SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2012

SUBSEQUENT EVENTS

SUBSEQUENT EVENTS

16.          SUBSEQUENT EVENTS

The Company has evaluated the effects of events subsequent to September 30, 2012, and through the date it filed its consolidated condensed financial statements with the United States Securities and Exchange Commission. All accounting and disclosure requirements related to subsequent events are included in the Company’s consolidated condensed financial statements.

Subsequent to the current period, Golden Gate V Vermont Captive Insurance Company (“Golden Gate V”) and Red Mountain, LLC (“Red Mountain”), wholly owned subsidiaries of the Company, entered into a 20-year transaction on October 10, 2012, to finance up to $945 million of Actuarial Guideline 38 (“AG 38”, commonly known as “AXXX”) reserves related to a block of universal life insurance policies with secondary guarantees issued on or before June 30, 2012 by the Company and wholly owned subsidiary, West Coast Life Insurance Company (“WCL”). Red Mountain issued a note with an initial principal amount of $275 million, increasing to a maximum of $945 million in 2027, to Golden Gate V for deposit to a reinsurance trust supporting Golden Gate V’s obligations under a reinsurance agreement with WCL, under which WCL cedes liabilities relating to the policies of WCL and retrocedes liabilities relating to the policies of the Company. Through the structure, Hannover Life Reassurance Company of America (“Hannover Re”), the ultimate risk taker in the transaction, provides credit enhancement to the Red Mountain note for the 20-year term in exchange for a fee. The transaction is “non-recourse” to Golden Gate V, Red Mountain, WCL, PLC, and the Company, meaning that none of these companies are liable for the reimbursement of any credit enhancement payments required to be made. The estimated average annual expense for the credit enhancement under generally accepted accounting principles is approximately $4.9 million after-tax.