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Reinsurance | 12 Months Ended
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Sep. 30, 2011
Reinsurance [Abstract] |
Reinsurance |
(20) | Reinsurance
FGL reinsures portions of its policy risks with other insurance companies. The use of reinsurance does not discharge an insurer from liability on the insurance ceded. The insurer is required to pay in full the amount of its insurance liability regardless of whether it is entitled to or able to receive payment from the reinsurer. The portion of risks exceeding FGL’s retention limit is reinsured with other insurers. FGL seeks reinsurance coverage in order to limit its exposure to mortality losses and enhance capital management. FGL follows reinsurance accounting when there is adequate risk transfer. Otherwise, the deposit method of accounting is followed. FGL also assumes policy risks from other insurance companies. The effect of reinsurance on premiums earned and benefits incurred for the period from April 6, 2011 to September 30, 2011 was as follows:
|  | Net Premiums |  |  | Net Benefits |
|  | Earned |  |  | Incurred |
Direct |  | $ | 157,772 |  |  | $ | 392,073 |
Assumed |  |  | 22,858 |  |  |  | 19,571 |
Ceded |  |  | (141,628 | ) |  |  | (164,012 | )
Net |  | $ | 39,002 |  |  | $ | 247,632 |
Amounts payable or recoverable for reinsurance on paid and unpaid claims are not subject to periodic or maximum limits. During the period April 6, 2011 to September 30, 2011, FGL did not write off any reinsurance balances nor did it commute any ceded reinsurance other than the recapture discussed below under “Reserve Facility.” No policies issued by FGL have been reinsured with a foreign company, which is controlled, either directly or indirectly, by a party not primarily engaged in the business of insurance. FGL has not entered into any reinsurance agreements in which the reinsurer may unilaterally cancel any reinsurance for reasons other than nonpayment of premiums or other similar credit issues. FGL has the following significant reinsurance agreements as of September 30, 2011: Reserve Facility Pursuant to the F&G Stock Purchase Agreement, on April 7, 2011, FGL Insurance recaptured all of the life insurance business ceded to Old Mutual Reassurance (Ireland) Ltd. (“OM Re”), an affiliated company of OMGUK, FGL’s former parent. OM Re transferred assets with a fair value of $653,684 to FGL Insurance in settlement of all of OM Re’s obligations under these reinsurance agreements. The fair value of the transferred assets, which was based on the economic reserves, was approved by the Maryland Insurance Administration. No gain or loss was recognized in connection with the recapture. The fair value of the assets transferred is reflected in the FGL acquisition purchase price allocation (see Note 22). On April 7, 2011 FGL Insurance ceded to Raven Re, on a coinsurance basis, a significant portion of the business recaptured from OM Re. Raven Re was capitalized by a $250 capital contribution from FGL Insurance and a surplus note (i.e., subordinated debt) issued to OMGUK in the principal amount of $95,000 (see Note 12 for the terms of such note). The proceeds from the surplus note issuance and the surplus note are reflected in the FGL acquisition purchase price allocation. Raven Re financed $535,000 of statutory reserves for this business with a letter of credit facility provided by an unaffiliated financial institution and guaranteed by OMGUK and HFG. On April 7, 2011, FGL Insurance entered into a reimbursement agreement with Nomura Bank International plc (“Nomura”) to establish a reserve facility and Nomura charged an upfront structuring fee (the “Structuring Fee”). The Structuring Fee was in the amount of $13,750 and is related to the retrocession of the life business recaptured from OM Re and related credit facility. The Structuring Fee was deferred and was fully amortized as of September 30, 2011 as a result of the termination of the reserve facility in connection with FGL Insurance accelerating the effective date of the amended and restated Raven Springing Amendment which is described in the Wilton Agreement discussion below. Commissioners Annuity Reserve Valuation Method Facility (“CARVM”) Effective September 30, 2008, FGL Insurance entered into a yearly renewable term quota share reinsurance agreement with OM Re, whereby OM Re assumes a portion of the risk that policyholders exercise the “waiver of surrender charge” features on certain deferred annuity policies. This agreement did not meet risk transfer requirements to qualify as reinsurance under US GAAP. Under the terms of the agreement, the Company expensed net fees of $1,809 for the period from April 6, 2011 to September 30, 2011. Although this agreement does not provide reinsurance for reserves on a US GAAP basis, it does provide for reinsurance of reserves on a statutory basis. The statutory reserves are secured by a letter of credit with Old Mutual plc of London, England (“OM”), OMGUK’s parent. Wilton Agreement On January 26, 2011, HFG entered into a commitment agreement (the “Commitment Agreement”) with Wilton Re U.S. Holdings, Inc. (“Wilton”) committing Wilton Re, a wholly-owned subsidiary of Wilton and a Minnesota insurance company to enter into certain coinsurance agreements with FGL Insurance. On April 8, 2011, FGL Insurance ceded significantly all of the remaining life insurance business that it had retained to Wilton Re under the first of the two amendments with Wilton. FGL Insurance transferred assets with a fair value of $535,826, net of ceding commission, to Wilton Re. FGL Insurance considered the effects of the first amendment in the purchase price allocation. Effective April 26, 2011, HFG elected the second amendment (the “Raven Springing Amendment”) that commits FGL Insurance to cede to Wilton Re all of the business currently reinsured with Raven Re (the “Raven Block”) on or before December 31, 2012, subject to regulatory approval. The Raven Springing Amendment was intended to mitigate the risk associated with HFG’s obligation under the F&G Stock Purchase Agreement to replace the Raven Re reserve facility by December 31, 2012. On September 9, 2011, FGL Insurance and Wilton Re executed an amended and restated Raven Springing Amendment whereby the recapture of the business ceded to Raven Re by FGL Insurance and the re-cession to Wilton Re closed on October 17, 2011 with an effective date of October 1, 2011. See Note 29 for additional details regarding the closing of the Raven Springing Amendment. Pursuant to the terms of the Raven Springing Amendment, the amount payable to Wilton at the closing of such amendment was adjusted to reflect the economic performance for the Raven Block from January 1, 2011 until the effective time of the closing of the Raven Springing Amendment. The estimated economic performance for the period from January 1, 2011 to April 6, 2011 was considered in the opening balance sheet and purchase price allocation. However, Wilton Re had no liability with respect to the Raven Block prior to the effective date of the Raven Springing Amendment. The Company recorded a charge of $10,426 for the estimated economic performance of the business for the period from April 6, 2011 to September 30, 2011. FGL Insurance has a significant concentration of reinsurance with Wilton Re that could have a material impact on FGL Insurance’s financial position. As of September 30, 2011, the net amount recoverable from Wilton Re was $609,340. FGL Insurance monitors both the financial condition of individual reinsurers and risk concentration arising from similar geographic regions, activities and economic characteristics of reinsurers to reduce the risk of default by such reinsurers. Additional information regarding the Company’s reinsurance agreements as of and for the period ended September 30, 2011 is as follows:
|  |  |  |  | Insurance Premiums and Other Considerations |
|  |  |  |  |  |  |  |  |  |  | Total Insurance |
|  |  |  |  | Annuity |  |  | Traditional Life |  |  | Premiums and |
|  | Life Insurance |  |  | Product |  |  | Insurance |  |  | Other |
|  | In-Force |  |  | Charges |  |  | Premiums |  |  | Considerations |
Gross amounts |  | $ | 2,256,696 |  |  | $ | 68,436 |  |  | $ | 157,772 |  |  | $ | 226,208 |
Ceded to other companies |  |  | (1,180,412 | ) |  |  | (18,776 | ) |  |  | (141,628 | ) |  |  | (160,404 | )
Assumed from other companies |  |  | 22,641 |  |  |  | — |  |  |  | 22,858 |  |  |  | 22,858 |
Net amount |  | $ | 1,098,925 |  |  | $ | 49,660 |  |  | $ | 39,002 |  |  | $ | 88,662 |
Percentage of amount assumed |  |  | 2.06 | % |  |  | 0.00 | % |  |  | 58.61 | % |  |  | 25.78 | %

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- Definition The entire disclosure pertaining to the existence, magnitude and information about insurance that has been ceded to or assumed from another insurance company, including the methodologies and assumptions used in determining recorded amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27261-158547 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 55 -Paragraph 13 -URI http://asc.fasb.org/extlink&oid=6588590&loc=d3e27795-158548 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Article 7 -Section 03 -Paragraph 13 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 310 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6485557&loc=d3e21549-158491 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 113 -Paragraph 120 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 92-5 -Paragraph 19 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 55 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=6588590&loc=d3e27703-158548 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 113 -Paragraph 27 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 605 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6486672&loc=d3e27374-158547 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 210 -Section S99 -Paragraph 1 -Subparagraph (SX 210.7-03.6,13) -URI http://asc.fasb.org/extlink&oid=6879938&loc=d3e572229-122910 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6811-158387 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Article 7 -Section 03 -Paragraph 6 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 944 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6480758&loc=d3e6816-158387 + Details
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