Derivative Financial Instruments

12 Months Ended

Dec. 31, 2015

Derivative Financial Instruments

4. Derivative Financial Instruments

See Note 2 for a description of the Company’s accounting policies for derivatives and Note 5 for information about the fair value hierarchy for derivatives.

The following table provides a summary of the notional and fair value positions of derivative financial instruments as of December 31, 2015 and 2014:

($ in thousands)	Successor
	December 31, 2015							December 31, 2014
			Gross Fair Value							Gross Fair Value
	Notional		Assets		Liabilities			Notional		Assets		Liabilities
Assets
Equity Options	$	879,853	$	28,588	$	(10,961	)	$	593,610	$	68,776	$	(43,104	)
Futures		15,373		108		—			20,195		329		—
Liabilities
Policyholders account balances
Derivatives embedded in life and annuity contracts
Equity-indexed annuity contracts(2)	$	1,494,084	$	—	$	(64,138	)	$	1,734,264	$	—	$	(63,660	)
Equity-indexed life contracts		401,511		—		(11,701	)		347,610		—		(18,720	)
Guaranteed accumulation benefits(1)		95,752		—		(7,499	)		120,714		—		(6,367	)
Guaranteed withdrawal benefits(1)		13,264		—		(315	)		17,102		—		(366	)

(1) As of April 1, 2014, these amounts were ceded in accordance with the Company’s reinsurance agreements

(2) Notional amount represents account value of equity indexed contracts

The standardized ISDA Master Agreement under which the Company’s derivative transactions are executed include provisions for payment netting. In the normal course of business activities, if there is more than one derivative transaction with a single counterparty, the Company will set-off the cash flows of those derivatives into a single amount to be exchanged in settlement of the resulting net payable or receivable with that counterparty. The Company nets the fair value of all derivative financial instruments with counterparties for which an ISDA Master Agreement and related Credit Support Annex (“CSA”) have been executed. At December 31, 2015 and December 31, 2014, the Company held $0.8 million and $6.4 million in cash and securities collateral delivered by trade counterparties. This cash collateral is reported in Cash on the Consolidated Balance Sheet.

The following table presents the amount and location of gains (losses) recognized in income, net of reinsurance, for derivatives that were not designated or qualifying as hedging instruments for the Successor Period for the year ended December 31, 2015 and for the period from April 1, 2014 through December 31, 2014:

	For the Year Ended December 31, 2015						For the Period from April 1, 2014 through December 31, 2014
($ in thousands)	Realized Investment Gains (Losses)			Policyholder Benefits			Realized Investment Gains (Losses)		Policyholder Benefits
Assets
Equity Options	$	(7,557	)	$	—		$	15,230	$	—
Futures		(1,651	)		—			2,187		—
Liabilities
Policyholders’ account balances
Equity-indexed annuity contracts	$	—		$	(478	)	$	—	$	(5,622	)
Equity-indexed life contracts		—			956			—		90

The following table presents the amount and location of gains (losses) recognized in income for derivatives that were not designated or qualifying as hedging instruments for the Predecessor Period from January 1, 2014 through March 31, 2014 and for the year ended December 31, 2013:

	For the Period from January 1, 2014 through March 31, 2014				For the Year Ended December 31, 2013
($ in thousands)	Interest Credited(1)		Policyholder Benefits(1)		Interest Credited(1)		Policyholder Benefits(1)
Liabilities
Policyholders’ account balances
Derivatives embedded in life and annuity contracts	$	16,427	$	946	$	36,890	$	10,177

(1) Prior to April 1, 2014, these amounts were ceded in accordance with the Company’s reinsurance agreements.