| POLICYHOLDER OBLIGATIONS | POLICYHOLDER OBLIGATIONS For universal life and annuity contracts, the liability for future policyholder obligations represents the account balance. Fixed-index products combine features associated with traditional fixed annuities and universal life contracts, with the option to have interest rates linked in part to an equity index. In accordance with GAAP guidance, the equity return component of such policy contracts must be identified separately and accounted for as embedded derivatives. The remaining portions of these policy contracts are considered the host contracts and are recorded separately as fixed annuity or universal life contracts. The host contracts are accounted for under GAAP guidance provisions that require debt instrument type accounting. The host contracts are recorded as discounted debt instruments that are accreted, using the effective yield method, to their minimum account values at their projected maturities or termination dates. A liability for future policy benefits, which is the present value of estimated future policy benefits to be paid to or on behalf of policyholders and certain related expenses less the present value of estimated future net premiums to be collected from policyholders, is accrued as premium revenue is recognized. Under GAAP, the liability for future policy benefits on traditional life products has been calculated using assumptions as to future mortality and withdrawals based on Company experience. Contracts are grouped into cohorts by product features and issue year. The liability is adjusted for differences between actual and expected experience. With the exception of the expense assumption, the Company reviews its historical and future cash flow assumptions quarterly and updates the net premium ratio used to calculate the liability each time the assumptions are changed. Each quarter, the Company updates its estimate of cash flows expected over the entire life of a group of contracts using actual historical experience and current future cash flow assumptions. These updated cash flows are used to calculate the revised net premiums and net premium ratio, which are used to derive an updated liability for future policy benefits as of the beginning of the current reporting period, discounted at the original contract issuance discount rate. This amount is then compared to the carrying amount of the liability as of that same date, before the updating of cash flow assumptions, to determine the current period change in liability estimate. This current period change in the liability is the liability remeasurement gain or loss and is presented as a separate component of benefit expense in the Condensed Consolidated Statements of Earnings. In subsequent periods, the revised net premiums are used to measure the liability for future policy benefits, subject to future revisions. The discount rate assumption is an equivalent single rate that is derived based on A-credit-rated fixed-income instruments with similar duration to the liability. The Company selects fixed-income instruments that have been A-rated by one of the major credit rating agencies, such as Moody's, Standard & Poor's, or Fitch. The discount rate assumption is updated quarterly and used to remeasure the liability at the reporting date, with the resulting change reflected in other comprehensive income. For liability cash flows that are projected beyond the duration of market-observable A-credit-rated fixed-income instruments, the Company uses the last market-observable yield level, and uses linear interpolation to determine yield assumptions for durations that do not have market-observable yields. The embedded derivatives are recorded at fair value. The fair value of the embedded derivative component of policy benefit reserves is estimated at each valuation date by (a) projecting policy and contract values and minimum guaranteed values over the expected lives of the policies and contracts and (b) discounting the excess of the projected value amounts at the applicable risk free interest rates adjusted for nonperformance risk related to those liabilities. The projections of policy and contract values are based upon best estimate assumptions for future policy growth and future policy decrements. Best estimate assumptions for future policy growth includes assumptions for the expected index credit on the next policy anniversary date which are derived from the fair values of the underlying call options purchased to fund such index credits and the expected costs of annual cost options purchased in the future to fund index credits beyond the next policy anniversary. The projections of minimum guaranteed contract values include the same best estimate assumptions for policy decrements as were used to project policy contract values. Other policy claims and benefits - Unearned revenue reserves are maintained that reflect the unamortized balance of charges assessed to interest sensitive contract holders which serve as compensation for services to be performed over future periods (policy premium loads). These charges have been deferred and are being recognized in income over the period benefited using the same assumptions and factors used to amortize deferred policy acquisition costs. The Company updates the net premium ratio for actual historical experience each quarter. Future cash flow assumptions are reviewed each quarter and are updated at least annually. Liability for Policyholder Account Balances - The Company recognizes a liability for policyholder account balances, which includes universal life products and annuities other than single premium immediate annuities with life contingencies. The following tables summarize balances and changes in the Liability for policyholder account balances. Three Months Ended March 31, 2024 Liability for Policyholder Account Balances Domestic Universal Life International Universal Life Annuities excl. SPIAs WLC (In thousands) Balance, beginning of period $ 1,454,356 490,603 4,955,532 Premiums received 29,416 8,057 24,296 Policy charges (17,054) (16,687) (7,294) Surrenders and withdrawals (12,933) (14,050) (156,174) Benefit payments (8,279) (504) (38,411) Interest credited 19,438 5,152 14,146 Change in embedded derivative 14,178 2,435 (9,122) Change in unearned revenue reserve 3,092 (182) — Other (2,424) 310 (8,055) Balance, end of period 1,479,790 475,134 4,774,918 Less reinsurance recoverable — — (1,065,753) Ending balance, net of reinsurance $ 1,479,790 475,134 3,709,165 Weighted-average crediting rate 6.34 % 4.37 % 1.11 % Net amount at risk $ 1,557 5,973 1,241,261 Cash surrender value $ 1,239,802 452,178 4,558,423 Three Months Ended March 31, 2023 Liability for Policyholder Account Balances Domestic Universal Life International Universal Life Annuities excl. SPIAs WLC (In thousands) Balance, beginning of period $ 1,420,569 563,998 5,677,218 Issuances — — — Premiums received 27,587 10,196 34,263 Policy charges (16,441) (19,656) (7,500) Surrenders and withdrawals (14,361) (11,000) (129,363) Benefit payments (8,189) (846) (53,150) Interest credited 3,267 2,249 13,857 Change in embedded derivative 13,219 1,321 2,414 Change in unearned revenue reserve 411 (46) — Other 313 125 (6,799) Balance, end of period 1,426,375 546,341 5,530,940 Less reinsurance recoverable — — (1,211,421) Ending balance, net of reinsurance $ 1,426,375 546,341 4,319,519 Weighted-average crediting rate 0.98 % 1.53 % 0.93 % Net amount at risk $ 1,621 6,910 1,162,927 Cash surrender value $ 1,211,837 522,501 5,201,886 The following table summarizes the Liability for policyholder account balances by line of business as of the end of the following periods. March 31, Liability for Policyholder Account Balances 2024 2023 (In thousands) Domestic universal life $ 1,479,790 1,426,375 International universal life 475,134 546,341 Annuities excl. SPIAs with life contingencies 4,774,918 5,530,940 Total $ 6,729,842 7,503,656 The following table presents the account values by range of guaranteed minimum crediting rates and the related range of difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums. March 31, 2024 At Guaranteed Minimum 1-50 Basis Points Above 51-150 Basis Points Above Greater Than 150 Basis Points Above Total (In thousands) Range of guaranteed minimum crediting rate: Less than 2.00% $ 1,629,149 2,719 14,120 100,508 1,746,496 2.00% - 2.99% 502,653 6,482 85,106 47,036 641,277 3.00% - 3.99% 449,173 35,915 11,515 28 496,631 4.00% and greater 375,935 — — 39 375,974 Total $ 2,956,910 45,116 110,741 147,611 3,260,378 March 31, 2023 At Guaranteed Minimum 1-50 Basis Points Above 51-150 Basis Points Above Greater Than 150 Basis Points Above Total (In thousands) Range of guaranteed minimum crediting rate: Less than 2.00% $ 1,977,043 2,291 38,739 140,367 2,158,440 2.00% - 2.99% 478,429 8,092 86,871 24,576 597,968 3.00% - 3.99% 453,414 40,857 2,780 27 497,078 4.00% and greater 398,573 — — 36 398,609 Total $ 3,307,459 51,240 128,390 165,006 3,652,095 Additional Liability for Benefits in Excess of Account Balances And Liability for Future Policy Benefits - The following table provides the balances and changes in insurance liabilities related to universal life and annuities that are in addition to the account balance, including annuitization benefits and death or other insurance benefits. Three Months Ended March 31, 2024 Additional Liability for Benefits in Excess of Account Balances and Liability for Future Policy Benefits Domestic Universal Life International Universal Life Annuities (In thousands) Balance, beginning of period $ 72,241 49,886 37,310 Beginning balance before shadow reserve adjustments 72,241 49,886 37,310 Effect of changes in cash flow assumptions — — — Effect of actual variances from expected experience 1,158 (1,546) (98) Adjusted beginning of period balance 73,399 48,340 37,212 Issuances — — — Interest accrual 1,106 618 342 Assessments collected 5,390 2,209 92 Benefit payments (5,502) (1,259) (369) Derecognition (lapses and withdrawals) — — — Other (2) (270) 13 Ending balance before shadow reserve adjustments 74,391 49,638 37,290 Effect of shadow reserve adjustments — — — Balance, end of period 74,391 49,638 37,290 Less reinsurance recoverable, end of period — — (37,273) Net additional liability, after reinsurance recoverable $ 74,391 49,638 17 Three Months Ended March 31, 2023 Additional Liability for Benefits in Excess of Account Balances and Liability for Future Policy Benefits Domestic Universal Life International Universal Life Annuities (In thousands) Balance, beginning of period $ 63,804 46,402 38,502 Beginning balance before shadow reserve adjustments 63,804 46,402 38,502 Effect of changes in cash flow assumptions — — — Effect of actual variances from expected experience 4,693 (771) 497 Adjusted beginning of period balance 68,497 45,631 38,999 Issuances — — — Interest accrual 184 93 374 Assessments collected 5,696 2,560 3 Benefit payments (9,001) (1,360) (552) Derecognition (lapses and withdrawals) — — — Other (1) (423) (12) Ending balance before shadow reserve adjustments 65,375 46,501 38,812 Effect of shadow reserve adjustments — — — Balance, end of period 65,375 46,501 38,812 Less reinsurance recoverable, end of period — — (38,812) Net additional liability, after reinsurance recoverable $ 65,375 46,501 — The following table summarizes the Additional liability for benefits in excess of account balance by line of business as of the end of the following periods. March 31, 2024 2023 (In thousands) Domestic universal life $ 74,391 65,375 International universal life 49,638 46,501 Annuities 37,290 38,812 Total $ 161,319 150,688 The following table provides the amount of gross assessments and interest expense related to annuitization and death or other insurance benefits recognized in the Condensed Consolidated Statements of Earnings related to additional insurance liabilities. Three months ended March 31, 2024 2023 Gross Assessments Interest Expense Gross Assessments Interest Expense (In thousands) Domestic universal life $ 15,180 1,106 16,790 184 International universal life 8,811 618 10,351 93 Annuities 6 342 255 374 Total $ 23,997 2,066 27,396 651 The following tables summarize balances and changes in the Liability for future policy benefits balance for traditional life contracts and single premium immediate annuities with life contingencies. Three Months Ended March 31, 2024 Domestic Traditional Life International Traditional Life SPIAs With Life Contingency ONL & Affiliates (In thousands) Present value of expected net premiums Balance, beginning of period $ (3,608) 35,323 — 409,519 Beginning balance at original discount rate (2,878) 36,038 — 485,238 Effect of changes in cash flow assumptions — — — — Effect of actual variances from expected experience (40) 40 — (1,693) Adjusted beginning of period balance (2,918) 36,078 — 483,545 Issuances — — — 2,181 Interest accrual (65) 384 — 3,949 Net premium collected 198 (847) — (9,574) Ending balance at original discount rate (2,785) 35,615 — 480,101 Effect of changes in discount rate assumptions (689) (1,669) — (82,850) Balance, end of period $ (3,474) 33,946 — 397,251 Present value of expected future policy benefits Balance, beginning of period $ 52,358 100,948 193,180 1,020,535 Beginning balance at original discount rate 45,030 99,868 209,910 1,291,686 Effect of changes in cash flow assumptions — — — — Effect of actual variances from expected experience (9) (77) 969 (1,648) Adjusted beginning of period balance 45,021 99,791 210,879 1,290,038 Issuances — — 2,982 2,208 Interest accrual 653 1,356 1,775 10,144 Benefit payments (1,370) (1,737) (5,265) (14,593) Derecognition (lapses and withdrawals) — — (1,656) — Other 126 449 (269) — Ending balance at original discount rate 44,430 99,859 208,446 1,287,797 Effect of changes in discount rate assumptions 5,774 (1,370) (20,469) (297,200) Balance, end of period 50,204 98,489 187,977 990,597 Net liability for future policy benefits 53,678 64,543 187,977 593,346 Less reinsurance recoverable — (149) (155,041) (25,799) Net liability for future policy benefits, after reinsurance $ 53,678 64,394 32,936 567,547 Three Months Ended March 31, 2023 Domestic Traditional Life International Traditional Life SPIAs With Life Contingencies ONL & Affiliates (In thousands) Present value of expected net premiums Balance, beginning of period $ 260 33,998 — 402,745 Beginning balance at original discount rate 660 35,907 — 494,962 Effect of changes in cash flow assumptions — — — — Effect of actual variances from expected experience 8 (915) — (677) Adjusted beginning of period 668 34,992 — 494,285 Issuances — — — 2,930 Interest accrual (3) 368 — 3,997 Net premium collected (59) (880) — (9,788) Ending balance at original discount rate 606 34,480 — 491,424 Effect of changes in discount rate assumptions (415) (770) — (80,359) Balance, end of period $ 191 33,710 — 411,065 Present value of expected future policy benefits Balance, beginning of period $ 70,165 99,168 191,817 975,999 Beginning balance at original discount rate 62,865 100,929 215,542 1,291,914 Effect of changes in cash flow assumptions — — — — Effect of actual variances from expected experience (359) (2,793) 1,000 (463) Adjusted beginning of year balance 62,506 98,136 216,542 1,291,451 Issuances — — 1,775 2,846 Interest accrual 962 1,367 1,747 10,092 Benefit payments (1,016) (1,485) (5,707) (15,344) Derecognition (lapses and withdrawals) — — (1,814) — Other 85 747 96 (38) Ending balance at original discount rate 62,537 98,765 212,639 1,289,007 Effect of changes in discount rate assumptions 9,133 1,190 (18,123) (280,035) Balance, end of period 71,670 99,955 194,516 1,008,972 Net liability for future policy benefits 71,479 66,245 194,516 597,907 Less reinsurance recoverable (13,160) (553) (164,270) (26,436) Net liability for future policy benefits, after reinsurance $ 58,319 65,692 30,246 571,471 The following table summarizes the net Liability for future policy benefits by product line as of the end of the following periods. March 31, 2024 2023 (In thousands) Domestic traditional life $ 53,678 71,479 International traditional life 64,543 66,245 SPIAs with life contingencies 187,977 194,516 ONL & Affiliates 593,346 597,907 Total $ 899,544 930,147 The following tables summarize the amount of revenue and interest related to traditional life contracts and single premium immediate annuities with life contingencies recognized in the Condensed Consolidated Statements of Earnings. Three months ended March 31, 2024 2023 Gross Assessments Interest Expense Gross Assessments Interest Expense (In thousands) Domestic traditional life $ 439 718 749 965 International traditional life 2,376 972 2,647 999 SPIAs with life contingencies 1,915 1,775 81 1,747 ONL & Affiliates 18,813 6,195 19,237 6,095 Total $ 23,543 9,660 22,714 9,806 The following table provides the amount of undiscounted expected gross premiums and expected future benefits and expenses for traditional life contracts and single premium immediate annuities with life contingencies. March 31, 2024 2023 Expected Future Gross Premiums Expected Future Benefit Payments Expected Future Gross Premiums Expected Future Benefit Payments (In thousands) Domestic traditional life $ 26,422 79,536 32,336 105,418 International traditional life 157,291 216,623 158,329 216,235 SPIAs with life contingencies — 277,925 — 282,340 ONL & Affiliates 1,389,010 2,264,018 1,419,206 2,263,534 Total $ 1,572,723 2,838,102 1,609,871 2,867,527 The following tables summarize the annualized actual experience and expected experience for mortality and lapses of the Liability for future policy benefits and the Additional liability for benefits in excess of account balance. 2024 2023 Actual Experience Expected Experience Actual Experience Expected Experience Mortality: Domestic traditional life 1.60% 1.25% 1.86% 2.05% Domestic universal life 1.83% 2.11% 2.12% 1.93% International traditional life 0.30% 0.43% 0.09% 0.39% International universal life 0.27% 0.29% 0.29% 0.26% SPIAs with life contingencies 4.41% 3.24% 3.27% 3.08% Annuities excl. SPIAs with life contingencies 2.72% 2.67% 3.55% 2.68% ONL & Affiliates 1.08% 0.89% 0.78% 0.74% 2024 2023 Actual Experience Expected Experience Actual Experience Expected Experience Lapses: Domestic traditional life 6.43% 6.67% 5.10% 6.18% Domestic universal life 4.40% 3.49% 4.71% 3.37% International traditional life 9.48% 5.79% 9.26% 7.74% International universal life 13.06% 6.86% 11.00% 7.06% SPIAs with life contingencies N/A N/A N/A N/A Annuities excl. SPIAs with life contingencies 7.65% 4.55% 4.60% 4.15% ONL & Affiliates 4.63% 4.43% 3.96% 4.69% The following table provides the weighted-average durations in years of the Liability for future policy benefits and the Additional liability for benefits in excess of account balance. March 31, 2024 2023 Domestic traditional life 8.0 8.0 Domestic universal life 8.1 8.1 International traditional life 8.0 8.0 International universal life 8.1 8.1 SPIAs with life contingencies 8.0 8.0 Annuities excl. SPIAs with life contingencies 6.6 6.6 ONL & Affiliates 22.0 22.0 The following table provides the weighted-average interest rates for the Liability for future policy benefits and the Additional liability for benefits in excess of account balance. March 31, 2024 March 31, 2023 Interest Accretion Rate Current Discount Rate Interest Accretion Rate Current Discount Rate Domestic traditional life 6.75% 5.00% 6.80% 4.65% Domestic universal life 6.34% 6.34% 0.98% 0.98% International traditional life 5.13% 5.00% 5.13% 4.65% International universal life 4.37% 4.37% 1.53% 1.53% SPIAs with life contingencies 3.45% 5.00% 3.31% 4.65% Annuities excl. SPIAs with life contingencies 1.11% 1.11% 0.93% 0.93% ONL & Affiliates 3.25% 5.40% 3.24% 5.20% The Company realized actual-expected experience variances but made no changes to assumptions for the periods shown other than the interest rates employed for purposes of calculating discounted values. Market risk benefits are contracts or contract features that both provide protection to the contract holder from other-than-nominal capital market risk and expose the Company to other-than-nominal capital market risk. Market risk benefits include certain contract features on annuity products that provide minimum guarantees to policyholders, such as guaranteed minimum withdrawal benefits and guaranteed annuitization benefits. Market risk benefits are measured at fair value using a risk-neutral valuation model based on current net amounts at risk, benefit utilization rates, market data, Company experience, and other factors. Changes in fair value are recognized in net income each period, with the exception of the portion of the change in fair value due to a change in the instrument-specific credit risk, which is recognized in Other comprehensive income. The following tables present the balances of and changes in market risk benefits associated with guaranteed minimum withdrawal benefits and guaranteed annuitization benefits. The Company does not have guaranteed minimum death benefits in its policies. Three Months Ended March 31, 2024 Guaranteed Minimum Withdrawal Benefits Guaranteed Annuitization Benefits (In thousands) Balance, beginning of period $ 174,375 68,210 Balance, beginning of period, before effect of changes in instrument-specific credit risk 174,375 68,210 Issuances 97 — Interest accrual — — Attributed fees collected 1,058 — Benefit payments — — Effect of changes in interest rates (18,051) (2,311) Actual policyholder behavior different from expected behavior (940) — Effect of changes in future expected policyholder behavior — — Effect of changes in other future expected assumptions — — Balance, end of period, before effect of changes in instrument-specific credit risk 156,539 65,899 Effect of changes in the instrument-specific credit risk — — Balance, end of period 156,539 65,899 Less reinsurance recoverable, end of period (6,188) (66,250) Balance, end of period, net of reinsurance $ 150,351 (351) Net amount at risk $ 1,116,647 124,613 Weighted-average attained age of contract holders 70.0 68.2 Three Months Ended March 31, 2023 Guaranteed Minimum Withdrawal Benefits Guaranteed Annuitization Benefits (In thousands) Balance, beginning of period $ 97,552 69,466 Balance, beginning of period, before effect of changes in instrument-specific credit risk 97,552 69,466 Issuances 22 — Interest accrual — — Attributed fees collected 6,771 — Benefit payments — — Effect of changes in interest rates 36,147 2,078 Actual policyholder behavior different from expected behavior (679) — Effect of changes in future expected policyholder behavior — — Effect of changes in other future expected assumptions — — Balance, end of period, before effect of changes in instrument-specific credit risk 139,813 71,544 Effect of changes in the instrument-specific credit risk — — Balance, end of period 139,813 71,544 Less reinsurance recoverable, end of period (4,167) (71,946) Balance, end of period, net of reinsurance $ 135,646 (402) Net amount at risk $ 1,035,476 127,450 Weighted-average attained age of contract holders 69.2 67.4 The following table summarizes Market risk benefits liability balances separately by amounts in an asset position and amounts in a liability position to the Market risk benefits liability amounts as of the end of the following periods. March 31, 2024 March 31, 2023 Asset Liability Net liability Asset Liability Net liability (In thousands) Guaranteed minimum withdrawal benefit $ 39,474 196,013 156,539 41,759 181,572 139,813 Guaranteed annuitization benefits — 65,899 65,899 — 71,544 71,544 Balance, end of period $ 39,474 261,912 222,438 41,759 253,116 211,357 For the periods shown, there were no notable changes made to the inputs to the fair value estimates of market risk benefit calculations other than the interest rates employed for purposes of calculating fair value. |
