Table_of_ContentsUNITED_STATES_SECURITIES_AND_EXCHANGE

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549

FORM 10-K

x Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2014

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 001-31901

PROTECTIVE LIFE INSURANCE COMPANY (Exact name of registrant as specified in its charter)

TENNESSEE 63-0169720 (State or other jurisdiction of incorporation or organization) (IRS Employer Identification Number)

2801 HIGHWAY 280 SOUTH

BIRMINGHAM, ALABAMA 35223

(Address of principal executive offices and zip code)

Registrant�s telephone number, including area code (205) 268-1000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered 6.750% Callable InterNotes® due 2033 of Protective Life Secured Trust 2008-20 New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o No x

Note � Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange Act from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant�s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definition of �accelerated filer and large accelerated filer� in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated Filer o Non-accelerated filer x Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

Aggregate market value of the registrant�s voting common stock held by non-affiliates of the registrant as of June 30, 2014: None

Number of shares of Common Stock, $1.00 Par Value, outstanding as of March 13, 2015: 5,000,000

REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) and (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM 10-K WITH THE REDUCED DISCLOSURE FORMAT WHERE NOTED HEREIN.

Table of Contents

PROTECTIVE LIFE INSURANCE COMPANY

ANNUAL REPORT ON FORM 10-K

FOR FISCAL YEAR ENDED DECEMBER 31, 2014

TABLE OF CONTENTS

Page PART I

Item 1. Business 3 Item 1A. Risk Factors 14 Item 1B. Unresolved Staff Comments 36 Item 2. Properties 36 Item 3. Legal Proceedings 37 Item 4. Mine Safety Disclosure - Not Applicable 37

PART II

Item 5. Market for the Registrant�s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 38 Item 6. Selected Financial Data 39 Item 7. Management�s Discussion and Analysis of Financial Condition and Results of Operations 40 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 115 Item 8. Financial Statements and Supplementary Data 115 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 209 Item 9A. Controls and Procedures 209 Item 9B. Other Information 210

PART III

Part III - Disclosure 211

PART IV

Item 15. Exhibits, Financial Statement Schedules 213 Signatures 217

Table of Contents

PART I

Item 1. Business

Protective Life Insurance Company (the �Company�), a stock life insurance company, was founded in 1907. The Company is a wholly owned subsidiary of Protective Life Corporation (�PLC�), an insurance holding company. The Company provides financial services primarily in the United States through the production, distribution, and administration of insurance and investment products. Unless the context otherwise requires, the �Company,� �we,� �us,� or �our� refers to the consolidated group of Protective Life Insurance Company and its subsidiaries.

As further discussed under the heading �Recent Developments�Merger�, on February 1, 2015, The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan (�Dai-ichi Life�), acquired 100% of PLC�s outstanding shares of common stock through the merger of DL Investment (Delaware), Inc., a Delaware corporation and wholly owned subsidiary of Dai-ichi Life, with and into PLC, with PLC continuing as the surviving entity. As a result of the merger, PLC is a direct, wholly owned subsidiary of Dai-ichi Life.

The Company operates several operating segments, each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. The Company�s operating segments are Life Marketing, Acquisitions, Annuities, Stable Value Products, and Asset Protection. The Company has an additional segment referred to as Corporate and Other which consists of net investment income not assigned to the segments above (including the impact of carrying liquidity) and expenses not attributable to the segments above. This segment also includes earnings from several non-strategic or runoff lines of business, various investment-related transactions, the operations of several small subsidiaries, and the repurchase of non-recourse funding obligations. The Company periodically evaluates operating segments, as prescribed in the Accounting Standard Codification (�ASC� or �Codification�) Segment Reporting Topic, and makes adjustments to its segment reporting as needed.

Additional information concerning the Company�s operating segments may be found in Item 7, Management�s Discussion and Analysis of Financial Condition and Results of Operations and Note 25, Operating Segments to consolidated financial statements included herein.

In the following paragraphs, the Company reports sales and other statistical information. These statistics are used to measure the relative progress of its marketing and acquisition efforts, but may or may not have an immediate impact on reported segment operating income. Sales data for traditional life insurance is based on annualized premiums, while universal life sales are based on annualized planned premiums, or �target� premiums if lesser, plus 6% of amounts received in excess of target premiums and 10% of single premiums. �Target� premiums for universal life are those premiums upon which full first year commissions are paid. Sales of annuities are measured based on the amount of purchase payments received less surrenders occurring within twelve months of the purchase payments. Stable value contract sales are measured at the time that the funding commitment is made based on the amount of purchase payments to be received. Sales within the Asset Protection segment are based on the amount of single premiums and fees received.

These statistics are derived from various sales tracking and administrative systems and are not derived from the Company�s financial reporting systems or financial statements. These statistics attempt to measure only some of the many factors that may affect future profitability, and therefore, are not intended to be predictive of future profitability.

Life Marketing

The Life Marketing segment markets fixed universal life (�UL�), indexed universal life (�IUL�), variable universal life (�VUL�), bank-owned life insurance (�BOLI�), and level premium term insurance (�traditional�) products on a national basis, primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, and independent marketing organizations.

Table of Contents

The following table presents the Life Marketing segment�s sales measured by new premium:

For The Year Ended

December 31, Sales (Dollars In Millions)

2010 $ 171 2011 133 2012 121 2013 155 2014 130

Acquisitions

The Acquisitions segment focuses on acquiring, converting, and servicing policies from other insurance companies. The segment�s primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the segment�s acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. The Company expects acquisition opportunities to continue to be available; however, the Company believes it may face increased competition and evolving capital requirements that may affect the environment and the form of future acquisitions.

Most acquisitions completed by the Acquisitions segment have not included the acquisition of an active sales force, thus policies acquired through the segment are typically blocks of business where no new policies are being marketed. Therefore, earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage, unless new acquisitions are made. The segment�s revenues and earnings may fluctuate from year to year depending upon the level of acquisition activity. In transactions where some marketing activity was included, the Company may cease future marketing efforts, redirect those efforts to another segment of the Company, or elect to continue marketing new policies as a component of other segments.

The Company believes that its focused and disciplined approach to the acquisition process and its experience in the assimilation, conservation, and servicing of acquired policies provides a significant competitive advantage. On occasion, the Company�s other operating segments have acquired companies and/or blocks of policies. The results of these acquisitions are included in the respective segment�s financial results.

On October 1, 2013 the Company completed the acquisition contemplated by the master agreement (the �Master Agreement�) dated April 10, 2013. Pursuant to that Master Agreement with AXA Financial, Inc. (�AXA�) and AXA Equitable Financial Services, LLC (�AEFS�), the Company acquired the stock of MONY Life Insurance Company (�MONY�) from AEFS and entered into a reinsurance agreement (the �Reinsurance Agreement�) pursuant to which it reinsured on a 100% indemnity reinsurance basis certain business (the �MLOA Business�) of MONY Life Insurance Company of America (�MLOA�). The final aggregate purchase price of MONY was $689 million. The ceding commission for the reinsurance of the MLOA Business was $370 million. Together, the purchase of MONY and reinsurance of the MLOA Business are hereto referred to as the �MONY acquisition�. The MONY acquisition allowed the Company to invest its capital and increase the scale of its Acquisitions segment. The MONY acquisition business is comprised of traditional and universal life insurance policies and fixed and variable annuities, most of which were written prior to 2004. See Note 3, Significant Acquisitions for additional information.

Annuities

The Annuities segment markets fixed and variable annuity (�VA�) products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.

The Company�s fixed annuities include modified guaranteed annuities which guarantee an interest rate for a fixed period. Contract values for these annuities are �market-value adjusted� upon surrender prior to maturity. In certain interest rate environments, these products afford the Company with a measure of protection from the effects of changes in interest rates. The Company�s fixed annuities also include single premium deferred annuities, single premium

Table of Contents

immediate annuities, and indexed annuities. The Company�s variable annuities offer the policyholder the opportunity to invest in various investment accounts and offer optional features that guarantee the death and withdrawal benefits of the underlying annuity.

The demand for annuity products is related to the general level of interest rates, performance of the equity markets, and perceived risk of insurance companies. The following table presents fixed and VA sales:

For The Year Ended Fixed Variable Total

December 31, Annuities Annuities Annuities (Dollars In Millions)

2010 $ 930 $ 1,715 $ 2,645 2011 1,032 2,349 3,381 2012 592 2,735 3,327 2013 693 1,867 2,560 2014 831 953 1,784

Stable Value Products

The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. The segment also issues funding agreements to the Federal Home Loan Bank (�FHLB�), and markets guaranteed investment contracts (�GICs�) to 401(k) and other qualified retirement savings plans. GICs are contracts which specify a return on funds for a specified period and often provide flexibility for withdrawals at book value in keeping with the benefits provided by the plan. The demand for GICs is related to the relative attractiveness of the �fixed rate� investment option in a 401(k) plan compared to the equity-based investment options which may be available to plan participants. Additionally, the Company has contracts outstanding pursuant to a funding agreement-backed notes program registered with the United States Securities and Exchange Commission (the �SEC�) which offers notes to both institutional and retail investors.

The segment�s products complement the Company�s overall asset/liability management in that the terms may be tailored to the needs of the Company as the seller of the contracts. The Company�s emphasis is on a consistent and disciplined approach to product pricing and asset/liability management, careful underwriting of early withdrawal risks, and maintaining low distribution and administration costs. Most GICs and funding agreements written by the Company have maturities of one to ten years.

The following table presents Stable Value Products sales:

For The Year Ended Funding

December 31, GICs Agreements Total (Dollars In Millions)

2010 $ 133 $ 625 $ 758 2011 499 300 799 2012 400 222 622 2013 495 � 495 2014 42 50 92

Table of Contents

Asset Protection

The Asset Protection segment markets extended service contracts and credit life and disability insurance to protect consumers� investments in automobiles and recreational vehicles (�RV�). In addition, the segment markets a guaranteed asset protection (�GAP�) product. GAP coverage covers the difference between the loan pay-off amount and an asset�s actual cash value in the case of a total loss. The segment�s products are primarily marketed through a national network of approximately 7,150 automobile and RV dealers. A network of direct employee sales representatives and general agents distribute these products to the dealer market.

The following table presents the insurance and related product sales measured by new revenue:

For The Year Ended

December 31, Sales (Dollars In Millions)

2010 $ 326 2011 395 2012 427 2013 444 2014 458

In 2014, all of the segment�s sales were through the automobile and RV dealer distribution channel and approximately 77.5% of the segment�s sales were extended service contracts. A portion of the sales and resulting premiums are reinsured with producer-affiliated reinsurers.

Corporate and Other

The Corporate and Other segment primarily consists of net investment income not assigned to the segments above (including the impact of carrying liquidity) and expenses not attributable to the segments above. This segment includes earnings from several non-strategic or runoff lines of business, various investment-related transactions, the operations of several small subsidiaries, and the repurchase of non-recourse funding obligations. The earnings of this segment may fluctuate from year to year.

Investments

As of December 31, 2014, the Company�s investment portfolio was approximately $45.6 billion. The types of assets in which the Company may invest are influenced by various state insurance laws which prescribe qualified investment assets. Within the parameters of these laws, the Company invests in assets giving consideration to such factors as liquidity and capital needs, investment quality, investment return, matching of assets and liabilities, and the overall composition of the investment portfolio by asset type and credit exposure. For further information regarding the Company�s investments, the maturity of and the concentration of risk among the Company�s invested assets, derivative financial instruments, and liquidity, see Note 2, Summary of Significant Accounting Policies, Note 6, Investment Operations, Note 23, Derivative Financial Instruments to consolidated financial statements, and Item 7, Management�s Discussion and Analysis of Financial Condition and Results of Operations.

Table of Contents

The following table presents the investment results from continuing operations of the Company:

Cash, Accrued Percentage Realized Investment Investment Earned on Gains (Losses)

For The Income, and Net Average of Derivative Year Ended Investments as of Investment Cash and Financial All Other

December 31, December 31, Income Investments Instruments Investments (Dollars In Thousands)

2010 $ 31,837,082 $ 1,624,845 5.2 $ (144,438) $ 117,056 2011 35,375,823 1,753,444 5.1 (155,005) 200,432 2012 37,480,220 1,789,338 4.8 (227,816) 174,692 2013 44,463,339 1,836,188 4.8 82,161 (143,984) 2014 46,326,345 2,098,013 4.5 (13,492) 198,027

Mortgage Loans

The Company invests a portion of its investment portfolio in commercial mortgage loans. As of December 31, 2014, the Company�s mortgage loan holdings were approximately $5.1 billion. The Company has specialized in making loans on either credit-oriented commercial properties or credit-anchored strip shopping centers and apartments. The Company�s underwriting procedures relative to its commercial loan portfolio are based, in the Company�s view, on a conservative and disciplined approach. The Company concentrates on a small number of commercial real estate asset types associated with the necessities of life (retail, multi-family, senior living, professional office buildings, and warehouses). The Company believes these asset types tend to weather economic downturns better than other commercial asset classes in which it has chosen not to participate. The Company believes this disciplined approach has helped to maintain a relatively low delinquency and foreclosure rate throughout its history. The majority of the Company�s mortgage loans portfolio was underwritten and funded by the Company. From time to time, the Company may acquire loans in conjunction with an acquisition. For more information regarding the Company�s investment in mortgage loans, refer to Item 7, Management�s Discussion and Analysis of Financial Condition and Results of Operations and Note 7, Mortgage Loans to the consolidated financial statements included herein.

Ratings

Various Nationally Recognized Statistical Rating Organizations (�rating organizations�) review the financial performance and condition of insurers, including the Company and its insurance subsidiaries, and publish their financial strength ratings as indicators of an insurer�s ability to meet policyholder and contract holder obligations. These ratings are important to maintaining public confidence in an insurer�s products, its ability to market its products and its competitive position. The following table summarizes the current financial strength ratings of the Company and its significant member companies from the major independent rating organizations:

Standard & Ratings A.M. Best Fitch Poor�s Moody�s

Insurance company financial strength rating: Protective Life Insurance Company A+ A+ AA- A2 West Coast Life Insurance Company A+ A+ AA- A2 Protective Life and Annuity Insurance Company A+ A+ AA- � Lyndon Property Insurance Company A- � � � MONY Life Insurance Company A+ A+ A+ A2

The Company�s ratings are subject to review and change by the rating organizations at any time and without notice. A downgrade or other negative action by a ratings organization with respect to the financial strength ratings of the Company�s insurance subsidiaries could adversely affect sales, relationships with distributors, the level of policy surrenders and withdrawals, competitive position in the marketplace, and the cost or availability of reinsurance. The

Table of Contents

rating agencies may take various actions, positive or negative, with respect to the debt and financial strength ratings of PLC and its subsidiaries, including as a result of our status as an indirect subsidiary of Dai-ichi Life.

Life Insurance In-Force

The following table presents life insurance sales by face amount and life insurance in-force:

For The Year Ended December 31, 2014 2013 2012 2011 2010

(Dollars In Thousands) New Business Written Life Marketing $ 35,967,402 $ 39,107,963 $ 20,488,483 $ 19,357,654 $ 30,626,739 Asset Protection 878,671 1,040,593 1,013,484 1,093,770 1,191,268 Total $ 36,846,073 $ 40,148,556 $ 21,501,967 $ 20,451,424 $ 31,818,007

Business Acquired through Acquisitions $ � $ 44,812,977 $ � $ 16,233,361 $ 13,185,627 Insurance In-Force at End of Year (1) Life Marketing $ 546,994,786 $ 535,747,678 $ 521,829,874 $ 541,899,176 $ 552,590,776 Acquisitions 215,223,031 235,552,325 212,812,930 217,216,920 217,101,363 Asset Protection 2,055,873 2,149,324 2,243,597 2,367,047 2,625,886 Total $ 764,273,690 $ 773,449,327 $ 736,886,401 $ 761,483,143 $ 772,318,025

(1) Reinsurance assumed has been included, reinsurance ceded (2014 - $388,890,060; 2013 - $416,809,287; 2012 - $444,950,866; 2011 - $469,530,487; 2010 - $495,056,077) has not been deducted.

The ratio of voluntary terminations of individual life insurance to mean individual life insurance in-force, which is determined by dividing the amount of insurance terminated due to lapses during the year by the mean of the insurance in-force at the beginning and end of the year, adjusted for the timing of major acquisitions is as follows:

Ratio of As of Voluntary

December 31, Termination 2010 4.8% 2011 5.0 2012 5.0 2013 5.1 2014 4.7

Table of Contents

Investment Products In-Force

The amount of investment products in-force is measured by account balances. The following table includes the stable value products and fixed and variable annuity account balances. A majority of the VA account balances are reported in the Company�s financial statements as liabilities related to separate accounts.

Stable As of Value Fixed Variable

December 31, Products Annuities Annuities (Dollars In Thousands)

2010 $ 3,076,233 $ 10,139,687 $ 5,622,111 2011 2,769,510 10,436,281 7,252,526 2012 2,510,559 10,107,365 10,152,515 2013 2,559,552 10,832,956 13,083,735 2014 1,959,488 10,724,849 13,383,309

Underwriting

The underwriting policies of the Company and its insurance subsidiaries are established by management. With respect to individual insurance, the Company and its subsidiaries use information from the application and, in some cases, inspection reports, attending physician statements, and/or medical examinations to determine whether a policy should be issued as applied for, other than applied for, or rejected. Medical examinations of applicants are required for individual life insurance in excess of certain prescribed amounts (which vary based on the type of insurance) and for most individual insurance applied for by applicants over age 50. In the case of �simplified issue� policies, which are issued primarily through the Asset Protection segment, coverage is rejected if the responses to certain health questions contained in the application indicate adverse health of the applicant. For other than �simplified issue� policies, medical examinations are requested of any applicant, regardless of age and amount of requested coverage, if an examination is deemed necessary to underwrite the risk. Substandard risks may be referred to reinsurers for evaluation.

The Company and its insurance subsidiaries generally require blood samples to be drawn with individual insurance applications above certain face amounts based on the applicant�s age, except in the worksite and BOLI markets where limited blood testing is required. Blood samples are tested for a wide range of chemical values and are screened for antibodies to certain viruses. Applications also contain questions permitted by law regarding certain viruses which must be answered by the proposed insureds.

The Company utilizes an advanced underwriting system, TeleLife®, for certain product lines in life business. TeleLife® streamlines the application process through a telephonic interview of the applicant, schedules medical exams, accelerates the underwriting process and the ultimate issuance of a policy mostly through electronic means, and reduces the number of attending physician statements.

The Company�s maximum retention limit on directly issued business is $2,000,000 for any one life on certain of its traditional life and universal life products.

Reinsurance Ceded

The Company and its insurance subsidiaries cede life insurance to other insurance companies. The ceding insurance company remains liable with respect to ceded insurance should any reinsurer fail to meet the obligations assumed by it. The Company has also reinsured guaranteed minimum death benefit (�GMDB�) claims relative to certain of its VA contracts.

For approximately 10 years prior to mid-2005, the Company entered into reinsurance contracts in which the Company ceded approximately 90% of its newly written traditional life insurance business on a first dollar quota share basis under coinsurance contracts. In mid-2005, the Company substantially discontinued coinsuring its newly written traditional life insurance and moved to yearly renewable term (�YRT�) reinsurance. The amount of insurance retained by the Company on any one life on traditional life insurance was $500,000 in years prior to mid-2005. In 2005, this

Table of Contents

retention amount was increased to $1,000,000 for certain policies, and during 2008, was increased to $2,000,000 for certain policies.

For approximately 15 years prior to 2012, the Company reinsured 90% of the mortality risk on the majority of its newly written universal life insurance on a YRT basis. During 2012, the Company moved to reinsure only amounts in excess of its $2,000,000 retention for the majority of its newly written universal life insurance.

Policy Liabilities and Accruals

The applicable insurance laws under which the Company and its insurance subsidiaries operate require that each insurance company report policy liabilities to meet future obligations on the outstanding policies. These liabilities are the amounts which, with the additional premiums to be received and interest thereon compounded annually at certain assumed rates, are calculated in accordance with applicable law to be sufficient to meet the various policy and contract obligations as they mature. These laws specify that the liabilities shall not be less than liabilities calculated using certain named mortality tables and interest rates.

The policy liabilities and accruals carried in the Company�s financial reports presented on the basis of accounting principles generally accepted in the United States of America (�GAAP�) differ from those specified by the laws of the various states and carried in the insurance subsidiaries� statutory financial statements (presented on the basis of statutory accounting principles mandated by state insurance regulations). For policy liabilities other than those for universal life policies, annuity contracts, GICs, and funding agreements, these differences arise from the use of mortality and morbidity tables and interest rate assumptions which are deemed to be more appropriate for financial reporting purposes than those required for statutory accounting purposes, from the introduction of lapse assumptions into the calculation, and from the use of the net level premium method on all business. Policy liabilities for universal life policies, annuity contracts, GICs, and funding agreements are generally carried in the Company�s financial reports at the account value of the policy or contract plus accrued interest.

Federal Taxes

Existing laws and regulations affect the taxation of the Company�s products. Income taxes that would otherwise be payable by policyholders on investment income that is earned inside certain types of insurance and annuity policies are deferred during these products� accumulation period. This favorable tax treatment gives certain of the Company�s products a competitive advantage over non-insurance products. If the individual income tax laws are revised such that there is an elimination or scale-back of the tax-deferred status of these insurance products, or competing non-insurance products are granted a tax-deferred status, then the relative attractiveness of the Company�s products may be reduced or eliminated.

In addition, life insurance products are often used to fund estate tax obligations. Changes to estate tax laws may affect the demand for life insurance products.

The Company is subject to the corporate income tax within the U.S. and various states. It currently benefits from certain special tax benefits, such as deductions relating to its variable products� separate accounts and its future policy benefits and claims. Tax legislation could be enacted that would cause the Company to lose some or all of these deductions and therefore incur additional income tax expense. In addition, life insurance products are often used to fund estate tax obligations. Changes to estate tax laws may affect the demand for life insurance products. In general, there is general uncertainty regarding the taxes to which the Company and its products will be subject to in the future. The Company cannot predict what changes to tax law will occur.

The Company and its insurance subsidiaries are taxed in a manner similar to other life insurance companies in the industry. Certain restrictions apply to the consolidation of recently-acquired life insurance companies into the Company�s consolidated income tax return. Additionally, restrictions on the amount of life insurance income that can be offset by non-life-insurance losses can cause the Company�s income tax expense to increase.

The Company�s move away from reliance on reinsurance for newly written traditional life products results in a net reduction of current taxes, but an increase in deferred taxes. The Company allocates the benefits of reduced current taxes to the Life Marketing and Acquisition segments. The profitability and competitive position of certain products is

Table of Contents

dependent on the continuation of existing tax rules and interpretations as well as the Company�s ability to generate future taxable income.

Competition

Life and health insurance is a mature and highly competitive industry. In recent years, the industry has experienced a decline in life insurance sales, though the aging population has increased the demand for retirement savings products. The Company encounters significant competition in all lines of business from other insurance companies, many of which have greater financial resources than the Company and which may have a greater market share, offer a broader range of products, services or features, assume a greater level of risk, have lower operating or financing costs, or have lower profitability expectations. The Company also faces competition from other providers of financial services. Competition could result in, among other things, lower sales or higher lapses of existing products.

The Company�s ability to compete is dependent upon, among other things, its ability to attract and retain distributors to market its insurance and investment products, its ability to develop competitive and profitable products, its ability to maintain low unit costs, and its maintenance of adequate ratings from rating agencies.

As technology evolves, a comparison of a particular product of any company for a particular customer with competing products for that customer is more readily available, which could lead to increased competition as well as agent or customer behavior, including persistency, which differs from past behavior.

Risk Management

Risk management is a critical part of the Company�s business, and the Company has adopted risk management processes in multiple aspects of its operations, including product development and management, business acquisitions, underwriting, investment management, asset-liability management, and technology development projects. The Company�s risk management office, under the direction of the Chief Risk Officer, along with other departments, management groups and committees, have responsibilities for managing different risks throughout the Company. Risk management includes the assessment of risk, a decision process to determine which risks are acceptable and the ongoing monitoring and management of identified risks. The primary objective of these risk management processes is to determine the acceptable level of variations the Company experiences from its expected results and to implement strategies designed to limit such variations to these levels.

Regulation

The Company is subject to government regulation in each of the states in which it conducts business. In many instances, the regulatory models emanate from the National Association of Insurance Commissioners (�NAIC�). Such regulation is vested in state agencies having broad administrative and in some instances discretionary power dealing with many aspects of the Company�s business, which may include, among other things, premium rates and increases thereto, underwriting practices, reserve requirements, marketing practices, advertising, privacy, policy forms, reinsurance reserve requirements, insurer use of captive reinsurance companies, acquisitions, mergers, capital adequacy, claims practices and the remittance of unclaimed property. In addition, some state insurance departments may enact rules or regulations with extra-territorial application, effectively extending their jurisdiction to areas such as permitted insurance company investments that are normally the province of an insurance company�s domiciliary state regulator.

The Company and its insurance subsidiaries are required to file periodic reports with the regulatory agencies in each of the jurisdictions in which they do business, and their business and accounts are subject to examination by such agencies at any time. Under the rules of the NAIC, insurance companies are examined periodically (generally every three to five years) by one or more of the regulatory agencies on behalf of the states in which they do business. At any given time, a number of financial and/or market conduct examinations of the Company and its subsidiaries may be ongoing. From time to time, regulators raise issues during examinations or audits for the Company and its subsidiaries that could, if determined adversely, have a material adverse impact on the Company. To date, no such insurance department examinations have produced any significant adverse findings regarding the Company or its insurance company subsidiaries.

Table of Contents

Under insurance guaranty fund laws, in most states insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. From time to time, companies may be asked to contribute amounts beyond the prescribed limits. Although the Company cannot predict the amount of any future assessments, most insurance guaranty fund laws currently provide that an assessment may be excused or deferred if it would threaten an insurer�s own financial strength.

In addition, many states, including the states in which the Company and its insurance subsidiaries are domiciled, have enacted legislation or adopted regulations regarding insurance holding company systems. These laws require registration of and periodic reporting by insurance companies domiciled within the jurisdiction which control or are controlled by other corporations or persons so as to constitute an insurance holding company system. These laws also affect the acquisition of control of insurance companies as well as transactions between insurance companies and companies controlling them. Most states, including Tennessee, where the Company is domiciled, require administrative approval of the acquisition of control of an insurance company domiciled in the state or the acquisition of control of an insurance holding company whose insurance subsidiary is incorporated in the state. In Tennessee, the acquisition of 10% of the voting securities of an entity is deemed to be the acquisition of control for the purpose of the insurance holding company statute and requires not only the filing of detailed information concerning the acquiring parties and the plan of acquisition, but also administrative approval prior to the acquisition. Recently, new holding company legislation has been adopted in certain states where the Company and its insurance subsidiaries are domiciled, which subjects such companies to increased reporting requirements. Holding company legislation has been proposed in additional states, which, if adopted, will subject any domiciled subsidiaries to additional reporting and supervision requirements (see further discussion under the heading �Recent Development � Dai-ichi Merger� related to PLC�s merger).

The states in which the Company and its insurance subsidiaries are domiciled also impose certain restrictions on their ability to pay dividends. These restrictions are based in part on the prior year�s statutory income and surplus. In general, dividends up to specified levels are considered ordinary and may be paid without prior approval. Dividends in larger amounts are subject to approval by the insurance commissioner of the state of domicile. The maximum amount that would qualify as ordinary dividends to the Company by its insurance subsidiaries in 2015 is estimated to be $138.4 million. No assurance can be given that more stringent restrictions will not be adopted from time to time by states in which the Company and its insurance subsidiaries are domiciled; such restrictions could have the effect, under certain circumstances, of significantly reducing dividends or other amounts payable to the Company by such subsidiaries without affirmative prior approval by state regulatory authorities.

State insurance regulators and the NAIC regularly re-examine existing laws and regulations applicable to insurance companies and their products. Changes in these laws and regulations, or in interpretations thereof, are often made for the benefit of the consumer and may lead to additional expense for the insurer. The NAIC may also be influenced by the initiatives or regulatory structures or schemes of international regulatory bodies, and those initiatives or regulatory structures or schemes may not translate readily into the regulatory structures or schemes or the legal system (including the interpretation or application of standards by juries), under which U.S. insurers must operate. Changes in laws and regulations, or in interpretations thereof, as well as initiatives or regulatory structures or schemes of international regulatory bodies, applicable to the Company could have a significant adverse impact on the Company. Some NAIC pronouncements, particularly as they affect accounting issues, take effect automatically in the various states without affirmative action by the states. Also, regulatory actions with prospective impact can potentially have a significant adverse impact on currently sold products.

At the federal level, bills are routinely introduced in both chambers of the United States Congress which could affect life insurers. In the past, Congress has considered legislation that would impact insurance companies in numerous ways, such as providing for an optional federal charter or a federal presence for insurance, pre-empting state law in certain respects to the regulation of reinsurance, increasing federal oversight in areas such as consumer protection and solvency regulation, and other matters. The Company cannot predict whether or in what form legislation will be enacted and, if so, the impact of such legislation on the Company.

PLC�s sole stockholder, Dai-ichi Life, is subject to regulation by the Japanese Financial Services Authority (�JFSA�). Under applicable laws and regulations, Dai-ichi Life is required to provide notice to or obtain the consent of

Table of Contents

the JFSA prior to taking certain actions or engaging in certain transactions, either directly or indirectly through its subsidiaries, including the Company and its consolidated subsidiaries.

The Company is also subject to various conditions and requirements of the Patient Protection and Affordable Care Act of 2010 (the �Healthcare Act�). The Healthcare Act makes significant changes to the regulation of health insurance and may affect the Company in various ways. The Healthcare Act may affect the benefit plans the Company sponsors for employees or retirees and their dependents, the Company�s expense to provide such benefits, the tax liabilities of the Company in connection with the provision of such benefits, and the Company�s ability to attract or retain employees. In addition, the Company may be subject to regulations, guidance or determinations emanating from the various regulatory authorities authorized under the Healthcare Act. The Healthcare Act, or any regulatory pronouncement made thereunder, could have a significant impact on the Company.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (�Dodd-Frank�) makes sweeping changes to the regulation of financial services entities, products and markets. Certain provisions of Dodd-Frank are or may become applicable to the Company, its competitors or those entities with which the Company does business. Such provisions include, but are not limited to, the following: the establishment of consolidated federal regulation and resolution authority over systemically important financial services firms, the establishment of the Federal Insurance Office, changes to the regulation and standards applicable to broker dealers and investment advisors, changes to the regulation of reinsurance, changes to regulations affecting the rights of shareholders, the imposition of additional regulation over credit rating agencies, and the imposition of concentration limits on financial institutions that restrict the amount of credit that may be extended to a single person or entity. Since the enactment of Dodd-Frank, many regulations have been enacted. However, there are still several studies and regulations yet to be written. Additionally, this is currently an area of activity and change. Both regulators and legislators continue to study, write regulations, and introduce and pass legislation related to Dodd-Frank. Any of these actions could significantly impact the Company.

Dodd-Frank also created the Consumer Financial Protection Bureau (�CFPB�), an independent division of the Department of Treasury with jurisdiction over credit, savings, payment, and other consumer financial products and services, other than investment products already regulated by the SEC or the U.S. Commodity Futures Trading Commission. Certain of the Company�s subsidiaries sell products that may be regulated by the CFPB. In addition, Dodd-Frank includes a new framework of regulation of over-the-counter (�OTC�) derivatives markets which requires clearing of certain types of transactions which have been or are currently traded OTC by the Company.The Company uses derivatives to mitigate a wide range of risks in connection with its business, including those arising from its VA products with guaranteed benefit features. The derivative clearing requirements of Dodd-Frank could continue to have an impact on the Company.

The Company may be subject to regulation by the United States Department of Labor when providing a variety of products and services to employee benefit plans and individual investors that are governed by the Employee Retirement Income Security Act (�ERISA�). The Department of Labor is expected to re-propose a rule that would change the circumstances under which one who works with employee benefit plans and Individual Retirement Accounts would be considered a fiduciary under ERISA. Severe penalties are imposed for breach of duties under ERISA and the Company cannot predict the impact that the Department of Labor�s re-proposed rule may have on its operations.

Certain equity and debt securities, policies, contracts, and annuities offered by the Company are subject to regulation under the federal securities laws administered by the SEC. The federal securities laws contain regulatory restrictions and criminal, administrative, and private remedial provisions. From time to time, the SEC and the Financial Industry Regulatory Authority (�FINRA�) examine or investigate the activities of broker dealers and investment advisors, including the Company�s affiliated broker dealers and investment advisors. These examinations often focus on the activities of the registered representatives and registered investment advisors doing business through such entities.

Other types of regulation that could affect the Company and its subsidiaries include insurance company investment laws and regulations, state statutory accounting practices, anti-trust laws, minimum solvency requirements, state securities laws, federal privacy laws, insurable interest laws, federal anti-money laundering and anti-terrorism laws, employment and immigration laws and because the Company owns and operates real property, state, federal, and local environmental laws.

Table of Contents

Additional issues related to regulation of the Company are discussed in Item 1A, Risk Factors and in Item 7, Management�s Discussion and Analysis of Financial Condition and Results of Operations, included herein.

Employees

As of December 31, 2014, PLC and the Company had approximately 2,457 employees, of which 2,441 were full-time and 16 were part-time employees. Included in the total were approximately 1,437 employees in Birmingham, Alabama, of which 1,429 were full-time and 8 were part-time employees. The Company believes its relations with its employees are satisfactory. Most employees are covered by contributory major medical, dental, vision, group life, and long-term disability insurance plans. The cost of these benefits to the Company in 2014 was approximately $12.3 million. In addition, substantially all of the employees may participate in a defined benefit pension plan and 401(k) plan. The Company matches employee contributions to its 401(k) plan. See Note 15, Stock-Based Compensation and Note 16, Employee Benefit Plans to our consolidated financial statements for additional information.

Available Information

The Company files reports with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other reports as required. The public may read and copy any materials the Company files with the SEC at the SEC�s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The Company is an electronic filer and the SEC maintains an internet site at www.sec.gov that contains the reports, proxy and information statements, and other information filed electronically by the Company.

The Company makes available free of charge through its website, www.protective.com, the Company�s annual reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC. The information found on the Company�s website is not part of this or any other report filed with or furnished to the SEC. The Company will furnish such documents to anyone who requests such copies in writing. Requests for copies should be directed to: Financial Information, Protective Life Corporation, P.O. Box 2606, Birmingham, Alabama 35202, Telephone (205) 268-3912, Fax (205) 268-3642.

The Company has adopted a Code of Business Conduct, which applies to all directors, officers and employees of the Company and its wholly owned subsidiaries. The Code of Business Conduct incorporates a code of ethics that applies to the principal executive officer and all financial officers (including the Chief Financial Officer and Chief Accounting Officer) of the Company and its subsidiaries. The Code of Conduct is available on the Company�s website, www.protective.com.

Item 1A. Risk Factors

The operating results of companies in the insurance industry have historically been subject to significant fluctuations. The factors which could affect the Company�s future results include, but are not limited to, general economic conditions and known trends and uncertainties which are discussed more fully below.

Risks Related to the Dai-ichi Merger and our Status as an Indirect Subsidiary of Dai-ichi Life

Uncertainty following the Merger could adversely affect our business and operations.

The completion of the Merger or our status as an indirect subsidiary of a foreign global insurer could cause disruptions to the Company�s business and business relationships, which could have an adverse impact on the Company�s results of operations, liquidity and financial condition. For example, the attention of the Company�s management may be directed to post-Merger related considerations, the Company�s current and prospective employees may experience uncertainty about their future roles with the Company which may adversely affect our ability to retain and hire key personnel, and parties with which the Company has business relationships, including customers, potential customers and distributors, may experience uncertainty as to the future of such relationships and seek alternative relationships with third parties or seek to alter their present business relationships with us in a manner that negatively impacts the Company.

Table of Contents

The debt ratings and the financial strength ratings of PLC and its insurance subsidiaries, including the Company, may be adversely affected by it being a subsidiary of Dai-ichi Life.

Rating organizations regularly review PLC�s debt ratings and the financial strength ratings of its insurance subsidiaries, including the Company. Those organizations may take various actions, positive or negative, with respect to debt and financial strength ratings of PLC and its subsidiaries, including as a result of its status as a subsidiary of Dai-ichi Life. Any negative action by a ratings organization could have a material adverse impact on PLC and the Company�s financial condition or results of operations.

General Risk Factors

The Company is exposed to risks related to natural and man-made disasters and catastrophes, diseases, epidemics, pandemics, malicious acts, terrorist acts and climate change, which could adversely affect the Company�s operations and results.

While the Company has obtained insurance, implemented risk management and contingency plans, and taken preventive measures and other precautions, no predictions of specific scenarios can be made nor can assurance be given that there are not scenarios that could have an adverse effect on the Company. A natural or man-made disaster or catastrophe, including a severe weather or geological event such as a storm, tornado, fire, flood, or earthquake, disease, epidemic, pandemic, malicious act, terrorist act, or the occurrence of climate change, could cause the Company�s workforce to be unable to engage in operations at one or more of its facilities or result in short or long-term interruptions in the Company�s business operations, any of which could be material to the Company�s operating results for a particular period. In addition, such events could adversely affect the mortality, morbidity, or other experience of the Company or its reinsurers and have a significant negative impact on the Company. In addition, claims arising from the occurrence of such events or conditions could have a material adverse effect on the Company�s financial condition and results of operations. Such events or conditions could also have an adverse effect on lapses and surrenders of existing policies, as well as sales of new policies. The Company�s risk management efforts and other precautionary plans and activities may not adequately predict the impact on the Company from such events.

In addition, such events or conditions could result in a decrease or halt in economic activity in large geographic areas, adversely affecting the marketing or administration of the Company�s business within such geographic areas and/or the general economic climate, which in turn could have an adverse effect on the Company. Such events or conditions could also result in additional regulation or restrictions on the Company in the conduct of its business. The possible macroeconomic effects of such events or conditions could also adversely affect the Company�s asset portfolio, as well as many other aspects of the Company�s business, financial condition, and results of operations.

A disruption affecting the electronic systems of the Company or those on whom the Company relies could adversely affect the Company�s business, financial condition and results of operations.

In conducting its business, the Company relies extensively on various electronic systems, including computer systems, networks, data processing and administrative systems, and communication systems. The Company�s business partners, counter parties, service providers and distributors also rely on such systems, as do securities exchanges and financial markets that are important to the Company�s ability to conduct its business. These systems could be disrupted, damaged or destroyed by intentional or unintentional acts or events such as cyber-attacks, viruses, sabotage, acts of war or terrorism, human error, system failures, failures of power or water supply, and the loss or malfunction of other utilities or services. They may also be disrupted, damaged or destroyed by natural events such as storms, tornadoes, fires, floods or earthquakes. While the Company and others on whom it depends try to identify threats and implement measures to protect their systems, such protective measures may not be sufficient. Disruption, damage or destruction of any of these systems could cause the Company or others on whom the Company relies to be unable to conduct business for an extended period of time, which could materially adversely impact the Company�s business and its financial condition and results of operations.

Table of Contents

Confidential information maintained in the systems of the Company or other parties upon which the Company relies could be compromised or misappropriated, damaging the Company�s business and reputation and adversely affecting its financial condition and results of operations.

In the course of conducting its business, the Company retains confidential information, including information about its customers and proprietary business information. The Company retains confidential information in various electronic systems, including computer systems, data processing and administrative systems, and communication systems. The Company maintains physical, administrative, and technical safeguards to protect the information and it relies on commercial technologies to maintain the security of its systems and to maintain the security of its transmission of such information to other parties, including its business partners, counter parties and service providers. The Company�s business partners, counter parties and service providers likewise maintain confidential information, including, in some cases, customer information, on behalf of the Company. An intentional or unintentional breach or compromise of the security measures of the Company or such other parties could result in the disclosure, misappropriation, misuse, alteration or destruction of the confidential information retained by or on behalf of the Company, which could damage the Company�s business and reputation, and adversely affect its financial condition and results of operations by, among other things, causing harm to the Company�s customers, deterring customers and others from doing business with the Company, subjecting the Company to significant regulatory, civil, and criminal liability, and requiring the Company to incur significant legal and other expenses. As cyber threats continue to evolve, the Company may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities. While the Company has experienced cyber-attacks in the past, to date the Company has not suffered any material harm or loss relating to cyber-attacks or other information security breaches at the Company or its counterparties, there can be no assurance that the Company will not suffer such losses in the future.

The Company�s results and financial condition may be negatively affected should actual experience differ from management�s assumptions and estimates.

In the conduct of business, the Company makes certain assumptions regarding mortality, morbidity, persistency, expenses, interest rates, equity market volatility, tax liability, business mix, frequency and severity of claims, contingent liabilities, investment performance, and other factors appropriate to the type of business it expects to experience in future periods. These assumptions are also used to estimate the amounts of deferred policy acquisition costs, policy liabilities and accruals, future earnings, and various components of the Company�s balance sheet. These assumptions are used in the operation of the Company�s business in making decisions crucial to the success of the Company, including the pricing of products and expense structures relating to products. The Company�s actual experience, as well as changes in estimates, is used to prepare the Company�s financial statements. To the extent the Company�s actual experience and changes in estimates differ from original estimates, the Company�s financial condition may be affected.

Mortality, morbidity, and casualty expectations incorporate assumptions about many factors, including for example, how a product is distributed, for what purpose the product is purchased, the mix of customers purchasing the products, persistency and lapses, future progress in the fields of health and medicine, and the projected level of used vehicle values. Actual mortality, morbidity, and/or casualty experience may differ from expectations. In addition, continued activity in the viatical, stranger-owned, and/or life settlement industry could cause the Company�s level of lapses to differ from its assumptions about persistency and lapses, which could negatively impact the Company�s performance.

The calculations the Company uses to estimate various components of its balance sheet and statements of income are necessarily complex and involve analyzing and interpreting large quantities of data. The Company currently employs various techniques for such calculations. From time to time it develops and implements more sophisticated administrative systems and procedures capable of facilitating the calculation of more precise estimates.

Assumptions and estimates involve judgment, and by their nature are imprecise and subject to changes and revisions over time. Accordingly, the Company�s results may be affected, positively or negatively, from time to time, by actual results differing from assumptions, by changes in estimates, and by changes resulting from implementing more sophisticated administrative systems and procedures that facilitate the calculation of more precise estimates.

Table of Contents

The Company may not realize its anticipated financial results from its acquisitions strategy.

The Company�s acquisitions of companies and acquisitions or coinsurance of blocks of insurance business have increased its earnings in part by allowing the Company to position itself to realize certain operating efficiencies. However, there can be no assurance that the Company will have future suitable opportunities for, or sufficient capital available to fund, such transactions. If our competitors have access to capital on more favorable terms or at a lower cost, our ability to compete for acquisitions may be diminished. In addition, there can be no assurance that the Company will realize the anticipated financial results from such transactions.

The Company may be unable to complete an acquisition transaction. Completion of an acquisition transaction may be more costly or take longer than expected, or may have a different or more costly financing structure than initially contemplated. In addition, the Company may not be able to complete or manage multiple acquisition transactions at the same time, or the completion of such transactions may be delayed or be more costly than initially contemplated. The Company or other parties to the transaction may be unable to obtain regulatory approvals required to complete an acquisition transaction. If the Company identifies and completes suitable acquisitions, it may not be able to successfully integrate the business in a timely or cost-effective manner. In addition, there may be unforeseen liabilities that arise in connection with businesses or blocks of insurance business that the Company acquires.

Additionally, in connection with its acquisition transactions that involve reinsurance, the Company assumes, or otherwise becomes responsible for, the obligations of policies and other liabilities of other insurers. Any regulatory, legal, financial, or other adverse development affecting the other insurer could also have an adverse effect on the Company.

Assets allocated to the MONY Closed Block benefit only the holders of certain policies; adverse performance of Closed Block assets or adverse experience of Closed Block liabilities may negatively affect the Company.

On October 1, 2013, the Company completed the acquisition of MONY Life Insurance Company from AXA Financial, Inc. MONY was converted from a mutual insurance company to a stock corporation in accordance with its Plan of Reorganization dated August 14, 1998, as amended. In connection with its demutualization, an accounting mechanism known as a closed block (the �Closed Block�) was established for the benefit of policyholders who owned certain individual insurance policies of MONY in force as of the date of demutualization. Please refer to Note 4, MONY Closed Block of Business, to the consolidated financial statements for a more detailed description of the Closed Block.

Assets allocated to the Closed Block inure solely to the benefit of the Closed Block�s policyholders and will not revert to the benefit of the Company. However, if the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments must be made from assets outside the Closed Block. Adverse financial or investment performance of the Closed Block, or adverse mortality or lapse experience on policies in the Closed Block, may require MONY to pay policyholder benefits using assets outside the Closed Block, which events could have a material adverse impact on the Company�s financial condition or results of operations and negatively affect the Company�s risk- based capital ratios.

The Company is dependent on the performance of others.

The Company�s results may be affected by the performance of others because the Company has entered into various arrangements involving other parties. For example, most of the Company�s products are sold through independent distribution channels, variable annuity deposits are invested in funds managed by third parties, and certain modified coinsurance assets are managed by third parties. Also, the Company may rely upon third parties to administer certain portions of its business. Additionally, the Company�s operations are dependent on various technologies, some of which are provided and/or maintained by other parties. Any of the other parties upon which the Company depends may default on their obligations to the Company due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions, operational failure, fraud, or other reasons. Such defaults could have a material adverse effect on the Company�s financial condition and results of operations.

Certain of these other parties may act on behalf of the Company or represent the Company in various capacities. Consequently, the Company may be held responsible for obligations that arise from the acts or omissions of these other parties. As with all financial services companies, the Company�s ability to conduct business is dependent

Table of Contents

upon consumer confidence in the industry and its products. Actions of competitors and financial difficulties of other companies in the industry could undermine consumer confidence and adversely affect retention of existing business and future sales of the Company�s insurance and investment products.

The Company�s risk management policies, practices, and procedures could leave it exposed to unidentified or unanticipated risks, which could negatively affect its business or result in losses.

The Company has developed risk management policies and procedures and expects to continue to enhance these in the future. Nonetheless, the Company�s policies and procedures to identify, monitor, and manage both internal and external risks may not predict future exposures, which could be different or significantly greater than expected.

These identified risks may not be the only risks facing the Company. Additional risks and uncertainties not currently known to the Company, or that it currently deems to be immaterial, may adversely affect its business, financial condition and/or operating results.

The Company�s strategies for mitigating risks arising from its day- to-day operations may prove ineffective resulting in a material adverse effect on its results of operations and financial condition.

The Company�s performance is highly dependent on its ability to manage risks that arise from a large number of its day-to-day business activities, including: policy pricing, reserving and valuation; underwriting; claims processing; policy administration and servicing; administration of reinsurance; execution of its investment and hedging strategy; financial and tax reporting; and other activities, many of which are very complex. The Company also may rely on third parties for such activities. The Company seeks to monitor and control its exposure to risks arising out of or related to these activities through a variety of internal controls, management review processes, and other mechanisms. However, the occurrence of unforeseen or uncontemplated risks, or the occurrence of risks of a greater magnitude than expected, including those arising from a failure in processes, procedures or systems implemented by the Company or a failure on the part of employees or third parties upon which the Company relies in this regard, may have a material adverse effect on the Company�s financial condition or results of operations.

Risks Related to the Financial Environment

Interest rate fluctuations and sustained periods of low interest rates could negatively affect the Company�s interest earnings and spread income, or otherwise impact its business.

Significant changes in interest rates expose the Company to the risk of not earning anticipated interest on products without significant account balances, or not realizing anticipated spreads between the interest rate earned on investments and the credited interest rates paid on in-force policies and contracts that have significant account balances. Both rising and declining interest rates as well as sustained periods of low interest rates can negatively affect the Company�s interest earnings and spread income.

Lower interest rates may also result in lower sales of certain of the Company�s life insurance and annuity products. Additionally, during periods of declining or low interest rates, certain previously issued life insurance and annuity products may be relatively more attractive investments to consumers, resulting in increased premium payments on products with flexible premium features, repayment of policy loans and increased persistency, or a higher percentage of insurance policies remaining in force from year to year during a period when the Company�s investments earn lower returns. Certain of the Company�s life insurance and annuity products guarantee a minimum credited interest rate, and the Company could become unable to earn its spread income or may earn less interest on its investments than it is required to credit to policy holders should interest rates decrease significantly and/or remain low for sustained periods. Additionally, the profitability of certain of the Company�s life insurance products that do not have significant account balances could be reduced should interest rates decrease significantly and/or remain low for sustained periods.

The Company�s expectation for future interest earnings and spreads is an important component in amortization of deferred acquisition costs (�DAC�) and value of business acquired (�VOBA�), and significantly lower interest earnings or spreads may cause it to accelerate amortization, thereby reducing net income in the affected reporting period. Sustained periods of low interest rates could also result in an increase in the valuation of the future policy benefit or policyholder account balance liabilities associated with the Company�s products.

Table of Contents

Higher interest rates may create a less favorable environment for the origination of mortgage loans and decrease the investment income the Company receives in the form of prepayment fees, make-whole payments, and mortgage participation income. Higher interest rates would also adversely affect the market value of fixed income securities within the Company�s investment portfolio. Higher interest rates may also increase the cost of debt and other obligations of the Company having floating rate or rate reset provisions and may result in fluctuations in sales of annuity products. During periods of increasing market interest rates, the Company may offer higher crediting rates on interest-sensitive products, such as universal life insurance and fixed annuities, and it may increase crediting rates on in-force products to keep these products competitive. In addition, rapidly rising interest rates may cause increased policy surrenders, withdrawals from life insurance policies and annuity contracts, and requests for policy loans as policyholders and contract holders shift assets into higher yielding investments. Increases in crediting rates, as well as surrenders and withdrawals, could have an adverse effect on the Company�s financial condition and results of operations, including earnings, equity (including AOCI), and statutory risk-based capital ratios.

Additionally, the Company�s asset/liability management programs and procedures incorporate assumptions about the relationship between short-term and long-term interest rates (i.e., the slope of the yield curve) and relationships between risk-adjusted and risk-free interest rates, market liquidity, and other factors. The effectiveness of the Company�s asset/liability management programs and procedures may be negatively affected whenever actual results differ from these assumptions. In general, the Company�s results of operations improve when the yield curve is positively sloped (i.e., when long-term interest rates are higher than short-term interest rates), and will be adversely affected by a flat or negatively sloped curve.

The Company�s investments are subject to market and credit risks. These risks could be heightened during periods of extreme volatility or disruption in financial and credit markets.

The Company�s invested assets and derivative financial instruments are subject to risks of credit defaults and changes in market values. These risks could be heightened during periods of extreme volatility or disruption in the financial and credit markets, including as a result of social or political unrest or instability domestically or abroad. A widening of credit spreads will increase the unrealized losses in the Company�s investment portfolio. The factors affecting the financial and credit markets could lead to other-than-temporary impairments of assets in the Company�s investment portfolio.

The value of the Company�s commercial mortgage loan portfolio depends in part on the financial condition of the tenants occupying the properties that the Company has financed. The value of the Company�s investment portfolio, including its portfolio of government debt obligations, debt obligations of those entities with an express or implied governmental guarantee and debt obligations of other issuers holding a large amount of such obligations, depends in part on the ability of the issuers or guarantors of such debt to maintain their credit ratings and meet their contractual obligations. Factors that may affect the overall default rate on, and market value of, the Company�s invested assets, derivative financial instruments, and mortgage loans include interest rate levels, financial market performance, and general economic conditions as well as particular circumstances affecting the individual tenants, borrowers, issuers and guarantors.

Significant continued financial and credit market volatility, changes in interest rates and credit spreads, credit defaults, real estate values, market illiquidity, declines in equity prices, acts of corporate malfeasance, ratings downgrades of the issuers or guarantors of these investments, and declines in general economic conditions, either alone or in combination, could have a material adverse impact on the Company�s results of operations, financial condition, or cash flows through realized losses, impairments, changes in unrealized loss positions, and increased demands on capital, including obligations to post additional capital and collateral. In addition, market volatility can make it difficult for the Company to value certain of its assets, especially if trading becomes less frequent. Valuations may include assumptions or estimates that may have significant period-to-period changes that could have an adverse impact on the Company�s results of operations or financial condition.

Equity market volatility could negatively impact the Company�s business.

Volatility in equity markets may discourage prospective purchasers of variable separate account products, such as variable annuities, that have returns linked to the performance of equity markets and may cause some existing

Table of Contents

customers to withdraw cash values or reduce investments in those products. The amount of policy fees received from variable products is affected by the performance of the equity markets, increasing or decreasing as markets rise or fall.

Equity market volatility can also affect the profitability of variable products in other ways, in particular as a result of death benefit and withdrawal benefit guarantees in these products. The estimated cost of providing guaranteed minimum death benefits (�GMDB�) and guaranteed minimum withdrawal benefits (�GMWB�) incorporates various assumptions about the overall performance of equity markets over certain time periods. Periods of significant and sustained downturns in equity markets or increased equity market volatility could result in an increase in the valuation of the future policy benefit or policyholder account balance liabilities associated with such products, resulting in a reduction to net income and an adverse impact to the statutory capital and risk-based capital ratios of the Company�s insurance subsidiaries.

The amortization of DAC relating to variable products and the estimated cost of providing GMDB and GMWB incorporate various assumptions about the overall performance of equity markets over certain time periods. The rate of amortization of DAC and the cost of providing GMDB and GMWB could increase if equity market performance is worse than assumed.

The Company�s use of derivative financial instruments within its risk management strategy may not be effective or sufficient.

The Company uses derivative financial instruments within its risk management strategy to mitigate risks to which it is exposed, including the adverse effects of domestic and/or international credit and/or equity market and/or interest rate levels or volatility on its fixed indexed annuity and variable annuity products with guaranteed benefit features. These derivative financial instruments may not effectively offset the changes in the carrying value of the guarantees due to, among other things, the time lag between changes in the value of such guarantees and the changes in the value of the derivative financial instruments purchased by the Company, extreme credit and/or equity market and/or interest rate levels or volatility, contract holder behavior that differs from the Company�s expectations, and divergence between the performance of the underlying funds of such variable annuity products with guaranteed benefit features and the indices utilized by the Company in estimating its exposure to such guarantees.

The Company may also use derivative financial instruments within its risk management strategy to mitigate risks arising from its exposure to investments in individual issuers or sectors of issuers and to mitigate the adverse effects of distressed domestic and/or international credit and/or equity markets and/or interest rate levels or volatility on its overall financial condition or results of operations.

The use of derivative financial instruments by the Company may have an adverse impact on the level of statutory capital and the risk-based capital ratios of the Company�s insurance subsidiaries. The Company employs strategies in the use of derivative financial instruments that are intended to mitigate such adverse impacts, but the Company�s strategies may not be effective.

The Company may also choose not to hedge, in whole or in part, these or other risks that it has identified, due to, for example, the availability and/or cost of a suitable derivative financial instrument or, in reaction to extreme credit, equity market and/or interest rate levels or volatility. Additionally, the Company�s estimates and assumptions made in connection with its use of any derivative financial instrument may fail to reflect or correspond to its actual long-term exposure in respect to identified risks. Derivative financial instruments held or purchased by the Company may also otherwise be insufficient to hedge the risks in relation to the Company�s obligations. In addition, the Company may fail to identify risks, or the magnitude thereof, to which it is exposed. The Company is also exposed to the risk that its use of derivative financial instruments within its risk management strategy may not be properly designed and/or may not be properly implemented as designed.

The Company is also subject to the risk that its derivative counterparties or clearinghouse may fail or refuse to meet their obligations to the Company under derivative financial instruments. If the Company�s derivative counterparties or clearinghouse fail or refuse to meet their obligations to the Company in this regard, the Company�s efforts to mitigate risks to which it is subject through the use of such derivative financial instruments may prove to be ineffective or inefficient.

Table of Contents

The above factors, either alone or in combination, may have a material adverse effect on the Company�s financial condition and results of operations.

Credit market volatility or disruption could adversely impact the Company�s financial condition or results from operations.

Significant volatility or disruption in domestic or foreign credit markets, including as a result of social or political unrest or instability, could have an adverse impact in several ways on either the Company�s financial condition or results from operations. Changes in interest rates and credit spreads could cause market price and cash flow variability in the fixed income instruments in the Company�s investment portfolio. Significant volatility and lack of liquidity in the credit markets could cause issuers of the fixed-income securities in the Company�s investment portfolio to default on either principal or interest payments on these securities. Additionally, market price valuations may not accurately reflect the underlying expected cash flows of securities within the Company�s investment portfolio.

The Company�s statutory surplus is also impacted by widening credit spreads as a result of the accounting for the assets and liabilities on its fixed market value adjusted (�MVA�) annuities. Statutory separate account assets supporting the fixed MVA annuities are recorded at fair value. In determining the statutory reserve for the fixed MVA annuities, the Company is required to use current crediting rates based on U.S. Treasuries. In many capital market scenarios, current crediting rates based on U.S. Treasuries are highly correlated with market rates implicit in the fair value of statutory separate account assets. As a result, the change in the statutory reserve from period to period will likely substantially offset the change in the fair value of the statutory separate account assets. However, in periods of volatile credit markets, actual credit spreads on investment assets may increase sharply for certain sub-sectors of the overall credit market, resulting in statutory separate account asset market value losses. Credit spreads are not consistently fully reflected in crediting rates based on U.S. Treasuries, and the calculation of statutory reserves will not substantially offset the change in fair value of the statutory separate account assets resulting in reductions in statutory surplus. This situation would result in the need to devote significant additional capital to support fixed MVA annuity products.

Volatility or disruption in the credit markets could also impact the Company�s ability to efficiently access financial solutions for purposes of issuing long-term debt for financing purposes, its ability to obtain financial solutions for purposes of supporting certain traditional and universal life insurance products for capital management purposes, or result in an increase in the cost of existing securitization structures.

The ability of the Company to implement financing solutions designed to fund a portion of statutory reserves on both the traditional and universal life blocks of business is dependent upon factors such as the ratings of the Company, the size of the blocks of business affected, the mortality experience of the Company, the credit markets, and other factors. The Company cannot predict the continued availability of such solutions or the form that the market may dictate. To the extent that such financing solutions were desired but are not available, the Company�s financial position could be adversely affected through impacts including, but not limited to, higher borrowing costs, surplus strain, lower sales capacity, and possible reduced earnings.

The Company�s ability to grow depends in large part upon the continued availability of capital.

The Company deploys significant amounts of capital to support its sales and acquisitions efforts. Although the Company believes it has sufficient capital to fund its immediate capital needs, the amount of capital available can vary significantly from period to period due to a variety of circumstances, some of which are not predictable, foreseeable, or within the Company�s control. Furthermore, our sole stockholder is not obligated to provide us with additional capital. A lack of sufficient capital could have a material adverse impact on the Company�s financial condition and results of operations.

A ratings downgrade or other negative action by a ratings organization could adversely affect the Company.

Table of Contents

important to maintaining public confidence in the Company, its products, its ability to market its products, and its competitive position. A downgrade or other negative action by a ratings organization with respect to the financial strength ratings of the Company and its insurance subsidiaries could adversely affect the Company in many ways, including the following: reducing new sales of insurance and investment products; adversely affecting relationships with distributors and sales agents; increasing the number or amount of policy surrenders and withdrawals of funds; requiring a reduction in prices for the Company�s insurance products and services in order to remain competitive; and adversely affecting the Company�s ability to obtain reinsurance at a reasonable price, on reasonable terms or at all. A downgrade of sufficient magnitude could result in the Company, its insurance subsidiaries, or both being required to collateralize reserves, balances or obligations under reinsurance, funding, swap, and securitization agreements. A downgrade of sufficient magnitude could also result in the termination of certain funding and swap agreements.

Rating organizations also publish credit ratings for issuers of debt securities, including the Company. Credit ratings are indicators of a debt issuer�s ability to meet the terms of debt obligations in a timely manner. These ratings are important to the Company�s overall ability to access credit markets and other types of liquidity. Credit ratings are not recommendations to buy the Company�s securities or products. Downgrades of the Company�s credit ratings, or an announced potential downgrade or other negative action, could have a material adverse effect on the Company�s financial conditions and results of operations in many ways, including, but not limited to, the following: limiting the Company�s access to capital markets; increasing the cost of debt; impairing its ability to raise capital to refinance maturing debt obligations; limiting its capacity to support the growth of its insurance subsidiaries; requiring it to pay higher amounts in connection with certain existing or future financing arrangements or transactions; and making it more difficult to maintain or improve the current financial strength ratings of its insurance subsidiaries. A downgrade of sufficient magnitude, in combination with other factors, could require the Company to post collateral pursuant to certain contractual obligations.

Rating organizations assign ratings based upon several factors. While most of the factors relate to the rated company, some of the factors relate to the views of the rating organization, general economic conditions, ratings of parent companies, and circumstances outside the rated company�s control. Factors identified by rating agencies that could lead to negative rating actions with respect to the Company or its insurance subsidiaries include, but are not limited to, weak growth in earnings, a deterioration of earnings (including deterioration due to spread compression in interest-sensitive lines of business), significant impairments in investment portfolios, heightened financial leverage, lower interest coverage ratios, risk-based capital ratios falling below ratings thresholds, a material reinsurance loss, underperformance of an acquisition, and the rating of a parent company. In addition, rating organizations use various models and formulas to assess the strength of a rated company, and from time to time rating organizations have, in their discretion, altered the models. Changes to the models could impact the rating organizations� judgment of the rating to be assigned to the rated company. Rating organizations may take various actions, positive or negative, with respect to our debt and financial strength ratings, including as a result of our status as an indirect subsidiary of Dai-ichi Life. Any negative action by a ratings agency could have a material adverse impact on the Company�s financial condition or results of operations. The Company cannot predict what actions the rating organizations may take, or what actions the Company may take in response to the actions of the rating organizations.

The Company could be forced to sell investments at a loss to cover policyholder withdrawals.

Many of the products offered by the Company allow policyholders and contract holders to withdraw their funds under defined circumstances. The Company manages its liabilities and configures its investment portfolios so as to provide and maintain sufficient liquidity to support expected withdrawal demands and contract benefits and maturities. While the Company owns a significant amount of liquid assets, a certain portion of its assets are relatively illiquid. If the Company experiences unexpected withdrawal or surrender activity, it could exhaust its liquid assets and be forced to liquidate other assets, perhaps at a loss or on other unfavorable terms. If the Company is forced to dispose of assets at a loss or on unfavorable terms, it could have an adverse effect on the Company�s financial condition. The degree of the adverse effect could vary in relation to the magnitude of the unexpected surrender or withdrawal activity.

Disruption of the capital and credit markets could negatively affect the Company�s ability to meet its liquidity and financing needs.

The Company needs liquidity to meet its obligations to its policyholders and its debt holders, and to pay its operating expenses. The Company�s sources of liquidity include insurance premiums, annuity considerations, deposit

Table of Contents

funds, cash flow from investments and assets, and other income from its operations. In normal credit and capital market conditions, the Company�s sources of liquidity also include a variety of short and long-term borrowing arrangements, including issuing debt securities.

The Company�s business is dependent on the capital and credit markets, including confidence in such markets. When the credit and capital markets are disrupted and confidence is eroded the Company may not be able to borrow money, including through the issuance of debt securities, or the cost of borrowing or raising equity capital may be prohibitively high. If the Company�s internal sources of liquidity are inadequate during such periods, the Company could suffer negative effects from not being able to borrow money, or from having to do so on unfavorable terms. The negative effects could include being forced to sell assets at a loss, a lowering of the Company�s credit ratings and the financial strength ratings of its insurance subsidiaries, and the possibility that customers, lenders, ratings agencies, or regulators develop a negative perception of the Company�s financial prospects, which could lead to further adverse effects on the Company.

Difficult general economic conditions could materially adversely affect the Company�s business and results of operations.

The Company�s business and results of operations could be materially affected by difficult general economic conditions. Stressed economic conditions and volatility and disruptions in capital markets, particular markets or financial asset classes can have an adverse effect on the Company due to the size of the Company�s investment portfolio and the sensitive nature of insurance liabilities to changing market factors. Disruptions in one market or asset class can also spread to other markets or asset classes. Volatility in financial markets can also affect the Company�s business by adversely impacting general levels of economic activity, employment and customer behavior.

Like other financial institutions, and particularly life insurers, the Company may be adversely affected by these conditions. The presence of these conditions could have an adverse impact on the Company by, among other things, decreasing demand for its insurance and investment products, and increasing the level of lapses and surrenders of its policies. The Company and its subsidiaries could also experience additional ratings downgrades from ratings agencies, unrealized losses, significant realized losses, impairments in its investment portfolio, and charges incurred as a result of fair value accounting principles. If general economic conditions become more difficult, the Company�s ability to access sources of capital and liquidity may be limited.

Economic trends may worsen in 2015, thus contributing to increased volatility and diminished expectations for the economy, markets, and financial asset classes. The Company cannot predict the occurrence of economic trends or the likelihood or timing of improvement in such trends.

The Company may be required to establish a valuation allowance against its deferred tax assets, which could materially adversely affect the Company�s results of operations, financial condition, and capital position.

Deferred tax assets refer to assets that are attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets in essence represent future savings of taxes that would otherwise be paid in cash. The realization of the deferred tax assets is dependent upon the generation of sufficient future taxable income, including capital gains. If it is determined that the deferred tax assets cannot be realized, a deferred tax valuation allowance must be established, with a corresponding charge to net income.

Based on the Company�s current assessment of future taxable income, including available tax planning opportunities, the Company anticipates that it is more likely than not that it will generate sufficient taxable income to realize its material deferred tax assets. If future events differ from the Company�s current forecasts, a valuation allowance may need to be established, which could have a material adverse effect on the Company�s results of operations, financial condition, and capital position.

The Company could be adversely affected by an inability to access its credit facility.

The Company relies on its credit facility as a potential source of liquidity. The availability of these funds could be critical to the Company�s credit and financial strength ratings and its ability to meet obligations, particularly when alternative sources of credit are either difficult to access or costly. The availability of the Company�s credit facility is

Table of Contents

dependent in part on the ability of the lenders to provide funds under the facility. The Company�s credit facility contains various affirmative and negative covenants and events of default, including covenants requiring the Company to maintain a specified minimum consolidated net worth. The Company�s right to make borrowings under the facility is subject to the fulfillment of certain conditions, including its compliance with all covenants. The Company�s failure to comply with the covenants in the credit facility could restrict its ability to access this credit facility when needed. The Company�s inability to access some or all of the line of credit under the credit facility could have a material adverse effect on its financial condition and results of operations.

The Company could be adversely affected by an inability to access FHLB lending.

The Company is a member of the Federal Home Loan Bank (the �FHLB�) of Cincinnati, which provides the Company with access to FHLB financial services, including advances that provide an attractive funding source for short-term borrowing and for the sale of funding agreements. In recent years, the Federal Housing Finance Agency (�FHFA�) has released proposed rules, which include revised member participation standards, and advisory bulletins addressing concerns associated with insurance company (as opposed to federally-backed bank) access to FHLB financial services, the state insurance regulatory framework and FHLB creditor status in the event of member insurer insolvency. In response to FHFA actions, FHLB members, the NAIC and trade groups developed model legislation that would enable insurers to access FHLB funding on similar collateral terms as federally insured depository institutions. While members of the FHLB and NAIC were not able to agree on certain points, legislation based on this model has been introduced in several states and is not being opposed by the NAIC. It is unclear at this time whether or to what extent additional or new legislation or regulatory action regarding continued membership in and access to FHLB financial services will be enacted or adopted. Any developments that limit access to FHLB financial services or eliminate the Company�s eligibility for continued FHLB membership could have a material adverse effect on the Company.

The Company�s financial condition or results of operations could be adversely impacted if the Company�s assumptions regarding the fair value and future performance of its investments differ from actual experience.

The Company makes assumptions regarding the fair value and expected future performance of its investments. Expectations that the Company�s investments in mortgage-backed and asset-backed securities will continue to perform in accordance with their contractual terms are based on assumptions a market participant would use in determining the current fair value and consider the performance of the underlying assets. It is reasonably possible that the underlying collateral of these investments will perform worse than current market expectations and that such reduced performance may lead to adverse changes in the cash flows on the Company�s holdings of these types of securities. This could lead to potential future write-downs within the Company�s portfolio of mortgage-backed and asset-backed securities. In addition, expectations that the Company�s investments in corporate securities and/or debt obligations will continue to perform in accordance with their contractual terms are based on evidence gathered through its normal credit surveillance process. It is possible that issuers of the Company�s investments in corporate securities and/or debt obligations will perform worse than current expectations. Such events may lead the Company to recognize potential future write-downs within its portfolio of corporate securities and/or debt obligations. It is also possible that such unanticipated events would lead the Company to dispose of such investments and recognize the effects of any market movements in its financial statements.

The Company also makes certain assumptions when utilizing internal models to value certain of its investments. It is possible that actual results will differ from the Company�s assumptions. Such events could result in a material change in the value of the Company�s investments.

Adverse actions of certain funds or their advisers could have a detrimental impact on the Company�s ability to sell its variable life and annuity products, or maintain current levels of assets in those products.

Certain of the Company�s insurance subsidiaries have arrangements with various open-end investment companies, or �mutual funds�, and the investment advisers to those mutual funds, to offer the mutual funds as investment options in the Company�s variable life and annuity products. It is possible that the termination of one or more of those arrangements by the mutual fund or its adviser could have a detrimental impact on the company�s ability to sell its variable life and annuity products, or maintain current levels of assets in those products, which could have a material adverse effect on the Company�s financial condition and results of operations.

Table of Contents

The amount of statutory capital that the Company has and the amount of statutory capital that it must hold to maintain its financial strength and credit ratings and meet other requirements can vary significantly from time to time and such amounts are sensitive to a number of factors outside of the Company�s control.

The Company primarily conducts business through licensed insurance company subsidiaries. Insurance regulators have established regulations that provide minimum capitalization requirements based on risk-based capital (�RBC�) formulas for life and property and casualty companies. The RBC formula for life insurance companies establishes capital requirements relating to insurance, business, asset, interest rate, and certain other risks.

In any particular year, statutory surplus amounts and RBC ratios may increase or decrease depending on a variety of factors including the following: the amount of statutory income or losses generated by the Company�s insurance subsidiaries (which itself is sensitive to equity market and credit market conditions); the amount of additional capital its insurance subsidiaries must hold to support business growth; changes in the Company�s reserve requirements; the Company�s ability to secure capital market solutions to provide reserve relief; changes in equity market levels; the value of certain fixed-income and equity securities in its investment portfolio; the credit ratings of investments held in its portfolio, including those issued by, or explicitly or implicitly guaranteed by, a government; the value of certain derivative instruments; changes in interest rates and foreign currency exchange rates; credit market volatility; changes in consumer behavior; and changes to the NAIC RBC formula. Most of these factors are outside of the Company�s control. The Company�s financial strength and credit ratings are significantly influenced by the statutory surplus amounts and RBC ratios of its insurance company subsidiaries. Rating agencies may implement changes to their internal models that have the effect of increasing or decreasing the amount of statutory capital the Company must hold in order to maintain its current ratings. In addition, rating agencies may downgrade the investments held in the Company�s portfolio, which could result in a reduction of the Company�s capital and surplus and/or its RBC ratio.

In scenarios of equity market declines, the amount of additional statutory reserves the Company is required to hold for its variable product guarantees may increase at a rate greater than the rate of change of the markets. Increases in reserves could result in a reduction to the Company�s capital, surplus, and/or RBC ratio. Also, in environments where there is not a correlative relationship between interest rates and spreads, the Company�s market value adjusted annuity product can have a material adverse effect on the Company�s statutory surplus position.

Industry Related Risks

The business of the Company is highly regulated and is subject to routine audits, examinations and actions by regulators, law enforcement agencies and self-regulatory organizations.

At any given time, a number of financial, market conduct, or other examinations or audits of the Company�s subsidiaries may be ongoing. It is possible that any examination or audit may result in payments of fines and penalties, payments to customers, or both, as well as changes in systems or procedures, any of which could have a material adverse effect on the Company�s financial condition or results of operations. The Company�s insurance subsidiaries are required to obtain state regulatory approval for rate increases for certain health insurance products. The Company�s profits may be adversely affected if the requested rate increases are not approved in full by regulators in a timely fashion.

Table of Contents

The NAIC and the Company�s state regulators may be influenced by the initiatives of international regulatory bodies, and those initiatives may not translate readily into the legal system under which U.S. insurers must operate. There is increasing pressure to conform to international standards due to the globalization of the business of insurance and the most recent financial crisis.

In addition to developments at the NAIC and in the United States, the Financial Stability Board (�FSB�), consisting of representatives of national financial authorities of the G20 nations, and the G20 have issued a series of proposals intended to produce significant changes in how financial companies, particularly companies that are members of large and complex financial groups, should be regulated.

The International Association of Insurance Supervisors (�IAIS�), at the direction of the FSB, has published a methodology for identifying �global systemically important insurers� (�G-SIIs�) and high level policy measures that will apply to G-SIIs. The FSB, working with national authorities and the IAIS, has designated nine insurance groups as G-SIIs. The IAIS is working on the policy measures which include higher capital requirements and enhanced supervision. Although neither the Company nor Dai-ichi Life has been designated a G-SII, the list of designated insurers will be updated annually by the FSB. It is possible that the greater size and reach of the combined group as a result of the Company becoming a subsidiary of Dai-ichi Life, or a change in the methodologies or their application, could lead to the combined group�s designation as a G-SII.

The IAIS is also in the process of developing a common framework for the supervision of internationally active insurance groups (�IAIGs�), which is targeted to be implemented in 2019. Under the proposed framework, insurance groups deemed to be IAIGs may be required by their regulators to comply with new global capital requirements, which may exceed the sum of state or other local capital requirements. In addition, the IAIS is developing a model framework for the supervision of IAIGs that contemplates �group wide supervision� across national boundaries, which requires each IAIG to conduct its own risk and solvency assessment to monitor and manage its overall solvency. It is possible that, as a result of the Merger, the combined group may be deemed an IAIG, in which case it may be subject to supervision and capital requirements beyond those applicable to any competitors who are not designated as an IAIG.

While it is not yet known how or if these actions will impact the Company, such regulation could result in increased costs of compliance, increased disclosure, less flexibility in capital management and more burdensome regulation and capital requirements for specific lines of business, and could impact the Company and its reserve and capital requirements, financial condition or results of operations.

Although some NAIC pronouncements, particularly as they affect accounting, reserving and risk-based capital issues, may take effect automatically without affirmative action taken by the states, the NAIC is not a governmental entity and its processes and procedures do not comport with those to which governmental entities typically adhere. Therefore, it is possible that actions could be taken by the NAIC that become effective without the procedural safeguards that would be present if governmental action was required. In addition, with respect to some financial regulations and guidelines, states sometimes defer to the interpretation of the insurance department of a non- domiciliary state. Neither the action of the domiciliary state nor the action of the NAIC is binding on a non-domiciliary state. Accordingly, a state could choose to follow a different interpretation. The Company is also subject to the risk that compliance with any particular regulator�s interpretation of a legal, accounting or actuarial issue may result in non-compliance with another regulator�s interpretation of the same issue, particularly when compliance is judged in hindsight. There is an additional risk that any particular regulator�s interpretation of a legal, accounting or actuarial issue may change over time to the Company�s detriment, or that changes to the overall legal or market environment may cause the Company to change its practices in ways that may, in some cases, limit its growth or profitability. Statutes, regulations, interpretations, and instructions may be applied with retroactive impact, particularly in areas such as accounting, reserve and risk-based capital requirements. Also, regulatory actions with prospective impact can potentially have a significant impact on currently sold products.

Table of Contents

The NAIC has announced more focused inquiries on certain matters that could have an impact on the Company�s financial condition and results of operations. Such inquiries concern, for example, examination of statutory accounting disclosures for separate accounts, insurer use of captive reinsurance companies, certain aspects of insurance holding company reporting and disclosure, reserving for universal life products with secondary guarantees, reinsurance, and risk-based capital calculations. In addition, the NAIC continues to consider various initiatives to change and modernize its financial and solvency requirements and regulations. It is considering changing to, or has considered and passed, a principles-based reserving method for life insurance and annuity reserves, changes to the accounting and risk-based capital regulations, changes to the governance practices of insurers, and other items. Some of these proposed changes, including implementing a principles-based reserving methodology, would require the approval of state legislatures. The Company cannot provide any estimate as to what impact these more focused inquiries or proposed changes, if they occur, will have on its product mix, product profitability, reserve and capital requirements, financial condition or results of operations.

With respect to reserving requirements for universal life policies with secondary guarantees (�ULSG�), in 2012 the NAIC adopted revisions to Actuarial Guideline XXXVIII (�AG38�) addressing those requirements. Some of the regulatory participants in the AG38 revision process appeared to believe that one of the purposes of the revisions was to calculate reserves for ULSG similarly to reserves for guaranteed level term life insurance contracts with the same guarantee period. The effect of the revisions was to increase the level of reserves that must be held by insurers on ULSG with certain product designs that are issued on and after January 1, 2013, and to cause insurers to test the adequacy of reserves, and possibly increase the reserves, on ULSG with certain product designs that were issued before January 1, 2013. The Company developed and introduced a new ULSG product for sales in 2013. The Company cannot predict future regulatory actions that could negatively impact the Company�s ability to market this or other products. Such regulatory reactions could include, for example, withdrawal of state approvals of the product, or adoption of further changes to AG38 or other adverse action including retroactive regulatory action that could negatively impact the Company�s product. A disruption of the Company�s ability to sell financially viable life insurance products or an increase in reserves on ULSG policies issued either before or after January 1, 2013, could have a material adverse impact on the Company�s financial condition or results of operations.

The Company currently uses affiliated captive reinsurance companies in various structures to finance certain statutory reserves based on a regulation entitled �Valuation of Life Insurance Policies Model Regulation,� commonly known as �Regulation XXX,� and a supporting guideline entitled �The Application of the Valuation of Life Insurance Policies Model Regulation,� commonly known as �Guideline AXXX, which are associated with term life insurance and universal life insurance with secondary guarantees, respectively, as well as to reduce the volatility in statutory risk based capital associated with certain guaranteed minimum withdrawal and death benefit riders associated with the Company�s variable annuity products. The NAIC, through various committees, subgroups and dedicated task forces, has undertaken a review of the use of captives and special purpose vehicles used to transfer insurance risk in relation to existing state laws and regulations, and several committees have adopted or exposed for comment white papers and reports that, if or when implemented, could impose additional requirements on the use of captives and other reinsurers (including traditional reinsurers) (the �Affected Business�). The Principles Based Reserving Implementation (EX) Task Force of the NAIC, charged with analysis of the adoption of a principles-based reserving methodology, recently adopted the �conceptual framework� contained in a report issued by Rector & Associates, Inc., dated June 4, 2014 (as modified or supplemented, the �Rector Report�), that contains numerous recommendations pertaining to the regulation and use of captive reinsurers. Certain high- level recommendations have been adopted and assigned to various NAIC working groups, which working groups are in various stages of discussions regarding recommendations. One recommendation of the Rector Report has been adopted as Actuarial Guideline XL VIII (�AG48�). AG48 sets more restrictive standards on the permitted collateral utilized to back reserves of a captive. Other recommendations in the Rector Report are subject to ongoing comment and revision. It is unclear at this time to what extent the recommendations in the Rector Report, or additional or revised recommendations relating to captive transactions or reinsurance transactions in general, will be adopted by the NAIC. If the recommendations proposed in the Rector Report are implemented, it will likely be difficult for the Company to establish new captive financing arrangements on a basis consistent with past practices. As a result of AG48 and the Rector Report, the implementation of new captive structures in the future may be less capital efficient, may lead to lower product returns and/or increased product pricing or result in reduced sales of certain products. Additionally, in some circumstances AG48 and the implementation of the recommendations in the Rector Report could impact the Company�s ability to engage in certain reinsurance transactions with non-affiliates.

Table of Contents

The NAIC�s Financial Regulation Standards and Accreditation (F) Committee is considering a proposal to include insurer-owned captives and special purpose vehicles that are single-state licensed but assume reinsurance from cedants operating in multiple states within the definition of �multi-state insurer� found in the preambles to Parts A and B of the NAIC Financial Regulation Standards and Accreditation Program. If adopted, the revised definition would subject captives (on a prospective basis, as proposed) to all of the Accreditation Standards applicable to other traditional multi-state insurers, including standards related to capital and surplus requirements, risk-based capital requirements, investment laws and credit for reinsurance laws. Such application would likely have a significant and adverse impact on the Company�s ability to engage in captive transactions on the same or a similar basis as in past periods.

Any regulatory action or changes in interpretation that materially adversely affects the Company�s use or materially increases the Company�s cost of using captives or reinsurers for the Affected Business, either retroactively or prospectively, could have a material adverse impact on the Company�s financial condition or results of operations. If the Company were required to discontinue its use of captives for intercompany reinsurance transactions on a retroactive basis, adverse impacts would include early termination fees payable with respect to certain structures, diminished capital position and higher cost of capital. Additionally, finding alternative means to support policy liabilities efficiently is an unknown factor that would be dependent, in part, on future market conditions and the Company�s ability to obtain required regulatory approvals. On a prospective basis, discontinuation of the use of captives could impact the types, amounts and pricing of products offered by the Company�s insurance subsidiaries.

Recently, new laws and regulations have been adopted in certain states that require life insurers to search for unreported deaths. The National Conference of Insurance Legislators (�NCOIL�) has adopted the Model Unclaimed Life Insurance Benefits Act (the �Unclaimed Benefits Act�) and legislation has been enacted in various states that is similar to the Unclaimed Benefits Act, although each state�s version differs in some respects. The Unclaimed Benefits Act would impose new requirements on insurers to periodically compare their in-force life insurance and annuity contracts and retained asset accounts against a Death Database, investigate any potential matches to confirm the death and determine whether benefits are due, and to attempt to locate the beneficiaries of any benefits that are due or, if no beneficiary can be located, escheat the benefit to the state as unclaimed property. Other states in which the Company does business may also consider adopting legislation similar to the Unclaimed Benefits Act. The Company cannot predict whether such legislation will be proposed or enacted in additional states. Additionally, the NAIC Unclaimed Life Insurance Benefits (A) Working Group recently recommended to its parent committee the development of an NAIC model unclaimed property law that, if developed, would overlap with the NCOIL based laws already adopted in several states. Other life insurance industry associations and regulatory associations are also considering these matters.

A number of state treasury departments and administrators of unclaimed property have audited life insurance companies for compliance with unclaimed property laws. The focus of the audits has been to determine whether there have been maturities of policies or contracts, or policies that have exceeded limiting age with respect to which death benefits or other payments under the policies should be treated as unclaimed property that should be escheated to the state. In addition, the audits have sought to identify unreported deaths of insureds. There is no clear basis in previously existing law for treating an unreported death as giving rise to a policy benefit that would be subject to unclaimed property procedures. A number of life insurers, however, have entered into resolution agreements with state treasury departments under which the life insurers agreed to procedures for comparing their previously issued life insurance and annuity contracts and retained asset accounts against a Death Database, treating confirmed deaths as giving rise to a death benefit under their policies, locating beneficiaries and paying them the benefits and interest, and escheating the benefits and interest to the state if the beneficiary could not be found. The amounts publicly reported to have been paid to beneficiaries and/or escheated to the states have been substantial.

The NAIC has established an Investigations of Life/Annuity Claims Settlement Practices (D) Task Force to coordinate targeted multi-state examinations of life insurance companies on claims settlement practices. The state insurance regulators on the Task Force have initiated targeted multi-state examinations of life insurance companies with respect to the companies� claims paying practices and use of a Death Database to identify unreported deaths in their life insurance policies, annuity contracts and retained asset accounts. There is no clear basis in previously existing law for requiring a life insurer to search for unreported deaths in order to determine whether a benefit is owed. A number of life insurers, however, have entered into settlement or consent agreements with state insurance regulators under which the life insurers agreed to implement systems and procedures for periodically comparing their life insurance and annuity contracts and retained asset accounts against a Death Database, treating confirmed deaths as giving rise to a death benefit under their policies, locating beneficiaries and paying them the benefits and interest, and escheating the benefits

Table of Contents

and interest to the state if the beneficiary could not be found. It has been publicly reported that the life insurers have paid substantial administrative and/or examination fees to the insurance regulators in connection with the settlement or consent agreements.

Certain of the Company�s subsidiaries as well as certain other insurance companies from whom the Company has coinsured blocks of life insurance and annuity policies are subject to unclaimed property audits and/or targeted multistate examinations by insurance regulators similar to those described above. It is possible that the audits, examinations and/or the enactment of state laws similar to the Unclaimed Benefits Act could result in additional payments to beneficiaries, additional escheatment of funds deemed abandoned under state laws, payment of administrative penalties and/or examination fees to state authorities, and changes to the Company�s procedures for identifying unreported deaths and escheatment of abandoned property. It is possible any such additional payments and any costs related to changes in Company procedures could materially impact the Company�s financial results from operations. It is also possible that life insurers, including the Company, may be subject to claims, regulatory actions, law enforcement actions, and civil litigation arising from their prior business practices. Any resulting liabilities, payments or costs, including initial and ongoing costs of changes to the Company�s procedures or systems, could be significant and could have a material adverse effect on the Company�s financial condition or results of operations.

During December 2012, the West Virginia Treasurer filed actions against the Company and its subsidiary West Coast Life Insurance Company in West Virginia state court (State of West Virginia ex rel. John D. Perdue v. Protective Life Insurance Company, State of West Virginia ex rel. John D. Perdue v. West Coast Life Insurance Company; Defendants� Motions to Dismiss granted on December 27, 2013; Notice of Appeal filed on January 27, 2014). The actions, which also name numerous other life insurance companies, allege that the companies violated the West Virginia Uniform Unclaimed Property Act, seek to compel compliance with the Act, and seek payment of unclaimed property, interest, and penalties. While the legal theory or theories that may give rise to liability in the West Virginia Treasurer litigation are uncertain, it is possible that other jurisdictions may pursue similar actions. The Company does not currently believe that losses, if any, arising from the West Virginia Treasurer litigation will be material. The Company cannot, however, predict whether other jurisdictions will pursue similar actions or, if they do, whether such actions will have a material impact on the Company�s financial results from operations. Additionally, the California Controller has recently sued several insurance carriers for alleged failure to comply with audit requests from an appointed third party auditor. The Company cannot predict whether California might pursue a similar action against the Company and further cannot predict whether other jurisdictions might pursue similar actions. The Company does not believe however that any such action would have a material impact on the Company�s financial condition or results of operations.

Under insurance guaranty fund laws in most states, insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. From time to time, companies may be asked to contribute amounts beyond prescribed limits. The Company cannot predict the amount or timing of any future assessments.

The purchase of life insurance products is limited by state insurable interest laws, which in most jurisdictions require that the purchaser of life insurance name a beneficiary that has some interest in the sustained life of the insured. To some extent, the insurable interest laws present a barrier to the life settlement, or �stranger-owned� industry, in which a financial entity acquires an interest in life insurance proceeds, and efforts have been made in some states to liberalize the insurable interest laws. To the extent these laws are relaxed, the Company�s lapse assumptions may prove to be incorrect.

At the federal level, bills are routinely introduced in both chambers of the United States Congress (�Congress�) that could affect life insurers. In the past, Congress has considered legislation that would impact insurance companies in numerous ways, such as providing for an optional federal charter or a federal presence for insurance, preempting state law in certain respects regarding the regulation of reinsurance, increasing federal oversight in areas such as consumer protection and other matters. The Company cannot predict whether or in what form legislation will be enacted and, if so, whether the enacted legislation will positively or negatively affect the Company or whether any effects will be material.

Table of Contents

the JFSA prior to taking certain actions or engaging in certain transactions, either directly or indirectly through its subsidiaries, including PLC, the Company, and its consolidated subsidiaries.

The Company is subject to various conditions and requirements of the Healthcare Act. The Healthcare Act makes significant changes to the regulation of health insurance and may affect the Company in various ways. The Healthcare Act may affect the small blocks of business the Company has offered or acquired over the years that are, or are deemed to constitute, health insurance. The Healthcare Act may also affect the benefit plans the Company sponsors for employees or retirees and their dependents, the Company�s expense to provide such benefits, the tax liabilities of the Company in connection with the provision of such benefits, and the Company�s ability to attract or retain employees. In addition, the Company may be subject to regulations, guidance or determinations emanating from the various regulatory authorities authorized under the Healthcare Act. The Company cannot predict the effect that the Healthcare Act, or any regulatory pronouncement made thereunder, will have on its results of operations or financial condition.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (�Dodd-Frank�) enacted in July 2010 made sweeping changes to the regulation of financial services entities, products and markets. Certain provisions of Dodd-Frank are or may become applicable to the Company, its competitors or those entities with which the Company does business. Such provisions include, but are not limited to the following: the establishment of the Federal Insurance Office, changes to the regulation and standards applicable to broker-dealers and investment advisors, changes to the regulation of reinsurance, changes to regulations affecting the rights of shareowners, and the imposition of additional regulation over credit rating agencies.

Dodd-Frank also created the Financial Stability Oversight Council (the �FSOC�), which has issued a final rule and interpretive guidance setting forth the methodology by which it will determine whether a non-bank financial company is a systemically important financial institution (�SIFI�). A non- bank financial company, such as the Company, that is designated as a SIFI by the FSOC will become subject to supervision by the Board of Governors of the Federal Reserve System (the �Federal Reserve�). The Company is not currently supervised by the Federal Reserve. Such supervision could impact the Company�s requirements relating to capital, liquidity, stress testing, limits on counterparty credit exposure, compliance and governance, early remediation in the event of financial weakness and other prudential matters, and in other ways the Company currently cannot anticipate. FSOC-designated non-bank financial companies will also be required to prepare resolution plans, so- called �living wills,� that set out how they could most efficiently be liquidated if they endangered the U.S. financial system or the broader economy. The FSOC has conducted two rounds of SIFI designation consideration. However, this process is still very new, and the FSOC continues to make changes to its process for designating a company as a SIFI. The FSOC has made its initial SIFI designations, and the Company was not designated as such. However, the Company could be considered and designated at any time. Because the process is in its initial stages, the Company is at this time unable to predict the impact on an entity that is supervised as a SIFI by the Federal Reserve Board. The Company is not able to predict whether the capital requirements or other requirements imposed on SIFIs may impact the requirements applicable to the Company even if it is not designated as a SIFI. The uncertainty about regulatory requirements could influence the Company�s product line or other business decisions with respect to some product lines. There is a similarly uncertain international designation process. The Financial Stability Board, appointed by the G-20 Summit, recently designated nine insurers as �G-SIIs,� or global systemically-important insurers. As with the designation of SIFI�s, it is unclear at this time how additional capital and other requirements affect the insurance and financial industries. The insurers designated as G-SIIs to date represent organizations larger than the Company, but the possibility remains that the Company could be so designated.

Additionally, Dodd-Frank created the Consumer Financial Protection Bureau (�CFPB�), an independent division of the Department of Treasury with jurisdiction over credit, savings, payment, and other consumer financial products and services, other than investment products already regulated by the United States Securities and Exchange Commission (the �SEC�) or the U.S. Commodity Futures Trading Commission. CFPB has issued a rule to bring under its supervisory authority certain non-banks whose activities or products it determines pose risks to consumers. It is unclear at this time which activities or products will be covered by this rule. Certain of the Company�s subsidiaries sell products that may be regulated by the CFPB. CFPB continues to bring enforcement actions involving a growing number of issues, including actions using state Attorney�s General, which could directly or indirectly affect the Company or use any of its subsidiaries. Additionally, the CFPB is exploring the possibility of helping Americans manage their retirement savings and is considering the extent of its authority in that area. The Company is unable at this time to predict the impact of these activities on the Company.

Table of Contents

Dodd-Frank includes a new framework of regulation of over-the- counter (�OTC�) derivatives markets which requires clearing of certain types of transactions which have been or are currently traded OTC by the Company. The types of transactions to be cleared are expected to increase in the future. The new framework could potentially impose additional costs, including increased margin requirements and additional regulation on the Company. Increased margin requirements on the Company�s part, combined with restrictions on securities that will qualify as eligible collateral, could continue to reduce its liquidity and require an increase in its holdings of cash and government securities with lower yields causing a reduction in income. The Company uses derivative financial instruments to mitigate a wide range of risks in connection with its businesses, including those arising from its variable annuity products with guaranteed benefit features. The derivative clearing requirements of Dodd- Frank could continue to increase the cost of the Company�s risk mitigation and expose it to the risk of a default by a clearinghouse with respect to the Company�s cleared derivative transactions.

Numerous provisions of Dodd-Frank require the adoption of implementing rules and/or regulations. The process of adopting such implementing rules and/or regulations have in some instances been delayed beyond the timeframes imposed by Dodd-Frank. Until the various final regulations are promulgated pursuant to Dodd-Frank, the full impact of the regulations on the Company will remain unclear. In addition, Dodd-Frank mandates multiple studies, which could result in additional legislation or regulation applicable to the insurance industry, the Company, its competitors or the entities with which the Company does business. Legislative or regulatory requirements imposed by or promulgated in connection with Dodd-Frank may impact the Company in many ways, including but not limited to the following: placing the Company at a competitive disadvantage relative to its competition or other financial services entities, changing the competitive landscape of the financial services sector and/or the insurance industry, making it more expensive for the Company to conduct its business, requiring the reallocation of significant company resources to government affairs, legal and compliance-related activities, causing historical market behavior or statistics utilized by the Company in connection with its efforts to manage risk and exposure to no longer be predictive of future risk and exposure or otherwise have a material adverse effect on the overall business climate as well as the Company�s financial condition and results of operations.

The Company may be subject to regulation by the United States Department of Labor when providing a variety of products and services to employee benefit plans and individual investors that are governed by the Employee Retirement Income Security Act (�ERISA�). The Department of Labor is expected to re- propose a rule that would change the circumstances under which one who works with employee benefit plans and Individual Retirement Accounts would be considered a fiduciary under ERISA. Severe penalties are imposed for breach of duties under ERISA and the Company cannot predict the impact that the Department of Labor�s re-proposed rule may have on its operations.

Certain life insurance policies, contracts, and annuities offered by the Company�s subsidiaries are subject to regulation under the federal securities laws administered by the SEC. The federal securities laws contain regulatory restrictions and criminal, administrative, and private remedial provisions. From time to time, the SEC and the Financial Industry Regulatory Authority (�FINRA�) examine or investigate the activities of broker-dealers and investment advisors, including the Company�s affiliated broker-dealers and investment advisors. These examinations or investigations often focus on the activities of the registered representatives and registered investment advisors doing business through such entities and the entities� supervision of those persons. It is possible that any examination or investigation could lead to enforcement action by the regulator and/or may result in payments of fines and penalties, payments to customers, or both, as well as changes in systems or procedures of such entities, any of which could have a material adverse effect on the Company�s financial condition or results of operations.

In addition, the SEC is reviewing the standard of conduct applicable to brokers, dealers, and investment advisers when those entities provide personalized investment advice about securities to retail customers. FINRA has also issued a report addressing how its member firms might identify and address conflicts of interest including conflicts related to the introduction of new products and services and the compensation of the member firms� associated persons. These regulatory initiatives could have an impact on Company operations and the manner in which broker-dealers and investment advisers distribute the Company�s products.

The Company may also be subject to regulation by governments of the countries in which it currently does, or may in the future, do, business, as well as regulation by the U.S. Government with respect to its operations in foreign countries, such as the Foreign Corrupt Practices Act. Penalties for violating the various laws governing the Company�s

Table of Contents

business in other countries may include restrictions upon business operations, fines and imprisonment, both within the U.S. and abroad. U.S. enforcement of anti-corruption laws continues to increase in magnitude, and penalties may be substantial.

The Company is subject to conditions and requirements set forth in the Telephone Consumer Protection Act (�TCPA�) which places restrictions on the use of automated telephone and facsimile machines. Class action lawsuits alleging violations of the act have been filed against a number of companies, including life insurance carriers. These class action lawsuits contain allegations that defendant carriers were vicariously liable for the alleged wrongful conduct of agents who violated the TCPA. Some of the class actions have resulted in substantial settlements against other insurers. Any such actions against the Company could result in a material adverse effect upon our financial condition or results of operations.

Other types of regulation that could affect the Company and its subsidiaries include insurance company investment laws and regulations, state statutory accounting and reserving practices, antitrust laws, minimum solvency requirements, enterprise risk requirements, state securities laws, federal privacy laws, insurable interest laws, federal anti-money laundering and anti-terrorism laws, employment and immigration laws (including laws in Alabama where over half of the Company�s employees are located), and because the Company owns and operates real property, state, federal, and local environmental laws. Under some circumstances, severe penalties may be imposed for breach of these laws.

The Company cannot predict what form any future changes to laws and/or regulations affecting participants in the financial services sector and/or insurance industry, including the Company and its competitors or those entities with which it does business, may take, or what effect, if any, such changes may have.

Changes to tax law or interpretations of existing tax law could adversely affect the Company and its ability to compete with non-insurance products or reduce the demand for certain insurance products.

Under the Internal Revenue Code of 1986, as amended (the �Code�), income taxes payable by policyholders on investment earnings is deferred during the accumulation period of most life insurance and annuity products. This favorable tax treatment provides some of the Company�s products with a competitive advantage over products offered by non-insurance companies. To the extent that the Code is revised to either reduce the tax-deferred status of life insurance and annuity products, or to establish the tax-deferred status of competing products, then all life insurance companies, including the Company�s subsidiaries, would be adversely affected with respect to their ability to sell such products. Furthermore, depending upon grandfathering provisions, such changes could cause increased surrenders of existing life insurance and annuity products. For example, new legislation that further restricts the deductibility of interest on funds borrowed to purchase corporate-owned life insurance products could result in increased surrenders of these products.

The Company is subject to the federal corporate income tax in the U.S. Certain tax provisions, such as the dividends-received deduction, the deferral of current taxation on certain types of derivatives� and securities� economic income, and the deduction for future policy benefits and claims, are beneficial to the Company. The Obama Administration and Congress have separately made proposals that either materially change or eliminate these benefits. Most of the foregoing proposals would cause the Company to pay higher current taxes, offset (in whole or in part) by a reduction in its deferred taxes. However, the proposal regarding the dividends-received deduction would cause the Company�s net income and earnings per share to decrease. Whether these proposals will be enacted, and if so, whether they will be enacted as described above, is uncertain.

The Company�s mid-2005 transition from relying on reinsurance for newly-written traditional life products to reinsuring some of these products� reserves into its captive insurance companies resulted in a net reduction in its current taxes, offset by an increase in its deferred taxes. The resulting benefit of reduced current taxes is attributed to the applicable life products and is an important component of the profitability of these products. The profitability and competitive position of these products is dependent on the continuation of current tax law and the ability to generate taxable income.

Table of Contents

There is general uncertainty regarding the taxes to which the Company and its products will be subject in the future. The Company cannot predict what changes to tax law or interpretations of existing tax law may ultimately be enacted or adopted, or whether such changes will adversely affect the Company.

Financial services companies are frequently the targets of legal proceedings, including class action litigation, which could result in substantial judgments.

A number of judgments have been returned against insurers, broker-dealers, and other providers of financial services involving, among other things, sales, underwriting practices, product design, product disclosure, product administration, denial or delay of benefits, charging excessive or impermissible fees, recommending unsuitable products to customers, breaching fiduciary or other duties to customers, refund or claims practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or other persons with whom the company does business, payment of sales or other contingent commissions, and other matters. Often these legal proceedings have resulted in the award of substantial judgments that are disproportionate to the actual damages, including material amounts of punitive non-economic compensatory damages. In some states, juries, judges, and arbitrators have substantial discretion in awarding punitive and non-economic compensatory damages, which creates the potential for unpredictable material adverse judgments or awards in any given legal proceeding. Arbitration awards are subject to very limited appellate review. In addition, in some legal proceedings, companies have made material settlement payments. In some instances, substantial judgments may be the result of a party�s perceived ability to satisfy such judgments as opposed to the facts and circumstances regarding the claims.

Group health coverage issued through associations and credit insurance coverages have received some negative publicity in the media as well as increased regulatory consideration and review and litigation. The Company has a small closed block of group health insurance coverage that was issued to members of an association.

A number of lawsuits and investigations regarding the method of paying claims have been initiated against life insurers. The Company offers payment methods that may be similar to those that have been the subject of such lawsuits and investigations.

The Company, like other financial services companies in the ordinary course of business, is involved in legal proceedings and regulatory actions. The occurrence of such matters may become more frequent and/or severe when general economic conditions have deteriorated. In addition, while the Company has entered into a Memorandum of Understanding to settle class action litigation related to the recent merger transaction, we can provide no assurances that other lawsuits will not be filed or as to the ultimate outcome of any pending or similar future lawsuits. The Company may be unable to predict the outcome of such matters and may be unable to provide a reasonable range of potential losses. Given the inherent difficulty in predicting the outcome of such matters, it is possible that an adverse outcome in certain such matters could be material to the Company�s results for any particular reporting period.

The financial services and insurance industries are sometimes the target of law enforcement investigations and the focus of increased regulatory scrutiny.

The financial services and insurance industries are sometimes the target of law enforcement and regulatory investigations relating to the numerous laws and regulations that govern such companies. Some companies have been the subject of law enforcement or other actions resulting from such investigations. Resulting publicity about one company may generate inquiries into or litigation against other financial service providers, even those who do not engage in the business lines or practices at issue in the original action. It is impossible to predict the outcome of such investigations or actions, whether they will expand into other areas not yet contemplated, whether they will result in changes in regulation, whether activities currently thought to be lawful will be characterized as unlawful, or the impact, if any, of such scrutiny on the financial services and insurance industry or the Company. From time to time, the Company receives subpoenas, requests, or other inquires and responds to them in the ordinary course of business.

New accounting rules, changes to existing accounting rules, or the grant of permitted accounting practices to competitors could negatively impact the Company.

The Company is required to comply with accounting principles generally accepted in the United States (�GAAP�). A number of organizations are instrumental in the development and interpretation of GAAP such as the

Table of Contents

SEC, the Financial Accounting Standards Board (�FASB�), and the American Institute of Certified Public Accountants (�AICPA�). GAAP is subject to constant review by these organizations and others in an effort to address emerging accounting rules and issue interpretative accounting guidance on a continual basis. The Company can give no assurance that future changes to GAAP will not have a negative impact on the Company. GAAP includes the requirement to carry certain investments and insurance liabilities at fair value. These fair values are sensitive to various factors including, but not limited to, interest rate movements, credit spreads, and various other factors. Because of this, changes in these fair values may cause increased levels of volatility in the Company�s financial statements.

The FASB is working on several projects in conjunction with the International Accounting Standards Board, which could result in significant changes as GAAP and International Financial Reporting Standards (�IFRS�) attempt to converge. Furthermore, the SEC is considering whether and how to incorporate IFRS into the U.S. financial reporting system. The changes to GAAP and potential incorporation of IFRS into the U.S. financial reporting system will impose special demands on issuers in the areas of governance, employee training, internal controls, contract fulfillment and disclosure and will likely affect how we manage our business, as it will likely affect other business processes such as design of compensation plans, product design, etc. The Company is unable to predict whether, and if so, when these projects and ultimately convergence with IFRS will be adopted and/or implemented.

In addition, the Company�s insurance subsidiaries are required to comply with statutory accounting principles (�SAP�). SAP and various components of SAP (such as actuarial reserving methodology) are subject to constant review by the NAIC and its task forces and committees as well as state insurance departments in an effort to address emerging issues and otherwise improve or alter financial reporting. Various proposals either are currently or have previously been pending before committees and task forces of the NAIC, some of which, if enacted, would negatively affect the Company. The NAIC is also currently working to reform model regulation in various areas, including comprehensive reforms relating to life insurance reserves and the accounting for such reserves. The Company cannot predict whether or in what form reforms will be enacted by state legislatures and, if so, whether the enacted reforms will positively or negatively affect the Company. In addition, the NAIC Accounting Practices and Procedures manual provides that state insurance departments may permit insurance companies domiciled therein to depart from SAP by granting them permitted accounting practices. The Company cannot predict whether or when the insurance departments of the states of domicile of its competitors may permit them to utilize advantageous accounting practices that depart from SAP, the use of which is not permitted by the insurance departments of the states of domicile of the Company�s insurance subsidiaries. With respect to regulations and guidelines, states sometimes defer to the interpretation of the insurance department of the state of domicile. Neither the action of the domiciliary state nor action of the NAIC is binding on a state. Accordingly, a state could choose to follow a different interpretation. The Company can give no assurance that future changes to SAP or components of SAP or the grant of permitted accounting practices to its competitors will not have a negative impact on the Company. For additional information regarding pending NAIC reforms, please see Item 7, Management�s Discussion and Analysis of Financial Condition and Results of Operations.

The use of reinsurance introduces variability in the Company�s statements of income.

The timing of premium payments to and receipt of expense allowances from reinsurers differs from the Company�s receipt of customer premium payments and incurrence of expenses. These timing differences introduce variability in certain components of the Company�s statements of income and may also introduce variability in the Company�s quarterly financial results.

The Company�s reinsurers could fail to meet assumed obligations, increase rates, terminate agreements or be subject to adverse developments that could affect the Company.

The Company and its insurance subsidiaries cede material amounts of insurance and transfer related assets to other insurance companies through reinsurance. However, notwithstanding the transfer of related assets or other issues, the Company remains liable with respect to ceded insurance should any reinsurer fail to meet the assumed obligations. Therefore, the failure, insolvency, or inability or unwillingness to pay under the terms of the reinsurance agreement with the Company of one or more of the Company�s reinsurers could negatively impact the Company�s earnings and financial position.

The Company�s results and its ability to compete are affected by the availability and cost of reinsurance. Premium rates charged by the Company are based, in part, on the assumption that reinsurance will be available at a

Table of Contents

certain cost. Under certain reinsurance agreements, a reinsurer may increase the rate it charges the Company for the reinsurance, including rates for new policies the Company is issuing and rates related to policies that the Company has already issued. The Company may not be able to increase the premium rates it charges for policies it has already issued, and for competitive reasons it may not be able to raise the premium rates it charges for new policies to offset the increase in rates charged by reinsurers. If the cost of reinsurance were to increase, if reinsurance were to become unavailable, if alternatives to reinsurance were not available to the Company, or if a reinsurer should fail to meet its obligations, the Company could be adversely affected.

In recent years, the number of life reinsurers has decreased as the reinsurance industry has consolidated. The decreased number of participants in the life reinsurance market results in increased concentration of risk for insurers, including the Company. If the reinsurance market further contracts, the Company�s ability to continue to offer its products on terms favorable to it could be adversely impacted.

In addition, reinsurers are facing many challenges regarding illiquid credit and/or capital markets, investment downgrades, rating agency downgrades, deterioration of general economic conditions, and other factors negatively impacting the financial services industry. Concerns over the potential default on the sovereign debt of several European Union member states, and its impact on the European financial sector have increased liquidity concerns, particularly for those reinsurers with significant exposure to European capital and/or credit markets. If such events cause a reinsurer to fail to meet its obligations, the Company would be adversely impacted.

The Company has implemented a reinsurance program through the use of captive reinsurers. Under these arrangements, an insurer owned by the Company serves as the reinsurer, and the consolidated books and tax returns of the Company reflects a liability consisting of the full reserve amount attributable to the reinsured business. The success of the Company�s captive reinsurance program is dependent on a number of factors outside the control of the Company, including continued access to financial solutions, a favorable regulatory environment, and the overall tax position of the Company. If the captive reinsurance program is not successful, the Company�s financial condition could be adversely impacted.

The Company�s policy claims fluctuate from period to period resulting in earnings volatility.

The Company�s results may fluctuate from period to period due to fluctuations in the amount of policy claims received. In addition, certain of the Company�s lines of business may experience higher claims if the economy is growing slowly or in recession, or if equity markets decline. Also, insofar as the Company continues to retain a larger percentage of the risk of newly written life insurance products than it has in the past, its financial results may have greater variability due to fluctuations in mortality results.

The Company operates in a mature, highly competitive industry, which could limit its ability to gain or maintain its position in the industry and negatively affect profitability.

The insurance industry is a mature and highly competitive industry. In recent years, the industry has experienced reduced growth in life insurance sales. The Company encounters significant competition in all lines of business from other insurance companies, many of which have greater financial resources and higher ratings than the Company and which may have a greater market share, offer a broader range of products, services or features, assume a greater level of risk, have lower operating or financing costs, or have different profitability expectations than the Company. The Company also faces competition from other providers of financial services. Competition could result in, among other things, lower sales or higher lapses of existing products. Consolidation and expansion among banks, insurance companies, distributors, and other financial service companies with which the Company does business could also have an adverse effect on the Company�s financial condition and results of operations if such companies require more favorable terms than previously offered to the Company or if such companies elect not to continue to do business with the Company following consolidation or expansion.

The Company�s ability to compete is dependent upon, among other things, its ability to attract and retain distribution channels to market its insurance and investment products, its ability to develop competitive and profitable products, its ability to maintain low unit costs, and its maintenance of adequate ratings from rating agencies.

Table of Contents

As technology evolves, comparison of a particular product of any company for a particular customer with competing products for that customer is more readily available, which could lead to increased competition as well as agent or customer behavior, including persistency that differs from past behavior.

The Company�s ability to maintain competitive unit costs is dependent upon the level of new sales and persistency of existing business.

The Company�s ability to maintain competitive unit costs is dependent upon a number of factors, such as the level of new sales, persistency of existing business, and expense management. A decrease in sales or persistency without a corresponding reduction in expenses may result in higher unit costs.

Additionally, a decrease in persistency of existing business may result in higher or more rapid amortization of deferred policy acquisition costs and thus higher unit costs and lower reported earnings. Although many of the Company�s products contain surrender charges, the charges decrease over time and may not be sufficient to cover the unamortized deferred policy acquisition costs with respect to the insurance policy or annuity contract being surrendered. Some of the Company�s products do not contain surrender charge features and such products can be surrendered or exchanged without penalty. A decrease in persistency may also result in higher claims.

The Company may not be able to protect its intellectual property and may be subject to infringement claims.

The Company relies on a combination of contractual rights and copyright, trademark, patent, and trade secret laws to establish and protect its intellectual property. Although the Company uses a broad range of measures to protect its intellectual property rights, third parties may infringe or misappropriate its intellectual property. The Company may have to litigate to enforce and protect its copyrights, trademarks, patents, trade secrets, and know-how or to determine their scope, validity, or enforceability, which represents a diversion of resources that may be significant in amount and may not prove successful. The loss of intellectual property protection or the inability to secure or enforce the protection of the Company�s intellectual property assets could have a material adverse effect on its business and ability to compete.

The Company also may be subject to costly litigation in the event that another party alleges its operations or activities infringe upon that party�s intellectual property rights. Third parties may have, or may eventually be issued, patents that could be infringed by the Company�s products, methods, processes, or services. Any party that holds such a patent could make a claim of infringement against the Company. The Company may also be subject to claims by third parties for breach of copyright, trademark, trade secret, or license usage rights. Any such claims and any resulting litigation could result in significant liability for damages. If the Company were found to have infringed third party patent or other intellectual property rights, it could incur substantial liability, and in some circumstances could be enjoined from providing certain products or services to its customers or utilizing and benefiting from certain methods, processes, copyrights, trademarks, trade secrets, or licenses, or alternatively could be required to enter into costly licensing arrangements with third parties, all of which could have a material adverse effect on the Company�s business, results of operations, and financial condition.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The Company and PLC�s home office is located at 2801 Highway 280 South, Birmingham, Alabama. The Company owns two buildings consisting of 310,000 square feet constructed in two phases. The first building was constructed in 1974 and the second building was constructed in 1982. Additionally, the Company leases a third 310,000 square-foot building constructed in 2004. Parking is provided for approximately 2,594 vehicles.

The Company leases administrative and marketing office space in 19 cities, including 24,090 square feet in Birmingham (excluding the home office building), with most leases being for periods of three to ten years. The aggregate annualized rent is approximately $6.5 million.

Table of Contents

The Company believes its properties are adequate and suitable for the Company�s business as currently conducted and are adequately maintained. The above properties do not include properties the Company owns for investment only.

Item 3. Legal Proceedings

To the knowledge and in the opinion of management, there are no material pending legal proceedings, other than ordinary routine litigation incidental to the business of the Company, to which the Company or any of its subsidiaries is a party or of which any of our properties is the subject. For additional information regarding legal proceedings see Item 1A, Risk Factors and Note 13, Commitments and Contingencies of the Notes to the Consolidated Financial Statements, each included herein.

Item 4. Mine Safety Disclosure � Not Applicable

Table of Contents

PART II

Item 5. Market for the Registrant�s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company is a wholly owned subsidiary of Protective Life Corporation (�PLC�), which also owns all of the preferred stock issued by the Company�s subsidiary, Protective Life and Annuity Insurance Company (�PL&A�). Therefore, neither the Company�s common stock nor PL&A�s preferred stock is publicly traded.

As of December 31, 2014, approximately $730.1 million of the Company�s consolidated shareowner�s equity excluding net unrealized gains and losses on investments represented restricted net assets of the Company�s insurance subsidiaries that cannot be transferred to Protective Life Insurance Company in the form of dividends, loans, or advances.

Insurers are subject to various state statutory and regulatory restrictions on the insurers� ability to pay dividends. In general, dividends up to specific levels are considered ordinary and may be paid thirty days after written notice to the insurance commissioner of the state of domicile unless such commissioner objects to the dividend prior to the expiration of such period. Dividends in larger amounts are considered extraordinary and are subject to affirmative prior approval by such commissioner. The maximum amount that would qualify as ordinary dividends to PLC by the Company and its insurance subsidiaries in 2015 is estimated to be $588.2 million.

PL&A paid no dividends on its preferred stock in 2014 or 2013. The Company and its subsidiaries may pay cash dividends in the future, subject to their earnings and financial condition and other relevant factors.

Table of Contents

Item 6. Selected Financial Data

For The Year Ended December 31, 2014 2013 2012 2011 2010

(Dollars In Thousands) INCOME STATEMENT DATA Premiums and policy fees $ 3,283,069 $ 2,967,322 $ 2,799,390 $ 2,784,134 $ 2,609,357 Reinsurance ceded (1,395,743) (1,387,437) (1,310,097) (1,363,914) (1,380,712) Net of reinsurance ceded 1,887,326 1,579,885 1,489,293 1,420,220 1,228,645 Net investment income 2,098,013 1,836,188 1,789,338 1,753,444 1,624,845 Realized investment gains (losses): Derivative financial instruments (13,492) 82,161 (227,816) (155,005) (144,438) All other investments 205,302 (121,537) 232,836 247,753 158,420 Other-than-temporary impairment losses (2,589) (10,941) (67,130) (62,210) (74,970) Portion recognized in other comprehensive income (before taxes) (4,686) (11,506) 8,986 14,889 33,606 Net impairment losses recognized in earnings (7,275) (22,447) (58,144) (47,321) (41,364) Other income 294,333 250,420 230,553 189,494 110,876 Total revenues 4,464,207 3,604,670 3,456,060 3,408,585 2,936,984 Total benefits and expenses 3,725,418 3,182,171 2,996,481 2,933,310 2,603,808 Income tax expense 246,838 130,897 151,043 151,519 109,865 Net income $ 491,951 $ 291,602 $ 308,536 $ 323,756 $ 223,311

As of December 31, 2014 2013 2012 2011 2010

(Dollars In Thousands) BALANCE SHEET DATA Total assets $ 69,992,118 $ 68,269,798 $ 57,157,583 $ 52,003,183 $ 46,717,138 Total stable value products and annuity account balances 12,910,217 13,684,805 13,169,022 13,716,358 13,667,838 Non-recourse funding obligations 1,527,752 1,495,448 1,446,900 1,248,600 1,360,800 Total shareowner�s equity 5,831,151 4,690,426 5,687,213 4,877,350 4,072,113

Table of Contents

Item 7. Management�s Discussion and Analysis of Financial Condition and Results of Operations

The following Management�s Discussion and Analysis of Financial Condition and Results of Operations (�MD&A�) should be read in conjunction with our consolidated audited financial statements and related notes included herein.

Certain reclassifications and revisions have been made in the previously reported financial statements and accompanying notes to make the prior period amounts comparable to those of the current period. Such reclassifications had no effect on previously reported net income or shareowner�s equity.

FORWARD-LOOKING STATEMENTS � CAUTIONARY LANGUAGE

This report reviews our financial condition and results of operations including our liquidity and capital resources. Historical information is presented and discussed, and where appropriate, factors that may affect future financial performance are also identified and discussed. Certain statements made in this report include �forward-looking statements� within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that may predict, forecast, indicate, or imply future results, performance, or achievements instead of historical facts and may contain words like �believe,� �expect,� �estimate,� �project,� �budget,� �forecast,� �anticipate,� �plan,� �will,� �shall,� �may,� and other words, phrases, or expressions with similar meaning. Forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from the results contained in the forward-looking statements, and we cannot give assurances that such statements will prove to be correct. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise. For more information about the risks, uncertainties, and other factors that could affect our future results, please refer to Item 1A, Risk Factors included herein.

OVERVIEW

Our business

We are a wholly owned subsidiary of Protective Life Corporation (�PLC�). On February 1, 2015, PLC became a wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan (�Dai-ichi Life�), when DL Investment (Delaware), Inc., a wholly owned subsidiary of Dai-ichi Life, merged with and into PLC. Prior to February 1, 2015 and for the periods this report presents PLC�s stock was publicly traded on the New York Stock Exchange. We provide financial services through the production, distribution, and administration of insurance and investment products. Unless the context otherwise requires, the �Company,� �we,� �us,� or �our� refers to the consolidated group of Protective Life Insurance Company and our subsidiaries.

We have several operating segments, each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. We periodically evaluate our operating segments as prescribed in the Accounting Standards Codification (�ASC�) Segment Reporting Topic, and make adjustments to our segment reporting as needed.

Our operating segments are Life Marketing, Acquisitions, Annuities, Stable Value Products, Asset Protection, and Corporate and Other.

• Life Marketing - We market fixed universal life (�UL�), indexed universal life (�IUL�), variable universal life (�VUL�), bank-owned life insurance (�BOLI�), and level premium term insurance (�traditional�) products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, and independent marketing organizations.

• Acquisitions - We focus on acquiring, converting, and servicing policies from other companies. The segment�s primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the segment�s acquisition activity is predicated upon many factors, including available

Table of Contents

capital, operating capacity, potential return on capital, and market dynamics. Policies acquired through the Acquisitions segment are typically blocks of business where no new policies are being marketed. Therefore earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage unless new acquisitions are made.

• Annuities - We market fixed and variable annuity (�VA�) products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.

• Stable Value Products - We sell fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. The segment also issues funding agreements to the Federal Home Loan Bank (�FHLB�), and markets guaranteed investment contracts (�GICs�) to 401(k) and other qualified retirement savings plans. Additionally, we have contracts outstanding pursuant to a funding agreement-backed notes program registered with the United States Securities and Exchange Commission (the �SEC�) which offered notes to both institutional and retail investors.

• Asset Protection - We market extended service contracts and credit life and disability insurance to protect consumers� investments in automobiles and recreational vehicles. In addition, this segment markets a guaranteed asset protection (�GAP�) product. GAP coverage covers the difference between the loan pay-off amount and an asset�s actual cash value in the case of a total loss.

• Corporate and Other - This segment primarily consists of net investment income not assigned to the segments above (including the impact of carrying liquidity) and expenses not attributable to the segments above. This segment includes earnings from several non-strategic or runoff lines of business, various investment-related transactions, the operations of several small subsidiaries, and the repurchase of non-recourse funding obligations.

RECENT DEVELOPMENTS � DAI-ICHI MERGER

As described in Note 5, Dai-ichi Merger, to the consolidated financial statements, on June 3, 2014, PLC entered into an Agreement and Plan of Merger (the �Merger Agreement�) with Dai-ichi Life and DL Investment (Delaware), Inc., a Delaware corporation and wholly owned subsidiary of Dai-ichi Life, which provides for the merger of DL Investment (Delaware), Inc. with and into PLC (the �Merger�), with PLC surviving the Merger as a wholly owned subsidiary of Dai-ichi Life. The Merger was completed as of February 1, 2015 with appropriate approvals from both PLC�s current shareholders of record and all relevant or required regulatory bodies, and as a result, each share of PLC�s common stock, par value of $0.50 per share, issued and outstanding immediately prior to the merger, other than certain excluded shares, was converted into the right to receive $70 in cash, without interest, (the �Per Share Merger Consideration�). Shares of common stock held by Dai-ichi Life or PLC or their respective direct or indirect wholly owned subsidiaries were not entitled to receive the Per Share Merger Consideration. Stock appreciation rights, restricted stock units and performance shares issued under various benefit plans will be paid out as described in Note 5, Dai-ichi Merger, to the consolidated financial statements included in this report, under the heading �Treatment of Benefit Plans�.

For additional information regarding the Merger and related matters, including the treatment of benefit plans, please refer to PLC�s Current Reports on Form 8-K filed with the SEC on June 4, 2014, September 25, 2014, and February 3, 2015, PLC�s definitive proxy statement filed with the SEC on August 25, 2014, as amended on August 27, 2014, and Note 5, Dai-ichi Merger, to the consolidated financial statements included in this report.

Table of Contents

RISKS AND UNCERTAINTIES

The factors which could affect our future results include, but are not limited to, general economic conditions and the following risks and uncertainties:

Risks Related to the Dai-ichi Merger and our Status as an Indirect Subsidiary of Dai-ichi Life

• uncertainty following the Merger could adversely affect our business and operations;

• the debt ratings and the financial strength ratings of PLC and its insurance subsidiaries, including the Company, may be adversely affected by it being a subsidiary of Dai-ichi Life;

General

• exposure to risks related to natural and man-made disasters and catastrophes, diseases, epidemics, pandemics, malicious acts, terrorist acts and climate change, could adversely affect our operations and results;

• a disruption affecting the electronic systems of the Company or those on whom the Company relies could adversely affect our business, financial condition and results of operations;

• confidential information maintained in the systems of the Company or other parties upon which the Company relies could be compromised or misappropriated, damaging our business and reputation and adversely affecting our financial condition and results of operations;

• our results and financial condition may be negatively affected should actual experience differ from management�s assumptions and estimates;

• we may not realize our anticipated financial results from our acquisitions strategy;

• assets allocated to the MONY Closed Block benefit only the holders of certain policies; adverse performance of Closed Block assets or adverse experience of Closed Block liabilities may negatively affect us;

• we are dependent on the performance of others;

• our risk management policies, practices, and procedures could leave us exposed to unidentified or unanticipated risks, which could negatively affect our business or result in losses;

• our strategies for mitigating risks arising from our day-to-day operations may prove ineffective resulting in a material adverse effect on our results of operations and financial condition;

Financial Environment

• interest rate fluctuations and sustained periods of low interest rates could negatively affect our interest earnings and spread income, or otherwise impact our business;

• our investments are subject to market and credit risks, which could be heightened during periods of extreme volatility or disruption in financial and credit markets;

• equity market volatility could negatively impact our business;

• our use of derivative financial instruments within our risk management strategy may not be effective or sufficient;

• credit market volatility or disruption could adversely impact our financial condition or results from operations;

• our ability to grow depends in large part upon the continued availability of capital;

• we could be adversely affected by a ratings downgrade or other negative action by a ratings organization;

• we could be forced to sell investments at a loss to cover policyholder withdrawals;

• disruption of the capital and credit markets could negatively affect our ability to meet our liquidity and financing needs;

• difficult general economic conditions could materially adversely affect our business and results of operations;

• we may be required to establish a valuation allowance against our deferred tax assets, which could materially adversely affect our results of operations, financial condition, and capital position;

• we could be adversely affected by an inability to access our credit facility;

• we could be adversely affected by an inability to access FHLB lending;

• our financial condition or results of operations could be adversely impacted if our assumptions regarding the fair value and future performance of our investments differ from actual experience;

Table of Contents

• adverse actions of certain funds or their advisers could have a detrimental impact on our ability to sell our variable life and annuity products, or maintain current levels of assets in those products;

• the amount of statutory capital that we have and the amount of statutory capital that we must hold to maintain our financial strength and credit ratings and meet other requirements can vary significantly from time to time and such amounts are sensitive to a number of factors outside of our control;

Industry

• we are highly regulated and are subject to routine audits, examinations, and actions by regulators, law enforcement agencies, and self- regulatory agencies;

• changes to tax law or interpretations of existing tax law could adversely affect our ability to compete with non-insurance products or reduce the demand for certain insurance products;

• financial services companies are frequently the targets of legal proceedings, including class action litigation, which could result in substantial judgments;

• the financial services and insurance industries are sometimes the target of law enforcement investigations and the focus of increased regulatory scrutiny;

• new accounting rules, changes to existing accounting rules, or the grant of permitted accounting practices to competitors could negatively impact us;

• use of reinsurance introduces variability in our statements of income;

• our reinsurers could fail to meet assumed obligations, increase rates, terminate agreements, or be subject to adverse developments that could affect us;

• our policy claims fluctuate from period to period resulting in earnings volatility;

Competition

• we operate in a mature, highly competitive industry, which could limit our ability to gain or maintain our position in the industry and negatively affect profitability;

• our ability to maintain competitive unit costs is dependent upon the level of new sales and persistency of existing business; and

• we may not be able to protect our intellectual property and may be subject to infringement claims.

For more information about the risks, uncertainties, and other factors that could affect our future results, please see Part I, Item 1A of this report.

CRITICAL ACCOUNTING POLICIES

Our accounting policies require the use of judgments relating to a variety of assumptions and estimates, including, but not limited to expectations of current and future mortality, morbidity, persistency, expenses, and interest rates, as well as expectations around the valuations of investments, securities, and certain intangible assets. Because of the inherent uncertainty when using the assumptions and estimates, the effect of certain accounting policies under different conditions or assumptions could be materially different from those reported in the consolidated financial statements. A discussion of our various critical accounting policies is presented below.

Fair Value of Financial Instruments - FASB guidance defines fair value for GAAP and establishes a framework for measuring fair value as well as a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. The term �fair value� in this document is defined in accordance with GAAP. The standard describes three levels of inputs that may be used to measure fair value. For more information, see Note 2, Summary of Significant Accounting Policies and Note 22, Fair Value of Financial Instruments.

Available-for-sale securities and trading account securities are recorded at fair value, which is primarily based on actively traded markets where prices are based on either direct market quotes or observed transactions. Liquidity is a significant factor in the determination of the fair value for these securities. Market price quotes may not be readily available for some positions or for some positions within a market sector where trading activity has slowed significantly

Table of Contents

or ceased. These situations are generally triggered by the market�s perception of credit uncertainty regarding a single company or a specific market sector. In these instances, fair value is determined based on limited available market information and other factors, principally from reviewing the issuer�s financial position, changes in credit ratings, and cash flows on the investments. As of December 31, 2014, $2.2 billion of available-for-sale and trading account assets, excluding other long-term investments, were classified as Level 3 fair value assets.

The fair values of derivative assets and liabilities include adjustments for market liquidity, counterparty credit quality, and other deal specific factors, where appropriate. The fair values of derivative assets and liabilities traded in the over-the-counter market are determined using quantitative models that require the use of multiple market inputs including interest rates, prices, and indices to generate continuous yield or pricing curves and volatility factors. The predominance of market inputs are actively quoted and can be validated through external sources. Estimation risk is greater for derivative financial instruments that are either option-based or have longer maturity dates where observable market inputs are less readily available or are unobservable, in which case quantitative based extrapolations of rate, price, or index scenarios are used in determining fair values. As of December 31, 2014, the Level 3 fair values of derivative assets and liabilities determined by these quantitative models were $44.6 million and $506.3 million, respectively.

The liabilities of certain of our annuity account balances are calculated at fair value using actuarial valuation models. These models use various observable and unobservable inputs including projected future cash flows, policyholder behavior, our credit rating, and other market conditions. As of December 31, 2014, the Level 3 fair value of these liabilities was $97.8 million.

For securities that are priced via non-binding independent broker quotations, we assess whether prices received from independent brokers represent a reasonable estimate of fair value through an analysis using internal and external cash flow models developed based on spreads and, when available, market indices. We use a market-based cash flow analysis to validate the reasonableness of prices received from independent brokers. These analytics, which are updated daily, incorporate various metrics (yield curves, credit spreads, prepayment rates, etc.) to determine the valuation of such holdings. As a result of this analysis, if we determine that there is a more appropriate fair value based upon the analytics, the price received from the independent broker is adjusted accordingly. As of December 31, 2014, we did not adjust any prices received from independent brokers.

Evaluation of Other-Than-Temporary Impairments - One of the significant estimates related to available-for-sale and held-to-maturity securities is the evaluation of investments for other-than-temporary impairments. If a decline in the fair value of an available-for-sale or held-to-maturity security is judged to be other-than-temporary, the security�s basis is adjusted and an other-than-temporary impairment is recognized through a charge in the statement of income. The portion of this other-than-temporary impairment related to credit losses on a security is recognized in earnings, while the non-credit portion, representing the difference between fair value and the discounted expected future cash flows of the security, is recognized within other comprehensive income (loss). The fair value of the other-than-temporarily impaired investment becomes its new cost basis on the date an other-than-temporary impairment is recognized. For fixed maturities, we accrete the new cost basis to par or to the estimated future value over the expected remaining life of the security by adjusting the security�s future yields, assuming that future expected cash flows on the securities can be properly estimated.

Determining whether a decline in the current fair value of invested assets is other-than-temporary is both objective and subjective, and can involve a variety of assumptions and estimates, particularly for investments that are not actively traded in established markets. For example, assessing the value of certain investments requires that we perform an analysis of expected future cash flows including rates of prepayments. Other investments, such as collateralized mortgage or bond obligations, represent selected tranches of a structured transaction, supported in the aggregate by underlying investments in a wide variety of issuers. Management considers a number of factors when determining the impairment status of individual securities. These include the economic condition of various industry segments and geographic locations and other areas of identified risks. Although it is possible for the impairment of one investment to affect other investments, we engage in ongoing risk management to safeguard against and limit any further risk to our investment portfolio. Special attention is given to correlative risks within specific industries, related parties, and business markets.

Table of Contents

For certain securitized financial assets with contractual cash flows, including other asset-backed securities, the ASC Investments-Other Topic requires us to periodically update our best estimate of cash flows over the life of the security. If the fair value of a securitized financial asset is less than its cost or amortized cost and there has been a decrease in the present value of the estimated cash flows since the last revised estimate, considering both timing and amount, an other-than-temporary impairment charge is recognized. Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third party sources along with certain internal assumptions and judgments regarding the future performance of the underlying collateral. Projections of expected future cash flows may change based upon new information regarding the performance of the underlying collateral. In addition, we consider our intent and ability to retain a temporarily depressed security until recovery.

Each quarter we review investments with unrealized losses and test for other-than-temporary impairments. We analyze various factors to determine if any specific other-than-temporary asset impairments exist. These include, but are not limited to: 1) actions taken by rating agencies, 2) default by the issuer, 3) the significance of the decline, 4) an assessment of our intent to sell the security (including a more likely than not assessment of whether we will be required to sell the security) before recovering the security�s amortized cost, 5) the duration of the decline, 6) an economic analysis of the issuer�s industry, and 7) the financial strength, liquidity, and recoverability of the issuer. Management performs a security by security review each quarter in evaluating the need for any other-than-temporary impairments. Although no set formula is used in this process, the investment performance, collateral position, and continued viability of the issuer are significant measures considered, and in some cases, an analysis regarding our expectations for recovery of the security�s entire amortized cost basis through the receipt of future cash flows is performed. Once a determination has been made that a specific other-than-temporary impairment exists, the security�s basis is adjusted and an other-than-temporary impairment is recognized. Equity securities that are other-than temporarily impaired are written down to fair value with a realized loss recognized in earnings. Other-than-temporary impairments to debt securities that we do not intend to sell and do not expect to be required to sell before recovering the security�s amortized cost are written down to discounted expected future cash flows (�post impairment cost�) and credit losses are recorded in earnings. The difference between the securities� discounted expected future cash flows and the fair value of the securities on the impairment date is recognized in other comprehensive income (loss) as a non-credit portion impairment. When calculating the post impairment cost for residential mortgage-backed securities (�RMBS�), commercial mortgage-backed securities (�CMBS�), and other asset-backed securities (collectively referred to as asset-backed securities or �ABS�), we consider all known market data related to cash flows to estimate future cash flows. When calculating the post impairment cost for corporate debt securities, we consider all contractual cash flows to estimate expected future cash flows. To calculate the post impairment cost, the expected future cash flows are discounted at the original purchase yield. Debt securities that we intend to sell or expect to be required to sell before recovery are written down to fair value with the change recognized in earnings.

During the years ended December 31, 2014, 2013, and 2012, we recorded pre-tax other than temporary impairments of investments of $2.6 million, $10.9 million, and $67.1 million, respectively. Credit impairments recorded in earnings during the year ended December 31, 2014, were $7.3 million. During the year ended December 31, 2013, $11.5 million of non-credit losses previously recorded in other comprehensive income (loss) were recorded in earnings as credit losses. Of the $67.1 million of impairments for the year ended December 31, 2012, $58.1 million was recorded in earnings and $9.0 million was recorded in other comprehensive income.

For the year ended December 31, 2014, there were no other-than-temporary impairments related to equity securities, and for the year ended December 31, 2013, there were $3.3 million of other-than-temporary impairments related to equity securities. For the year ended December 31, 2012, there were no other-than-temporary impairments related to equity securities. For the years ended December 31, 2014, 2013, and 2012, there were $2.6 million, $7.6 million, and $67.1 million of other-than-temporary impairments related to debt securities, respectively.

For the years ended December 31, 2014, 2013, and 2012, there were no other-than-temporary impairments related to debt or equity securities that we intend to sell or expect to be required to sell.

Our specific accounting policies related to our invested assets are discussed in Note 2, Summary of Significant Accounting Policies, and Note 6, Investment Operations, to the consolidated financial statements. As of December 31, 2014, we held $33.9 billion of available-for-sale investments, including $4.1 billion in investments with a gross unrealized loss of $213.4 million, and $435.0 million of held-to-maturity investments, none of which were in an unrealized loss position.

Table of Contents

Derivatives - We utilize a risk management strategy that incorporates the use of derivative financial instruments to reduce exposure to interest rate risk, inflation risk, currency exchange risk, volatility risk, foreign exchange, and equity market risk. Assessing the effectiveness of the hedging programs and evaluating the carrying values of the related derivatives often involve a variety of assumptions and estimates. Derivative financial instruments are valued using exchange prices, independent broker quotations, or pricing valuation models, which utilize market data inputs. The fair values of most of our derivatives are determined using exchange prices or independent broker quotes, but certain derivatives, including embedded derivatives, are valued based upon industry standard models which calculate the present-value of the projected cash flows of the derivatives using current and implied future market conditions. These models include market-observable estimates of volatility and interest rates in the determination of fair value. The use of different assumptions may have a material effect on the estimated fair value amounts, as well as the amount of reported net income. In addition, measurements of ineffectiveness of hedging relationships are subject to interpretations and estimations, and any differences may result in material changes to our results of operations. As of December 31, 2014, the fair value of derivatives reported on our balance sheet in �other long-term investments� and �other liabilities� was $270.7 million and $629.5 million, respectively.

Reinsurance - For each of our reinsurance contracts, we must determine if the contract provides indemnification against loss or liability relating to insurance risk, in accordance with applicable accounting standards. We must review all contractual features, particularly those that may limit the amount of insurance risk to which we are subject or features that delay the timely reimbursement of claims. If we determine that the possibility of a significant loss from insurance risk will occur only under remote circumstances, we record the contract under a deposit method of accounting with the net amount payable/receivable reflected in other reinsurance assets or liabilities on our consolidated balance sheets. Fees earned on the contracts are reflected as other revenues, as opposed to premiums, in our consolidated statements of income.

Our reinsurance is ceded to a diverse group of reinsurers. The collectability of reinsurance is largely a function of the solvency of the individual reinsurers. We perform periodic credit reviews on our reinsurers, focusing on, among other things, financial capacity, stability, trends, and commitment to the reinsurance business. We also require assets in trust, letters of credit, or other acceptable collateral to support balances due from reinsurers not authorized to transact business in the applicable jurisdictions. Despite these measures, a reinsurer�s insolvency, inability, or unwillingness to make payments under the terms of a reinsurance contract could have a material adverse effect on our results of operations and financial condition. As of December 31, 2014, our third party reinsurance receivables amounted to $5.9 billion. These amounts include ceded reserve balances and ceded benefit payments.

We account for reinsurance as required by Financial Accounting Standards Board (�FASB�) guidance under the ASC Financial Services Topic as applicable. In accordance with this guidance, costs for reinsurance are amortized as a level percentage of premiums for traditional life products and a level percentage of estimated gross profits for universal life products. Accordingly, ceded reserve and deferred acquisition cost balances are established using methodologies consistent with those used in establishing direct policyholder reserves and deferred acquisition costs. Establishing these balances requires the use of various assumptions including investment returns, mortality, persistency, and expenses. The assumptions made for establishing ceded reserves and ceded deferred acquisition costs are consistent with those used for establishing direct policyholder reserves and deferred acquisition costs.

Assumptions are also made regarding future reinsurance premium rates and allowance rates. Assumptions made for mortality, persistency, and expenses are consistent with those used for establishing direct policyholder reserves and deferred acquisition costs. Assumptions made for future reinsurance premium and allowance rates are consistent with rates provided for in our various reinsurance agreements. For certain of our reinsurance agreements, premium and allowance rates may be changed by reinsurers on a prospective basis, assuming certain contractual conditions are met (primarily that rates are changed for all companies with which the reinsurer has similar agreements). We do not anticipate any changes to these rates and, therefore, have assumed continuation of these non-guaranteed rates. To the extent that future rates are modified, these assumptions would be revised and both current and future results would be affected. For traditional life products, assumptions are not changed unless projected future revenues are expected to be less than future expenses. For universal life products, assumptions are periodically updated whenever actual experience and/or expectations for the future differ from that assumed. When assumptions are updated, changes are reflected in the income statement as part of an �unlocking� process. For the year ended December 31, 2014, we adjusted our estimates of future reinsurance costs in both the Acquisitions and Life Marketing segments, resulting in a favorable unlocking impact of $0.6 million.

Table of Contents

Deferred Acquisition Costs and Value of Business Acquired - We incur significant costs in connection with acquiring new insurance business. Portions of these costs, which are determined to be incremental direct costs associated with successfully acquired policies and coinsurance of blocks of policies, are deferred and amortized over future periods. The recovery of such costs is dependent on the future profitability of the related policies. The amount of future profit is dependent principally on investment returns, mortality, morbidity, persistency, and expenses to administer the business and certain economic variables, such as inflation. These costs are amortized over the expected lives of the contracts, based on the level and timing of either gross profits or gross premiums, depending on the type of contract. Revisions to estimates result in changes to the amounts expensed in the reporting period in which the revisions are made and could result in the impairment of the asset and a charge to income if estimated future profits are less than the unamortized deferred amounts. As of December 31, 2014, we had deferred acquisition costs (�DAC�)/value of business acquired (�VOBA�) of $3.2 billion.

We periodically review and update as appropriate our key assumptions on certain life and annuity products including future mortality, expenses, lapses, premium persistency, investment yields, and interest spreads. Changes to these assumptions result in adjustments which increase or decrease DAC amortization and/or benefits and expenses. When we refer to DAC amortization or unlocking, we are referring to changes in balance sheet components amortized over estimated gross profits.

In conjunction with the acquisition of a block of insurance policies or investment contracts, a portion of the purchase price is allocated to the right to receive future gross profits from the acquired insurance policies or investment contracts. This intangible asset, called VOBA, represents the actuarially estimated present value of future cash flows from the acquired policies. The estimated present value of future cash flows is based on certain assumptions, including mortality, persistency, expenses, and interest rates that the Company expects to experience in future years. These assumptions are to be best estimates and are periodically updated whenever actual experience and/or expectations for the future change from that assumed. We amortize VOBA in proportion to gross premiums for traditional life products and in proportion to expected gross profits (�EGPs�) for interest sensitive products, including accrued interest credited to account balances of up to approximately 8.75%. VOBA is subject to annual recoverability testing.

Goodwill - Accounting for goodwill requires an estimate of the future profitability of the associated lines of business to assess the recoverability of the capitalized acquisition goodwill. We evaluate the carrying value of goodwill at the segment (or reporting unit) level at least annually and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to: 1) a significant adverse change in legal factors or in business climate, 2) unanticipated competition, or 3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, we first determines through qualitative analysis whether relevant events and circumstances indicate that it is more likely than not that segment goodwill balances are impaired as of the testing date. If it is determined that it is more likely than not that impairment exists, we compare its estimate of the fair value of the reporting unit to which the goodwill is assigned to the reporting unit�s carrying amount, including goodwill. We utilize a fair value measurement (which includes a discounted cash flows analysis) to assess the carrying value of the reporting units in consideration of the recoverability of the goodwill balance assigned to each reporting unit as of the measurement date. Our material goodwill balances are attributable to certain of our operating segments (which are each considered to be reporting units). The cash flows used to determine the fair value of our reporting units are dependent on a number of significant assumptions. We estimate, which consider a market participant view of fair value, are subject to change given the inherent uncertainty in predicting future results and cash flows, which are impacted by such things as policyholder behavior, competitor pricing, capital limitations, new product introductions, and specific industry and market conditions. As of December 31, 2014, we performed our annual evaluation of goodwill and determined that no adjustment to impair goodwill was necessary. As of December 31, 2014, we had goodwill of $77.6 million.

Insurance Liabilities and Reserves - Establishing an adequate liability for our obligations to policyholders requires the use of assumptions. Estimating liabilities for future policy benefits on life and health insurance products requires the use of assumptions relative to future investment yields, mortality, morbidity, persistency, and other assumptions based on our historical experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviation. Determining liabilities for our property and casualty insurance products also requires the use of assumptions, including the frequency and severity of claims, and the effectiveness of internal processes designed to reduce the level of claims. Our results depend significantly upon the extent to which our actual claims experience is consistent with the assumptions that we used in determining our reserves and pricing our products. Our reserve assumptions and estimates require significant judgment and, therefore, are inherently uncertain. We cannot

Table of Contents

determine with precision the ultimate amounts that we will pay for actual claims or the timing of those payments. In addition, we fair value the liability related to our equity indexed annuity product at each balance sheet date, with changes in the fair value recorded through earnings. Changes in this liability may be significantly affected by interest rate fluctuations. As of December 31, 2014, we had total policy liabilities and accruals of $31.5 billion.

Guaranteed Minimum Death Benefits - We establish liabilities for guaranteed minimum death benefits (�GMDB�) on our VA products. The methods used to estimate the liabilities employ assumptions about mortality and the performance of equity markets. We assume age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience, with attained age factors varying from 49% - 80%. Future declines in the equity market would increase our GMDB liability. Differences between the actual experience and the assumptions used result in variances in profit and could result in losses. Our GMDB as of December 31, 2014, is subject to a dollar-for-dollar reduction upon withdrawal of related annuity deposits on contracts issued prior to January 1, 2003. We reinsure certain risks associated with the GMWB to Shades Creek Captive Insurance Company (�Shades Creek�), a direct wholly owned insurance subsidiary of PLC. As of December 31, 2014, the GMDB liability, including the impact of reinsurance was $21.4 million.

Guaranteed Minimum Withdrawal Benefits � We establish reserves for guaranteed minimum withdrawal benefits (�GMWB�) on our VA products. The GMWB is carried at fair value using current implied volatilities for the equity indices. The methods used to estimate the liabilities employ assumptions about mortality, lapses, policyholder behavior, equity market returns, interest rates, and market volatility. We assume age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience, with attained age factors varying from 44.5% to 100%. Differences between the actual experience and the assumptions used result in variances in profit and could result in losses. We reinsure certain risks associated with the GMWB to Shades Creek. As of December 31, 2014, our net GMWB liability held, including the impact of reinsurance was $25.9 million.

Pension and Other Postretirement Benefits - Determining PLC�s obligations to employees under its pension plans and other postretirement benefit plans requires the use of assumptions. The calculation of the liability and expense related to PLC�s benefit plans incorporates the following significant assumptions:

• appropriate weighted average discount rate;

• estimated rate of increase in the compensation of employees; and

• expected long-term rate of return on the plan�s assets.

See Note 16, Employee Benefit Plans, to the consolidated financial statements included in this report for further information on this plan.

Stock-Based Payments - Accounting for stock-based compensation plans may require the use of option pricing models to estimate PLC�s obligations. Assumptions used in such models relate to equity market movements and volatility, the risk-free interest rate at the date of grant, expected dividend rates, and expected exercise dates. See Note 15, Stock-Based Compensation, to the consolidated financial statements included in this report for further information.

Deferred Taxes and Uncertain Tax Positions - Deferred federal income taxes arise from the recognition of temporary differences between the basis of assets and liabilities determined for financial reporting purposes and the basis determined for income tax purposes. Such temporary differences are principally related to net unrealized gains (losses), deferred policy acquisition costs and value of business acquired, and future policy benefits and claims. Deferred tax assets and liabilities are measured using the enacted tax rates expected to be in effect when such differences reverse. We evaluate deferred tax assets for impairment quarterly at the taxpaying component level within each tax jurisdiction. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of such assets will not be realized as future reductions of current taxes. In determining the need for a valuation allowance we consider the reversal of existing temporary differences, future taxable income, and tax planning strategies. The determination of any valuation allowance requires management to make certain judgments and assumptions regarding future operations that are based on our historical experience and our expectations of future performance.

Table of Contents

The ASC Income Taxes Topic prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of an expected or actual uncertain income tax return position and provides guidance on disclosure. Additionally, in order for us to recognize any degree of benefit in our financial statements from such a position, there must be a greater than 50 percent chance of success with the relevant taxing authority with regard to that position. In making this analysis, we assume that the taxing authority is fully informed of all of the facts regarding any issue. Our judgments and assumptions regarding uncertain tax positions are subject to change over time due to the enactment of new legislation, the issuance of revised or new regulations or rulings by the various tax authorities, and the issuance of new decisions by the courts.

Contingent Liabilities - The assessment of potential obligations for tax, regulatory, and litigation matters inherently involves a variety of estimates of potential future outcomes. We make such estimates after consultation with our advisors and a review of available facts. However, there can be no assurance that future outcomes will not differ from management�s assessments.

RESULTS OF OPERATIONS

We use the same accounting policies and procedures to measure segment operating income (loss) and assets as we use to measure consolidated net income and assets. Segment operating income (loss) is income before income tax, excluding realized gains and losses on investments and derivatives net of the amortization related to DAC, VOBA, and benefits and settlement expenses. Segment operating income (loss) also excludes changes in the GMWB embedded derivatives (excluding the portion attributed to economic cost), realized and unrealized gains (losses) on derivatives used to hedge the VA product, actual GMWB incurred claims, and the related amortization of DAC attributed to each of these items.

Segment operating income (loss) represents the basis on which the performance of our business is internally assessed by management. Premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC/VOBA are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Realized investment gains (losses) and other operating expenses are allocated to the segments in a manner that most appropriately reflects the operations of that segment. During the year ended December 31, 2013, we began allocating realized gains and losses to certain of our segments to better reflect the economics of the investments supporting those segments. This change had no impact to segment operating income. Investments and other assets are allocated based on statutory policy liabilities net of associated statutory policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable.

However, segment operating income (loss) should not be viewed as a substitute for net income calculated in accordance with accounting principles generally accepted in the United States of America (�GAAP�). In addition, our segment operating income (loss) measures may not be comparable to similarly titled measures reported by other companies.

We periodically review and update as appropriate our key assumptions on products using the ASC Financial Services-Insurance Topic, including future mortality, expenses, lapses, premium persistency, investment yields, interest spreads, and equity market returns. Changes to these assumptions result in adjustments which increase or decrease DAC/VOBA amortization and/or benefits and expenses. The periodic review and updating of assumptions is referred to as �unlocking�. When referring to DAC/VOBA amortization or unlocking on products covered under the ASC Financial Services-Insurance Topic, the reference is to changes in all balance sheet components amortized over estimated gross profits.

Table of Contents

The following table presents a summary of results and reconciles segment operating income (loss) to consolidated net income:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) Segment Operating Income (Loss) Life Marketing $ 116,875 $ 106,812 $ 102,114 9.4% 4.6% Acquisitions 254,021 154,003 171,060 64.9 (10.0) Annuities 204,015 166,278 117,778 22.7 41.2 Stable Value Products 73,354 80,561 60,329 (8.9) 33.5 Asset Protection 26,274 20,148 9,765 30.4 n/m Corporate and Other (99,048) (74,620) 1,119 (32.7) n/m Total segment operating income 575,491 453,182 462,165 27.0 (1.9) Realized investment gains (losses) - investments(1) 151,035 (140,236) 188,729 Realized investment gains (losses) - derivatives 12,263 109,553 (191,315) Income tax expense (246,838) (130,897) (151,043) Net income $ 491,951 $ 291,602 $ 308,536 68.7 (5.5)

Investment gains (losses)(2) $ 198,027 $ (143,984) $ 174,692 Less: amortization related to DAC/VOBA and benefits and settlement expenses 46,992 (3,748) (14,037) Realized investment gains (losses) - investments $ 151,035 $ (140,236) $ 188,729

Derivative gains (losses) (3) $ (13,492) $ 82,161 $ (227,816) Less: VA GMWB economic cost (25,755) (27,392) (36,501) Realized investment gains (losses) - derivatives $ 12,263 $ 109,553 $ (191,315)

(1) Includes credit related other-than-temporary impairments of $7.3 million, $22.4 million, and $58.1 million for the years endedDecember 31, 2014, 2013, and 2012, respectively.

(2) Includes realized investment gains (losses) before related amortization.

(3) Includes realized gains (losses) on derivatives before the VA GMWB economic cost.

For The Year Ended December 31, 2014 as compared to The Year Ended December 31, 2013

Net income for the year ended December 31, 2014, included a $122.3 million, or 27.0%, increase in segment operating income. The increase was primarily related to a $10.1 million increase in the Life Marketing segment, a $100.0 million increase in the Acquisition segment, a $37.7 million increase in the Annuities segment, and a $6.1 million increase in the Asset Protection segment. These increases were partially offset by a $7.2 million decrease in the Stable Value Products segment and a $24.4 million decrease in the Corporate and Other segment.

We experienced net realized gains of $184.5 million for the year ended December 31, 2014, as compared to net realized losses of $61.8 million for the year ended December 31, 2013. The gains realized for the year ended December 31, 2014, were primarily related to gains of $75.6 million related to investment securities sale activity, net gains of $94.0 million of derivatives related to VA contracts, and $36.7 million of gains related to the net activity of the modified coinsurance portfolio. Partially offsetting these gains were losses of $7.3 million for other-than-temporary impairment credit-related losses, $6.1 million of losses for derivatives related to fixed indexed annuity (�FIA�) contracts, and net losses of $8.4 million related to other investment and derivative activity.

• Life Marketing segment operating income was $116.9 million for the year ended December 31, 2014, representing an increase of $10.1 million, or 9.4%, from the year ended December 31, 2013. The increase was primarily due to higher premiums and policy fees, higher investment income due to an increase in reserves,

Table of Contents

and favorable traditional life mortality. These increases were largely offset by less favorable universal life mortality, unfavorable prospective unlocking compared to 2013, and higher operating expenses.

• Acquisitions segment operating income was $254.0 million for the year ended December 31, 2014 an increase of $100.0 million, or 64.9%, as compared to the year ended December 31, 2013 primarily due to increased earnings from the MONY acquisition and a favorable change in unlocking of $19.3 million. The MONY acquisition operating income was $109.5 million for the year ended December 31, 2014, an increase of $84.3 million compared to 2013. This increase was due to a full year of MONY results being included in 2014 compared to only one quarter in 2013. Expected runoff offset other favorable items.

• Annuities segment operating income was $204.0 million for the year ended December 31, 2014, as compared to $166.3 million for the year ended December 31, 2013, an increase of $37.7 million, or 22.7%. This increase was a result of higher net policy fees and other income in the VA line, lower credited interest, and a favorable change in single premium immediate annuities (�SPIA�) mortality results. These favorable increases were partially offset by an unfavorable change in unlocking and other operating expenses and increased ceded policy fees. The segment recorded a favorable $2.1 million of unlocking for year ended December 31, 2014, as compared to favorable unlocking of $11.7 million for the year ended December 31, 2013.

• Stable Value Products segment operating income was $73.4 million and decreased $7.2 million, or 8.9%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. The decrease in operating earnings resulted from a decrease in participating mortgage income and a decline in average account values offset by higher operating spreads and lower expenses. Participating mortgage income for the year ended December 31, 2014 was $4.9 million, as compared to $12.1 million for the year ended December 31, 2013. The adjusted operating spread, which excludes participating income and other income, increased by 4 basis points for the year ended December 31, 2014 over the prior year.

• Asset Protection segment operating income was $26.3 million, representing an increase of $6.1 million, or 30.4%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. Service contract earnings increased $5.3 million primarily due to lower loss ratios and higher sales. Credit insurance earnings increased $1.8 million primarily due to lower loss ratios and lower expenses in 2014. Earnings from the GAP product line decreased $1.0 million primarily resulting from higher loss ratios.

• Corporate and Other segment operating loss was $99.0 million for the year ended December 31, 2014, as compared to an operating loss of $74.6 million for the year ended December 31, 2013. The decrease was primarily due to a $20.7 million unfavorable variance related to other operating expenses and a $8.0 million unfavorable variance related to a decrease in net investment income. Offsetting these negative variances was a $3.0 million favorable variance related to gains on the repurchase of non-recourse funding obligations.

For The Year Ended December 31, 2013 as compared to The Year Ended December 31, 2012

Net income for the year ended December 31, 2013, included a $9.0 million, or 1.9%, decrease in segment operating income. The decrease was primarily related to a $17.1 million decrease in the Acquisitions segment and a $75.7 million decrease in the Corporate and Other segment. These decreases were partially offset by a $4.7 million increase in the Life Marketing segment, a $48.5 million increase in the Annuities segment, a $20.2 million increase in the Stable Value Products segment, and a $10.4 million increase in the Asset Protection segment.

Table of Contents

We experienced net realized losses of $61.8 million for the year ended December 31, 2013, as compared to net realized losses of $53.1 million for the year ended December 31, 2012. The losses realized for the year ended December 31, 2013, were primarily related to $22.4 million for other-than-temporary impairment credit-related losses, net losses of $112.0 million of derivatives related to variable annuity contracts, and a $24.9 million loss related to other investment and derivative activity. Partially offsetting these losses were gains of $66.4 million of gains related to investment securities sale activity, $27.0 million of gains related to the net activity of the modified coinsurance portfolio, $3.0 million of gains related to interest rate swaps, and net gains of $1.1 million of derivatives related to FIA contracts.

• Life Marketing segment operating income was $106.8 million for the year ended December 31, 2013, representing an increase of $4.7 million, or 4.6%, from the year ended December 31, 2012. The increase was primarily due to higher premiums and policy fees, higher investment income due to growth of the block of business and favorable prospective unlocking. These increases were largely offset by less favorable traditional mortality and higher universal life claims due to growth in in-force and an increase in non-deferred expenses resulting from higher sales.

• Acquisitions segment operating income was $154.0 million for the year ended December 31, 2013, a decrease of $17.1 million, or 10.0%, as compared to the year ended December 31, 2012, primarily due to less favorable mortality, an unfavorable change in prospective unlocking, lower spread income, the impact of increased reinsurance, and the expected runoff of business, partly offset by the favorable impact of $25.2 million from the MONY acquisition in the fourth quarter of 2013.

• Annuities segment operating income was $166.3 million for the year ended December 31, 2013, as compared to $117.8 million for the year ended December 31, 2012, an increase of $48.5 million, or 41.2%. This variance included a favorable change of $36.9 million in unlocking and higher gross policy fees and other income in the VA line. Partially offsetting these favorable changes was an unfavorable change in net investment income and an increase in ceded policy fees.

• Stable Value Products segment operating income was $80.6 million and increased $20.2 million, or 33.5%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. The increase in operating earnings resulted from an increase in participating mortgage income, higher operating spreads, and lower expenses offset by a decline in average account values. Participating mortgage income for the year ended December 31, 2013 was $12.1 million as compared to $5.5 million for the year ended December 31, 2012. The adjusted operating spread, which excludes participating income and other income, increased by 58 basis points for the year ended December 31, 2013 over the prior year.

• Asset Protection segment operating income was $20.1 million, representing an increase of $10.4 million for the year ended December 31, 2013, as compared to the year ended December 31, 2012. Service contract earnings increased $5.4 million primarily due to $4.1 million of expense incurred in 2012 to write off previously capitalized costs associated with developing internal-use software. In addition, the line experienced higher volume and lower general expenses in 2013. Credit insurance earnings increased $4.2 million primarily due to $3.1 million in legal settlement and related costs incurred in 2012 and lower expenses in 2013. Earnings from the GAP product line increased $0.8 million primarily resulting from lower expenses, somewhat offset by higher losses.

• Corporate and Other segment operating loss was $74.6 million for the year ended December 31, 2013, as compared to operating income of $1.1 million for the year ended December 31, 2012. The decrease was primarily due to a $27.6 million unfavorable variance related to gains on the repurchase of non-recourse funding obligations. For the year ended December 31, 2013, $4.4 million of pre-tax gains were generated from the repurchase of non-recourse funding obligations compared to $32.0 million of pre-tax gains during 2012. In addition, the segment experienced a $2.8 million decrease related to a portfolio of securities designated for trading, a $4.0 million unfavorable variance related to income on called securities, lower core investment income, and higher other operating expenses.

Table of Contents

Life Marketing

Segment results of operations

Segment results were as follows:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) REVENUES Gross premiums and policy fees $ 1,684,393 $ 1,634,132 $ 1,575,074 3.1% 3.7% Reinsurance ceded (830,207) (838,023) (831,713) 0.9 (0.8) Net premiums and policy fees 854,186 796,109 743,361 7.3 7.1 Net investment income 553,006 521,219 486,374 6.1 7.2 Other income 2,813 3,204 3,919 (12.2) (18.2) Total operating revenues(1) 1,410,005 1,320,532 1,233,654 6.8 7.0 Realized gains (losses)- investments 11,633 3,877 � n/m n/m Realized gains (losses)- derivatives 157 � � n/m n/m Total revenues 1,421,795 1,324,409 1,233,654 7.4 7.4 BENEFITS AND EXPENSES Benefits and settlement expenses 1,073,660 1,142,619 1,054,645 (6.0) 8.3 Amortization of deferred policy acquisition costs 171,782 24,838 45,079 n/m (44.9) Other operating expenses 47,688 46,263 31,816 3.1 45.4 Operating benefits and expenses 1,293,130 1,213,720 1,131,540 6.5 7.3 Amortization related to benefits and settlement expenses(1) 1,726 513 � n/m n/m Amortization of DAC related to realized gains (losses)- investments(1) 4,025 936 � n/m n/m Total benefits and expenses 1,298,881 1,215,169 1,131,540 6.9 7.4 INCOME BEFORE INCOME TAX 122,914 109,240 102,114 12.5 7.0 Less: realized gains (losses)(1) 11,790 3,877 � Less: amortization related to benefits and settlement expenses(1) (1,726) (513) � Less: related amortization of DAC(1) (4,025) (936) � OPERATING INCOME $ 116,875 $ 106,812 $ 102,114 9.4 4.6

(1) During the year ended December 31, 2013, we began allocating realized gains and losses and associated amortization of DAC and benefits and settlement expenses to certain of our segments to better reflect the economics of the investments supporting these segments. Prior year realized gains and losses are not comparable to the current year presentation.

Table of Contents

The following table summarizes key data for the Life Marketing segment:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) Sales By Product Traditional $ 501 $ 1,293 $ 1,115 (61.3)% 16.0% Universal life 129,508 153,428 117,099 (15.6) 31.0 BOLI 22 � 3,253 n/m n/m

$ 130,031 $ 154,721 $ 121,467 (16.0) 27.4 Sales By Distribution Channel Independent agents $ 98,755 $ 108,180 $ 73,692 (8.7) 46.8 Stockbrokers / banks 28,588 44,343 42,973 (35.5) 3.2 BOLI / other 2,688 2,198 4,802 22.3 (54.2)

$ 130,031 $ 154,721 $ 121,467 (16.0) 27.4 Average Life Insurance In-force(1) Traditional $ 400,127,927 $ 424,012,114 $ 449,462,487 (5.6) (5.7) Universal life 139,824,061 109,131,467 80,331,839 28.1 35.9

$ 539,951,988 $ 533,143,581 $ 529,794,326 1.3 0.6 Average Account Values Universal life $ 7,178,418 $ 6,965,424 $ 6,501,025 3.1 7.1 Variable universal life 559,566 475,064 387,424 17.8 22.6

$ 7,737,984 $ 7,440,488 $ 6,888,449 4.0 8.0

(1)Amounts are not adjusted for reinsurance ceded.

Operating expenses detail

Other operating expenses for the segment were as follows:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) First year commissions $ 154,241 $ 169,597 $ 124,030 (9.1)% 36.7% Renewal commissions 31,824 34,855 35,231 (8.7) (1.1) First year ceding allowances (2,309) (4,139) (4,538) 44.2 8.8 Renewal ceding allowances (148,599) (167,853) (166,445) 11.5 (0.8) General & administrative 180,982 175,641 147,582 3.0 19.0 Taxes, licenses, and fees 28,192 36,823 35,439 (23.4) 3.9 Other operating expenses incurred 244,331 244,924 171,299 (0.2) 43.0 Less: commissions, allowances & expenses capitalized (196,643) (198,661) (139,483) 1.0 (42.4) Other operating expenses $ 47,688 $ 46,263 $ 31,816 3.1 45.4

For The Year Ended December 31, 2014 as compared to The Year Ended December 31, 2013

Segment operating income

Operating income was $116.9 million for the year ended December 31, 2014, representing an increase of $10.1 million, or 9.4%, from the year ended December 31, 2013. The increase was primarily due to higher premiums and policy fees, higher investment income due to an increase in reserves, and favorable traditional life mortality. These

Table of Contents

increases were largely offset by less favorable universal life mortality, unfavorable prospective unlocking compared to 2013, and higher operating expenses.

Operating revenues

Total operating revenues for the year ended December 31, 2014, increased $89.5 million, or 6.8%, as compared to the year ended December 31, 2013. This increase was driven by higher premiums and policy fees due to continued growth in the universal life block and higher investment income due to increases in net in-force reserves.

Net premiums and policy fees

Net premiums and policy fees increased by $58.1 million, or 7.3%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to an increase in premium and policy fees associated with growth of the universal life block of business and the impact from a reinsurance settlement on ceded premiums, which was almost entirely offset in benefit and settlement expense during 2014. The increase was partially offset by decreases in traditional life premiums.

Net investment income

Net investment income in the segment increased $31.8 million, or 6.1%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. Of the increase in net investment income, $19.2 million was the result of a net increase in universal life reserves. Additionally, traditional life investment income increased $10.4 million due to a net increase in reserves.

Other income

Other income decreased $0.4 million, or 12.2%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. The decrease relates primarily to fees on variable universal life funds.

Benefits and settlement expenses

Benefits and settlement expenses decreased by $69.0 million, or 6.0%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013, due to the impact of unlocking and favorable traditional life mortality, partially offset by growth in retained universal life insurance in-force and less favorable universal life mortality. Universal life and BOLI unlocking decreased policy and settlement expenses $50.2 million in 2014, as compared to an increase of $50.5 million in 2013. Unlocking in 2014 was largely driven by assumption changes to mortality, reinsurance, and portfolio yields. Reinsurance, lapses, yields, and credited interest contributed to the unlocking in 2013. Of the total impact due to unlocking, $23.5 million is offset by the decline in ceded premiums during 2014 due to the reinsurance settlement noted above.

Amortization of DAC

DAC amortization increased $146.9 million for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to differing impacts of unlocking. Unlocking during 2014 increased DAC amortization by $94.0 million, as compared to a decrease of $47.6 million in 2013. The unlocking of DAC during 2014 was largely offset by favorable unlocking impacting benefit and settlement expenses.

Other operating expenses

Other operating expenses increased $1.4 million for the year ended December 31, 2014, as compared to the year ended December 31, 2013. This increase reflects higher general administrative expenses, offset by reduced new business acquisition costs associated with lower sales.

Table of Contents

Sales

Sales for the segment decreased $24.7 million, or 16.0%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. Universal life sales decreased $23.9 million due to sales in 2013 of a product that we are no longer marketing.

For The Year Ended December 31, 2013 as compared to The Year Ended December 31, 2012

Segment operating income

Operating income was $106.8 million for the year ended December 31, 2013, representing an increase of $4.7 million, or 4.6%, from the year ended December 31, 2012. The increase was primarily due to higher premiums and policy fees, higher investment income due to growth of the block of business and favorable prospective unlocking. These increases were largely offset by less favorable traditional mortality and higher universal life claims due to growth in in-force and an increase in non-deferred expenses resulting from higher sales.

Operating revenues

Total operating revenues for the year ended December 31, 2013, increased $86.9 million, or 7.0%, as compared to the year ended December 31, 2012. This increase was driven by higher premiums and policy fees due to increased sales and higher investment income due to increases in net in-force reserves.

Net premiums and policy fees

Net premiums and policy fees increased by $52.7 million, or 7.1%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily due to an increase in premium and policy fees associated with increased sales of universal life business, partially offset by decreases in traditional life premiums.

Net investment income

Net investment income in the segment increased $34.8 million, or 7.2%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. Of the increase in net investment income, $25.1 million was the result of a net increase in universal life reserves. Additionally, traditional life investment income increased $8.8 million due to a net increase in reserves.

Other income

Other income decreased $0.7 million, or 18.2%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. The decrease relates primarily to fees on variable universal life funds.

Benefits and settlement expenses

Benefits and settlement expenses increased by $88.0 million, or 8.3%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012, due to growth in retained universal life insurance in-force, higher credited interest on universal life products resulting from increases in account values, and higher claims from growth in the universal life block and less favorable mortality in the traditional life block. Unlocking during 2013 and 2012 increased benefit and settlement expenses by $50.5 million and $51.0 million, respectively.

Amortization of DAC

DAC amortization decreased $20.2 million, or 44.9%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily due to differing impacts of unlocking. In 2013, universal life and BOLI unlocking decreased amortization $47.6 million, as compared to a decrease of $39.3 million in 2012.

Table of Contents

Other operating expenses

Other operating expenses increased $14.4 million for the year ended December 31, 2013, as compared to the year ended December 31, 2012. This increase reflects higher new business acquisition costs associated with higher sales, higher general administrative expenses, and a $4.0 million increase in interest expense associated with reserve financing costs.

Sales

Sales for the segment increased $33.3 million, or 27.4%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. Universal life sales increased $36.3 million due to more competitive product positioning. BOLI sales decreased by $3.3 million due to less favorable product positioning.

Reinsurance

Currently, the Life Marketing segment reinsures significant amounts of its life insurance in-force. Pursuant to the underlying reinsurance contracts, reinsurers pay allowances to the segment as a percentage of both first year and renewal premiums. Reinsurance allowances represent the amount the reinsurer is willing to pay for reimbursement of acquisition costs incurred by the direct writer of the business. A portion of reinsurance allowances received is deferred as part of DAC and a portion is recognized immediately as a reduction of other operating expenses. As the non-deferred portion of allowances reduces operating expenses in the period received, these amounts represent a net increase to operating income during that period.

Reinsurance allowances do not affect the methodology used to amortize DAC or the period over which such DAC is amortized. However, they do affect the amounts recognized as DAC amortization. DAC on universal life-type, limited-payment long duration, and investment contracts business is amortized based on the estimated gross profits of the policies in-force. Reinsurance allowances are considered in the determination of estimated gross profits, and therefore, impact DAC amortization on these lines of business. Deferred reinsurance allowances on level term business are recorded as ceded DAC, which is amortized over estimated ceded premiums of the policies in-force. Thus, deferred reinsurance allowances may impact DAC amortization. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in this report.

Table of Contents

Impact of reinsurance

Reinsurance impacted the Life Marketing segment line items as shown in the following table:

Life Marketing Segment

Line Item Impact of Reinsurance

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) REVENUES Reinsurance ceded $ (830,207) $ (838,023) $ (831,713) BENEFITS AND EXPENSES Benefits and settlement expenses (819,301) (818,597) (823,510) Amortization of deferred policy acquisition costs (57,270) (45,574) (41,734) Other operating expenses (1) (148,062) (144,801) (142,169) Total benefits and expenses (1,024,633) (1,008,972) (1,007,413)

NET IMPACT OF REINSURANCE $ 194,426 $ 170,949 $ 175,700

Allowances received $ (150,908) $ (169,552) $ (170,982) Less: Amount deferred 2,846 24,751 28,813 Allowances recognized (ceded other operating expenses) (1) $ (148,062) $ (144,801) $ (142,169)

(1)Other operating expenses ceded per the income statement are equal to reinsurance allowances recognized after capitalization.

The table above does not reflect the impact of reinsurance on our net investment income. By ceding business to the assuming companies, we forgo investment income on the reserves ceded. Conversely, the assuming companies will receive investment income on the reserves assumed, which will increase the assuming companies� profitability on the business we cede. The net investment income impact to us and the assuming companies has not been quantified. The impact of including foregone investment income would be to substantially reduce the favorable net impact of reinsurance reflected above. We estimate that the impact of foregone investment income would be to reduce the net impact of reinsurance presented in the table above by 100% to 200%. The Life Marketing segment�s reinsurance programs do not materially impact the �other income� line of our income statement.

As shown above, reinsurance had a favorable impact on the Life Marketing segment�s operating income for the periods presented above. The impact of reinsurance is largely due to our quota share coinsurance program in place prior to mid-2005. Under that program, generally 90% of the segment�s traditional new business was ceded to reinsurers. Since mid-2005, a much smaller percentage of overall term business has been ceded due to a change in reinsurance strategy on traditional business. In addition, since 2012, a much smaller percentage of the segment�s new universal life business has been ceded. As a result of that change, the relative impact of reinsurance on the Life Marketing segment�s overall results is expected to decrease over time. While the significance of reinsurance is expected to decline over time, the overall impact of reinsurance for a given period may fluctuate due to variations in mortality and unlocking of balances.

Table of Contents

For The Year Ended December 31, 2014 as compared to The Year Ended December 31, 2013

The decrease in ceded premiums for 2014 as compared to 2013 was caused primarily by lower ceded universal life premiums and policy fees of $5.0 million and lower ceded traditional life premiums of $2.3 million. Ceded universal life premiums decreased for the year ended December 31, 2014 as compared to the year ended December 31, 2013. This was due to a $23.5 million reduction in ceded premiums from a reinsurance settlement, which more than offset the increase in ceded universal life in-force during the year. Ceded traditional life premiums decreased from the year ended December 31, 2014 as compared to the year ended December 31, 2013, primarily due to fluctuations in the number of policies entering their post level period.

Ceded benefits and settlement expenses were higher for the year ended December 31, 2014, as compared to the year ended December 31, 2013, due to higher ceded claims, largely offset by a decrease in change in ceded reserves. Traditional ceded benefits decreased $3.6 million for the year ended December 31, 2014, as compared to the year ended December 31, 2013, due to lower ceded death benefits, largely offset by an increase in ceded reserves. Universal life ceded benefits increased $5.4 million for the year ended December 31, 2014, as compared to the year ended December 31, 2013, due to higher ceded claims, largely offset by a decrease in ceded reserves due to the impact of unlocking on ceded premium. Ceded universal life claims were $72.4 million higher for the year ended December 31, 2014, as compared to the year ended December 31, 2013.

Ceded amortization of deferred policy acquisitions costs increased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to the differences in unlocking between the two periods.

Total allowances recognized for the year ended December 31, 2014, increased from the year ended December 31, 2013, with the impact of the allowance pattern on older universal life business and changes in the mix of business. This increase more than offset the impact of the continued reduction in our traditional life reinsurance allowances due to runoff from the number of policies reaching their post level period.

For The Year Ended December 31, 2013 as compared to The Year Ended December 31, 2012

The increase in ceded premiums for 2013 as compared to 2012 was caused primarily by higher ceded universal life premiums and policy fees of $35.4 million, offset by lower ceded traditional life premiums of $28.6 million.

Ceded benefits and settlement expenses were lower for the year ended December 31, 2013, as compared to the year ended December 31, 2012, due to a smaller increase in ceded reserves, largely offset by higher ceded claims. Traditional ceded benefits decreased $5.9 million for the year ended December 31, 2013, as compared to the year ended December 31, 2012, due to a smaller increase in ceded reserves, largely offset by higher ceded death benefits. Universal life ceded benefits increased $0.6 million for the year ended December 31, 2013, as compared to the year ended December 31, 2012, due to higher ceded claims, largely offset by a smaller increase in the ceded reserves. Ceded universal life claims were $10.9 million higher for the year ended December 31, 2013, as compared to the year ended December 31, 2012.

Ceded amortization of deferred policy acquisitions costs increased for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily due to the differences in unlocking between the two periods.

Total allowances recognized for the year ended December 31, 2013, increased slightly from the year ended December 31, 2012, as the impact of growth in the universal life product line more than offset the impact of the continued reduction in our traditional life reinsurance allowances.

Table of Contents

Acquisitions

Segment Results of Operations

Segment results were as follows:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) REVENUES Gross premiums and policy fees $ 1,171,550 $ 929,125 $ 847,080 26.1% 9.7% Reinsurance ceded (399,530) (409,648) (387,245) 2.5 (5.8) Net premiums and policy fees 772,020 519,477 459,835 48.6 13.0 Net investment income 874,653 617,298 550,334 41.7 12.2 Other income 15,963 6,924 6,003 n/m 15.3 Total operating revenues 1,662,636 1,143,699 1,016,172 45.4 12.5 Realized gains (losses) - investments 162,310 (160,065) 178,941 n/m n/m Realized gains (losses) - derivatives (104,767) 202,945 (130,818) n/m n/m Total revenues 1,720,179 1,186,579 1,064,295 45.0 11.5 BENEFITS AND EXPENSES Benefits and settlement expenses 1,227,751 839,616 716,893 46.2 17.1 Amortization of value of business acquired 58,515 71,836 76,505 (18.5) (6.1) Other operating expenses 122,349 78,244 51,714 56.4 51.3 Operating benefits and expenses 1,408,615 989,696 845,112 42.3 17.1 Amortization related to benefits and settlement expenses(1) 20,085 11,770 � 70.6 n/m Amortization of VOBA related to realized gains (losses) - investments 1,516 926 746 63.7 24.1 Total benefits and expenses 1,430,216 1,002,392 845,858 42.7 18.5 INCOME BEFORE INCOME TAX 289,963 184,187 218,437 57.4 (15.7) Less: realized gains (losses) 57,543 42,880 48,123 Less: amortization related to benefits and settlement expenses(1) (20,085) (11,770) � Less: related amortization of VOBA (1,516) (926) (746) OPERATING INCOME $ 254,021 $ 154,003 $ 171,060 64.9 (10.0)

(1) During the year ended December 31, 2013, we began allocating benefits and settlement expenses associated with realized gains and losses to the Acquisitions segment. Prior period amounts of amortization related to benefits and settlement expenses are not comparable.

Table of Contents

The following table summarizes key data for the Acquisitions segment:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) Average Life Insurance In-Force(1)(4) Traditional $ 188,466,828 $ 167,594,421 $ 179,586,818 12.5% (6.7)% Universal life 34,995,011 27,771,451 30,351,626 26.0 (8.5)

$ 223,461,839 $ 195,365,872 $ 209,938,444 14.4 (6.9) Average Account Values(5) Universal life $ 4,555,949 $ 3,330,496 $ 3,418,753 36.8 (2.6) Fixed annuity(2) 3,780,914 3,033,811 3,187,616 24.6 (4.8) Variable annuity 1,474,256 583,758 597,467 n/m (2.3)

$ 9,811,119 $ 6,948,065 $ 7,203,836 41.2 (3.6) Interest Spread - UL & Fixed Annuities(5) Net investment income yield(3) 5.64% 5.73% 5.83% Interest credited to policyholders 3.99 4.00 3.99 Interest spread 1.65% 1.73% 1.84%

(1)Amounts are not adjusted for reinsurance ceded.

(2)Includes general account balances held within variable annuity products and is net of coinsurance ceded.

(3)Earned rates exclude portfolios supporting modified coinsurance and crediting rates exclude 100% cessions.

(4)Excludes $44,812,977 related to the MONY acquisition for the year ended December 31, 2013.

(5)Excludes the MONY acquisition for the year ended December 31, 2013.

For The Year Ended December 31, 2014 as compared to The Year Ended December 31, 2013

Segment Operating Income

Operating income was $254.0 million for the year ended December 31, 2014 an increase of $100.0 million, or 64.9%, as compared to the year ended December 31, 2013 primarily due to increased earnings from the MONY acquisition and a favorable change in unlocking of $19.3 million. The MONY acquisition operating income was $109.5 million for the year ended December 31, 2014, an increase of $84.3 million compared to 2013. This increase was due to a full year of MONY results being included in 2014 compared to only one quarter in 2013. Expected runoff offset other favorable items.

Operating Revenues

Net premiums and policy fees increased $252.5 million, or 48.6%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. The impact of the MONY acquisition increased $277.4 million in 2014 compared to 2013, which reflects four quarters in 2014 as compared to one quarter in 2013. In addition, a 2014 reinsurance recapture increased net premiums compared to 2013. This increase was partly offset by expected runoff. Net investment income increased $257.3 million, or 41.7%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to the MONY acquisition, which was offset by expected runoff of other blocks of business.

Total Benefits and Expenses

Total benefits and expenses increased $427.8 million, or 42.7%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. The increase was due to a $493.6 million impact from the MONY acquisition which was partly offset by more favorable unlocking, a reinsurance recapture, and the expected runoff of the in-force business. Unlocking was favorable $14.1 million for the year ended December 31, 2014, as compared to unfavorable unlocking of $5.2 million for the year ended December 31, 2013.

Table of Contents

For The Year Ended December 31, 2013 as compared to The Year Ended December 31, 2012

Segment operating income

Operating income was $154.0 million for the year ended December 31, 2013, a decrease of $17.1 million, or 10.0%, as compared to the year ended December 31, 2012, primarily due to less favorable mortality, an unfavorable change in prospective unlocking, lower spread income, the impact of increased reinsurance, and the expected runoff of business, partly offset by the favorable impact of $25.2 million from the MONY acquisition in the fourth quarter of 2013.

Operating revenues

Net premiums and policy fees increased $59.6 million, or 13.0%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily due to the MONY acquisition which added $104.3 million in 2013. This increase was partly offset by a reinsurance transaction in 2013, the favorable impact of a reinsurance recapture in 2012, and expected runoff. Net investment income increased $67.0 million, or 12.2%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily due to the MONY acquisition. This was offset by expected runoff related to other blocks of business.

Total benefits and expenses

Total benefits and expenses increased $156.5 million, or 18.5%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. The increase was due to a $175.9 million impact from the MONY acquisition, less favorable mortality and less favorable unlocking, which was partly offset by reinsurance changes, and the expected runoff of the in-force business.

Reinsurance

The Acquisitions segment currently reinsures portions of both its life and annuity in-force. The cost of reinsurance to the segment is reflected in the chart shown below. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in this report.

Table of Contents

Impact of reinsurance

Reinsurance impacted the Acquisitions segment line items as shown in the following table:

Acquisitions Segment

Line Item Impact of Reinsurance

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) REVENUES Reinsurance ceded $ (399,530) $ (409,648) $ (387,245) BENEFITS AND EXPENSES Benefits and settlement expenses (340,647) (330,153) (320,662) Amortization of deferred policy acquisition costs (13,885) (8,968) (11,766) Other operating expenses (45,596) (50,159) (54,595) Total benefits and expenses (400,128) (389,280) (387,023)

NET IMPACT OF REINSURANCE (1) $ 598 $ (20,368) $ (222)

(1)Assumes no investment income on reinsurance. Foregone investment income would be an unfavorable impact if it were included.

The segment�s reinsurance programs do not materially impact the other income line of the income statement. In addition, net investment income generally has no direct impact on reinsurance cost. However, by ceding business to the assuming companies, we forgo investment income on the reserves ceded to the assuming companies. Conversely, the assuming companies will receive investment income on the reserves assumed which will increase the assuming companies� profitability on business assumed from the Company. For business ceded under modified coinsurance arrangements, the amount of investment income attributable to the assuming company is included as part of the overall change in policy reserves and, as such, is reflected in benefit and settlement expenses. The net investment income impact to us and the assuming companies has not been quantified as it is not fully reflected in our consolidated financial statements.

The net impact of reinsurance is more favorable by $20.9 million for the year ended December 31, 2014, as compared to the year ended December 31, 2013, due to a decrease in ceded premiums in relation to the increase in ceded benefits and settlement expenses. This was primarily driven by higher ceded claims in 2014.

The net impact of reinsurance decreased $20.1 million for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily due to an increase in ceded premiums in relation to the increase in ceded benefits and settlement expenses. This was primarily driven by the MONY acquisition in the fourth quarter of 2013.

Table of Contents

Annuities

Segment results of operations

Segment results were as follows:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) REVENUES Gross premiums and policy fees $ 149,825 $ 132,317 $ 97,928 13.2% 35.1% Reinsurance ceded (74,379) (51,974) (26) (43.1) n/m Net premiums and policy fees 75,446 80,343 97,902 (6.1) (17.9) Net investment income 465,849 468,329 504,342 (0.5) (7.1) Realized gains (losses) - derivatives (25,755) (27,392) (36,501) 6.0 25.0 Other income 146,414 122,828 82,607 19.2 48.7 Total operating revenues 661,954 644,108 648,350 2.8 (0.7) Realized gains (losses) - investments 9,601 8,418 28,470 14.1 (70.4) Realized gains (losses) - derivatives, net of economic cost 113,621 (83,522) (66,331) n/m (25.9) Total revenues 785,176 569,004 610,489 38.0 (6.8) BENEFITS AND EXPENSES Benefits and settlement expenses 305,207 320,209 369,692 (4.7) (13.4) Amortization of deferred policy acquisition costs and value of business acquired 37,089 47,355 60,032 (21.7) (21.1) Other operating expenses 115,643 110,266 100,848 4.9 9.3 Operating benefits and expenses 457,939 477,830 530,572 (4.2) (9.9) Amortization related to benefits and settlement expenses 9,281 (2,036) (70) n/m n/m Amortization of DAC related to realized gains (losses) - investments 10,359 (15,857) (14,713) n/m (7.8) Total benefits and expenses 477,579 459,937 515,789 3.8 (10.8) INCOME BEFORE INCOME TAX 307,597 109,067 94,700 n/m 15.2 Less: realized gains (losses) - investments 9,601 8,418 28,470 Less: realized gains (losses) - derivatives, net of economic cost 113,621 (83,522) (66,331) Less: amortization related to benefits and settlement expenses (9,281) 2,036 70 Less: related amortization of DAC (10,359) 15,857 14,713 OPERATING INCOME $ 204,015 $ 166,278 $ 117,778 22.7 41.2

Table of Contents

The following table summarizes key data for the Annuities segment:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) Sales Fixed annuity $ 831,147 $ 693,128 $ 591,711 19.9% 17.1% Variable annuity 952,641 1,866,494 2,734,985 (49.0) (31.8)

$ 1,783,788 $ 2,559,622 $ 3,326,696 (30.3) (23.1) Average Account Values Fixed annuity(1) $ 8,220,560 $ 8,233,343 $ 8,559,562 (0.2) (3.8) Variable annuity 12,309,922 10,696,375 7,550,714 15.1 41.7

$ 20,530,482 $ 18,929,718 $ 16,110,276 8.5 17.5 Interest Spread - Fixed Annuities(2) Net investment income yield 5.44% 5.50% 5.80% Interest credited to policyholders 3.33 3.53 3.85 Interest spread 2.11% 1.97% 1.95%

(1) Includes general account balances held within variable annuity products.

(2) Interest spread on average general account values.

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) Derivatives related to variable annuity contracts: Interest rate futures - VA $ 27,801 $ (31,216) $ 21,138 $ 59,017 $ (52,354) Equity futures - VA (26,104) (52,640) (50,797) 26,536 (1,843) Currency futures - VA 14,433 (469) (2,763) 14,902 2,294 Volatility futures - VA � � (132) � 132 Variance swaps - VA (744) (11,310) (11,792) 10,566 482 Equity options - VA (41,216) (95,022) (37,370) 53,806 (57,652) Volatility options - VA � (115) � 115 (115) Interest rate swaptions - VA (22,280) 1,575 (2,260) (23,855) 3,835 Interest rate swaps - VA 214,164 (157,408) 3,264 371,572 (160,672) Embedded derivative - GMWB(1) (119,844) 162,737 (22,120) (282,581) 184,857 Funds withheld derivative 47,792 71,862 � (24,070) 71,862 Total derivatives related to variable annuity contracts 94,002 (112,006) (102,832) 206,008 (9,174) Derivatives related to FIA contracts: Embedded derivative - FIA (16,932) (942) � (15,990) (942) Equity futures - FIA 870 173 � 697 173 Volatility futures - FIA 20 (5) � 25 (5) Equity options - FIA 9,906 1,866 � 8,040 1,866 Total derivatives related to FIA contracts (6,136) 1,092 � (7,228) 1,092 Economic cost- VA GMWB(2) 25,755 27,392 36,501 (1,637) (9,109) Realized gains (losses) - derivatives, net of economic cost $ 113,621 $ (83,522) $ (66,331) $ 197,143 $ (17,191)

(1) Includes impact of nonperformance risk of $(1.5) million and $(7.2) million for the year ended December 31, 2014 and 2013, respectively.

(2) Economic cost is the long-term expected average cost of providing the product benefit over the life of the policy based on product pricing assumptions. These include assumptions about the economic/market environment, and elective and non-elective policy owner behavior (e.g. lapses, withdrawal timing, mortality, etc.).

Table of Contents

As of December 31, 2014 2013 Change

(Dollars In Thousands)

GMDB - Net amount at risk(1) $ 82,346 $ 85,137 (3.3)% GMDB Reserves 21,403 13,324 60.6 GMWB and GMAB Reserves 25,964 (93,881) n/m Account value subject to GMWB rider(2) 9,738,496 9,513,847 2.4 GMWB Benefit Base(2) 9,837,891 9,162,797 7.4 GMAB Benefit Base 4,967 5,441 (8.7) S&P 500® Index 2,059 1,848 11.4

(1)Guaranteed death benefits in excess of contract holder account balance.

(2)Amounts are not adjusted for reinsurance ceded.

For The Year Ended December 31, 2014 as compared to The Year Ended December 31, 2013

Segment operating income

Segment operating income was $204.0 million for the year ended December 31, 2014, as compared to $166.3 million for the year ended December 31, 2013, an increase of $37.7 million, or 22.7%. This increase was a result of higher net policy fees and other income in the VA line, lower credited interest, and a favorable change in SPIA mortality results. These favorable increases were partially offset by an unfavorable change in unlocking and other operating expenses and increased ceded policy fees. The segment recorded a favorable $2.1 million of unlocking for year ended December 31, 2014, as compared to favorable unlocking of $11.7 million for the year ended December 31, 2013.

Operating revenues

Segment operating revenues increased $17.9 million, or 2.8%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to an increase in other income from the VA line of business along with a decrease in GMWB economic cost. Those increases were partially offset by increased ceded policy fees. Average fixed account balances decreased by 0.2% and average variable account balances grew 15.1% for the year ended December 31, 2014, as compared to the year ended December 31, 2013.

Benefits and settlement expenses

Benefits and settlement expenses decreased $15.0 million, or 4.7%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. This decrease was primarily the result of lower credited interest, lower realized losses in the market value adjusted line, and a favorable change in the SPIA mortality variance. These favorable changes were partially offset by unfavorable changes in guaranteed benefit reserves and unlocking.

Amortization of DAC

The decrease in DAC amortization for the year ended December 31, 2014, as compared to the year ended December 31, 2013, was primarily due to a favorable change in normal amortization, primarily due to lower rates of amortization in the VA line. The segment recorded favorable DAC unlocking of $9.8 million for the year ended December 31, 2014, as compared to favorable unlocking of $13.8 million for the year ended December 31, 2013.

Other operating expenses

Other operating expenses increased $5.4 million, or 4.9%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. The increase was due to higher renewal commissions partially offset by lower acquisition expenses and lower guaranty fund assessments.

Table of Contents

Sales

Total sales decreased $775.8 million, or 30.3%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. Sales of variable annuities decreased $913.9 million, or 49.0% for the year ended December 31, 2014, as compared to the year ended December 31, 2013 primarily due to product changes. Sales of fixed annuities increased by $138.0 million, or 19.9% for the year ended December 31, 2014, as compared to the year ended December 31, 2013, driven by sales of fixed indexed annuities.

For The Year Ended December 31, 2013 as compared to The Year Ended December 31, 2012

Segment operating income

Segment operating income was $166.3 million for the year ended December 31, 2013, as compared to $117.8 million for the year ended December 31, 2012, an increase of $48.5 million, or 41.2%. This variance included a favorable change of $36.9 million in unlocking and higher gross policy fees and other income in the VA line. Partially offsetting these favorable changes was an unfavorable change in net investment income and an increase in ceded policy fees.

Operating revenues

Segment operating revenues decreased $4.2 million, or 0.7%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily due to lower overall investment income and an increase in ceded policy fees within the VA line of business. Average fixed account balances decreased by 3.8% and average variable account balances increased by 41.7% for the year ended December 31, 2013, as compared to the year ended December 31, 2012.

Benefits and settlement expenses

Benefits and settlement expenses decreased $49.5 million, or 13.4%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. This decrease was primarily the result of lower credited interest, lower realized losses in the market value adjusted line, lower amortization, a favorable change in unlocking, and a $2.8 million favorable change in the FIA fair value adjustments. These favorable changes were partially offset by a $17.5 million unfavorable change in SPIA mortality results. Unfavorable unlocking of $2.1 million was recorded in the year ended December 31, 2013, as compared to $13.8 million of unfavorable unlocking during the year ended December 31, 2012.

Amortization of DAC

The decrease in DAC amortization for the year ended December 31, 2013, as compared to the year ended December 31, 2012, was primarily due to a favorable change in unlocking. The segment recorded favorable DAC unlocking of $13.8 million for the year ended December 31, 2013, as compared to unfavorable unlocking of $11.4 million for the year ended December 31, 2012. The favorable change in unlocking is partially offset by increased DAC amortization in the VA line that is attributable to the growth in the business.

Other operating expenses

Other operating expenses increased $9.4 million, or 9.3%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. The increase is due to higher commissions and maintenance expenses. Lower acquisition expenses are partially offsetting these increases.

Sales

Total sales decreased $767.1 million, or 23.1%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. Sales of variable annuities decreased $868.5 million, or 31.8% for the year ended December 31, 2013, as compared to the year ended December 31, 2012. Sales of fixed annuities increased by $101.4

Table of Contents

million, or 17.1% for the year ended December 31, 2013, as compared to the year ended December 31, 2012, driven by sales of a recently launched fixed indexed annuity.

Reinsurance

During the year ended December 31, 2013, the Annuity segment began reinsuring certain risks associated with the GMWB and GMDB riders to Shades Creek, a subsidiary of PLC. The cost of reinsurance to the segment is reflected in the chart shown below. Prior to April 1, 2013, we paid as a dividend all of Shades Creek�s outstanding common stock to its parent, PLC. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in this report.

Impact of reinsurance

Reinsurance impacted the Annuities segment line items as shown in the following table:

Annuities Segment

Line Item Impact of Reinsurance

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) REVENUES Reinsurance ceded $ (74,379) $ (51,974) $ (26) Realized gains (losses)- derivatives 44,912 32,344 � Total operating revenues (29,467) (19,630) (26) Realized gains (losses)- derivatives, net of economic cost 284,391 (123,241) � Total revenues 254,924 (142,871) (26) BENEFITS AND EXPENSES Benefits and settlement expenses (1,962) (1,247) � Amortization of deferred policy acquisition costs (4,074) (853) � Other operating expenses (2,147) (1,684) � Operating benefits and expenses (8,183) (3,784) � Amortization of deferred policy acquisition costs related to realized gain (loss) investments 56,172 (30,483) � Total benefit and expenses 47,989 (34,267) �

NET IMPACT OF REINSURANCE $ 206,935 $ (108,604) $ (26)

The table above does not reflect the impact of reinsurance on our net investment income. The net investment income impact to us and the assuming company has been quantified and is immaterial. The Annuities segment�s reinsurance programs do not materially impact the �other income� line of our income statement.

The net impact of reinsurance is favorable by $206.9 million for the year December 31, 2014, as compared to the unfavorable net impact of $108.6 million for the year ended December 31, 2013, primarily due to realized gains on derivatives that were ceded.

Table of Contents

Stable Value Products

Segment Results of Operations

Segment results were as follows:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) REVENUES Net investment income $ 107,170 $ 123,798 $ 128,239 (13.4)% (3.5)% Other income 3,536 759 1 n/m n/m Total operating revenues 110,706 124,557 128,240 (11.1) (2.9) Realized gains (losses) 17,002 (1,583) (4,966) n/m 68.1 Total revenues 127,708 122,974 123,274 3.8 (0.2) BENEFITS AND EXPENSES Benefits and settlement expenses 35,559 41,793 64,790 (14.9) (35.5) Amortization of deferred policy acquisition costs 380 398 947 (4.5) (58.0) Other operating expenses 1,413 1,805 2,174 (21.7) (17.0) Total benefits and expenses 37,352 43,996 67,911 (15.1) (35.2) INCOME BEFORE INCOME TAX 90,356 78,978 55,363 14.4 42.7 Less: realized gains (losses) 17,002 (1,583) (4,966) OPERATING INCOME $ 73,354 $ 80,561 $ 60,329 (8.9) 33.5

The following table summarizes key data for the Stable Value Products segment:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) Sales GIC $ 41,650 $ 494,582 $ 400,104 (91.6)% 23.6% GFA - Direct Institutional 50,000 � 221,500 n/m n/m

$ 91,650 $ 494,582 $ 621,604 (81.5) (20.4)

Average Account Values $ 2,384,824 $ 2,537,307 $ 2,637,549 (6.0)% (3.8)% Ending Account Values $ 1,959,488 $ 2,559,552 $ 2,510,559 (23.4)% 2.0%

Operating Spread Net investment income yield 4.50% 4.88% 4.87% Other income yield 0.17 0.03 � Interest credited 1.49 1.65 2.44 Operating expenses 0.08 0.09 0.12 Operating spread 3.10% 3.17% 2.31%

Adjusted operating spread(1) 2.71% 2.67% 2.09%

(1)Excludes participating mortgage loan income and other income.

Table of Contents

For The Year Ended December 31, 2014 as compared to The Year Ended December 31, 2013

Segment Operating Income

Operating income was $73.4 million and decreased $7.2 million, or 8.9%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. The decrease in operating earnings resulted from a decrease in participating mortgage income and a decline in average account values offset by higher operating spreads and lower expenses. Participating mortgage income for the year ended December 31, 2014 was $4.9 million, as compared to $12.1 million for the year ended December 31, 2013. The adjusted operating spread, which excludes participating income and other income, increased by 4 basis points for the year ended December 31, 2014 over the prior year.

For The Year Ended December 31, 2013 as compared to The Year Ended December 31, 2012

Segment Operating Income

Operating income was $80.6 million and increased $20.2 million, or 33.5%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. The increase in operating earnings resulted from an increase in participating mortgage income, higher operating spreads, and lower expenses offset by a decline in average account values. Participating mortgage income for the year ended December 31, 2013 was $12.1 million as compared to $5.5 million for the year ended December 31, 2012. The adjusted operating spread, which excludes participating income and other income, increased by 58 basis points for the year ended December 31, 2013 over the prior year.

Table of Contents

Asset Protection

Segment Results of Operations

Segment results were as follows:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) REVENUES Gross premiums and policy fees $ 260,828 $ 253,588 $ 259,741 2.9% (2.4)% Reinsurance ceded (91,616) (87,781) (91,085) (4.4) 3.6 Net premiums and policy fees 169,212 165,807 168,656 2.1 (1.7) Net investment income 18,830 19,046 19,698 (1.1) (3.3) Other income 117,354 111,929 105,792 4.8 5.8 Total operating revenues 305,396 296,782 294,146 2.9 0.9 BENEFITS AND EXPENSES Benefits and settlement expenses 93,193 97,174 91,778 (4.1) 5.9 Amortization of deferred policy acquisition costs 24,169 23,603 22,569 2.4 4.6 Other operating expenses 161,760 155,857 170,034 3.8 (8.3) Total benefits and expenses 279,122 276,634 284,381 0.9 (2.7) INCOME BEFORE INCOME TAX 26,274 20,148 9,765 30.4 n/m OPERATING INCOME $ 26,274 $ 20,148 $ 9,765 30.4 n/m

The following table summarizes key data for the Asset Protection segment:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) Sales Credit insurance $ 29,399 $ 33,635 $ 35,336 (12.6)% (4.8)% Service contracts 354,965 344,081 328,931 3.2 4.6 GAP 73,610 66,646 62,342 10.4 6.9

$ 457,974 $ 444,362 $ 426,609 3.1 4.2 Loss Ratios(1) Credit insurance 27.7% 36.1% 37.7% Service contracts 56.9 61.3 58.7 GAP 62.0 58.1 41.3

(1)Incurred claims as a percentage of earned premiums

For The Year Ended December 31, 2014 as compared to The Year Ended December 31, 2013

Segment operating income

Operating income was $26.3 million, representing an increase of $6.1 million, or 30.4%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. Service contract earnings increased $5.3 million primarily due to lower loss ratios and higher sales. Credit insurance earnings increased $1.8 million primarily due to lower loss ratios and lower expenses in 2014. Earnings from the GAP product line decreased $1.0 million primarily resulting from higher loss ratios.

Table of Contents

Net premiums and policy fees

Net premiums and policy fees increased $3.4 million, or 2.1%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. GAP premiums increased $3.9 million, or 16.8%, primarily due to lower ceded premiums. Credit insurance premiums increased $0.1 million, or 1.0%. The increases were partially offset by a decrease in service contract premiums of $0.6 million, or 0.5%, due to higher ceded premiums.

Other income

Other income increased $5.4 million, or 4.8%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to higher volume in the service contract and GAP product lines.

Benefits and settlement expenses

Benefits and settlement expenses decreased $4.0 million, or 4.1%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. Service contract claims decreased $6.1 million due to higher ceded losses and lower loss ratios. Credit insurance claims decreased $1.2 million due to lower loss ratios. The decreases were partially offset by an increase in GAP claims of $3.3 million due to higher loss ratios.

Amortization of DAC and Other operating expenses

Amortization of DAC increased $0.6 million, or 2.4%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a decline in ceded activity in the GAP product line mostly offset by lower DAC balances in the service contract and credit product lines. Other operating expenses increased $5.9 million, or 3.8%, for the year ended December 31, 2014, primarily due to higher volume.

Sales

Total segment sales increased $13.6 million, or 3.1%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. Higher auto sales in 2014 helped drive increased service contract sales of $10.9 million, or 3.2%, and GAP product sales of $6.9 million, or 10.4%. The increase was partially offset by a decrease in credit insurance sales of $4.2 million, or 12.6%, due to decreasing demand for this product.

For The Year Ended December 31, 2013 as compared to The Year Ended December 31, 2012

Segment operating income

Operating income was $20.1 million, representing an increase of $10.4 million for the year ended December 31, 2013, as compared to the year ended December 31, 2012. Service contract earnings increased $5.4 million primarily due to $4.1 million of expense incurred in 2012 to write off previously capitalized costs associated with developing internal-use software. In addition, the line experienced higher volume and lower general expenses in 2013. Credit insurance earnings increased $4.2 million primarily due to $3.1 million in legal settlement and related costs incurred in 2012 and lower expenses in 2013. Earnings from the GAP product line increased $0.8 million primarily resulting from lower expenses, somewhat offset by higher losses.

Net premiums and policy fees

Net premiums and policy fees decreased $2.8 million, or 1.7%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. Service contract premiums decreased $3.3 million, or 2.5%, partly due to higher ceded premiums. Credit insurance premiums decreased $1.3 million, or 8.3%, primarily the result of decreasing sales and the related impact on earned premiums. The decreases were partially offset by an increase of $1.8 million, or 8.4%, in the GAP product line primarily due to lower ceded premiums.

Table of Contents

Other income

Other income increased $6.1 million, or 5.8%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily due to an increase in 2013 sales reflecting improvement in the U.S. automobile market.

Benefits and settlement expenses

Benefits and settlement expenses increased $5.4 million, or 5.9%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. GAP claims increased $4.7 million and service contract claims increased $1.5 million due to higher loss ratios. The increases were partially offset by a decrease in credit insurance claims of $0.8 million.

Amortization of DAC and Other operating expenses

Amortization of DAC increased $1.0 million, or 4.6%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily due to higher amortization expense in the service contract product line somewhat offset by lower expense in the GAP and credit product lines. Other operating expenses decreased $14.2 million, or 8.3%, for the year ended December 31, 2013, partly due to the $4.1 million impairment and disposal of capitalized costs associated with developing internal-use software in 2012, $2.0 million legal settlement costs incurred in 2012 and an expense reduction initiative implemented in the first quarter of 2013.

Sales

Total segment sales increased $17.8 million, or 4.2%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. Service contract sales increased $15.2 million, or 4.6%, and sales in the GAP product line increased $4.3 million, or 6.9%. The increase is partly attributable to the improvement in auto sales over the prior year. Credit insurance sales decreased $1.7 million, or 4.8%, partly due to an increase in refunds as a result of the 2012 legal settlement.

Reinsurance

The majority of the Asset Protection segment�s reinsurance activity relates to the cession of single premium credit life and credit accident and health insurance, vehicle service contracts, and guaranteed asset protection insurance to producer affiliated reinsurance companies (�PARC�s�). These arrangements are coinsurance contracts ceding the business on a first dollar quota share basis at 100% to limit our exposure and allow the PARC�s to share in the underwriting income of the product. Reinsurance contracts do not relieve us from our obligations to our policyholders. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in this report.

Table of Contents

Reinsurance impacted the Asset Protection segment line items as shown in the following table:

Asset Protection Segment

Line Item Impact of Reinsurance

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) REVENUES Reinsurance ceded $ (91,616) $ (87,781) $ (91,085) BENEFITS AND EXPENSES Benefits and settlement expenses (55,781) (52,402) (56,958) Amortization of deferred policy acquisition costs (7,507) (13,788) (18,869) Other operating expenses (7,675) (7,300) (9,353) Total benefits and expenses (70,963) (73,490) (85,180)

NET IMPACT OF REINSURANCE (1) $ (20,653) $ (14,291) $ (5,905)

(1) Assumes no investment income on reinsurance. Foregone investment income would substantially change the impact of reinsurance.

For The Year Ended December 31, 2014 as compared to The Year Ended December 31, 2013

Reinsurance premiums ceded increased $3.8 million, or 4.4%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. The increase was primarily due to an increase in ceded service contract premiums, partially offset by a decline in ceded dealer credit insurance premiums due to lower sales and a decrease in ceded GAP premiums primarily due to a change in mix of GAP business.

Benefits and settlement expenses ceded increased $3.4 million, or 6.4%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013. The increase was primarily due to increases in ceded losses in the service contract and GAP lines.

Amortization of DAC ceded decreased $6.3 million, or 45.6%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily as the result of a change in the mix of business in the GAP product line. Other operating expenses ceded increased $0.4 million, or 5.1%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily as a result of increases in the GAP product line.

Net investment income has no direct impact on reinsurance cost. However, by ceding business to the assuming companies, we forgo investment income on the reserves ceded. Conversely, the assuming companies will receive investment income on the reserves assumed which will increase the assuming companies� profitability on business we cede. The net investment income impact to us and the assuming companies has not been quantified as it is not reflected in our consolidated financial statements.

For The Year Ended December 31, 2013 as compared to The Year Ended December 31, 2012

Reinsurance premiums ceded decreased $3.3 million, or 3.6%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. The decrease was primarily due to a decline in ceded dealer credit insurance premiums due to lower sales in prior years and a decrease in ceded GAP premiums primarily due to a change in mix of GAP business, somewhat offset by an increase in service contract premiums.

Benefits and settlement expenses ceded decreased $4.6 million, or 8.0%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012. The decrease was primarily due to lower losses in the service contract and dealer credit lines, somewhat offset by an increase in GAP losses.

Table of Contents

Amortization of DAC ceded decreased $5.1 million, or 26.9%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily as the result of the decreases in the GAP product line. Other operating expenses ceded decreased $2.1 million, or 22.0%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily as a result of decreases in the GAP product line.

Table of Contents

Corporate and Other

Segment Results of Operations

Segment results were as follows:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) REVENUES Gross premiums and policy fees $ 16,473 $ 18,160 $ 19,567 (9.3)% (7.2)% Reinsurance ceded (11) (11) (28) n/m 60.7 Net premiums and policy fees 16,462 18,149 19,539 (9.3) (7.1) Net investment income 78,505 86,498 100,351 (9.2) (13.8) Other income 8,253 4,776 32,231 72.8 (85.2) Total operating revenues 103,220 109,423 152,121 (5.7) (28.1) Realized gains (losses) - investments (2,742) 5,180 (27,930) n/m n/m Realized gains (losses) - derivatives 3,475 (9,681) 6,011 n/m n/m Total revenues 103,953 104,922 130,202 (0.9) (19.4) BENEFITS AND EXPENSES Benefits and settlement expenses 20,001 22,330 19,393 (10.4) 15.1 Amortization of deferred policy acquisition costs 485 625 1,018 (22.4) (38.6) Other operating expenses 181,782 161,088 130,591 12.8 23.4 Total benefits and expenses 202,268 184,043 151,002 9.9 21.9 INCOME (LOSS) BEFORE INCOME TAX (98,315) (79,121) (20,800) (24.3) n/m Less: realized gains (losses) - investments (2,742) 5,180 (27,930) Less: realized gains (losses) - derivatives 3,475 (9,681) 6,011 OPERATING INCOME (LOSS) $ (99,048) $ (74,620) $ 1,119 (32.7) n/m

For The Year Ended December 31, 2014 as compared to The Year Ended December 31, 2013

Segment operating income (loss)

Corporate and Other segment operating loss was $99.0 million for the year ended December 31, 2014, as compared to an operating loss of $74.6 million for the year ended December 31, 2013. The decrease was primarily due to a $20.7 million unfavorable variance related to other operating expenses and a $8.0 million unfavorable variance related to a decrease in net investment income. Offsetting these negative variances was a $3.0 million favorable variance related to gains on the repurchase of non-recourse funding obligations.

Operating revenues

Net investment income for the segment decreased $8.0 million, or 9.2%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013, and net premiums and policy fees decreased $1.7 million, or 9.3%. The decrease in net investment income was primarily due to lower core investment income as compared to 2013. Other income increased $3.5 million, or 72.8%, for the year ended December 31, 2014 as compared to the year ended December 31, 2013, primarily due to a $3.0 favorable variance related to gains on the repurchase of non-recourse funding obligations.

Table of Contents

Total benefits and expenses

Total benefits and expenses increased $18.2 million, or 9.9%, for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to an increase in other operating expenses. The increase in operating expenses includes $6.4 million of Dai-ichi Life acquisition related expenses and higher overhead expenses recorded during the twelve months ended December 31, 2014.

For The Year Ended December 31, 2013 as compared to The Year Ended December 31, 2012

Segment operating income (loss)

Corporate and Other segment operating loss was $74.6 million for the year ended December 31, 2013, as compared to operating income of $1.1 million for the year ended December 31, 2012. The decrease was primarily due to a $27.6 million unfavorable variance related to gains on the repurchase of non-recourse funding obligations. For the year ended December 31, 2013, $4.4 million of pre-tax gains were generated from the repurchase of non-recourse funding obligations compared to $32.0 million of pre-tax gains during 2012. In addition, the segment experienced a $2.8 million decrease related to a portfolio of securities designated for trading, a $4.0 million unfavorable variance related to income on called securities, lower core investment income, and higher other operating expenses.

Operating revenues

Net investment income for the segment decreased $13.9 million, or 13.8%, for the year ended December 31, 2013, as compared to the year ended December 31, 2012, and net premiums and policy fees decreased $1.4 million, or 7.1%. The decrease in net investment income was primarily the result of a $2.8 million decrease related to a portfolio of securities designated for trading, a $4.0 million unfavorable variance related to income on called securities, and lower core investment income as compared to 2012. Partially offsetting these decreases was a $14.0 million increase in interest income associated with a reserve financing transaction which is entirely offset by the increase in interest expense as referred to below. Other income decreased $27.5 million for the year ended December 31, 2013 as compared to the year ended December 31, 2012, primarily due to a $27.6 million unfavorable variance related to gains generated on the repurchase of non-recourse funding obligations.

Total benefits and expenses

Total benefits and expenses increased $33.0 million for the year ended December 31, 2013, as compared to the year ended December 31, 2012. The increase in operating expenses reflects a $14.0 million increase in interest expense associated with a reserve financing transaction which was entirely offset by the increase in interest income as referred to above, $5.1 million of acquisition related expenses recorded during the twelve months ended December 31, 2013, and an increase in general overhead expenses as compared to the year ended December 31, 2012.

Table of Contents

CONSOLIDATED INVESTMENTS

Certain reclassifications have been made in the previously reported financial statements and accompanying tables to make the prior year amounts comparable to those of the current year. Such reclassifications had no effect on previously reported net income, shareowner�s equity, or the totals reflected in the accompanying tables.

Portfolio Description

As of December 31, 2014, our investment portfolio was approximately $45.6 billion. The types of assets in which we may invest are influenced by various state insurance laws which prescribe qualified investment assets. Within the parameters of these laws, we invest in assets giving consideration to such factors as liquidity and capital needs, investment quality, investment return, matching of assets and liabilities, and the overall composition of the investment portfolio by asset type and credit exposure.

The following table presents the reported values of our invested assets:

As of December 31, 2014 2013

(Dollars In Thousands) Publicly issued bonds (amortized cost: 2014 - $26,358,248; 2013 - $26,096,769) $ 28,835,015 63.3% $ 27,054,793 62.0% Privately issued bonds (amortized cost: 2014 - $7,793,600; 2013 - $7,916,529) 8,356,225 18.3 8,115,126 18.6 Fixed maturities 37,191,240 81.6 35,169,919 80.6 Equity securities (cost: 2014 - $735,297; 2013 - $632,652) 756,790 1.7 602,388 1.4 Mortgage loans 5,133,780 11.3 5,493,492 12.6 Investment real estate 5,918 � 16,873 � Policy loans 1,758,237 3.9 1,815,744 4.2 Other long-term investments 491,282 1.1 424,481 1.0 Short-term investments 246,717 0.4 133,025 0.2 Total investments $ 45,583,964 100.0% $ 43,655,922 100.0%

Included in the preceding table are $2.8 billion and $2.8 billion of fixed maturities and $95.1 million and $52.4 million of short-term investments classified as trading securities as of December 31, 2014 and 2013, respectively. The trading portfolio includes invested assets of $2.8 billion and $2.8 billion as of December 31, 2014 and 2013, respectively, held pursuant to modified coinsurance (�Modco�) arrangements under which the economic risks and benefits of the investments are passed to third party reinsurers. Also included above, are $435.0 million and $365.0 million of securities classified as held-to-maturity as of December 31, 2014 and 2013, respectively.

Fixed Maturity Investments

As of December 31, 2014, our fixed maturity investment holdings were approximately $37.2 billion. The approximate percentage distribution of our fixed maturity investments by quality rating is as follows:

As of December 31, Rating 2014 2013 AAA 12.3% 12.5% AA 7.4 7.0 A 33.1 32.2 BBB 40.9 41.7 Below investment grade 5.2 5.6 Not rated 1.1 1.0

100.0% 100.0%

Table of Contents

We use various Nationally Recognized Statistical Rating Organizations� (�NRSRO�) ratings when classifying securities by quality ratings. When the various NRSRO ratings are not consistent for a security, we use the second-highest convention in assigning the rating. When there are no such published ratings, we assign a rating based on the statutory accounting rating system if such ratings are available.

We do not have material exposure to financial guarantee insurance companies with respect to our investment portfolio.

Changes in fair value for our available-for-sale portfolio, net of related DAC, VOBA, and policyholder dividend obligation, are charged or credited directly to shareowner�s equity, net of tax. Declines in fair value that are other-than-temporary are recorded as realized losses in the consolidated statements of income, net of any applicable non-credit component of the loss, which is recorded as an adjustment to other comprehensive income (loss).

The distribution of our fixed maturity investments by type is as follows:

As of December 31, Type 2014 2013

(Dollars In Millions) Corporate bonds $ 28,837.8 $ 27,275.2 Residential mortgage-backed securities 1,706.4 1,756.0 Commercial mortgage-backed securities 1,328.4 1,129.2 Other asset-backed securities 1,114.0 1,160.2 U.S. government-related securities 1,679.3 1,704.1 Other government-related securities 77.2 108.5 States, municipals, and political subdivisions 2,013.1 1,671.7 Other 435.0 365.0 Total fixed income portfolio $ 37,191.2 $ 35,169.9

Within our fixed maturity investments, we maintain portfolios classified as �available-for-sale�, �trading�, and �held-to-maturity�. We purchase our available-for-sale investments with the intent to hold to maturity by purchasing investments that match future cash flow needs. However, we may sell any of our available-for-sale and trading investments to maintain proper matching of assets and liabilities. Accordingly, we classified $33.9 billion, or 91.2%, of our fixed maturities as �available-for-sale� as of December 31, 2014. These securities are carried at fair value on our consolidated balance sheets.

Fixed maturities with respect to which we have both the positive intent and ability to hold to maturity are classified as �held-to-maturity�. We classified $435.0 million, or 1.2%, of our fixed maturities as �held-to-maturity� as of December 31, 2014. These securities are carried at amortized cost on our consolidated balance sheets.

Table of Contents

Trading securities are carried at fair value and changes in fair value are recorded on the income statement as they occur. Our trading portfolio accounted for $2.8 billion, or 7.6%, of our fixed maturities and $95.1 million of short-term investments as of December 31, 2014. Changes in fair value on the Modco trading portfolio, including gains and losses from sales, are passed to the reinsurers through the contractual terms of the reinsurance arrangements. Partially offsetting these amounts are corresponding changes in the fair value of the embedded derivative associated with the underlying reinsurance arrangement. The total Modco trading portfolio fixed maturities by rating is as follows:

As of December 31, Rating 2014 2013

(Dollars In Thousands) AAA $ 478,632 $ 419,866 AA 290,255 266,173 A 910,669 854,020 BBB 824,143 924,554 Below investment grade 312,594 324,453 Total Modco trading fixed maturities $ 2,816,293 $ 2,789,066

A portion of our bond portfolio is invested in residential mortgage-backed securities (�RMBS�), commercial mortgage-backed securities (�CMBS�), and other asset-backed securities (collectively referred to as asset-backed securities or �ABS�). ABS are securities that are backed by a pool of assets. These holdings as of December 31, 2014, were approximately $4.1 billion. Mortgage-backed securities (�MBS�) are constructed from pools of mortgages and may have cash flow volatility as a result of changes in the rate at which prepayments of principal occur with respect to the underlying loans. Excluding limitations on access to lending and other extraordinary economic conditions, prepayments of principal on the underlying loans can be expected to accelerate with decreases in market interest rates and diminish with increases in interest rates.

Table of Contents

Residential Mortgage-Backed Securities - As of December 31, 2014, our RMBS portfolio was approximately $1.7 billion. Sequential securities receive payments in order until each class is paid off. Planned amortization class securities (�PACs�) pay down according to a schedule. Pass through securities receive principal as principal of the underlying mortgages is received.

The tables below include a breakdown of these holdings by type and rating as of December 31, 2014.

Percentage of Residential Mortgage-

Backed Type Securities Sequential 27.3% PAC 37.4 Pass Through 10.1 Other 25.2

100.00%

Percentage of Residential

Mortgage-Backed Rating Securities AAA 66.7% AA 0.1 A 0.5 BBB 0.8 Below investment grade 31.9

100.0%

Table of Contents

Alt-A Collateralized Holdings

As of December 31, 2014, we held securities with a fair value of $351.6 million, or 0.8% of invested assets, supported by collateral classified as Alt-A. As of December 31, 2013, we held securities with a fair value of $395.0 million supported by collateral classified as Alt-A. We include in this classification certain whole loan securities where such securities have underlying mortgages with a high level of limited loan documentation. As of December 31, 2014, these securities had a fair value of $130.5 million and an unrealized gain of $32.0 million.

The following table includes the percentage of our collateral classified as Alt-A, grouped by rating category, as of December 31, 2014:

Percentage of Alt-A

Rating Securities A 1.4% BBB 0.3 Below investment grade 98.3

100.0%

The following tables categorize the estimated fair value and unrealized gain/(loss) of our mortgage-backed securities collateralized by Alt-A mortgage loans by rating as of December 31, 2014:

Alt-A Collateralized Holdings

Estimated Fair Value of Security by Year of Security Origination 2010 and

Rating Prior 2011 2012 2013 2014 Total (Dollars In Millions)

A $ 5.1 $ � $ � $ � $ � $ 5.1 BBB 1.2 � � � � 1.2 Below investment grade 345.3 � � � � 345.3 Total mortgage-backed securities collateralized by Alt-A mortgage loans $ 351.6 $ � $ � $ � $ � $ 351.6

Estimated Unrealized Gain (Loss) of Security by Year of Security Origination 2010 and

Rating Prior 2011 2012 2013 2014 Total (Dollars In Millions)

A $ 0.1 $ � $ � $ � $ � $ 0.1 BBB 0.1 � � � � 0.1 Below investment grade 41.3 � � � � 41.3 Total mortgage-backed securities collateralized by Alt-A mortgage loans $ 41.5 $ � $ � $ � $ � $ 41.5

Table of Contents

Sub-Prime Collateralized Holdings

As of December 31, 2014, we held securities with a total fair value of $1.7 million that were supported by collateral classified as sub-prime. As of December 31, 2013, we held securities with a fair value of $2.0 million that were supported by collateral classified as sub-prime.

Prime Collateralized Holdings

As of December 31, 2014, we had RMBS collateralized by prime mortgage loans (including agency mortgages) with a total fair value of $1.4 billion, or 3.0%, of total invested assets. As of December 31, 2013, we held securities with a fair value of $1.4 billion of RMBS collateralized by prime mortgage loans (including agency mortgages).

The following table includes the percentage of our collateral classified as prime, grouped by rating category, as of December 31, 2014:

Percentage of Prime

Rating Securities AAA 84.1% AA 0.2 A 0.3 BBB 0.9 Below investment grade 14.5

100.0%

The following tables categorize the estimated fair value and unrealized gain/(loss) of our mortgage-backed securities collateralized by prime mortgage loans (including agency mortgages) by rating as of December 31, 2014:

Prime Collateralized Holdings

Estimated Fair Value of Security by Year of Security Origination 2010 and

Rating Prior 2011 2012 2013 2014 Total (Dollars In Millions)

AAA $ 484.0 $ 320.3 $ 27.5 $ 151.5 $ 154.2 $ 1,137.5 AA 0.2 � � � 2.2 2.4 A 4.0 � � � � 4.0 BBB 11.8 � � � � 11.8 Below investment grade 197.4 � � � � 197.4 Total mortgage-backed securities collateralized by prime mortgage loans $ 697.4 $ 320.3 $ 27.5 $ 151.5 $ 156.4 $ 1,353.1

Estimated Unrealized Gain (Loss) of Security by Year of Security Origination 2010 and

Rating Prior 2011 2012 2013 2014 Total (Dollars In Millions)

AAA $ 25.7 $ 16.0 $ 0.9 $ 3.1 $ 0.4 $ 46.1 AA � � � � � � A 0.2 � � � � 0.2 BBB 0.7 � � � � 0.7 Below investment grade 8.7 � � � � 8.7 Total mortgage-backed securities collateralized by prime mortgage loans $ 35.2 $ 16.0 $ 0.9 $ 3.1 $ 0.4 $ 55.7

Table of Contents

Commercial Mortgage-Backed Securities - Our CMBS portfolio consists of commercial mortgage-backed securities issued in securitization transactions. As of December 31, 2014, the CMBS holdings were approximately $1.3 billion. As of December 31, 2013, the CMBS holdings were approximately $1.1 billion.

The following table includes the percentages of our CMBS holdings, grouped by rating category, as of December 31, 2014:

Percentage of Commercial

Mortgage-Backed Rating Securities AAA 70.2% AA 15.6 A 12.6 BBB 1.6

100.0%

The following tables categorize the estimated fair value and unrealized gain/(loss) of our CMBS as of December 31, 2014:

Commercial Mortgage-Backed Securities

Estimated Fair Value of Security by Year of Security Origination 2010 and

Rating Prior 2011 2012 2013 2014 Total (Dollars In Millions)

AAA $ 133.7 $ 212.0 $ 314.1 $ 150.6 $ 121.7 $ 932.1 AA 33.6 38.6 43.1 30.3 61.0 206.6 A 80.1 52.7 14.2 20.1 � 167.1 BBB 22.6 � � � � 22.6 Total commercial mortgage-backed securities $ 270.0 $ 303.3 $ 371.4 $ 201.0 $ 182.7 $ 1,328.4

Estimated Unrealized Gain (Loss) of Security by Year of Security Origination 2010 and

Rating Prior 2011 2012 2013 2014 Total (Dollars In Millions)

AAA $ 9.2 $ 21.2 $ 9.1 $ 3.5 $ 3.1 $ 46.1 AA 2.8 3.6 (0.8) 0.1 1.9 7.6 A 4.6 1.3 (0.2) (0.3) � 5.4 BBB 0.2 � � � � 0.2 Total commercial mortgage-backed securities $ 16.8 $ 26.1 $ 8.1 $ 3.3 $ 5.0 $ 59.3

Table of Contents

Other Asset-Backed Securities � Other asset-backed securities pay down based on cash flow received from the underlying pool of assets, such as receivables on auto loans, student loans, credit cards, etc. As of December 31, 2014, these holdings were approximately $1.1 billion. As of December 31, 2013, these holdings were approximately $1.2 billion.

The following table includes the percentages of our other asset-backed holdings, grouped by rating category, as of December 31, 2014:

Percentage of Other Asset-

Backed Rating Securities AAA 52.3% AA 19.1 A 16.5 BBB 0.9 Below investment grade 11.2

100.0%

The following tables categorize the estimated fair value and unrealized gain/(loss) of our asset-backed securities as of December 31, 2014:

Other Asset-Backed Securities

Estimated Fair Value of Security by Year of Security Origination 2010 and

Rating Prior 2011 2012 2013 2014 Total (Dollars In Millions)

AAA $ 492.8 $ 13.4 $ 32.1 $ 19.6 $ 25.0 $ 582.9 AA 156.4 � 55.9 � � 212.3 A 30.8 54.2 53.7 34.5 10.1 183.3 BBB 9.9 � � � � 9.9 Below investment grade 125.6 � � � � 125.6 Total other asset-backed securities $ 815.5 $ 67.6 $ 141.7 $ 54.1 $ 35.1 $ 1,114.0

Estimated Unrealized Gain (Loss) of Security by Year of Security Origination 2010 and

Rating Prior 2011 2012 2013 2014 Total (Dollars In Millions)

AAA $ (18.5) $ 1.4 $ 1.3 $ 1.1 $ 0.6 $ (14.1) AA (9.7) � (1.5) � � (11.2) A 2.5 7.5 (1.1) 2.8 0.1 11.8 BBB 1.3 � � � � 1.3 Below investment grade 10.0 � � � � 10.0 Total other asset-backed securities $ (14.4) $ 8.9 $ (1.3) $ 3.9 $ 0.7 $ (2.2)

Table of Contents

We obtained ratings of our fixed maturities from Moody�s Investors Service, Inc. (�Moody�s�), Standard & Poor�s Corporation (�S&P�), and/or Fitch Ratings (�Fitch�). If a fixed maturity is not rated by Moody�s, S&P, or Fitch, we use ratings from the National Association of Insurance Commissioners (�NAIC�), or we rate the fixed maturity based upon a comparison of the unrated issue to rated issues of the same issuer or rated issues of other issuers with similar risk characteristics. As of December 31, 2014, over 98.9% of our fixed maturities were rated by Moody�s, S&P, Fitch, and/or the NAIC.

The industry segment composition of our fixed maturity securities is presented in the following table:

As of % Fair As of % Fair December 31, 2014 Value December 31, 2013 Value

(Dollars In Thousands) Banking $ 2,931,579 7.9% $ 2,663,408 7.6% Other finance 665,866 1.8 620,051 1.8 Electric 4,062,991 10.9 3,752,261 10.7 Energy and natural gas 4,593,251 12.4 4,310,893 12.2 Insurance 2,969,648 8.0 2,631,715 7.5 Communications 1,504,581 4.0 1,500,544 4.3 Basic industrial 1,763,195 4.7 1,673,188 4.8 Consumer noncyclical 3,247,522 8.7 3,040,080 8.6 Consumer cyclical 1,986,710 5.3 2,140,643 6.1 Finance companies 240,976 0.6 259,925 0.7 Capital goods 1,369,912 3.7 1,299,535 3.7 Transportation 993,067 2.7 908,600 2.6 Other industrial 338,285 0.9 390,766 1.1 Brokerage 607,445 1.6 627,630 1.8 Technology 1,078,026 2.9 1,007,174 2.9 Real estate 246,712 0.7 269,378 0.8 Other utility 238,089 0.6 179,346 0.5 Commercial mortgage-backed securities 1,328,363 3.6 1,129,226 3.2 Other asset-backed securities 1,113,955 3.0 1,160,238 3.3 Residential mortgage-backed non-agency securities 779,612 2.1 800,154 2.3 Residential mortgage-backed agency securities 926,760 2.5 955,791 2.7 U.S. government-related securities 1,679,356 4.5 1,704,128 4.8 Other government-related securities 77,204 0.2 108,524 0.3 State, municipals, and political divisions 2,013,135 5.4 1,671,721 4.8 Other 435,000 1.3 365,000 0.9 Total $ 37,191,240 100.0% $ 35,169,919 100.0%

Our investments classified as available-for-sale and trading in debt and equity securities are reported at fair value. Our investments classified as held-to-maturity are reported at amortized cost. As of December 31, 2014, our fixed maturity investments (bonds and redeemable preferred stocks) had a fair value of $37.2 billion, which was 10.1% above amortized cost of $33.8 billion. These assets are invested for terms approximately corresponding to anticipated future benefit payments. Thus, market fluctuations are not expected to adversely affect liquidity.

Fair values for private, non-traded securities are determined as follows: 1) we obtain estimates from independent pricing services and 2) we estimate fair value based upon a comparison to quoted issues of the same issuer or issues of other issuers with similar terms and risk characteristics. We analyze the independent pricing services valuation methodologies and related inputs, including an assessment of the observability of market inputs. Upon obtaining this information related to fair value, management makes a determination as to the appropriate valuation amount.

Table of Contents

Mortgage Loans

We invest a portion of our investment portfolio in commercial mortgage loans. As of December 31, 2014, our mortgage loan holdings were approximately $5.1 billion. We have specialized in making loans on either credit-oriented commercial properties or credit-anchored strip shopping centers and apartments. Our underwriting procedures relative to our commercial loan portfolio are based, in our view, on a conservative and disciplined approach. We concentrate on a small number of commercial real estate asset types associated with the necessities of life (retail, multi-family, senior living, professional office buildings, and warehouses). We believe that these asset types tend to weather economic downturns better than other commercial asset classes in which we have chosen not to participate. We believe this disciplined approach has helped us to maintain a relatively low delinquency and foreclosure rate throughout our history. The majority of our mortgage loans portfolio was underwritten and funded by us. From time to time, we may acquire loans in conjunction with an acquisition.

Our commercial mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, and net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan�s contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts, and prepayment fees are reported in net investment income.

Certain of our mortgage loans have call options or interest rate reset options between 3 and 10 years. However, if interest rates were to significantly increase, we may be unable to exercise the call options or increase the interest rates on our existing mortgage loans commensurate with significantly increased market rates. Assuming the loans are called at their next call dates, approximately $243.6 million will be due in 2015, $961.8 million in 2016 through 2020, $392.6 million in 2021 through 2025, and $120.8 million thereafter.

We also offer a type of commercial mortgage loan under which we will permit a loan-to-value ratio of up to 85% in exchange for a participating interest in the cash flows from the underlying real estate. As of December 31, 2014 and 2013, approximately $553.6 million and $666.6 million, respectively, of our mortgage loans had this participation feature. Cash flows received as a result of this participation feature are recorded as interest income. During the year ended December 31, 2014 and 2013, we recognized $16.7 million and $17.9 million of participating mortgage loan income, respectively.

We record mortgage loans net of an allowance for credit losses. This allowance is calculated through analysis of specific loans that have indicators of potential impairment based on current information and events. As of December 31, 2014 and 2013, our allowance for mortgage loan credit losses was $5.7 million and $3.1 million, respectively. While our mortgage loans do not have quoted market values, as of December 31, 2014, we estimated the fair value of our mortgage loans to be $5.5 billion (using discounted cash flows from the next call date), which was approximately 7.3% greater than the amortized cost, less any related loan loss reserve.

At the time of origination, our mortgage lending criteria targets that the loan-to-value ratio on each mortgage is 75% or less. We target projected rental payments from credit anchors (i.e., excluding rental payments from smaller local tenants) of 70% of the property�s projected operating expenses and debt service.

As of December 31, 2014, approximately $24.5 million, or 0.05%, of invested assets consisted of nonperforming, restructured or mortgage loans that were foreclosed and were converted to real estate properties. We do not expect these investments to adversely affect our liquidity or ability to maintain proper matching of assets and liabilities. During the year ended December 31, 2014, certain mortgage loan transactions occurred that were accounted for as troubled debt restructurings under Topic 310 of the FASB ASC. For all mortgage loans, the impact of troubled debt restructurings is generally reflected in our investment balance and in the allowance for mortgage loan credit losses. Transactions accounted for as troubled debt restructurings during the year ended December 31, 2014 included either the acceptance of assets in satisfaction of principal at a future date or the recognition of permanent impairments to principal, and were the result of agreements between the creditor and the debtor. During the year ended December 31, 2014, we accepted or agreed to accept assets of $33.0 million in satisfaction of $41.7 million of principal. We also identified one $12.6 million loan whose principal was permanently impaired to a value of $7.3 million. These transactions resulted in realized losses of $10.3 million and a decrease in our investment in mortgage loans net of

Table of Contents

existing allowances for mortgage loans losses. Of the mortgage loan transactions accounted for as troubled debt restructurings, $23.3 million remain on our balance sheet as of December 31, 2014.

Our mortgage loan portfolio consists of two categories of loans: 1) those not subject to a pooling and servicing agreement and 2) those subject to a contractual pooling and servicing agreement. As of December 31, 2014, $24.5 million of mortgage loans not subject to a pooling and servicing agreement were nonperforming, restructured, or foreclosed and converted to real estate. Of the restructured loans, $1.5 million were nonperforming during the year ended December 31, 2014. We foreclosed on $1.2 million nonperforming loans not subject to a pooling and servicing agreement during the year ended December 31, 2014.

As of December 31, 2014, none of the loans subject to a pooling and servicing agreement were nonperforming. We did not foreclose on any nonperforming loans subject to pooling and servicing agreement during the year ended December 31, 2014.

We do not expect these investments to adversely affect our liquidity or ability to maintain proper matching of assets and liabilities.

It is our policy to cease to carry accrued interest on loans that are over 90 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. If a loan becomes over 90 days delinquent, it is our general policy to initiate foreclosure proceedings unless a workout arrangement to bring the loan current is in place. For loans subject to a pooling and servicing agreement, there are certain additional restrictions and/or requirements related to workout proceedings, and as such, these loans may have different attributes and/or circumstances affecting the status of delinquency or categorization of those in nonperforming status.

Risk Management and Impairment Review

We monitor the overall credit quality of our portfolio within established guidelines. The following table includes our available-for-sale fixed maturities by credit rating as of December 31, 2014:

Percent of Rating Fair Value Fair Value

(Dollars In Thousands) AAA $ 4,099,174 12.1% AA 2,444,539 7.2 A 11,400,734 33.6 BBB 14,396,717 42.4 Investment grade 32,341,164 95.3 BB 1,069,951 3.2 B 163,262 0.5 CCC or lower 363,043 1.0 Below investment grade 1,596,256 4.7 Total $ 33,937,420 100.0%

Not included in the table above are $2.5 billion of investment grade and $315.1 million of below investment grade fixed maturities classified as trading securities and $435.0 million of fixed maturities classified as held-to-maturity.

Table of Contents

Limiting bond exposure to any creditor group is another way we manage credit risk. We held no credit default swaps on the positions listed below as of December 31, 2014. The following summarizes our ten largest maturity exposures to an individual creditor group as of December 31, 2014:

Fair Value of Funded Unfunded Total

Creditor Securities Exposures Fair Value (Dollars In Millions)

Berkshire Hathaway Inc. $ 185.1 $ � $ 185.1 Nextera Energy Inc. 174.8 � 174.8 Wells Fargo & Co. 172.3 1.6 173.9 Duke Energy Corp. 165.6 � 165.6 General Electric 165.6 � 165.6 Exelon Corp. 162.4 � 162.4 Comcast Corp. 161.0 � 161.0 Rio Tinto PLC 155.5 � 155.5 Bank of America Corp 154.7 0.5 155.2 Morgan Stanley 153.3 0.1 153.4

Determining whether a decline in the current fair value of invested assets is an other-than-temporary decline in value is both objective and subjective, and can involve a variety of assumptions and estimates, particularly for investments that are not actively traded in established markets. We review our positions on a monthly basis for possible credit concerns and review our current exposure, credit enhancement, and delinquency experience.

Management considers a number of factors when determining the impairment status of individual securities. These include the economic condition of various industry segments and geographic locations and other areas of identified risks. Since it is possible for the impairment of one investment to affect other investments, we engage in ongoing risk management to safeguard against and limit any further risk to our investment portfolio. Special attention is given to correlative risks within specific industries, related parties, and business markets.

For certain securitized financial assets with contractual cash flows, including RMBS, CMBS, and other asset-backed securities (collectively referred to as asset-backed securities or �ABS�), GAAP requires us to periodically update our best estimate of cash flows over the life of the security. If the fair value of a securitized financial asset is less than its cost or amortized cost and there has been a decrease in the present value of the expected cash flows since the last revised estimate, considering both timing and amount, an other-than-temporary impairment charge is recognized. Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third party sources along with certain internal assumptions and judgments regarding the future performance of the underlying collateral. Projections of expected future cash flows may change based upon new information regarding the performance of the underlying collateral. In addition, we consider our intent and ability to retain a temporarily depressed security until recovery.

Securities in an unrealized loss position are reviewed at least quarterly to determine if an other-than-temporary impairment is present based on certain quantitative and qualitative factors. We consider a number of factors in determining whether the impairment is other-than-temporary. These include, but are not limited to: 1) actions taken by rating agencies, 2) default by the issuer, 3) the significance of the decline, 4) an assessment of our intent to sell the security (including a more likely than not assessment of whether we will be required to sell the security) before recovering the security�s amortized cost, 5) the time period during which the decline has occurred, 6) an economic analysis of the issuer�s industry, and 7) the financial strength, liquidity, and recoverability of the issuer. Management performs a security-by-security review each quarter in evaluating the need for any other-than-temporary impairments. Although no set formula is used in this process, the investment performance, collateral position, and continued viability of the issuer are significant measures considered, along with an analysis regarding our expectations for recovery of the security�s entire amortized cost basis through the receipt of future cash flows. Based on our analysis, for the year ended December 31, 2014, we concluded that approximately $7.3 million of investment securities in an unrealized loss position were other-than-temporarily impaired, due to credit-related factors, resulting in a charge to earnings. The

Table of Contents

$7.3 million of credit losses included $4.7 million of non-credit losses previously recorded in other comprehensive income.

There are certain risks and uncertainties associated with determining whether declines in fair values are other-than-temporary. These include significant changes in general economic conditions and business markets, trends in certain industry segments, interest rate fluctuations, rating agency actions, changes in significant accounting estimates and assumptions, commission of fraud, and legislative actions. We continuously monitor these factors as they relate to the investment portfolio in determining the status of each investment.

During 2014, the energy and natural gas sector experienced increased volatility due to the decline in oil prices. A prolonged decline in oil prices could have a broad economic impact and put financial stress on companies in this sector. We continue to monitor our exposure to companies within and exposed to this sector closely. Our current exposure is predominantly with investment grade securities of companies with ample liquidity to weather a prolonged decline in oil prices. Many of these companies have displayed financial discipline by reducing capital expenditures to conserve cash and maintain their credit ratings. As of December 31, 2014, we have determined that no other-than-temporary impairments exist with our current investments within this industry.

We have deposits with certain financial institutions which exceed federally insured limits. We have reviewed the creditworthiness of these financial institutions and believe that there is minimal risk of a material loss.

Certain European countries have experienced varying degrees of financial stress. Risks from the debt crisis in Europe could continue to disrupt the financial markets, which could have a detrimental impact on global economic conditions and on sovereign and non-sovereign obligations. There remains considerable uncertainty as to future developments in the European debt crisis and the impact on financial markets.

Table of Contents

The chart shown below includes our non-sovereign fair value exposures in these countries as of December 31, 2014. As December 31, 2014, we had no unfunded exposure and had no direct sovereign fair value exposure.

Total Gross Non-sovereign Debt Funded

Financial Instrument and Country Financial Non-financial Exposure (Dollars In Millions)

Securities: United Kingdom $ 538.4 $ 812.2 $ 1,350.6 Netherlands 157.9 182.7 340.6 France 105.6 220.1 325.7 Switzerland 151.7 162.3 314.0 Germany 107.8 115.5 223.3 Spain 42.4 151.6 194.0 Sweden 126.5 37.5 164.0 Norway 12.3 93.6 105.9 Belgium � 105.3 105.3 Italy � 103.0 103.0 Ireland 11.6 71.9 83.5 Luxembourg � 64.3 64.3 Portugal � 15.6 15.6 Denmark 13.8 � 13.8 Total securities 1,268.0 2,135.6 3,403.6 Derivatives: Germany 24.8 � 24.8 United Kingdom 19.7 � 19.7 Switzerland 8.8 � 8.8 France 4.4 � 4.4 Total derivatives 57.7 � 57.7 Total securities $ 1,325.7 $ 2,135.6 $ 3,461.3

Table of Contents

Realized Gains and Losses

The following table sets forth realized investment gains and losses for the periods shown:

For The Year Ended December 31, Change 2014 2013 2012 2014 2013

(Dollars In Thousands) Fixed maturity gains - sales $ 76,242 $ 69,356 $ 73,017 $ 6,886 $ (3,661) Fixed maturity losses - sales (1,168) (6,195) (5,348) 5,027 (847) Equity gains - sales 495 3,276 206 (2,781) 3,070 Equity losses - sales � � (251) � 251 Impairments on fixed maturity securities (7,275) (19,100) (58,144) 11,825 39,044 Impairments on equity securities � (3,347) � 3,347 (3,347) Modco trading portfolio 142,016 (178,134) 177,986 320,150 (356,120) Other (12,283) (9,840) (12,774) (2,443) 2,934 Total realized gains (losses) - investments $ 198,027 $ (143,984) $ 174,692 $ 342,011 $ (318,676)

Derivatives related to variable annuity contracts: Interest rate futures - VA $ 27,801 $ (31,216) $ 21,138 $ 59,017 $ (52,354) Equity futures - VA (26,104) (52,640) (50,797) 26,536 (1,843) Currency futures - VA 14,433 (469) (2,763) 14,902 2,294 Volatility futures - VA � � (132) � 132 Variance swaps - VA (744) (11,310) (11,792) 10,566 482 Equity options - VA (41,216) (95,022) (37,370) 53,806 (57,652) Volatility options- VA � (115) � 115 (115) Interest rate swaptions - VA (22,280) 1,575 (2,260) (23,855) 3,835 Interest rate swaps - VA 214,164 (157,408) 3,264 371,572 (160,672) Embedded derivative - GMWB (119,844) 162,737 (22,120) (282,581) 184,857 Funds withheld derivative 47,792 71,862 � (24,070) 71,862 Total derivatives related to variable annuity contracts 94,002 (112,006) (102,832) 206,008 (9,174) Derivatives related to FIA contracts: Embedded derivative - FIA (16,932) (942) � (15,990) (942) Equity futures - FIA 870 173 � 697 173 Volatility futures - FIA 20 (5) � 25 (5) Equity options - FIA 9,906 1,866 � 8,040 1,866 Total derivatives related to FIA contracts (6,136) 1,092 � (7,228) 1,092 Derivatives related to IUL contracts: Embedded derivative - IUL (8) � � (8) � Equity futures - IUL 15 � � 15 � Equity options - IUL 150 � � 150 � Total derivatives related to IUL contracts 157 � � 157 � Embedded derivative - Modco reinsurance treaties (105,276) 205,176 (132,816) (310,452) 337,992 Interest rate swaps � 2,985 (87) (2,985) 3,072 Interest rate caps � � (2,666) � 2,666 Derivatives with PLC(1) 4,085 (15,072) 10,664 19,157 (25,736) Other derivatives (324) (14) (79) (310) 65 Total realized gains (losses) - derivatives $ (13,492) $ 82,161 $ (227,816) $ (95,653) $ 309,977

(1) These derivatives include an interest support, a yearly renewable term (�YRT�) premium support, and portfolio maintenance agreements between certain of our subsidiaries and PLC.

100

Table of Contents

Realized gains and losses on investments reflect portfolio management activities designed to maintain proper matching of assets and liabilities and to enhance long-term investment portfolio performance. The change in net realized investment gains (losses), excluding impairments and Modco trading portfolio activity during the year ended December 31, 2014, primarily reflects the normal operation of our asset/liability program within the context of the changing interest rate and spread environment, as well as tax planning strategies designed to utilize capital loss carryforwards.

Realized losses are comprised of both write-downs of other-than-temporary impairments and actual sales of investments. For the year ended December 31, 2014, we recognized pre-tax other-than-temporary impairments of $7.3 million due to credit-related factors, resulting in a charge to earnings. Of the credit losses, $4.7 million were non-credit losses previously recorded in other comprehensive income. For the year ended December 31, 2013, we recognized pre-tax other-than-temporary impairments of $22.4 million. These other-than-temporary impairments resulted from our analysis of circumstances and our belief that credit events, loss severity, changes in credit enhancement, and/or other adverse conditions of the respective issuers have caused, or will lead to, a deficiency in the contractual cash flows related to these investments. These other-than-temporary impairments, net of Modco recoveries, are presented in the chart below:

For The Year Ended December 31, 2014 2013

(Dollars In Millions) Alt-A MBS $ 3.6 $ 8.5 Other MBS 2.9 6.2 Corporate bonds � 4.3 Equities � 3.4 Other 0.8 � Total $ 7.3 $ 22.4

As previously discussed, management considers several factors when determining other-than-temporary impairments. Although we purchase securities with the intent to hold them until maturity, we may change our position as a result of a change in circumstances. Any such decision is consistent with our classification of all but a specific portion of our investment portfolio as available-for-sale. For the year ended December 31, 2014, we sold securities in an unrealized loss position with a fair value of $22.9 million. For such securities, the proceeds, realized loss, and total time period that the security had been in an unrealized loss position are presented in the table below:

Proceeds % Proceeds Realized Loss % Realized Loss (Dollars In Thousands)

<= 90 days $ 18,927 82.8% $ (445) 38.1% >90 days but <= 180 days 991 4.3 (167) 14.3 >180 days but <= 270 days 209 0.9 (16) 1.4 >270 days but <= 1 year 135 0.6 (20) 1.7 >1 year 2,606 11.4 (520) 44.5 Total $ 22,868 100.0% $ (1,168) 100.0%

For the year ended December 31, 2014, we sold securities in an unrealized loss position with a fair value (proceeds) of $22.9 million. The loss realized on the sale of these securities was $1.2 million. We made the decision to exit these holdings in conjunction with our overall asset liability management process.

For the year ended December 31, 2014, we sold securities in an unrealized gain position with a fair value of $1.7 billion. The gain realized on the sale of these securities was $76.7 million.

The $12.3 million of other realized losses recognized for the year ended December 31, 2014, primarily consists of mortgage loan losses of $11.1 million.

101

Table of Contents

For the year ended December 31, 2014, net gains of $142.0 million primarily related to changes in fair value on our Modco trading portfolios were included in realized gains and losses. Of this amount, approximately $32.6 million of gains were realized through the sale of certain securities, which will be reimbursed to our reinsurance partners over time through the reinsurance settlement process for this block of business. The Modco embedded derivative associated with the trading portfolios had realized pre-tax losses of $105.3 million during the year ended December 31, 2014. These losses were due to wider credit spreads and lower treasury yields.

Realized investment gains and losses related to derivatives represent changes in their fair value during the period and termination gains/(losses) on those derivatives that were closed during the period.

We use various derivative instruments to manage risks related to certain life insurance and annuity products. We can use these derivatives as economic hedges against risks inherent in the products. These risks have a direct impact on the cost of these products and are correlated with the equity markets, interest rates, foreign currency levels, and overall volatility. The hedged risks are recorded through the recognition of embedded derivatives associated with the products. These products include the GMWB rider associated with the variable annuity, fixed indexed annuity products as well as indexed universal life products. During the year ended December 31, 2014, we experienced net realized gains on derivatives related to VA contracts of approximately $94.0 million.

The Funds Withheld derivative associated with Shades Creek had a pre-tax realized gain of $47.8 million for the year ended December 31, 2014.

Certain of our subsidiaries have derivatives with PLC. These derivatives consist of an interest support agreement, a YRT premium support agreement, and two portfolio maintenance agreements with PLC. We recognized a pre-tax gain of $4.2 million related to the interest support agreement and a pre-tax gain of $0.1 million related to the YRT premium support agreement for the year ended December 31, 2014. We entered into two separate portfolio maintenance agreements in October 2012. We recognized a pre-tax loss of $0.3 million for the year ended December 31, 2014 related to our portfolio maintenance agreements.

We also use various swaps and other types of derivatives to mitigate risk related to other exposures. These contracts generated net pre-tax losses of $0.3 million for the year ended December 31, 2014.

Unrealized Gains and Losses � Available-for-Sale Securities

The information presented below relates to investments at a certain point in time and is not necessarily indicative of the status of the portfolio at any time after December 31, 2014, the balance sheet date. Information about unrealized gains and losses is subject to rapidly changing conditions, including volatility of financial markets and changes in interest rates. Management considers a number of factors in determining if an unrealized loss is other-than-temporary, including the expected cash to be collected and the intent, likelihood, and/or ability to hold the security until recovery. Consistent with our long-standing practice, we do not utilize a �bright line test� to determine other-than-temporary impairments. On a quarterly basis, we perform an analysis on every security with an unrealized loss to determine if an other-than-temporary impairment has occurred. This analysis includes reviewing several metrics including collateral, expected cash flows, ratings, and liquidity. Furthermore, since the timing of recognizing realized gains and losses is largely based on management�s decisions as to the timing and selection of investments to be sold, the tables and information provided below should be considered within the context of the overall unrealized gain/(loss) position of the portfolio. We had an overall net unrealized gain of $3.1 billion, prior to tax, DAC, VOBA, and policyholder dividend obligation offsets, as of December 31, 2014, and an overall net unrealized gain of $1.1 billion as of December 31, 2013.

102

Table of Contents

For fixed maturity and equity securities held that are in an unrealized loss position as of December 31, 2014, the fair value, amortized cost, unrealized loss, and total time period that the security has been in an unrealized loss position are presented in the table below:

Fair % Fair Amortized % Amortized Unrealized % Unrealized Value Value Cost Cost Loss Loss

(Dollars In Thousands) <= 90 days $ 2,062,945 49.9% $ 2,146,064 49.3% $ (83,119) 38.9% >90 days but <= 180 days 93,453 2.3 103,924 2.4 (10,471) 4.9 >180 days but <= 270 days 35,997 0.9 38,032 0.9 (2,035) 1.0 >270 days but <= 1 year 40,409 1.0 41,643 1.0 (1,234) 0.6 >1 year but <= 2 years 1,166,007 28.2 1,211,590 27.8 (45,583) 21.4 >2 years but <= 3 years 424,143 10.3 461,994 10.6 (37,851) 17.7 >3 years but <= 4 years 28,698 0.7 30,788 0.7 (2,090) 1.0 >4 years but <= 5 years 14,240 0.3 17,258 0.4 (3,018) 1.4 >5 years 271,887 6.4 299,905 6.9 (28,018) 13.1 Total $ 4,137,779 100.0% $ 4,351,198 100.0% $ (213,419) 100.0%

The majority of the unrealized loss as of December 31, 2014 for both investment grade and below investment grade securities was attributable to fluctuations in credit and mortgage spreads for certain securities. The negative impact of spread levels for certain securities was partially offset by lower treasury yield levels and the associated positive effect on security prices. Spread levels have improved since December 31, 2013. However, certain types of securities, including tranches of RMBS and ABS, continue to be priced at a level which has caused the unrealized losses noted above. We believe that spread levels on these RMBS and ABS are largely due to uncertainties regarding future performance of the underlying mortgage loans and/or assets.

As of December 31, 2014, the Barclays Investment Grade Index was priced at 127.1 bps versus a 10 year average of 165.6 bps. Similarly, the Barclays High Yield Index was priced at 519.0 bps versus a 10 year average 605.0 bps. As of December 31, 2014, the five, ten, and thirty-year U.S. Treasury obligations were trading at levels of 1.654%, 2.172%, and 2.752%, as compared to 10 year averages of 2.517%, 3.320%, and 4.050%, respectively.

As of December 31, 2014, 68.7% of the unrealized loss was associated with securities that were rated investment grade. We have examined the performance of the underlying collateral and cash flows and expect that our investments will continue to perform in accordance with their contractual terms. Factors such as credit enhancements within the deal structures and the underlying collateral performance/characteristics support the recoverability of the investments. Based on the factors discussed, we do not consider these unrealized loss positions to be other-than-temporary. However, from time to time, we may sell securities in the ordinary course of managing our portfolio to meet diversification, credit quality, yield enhancement, asset/liability management, and liquidity requirements.

Expectations that investments in mortgage-backed and asset-backed securities will continue to perform in accordance with their contractual terms are based on assumptions that a market participant would use in determining the current fair value. It is reasonably possible that the underlying collateral of these investments will perform worse than current market expectations and that such an event may lead to adverse changes in the cash flows on our holdings of these types of securities. This could lead to potential future write-downs within our portfolio of mortgage-backed and asset-backed securities. Expectations that our investments in corporate securities and/or debt obligations will continue to perform in accordance with their contractual terms are based on evidence gathered through our normal credit surveillance process. Although we do not anticipate such events, it is reasonably possible that issuers of our investments in corporate securities will perform worse than current expectations. Such events may lead us to recognize potential future write-downs within our portfolio of corporate securities. It is also possible that such unanticipated events would lead us to dispose of those certain holdings and recognize the effects of any such market movements in our financial statements.

As of December 31, 2014, there were estimated gross unrealized losses of $7.7 million related to our mortgage-backed securities collateralized by Alt-A mortgage loans. Gross unrealized losses in our securities collateralized by Alt-A residential mortgage loans as of December 31, 2014, were primarily the result of continued

103

Table of Contents

widening spreads, representing marketplace uncertainty arising from higher defaults in Alt-A residential mortgage loans and rating agency downgrades of securities collateralized by Alt-A residential mortgage loans.

We have no material concentrations of issuers or guarantors of fixed maturity securities. The industry segment composition of all securities in an unrealized loss position held as of December 31, 2014, is presented in the following table:

Fair % Fair Amortized % Amortized Unrealized %

Unrealized Value Value Cost Cost Loss Loss

(Dollars In Thousands) Banking $ 357,458 8.6% $ 377,105 8.7% $ (19,647) 9.2% Other finance 96,060 2.3 97,814 2.2 (1,754) 0.8 Electric 68,387 1.7 69,566 1.6 (1,179) 0.6 Energy and natural gas 757,450 18.3 806,364 18.6 (48,914) 22.9 Insurance 56,276 1.4 64,886 1.5 (8,610) 4.0 Communications 170,531 4.1 176,058 4.0 (5,527) 2.6 Basic industrial 270,962 6.5 310,324 7.1 (39,362) 18.4 Consumer noncyclical 254,852 6.2 262,942 6.0 (8,090) 3.8 Consumer cyclical 201,510 4.9 210,858 4.8 (9,348) 4.4 Finance companies 5,077 0.1 5,965 0.1 (888) 0.4 Capital goods 88,630 2.1 90,775 2.1 (2,145) 1.0 Transportation 22,316 0.5 22,505 0.5 (189) 0.1 Other industrial 63,436 1.5 64,625 1.5 (1,189) 0.6 Brokerage 29,483 0.7 29,820 0.7 (337) 0.2 Technology 129,487 3.1 135,406 3.1 (5,919) 2.8 Real estate 8,990 0.2 9,020 0.2 (30) � Other utility � � � � � � Commercial mortgage-backed securities 152,437 3.7 154,801 3.6 (2,364) 1.1 Other asset-backed securities 646,153 15.6 682,103 15.7 (35,950) 16.8 Residential mortgage-backed non-agency securities 208,194 5.0 219,648 5.0 (11,454) 5.4 Residential mortgage-backed agency securities 24,984 0.6 25,794 0.6 (810) 0.4 U.S. government-related securities 512,720 12.4 522,002 12.0 (9,282) 4.3 Other government-related securities � � � � � � States, municipals, and political divisions 12,386 0.5 12,817 0.4 (431) 0.2 Total $ 4,137,779 100.0% $ 4,351,198 100.0% $ (213,419) 100.0%

104

Table of Contents

The percentage of our unrealized loss positions, segregated by industry segment, is presented in the following table:

As of December 31, 2014 2013

Banking 9.2% 8.1% Other finance 0.8 2.3 Electric 0.6 7.0 Energy and natural gas 22.9 7.4 Insurance 4.0 4.2 Communications 2.6 5.6 Basic industrial 18.4 5.1 Consumer noncyclical 3.8 12.1 Consumer cyclical 4.4 6.1 Finance companies 0.4 0.2 Capital goods 1.0 2.8 Transportation 0.1 2.4 Other industrial 0.6 1.6 Brokerage 0.2 0.7 Technology 2.8 3.9 Real estate � 0.6 Other utility � 0.7 Commercial mortgage-backed securities 1.1 3.3 Other asset-backed securities 16.8 11.5 Residential mortgage-backed non-agency securities 5.4 2.5 Residential mortgage-backed agency securities 0.4 1.6 U.S. government-related securities 4.3 8.9 Other government-related securities � � States, municipals, and political divisions 0.2 1.4 Total 100.0% 100.0%

The range of maturity dates for securities in an unrealized loss position as of December 31, 2014, varies, with 24.8% maturing in less than 5 years, 59.4% maturing between 5 and 10 years, and 15.8% maturing after 10 years. The following table shows the credit rating of securities in an unrealized loss position as of December 31, 2014:

S&P or Equivalent Fair % Fair Amortized % Amortized Unrealized % Unrealized Designation Value Value Cost Cost Loss Loss

(Dollars In Thousands) AAA/AA/A $ 2,027,295 49.0% $ 2,095,724 48.2% $ (68,429) 32.1% BBB 1,599,578 38.7 1,677,670 38.6 (78,092) 36.6 Investment grade 3,626,873 87.7 3,773,394 86.8 (146,521) 68.7 BB 265,969 6.4 293,572 6.7 (27,603) 12.9 B 41,653 1.0 65,574 1.5 (23,921) 11.2 CCC or lower 203,284 4.9 218,658 5.0 (15,374) 7.2 Below investment grade 510,906 12.3 577,804 13.2 (66,898) 31.3 Total $ 4,137,779 100.0% $ 4,351,198 100.0% $ (213,419) 100.0%

As of December 31, 2014, we held a total of 416 positions that were in an unrealized loss position. Included in that amount were 105 positions of below investment grade securities with a fair value of $510.9 million that were in an unrealized loss position. Total unrealized losses related to below investment grade securities were $66.9 million, of which $41.9 million had been in an unrealized loss position for more than twelve months. Below investment grade securities in an unrealized loss position were 1.1% of invested assets.

105

Table of Contents

As of December 31, 2014, securities in an unrealized loss position that were rated as below investment grade represented 12.3% of the total fair value and 31.3% of the total unrealized loss. We have the ability and intent to hold these securities to maturity. After a review of each security and its expected cash flows, we believe the decline in fair value to be temporary. As of December 31, 2014, total unrealized losses for all securities in an unrealized loss position for more than twelve months were $116.6 million. A widening of credit spreads is estimated to account for unrealized losses of $508.7 million, with changes in treasury rates offsetting this loss by an estimated $392.1 million.

The majority of our RMBS holdings as of December 31, 2014, were super senior or senior bonds in the capital structure. Our total non-agency portfolio has a weighted-average life of 6.41 years. The following table categorizes the weighted-average life for our non-agency portfolio, by category of material holdings, as of December 31, 2014:

Weighted- Average

Non-agency portfolio Life

Prime 7.73 Alt-A 4.24 Sub-prime 3.77

The following table includes the fair value, amortized cost, unrealized loss, and total time period that the security has been in an unrealized loss position for all below investment grade securities as of December 31, 2014:

Fair % Fair Amortized % Amortized Unrealized % Unrealized Value Value Cost Cost Loss Loss

(Dollars In Thousands) <= 90 days $ 214,200 41.9% $ 228,055 39.5% $ (13,855) 20.7% >90 days but <= 180 days 48,989 9.6 57,347 9.9 (8,358) 12.5 >180 days but <= 270 days 27,983 5.5 29,959 5.2 (1,976) 3.0 >270 days but <= 1 year 7,270 1.4 8,045 1.4 (775) 1.2 >1 year but <= 2 years 70,487 13.8 81,850 14.2 (11,363) 17.0 >2 years but <= 3 years 17,516 3.4 30,196 5.2 (12,680) 19.0 >3 years but <= 4 years 4,265 0.8 4,585 0.8 (320) 0.5 >4 years but <= 5 years 1,978 0.4 2,258 0.4 (280) 0.4 >5 years 118,218 23.2 135,509 23.4 (17,291) 25.7 Total $ 510,906 100.0% $ 577,804 100.0% $ (66,898) 100.0%

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity refers to a company�s ability to generate adequate amounts of cash to meet its needs. We meet our liquidity requirements primarily through positive cash flows from our operating subsidiaries. Primary sources of cash from the operating subsidiaries are premiums, deposits for policyholder accounts, investment sales and maturities, and investment income. Primary uses of cash include benefit payments, withdrawals from policyholder accounts, investment purchases, policy acquisition costs, interest payments, and other operating expenses. We believe that we have sufficient liquidity to fund our cash needs under normal operating scenarios.

In the event of significant unanticipated cash requirements beyond our normal liquidity needs, we have additional sources of liquidity available depending on market conditions and the amount and timing of the liquidity need. These additional sources of liquidity include cash flows from operations, the sale of liquid assets, accessing our credit facility, and other sources described herein.

Our decision to sell investment assets could be impacted by accounting rules, including rules relating to the likelihood of a requirement to sell securities before recovery of our cost basis. Under stressful market and economic conditions, liquidity may broadly deteriorate which could negatively impact our ability to sell investment assets. If we

106

Table of Contents

require on short notice significant amounts of cash in excess of normal requirements, we may have difficulty selling investment assets in a timely manner, be forced to sell them for less than we otherwise would have been able to realize, or both.

While we anticipate that the cash flows of our operations and our operating subsidiaries will be sufficient to meet our investment commitments and operating cash needs in a normal credit market environment, we recognize that investment commitments scheduled to be funded may, from time to time, exceed the funds then available.Therefore, we have established repurchase agreement programs for certain of our insurance subsidiaries to provide liquidity when needed. We expect that the rate received on our investments will equal or exceed our borrowing rate. Under this program, we may, from time to time, sell an investment security at a specific price and agree to repurchase that security at another specified price at a later date. These borrowings are for a term less than ninety days. The market value of securities to be repurchased is monitored and collateral levels are adjusted where appropriate to protect the counterparty against credit exposure. The agreements provide for net settlement in the event of default or on termination of the agreements. As of December 31, 2014, the fair value of securities pledged under the repurchase program was $55.1 million and the repurchase obligation of $50.0 million was included in our consolidated balance sheets (at an average borrowing rate of 16 basis points). During 2014, the maximum balance outstanding at any one point in time related to these programs was $633.7 million. The average daily balance was $470.4 million (at an average borrowing rate of 11 basis points) during the year ended December 31, 2014. As of December 31, 2013, we had a $350.0 million outstanding balance related to such borrowings. During 2013, the maximum balance outstanding at any one point in time related to these programs was $815.0 million. The average daily balance was $496.9 million (at an average borrowing rate of 11 basis points) during the year ended December 31, 2013.

Additionally, we may, from time to time, sell short-duration stable value products to complement our cash management practices. Depending on market conditions, we may also use securitization transactions involving our commercial mortgage loans to increase liquidity for the operating subsidiaries.

Credit Facility

Under a revolving line of credit arrangement that was in effect until February 2, 2015 (the �Credit Facility�), we and PLC had the ability to borrow on an unsecured basis up to an aggregate principal amount of $750 million. We had the right in certain circumstances to request that the commitment under the Credit Facility be increased up to a maximum principal amount of $1.0 billion. Balances outstanding under the Credit Facility accrued interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC�s senior unsecured long-term debt (�Senior Debt�), or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent�s prime rate, (y) 0.50% above the Federal Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC�s Senior Debt. The Credit Facility also provided for a facility fee at a rate, 0.175%, that could vary with the ratings of PLC�s Senior Debt and that was calculated on the aggregate amount of commitments under the Credit Facility, whether used or unused. The Credit Facility provided that PLC was liable for the full amount of any obligations for borrowings or letters of credit, including those of the Company, under the Credit Facility. The maturity date of the Credit Facility was July 17, 2017. We are not aware of any non-compliance with the financial debt covenants of the Credit Facility as of December 31, 2014. We did not have an outstanding balance under the Credit Facility as of December 31, 2014. PLC had an outstanding balance of $450.0 million bearing interest at a rate of LIBOR plus 1.20% under the Credit Facility as of December 31, 2014. As of December 31, 2014, we had used $55.0 million of borrowing capacity by executing a Letter of Credit under the Credit Facility for the benefit of an affiliated captive reinsurance subsidiary of the Company. This Letter of Credit had not been drawn upon as of December 31, 2014.

On February 2, 2015, we and PLC amended and restated the Credit Facility (the �2015 Credit Facility�). Under the 2015 Credit Facility, we have the ability to borrow on an unsecured basis up to an aggregate principal amount of $1.0 billion. We have the right in certain circumstances to request that the commitment under the 2015 Credit Facility be increased up to a maximum principal amount of $1.25 billion. Balances outstanding under the 2015 Credit Facility accrue interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC�s Senior Debt, or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent�s prime rate, (y) 0.50% above the Federal Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC�s Senior Debt. The 2015 Credit Facility also provided for a facility fee at a rate that varies with the ratings of PLC�s Senior Debt and that is calculated on the aggregate amount of commitments under the 2015 Credit

107

Table of Contents

Facility, whether used or unused. The facility fee rate was 0.15% on February 2, 2015, and was adjusted to 0.125% upon our subsequent ratings upgrade on February 2, 2015. The 2015 Credit Facility provides that PLC is liable for the full amount of any obligations for borrowings or letters of credit, including those of the Company, under the 2015 Credit Facility. The maturity date of the 2015 Credit Facility is February 2, 2020. We are not aware of any non-compliance with the financial debt covenants of the Credit Facility or the 2015 Credit Facility as of February 2, 2015. PLC had an outstanding balance of $390.0 million bearing interest at a rate of LIBOR plus 1.20% when the Credit Facility was amended and restated by the 2015 Credit Facility on February 2, 2015. The $55.0 million Letter of Credit, which we executed under the Credit Facility for the benefit of an affiliated captive reinsurance subsidiary of the Company, remained undrawn as of February 2, 2015.

Sources and Use of Cash

Our primary sources of funding are from our insurance operations and revenues from investments. These sources of cash support our operations and are used to pay dividends to PLC. The states in which we and our insurance subsidiaries are domiciled impose certain restrictions on the ability to pay dividends. These restrictions are based in part on the prior year�s statutory income and/or surplus.

We are a member of the FHLB of Cincinnati. FHLB advances provide an attractive funding source for short-term borrowing and for the sale of funding agreements. Membership in the FHLB requires that we purchase FHLB capital stock based on a minimum requirement and a percentage of the dollar amount of advances outstanding. Our borrowing capacity is determined by the following factors: 1) total advance capacity is limited to the lower of 50% of total assets or 100% of mortgage-related assets of Protective Life Insurance Company, 2) ownership of appropriate capital and activity stock to support continued membership in the FHLB and current and future advances, and 3) the availability of adequate eligible mortgage or treasury/agency collateral to back current and future advances.

We held $66.0 million of FHLB common stock as of December 31, 2014, which is included in equity securities. In addition, our obligations under the advances must be collateralized. We maintain control over any such pledged assets, including the right of substitution. As of December 31, 2014, we had $671.9 million of funding agreement-related advances and accrued interest outstanding under the FHLB program.

As of December 31, 2014, we reported approximately $613.0 million (fair value) of Auction Rate Securities (�ARS�) in non-Modco portfolios. As of December 31, 2014, 100% of these ARS were rated Aaa/AA+. While the auction rate market has experienced liquidity constraints, we believe that based on our current liquidity position and our operating cash flows, any lack of liquidity in the ARS market will not have a material impact on our liquidity, financial condition, or cash flows. For information on how we determine the fair value of these securities, refer to Note 22, Fair Value of Financial Instruments, of the consolidated financial statements.

The liquidity requirements primarily relate to the liabilities associated with our various insurance and investment products, operating expenses, and income taxes. Liabilities arising from insurance and investment products include the payment of policyholder benefits, as well as cash payments in connection with policy surrenders and withdrawals, policy loans, and obligations to redeem funding agreements.

We maintain investment strategies intended to provide adequate funds to pay benefits and expected surrenders, withdrawals, loans, and redemption obligations without forced sales of investments. In addition, we hold highly liquid, high-quality short-term investment securities and other liquid investment grade fixed maturity securities to fund our expected operating expenses, surrenders, and withdrawals. We were committed as of December 31, 2014, to fund mortgage loans in the amount of $537.7 million.

Our positive cash flows from operations are used to fund an investment portfolio that provides for future benefit payments. We employ a formal asset/liability program to manage the cash flows of our investment portfolio relative to our long-term benefit obligations. As of December 31, 2014, we held cash and short-term investments of $515.0 million.

100

108

Table of Contents

The following chart includes the cash flows provided by or used in operating, investing, and financing activities for the following periods:

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Net cash provided by operating activities $ 643,654 $ 542,477 $ 696,632 Net cash provided by (used in) investing activities 92,798 (1,082,652) (585,833) Net cash (used in) provided by financing activities (813,745) 616,172 (10,992) Total $ (77,293) $ 75,997 $ 99,807

For The Year Ended December 31, 2014 as compared to The Year Ended December 31, 2013

Net cash provided by operating activities - Cash flows from operating activities are affected by the timing of premiums received, fees received, investment income, and expenses paid. Principal sources of cash include sales of our products and services. We typically generate positive cash flows from operating activities, as premiums and deposits collected from our insurance and investment products exceed benefit payments and redemptions, and we invest the excess. Accordingly, in analyzing our cash flows we focus on the change in the amount of cash available and used in investing activities.

Net cash provided by (used) in investing activities - Changes in cash from investing activities primarily related to the activity in our investment portfolio.

Net cash (used in) provided by financing activities - Changes in cash from financing activities included $300.0 million outflows from repurchase program borrowings for the year ended December 31, 2014, as compared to $200.0 million inflows for the year ended December 31, 2013 and $250.6 million outflows of investment product and universal life net activity for the year ended December 31, 2014, as compared to $345.1 million of inflows in the prior year. Net issuances of non-recourse funding obligations equaled $32.3 million during the year ended December 31, 2014, as compared to net issuances of $46.0 million during the year ended December 31, 2013. In addition, we paid $300.0 million of dividends for the year ended December 31, 2014, as compared to $45.0 million for the year ended December 31, 2013.

Capital Resources

Our primary sources of capital are from retained income from our insurance operations and capital infusions from our parent, PLC. Additionally, we have access to the Credit Facility discussed above.

Captive Reinsurance Companies

Our life insurance subsidiaries are subject to a regulation entitled �Valuation of Life Insurance Policies Model Regulation,� commonly known as �Regulation XXX,� and a supporting guideline entitled �The Application of the Valuation of Life Insurance Policies Model Regulation,� commonly known as �Guideline AXXX.� The regulation and supporting guideline require insurers to establish statutory reserves for term and universal life insurance policies with long-term premium guarantees that are consistent with the statutory reserves required for other individual life insurance policies with similar guarantees. Many market participants believe that these levels of reserves are non-economic. We use captive reinsurance companies to implement reinsurance and capital management actions to satisfy these reserve requirements by financing the non-economic reserves either through the issuance of non-recourse funding obligations by the captives or obtaining Letters of Credit from third-party financial institutions. For more information regarding our use of captives and their impact on our financial statements, please refer to Note 12, Debt and Other Obligations.

Our captive reinsurance companies assume business from affiliates only. Our captives are capitalized to a level we believe is sufficient to support the contractual risks and other general obligations of the respective captive entity. All of our captive reinsurance companies, with the exception of Shades Creek, are wholly owned subsidiaries and are located domestically. The captive insurance companies are subject to regulations in the state of domicile.

The National Association of Insurance Commissioners (�NAIC�), through various committees, subgroups and dedicated task forces, has undertaken a review of the use of captives and special purpose vehicles used to transfer

101

109

Table of Contents

insurance risk in relation to existing state laws and regulations, and several committees have adopted or exposed for comment white papers and reports that, if or when implemented, could impose additional requirements on the use of captives and other reinsurers.

The Principles Based Reserving Implementation (EX) Task Force of the NAIC, charged with analysis of the adoption of a principles-based reserving methodology, recently adopted the �conceptual framework� contained in a report issued by Rector & Associates, Inc., dated June 4, 2014 (as modified or supplemented, the �Rector Report�), that contains numerous recommendations pertaining to the regulation and use of captive reinsurers. Certain high-level recommendations have been adopted and assigned to various NAIC working groups, which working groups are in various stages of discussions regarding recommendations. One recommendation of the Rector Report has been adopted as Actuarial Guideline XXXXVIII (�AG48�). AG48 sets more restrictive standards on the permitted collateral utilized to back reserves of a captive. Other recommendations in the Rector Report are subject to ongoing comment and revision. It is unclear at this time to what extent the recommendations in the Rector Report, or additional or revised recommendations relating to captive transactions or reinsurance transactions in general, will be adopted by the NAIC. If the recommendations proposed in the Rector Report are implemented, it will likely be difficult for the Company to establish new captive financing arrangements on a basis consistent with past practices. As a result of AG48 and the Rector Report, the implementation of new captive structures in the future may be less capital efficient, may lead to lower product returns and/or increased product pricing or result in reduced sales of certain products. Additionally, in some circumstances AG48 and the implementation of the recommendations in the Rector Report could impact the Company�s ability to engage in certain reinsurance transactions with non-affiliates.

We also use a captive reinsurance company to reinsure risks associated with GMWB and GMDB riders which helps us to manage those risks on an economic basis. In an effort to mitigate the equity market risks relative to our RBC ratio, we reinsure these risks to Shades Creek. The purpose of Shades Creek is to reduce the volatility in RBC due to non-economic variables included within the RBC calculation.

During 2012, PLC entered into an intercompany capital support agreement with Shades Creek. The agreement provides through a guarantee that PLC will contribute assets or purchase surplus notes (or cause an affiliate or third party to contribute assets or purchase surplus notes) in amounts necessary for Shades Creek�s regulatory capital levels to equal or exceed minimum thresholds as defined by the agreement. Under this support agreement, we issued a $55 million Letter of Credit on December 31, 2014. No borrowings under this Letter of Credit were outstanding as of December 31, 2014. The maximum potential future payment amount which could be required under the capital support agreement will be dependent on numerous factors, including the performance of equity markets, the level of interest rates, performance of associated hedges, and related policyholder behavior.

A life insurance company�s statutory capital is computed according to rules prescribed by the NAIC, as modified by state law. Generally speaking, other states in which a company does business defer to the interpretation of the domiciliary state with respect to NAIC rules, unless inconsistent with the other state�s regulations. Statutory accounting rules are different from GAAP and are intended to reflect a more conservative view, for example, requiring immediate expensing of policy acquisition costs. The NAIC�s risk-based capital requirements require insurance companies to calculate and report information under a risk-based capital formula. The achievement of long-term growth will require growth in our statutory capital and that of our insurance subsidiaries. We and our subsidiaries may secure additional statutory capital through various sources, such as retained statutory earnings or our equity contributions. In general, dividends up to specified levels are considered ordinary and may be paid thirty days after written notice to the insurance commissioner of the state of domicile unless such commissioner objects to the dividend prior to the expiration of such period. Dividends in larger amounts are considered extraordinary and are subject to affirmative prior approval by such commissioner. The maximum amount that would qualify as an ordinary dividend from our insurance subsidiaries in 2015 is approximately $138.4 million.

State insurance regulators and the NAIC have adopted risk-based capital (�RBC�) requirements for life insurance companies to evaluate the adequacy of statutory capital and surplus in relation to investment and insurance risks. The requirements provide a means of measuring the minimum amount of statutory surplus appropriate for an insurance company to support its overall business operations based on its size and risk profile. A company�s risk-based statutory surplus is calculated by applying factors and performing calculations relating to various asset, premium, claim, expense, and reserve items. Regulators can then measure the adequacy of a company�s statutory surplus by comparing it to the RBC. We manage our capital consumption by using the ratio of our total adjusted capital, as defined by the

102

110

Table of Contents

insurance regulators, to our company action level RBC (known as the RBC ratio), also as defined by insurance regulators. As of December 31, 2014, our total adjusted capital and company action level RBC was $3.9 billion and $687.8 million, respectively, providing an RBC of approximately 562%.

Statutory reserves established for VA contracts are sensitive to changes in the equity markets and are affected by the level of account values relative to the level of any guarantees and product design. As a result, the relationship between reserve changes and equity market performance may be non-linear during any given reporting period. Market conditions greatly influence the capital required due to their impact on the valuation of reserves and derivative investments mitigating the risk in these reserves. Risk mitigation activities may result in material and sometimes counterintuitive impacts on statutory surplus and RBC ratio. Notably, as changes in these market and non-market factors occur, both our potential obligation and the related statutory reserves and/or required capital can vary at a non-linear rate.

Our statutory surplus is impacted by credit spreads as a result of accounting for the assets and liabilities on our fixed MVA annuities. Statutory separate account assets supporting the fixed MVA annuities are recorded at fair value. In determining the statutory reserve for the fixed MVA annuities, we are required to use current crediting rates based on U.S. Treasuries. In many capital market scenarios, current crediting rates based on U.S. Treasuries are highly correlated with market rates implicit in the fair value of statutory separate account assets. As a result, the change in the statutory reserve from period to period will likely substantially offset the change in the fair value of the statutory separate account assets. However, in periods of volatile credit markets, actual credit spreads on investment assets may increase or decrease sharply for certain sub-sectors of the overall credit market, resulting in statutory separate account asset market value gains or losses. As actual credit spreads are not fully reflected in current crediting rates based on U.S. Treasuries, the calculation of statutory reserves will not substantially offset the change in fair value of the statutory separate account assets resulting in a change in statutory surplus. The result of this mismatch had a negative impact to our statutory surplus of approximately $3 million on a pre-tax basis for the year ended December 31, 2014, as compared to a negative impact to our statutory surplus of approximately $57 million on a pre-tax basis for the year ended December 31, 2013.

On October 1, 2013 we completed the acquisition contemplated by the master agreement (the �Master Agreement�) dated April 10, 2013 and incorporated by reference in this Annual Report on Form 10-K as Exhibit 2. Pursuant to that Master Agreement with AXA Financial, Inc. (�AXA�) and AXA Equitable Financial Services, LLC (�AEFS�), we acquired the stock of MONY Life Insurance Company (�MONY�) from AEFS and entered into a reinsurance agreement (the �Reinsurance Agreement�) pursuant to which it reinsured on a 100% indemnity reinsurance basis certain business (the �MLOA Business�) of MONY Life Insurance Company of America (�MLOA�). The final aggregate purchase price of MONY was $689 million. The ceding commission for the reinsurance of the MLOA Business was $370 million. Together, the purchase of MONY and reinsurance of the MLOA Business are hereto referred to as (the �MONY acquisition�). The MONY acquisition allowed us to invest our capital and increase the scale of its Acquisitions segment. The MONY acquisition business is comprised of traditional and universal life insurance policies and fixed and variable annuities, most of which were written prior to 2004. See Note 3, Significant Acquisitions, to the consolidated financial statements included in this report for additional information.

We cede material amounts of insurance and transfer related assets to other insurance companies through reinsurance. However, notwithstanding the transfer of related assets, we remain liable with respect to ceded insurance should any reinsurer fail to meet the obligations that it assumed. We evaluate the financial condition of our reinsurers and monitor the associated concentration of credit risk. For the year ended December 31, 2014, we ceded premiums to unaffiliated third party reinsurers amounting to $1.4 billion. In addition, we had receivables from unaffiliated reinsurers amounting to $5.9 billion as of December 31, 2014. We review reinsurance receivable amounts for collectability and establish bad debt reserves if deemed appropriate. For additional information related to our reinsurance exposure, see Note 11, Reinsurance to the consolidated financial statements included in this report.

103

111

Table of Contents

Ratings

Various Nationally Recognized Statistical Rating Organizations (�rating organizations�) review the financial performance and condition of insurers, including us and our insurance subsidiaries, and publish their financial strength ratings as indicators of an insurer�s ability to meet policyholder and contract holder obligations. These ratings are important to maintaining public confidence in an insurer�s products, its ability to market its products and its competitive position. The following table summarizes the current financial strength ratings of our significant member companies from the major independent rating organizations:

Standard & Ratings A.M. Best Fitch Poor�s Moody�s

Our ratings are subject to review and change by the rating organizations at any time and without notice. A downgrade or other negative action by a ratings organization with respect to our financial strength ratings or those of our insurance subsidiaries could adversely affect sales, relationships with distributors, the level of policy surrenders and withdrawals, competitive position in the marketplace, and the cost or availability of reinsurance. The rating agencies may take various actions, positive or negative, with respect to the debt and financial strength ratings of PLC and its subsidiaries, including as a result of PLC�s status as a subsidiary of Dai-ichi Life.

LIABILITIES

Many of our products contain surrender charges and other features that are designed to reward persistency and penalize the early withdrawal of funds. Certain stable value and annuity contracts have market-value adjustments that protect us against investment losses if interest rates are higher at the time of surrender than at the time of issue.

As of December 31, 2014, we had policy liabilities and accruals of approximately $31.5 billion. Our interest-sensitive life insurance policies have a weighted average minimum credited interest rate of approximately 3.50%.

Contractual Obligations

We enter into various obligations to third parties in the ordinary course of our operations. However, we do not believe that our cash flow requirements can be assessed solely based upon an analysis of these obligations. The most significant factors affecting our future cash flows are our ability to earn and collect cash from our customers, and the cash flows arising from our investment program. Future cash outflows, whether they are contractual obligations or not, will also vary based upon our future needs. Although some outflows are fixed, others depend on future events. Examples of fixed obligations include our obligations to pay principal and interest on fixed-rate borrowings. Examples of obligations that will vary include obligations to pay interest on variable-rate borrowings and insurance liabilities that depend on future interest rates, market performance, or surrender provisions. Many of our obligations are linked to cash-generating contracts. In addition, our operations involve significant expenditures that are not based upon contractual obligations. These include expenditures for income taxes and payroll.

As of December 31, 2014, we carried a $166.9 million liability for uncertain tax positions. These amounts are not included in the long-term contractual obligations table because of the difficulty in making reasonably reliable estimates of the occurrence or timing of cash settlements with the respective taxing authorities.

104

112

Table of Contents

The table below sets forth future maturities of our contractual obligations.

Payments due by period Less than More than

Total 1 year 1-3 years 3-5 years 5 years (Dollars In Thousands)

Non-recourse funding obligations(1) $ 4,488,710 $ 95,703 $ 203,530 $ 217,060 $ 3,972,417 Stable value products(2) 2,024,897 744,680 818,670 400,436 61,111 Operating leases(3) 25,081 5,911 7,692 3,990 7,488 Home office lease(4) 79,910 1,233 2,469 76,208 � Mortgage loan and investment commitments 544,555 544,555 � � � Repurchase program borrowings(5) 50,000 50,000 � � � Policyholder obligations(6) 42,410,207 1,355,962 2,751,689 3,221,879 35,080,677 Total $ 49,623,360 $ 2,798,044 $ 3,784,050 $ 3,919,573 $ 39,121,693

(1) Non-recourse funding obligations include all undiscounted principal amounts owed and expected future interest payments due over the term of the notes. Of the total undiscounted cash flows, $1.9 billion relates to the Golden Gate V transaction. These cash outflows are matched and predominantly offset by the cash inflows Golden Gate V receives from notes issued by a nonconsolidated variable interest entity. Additionally, $2.2 billion of the total undiscounted cash flows are obligations to PLC. The remaining $0.4 billion of undiscounted cash flows are associated with the Golden Gate II notes outstanding.

(2) Anticipated stable value products cash flows including interest.

(3) Includes all lease payments required under operating lease agreements.

(4) The lease payments shown assume we exercise our option to purchase the building at the end of the lease term. Additionally, the payments due by the periods above were computed based on the terms of the renegotiated lease agreement, which was entered in December 2013.

(5) Represents secured borrowings as part of our repurchase program as well as related interest.

(6) Estimated contractual policyholder obligations are based on mortality, morbidity, and lapse assumptions comparable to our historical experience, modified for recent observed trends. These obligations are based on current balance sheet values and include expected interest crediting, but do not incorporate an expectation of future market growth, or future deposits. Due to the significance of the assumptions used, the amounts presented could materially differ from actual results. As variable separate account obligations are legally insulated from general account obligations, the variable separate account obligations will by fully funded by cash flows from variable separate account assets. We expect to fully fund the general account obligations from cash flows from general account investments.

Employee Benefit Plans

PLC sponsors a defined benefit pension plan covering substantially all of its employees. In addition, PLC sponsors an unfunded excess benefit plan and provides other postretirement benefits to eligible employees.

PLC reports the net funded status of its pension and other postretirement plans in the consolidated balance sheet. The net funded status represents the differences between the fair value of plan assets and the projected benefit obligation.

PLC�s funding policy is to contribute amounts to the plan sufficient to meet the minimum funding requirements of the Employee Retirement Income Security Act (�ERISA�) plus such additional amounts as it may determine to be appropriate from time to time. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. PLC may also make additional contributions in future periods to maintain an adjusted funding target attainment percentage (�AFTAP�) of at least 80% and to avoid certain Pension Benefit Guaranty Corporation (�PBGC�) reporting triggers.

PLC has not yet determined the total amount it will fund during 2015, but it estimates that the amount will be between $1.0 million and $10.0 million.

105

113

Table of Contents

For a complete discussion of PLC�s benefit plans, additional information related to the funded status of its benefit plans, and its funding policy, see Note 16, Employee Benefit Plans, to the consolidated financial statements included in this report.

OFF-BALANCE SHEET ARRANGEMENTS

We have entered into operating leases that do not result in an obligation being recorded on the balance sheet. Refer to Note 13, Commitments and Contingencies, of the consolidated financial statements for more information.

MARKET RISK EXPOSURES

Our financial position and earnings are subject to various market risks including changes in interest rates, the yield curve, spreads between risk-adjusted and risk-free interest rates, foreign currency rates, used vehicle prices, and equity price risks and issuer defaults. We analyze and manage the risks arising from market exposures of financial instruments, as well as other risks, through an integrated asset/liability management process. Our asset/liability management programs and procedures involve the monitoring of asset and liability durations for various product lines; cash flow testing under various interest rate scenarios; and the continuous rebalancing of assets and liabilities with respect to yield, credit and market risk, and cash flow characteristics. These programs also incorporate the use of derivative financial instruments primarily to reduce our exposure to interest rate risk, inflation risk, currency exchange risk, volatility risk, and equity market risk. See Note 23, Derivative Financial Instruments to the consolidated financial statements included in this report for additional information on our financial instruments.

The primary focus of our asset/liability program is the management of interest rate risk within the insurance operations. This includes monitoring the duration of both investments and insurance liabilities to maintain an appropriate balance between risk and profitability for each product category, and for us as a whole. It is our policy to maintain asset and liability durations within one year of one another, although, from time to time, a broader interval may be allowed.

We are exposed to credit risk within our investment portfolio and through derivative counterparties. Credit risk relates to the uncertainty of an obligor�s continued ability to make timely payments in accordance with the contractual terms of the instrument or contract. We manage credit risk through established investment policies which attempt to address quality of obligors and counterparties, credit concentration limits, diversification requirements, and acceptable risk levels under expected and stressed scenarios. Derivative counterparty credit risk is measured as the amount owed to us, net of collateral held, based upon current market conditions. In addition, we periodically assess exposure related to potential payment obligations between us and our counterparties. We minimize the credit risk in derivative financial instruments by entering into transactions with high quality counterparties, (A-rated or higher at the time we enter into the contract), and we maintain credit support annexes with certain of those counterparties.

We utilize a risk management strategy that includes the use of derivative financial instruments. Derivative instruments expose us to credit market and basis risk. Such instruments can change materially in value from period- to-period. We minimize our credit risk by entering into transactions with highly rated counterparties. We manage the market and basis risks by establishing and monitoring limits as to the types and degrees of risk that may be undertaken. We monitor our use of derivatives in connection with our overall asset/liability management programs and procedures. In addition, all derivative programs are monitored by our risk management department.

Derivative instruments that are used as part of our interest rate risk management strategy include interest rate swaps, interest rate futures, interest rate caps, and interest rate options. Our inflation risk management strategy involves the use of swaps that require us to pay a fixed rate and receive a floating rate that is based on changes in the Consumer Price Index (�CPI�).

106

114

Table of Contents

We may use the following types of derivative contracts to mitigate our exposure to certain guaranteed benefits related to variable annuity contracts and fixed indexed annuities:

• Foreign Currency Futures

• Variance Swaps

• Interest Rate Futures

• Equity Options

• Equity Futures

• Credit Derivatives

• Interest Rate Swaps

• Interest Rate Swaptions

• Volatility Futures

• Volatility Options

• Funds Withheld Agreement

• Total Return Swaps

Other Derivatives

Certain of our subsidiaries have derivatives with PLC. These derivatives consist of an interest support agreement, a YRT premium support arrangement, and portfolio maintenance agreements with PLC.

We have a funds withheld account that consists of various derivative instruments held by us that is used to hedge the GMWB and GMDB riders. The economic performance of derivatives in the funds withheld account is ceded to Shades Creek. The funds withheld account is accounted for as a derivative financial instrument.

We believe our asset/liability management programs and procedures and certain product features provide protection against the effects of changes in interest rates under various scenarios. Additionally, we believe our asset/liability management programs and procedures provide sufficient liquidity to enable us to fulfill our obligation to pay benefits under our various insurance and deposit contracts. However, our asset/liability management programs and procedures incorporate assumptions about the relationship between short-term and long-term interest rates (i.e., the slope of the yield curve), relationships between risk-adjusted and risk-free interest rates, market liquidity, spread movements, implied volatility, policyholder behavior, and other factors, and the effectiveness of our asset/liability management programs and procedures may be negatively affected whenever actual results differ from those assumptions.

The following table sets forth the estimated market values of our fixed maturity investments and mortgage loans resulting from a hypothetical immediate 100 basis point increase in interest rates from levels prevailing as of December 31, 2014 and 2013, and the percent change in fair value the following estimated fair values would represent:

Percent As of December 31, Amount Change

(Dollars In Millions) 2014 Fixed maturities $ 34,242.0 (7.9)% Mortgage loans 5,274.4 (4.5) 2013 Fixed maturities $ 32,637.7 (7.2)% Mortgage loans 5,693.5 (4.4)

Estimated fair values were derived from the durations of our fixed maturities and mortgage loans. Duration measures the change in fair value resulting from a change in interest rates. While these estimated fair values provide an indication of how sensitive the fair values of our fixed maturities and mortgage loans are to changes in interest rates, they do not represent management�s view of future fair value changes or the potential impact of fluctuations in credit spreads. Actual results may differ from these estimates.

115

107

116

Table of Contents

In the ordinary course of our commercial mortgage lending operations, we may commit to provide a mortgage loan before the property to be mortgaged has been built or acquired. The mortgage loan commitment is a contractual obligation to fund a mortgage loan when called upon by the borrower. The commitment is not recognized in our financial statements until the commitment is actually funded. The mortgage loan commitment contains terms, including the rate of interest, which may be different than prevailing interest rates.

As of December 31, 2014 and 2013, we had outstanding mortgage loan commitments of $537.7 million at an average rate of 4.6% and $322.8 million at an average rate of 4.9%, respectively, with estimated fair values of $576.9 million and $346.9 million, respectively (using discounted cash flows from the first call date). The following table sets forth the estimated fair value of our mortgage loan commitments resulting from a hypothetical immediate 100 basis point increase in interest rate levels prevailing as of December 31, 2014, and the percent change in fair value the following estimated fair values would represent:

Percent As of December 31, Amount Change

(Dollars In Millions) 2014 $ 549.9 (4.7)% 2013 330.8 (4.7)

The estimated fair values were derived from the durations of our outstanding mortgage loan commitments. While these estimated fair values provide an indication of how sensitive the fair value of our outstanding commitments are to changes in interest rates, they do not represent management�s view of future market changes, and actual market results may differ from these estimates.

As previously discussed, we utilize a risk management strategy that involves the use of derivative financial instruments. Derivative instruments expose us to credit and market risk and could result in material changes from period to period. We minimize our credit risk by entering into transactions with highly rated counterparties. We manage the market risk by establishing and monitoring limits as to the types and degrees of risk that may be undertaken. We monitor our use of derivatives in connection with our overall asset/liability management programs and procedures.

As of December 31, 2014, total derivative contracts with a notional amount of $14.8 billion were in a $604.1 million net loss position. Included in the $14.8 billion, is a notional amount of $2.6 billion in a $310.7 million net loss position that relates to our Modco trading portfolio. Also included in the total, is $1.2 billion in a $57.3 million net loss position that relates to our funds withheld derivative, $3.0 billion in a $26.0 million net loss position that relates to our GMWB derivatives, $0.7 billion in a $124.5 million net loss position that relates to our FIA embedded derivatives, and $12.0 million in a $6.7 million net loss position that relates to our IUL embedded derivatives. As of December 31, 2013, total derivative contracts with a notional amount of $11.9 billion were in a $439.6 million net loss position. We recognized losses of $13.5 million, gains of $82.2 million, and losses of $227.8 million related to derivative financial instruments for the years ended December 31, 2014, 2013, and 2012, respectively.

108

117

Table of Contents

The following table sets forth the notional amount and fair value of our interest rate risk related derivative financial instruments and the estimated fair value resulting from a hypothetical immediate plus and minus 100 basis points change in interest rates from levels prevailing as of December 31:

Fair Value Resulting From an Immediate +/- 100 bps Change

Fair Value in the Underlying Reference Notional as of Interest Rates Amount December 31, +100 bps -100 bps

(Dollars In Millions) 2014 Futures $ 28.0 $ 0.9 $ (3.5) $ 6.5 Interest Rate Swaptions 625.0 8.0 19.6 42.7 Floating to fixed Swaps 240.5 0.9 6.3 (4.6) Fixed to floating Swaps 1,625.0 46.1 (135.0) 264.2 Total $ 2,518.5 $ 55.9 $ (112.6) $ 308.8

2013 Futures(1) $ 322.9 $ (5.2) $ (21.6) $ 14.8 Interest Rate Swaptions 625.0 30.3 45.6 17.1 Floating to fixed Swaps(2) 383.0 0.1 7.6 (7.8) Fixed to floating Swaps(2) 1,230.0 (153.3) (268.9) (14.2) Total $ 2,560.9 $ (128.1) $ (237.3) $ 9.9

(1)Interest rate change scenario subject to floor, based on treasury rates as of December 31, 2013.

(2)Includes an effect for inflation.

The following table sets forth the notional amount and fair value of our equity risk related derivative financial instruments and the estimated fair value resulting from a hypothetical immediate plus and minus ten percentage point change in equity level from levels prevailing as of December 31:

Fair Value Resulting From an Immediate +/- 10% Change

Fair Value in the Underlying Reference Notional as of Index Equity Level Amount December 31, +10% -10%

(Dollars In Millions) 2014 Futures $ 411.7 $ (14.6) $ (54.9) $ 25.7 Options 2,620.7 116.5 94.3 146.7 Total $ 3,032.4 $ 101.9 $ 39.4 $ 172.4

2013 Futures $ 168.0 $ (6.5) $ (23.3) $ 10.3 Options 1,633.5 61.2 43.1 92.3 Total $ 1,801.5 $ 54.7 $ 19.8 $ 102.6

109

118

Table of Contents

The following table sets forth the notional amount and fair value of our currency risk related derivative financial instruments and the estimated fair value resulting from a hypothetical immediate plus and minus ten percentage point change in currency level from levels prevailing as of December 31:

Fair Value Resulting From an Immediate +/- 10% Change

Fair Value in the Underlying Reference Notional as of in Currency Level Amount December 31, +10% -10%

(Dollars In Millions) 2014 Currency futures $ 197.6 $ 2.4 $ (17.1) $ 21.9 2013 Currency futures $ 132.3 $ (0.5) $ (13.8) $ 12.8

The following table sets forth the notional amount and fair value of our volatility risk related derivative financial instruments and the estimated fair value resulting from a hypothetical immediate plus and minus ten percentage point change in volatility level from levels prevailing as of December 31:

Fair Value Resulting From an Immediate +/- 10% Change

Fair Value in the Underlying Reference Notional as of in Volatility Level Amount December 31, +10% -10%

(Dollars In Millions) 2014 Volatility futures $ � $ � $ � $ � Variance swaps � � � � Total $ � $ � $ � $ �

2013 Volatility futures $ 0.4 $ � $ � $ � Variance swaps 1.5 (1.7) 9.5 (8.8) Total $ 1.9 $ (1.7) $ 9.5 $ (8.8)

Estimated gains and losses were derived using pricing models specific to derivative financial instruments. While these estimated gains and losses provide an indication of how sensitive our derivative financial instruments are to changes in interest rates, volatility, equity levels, and credit spreads, they do not represent management�s view of future market changes, and actual market results may differ from these estimates.

Our stable value contract and annuity products tend to be more sensitive to market risks than our other products. As such, many of these products contain surrender charges and other features that reward persistency and penalize the early withdrawal of funds. Certain stable value and annuity contracts have market-value adjustments that protect us against investment losses if interest rates are higher at the time of surrender than at the time of issue. Additionally, approximately $526.6 million of our stable value contracts have no early termination rights.

As of December 31, 2014, we had $2.0 billion of stable value product account balances with an estimated fair value of $2.0 billion (using discounted cash flows) and $11.0 billion of annuity account balances with an estimated fair value of $10.5 billion (using discounted cash flows). As of December 31, 2013, we had $2.6 billion of stable value product account balances with an estimated fair value of $2.6 billion (using discounted cash flows) and $11.1 billion of annuity account balances with an estimated fair value of $10.6 billion (using discounted cash flows).

110

119

Table of Contents

The following table sets forth the estimated fair values of our stable value and annuity account balances resulting from a hypothetical immediate plus and minus 100 basis points change in interest rates from levels prevailing and the percent change in fair value that the following estimated fair values would represent:

Fair Value Resulting From an

Immediate +/- 100 bps Change in the Underlying

Fair Value Reference as of Interest Rates

As of December 31, December 31, +100 bps -100 bps (Dollars In Millions)

2014 Stable value product account balances $ 1,973.6 $ 1,943.2 $ 2,004.0 Annuity account balances 10,491.8 10,329.2 10,612.8

2013 Stable value product account balances $ 2,566.2 $ 2,524.9 $ 2,607.5 Annuity account balances 10,639.6 10,485.4 10,752.5

Estimated fair values were derived from the durations of our stable value and annuity account balances. While these estimated fair values provide an indication of how sensitive the fair values of our stable value and annuity account balances are to changes in interest rates, they do not represent management�s view of future market changes, and actual market results may differ from these estimates.

Certain of our liabilities relate to products whose profitability could be significantly affected by changes in interest rates. In addition to traditional whole life and term insurance, many universal life policies with secondary guarantees that insurance coverage will remain in force (subject to the payment of specified premiums) have such characteristics. These products do not allow us to adjust policyholder premiums after a policy is issued, and most of these products do not have significant account values upon which we credit interest. If interest rates fall, these products could have both decreased interest earnings and increased amortization of deferred acquisition costs, and the converse could occur if interest rates rise.

Impact of Continued Low Interest Rate Environment

Significant changes in interest rates expose us to the risk of not realizing anticipated spreads between the interest rate earned on investments and the interest rate credited to in-force policies and contracts. In addition, certain of our insurance and investment products have a minimum guaranteed interest rate (�MGIR�). In periods of prolonged low interest rates, the interest spread earned may be negatively impacted to the extent our ability to reduce policyholder crediting rates is limited by the guaranteed minimum credited interest rates. Additionally, those policies without account values may exhibit lower profitability in periods of prolonged low interest rates due to reduced investment income.

111

120

Table of Contents

The table below presents account values by range of current minimum guaranteed interest rates and current crediting rates for our universal life and deferred fixed annuity products as of December 31, 2014 and 2013:

Credited Rate Summary

As of December 31, 2014 1-50 bps More than

Minimum Guaranteed Interest Rate At above 50 bps Account Value MGIR MGIR above MGIR Total

(Dollars In Millions) Universal Life Insurance >2% - 3% $ 188 $ 958 $ 2,018 $ 3,164 >3% - 4% 3,526 1,670 138 5,334 >4% - 5% 2,035 15 � 2,050 >5% - 6% 224 � � 224 Subtotal 5,973 2,643 2,156 10,772

Fixed Annuities 1% $ 602 $ 179 $ 239 $ 1,020 >1% - 2% 597 516 197 1,310 >2% - 3% 2,005 368 203 2,576 >3% - 4% 297 � � 297 >4% - 5% 295 � � 295 >5% - 6% 3 � � 3 Subtotal 3,799 1,063 639 5,501 Total $ 9,772 $ 3,706 $ 2,795 $ 16,273

Percentage of Total 60% 23% 17% 100%

Credited Rate Summary

As of December 31, 2013 1-50 bps More than

Minimum Guaranteed Interest Rate At above 50 bps Account Value MGIR MGIR above MGIR Total

(Dollars In Millions) Universal Life Insurance >2% - 3% $ 43 $ 1,024 $ 1,984 $ 3,051 >3% - 4% 3,109 2,099 150 5,358 >4% - 5% 2,110 15 � 2,125 >5% - 6% 232 � � 232 Subtotal 5,494 3,138 2,134 10,766

Fixed Annuities 1% $ 422 $ 173 $ 461 $ 1,056 >1% - 2% 612 518 279 1,409 >2% - 3% 1,846 308 632 2,786 >3% - 4% 309 � � 309 >4% - 5% 313 � � 313 Subtotal 3,502 999 1,372 5,873 Total $ 8,996 $ 4,137 $ 3,506 $ 16,639

Percentage of Total 54% 25% 21% 100%

112

121

Table of Contents

We are active in mitigating the impact of a continued low interest rate environment through product design, as well as adjusting crediting rates on current in-force policies and contracts. We also manage interest rate and reinvestment risks through our asset/liability management process. Our asset/liability management programs and procedures involve the monitoring of asset and liability durations; cash flow testing under various interest rate scenarios; and the regular rebalancing of assets and liabilities with respect to yield, credit and market risk, and cash flow characteristics. These programs also incorporate the use of derivative financial instruments primarily to reduce our exposure to interest rate risk, inflation risk, currency exchange risk, volatility risk, and equity market risk.

Employee Benefit Plans

Pursuant to the accounting guidance related to PLC�s obligations to employees under its pension plan and other postretirement benefit plans, PLC is required to make a number of assumptions to estimate related liabilities and expenses. PLC�s most significant assumptions are those for the discount rate and expected long-term rate of return.

Discount Rate Assumption

The assumed discount rates used to determine the benefit obligations were based on an analysis of future benefits expected to be paid under the plans. The assumed discount rate reflects the interest rate at which an amount that is invested in a portfolio of high-quality debt instruments on the measurement date would provide the future cash flows necessary to pay benefits when they come due.

The following presents PLC�s estimates of the hypothetical impact to the December 31, 2014 benefit obligation and to the 2014 benefit cost, associated with sensitivities related to the discount rate assumption:

Other Defined Benefit Postretirement

Pension Plan Benefit Plans(1) (Dollars in Thousands)

Increase (Decrease) in Benefit Cost: 100 basis point increase $ (1,622) $ (62) 100 basis point decrease 1,622 62

(1)Includes excess pension plan, retiree medical plan, and postretirement life insurance plan.

IMPACT OF INFLATION

Inflation increases the need for life insurance. Many policyholders who once had adequate insurance programs may increase their life insurance coverage to provide the same relative financial benefit and protection. Higher interest rates may result in higher sales of certain of our investment products.

The higher interest rates that have traditionally accompanied inflation could also affect our operations. Policy loans increase as policy loan interest rates become relatively more attractive. As interest rates increase, disintermediation of stable value and annuity account balances and individual life policy cash values may increase. The market value of our fixed-rate, long-term investments may decrease, we may be unable to implement fully the interest rate reset and call provisions of our mortgage loans, and our ability to make attractive mortgage loans, including participating mortgage loans, may decrease. In addition, participating mortgage loan income may decrease. The difference between the interest rate earned on investments and the interest rate credited to life insurance and investment products may also be adversely affected by rising interest rates. During the periods covered by this report, we believe inflation has not had a material impact on our business.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in this report for information regarding recently issued accounting standards.

114

123

Table of Contents

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The information required by this item is included in Item 7, Management�s Discussion and Analysis of Financial Condition and Results of Operations.

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements

The following financial statements are located in this report on the pages indicated.

Page Consolidated Statements of Income For The Year Ended December 31, 2014, 2013, and 2012 116 Consolidated Statements of Comprehensive Income (Loss) For The Year Ended December 31, 2014, 2013, and 2012 117 Consolidated Balance Sheets as of December 31, 2014 and 2013 118 Consolidated Statements of Shareowner�s Equity For The Year Ended December 31, 2014, 2013, and 2012 120 Consolidated Statements of Cash Flows For The Year Ended December 31, 2014, 2013, and 2012 121 Notes to Consolidated Financial Statements 122 Report of Independent Registered Public Accounting Firm 207

For supplemental quarterly financial information, please see Note 26, Consolidated Quarterly Results-Unaudited of the notes to consolidated financial statements included herein.

115

124

Table of Contents

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF INCOME

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Revenues Premiums and policy fees $ 3,283,069 $ 2,967,322 $ 2,799,390 Reinsurance ceded (1,395,743) (1,387,437) (1,310,097) Net of reinsurance ceded 1,887,326 1,579,885 1,489,293 Net investment income 2,098,013 1,836,188 1,789,338 Realized investment gains (losses): Derivative financial instruments (13,492) 82,161 (227,816) All other investments 205,302 (121,537) 232,836 Other-than-temporary impairment losses (2,589) (10,941) (67,130) Portion recognized in other comprehensive income (before taxes) (4,686) (11,506) 8,986 Net impairment losses recognized in earnings (7,275) (22,447) (58,144) Other income 294,333 250,420 230,553 Total revenues 4,464,207 3,604,670 3,456,060 Benefits and expenses Benefits and settlement expenses, net of reinsurance ceded: (2014 - $1,223,804; 2013 - $1,207,781; 2012 - $1,228,897) 2,786,463 2,473,988 2,317,121 Amortization of deferred policy acquisition costs and value of business acquired 308,320 154,660 192,183 Other operating expenses, net of reinsurance ceded: (2014 - $199,824; 2013 - $199,079; 2012 - $200,442) 630,635 553,523 487,177 Total benefits and expenses 3,725,418 3,182,171 2,996,481 Income before income tax 738,789 422,499 459,579 Income tax (benefit) expense Current 181,763 (18,298) 81,006 Deferred 65,075 149,195 70,037 Total income tax expense 246,838 130,897 151,043 Net income $ 491,951 $ 291,602 $ 308,536

See Notes to Consolidated Financial Statements

116

125

Table of Contents

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Net income $ 491,951 $ 291,602 $ 308,536 Other comprehensive income (loss): Change in net unrealized gains (losses) on investments, net of income tax: (2014 - $529,838; 2013 - $(673,302); 2012 - $392,372) 983,985 (1,250,416) 728,692 Reclassification adjustment for investment amounts included in net income, net of income tax: (2014 - $(23,903); 2013 - $(15,396); 2012 - $(3,317)) (44,391) (28,594) (6,163) Change in net unrealized gains (losses) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (2014 - $1,883; 2013 - $2,472; 2012 - $16,227) 3,498 4,591 30,136 Change in accumulated (loss) gain - derivatives, net of income tax: (2014 - $(1); 2013 - $395; 2012 - $1,108) (2) 734 2,058 Reclassification adjustment for derivative amounts included in net income, net of income tax: (2014 - $622; 2013 - $822; 2012 - $1,120) 1,155 1,527 2,080 Total other comprehensive income (loss) 944,245 (1,272,158) 756,803 Total comprehensive income (loss) $ 1,436,196 $ (980,556) $ 1,065,339

See Notes to Consolidated Financial Statements

117

126

Table of Contents

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED BALANCE SHEETS

As of December 31, 2014 2013

(Dollars In Thousands) Assets Fixed maturities, at fair value (amortized cost: 2014 - $33,716,848; 2013 - $33,648,298) $ 36,756,240 $ 34,804,919 Fixed maturities, at amortized cost (fair value: 2014 - $485,422; 2013 - $335,676) 435,000 365,000 Equity securities, at fair value (cost: 2014 - $735,297; 2013 - $632,652) 756,790 602,388 Mortgage loans (2014 and 2013 includes: $455,250 and $627,731 related to securitizations) 5,133,780 5,493,492 Investment real estate, net of accumulated depreciation (2014 - $246; 2013 - $937) 5,918 16,873 Policy loans 1,758,237 1,815,744 Other long-term investments 491,282 424,481 Short-term investments 246,717 133,025 Total investments 45,583,964 43,655,922 Cash 268,286 345,579 Accrued investment income 474,095 461,838 Accounts and premiums receivable, net of allowance for uncollectible amounts (2014 - $3,465; 2013 - $4,211) 81,137 101,324 Reinsurance receivables 5,907,662 6,008,010 Deferred policy acquisition costs and value of business acquired 3,155,046 3,476,622 Goodwill 77,577 80,675 Property and equipment, net of accumulated depreciation (2014 - $116,688; 2013 - $110,080) 51,760 51,071 Other assets 398,574 501,302 Income tax receivable 1,648 12,399 Assets related to separate accounts Variable annuity 13,157,429 12,791,438 Variable universal life 834,940 783,618 Total assets $ 69,992,118 $ 68,269,798

See Notes to Consolidated Financial Statements

118

127

Table of Contents

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED BALANCE SHEETS

(continued)

As of December 31, 2014 2013

(Dollars In Thousands) Liabilities Future policy benefits and claims $ 29,944,477 $ 29,771,958 Unearned premiums 1,515,001 1,500,394 Total policy liabilities and accruals 31,459,478 31,272,352 Stable value product account balances 1,959,488 2,559,552 Annuity account balances 10,950,729 11,125,253 Other policyholders� funds 1,430,325 1,214,380 Other liabilities 1,178,962 945,911 Deferred income taxes 1,611,864 1,041,420 Non-recourse funding obligations 1,527,752 1,495,448 Repurchase program borrowings 50,000 350,000 Liabilities related to separate accounts Variable annuity 13,157,429 12,791,438 Variable universal life 834,940 783,618 Total liabilities 64,160,967 63,579,372 Commitments and contingencies - Note 13 Shareowner�s equity Preferred Stock; $1 par value, shares authorized: 2,000; Liquidation preference: $2,000 2 2 Common Stock, $1 par value, shares authorized and issued: 2014 and 2013 - 5,000,000 5,000 5,000 Additional paid-in-capital 1,437,787 1,433,258 Retained earnings 2,905,151 2,713,200 Accumulated other comprehensive income (loss): Net unrealized gains (losses) on investments, net of income tax: (2014 - $796,488; 2013 - $290,553) 1,479,192 539,598 Net unrealized (losses) gains relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (2014 - $2,208; 2013 - $325) 4,101 603 Accumulated loss - derivatives, net of income tax: (2014 - $(45); 2013 - $(666)) (82) (1,235) Total shareowner�s equity 5,831,151 4,690,426 Total liabilities and shareowner�s equity $ 69,992,118 $ 68,269,798

See Notes to Consolidated Financial Statements

119

128

Table of Contents

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF SHAREOWNER�S EQUITY

Accumulated Additional Other Total

Preferred Common Paid-in Retained Comprehensive Shareowner�s Stock Stock Capital Earnings Income (Loss) Equity

(Dollars In Thousands) Balance, December 31, 2011 $ 2 $ 5,000 $ 1,361,734 $ 2,456,293 $ 1,054,321 $ 4,877,350 Net income for 2012 308,536 308,536 Other comprehensive income 756,803 756,803 Comprehensive income for 2012 1,065,339 Capital contributions 1,524 1,524 Dividends paid to the parent company (257,000) (257,000) Balance, December 31, 2012 $ 2 $ 5,000 $ 1,363,258 $ 2,507,829 $ 1,811,124 $ 5,687,213 Net income for 2013 291,602 291,602 Other comprehensive loss (1,272,158) (1,272,158) Comprehensive loss for 2013 (980,556) Capital contributions 70,000 70,000 Dividends paid to the parent company (86,231) (86,231) Balance, December 31, 2013 $ 2 $ 5,000 $ 1,433,258 $ 2,713,200 $ 538,966 $ 4,690,426 Net income for 2014 491,951 491,951 Other comprehensive income 944,245 944,245 Comprehensive income for 2014 1,436,196 Capital contributions 4,529 4,529 Dividends paid to the parent company (300,000) (300,000) Balance, December 31, 2014 $ 2 $ 5,000 $ 1,437,787 $ 2,905,151 $ 1,483,211 $ 5,831,151

See Notes to Consolidated Financial Statements

120

129

Table of Contents

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Cash flows from operating activities Net income $ 491,951 $ 291,602 $ 308,536 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Realized investment losses (gains) (184,535) 61,823 53,124 Amortization of deferred policy acquisition costs and value of business acquired 308,320 154,660 192,183 Capitalization of deferred policy acquisition costs (293,612) (345,885) (311,960) Depreciation expense 7,401 6,595 7,378 Deferred income tax 65,075 149,195 70,037 Accrued income tax 10,751 70,749 359 Interest credited to universal life and investment products 824,418 875,180 962,678 Policy fees assessed on universal life and investment products (1,038,180) (894,176) (794,825) Change in reinsurance receivables 100,348 97,523 (140,424) Change in accrued investment income and other receivables 14,332 (34,551) 580 Change in policy liabilities and other policyholders� funds of traditional life and health products 92,823 95,421 300,523 Trading securities: Maturities and principal reductions of investments 114,793 179,180 276,659 Sale of investments 353,250 256,938 454,150 Cost of investments acquired (320,928) (380,836) (585,618) Other net change in trading securities (69,641) 38,999 (56,615) Change in other liabilities 197,442 (78,240) (22,009) Other income - gains on repurchase of non-recourse funding obligations (7,393) (15,379) (29,344) Other, net (22,961) 13,679 11,220 Net cash provided by operating activities 643,654 542,477 696,632 Cash flows from investing activities Maturities and principal reductions of investments, available-for-sale 1,198,690 1,094,862 1,169,563 Sale of investments, available-for-sale 2,273,909 3,241,559 2,535,708 Cost of investments acquired, available-for-sale (3,602,600) (5,079,971) (4,228,755) Change in investments, held-to-maturity (70,000) (65,000) (300,000) Mortgage loans: New lendings (925,910) (583,697) (346,435) Repayments 1,285,489 861,562 739,402 Change in investment real estate, net 13,032 (10,356) 4,927 Change in policy loans, net 57,507 17,181 14,428 Change in other long-term investments, net (87,522) (231,653) (123,401) Change in short-term investments, net (71,015) 147,477 (82,282) Net unsettled security transactions 30,212 7,373 37,169 Purchase of property and equipment (8,088) (10,275) (6,157) Payments for business acquisitions, net of cash acquired (906) (471,714) � Net cash provided by (used in) investing activities 92,798 (1,082,652) (585,833) Cash flows from financing activities Issuance (repayment) of non-recourse funding obligations 32,348 46,000 198,300 Repurchase program borrowings (300,000) 200,000 150,000 Capital contributions from PLC 4,529 70,000 � Dividends paid to the parent company (300,000) (44,963) (257,000) Investment product deposits and change in universal life deposits 2,576,727 3,219,561 3,716,553 Investment product withdrawals (2,827,305) (2,874,426) (3,818,845) Other financing activities, net (44) � � Net cash (used in) provided by financing activities (813,745) 616,172 (10,992) Change in cash (77,293) 75,997 99,807 Cash at beginning of period 345,579 269,582 169,775 Cash at end of period $ 268,286 $ 345,579 $ 269,582

See Notes to Consolidated Financial Statements

121

130

Table of Contents

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION

Basis of Presentation

Protective Life Insurance Company (the �Company�), a stock life insurance company, was founded in 1907. The Company is a wholly owned subsidiary of Protective Life Corporation (�PLC�), an insurance holding company. On February 1, 2015, PLC became a wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan (�Dai-ichi Life�), when DL Investment (Delaware), Inc. a wholly owned subsidiary of Dai-ichi Life, merged with and into PLC. Prior to February 1, 2015, and for the periods this report presents, PLC�s stock was publicly traded on the New York Stock Exchange. PLC is a holding company with subsidiaries that provide financial services through the production, distribution, and administration of insurance and investment products.

The Company markets individual life insurance, credit life and disability insurance, guaranteed investment contracts, guaranteed funding agreements, fixed and variable annuities, and extended service contracts throughout the United States. The Company also maintains a separate segment devoted to the acquisition of insurance policies from other companies.

These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (�GAAP�). Such accounting principles differ from statutory reporting practices used by insurance companies in reporting to state regulatory authorities (see also Note 21, Statutory Reporting Practices and Other Regulatory Matters).

The operating results of companies in the insurance industry have historically been subject to significant fluctuations due to changing competition, economic conditions, interest rates, investment performance, insurance ratings, claims, persistency, and other factors.

Reclassifications

Certain reclassifications have been made in the previously reported financial statements and accompanying notes to make the prior year amounts comparable to those of the current year. Such reclassifications had no effect on previously reported net income or shareowners� equity.

Entities Included

The consolidated financial statements include the accounts of Protective Life Insurance Company and its affiliate companies in which the Company holds a majority voting or economic interest. Intercompany balances and transactions have been eliminated.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with 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. Actual results could differ from those estimates. The most significant estimates include those used in determining deferred policy acquisition costs (�DAC�) and related amortization periods, goodwill recoverability, value of business acquired (�VOBA�), investment and certain derivatives fair values, other-than-temporary impairments, future policy benefits, pension and other postretirement benefits, provisions for income taxes, reserves for contingent liabilities, reinsurance risk transfer assessments, and reserves for losses in connection with unresolved legal matters.

131

122

132

Table of Contents

Significant Accounting Policies

Valuation of Investment Securities

The Company determines the appropriate classification of investment securities at the time of purchase and periodically re-evaluates such designations. Investment securities are classified as either trading, available-for-sale, or held-to-maturity securities. Investment securities classified as trading are recorded at fair value with changes in fair value recorded in realized gains (losses). Investment securities purchased for long term investment purposes are classified as available-for-sale and are recorded at fair value with changes in unrealized gains and losses, net of taxes, reported as a component of other comprehensive income (loss). Investment securities are classified as held-to-maturity when the Company has the intent and ability to hold the securities to maturity and are reported at amortized cost. Interest income on available-for-sale and held-to-maturity securities includes the amortization of premiums and accretion of discounts and are recorded in investment income.

The fair value of fixed maturity, short-term, and equity securities is determined by management after considering one of three primary sources of information: third party pricing services, non-binding independent broker quotations, or pricing matrices. Security pricing is applied using a �waterfall� approach whereby publicly available prices are first sought from third party pricing services, the remaining unpriced securities are submitted to independent brokers for non-binding prices, or lastly, securities are priced using a pricing matrix. Typical inputs used by these three pricing methods include, but are not limited to: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Based on the typical trading volumes and the lack of quoted market prices for available-for-sale and trading fixed maturities, third party pricing services derive the majority of security prices from observable market inputs such as recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information as outlined above. If there are no recent reported trades, the third party pricing services and brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Certain securities are priced via independent non-binding broker quotations, which are considered to have no significant unobservable inputs. When using non- binding independent broker quotations, the Company obtains one quote per security, typically from the broker from which the Company purchased the security. A pricing matrix is used to price securities for which the Company is unable to obtain or effectively rely on either a price from a third party service or an independent broker quotation. Included in the pricing of other asset-backed securities, collateralized mortgage obligations (�CMOs�), and mortgage-backed securities (�MBS�) are estimates of the rate of future prepayments of principal and underlying collateral support over the remaining life of the securities. Such estimates are derived based on the characteristics of the underlying structure and rates of prepayments previously experienced at the interest rate levels projected for the underlying collateral. The basis for the cost of securities sold was determined at the Committee on Uniform Securities Identification Procedures (�CUSIP�) level. The committee supplies a unique nine-character identification, called a CUSIP number, for each class of security approved for trading in the U.S., to facilitate clearing and settlement. These numbers are used when any buy and sell orders are recorded.

Each quarter the Company reviews investments with unrealized losses and tests for other-than-temporary impairments. The Company analyzes various factors to determine if any specific other-than-temporary asset impairments exist. These include, but are not limited to: 1) actions taken by rating agencies, 2) default by the issuer, 3) the significance of the decline, 4) an assessment of the Company�s intent to sell the security (including a more likely than not assessment of whether the Company will be required to sell the security) before recovering the security�s amortized cost, 5) the duration of the decline, 6) an economic analysis of the issuer�s industry, and 7) the financial strength, liquidity, and recoverability of the issuer. Management performs a security by security review each quarter in evaluating the need for any other-than-temporary impairments. Although no set formula is used in this process, the investment performance, collateral position, and continued viability of the issuer are significant measures considered, and in some cases, an analysis regarding the Company�s expectations for recovery of the security�s entire amortized cost basis through the receipt of future cash flows is performed. Once a determination has been made that a specific other-than-temporary impairment exists, the security�s basis is adjusted and an other-than-temporary impairment is recognized. Equity securities that are other-than-temporarily impaired are written down to fair value with a realized loss recognized in earnings. Other-than- temporary impairments to debt securities that the Company does not intend to sell and does not expect to be required to sell before recovering the security�s amortized cost are written down to discounted expected future cash flows (�post impairment cost�) and credit losses are recorded in earnings. The difference between

123

133

Table of Contents

the securities� discounted expected future cash flows and the fair value of the securities on the impairment date is recognized in other comprehensive income (loss) as a non-credit portion impairment. When calculating the post impairment cost for residential mortgage-backed securities (�RMBS�), commercial mortgage-backed securities (�CMBS�), and other asset-backed securities (collectively referred to as asset-backed securities or �ABS�), the Company considers all known market data related to cash flows to estimate future cash flows. When calculating the post impairment cost for corporate debt securities, the Company considers all contractual cash flows to estimate expected future cash flows. To calculate the post impairment cost, the expected future cash flows are discounted at the original purchase yield. Debt securities that the Company intends to sell or expects to be required to sell before recovery are written down to fair value with the change recognized in earnings.

Cash

Cash includes all demand deposits reduced by the amount of outstanding checks and drafts. As a result of the Company�s cash management system, checks issued from a particular bank but not yet presented for payment may create negative book cash balances with the bank. Such negative balances are included in other liabilities and were immaterial as of December 31, 2014 and $41.3 million as of December 31, 2013, respectively. The Company has deposits with certain financial institutions which exceed federally insured limits. The Company has reviewed the creditworthiness of these financial institutions and believes there is minimal risk of a material loss.

Deferred Policy Acquisition Costs

The incremental direct costs associated with successfully acquired insurance policies, are deferred to the extent such costs are deemed recoverable from future profits. Such costs include commissions and other costs of acquiring traditional life and health insurance, credit insurance, universal life insurance, and investment products. DAC are subject to recoverability testing at the end of each accounting period. Traditional life and health insurance acquisition costs are amortized over the premium-payment period of the related policies in proportion to the ratio of annual premium income to the present value of the total anticipated premium income. Credit insurance acquisition costs are being amortized in proportion to earned premium. Acquisition costs for universal life and investment products are amortized over the lives of the policies in relation to the present value of estimated gross profits before amortization.

The Company makes certain assumptions regarding the mortality, persistency, expenses, and interest rates (equal to the rate used to compute liabilities for future policy benefits, currently 1.0% to 6.65%) the Company expects to experience in future periods when determining the present value of estimated gross profits. These assumptions are best estimates and are periodically updated whenever actual experience and/or expectations for the future change from that assumed. Additionally, these costs have been adjusted by an amount equal to the amortization that would have been recorded if unrealized gains or losses on investments associated with our universal life and investment products had been realized. Acquisition costs for stable value contracts are amortized over the term of the contracts using the effective yield method.

Value of Businesses Acquired

In conjunction with the acquisition of a block of insurance policies or investment contracts, a portion of the purchase price is allocated to the right to receive future gross profits from cash flow and earnings of the acquired insurance policies or investment contracts. This intangible asset, called VOBA, represents the actuarially estimated present value of future cash flows from the acquired policies. The estimated present value of future cash flows used in the calculation of the VOBA is based on certain assumptions, including mortality, persistency, expenses, and interest rates that the Company expects to experience in future years. These assumptions are best estimates and are periodically updated whenever actual experience and/or expectations for the future change from that assumed. The Company amortizes VOBA in proportion to gross premiums for traditional life products, in proportion to expected gross profits (�EGPs�) for interest sensitive products, including accrued interest credited to account balances of up to approximately 8.75% and in proportion to estimated gross margin for policies within the Closed Block that was acquired as part of the MONY acquisition. VOBA is subject to annual recoverability testing.

124

134

Table of Contents

Property and Equipment

The Company reports land, buildings, improvements, and equipment at cost, including interest capitalized during any acquisition or development period, less accumulated depreciation. The Company depreciates its assets using the straight-line method over the estimated useful lives of the assets. The Company�s home office building is depreciated over a thirty-nine year useful life, furniture is depreciated over a ten year useful life, office equipment and machines are depreciated over a five year useful life, and software and computers are depreciated over a three year useful life. Major repairs or improvements are capitalized and depreciated over the estimated useful lives of the assets. Other repairs are expensed as incurred. The cost and related accumulated depreciation of property and equipment sold or retired are removed from the accounts, and resulting gains or losses are included in income.

Property and equipment consisted of the following:

As of December 31, 2014 2013

(Dollars In Thousands) Home office building $ 75,109 $ 74,313 Data processing equipment 40,568 35,789 Other, principally furniture and equipment 52,771 51,049

168,448 161,151 Accumulated depreciation (116,688) (110,080) Total property and equipment $ 51,760 $ 51,071

Separate Accounts

The separate account assets represent funds for which the Company does not bear the investment risk. These assets are carried at fair value and are equal to the separate account liabilities, which represent the policyholder�s equity in those assets. The investment income and investment gains and losses on the separate account assets accrue directly to the policyholder. These amounts are reported separately as assets and liabilities related to separate accounts in the accompanying consolidated financial statements. Amounts assessed against policy account balances for the costs of insurance, policy administration, and other services are included in premiums and policy fees in the accompanying consolidated statements of income.

Stable Value Product Account Balances

The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. The segment also issues funding agreements to the Federal Home Loan Bank (�FHLB�), and markets guaranteed investment contracts (�GICs�) to 401(k) and other qualified retirement savings plans. GICs are contracts which specify a return on deposits for a specified period and often provide flexibility for withdrawals at book value in keeping with the benefits provided by the plan. Additionally, the Company has contracts outstanding pursuant to a funding agreement-backed notes program registered with the United States Securities and Exchange Commission (the �SEC�) which offered notes to both institutional and retail investors.

The segment�s products complement the Company�s overall asset/liability management in that the terms may be tailored to the needs of the Company as the seller of the contracts. Stable value product account balances include GICs and funding agreements the Company has issued. As of December 31, 2014 and 2013, the Company had $39.8 million and $0.2 billion, respectively, of stable value product account balances marketed through structured programs. Most GICs and funding agreements the Company has written have maturities of one to ten years.

125

135

Table of Contents

As of December 31, 2014, future maturities of stable value products were as follows:

Year of Maturity Amount (Dollars In Millions)

2015 $ 624.3 2016-2017 791.4 2018-2019 488.0 Thereafter 55.8

Derivative Financial Instruments

The Company records its derivative financial instruments in the consolidated balance sheet in �other long-term investments� and �other liabilities� in accordance with GAAP, which requires that all derivative instruments be recognized in the balance sheet at fair value. The change in the fair value of derivative financial instruments is reported either in the statement of income or in the other comprehensive income (loss), depending upon whether the derivative instrument qualified for and also has been properly identified as being part of a hedging relationship, and also on the type of hedging relationship that exists. For cash flow hedges, the effective portion of their gain or loss is reported as a component of other comprehensive income (loss) and reclassified into earnings in the period during which the hedged item impacts earnings. Any remaining gain or loss, the ineffective portion, is recognized in current earnings. For fair value hedge derivatives, their gain or loss as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in current earnings. Effectiveness of the Company�s hedge relationships is assessed on a quarterly basis. The Company reports changes in fair values of derivatives that are not part of a qualifying hedge relationship in earnings. Changes in the fair value of derivatives that are recognized in current earnings are reported in �Realized investment gains (losses) - Derivative financial instruments�. For additional information, see Note 23, Derivative Financial Instruments.

Insurance Liabilities and Reserves

Establishing an adequate liability for the Company�s obligations to policyholders requires the use of certain assumptions. Estimating liabilities for future policy benefits on life and health insurance products requires the use of assumptions relative to future investment yields, mortality, morbidity, persistency, and other assumptions based on the Company�s historical experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviation. Determining liabilities for the Company�s property and casualty insurance products also requires the use of assumptions, including the projected levels of used vehicle prices, the frequency and severity of claims, and the effectiveness of internal processes designed to reduce the level of claims. The Company�s results depend significantly upon the extent to which its actual claims experience is consistent with the assumptions the Company used in determining its reserves and pricing its products. The Company�s reserve assumptions and estimates require significant judgment and, therefore, are inherently uncertain. The Company cannot determine with precision the ultimate amounts that it will pay for actual claims or the timing of those payments.

Guaranteed Minimum Withdrawal Benefits

The Company also establishes reserves for guaranteed minimum withdrawal benefits (�GMWB�) on its variable annuity (�VA�) products. The GMWB is valued in accordance with FASB guidance under the ASC Derivatives and Hedging Topic which utilizes the valuation technique prescribed by the ASC Fair Value Measurements and Disclosures Topic, which requires the liability to be recorded at fair value using current implied volatilities for the equity indices. The methods used to estimate the liabilities employ assumptions about mortality, lapses, policyholder behavior, equity market returns, interest rates, and market volatility. The Company assumes age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience, with attained age factors varying from 44.5% to 100%. Differences between the actual experience and the assumptions used result in variances in profit and could result in losses. The Company reinsures certain risks associated with the GMWB to Shades Creek Captive Insurance (�Shades Creek�), a direct wholly owned insurance subsidiary of PLC. As of December 31, 2014, the Company�s net GMWB liability held, including the impact of reinsurance was $25.9 million.

126

136

Table of Contents

Goodwill

Accounting for goodwill requires an estimate of the future profitability of the associated lines of business to assess the recoverability of the capitalized acquisition goodwill. The Company evaluates the carrying value of goodwill at the segment (or reporting unit) level at least annually and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to: 1) a significant adverse change in legal factors or in business climate, 2) unanticipated competition, or 3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company first determines through qualitative analysis whether relevant events and circumstances indicate that it is more likely than not that segment goodwill balances are impaired as of the testing date. If it is determined that it is more likely than not that impairment exists, the Company compares its estimate of the fair value of the reporting unit to which the goodwill is assigned to the reporting unit�s carrying amount, including goodwill. The Company utilizes a fair value measurement (which includes a discounted cash flows analysis) to assess the carrying value of the reporting units in consideration of the recoverability of the goodwill balance assigned to each reporting unit as of the measurement date. The Company�s material goodwill balances are attributable to certain of its operating segments (which are each considered to be reporting units). The cash flows used to determine the fair value of the Company�s reporting units are dependent on a number of significant assumptions. The Company�s estimates, which consider a market participant view of fair value, are subject to change given the inherent uncertainty in predicting future results and cash flows, which are impacted by such things as policyholder behavior, competitor pricing, capital limitations, new product introductions, and specific industry and market conditions. As of December 31, 2014, the Company performed its annual evaluation of goodwill and determined that no adjustment to impair goodwill was necessary. As of December 31, 2014, the Company had goodwill of $77.6 million.

Income Taxes

The Company is included in the consolidated federal income tax return of PLC. The Company utilizes the asset and liability method of accounting for income taxes in accordance with FASB ASC Topic 740. The method of allocation of current income taxes between the affiliates is subject to a written agreement under which the Company incurs a liability to PLC to the extent that a separate return calculation indicates that the Company has a federal income tax liability. If the Company has an income tax benefit, the benefit is recorded currently to the extent it can be carried back against prior years� separate company income tax expense. Any amount not carried back is carried forward on a separate company basis (generally without a time limit), and the tax benefit is reflected in future periods when the Company generates taxable income. Income taxes recoverable (payable) are recorded in income taxes receivable (payable), respectively, and are settled periodically, per the tax sharing agreement. In general, income tax provisions are based on the income reported for financial statement purposes. Deferred income taxes arise from the recognition of temporary differences between the basis of assets and liabilities determined for financial reporting purposes and the basis determined for income tax purposes. Such temporary differences are principally related to net unrealized gains (losses), deferred policy acquisition costs and value of business acquired, and future policy benefits and claims.

The Company analyzes whether it needs to establish a valuation allowance on each of its deferred tax assets. In performing this analysis, the Company first considers the need for a valuation allowance on each separate deferred tax asset. Ultimately, it analyzes this need in the aggregate in order to prevent the double-counting of expected future taxable income in each of the foregoing separate analyses.

Variable Interest Entities

The Company holds certain investments in entities in which its ownership interests could possibly be considered variable interests under Topic 810 of the FASB ASC (excluding debt and equity securities held as trading, available-for-sale, or held-to-maturity). The Company reviews the characteristics of each of these applicable entities and compares those characteristics to applicable criteria to determine whether the entity is a Variable Interest Entity (�VIE�). If the entity is determined to be a VIE, the Company then performs a detailed review to determine whether the interest would be considered a variable interest under the guidance. The Company then performs a qualitative review of all variable interests with the entity and determines whether the Company is the primary beneficiary. ASC 810 provides that an entity is the primary beneficiary of a VIE if the entity has 1) the power to direct the activities of the VIE that most significantly impact the VIE�s economic performance, and 2) the obligation to absorb losses of the VIE that could potentially be significant

127

137

Table of Contents

to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. For more information on the Company�s investment in a VIE refer to Note 6, Investment Operations, to the consolidated financial statements.

Policyholder Liabilities, Revenues, and Benefits Expense

Traditional Life, Health, and Credit Insurance Products

Traditional life insurance products consist principally of those products with fixed and guaranteed premiums and benefits, and they include whole life insurance policies, term and term-like life insurance policies, limited payment life insurance policies, and certain annuities with life contingencies. Traditional life insurance premiums are recognized as revenue when due. Health and credit insurance premiums are recognized as revenue over the terms of the policies. Benefits and expenses are associated with earned premiums so that profits are recognized over the life of the contracts. This is accomplished by means of the provision for liabilities for future policy benefits and the amortization of DAC and VOBA. Gross premiums in excess of net premiums related to immediate annuities are deferred and recognized over the life of the policy.

Liabilities for future policy benefits on traditional life insurance products have been computed using a net level method including assumptions as to investment yields, mortality, persistency, and other assumptions based on the Company�s experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviation. Reserve investment yield assumptions on December 31, 2014, range from approximately 2.0% to 7.5%. The liability for future policy benefits and claims on traditional life, health, and credit insurance products includes estimated unpaid claims that have been reported to us and claims incurred but not yet reported. Policy claims are charged to expense in the period in which the claims are incurred.

Activity in the liability for unpaid claims for life and health insurance is summarized as follows:

As of December 31, 2014 2013 2012

(Dollars In Thousands) Balance beginning of year $ 334,450 $ 326,633 $ 312,799 Less: reinsurance 117,502 155,341 161,450 Net balance beginning of year 216,948 171,292 151,349 Incurred related to: Current year 1,075,005 698,028 702,555 Prior year 102,936 68,396 62,926 Total incurred 1,177,941 766,424 765,481 Paid related to: Current year 1,017,193 682,877 664,744 Prior year 121,966 85,146 80,794 Total paid 1,139,159 768,023 745,538 Other changes: Acquisition and reserve transfers � 47,255(1) � Net balance end of year 255,730 216,948 171,292 Add: reinsurance 163,671 117,502 155,341 Balance end of year $ 419,401 $ 334,450 $ 326,633

(1) This amount represents the net liability, before reinsurance, for unpaid claims as of December 31, 2013 for MONY Life Insurance Company. The claims activity from the acquisition date of October 1, 2013 through December 31, 2013 for MONY Life Insurance Company is not reflected in this chart.

128

138

Table of Contents

Universal Life and Investment Products

Universal life and investment products include universal life insurance, guaranteed investment contracts, guaranteed funding agreements, deferred annuities, and annuities without life contingencies. Premiums and policy fees for universal life and investment products consist of fees that have been assessed against policy account balances for the costs of insurance, policy administration, and surrenders. Such fees are recognized when assessed and earned. Benefit reserves for universal life and investment products represent policy account balances before applicable surrender charges plus certain deferred policy initiation fees that are recognized in income over the term of the policies. Policy benefits and claims that are charged to expense include benefit claims incurred in the period in excess of related policy account balances and interest credited to policy account balances. Interest rates credited to universal life products ranged from 1.0% to 8.75% and investment products ranged from 0.2% to 10% in 2014.

The Company establishes liabilities for fixed indexed annuity (�FIA�) products. These products are deferred fixed annuities with a guaranteed minimum interest rate plus a contingent return based on equity market performance. The FIA product is considered a hybrid financial instrument under the Financial Accounting Standards Board (�FASB�) Accounting Standards Codification (�ASC� or �Codification�) Topic 815�Derivatives and Hedging which allows the Company to make the election to value the liabilities of these FIA products at fair value. This election was made for the FIA products issued prior to 2010 as the policies were issued. These products are no longer being marketed. The changes in the fair value of the liability for these FIA products are recorded in Benefit and settlement expenses with the liability being recorded in Annuity account balances. For more information regarding the determination of fair value of annuity account balances please refer to Note 22, Fair Value of Financial Instruments. Premiums and policy fees for these FIA products consist of fees that have been assessed against the policy account balances for surrenders. Such fees are recognized when assessed and earned.

During 2013, the Company began marketing a new FIA product. These products are also deferred fixed annuities with a guaranteed minimum interest rate plus a contingent return based on equity market performance and are considered hybrid financial instruments under the FASB�s ASC Topic 815�Derivatives and Hedging. The Company did not elect to value these FIA products at fair value. As a result the Company accounts for the provision that provides for a contingent return based on equity market performance as an embedded derivative. The embedded derivative is bifurcated from the host contract and recorded at fair value in Other liabilities. Changes in the fair value of the embedded derivative are recorded in Realized investment gains (losses)�Derivative financial instruments. For more information regarding the determination of fair value of the FIA embedded derivative refer to Note 22, Fair Value of Financial Instruments. The host contract is accounted for as a debt instrument in accordance with ASC Topic 944�Financial Services�Insurance and is recorded in Annuity account balances with any discount to the minimum account value being accreted using the effective yield method. Benefits and settlement expenses include accreted interest and benefit claims incurred during the period.

During 2014, the Company began marketing a new indexed universal life (�IUL�) product. These products are universal life products with a guaranteed minimum interest rate plus a contingent return based on equity market performance and are considered hybrid financial instruments under the FASB�s ASC Topic 815�Derivatives and Hedging. The Company did not elect to value these IUL products at fair value. As a result the Company accounts for the provision that provides for a contingent return based on equity market performance as an embedded derivative. The embedded derivative is bifurcated from the host contract and recorded at fair value in Other liabilities. Changes in the fair value of the embedded derivative are recorded in Realized investment gains (losses)�Derivative financial instruments. For more information regarding the determination of fair value of the IUL embedded derivative refer to Note 22, Fair Value of Financial Instruments. The host contract is accounted for as a debt instrument in accordance with ASC Topic 944�Financial Services�Insurance and is recorded in Future policy benefits and claims with any discount to the minimum account value being accreted using the effective yield method. Benefits and settlement expenses include accreted interest and benefit claims incurred during the period.

The Company�s accounting policies with respect to variable universal life (�VUL�) and VA are identical except that policy account balances (excluding account balances that earn a fixed rate) are valued at fair value and reported as components of assets and liabilities related to separate accounts.

The Company establishes liabilities for guaranteed minimum death benefits (�GMDB�) on its VA products. The methods used to estimate the liabilities employ assumptions about mortality and the performance of equity

129

139

Table of Contents

markets. The Company assumes age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience, with attained age factors varying from 49% - 80%. Future declines in the equity market would increase the Company�s GMDB liability. Differences between the actual experience and the assumptions used result in variances in profit and could result in losses. Our GMDB as of December 31, 2014, are subject to a dollar for dollar reduction upon withdrawal of related annuity deposits on contracts issued prior to January 1, 2003. The Company reinsures certain risks associated with the GMDB to Shades Creek. As of December 31, 2014, the GMDB reserve, including the impact of reinsurance was $21.7 million.

Property and Casualty Insurance Products

Property and casualty insurance products include service contract business, surety bonds, and guaranteed asset protection (�GAP). Premiums for service contracts and GAP products are recognized based on expected claim patterns. For all other products, premiums are generally recognized over the terms of the contract on a pro-rata basis. Fee income from providing administrative services is recognized as earned when the related services are performed. Unearned premium reserves are maintained for the portion of the premiums that is related to the unexpired period of the policy. Benefit reserves are recorded when insured events occur. Benefit reserves include case basis reserves for known but unpaid claims as of the balance sheet date as well as incurred but not reported (�IBNR�) reserves for claims where the insured event has occurred but has not been reported to the Company as of the balance sheet date. The case basis reserves and IBNR are calculated based on historical experience and on assumptions relating to claim severity and frequency, the level of used vehicle prices, and other factors. These assumptions are modified as necessary to reflect anticipated trends.

Reinsurance

The Company uses reinsurance extensively in certain of its segments and accounts for reinsurance and the recognition of the impact of reinsurance costs in accordance with the ASC Financial Services�Insurance Topic. The following summarizes some of the key aspects of the Company�s accounting policies for reinsurance.

Reinsurance Accounting Methodology�Ceded premiums of the Company�s traditional life insurance products are treated as an offset to direct premium and policy fee revenue and are recognized when due to the assuming company. Ceded claims are treated as an offset to direct benefits and settlement expenses and are recognized when the claim is incurred on a direct basis. Ceded policy reserve changes are also treated as an offset to benefits and settlement expenses and are recognized during the applicable financial reporting period. Expense allowances paid by the assuming companies which are allocable to the current period are treated as an offset to other operating expenses. Since reinsurance treaties typically provide for allowance percentages that decrease over the lifetime of a policy, allowances in excess of the �ultimate� or final level allowance are capitalized. Amortization of capitalized reinsurance expense allowances representing recovery of acquisition costs is treated as an offset to direct amortization of DAC or VOBA. Amortization of deferred expense allowances is calculated as a level percentage of expected premiums in all durations given expected future lapses and mortality and accretion due to interest.

The Company utilizes reinsurance on certain short duration insurance contracts (primarily issued through the Asset Protection segment). As part of these reinsurance transactions the Company receives reinsurance allowances which reimburse the Company for acquisition costs such as commissions and premium taxes. A ceding fee is also collected to cover other administrative costs and profits for the Company. As a component of reinsurance costs, reinsurance allowances are accounted for in accordance with the relevant provisions of ASC Financial Services�Insurance Topic, which state that reinsurance costs should be amortized over the contract period of the reinsurance if the contract is short-duration. Accordingly, reinsurance allowances received related to short-duration contracts are capitalized and charged to expense in proportion to premiums earned. Ceded unamortized acquisition costs are netted with direct unamortized acquisition costs in the balance sheet.

Ceded premiums and policy fees on the Company�s fixed universal life (�UL�), VUL, bank-owned life insurance (�BOLI�), and annuity products reduce premiums and policy fees recognized by the Company. Ceded claims are treated as an offset to direct benefits and settlement expenses and are recognized when the claim is incurred on a direct basis. Ceded policy reserve changes are also treated as an offset to benefits and settlement expenses and are recognized during the applicable valuation period.

130

140

Table of Contents

Since reinsurance treaties typically provide for allowance percentages that decrease over the lifetime of a policy, allowances in excess of the �ultimate� or final level allowance are capitalized. Amortization of capitalized reinsurance expense allowances are amortized based on future expected gross profits. Assumptions regarding mortality, lapses, and interest rates are continuously reviewed and may be periodically changed. These changes will result in �unlocking� that changes the balance in the ceded deferred acquisition cost and can affect the amortization of DAC and VOBA. Ceded unearned revenue liabilities are also amortized based on expected gross profits. Assumptions are based on the best current estimate of expected mortality, lapses and interest spread.

The Company has also assumed certain policy risks written by other insurance companies through reinsurance agreements. Premiums and policy fees as well as Benefits and settlement expenses include amounts assumed under reinsurance agreements and are net of reinsurance ceded. Assumed reinsurance is accounted for in accordance with ASC Financial Services�Insurance Topic.

Reinsurance Allowances�Long-Duration Contracts�Reinsurance allowances are intended to reimburse the ceding company for some portion of the ceding company�s commissions, expenses, and taxes. The amount and timing of reinsurance allowances (both first year and renewal allowances) are contractually determined by the applicable reinsurance contract and do not necessarily bear a relationship to the amount and incidence of expenses actually paid by the ceding company in any given year.

Ultimate reinsurance allowances are defined as the lowest allowance percentage paid by the reinsurer in any policy duration over the lifetime of a universal life policy (or through the end of the level term period for a traditional life policy). Ultimate reinsurance allowances are determined during the negotiation of each reinsurance agreement and will differ between agreements.

The Company determines its �cost of reinsurance� to include amounts paid to the reinsurer (ceded premiums) net of amounts reimbursed by the reinsurer (in the form of allowances). As noted within ASC Financial Services�Insurance Topic, �The difference, if any, between amounts paid for a reinsurance contract and the amount of the liabilities for policy benefits relating to the underlying reinsured contracts is part of the estimated cost to be amortized.� The Company�s policy is to amortize the cost of reinsurance over the life of the underlying reinsured contracts (for long-duration policies) in a manner consistent with the way in which benefits and expenses on the underlying contracts are recognized. For the Company�s long-duration contracts, it is the Company�s practice to defer reinsurance allowances as a component of the cost of reinsurance and recognize the portion related to the recovery of acquisition costs as a reduction of applicable unamortized acquisition costs in such a manner that net acquisition costs are capitalized and charged to expense in proportion to net revenue recognized. The remaining balance of reinsurance allowances are included as a component of the cost of reinsurance and those allowances which are allocable to the current period are recorded as an offset to operating expenses in the current period consistent with the recognition of benefits and expenses on the underlying reinsured contracts. This practice is consistent with the Company�s practice of capitalizing direct expenses (e.g. commissions), and results in the recognition of reinsurance allowances on a systematic basis over the life of the reinsured policies on a basis consistent with the way in which acquisition costs on the underlying reinsured contracts would be recognized. In some cases reinsurance allowances allocable to the current period may exceed non-deferred direct costs, which may cause net other operating expenses (related to specific contracts) to be negative.

Amortization of Reinsurance Allowances�Reinsurance allowances do not affect the methodology used to amortize DAC and VOBA, or the period over which such DAC and VOBA are amortized. Reinsurance allowances offset the direct expenses capitalized, reducing the net amount that is capitalized. DAC and VOBA on traditional life policies are amortized based on the pattern of estimated gross premiums of the policies in force. Reinsurance allowances do not affect the gross premiums, so therefore they do not impact traditional life amortization patterns. DAC and VOBA on universal life products are amortized based on the pattern of estimated gross profits of the policies in force. Reinsurance allowances are considered in the determination of estimated gross profits, and therefore do impact amortization patterns.

Reinsurance Assets and Liabilities�Claim liabilities and policy benefits are calculated consistently for all policies in accordance with GAAP, regardless of whether or not the policy is reinsured. Once the claim liabilities and policy benefits for the underlying policies are estimated, the amounts recoverable from the reinsurers are estimated based on a number of factors including the terms of the reinsurance contracts, historical payment patterns of reinsurance

131

141

Table of Contents

partners, and the financial strength and credit worthiness of reinsurance partners and recorded as Reinsurance receivables on the balance sheet. Liabilities for unpaid reinsurance claims are produced from claims and reinsurance system records, which contain the relevant terms of the individual reinsurance contracts. The Company monitors claims due from reinsurers to ensure that balances are settled on a timely basis. Incurred but not reported claims are reviewed by the Company�s actuarial staff to ensure that appropriate amounts are ceded.

The Company analyzes and monitors the credit worthiness of each of its reinsurance partners to minimize collection issues. For newly executed reinsurance contracts with reinsurance companies that do not meet predetermined standards, the Company requires collateral such as assets held in trusts or letters of credit.

Components of Reinsurance Cost�The following income statement lines are affected by reinsurance cost:

Premiums and policy fees (�reinsurance ceded� on the Company�s financial statements) represent consideration paid to the assuming company for accepting the ceding company�s risks. Ceded premiums and policy fees increase reinsurance cost.

Benefits and settlement expenses include incurred claim amounts ceded and changes in ceded policy reserves. Ceded benefits and settlement expenses decrease reinsurance cost.

Amortization of deferred policy acquisition cost and VOBA reflects the amortization of capitalized reinsurance allowances representing recovery of acquisition costs. Ceded amortization decreases reinsurance cost.

Other expenses include reinsurance allowances paid by assuming companies to the Company less amounts representing recovery of acquisition costs. Reinsurance allowances decrease reinsurance cost.

The Company�s reinsurance programs do not materially impact the other income line of the Company�s income statement. In addition, net investment income generally has no direct impact on the Company�s reinsurance cost. However, it should be noted that by ceding business to the assuming companies, the Company forgoes investment income on the reserves ceded to the assuming companies. Conversely, the assuming companies will receive investment income on the reserves assumed which will increase the assuming companies� profitability on business assumed from the Company.

Accounting Pronouncements Not Yet Adopted

Accounting Standards Update (�ASU�) No. 2014-08�Reporting Discontinued Operations and Disclosure of Disposals of Components of an Entity. This Update changes the requirements for reporting discontinued operations and related disclosures. The Update limits the definition of a discontinued operation to disposals that represent �strategic shifts� that will have a major effect on an entity�s operation and financial results. Additionally, the Update requires enhanced disclosures about the components of discontinued operations and the financial effects of the disposal. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2014. The Company is reviewing the additional disclosures required by the Update, and will apply the revised guidance to any disposals occurring after the effective date.

ASU No. 2014-09�Revenue from Contracts with Customers (Topic 606). This Update provides for significant revisions to the recognition of revenue from contracts with customers across various industries. Under the new guidance, entities are required to apply a prescribed 5-step process to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting for revenues associated with insurance products is not within the scope of this Update. The Update is effective for annual and interim periods beginning after December 15, 2016. The Company is reviewing its policies and processes to ensure compliance with the requirements in this Update, upon adoption.

ASU No. 2014-11�Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. This Update changes the requirements for classification of certain repurchase agreements, and will expand the use of secured borrowing accounting for repurchase-to-maturity transactions. In addition, the Update requires additional disclosures for repurchase agreements accounted for both as sales and as secured borrowings. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2014. The Update is not expected to

132

142

Table of Contents

impact the Company�s financial position or results of operations, and the Company has reviewed its policies and processes to ensure compliance with the additional disclosure requirements.

ASU No. 2014-15�Presentation of Financial Statements�Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity�s Ability to Continue as a Going Concern. This Update will require management to assess an entity�s ability to continue as a going concern, and will require footnote disclosures in certain circumstances. Under the updated guidance, management should consider relevant conditions and evaluate whether it is probable that the entity will be unable to meet its obligations within one year after the issuance date of the financial statements. The Update is effective for annual periods ending December 31, 2016 and interim periods thereafter, with early adoption is permitted. The amendments in this Update will not impact the Company�s financial position or results of operations. However, the new guidance will require a formal assessment of going concern by management based on criteria prescribed in the new guidance. The Company is reviewing its policies and processes to ensure compliance with the new guidance.

ASU No. 2014-17�Business Combinations (Topic 805). This Update relates to �pushdown accounting�, which refers to pushing down the acquirer�s accounting and reporting basis (which is recognized in conjunction with its accounting for a business combination) to the acquiree�s standalone financial statements. The new guidance makes pushdown accounting optional for an acquiree that is a business or nonprofit activity when there is a change-in- control event (e.g., the acquirer in a business combination obtains control over the acquiree). In addition, the staff of the SEC released Staff Accounting Bulletin (�SAB�) No. 115, which rescinds SAB Topic 5J, �New Basis of Accounting Required in Certain Circumstances� (the SEC staff�s pre-existing guidance on pushdown accounting) and conforms SEC guidance on pushdown accounting to the FASB�s new guidance. The new pushdown accounting guidance became effective upon its issuance on November 18, 2014. Although now optional, the Company expects to apply pushdown accounting to its standalone financial statements effective with the Company becoming a wholly owned subsidiary of Dai-ichi Life on February 1, 2015.

ASU No. 2015-02�Consolidation�Amendments to the Consolidation Analysis. This Update makes several targeted changes to generally accepted accounting principles, including a) eliminating the presumption that a general partner should consolidate a limited partnership and b) eliminating the consolidation model specific to limited partnerships. The amendments also clarify when fees and related party relationships should be considered in the consolidation of variable interest entities. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2015. The Company is reviewing its policies and processes to ensure compliance with the requirements in this Update, upon adoption.

3. SIGNIFICANT ACQUISITIONS

On October 1, 2013 the Company completed the acquisition contemplated by the master agreement (the �Master Agreement�) dated April 10, 2013. Pursuant to that Master Agreement with AXA Financial, Inc. (�AXA�) and AXA Equitable Financial Services, LLC (�AEFS�), the Company acquired the stock of MONY Life Insurance Company (�MONY�) from AEFS and entered into a reinsurance agreement (the �Reinsurance Agreement�) pursuant to which it reinsured on a 100% indemnity reinsurance basis certain business (the �MLOA Business�) of MONY Life Insurance Company of America (�MLOA�). The final aggregate purchase price of MONY was $689 million. The ceding commission for the reinsurance of the MLOA Business was $370 million. Together, the purchase of MONY and reinsurance of the MLOA Business are hereto referred to as (the �MONY acquisition�). The MONY acquisition allowed the Company to invest its capital and increase the scale of its Acquisitions segment. The MONY acquisition business is comprised of traditional and universal life insurance policies and fixed and variable annuities, most of which were written prior to 2004.

The MONY acquisition was accounted for under the acquisition method of accounting under ASC Topic 805. In accordance with ASC 805-20-30, all identifiable assets acquired and liabilities assumed were measured at fair value as of the acquisition date. Within one year of the acquisition date, as a result of new information obtained about facts and circumstances that existed as of the acquisition date, the Company recorded certain measurement period adjustments to fixed maturities, mortgage loans, cash, accounts and premiums receivable, VOBA, other assets, deferred income taxes, future policy benefits and claims, other policyholders� funds, and other liabilities. These were customary adjustments that occurred during the normal course of reviewing and integrating the MONY acquisition. The net result on the amount of VOBA recorded by the Company in relation to the MONY acquisition was to decrease VOBA by

133

143

Table of Contents

approximately $14.0 million. This impact has been revised in the comparative consolidated balance sheet presented as of December 31, 2013. The Company has determined that the impact on amortization and other related amounts within the comparative interim and annual periods from that previously presented in the annual or interim consolidated condensed statements of income is immaterial. The amounts presented in the following table related to the MONY acquisition (presented as of the acquisition date of October 1, 2013) have been retrospectively revised for the aforementioned measurement period adjustments.

The following table summarizes the consideration paid for the acquisition and the determination of the fair value of assets acquired and liabilities assumed at the acquisition date:

Fair Value As of

October 1, 2013 (Dollars In Thousands)

Assets Fixed maturities, at fair value $ 6,557,853 Equity securities, at fair value 108,413 Mortgage loans 830,415 Policy loans 967,534 Short-term investments 130,963 Total investments 8,595,178 Cash 216,164 Accrued investment income 114,695 Accounts and premiums receivable, net of allowance for uncollectible amounts 26,055 Reinsurance receivables 422,692 Value of business acquired 205,767 Other assets 5,104 Income tax receivable 21,197 Deferred income taxes 188,142 Separate account assets 195,452 Total assets $ 9,990,446 Liabilities Future policy benefits and claims $ 7,645,969 Unearned premiums 3,066 Total policy liabilities and accruals 7,649,035 Annuity account balances 752,163 Other policyholders� funds 636,448 Other liabilities 66,124 Non-recourse funding obligation 2,548 Separate account liabilities 195,344 Total liabilities 9,301,662 Net assets acquired $ 688,784

134

144

Table of Contents

The following (unaudited) pro forma condensed consolidated results of operations assumes that the aforementioned acquisition was completed as of January 1, 2012:

Unaudited For The Year Ended

December 31, 2013 2012

(Dollars In Thousands) Revenue $ 4,245,388(1) $ 4,330,935

Net income $ 325,783(2) $ 365,204

(1) Includes $203.8 million of revenue recognized in the Company�s net income for the year ended December 31, 2013.

(2) Includes $27.9 million of pre-tax net income recognized by the Company for the year ended December 31, 2013.

4. MONY CLOSED BLOCK OF BUSINESS

In 1998, MONY converted from a mutual insurance company to a stock corporation (�demutualization�). In connection with its demutualization, an accounting mechanism known as a closed block (the �Closed Block�) was established for certain individuals� participating policies in force as of the date of demutualization. Assets, liabilities, and earnings of the Closed Block are specifically identified to support its participating policyholders. The Company acquired the Closed Block in conjunction with the MONY acquisition as discussed in Note 3, Significant Acquisitions.

Assets allocated to the Closed Block inure solely to the benefit of each Closed Block�s policyholders and will not revert to the benefit of MONY or the Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of MONY�s general account, any of MONY�s separate accounts or any affiliate of MONY without the approval of the Superintendent of The New York State Insurance Department (the �Superintendent�). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the general account.

The excess of Closed Block liabilities over Closed Block assets (adjusted to exclude the impact of related amounts in accumulated other comprehensive income (loss) (�AOCI�)) at the acquisition date represented the estimated maximum future post-tax earnings from the Closed Block that would be recognized in income from continuing operations over the period the policies and contracts in the Closed Block remain in force. In connection with the acquisition of MONY, the Company has developed an actuarial calculation of the expected timing of MONY�s Closed Block�s earnings as of October 1, 2013.

If the actual cumulative earnings from the Closed Block are greater than the expected cumulative earnings, only the expected earnings will be recognized in the Company�s net income. Actual cumulative earnings in excess of expected cumulative earnings at any point in time are recorded as a policyholder dividend obligation because they will ultimately be paid to Closed Block policyholders as an additional policyholder dividend unless offset by future performance that is less favorable than originally expected. If a policyholder dividend obligation has been previously established and the actual Closed Block earnings in a subsequent period are less than the expected earnings for that period, the policyholder dividend obligation would be reduced (but not below zero). If, over the period the policies and contracts in the Closed Block remain in force, the actual cumulative earnings of the Closed Block are less than the expected cumulative earnings, only actual earnings would be recognized in income from continuing operations. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside the Closed Block.

Many expenses related to Closed Block operations, including amortization of VOBA, are charged to operations outside of the Closed Block; accordingly, net revenues of the Closed Block do not represent the actual profitability of the Closed Block operations. Operating costs and expenses outside of the Closed Block are, therefore, disproportionate to the business outside of the Closed Block.

135

145

Table of Contents

Summarized financial information for the Closed Block as of December 31, 2013 and December 31, 2014 is as follows:

As of December 31, 2014 2013

(Dollars In Thousands) Closed block liabilities Future policy benefits, policyholders� account balances and other $ 6,138,505 $ 6,261,819 Policyholder dividend obligation 366,745 190,494 Other liabilities 53,838 1,259 Total closed block liabilities 6,559,088 6,453,572

Closed block assets Fixed maturities, available-for-sale, at fair value $ 4,524,037 $ 4,113,829 Equity securities, available-for-sale, at fair value 5,387 5,223 Mortgage loans on real estate 448,855 601,959 Policy loans 771,120 802,013 Cash and other invested assets 30,984 140,577 Other assets 221,270 206,938 Total closed block assets 6,001,653 5,870,539

Excess of reported closed block liabilities over closed block assets 557,435 583,033 Portion of above representing accumulated other comprehensive income: Net unrealized investments gains (losses) net of deferred tax benefit of $0 and $1,074 net of policyholder dividend obligation of $106,886 and $12,720 � (1,994) Future earnings to be recognized from closed block assets and closed block liabilities $ 557,435 581,039

Reconciliation of the policyholder dividend obligation for the years ending December 31, 2013 and 2014 is as follows:

For The Year Ended

December 31, 2014 2013

(Dollars In Thousands) Policyholder dividend obligation, beginning balance $ 190,494 $ 213,350 Applicable to net revenue (losses) (910) (10,136) Change in net unrealized investment gains (losses) allocated to policyholder dividend obligation 177,161 (12,720) Policyholder dividend obligation, end of period $ 366,745 $ 190,494

136

146

Table of Contents

Closed Block revenues and expenses were as follows:

For The Year Ended December 31,

2014 2013 (Dollars In Thousands)

Revenues Premiums and other income $ 212,765 $ 64,171 Net investment income 239,028 51,141 Net investment gains 10,528 9,252 Total revenues 462,321 124,564 Benefits and other deductions Benefits and settlement expenses 417,667 113,564 Other operating expenses 674 548 Total benefits and other deductions 418,341 114,112 Net revenues before income taxes 43,980 10,452 Income tax expense 20,377 3,658 Net revenues $ 23,603 $ 6,794

5. DAI-ICHI MERGER

On February 1, 2015 PLC, subsequent to required approvals from PLC�s shareholders and relevant regulatory authorities, became a wholly owned subsidiary as contemplated by the Agreement and Plan of Merger (the �Merger Agreement�) with Dai-ichi Life and DL Investment (Delaware), Inc., a Delaware corporation and wholly owned subsidiary of Dai-ichi Life, which provides for the merger of DL Investment (Delaware), Inc. with and into PLC (the �Merger�), with PLC surviving the Merger as a wholly owned subsidiary of Dai-ichi Life. On February 1, 2015 each share of PLC�s common stock outstanding was converted into the right to receive $70 per share, without interest, (the �Per Share Merger Consideration�). The aggregate cash consideration to be paid in connection with the Merger for the outstanding shares of common stock was approximately $5.6 billion.

The Merger resulted in the Company recognizing certain contingent or transaction related costs. Subsequent to the Merger, the Company will apply �pushdown� accounting by applying the guidance allowed by ASC 805, Business Combinations, including the initial recognition of most of the Company�s assets and liabilities at fair value as of the acquisition date, and similarly goodwill calculated and recognized based on the terms of the transaction and the new basis of net assets of the Company. The new basis of accounting will be the basis of the accounting records in the preparation of future financial statements and related disclosures.

Treatment of Benefit Plans

At or immediately prior to the Merger, each stock appreciation right with respect to shares of PLC�s Common Stock granted under any Stock Plan (each, a �SAR�) that was outstanding and unexercised immediately prior to the Merger and that had a base price per share of Common Stock underlying such SAR (the �Base Price�) that was less than the Per Share Merger Consideration (each such SAR, an �In-the-Money SAR�), whether or not exercisable or vested, was cancelled and converted into the right to receive an amount in cash less any applicable withholding taxes, determined by multiplying (i) the excess of the Per Share Merger Consideration over the Base Price of such In-the-Money SAR by (ii) the number of shares of PLC�s Common Stock subject to such In- the-Money SAR (such amount, the �SAR Consideration�).

At or immediately prior to the effective time of the merger, each restricted stock unit with respect to a share of Common Stock granted under any Stock Plan (each, a �RSU�) that was outstanding immediately prior to the Merger, whether or not vested, was cancelled and converted into the right to receive an amount in cash, without interest, less any applicable withholding taxes, determined by multiplying (i) the Per Share Merger Consideration by (ii) the number of RSUs.

137

147

Table of Contents

The number of performance shares earned for each award of performance shares granted under any Stock Plan will be calculated by determining the number of performance shares that would have been paid if the subject award period had ended on the December 31 immediately preceding the Merger (based on the conditions set for payment of performance share awards for the subject award period), provided that the number of performance shares earned for each award were not less than the aggregate number of performance shares at the target performance level. Each performance share earned that was outstanding immediately prior to the Merger, whether or not vested, was cancelled and converted into the right to receive an amount in cash, without interest, less any applicable withholding taxes, determined by multiplying (i) the Per Share Merger Consideration by (ii) the number of Performance Shares.

6. INVESTMENT OPERATIONS

Major categories of net investment income are summarized as follows:

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Fixed maturities $ 1,711,722 $ 1,508,924 $ 1,453,018 Equity securities 41,533 26,735 20,740 Mortgage loans 360,778 333,093 349,845 Investment real estate 4,483 3,555 3,289 Short-term investments 109,592 72,433 62,887

2,228,108 1,944,740 1,889,779 Other investment expenses 130,095 108,552 100,441 Net investment income $ 2,098,013 $ 1,836,188 $ 1,789,338

Net realized investment gains (losses) for all other investments are summarized as follows:

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Fixed maturities $ 75,074 $ 63,161 $ 67,669 Equity securities 495 3,276 (45) Impairments on fixed maturity securities (7,275) (19,100) (58,144) Impairments on equity securities � (3,347) � Modco trading portfolio 142,016 (178,134) 177,986 Other investments (12,283) (9,840) (12,774) Total realized gains (losses) - investments $ 198,027 $ (143,984) $ 174,692

For the year ended December 31, 2014, gross realized gains on investments available-for-sale (fixed maturities, equity securities, and short-term investments) were $76.7 million and gross realized losses were $8.1 million, including $6.9 million of impairment losses. For the year ended December 31, 2013, gross realized gains on investments available-for-sale (fixed maturities, equity securities, and short-term investments) were $72.6 million and gross realized losses were $27.9 million, including $21.7 million of impairment losses. For the year ended December 31, 2012, gross realized gains on investments available-for-sale (fixed maturities, equity securities, and short-term investments) were $73.2 million and gross realized losses were $60.3 million, including $54.7 million of impairment losses.

For the year ended December 31, 2014, the Company sold securities in an unrealized gain position with a fair value (proceeds) of $1.7 billion. The gain realized on the sale of these securities was $76.7 million. For the year ended December 31, 2013, the Company sold securities in an unrealized gain position with a fair value (proceeds) of $2.3 billion. The gain realized on the sale of these securities was $72.6 million. For the year ended December 31, 2012, the Company sold securities in an unrealized gain position with a fair value (proceeds) of $1.6 billion. The gain realized on the sale of these securities was $73.2 million.

138

148

Table of Contents

For the year ended December 31, 2014, the Company sold securities in an unrealized loss position with a fair value (proceeds) of $22.9 million. The loss realized on the sale of these securities was $1.2 million. The Company made the decision to exit these holdings in conjunction with our overall asset liability management process.

For the year ended December 31, 2013, the Company sold securities in an unrealized loss position with a fair value (proceeds) of $398.2 million. The loss realized on the sale of these securities was $6.2 million. The Company made the decision to exit these holdings in conjunction with our overall asset liability management process.

For the year ended December 31, 2012, the Company sold securities in an unrealized loss position with a fair value (proceeds) of $38.0 million. The loss realized on the sale of these securities was $5.6 million. The Company made the decision to exit these holdings in order to reduce its European financial exposure.

The amortized cost and fair value of the Company�s investments classified as available-for-sale as of December 31, are as follows:

Gross Gross Total OTTI Amortized Unrealized Unrealized Fair Recognized

Cost Gains Losses Value in OCI(1) (Dollars In Thousands)

2014 Fixed maturities: Bonds Residential mortgage-backed securities $ 1,374,141 $ 56,381 $ (12,264) $ 1,418,258 $ 6,404 Commercial mortgage-backed securities 1,119,979 59,637 (2,364) 1,177,252 � Other asset-backed securities 857,365 17,961 (35,950) 839,376 (95) U.S. government-related securities 1,394,028 44,149 (9,282) 1,428,895 � Other government-related securities 16,939 3,233 � 20,172 � States, municipals, and political subdivisions 1,391,526 296,594 (431) 1,687,689 � Corporate bonds 24,744,050 2,760,703 (138,975) 27,365,778 �

30,898,028 3,238,658 (199,266) 33,937,420 6,309 Equity securities 713,813 35,646 (14,153) 735,306 � Short-term investments 151,572 � � 151,572 �

$ 31,763,413 $ 3,274,304 $ (213,419) $ 34,824,298 $ 6,309 2013 Fixed maturities: Bonds Residential mortgage-backed securities $ 1,435,349 $ 34,255 $ (24,536) $ 1,445,068 $ 979 Commercial mortgage-backed securities 963,461 26,900 (19,705) 970,656 � Other asset-backed securities 926,396 15,135 (69,548) 871,983 (51) U.S. government-related securities 1,529,818 32,150 (54,078) 1,507,890 � Other government-related securities 49,171 2,257 (1) 51,427 � States, municipals, and political subdivisions 1,315,457 103,663 (8,291) 1,410,829 � Corporate bonds 24,630,156 1,510,233 (391,813) 25,748,576 �

30,849,808 1,724,593 (567,972) 32,006,429 928 Equity securities 611,473 6,068 (36,332) 581,209 � Short-term investments 80,582 � � 80,582 �

$ 31,541,863 $ 1,730,661 $ (604,304) $ 32,668,220 $ 928

(1)These amounts are included in the gross unrealized gains and gross unrealized losses columns above.

139

149

Table of Contents

The amortized cost and fair value of the Company�s investments classified as held-to-maturity as of December 31, 2014 are as follows:

Gross Gross Total OTTI Amortized Unrealized Unrealized Fair Recognized

Cost Gains Losses Value in OCI

2014 Fixed maturities: Other $ 435,000 $ 50,422 $ � $ 485,422 $ �

$ 435,000 $ 50,422 $ � $ 485,422 $ � 2013 Fixed maturities: Other $ 365,000 $ � $ (29,324) $ 335,676 $ �

$ 365,000 $ � $ (29,324) $ 335,676 $ �

During the year ended December 31, 2014 and 2013, the Company did not record any other-than-temporary impairments on held-to-maturity securities. The Company�s held-to-maturity securities did not have any gross unrecognized holding losses for the year ended December 31, 2014 and $29.3 million for the year ended December 31, 2013. The Company does not consider these unrecognized holding losses to be other-than-temporary based on certain positive factors associated with the securities which include credit ratings, financial health of the issuer, continued access of the issuer to capital markets and other pertinent information.

As of December 31, 2014 and 2013, the Company had an additional $2.8 billion and $2.8 billion of fixed maturities, $21.5 million and $21.2 million of equity securities, and $95.1 million and $52.4 million of short-term investments classified as trading securities, respectively.

The amortized cost and fair value of available-for-sale and held-to-maturity fixed maturities as of December 31, 2014, by expected maturity, are shown below. Expected maturities of securities without a single maturity date are allocated based on estimated rates of prepayment that may differ from actual rates of prepayment.

Available-for-sale Held-to-maturity Amortized Fair Amortized Fair

Cost Value Cost Value (Dollars In Thousands) (Dollars In Thousands)

Due in one year or less $ 1,033,959 $ 1,045,159 $ � $ � Due after one year through five years 7,084,156 7,547,483 � � Due after five years through ten years 6,203,383 6,519,436 � � Due after ten years 16,576,530 18,825,342 435,000 485,422

$ 30,898,028 $ 33,937,420 $ 435,000 $ 485,422

During the year ended December 31, 2014, the Company recorded pre-tax other-than-temporary impairments of investments of $2.6 million, all of which were related to fixed maturities. Credit impairments recorded in earnings during the year ended December 31, 2014, were $7.3 million. During the year ended December 31, 2014, $4.7 million of non-credit losses previously recorded in other comprehensive income were recorded in earnings as credit losses. There were no other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell for the year ended December 31, 2014.

During the year ended December 31, 2013, the Company recorded pre-tax other-than-temporary impairments of investments of $10.9 million, of which $7.6 million were related to fixed maturities and $3.3 million were related to equity securities. Credit impairments recorded in earnings during the year ended December 31, 2013, were $22.4 million. During the year ended December 31, 2013, $11.5 million of non-credit losses previously recorded in other comprehensive income were recorded in earnings as credit losses. There were no other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell for the year ended December 31, 2013.

140

150

Table of Contents

During the year ended December 31, 2012, the Company recorded pre-tax other-than-temporary impairments of investments of $67.1 million all of which were related to fixed maturities. Of the $67.1 million of impairments for the year ended December 31, 2012, $58.1 million were recorded in earnings and $9.0 million were recorded in other comprehensive income (loss). There were no impairments related to equity securities. For the year ended December 31, 2012, there were no other-than-temporary impairments related to fixed maturities or equity securities that the Company intended to sell or expected to be required to sell.

The following chart is a rollforward of available-for-sale credit losses on fixed maturities held by the Company for which a portion of an other-than-temporary impairment was recognized in other comprehensive income (loss):

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Beginning balance $ 41,674 $ 121,237 $ 69,476 Additions for newly impaired securities � 3,516 26,544 Additions for previously impaired securities 2,263 12,066 25,217 Reductions for previously impaired securities due to a change in expected cash flows (28,474) (87,908) � Reductions for previously impaired securities that were sold in the current period � (7,237) � Other � � � Ending balance $ 15,463 $ 41,674 $ 121,237

The following table includes the gross unrealized losses and fair value of the Company�s investments that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2014:

Less Than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized

Value Loss Value Loss Value Loss (Dollars In Thousands)

Residential mortgage-backed securities $ 165,877 $ (9,547) $ 67,301 $ (2,717) $ 233,178 $ (12,264) Commercial mortgage-backed securities 49,908 (334) 102,529 (2,030) 152,437 (2,364) Other asset-backed securities 108,665 (6,473) 537,488 (29,477) 646,153 (35,950) U.S. government-related securities 231,917 (3,868) 280,803 (5,414) 512,720 (9,282) Other government-related securities � � � � � � States, municipalities, and political subdivisions 1,905 (134) 10,481 (297) 12,386 (431) Corporate bonds 1,657,103 (76,285) 776,863 (62,690) 2,433,966 (138,975) Equities 17,430 (218) 129,509 (13,935) 146,939 (14,153)

$ 2,232,805 $ (96,859) $ 1,904,974 $ (116,560) $ 4,137,779 $ (213,419)

RMBS have a gross unrealized loss greater than twelve months of $2.7 million as of December 31, 2014. Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.

CMBS have a gross unrealized loss greater than twelve months of $2.0 million as of December 31, 2014. Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.

The other asset-backed securities have a gross unrealized loss greater than twelve months of $29.5 million as of December 31, 2014. This category predominately includes student-loan backed auction rate securities, the underlying collateral, of which is at least 97% guaranteed by the Federal Family Education Loan Program (�FFELP�). These

141

151

Table of Contents

unrealized losses have occurred within the Company�s auction rate securities (�ARS�) portfolio since the market collapse during 2008. At this time, the Company has no reason to believe that the U.S. Department of Education would not honor the FFELP guarantee, if it were necessary.

The U.S. government-related category has gross unrealized losses greater than twelve months of $5.4 million as of December 31, 2014. These declines were entirely related to changes in interest rates.

The corporate bonds category has gross unrealized losses greater than twelve months of $62.7 million as of December 31, 2014. The aggregate decline in market value of these securities was deemed temporary due to positive factors supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.

The equities category has a gross unrealized loss greater than twelve months of $14.0 million as of December 31, 2014. The aggregate decline in market value of these securities was deemed temporary due to factors supporting the recoverability of the respective investments. Positive factors include credit ratings, the financial health of the issuer, the continued access of the issuer to the capital markets, and other pertinent information.

The Company does not consider these unrealized loss positions to be other-than-temporary, based on the aggregate factors discussed previously and because the Company has the ability and intent to hold these investments until the fair values recover, and does not intend to sell or expect to be required to sell the securities before recovering the Company�s amortized cost of the securities.

Less Than 12 Months 12 Months or More Total Fair Unrealized Fair Unrealized Fair Unrealized

Value Loss Value Loss Value Loss (Dollars In Thousands)

Residential mortgage-backed securities $ 332,812 $ (14,050) $ 209,818 $ (10,486) $ 542,630 $ (24,536) Commercial mortgage-backed securities 429,228 (18,467) 13,840 (1,238) 443,068 (19,705) Other asset-backed securities 175,846 (14,555) 497,512 (54,993) 673,358 (69,548) U.S. government-related securities 891,698 (53,508) 6,038 (570) 897,736 (54,078) Other government-related securities 10,161 (1) � � 10,161 (1) States, municipalities, and political subdivisions 172,157 (8,113) 335 (178) 172,492 (8,291) Corporate bonds 7,480,163 (353,069) 271,535 (38,744) 7,751,698 (391,813) Equities 376,776 (27,861) 21,764 (8,471) 398,540 (36,332)

$ 9,868,841 $ (489,624) $ 1,020,842 $ (114,680) $ 10,889,683 $ (604,304)

142

152

Table of Contents

RMBS had a gross unrealized loss greater than twelve months of $10.5 million as of December 31, 2013. Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.

CMBS had a gross unrealized loss greater than twelve months of $1.2 million as of December 31, 2013. Factors such as the credit enhancement within the deal structure, the average life of the securities, and the performance of the underlying collateral support the recoverability of these investments.

The other asset-backed securities had a gross unrealized loss greater than twelve months of $55.0 million as of December 31, 2013. This category predominately includes student-loan backed auction rate securities, the underlying collateral, of which is at least 97% guaranteed by the FFELP. These unrealized losses have occurred within the Company�s ARS portfolio since the market collapse during 2008. At this time, the Company has no reason to believe that the U.S. Department of Education would not honor the FFELP guarantee, if it were necessary.

The corporate bonds category had gross unrealized losses less than and greater than twelve months of $353.1 million and $38.7 million, respectively, as of December 31, 2013. The aggregate decline in market value of these securities was deemed temporary due to positive factor supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, and other pertinent information.

The equities category had a gross unrealized loss greater than twelve months of $8.5 million as of December 31, 2013. The aggregate decline in market value of these securities was deemed temporary due to factors supporting the recoverability of the respective investments. Positive factors include credit ratings, the financial health of the issuer, the continued access of the issuer to the capital markets, and other pertinent information.

As of December 31, 2014, the Company had securities in its available-for-sale portfolio which were rated below investment grade of $1.6 billion and had an amortized cost of $1.6 billion. In addition, included in the Company�s trading portfolio, the Company held $315.1 million of securities which were rated below investment grade. Approximately $360.1 million of the below investment grade securities were not publicly traded.

The change in unrealized gains (losses), net of income tax, on fixed maturity and equity securities, classified as available-for-sale is summarized as follows:

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Fixed maturities $ 1,224,248 $ (1,269,277) $ 819,152 Equity securities 33,642 (20,899) 8,484

The Company held $9.0 million of non-income producing securities for the year ended December 31, 2014.

Included in the Company�s invested assets are $1.8 billion of policy loans as of December 31, 2014. The interest rates on standard policy loans range from 3.0% to 13.64%. The collateral loans on life insurance policies have an interest rate of 13.64%.

Variable Interest Entities

143

153

Table of Contents

(�VIE�). If the entity is determined to be a VIE, the Company then performs a detailed review to determine whether the interest would be considered a variable interest under the guidance. The Company then performs a qualitative review of all variable interests with the entity and determines whether the Company is the primary beneficiary. ASC 810 provides that an entity is the primary beneficiary of a VIE if the entity has 1) the power to direct the activities of the VIE that most significantly impact the VIE�s economic performance, and 2) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE.

Based on this analysis, the Company had an interest in one wholly owned subsidiary, Red Mountain, LLC (�Red Mountain�), that continued to be classified as a VIE as of December 31, 2014 and December 31, 2013. The activity most significant to Red Mountain is the issuance of a note in connection with a financing transaction involving Golden Gate V Vermont Captive Insurance Company (�Golden Gate V�) and the Company in which Golden Gate V issued non-recourse funding obligations to Red Mountain and Red Mountain issued the note to Golden Gate V. Credit enhancement on the Red Mountain Note is provided by an unrelated third party. For details of this transaction, see Note 9, Debt and Other Obligations. The Company had the power, via its 100% ownership through an affiliate, to direct the activities of the VIE, but did not have the obligation to absorb losses related to the primary risks or sources of variability to the VIE. The variability of loss would be borne primarily by the third party in its function as provider of credit enhancement on the Red Mountain Note. Accordingly, it was determined that the Company is not the primary beneficiary of the VIE. The Company�s risk of loss related to the VIE is limited to its investment of $10,000. Additionally, PLC has guaranteed the VIE�s payment obligation for the credit enhancement fee to the unrelated third party provider. As of December 31, 2014 no payments have been made or required related to this guarantee.

7. MORTGAGE LOANS

Mortgage Loans

The Company invests a portion of its investment portfolio in commercial mortgage loans. As of December 31, 2014, the Company�s mortgage loan holdings were approximately $5.1 billion. The Company has specialized in making loans on either credit-oriented commercial properties or credit-anchored strip shopping centers and apartments. The Company�s underwriting procedures relative to its commercial loan portfolio are based, in the Company�s view, on a conservative and disciplined approach. The Company concentrates on a small number of commercial real estate asset types associated with the necessities of life (retail, multi-family, senior living, professional office buildings, and warehouses). The Company believes that these asset types tend to weather economic downturns better than other commercial asset classes in which it has chosen not to participate. The Company believes that this disciplined approach has helped to maintain a relatively low delinquency and foreclosure rate throughout its history. The majority of the Company�s mortgage loans portfolio was underwritten and funded by the Company. From time to time, the Company may acquire loans in conjunction with an acquisition.

The Company�s commercial mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, and net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan�s contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts and prepayment fees are reported in net investment income.

144

154

Table of Contents

The following table includes a breakdown of the Company�s commercial mortgage loan portfolio by property type as of December 31, 2014:

Percentage of Mortgage Loans

Type on Real Estate Retail 61.7% Office Buildings 13.3 Apartments 9.6 Warehouses 7.8 Other 7.6

100.0%

The Company specializes in originating mortgage loans on either credit- oriented or credit-anchored commercial properties. No single tenant�s exposure represents more than 2.2% of mortgage loans. Approximately 71.8% of the mortgage loans are on properties located in the following states:

Percentage of Mortgage Loans

State on Real Estate Texas 10.1% Alabama 8.2 Georgia 8.0 Florida 7.3 Tennessee 6.6 South Carolina 4.8 North Carolina 4.5 Utah 4.2 New York 4.2 Ohio 4.0 California 4.0 Virginia 3.0 Michigan 2.9

71.8%

During 2014, the Company funded approximately $869.7 million of new loans, with an average loan size of $5.8 million. The average size mortgage loan in the portfolio as of December 31, 2014, was $2.8 million, and the weighted-average interest rate was 5.72%. The largest single mortgage loan was $50.0 million.

Many of the mortgage loans have call options or interest rate reset options between 3 and 10 years. However, if interest rates were to significantly increase, we may be unable to exercise the call options or increase the interest rates on our existing mortgage loans commensurate with the significantly increased market rates. Assuming the loans are called at their next call dates, approximately $243.6 million would become due in 2015, $961.8 million in 2016 through 2020, $392.6 million in 2021 through 2025, and $120.8 million thereafter.

The Company offers a type of commercial mortgage loan under which the Company will permit a loan-to-value ratio of up to 85% in exchange for a participating interest in the cash flows from the underlying real estate. As of December 31, 2014 and December 31, 2013, approximately $553.6 million and $666.6 million, respectively, of the Company�s mortgage loans have this participation feature. Cash flows received as a result of this participation feature are recorded as interest income. During the year ended December 31, 2014 and 2013, the Company recognized $16.7 million and $17.9 million of participating mortgage loan income, respectively.

145

155

Table of Contents

assets and liabilities. During the year ended December 31, 2014, certain mortgage loan transactions occurred that were accounted for as troubled debt restructurings under Topic 310 of the FASB ASC. For all mortgage loans, the impact of troubled debt restructurings is generally reflected in our investment balance and in the allowance for mortgage loan credit losses. Transactions accounted for as troubled debt restructurings during the year ended December 31, 2014 included either the acceptance of assets in satisfaction of principal at a future date or the recognition of permanent impairments to principal, and were the result of agreements between the creditor and the debtor. During the year ended December 31, 2014, the Company accepted or agreed to accept assets of $33.0 million in satisfaction of $41.7 million of principal. The Company also identified one loan whose principal of $12.6 million was permanently impaired to a value of $7.3 million. These transactions resulted in realized losses of $10.3 million and a decrease in the Company�s investment in mortgage loans net of existing allowances for mortgage loans losses. Of the mortgage loan transactions accounted for as troubled debt restructurings, $23.3 million remain on the Company�s balance sheet as of December 31, 2014.

The Company�s mortgage loan portfolio consists of two categories of loans: 1) those not subject to a pooling and servicing agreement and 2) those subject to a contractual pooling and servicing agreement. As of December 31, 2014, $24.5 million of mortgage loans not subject to a pooling and servicing agreement were nonperforming, restructured, or foreclosed and converted to real estate. Of the restructured loans, $1.5 million were nonperforming during the year ended December 31, 2014. The Company foreclosed on $1.2 million of nonperforming loans not subject to a pooling and servicing agreement during the year ended December 31, 2014.

As of December 31, 2014, none of the loans subject to a pooling and servicing agreement were nonperforming. The Company did not foreclose on any nonperforming loans subject to pooling and servicing agreement during the year ended December 31, 2014.

As of December 31, 2014 and 2013, the Company had an allowance for mortgage loan credit losses of $5.7 million and $3.1 million, respectively. Due to the Company�s loss experience and nature of the loan portfolio, the Company believes that a collectively evaluated allowance would be inappropriate. The Company believes an allowance calculated through an analysis of specific loans that are believed to have a higher risk of credit impairment provides a more accurate presentation of expected losses in the portfolio and is consistent with the applicable guidance for loan impairments in ASC Subtopic 310. Since the Company uses the specific identification method for calculating the allowance, it is necessary to review the economic situation of each borrower to determine those that have higher risk of credit impairment. The Company has a team of professionals that monitors borrower conditions such as payment practices, borrower credit, operating performance, and property conditions, as well as ensuring the timely payment of property taxes and insurance. Through this monitoring process, the Company assesses the risk of each loan. When issues are identified, the severity of the issues are assessed and reviewed for possible credit impairment. If a loss is probable, an expected loss calculation is performed and an allowance is established for that loan based on the expected loss. The expected loss is calculated as the excess carrying value of a loan over either the present value of expected future cash flows discounted at the loan�s original effective interest rate, or the current estimated fair value of the loan�s underlying collateral. A loan may be subsequently charged off at such point that the Company no longer expects to receive cash payments, the present value of future expected payments of the renegotiated loan is less than the current principal balance, or at such time that the Company is party to foreclosure or bankruptcy proceedings associated with the borrower and does not expect to recover the principal balance of the loan.

146

156

Table of Contents

A charge off is recorded by eliminating the allowance against the mortgage loan and recording the renegotiated loan or the collateral property related to the loan as investment real estate on the balance sheet, which is carried at the lower of the appraised fair value of the property or the unpaid principal balance of the loan, less estimated selling costs associated with the property:

As of December 31, 2014 2013

(Dollars In Thousands) Beginning balance $ 3,130 $ 2,875 Charge offs (675) (6,838) Recoveries (2,600) (1,016) Provision 5,865 8,109 Ending balance $ 5,720 $ 3,130

It is the Company�s policy to cease to carry accrued interest on loans that are over 90 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. If a loan becomes over 90 days delinquent, it is the Company�s general policy to initiate foreclosure proceedings unless a workout arrangement to bring the loan current is in place. For loans subject to a pooling and servicing agreement, there are certain additional restrictions and/or requirements related to workout proceedings, and as such, these loans may have different attributes and/or circumstances affecting the status of delinquency or categorization of those in nonperforming status. An analysis of the delinquent loans is shown in the following chart as of December 31:

Greater 30-59 Days 60-89 Days than 90 Days Total Delinquent Delinquent Delinquent Delinquent

(Dollars In Thousands) 2014 Commercial mortgage loans $ 8,972 $ � $ 1,484 $ 10,456 Number of delinquent commercial mortgage loans 4 � 1 5

2013 Commercial mortgage loans $ 14,368 $ � $ 2,208 $ 16,576 Number of delinquent commercial mortgage loans 8 � 1 9

The Company�s commercial mortgage loan portfolio consists of mortgage loans that are collateralized by real estate. Due to the collateralized nature of the loans, any assessment of impairment and ultimate loss given a default on the loans is based upon a consideration of the estimated fair value of the real estate. The Company limits accrued interest income on impaired loans to ninety days of interest. Once accrued interest on the impaired loan is received, interest income is recognized on a cash basis. For information regarding impaired loans, please refer to the following chart as of December 31:

Unpaid Average Interest Cash Basis Recorded Principal Related Recorded Income Interest

Investment Balance Allowance Investment Recognized Income (Dollars In Thousands)

2014 Commercial mortgage loans: With no related allowance recorded $ � $ � $ � $ � $ � $ � With an allowance recorded 19,632 20,603 5,720 3,272 1,224 1,280 2013 Commercial mortgage loans: With no related allowance recorded $ 2,208 $ 2,208 $ � $ 2,208 $ 31 $ � With an allowance recorded 21,288 21,281 3,130 5,322 304 304

147

157

Table of Contents

Mortgage loans that were modified in a troubled debt restructuring were as follows:

Pre-Modification Post-Modification Outstanding Outstanding

Number of Recorded Recorded contracts Investment Investment

(Dollars In Thousands) 2014 Troubled debt restructuring: Commercial mortgage loans 6 $ 28,648 $ 19,593

8. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED

Deferred policy acquisition costs

The balances and changes in DAC are as follows:

As of December 31, 2014 2013

(Dollars In Thousands) Balance, beginning of period $ 2,720,604 $ 2,493,729 Capitalization of commissions, sales, and issue expenses 293,672 345,885 Amortization (194,517) (112,117) Change in unrealized investment gains and losses (166,694) (6,893) Balance, end of period $ 2,653,065 $ 2,720,604

Value of Business Acquired

The balances and changes in VOBA are as follows:

As of December 31, 2014 2013

(Dollars In Thousands) Balance, beginning of period $ 756,018 $ 731,627 Acquisitions(1) � 49,643 Amortization (113,803) (42,543) Change in unrealized gains and losses (140,234) 17,291 Balance, end of period $ 501,981 $ 756,018

(1) Includes VOBA associated with the MONY acquisition of $205.7 million, offset by $156.1 million ceded to reinsurers.

As of February 1, 2015, the existing DAC and VOBA balance was written off in conjunction with the merger previously disclosed in Note 5, Dai-ichi Merger and in accordance with ASC Topic 805 � Business Combinations. Therefore, the disclosure of the expected amortization of VOBA over the next five years was excluded.

148

158

Table of Contents

9. GOODWILL

The changes in the carrying amount of goodwill by segment are as follows:

Asset Total Acquisitions Protection Consolidated

(Dollars In Thousands) Balance as of December 31, 2012 $ 35,615 $ 48,158 $ 83,773 Tax benefit of excess tax goodwill (3,098) � (3,098) Balance as of December 31, 2013 32,517 48,158 80,675 Tax benefit of excess tax goodwill (3,098) � (3,098) Balance as of December 31, 2014 $ 29,419 $ 48,158 $ 77,577

During the year ended December 31, 2014 and 2013, the Company decreased its goodwill balance by approximately $3.1 million and $3.1 million, respectively. The decreases were due to an adjustment in the Acquisitions segment related to tax benefits realized during 2014 and 2013 on the portion of tax goodwill in excess of GAAP basis goodwill. See Note 2, Summary of Significant Accounting Policies for additional information.

10. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS

The Company issues variable universal life and VA products through its separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contract holder. The Company also offers, for our VA products, certain GMDB. The most significant of these guarantees involve 1) return of the highest anniversary date account value, or 2) return of the greater of the highest anniversary date account value or the last anniversary date account value compounded at 5% interest or 3) return of premium. The GMWB rider provides the contract holder with protection against certain adverse market impacts on the amount they can withdrawal and is classified as an embedded derivative and is carried at fair value on the Company�s balance sheet. The VA separate account balances subject to GMWB were $9.7 billion as of December 31, 2014. For more information regarding the valuation of and income impact of GMWB, please refer to Note 2, Summary of Significant Accounting Policies, Note 22, Fair Value of Financial Instruments, and Note 23, Derivative Financial Instruments.

The GMDB reserve is calculated by applying a benefit ratio, equal to the present value of total expected GMDB claims divided by the present value of total expected contract assessments, to cumulative contract assessments. This amount is then adjusted by the amount of cumulative GMDB claims paid and accrued interest. Assumptions used in the calculation of the GMDB reserve were as follows: mean investment performance of 6.18%, age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience with attained age factors varying from 49% - 80%, lapse rates ranging from 2.2% - 33% (depending on product type and duration), and an average discount rate of 6.0%. Changes in the GMDB reserve are included in benefits and settlement expenses in the accompanying consolidated statements of income.

The VA separate account balances subject to GMDB were $13.0 billion as of December 31, 2014. The total GMDB amount payable based on VA account balances as of December 31, 2014, was $108.6 million (including $93.1 million in the Annuities segment and $15.5 million in the Acquisitions segment) with a GMDB reserve of $21.4 million and $0.3 million in the Annuities and Acquisitions segment, respectively. The average attained age of contract holders as of December 31, 2014 for the Company was 69.

These amounts exclude certain VA business which has been 100% reinsured to Commonwealth Annuity and Life Insurance Company (formerly known as Allmerica Financial Life Insurance and Annuity Company) (�CALIC�), under a Modco agreement. The guaranteed amount payable associated with the annuities reinsured to CALIC was $11.6 million and is included in the Acquisitions segment. The average attained age of contract holders as of December 31, 2014, was 65.

149

159

Table of Contents

Activity relating to GMDB reserves (excluding those 100% reinsured under the Modco agreement) is as follows:

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Beginning balance $ 13,608 $ 19,606 $ 9,798 Incurred guarantee benefits 10,130 (3,133) 14,087 Less: Paid guarantee benefits 2,043 2,865 4,279 Ending balance $ 21,695 $ 13,608 $ 19,606

Account balances of variable annuities with guarantees invested in variable annuity separate accounts are as follows:

As of December 31, 2014 2013

(Dollars In Thousands) Equity mutual funds $ 7,834,480 $ 7,984,198 Fixed income mutual funds 5,137,312 4,606,093 Total $ 12,971,792 $ 12,590,291

Certain of the Company�s fixed annuities and universal life products have a sales inducement in the form of a retroactive interest credit (�RIC�). In addition, certain annuity contracts provide a sales inducement in the form of a bonus interest credit. The Company maintains a reserve for all interest credits earned to date. The Company defers the expense associated with the RIC and bonus interest credits each period and amortizes these costs in a manner similar to that used for DAC.

Activity in the Company�s deferred sales inducement asset was as follows:

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Deferred asset, beginning of period $ 146,651 $ 143,949 $ 125,527 Amounts deferred 18,302 15,274 23,362 Amortization (9,803) (12,572) (4,940) Deferred asset, end of period $ 155,150 $ 146,651 $ 143,949

11. REINSURANCE

The Company reinsures certain of its risks with (cedes), and assumes risks from, other insurers under yearly renewable term, coinsurance, and modified coinsurance agreements. Under yearly renewable term agreements, the Company reinsures only the mortality risk, while under coinsurance the Company reinsures a proportionate share of all risks arising under the reinsured policy. Under coinsurance, the reinsurer receives a proportionate share of the premiums less commissions and is liable for a corresponding share of all benefit payments. Modified coinsurance is accounted for in a manner similar to coinsurance except that the liability for future policy benefits is held by the ceding company, and settlements are made on a net basis between the companies.

150

160

Table of Contents

Reinsurance ceded arrangements do not discharge the Company as the primary insurer. Ceded balances would represent a liability of the Company in the event the reinsurers were unable to meet their obligations to us under the terms of the reinsurance agreements. The Company monitors the concentration of credit risk the Company has with any reinsurer, as well as the financial condition of its reinsurers. As of December 31, 2014, the Company had reinsured approximately 51% of the face value of its life insurance in-force. The Company has reinsured approximately 22% of the face value of its life insurance in-force with the following three reinsurers:

• Security Life of Denver Insurance Co. (currently administered by Hanover Re)

• Swiss Re Life & Health America Inc.

• The Lincoln National Life Insurance Co. (currently administered by Swiss Re Life & Health America Inc.)

The Company has not experienced any credit losses for the years ended December 31, 2014, 2013, or 2012 related to these reinsurers. The Company has set limits on the amount of insurance retained on the life of any one person. In 2005, the Company increased its retention for certain newly issued traditional life products from $500,000 to $1,000,000 on any one life. During 2008, the Company increased its retention limit to $2,000,000 on certain of its traditional and universal life products.

Reinsurance premiums, commissions, expense reimbursements, benefits, and reserves related to reinsured long-duration contracts are accounted for over the life of the underlying reinsured contracts using assumptions consistent with those used to account for the underlying contracts. The cost of reinsurance related to short-duration contracts is accounted for over the reinsurance contract period. Amounts recoverable from reinsurers, for both short-and long-duration reinsurance arrangements, are estimated in a manner consistent with the claim liabilities and policy benefits associated with reinsured policies.

The following table presents the net life insurance in-force:

For The Year Ended December 31, 2014 2013 2012

(Dollars In Millions) Direct life insurance in-force $ 721,036 $ 726,697 $ 706,416 Amounts assumed from other companies 43,237 46,752 30,470 Amounts ceded to other companies (388,890) (416,809) (444,951) Net life insurance in-force $ 375,383 $ 356,640 $ 291,935

Percentage of amount assumed to net 12% 13% 10%

151

161

Table of Contents

The following table reflects the effect of reinsurance on life, accident/health, and property and liability insurance premiums written and earned:

Assumed Percentage of Ceded to from Amount

Gross Other Other Net Assumed to Amount Companies Companies Amount Net

(Dollars In Thousands) For The Year Ended December 31, 2014: Premiums and policy fees: Life insurance $ 2,603,956 $ 1,279,908 $ 349,934 $ 1,673,982(1) 20.9 Accident/health insurance 81,037 42,741 20,804 59,100 35.2 Property and liability insurance 218,663 73,094 8,675 154,244 5.6 Total $ 2,903,656 $ 1,395,743 $ 379,413 $ 1,887,326 For The Year Ended December 31, 2013: Premiums and policy fees: Life insurance $ 2,371,871 $ 1,299,631 $ 306,921 $ 1,379,161(1) 22.3 Accident/health insurance 45,262 20,011 24,291 49,542 49.0 Property and liability insurance 211,000 67,795 7,977 151,182 5.3 Total $ 2,628,133 $ 1,387,437 $ 339,189 $ 1,579,885 For The Year Ended December 31, 2012 Premiums and policy fees: Life insurance $ 2,226,614 $ 1,228,444 $ 281,711 $ 1,279,881(1) 22.0 Accident/health insurance 38,873 12,065 29,413 56,221 52.3 Property and liability insurance 216,014 69,588 6,765 153,191 4.4 Total $ 2,481,501 $ 1,310,097 $ 317,889 $ 1,489,293

(1)Includes annuity policy fees of $92.8 million, $88.7 million, and $103.8 million for the years ended December 31, 2014, 2013,

and 2012, respectively.

As of December 31, 2014 and 2013, policy and claim reserves relating to insurance ceded of $5.9 billion and $6.0 billion, respectively, are included in reinsurance receivables. Should any of the reinsurers be unable to meet its obligation at the time of the claim, the Company would be obligated to pay such claims. As of December 31, 2014 and 2013, the Company had paid $120.5 million and $79.7 million, respectively, of ceded benefits which are recoverable from reinsurers. In addition, as of December 31, 2014 and 2013, the Company had receivables of $65.8 million and $66.1 million, respectively, related to insurance assumed.

152

162

Table of Contents

The Company�s third party reinsurance receivables amounted to $5.9 billion and $6.0 billion as of December 31, 2014 and 2013, respectively. These amounts include ceded reserve balances and ceded benefit payments. The ceded benefit payments are recoverable from reinsurers. The following table sets forth the receivables attributable to our more significant reinsurance partners:

As of December 31, 2014 2013

Reinsurance A.M. Best Reinsurance A.M. Best Receivable Rating Receivable Rating

(Dollars In Millions) Security Life of Denver Insurance Company $ 842.1 A $ 819.3 A Swiss Re Life & Health America, Inc. 820.9 A+ 823.0 A+ Lincoln National Life Insurance Co. 556.3 A+ 553.7 A+ Transamerica Life Insurance Co. 497.7 A+ 531.1 A+ RGA Reinsurance Company 412.4 A+ 419.1 A+ SCOR Global Life USA Reinsurance Company 411.8 A 402.7 A American United Life Insurance Company 336.1 A+ 342.2 A+ Scottish Re (U.S.), Inc. 298.0 NR 305.1 NR Centre Reinsurance (Bermuda) Ltd 260.9 NR 281.6 NR Employers Reassurance Corporation 254.3 A- 289.2 A-

The Company�s reinsurance contracts typically do not have a fixed term. In general, the reinsurers� ability to terminate coverage for existing cessions is limited to such circumstances as material breach of contract or non-payment of premiums by the ceding company. The reinsurance contracts generally contain provisions intended to provide the ceding company with the ability to cede future business on a basis consistent with historical terms. However, either party may terminate any of the contracts with respect to future business upon appropriate notice to the other party.

Generally, the reinsurance contracts do not limit the overall amount of the loss that can be incurred by the reinsurer. The amount of liabilities ceded under contracts that provide for the payment of experience refunds is immaterial.

12. DEBT AND OTHER OBLIGATIONS

Under a revolving line of credit arrangement that was in effect until February 2, 2015 (the �Credit Facility�), the Company and PLC had the ability to borrow on an unsecured basis up to an aggregate principal amount of $750 million. The Company had the right in certain circumstances to request that the commitment under the Credit Facility be increased up to a maximum principal amount of $1.0 billion. Balances outstanding under the Credit Facility accrued interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC�s senior unsecured long-term debt (�Senior Debt�), or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent�s prime rate, (y) 0.50% above the Federal Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC�s Senior Debt. The Credit Facility also provided for a facility fee at a rate, 0.175%, that could vary with the ratings of PLC�s Senior Debt and that was calculated on the aggregate amount of commitments under the Credit Facility, whether used or unused. The Credit Facility provided that PLC was liable for the full amount of any obligations for borrowings or letters of credit, including those of the Company, under the Credit Facility. The maturity date of the Credit Facility was July 17, 2017. The Company is not aware of any non-compliance with the financial debt covenants of the Credit Facility as of December 31, 2014. The Company did not have an outstanding balance under the Credit Facility as of December 31, 2014. PLC had an outstanding balance of $450.0 million bearing interest at a rate of LIBOR plus 1.20% under the Credit Facility as of December 31, 2014. As of December 31, 2014, the Company had used $55.0 million of borrowing capacity by executing a Letter of Credit under the Credit Facility for the benefit of an affiliated captive reinsurance subsidiary of the Company. This Letter of Credit had not been drawn upon as of December 31, 2014.

153

163

Table of Contents

On February 2, 2015, the Company and PLC amended and restated the Credit Facility (the �2015 Credit Facility�). Under the 2015 Credit Facility, the Company has the ability to borrow on an unsecured basis up to an aggregate principal amount of $1.0 billion. The Company has the right in certain circumstances to request that the commitment under the 2015 Credit Facility be increased up to a maximum principal amount of $1.25 billion. Balances outstanding under the 2015 Credit Facility accrue interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC�s Senior Debt, or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent�s prime rate, (y) 0.50% above the Federal Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC�s Senior Debt. The 2015 Credit Facility also provided for a facility fee at a rate that varies with the ratings of PLC�s Senior Debt and that is calculated on the aggregate amount of commitments under the 2015 Credit Facility, whether used or unused. The facility fee rate was 0.15% on February 2, 2015, and was adjusted to 0.125% upon our subsequent ratings upgrade on February 2, 2015. The 2015 Credit Facility provides that PLC is liable for the full amount of any obligations for borrowings or letters of credit, including those of the Company, under the 2015 Credit Facility. The maturity date of the 2015 Credit Facility is February 2, 2020. The Company is not aware of any non-compliance with the financial debt covenants of the Credit Facility or the 2015 Credit Facility as of February 2, 2015. PLC had an outstanding balance of $390.0 million bearing interest at a rate of LIBOR plus 1.20% when the Credit Facility was amended and restated by the 2015 Credit Facility on February 2, 2015. The $55.0 million Letter of Credit, which the Company executed under the Credit Facility for the benefit of an affiliated captive reinsurance subsidiary of the Company, remained undrawn as of February 2, 2015.

Non-Recourse Funding Obligations

Golden Gate Captive Insurance Company

Golden Gate Captive Insurance Company (�Golden Gate�), a South Carolina special purpose financial captive insurance company and wholly owned subsidiary, had three series of non-recourse funding obligations with a total outstanding balance of $800 million as of December 31, 2014. PLC holds the entire outstanding balance of non-recourse funding obligations. The Series A1 non-recourse funding obligations have a balance of $400 million and accrue interest at a fixed rate of 7.375%, the Series A2 non-recourse funding obligations have a balance of $100 million and accrue interest at a fixed rate of 8%, and the Series A3 non-recourse funding obligations have a balance of $300 million and accrue interest at a fixed rate of 8.45%.

Golden Gate II Captive Insurance Company

Golden Gate II Captive Insurance Company (�Golden Gate II�), a South Carolina special purpose financial captive insurance company and wholly owned subsidiary, had $575 million of non-recourse funding obligations outstanding as of December 31, 2014. These outstanding non-recourse funding obligations were issued to special purpose trusts, which in turn issued securities to third parties. Certain of our affiliates own a portion of these securities. As of December 31, 2014, securities related to $144.9 million of the outstanding balance of the non-recourse funding obligations were held by external parties, securities related to $145.3 million of the non-recourse funding obligations were held by nonconsolidated affiliates, and $284.8 million were held by consolidated subsidiaries of the Company. PLC has entered into certain support agreements with Golden Gate II obligating it to make capital contributions or provide support related to certain of Golden Gate II�s expenses and in certain circumstances, to collateralize certain of PLC�s obligations to Golden Gate II. These support agreements provide that amounts would become payable by PLC to Golden Gate II if its annual general corporate expenses were higher than modeled amounts or if Golden Gate II�s investment income on certain investments or premium income was below certain actuarially determined amounts. As of December 31, 2014, no payments have been made under these agreements and no amounts are collateralized by PLC under these agreements. Re-evaluation and, if necessary, adjustments of any support agreement collateralization amounts occurs annually during the first quarter pursuant to the terms on the support agreement. There are no support agreements between the Company and Golden Gate II.

Golden Gate V Vermont Captive Insurance Company

On October 10, 2012, Golden Gate V Vermont Captive Insurance Company (�Golden Gate V�), a Vermont special purpose financial insurance company and Red Mountain, LLC (�Red Mountain�), both wholly owned subsidiaries, entered into a 20-year transaction to finance up to $945 million of �AXXX� reserves related to a block of universal life insurance policies with secondary guarantees issued by the Company and its subsidiary, West Coast Life Insurance Company (�WCL�). Golden Gate V issued non-recourse funding obligations to Red Mountain, and Red

154

164

Table of Contents

Mountain issued a note with an initial principal amount of $275 million, increasing to a maximum of $945 million in 2027, to Golden Gate V for deposit to a reinsurance trust supporting Golden Gate V�s obligations under a reinsurance agreement with WCL, pursuant to which WCL cedes liabilities relating to the policies of WCL and retrocedes liabilities relating to the policies of the Company. Through the structure, Hannover Life Reassurance Company of America (�Hannover Re�), the ultimate risk taker in the transaction, provides credit enhancement to the Red Mountain note for the 20-year term in exchange for a fee. The transaction is �non-recourse� to Golden Gate V, Red Mountain, WCL, PLC, and the Company, meaning that none of these companies are liable for the reimbursement of any credit enhancement payments required to be made. As of December 31, 2014, the principal balance of the Red Mountain note was $435 million. In connection with the transaction, PLC has entered into certain support agreements under which PLC guarantees or otherwise supports certain obligations of Golden Gate V or Red Mountain. Future scheduled capital contributions to prefund credit enhancement fees amount to approximately $139.6 million and will be paid in annual installments through 2031. The support agreements provide that amounts would become payable by PLC if Golden Gate V�s annual general corporate expenses were higher than modeled amounts or in the event write-downs due to other-than-temporary impairments on assets held in certain accounts exceed defined threshold levels. Additionally, PLC has entered into separate agreements to indemnify Golden Gate V with respect to material adverse changes in non-guaranteed elements of insurance policies reinsured by Golden Gate V, and to guarantee payment of certain fee amounts in connection with the credit enhancement of the Red Mountain note. As of December 31, 2014, no payments have been made under these agreements.

In connection with the transaction outlined above, Golden Gate V had a $435 million outstanding non-recourse funding obligation as of December 31, 2014. This non-recourse funding obligation matures in 2037, has scheduled increases in principal to a maximum of $945 million, and accrues interest at a fixed annual rate of 6.25%.

Non-recourse funding obligations outstanding as of December 31, 2014, on a consolidated basis, are shown in the following table:

Year-to-Date

Maturity Weighted-

Avg Issuer Balance Year Interest Rate

(Dollars In Thousands) Golden Gate Captive Insurance Company(1) $ 800,000 2037 7.86% Golden Gate II Captive Insurance Company 290,248 2052 1.13% Golden Gate V Vermont Captive Insurance Company(1) 435,000 2037 6.25% MONY Life Insurance Company(1) 2,504 2024 6.63% Total $ 1,527,752

(1) Fixed rate obligations

During 2014, consolidated subsidiaries of the Company repurchased $37.7 million of its outstanding non-recourse funding obligations, at a discount. These repurchases resulted in a $7.4 million pre-tax gain for the Company. For the year ended December 31, 2013, consolidated subsidiaries of the Company repurchased $68.5 million of its outstanding non-recourse funding obligations, at a discount. These repurchases resulted in a $15.4 million pre-tax gain for the Company. These gains are recorded in other income in the consolidated statements of income.

Letters of Credit

Golden Gate III Vermont Captive Insurance Company (�Golden Gate III�), a Vermont special purpose financial insurance company and wholly owned subsidiary, is party to a Reimbursement Agreement (the �Reimbursement Agreement�) with UBS AG, Stamford Branch (�UBS�), as issuing lender. Under the original Reimbursement Agreement, dated April 23, 2010, UBS issued a letter of credit (the �LOC�) in the initial amount of $505 million to a trust for the benefit of WCL. The Reimbursement Agreement was subsequently amended and restated effective November 21, 2011 (the �First Amended and Restated Reimbursement Agreement�), to replace the existing LOC with one or more letters of credit from UBS, and to extend the maturity date from April 1, 2018, to April 1, 2022. On August 7, 2013, Golden Gate III entered into a Second Amended and Restated Reimbursement Agreement with UBS (the �Second Amended and Restated Reimbursement Agreement�), which amended and restated the First Amended and Restated Reimbursement Agreement. Under the Second and Amended and Restated Reimbursement Agreement a new LOC in an initial amount of $710 million was issued by UBS in replacement of the existing LOC

155

165

Table of Contents

issued under the First Amended and Restated Reimbursement Agreement. The term of the LOC was extended from April 1, 2022 to October 1, 2023, subject to certain conditions being satisfied including scheduled capital contributions being made to Golden Gate III by one of its affiliates. The maximum stated amount of the LOC was increased from $610 million to $720 million in 2015 if certain conditions are met. On June 25, 2014, PLC entered into a Third Amended and Restated Reimbursement Agreement with UBS (the �Third Amended and Restated Reimbursement Agreement�), which amended and restated the Second Amended and Restated Reimbursement Agreement. Under the Third Amended and Restated Reimbursement Agreement, a new LOC in an initial amount of $915 million was issued by UBS in replacement of the existing LOC issued under the Second Amended and Restated Reimbursement Agreement. The term of the LOC was extended from October 1, 2023 to April 1, 2025, subject to certain conditions being satisfied including scheduled capital contributions being made to Golden Gate III by one of its affiliates. The maximum stated amount of the LOC was increased from $720 million to $935 million in 2015 if certain conditions are met. The LOC is held in trust for the benefit of WCL, and supports certain obligations of Golden Gate III to WCL under an indemnity reinsurance agreement originally effective April 1, 2010, as amended and restated on November 21, 2011, and as further amended and restated on August 7, 2013 and on June 25, 2014 to include additional blocks of policies, and pursuant to which WCL cedes liabilities relating to the policies of WCL and retrocedes liabilities relating to the policies of the Company. The LOC balance was $930 million as of December 31, 2014. Subject to certain conditions, the amount of the LOC will be periodically increased up to a maximum of $935 million in 2015. The term of the LOC is expected to be approximately 15 years from the original issuance date. This transaction is �non-recourse� to WCL, PLC, and the Company, meaning that none of these companies other than Golden Gate III are liable for reimbursement on a draw of the LOC. PLC has entered into certain support agreements with Golden Gate III obligating PLC to make capital contributions or provide support related to certain of Golden Gate III�s expenses and in certain circumstances, to collateralize certain of PLC�s obligations to Golden Gate III. Future scheduled capital contributions amount to approximately $122.5 million and will be paid in three installments with the last payment occurring in 2021, and these contributions may be subject to potential offset against dividend payments as permitted under the terms of the Third Amended and Restated Reimbursement Agreement. The support agreements provide that amounts would become payable by PLC to Golden Gate III if its annual general corporate expenses were higher than modeled amounts or if specified catastrophic losses occur during defined time periods with respect to the policies reinsured by Golden Gate III. Pursuant to the terms of an amended and restated letter agreement with UBS, PLC has continued to guarantee the payment of fees to UBS as specified in the Third Amended and Restated Reimbursement Agreement. As of December 31, 2014, no payments have been made under these agreements.

Golden Gate IV Vermont Captive Insurance Company (�Golden Gate IV�), a Vermont special purpose financial insurance company and wholly owned subsidiary, is party to a Reimbursement Agreement with UBS AG, Stamford Branch, as issuing lender. Under the Reimbursement Agreement, dated December 10, 2010, UBS issued an LOC in the initial amount of $270 million to a trust for the benefit of WCL. The LOC balance increased, in accordance with the terms of the Reimbursement Agreement, during each quarter of 2014 and was $750 million as of December 31, 2014. Subject to certain conditions, the amount of the LOC will be periodically increased up to a maximum of $790 million in 2016. The term of the LOC is expected to be 12 years from the original issuance date (stated maturity of December 30, 2022). The LOC was issued to support certain obligations of Golden Gate IV to WCL under an indemnity reinsurance agreement, pursuant to which WCL cedes liabilities relating to the policies of WCL and retrocedes liabilities relating to the policies of the Company. This transaction is �non-recourse� to WCL, PLC, and the Company, meaning that none of these companies other than Golden Gate IV are liable for reimbursement on a draw of the LOC. PLC has entered into certain support agreements with Golden Gate IV obligating PLC to make capital contributions or provide support related to certain of Golden Gate IV�s expenses and in certain circumstances, to collateralize certain of PLC�s obligations to Golden Gate IV. The support agreements provide that amounts would become payable by PLC to Golden Gate IV if Golden Gate IV�s annual general corporate expenses were higher than modeled amounts or if specified catastrophic losses occur during defined time periods with respect to the policies reinsured by Golden Gate IV. PLC has also entered into a separate agreement to guarantee the payments of LOC fees under the terms of the Reimbursement Agreement. As of December 31, 2014, no payments have been made under these agreements.

Repurchase Program Borrowings

While the Company anticipates that the cash flows of its operations and its operating subsidiaries will be sufficient to meet its investment commitments and operating cash needs in a normal credit market environment, the Company recognizes that investment commitments scheduled to be funded may, from time to time, exceed the funds

156

166

Table of Contents

then available. Therefore, the Company has established repurchase agreement programs for certain of its insurance subsidiaries to provide liquidity when needed. The Company expects that the rate received on its investments will equal or exceed its borrowing rate. Under this program, the Company may, from time to time, sell an investment security at a specific price and agree to repurchase that security at another specified price at a later date. These borrowings are for a term less than 90 days. The market value of securities to be repurchased is monitored and collateral levels are adjusted where appropriate to protect the counterparty against credit exposure. Cash received is invested in fixed maturity securities, and the agreements provided for net settlement in the event of default or on termination of the agreements. As of December 31, 2014, the fair value of securities pledged under the repurchase program was $55.1 million and the repurchase obligation of $50.0 million was included in the Company�s consolidated balance sheets (at an average borrowing rate of 16 basis points). During the year ended December 31, 2014, the maximum balance outstanding at any one point in time related to these programs was $633.7 million. The average daily balance was $470.4 million (at an average borrowing rate of 11 basis points) during the year ended December 31, 2014. As of December 31, 2013, the Company had a $350.0 million outstanding balance related to such borrowings. During 2013, the maximum balance outstanding at any one point in time related to these programs was $815.0 million. The average daily balance was $496.9 million (at an average borrowing rate of 11 basis points) during the year ended December 31, 2013.

Other Obligations

The Company routinely receives from or pays to affiliates under the control of PLC reimbursements for expenses incurred on one another�s behalf. Receivables and payables among affiliates are generally settled monthly.

Interest Expense

Interest expense on non-recourse funding obligations, letters of credit, and other temporary borrowings was $118.6 million, $111.4 million, and $92.9 million in 2014, 2013, and 2012, respectively. The $7.2 million unfavorable variance was primarily due to increased interest expense on the Golden Gate V non-recourse funding obligation of $4.2 million and $3.0 million increased interest expense primarily on Golden Gate III and Golden Gate IV letters of credit.

13. COMMITMENTS AND CONTINGENCIES

The Company leases administrative and marketing office space in approximately 19 cities including 24,090 square feet in Birmingham (excluding the home office building), with most leases being for periods of three to ten years. The Company had rental expense of $10.8 million, $11.2 million, and $11.2 million for the years ended December 31, 2014, 2013, and 2012, respectively. The aggregate annualized rent was approximately $6.5 million for the year ended December 31, 2014. The following is a schedule by year of future minimum rental payments required under these leases:

Year Amount (Dollars In Thousands)

2015 $ 5,911 2016 4,942 2017 2,750 2018 2,111 2019 1,879

Thereafter 7,488

157

167

Table of Contents

Additionally, the Company leases a building contiguous to its home office. The lease was renewed in December 2013 and was extended to December 2018. At the end of the lease term the Company may purchase the building for approximately $75 million. Monthly rental payments are based on the current LIBOR rate plus a spread. The following is a schedule by year of future minimum rental payments required under this lease:

Year Amount (Dollars In Thousands)

2015 $ 1,233 2016 1,236 2017 1,233 2018 76,208

As of December 31, 2014 and 2013, the Company had outstanding mortgage loan commitments of $537.7 million at an average rate of 4.61% and $322.8 million at an average rate of 4.93%, respectively.

Under insurance guaranty fund laws, in most states insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. In addition, from time to time, companies may be asked to contribute amounts beyond prescribed limits. Most insurance guaranty fund laws provide that an assessment may be excused or deferred if it would threaten an insurer�s own financial strength. The Company does not believe its insurance guaranty fund assessments will be materially different from amounts already provided for in the financial statements.

A number of civil jury verdicts have been returned against insurers, broker dealers and other providers of financial services involving sales, refund or claims practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or persons with whom the insurer does business, and other matters. Often these lawsuits have resulted in the award of substantial judgments that are disproportionate to the actual damages, including material amounts of punitive and non-economic compensatory damages. In some states, juries, judges, and arbitrators have substantial discretion in awarding punitive non-economic compensatory damages which creates the potential for unpredictable material adverse judgments or awards in any given lawsuit or arbitration. Arbitration awards are subject to very limited appellate review. In addition, in some class action and other lawsuits, companies have made material settlement payments. Publicly held companies in general and the financial services and insurance industries in particular are also sometimes the target of law enforcement and regulatory investigations relating to the numerous laws and regulations that govern such companies. Some companies have been the subject of law enforcement or regulatory actions or other actions resulting from such investigations. The Company, in the ordinary course of business, is involved in such matters.

The Company establishes liabilities for litigation and regulatory actions when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. For matters where a loss is believed to be reasonably possible, but not probable, no liability is established. For such matters, the Company may provide an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. The Company reviews relevant information with respect to litigation and regulatory matters on a quarterly and annual basis and updates its established liabilities, disclosures and estimates of reasonably possible losses or range of loss based on such reviews.

Although the Company cannot predict the outcome of any litigation or regulatory action, the Company does not believe that any such outcome will have an impact, either individually or in the aggregate, on its financial condition or results of operations that differs materially from the Company�s established liabilities. Given the inherent difficulty in predicting the outcome of such matters, however, it is possible that an adverse outcome in certain such matters could be material to the Company�s financial condition or results of operations for any particular reporting period.

The Company was audited by the IRS and the IRS proposed favorable and unfavorable adjustments to the Company�s 2003 through 2007 reported taxable income. The Company protested certain unfavorable adjustments and sought resolution at the IRS� Appeals Division. The case has followed normal procedure and is now under review at Congress� Joint Committee on Taxation. The Company believes the matter will conclude within the next twelve months. If the IRS prevails on every issue that it identified in this audit, and the Company does not litigate these issues,

158

168

Table of Contents

then the Company will make an income tax payment of approximately $136,000. However, this payment, if it were to occur, would not materially impact the Company or its effective tax rate.

Through the acquisition of MONY by the Company certain income tax credit carryforwards, which arose in MONY�s pre-acquisition tax years, transferred to the Company. This transfer was in accordance with the applicable rules of the Internal Revenue Code and the related Regulations. In spite of this transfer, AXA, the former parent of the consolidated income tax return group in which MONY was a member, retains the right to utilize these credits in the future to offset future increases in its 2010 through 2013 tax liabilities. The Company had determined that, based on all information known as of the acquisition date and through the March 31, 2014 reporting date, it was probable that a loss of the utilization of these carryforwards had been incurred. Due to indemnification received from AXA during the quarter ending June 30, 2014, the probability of loss of these carryforwards has been eliminated. Accordingly, in the table summarizing the fair value of net assets acquired from the Acquisition, the amount of the deferred tax asset from the credit carryforwards is no longer offset by a liability.

Certain of the Company�s insurance subsidiaries, as well as certain other insurance companies for which the Company has coinsured blocks of life insurance and annuity policies, are under audit for compliance with the unclaimed property laws of a number of states. The audits are being conducted on behalf of the treasury departments or unclaimed property administrators in such states. The focus of the audits is on whether there have been unreported deaths, maturities, or policies that have exceeded limiting age with respect to which death benefits or other payments under life insurance or annuity policies should be treated as unclaimed property that should be escheated to the state. The Company is presently unable to estimate the reasonably possible loss or range of loss that may result from the audits due to a number of factors, including uncertainty as to the legal theory or theories that may give rise to liability, the early stages of the audits being conducted, and, with respect to one block of life insurance policies that is co-insured by a subsidiary of the Company, uncertainty as to whether the Company or other companies are responsible for the liabilities, if any, arising in connection with such policies. The Company will continue to monitor the matter for any developments that would make the loss contingency associated with the audits probable or reasonably estimable.

Certain of the Company�s subsidiaries are under a targeted multi-state examination with respect to their claims paying practices and their use of the U.S. Social Security Administration�s Death Master File or similar databases (a �Death Database�) to identify unreported deaths in their life insurance policies, annuity contracts and retained asset accounts. There is no clear basis in previously existing law for requiring a life insurer to search for unreported deaths in order to determine whether a benefit is owed, and substantial legal authority exists to support the position that the prevailing industry practice was lawful. A number of life insurers, however, have entered into settlement or consent agreements with state insurance regulators under which the life insurers agreed to implement procedures for periodically comparing their life insurance and annuity contracts and retained asset accounts against a Death Database, treating confirmed deaths as giving rise to a death benefit under their policies, locating beneficiaries and paying them the benefits and interest, and escheating the benefits and interest as well as penalties to the state if the beneficiary could not be found. It has been publicly reported that the life insurers have paid administrative and/or examination fees to the insurance regulators in connection with the settlement or consent agreements. The Company believes it is reasonably possible that insurance regulators could demand from the Company administrative and/or examination fees relating to the targeted multi-state examination. Based on publicly reported payments by other life insurers, the Company estimates the range of such fees to be from $0 to $3.5 million.

14. SHAREOWNER�S EQUITY

PLC owns all of the 2,000 shares of non-voting preferred stock issued by the Company�s subsidiary, Protective Life and Annuity Insurance Company (�PL&A�). The stock pays, when and if declared, noncumulative participating dividends to the extent PL&A�s statutory earnings for the immediately preceding fiscal year exceeded $1.0 million. In 2014, 2013, and 2012, PL&A paid no dividends to PLC on its preferred stock.

15. STOCK-BASED COMPENSATION

Since 1973, PLC has had stock-based incentive plans to motivate management to focus on its long-range performance through the awarding of stock-based compensation. Under plans approved by shareowners in 1997, 2003, 2008, and 2012, up to 9.5 million shares may be issued in payment of awards. Due to an existing change in control

159

169

Table of Contents

provision, the awards outstanding immediately prior to the Merger will be cancelled and converted into the right to receive an amount in cash. For more information refer to Note 5, Dai-ichi Merger.

Performance Shares

The criteria for payment of the 2014 performance awards is based on PLC�s average operating return on average equity (�ROE�) over a three- year period. If PLC�s ROE is below 10.5%, no award is earned. If PLC�s ROE is at or above 12.0%, the award maximum is earned.

The criteria for payment of the 2013 performance awards is based on PLC�s average operating ROE over a three-year period. If PLC�s ROE is below 10.0%, no award is earned. If PLC�s ROE is at or above 11.5%, the award maximum is earned.

Performance shares are equivalent in value to one share of PLC�s common stock times the award earned percentage payout. Performance share awards of 203,295 were issued during the year ended December 31, 2014 and 298,500 performance share awards were issued during the year ended December 31, 2013.

Performance share awards and the estimated fair value of the awards at grant date are as follows:

Year Performance Estimated Awarded Shares Fair Value

(Dollars In Thousands) 2014 203,295 $ 10,484 2013 298,500 9,328 2012 306,100 8,608 2011 191,100 5,433

Stock Appreciation Rights

Stock appreciation rights (�SARs�) of PLC have been granted to certain officers to provide long-term incentive compensation based solely on the performance of PLC�s common stock. The SARs are exercisable either five years after the date of grant or in three or four equal annual installments beginning one year after the date of grant (earlier upon the death, disability, or retirement of the officer, or in certain circumstances, of a change in control of PLC) and expire after ten years or upon termination of employment. The SARs activity as well as weighted-average base price is as follows:

Weighted-Average Base Price per share No. of SARs

Balance at December 31, 2011 $ 22.27 2,274,229 SARs exercised / forfeited 22.60 (633,062) Balance at December 31, 2012 $ 22.15 1,641,167 SARs exercised / forfeited 18.54 (336,066) Balance at December 31, 2013 $ 23.08 1,305,101 SARs exercised / forfeited / expired 22.07 (1,147,473) Balance at December 31, 2014 $ 30.41 157,628

160

170

Table of Contents

The outstanding SARs as of December 31, 2014, were at the following base prices:

SARs Remaining Life Currently Base Price Outstanding in Years Exercisable

$ 41.05 10,000 1 10,000 $ 43.46 22,300 3 22,300 $ 38.59 52,000 4 52,000 $ 3.50 46,110 5 46,110 $ 18.36 27,218 6 27,218

There were no SARs issued for the years ended December 31, 2014, 2013, and 2012. These fair values were estimated using a Black-Scholes option pricing model. The assumptions used in this pricing model varied depending on the vesting period of awards. Assumptions used in the model for the 2010 SARs granted (the simplified method under the ASC Compensation-Stock Compensation Topic was used for the 2010 awards) were as follows: an expected volatility of 69.4%, a risk-free interest rate of 2.6%, a dividend rate of 2.4%, a zero percent forfeiture rate, and expected exercise date of 2016.

Restricted Stock Units

Restricted stock units are awarded to participants and include certain restrictions relating to vesting periods. PLC issued 98,700 restricted stock units for the year ended December 31, 2014 and 166,850 restricted stock units for the year ended December 31, 2013. These awards had a total fair value at grant date of $5.1 million and $5.5 million, respectively. Approximately half of these restricted stock units vest after three years from grant date and the remainder vest after four years.

PLC recognizes all stock-based compensation expense over the related service period of the award, or earlier for retirement eligible employees. The expense recorded by PLC for its stock-based compensation plans was $25.9 million, $15.7 million, and $10.3 million in 2014, 2013, and 2012, respectively. The Company recognized expense associated with PLC�s stock-based compensation plans for compensations awarded to its employees of $6.5 million, $4.5 million, and $3.9 million in 2014, 2013, and 2012, respectively. PLC�s obligations of its stock-based compensation plans that are expected to be settled in shares of PLC�s common stock are reported as a component of shareowners� equity, net of deferred taxes. As of December 31, 2014, the total compensation cost related to non-vested stock-based compensation not yet recognized was $27.0 million. Due to the Merger, the unrecognized stock compensation expense will be accelerated as of the date of the merger due to an existing change in control provision.

161

171

Table of Contents

The following table provides information as of December 31, 2014, about equity compensation plans under which PLC�s common stock is authorized for issuance:

Securities Authorized for Issuance under Equity Compensation Plans

Number of securities remaining available for future issuance

Number of securities under equity to be issued upon Weighted-average compensation plans

exercise of exercise price of (excluding securities outstanding options, outstanding options, reflected in

warrants and rights as warrants and rights as column (a)) as of Plan category of December 31, 2014 (a) of December 31, 2014 (b) of December 31, 2014 (c) Equity compensation plans approved by shareowners 1,960,959(1) $ 22.07(3) 4,092,546(4) Equity compensation plans not approved by shareowners 193,720(2) Not applicable Not applicable(5) Total 2,154,679 $ 22.07 4,092,546

(1) Includes the following number of shares: (a) 102,458 shares issuable with respect to outstanding SARs (assuming for this purpose that one share of common stock will be payable with respect to each outstanding SAR); (b) 907,487 shares issuable with respect to outstanding performance share awards (assuming for this purpose that the awards are payable based on estimated performance under the awards as of September 30, 2014); (c) 313,199 shares issuable with respect to outstanding restricted stock units (assuming for this purpose that shares will be payable with respect to all outstanding restricted stock units); (d) 475,386 shares issuable with respect to stock equivalents representing previously earned awards under the LTIP that the recipient deferred under PLC�s Deferred Compensation Plan for Officers; and (e) 162,429 shares issuable with respect to stock equivalents representing previous awards under PLC�s Stock Plan for Non-Employee Directors that the recipient deferred under PLC�s Deferred Compensation Plan for Directors Who Are Not Employees of PLC.

(2) Includes the following number of shares of common stock: (a) 152,709 shares issuable with respect to stock equivalents representing (i) stock awards to PLC�s Directors before June 1, 2004 that the recipient deferred pursuant to PLC�s Deferred Compensation Plan for Directors Who Are Not Employees of PLC and (ii) cash retainers and fees that PLC�s Directors deferred under PLC�s Deferred Compensation Plan for Directors Who Are Not Employees of PLC, and (b) 41,011 shares issuable with respect to stock equivalents pursuant to PLCs Deferred Compensation Plan for Officers.

(3) Based on exercise prices of outstanding SARs.

(4) Represents shares of common stock available for future issuance under the LTIP and PLC�s Stock Plan for Non-Employee Directors.

(5) The plans listed in Note (2) do not currently have limits on the number of shares of common stock issuable under such plans. The total number of shares of common stock that may be issuable under such plans will depend upon, among other factors, the deferral elections made by the plans� participants.

16. EMPLOYEE BENEFIT PLANS

Defined Benefit Pension Plan and Unfunded Excess Benefit Plan

PLC sponsors a defined benefit pension plan covering substantially all of its employees, including those of the Company. Benefits are based on years of service and the employee�s compensation.

Effective January 1, 2008, PLC made the following changes to its defined benefit pension plan. These changes have been reflected in the computations within this note.

• Employees hired after December 31, 2007, will receive benefits under a cash balance plan.

• Employees active on December 31, 2007, with age plus vesting service less than 55 years will receive a final pay-based pension benefit for service through December 31, 2007, plus a cash balance benefit for service after December 31, 2007.

• Employees active on December 31, 2007, with age plus vesting service equaling or exceeding 55 years, will receive a final pay-based pension benefit for service both before and after December 31, 2007, with a modest reduction in the formula for benefits earned after December 31, 2007.

172

162

173

Table of Contents

• All participants terminating employment on or after December of 2007 may elect to receive a lump sum benefit.

Under the Pension Protection Act of 2006 (�PPA�), a plan could be subject to certain benefit restrictions if the plan�s adjusted funding target attainment percentage (�AFTAP�) drops below 80%. Therefore, PLC may make additional contributions in future periods to maintain an AFTAP of at least 80%. In general, the AFTAP is a measure of how well the plan is funded and is obtained by dividing the plan�s assets by the plan�s funding liabilities. AFTAP is based on participant data, plan provisions, plan methods and assumptions, funding credit balances, and plan assets as of the plan valuation date. Some of the assumptions and methods used to determine the plan�s AFTAP may be different from the assumptions and methods used to measure the plan�s funded status on a GAAP basis.

In July of 2012, the Moving Ahead for Progress in the 21st Century Act (�MAP-21�), which includes pension funding stabilization provisions, was signed into law. These provisions establish an interest rate corridor which is designed to stabilize the segment rates used to determine funding requirements from the effects of interest rate volatility. In August of 2014, the Highway and Transportation Funding Act of 2014 (�HATFA�) was signed into law. HAFTA extends the funding relief provided by MAP-21 by delaying the interest rate corridor expansion. The funding stabilization provisions of MAP-21 and HATFA reduced PLC�s minimum required defined benefit plan contributions for the 2013 and 2014 plan years. PLC is evaluating the impact these changes will have on funding requirements in future years. Since the funding stabilization provisions of MAP-21 and HATFA do not apply for Pension Benefit Guaranty Corporation (�PBGC�) reporting purposes, PLC may also make additional contributions in future periods to avoid certain PBGC reporting triggers.

During the twelve months ended December 31, 2014, PLC contributed $9.0 million to its defined benefit pension plan for the 2013 plan year and $6.5 million to its defined benefit pension plan for the 2014 plan year. In addition, during January of 2015, PLC made a $2.2 million contribution to the defined benefit pension plan for the 2014 plan year. PLC has not yet determined what amount it will fund for the remainder of 2015, but estimates that the amount will be between $1 million and $10 million.

PLC also sponsors an unfunded excess benefit plan, which is a nonqualified plan that provides defined pension benefits in excess of limits imposed on qualified plans by federal tax law.

PLC uses a December 31 measurement date for all of its plans. The following table presents the benefit obligation, fair value of plan assets, and the funded status of PLC�s defined benefit pension plan and unfunded excess benefit plan as of December 31. This table also includes the amounts not yet recognized as components of net periodic pension costs as of December 31:

163

174

Table of Contents

Defined Benefit Unfunded Excess Pension Plan Benefit Plan

2014 2013 2014 2013 (Dollars In Thousands)

Accumulated benefit obligation, end of year $ 249,453 $ 207,999 $ 47,368 $ 36,306

Change in projected benefit obligation: Projected benefit obligation at beginning of year $ 219,152 $ 223,319 $ 39,679 $ 42,971 Service cost 9,411 9,345 954 1,037 Interest cost 10,493 8,985 1,696 1,387 Amendments � � � � Actuarial (gain) loss 38,110 (8,172) 9,153 (1,505) Benefits paid (9,835) (14,325) (1,907) (4,211) Projected benefit obligation at end of year 267,331 219,152 49,575 39,679

Change in plan assets: Fair value of plan assets at beginning of year 180,173 152,187 � � Actual return on plan assets 17,921 33,368 � � Employer contributions(1) 15,513 8,943 1,907 4,211 Benefits paid (9,835) (14,325) (1,907) (4,211) Fair value of plan assets at end of year 203,772 180,173 � � After reflecting FASB guidance: Funded status (63,559) (38,979) (49,575) (39,679) Amounts recognized in the balance sheet: Other liabilities (63,559) (38,979) (49,575) (39,679) Amounts recognized in accumulated other comprehensive income: Net actuarial loss/(gain) 80,430 54,897 20,983 13,346 Prior service cost/(credit) (1,033) (1,425) 24 36 Total $ 79,397 $ 53,472 $ 21,007 $ 13,382

(1) Employer contributions disclosed are based on PLC�s fiscal filing year

Weighted-average assumptions used to determine benefit obligations as of December 31 are as follows:

Defined Benefit Pension Unfunded Excess Plan Benefit Plan

2014 2013 2014 2013 Discount rate 3.95% 4.86% 3.65% 4.30% Rate of compensation increase 4.75% prior to age 40 3.0 4.75% prior to age 40 4.0

3.75% for age 40 and 3.75% for age 40 and above above

Expected long-term return on plan assets 7.5 7.5 N/A N/A

Weighted-average assumptions used to determine the net periodic benefit cost for the year ended December 31 are as follows:

Defined Benefit Pension Plan Unfunded Excess Benefit Plan 2014 2013 2012 2014 2013 2012

Discount rate 4.86% 4.07% 4.62% 4.30% 3.37% 4.07% Rates of compensation increase 3.0 3.0 2.5 - 3.0 4.0 4.0 3.5 - 4.0 Expected long-term return on plan assets 7.5 7.5 7.75 N/A N/A N/A

164

175

Table of Contents

that is invested in a portfolio of high-quality debt instruments on the measurement date would provide the future cash flows necessary to pay benefits when they come due.

To determine an appropriate long-term rate of return assumption, PLC obtained 25 year annualized returns for each of the represented asset classes. In addition, PLC received evaluations of market performance based on PLC�s asset allocation as provided by external consultants. A combination of these statistical analytics provided results that PLC utilized to determine an appropriate long-term rate of return assumption.

Components of the net periodic benefit cost for the year ended December 31 are as follows:

Defined Benefit Pension Plan Unfunded Excess Benefit Plan 2014 2013 2012 2014 2013 2012

(Dollars In Thousands) Service cost � benefits earned during the period $ 9,411 $ 9,345 $ 9,145 $ 954 $ 1,037 $ 867 Interest cost on projected benefit obligation 10,493 8,985 8,977 1,696 1,387 1,473 Expected return on plan assets (12,166) (11,013) (10,916) � � � Amortization of prior service cost/(credit) (392) (392) (392) 12 12 12 Amortization of actuarial losses(1) 6,821 9,631 7,749 1,516 1,792 1,300 Preliminary net periodic benefit cost 14,167 16,556 14,563 4,178 4,228 3,652 Settlement/curtailment expense(2) � � � � 928 � Total net periodic benefit cost $ 14,167 $ 16,556 $ 14,563 $ 4,178 $ 5,156 $ 3,652

(1)2014 average remaining service period used is 8.10 years and 7.51 years for the defined benefit pension plan and unfunded excess benefit plan, respectively.

(2)The unfunded excess pension plan triggered settlement accounting for the year ended December 31, 2013 since the total lump sum

payments exceeded the settlement threshold of service cost plus interest cost.

The estimated net actuarial loss/(gain), prior service cost/(credit), and transition obligation/(asset) for these plans that will be amortized from accumulated other comprehensive income into net periodic benefit cost during 2015 is as follows:

Defined Benefit Unfunded Excess Pension Plan Benefit Plan

(Dollars In Thousands) Net actuarial loss/(gain) $ 7,603 $ 1,901 Prior service cost/(credit) (392) 12 Transition obligation/(asset) � �

The amortization of any prior service cost is determined using a straight-line amortization of the cost over the average remaining service period of employees expected to receive benefits under the Plan.

Allocation of plan assets of the defined benefit pension plan by category as of December 31 are as follows:

Target Allocation for

Asset Category 2015 2014 2013 Cash and cash equivalents 2% 4% 2% Equity securities 60 62 64 Fixed income 38 34 34 Total 100% 100% 100%

165

176

Table of Contents

PLC�s target asset allocation is designed to provide an acceptable level of risk and balance between equity assets and fixed income assets. The weighting towards equity securities is designed to help provide for an increased level of asset growth potential and liquidity.

Prior to July 1999, upon an employee�s retirement, a distribution from pension plan assets was used to purchase a single premium annuity from the Company in the retiree�s name. Therefore, amounts shown above as plan assets exclude assets relating to such retirees. Since July 1999, retiree obligations have been fulfilled from pension plan assets. The defined benefit pension plan has a target asset allocation of 60% domestic equities, 38% fixed income, and 2% cash. When calculating asset allocation, PLC includes reserves for pre- July 1999 retirees.

PLC�s investment policy includes various guidelines and procedures designed to ensure assets are invested in a manner necessary to meet expected future benefits earned by participants. The investment guidelines consider a broad range of economic conditions. Central to the policy are target allocation ranges (shown above) by major asset categories. The objectives of the target allocations are to maintain investment portfolios that diversify risk through prudent asset allocation parameters, achieve asset returns that meet or exceed the plans� actuarial assumptions, and achieve asset returns that are competitive with like institutions employing similar investment strategies.

The plan�s equity assets are in a Russell 3000 index fund that invests in a domestic equity index collective trust managed by Northern Trust Corporation and in a Spartan 500 index fund managed by Fidelity. The plan�s cash is invested in a collective trust managed by Northern Trust Corporation. The plan�s fixed income assets are invested in a group deposit administration annuity contract with the Company.

Plan assets of the defined benefit pension plan by category as of December 31, are as follows:

As of December 31, Asset Category 2014 2013

(Dollars In Thousands) Cash and cash equivalents $ 7,968 $ 3,052 Equity securities: Collective Russell 3000 equity index fund 79,660 74,753 Fidelity Spartan 500 index fund 51,848 45,632 Fixed income 64,296 56,736 Total investments 203,772 180,173 Employer contribution receivable 2,165 2,314 Total $ 205,937 $ 182,487

The valuation methodologies used to determine the fair values reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The following is a description of the valuation methodologies used for assets measured at fair value. The Plan�s group deposit administration annuity contract with the Company is recorded at contract value, which, by utilizing a long-term view, PLC believes approximates fair value. Contract value represents contributions made under the contract, plus interest at the contract rate, less funds used to purchase annuities. Units in collective short-term and collective investment funds are valued at the unit value, which approximates fair value, as reported by the trustee of the collective short-term and collective investment funds on each valuation date. These methods of valuation may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while PLC believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.

166

177

Table of Contents

The following table sets forth by level, within the fair value hierarchy, the Plan�s assets at fair value as of December 31, 2014:

Level 1 Level 2 Level 3 Total (Dollars In Thousands)

Collective short-term investment fund $ 7,968 $ � $ � $ 7,968 Collective investment funds: Equity index funds 51,848 79,660 � 131,508 Group deposit administration annuity contract � � 64,296 64,296 Total investments $ 59,816 $ 79,660 $ 64,296 $ 203,772

The following table sets forth by level, within the fair value hierarchy, the Plan�s assets at fair value as of December 31, 2013:

Level 1 Level 2 Level 3 Total (Dollars In Thousands)

Collective short-term investment fund $ 3,052 $ � $ � $ 3,052 Collective investment funds: Equity index funds 45,632 74,753 � 120,385 Group deposit administration annuity contract � � 56,736 56,736 Total investments $ 48,684 $ 74,753 $ 56,736 $ 180,173

For the year ended December 31, 2014, $4.5 million was transferred into Level 3 from Level 2. For the year ended December 31, 2013, $4.0 million was transferred into Level 3 from Level 2. These transfers were made to maintain an acceptable asset allocation as set by PLC�s investment policy.

For the year ended December 31, 2014 and 2013, there were no transfers between Level 1 and Level 2.

The following table summarizes the Plan investments measured at fair value based on NAV per share as of December 31, 2014 and 2013, respectively:

Unfunded Redemption Redemption Name Fair Value Commitments Frequency Notice Period

(Dollars In Thousands) As of December 31, 2014: Collective short-term investment fund $ 7,968 Not Applicable Daily 1 day Collective Russell 3000 index fund(1) 79,660 Not Applicable Daily 1 day Fidelity Spartan 500 index fund 51,848 Not Applicable Daily 1 day

As of December 31, 2013: Collective short-term investment fund $ 3,052 Not Applicable Daily 1 day Collective Russell 3000 index fund(1) 74,753 Not Applicable Daily 1 day Fidelity Spartan 500 index fund 45,632 Not Applicable Daily 1 day

(1) Non-lending collective trust that does not publish a daily NAV but tracks the Russell 3000 index and provides a daily NAV to the Plan.

167

178

Table of Contents

A reconciliation of the beginning and ending balances for the fair value measurements for which significant unobservable inputs (Level 3) have been used is as follows:

As of December 31, 2014 2013

(Dollars In Thousands) Balance, beginning of year $ 56,736 $ 50,032 Interest income 3,060 2,704 Transfers from collective short-term investments fund 4,500 4,000 Transfers to collective short-term investments fund � � Balance, end of year $ 64,296 $ 56,736

The following table represents the Plan�s Level 3 financial instrument, the valuation technique used, and the significant unobservable input and the ranges of values for that input as of December 31, 2014:

Principal Significant Range of Valuation Unobservable Significant Input

Instrument Fair Value Technique Inputs Values (Dollars In Thousands)

Group deposit administration annuity contract $ 64,296 Contract Value Contract Rate 5.28% - 5.47%

Investment securities are exposed to various risks, such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect the amounts reported.

Estimated future benefit payments under the defined benefit pension plan are as follows:

Defined Benefit Unfunded Excess Years Pension Plan Benefit Plan

(Dollars In Thousands) 2015 $ 15,055 $ 4,016 2016 15,243 4,036 2017 16,957 5,610 2018 16,515 4,005 2019 19,014 4,303

2020-2024 97,137 17,800

Other Postretirement Benefits

In addition to pension benefits, PLC provides limited healthcare benefits to eligible retired employees until age 65. This postretirement benefit is provided by an unfunded plan. As of December 31, 2014 and 2013, the accumulated postretirement benefit obligation associated with these benefits was $0.2 million and $0.4 million, respectively.

168

179

Table of Contents

The change in the benefit obligation for the retiree medical plan is as follows:

As of December 31, 2014 2013

(Dollars In Thousands) Change in Benefit Obligation Benefit obligation, beginning of year $ 447 $ 788 Service cost 2 4 Interest cost 4 5 Actuarial (gain)/loss 30 29 Plan participant contributions 254 289 Benefits paid (490) (668) Benefit obligation, end of year $ 247 $ 447

For the retiree medical plan, PLC�s discount rate assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2014, is 1.27% and 1.26%, respectively.

For a closed group of retirees over age 65, PLC provides a prescription drug benefit. As of December 31, 2014 and 2013, PLC�s liability related to this benefit was less than $0.1 million. PLC�s obligation is not materially affected by a 1% change in the healthcare cost trend assumptions used in the calculation of the obligation.

PLC also offers life insurance benefits for retirees from $10,000 up to a maximum of $75,000 which are provided through the payment of premiums under a group life insurance policy. This plan is partially funded at a maximum of $50,000 face amount of insurance. The accumulated postretirement benefit obligation associated with these benefits is as follows:

As of December 31, 2014 2013

(Dollars In Thousands) Change in Benefit Obligation Benefit obligation, beginning of year $ 8,653 $ 10,070 Service cost 97 144 Interest cost 416 405 Actuarial (gain)/loss 694 (1,620) Benefits paid (572) (346) Benefit obligation, end of year $ 9,288 $ 8,653

For the postretirement life insurance plan, PLC�s discount rate assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2014, is 4.21% and 5.05%, respectively.

PLC�s expected long-term rate of return assumption used to determine benefit obligation and the net periodic benefit cost as of December 31, 2014, is 3.14% and 3.13%, respectively. To determine an appropriate long-term rate of return assumption, PLC utilized 20 year average and annualized return results on the Barclay�s short treasury index.

Investments of PLC�s group life insurance plan are held by Wells Fargo Bank, N.A. Plan assets held by the Custodian are invested in a money market fund.

169

180

Table of Contents

The fair value of each major category of plan assets for PLC�s postretirement life insurance plan is as follows:

For The Year Ended December 31, Category of Investment 2014 2013 2012

(Dollars In Thousands) Money market fund $ 5,925 $ 6,156 $ 6,174

Investments are stated at fair value and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The money market funds are valued based on historical cost, which represents fair value, at year end. This method of valuation may produce a fair value calculation that may not be reflective of future fair values. Furthermore, while PLC believes its valuation method is appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value could result in a different fair value measurement at the reporting date.

The following table sets forth by level, within the fair value hierarchy, the Plan�s assets at fair value as of December 31, 2014:

Level 1 Level 2 Level 3 Total (Dollars In Thousands)

Money market fund $ 5,925 $ � $ � $ 5,925

The following table sets forth by level, within the fair value hierarchy, the Plan�s assets at fair value as of December 31, 2013:

Level 1 Level 2 Level 3 Total (Dollars In Thousands)

Money market fund $ 6,156 $ � $ � $ 6,156

For the year ended December 31, 2014 and 2013, there were no transfers between levels.

Investments are exposed to various risks, such as interest rate and credit risks. Due to the level of risk associated with investments and the level of uncertainty related to credit risks, it is at least reasonably possible that changes in risk in the near term could materially affect the amounts reported.

401(k) Plan

PLC sponsors a 401(k) Plan which covers substantially all employees. Employee contributions are made on a before-tax basis as provided by Section 401(k) of the Internal Revenue Code or as after-tax �Roth� contributions. Employees may contribute up to 25% of their eligible annual compensation to the 401(k) Plan, limited to a maximum annual amount as set periodically by the Internal Revenue Service ($17,500 for 2014). The Plan also provides a �catch-up� contribution provision which permits eligible participants (age 50 or over at the end of the calendar year), to make additional contributions that exceed the regular annual contribution limits up to a limit periodically set by the Internal Revenue Service ($5,500 for 2014). PLC matches the sum of all employee contributions dollar for dollar up to a maximum of 4% of an employee�s pay per year per person. All matching contributions vest immediately.

Prior to 2009, employee contributions to PLC�s 401(k) Plan were matched through use of an ESOP established by PLC. Beginning in 2009, PLC adopted a cash match for employee contributions to the 401(k) plan. For the year ended December 31, 2014 and 2013, PLC recorded an expense of $6.3 million and $6.0 million, respectively.

Effective as of January 1, 2005, PLC adopted a supplemental matching contribution program, which is a nonqualified plan that provides supplemental matching contributions in excess of the limits imposed on qualified defined contribution plans by federal tax law. The first allocations under this program were made in early 2006, with

170

181

Table of Contents

respect to the 2005 plan year. The expense recorded by PLC for this employee benefit was $0.4 million, $0.5 million, and $0.4 million, respectively, in 2014, 2013, and 2012.

Deferred Compensation Plan

PLC has established deferred compensation plans for directors, officers, and others. Compensation deferred is credited to the participants in cash, mutual funds, common stock equivalents, or a combination thereof. PLC may, from time to time, reissue treasury shares or buy in the open market shares of common stock to fulfill its obligation under the plans. As of December 31, 2014, the plans had 1,109,595 common stock equivalents credited to participants. PLC�s obligations related to its deferred compensation plans are reported in other liabilities, unless they are to be settled in shares of its common stock, in which case they are reported as a component of shareowners� equity. On February 1, 2015, PLC became a wholly subsidiary of Dai-ichi Life and PLC�s stock ceased to be publicly traded. Thus, any common stock equivalents within the plans converted into rights to receive the merger consideration of $70.00 per common stock equivalent.

17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) (�AOCI�) as of December 31, 2014 and 2013.

Changes in Accumulated Other Comprehensive Income (Loss) by Component

Total Accumulated

Unrealized Accumulated Other Gains and Losses Gain and Loss Comprehensive on Investments(2) Derivatives Income (Loss)

(Dollars In Thousands, Net of Tax) Beginning Balance, December 31, 2013 $ 540,201 $ (1,235) $ 538,966 Other comprehensive income (loss) before reclassifications 983,985 (2) 983,983 Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings 3,498 � 3,498 Amounts reclassified from accumulated other comprehensive income (loss)(1) (44,391) 1,155 (43,236) Net current-period other comprehensive income (loss) 943,092 1,153 944,245 Ending Balance, December 31, 2014 $ 1,483,293 $ (82) $ 1,483,211

(1) See Reclassification table below for details.

(2) These balances were offset by the impact of DAC and VOBA by $198.1 million and $397.5 million as of December 31, 2013 and 2014, respectively.

171

182

Table of Contents

Changes in Accumulated Other Comprehensive Income (Loss) by Component

Total Accumulated

Unrealized Accumulated Other Gains and Losses Gain and Loss Comprehensive on Investments(2) Derivatives Income (Loss)

(Dollars In Thousands, Net of Tax) Beginning Balance, December 31, 2012 $ 1,814,620 $ (3,496) $ 1,811,124 Other comprehensive income (loss) before reclassifications (1,250,416) 734 (1,249,682) Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings 4,591 � 4,591 Amounts reclassified from accumulated other comprehensive income (loss)(1) (28,594) 1,527 (27,067) Net current-period other comprehensive income (loss) (1,274,419) 2,261 (1,272,158) Ending Balance, December 31, 2013 $ 540,201 $ (1,235) $ 538,966

(1) See Reclassification table below for details.

(2) These balances were offset by the impact of DAC and VOBA by $204.9 million and $198.1 million as of December 31, 2012 and 2013, respectively.

172

183

Table of Contents

The following table summarizes the reclassifications amounts out of AOCI for the year ended December 31, 2014 and 2013.

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

Amount Reclassified

from Accumulated Other Comprehensive Affected Line Item in the Consolidated

Income (Loss) Statements of Income (Dollars In Thousands)

For The Year Ended December 31, 2014 Gains and losses on derivative instruments Net settlement (expense)/benefit(1) $ (1,777) Benefits and settlement expenses, net of reinsurance ceded

(1,777) Total before tax 622 Tax (expense) or benefit

$ (1,155) Net of tax

Unrealized gains and losses on available-for-sale securities Net investment gains/losses $ 75,569 Realized investment gains (losses): All other investments Impairments recognized in earnings (7,275) Net impairment losses recognized in earnings

68,294 Total before tax (23,903) Tax (expense) or benefit

$ 44,391 Net of tax

(1) See Note 23, Derivative Financial Instruments for additional information.

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)

Amount Reclassified

from Accumulated Other Comprehensive Affected Line Item in the Consolidated

Income (Loss) Statements of Income (Dollars In Thousands)

For The Year Ended December 31, 2013 Gains and losses on derivative instruments Net settlement (expense)/benefit(1) $ (2,349) Benefits and settlement expenses, net of reinsurance ceded

(2,349) Total before tax 822 Tax (expense) or benefit

$ (1,527) Net of tax

Unrealized gains and losses on available-for-sale securities Net investment gains/losses $ 66,437 Realized investment gains (losses): All other investments Impairments recognized in earnings (22,447) Net impairment losses recognized in earnings

43,990 Total before tax (15,396) Tax (expense) or benefit

$ 28,594 Net of tax

(1) See Note 23, Derivative Financial Instruments for additional information.

173

184

Table of Contents

18. INCOME TAXES

The Company�s effective income tax rate related to continuing operations varied from the maximum federal income tax rate as follows:

For The Year Ended December 31, 2014 2013 2012

Statutory federal income tax rate applied to pre-tax income 35.0% 35.0% 35.0% State income taxes 0.5 0.4 0.4 Investment income not subject to tax (2.7) (4.4) (3.1) Uncertain tax positions 0.5 0.1 0.2 Other 0.1 (0.1) 0.4

33.4% 31.0% 32.9%

The annual provision for federal income tax in these financial statements differs from the annual amounts of income tax expense reported in the respective income tax returns. Certain significant revenues and expenses are appropriately reported in different years with respect to the financial statements and the tax returns.

The components of the Company�s income tax are as follows:

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Current income tax expense: Federal $ 176,238 $ (18,076) $ 78,510 State 5,525 (222) 2,496 Total current $ 181,763 $ (18,298) $ 81,006 Deferred income tax expense: Federal $ 65,566 $ 149,288 $ 66,375 State (491) (93) 3,662 Total deferred $ 65,075 $ 149,195 $ 70,037

174

185

Table of Contents

The components of the Company�s net deferred income tax liability are as follows:

As of December 31, 2014 2013

(Dollars In Thousands) Deferred income tax assets: Premium receivables and policy liabilities $ 154,720 $ 275,355 Loss and credit carryforwards 35,642 104,530 Deferred compensation 104,117 104,062 Invested assets (other than unrealized gains) 2,960 � Valuation allowance (791) (780)

296,648 483,167 Deferred income tax liabilities: Deferred policy acquisition costs and value of business acquired 1,073,499 1,034,614 Invested assets (other than unrealized gains) � 147,446 Net unrealized gains (losses) on investments 798,529 290,062 Other 36,484 52,465

1,908,512 1,524,587 Net deferred income tax liability $ (1,611,864) $ (1,041,420)

The Company�s income tax returns, except for MONY which files separately, are included in PLC�s consolidated U.S. income tax return.

The deferred tax assets reported above include certain deferred tax assets related to nonqualified deferred compensation and other employee benefit liabilities. These liabilities were assumed by AXA; they were not acquired by the Company in connection with the acquisition of MONY discussed in Note 3, Significant Acquisitions. The future tax deductions stemming from these liabilities will be claimed by the Company on MONY�s tax returns in its post-acquisition periods. These deferred tax assets have been estimated as of the MONY Acquisition date (and through the December 31, 2014 reporting date) based on all available information. However, it is possible that these estimates may be adjusted in future reporting periods based on actuarial changes to the projected future payments associated with these liabilities. Any such adjustments will be recognized by the Company as an adjustment to income tax expense during the period in which they are realized.

In management�s judgment, the gross deferred income tax asset as of December 31, 2014, will more likely than not be fully realized. The Company has recognized a valuation allowance of $1.2 million and $1.2 million as of December 31, 2014 and 2013, respectively, related to state-based loss carryforwards that it has determined are more likely than not to expire unutilized. Since there was no change in the valuation allowance, there were no impact to state income tax expense in 2014.

As of December 31, 2014 and 2013, some of the Company�s fixed maturities were reported at an unrealized loss. If the Company were to realize a tax-basis net capital loss for a year, then such loss could not be deducted against that year�s other taxable income. However, such a loss could be carried back and forward against prior year or future year tax-basis net capital gains. Therefore, the Company has relied upon a prudent and feasible tax-planning strategy regarding its fixed maturities that were reported at an unrealized loss. The Company has the ability and the intent to either hold such fixed maturities to maturity, thereby avoiding a realized loss, or to generate an offsetting realized gain from unrealized gain fixed maturities if such unrealized loss fixed maturities are sold at a loss prior to maturity. As of December 31, 2014, the Company recorded a net unrealized gain on its fixed maturities.

175

186

Table of Contents

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

As of December 31, 2014 2013 2012

(Dollars In Thousands) Balance, beginning of period $ 85,846 $ 74,335 $ 4,318 Additions for tax positions of the current year 57,392 7,464 9,465 Additions for tax positions of prior years 34,371 6,787 64,050 Reductions of tax positions of prior years: Changes in judgment (9,533) (2,740) (3,498) Settlements during the period � � � Lapses of applicable statute of limitations � � � Balance, end of period $ 168,076 $ 85,846 $ 74,335

Included in the balance above, as of December 31, 2014 and 2013, are approximately $157.3 million and $78.5 million of unrecognized tax benefits, respectively, for which the ultimate deductibility is certain but for which there is uncertainty about the timing of such deductions. Other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective income tax rate but would accelerate to an earlier period the payment of cash to the taxing authority. The total amount of unrecognized tax benefits, if recognized, that would affect the effective income tax rate is approximately $10.7 million and $7.4 million as of December 31, 2014 and as of December 31, 2013, respectively.

Any accrued interest related to the unrecognized tax benefits have been included in income tax expense. There were no amounts included in 2014, 2013 or 2012, as the parent company maintains responsibility for the interest on unrecognized tax benefits. The Company has no accrued interest associated with unrecognized tax benefits as of December 31, 2014 and 2013 (before taking into consideration the related income tax benefit that is associated with such an expense).

During 2012, an IRS audit concluded in which the IRS proposed favorable and unfavorable adjustments to the Company�s 2003 through 2007 reported taxable incomes. The Company protested certain unfavorable adjustments and sought resolution at the IRS� Appeals Division. In January 2014, the Appeals Division completed its analysis and sent the Company�s case to Congress� Joint Committee on Taxation for routine review. Although it cannot be certain, the Company believes this review process may conclude within the next 12 months. In addition, an examination of tax years 2008 through 2011 is currently underway. The Company believes that this examination may conclude within the next 12 months. It is possible, therefore, that in the next 12 months approximately $98.4 million of the unrecognized tax benefits on the above chart will be reduced due to the expected closure of the aforementioned Appeals process, the closing of the 2008 through 2011 examination, and the lapsing of various tax years� statutes of limitations. In general, these reductions would represent the Company�s possible successful negotiation of certain issues, coupled with its payment of the assessed taxes on other issues. This possible scenario includes an assumption that the Company would pay the IRS-asserted deficiencies on issues that it loses at Appeals rather than litigating such issues. These assumed tax payments would not materially impact the Company or its effective tax rate.

During the 12 months ended December 31, 2014 and 2013, discussions with the IRS, related to their ongoing examination of tax years 2008 through 2011 prompted the Company overall to revise upward its measurement of unrecognized tax benefits. These changes underlying this overall increase were almost entirely related to timing issues. Therefore, aside from the cost of interest, such changes did not result in any impact on the Company�s effective tax rate. In addition, during the 12 months ended December 31, 2013, the Company�s uncertain tax position liability decreased in the amount of $2.7 million. This was caused by the interaction of certain limitations regarding the dividends-received deduction and changes to taxable income caused by other uncertain tax positions resulting from new technical guidance, etc. This led the Company to conclude that the full amount of the associated tax benefit was more than 50% likely to be realized.

In general, the Company is no longer subject to U.S. federal, state and local income tax examinations by taxing authorities for tax years that began before 2003.

176

187

Table of Contents

19. SUPPLEMENTAL CASH FLOW INFORMATION

The following table sets forth supplemental cash flow information:

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Cash paid / (received) during the year: Interest expense $ 117,776 $ 110,301 $ 92,175 Income taxes 159,724 (54,370) 77,665

20. RELATED PARTY TRANSACTIONS

The Company leases furnished office space and computers to affiliates. Lease revenues were $4.9 million, $4.9 million, and $4.7 million for the years ended December 31, 2014, 2013, and 2012, respectively. The Company purchases data processing, legal, investment, and management services from affiliates. The costs of such services were $206.3 million, $170.9 million, and $154.7 million for the years ended December 31, 2014, 2013, and 2012, respectively. In addition, the Company has an intercompany payable with affiliates as of December 31, 2014 and 2013 of $19.5 million and $27.6 million, respectively. There was no intercompany receivable with affiliates balance as of December 31, 2014 or December 31, 2013.

Certain corporations with which PLC�s directors were affiliated paid us premiums and policy fees or other amounts for various types of insurance and investment products, interest on bonds we own and commissions on securities underwritings in which our affiliates participated. Such amounts totaled $33.4 million, $40.0 million, and $59.1 million in 2014, 2013, and 2012, respectively. The Company and/or PLC paid commissions, interest on debt and investment products, and fees to these same corporations totaling $16.5 million, $16.4 million, and $13.0 million in 2014, 2013, and 2012, respectively.

Prior to the Merger, PLC and the Company had no related party transactions with Dai-ichi Life.

PLC has guaranteed the Company�s obligations for borrowings or letters of credit under the revolving line of credit arrangement to which PLC is also a party. PLC has also issued guarantees, entered into support agreements and/or assumed a duty to indemnify its indirect wholly owned captive insurance companies in certain respects. In addition, as of December 31, 2014, PLC is the sole holder of the $800 million balance of outstanding surplus notes issued by one such wholly owned captive insurance company, Golden Gate.

As of February 1, 2000, PLC guaranteed the obligations of the Company under a synthetic lease entered into by the Company, as lessee, with a non-affiliated third party, as lessor. Under the terms of the synthetic lease, financing of $75 million was available to the Company for construction of a new office building and parking deck. The synthetic lease was amended and restated as of January 11, 2007, and again on December 19, 2013, wherein as of December 31, 2014, PLC continues to guarantee the obligations of the Company thereunder.

The Company has agreements with certain of its subsidiaries under which it provides administrative services for a fee. These services include but are not limited to accounting, financial reporting, compliance, policy administration, reserve computations, and projections. In addition, the Company and its subsidiaries pay PLC for investment, legal and data processing services.

The Company and/or certain of its affiliates have reinsurance agreements in place with companies owned by PLC. These agreements relate to certain portions of our service contract business which is included within the Asset Protection segment. These transactions are eliminated at the PLC consolidated level.

The Company has reinsured GMWB and GMDB riders related to our variable annuity contracts to Shades Creek, a wholly owned insurance subsidiary of PLC. Also during 2012, PLC entered into an intercompany capital support agreement with Shades Creek which provides through a guarantee that PLC will contribute assets or purchase surplus notes (or cause an affiliate or third party to contribute assets or purchase surplus notes) in amounts necessary for

177

188

Table of Contents

Shades Creek�s regulatory capital levels to equal or exceed minimum thresholds as defined by the agreement. Under this support agreement, the Company issued a $55 million Letter of Credit on December 31, 2014. No borrowings under this agreement were outstanding as of December 31, 2014. As of December 31, 2014, Shades Creek maintained capital levels in excess of the required minimum thresholds. The maximum potential future payment amount which could be required under the capital support agreement will be dependent on numerous factors, including the performance of equity markets, the level of interest rates, performance of associated hedges, and related policyholder behavior.

As of December 31, 2012, Shades Creek was a direct wholly owned insurance subsidiary of the Company. On April 1, 2013, the Company paid to its parent, PLC, a dividend that consisted of all outstanding stock of Shades Creek. The Company will continue to reinsure guaranteed minimum withdrawal benefits (�GMWB�) and guaranteed minimum death benefits (�GMDB�) riders to Shades Creek, which include a funds withheld account that is considered a derivative. For more information related to the derivative, refer to Note 22, Fair Value of Financial Instruments and Note 23, Derivative Financial Instruments. For cash flow purposes, portions of the dividend were treated as non-cash transactions.

The following balances from Shades Creek�s balance sheet as of March 31, 2013 with the exception of cash, were excluded from the Company�s cash flow statement for the year ended December 31, 2013:

As of March 31, 2013

(Dollars In Thousands)

Assets Other long-term investments $ 34,093 Short-term investments 745 Total investments 34,838 Cash 44,963 Accounts and premiums receivable 16,036 Deferred policy acquisition cost 123,847 Other assets 48,953 Total assets $ 268,637

Liabilities Future policy benefits and claims $ 1,626 Other liabilities 178,321 Deferred income taxes 2,459 Total liabilities 182,406 Total equity 86,231 Total liabilities and equity $ 268,637

21. STATUTORY REPORTING PRACTICES AND OTHER REGULATORY MATTERS

The Company�s insurance subsidiaries prepare statutory financial statements for regulatory purposes in accordance with accounting practices prescribed by the NAIC and the applicable state insurance department laws and regulations. These financial statements vary materially from GAAP. Statutory accounting practices include publications of the NAIC, state laws, regulations, general administrative rules as well as certain permitted accounting practices granted by the respective state insurance department. Generally, the most significant differences are that statutory financial statements do not reflect 1) deferred acquisition costs, 2) benefit liabilities that are calculated using Company estimates of expected mortality, interest, and withdrawals, 3) deferred income taxes that are not subject to statutory limits, 4) recognition of realized gains and losses on the sale of securities in the period they are sold, and 5) fixed maturities recorded at fair values, but instead at amortized cost.

178

189

Table of Contents

Statutory net income for the Company was $554.2 million, $165.5 million, and $376.3 million for the year ended December 31, 2014, 2013 and 2012, respectively. Statutory capital and surplus for the Company was $3.5 billion and $2.9 billion as of December 31, 2014 and 2013, respectively.

The Company�s insurance subsidiaries are subject to various state statutory and regulatory restrictions on the insurance subsidiaries� ability to pay dividends to Protective Life Corporation. In general, dividends up to specified levels are considered ordinary and may be paid thirty days after written notice to the insurance commissioner of the state of domicile unless such commissioner objects to the dividend prior to the expiration of such period. Dividends in larger amounts are considered extraordinary and are subject to affirmative prior approval by such commissioner. The maximum amount that would qualify as ordinary dividends to the Company from our insurance subsidiaries in 2015 is approximately $138.4 million. Additionally, as of December 31, 2014, approximately $730.1 million of consolidated shareowner�s equity, excluding net unrealized gains on investments, represented restricted net assets of the Company�s insurance subsidiaries needed to maintain the minimum capital required by the insurance subsidiaries� respective state insurance departments.

State insurance regulators and the National Association of Insurance Commissioners (�NAIC�) have adopted risk-based capital (�RBC�) requirements for life insurance companies to evaluate the adequacy of statutory capital and surplus in relation to investment and insurance risks. The requirements provide a means of measuring the minimum amount of statutory surplus appropriate for an insurance company to support its overall business operations based on its size and risk profile.

A company�s risk-based statutory surplus is calculated by applying factors and performing calculations relating to various asset, premium, claim, expense and reserve items. Regulators can then measure the adequacy of a company�s statutory surplus by comparing it to the RBC. Under specific RBC requirements, regulatory compliance is determined by the ratio of a company�s total adjusted capital, as defined by the insurance regulators, to its company action level of RBC (known as the RBC ratio), also as defined by insurance regulators. As of December 31, 2014, the Company�s total adjusted capital and company action level RBC was $3.9 billion and $687.8 million, respectively, providing an RBC ratio of approximately 562%.

Additionally, the Company has certain assets that are on deposit with state regulatory authorities and restricted from use. As of December 31, 2014, the Company�s insurance subsidiaries had on deposit with regulatory authorities, fixed maturity and short-term investments with a fair value of approximately $45.3 million.

The states of domicile of the Company�s insurance subsidiaries have adopted prescribed accounting practices that differ from the required accounting outlined in NAIC Statutory Accounting Principles (�SAP�). The insurance subsidiaries also have certain accounting practices permitted by the states of domicile that differ from those found in NAIC SAP.

Certain prescribed and permitted practices impact the statutory surplus of the Company. These practices include the non-admission of goodwill as an asset for statutory reporting and the reporting of Bank Owned Life Insurance (�BOLI�) separate account amounts at book value rather than at fair value.

The favorable (unfavorable) effects of the Company�s statutory surplus, compared to NAIC statutory surplus, from the use of these prescribed and permitted practices were as follows:

As of December 31, 2014 2013

(Dollars In Millions) Non-admission of goodwill $ (310) $ (311) Total (net) $ (310) $ (311)

The Company also has certain prescribed and permitted practices which are applied at the subsidiary level and do not have a direct impact on the statutory surplus of the Company. These practices include permission to follow the actuarial guidelines of the domiciliary state of the ceding insurer for certain captive reinsurers, accounting for the face amount of all issued and outstanding letters of credit, and a note issued by an affiliate as an asset in the statutory

179

190

Table of Contents

financial statements of certain wholly owned subsidiaries that are considered �Special Purpose Financial Captives�, and a reserve difference related to a captive insurance company.

The favorable (unfavorable) effects on the statutory surplus of the Company�s insurance subsidiaries, compared to NAIC statutory surplus, from the use of these prescribed and permitted practices were as follows:

As of December 31, 2014 2013

(Dollars In Millions) Accounting for Letters of Credit as admitted assets $ 1,735 $ 1,415 Accounting for Red Mountain Note as admitted asset $ 435 $ 365 Reserving based on state specific actuarial practices $ 112 $ 105 Reserving difference related to a captive insurance company $ (87) $ (22)

22. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company determined the fair value of its financial instruments based on the fair value hierarchy established in FASB guidance referenced in the Fair Value Measurements and Disclosures Topic which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company has adopted the provisions from the FASB guidance that is referenced in the Fair Value Measurements and Disclosures Topic for non-financial assets and liabilities (such as property and equipment, goodwill, and other intangible assets) that are required to be measured at fair value on a periodic basis. The effect on the Company�s periodic fair value measurements for non-financial assets and liabilities was not material.

The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded at fair value on the consolidated balance sheets are categorized as follows:

• Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market.

• Level 2: Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly. Level 2 inputs include the following:

a) Quoted prices for similar assets or liabilities in active markets

b) Quoted prices for identical or similar assets or liabilities in non-active markets

c) Inputs other than quoted market prices that are observable

d) Inputs that are derived principally from or corroborated by observable market data through correlation or other means.

• Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management�s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

180

191

Table of Contents

The following table presents the Company�s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2014:

Level 1 Level 2 Level 3 Total (Dollars In Thousands)

Assets: Fixed maturity securities - available-for-sale Residential mortgage-backed securities $ � $ 1,418,255 $ 3 $ 1,418,258 Commercial mortgage-backed securities � 1,177,252 � 1,177,252 Other asset-backed securities � 275,415 563,961 839,376 U.S. government-related securities 1,165,188 263,707 � 1,428,895 State, municipalities, and political subdivisions � 1,684,014 3,675 1,687,689 Other government-related securities � 20,172 � 20,172 Corporate bonds 132 26,039,963 1,325,683 27,365,778 Total fixed maturity securities - available-for-sale 1,165,320 30,878,778 1,893,322 33,937,420

Fixed maturity securities - trading Residential mortgage-backed securities � 288,114 � 288,114 Commercial mortgage-backed securities � 151,111 � 151,111 Other asset-backed securities � 105,118 169,461 274,579 U.S. government-related securities 245,563 4,898 � 250,461 State, municipalities, and political subdivisions � 325,446 � 325,446 Other government-related securities � 57,032 � 57,032 Corporate bonds � 1,447,333 24,744 1,472,077 Total fixed maturity securities - trading 245,563 2,379,052 194,205 2,818,820 Total fixed maturity securities 1,410,883 33,257,830 2,087,527 36,756,240 Equity securities 590,832 99,267 66,691 756,790 Other long-term investments (1) 119,997 106,079 44,625 270,701 Short-term investments 243,436 3,281 � 246,717 Total investments 2,365,148 33,466,457 2,198,843 38,030,448 Cash 268,286 � � 268,286 Assets related to separate accounts Variable annuity 13,157,429 � � 13,157,429 Variable universal life 834,940 � � 834,940 Total assets measured at fair value on a recurring basis $ 16,625,803 $ 33,466,457 $ 2,198,843 $ 52,291,103

Liabilities: Annuity account balances(2) $ � $ � $ 97,825 $ 97,825 Other liabilities (1) 62,146 61,046 506,343 629,535 Total liabilities measured at fair value on a recurring basis $ 62,146 $ 61,046 $ 604,168 $ 727,360

(1)Includes certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

181

192

Table of Contents

The following table presents the Company�s hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2013:

Level 1 Level 2 Level 3 Total (Dollars In Thousands)

Assets: Fixed maturity securities - available-for-sale Residential mortgage-backed securities $ � $ 1,445,040 $ 28 $ 1,445,068 Commercial mortgage-backed securities � 970,656 � 970,656 Other asset-backed securities � 326,175 545,808 871,983 U.S. government-related securities 1,211,141 296,749 � 1,507,890 State, municipalities, and political subdivisions � 1,407,154 3,675 1,410,829 Other government-related securities � 51,427 � 51,427 Corporate bonds 107 24,198,529 1,549,940 25,748,576 Total fixed maturity securities - available-for-sale 1,211,248 28,695,730 2,099,451 32,006,429

Fixed maturity securities - trading Residential mortgage-backed securities � 310,877 � 310,877 Commercial mortgage-backed securities � 158,570 � 158,570 Other asset-backed securities � 93,278 194,977 288,255 U.S. government-related securities 191,332 4,906 � 196,238 State, municipalities, and political subdivisions � 260,892 � 260,892 Other government-related securities � 57,097 � 57,097 Corporate bonds � 1,497,362 29,199 1,526,561 Total fixed maturity securities - trading 191,332 2,382,982 224,176 2,798,490 Total fixed maturity securities 1,402,580 31,078,712 2,323,627 34,804,919 Equity securities 483,482 50,927 67,979 602,388 Other long-term investments (1) 56,469 54,965 98,886 210,320 Short-term investments 131,422 1,603 � 133,025 Total investments 2,073,953 31,186,207 2,490,492 35,750,652 Cash 345,579 � � 345,579 Other assets � � � � Assets related to separate accounts Variable annuity 12,791,438 � � 12,791,438 Variable universal life 783,618 � � 783,618 Total assets measured at fair value on a recurring basis $ 15,994,588 $ 31,186,207 $ 2,490,492 $ 49,671,287

Liabilities: Annuity account balances (2) $ � $ � $ 107,000 $ 107,000 Other liabilities (1) 30,241 191,182 233,738 455,161 Total liabilities measured at fair value on a recurring basis $ 30,241 $ 191,182 $ 340,738 $ 562,161

(1)Includes certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

Determination of Fair Values

The valuation methodologies used to determine the fair values of assets and liabilities reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The Company determines the fair values of certain financial assets and financial liabilities based on quoted market prices, where available. The Company also determines certain fair values based on future cash flows discounted at the appropriate current market rate. Fair values reflect adjustments for counterparty credit quality, the Company�s credit standing, liquidity, and where appropriate, risk margins on unobservable parameters. The following is a discussion of the methodologies used to determine fair values for the financial instruments as listed in the above table.

182

193

Table of Contents

prices are first sought from third party pricing services, the remaining unpriced securities are submitted to independent brokers for non-binding prices, or lastly, securities are priced using a pricing matrix. Typical inputs used by these three pricing methods include, but are not limited to: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Third party pricing services price approximately 90% of the Company�s available-for-sale and trading fixed maturity securities. Based on the typical trading volumes and the lack of quoted market prices for available-for-sale and trading fixed maturities, third party pricing services derive the majority of security prices from observable market inputs such as recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information outlined above. If there are no recent reported trades, the third party pricing services and brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Certain securities are priced via independent non-binding broker quotations, which are considered to have no significant unobservable inputs. When using non-binding independent broker quotations, the Company obtains one quote per security, typically from the broker from which we purchased the security. A pricing matrix is used to price securities for which the Company is unable to obtain or effectively rely on either a price from a third party pricing service or an independent broker quotation.

The pricing matrix used by the Company begins with current spread levels to determine the market price for the security. The credit spreads, assigned by brokers, incorporate the issuer�s credit rating, liquidity discounts, weighted-average of contracted cash flows, risk premium, if warranted, due to the issuer�s industry, and the security�s time to maturity. The Company uses credit ratings provided by nationally recognized rating agencies.

For securities that are priced via non-binding independent broker quotations, the Company assesses whether prices received from independent brokers represent a reasonable estimate of fair value through an analysis using internal and external cash flow models developed based on spreads and, when available, market indices. The Company uses a market-based cash flow analysis to validate the reasonableness of prices received from independent brokers. These analytics, which are updated daily, incorporate various metrics (yield curves, credit spreads, prepayment rates, etc.) to determine the valuation of such holdings. As a result of this analysis, if the Company determines there is a more appropriate fair value based upon the analytics, the price received from the independent broker is adjusted accordingly. The Company did not adjust any quotes or prices received from brokers during the year ended December 31, 2014.

The Company has analyzed the third party pricing services� valuation methodologies and related inputs and has also evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs that is in accordance with the Fair Value Measurements and Disclosures Topic of the ASC. Based on this evaluation and investment class analysis, each price was classified to Level 1, 2, or 3. Most prices provided by third party pricing services are classified into Level 2 because the significant inputs used in pricing the securities are market observable and the observable inputs are corroborated by the Company. Since the matrix pricing of certain debt securities includes significant non-observable inputs, they are classified as Level 3.

Asset-Backed Securities

This category mainly consists of residential mortgage-backed securities, commercial mortgage-backed securities, and other asset-backed securities (collectively referred to as asset-backed securities or �ABS�). As of December 31, 2014, the Company held $3.4 billion of ABS classified as Level 2. These securities are priced from information provided by a third party pricing service and independent broker quotes. The third party pricing services and brokers mainly value securities using both a market and income approach to valuation. As part of this valuation process they consider the following characteristics of the item being measured to be relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, and 7) credit ratings of the securities.

After reviewing these characteristics of the ABS, the third party pricing service and brokers use certain inputs to determine the value of the security. For ABS classified as Level 2, the valuation would consist of predominantly market observable inputs such as, but not limited to: 1) monthly principal and interest payments on the underlying

183

194

Table of Contents

assets, 2) average life of the security, 3) prepayment speeds, 4) credit spreads, 5) treasury and swap yield curves, and 6) discount margin. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.

As of December 31, 2014, the Company held $733.4 million of Level 3 ABS, which included $564.0 million of other asset-backed securities classified as available-for-sale and $169.4 million of other asset-backed securities classified as trading. These securities are predominantly ARS whose underlying collateral is at least 97% guaranteed by the FFELP. As a result of the ARS market collapse during 2008, the Company prices its ARS using an income approach valuation model. As part of the valuation process the Company reviews the following characteristics of the ARS in determining the relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, 7) credit ratings of the securities, 8) liquidity premium, and 9) paydown rate.

Corporate Bonds, U.S. Government-Related Securities, States, Municipals, and Political Subdivisions, and Other Government Related Securities

As of December 31, 2014, the Company classified approximately $29.8 billion of corporate bonds, U.S. government-related securities, states, municipals, and political subdivisions, and other government-related securities as Level 2. The fair value of the Level 2 bonds and securities is predominantly priced by broker quotes and a third party pricing service. The Company has reviewed the valuation techniques of the brokers and third party pricing service and has determined that such techniques used Level 2 market observable inputs. The following characteristics of the bonds and securities are considered to be the primary relevant inputs to the valuation: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) seniority, and 4) credit ratings. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.

The brokers and third party pricing service utilize valuation models that consist of a hybrid income and market approach to valuation. The pricing models utilize the following inputs: 1) principal and interest payments, 2) treasury yield curve, 3) credit spreads from new issue and secondary trading markets, 4) dealer quotes with adjustments for issues with early redemption features, 5) liquidity premiums present on private placements, and 6) discount margins from dealers in the new issue market.

As of December 31, 2014, the Company classified approximately $1.4 billion of bonds and securities as Level 3 valuations. Level 3 bonds and securities primarily represent investments in illiquid bonds for which no price is readily available. To determine a price, the Company uses a discounted cash flow model with both observable and unobservable inputs. These inputs are entered into an industry standard pricing model to determine the final price of the security. These inputs include: 1) principal and interest payments, 2) coupon rate, 3) sector and issuer level spread over treasury, 4) underlying collateral, 5) credit ratings, 6) maturity, 7) embedded options, 8) recent new issuance, 9) comparative bond analysis, and 10) an illiquidity premium.

Equities

As of December 31, 2014, the Company held approximately $166.0 million of equity securities classified as Level 2 and Level 3. Of this total, $66.0 million represents Federal Home Loan Bank (�FHLB�) stock. The Company believes that the cost of the FHLB stock approximates fair value. The remainder of these equity securities is primarily investments in preferred stock.

184

195

Table of Contents

Other Long-Term Investments and Other Liabilities

Other long-term investments and other liabilities consist entirely of free-standing and embedded derivative financial instruments. Refer to Note 23, Derivative Financial Instruments for additional information related to derivatives. Derivative financial instruments are valued using exchange prices, independent broker quotations, or pricing valuation models, which utilize market data inputs. Excluding embedded derivatives, as of December 31, 2014, 78.8% of derivatives based upon notional values were priced using exchange prices or independent broker quotations. The remaining derivatives were priced by pricing valuation models, which predominantly utilize observable market data inputs. Inputs used to value derivatives include, but are not limited to, interest swap rates, credit spreads, interest rate and equity market volatility indices, equity index levels, and treasury rates. The Company performs monthly analysis on derivative valuations that includes both quantitative and qualitative analyses.

Derivative instruments classified as Level 1 generally include futures and options, which are traded on active exchange markets.

Derivative instruments classified as Level 2 primarily include interest rate and inflation swaps, options, and swaptions. These derivative valuations are determined using independent broker quotations, which are corroborated with observable market inputs.

Derivative instruments classified as Level 3 were embedded derivatives and include at least one significant non-observable input. A derivative instrument containing Level 1 and Level 2 inputs will be classified as a Level 3 financial instrument in its entirety if it has at least one significant Level 3 input.

The Company utilizes derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instruments may not be classified within the same fair value hierarchy level as the associated assets and liabilities. Therefore, the changes in fair value on derivatives reported in Level 3 may not reflect the offsetting impact of the changes in fair value of the associated assets and liabilities.

The embedded derivatives are carried at fair value in �other long-term investments� and �other liabilities� on the Company�s consolidated balance sheet. The changes in fair value are recorded in earnings as �Realized investment gains (losses) � Derivative financial instruments�. Refer to Note 23, Derivative Financial Instruments for more information related to each embedded derivatives gains and losses.

The fair value of the GMWB embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using multiple risk neutral stochastic equity scenarios and policyholder behavior assumptions. The risk neutral scenarios are generated using the current swap curve and projected equity volatilities and correlations. The projected equity volatilities are based on a blend of historical volatility and near-term equity market implied volatilities. The equity correlations are based on historical price observations. For policyholder behavior assumptions, expected lapse and utilization assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the National Association of Insurance Commissioners 1994 Variable Annuity MGDB Mortality Table for company experience, with attained age factors varying from 44.5% - 100%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR plus a credit spread (to represent the Company�s non-performance risk). As a result of using significant unobservable inputs, the GMWB embedded derivative is categorized as Level 3. These assumptions are reviewed on a quarterly basis.

The balance of the FIA embedded derivative is impacted by policyholder cash flows associated with the FIA product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the FIA embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the 1994 Variable Annuity MGDB mortality table modified for company experience, with attained age factors varying from 49% - 80%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company�s non-performance risk) thereafter. Policyholder

185

196

Table of Contents

assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the FIA embedded derivative is categorized as Level 3.

The balance of the indexed universal life (�IUL�) embedded derivative is impacted by policyholder cash flows associated with the IUL product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the IUL embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the SOA 2008 VBT Primary Tables modified for company experience, with attained age factors varying from 37% - 74%. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company�s non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the IUL embedded derivative is categorized as Level 3.

The Company has assumed and ceded certain blocks of policies under modified coinsurance agreements in which the investment results of the underlying portfolios inure directly to the reinsurers. As a result, these agreements contain embedded derivatives that are reported at fair value. Changes in their fair value are reported in earnings. The investments supporting these agreements are designated as �trading securities�; therefore changes in their fair value are also reported in earnings. The fair value of the embedded derivative is the difference between the statutory policy liabilities (net of policy loans) of $2.5 billion and the fair value of the trading securities of $2.8 billion. As a result, changes in the fair value of the embedded derivatives are largely offset by the changes in fair value of the related investments and each are reported in earnings. The fair value of the embedded derivative is considered a Level 3 valuation due to the unobservable nature of the policy liabilities.

Certain of the Company�s subsidiaries have entered into interest support, a yearly renewable term (�YRT�) premium support, and portfolio maintenance agreements with PLC. These agreements meet the definition of a derivative and are accounted for at fair value and are considered Level 3 valuations. The fair value of these derivatives as of December 31, 2014 was $6.1 million and is included in Other long-term investments. For information regarding realized gains on these derivatives please refer to Note 23, Derivative Financial Instruments.

The Interest Support Agreement provides that PLC will make payments to Golden Gate II if actual investment income on certain of Golden Gate II�s asset portfolios falls below a calculated investment income amount as defined in the Interest Support Agreement. The calculated investment income amount is a level of investment income deemed to be sufficient to support certain of Golden Gate II�s obligations under a reinsurance agreement with the Company, dated July 1, 2007. The derivative is valued using an internal valuation model that assumes a conservative projection of investment income under an adverse interest rate scenario and the probability that the expectation falls below the calculated investment income amount. This derivative had a fair value of $4.2 million as of December 31, 2014. The assessment of required payments from PLC under the Interest Support Agreement occurs annually. As of December 31, 2014, no payments have been triggered under this agreement.

The YRT Premium support agreement provides that PLC will make payments to Golden Gate II in the event that YRT premium rates increase. The derivative is valued using an internal valuation model. The valuation model is a probability weighted discounted cash flow model. The value is primarily a function of the likelihood and severity of future YRT premium increases. The fair value of this derivative as of December 31, 2014 was $1.7 million. As of December 31, 2014, no payments have been triggered under this agreement.

The portfolio maintenance agreements provide that PLC will make payments to Golden Gate V and WCL in the event of other-than-temporary impairments on investments that exceed defined thresholds. The derivatives are valued using an internal discounted cash flow model. The significant unobservable inputs are the projected probability and severity of credit losses used to project future cash flows on the investment portfolios. The fair value of the portfolio maintenance agreements as of December 31, 2014, was approximately $0.1 million. As of December 31, 2014, no payments have been triggered under this agreement.

186

197

Table of Contents

The Funds Withheld derivative results from a reinsurance agreement with Shades Creek where the economic performance of certain hedging instruments held by the Company is ceded to Shades Creek. The value of the Funds Withheld derivative is directly tied to the value of the hedging instruments held in the funds withheld account. The hedging instruments predominantly consist of derivative instruments the fair values of which are classified as a Level 2 measurement; as such, the fair value of the Funds Withheld derivative has been classified as a Level 2 measurement. The fair value of the Funds Withheld derivative as of December 31, 2014, was a liability of $57.3 million.

Annuity Account Balances

The Company records certain of its FIA reserves at fair value. The fair value is considered a Level 3 valuation. The FIA valuation model calculates the present value of future benefit cash flows less the projected future profits to quantify the net liability that is held as a reserve. This calculation is done using multiple risk neutral stochastic equity scenarios. The cash flows are discounted using LIBOR plus a credit spread. Best estimate assumptions are used for partial withdrawals, lapses, expenses and asset earned rate with a risk margin applied to each. These assumptions are reviewed at least annually as a part of the formal unlocking process. If an event were to occur within a quarter that would make the assumptions unreasonable, the assumptions would be reviewed within the quarter.

The discount rate for the fixed indexed annuities is based on an upward sloping rate curve which is updated each quarter. The discount rates for December 31, 2014, ranged from a one month rate of 0.30%, a 5 year rate of 2.37%, and a 30 year rate of 3.67%. A credit spread component is also included in the calculation to accommodate non-performance risk.

Separate Accounts

Separate account assets are invested in open-ended mutual funds and are included in Level 1.

187

198

Table of Contents

Valuation of Level 3 Financial Instruments

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:

Fair Value As of Valuation Unobservable Range

December 31, 2014 Technique Input (Weighted Average) (Dollars In Thousands)

Assets: Other asset-backed securities

$ 563,752 Discounted cash flow Liquidity premium Paydown rate

0.39%-1.49% (0.69%) 9.70% - 15.80% (12.08%)

Corporate bonds 1,282,864 Discounted cash flow Spread over treasury 0.33% - 7.50% (2.19%) Liabilities: Embedded derivatives - GMWB(1)

$ 25,927 Actuarial cash flow model Mortality

Lapse

44.5% to 100% of 1994 MGDB table

0.25% - 17%, depending on product/duration/funded status of

guarantee Utilization 97% - 101%

Nonperformance risk 0.12% - 0.96% Annuity account balances(2)

97,825 Actuarial cash flow model Asset earned rate Expenses

3.86% - 5.92% $88 - $102 per policy

Withdrawal rate Mortality

2.20% 49% to 80% of 1994

MGDB table Lapse 2.2% - 33.0%, depending on

duration/surrender charge period Return on assets 1.50% - 1.85% depending on

surrender charge period Nonperformance risk 0.12% - 0.96%

Embedded derivative-FIA 124,465 Actuarial cash flow model Expenses

Withdrawal rate $83 - $97 per policy

1.1% - 4.5% depending on duration and tax qualification

Mortality 49% - 80% of 1994 MGDB table

Lapse 2.5% - 40.0%, depending on duration/surrender charge period

Nonperformance risk 0.12% - 0.96%

Embedded derivative-IUL 6,691 Actuarial cash flow model Mortality 37% - 74% of 2008 VBT

Primary Tables Lapse 0.5% - 10.0%, depending on

duration/distribution channel and smoking class

Nonperformance risk 0.12% - 0.96%

(1)The fair value for the GMWB embedded derivative is presented as a net liability. Excludes modified coinsurance agreements.

(2)Represents liabilities related to fixed indexed annuities.

The chart above excludes Level 3 financial instruments that are valued using broker quotes and those which book value approximates fair value.

The Company has considered all reasonably available quantitative inputs as of December 31, 2014, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $237.2 million of financial instruments being classified as Level 3 as of December 31, 2014. Of the $237.2 million, $169.7 million are other asset-backed securities and $67.5 million are corporate bonds.

In certain cases the Company has determined that book value materially approximates fair value. As of December 31, 2014, the Company held $70.4 million of financial instruments where book value approximates fair

188

199

Table of Contents

value. Of the $70.4 million, $66.7 million represents equity securities, which are predominantly FHLB stock, and $3.7 million of other fixed maturity securities.

The following table presents the valuation method for material financial instruments included in Level 3, as well as the unobservable inputs used in the valuation of those financial instruments:

Fair Value As of Valuation Unobservable Range

December 31, 2013 Technique Input (Weighted Average) (Dollars In Thousands)

Assets: Other asset-backed securities $ 545,808 Discounted cash flow Liquidity premium

Paydown rate 1.00%-1.68%% (1.08%)

8.57% - 16.87% (12.05%) Corporate bonds 1,555,898 Discounted cash flow Spread over treasury 0.11% - 6.75% (2.06%) Embedded derivatives - GMWB(1)

93,939 Actuarial cash flow model Mortality 49% to 80% of 1994 MGDB table

Lapse 0% - 24%, depending on product/duration/funded status of

guarantee Utilization

Nonperformance risk 97% - 103%

0.15% - 1.06% Liabilities: Annuity account balances(2) $ 107,000 Actuarial cash flow model Asset earned rate

Expenses 5.37%

$88 - $102 per policy Withdrawal rate

Mortality 2.20%

49% to 80% of 1994 MGDB table

Lapse 2.2% - 33.0%, depending on duration/surrender charge period

Return on assets 1.50% - 1.85% depending on surrender charge period

Nonperformance risk 0.15% - 1.06% Embedded derivative - FIA 25,324 Actuarial cash flow model Expenses

Withdrawal rate $83 - $97 per policy

1.1% to 4.5% depending on duration and tax qualification

Mortality 49% to 80% of 1994 MGDB table

Lapse 2.5% - 40.0%, depending on duration/surrender charge period

Nonperformance risk 0.15% - 1.06%

(1)The fair value for the GMWB embedded derivative is presented as a net asset. Excludes modified coinsurance arrangements.

(2)Represents liabilities related to fixed indexed annuities.

The chart above excludes Level 3 financial instruments that are valued using broker quotes and those which book value approximates fair value.

The Company has considered all reasonably available quantitative inputs as of December 31, 2013, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $216.0 million of financial instruments being classified as Level 3 as of December 31, 2013. Of the $216.0 million, $195.0 million are other asset backed securities and $21.0 million are corporate bonds.

In certain cases the Company has determined that book value materially approximates fair value. As of December 31, 2013, the Company held $73.9 million of financial instruments where book value approximates fair value. Of the $73.9 million, $68.0 million represents equity securities, which are predominantly FHLB stock, and $3.7 million of other fixed maturity securities, and $2.2 million of other corporate bonds.

The asset-backed securities classified as Level 3 are predominantly ARS. A change in the paydown rate (the projected annual rate of principal reduction) of the ARS can significantly impact the fair value of these securities. A decrease in the paydown rate would increase the projected weighted average life of the ARS and increase the sensitivity

189

200

Table of Contents

of the ARS� fair value to changes in interest rates. An increase in the liquidity premium would result in a decrease in the fair value of the securities, while a decrease in the liquidity premium would increase the fair value of these securities.

The fair value of corporate bonds classified as Level 3 is sensitive to changes in the interest rate spread over the corresponding U.S. Treasury rate. This spread represents a risk premium that is impacted by company specific and market factors. An increase in the spread can be caused by a perceived increase in credit risk of a specific issuer and/or an increase in the overall market risk premium associated with similar securities. The fair values of corporate bonds are sensitive to changes in spread. When holding the treasury rate constant, the fair value of corporate bonds increases when spreads decrease, and decreases when spreads increases.

The fair value of the GMWB embedded derivative is sensitive to changes in the discount rate which includes the Company�s nonperformance risk, volatility, lapse, and mortality assumptions. The volatility assumption is an observable input as it is based on market inputs. The Company�s nonperformance risk, lapse, and mortality are unobservable. An increase in the three unobservable assumptions would result in a decrease in the fair value and conversely, if there is a decrease in the assumptions the fair value would increase. The fair value is also dependent on the assumed policyholder utilization of the GMWB where an increase in assumed utilization would result in an increase in the liability and conversely, if there is a decrease in the assumption, the liability would decrease.

The fair value of the FIA account balance liability is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the FIA embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and nonperformance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

The fair value of the IUL embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the IUL embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and nonperformance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

190

201

Table of Contents

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the year ended December 31, 2014, for which the Company has used significant unobservable inputs (Level 3):

Total Gains (losses)

Total Total included in Realized and Unrealized Realized and Unrealized Earnings

Gains Losses related to Included in Included in Instruments

Other Other Transfers still held at Beginning Included inComprehensive Included in Comprehensive in/out of Ending the Reporting Balance Earnings Income Earnings Income Purchases Sales Issuances Settlements Level 3 Other Balance Date

(Dollars In Thousands) Assets: Fixed maturity securities available-for-sale Residential mortgage-backed securities $ 28 $ � $ � $ � $ (1) $ � $ (24) $ � $ � $ � $ � $ 3 $ � Commercial mortgage-backed securities � � � � � � � � � � � � � Other asset-backed securities 545,808 � 36,395 (248) (8,033) � (10,064) � � � 103 563,961 � U.S. government-related securities � � � � � � � � � � � � � States, municipals, and political subdivisions 3,675 � � � � � � � � � � 3,675 � Other government-related securities � � � � � � � � � � � � � Corporate bonds 1,549,940 1,183 67,955 (2) (33,553) 139,029 (226,073) � � (162,236) (10,560) 1,325,683 � Total fixed maturity securities - available-for-sale 2,099,451 1,183 104,350 (250) (41,587) 139,029 (236,161) � � (162,236) (10,457) 1,893,322 � Fixed maturity securities - trading Residential mortgage-backed securities � 11 � � � 842 � � � (853) � � � Commercial mortgage-backed securities � � � � � � � � � � � � � Other asset-backed securities 194,977 9,507 � (5,508) � � (30,462) � � � 947 169,461 1,083 U.S. government-related securities � � � � � � � � � � � � � States, municipals and political subdivisions � � � � � � � � � � � � � Other government-related securities � � � � � � � � � � � � � Corporate bonds 29,199 1,294 � (1,098) � 5,839 (10,770) � � 4 276 24,744 (121) Total fixed maturity securities - trading 224,176 10,812 � (6,606) � 6,681 (41,232) � � (849) 1,223 194,205 962 Total fixed maturity securities 2,323,627 11,995 104,350 (6,856) (41,587) 145,710 (277,393) � � (163,085) (9,234) 2,087,527 962 Equity securities 67,979 � 1,192 � (261) 9,551 (1,119) � � (10,651) 66,691 � Other long-term investments(1) 98,886 4,979 � (59,240) � � � � � � � 44,625 (54,261) Short-term investments � � � � � � � � � � � � � Total investments 2,490,492 16,974 105,542 (66,096) (41,848) 155,261 (278,512) � � (173,736) (9,234) 2,198,843 (53,299) Total assets measured at fair value on a recurring basis $ 2,490,492 $ 16,974 $ 105,542 $ (66,096) $ (41,848) $ 155,261 $ (278,512) $ � $ � $ (173,736) $ (9,234) $ 2,198,843 $ (53,299)

Liabilities: Annuity account balances(2) $ 107,000 $ � $ � $ (4,307) $ � $ � $ � $ 685 $ 14,167 $ � $ � $ 97,825 $ � Other liabilities(1) 233,738 22,547 � (295,152) � � � � � � � 506,343 (272,605) Total liabilities measured at fair value on a recurring basis $ 340,738 $ 22,547 $ � $ (299,459) $ � $ � $ � $ 685 $ 14,167 $ � $ � $ 604,168 $ (272,605)

(1)Represents certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

202

For the year ended December 31, 2014, $31.0 million of securities were transferred into Level 3. This amount was transferred from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods, using no significant unobservable inputs, but were priced internally using significant unobservable inputs where market observable inputs were no longer available as of December 31, 2014.

For the year ended December 31, 2014, $204.7 million of securities were transferred out of Level 3. This amount was transferred to Level 2. These transfers resulted from securities that were previously valued using an internal model that utilized significant unobservable inputs but were valued internally or by independent pricing services or brokers, utilizing no significant unobservable inputs. All transfers are recognized as of the end of the reporting period.

For the year ended December 31, 2014, there were no transfers from Level 2 to Level 1.

For the year ended December 31, 2014, there were no transfers from Level 1.

191

203

Table of Contents

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the year ended December 31, 2013, for which the Company has used significant unobservable inputs (Level 3):

Total Gains (losses)

Total Total included in Realized and Unrealized Realized and Unrealized Earnings

Gains Losses related to Included in Included in Instruments

Other Other Transfers still held at Beginning Included in ComprehensiveIncluded in Comprehensive in/out of Ending the Reporting Balance Earnings Income Earnings Income Purchases Sales Issuances Settlements Level 3 Other Balance Date

(Dollars In Thousands) Assets: Fixed maturity securities available-for-sale Residential mortgage-backed securities $ 4 $ � $ 1,310 $ � $ (338) $ 14,349 $ (23) $ � $ � $ (15,287) $ 13 $ 28 $ � Commercial mortgage-backed securities � � � � � � � � � � � Other asset-backed securities 596,143 � 44,620 (58,937) 24,931 (62,760) � � 1,227 584 545,808 � U.S. government-related securities � � � � � � � � � � � � � States, municipals, and political subdivisions 4,275 � � � � � (600) � � � � 3,675 � Other government-related securities 20,011 � 2 � (3) � (20,000) � � � (10) � � Corporate bonds 167,892 116 8,310 � (20,118) 736,012 (67,431) � � 726,760 (1,601) 1,549,940 � Total fixed maturity securities - available-for-sale 788,325 116 54,242 � (79,396) 775,292 (150,814) � � 712,700 (1,014) 2,099,451 � Fixed maturity securities - trading � � � (1) � 1,582 (72) � � (1,494) (15) � � Residential mortgage-backed securities Commercial mortgage-backed securities � � � � � � � � � � � � � Other asset-backed securities 70,535 8,785 � (5,947) � 147,224 (29,344) � � 2,210 1,514 194,977 3,588 U.S. government-related securities � � � � � � � � � � � � States, municipals and political subdivisions � � � (123) � 3,500 � � � (3,377) � � � Other government-related securities � � � � � � � � � � � � � Corporate bonds 115 1 � (102) � 4,880 (17) � � 24,312 10 29,199 (5) Total fixed maturity securities - trading 70,650 8,786 � (6,173) � 157,186 (29,433) � � 21,651 1,509 224,176 3,583 Total fixed maturity securities 858,975 8,902 54,242 (6,173) (79,396) 932,478 (180,247) � � 734,351 495 2,323,627 3,583 Equity securities 65,527 � � � � 2,452 � � � � 67,979 � Other long-term investments(1) 48,655 100,441 � (16,117) � � � � � � (34,093) 98,886 84,324 Short-term investments � � � � � � � � � � � � � Total investments 973,157 109,343 54,242 (22,290) (79,396) 934,930 (180,247) � � 734,351 (33,598) 2,490,492 87,907 Total assets measured at fair value on a recurring basis $ 973,157 $ 109,343 $ 54,242 $ (22,290) $ (79,396) $ 934,930 $ (180,247) $ � $ � $ 734,351 $ (33,598) $ 2,490,492 $ 87,907

Liabilities: Annuity account balances(2) $ 129,468 $ � $ � $ (8,029) $ � $ � $ � $ 406 $ 30,903 $ � $ � $ 107,000 $ � Other liabilities(1) 611,437 295,910 � (52,716) � � � � � � 134,505 233,738 242,411 Total liabilities measured at fair value on a recurring basis $ 740,905 $ 295,910 $ � $ (60,745) $ � $ � $ � $ 406 $ 30,903 $ � $ 134,505 $ 340,738 $ 242,411

(1)Represents certain freestanding and embedded derivatives.

(2)Represents liabilities related to fixed indexed annuities.

204

For the year ended December 31, 2013, $771.6 million of securities were transferred into Level 3. This amount was transferred from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods, using no significant unobservable inputs, but were priced internally using significant unobservable inputs where market observable inputs were no longer available as of December 31, 2013.

For the year ended December 31, 2013, $37.2 million of securities were transferred out of Level 3. This amount was transferred into Level 2. These transfers resulted from securities that were previously valued using an internal model that utilized significant unobservable inputs but were valued internally or by independent pricing services or brokers, utilizing no significant unobservable inputs. All transfers are recognized as of the end of the reporting period.

For the year ended December 31, 2013, there were no transfers from Level 2 to Level 1.

For the year ended December 31, 2013, there were no transfers from Level 1.

Total realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either realized investment gains (losses) within the consolidated statements of income (loss) or other comprehensive income (loss) within shareowners� equity based on the appropriate accounting treatment for the item.

192

205

Table of Contents

Purchases, sales, issuances, and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily relates to purchases and sales of fixed maturity securities and issuances and settlements of fixed indexed annuities.

The Company reviews the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur. The asset transfers in the table(s) above primarily related to positions moved from Level 3 to Level 2 as the Company determined that certain inputs were observable.

The amount of total gains (losses) for assets and liabilities still held as of the reporting date primarily represents changes in fair value of trading securities and certain derivatives that exist as of the reporting date and the change in fair value of fixed indexed annuities.

Estimated Fair Value of Financial Instruments

The carrying amounts and estimated fair values of the Company�s financial instruments as of the periods shown below are as follows:

As of December 31, 2014 2013

Fair Value Carrying Carrying Level Amounts Fair Values Amounts Fair Values

(Dollars In Thousands) Assets: Mortgage loans on real estate 3 $ 5,133,780 $ 5,524,059 $ 5,493,492 $ 5,956,133 Policy loans 3 1,758,237 1,758,237 1,815,744 1,815,744 Fixed maturities, held-to-maturity(1) 3 435,000 458,422 365,000 335,676

Liabilities: Stable value product account balances 3 $ 1,959,488 $ 1,973,624 $ 2,559,552 $ 2,566,209 Annuity account balances 3 10,950,729 10,491,775 11,125,253 10,639,637

Debt: Non-recourse funding obligations(2) 3 $ 1,527,752 $ 1,753,183 $ 1,495,448 $ 1,272,425

Except as noted below, fair values were estimated using quoted market prices.

(1) Security purchased from unconsolidated subsidiary, Red Mountain LLC.

(2) Of this carrying amount $435.0 million, fair value of $461.4 million, as of December 31, 2014, and $365.0 million, fair value of

$321.5 million, as of December 31, 2013, relates to non-recourse funding obligations issued by Golden Gate V.

Fair Value Measurements

Mortgage Loans on Real Estate

The Company estimates the fair value of mortgage loans using an internally developed model. This model includes inputs derived by the Company based on assumed discount rates relative to the Company�s current mortgage loan lending rate and an expected cash flow analysis based on a review of the mortgage loan terms. The model also contains the Company�s determined representative risk adjustment assumptions related to credit and liquidity risks.

Policy Loans

The Company believes the fair value of policy loans approximates book value. Policy loans are funds provided to policy holders in return for a claim on the policy. The funds provided are limited to the cash surrender value of the underlying policy. The nature of policy loans is to have a negligible default risk as the loans are fully collateralized by

206

193

207

Table of Contents

the value of the policy. Policy loans do not have a stated maturity and the balances and accrued interest are repaid either by the policyholder or with proceeds from the policy. Due to the collateralized nature of policy loans and unpredictable timing of repayments, the Company believes the fair value of policy loans approximates carrying value.

Fixed Maturities, Held-to-Maturity

The Company estimates the fair value of its fixed maturity, held-to-maturity using internal discounted cash flow models. The discount rates used in the model were based on a current market yield for similar financial instruments.

Stable Value Product and Annuity Account Balances

The Company estimates the fair value of stable value product account balances and annuity account balances using models based on discounted expected cash flows. The discount rates used in the models were based on a current market rate for similar financial instruments.

Non-Recourse Funding Obligations

The Company estimates the fair value of its non-recourse funding obligations using internal discounted cash flow models. The discount rates used in the model were based on a current market yield for similar financial instruments.

23. DERIVATIVE FINANCIAL INSTRUMENTS

Types of Derivative Instruments and Derivative Strategies

The Company utilizes a risk management strategy that incorporates the use of derivative financial instruments to reduce exposure to certain risks, including but not limited to, interest rate risk, inflation risk, currency exchange risk, volatility risk, and equity market risk. These strategies are developed through the Company�s analysis of data from financial simulation models and other internal and industry sources, and are then incorporated into the Company�s risk management program.

Derivative instruments expose the Company to credit and market risk and could result in material changes from period to period. The Company attempts to minimize its credit risk by entering into transactions with highly rated counterparties. The Company manages the market risk by establishing and monitoring limits as to the types and degrees of risk that may be undertaken. The Company monitors its use of derivatives in connection with its overall asset/liability management programs and risk management strategies. In addition, all derivative programs are monitored by our risk management department.

Derivatives Related to Interest Rate Risk Management

Derivative instruments that are used as part of the Company�s interest rate risk management strategy include interest rate swaps, interest rate futures, interest rate caps, and interest rate swaptions. The Company�s inflation risk management strategy involves the use of swaps that requires the Company to pay a fixed rate and receive a floating rate that is based on changes in the Consumer Price Index (�CPI�).

Derivatives Related to Risk Mitigation of Variable Annuity Contracts

The Company may use the following types of derivative contracts to mitigate its exposure to certain guaranteed benefits related to VA contracts and fixed indexed annuities:

• Foreign Currency Futures

208

• Variance Swaps

• Interest Rate Futures

• Equity Options

• Equity Futures

194

209

Table of Contents

• Credit Derivatives

• Interest Rate Swaps

• Interest Rate Swaptions

• Volatility Futures

• Volatility Options

• Funds Withheld Agreement

• Total Return Swaps

Other Derivatives

The Company and certain of its subsidiaries have derivatives with PLC. These derivatives consist of an interest support agreement, a YRT premium support agreement, and portfolio maintenance agreements with PLC.

The Company has a funds withheld account that consists of various derivative instruments held by us that is used to hedge the GMWB and GMDB riders. The economic performance of derivatives in the funds withheld account is ceded to Shades Creek. The funds withheld account is accounted for as a derivative financial instrument.

Accounting for Derivative Instruments

The Company records its derivative financial instruments in the consolidated condensed balance sheet in �other long-term investments� and �other liabilities� in accordance with GAAP, which requires that all derivative instruments be recognized in the balance sheet at fair value. The change in the fair value of derivative financial instruments is reported either in the statement of income or in other comprehensive income (loss), depending upon whether it qualified for and also has been properly identified as being part of a hedging relationship, and also on the type of hedging relationship that exists.

For a derivative financial instrument to be accounted for as an accounting hedge, it must be identified and documented as such on the date of designation. For cash flow hedges, the effective portion of their realized gain or loss is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged item impacts earnings. Any remaining gain or loss, the ineffective portion, is recognized in current earnings. For fair value hedge derivatives, their gain or loss as well as the offsetting loss or gain attributable to the hedged risk of the hedged item is recognized in current earnings. Effectiveness of the Company�s hedge relationships is assessed on a quarterly basis.

The Company reports changes in fair values of derivatives that are not part of a qualifying hedge relationship through earnings in the period of change. Changes in the fair value of derivatives that are recognized in current earnings are reported in �Realized investment gains (losses) - Derivative financial instruments�.

Derivative Instruments Designated and Qualifying as Hedging Instruments

Cash-Flow Hedges

• In connection with the issuance of inflation-adjusted funding agreements, the Company has entered into swaps to essentially convert the floating CPI-linked interest rate on these agreements to a fixed rate. The Company pays a fixed rate on the swap and receives a floating rate primarily determined by the period�s change in the CPI. The amounts that are received on the swaps are almost equal to the amounts that are paid on the agreements.

Derivative Instruments Not Designated and Not Qualifying as Hedging Instruments

210

The Company uses various other derivative instruments for risk management purposes that do not qualify for hedge accounting treatment. Changes in the fair value of these derivatives are recognized in earnings during the period of change.

195

211

Table of Contents

Derivatives Related to Variable Annuity Contracts

• The Company uses equity, interest rate, currency, and volatility futures to mitigate the risk related to certain guaranteed minimum benefits, including GMWB, within its VA products. In general, the cost of such benefits varies with the level of equity and interest rate markets, foreign currency levels, and overall volatility. No volatility future positions were held as of December 31, 2014.

• The Company uses equity options, volatility swaps, and volatility options to mitigate the risk related to certain guaranteed minimum benefits, including GMWB, within its VA products. In general, the cost of such benefits varies with the level of equity markets and overall volatility. No volatility option positions were held as of December 31, 2014.

• The Company uses interest rate swaps and interest rate swaptions to mitigate the risk related to certain guaranteed minimum benefits, including GMWB, within its VA products.

• The Company markets certain VA products with a GMWB rider. The GMWB component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.

• The Company has a funds withheld account that consists of various derivative instruments held by the Company that are used to hedge the GMWB and GMDB riders. The economic performance of derivatives in the funds withheld account is ceded to Shades Creek. The funds withheld account is accounted for as a derivative financial instrument.

Derivatives Related to Fixed Annuity Contracts

• The Company uses equity and volatility futures to mitigate the risk within its fixed indexed annuity products. In general, the cost of such benefits varies with the level of equity and overall volatility.

• The Company uses equity options to mitigate the risk within its fixed indexed annuity products. In general, the cost of such benefits varies with the level of equity markets.

• The Company markets certain fixed indexed annuity products. The FIA component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.

Derivatives Related to Indexed Universal Life Contracts

• The Company uses equity futures and options to mitigate the risk within its IUL contracts. In general, the cost of such benefits varies with the level of equity markets.

• The Company markets certain IUL products. The IUL component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.

Other Derivatives

• The Company uses certain interest rate swaps to mitigate the price volatility of fixed maturities. None of these positions were held as of December 31, 2014.

212

• The Company and certain of its subsidiaries have an interest support agreement, YRT premium support agreement, and two portfolio maintenance agreements with PLC.

• The Company uses various swaps and other types of derivatives to manage risk related to other exposures.

• The Company is involved in various modified coinsurance which contain embedded derivatives. Changes in their fair value are recorded in current period earnings. The investment portfolios that

196

213

Table of Contents

support the related modified coinsurance reserves had fair value changes which substantially offset the gains or losses on these embedded derivatives.

The following table sets forth realized investments gains and losses for the periods shown:

Realized investment gains (losses) - derivative financial instruments

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Derivatives related to variable annuity contracts: Interest rate futures - VA $ 27,801 $ (31,216) $ 21,138 Equity futures - VA (26,104) (52,640) (50,797) Currency futures - VA 14,433 (469) (2,763) Volatility futures - VA � � (132) Variance swaps - VA (744) (11,310) (11,792) Equity options - VA (41,216) (95,022) (37,370) Volatility options- VA � (115) � Interest rate swaptions - VA (22,280) 1,575 (2,260) Interest rate swaps - VA 214,164 (157,408) 3,264 Embedded derivative - GMWB (119,844) 162,737 (22,120) Funds withheld derivative 47,792 71,862 � Total derivatives related to variable annuity contracts 94,002 (112,006) (102,832) Derivatives related to FIA contracts: Embedded derivative- FIA (16,932) (942) � Equity futures- FIA 870 173 � Volatility futures- FIA 20 (5) � Equity options- FIA 9,906 1,866 � Total derivatives related to FIA contracts (6,136) 1,092 � Derivatives related to IUL contracts: Embedded derivative- IUL (8) � � Equity futures - IUL 15 � � Equity options - IUL 150 � � Total derivatives related to IUL contracts 157 � � Embedded derivative - Modco reinsurance treaties (105,276) 205,176 (132,816) Interest rate swaps � 2,985 (87) Interest rate caps � � (2,666) Derivatives with PLC(1) 4,085 (15,072) 10,664 Other derivatives (324) (14) (79) Total realized gains (losses) - derivatives $ (13,492) $ 82,161 $ (227,816)

(1) These derivatives include an interest support, YRT premium support, and portfolio maintenance agreements between certain of the Company�s subsidiaries and PLC.

197

214

Table of Contents

The following table sets forth realized investments gains and losses for the Modco trading portfolio that is included in realized investment gains (losses) � all other investments:

Realized investment gains (losses) - all other investments

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Modco trading portfolio(1) $ 142,016 $ (178,134) $ 177,986

(1) The Company elected to include the use of alternate disclosures for trading activities.

The following tables present the components of the gain or loss on derivatives that qualify as a cash flow hedging relationship:

Gain (Loss) on Derivatives in Cash Flow Relationship

Amount and Location of Gains (Losses)

Reclassified from Amount and Location of Amount of Gains (Losses) Accumulated Other (Losses) Recognized in

Deferred in Comprehensive Income Income (Loss) on Accumulated Other (Loss) into Income (Loss) Derivatives

Comprehensive Income (Effective Portion) (Ineffective Portion) (Loss) on Derivatives Benefits and settlement Realized investment

(Effective Portion) expenses gains (losses) (Dollars In Thousands)

For The Year Ended December 31, 2014 Inflation $ (4) $ (1,777) $ (223) Total $ (4) $ (1,777) $ (223)

For The Year Ended December 31, 2013 Inflation 1,130 $ (2,349) $ (190) Total $ 1,130 $ (2,349) $ (190)

198

215

Table of Contents

The table below presents information about the nature and accounting treatment of the Company�s primary derivative financial instruments and the location in and effect on the consolidated financial statements for the periods presented below:

As of December 31, 2014 2013

Notional Fair Notional Fair Amount Value Amount Value

(Dollars In Thousands) Other long-term investments Derivatives not designated as hedging instruments: Interest rate swaps $ 1,550,000 $ 50,743 $ 200,000 $ 1,961 Derivatives with PLC(1) 1,497,010 6,077 1,464,164 1,993 Embedded derivative - Modco reinsurance treaties 25,760 1,051 80,376 1,517 Embedded derivative - GMWB 1,302,895 37,497 1,921,443 95,376 Interest rate futures 27,977 938 Equity futures 26,483 427 3,387 111 Currency futures 197,648 2,384 14,338 321 Equity options 1,921,167 163,212 1,376,205 78,277 Interest rate swaptions 625,000 8,012 625,000 30,291 Other 242 360 425 473

$ 7,174,182 $ 270,701 $ 5,685,338 $ 210,320 Other liabilities Cash flow hedges: Inflation $ 40,469 $ 142 $ 182,965 $ 1,865 Derivatives not designated as hedging instruments: Interest rate swaps 275,000 3,599 1,230,000 153,322 Variance swaps � � 1,500 1,744 Embedded derivative - Modco reinsurance treaties 2,562,848 311,727 2,578,590 206,918 Funds withheld derivative 1,233,424 57,305 991,568 34,251 Embedded derivative - GMWB 1,702,899 63,460 104,180 1,496 Embedded derivative- FIA 749,933 124,465 244,424 25,324 Embedded derivative- IUL 12,019 6,691 � � Interest rate futures � � 322,902 5,221 Equity futures 385,256 15,069 164,595 6,595 Currency futures � � 118,008 840 Equity options 699,295 47,077 257,065 17,558 Other � � 230 27

$ 7,661,143 $ 629,535 $ 6,196,027 $ 455,161

(1) These derivatives include an interest support, YRT premium support, and portfolio maintenance agreements between certain of the Company�s subsidiaries and PLC.

Based on the expected cash flows of the underlying hedged items, the Company expects to reclassify $0.1 million out of accumulated other comprehensive income (loss) into earnings during the next twelve months.

24. OFFSETTING OF ASSETS AND LIABILITIES

Certain of the Company�s derivative instruments are subject to enforceable master netting arrangements that provide for the net settlement of all derivative contracts between the Company and a counterparty in the event of default or upon the occurrence of certain termination events. Collateral support agreements associated with each master netting arrangement provide that the Company will receive or pledge financial collateral in the event either minimum thresholds, or in certain cases ratings levels, have been reached. Additionally, certain of the Company�s repurchase

199

216

Table of Contents

agreements provide for net settlement on termination of the agreement. Refer to Note 12, Debt and Other Obligations for details of the Company�s repurchase agreement programs.

The tables below present the derivative instruments by assets and liabilities for the Company as of December 31, 2014:

Net Amounts Gross of Assets Gross Amounts Not Offset

Amounts Presented in in the Statement of Gross Offset in the the Financial Position

Amounts of Statement of Statement of Cash Recognized Financial Financial Financial Collateral

Assets Position Position Instruments Received Net Amount (Dollars In Thousands)

Offsetting of Derivative Assets Derivatives: Free-Standing derivatives $ 225,716 $ � $ 225,716 $ 53,612 $ 73,935 $ 98,169 Total derivatives, subject to a master netting arrangement or similar arrangement 225,716 � 225,716 53,612 73,935 98,169 Derivatives not subject to a master netting arrangement or similar arrangement Embedded derivative - Modco reinsurance treaties 1,051 � 1,051 � � 1,051 Embedded derivative - GMWB 37,497 � 37,497 � � 37,497 Derivatives with PLC 6,077 � 6,077 � � 6,077 Other 360 � 360 � � 360 Total derivatives, not subject to a master netting arrangement or similar arrangement 44,985 � 44,985 � � 44,985 Total derivatives 270,701 � 270,701 53,612 73,935 143,154 Total Assets $ 270,701 $ � $ 270,701 $ 53,612 $ 73,935 $ 143,154

200

217

Table of Contents

Net Amounts Gross of Liabilities Gross Amounts Not Offset

Amounts Presented in in the Statement of Gross Offset in the the Financial Position

Amounts of Statement of Statement of Cash Recognized Financial Financial Financial Collateral Liabilities Position Position Instruments Paid Net Amount

(Dollars In Thousands) Offsetting of Derivative Liabilities Derivatives: Free-Standing derivatives $ 65,887 $ � $ 65,887 $ 53,612 $ 12,258 $ 17 Total derivatives, subject to a master netting arrangement or similar arrangement 65,887 � 65,887 53,612 12,258 17 Derivatives not subject to a master netting arrangement or similar arrangement Embedded derivative - Modco reinsurance treaties 311,727 � 311,727 � � 311,727 Funds withheld derivative 57,305 � 57,305 � � 57,305 Embedded derivative - GMWB 63,460 � 63,460 � � 63,460 Embedded derivative - FIA 124,465 � 124,465 � � 124,465 Embedded derivative - IUL 6,691 � 6,691 � � 6,691 Total derivatives, not subject to a master netting arrangement or similar arrangement 563,648 � 563,648 � � 563,648 Total derivatives 629,535 � 629,535 53,612 12,258 563,665 Repurchase agreements(1) 50,000 � 50,000 � � 50,000 Total Liabilities $ 679,535 $ � $ 679,535 $ 53,612 $ 12,258 $ 613,665

(1) Borrowings under repurchase agreements are for a term less than 90 days.

The tables below present the derivative instruments by assets and liabilities for the Company as of December 31, 2013.

Net Amounts Gross of Assets Gross Amounts Not Offset

Amounts Presented in in the Statement of Gross Offset in the the Financial Position

Amounts of Statement of Statement of Cash Recognized Financial Financial Financial Collateral

Assets Position Position Instruments Received Net Amount (Dollars In Thousands)

Offsetting of Derivative Assets Derivatives: Free-Standing derivatives $ 110,983 $ � $ 110,983 $ 52,487 $ 10,700 $ 47,796 Embedded derivative - Modco reinsurance treaties 1,517 � 1,517 � � 1,517 Embedded derivative - GMWB 95,376 � 95,376 � � 95,376 Total derivatives, subject to a master netting arrangement or similar arrangement 207,876 � 207,876 52,487 10,700 144,689 Total derivatives, not subject to a master netting arrangement or similar arrangement 2,444 � 2,444 � � 2,444 Total derivatives 210,320 � 210,320 52,487 10,700 147,133 Total Assets $ 210,320 $ � $ 210,320 $ 52,487 $ 10,700 $ 147,133

201

218

Table of Contents

Net Amounts Gross of Liabilities Gross Amounts Not Offset

Amounts Presented in in the Statement of Gross Offset in the the Financial Position

Amounts of Statement of Statement of Cash Recognized Financial Financial Financial Collateral Liabilities Position Position Instruments Paid Net Amount

(Dollars In Thousands) Offsetting of Derivative Liabilities Derivatives: Free-Standing derivatives $ 187,172 $ � $ 187,172 $ 52,487 $ 98,359 $ 36,326 Embedded derivative - Modco reinsurance treaties 206,918 � 206,918 � � 206,918 Funds withheld derivative 34,251 � 34,251 � � 34,251 Embedded derivative - GMWB 1,496 � 1,496 � � 1,496 Embedded derivative - FIA 25,324 � 25,324 � � 25,324 Total derivatives, subject to a master netting arrangement or similar arrangement 455,161 � 455,161 52,487 98,359 304,315 Total derivatives, not subject to a master netting arrangement or similar arrangement � � � � � � Total derivatives 455,161 � 455,161 52,487 98,359 304,315 Repurchase agreements(1) 350,000 � 350,000 � � 350,000 Total Liabilities $ 805,161 $ � $ 805,161 $ 52,487 $ 98,359 $ 654,315

(1) Borrowings under repurchase agreements are for a term less than 90 days.

25. OPERATING SEGMENTS

The Company has several operating segments each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. The Company periodically evaluates its operating segments, as prescribed in the ASC Segment Reporting Topic, and makes adjustments to its segment reporting as needed. A brief description of each segment follows.

• The Life Marketing segment markets fixed UL, IUL, VUL, BOLI, and level premium term insurance (�traditional�) products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, and independent marketing organizations.

• The Acquisitions segment focuses on acquiring, converting, and servicing policies acquired from other companies. The segment�s primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the segment�s acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. Policies acquired through the Acquisitions segment are typically blocks of business where no new policies are being marketed. Therefore earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage unless new acquisitions are made.

• The Annuities segment markets fixed and VA products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.

• The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. The segment also issues funding agreements to the FHLB, and markets GICs to 401(k) and other qualified retirement savings plans. Additionally, the Company has contracts outstanding pursuant to a funding agreement-backed notes program registered with the SEC which offered notes to both institutional and retail investors.

• The Asset Protection segment markets extended service contracts and credit life and disability insurance to protect consumers� investments in automobiles and recreational vehicles. In addition, the segment

202

219

Table of Contents

markets a guaranteed asset protection (�GAP�) product. GAP coverage covers the difference between the loan pay-off amount and an asset�s actual cash value in the case of a total loss.

• The Corporate and Other segment primarily consists of net investment income not assigned to the segments above (including the impact of carrying liquidity) and expenses not attributable to the segments above. This segment includes earnings from several non-strategic or runoff lines of business, various investment-related transactions, the operations of several small subsidiaries, and the repurchase of non-recourse funding obligations.

The Company uses the same accounting policies and procedures to measure segment operating income (loss) and assets as it uses to measure consolidated net income and assets. Segment operating income (loss) is income before income tax, excluding realized gains and losses on investments and derivatives net of the amortization related to DAC, VOBA, and benefits and settlement expenses. Operating earnings exclude changes in the GMWB embedded derivatives (excluding the portion attributed to economic cost), realized and unrealized gains (losses) on derivatives used to hedge the VA product, actual GMWB incurred claims and the related amortization of DAC attributed to each of these items.

Segment operating income (loss) represents the basis on which the performance of the Company�s business is internally assessed by management. Premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC/VOBA are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Realized investment gains (losses) and other operating expenses are allocated to the segments in a manner that most appropriately reflects the operations of that segment. During the year ended December 31, 2013, the Company began allocating realized gains and losses to certain of its segments to better reflect the economics of the investments supporting those segments. This change had no impact to segment operating income. Investments and other assets are allocated based on statutory policy liabilities net of associated statutory policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable.

There were no significant intersegment transactions during the year ended December 31, 2014, 2013, and 2012.

203

220

Table of Contents

The following tables summarize financial information for the Company�s segments:

For The Year Ended December 31, 2014 2013 2012

(Dollars In Thousands) Revenues Life Marketing $ 1,421,795 $ 1,324,409 $ 1,233,654 Acquisitions 1,720,179 1,186,579 1,064,295 Annuities 785,176 569,004 610,489 Stable Value Products 127,708 122,974 123,274 Asset Protection 305,396 296,782 294,146 Corporate and Other 103,953 104,922 130,202 Total revenues $ 4,464,207 $ 3,604,670 $ 3,456,060 Segment Operating Income (Loss) Life Marketing $ 116,875 $ 106,812 $ 102,114 Acquisitions 254,021 154,003 171,060 Annuities 204,015 166,278 117,778 Stable Value Products 73,354 80,561 60,329 Asset Protection 26,274 20,148 9,765 Corporate and Other (99,048) (74,620) 1,119 Total segment operating income 575,491 453,182 462,165 Realized investment (losses) gains - investments(1) 151,035 (140,236) 188,729 Realized investment (losses) gains - derivatives 12,263 109,553 (191,315) Income tax expense (246,838) (130,897) (151,043) Net income $ 491,951 $ 291,602 $ 308,536

Derivative gains (losses)(3) $ (13,492) $ 82,161 $ (227,816) Less: VA GMWB economic cost (25,755) (27,392) (36,501) Realized investment gains (losses)- derivatives $ 12,263 $ 109,553 $ (191,315)

Net investment income Life Marketing $ 553,006 $ 521,219 $ 486,374 Acquisitions 874,653 617,298 550,334 Annuities 465,849 468,329 504,342 Stable Value Products 107,170 123,798 128,239 Asset Protection 18,830 19,046 19,698 Corporate and Other 78,505 86,498 100,351 Total net investment income $ 2,098,013 $ 1,836,188 $ 1,789,338

Amortization of DAC and VOBA Life Marketing $ 175,807 $ 25,774 $ 45,079 Acquisitions 60,031 72,762 77,251 Annuities 47,448 31,498 45,319 Stable Value Products 380 398 947 Asset Protection 24,169 23,603 22,569 Corporate and Other 485 625 1,018 Total amortization of DAC and VOBA $ 308,320 $ 154,660 $ 192,183

(1) Includes credit related other-than-temporary impairments of $7.3 million, $22.4 million, and $58.1 million for the year ended December 31, 2014, 2013, and 2012, respectively.

(2)Includes realized investment gains (losses) before related amortization.

(3)Includes realized gains (losses) on derivatives before the VA GMWB economic cost.

204

221

Table of Contents

Operating Segment Assets As of December 31, 2014 (Dollars In Thousands)

Life Stable Value Marketing Acquisitions Annuities Products

Investments and other assets $ 13,858,491 $ 19,858,284 $ 20,678,948 $ 1,958,867 Deferred policy acquisition costs and value of business acquired 1,973,156 600,482 539,965 621 Goodwill � 29,419 � � Total assets $ 15,831,647 $ 20,488,185 $ 21,218,913 $ 1,959,488

Asset Corporate Total Protection and Other Adjustments Consolidated

Investments and other assets $ 832,887 $ 9,557,226 $ 14,792 $ 66,759,495 Deferred policy acquisition costs and value of business acquired 40,503 319 � 3,155,046 Goodwill 48,158 � � 77,577 Total assets $ 921,548 $ 9,557,545 $ 14,792 $ 69,992,118

Operating Segment Assets As of December 31, 2013 (Dollars In Thousands)

Life Stable Value Marketing Acquisitions Annuities Products

Investments and other assets $ 13,135,914 $ 20,188,321 $ 20,029,310 $ 2,558,551 Deferred policy acquisition costs and value of business acquired 2,071,470 799,255 554,974 1,001 Goodwill � 32,517 � � Total assets $ 15,207,384 $ 21,020,093 $ 20,584,284 $ 2,559,552

Asset Corporate Total Protection and Other Adjustments Consolidated

Investments and other assets $ 777,387 $ 8,006,256 $ 16,762 $ 64,712,501 Deferred policy acquisition costs and value of business acquired 49,276 646 � 3,476,622 Goodwill 48,158 � � 80,675 Total assets $ 874,821 $ 8,006,902 $ 16,762 $ 68,269,798

205

222

Table of Contents

26. CONSOLIDATED QUARTERLY RESULTS � UNAUDITED

The Company�s unaudited consolidated quarterly operating data for the year ended December 31, 2014 and 2013 is presented below. In the opinion of management, all adjustments (consisting only of normal recurring items) necessary for a fair statement of quarterly results have been reflected in the following data. It is also management�s opinion, however, that quarterly operating data for insurance enterprises are not necessarily indicative of results that may be expected in succeeding quarters or years. In order to obtain a more accurate indication of performance, there should be a review of operating results, changes in shareowners� equity, and cash flows for a period of several quarters.

First Second Third Fourth Quarter Quarter Quarter Quarter

(Dollars In Thousands) 2014 Premiums and policy fees $ 812,323 $ 848,183 $ 755,300 $ 867,263 Reinsurance ceded (333,506) (348,255) (283,104) (430,878) Net of reinsurance ceded 478,817 499,928 472,196 436,385 Net investment income 514,037 525,576 532,861 525,539 Realized investment gains (losses) 30,981 42,386 39,299 71,869 Other income 65,514 71,296 72,404 85,119 Total revenues 1,089,349 1,139,186 1,116,760 1,118,912 Total benefits and expenses 937,738 966,571 932,640 888,469 Income before income tax 151,611 172,615 184,120 230,443 Income tax expense 49,062 56,572 62,287 78,917 Net income $ 102,549 $ 116,043 $ 121,833 $ 151,526

2013 Premiums and policy fees $ 723,200 $ 752,752 $ 653,664 $ 837,706 Reinsurance ceded (325,840) (396,777) (277,628) (387,192) Net of reinsurance ceded 397,360 355,975 376,036 450,514 Net investment income 439,012 447,064 434,772 515,340 Realized investment gains (losses) (5,223) (47,636) 4,263 (13,227) Other income 54,434 60,638 65,523 69,825 Total revenues 885,583 816,041 880,594 1,022,452 Total benefits and expenses 775,769 737,114 767,239 902,049 Income before income tax 109,814 78,927 113,355 120,403 Income tax expense 35,936 25,923 37,107 31,931 Net income $ 73,878 $ 53,004 $ 76,248 $ 88,472

27. SUBSEQUENT EVENTS

On February 1, 2015, PLC announced the completion of the acquisition of PLC by Dai-ichi Life in accordance with the terms of the previously announced Agreement and Plan of Merger dated June 3, 2014, among PLC, Dai-ichi Life, and DL Investment (Delaware), Inc., a wholly owned subsidiary of Dai-ichi Life. As a result of the merger, each outstanding share of common stock of PLC was converted into the right to receive the Per Share Merger Consideration in cash, and PLC has become a wholly owned subsidiary of Dai-ichi Life, see also Note 5, Dai-ichi Merger. PLC�s common stock has ceased trading, and was delisted from the New York Stock Exchange on February 13, 2015.

The Company has evaluated the effects of events subsequent to December 31, 2014, and through the date we filed our consolidated financial statements with the United States Securities and Exchange Commission. All accounting and disclosure requirements related to subsequent events are included in our consolidated financial statements.

206

223

Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareowner of

Protective Life Insurance Company

In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Protective Life Insurance Company and its subsidiaries at December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the accompanying index appearing under Item 15 (2) present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company�s management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in �Management�s Report on Internal Controls Over Financial Reporting� appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on the Company�s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 5 to the consolidated financial statements, the Company�s parent, Protective Life Corporation, was acquired on February 1, 2015 by The Dai-ichi Life Insurance Company, Limited. After completion of the acquisition, the Company is an ultimate wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited.

A company�s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company�s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company�s assets that could have a material effect on the financial statements.

207

224

Table of Contents

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Birmingham, Alabama

March 24, 2015

208

225

Table of Contents

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Disclosure Controls and Procedures

In order to ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized, and reported on a timely basis, the Company�s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the �Exchange Act�)), except as otherwise noted below. Based on their evaluation as of the end of the period covered by this Form 10-K, the Company�s Chief Executive Officer and Chief Financial Officer have concluded that the Company�s disclosure controls and procedures were effective. It should be noted that any system of controls, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system�s objectives will be met. Further, the design of any control system is based in part upon certain judgments, including the costs and benefits of controls and the likelihood of future events. Because of these and other inherent limitations of control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected.

(b) Management�s Report on Internal Controls Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company�s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Company�s internal control over financial reporting includes those policies and procedures that:

• pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company�s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company�s internal control over financial reporting as of December 31, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (�COSO�) in Internal Control� Integrated Framework (2013).

Based on the Company�s assessment of internal control over financial reporting, management has concluded that, as of December 31, 2014, the Company�s internal control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

209

226

Table of Contents

The effectiveness of the Company�s internal control over financial reporting as of December 31, 2014, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report included in Item 8.

March 24, 2015

During the annual period ending December 31, 2014, the Company completed the conversion and integration of administrative systems and processing associated with the acquisition of MONY Life Insurance Company and the reinsured business from MONY Life Insurance Company of America into its internal controls over financial reporting. Other than the conversion and integration discussed above, there have been no change in the Company�s internal control over financial reporting during the period ended December 31, 2014, that have materially affected, or are reasonably likely to materially affect, the Company�s internal control over financial reporting. The Company�s internal controls exist within a dynamic environment and the Company continually strives to improve its internal controls and procedures to enhance the quality of its financial reporting.

Item 9B. Other Information

None.

210

227

Table of Contents

PART III

Item 10. Directors and Executive Officers and Corporate Governance

Information omitted in accordance with General Instruction I (2)(c).

Item 11. Executive Compensation

Information omitted in accordance with General Instruction I (2)(c).

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information omitted in accordance with General Instruction I (2)(c).

Item 13. Certain Relationships and Related Transactions and Director Independence

Information omitted in accordance with General Instruction I (2)(c).

Item 14. Principal Accountant Fees and Services

The following table shows the aggregate fees billed by PricewaterhouseCoopers LLP for 2014 and 2013 with respect to various services provided to PLC and its subsidiaries.

For The Year Ended December 31, 2014 2013

(Dollars in Millions) Audit fees $ 6.0 $ 6.3 Audit-related fees 0.8 0.6 Tax fees 0.5 0.3 All other fees � � Total $ 7.3 $ 7.2

Audit Fees were for professional services rendered for the audits of PLC, including integrated audits of PLC�s consolidated financial statements and the effectiveness of internal controls over financial reporting, audits (GAAP and statutory basis) of certain of PLC�s subsidiaries, issuance of comfort letters and consents, assistance with review of documents filed with the SEC and other regulatory authorities, and expenses related to the above services.

Audit-Related Fees were for assurance and related services related to employee benefit plan audits, due diligence and accounting consultations in connection with acquisitions, attest services that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards.

Tax Fees were for services related to tax compliance, including the preparation and review of tax returns and claims for refund as well as tax planning and tax advice, including assistance with tax audits and appeals, advice related to acquisitions, tax services for employee benefit plans, and requests for rulings or technical advice from tax authorities.

All Other Fees include fees that are appropriately not included in the Audit, Audit-Related, and Tax categories.

228

On February 20, 2015, the Audit Committee approved the engagement of PricewaterhouseCoopers LLP to render audit and non-audit services for the Company and its subsidiaries for the period ended February 2016. The Committee�s policy is to pre-approve, generally for a 12-month period, the audit, audit-related, tax and other services provided by the independent accountants to the Company and its subsidiaries. Under the pre-approval process, the Committee reviews and approves specific services and categories of services and the maximum aggregate fee for each service or service category. Performance of any additional services or categories of services, or of services that would result in fees in excess of the established maximum, requires the separate pre-approval of the Audit Committee or one

211

229

Table of Contents

of its members who has been delegated pre-approval authority. The Committee or its Chairman pre- approved all Audit, Audit-Related, Tax and Other services performed for the Company by PricewaterhouseCoopers LLP with respect to fiscal year 2014.

In evaluating the selection of PricewaterhouseCoopers LLP as principal independent accountants for the Company and its subsidiaries, the Audit Committee considered whether the provision of the non-audit services described above is compatible with maintaining the independent accountants� independence. The Committee determined that such services have not affected PricewaterhouseCoopers LLP�s independence. The Committee also reviewed the non-audit services performed in 2014 and determined that those services were consistent with our policy. In addition, the Audit Committee considered the non-audit professional services that PricewaterhouseCoopers LLP will likely be asked to provide for us during 2015, and the effect which performing such services might have on audit independence.

212

230

Table of Contents

PART IV

Item 15. Exhibits and Financial Statement Schedules

The following documents are filed as part of this report:

1. Financial Statements (See Item 8, Financial Statements and Supplementary Data)

2. Financial Statement Schedules:

The Report of Independent Registered Public Accounting Firm which covers the financial statement schedules appears on pages 207 and 208 of this report. The following schedules are located in this report on the pages indicated.

Page Schedule III - Supplementary Insurance Information 218 Schedule IV - Reinsurance 219 Schedule V - Valuation and Qualifying Accounts 220

All other schedules to the consolidated financial statements required by Article 7 of Regulation S-X are not required under the related instructions or are inapplicable and therefore have been omitted.

3. Exhibits:

For a list of exhibits, refer to the �Exhibit Index� filed as part of this report beginning on the following page and incorporated herein by this reference.

The exhibits to this report are included to provide you with information regarding the terms thereof and are not intended to provide any other factual or disclosure information about the Company or the other parties thereto or referenced therein. Such documents may contain representations and warranties by the parties to such documents that have been made solely for the benefit of the parties specified therein. These representations and warranties (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate, (ii) may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable document, which disclosures are not necessarily reflected in the documents, (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors, and (iv) were made only as of the date or dates specified in the documents and are subject to more recent developments. Accordingly, the representations and warranties contained in the documents included as exhibits may not describe the actual state of affairs as of the date they were made or at any other time.

213

231

Table of Contents

EXHIBIT INDEX

Exhibit Number � 2(a) Stock Purchase Agreement among Protective Life Insurance Company, United Investors Life Insurance Company, Liberty National Life

Insurance Company and Torchmark Corporation, dated as of September 13, 2010, filed as Exhibit 2.01 to the Company�s Current Report on Form 8-K filed September 17, 2010 (No. 001-31901).

� 2(b) Master Agreement by and among AXA Equitable Financial Services LLC, AXA Financial Inc. and Protective Life Insurance Company, dated as of April 10, 2013, filed as Exhibit 2(b) to the Company�s Quarterly Report on Form 10-Q filed August 12, 2013 (No. 001-11339).

� 3(a) 2011 Amended and Restated Charter of Protective Life Insurance Company dated as of June 27, 2011, filed as Exhibit 3(a) to the Company�s Annual Report on Form 10-K for the year ended December 31, 2011 filed March 29, 2012 (No. 001-31901).

� 3(b) 2011 Amended and Restated By-Laws of Protective Life Insurance Company dated as of June 27, 2011, filed as Exhibit 3(b) to the Company�s Annual Report on Form 10-K for the year ended December 31, 2011 filed March 29, 2012 (No. 001-31901).

** 4(a) Group Modified Guaranteed Annuity Contract *** 4(b) Individual Certificate ** 4(c) Tax-Sheltered Annuity Endorsement ** 4(d) Qualified Retirement Plan Endorsement ** 4(e) Individual Retirement Annuity Endorsement ** 4(f) Section 457 Deferred Compensation Plan Endorsement * 4(g) Qualified Plan Endorsement

** 4(h) Application for Individual Certificate ** 4(i) Adoption Agreement for Participation in Group Modified Guaranteed Annuity

*** 4(j) Individual Modified Guaranteed Annuity Contract ** 4(k) Application for Individual Modified Guaranteed Annuity Contract

**** 4(l) Endorsement - Group Policy **** 4(m) Endorsement - Certificate **** 4(n) Endorsement - Individual Contracts **** 4(o) Endorsement (Annuity Deposits) - Group Policy **** 4(p) Endorsement (Annuity Deposits) - Certificate **** 4(q) Endorsement (Annuity Deposits) - Individual Contracts

***** 4(r) Endorsement - Individual ***** 4(s) Endorsement - Group Contract/Certificate

� 4(t) Endorsement - Individual, filed as Exhibit 4(EE) to the Company�s Registration Statement on Form S-1 filed April 4, 1996 (No. 333-02249).

� 4(u) Endorsement - Group Contract, filed as Exhibit 4(FF) to the Company�s Registration Statement on Form S-1 filed April 4, 1996 (No. 333-02249).

� 4(v) Endorsement - Group Certificate, filed as Exhibit 4(GG) to the Company�s Registration Statement on Form S-1 filed April 4, 1996 (No. 333-02249).

� 4(w) Individual Modified Guaranteed Annuity Contract, filed as Exhibit 4(HH) to the Company�s Registration Statement on Form S-1 filed April 4, 1996 (No. 333-02249).

� 4(x) Cancellation Endorsement, filed as Exhibit 4(HH) to the Company�s Registration Statement on Form S-1 filed April 4, 1996 (No. 333-02249).

� 4(y) Group Modified Guaranteed Annuity Contract, filed as Exhibit 4(A) to the Company�s Registration Statement on Form S-1 filed December 18, 2008 (No. 333-156285).

� 4(z) Individual Modified Guaranteed Annuity Contract, filed as Exhibit 4(B) to the Company�s Registration Statement on Form S-1 filed December 18, 2008 (No. 333-156285).

214

232

Table of Contents

� 4(aa) Group Certificate, filed as Exhibit 4(C) to the Company�s Registration Statement on Form S-1 filed December 18, 2008 (No. 333-156285).

� 4(bb) Application for Modified Guaranteed Annuity, filed as Exhibit 4(D) to the Company�s Amended Registration Statement on Form S-1/A filed February 10, 2009 (No. 333-156285).

� 4(cc) Endorsement - Free Look, filed as Exhibit 4(E) to the Company�s Registration Statement on Form S-1 filed December 18, 2008 (No. 333-156285).

� 4(dd) Endorsement - Settlement Option, filed as Exhibit 4(F) to the Company�s Registration Statement on Form S-1 filed December 18, 2008 (No. 333-156285).

� 4(ee) Endorsement - Automatic Renewal, filed as Exhibit 4(G) to the Company�s Registration Statement on Form S-1 filed December 18, 2008 (No. 333-156285).

� 4(ff) Endorsement - Traditional IRA, filed as Exhibit 4(H) to the Company�s Registration Statement on Form S-1 filed December 18, 2008 (No. 333-156285).

� 4(gg) Endorsement - Roth IRA, filed as Exhibit 4(I) to the Company�s Registration Statement on Form S-1 filed December 18, 2008 (No. 333-156285).

� 4(hh) Endorsement - Qualified Retirement Plan, filed as Exhibit 4(J) to the Company�s Registration Statement on Form S-1 filed December 18, 2008 (No. 333-156285).

� 4(ii) Endorsement - Section 457 Deferred Compensation Plan, filed as Exhibit 4(K) to the Company�s Registration Statement on Form S-1 filed December 18, 2008 (No. 333-156285).

� 4(jj) Application for Modified Guaranteed Annuity, filed as Exhibit 4(bb) to the Company�s Annual Report on Form 10-K for the year ended December 31, 2007 filed March 31, 2008 (No. 001-31901).

* 10(a) Bond Purchase Agreement * 10(b) Escrow Agreement � 10(c) Amended and Restated Credit Agreement dated as of February 2, 2015, among Protective Life Corporation and Protective Life Insurance

Company, as borrowers, the several lenders from time to time a party thereto, Regions Bank, as Administrative Agent, and Wells Fargo Bank, National Association, as Syndication Agent, filed as Exhibit 10.1 to the Company�s Current Report on Form 8-K filed February 3, 2015 (No. 001-11339).

� 10(d) Second Amended and Restated Lease Agreement dated as of December 19, 2013, between Protective Life Insurance Company and Wachovia Development Corporation, filed as Exhibit 10(d) to the Company�s Annual Report on Form 10-K for the year ended December 31, 2013 filed March 25, 2014 (No. 001-31901).

� 10(e) Second Amended and Restated Investment and Participation Agreement dated as of December 19, 2013, between Protective Life Insurance Company and Wachovia Development Corporation, filed as Exhibit 10(e) to the Company�s Annual Report on Form 10-K for the year ended December 31, 2013 filed March 25, 2014 (No. 001-31901).

� 10(f) Amendment and Clarification of the Tax Allocation Agreement dated January 1, 1988 by and among Protective Life Corporation and its subsidiaries, filed as Exhibit 10(h) to the Company�s Annual Report on Form 10-K for the year ended December 31, 2004 filed March 31, 2005 (No. 001-131901).

� 10(g) Third Amended and Restated Reimbursement Agreement dated as of June 25, 2014 between Golden Gate III Vermont Captive Insurance Company and USB AG, Stamford Branch, filed as Exhibit 10 to the Company�s Quarterly Report on Form 10-Q filed August 13, 2014 (No. 001-31901). ±

� 10(h) Stock Purchase Agreement by and among RBC Insurance Holdings (USA), Inc., Athene Holding Ltd., Protective Life Insurance Company and RBC USA Holdco Corporation (solely for the purposes of Sections 5.14-5.17 and Articles 7.8 and 10), dated as of October 22, 2010, filed as Exhibit 10.01 to the Company�s Current Report on Form 8-K filed October 28, 2010 (No. 001-31901).

� 10(i) Reimbursement Agreement dated as of December 10, 2010 between Golden Gate IV Vermont Captive Insurance Company and UBS AG, Stamford Branch, filed as Exhibit 10(J) to the Company�s Annual Report on Form 10-K for the year ended December 31, 2010 filed March 30, 2011 (No. 001-31901). ±

215

233

Table of Contents

� 10(j) Coinsurance Agreement by and between Liberty Life Insurance Company and Protective Life Insurance Company, filed as Exhibit 10.02 to the Company�s Current Report on Form 8-K filed October 28, 2010 (No. 001-31901).

12 Consolidated Earnings Ratio � 14 Code of Business Conduct for Protective Life Corporation and all of its subsidiaries, revised June 2, 2014 filed as Exhibit 14 to Protective

Life Corporation�s Annual Report on Form 10-K for the year ended December 31, 2014 filed February 26, 2015 (No. 001-11339). � 14(a) Supplemental Policy on Conflict of Interest, revised August 30, 2010 for Protective Life Corporation and all of its subsidiaries, filed as

Exhibit 14(a) to Protective Life Corporation�s Annual Report on Form 10-K for the year ended December 31, 2013 filed February 28, 2014 (No. 001-11339).

23 Consent of Independent Registered Public Accounting Firm 31(a) Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31(b) Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32(a) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32(b) Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101 Financial statements from the annual report on Form 10-K of Protective Life Insurance Company for the year ended December 31, 2014,

filed on March 24, 2015, formatted in XBRL: (i) the Consolidated Statements of Income, (ii) the Statements of Comprehensive Income (Loss) (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Shareowner�s Equity, (v) the Consolidated Statement of Cash Flow, and (vi) the Notes to Consolidated Financial Statements.

* Previously filed or incorporated by reference in Form S-1 Registration Statement, Registration No. 33-31940. ** Previously filed or incorporated by reference in Amendment No. 1 to Form S-1 Registration Statement, Registration No. 33-31940.

*** Previously filed or incorporated by reference from Amendment No. 2 to Form S-1 Registration Statement, Registration No. 33-31940. **** Previously filed or incorporated by reference from Amendment No. 2 to Form S-1 Registration Statement, Registration No. 33-57052.

***** Previously filed or incorporated by reference from Amendment No. 3 to Form S-1 Registration Statement, Registration No. 33-57052.

� Incorporated by reference. ± Certain portions of this Exhibit have been omitted pursuant to a request for confidential treatment. The non-public information has been

filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

216

234

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

PROTECTIVE LIFE INSURANCE COMPANY

By: /s/ Steven G. Walker Steven G. Walker Senior Vice President, Controller and Chief Accounting Officer March 24, 2015

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

Signature Capacity in Which Signed Date

/s/ John D. Johns Chairman of the Board, President March 24, 2015 JOHN D. JOHNS and Chief Executive Officer

(Principal Executive Officer) and Director

/s/ Richard J. Bielen Vice Chairman and March 24, 2015 RICH BIELEN Chief Financial Officer

(Principal Executive Officer) and Director

/s/ Carl S. Thigpen Executive Vice President March 24, 2015 CARL S. THIGPEN Chief Investment Officer

and a Director

/s/ Steven G. Walker Senior Vice President March 24, 2015 STEVEN G. WALKER Chief Accounting Officer and

Controller

217

235

Table of Contents

SCHEDULE III - SUPPLEMENTARY INSURANCE INFORMATION

PROTECTIVE LIFE CORPORATION AND SUBSIDIARIES

Amortization Deferred Stable Value of Deferred

Policy Products, Policy Acquisition Annuity Acquisitions Costs and Contracts and Net Benefits Costs and Value of Future Policy Other Premiums Net and Value of Other

Businesses Benefits and Unearned Policyholders� and Policy Investment Settlement Businesses Operating Premiums Segment Acquired Claims Premiums Funds Fees Income(1) Expenses Acquired Expenses(1) Written(2)

(Dollars In Thousands) For The Year Ended December 31, 2014: Life Marketing $ 1,973,156 $ 14,077,360 $ 772,880 $ 349,698 $ 854,186 $ 553,006 $ 1,075,386 $ 175,807 $ 47,688 $ 151 Acquisitions 600,482 14,740,562 3,473 4,770,181 772,020 874,653 1,247,836 60,031 122,349 35,857 Annuities 539,965 1,015,928 120,850 7,190,908 75,446 465,849 314,488 47,448 115,643 � Stable Value Products 621 � � 1,959,488 � 107,170 35,559 380 1,413 � Asset Protection 40,503 46,963 616,908 � 169,212 18,830 93,193 24,169 161,760 160,948 Corporate and Other 319 63,664 890 70,267 16,462 78,505 20,001 485 181,782 16,388 Total $ 3,155,046 $ 29,944,477 $ 1,515,001 $ 14,340,542 $ 1,887,326 $ 2,098,013 $ 2,786,463 $ 308,320 $ 630,635 $ 213,344 For The Year Ended December 31, 2013: Life Marketing $ 2,071,470 $ 13,504,869 $ 812,929 $ 311,290 $ 796,109 $ 521,219 $ 1,143,132 $ 25,774 $ 46,263 $ 173 Acquisitions 799,255 15,112,574 4,680 4,734,487 519,477 617,298 851,386 72,762 78,244 24,781 Annuities 554,974 1,037,348 102,734 7,228,119 80,343 468,329 318,173 31,498 110,266 � Stable Value Products 1,001 � � 2,559,552 � 123,798 41,793 398 1,805 � Asset Protection 49,276 49,362 578,755 1,556 165,807 19,046 97,174 23,603 155,857 157,629 Corporate and Other 646 67,805 1,296 64,181 18,149 86,498 22,330 625 161,088 18,141 Total $ 3,476,622 $ 29,771,958 $ 1,500,394 $ 14,899,185 $ 1,579,885 $ 1,836,188 $ 2,473,988 $ 154,660 $ 553,523 $ 200,724 For The Year Ended December 31, 2012: Life Marketing $ 2,001,708 $ 12,733,602 $ 698,862 $ 277,919 $ 743,361 $ 486,374 $ 1,054,645 $ 45,079 $ 31,816 $ 161 Acquisitions 679,746 7,666,423 8,367 3,514,838 459,835 550,334 716,893 77,251 51,714 29,874 Annuities 491,184 1,102,577 103,316 7,372,471 97,902 504,342 369,622 45,319 100,848 � Stable Value Products 1,399 � � 2,510,559 � 128,239 64,790 947 2,174 � Asset Protection 50,253 51,279 540,766 1,790 168,656 19,698 91,778 22,569 170,034 159,927 Corporate and Other 1,066 72,184 1,561 58,430 19,539 100,351 19,393 1,018 130,591 19,456 Total $ 3,225,356 $ 21,626,065 $ 1,352,872 $ 13,736,007 $ 1,489,293 $ 1,789,338 $ 2,317,121 $ 192,183 $ 487,177 $ 209,418

(1)Allocations of Net Investment Income and Other Operating Expenses are based on a number of assumptions and estimates and results would change if different methods were applied.

(2) Excludes Life Insurance

218

236

Table of Contents

SCHEDULE IV - REINSURANCE

PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES

Assumed Percentage of Ceded to from Amount

Gross Other Other Net Assumed to Amount Companies Companies Amount Net

(Dollars In Thousands) For The Year Ended December 31, 2014: Life insurance in-force $ 721,036,332 $ 388,890,060 $ 43,237,358 $ 375,383,630 11.5% Premiums and policy fees: Life insurance 2,603,956 1,279,908 349,934 1,673,982(1) 20.9 Accident/health insurance 81,037 42,741 20,804 59,100 35.2 Property and liability insurance 218,663 73,094 8,675 154,244 5.6 Total $ 2,903,656 $ 1,395,743 $ 379,413 $ 1,887,326 For The Year Ended December 31, 2013: Life insurance in-force $ 726,697,151 $ 416,809,287 $ 46,752,176 $ 356,640,040 13.1% Premiums and policy fees: Life insurance 2,371,871 1,299,631 306,921 1,379,161(1) 22.3 Accident/health insurance 45,262 20,011 24,291 49,542 49.0 Property and liability insurance 211,000 67,795 7,977 151,182 5.3 Total $ 2,628,133 $ 1,387,437 $ 339,189 $ 1,579,885 For The Year Ended December 31, 2012: Life insurance in-force $ 706,415,969 $ 444,950,866 $ 30,470,432 $ 291,935,535 10.4% Premiums and policy fees: Life insurance 2,226,614 1,228,444 281,711 1,279,881(1) 22.0 Accident/health insurance 38,873 12,065 29,413 56,221 52.3 Property and liability insurance 216,014 69,588 6,765 153,191 4.4 Total $ 2,481,501 $ 1,310,097 $ 317,889 $ 1,489,293

(1)Includes annuity policy fees of $92.8 million, $88.7 million, and $103.8 million for the years ended December 31, 2014, 2013, and 2012, respectively.

219

237

Table of Contents

SCHEDULE V � VALUATION AND QUALIFYING ACCOUNTS

PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES

Additions Balance Charged to Charges Balance

at beginning costs and to other at end of Description of period expenses accounts Deductions period

(Dollars In Thousands) 2014 Allowance for losses on commercial mortgage loans $ 3,130 $ 3,265 $ � $ (675) $ 5,720 2013 Allowance for losses on commercial mortgage loans $ 2,875 $ 7,093 $ � $ (6,838) $ 3,130 2012 Allowance for losses on commercial mortgage loans $ 4,975 $ 6,240 $ � $ (8,340) $ 2,875

220

Exhibit 12

CONSOLIDATED EARNINGS RATIOS

The following table sets forth, for the years and periods ended, Protective Life Insurance Company�s (the �Company�) ratios of:

• Consolidated earnings to fixed charges.

• Consolidated earnings to fixed charges before interest credited on investment products.

For The Year Ended December 31, 2014 2013 2012 2011 2010

Ratio of Consolidated Earnings to Fixed Charges (1) 1.8 1.4 1.4 1.4 1.3 Ratio of Consolidated Earnings to Fixed Charges Before Interest Credited on Investment Products (2) 7.0 4.7 5.8 6.1 5.5

(1)The Company calculates the ratio of �Consolidated Earnings to Fixed Charges� by dividing the sum of income from continuing operations before income tax (BT), interest expense (which includes an estimate of the interest component of operating lease expense) (I) and interest credited on investment products (IP) by the sum of interest expense (I) and interest credited on investment products (IP). The formula for this ratio is: (BT+I+IP)(I+IP). The Company continues to sell investment products that credit interest to the contract holder. Investment products include products such as guaranteed investment contracts, annuities, and variable universal life interest credited insurance policies. The inclusion of interest credited on investment products results in a negative impact on the ratio of earnings to fixed charges because the effect of increases in interest credited to contract holders more than offsets the effect of the increase in earnings.

(2)The Company calculates the ratio of �Consolidated Earnings to Fixed Charges Before Interest Credited on Investment Products� by dividing the sum of income from continuing operations before income tax (BT) and interest expense (I) by interest expense (I). The formula for this calculation, therefore, would be: (BT+I)/I.

238

Computation of Consolidated Earnings Ratios

For The Year Ended December 31, 2014 2013 2012 2011 2010

(Dollars In Thousands, Except Ratio Data) Computation of Ratio of Consolidated Earnings to Fixed Charges Income from Continuing Operations before Income Tax $ 738,789 $ 422,499 $ 459,579 $ 475,275 $ 333,176 Add Interest Expense (1) 122,152 115,113 95,759 93,797 73,841 Add Interest Credited on Investment Products 824,418 875,180 962,678 993,574 972,806 Earnings before Interest, Interest Credited on Investment Products and Taxes $ 1,685,359 $ 1,412,792 $ 1,518,016 $ 1,562,646 $ 1,379,823 Earnings before Interest, Interest Credited on Investment Products and Taxes Divided by Interest expense and Interest Credited on Investment Products 1.8 1.4 1.4 1.4 1.3 Computation of Ratio of Consolidated Earnings to Fixed Charges Before Interest Credited on Investment Products Income from Continuing Operations before Income Tax $ 738,789 $ 422,499 $ 459,579 $ 475,275 $ 333,176 Add Interest Expense (1) 122,152 115,113 95,759 93,797 73,841 Earnings before Interest and Taxes $ 860,941 $ 537,612 $ 555,338 $ 569,072 $ 407,017 Earnings before Interest and Taxes Divided by Interest Expense 7.0 4.7 5.8 6.1 5.5

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-187453) of Protective Life Insurance Company and its subsidiaries of our report dated March 24, 2015 relating to the financial statements, financial statement schedules and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

PricewaterhouseCoopers LLP

Birmingham, Alabama

March 24, 2015

Exhibit 31(a)

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, John D. Johns, certify that:

1. I have reviewed the Annual Report on Form 10-K for the year ended December 31, 2014, of Protective Life Insurance Company;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

239

4. The registrant�s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant�s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant�s internal control over financial reporting that occurred during the registrant�s most recent fiscal quarter (the registrant�s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant�s internal control over financial reporting; and

5. The registrant�s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant�s auditors and the audit committee of registrant�s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant�s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant�s internal control over financial reporting.

Date: March 24, 2015

/s/ John D. Johns Chairman of the Board, President and Chief Executive Officer

Exhibit 31(b)

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Richard J. Bielen, certify that:

1. I have reviewed the Annual Report on Form 10-K for the year ended December 31, 2014, of Protective Life Insurance Company;

240

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant�s internal control over financial reporting.

Date: March 24, 2015

/s/ Richard J. Bielen Vice Chairman and Chief Financial Officer

Exhibit 32(a)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Protective Life Insurance Company (the �Company�) on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the �Report�), I, John D. Johns, Chairman of the Board, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

241

/s/ John D. Johns Chairman of the Board, President and Chief Executive Officer

March 24, 2015

This certification accompanies the Report pursuant to §906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

Exhibit 32(b)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Protective Life Insurance Company (the �Company�) on Form 10-K for the year ended December 31, 2014, as filed with the Securities and Exchange Commission on the date hereof (the �Report�), I, Richard J. Bielen, Vice Chairman and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Richard J. Bielen Vice Chairman and Chief Financial Officer

March 24, 2015

242

fullDocument

blog16

Get help from top-rated tutors in any subject.