Exhibit a Implementation Guidance

Ref #2016-03

Exhibit A – Implementation Guidance

This implementation guide is focused on the accounting and reporting of ahedging instrument used to hedge AG 43 liabilities after hedge effectiveness is determined, and the reporting/amortization ofdeferred assets or deferred liabilitiesas proposed in the issue paper. (This implementation guide does not address the calculation of the AG 43 liability or the determination of fair value for the AG 43 liability to assess hedge effectiveness.) These examples assume that the fair value changes in the hedging instruments and the AG 43 reserve changes are all attributed to the hedged risk. (Please see Appendix A in the issue paper for situations when the hedged risk is only a portion of the hedged item.) As detailed within the issue paper, all derivatives, regardless if included within a portfolio, must be separately detailed and reported.

1. One-Year Derivative Swap (Expires 12/31/2016) in a Highly Effective Hedging Strategywith Examples of Accelerated Recognition (6/30/2017) and Termination (9/30/2017)

1/1/2016:Acquisition of “no cost” derivative swap, designated as one derivative in a portfolio of hedging instruments used in a highly effective clearly defined hedging strategy.

Swap0

Cash0

Recognize swap at purchase price. Subsequently, the derivative is reported at fair value.

3/31/2016:Compare the derivative fair value change (decrease of $82) to the change in the AG 43 reserve liability ($38), and derivative income ($4), to determine extent swap offsetscurrent period changes in the AG 43 reserve:

Cash4

Derivative Income4

Recognize derivative income

Unrealized Loss42

Deferred Asset - Hedge Loss40

Swap82

The portion ($42) of the fair value fluctuation in the derivative offset by the change in AG 43 reserve liability ($38) of and swap income ($4) is recognized as an unrealized loss. This unrealized loss is captured on line 38 of the quarterly statement as a “change in net unrealized capital gains (losses)” impacting surplus. (This item is not reflected in Net Income.) Although hedge effectiveness is determined by a FV hedge (comparison of FV fluctuations between the hedging instruments and hedged item), after determining that the hedge is highly effective, income from the hedging instruments should still be a factor in determining the amount recognized as an unrealized gains/losses and deferred assets/liabilities.The portion of the fair value derivative change not reported as an unrealized loss is reported as a deferred asset and scheduled for amortization over 5 years:

Scheduled Amortization
Reporting Period / FV / Unrealized Loss (Gain) / Deferred Asset (Liability) / 6/30 / 9/30 / 12/31 / 2017 / 2018 / 2019 / 2020 / 2021
3/31/2016 / (82) / 42 / 40 / 2 / 2 / 2 / 8 / 8 / 8 / 8 / 2

6/30/2016: Amortize deferred asset to unrealized loss per amortization schedule and recognize swap income. Compare the derivative fair value change(decrease of $18, total FV liability of 100) to the change in the AG 43 reserve liability ($4) and derivative income ($4), to determine extent swap offsetscurrent period changes in the AG 43 reserve.

Unrealized Loss2

Deferred Asset – Hedge Loss2

Cash4

Derivative Income4

Unrealized Loss8

Deferred Asset - Hedge Loss10

Swap18

The portion ($8) of the fair value fluctuation in the derivative offset by the change in AG 43 reserve liability ($4) and swap income ($4) is recognized as an unrealized loss. This unrealized loss is captured on line 38 of the quarterly statement as a “change in net unrealized capital gains (losses)” impacting surplus. (This item is not reflected in Net Income.) The portion of the derivative fair value change not reported as an unrealized loss, as it does not offset current period changes in AG 43 reserve is reported as a deferred asset and scheduled for amortization over 5 years. Although hedge effectiveness is determined by a FV hedge (comparison of FV fluctuations between the hedging instruments and hedged item), after determining that the hedge is highly effective, income from the hedging instruments should still be a factor in determining the amount recognized as an unrealized gains/losses and deferred assets/liabilities. The portion of the fair value derivative change not reported as an unrealized loss is reported as a deferred asset and scheduled for amortization over 5 years. In the second quarter financial statements, the deferred asset will be reported at $48.

Scheduled Amortization
Reporting Period / FV / Unrealized Loss (Gain) / Deferred Asset (Liability) / 9/30 / 12/31 / 2017 / 2018 / 2019 / 2020 / 2021
3/31/2016 / (82) / 44 / 38 / 2 / 2 / 8 / 8 / 8 / 8 / 2
6/30/2016 / (100) / 8 / 10 / .50 / .50 / 2 / 2 / 2 / 2 / 1
Total / 52 / 48 / 2.50 / 2.50 / 10 / 10 / 10 / 10 / 3

9/30/2016:Amortize portion of deferred asset to unrealized loss per amortization schedule and recognize swap income. Compare the current period derivative instrument fair value change (increase of $30, total FV liability of 70) to the change in the AG 43 reserve liability ($6), and derivative income ($4), to determine extent swap offsets current periodchanges in the AG 43 reserve.

Unrealized Loss2.50

Deferred Asset – Hedge Loss2.50

Cash4

Derivative Income4

Swap30

Unrealized Gain10

Deferred Liability - Hedge Gain20

In the third quarter financial statements, the deferred asset will be reported at $25.50.

Scheduled Amortization
Reporting Period / Derivative at FV / Unrealized Loss (Gain) / Deferred Asset (Liability) / 12/31/2016 / 2017 / 2018 / 2019 / 2020 / 2021
3/31/2016 / (82) / 46 / 36 / 2 / 8 / 8 / 8 / 8 / 2
6/30/2016 / (100) / 8.50 / 9.5 / .50 / 2 / 2 / 2 / 2 / 1
9/30/2016 / (70) / (10) / (20) / (1) / (4) / (4) / (4) / (4) / (3)
Total / (70) / 44.50 / 25.5 / 1.50 / 6 / 6 / 6 / 6 / 0

12/31/2016:Amortize portion of deferred asset to unrealized loss per amortization schedule and recognize swap income. Compare the current period derivative fair value change (increase of $20, total fair liability of 50) to the change in the AG 43 reserve liability ($4), and derivative income ($4), to determine extent swap is currently offsetting reserve changes.

Upon expiration of the derivative, reflect the settlement of the derivative liability (cash out), and the unrealized losses are reclassified as realized losses.As the individual derivative has expired, but the overall hedging strategy is still effective, unrealized gains or losses are realized, but the amortization schedule continues.

Unrealized Loss1.50

Deferred Asset – Hedge Loss1.50

Cash4

Derivative Income4

Swap20

Unrealized Gain8

Deferred Liability - Hedge Gain12

Derivative50

Cash50

Realized Loss38

Unrealized Loss38

In the year-end financial statements, the net deferred asset will be reported at $12.

Amortization Schedule
Reporting Period / Derivative at FV / Unrealized Loss (Gain) / Deferred Asset (Liability) / 2017 / 2018 / 2019 / 2020 / 2021
3/31/2016 / (82) / 48 / 34 / 8 / 8 / 8 / 8 / 2
6/30/2016 / (100) / 9 / 9 / 2 / 2 / 2 / 2 / 1
9/30/2016 / (70) / (11) / (19) / (4) / (4) / (4) / (4) / (3)
12/30/2016 / (50) / (8) / (12) / (2.4) / (2.4) / (2.4) / (2.4) / (2.4)
Total / (50)* / 38* / 12 / 3.6 / 3.6 / 3.6 / 3.6 / (2.4)

*Prior to the expiration, derivative fair value was in a $50 liability position. At expiration and settlement, the net unrealized gains and losses from fair value fluctuations that are not reflected as deferred assets or deferred liabilities are realized. These realized gains/losses are reflected on line 34 of the Summary of Operations and are reflected as a component of Net Income. In this example, losses of $50 have occurred, but only $38 is realized, with $12 deferred for five years.

3/31/2017:Although the derivative expired as of 12/31/2016, as the derivative was part of a highly effective hedging strategy at the time of expiration, the deferred assets and deferred liabilities continue to amortize in accordance with their amortization schedule.

Realized Loss.90

Deferred Asset – Hedge Loss.90

In the first quarter financial statements, the net deferred asset will be reported at $11.10.

Current Year Scheduled Amortization / Future Scheduled Amortization
Originally Recognized / 2017
Beginning Deferred Asset (Liability) / 3/31 / 6/30 / 9/30 / 12/31 / 2017 Ending Deferred Asset (Liability) / 2018 / 2019 / 2020 / 2021
3/31/2016 / 34 / 2 / 2 / 2 / 2 / 26 / 8 / 8 / 8 / 2
6/30/2016 / 9 / .50 / .50 / .50 / .50 / 7 / 2 / 2 / 2 / 1
9/30/2016 / (19) / (1) / (1) / (1) / (1) / (15) / (4) / (4) / (4) / (3)
12/30/2016 / (12) / (.60) / (.60) / (.60) / (.60) / (9.6) / (2.4) / (2.4) / (2.4) / (2.4)
Total / 12 / .90 / .90 / .90 / .90 / 8.4 / 3.6 / 3.6 / 3.6 / (2.4)

Unless the reporting entity elects to accelerate amortization and recognize a greater portion of deferred assets and deferred liabilities or to terminate use of the special accounting provision, the above amortization would continue until the deferred assets and deferred liabilities were fully recognized as realized losses and realized gains.

6/30/2017:Reporting entity elects to accelerate recognition of the deferred assets and deferred liabilities. Although recognized as a net impact, reporting entities are required to separately track the impact to both deferred assets and deferred liabilities proportionately for future amortization purposes. This essentially prohibits accelerated recognition of deferred liabilities (gains) without recognizing a proportionate amount of any deferred assets (losses). After recognizing the second quarter amortization of $.90, the entity elects to recognize 50% of remaining deferred assets (38) and deferred liabilities (27.80):

Realized Loss5.10

Deferred Asset – Hedge Loss5.10

The net recognition reflects the following for amortization scheduling purposes:

Realized Loss19

Deferred Asset – Hedge Loss19

Deferred Liability – Hedge Gain13.90

Realized Gain13.90

In the second quarter financial statements, the net deferred asset will be reported at $5.10

Current Year Amortization / Future Scheduled Amortization
Originally Recognized / 3/31/2017
Deferred Asset (Liability) / 6/30 / Election / 9/30 / 12/31 / 2017 Ending Deferred Asset (Liability) / 2018 / 2019 / 2020 / 2021
3/31/2016 / 32 / 2 / 15 / 2 / 2 / 11 / 8 / 3 / - / -
6/30/2016 / 8.50 / .50 / 4 / .50 / .50 / 3 / 2 / 1 / - / -
9/30/2016 / (18) / (1) / (8.5) / (1) / (1) / (6.5) / (4) / (2.5) / - / -
12/30/2016 / (11.40) / (.60) / (5.4) / (.60) / (.60) / (4.2) / (2.4) / (1.8) / - / -
Total / 11.10 / .90 / 5.1 / .90 / .90 / 3.3 / 3.6 / (0.3)

9/30/2017:Reporting entity elects to terminate use of this special accounting provision. As such, with this election, all deferred assets and deferred liabilities recognized under the hedging strategy must be immediately eliminated with recognition as realized gains and losses.

Realized Loss4.20

Deferred Asset – Hedge Loss4.20

The net recognition reflects the following:

Realized Loss16.5

Deferred Asset – Hedge Loss16.50

Deferred Liability – Hedge Gain12.30

Realized Gain12.30

Originally Recognized / 6/30/2017
Deferred Asset (Liability) / 9/30 / Termination / 9/30/2017 Ending Deferred Asset (Liability)
3/31/2016 / 15 / 2 / 13 / 0
6/30/2016 / 4 / .50 / 3.5 / 0
9/30/2016 / (8.5) / (1) / (7.5) / 0
12/30/2016 / (5.4) / (.60) / (4.8) / 0
Total / 5.10 / .90 / 4.2 / 0

2. One-Year Swap (Expires 12/31/2016) in a Highly Effective Hedging Strategy Removed as a Hedging Instrument Prior to Expiration - (Hedging Strategy Continues as Highly Effective)

1/1/2016:Acquisition of “no cost” derivative swap, designated as one derivative in a portfolio of hedging instruments used in a highly effective clearly defined hedging strategy.

Swap0

Cash0

Recognize swap at purchase price. Subsequently, the derivative is reported at fair value.

3/31/2016: Compare the derivative fair value change (decrease of $82) to the change in the AG 43 reserve liability ($38), and derivative income ($4), determine extent swap offsets current period changes in the AG 43 reserve:

A.Cash4

Derivative Income4

Recognize derivative income

B.AG 43Liability38

AG 43 – Operations Impact38

C.Unrealized Loss42

Deferred Asset - Hedge Loss40

Swap82

The portion ($42) of the fair value fluctuation in the derivative offset by the change in AG 43 reserve liability ($38) of and swap income ($4) is recognized as an unrealized loss. This unrealized loss is captured on line 38 of the quarterly statement as a “change in net unrealized capital gains (losses)” impacting surplus. (This item is not reflected in Net Income.) Although hedge effectiveness is determined by a FV hedge (comparison of FV fluctuations between the hedging instruments and hedged item), after determining that the hedge is highly effective, income from the hedging instruments should still be a factor in determining the amount recognized as an unrealized gains/losses and deferred assets/liabilities. The portion of the fair value derivative change not reported as an unrealized loss is reported as a deferred asset and scheduled for amortization over 5 years:

Scheduled Amortization
Reporting Period / FV / Unrealized Loss (Gain) / Deferred Asset (Liability) / 6/30 / 9/30 / 12/31 / 2017 / 2018 / 2019 / 2020 / 2021
3/31/2016 / (82) / 42 / 40 / 2 / 2 / 2 / 8 / 8 / 8 / 8 / 2

6/30/2016: Amortize deferred asset to unrealized loss per amortization schedule and recognize swap income. Compare the derivative fair value change (decrease of $18, total FV liability of 100) to the change in the AG 43 reserve liability ($4) and derivative income ($4), to determine extent swap offsets current period changes in the AG 43 reserve.

A.Unrealized Loss2

Deferred Asset – Hedge Loss2

B.Cash4

Derivative Income4

AG 43 Liability4

AG 43 - Operations4

C.Unrealized Loss8

Deferred Asset - Hedge Loss10

Swap18

Scheduled Amortization
Reporting Period / FV / Unrealized Loss (Gain) / Deferred Asset (Liability) / 9/30 / 12/31 / 2017 / 2018 / 2019 / 2020 / 2021
3/31/2016 / (82) / 42 / 38 / 2 / 2 / 8 / 8 / 8 / 8 / 2
6/30/2016 / (100) / 8 / 10 / .50 / .50 / 2 / 2 / 2 / 2 / 1
Total / 50 / 48 / 2.50 / 2.50 / 10 / 10 / 10 / 10 / 3

7/1/2016:As a result rebalancing, the derivative swap is removed from the portfolio of hedging instruments and replaced with a new derivative instrument. The hedging strategy continues to be highly effective after the rebalancing occurs. As the strategy is highly effective at the time the derivative is replaced, the previously recognized deferred assets from the replaced derivative continues to amortize over the previously established schedule, unless the reporting entity elects to accelerate recognition, or terminate use of the special accounting provision. In the event the hedging strategy is subsequently deemed ineffective, there is no impact on the deferred assets, or the future amortization schedule. As the derivative is no longer part of a highly effective hedging strategy, but is still outstanding, future fair value fluctuations are recognized as unrealized gains or losses.

9/30/2016:Amortize portion of deferred asset to unrealized loss per amortization schedule. Recognize current period derivative income. Compare prior period derivative FV to current period FV (decline of $30) and recognize the fluctuation as an unrealized loss.

A.Unrealized Loss2.50

Deferred Asset – Hedge Loss2.50

B.Cash4

Derivative Income4

C.Swap30

Unrealized Gain30

In the third quarter financial statements, the deferred asset will be reported at $45.50.

Scheduled Amortization
Reporting Period / Derivative at FV / Unrealized Loss (Gain) / Deferred Asset (Liability) / 12/31/2016 / 2017 / 2018 / 2019 / 2020 / 2021
3/31/2016 / (82) / 42 / 36 / 2 / 8 / 8 / 8 / 8 / 2
6/30/2016 / (100) / 8 / 9.5 / .50 / 2 / 2 / 2 / 2 / 1
LOCKED / 50 / 45.50 / 2.50 / 10 / 10 / 10 / 10 / 3
9/30/2016 / (70) / (30) / - / - / - / - / - / - / -

12/31/2016:Amortize portion of deferred asset to unrealized loss per amortization schedule and recognize swap income. As of 12/31, swap derivative expires while in a liability position ($50), therefore recognize settlement of the derivative. As the individual derivative has expired, but the overall hedging strategy is still effective, unrealized gains or losses are realized, but the amortization schedule continues.

A.Unrealized Loss2.50

Deferred Asset – Hedge Loss2.50

B.Cash4

Derivative Income4

C.Swap20

Unrealized Gain20

D.Swap50

Cash50

E.Realized Loss7

Unrealized Loss7

In the year-end financial statements, the net deferred asset will be reported at $43.

Reporting Period / Derivative at FV / Unrealized Loss (Gain) / Deferred Asset (Liability) / 2017 / 2018 / 2019 / 2020 / 2021
3/31/2016 / (82) / 42 / 34 / 8 / 8 / 8 / 8 / 2
6/30/2016 / (100) / 8 / 9 / 2 / 2 / 2 / 2 / 1
LOCKED / 50 / 43 / 10 / 10 / 10 / 10 / 3
9/30/2016 / (70) / (30) / - / - / - / - / - / -
12/31/2016 / (50)* / (20)*

*At expiration unrealized gains and losses from fair value fluctuations are realized. These realized gains/losses are reflected on line 34 of the Summary of Operations and are a component of Net Income. Although the realized loss is $50 at time of expiration, with the special accounting provision, only $7 is shown as a realized loss as of 12/31/2016. This results in an overall net income (positive) positon of $9 instead of a netloss of ($34). The $43 deferred asset will be amortized to realized losses over the next five years.

Example 2: One-Year Swap Removed as Hedging Instrument Prior to Expiration – Remains Highly Effective

Cash / Derivative / Deferred Asset & Liability / AG 43 Reserve / Unrealized LossGain / Income / Operations
1/1/16 Acquire / 0 Cr / 0 Dr
3/30/16
A / 4 Dr / 4 Cr
B / 38 Dr / 38 Cr
C / 82 Cr / 40 Dr / 42 Dr
3/30/16 / 4 Dr / 82 Cr / 40 Dr / 38 Dr / 42 Dr / 4 Cr / 38 Cr
6/30/16
A / 2 CR / 2 Dr
B / 4 Dr / 4 Dr / 4 Cr / 4 Cr
C / 18 Cr / 10 Dr / 8 Dr
6/30/16 / 8 Dr / 100 Cr / 48 Dr / 42Dr / 52Dr / 8 Cr / 42Cr
9/30/16
A / 2.50 Cr / 2.50 Dr
B / 4 Dr / 4 Cr
C / 30 Dr / 30 Cr
9/30/16 / 12 Dr / 70 Cr / 45.50 Dr / 24.50 Dr / 12 Cr
12/31/16
A / 2.50 Cr / 2.50 Dr
B / 4 Dr / 4 Cr
C / 20Dr / 20 Cr
D / 50 Cr / 50 Dr
E / 7 Cr / 7 Dr
12/31/16 / 34 Cr
Net cash outflow of $34 from swap income and settlement / 0
Swap Sold / 43 Dr
Deferred Asset to be amortized into realized losses over time. / --
Changes in AG 43 no longer a factor / 0
Swap Sold
All Unrealized Gains & Losses Realized / 9 Cr
Income is positive,losses ($43) are deferred assets. / --
AG 43 Change no longer a factor