Disposition

9 Months Ended

Sep. 30, 2014

Disposition

Disposition

3.  Disposition

On April 1, 2014, the Company completed the sale of Lincoln Benefit Life Company (“LBL”), LBL’s life insurance business generated through independent master brokerage agencies, and all of LBL’s deferred fixed annuity and long-term care insurance business to Resolution Life Holdings, Inc.  The gross sale price was $797 million, representing $596 million of cash and the retention of tax benefits.  The loss on disposition increased by $28 million, pre-tax, ($29 million, after-tax) and $100 million, pre-tax, ($60 million, after-tax) in the three months and nine months ended September 30, 2014, respectively.  The loss on disposition in the three months ended September 30, 2014 included the finalization of certain tax balances and other adjustments.  The loss on disposition in the nine months ended September 30, 2014 included a $22 million, pre-tax, reduction in goodwill.

In conjunction with the sale, the Company was required to establish a trust relating to the business that LBL continues to cede to ALIC.  This trust is required to have assets greater than or equal to the statutory reserves ceded by LBL to ALIC, measured on a monthly basis.  As of September 30, 2014, the trust holds $5.08 billion of investments, which are reported in the statement of financial position.

The following table summarizes the assets and liabilities classified as held for sale as of December 31, 2013.

($ in millions)
Assets
Investments
Fixed income securities	$	10,167
Mortgage loans		1,367
Short-term investments		160
Other investments		289
Total investments		11,983
Cash		--
Deferred policy acquisition costs		743
Reinsurance recoverables, net		1,660
Accrued investment income		109
Other assets		79
Separate Accounts		1,701
Assets held for sale		16,275
Less: Loss accrual		(682)
Total assets held for sale	$	15,593
Liabilities
Reserve for life-contingent contract benefits	$	1,894
Contractholder funds		10,945
Unearned premiums		12
Deferred income taxes		151
Other liabilities and accrued expenses		196
Separate Accounts		1,701
Total liabilities held for sale	$	14,899

Included in shareholders’ equity was $85 million of accumulated other comprehensive income related to assets held for sale as of December 31, 2013.