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Investments | 12 Months Ended
--- | ---
Sep. 30, 2011
Investments [Abstract] |
Investments |
(5) | Investments
Consumer Products and Other The Company’s short-term investments are summarized as follows:
|  | September 30, |
|  | 2011 |  |  | 2010 |
Trading: |  |  |  |  |  |  |  |
Marketable equity securities |  | $ | 262,085 |  |  | $ | — |
Marketable debt securities |  |  | 12,665 |  |  |  | — |
|  |  | 274,750 |  |  |  | — |
Held to maturity: |  |  |  |  |  |  |  |
U.S. Treasury securities |  |  | 75,638 |  |  |  | 53,965 |
Certificate of deposit |  |  | 250 |  |  |  | — |
|  |  | 75,888 |  |  |  | 53,965 |
Total |  | $ | 350,638 |  |  | $ | 53,965 |
There was $44,030 of net unrealized losses recognized in “Other (expense) income, net” during Fiscal 2011 that relate to trading securities held at September 30, 2011. Insurance Investments of FGL at September 30, 2011 are summarized as follows:
|  |  |  |  |  |  |  |  |  |  | Fair |
|  |  |  |  | Gross |  |  | Gross |  |  | Value and |
|  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Carrying |
|  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
Available-for-sale securities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Asset-backed securities |  | $ | 501,469 |  |  | $ | 1,785 |  |  | $ | (2,770 | ) |  | $ | 500,484 |
Commercial mortgage-backed securities |  |  | 580,313 |  |  |  | 3,427 |  |  |  | (18,163 | ) |  |  | 565,577 |
Corporates |  |  | 11,479,862 |  |  |  | 506,264 |  |  |  | (130,352 | ) |  |  | 11,855,774 |
Equities |  |  | 292,112 |  |  |  | 3,964 |  |  |  | (9,033 | ) |  |  | 287,043 |
Hybrids |  |  | 699,915 |  |  |  | 10,429 |  |  |  | (51,055 | ) |  |  | 659,289 |
Municipals |  |  | 824,562 |  |  |  | 111,929 |  |  |  | (7 | ) |  |  | 936,484 |
Agency residential mortgage-backed securities |  |  | 217,354 |  |  |  | 4,966 |  |  |  | (295 | ) |  |  | 222,025 |
Non-agency residential mortgage-backed securities |  |  | 465,666 |  |  |  | 1,971 |  |  |  | (23,120 | ) |  |  | 444,517 |
U.S. Government |  |  | 175,054 |  |  |  | 8,270 |  |  |  | — |  |  |  | 183,324 |
Total available-for-sale securities |  |  | 15,236,307 |  |  |  | 653,005 |  |  |  | (234,795 | ) |  |  | 15,654,517 |
Derivative investments |  |  | 171,612 |  |  |  | 405 |  |  |  | (119,682 | ) |  |  | 52,335 |
Other invested assets |  |  | 44,279 |  |  |  | — |  |  |  | — |  |  |  | 44,279 |
Total investments |  | $ | 15,452,198 |  |  | $ | 653,410 |  |  | $ | (354,477 | ) |  | $ | 15,751,131 |
Included in other comprehensive income were unrealized gains of $524 and unrealized losses of $24 related to the non-credit portion of other-than-temporary impairments on non-agency residential-mortgage-backed securities at September 30, 2011. The amortized cost and fair value of fixed maturity available-for-sale securities by contractual maturities, as applicable, at September 30, 2011 were as follows:
|  | Amortized |  |  | Fair |
|  | Cost |  |  | Value |
Corporate, Municipal and U.S. Government securities: |  |  |  |  |  |  |  |
Due in one year or less |  | $ | 399,362 |  |  | $ | 398,594 |
Due after one year through five years |  |  | 2,646,037 |  |  |  | 2,653,699 |
Due after five years through ten years |  |  | 4,481,497 |  |  |  | 4,593,136 |
Due after ten years |  |  | 4,952,582 |  |  |  | 5,330,153 |
Subtotal |  |  | 12,479,478 |  |  |  | 12,975,582 |
Other securities which provide for periodic payments: |  |  |  |  |  |  |  |
Asset-backed securities |  |  | 501,469 |  |  |  | 500,484 |
Commercial-mortgage-backed securities |  |  | 580,313 |  |  |  | 565,577 |
Hybrids |  |  | 699,915 |  |  |  | 659,289 |
Agency residential mortgage-backed securities |  |  | 217,354 |  |  |  | 222,025 |
Non-agency residential mortgage-backed securities |  |  | 465,666 |  |  |  | 444,517 |
Total fixed maturity available-for-sale securities |  | $ | 14,944,195 |  |  | $ | 15,367,474 |
Actual maturities may differ from contractual maturities because issuers may have the right to call or pre-pay obligations. As part of FGL’s ongoing securities monitoring process, FGL evaluates whether securities in an unrealized loss position could potentially be other-than-temporarily impaired. FGL has concluded that the fair values of the securities presented in the table below were not other-than-temporarily impaired as of September 30, 2011. This conclusion is derived from the issuers’ continued satisfaction of the securities’ obligations in accordance with their contractual terms along with the expectation that they will continue to do so. Also contributing to this conclusion is FGL’s determination that it is more likely than not that FGL will not be required to sell these securities prior to recovery, an assessment of the issuers’ financial condition and other objective evidence. As it specifically relates to asset-backed securities and commercial mortgage-backed securities, the present value of cash flows expected to be collected is at least the amount of the amortized cost basis of the security and FGL management has the intent to hold these securities for a period of time sufficient to allow for any anticipated recovery in fair value. As the amortized cost of all investments was adjusted to fair value as of the FGL Acquisition Date, no individual securities have been in a continuous unrealized loss position greater than twelve months. The fair value and gross unrealized losses, of available-for-sale securities with gross unrealized losses, aggregated by investment category, were as follows:
|  | September 30, 2011 |
|  |  |  |  | Gross |
|  |  |  |  | Unrealized |
|  | Fair Value |  |  | Losses |
Available-for-sale securities: |  |  |  |  |  |  |  |
Asset-backed securities |  | $ | 275,135 |  |  | $ | (2,770 | )
Commercial mortgage-backed securities |  |  | 338,865 |  |  |  | (18,163 | )
Corporates |  |  | 3,081,556 |  |  |  | (130,352 | )
Equities |  |  | 99,772 |  |  |  | (9,033 | )
Hybrids |  |  | 450,376 |  |  |  | (51,055 | )
Municipals |  |  | 1,137 |  |  |  | (7 | )
Agency residential mortgage-backed securities |  |  | 25,820 |  |  |  | (295 | )
Non-agency residential mortgage-backed securities |  |  | 375,349 |  |  |  | (23,120 | )
Total available-for-sale securities |  | $ | 4,648,010 |  |  | $ | (234,795 | )
Total number of available-for-sale securities in an unrealized loss position |  |  |  |  |  |  | 505 |
At September 30, 2011, securities in an unrealized loss position were primarily concentrated in investment grade corporate debt instruments, residential mortgage-backed securities, commercial mortgage-backed securities and hybrids. Total unrealized losses were $234,795 at September 30, 2011. Finance-related exposure represents the largest component of the unrealized loss position in the portfolio at September 30, 2011. The increase in risk aversion in capital markets during the most recent period has also affected prices of commercial mortgage-backed securities and non-agency residential mortgage-backed securities, including the earlier vintage and higher quality securities currently owned. FGL has not added to any exposure in these sectors and will continue to monitor existing positions carefully. At September 30, 2011, securities with a fair value of $31,320 were depressed greater than 20% of amortized cost, which represented less than 1% of the carrying values of all investments. Based upon FGL’s current evaluation of these securities in accordance with its impairment policy and FGL’s intent to retain these investments for a period of time sufficient to allow for recovery in value, FGL has determined that these securities are not other-than-temporarily impaired. The following table provides a reconciliation of the beginning and ending balances of the credit loss portion of other-than-temporary impairments on fixed maturity securities held by FGL at September 30, 2011, for which a portion of the other-than-temporary impairment was recognized in accumulated other comprehensive income:
Balance at April 6, 2011 |  | $ | — |
Increases attributable to credit losses on securities: |  |  |  |
Other-than-temporary impairment was previously recognized |  |  | — |
Other-than-temporary impairment was not previously recognized |  |  | 667 |
Balance at September 30, 2011 |  | $ | 667 |
For the period from April 6, 2011 to September 30, 2011, FGL recognized credit losses in operations totaling $17,966, which experienced other-than-temporary impairments and had an amortized cost of $103,312 and a fair value of $85,846 at the time of impairment. Details underlying write-downs taken as a result of other-than-temporary impairments that were recognized in net income and included in realized loss on investments above were as follows:
|  | For the Period |
|  | April 6, 2011 to |
|  | September 30, 2011 |
Other-than-temporary impairments recognized in net income: |  |  |  |
Commercial mortgage-backed securities |  | $ | 20 |
Corporates |  |  | 1,462 |
Equities |  |  | 11,007 |
Non-agency residential mortgage-backed securities |  |  | 5,059 |
Other invested assets |  |  | 418 |
Total credit impairments |  | $ | 17,966 |
Net Investment Income The major sources of “Net investment income” on the Consolidated Statement of Operations were as follows:
|  | For the Period |
|  | April 6, 2011 to |
|  | September 30, 2011 |
Fixed maturity available-for-sale securities |  | $ | 364,771 |
Equity available-for-sale securities |  |  | 10,190 |
Policy loans |  |  | 1,511 |
Invested cash and short-term investments |  |  | 129 |
Other investments |  |  | 326 |
Gross investment income |  |  | 376,927 |
Investment expense |  |  | (7,087 | )
Net investment income |  | $ | 369,840 |
Net Investment Losses Details underlying “Net investment losses” reported on the accompanying Consolidated Statement of Operations were as follows:
|  | For the Period |
|  | April 6, 2011 to |
|  | September 30, 2011 |
Net realized gain on fixed maturity available-for-sale securities |  | $ | 16,912 |
Realized loss on equity securities |  |  | (10,977 | )
Net realized gains on securities |  |  | 5,935 |
Realized loss on certain derivative instruments |  |  | (44,776 | )
Unrealized loss on certain derivative instruments |  |  | (125,976 | )
Losses on derivative instruments |  |  | (170,752 | )
Realized loss on other invested assets |  |  | (2,074 | )
Net investment losses |  | $ | (166,891 | )
Additional detail regarding the net investment losses is as follows:
|  | For the Period |
|  | April 6, 2011 to |
|  | September 30, 2011 |
Total other-than-temporary impairments |  | $ | (17,466 | )
Less non-credit portion of other-than-temporary impairments included in other comprehensive income |  |  | 500 |
Net other-than temporary impairments |  |  | (17,966 | )
Losses on derivative instruments |  |  | (170,752 | )
Other realized investment gains |  |  | 21,827 |
Net investment losses |  | $ | (166,891 | )
For the period from April 6, 2011 to September 30, 2011, principal repayments, calls, tenders and proceeds from the sale of fixed maturity available-for-sale securities, including assets transferred to Wilton Re as discussed in Note 20, totaled $2,104,272, gross gains on such sales totaled $43,902 and gross losses totaled $20,031. Underlying write-downs taken to fixed maturity available-for-sale securities as a result of other-than-temporary impairments that were recognized in net income and included in net realized gains on available-for-sale securities above were $17,966 for the period from April 6, 2011 to September 30, 2011. The portion of other-than-temporary impairments recognized in AOCI is disclosed in Note 14. Cash flows from investing activities by security classification were as follows:
|  | Year Ended September 30, |
|  | 2011 |  |  | 2010 |
Cost of investments acquired: |  |  |  |  |  |  |  |
Available-for-sale |  | $ | 1,285,951 |  |  | $ | — |
Held-to-maturity |  |  | 123,428 |  |  |  | (3,989 | )
Trading (acquired for holding) |  |  | 332,715 |  |  |  | — |
Derivatives and other |  |  | 66,905 |  |  |  | — |
|  | $ | 1,808,999 |  |  | $ | (3,989 | )
Proceeds from investments sold, matured or repaid: |  |  |  |  |  |  |  |
Available-for-sale |  | $ | 1,482,195 |  |  | $ | — |
Held-to-maturity |  |  | 101,755 |  |  |  | 30,094 |
Trading |  |  | 29,532 |  |  |  | — |
Derivatives and other |  |  | 86,437 |  |  |  | — |
|  | $ | 1,699,919 |  |  | $ | 30,094 |

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- Definition The entire disclosure for cash, cash equivalents, investments in debt and equity instruments (including cost and equity investees and related income statement amounts), equity and cost method investments, investments in joint ventures and any other investment. + References No definition available. + Details
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