5.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 Insurance Department (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 accumulated other comprehensive income (loss) (“AOCI”)) at the merger date 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 PLC by Dai-ichi Life, this actuarial calculation of the expected timing of MONY’s Closed Block earnings was recalculated and reset as of 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 September 30, 2015 (Successor Company) and December 31, 2014 (Predecessor Company) is as follows:

	Successor		Predecessor
	Company		Company

	As of		As of
	September 30, 2015		December 31, 2014

	(Dollars In Thousands)		(Dollars In Thousands)
Closed block liabilities
Future policy benefits, policyholders’ account balances and other policyholder liabilities	$	6,036,312	$	6,138,505
Policyholder dividend obligation	58,435		366,745
Other liabilities	33,706		53,838

Total closed block liabilities	6,128,453		6,559,088

Closed block assets
Fixed maturities, available-for-sale, at fair value	$	4,426,194	$	4,524,037
Equity securities, available-for-sale, at fair value	—		5,387
Mortgage loans on real estate	247,797		448,855
Policy loans	749,908		771,120
Cash and other invested assets	131,183		30,984
Other assets	161,407		221,270

Total closed block assets	5,716,489		6,001,653

Excess of reported closed block liabilities over closed block assets	411,964		557,435
Portion of above representing accumulated other comprehensive income:
Net unrealized investment gains (losses) net of policyholder dividend obligation of $(154,143) (Successor) and $106,886 (Predecessor)	—		—

Future earnings to be recognized from closed block assets and closed block liabilities	$	411,964	$	557,435

Reconciliation of the policyholder dividend obligation is as follows:

	Successor			Predecessor
	Company			Company

	February 1, 2015			January 1, 2015			For The Nine
	to			to			Months Ended
	September 30, 2015			January 31, 2015			September 30, 2014

	(Dollars In Thousands)			(Dollars In Thousands)
Policyholder dividend obligation, beginning of period	$	323,432		$	366,745		$	190,494
Applicable to net revenue (losses)	(27,854		)	(1,369		)	(8,781		)
Change in net unrealized investment gains (losses) allocated to the policyholder dividend obligation; includes deferred tax benefits of $(83,000) (Successor); $47,277 (2015 - Predecessor); $38,448 (2014 - Predecessor)	(237,143		)	135,077			119,502

Policyholder dividend obligation, end of period	$	58,435		$	500,453		$	301,215

Closed Block revenues and expenses were as follows:

	Successor				Predecessor
	Company				Company

	For The Three		February 1, 2015		January 1, 2015		For The Three		For The Nine
	Months Ended		to		to		Months Ended		Months Ended
	September 30, 2015		September 30, 2015		January 31, 2015		September 30, 2014		September 30, 2014

	(Dollars In Thousands)				(Dollars In Thousands)
Revenues
Premiums and other income	$	46,610	$	128,279	$	15,065	$	48,596	$	151,442
Net investment income (loss)	54,593		142,274		19,107		63,847		176,470
Net investment gains (losses)	167		3,017		568		223		6,328

Total revenues	101,370		273,570		34,740		112,666		334,240

Benefits and other deductions
Benefits and settlement expenses	90,966		245,711		31,152		101,200		300,735
Other operating expenses	258		733		—		286		376

Total benefits and other deductions	91,224		246,444		31,152		101,486		301,111

Net revenues before income taxes	10,146		27,126		3,588		11,180		33,129
Income tax expense	3,551		9,494		1,256		3,913		11,595

Net revenues	$	6,595	$	17,632	$	2,332	$	7,267	$	21,534