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.

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The Life Marketing segment markets fixed universal life (“UL”), indexed universal life, variable universal life (“VUL”), bank-owned life insurance (“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, independent marketing organizations and affinity groups.

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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 VA products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.

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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 guaranteed investment contracts (“GICs”) to 401(k) and other qualified retirement savings plans. The Company also has an unregistered funding agreement-backed notes program which provides for offers of notes to both domestic and international institutional investors.


•	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.

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The Corporate and Other segment primarily consists of net investment income on assets supporting our equity capital, unallocated corporate 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.

There were no significant intersegment transactions during the three and six months ended June 30, 2016 (Successor Company), the three months ended June 30, 2015 (Successor Company), the period of February 1, 2015 to June 30, 2015 (Successor Company), and the period of January 1, 2015 to January 31, 2015 (Predecessor Company).

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



	Successor Company												Predecessor Company
	For The Three Months Ended June 30, 2016			For The Three Months Ended June 30, 2015			For The Six Months Ended June 30, 2016			February 1, 2015 to June 30, 2015			January 1, 2015 to January 31, 2015
	(Dollars In Thousands)												(Dollars In Thousands)
Revenues
Life Marketing	$	384,823		$	347,691		$	765,897		$	602,613		$	133,361
Acquisitions	453,848			363,985			878,655			622,774			139,761
Annuities	188,597			43,468			407,113			92,812			130,918
Stable Value Products	26,237			16,656			56,139			26,998			8,181
Asset Protection	76,419			77,625			150,098			126,921			24,566
Corporate and Other	44,918			13,528			76,842			31,796			22,859
Total revenues	$	1,174,842		$	862,953		$	2,334,744		$	1,503,914		$	459,646
Segment Operating Income (Loss)
Life Marketing	$	25,098		5,672			38,224			$	9,953		$	(2,271	)
Acquisitions	45,285			37,876			113,938			73,946			20,134
Annuities	47,480			40,513			92,756			71,886			11,363
Stable Value Products	15,178			9,349			29,626			15,464			4,529
Asset Protection	4,141			4,880			8,397			8,523			1,907
Corporate and Other	(30,248		)	(36,374		)	(64,990		)	(50,331		)	(16,662		)
Total segment operating income	106,934			61,916			217,951			129,441			19,000
Realized investment (losses) gains - investments⁽¹⁾	100,889			(115,716		)	184,031			(158,649		)	89,414
Realized investment (losses) gains - derivatives	52,757			18,233			93,577			18,177			24,433
Income tax (expense) benefit	(87,787		)	9,991			(164,149		)	1,875			(44,325		)
Net income (loss)	$	172,793		$	(25,576	)	$	331,410		$	(9,156	)	$	88,522

All other investment gains (losses)	$	87,816		$	(108,081	)	$	166,908		$	(143,137	)	$	80,672
Less: amortization related to DAC/VOBA and benefits and settlement expenses	(13,073		)	7,635			(17,123		)	15,512			(8,742		)
Realized investment gains (losses) - investments	$	100,889		$	(115,716	)	$	184,031		$	(158,649	)	$	89,414

Derivative financial instruments gains (losses)	$	43,548		$	10,566		$	75,456		$	5,618		$	22,031
Less: VA GMWB economic cost	(9,209		)	(7,667		)	(18,121		)	(12,559		)	(2,402		)
Realized investment gains (losses) - derivatives	$	52,757		$	18,233		$	93,577		$	18,177		$	24,433

(1) Includes credit related other-than-temporary impairments of $1.0 million, $3.6 million, $5.7 million, $5.7 million, and $0.5 million for the three and six months ended June 30, 2016 (Successor Company), the three months ended June 30, 2015 (Successor Company), the period of February 1, 2015 to June 30, 2015 (Successor Company), and for the period of January 1, 2015 to January 31, 2015 (Predecessor Company), respectively.



	Operating Segment Assets As of June 30, 2016 (Successor Company)
	(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	13,916,859	$	20,052,484	$	19,873,357	$	2,711,452
Deferred policy acquisition costs and value of business acquired	1,134,643		93,983		625,628		4,353
Other intangibles	310,141		38,380		190,116		9,056
Goodwill	200,274		14,524		336,677		113,813
Total assets	$	15,561,917	$	20,199,371	$	21,025,778	$	2,838,674



	Asset Protection		Corporate and Other		Total Consolidated
Investments and other assets	$	812,678	$	13,755,465	$	71,122,295
Deferred policy acquisition costs and value of business acquired	36,559		—		1,895,166
Other intangibles	76,782		—		624,475
Goodwill	67,155		—		732,443
Total assets	$	993,174	$	13,755,465	$	74,374,379



	Operating Segment Assets As of December 31, 2015 (Successor Company)
	(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		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