17.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. There were no changes to the Company’s operating segments made or required to be made as a result of the Merger on February 1, 2015. A brief description of each segment follows.

The Life Marketing segment markets fixed universal life (“UL”), indexed universal life, variable universal life (“VUL”), bank-owned life insurance (“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 guaranteed investment contracts (“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 United States Securities and Exchange Commission (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), actual GMWB incurred claims and the related amortization of DAC/VOBA 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. 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. The goodwill as of June 30, 2015 (Successor Company) was the result of the Dai-ichi Merger. The purchase price was allocated to the segments in proportion to the segment’s respective fair value. The allocated purchase price in excess of the fair value of assets and liabilities of each segment resulted in the establishment of that segment’s goodwill as of the date of the Merger.

There were no significant intersegment transactions during the three months ended June 30, 2015 (Successor Company), the period of February 1, 2015 to June 30, 2015 (Successor Company), the period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the three and six months ended June 30, 2014 (Predecessor Company).

The following tables summarize financial information for the Company’s segments (Predecessor and Successor periods are not comparable):

	Successor						Predecessor
	Company						Company
	For The Three			February 1, 2015			January 1, 2015			For The Three			For The Six
	Months Ended			to			to			Months Ended			Months Ended
	June 30, 2015			June 30, 2015			January 31, 2015			June 30, 2014			June 30, 2014
	(Dollars In Thousands)						(Dollars In Thousands)
Revenues
Life Marketing	$	347,691		$	602,613		$	133,361		$	376,713		$	729,536
Acquisitions	363,985			622,774			139,761			438,244			865,192
Annuities	43,468			92,812			130,918			190,304			382,279
Stable Value Products	16,656			26,998			8,181			27,125			54,975
Asset Protection	77,625			126,921			24,566			77,122			149,969
Corporate and Other	13,528			31,796			22,859			29,678			46,584

Total revenues	$	862,953		$	1,503,914		$	459,646		$	1,139,186		$	2,228,535

Segment Operating Income (Loss)
Life Marketing	$	5,672		$	9,953		$	(2,271	)	$	25,403		$	47,900
Acquisitions	37,876			73,946			20,134			64,882			125,878
Annuities	40,513			71,886			11,363			48,603			93,931
Stable Value Products	9,349			15,464			4,529			17,287			34,684
Asset Protection	4,880			8,523			1,907			6,764			11,573
Corporate and Other	(36,374		)	(50,331		)	(16,662		)	(26,696		)	(50,377		)

Total segment operating income	61,916			129,441			19,000			136,243			263,589
Realized investment (losses) gains - investments (1)	(115,716		)	(158,649		)	89,414			66,742			124,672
Realized investment (losses) gains - derivatives	18,233			18,177			24,433			(30,370		)	(64,035		)
Income tax benefit (expense)	9,991			1,875			(44,325		)	(56,572		)	(105,634		)

Net income (loss)	$	(25,576	)	$	(9,156	)	$	88,522		$	116,043		$	218,592


(2)Investment gains (losses)	$	(108,081	)	$	(143,137	)	$	80,672		$	79,006		$	149,561
Less: amortization related to DAC/VOBA and benefits and settlement expenses	7,635			15,512			(8,742		)	12,264			24,889

Realized investment gains (losses) - investments	$	(115,716	)	$	(158,649	)	$	89,414		$	66,742		$	124,672


(3)Derivative gains (losses)	$	10,566		$	5,618		$	22,031		$	(36,620	)	$	(76,194	)
Less: VA GMWB economic cost	(7,667		)	(12,559		)	(2,402		)	(6,250		)	(12,159		)

Realized investment gains (losses) - derivatives	$	18,233		$	18,177		$	24,433		$	(30,370	)	$	(64,035	)

(1) Includes credit related other-than-temporary impairments of $5.7 million and $5.7 million for the three months ended June 30, 2015 (Successor Company) and for the period of February 1, 2015 to June 30, 2015 (Successor Company), respectively. Includes credit related other-than-temporary impairments of $0.5 million, $1.5 million, and $3.1 million for the period of January 1, 2015 to January 31, 2015 (Predecessor Company) and for the three and six months ended June 30, 2014 (Predecessor Company), 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 June 30, 2015 (Successor Company)
	(Dollars In Thousands)
	Life							Stable Value
	Marketing		Acquisitions			Annuities		Products
Investments and other assets	$	13,170,634	$	20,223,282		$	20,186,183	$	1,737,745
Deferred policy acquisition costs and value of business acquired	1,051,702		(190,193		)	490,973		—
Other intangibles	329,102		40,936			203,446		9,722
Goodwill	203,543		14,524			336,677		113,813

Total assets	$	14,754,981	$	20,088,549		$	21,217,279	$	1,861,280

	Asset		Corporate				Total
	Protection		and Other		Adjustments		Consolidated
Investments and other assets	$	751,376	$	10,019,177	$	11,034	$	66,099,431
Deferred policy acquisition costs and value of business acquired	43,985		—		—		1,396,467
Other intangibles	82,581						665,787
Goodwill	67,155		—		—		735,712

Total assets	$	945,097	$	10,019,177	$	11,034	$	68,897,397

	Operating Segment Assets
	As of December 31, 2014 (Predecessor Company)
	(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