FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2016

Schedule of assets and liabilities measured at fair value on a recurring basis

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2016 (Successor Company):



	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	1,889,604	$	3	$	1,889,607
Commercial mortgage-backed securities	—		1,782,497		—		1,782,497
Other asset-backed securities	—		648,929		562,604		1,211,533
U.S. government-related securities	1,002,020		266,139		—		1,268,159
State, municipalities, and political subdivisions	—		1,656,503		—		1,656,503
Other government-related securities	—		237,926		—		237,926
Corporate securities	—		26,560,603		664,046		27,224,649
Preferred stock	66,781		19,062		—		85,843
Total fixed maturity securities - available-for-sale	1,068,801		33,061,263		1,226,653		35,356,717
Fixed maturity securities - trading
Residential mortgage-backed securities	—		255,027		—		255,027
Commercial mortgage-backed securities	—		149,683		—		149,683
Other asset-backed securities	—		115,521		84,563		200,084
U.S. government-related securities	22,424		4,537		—		26,961
State, municipalities, and political subdivisions	—		316,519		—		316,519
Other government-related securities	—		63,012		—		63,012
Corporate securities	—		1,619,097		5,492		1,624,589
Preferred stock	3,985		—		—		3,985
Total fixed maturity securities - trading	26,409		2,523,396		90,055		2,639,860
Total fixed maturity securities	1,095,210		35,584,659		1,316,708		37,996,577
Equity securities	650,231		—		65,786		716,017
Other long-term investments ⁽¹⁾	82,420		335,497		115,516		533,433
Short-term investments	313,835		1,999		—		315,834
Total investments	2,141,696		35,922,155		1,498,010		39,561,861
Cash	214,439		—		—		214,439
Assets related to separate accounts
Variable annuity	13,244,252		—		—		13,244,252
Variable universal life	895,925		—		—		895,925
Total assets measured at fair value on a recurring basis	$	16,496,312	$	35,922,155	$	1,498,010	$	53,916,477

Liabilities:
Annuity account balances⁽²⁾	$	—	$	—	$	87,616	$	87,616
Other liabilities⁽¹⁾⁽³⁾	13,004		255,241		405,803		674,048
Total liabilities measured at fair value on a recurring basis	$	13,004	$	255,241	$	493,419	$	761,664


(1)	Includes certain freestanding and embedded derivatives.


(2)	Represents liabilities related to fixed indexed annuities.


(3)	During 2016, the Company revised its methodology for assessing inputs to its valuation of certain centrally cleared derivatives. The change in estimate resulted in a transfer of $169.4 million in other long-term investments and $120.0 million in other liabilities from Level 1 to Level 2 of the fair value hierarchy.

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2015 (Successor Company):



	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	1,765,270	$	3	$	1,765,273
Commercial mortgage-backed securities	—		1,285,864		—		1,285,864
Other asset-backed securities	—		210,020		587,031		797,051
U.S. government-related securities	1,054,353		477,824		—		1,532,177
State, municipalities, and political subdivisions	—		1,603,600		—		1,603,600
Other government-related securities	—		17,740		—		17,740
Corporate securities	83		24,876,455		902,119		25,778,657
Preferred stock	43,073		19,614		—		62,687
Total fixed maturity securities - available-for-sale	1,097,509		30,256,387		1,489,153		32,843,049

Fixed maturity securities - trading
Residential mortgage-backed securities	—		286,658		—		286,658
Commercial mortgage-backed securities	—		146,743		—		146,743
Other asset-backed securities	—		122,511		152,912		275,423
U.S. government-related securities	233,592		4,755		—		238,347
State, municipalities, and political subdivisions	—		313,354		—		313,354
Other government-related securities	—		58,827		—		58,827
Corporate securities	—		1,322,276		18,225		1,340,501
Preferred stock	2,794		1,402		—		4,196
Total fixed maturity securities - trading	236,386		2,256,526		171,137		2,664,049
Total fixed maturity securities	1,333,895		32,512,913		1,660,290		35,507,098
Equity securities	620,358		13,063		66,504		699,925
Other long-term investments ⁽¹⁾	113,699		141,487		68,384		323,570
Short-term investments	261,659		2,178		—		263,837
Total investments	2,329,611		32,669,641		1,795,178		36,794,430
Cash	212,358		—		—		212,358
Assets related to separate accounts
Variable annuity	12,829,188		—		—		12,829,188
Variable universal life	827,610		—		—		827,610
Total assets measured at fair value on a recurring basis	$	16,198,767	$	32,669,641	$	1,795,178	$	50,663,586

Liabilities:
Annuity account balances ⁽²⁾	$	—	$	—	$	92,512	$	92,512
Other liabilities ⁽¹⁾	40,067		106,310		375,848		522,225
Total liabilities measured at fair value on a recurring basis	$	40,067	$	106,310	$	468,360	$	614,737


(1)	Includes certain freestanding and embedded derivatives.


(2)	Represents liabilities related to fixed indexed annuities.

Schedule of valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:



	Successor Company
	Fair Value As of December 31, 2015		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	587,031	Discounted cash flow	Liquidity premium	0.27% - 1.49% (0.42%)
				Paydown rate	10.20% - 14.72% (13.11%)
Corporate securities	875,810		Discounted cash flow	Spread over treasury	0.10% - 19.00% (2.61%)
Liabilities:⁽¹⁾
Embedded derivatives—GLWB⁽²⁾	$	18,511	Actuarial cash flow model	Mortality	1994 MGDB table with company experience
				Lapse	0.3% - 15%, depending on product/duration/funded status of guarantee
				Utilization	99%. 10% of policies have a one-time over-utilization of 400%
				Nonperformance risk	0.18% - 1.04%
Annuity account balances⁽³⁾	92,512		Actuarial cash flow model	Asset earned rate	4.53% - 5.67%
				Expenses	$81 per policy
				Withdrawal rate	2.20%
				Mortality	1994 MGDB table with company experience
				Lapse	2.2% - 33.0%, depending on duration/surrender charge period
				Return on assets	1.50% - 1.85% depending on surrender charge period
				Nonperformance risk	0.18% - 1.04%
Embedded derivative—FIA	100,329		Actuarial cash flow model	Expenses	$81.50 per policy
				Withdrawal rate	1.1% - 4.5% depending on duration and tax qualification
				Mortality	1994 MGDB table with company experience
				Lapse	2.5% - 40.0%, depending on duration/surrender charge period
				Nonperformance risk	0.18% - 1.04%
Embedded derivative—IUL	29,629		Actuarial cash flow model	Mortality	38% - 153% of 2015
					VBT Primary Tables
				Lapse	0.5% - 10.0%, depending on duration/distribution channel and smoking class
				Nonperformance risk	0.18% - 1.04%


(1)	Excludes modified coinsurance arrangements.


(2)	The fair value for the GLWB embedded derivative is presented as a net liability.


(3)	Represents liabilities related to fixed indexed annuities.

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:



	Successor Company
	Fair Value As of December 31, 2016		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	553,308	Liquidation	Liquidation value	$88 - $97.25 ($95.04)
Corporate securities	638,279		Discounted cash flow	Spread over treasury	0.31% - 4.50% (2.04%)
Liabilities:⁽¹⁾
Embedded derivatives—GLWB⁽²⁾	$	7,031	Actuarial cash flow model	Mortality	91.1% to 106.6% of Ruark 2015 ALB Table
				Lapse	0.3% - 15%, depending on product/duration/funded status of guarantee
				Utilization	99%. 10% of policies have a one-time over-utilization of 400%
				Nonperformance risk	0.18% - 1.09%
Embedded derivative—FIA	147,368		Actuarial cash flow model	Expenses	$126 per policy
				Asset Earned Rate	4.08% - 4.66%
				Withdrawal rate	1% prior to age 70, 100% of the RMD for ages 70+
				Mortality	1994 MGDB table with company experience
				Lapse	2.0% - 40.0%, depending on duration/surrender charge period
				Nonperformance risk	0.18% - 1.09%
Embedded derivative—IUL	46,051		Actuarial cash flow model	Mortality	38% - 153% of 2015 VBT Primary Tables
				Lapse	0.5% - 10.0%, depending on duration/distribution channel and smoking class
				Nonperformance risk	0.18% - 1.09%


(1)	Excludes modified coinsurance arrangements.


(2)	The fair value for the GLWB embedded derivative is presented as a net liability.

Schedule of reconciliation of the beginning and ending balances for fair value measurements, for which the Company has used significant unobservable inputs (Level 3)

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for year ended December 31, 2016 (Successor Company), for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																							Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included In Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—		$	—		$	3	$	—
Commercial mortgage-backed securities	—		—		6		—			(1,608		)	23,559		—			—		—		(21,938		)	(19		)	—		—
Other asset-backed securities	587,031		6,859		42,865		—			(29,673		)	30,441		(79,314		)	—		—		7,457			(3,062		)	562,604		—
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
States, municipals, and political subdivisions	—		—		—		—			—			—		—			—		—		—			—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate securities	902,119		925		40,574		(4,135		)	(33,151		)	102,425		(225,556		)	—		—		(109,792		)	(9,363		)	664,046		—
Total fixed maturity securities - available-for-sale	1,489,153		7,784		83,445		(4,135		)	(64,432		)	156,425		(304,870		)	—		—		(124,273		)	(12,444		)	1,226,653		—
Fixed maturity securities - trading
Residential mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	152,912		5,386		—		(4,790		)	—			—		(70,270		)	—		—		172			1,153			84,563		594
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
States, municipals and political subdivisions	—		—		—		—			—			—		—			—		—		—			—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate securities	18,225		713		—		(442		)	—			10,906		(4,071		)	—		—		(19,722		)	(117		)	5,492		101
Total fixed maturity securities - trading	171,137		6,099		—		(5,232		)	—			10,906		(74,341		)	—		—		(19,550		)	1,036			90,055		695
Total fixed maturity securities	1,660,290		13,883		83,445		(9,367		)	(64,432		)	167,331		(379,211		)	—		—		(143,823		)	(11,408		)	1,316,708		695
Equity securities	66,504		—		—		(740		)	—			22		—			—		—		—			—			65,786		—
Other long-term investments⁽¹⁾	68,384		76,606		—		(30,903		)	—			1,429		—			—		—		—			—			115,516		45,703
Short-term investments	—		—		—		—			—			—		—			—		—		—			—			—		—
Total investments	1,795,178		90,489		83,445		(41,010		)	(64,432		)	168,782		(379,211		)	—		—		(143,823		)	(11,408		)	1,498,010		46,398
Total assets measured at fair value on a recurring basis	$	1,795,178	$	90,489	$	83,445	$	(41,010	)	$	(64,432	)	$	168,782	$	(379,211	)	$	—	$	—	$	(143,823	)	$	(11,408	)	$	1,498,010	$	46,398

Liabilities:
Annuity account balances⁽²⁾	$	92,512	$	—	$	—	$	3,144		$	—		$	—	$	—		$	555	$	9,844	$	—		$	1,249		$	87,616	$	—
Other liabilities⁽¹⁾	375,848		252,324		—		(282,279		)	—			—		—			—		—		—			—			405,803		(29,955		)
Total liabilities measured at fair value on a recurring basis	$	468,360	$	252,324	$	—	$	(279,135	)	$	—		$	—	$	—		$	555	$	9,844	$	—		$	1,249		$	493,419	$	(29,955	)


(1)	Represents certain freestanding and embedded derivatives.


(2)	Represents liabilities related to fixed indexed annuities.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the period of February 1, 2015 to December 31, 2015 (Successor Company), for which the Company has used significant unobservable inputs (Level 3):



																														Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—		$	—		$	3	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	603,646		—		11,040		(92		)	(17,076		)	—		(9,677		)	—		—		—			(810		)	587,031		—
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
States, municipals, and political subdivisions	3,675		—		—		—			—			—		(3,675		)	—		—		—			—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate securities	1,307,259		4,367		24,490		(963		)	(52,898		)	199,924		(407,052		)	—		—		(164,588		)	(8,420		)	902,119		—
Total fixed maturity securities— available-for-sale	1,914,583		4,367		35,530		(1,055		)	(69,974		)	199,924		(420,404		)	—		—		(164,588		)	(9,230		)	1,489,153		—
Fixed maturity securities—trading
Residential mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	169,473		6,260		—		(7,967		)	—			2,000		(15,154		)	—		—		(1,982		)	282			152,912		(5,804		)
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
States, municipals and political subdivisions	—		—		—		—			—			—		—			—		—		—			—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate securities	25,130		501		—		(1,407		)	—			—		(5,805		)	—		—		—			(194		)	18,225		(1,430		)
Total fixed maturity securities—trading	194,603		6,761		—		(9,374		)	—			2,000		(20,959		)	—		—		(1,982		)	88			171,137		(7,234		)
Total fixed maturity securities	2,109,186		11,128		35,530		(10,429		)	(69,974		)	201,924		(441,363		)	—		—		(166,570		)	(9,142		)	1,660,290		(7,234		)
Equity securities	66,691		—		44		—			—			—		(231		)	—		—		—			—			66,504		—
Other long-term investments⁽¹⁾	64,200		52,792		—		(48,608		)	—			—		—			—		—		—			—			68,384		4,184
Short-term investments	—		—		—		—			—			—		—			—		—		—			—			—		—
Total investments	2,240,077		63,920		35,574		(59,037		)	(69,974		)	201,924		(441,594		)	—		—		(166,570		)	(9,142		)	1,795,178		(3,050		)
Total assets measured at fair value on a recurring basis	$	2,240,077	$	63,920	$	35,574	$	(59,037	)	$	(69,974	)	$	201,924	$	(441,594	)	$	—	$	—	$	(166,570	)	$	(9,142	)	$	1,795,178	$	(3,050	)

Liabilities:
Annuity account balances⁽²⁾	$	98,279	$	—	$	—	$	(6,156	)	$	—		$	—	$	—		$	368	$	12,291	$	—		$	—		$	92,512	$	—
Other liabilities⁽¹⁾	530,118		278,171		—		(123,901		)	—			—		—			—		—		—			—			375,848		154,270
Total liabilities measured at fair value on a recurring basis	$	628,397	$	278,171	$	—	$	(130,057	)	$	—		$	—	$	—		$	368	$	12,291	$	—		$	—		$	468,360	$	154,270


(1)	Represents certain freestanding and embedded derivatives.


(2)	Represents liabilities related to fixed indexed annuities.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the period of January 1, 2015 to January 31, 2015 (Predecessor Company), for which the Company has used significant unobservable inputs (Level 3):



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																						Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3		Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—	$	—		$	3	$	—
Commercial mortgage-backed securities	—		—				—			—			—		—			—		—		—					—		—
Other asset-backed securities	563,961		—		—		—			(3,867		)	—		(32		)	—		—		43,205		379			603,646		—
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
States, municipals, and political subdivisions	3,675		—		—		—			—			—		—			—		—		—		—			3,675		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Corporate securities	1,325,683		—		12,282		—			(23,029		)	—		(7,062		)	—		—		—		(615		)	1,307,259		—
Total fixed maturity securities - available-for-sale	1,893,322		—		12,282		—			(26,896		)	—		(7,094		)	—		—		43,205		(236		)	1,914,583		—
Fixed maturity securities - trading
Residential mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Other asset-backed securities	169,461		586		—		(139		)	—			—		(472		)	—		—		—		37			169,473		447
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—					—		—
States, municipals and political subdivisions	—		—		—		—			—			—		—			—		—		—		—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Corporate securities	24,744		602		—		(196		)	—			—		(20		)	—		—		—		—			25,130		406
Total fixed maturity securities - trading	194,205		1,188		—		(335		)	—			—		(492		)	—		—		—		37			194,603		853
Total fixed maturity securities	2,087,527		1,188		12,282		(335		)	(26,896		)	—		(7,586		)	—		—		43,205		(199		)	2,109,186		853
Equity securities	66,691		—		—		—			—			—		—			—		—		—		—			66,691		—
Other long-term investments⁽¹⁾	44,625		16,617		—		(15,166		)	—			—		—			—		—		—		—			46,076		1,451
Short-term investments	—		—		—		—			—			—		—			—		—		—		—			—		—
Total investments	2,198,843		17,805		12,282		(15,501		)	(26,896		)	—		(7,586		)	—		—		43,205		(199		)	2,221,953		2,304
Total assets measured at fair value on a recurring basis	$	2,198,843	$	17,805	$	12,282	$	(15,501	)	$	(26,896	)	$	—	$	(7,586	)	$	—	$	—	$	43,205	$	(199	)	$	2,221,953	$	2,304

Liabilities:
Annuity account balances(2)	$	97,825	$	—	$	—	$	(536	)	$	—		$	—	$	—		$	7	$	419	$	—	$	—		$	97,949	$	—
Other liabilities(1)	506,343		61		—		(125,995		)	—			—		—			—		—		—		—			632,277		(125,934		)
Total liabilities measured at fair value on a recurring basis	$	604,168	$	61	$	—	$	(126,531	)	$	—		$	—	$	—		$	7	$	419	$	—	$	—		$	730,226	$	(125,934	)


(1)	Represents certain freestanding and embedded derivatives.


(2)	Represents liabilities related to fixed indexed annuities.

Schedule of the carrying amounts and estimated fair value of the Company's financial instruments

The carrying amounts and estimated fair values of the Company’s financial instruments as of the periods shown below are as follows:



		Successor Company
		As of December 31,
		2016				2015
	Fair Value Level	Carrying Amounts		Fair Values		Carrying Amounts		Fair Values
		(Dollars In Thousands)
Assets:
Mortgage loans on real estate	3	$	6,132,125	$	5,930,992	$	5,662,812	$	5,529,803
Policy loans	3	1,650,240		1,650,240		1,699,508		1,699,508
Fixed maturities, held-to-maturity⁽¹⁾	3	2,770,177		2,733,340		593,314		515,000

Liabilities:
Stable value product account balances	3	$	3,501,636	$	3,488,877	$	2,131,822	$	2,124,712
Future policy benefits and claims⁽²⁾	3	221,634		221,658		226,499		226,527
Other policyholders' funds⁽³⁾	3	135,367		136,127		132,840		133,657

Debt:
Non-recourse funding obligations⁽⁴⁾	3	$	2,973,829	$	2,939,387	$	1,951,563	$	1,621,773

Except as noted below, fair values were estimated using quoted market prices.


(1)	Securities purchased from unconsolidated subsidiaries, Red Mountain LLC and Steel City LLC.


(2)	Single premium immediate annuity without life contingencies.


(3)	Supplementary contracts without life contingencies.


(4)	Of this carrying amount $565.0 million, fair value of $567.1 million, as of December 31, 2016 (Successor Company) and $500.0 million, fair value of $495.5 million, as of December 31, 2015 (Successor Company), relates to non-recourse funding obligations issued by Golden Gate V.