AMERITAS MUTUAL HOLDING COMPANY AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2015 AND 2014 AND FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 2015 AND INDEPENDENT AUDITORS’ REPORT

INDEPENDENT AUDITORS’ REPORT To the Board of Directors Ameritas Mutual Holding Company Lincoln, Nebraska We have audited the accompanying consolidated financial statements of Ameritas Mutual Holding Company and its subsidiaries (the "Company"), which comprise the consolidated balance sheets as of December 31, 2015 and 2014, and the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2015, and the related notes to the consolidated financial statements. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ameritas Mutual Holding Company and its subsidiaries as of December 31, 2015 and 2014, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, in accordance with accounting principles generally accepted in the United States of America.

Omaha, Nebraska March 4, 2016

2

AMERITAS MUTUAL HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands) December 31 2015

2014

ASSETS Investments: Fixed maturity securities held to maturity (fair value $31,621 - 2015, $57,761 - 2014) Fixed maturity securities available for sale (amortized cost $9,152,435 - 2015, $7,783,623 - 2014) Fixed maturity securities trading (amortized cost $64,223 - 2015, $48,802 - 2014) Equity securities available for sale (cost $329,272 - 2015, $275,508 - 2014) Equity securities trading Mortgage loans on real estate, net Loans on insurance policies Real estate, less accumulated depreciation Other investments Total investments Cash and cash equivalents Accrued investment income Deferred acquisition costs (DAC) and identifiable intangibles Property and equipment, less accumulated depreciation Current income taxes Reinsurance receivables Other assets Separate accounts Total assets

$

$

30,547

$

54,738

9,297,279

8,235,037

64,961

53,799

395,479 103,045 1,597,896 378,789 36,541 264,260 12,168,797 365,728 111,670 715,705 83,676 536,590 202,168 6,314,191 20,498,525

387,417 89,040 1,527,752 362,994 50,306 217,620 10,978,703 268,414 92,844 670,813 81,641 5,604 483,368 199,855 6,707,934 19,489,176

$

LIABILITIES AND EQUITY Policy and contract liabilities Accumulated contract values Deposit liability (Note 9) Dividends payable to policyowners Borrowings Surplus notes payable Current income taxes Deferred income taxes Other liabilities Separate accounts Total liabilities

$

2,681,337 7,085,324 1,174,062 14,192 15,383 49,624 23,924 84,069 447,989 6,314,191 17,890,095

$

2,524,508 6,817,493 15,289 49,590 204,438 482,420 6,707,934 16,801,672

COMMITMENTS AND CONTINGENCIES (Note 12) Retained earnings Accumulated other comprehensive income Total members' equity Total liabilities and equity

$

2,547,223 61,207 2,608,430 20,498,525

The accompanying notes to the consolidated financial statements are an integral part of these statements. 3

$

2,436,123 251,381 2,687,504 19,489,176

AMERITAS MUTUAL HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands)

INCOME Insurance revenues Premium income Contract charges Reinsurance, net Mutual fund management and related fees Broker dealer revenues Other income Net investment income Realized capital gains and (losses) Total other-than-temporary-impairment losses and provision for loan losses Portion recognized in other comprehensive income Net other-than-temporary-impairment losses recognized in earnings Sales and other realized capital gains Total realized capital gains

2015 $

Years Ended December 31 2014 2013

1,034,684 353,943 (142,660) 118,122 126,661 57,320 457,240

$

1,039,856 364,793 (144,802) 119,357 128,093 54,361 525,172

$

1,007,173 380,931 (131,071) 117,052 122,304 53,908 447,579

(18,582) (1,095)

(10,805) (21)

(2,527) (1,900)

(19,677) 60,400 40,723 2,046,033

(10,826) 43,912 33,086 2,119,916

(4,427) 37,864 33,437 2,031,313

848,581 231,520 23,701 678,971 7,527 83,383 1,873,683

913,371 240,718 25,237 670,220 4,100 101,457 1,955,103

784,445 235,951 26,500 669,552 4,100 121,960 1,842,508

Income from continuing operations before income taxes Income tax expense

172,350 61,250

164,813 54,716

188,805 57,017

Income from continuing operations, net of taxes Income (loss) from discontinued operations, net of taxes Income before noncontrolling interest Less net loss attributable to noncontrolling interest

111,100 111,100 -

110,097 (451) 109,646 -

131,788 4,662 136,450 31

BENEFITS AND EXPENSES Policy benefits Interest credited to accumulated contract values Policyowner dividends Sales and operating expenses Interest expense Amortization of DAC and identifiable intangibles

Net income attributable to members

$

111,100

$

109,646

The accompanying notes to the consolidated financial statements are an integral part of these statements. 4

$

136,481

AMERITAS MUTUAL HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in thousands)

Income before noncontrolling interest $ Other comprehensive income, net of tax Change in unrealized gains on securities Unrealized holding gains/losses arising during the period (net of deferred tax expense (benefit) of $(110,861) - 2015, $54,549 - 2014, $(103,682) - 2013) Reclassification adjustments from accumulated other comprehensive income, (net of deferred tax expense (benefit) of $(9,360) - 2015, $(6,830) - 2014, $(12,623) - 2013) Allocation from (to) Closed Block policyholder dividend obligation (PDO) (net of deferred tax expense (benefit) of $4,455 - 2015, $(1,154) - 2014, $13,315 - 2013) Allocation of unrealized gains (losses) to DAC (net of deferred tax expense (benefit) of $8,735 - 2015, $(8,106) - 2014, $25,371 - 2013) Allocation of unrealized gains (losses) to policy and contract liabilities (net of deferred tax expense (benefit) of $(3,107) - 2015, $13,600 - 2014, $2,364 - 2013) Other-than-temporary impairments (net of deferred tax expense (benefit) of $(456) - 2015, $(1,076) - 2014, $2,593 - 2013) Change in unrecognized gains/losses on defined benefit plan obligations Unrecognized defined benefit plans obligation (net of deferred tax expense (benefit) of $5,820 - 2015, $(24,064) - 2014, $27,275 - 2013) Reclassification adjustments into accumulated other comprehensive income, (net of deferred tax expense (benefit) of $4,291 - 2015, $2,112 - 2014, $5,336 - 2013) Other comprehensive income (loss) Comprehensive income (loss) before noncontrolling interest Less comprehensive loss attributable to noncontrolling interest Comprehensive income (loss) attributable to members $

Years Ended December 31 2013 2015 2014 111,100 $ 109,646 $ 136,450

(206,320)

101,152

(194,038)

(17,382)

(12,685)

(23,442)

8,272

(2,143)

24,729

16,222

(15,052)

47,116

(5,769)

25,254

4,391

(1,999)

4,816

(37,235)

41,609

3,343 60,635 170,281

8,275 (86,544) 49,906

(847)

8,935

6,715 (190,174) (79,074) (79,074)

$

170,281

The accompanying notes to the consolidated financial statements are an integral part of these statements.

5

$

31 49,937

AMERITAS MUTUAL HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (in thousands)

Retained Earnings $ 2,189,996

Accumulated Other Comprehensive Income (Loss) $ 277,290

Non-controlling Interest $ 2,424

Total Equity $ 2,469,710

Net income (loss) Other comprehensive loss Acquisition - noncontrolling interest BALANCE, December 31, 2013

136,481 2,326,477

(86,544) 190,746

(31) (2,393) -

136,450 (86,544) (2,393) 2,517,223

Net income Other comprehensive income BALANCE, December 31, 2014

109,646 2,436,123

60,635 251,381

-

Net income Other comprehensive loss BALANCE, December 31, 2015

111,100 2,547,223

(190,174) 61,207

-

BALANCE, January 1, 2013

$

$

$

The accompanying notes to the consolidated financial statements are an integral part of these statements. 6

109,646 60,635 2,687,504 111,100 (190,174) $ 2,608,430

AMERITAS MUTUAL HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

2015 OPERATING ACTIVITIES: Income before noncontrolling interest Income (loss) from discontinued operations, net of tax Income from continuing operations, net of tax Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations: Depreciation and amortization Amortization of DAC and identifiable intangibles Acquisition costs deferred Interest credited to accumulated contract values Policy charges and fee income on accumulated contract values Interest expense Amortization of discounts or premiums, net Net realized capital gains on investment transactions Unrealized losses (gains) on other investments Unrealized losses (gains) on trading securities Deferred income taxes Change in assets and liabilities: Securities trading Accrued investment income Current income taxes Reinsurance receivables Other assets Policy and contract liabilities Dividends payable to policyholders Other liabilities Net cash from operating activities of continuing operations Net cash from operating activities of discontinued operations Net cash from operating activities INVESTING ACTIVITIES: Purchase of investments: Securities available for sale Mortgage loans on real estate Real estate Other investments Proceeds from sales, maturities or repayment of investments: Securities held to maturity Securities available for sale Mortgage loans on real estate Real estate Other investments

$

Years Ended December 31 2014 2013

111,100 111,100

$

109,646 (451) 110,097

136,450 4,662 131,788

17,573 83,383 (103,318) 231,520 (284,485) 3,278 (8,186) (40,723) 26,542 4,963 (20,258)

17,772 101,457 (102,939) 240,718 (271,533) (7,096) (33,086) (6,653) (3,594) 28,091

19,674 121,960 (95,040) 235,951 (256,317) (12,132) (33,437) (18,751) (12,271) 30,846

(30,099) (6,350) 29,615 (53,221) (2,470) 145,650 (1,097) (32,124) 71,293 71,293

(22,611) (944) 16,088 (1,313) (5,644) 133,173 (289) 22,441 214,135 214,135

(3,440) 1,829 19,543 (15,699) (19,774) 1,269 139 (11,488) 84,650 (27,128) 57,522

(1,679,187) (315,617) (1,309) (97,942)

(1,385,205) (228,653) (2,400) (70,366)

(1,364,230) (189,558) (1,482) (44,839)

24,257 1,335,093 241,023 12,923 85,951

18,638 905,709 192,697 11,881 73,690

The accompanying notes to the consolidated financial statements are an integral part of these statements. 7

$

10,145 1,001,853 180,024 18,369 52,703

AMERITAS MUTUAL HOLDING COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)

2015

Years Ended December 31 2014 2013

INVESTING ACTIVITIES (continued): Purchase of property and equipment Proceeds from sale of property and equipment Net change in loans on insurance policies Net change in restricted cash Settlement from sale of subsidiary Net cash from investing activities of continuing operations Net cash from investing activities of discontinued operations Net cash from investing activities

(17,828) 947 (15,795) 3,282 (424,202) (424,202)

(27,436) 62 (25,773) 106 (433) (537,483) (537,483)

(19,831) 166 (8,421) 15 66,627 (298,459) 177,452 (121,007)

FINANCING ACTIVITIES: Deposits credited to accumulated contract values Withdrawals from accumulated contract values Proceeds from borrowings Repayment of borrowings Proceeds from deposit liability (Note 9) Acquisition of noncontrolling interest Net cash from financing activities of continued operations Net cash from financing activities of discontinued operations Net cash from financing activities

1,482,378 (1,161,582) 15,330 (62) 114,159 450,223 450,223

1,530,619 (1,218,076) 312,543 312,543

1,440,975 (1,215,405) 6,000 (34,000) (2,393) 195,177 (232,561) (37,384)

(10,805)

82,237 (18,632)

CHANGE IN CASH OF DISCONTINUED OPERATIONS CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD CASH AND CASH EQUIVALENTS AT END OF PERIOD

Supplemental cash flow information from continuing operations: Cash paid for income taxes, net Cash paid for interest Supplemental cash flow information from discontinued operations: Cash received for income taxes, net Cash paid for interest Non-cash transactions from continuing operations: Conversion of mortgage loans to real estate Acquisition of securities and accrued interest in reinsurance transactions (Note 9) Recognition of commitments for low-income housing partnerships Non-cash transactions from discontinued operations: Conversion of mortgage loans to real estate

97,314

$

268,414 365,728

$

$

51,893 4,100

$

$

-

$

$

2,453

$

$

279,219 268,414

$

$

6,604 4,100

(175) -

$

(7,498) 6,634

788

$

8,694

11,525 4,100

1,170,784

-

-

37,009

-

-

-

$

-

$

The accompanying notes to the consolidated financial statements are an integral part of these statements. 8

297,851 279,219

1,818

AMERITAS MUTUAL HOLDING COMPANY AND SUBSIDIARIES Notes to the Consolidated Financial Statements For The Years Ended December 31, 2015, 2014 and 2013 (in thousands) NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Nature of Operations Ameritas Mutual Holding Company (AMHC or the Company) is a mutual insurance holding company. AMHC’s whollyowned holding company, Ameritas Holding Company (AHC), owns one stock life insurance company, Ameritas Life Insurance Corp. (Ameritas Life). AHC also wholly owns Ameritas Investment Partners, Inc. (AIP), an advisor providing investment management services. Ameritas Life’s insurance operations consist of life and health insurance and annuity and pension contracts. Ameritas Life and its insurance subsidiary operate in all 50 states and the District of Columbia. Ameritas Life wholly-owns Ameritas Life Insurance Corp. of New York (Ameritas-NY), a New York domiciled life insurance subsidiary, Calvert Group Ltd. (Calvert), a provider of investment advisory, distribution, administrative, and investor servicing services to The Calvert Group of mutual funds, Ameritas Investment Corp. (AIC), a broker dealer, and Griffin Realty LLC (Griffin), a limited liability company that purchased certain owned real estate and commercial loans from a previously affiliated company. On December 31, 2015 Ameritas Life formed a limited liability company, Milford Realty LLC (Milford), with one real estate property contributed. Owners of designated policies issued by Ameritas Life and Ameritas-NY have membership interests in AMHC, while contractual rights remain with each respective insurance company. Basis of Accounting and Principles of Consolidation The accompanying consolidated financial statements of AMHC and subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The consolidated financial statements include the accounts of AMHC and its majority owned subsidiaries and all variable interest entities (VIEs) for which the Company is the primary beneficiary, but exclude the effects of all intercompany transactions as these amounts have been eliminated in consolidation. The Company invests through normal investment activities in entities that are considered VIEs. The Company is also involved in one VIE by owning an equity interest in a Collateralized Bond Obligation (CBO) in which the Company also manages the underlying collateral. A VIE is an entity that has insufficient equity to finance its activities without additional subordinated financial support or has equity investors that, as a group, lack either the power to direct the activities that most significantly impact the entity’s economic performance, the obligation to absorb the expected losses of the entity, or the right to receive residual returns of the entity. The Company performs an ongoing assessment to identify the primary beneficiary of its VIEs. The Company is deemed to be the primary beneficiary when it has both the power to direct the activities of the VIE that most significantly impact the economic performance of the VIE and the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. If the Company is deemed to be the primary beneficiary, the Company consolidates the VIE on the Company’s consolidated financial statements. The Company elected the fair value option for the Summit CBO I, Limited in order to apply a consistent accounting model for the VIEs’ assets and liabilities. The Summit CBO I, Limited is a Company managed CBO that holds various subordinated debt securities as collateral, which include other CBOs, in a trust. The trust issued securities to investors that bear the risk of the investment and have no recourse against the Company. The fair value of assets was determined based on observable market data including quoted prices for similar assets. The fair value of liabilities was based on internal valuation models that include inputs that are unobservable. Fair value of the assets and liabilities for the Summit CBO I, Limited were each determined to be $0 and as such, were not required to be consolidated. The unpaid principal balance of long term debt instruments held within the Summit CBO I, Limited was $321,185 and $295,850 at December 31, 2015 and 2014, respectively.

9

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) The Company has no exposure to loss as the investors have no recourse against the Company in the event of default by the VIE and the Company has no obligation to provide funding to the VIE in the future. Consolidated VIEs The Company consolidates four grantor trusts which were formed in 2015 in conjunction with reinsurance transactions and were determined to be VIEs based on a lack of sufficient equity at risk. The VIEs were formed to provide a security interest in the grantor trusts’ assets to ceding entities which were a party to the reinsurance transactions. The Company is the investment manager of each VIEs’ assets and receives all investment income and gains and losses on these assets. As the Company has both the power to direct the activities of the VIEs that most significantly impact the economic performance of the VIEs and the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIEs, the Company determined it was the primary beneficiary of the VIEs. The consolidated VIEs’ assets were reported on the consolidated balance sheets at their respective carrying values as of December 31, 2015 and included fixed maturity securities available for sale of $1,077,099, cash and cash equivalents of $114,330 and accrued investment income of $12,605. Nonconsolidated VIEs The following table presents the carrying value of assets and liabilities, and the maximum exposure to loss related to VIEs for which the Company is not the primary beneficiary. The Company determined the maximum exposure to loss was equivalent to the carrying value of the assets as the Company is not required to provide additional financial support in the future and other investors have no recourse against the Company in the event of a default. December 31, 2015 Maximum Exposure Total Assets To Loss Other Investments: Real estate partnerships Low-income housing partnerships Total

$

19,031 $ 42,203 61,234 $

$

19,031 $ 42,203 61,234 $

December 31, 2014 Maximum Exposure Total Assets To Loss 8,733 $ 2,597 11,330 $

8,733 2,597 11,330

Other investments in the above table represent real estate partnerships and low-income housing partnerships for which the Company does not have a controlling financial interest, and therefore is not the primary beneficiary, as it does not have the ability to manage the activities of the partnership that most significantly impact the VIEs’ economic performance. The Company has provided equity financing to these partnerships since the mid 1990s and, in return, the Company has and will continue to receive cash flows and/or income tax credits based on the economic performance of the partnerships. The Company has made unconditional commitments to provide additional capital contributions in low-income housing partnerships of $10,828, $19,318, and $5,135 in 2016, 2017 and 2018, respectively, and $1,728 thereafter. The carrying value of the largest VIE in which the Company is not the primary beneficiary is not material to the Company’s total assets or equity as of December 31, 2015. Through normal investment activities, the Company makes passive investments in structured securities issued by VIEs for which the Company is not the manager. The securities are included in residential mortgage-backed securities, commercial mortgage-backed securities, asset-backed securities and collateralized debt obligations which are presented in the fixed maturity securities section of the cost/amortized cost and fair value table presented in Note 5. The Company has not provided financial or other support with respect to these investments other than its original investment. The Company determined that it is not the primary beneficiary of these investments after considering the relative size of the Company’s investment in comparison to the principal amount of the structured securities issued by the VIEs and the Company’s inability to direct the activities that most significantly impact the economic performance of the VIEs. The Company’s maximum exposure to loss on these investments is limited to the amount of the Company’s investment. Use of Estimates The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates susceptible to significant change include investment valuations, deferred policy acquisition costs, unearned revenue, pension plan assumptions, policy and contract liabilities, and income taxes. 10

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) Risks and Uncertainties The Company operates in a business environment which is subject to various risks and uncertainties. Such risks and uncertainties include, but are not limited to, interest rate risk, market risk, credit risk and legal and regulatory changes. Interest rate risk is the potential for interest rates to change, which can cause fluctuations in the value of investments, the liabilities for future policy benefits and the carrying amount of deferred policy acquisition costs. Market risk is the potential for market values to change, which can cause fluctuations in certain future policy benefits and contract charges. Credit risk is the risk that issuers of investments owned by the Company may default or that other parties may not be able to pay amounts due to the Company. The Company is also subject to oversight by various state and federal regulatory authorities. The potential exists for changes in regulatory initiatives, which can result in additional, unanticipated impacts to the Company. Subsequent Events The Company has evaluated events subsequent to December 31, 2015 and through March 4, 2016, the date the consolidated financial statements were available to be issued. The Company has not evaluated subsequent events after that date for presentation on these consolidated financial statements. Investments The Company classifies its securities into categories based upon the Company’s intent relative to the eventual disposition of the securities. The first category, held to maturity, is for fixed maturity securities which the Company has the positive intent and ability to hold to maturity. These securities are carried at amortized cost. The second category, available for sale, is for fixed maturity securities and equity securities that may be sold to address the liquidity and other needs of the Company. Securities classified as available for sale are carried at fair value on the consolidated balance sheets with unrealized gains and losses excluded from operations and reported as a component of accumulated other comprehensive income (loss), net of related deferred policy acquisition costs, policy and contract liabilities, and income tax effects. The third category, trading, is for fixed maturity securities and equity securities acquired for the purpose of selling them in the near term and are carried at fair value. Unrealized gains and losses on trading securities are reflected in net investment income on the consolidated statements of operations. As of December 31, 2015 and 2014, respectively, the Company had $41,387 and $24,862 of equity securities trading invested in mutual funds, which are advised by affiliates. Realized investment gains and losses on sales of securities are determined on the specific identification method. For residential and commercial mortgage-backed and asset-backed securities, the Company recognizes income using a constant effective yield based on anticipated prepayments and the estimated economic life of the securities. When estimates of prepayments change, the effective yield is recalculated to reflect actual payments to date and anticipated future payments and any resulting adjustment is included in net investment income. Mortgage loans on real estate are carried at amortized cost less an allowance for estimated uncollectible amounts, except impaired loans, which are measured at the present value of expected future cash flows, or alternatively, the loan’s observable market price or the fair value of the collateral. The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to earnings and reflected in sales and other realized capital gains on the consolidated statements of operations. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses includes management’s estimate of the amounts expected to be uncollectible on specific and unidentified loans. It is evaluated on a regular basis by management and is based upon management’s periodic review of loan collectability in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral, and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to revisions, as additional information becomes available.

11

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) Interest income is accrued on the unpaid principal balance of mortgage loans. Loan origination fees, net of direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest or straight-line methods. The accrual of interest on mortgage loans is placed on nonaccrual status when collection of principal and interest is considered doubtful. Interest received on nonaccrual loans is accounted for on the cash basis or cost-recovery method until returned to accrual status. Mortgage loans are returned to accrual status when collectability of past due and future payments is reasonably assured. Loans on insurance policies are recorded at the unpaid principal balance. Real estate held for investment, including related improvements, is carried at cost less accumulated depreciation of $24,446 and $26,457 at December 31, 2015 and 2014, respectively. Real estate held for sale of $15,640 and $14,627 as of December 31, 2015 and 2014, respectively, is carried at the lower of depreciated cost or fair value minus expected disposition costs. Real estate is not depreciated while it is classified as held for sale. Real estate acquired through, or in lieu of, loan foreclosure is classified on an individual loan basis and is initially recorded at the lower of the amount of the loan satisfied or fair value less selling costs at the time of the foreclosure or other proceeding. Subsequent to foreclosure, valuations are periodically performed by management, and the real estate is carried at the lower of initial book value or fair value less cost to sell. Market write-downs and losses on sales of foreclosed real estate are charged to net income when incurred. Assets are held by the Federal Home Loan Banks (FHLB) of Topeka, as custodian, to use as collateral to support the issuance of funding agreements. The Company maintains control over these assets and the estimated fair value at December 31, 2015 and 2014 is $526,490 and $619,665, respectively, which are reported in fixed maturity securities available for sale on the consolidated balance sheets. As of December 31, 2015 and 2014, the Company had $450,000 and $350,000, respectively, of funding agreements outstanding with the FHLB of Topeka, which are reported in accumulated contract values on the consolidated balance sheets. Other investments primarily include investments in venture capital partnerships accounted for using the cost or equity method, depending on ownership percentages, investments in real estate limited partnerships and real estate limited liability companies accounted for using the equity method, low-income housing partnerships accounted for using the proportional amortization method or equity method, Federal Home Loan Bank stock and restricted cash accounted for at cost, call options carried at fair value, and private equity securities carried at fair value. The Company records write-downs or allowances for its investments based upon an evaluation of specific investments. The Company reviews, on a continual basis, all invested assets to identify investments where the Company may have an otherthan-temporary decline in fair value below cost. Cash Equivalents The Company considers all highly liquid debt securities purchased with a remaining maturity of less than three months to be cash equivalents. Deferred Acquisition Costs (DAC) and Identifiable Intangibles DAC and acquisition related intangible assets are generally originated through the issuance of new insurance business or the purchase of existing business, either by purchasing blocks of insurance policies from other insurers or by the outright purchase of other companies. The costs of acquiring new business, which are only costs related directly to successful acquisition of new or renewal contracts, have been deferred to the extent that such costs are deemed recoverable from future premiums. Such costs include commissions, certain costs of policy issuance and underwriting, and certain agency expenses. Costs deferred related to term life and disability income insurance are amortized over the premium-paying period of the related policies, in proportion to the ratio of annual premium revenues to total anticipated premium revenues. Such anticipated premium revenues are estimated using the same assumptions used for computing liabilities for future policy benefits.

12

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) Costs deferred related to participating life, universal life-type policies and investment contracts are generally amortized over the lives of the policies, in relation to the present value of estimated gross profits from mortality, investment and expense margins. The estimated gross profits are reviewed and adjusted periodically based on actual experience and changes in assumptions. A rollforward of the amounts reflected on the consolidated balance sheets as deferred acquisition costs is as follows:

Beginning balance Acquisition costs deferred Amortization of deferred acquisition costs Adjustment for change in unrealized investment gains/losses Ending balance

$

$

Years Ended December 31 2015 2014 683,247 $ 663,653 $ 103,318 102,939 (81,348) (99,375) 24,957 (23,158) 663,653 $ 710,580 $

2013 634,918 95,040 (119,198) 72,487 683,247

To the extent that unrealized gains or losses on available for sale securities would result in an adjustment of deferred acquisition costs had those gains or losses actually been realized, the related unamortized deferred acquisition costs are recorded as an adjustment to the unrealized investment gains or losses included in accumulated other comprehensive income. Identifiable intangible assets primarily consist of the fully amortized value of business acquired (VOBA) and the value of customer relationships acquired in subsidiary acquisitions. VOBA that relates to group dental and vision policies has been amortized over 1 year in proportion to the policy renewal period. The value of customer relationships are amortized in relation to customer persistency not to exceed ten years. If customer persistency differs from the expected experience, the amortization of intangible assets will be adjusted accordingly. There were no adjustments in 2015 and 2014. The identifiable amortized intangible assets were as follows: December 31 2015 $

Gross carrying amount Accumulated amortization Net carrying amount Amortization expense

$ $

2014

23,652 $ (18,527) 5,125 $ 2,035 $

23,652 (16,492) 7,160 2,082

At December 31, 2015 and 2014, there was no impairment indicated for intangible assets. Future amortization of the intangible assets is estimated to be recognized as follows: 2016 2017 2018 2019 2020 2021 and thereafter

$

December 31 1,490 1,079 755 676 598 527

Property and Equipment Property and equipment are carried at cost of $259,270 and $248,526 less accumulated depreciation of $175,594 and $166,885 at December 31, 2015 and 2014, respectively. Property and equipment (net) primarily includes properties occupied by the Company of $42,850 and $35,214 as of December 31, 2015 and 2014, respectively, and also includes electronic data processing equipment, and furniture and equipment. The Company provides for depreciation of property and equipment using straight-line and accelerated methods over the estimated useful lives of the assets. Depreciation expense for property and equipment is included in sales and operating expenses on the consolidated statements of operations at $7,822, $8,318, and $9,496 in 2015, 2014 and 2013, respectively.

13

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) Capitalization of Software Costs Software development costs of $6,923 and $13,233 were capitalized in 2015 and 2014, respectively. Amortization expense of $7,379, $4,914 and $4,823, respectively, was recorded in sales and operating expenses on the consolidated statements of operations in 2015, 2014 and 2013. Amortization is computed using the straight-line method over the estimated useful life of the software, not to exceed 5 years. Unamortized software costs included in property and equipment on the consolidated balance sheets were $22,265 and $22,734 at December 31, 2015 and 2014, respectively. Reinsurance Receivables Reinsurance receivables include amounts due from reinsurers relating to paid and unpaid losses, reinsurance ceded reserves and the unexpired or unearned portion of reinsured policies. Other Assets Other assets include cash surrender value on a company owned life insurance policy, goodwill, receivables for uncollected premium income, prepaid expenses, and other miscellaneous receivables. Goodwill is calculated as the excess of the consideration transferred for acquisitions of businesses over the net assets recognized and represents the future economic benefits arising from other assets acquired and liabilities assumed that could not be individually identified. Goodwill is not amortized but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company tests goodwill by performing a qualitative assessment with factors including but not limited to overall financial performance and market or competitive environment conditions where it has concluded that it is more likely than not that the fair value amount is greater than the carrying amount. At December 31, 2015 and 2014, there was no impairment indicated for goodwill. The carrying amount of goodwill reported and included in other assets on the consolidated balance sheets was $13,379 as of December 31, 2015 and 2014. Separate Accounts The Company operates separate accounts on which the earnings or losses accrue exclusively to policyowners. The assets (principally investments) and liabilities of each account are clearly segregated from other assets and liabilities of the Company. The separate accounts are an investment option for pension, variable life, and variable annuity products, which the Company markets and are reported at fair value. The Company offers Calvert Variable Series, Inc. (CVS) and Calvert Variable Products, Inc. (CVP) mutual funds, which are affiliates, to policyowners through the separate accounts. Separate account investments in mutual funds offered through CVS and CVP were $1,566,908 and $1,728,147 as of December 31, 2015 and 2014, respectively. Premium Income and Policy Benefits Participating and Term Life, Accident and Health And Annuity Participating life insurance products include those products with fixed and guaranteed premiums and benefits on which dividends are paid by the Company. Premiums on participating and term life products and certain annuities with life contingencies (immediate annuities) are recognized as premium income when due. Accident and health insurance premiums are recognized as premium income over the time period to which the premiums relate. Benefits and expenses are associated with earned premiums so as to result in recognition of profits over the premium-paying period of the contracts. This association is accomplished by means of the provision for liabilities for future policy and contract benefits and the amortization of deferred policy acquisition costs. Universal Life-Type Contracts Universal life-type policies are insurance contracts with terms that are not fixed, not guaranteed and contain policyowner mortality. The terms that may be changed include one or more of the amounts assessed to the policyowner, premiums paid by the policyowner or interest accrued to the policyowner’s balance. Amounts received as payments for such contracts are reflected as deposits in accumulated contract values and are not reported as premium income. Revenues for universal life-type policies consist of contract charges assessed against policy account values for deferred policy charges, mortality risk expense, the cost of insurance and policy administration. Policy benefits and claims that are charged to expense include interest credited to contracts and benefit claims incurred in the period in excess of related policy account balances.

14

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) Investment Contracts Contracts that do not subject the Company to significant risks arising from policyowner mortality or morbidity are referred to as investment contracts. Deposit administration plans and certain deferred annuities, including funding agreements, are considered investment contracts. Amounts received as payments for such contracts are reflected as deposits in accumulated contract values and are not reported as premium revenues. Revenues for investment contracts consist of investment income and policy administration charges. Contract benefits that are charged to expense include benefit claims incurred in the period in excess of related contract balances, and interest credited to contract balances. In 2015, the Company revised its presentation of non-cash policy charges within its statements of cash flows to present these changes within cash flows from operating activities. Such amounts had previously been included within financing activities. The Company has revised the balances for 2014 and 2013 which decreased net cash from operating activities of continuing operations and increased net cash from financing activities of continuing operations by $271,533 and $256,317, respectively, to conform to the current year presentation. Reinsurance, net Reinsurance premiums are generally reflected in income in a manner consistent with the recognition of premiums on the reinsured contracts. Recognition of Mutual Fund Management and Related Fees Mutual fund management and related fees are contractually based charges accrued daily and consist of advisory, administrative services and distribution services. Fees for shareholder services are determined based on the number of shareholder accounts and shareholder transactions processed and are accrued as earned. Mutual fund fees may be subject to periodic approval by the Board of Trustees/Directors and/or shareholders of the respective mutual funds. Fees for brokerage of depository accounts are negotiated with the respective banks and/or savings institutions and are based on the average daily account balances. The fees are recognized as earned. Recognition of Broker Dealer Revenues Broker dealer revenues consist of commissions, underwriting income and service and advisory fees. Front-end sales commission is based on set rates and recognized at the time the trade is executed. Trailing commission is recognized when earned based on a percentage of the customer’s account balance. Underwriting income is recognized at the time the underwriting is completed and the income is reasonably determinable. Fees for general financial services and personal investment advisory services are recognized as they are earned. Policy and Contract Liabilities Future Policy and Contract Benefits Liabilities for future policy and contract benefits for participating and term life contracts and additional coverages offered under policy riders and disability income policies are calculated using the net level premium method and assumptions as to investment yields, mortality or morbidity, withdrawals and dividends. The term life assumptions are based on projections of past experience and include provisions for possible unfavorable deviation. These assumptions are made at the time the contract is issued. These liabilities are shown as policy and contract liabilities. Interest assumptions for participating traditional life reserves for all policies ranged from 2.0% to 6.0% for the years ended December 31, 2015 and 2014. Liabilities for future policy and contract benefits on universal life-type and investment contracts are based on the policy account balance, and are shown as accumulated contract values. Policy account balances are comprised primarily of deposits received and interest credited for the benefit of the policyowner less surrenders and withdrawals, mortality charges and administrative expenses. Policy Claim Reserves Policy claim reserves represent the estimated ultimate net cost of all reported and unreported claims incurred. In addition, a claim adjustment expense reserve is held to account for the expense associated with administering these claims. The reserves for unpaid claims are estimated using individual case basis valuations and statistical analysis. The claim adjustment expense reserve is estimated using statistical analysis. These estimates are subject to the effects of trends in claim severity and

15

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) frequency. The estimates are reviewed and adjusted as experience develops or new information becomes known and such adjustments are included in current operations. Policy claim reserves are included in policy and contract liabilities on the consolidated balance sheets. Deposit Liability If the Company determines that a reinsurance agreement does not expose the reinsurer to a reasonable possibility of a significant loss from insurance risk, the Company records the agreement using the deposit method of accounting. Under the deposit accounting, a deposit asset or liability is recorded based on the consideration paid or received. The amount of the deposit asset or liability is adjusted at subsequent reporting dates by calculating the effective yield on the deposit to reflect actual payments to date and expected future payments with a corresponding credit or charge to interest income or expense. Dividends Payable To Policyowners A portion of the Company’s business has been issued on a participating basis which is 10.3% and 10.0% of in force at December 31, 2015 and 2014, respectively. The amount of policyowners’ dividends to be paid is determined annually by the respective insurance subsidiaries’ Board of Directors. Income Taxes The Company recognizes taxes payable or refundable for the current year and deferred taxes for the tax consequences of differences between the financial reporting and tax basis of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years the temporary differences are expected to reverse. The principal assets and liabilities giving rise to such differences are unrealized capital gains and losses on certain investments, policy and contract liabilities, deferred policy acquisition costs and employee benefits. A deferred tax asset valuation allowance is established when there is uncertainty that such assets will be realized. The Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. Uncertain tax positions are evaluated based upon the facts and circumstances that exist at each reporting period. Subsequent changes in judgment based upon new information may lead to changes in recognition, derecognition, and measurement. Adjustments may result from new information, resolution of an issue with the taxing authorities, or changes in laws or regulations. The Company recognizes interest and penalties related to unrecognized benefits within the income tax expense line on the consolidated statements of operations. Accrued interest and penalties are included within the other liabilities line on the consolidated balance sheets. The Company files a life/non-life consolidated federal income tax return with its eligible affiliates. A life company may not be included in the consolidated income tax return until it has been a member of the consolidated group for five years. For the tax years 2015, 2014 and 2013, AMHC, AHC, and Ameritas Life and their includible affiliates have joined in one consolidated federal income tax return. An acquired subsidiary filed a separate federal income tax return for the tax year 2012 and the short period ending March 31, 2013 for the period prior to its March 31, 2013 disposal date. An agreement among the members of the consolidated group generally provides for distribution of consolidated income tax results as if filed on a separate income tax return basis. Accounting Pronouncements Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure In 2013, the FASB issued guidance that will require a creditor to reclassify a collateralized consumer mortgage loan to operating real estate owned upon obtaining legal title to the real estate collateral, or the borrower voluntarily conveying all interest in the real estate property to the lender to satisfy the loan through a deed in lieu of foreclosure or similar legal agreement. The existence of any borrower redemption periods subsequent to the creditor receiving legal title will not delay the creditor from being considered to have taken physical possession and therefore reclassifying the loan to a real estate asset. The guidance provides for the requirement to disclose loans in the process of foreclosure during interim and annual periods. This was effective for fiscal years beginning after December 15, 2014. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements.

16

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued) Revenue from Contracts with Customers In May 2014, the FASB issued guidance which revises the criteria for revenue recognition. Under the guidance, the transaction price is attributed to underlying performance obligations in the contract and revenue is recognized as the entity satisfies the performance obligations and transfers control of a good or service to the customer. Insurance contracts, leases, and financial instruments are excluded from the scope of the new guidance. In July 2015, the guidance adoption was deferred. The guidance is effective for reporting periods beginning after December 15, 2017 and is to be applied retrospectively. Early adoption of the guidance is not permitted. The Company is currently evaluating the impact of this guidance on its consolidated financial statements. Amendments to the Consolidation Analysis In February 2015, the FASB issued guidance affecting the consolidation evaluation for limited partnerships and similar entities, fees paid to a decision maker or service provider, and variable interests in a variable interest entity held by related parties of the reporting enterprise. The guidance is effective for reporting periods beginning after December 15, 2015. The Company is in the process of assessing the impact of adoption which is not expected to be material to the Company’s results of operations or financial position. Presentation of Debt Issuance Costs In April 2015, the FASB issued guidance that amends the accounting for debt issuance costs. The amended guidance requires that debt issuance costs related to a recognized debt liability be presented as a direct reduction in the carrying amount of the debt liability. The amortization of debt issuance costs shall be classified as interest expense. In August 2015, the FASB expanded the guidance on debt issuance costs to address debt issuance costs associated with line-of-credit agreements. The guidance allows reporting entities to defer and present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The guidance is effective for reporting periods beginning after December 15, 2015 and is to be applied retrospectively. Early adoption of the guidance is permitted, and the Company has made this election. The impact decreased other assets and surplus notes on the consolidated balance sheet by $307 at December 31, 2014. There was no impact to the consolidated statements of operations. Disclosures about Short-Duration Contracts In May 2015, the FASB issued guidance requiring expanded disclosures for insurance entities that issue short-duration contracts. The expanded disclosures are designed to provide additional insight into an insurance entity’s ability to underwrite and anticipate costs associated with insurance claims. The disclosures include information about incurred and paid claims development by accident year, on a net basis after reinsurance, for the number of years claims incurred typically remain outstanding, not to exceed ten years. Each period presented in the disclosure about claims development that precedes the current reporting period is considered required supplementary information. The expanded disclosures also include information about significant changes in methodologies and assumptions, a reconciliation of incurred and paid claims development to the carrying amount of the liability for unpaid claims and claim adjustment expenses, the total amount of incurred but not reported liabilities plus expected development, claims frequency information including the methodology used to determine claim frequency and any changes to that methodology, and claim duration. The guidance is effective for annual periods beginning after December 15, 2015 and is to be applied retrospectively. The new guidance affects disclosures only and will have no impact on the Company’s results of operations or financial position. Recognition and Measurement of Financial Assets and Financial Liabilities In January 2016, the FASB issued new guidance on the recognition and measurement of financial instruments. The new guidance changes the current accounting guidance related to (i) the classification and measurement of certain equity investments, (ii) the presentation of changes in the fair value of financial liabilities measured under the fair value option that are due to instrument-specific credit risk, and (iii) certain disclosures associated with the fair value of financial instruments. The new guidance is effective for fiscal years beginning after December 15, 2017. Early adoption is permitted for the instrument-specific credit risk provision only. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.

17

NOTE 2 - DISCONTINUED OPERATIONS On June 27, 2013 the Company entered into a definitive agreement with Stifel Bank & Trust to sell 100 percent of the stock of Acacia Federal Savings Bank (AFSB). This sale was completed as of October 31, 2013. The following table presents the amounts related to the operations and financial position of AFSB that have been reflected as discontinued operations on the consolidated statements of operations: Year Ended December 31, 2013 Other income $ 1,779 Net investment income 19,621 Sales and other realized capital gains 3,105 24,505

Sales and operating expenses Interest expense Income before taxes Income tax expense Net income

$

15,755 6,987 22,742 1,763 18,971 (17,208)

In 2014 and as a result of final purchase price adjustments, the Company realized a pre-tax loss on the disposal of $(655) and a federal income tax expense of $204 on the consolidated statement of operations under income (loss) from discontinued operations, net of tax. In 2013, the Company realized a pre-tax gain on the disposal of $30,991 and a federal income tax expense of $9,121 on the consolidated statement of operations under income (loss) from discontinued operations, net of tax. Included in the pre-tax gain on the disposal was $2,922 of estimated selling costs. Prior to the sale in 2013, residential mortgage loans with a book value of $12,047 and real estate with a book value of $1,647 were transferred from AFSB to Ameritas Life. NOTE 3 - FAIR VALUE HEDGING INSTRUMENTS The Company purchases and sells call options (Index call options) to hedge insurance contracts whose credited interest is linked to returns in Standard & Poor’s 500 Stock Index (Index) based on a formula which applies participation rates to the returns in the Index. Call options are contracts, which give the option purchaser the right, but not the obligation, to buy securities at a specified price during a specified period. The Index call options expire monthly until December 1, 2016. The Company paid and received initial fees (the option premium) to enter the option contracts. The purchased Index call options give the Company the right to receive cash at settlement if the closing Index value is above the strike price, while the written Index call options require the Company to pay cash at settlement if the closing Index value is above the strike price. The Company sells Index call options to effectively offset the proceeds the Company would receive on its purchased Index call options that represent a return above the amount that would be credited to insurance contracts electing a capped return in the Index. The Company purchases and sells exchange traded index call options (Exchange traded index call options) based on multiple equity indices to hedge equity index annuity and universal life contracts. The Company has purchased and written Exchange traded index call options that expire through October 25, 2016. The Company paid and received initial fees (the option premium) to enter the option contracts. The purchased Exchange traded index call options give the Company the right to receive cash at settlement if the closing index value is above the strike price, while the written Exchange traded index call options require the Company to pay cash at settlement if the closing index value is above the strike price. If the closing index value is below the strike price, the Exchange traded index call options expire without value. The Company purchases and sells exchange traded put options (Equity put options) based on multiple equity indices to hedge variable annuity contracts with a guaranteed lifetime withdrawal benefit rider attached. Put options are contracts, which give the option purchaser the right, but not the obligation, to sell securities at a specified price during a specified period. The Company has no outstanding purchased and written Equity put options as of December 31, 2015. The Company paid and received initial fees (the option premium) to enter the option contracts. The purchased Equity put options give the Company the right to receive cash at settlement if the closing index value is below the strike price, while the written Equity put options

18

NOTE 3 - FAIR VALUE HEDGING INSTRUMENTS, (continued) require the Company to pay cash at settlement if the closing index value is below the strike price. If the closing index value is above the strike price, the Equity put options expire without value. The Equity call options (Index call options and Exchange traded index call options) and Equity put options are carried at their fair value as disclosed in Note 13 (Fair Value Measurements). The Company is exposed to credit-related losses in the event of nonperformance by counter-parties to the Index call options. To minimize this risk, the Company enters into private options contracts with counterparties having Standard & Poor’s credit ratings of AA- or above or listed contracts guaranteed by the Chicago Board Options Exchange. The Company is required to post collateral to the brokering bank. To comply with this requirement, the Company has posted a long-term Agency CMO and a short-term Treasury bill with the bank. The collateral of $4,996 and $9,999 is recorded as an asset by the Company and included in fixed maturity securities available for sale on the consolidated balance sheets as of December 31, 2015 and 2014, respectively. The notional amount of the Equity call options (Index call options and Exchange traded index call options) at December 31, 2015 and 2014 was $30,403 and $24,867, respectively. The credit exposure is limited to the fair value of the options as follows:

Fair Values of Derivative Instruments Asset Derivatives Fair Value Consolidated Balance Sheets Location 2015 2014 Derivatives Not Designated as Hedging Instruments: Equity call option contracts owned Equity call option contracts written Total asset derivatives

Other investments Other investments

$

33,211 $ (9,096) 24,115 $

$

58,020 (20,571) 37,449

The liabilities for the insurance contracts are adjusted based on the fair value of the related embedded derivatives as follows: Fair Values of Derivative Instruments Liability Derivatives Fair Value Consolidated Balance Sheets Location 2015 2014 Derivatives Not Designated as Hedging Instruments: Equity call option contracts written Derivative Instruments: Equity index annuities Equity index universal life Variable annuity with guaranteed lifetime withdrawal benefit Total liability derivatives

Other liabilities

$

Policy and contract liabilities Policy and contract liabilities

6,059 $ 36,750 1,076

Policy and contract liabilities $

52,002 95,887 $

11,279 49,631 5,765 39,759 106,434

Information on derivatives is also disclosed in Note 11 (Liabilities for Contract Guarantees) and Note 13 (Fair Value Measurements).

19

NOTE 3 - FAIR VALUE HEDGING INSTRUMENTS, (continued) The Company buys and sells futures contracts to hedge against principal losses on variable annuity contracts with a guaranteed lifetime withdrawal benefit rider attached. Futures contracts are a standardized contractual agreement to buy or sell a particular financial instrument at a pre-determined price in the future. The gains and losses of futures contracts are derived from the daily movement of the underlying markets. These gains and losses are settled in cash through a daily variation margin. The Company sells futures contracts on certain equity indices with expiration dates of less than 6 months as well as buys and sells futures contracts on certain treasury notes and bonds, ranging in maturities between 1 and 30 years, with expiration dates of less than 6 months. The Company does not receive cash on the initial purchase or sale of futures contracts, but will receive or pay cash daily based on the movement of the underlying indices or Treasury notes. The notional amount of the Equity and Treasury Futures at December 31, 2015 and 2014 was $1,050 and $3,820, respectively. The Company is required to post collateral to the Futures Clearing Merchant (FCM) to ensure performance of its obligations under the futures contracts. To comply with this requirement, the Company usually posts short-term Treasury bills with the FCM. The collateral (Treasury bills) of $14,992 and $16,995 are recorded as an asset by the Company and included in fixed maturity securities available for sale on the consolidated balance sheets as of December 31, 2015 and 2014, respectively. Since the futures contracts are not considered an effective hedge, the total variation margin on open and closed contracts is reflected in net investment income on the consolidated statements of operations. The Company buys and sells interest rate swaps to hedge against principal losses on variable annuity contracts with a guaranteed lifetime withdrawal benefit rider attached. An interest rate swap is an agreement between two parties to exchange a stream of future cash flows based on a notional (principal) amount over a specified period of time. The company trades “plain vanilla” interest rate swaps where a fixed payment is exchanged for a floating payment where the floating payment is based on three-month LIBOR. The Company does not receive cash on the initial purchase or sale of an interest rates swap, but will receive or pay cash daily based on the change in value of the position. The notional amount of the swaps at December 31, 2015 and 2014 was $415,000 and $0, respectively. The Company is required to post collateral to the FCM to ensure performance of its obligations under the swap contracts. To comply with this requirement, the Company usually posts short-term Treasury bills with the FMC. The collateral (Treasury bills) of $19,976 and $0 is recorded as an asset by the Company and included in fixed maturity securities available for sale on the consolidated balance sheets as of December 31, 2015 and 2014, respectively. Since the swap contracts are not considered an effective hedge, the total variation margin on open and closed contracts is reflected in net investment income on the consolidated statements of operations. The gain (loss) on call and put options, futures and swaps is as follows:

Amount Recognized in Income Consolidated Statements of Operations Location Derivatives Not Designated as Hedging Instruments: Call and put options contract - open Call and put options contract - closed Futures contracts - open Futures contracts - closed Swaps contracts - open Swaps contracts - closed Total

Net investment income Net investment income Net investment income Net investment income Net investment income Net investment income

2015

$

$

20

(14,153) $ 3,694 (7,393) (8,908) (311) 11,528 (15,543) $

2014

(2,722) $ 18,159 10,807 23,431 49,675 $

2013

13,360 7,806 (586) (50,316) (29,736)

NOTE 4 - CLOSED BLOCKS The Company has established three Closed Blocks of policies: (a) the first on October 1, 1998 in connection with the reorganization of Ameritas Life from a mutual company to a stock company, (b) the second on July 1, 2005 in connection with the reorganization of The Union Central Life Insurance Company from a mutual company to a stock company, and (c) the third on July 1, 2007, in connection with the reorganization of Acacia Life Insurance Company that occurred in 1999 from a mutual company to a stock company (collectively, the Closed Blocks). The Company formed these closed blocks of policies, under arrangements approved by the Insurance Departments of the State of Nebraska, Ohio or the District of Columbia, as appropriate, to provide for dividends on policies that were in force on each respective effective date and which were within the classes of individual policies, for which the Company had a dividend scale in effect at those dates. The Closed Blocks were designed to give reasonable assurance to owners of affected policies that the assets will be available to support such policies, including maintaining dividend scales in effect at the effective dates, if the experience underlying such scales continues. The assets, including income thereon, will accrue solely to the benefit of the owners of policies included in each block until the respective block is no longer in effect. The financial results of the Closed Blocks, while prepared in accordance with GAAP, reflect the provisions of the approved arrangement and not the actual results of operations and financial position. The arrangement provides for the level of expenses charged to the Closed Blocks, actual expenses related to the Closed Blocks’ operations are charged outside of the Closed Blocks; therefore, the contribution or loss from the Closed Blocks does not represent the actual operations of the Closed Blocks. Summarized financial information for the Closed Blocks included on the consolidated financial statements is as follows:

2015 Liabilities: Policy and contract liabilities Accumulated contract values Dividends payable to policyowners Other liabilities (including PDO $633 - 2015, $13,360 - 2014) Total Closed Block liabilities Assets: Fixed maturity securities held to maturity (fair value $7,428 - 2015, $17,556 - 2014) Fixed maturity securities available for sale (amortized cost $616,863 - 2015, $630,062 - 2014) Mortgage loans on real estate Loans on insurance policies Cash and cash equivalents Accrued investment income Other assets Total Closed Block assets Excess of reported Closed Block liabilities over Closed Block assets Amounts included in accumulated other comprehensive income: Unrealized investment gains, net of tax Allocated to PDO, net of tax Maximum future earnings to be recognized from Closed Block assets and liabilities

21

$

December 31 2014

933,702 $ 57,909 12,946 4,317 1,008,874

7,269

16,726

632,138 123,567 98,544 12,275 10,790 19,001 903,584 105,290

670,201 119,438 102,945 13,786 11,206 12,584 946,886 102,764

9,928 (412) $

955,718 60,889 14,175 18,868 1,049,650

114,806 $

26,091 (8,684) 120,171

NOTE 4 - CLOSED BLOCKS, (continued)

2015 Change in policyowner dividend obligation: Balance at beginning of period Net unrealized investment activity Balance at end of period

13,360 $ (12,727) 633

$

Income: Premiums Net investment income Total Closed Block income Benefits and expenses: Policy benefits Policyowner dividends Sales and operating expenses Total Closed Block benefits and expenses Closed Block income, net of closed block benefits and expenses, before income taxes Income taxes Closed Block income, net of closed block benefits and expenses and income taxes

Years ended December 31 2014 2013

$

10,063 $ 3,297 13,360

48,107 (38,044) 10,063

42,115 42,634 84,749

45,614 46,117 91,731

46,372 51,229 97,601

56,110 20,005 4,224 80,339

59,358 22,217 4,689 86,264

63,088 24,084 5,758 92,930

4,410 1,547

5,467 1,918

4,671 1,636

2,863 $

3,549 $

3,035

NOTE 5 - INVESTMENTS Investment income from continuing operations summarized by type of investment is as follows:

Years Ended December 31 2014 4,172 $ 2,560 $ 356,682 351,587 1,573 4,077 7,890 7,541 (1,717) 3,534 87,523 81,426 19,788 19,977 9,709 10,177 (15,543) 49,675 20,533 27,861 488,998 560,027 31,758 34,855 525,172 $ 457,240 $

2015 Fixed maturity securities held to maturity Fixed maturity securities available for sale Fixed maturity securities trading Equity securities available for sale Equity securities trading Mortgage loans on real estate, net Loans on insurance policies Real estate Derivatives Other investments and cash and cash equivalents Gross investment income Investment expenses Net investment income

$

$

2013 4,895 354,584 7,312 5,494 8,508 83,319 18,298 10,216 (29,736) 26,504 489,394 41,815 447,579

The net gains (losses) recognized during 2015, 2014 and 2013 on fixed maturity securities trading and equity securities trading held at December 31, 2015, 2014 and 2013 were $(4,138), $2,673 and $10,675, respectively.

22

NOTE 5 - INVESTMENTS, (continued) Net pretax realized investment gains (losses) from continuing operations were as follows:

2015 Net gains (losses) on disposals, including calls of investments Fixed maturity securities available for sale Equity securities available for sale Mortgage loans on real estate, net Real estate Real estate held for sale Other investments Property and equipment Net losses on writedowns Fixed maturity securities available for sale Equity securities available for sale Mortgage loans on real estate, net Real estate Real estate held for sale Other investments Net pretax realized investment gains (losses)

$

$

Years Ended December 31 2014

6,826 30,167 2,868 895 19,324 320

$

(8,751) (3,129) (1,848) (5,949) 40,723 $

2013

14,521 $ 17,656 2,352 1,476 8,136 (229)

13,673 16,786 949 2,155 2,701 1,860 (260)

(4,514) (3,828) (1,376) (262) (846) 33,086

(1,932) (197) (52) (798) (773) (675) 33,437

$

Proceeds from sales of securities and gross gains and losses realized on those sales were as follows for continuing operations:

Fixed maturity securities available for sale Equity securities available for sale

Year Ended December 31, 2015 Proceeds Gains Losses $ 346,846 $ 10,416 $ 12,342 242,479 51,579 24,543

Fixed maturity securities available for sale Equity securities available for sale

Year Ended December 31, 2014 Proceeds Gains Losses $ 244 $ 170,480 6,360 $ 100,031 22,199 4,683

Fixed maturity securities available for sale Equity securities available for sale

Year Ended December 31, 2013 Proceeds Gains Losses $ 223,033 $ 13,951 $ 605 106,623 18,735 3,675

23

NOTE 5 - INVESTMENTS, (continued) The cost/amortized cost and fair value of investments in securities by type of investment were as follows: December 31, 2015 Cost/ Amortized Cost Fixed maturity securities held to maturity U.S. Treasury securities and obligations of U.S. government agencies U.S. corporate securities Residential mortgage-backed securities Foreign corporate securities Total fixed maturity securites held to maturity Fixed maturity securities available for sale U.S. Treasury securities and obligations of U.S. government agencies Debt securities issued by states of the U.S. and political subdivisions of the states Foreign government securities U.S. corporate securities Residential mortgage-backed securities Commercial mortgage-backed securities Asset-backed securities Collateralized debt obligations Foreign corporate securities Total fixed maturity securities available for sale Equity securities available for sale

$

$

5,419 9,220 408 15,500 30,547

$

157,901

$

89,374 3,125 5,279,111 996,770 192,037 745,837 4,546 1,683,734 $ 9,152,435 $ 329,272

Fair Value

Gross Unrealized Gains Losses

$

$

125 687 36 226 1,074

$

$

-

$

5,544 9,907 444 15,726 31,621

$

6,346

$

65

$

164,182

$ $

2,950 1 183,941 46,212 2,372 7,075 408 45,354 294,659 76,277

$ $

560 13 87,715 6,134 311 14,981 40,036 149,815 10,070

91,764 3,113 5,375,337 1,036,848 194,098 737,931 4,954 1,689,052 $ 9,297,279 $ 395,479

At December 31, 2015, the Company had fixed maturity securities with a carrying amount of $126,802 and cash of $6,934 on deposit with various state insurance departments. Deposits with states include fixed maturity securities with a carrying value of $118,081 at December 31, 2015 that the Company has in a Regulation 109 deposit account with the State of New York.

24

NOTE 5 - INVESTMENTS, (continued)

December 31, 2014 Cost/ Amortized Cost Fixed maturity securities held to maturity U.S. Treasury securities and obligations of U.S. government agencies U.S. corporate securities Residential mortgage-backed securities Foreign corporate securities Total fixed maturity securites held to maturity Fixed maturity securities available for sale U.S. Treasury securities and obligations of U.S. government agencies Debt securities issued by states of the U.S. and political subdivisions of the states Foreign government securities U.S. corporate securities Residential mortgage-backed securities Commercial mortgage-backed securities Asset-backed securities Collateralized debt obligations Foreign corporate securities Total fixed maturity securities available for sale Equity securities available for sale

Gross Unrealized Gains Losses

$

$

5,478 15,718 542 33,000 54,738

$

181,702

$

32,806 4,317,463 1,060,038 94,907 629,734 9,404 1,457,569 $ 7,783,623 $ 275,508

$

$

608 1,264 50 1,101 3,023

$

9,243

$ $

3,220 305,461 58,489 2,815 11,256 511 86,717 477,712 114,142

Fair Value

$

$

-

$

6,086 16,982 592 34,101 57,761

$

53

$

190,892

$ $

13,125 4,545 760 2,161 5,654 26,298 2,233

36,026 4,609,799 1,113,982 96,962 638,829 9,915 1,538,632 $ 8,235,037 $ 387,417

At December 31, 2014, the Company had fixed maturity securities with a carrying amount of $130,804 and cash of $4,177 on deposit with various state insurance departments. Deposits with states include fixed maturity securities with a carrying value of $121,666 at December 31, 2014 that the Company placed into a Regulation 109 deposit account with the State of New York.

25

NOTE 5 - INVESTMENTS, (continued) An aging of unrealized losses on the Company’s investments except those classified as trading were as follows: December 31, 2015 12 months or more Unrealized Fair Value Losses

Less than 12 months Unrealized Losses Fair Value Fixed maturity securities: U.S. Treasury securities and obligations of U.S. government agencies Debt securities issued by states of the U.S. and political subdivisions of the states Foreign government securities U.S. corporate securities Residential mortgage-backed securities Commercial mortgage-backed securities Asset-backed securities Collateralized debt obligations Foreign corporate securities Total fixed maturity securities Equity securities Cost method investments Total

$

$

5,310

$

47

$

$

1,368

$

18

Unrealized Losses

Fair Value

$

6,678

$

65

48,583 2,508 1,985,977

560 13 79,720

52,821

7,995

48,583 2,508 2,038,798

560 13 87,715

199,387

3,968

37,278

2,166

236,665

6,134

66,593 485,066 770,382 3,563,806 136,043 590 3,700,439

200 11,180 38,948 134,636 9,457 127 $ 144,220

4,392 91,944 10,224 198,027 2,012 10 200,049

111 3,801 1,088 15,179 613 69 $ 15,861

70,985 577,010 780,606 3,761,833 138,055 600 3,900,488

311 14,981 40,036 149,815 10,070 196 160,081

Less than 12 months Unrealized Losses Fair Value Fixed maturity securities: U.S. Treasury securities and obligations of U.S. government agencies U.S. corporate securities Residential mortgage-backed securities Commercial mortgage-backed securities Asset-backed securities Collateralized debt obligations Foreign corporate securities Total fixed maturity securities Equity securities Cost method investments Total

$

Total

2,326 272,190

$

51 6,535

$

$

December 31, 2014 12 months or more Unrealized Fair Value Losses

$

146 252,222

$

2 6,590

$

Total Fair Value

$

2,472 524,412

Unrealized Losses

$

53 13,125

43,859

720

133,634

3,825

177,493

4,545

10,345 285,617 87,470 701,807 30,194 732,001

98 1,984 2,768 12,156 2,020 14,176

25,348 23,195 121,431 555,976 1,921 34 557,931

662 177 2,886 14,142 213 45 14,400

35,693 308,812 208,901 1,257,783 32,115 34 1,289,932

760 2,161 5,654 26,298 2,233 45 28,576

$

26

$

$

$

$

NOTE 5 - INVESTMENTS, (continued) Of the $149,815 and $26,298 of total unrealized losses on fixed maturity securities as of December 31, 2015 and 2014, approximately $132,360 and $21,898 was related to unrealized losses on investment grade fixed maturity securities. Investment grade is defined as a security with a rating from the National Association of Insurance Commissioners (NAIC) of 1 or 2, a rating of Aaa, Aa, A or Baa from Moody’s, a rating of AAA, AA, A, or BBB from Standard and Poor’s (S&P), a rating of AAA, AA, or A from Fitch, or an equivalent internal rating if an external rating is not available. Of the $15,179 and $14,142 of unrealized losses of 12 months or more as of December 31, 2015 and 2014, approximately $12,948 and $12,772 was related to unrealized losses on investment grade securities. For the securities in the prior two tables, the Company does not intend to sell the fixed maturity securities and it is not more likely than not the Company will be required to sell the fixed maturity security with unrealized losses before recovery of the amortized cost. The Company has the intent and ability to hold the equity securities and cost method investments with unrealized losses for a period of time sufficient for them to recover. The Company regularly reviews its securities in an unrealized loss position to determine if other-than-temporary-impairments (OTTI) exist. Under the current OTTI accounting model, if the Company has the intent to sell a security or it is more likely than not that the Company will be required to sell the security before recovery, an OTTI loss will be recognized in net income equal to the difference between fair value and amortized cost. If the Company does not intend to sell the security before recovery and it is not more likely than not that the Company will be required to sell the security before recovery, the Company must evaluate the security for credit losses. If a credit loss exists, only the amount of impairment associated with the credit loss is recognized in net income. The portion of unrealized loss relating to all other factors is recorded in accumulated other comprehensive income. The following paragraphs describe the Company’s OTTI process for the fixed maturity securities and equity securities with significant unrealized losses and the assumptions used to estimate potential credit losses: Fixed maturity securities: • For other than residential and commercial mortgage-backed and asset-backed fixed maturity securities, the Company monitors several factors to determine if an unrealized loss should be recognized as OTTI. Based on the evaluation of the prospects of the issuers, including, but not limited to, the Company’s intentions to sell or whether it is more likely than not that the Company will be required to sell the security prior to recovery, the length of time and magnitude of the unrealized loss, credit ratings of the issuers, failure of the issuer to make contractual payments, management judgment of future performance, and relevant independent research, the Company has concluded that the declines in fair values of the Company’s investments in U.S. corporate, foreign, U.S. Treasury securities and obligations of U.S. government agencies fixed maturity securities at December 31, 2015 and 2014 were temporary. •

For residential and commercial mortgage-backed and asset-backed fixed maturity securities, credit impairment is assessed by estimating future cash flows from the underlying collateral. The cash flow estimates are based on actual cash flows through the current period and projections of the remaining cash flows. Projections of the remaining cash flows are developed using assumptions for prepayment rate, default rate, loss severity, rating agency action, and other credit performance by security type based on the underlying collateral and vintage. The estimated future cash flows are discounted to present value. If the present value of future cash flows is less than amortized cost, the Company recognizes the estimated credit loss in earnings, with the remaining unrealized loss recognized in accumulated other comprehensive income. Based on the evaluation of estimated future cash flows, the Company has identified the non-credit component of OTTI losses of $(1,095), $(21) and $(1,900) on residential mortgage backed securities at December 31, 2015, 2014 and 2013, respectively, which were recognized coming from accumulated other comprehensive income. Additionally based on the evaluation of estimated future cash flows, the Company has concluded that all other declines in fair values of the Company’s investments in mortgage-backed fixed maturity securities at December 31, 2015 and 2014 were temporary.

27

NOTE 5 - INVESTMENTS, (continued) Equity securities • For public equity securities and retail and institutional mutual fund investments with an unrealized loss greater than 12 months, such unrealized loss was less than 25% of the Company’s carrying value of each equity security. The Company considers various factors when considering if a decline in fair value of an equity security is other-thantemporary, including but not limited to, the length of time and magnitude of the unrealized loss; the volatility of the investment; analyst recommendations and price targets; opinions of the Company’s investment managers; market liquidity, and the Company’s intent and ability to hold the investments until recovery. Based on an evaluation of these factors, the Company has concluded that the declines in the fair values of the Company’s investments in these public equity securities and retail and institutional mutual fund investments at December 31, 2015 and 2014 were temporary. The table below presents a rollforward of the cumulative credit loss component of OTTI loss recognized in net income on fixed maturity residential mortgage-backed securities still held by the Company at December 31, 2015 and 2014 for which $6,047 and $6,894 was recognized in accumulated other comprehensive income at December 31, 2015 and 2014, respectively: Credit Losses 2014 2015 Cumulative credit loss at beginning of period $ 27,751 $ 36,986 Additions: Previously other-than-temporarily impaired securities 838 Securities without prior impairments 679 1,010 Total additions 1,517 1,010 Reductions Sales and repayments of fixed maturity securities on which credit losses were recognized (5,378) (10,245) Cumulative credit loss at end of period $ 23,890 $ 27,751 The total aggregate cost of the Company’s cost method investments was $20,551 and $18,036 at December 31, 2015 and 2014, respectively. All cost method investments were evaluated for impairment at December 31, 2015, and $600 of such investments had unrealized losses which totaled $196. In 2014, $34 of cost method investments had unrealized losses which totaled $45. Based on the Company’s ability and intent to hold the investments until recovery and management’s evaluation of the investments, the Company does not consider such investments with unrealized losses to be other-than-temporarily impaired at December 31, 2015 and 2014. The Company has exposure to subprime mortgage loans within its total investments in non-agency residential mortgagebacked securities (RMBS) and asset-backed securities (ABS). The Company manages its exposure to non-agency subprime mortgage loans in several ways. First, the Company monitors its exposure level to non-agency RMBS and ABS against defined restrictions prescribed by its Investment Policy. Restrictions include exposure at the aggregate level to non-agency RMBS and ABS along with exposure to ratings classes and subsectors. Also, the Company continually tracks non-agency subprime RMBS and ABS for factors including credit performance, rating agency actions, prepayment trends and delevering. Loans with trends that may indicate underperformance are monitored closely for any further deterioration that may result in action by the Company. As of December 31, 2015 and 2014, the Company’s total investment in non-agency RMBS and ABS represents securities with an adjusted cost basis of $249,993 and $145,251, respectively, and a fair value of $261,780 and $158,258, respectively. As of December 31, 2015 and 2014, the Company’s subprime exposure related to non-agency subprime RMBS and ABS represents securities with an adjusted cost basis of $46,009 and $58,975, respectively, and a fair value of $51,646 and $65,078, respectively. The difference related to the non-agency subprime RMBS and ABS of $5,637 and $6,103, respectively, is recognized in unrealized investment gains (losses) in accumulated other comprehensive income.

28

NOTE 5 - INVESTMENTS, (continued) The amortized cost and fair value of fixed maturity securities by contractual maturity at December 31, 2015 are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Due in one year or less Due after one year through five years Due after five years through ten years Due after ten years Mortgage-backed and asset-backed securities Other securities with multiple repayment dates Total

Available for Sale Amortized Fair Cost Value $ 261,947 $ 265,871 2,213,873 2,342,349 3,111,822 3,096,549 1,443,707 1,432,423 1,939,190 1,973,831 181,896 186,256 $ 9,152,435 $ 9,297,279

Held to Maturity Amortized Fair Cost Value $ 19,101 $ 19,322 3,818 4,049 408 444 7,220 7,806 $ 30,547 $ 31,621

Mortgage loans on real estate are summarized as follows:

Residential first mortgages Commercial real estate Construction and land development Second trusts and home equity Total loans - gross Net deferred loan costs Allowances for losses on loans Total loans - net

$

$

December 31 2015 2014 192,225 $ 214,857 1,388,127 1,294,277 8,450 2,770 14,763 21,404 1,603,565 1,533,308 1,050 1,247 (6,719) (6,803) 1,597,896 $ 1,527,752

Commercial mortgage loans are evaluated individually for impairment, while residential mortgage loans are evaluated collectively for impairment. Loans are considered impaired when it is probable that the Company will not collect contractual principal and interest. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls are generally not classified as impaired. Management determines the significance of payment delays and shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of shortfall in relation to the principal and interest owed. Impairments are measured on a loan-by-loan basis for commercial mortgage loans and residential mortgage loans by the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of collateral if the loan is collateral dependent. The Company requires collateral on residential real estate loans and originates loans generally with loan-to-value ratios of no greater than 80% at the time of origination, unless appropriate private mortgage insurance is obtained. For commercial real estate mortgages, the Company requires collateral on original loans with a loan-to-value ratio of no greater than 75% at the time of origination. The amount of collateral on non-real estate loans is based on management’s credit assessment of the customer.

29

NOTE 5 - INVESTMENTS, (continued) The Company’s key credit quality indicators as discussed below for its loans are summarized as follows:

December 31, 2015 1,377,063 19,514 206,988 $ 1,603,565

Debt service coverage ratio grade Loan to value grade Loans based on payment activity grade Total loans - gross

$

December 31, 2014 1,280,461 16,586 236,261 $ 1,533,308

Debt service coverage ratio grade Loan to value grade Loans based on payment activity grade Total loans - gross

$

For the commercial mortgage loans, debt service coverage ratio (DSCR) is considered a key credit quality indicator for loans that are income dependent while loan to value and borrower financial strength are considered key credit quality indicators for borrower-occupied loans. Debt service coverage ratios compare a property’s net operating income to the borrower’s principal and interest payments. Loan to value and debt service coverage ratios are updated annually or as warranted by economic conditions or impairment considerations. Debt service coverage ratios for income dependent loans on commercial real estate are summarized as follows: December 31 2015 DSCR Distribution Below 1.0 1.0 - 1.2 1.2 - 1.8 Greater than 1.8

$

2014 71,648 211,887 721,095 372,433 1,377,063

$

$

86,367 222,151 669,687 302,256 1,280,461

$

Mortgage loans with a debt service coverage ratio below 1.0 that are not considered impaired primarily relate to instances where the borrower has the financial capacity to fund the revenue shortfalls from the properties for the foreseeable future, the decrease in cash flows is considered temporary, or there are other risk mitigating factors. Loan to value for borrower-occupied commercial loans is summarized as follows:

December 31 2015 Loan to Value Below 60% 60-75%

$ $

2014 13,529 5,985 19,514

$ $

12,447 4,139 16,586

The Company had no nonperforming commercial mortgage loans as of December 31, 2015 and 2014. There were no nonperforming construction mortgage loans as of December 31, 2015 and 2014.

30

NOTE 5 - INVESTMENTS, (continued) All assets are reviewed as appropriate to their size and presentation of risk. In general, large, individual loans which represent a greater element of risk will be reviewed quarterly. Other loans such as residential mortgage loans will be reviewed based upon asset size and payment history. Any asset not reviewed in detail as a single item will be reviewed as part of an asset class. Management regularly reviews credit quality indicators including the composition of the loan portfolio, net charge-offs, nonperforming loans, performance of troubled debt restructurings (TDRs) and general economic conditions in its market. This review process is assisted by frequent internal reporting of loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and potential problem loans. Credit risk profile based on payment activity for residential mortgage loans held were as follows: Residential First Second Trusts Mortgages and Home Equity $ 184,018 $ 14,296 8,207 467 $ 192,225 $ 14,763

December 31, 2015 Performing Nonperforming Total

Residential First Second Trusts Mortgages and Home Equity $ 203,245 $ 20,869 11,612 535 $ 214,857 $ 21,404

December 31, 2014 Performing Nonperforming Total

Residential mortgage loans which are delinquent as to principal and or interest 90 days or more are classified as nonperforming loans. The Company had nine properties that foreclosed in 2015 with a carry value of $2,413 and fourteen additional properties with a carry value of $4,871 in the process of foreclosure. The Company had four properties that foreclosed in 2014 with a carry value of $628 and twenty-three additional properties with a carry value of $7,326 in the process of foreclosure.

31

NOTE 5 - INVESTMENTS, (continued) The activity in the allowance for loan losses is summarized as follows:

At December 31, 2015 Allowance for loan losses: Balance at January 1 Charge-offs Recoveries Provisions Balance at December 31 Ending balance: individually evaluated for impairment Ending balance: collectively evaluated for impairment Loan receivables: Ending balance - net Ending balance: individually evaluated for impairment Ending balance: collectively evaluated for impairment

At December 31, 2014 Allowance for loan losses: Balance at January 1 Charge-offs Recoveries Provisions Balance at December 31 Ending balance: individually evaluated for impairment Ending balance: collectively evaluated for impairment Loan receivables: Ending balance - net Ending balance: individually evaluated for impairment Ending balance: collectively evaluated for impairment

Residential First Mortgages $

$

(6,136) 2,084 (608) (1,151) (5,811)

$ $

Construction and Land Development

Commercial Real Estate

(5,811)

$

Second Trusts and Home Equity

Total

-

$

$

(667) $ 375 (616) (908) $

$

- $ 82 (82) - $

$

-

$

-

$

-

$

$

(908) $

-

$

-

$

(6,803) 2,541 (608) (1,849) (6,719) (6,719)

$

192,225

$

1,388,127

$

8,450

$

14,763

$

1,603,565

$

6,453

$

1,388,127

$

8,450

$

240

$

1,403,270

$

185,772

$

-

$

-

$

14,523

$

200,295

Residential First Mortgages $

$ $ $

Construction and Land Development

Commercial Real Estate

(2,699) 1,308 (10) (4,735) (6,136) (6,136)

$

Second Trusts and Home Equity

Total

-

$

$

(826) $ (761) 920 (667) $

$

- $ 13 (13) - $

$

-

$

-

$

-

$

$

(667) $

-

$

-

$

(3,525) 1,321 (771) (3,828) (6,803) (6,803)

$

214,857

$

1,294,277

$

2,770

$

21,404

$

1,533,308

$

9,923

$

1,294,277

$

2,770

$

535

$

1,307,505

$

204,934

$

-

$

-

$

20,869

$

225,803

32

NOTE 5 - INVESTMENTS, (continued) An aging analysis of the loans held by the Company at December 31, 2015 and 2014 is summarized as follows:

December 31, 2015 Residential First Mortgage Commercial Real Estate Construction & Land Development Second Trusts & Home Equity Total

Current $

$

December 31, 2014 Residential First Mortgage Commercial Real Estate Construction & Land Development Second Trusts & Home Equity Total

180,258 $ 1,388,127 8,450 14,296 1,591,131 $

$

$

3,329 $ 3,329 $

31-59 days

Current 198,893 $ 1,294,277 2,770 20,205 1,516,145 $

90 days and greater

60-89 days

31-59 days

431 $ 431 $

3,740 $ 568 4,308 $

8,207 $ 467 8,674 $

90 days and greater

60-89 days 612 $ 96 708 $

Total Past Due 11,967 $ 467 12,434 $

Total Past Due

11,612 $ 535 12,147 $

192,225 1,388,127 8,450 14,763 1,603,565

Total Gross

15,964 $ 1,199 17,163 $

Loans>90 days and accruing

Total Gross

214,857 1,294,277 2,770 21,404 1,533,308

$

-

$

Loans>90 days and accruing $

-

$

A summary of information pertaining to impaired loans held at December 31, 2015 and 2014 is as follows: Unpaid Contractual Principal Balance

December 31, 2015 Residential First Mortgage Commercial Real Estate Second Trusts & Home Equity Total

$

$

Residential First Mortgage Commercial Real Estate Second Trusts & Home Equity Total

60,755 $ 6,573 8,506 75,834 $ Unpaid Contractual Principal Balance

December 31, 2014 $

$

Recorded Recorded Investment Investment with No with Allowance Allowance 53,167 $ 6,439 6,051 65,657 $

- $ - $

Recorded Recorded Investment Investment with No with Allowance Allowance

30,624 $ 6,848 9,583 47,055 $

23,869 $ 6,373 6,911 37,153 $

- $ - $

Total Recorded Investment

Related Allowance

53,167 $ 6,439 6,051 65,657 $

Total Recorded Investment

- $ - $

Related Allowance

23,869 $ 6,373 6,911 37,153 $

- $ - $

Average Recorded Investment 36,953 5,160 6,774 48,887

Average Recorded Investment 23,731 6,394 7,042 37,167

Year to date Interest Income Recognized $

$

1,737 260 232 2,229

Year to date Interest Income Recognized $

$

766 372 287 1,425

The Company considers all TDRs to be impaired and defines TDRs as loans whose terms have been modified to provide for a reduction of either interest or principal because of deterioration in the financial condition of the borrower. A loan extended or renewed at a stated interest rate equal to the current interest rate for new debt with similar risk is not considered a TDR. Once an obligation has been classified as a TDR it continues to be considered a TDR until paid in full or until the loan returns to performing status and yields a market interest rate equal to the current interest rate for new debt with similar risk. TDRs are evaluated by management on a regular basis utilizing the Company’s risk grading matrix. TDRs are evaluated for impairment on a loan-by-loan basis in accordance with the Company’s impairment methodology. The Company does not participate in any specific government or Company-sponsored loan modification programs. All restructured loan agreements are individual contracts negotiated with a borrower.

33

NOTE 5 - INVESTMENTS, (continued) In 2015, the Company had ninety-six new TDRs for residential mortgage loans with a recorded value of $31,543 and no new TDRs for commercial mortgage loans. Additionally, there were nine short sales in 2015. In 2014, the Company had twelve new TDRs for residential mortgage loans with a recorded value of $2,992 and no new TDRs for commercial mortgage loans. Additionally, there were ten short sales in 2014. TDRs related to residential mortgage loans were $46,158 and $16,913 and commercial mortgage loans were $2,789 and $6,373 as of December 31, 2015 and 2014, respectively. The Company had no other TDR balances in 2015 and 2014. For TDRs of residential mortgage loans, the restructurings consisted of revisions to interest rates and timing of principal repayments. For TDRs of commercial mortgage loans, the restructurings consist of forbearance agreements allowing regular loan payments to stop, but interest to continue to accrue and increase the amount of the loan obligation. After the forbearance period, the payment arrangements are restructured to meet the ability of the borrower to repay the loan over an extended period. At December 31, 2015 and 2014, $47,297 and $21,630, respectively, or 96.63% and 92.89%, respectively, of TDRs were performing according to the terms of their restructured agreements NOTE 6 - INCOME TAXES The items that give rise to deferred tax assets and liabilities relate to the following:

December 31 2015 Future policy and contract liabilities Deposit liability Policyholder dividends Pension and post-retirement benefits Policyowner dividend obligation Provision for loan losses Other Net operating/capital losses and credits Gross deferred tax asset Deferred policy acquisition costs Net unrealized investments gains Other Gross deferred tax liability Net deferred tax liability

$

$

42,771 $ 10,628 4,965 52,918 222 2,352 26,595 612 141,063 124,686 82,041 18,405 225,132 (84,069) $

2014 48,271 5,349 65,244 4,676 2,381 28,085 15,052 169,058 145,249 209,644 18,603 373,496 (204,438)

The difference between the U.S. federal income tax rate and the consolidated tax provision rate for continuing operations is summarized as follows: Years ended December 31 2015 2014 35.00 % 35.00 % 2.38 1.80 (2.06) (3.33) (0.30) (0.29) (0.44) 0.52 0.46 33.20 % 35.54 %

Federal statutory tax rate Affordable Care Act assessment Dividend received deduction Tax credits Change in uncertain tax positions Other Effective tax rate

34

2013 35.00 % (2.92) (0.34) 0.02 (1.56) 30.20 %

NOTE 6 - INCOME TAXES, (continued) Ameritas Life has a $612 foreign tax credit carryover as of December 31, 2015. The foreign tax credit carryforward of $38, $410, and $164, will expire in 2022, 2019, and 2018, respectively. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. At December 31, 2015 and 2014, the Company accrued $0 for the payments of interest and penalties on the consolidated balance sheets and $0, $(457) and $53 was recognized for the years ended December 31, 2015, 2014 and 2013, respectively, for interest and penalties on the consolidated statements of operations. The Company has recorded an income tax expense from continuing operations of $81,508, $26,625 and $26,171 for the years ended December 31, 2015, 2014 and 2013, respectively. Additionally, the Company has recognized deferred tax items from continuing operations as a (benefit) expense of $(20,258), $28,091 and $30,846 for the years ended December 31, 2015, 2014 and 2013, respectively. In 2012, the Internal Revenue Service completed its field examination of AMHC consolidated federal income tax returns for years 2007-2009. AMHC has accepted the IRS field examination report. The Joint Committee on Taxation (Joint Committee) accepted the IRS field examination report in March 2013. The Company’s management has determined that the settlement is not material. The IRS completed a field examination of a previously un-merged subsidiary (The Union Central Life Insurance Company or Union Central) for tax year 2008 and limited scope examinations for tax years 2009-2010. The Union Central examinations also included a review of amended returns filed for tax years 2003-2008, which had been at IRS appeals, along with the IRS field examination reports for tax years 2004-2007. Union Central is in agreement with all the IRS field examinations reports forwarded to IRS appeals in January 2013. The Joint Committee accepted the Union Central IRS field examination report in August 2014. The Company’s management has determined that the settlement is not material. The Company is subject to taxation in the United States and various states. As of December 31, 2015, the Company’s tax years, generally, for 2012-2015 are subject to examination by the tax authorities.

35

NOTE 7 - EMPLOYEE AND AGENT BENEFIT PLANS Defined Benefit Plans AHC and certain of its subsidiaries (the Sponsors) are sponsors and/or administrators of non-contributory defined benefit plans (the Plans) covering eligible employees. Benefits are based on the average of the employee’s compensation over their career. The Sponsors use a December 31 measurement date for their Plans. Obligations and Funded Status at December 31:

Pension Benefits 2015 2014 385,252 $ 430,096 $ 322,754 332,541 (62,498) (97,555) 20,000 20,000 30,842 20,419 369,762 411,228 16,128 10,878

2013 Projected benefit obligation $ 363,162 Fair value of plan assets 305,565 Funded status (57,597) Employer contributions 20,000 Benefit payments 28,927 Accumulated benefit obligation 345,503 Net periodic benefit cost 19,988 Amounts recognized in the balance sheet consist of: Other liabilities $ 62,498 $ 97,555 $ 57,597 Amounts amortizing into net periodic benefit cost, net of tax, consist of: Prior service cost $ 4 $ (203) $ (366) Net loss 8,306 5,192 9,876 Amounts recognized in other comprehensive income, net of tax, arising during the period consist of : Net gain (loss) $ 8,350 $ (37,083) $ 36,690 Amounts recognized in accumulated other comprehensive income, net of tax, not yet recognized in net periodic benefit cost consist of: Prior service cost $ (8) $ (12) $ 191 Net loss (85,903) (102,560) (70,669) Information for pension plans with an accumulated benefit obligation in excess of plan assets: Projected benefit obligation $ 48,494 $ 430,096 $ 46,644 Accumulated benefit obligation 47,541 411,228 44,718 Fair value of plan assets 332,541 Amounts expected to be amortized into net periodic benefit cost, net of tax, in the next twelve months consist of the following: Prior service cost $ 4 $ 4 $ (203) Net loss 7,336 8,111 5,106 The qualified pension plan with an accumulated benefit obligation of $322,221 and $300,785 is not included above for December 31, 2015 and 2013, respectively as the fair value of plan assets of $322,754 and $305,565, respectively are in excess of the benefit obligation. The projected benefit obligation for this qualified pension plan is $336,758 and $316,518, respectively at December 31, 2015 and 2013. There are no pension plan assets expected to be returned to the Company during the twelve month period ending December 31, 2016. Investment Policies and Strategies The investment objective of the Plans is to maximize the real rate of return (adjusted for inflation) within prudent limits on the level of risk incurred. At a minimum, the investment objective is to generate a positive real rate of return. The current asset allocation mix between equity and fixed income asset classes is targeted at 50% equity and 50% fixed income. Due to the market conditions at December 31, 2015, the actual allocations were higher than target for fixed income. Except where prudence dictates otherwise, the assets of the Plans will be reviewed monthly and will be rebalanced when the ratio of equity to fixed income varies by more than 3% from the current approved asset allocation mix.

36

NOTE 7 - EMPLOYEE AND AGENT BENEFIT PLANS, (continued) All assets of the Plans may be allocated to and invested in any one or more of these basic forms of investment: • • •

Fixed income securities, including, but not limited to, fixed income or general account options under an insurance company contract. Equity issues, including but not limited to, common stocks or units of beneficial interest in one or more pooled separate accounts of an insurance company. Cash or cash equivalents, including but not limited to, units of beneficial interest in one or more pooled separate accounts of an insurance company.

The Plans currently do not invest in derivative instruments. The assets in the Plans are diversified in order to minimize significant concentrations of risk. Risk Management Practices On a quarterly basis, the Plans’ Trustees, who are certain officers of the Company, review the performance of the assets in the Plans relative to expectations in order to determine if the Plans’ investment goals and overall investment objectives are being met. Fair Value Measurements of Plan Assets The following is a description of the valuation methodologies used for instruments measured at fair value in accordance with fair value measurement guidance (see Note 13), including the general classification of such instruments pursuant to the valuation hierarchy. Unallocated Insurance Contract The fair value for the unallocated insurance contract is determined as the present value of future guaranteed account values. Present values are derived by discounting future guaranteed account values by the appropriate market interest rates. Market interest rates are deemed to be the same rates to be credited to new issues of the same contract with like guarantees issued as of the date of the fair value determination. The market interest rates used have interest guarantee periods that match the guarantee periods remaining as of the valuation date for the contract. Interest rate guarantees of the deposit account are backed by assets of the Plans’ custodian. Credited rates are set based on yields earned on new purchases of fixed income securities for the general account. Credited rates are guaranteed for the duration of the guaranteed period elected by the Plan Sponsor and do not vary with the subsequent performance of assets of the general account that back these guarantees. Due to the nature of these contracts, specific underlying assets are not assigned and there is no market (quoted prices or observable inputs) and as such the valuation includes significant inputs based on assumptions about market participant assumptions. The unallocated insurance contract is classified in Level 3 of the fair value hierarchy. Pooled Separate Accounts Pooled separate accounts are valued at the net asset value (NAV) of the shares held by the Plans at year-end and are classified in Level 1 of the fair value hierarchy. The funds in the separate accounts are considered open-end mutual funds, meaning that the fund is ready to redeem its shares at any time and offers its shares for sale to the public, either through retail outlets or through institutional investors continuously. For institutional funds, NAVs are received daily from fund managers, and the managers stand ready to transact at these quoted amounts. The Plans’ custodian transacts in these funds on a daily basis as part of the separate account trading activity. The calculation of the NAV for funds composed of other funds (e.g., retirement target date funds) is essentially the same as the calculation of the NAV for any other fund: the total market value of assets across all underlying funds less any liabilities is divided by the outstanding shares. Again, this resulting NAV is published and/or the fund managers are ready to transact at the quoted prices.

37

NOTE 7 - EMPLOYEE AND AGENT BENEFIT PLANS, (continued) The following table presents the financial instruments carried at fair value in the Plans by the fair value measurement valuation hierarchy, as described above:

Level 1 Unallocated insurance contract Pooled separate accounts Total assets at fair value

$

271,489 271,489

$

Level 1 Unallocated insurance contract Pooled separate accounts Total assets at fair value

$ $

281,473 281,473

December 31, 2015 Level 2 Level 3 $ - $ 51,265 $ - $ 51,265

$

December 31, 2014 Level 2 Level 3 $ - $ 51,068 $ - $ 51,068

$

$

$

Total 51,265 271,489 322,754

Total 51,068 281,473 332,541

The table below sets forth a summary of changes in the fair value of the Plans’ Level 3 assets related to unallocated insurance contracts for the year ended December 31: 2015 2014 Balance at beginning of year $ 51,068 $ 47,033 Purchases 2,889 2,767 Actual return on plan assets 1,905 1,833 Settlements (4,597) (565) 51,068 Balance at end of year $ 51,265 $ The following table presents information about significant unobservable inputs used in Level 3 assets measured at fair value: December 31, 2015 Assets Accounted for at Fair Value on a Recurring Basis Unallocated Insurance Contract

Fair Value $ 51,265

Predominant Valuation Method

Significant Unobservable Input

Discounted cash flows

New deposit rate Benefit withdrawal rate

Range of Values Unobservable Inputs 3.00 % 9.00 %

Impact of Increase in Input on Fair Value ¹ Increase Decrease

December 31, 2014 Assets Accounted for at Fair Value on a Recurring Basis Unallocated Insurance Contract

1

Fair Value $ 51,068

Predominant Valuation Method

Significant Unobservable Input

Discounted cash flows

New deposit rate Benefit withdrawal rate

Range of Values Unobservable Inputs 3.00 % 9.00 %

Conversely, the impact of a change in input would have the opposite impact to the fair value as that presented in the tables above.

38

Impact of Increase in Input on Fair Value ¹ Increase Decrease

NOTE 7 - EMPLOYEE AND AGENT BENEFIT PLANS, (continued) The long term expected return for the Plans assets is 5.7%, 6.1% and 6.6% for 2015, 2014 and 2013, respectively. The expected return was based on historical data of equity and fixed income benchmarks. It was also based on current market valuations and forecasted market returns. The allocation ranges are determined to be the most consistent at providing the expected return, limiting risk and covering the Plans’ benefit obligation considering the size, duration, and nature of the Plans’ obligations. The actual allocation ratio at December 31 was: 2015 24.5 % 18.7 22.5 34.3

Equities - affiliated Equities - unaffiliated Fixed income - affiliated Fixed income - unaffiliated

2014 24.5 % 18.6 22.2 34.7

The equities-affiliated and fixed income-affiliated represent separate account assets invested in mutual funds, which are advised by affiliates, and are $151,879 and $155,305 at December 31, 2015 and 2014, respectively. Contributions The Sponsors made contributions to the Plans totaling $20,000 in 2015, 2014 and 2013. The Plans are subject to the minimum funding requirements of ERISA. The Sponsors’ funding policy is to contribute a minimum of $20,000 into the Plans annually to provide maximum derisking flexibility in the Plan. 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. The Sponsors are expected to contribute approximately $20,000 to the Plans in fiscal year 2016 which is in excess of any anticipated minimum funding requirements. The Plans’ enrolled actuary determines the annual funding contributions. No voluntary contributions by participants are permitted. Estimated Future Benefit Payments The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid by the Plans:

Fiscal Year 2016 2017 2018 2019 2020 2021 - 2025

$

Amount 24,931 25,554 25,799 25,774 28,696 142,122

Assumptions Weighted-average assumptions used to determine benefit obligations and net periodic pension cost at December 31:

Discount rate - benefit obligation Discount rate - net periodic pension cost Rate of compensation increase - benefit obligation Rate of compensation increase - net periodic pension cost Expected long term rate of return on assets for next year Expected long term rate of return on assets - net periodic pension cost

2015 4.51 % 4.10 3.15 3.14 5.70 6.10

2014 4.10 % 4.93 3.14 3.15 6.10 6.60

2013 4.93 % 4.14 3.15 3.14 6.60 7.00

The change in the funded status and accumulated other comprehensive income/(loss) is primarily a result of higher discount rates. The change in discount rates decreased the projected benefit obligation by $20,819 at December 31, 2015.

39

NOTE 7 - EMPLOYEE AND AGENT BENEFIT PLANS, (continued) Defined Contribution Plans Substantially all full-time employees and agents participate in defined contribution plans sponsored by AHC. In addition, certain of the Company’s employees participate in an unfunded, non-qualified defined contribution plan sponsored by AHC. Company matching contributions under the defined contribution plan ranged from 0.5% to 3.0% in 2015, 2014 and 2013. In addition, for eligible employees who do not participate in the Plans, the Company makes an additional contribution of 6.0% of the participants’ eligible compensation on a quarterly basis for those hired prior to January 1, 2006, and 5.0% for those hired after January 1, 2006. Contributions by the Company to the employee and agents defined contribution plans were $13,685, $13,092 and $12,890 in 2015, 2014 and 2013, respectively. The defined contribution plans’ assets also include investments in deposit administration contracts which include underlying investments in separate accounts of Ameritas Life. The carrying value of the assets invested in the defined contribution plans were approximately $536,770 and $538,511 at December 31, 2015 and 2014, respectively. A portion of the separate account assets are invested in mutual funds, which are advised by affiliates, and are $98,347 and $127,674 at December 31, 2015 and 2014, respectively. Postretirement Benefit Plans The Company provides certain health care and life insurance benefits for its eligible retired employees. Substantially all employees who had been employees of a previously un-merged subsidiary may become eligible for these benefits if they reach normal retirement age while employed by the Company. Benefits for all other employees are limited to those employees hired before January 1, 2005. The Sponsors used a December 31 measurement date for their plans. Obligations and Funded Status at December 31: 2015 2014 2013 Projected benefit obligation $ 17,308 $ 20,725 $ 20,604 Fair value of plan assets 14,600 16,447 15,967 Funded status (2,708) (4,278) (4,637) Employer contributions 581 825 2,174 Participant contributions 256 248 558 Benefit payments 2,108 2,199 3,122 Net periodic benefit cost (2,662) (2,511) (1,575) Amounts recognized in the balance sheet consist of: 4,278 $ 4,637 Other liabilities $ 2,708 $ Amounts amortizing into net periodic benefit cost, net of tax, consist of: (1,493) $ (1,209) Prior service cost $ (1,453) $ Net gain (143) (152) (26) Amounts recognized in other comprehensive income, net of tax, arising during the period consist of : - $ 2,145 Prior service cost $ - $ (152) $ 2,774 Net gain (loss) 585 $ Amounts recognized in accumulated other comprehensive income, net of tax, consist of: Prior service cost $ 4,388 $ 6,059 $ 7,536 Net gain 1,561 901 1,222 Amounts expected to be amortized into net periodic benefit cost, net of tax, in the next twelve months consist of the following: Prior service cost $ (1,357) $ (1,453) $ (1,493) Net gain (111) (85) (191) There are no Postretirement Benefit Plan (Postretirement Plan) assets expected to be returned to the Company in the twelve month period ending December 31, 2016.

40

NOTE 7 - EMPLOYEE AND AGENT BENEFIT PLANS, (continued) Investment Policies and Strategies The investment objective of the Postretirement Plan is to provide sufficient assets and liquidity to meet the distribution requirements of the Postretirement Plan through capital appreciation of assets. The Postretirement Plan’s Trustees require investment opportunities that offer equity, fixed income and money market or other cash equivalent investment options. All assets of the Postretirement Plan may be allocated to and invested in any one or more of these basic forms of investments: • • • • •

Unallocated insurance contracts Common stocks listed on U.S. exchanges Limited partnerships Indexed mutual funds Cash or cash equivalents

Investments in non-marketable securities are not permitted, unless specifically authorized by the Trustees. In addition, investments in derivative instruments are not permitted. The assets in the Postretirement Plan are diversified in order to minimize significant concentrations of risk. Risk Management Practices On a quarterly basis, the Postretirement Plan’s Trustees, who are certain officers of the Company, review the performance of the assets in the Postretirement Plan relative to expectations in order to determine if the Postretirement Plan’s investment goals and overall investment objectives are being met. Fair Value Measurements of Plan Assets The following is a description of the valuation methodologies used for instruments measured at fair value in accordance with fair value measurement guidance (see Note 13), including the general classification of such instruments pursuant to the valuation hierarchy. Unallocated Insurance Contract The fair value for the unallocated insurance contract is determined as the present value of future guaranteed account values. Present values are derived by discounting future guaranteed account values by the appropriate market interest rates. Market interest rates are deemed to be the same rates to be credited to new issues of the same contract with like guarantees issued as of the date of the fair value determination. The market interest rates used have interest guarantee periods that match the guarantee periods remaining as of the valuation date for the contract. Interest rate guarantees of the deposit account are backed by assets of the Postretirement Plan’s custodian. Credited rates are set based on yields earned on new purchases of fixed income securities for the general account. Credited rates are guaranteed for the duration of the guaranteed period elected by the Plan Sponsor and do not vary with the subsequent performance of assets of the general account that back these guarantees. Due to the nature of these contracts, specific underlying assets are not assigned and there is no market (quoted prices or observable inputs) and as such the valuation includes significant inputs based on assumptions about market participant assumptions. The unallocated insurance contract is classified in Level 3 of the fair value hierarchy. Money Market Funds The money market funds are classified in Level 1 of the fair value hierarchy as fair value is based on quoted prices in active markets for identical securities. Common Stocks Common stocks are valued based on quoted prices in active markets for publicly traded securities at year-end and are classified in Level 1 of the fair value hierarchy. These assets can be redeemed at any time and its shares are offered for sale to the public.

41

NOTE 7 - EMPLOYEE AND AGENT BENEFIT PLANS, (continued) The following table presents the financial instruments carried at fair value in the Postretirement Plan by the fair value measurement valuation hierarchy, as described above:

Level 1 Unallocated insurance contract Money market funds Common stocks Other assets Total assets at fair value

$

5,345 7,964 20 13,329

$

Level 1 Unallocated insurance contract Money market funds Common stocks Other assets Total assets at fair value

$

$

395 14,461 19 14,875

December 31, 2015 Level 2 Level 3 - $ 1,271 $ $ - $ 1,271 December 31, 2014 Level 2 Level 3 $ - $ 1,572 $ - $ 1,572

$

$

$

$

Total 1,271 5,345 7,964 20 14,600

Total 1,572 395 14,461 19 16,447

The table below sets forth a summary of changes in the fair value of the Postretirement Plan’s Level 3 assets related to unallocated insurance contracts for the year ended December 31:

Balance at beginning of year Actual return on plan assets Settlements Balance at end of year

$

$

2015 1,572 $ 52 (353) 1,271 $

2014 1,717 61 (206) 1,572

The following table presents information about significant unobservable inputs used in Level 3 assets measured at fair value:

December 31, 2015 Assets Accounted for at Fair Value on a Recurring Basis Unallocated Insurance Contract

$

Fair Value

Predominant Valuation Method

Significant Unobservable Input

1,271

Discounted cash flows

New deposit rate Benefit withdrawal rate

Range of Values Unobservable Inputs 3.00 % 9.00 %

Impact of Increase in Input on Fair Value ¹ Increase Decrease

December 31, 2014 Assets Accounted for at Fair Value on a Recurring Basis Unallocated Insurance Contract 1

$

Fair Value

Predominant Valuation Method

Significant Unobservable Input

1,572

Discounted cash flows

New deposit rate Benefit withdrawal rate

Range of Values Unobservable Inputs 3.00 % 9.00 %

Conversely, the impact of a change in input would have the opposite impact to the fair value as that presented in the tables above.

42

Impact of Increase in Input on Fair Value ¹ Increase Decrease

NOTE 7 - EMPLOYEE AND AGENT BENEFIT PLANS, (continued) The actual allocation ratio at December 31 was: 2015 54.6 % 8.7 36.7

Equities - unaffiliated Fixed income - affiliated Cash equivalents

2014 87.9 % 9.6 2.5

The target allocation will be maintained on a continuous basis with an allowable range of 95% to 100% in equities, limited partnerships, an unallocated insurance contract, and 0% to 5% in cash. The higher actual cash allocation compared to the target allocation at December 31, 2015 was the result of a temporary reallocation that occurred for strategic reasons. The Sponsors expect to contribute $0 to the Postretirement Plan in 2016. Estimated Future Benefit Payments The expected benefit payments and the gross amount of anticipated subsidy receipts are noted below for the Postretirement Plan: Expected Before Medicare Net Medicare Part D Subsidies Payments Year Part D Subsidies $ 1,567 $ - $ 1,567 2016 1,522 2017 1,522 2018 1,472 1,472 2019 1,435 1,435 2020 1,398 1,398 2021 - 2025 6,252 6,252 Assumptions Weighted-average assumptions used to determine postretirement benefit obligations at December 31:

Discount rate - benefit obligation Discount rate - net periodic pension cost Rate of compensation increase - net periodic postretirement benefit cost Expected long term rate of return on assets for next year Expected long term rate of return on assets - net periodic postretirement benefit cost

2015 4.22 % 3.85 NA 7.76 7.74

2014 3.85 % 4.54 NA 7.74 7.70

2013 4.54 % 3.90 NA 7.70 7.57

Assumed Health Care Trend rates at December 31 Health care cost trend rate assumed for next year Rate to which the cost trend rate is assumed to decline (the ultimate trend rate) Year that rate reaches the ultimate trend rate

43

2015 7.00 %

2014 7.50 %

2013 7.40 %

5.00 % 2024

5.00 % 2024

5.00 % 2017

NOTE 8 - REGULATORY MATTERS The Company and its subsidiaries are regulated primarily by, but not limited to, the various domiciliary state insurance or financial services departments as indicated below, the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and various other governmental authorities. Combined net income (loss) of the Company’s insurance subsidiaries, as determined in accordance with statutory accounting practices prescribed by the NAIC or permitted by the Insurance Departments of the states of Nebraska, New York, and the District of Columbia (2013 only), as applicable, was $(21,604) for 2015, $125,921 for 2014 and $144,531 for 2013 and combined statutory capital and surplus was $1,510,249, $1,623,458 and $1,501,796 at December 31, 2015, 2014 and 2013, respectively. Insurance companies are required to maintain a certain level of surplus to be in compliance with state laws and regulations. Surplus is monitored by state regulators to ensure compliance with risk based capital (RBC) requirements. All state insurance regulators have adopted RBC requirements developed by the NAIC. Under those requirements, the amount of capital and surplus maintained by a life and health company is to be determined based on various risk factors related to it. At December 31, 2015, the Company’s insurance subsidiaries exceed the minimum RBC requirements. Ameritas Life is subject to regulation by the Insurance Department of the State of Nebraska (DOI-NE), which restricts the advancement of funds to parent and affiliated companies as well as the amount of dividends that may be paid without prior approval. Dividend payments by Ameritas Life, when aggregated with all other dividends in the preceding 12 months, cannot exceed the greater of 10% of surplus as of the preceding year-end or the statutory net gain from operations for the previous calendar year, without prior approval from the DOI-NE. Based on this limitation, Ameritas Life would be able to pay $150,775 in dividends in 2016 without prior approval. Ameritas Life paid cash dividends of $20,000 to AHC in 2015, 2014 and 2013. Ameritas-NY is subject to regulation by the New York Department of Financial Services (NY-DFS), which restricts the advancement of funds to parent and affiliated companies as well as the amount of dividends that may be paid without prior approval. Dividend payments by Ameritas-NY cannot exceed the lesser of 10% of surplus as of the preceding year-end or the statutory net gain from operations for the previous calendar year, without prior approval from the NY-DFS. Based on this limitation, Ameritas-NY would not be able to pay any dividends in 2016 without prior approval. No dividends to parent or affiliated companies were paid in 2015, 2014 and 2013. NOTE 9 - REINSURANCE In the ordinary course of business, the Company assumes and cedes reinsurance with other insurers and reinsurers. These arrangements provide greater diversification of business and limit the maximum net loss potential on large or hazardous risks. Reinsurance ceded contracts do not relieve the Company from its obligations to policyowners. The Company remains liable to its policyowners for the portion reinsured to the extent that any reinsurer does not meet its obligations for reinsurance ceded to it under the reinsurance agreements. Failure of reinsurers to honor their obligations could result in losses to the Company; consequently, allowances would be established for amounts deemed or estimated to be uncollectible. To minimize its exposure to significant losses from reinsurance insolvencies, the Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers. No losses are anticipated, and, based on management's evaluation; there are no concentrations of credit risk at December 31, 2015 and 2014. Reinsurance premium transactions with other insurance companies are summarized as follows:

Premiums: Assumed Ceded Reinsurance, net

Years ended December 31 2015 2014 66,956 $ 68,835 $ (209,616) (213,637) (142,660) $ (144,802) $

$ $

44

2013 73,499 (204,570) (131,071)

NOTE 9 – REINSURANCE, (continued) The Company entered into two reinsurance transactions in 2015 with third parties. The transactions resulted in the Company becoming the assuming reinsurer under two coinsurance treaties. Based on the Company’s analysis, the coinsurance treaties did not result in the transfer of a reasonable possibility of significant loss from insurance risk. As such, the treaties were accounted for under the deposit method of accounting. A deposit liability of $1,174,062 was included as reinsurance deposit liability on the consolidated balance sheets at December 31, 2015. NOTE 10 - LIABILITIES FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSES The following table provides an analysis of the activity in the liability for unpaid accident and health claims and claim adjustment expenses, which are reported within policy and contract liabilities on the consolidated balance sheets:

Balance at January 1 Less reinsurance assumed reserves Net direct balance at January 1 Incurred related to: Current year Prior year Total incurred Paid related to: Current year Prior year Total paid Net direct balance at December 31 Plus reinsurance assumed reserves Total reserve for unpaid claims

$ $

$

$

$

Years ended December 31 2015 2014 368,821 $ 346,839 $ (45,585) (48,202) 323,236 $ 298,637 $

2013 332,564 (51,602) 280,962

513,355 3,063 516,418 $

529,001 3,322 532,323 $

501,278 887 502,165

420,446 71,175 491,621 $ 348,033 43,532 391,565 $

442,241 65,483 507,724 $ 323,236 45,585 368,821 $

422,154 62,336 484,490 298,637 48,202 346,839

As a result of unfavorable settlements of prior years’ estimated claims, the provision for claims and claim adjustment expenses increased by $3,063, $3,322 and $887 for the years ended December 31, 2015, 2014 and 2013, respectively. The Company paid assumed reinsurance claims of $67,024, $68,062 and $71,761, and incurred assumed reinsurance claims of $64,971, $65,445 and $68,360 for the years ended December 31, 2015, 2014 and 2013, respectively. The Company paid ceded reinsurance claims of $16,020, $17,418 and $14,477, and incurred ceded reinsurance claims of $25,889, $23,258 and $19,419 for the years ended December 31, 2015, 2014 and 2013, respectively. Paid and unpaid claims of $115,534, $106,094, $100,240 and $94,834 on ceded reinsurance for long term disability products are reported in reinsurance receivables on the consolidated balance sheets as of December 31, 2015, 2014, 2013 and 2012, respectively. Paid and unpaid claims of $4,053, $3,624, $3,638 and $3,965 on ceded reinsurance for products other than long term disability are reported in reinsurance receivables on the consolidated balance sheets as of December 31, 2015, 2014, 2013 and 2012, respectively.

45

NOTE 11 - LIABILITIES FOR CONTRACT GUARANTEES The Company offers various guarantees to variable annuity (VA) and equity index annuity (EIA) contractholders including a return of no less than (1) the account value; (2) the sum of all premium payments less prior withdrawals and, in some cases, minus a partial withdrawal adjustment; (3) the sum of all premium payments less prior withdrawals plus a minimum return minus a partial withdrawal adjustment; (4) the highest account value on a specified anniversary date plus any premium payments since the anniversary minus any withdrawals following the anniversary and, in most cases, minus a partial withdrawal adjustment; or (5) the highest account value on a specified anniversary date minus any withdrawals following the anniversary and minus a partial withdrawal adjustment, and (6) a specified percentage of gains within the contract, or a percentage of gains plus a percentage of transferred premiums, in addition to other guarantees previously described. These guarantees include benefits that are payable in the event of death (VA) or as guaranteed periodic withdrawals (VA and EIA). The Company currently reinsures some of those guaranteed minimum death benefits (GMDB) greater than the sum of all premium payments less prior withdrawals. The withdrawal benefits are provided through activated guaranteed lifetime withdrawal benefit (GLWB) riders. Prior to the start of the periodic withdrawals, various minimum return guarantees are tracked. At the start of the periodic withdrawals, a benefit base is determined such that it is the greatest of the tracked minimum return guarantees. The guaranteed periodic withdrawal amount is a percentage of the benefit base at the time periodic withdrawals begin. Once periodic withdrawals begin, the benefit base is increased by premium payments; the benefit base can be reset on an annual basis to the anniversary account value, if it is greater, and will be reduced for any withdrawals in excess of the guaranteed periodic withdrawal, but the percentage applied to the base benefit will not change. Guarantees related to the variable annuity withdrawal benefits are considered to be derivative financial instruments; therefore, the liability for these benefits is established based on its fair value. The liability for these benefits was $52,002 and $39,759 at December 31, 2015 and 2014, respectively. No guaranteed withdrawal payments were made in 2015 and 2014 with an account balance less than the payment amount. Variable and non-variable universal life-type contracts were sold with secondary guarantees that guarantee that the policy will not lapse, even if the account value is reduced to zero, as long as the policyowner makes scheduled premium payments or, for some products, if the shadow account is positive. If benefits arise from these secondary guarantees, they generally do so in the late durations of a contract's lifetime. The liability for universal life-type contracts with secondary guarantees is established equal to a benefit ratio multiplied by the cumulative assessments earned, plus accrued interest less the secondary guarantee benefit payments. The benefit ratio is calculated as the estimated present value of all expected secondary guarantee benefit payments divided by the present value of all expected assessments. The secondary guarantee benefit payments are defined as death benefits paid on policies with an account value of zero that were still in force due to the presence of the secondary guarantee. At December 31, 2015 and 2014 the Company's reserve for these guarantees was $57,282 and $43,855, respectively and is recorded in policy and contract liabilities on the consolidated balance sheets. NOTE 12 - COMMITMENTS AND CONTINGENCIES Leases The Company leases office space and equipment under operating leases that expire at various dates through 2031. Rent expense was $6,819 for 2015, $6,520 for 2014 and $8,653 for 2013. Future minimum payments under noncancellable operating leases consist of the following:

2016 2017 2018 2019 2020 Thereafter

$

$

46

December 31 7,836 7,358 6,910 6,616 5,925 1,543 36,188

NOTE 12 - COMMITMENTS AND CONTINGENCIES, (continued) Line Of Credit and Borrowings The Company has FHLB lines of credit available up to $56,734 if an immediate liquidity need would arise. The Company had no outstanding balance as of December 31, 2015 and 2014 related to these lines of credit. Additionally, AHC had an unsecured line of credit available in the amount of $25,000 with an unaffiliated bank. No balance was outstanding at any time during 2015 and 2014. In 2015, Ameritas Life entered into a ten year, 4.00% non-recourse loan of $15,500 on a real estate property with scheduled maturities of $381, $396, $412, $428, and $444 as of December 31, 2016, 2017, 2018, 2019 and 2020, respectively. Off Balance Sheet Instruments Commitments on financial instruments were as follows:

Securities commitments Loan and real estate commitments

$

December 31 2015 2014 123,381 $ 122,394

63,147 89,619

These commitments have been made in the normal course of business. The Company’s exposure to credit loss is represented by the contractual amount of these instruments. The Company uses the same credit policies and collateral requirements in making commitments and conditional obligations as it does for on-balance sheet instruments. Commitments to extend credit are agreements to lend to a customer based upon the customer’s fulfilling certain conditions as established in the loan agreement. These conditions are dependent on the type of loan. Commitments to extend credit under consumer lines of credit are generally dependent upon payments in accordance with the loan agreement. Adherence to the loan agreement as to prompt payment is also required for commercial and construction lines of credit. In addition, most of these credit lines require that collateral be identified and evaluated according to the terms of the loan agreement in order for additional amounts to be advanced. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Commitments for lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. In the normal course of business the Company's brokerage activities involve, principally through its clearing firm, various securities transactions. These activities may expose the Company to off balance sheet risk in the event the customer or clearing firm is unable to fulfill its contractual obligations. State Life and Health Guaranty Funds As a condition of doing business, all states and jurisdictions have adopted laws requiring membership in life and health insurance guaranty funds. Member companies are subject to assessments each year based on life, health or annuity premiums collected in the state. In some states these assessments may be applied against premium taxes. The Company has estimated its costs related to past insolvencies and has provided a reserve included in other liabilities of $2,695 and $2,926 and recorded the related asset for premium tax offsets in other assets of $1,899 and $1,820 as of December 31, 2015 and 2014, respectively. Litigation and Regulatory Examination From time to time, the Company and its subsidiaries are subject to litigation and regulatory examination in the normal course of business. Management does not believe that the Company is party to any such pending litigation or examination which would have a material adverse effect on its financial condition or results of its operations.

47

NOTE 13 - FAIR VALUE MEASUREMENTS Fair value measurement guidance requires that financial and nonfinancial assets and liabilities carried at fair value in the financial statements be included in a fair value hierarchy for disclosure purposes. The guidance defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”. In determining fair value of financial assets and liabilities, the Company utilizes market data, evaluated pricing models, cash flow, and loan performance data as available. The degree of judgment used in measuring fair value of financial instruments generally correlates with the level of pricing observability. That is, financial instruments with quoted prices in active markets have more pricing observability and therefore less judgment is used in measuring fair value. Conversely, financial instruments traded in other than active markets or that do not have quoted prices have less observability and are measured at fair value using the valuation models or other pricing techniques that require more judgment. The Company uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable techniques. A fair value working group (the Working Group) comprised of investment, operations and accounting professionals (including the functional heads of Investments and Investment Accounting) collaborate on a monthly basis to perform ongoing analysis of both third party and internally developed prices. Prices from third party pricing services are validated through comparison to internal pricing information and economic indicators including observed interest rates, credit spreads and market events as well as back testing to trade data to confirm that the pricing service’s significant inputs are observable. The reasonableness of prices are further reviewed on a monthly basis through reports that identify securities with changes in price or yield that fall outside of a stated tolerance. The tolerance levels are adjusted by type of security based on the volatility inherent in the asset class. Securities falling outside of the stated tolerances are then examined further to verify reasonableness. Broker quotes are non-binding, are reviewed for reasonableness based on the Company’s understanding of the market, and are generally considered unobservable inputs. Under certain conditions, the Company may conclude the prices received from independent third party pricing services or brokers are not reasonable or reflective of market activity. In those instances, the Company may choose to override third party pricing information or broker quotes received and apply internally developed values to the related assets or liabilities. Overrides of third party pricing information and the rationale for the overrides are shared with the Working Group for approval. Also, the Company will periodically request more granular information from the third party pricing service on asset classes judged to have more inherent subjectivity such as nonagency residential mortgage-backed securities. The Company will also challenge third party vendor prices for certain securities either when the vendor’s prices differ from what level the Company believes is reflective of the market or if further granularity is needed. In accordance with the guidance, the Company categorizes its financial instruments into a three level hierarchy based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (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 disclosed is based on the lowest priority level input that is significant to the fair value measurement of the instrument in its entirety. In summary, the hierarchy prioritizes inputs to valuation techniques into three levels: •

Level 1 – Quoted prices in active markets for identical assets/liabilities. The Company’s Level 1 assets include: Money market funds, exchange traded call and put options, equity securities and retail and institutional mutual funds (including investments held in the separate accounts).

•

Level 2 – Includes prices based on other observable inputs, including quoted prices for similar assets/liabilities. The Company’s Level 2 assets include the following fixed maturity securities: U.S. Treasury securities and obligations of U.S. government agencies (other than residential and commercial mortgage-backed securities and asset-backed securities), fixed maturity securities issued by states and political subdivisions of the U.S., U.S. agency residential and commercial mortgage-backed and asset-backed securities and virtually all of the U.S. and foreign public corporate securities. Level 2 assets also include commercial paper and call options.

•

Level 3 – Includes unobservable inputs and may include the entities own assumptions about market participant assumptions. The Company’s Level 3 assets include: Debt securities issued by states of the United States and political subdivisions of the states, non-agency residential and commercial mortgage-backed and asset-backed fixed maturity securities, private U.S. and foreign corporate fixed maturity and private equity securities, certain public U.S. and foreign corporate fixed maturity securities, collateralized debt obligations and liabilities for products with embedded derivatives. 48

NOTE 13 - FAIR VALUE MEASUREMENTS, (continued) The following table summarizes financial assets and liabilities measured at fair value on a recurring basis by the guidance hierarchy levels described above as of December 31, 2015: Level 1 Financial Assets: Fixed maturity securities available for sale: U.S. Treasury securities and obligations of U.S. government agencies $ - $ Debt securities issued by states of the United States and political subdivisions of the states Foreign government securities U.S. corporate securities Residential mortgage-backed securities Commercial mortgage-backed securities Asset-backed securities Collateralized debt obligations Foreign corporate securities Fixed maturity securities trading: U.S. corporate securities Foreign corporate securities Equity securities: Available for sale 395,479 Trading 103,045 Other investments: Call and put options 13,667 Municipal warrants Private equity securities Cash equivalents 296,468 Subtotal excluding assets related to separate accounts 808,659 Assets related to separate accounts 6,314,191 Total assets accounted for at fair market value $ 7,122,850 $ Financial liabilities: Call options Liabilities for products with embedded derivatives and equity indexed products Total liabilities accounted for at fair market value

Level 2

Level 3

164,182

$

-

$

164,182

67,257 3,113 4,962,172 855,930 194,098 289,344 1,119,736

24,507 413,165 180,918 448,587 4,954 569,316

91,764 3,113 5,375,337 1,036,848 194,098 737,931 4,954 1,689,052

53,792 -

2,906 8,263

56,698 8,263

-

-

395,479 103,045

10,448 7,720,072 7,720,072

757 47,637 1,701,010 $ 1,701,010 $

$

(6,059) $

-

$

$

(6,059) $

-

$

49

Total

-

24,115 757 47,637 296,468 10,229,741 6,314,191 16,543,932

$

(6,059)

(89,828) (89,828) $

(89,828) (95,887)

NOTE 13 - FAIR VALUE MEASUREMENTS, (continued) The following table summarizes financial assets and liabilities measured at fair value on a recurring basis by the guidance hierarchy levels described above as of December 31, 2014: Level 1 Financial Assets: Fixed maturity securities available for sale: U.S. Treasury securities and obligations of U.S. government agencies $ - $ Debt securities issued by states of the United States and political subdivisions of the states U.S. corporate securities Residential mortgage-backed securities Commercial mortgage-backed securities Asset-backed securities Collateralized debt obligations Foreign corporate securities Fixed maturity securities trading: U.S. corporate securities Foreign corporate securities Equity securities: Available for sale 387,417 Trading 89,040 Other investments: Call and put options 19,051 Municipal warrants Private equity securities Cash equivalents 177,682 Subtotal excluding assets related to separate accounts 673,190 Assets related to separate accounts 6,707,934 Total assets accounted for at fair market value $ 7,381,124 $ Financial liabilities: Call options Liabilities for products with embedded derivatives and equity indexed products Total liabilities accounted for at fair market value

Level 2

Total

Level 3

190,892

$

-

$

190,892

17,884 4,240,561 1,051,346 96,962 321,290 981,610

18,142 369,238 62,636 317,539 9,915 557,022

36,026 4,609,799 1,113,982 96,962 638,829 9,915 1,538,632

41,980 819

2,389 8,611

44,369 9,430

-

-

387,417 89,040

18,398 10,000 6,971,742 6,971,742

953 41,574 1,388,019 $ 1,388,019

$

37,449 953 41,574 187,682 9,032,951 6,707,934 15,740,885

$

(11,279)

(95,155) (95,155) $

(95,155) (106,434)

$

(11,279) $

-

$

$

(11,279) $

-

$

-

The market approach is utilized for the majority of the Company’s fair value measurements; however, certain Level 2 and Level 3 measurements utilize a combination of the market and income approaches. The valuation techniques used to measure the fair values by type of investment and liabilities in the above table follow: Fixed maturity securities: • U.S. Treasury securities and obligations of U.S. government agencies: The primary inputs to valuation include reported trades, benchmark yields and credit spreads. The fair values of the agency securities are generally classified as Level 2 as the prices are based on observable market data. •

U.S. Government Agency and non-agency commercial and residential mortgage-backed and asset-backed securities: The primary inputs to valuation include reported trades, bids, benchmark yields, credit spreads, estimated cash flows, prepayment speeds and collateral performance. Collateral performance is analyzed for each security and includes delinquency rates, loss severity rates and prepayment speeds. U.S. government agency securities are classified as Level 2 as the prices are based on observable market data. Non-agency commercial and residential mortgage-backed and asset-backed securities are generally classified as Level 3 due to current market conditions and due to the unobservable assumptions used to price the securities.

50

NOTE 13 - FAIR VALUE MEASUREMENTS, (continued) Fixed maturity securities, (continued): •

All other fixed maturity securities: The primary inputs to valuation include reported trades, bids, benchmark yields, observations of credit default swap curves and credit spreads. A pricing matrix is used to price non-public fixed maturity securities. Fixed maturity securities are generally classified as Level 2 as the fair values are based on observable market data. Fixed maturity securities with a fair value based only on uncorroborated dealer quotes or internal valuations are assigned to Level 3.

Equity securities: • Public equity securities and mutual funds: Classified primarily as Level 1 as the fair values are based on quoted prices in active markets for identical securities for public equity securities and retail mutual funds, while fair values for institutional mutual funds represent net asset values received from fund managers who stand ready to transact at the quoted values. Other investments: • Index call options: The primary inputs to valuation include broker quotes that utilize inputs tailored to the remaining term of each call option. Over the counter index call options are classified as Level 2. •

Private equity securities: The primary inputs to valuation include comparisons to similar publicly traded securities and other widely accepted valuation techniques. Private equity securities are categorized as Level 3 as internal valuations are required to value the securities.

•

Municipal warrants: Municipal warrants are categorized as Level 3 as internal valuations are used to value the Company’s municipal warrants investments and significant inputs are unobservable.

•

Exchange traded call and put options: Valuation is based on quoted net asset values in active markets for identical securities. Exchange traded call options and equity put options are classified as Level 1.

Cash equivalents: • Commercial paper and money market funds: Commercial paper is generally classified as Level 2 as prices are based on observable market data where primary inputs to valuation include reported trades, benchmark yields and credit spreads. Money market funds are classified as Level 1 as the valuation is based on quoted net asset values in active markets for identical securities. Assets related to separate accounts: • Public equity securities and mutual funds: Classified primarily as Level 1 as the fair values are based on quoted prices in active markets for identical securities for public equity securities and retail mutual funds, while fair values for institutional mutual funds represent net asset values received from fund managers who stand ready to transact at the quoted values. Financial Liabilities: Liabilities for products with embedded derivatives: The Company has three products with embedded derivatives: equity index annuity, equity index universal life, and variable annuity with a guaranteed lifetime withdrawal benefit rider. These liabilities are classified as Level 3 as observable market prices are not available and actuarial methods are used to estimate the fair values.

51

NOTE 13 - FAIR VALUE MEASUREMENTS, (continued) The following summarizes changes to our financial instruments for the years 2015 and 2014 carried at fair value for which the Company used significant unobservable inputs (Level 3) to determine fair value measurements: Fair Value Measurements Using Significant Unobservable Inputs - Level 3 Total gains or losses (realized/unrealized) Included Fair

in other

Fair

value at

Included

compre-

Purchases

Sales

Transfers

Transfers

value at

Dec 31,

in net

hensive

and

and

into

out of

Dec 31,

2014

income

income (loss)

issuances

settlements

Level 3

Level 3

2015

Fixed maturity securities available for sale: Debt securities issued by states of the United States and political subdivisions of the states

$

U.S. corporate securities

18,142 $

(31) $

369,238

628

62,636

428

-

-

317,539

1,187

(404) $ (18,605)

7,288 $

(488) $

- $

- $

24,507

77,542

(17,753)

2,115

-

413,165

896

117,183

(24,957)

24,732

-

180,918

-

-

-

-

-

Residential mortgagebacked securities Commercial mortgagebacked securities Asset-backed securities

(9,527)

175,910

(51,617)

28,740

(13,645)

448,587

Collateralized debt obligations

9,915

Foreign corporate securities

142

557,022

(115)

U.S. corporate securities

2,389

(1,093)

Foreign corporate securities

8,611

(188)

(103)

-

(5,000)

-

-

4,954

(22,500)

68,000

(33,091)

-

-

569,316

-

3,425

(1,815)

-

-

2,906

-

2,570

(2,730)

-

-

8,263

(301)

-

-

757

-

-

47,637

Fixed maturity securities trading:

Other investments: Municipal warrants Private equity securities Embedded derivatives Total

953

105

-

-

41,574

-

6,063

-

(95,155) $

1,292,864 $

1,589 2,652 $

(44,180) $

-

(1,042)

4,780

450,876 $

(132,972) $

55,587 $

(13,645) $

(89,828) 1,611,182

Purchases and issuances in the above table reflect purchases except for issuances of $(1,042) of embedded derivatives. Sales and settlements in the above table reflect settlements except for sales of $(9,548) of fixed maturity securities available for sale.

52

NOTE 13 - FAIR VALUE MEASUREMENTS, (continued) Fair Value Measurements Using Significant Unobservable Inputs - Level 3 Total gains or losses (realized/unrealized) Included Fair

in other

value at

Fair

compre-

Included

Purchases

Sales

Transfers

Transfers

value at

Dec 31,

in net

hensive

and

and

into

out of

Dec 31,

2013

income

income (loss)

issuances

settlements

Level 3

Level 3

2014

Fixed maturity securities available for sale: Debt securities issued by states of the United States and political subdivisions of the states

$

U.S. corporate securities

18,140 $

(29) $

308,921

32

96,587

454 $

- $

(423) $

- $

- $

18,142

12,500

81,000

(26,667)

1,905

(8,453)

369,238

1,694

(2,361)

2,259

(22,172)

3,982

(17,353)

62,636

4,555

23

(116)

-

(4,462)

-

145,850

2,471

(1,598)

210,453

(21,061)

-

9,762

136

17

-

482,004

22

22,869

73,000

Residential mortgagebacked securities Commercial mortgagebacked securities Asset-backed securities

(18,576)

317,539

Collateralized debt obligations Foreign corporate securities

(22,880)

-

-

9,915

2,007

-

557,022

Fixed maturity securities trading: U.S. corporate securities

2,136

253

-

-

-

-

-

2,389

Foreign corporate securities

2,659

(415)

-

6,367

-

-

-

8,611

753

(30)

-

-

-

953

-

-

41,574

Other investments: Municipal warrants Private equity securities

41,722

Embedded derivatives Total

(57,080) $

1,056,009 $

-

-

230

1,986

1,500

(37,522) (33,365) $

33,751 $

(3,634)

(3,505)

2,952

371,304 $

(98,347) $

7,894 $

(44,382) $

(95,155) 1,292,864

Purchases and issuances in the above table reflect purchases except for issuances of $(3,505) of embedded derivatives. Sales and settlements in the above table reflect sales except for settlements of $(7,588) of fixed maturity securities available for sale. In the tables above for fixed maturity securities and other investments, $2,580 and $5,192 was included in net investment income and $(1,517) and $(1,005) was included in net realized capital gains on the consolidated statements of operations in 2015 and 2014, respectively. For embedded derivatives, $1,589 and $(37,522) was included in change in policy and contract liabilities on the consolidated statements of operations in 2015 and 2014, respectively. The amount of total gains (losses) in 2015 and 2014 included in earnings attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2015 and 2014 was $(1,249) and $(132) for fixed maturities, $105 and $(30) for municipal warrants, and $160 and $(37,912) for embedded derivatives, respectively. Transfers into and out of Level 3 typically occur due to changes in the valuation source and the availability of observable market inputs. Transfers into Level 3 in 2015 and 2014 included situations where a fair value quote based on observable market inputs was not available and the price was replaced with a broker quote that could not be corroborated to observable market inputs. Transfers out of Level 3 in 2015 and 2014 included situations where a fair value quote based on observable market inputs was available and the price had been based in the prior period on a broker quote that could not be corroborated to observable market inputs.

53

NOTE 13 - FAIR VALUE MEASUREMENTS, (continued) The following table presents information about significant unobservable inputs used in Level 3 fair value measurements at December 31, 2015: Assets accounted for Predominant Range of Values Impact of Increase at Fair Value Valuation Significant - Unobservable Inputs in Input on on a recurring basis Method Unobservable Input Fair Value (Weighted Average) ¹ Fair Value ² Debt securities issued by states Discounted of the U.S. or political cash flows Spread 117 bps Decrease $ 3,300 subdivisions of the states ³ 21,207 Broker quote Price 99 - 110 (106) Increase U.S. corporate securities ⁴ Discounted 120 bps - 530 bps cash flows (180 bps) Spread Decrease $ 397,299 2,906 Broker quote Price 84 Increase 15,866 Vendor price Price 49 - 102 (81) Increase Residential mortgage-backed Discounted Constant prepayment rate 0% - 40% (14%) Decrease cash flows securities ⁵ $ 130,044 Constant default rate 0% - 10% (2%) Decrease Loss severity 0% - 100% (32%) Decrease 2,827 Broker quote Price 102 Increase 48,047 Vendor price Price 55 - 100 (91) Increase Asset-backed securities ⁶ Discounted Constant prepayment rate Decrease 0% - 36% (8%) cash flows $ 113,614 Constant default rate 0% - 8% (3%) Decrease Loss severity 0% - 100% (65%) Decrease 259,355 Broker quote Price 92 - 100 (96) Increase 64,077 Vendor price Price 70 - 100 (93) Increase 115 bps - 274 bps Discounted (171 bps) 11,541 Spread cash flows Decrease Collateralized debt obligation securities ⁷ $ 4,954 Broker quote Price 99 Increase Foreign corporate securities ⁸ Discounted 120 bps - 420 bps cash flows (184 bps) $ 566,206 Spread Decrease 11,373 Broker quote Price 89 - 107 (96) Increase Municipal warrants Discounted Discount Rate $ 757 cash flows 10.9% Decrease Private equity securities Market $ 45,887 comparable Times revenue multiple 3.25 Increase Marketability discount 30% Decrease 1,750 Vendor price Price 1.5 Increase VA GLWB Embedded 80% of US Annuity Stochastic Derivatives Basic Table (2000) $ (52,002) Cash Flow Mortality Decrease Base Surrenders 2.3% - 17.1% Decrease Model Delay Prior to Withdrawals 0 - 10 years Increase Volatility 1.0% - 28.4% Increase Nonperformance Risk Spread 0.51% - 1.43% Decrease Equity Indexed Products Projected Option Cost 2.08% - 4.46% Increase Actuarial Cash $ (37,826) Base Withdrawals 4.08% - 17.00% Decrease Flow 65% of 1975-80 Basic Mortality Decrease Ultimate Table Nonperformance Risk Spread 0.51% - 1.43% Decrease ¹The weighted average is determined based on the fair value of the securities. ²Conversely, the impact of a change in input would have the opposite impact to the fair value as that presented in the table above. ³Includes $24,507 of investment grade securities based on NAIC rating. ⁴Includes $394,239 of privately placed securities and $399,993 of investment grade securities based on NAIC rating. ⁵Primarily mezzanine tranches of non-agency residential mortgage-backed securities and includes $175,810 of investment grade securities based on NAIC rating. ⁶Primarily collateralized by home equity and manufactured housing and includes $448,502 of investment grade securities based on NAIC rating. ⁷Includes $4,954 of investment grade securities based on NAIC rating. ⁸Includes $543,336 of privately placed securities and $556,729 of investment grade securities based on NAIC rating.

54

NOTE 13 - FAIR VALUE MEASUREMENTS, (continued) The following table presents information about significant unobservable inputs used in Level 3 2014: Assets accounted for Predominant at Fair Value Valuation Significant on a recurring basis Method Unobservable Input Fair Value Discounted Debt securities issued by states cash flows $ 3,901 Spread of the U.S. or political 14,241 Broker quote subdivisions of the states ³ Price U.S. corporate securities ⁴ Discounted $ 363,223 Spread cash flows 2,657 Broker quote Price 5,747 Vendor price Price Residential mortgage-backed Discounted Constant prepayment rate cash flows securities ⁵ $ 55,952 Constant default rate Loss severity 3,437 Broker quote Price 3,247 Vendor price Price Asset-backed securities ⁶ Discounted Constant prepayment rate cash flows $ 53,117 Constant default rate Loss severity 191,970 Broker quote Price 65,179 Vendor price Price Discounted 7,273 Spread cash flows Collateralized debt obligation securities ⁷ $ 9,915 Broker quote Price Foreign corporate securities ⁸ Discounted cash flows $ 553,854 Spread 11,779 Broker quote Price Municipal warrants Discounted Discount Rate cash flows $ 953 Private equity securities Market $ 40,074 comparable Times revenue multiple Marketability discount 1,500 Vendor price Price VA GLWB Embedded Stochastic Derivatives $ (39,759) Cash Flow Mortality Base Surrenders Model Delay Prior to Withdrawals Volatility Nonperformance Risk Spread Equity Indexed Products Projected Option Cost Actuarial Cash $ (55,396) Base Withdrawals Flow Mortality Nonperformance Risk Spread

fair value measurements at December 31, Range of Values Impact of Increase - Unobservable Inputs in Input on (Weighted Average) ¹ Fair Value ² 82 bps - 125 bps (96 bps) Decrease 109 - 111 (110) Increase 85 bps - 373 bps (137 Decrease bps) 25 - 138 (88) Increase 57 - 72 (65) Increase 0% - 40% (15%) Decrease 0% - 21% (2%) Decrease 0% - 100% (33%) Decrease 103 Increase 45 - 105 (86) Increase 0% - 19% (5%) Decrease 2% - 8% (4%) Decrease 50% - 100% (77%) Decrease 95 - 100 (98) Increase 70 - 101 (96) Increase 80 bps - 94 bps (87 bps) Decrease 98 - 100 (99) 82 bps - 365 bps (137 bps)

Increase

91 - 114 (99)

Decrease Increase

10.9%

Decrease

3.25 30% 1.5 80% of US Annuity Basic Table (2000) 2.3% - 17.1% 0 - 10 years 1.0% - 28.4% 0.42% - 1.22% 2.02% - 4.46% 4.59% - 17.00% 65% of 1975-80 Basic Ultimate Table 0.42% - 1.22%

Increase Decrease Increase Decrease Decrease Increase Increase Decrease Increase Decrease Decrease Decrease

¹The weighted average is determined based on the fair value of the securities. ²Conversely, the impact of a change in input would have the opposite impact to the fair value as that presented in the table above. ³Includes $18,142 of investment grade securities based on NAIC rating. ⁴Includes $350,284 of privately placed securities and $361,017 of investment grade securities based on NAIC rating. ⁵Primarily mezzanine tranches of non-agency residential mortgage-backed securities and includes $59,378 of investment grade securities based on NAIC rating. ⁶Primarily collateralized by home equity and manufactured housing and includes $316,345 of investment grade securities based on NAIC rating. ⁷Includes $9,915 of investment grade securities based on NAIC rating. ⁸Includes $551,753 of privately placed securities and $557,003 of investment grade securities based on NAIC rating.

55

NOTE 13 - FAIR VALUE MEASUREMENTS, (continued) Nonrecurring Fair Value Measurements The Company may be required to measure certain other financial assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from the write-downs of individual assets, primarily impaired assets for the Company.

December 31, 2015 Level 2 Level 3

Level 1 Financial assets: Mortgage loans on real estate Real estate Venture capital limited partnerships Total

$

- $ - $

$

$

$

12,738 $ 8,653 2,663 24,054 $

December 30, 2014 Level 2 Level 3

Level 1 Financial assets: Mortgage loans on real estate Real estate Venture capital limited partnerships Total

- $ - $

- $ - $

- $ - $

5,339 $ 5,702 1,390 12,431 $

Total 12,738 8,653 2,663 24,054

Total 5,339 5,702 1,390 12,431

The valuation techniques used to measure the fair values by type of investment in the above table follow: Mortgage loans on real estate: • The Company considers a loan impaired when it is probable that it will be unable to collect all amounts due according to the contractual terms of the note agreement, including principal and interest. Management has determined that loan relationships that have nonaccrual status or have had their terms restructured meet this impaired loan definition, with the amount of impairment based upon the loan’s observable market price, the estimated fair value of the collateral for collateral-dependent loans, or alternatively, the present value of the expected future cash flows discounted at the loan’s effective interest rate. Per the guidance, the use of observable market price or estimated fair value of collateral on collateral-dependent loans is considered a fair value measurement subject to the fair value hierarchy and provisions of the guidance. Appraised values, adjusted for management’s assumptions, are generally used on real estate collateral-dependent impaired loans, which the Company classifies as a Level 3 nonrecurring fair value measurement. Real estate: • The fair value is based on appraised value of collateral or the present value of expected future cash flows, which often results in significant management assumptions and input with respect to the determination and as such are classified as a Level 3 nonrecurring fair value measurement. Venture capital limited partnerships: • The Company measures based on management’s assumptions as to the expected realizable proceeds, and as such are classified as a Level 3 nonrecurring fair value measurement. The Company may also be required to measure certain other nonfinancial assets at fair value on a nonrecurring basis. These fair value measurements are typically related to intangible assets acquired in a business acquisition or goodwill which has been impaired to fair value. There were no nonfinancial assets carried at fair value on a nonrecurring basis at December 31, 2015 or 2014.

56

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosures are made regarding fair value information about certain financial instruments for which it is practicable to estimate fair value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates, in many cases, could not be realized on immediate settlement of the instrument. All nonfinancial instruments are excluded from disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The fair value estimates presented herein are based on pertinent information available to management as of December 31, 2015 and 2014. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date; therefore, current estimates of fair value may differ significantly from the amounts presented herein. The following methods and assumptions were used by the Company in estimating its fair value disclosures for each class of financial instrument for which it is practicable to estimate a value: Fixed maturity securities – Fair value is determined as described in Note 13 on available for sale and trading securities. For held to maturity securities which are publicly traded securities, fair value is determined utilizing methodologies consistent with those described in Note 13 for fixed maturity securities. For held to maturity securities without a readily ascertainable fair value, the value has been determined using an interest rate spread matrix based upon quality, weighted average maturity and U.S. Treasury yields. Equity securities – Fair value is determined as described in Note 13. Mortgage loans on real estate, net – Fair value is determined as described in Note 13. Loans on insurance policies – The fair values for loans on insurance policies are estimated using discounted cash flow analysis at interest rates currently offered for similar loans. Loans on insurance policies with similar characteristics are aggregated for purposes of the calculations. Other investments – Fair value for venture capital limited partnerships is based on the underlying net asset value of the partnerships, adjusted for significant market events if the net asset value was not calculated as of December 31, 2015 and 2014. The fair value for private equity securities is determined based on internal valuations. Carrying amounts for restricted cash approximate fair value due to the short maturity of these instruments. Venture capital partnerships and real estate partnerships that are carried on the equity method are excluded from the fair value disclosure. Cash and cash equivalents and accrued investment income - The carrying amounts approximate fair value due to the short maturity of these instruments. Accumulated contract values – Only contracts defined as investment contracts where there is no risk arising from policyowner mortality or morbidity are included in the fair value disclosure. Funds on deposit with a fixed maturity are valued at discounted present value using market interest rates. Funds on deposit which do not have fixed maturities are carried at the amount payable on demand at the reporting date, which approximates fair value. Borrowings – The fair value is estimated using a discounted cash flow calculation based on current interest rates consistent with the maturity of the obligation. Surplus notes payable - Fair value for the Company’s surplus notes liability was estimated using a discounted cash flow calculation based on current interest rates consistent with the maturity of the surplus notes. Separate account assets and liabilities - Fair value is determined as described in Note 13. liabilities are carried at the fair value of the underlying assets.

Separate account

Commitments - The estimated fair value of commitments approximates carrying amount because the fees currently charged for these arrangements and the underlying interest rates approximate fair value.

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NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS, (continued) Assets or liabilities where carrying amount equals fair value are previously disclosed in Note 13. Estimated fair values of assets or liabilities not carried at fair value are as follows:

December 31, 2015 Carrying Fair Amount Value Financial assets: Fixed maturity securites held to maturity Mortgage loans on real estate, net Loans on insurance policies Other investments Cash Accrued investment income Financial liabilities: Accumulated contract values Borrowings Surplus notes payable Liabilities related to separate accounts

$

30,547 1,597,896 378,789 68,188 69,260 111,670 772,947 15,383 49,624 6,314,191

$

31,621 1,679,982 412,288 71,708 69,260 111,670 772,921 15,407 65,214 6,314,191

December 30, 2014 Carrying Fair Amount Value $

54,738 1,527,752 362,994 63,298 80,732 92,844 676,548 49,897 6,707,934

$

57,761 1,644,065 396,916 69,410 80,732 92,844 677,041 66,286 6,707,934

NOTE 15 - SURPLUS NOTES On November 1, 1996, Ameritas Life issued $50,000 of 8.20% Surplus Notes (Notes). The Notes mature on November 1, 2026 and may not be redeemed prior to maturity. The Notes are unsecured and subordinated to all present and future policy claims, prior claims and senior indebtedness. Subject to prior written approval of the Commissioner of the DOI-NE, these Notes pay interest semi-annually on May 1 and November 1. Interest expense of $4,100 was incurred in 2015, 2014 and 2013, and was recorded in interest expense on the consolidated statements of operations. In connection with issuing the Notes, Ameritas Life incurred and capitalized $765 of issuance cost. This cost is recorded in surplus notes payable on the consolidated balance sheets, and totaled $281 and $307 as of December 31, 2015 and 2014, respectively. Issuance cost of $26, $26 and $25 was amortized in 2015, 2014 and 2013, respectively, and recorded to sales and operating expenses on the consolidated statements of operations. Additionally, the Notes have an original issue discount of $260, which is deducted from the balance of the Notes. Issuance costs and original issue discount are amortized under the straight-line method over the term of the Notes. Amortization relating to original issue discount of $9, $9 and $8 was recorded in 2015, 2014 and 2013, respectively, in sales and operating expenses on the consolidated statements of operations. Unamortized original issue discount of $94 and $103 was deducted from the balance of the Notes as of December 31, 2015 and 2014, respectively.

58

NOTE 16 – OTHER COMPREHENSIVE INCOME ACTIVITY AND BALANCES The following table presents information about the changes in the balances for each component of accumulated other comprehensive income: Net Unrealized Gains on Available for Sale Securities Balance, January 1, 2013 Other comprehensive income before reclassifications, net of tax Amounts reclassified from AOCI, net of tax Balance, December 31, 2013 Other comprehensive income before reclassifications, net of tax Amounts reclassified from AOCI, net of tax Balance, December 31, 2014 Other comprehensive income before reclassifications, net of tax Amounts reclassified from AOCI, net of tax Balance, December 31, 2015

$

$

384,817 $

Other than Temporary Impairments 4,077 $

Unrealized Losses on Defined Benefit Plan Obligations

Total Accumulated Other Comprehensive Income

(111,604) $

277,290

(117,802) (23,442) 243,573

4,816 8,893

41,609 8,275 (61,720)

(71,377) (15,167) 190,746

109,211 (12,685) 340,099

(1,999) 6,894

(37,235) 3,343 (95,612)

69,977 (9,342) 251,381

(187,595) (17,382) 135,122 $

59

(847) 6,047 $

8,935 6,715 (79,962) $

(179,507) (10,667) 61,207