MONY CLOSED BLOCK OF BUSINESS

In 1998, MONY Life Insurance Company (“MONY”) converted from a mutual insurance company to a stock corporation (“demutualization”). In connection with its demutualization, an accounting mechanism known as a closed block (the “Closed Block”) was established for certain individuals’ participating policies in force as of the date of demutualization. Assets, liabilities, and earnings of the Closed Block are specifically identified to support its participating policyholders. The Company acquired the Closed Block in conjunction with the acquisition of MONY in 2013.

Assets allocated to the Closed Block inure solely to the benefit of each Closed Block’s policyholders and will not revert to the benefit of MONY or the Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of MONY’s general account, any of MONY’s separate accounts or any affiliate of MONY without the approval of the Superintendent of The New York State Department of Financial Services (the “Superintendent”). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the general account.

The excess of Closed Block liabilities over Closed Block assets (adjusted to exclude the impact of related amounts in accumulated other comprehensive income (loss) (“AOCI”)) at the acquisition date of October 1, 2013, represented the estimated maximum future post-tax earnings from the Closed Block that would be recognized in income from continuing operations over the period the policies and contracts in the Closed Block remain in force. In connection with the acquisition of MONY, the Company developed an actuarial calculation of the expected timing of MONY’s Closed Block’s earnings as of October 1, 2013. Pursuant to the acquisition of the Company by Dai-ichi Life, this actuarial calculation of the expected timing of MONY’s Closed Block earnings was recalculated and reset as of February 1, 2015, along with the establishment of a policyholder dividend obligation as of such date.

If the actual cumulative earnings from the Closed Block are greater than the expected cumulative earnings, only the expected earnings will be recognized in the Company’s net income. Actual cumulative earnings in excess of expected cumulative earnings at any point in time are recorded as a policyholder dividend obligation because they will ultimately be paid to Closed Block policyholders as an additional policyholder dividend unless offset by future performance that is less favorable than originally expected. If a policyholder dividend obligation has been previously established and the actual Closed Block earnings in a subsequent period are less than the expected earnings for that period, the policyholder dividend obligation would be reduced (but not below zero). If, over the period the policies and contracts in the Closed Block remain in force, the actual cumulative earnings of the Closed Block are less than the expected cumulative earnings, only actual earnings would be recognized in income from continuing operations. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside the Closed Block.

Many expenses related to Closed Block operations, including amortization of VOBA, are charged to operations outside of the Closed Block; accordingly, net revenues of the Closed Block do not represent the actual profitability of the Closed Block operations. Operating costs and expenses outside of the Closed Block are, therefore, disproportionate to the business outside of the Closed Block.

Summarized financial information for the Closed Block as of September 30, 2016 (Successor Company) and December 31, 2015 (Successor Company) is as follows:



	Successor Company
	As of September 30, 2016		As of December 31, 2015
	(Dollars In Thousands)
Closed block liabilities
Future policy benefits, policyholders’ account balances and other policyholder liabilities	$	5,913,411	$	6,010,520
Policyholder dividend obligation	264,107		—
Other liabilities	52,435		24,539
Total closed block liabilities	6,229,953		6,035,059
Closed block assets
Fixed maturities, available-for-sale, at fair value	$	4,696,136	$	4,426,090
Mortgage loans on real estate	201,078		247,162
Policy loans	717,887		746,102
Cash	79,115		34,420
Other assets	155,360		162,640
Total closed block assets	5,849,576		5,616,414
Excess of reported closed block liabilities over closed block assets	380,377		418,645
Portion of above representing accumulated other comprehensive income:
Net unrealized investment gains (losses) net of policyholder dividend obligation of $16,169 (Successor) and $(179,360) (Successor)	—		(18,597		)
Future earnings to be recognized from closed block assets and closed block liabilities	$	380,377	$	400,048

Reconciliation of the policyholder dividend obligation is as follows:



	Successor Company						Predecessor Company
	For The Nine Months Ended September 30, 2016			February 1, 2015 to September 30, 2015			January 1, 2015 to January 31, 2015
	(Dollars In Thousands)						(Dollars In Thousands)
Policyholder dividend obligation, beginning of period	$	—		$	323,432		$	366,745
Applicable to net revenue (losses)	(36,707		)	(27,854		)	(1,369		)
Change in net unrealized investment gains (losses) allocated to the policyholder dividend obligation; includes deferred tax benefits of $(8,706) (Successor); $(83,000) (2015 - Successor); $47,277 (2015 - Predecessor)	300,814			(237,143		)	135,077
Policyholder dividend obligation, end of period	$	264,107		$	58,435		$	500,453

Closed Block revenues and expenses were as follows:



	Successor Company								Predecessor Company
	For The Three Months Ended September 30, 2016		For The Three Months Ended September 30, 2015		For The Nine Months Ended September 30, 2016		February 1, 2015 to September 30, 2015		January 1, 2015 to January 31, 2015
	(Dollars In Thousands)								(Dollars In Thousands)
Revenues
Premiums and other income	$	44,043	$	46,610	$	135,282	$	128,279	$	15,065
Net investment income	53,582		54,593		156,458		142,274		19,107
Net investment gains	326		167		963		3,017		568
Total revenues	97,951		101,370		292,703		273,570		34,740
Benefits and other deductions
Benefits and settlement expenses	88,143		90,966		260,227		245,711		31,152
Other operating expenses	537		258		2,214		733		—
Total benefits and other deductions	88,680		91,224		262,441		246,444		31,152
Net revenues before income taxes	9,271		10,146		30,262		27,126		3,588
Income tax expense	3,245		3,551		10,591		9,494		1,256
Net revenues	$	6,026	$	6,595	$	19,671	$	17,632	$	2,332