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MONY CLOSED BLOCK OF BUSINESS
12 Months Ended
Dec. 31, 2018
Closed Block Disclosure [Abstract]  
MONY CLOSED BLOCK OF BUSINESS
 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 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 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 December 31, 2018 and December 31, 2017 and is as follows:
 
As of December 31,
 
2018
 
2017
 
(Dollars In Thousands)
Closed block liabilities
 

 
 

Future policy benefits, policyholders’ account balances and other policyholder liabilities
$
5,679,732

 
$
5,791,867

Policyholder dividend obligation

 
160,712

Other liabilities
22,505

 
30,764

Total closed block liabilities
5,702,237

 
5,983,343

Closed block assets
 

 
 

Fixed maturities, available-for-sale, at fair value
4,257,437

 
4,669,856

Mortgage loans on real estate
75,838

 
108,934

Policy loans
672,213

 
700,769

Cash and other invested assets
116,225

 
31,182

Other assets
136,388

 
122,637

Total closed block assets
5,258,101

 
5,633,378

Excess of reported closed block liabilities over closed block assets
444,136

 
349,965

Portion of above representing accumulated other comprehensive income:
 

 
 

Net unrealized investments gains (losses) net of policyholder dividend obligation: $(141,128) and $(13,429); and net of income tax: $61,676 and $2,820
(120,528
)
 

Future earnings to be recognized from closed block assets and closed block liabilities
$
323,608

 
$
349,965


Reconciliation of the policyholder dividend obligation is as follows:
 
For The Year Ended December 31,
 
2018
 
2017
 
(Dollars In Thousands)
Policyholder dividend obligation, beginning balance
$
160,712

 
$
31,932

Applicable to net revenue (losses)
(33,014
)
 
(55,241
)
Change in net unrealized investment gains (losses) allocated to policyholder dividend obligation
(127,698
)
 
184,021

Policyholder dividend obligation, ending balance
$

 
$
160,712


Closed Block revenues and expenses were as follows:
 
For The Year Ended December 31,
 
2018
 
2017
 
2016
 
(Dollars In Thousands)
Revenues
 
 
 
 
 
Premiums and other income
$
171,117

 
$
180,097

 
$
189,700

Net investment income
202,282

 
203,964

 
211,175

Net investment gains
(1,970
)
 
910

 
1,524

Total revenues
371,429

 
384,971

 
402,399

Benefits and other deductions
 
 
 

 
 

Benefits and settlement expenses
337,352

 
335,200

 
353,488

Other operating expenses
714

 
1,940

 
2,804

Total benefits and other deductions
338,066

 
337,140

 
356,292

Net revenues before income taxes
33,363

 
47,831

 
46,107

Income tax expense
7,006

 
27,718

 
16,137

Net revenues
$
26,357

 
$
20,113

 
$
29,970