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Significant Risks and Uncertainties
 12 Months Ended
Sep. 30, 2011
Significant Risks and Uncertainties [Abstract]  
Significant Risks and Uncertainties
   
(3)   Significant Risks and Uncertainties
 
Use of Estimates
 
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Due to the inherent uncertainty involved in making estimates, actual results in future periods could differ from those estimates.
 
The Company’s significant estimates which are susceptible to change in the near term relate to (1) recognition of deferred tax assets and related valuation allowances (see Notes 17 and 22), (2) estimates of reserves for loss contingencies, including litigation, regulatory and environmental reserves (see Note 19), (3) valuation and impairment recognition for long-lived assets including properties, goodwill and intangibles (see Note 10), (4) revenue recognition, including estimates for returns, promotions and collectability of receivables (see Note 4), (5) assumptions used in actuarial valuations for defined benefit plans (see Note 15), (6) restructuring and related charges (see Note 23) and acquisition and integration related charges (see Note 22), (7) fair value of equity conversion feature of preferred stock (see Notes 6 and 13), (8) fair value of certain invested assets and derivatives including embedded derivatives (see Notes 5 and 6), (9) other-than-temporary impairments of available-for-sale investments (see Note 5) and (10) VOBA and DAC amortization (see Notes 2 and 10).
 
Concentrations of Credit Risk and Major Customers
 
Trade receivables subject the Company’s consumer products segment to credit risk. Trade accounts receivable are carried at net realizable value. The Company extends credit to its customers based upon an evaluation of the customer’s financial condition and credit history, but generally does not require collateral. The Company monitors its customers’ credit and financial condition based on changing economic conditions and will make adjustments to credit policies as required. Provisions for losses on uncollectible trade receivables are determined based on ongoing evaluations of the Company’s receivables, principally on the basis of historical collection experience and evaluations of the risks of nonpayment for a given customer.
 
The Company’s consumer products segment has a broad range of customers including many large retail outlet chains, one of which accounts for a significant percentage of its sales volume. This major customer represented approximately 24%, 22% and 23% of the Company’s “Net sales” during Fiscal 2011, Fiscal 2010 and the period from August 31, 2009 through September 30, 2009, respectively, and approximately 23% of “Net sales” during the Predecessor’s period from October 1, 2008 through August 30, 2009. This major customer also represented approximately 16% and 15% of the Company’s trade account receivables, net as of September 30, 2011 and September 30, 2010, respectively (see Note 4).
 
Approximately 44%, 44% and 48% of the Company’s “Net sales” during Fiscal 2011, Fiscal 2010 and the period from August 31, 2009 through September 30, 2009, respectively, occurred outside of the United States and approximately 42% of the Predecessor’s “Net sales” during the period from October 1, 2008 through August 30, 2009, occurred outside of the United States. These sales and related receivables are subject to varying degrees of credit, currency, and political and economic risk. The Company monitors these risks and makes appropriate provisions for collectibility based on an assessment of the risks present.
 
Concentrations of Financial Instruments
 
As of September 30, 2011, the Company’s most significant investment in one industry was FGL’s investment securities in the banking industry with a fair value of $1,987,993, or 12.6% of the invested assets portfolio. As of September 30, 2011, FGL’s exposure to sub-prime and Alt-A residential mortgage-backed securities was $264,575 and $34,112 or 1.7% and 0.2% of FGL’s invested assets, respectively.
 
Concentrations of Financial and Capital Markets Risk
 
Financial markets in the United States and elsewhere have experienced extreme volatility and disruption for more than two years, due largely to the stresses affecting the global banking system. Like other life insurers, FGL has been adversely affected by these conditions. FGL is exposed to financial and capital markets risk, including changes in interest rates and credit spreads which have had an adverse effect on FGL’s results of operations, financial condition and liquidity prior to the FGL Acquisition. As discussed further in the following paragraph regarding risk factors, FGL expects to continue to face challenges and uncertainties that could adversely affect FGL’s results of operations and financial condition.
 
FGL’s exposure to interest rate risk relates primarily to the market price and cash flow variability associated with changes in interest rates. A rise in interest rates, in the absence of other countervailing changes, will decrease the net unrealized gain position of FGL’s investment portfolio and, if long-term interest rates rise dramatically within a six to twelve month time period, certain of FGL’s products may be exposed to disintermediation risk. Disintermediation risk refers to the risk that policyholders may surrender their contracts in a rising interest rate environment, requiring FGL to liquidate assets in an unrealized loss position. This risk is mitigated to some extent by the high level of surrender charge protection provided by FGL’s products.
 
Concentration of Reinsurance Risk
 
FGL has a significant concentration of reinsurance with Wilton Reassurance Company (“Wilton Re”) that could have a material impact on FGL’s financial position (see Note 20). FGL 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.