Ohio | 6311 | 13-1935920 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| Non-accelerated filer | ☒ | Smaller reporting company | ☐ | |||
| Emerging growth company | ☐ | |||||
Title of each class of securities to be registered | Amount to be registered | Proposed maximum offering price per unit (1) | Proposed maximum aggregate offering price | Amount of registration fee (2) | ||||
Individual Index-linked Modified Single Premium Deferred Annuity Contract and interests therein | $1, 435,286,952 | N/A | $999,000,000 | $92,607.30 | ||||
| Note 1 | Interests are sold on a dollar for dollar basis and not on the basis of a price per share or unit. |
| Note 2 | Pursuant to Rule 415(a)(6) under the Securities Act, this Registration Statement carries forward approximately $ 435,286,952 of unsold securities that were previously registered on the Registrant’s Registration Statement on Form S-1 (FileNo. 333-252949), which was initially filed by the Registrant on February 10, 2021. Because a filing fee of $47,490 was previously paid for the securities being carried forward to this Registration Statement, no filing fee is currently due in connection with those securities. The Registrant is also registering an additional $999,000,000 in securities with this filing. The filing fee of $92,607.30 due in connection with the newly-registered securities is paid herewith. |
| • | The Cap for a Term is the largest rise in the Index over the Term taken into account to determine the Strategy value at the end of the Term. We can change the Cap for each new Term of an Indexed Strategy. It will never be less than 1%. At least 10 days before the start of any Term, we will post the Caps for that Term on our website (www.gaig.com/RILArates). |
| • | If the rise in the Index is greater than or equal to the Cap, the increase applied to the remaining Investment Base for the Term will be limited to the Cap and will be less than the rise in the Index. |
| • | If the rise in the Index is less than the Cap, the increase for the Term will be less than the Cap and will equal the rise in the Index applied to the remaining Investment Base. |
| • | In both cases, the increase for a Term will always be less than the Cap or the rise in the Index because the Daily Charge is subtracted from the Investment Base before applying the increase for the Index performance. |
| • | The Upside Participation Rate for a Term is the portion of any rise in the Index over the Term that is taken into account to determine the Strategy value at the end of the Term. We can change the Upside Participation Rate for each new Term of an Indexed Strategy. It never will be less than 5%. At least 10 days before the start of any Term, we will post the Upside Participation Rates for that Term on our website (www.gaig.com/RILArates). The increase for the Term will be less than the rise in the Index unless the Participation Rate for the Term exceeds 100%. The increase for a Term will be less than the Upside Participation Rate multiplied by the rise in the Index because the Daily Charge is subtracted from the Investment Base before applying the increase for Index performance. |
| • | The Downside Participation Rate is the portion of any fall in the Index over the Term taken into account to determine the Strategy value at the end of the Term. For each Term of each Indexed Strategy that we currently offer with this Contract, the Downside Participation Rate is 50%. In addition to the Daily Charge, the decrease for the Term will be only half of the fall in the Index. |
• | The Contract is not insured by the FDIC (Federal Deposit Insurance Corporation) or the NCUSIF (National Credit Union Share Insurance Fund). |
• | Although the Contract may be sold through relationships with banks or other financial institutions, the Contract is not a deposit or obligation of, or guaranteed by, such institutions or any federal regulatory agency. |
• | The Contract is a security. It involves investment risk and may lose value. There is a risk of loss of principal under the Contract and that loss can become greater due to Early Withdrawal Charges. |
• | All guarantees under the Contract are the obligations of Great American Life and are subject to the credit worthiness and claims-paying ability of Great American Life. |
| 6 | ||||
| 6 | ||||
| 9 | ||||
| 10 | ||||
| 15 | ||||
| 21 | ||||
| 25 | ||||
| 28 | ||||
| 29 | ||||
| 30 | ||||
| 33 | ||||
| 34 | ||||
| 34 | ||||
| 36 | ||||
| 37 | ||||
| 37 | ||||
| 37 | ||||
| 39 | ||||
| 40 | ||||
| 43 | ||||
| 45 | ||||
| 47 | ||||
| 48 | ||||
| 48 | ||||
| 48 | ||||
| 49 | ||||
| 50 | ||||
| 50 | ||||
| 50 | ||||
| 51 | ||||
| 55 | ||||
| 56 | ||||
| 57 | ||||
| 57 | ||||
| 58 | ||||
| 58 | ||||
| 58 | ||||
| 60 | ||||
| 70 | ||||
| 75 |
| • | complete and satisfactory to us; |
| • | sent to us on our form or in a manner satisfactory to us, which may, at our discretion, be by telephone or electronic means; and |
| • | received at our administrative office. |
| • | For strategies with a Cap, the Net Option Price as of a Market Close is equal to: (1) the ATM Call Option Price at that Market Close; minus (2) the OTM Call Option Price at that Market Close; and minus (3) the ATM Put Option Price at that Market Close multiplied by the Downside Participation Rate. |
| • | For strategies with an Upside Participation Rate, the Net Option Price as of a Market Close is equal to: (1) the ATM Call Option Price at a Market Close multiplied by the Upside Participation Rate; minus (2) the ATM Put Option Price at that Market Close multiplied by the Downside Participation Rate. |
| • | The Annuity Payout Benefit |
| • | The Cash Benefit |
| • | The Death Benefit |
| • | Once the last Market Day of the Term has been reached, the value of an Indexed Strategy is equal to the remaining Investment Base increased for any rise in the applicable Index over that Term or decreased for any fall in the applicable Index over that Term. Any increase for the Term is limited by the Cap or Upside Participation Rate for the Term. Any decrease for the Term is limited by the Downside Participation Rate. |
| • | On each day before the last Market Day of the Term, the value of an Indexed Strategy is equal to the remaining Investment Base increased or decreased by the Daily Value Percentage as of the most recent Market Close. |
| • | If the Strategy value immediately before the withdrawal is greater than the Investment Base, then the proportional reduction in the Investment Base will be less than the withdrawal and the related Early Withdrawal Charge. |
| • | If the Strategy value immediately before the withdrawal is less than the Investment Base, then the proportional reduction in the Investment Base will be greater than the withdrawal and the related Early Withdrawal Charge. |
On Day 73 of the Term | On Day 219 of the Term | |||
Investment Base Calculation | ||||
Initial Investment Base | $100,000 | $100,000 | ||
Accumulated Daily Charges | $150 = ($100,000 - ($100,000 x (1 - 0.0000206251) ^ 73) | $451 = ($100,000 - ($100,000 x (1 - 0.0000206251) ^ 219) | ||
Investment Base After Daily Charges | $99,850 = ($100,000 - $150) | $99,549 = ($100,000 - $451) |
| (a) | When the Index rises over a Term, the resulting Strategy Value increase will be smaller than the rise in the Index applied to the initial Investment Base. This is because the Daily Charge reduces the Investment Base before the Index rise is taken into account. (Note: this would not apply if the Upside Participation Rate were to exceed 100% to the extent needed to offset the Daily Charge). |
| (b) | When the Index falls over a Term, the resulting Strategy Value decrease will be larger than 50% of the Index fall applied to the initial Investment Base. This is because the Daily Charge reduces the Investment Base before the Index fall is taken into account. |
| • | The Net Option Price is the calculated price of hypothetical options that represent the projected change in the applicable Index over the full Term. The calculated price takes into account the applicable Cap or Upside Participation Rate and the Downside Participation Rate. |
| • | For strategies with a Cap, the Net Option Price as of a Market Close is a percentage equal to: (1) the ATM Call Option Price at that Market Close; minus (2) the OTM Call Option Price at that Market Close; and minus (3) the ATM Put Option Price at that Market Close multiplied by the Downside Participation Rate. |
| • | For strategies with an Upside Participation Rate, the Net Option Price as of a Market Close is a percentage equal to: (1) the ATM Call Option Price at a Market Close multiplied by the Upside Participation Rate; minus (2) the ATM Put Option Price at that Market Close multiplied by the Downside Participation Rate. |
| • | The Amortized Option Cost is the calculated price of those options at the start of the Term amortized over the Term. |
| • | The Amortized Option Cost is a percentage equal to: (1) the initial Net Option Price for an Indexed Strategy for the Term; multiplied by (2) the number of days remaining until the final Market Close of that Term divided by 365 days if that Term is one year long or by 730 days if that Term is two years long. |
| • | The Trading Cost is the estimated cost of selling those options. It is a percentage set by us by the last Market Close on or before that day. |
On Day 73 of the Term | On Day 219 of the Term | |||
Investment Base Calculation | ||||
Initial Investment Base | $100,000 | $100,000 | ||
Accumulated Daily Charges | $150 | $451 | ||
Investment Base on Day 73 | $99,850 ($100,000 - $150) | $99,549 ($100,000 - $451) | ||
Assumptions | ||||
Net Option Price | 1.61% | 10.00% | ||
Amortized Option Cost | 2.11% | 0.70% | ||
Trading Cost | 0.20% | 0.20% | ||
Calculations | ||||
Daily Value Percentage | -0.70% (1.61% - 2.11% - 0.20%) | 9.10% (10.00% - 0.70% - 0.20%) | ||
Dollar amount of increase/decrease | $699 decrease ($99,850 x -0.70%) | $9,059 increase ($99,549 x 9.10%) | ||
Strategy value | $99,151 ($99,850 - $699) | $108,608 ($99,549 + $9,059) |
| • | If you reallocate, then we will apply the ending values of the Indexed Strategies to a new Term of the Indexed Strategies that you select. |
| • | If you do not reallocate, then we will apply the ending value of each Indexed Strategy to a new Term of that same Strategy. |
Contract Year | 1 | 2 | 3 | 4 | 5 | 6 | 7+ | |||||||||||||||||||||
Early Withdrawal Charge Rate | 9 | % | 8 | % | 7 | % | 6 | % | 5 | % | 4 | % | 0 | % | ||||||||||||||
| • | For the first Contract Year, the Free Withdrawal Allowance is an amount equal to 10% of the total Purchase Payments received by us. |
| • | For each subsequent Contract Year, the Free Withdrawal Allowance is equal to 10% of the Account Value as of the most recent Contract Anniversary. |
| • | Fixed Period Payout |
| • | Life Payout |
| • | Life Payout with Payments for at Least a Fixed Period |
| • | Joint and One-Half Survivor Payout |
| • | If you take a withdrawal from an Indexed Strategy before the end of a Term, we will immediately reduce the Investment Base for that Indexed Strategy. |
| • | The reduction will be proportional to the reduction in the Strategy Value, which means that the proportional reduction in the Investment Base could be larger than the dollar amount of the withdrawal. |
| • | Reductions to the Investment Base will have a negative effect on any increases in the Indexed Strategy value for the remainder of that Term, but will reduce any decreases in the Indexed Strategy value for the remainder of that Term. |
| • | Once the Investment Base for an Indexed Strategy is reduced due to a withdrawal before the end of a Term, it will not increase at any time during the remainder of that Term. |
| • | Financial losses including those resulting from the following events: |
| • | Adverse developments in financial markets and deterioration in global economic conditions |
| • | Unfavorable interest rate environments |
| • | Losses on our investment portfolio |
| • | Loss of market share due to intense competition |
| • | Ineffectiveness of risk management policies |
| • | Changes in applicable law and regulations |
| • | Inability to obtain or collect on reinsurance |
| • | A downgrade or potential downgrade in our financial strength ratings |
| • | Variations from actual experience and management’s estimates and assumptions that could result in inadequate reserves |
| • | Significant variations in the amount of capital we must hold to meet statutory capital requirements |
| • | Legal actions and regulatory proceedings |
| • | Difficulties with technology or data security |
| • | Failure to protect confidentiality of customer information |
| • | Failure to maintain effective and efficient information systems |
| • | Occurrence of catastrophic events, terrorism or military actions |
| • | An Indexed Strategy with Cap provides you with the opportunity to participate in any rise in the Index up to the Cap (after Daily Charges have been deducted from the Investment Base), but you will not participate in any rise in the Index in excess of the Cap. |
| • | An Indexed Strategy with Participation Rate provides you with the opportunity to share in any rise in the Index without a Cap, but your share of any rise is always expected to be less than 100%. |
| • | In any Term where the rise in the Index is less than the Cap, the Cap Strategy will always perform better than the corresponding Participation Rate Strategy. |
| • | In any Term where the rise in the Index is more than the Cap, but less than the Cap divided by the Upside Participation Rate, the Cap Strategy will always perform better than the corresponding Participation Rate Strategy. |
| • | In any Term where the rise in the Index is more than the Cap divided by the Upside Participation Rate, the Participation Rate Strategy will always perform better than the Cap Strategy. |
| • | In any Term where the Index falls, the Cap Strategy and Participation Rate Strategy will produce the same results at the end of the Term because both have a 50% Downside Participation Rate. However, before the end of the Term, due to different option pricing, they may have different Daily Value Percentages and returns. |
Index rise over Term | Return at end of Term | |||||
12% Cap | 75% Upside Participation Rate | Explanation | ||||
| 4% | 4% | 3% | The Cap Strategy has a better return than the Participation Rate Strategy because the 4% rise in the Index is less than the 12% Cap. | |||
| 14% | 12% | 10.5% | The Cap Strategy has a better return than the Participation Rate Strategy because the 14% rise in the Index is more than the 12% Cap, but less than 16% (the 12% Cap divided by the 75% Upside Participation Rate). | |||
| 16% | 12% | 12% | Both Strategies have the same positive return because the rise in the Index is equal to 16% (the 12% Cap divided by the 75% Upside Participation Rate). | |||
| 20% | 12% | 15% | The Participation Rate Strategy has a better return than the Cap Strategy because the 20% rise in the Index is more than 16% (the 12% Cap divided by the 75%Upside Participation Rate) | |||
| -30% | -15% | -15% | Both Strategies have the same negative return. | |||
| • | You make your initial Purchase Payment on March 10 and another Purchase Payment on March 17. You allocate both payments to the same Indexed Strategy and both payments are applied on March 20. Each Term of that Indexed Strategy will start and end on March 20. |
| • | You make your initial Purchase Payment on May 2 and another Purchase Payment on June 14. You allocate both payments to the same Indexed Strategy. Your initial Purchase Payment is applied on May 6 and the other Purchase Payment is applied on June 20. That Indexed Strategy will have Terms that start and end on May 6 and other Terms that start and end on June 20. |
| • | If the Strategy value immediately before the withdrawal is greater than the Investment Base, then the reduction in the Investment Base will be less than the withdrawal and the related Early Withdrawal Charge. |
| • | If the Strategy value immediately before the withdrawal is less than the Investment Base, then the reduction in the Investment Base will be more than the withdrawal and the related Early Withdrawal Charge. |
| • | the Investment Base at the end of the Term; plus |
| • | any increase for a rise in the Index over the Term; or minus |
| • | any decrease for a fall in the Index over the Term. |
At Final Market Close of Term | ||
Rise in Index | +20% | |
Increase as a Percentage | +10% (10% Cap, or 50% Par Rate x 20%) | |
Dollar Amount of Increase | +$500 ($5,000 x 10%) | |
Strategy value before Withdrawal | $5,500 ($5,000 + $500) | |
Withdrawal Amount | $1,000 | |
Strategy Value at Term End | $4,500 ($5,500 - $1,000) |
At Final Market Close of Term | ||
Fall in Index | -20% | |
Decrease as a Percentage | -10% (50% x -20%) | |
Dollar Amount of Decrease | -$500 ($5,000 x -10%) | |
Strategy value before Withdrawal | $4,500 ($5,000 - $500) | |
Withdrawal Amount | $1,000 | |
Strategy Value at Term End | $3,500 ($4,500 - $1,000) |
| • | the Investment Base on that day; plus |
| • | any increase for a positive Daily Value Percentage; or minus |
| • | any decrease for a negative Daily Value Percentage. |
| • | The increase for the Daily Value Percentage is equal to $250 ($5,000 x 5%). |
| • | The Strategy value on the withdrawal date is $5,250 ($5,000 + $250). |
| • | The Strategy value after the withdrawal is $4,250 ($5,250 - $1,000). |
| • | The withdrawal as a percentage of the Strategy value is 19.05% ($1,000 / $5,250). |
| • | The reduction in the Investment Base is $952 ($5,000 x 19.05%). |
| • | The Investment Base after the withdrawal is $4,048 ($5,000 - $952). |
| • | Because the Strategy Value on the withdrawal date was more than the Investment Base, the reduction in the Investment Base is only $952, which is less than the $1000 withdrawal. |
| • | The increase for the Daily Value Percentage is equal to $250 ($5,000 x 5%). |
| • | The Strategy value on the withdrawal date is $5,250 ($5,000 + $250). |
| • | The total amount withdrawn is $1,053 ($1,000 / (1 – 0.05)). |
| • | The Strategy value after the withdrawal is $4,197 ($5,250 - $1,053). |
| • | The withdrawal as a percentage of the Strategy value is 20.05% ($1,053 / $5,250). |
| • | The reduction in the Investment Base is $1,003 ($5,000 x 20.05%). |
| • | The Investment Base after the withdrawal is $3,997 ($5,000 - $1,003). |
| • | Because the Strategy Value on the withdrawal date was more than the Investment Base, the reduction in the Investment Base was $1,003, which is less than the $1,053 withdrawal. |
| • | The reduction for the Daily Value Percentage is equal to $500 ($5,000 x -10%). |
| • | The Strategy value on the withdrawal date is $4,500 ($5,000 - $500). |
| • | The Strategy value after the withdrawal is $3,500 ($4,500 - $1,000). |
| • | The withdrawal as a percentage of the Strategy value is 22.22% ($1,000 / $4,500). |
| • | The reduction in the Investment Base is $1,111 ($5,000 x 22.22%). |
| • | The Investment Base after the withdrawal is $3,889 ($5,000 - $1,111). |
| • | Because the Strategy Value on the withdrawal date was less than the Investment Base, the reduction in the Investment Base was $1,111, which is greater than the $1,000 withdrawal. |
| • | The reduction for the Daily Value Percentage is equal to $500 ($5,000 x 10%). |
| • | The Strategy value on the withdrawal date is $4,500 ($5,000 - $500). |
| • | The Strategy value after the withdrawal is $3,447 ($4,500 - $1,053). |
| • | The total amount withdrawn is $1,053 ($1,000 / (1 – 0.05)). |
| • | The withdrawal as a percentage of the Strategy value is 23.39% ($1,053 / $4,500). |
| • | The reduction in the Investment Base is $1,170 ($5,000 x 23.39%). |
| • | The Investment Base after the withdrawal is $3,830 ($5,000 - $1,170). |
| • | Because the Strategy Value on the withdrawal date was less than the Investment Base, the reduction in the Investment Base was $1,170, which is greater than the $1,053 withdrawal. |
Rise or Fall of Index on Replacement Date for Old Index | ||
Old Index at Term start | 1000 | |
Old Index on replacement date | 1050 | |
Rise or fall of old Index on replacement date | (1050 - 1000) / 1,000 = 5% | |
Modified Start of Term Value for New Index | ||
Rise in old Index on replacement date | 5% | |
New Index on replacement date | 1785 | |
Modified start of Term value for new Index | 1785 / (100% + 5%) = 1700 | |
Indexed Strategy Value at Term End | ||
Investment Base at Term start | $50,000 | |
Accumulated Daily Charges | $375 | |
Investment Base After Daily Charges | $49,625 | |
Modified start of Term value for new Index | 1700 | |
Value of new Index at Term end | 1853 | |
Rise in new Index | (1853 - 1,700) / 1700) = 9% | |
Cap | 8% | |
Rise in new Index limited by Cap | 8% | |
Increase as a percentage | 8% x 100% = 8% | |
Dollar amount of increase | $49,625 x 8% = $3,970 | |
Strategy value at Term end | $49,625 + $4,000 = $53,625 | |
• | The Cap will vary among Indexed Strategies. |
• | The Cap for a given Indexed Strategy will vary from Term to Term. |
• | We guarantee that the Cap for a Term of an Indexed Strategy will never be less than 1%. |
• | For each Term, your return on an Indexed Strategy with a Cap will be less than any rise in the Index over that Term. |
• | For each Term, your return on an Indexed Strategy with a Cap will be less than the Cap for that Term. |
• | Your return on an Indexed Strategy with a Cap could be negative even when the Index rises. This will occur when the amount of increase attributable to an Index rise is smaller than the Daily Charge. |
• | The Upside Participation Rate will vary among Indexed Strategies. |
• | The Upside Participation Rare for a given Indexed Strategy will vary from Term to Term. |
• | We guarantee that the Upside Participation Rate for a Term of an Indexed Strategy will never be less than 5%. |
• | For each Term, your return on an Indexed Strategy with an Upside Participation Rate of less than 100% will be less than any rise in the Index over that Term. In addition, any increase for the Term will be reduced by the Daily Charge. |
• | Your return on an Indexed Strategy with an Upside Participation Rate could be negative even when the Index rises. This will occur when the amount of increase attributable to an Index rise is smaller than the Daily Charge. |
| • | If the Index at the final Market Close of the Term is 1065, then the Index has risen by 6.5% ((1065 - 1000) / 1000). |
| • | If the Index at the final Market Close of the Term is 925, then the Index has fallen by 7.5% ((925 - 1000) / 1000). |
At Final Market Close of Term | At Final Market Close of Term | |||
Rise or fall in Index | +16% | –16% | ||
Increase or decrease percentage | +14% (16% > 14% Cap) | –8% (50% of –16%) | ||
Dollar amount of increase or decrease | +14,000 ($100,000 x 14%) | –8,000 ($100,000 x –8%) | ||
Strategy value at end of Term | $114,000 ($100,000 + $14,000) | $92,000 ($100,000 - $8,000) |
At Final Market Close of Term | At Final Market Close of Term | |||
Rise or fall in Index | +16% | –16% | ||
Increase or decrease percentage | +12% (75% of 16%) | –8% (50% of –16%) | ||
Dollar amount of increase or decrease | +12,000 ($100,000 x 12%) | –8,000 ($100,000 x –8%) | ||
Strategy value at end of Term | $112,000 ($100,000 + $12,000) | $92,000 ($100,000 - $8,000) |
| • | ATM Call Option Price, which represents the possible rise in the Index |
| • | OTM Call Option Price, which is subtracted in order to limit any rise in the Index by the Cap |
| • | ATM Put Option Price, which represents the possible fall in the Index and is multiplied by the Downside Participation Rate in order to reflect your share in any such fall. |
| • | ATM Call Option Price, which represents the possible rise in the Index and is multiplied by the Upside Participation Rate in order to reflect your share in any such rise |
| • | ATM Put Option Price, which represents the possible fall in the Index and is multiplied by the Downside Participation Rate in order to reflect your share in any such fall. |
Option Price Assumptions | Price at Start of Term | Price at Current Market Close | ||||||||||
ATM Call Option Price | 6.00 | % | 7.47 | % | ||||||||
OTM Call Option Price | 1.15 | % | 1.81 | % | ||||||||
ATM Put Option Price | 5.40 | % | 3.36 | % | ||||||||
Strategy Assumptions | ||||||||||||
Investment Base for each Strategy (after taking Daily Charges into account) | $ | 100,000 | ||||||||||
Cap Strategy: Cap for one-year Term | 11 | % | ||||||||||
Participation Rate Strategy: Upside Participation Rate for one-year Term | 75 | % | ||||||||||
Downside Participation Rate | 50 | % | ||||||||||
Days remaining to last Market Day of one-year Term | 275 | |||||||||||
Trading Cost Assumption | 0.15 | % | ||||||||||
Current ATM Call Option Price – Current OTM Call Option Price | 5.66 | % | (7.47% – 1.81 | %) | ||||
Current ATM Put Option Price x Downside Participation Rate | – 1.68 | % | (50% of 3.36 | %) | ||||
Net Option Price | = 3.98 | % | ||||||
Initial ATM Call Option Price – Initial OTM Call Option Price | 4.85 | % | (6.00% – 1.15 | %) | ||||
Initial ATM Put Option Price x Downside Participation Rate | – 2.70 | % | (50% of 5.40 | %) | ||||
Net Option Cost | = 2.15 | % | ||||||
Amortization Factor for days remaining to final Market Day of Term | x 75.34 | % | (275 / 365 | ) | ||||
Amortized Option Cost | = 1.62 | % | ||||||
Net Option Price | 3.98 | % | ||||||
Amortized Option Cost | – 1.62 | % | ||||||
Assumed Trading Cost | – 0.15 | % | ||||||
Daily Value Percentage | = 2.21 | % | ||||||
Dollar amount of increase | $ | 2,210 | ($100,000 x 2.21 | %) | ||||
Value of Cap Strategy | $ | 102,210 | ($ | 100,000 + $2,210 | ) |
Current ATM Call Option Price x Upside Participation Rate | 5.60 | % | (75% of 7.47 | %) | ||||
Current ATM Put Option Price x Downside Participation Rate | – 1.68 | % | (50% of 3.36 | %) | ||||
Net Option Price | = 3.92 | % | ||||||
Initial ATM Call Option Price x Upside Participation Rate | 4.50 | % | (75% of 6.00 | %) | ||||
Initial ATM Put Option Price x Downside Participation Rate | – 2.70 | % | (50% of 5.40 | %) | ||||
Net Option Cost | = 1.80 | % | ||||||
Amortization Factor for days remaining to final Market Day of Term | x 75.34 | % | (275 / 365 | ) | ||||
Amortized Option Cost | 1.36 | % | ||||||
Net Option Price | 3.92 | % | ||||||
Amortized Option Cost | –1.36 | % | ||||||
Assumed Trading Cost | – 0.15 | % | ||||||
Daily Value Percentage | = 2.41 | % | ||||||
Increase as a dollar amount | $ | 2,410 | ($100,000 x 2.41 | %) | ||||
Value of Participation Rate Strategy | $ | 102,410 | ($ | 100,000 + $2,410 | ) |
| • | Purchase Payments received by us plus interest earned daily; minus |
| • | the premium tax or other tax that may apply to the Purchase Payments; and minus |
| • | each withdrawal and related Early Withdrawal Charge taken from the Purchase Payment Account since the last Strategy Application Date. |
| • | first from the Purchase Payment Account; and |
| • | then proportionally from Indexed Strategies having the shortest Term. |
| • | Automatic withdrawals are similar to starting Annuity Payout Benefit payments, but will result in different taxation of payments and potentially a different amount of total payments over the life of your Contract. |
| • | Automatic withdrawals during a Term of an Indexed Strategy will systematically reduce the Investment Base, which will reduce any subsequent increase in the Strategy value due to a positive Daily Value Percentage during that Term or a rise in the applicable Index at the end of that Term. Such reductions could be significant. |
| • | Automatic withdrawals will reduce the amount available under the Free Withdrawal Allowance described below. |
| • | Unless a waiver applies, an Early Withdrawal Charge may apply to an automatic withdrawal during the Early Withdrawal Charge period. |
| • | The value of an Indexed Strategy on an automatic withdrawal date will reflect the Daily Value Percentage on that date. |
| • | If you take a withdrawal from your Contract, the amount subject to the charge is the amount you withdraw, which includes any amount needed to pay the Early Withdrawal Charge. |
| • | If you Surrender your Contract, the amount subject to the charge is your Account Value. |
| • | The amount subject to the charge will not include the Free Withdrawal Allowance or the amount, if any, that qualifies for a waiver as described below. |
Contract Year | 1 | 2 | 3 | 4 | 5 | 6 | 7+ | |||||||||||||||||||||
Early Withdrawal Charge Rate | 9 | % | 8 | % | 7 | % | 6 | % | 5 | % | 4 | % | 0 | % | ||||||||||||||
| • | your Contract is modified by the Extended Care Waiver Rider; |
| • | you are confined in a long-term care facility or hospital and the confinement is prescribed by a physician and is medically necessary; |
| • | the first day of the confinement is at least one year after the Contract Effective Date; and |
| • | the confinement has continued for a period of at least 90 consecutive days. |
| • | your Contract is modified by the Waiver of Early Withdrawal Charges upon Terminal Illness Rider; |
| • | you are diagnosed with a terminal illness by a physician and, as a result of the terminal illness, you have a life expectancy of less than 12 months from the date of diagnosis; and |
| • | the diagnosis is rendered by a physician more than one year after the Contract Effective Date. |
| • | The earliest Annuity Payout Initiation you may select is the first Contract Anniversary. |
| • | Unless we agree to a later date, the latest Annuity Payout Initiation Date you may select is the Contract Anniversary following your 95th birthday or the 95th birthday, of a joint owner, if earlier. If the Owner is not a human being such as a trust or a corporation, then the Annuity Payout Initiation Date may not be later than the Contract Anniversary following the 95th birthday of the eldest Annuitant, unless we agree to a later date. |
| • | the surviving Owner(s); or if none |
| • | then to the surviving contingent payee(s) designated by the surviving Owner(s); or if none; |
| • | the estate of the last payee who received payments. |
| • | If the Death Benefit is to be paid as a lump sum, then it will be paid as soon as practicable after receipt of proof of death and a Request in Good Order for a lump sum payment. |
| • | If the Death Benefit is to be paid under a Payout Option, then we will apply the Death Benefit value to a Payout Option as soon as practicable after receipt of proof of death and a Request in Good Order. That application date will be the first day of the first payment interval for which a payment is to be made. Death Benefit payments under a Payout Option are made at the end of each payment interval. This means that, for annual payments, the first payment will be made one year after that application date. |
| • | If the Death Benefit is paid in a lump sum, then it is equal to the Death Benefit value, increased by any additional post-death interest as required by law. |
| • | If the Death Benefit will be paid as a series of periodic payments under a Payout Option, then the amount of each payment under the Death Benefit is determined on the date that the Death Benefit value is applied to the Payout Option. The amount or each payment will be based on the Death Benefit value (increased by any additional post-death interest as required by law to the date it is applied to the Payout Option), the Payout Option that applies, and the payment interval. |
| • | the Account Value determined as of the date that the Death Benefit value is determined; or |
| • | the Return of Premium Guarantee. |
Before | After | Explanation | ||||||||
Account Value | $ | 100,000 | $ | 92,000 | Your withdrawal reduces your Account Value by $8,000 (which is an 8% reduction in your Account Value). $8,000 / $100,000 = 8% | |||||
Purchase Payment base for Death Benefit | $ | 120,000 | $ | 110,400 | After the withdrawal, the Purchase Payment base for the Death Benefit is also reduced by 8% or $9,600. $120,000 x 8% = $9,600 | |||||
| • | a certified copy of a death certificate showing the cause and manner of death; |
| • | a certified copy of a decree that is made by a court of competent jurisdiction as to the finding of death; or |
| • | other proof that is satisfactory to us. |
| • | as a tax-free exchange, transfer, or rollover to or for an annuity ortax-qualified account as permitted by federal tax law; or |
| • | in cases where the Beneficiary is an estate, trust, custodial account, corporation, limited liability company, partnership, or other entity, to a person to whom the Beneficiary is obligated to make corresponding payments. |
| • | the contingent payee designated as part of a Death Benefit Payout Option elected by you; or if none |
| • | then to a contingent payee designated by the Beneficiary; or if none |
| • | the estate of the last payee who received payments. |
| • | For a Tax Qualified Contract. The Death Benefit must be paid in accordance with the tax qualification endorsement. |
| • | For a Nonqualified Contract. The Death Benefit must be paid either: (1) in full within five years of the date of death; or (2) over the life of the Beneficiary or over a period certain not exceeding the Beneficiary’s life expectancy, with payments at least annually, and with the first payment made within one year of the date of death. |
| • | For the Annuity Payout Benefit |
| • | If the payee dies before the end of the fixed period, then we will make periodic payments to the surviving owner(s), or if none, then to the surviving contingent payee(s), or if none, then to the estate of the last payee who received payments. |
| • | In all cases, payments will stop at the end of the fixed period. |
| • | For the Death Benefit |
| • | If the Beneficiary dies before the end of the fixed period, then we will make periodic payments to the contingent payee designated as part of any Death Benefit Payout Option that you have elected. If no such contingent payee is surviving, then such payments will be made to a contingent payee designated by the Beneficiary. If there is no contingent payee surviving, then such payments will be made to the estate of the last payee who received payments. |
| • | In all cases, payments will stop at the end of the fixed period. |
| • | For the Annuity Payout Benefit |
| • | If the Owner is living, this treatment will generally allow the Owner to choose between continuing the Contract as a deferred annuity or electing a new Annuity Payout Initiation Date and another Payout Option. |
| • | If the Annuitant’s death before the Annuity Payout Initiation Date would give rise to a Death Benefit, then the Death Benefit will be available. |
| • | For the Death Benefit |
| • | For the Annuity Payout Benefit |
| • | If the Annuitant dies after the end of the fixed period you selected, then payments will stop on the death of the Annuitant. |
| • | If the Annuitant dies before the end of the fixed period you selected, then we will make periodic payments to the surviving owner(s), or if none, then to the surviving contingent payee(s), or if none, then to the estate of the last payee who received payments. In this case, payments will stop at the end of the fixed period you selected. |
| • | For the Death Benefit |
| • | If the Beneficiary dies after the end of the fixed period selected, then payments will stop on the death of the Beneficiary. |
| • | If the Beneficiary dies before the end of the fixed period you or the Beneficiary selected, then we will make periodic payments to the contingent payee designated as part of any Death Benefit Payout Option that you have elected. If no such contingent payee is surviving, then such payments will be made to a contingent payee designated by the Beneficiary. If there is no contingent payee surviving, then such payments will be made to the estate of the last payee who received payments. In this case, payments will stop at the end of the fixed period you or the Beneficiary selected. |
| • | For the Annuity Payout Benefit |
| • | If the primary Annuitant dies and the secondary Annuitant does not |
| • | If the primary Annuitant dies and the secondary Annuitant is surviving, then we will make one-half of the periodic payment to you, or the secondary Annuitant, if you direct, for the rest of the secondary Annuitant’s life. In this case, payments will stop on the death of the secondary Annuitant. |
| • | If the Owner is living, this treatment will generally allow the Owner to choose between continuing the Contract as a deferred annuity or electing a new Annuity Payout Initiation Date and another Payout Option. |
| • | If the Annuitant’s death before the Annuity Benefit Payout Initiation Date would give rise to a Death Benefit, then the Death Benefit will be available. |
| • | For the Death Benefit |
| • | If the Beneficiary dies and the contingent payee does not survive the Beneficiary, then payments will stop on the death of the Beneficiary. This means that, even if we have made only one payment when the Beneficiary dies, payments will stop unless the contingent payee survives. |
| • | If the Beneficiary dies and the contingent payee designated as part of the Death Benefit Payout Option election is surviving, then we will make one-half of the periodic payment to the contingent payee for the rest of the contingent payee’s life. In this case, payments will stop on the death of the contingent payee. |
| • | Generally, the longer the period over which payments are made or the more frequently the payments are made, the lower the amount of each payment because more payments will be made. |
| • | For Life Payout Options, the longer the life expectancy of the Annuitant or Beneficiary, the lower the amount of each payment because more payments are expected to be paid. |
| • | A nonhuman that is the Owner of the Contract may be the primary payee. For example, if the Owner is a trust, that trust may be the primary payee. |
| • | Payments may be made payable to another insurance company or financial institution as a tax-free exchange, transfer, or rollover to or for another annuity ortax-qualified account as allowed by federal tax law. |
| • | If we receive a Purchase Payment on a Market Day before the Market Close, we will apply it to your Contract on that Market Day. |
| • | If we receive a Purchase Payment on a Market Day after the Market Close or on a day that is not a Market Day, then we will apply it to your Contract on the next Market Day. |
| • | Requests may be made by mail at P.O. Box 5423, Cincinnati OH 45201-5423. |
| • | Requests by fax may be made at 513-768-5115. |
| • | Requests for reallocations among Indexed Strategies may be made by telephone at 1-800-789-6771 |
| • | If we receive a Request in Good Order on a Market Day before the Market Close, we will process it using values determined at the Market Close on that Market Day. |
| • | If we receive a Request in Good Order after the Market Close or on a day that is not a Market Day, then we will treat that request as received at the start of the next Market Day. |
| • | Saturdays, Sundays, holidays and any other day that the New York Stock Exchange and the NYSE Arca are closed are not Market Days. |
| • | The NYSE and the NYSE Arca observe the following holidays: New Year’s Day, Martin Luther King, Jr. Day, President’s Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. |
| • | Regular trading hours on the NYSE and core trading sessions on the NYSE Arca usually end at 4:00 PM Eastern Time |
| • | Trading hours on the NYSE and core trading sessions on the NYSE Arca end at 1:00 PM Eastern Time on the day before the Fourth of July and the Friday after Thanksgiving and Christmas Eve. |
| • | the New York Stock Exchange or NYSE Arca is closed (other than customary weekend and holiday closings); |
| • | trading on the New York Stock Exchange or NYSE Arca is restricted; or |
| • | an emergency exists such that it is not reasonably practicable to determine fairly the value of the Index. |
| • | If you live in a state where we are required to refund your Purchase Payment(s), we reserve the right to hold your Purchase Payment(s) in the Purchase Payment Account until the first Strategy Application Date on or after the end of the free look period. |
| • | If you live in a state where we are required to refund the Account Value of your Contract, you will receive the Account Value on the day that we receive your cancellation Request in Good Order. If the Account Value includes the value of an Indexed Strategy, that Strategy value will reflect the applicable Daily Value Percentage. The amount you receive may be more or less than your Purchase Payment(s) depending upon any interest earned by your Contract and the value of your Indexed Strategies. This means that you bear the risk of any decline in the Account Value of your Contract before we receive your cancellation request. No adjustment will be made for the Daily Value Percentage and no Early Withdrawal Charges will apply to the amount refunded. Unless required by state law, we do not refund any Daily Charge assessed during the free look period or any Early Withdrawal Charges assessed during the free look period that relate to a withdrawal taken before you cancel the Contract. |
| • | to update your contact information, such as your address, phone number, and email address, if and as it changes; and |
| • | to update your Beneficiary and other designations, including complete names, complete addresses, phone numbers, and social security numbers, if and as they change. |
| • | For a Nonqualified Contract |
| • | For a Tax Qualified Contract |
| • | For a Nonqualified Contract. |
| • | For a Tax Qualified Contract |
| • | For a Nonqualified Contract |
| • | For a Tax Qualified Contract |
| • | a Death Benefit is payable on account of your death; |
| • | the sole Beneficiary under the Contract is your spouse or a revocable trust or custodial account created by your spouse; |
| • | either you make that election by a Request in Good Order before your death or your spouse makes that election by a Request in Good Order before the Death Benefit Payment Date; and |
| • | you were not a successor owner of the Contract. |
| • | For a Nonqualified Contract |
| • | For a Tax Qualified Contract |
| • | the surviving joint Annuitant(s); or if none |
| • | the Owner(s). |
| • | If a Death Benefit becomes payable on account of your death or the death of a joint Owner, then the surviving Owner is the Beneficiary no matter what other designation you may have made. |
| • | In all other cases, you may designate a person or person who will be the Beneficiaries as provided in the Designation of Beneficiary provision of the Contract. |
| • | If no designated Beneficiary is surviving, then the Beneficiary is your estate. |
| • | If the sole Beneficiary under the Contract is your spouse or a revocable trust or custodial account created by your spouse and all other requirements for successor ownership are met, then your spouse may become the successor owner of the Contract in lieu of receiving the Death Benefit. |
| • | You may designate two or more persons jointly as the Beneficiaries. Unless you state otherwise, joint Beneficiaries that are surviving are entitled to equal shares. |
| • | You may designate one or more persons as contingent Beneficiary. Unless you state otherwise, a contingent Beneficiary is entitled to a benefit only if there is no primary Beneficiary who that is surviving. |
| • | a court order provides that the former spouse’s rights as a beneficiary are to continue; or |
| • | the former spouse remains or becomes an Owner. |
| • | If you make only one Purchase Payment, each Term will end on an anniversary of the initial Strategy Application Date. In this case, any involuntary termination will occur on a date that is the end of a Term. |
| • | If you make multiple Purchase Payments, Terms may end on different dates. In this case, any involuntary termination will occur on a date that is the end of a Term, but it will occur before the end of other Terms. In this case, the Surrender Value payable upon termination of your Contract will reflect the Daily Value Percentages used to calculate the value of Indexed Strategies with Terms that are not ending on the termination date. |
| • | If your Account Value is less than $5,000 on June 20, 2024, we may not terminate your Contract because June 20 is not an anniversary of the initial Strategy Application Date. |
| • | If your Account Value is less than $5,000 on May 6, 2025, we may terminate your Contract on that anniversary date even though the other Term will not end until June 20, 2025. |
Tax-Qualified Contracts andPlans | Nonqualified Deferred Compensation Plans | Other Non-Tax-Qualified Contracts | ||||
| Plan Types | • IRC §408 (IRA, SEP, SIMPLE IRA) • IRC §408A (Roth IRA) • IRC §403(b) (Tax-Sheltered Annuity)• IRC §401 (Pension, Profit–Sharing, 401(k)) • Governmental IRC §457(b) • IRC §402A (Roth TSA, Roth 401(k), or Roth 457(b)) | • IRC §409A • Nongovernmental IRC §457(b) • IRC §457(f) | • IRC §72 only | |||
| Who May Purchase a Contract | Eligible employee, employer, or employer plan. | Employer on behalf of eligible employee. Employer generally loses tax-deferred status of Contract itself. | Anyone. Non-natural person will generally losetax-deferred status. |
Tax-Qualified Contracts andPlans | Nonqualified Deferred Compensation Plans | Other Non-Tax-Qualified Contracts | ||||
| Contribution Limits | Contributions are limited by IRC and/or plan requirements. | None. | ||||
| Distribution Restrictions | Distributions from Contract and/or plan may be restricted to meet IRC and/or plan requirements. | None. | ||||
| Taxation of Withdrawals, Surrenders, and Lump Sum Death Benefit | Generally, 100% of distributions must be included in taxable income. However, the portion that represents an after-tax investment is not taxable. Distributions from Roth IRA are deemed to come first from after- tax contributions. Distributions from other plans are generally deemed to come from income andafter-tax investment (if any) on apro-rata basis. Distributions from §408A Roth IRA or §402A Roth TSA, Roth 401(k), or Roth 457(b) are completely tax free if certain requirements are met.For tax purposes, all IRAs and SEP IRAs of an owner are treated as a single IRA, and all Roth IRAs of an owner are treated as a single Roth IRA. | Generally, distributions must be included in taxable income until all accumulated earnings are paid out. Thereafter, distributions are tax-free return of the original investment. However, distributions aretax-free until any investment made before August 14, 1982 is returned.For tax purposes, all non-tax-qualified | ||||
| Taxation of Payout Option Payments (Annuity Benefit or Death Benefit) | A percentage of each payment is tax free equal to the ratio of after-tax investment (if any) to the total expected payments, and the balance is included in taxable income. Once theafter-tax investment has been recovered, the full amount of each benefit payment is included in taxable income. Distributions from a Roth IRA, Roth TSA, Roth 401(k), or Roth 457(b) are completely tax free if certain requirements are met. | |||||
| Possible Penalty Taxes for Distributions Before Age 59 1/2 | Taxable portion of payments made before age 59 1/2 may be subject to 10% penalty tax (or 25% for a SIMPLE IRA during the first two years of participation). Penalty taxes do not apply to payments after the participant’s death, or to §457 plans. Other exceptions may apply. | None. | Taxable portion of payments made before age 59 1/2 may be subject to a 10% penalty tax. Penalty taxes do not apply to payments after the Owner’s death. Other exceptions may apply. | |||
| Assignment/ Transfer of Contract | Assignment and transfer of Ownership generally not permitted. | Generally, deferred earnings taxable to transferor upon transfer or assignment. Gift tax consequences are not discussed herein. | ||||
| Federal Income Tax Withholding | Eligible rollover distributions from §401, §403(b), and governmental §457(b) plans are subject to 20% mandatory withholding on taxable portion unless direct rollover. For other payments, Payee may generally elect to have taxes withheld or not. | Generally subject to wage withholding. | Generally, Payee may elect to have taxes withheld or not. | |||
| • | ATM Call Option Price (at-the-money |
| • | ATM Put Option Price (at-the-money |
| • | OTM Call Option Price (out-of-the-money |
| • | Index Levels or Prices |
| • | Dividend Yield (Div) |
| • | Strike Price (K) |
| • | Interest Rate (Rate) |
| • | Time (T) |
| • | Implied Volatility (Vol) |
| • | you allocate $50,000 to an S&P 500 Cap Strategy and $50,000 to an S&P 500 Upside Participation Rate Strategy; |
| • | the Cap for the initial Term of the S&P 500 Cap Strategy is 10%; |
| • | the Participation Rate for the initial Term of the S&P 500 Upside Participation Rate Strategy is 75%; |
| • | the S&P 500 is 1000 on the Term start date; |
| • | you request a $10,000 withdrawal on Day 146 when the Daily Value Percentage is 2.15% for the S&P 500 Cap Strategy and 2.33% for the S&P 500 Upside Participation Rate Strategy; |
| • | you do not take any other withdrawals during the initial Term; |
| • | the withdrawal is covered by the Free Withdrawal Allowance and therefore no Early Withdrawal Charges apply (If Early Withdrawal Charges did apply, the amounts realized at the end of the Term would be reduced by both the withdrawal and the amount of the Early Withdrawal Charge); and |
| • | the S&P 500 is 1130 on the Term end date. |
Impact of $10,000 Withdrawal from Each Strategy on Day 146 of Term | S&P 500 with Cap | S&P 500 with Upside Participation Rate | ||
Investment Base at Term Start | $50,000 | $50,000 | ||
Daily Charges through withdrawal date | $150 | $150 | ||
Remaining Investment Base | $49,850 | $49,850 | ||
Daily Value Percentage on Withdrawal Date | 2.15% | 2.33% | ||
Dollar Amount of Increase on Withdrawal Date | $49,850 x .0215 = $1,072 | $49,850 x .0233 = $1,162 | ||
Strategy Value before Withdrawal | $49,850 + $1,072 = $50,922 | $49,850 + $1,162 = $51,012 | ||
Amount Withdrawn* | $4,996 | $5,004 | ||
Withdrawal as Percentage of Strategy Value | $4,996 / $50,922 = 9.81% | $5,004 / $51,012 = 9.81% | ||
Proportional Reduction in Investment Base | $49,850 x .0981 = $4,890 | $49,850 x .0981 = $4,890 | ||
Investment Base after Withdrawal | $49,850 - $4,890 = $44,959 | $49,850 - $4,890 = $44,959 | ||
Value at End of Term | ||||
Investment Base after Withdrawal | $44,959 | $44,959 | ||
Daily Charges From Withdrawal Date to Term End | $203 | $203 | ||
Remaining Investment Base | $44,757 | $44,757 | ||
Index at Term Start | 1000 | 1000 | ||
Index at Term End | 1130 | 1130 | ||
Rise in Index | 13% | 13% | ||
Cap | 10% | n/a | ||
Upside Participation Rate | n/a | 75% | ||
Increase as a Percentage | 10% | 13% x 75% = 9.75% | ||
Dollar Amount of Increase | $44,757 x .10 = $4,476 | $44,757 x .0975 = $4,364 | ||
Strategy Value at Term End | $44,757 + $4,476 = $49,232 | $44,757 + $4,364 = $49,120 |
| * | Note: The withdrawal is taken proportionally from each Indexed Strategy, based on the ratio of that Strategy’s value to the total value of all Indexed Strategies immediately before the withdrawal. In this example, the total value of all Indexed Strategies immediately before the withdrawal was $101,934 ($50,922 + $51,012). The S&P 500 with Cap Strategy value was 49.96% of that total value ($50,922 / $101,934 = 49.96%), so 49.96% of the $10,000 withdrawal ($4,996) was taken from it. The S&P 500 with Upside Participation Rate Strategy value was 50.04% of that total value ($51,012 / $101,934 = 50.04%), so 50.04% of the $10,000 withdrawal ($5,004) was taken from it. |
| • | you allocate $50,000 to an S&P 500 Cap Strategy and $50,000 to an S&P 500 Upside Participation Rate Strategy; |
| • | the Downside Participation Rate for each Strategy is 50%; |
| • | the S&P 500 is 1000 on the Term start date; |
| • | you request a $10,000 withdrawal on Day 146 when the Daily Value Percentage is -2% for the S&P 500 Cap Strategy and -2.1% for the S&P 500 Upside Participation Rate Strategy; |
| • | you do not take any other withdrawals during the initial Term; |
| • | the withdrawal is covered by the Free Withdrawal Allowance and therefore no Early Withdrawal Charges apply (If Early Withdrawal Charges did apply, the amounts realized at the end of the Term would be reduced by both the withdrawal and the amount of the Early Withdrawal Charge); and |
| • | the S&P 500 is 800 on the Term end date. |
Impact of $10,000 Withdrawal from Each Strategy on Day 146 of Term | S&P 500 with Cap | S&P 500 with Upside Participation Rate | ||
Investment Base at Term Start | $50,000 | $50,000 | ||
Daily Charges through withdrawal date | $150 | $150 | ||
Remaining Investment Base | $49,850 | $49,850 | ||
Daily Value Percentage on Withdrawal Date | -2% | -2.1% | ||
Dollar Amount of Decrease on Withdrawal Date | $49,850 x -.02 = $997 | $49,850 x -.021 = $1,047 | ||
Strategy Value before Withdrawal | $49,850 - $997 = $48,853 | $49,850 - $1,047 = $48,803 | ||
Amount Withdrawn* | $5,003 | $4,997 | ||
Withdrawal as Percentage of Strategy Value | $5,003 / $48,853 = 10.24% | $4,997 / $48,803 = 10.24% | ||
Proportional Reduction in Investment Base | $49,850 x .1024 = $5,105 | $49,850 x .1024 = $5,105 | ||
Investment Base after Withdrawal | $49,850 - $5,105 = $44,745 | $49,850 - $5,105 = $44,745 | ||
Value at End of Term | ||||
Investment Base after Withdrawal | $44,745 | $44,745 | ||
Daily Charges From Withdrawal Date to Term End | $202 | $202 | ||
Remaining Investment Base | $44,543 | $44,543 | ||
Index at Term Start | 1000 | 1000 | ||
Index at Term End | 800 | 800 | ||
Fall in Index | -20% | -20% |
Impact of $10,000 Withdrawal from Each Strategy on Day 146 of Term | S&P 500 with Cap | S&P 500 with Upside Participation Rate | ||
Downside Participation Rate | 50% | 50% | ||
Decrease as a Percentage | -20% x 50% = -10% | -20% x 50% = -10% | ||
Dollar Amount of Decrease | $44,543 x -.10 = $4,454 | $44,543 x -.10 = $4,454 | ||
Strategy Value at Term End | $44,543 - $4,454 = $40,089 | $44,543 - $4,454 = $40,089 |
| * | Note: The withdrawal is taken proportionally from each Indexed Strategy, based on the ratio of that Strategy’s value to the total value of all Indexed Strategies immediately before the withdrawal. In this example, the total value of all Indexed Strategies immediately before the withdrawal was $97,656 ($48,853 + $48,803). The S&P 500 with Cap Strategy value was 50.03% of that total value ($48,853 / $97,656 = 50.03%), so 50.03% of the $10,000 withdrawal ($5,003) was taken from it. The S&P 500 with Upside Participation Rate Strategy value was 49.97% of that total value ($48,803 / $97,656 = 49.97%), so 49.97% of the $10,000 withdrawal ($4,997) was taken from it. |
| • | you allocate your entire $50,000 Purchase Payment to the S&P 500 with Cap Strategy when the S&P 500 is 1900; |
| • | the Contract Effective Date and the Term start date are both April 6, 2021; |
| • | an Early Withdrawal Charge of 9% applies in the initial Term; |
| • | the Cap for the initial Term of that Strategy is 12%; |
| • | you request a $10,000 withdrawal on August 1, 2021 when the Daily Value Percentage is 1%; |
| • | you do not take any other withdrawals during the initial Term; and |
| • | the S&P 500 is 2033 on the Term end date of April 6, 2022. |
Term Start Date | April 6, 2021 | |||||
Strategy Value | $ | 50,000 | See Footnote 1 below. | |||
Investment Base | $ | 50,000 | See Footnote 1 below. | |||
Cap for Term | 12 | % | See Footnote 2 below. | |||
Index | 1900 | |||||
Withdrawal Date | August 30, 2021 | |||||
Daily Charges through withdrawal date | $ | 150 | See Footnote 3 below | |||
Remaining Investment Base | $ | 49,850 | See Footnote 4 below | |||
Daily Value Percentage on Withdrawal Date | 1 | % | ||||
Dollar Amount of Increase on Withdrawal Date | $ | 499 | See Footnote 5 below. | |||
Strategy Value before Withdrawal | $ | 50,349 | See Footnote 6 below. | |||
Amount of Withdrawal Requested | $ | 10,000 | ||||
Free Withdrawal Allowance | $ | 5,000 | See Footnote 7 below. | |||
Early Withdrawal Charge | $ | 495 | See Footnote 8 below. | |||
Total Amount Withdrawn | $ | 10,495 | See Footnote 9 below. | |||
Withdrawal as Percentage of Strategy Value | 20.84 | % | See Footnote 10 below. | |||
Proportional Reduction in Investment Base | $ | 10,391 | See Footnote 10 below. | |||
Investment Base after Withdrawal | $ | 39,459 | See Footnote 11 below. | |||
Strategy Value after Withdrawal | $ | 39,854 | See Footnote 12 below. | |||
Term End Date | April 6, 2022 | |||||
Daily Charges From Withdrawal Date to Term End | $ | 178 | See Footnote 13 below | |||
Remaining Investment Base | $ | 39,281 | See Footnote 14 below | |||
Index | 2033 | |||||
Rise in Index | 7 | % | See Footnote 15 below. | |||
Increase as a Percentage | 7 | % | See Footnote 16 below. | |||
Dollar Amount of Increase | $ | 2,750 | See Footnote 16 below. | |||
Strategy Value at Term End | $ | 42,031 | See Footnote 17 below. | |||
| Formula | Investment Base on the Term Start Date – (Investment Base on the Term Start Date x (1 – Daily Fee Rate) ^ number of days elapsed prior to withdrawal) | |
| Calculation | $50,000 - ($50,000 x (1 - 0.0000206251) ^ 146) = $150 | |
| Formula | Beginning Investment Base – sum of Daily Charges since Term Start Date) – proportional reduction for any prior Withdrawals and related Early Withdrawal Charges = remaining Investment Base | |
| Calculation | $50,000 - $150 - $0 = $49,850 | |
| Formula | Investment Base x Daily Value Percentage = dollar amount of increase | |
| Calculation | $49,850 x 1% = $499 | |
| Formula | Investment Base + dollar amount of increase = Strategy value | |
| Calculation | $49,850 + $499 = $50,349 | |
| Formula | Purchase Payment x 10% = FWA for first Contract Year | |
| Calculation | $50,000 x 10% = $5,000 | |
| Formula | [(Requested withdrawal - FWA) x EWC rate] / (1.00 - EWC rate) = Early Withdrawal Charge | |
| Calculation | [($10,000 - $5,000) x 9%] / (1.00 - 0.09) = $5,000 x 9% / 0.91 = $450 / 0.91 = $495 | |
| Formula | Requested withdrawal + Early Withdrawal Charge = total amount withdrawn | |
| Calculation | $10,000 + $495 = $10,495 | |
| Formula Calculation | Total amount withdrawn / Strategy value before withdrawal = withdrawal as percentage of Strategy value $10,495 / $50,349 = 20.84% | |
| Formula | Investment Base before withdrawal x withdrawal as percentage of Strategy value = proportional reduction in Investment Base | |
| Calculation | $49,850 x 20.84% = $10,391 | |
| Formula | Investment Base before withdrawal - proportional reduction in Investment Base for withdrawal = Investment Base after withdrawal | |
| Calculation | $49,850 - $10,391 = $39,459 | |
| Formula | Strategy value before withdrawal - total amount withdrawn = Strategy value after withdrawal | |
| Calculation | $50,349 - $10,495 = $39,854 | |
| Formula | Investment Base after Previous Withdrawal – (Investment Base after Previous Withdrawal x (1 – Daily Fee Rate) ^ Number of Days Elapsed Since Previous Withdrawal) = Daily Charges | |
| Calculation | $39,459 - ($39,459 x (1 - 0.0000206251) ^ 219) = $178 | |
| Formula | Beginning Investment Base – sum of Daily Charges since Term Start Date) – proportional reduction for any prior Withdrawals and related Early Withdrawal Charges = remaining Investment Base | |
| Calculation | $50,000 – ($150 + $178) - $10,391 = $39,281 | |
| Formula | (Index on Term end date - Index on Term start date) / Index on Term start date = rise in Index | |
| Calculation | (2033 - 1900) / 1900 = 7% | |
| Formula | If the rise in Index is less than Cap, then rise in Index = increase percentage based on rise in Index | |
| Calculation | 7% rise in Index < 12% cap, so increase percentage = 7% | |
| Formula | Investment Base x increase percentage based on rise in Index = dollar amount of increase based on rise in Index | |
| Calculation | $39,281 x 7% = $2,750 | |
| Formula | Investment Base on Term end date + dollar amount of increase based on rise in Index = Strategy value on Term end date | |
| Calculation | $39,281 + $2,750 = $42,031 | |
| • | you allocate your entire $50,000 Purchase Payment to the S&P 500 with Cap Strategy when the S&P 500 is 1900; |
| • | the Contract Effective Date and the Term Start Date are both April 6, 2021; |
| • | an Early Withdrawal Charge of 9% applies in the initial Term; |
| • | you request a $10,000 withdrawal on August 1, 2021 when the Daily Value Percentage is -6%; |
| • | you do not take any other withdrawals during the initial Term; and |
| • | the S&P 500 is 1748 on the Term end date of April 6, 2022. |
Term Start Date | April 6, 2021 | |||
Strategy Value | $50,000 | See Footnote 1 below. | ||
Investment Base | $50,000 | See Footnote 1 below. | ||
Downside Participation Rate | 50% | See Footnote 2 below. | ||
Index | 1900 | |||
Withdrawal Date | August 30, 2021 | |||
Daily Charges through withdrawal date | $150 | See Footnote 3 below. | ||
Remaining Investment Base | $49,850 | See Footnote 4 below. | ||
Daily Value Percentage on Withdrawal Date | -6% | |||
Dollar Amount of Decrease on Withdrawal Date | -$2,991 | See Footnote 5 below. | ||
Strategy Value before Withdrawal | $46,859 | See Footnote 6 below. | ||
Amount of Withdrawal Requested | $10,000 | |||
Free Withdrawal Allowance | $5,000 | See Footnote 7 below. | ||
Early Withdrawal Charge | $495 | See Footnote 8 below. | ||
Total Amount Withdrawn | $10,495 | See Footnote 9 below. | ||
Withdrawal as Percentage of Strategy Value | 22.4% | See Footnote 10 below. | ||
Proportional Reduction in Investment Base | $11,165 | See Footnote 10 below. | ||
Investment Base after Withdrawal | $38,685 | See Footnote 11 below. | ||
Strategy Value after Withdrawal | $36,364 | See Footnote 12 below. | ||
Term End Date | April 6, 2022 | |||
Daily Charges From Withdrawal Date to Term End | $174 | See Footnote 13 below. | ||
Remaining Investment Base | $38,511 | See Footnote 14 below. | ||
Index | 1748 | |||
Fall in Index | -8% | See Footnote 15 below. | ||
Decrease as a Percentage | -4% | See Footnote 16 below. | ||
Dollar Amount of Decrease | -$1,540 | See Footnote 16 below. | ||
Strategy Value at Term End | $36,971 | See Footnote 17 below. |
| Formula | Investment Base on the Term Start Date – (Investment Base on the Term Start Date x (1 – Daily Fee Rate) ^ number of days elapsed prior to withdrawal) | |
| Calculation | $50,000 - ($50,000 x (1 - 0.0000206251) ^ 146) = $150 | |
| Formula | Beginning Investment Base – sum of Daily Charges since Term Start Date) – proportional reduction for any prior Withdrawals and related Early Withdrawal Charges = remaining Investment Base | |
| Calculation | $50,000 - $150 - $0 = $49,850 | |
| Formula | Investment Base x Daily Value Percentage = dollar amount of decrease | |
| Calculation | $49,850 x -6% = -$2,991 | |
| Formula | Investment Base – dollar amount of decrease = Strategy value | |
| Calculation | $49,850 - $2,991 = $46,859 | |
| Formula | Purchase Payment x 10% = FWA for first Contract Year | |
| Calculation | $50,000 x 10% = $5,000 | |
| Formula | [(Requested withdrawal - FWA) x EWC rate] / (1.00 - EWC rate) = Early Withdrawal Charge | |
| Calculation | [($10,000 - $5,000) x 9%] / (1.00 - 0.09) = $5,000 x 9% / 0.91 = $450 / 0.91 = $495 | |
| Formula | Requested withdrawal + Early Withdrawal Charge = total amount withdrawn | |
| Calculation | $10,000 + $495 = $10,495 | |
| Formula | total amount withdrawn / Strategy value before withdrawal = withdrawal as percentage of Strategy value | |
| Calculation | $10,495 / $46,859 = 22.4% | |
| Formula | Investment Base before withdrawal x withdrawal as percentage of Strategy value = proportional reduction in Investment Base | |
| Calculation | $49,850 x 22.4% = $11,165 | |
| Formula | Investment Base before withdrawal - proportional reduction in Investment Base for withdrawal = Investment Base after withdrawal | |
| Calculation | $49,850 - $11,165 = $38,685 | |
| Formula | Strategy value before withdrawal - total amount withdrawn = Strategy value after withdrawal | |
| Calculation | $46,859 - $10,495 = $36,364 | |
| Formula | Investment Base after Previous Withdrawal – (Investment Base after Previous Withdrawal x (1 – Daily Fee Rate) ^ Number of Days Elapsed Since Previous Withdrawal) = Daily Charges | |
| Calculation | $38,685 - ($38,685 x (1 - 0.0000206251) ^ 219) = $174 | |
| Formula | Beginning Investment Base – sum of Daily Charges since Term Start Date) – proportional reduction for any prior Withdrawals and related Early Withdrawal Charges = remaining Investment Base | |
| Calculation | $50,000 – ($150 + $174) - $10,495 = $38,511 | |
| Formula | (Index on Term end date - Index on Term start date) / Index on Term start date | |
| Calculation | (1748 - 1900) / 1900 = -8% | |
| Formula | Fall in Index x Downside Participation Rate = decrease as a percentage based on fall in Index | |
| Calculation | -8% x 50% = -4% | |
| Formula | Investment Base x decrease percentage based on fall in Index = dollar amount of decrease based on fall in Index | |
| Calculation | $38,511 x -4% = -$1,540 | |
| Formula | Investment Base on Term end date – dollar amount of decrease based on fall in Index = Strategy value on Term end date | |
| Calculation | $38,511 - $1,540 = $36,971 | |
| • | you allocate a $50,000 Purchase Payment to the S&P 500 with Cap Strategy when the S&P 500 is 1000; |
| • | you allocate a $50,000 Purchase Payment to the S&P 500 with Participation Rate Strategy when the S&P 500 is 1000; |
| • | the Contract Effective Date and the Term Start Date are both April 6, 2021; |
| • | you do not take any withdrawals during the initial Term; and |
| • | the S&P 500 is 1005 on the Term end date of April 6, 2022. |
Term Start Date - April 6, 2021 | S&P 500 with Cap | S&P 500 with Upside Participation Rate | ||||
Strategy Value | $50,000 | $50,000 | See Footnote 1 below. | |||
Investment Base | $50,000 | $50,000 | See Footnote 1 below. | |||
Cap for Term | 10% | n/a | See Footnote 2 below. | |||
Upside Participation Rate for Term | n/a | 75% | See Footnote 3 below. | |||
Index | 1000 | 1000 | ||||
Term End Date - April 6, 2022 | ||||||
Daily Charges From Withdrawal Date to Term End | $375 | $375 | See Footnote 4 below. | |||
Remaining Investment Base | $49,625 | $49,625 | See Footnote 5 below. | |||
Index at Term Start | 1000 | 1000 | ||||
Index at Term End | 1005 | 1005 | ||||
Rise in Index | 0.50% | 0.50% | See Footnote 6 below. | |||
Increase as a Percentage | 0.50% | 0.50% x 75% = 0.375% | See Footnote 7 below. | |||
Dollar Amount of Increase | $49,625 x .005 = $248 | $49,625 x .00375 = $186 | See Footnote 8 below. | |||
Strategy Value at Term End | $49,625 + $248 = $49,873 | $49,625 + $186 = $49,811 | See Footnote 9 below. |
| Formula | Investment Base on Term Start Date x annual rate | |
| Calculation | $50,000 x 0.75% = $375 | |
| Formula | Beginning Investment Base – sum of Daily Charges since Term Start Date) – proportional reduction for any prior Withdrawals and related Early Withdrawal Charges = remaining Investment Base | |
| Calculation | $50,000 - $375 - $0 = $49,625 | |
| Formula | (Index Value on Term End Date - Index Value on Term Start Date) / Index Value on Term Start Date | |
| Calculation | (1005 - 1000) / 1000 = 0.50% | |
| Formula | If the rise in Index is less than Cap, then rise in Index = increase percentage based on rise in Index | |
| Calculation | 0.50% rise in Index < 10% cap, so increase percentage = 0.50% | |
| Formula | Rise in Index for Term x Upside Participation Rate for Term = Increase as a Percentage | |
| Calculation | 0.50% x 75% = 0.375% | |
| Formula | Investment Base x increase percentage based on rise in Index = dollar amount of increase based on rise in Index | |
| Calculation | ||
| Strategy with a Cap: | $49,625 x 0.50% = $248 | |
| Strategy with a Participation Rate: | $49,625 x 0.375% = $186 |
| Formula | Investment Base on Term end date + dollar amount of increase based on rise in Index = Strategy value on Term end date | |
| Calculation | ||
| Strategy with a Cap: | $49,625 + $248 = $49,873 | |
| Strategy with a Participation Rate: | $49,625 + $186 = $49,811 |
For Contracts Issued in: | Free Look Period | Refund | Replacement Free Look Period | Replacement Refund | ||||
| Alabama | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| Alaska | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
| Arizona | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
| Arkansas | 20 days | Account Value | 30 days | Account Value | ||||
| California | 30 days | Account Value + Fees/Charges Note refund amount is Purchase Payments. | 30 days | Account Value + Fees/Charges Note refund amount is Purchase Payments. | ||||
| Colorado | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| Connecticut | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
| Delaware | 20 days | Account Value | 30 days | Purchase Payments | ||||
| District of Columbia | 20 days | Account Value | 30 days | Account Value | ||||
| Florida | 21 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
| Georgia | 20 days | Purchase Payments | 30 days | Purchase Payments | ||||
| Hawaii | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| Idaho | 20 days | Purchase Payments | 30 days | Purchase Payments | ||||
| Illinois | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
| Indiana | 20 days | Account Value | 30 days | Purchase Payments | ||||
| Iowa | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| Kansas | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
| Kentucky | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
| Louisiana | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
| Maine | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| Maryland | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
| Massachusetts | 20 days | Account Value | 30 days | Purchase Payments | ||||
| Michigan | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges |
For Contracts Issued in: | Free Look Period | Refund | Replacement Free Look Period | Replacement Refund | ||||
| Minnesota | 20 days | Account Value + Fees/Charges | 30 days | Purchase Payments | ||||
| Mississippi | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| Missouri | 20 days | Purchase Payments | 30 days | Purchase Payments | ||||
| Montana | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| Nebraska | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
| Nevada | 20 days | Purchase Payments | 30 days | Purchase Payments | ||||
| New Hampshire | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
| New Jersey | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
| New Mexico | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| North Carolina | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
| North Dakota | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
| Ohio | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| Oklahoma | 20 days | Purchase Payments | 30 days | Purchase Payments | ||||
| Oregon | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| Pennsylvania | 20 days | Account Value | 30 days | Account Value | ||||
| Rhode Island | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
| South Carolina | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
| South Dakota | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
| Tennessee | 20 days | Account Value | 30 days | Purchase Payments | ||||
| Texas | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
| Utah | 20 days | Purchase Payments | 30 days | Purchase Payments | ||||
| Vermont | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| Virginia | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| Washington | 20 days | Greater of: (1) Purchase Payments or (2) Account Value minus taxes | 30 days | Purchase Payments | ||||
| West Virginia | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| Wisconsin | 30 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
| Wyoming | 20 days | Account Value | 30 days | Greater of: (1) Purchase Payments or (2) Account Value + Fees/Charges |
| • | Glidepath Holdings Inc. (“Glidepath”) is a subsidiary of MassMutual. It is a financial services holding company. |
| • | Great American Life Insurance Company |
| • | Great American Advisors, Inc. (“GAA”) is a subsidiary of GALIC. It is the principal underwriter and distributor of the Index Summit Pro annuities. |
| • | MM Asset Management Holding LLC is a subsidiary of MassMutual. It is a financial services holding company. |
| • | Barings LLC (“Barings”) is a subsidiary of MM Asset Management Holding LLC. It provides investment services for MassMutual and certain of its affiliated companies, including GALIC. |
Name | Year of Birth | Position(s) with Great American Life | Served in Position(s) Since | |||||
Adrienne Baglier | 1963 | Executive Vice President – Operations | February 2019 | |||||
Dominic L. Blue | 1976 | Director | 2021 | |||||
Susan M. Cicco | 1971 | Director | 2021 | |||||
Geoffrey J. Craddock | 1959 | Director | 2021 | |||||
Roger W. Crandall | 1964 | Director, Chairman of the Board | 2021 | |||||
Michael R. Fanning | 1963 | Director, Vice Chairman of the Board and Chief Executive Officer | 2021 | |||||
Paul A. LaPiana | 1969 | Director | 2021 | |||||
Christopher P. Miliano | 1958 | Head of GALIC Finance Treasurer | December 2021 May 2002 | |||||
Mark F. Muething | 1959 | Director President & Assistant Secretary | October 1993 April 2018 April 2012 | |||||
Name | Year of Birth | Position(s) with Great American Life | Served in Position(s) Since | |||||
Michael J. O’Connor | 1969 | Director | 2021 | |||||
Eric W. Partlan | 1973 | Director, Chief Investment Officer | 2021 | |||||
Gareth F. Ross | 1975 | Director | 2021 | |||||
Arthur W. Wallace | 1974 | Director | 2021 | |||||
Elizabeth A. Ward | 1964 | Director | 2021 | |||||
| Annuity | ||||||||||||
| Annuity | Policies | Ratings | ||||||||||
Company | Premiums | In Force | AM Best | S&P | ||||||||
Great American Life Insurance Company | $ | 3,474 | 371,000 | A+ | A+ | |||||||
Annuity Investors Life Insurance Company | 121 | 102,000 | A+ | A+ | ||||||||
| Statutory Premiums | ||||||||||||
| 2020 | 2019 | 2018 | ||||||||||
Financial institutions single premium annuities — indexed | $ | 1,372 | $ | 1,537 | $ | 1,776 | ||||||
Financial institutions single premium annuities — fixed | 896 | 1,229 | 492 | |||||||||
Retail single premium annuities — indexed | 591 | 943 | 1,418 | |||||||||
Retail single premium annuities — fixed | 99 | 120 | 87 | |||||||||
Broker dealer single premium annuities — indexed | 457 | 657 | 1,271 | |||||||||
Broker dealer single premium annuities — fixed | 27 | 32 | 14 | |||||||||
Pension risk transfer | 499 | 257 | 132 | |||||||||
Education market — fixed and indexed annuities | 129 | 164 | 192 | |||||||||
Total fixed annuity premiums | 4,070 | 4,939 | 5,382 | |||||||||
Variable annuities | 17 | 21 | 25 | |||||||||
Total gross annuity premiums | 4,087 | 4,960 | 5,407 | |||||||||
Ceded premiums | (492 | ) | — | — | ||||||||
Total net annuity premiums | $ | 3,595 | $ | 4,960 | $ | 5,407 | ||||||
| Year ended December 31, | ||||||||||||
| 2020 | 2019 | 2018 | ||||||||||
Annuity earnings before income taxes — before the impact of unlocking, derivatives related to FIAs and other impacts of stock market performance and interest rates on FIAs | $ | 358 | $ | 410 | $ | 411 | ||||||
Reinsurance | (47 | ) | — | — | ||||||||
Unlocking | (46 | ) | (1 | ) | (31 | ) | ||||||
Impact of derivatives related to FIAs and other impacts of changes in the stock market and interest rates on FIAs over or under option costs (a): | ||||||||||||
Change in fair value of derivatives related to FIAs | (279 | ) | (294 | ) | (51 | ) | ||||||
Accretion of guaranteed minimum FIA benefits | (404 | ) | (408 | ) | (347 | ) | ||||||
Other annuity benefits | (60 | ) | (14 | ) | (83 | ) | ||||||
Less cost of equity options | 562 | 586 | 506 | |||||||||
Related impact on the amortization of deferred policy acquisition costs (b) | 86 | 84 | (42 | ) | ||||||||
Annuity segment earnings before income taxes | $ | 170 | $ | 363 | $ | 363 | ||||||
| (a) | FIAs provide policyholders with a crediting rate tied, in part, to the performance of an existing stock market or other financial index. GALIC attempts to mitigate the risk in the index-based component of these products through the purchase and sale of call and put options on the appropriate index. GALIC’s strategy is designed so that the net change in the fair value of the call option assets and put option liabilities will generally offset the economic change in the net liability from the index participation. Both the index-based component of the annuities (an embedded derivative with a fair value of $3.93 billion at December 31, 2020) and the related call and put options (net fair value of $820 million at December 31, 2020) are considered derivatives that must be adjusted for changes in fair value through earnings each period. The fair values of these derivatives are impacted by actual and expected stock market performance and interest rates as well as other factors. Fluctuations in certain of these factors, such as changes in interest rates and the performance of the stock market, are not economic in nature for the current reporting period, but rather impact the timing of reported results. |
| (b) | An estimate of the related acceleration/deceleration of the amortization of deferred policy acquisition costs and deferred sales inducements. |
| 2020 | 2019 | 2018 | ||||||||||
Wells Fargo & Company | 11.9 | % | 12.0 | % | 7.4 | % | ||||||
The PNC Financial Services Group, Inc. | 9.0 | % | 8.8 | % | 6.6 | % | ||||||
Regions Financial Corporation | 7.4 | % | 6.7 | % | 4.8 | % | ||||||
LPL Financial | 4.4 | % | 4.4 | % | 4.8 | % | ||||||
BB&T Corporation | 3.5 | % | 5.1 | % | 3.7 | % | ||||||
| Amortized | Fair Value | |||||||||||
| Cost | Amount | % | ||||||||||
S&P or comparable rating | ||||||||||||
AAA, AA, A | $ | 17,102 | $ | 18,298 | 54 | % | ||||||
BBB | 10,850 | 12,018 | 35 | % | ||||||||
Total investment grade | 27,952 | 30,316 | 89 | % | ||||||||
BB | 756 | 772 | 2 | % | ||||||||
B | 202 | 200 | 1 | % | ||||||||
CCC, CC, C | 314 | 358 | 1 | % | ||||||||
D | 109 | 128 | — | % | ||||||||
Total non-investment grade | 1,381 | 1,458 | 4 | % | ||||||||
Not rated | 2,237 | 2,349 | 7 | % | ||||||||
Total | $ | 31,570 | $ | 34,123 | 100 | % | ||||||
| • | Reduction in new sales of annuity products; |
| • | Harm to our relationships with distributors of our annuity products; |
| • | Increases to the cost of capital or limitation on our access to sources of capital; |
| • | Harm to our ability to obtain reinsurance or reasonable terms for reinsurance; |
| • | Significant increases in the number and amount of surrenders of, or withdrawals from, our annuity products; and |
| • | Pressure to increase the crediting rates for our annuity products. |
• | changes in financial, political and economic conditions, including changes in interest and inflation rates, currency fluctuations and extended economic recessions or expansions in the U.S. and/or abroad; |
• | performance of securities markets, including the cost of equity index options; |
• | new legislation or declines in credit quality or credit ratings that could have a material impact on the valuation of securities in GALIC’s investment portfolio; |
• | the availability of capital; |
• | regulatory actions (including changes in statutory accounting rules); |
• | changes in the legal environment affecting GALIC or its customers; |
• | tax law and accounting changes, including the impact of recent changes in U.S. corporate tax law; |
• | terrorist activities (including any nuclear, biological, chemical or radiological events), incidents of war or losses resulting from civil unrest and other major losses; |
• | disruption caused by cyber-attacks or other technology breaches or failures by GALIC or its business partners and service providers, which could negatively impact GALIC’s business and/or expose GALIC to litigation; |
• | availability of reinsurance and ability of reinsurers to pay their obligations; |
• | trends in persistency and mortality; |
• | competitive pressures; |
• | the ability to obtain adequate rates and policy terms; and |
• | changes in GALIC’s financial strength ratings assigned by major ratings agencies. |
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||||||
Earnings Statement Data: | ||||||||||||||||||||||||||||
Total revenues | $ | 1,537 | $ | 1,271 | $ | 2,208 | $ | 2,081 | $ | 1,691 | $ | 1,598 | $ | 1,499 | ||||||||||||||
Earnings before income taxes | 417 | (22 | ) | 529 | 497 | 256 | 381 | 367 | ||||||||||||||||||||
Net earnings, including noncontrolling interests | 310 | (14 | ) | $ | 422 | $ | 395 | $ | 209 | $ | 276 | $ | 240 | |||||||||||||||
Less: Net earnings attributable to noncontrolling interests | — | (2 | ) | (1 | ) | 2 | 2 | 6 | 4 | |||||||||||||||||||
Net earnings attributable to shareholder | $ | 310 | $ | (12 | ) | $ | 423 | $ | 393 | $ | 207 | $ | 236 | $ | 205 | |||||||||||||
| September 30, 2021 | December 31, | |||||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||
Cash and investments | $ | 40,519 | $ | 38,907 | $ | 42,028 | $ | 37,356 | $ | 34,500 | $ | 30,976 | ||||||||||||||||
Total assets | 50,134 | 48,571 | 45,893 | 40,801 | 38,120 | 34,362 | ||||||||||||||||||||||
Annuity benefits accumulated | 44,376 | 42,573 | 40,406 | 36,616 | 33,316 | 29,907 | ||||||||||||||||||||||
Life, accident and health reserves | 592 | 610 | 612 | 635 | 658 | 691 | ||||||||||||||||||||||
Shareholder’s equity | 3,738 | 3,948 | 3,433 | 2,492 | 2,761 | 2,509 | ||||||||||||||||||||||
Page | ||||
General | 97 | |||
Overview | 97 | |||
Critical Accounting Policies | 98 | |||
Liquidity and Capital Resources | 98 | |||
Condensed Consolidated Cash Flows | 99 | |||
Liquidity | 100 | |||
Page | ||||
Contractual Obligations | 101 | |||
Off-Balance Sheet Arrangements | 102 | |||
Investments | 102 | |||
Uncertainties | 106 | |||
Results of Operations | 106 | |||
Accounting Standards to be Adopted | 115 | |||
| • | the recoverability of reinsurance, |
| • | the amortization of annuity deferred policy acquisition costs, |
| • | the measurement of the derivatives embedded in indexed annuity liabilities, and |
| • | the valuation of investments, including the determination of impairment allowances. |
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
Net cash provided by operating activities | $ | 647 | $ | 1,087 | $ | 1,321 | $ | 1,334 | $ | 1,068 | ||||||||||
Net cash used in investing activities | (970 | ) | (563 | ) | (416 | ) | (2,449 | ) | (4,052 | ) | ||||||||||
Net cash provided (used) by financing activities | 480 | 200 | (488 | ) | 1,520 | 2,702 | ||||||||||||||
Net change in cash and cash equivalents | $ | 157 | $ | 724 | $ | 417 | $ | 405 | $ | (282 | ) | |||||||||
| % of Reserves | ||||||||||||||||
| September 30, | at December 31, | |||||||||||||||
GMIR | 2021 | 2021 | 2019 | 2018 | ||||||||||||
1 — 1.99% | 86 | % | 85 | % | 84 | % | 80 | % | ||||||||
2 — 2.99% | 3 | % | 3 | % | 3 | % | 4 | % | ||||||||
3 — 3.99% | 6 | % | 7 | % | 7 | % | 8 | % | ||||||||
4.00% and above | 5 | % | 5 | % | 6 | % | 8 | % | ||||||||
Annuity benefits accumulated (in millions) | $ | 44,376 | $ | 42,573 | $ | 40,406 | $ | 36,616 | ||||||||
| Total | Within One Year | 2-3 Years | 4-5 Years | More than 5 Years | ||||||||||||||||
Annuities (*) | $ | 46,885 | $ | 4,584 | $ | 10,716 | $ | 11,559 | $ | 20,026 | ||||||||||
Life, accident and health liabilities (*) | 1,217 | 99 | 212 | 139 | 767 | |||||||||||||||
Total | $ | 48,102 | $ | 4,683 | $ | 10,928 | $ | 11,698 | $ | 20,793 | ||||||||||
| (*) | Amounts presented in the table represent estimated cash payments under such contracts, based on significant assumptions related to mortality, morbidity, lapse, renewal, retirement and annuitization. These assumptions also include interest and index crediting consistent with assumptions used to amortize DPAC and assess loss recognition. All estimated cash payments are undiscounted for the time value of money. As a result, total outflows for all years exceed the corresponding liabilities of $42.57 billion for annuity benefits accumulated and $610 million for life, accident and health reserves included in GALIC’s Balance Sheet as of December 31, 2020. Based on the same assumptions, GALIC projects reinsurance recoveries related to annuity benefits accumulated totaling $7.25 billion as follows: Within 1 year — $876 million; 2-3 years — $1.73 billion;4-5 years — $2.05 billion; and thereafter — $2.59 billion and reinsurance recoveries related to life, accident and health reserves totaling $577 million as follows: Within 1 year — $58 million;2-3 years — $91 million;4-5 years — $74 million; and thereafter — $354 million. Actual payments and their timing could differ significantly from these estimates. |
| September 30, 2021 | December 31, 2020 | |||||||
Fair value of fixed maturity portfolio | $ | 36,123 | $ | 34,165 | ||||
Pretax impact on fair value of fixed maturity portfolio | $ | — | $ | (1,367 | ) | |||
Percentage impact on fair value of 100 bps increase in interest rates | — | % | (4.0 | %) | ||||
| Amortized Cost, net (*) | Fair Value | Fair Value as % of Cost | Unrealized Gain (Loss) | % Rated Investment Grade | ||||||||||||||||
Collateral type | ||||||||||||||||||||
Residential: | ||||||||||||||||||||
Agency-backed | $ | 834 | $ | 834 | 100 | % | $ | — | 100 | % | ||||||||||
Non-agency prime | 884 | 954 | 108 | % | 70 | 62 | % | |||||||||||||
Alt-A | 506 | 577 | 114 | % | 71 | 45 | % | |||||||||||||
Subprime | 137 | 154 | 112 | % | 17 | 30 | % | |||||||||||||
Commercial | 573 | 602 | 105 | % | 29 | 96 | % | |||||||||||||
| $ | 2,934 | $ | 3,121 | 106 | % | $ | 187 | — | % | |||||||||||
| (*) | Amortized cost, net of allowance for expected credit losses. |
| Securities With Unrealized Gains | Securities With Unrealized Losses | |||||||
Available for Sale Fixed Maturities | ||||||||
Fair value of securities | $ | 29,583 | $ | 5,220 | ||||
Amortized cost of securities | $ | 27,396 | $ | 5,312 | ||||
Gross unrealized gain (loss) | $ | 2,187 | $ | (92 | ) | |||
Fair value as % of amortized cost | 108 | % | 98 | % | ||||
Number of security positions | 3,265 | 534 | ||||||
Number individually exceeding $2 million gain or loss | 232 | 3 | ||||||
Concentration of gains (losses) by type or industry (exceeding 5% of unrealized): | ||||||||
Banks, savings, and credit institutions | $ | 356 | $ | (3 | ) | |||
States and municipalities | 264 | — | ||||||
Mortgage-backed securities | 195 | (8 | ) | |||||
Insurance | 179 | (1 | ) | |||||
Other asset-backed securities | 142 | (48 | ) | |||||
Other financial institutions | 112 | — | ||||||
U.S. Government and government agencies | 2 | (16 | ) | |||||
Percentage rated investment grade | 92 | % | 84 | % | ||||
| Securities With Unrealized Gains | Securities With Unrealized Losses | |||||||
Maturity | ||||||||
One year or less | 5 | % | 1 | % | ||||
After one year through five years | 28 | % | 3 | % | ||||
After five years through ten years | 26 | % | 1 | % | ||||
After ten years | 10 | % | 11 | % | ||||
| 69 | % | 16 | % | |||||
Collateralized loan obligations and other asset-backed securities (average life of approximately 3 years) | 24 | % | 66 | % | ||||
Mortgage-backed securities (average life of approximately 4-1/2 years) | 7 | % | 18 | % | ||||
| 100 | % | 100 | % | |||||
| Aggregate Fair Value | Aggregate Unrealized Gain (Loss) | Fair Value as % of Cost | ||||||||||
Fixed Maturities at September 30, 2021 | ||||||||||||
Securities with unrealized gains: | ||||||||||||
Exceeding $500,000 (1,218 securities) | $ | 18,399 | $ | 1,884 | 111 | % | ||||||
$500,000 or less (2,047 securities) | 11,184 | 303 | 103 | % | ||||||||
| $ | 29,583 | $ | 2,187 | 108 | % | |||||||
Securities with unrealized losses: | ||||||||||||
Exceeding $500,000 (41 securities) | $ | 1,287 | $ | (54 | ) | 96 | % | |||||
$500,000 or less (493 securities) | 3,933 | (38 | ) | 99 | % | |||||||
| $ | 5,220 | $ | (92 | ) | 98 | % | ||||||
| Aggregate Fair Value | Aggregate Unrealized Loss | Fair Value as % of Cost | ||||||||||
Securities with Unrealized Losses at September 30, 2021 | ||||||||||||
Investment grade fixed maturities with losses for: | ||||||||||||
Less than one year (260 securities) | $ | 3,859 | $ | (51 | ) | 99 | % | |||||
One year or longer (60 securities) | 532 | (10 | ) | 98 | % | |||||||
| $ | 4,391 | $ | (61 | ) | 99 | % | ||||||
Non-investment grade fixed maturities with losses for: | ||||||||||||
Less than one year (103 securities) | $ | 629 | $ | (24 | ) | 96 | % | |||||
One year or longer (111 securities) | 200 | (7 | ) | 97 | % | |||||||
| $ | 829 | $ | (31 | ) | 96 | % | ||||||
| a) | whether the unrealized loss is credit-driven or a result of changes in market interest rates, |
| b) | the extent to which fair value is less than cost basis, |
| c) | cash flow projections received from independent sources, |
| d) | historical operating, balance sheet and cash flow data contained in issuer SEC filings and news releases, |
| e) | near-term prospects for improvement in the issuer and/or its industry, |
| f) | third-party research and communications with industry specialists, |
| g) | financial models and forecasts, |
| h) | the continuity of interest payments, maintenance of investment grade ratings and hybrid nature of certain investments, |
| i) | discussions with issuer management, and |
| j) | ability and intent to hold the investment for a period of time sufficient to allow for anticipated recovery in fair value. |
| Nine months ended | ||||||||||||||||||||||||||||||||
| September 30, | % Change | Year ended December 31, | % Change | |||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 - 2020 | 2020 | 2019 | 2018 | 2020 - 2019 | 2019 - 2018 | |||||||||||||||||||||||||
Earnings before realized gains (losses) on securities and income taxes — excluding the impact of reinsurance, unlocking, derivatives related to FIAs and other impacts of stock market performance and interest rates on FIAs | $ | 406 | $ | 223 | 82 | % | $ | 352 | $ | 412 | $ | 409 | (15 | %) | 1 | % | ||||||||||||||||
Reinsurance | (118 | ) | — | (47 | ) | — | — | — | % | — | % | |||||||||||||||||||||
Unlocking | — | (46 | ) | — | % | (46 | ) | (1 | ) | (31 | ) | 4,500 | % | (97 | %) | |||||||||||||||||
Impact of derivatives related to FIAs and other impacts of changes in the stock market and interest rates on FIAs over or under option costs: | ||||||||||||||||||||||||||||||||
Change in fair value of derivatives related to FIAs | 14 | (240 | ) | 106 | % | (279 | ) | (294 | ) | (51 | ) | (5 | %) | 476 | % | |||||||||||||||||
Accretion of guaranteed minimum FIA benefits | (270 | ) | (318 | ) | (15 | %) | (404 | ) | (408 | ) | (347 | ) | (1 | %) | 18 | % | ||||||||||||||||
Other annuity benefits | (52 | ) | (50 | ) | 4 | % | (60 | ) | (14 | ) | (83 | ) | 329 | % | (83 | %) | ||||||||||||||||
Less cost of equity options | 335 | 446 | (25 | %) | 562 | 586 | 506 | (4 | %) | 16 | % | |||||||||||||||||||||
Related impact on the amortization of deferred policy acquisition costs | (10 | ) | 68 | (115 | %) | 86 | 84 | (42 | ) | 2 | % | (300 | %) | |||||||||||||||||||
Earnings before realized gains (losses) on securities and income taxes | $ | 305 | $ | 83 | 267 | % | 164 | 365 | 361 | (55 | %) | 1 | % | |||||||||||||||||||
Realized gains (losses) on securities | 112 | (105 | ) | 207 | % | 365 | 132 | (105 | ) | 177 | % | (226 | %) | |||||||||||||||||||
Earnings (loss) before income taxes | $ | 417 | $ | (22 | ) | 1,995 | % | $ | 529 | $ | 497 | $ | 256 | 6 | % | 94 | % | |||||||||||||||
| Nine months ended | ||||||||||||||||||||
| September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
Realized gains (losses) before impairments: | ||||||||||||||||||||
Disposals | $ | 42 | $ | 39 | $ | 524 | $ | 16 | $ | 12 | ||||||||||
Change in the fair value of derivatives | (18 | ) | 2 | (2 | ) | 5 | (7 | ) | ||||||||||||
Change in the fair value of equity securities | 84 | (111 | ) | (85 | ) | 122 | (107 | ) | ||||||||||||
Adjustments to annuity deferred policy acquisition costs and related items | (1 | ) | (6 | ) | (51 | ) | (1 | ) | 11 | |||||||||||
| 107 | (76 | ) | 386 | 142 | (91 | ) | ||||||||||||||
Change in allowance and impairments: | ||||||||||||||||||||
Securities | 7 | (43 | ) | (32 | ) | (21 | ) | (21 | ) | |||||||||||
Adjustments to annuity deferred policy acquisition costs and related items | (2 | ) | 14 | 11 | 11 | 7 | ||||||||||||||
| 5 | (29 | ) | (21 | ) | (10 | ) | (14 | ) | ||||||||||||
Realized gains (losses) on securities | $ | 112 | $ | (105 | ) | $ | 365 | $ | 132 | $ | (105 | ) | ||||||||
| Nine months ended | ||||||||||||||||||||||||||||||||
| September 30, | % Change | Year ended December 31, | % Change | |||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 - 2020 | 2020 | 2019 | 2018 | 2020 - 2019 | 2019 - 2018 | |||||||||||||||||||||||||
Interest credited — fixed | $ | 286 | $ | 307 | (7 | %) | $ | 399 | $ | 396 | $ | 357 | 1 | % | 11 | % | ||||||||||||||||
Include cost of equity options | 335 | 446 | (25 | %) | 562 | 586 | 506 | (4 | %) | 16 | % | |||||||||||||||||||||
Cost of funds | 621 | 753 | (18 | %) | 961 | 982 | 863 | (2 | %) | 14 | % | |||||||||||||||||||||
Interest credited — fixed component of variable annuities | 3 | 3 | — | % | 4 | 4 | 5 | — | % | (20 | %) | |||||||||||||||||||||
Other annuity benefits, excluding the impact of reinsurance and interest rates and the stock market on FIAs | 62 | 64 | (3 | %) | 87 | 109 | 96 | (20 | %) | 14 | % | |||||||||||||||||||||
| 686 | 820 | (16 | %) | 1,052 | 1,095 | 964 | (4 | %) | 14 | % | ||||||||||||||||||||||
Impact of reinsurance, unlocking, changes in fair value of derivatives related to FIAs, and other impacts of the stock market and interest rates over or under option costs: | ||||||||||||||||||||||||||||||||
Reinsurance | 85 | — | — | % | 36 | — | — | — | % | — | % | |||||||||||||||||||||
Unlocking | — | (77 | ) | — | % | (77 | ) | (74 | ) | 59 | 4 | % | (225 | %) | ||||||||||||||||||
Impact of derivatives related to FIAs | (14 | ) | 240 | (106 | %) | 279 | 294 | 51 | (5 | %) | 476 | % | ||||||||||||||||||||
Accretion of guaranteed minimum FIA benefits | 270 | 318 | (15 | %) | 404 | 408 | 347 | (1 | %) | 18 | % | |||||||||||||||||||||
Other annuity benefits — impact of the stock market and interest rates on FIAs | 52 | 50 | 4 | % | 60 | 14 | 83 | 329 | % | (83 | %) | |||||||||||||||||||||
Less cost of equity options (included in cost of funds) | (335 | ) | (446 | ) | (25 | %) | (562 | ) | (586 | ) | (506 | ) | (4 | %) | 16 | % | ||||||||||||||||
Total annuity benefits | $ | 744 | $ | 905 | (18 | %) | $ | 1,192 | $ | 1,151 | $ | 998 | 4 | % | 15 | % | ||||||||||||||||
| Nine months ended September 30, | % Change | Year ended December 31, | % Change | |||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 - 2020 | 2020 | 2019 | 2018 | 2020 - 2019 | 2019 - 2018 | |||||||||||||||||||||||||
Excluding reinsurance: | ||||||||||||||||||||||||||||||||
Change in the fair value of derivatives related to FIAs | $ | 14 | $ | (240 | ) | 106 | % | $ | (279 | ) | $ | (294 | ) | $ | (51 | ) | (5 | %) | 476 | % | ||||||||||||
Accretion of guaranteed minimum FIA benefits | (270 | ) | (318 | ) | (15 | %) | (404 | ) | (408 | ) | (347 | ) | (1 | %) | 18 | % | ||||||||||||||||
Other annuity benefits | (52 | ) | (50 | ) | 4 | % | (60 | ) | (14 | ) | (83 | ) | 329 | % | (83 | %) | ||||||||||||||||
Less cost of equity options | 335 | 446 | (25 | %) | 562 | 586 | 506 | (4 | %) | 16 | % | |||||||||||||||||||||
Related impact on the amortization of DPAC | (10 | ) | 68 | (115 | %) | 86 | 84 | (42 | ) | 2 | % | (300 | %) | |||||||||||||||||||
Reinsurance | (118 | ) | — | — | % | (47 | ) | — | — | — | % | — | % | |||||||||||||||||||
Impact on earnings before income taxes | $ | (101 | ) | $ | (94 | ) | 7 | % | $ | (142 | ) | $ | (46 | ) | $ | (17 | ) | 209 | % | 171 | % | |||||||||||
| Nine months ended September 30, | % Change | Year ended December 31, | % Change | |||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 - 2020 | 2020 | 2019 | 2018 | 2020 - 2019 | 2019 - 2018 | |||||||||||||||||||||||||
Financial institutions single premium annuities — indexed | $ | 1,406 | $ | 1,014 | 39 | % | $ | 1,372 | $ | 1,537 | $ | 1,776 | (11 | %) | (13 | %) | ||||||||||||||||
Financial institutions single premium annuities — fixed | 1,562 | 526 | 197 | % | 896 | 1,229 | 492 | (27 | %) | 150 | % | |||||||||||||||||||||
Retail single premium annuities — indexed | 542 | 444 | 22 | % | 591 | 943 | 1,418 | (37 | %) | (33 | %) | |||||||||||||||||||||
Retail single premium annuities — fixed | 126 | 73 | 73 | % | 99 | 120 | 87 | (18 | %) | 38 | % | |||||||||||||||||||||
Broker dealer single premium annuities — indexed | 608 | 347 | 75 | % | 457 | 657 | 1,271 | (30 | %) | (48 | %) | |||||||||||||||||||||
Broker dealer single premium annuities — fixed | 138 | 22 | 527 | % | 27 | 32 | 14 | (16 | %) | 129 | % | |||||||||||||||||||||
Pension risk transfer | 94 | 225 | (58 | )% | 499 | 257 | 132 | 94 | % | 95 | % | |||||||||||||||||||||
Education market — fixed and indexed annuities | 82 | 104 | (21 | )% | 129 | 164 | 192 | (21 | %) | (15 | %) | |||||||||||||||||||||
Total fixed annuity premiums | 4,558 | 2,755 | 65 | % | 4,070 | 4,939 | 5,382 | (18 | %) | (8 | %) | |||||||||||||||||||||
Variable annuities | 11 | 13 | (15 | )% | 17 | 21 | 25 | (19 | %) | (16 | %) | |||||||||||||||||||||
Total gross annuity premiums | 4,569 | 2,768 | 65 | % | 4,087 | 4,960 | 5,407 | (18 | %) | (8 | %) | |||||||||||||||||||||
Ceded premiums | (481 | ) | (246 | ) | 96 | % | (492 | ) | — | — | — | % | — | % | ||||||||||||||||||
Total net annuity premiums | $ | 4,088 | $ | 2,522 | 62 | % | $ | 3,595 | $ | 4,960 | $ | 5,407 | (28 | %) | (8 | %) | ||||||||||||||||
| Nine months ended | ||||||||||||||||||||
| September 30 | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
Policy charges and other income: | ||||||||||||||||||||
Unearned revenue | — | $ | (5 | ) | $ | (5 | ) | $ | 1 | $ | (1 | ) | ||||||||
Total revenues | — | (5 | ) | (5 | ) | 1 | (1 | ) | ||||||||||||
Annuity benefits: | ||||||||||||||||||||
Fixed-indexed annuities embedded derivative | — | (240 | ) | (240 | ) | (181 | ) | 44 | ||||||||||||
Guaranteed withdrawal benefit reserve | — | 107 | 107 | 102 | 10 | |||||||||||||||
Other reserves | — | 60 | 60 | 4 | 5 | |||||||||||||||
Sales inducements asset | — | (4 | ) | (4 | ) | 1 | — | |||||||||||||
Total annuity benefits | — | (77 | ) | (77 | ) | (74 | ) | 59 | ||||||||||||
Insurance acquisition expenses, net: | ||||||||||||||||||||
Deferred policy acquisition costs | — | 118 | 118 | 76 | (29 | ) | ||||||||||||||
Total costs and expenses | — | 41 | 41 | 2 | 30 | |||||||||||||||
Net charge | — | $ | (46 | ) | $ | (46 | ) | $ | (1 | ) | $ | (31 | ) | |||||||
| September 30, 2021 | December 31, 2020 | |||||||
Fair value of fixed maturity portfolio | $ | 36,123 | $ | 34,165 | ||||
Pretax impact on fair value of fixed maturity portfolio | $ | — | $ | (1,367 | ) | |||
Percentage impact on fair value of 100 bps increase in interest rates | — | % | (4.0 | )% | ||||
Valuation of investments in securities | ||
Description of the Matter | As of December 31, 2020, the fair value of the Company’s fixed-income and equity securities totaled $34.94 billion, a portion of which are valued based on non-binding broker quotes or internally developed using significant inputs not based on, or corroborated by, observable market information. The fair value of these securities are determined by management applying the methodologies outlined in Note D to the consolidated financial statements. The lack of visibility into assumptions used innon-binding broker quotes and the credit spread applied by management for internally developed fixed-income investments are significant unobservable inputs, which create greater subjectivity when determining the fair values. Credit spread inputs are developed based on management’s review of trade activity for comparable securities and credit spreads over the treasury yield of securities with a similar duration.Auditing the fair value of the fixed-income and equity securities that use unobservable inputs was complex and highly judgmental due to the judgment used by the Company in determining unobservable inputs and assumptions to estimate the securities’ fair value. Significant unobservable inputs and assumptions include non-binding broker quotes and credit spreads over the treasury yield. | |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over management’s valuation process for the fixed-income and equity securities priced using unobservable inputs. This included, among others, testing controls over investment pricing and the development and review of significant inputs and assumptions used in determining the fair values. To test the Company’s investment fair values, our audit procedures included, among others, comparing the fair values for a sample of securities to pricing service values or internally developed cash flow models. With the assistance of our valuation specialists, we evaluated the valuation methodologies used by the Company and compared the Company’s fair value estimate to an independently calculated range of fair value estimates for a sample of securities. We evaluated information that corroborated or contradicted the Company’s fair value estimates, including observable spreads, transaction data for similar securities, and historical collateral performance data. | |
Amortization of annuity deferred policy acquisition costs | ||
Description of the Matter | At December 31, 2020, deferred policy acquisition costs totaled $302 million, of which $286 million related to annuity contracts. As described in Notes A and G to the consolidated financial statements, the carrying amount of the annuity deferred policy acquisition costs is the total of costs deferred less amortization that is calculated in relation to the present value of estimated gross profits of the underlying annuity policies. There is a significant amount of uncertainty inherent in calculating estimated gross profits as the calculation is sensitive to management’s best estimate of assumptions, such as future investment yields and lapse rates. Management’s assumptions are adjusted, also known as unlocking, over time for emerging experience and expected trends. The unlocking results in amortization being recalculated, using the new assumptions for estimated gross profits, that results either in additional or less cumulative amortization expense. Auditing management’s estimate of the amortization of annuity deferred policy acquisition costs was complex because it required the involvement of our actuarial specialists due to the highly judgmental nature of the assumptions used in management’s projection of estimated gross profits, which are used in the amortization of annuity deferred policy acquisition costs. The significant judgment was primarily due to the sensitivity of the estimated gross profits to the expected investment yield and lapse rate assumptions. | |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the process for estimating amortization of annuity deferred policy acquisition costs. This included, among others, controls over the review and approval processes that management has in place for the assumptions used in measuring estimated gross profits. To test the amortization of deferred policy acquisition costs related to annuity contracts, our audit procedures included, among others, testing the completeness and accuracy of the data used to calculate the estimated gross profits through testing the reconciliation of the underlying data recorded in the source systems to the actuarial valuation models. With the assistance of our actuarial specialists, we evaluated the assumptions used by management in determining estimated gross profits. Also, with the assistance of our actuarial specialists, we compared significant assumptions, including expected investment yields and lapse rates, to prior actual experience and observable market data, and we evaluated management’s estimates of prospective changes in these assumptions. In addition, we performed an independent calculation of estimated and actual gross profits for a sample of product cohorts for comparison with the actuarial model used by management. | |
Valuation of annuity contract embedded derivatives | ||
Description of the Matter | At December 31, 2020, the liability for annuity benefits accumulated included $3.93 billion for the embedded derivatives related to the equity participation feature of the Company’s fixed-indexed annuity products. As described in Note F to the consolidated financial statements, there is a significant amount of estimation uncertainty inherent in measuring the fair value of the embedded derivatives as it includes management’s assumptions of various factors, such as future interest rates, expected stock market performance, budgeted option costs, lapses, and annuitizations. Management’s assumptions are adjusted for emerging experience and expected trends, resulting in changes to the estimated fair value of the embedded derivatives. Auditing management’s estimate of the fair value of the embedded derivatives related to fixed-indexed annuity products was complex because it required the involvement of our actuarial specialists due to the highly judgmental nature of the assumptions used in the valuation process. The significant judgment was primarily due to the sensitivity of the budgeted option costs and lapse assumptions. | |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the process for estimating the embedded derivatives. This included, among others, the review and approval processes that management has in place for the methods and assumptions used in the valuation process of the embedded derivatives. To test the embedded derivatives related to fixed-indexed annuity products, our procedures included, among others, testing the completeness and accuracy of data used in the valuation process through testing the reconciliation of the underlying data recorded in the source systems to the actuarial valuation models. With the assistance of our actuarial specialists, we evaluated the methods and assumptions used by management in determining the estimated fair value of the embedded derivatives. We compared the significant assumptions, including expected budget option costs and lapses, to prior actual experience and management’s estimates of prospective changes in these assumptions. In addition, we performed an independent calculation of the embedded derivatives for a sample of policies for comparison with the fair value calculated by the actuarial model used by management. | |
/s/ ERNST & YOUNG LLP | ||
| We have served as the Company’s auditor since 2015 | ||
| Cincinnati, Ohio | ||
April 26, 2021 | ||
| September 30 | December 31, | |||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| (unaudited) | ||||||||||||
Assets: | ||||||||||||
Cash and cash equivalents | $ | 1,308 | $ | 1,151 | $ | 734 | ||||||
Investments: | ||||||||||||
Fixed maturities, available for sale at fair value (amortized cost — $34,003 (unaudited), $31,598 and $36,144; allowance for expected credit losses of $15 at September 30, 2021 (unaudited) and $28 at December 31, 2020) | 36,083 | 34,123 | 37,899 | |||||||||
Fixed maturities, trading at fair value | 40 | 42 | 54 | |||||||||
Equity securities, at fair value | 648 | 773 | 809 | |||||||||
Investments accounted for using the equity method | 786 | 1,075 | 985 | |||||||||
Mortgage loans | 1,512 | 1,251 | 1,072 | |||||||||
Policy loans | 142 | 151 | 164 | |||||||||
Real estate and other investments | 0 | 341 | 311 | |||||||||
Total cash and investments | 40,519 | 38,907 | 42,028 | |||||||||
Recoverables from reinsurers: | ||||||||||||
Fixed and indexed annuities | 6,522 | 6,539 | 0 | |||||||||
Other | 257 | 267 | 282 | |||||||||
Deferred policy acquisition costs (including the impact of unrealized gains on securities of $768 (unaudited), $934 and $681) | 474 | 302 | 713 | |||||||||
Accrued investment income | 292 | 278 | 335 | |||||||||
Equity index call options | 646 | 825 | 924 | |||||||||
Variable annuity assets (separate accounts) | 668 | 664 | 628 | |||||||||
Funds held as collateral | 318 | 351 | 577 | |||||||||
Net deferred tax assets | — | — | 44 | |||||||||
Other assets | 438 | 438 | 362 | |||||||||
Total assets | $ | 50,134 | $ | 48,571 | $ | 45,893 | ||||||
Liabilities and Equity: | ||||||||||||
Annuity benefits accumulated (including the impact of unrealized gains on securities of $287 (unaudited), $324 and $220) | $ | 44,376 | $ | 42,573 | $ | 40,406 | ||||||
Life, accident and health reserves | 592 | 610 | 612 | |||||||||
Variable annuity liabilities (separate accounts) | 668 | 664 | 628 | |||||||||
Liability for funds held as collateral | 318 | 351 | 577 | |||||||||
Net deferred tax liabilities | 11 | 99 | — | |||||||||
Other liabilities | 431 | 279 | 189 | |||||||||
Total liabilities | 46,396 | 44,576 | 42,412 | |||||||||
Shareholder’s equity: | ||||||||||||
Common stock and capital surplus — Par value — $7.50 per share: — 1,200,000 shares authorized — 201,000 shares issued and outstanding | 1,006 | 1,004 | 992 | |||||||||
Retained earnings | 1,884 | 1,874 | 1,741 | |||||||||
Accumulated other comprehensive income, net of tax | 848 | 1,070 | 700 | |||||||||
Total shareholder’s equity | 3,738 | 3,948 | 3,433 | |||||||||
Noncontrolling interests | 0 | 47 | 48 | |||||||||
Total equity | 3,738 | 3,995 | 3,481 | |||||||||
Total liabilities and equity | $ | 50,134 | $ | 48,571 | $ | 45,893 | ||||||
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||
Revenues: | ||||||||||||||||||||
Net investment income | $ | 1,330 | $ | 1,283 | $ | 1,717 | $ | 1,813 | $ | 1,657 | ||||||||||
Realized gains (losses) on securities | 112 | (105 | ) | 365 | 132 | (105 | ) | |||||||||||||
Life, accident and health net earned premiums | 14 | 17 | 22 | 22 | 24 | |||||||||||||||
Policy charges and other income | 81 | 76 | 104 | 114 | 115 | |||||||||||||||
Total revenues | 1,537 | 1,271 | 2,208 | 2,081 | 1,691 | |||||||||||||||
Costs and Expenses: | ||||||||||||||||||||
Annuity benefits | 744 | 905 | 1,192 | 1,151 | 998 | |||||||||||||||
Life, accident and health benefits | 19 | 30 | 40 | 36 | 37 | |||||||||||||||
Insurance acquisition expenses, net | 230 | 251 | 306 | 253 | 260 | |||||||||||||||
Other expenses | 127 | 107 | 141 | 144 | 140 | |||||||||||||||
Total costs and expenses | 1,120 | 1,293 | 1,679 | 1,584 | 1,435 | |||||||||||||||
Earnings (Loss) before income taxes | 417 | (22 | ) | 529 | 497 | 256 | ||||||||||||||
Provision (Benefit) for income taxes | 107 | (8 | ) | 107 | 102 | 47 | ||||||||||||||
Net earnings (loss), including noncontrolling interests | 310 | (14 | ) | 422 | 395 | 209 | ||||||||||||||
Less: Net earnings attributable to noncontrolling interests | — | (2 | ) | (1 | ) | 2 | 2 | |||||||||||||
Net Earnings (Loss) Attributable to Shareholder | $ | 310 | $ | (12 | ) | $ | 423 | $ | 393 | $ | 207 | |||||||||
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||
Net earnings (loss), including noncontrolling interest s | $ | 310 | $ | (14 | ) | $ | 422 | $ | 395 | $ | 209 | |||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Net unrealized gains (losses) on securities: | ||||||||||||||||||||
Unrealized holding gains (losses) on securities arising during the period | (184 | ) | 326 | 659 | 654 | (443 | ) | |||||||||||||
Reclassification adjustment for realized (gains) losses included in net earnings | (19) | (4 | ) | (313 | ) | (13 | ) | 5 | ||||||||||||
Total net unrealized gains (losses) on securities | (203 | ) | 322 | 346 | 641 | (438 | ) | |||||||||||||
Net unrealized gains on cash flow hedges | (19 | ) | 24 | 24 | 28 | 2 | ||||||||||||||
Other comprehensive income (loss), net of tax | (222 | ) | 346 | 370 | 669 | (436 | ) | |||||||||||||
Total comprehensive income (loss), net of tax | 88 | 332 | 792 | 1,064 | (227 | ) | ||||||||||||||
Less: Comprehensive income (loss) attributable to noncontrolling interests | — | (2 | ) | (1 | ) | 2 | 2 | |||||||||||||
Comprehensive income (loss) attributable to shareholder | $ | 88 | $ | 334 | $ | 793 | $ | 1,062 | $ | (229 | ) | |||||||||
| Shareholder’s Equity | ||||||||||||||||||||||||||||
| Common Shares | Common Stock and Capital Surplus | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||
Balance at December 31, 2017 | 201,000 | $ | 956 | $ | 1,248 | $ | 557 | $ | 2,761 | $ | 47 | $ | 2,808 | |||||||||||||||
Cumulative effect of accounting change | — | — | 93 | (90 | ) | 3 | — | 3 | ||||||||||||||||||||
Net earnings | — | — | 207 | — | 207 | 2 | 209 | |||||||||||||||||||||
Other comprehensive loss | — | — | — | (436 | ) | (436 | ) | — | (436 | ) | ||||||||||||||||||
Capital contributions from parent | — | 17 | — | — | 17 | — | 17 | |||||||||||||||||||||
Dividends | — | — | (60 | ) | — | (60 | ) | — | (60 | ) | ||||||||||||||||||
Other | — | — | — | — | — | (2 | ) | (2 | ) | |||||||||||||||||||
Balance at December 31, 2018 | 201,000 | $ | 973 | $ | 1,488 | $ | 31 | $ | 2,492 | $ | 47 | $ | 2,539 | |||||||||||||||
Net earnings | — | — | 393 | — | 393 | 2 | 395 | |||||||||||||||||||||
Other comprehensive income | — | — | — | 669 | 669 | — | 669 | |||||||||||||||||||||
Capital contributions from parent | — | 19 | — | — | 19 | — | 19 | |||||||||||||||||||||
Dividends | — | — | (140 | ) | — | (140 | ) | — | (140 | ) | ||||||||||||||||||
Other | — | — | — | — | — | (1 | ) | (1 | ) | |||||||||||||||||||
Balance at December 31, 2019 | 201,000 | $ | 992 | $ | 1,741 | $ | 700 | $ | 3,433 | $ | 48 | $ | 3,481 | |||||||||||||||
Cumulative effect of accounting change | — | — | (5 | ) | — | (5 | ) | — | (5 | ) | ||||||||||||||||||
Net earnings (loss) | — | — | 423 | — | 423 | (1 | ) | 422 | ||||||||||||||||||||
Other comprehensive income | — | — | — | 370 | 370 | — | 370 | |||||||||||||||||||||
Capital contributions from parent | — | 12 | — | — | 12 | — | 12 | |||||||||||||||||||||
Dividends | — | — | (285 | ) | — | (285 | ) | — | (285 | ) | ||||||||||||||||||
Other | — | — | — | — | — | — | — | |||||||||||||||||||||
Balance at December 31, 2020 | 201,000 | $ | 1,004 | $ | 1,874 | $ | 1,070 | $ | 3,948 | $ | 47 | $ | 3,995 | |||||||||||||||
Cumulative effect of accounting change (unaudited) | — | — | — | — | — | — | — | |||||||||||||||||||||
Net earnings (unaudited) | — | — | 310 | — | 310 | — | 310 | |||||||||||||||||||||
Other comprehensive loss (unaudited) | — | — | — | (222 | ) | (222 | ) | — | (222 | ) | ||||||||||||||||||
Capital contributions from parent (unaudited) | — | 1 | — | — | 1 | — | 1 | |||||||||||||||||||||
Dividends (unaudited) | — | — | (300 | ) | — | (300 | ) | — | (300 | ) | ||||||||||||||||||
Stock-based compensation expense (unaudited) | — | 1 | — | — | 1 | — | 1 | |||||||||||||||||||||
Sale of real estate (unaudited) | — | — | — | — | — | (47 | ) | (47 | ) | |||||||||||||||||||
Other (unaudited) | — | — | — | — | — | — | — | |||||||||||||||||||||
Balance at September 30, 2021 (unaudited) | 201,000 | $ | 1,006 | $ | 1,884 | $ | 848 | $ | 3,738 | $ | 0 | $ | 3,738 | |||||||||||||||
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
Operating Activities: | ||||||||||||||||||||
Net earnings (loss), including noncontrolling interests | $ | 309 | $ | (14 | ) | $ | 422 | $ | 395 | $ | 209 | |||||||||
Adjustments: | ||||||||||||||||||||
Depreciation and amortization | (75 | ) | (48 | ) | (68 | ) | (59 | ) | (67 | ) | ||||||||||
Annuity benefits | 744 | 905 | 1,192 | 1,151 | 998 | |||||||||||||||
Realized (gains) losses on investing activities | (112 | ) | 107 | (363 | ) | (132 | ) | 105 | ||||||||||||
Net sales of trading securities | 1 | 9 | 12 | 3 | 59 | |||||||||||||||
Deferred annuity and life policy acquisition costs | (185 | ) | (112 | ) | (155 | ) | (206 | ) | (263 | ) | ||||||||||
Amortization of insurance acquisition costs | 186 | 208 | 250 | 202 | 215 | |||||||||||||||
Change in: | ||||||||||||||||||||
Recoverables from reinsurers | 135 | 25 | (67 | ) | 16 | 14 | ||||||||||||||
Accrued investment income | (14 | ) | 14 | 57 | (9 | ) | (35 | ) | ||||||||||||
Funds held as collateral | 33 | 235 | 226 | (474 | ) | 286 | ||||||||||||||
Other assets | 26 | 24 | (64 | ) | 112 | (71 | ) | |||||||||||||
Life, accident and health reserves | (18 | ) | (4 | ) | (4 | ) | (23 | ) | (23 | ) | ||||||||||
Liability for funds held as collateral | (33 | ) | (235 | ) | (226 | ) | 474 | (286 | ) | |||||||||||
Other liabilities | (48 | ) | (45 | ) | 51 | (42 | ) | 11 | ||||||||||||
Other operating activities, net | (305 | ) | 18 | 58 | (74 | ) | (84 | ) | ||||||||||||
Net cash provided by operating activities | 644 | 1,087 | 1,321 | 1,334 | 1,068 | |||||||||||||||
Investing Activities: | ||||||||||||||||||||
Purchases of: | ||||||||||||||||||||
Fixed maturities | (7,885 | ) | (6,136 | ) | (7,615 | ) | (6,177 | ) | (7,898 | ) | ||||||||||
Equity securities | (78 | ) | (206 | ) | (229 | ) | (126 | ) | (326 | ) | ||||||||||
Mortgage loans | (306 | ) | (120 | ) | (243 | ) | (407 | ) | (142 | ) | ||||||||||
Equity index options | (359 | ) | (429 | ) | (544 | ) | (600 | ) | (567 | ) | ||||||||||
Other investments | (77 | ) | (190 | ) | (249 | ) | (220 | ) | (296 | ) | ||||||||||
Real estate, property and equipment | (3 | ) | (6 | ) | (8 | ) | (8 | ) | (15 | ) | ||||||||||
Proceeds from: | ||||||||||||||||||||
Maturities and redemptions of fixed maturities | 4,818 | 3,004 | 4,100 | 3,215 | 3,551 | |||||||||||||||
Repayments of mortgage loans | 46 | 33 | 68 | 118 | 155 | |||||||||||||||
Sales of fixed maturities | 960 | 2,658 | 3,065 | 801 | 447 | |||||||||||||||
Sales of equity securities | 339 | 170 | 284 | 214 | 121 | |||||||||||||||
Settlements of equity index options | 835 | 617 | 873 | 666 | 786 | |||||||||||||||
Sales of other investments | 592 | 32 | 79 | 65 | 122 | |||||||||||||||
Other investing activities, net | 9 | 10 | 3 | 10 | 10 | |||||||||||||||
Net cash used in investing activities | (967 | ) | (563 | ) | (416 | ) | (2,449 | ) | (4,052 | ) | ||||||||||
Financing Activities: | ||||||||||||||||||||
Annuity receipts | 4,569 | 2,767 | 4,087 | 4,960 | 5,407 | |||||||||||||||
Ceded annuity receipts | (482 | ) | (246 | ) | (492 | ) | 0 | 0 | ||||||||||||
Annuity surrenders, benefits and withdrawals | (3,105 | ) | (2,466 | ) | (3,546 | ) | (3,358 | ) | (2,916 | ) | ||||||||||
Ceded annuity surrenders, benefits and withdrawals | 514 | 0 | 206 | 0 | 0 | |||||||||||||||
Net transfers from variable annuity assets | 62 | 44 | 61 | 60 | 47 | |||||||||||||||
Cash transferred in reinsurance | 0 | 0 | (554 | ) | 0 | 0 | ||||||||||||||
Advances from Federal Home Loan Bank | 0 | 200 | 200 | 0 | 225 | |||||||||||||||
Repayments to Federal Home Loan Bank | (731 | ) | (40 | ) | (165 | ) | 0 | 0 | ||||||||||||
Cash dividends paid | (300 | ) | (60 | ) | (285 | ) | (140 | ) | (60 | ) | ||||||||||
Other financing activities, net | (47 | ) | 1 | 0 | (2 | ) | (1 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 480 | 200 | (488 | ) | 1,520 | 2,702 | ||||||||||||||
Net Change in Cash and Cash Equivalents | 157 | 724 | 417 | 405 | (282 | ) | ||||||||||||||
Cash and cash equivalents at beginning of period | 1,151 | 734 | 734 | 329 | 611 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 1,308 | $ | 1,458 | $ | 1,151 | $ | 734 | $ | 329 | ||||||||||
Page | ||||||
A. | A-9 | |||||
B. | A-15 | |||||
C. | A-15 | |||||
D. | A-23 | |||||
E. | A-24 | |||||
F. | A-30 | |||||
Page | ||||||
G. | A-32 | |||||
H. | A-32 | |||||
I. | A-34 | |||||
J. | A-35 | |||||
K. | A-35 | |||||
L. | A-37 | |||||
| • | exclude leases with a term of 12 months or less from the calculation of lease assets and liabilities, |
| • | not separate lease and non-lease components except for buildings (office space and storage facilities), |
| • | for contracts existing at the date of adoption — not reassess whether a contract is a lease or contains a lease, how initial direct costs were accounted for or whether the lease is an operating or finance lease, and |
| • | use hindsight to determine the lease term for leases existing at the date of adoption. |
| 2020 | 2019 | 2018 | ||||||||||
Assets | ||||||||||||
Annuity | $ | 47,886 | $ | 45,217 | $ | 40,115 | ||||||
Run-off life | 685 | 676 | 686 | |||||||||
Total assets | $ | 48,571 | $ | 45,893 | $ | 40,801 | ||||||
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||
Revenues | ||||||||||||||||||||
Annuity: | ||||||||||||||||||||
Net investment income | $ | 1,316 | $ | 1,268 | $ | 1,699 | $ | 1,792 | $ | 1,638 | ||||||||||
Other income | 76 | 73 | 97 | 108 | 108 | |||||||||||||||
Total annuity | 1,392 | 1,341 | 1,796 | 1,900 | 1,746 | |||||||||||||||
Run-off life | 33 | 35 | 47 | 49 | 50 | |||||||||||||||
Total revenues before realized gains (losses) | 1,425 | 1,376 | 1,843 | 1,949 | 1,796 | |||||||||||||||
Realized gains (losses) on securities | 112 | (105 | ) | 365 | 132 | (105 | ) | |||||||||||||
Total revenues | $ | 1,537 | $ | 1,271 | $ | 2,208 | $ | 2,081 | $ | 1,691 | ||||||||||
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||
Earnings Before (Loss) Income Taxes | ||||||||||||||||||||
Annuity | $ | 303 | $ | 89 | $ | 170 | $ | 363 | $ | 363 | ||||||||||
Run-off life | 2 | (6 | ) | (6 | ) | 2 | (2 | ) | ||||||||||||
Total earnings before realized gains (losses) and income taxes | 305 | 83 | 164 | 365 | 361 | |||||||||||||||
Realized gains (losses) on securities | 112 | (105 | ) | 365 | 132 | (105 | ) | |||||||||||||
Total earnings (loss) before income taxes | $ | 417 | $ | (22 | ) | $ | 529 | $ | 497 | $ | 256 | |||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
September 30, 2021 (unaudited) | ||||||||||||||||
Assets: | ||||||||||||||||
Available for sale (“AFS”) fixed maturities: | ||||||||||||||||
U.S. Government and government agencies | $ | 0 | $ | 25 | $ | 0 | $ | 25 | ||||||||
States, municipalities and political subdivisions | 0 | 2,885 | 59 | 2,944 | ||||||||||||
Foreign government | 0 | 34 | 0 | 34 | ||||||||||||
Residential MBS | 0 | 2,516 | 2 | 2,518 | ||||||||||||
Commercial MBS | 0 | 593 | 9 | 602 | ||||||||||||
Collateralized loan obligations | 0 | 3,290 | 0 | 3,290 | ||||||||||||
Other asset-backed securities | 298 | 6,742 | 1,026 | 8,066 | ||||||||||||
Corporate and other | 28 | 16,847 | 1,729 | 18,604 | ||||||||||||
Total AFS fixed maturities | 326 | 32,932 | 2,825 | 36,083 | ||||||||||||
Trading fixed maturities | 0 | 40 | 0 | 40 | ||||||||||||
Equity securities | 68 | 199 | 381 | 648 | ||||||||||||
Equity index call options | 0 | 646 | 0 | 646 | ||||||||||||
Variable annuity assets (separate accounts) (*) | 0 | 668 | 0 | 668 | ||||||||||||
Other assets — derivatives | 0 | 59 | 0 | 59 | ||||||||||||
Total assets accounted for at fair value | $ | 394 | $ | 34,544 | $ | 3,206 | $ | 38,144 | ||||||||
Liabilities: | ||||||||||||||||
Derivatives in annuity benefits accumulated | $ | 0 | $ | 0 | $ | 4,208 | $ | 4,208 | ||||||||
Other liabilities — derivatives | 0 | 19 | 0 | 19 | ||||||||||||
Total liabilities accounted for at fair value | $ | 0 | $ | 19 | $ | 4,208 | $ | 4,227 | ||||||||
| (*) | Variable annuity liabilities equal the fair value of variable annuity assets. |
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
December 31, 2020 | ||||||||||||||||
Assets: | ||||||||||||||||
Available for sale (“AFS”) fixed maturities: | ||||||||||||||||
U.S. Government and government agencies | $ | 6 | $ | 23 | $ | 15 | $ | 44 | ||||||||
States, municipalities and political subdivisions | 0 | 3,358 | 64 | 3,422 | ||||||||||||
Foreign government | 0 | 34 | 0 | 34 | ||||||||||||
Residential MBS | 0 | 2,013 | 127 | 2,140 | ||||||||||||
Commercial MBS | 0 | 688 | 10 | 698 | ||||||||||||
Collateralized loan obligations | 0 | 3,443 | 48 | 3,491 | ||||||||||||
Other asset-backed securities | 0 | 4,107 | 1,069 | 5,176 | ||||||||||||
Corporate and other | 41 | 17,733 | 1,344 | 19,118 | ||||||||||||
Total AFS fixed maturities | 47 | 31,399 | 2,677 | 34,123 | ||||||||||||
Trading fixed maturities | 0 | 42 | 0 | 42 | ||||||||||||
Equity securities | 431 | 49 | 293 | 773 | ||||||||||||
Equity index call options | 0 | 825 | 0 | 825 | ||||||||||||
Variable annuity assets (separate accounts) (*) | 0 | 664 | 0 | 664 | ||||||||||||
Other assets — derivatives | 0 | 102 | 0 | 102 | ||||||||||||
Total assets accounted for at fair value | $ | 478 | $ | 33,081 | $ | 2,970 | $ | 36,529 | ||||||||
Liabilities: | ||||||||||||||||
Derivatives in annuity benefits accumulated | $ | 0 | $ | 0 | $ | 3,933 | $ | 3,933 | ||||||||
Other liabilities — derivatives | 0 | 10 | 0 | 10 | ||||||||||||
Total liabilities accounted for at fair value | $ | 0 | $ | 10 | $ | 3,933 | $ | 3,943 | ||||||||
December 31, 2019 | ||||||||||||||||
Assets: | ||||||||||||||||
Available for sale fixed maturities: | ||||||||||||||||
U.S. Government and government agencies | $ | 6 | $ | 24 | $ | 15 | $ | 45 | ||||||||
States, municipalities and political subdivisions | 0 | 4,284 | 65 | 4,349 | ||||||||||||
Foreign government | 0 | 34 | 0 | 34 | ||||||||||||
Residential MBS | 0 | 1,971 | 128 | 2,099 | ||||||||||||
Commercial MBS | 0 | 806 | 29 | 835 | ||||||||||||
Collateralized loan obligations | 0 | 3,365 | 14 | 3,379 | ||||||||||||
Other asset-backed securities | 0 | 4,357 | 1,030 | 5,387 | ||||||||||||
Corporate and other | 16 | 20,220 | 1,535 | 21,771 | ||||||||||||
Total AFS fixed maturities | 22 | 35,061 | 2,816 | 37,899 | ||||||||||||
Trading fixed maturities | 0 | 54 | 0 | 54 | ||||||||||||
Equity securities | 492 | 41 | 276 | 809 | ||||||||||||
Equity index call options | 0 | 924 | 0 | 924 | ||||||||||||
Variable annuity assets (separate accounts) (*) | 0 | 628 | 0 | 628 | ||||||||||||
Other assets — derivatives | 0 | 50 | 0 | 50 | ||||||||||||
Total assets accounted for at fair value | $ | 514 | $ | 36,758 | $ | 3,092 | $ | 40,364 | ||||||||
Liabilities: | ||||||||||||||||
Derivatives in annuity benefits accumulated | $ | 0 | $ | 0 | $ | 3,730 | $ | 3,730 | ||||||||
Other liabilities — derivatives | 0 | 10 | 0 | 10 | ||||||||||||
Total liabilities accounted for at fair value | $ | 0 | $ | 10 | $ | 3,730 | $ | 3,740 | ||||||||
| (*) | Variable annuity liabilities equal the fair value of variable annuity assets. |
Unobservable Input | Range | |
Adjustment for insurance subsidiary’s credit risk | 0% – 2.2% over the risk-free rate | |
Risk margin for uncertainty in cash flows | 0.99% reduction in the discount rate | |
Surrenders | 7% – 22% of indexed account value | |
Partial surrenders | 2% – 10% of indexed account value | |
Annuitizations | 0.1% – 1% of indexed account value | |
Deaths | 2.0% – 13.7% of indexed account value | |
Budgeted option costs | 2.2% – 2.8% of indexed account value |
| Total realized/unrealized gains (losses) included in | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | Net earnings | Other comprehensive income (loss) | Purchases and issuances | Sales and settlements | Transfer into Level 3 | Transfer out of Level 3 | Balance at September 30, 2021 (unaudited) | |||||||||||||||||||||||||
AFS fixed maturities: | ||||||||||||||||||||||||||||||||
U.S. government agency | $ | 15 | $ | 3 | $ | (18 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||
State and municipal | 64 | 0 | (2 | ) | 0 | (3 | ) | 0 | 0 | 59 | ||||||||||||||||||||||
Residential MBS | 127 | (3 | ) | 1 | 0 | (13 | ) | 2 | (112 | ) | 2 | |||||||||||||||||||||
Commercial MBS | 10 | (1 | ) | 0 | 0 | (1 | ) | 8 | (7 | ) | 9 | |||||||||||||||||||||
Collateralized loan obligations | 48 | 3 | (3 | ) | 0 | (1 | ) | 0 | (47 | ) | 0 | |||||||||||||||||||||
Other asset-backed securities | 1,069 | 5 | 3 | 330 | (318 | ) | 152 | (215 | ) | 1,026 | ||||||||||||||||||||||
Corporate and other | 1,344 | 0 | 58 | 235 | (134 | ) | 295 | (69 | ) | 1,729 | ||||||||||||||||||||||
Total AFS fixed maturities | 2,677 | 7 | 39 | 565 | (470 | ) | 457 | (450 | ) | 2,825 | ||||||||||||||||||||||
Equity securities | 293 | 91 | 0 | 69 | (65 | ) | 0 | (7 | ) | 381 | ||||||||||||||||||||||
Total Level 3 assets | $ | 2,970 | $ | 98 | $ | 39 | $ | 634 | $ | (535 | ) | $ | 457 | $ | (457 | ) | $ | 3,206 | ||||||||||||||
Embedded derivatives | $ | (3,933 | ) | $ | (296 | ) | $ | 0 | $ | (283 | ) | $ | 304 | $ | 0 | $ | 0 | $ | (4,208 | ) | ||||||||||||
Total Level 3 liabilities | $ | (3,933 | ) | $ | (296 | ) | $ | 0 | $ | (283 | ) | $ | 304 | $ | 0 | $ | 0 | $ | (4,208 | ) | ||||||||||||
| Total realized/unrealized gains (losses) included in | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2019 | Net earnings | Other comprehensive income (loss) | Purchases and issuances | Sales and settlements | Transfer into Level 3 | Transfer out of Level 3 | Balance at December 31, 2020 | |||||||||||||||||||||||||
AFS fixed maturities: | ||||||||||||||||||||||||||||||||
U.S. government agency | $ | 15 | $ | 3 | $ | (3 | ) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 15 | |||||||||||||||
State and municipal | 65 | 0 | 4 | 0 | (3 | ) | 0 | (2 | ) | 64 | ||||||||||||||||||||||
Residential MBS | 128 | (6 | ) | (7 | ) | 0 | (13 | ) | 49 | (24 | ) | 127 | ||||||||||||||||||||
Commercial MBS | 29 | 0 | 0 | 0 | (3 | ) | 1 | (17 | ) | 10 | ||||||||||||||||||||||
Collateralized loan obligations | 14 | (5 | ) | 17 | 0 | 0 | 135 | (113 | ) | 48 | ||||||||||||||||||||||
Other asset-backed securities | 1,030 | (10 | ) | 14 | 296 | (282 | ) | 173 | (152 | ) | 1,069 | |||||||||||||||||||||
Corporate and other | 1,535 | 2 | 34 | 227 | (130 | ) | 128 | (452 | ) | 1,344 | ||||||||||||||||||||||
Total AFS fixed maturities | 2,816 | (16 | ) | 59 | 523 | (431 | ) | 486 | (760 | ) | 2,677 | |||||||||||||||||||||
Equity securities | 276 | (1 | ) | 0 | 35 | (12 | ) | 9 | (14 | ) | 293 | |||||||||||||||||||||
Total Level 3 assets | $ | 3,092 | $ | (17 | ) | $ | 59 | $ | 558 | $ | (443 | ) | $ | 495 | $ | (774 | ) | $ | 2,970 | |||||||||||||
Embedded derivatives (*) | $ | (3,730 | ) | $ | (283 | ) | $ | 0 | $ | (242 | ) | $ | 322 | $ | 0 | $ | 0 | $ | (3,933 | ) | ||||||||||||
Total Level 3 liabilities | $ | (3,730 | ) | $ | (283 | ) | $ | 0 | $ | (242 | ) | $ | 322 | $ | 0 | $ | 0 | $ | (3,933 | ) | ||||||||||||
| (*) | Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects a favorable adjustment related to the unlocking of actuarial assumptions of $ 240 million in 2020. |
| Total realized/unrealized gains (losses) included in | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2018 | Net earnings | Other comprehensive income (loss) | Purchases and issuances | Sales and settlements | Transfer into Level 3 | Transfer out of Level 3 | Balance at December 31, 2019 | |||||||||||||||||||||||||
AFS fixed maturities: | ||||||||||||||||||||||||||||||||
U.S. government agency | $ | 8 | $ | 0 | $ | 7 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 15 | ||||||||||||||||
State and municipal | 59 | 0 | 6 | 0 | (3 | ) | 10 | (7 | ) | 65 | ||||||||||||||||||||||
Residential MBS | 161 | 3 | (3 | ) | 0 | (18 | ) | 36 | (51 | ) | 128 | |||||||||||||||||||||
Commercial MBS | 48 | 2 | 0 | 0 | (13 | ) | 3 | (11 | ) | 29 | ||||||||||||||||||||||
Collateralized loan obligations | 85 | (4 | ) | 4 | 0 | 0 | 14 | (85 | ) | 14 | ||||||||||||||||||||||
Other asset-backed securities | 543 | 0 | 5 | 727 | (162 | ) | 23 | (106 | ) | 1,030 | ||||||||||||||||||||||
Corporate and other | 1,719 | (1 | ) | 53 | 378 | (250 | ) | 28 | (392 | ) | 1,535 | |||||||||||||||||||||
Total AFS fixed maturities | 2,623 | 0 | 72 | 1,105 | (446 | ) | 114 | (652 | ) | 2,816 | ||||||||||||||||||||||
Equity securities | 212 | 8 | 0 | 36 | (2 | ) | 22 | 0 | 276 | |||||||||||||||||||||||
Total Level 3 assets | $ | 2,835 | $ | 8 | $ | 72 | $ | 1,141 | $ | (448 | ) | $ | 136 | $ | (652 | ) | $ | 3,092 | ||||||||||||||
Embedded derivatives (*) | $ | (2,720 | ) | $ | (919 | ) | $ | 0 | $ | (333 | ) | $ | 242 | $ | 0 | $ | 0 | $ | (3,730 | ) | ||||||||||||
Total Level 3 liabilities | $ | (2,720 | ) | $ | (919 | ) | $ | 0 | $ | (333 | ) | $ | 242 | $ | 0 | $ | 0 | $ | (3,730 | ) | ||||||||||||
| (*) | Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives includes a favorable adjustment related to the unlocking of actuarial assumptions of $ 181 million in 2019. |
| Total realized/unrealized gains (losses) included in | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2017 | Net earnings | Other comprehensive income (loss) | Purchases and issuances | Sales and settlements | Transfer into Level 3 | Transfer out of Level 3 | Balance at December 31, 2018 | |||||||||||||||||||||||||
AFS fixed maturities: | ||||||||||||||||||||||||||||||||
U.S. government agency | $ | 8 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 8 | ||||||||||||||||
State and municipal | 72 | 0 | (3 | ) | 0 | (2 | ) | 0 | (8 | ) | 59 | |||||||||||||||||||||
Residential MBS | 99 | (5 | ) | (4 | ) | 0 | (18 | ) | 106 | (17 | ) | 161 | ||||||||||||||||||||
Commercial MBS | 34 | 0 | 0 | 14 | 0 | 0 | 0 | 48 | ||||||||||||||||||||||||
Collateralized loan obligations | 142 | (2 | ) | (9 | ) | 24 | (11 | ) | 2 | (61 | ) | 85 | ||||||||||||||||||||
Other asset-backed securities | 398 | 0 | (1 | ) | 292 | (171 | ) | 69 | (44 | ) | 543 | |||||||||||||||||||||
Corporate and other | 941 | (9 | ) | (18 | ) | 986 | (148 | ) | 26 | (59 | ) | 1,719 | ||||||||||||||||||||
Total AFS fixed maturities | 1,694 | (16 | ) | (35 | ) | 1,316 | (350 | ) | 203 | (189 | ) | 2,623 | ||||||||||||||||||||
Equity securities | 105 | (4 | ) | 0 | 106 | (4 | ) | 20 | (11 | ) | 212 | |||||||||||||||||||||
Total Level 3 assets | $ | 1,799 | $ | (20 | ) | $ | (35 | ) | $ | 1,422 | $ | (354 | ) | $ | 223 | $ | (200 | ) | $ | 2,835 | ||||||||||||
Embedded derivatives (*) | $ | (2,542 | ) | $ | 204 | $ | 0 | $ | (545 | ) | $ | 163 | $ | 0 | $ | 0 | $ | (2,720 | ) | |||||||||||||
Total Level 3 liabilities | $ | (2,542 | ) | $ | 204 | $ | 0 | $ | (545 | ) | $ | 163 | $ | 0 | $ | 0 | $ | (2,720 | ) | |||||||||||||
| (*) | Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives includes losses related to the unlocking of actuarial assumptions of $ 44 million in 2018. |
| Carrying | Fair Value | |||||||||||||||||||
| Value | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||
September 30, 2021 (unaudited) | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 1,308 | $ | 1,308 | $ | 1,308 | $ | 0 | $ | 0 | ||||||||||
Mortgage loans | 1,512 | 0 | 0 | 0 | 0 | |||||||||||||||
Policy loans | 142 | 142 | 0 | 0 | 0 | |||||||||||||||
Total financial assets not accounted for at fair value | $ | 2,962 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Financial liabilities: | ||||||||||||||||||||
Annuity benefits accumulated (*) | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
Total financial liabilities not accounted for at fair value | $ | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | ||||||||||
December 31, 2020 | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 1,151 | $ | 1,151 | $ | 1,151 | $ | 0 | $ | 0 | ||||||||||
Mortgage loans | 1,251 | 1,271 | 0 | 0 | 1,271 | |||||||||||||||
Policy loans | 151 | 151 | 0 | 0 | 151 | |||||||||||||||
Total financial assets not accounted for at fair value | $ | 2,553 | $ | 2,573 | $ | 1,151 | $ | 0 | $ | 1,422 | ||||||||||
Financial liabilities: | ||||||||||||||||||||
Annuity benefits accumulated (*) | $ | 41,460 | $ | 43,081 | $ | 0 | $ | 0 | $ | 43,081 | ||||||||||
Total financial liabilities not accounted for at fair value | $ | 41,460 | $ | 43,081 | $ | 0 | $ | 0 | $ | 43,081 | ||||||||||
December 31, 2019 | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 734 | $ | 734 | $ | 734 | $ | 0 | $ | 0 | ||||||||||
Mortgage loans | 1,072 | 1,081 | 0 | 0 | 1,081 | |||||||||||||||
Policy loans | 164 | 164 | 0 | 0 | 164 | |||||||||||||||
Total financial assets not accounted for at fair value | $ | 1,970 | $ | 1,979 | $ | 734 | $ | 0 | $ | 1,245 | ||||||||||
Financial liabilities: | ||||||||||||||||||||
Annuity benefits accumulated (*) | $ | 40,160 | $ | 40,182 | $ | 0 | $ | 0 | $ | 40,182 | ||||||||||
Total financial liabilities not accounted for at fair value | $ | 40,160 | $ | 40,182 | $ | 0 | $ | 0 | $ | 40,182 | ||||||||||
| (*) | Excludes $ 1.16 1.11 billion and $247 million of life contingent annuities in the payout phase at September 30, 2021 (unaudited), December 31, 2020 and 2019, respectively. |
| Asset (Liability) before Net Unrealized | Impact of Net Unrealized Gains on Securities | Carrying Value of Asset (Liability) | ||||||||||
September 30, 2021 (unaudited) | ||||||||||||
Fixed maturities | $ | 33,988 | $ | 2,095 | $ | 36,083 | ||||||
Deferred policy acquisition costs | 1,242 | (768 | ) | 474 | ||||||||
Annuity benefits accumulated | (44,089 | ) | (287 | ) | (44,376 | ) | ||||||
Life, accident and health reserves | (589 | ) | (3 | ) | (592 | ) | ||||||
Unearned revenue (included in other liabilities) | (25 | ) | 8 | (17 | ) | |||||||
Net unrealized gain, pretax | 1,045 | |||||||||||
Deferred tax on unrealized gain | (219 | ) | ||||||||||
Net unrealized gain, after tax (included in AOCI) | $ | 826 | ||||||||||
December 31, 2020 | ||||||||||||
Fixed maturities | $ | 31,570 | $ | 2,553 | $ | 34,123 | ||||||
Deferred policy acquisition costs | 1,236 | (934 | ) | 302 | ||||||||
Annuity benefits accumulated | (42,249 | ) | (324 | ) | (42,573 | ) | ||||||
Life, accident and health reserves | (607 | ) | (3 | ) | (610 | ) | ||||||
Unearned revenue (included in other liabilities) | (26 | ) | 11 | (15 | ) | |||||||
Net unrealized gain, pretax | 1,303 | |||||||||||
Deferred tax on unrealized gain | (274 | ) | ||||||||||
Net unrealized gain, after tax (included in AOCI) | $ | 1,029 | ||||||||||
December 31, 2019 | ||||||||||||
Fixed maturities | $ | 36,144 | $ | 1,755 | $ | 37,899 | ||||||
Deferred policy acquisition costs | 1,394 | (681 | ) | 713 | ||||||||
Annuity benefits accumulated | (40,186 | ) | (220 | ) | (40,406 | ) | ||||||
Unearned revenue (included in other liabilities) | (23 | ) | 11 | (12 | ) | |||||||
Net unrealized gain, pretax | 865 | |||||||||||
Deferred tax on unrealized gain | (182 | ) | ||||||||||
Net unrealized gain, after tax (included in AOCI) | $ | 683 | ||||||||||
| Amortized Cost | Allowance for Expected Credit Losses | Gross Unrealized | Net Unrealized | Fair Value | ||||||||||||||||||||
| Gains | Losses | |||||||||||||||||||||||
September 30, 2021 (unaudited) | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Government and government agencies | $ | 39 | $ | 0 | $ | 2 | $ | (16 | ) | $ | (14 | ) | $ | 25 | ||||||||||
States, municipalities and political subdivisions | 2,680 | 0 | 264 | 0 | 264 | 2,944 | ||||||||||||||||||
Foreign government | 31 | 0 | 3 | 0 | 3 | 34 | ||||||||||||||||||
Residential MBS | 2,362 | 2 | 166 | (8 | ) | 158 | 2,518 | |||||||||||||||||
Commercial MBS | 573 | 0 | 29 | 0 | 29 | 602 | ||||||||||||||||||
Collateralized loan obligations | 3,279 | 3 | 18 | (4 | ) | 14 | 3,290 | |||||||||||||||||
Other asset-backed securities | 7,982 | 10 | 142 | (48 | ) | 94 | 8,066 | |||||||||||||||||
Corporate and other | 17,057 | 0 | 1,563 | (16 | ) | 1,547 | 18,604 | |||||||||||||||||
Total fixed maturities | $ | 34,003 | $ | 15 | $ | 2,187 | $ | (92 | ) | $ | 2,095 | $ | 36,083 | |||||||||||
December 31, 2020 | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Government and government agencies | $ | 40 | $ | 0 | $ | 4 | $ | 0 | $ | 4 | $ | 44 | ||||||||||||
States, municipalities and political subdivisions | 3,053 | 0 | 371 | (2 | ) | 369 | 3,422 | |||||||||||||||||
Foreign government | 31 | 0 | 3 | 0 | 3 | 34 | ||||||||||||||||||
Residential MBS | 1,954 | 3 | 192 | (3 | ) | 189 | 2,140 | |||||||||||||||||
Commercial MBS | 659 | 0 | 40 | (1 | ) | 39 | 698 | |||||||||||||||||
Collateralized loan obligations | 3,490 | 10 | 24 | (13 | ) | 11 | 3,491 | |||||||||||||||||
Other asset-backed securities | 5,099 | 11 | 142 | (54 | ) | 88 | 5,176 | |||||||||||||||||
Corporate and other | 17,272 | 4 | 1,874 | (24 | ) | 1,850 | 19,118 | |||||||||||||||||
Total fixed maturities | $ | 31,598 | $ | 28 | $ | 2,650 | $ | (97 | ) | $ | 2,553 | $ | 34,123 | |||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Government and government agencies | $ | 38 | $ | 0 | $ | 7 | $ | 0 | $ | 7 | $ | 45 | ||||||||||||
States, municipalities and political subdivisions | 4,080 | 0 | 270 | (1 | ) | 269 | 4,349 | |||||||||||||||||
Foreign government | 31 | 0 | 3 | 0 | 3 | 34 | ||||||||||||||||||
Residential MBS | 1,909 | 0 | 193 | (3 | ) | 190 | 2,099 | |||||||||||||||||
Commercial MBS | 807 | 0 | 28 | 0 | 28 | 835 | ||||||||||||||||||
Collateralized loan obligations | 3,401 | 0 | 8 | (30 | ) | (22 | ) | 3,379 | ||||||||||||||||
Other asset-backed securities | 5,265 | 0 | 138 | (16 | ) | 122 | 5,387 | |||||||||||||||||
Corporate and other | 20,613 | 0 | 1,176 | (18 | ) | 1,158 | 21,771 | |||||||||||||||||
Total fixed maturities | $ | 36,144 | $ | 0 | $ | 1,823 | $ | (68 | ) | $ | 1,755 | $ | 37,899 | |||||||||||
| September 30, 2021 (unaudited) | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
| Fair Value | Fair Value | Fair Value | ||||||||||||||||||||||||||||||||||
| over (under) | over (under) | over (under) | ||||||||||||||||||||||||||||||||||
| Actual Cost | Fair Value | Cost | Actual Cost | Fair Value | Cost | Actual Cost | Fair Value | Cost | ||||||||||||||||||||||||||||
Common stocks | $ | 0 | $ | 241 | $ | 0 | $ | 423 | $ | 412 | $ | (11 | ) | $ | 497 | $ | 552 | $ | 55 | |||||||||||||||||
Perpetual preferred stocks | 0 | 407 | 0 | 333 | 361 | 28 | 249 | 257 | 8 | |||||||||||||||||||||||||||
Total equity securities carried at fair value | $ | 0 | $ | 648 | $ | 0 | $ | 756 | $ | 773 | $ | 17 | $ | 746 | $ | 809 | $ | 63 | ||||||||||||||||||
| Less Than Twelve Months | Twelve Months or More | |||||||||||||||||||||||
| Unrealized Loss | | Fair Value | | Fair Value as % of Cost | | Unrealized Loss | | Fair Value | | Fair Value as % of Cost | | |||||||||||||
September 30, 2021 (unaudited) | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Government and government agencies | $ | (16 | ) | $ | 1 | 6 | % | $ | 0 | $ | 0 | 0 | % | |||||||||||
States, municipalities and political subdivisions | 0 | 5 | 100 | % | 0 | 0 | 0 | % | ||||||||||||||||
Residential MBS | (6 | ) | 907 | 99 | % | (2 | ) | 20 | 91 | % | ||||||||||||||
Commercial MBS | 0 | 9 | 100 | % | 0 | 0 | 0 | % | ||||||||||||||||
Collateralized loan obligations | (3 | ) | 433 | 99 | % | (1 | ) | 259 | 100 | % | ||||||||||||||
Other asset-backed securities | (37 | ) | 2,410 | 98 | % | (11 | ) | 314 | 97 | % | ||||||||||||||
Corporate and other | (13 | ) | 723 | 98 | % | (3 | ) | 139 | 98 | % | ||||||||||||||
Total fixed maturities | $ | (75 | ) | $ | 4,488 | 98 | % | $ | (17 | ) | $ | 732 | 98 | % | ||||||||||
December 31, 2020 | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Government and government agencies | $ | 0 | $ | 0 | 0 | % | $ | 0 | $ | 0 | 0 | % | ||||||||||||
States, municipalities and political subdivisions | (2 | ) | 80 | 98 | % | 0 | 0 | 0 | % | |||||||||||||||
Residential MBS | (2 | ) | 124 | 98 | % | (1 | ) | 23 | 96 | % | ||||||||||||||
Commercial MBS | (1 | ) | 32 | 97 | % | 0 | 5 | 100 | % | |||||||||||||||
Collateralized loan obligations | (2 | ) | 496 | 100 | % | (11 | ) | 1,256 | 99 | % | ||||||||||||||
Other asset-backed securities | (35 | ) | 974 | 97 | % | (19 | ) | 295 | 94 | % | ||||||||||||||
Corporate and other | (20 | ) | 724 | 97 | % | (4 | ) | 107 | 96 | % | ||||||||||||||
Total fixed maturities | $ | (62 | ) | $ | 2,430 | 98 | % | $ | (35 | ) | $ | 1,686 | 98 | % | ||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Government and government agencies | $ | 0 | $ | 0 | 0 | % | $ | 0 | $ | 0 | 0 | % | ||||||||||||
States, municipalities and political subdivisions | (1 | ) | 105 | 99 | % | 0 | 5 | 100 | % | |||||||||||||||
Residential MBS | (2 | ) | 315 | 99 | % | (1 | ) | 15 | 94 | % | ||||||||||||||
Commercial MBS | 0 | 11 | 100 | % | 0 | 0 | 0 | % | ||||||||||||||||
Collateralized loan obligations | (9 | ) | 995 | 99 | % | (21 | ) | 1,363 | 98 | % | ||||||||||||||
Other asset-backed securities | (11 | ) | 838 | 99 | % | (5 | ) | 91 | 95 | % | ||||||||||||||
Corporate and other | (11 | ) | 937 | 99 | % | (7 | ) | 202 | 97 | % | ||||||||||||||
Total fixed maturities | $ | (34 | ) | $ | 3,201 | 99 | % | $ | (34 | ) | $ | 1,676 | 98 | % | ||||||||||
| Structured Securities (*) | Corporate and other | Total | ||||||||||
Balance at January 1, 2020 | $ | 0 | $ | 0 | $ | 0 | ||||||
Impact of adoption of new accounting policy | 0 | 0 | 0 | |||||||||
Initial allowance for purchased securities with credit deterioration | 1 | 0 | 1 | |||||||||
Provision for expected credit losses on securities with no previous allowance | 28 | 23 | 51 | |||||||||
Additions (reductions) to previously recognized expected credit losses | (5 | ) | (14 | ) | (19 | ) | ||||||
Reductions due to sales or redemptions | 0 | (5 | ) | (5 | ) | |||||||
Balance at December 31, 2020 | $ | 24 | $ | 4 | $ | 28 | ||||||
Balance at January 1, 2021 | $ | 24 | $ | 4 | $ | 28 | ||||||
Impact of adoption of new accounting policy | 0 | 0 | 0 | |||||||||
Initial allowance for purchased securities with credit deterioration | 0 | 0 | 0 | |||||||||
Provision for expected credit losses on securities with no previous allowance | 0 | 1 | 1 | |||||||||
Additions (reductions) to previously recognized expected credit losses | (7 | ) | (1 | ) | (8 | ) | ||||||
Reductions due to sales or redemptions | (2 | ) | (4 | ) | (6 | ) | ||||||
Balance at September 30, 2021 (unaudited) | $ | 15 | $ | 0 | $ | 15 | ||||||
| (*) | Includes mortgage-backed securities, collateralized loan obligations and other asset-backed securities. |
| September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||
| Amortized | Fair Value | Amortized | Fair Value | |||||||||||||||||||||
| Cost, net (*) | Amount | % | Cost, net (*) | Amount | % | |||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||
Maturity | ||||||||||||||||||||||||
One year or less | $ | 1,577 | $ | 1,617 | 4 | % | $ | 1,975 | $ | 1,995 | 6 | % | ||||||||||||
After one year through five years | 8,006 | 8,652 | 24 | % | 7,761 | 8,442 | 25 | % | ||||||||||||||||
After five years through ten years | 7,032 | 7,860 | 22 | % | 8,198 | 9,402 | 28 | % | ||||||||||||||||
After ten years | 3,192 | 3,478 | 10 | % | 2,458 | 2,779 | 8 | % | ||||||||||||||||
| 19,807 | 21,607 | 60 | % | 20,392 | 22,618 | 67 | % | |||||||||||||||||
Collateralized loan obligations and other ABS (average life of approximately 4 years) | 11,248 | 11,356 | 31 | % | 8,568 | 8,667 | 25 | % | ||||||||||||||||
MBS (average life of approximately 3 -1/2 | 2,933 | 3,120 | 9 | % | 2,610 | 2,838 | 8 | % | ||||||||||||||||
Total | $ | 33,988 | $ | 36,083 | 100 | % | $ | 31,570 | $ | 34,123 | 100 | % | ||||||||||||
| (*) | Amortized cost, net of allowance for expected credit losses |
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||
Investment income: | ||||||||||||||||||||
Fixed maturities | $ | 1,059 | $ | 1,216 | $ | 1,577 | $ | 1,600 | $ | 1,450 | ||||||||||
Equity securities: | ||||||||||||||||||||
Dividends | 14 | 22 | 28 | 34 | 30 | |||||||||||||||
Change in fair value (*) | 36 | 3 | 17 | 17 | 13 | |||||||||||||||
Equity in earnings of partnerships and similar investments | 169 | 14 | 48 | 90 | 96 | |||||||||||||||
Mortgage loans | 43 | 40 | 54 | 43 | 45 | |||||||||||||||
Policy loans | 6 | 7 | 9 | 9 | 10 | |||||||||||||||
Real estate and other | 27 | (7 | ) | 7 | 36 | 26 | ||||||||||||||
Gross investment income | 1,354 | 1,295 | 1,740 | 1,829 | 1,670 | |||||||||||||||
Investment expenses | (24 | ) | (12 | ) | (23 | ) | (16 | ) | (13 | ) | ||||||||||
Net investment income | $ | 1,330 | $ | 1,283 | $ | 1,717 | $ | 1,813 | $ | 1,657 | ||||||||||
| (*) | Although the change in the fair value of the majority of GALIC’s equity securities is recorded in realized gains (losses) on securities, GALIC records holding gains and losses in net investment income on equity securities classified as “trading” under previous guidance and on a small portfolio of limited partnership and similar investments that do not qualify for the equity method of accounting. |
| Nine months ended September 30, 2021 (unaudited) | Nine months ended September 30, 2020 (unaudited) | |||||||||||||||||||||||||||||||
| Realized gains (losses) | Realized gains (losses) | |||||||||||||||||||||||||||||||
| Before Impairments | Impairments | Total | Change in Unrealized | Before Impairments | Impairments | Total | Change in Unrealized | |||||||||||||||||||||||||
Fixed maturitie s | $ | 21 | $ | 7 | $ | 28 | $ | (458 | ) | $ | 38 | $ | (43 | ) | $ | (5 | ) | $ | 933 | |||||||||||||
Equity securities | 84 | 0 | 84 | 0 | (111 | ) | 0 | (111 | ) | 0 | ||||||||||||||||||||||
Mortgage loans and other investments | 3 | 0 | 3 | 0 | 3 | 0 | 3 | 0 | ||||||||||||||||||||||||
Other (*) | (1 | ) | (2 | ) | (3 | ) | 200 | (6 | ) | 14 | 8 | (526 | ) | |||||||||||||||||||
Total pretax | 107 | 5 | 112 | (258 | ) | (76 | ) | (29 | ) | (105 | ) | 407 | ||||||||||||||||||||
Tax effects | (22 | ) | (1 | ) | (23 | ) | 55 | 16 | 6 | �� | 22 | (85 | ) | |||||||||||||||||||
Net of tax | $ | 85 | $ | 4 | $ | 89 | $ | (203 | ) | $ | (60 | ) | $ | (23 | ) | $ | (83 | ) | $ | 322 | ||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||||||||||
| Realized gains (losses) | Realized gains (losses) | |||||||||||||||||||||||||||||||
| Before Impairments | Impairments | Total | Change in Unrealized | Before Impairments | Impairments | Total | Change in Unrealized | |||||||||||||||||||||||||
Fixed maturities | $ | 461 | $ | (32 | ) | $ | 429 | $ | 798 | $ | 19 | $ | (21 | ) | $ | (2 | ) | $ | 1,647 | |||||||||||||
Equity securities | (27 | ) | 0 | (27 | ) | 0 | 122 | 0 | 122 | 0 | ||||||||||||||||||||||
Mortgage loans and other investments | 3 | 0 | 3 | 0 | 2 | 0 | 2 | 0 | ||||||||||||||||||||||||
Other (*) | (51 | ) | 11 | (40 | ) | (360 | ) | (1 | ) | 11 | 10 | (835 | ) | |||||||||||||||||||
Total pretax | 386 | (21 | ) | 365 | 438 | 142 | (10 | ) | 132 | 812 | ||||||||||||||||||||||
Tax effects | (81 | ) | 4 | (77 | ) | (92 | ) | (30 | ) | 2 | (28 | ) | (171 | ) | ||||||||||||||||||
Net of tax | $ | 305 | $ | (17 | ) | $ | 288 | $ | 346 | $ | 112 | $ | (8 | ) | $ | 104 | $ | 641 | ||||||||||||||
| 2018 | ||||||||||||||||
| Realized gains (losses) | ||||||||||||||||
| Before Impairments | Impairments | Total | Change in Unrealized | |||||||||||||
Fixed maturitie s | $ | 5 | $ | (21 | ) | $ | (16 | ) | $ | (1,057 | ) | |||||
Equity securities | (107 | ) | 0 | (107 | ) | 0 | ||||||||||
Mortgage loans and other investments | 0 | 0 | 0 | 0 | ||||||||||||
Other (*) | 11 | 7 | 18 | 502 | ||||||||||||
Total pretax | (91 | ) | (14 | ) | (105 | ) | (555 | ) | ||||||||
Tax effects | 19 | 3 | 22 | 117 | ||||||||||||
Net of tax | $ | (72 | ) | $ | (11 | ) | $ | (83 | ) | $ | (438 | ) | ||||
| (*) | Primarily adjustments to deferred policy acquisition costs and reserves related to the annuity business. |
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||
| 2021 | 2020 | 2020 | 2019 | |||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Included in realized gains (losses) | $ | 50 | $ | (126 | ) | $ | (25 | ) | $ | 123 | ||||||
Included in net investment income | 35 | 3 | 11 | 17 | ||||||||||||
| $ | 85 | $ | (123 | ) | $ | (14 | ) | $ | 140 | |||||||
(Unaudited) Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
Gross gains | $ | 82 | $ | 69 | $ | 514 | $ | 30 | $ | 17 | ||||||||||
Gross losses | (1 | ) | (30 | ) | (51 | ) | (16 | ) | (12 | ) | ||||||||||
| September 30, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||
Derivative | Balance Sheet Line | Asset | Liability | Asset | Liability | Asset | Liability | |||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||||
MBS with embedded derivatives | Fixed maturities | $ | 117 | $ | — | $ | 137 | $ | — | $ | 74 | $ | — | |||||||||||||
Public company warrants | Equity securities | — | — | — | — | — | — | |||||||||||||||||||
Fixed-indexed and registered index-linked annuities (embedded derivative) | Annuity benefits accumulated | — | 4,208 | — | 3,933 | — | 3,730 | |||||||||||||||||||
Equity index call options | Equity index call options | 646 | — | 825 | — | 924 | — | |||||||||||||||||||
Equity index put options | Other liabilities | — | (14 | ) | — | 5 | — | 1 | ||||||||||||||||||
Reinsurance contract (embedded derivative) | Other liabilities | — | 5 | — | 5 | — | 4 | |||||||||||||||||||
| $ | 763 | $ | 4,199 | $ | 962 | $ | 3,943 | $ | 998 | $ | 3,735 | |||||||||||||||
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||||
Derivative | Statement of Earnings Line | 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||
MBS with embedded derivative s | Realized gains (losses) on securities | $ | (18 | ) | $ | 2 | $ | (2 | ) | $ | 5 | $ | (4 | ) | ||||||||
Public company warrants | Realized gains (losses) on securities | 0 | 0 | 0 | 0 | (3 | ) | |||||||||||||||
Fixed-indexed and registered index-linked annuities (embedded derivative) (*) | Annuity benefits | 296 | 41 | (283 | ) | (919 | ) | 204 | ||||||||||||||
Equity index call options | Annuity benefits | 282 | (42 | ) | 223 | 804 | (298 | ) | ||||||||||||||
Equity index put options | Annuity benefits | 5 | 1 | 3 | 2 | (1 | ) | |||||||||||||||
Reinsurance contract (embedded derivative) | Net investment income | 0 | 0 | (1 | ) | (2 | ) | 2 | ||||||||||||||
| $ | 565 | $ | 2 | $ | (60 | ) | $ | (110 | ) | $ | (100 | ) | ||||||||||
| (*) | The change in fair value of the embedded derivative includes a favorable adjustment related to unlocking of actuarial assumptions of $240 million in 2020 and $181 million in 2019 and losses of $44 million in 2018. |
| Deferred Costs | Sales Inducements | PVFP | Subtotal | Unrealized (*) | Total | |||||||||||||||||||
Balance at December 31, 2017 | $ | 1,214 | $ | 102 | $ | 49 | $ | 1,365 | $ | (422 | ) | $ | 943 | |||||||||||
Additions | 263 | 2 | — | 265 | — | 265 | ||||||||||||||||||
Amortization: | ||||||||||||||||||||||||
Periodic amortization | (237 | ) | (19 | ) | (7 | ) | (263 | ) | — | (263 | ) | |||||||||||||
Annuity unlocking | 29 | 0 | 0 | 29 | — | 29 | ||||||||||||||||||
Included in realized gains | 14 | 1 | — | 15 | — | 15 | ||||||||||||||||||
Other | — | — | 0 | 0 | — | 0 | ||||||||||||||||||
Change in unrealized | — | — | — | 0 | 392 | 392 | ||||||||||||||||||
Balance at December 31, 2018 | 1,283 | 86 | 42 | 1,411 | (30 | ) | 1,381 | |||||||||||||||||
Additions | 206 | 2 | — | 208 | — | 208 | ||||||||||||||||||
Amortization: | ||||||||||||||||||||||||
Periodic amortization | (120 | ) | (13 | ) | (6 | ) | (139 | ) | — | (139 | ) | |||||||||||||
Annuity unlocking | (76 | ) | (1 | ) | 0 | (77 | ) | — | (77 | ) | ||||||||||||||
Included in realized gains | 8 | 1 | — | 9 | — | 9 | ||||||||||||||||||
Change in unrealized | — | — | — | 0 | (669 | ) | (669 | ) | ||||||||||||||||
Balance at December 31, 2019 | 1,301 | 75 | 36 | 1,412 | (699 | ) | 713 | |||||||||||||||||
Additions | 155 | 2 | — | 157 | — | 157 | ||||||||||||||||||
Amortization: | ||||||||||||||||||||||||
Periodic amortization | (126 | ) | (9 | ) | (6 | ) | (141 | ) | — | (141 | ) | |||||||||||||
Annuity unlocking | (118 | ) | 4 | 0 | (114 | ) | — | (114 | ) | |||||||||||||||
Included in realized gains | (42 | ) | 1 | — | (41 | ) | — | (41 | ) | |||||||||||||||
Change in unrealized | — | — | — | 0 | (272 | ) | (272 | ) | ||||||||||||||||
Balance at December 31, 2020 | $ | 1,170 | $ | 73 | $ | 30 | $ | 1,273 | $ | (971 | ) | $ | 302 | |||||||||||
Additions (unaudited) | 185 | 0 | — | 185 | — | 185 | ||||||||||||||||||
Amortization: | ||||||||||||||||||||||||
Periodic amortization (unaudited) | (182 | ) | (6 | ) | (4 | ) | (192 | ) | — | (192 | ) | |||||||||||||
Annuity unlocking (unaudited) | 0 | 0 | 0 | 0 | — | 0 | ||||||||||||||||||
Included in realized gains (unaudited) | (3 | ) | 0 | — | (3 | ) | — | (3 | ) | |||||||||||||||
Change in unrealized (unaudited) | — | — | — | 0 | 182 | 182 | ||||||||||||||||||
Balance at September 30, 2021 (unaudited) | $ | 1,170 | $ | 67 | $ | 26 | $ | 1,263 | $ | (789 | ) | $ | 474 | |||||||||||
| (*) | Adjustments to DPAC related to net unrealized gains/losses on securities and cash flow hedges. |
| Other Comprehensive Income (Loss) | ||||||||||||||||||||||||
| AOCI Beginning Balance | Pretax | Tax | Net of tax | Other (b) | AOCI Ending Balance | |||||||||||||||||||
Nine months ended September 30, 2021 (unaudited) | ||||||||||||||||||||||||
Net unrealized gains (losses) on securities: | ||||||||||||||||||||||||
Unrealized holding losses on securities arising during the period | $ | (233 | ) | $ | 49 | $ | (184 | ) | ||||||||||||||||
Reclassification adjustment for realized (gains) losses included in net earnings (a) | (25 | ) | 6 | (19 | ) | |||||||||||||||||||
Total net unrealized gains (losses) on securities (b) | $ | 1,029 | (258 | ) | 55 | (203 | ) | $ | — | $ | 826 | |||||||||||||
Net unrealized losses on cash flow hedges | 41 | (24 | ) | 5 | (19 | ) | — | 22 | ||||||||||||||||
Total | $ | 1,070 | $ | (282 | ) | $ | 60 | $ | (222 | ) | $ | — | $ | 848 | ||||||||||
Year ended December 31, 2020 | ||||||||||||||||||||||||
Net unrealized gains on securities: | ||||||||||||||||||||||||
Unrealized holding gains on securities arising during the period | $ | 834 | $ | (175 | ) | $ | 659 | |||||||||||||||||
Reclassification adjustment for realized (gains) losses included in net earnings (a) | (396 | ) | 83 | (313 | ) | |||||||||||||||||||
Total net unrealized gains on securities | $ | 683 | 438 | (92 | ) | 346 | $ | — | $ | 1,029 | ||||||||||||||
Net unrealized gains (losses) on cash flow hedges | 17 | 30 | (6 | ) | 24 | — | 41 | |||||||||||||||||
Total | $ | 700 | $ | 468 | $ | (98 | ) | $ | 370 | $ | — | $ | 1,070 | |||||||||||
Year ended December 31, 2019 | ||||||||||||||||||||||||
Net unrealized gains (losses) on securities: | ||||||||||||||||||||||||
Unrealized holding losses on securities arising during the period | $ | 828 | $ | (174 | ) | $ | 654 | |||||||||||||||||
Reclassification adjustment for realized (gains) losses included in net earnings (a) | (16 | ) | 3 | (13 | ) | |||||||||||||||||||
Total net unrealized gains (losses) on securities | $ | 42 | 812 | (171 | ) | 641 | $ | — | $ | 683 | ||||||||||||||
Net unrealized gains (losses) on cash flow hedges | (11 | ) | 36 | (8 | ) | 28 | — | 17 | ||||||||||||||||
Total | $ | 31 | $ | 848 | $ | (179 | ) | $ | 669 | $ | — | $ | 700 | |||||||||||
Year ended December 31, 2018 | ||||||||||||||||||||||||
Net unrealized gains on securities: | ||||||||||||||||||||||||
Unrealized holding gains on securities arising during the period | $ | (561 | ) | $ | 118 | $ | (443 | ) | ||||||||||||||||
Reclassification adjustment for realized (gains) losses included in net earnings (a) | 6 | (1 | ) | 5 | ||||||||||||||||||||
Total net unrealized gains on securities | $ | 570 | (555 | ) | 117 | (438 | ) | $ | (90 | ) | $ | 42 | ||||||||||||
Net unrealized losses on cash flow hedges | (13 | ) | 2 | 0 | 2 | 0 | (11 | ) | ||||||||||||||||
Total | $ | 557 | $ | (553 | ) | $ | 117 | $ | (436 | ) | $ | (90 | ) | $ | 31 | |||||||||
| (a) | The reclassification adjustment out of net unrealized gains on securities affected the following lines in GALIC’s Statement of Earnings: |
OCI component | Affected line in the statement of earnings | |
| Pretax | Realized gains (losses) on securities | |
| Tax | Provision for income taxes |
| (b) | On January 1, 2018, GALIC adopted new guidance that requires all equity securities other than those accounted for under the equity method to be reported at fair value with holding gains and losses recognized in net earnings. At the date of |
| adoption, the $90 million net unrealized gain on equity securities classified as available for sale (with unrealized holding gains and losses reported in AOCI) under the prior guidance was reclassified from AOCI to retained earnings as the cumulative effect of an accounting change. |
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||||
| Amount | % of EBT | Amount | % of EBT | Amount | % of EBT | Amount | % of EBT | Amount | % of EBT | |||||||||||||||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||||||||||||||||||
Earnings before income taxes (“EBT”) | $ | 417 | $ | (22 | ) | $ | 529 | $ | 497 | $ | 256 | |||||||||||||||||||||||||||||
Income taxes at statutory rate | $ | 88 | 21 | % | $ | (5 | ) | (23 | %) | $ | 111 | 21 | % | $ | 104 | 21 | % | $ | 54 | 21 | % | |||||||||||||||||||
Effect of permanent items | 19 | 5 | % | (3 | ) | (13 | %) | (4 | ) | (1 | %) | (2 | ) | 0 | % | (7 | ) | (3 | %) | |||||||||||||||||||||
Provision for income taxes as shown in the statement of earnings | $ | 107 | 26 | % | $ | (8 | ) | (36 | )% | $ | 107 | 20 | % | $ | 102 | 21 | % | $ | 47 | 18 | % | |||||||||||||||||||
| 2020 | 2019 | 2018 | ||||||||||
Current taxes: | ||||||||||||
Federal | $ | 60 | $ | 152 | $ | 130 | ||||||
State | 2 | 4 | 3 | |||||||||
Deferred taxes: | ||||||||||||
Federal | 45 | (54 | ) | (86 | ) | |||||||
Provision for income taxes | $ | 107 | $ | 102 | $ | 47 | ||||||
| 2020 | 2019 | |||||||||||||||||||||||
| Excluding Unrealized Gains | Impact of Unrealized Gains | Total | Excluding Unrealized Gains | Impact of Unrealized Gains | Total | |||||||||||||||||||
Deferred tax assets: | ||||||||||||||||||||||||
Insurance claims and reserve s | $ | 531 | $ | 68 | $ | 599 | $ | 601 | $ | 46 | $ | 647 | ||||||||||||
Other, net | 10 | (2 | ) | 8 | 7 | (2 | ) | 5 | ||||||||||||||||
Total deferred tax assets | 541 | 66 | 607 | 608 | 44 | 652 | ||||||||||||||||||
Deferred tax liabilities: | ||||||||||||||||||||||||
Investment securities | (97 | ) | (537 | ) | (634 | ) | (78 | ) | (369 | ) | (447 | ) | ||||||||||||
Deferred policy acquisition costs | (212 | ) | 197 | (15 | ) | (236 | ) | 143 | (93 | ) | ||||||||||||||
Insurance claims and reserves transition liability | (57 | ) | 0 | (57 | ) | (68 | ) | 0 | (68 | ) | ||||||||||||||
Total deferred tax liabilities | (366 | ) | (340 | ) | (706 | ) | (382 | ) | (226 | ) | (608 | ) | ||||||||||||
Net deferred tax asset (liability) | $ | 175 | $ | (274 | ) | $ | (99 | ) | $ | 226 | $ | (182 | ) | $ | 44 | |||||||||
| Net Earnings | Capital and Surplus | |||||||||||||||||||
| 2020 | 2019 | 2018 | 2020 | 2019 | ||||||||||||||||
GALIC consolidated life insurance companies | $ | 209 | $ | 34 | $ | 802 | $ | 2,897 | $ | 2,868 | ||||||||||
| Recoverables from Reinsurers | ||||
Balance at January 1 | $ | 0 | ||
Impact of adoption of new accounting policy | 5 | |||
Provision for expected credit losses | 2 | |||
Balance at December 31 | $ | 7 | ||
| 2020 | 2019 | |||||||
Expected death and annuitization | $ | 260 | $ | 232 | ||||
Guaranteed withdrawal benefits | 817 | 625 | ||||||
Accrued persistency and premium bonuses | 0 | 1 | ||||||
Segment | Deferred policy acquisition costs | Reserves for future policy benefits and claims | Net earned premiums | Net investment income | Benefits, claims, losses and settlement expenses | Amortization of deferred policy acquisition costs | Other operating expenses | |||||||||||||||||||||
2020 | ||||||||||||||||||||||||||||
Annuity | $ | 286 | $ | 42,573 | $ | 0 | $ | 1,700 | $ | 1,192 | $ | 246 | $ | 188 | ||||||||||||||
Run-off life | 16 | 610 | 22 | 17 | 40 | 3 | 10 | |||||||||||||||||||||
Total | $ | 302 | $ | 43,183 | $ | 22 | $ | 1,717 | $ | 1,232 | $ | 249 | $ | 198 | ||||||||||||||
2019 | ||||||||||||||||||||||||||||
Annuity | $ | 694 | $ | 40,406 | $ | 0 | $ | 1,792 | $ | 1,151 | $ | 198 | $ | 188 | ||||||||||||||
Run-off life | 19 | 612 | 22 | 21 | 36 | 4 | 7 | |||||||||||||||||||||
Total | $ | 713 | $ | 41,018 | $ | 22 | $ | 1,813 | $ | 1,187 | $ | 202 | $ | 195 | ||||||||||||||
2018 | ||||||||||||||||||||||||||||
Annuity | $ | 1,358 | $ | 36,616 | $ | 0 | $ | 1,638 | $ | 998 | $ | 211 | $ | 174 | ||||||||||||||
Run-off life | 23 | 635 | 24 | 19 | 37 | 4 | 11 | |||||||||||||||||||||
Total | $ | 1,381 | $ | 37,251 | $ | 24 | $ | 1,657 | $ | 1,035 | $ | 215 | $ | 185 | ||||||||||||||
| • | The Cap for a Term is the largest rise in the Index over the Term taken into account to determine the Strategy value at the end of the Term. We can change the Cap for each new Term of an Indexed Strategy. It will never be less than 1%. At least 10 days before the start of any Term, we will post the Caps for that Term on our website (www.gaig.com/RILArates). |
| • | If the rise in the Index is greater than or equal to the Cap, the increase applied to the remaining Investment Base for the Term will be limited to the Cap and will be less than the rise in the Index. |
| • | If the rise in the Index is less than the Cap, the increase for the Term will be less than the Cap and will equal the rise in the Index applied to the remaining Investment Base. |
| • | In both cases, the increase for a Term will always be less than the Cap or the rise in the Index because the Daily Charge is subtracted from the Investment Base before applying the increase for the Index performance. |
| • | The Upside Participation Rate for a Term is the portion of any rise in the Index over the Term that is taken into account to determine the Strategy value at the end of the Term. We can change the Upside Participation Rate for each new Term of an Indexed Strategy. It never will be less than 5%. At least 10 days before the start of any Term, we will post the Upside Participation Rates for that Term on our website (www.gaig.com/RILArates). The increase for the Term will be less than the rise in the Index unless the Participation Rate for the Term exceeds 100%. The increase for a Term will be less than the Upside Participation Rate multiplied by the rise in the Index because the Daily Charge is subtracted from the Investment Base before applying the increase for Index performance. |
| • | The Downside Participation Rate is the portion of any fall in the Index over the Term taken into account to determine the Strategy value at the end of the Term. For each Term of each Indexed Strategy that we currently offer with this Contract, the Downside Participation Rate is 50%. In addition to the Daily Charge, the decrease for the Term will be only half of the fall in the Index. |
• | The Contract is not insured by the FDIC (Federal Deposit Insurance Corporation) or the NCUSIF (National Credit Union Share Insurance Fund). |
• | Although the Contract may be sold through relationships with banks or other financial institutions, the Contract is not a deposit or obligation of, or guaranteed by, such institutions or any federal regulatory agency. |
• | The Contract is a security. It involves investment risk and may lose value. There is a risk of loss of principal under the Contract and that loss can become greater due to Early Withdrawal Charges. |
• | All guarantees under the Contract are the obligations of Great American Life and are subject to the credit worthiness and claims-paying ability of Great American Life. |
| 6 | ||||
| 6 | ||||
| 9 | ||||
| 10 | ||||
| 15 | ||||
| 21 | ||||
| 25 | ||||
| 28 | ||||
| 29 | ||||
| 30 | ||||
| 33 | ||||
| 34 | ||||
| 34 | ||||
| 36 | ||||
| 37 | ||||
| 37 | ||||
| 37 | ||||
| 39 | ||||
| 40 | ||||
| 42 | ||||
| 45 | ||||
| 46 | ||||
| 47 | ||||
| 47 | ||||
| 47 | ||||
| 48 | ||||
| 49 | ||||
| 49 | ||||
| 50 | ||||
| 51 | ||||
| 55 | ||||
| 55 | ||||
| 56 | ||||
| 57 | ||||
| 58 | ||||
| 58 | ||||
| 58 | ||||
| 60 | ||||
| 71 | ||||
| 76 |
| • | complete and satisfactory to us; |
| • | sent to us on our form or in a manner satisfactory to us, which may, at our discretion, be by telephone or electronic means; and |
| • | received at our administrative office. |
| • | For strategies with a Cap, the Net Option Price as of a Market Close is equal to: (1) the ATM Call Option Price at that Market Close; minus (2) the OTM Call Option Price at that Market Close; and minus (3) the ATM Put Option Price at that Market Close multiplied by the Downside Participation Rate. |
| • | For strategies with an Upside Participation Rate, the Net Option Price as of a Market Close is equal to: (1) the ATM Call Option Price at a Market Close multiplied by the Upside Participation Rate; minus (2) the ATM Put Option Price at that Market Close multiplied by the Downside Participation Rate. |
| • | The Annuity Payout Benefit |
| • | The Cash Benefit |
| • | The Death Benefit |
| • | Once the last Market Day of the Term has been reached, the value of an Indexed Strategy is equal to the remaining Investment Base increased for any rise in the applicable Index over that Term or decreased for any fall in the applicable Index over that Term. Any increase for the Term is limited by the Cap or Upside Participation Rate for the Term. Any decrease for the Term is limited by the Downside Participation Rate. |
| • | On each day before the last Market Day of the Term, the value of an Indexed Strategy is equal to the remaining Investment Base increased or decreased by the Daily Value Percentage as of the most recent Market Close. |
| • | If the Strategy value immediately before the withdrawal is greater than the Investment Base, then the proportional reduction in the Investment Base will be less than the withdrawal and the related Early Withdrawal Charge. |
| • | If the Strategy value immediately before the withdrawal is less than the Investment Base, then the proportional reduction in the Investment Base will be greater than the withdrawal and the related Early Withdrawal Charge. |
On Day 73 of the Term | On Day 219 of the Term | |||||||
Investment Base Calculation | ||||||||
Initial Investment Base | $100,000 | $100,000 | ||||||
Accumulated Daily Charges | | $150 = ($100,000 - ($100,000 x (1 - 0.0000206251) ^ 73) | | $451 = ($100,000 - ($100,000 x (1 - 0.0000206251) ^ 219) | ||||
Investment Base After Daily Charges | | $99,850 = ($100,000 - $150) | | | $99,549 = ($100,000 - $451) | | ||
| (a) | When the Index rises over a Term, the resulting Strategy Value increase will be smaller than the rise in the Index applied to the initial Investment Base. This is because the Daily Charge reduces the Investment Base before the Index rise is taken into account. (Note: this would not apply if the Upside Participation Rate were to exceed 100% to the extent needed to offset the Daily Charge). |
| (b) | When the Index falls over a Term, the resulting Strategy Value decrease will be larger than 50% of the Index fall applied to the initial Investment Base. This is because the Daily Charge reduces the Investment Base before the Index fall is taken into account. |
| • | The Net Option Price is the calculated price of hypothetical options that represent the projected change in the applicable Index over the full Term. The calculated price takes into account the applicable Cap or Upside Participation Rate and the Downside Participation Rate. |
| • | For strategies with a Cap, the Net Option Price as of a Market Close is a percentage equal to: (1) the ATM Call Option Price at that Market Close; minus (2) the OTM Call Option Price at that Market Close; and minus (3) the ATM Put Option Price at that Market Close multiplied by the Downside Participation Rate. |
| • | For strategies with an Upside Participation Rate, the Net Option Price as of a Market Close is a percentage equal to: (1) the ATM Call Option Price at a Market Close multiplied by the Upside Participation Rate; minus (2) the ATM Put Option Price at that Market Close multiplied by the Downside Participation Rate. |
| • | The Amortized Option Cost is the calculated price of those options at the start of the Term amortized over the Term. |
| • | The Amortized Option Cost is a percentage equal to: (1) the initial Net Option Price for an Indexed Strategy for the Term; multiplied by (2) the number of days remaining until the final Market Close of that Term divided by 365 days if that Term is one year long or by 730 days if that Term is two years long. |
| • | The Trading Cost is the estimated cost of selling those options. It is a percentage set by us by the last Market Close on or before that day. |
On Day 73 of the Term | On Day 219 of the Term | |||||||
Investment Base Calculation | ||||||||
Initial Investment Base | $100,000 | $100,000 | ||||||
Accumulated Daily Charges | $150 | $451 | ||||||
Investment Base on Day 73 | $99,850 ($100,000 - $150) | $99,549 ($100,000 - $451) | ||||||
Assumptions | ||||||||
Net Option Price | 1.61% | 10.00% | ||||||
Amortized Option Cost | 2.11% | 0.70% | ||||||
Trading Cost | 0.20% | 0.20% | ||||||
Calculations | ||||||||
Daily Value Percentage | -0.70% (1.61% - 2.11% - 0.20%) | 9.10% (10.00% - 0.70% - 0.20%) | ||||||
Dollar amount of increase/decrease | $699 decrease ($99,850 x - 0.70%) | $9,059 increase ($99,549 x 9.10%) | ||||||
Strategy value | $99,151 ($99,850 - $699) | $108,608 ($99,549 + $9,059) | ||||||
| • | If you reallocate, then we will apply the ending values of the Indexed Strategies to a new Term of the Indexed Strategies that you select. |
| • | If you do not reallocate, then we will apply the ending value of each Indexed Strategy to a new Term of that same Strategy. |
Contract Year | 1 | 2 | 3 | 4 | 5 | 6 | 7+ | |||||||||||||||||||||
Early Withdrawal Charge Rate | 9 | % | 8 | % | 7 | % | 6 | % | 5 | % | 4 | % | 0 | % | ||||||||||||||
| • | For the first Contract Year, the Free Withdrawal Allowance is an amount equal to 10% of the total Purchase Payments received by us. |
| • | For each subsequent Contract Year, the Free Withdrawal Allowance is equal to 10% of the Account Value as of the most recent Contract Anniversary. |
| • | Fixed Period Payout |
| • | Life Payout |
| • | Life Payout with Payments for at Least a Fixed Period |
| • | Joint and One-Half Survivor Payout |
| • | If you take a withdrawal from an Indexed Strategy before the end of a Term, we will immediately reduce the Investment Base for that Indexed Strategy. |
| • | The reduction will be proportional to the reduction in the Strategy Value, which means that the proportional reduction in the Investment Base could be larger than the dollar amount of the withdrawal. |
| • | Reductions to the Investment Base will have a negative effect on any increases in the Indexed Strategy value for the remainder of that Term, but will reduce any decreases in the Indexed Strategy value for the remainder of that Term. |
| • | Once the Investment Base for an Indexed Strategy is reduced due to a withdrawal before the end of a Term, it will not increase at any time during the remainder of that Term. |
| • | Financial losses including those resulting from the following events: |
| • | Adverse developments in financial markets and deterioration in global economic conditions |
| • | Unfavorable interest rate environments |
| • | Losses on our investment portfolio |
| • | Loss of market share due to intense competition |
| • | Ineffectiveness of risk management policies |
| • | Changes in applicable law and regulations |
| • | Inability to obtain or collect on reinsurance |
| • | A downgrade or potential downgrade in our financial strength ratings |
| • | Variations from actual experience and management’s estimates and assumptions that could result in inadequate reserves |
| • | Significant variations in the amount of capital we must hold to meet statutory capital requirements |
| • | Legal actions and regulatory proceedings |
| • | Difficulties with technology or data security |
| • | Failure to protect confidentiality of customer information |
| • | Failure to maintain effective and efficient information systems |
| • | Occurrence of catastrophic events, terrorism or military actions |
| • | An Indexed Strategy with Cap provides you with the opportunity to participate in any rise in the Index up to the Cap (after Daily Charges have been deducted from the Investment Base), but you will not participate in any rise in the Index in excess of the Cap. |
| • | An Indexed Strategy with Participation Rate provides you with the opportunity to share in any rise in the Index without a Cap, but your share of any rise is always expected to be less than 100%. |
| • | In any Term where the rise in the Index is less than the Cap, the Cap Strategy will always perform better than the corresponding Participation Rate Strategy. |
| • | In any Term where the rise in the Index is more than the Cap, but less than the Cap divided by the Upside Participation Rate, the Cap Strategy will always perform better than the corresponding Participation Rate Strategy. |
| • | In any Term where the rise in the Index is more than the Cap divided by the Upside Participation Rate, the Participation Rate Strategy will always perform better than the Cap Strategy. |
| • | In any Term where the Index falls, the Cap Strategy and Participation Rate Strategy will produce the same results at the end of the Term because both have a 50% Downside Participation Rate. However, before the end of the Term, due to different option pricing, they may have different Daily Value Percentages and returns. |
Return at end of Term | ||||||||||||
Index rise over Term | 12% Cap | 75% Upside Participation Rate | Explanation | |||||||||
| 4 | % | 4 | % | 3 | % | The Cap Strategy has a better return than the Participation Rate Strategy because the 4% rise in the Index is less than the 12% Cap. | ||||||
| 14 | % | 12 | % | 10.5 | % | The Cap Strategy has a better return than the Participation Rate Strategy because the 14% rise in the Index is more than the 12% Cap, but less than 16% (the 12% Cap divided by the 75% Upside Participation Rate). | ||||||
| 16 | % | 12 | % | 12 | % | Both Strategies have the same positive return because the rise in the Index is equal to 16% (the 12% Cap divided by the 75% Upside Participation Rate). | ||||||
| 20 | % | 12 | % | 15 | % | The Participation Rate Strategy has a better return than the Cap Strategy because the 20% rise in the Index is more than 16% (the 12% Cap divided by the 75%Upside Participation Rate) | ||||||
| -30 | % | -15 | % | -15 | % | Both Strategies have the same negative return. | ||||||
| • | You make your initial Purchase Payment on March 10 and another Purchase Payment on March 17. You allocate both payments to the same Indexed Strategy and both payments are applied on March 20. Each Term of that Indexed Strategy will start and end on March 20. |
| • | You make your initial Purchase Payment on May 2 and another Purchase Payment on June 14. You allocate both payments to the same Indexed Strategy. Your initial Purchase Payment is applied on May 6 and the other Purchase Payment is applied on June 20. That Indexed Strategy will have Terms that start and end on May 6 and other Terms that start and end on June 20. |
| • | If the Strategy value immediately before the withdrawal is greater than the Investment Base, then the reduction in the Investment Base will be less than the withdrawal and the related Early Withdrawal Charge. |
| • | If the Strategy value immediately before the withdrawal is less than the Investment Base, then the reduction in the Investment Base will be more than the withdrawal and the related Early Withdrawal Charge. |
| • | the Investment Base at the end of the Term; plus |
| • | any increase for a rise in the Index over the Term; or minus |
| • | any decrease for a fall in the Index over the Term. |
At Final Market Close of Term | ||
Rise in Index | +20% | |
Increase as a Percentage | +10% (10% Cap, or 50% Par Rate x 20%) | |
Dollar Amount of Increase | +$500 ($5,000 x 10%) | |
Strategy value before Withdrawal | $5,500 ($5,000 + $500) | |
Withdrawal Amount | $1,000 | |
Strategy Value at Term End | $4,500 ($5,500 - $1,000) |
At Final Market Close of Term | ||
Fall in Index | -20% | |
Decrease as a Percentage | -10% (50% x -20%) | |
Dollar Amount of Decrease | -$500 ($5,000 x -10%) | |
Strategy value before Withdrawal | $4,500 ($5,000 - $500) | |
Withdrawal Amount | $1,000 | |
Strategy Value at Term End | $3,500 ($4,500 - $1,000) |
| • | the Investment Base on that day; plus |
| • | any increase for a positive Daily Value Percentage; or minus |
| • | any decrease for a negative Daily Value Percentage. |
| • | The increase for the Daily Value Percentage is equal to $250 ($5,000 x 5%). |
| • | The Strategy value on the withdrawal date is $5,250 ($5,000 + $250). |
| • | The Strategy value after the withdrawal is $4,250 ($5,250 - $1,000). |
| • | The withdrawal as a percentage of the Strategy value is 19.05% ($1,000 / $5,250). |
| • | The reduction in the Investment Base is $952 ($5,000 x 19.05%). |
| • | The Investment Base after the withdrawal is $4,048 ($5,000 - $952). |
| • | Because the Strategy Value on the withdrawal date was more than the Investment Base, the reduction in the Investment Base is only $952, which is less than the $1000 withdrawal. |
| • | The increase for the Daily Value Percentage is equal to $250 ($5,000 x 5%). |
| • | The Strategy value on the withdrawal date is $5,250 ($5,000 + $250). |
| • | The total amount withdrawn is $1,053 ($1,000 / (1 – 0.05)). |
| • | The Strategy value after the withdrawal is $4,197 ($5,250 - $1,053). |
| • | The withdrawal as a percentage of the Strategy value is 20.05% ($1,053 / $5,250). |
| • | The reduction in the Investment Base is $1,003 ($5,000 x 20.05%). |
| • | The Investment Base after the withdrawal is $3,997 ($5,000 - $1,003). |
| • | Because the Strategy Value on the withdrawal date was more than the Investment Base, the reduction in the Investment Base was $1,003, which is less than the $1,053 withdrawal. |
| • | The reduction for the Daily Value Percentage is equal to $500 ($5,000 x -10%). |
| • | The Strategy value on the withdrawal date is $4,500 ($5,000 - $500). |
| • | The Strategy value after the withdrawal is $3,500 ($4,500 - $1,000). |
| • | The withdrawal as a percentage of the Strategy value is 22.22% ($1,000 / $4,500). |
| • | The reduction in the Investment Base is $1,111 ($5,000 x 22.22%). |
| • | The Investment Base after the withdrawal is $3,889 ($5,000 - $1,111). |
| • | Because the Strategy Value on the withdrawal date was less than the Investment Base, the reduction in the Investment Base was $1,111, which is greater than the $1,000 withdrawal. |
| • | The reduction for the Daily Value Percentage is equal to $500 ($5,000 x 10%). |
| • | The Strategy value on the withdrawal date is $4,500 ($5,000 - $500). |
| • | The Strategy value after the withdrawal is $3,447 ($4,500 - $1,053). |
| • | The total amount withdrawn is $1,053 ($1,000 / (1 – 0.05)). |
| • | The withdrawal as a percentage of the Strategy value is 23.39% ($1,053 / $4,500). |
| • | The reduction in the Investment Base is $1,170 ($5,000 x 23.39%). |
| • | The Investment Base after the withdrawal is $3,830 ($5,000 - $1,170). |
| • | Because the Strategy Value on the withdrawal date was less than the Investment Base, the reduction in the Investment Base was $1,170, which is greater than the $1,053 withdrawal. |
Rise or Fall of Index on Replacement Date for Old Index | ||
Old Index at Term start | 1000 | |
Old Index on replacement date | 1050 | |
Rise or fall of old Index on replacement date | (1050 - 1000) / 1,000 = 5% | |
Modified Start of Term Value for New Index | ||
Rise in old Index on replacement date | 5% | |
New Index on replacement date | 1785 | |
Modified start of Term value for new Index | 1785 / (100% + 5%) = 1700 | |
Indexed Strategy Value at Term End | ||
Investment Base at Term start | $50,000 | |
Accumulated Daily Charges | $375 | |
Investment Base After Daily Charges | $49,625 | |
Modified start of Term value for new Index | 1700 | |
Value of new Index at Term end | 1853 | |
Rise in new Index | (1853 - 1,700) / 1700) = 9% | |
Cap | 8% | |
Rise in new Index limited by Cap | 8% | |
Increase as a percentage | 8% x 100% = 8% | |
Dollar amount of increase | $49,625 x 8% = $3,970 | |
Strategy value at Term end | $49,625 + $4,000 = $53,625 | |
• | The Cap will vary among Indexed Strategies. |
• | The Cap for a given Indexed Strategy will vary from Term to Term. |
• | We guarantee that the Cap for a Term of an Indexed Strategy will never be less than 1%. |
• | For each Term, your return on an Indexed Strategy with a Cap will be less than any rise in the Index over that Term. |
• | For each Term, your return on an Indexed Strategy with a Cap will be less than the Cap for that Term. |
• | Your return on an Indexed Strategy with a Cap could be negative even when the Index rises. This will occur when the amount of increase attributable to an Index rise is smaller than the Daily Charge. |
• | The Upside Participation Rate will vary among Indexed Strategies. |
• | The Upside Participation Rare for a given Indexed Strategy will vary from Term to Term. |
• | We guarantee that the Upside Participation Rate for a Term of an Indexed Strategy will never be less than 5%. |
• | For each Term, your return on an Indexed Strategy with an Upside Participation Rate of less than 100% will be less than any rise in the Index over that Term. In addition, any increase for the Term will be reduced by the Daily Charge. |
| • | Your return on an Indexed Strategy with an Upside Participation Rate could be negative even when the Index rises. This will occur when the amount of increase attributable to an Index rise is smaller than the Daily Charge |
| • | If the Index at the final Market Close of the Term is 1065, then the Index has risen by 6.5% ((1065 - 1000) / 1000). |
| • | If the Index at the final Market Close of the Term is 925, then the Index has fallen by 7.5% ((925 - 1000) / 1000). |
At Final Market Close of Term | At Final Market Close of Term | |||
Rise or fall in Index | +16% | –16% | ||
Increase or decrease percentage | +14% (16% > 14% Cap) | –8% (50% of – 16%) | ||
Dollar amount of increase or decrease | +14,000 ($100,000 x 14%) | –8,000 ($100,000 x – 8%) | ||
Strategy value at end of Term | $114,000 ($100,000 + $14,000) | $92,000 ($100, 000 - $8,000) |
At Final Market Close of Term | At Final Market Close of Term | |||
Rise or fall in Index | +16% | –16% | ||
Increase or decrease percentage | +12% (75% of 16%) | –8% (50% of –16%) | ||
Dollar amount of increase or decrease | +12,000 ($100,000 x 12%) | –8,000 ($100,000 x – 8%) | ||
Strategy value at end of Term | $112,000 ($100,000 + $12,000) | $92,000 ($100, 000 - $8,000) |
| • | ATM Call Option Price, which represents the possible rise in the Index |
| • | OTM Call Option Price, which is subtracted in order to limit any rise in the Index by the Cap |
| • | ATM Put Option Price, which represents the possible fall in the Index and is multiplied by the Downside Participation Rate in order to reflect your share in any such fall. |
| • | ATM Call Option Price, which represents the possible rise in the Index and is multiplied by the Upside Participation Rate in order to reflect your share in any such rise |
| • | ATM Put Option Price, which represents the possible fall in the Index and is multiplied by the Downside Participation Rate in order to reflect your share in any such fall. |
Option Price Assumptions | Price at Start of Term | Price at Current Market Close | ||||||||||
ATM Call Option Price | 6.00 | % | 7.47 | % | ||||||||
OTM Call Option Price | 1.15 | % | 1.81 | % | ||||||||
ATM Put Option Price | 5.40 | % | 3.36 | % | ||||||||
Strategy Assumptions | ||||||||||||
Investment Base for each Strategy (after taking Daily Charges into account) | $ | 100,000 | ||||||||||
Cap Strategy: Cap for one-year Term | 11 | % | ||||||||||
Participation Rate Strategy: Upside Participation Rate for one-year Term | 75 | % | ||||||||||
Downside Participation Rate | 50 | % | ||||||||||
Days remaining to last Market Day of one-year Term | 275 | |||||||||||
Trading Cost Assumption | 0.15 | % | ||||||||||
Current ATM Call Option Price – Current OTM Call Option Price | 5.66 | % | (7.47% – 1.81%) | |||
Current ATM Put Option Price x Downside Participation Rate | – 1.68 | % | (50% of 3.36%) | |||
Net Option Price | = 3.98 | % | ||||
Initial ATM Call Option Price – Initial OTM Call Option Price | 4.85 | % | (6.00% – 1.15%) | |||
Initial ATM Put Option Price x Downside Participation Rate | – 2.70 | % | (50% of 5.40%) | |||
Net Option Cost | = 2.15 | % | ||||
Amortization Factor for days remaining to final Market Day of Term | x 75.34 | % | (275 / 365) | |||
Amortized Option Cost | = 1.62 | % | ||||
Net Option Price | 3.98 | % | ||||
Amortized Option Cost | – 1.62 | % | ||||
Assumed Trading Cost | – 0.15 | % | ||||
Daily Value Percentage | = 2.21 | % | ||||
Dollar amount of increase | $ | 2,210 | ($100,000 x 2.21%) | |||
Value of Cap Strategy | $ | 102,210 | ($100,000 + $2,210) |
Current ATM Call Option Price x Upside Participation Rate | 5.60 | % | (75% of 7.47%) | |||
Current ATM Put Option Price x Downside Participation Rate | – 1.68 | % | (50% of 3.36%) | |||
Net Option Price | = 3.92 | % | ||||
Initial ATM Call Option Price x Upside Participation Rate | 4.50 | % | (75% of 6.00%) | |||
Initial ATM Put Option Price x Downside Participation Rate | – 2.70 | % | (50% of 5.40%) | |||
Net Option Cost | = 1.80 | % | ||||
Amortization Factor for days remaining to final Market Day of Term | x 75.34 | % | (275 / 365) | |||
Amortized Option Cost | 1.36 | % | ||||
Net Option Price | 3.92 | % | ||||
Amortized Option Cost | – 1.36 | % | ||||
Assumed Trading Cost | – 0.15 | % | ||||
Daily Value Percentage | = 2.41 | % | ||||
Increase as a dollar amount | $ | 2,410 | ($100,000 x 2.41%) | |||
Value of Participation Rate Strategy | $ | 102,410 | ($100,000 + $2,410) |
| • | Purchase Payments received by us plus interest earned daily; minus |
| • | the premium tax or other tax that may apply to the Purchase Payments; and minus |
| • | each withdrawal and related Early Withdrawal Charge taken from the Purchase Payment Account since the last Strategy Application Date. |
| • | first from the Purchase Payment Account; and |
| • | then proportionally from Indexed Strategies having the shortest Term. |
| • | Automatic withdrawals are similar to starting Annuity Payout Benefit payments, but will result in different taxation of payments and potentially a different amount of total payments over the life of your Contract. |
| • | Automatic withdrawals during a Term of an Indexed Strategy will systematically reduce the Investment Base, which will reduce any subsequent increase in the Strategy value due to a positive Daily Value Percentage during that Term or a rise in the applicable Index at the end of that Term. Such reductions could be significant. |
| • | Automatic withdrawals will reduce the amount available under the Free Withdrawal Allowance described below. |
| • | Unless a waiver applies, an Early Withdrawal Charge may apply to an automatic withdrawal during the Early Withdrawal Charge period. |
| • | The value of an Indexed Strategy on an automatic withdrawal date will reflect the Daily Value Percentage on that date. |
| • | If you take a withdrawal from your Contract, the amount subject to the charge is the amount you withdraw, which includes any amount needed to pay the Early Withdrawal Charge. |
| • | If you Surrender your Contract, the amount subject to the charge is your Account Value. |
| • | The amount subject to the charge will not include the Free Withdrawal Allowance or the amount, if any, that qualifies for a waiver as described below. |
Contract Year | 1 | 2 | 3 | 4 | 5 | 6 | 7+ | |||||||||||||||||||||
Early Withdrawal Charge Rate | 9 | % | 8 | % | 7 | % | 6 | % | 5 | % | 4 | % | 0 | % | ||||||||||||||
| • | your Contract is modified by the Extended Care Waiver Rider; |
| • | you are confined in a long-term care facility or hospital and the confinement is prescribed by a physician and is medically necessary; |
| • | the first day of the confinement is at least one year after the Contract Effective Date; and |
| • | the confinement has continued for a period of at least 90 consecutive days. |
| • | your Contract is modified by the Waiver of Early Withdrawal Charges upon Terminal Illness Rider; |
| • | you are diagnosed with a terminal illness by a physician and, as a result of the terminal illness, you have a life expectancy of less than 12 months from the date of diagnosis; and |
| • | the diagnosis is rendered by a physician more than one year after the Contract Effective Date. |
| • | The earliest Annuity Payout Initiation you may select is the first Contract Anniversary. |
| • | Unless we agree to a later date, the latest Annuity Payout Initiation Date you may select is the Contract Anniversary following your 95th birthday or the 95th birthday, of a joint owner, if earlier. If the Owner is not a human being such as a trust or a corporation, then the Annuity Payout Initiation Date may not be later than the Contract Anniversary following the 95th birthday of the eldest Annuitant, unless we agree to a later date. |
| • | the surviving Owner(s); or if none |
| • | then to the surviving contingent payee(s) designated by the surviving Owner(s); or if none; |
| • | the estate of the last payee who received payments. |
| • | If the Death Benefit is to be paid as a lump sum, then it will be paid as soon as practicable after receipt of proof of death and a Request in Good Order for a lump sum payment. |
| • | If the Death Benefit is to be paid under a Payout Option, then we will apply the Death Benefit value to a Payout Option as soon as practicable after receipt of proof of death and a Request in Good Order. That application date will be the first day of the first payment interval for which a payment is to be made. Death Benefit payments under a Payout Option are made at the end of each payment interval. This means that, for annual payments, the first payment will be made one year after that application date. |
| • | If the Death Benefit is paid in a lump sum, then it is equal to the Death Benefit value, increased by any additional post-death interest as required by law. |
| • | If the Death Benefit will be paid as a series of periodic payments under a Payout Option, then the amount of each payment under the Death Benefit is determined on the date that the Death Benefit value is applied to the Payout Option. The amount or each payment will be based on the Death Benefit value (increased by any additional post-death interest as required by law to the date it is applied to the Payout Option), the Payout Option that applies, and the payment interval. |
| • | a certified copy of a death certificate showing the cause and manner of death; |
| • | a certified copy of a decree that is made by a court of competent jurisdiction as to the finding of death; or |
| • | other proof that is satisfactory to us. |
| • | as a tax-free exchange, transfer, or rollover to or for an annuity ortax-qualified account as permitted by federal tax law; or |
| • | in cases where the Beneficiary is an estate, trust, custodial account, corporation, limited liability company, partnership, or other entity, to a person to whom the Beneficiary is obligated to make corresponding payments. |
| • | the contingent payee designated as part of a Death Benefit Payout Option elected by you; or if none |
| • | then to a contingent payee designated by the Beneficiary; or if none |
| • | the estate of the last payee who received payments. |
| • | For a Tax Qualified Contract. The Death Benefit must be paid in accordance with the tax qualification endorsement. |
| • | For a Nonqualified Contract. The Death Benefit must be paid either: (1) in full within five years of the date of death; or (2) over the life of the Beneficiary or over a period certain not exceeding the Beneficiary’s life expectancy, with payments at least annually, and with the first payment made within one year of the date of death. |
| • | For the Annuity Payout Benefit |
| • | If the payee dies before the end of the fixed period, then we will make periodic payments to the surviving owner(s), or if none, then to the surviving contingent payee(s), or if none, then to the estate of the last payee who received payments. |
| • | In all cases, payments will stop at the end of the fixed period. |
| • | For the Death Benefit |
| • | If the Beneficiary dies before the end of the fixed period, then we will make periodic payments to the contingent payee designated as part of any Death Benefit Payout Option that you have elected. If no such contingent payee is surviving, then such payments will be made to a contingent payee designated by the Beneficiary. If there is no contingent payee surviving, then such payments will be made to the estate of the last payee who received payments. |
| • | In all cases, payments will stop at the end of the fixed period. |
| • | For the Annuity Payout Benefit |
| • | If the Owner is living, this treatment will generally allow the Owner to choose between continuing the Contract as a deferred annuity or electing a new Annuity Payout Initiation Date and another Payout Option. |
| • | If the Annuitant’s death before the Annuity Payout Initiation Date would give rise to a Death Benefit, then the Death Benefit will be available. |
| • | For the Death Benefit |
| • | For the Annuity Payout Benefit |
| • | If the Annuitant dies after the end of the fixed period you selected, then payments will stop on the death of the Annuitant. |
| • | If the Annuitant dies before the end of the fixed period you selected, then we will make periodic payments to the surviving owner(s), or if none, then to the surviving contingent payee(s), or if none, then to the estate of the last payee who received payments. In this case, payments will stop at the end of the fixed period you selected. |
| • | For the Death Benefit |
| • | If the Beneficiary dies after the end of the fixed period selected, then payments will stop on the death of the Beneficiary. |
| • | If the Beneficiary dies before the end of the fixed period you or the Beneficiary selected, then we will make periodic payments to the contingent payee designated as part of any Death Benefit Payout Option that you have elected. If no such contingent payee is surviving, then such payments will be made to a contingent payee designated by the Beneficiary. If there is no contingent payee surviving, then such payments will be made to the estate of the last payee who received payments. In this case, payments will stop at the end of the fixed period you or the Beneficiary selected. |
| • | For the Annuity Payout Benefit |
| • | If the primary Annuitant dies and the secondary Annuitant does not |
| • | If the primary Annuitant dies and the secondary Annuitant is surviving, then we will make one-half of the periodic payment to you, or the secondary Annuitant, if you direct, for the rest of the secondary Annuitant’s life. In this case, payments will stop on the death of the secondary Annuitant. |
| • | If the Owner is living, this treatment will generally allow the Owner to choose between continuing the Contract as a deferred annuity or electing a new Annuity Payout Initiation Date and another Payout Option. |
| • | If the Annuitant’s death before the Annuity Benefit Payout Initiation Date would give rise to a Death Benefit, then the Death Benefit will be available. |
| • | For the Death Benefit |
| • | If the Beneficiary dies and the contingent payee does not survive the Beneficiary, then payments will stop on the death of the Beneficiary. This means that, even if we have made only one payment when the Beneficiary dies, payments will stop unless the contingent payee survives. |
| • | If the Beneficiary dies and the contingent payee designated as part of the Death Benefit Payout Option election is surviving, then we will make one-half of the periodic payment to the contingent payee for the rest of the contingent payee’s life. In this case, payments will stop on the death of the contingent payee. |
| • | Generally, the longer the period over which payments are made or the more frequently the payments are made, the lower the amount of each payment because more payments will be made. |
| • | For Life Payout Options, the longer the life expectancy of the Annuitant or Beneficiary, the lower the amount of each payment because more payments are expected to be paid. |
| • | A nonhuman that is the Owner of the Contract may be the primary payee. For example, if the Owner is a trust, that trust may be the primary payee. |
| • | Payments may be made payable to another insurance company or financial institution as a tax-free exchange, transfer, or rollover to or for another annuity ortax-qualified account as allowed by federal tax law. |
| • | If we receive a Purchase Payment on a Market Day before the Market Close, we will apply it to your Contract on that Market Day. |
| • | If we receive a Purchase Payment on a Market Day after the Market Close or on a day that is not a Market Day, then we will apply it to your Contract on the next Market Day. |
| • | Requests may be made by mail at P.O. Box 5423, Cincinnati OH 45201-5423. |
| • | Requests by fax may be made at 513-768-5115. |
| • | Requests for reallocations among Indexed Strategies may be made by telephone at 1-800-789-6771 |
| • | If we receive a Request in Good Order on a Market Day before the Market Close, we will process it using values determined at the Market Close on that Market Day. |
| • | If we receive a Request in Good Order after the Market Close or on a day that is not a Market Day, then we will treat that request as received at the start of the next Market Day. |
| • | Saturdays, Sundays, holidays and any other day that the New York Stock Exchange and the NYSE Arca are closed are not Market Days. |
| • | The NYSE and the NYSE Arca observe the following holidays: New Year’s Day, Martin Luther King, Jr. Day, President’s Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. |
| • | Regular trading hours on the NYSE and core trading sessions on the NYSE Arca usually end at 4:00 PM Eastern Time |
| • | Trading hours on the NYSE and core trading sessions on the NYSE Arca end at 1:00 PM Eastern Time on the day before the Fourth of July and the Friday after Thanksgiving and Christmas Eve. |
| • | the New York Stock Exchange or NYSE Arca is closed (other than customary weekend and holiday closings); |
| • | trading on the New York Stock Exchange or NYSE Arca is restricted; or |
| • | an emergency exists such that it is not reasonably practicable to determine fairly the value of the Index. |
| • | If you live in a state where we are required to refund your Purchase Payment(s), we reserve the right to hold your Purchase Payment(s) in the Purchase Payment Account until the first Strategy Application Date on or after the end of the free look period. |
| • | If you live in a state where we are required to refund the Account Value of your Contract, you will receive the Account Value on the day that we receive your cancellation Request in Good Order. If the Account Value includes the value of an Indexed Strategy, that Strategy value will reflect the applicable Daily Value Percentage. The amount you receive may be more or less than your Purchase Payment(s) depending upon any interest earned by your Contract and the value of your Indexed Strategies. This means that you bear the risk of any decline in the Account Value of your Contract before we receive your cancellation request. No adjustment will be made for the Daily Value Percentage and no Early Withdrawal Charges will apply to the amount refunded. Unless required by state law, we do not refund any Daily Charge assessed during the free look period or any Early Withdrawal Charges assessed during the free look period that relate to a withdrawal taken before you cancel the Contract. |
| • | to update your contact information, such as your address, phone number, and email address, if and as it changes; and |
| • | to update your Beneficiary and other designations, including complete names, complete addresses, phone numbers, and social security numbers, if and as they change. |
| • | For a Nonqualified Contract |
| • | For a Tax Qualified Contract |
| • | For a Nonqualified Contract. |
| • | For a Tax Qualified Contract |
| • | For a Nonqualified Contract |
| • | For a Tax Qualified Contract |
| • | a Death Benefit is payable on account of your death; |
| • | the sole Beneficiary under the Contract is your spouse or a revocable trust or custodial account created by your spouse; |
| • | either you make that election by a Request in Good Order before your death or your spouse makes that election by a Request in Good Order before the Death Benefit Payment Date; and |
| • | you were not a successor owner of the Contract. |
| • | For a Nonqualified Contract |
| • | For a Tax Qualified Contract |
| • | the surviving joint Annuitant(s); or if none |
| • | the Owner(s). |
| • | If a Death Benefit becomes payable on account of your death or the death of a joint Owner, then the surviving Owner is the Beneficiary no matter what other designation you may have made. |
| • | In all other cases, you may designate a person or person who will be the Beneficiaries as provided in the Designation of Beneficiary provision of the Contract. |
| • | If no designated Beneficiary is surviving, then the Beneficiary is your estate. |
| • | If the sole Beneficiary under the Contract is your spouse or a revocable trust or custodial account created by your spouse and all other requirements for successor ownership are met, then your spouse may become the successor owner of the Contract in lieu of receiving the Death Benefit. |
| • | You may designate two or more persons jointly as the Beneficiaries. Unless you state otherwise, joint Beneficiaries that are surviving are entitled to equal shares. |
| • | You may designate one or more persons as contingent Beneficiary. Unless you state otherwise, a contingent Beneficiary is entitled to a benefit only if there is no primary Beneficiary who that is surviving. |
| • | a court order provides that the former spouse’s rights as a beneficiary are to continue; or |
| • | the former spouse remains or becomes an Owner. |
| • | If you make only one Purchase Payment, each Term will end on an anniversary of the initial Strategy Application Date. In this case, any involuntary termination will occur on a date that is the end of a Term. |
| • | If you make multiple Purchase Payments, Terms may end on different dates. In this case, any involuntary termination will occur on a date that is the end of a Term, but it will occur before the end of other Terms. In this case, the Surrender Value payable upon termination of your Contract will reflect the Daily Value Percentages used to calculate the value of Indexed Strategies with Terms that are not ending on the termination date. |
| • | If your Account Value is less than $5,000 on June 20, 2024, we may not terminate your Contract because June 20 is not an anniversary of the initial Strategy Application Date. |
| • | If your Account Value is less than $5,000 on May 6, 2025, we may terminate your Contract on that anniversary date even though the other Term will not end until June 20, 2025. |
Tax-Qualified Contracts and Plans | Nonqualified Deferred Compensation Plans | Other Non-Tax-Qualified Contracts | ||||
| Plan Types | • IRC §408 (IRA, SEP, SIMPLE IRA) • IRC §408A (Roth IRA) • IRC §403(b) (Tax-Sheltered Annuity)• IRC §401 (Pension, Profit– Sharing, 401(k)) • Governmental IRC §457(b) • IRC §402A (Roth TSA, Roth 401(k), or Roth 457(b)) | • IRC §409A • Nongovernmental IRC §457(b) • IRC §457(f) | • IRC §72 only | |||
| Who May Purchase a Contract | Eligible employee, employer, or employer plan. | Employer on behalf of eligible employee. Employer generally loses tax-deferred status of Contract itself. | Anyone. Non-natural person will generally losetax-deferred status. | |||
| Contribution Limits | Contributions are limited by IRC and/or plan requirements. | None. | ||||
| Distribution Restrictions | Distributions from Contract and/or plan may be restricted to meet IRC and/or plan requirements. | None. | ||||
| Taxation of Withdrawals, Surrenders, and Lump Sum Death Benefit | Generally, 100% of distributions must be included in taxable income. However, the portion that represents an after-tax investment is not taxable. Distributions from Roth IRA are deemed to come first from after- tax contributions. Distributions from other plans are generally deemed to come from income andafter-tax investment (if any) on apro-rata basis. Distributions from §408A Roth IRA or §402A Roth TSA, Roth 401(k), or Roth 457(b) are completely tax free if certain requirements are met.For tax purposes, all IRAs and SEP IRAs of an owner are treated as a single IRA, and all Roth IRAs of an owner are treated as a single Roth IRA. | Generally, distributions must be included in taxable income until all accumulated earnings are paid out. Thereafter, distributions are tax-free return of the original investment. However, distributions aretax-free until any investment made before August 14, 1982 is returned.For tax purposes, all non-tax-qualified | ||||
| Taxation of Payout Option Payments (Annuity Benefit or Death Benefit) | A percentage of each payment is tax free equal to the ratio of after-tax investment (if any) to the total expected payments, and the balance is included in taxable income. Once theafter-tax investment has been recovered, the full amount of each benefit payment is included in taxable income. Distributions from a Roth IRA, Roth TSA, Roth 401(k), or Roth 457(b) are completely tax free if certain requirements are met. | |||||
Tax-Qualified Contracts and Plans | Nonqualified Deferred Compensation Plans | Other Non-Tax-Qualified Contracts | ||||
| Possible Penalty Taxes for Distributions Before Age 59 1/2 | Taxable portion of payments made before age 59 1/2 may be subject to 10% penalty tax (or 25% for a SIMPLE IRA during the first two years of participation). Penalty taxes do not apply to payments after the participant’s death, or to §457 plans. Other exceptions may apply. | None. | Taxable portion of payments made before age 59 1/2 may be subject to a 10% penalty tax. Penalty taxes do not apply to payments after the Owner’s death. Other exceptions may apply. | |||
| Assignment/ Transfer of Contract | Assignment and transfer of Ownership generally not permitted. | Generally, deferred earnings taxable to transferor upon transfer or assignment. Gift tax consequences are not discussed herein. | ||||
| Federal Income Tax Withholding | Eligible rollover distributions from §401, §403(b), and governmental §457(b) plans are subject to 20% mandatory withholding on taxable portion unless direct rollover. For other payments, Payee may generally elect to have taxes withheld or not. | Generally subject to wage withholding. | Generally, Payee may elect to have taxes withheld or not. | |||
• | ATM Call Option Price (at-the-money |
• | ATM Put Option Price (at-the-money |
• | OTM Call Option Price (out-of-the-money |
• | Index Levels or Prices |
• | Dividend Yield (Div) |
• | Strike Price (K) |
• | Interest Rate (Rate) |
• | Time (T) |
• | Implied Volatility (Vol) |
| • | you allocate $50,000 to an S&P 500 Cap Strategy and $50,000 to an S&P 500 Upside Participation Rate Strategy; |
| • | the Cap for the initial Term of the S&P 500 Cap Strategy is 10%; |
| • | the Participation Rate for the initial Term of the S&P 500 Upside Participation Rate Strategy is 75%; |
| • | the S&P 500 is 1000 on the Term start date; |
| • | you request a $10,000 withdrawal on Day 146 when the Daily Value Percentage is 2.15% for the S&P 500 Cap Strategy and 2.33% for the S&P 500 Upside Participation Rate Strategy; |
| • | you do not take any other withdrawals during the initial Term; |
| • | the withdrawal is covered by the Free Withdrawal Allowance and therefore no Early Withdrawal Charges apply (If Early Withdrawal Charges did apply, the amounts realized at the end of the Term would be reduced by both the withdrawal and the amount of the Early Withdrawal Charge); and |
| • | the S&P 500 is 1130 on the Term end date. |
Impact of $10,000 Withdrawal from Each Strategy on Day 146 of Term | S&P 500 with Cap | S&P 500 with Upside Participation Rate | ||
Investment Base at Term Start | $50,000 | $50,000 | ||
Daily Charges through withdrawal date | $150 | $150 | ||
Remaining Investment Base | $49,850 | $49,850 | ||
Daily Value Percentage on Withdrawal Date | 2.15% | 2.33% | ||
Dollar Amount of Increase on Withdrawal Date | $49,850 x .0215 = $1,072 | $49,850 x .0233 = $1,162 | ||
Strategy Value before Withdrawal | $49,850 + $1,072 = $50,922 | $49,850 + $1,162 = $51,012 | ||
Amount Withdrawn* | $4,996 | $5,004 | ||
Withdrawal as Percentage of Strategy Value | $4,996 / $50,922 = 9.81% | $5,004 / $51,012 = 9.81% | ||
Proportional Reduction in Investment Base | $49,850 x .0981 = $4,890 | $49,850 x .0981 = $4,890 | ||
Investment Base after Withdrawal | $49,850 - $4,890 = $44,959 | $49,850 - $4,890 = $44,959 | ||
Value at End of Term | ||||
Investment Base after Withdrawal | $44,959 | $44,959 | ||
Daily Charges From Withdrawal Date to Term End | $203 | $203 | ||
Remaining Investment Base | $44,757 | $44,757 | ||
Index at Term Start | 1000 | 1000 | ||
Index at Term End | 1130 | 1130 | ||
Rise in Index | 13% | 13% | ||
Cap | 10% | n/a | ||
Upside Participation Rate | n/a | 75% | ||
Increase as a Percentage | 10% | 13% x 75% = 9.75% | ||
Dollar Amount of Increase | $44,757 x .10 = $4,476 | $44,757 x .0975 = $4,364 | ||
Strategy Value at Term End | $44,757 + $4,476 = $49,232 | $44,757 + $4,364 = $49,120 |
| * | Note: The withdrawal is taken proportionally from each Indexed Strategy, based on the ratio of that Strategy’s value to the total value of all Indexed Strategies immediately before the withdrawal. In this example, the total value of all Indexed Strategies immediately before the withdrawal was $101,934 ($50,922 + $51,012). The S&P 500 with Cap Strategy value was 49.96% of that total value ($50,922 / $101,934 = 49.96%), so 49.96% of the $10,000 withdrawal ($4,996) was taken from it. The S&P 500 with Upside Participation Rate Strategy value was 50.04% of that total value ($51,012 / $101,934 = 50.04%), so 50.04% of the $10,000 withdrawal ($5,004) was taken from it. |
| • | you allocate $50,000 to an S&P 500 Cap Strategy and $50,000 to an S&P 500 Upside Participation Rate Strategy; |
| • | the Downside Participation Rate for each Strategy is 50%; |
| • | the S&P 500 is 1000 on the Term start date; |
| • | you request a $10,000 withdrawal on Day 146 when the Daily Value Percentage is -2% for the S&P 500 Cap Strategy and-2.1% for the S&P 500 Upside Participation Rate Strategy; |
| • | you do not take any other withdrawals during the initial Term; |
| • | the withdrawal is covered by the Free Withdrawal Allowance and therefore no Early Withdrawal Charges apply (If Early Withdrawal Charges did apply, the amounts realized at the end of the Term would be reduced by both the withdrawal and the amount of the Early Withdrawal Charge); and |
| • | the S&P 500 is 800 on the Term end date. |
Impact of $10,000 Withdrawal from Each Strategy on Day 146 of Term | S&P 500 with Cap | S&P 500 with Upside Participation Rate | ||
Investment Base at Term Start | $50,000 | $50,000 | ||
Daily Charges through withdrawal date | $150 | $150 | ||
Remaining Investment Base | $49,850 | $49,850 | ||
Daily Value Percentage on Withdrawal Date | -2% | -2.1% | ||
Dollar Amount of Decrease on Withdrawal Date | $49,850 x -.02 = $997 | $49,850 x -.021 = $1,047 | ||
Strategy Value before Withdrawal | $49,850 - $997 = $48,853 | $49,850 - $1,047 = $48,803 | ||
Amount Withdrawn* | $5,003 | $4,997 | ||
Withdrawal as Percentage of Strategy Value | $5,003 / $48,853 = 10.24% | $4,997 / $48,803 = 10.24% | ||
Proportional Reduction in Investment Base | $49,850 x .1024 = $5,105 | $49,850 x .1024 = $5,105 | ||
Investment Base after Withdrawal | $49,850 - $5,105 = $44,745 | $49,850 - $5,105 = $44,745 | ||
Value at End of Term | ||||
Investment Base after Withdrawal | $44,745 | $44,745 | ||
Daily Charges From Withdrawal Date to Term End | $202 | $202 | ||
Remaining Investment Base | $44,543 | $44,543 | ||
Index at Term Start | 1000 | 1000 | ||
Index at Term End | 800 | 800 | ||
Fall in Index | -20% | -20% | ||
Downside Participation Rate | 50% | 50% | ||
Decrease as a Percentage | -20% x 50% = -10% | -20% x 50% = -10% | ||
Dollar Amount of Decrease | $44,543 x -.10 = $4,454 | $44,543 x -.10 = $4,454 | ||
Strategy Value at Term End | $44,543 - $4,454 = $40,089 | $44,543 - $4,454 = $40,089 |
| * | Note: The withdrawal is taken proportionally from each Indexed Strategy, based on the ratio of that Strategy’s value to the total value of all Indexed Strategies immediately before the withdrawal. In this example, the total value of all Indexed Strategies immediately before the withdrawal was $97,656 ($48,853 + $48,803). The S&P 500 with Cap Strategy value was 50.03% of that total value ($48,853 / $97,656 = 50.03%), so 50.03% of the $10,000 withdrawal ($5,003) was taken from it. The S&P 500 with Upside Participation Rate Strategy value was 49.97% of that total value ($48,803 / $97,656 = 49.97%), so 49.97% of the $10,000 withdrawal ($4,997) was taken from it. |
| • | you allocate your entire $50,000 Purchase Payment to the S&P 500 with Cap Strategy when the S&P 500 is 1900; |
| • | the Contract Effective Date and the Term start date are both April 6, 2021; |
| • | an Early Withdrawal Charge of 9% applies in the initial Term; |
| • | the Cap for the initial Term of that Strategy is 12%; |
| • | you request a $10,000 withdrawal on August 1, 2021 when the Daily Value Percentage is 1%; |
| • | you do not take any other withdrawals during the initial Term; and |
| • | the S&P 500 is 2033 on the Term end date of April 6, 2022. |
Term Start Date | April 6, 2021 | |||||||
Strategy Value | $ | 50,000 | See Footnote 1 below. | |||||
Investment Base | $ | 50,000 | See Footnote 1 below. | |||||
Cap for Term | 12 | % | See Footnote 2 below. | |||||
Index | 1900 | |||||||
Withdrawal Date | August 30, 2021 | |||||||
Daily Charges through withdrawal date | $ | 150 | See Footnote 3 below | |||||
Remaining Investment Base | $ | 49,850 | See Footnote 4 below | |||||
Daily Value Percentage on Withdrawal Date | 1 | % | ||||||
Dollar Amount of Increase on Withdrawal Date | $ | 499 | See Footnote 5 below. | |||||
Strategy Value before Withdrawal | $ | 50,349 | See Footnote 6 below. | |||||
Amount of Withdrawal Requested | $ | 10,000 | ||||||
Free Withdrawal Allowance | $ | 5,000 | See Footnote 7 below. | |||||
Early Withdrawal Charge | $ | 495 | See Footnote 8 below. | |||||
Total Amount Withdrawn | $ | 10,495 | See Footnote 9 below. | |||||
Withdrawal as Percentage of Strategy Value | 20.84 | % | See Footnote 10 below. | |||||
Proportional Reduction in Investment Base | $ | 10,391 | See Footnote 10 below. | |||||
Investment Base after Withdrawal | $ | 39,459 | See Footnote 11 below. | |||||
Strategy Value after Withdrawal | $ | 39,854 | See Footnote 12 below. | |||||
Term End Date | April 6, 2022 | |||||||
Daily Charges From Withdrawal Date to Term End | $ | 178 | See Footnote 13 below | |||||
Remaining Investment Base | $ | 39,281 | See Footnote 14 below | |||||
Index | 2033 | |||||||
Rise in Index | 7 | % | See Footnote 15 below. | |||||
Increase as a Percentage | 7 | % | See Footnote 16 below. | |||||
Dollar Amount of Increase | $ | 2,750 | See Footnote 16 below. | |||||
Strategy Value at Term End | $ | 42,031 | See Footnote 17 below. |
| Formula | Investment Base on the Term Start Date – (Investment Base on the Term Start Date x (1 – Daily Fee Rate) ^ number of days elapsed prior to withdrawal) | |
| Calculation | $50,000 - ($50,000 x (1 - 0.0000206251) ^ 146) = $150 | |
| Formula | Beginning Investment Base – sum of Daily Charges since Term Start Date) – proportional reduction for any prior Withdrawals and related Early Withdrawal Charges = remaining Investment Base | |
| Calculation | $50,000 - $150 - $0 = $49,850 | |
| Formula | Investment Base x Daily Value Percentage = dollar amount of increase | |
| Calculation | $49,850 x 1% = $499 | |
| Formula | Investment Base + dollar amount of increase = Strategy value | |
| Calculation | $49,850 + $499 = $50,349 | |
| Formula | Purchase Payment x 10% = FWA for first Contract Year | |
| Calculation | $50,000 x 10% = $5,000 | |
| Formula | [(Requested withdrawal - FWA) x EWC rate] / (1.00 - EWC rate) = Early Withdrawal Charge | |
| Calculation | [($10,000 - $5,000) x 9%] / (1.00 - 0.09) = $5,000 x 9% / 0.91 = $450 / 0.91 = $495 | |
| Formula | Requested withdrawal + Early Withdrawal Charge = total amount withdrawn | |
| Calculation | $10,000 + $495 = $10,495 | |
| Formula | Total amount withdrawn / Strategy value before withdrawal = withdrawal as percentage of Strategy value | |
| Calculation | $10,495 / $50,349 = 20.84% | |
| Formula | Investment Base before withdrawal x withdrawal as percentage of Strategy value = proportional reduction in Investment Base | |
| Calculation | $49,850 x 20.84% = $10,391 | |
| Formula | Investment Base before withdrawal - proportional reduction in Investment Base for withdrawal = Investment Base after withdrawal | |
| Calculation | $49,850 - $10,391 = $39,459 | |
| Formula | Strategy value before withdrawal - total amount withdrawn = Strategy value after withdrawal | |
| Calculation | $50,349 - $10,495 = $39,854 | |
| Formula | Investment Base after Previous Withdrawal – (Investment Base after Previous Withdrawal x (1 – Daily Fee Rate) ^ Number of Days Elapsed Since Previous Withdrawal) = Daily Charges | |
| Calculation | $39,459 - ($39,459 x (1 - 0.0000206251) ^ 219) = $178 | |
| Formula | Beginning Investment Base – sum of Daily Charges since Term Start Date) – proportional reduction for any prior Withdrawals and related Early Withdrawal Charges = remaining Investment Base | |
| Calculation | $50,000 – ($150 + $178) - $10,391 = $39,281 | |
| Formula | (Index on Term end date - Index on Term start date) / Index on Term start date = rise in Index | |
| Calculation | (2033 - 1900) / 1900 = 7% | |
| Formula | If the rise in Index is less than Cap, then rise in Index = increase percentage based on rise in Index | |
| Calculation | 7% rise in Index < 12% cap, so increase percentage = 7% | |
| Formula | Investment Base x increase percentage based on rise in Index = dollar amount of increase based on rise in Index | |
| Calculation | $39,281 x 7% = $2,750 | |
| Formula | Investment Base on Term end date + dollar amount of increase based on rise in Index = Strategy value on Term end date | |
| Calculation | $39,281 + $2,750 = $42,031 | |
| • | you allocate your entire $50,000 Purchase Payment to the S&P 500 with Cap Strategy when the S&P 500 is 1900; |
| • | the Contract Effective Date and the Term Start Date are both April 6, 2021; |
| • | an Early Withdrawal Charge of 9% applies in the initial Term; |
| • | you request a $10,000 withdrawal on August 1, 2021 when the Daily Value Percentage is -6%; |
| • | you do not take any other withdrawals during the initial Term; and |
| • | the S&P 500 is 1748 on the Term end date of April 6, 2022. |
Term Start Date | April 6, 2021 | |||||||
Strategy Value | $ | 50,000 | See Footnote 1 below. | |||||
Investment Base | $ | 50,000 | See Footnote 1 below. | |||||
Downside Participation Rate | 50 | % | See Footnote 2 below. | |||||
Index | 1900 | |||||||
Withdrawal Date | August 30, 2021 | |||||||
Daily Charges through withdrawal date | $ | 150 | See Footnote 3 below. | |||||
Remaining Investment Base | $ | 49,850 | See Footnote 4 below. | |||||
Daily Value Percentage on Withdrawal Date | -6 | % | ||||||
Dollar Amount of Decrease on Withdrawal Date | -$ | 2,991 | See Footnote 5 below. | |||||
Strategy Value before Withdrawal | $ | 46,859 | See Footnote 6 below. | |||||
Amount of Withdrawal Requested | $ | 10,000 | ||||||
Free Withdrawal Allowance | $ | 5,000 | See Footnote 7 below. | |||||
Early Withdrawal Charge | $ | 495 | See Footnote 8 below. | |||||
Total Amount Withdrawn | $ | 10,495 | See Footnote 9 below. | |||||
Withdrawal as Percentage of Strategy Value | 22.4 | % | See Footnote 10 below. | |||||
Proportional Reduction in Investment Base | $ | 11,165 | See Footnote 10 below. | |||||
Investment Base after Withdrawal | $ | 38,685 | See Footnote 11 below. | |||||
Strategy Value after Withdrawal | $ | 36,364 | See Footnote 12 below. | |||||
Term End Date | April 6, 2022 | |||||||
Daily Charges From Withdrawal Date to Term End | $ | 174 | See Footnote 13 below. | |||||
Remaining Investment Base | $ | 38,511 | See Footnote 14 below. | |||||
Index | 1748 | |||||||
Fall in Index | -8 | % | See Footnote 15 below. | |||||
Decrease as a Percentage | -4 | % | See Footnote 16 below. | |||||
Dollar Amount of Decrease | -$ | 1,540 | See Footnote 16 below. | |||||
Strategy Value at Term End | $ | 36,971 | See Footnote 17 below. |
| Formula | Investment Base on the Term Start Date – (Investment Base on the Term Start Date x (1 – Daily Fee Rate) ^ number of days elapsed prior to withdrawal) | |
| Calculation | $50,000 - ($50,000 x (1 - 0.0000206251) ^ 146) = $150 | |
| Formula | Beginning Investment Base – sum of Daily Charges since Term Start Date) – proportional reduction for any prior Withdrawals and related Early Withdrawal Charges = remaining Investment Base | |
| Calculation | $50,000 - $150 - $0 = $49,850 | |
| Formula | Investment Base x Daily Value Percentage = dollar amount of decrease | |
| Calculation | $49,850 x -6% = -$2,991 | |
| Formula | Investment Base – dollar amount of decrease = Strategy value | |
| Calculation | $49,850 - $2,991 = $46,859 | |
| Formula | Purchase Payment x 10% = FWA for first Contract Year | |
| Calculation | $50,000 x 10% = $5,000 | |
| Formula | [(Requested withdrawal - FWA) x EWC rate] / (1.00 - EWC rate) = Early Withdrawal Charge | |
| Calculation | [($10,000 - $5,000) x 9%] / (1.00 - 0.09) = $5,000 x 9% / 0.91 = $450 / 0.91 = $495 | |
| Formula | Requested withdrawal + Early Withdrawal Charge = total amount withdrawn | |
| Calculation | $10,000 + $495 = $10,495 | |
| Formula | total amount withdrawn / Strategy value before withdrawal = withdrawal as percentage of Strategy value | |
| Calculation | $10,495 / $46,859 = 22.4% | |
| Formula | Investment Base before withdrawal x withdrawal as percentage of Strategy value = proportional reduction in Investment Base | |
| Calculation | $49,850 x 22.4% = $11,165 | |
| Formula | Investment Base before withdrawal - proportional reduction in Investment Base for withdrawal = Investment Base after withdrawal | |
| Calculation | $49,850 - $11,165 = $38,685 | |
| Formula | Strategy value before withdrawal - total amount withdrawn = Strategy value after withdrawal | |
| Calculation | $46,859 - $10,495 = $36,364 | |
| Formula | Investment Base after Previous Withdrawal – (Investment Base after Previous Withdrawal x (1 – Daily Fee Rate) ^ Number of Days Elapsed Since Previous Withdrawal) = Daily Charges | |
| Calculation | $38,685 - ($38,685 x (1 - 0.0000206251) ^ 219) = $174 | |
| Formula | Beginning Investment Base – sum of Daily Charges since Term Start Date) – proportional reduction for any prior Withdrawals and related Early Withdrawal Charges = remaining Investment Base | |
| Calculation | $50,000 – ($150 + $174) - $10,495 = $38,511 | |
| Formula | (Index on Term end date - Index on Term start date) / Index on Term start date | |
| Calculation | (1748 - 1900) / 1900 = -8% | |
| Formula | Fall in Index x Downside Participation Rate = decrease as a percentage based on fall in Index | |
| Calculation | -8% x 50% = -4% | |
| Formula | Investment Base x decrease percentage based on fall in Index = dollar amount of decrease based on fall in Index | |
| Calculation | $38,511 x -4% = -$1,540 | |
| Formula | Investment Base on Term end date – dollar amount of decrease based on fall in Index = Strategy value on Term end date | |
| Calculation | $38,511 - $1,540 = $36,971 | |
| • | you allocate a $50,000 Purchase Payment to the S&P 500 with Cap Strategy when the S&P 500 is 1000; |
| • | you allocate a $50,000 Purchase Payment to the S&P 500 with Participation Rate Strategy when the S&P 500 is 1000; |
| • | the Contract Effective Date and the Term Start Date are both April 6, 2021; |
| • | you do not take any withdrawals during the initial Term; and |
| • | the S&P 500 is 1005 on the Term end date of April 6, 2022. |
S&P 500 with Cap | S&P 500 with Upside Participation Rate | |||||||||||
Term Start Date - April 6, 2021 | ||||||||||||
Strategy Value | $50,000 | $50,000 | See Footnote 1 below. | |||||||||
Investment Base | $50,000 | $50,000 | See Footnote 1 below. | |||||||||
Cap for Term | 10% | n/a | See Footnote 2 below. | |||||||||
Upside Participation Rate for Term | n/a | 75% | See Footnote 3 below. | |||||||||
Index | 1000 | 1000 | ||||||||||
Term End Date - April 6, 2022 | ||||||||||||
Daily Charges From Withdrawal Date to Term End | $375 | $375 | See Footnote 4 below. | |||||||||
Remaining Investment Base | $49,625 | $49,625 | See Footnote 5 below. | |||||||||
Index at Term Start | 1000 | 1000 | ||||||||||
Index at Term End | 1005 | 1005 | ||||||||||
Rise in Index | 0.50% | 0.50% | See Footnote 6 below. | |||||||||
Increase as a Percentage | 0.50% | 0.50% x 75% = 0.375% | See Footnote 7 below. | |||||||||
Dollar Amount of Increase | $49,625 x .005 = $248 | $49,625 x .00375 = $186 | See Footnote 8 below. | |||||||||
Strategy Value at Term End | $49,625 + $248 = $49,873 | $49,625 + $186 = $49,811 | See Footnote 9 below. | |||||||||
| Formula | Investment Base on Term Start Date x annual rate | |
| Calculation | $50,000 x 0.75% = $375 | |
| Formula | Beginning Investment Base – sum of Daily Charges since Term Start Date) – proportional reduction for any prior Withdrawals and related Early Withdrawal Charges = remaining Investment Base | |
| Calculation | $50,000 - $375 - $0 = $49,625 | |
| Formula | (Index Value on Term End Date - Index Value on Term Start Date) / Index Value on Term Start Date | |
| Calculation | (1005 - 1000) / 1000 = 0.50% | |
| Formula | If the rise in Index is less than Cap, then rise in Index = increase percentage based on rise in Index | |
| Calculation | 0.50% rise in Index < 10% cap, so increase percentage = 0.50% | |
| Formula | Rise in Index for Term x Upside Participation Rate for Term = Increase as a Percentage | |
| Calculation | 0.50% x 75% = 0.375% | |
| Formula | Investment Base x increase percentage based on rise in Index = dollar amount of increase based on rise in Index | |
| Calculation | ||
| Strategy with a Cap: | $49,625 x 0.50% = $248 | |
| Strategy with a Participation Rate: | $49,625 x 0.375% = $186 | |
| Formula | Investment Base on Term end date + dollar amount of increase based on rise in Index = Strategy value on Term end date | |
| Calculation | ||
| Strategy with a Cap: | $49,625 + $248 = $49,873 | |
| Strategy with a Participation Rate: | $49,625 + $186 = $49,811 | |
For Contracts Issued in: | Free Look Period | Refund | Replacement Free Look Period | Replacement Refund | ||||
Alabama | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
Alaska | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
Arizona | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
Arkansas | 20 days | Account Value | 30 days | Account Value | ||||
California | 30 days | Account Value + Fees/Charges Note refund amount is Purchase Payments. | 30 days | Account Value + Fees/Charges Note refund amount is Purchase Payments. | ||||
Colorado | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
Connecticut | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
Delaware | 20 days | Account Value | 30 days | Purchase Payments | ||||
District of Columbia | 20 days | Account Value | 30 days | Account Value | ||||
Florida | 21 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
Georgia | 20 days | Purchase Payments | 30 days | Purchase Payments | ||||
Hawaii | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
Idaho | 20 days | Purchase Payments | 30 days | Purchase Payments | ||||
Illinois | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges |
For Contracts Issued in: | Free Look Period | Refund | Replacement Free Look Period | Replacement Refund | ||||
Indiana | 20 days | Account Value | 30 days | Purchase Payments | ||||
Iowa | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
Kansas | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
Kentucky | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
Louisiana | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
Maine | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
Maryland | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
Massachusetts | 20 days | Account Value | 30 days | Purchase Payments | ||||
Michigan | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
Minnesota | 20 days | Account Value + Fees/Charges | 30 days | Purchase Payments | ||||
Mississippi | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
Missouri | 20 days | Purchase Payments | 30 days | Purchase Payments | ||||
Montana | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
Nebraska | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
Nevada | 20 days | Purchase Payments | 30 days | Purchase Payments | ||||
New Hampshire | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
New Jersey | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
New Mexico | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
North Carolina | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
North Dakota | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
Ohio | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
Oklahoma | 20 days | Purchase Payments | 30 days | Purchase Payments | ||||
Oregon | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
Pennsylvania | 20 days | Account Value | 30 days | Account Value | ||||
Rhode Island | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
South Carolina | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
South Dakota | 20 days | Account Value + Fees/Charges | 30 days | Account Value + Fees/Charges | ||||
Tennessee | 20 days | Account Value | 30 days | Purchase Payments | ||||
Texas | 20 days | Purchase Payments | 30 days | Account Value + Fees/Charges | ||||
Utah | 20 days | Purchase Payments | 30 days | Purchase Payments | ||||
Vermont | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
Virginia | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
Washington | 20 days | Greater of: (1) Purchase Payments or (2) Account Value minus taxes | 30 days | Purchase Payments | ||||
West Virginia | 20 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
Wisconsin | 30 days | Account Value | 30 days | Account Value + Fees/Charges | ||||
Wyoming | 20 days | Account Value | 30 days | Greater of: (1) Purchase Payments or (2) Account Value + Fees/Charges |
| • | Glidepath Holdings Inc. (“Glidepath”) is a subsidiary of MassMutual. It is a financial services holding company. |
| • | Great American Life Insurance Company |
| • | Great American Advisors, Inc. (“GAA”) is a subsidiary of GALIC. It is the principal underwriter and distributor of the Index Summit Pro annuities. |
| • | MM Asset Management Holding LLC is a subsidiary of MassMutual. It is a financial services holding company. |
| • | Barings LLC (“Barings”) is a subsidiary of MM Asset Management Holding LLC. It provides investment services for MassMutual and certain of its affiliated companies, including GALIC. |
Name | Year of Birth | Position(s) with Great American Life | Served in Position(s) Since | |||||
Adrienne Baglier | 1963 | Executive Vice President – Operations | February 2019 | |||||
Dominic L. Blue | 1976 | Director | 2021 | |||||
Susan M. Cicco | 1971 | Director | 2021 | |||||
Geoffrey J. Craddock | 1959 | Director | 2021 | |||||
Roger W. Crandall | 1964 | Director, Chairman of the Board | 2021 | |||||
Michael R. Fanning | 1963 | Director, Vice Chairman of the Board and Chief Executive Officer | 2021 | |||||
Paul A. LaPiana | 1969 | Director | 2021 | |||||
Christopher P. Miliano | 1958 | Head of GALIC Finance Treasurer | December 2021 May 2002 | |||||
Mark F. Muething | 1959 | Director President & Assistant Secretary | October 1993 April 2018 April 2012 | |||||
Name | Year of Birth | Position(s) with Great American Life | Served in Position(s) Since | |||||
Michael J. O’Connor | 1969 | Director | 2021 | |||||
Eric W. Partlan | 1973 | Director, Chief Investment Officer | 2021 | |||||
Gareth F. Ross | 1975 | Director | 2021 | |||||
Arthur W. Wallace | 1974 | Director | 2021 | |||||
Elizabeth A. Ward | 1964 | Director | 2021 | |||||
| Annuity | ||||||||||||
| Annuity | Policies | Ratings | ||||||||||
Company | Premiums | In Force | AM Best | S&P | ||||||||
Great American Life Insurance Company | $ | 3,474 | 371,000 | A+ | A+ | |||||||
Annuity Investors Life Insurance Company | 121 | 102,000 | A+ | A+ | ||||||||
| Statutory Premiums | ||||||||||||
| 2020 | 2019 | 2018 | ||||||||||
Financial institutions single premium annuities — indexed | $ | 1,372 | $ | 1,537 | $ | 1,776 | ||||||
Financial institutions single premium annuities — fixed | 896 | 1,229 | 492 | |||||||||
Retail single premium annuities — indexed | 591 | 943 | 1,418 | |||||||||
Retail single premium annuities ��� fixed | 99 | 120 | 87 | |||||||||
Broker dealer single premium annuities — indexed | 457 | 657 | 1,271 | |||||||||
Broker dealer single premium annuities — fixed | 27 | 32 | 14 | |||||||||
Pension risk transfer | 499 | 257 | 132 | |||||||||
Education market — fixed and indexed annuities | 129 | 164 | 192 | |||||||||
Total fixed annuity premiums | 4,070 | 4,939 | 5,382 | |||||||||
Variable annuities | 17 | 21 | 25 | |||||||||
Total gross annuity premiums | 4,087 | 4,960 | 5,407 | |||||||||
Ceded premiums | (492 | ) | — | — | ||||||||
Total net annuity premiums | $ | 3,595 | $ | 4,960 | $ | 5,407 | ||||||
| Year ended December 31, | ||||||||||||
| 2020 | 2019 | 2018 | ||||||||||
Annuity earnings before income taxes — before the impact of unlocking, derivatives related to FIAs and other impacts of stock market performance and interest rates on FIAs | $ | 358 | $ | 410 | $ | 411 | ||||||
Reinsurance | (47 | ) | — | — | ||||||||
Unlocking | (46 | ) | (1 | ) | (31 | ) | ||||||
Impact of derivatives related to FIAs and other impacts of changes in the stock market and interest rates on FIAs over or under option costs (a): | ||||||||||||
Change in fair value of derivatives related to FIAs | (279 | ) | (294 | ) | (51 | ) | ||||||
Accretion of guaranteed minimum FIA benefits | (404 | ) | (408 | ) | (347 | ) | ||||||
Other annuity benefits | (60 | ) | (14 | ) | (83 | ) | ||||||
Less cost of equity options | 562 | 586 | 506 | |||||||||
Related impact on the amortization of deferred policy acquisition costs (b) | 86 | 84 | (42 | ) | ||||||||
Annuity segment earnings before income taxes | $ | 170 | $ | 363 | $ | 363 | ||||||
| (a) | FIAs provide policyholders with a crediting rate tied, in part, to the performance of an existing stock market or other financial index. GALIC attempts to mitigate the risk in the index-based component of these products through the purchase and sale of call and put options on the appropriate index. GALIC’s strategy is designed so that the net change in the fair value of the call option assets and put option liabilities will generally offset the economic change in the net liability from the index participation. Both the index-based component of the annuities (an embedded derivative with a fair value of $3.93 billion at December 31, 2020) and the related call and put options (net fair value of $820 million at December 31, 2020) are considered derivatives that must be adjusted for changes in fair value through earnings each period. The fair values of these derivatives are impacted by actual and expected stock market performance and interest rates as well as other factors. Fluctuations in certain of these factors, such as changes in interest rates and the performance of the stock market, are not economic in nature for the current reporting period, but rather impact the timing of reported results. |
| (b) | An estimate of the related acceleration/deceleration of the amortization of deferred policy acquisition costs and deferred sales inducements. |
| 2020 | 2019 | 2018 | ||||||||||
Wells Fargo & Company | 11.9 | % | 12.0 | % | 7.4 | % | ||||||
The PNC Financial Services Group, Inc. | 9.0 | % | 8.8 | % | 6.6 | % | ||||||
Regions Financial Corporation | 7.4 | % | 6.7 | % | 4.8 | % | ||||||
LPL Financial | 4.4 | % | 4.4 | % | 4.8 | % | ||||||
BB&T Corporation | 3.5 | % | 5.1 | % | 3.7 | % | ||||||
| Amortized | Fair Value | |||||||||||
| Cost | Amount | % | ||||||||||
S&P or comparable rating | ||||||||||||
AAA, AA, A | $ | 17,102 | $ | 18,298 | 54 | % | ||||||
BBB | 10,850 | 12,018 | 35 | % | ||||||||
Total investment grade | 27,952 | 30,316 | 89 | % | ||||||||
BB | 756 | 772 | 2 | % | ||||||||
B | 202 | 200 | 1 | % | ||||||||
CCC, CC, C | 314 | 358 | 1 | % | ||||||||
D | 109 | 128 | — | % | ||||||||
Total non-investment grade | 1,381 | 1,458 | 4 | % | ||||||||
Not rated | 2,237 | 2,349 | 7 | % | ||||||||
Total | $ | 31,570 | $ | 34,123 | 100 | % | ||||||
| • | Reduction in new sales of annuity products; |
| • | Harm to our relationships with distributors of our annuity products; |
| • | Increases to the cost of capital or limitation on our access to sources of capital; |
| • | Harm to our ability to obtain reinsurance or reasonable terms for reinsurance; |
| • | Significant increases in the number and amount of surrenders of, or withdrawals from, our annuity products; and |
| • | Pressure to increase the crediting rates for our annuity products. |
• | changes in financial, political and economic conditions, including changes in interest and inflation rates, currency fluctuations and extended economic recessions or expansions in the U.S. and/or abroad; |
• | performance of securities markets, including the cost of equity index options; |
• | new legislation or declines in credit quality or credit ratings that could have a material impact on the valuation of securities in GALIC’s investment portfolio; |
• | the availability of capital; |
• | regulatory actions (including changes in statutory accounting rules); |
• | changes in the legal environment affecting GALIC or its customers; |
• | tax law and accounting changes, including the impact of recent changes in U.S. corporate tax law; |
• | terrorist activities (including any nuclear, biological, chemical or radiological events), incidents of war or losses resulting from civil unrest and other major losses; |
• | disruption caused by cyber-attacks or other technology breaches or failures by GALIC or its business partners and service providers, which could negatively impact GALIC’s business and/or expose GALIC to litigation; |
• | availability of reinsurance and ability of reinsurers to pay their obligations; |
• | trends in persistency and mortality; |
• | competitive pressures; |
• | the ability to obtain adequate rates and policy terms; and |
• | changes in GALIC’s financial strength ratings assigned by major ratings agencies. |
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||||||
Earnings Statement Data: | ||||||||||||||||||||||||||||
Total revenues | $ | 1,537 | $ | 1,271 | $ | 2,208 | $ | 2,081 | $ | 1,691 | $ | 1,598 | $ | 1,499 | ||||||||||||||
Earnings before income taxes | 417 | (22 | ) | 529 | 497 | 256 | 381 | 367 | ||||||||||||||||||||
Net earnings, including noncontrolling interests | 310 | (14 | ) | $ | 422 | $ | 395 | $ | 209 | $ | 276 | $ | 240 | |||||||||||||||
Less: Net earnings attributable to noncontrolling interests | — | (2 | ) | (1 | ) | 2 | 2 | 6 | 4 | |||||||||||||||||||
Net earnings attributable to shareholder | $ | 310 | $ | (12 | ) | $ | 423 | $ | 393 | $ | 207 | $ | 236 | $ | 205 | |||||||||||||
| September 30, 2021 | December 31, | |||||||||||||||||||||||||||
| 2020 | 2019 | 2018 | 2017 | 2016 | ||||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||
Cash and investments | $ | 40,519 | $ | 38,907 | $ | 42,028 | $ | 37,356 | $ | 34,500 | $ | 30,976 | ||||||||||||||||
Total assets | 50,134 | 48,571 | 45,893 | 40,801 | 38,120 | 34,362 | ||||||||||||||||||||||
Annuity benefits accumulated | 44,376 | 42,573 | 40,406 | 36,616 | 33,316 | 29,907 | ||||||||||||||||||||||
Life, accident and health reserves | 592 | 610 | 612 | 635 | 658 | 691 | ||||||||||||||||||||||
Shareholder’s equity | 3,738 | 3,948 | 3,433 | 2,492 | 2,761 | 2,509 | ||||||||||||||||||||||
Page | ||||
General | 97 | |||
Overview | 97 | |||
Critical Accounting Policies | 98 | |||
Liquidity and Capital Resources | 98 | |||
Condensed Consolidated Cash Flows | 99 | |||
Liquidity | 100 | |||
Page | ||||
Contractual Obligations | 101 | |||
Off-Balance Sheet Arrangements | 102 | |||
Investments | 102 | |||
Uncertainties | 106 | |||
Results of Operations | 106 | |||
Accounting Standards to be Adopted | 115 | |||
| • | the recoverability of reinsurance, |
| • | the amortization of annuity deferred policy acquisition costs, |
| • | the measurement of the derivatives embedded in indexed annuity liabilities, and |
| • | the valuation of investments, including the determination of impairment allowances. |
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
Net cash provided by operating activities | $ | 647 | $ | 1,087 | $ | 1,321 | $ | 1,334 | $ | 1,068 | ||||||||||
Net cash used in investing activities | (970 | ) | (563 | ) | (416 | ) | (2,449 | ) | (4,052 | ) | ||||||||||
Net cash provided (used) by financing activities | 480 | 200 | (488 | ) | 1,520 | 2,702 | ||||||||||||||
Net change in cash and cash equivalents | $ | 157 | $ | 724 | $ | 417 | $ | 405 | $ | (282 | ) | |||||||||
| % of Reserves | ||||||||||||||||
| September 30, | at December 31, | |||||||||||||||
GMIR | 2021 | 2021 | 2019 | 2018 | ||||||||||||
1 — 1.99% | 86 | % | 85 | % | 84 | % | 80 | % | ||||||||
2 — 2.99% | 3 | % | 3 | % | 3 | % | 4 | % | ||||||||
3 — 3.99% | 6 | % | 7 | % | 7 | % | 8 | % | ||||||||
4.00% and above | 5 | % | 5 | % | 6 | % | 8 | % | ||||||||
Annuity benefits accumulated (in millions) | $ | 44,376 | $ | 42,573 | $ | 40,406 | $ | 36,616 | ||||||||
| Total | Within One Year | 2-3 Years | 4-5 Years | More than 5 Years | ||||||||||||||||
Annuities (*) | $ | 46,885 | $ | 4,584 | $ | 10,716 | $ | 11,559 | $ | 20,026 | ||||||||||
Life, accident and health liabilities (*) | 1,217 | 99 | 212 | 139 | 767 | |||||||||||||||
Total | $ | 48,102 | $ | 4,683 | $ | 10,928 | $ | 11,698 | $ | 20,793 | ||||||||||
| (*) | Amounts presented in the table represent estimated cash payments under such contracts, based on significant assumptions related to mortality, morbidity, lapse, renewal, retirement and annuitization. These assumptions also include interest and index crediting consistent with assumptions used to amortize DPAC and assess loss recognition. All estimated cash payments are undiscounted for the time value of money. As a result, total outflows for all years exceed the corresponding liabilities of $42.57 billion for annuity benefits accumulated and $610 million for life, accident and health reserves included in GALIC’s Balance Sheet as of December 31, 2020. Based on the same assumptions, GALIC projects reinsurance recoveries related to annuity benefits accumulated totaling $7.25 billion as follows: Within 1 year — $876 million; 2-3 years — $1.73 billion;4-5 years — $2.05 billion; and thereafter — $2.59 billion and reinsurance recoveries related to life, accident and health reserves totaling $577 million as follows: Within 1 year — $58 million;2-3 years — $91 million;4-5 years — $74 million; and thereafter — $354 million. Actual payments and their timing could differ significantly from these estimates. |
| September 30, 2021 | December 31, 2020 | |||||||
Fair value of fixed maturity portfolio | $ | 36,123 | $ | 34,165 | ||||
Pretax impact on fair value of fixed maturity portfolio | $ | — | $ | (1,367 | ) | |||
Percentage impact on fair value of 100 bps increase in interest rates | — | % | (4.0 | %) | ||||
| Amortized Cost, net (*) | Fair Value | Fair Value as % of Cost | Unrealized Gain (Loss) | % Rated Investment Grade | ||||||||||||||||
Collateral type | ||||||||||||||||||||
Residential: | ||||||||||||||||||||
Agency-backed | $ | 834 | $ | 834 | 100 | % | $ | — | 100 | % | ||||||||||
Non-agency prime | 884 | 954 | 108 | % | 70 | 62 | % | |||||||||||||
Alt-A | 506 | 577 | 114 | % | 71 | 45 | % | |||||||||||||
Subprime | 137 | 154 | 112 | % | 17 | 30 | % | |||||||||||||
Commercial | 573 | 602 | 105 | % | 29 | 96 | % | |||||||||||||
| $ | 2,934 | $ | 3,121 | 106 | % | $ | 187 | — | % | |||||||||||
| (*) | Amortized cost, net of allowance for expected credit losses. |
| Securities With Unrealized Gains | Securities With Unrealized Losses | |||||||
Available for Sale Fixed Maturities | ||||||||
Fair value of securities | $ | 29,583 | $ | 5,220 | ||||
Amortized cost of securities | $ | 27,396 | $ | 5,312 | ||||
Gross unrealized gain (loss) | $ | 2,187 | $ | (92 | ) | |||
Fair value as % of amortized cost | 108 | % | 98 | % | ||||
Number of security positions | 3,265 | 534 | ||||||
Number individually exceeding $2 million gain or loss | 232 | 3 | ||||||
Concentration of gains (losses) by type or industry (exceeding 5% of unrealized): | ||||||||
Banks, savings, and credit institutions | $ | 356 | $ | (3 | ) | |||
States and municipalities | 264 | — | ||||||
Mortgage-backed securities | 195 | (8 | ) | |||||
Insurance | 179 | (1 | ) | |||||
Other asset-backed securities | 142 | (48 | ) | |||||
Other financial institutions | 112 | — | ||||||
U.S. Government and government agencies | 2 | (16 | ) | |||||
Percentage rated investment grade | 92 | % | 84 | % | ||||
| Securities With Unrealized Gains | Securities With Unrealized Losses | |||||||
Maturity | ||||||||
One year or less | 5 | % | 1 | % | ||||
After one year through five years | 28 | % | 3 | % | ||||
After five years through ten years | 26 | % | 1 | % | ||||
After ten years | 10 | % | 11 | % | ||||
| 69 | % | 16 | % | |||||
Collateralized loan obligations and other asset-backed securities (average life of approximately 3 years) | 24 | % | 66 | % | ||||
Mortgage-backed securities (average life of approximately 4-1/2 years) | 7 | % | 18 | % | ||||
| 100 | % | 100 | % | |||||
| Aggregate Fair Value | Aggregate Unrealized Gain (Loss) | Fair Value as % of Cost | ||||||||||
Fixed Maturities at September 30, 2021 | ||||||||||||
Securities with unrealized gains: | ||||||||||||
Exceeding $500,000 (1,218 securities) | $ | 18,399 | $ | 1,884 | 111 | % | ||||||
$500,000 or less (2,047 securities) | 11,184 | 303 | 103 | % | ||||||||
| $ | 29,583 | $ | 2,187 | 108 | % | |||||||
Securities with unrealized losses: | ||||||||||||
Exceeding $500,000 (41 securities) | $ | 1,287 | $ | (54 | ) | 96 | % | |||||
$500,000 or less (493 securities) | 3,933 | (38 | ) | 99 | % | |||||||
| $ | 5,220 | $ | (92 | ) | 98 | % | ||||||
| Aggregate Fair Value | Aggregate Unrealized Loss | Fair Value as % of Cost | ||||||||||
Securities with Unrealized Losses at September 30, 2021 | ||||||||||||
Investment grade fixed maturities with losses for: | ||||||||||||
Less than one year (260 securities) | $ | 3,859 | $ | (51 | ) | 99 | % | |||||
One year or longer (60 securities) | 532 | (10 | ) | 98 | % | |||||||
| $ | 4,391 | $ | (61 | ) | 99 | % | ||||||
Non-investment grade fixed maturities with losses for: | ||||||||||||
Less than one year (103 securities) | $ | 629 | $ | (24 | ) | 96 | % | |||||
One year or longer (111 securities) | 200 | (7 | ) | 97 | % | |||||||
| $ | 829 | $ | (31 | ) | 96 | % | ||||||
| a) | whether the unrealized loss is credit-driven or a result of changes in market interest rates, |
| b) | the extent to which fair value is less than cost basis, |
| c) | cash flow projections received from independent sources, |
| d) | historical operating, balance sheet and cash flow data contained in issuer SEC filings and news releases, |
| e) | near-term prospects for improvement in the issuer and/or its industry, |
| f) | third-party research and communications with industry specialists, |
| g) | financial models and forecasts, |
| h) | the continuity of interest payments, maintenance of investment grade ratings and hybrid nature of certain investments, |
| i) | discussions with issuer management, and |
| j) | ability and intent to hold the investment for a period of time sufficient to allow for anticipated recovery in fair value. |
| Nine months ended | ||||||||||||||||||||||||||||||||
| September 30, | % Change | Year ended December 31, | % Change | |||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 - 2020 | 2020 | 2019 | 2018 | 2020 - 2019 | 2019 - 2018 | |||||||||||||||||||||||||
Earnings before realized gains (losses) on securities and income taxes — excluding the impact of reinsurance, unlocking, derivatives related to FIAs and other impacts of stock market performance and interest rates on FIAs | $ | 406 | $ | 223 | 82 | % | $ | 352 | $ | 412 | $ | 409 | (15 | %) | 1 | % | ||||||||||||||||
Reinsurance | (118 | ) | — | (47 | ) | — | — | — | % | — | % | |||||||||||||||||||||
Unlocking | — | (46 | ) | — | % | (46 | ) | (1 | ) | (31 | ) | 4,500 | % | (97 | %) | |||||||||||||||||
Impact of derivatives related to FIAs and other impacts of changes in the stock market and interest rates on FIAs over or under option costs: | ||||||||||||||||||||||||||||||||
Change in fair value of derivatives related to FIAs | 14 | (240 | ) | 106 | % | (279 | ) | (294 | ) | (51 | ) | (5 | %) | 476 | % | |||||||||||||||||
Accretion of guaranteed minimum FIA benefits | (270 | ) | (318 | ) | (15 | %) | (404 | ) | (408 | ) | (347 | ) | (1 | %) | 18 | % | ||||||||||||||||
Other annuity benefits | (52 | ) | (50 | ) | 4 | % | (60 | ) | (14 | ) | (83 | ) | 329 | % | (83 | %) | ||||||||||||||||
Less cost of equity options | 335 | 446 | (25 | %) | 562 | 586 | 506 | (4 | %) | 16 | % | |||||||||||||||||||||
Related impact on the amortization of deferred policy acquisition costs | (10 | ) | 68 | (115 | %) | 86 | 84 | (42 | ) | 2 | % | (300 | %) | |||||||||||||||||||
Earnings before realized gains (losses) on securities and income taxes | $ | 305 | $ | 83 | 267 | % | 164 | 365 | 361 | (55 | %) | 1 | % | |||||||||||||||||||
Realized gains (losses) on securities | 112 | (105 | ) | 207 | % | 365 | 132 | (105 | ) | 177 | % | (226 | %) | |||||||||||||||||||
Earnings (loss) before income taxes | $ | 417 | $ | (22 | ) | 1,995 | % | $ | 529 | $ | 497 | $ | 256 | 6 | % | 94 | % | |||||||||||||||
| Nine months ended | ||||||||||||||||||||
| September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
Realized gains (losses) before impairments: | ||||||||||||||||||||
Disposals | $ | 42 | $ | 39 | $ | 524 | $ | 16 | $ | 12 | ||||||||||
Change in the fair value of derivatives | (18 | ) | 2 | (2 | ) | 5 | (7 | ) | ||||||||||||
Change in the fair value of equity securities | 84 | (111 | ) | (85 | ) | 122 | (107 | ) | ||||||||||||
Adjustments to annuity deferred policy acquisition costs and related items | (1 | ) | (6 | ) | (51 | ) | (1 | ) | 11 | |||||||||||
| 107 | (76 | ) | 386 | 142 | (91 | ) | ||||||||||||||
Change in allowance and impairments: | ||||||||||||||||||||
Securities | 7 | (43 | ) | (32 | ) | (21 | ) | (21 | ) | |||||||||||
Adjustments to annuity deferred policy acquisition costs and related items | (2 | ) | 14 | 11 | 11 | 7 | ||||||||||||||
| 5 | (29 | ) | (21 | ) | (10 | ) | (14 | ) | ||||||||||||
Realized gains (losses) on securities | $ | 112 | $ | (105 | ) | $ | 365 | $ | 132 | $ | (105 | ) | ||||||||
| Nine months ended | ||||||||||||||||||||||||||||||||
| September 30, | % Change | Year ended December 31, | % Change | |||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 - 2020 | 2020 | 2019 | 2018 | 2020 - 2019 | 2019 - 2018 | |||||||||||||||||||||||||
Interest credited — fixed | $ | 286 | $ | 307 | (7 | %) | $ | 399 | $ | 396 | $ | 357 | 1 | % | 11 | % | ||||||||||||||||
Include cost of equity options | 335 | 446 | (25 | %) | 562 | 586 | 506 | (4 | %) | 16 | % | |||||||||||||||||||||
Cost of funds | 621 | 753 | (18 | %) | 961 | 982 | 863 | (2 | %) | 14 | % | |||||||||||||||||||||
Interest credited — fixed component of variable annuities | 3 | 3 | — | % | 4 | 4 | 5 | — | % | (20 | %) | |||||||||||||||||||||
Other annuity benefits, excluding the impact of reinsurance and interest rates and the stock market on FIAs | 62 | 64 | (3 | %) | 87 | 109 | 96 | (20 | %) | 14 | % | |||||||||||||||||||||
| 686 | 820 | (16 | %) | 1,052 | 1,095 | 964 | (4 | %) | 14 | % | ||||||||||||||||||||||
Impact of reinsurance, unlocking, changes in fair value of derivatives related to FIAs, and other impacts of the stock market and interest rates over or under option costs: | ||||||||||||||||||||||||||||||||
Reinsurance | 85 | — | — | % | 36 | — | — | — | % | — | % | |||||||||||||||||||||
Unlocking | — | (77 | ) | — | % | (77 | ) | (74 | ) | 59 | 4 | % | (225 | %) | ||||||||||||||||||
Impact of derivatives related to FIAs | (14 | ) | 240 | (106 | %) | 279 | 294 | 51 | (5 | %) | 476 | % | ||||||||||||||||||||
Accretion of guaranteed minimum FIA benefits | 270 | 318 | (15 | %) | 404 | 408 | 347 | (1 | %) | 18 | % | |||||||||||||||||||||
Other annuity benefits — impact of the stock market and interest rates on FIAs | 52 | 50 | 4 | % | 60 | 14 | 83 | 329 | % | (83 | %) | |||||||||||||||||||||
Less cost of equity options (included in cost of funds) | (335 | ) | (446 | ) | (25 | %) | (562 | ) | (586 | ) | (506 | ) | (4 | %) | 16 | % | ||||||||||||||||
Total annuity benefits | $ | 744 | $ | 905 | (18 | %) | $ | 1,192 | $ | 1,151 | $ | 998 | 4 | % | 15 | % | ||||||||||||||||
| Nine months ended September 30, | % Change | Year ended December 31, | % Change | |||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 - 2020 | 2020 | 2019 | 2018 | 2020 - 2019 | 2019 - 2018 | |||||||||||||||||||||||||
Excluding reinsurance: | ||||||||||||||||||||||||||||||||
Change in the fair value of derivatives related to FIAs | $ | 14 | $ | (240 | ) | 106 | % | $ | (279 | ) | $ | (294 | ) | $ | (51 | ) | (5 | %) | 476 | % | ||||||||||||
Accretion of guaranteed minimum FIA benefits | (270 | ) | (318 | ) | (15 | %) | (404 | ) | (408 | ) | (347 | ) | (1 | %) | 18 | % | ||||||||||||||||
Other annuity benefits | (52 | ) | (50 | ) | 4 | % | (60 | ) | (14 | ) | (83 | ) | 329 | % | (83 | %) | ||||||||||||||||
Less cost of equity options | 335 | 446 | (25 | %) | 562 | 586 | 506 | (4 | %) | 16 | % | |||||||||||||||||||||
Related impact on the amortization of DPAC | (10 | ) | 68 | (115 | %) | 86 | 84 | (42 | ) | 2 | % | (300 | %) | |||||||||||||||||||
Reinsurance | (118 | ) | — | — | % | (47 | ) | — | — | — | % | — | % | |||||||||||||||||||
Impact on earnings before income taxes | $ | (101 | ) | $ | (94 | ) | 7 | % | $ | (142 | ) | $ | (46 | ) | $ | (17 | ) | 209 | % | 171 | % | |||||||||||
| Nine months ended September 30, | % Change | Year ended December 31, | % Change | |||||||||||||||||||||||||||||
| 2021 | 2020 | 2021 - 2020 | 2020 | 2019 | 2018 | 2020 - 2019 | 2019 - 2018 | |||||||||||||||||||||||||
Financial institutions single premium annuities — indexed | $ | 1,406 | $ | 1,014 | 39 | % | $ | 1,372 | $ | 1,537 | $ | 1,776 | (11 | %) | (13 | %) | ||||||||||||||||
Financial institutions single premium annuities — fixed | 1,562 | 526 | 197 | % | 896 | 1,229 | 492 | (27 | %) | 150 | % | |||||||||||||||||||||
Retail single premium annuities — indexed | 542 | 444 | 22 | % | 591 | 943 | 1,418 | (37 | %) | (33 | %) | |||||||||||||||||||||
Retail single premium annuities — fixed | 126 | 73 | 73 | % | 99 | 120 | 87 | (18 | %) | 38 | % | |||||||||||||||||||||
Broker dealer single premium annuities — indexed | 608 | 347 | 75 | % | 457 | 657 | 1,271 | (30 | %) | (48 | %) | |||||||||||||||||||||
Broker dealer single premium annuities — fixed | 138 | 22 | 527 | % | 27 | 32 | 14 | (16 | %) | 129 | % | |||||||||||||||||||||
Pension risk transfer | 94 | 225 | (58 | )% | 499 | 257 | 132 | 94 | % | 95 | % | |||||||||||||||||||||
Education market — fixed and indexed annuities | 82 | 104 | (21 | )% | 129 | 164 | 192 | (21 | %) | (15 | %) | |||||||||||||||||||||
Total fixed annuity premiums | 4,558 | 2,755 | 65 | % | 4,070 | 4,939 | 5,382 | (18 | %) | (8 | %) | |||||||||||||||||||||
Variable annuities | 11 | 13 | (15 | )% | 17 | 21 | 25 | (19 | %) | (16 | %) | |||||||||||||||||||||
Total gross annuity premiums | 4,569 | 2,768 | 65 | % | 4,087 | 4,960 | 5,407 | (18 | %) | (8 | %) | |||||||||||||||||||||
Ceded premiums | (481 | ) | (246 | ) | 96 | % | (492 | ) | — | — | — | % | — | % | ||||||||||||||||||
Total net annuity premiums | $ | 4,088 | $ | 2,522 | 62 | % | $ | 3,595 | $ | 4,960 | $ | 5,407 | (28 | %) | (8 | %) | ||||||||||||||||
| Nine months ended | ||||||||||||||||||||
| September 30 | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
Policy charges and other income: | ||||||||||||||||||||
Unearned revenue | — | $ | (5 | ) | $ | (5 | ) | $ | 1 | $ | (1 | ) | ||||||||
Total revenues | — | (5 | ) | (5 | ) | 1 | (1 | ) | ||||||||||||
Annuity benefits: | ||||||||||||||||||||
Fixed-indexed annuities embedded derivative | — | (240 | ) | (240 | ) | (181 | ) | 44 | ||||||||||||
Guaranteed withdrawal benefit reserve | — | 107 | 107 | 102 | 10 | |||||||||||||||
Other reserves | — | 60 | 60 | 4 | 5 | |||||||||||||||
Sales inducements asset | — | (4 | ) | (4 | ) | 1 | — | |||||||||||||
Total annuity benefits | — | (77 | ) | (77 | ) | (74 | ) | 59 | ||||||||||||
Insurance acquisition expenses, net: | ||||||||||||||||||||
Deferred policy acquisition costs | — | 118 | 118 | 76 | (29 | ) | ||||||||||||||
Total costs and expenses | — | 41 | 41 | 2 | 30 | |||||||||||||||
Net charge | — | $ | (46 | ) | $ | (46 | ) | $ | (1 | ) | $ | (31 | ) | |||||||
| September 30, 2021 | December 31, 2020 | |||||||
Fair value of fixed maturity portfolio | $ | 36,123 | $ | 34,165 | ||||
Pretax impact on fair value of fixed maturity portfolio | $ | — | $ | (1,367 | ) | |||
Percentage impact on fair value of 100 bps increase in interest rates | — | % | (4.0 | )% | ||||
Valuation of investments in securities | ||
Description of the Matter | As of December 31, 2020, the fair value of the Company’s fixed-income and equity securities totaled $34.94 billion, a portion of which are valued based on non-binding broker quotes or internally developed using significant inputs not based on, or corroborated by, observable market information. The fair value of these securities are determined by management applying the methodologies outlined in Note D to the consolidated financial statements. The lack of visibility into assumptions used innon-binding broker quotes and the credit spread applied by management for internally developed fixed-income investments are significant unobservable inputs, which create greater subjectivity when determining the fair values. Credit spread inputs are developed based on management’s review of trade activity for comparable securities and credit spreads over the treasury yield of securities with a similar duration.Auditing the fair value of the fixed-income and equity securities that use unobservable inputs was complex and highly judgmental due to the judgment used by the Company in determining unobservable inputs and assumptions to estimate the securities’ fair value. Significant unobservable inputs and assumptions include non-binding broker quotes and credit spreads over the treasury yield. | |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over management’s valuation process for the fixed-income and equity securities priced using unobservable inputs. This included, among others, testing controls over investment pricing and the development and review of significant inputs and assumptions used in determining the fair values. To test the Company’s investment fair values, our audit procedures included, among others, comparing the fair values for a sample of securities to pricing service values or internally developed cash flow models. With the assistance of our valuation specialists, we evaluated the valuation methodologies used by the Company and compared the Company’s fair value estimate to an independently calculated range of fair value estimates for a sample of securities. We evaluated information that corroborated or contradicted the Company’s fair value estimates, including observable spreads, transaction data for similar securities, and historical collateral performance data. | |
Amortization of annuity deferred policy acquisition costs | ||
Description of the Matter | At December 31, 2020, deferred policy acquisition costs totaled $302 million, of which $286 million related to annuity contracts. As described in Notes A and G to the consolidated financial statements, the carrying amount of the annuity deferred policy acquisition costs is the total of costs deferred less amortization that is calculated in relation to the present value of estimated gross profits of the underlying annuity policies. There is a significant amount of uncertainty inherent in calculating estimated gross profits as the calculation is sensitive to management’s best estimate of assumptions, such as future investment yields and lapse rates. Management’s assumptions are adjusted, also known as unlocking, over time for emerging experience and expected trends. The unlocking results in amortization being recalculated, using the new assumptions for estimated gross profits, that results either in additional or less cumulative amortization expense. Auditing management’s estimate of the amortization of annuity deferred policy acquisition costs was complex because it required the involvement of our actuarial specialists due to the highly judgmental nature of the assumptions used in management’s projection of estimated gross profits, which are used in the amortization of annuity deferred policy acquisition costs. The significant judgment was primarily due to the sensitivity of the estimated gross profits to the expected investment yield and lapse rate assumptions. | |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the process for estimating amortization of annuity deferred policy acquisition costs. This included, among others, controls over the review and approval processes that management has in place for the assumptions used in measuring estimated gross profits. To test the amortization of deferred policy acquisition costs related to annuity contracts, our audit procedures included, among others, testing the completeness and accuracy of the data used to calculate the estimated gross profits through testing the reconciliation of the underlying data recorded in the source systems to the actuarial valuation models. With the assistance of our actuarial specialists, we evaluated the assumptions used by management in determining estimated gross profits. Also, with the assistance of our actuarial specialists, we compared significant assumptions, including expected investment yields and lapse rates, to prior actual experience and observable market data, and we evaluated management’s estimates of prospective changes in these assumptions. In addition, we performed an independent calculation of estimated and actual gross profits for a sample of product cohorts for comparison with the actuarial model used by management. | |
Valuation of annuity contract embedded derivatives | ||
Description of the Matter | At December 31, 2020, the liability for annuity benefits accumulated included $3.93 billion for the embedded derivatives related to the equity participation feature of the Company’s fixed-indexed annuity products. As described in Note F to the consolidated financial statements, there is a significant amount of estimation uncertainty inherent in measuring the fair value of the embedded derivatives as it includes management’s assumptions of various factors, such as future interest rates, expected stock market performance, budgeted option costs, lapses, and annuitizations. Management’s assumptions are adjusted for emerging experience and expected trends, resulting in changes to the estimated fair value of the embedded derivatives. Auditing management’s estimate of the fair value of the embedded derivatives related to fixed-indexed annuity products was complex because it required the involvement of our actuarial specialists due to the highly judgmental nature of the assumptions used in the valuation process. The significant judgment was primarily due to the sensitivity of the budgeted option costs and lapse assumptions. | |
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the process for estimating the embedded derivatives. This included, among others, the review and approval processes that management has in place for the methods and assumptions used in the valuation process of the embedded derivatives. To test the embedded derivatives related to fixed-indexed annuity products, our procedures included, among others, testing the completeness and accuracy of data used in the valuation process through testing the reconciliation of the underlying data recorded in the source systems to the actuarial valuation models. With the assistance of our actuarial specialists, we evaluated the methods and assumptions used by management in determining the estimated fair value of the embedded derivatives. We compared the significant assumptions, including expected budget option costs and lapses, to prior actual experience and management’s estimates of prospective changes in these assumptions. In addition, we performed an independent calculation of the embedded derivatives for a sample of policies for comparison with the fair value calculated by the actuarial model used by management. | |
/s/ ERNST & YOUNG LLP | ||
| We have served as the Company’s auditor since 2015 | ||
| Cincinnati, Ohio | ||
April 26, 2021 | ||
| September 30 | December 31, | |||||||||||
| 2021 | 2020 | 2019 | ||||||||||
| (unaudited) | ||||||||||||
Assets: | ||||||||||||
Cash and cash equivalents | $ | 1,308 | $ | 1,151 | $ | 734 | ||||||
Investments: | ||||||||||||
Fixed maturities, available for sale at fair value (amortized cost — $34,003 (unaudited), $31,598 and $36,144; allowance for expected credit losses of $15 at September 30, 2021 (unaudited) and $28 at December 31, 2020) | 36,083 | 34,123 | 37,899 | |||||||||
Fixed maturities, trading at fair value | 40 | 42 | 54 | |||||||||
Equity securities, at fair value | 648 | 773 | 809 | |||||||||
Investments accounted for using the equity method | 786 | 1,075 | 985 | |||||||||
Mortgage loans | 1,512 | 1,251 | 1,072 | |||||||||
Policy loans | 142 | 151 | 164 | |||||||||
Real estate and other investments | — | 341 | 311 | |||||||||
Total cash and investments | 40,519 | 38,907 | 42,028 | |||||||||
Recoverables from reinsurers: | ||||||||||||
Fixed and indexed annuities | 6,522 | 6,539 | — | |||||||||
Other | 257 | 267 | 282 | |||||||||
Deferred policy acquisition costs (including the impact of unrealized gains on securities of $768 (unaudited), $934 and $681) | 474 | 302 | 713 | |||||||||
Accrued investment income | 292 | 278 | 335 | |||||||||
Equity index call options | 646 | 825 | 924 | |||||||||
Variable annuity assets (separate accounts) | 668 | 664 | 628 | |||||||||
Funds held as collateral | 318 | 351 | 577 | |||||||||
Net deferred tax assets | — | — | 44 | |||||||||
Other assets | 438 | 438 | 362 | |||||||||
Total assets | $ | 50,134 | $ | 48,571 | $ | 45,893 | ||||||
Liabilities and Equity: | ||||||||||||
Annuity benefits accumulated (including the impact of unrealized gains on securities of $287 (unaudited), $324 and $220) | $ | 44,376 | $ | 42,573 | $ | 40,406 | ||||||
Life, accident and health reserves | 592 | 610 | 612 | |||||||||
Variable annuity liabilities (separate accounts) | 668 | 664 | 628 | |||||||||
Liability for funds held as collateral | 318 | 351 | 577 | |||||||||
Net deferred tax liabilities | 11 | 99 | — | |||||||||
Other liabilities | 431 | 279 | 189 | |||||||||
Total liabilities | 46,396 | 44,576 | 42,412 | |||||||||
Shareholder’s equity: | ||||||||||||
Common stock and capital surplus — Par value — $7.50 per share: — 1,200,000 shares authorized — 201,000 shares issued and outstanding | 1,006 | 1,004 | 992 | |||||||||
Retained earnings | 1,884 | 1,874 | 1,741 | |||||||||
Accumulated other comprehensive income, net of tax | 848 | 1,070 | 700 | |||||||||
Total shareholder’s equity | 3,738 | 3,948 | 3,433 | |||||||||
Noncontrolling interests | — | 47 | 48 | |||||||||
Total equity | 3,738 | 3,995 | 3,481 | |||||||||
Total liabilities and equity | $ | 50,134 | $ | 48,571 | $ | 45,893 | ||||||
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||
Revenues: | ||||||||||||||||||||
Net investment income | $ | 1,330 | $ | 1,283 | $ | 1,717 | $ | 1,813 | $ | 1,657 | ||||||||||
Realized gains (losses) on securities | 112 | (105 | ) | 365 | 132 | (105 | ) | |||||||||||||
Life, accident and health net earned premiums | 14 | 17 | 22 | 22 | 24 | |||||||||||||||
Policy charges and other income | 81 | 76 | 104 | 114 | 115 | |||||||||||||||
Total revenues | 1,537 | 1,271 | 2,208 | 2,081 | 1,691 | |||||||||||||||
Costs and Expenses: | ||||||||||||||||||||
Annuity benefits | 744 | 905 | 1,192 | 1,151 | 998 | |||||||||||||||
Life, accident and health benefits | 19 | 30 | 40 | 36 | 37 | |||||||||||||||
Insurance acquisition expenses, net | 230 | 251 | 306 | 253 | 260 | |||||||||||||||
Other expenses | 127 | 107 | 141 | 144 | 140 | |||||||||||||||
Total costs and expenses | 1,120 | 1,293 | 1,679 | 1,584 | 1,435 | |||||||||||||||
Earnings (Loss) before income taxes | 417 | (22 | ) | 529 | 497 | 256 | ||||||||||||||
Provision (Benefit) for income taxes | 107 | (8 | ) | 107 | 102 | 47 | ||||||||||||||
Net earnings (loss), including noncontrolling interests | 310 | (14 | ) | 422 | 395 | 209 | ||||||||||||||
Less: Net earnings attributable to noncontrolling interests | — | (2 | ) | (1 | ) | 2 | 2 | |||||||||||||
Net Earnings (Loss) Attributable to Shareholder | $ | 310 | $ | (12 | ) | $ | 423 | $ | 393 | $ | 207 | |||||||||
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||
Net earnings (loss), including noncontrolling interests | $ | 310 | $ | (14 | ) | $ | 422 | $ | 395 | $ | 209 | |||||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||
Net unrealized gains (losses) on securities: | ||||||||||||||||||||
Unrealized holding gains (losses) on securities arising during the period | (184 | ) | 326 | 659 | 654 | (443 | ) | |||||||||||||
Reclassification adjustment for realized (gains) losses included in net earnings | (19) | (4 | ) | (313 | ) | (13 | ) | 5 | ||||||||||||
Total net unrealized gains (losses) on securities | (203 | ) | 322 | 346 | 641 | (438 | ) | |||||||||||||
Net unrealized gains on cash flow hedges | (19 | ) | 24 | 24 | 28 | 2 | ||||||||||||||
Other comprehensive income (loss), net of tax | (222 | ) | 346 | 370 | 669 | (436 | ) | |||||||||||||
Total comprehensive income (loss), net of tax | 88 | 332 | 792 | 1,064 | (227 | ) | ||||||||||||||
Less: Comprehensive income (loss) attributable to noncontrolling interests | — | (2 | ) | (1 | ) | 2 | 2 | |||||||||||||
Comprehensive income (loss) attributable to shareholder | $ | 88 | $ | 334 | $ | 793 | $ | 1,062 | $ | (229 | ) | |||||||||
| Shareholder’s Equity | ||||||||||||||||||||||||||||
| Common Shares | Common Stock and Capital Surplus | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||
Balance at December 31, 2017 | 201,000 | $ | 956 | $ | 1,248 | $ | 557 | $ | 2,761 | $ | 47 | $ | 2,808 | |||||||||||||||
Cumulative effect of accounting change | — | — | 93 | (90 | ) | 3 | — | 3 | ||||||||||||||||||||
Net earnings | — | — | 207 | — | 207 | 2 | 209 | |||||||||||||||||||||
Other comprehensive loss | — | — | — | (436 | ) | (436 | ) | — | (436 | ) | ||||||||||||||||||
Capital contributions from parent | — | 17 | — | — | 17 | — | 17 | |||||||||||||||||||||
Dividends | — | — | (60 | ) | — | (60 | ) | — | (60 | ) | ||||||||||||||||||
Other | — | — | — | — | — | (2 | ) | (2 | ) | |||||||||||||||||||
Balance at December 31, 2018 | 201,000 | $ | 973 | $ | 1,488 | $ | 31 | $ | 2,492 | $ | 47 | $ | 2,539 | |||||||||||||||
Net earnings | — | — | 393 | — | 393 | 2 | 395 | |||||||||||||||||||||
Other comprehensive income | — | — | — | 669 | 669 | — | 669 | |||||||||||||||||||||
Capital contributions from parent | — | 19 | — | — | 19 | — | 19 | |||||||||||||||||||||
Dividends | — | — | (140 | ) | — | (140 | ) | — | (140 | ) | ||||||||||||||||||
Other | — | — | — | — | — | (1 | ) | (1 | ) | |||||||||||||||||||
Balance at December 31, 2019 | 201,000 | $ | 992 | $ | 1,741 | $ | 700 | $ | 3,433 | $ | 48 | $ | 3,481 | |||||||||||||||
Cumulative effect of accounting change | — | — | (5 | ) | — | (5 | ) | — | (5 | ) | ||||||||||||||||||
Net earnings (loss) | — | — | 423 | — | 423 | (1 | ) | 422 | ||||||||||||||||||||
Other comprehensive income | — | — | — | 370 | 370 | — | 370 | |||||||||||||||||||||
Capital contributions from parent | — | 12 | — | — | 12 | — | 12 | |||||||||||||||||||||
Dividends | — | — | (285 | ) | — | (285 | ) | — | (285 | ) | ||||||||||||||||||
Other | — | — | — | — | — | — | — | |||||||||||||||||||||
Balance at December 31, 2020 | 201,000 | $ | 1,004 | $ | 1,874 | $ | 1,070 | $ | 3,948 | $ | 47 | $ | 3,995 | |||||||||||||||
Cumulative effect of accounting change (unaudited) | — | — | — | — | — | — | — | |||||||||||||||||||||
Net earnings (unaudited) | — | — | 310 | — | 310 | — | 310 | |||||||||||||||||||||
Other comprehensive loss (unaudited) | — | — | — | (222 | ) | (222 | ) | — | (222 | ) | ||||||||||||||||||
Capital contributions from parent (unaudited) | — | 1 | — | — | 1 | — | 1 | |||||||||||||||||||||
Dividends (unaudited) | — | — | (300 | ) | — | (300 | ) | — | (300 | ) | ||||||||||||||||||
Stock-based compensation expense (unaudited) | — | 1 | — | — | 1 | — | 1 | |||||||||||||||||||||
Sale of real estate (unaudited) | — | — | — | — | — | (47 | ) | (47 | ) | |||||||||||||||||||
Other (unaudited) | — | — | — | — | — | — | — | |||||||||||||||||||||
Balance at September 30, 2021 (unaudited) | 201,000 | $ | 1,006 | $ | 1,884 | $ | 848 | $ | 3,738 | $ | — | $ | 3,738 | |||||||||||||||
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
(unaudited) | ||||||||||||||||||||
Operating Activities: | ||||||||||||||||||||
Net earnings (loss), including noncontrolling interests | $ | 309 | $ | (14 | ) | $ | 422 | $ | 395 | $ | 209 | |||||||||
Adjustments: | ||||||||||||||||||||
Depreciation and amortization | (75 | ) | (48 | ) | (68 | ) | (59 | ) | (67 | ) | ||||||||||
Annuity benefits | 744 | 905 | 1,192 | 1,151 | 998 | |||||||||||||||
Realized (gains) losses on investing activities | (112 | ) | 107 | (363 | ) | (132 | ) | 105 | ||||||||||||
Net sales of trading securities | 1 | 9 | 12 | 3 | 59 | |||||||||||||||
Deferred annuity and life policy acquisition costs | (185 | ) | (112 | ) | (155 | ) | (206 | ) | (263 | ) | ||||||||||
Amortization of insurance acquisition costs | 186 | 208 | 250 | 202 | 215 | |||||||||||||||
Change in: | ||||||||||||||||||||
Recoverables from reinsurers | 135 | 25 | (67 | ) | 16 | 14 | ||||||||||||||
Accrued investment income | (14 | ) | 14 | 57 | (9 | ) | (35 | ) | ||||||||||||
Funds held as collateral | 33 | 235 | 226 | (474 | ) | 286 | ||||||||||||||
Other assets | 26 | 24 | (64 | ) | 112 | (71 | ) | |||||||||||||
Life, accident and health reserves | (18 | ) | (4 | ) | (4 | ) | (23 | ) | (23 | ) | ||||||||||
Liability for funds held as collateral | (33 | ) | (235 | ) | (226 | ) | 474 | (286 | ) | |||||||||||
Other liabilities | (48 | ) | (45 | ) | 51 | (42 | ) | 11 | ||||||||||||
Other operating activities, net | (305 | ) | 18 | 58 | (74 | ) | (84 | ) | ||||||||||||
Net cash provided by operating activities | 644 | 1,087 | 1,321 | 1,334 | 1,068 | |||||||||||||||
Investing Activities: | ||||||||||||||||||||
Purchases of: | ||||||||||||||||||||
Fixed maturities | (7,885 | ) | (6,136 | ) | (7,615 | ) | (6,177 | ) | (7,898 | ) | ||||||||||
Equity securities | (78 | ) | (206 | ) | (229 | ) | (126 | ) | (326 | ) | ||||||||||
Mortgage loans | (306 | ) | (120 | ) | (243 | ) | (407 | ) | (142 | ) | ||||||||||
Equity index options | (359 | ) | (429 | ) | (544 | ) | (600 | ) | (567 | ) | ||||||||||
Other investments | (77 | ) | (190 | ) | (249 | ) | (220 | ) | (296 | ) | ||||||||||
Real estate, property and equipment | (3 | ) | (6 | ) | (8 | ) | (8 | ) | (15 | ) | ||||||||||
Proceeds from: | ||||||||||||||||||||
Maturities and redemptions of fixed maturities | 4,818 | 3,004 | 4,100 | 3,215 | 3,551 | |||||||||||||||
Repayments of mortgage loans | 46 | 33 | 68 | 118 | 155 | |||||||||||||||
Sales of fixed maturities | 960 | 2,658 | 3,065 | 801 | 447 | |||||||||||||||
Sales of equity securities | 339 | 170 | 284 | 214 | 121 | |||||||||||||||
Settlements of equity index options | 835 | 617 | 873 | 666 | 786 | |||||||||||||||
Sales of other investments | 592 | 32 | 79 | 65 | 122 | |||||||||||||||
Other investing activities, net | 9 | 10 | 3 | 10 | 10 | |||||||||||||||
Net cash used in investing activities | (967 | ) | (563 | ) | (416 | ) | (2,449 | ) | (4,052 | ) | ||||||||||
Financing Activities: | ||||||||||||||||||||
Annuity receipts | 4,569 | 2,767 | 4,087 | 4,960 | 5,407 | |||||||||||||||
Ceded annuity receipts | (482 | ) | (246 | ) | (492 | ) | — | — | ||||||||||||
Annuity surrenders, benefits and withdrawals | (3,105 | ) | (2,466 | ) | (3,546 | ) | (3,358 | ) | (2,916 | ) | ||||||||||
Ceded annuity surrenders, benefits and withdrawals | 514 | — | 206 | — | — | |||||||||||||||
Net transfers from variable annuity assets | 62 | 44 | 61 | 60 | 47 | |||||||||||||||
Cash transferred in reinsurance | — | — | (554 | ) | — | — | ||||||||||||||
Advances from Federal Home Loan Bank | — | 200 | 200 | — | 225 | |||||||||||||||
Repayments to Federal Home Loan Bank | (731 | ) | (40 | ) | (165 | ) | — | — | ||||||||||||
Cash dividends paid | (300 | ) | (60 | ) | (285 | ) | (140 | ) | (60 | ) | ||||||||||
Other financing activities, net | (47 | ) | 1 | — | (2 | ) | (1 | ) | ||||||||||||
Net cash provided by (used in) financing activities | 480 | 200 | (488 | ) | 1,520 | 2,702 | ||||||||||||||
Net Change in Cash and Cash Equivalents | 157 | 724 | 417 | 405 | (282 | ) | ||||||||||||||
Cash and cash equivalents at beginning of period | 1,151 | 734 | 734 | 329 | 611 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 1,308 | $ | 1,458 | $ | 1,151 | $ | 734 | $ | 329 | ||||||||||
Page | ||||||
A. | A-9 | |||||
B. | A-15 | |||||
C. | A-15 | |||||
D. | A-23 | |||||
E. | A-24 | |||||
F. | A-30 | |||||
Page | ||||||
G. | A-32 | |||||
H. | A-32 | |||||
I. | A-34 | |||||
J. | A-35 | |||||
K. | A-35 | |||||
L. | A-37 | |||||
| • | exclude leases with a term of 12 months or less from the calculation of lease assets and liabilities, |
| • | not separate lease and non-lease components except for buildings (office space and storage facilities), |
| • | for contracts existing at the date of adoption — not reassess whether a contract is a lease or contains a lease, how initial direct costs were accounted for or whether the lease is an operating or finance lease, and |
| • | use hindsight to determine the lease term for leases existing at the date of adoption. |
| 2020 | 2019 | 2018 | ||||||||||
Assets | ||||||||||||
Annuity | $ | 47,886 | $ | 45,217 | $ | 40,115 | ||||||
Run-off life | 685 | 676 | 686 | |||||||||
Total assets | $ | 48,571 | $ | 45,893 | $ | 40,801 | ||||||
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||
Revenues | ||||||||||||||||||||
Annuity: | ||||||||||||||||||||
Net investment income | $ | 1,316 | $ | 1,268 | $ | 1,699 | $ | 1,792 | $ | 1,638 | ||||||||||
Other income | 76 | 73 | 97 | 108 | 108 | |||||||||||||||
Total annuity | 1,392 | 1,341 | 1,796 | 1,900 | 1,746 | |||||||||||||||
Run-off life | 33 | 35 | 47 | 49 | 50 | |||||||||||||||
Total revenues before realized gains (losses) | 1,425 | 1,376 | 1,843 | 1,949 | 1,796 | |||||||||||||||
Realized gains (losses) on securities | 112 | (105 | ) | 365 | 132 | (105 | ) | |||||||||||||
Total revenues | $ | 1,537 | $ | 1,271 | $ | 2,208 | $ | 2,081 | $ | 1,691 | ||||||||||
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||
Earnings Before (Loss) Income Taxes | ||||||||||||||||||||
Annuity | $ | 303 | $ | 89 | $ | 170 | $ | 363 | $ | 363 | ||||||||||
Run-off life | 2 | (6 | ) | (6 | ) | 2 | (2 | ) | ||||||||||||
Total earnings before realized gains (losses) and income taxes | 305 | 83 | 164 | 365 | 361 | |||||||||||||||
Realized gains (losses) on securities | 112 | (105 | ) | 365 | 132 | (105 | ) | |||||||||||||
Total earnings (loss) before income taxes | $ | 417 | $ | (22 | ) | $ | 529 | $ | 497 | $ | 256 | |||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
September 30, 2021 (unaudited) | ||||||||||||||||
Assets: | ||||||||||||||||
Available for sale (“AFS”) fixed maturities: | ||||||||||||||||
U.S. Government and government agencies | $ | — | $ | 25 | $ | — | $ | 25 | ||||||||
States, municipalities and political subdivisions | — | 2,885 | 59 | 2,944 | ||||||||||||
Foreign government | — | 34 | — | 34 | ||||||||||||
Residential MBS | — | 2,516 | 2 | 2,518 | ||||||||||||
Commercial MBS | — | 593 | 9 | 602 | ||||||||||||
Collateralized loan obligations | — | 3,290 | — | 3,290 | ||||||||||||
Other asset-backed securities | 298 | 6,742 | 1,026 | 8,066 | ||||||||||||
Corporate and other | 28 | 16,847 | 1,729 | 18,604 | ||||||||||||
Total AFS fixed maturities | 326 | 32,932 | 2,825 | 36,083 | ||||||||||||
Trading fixed maturities | — | 40 | — | 40 | ||||||||||||
Equity securities | 68 | 199 | 381 | 648 | ||||||||||||
Equity index call options | — | 646 | — | 646 | ||||||||||||
Variable annuity assets (separate accounts) (*) | — | 668 | — | 668 | ||||||||||||
Other assets — derivatives | — | 59 | — | 59 | ||||||||||||
Total assets accounted for at fair value | $ | 394 | $ | 34,544 | $ | 3,206 | $ | 38,144 | ||||||||
Liabilities: | ||||||||||||||||
Derivatives in annuity benefits accumulated | $ | — | $ | — | $ | 4,208 | $ | 4,208 | ||||||||
Other liabilities — derivatives | — | 19 | — | 19 | ||||||||||||
Total liabilities accounted for at fair value | $ | — | $ | 19 | $ | 4,208 | $ | 4,227 | ||||||||
| (*) | Variable annuity liabilities equal the fair value of variable annuity assets. |
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
December 31, 2020 | ||||||||||||||||
Assets: | ||||||||||||||||
Available for sale (“AFS”) fixed maturities: | ||||||||||||||||
U.S. Government and government agencies | $ | 6 | $ | 23 | $ | 15 | $ | 44 | ||||||||
States, municipalities and political subdivisions | — | 3,358 | 64 | 3,422 | ||||||||||||
Foreign government | — | 34 | — | 34 | ||||||||||||
Residential MBS | — | 2,013 | 127 | 2,140 | ||||||||||||
Commercial MBS | — | 688 | 10 | 698 | ||||||||||||
Collateralized loan obligations | — | 3,443 | 48 | 3,491 | ||||||||||||
Other asset-backed securities | — | 4,107 | 1,069 | 5,176 | ||||||||||||
Corporate and other | 41 | 17,733 | 1,344 | 19,118 | ||||||||||||
Total AFS fixed maturities | 47 | 31,399 | 2,677 | 34,123 | ||||||||||||
Trading fixed maturities | — | 42 | — | 42 | ||||||||||||
Equity securities | 431 | 49 | 293 | 773 | ||||||||||||
Equity index call options | — | 825 | — | 825 | ||||||||||||
Variable annuity assets (separate accounts) (*) | — | 664 | — | 664 | ||||||||||||
Other assets — derivatives | — | 102 | — | 102 | ||||||||||||
Total assets accounted for at fair value | $ | 478 | $ | 33,081 | $ | 2,970 | $ | 36,529 | ||||||||
Liabilities: | ||||||||||||||||
Derivatives in annuity benefits accumulated | $ | — | $ | — | $ | 3,933 | $ | 3,933 | ||||||||
Other liabilities — derivatives | — | 10 | — | 10 | ||||||||||||
Total liabilities accounted for at fair value | $ | — | $ | 10 | $ | 3,933 | $ | 3,943 | ||||||||
December 31, 2019 | ||||||||||||||||
Assets: | ||||||||||||||||
Available for sale fixed maturities: | ||||||||||||||||
U.S. Government and government agencies | $ | 6 | $ | 24 | $ | 15 | $ | 45 | ||||||||
States, municipalities and political subdivisions | — | 4,284 | 65 | 4,349 | ||||||||||||
Foreign government | — | 34 | — | 34 | ||||||||||||
Residential MBS | — | 1,971 | 128 | 2,099 | ||||||||||||
Commercial MBS | — | 806 | 29 | 835 | ||||||||||||
Collateralized loan obligations | — | 3,365 | 14 | 3,379 | ||||||||||||
Other asset-backed securities | — | 4,357 | 1,030 | 5,387 | ||||||||||||
Corporate and other | 16 | 20,220 | 1,535 | 21,771 | ||||||||||||
Total AFS fixed maturities | 22 | 35,061 | 2,816 | 37,899 | ||||||||||||
Trading fixed maturities | — | 54 | — | 54 | ||||||||||||
Equity securities | 492 | 41 | 276 | 809 | ||||||||||||
Equity index call options | — | 924 | — | 924 | ||||||||||||
Variable annuity assets (separate accounts) (*) | — | 628 | — | 628 | ||||||||||||
Other assets — derivatives | — | 50 | — | 50 | ||||||||||||
Total assets accounted for at fair value | $ | 514 | $ | 36,758 | $ | 3,092 | $ | 40,364 | ||||||||
Liabilities: | ||||||||||||||||
Derivatives in annuity benefits accumulated | $ | — | $ | — | $ | 3,730 | $ | 3,730 | ||||||||
Other liabilities — derivatives | — | 10 | — | 10 | ||||||||||||
Total liabilities accounted for at fair value | $ | — | $ | 10 | $ | 3,730 | $ | 3,740 | ||||||||
| (*) | Variable annuity liabilities equal the fair value of variable annuity assets. |
Unobservable Input | Range | |
Adjustment for insurance subsidiary’s credit risk | 0% – 2.2% over the risk-free rate | |
Risk margin for uncertainty in cash flows | 0.99% reduction in the discount rate | |
Surrenders | 7% – 22% of indexed account value | |
Partial surrenders | 2% – 10% of indexed account value | |
Annuitizations | 0.1% – 1% of indexed account value | |
Deaths | 2.0% – 13.7% of indexed account value | |
Budgeted option costs | 2.2% – 2.8% of indexed account value |
| Total realized/unrealized gains (losses) included in | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | Net earnings | Other comprehensive income (loss) | Purchases and issuances | Sales and settlements | Transfer into Level 3 | Transfer out of Level 3 | Balance at September 30, 2021 (unaudited) | |||||||||||||||||||||||||
AFS fixed maturities: | ||||||||||||||||||||||||||||||||
U.S. government agency | $ | 15 | $ | 3 | $ | (18 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
State and municipal | 64 | — | (2 | ) | — | (3 | ) | — | — | 59 | ||||||||||||||||||||||
Residential MBS | 127 | (3 | ) | 1 | — | (13 | ) | 2 | (112 | ) | 2 | |||||||||||||||||||||
Commercial MBS | 10 | (1 | ) | — | — | (1 | ) | 8 | (7 | ) | 9 | |||||||||||||||||||||
Collateralized loan obligations | 48 | 3 | (3 | ) | — | (1 | ) | — | (47 | ) | — | |||||||||||||||||||||
Other asset-backed securities | 1,069 | 5 | 3 | 330 | (318 | ) | 152 | (215 | ) | 1,026 | ||||||||||||||||||||||
Corporate and other | 1,344 | — | 58 | 235 | (134 | ) | 295 | (69 | ) | 1,729 | ||||||||||||||||||||||
Total AFS fixed maturities | 2,677 | 7 | 39 | 565 | (470 | ) | 457 | (450 | ) | 2,825 | ||||||||||||||||||||||
Equity securities | 293 | 91 | — | 69 | (65 | ) | — | (7 | ) | 381 | ||||||||||||||||||||||
Total Level 3 assets | $ | 2,970 | $ | 98 | $ | 39 | $ | 634 | $ | (535 | ) | $ | 457 | $ | (457 | ) | $ | 3,206 | ||||||||||||||
Embedded derivatives | $ | (3,933 | ) | $ | (296 | ) | $ | — | $ | (283 | ) | $ | 304 | $ | — | $ | — | $ | (4,208 | ) | ||||||||||||
Total Level 3 liabilities | $ | (3,933 | ) | $ | (296 | ) | $ | — | $ | (283 | ) | $ | 304 | $ | — | $ | — | $ | (4,208 | ) | ||||||||||||
| Total realized/unrealized gains (losses) included in | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2019 | Net earnings | Other comprehensive income (loss) | Purchases and issuances | Sales and settlements | Transfer into Level 3 | Transfer out of Level 3 | Balance at December 31, 2020 | |||||||||||||||||||||||||
AFS fixed maturities: | ||||||||||||||||||||||||||||||||
U.S. government agency | $ | 15 | $ | 3 | $ | (3 | ) | $ | — | $ | — | $ | — | $ | — | $ | 15 | |||||||||||||||
State and municipal | 65 | — | 4 | — | (3 | ) | — | (2 | ) | 64 | ||||||||||||||||||||||
Residential MBS | 128 | (6 | ) | (7 | ) | — | (13 | ) | 49 | (24 | ) | 127 | ||||||||||||||||||||
Commercial MBS | 29 | — | — | — | (3 | ) | 1 | (17 | ) | 10 | ||||||||||||||||||||||
Collateralized loan obligations | 14 | (5 | ) | 17 | — | — | 135 | (113 | ) | 48 | ||||||||||||||||||||||
Other asset-backed securities | 1,030 | (10 | ) | 14 | 296 | (282 | ) | 173 | (152 | ) | 1,069 | |||||||||||||||||||||
Corporate and other | 1,535 | 2 | 34 | 227 | (130 | ) | 128 | (452 | ) | 1,344 | ||||||||||||||||||||||
Total AFS fixed maturities | 2,816 | (16 | ) | 59 | 523 | (431 | ) | 486 | (760 | ) | 2,677 | |||||||||||||||||||||
Equity securities | 276 | (1 | ) | — | 35 | (12 | ) | 9 | (14 | ) | 293 | |||||||||||||||||||||
Total Level 3 assets | $ | 3,092 | $ | (17 | ) | $ | 59 | $ | 558 | $ | (443 | ) | $ | 495 | $ | (774 | ) | $ | 2,970 | |||||||||||||
Embedded derivatives (*) | $ | (3,730 | ) | $ | (283 | ) | $ | — | $ | (242 | ) | $ | 322 | $ | — | $ | — | $ | (3,933 | ) | ||||||||||||
Total Level 3 liabilities | $ | (3,730 | ) | $ | (283 | ) | $ | — | $ | (242 | ) | $ | 322 | $ | — | $ | — | $ | (3,933 | ) | ||||||||||||
| (*) | Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives reflects a favorable adjustment related to the unlocking of actuarial assumptions of $240 million in 2020. |
| Total realized/unrealized gains (losses) included in | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2018 | Net earnings | Other comprehensive income (loss) | Purchases and issuances | Sales and settlements | Transfer into Level 3 | Transfer out of Level 3 | Balance at December 31, 2019 | |||||||||||||||||||||||||
AFS fixed maturities: | ||||||||||||||||||||||||||||||||
U.S. government agency | $ | 8 | $ | — | $ | 7 | $ | — | $ | — | $ | — | $ | — | $ | 15 | ||||||||||||||||
State and municipal | 59 | — | 6 | — | (3 | ) | 10 | (7 | ) | 65 | ||||||||||||||||||||||
Residential MBS | 161 | 3 | (3 | ) | — | (18 | ) | 36 | (51 | ) | 128 | |||||||||||||||||||||
Commercial MBS | 48 | 2 | — | — | (13 | ) | 3 | (11 | ) | 29 | ||||||||||||||||||||||
Collateralized loan obligations | 85 | (4 | ) | 4 | — | — | 14 | (85 | ) | 14 | ||||||||||||||||||||||
Other asset-backed securities | 543 | — | 5 | 727 | (162 | ) | 23 | (106 | ) | 1,030 | ||||||||||||||||||||||
Corporate and other | 1,719 | (1 | ) | 53 | 378 | (250 | ) | 28 | (392 | ) | 1,535 | |||||||||||||||||||||
Total AFS fixed maturities | 2,623 | — | 72 | 1,105 | (446 | ) | 114 | (652 | ) | 2,816 | ||||||||||||||||||||||
Equity securities | 212 | 8 | — | 36 | (2 | ) | 22 | — | 276 | |||||||||||||||||||||||
Total Level 3 assets | $ | 2,835 | $ | 8 | $ | 72 | $ | 1,141 | $ | (448 | ) | $ | 136 | $ | (652 | ) | $ | 3,092 | ||||||||||||||
Embedded derivatives (*) | $ | (2,720 | ) | $ | (919 | ) | $ | — | $ | (333 | ) | $ | 242 | $ | — | $ | — | $ | (3,730 | ) | ||||||||||||
Total Level 3 liabilities | $ | (2,720 | ) | $ | (919 | ) | $ | — | $ | (333 | ) | $ | 242 | $ | — | $ | — | $ | (3,730 | ) | ||||||||||||
| (*) | Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives includes a favorable adjustment related to the unlocking of actuarial assumptions of $181 million in 2019. |
| Total realized/unrealized gains (losses) included in | ||||||||||||||||||||||||||||||||
| Balance at December 31, 2017 | Net earnings | Other comprehensive income (loss) | Purchases and issuances | Sales and settlements | Transfer into Level 3 | Transfer out of Level 3 | Balance at December 31, 2018 | |||||||||||||||||||||||||
AFS fixed maturities: | ||||||||||||||||||||||||||||||||
U.S. government agency | $ | 8 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 8 | ||||||||||||||||
State and municipal | 72 | — | (3 | ) | — | (2 | ) | — | (8 | ) | 59 | |||||||||||||||||||||
Residential MBS | 99 | (5 | ) | (4 | ) | — | (18 | ) | 106 | (17 | ) | 161 | ||||||||||||||||||||
Commercial MBS | 34 | — | — | 14 | — | — | — | 48 | ||||||||||||||||||||||||
Collateralized loan obligations | 142 | (2 | ) | (9 | ) | 24 | (11 | ) | 2 | (61 | ) | 85 | ||||||||||||||||||||
Other asset-backed securities | 398 | — | (1 | ) | 292 | (171 | ) | 69 | (44 | ) | 543 | |||||||||||||||||||||
Corporate and other | 941 | (9 | ) | (18 | ) | 986 | (148 | ) | 26 | (59 | ) | 1,719 | ||||||||||||||||||||
Total AFS fixed maturities | 1,694 | (16 | ) | (35 | ) | 1,316 | (350 | ) | 203 | (189 | ) | 2,623 | ||||||||||||||||||||
Equity securities | 105 | (4 | ) | — | 106 | (4 | ) | 20 | (11 | ) | 212 | |||||||||||||||||||||
Total Level 3 assets | $ | 1,799 | $ | (20 | ) | $ | (35 | ) | $ | 1,422 | $ | (354 | ) | $ | 223 | $ | (200 | ) | $ | 2,835 | ||||||||||||
Embedded derivatives (*) | $ | (2,542 | ) | $ | 204 | $ | — | $ | (545 | ) | $ | 163 | $ | — | $ | — | $ | (2,720 | ) | |||||||||||||
Total Level 3 liabilities | $ | (2,542 | ) | $ | 204 | $ | — | $ | (545 | ) | $ | 163 | $ | — | $ | — | $ | (2,720 | ) | |||||||||||||
| (*) | Total realized/unrealized gains (losses) included in net earnings for the embedded derivatives includes losses related to the unlocking of actuarial assumptions of $44 million in 2018. |
| Carrying | Fair Value | |||||||||||||||||||
| Value | Total | Level 1 | Level 2 | Level 3 | ||||||||||||||||
September 30, 2021 (unaudited) | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 1,308 | $ | 1,308 | $ | 1,308 | $ | — | $ | — | ||||||||||
Mortgage loans | 1,512 | — | — | — | — | |||||||||||||||
Policy loans | 142 | 142 | — | — | — | |||||||||||||||
Total financial assets not accounted for at fair value | $ | 2,962 | $ | — | $ | — | $ | — | $ | — | ||||||||||
| �� | ||||||||||||||||||||
Financial liabilities: | ||||||||||||||||||||
Annuity benefits accumulated (*) | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Total financial liabilities not accounted for at fair value | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
December 31, 2020 | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 1,151 | $ | 1,151 | $ | 1,151 | $ | — | $ | — | ||||||||||
Mortgage loans | 1,251 | 1,271 | — | — | 1,271 | |||||||||||||||
Policy loans | 151 | 151 | — | — | 151 | |||||||||||||||
Total financial assets not accounted for at fair value | $ | 2,553 | $ | 2,573 | $ | 1,151 | $ | — | $ | 1,422 | ||||||||||
Financial liabilities: | ||||||||||||||||||||
Annuity benefits accumulated (*) | $ | 41,460 | $ | 43,081 | $ | — | $ | — | $ | 43,081 | ||||||||||
Total financial liabilities not accounted for at fair value | $ | 41,460 | $ | 43,081 | $ | — | $ | — | $ | 43,081 | ||||||||||
December 31, 2019 | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 734 | $ | 734 | $ | 734 | $ | — | $ | — | ||||||||||
Mortgage loans | 1,072 | 1,081 | — | — | 1,081 | |||||||||||||||
Policy loans | 164 | 164 | — | — | 164 | |||||||||||||||
Total financial assets not accounted for at fair value | $ | 1,970 | $ | 1,979 | $ | 734 | $ | — | $ | 1,245 | ||||||||||
Financial liabilities: | ||||||||||||||||||||
Annuity benefits accumulated (*) | $ | 40,160 | $ | 40,182 | $ | — | $ | — | $ | 40,182 | ||||||||||
Total financial liabilities not accounted for at fair value | $ | 40,160 | $ | 40,182 | $ | — | $ | — | $ | 40,182 | ||||||||||
| (*) | Excludes $1.16 billion, $1.11 billion and $247 million of life contingent annuities in the payout phase at September 30, 2021 (unaudited), December 31, 2020 and 2019, respectively. |
| Asset (Liability) before Net Unrealized | Impact of Net Unrealized Gains on Securities | Carrying Value of Asset (Liability) | ||||||||||
September 30, 2021 (unaudited) | ||||||||||||
Fixed maturities | $ | 33,988 | $ | 2,095 | $ | 36,083 | ||||||
Deferred policy acquisition costs | 1,242 | (768 | ) | 474 | ||||||||
Annuity benefits accumulated | (44,089 | ) | (287 | ) | (44,376 | ) | ||||||
Life, accident and health reserves | (589 | ) | (3 | ) | (592 | ) | ||||||
Unearned revenue (included in other liabilities) | (25 | ) | 8 | (17 | ) | |||||||
Net unrealized gain, pretax | 1,045 | |||||||||||
Deferred tax on unrealized gain | (219 | ) | ||||||||||
Net unrealized gain, after tax (included in AOCI) | $ | 826 | ||||||||||
December 31, 2020 | ||||||||||||
Fixed maturities | $ | 31,570 | $ | 2,553 | $ | 34,123 | ||||||
Deferred policy acquisition costs | 1,236 | (934 | ) | 302 | ||||||||
Annuity benefits accumulated | (42,249 | ) | (324 | ) | (42,573 | ) | ||||||
Life, accident and health reserves | (607 | ) | (3 | ) | (610 | ) | ||||||
Unearned revenue (included in other liabilities) | (26 | ) | 11 | (15 | ) | |||||||
Net unrealized gain, pretax | 1,303 | |||||||||||
Deferred tax on unrealized gain | (274 | ) | ||||||||||
Net unrealized gain, after tax (included in AOCI) | $ | 1,029 | ||||||||||
December 31, 2019 | ||||||||||||
Fixed maturities | $ | 36,144 | $ | 1,755 | $ | 37,899 | ||||||
Deferred policy acquisition costs | 1,394 | (681 | ) | 713 | ||||||||
Annuity benefits accumulated | (40,186 | ) | (220 | ) | (40,406 | ) | ||||||
Unearned revenue (included in other liabilities) | (23 | ) | 11 | (12 | ) | |||||||
Net unrealized gain, pretax | 865 | |||||||||||
Deferred tax on unrealized gain | (182 | ) | ||||||||||
Net unrealized gain, after tax (included in AOCI) | $ | 683 | ||||||||||
| Amortized Cost | Allowance for Expected Credit Losses | Gross Unrealized | Net Unrealized | Fair Value | ||||||||||||||||||||
| Gains | Losses | |||||||||||||||||||||||
September 30, 2021 (unaudited) | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Government and government agencies | $ | 39 | $ | — | $ | 2 | $ | (16 | ) | $ | (14 | ) | $ | 25 | ||||||||||
States, municipalities and political subdivisions | 2,680 | — | 264 | — | 264 | 2,944 | ||||||||||||||||||
Foreign government | 31 | — | 3 | — | 3 | 34 | ||||||||||||||||||
Residential MBS | 2,362 | 2 | 166 | (8 | ) | 158 | 2,518 | |||||||||||||||||
Commercial MBS | 573 | — | 29 | — | 29 | 602 | ||||||||||||||||||
Collateralized loan obligations | 3,279 | 3 | 18 | (4 | ) | 14 | 3,290 | |||||||||||||||||
Other asset-backed securities | 7,982 | 10 | 142 | (48 | ) | 94 | 8,066 | |||||||||||||||||
Corporate and other | 17,057 | — | 1,563 | (16 | ) | 1,547 | 18,604 | |||||||||||||||||
Total fixed maturities | $ | 34,003 | $ | 15 | $ | 2,187 | $ | (92 | ) | $ | 2,095 | $ | 36,083 | |||||||||||
December 31, 2020 | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Government and government agencies | $ | 40 | $ | — | $ | 4 | $ | — | $ | 4 | $ | 44 | ||||||||||||
States, municipalities and political subdivisions | 3,053 | — | 371 | (2 | ) | 369 | 3,422 | |||||||||||||||||
Foreign government | 31 | — | 3 | — | 3 | 34 | ||||||||||||||||||
Residential MBS | 1,954 | 3 | 192 | (3 | ) | 189 | 2,140 | |||||||||||||||||
Commercial MBS | 659 | — | 40 | (1 | ) | 39 | 698 | |||||||||||||||||
Collateralized loan obligations | 3,490 | 10 | 24 | (13 | ) | 11 | 3,491 | |||||||||||||||||
Other asset-backed securities | 5,099 | 11 | 142 | (54 | ) | 88 | 5,176 | |||||||||||||||||
Corporate and other | 17,272 | 4 | 1,874 | (24 | ) | 1,850 | 19,118 | |||||||||||||||||
Total fixed maturities | $ | 31,598 | $ | 28 | $ | 2,650 | $ | (97 | ) | $ | 2,553 | $ | 34,123 | |||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Government and government agencies | $ | 38 | $ | — | $ | 7 | $ | — | $ | 7 | $ | 45 | ||||||||||||
States, municipalities and political subdivisions | 4,080 | — | 270 | (1 | ) | 269 | 4,349 | |||||||||||||||||
Foreign government | 31 | — | 3 | — | 3 | 34 | ||||||||||||||||||
Residential MBS | 1,909 | — | 193 | (3 | ) | 190 | 2,099 | |||||||||||||||||
Commercial MBS | 807 | — | 28 | — | 28 | 835 | ||||||||||||||||||
Collateralized loan obligations | 3,401 | — | 8 | (30 | ) | (22 | ) | 3,379 | ||||||||||||||||
Other asset-backed securities | 5,265 | — | 138 | (16 | ) | 122 | 5,387 | |||||||||||||||||
Corporate and other | 20,613 | — | 1,176 | (18 | ) | 1,158 | 21,771 | |||||||||||||||||
Total fixed maturities | $ | 36,144 | $ | — | $ | 1,823 | $ | (68 | ) | $ | 1,755 | $ | 37,899 | |||||||||||
| September 30, 2021 (unaudited) | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||||||||||||
| Fair Value | Fair Value | Fair Value | ||||||||||||||||||||||||||||||||||
| over (under) | over (under) | over (under) | ||||||||||||||||||||||||||||||||||
| Actual Cost | Fair Value | Cost | Actual Cost | Fair Value | Cost | Actual Cost | Fair Value | Cost | ||||||||||||||||||||||||||||
Common stocks | $ | — | $ | 241 | $ | — | $ | 423 | $ | 412 | $ | (11 | ) | $ | 497 | $ | 552 | $ | 55 | |||||||||||||||||
Perpetual preferred stocks | — | 407 | — | 333 | 361 | 28 | 249 | 257 | 8 | |||||||||||||||||||||||||||
Total equity securities carried at fair value | $ | — | $ | 648 | $ | — | $ | 756 | $ | 773 | $ | 17 | $ | 746 | $ | 809 | $ | 63 | ||||||||||||||||||
| Less Than Twelve Months | Twelve Months or More | |||||||||||||||||||||||
| | Unrealized Loss | | | Fair Value | | | Fair Value as % of Cost | | | Unrealized Loss | | | Fair Value | | | Fair Value as % of Cost | | |||||||
September 30, 2021 (unaudited) | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Government and government agencies | $ | (16 | ) | $ | 1 | 6 | % | $ | — | $ | — | — | % | |||||||||||
States, municipalities and political subdivisions | — | 5 | 100 | % | — | — | — | % | ||||||||||||||||
Residential MBS | (6 | ) | 907 | 99 | % | (2 | ) | 20 | 91 | % | ||||||||||||||
Commercial MBS | — | 9 | 100 | % | — | — | — | % | ||||||||||||||||
Collateralized loan obligations | (3 | ) | 433 | 99 | % | (1 | ) | 259 | 100 | % | ||||||||||||||
Other asset-backed securities | (37 | ) | 2,410 | 98 | % | (11 | ) | 314 | 97 | % | ||||||||||||||
Corporate and other | (13 | ) | 723 | 98 | % | (3 | ) | 139 | 98 | % | ||||||||||||||
Total fixed maturities | $ | (75 | ) | $ | 4,488 | 98 | % | $ | (17 | ) | $ | 732 | 98 | % | ||||||||||
December 31, 2020 | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Government and government agencies | $ | — | $ | — | — | % | $ | — | $ | — | — | % | ||||||||||||
States, municipalities and political subdivisions | (2 | ) | 80 | 98 | % | — | — | — | % | |||||||||||||||
Residential MBS | (2 | ) | 124 | 98 | % | (1 | ) | 23 | 96 | % | ||||||||||||||
Commercial MBS | (1 | ) | 32 | 97 | % | — | 5 | 100 | % | |||||||||||||||
Collateralized loan obligations | (2 | ) | 496 | 100 | % | (11 | ) | 1,256 | 99 | % | ||||||||||||||
Other asset-backed securities | (35 | ) | 974 | 97 | % | (19 | ) | 295 | 94 | % | ||||||||||||||
Corporate and other | (20 | ) | 724 | 97 | % | (4 | ) | 107 | 96 | % | ||||||||||||||
Total fixed maturities | $ | (62 | ) | $ | 2,430 | 98 | % | $ | (35 | ) | $ | 1,686 | 98 | % | ||||||||||
December 31, 2019 | ||||||||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. Government and government agencies | $ | — | $ | — | — | % | $ | — | $ | — | — | % | ||||||||||||
States, municipalities and political subdivisions | (1 | ) | 105 | 99 | % | — | 5 | 100 | % | |||||||||||||||
Residential MBS | (2 | ) | 315 | 99 | % | (1 | ) | 15 | 94 | % | ||||||||||||||
Commercial MBS | — | 11 | 100 | % | — | — | — | % | ||||||||||||||||
Collateralized loan obligations | (9 | ) | 995 | 99 | % | (21 | ) | 1,363 | 98 | % | ||||||||||||||
Other asset-backed securities | (11 | ) | 838 | 99 | % | (5 | ) | 91 | 95 | % | ||||||||||||||
Corporate and other | (11 | ) | 937 | 99 | % | (7 | ) | 202 | 97 | % | ||||||||||||||
Total fixed maturities | $ | (34 | ) | $ | 3,201 | 99 | % | $ | (34 | ) | $ | 1,676 | 98 | % | ||||||||||
| Structured Securities (*) | Corporate and other | Total | ||||||||||
Balance at January 1, 2020 | $ | — | $ | — | $ | — | ||||||
Impact of adoption of new accounting policy | — | — | — | |||||||||
Initial allowance for purchased securities with credit deterioration | 1 | — | 1 | |||||||||
Provision for expected credit losses on securities with no previous allowance | 28 | 23 | 51 | |||||||||
Additions (reductions) to previously recognized expected credit losses | (5 | ) | (14 | ) | (19 | ) | ||||||
Reductions due to sales or redemptions | — | (5 | ) | (5 | ) | |||||||
Balance at December 31, 2020 | $ | 24 | $ | 4 | $ | 28 | ||||||
Balance at January 1, 2021 | $ | 24 | $ | 4 | $ | 28 | ||||||
Impact of adoption of new accounting policy | — | — | — | |||||||||
Initial allowance for purchased securities with credit deterioration | — | — | — | |||||||||
Provision for expected credit losses on securities with no previous allowance | — | 1 | 1 | |||||||||
Additions (reductions) to previously recognized expected credit losses | (7 | ) | (1 | ) | (8 | ) | ||||||
Reductions due to sales or redemptions | (2 | ) | (4 | ) | (6 | ) | ||||||
Balance at September 30, 2021 (unaudited) | $ | 15 | $ | — | $ | 15 | ||||||
| (*) | Includes mortgage-backed securities, collateralized loan obligations and other asset-backed securities. |
| September 30, 2021 | December 31, 2020 | |||||||||||||||||||||||
| Amortized | Fair Value | Amortized | Fair Value | |||||||||||||||||||||
| Cost, net (*) | Amount | % | Cost, net (*) | Amount | % | |||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||
Maturity | ||||||||||||||||||||||||
One year or less | $ | 1,577 | $ | 1,617 | 4 | % | $ | 1,975 | $ | 1,995 | 6 | % | ||||||||||||
After one year through five years | 8,006 | 8,652 | 24 | % | 7,761 | 8,442 | 25 | % | ||||||||||||||||
After five years through ten years | 7,032 | 7,860 | 22 | % | 8,198 | 9,402 | 28 | % | ||||||||||||||||
After ten years | 3,192 | 3,478 | 10 | % | 2,458 | 2,779 | 8 | % | ||||||||||||||||
| 19,807 | 21,607 | 60 | % | 20,392 | 22,618 | 67 | % | |||||||||||||||||
Collateralized loan obligations and other ABS (average life of approximately 4 years) | 11,248 | 11,356 | 31 | % | 8,568 | 8,667 | 25 | % | ||||||||||||||||
MBS (average life of approximately 3-1/2 years) | 2,933 | 3,120 | 9 | % | 2,610 | 2,838 | 8 | % | ||||||||||||||||
Total | $ | 33,988 | $ | 36,083 | 100 | % | $ | 31,570 | $ | 34,123 | 100 | % | ||||||||||||
| (*) | Amortized cost, net of allowance for expected credit losses |
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||
Investment income: | ||||||||||||||||||||
Fixed maturities | $ | 1,059 | $ | 1,216 | $ | 1,577 | $ | 1,600 | $ | 1,450 | ||||||||||
Equity securities: | ||||||||||||||||||||
Dividends | 14 | 22 | 28 | 34 | 30 | |||||||||||||||
Change in fair value (*) | 36 | 3 | 17 | 17 | 13 | |||||||||||||||
Equity in earnings of partnerships and similar investments | 169 | 14 | 48 | 90 | 96 | |||||||||||||||
Mortgage loans | 43 | 40 | 54 | 43 | 45 | |||||||||||||||
Policy loans | 6 | 7 | 9 | 9 | 10 | |||||||||||||||
Real estate and other | 27 | (7 | ) | 7 | 36 | 26 | ||||||||||||||
Gross investment income | 1,354 | 1,295 | 1,740 | 1,829 | 1,670 | |||||||||||||||
Investment expenses | (24 | ) | (12 | ) | (23 | ) | (16 | ) | (13 | ) | ||||||||||
Net investment income | $ | 1,330 | $ | 1,283 | $ | 1,717 | $ | 1,813 | $ | 1,657 | ||||||||||
| (*) | Although the change in the fair value of the majority of GALIC’s equity securities is recorded in realized gains (losses) on securities, GALIC records holding gains and losses in net investment income on equity securities classified as “trading” under previous guidance and on a small portfolio of limited partnership and similar investments that do not qualify for the equity method of accounting. |
| Nine months ended September 30, 2021 (unaudited) | Nine months ended September 30, 2020 (unaudited) | |||||||||||||||||||||||||||||||
| Realized gains (losses) | Realized gains (losses) | |||||||||||||||||||||||||||||||
| Before Impairments | Impairments | Total | Change in Unrealized | Before Impairments | Impairments | Total | Change in Unrealized | |||||||||||||||||||||||||
Fixed maturities | $ | 21 | $ | 7 | $ | 28 | $ | (458 | ) | $ | 38 | $ | (43 | ) | $ | (5 | ) | $ | 933 | |||||||||||||
Equity securities | 84 | — | 84 | — | (111 | ) | — | (111 | ) | — | ||||||||||||||||||||||
Mortgage loans and other investments | 3 | — | 3 | — | 3 | — | 3 | — | ||||||||||||||||||||||||
Other (*) | (1 | ) | (2 | ) | (3 | ) | 200 | (6 | ) | 14 | 8 | (526 | ) | |||||||||||||||||||
Total pretax | 107 | 5 | 112 | (258 | ) | (76 | ) | (29 | ) | (105 | ) | 407 | ||||||||||||||||||||
Tax effects | (22 | ) | (1 | ) | (23 | ) | 55 | 16 | 6 | 22 | (85 | ) | ||||||||||||||||||||
Net of tax | $ | 85 | $ | 4 | $ | 89 | $ | (203 | ) | $ | (60 | ) | $ | (23 | ) | $ | (83 | ) | $ | 322 | ||||||||||||
| 2020 | 2019 | |||||||||||||||||||||||||||||||
| Realized gains (losses) | Realized gains (losses) | |||||||||||||||||||||||||||||||
| Before Impairments | Impairments | Total | Change in Unrealized | Before Impairments | Impairments | Total | Change in Unrealized | |||||||||||||||||||||||||
Fixed maturities | $ | 461 | $ | (32 | ) | $ | 429 | $ | 798 | $ | 19 | $ | (21 | ) | $ | (2 | ) | $ | 1,647 | |||||||||||||
Equity securities | (27 | ) | — | (27 | ) | — | 122 | — | 122 | — | ||||||||||||||||||||||
Mortgage loans and other investments | 3 | — | 3 | — | 2 | — | 2 | — | ||||||||||||||||||||||||
Other (*) | (51 | ) | 11 | (40 | ) | (360 | ) | (1 | ) | 11 | 10 | (835 | ) | |||||||||||||||||||
Total pretax | 386 | (21 | ) | 365 | 438 | 142 | (10 | ) | 132 | 812 | ||||||||||||||||||||||
Tax effects | (81 | ) | 4 | (77 | ) | (92 | ) | (30 | ) | 2 | (28 | ) | (171 | ) | ||||||||||||||||||
Net of tax | $ | 305 | $ | (17 | ) | $ | 288 | $ | 346 | $ | 112 | $ | (8 | ) | $ | 104 | $ | 641 | ||||||||||||||
| 2018 | ||||||||||||||||
| Realized gains (losses) | ||||||||||||||||
| Before Impairments | Impairments | Total | Change in Unrealized | |||||||||||||
Fixed maturities | $ | 5 | $ | (21 | ) | $ | (16 | ) | $ | (1,057 | ) | |||||
Equity securities | (107 | ) | — | (107 | ) | — | ||||||||||
Mortgage loans and other investments | — | — | — | — | ||||||||||||
Other (*) | 11 | 7 | 18 | 502 | ||||||||||||
Total pretax | (91 | ) | (14 | ) | (105 | ) | (555 | ) | ||||||||
Tax effects | 19 | 3 | 22 | 117 | ||||||||||||
Net of tax | $ | (72 | ) | $ | (11 | ) | $ | (83 | ) | $ | (438 | ) | ||||
| (*) | Primarily adjustments to deferred policy acquisition costs and reserves related to the annuity business. |
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||
| 2021 | 2020 | 2020 | 2019 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
Included in realized gains (losses) | $ | 50 | $ | (126 | ) | $ | (25 | ) | $ | 123 | ||||||
Included in net investment income | 35 | 3 | 11 | 17 | ||||||||||||
| $ | 85 | $ | (123 | ) | $ | (14 | ) | $ | 140 | |||||||
| (Unaudited) Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
Gross gains | $ | 82 | $ | 69 | $ | 514 | $ | 30 | $ | 17 | ||||||||||
Gross losses | (1 | ) | (30 | ) | (51 | ) | (16 | ) | (12 | ) | ||||||||||
| September 30, 2021 | December 31, 2020 | December 31, 2019 | ||||||||||||||||||||||||
Derivative | Balance Sheet Line | Asset | Liability | Asset | Liability | Asset | Liability | |||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||||
MBS with embedded derivatives | Fixed maturities | $ | 117 | $ | — | $ | 137 | $ | — | $ | 74 | $ | — | |||||||||||||
Public company warrants | Equity securities | — | — | — | — | — | — | |||||||||||||||||||
Fixed-indexed and registered index-linked annuities (embedded derivative) | Annuity benefits accumulated | — | 4,208 | — | 3,933 | — | 3,730 | |||||||||||||||||||
Equity index call options | Equity index call options | 646 | — | 825 | — | 924 | — | |||||||||||||||||||
Equity index put options | Other liabilities | — | (14 | ) | — | 5 | — | 1 | ||||||||||||||||||
Reinsurance contract (embedded derivative) | Other liabilities | — | 5 | — | 5 | — | 4 | |||||||||||||||||||
| $ | 763 | $ | 4,199 | $ | 962 | $ | 3,943 | $ | 998 | $ | 3,735 | |||||||||||||||
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||||
Derivative | Statement of Earnings Line | 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||
MBS with embedded derivatives | Realized gains (losses) on securities | $ | (18 | ) | $ | 2 | $ | (2 | ) | $ | 5 | $ | (4 | ) | ||||||||
Public company warrants | Realized gains (losses) on securities | — | — | — | — | (3 | ) | |||||||||||||||
Fixed-indexed and registered index-linked annuities (embedded derivative) (*) | Annuity benefits | 296 | 41 | (283 | ) | (919 | ) | 204 | ||||||||||||||
Equity index call options | Annuity benefits | 282 | (42 | ) | 223 | 804 | (298 | ) | ||||||||||||||
Equity index put options | Annuity benefits | 5 | 1 | 3 | 2 | (1 | ) | |||||||||||||||
Reinsurance contract (embedded derivative) | Net investment income | — | — | (1 | ) | (2 | ) | 2 | ||||||||||||||
| $ | 565 | $ | 2 | $ | (60 | ) | $ | (110 | ) | $ | (100 | ) | ||||||||||
| (*) | The change in fair value of the embedded derivative includes a favorable adjustment related to unlocking of actuarial assumptions of $240 million in 2020 and $181 million in 2019 and losses of $44 million in 2018. |
| Deferred Costs | Sales Inducements | PVFP | Subtotal | Unrealized (*) | Total | |||||||||||||||||||
Balance at December 31, 2017 | $ | 1,214 | $ | 102 | $ | 49 | $ | 1,365 | $ | (422 | ) | $ | 943 | |||||||||||
Additions | 263 | 2 | — | 265 | — | 265 | ||||||||||||||||||
Amortization: | ||||||||||||||||||||||||
Periodic amortization | (237 | ) | (19 | ) | (7 | ) | (263 | ) | — | (263 | ) | |||||||||||||
Annuity unlocking | 29 | — | — | 29 | — | 29 | ||||||||||||||||||
Included in realized gains | 14 | 1 | — | 15 | — | 15 | ||||||||||||||||||
Other | — | — | — | — | — | — | ||||||||||||||||||
Change in unrealized | — | — | — | — | 392 | 392 | ||||||||||||||||||
Balance at December 31, 2018 | 1,283 | 86 | 42 | 1,411 | (30 | ) | 1,381 | |||||||||||||||||
Additions | 206 | 2 | — | 208 | — | 208 | ||||||||||||||||||
Amortization: | ||||||||||||||||||||||||
Periodic amortization | (120 | ) | (13 | ) | (6 | ) | (139 | ) | — | (139 | ) | |||||||||||||
Annuity unlocking | (76 | ) | (1 | ) | — | (77 | ) | — | (77 | ) | ||||||||||||||
Included in realized gains | 8 | 1 | — | 9 | — | 9 | ||||||||||||||||||
Change in unrealized | — | — | — | — | (669 | ) | (669 | ) | ||||||||||||||||
Balance at December 31, 2019 | 1,301 | 75 | 36 | 1,412 | (699 | ) | 713 | |||||||||||||||||
Additions | 155 | 2 | — | 157 | — | 157 | ||||||||||||||||||
Amortization: | ||||||||||||||||||||||||
Periodic amortization | (126 | ) | (9 | ) | (6 | ) | (141 | ) | — | (141 | ) | |||||||||||||
Annuity unlocking | (118 | ) | 4 | — | (114 | ) | — | (114 | ) | |||||||||||||||
Included in realized gains | (42 | ) | 1 | — | (41 | ) | — | (41 | ) | |||||||||||||||
Change in unrealized | — | — | — | — | (272 | ) | (272 | ) | ||||||||||||||||
Balance at December 31, 2020 | $ | 1,170 | $ | 73 | $ | 30 | $ | 1,273 | $ | (971 | ) | $ | 302 | |||||||||||
Additions (unaudited) | 185 | — | — | 185 | — | 185 | ||||||||||||||||||
Amortization: | ||||||||||||||||||||||||
Periodic amortization (unaudited) | (182 | ) | (6 | ) | (4 | ) | (192 | ) | — | (192 | ) | |||||||||||||
Annuity unlocking (unaudited) | — | — | — | — | — | — | ||||||||||||||||||
Included in realized gains (unaudited) | (3 | ) | — | — | (3 | ) | — | (3 | ) | |||||||||||||||
Change in unrealized (unaudited) | — | — | — | — | 182 | 182 | ||||||||||||||||||
Balance at September 30, 2021 (unaudited) | $ | 1,170 | $ | 67 | $ | 26 | $ | 1,263 | $ | (789 | ) | $ | 474 | |||||||||||
| (*) | Adjustments to DPAC related to net unrealized gains/losses on securities and cash flow hedges. |
| Other Comprehensive Income (Loss) | ||||||||||||||||||||||||
| AOCI Beginning Balance | Pretax | Tax | Net of tax | Other (b) | AOCI Ending Balance | |||||||||||||||||||
Nine months ended September 30, 2021 (unaudited) | ||||||||||||||||||||||||
Net unrealized gains (losses) on securities: | ||||||||||||||||||||||||
Unrealized holding losses on securities arising during the period | $ | (233 | ) | $ | 49 | $ | (184 | ) | ||||||||||||||||
Reclassification adjustment for realized (gains) losses included in net earnings (a) | (25 | ) | 6 | (19 | ) | |||||||||||||||||||
Total net unrealized gains (losses) on securities (b) | $ | 1,029 | (258 | ) | 55 | (203 | ) | $ | — | $ | 826 | |||||||||||||
Net unrealized losses on cash flow hedges | 41 | (24 | ) | 5 | (19 | ) | — | 22 | ||||||||||||||||
Total | $ | 1,070 | $ | (282 | ) | $ | 60 | $ | (222 | ) | $ | — | $ | 848 | ||||||||||
Year ended December 31, 2020 | ||||||||||||||||||||||||
Net unrealized gains on securities: | ||||||||||||||||||||||||
Unrealized holding gains on securities arising during the period | $ | 834 | $ | (175 | ) | $ | 659 | |||||||||||||||||
Reclassification adjustment for realized (gains) losses included in net earnings (a) | (396 | ) | 83 | (313 | ) | |||||||||||||||||||
Total net unrealized gains on securities | $ | 683 | 438 | (92 | ) | 346 | $ | — | $ | 1,029 | ||||||||||||||
Net unrealized gains (losses) on cash flow hedges | 17 | 30 | (6 | ) | 24 | — | 41 | |||||||||||||||||
Total | $ | 700 | $ | 468 | $ | (98 | ) | $ | 370 | $ | — | $ | 1,070 | |||||||||||
Year ended December 31, 2019 | ||||||||||||||||||||||||
Net unrealized gains (losses) on securities: | ||||||||||||||||||||||||
Unrealized holding losses on securities arising during the period | $ | 828 | $ | (174 | ) | $ | 654 | |||||||||||||||||
Reclassification adjustment for realized (gains) losses included in net earnings (a) | (16 | ) | 3 | (13 | ) | |||||||||||||||||||
Total net unrealized gains (losses) on securities | $ | 42 | 812 | (171 | ) | 641 | $ | — | $ | 683 | ||||||||||||||
Net unrealized gains (losses) on cash flow hedges | (11 | ) | 36 | (8 | ) | 28 | — | 17 | ||||||||||||||||
Total | $ | 31 | $ | 848 | $ | (179 | ) | $ | 669 | $ | — | $ | 700 | |||||||||||
Year ended December 31, 2018 | ||||||||||||||||||||||||
Net unrealized gains on securities: | ||||||||||||||||||||||||
Unrealized holding gains on securities arising during the period | $ | (561 | ) | $ | 118 | $ | (443 | ) | ||||||||||||||||
Reclassification adjustment for realized (gains) losses included in net earnings (a) | 6 | (1 | ) | 5 | ||||||||||||||||||||
Total net unrealized gains on securities | $ | 570 | (555 | ) | 117 | (438 | ) | $ | (90 | ) | $ | 42 | ||||||||||||
Net unrealized losses on cash flow hedges | (13 | ) | 2 | — | 2 | — | (11 | ) | ||||||||||||||||
Total | $ | 557 | $ | (553 | ) | $ | 117 | $ | (436 | ) | $ | (90 | ) | $ | 31 | |||||||||
| (a) | The reclassification adjustment out of net unrealized gains on securities affected the following lines in GALIC’s Statement of Earnings: |
OCI component | Affected line in the statement of earnings | |
| Pretax | Realized gains (losses) on securities | |
| Tax | Provision for income taxes |
| (b) | On January 1, 2018, GALIC adopted new guidance that requires all equity securities other than those accounted for under the equity method to be reported at fair value with holding gains and losses recognized in net earnings. At the date of |
| adoption, the $90 million net unrealized gain on equity securities classified as available for sale (with unrealized holding gains and losses reported in AOCI) under the prior guidance was reclassified from AOCI to retained earnings as the cumulative effect of an accounting change. |
| Nine months ended September 30, | Year ended December 31, | |||||||||||||||||||||||||||||||||||||||
| 2021 | 2020 | 2020 | 2019 | 2018 | ||||||||||||||||||||||||||||||||||||
| Amount | % of EBT | Amount | % of EBT | Amount | % of EBT | Amount | % of EBT | Amount | % of EBT | |||||||||||||||||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||||||||||||||||||||||||||
Earnings before income taxes (“EBT”) | $ | 417 | $ | (22 | ) | $ | 529 | $ | 497 | $ | 256 | |||||||||||||||||||||||||||||
Income taxes at statutory rate | $ | 88 | 21 | % | $ | (5 | ) | (23 | %) | $ | 111 | 21 | % | $ | 104 | 21 | % | $ | 54 | 21 | % | |||||||||||||||||||
Effect of permanent items | 19 | 5 | % | (3 | ) | (13 | %) | (4 | ) | (1 | %) | (2 | ) | — | % | (7 | ) | (3 | %) | |||||||||||||||||||||
Provision for income taxes as shown in the statement of earnings | $ | 107 | 26 | % | $ | (8 | ) | (36 | )% | $ | 107 | 20 | % | $ | 102 | 21 | % | $ | 47 | 18 | % | |||||||||||||||||||
| 2020 | 2019 | 2018 | ||||||||||
Current taxes: | ||||||||||||
Federal | $ | 60 | $ | 152 | $ | 130 | ||||||
State | 2 | 4 | 3 | |||||||||
Deferred taxes: | ||||||||||||
Federal | 45 | (54 | ) | (86 | ) | |||||||
Provision for income taxes | $ | 107 | $ | 102 | $ | 47 | ||||||
| 2020 | 2019 | |||||||||||||||||||||||
| Excluding Unrealized Gains | Impact of Unrealized Gains | Total | Excluding Unrealized Gains | Impact of Unrealized Gains | Total | |||||||||||||||||||
Deferred tax assets: | ||||||||||||||||||||||||
Insurance claims and reserves | $ | 531 | $ | 68 | $ | 599 | $ | 601 | $ | 46 | $ | 647 | ||||||||||||
Other, net | 10 | (2 | ) | 8 | 7 | (2 | ) | 5 | ||||||||||||||||
Total deferred tax assets | 541 | 66 | 607 | 608 | 44 | 652 | ||||||||||||||||||
Deferred tax liabilities: | ||||||||||||||||||||||||
Investment securities | (97 | ) | (537 | ) | (634 | ) | (78 | ) | (369 | ) | (447 | ) | ||||||||||||
Deferred policy acquisition costs | (212 | ) | 197 | (15 | ) | (236 | ) | 143 | (93 | ) | ||||||||||||||
Insurance claims and reserves transition liability | (57 | ) | — | (57 | ) | (68 | ) | — | (68 | ) | ||||||||||||||
Total deferred tax liabilities | (366 | ) | (340 | ) | (706 | ) | (382 | ) | (226 | ) | (608 | ) | ||||||||||||
Net deferred tax asset (liability) | $ | 175 | $ | (274 | ) | $ | (99 | ) | $ | 226 | $ | (182 | ) | $ | 44 | |||||||||
| Net Earnings | Capital and Surplus | |||||||||||||||||||
| 2020 | 2019 | 2018 | 2020 | 2019 | ||||||||||||||||
GALIC consolidated life insurance companies | $ | 209 | $ | 34 | $ | 802 | $ | 2,897 | $ | 2,868 | ||||||||||
| Recoverables from Reinsurers | ||||
Balance at January 1 | $ | — | ||
Impact of adoption of new accounting policy | 5 | |||
Provision for expected credit losses | 2 | |||
Balance at December 31 | $ | 7 | ||
| 2020 | 2019 | |||||||
Expected death and annuitization | $ | 260 | $ | 232 | ||||
Guaranteed withdrawal benefits | 817 | 625 | ||||||
Accrued persistency and premium bonuses | — | 1 | ||||||
Segment | Deferred policy acquisition costs | Reserves for future policy benefits and claims | Net earned premiums | Net investment income | Benefits, claims, losses and settlement expenses | Amortization of deferred policy acquisition costs | Other operating expenses | |||||||||||||||||||||
2020 | ||||||||||||||||||||||||||||
Annuity | $ | 286 | $ | 42,573 | $ | — | $ | 1,700 | $ | 1,192 | $ | 246 | $ | 188 | ||||||||||||||
Run-off life | 16 | 610 | 22 | 17 | 40 | 3 | 10 | |||||||||||||||||||||
Total | $ | 302 | $ | 43,183 | $ | 22 | $ | 1,717 | $ | 1,232 | $ | 249 | $ | 198 | ||||||||||||||
2019 | ||||||||||||||||||||||||||||
Annuity | $ | 694 | $ | 40,406 | $ | — | $ | 1,792 | $ | 1,151 | $ | 198 | $ | 188 | ||||||||||||||
Run-off life | 19 | 612 | 22 | 21 | 36 | 4 | 7 | |||||||||||||||||||||
Total | $ | 713 | $ | 41,018 | $ | 22 | $ | 1,813 | $ | 1,187 | $ | 202 | $ | 195 | ||||||||||||||
2018 | ||||||||||||||||||||||||||||
Annuity | $ | 1,358 | $ | 36,616 | $ | — | $ | 1,638 | $ | 998 | $ | 211 | $ | 174 | ||||||||||||||
Run-off life | 23 | 635 | 24 | 19 | 37 | 4 | 11 | |||||||||||||||||||||
Total | $ | 1,381 | $ | 37,251 | $ | 24 | $ | 1,657 | $ | 1,035 | $ | 215 | $ | 185 | ||||||||||||||
Estimated Accounting Fees | $ | 200,000 | ||
Estimated Filing Fees | $ | 0 | ||
Estimated Legal Fees | $ | 200,000 | ||
Registration Fees | $ | 92,607.30 |
| (1) |
| (2) | Plan of acquisition, reorganization, arrangement, liquidation or succession—Not applicable. |
| (3) | Governing Documents |
| (a) |
| (b) |
| (4)(a) | Contracts |
| (1) |
| (4)(b) | Tax Endorsements |
| (1) |
| (2) |
| (3) |
| (4) |
| (5) |
| (6) |
| (7) |
| (8) |
| (9) |
| (10) |
| (4)(c) | Strategy Endorsements |
| (1) |
| (2) |
| (3) |
| (4) |
| (5) |
| (6) |
| (7) |
| (8) |
| (9) |
| (1) |
| (2) |
| (3) |
| (5) |
| (8) | Opinion re Tax Matters—Not applicable. |
| (9) | Voting Trust Agreement—Not applicable. |
| (10) | Materials Contracts |
| (a) |
| (b) |
| (c) |
| (11) | Statement re Computation of Per Share Earnings—Not applicable. |
| (12) | Statements re Computation of Ratios—Not applicable. |
| (15) | Letter re Unaudited Interim Financial Information—Not applicable. |
| (16) | Letter re Change in Certifying Accountant—Not applicable. |
| (21) |
| (23) | Consents |
| (a) |
| (b) |
| (a) |
| (b) |
| (c) |
| (d) |
| (e) |
| (f) |
| (g) |
| (h) |
| (i) |
| (j) |
| (k) |
| (l) |
| (25) | Statement of Eligibility of Trustee—Not applicable. |
| (26) | Invitation for Competitive Bids—Not applicable. |
| (99) | Additional Exhibits – None. |
| (101) | Interactive Data File is filed herewith. |
Report of Independent Registered Public Accounting Firm | A-1 | |||
Financial Statements: | ||||
Consolidated Balance Sheet as of September 30, 2021 and December 31, 2020 and 2019 | A-4 | |||
Consolidated Statement of Earnings for the nine months ended September 30, 2021 and 2020 and the years ended December 31, 2020, 2019 and 2018 | A-5 | |||
Consolidated Statement of Comprehensive Income for the nine months ended September 30, 2021 and 2020 and the years ended December 31, 2020, 2019 and 2018 | A-6 | |||
Consolidated Statement of Changes in Equity for the nine months ended September 30, 2021 and the years ended December 31, 2020, 2019 and 2018 | A-7 | |||
Consolidated Statement of Cash Flows for the nine months ended September 30, 2021 and 2020 and the years ended December 31, 2020, 2019 and 2018 | A-8 | |||
Notes to Consolidated Financial Statements | A-9 | |||
Supplementary Data: | ||||
Supplementary Insurance Information | A-39 | |||
| (1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
| (i) | To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; |
| (ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (§ 230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement. |
| (iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; |
| (2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
| (3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
| (4) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§ 230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, |
| (5) | That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
| (i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§ 230.424 of this chapter); |
| (ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
| (iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
| (iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
| (6) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
| (i) | Consolidated Balance Sheet |
| (ii) | Consolidated Statement of Earnings |
| (iii) | Consolidated Statement of Comprehensive Income |
| (iv) | Consolidated Statement of Changes in Equity |
| (v) | Consolidated Statement of Cash Flows |
| (vi) | Notes to Consolidated Financial Statements |
| (vii) | Financial Statement Schedules |
Great American Life Insurance Company | ||||||
| January 6, 2022 | By: | /s/ Christopher P. Miliano | ||||
| Christopher P. Miliano | ||||||
| Head of GALIC Finance and Treasurer | ||||||
Signature | Capacity | Date | ||
/s/ Dominic L. Blue* | Director | January 6, 2022 | ||
| Dominic L. Blue* | ||||
/s/ Susan M. Cicco* | Director | January 6, 2022 | ||
| Susan M. Cicco* | ||||
/s/ Geoffrey J. Craddock* | Director | January 6, 2022 | ||
| Geoffrey J. Craddock* | ||||
/s/ Roger W. Crandall* | Director | January 6, 2022 | ||
| Roger W. Crandall* | ||||
/s/ Michael R. Fanning* | Director | January 6, 2022 | ||
| Michael R. Fanning* | ||||
/s/ Paul A. LaPiana* | Director | January 6, 2022 | ||
| Paul A. LaPiana* | ||||
/s/ Mark F. Muething* | President Chief Operating Officer Director | January 6, 2022 | ||
| Mark F. Muething* | ||||
/s/ Michael J. O’Connor* | Director | January 6, 2022 | ||
| Michael J. O’Connor* | ||||
/s/ Eric W. Partlan* | Director | January 6, 2022 | ||
| Eric W. Partlan* | ||||
/s/ Gareth F. Ross* | Director | January 6, 2022 | ||
| Gareth F. Ross* | ||||
/s/ Arthur W. Wallace* | Director | January 6, 2022 | ||
| Arthur W. Wallace* | ||||
/s/ Elizabeth A. Ward* | Director | January 6, 2022 | ||
| Elizabeth A. Ward* | ||||
*By: /s/ John P. Gruber | As Attorney-in-Fact attorney filed herewith | |||
John P. Gruber |
