10.

Certain Nontraditional Long-Duration Contracts

The Company offered traditional variable annuity contracts through its separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contractholder. The Company also offered variable annuity contracts with general and separate account options where the Company contractually guarantees to the contractholder a return of no less than total deposits made to the contract less any partial withdrawals (“return of net deposits”). In certain of these variable annuity contracts, the Company also contractually guarantees to the contractholder a return of no less than (1) total deposits made to the contract less any partial withdrawals plus a minimum return (“minimum return”), and/or (2) the highest contract value on a specified date adjusted for any withdrawals (“contract value”). These guarantees include benefits that are payable in the event of death, annuitization or at specified dates during the accumulation period and withdrawal and income benefits payable during specified periods. The Company also issues annuity contracts with market value adjusted investment options (“MVAs”), which provide for a return of principal plus a fixed rate of return if held to maturity, or, alternatively, a “market adjusted value” if surrendered prior to maturity or if funds are allocated to other investment options. The market value adjustment may result in a gain or loss to the Company, depending on crediting rates or an indexed rate at surrender, as applicable. The Company also issues fixed deferred annuity contracts without MVA that have a guaranteed credited rate and annuity benefit. All of the risks associated with the Company’s variable annuity contracts are reinsured with external reinsurers.

In addition, the Company issues certain variable life, variable universal life and universal life contracts where the Company contractually guarantees to the contractholder a death benefit even when there is insufficient value to cover monthly mortality and expense charges, whereas otherwise the contract would typically lapse (“no lapse guarantee”). Variable life and variable universal life contracts are offered with general and separate account options similar to variable annuities.

The assets supporting the variable portion of both traditional variable annuities and certain variable contracts with guarantees are carried at fair value and reported as Separate Account assets with an equivalent amount reported as Separate Account liabilities. Amounts assessed against the contractholders for mortality, administration, and other services are included within revenue in fee income from policyholders and changes in liabilities for minimum guarantees are generally included in policyholder benefits in the Consolidated Statement of Operations and Comprehensive Income (Loss) (Successor) and Statements of Operations and Comprehensive Income (Predecessor).

For those guarantees of benefits that are payable in the event of death, the net amount at risk is generally defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including fixed income and equity market returns, contract lapses and contractholder mortality.

For guarantees of benefits that are payable at annuitization, the net amount at risk is generally defined as the present value of the minimum guaranteed annuity payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including fixed income and equity market returns, benefit utilization, timing of annuitization, contract lapses and contractholder mortality.

For guarantees of benefits that are payable at withdrawal, the net amount at risk is generally defined as the present value of the minimum guaranteed withdrawal payments available to the contractholder determined in accordance with the terms of the contract in excess of the current account balance. For guarantees of accumulation balances, the net amount at risk is generally defined as the guaranteed minimum accumulation balance minus the current account balance. The Company’s primary risk exposures for these contracts relates to actual deviations from, or changes to, the assumptions used in the original pricing of these products, including equity market returns, interest rates, market volatility or contractholder behavior used in the original pricing of these products.

The Company’s contracts with guarantees may offer more than one type of guarantee in each contract; therefore, the amounts listed may not be mutually exclusive. The liabilities related to the net amount at risk are reflected within Future policy benefits and other policyholder liabilities or Policyholders’ account balances. As of December 31, 2014, the Company had the following guarantees associated with these contracts, by product and guarantee type:


	Successor
	December 31, 2014
($ in millions)	In the Event of Death		At Annuitization/ Accumulation⁽¹⁾		For Cumulative Periodic Withdrawals		Accumulation at Specified Dates
*Variable Annuity Contracts*
Separate Account value	$	742.7	$	151.9	$	16.6	$	118.4
Net amount at risk	$	57.2	$	15.2	$	0.1	$	6.2
Average attained age of contractholders		60 years		N/A		N/A		N/A
Weighted average waiting period until guarantee date		N/A		None		N/A		6 years
*Variable Life, Variable Universal Life and Universal Life Contracts*
No Lapse Guarantees:
Separate Account value	$	325.1
General account value	$	31518.3
Net amount at risk	$	89,942.8
Average attained age of contractholders		51 years

As of December 31, 2013, the Company had the following guarantees associated with these contracts, by product and guarantee type:


	Predecessor
	December 31, 2013
($ in millions)	In the Event of Death		At Annuitization/ Accumulation⁽¹⁾		For Cumulative Periodic Withdrawals		Accumulation at Specified Dates
*Variable Annuity Contracts*
Separate Account value	$	877.0	$	170.5	$	21.8	$	151.1
Net amount at risk	$	63.2	$	16.6	$	0.1	$	7.3
Average attained age of contractholders		59 years		N/A		N/A		N/A
Weighted average waiting period until guarantee date		N/A		None		N/A		6 years

Liabilities for Guarantee Benefits

The table below summarizes the changes in general account liabilities for guarantees on variable contracts. The liabilities for guaranteed minimum death benefits (“GMDB”) and secondary guarantees on interest-sensitive life and fixed annuities are included in Future policy benefits and other policyholder liabilities on the Consolidated Balance Sheet (Successor) and the related changes in the liabilities are included in policyholder benefits in the Consolidated Statement of Operations and Comprehensive Income (Loss) for the Successor Period from April 1, 2014 through December 31, 2014. In the Predecessor Period, secondary guarantees on interest-sensitive life and fixed annuities are included in policyholders’ account balances. Guaranteed minimum income benefits (“GMIB”), guaranteed minimum withdrawal benefits (“GMWB”) and guaranteed minimum accumulation benefits (“GMAB”) features are accounted for as bifurcated embedded derivatives and are recorded at fair value within Policyholders’ account balances on the Consolidated Balance Sheet (Successor).


	GMDB		GMIB		GMWB/ GMAB		Secondary Guarantees
($ in thousands)	Variable Annuity		Variable Annuity		Variable Annuity		Interest- Sensitive Life and Fixed Annuities			Total
Predecessor
Balance as of December 21, 2012	$	9,390	$	19,484	$	19,621	$	200,688		$	249,183
Less: reinsurance recoverable		9,390		19,484		19,621		200,688			249,183

Net balance as of December 31, 2012		—		—		—		—			—
Incurred guarantee benefits		—		—		—		—			—
Paid guarantee benefits		—		—		—		—			—

Net change		—		—		—		—			—
Net balance as of December 31, 2013		—		—		—		—			—
Plus reinsurance recoverable		8,444		8,743		9,444		281,771			308,402

Balance as of December 31, 2013	$	8,444	$	8,743	$	9,444	$	281,771		$	308,402

Less: reinsurance recoverable		8,444		8,743		9,444		281,771			308,402
Net balance as of December 31, 2013		—		—		—		—			—
Incurred guarantee benefits		—		—		—		—			—
Paid guarantee benefits		—		—		—		—			—

Net change		—		—		—		—			—
Net balance as of March 31, 2014		—		—		—		—			—
Plus reinsurance recoverable		8,057		7,122		8,499		293,704			317,382

Balance as of March 31, 2014	$	8,057	$	7,122	$	8,499	$	293,704		$	317,382



Successor
Balance as of April 1, 2014	$	8,057	$	7,122	$	8,499	$	552,163		$	575,841
Less: reinsurance recoverable		8,057		7,122		8,499		67,288			90,966

Net balance as of April 1, 2014		—		—		—		484,875			484,875
Incurred guarantee benefits		—		—		—		159,104			159,104
Paid guarantee benefits		—		—		—		(108,252	)		(108,252	)

Net change		—		—		—		50,852			50,852
Net balance as of December 31, 2014		—		—		—		535,727			535,727
Plus reinsurance recoverable		8,358		8,240		6,733		83,733			107,064

Balance as of December 31, 2014	$	8,358	$	8,240	$	6,733	$	619,460		$	642,791