15.FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company determined the fair value of its financial instruments based on the fair value hierarchy established in FASB guidance referenced in the Fair Value Measurements and Disclosures Topic which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company has adopted the provisions from the FASB guidance that is referenced in the Fair Value Measurements and Disclosures Topic for non-financial assets and liabilities (such as property and equipment, goodwill, and other intangible assets) that are required to be measured at fair value on a periodic basis. The effect on the Company’s periodic fair value measurements for non-financial assets and liabilities was not material.

The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded at fair value on the consolidated balance sheets are categorized as follows:

Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market.

Level 2: Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly. Level 2 inputs include the following:

Quoted prices for similar assets or liabilities in active markets

Quoted prices for identical or similar assets or liabilities in non-active markets

Inputs other than quoted market prices that are observable

Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of September 30, 2015 (Successor Company):

	Level 1		Level 2		Level 3		Total
	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	1,615,819	$	3	$	1,615,822
Commercial mortgage-backed securities	—		1,276,615		—		1,276,615
Other asset-backed securities	—		207,263		585,751		793,014
U.S. government-related securities	1,102,371		515,101		—		1,617,472
State, municipalities, and political subdivisions	—		1,613,485		—		1,613,485
Other government-related securities	—		18,884		—		18,884
Corporate securities	83		24,844,977		1,048,738		25,893,798
Preferred stock	62,112		—		—		62,112

Total fixed maturity securities - available-for-sale	1,164,566		30,092,144		1,634,492		32,891,202


Fixed maturity securities - trading
Residential mortgage-backed securities	—		288,280		—		288,280
Commercial mortgage-backed securities	—		148,640		—		148,640
Other asset-backed securities	—		121,937		155,153		277,090
U.S. government-related securities	236,425		4,880		—		241,305
State, municipalities, and political subdivisions	—		310,973		—		310,973
Other government-related securities	—		59,527		—		59,527
Corporate securities	—		1,359,582		18,319		1,377,901
Preferred stock	6,925		—		—		6,925

Total fixed maturity securities - trading	243,350		2,293,819		173,472		2,710,641

Total fixed maturity securities	1,407,916		32,385,963		1,807,964		35,601,843
Equity securities	606,400		11,792		66,504		684,696
Other long-term investments (1)	122,120		172,937		55,750		350,807
Short-term investments	228,621		4,716		—		233,337

Total investments	2,365,057		32,575,408		1,930,218		36,870,683
Cash	517,900		—		—		517,900
Assets related to separate accounts
Variable annuity	12,646,751		—		—		12,646,751
Variable universal life	792,800		—		—		792,800

Total assets measured at fair value on a recurring basis	$	16,322,508	$	32,575,408	$	1,930,218	$	50,828,134


Liabilities:
Annuity account balances(2)	$	—	$	—	$	95,198	$	95,198
Other liabilities (1)	22,085		138,496		383,809		544,390

Total liabilities measured at fair value on a recurring basis	$	22,085	$	138,496	$	479,007	$	639,588

(1)Includes certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

The following table presents the Company’s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2014 (Predecessor Company):

	Level 1		Level 2		Level 3		Total

	(Dollars In Thousands)
Assets:
Fixed maturity securities - available-for-sale
Residential mortgage-backed securities	$	—	$	1,418,255	$	3	$	1,418,258
Commercial mortgage-backed securities	—		1,177,252		—		1,177,252
Other asset-backed securities	—		275,415		563,961		839,376
U.S. government-related securities	1,165,188		263,707		—		1,428,895
State, municipalities, and political subdivisions	—		1,684,014		3,675		1,687,689
Other government-related securities	—		20,172		—		20,172
Corporate securities	132		26,039,963		1,325,683		27,365,778

Total fixed maturity securities - available-for-sale	1,165,320		30,878,778		1,893,322		33,937,420


Fixed maturity securities - trading
Residential mortgage-backed securities	—		288,114		—		288,114
Commercial mortgage-backed securities	—		151,111		—		151,111
Other asset-backed securities	—		105,118		169,461		274,579
U.S. government-related securities	245,563		4,898		—		250,461
State, municipalities, and political subdivisions	—		325,446		—		325,446
Other government-related securities	—		57,032		—		57,032
Corporate securities	—		1,447,333		24,744		1,472,077

Total fixed maturity securities - trading	245,563		2,379,052		194,205		2,818,820

Total fixed maturity securities	1,410,883		33,257,830		2,087,527		36,756,240
Equity securities	590,832		99,267		66,691		756,790
Other long-term investments (1)	119,997		106,079		44,625		270,701
Short-term investments	243,436		3,281		—		246,717

Total investments	2,365,148		33,466,457		2,198,843		38,030,448
Cash	268,286		—		—		268,286
Other assets	—		—		—		—
Assets related to separate accounts
Variable annuity	13,157,429		—		—		13,157,429
Variable universal life	834,940		—		—		834,940

Total assets measured at fair value on a recurring basis	$	16,625,803	$	33,466,457	$	2,198,843	$	52,291,103


Liabilities:
Annuity account balances (2)	$	—	$	—	$	97,825	$	97,825
Other liabilities (1)	62,146		61,046		506,343		629,535

Total liabilities measured at fair value on a recurring basis	$	62,146	$	61,046	$	604,168	$	727,360

(1)Includes certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

Determination of fair values

The valuation methodologies used to determine the fair values of assets and liabilities reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The Company determines the fair values of certain financial assets and financial liabilities based on quoted market prices, where available. The Company also determines certain fair values based on future cash flows discounted at the appropriate current market rate. Fair values reflect adjustments for counterparty credit quality, the Company’s credit standing, liquidity, and where appropriate, risk margins on unobservable parameters. The following is a discussion of the methodologies used to determine fair values for the financial instruments as listed in the above table.

The fair value of fixed maturity, short-term, and equity securities is determined by management after considering one of three primary sources of information: third party pricing services, non-binding independent broker quotations, or pricing matrices. Security pricing is applied using a “waterfall” approach whereby publicly available prices are first sought from third party pricing services, the remaining unpriced securities are submitted to independent brokers for non-binding prices, or lastly, securities are priced using a pricing matrix. Typical inputs used by these three pricing methods include, but are not limited to: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Third party pricing services price approximately 90% of the Company’s available-for-sale and trading fixed maturity securities. Based on the typical trading volumes and the lack of quoted market prices for available-for-sale and trading fixed maturities, third party pricing services derive the majority of security prices from observable market inputs such as recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information outlined above. If there are no recent reported trades, the third party pricing services and brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Certain securities are priced via independent non-binding broker quotations, which are considered to have no significant unobservable inputs. When using non- binding independent broker quotations, the Company obtains one quote per security, typically from the broker from which we purchased the security. A pricing matrix is used to price securities for which the Company is unable to obtain or effectively rely on either a price from a third party pricing service or an independent broker quotation.

The pricing matrix used by the Company begins with current spread levels to determine the market price for the security. The credit spreads, assigned by brokers, incorporate the issuer’s credit rating, liquidity discounts, weighted- average of contracted cash flows, risk premium, if warranted, due to the issuer’s industry, and the security’s time to maturity. The Company uses credit ratings provided by nationally recognized rating agencies.

For securities that are priced via non-binding independent broker quotations, the Company assesses whether prices received from independent brokers represent a reasonable estimate of fair value through an analysis using internal and external cash flow models developed based on spreads and, when available, market indices. The Company uses a market-based cash flow analysis to validate the reasonableness of prices received from independent brokers. These analytics, which are updated daily, incorporate various metrics (yield curves, credit spreads, prepayment rates, etc.) to determine the valuation of such holdings. As a result of this analysis, if the Company determines there is a more appropriate fair value based upon the analytics, the price received from the independent broker is adjusted accordingly. The Company did not adjust any quotes or prices received from brokers during the period of February 1, 2015 to September 30, 2015 (Successor Company) and the period of January 1, 2015 to January 31, 2015 (Predecessor Company).

The Company has analyzed the third party pricing services’ valuation methodologies and related inputs and has also evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs that is in accordance with the Fair Value Measurements and Disclosures Topic of the ASC. Based on this evaluation and investment class analysis, each price was classified into Level 1, 2, or 3. Most prices provided by third party pricing services are classified into Level 2 because the significant inputs used in pricing the securities are market observable and the observable inputs are corroborated by the Company. Since the matrix pricing of certain debt securities includes significant non-observable inputs, they are classified as Level 3.

Asset-Backed Securities

This category mainly consists of residential mortgage-backed securities, commercial mortgage-backed securities, and other asset-backed securities (collectively referred to as asset-backed securities or “ABS”). As of September 30, 2015 (Successor Company), the Company held $3.7 billion of ABS classified as Level 2. These securities are priced from information provided by a third party pricing service and independent broker quotes. The third party pricing services and brokers mainly value securities using both a market and income approach to valuation. As part of this valuation process they consider the following characteristics of the item being measured to be relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, and 7) credit ratings of the securities.

After reviewing these characteristics of the ABS, the third party pricing service and brokers use certain inputs to determine the value of the security. For ABS classified as Level 2, the valuation would consist of predominantly market observable inputs such as, but not limited to: 1) monthly principal and interest payments on the underlying assets, 2) average life of the security, 3) prepayment speeds, 4) credit spreads, 5) treasury and swap yield curves, and 6) discount margin. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.

As of September 30, 2015 (Successor Company), the Company held $740.9 million of Level 3 ABS, which included $585.8 million of other asset-backed securities classified as available-for-sale and $155.1 million of other asset-backed securities classified as trading. These securities are predominantly ARS whose underlying collateral is at least 97% guaranteed by the FFELP. As a result of the ARS market collapse during 2008, the Company prices its ARS using an income approach valuation model. As part of the valuation process the Company reviews the following characteristics of the ARS in determining the relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, 7) credit ratings of the securities, 8) liquidity premium, and 9) paydown rate.

Corporate Securities, U.S. Government-Related Securities, States, Municipals, and Political Subdivisions, and Other Government Related Securities

As of September 30, 2015 (Successor Company), the Company classified approximately $28.7 billion of corporate securities, U.S. government-related securities, states, municipals, and political subdivisions, and other government-related securities as Level 2. The fair value of the Level 2 securities is predominantly priced by broker quotes and a third party pricing service. The Company has reviewed the valuation techniques of the brokers and third party pricing service and has determined that such techniques used Level 2 market observable inputs. The following characteristics of the securities are considered to be the primary relevant inputs to the valuation: 1) weighted- average coupon rate, 2) weighted-average years to maturity, 3) seniority, and 4) credit ratings. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.

The brokers and third party pricing service utilize valuation models that consist of a hybrid income and market approach to valuation. The pricing models utilize the following inputs: 1) principal and interest payments, 2) treasury yield curve, 3) credit spreads from new issue and secondary trading markets, 4) dealer quotes with adjustments for issues with early redemption features, 5) liquidity premiums present on private placements, and 6) discount margins from dealers in the new issue market.

As of September 30, 2015 (Successor Company), the Company classified approximately $1.1 billion of securities as Level 3 valuations. Level 3 securities primarily represent investments in illiquid bonds for which no price is readily available. To determine a price, the Company uses a discounted cash flow model with both observable and unobservable inputs. These inputs are entered into an industry standard pricing model to determine the final price of the security. These inputs include: 1) principal and interest payments, 2) coupon rate, 3) sector and issuer level spread over treasury, 4) underlying collateral, 5) credit ratings, 6) maturity, 7) embedded options, 8) recent new issuance, 9) comparative bond analysis, and 10) an illiquidity premium.

Equities

As of September 30, 2015 (Successor Company), the Company held approximately $78.3 million of equity securities classified as Level 2 and Level 3. Of this total, $65.7 million represents Federal Home Loan Bank (“FHLB”) stock. The Company believes that the cost of the FHLB stock approximates fair value. The remainder of these equity securities is primarily investments in preferred stock.

Other long-term investments and Other liabilities

Other long-term investments and other liabilities consist entirely of free-standing and embedded derivative financial instruments. Refer to Note 16, Derivative Financial Instruments for additional information related to derivatives. Derivative financial instruments are valued using exchange prices, independent broker quotations, or pricing valuation models, which utilize market data inputs. Excluding embedded derivatives, as of September 30, 2015 (Successor Company), 83.2% of derivatives based upon notional values were priced using exchange prices or independent broker quotations. The remaining derivatives were priced by pricing valuation models, which predominantly utilize observable market data inputs. Inputs used to value derivatives include, but are not limited to, interest swap rates, credit spreads, interest rate and equity market volatility indices, equity index levels, and treasury rates. The Company performs monthly analysis on derivative valuations that includes both quantitative and qualitative analyses.

Derivative instruments classified as Level 1 generally include futures and options, which are traded on active exchange markets.

Derivative instruments classified as Level 2 primarily include interest rate and inflation swaps, options, and swaptions. These derivative valuations are determined using independent broker quotations, which are corroborated with observable market inputs.

Derivative instruments classified as Level 3 are embedded derivatives and include at least one significant non-observable input. A derivative instrument containing Level 1 and Level 2 inputs will be classified as a Level 3 financial instrument in its entirety if it has at least one significant Level 3 input.

The Company utilizes derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instruments may not be classified within the same fair value hierarchy level as the associated assets and liabilities. Therefore, the changes in fair value on derivatives reported in Level 3 may not reflect the offsetting impact of the changes in fair value of the associated assets and liabilities.

The embedded derivatives are carried at fair value in “other long-term investments” and “other liabilities” on the Company’s consolidated condensed balance sheet. The changes in fair value are recorded in earnings as “Realized investment gains (losses)—Derivative financial instruments”. Refer to Note 16, Derivative Financial Instruments for more information related to each embedded derivatives gains and losses.

The fair value of the GMWB embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using multiple risk neutral stochastic equity scenarios and policyholder behavior assumptions. The risk neutral scenarios are generated using the current swap curve and projected equity volatilities and correlations. The projected equity volatilities are based on a blend of historical volatility and near- term equity market implied volatilities. The equity correlations are based on historical price observations. For policyholder behavior assumptions, expected lapse and utilization assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience, with attained age factors varying from 44.5% - 100%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR plus a credit spread (to represent the Company’s non-performance risk). As a result of using significant unobservable inputs, the GMWB embedded derivative is categorized as Level 3. These assumptions are reviewed on a quarterly basis.

The balance of the FIA embedded derivative is impacted by policyholder cash flows associated with the FIA product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the FIA embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the 1994 Variable Annuity MGDB mortality table modified for company experience, with attained age factors varying from 49% - 80%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company’s non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the FIA embedded derivative is categorized as Level 3.

The balance of the indexed universal life (“IUL”) embedded derivative is impacted by policyholder cash flows associated with the IUL product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the IUL embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the SOA 2015 VBT Primary Tables modified for company experience, with attained age factors varying from 38% - 153%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company’s non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the IUL embedded derivative is categorized as Level 3.

The Company has assumed and ceded certain blocks of policies under modified coinsurance agreements in which the investment results of the underlying portfolios inure directly to the reinsurers. As a result, these agreements contain embedded derivatives that are reported at fair value. Changes in their fair value are reported in earnings. The investments supporting these agreements are designated as “trading securities”; therefore changes in their fair value are also reported in earnings. As of September 30, 2015 (Successor Company), the fair value of the embedded derivative is based upon the relationship between the statutory policy liabilities (net of policy loans) of $2.5 billion and the statutory unrealized gain (loss) of the securities of $227.9 million. As a result, changes in the fair value of the embedded derivatives are largely offset by the changes in fair value of the related investments and each are reported in earnings. The fair value of the embedded derivative is considered a Level 3 valuation due to the unobservable nature of the policy liabilities.

Certain of the Company’s subsidiaries have entered into interest support, yearly renewable term (“YRT”) premium support, and portfolio maintenance agreements with PLC. These agreements meet the definition of a derivative and are accounted for at fair value and are considered Level 3 valuations. The fair value of these derivatives as of September 30, 2015 (Successor Company) was $5.8 million and is included in Other long-term investments. For information regarding realized gains on these derivatives please refer to Note 16, Derivative Financial Instruments.

The Interest Support Agreement provides that PLC will make payments to Golden Gate II if actual investment income on certain of Golden Gate II’s asset portfolios falls below a calculated investment income amount as defined in the Interest Support Agreement. The calculated investment income amount is a level of investment income deemed to be sufficient to support certain of Golden Gate II’s obligations under a reinsurance agreement with the Company, dated July 1, 2007. The derivative is valued using an internal valuation model that assumes a conservative projection of investment income under an adverse interest rate scenario and the probability that the expectation falls below the calculated investment income amount. This derivative had a fair value of $3.7 million as of September 30, 2015 (Successor Company), however, interest support agreement obligations to Golden Gate II of approximately $1.9 million have been collateralized by PLC. Re-evaluation and, if necessary, adjustments of any support agreement collateralization amounts occur annually during the first quarter pursuant to the terms of the support agreement. As of September 30, 2015 (Successor Company), no payments have been triggered under this agreement.

The YRT Premium support agreement provides that PLC will make payments to Golden Gate II in the event that YRT premium rates increase. The derivative is valued using an internal valuation model. The valuation model is a probability weighted discounted cash flow model. The value is primarily a function of the likelihood and severity of future YRT premium increases. The fair value of this derivative as of September 30, 2015 (Successor Company) was $2.2 million. As of September 30, 2015 (Successor Company), no payments have been made under this agreement.

The portfolio maintenance agreements provide that PLC will make payments to Golden Gate V and WCL in the event of other-than-temporary impairments on investments that exceed defined thresholds. The derivatives are valued using an internal discounted cash flow model. The significant unobservable inputs are the projected probability and severity of credit losses used to project future cash flows on the investment portfolios. The fair value of the portfolio maintenance agreements as of September 30, 2015 (Successor Company), was zero. As of September 30, 2015 (Successor Company), no payments have been made under this agreement.

The Funds Withheld derivative results from a reinsurance agreement with Shades Creek where the economic performance of certain hedging instruments held by the Company is ceded to Shades Creek. The value of the Funds Withheld derivative is directly tied to the value of the hedging instruments held in the funds withheld account. The hedging instruments predominantly consist of derivative instruments the fair values of which are classified as a Level 2 measurement; as such, the fair value of the Funds Withheld derivative has been classified as a Level 2 measurement.

The fair value of the Funds Withheld derivative as of September 30, 2015 (Successor Company) was a liability of $135.6 million.

Annuity account balances

The Company records certain of its FIA reserves at fair value. The fair value is considered a Level 3 valuation. The FIA valuation model calculates the present value of future benefit cash flows less the projected future profits to quantify the net liability that is held as a reserve. This calculation is done using multiple risk neutral stochastic equity scenarios. The cash flows are discounted using LIBOR plus a credit spread. Best estimate assumptions are used for partial withdrawals, lapses, expenses and asset earned rate with a risk margin applied to each. These assumptions are reviewed at least annually as a part of the formal unlocking process. If an event were to occur within a quarter that would make the assumptions unreasonable, the assumptions would be reviewed within the quarter.

The discount rate for the fixed indexed annuities is based on an upward sloping rate curve which is updated each quarter. The discount rates for September 30, 2015 (Successor Company), ranged from a one month rate of 0.40%, a 5 year rate of 2.19%, and a 30 year rate of 3.69%. A credit spread component is also included in the calculation to accommodate non-performance risk.

Separate Accounts

Separate account assets are invested in open-ended mutual funds and are included in Level 1.

Valuation of Level 3 Financial Instruments

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:

	Successor
	Company

	Fair Value
	As of			Valuation	Unobservable	Range
	September 30, 2015			Technique	Input	(Weighted Average)

	(Dollars In Thousands)
Assets:

Other asset-backed securities	$	585,751		Discounted cash flow	Liquidity premium	0.43% - 1.49% (0.70%)
					Paydown rate	9.85% - 15.41% (13.17%)

Corporate securities	1,022,464			Discounted cash flow	Spread over treasury	0.74% - 12.18% (2.45%)

Liabilities:

Embedded derivatives - GMWB(1)	$		14,454	Actuarial cash flow model	Mortality	1994 MGDB table with
						company experience

					Lapse	0.3% - 15%, depending on
						product/duration/funded
						status of guarantee
					Utilization	99%. 10% of policies have
						a one-time over-utilization
						of 400%
					Nonperformance risk	0.21% - 1.17%

Annuity account balances(2)		95,198		Actuarial cash flow model	Asset earned rate	4.53% - 5.67%
					Expenses	$81 per policy
					Withdrawal rate	2.20%
					Mortality	1994 MGDB table with
						company experience
					Lapse	2.2% - 33.0%, depending
						on duration/surrender
						charge period
					Return on assets	1.50% - 1.85% depending on
						surrender charge period
					Nonperformance risk	0.21% - 1.17%

Embedded derivative - FIA	76,709			Actuarial cash flow model	Expenses	$81.5 per policy
					Withdrawal rate	1.1% - 4.5% depending on
						duration and tax qualification
					Mortality	1994 MGDB table with
						company experience
					Lapse	2.5% - 40.0%, depending on
						on duration/surrender
						charge period
					Nonperformance risk	0.21% - 1.17%

Embedded derivative - IUL	21,711			Actuarial cash flow model	Mortality	38% - 153% of 2015
						VBT Primary Tables
					Lapse	0.5% - 10.0%, depending on
						duration/distribution channel
						and smoking class
					Nonperformance risk	0.21% - 1.17%

(1)The fair value for the GMWB embedded derivative is presented as a net liability for the purposes of this chart. Excludes modified coinsurance arrangements.

(2)Represents liabilities related to fixed indexed annuities.

The chart above excludes Level 3 financial instruments that are valued using broker quotes and those which book value approximates fair value.

The Company has considered all reasonably available quantitative inputs as of September 30, 2015 (Successor Company), but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $199.8 million of financial instruments being classified as Level 3 as of September 30, 2015 (Successor Company). Of the $199.8 million, $155.2 million are other asset-backed securities and $44.6 million are corporate securities.

In certain cases the Company has determined that book value materially approximates fair value. As of September 30, 2015 (Successor Company), the Company held $66.5 million of financial instruments where book value approximates fair value which were predominantly FHLB stock.

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:

	Predecessor
	Company

	Fair Value
	As of		Valuation	Unobservable	Range
	December 31, 2014		Technique	Input	(Weighted Average)

	(Dollars In Thousands)
Assets:

Other asset-backed securities	$	563,752	Discounted cash flow	Liquidity premium	0.39% - 1.49% (0.69%)
				Paydown rate	9.70% - 15.80% (12.08%)

Corporate securities	1,282,864		Discounted cash flow	Spread over	0.33% - 7.50% (2.19%)
				treasury

Liabilities:

Embedded derivatives - GMWB(1)	$	25,927	Actuarial cash flow model	Mortality	44.5% to 100% of 1994
					MGDB table
				Lapse	0.25% - 17%, depending on
					product/duration/funded
					status of guarantee
				Utilization	97% - 101%
				Nonperformance risk	0.12% - 0.96%

Annuity account balances(2)	97,825		Actuarial cash flow model	Asset earned rate	3.86% - 5.92%
				Expenses	$88 - $102 per policy
				Withdrawal rate	2.20%
				Mortality	49% to 80% of 1994
					MGDB table
				Lapse	2.2% - 33.0%, depending
					on duration/surrender
					charge period
				Return on assets	1.50% - 1.85% depending on
					surrender charge period
				Nonperformance risk	0.12% - 0.96%

Embedded derivative - FIA	124,465		Actuarial cash flow model	Expenses	$83 - $97 per policy
				Withdrawal rate	1.1% - 4.5% depending on
					duration and tax qualification
				Mortality	49% to 80% of 1994
					MGDB table
				Lapse	2.5% - 40.0%, depending
					on duration/surrender
					charge period
				Nonperformance risk	0.12% - 0.96%

Embedded derivative - IUL	6,691		Actuarial cash flow model	Mortality	37% - 74% of 2008
					VBT Primary Tables
				Lapse	0.5% - 10.0%, depending
					on duration/distribution
					channel and smoking class
				Nonperformance risk	0.12% - 0.96%

(1)The fair value for the GMWB embedded derivative is presented as a net liability, for the purposes of this chart. Excludes modified coinsurance arrangements.

(2)Represents liabilities related to fixed indexed annuities.

The chart above excludes Level 3 financial instruments that are valued using broker quotes and those which book value approximates fair value.

The Company has considered all reasonably available quantitative inputs as of December 31, 2014 (Predecessor Company), but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $237.2 million of financial instruments being classified as Level 3 as of December 31, 2014 (Predecessor Company). Of the $237.2 million, $169.7 million are other asset backed securities and $67.5 million are corporate securities.

In certain cases the Company has determined that book value materially approximates fair value. As of December 31, 2014 (Predecessor Company), the Company held $70.4 million of financial instruments where book value approximates fair value. Of the $70.4 million, $66.7 million represents equity securities, which are predominantly FHLB stock, and $3.7 million of other fixed maturity securities.

The asset-backed securities classified as Level 3 are predominantly ARS. A change in the paydown rate (the projected annual rate of principal reduction) of the ARS can significantly impact the fair value of these securities. A decrease in the paydown rate would increase the projected weighted average life of the ARS and increase the sensitivity of the ARS’ fair value to changes in interest rates. An increase in the liquidity premium would result in a decrease in the fair value of the securities, while a decrease in the liquidity premium would increase the fair value of these securities.

The fair value of corporate bonds classified as Level 3 is sensitive to changes in the interest rate spread over the corresponding U.S. Treasury rate. This spread represents a risk premium that is impacted by company specific and market factors. An increase in the spread can be caused by a perceived increase in credit risk of a specific issuer and/or an increase in the overall market risk premium associated with similar securities. The fair values of corporate bonds are sensitive to changes in spread. When holding the treasury rate constant, the fair value of corporate bonds increases when spreads decrease, and decreases when spreads increase.

The fair value of the GMWB embedded derivative is sensitive to changes in the discount rate which includes the Company’s nonperformance risk, volatility, lapse, and mortality assumptions. The volatility assumption is an observable input as it is based on market inputs. The Company’s nonperformance risk, lapse, and mortality are unobservable. An increase in the three unobservable assumptions would result in a decrease in the fair value of the liability and conversely, if there is a decrease in the assumptions the fair value would increase. The fair value is also dependent on the assumed policyholder utilization of the GMWB where an increase in assumed utilization would result in an increase in the fair value of the liability and conversely, if there is a decrease in the assumption, the fair value would decrease.

The fair value of the FIA account balance liability is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the FIA embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in discount rate and non-performance risk and decreases with increases in the discount rate and non-performance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

The fair value of the FIA embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the FIA embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and nonperformance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

The fair value of the IUL embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the IUL embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and non-performance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended September 30, 2015 (Successor Company), for which the Company has used significant unobservable inputs (Level 3):

																															Total
																															Gains (losses)
			Total					Total																							included in
			Realized and Unrealized					Realized and Unrealized																							Earnings
			Gains					Losses																							related to

					Included in						Included in																				Instruments
					Other						Other												Transfers								still held at
	Beginning		Included in		Comprehensive			Included in			Comprehensive												in/out of						Ending		the Reporting
	Balance		Earnings		Income			Earnings			Income			Purchases		Sales			Issuances		Settlements		Level 3			Other			Balance		Date

	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	—		$	—		$	—		$	—	$	—		$	—	$	—	$	—		$	—		$	3	$	—
Commercial mortgage-backed securities	—		—		—			—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	590,885		—		—			—			(4,185		)	—		—			—		—		—			(949		)	585,751		—
U.S. government-related securities	—		—		—			—			—			—		—			—		—		—			—			—		—
States, municipals, and political subdivisions	—		—		—			—			—			—		—			—		—		—			—			—		—
Other government-related securities	—		—		—			—			—			—		—			—		—		—			—			—		—
Corporate securities	1,111,431		76		5,939			(164		)	(8,800		)	62,183		(101,161		)	—		—		(20,037		)	(729		)	1,048,738		—

Total fixed maturity securities - available-for-sale	1,702,319		76		5,939			(164		)	(12,985		)	62,183		(101,161		)	—		—		(20,037		)	(1,678		)	1,634,492		—
Fixed maturity securities - trading
Residential mortgage-backed securities	—		—		—			—			—			—		—			—		—		—			—			—		—
Commercial mortgage-backed securities	—		—		—			—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	160,594		83		—			(1,640		)	—			2,000		(6,001		)	—		—		—			117			155,153		(1,500		)
U.S. government-related securities	—		—		—			—			—			—		—			—		—		—			—			—		—
States, municipals and political subdivisions	—		—		—			—			—			—		—			—		—		—			—			—		—
Other government-related securities	—		—		—			—			—			—		—			—		—		—			—			—		—
Corporate securities	19,316		73		—			(970		)	—			—		(56		)	—		—		—			(44		)	18,319		(897		)

Total fixed maturity securities - trading	179,910		156		—			(2,610		)	—			2,000		(6,057		)	—		—		—			73			173,472		(2,397		)
Total fixed maturity securities	1,882,229		232		5,939			(2,774		)	(12,985		)	64,183		(107,218		)	—		—		(20,037		)	(1,605		)	1,807,964		(2,397		)
Equity securities	66,460		—		44			—			—			—		—			—		—		—			—			66,504		—
Other long-term investments(1)	100,519		—		—			(44,769		)	—			—		—			—		—		—			—			55,750		(44,769		)
Short-term investments	—		—		—			—			—			—		—			—		—		—			—			—		—

Total investments	2,049,208		232		5,983			(47,543		)	(12,985		)	64,183		(107,218		)	—		—		(20,037		)	(1,605		)	1,930,218		(47,166		)

Total assets measured at fair value on a recurring basis	$	2,049,208	$	232	$	5,983		$	(47,543	)	$	(12,985	)	$	64,183	$	(107,218	)	$	—	$	—	$	(20,037	)	$	(1,605	)	$	1,930,218	$	(47,166	)


Liabilities:
Annuity account balances(2)	$	95,178	$	—	$	(3,173	)	$	—		$	—		$	—	$	—		$	93	$	3,246	—			$	—		$	95,198	$	—
Other liabilities(1)	342,945		17,329		—			(58,193		)	—			—		—			—		—		—			—			383,809		(40,864		)

Total liabilities measured at fair value on a recurring basis	$	438,123	$	17,329	$	(3,173	)	$	(58,193	)	$	—		$	—	$	—		$	93	$	3,246	$	—		$	—		$	479,007	$	(40,864	)

(1)Represents certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

For the three months ended September 30, 2015 (Successor Company), there were no transfers of securities into Level 3.

For the three months ended September 30, 2015 (Successor Company), $20.0 million of securities were transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of September 30, 2015 (Successor Company).

For the three months ended September 30, 2015 (Successor Company), there were no transfers of securities from Level 2 to Level 1.

For the three months ended September 30, 2015 (Successor Company), there were no transfers of securities from Level 1.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the period of February 1, 2015 to September 30, 2015 (Successor Company), for which the Company has used significant unobservable inputs (Level 3):

																														Total
																														Gains (losses)
			Total				Total																							included in
			Realized and Unrealized				Realized and Unrealized																							Earnings
			Gains				Losses																							related to
					Included in					Included in																				Instruments
					Other					Other												Transfers								still held at
	Beginning		Included in		Comprehensive		Included in			Comprehensive												in/out of						Ending		the Reporting
	Balance		Earnings		Income		Earnings			Income			Purchases		Sales			Issuances		Settlements		Level 3			Other			Balance		Date
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—		$	—		$	3	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	603,646		—		165		(92		)	(17,076		)	—		(127		)	—		—		—			(765		)	585,751		—
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
States, municipals, and political subdivisions	3,675		—		—		—			—			—		(3,675		)	—		—		—			—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate securities	1,307,259		4,367		21,558		(851		)	(33,047		)	174,112		(356,096		)	—		—		(61,890		)	(6,674		)	1,048,738		—
Total fixed maturity securities - available-for-sale	1,914,583		4,367		21,723		(943		)	(50,123		)	174,112		(359,898		)	—		—		(61,890		)	(7,439		)	1,634,492		—
Fixed maturity securities - trading
Residential mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	169,473		4,032		—		(6,813		)	—			2,000		(13,877		)	—		—		—			338			155,153		(6,896		)
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
States, municipals and political subdivisions	—		—		—		—			—			—		—			—		—		—			—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate securities	25,130		247		—		(1,269		)	—			—		(5,640		)	—		—		—			(149		)	18,319		(1,546		)
Total fixed maturity securities - trading	194,603		4,279		—		(8,082		)	—			2,000		(19,517		)	—		—		—			189			173,472		(8,442		)
Total fixed maturity securities	2,109,186		8,646		21,723		(9,025		)	(50,123		)	176,112		(379,415		)	—		—		(61,890		)	(7,250		)	1,807,964		(8,442		)
Equity securities	66,691		—		44		—			—			—		(231		)	—		—		—			—			66,504		—
Other long-term investments(1)	64,200		40,032		—		(48,482		)	—			—		—			—		—		—			—			55,750		(8,450		)
Short-term investments	—		—		—		—			—			—		—			—		—		—			—			—		—
Total investments	2,240,077		48,678		21,767		(57,507		)	(50,123		)	176,112		(379,646		)	—		—		(61,890		)	(7,250		)	1,930,218		(16,892		)
Total assets measured at fair value on a recurring basis	$	2,240,077	$	48,678	$	21,767	$	(57,507	)	$	(50,123	)	$	176,112	$	(379,646	)	$	—	$	—	$	(61,890	)	$	(7,250	)	$	1,930,218	$	(16,892	)

Liabilities:
Annuity account balances(2)	$	98,279	$	—	$	—	$	(4,716	)	$	—		$	—	$	—		$	179	$	7,976	$	—		$	—		$	95,198	$	—
Other liabilities(1)	530,118		230,183		—		(83,874		)	—			—		—			—		—		—			—			383,809		146,309
Total liabilities measured at fair value on a recurring basis	$	628,397	$	230,183	$	—	$	(88,590	)	$	—		$	—	$	—		$	179	$	7,976	$	—		$	—		$	479,007	$	146,309

(1)Represents certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

For the period of February 1, 2015 to September 30, 2015 (Successor Company), there were no transfers of securities into Level 3.

For the period of February 1, 2015 to September 30, 2015 (Successor Company), $61.9 million of securities were transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of September 30, 2015 (Successor Company).

For the period of February 1, 2015 to September 30, 2015 (Successor Company), $90.4 million of securities were transferred from Level 2 to Level 1.

For the period of February 1, 2015 to September 30, 2015 (Successor Company), there were no transfers from Level 1.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for period of January 1, 2015 to January 31, 2015 (Predecessor Company), for which the Company has used significant unobservable inputs (Level 3):

																													Total
																													Gains (losses)
			Total				Total																						included in
			Realized and Unrealized				Realized and Unrealized																						Earnings
			Gains				Losses																						related to

					Included in					Included in																			Instruments
					Other					Other												Transfers							still held at
	Beginning		Included in		Comprehensive		Included in			Comprehensive												in/out of					Ending		the Reporting
	Balance		Earnings		Income		Earnings			Income			Purchases		Sales			Issuances		Settlements		Level 3		Other			Balance		Date

	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	3	$	—	$	—	$	—		$	—		$	—	$	—		$	—	$	—	$	—	$	—		$	3	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Other asset-backed securities	563,961		—		—		—			(3,867		)	—		(32		)	—		—		43,205		379			603,646		—
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
States, municipals, and political subdivisions	3,675		—		—		—			—			—		—			—		—		—		—			3,675		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Corporate securities	1,325,683		—		12,282		—			(23,029		)	—		(7,062		)	—		—		—		(615		)	1,307,259		—

Total fixed maturity securities - available-for-sale	1,893,322		—		12,282		—			(26,896		)	—		(7,094		)	—		—		43,205		(236		)	1,914,583		—
Fixed maturity securities - trading
Residential mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Other asset-backed securities	169,461		586		—		(139		)	—			—		(472		)	—		—		—		37			169,473		447
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
States, municipals and political subdivisions	—		—		—		—			—			—		—			—		—		—		—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—		—			—		—
Corporate securities	24,744		602		—		(196		)	—			—		(20		)	—		—		—		—			25,130		406

Total fixed maturity securities - trading	194,205		1,188		—		(335		)	—			—		(492		)	—		—		—		37			194,603		853
Total fixed maturity securities	2,087,527		1,188		12,282		(335		)	(26,896		)	—		(7,586		)	—		—		43,205		(199		)	2,109,186		853
Equity securities	66,691		—		—		—			—			—		—			—		—		—		—			66,691		—
Other long-term investments(1)	44,625		16,617		—		(15,166		)	—			—		—			—		—		—		—			46,076		1,451
Short-term investments	—		—		—		—			—			—		—			—		—		—		—			—		—

Total investments	2,198,843		17,805		12,282		(15,501		)	(26,896		)	—		(7,586		)	—		—		43,205		(199		)	2,221,953		2,304

Total assets measured at fair value on a recurring basis	$	2,198,843	$	17,805	$	12,282	$	(15,501	)	$	(26,896	)	$	—	$	(7,586	)	$	—	$	—	$	43,205	$	(199	)	$	2,221,953	$	2,304


Liabilities:
Annuity account balances(2)	$	97,825	$	—	$	—	$	(536	)	$	—		$	—	$	—		$	7	$	419	$	—	$	—		$	97,949	$	—
Other liabilities(1)	506,343		61		—		(125,995		)	—			—		—			—		—		—		—			632,277		(125,934		)

Total liabilities measured at fair value on a recurring basis	$	604,168	$	61	$	—	$	(126,531	)	$	—		$	—	$	—		$	7	$	419	$	—	$	—		$	730,226	$	(125,934	)

(1)Represents certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

For the period of January 1, 2015 to January 31, 2015 (Predecessor Company), $43.2 million of securities were transferred into Level 3. This amount was transferred from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods, using no significant unobservable inputs, but were priced internally using significant unobservable inputs where market observable inputs were no longer available as of January 31, 2015 (Predecessor Company). All transfers are recognized as of the end of the period.

For the period of January 1, 2015 to January 31, 2015 (Predecessor Company), there were no transfers from Level 3 to Level 2.

For the period of January 1, 2015 to January 31, 2015 (Predecessor Company), there were no transfers from Level 2 to Level 1 and there were no transfers out of Level 1.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended September 30, 2014 (Predecessor Company), for which the Company has used significant unobservable inputs (Level 3):

																														Total
																														Gains (losses)
			Total				Total																							included in
			Realized and Unrealized				Realized and Unrealized																							Earnings
			Gains				Losses																							related to
					Included in					Included in																				Instruments
					Other					Other												Transfers								still held at
	Beginning		Included in		Comprehensive		Included in			Comprehensive												in/out of						Ending		the Reporting
	Balance		Earnings		Income		Earnings			Income			Purchases		Sales			Issuances		Settlements		Level 3			Other			Balance		Date
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	10	$	—	$	—	$	—		$	(1	)	$	—	$	(5	)	$	—	$	—	$	—		$	1		$	5	$	—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	568,097		—		2,161		(71		)	(4,299		)	—		(140		)	—		—		—			(380		)	565,368		—
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
States, municipals, and political subdivisions	3,675		—		—		—			—			—		—			—		—		—			—			3,675		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate securities	1,524,297		201		8,435		—			(9,452		)	11,797		(59,352		)	—		—		(96,565		)	(1,555		)	1,377,806		—

Total fixed maturity securities - available-for-sale	2,096,079		201		10,596		(71		)	(13,752		)	11,797		(59,497		)	—		—		(96,565		)	(1,934		)	1,946,854		—
Fixed maturity securities - trading
Residential mortgage-backed securities	842		11		—		—			—			—		—			—		—		(853		)	—			—		—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	176,386		1,834		—		(837		)	—			—		(7,137		)	—		—		—			430			170,676		1,287
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
States, municipals and political subdivisions	—		—		—		—			—			—		—			—		—		—			—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate securities	31,520		182		—		(676		)	—			—		(5,583		)	—		—		(2,518		)	252			23,177		234

Total fixed maturity securities - trading	208,748		2,027		—		(1,513		)	—			—		(12,720		)	—		—		(3,371		)	682			193,853		1,521
Total fixed maturity securities	2,304,827		2,228		10,596		(1,584		)	(13,752		)	11,797		(72,217		)	—		—		(99,936		)	(1,252		)	2,140,707		1,521
Equity securities	77,882		—		—		—			(91		)	—		(445		)	—		—		(10,651		)	—			66,695		—
Other long-term investments(1)	67,222		895		—		(6,843		)	—			—		—			—		—		—			—			61,274		(5,948		)
Short-term investments	—		—		—		—			—			—		—			—		—		—			—			—		—

Total investments	2,449,931		3,123		10,596		(8,427		)	(13,843		)	11,797		(72,662		)	—		—		(110,587		)	(1,252		)	2,268,676		(4,427		)

Total assets measured at fair value on a recurring basis	$	2,449,931	$	3,123	$	10,596	$	(8,427	)	$	(13,843	)	$	11,797	$	(72,662	)	$	—	$	—	$	(110,587	)	$	(1,252	)	$	2,268,676	$	(4,427	)


Liabilities:
Annuity account balances(2)	$	102,456	$	862	$	—	$	—		$	—		$	—	$	—		$	125	$	3,590	$	—		$	—		$	98,129	$	—
Other liabilities(1)	399,669		22,317		—		(42,833		)	—			—		—			—		—		—			—			420,185		(20,516		)

Total liabilities measured at fair value on a recurring basis	$	502,125	$	23,179	$	—	$	(42,833	)	$	—		$	—	$	—		$	125	$	3,590	$	—		$	—		$	518,314	$	(20,516	)

(1)Represents certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

For the three months ended September 30, 2014 (Predecessor Company), there were no transfers into Level 3.

For the three months ended September 30, 2014 (Predecessor Company), there were $110.6 million of securities transferred out of Level 3. This amount was transferred to Level 2. These transfers resulted from securities that were previously priced internally using significant unobservable inputs, now being priced by independent pricing services or brokers.

For the three months ended September 30, 2014 (Predecessor Company), there were no transfers from Level 2 to Level 1.

For the three months ended September 30, 2014 (Predecessor Company), there were no transfers from Level 1.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the nine months ended September 30, 2014 (Predecessor Company), for which the Company has used significant unobservable inputs (Level 3):

																														Total
																														Gains (losses)
			Total				Total																							included in
			Realized and Unrealized				Realized and Unrealized																							Earnings
			Gains				Losses																							related to
					Included in					Included in																				Instruments
					Other					Other												Transfers								still held at
	Beginning		Included in		Comprehensive		Included in			Comprehensive												in/out of						Ending		the Reporting
	Balance		Earnings		Income		Earnings			Income			Purchases		Sales			Issuances		Settlements		Level 3			Other			Balance		Date
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	28	$	—	$	—	$	—		$	(1	)	$	—	$	(23	)	$	—	$	—	$	—		$	1		$	5	$	—
Commercial mortgage-backed securities	—		—				—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	545,808		—		36,227		(71		)	(5,532		)	—		(9,934		)	—		—		—			(1,130		)	565,368		—
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
States, municipals, and political subdivisions	3,675		—		—		—			—			—		—			—		—		—			—			3,675		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate securities	1,549,940		1,170		62,723		—			(16,717		)	102,029		(162,391		)	—		—		(151,858		)	(7,090		)	1,377,806		—

Total fixed maturity securities - available-for-sale	2,099,451		1,170		98,950		(71		)	(22,250		)	102,029		(172,348		)	—		—		(151,858		)	(8,219		)	1,946,854		—
Fixed maturity securities - trading
Residential mortgage-backed securities	—		11		—		—			—			842		—			—		—		(853		)	—			—		—
Commercial mortgage-backed securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Other asset-backed securities	194,977		8,685		—		(3,951		)	—			—		(29,832		)	—		—		—			797			170,676		1,959
U.S. government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
States, municipals and political subdivisions	—		—		—		—			—			—		—			—		—		—			—			—		—
Other government-related securities	—		—		—		—			—			—		—			—		—		—			—			—		—
Corporate securities	29,199		1,060		—		(729		)	—			4,059		(10,693		)	—		—		4			277			23,177		(1		)

Total fixed maturity securities - trading	224,176		9,756		—		(4,680		)	—			4,901		(40,525		)	—		—		(849		)	1,074			193,853		1,958
Total fixed maturity securities	2,323,627		10,926		98,950		(4,751		)	(22,250		)	106,930		(212,873		)	—		—		(152,707		)	(7,145		)	2,140,707		1,958
Equity securities	67,979		—		1,192		—			(257		)	9,551		(1,119		)	—		—		(10,651		)	—			66,695		—
Other long-term investments(1)	98,886		1,320		—		(38,932		)	—			—		—			—		—		—			—			61,274		(37,612		)
Short-term investments	—		—		—		—			—			—		—			—		—		—			—			—		—

Total investments	2,490,492		12,246		100,142		(43,683		)	(22,507		)	116,481		(213,992		)	—		—		(163,358		)	(7,145		)	2,268,676		(35,654		)

Total assets measured at fair value on a recurring basis	$	2,490,492	$	12,246	$	100,142	$	(43,683	)	$	(22,507	)	$	116,481	$	(213,992	)	$	—	$	—	$	(163,358	)	$	(7,145	)	$	2,268,676	$	(35,654	)


Liabilities:
Annuity account balances(2)	$	107,000	$	—	$	—	$	(2,261	)	$	—		$	—	$	—		$	300	$	11,432	$	—		$	—		$	98,129	$	—
Other liabilities(1)	233,738		22,342		—		(208,789		)	—			—		—			—		—		—			—			420,185		(186,447		)

Total liabilities measured at fair value on a recurring basis	$	340,738	$	22,342	$	—	$	(211,050	)	$	—		$	—	$	—		$	300	$	11,432	$	—		$	—		$	518,314	$	(186,447	)

(1)Represents certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

For the nine months ended September 30, 2014 (Predecessor Company), $31.0 million of securities were transferred into Level 3. This amount was transferred from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods, using no significant unobservable inputs, but were priced internally using significant unobservable inputs where market observable inputs were no longer available as of September 30, 2014 (Predecessor Company). All transfers are recognized as of the end of the period.

For the nine months ended September 30, 2014 (Predecessor Company), $194.4 million of securities were transferred into Level 2. This amount was transferred from Level 3. These transfers resulted from securities that were previously priced internally using significant unobservable inputs, now being priced by independent pricing services or brokers.

For the nine months ended September 30, 2014 (Predecessor Company), there were no transfers from Level 2 to Level 1.

For the nine months ended September 30, 2014 (Predecessor Company), there were no transfers out of Level 1.

Total realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either realized investment gains (losses) within the consolidated condensed statements of income (loss) or other comprehensive income (loss) within shareowner’s equity based on the appropriate accounting treatment for the item.

Purchases, sales, issuances, and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily relates to purchases and sales of fixed maturity securities and issuances and settlements of fixed indexed annuities.

The Company reviews the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur. The asset transfers in the table(s) above primarily related to positions moved from Level 3 to Level 2 as the Company determined that certain inputs were observable.

The amount of total gains (losses) for assets and liabilities still held as of the reporting date primarily represents changes in fair value of trading securities and certain derivatives that exist as of the reporting date and the change in fair value of fixed indexed annuities.

Estimated Fair Value of Financial Instruments

The carrying amounts and estimated fair values of the Company’s financial instruments as of the periods shown below are as follows:

		Successor				Predecessor
		Company				Company

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

	Fair Value	Carrying				Carrying
	Level	Amounts		Fair Values		Amounts		Fair Values

		(Dollars In Thousands)				(Dollars In Thousands)
Assets:
Mortgage loans on real estate	3	$	5,728,237	$	5,590,446	$	5,133,780	$	5,524,059
Policy loans	3	1,706,402		1,706,402		1,758,237		1,758,237
Fixed maturities, held-to-maturity(1)	3	579,329		518,363		435,000		458,422

Liabilities:
Stable value product account balances	3	$	1,914,093	$	1,903,615	$	1,959,488	$	1,973,624
Annuity account balances	3	10,754,799		10,321,313		10,950,729		10,491,775

Debt:
Non-recourse funding obligations(2)	3	$	1,939,078	$	1,630,091	$	1,527,752	$	1,753,183

Except as noted below, fair values were estimated using quoted market prices.

(1)	Security purchased from unconsolidated subsidiary, Red Mountain LLC.
(2)	Of this carrying amount, $485.0 million, fair value of $496.7 million, as of September 30, 2015 (Successor Company), and $435.0 million, fair value of $461.4 million, as of December 31, 2014 (Predecessor Company), relates to non-recourse funding obligations issued by Golden Gate V.

Fair Value Measurements

Mortgage loans on real estate

The Company estimates the fair value of mortgage loans using an internally developed model. This model includes inputs derived by the Company based on assumed discount rates relative to the Company’s current mortgage loan lending rate and an expected cash flow analysis based on a review of the mortgage loan terms. The model also contains the Company’s determined representative risk adjustment assumptions related to credit and liquidity risks.

Policy loans

The Company believes the fair value of policy loans approximates book value. Policy loans are funds provided to policy holders in return for a claim on the policy. The funds provided are limited to the cash surrender value of the underlying policy. The nature of policy loans is to have a negligible default risk as the loans are fully collateralized by the value of the policy. Policy loans do not have a stated maturity and the balances and accrued interest are repaid either by the policyholder or with proceeds from the policy. Due to the collateralized nature of policy loans and unpredictable timing of repayments, the Company believes the fair value of policy loans approximates carrying value.

Fixed maturities, held-to-maturity

The Company estimates the fair value of its fixed maturity, held-to-maturity securities using internal discounted cash flow models. The discount rates used in the model are based on a current market yield for similar financial instruments.

Stable Value Product and Annuity Account Balances

The Company estimates the fair value of stable value product account balances and annuity account balances using models based on discounted expected cash flows. The discount rates used in the models are based on a current market rate for similar financial instruments.

Non-recourse Funding Obligations

The Company estimates the fair value of its non-recourse funding obligations using internal discounted cash flow models. The discount rates used in the model are based on a current market yield for similar financial instruments.