OPERATING SEGMENTS

The Company has several operating segments each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. The Company periodically evaluates its operating segments, as prescribed in the ASC Segment Reporting Topic, and makes adjustments to its segment reporting as needed. There were no changes to the Company's operating segments made or required to be made as a result of the Merger on February 1, 2015. A brief description of each segment follows.


•	The Life Marketing segment markets fixed UL, IUL, VUL, BOLI, and level premium term insurance (“traditional”) products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, and independent marketing organizations.

•

The Acquisitions segment focuses on acquiring, converting, and servicing policies acquired from other companies. The segment's primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the segment's acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. Policies acquired through the Acquisitions segment are typically blocks of business where no new policies are being marketed. Therefore earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage unless new acquisitions are made.


•	The Annuities segment markets fixed and variable annuity products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.

•

The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. The segment also issues funding agreements to the FHLB, and markets GICs to 401(k) and other qualified retirement savings plans. The Company recently terminated its funding agreement-backed notes program registered with the SEC and, on October 2, 2015, established an unregistered funding agreement-backed notes program.


•	The Asset Protection segment markets extended service contracts and credit life and disability insurance to protect consumers' investments in automobiles and recreational vehicles. In addition, the segment markets a guaranteed asset protection ("GAP") product. GAP coverage covers the difference between the loan pay-off amount and an asset's actual cash value in the case of a total loss.

•

The Corporate and Other segment primarily consists of net investment income on assets supporting our equity capital, unallocated overhead, and expenses not attributable to the segments above. This segment includes earnings from several non-strategic or runoff lines of business, various investment-related transactions, the operations of several small subsidiaries, and the repurchase of non-recourse funding obligations.

The Company uses the same accounting policies and procedures to measure segment operating income (loss) and assets as it uses to measure consolidated net income and assets. Segment operating income (loss) is income before income tax, excluding realized gains and losses on investments and derivatives net of the amortization related to DAC, VOBA, and benefits and settlement expenses. Operating earnings exclude changes in the GMWB embedded derivatives (excluding the portion attributed to economic cost), actual GMWB incurred claims and the related amortization of DAC/VOBA attributed to each of these items.

Segment operating income (loss) represents the basis on which the performance of the Company's business is internally assessed by management. Premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC/VOBA are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Realized investment gains (losses) and other operating expenses are allocated to the segments in a manner that most appropriately reflects the operations of that segment. Investments and other assets are allocated based on statutory policy liabilities net of associated statutory policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable. The goodwill as of December 31, 2015 (Successor Company), was the result of the Dai-ichi Merger. The purchase price was allocated to the segments in proportion to the segment's respective fair value. The allocated purchase price in excess of the fair value of assets and liabilities of each segment resulted in the establishment of that segment's goodwill as of the date of the Merger.

There were no significant intersegment transactions during the period of February 1, 2015 to December 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the years ended December 31, 2014 and 2013 (Predecessor Company).

The following tables summarize financial information for the Company’s segments (Predecessor and Successor period are not comparable):



	Successor Company			Predecessor Company
	February 1, 2015 to December 31, 2015			January 1, 2015 to January 31, 2015			For The Year Ended December 31,
	February 1, 2015 to December 31, 2015			January 1, 2015 to January 31, 2015			2014			2013
	(Dollars In Thousands)			(Dollars In Thousands)
Revenues
Life Marketing	$	1,316,832		$	133,361		$	1,421,795		$	1,324,409
Acquisitions	1,333,430			139,761			1,720,179			1,186,579
Annuities	396,651			130,918			785,176			569,004
Stable Value Products	79,670			8,181			127,708			122,974
Asset Protection	294,657			24,566			305,396			296,782
Corporate and Other	65,802			22,859			103,953			104,922
Total revenues	$	3,487,042		$	459,646		$	4,464,207		$	3,604,670
Segment Operating Income (Loss)
Life Marketing	$	54,864		$	(2,271	)	$	116,875		$	106,812
Acquisitions	194,654			20,134			254,021			154,003
Annuities	146,828			11,363			204,015			166,278
Stable Value Products	56,581			4,529			73,354			80,561
Asset Protection	17,632			1,907			26,274			20,148
Corporate and Other	(118,832		)	(16,662		)	(99,048		)	(74,620		)
Total segment operating income	351,727			19,000			575,491			453,182
Realized investment (losses) gains - investments⁽¹⁾⁽³⁾	(185,202		)	89,414			151,035			(140,236		)
Realized investment (losses) gains - derivatives⁽²⁾	87,663			24,433			12,263			109,553
Income tax expense	(74,491		)	(44,325		)	(246,838		)	(130,897		)
Net income	$	179,697		$	88,522		$	491,951		$	291,602

(1)Investment gains (losses)	$	(193,928	)	$	80,672		$	198,027		$	(143,984	)
Less: amortization related to DAC/VOBA and benefits and settlement expenses	(8,726		)	(8,742		)	46,992			(3,748		)
Realized investment gains (losses)- investments	$	(185,202	)	$	89,414		$	151,035		$	(140,236	)

(2)Derivative gains (losses)	$	58,436		$	22,031		$	(13,492	)	$	82,161
Less: VA GMWB economic cost	(29,227		)	(2,402		)	(25,755		)	(27,392		)
Realized investment gains (losses)- derivatives	$	87,663		$	24,433		$	12,263		$	109,553

Net investment income
Life Marketing	$	446,518		$	47,622		$	553,006		$	521,219
Acquisitions	639,422			71,088			874,653			617,298
Annuities	296,839			37,189			465,849			468,329
Stable Value Products	78,459			6,888			107,170			123,798
Asset Protection	14,042			1,540			18,830			19,046
Corporate and Other	57,516			278			78,505			86,498
Total net investment income	$	1,532,796		$	164,605		$	2,098,013		$	1,836,188

Amortization of DAC and VOBA
Life Marketing	$	107,811		$	4,813		$	175,807		$	25,774
Acquisitions	2,035			5,033			60,031			72,762
Annuities	(41,071		)	(6,999		)	47,448			31,498
Stable Value Products	43			25			380			398
Asset Protection	26,219			1,858			24,169			23,603
Corporate and Other	27			87			485			625
Total amortization of DAC and VOBA	$	95,064		$	4,817		$	308,320		$	154,660


(3)	Includes credit related other-than-temporary impairments of $27.0 million, $0.5 million, $7.3 million, and $22.4 million for the period of February 1, 2015 to December 31, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the years ended December 31, 2014 and 2013 (Predecessor Company), respectively.



Successor Company
	Operating Segment Assets As of December 31, 2015
	(Dollars In Thousands)
	Life Marketing		Acquisitions			Annuities		Stable Value Products
Investments and other assets	$	13,258,639	$	19,879,988		$	19,715,901	$	2,006,263
Deferred policy acquisition costs and value of business acquired	1,119,515		(178,662		)	578,742		2,357
Other intangibles	319,623		39,658			196,780		9,389
Goodwill	200,274		14,524			336,677		113,813
Total assets	$	14,898,051	$	19,755,508		$	20,828,100	$	2,131,822



	Asset Protection		Corporate and Other		Adjustments		Total Consolidated
Investments and other assets	$	766,294	$	9,464,906	$	—	$	65,091,991
Deferred policy acquisition costs and value of business acquired	40,421		—		—		1,562,373
Other intangibles	79,681		—		—		645,131
Goodwill	67,155		—		—		732,443
Total assets	$	953,551	$	9,464,906	$	—	$	68,031,938



Predecessor Company
	Operating Segment Assets As of December 31, 2014
	(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	13,858,491	$	19,858,284	$	20,678,948	$	1,958,867
Deferred policy acquisition costs and value of business acquired	1,973,156		600,482		539,965		621
Goodwill	—		29,419		—		—
Total assets	$	15,831,647	$	20,488,185	$	21,218,913	$	1,959,488



	Asset Protection		Corporate and Other		Adjustments		Total Consolidated
Investments and other assets	$	832,887	$	9,572,018	$	—	$	66,759,495
Deferred policy acquisition costs and value of business acquired	40,503		319		—		3,155,046
Goodwill	48,158		—		—		77,577
Total assets	$	921,548	$	9,572,337	$	—	$	69,992,118