeasure the estimated fair value and loss on sale at the end of each quarter until closing of the Transaction. Changes in the estimated loss on sale that occur prior to closing of the Transaction will be reported as an adjustment to Income (loss) from discontinued operations, net of tax, in future quarters prior to closing.

The following table summarizes the major categories of assets and liabilities classified as held for sale in the accompanying Consolidated Balance Sheets as of December 31, 2017 and 2016:



	As of December 31,
	2017			2016
Assets:
Investments:
Fixed maturities, available-for-sale, at fair value	$	21,904		$	22,075
Fixed maturities, at fair value using the fair value option	615			647
Short-term investments	352			430
Mortgage loans on real estate, net of valuation allowance	4,212			3,722
Derivatives	1,514			976
Other investments⁽¹⁾	351			258
Securities pledged	861			748
Total investments	29,809			28,856
Cash and cash equivalents	498			815
Short-term investments under securities loan agreements, including collateral delivered	473			202
Deferred policy acquisition costs and Value of business acquired	805			890
Sales Inducements	196			206
Deferred income taxes	404			520
Other assets⁽²⁾	396			286
Assets held in separate accounts	28,894			30,934
Write-down of businesses held for sale to fair value less cost to sell	(2,423		)	—
Total assets held for sale	$	59,052		$	62,709

Liabilities:
Future policy benefits and contract owner account balances	$	27,065		$	27,205
Payables under securities loan agreement, including collateral held	1,152			872
Derivatives	782			174
Notes payable	350			350
Other liabilities	34			41
Liabilities related to separate accounts	28,894			30,934
Total liabilities held for sale	$	58,277		$	59,576

⁽¹⁾ Includes Other investments, Equity securities, Limited Partnerships/corporations and Policy loans.

⁽²⁾ Includes Other assets, Accrued investment income, Premium receivable and reinsurance recoverable.

The following table summarizes the components of Income (loss) from discontinued operations, net of tax in the accompanying Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015:



	Year Ended December 31,
	2017			2016			2015
Revenues:
Net investment income	$	1,266		$	1,288		$	1,217
Fee income	801			889			1,011
Premiums	190			720			470
Total net realized capital gains (losses)	(1,234		)	(900		)	(173		)
Other revenue	19			19			22
Total revenues	1,042			2,016			2,547
Benefits and expenses:
Interest credited and other benefits to contract owners/policyholders	978			2,199			1,812
Operating expenses	250			283			319
Net amortization of Deferred policy acquisition costs and Value of business acquired	127			136			286
Interest expense	22			22			22
Total benefits and expenses	1,377			2,640			2,439
Income (loss) from discontinued operations before income taxes	(335		)	(624		)	108
Income tax expense (benefit)	(178		)	(287		)	(38		)
Loss on sale, net of tax	(2,423		)	—			—
Income (loss) from discontinued operations, net of tax	$	(2,580	)	$	(337	)	$	146

For additional information on certain assets, liabilities and other financial information related to businesses held for sale, see the Derivatives Note, Fair Value Measurements (excluding Consolidated Investments Entities) Note and the Guaranteed Benefit Features Note to these Consolidated Financial Statements.