American National (ANAT) 10-Q 2021 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

FORM 10-Q

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

For the quarterly period ended March 31, 2021

or

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

Commission File No. 001-39369

American National Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware	30-1221711
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Moody Plaza

Galveston, Texas 77550-7999

(Address of principal executive offices) (Zip Code)

(409) 763-4661

(Registrant’s telephone number, including area code)

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

Title of Each Class	Trading Symbol	Name of Each Exchange on which Registered
Common Stock, par value $0.01	ANAT	NASDAQ

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

As of April 29, 2021, there were 26,887,200 shares of the registrant’s voting common stock, $0.01 par value per share, outstanding.

AMERICAN NATIONAL GROUP, INC.

TABLE OF CONTENTS

	PART I – FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS:
	Condensed Consolidated Statements of Financial Position as of March 31, 2021 and December 31, 2020 (unaudited)	3
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020 (unaudited)	5
	Condensed Consolidated Statements of Changes in Equity for the three months ended March 31, 2021 and 2020 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited)	7
	Notes to the Condensed Consolidated Financial Statements (unaudited)	9
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	39
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	62
ITEM 4.	CONTROLS AND PROCEDURES	62
	PART II – OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	62
ITEM 1A.	RISK FACTORS	62
ITEM 6.	EXHIBITS	63
SIGNATURES		64

2

AMERICAN NATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

(In thousands, except share data)

	March 31, 2021		December 31, 2020
ASSETS
Fixed maturity, bonds held-to-maturity, at amortized cost, net of allowance for credit losses of $18,854 in 2021 and $12,442 in 2020 (Fair value $7,908,767 in 2021 and $7,983,181 in 2020)	$	7,475,862	$	7,354,970
Fixed maturity, bonds available-for-sale, at fair value (Allowance for credit losses of $8,716 in 2021 and $7,482 in 2020) (Amortized cost $7,046,940 in 2021 and $7,073,142 in 2020)	7,397,792		7,597,180
Equity securities, at fair value (Cost $777,796 in 2021 and $754,625 in 2020)	2,164,146		2,070,766
Mortgage loans on real estate, net of allowance for credit losses of $126,588 in 2021 and $125,703 in 2020	5,141,094		5,242,531
Policy loans	369,525		373,014
Real estate and real estate partnerships, net of accumulated depreciation of $270,770 in 2021 and $269,626 in 2020	938,189		960,572
Investment funds	523,225		477,135
Short-term investments	1,212,342		1,028,379
Other invested assets	94,316		94,415
Total investments	25,316,491		25,198,962
Cash and cash equivalents	459,087		339,947
Accrued investment income	213,760		216,389
Reinsurance recoverables, net of allowance for credit losses of $14,390 in 2021 and $14,353 in 2020	444,286		414,359
Prepaid reinsurance premiums	40,807		42,804
Premiums due and other receivables	373,136		351,972
Deferred policy acquisition costs	1,421,900		1,360,211
Property and equipment, net of accumulated depreciation of $287,615 in 2021 and $281,738 in 2020	125,810		121,578
Prepaid pension	84,089		80,526
Other assets	162,701		155,600
Separate account assets	1,207,754		1,185,467
Total assets	$	29,849,821	$	29,467,815
LIABILITIES
Future policy benefits
Life	$	3,149,000	$	3,149,067
Annuity	1,621,258		1,617,774
Health	48,812		49,658
Policyholders’ account balances	12,960,532		12,812,155
Policy and contract claims	1,637,130		1,575,288
Unearned premium reserve	979,302		956,343
Other policyholder funds	355,898		358,601
Liability for retirement benefits	65,704		70,254
Notes payable	152,607		153,703
Deferred tax liabilities, net	478,469		478,347
Current tax payable	24,499		10,372
Federal Home Loan Bank advance	250,000		250,000
Other liabilities	407,377		335,219
Separate account liabilities	1,207,754		1,185,467
Total liabilities	23,338,342		23,002,248
EQUITY
American National Group, Inc. stockholders’ equity:
Common stock, $0.01 par value; 50,000,000 shares authorized; 26,887,200 shares issued and outstanding in 2021 and 2020	269		269
Additional paid-in capital	47,702		47,683
Accumulated other comprehensive income	119,959		222,170
Retained earnings	6,336,273		6,188,148
Total American National stockholders’ equity	6,504,203		6,458,270
Noncontrolling interest	7,276		7,297
Total stockholders' equity	6,511,479		6,465,567
Total liabilities and stockholders' equity	$	29,849,821	$	29,467,815

See accompanying notes to the unaudited condensed consolidated financial statements.

3

AMERICAN NATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share data)

	Three months ended March 31,
		2021		2020
PREMIUMS AND OTHER REVENUES
Premiums
Life		$	100,779	$	89,516
Annuity		24,241		15,509
Health		38,228		43,086
Property and casualty		399,405		388,657
Other policy revenues		86,539		79,605
Net investment income		269,981		130,991
Net realized investment gains		19,239		4,148
Change in investment credit loss		(5,486)		(44,678)
Net gains (losses) on equity securities		95,940		(332,575)
Other income		9,752		11,133
Total premiums and other revenues		1,038,618		385,392
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits
Life		146,160		110,466
Annuity		44,717		34,802
Claims incurred
Health		24,251		34,885
Property and casualty		244,135		229,709
Interest credited to policyholders’ account balances		107,787		(4,323)
Commissions for acquiring and servicing policies		153,685		130,435
Other operating expenses		133,502		133,926
Change in deferred policy acquisition costs		(28,119)		(1,672)
Total benefits, losses and expenses		826,118		668,228
Income (loss) before federal income tax and other items		212,500		(282,836)
Less: Provision (benefit) for federal income taxes
Current		16,130		24,503
Deferred		27,041		(86,171)
Total provision (benefit) for federal income taxes		43,171		(61,668)
Income (loss) after federal income tax		169,329		(221,168)
Other components of net periodic pension benefit, net of tax		944		571
Net income (loss)		170,273		(220,597)
Less: Net income (loss) attributable to noncontrolling interest, net of tax		100		(153)
Net income (loss) attributable to American National		$	170,173	$	(220,444)
Amounts available to American National common stockholders
Earnings (losses) per share
Basic		$	6.33	$	(8.20)
Diluted		6.33		(8.20)
Weighted average common shares outstanding		26,877,200		26,881,700
Weighted average common shares outstanding and dilutive potential common shares		26,884,899		26,891,675

See accompanying notes to the unaudited condensed consolidated financial statements.

4

AMERICAN NATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(In thousands)

	Three months ended March 31,
		2021		2020
Net income (loss)		$	170,273	$	(220,597)
Other comprehensive income (loss), net of tax
Change in net unrealized losses on securities		(106,264)		(112,403)
Foreign currency transaction and translation adjustments		244		(924)
Defined benefit pension plan adjustment		3,809		1,756
Total other comprehensive loss, net of tax		(102,211)		(111,571)
Total comprehensive income (loss)		68,062		(332,168)
Less: Comprehensive income (loss) attributable to noncontrolling interest		100		(153)
Total comprehensive income (loss) attributable to American National		$	67,962	$	(332,015)

See accompanying notes to the unaudited condensed consolidated financial statements.

5

AMERICAN NATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

(In thousands, except per share data)

	Common Stock*		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Noncontrolling Interest		Total Equity
Balance at January 1, 2021	$	269	$	47,683	$	222,170	$	6,188,148	$	7,297	$	6,465,567
Amortization of restricted stock	—		19		—		—		—		19
Other comprehensive loss	—		—		(102,211)		—		—		(102,211)
Net income attributable to American National	—		—		—		170,173		—		170,173
Cash dividends to common stockholders (declared per share of $0.82)	—		—		—		(22,048)		—		(22,048)
Contributions	—		—		—		—		259		259
Distributions	—		—		—		—		(380)		(380)
Net income attributable to noncontrolling interest	—		—		—		—		100		100
Balance at March 31, 2021	$	269	$	47,702	$	119,959	$	6,336,273	$	7,276	$	6,511,479

*Refer to Note 1 - Nature of Operations for more information on changes in Common Stock and Treasury Stock resulting from the Company's reorganization effective July 1, 2020.

	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock		Noncontrolling Interest		Total Equity
Balance at January 1, 2020	$	30,832	$	21,011	$	99,518	$	5,946,857	$	(108,469)	$	6,014	$	5,995,763
Amortization of restricted stock	—		20		—		—		—		—		20
Cumulative effect of accounting change	—		—		—		(34,702)		—		—		(34,702)
Other comprehensive loss	—		—		(111,571)		—		—		—		(111,571)
Net loss attributable to American National	—		—		—		(220,444)		—		—		(220,444)
Cash dividends to common stockholders (declared per share of $0.82)	—		—		—		(22,047)		—		—		(22,047)
Contributions	—		—		—		—		—		546		546
Distributions	—		—		—		—		—		(323)		(323)
Net loss attributable to noncontrolling interest	—		—		—		—		—		(153)		(153)
Balance at March 31, 2020	$	30,832	$	21,031	$	(12,053)	$	5,669,664	$	(108,469)	$	6,084	$	5,607,089

See accompanying notes to the unaudited condensed consolidated financial statements.

6

AMERICAN NATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

	Three months ended March 31,
	2021		2020
OPERATING ACTIVITIES
Net income (loss)	$	170,273	$	(220,597)
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment gains	(19,239)		(4,148)
Change in investment credit loss	5,486		44,678
Accretion of premiums, discounts and loan origination fees	2,991		1,845
Net capitalized interest on policy loans and mortgage loans	(8,969)		(6,351)
Depreciation	12,688		12,614
Fair value of option securities	(28,827)		108,095
Fair value of equity securities	(95,940)		332,575
Interest credited to policyholders’ account balances	107,787		(4,323)
Charges to policyholders’ account balances	(86,539)		(79,605)
Deferred federal income tax expense	27,041		(86,171)
Income from equity method investments	(23,161)		(15,707)
Distributions from unconsolidated affiliates	17,605		27,246
Changes in:
Policyholder liabilities	130,675		(4,203)
Deferred policy acquisition costs	(28,119)		(1,672)
Reinsurance recoverables	(29,927)		6,207
Premiums due and other receivables	(21,164)		(35,858)
Prepaid reinsurance premiums	1,997		5,862
Accrued investment income	2,629		8,604
Current tax payable	14,127		22,392
Liability for retirement benefits	(3,291)		(2,879)
Other, net	1,313		3,447
Net cash provided by operating activities	149,436		112,051
INVESTING ACTIVITIES
Proceeds from sale/maturity/prepayment of:
Held-to-maturity securities	446,616		360,849
Available-for-sale securities	249,726		274,697
Equity securities	35,383		27,620
Real estate and real estate partnerships	11,119		964
Mortgage loans	267,290		105,964
Policy loans	15,106		12,414
Other invested assets	38,231		32,609
Disposals of property and equipment	11		0
Distributions from real estate and real estate partnerships	40,846		3,994
Distributions from investment funds	30,557		7,717
Payment for the purchase/origination of:
Held-to-maturity securities	(560,406)		(345,112)
Available-for-sale securities	(210,290)		(250,954)
Equity securities	(32,845)		(34,350)
Real estate and real estate partnerships	(2,910)		(3,361)
Mortgage loans	(157,027)		(166,933)
Policy loans	(5,090)		(6,520)
Other invested assets	(22,441)		(10,192)
Additions to property and equipment	(9,914)		(5,354)
Contributions to real estate and real estate partnerships	(28,092)		(24,933)
Contributions to investment funds	(66,589)		(57,132)
Change in short-term investments	(183,963)		6,439
Change in collateral held for derivatives	13,136		(128,078)
Other, net	(2,356)		4,400
Net cash used in investing activities	(133,902)		(195,252)

7

AMERICAN NATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)

(In thousands)

	Three months ended March 31,
	2021		2020
FINANCING ACTIVITIES
Policyholders’ account deposits	450,984		294,297
Policyholders’ account withdrawals	(323,854)		(310,921)
Change in notes payable	(1,096)		(1,054)
Dividends to stockholders	(22,048)		(22,047)
Payments to noncontrolling interest	(380)		(323)
Net cash provided by (used in) financing activities	103,606		(40,048)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	119,140		(123,249)
Cash and cash equivalents at beginning of the period	339,947		452,001
Cash and cash equivalents at end of the period	$	459,087	$	328,752
Supplemental cash flow information:
Interest paid	$	218	$	21
Income taxes paid, net	18		0

See accompanying notes to the unaudited condensed consolidated financial statements.

8

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Nature of Operations

On July 1, 2020, American National Insurance Company, a Texas insurance company (“ANICO”), completed its previously announced holding company reorganization. As a result of such reorganization, ANICO became a wholly owned subsidiary of American National Group, Inc., a Delaware corporation (“ANAT”), and ANAT replaced ANICO as the publicly held company. Consequently, all filings with the Securities and Exchange Commission from July 2, 2020 forward will be filed by ANAT under CIK No. 0001801075. Upon the effective date of the holding company reorganization, ANAT retired 3,945,249 shares of common stock that were held in treasury at ANICO prior to the reorganization. The amount of retired treasury stock in excess of par value was charged to retained earnings. Before and after the reorganization, the issuer had 50,000,000 authorized shares of common stock and 26,887,200 common shares outstanding. As a result of the reorganization, each share of ANICO common stock, par value $1.00 per share was automatically converted into one duly issued, fully paid and non-assessable share of ANAT common stock, par value $0.01 per share. As a result of the reorganization, the directors and officers of ANICO became directors and officers of ANAT. There is no change in the ultimate ownership of the organization and business operations will continue from our current office locations and companies. ANAT, through its consolidated subsidiaries (collectively “American National” or the “Company”) offers a broad portfolio of insurance products, including individual and group life insurance, annuities, health insurance, and property and casualty insurance. Business is conducted in all 50 states, the District of Columbia and Puerto Rico.

Note 2 – Summary of Significant Accounting Policies and Practices

The condensed consolidated financial statements and notes thereto have been prepared in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) and are reported in U.S. currency. American National consolidates entities that are wholly-owned and those in which American National owns less than 100% but controls the voting rights, as well as variable interest entities in which American National is the primary beneficiary. Intercompany balances and transactions with consolidated entities have been eliminated. Investments in unconsolidated affiliates are accounted for using the equity method of accounting. Changes in prior period presentation were made to conform to the current period presentation.

We reclassified the Company's earnings from equity method investments in the condensed consolidated statements of operations from "Equity in earnings of unconsolidated affiliates" to "Net investment income." For the three months ended March 31, 2020, $15.7 million was reclassified, with no impact to net income. We also reclassified the related asset balances in the condensed consolidated statements of financial position from "Investments in unconsolidated affiliates" to "Real estate and real estate partnerships" and "Investment funds", with no impact to total assets. Management believes these reclassifications result in increased transparency to the users of the financial statements as it relates to the Company's invested assets and the performance of these investments that are tied to the primary operations of the Company.

The interim condensed consolidated financial statements and notes should be read in conjunction with the annual consolidated financial statements and notes thereto included in American National’s Annual Report on Form 10-K as of and for the year ended December 31, 2020. The condensed consolidated results of operations for the interim periods should not be considered indicative of results to be expected for the full year.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported consolidated financial statement balances. Actual results could differ from those estimates.

9

Note 3 – Recently Issued Accounting Pronouncements

Adoption of New Accounting Standards

Standard	Description	Effective Date and Method of Adoption	Impact on Financial Statements
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	The amendments simplify the accounting for income taxes by removing certain exceptions in the existing guidance including those related to intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items. The amendments require that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax as well as other minor changes.	This standard became effective for the Company for all annual and interim periods beginning January 1, 2021. The new guidance specifies which amendments should be applied prospectively, retrospective to all periods presented or on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption.	The adoption of this standard did not have a material impact to the Company's Condensed Consolidated Financial Statements or Notes to the Condensed Consolidated Financial Statements.

0Future Adoption of New Accounting Standards—The FASB issued the following accounting guidance relevant to American National:

Standard	Description	Effective Date and Method of Adoption	Impact on Financial Statements
ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts	The guidance will improve the timeliness of recognizing changes in the liability for future policy benefits for traditional and limited payment long-duration contracts and will modify the rate used to discount future cash flows. The guidance will also simplify the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts (market risk benefits), simplify the amortization of deferred acquisition costs and add significant qualitative and quantitative disclosures.	This standard will become effective for the Company for all annual and interim periods beginning January 1, 2023, which was extended from the previous effective date of January 1, 2022 through the issuance of ASU 2020-11. The guidance allows for one of two adoption methods, a modified retrospective transition or a full retrospective transition except for the changes to accounting for market risk benefits which will require a retrospective transition.	We are currently evaluating the impact of the amendment to the Company. Based on the nature of the standard, we expect the impact to be material to our Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements.
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting	The amendments in this guidance provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The guidance only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.	The amendments in this guidance are effective for all entities as of March 12, 2020 and will sunset through December 31, 2022, at which time the application of exceptions and optional expedients will no longer be permitted.	The inventory of LIBOR exposures has been completed and is primarily limited to floating rate bonds, alternative investments, and borrowings within joint venture investments. Some of the contracts included in these categories will mature prior to December 31, 2021, the start of LIBOR rates cessations. The transition from LIBOR is expected to result in an immaterial impact to the Company.

10

Note 4 – Investment in Securities

The cost or amortized cost and fair value of investments in securities are shown below (in thousands):

	March 31, 2021
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Allowance for Credit Losses		Fair Value
Fixed maturity, bonds held-to-maturity
U.S. treasury and government	$	11,478	$	0	$	(181)	$	0	$	11,297
U.S. states and political subdivisions	114,154		3,186		(3,669)		0		113,671
Foreign governments	14,468		313		(296)		0		14,485
Corporate debt securities	7,128,893		458,923		(35,626)		(11,793)		7,540,397
Residential mortgage-backed securities	81,778		4,546		(836)		(542)		84,946
Collateralized debt securities	143,945		7,220		(675)		(6,519)		143,971
Total bonds held-to-maturity	7,494,716		474,188		(41,283)		(18,854)		7,908,767
Fixed maturity, bonds available-for-sale
U.S. treasury and government	25,088		298		(30)		(3)		25,353
U.S. states and political subdivisions	1,054,322		58,630		(4,416)		0		1,108,536
Foreign governments	14,999		1,182		0		0		16,181
Corporate debt securities	5,868,891		344,930		(42,162)		(8,008)		6,163,651
Residential mortgage-backed securities	19,048		675		(8)		(198)		19,517
Collateralized debt securities	64,592		671		(202)		(507)		64,554
Total bonds available-for-sale	7,046,940		406,386		(46,818)		(8,716)		7,397,792
Total investments in fixed maturity	$	14,541,656	$	880,574	$	(88,101)	$	(27,570)	$	15,306,559

	December 31, 2020
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Allowance for Credit Losses		Fair Value
Fixed maturity, bonds held-to-maturity
U.S. treasury and government	$	7,733	$	11	$	0	$	0	$	7,744
U.S. states and political subdivisions	109,445		4,101		(11)		0		113,535
Foreign governments	3,851		374		0		0		4,225
Corporate debt securities	6,992,095		623,233		(9,117)		(7,475)		7,598,736
Residential mortgage-backed securities	114,579		5,065		(1,464)		(452)		117,728
Collateralized debt securities	139,709		6,864		(845)		(4,515)		141,213
Total bonds held-to-maturity	7,367,412		639,648		(11,437)		(12,442)		7,983,181
Fixed maturity, bonds available-for-sale
U.S. treasury and government	28,766		418		(1)		0		29,183
U.S. states and political subdivisions	1,066,627		73,976		(145)		0		1,140,458
Foreign governments	14,995		1,393		0		0		16,388
Corporate debt securities	5,887,756		471,205		(17,207)		(7,275)		6,334,479
Residential mortgage-backed securities	20,544		964		(29)		(188)		21,291
Collateralized debt securities	54,454		1,040		(94)		(19)		55,381
Total bonds available-for-sale	7,073,142		548,996		(17,476)		(7,482)		7,597,180
Total investments in fixed maturity	$	14,440,554	$	1,188,644	$	(28,913)	$	(19,924)	$	15,580,361

11

Note 4 – Investment in Securities – (Continued)

The amortized cost and fair value, by contractual maturity, of fixed maturity securities are shown below (in thousands):

	March 31, 2021
	Bonds Held-to-Maturity				Bonds Available-for-Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	553,460	$	561,970	$	371,354	$	374,859
Due after one year through five years	2,833,579		3,020,077		3,253,114		3,456,068
Due after five years through ten years	3,026,464		3,231,420		2,309,455		2,442,852
Due after ten years	1,081,213		1,095,300		1,113,017		1,124,013
Total	$	7,494,716	$	7,908,767	$	7,046,940	$	7,397,792

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Residential and commercial mortgage-backed securities, which are not due at a single maturity, have been presented based on the year of final contractual maturity.

Proceeds from sales of bonds available-for-sale, with the related gross realized gains and losses, are shown below (in thousands):

	Three months ended March 31,
		2021		2020
Proceeds from sales of fixed maturity, bonds available-for-sale		$	11,650	$	46,513
Gross realized gains		0		412
Gross realized losses		0		(4,072)

Gains and losses are determined using specific identification of the securities sold. There was no transfer of bonds from held-to-maturity to available-for-sale during the three months ended March 31, 2021 and 2020.

In accordance with various regulations, American National has bonds on deposit with regulating authorities with a carrying value of $47.1 million and $47.7 million at March 31, 2021 and December 31, 2020, respectively. In addition, American National has pledged bonds in connection with agreements and transactions, such as financing and reinsurance agreements. The carrying value of bonds pledged was $97.2 million and $111.0 million at March 31, 2021 and December 31, 2020, respectively.

The components of the change in net unrealized losses on debt securities are shown below (in thousands):

	Three months ended March 31,
	2021		2020
Bonds available-for-sale: change in unrealized losses	$	(171,952)	$	(244,361)
Adjustments for
Deferred policy acquisition costs	33,570		89,326
Participating policyholders’ interest	4,322		11,151
Deferred federal income tax benefit	27,796		31,481
Change in net unrealized losses on debt securities, net of tax	$	(106,264)	$	(112,403)

The components of the change in net gains (losses) on equity securities are shown below (in thousands):

	Three months ended March 31,
		2021		2020
Unrealized gains (losses) on equity securities		$	96,766	$	(333,601)
Net gains (losses) on equity securities sold		(826)		1,026
Net gains (losses) on equity securities		$	95,940	$	(332,575)

12

Note 4 – Investment in Securities – (Continued)

The gross unrealized losses and fair value of bonds available-for-sale, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position due to market factors are shown below (in thousands, except number of issues):

	March 31, 2021
	Less than 12 months					12 months or more					Total
	Number of Issues	Gross Unrealized (Losses)		Fair Value		Number of Issues	Gross Unrealized (Losses)		Fair Value		Number of Issues	Gross Unrealized (Losses)		Fair Value
Fixed maturity, bonds available-for-sale
U.S. treasury and government	5	$	(30)	$	12,353	0	$	0	$	0	5	$	(30)	$	12,353
U.S. states and political subdivisions	19	(4,416)		83,704		0	0		0		19	(4,416)		83,704
Corporate debt securities	128	(31,727)		738,969		16	(10,435)		54,603		144	(42,162)		793,572
Residential mortgage-backed securities	1	(1)		245		3	(7)		566		4	(8)		811
Collateralized debt securities	8	(200)		39,113		1	(2)		156		9	(202)		39,269
Total	161	$	(36,374)	$	874,384	20	$	(10,444)	$	55,325	181	$	(46,818)	$	929,709

	December 31, 2020
	Less than 12 months					12 months or more					Total
	Number of Issues	Gross Unrealized (Losses)		Fair Value		Number of Issues	Gross Unrealized (Losses)		Fair Value		Number of Issues	Gross Unrealized (Losses)		Fair Value
Fixed maturity, bonds available-for-sale
U.S. treasury and government	1	$	(1)	$	2,868	0	$	0	$	0	1	$	(1)	$	2,868
U.S. states and political subdivisions	2	(145)		10,205		0	0		0		2	(145)		10,205
Corporate debt securities	43	(8,507)		270,249		8	(8,700)		13,270		51	(17,207)		283,519
Residential mortgage-backed securities	1	(21)		1,391		3	(8)		593		4	(29)		1,984
Collateralized debt securities	3	(93)		12,752		1	(1)		158		4	(94)		12,910
Total	50	$	(8,767)	$	297,465	12	$	(8,709)	$	14,021	62	$	(17,476)	$	311,486

Unrealized losses on bonds available-for-sale where an allowance for credit loss was not recorded were concentrated in the Company's corporate securities within the oil and gas sectors. A number of assumptions and estimates are inherent in evaluating whether an allowance for credit loss is necessary, which include the financial condition, near term and long-term prospects of the issue or issuer, including relevant industry conditions and trends and implications of rating agency actions and offering prices.

Equity securities by market sector distribution are shown below, based on fair value:

	March 31, 2021		December 31, 2020
Consumer goods	18.4	%	19.3	%
Energy and utilities	5.8		5.2
Finance	22.9		21.6
Healthcare	14.5		15.0
Industrials	7.7		7.4
Information technology	26.2		27.1
Other	4.5		4.4
Total	100.0	%	100.0	%

13

Note 4 – Investment in Securities – (Continued)

Allowance for Credit Losses

Held-to-Maturity Securities—Management measures expected credit losses on bonds held-to-maturity on a qualitative adjustment basis by major security type: corporate bonds, structured products, municipals, specialty products and treasuries. Accrued interest receivable on held-to maturity debt securities are excluded from the estimate of credit losses. The estimate of expected credit losses considers historical credit loss information that is adjusted for current market conditions and reasonable and supportable economic forecasts based upon a third-party valuation model.

Available-for-Sale Securities—For available-for-sale bonds in an unrealized loss position, the Company first assesses whether it intends to sell the security or will be required to sell the security before recovery of its amortized cost basis. If either of these criteria are met, the security’s amortized cost basis is written down to fair value through income. For bonds available-for-sale that do not meet either indicated criteria, the Company evaluates whether the decline in fair value has resulted from credit events or market factors. In making this assessment, management first calculates the extent to which fair value is less than amortized cost, and then may consider any changes to the rating of the security by a rating agency, and any specific conditions related to the security. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded through income, limited to the amount fair value is less than amortized cost. Any remaining unrealized loss is recognized in other comprehensive income.

When the discounted cash flow method is used to determine the allowance for credit losses, management's estimates incorporate expected prepayments, if any. Model inputs are considered reasonable and supportable for three years. A mean reversion is applied in years four and five. Credit loss allowance is not measured on accrued interest receivable because the balance is written off to net investment income in a timely manner, within 90 days. Changes in the allowance for credit losses are recognized through the condensed consolidated statement of operations as change in estimated credit loss.

No accrued interest receivables were written off as of March 31, 2021.

The rollforward of the allowance for credit losses for bonds held-to-maturity is shown below (in thousands):

	Three months ended March 31, 2021
	Foreign Governments		Corporate Debt Securities		Collateralized Debt Securities		Residential Mortgage Backed Securities		Total
Allowance for credit losses
Balance at January 1, 2021	$	0	$	(7,475)	$	(4,515)	$	(452)	$	(12,442)
Purchases	0		(228)		0		0		(228)
Disposition	0		125		0		0		125
Provision	0		(4,215)		(2,004)		(90)		(6,309)
Balance at March 31, 2021	$	0	$	(11,793)	$	(6,519)	$	(542)	$	(18,854)
	Three months ended March 31, 2020
	Foreign Governments		Corporate Debt Securities		Collateralized Debt Securities		Residential Mortgage Backed Securities		Total
Allowance for credit losses
Balance at January 1, 2020	$	4	$	(18,563)	$	(2,968)	$	(137)	$	(21,664)
Purchases	0		(622)		(323)		0		(945)
Disposition	0		6,901		106		134		7,141
Provision	1		(6,117)		199		0		(5,917)
Balance at March 31, 2020	$	5	$	(18,401)	$	(2,986)	$	(3)	$	(21,385)

14

Note 4 – Investment in Securities – (Continued)

The rollforward of the allowance for credit losses for available-for-sale debt securities is shown below (in thousands):

	Three months ended March 31, 2021
	U.S. Treasury and Government		Corporate Debt Securities		Collateralized Debt Securities		Residential Mortgage Backed Securities		Total
Allowance for credit losses
Balance at January 1, 2021	$	0	$	(7,275)	$	(19)	$	(188)	$	(7,482)
Allowance on securities that had an allowance recorded in a previous period	0		(733)		(488)		(10)		(1,231)
Allowance on securities where credit losses were not previously recorded	(3)		0		0		0		(3)
Balance at March 31, 2021	$	(3)	$	(8,008)	$	(507)	$	(198)	$	(8,716)
	Three months ended March 31, 2020
	U.S. Treasury and Government		Corporate Debt Securities		Collateralized Debt Securities		Residential Mortgage Backed Securities		Total
Allowance for credit losses
Balance at January 1, 2020	$	0	$	0	$	0	$	0	$	0
Allowance on securities that had an allowance recorded in a previous period	0		(12,499)		(236)		(130)		(12,865)
Balance at March 31, 2020	$	0	$	(12,499)	$	(236)	$	(130)	$	(12,865)

Credit Quality Indicators

The Company monitors the credit quality of bonds held-to-maturity through the use of credit ratings, which are updated on a monthly basis. The two traditional metrics for assessing interest rate risks are interest-coverage ratios and capitalization ratios, which can also be used in the assessment of credit risk. These risks are fairly mitigated through the diversification of bond investments. Categories of diversification include credit ratings, geographic locations, maturities, and market sector.

The credit quality indicators for the amortized cost of bonds held-to-maturity are shown below (in thousands):

	March 31, 2021
	Amortized cost of bonds held-to-maturity by credit rating
Fixed maturity, bonds held-to-maturity	AAA		AA		A		BBB		BB and below		Total
U.S. treasury and government	$	0	$	11,478	$	0	$	0	$	0	$	11,478
U.S. state and political subdivisions	17,828		55,474		34,325		0		6,527		114,154
Foreign governments	0		13,441		1,027		0		0		14,468
Corporate debt securities	25,982		337,853		3,210,816		3,455,649		98,593		7,128,893
Collateralized debt securities	0		0		105,327		33,580		5,038		143,945
Residential mortgage backed securities	0		80,268		0		0		1,510		81,778
Total	$	43,810	$	498,514	$	3,351,495	$	3,489,229	$	111,668	$	7,494,716

	December 31, 2020
	Amortized cost of bonds held-to-maturity by credit rating
Fixed maturity, bonds held-to-maturity	AAA		AA		A		BBB		BB and below		Total
U.S. treasury and government	$	0	$	7,733	$	0	$	0	$	0	$	7,733
U.S. state and political subdivisions	25,831		43,964		34,893		0		4,757		109,445
Foreign governments	0		2,820		1,031		0		0		3,851
Corporate debt securities	1,956		262,830		2,976,571		3,647,496		103,242		6,992,095
Collateralized debt securities	0		0		107,795		31,914		0		139,709
Residential mortgage backed securities	0		112,995		0		0		1,584		114,579
Total	$	27,787	$	430,342	$	3,120,290	$	3,679,410	$	109,583	$	7,367,412

15

Note 5 – Mortgage Loans

Generally, commercial mortgage loans are secured by first liens on income-producing real estate. American National attempts to maintain a diversified portfolio by considering both the location of the underlying collateral as well as the type of mortgage loan. The geographic categories come from the U.S. Census Bureau's "Census Regions and Divisions of the United States." The distribution based on carrying amount of mortgage loans by location is as follows (in thousands, except percentages):

	March 31, 2021				December 31, 2020
	Amount		Percentage		Amount		Percentage
East North Central	$	741,253	14.4	%	$	783,614	14.9	%
East South Central	140,020		2.7		146,052		2.8
Mountain	1,324,391		25.8		1,284,555		24.5
Pacific	785,654		15.3		806,426		15.4
South Atlantic	574,516		11.2		619,405		11.8
West South Central	1,278,061		24.9		1,313,848		25.1
Other	297,199		5.7		288,631		5.5
Total	$	5,141,094	100.0	%	$	5,242,531	100.0	%

As of March 31, 2021 and December 31, 2020, loans in foreclosure and loans foreclosed are as follows (in thousands, except number of loans):

	March 31, 2021			December 31, 2020
Foreclosure and foreclosed	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
In foreclosure	1	$	5,168	1	$	5,168
Filed for bankruptcy*	1	9,230		1	9,230
Total in foreclosure	2	$	14,398	2	$	14,398
Foreclosed	0	$	0	2	$	8,603

*Borrower filed for bankruptcy after foreclosure proceedings had begun.

The age analysis of past due loans is shown below (in thousands, except percentages):

	30-59 Days Past Due		60-89 Days Past Due		More Than 90 Days Past Due		Total		Current		Total
March 31, 2021											Amount		Percentage
Apartment	$	0	$	0	$	0	$	0	$	552,091	$	552,091	10.5	%
Hotel	101,432		0		0		101,432		791,927		893,359		17.0
Industrial	0		0		5,168		5,168		831,194		836,362		15.9
Office	9,803		0		9,230		19,033		1,524,777		1,543,810		29.3
Parking	0		0		0		0		363,737		363,737		6.9
Retail	74,004		0		0		74,004		709,392		783,396		14.9
Storage	0		0		0		0		152,488		152,488		2.9
Other	0		0		0		0		142,439		142,439		2.6
Total	$	185,239	$	0	$	14,398	$	199,637	$	5,068,045	$	5,267,682	100.0	%
Allowance for credit losses											(126,588)
Total, net of allowance											$	5,141,094
December 31, 2020
Apartment	$	0	$	0	$	0	$	0	$	557,159	$	557,159	10.5	%
Hotel	30,315		30,158		0		60,473		853,522		913,995		17.0
Industrial	14,930		0		5,168		20,098		836,105		856,203		15.9
Office	24,804		0		9,230		34,034		1,522,197		1,556,231		29.0
Parking	48,825		29,355		0		78,180		286,107		364,287		6.8
Retail	4,991		0		25,779		30,770		760,907		791,677		14.7
Storage	0		0		0		0		165,561		165,561		3.1
Other	0		0		0		0		163,121		163,121		3.0
Total	$	123,865	$	59,513	$	40,177	$	223,555	$	5,144,679	$	5,368,234	100.0	%
Allowance for credit losses											(125,703)
Total, net of allowance											$	5,242,531

16

Note 5 – Mortgage Loans – (Continued)

As a result of the economic impact associated with COVID-19, American National originally granted 93 loan modifications during the second and third quarters of 2020 with a total balance of $1.6 billion in the form of forbearance of principal and interest payments for up to six months, extensions of maturity dates, and/or provisions for interest only payments. Modifications were primarily related to our loans to hotels, retail and parking operations. Due to the ongoing economic stress brought on by the pandemic, we made additional modifications in the first quarter of 2021 for 24 of these loans with a total balance of $633.6 million which extended the forbearance of principal and interest payments and interest only provisions but also included a requirement for the payment of at least 20% of the total interest due during the extended modification period. The modified loans had an aggregate deferred interest of $17.0 million as of March 31, 2021.

There were 0 unamortized purchase discounts as of March 31, 2021 and December 31, 2020. Total mortgage loans were net of unamortized origination fees of $24.0 million and $26.1 million at March 31, 2021 and December 31, 2020, respectively. No unearned income is included in these amounts.

Troubled Debt Restructurings

American National has granted concessions to certain mortgage loan borrowers. Concessions are generally one of, or a combination of, a delay in payment of principal or interest, a reduction of the contractual interest rate or an extension of the maturity date. Loans that have these concessions could be classified as troubled debt restructurings. The carrying value after the allowance, before and after modification in a troubled debt restructuring, may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment. Loan modifications executed due to COVID-19 resulting in a total delay of more than six months were evaluated for troubled debt restructured status under current GAAP guidance.

Troubled debt restructuring mortgage loan information is as follows (in thousands, except number of loans):

	Three months ended March 31,
	2021					2020
	Number of Loans	Recorded Investment Pre-Modification		Recorded Investment Post Modification		Number of Loans	Recorded Investment Pre- Modification		Recorded Investment Post Modification
Office	2	$	14,660	$	14,660	0	$	0	$	0
Retail	2	28,234		28,234		0	0		0
Parking	1	9,730		9,730		0	0		0
Storage	1	8,937		8,937		0	0		0
Total	6	$	61,561	$	61,561	0	$	0	$	0

American National considers the amount, timing and extent of concessions in determining credit loss allowances for loan losses recorded in connection with a troubled debt restructuring.

There were 6 loans determined to be a troubled debt restructuring for the three months ended March 31, 2021. There are $2.7 million of commitments to lend additional funds to debtors whose loans have been modified in a troubled debt restructuring during the periods presented. The increase in loans determined to be a troubled debt restructuring in the three months ended March 31, 2021 is primarily attributable to COVID-19 related loan modifications where the concessions granted were in excess of six-months in duration.

17

Note 5 – Mortgage Loans – (Continued)

Allowance for Credit Losses

Mortgage loans on real estate are stated at unpaid principal balance, adjusted for any unamortized discount, deferred expenses and allowances. The allowance for credit losses is based upon the current expected credit loss model. The model considers past loss experience, current economic conditions, and reasonable and supportable forecasts of future conditions. Reversion for the allowance calculation is implicit in the models used to determine the allowance. The methodology uses a discounted cash flow approach based on expected cash flows.

The rollforward of the allowance for credit losses for mortgage loans is shown below (in thousands):

	Commercial Mortgage Loans
Balance at January 1, 2021	$	(125,703)
Provision	(885)
Balance at March 31, 2021	$	(126,588)
	Commercial Mortgage Loans
Balance at January 1, 2020	$	(19,160)
Cumulative adjustment at January 1, 2020	(11,216)
Provision	(29,069)
Balance at March 31, 2020	$	(59,445)

The change in allowance for the three months ended March 31, 2021 was primarily driven by distress in the hospitality industry which has seen a dramatic increase in loss results as the individual markets are now expected to rebound more slowly than previously anticipated. This is partially offset; however, by a more optimistic outlook for the industrial, office and retail sectors as they are expected to more directly benefit from the general re-opening of the economy, access to vaccines and approval of the "American Rescue Plan Act."

The asset and allowance balances for credit losses for mortgage loans by property-type are shown below (in thousands):

	March 31, 2021				December 31, 2020
	Asset Balance		Allowance		Asset Balance		Allowance
Apartment	$	552,091	$	(6,195)	$	557,159	$	(8,845)
Hotel	893,359		(53,075)		913,995		(45,596)
Industrial	836,362		(3,337)		856,203		(2,516)
Office	1,543,810		(25,753)		1,556,231		(33,373)
Parking	363,737		(21,583)		364,287		(18,178)
Retail	783,396		(12,725)		791,677		(10,856)
Storage	152,488		(1,697)		165,561		(2,509)
Other	142,439		(2,223)		163,121		(3,830)
Total	$	5,267,682	$	(126,588)	$	5,368,234	$	(125,703)

18

Note 5 – Mortgage Loans – (Continued)

Credit Quality Indicators

Mortgage loans are segregated by property-type and quantitative and qualitative allowance factors are applied. Qualitative factors are developed quarterly based on the pooling of assets with similar risk characteristics and historical loss experience adjusted for the expected trend in the current market environment. Credit losses are pooled by property-type as it represents the most similar and reliable risk characteristics in our portfolio. The amortized cost of mortgage loans by year of origination by property-type are shown below (in thousands):

	Amortized Cost Basis by Origination Year
	2021		2020		2019		2018		2017		Prior		Total
Apartment	$	0	$	48,092	$	218,763	$	48,323	$	160,068	$	76,845	$	552,091
Hotel	0		20,415		69,492		204,080		219,713		379,659		893,359
Industrial	40,891		251,592		157,235		114,493		46,912		225,239		836,362
Office	2,111		31,803		60,469		199,646		341,820		907,961		1,543,810
Parking	0		28,672		13,795		27,153		8,600		285,517		363,737
Retail	2,562		69,245		38,942		96,819		79,723		496,105		783,396
Storage	0		23,156		58,734		44,566		17,095		8,937		152,488
Other	0		0		21,612		69,087		2,236		49,504		142,439
Total	$	45,564	$	472,975	$	639,042	$	804,167	$	876,167	$	2,429,767	$	5,267,682
Allowance for credit losses													(126,588)
Total, net of allowance													$	5,141,094

Generally, mortgage loans are secured by first liens on income-producing real estate with a loan-to-value ratio of up to 75%. It is the Company's policy to not accrue interest on loans that are 90 days delinquent and where amounts are determined to be uncollectible. At March 31, 2021, commercial loans of $14.4 million were past due over 90 days and are in non-accrual status.

Off-Balance Sheet Credit Exposures

The Company has off-balance sheet credit exposures related to non-cancellable unfunded commitment amounts on commercial mortgage loans. We estimate the allowance for these exposures by applying the allowance rate we computed for each property type to the related outstanding commitment amounts. As of March 31, 2021, we have included a $8.8 million liability in other liabilities on the condensed consolidated statements of financial position based on unfunded loan commitments of $549.7 million.

Note 6 - Real Estate and Other Investments

The carrying amount of investment real estate, net of accumulated depreciation, and real estate partnerships by property-type and geographic distribution are as follows (in thousands, except percentages):

	March 31, 2021				December 31, 2020
	Amount		Percentage		Amount		Percentage
Hotel	$	61,415	6.6	%	$	67,857	7.1	%
Industrial	119,122		12.7		132,757		13.8
Land	49,725		5.3		51,220		5.3
Office	297,756		31.7		299,500		31.2
Retail	268,224		28.6		268,588		28.0
Apartments	123,275		13.1		120,847		12.6
Other	18,672		2.0		19,803		2.0
Total	$	938,189	100.0	%	$	960,572	100.0	%

19

Note 6 – Real Estate and Other Investments – (Continued)

	March 31, 2021				December 31, 2020
	Amount		Percentage		Amount		Percentage
East North Central	$	96,423	10.3	%	$	81,310	8.5	%
East South Central	62,708		6.7		65,302		6.8
Mountain	134,988		14.4		133,233		13.9
Pacific	113,026		12.0		127,421		13.3
South Atlantic	90,755		9.7		97,801		10.1
West South Central	430,015		45.8		434,722		45.3
Other	10,274		1.1		20,783		2.1
Total	$	938,189	100.0	%	$	960,572	100.0	%

As of March 31, 2021, 0 real estate investments met the criteria as held-for-sale.

American National regularly invests in real estate partnerships and joint ventures. American National frequently participates in the design of these joint venture or partnership entities with the sponsor, but in most cases, our involvement is limited to financing. Through analysis performed by American National, some of these partnerships and joint ventures have been determined to be variable interest entities (“VIEs”). In certain instances, in addition to an economic interest in the entity, American National holds the power to direct the most significant activities of the entity and is deemed the primary beneficiary or consolidator of the entity. The assets of the consolidated VIEs are restricted and must first be used to settle their liabilities. Creditors or beneficial interest holders of these VIEs have no recourse to the general credit of American National, as American National’s obligation is limited to the amount of its committed investment. American National has not provided financial or other support to the VIEs in the form of liquidity arrangements, guarantees, or other commitments to third-parties that may affect the fair value or risk of its variable interest in the VIEs in 2021 or 2020.

The assets and liabilities relating to the VIEs included in the condensed consolidated financial statements are as follows (in thousands):

	March 31, 2021		December 31, 2020
Real estate and real estate partnerships	$	130,448	$	131,405
Short-term investments	500		500
Cash and cash equivalents	6,925		8,070
Premiums due and other receivables	3,563		3,484
Other assets	14,128		13,796
Total assets of consolidated VIEs	$	155,564	$	157,255
Notes payable	$	152,607	$	153,703
Other liabilities	8,935		8,490
Total liabilities of consolidated VIEs	$	161,542	$	162,193

The notes payable in the condensed consolidated statements of financial position pertain to the borrowings of the consolidated VIEs. The liability of American National relating to notes payable of the consolidated VIEs is limited to the amount of its direct or indirect investment in the respective ventures, which totaled $2.9 million and $3.0 million at March 31, 2021 and December 31, 2020, respectively.

The total long-term notes payable of the consolidated VIEs consists of the following (in thousands):

Interest rate	Maturity	March 31, 2021		December 31, 2020
LIBOR	2021	$	10,819	$	10,819
4% fixed	2022	77,759		78,565
4.18% fixed	2024	64,029		64,319
Total		$	152,607	$	153,703

20

Note 6 – Real Estate and Other Investments – (Continued)

For other VIEs in which American National is a partner, it is not the primary beneficiary, and these entities are not consolidated, as the major decisions that most significantly impact the economic activities of the VIE require consent of all partners. The carrying amount and maximum exposure to loss relating to unconsolidated VIEs follows (in thousands):

	March 31, 2021				December 31, 2020
	Carrying Amount		Maximum Exposure to Loss		Carrying Amount		Maximum Exposure to Loss
Real estate and real estate partnerships	$	349,073	$	349,073	$	368,588	$	368,588
Mortgage loans on real estate	691,488		691,488		722,917		722,917
Accrued investment income	4,692		4,692		4,980		4,980

American National’s equity in earnings of real estate partnerships is the Company’s share of operating earnings and realized gains from investments in real estate joint ventures and other limited partnership interests (“joint ventures”) using the equity method of accounting. In 2021 and 2020, certain joint ventures took advantage of market opportunities to generate realized gains on the sale of real estate held or developed by the ventures.

The Company’s income from and investment in each joint venture did not exceed 20% and therefore no separate financial disclosure is required. The Company’s income from, assets held, and investment in each joint venture did not exceed 10% of operating income before tax. Additionally, American National’s investment in joint ventures is less than 3% of the Company’s total assets, and investments in individual joint ventures are not considered to be material to the Company in relation to its financial position or ongoing results of operations. Therefore, summarized financial information of equity method investees has not been included.

The Company’s total investment in investment funds and other partnerships, of which substantially all are LLC’s or limited partnerships, was comprised of $523.2 million and $477.1 million in 2021 and 2020 respectively.

Note 7 – Derivative Instruments

American National purchases over-the-counter equity-indexed options as economic hedges against fluctuations in the equity markets to which equity-indexed products are exposed. These options are not designated as hedging instruments for accounting purposes under GAAP. Equity-indexed contracts include a fixed host universal-life insurance or annuity contract and an equity-indexed embedded derivative. The detail of derivative instruments is shown below (in thousands, except number of instruments):

Derivatives Not Designated as Hedging Instruments	Location in the Condensed Consolidated Statements of Financial Position	March 31, 2021					December 31, 2020
		Number of Instruments	Notional Amounts		Estimated Fair Value		Number of Instruments	Notional Amounts		Estimated Fair Value
Equity-indexed options	Other invested assets	452	$	3,013,400	$	253,363	455	$	2,867,600	$	242,201
Equity-indexed embedded derivative	Policyholders’ account balances	115,235	2,909,609		740,514		112,103	2,748,540		705,013

Derivatives Not Designated as Hedging Instruments	Location in the Condensed Consolidated Statements of Operations		Gains (Losses) Recognized in Income on Derivatives
		Three months ended March 31,
			2021		2020
Equity-indexed options	Net investment income		$	28,827	$	(108,095)
Equity-indexed embedded derivative	Interest credited to policyholders’ account balances		(26,689)		89,581

The Company’s use of derivative instruments exposes it to credit risk in the event of non-performance by the counterparties. The Company has a policy of only dealing with counterparties it believes are creditworthy and obtaining sufficient collateral where appropriate, as a means of mitigating the financial loss from defaults. The Company holds collateral in cash and notes secured by U.S. government-backed assets. The non-performance risk is the net counterparty exposure based on the fair value of the open contracts, less the fair value of collateral held. The Company maintains master netting agreements with its current active trading partners. As such, a right of offset has been applied to collateral that supports credit risk and has been recorded in the condensed consolidated statements of financial position as an offset to “Other invested assets” with an associated payable to “Other liabilities” for excess collateral.

21

Note 7 – Derivative Instruments – (Continued)

Information regarding the Company’s exposure to credit loss on the options it holds is presented below (in thousands):

		March 31, 2021
Counterparty	Moody/S&P Rating	Options Fair Value		Collateral Held in Cash		Collateral Held in Invested Assets		Total Collateral Held		Collateral Amounts used to Offset Exposure		Excess Collateral		Exposure Net of Collateral
Barclays	Baa2/BBB	$	54,613	$	36,563	$	18,100	$	54,663	$	54,613	$	50	$	0
Credit Suisse	Baa1/BBB+	13,416		12,580		0		12,580		12,580		0		836
Goldman-Sachs	A2/BBB+	1,285		1,170		0		1,170		1,170		0		115
ING	Baa1/A-	19,568		9,220		10,300		19,520		19,520		0		48
Morgan Stanley	A1/BBB+	50,800		44,526		5,700		50,226		50,226		0		574
NATIXIS*	A1/A+	29,198		29,500		0		29,500		29,198		302		0
Truist	A3/A-	44,698		33,810		11,000		44,810		44,698		112		0
Wells Fargo	A2/BBB+	39,785		29,580		9,900		39,480		39,480		0		305
Total		$	253,363	$	196,949	$	55,000	$	251,949	$	251,485	$	464	$	1,878

		December 31, 2020
Counterparty	Moody/S&P Rating	Options Fair Value		Collateral Held in Cash		Collateral Held in Invested Assets		Total Collateral Held		Collateral Amounts used to Offset Exposure		Excess Collateral		Exposure Net of Collateral
Barclays	Baa2/BBB	$	51,489	$	31,513	$	18,100	$	49,613	$	49,613	$	0	$	1,876
Credit Suisse	Baa1/BBB+	9,447		8,680		0		8,680		8,680		0		767
Goldman-Sachs	A3/BBB+	1,227		1,170		0		1,170		1,170		0		57
ING	Baa1/A-	20,606		10,450		10,300		20,750		20,606		144		0
Morgan Stanley	A2/BBB+	37,406		30,616		5,700		36,316		36,316		0		1,090
NATIXIS*	A1/A+	30,567		30,720		0		30,720		30,567		153		0
Truist	A3/A-	52,127		43,960		11,000		54,960		52,127		2,833		0
Wells Fargo	A2/BBB+	39,332		29,370		9,900		39,270		39,270		0		62
Total		$	242,201	$	186,479	$	55,000	$	241,479	$	238,349	$	3,130	$	3,852

*Collateral is prohibited from being held in invested assets.

22

Note 8 – Net Investment Income and Realized Investment Gains (Losses)

Net investment income (loss) is shown below (in thousands):

	Three months ended March 31,
		2021		2020
Bonds		$	130,497	$	146,119
Equity securities		7,493		7,847
Mortgage loans		70,866		59,328
Real estate and real estate partnerships		3,485		12,487
Investment funds		21,356		4,933
Equity-indexed options		28,827		(108,095)
Other invested assets		7,457		8,372
Total		$	269,981	$	130,991

Net realized investment gains (losses) are shown below (in thousands):

	Three months ended March 31,
		2021		2020
Bonds		$	7,699	$	5,478
Real estate		11,193		(1,307)
Other invested assets		347		(23)
Total		$	19,239	$	4,148

Net realized investment gains (losses) by transaction type are shown below (in thousands):

	Three months ended March 31,
		2021		2020
Sales		$	12,898	$	(3,618)
Calls and maturities		7,260		9,120
Paydowns		439		19
Impairments		(1,265)		(1,276)
Other		(93)		(97)
Total		$	19,239	$	4,148

23

Note 9 – Fair Value of Financial Instruments

The carrying amount and fair value of financial instruments are shown below (in thousands):

	March 31, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Fixed maturity, bonds held-to-maturity	$	7,475,862	$	7,908,767	$	7,354,970	$	7,983,181
Fixed maturity, bonds available-for-sale	7,397,792		7,397,792		7,597,180		7,597,180
Equity securities	2,164,146		2,164,146		2,070,766		2,070,766
Equity-indexed options, included in other invested assets	253,363		253,363		242,201		242,201
Mortgage loans on real estate, net of allowance	5,141,094		5,264,896		5,242,531		5,451,152
Policy loans	369,525		369,525		373,014		373,014
Short-term investments	1,212,342		1,212,342		1,028,379		1,028,379
Separate account assets ($1,175,689 and $1,153,702 included in fair value hierarchy)	1,207,754		1,207,754		1,185,467		1,185,467
Separately managed accounts, included in other invested assets	66,981		66,981		64,424		64,424
Total financial assets	$	25,288,859	$	25,845,566	$	25,158,932	$	25,995,764
Financial liabilities
Investment contracts	$	10,235,015	$	10,235,015	$	10,101,764	$	10,101,764
Embedded derivative liability for equity-indexed contracts	740,514		740,514		705,013		705,013
Notes payable	152,607		152,607		153,703		153,703
Federal Home Loan Bank advance	250,000		250,070		250,000		250,227
Separate account liabilities ($1,175,689 and $1,153,702 included in fair value hierarchy)	1,207,754		1,207,754		1,185,467		1,185,467
Total financial liabilities	$	12,585,890	$	12,585,960	$	12,395,947	$	12,396,174

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability. A fair value hierarchy is used to determine fair value based on a hypothetical transaction at the measurement date from the perspective of a market participant. American National has evaluated the types of securities in its investment portfolio to determine an appropriate hierarchy level based upon trading activity and the observability of market inputs. The classification of assets or liabilities within the fair value hierarchy is based on the lowest level of significant input to its valuation. The input levels are defined as follows:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2	Quoted prices in markets that are not active or inputs that are observable directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3	Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect American National’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models and third-party evaluation, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

24

Note 9 – Fair Value of Financial Instruments – (Continued)

Valuation Techniques for Financial Instruments Recorded at Fair Value

Fixed Maturity Securities and Equity Options—American National utilizes a pricing service to estimate fair value measurements. The fair value for fixed maturity securities that are disclosed as Level 1 measurements are based on unadjusted quoted market prices for identical assets that are readily available in an active market. The estimates of fair value for most fixed maturity securities, including municipal bonds, provided by the pricing service are disclosed as Level 2 measurements as the estimates are based on observable market information rather than market quotes. The pricing service utilizes market quotations for fixed maturity securities that have quoted prices in active markets. Since fixed maturity securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value measurements for these securities using its proprietary pricing applications, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Additionally, an option adjusted spread model is used to develop prepayment and interest rate scenarios.

The pricing service evaluates each asset class based on relevant market information, credit information, perceived market movements and sector news. The market inputs utilized in the pricing evaluation, listed in the approximate order of priority, include: benchmark yields, reported trades, pricing source quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and economic events. The extent of the use of each market input depends on the asset class and the market conditions. Depending on the security, the priority of the use of inputs may change or some market inputs may not be relevant. For some securities, additional inputs may be necessary.

American National has reviewed the inputs and methodology used and the techniques applied by the pricing service to produce quotes that represent the fair value of a specific security. The review confirms that the pricing service is utilizing information from observable transactions or a technique that represents a market participant’s assumptions. American National does not adjust quotes received from the pricing service. The pricing service utilized by American National has indicated that they will only produce an estimate of fair value if there is objectively verifiable information available.

American National holds a small amount of private placement debt and fixed maturity securities that have characteristics that make them unsuitable for matrix pricing. For these securities, a quote from an independent pricing source (typically a market maker) is obtained. Due to the disclaimers on the quotes that indicate the price is indicative only, American National includes these fair value estimates in Level 3.

For securities priced using a quote from an independent pricing source, such as the equity-indexed options and certain fixed maturity securities, American National uses a market-based fair value analysis to validate the reasonableness of prices received. Price variances above a certain threshold are analyzed further to determine if any pricing issue exists. This analysis is performed quarterly.

Equity Securities—For publicly-traded equity securities, prices are received from a nationally recognized pricing service that are based on observable market transactions, and these securities are classified as Level 1 measurements. For certain preferred stock, current market quotes in active markets are unavailable. In these instances, an estimated fair value is received from the pricing service. The service utilizes similar methodologies to price preferred stocks as it does for fixed maturity securities. If applicable, these estimates would be disclosed as Level 2 measurements. American National tests the accuracy of the information provided by reference to other services annually.

Short-Term Investments—Short-term investments are primarily commercial paper rated A2 or P2 or better by Standard & Poor's and Moody's, respectively. Commercial paper is carried at amortized cost which approximates fair value. These investments are classified as Level 2 measurements.

25

Note 9 – Fair Value of Financial Instruments – (Continued)

Separate Account Assets and Liabilities—Separate account assets and liabilities are funds that are held separate from the general assets and liabilities of American National. Separate account assets include funds representing the investments of variable insurance product contract holders, who bear the investment risk of such funds. Investment income and investment gains and losses from these separate funds accrue to the benefit of the contract holders. American National reports separately, as assets and liabilities, investments held in such separate accounts and liabilities of the separate accounts if (i) such separate accounts are legally recognized; (ii) assets supporting the contract liabilities are legally insulated from American National’s general account liabilities; (iii) investments are directed by the contract holder; and (iv) all investment performance, net of contract fees and assessments, is passed through to the contract holder. In addition, American National's qualified pension plan assets are included in separate accounts. The assets of these accounts are carried at fair value. Deposits, net investment income and realized investment gains and losses for these accounts are excluded from revenues, and related liability increases are excluded from benefits and expenses in the condensed consolidated statements of operations. Separate accounts are established in conformity with insurance laws and are not chargeable with liabilities that arise from any other business of American National.

The separate account assets included on the quantitative disclosures fair value hierarchy table are comprised of short-term investments, equity securities, and fixed maturity bonds available-for-sale. Equity securities are classified as Level 1 measurements. Short-term investments and fixed maturity securities are classified as Level 2 measurements. These classifications for separate account assets reflect the same fair value level methodologies as listed above as they are derived from the same vendors and follow the same process.

The separate account assets also include cash and cash equivalents, investment funds, accrued investment income, and receivables for securities. These are not financial instruments and are not included in the quantitative disclosures of fair value hierarchy table.

No gains or losses were recognized on assets transferred to separate accounts for the three months ended March 31, 2021 and 2020, respectively.

Embedded Derivative—The amounts reported within policyholder contract deposits include equity linked interest crediting rates based on the S&P 500 within indexed annuities and indexed life. The following unobservable inputs are used for measuring the fair value of the embedded derivatives associated with the policyholder contract liabilities:

•Lapse rate assumptions are determined by company experience. Lapse rates are generally assumed to be lower during a contract’s surrender charge period and then higher once the surrender charge period has ended. Decreases to the assumed lapse rates generally increase the fair value of the liability as more policyholders persist to collect the crediting interest pertaining to the indexed product. Increases to the lapse rate assumption decrease the fair value.

•Mortality rate assumptions vary by age and gender based on company and industry experience. Decreases to the assumed mortality rates increase the fair value of the liabilities as more policyholders earn crediting interest. Increases to the assumed mortality rates decrease the fair value as higher decrements reduce the potential for future interest credits.

•Equity volatility assumptions begin with current market volatilities and grow to long-term values. Increases to the assumed volatility will increase the fair value of liabilities, as future projections will produce higher increases in the linked index. At March 31, 2021 and December 31, 2020, the one year implied volatility used to estimate embedded derivative value was 15.0% and 17.6%, respectively.

Fair values of indexed life and annuity liabilities are calculated using the discounted cash flow technique. Shown below are the significant unobservable inputs used to calculate the Level 3 fair value of the embedded derivatives within policyholder contract deposits (in millions, except range percentages):

	Fair Value					Range
	March 31, 2021		December 31, 2020		Unobservable Input	March 31, 2021	December 31, 2020
Indexed Annuities	$	704.4	$	670.8	Lapse Rate	1-50%	1-50%
					Mortality Multiplier	100%	100%
					Equity Volatility	15-62%	16-69%
Indexed Life	36.1		34.2		Equity Volatility	15-62%	16-69%

26

Note 9 – Fair Value of Financial Instruments – (Continued)

Quantitative Disclosures

The fair value hierarchy measurements of the financial instruments are shown below (in thousands):

	Assets and Liabilities Carried at Fair Value by Hierarchy Level at March 31, 2021
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
Fixed maturity, bonds available-for-sale
U.S. treasury and government	$	25,353	$	25,353	$	0	$	0
U.S. states and political subdivisions	1,108,536		0		1,108,536		0
Foreign governments	16,181		0		16,181		0
Corporate debt securities	6,163,651		0		6,037,574		126,077
Residential mortgage-backed securities	19,517		0		19,517		—
Collateralized debt securities	64,554		0		64,554		0
Total bonds available-for-sale	7,397,792		25,353		7,246,362		126,077
Equity securities
Common stock	2,148,131		2,147,001		0		1,130
Preferred stock	16,015		14,736		0		1,279
Total equity securities	2,164,146		2,161,737		0		2,409
Options	253,363		0		0		253,363
Short-term investments	1,212,342		0		1,212,342		0
Separate account assets	1,175,689		324,269		851,420		0
Separately managed accounts	66,981		0		0		66,981
Total financial assets	$	12,270,313	$	2,511,359	$	9,310,124	$	448,830
Financial liabilities
Embedded derivative for equity-indexed contracts	$	740,514	$	0	$	0	$	740,514
Notes payable	152,607		0		0		152,607
Separate account liabilities	1,175,689		324,269		851,420		0
Total financial liabilities	$	2,068,810	$	324,269	$	851,420	$	893,121

	Assets and Liabilities Carried at Fair Value by Hierarchy Level at December 31, 2020
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
Fixed maturity, bonds available-for-sale
U.S. treasury and government	$	29,183	$	0	$	29,183	$	0
U.S. states and political subdivisions	1,140,458		0		1,140,458		0
Foreign governments	16,388		0		16,388		0
Corporate debt securities	6,334,479		0		6,224,042		110,437
Residential mortgage-backed securities	21,291		0		21,291		0
Collateralized debt securities	55,381		0		55,381		0
Total bonds available-for-sale	7,597,180		0		7,486,743		110,437
Equity securities
Common stock	2,055,229		2,054,789		0		440
Preferred stock	15,537		14,909		0		628
Total equity securities	2,070,766		2,069,698		0		1,068
Options	242,201		0		0		242,201
Short-term investments	1,028,379		0		1,028,379		0
Separate account assets	1,153,702		309,425		844,277		0
Separately managed accounts	64,424		0		0		64,424
Total financial assets	$	12,156,652	$	2,379,123	$	9,359,399	$	418,130
Financial liabilities
Embedded derivative for equity-indexed contracts	$	705,013	$	0	$	0	$	705,013
Notes payable	153,703		0		0		153,703
Separate account liabilities	1,153,702		309,425		844,277		0
Total financial liabilities	$	2,012,418	$	309,425	$	844,277	$	858,716

27

Note 9 – Fair Value of Financial Instruments – (Continued)

For financial instruments measured at fair value on a recurring basis using Level 3 inputs during the period, a reconciliation of the beginning and ending balances is shown below (in thousands):

			Level 3
	Three months ended March 31, 2021
		Assets			Liability
			Investment Securities		Equity-Indexed Options		Separately Managed Accounts		Embedded Derivative
Balance at January 1, 2021			$	111,505	$	242,201	$	64,424	$	705,013
Net gain for derivatives included in net investment income			0		28,827		0		0
Net change included in interest credited			0		0		0		26,689
Net fair value change included in other comprehensive income			1,178		0		594		0
Purchases, sales and settlements or maturities
Purchases			27,453		20,147		10,072		0
Sales			(11,650)		0		(8,109)		0
Settlements or maturities			0		(37,812)		0		0
Premiums less benefits			0		0		0		8,812
Ending balance at March 31, 2021			$	128,486	$	253,363	$	66,981	$	740,514
			Level 3
	Three months ended March 31, 2020
		Assets			Liability
			Investment Securities		Equity-Indexed Options		Separately Managed Accounts		Embedded Derivative
Balance at January 1, 2020			$	45,307	$	256,005	$	50,503	$	731,552
Net loss for derivatives included in net investment income			0		(108,095)		0		0
Net change included in interest credited			0		0		0		(89,581)
Net fair value change included in other comprehensive income			0		0		80		0
Purchases, sales and settlements or maturities
Purchases			22,702		14,164		0		0
Sales			(14,156)		0		0		0
Settlements or maturities			0		(36,086)		0		0
Premiums less benefits			0		0		0		(11,019)
Ending balance at March 31, 2020			$	53,853	$	125,988	$	50,583	$	630,952

Within the net gain (loss) for derivatives included in net investment income were unrealized gains of $7.9 million and $127.2 million, relating to assets still held at March 31, 2021 and 2020, respectively.

Unless information is obtained from the pricing sources that indicates observable inputs were used in their pricing, there are not enough observable inputs to enable American National to classify the securities priced by the pricing source as other than Level 3. American National’s valuation of these securities involves judgment regarding assumptions market participants would use including quotes from independent pricing sources. The inputs used by the pricing sources include recent transactions in the security, similar bonds with same name, ratings, maturity and structure, external dealer quotes in the security, Bloomberg evaluated pricing and prior months pricing. None of these inputs were observable to American National as of March 31, 2021. The transfers out of Level 3 during the three months ended March 31, 2021 were the result of securities being priced by the third-party service at the end of the period, using inputs that were observable or derived from market data, which resulted in classification of these assets as Level 2.

28

Note 9 – Fair Value of Financial Instruments – (Continued)

Fair Value Information About Financial Instruments Not Recorded at Fair Value

Information about fair value estimates for financial instruments not measured at fair value is discussed below:

Fixed Maturity Securities—The fair value of bonds held-to-maturity is determined to be consistent with the disclosure under Valuation Techniques for the Financial Instrument Recorded at Fair Value section.

Mortgage Loans—The fair value of mortgage loans is estimated using discounted cash flow analyses on a loan by loan basis by applying a discount rate to expected cash flows from future installment and balloon payments. The discount rate takes into account general market trends and specific credit risk trends for the individual loan. Factors used to arrive at the discount rate include inputs from spreads based on U.S. Treasury notes and the loan’s credit quality, region, property type, lien priority, payment type and current status.

Policy Loans—The carrying value of policy loans is the outstanding balance plus any accrued interest. Due to the collateralized nature of policy loans such that they cannot be separated from the policy contracts, the unpredictable timing of repayments and the fact that settlement is at outstanding value, American National believes the carrying value of policy loans approximates fair value.

Separately Managed Accounts—The amounts reported in separately managed accounts consist primarily of notes and private equity. These investments are private placements and do not have a readily determinable fair value. The carrying value of the separately managed accounts is cost or market value, if available from the separately managed account manager. Market value is provided by the separately managed account manager in subsequent quarters. American National believes that cost approximates fair value at initial recognition during the quarter of investment.

Investment Contracts—The carrying value of investment contracts is equivalent to the accrued account balance. The accrued account balance consists of deposits, net of withdrawals, net of interest credited, fees and charges assessed and other adjustments. American National believes that the carrying value of investment contracts approximates fair value because the majority of these contracts’ interest rates reset at anniversary.

Notes Payable—Notes payable are carried at outstanding principal balance. The carrying value of the notes payable approximates fair value because the underlying interest rates approximate market rates at the balance sheet date.

Federal Home Loan Bank Advance—The Federal Home Loan Bank advance is carried at outstanding principal balance. The fair value of the advance is obtained from the Federal Home Loan Bank of Dallas.

29

Note 9 – Fair Value of Financial Instruments – (Continued)

The carrying value and estimated fair value of financial instruments not recorded at fair value on a recurring basis are shown below (in thousands):

	March 31, 2021
	FV Hierarchy Level	Carrying Amount		Fair Value
Financial assets
Fixed maturity, bonds held-to-maturity
U.S. Treasury and government	Level 1	$	11,478	$	11,297
U.S. states and political subdivisions	Level 2	114,154		113,671
Foreign governments	Level 2	14,468		14,485
Corporate debt securities	Level 2	7,117,100		7,540,397
Residential mortgage-backed securities	Level 2	81,236		84,946
Collateralized debt securities	Level 2	137,426		143,971
Total fixed maturity, bonds held-to-maturity		7,475,862		7,908,767
Mortgage loans on real estate, net of allowance	Level 3	5,141,094		5,264,896
Policy loans	Level 3	369,525		369,525
Total financial assets		$	12,986,481	$	13,543,188
Financial liabilities
Investment contracts	Level 3	$	10,235,015	$	10,235,015
Notes payable	Level 3	152,607		152,607
Federal Home Loan Bank advance	Level 2	250,000		250,070
Total financial liabilities		$	10,637,622	$	10,637,692

	December 31, 2020
	FV Hierarchy Level	Carrying Amount		Fair Value
Financial assets
Fixed maturity, bonds held-to-maturity
U.S. treasury and government	Level 2	$	7,732	$	7,744
U.S. states and political subdivisions	Level 2	109,445		113,535
Foreign governments	Level 2	3,851		4,225
Corporate debt securities	Level 2	6,981,597		7,595,712
Corporate debt securities	Level 3	3,024		3,024
Residential mortgage-backed securities	Level 2	114,127		117,728
Collateralized debt securities	Level 2	135,194		141,213
Total fixed maturity, bonds held-to-maturity		7,354,970		7,983,181
Mortgage loans on real estate, net of allowance	Level 3	5,242,531		5,451,152
Policy loans	Level 3	373,014		373,014
Total financial assets		$	12,970,515	$	13,807,347
Financial liabilities
Investment contracts	Level 3	$	10,101,764	$	10,101,764
Notes payable	Level 3	153,703		153,703
Federal Home Loan Bank advance	Level 2	250,000		250,227
Total financial liabilities		$	10,505,467	$	10,505,694

30

Note 10 – Deferred Policy Acquisition Costs

Deferred policy acquisition costs are shown below (in thousands):

	Life		Annuity		Health		Property & Casualty		Total
Beginning balance at January 1, 2021	$	896,208	$	309,056	$	32,885	$	122,062	$	1,360,211
Additions	43,256		23,488		2,849		86,579		156,172
Amortization	(28,787)		(12,417)		(3,703)		(83,146)		(128,053)
Effect of change in unrealized gains on available-for-sale debt securities	8,915		24,655		0		0		33,570
Net change	23,384		35,726		(854)		3,433		61,689
Ending balance at March 31, 2021	$	919,592	$	344,782	$	32,031	$	125,495	$	1,421,900

Commissions comprise the majority of the additions to deferred policy acquisition costs.

Note 11 – Liability for Unpaid Claims and Claim Adjustment Expenses

The liability for unpaid claims and claim adjustment expenses (“claims”) for health and property and casualty insurance is included in “Policy and contract claims” in the condensed consolidated statements of financial position and is the amount estimated for incurred but not reported (“IBNR”) claims and claims that have been reported but not settled. The liability for unpaid claims is estimated based upon American National’s historical experience and actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs, less anticipated salvage and subrogation. The effects of the changes are included in the condensed consolidated results of operations in the period in which the changes occur. The time value of money is not taken into account for the purposes of calculating the liability for unpaid claims. There have been no significant changes in methodologies or assumptions used to calculate the liability for unpaid claims and claim adjustment expenses.

Information regarding the liability for unpaid claims is shown below (in thousands):

	Three months ended March 31,
	2021		2020
Unpaid claims balance, beginning	$	1,373,600	$	1,322,837
Less: Reinsurance recoverables	262,471		246,447
Net beginning balance	1,111,129		1,076,390
Incurred related to
Current	300,176		260,025
Prior years	(31,127)		4,172
Total incurred claims	269,049		264,197
Paid claims related to
Current	99,857		95,635
Prior years	160,716		174,986
Total paid claims	260,573		270,621
Net balance	1,119,605		1,069,966
Plus: Reinsurance recoverables	239,160		244,230
Unpaid claims balance, ending	$	1,358,765	$	1,314,196

The net and gross reserve calculations have shown favorable development as a result of favorable loss emergence compared to what was implied by the loss development patterns used in the original estimation of losses in prior years. Estimates for ultimate incurred claims attributable to insured events of prior years decreased by approximately $31.1 million during the first three months of 2021 and increased by $4.2 million during the same period in 2020. The favorable development in 2021 was a reflection of lower liability claim settlement costs emerging from commercial automobile, agribusiness, and private passenger automobile lines of business. The unfavorable development in 2020 was a reflection of higher-than-normal settlements of losses in the Managing General Underwriting and Collateral Protection Insurance lines of business.

For short-duration health insurance claims, the total of IBNR plus expected development on reported claims included in the liability for unpaid claims and claim adjustment expenses at March 31, 2021 and December 31, 2020 was $22.2 million and $20.5 million, respectively.

31

Note 12 – Federal Income Taxes

A reconciliation of the effective tax rate to the statutory federal tax rate is shown below (in thousands, except percentages):

	Three months ended March 31,
		2021	2020
			Amount		Rate		Amount		Rate
Total expected income tax expense at the statutory rate			$	44,625	21.0	%	$	(59,396)	21.0	%
Tax-exempt investment income			(1,172)		(0.6)		(1,027)		0.4
Dividend exclusion			(813)		(0.4)		(862)		0.3
Tax credits, net			(1,618)		(0.8)		(2,395)		0.8
Low income housing tax credit expense			1,513		0.7		1,774		(0.6)
Change in valuation allowance			29		0		112		0
Other items, net			607		0.4		126		(0.1)
Total			$	43,171	20.3	%	$	(61,668)	21.8	%

As of March 31, 2021, American National had no material net operating loss or tax credit carryforwards.

American National’s federal income tax returns for tax years 2016 to 2019 are subject to examination by the Internal Revenue Service. In the opinion of management, all prior year deficiencies have been paid or adequate provisions have been made for any tax deficiencies that may be upheld.

As of March 31, 2021, American National had no provision for uncertain tax positions and no provision for penalties or interest. In addition, management does not believe there are any uncertain tax benefits that could be recognized within the next twelve months that would impact American National’s effective tax rate.

Note 13 – Accumulated Other Comprehensive Income (Loss)

The components of and changes in the accumulated other comprehensive income (“AOCI”), and the related tax effects, are shown below (in thousands):

	Net Unrealized Gains (Losses) on Securities		Defined Benefit Pension Plan Adjustments		Foreign Currency Adjustments		Accumulated Other Comprehensive Income (Loss)
Beginning balance at January 1, 2021	$	292,166	$	(67,130)	$	(2,866)	$	222,170
Amounts reclassified from AOCI (net of tax benefit $944 and expense $1,013)	(3,553)		3,809		—		256
Unrealized holding losses arising during the period (net of tax benefit $35,260)	(132,644)		—		—		(132,644)
Unrealized adjustment to DAC (net of tax expense $7,050)	26,519		—		—		26,519
Unrealized losses on investments attributable to participating policyholders’ interest (net of tax expense $908)	3,414		—		—		3,414
Foreign currency adjustment (net of tax expense $65)	—		—		244		244
Ending balance at March 31, 2021	$	185,902	$	(63,321)	$	(2,622)	$	119,959
	Net Unrealized Gains (Losses) on Securities		Defined Benefit Pension Plan Adjustments		Foreign Currency Adjustments		Accumulated Other Comprehensive Income (Loss)
Beginning balance at January 1, 2020	$	157,851	$	(55,232)	$	(3,101)	$	99,518
Amounts reclassified from AOCI (net of tax expense $2,554 and $467)	9,606		1,756		—		11,362
Unrealized holding losses arising during the period (net of tax benefit $53,533)	(201,385)		—		—		(201,385)
Unrealized adjustment to DAC (net of tax expense $18,759)	70,567		—		—		70,567
Unrealized losses on investments attributable to participating policyholders’ interest (net of tax expense $2,342)	8,809		—		—		8,809
Foreign currency adjustment (net of tax benefit $246)	—		—		(924)		(924)
Ending balance at March 31, 2020	$	45,448	$	(53,476)	$	(4,025)	$	(12,053)

32

Note 14 – Stockholders’ Equity and Noncontrolling Interests

ANAT has one class of common stock with a par value $0.01 per share and 50,000,000 authorized shares. The number of shares outstanding at the dates indicated are shown below:

	March 31, 2021	December 31, 2020
Common stock
Shares issued	26,887,200	26,887,200
Restricted shares	(10,000)	(10,000)
Unrestricted outstanding shares	26,877,200	26,877,200

Stock-based Compensation

American National has made grants of Stock Appreciation Rights (“SAR”), Restricted Stock (“RS”) Awards, and Restricted Stock Units (“RSU”), pursuant to a stock-based compensation plan. The term for granting additional awards under such plan expired in 2019. Pursuant to the plan, grants were made to certain officers meeting established performance objectives, and grants were made to directors as compensation and to align their interests with those of other shareholders. In addition, American National has made grants to directors and advisory directors of RSUs that are cash-settled only, with no provision for conversion to stock. 8,250 of such cash-settled RSUs were granted during the third quarter of 2020 and remained outstanding at March 31, 2021 as shown in the table below.

RS and RSU information for the periods indicated are shown below:

	RS Shares		RSUs
		Shares	Weighted-Average Grant Date Fair Value		Units	Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2020		10,000	$	80.05	8,250	$	75.35
Granted		—	—		0	0
Exercised		—	—		0	0
Forfeited		—	—		—	—
Expired		—	—		0	0
Outstanding at March 31, 2021		10,000	$	80.05	8,250	$	75.35

	SAR		RS Shares		RSUs
Weighted-average contractual remaining life (in years)	0.00		1.92		0.08
Exercisable shares	0		N/A		N/A
Weighted-average exercise price	$	0	$	80.05	$	75.35
Weighted-average exercise price exercisable shares	0		N/A		N/A
Compensation expense (credit)
Three months ended March 31, 2021	$	0	$	20,000	$	220,000
Three months ended March 31, 2020	(1,000)		20,000		(171,000)
Fair value of liability award
March 31, 2021	$	0	N/A		$	890,000
December 31, 2020	0		N/A		793,000

The SARs gave the holder the right to cash compensation based on the difference between the stock price on the grant date and the stock price on the exercise date. The SARs vested at a rate of 20% per year for five years and expired five years after vesting. All remaining SARs expired on May 1, 2020.

RS awards entitle the participant to full dividend and voting rights. Each RS share awarded has the value of one share of restricted stock and vests 10 years from the grant date. Unvested shares are restricted as to disposition, and are subject to forfeiture under certain circumstances. Compensation expense is recognized over the vesting period. The restrictions on these awards lapse after 10 years and feature a graded vesting schedule in the case of the retirement, death or disability of an award holder. Restricted stock awards for 350,334 shares have been granted at an exercise price of 0, of which 10,000 shares are unvested.

RSU awards to our directors and advisory directors are settled in cash based upon the market price of our common stock after one-year or earlier upon death, disability or retirement from service after age 65. During the twelve months ended December 31, 2020, 8,250 RSUs were granted and will vest on May 1, 2021 and will be settled in cash.

33

Note 14 – Stockholders’ Equity and Noncontrolling Interests – (Continued)

Earnings per Share

Basic earnings per share were calculated using a weighted average number of shares outstanding. Diluted earnings per share include RS awards. RSUs may only be settled in cash.

	Three months ended March 31,
		2021		2020
Weighted average shares outstanding		26,877,200		26,881,700
Incremental shares from RS awards and RSUs		7,699		9,975
Total shares for diluted calculations		26,884,899		26,891,675
Net income (loss) attributable to American National (in thousands)		$	170,173	$	(220,444)
Basic earnings (losses) per share		$	6.33	$	(8.20)
Diluted earnings (losses) per share		$	6.33	$	(8.20)

Statutory Capital and Surplus

Risk Based Capital (“RBC”) is a measure insurance regulators use to evaluate the capital adequacy of American National's insurance subsidiaries. RBC is calculated using formulas applied to certain financial balances and activities that consider, among other things, investment risks related to the type and quality of investments, insurance risks associated with products and liabilities, interest rate risks and general business risks. Insurance companies that do not maintain capital and surplus at a level at least 200% of the authorized control level RBC are required to take certain actions. At March 31, 2021 and December 31, 2020, ANICO's statutory capital and surplus was $3.7 billion and $3.6 billion, respectively, which resulted in an RBC level above 200% of the authorized control level. All of our other insurance subsidiaries had statutory capital and surplus at March 31, 2021 and December 31, 2020, above 200% of the authorized control level, except for ANPAC Louisiana Insurance Company ("ANPLA"). At March 31, 2021 and December 31, 2020, ANPLA's statutory capital and surplus was $63.5 million and $68.5 million respectively, which resulted in an RBC level of 179% and 194% of the authorized control level. This decrease in RBC of ANPLA is primarily driven by an increase in homeowners catastrophe losses impacting the operating results in 2021 and 2020. We are actively managing our homeowners exposure of ANPLA, will continue to monitor the surplus levels and will be addressing rate adequacy through future planned underwriting and rate actions.

American National's insurance subsidiaries prepare financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of each subsidiary's state of domicile, which include certain components of the National Association of Insurance Commissioners’ Codification of Statutory Accounting Principles (“NAIC Codification”). NAIC Codification is intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting practices continue to be established by individual state laws and permitted practices. Modifications by the various state insurance departments may impact the statutory capital and surplus of our insurance subsidiaries.

Statutory accounting differs from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions, and valuing securities on a different basis. In addition, certain assets are not admitted under statutory accounting principles and are charged directly to surplus.

One of American National’s insurance subsidiaries has been granted a permitted practice from the Missouri Department of Insurance to record as the valuation of its investment in a wholly-owned subsidiary that is the attorney-in-fact for a Texas domiciled insurer, the statutory capital and surplus of the Texas domiciled insurer. This permitted practice increases the statutory capital and surplus of both ANICO and American National Lloyds Insurance Company by $65.3 million and $75.3 million at March 31, 2021 and December 31, 2020, respectively. The statutory capital and surplus of both ANICO and American National Lloyds Insurance Company would have remained above the Company action level RBC had it not used the permitted practice.

34

Note 14 – Stockholders’ Equity and Noncontrolling Interests – (Continued)

The statutory capital and surplus and net income (loss) of our life and property and casualty insurance entities in accordance with statutory accounting practices are shown below (in thousands):

	March 31, 2021		December 31, 2020
Statutory capital and surplus
Life insurance entities	$	2,190,618	$	2,188,808
Property and casualty insurance entities	1,514,248		1,463,179

	Three months ended March 31,
		2021		2020
Statutory net income (loss)
Life insurance entities		$	(32,217)	$	52,975
Property and casualty insurance entities		39,272		48,254

Dividends

Dividends are paid on a quarterly basis. We paid a quarterly dividend of $0.82 per share for each quarter during the three months ended March 31, 2021 and March 31, 2020, and we expect to continue to pay regular cash dividends, although there is no assurance as to future dividends because they depend on future earnings, capital requirements and financial conditions.

The amount of dividends paid by our insurance company subsidiaries is restricted by insurance law. These restrictions are based, in part, on the prior year’s statutory income and surplus. In general, dividends up to specified levels are considered ordinary and may be paid without prior regulatory approval. Dividends in larger amounts, or extraordinary dividends, are subject to approval by the insurance commissioner of the relevant state of domicile. For example, restrictions applicable to Texas-domiciled life insurance companies like ANICO limit the payment of dividends to the greater of the prior year’s statutory net income from operations, or 10% of prior year statutory surplus, in each case determined in accordance with statutory accounting principles. ANICO is permitted without prior approval of the Texas Department of Insurance to pay total dividends of $363.9 million during 2021.

Noncontrolling Interest

American National County Mutual Insurance Company (“County Mutual”) is a mutual insurance company owned by its policyholders. ANICO has a management agreement that effectively gives it control of County Mutual. As a result, County Mutual is included in the condensed consolidated financial statements of American National. Policyholder interests in the financial position of County Mutual are reflected as noncontrolling interest of $6.8 million at March 31, 2021 and December 31, 2020.

American National Group, Inc. and its subsidiaries exercise control or ownership of various joint ventures, resulting in their consolidation into American National’s condensed consolidated financial statements. The interests of the other partners in the consolidated joint ventures are shown as a noncontrolling interest of $0.5 million and a noncontrolling deficit of $0.9 million at March 31, 2021 and December 31, 2020, respectively.

Note 15 – Segment Information

Management organizes the business into 5 operating segments:

•Life—consists of whole, term, universal, indexed and variable life insurance. Products are primarily sold through career, multiple-line, and independent agents as well as direct marketing channels.

•Annuity—consists of fixed, indexed, and variable annuity products. Products are primarily sold through independent agents, brokers, and financial institutions, along with multiple-line and career agents.

•Health—consists of Medicare Supplement, stop-loss, other supplemental health products and credit disability insurance. Products are typically distributed through independent agents and managing general underwriters.

•Property and Casualty—consists of personal, agricultural and targeted commercial coverages and credit-related property insurance. Products are primarily sold through multiple-line and independent agents or managing general agents.

•Corporate and Other—consists of net investment income from investments and certain expenses not allocated to the insurance segments and revenues and related expenses from non-insurance operations.

35

Note 15 – Segment Information – (Continued)

The accounting policies of the segments are the same as those described in Note 2, Summary of Significant Accounting Policies and Practices, of American National’s 2020 annual report on Form 10-K filed with the SEC on March 4, 2021. All revenues and expenses specifically attributable to policy transactions are recorded directly to the appropriate operating segment. Revenues and expenses not specifically attributable to policy transactions are allocated to each segment as follows:

•Recurring income from bonds and mortgage loans is allocated based on the assets allocated to each line of business at the average yield available from these assets.

•Net investment income from all other assets is allocated to the insurance segments in accordance with the amount of capital allocated to each segment, with the remainder recorded in the Corporate and Other segment.

•Expenses are charged to segments through direct identification and allocations based upon various factors.

The results of operations measured as the income (loss) before federal income tax and other items by operating segments are summarized below (in thousands):

	Three months ended March 31, 2021
	Life		Annuity		Health		Property & Casualty		Corporate & Other		Total
PREMIUMS AND OTHER REVENUES
Premiums	$	100,779	$	24,241	$	38,228	$	399,405	$	0	$	562,653
Other policy revenues	81,508		5,031		0		0		0		86,539
Net investment income	67,797		153,864		2,083		15,513		30,724		269,981
Net realized investment gains	0		0		0		0		19,239		19,239
Change in investment credit loss	0		0		0		0		(5,486)		(5,486)
Net gains on equity securities	0		0		0		0		95,940		95,940
Other income	458		856		4,094		3,489		855		9,752
Total premiums and other revenues	250,542		183,992		44,405		418,407		141,272		1,038,618
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	146,160		44,717		0		0		0		190,877
Claims incurred	0		0		24,251		244,135		0		268,386
Interest credited to policyholders’ account balances	19,770		88,017		0		0		0		107,787
Commissions for acquiring and servicing policies	45,420		23,042		5,986		79,237		0		153,685
Other operating expenses	47,041		12,181		10,608		53,886		9,786		133,502
Change in deferred policy acquisition costs	(14,469)		(11,071)		854		(3,433)		—		(28,119)
Total benefits, losses and expenses	243,922		156,886		41,699		373,825		9,786		826,118
Income before federal income tax and other items	$	6,620	$	27,106	$	2,706	$	44,582	$	131,486	$	212,500

	Three months ended March 31, 2020
	Life		Annuity		Health		Property & Casualty		Corporate & Other		Total
PREMIUMS AND OTHER REVENUES
Premiums	$	89,516	$	15,509	$	43,086	$	388,657	$	0	$	536,768
Other policy revenues	75,540		4,065		0		0		0		79,605
Net investment income	45,575		41,541		2,233		16,085		25,557		130,991
Net realized investment gains	0		0		0		0		4,148		4,148
Change in investment credit loss	0		0		0		0		(44,678)		(44,678)
Net losses on equity securities	0		0		0		0		(332,575)		(332,575)
Other income	736		638		4,527		3,733		1,499		11,133
Total premiums and other revenues	211,367		61,753		49,846		408,475		(346,049)		385,392
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	110,466		34,802		0		0		0		145,268
Claims incurred	0		0		34,885		229,709		0		264,594
Interest credited to policyholders’ account balances	(1,903)		(2,420)		0		0		0		(4,323)
Commissions for acquiring and servicing policies	39,467		10,248		8,024		72,696		0		130,435
Other operating expenses	47,480		11,876		10,629		53,004		10,937		133,926
Change in deferred policy acquisition costs	(7,838)		7,286		(23)		(1,097)		0		(1,672)
Total benefits, losses and expenses	187,672		61,792		53,515		354,312		10,937		668,228
Income (loss) before federal income tax and other items	$	23,695	$	(39)	$	(3,669)	$	54,163	$	(356,986)	$	(282,836)

36

Note 16 – Commitments and Contingencies

Commitments

American National and its subsidiaries lease insurance sales office space, technological equipment, and automobiles. The remaining long-term lease commitments at March 31, 2021 were approximately $8.0 million.

American National had aggregate commitments at March 31, 2021 to purchase, expand or improve real estate, to fund fixed interest rate mortgage loans, and to purchase other invested assets of $1.3 billion of which $572.6 million is expected to be funded in 2021 with the remainder funded in 2022 and beyond.

American National had outstanding letters of credit in the amount of $3.5 million as of March 31, 2021 and December 31, 2020.

Federal Home Loan Bank (FHLB) Agreements

In May 2018, the Company became a member of the Federal Home Loan Bank of Dallas (“FHLB”) to augment its liquidity resources. The Company initially purchased $7.0 million of stock to meet the FHLB’s membership requirement. The FHLB member stock is recorded in other invested assets on the Company’s condensed consolidated statements of financial position. Through its membership, the Company has access to the FHLB’s financial services including advances that provide an attractive funding source for short-term borrowing and for access to other funding agreements. As of March 31, 2021, certain municipal bonds and collateralized mortgage obligations with a fair value of approximately $60.3 million and commercial mortgage loans of approximately $1.5 billion were on deposit with the FHLB as collateral for borrowing. As of March 31, 2021, the collateral provided borrowing capacity for the $250.0 million in outstanding advances as well as approximately $740.7 million in additional borrowing capacity. The deposited securities and commercial mortgage loans are included in the Company’s condensed consolidated statements of financial position within fixed maturity securities and mortgage loans on real estate, net of allowance, respectively.

FHLB outstanding advances as of March 31, 2021 are shown below (in thousands, except percentages):

	Principal Amount		Interest Rate		Maturity Date
At March 31, 2021
FHLB advance, fixed rate	$	250,000	0.38	%	4/28/2021

Guarantees

ANICO has guaranteed bank loans for customers of a third-party marketing operation. The bank loans are used to fund premium payments on life insurance policies issued by ANICO. The loans are secured by the cash values of the life insurance policies. If the customer were to default on a bank loan, ANICO would be obligated to pay off the loan. As the cash values of the life insurance policies always equal or exceed the balance of the loans, management does not foresee any loss on these guarantees. The total amount of the guarantees outstanding as of March 31, 2021, was approximately $121.4 million, while the total cash value of the related life insurance policies was approximately $143.8 million.

37

Note 16 – Commitments and Contingencies – (Continued)

Litigation

American National and certain subsidiaries are defendants in various lawsuits concerning alleged breaches of contracts, various employment matters, allegedly deceptive insurance sales and marketing practices, and miscellaneous other causes of action arising in the ordinary course of operations. Certain of these lawsuits include claims for compensatory and punitive damages. We provide accruals for these items to the extent we deem the losses probable and reasonably estimable. After reviewing these matters with legal counsel, based upon information presently available, management is of the opinion that the ultimate resultant liability, if any, would not have a material adverse effect on American National’s condensed consolidated financial position, liquidity or results of operations; however, assessing the eventual outcome of litigation necessarily involves forward-looking speculation as to judgments to be made by judges, juries and appellate courts in the future.

Such speculation warrants caution, as the frequency of large damage awards, which bear little or no relation to the economic damages incurred by plaintiffs in some jurisdictions, continues to create the potential for an unpredictable judgment in any given lawsuit. These lawsuits are in various stages of development, and future facts and circumstances could result in management changing its conclusions. It is possible that, if the defenses in these lawsuits are not successful, and the judgments are greater than management can anticipate, the resulting liability could have a material impact on our condensed consolidated financial position, liquidity, or results of operations. With respect to the existing litigation, management currently believes that the possibility of a material judgment adverse to American National is remote and no estimate of range can be made for loss contingencies that are at least reasonably possible but not accrued.

Note 17 – Related Party Transactions

American National has entered into recurring transactions and agreements with certain related parties. These include mortgage loans, management contracts, agency commission contracts, marketing agreements, health insurance contracts, and legal services. The impact on the condensed consolidated financial statements of significant related party transactions is shown below (in thousands):

			Dollar Amount of Transactions
	Financial Statement Line Impacted	Three months ended March 31,			Amount due from American National
Related Party			2021		2020		March 31, 2021		December 31, 2020
Greer, Herz & Adams, LLP	Other operating expenses		$	3,713	$	3,843	$	(617)	$	(441)

Transactions with Greer, Herz & Adams, LLP: Irwin M. Herz, Jr. is a member of the Board of Directors of American National Group, Inc. and certain of its subsidiaries, and a Partner with Greer, Herz & Adams, LLP, which serves as American National’s General Counsel.

Note 18 – Subsequent Events

On April 28, 2020, the Company borrowed from the Federal Home Loan Bank of Dallas' COVID-19 Relief Advance Program. The net amount of the advance was approximately $245.0 million after a required capital stock purchase of approximately $5.0 million. The loan had an interest rate of 0.38% with a final maturity date of April 28, 2021. The Company paid this advance in full on its maturity date of April 28, 2021. The capital stock purchased for the advance was not sold and is now considered excess stock at the Federal Home Loan Bank of Dallas, and will be available to use in the event of future advances.

38

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following pages provide management’s discussion and analysis (“MD&A”) of financial condition and results of operations for the three months ended March 31, 2021 and 2020 of American National Group, Inc. and its subsidiaries (referred to in this document as “we,” “our,” “us,” or the “Company”). This information should be read in conjunction with our condensed consolidated financial statements included in Item 1, Financial Statements, of this Form 10-Q.

Caution Regarding Forward-Looking Statements

Certain statements made in this report, including but not limited to the accompanying condensed consolidated financial statements, and the notes thereto appearing in Item 1 herein, Management's Discussion and Analysis of Financial Condition and Results of Operations in this Item 2 ("MD&A"), and the exhibits and financial statement schedules filed as a part hereof or incorporated by reference herein, may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are indicated by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “estimates,” “will” or words of similar meaning, and include, without limitation, statements regarding the outlook of our business and expected financial performance, and statements relating to the COVID-19 pandemic and its effects on the Company. These forward-looking statements are subject to changes and uncertainties which are, in many instances, beyond our control and have been made based upon our assumptions, expectations and beliefs concerning future developments and their potential effect upon us. There can be no assurance that future developments will be in accordance with our expectations, that the effect of future developments on us will be as anticipated, or that our risk management policies and procedures will be effective, particularly given the uncertainty relating to the COVID-19 pandemic. We do not make public specific projections relating to future earnings, and we do not endorse any projections regarding future performance made by others. Additionally, we do not publicly update or revise forward-looking statements based on the outcome of various foreseeable or unforeseeable events. Forward-looking statements are not guarantees of future performance and involve various risks and uncertainties. There are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including without limitation risks, uncertainties and other factors discussed in Item 1A of our 2020 Form 10-K filed with the SEC on March 4, 2021 and elsewhere in this report.

Many of these risks and uncertainties have been exacerbated by the COVID-19 pandemic, particularly those described in the Economic and Investment Risk Factors, Litigation and Regulation Risk Factors, and Reinsurance and Counterparty Risk Factors in the Company's Form 10-K filed with the SEC on March 4, 2021. Risks and uncertainties include the following:

•Economic & Investment Risk Factors

•potential for difficult conditions in the economy, which may not improve in the near future, and risks related to persistently low or unpredictable interest rates;

•fluctuations in the markets for fixed maturity securities, equity securities, and commercial real estate, which could adversely affect the valuation of our investment portfolio, our net investment income, our retirement expense, and sales of or fees from certain of our products;

•lack of liquidity for certain of our investments;

•risk of investment losses and defaults;

•Risk Factors Relating to Our Business and Industry

•the impact of major public health issues, like COVID-19;

•differences between actual experience regarding mortality, morbidity, persistency, expense, surrenders and investment returns, and our assumptions for product pricing, establishing liabilities and reserves or for other purposes;

•changes in our experience related to deferred policy acquisition costs;

•advances in medical technology and testing, which may increase our adverse selection risk;

•potentially adverse rating agency actions;

39

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

•Information Technology Risk Factors

•failures or limitations of our computer, information security and administration systems;

•failure to complete and implement technology initiatives in a timely manner;

•Catastrophic Event Risk Factors

•natural or man-made catastrophes resulting in increased claims activity from catastrophic loss of life or property;

•the effects of global climate change;

•Marketplace Risk Factors

•the highly competitive nature of the insurance and annuity business;

•potential difficulty in attraction and retention of qualified employees and agents;

•the introduction of alternative healthcare solutions or changes in federal healthcare policy, both of which could impact our supplemental healthcare business;

•Litigation and Regulation Risk Factors

•adverse determinations in litigation or regulatory proceedings which may result in significant financial losses and harm to our reputation;

•significant changes in government regulation;

•changes in tax law;

•changes in statutory or U.S. Generally Accepted Accounting Principles (“GAAP”), practices or policies;

•Reinsurance and Counterparty Risk Factors

•potential changes in the availability, affordability, adequacy and collectability of reinsurance protection;

•potential default or failure to perform by the counterparties to our reinsurance arrangements and derivative instruments;

•Risk Factors Relating to Our Corporate Structure and Ownership of Our Common Stock

•state law limitations on the payment of dividends by our subsidiaries, which could limit the amount of dividends we pay;

•control of our Company by a small number of stockholders;

•anti-takeover provisions in our governing documents;

•the designation in our governing documents of the Delaware Court of Chancery as the exclusive forum for substantially all disputes between our stockholders and us;

•General Risk Factors

•potential employee error or misconduct, which may result in fraud or adversely affect the execution and administration of our policies and claims;

•potential ineffectiveness of our risk management policies and procedures;

•the effects of unanticipated events on our disaster recovery and business continuity planning; and

•potential ineffectiveness of our internal controls over financial reporting.

40

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

COVID-19 Response

A summary of actions the company has taken in response to COVID-19 through December 31, 2020 is disclosed in our 2020 Annual Report on form 10-K filed with the SEC on March 4, 2021. Below is a summary of subsequent developments in our COVID-19 response:

•We have taken steps to protect employees with the goals of maintaining their health and sustaining an adequate workforce, including directing as many employees as possible to work from home and offering flexibility for employees negotiating scheduling conflicts due to the impacts of COVID-19, such as caring for family, alternative arrangements and shutdowns for business and schools, self-isolation or personal illness, including granting additional paid time off to get vaccinations and to address these hardships.

•We suspended our summer Internship Program for 2020 and in 2021 are piloting a program which combines both virtual and in-person elements for a small group of interns.

•We developed and continue to refine return-to-office programs as we transition through the different reopening situations at our locations. During the first quarter of 2021, viral infections in the general population have begun to increase again resulting in resumption of restrictions in certain areas in which we operate. As a result, we have temporarily paused further return-to-office plans at our locations until June 2021. At that time, we will potentially be gradually re-introducing more employees to our office locations and are exploring longer-term plans to offer employees hybrid work schedules, where possible.

No assurance can be given that these actions will be successful, nor can we predict the level of disruption that will occur should the COVID-19 pandemic and its related macroeconomic risks continue for an extended period of time. Given this uncertainty, we are unable to quantify with reasonable confidence the expected impact of the COVID-19 pandemic on our future operations, financial condition, liquidity and results of operations. The wide-ranging social, economic and financial consequences of the COVID-19 pandemic and the possible effects of ongoing and future governmental action in response to COVID-19 compound this uncertainty. Additional information regarding risks and uncertainties related to the COVID-19 pandemic are set forth in Part II, Item 1A, Risk Factors of our 2020 Form 10-K filed with the SEC on March 4, 2021. For additional information regarding the direct and indirect impact to mortality refer to Item 2. MD&A, Life.

This MD&A should be read in conjunction with our condensed consolidated financial statements and related notes included in Part I - Financial Information - Item 1, Financial Statements.

41

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Overview

American National Insurance Company ("ANICO"), founded in 1905 and headquartered in Galveston, Texas, and other American National ("ANAT") subsidiaries offer a broad spectrum of products and services, which include life insurance, annuities, property and casualty insurance, health insurance, credit insurance, and pension products. The American National companies operate in all 50 states, the District of Columbia and Puerto Rico. In addition to ANICO, major subsidiaries include American National Life Insurance Company of Texas, American National Life Insurance Company of New York, American National Property and Casualty Company, Garden State Life Insurance Company, Standard Life and Accident Insurance Company, Farm Family Casualty Insurance Company and United Farm Family Insurance Company.

General Trends

During the first quarter of 2021, American National had no material changes to the general trends discussed in the MD&A included in our 2020 Annual Report on Form 10-K filed with the SEC on March 4, 2021. However, please see the "COVID-19 Response and Update" discussion above for general information about the pandemic's impact on us.

Critical Accounting Estimates

The unaudited interim condensed consolidated financial statements have been prepared in conformity with GAAP. In addition to GAAP, insurance companies apply specific SEC regulations when preparing the condensed consolidated financial statements. The preparation of the condensed consolidated financial statements and notes requires us to make estimates and assumptions that affect the amounts reported. Actual results could differ from results reported using those estimates and assumptions. Our accounting policies inherently require the use of judgment relating to a variety of assumptions and estimates, particularly expectations of current and future mortality, morbidity, persistency, expenses, interest rates, and property and casualty loss frequency, severity, claim reporting and settlement patterns. Due to the inherent uncertainty when using the assumptions and estimates, the effect of certain accounting policies under different conditions or assumptions could vary from those reported in the condensed consolidated financial statements.

For a discussion of our critical accounting estimates, see the MD&A in our 2020 Annual Report on Form 10-K filed with the SEC on March 4, 2021.

Recently Issued Accounting Pronouncements

Refer to Note 3, Recently Issued Accounting Pronouncements, of the Notes to the Unaudited Condensed Consolidated Financial Statements in Item 1.

42

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Condensed Consolidated Results of Operations

The following sets forth the condensed consolidated results of operations (in thousands):

	Three months ended March 31,
		2021		2020		Change
PREMIUMS AND OTHER REVENUES
Premiums		$	562,653	$	536,768	$	25,885
Other policy revenues		86,539		79,605		6,934
Net investment income		269,981		130,991		138,990
Net realized investments gains		19,239		4,148		15,091
Change in investment credit loss		(5,486)		(44,678)		39,192
Net gains (losses) on equity securities		95,940		(332,575)		428,515
Other income		9,752		11,133		(1,381)
Total premiums and other revenues		1,038,618		385,392		653,226
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits		190,877		145,268		45,609
Claims incurred		268,386		264,594		3,792
Interest credited to policyholders’ account balances		107,787		(4,323)		112,110
Commissions for acquiring and servicing policies		153,685		130,435		23,250
Other operating expenses		133,502		133,926		(424)
Change in deferred policy acquisition costs (1)		(28,119)		(1,672)		(26,447)
Total benefits, losses and expenses		826,118		668,228		157,890
Income (loss) before federal income taxes and other items		$	212,500	$	(282,836)	$	495,336

(1) A negative amount of change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.

Comparison of the three months ended March 31, 2021 to 2020

Earnings increased primarily due to the following:

•An increase in net gains on equity securities resulting from favorable market conditions in the three months ended March 31, 2021 compared to a net loss on equity securities in the same period in 2020 driven by unfavorable market conditions as a result of the COVID-19 pandemic

•An increase in earnings in our Annuity segment driven by our equity indexed annuity products

•An increase in net investment income due to higher option gains resulting from favorable market conditions

The increase in earnings was partially offset due to the following:

•Increase in claims which reduced the earnings from our Life segment

43

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Life

Life segment financial results for the periods indicated were as follows (in thousands):

	Three months ended March 31,
		2021		2020		Change
PREMIUMS AND OTHER REVENUES
Premiums		$	100,779	$	89,516	$	11,263
Other policy revenues		81,508		75,540		5,968
Net investment income		67,797		45,575		22,222
Other income		458		736		(278)
Total premiums and other revenues		250,542		211,367		39,175
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits		146,160		110,466		35,694
Interest credited to policyholders’ account balances		19,770		(1,903)		21,673
Commissions for acquiring and servicing policies		45,420		39,467		5,953
Other operating expenses		47,041		47,480		(439)
Change in deferred policy acquisition costs (1)		(14,469)		(7,838)		(6,631)
Total benefits, losses and expenses		243,922		187,672		56,250
Income before federal income taxes and other items		$	6,620	$	23,695	$	(17,075)

(1)A negative amount of change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.

Comparison of the three months ended March 31, 2021 to 2020

Earnings for our Life segment decreased primarily due to the following:

•An overall increase in mortality which includes claims directly and indirectly attributable to COVID-19

The decrease in earnings was partially offset by the following:

•Improved persistency and an increase in sales, resulting in an increase in premiums and other policy revenues

44

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Life Insurance Sales

The following table presents life insurance sales as measured by annualized premium, a statistical measure used by the insurance industry, which allows a comparison of new policies sold by an insurance company during the period (in thousands):

	Three months ended March 31,
		2021		2020		Change
Traditional life		$	15,757	$	14,974	$	783
Universal life		8,376		6,150		2,226
Indexed UL		8,370		6,802		1,568
Total recurring		32,503		27,926		4,577
Single and excess (1)		378		202		176
Credit life (1)		1,657		2,184		(527)
Total annualized premium		$	34,538	$	30,312	$	4,226

(1)These are weighted amounts representing 10% of single and excess premiums.

Life insurance sales are based on the total yearly premium that insurance companies would expect to receive if all recurring premium policies would remain in-force, plus 10% of single and excess premiums. Life insurance sales measure activity associated with gaining new insurance business in the current period, and includes deposits received related to interest sensitive life and universal life-type products. Whereas GAAP premium revenues are associated with policies sold in current and prior periods, and deposits received related to interest sensitive life and universal life-type products are recorded in a policyholder account which is reflected as a liability. Therefore, a reconciliation of premium revenues and insurance sales is not meaningful.

Total Life sales increased during the three months ended March 31, 2021 compared to 2020 primarily due to higher Universal Life and Indexed Universal Life sales.

Policy In-force Information

The following table summarizes changes in the Life segment’s in-force amounts (in thousands):

	March 31, 2021		December 31, 2020		Change
Life insurance in-force
Traditional life	$	93,497,659	$	91,920,577	$	1,577,082
Interest-sensitive life	36,920,337		36,326,621		593,716
Total life insurance in-force	$	130,417,996	$	128,247,198	$	2,170,798

The following table summarizes changes in the Life segment’s number of policies in-force:

	March 31, 2021	December 31, 2020	Change
Number of policies in-force
Traditional life	1,792,484	1,832,536	(40,052)
Interest-sensitive life	272,377	269,668	2,709
Total number of policies in-force	2,064,861	2,102,204	(37,343)

Life insurance in-force increased during the three months ended March 31, 2021 compared to December 31, 2020 despite a reduction of policies in-force due to an increase in sales of higher face amount policies.

Change in Deferred Policy Acquisition Costs

The change in DAC represents acquisition costs capitalized less the amortization of existing DAC. The following shows the components of the change in DAC (in thousands):

	Three months ended March 31,
		2021		2020		Change
Acquisition cost capitalized		$	(43,256)	$	(33,353)	$	(9,903)
Amortization of DAC		28,787		25,515		3,272
Change in DAC		$	(14,469)	$	(7,838)	$	(6,631)

45

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Annuity

Annuity segment financial results for the periods indicated were as follows (in thousands):

	Three months ended March 31,
		2021		2020		Change
PREMIUMS AND OTHER REVENUES
Premiums		$	24,241	$	15,509	$	8,732
Other policy revenues		5,031		4,065		966
Net investment income		153,864		41,541		112,323
Other income		856		638		218
Total premiums and other revenues		183,992		61,753		122,239
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits		44,717		34,802		9,915
Interest credited to policyholders’ account balances		88,017		(2,420)		90,437
Commissions for acquiring and servicing policies		23,042		10,248		12,794
Other operating expenses		12,181		11,876		305
Change in deferred policy acquisition costs (1)		(11,071)		7,286		(18,357)
Total benefits, losses and expenses		156,886		61,792		95,094
Income (loss) before federal income taxes and other items		$	27,106	$	(39)	$	27,145

(1)A negative amount of change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.

Comparison of the three months ended March 31, 2021 to 2020

Earnings for our Annuity segment increased primarily due to the following:

•An increase in net investment income due to higher option gains resulting from favorable market conditions

•Favorable mark-to-market impact for equity indexed annuity products due to favorable interest rates

•Lower DAC amortization for fixed deferred products due to an increase in estimated gross profits driven by higher projected future interest rates compared to our previous expectations

46

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Annuity premium and deposit amounts received are shown below (in thousands):

	Three months ended March 31,
		2021		2020		Change
Fixed deferred annuity		$	123,752	$	118,410	$	5,342
Single premium immediate annuity		28,530		22,758		5,772
Equity-indexed deferred annuity		202,856		57,976		144,880
Variable deferred annuity		14,187		15,681		(1,494)
Total premium and deposits		369,325		214,825		154,500
Less: Policy deposits		345,084		199,316		145,768
Total earned premiums		$	24,241	$	15,509	$	8,732

Annuity premium and deposits increased primarily for equity indexed deferred products during the three months ended March 31, 2021 compared to 2020 reflecting the competitiveness of the product.

Change in Deferred Policy Acquisition Costs

The change in DAC represents acquisition costs capitalized less the amortization of existing DAC, which is calculated in proportion to expected gross profits. The following shows the components of the change in DAC (in thousands):

	Three months ended March 31,
		2021		2020		Change
Acquisition cost capitalized		$	(23,488)	$	(11,525)	$	(11,963)
Amortization of DAC		12,417		18,811		(6,394)
Change in DAC		$	(11,071)	$	7,286	$	(18,357)

The change in acquisition costs capitalized for the three months ended March 31, 2021 strongly correlates with the change in commissions, which increased due to higher sales. The amortization of DAC was lower for the three months ended March 31, 2021 due to an increase in estimated gross profits driven by higher projected future interest rates.

47

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Shown below are the changes in account values (in thousands):

	Three months ended March 31,
	2021		2020
Fixed deferred annuity
Reserve, beginning of period	$	6,635,203	$	6,893,174
Premiums	123,752		118,410
Death and other benefits	(64,071)		(45,937)
Surrenders	(128,156)		(127,941)
Fees	(405)		(463)
Interest and mortality	44,621		47,912
Reserve, end of period	6,610,944		6,885,155
Equity-indexed annuity
Reserve, beginning of period	4,097,013		3,985,166
Premiums	202,856		57,976
Death and other benefits	(11,912)		(11,811)
Surrenders	(75,147)		(73,332)
Fees	(747)		(915)
Interest and mortality	45,932		(52,018)
Reserve, end of period	4,257,995		3,905,066
Single premium immediate annuity
Reserve, beginning of period	1,851,955		1,874,942
Premiums	28,530		22,758
Payments	(49,601)		(54,249)
Interest and mortality	14,701		18,216
Reserve, end of period	1,845,585		1,861,667
Variable deferred annuity
Account value, beginning of period	418,510		385,736
Premiums	14,187		15,681
Other flows	120		959
Surrenders	(21,325)		(30,486)
Fees	(1,256)		(1,063)
Change in market value and other	13,665		(54,898)
Reserve, end of period	423,901		315,929
Total reserve, end of period	$	13,138,425	$	12,967,817

48

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Interest and Mortality Margin

Margins increased during the three months ended March 31, 2021 compared to 2020 due to favorable changes in mark-to-market reserves for indexed annuities. The following table summarizes the interest margin due to the impact of the investment performance, interest credited to policyholder’s account balances, and the end of period assets measured by account balance (in thousands):

	Three months ended March 31,
		2021		2020		Change
Fixed annuity
Fixed investment income		$	88,462	$	93,620	$	(5,158)
Interest credited and mortality		(59,322)		(66,128)		6,806
Interest and mortality margin		29,140		27,492		1,648
Equity-indexed annuity
Fixed investment income		41,719		39,699		2,020
Option return		23,683		(91,778)		115,461
Interest credited and mortality		(45,932)		52,018		(97,950)
Interest and mortality margin		19,470		(61)		19,531
Variable annuity
Separate account management fees		1,247		940		307
Interest and mortality margin		1,247		940		307
Total interest and mortality margin		$	49,857	$	28,371	$	21,486

49

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Health

Health segment financial results for the periods indicated were as follows (in thousands):

	Three months ended March 31,
	2021		2020		Change
PREMIUMS AND OTHER REVENUES
Premiums	$	38,228	$	43,086	$	(4,858)
Net investment income	2,083		2,233		(150)
Other income	4,094		4,527		(433)
Total premiums and other revenues	44,405		49,846		(5,441)
BENEFITS, LOSSES AND EXPENSES
Claims incurred	24,251		34,885		(10,634)
Commissions for acquiring and servicing policies	5,986		8,024		(2,038)
Other operating expenses	10,608		10,629		(21)
Change in deferred policy acquisition costs (1)	854		(23)		877
Total benefits, losses and expenses	41,699		53,515		(11,816)
Income (loss) before federal income taxes and other items	$	2,706	$	(3,669)	$	6,375

(1) A positive amount of change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.

Comparison of the three months ended March 31, 2021 to 2020

Earnings for our Health segment increased primarily due to the following:

•A reduction in claims for Medical Expense. There was a single large claim in 2020

•Lower loss ratio for Medicare Supplement as rate increases are approved and implemented

•Lower claims for Supplemental health

50

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Health earned premiums for the periods indicated were as follows (in thousands):

	Three months ended March 31,
	2021		2020		Change
Medicare Supplement	$	18,824	$	21,576	$	(2,752)
MGU	5,185		5,471		(286)
Supplemental insurance	3,889		4,981		(1,092)
Credit Health	3,255		4,174		(919)
Medical expense	1,956		2,197		(241)
Worksite	4,018		3,555		463
Group health	349		369		(20)
All other	752		763		(11)
Total	$	38,228	$	43,086	$	(4,858)

Policy lapses as a result of rate increases drove a decrease in premiums for Medicare Supplement in 2021. Supplemental insurance premiums decreased due to a reduction in sales across all product lines, primarily in Short Term Medical. Premiums for Credit Health decreased as a result of contract terminations.

Health claims incurred for the periods indicated were as follows (in thousands):

	Three months ended March 31,
	2021		2020		Change
Medicare Supplement	$	14,226	$	19,704	$	(5,478)
MGU	3,302		4,643		(1,341)
Supplemental insurance	1,675		3,158		(1,483)
Credit Health	825		728		97
Medical expense	2,280		4,025		(1,745)
Worksite	2,133		1,442		691
Group health	(73)		550		(623)
All other	(117)		635		(752)
Total	$	24,251	$	34,885	$	(10,634)

Favorable claim experience for the three months ended March 31, 2021 is driven by improved benefit ratios resulting from rate increases impacting Medicare Supplement policies. In addition, Supplemental insurance claim severity for the legacy master cancer plan has lessened in 2021. Similarly, Medical Expense claims decreased driven by the aforementioned single large claim in early 2020. MGU claims decreased as a result of large ceded paid claims for one MGU program in 2021.

Change in Deferred Policy Acquisition Costs

The following table presents the components of the change in DAC (in thousands):

	Three months ended March 31,
	2021		2020		Change
Acquisition cost capitalized	$	(2,849)	$	(5,378)	$	2,529
Amortization of DAC	3,703		5,355		(1,652)
Change in DAC	$	854	$	(23)	$	877

51

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Property and Casualty

Property and Casualty segment financial results for the periods indicated were as follows (in thousands, except percentages):

	Three months ended March 31,
		2021			2020			Change
PREMIUMS AND OTHER REVENUES
Net premiums written		$	425,366		$	407,588		$	17,778
Net premiums earned		$	399,405		$	388,657		$	10,748
Net investment income		15,513			16,085			(572)
Other income		3,489			3,733			(244)
Total premiums and other revenues		418,407			408,475			9,932
BENEFITS, LOSSES AND EXPENSES
Claims incurred		244,135			229,709			14,426
Commissions for acquiring and servicing policies		79,237			72,696			6,541
Other operating expenses		53,886			53,004			882
Change in deferred policy acquisition costs (1)		(3,433)			(1,097)			(2,336)
Total benefits, losses and expenses		373,825			354,312			19,513
Income before federal income taxes and other items		$	44,582		$	54,163		$	(9,581)
Loss and loss adjustment expense ratio		61.1		%	59.1		%	2.0		%
Underwriting expense ratio		32.5			32.1			0.4
Combined ratio		93.6		%	91.2		%	2.4		%
Impact of catastrophe events on combined ratio		9.0			3.0			6.0
Combined ratio without impact of catastrophe events		84.6		%	88.2		%	(3.6)		%
Gross catastrophe losses		$	36,932		$	12,566		$	24,366
Net catastrophe losses		$	35,966		$	11,479		$	24,487

(1) A negative amount of change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.

Comparison of the three months ended March 31, 2021 to 2020

Earnings for our Property and Casualty segment decreased primarily due to the following:

•Earnings from our personal products decreased. The decrease was primarily due to significantly higher catastrophe losses caused by freezing conditions in the south and mid-west, which had the greatest impact on our homeowners' loss ratio

The decrease in earnings was partially offset by the following:

•Earnings from our commercial products increased. The increase was driven by lower loss and loss adjustment expense ratios on our automobile and business owner products

Additional Information:

•The increase in commissions expense was primarily attributable to our Specialty Markets Group products, which had increases in direct commissions due to an increase in premiums written and contingent commissions tied to improvements in the loss ratio.

52

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Products

Our Property and Casualty segment consists of: (i) Personal products, marketed primarily to individuals, representing 52% of net premiums written; (ii) Commercial products, focused primarily on agricultural and other business related markets, representing 33% of net premiums written; and (iii) Specialty Markets Group products, marketed through independent managing general agents and managing general underwriters, representing 15% of net premiums written.

Personal Products

Personal Products results for the periods indicated were as follows (in thousands, except percentages):

	Three months ended March 31,
		2021			2020			Change
Net premiums written
Automobile		$	141,425		$	145,011		$	(3,586)
Homeowner		65,691			61,250			4,441
Other Personal		14,078			12,986			1,092
Total net premiums written		$	221,194		$	219,247		$	1,947
Net premiums earned
Automobile		$	134,110		$	137,483		$	(3,373)
Homeowner		70,195			66,699			3,496
Other Personal		12,752			12,454			298
Total net premiums earned		$	217,057		$	216,636		$	421
Loss and loss adjustment expense ratio
Automobile		63.2		%	62.1		%	1.1		%
Homeowner		86.4		%	65.5		%	20.9		%
Other Personal		48.5		%	55.2		%	(6.7)		%
Personal line loss and loss adjustment expense ratio		69.8		%	62.7		%	7.1		%
Combined Ratio
Automobile		87.5		%	86.2		%	1.3		%
Homeowner		115.5		%	98.3		%	17.2		%
Other Personal		78.4		%	89.5		%	(11.1)		%
Personal line combined ratio		96.0		%	90.1		%	5.9		%

Comparison of 2021 to 2020

Automobile: Net premiums written and earned decreased for the first quarter primarily due to a decrease in policies in-force.

Homeowners: Net premiums written and earned increased for the first quarter primarily due to rate increases. The loss and loss adjustment expense and combined ratios increased due to higher catastrophe losses caused by winter storms. Catastrophe losses, net of reinsurance, increased by $16.0 million, to $23.0 million in the first quarter compared to $7.0 million in 2020.

Other Personal: These products include coverages for individuals seeking to protect their personal property and liability not covered within their home and auto policies, such as coverages for watercraft, personal umbrella, and rental owners. Net premiums written and earned increased for the first quarter due to rate increases in the rental owners product. The loss and loss adjustment expense and combined ratios improved for the first quarter due to fewer non-catastrophe losses.

53

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Commercial Products

Commercial Products results for the periods indicated were as follows (in thousands, except percentages):

	Three months ended March 31,
		2021			2020			Change
Net premiums written
Agricultural Business		$	44,773		$	40,982		$	3,791
Automobile		40,066			37,712			2,354
Business Owner		23,087			21,378			1,709
Workers Compensation		20,918			21,012			(94)
Other Commercial		10,075			9,339			736
Total net premiums written		$	138,919		$	130,423		$	8,496
Net premiums earned
Agricultural Business		$	41,323		$	39,073		$	2,250
Automobile		32,366			30,464			1,902
Business Owner		19,814			18,413			1,401
Workers Compensation		17,239			17,596			(357)
Other Commercial		8,847			8,090			757
Total net premiums earned		$	119,589		$	113,636		$	5,953
Loss and loss adjustment expense ratio
Agricultural Business		52.0		%	39.7		%	12.3		%
Automobile		50.6		%	63.5		%	(12.9)		%
Business Owner		76.8		%	94.6		%	(17.8)		%
Workers Compensation		57.1		%	52.9		%	4.2		%
Other Commercial		34.3		%	68.8		%	(34.5)		%
Commercial line loss and loss adjustment expense ratio		55.2		%	59.1		%	(3.9)		%
Combined ratio
Agricultural Business		89.3		%	77.2		%	12.1		%
Automobile		73.5		%	86.8		%	(13.3)		%
Business Owner		111.8		%	130.1		%	(18.3)		%
Workers Compensation		75.0		%	71.1		%	3.9		%
Other Commercial		78.2		%	111.4		%	(33.2)		%
Commercial line combined ratio		85.9		%	89.8		%	(3.9)		%

Comparison of 2021 to 2020

Agricultural Business: Our agricultural business product allows policyholders to customize and cover their agriculture exposure using a package policy, which includes coverage for residences and household contents, farm and ranch buildings and building contents, personal and commercial liability and personal property. Net premiums written and earned increased for the first quarter primarily due to increases in policies in-force and rate increases. The loss and loss adjustment expense and combined ratios increased primarily due to higher catastrophe losses. Catastrophe losses, net of reinsurance, increased by $4.5 million, to $6.7 million in the first quarter compared to $2.2 million in 2020.

Commercial Automobile: Net premiums written and earned increased for the first quarter primarily due to rate increases. The loss and loss adjustment expense ratio and combined ratio improved for the first quarter primarily due to favorable prior year claim development and a decrease in claim frequency as policyholders drove fewer miles due to the impact of COVID-19.

Business Owner: Our business owner product allows policyholders to customize and cover their property and liability exposures using a package policy. Net premiums written and earned increased for the first quarter primarily due to increases in policies in-force and rate increases. The loss and loss adjustment expense and combined ratios improved for the first quarter primarily due to favorable prior year claim development and a decrease in claim frequency.

54

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Workers Compensation: The loss and loss adjustment expense and combined ratios increased for the first quarter primarily due to less favorable prior year claim development and an increase in claim severity.

Other Commercial: Other commercial products primarily provide umbrella and other liability coverages. Net premiums written and earned increased for the first quarter primarily due to an increase in premium for umbrella products. The loss and loss adjustment expense and combined ratios improved primarily due to favorable prior year claim development.

Specialty Markets Products

Specialty Markets product results for the periods indicated were as follows (in thousands, except percentages):

	Three months ended March 31,
		2021			2020			Change
Net premiums written		$	65,254		$	57,916		$	7,338
Net premiums earned		62,758			58,383			4,375
Loss and loss adjustment expense ratio (1)		42.5		%	45.6		%	(3.1)		%
Combined ratio (1)		100.0		%	97.6		%	2.4		%

(1)Ratio does not include fee income.

Specialty Markets products provide protection to borrowers and the creditors that extend credit to them. Products offer coverage against unpaid indebtedness as a result of death, disability, involuntary unemployment or untimely loss to the collateral securing a personal or mortgage loan. Specialty Markets products also include renters, mortgage security, aviation, and private flood insurance.

Comparison of 2021 to 2020

Net written and earned premiums increased for the first quarter primarily due to the addition of new accounts related to the investor property protection product. The loss and loss adjustment expense ratio decreased for the first quarter primarily due to the improvement of loss ratios on products that provide collateral protection related to automobiles, also known as auto GAP business, and collateral protection insurance. The combined ratio increased for the first quarter primarily due to increases in direct commissions as a result of an increase in premiums written and contingent commissions tied to improvements in the loss ratio.

55

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Corporate and Other

Corporate and Other segment financial results for the periods indicated were as follows (in thousands):

	Three months ended March 31,
	2021		2020		Change
OTHER REVENUES
Net investment income	$	30,724	$	25,557	$	5,167
Realized investment gains	19,239		4,148		15,091
Change in investment credit loss	(5,486)		(44,678)		39,192
Net gains (losses) on equity securities	95,940		(332,575)		428,515
Other income	855		1,499		(644)
Total other revenues	141,272		(346,049)		487,321
BENEFITS, LOSSES AND EXPENSES
Other operating expenses	9,786		10,937		(1,151)
Total benefits, losses and expenses	9,786		10,937		(1,151)
Income (loss) before federal income taxes and other items	$	131,486	$	(356,986)	$	488,472

Comparison of the three months ended March 31, 2021 to 2020

Earnings for our Corporate and Other segment increased primarily due to the following:

•An increase in net gains on equity securities due to an increase in the S&P 500 of 5.8% for the three months ended March 31, 2021 compared to a 20.0% decrease for the same period in 2020, which reflects the impact from the declaration of a pandemic in March of 2020

•Expense for credit losses decreased; the expense for credit losses in the previous year was due to economic disruptions caused by the COVID-19 pandemic

56

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Investments

We manage our investment portfolio to optimize the rate of return commensurate with sound and prudent asset selection and to maintain a well-diversified portfolio in support of our products and capital. Our investment operations are regulated primarily by the state insurance departments where our insurance companies are domiciled. Investment activities, including setting investment policies and defining acceptable risk levels, are subject to oversight by our Board of Directors, which is assisted by our Finance Committee, ALM Committee and Enterprise Risk Management Committee.

Our insurance and annuity products are generally supported by investment-grade bonds and commercial mortgage loans. We also invest in equity options as a hedge for our indexed products. We purchase fixed maturity securities and designate them as either held-to-maturity or available-for-sale considering our estimated future cash flow needs. We also monitor the composition of our fixed maturity securities classified as held-to-maturity and available-for-sale and adjust the mix within the portfolio as investments mature or new investments are purchased.

We invest in commercial mortgage loans when the yield and credit risk compare favorably with fixed maturity securities. Individual residential mortgage loans including sub-prime or Alt-A mortgage loans have not been and are not expected to be part of our investment portfolio. We purchase real estate and equity investments based on a risk and reward analysis where we believe there are opportunities for enhanced returns.

The following summarizes the carrying values of our invested assets by asset class (in thousands, except percentages):

	March 31, 2021				December 31, 2020
Fixed maturity, bond held-to-maturity, at amortized cost	$	7,475,862	29.5	%	$	7,354,970	29.2	%
Fixed maturity, bond available-for-sale, at fair value	7,397,792		29.2		7,597,180		30.1
Equity securities, at fair value	2,164,146		8.5		2,070,766		8.2
Mortgage loans on real estate, net of allowance	5,141,094		20.3		5,242,531		20.8
Policy loans	369,525		1.5		373,014		1.5
Real estate and real estate partnerships, net of accumulated depreciation	938,189		3.7		960,572		3.8
Investment funds	523,225		2.1		477,135		1.9
Short-term investments	1,212,342		4.8		1,028,379		4.1
Other invested assets	94,316		0.4		94,415		0.4
Total investments	$	25,316,491	100.0	%	$	25,198,962	100.0	%

The increase in our total investments at March 31, 2021 compared to year-end 2020 was primarily the result of an increase in short-term investments.

Bonds—We allocate most of our fixed maturity securities to support our insurance business. At March 31, 2021, our fixed maturity securities had an estimated fair value of $15.3 billion, which was $0.8 billion, or 5.4%, above amortized cost. At December 31, 2020, our fixed maturity securities had an estimated fair value of $15.6 billion, which was $1.2 billion, or 8.0%, above amortized cost. The estimated fair value for securities due in one year or less was $0.9 billion and $1.1 billion as of March 31, 2021 and December 31, 2020, respectively. For additional information regarding total bonds by credit quality rating. Refer to Note 4, Investments in Securities, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Equity Securities—We invest in the equity securities of companies traded on national U.S. stock exchanges. See Note 4, Investments in Securities, of the Notes to the Unaudited Condensed Consolidated Financial Statements for the unrealized and realized gains and losses of equity securities.

Mortgage Loans—We invest in commercial mortgage loans that are diversified by property-type and geography. Generally, mortgage loans are secured by first liens on income-producing real estate with a loan-to-value ratio of up to 75%. Mortgage loans are generally carried at outstanding principal balances, adjusted for any unamortized premium or discount, deferred fees or expenses, and net of allowances. The weighted average coupon yield on the principal funded for mortgage loans was 4.7% and 4.8% at March 31, 2021 and December 31, 2020, respectively. For additional information regarding mortgage loans refer to Note 5, Mortgage Loans, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

57

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Policy Loans—For certain life insurance products, policyholders may borrow funds using the policy’s cash value as collateral. The maximum amount of the policy loan depends upon the policy’s surrender value. As of March 31, 2021, we had $369.5 million in policy loans with a loan to surrender value of 55%, and at December 31, 2020, we had $373.0 million in policy loans with a loan to surrender value of approximately 56%. Interest rates on policy loans primarily range from 3.0% to 12.0% per annum. Policy loans may be repaid at any time by the policyholder and have priority to any claims on the policy. If the policyholder fails to repay the policy loan, funds are withdrawn from the policy’s benefits.

Real Estate and Real Estate Partnerships—We invest in commercial real estate where positive cash flows and/or appreciation in value is expected. Real estate may be owned directly by our insurance companies or non-insurance affiliates or indirectly in joint ventures with real estate developers or investors we determine share our perspective regarding risk and return relationships. The carrying value of real estate is stated at cost, less accumulated depreciation and impairments, if any. Depreciation is provided over the estimated useful lives of the properties. The carrying value of our real estate partnerships is determined by using the equity method of accounting.

Investment Funds—Our investment funds are primarily comprised of senior secured and second lien private loans that are secured by assets, revenues and credit/balance sheet lending. We recognize our share of the fund’s earnings in net investment income on a one-quarter lag under the equity method of accounting. Cash distributions are received from the earnings and from liquidation of underlying investments.

Short-Term Investments—Short-term investments are primarily commercial paper rated A2 or P2 or better by Standard & Poor’s and Moody’s, respectively. The amount fluctuates depending on our view of the desirability of investing in the available long-term investment opportunities and our liquidity needs, including mortgage investment-funding commitments.

Other Invested Assets—Other invested assets are comprised primarily of pooled loans to mid-sized businesses which are initiated and administered by third-party managers. These loans are carried at fair value. Other invested assets also include equity-indexed options, carried at fair value, net of collateral provided by counterparties; such collateral is restricted to the Company’s use. Additionally, other invested assets include FHLB capital stock, mineral rights, mezzanine loans and lease financing arrangements, all of which are carried at cost.

Net Investment Income and Net Realized Gains (Losses)

Net investment income increased $139.0 million during the three months ended March 31, 2021 compared to 2020 primarily due to higher gains on options from improvement in the S&P 500 Index.

Interest income on mortgage loans is accrued on the principal amount of the loan at the contractual interest rate. Accretion of discounts is recorded using the effective yield method. Interest income, accretion of discounts and prepayment fees are reported in net investment income. Interest is not accrued on loans generally more than 90 days past due or when the collection of interest is not considered probable. Loans in foreclosure are placed on non-accrual status. Interest received on non-accrual status mortgage loans is included in net investment income in the period received.

Net realized investment gains increased $15.1 million during the three months ended March 31, 2021 compared to 2020 primarily attributable to an increase in sales of real estate partnership interests. Net realized investment gains (losses) are shown below (in thousands):

	Three months ended March 31,
		2021		2020
Bonds		$	7,699	$	5,478
Real estate		11,193		(1,307)
Other invested assets		347		(23)
Total		$	19,239	$	4,148

58

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Net Unrealized Gains and Losses

The unrealized gains and losses of our fixed maturity securities investment portfolio are shown below (in thousands):

	March 31, 2021		December 31, 2020		Change
Held-to-Maturity
Gains	$	474,188	$	639,648	$	(165,460)
Losses	(41,283)		(11,437)		(29,846)
Net gains	432,905		628,211		(195,306)
Available-for-Sale
Gains	406,386		548,996		(142,610)
Losses	(46,818)		(17,476)		(29,342)
Net gains	359,568		531,520		(171,952)
Total	$	792,473	$	1,159,731	$	(367,258)

The net change in the unrealized gains on fixed maturity securities between March 31, 2021 and December 31, 2020 is primarily attributable to the increase in benchmark ten-year interest rates, which were 1.8% and 0.9% respectively. The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position.

Liquidity

As a result of the holding company reorganization, ANICO became a wholly owned subsidiary of ANAT. ANAT's source of liquidity is solely derived from dividends received from ANICO.

We are monitoring our liquidity needs closely. In April 2020, the Company borrowed $500.0 million from the Federal Home Loan Bank of Dallas' COVID-19 Relief Advance Program. As of March 31, 2021, one advance totaling $250.0 million was outstanding and was repaid on its maturity date of April 28, 2021. The available liquidity immediately following the repayment was approximately $1.1 billion.

As a result of the impacts of COVID-19, state insurance departments across the country issued regulations that required us not to cancel policies for non-payment for varying amounts of time but generally for at least 90-day periods which began in March and early April 2020. The cancellation and grace periods have been lifted in most states.

The primary use of cash has been and is expected to continue to be payment of policyholder benefits and claims incurred. Current and expected patterns of claim frequency and severity may change from period to period but continue to be within historical norms. Management currently considers our current liquidity position to be sufficient to meet anticipated demands over the next twelve months. Our contractual obligations are not expected to have a significant negative impact to cash flows from operations.

Our defined benefit plans are frozen and currently adequately funded; however, low interest rates, increased longevity of participants, and rising Pension Benefit Guaranty Corporation (“PBGC”) premiums may cause us to increase our funding of the plans.

We are currently evaluating the renovation and modernization of our home office facilities. This could result in capital expenditures that could aggregate to approximately $100 million over a three year period beginning in 2021; however, current uncertainties relating to the COVID-19 pandemic could cause us to lower or delay anticipated spending on capital investment projects. There are no other unusually large capital expenditures expected in the next 12-24 months.

We have consistently paid dividends to our stockholders and expect to continue this tradition. There are no other known trends or uncertainties regarding product pricing, changes in product lines or rising costs that are expected to have a significant impact to cash flows from operations, although uncertainties relating to the COVID-19 pandemic could still significantly impact one or more of these items.

59

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Funds received as premium payments and deposits that are not used for liquidity requirements are generally invested in bonds and commercial mortgages. Funds are invested with the intent that income from the investments and proceeds from the maturities will meet our ongoing cash flow needs. We historically have not had to liquidate invested assets in order to cover cash flow needs. Our investment portfolio was significantly impacted by volatility associated with COVID-19 during 2020. We believe our portfolio of highly liquid bonds, available-for-sale investment securities, and equity securities, coupled with our ability to borrow funds through the FHLB, are sufficient to meet future liquidity needs as necessary.

As a result of the economic impact associated with COVID-19, American National originally granted 93 loan modifications during the second and third quarters of 2020 with a total balance of $1.6 billion in the form of forbearance of principal and interest payments for up to six months, extensions of maturity dates, and/or provisions for interest only payments. Modifications were primarily related to our loans to hotels, retail and parking operations. Due to the ongoing economic stress brought on by the pandemic, we made additional modifications in the first quarter of 2021 for 24 of these loans with a total balance of $633.6 million which extended the forbearance of principal and interest payments and interest only provisions but also included a requirement for the payment of at least 20% of the total interest due during the extended modification period. The modified loans had an aggregate deferred interest of $17.0 million as of March 31, 2021.

The Company holds collateral of $251.9 million at March 31, 2021 to offset exposure from its derivative counterparties. Cash flows associated with collateral received from counterparties change as the market value of the underlying derivative contract changes.

Our cash and cash equivalents and short-term investment position increased from $1.4 billion at December 31, 2020 to $1.7 billion at March 31, 2021. The increase in cash is a result of reduced investment in long-term securities due to market uncertainty.

A downgrade or a potential downgrade in our financial strength ratings could result in a loss of business and could adversely affect our cash flows from operations.

Further information regarding additional sources or uses of cash is described in Note 16, Commitments and Contingencies, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Capital Resources

Our capital resources are summarized below (in thousands):

	March 31, 2021		December 31, 2020
American National stockholders’ equity, excluding accumulated other comprehensive income (“AOCI”), net of tax	$	6,384,244	$	6,236,100
Accumulated other comprehensive income	119,959		222,170
Total American National stockholders’ equity	$	6,504,203	$	6,458,270

We have notes payable relating to borrowings by real estate joint ventures that we consolidate into our financial statements that are not part of our capital resources. The lenders for the notes payable generally have no recourse against us in the event of default by the joint ventures. Therefore, the liability we have for these notes payable is limited to our investment in the respective ventures, which totaled $2.9 million and $3.0 million at March 31, 2021 and December 31, 2020, respectively.

60

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

The changes in our capital resources are summarized below (in thousands):

	March 31, 2021						December 31, 2020
	Capital and Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total		Capital and Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Net income attributable to American National	$	170,173	$	—	$	170,173	$	467,505	$	—	$	467,505
Dividends to shareholders	(22,048)		—		(22,048)		(88,190)		—		(88,190)
Change in net unrealized gains on debt securities	—		(106,264)		(106,264)		—		134,315		134,315
Foreign currency transaction and translation adjustment	—		244		244		—		235		235
Defined benefit pension plan adjustment	—		3,809		3,809		—		(11,898)		(11,898)
Cumulative effect of accounting change (1)	—		—		—		(33,500)		—		(33,500)
Other	—		—		—		54		—		54
Total	$	148,125	$	(102,211)	$	45,914	$	345,869	$	122,652	$	468,521

(1) Result of adoption of ASU-2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

Statutory Capital and Surplus and Risk-based Capital

Statutory capital and surplus is the capital of our insurance companies reported in accordance with accounting practices prescribed or permitted by the applicable state insurance departments. RBC is calculated using formulas applied to certain financial balances and activities that consider, among other things, investment risks related to the type and quality of investments, insurance risks associated with products and liabilities, interest rate risks and general business risks. Insurance companies that do not maintain capital and surplus at a level of at least 200% of the authorized control level RBC are required to take certain actions. At March 31, 2021 and December 31, 2020, ANICO’s statutory capital and surplus was $3.7 billion and $3.6 billion, respectively. ANICO and each of our other insurance subsidiaries had statutory capital and surplus at March 31, 2021 and December 31, 2020 above 200% of the authorized control level, except for ANPAC Louisiana Insurance Company ("ANPLA").

At March 31, 2021 and December 31, 2020, ANPLA's statutory capital and surplus was $63.5 million and $68.5 million, which resulted in an RBC level of 179% and 194% of the authorized control level, respectively. This decrease in RBC of ANPLA is primarily driven by an increase in homeowners catastrophe losses during 2021 and 2020, respectively. We are actively managing our homeowners exposure of ANPLA, will continue to monitor the surplus levels and will be addressing rate adequacy through future planned rate and underwriting actions.

The achievement of long-term growth will require growth in our insurance subsidiaries’ statutory capital and surplus. Our subsidiaries may obtain additional statutory capital through various sources, such as retained statutory earnings or equity contributions from us.

Contractual Obligations

Our future cash payments associated with claims and claims adjustment expenses, life, annuity and disability obligations, contractual obligations pursuant to operating leases for office space and equipment, and notes payable have not materially changed since December 31, 2020. We expect to have the capacity to pay our obligations as they come due.

At March 31, 2021, the Company had a $250 million advance outstanding with Federal Home Loan Bank. On April 28, 2021, the advance was paid in full. It is expected the Company will have sufficient cash flow to meet its current lending commitments. For additional details see Note 16, Commitments and Contingencies, and Note 18, Subsequent Events, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Off-Balance Sheet Arrangements

We have off-balance sheet arrangements relating to third-party marketing operation bank loans as discussed in Note 16, Commitments and Contingencies, of the Notes to the Unaudited Condensed Consolidated Financial Statements. We could be exposed to a liability for these loans, which are supported by the cash value of the underlying insurance contracts. The cash value of the life insurance policies is designed to always equal or exceed the balance of the loans. Accordingly, management does not foresee any material loss related to these arrangements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Related-Party Transactions

We have various agency, consulting and service arrangements with individuals and entities considered to be related parties. Each of these arrangements has been reviewed and approved by our Audit Committee, which retains final decision-making authority for these transactions. The amounts involved, both individually and in the aggregate, with these arrangements are not material to any segment or to our overall operations. For additional details regarding significant related party transactions, see Note 17, Related Party Transactions, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk has not changed materially from those disclosed in our 2020 Annual Report on form 10-K filed with the SEC on March 4, 2021, although the recent economic disruptions caused by the COVID-19 pandemic has added greater uncertainty to the credit risk and equity risk that we face.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief

Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2021. Based upon that evaluation and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2021, the design and operation of the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

Management has monitored the internal controls over financial reporting, including any material changes to the internal control over financial reporting. There were no changes in the Company’s internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information required for Item 1 is incorporated by reference to the discussion under the heading “Litigation” in Note 16, Commitments and Contingencies, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

ITEM 1A. RISK FACTORS

There have been no material changes to the "Risk Factors" discussion in Item 1A of our 2020 Form 10-K filed with the SEC on March 4, 2021.

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ITEM 6. EXHIBITS

Exhibit Number	Description
2.1	Agreement and Plan of Merger, dated February 11, 2020, among American National Insurance Company, a Texas insurance company ("ANICO"), American National Group, Inc., a Delaware corporation ("ANAT"), and AN MergerCo., Inc., a Texas corporation (incorporated by reference to Annex I to the Proxy Statement/Prospectus filed on March 25, 2020).
3.1	Amended and Restated Certificate of Incorporation of ANAT (incorporated by reference to Annex II of the Proxy Statement/Prospectus filed with the SEC on March 25, 2020).
3.2	Restated Articles of Incorporation, as amended, of ANICO (incorporated by reference to Exhibit No. 3.1 to the registrant's Registration Statement on Form 10-12B filed April 10, 2009).
3.3	Amended and Restated Bylaws of ANAT (incorporated by reference to Annex III of the Proxy Statement/Prospectus filed with the SEC on March 25, 2020)
3.4	Amended and Restated Bylaws of ANICO (incorporated by reference to Exhibit No. 3.2 to the registrant's Current Report on Form 8-K filed February 23, 2018).
10.1*	Form of Restricted Stock Unit Agreement for Directors (filed herewith).
31.1	Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification of the principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
104	Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

*Management contract or compensatory plan or arrangement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

By:	/s/ James E. Pozzi
Name:	James E. Pozzi
Title:	President and Chief Executive Officer
By:	/s/ Brody J. Merrill
Name:	Brody J. Merrill
Title:	Senior Vice President, Chief Financial Officer and Treasurer

Date: May 6, 2021

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