We separated our Closed Block Variable Annuity and Closed Block Institutional Spread Products segments from our other operations, placing them in run-off, and made a strategic decision to stop actively writing new retail variable annuity products with substantial guarantee features and to run-off the Institutional Spread Products portfolio over time. Accordingly, these segments have been classified as Closed Blocks and are managed separately from our Ongoing Business.

Closed Block Variable Annuity.

In 2009, we decided to cease sales of retail variable annuity products with substantial guarantee features (the last policies were issued in early 2010 and placed this portfolio in run-off). Subsequently, we refined our hedging program to dynamically protect regulatory reserves and rating agency capital of the variable annuities block for adverse equity market movements. In addition, since 2010, we have increased statutory reserves considerably, added significant interest rate risk protection and have more closely aligned our policyholder behavior assumptions with experience. Our focus in managing our CBVA segment is on protecting regulatory and rating agency capital from equity market movements via hedging and judiciously looking for opportunities to accelerate the run-off of the block, where possible.  For example, in the fourth quarter of 2014, we offered enhanced income for certain eligible GMIB policyholders which allowed them to annuitize prior to the end of their 10-year waiting period.

Closed Block Institutional Spread Products.

In 2009, we also placed the Institutional Spread Products portfolio in run-off. As of December 31, 2014, remaining assets in the Institutional Spread Products portfolio had an amortized cost of $1.3 billion, down from a peak of $14.3 billion in 2008.

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Michael Katz
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