25.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. A brief description of each segment follows.

The Life Marketing segment markets fixed UL, IUL, VUL, 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, and independent marketing organizations.

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.

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 GICs to 401(k) and other qualified retirement savings plans. Additionally, the Company has contracts outstanding pursuant to a funding agreement-backed notes program registered with the SEC which offered notes to both institutional and retail 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.

The Corporate and Other segment primarily consists of net investment income not assigned to the segments above (including the impact of carrying liquidity) 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), realized and unrealized gains (losses) on derivatives used to hedge the VA product, actual GMWB incurred claims and the related amortization of DAC 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. During the year ended December 31, 2013, the Company began allocating realized gains and losses to certain of its segments to better reflect the economics of the investments supporting those segments. This change had no impact to segment operating income. 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 year ended December 31, 2014, 2013, and 2012.

The following tables summarize financial information for the Company’s segments:

	For The Year Ended December 31,
	2014			2013			2012
	(Dollars In Thousands)
Revenues
Life Marketing	$	1,421,795		$	1,324,409		$	1,233,654
Acquisitions	1,720,179			1,186,579			1,064,295
Annuities	785,176			569,004			610,489
Stable Value Products	127,708			122,974			123,274
Asset Protection	305,396			296,782			294,146
Corporate and Other	103,953			104,922			130,202
Total revenues	$	4,464,207		$	3,604,670		$	3,456,060
Segment Operating Income (Loss)
Life Marketing	$	116,875		$	106,812		$	102,114
Acquisitions	254,021			154,003			171,060
Annuities	204,015			166,278			117,778
Stable Value Products	73,354			80,561			60,329
Asset Protection	26,274			20,148			9,765
Corporate and Other	(99,048		)	(74,620		)	1,119
Total segment operating income	575,491			453,182			462,165
Realized investment (losses) gains - investments(1)	151,035			(140,236		)	188,729
Realized investment (losses) gains - derivatives	12,263			109,553			(191,315		)
Income tax expense	(246,838		)	(130,897		)	(151,043		)
Net income	$	491,951		$	291,602		$	308,536

Investment gains (losses)(2)	$	198,027		$	(143,984	)	$	174,692
Less: amortization related to DAC/VOBA and benefits and settlement expenses	46,992			(3,748		)	(14,037		)
Realized investment gains (losses)- investments	$	151,035		$	(140,236	)	$	188,729

Derivative gains (losses)(3)	$	(13,492	)	$	82,161		$	(227,816	)
Less: VA GMWB economic cost	(25,755		)	(27,392		)	(36,501		)
Realized investment gains (losses)- derivatives	$	12,263		$	109,553		$	(191,315	)

Net investment income
Life Marketing	$	553,006		$	521,219		$	486,374
Acquisitions	874,653			617,298			550,334
Annuities	465,849			468,329			504,342
Stable Value Products	107,170			123,798			128,239
Asset Protection	18,830			19,046			19,698
Corporate and Other	78,505			86,498			100,351
Total net investment income	$	2,098,013		$	1,836,188		$	1,789,338

Amortization of DAC and VOBA
Life Marketing	$	175,807		$	25,774		$	45,079
Acquisitions	60,031			72,762			77,251
Annuities	47,448			31,498			45,319
Stable Value Products	380			398			947
Asset Protection	24,169			23,603			22,569
Corporate and Other	485			625			1,018
Total amortization of DAC and VOBA	$	308,320		$	154,660		$	192,183

(1)

Includes credit related other-than-temporary impairments of $7.3 million, $22.4 million, and $58.1 million for the year ended December 31, 2014, 2013, and 2012, respectively.

(2)

Includes realized investment gains (losses) before related amortization.

(3)

Includes realized gains (losses) on derivatives before the VA GMWB economic cost.

	Operating Segment Assets
	As of December 31, 2014
	(Dollars In Thousands)
	Life						Stable Value
	Marketing		Acquisitions		Annuities		Products
Investments and other assets	$	13,858,491	$	19,858,284	$	20,678,948	$	1,958,867
Deferred policy acquisition costs and value of business acquired	1,973,156		600,482		539,965		621
Goodwill	—		29,419		—		—
Total assets	$	15,831,647	$	20,488,185	$	21,218,913	$	1,959,488

	Asset		Corporate				Total
	Protection		and Other		Adjustments		Consolidated
Investments and other assets	$	832,887	$	9,557,226	$	14,792	$	66,759,495
Deferred policy acquisition costs and value of business acquired	40,503		319		—		3,155,046
Goodwill	48,158		—		—		77,577
Total assets	$	921,548	$	9,557,545	$	14,792	$	69,992,118

	Operating Segment Assets
	As of December 31, 2013
	(Dollars In Thousands)
	Life						Stable Value
	Marketing		Acquisitions		Annuities		Products
Investments and other assets	$	13,135,914	$	20,188,321	$	20,029,310	$	2,558,551
Deferred policy acquisition costs and value of business acquired	2,071,470		799,255		554,974		1,001
Goodwill	—		32,517		—		—
Total assets	$	15,207,384	$	21,020,093	$	20,584,284	$	2,559,552

	Asset		Corporate				Total
	Protection		and Other		Adjustments		Consolidated
Investments and other assets	$	777,387	$	8,006,256	$	16,762	$	64,712,501
Deferred policy acquisition costs and value of business acquired	49,276		646		—		3,476,622
Goodwill	48,158		—		—		80,675
Total assets	$	874,821	$	8,006,902	$	16,762	$	68,269,798