American National 10-Q 2017 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

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

For the quarterly period ended March 31, 2017

or

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

Commission FileNo. 001- 34280

American National Insurance Company

(Exact name of registrant as specified in its charter)

Texas	74-0484030
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Moody Plaza

Galveston, Texas 77550-7999

(Address of principal executive offices) (Zip Code)

(409)763-4661

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ☒  Yes    ☐  No

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

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

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

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

As of May 01, 2017, there were 26,926,305 shares of the registrant’s voting common stock, $1.00 par value per share, outstanding.

AMERICAN NATIONAL INSURANCE COMPANY

TABLE OF CONTENTS

	PART I – FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS (Unaudited):
	Consolidated Statements of Financial Position as of March 31, 2017 and December 31, 2016	3
	Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016	4
	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016	5
	Consolidated Statements of Changes in Equity for the three months ended March 31, 2017 and 2016	5
	Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016	6
	Notes to the Unaudited Consolidated Financial Statements	7
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	35
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	53
ITEM 4.	CONTROLS AND PROCEDURES	53
	PART II – OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	55
ITEM 1A.	RISK FACTORS	55
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	55
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	55
ITEM 4.	MINE SAFETY DISCLOSURES	55
ITEM 5.	OTHER INFORMATION	55
ITEM 6.	EXHIBIT INDEX	56

2

AMERICAN NATIONAL INSURANCE COMPANY    

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION    

(Unaudited and in thousands, except share data)    

	March 31, 2017			December 31, 2016
ASSETS
Fixed maturity, bondsheld-to-maturity, at amortized cost (Fair value $7,329,302 and $7,496,692)	$	7,063,930		$	7,251,385
Fixed maturity, bondsavailable-for-sale, at fair value (Amortized cost $5,730,335 and $5,668,984)		5,900,702			5,803,276
Equity securities, at fair value (Cost $747,779 and $732,433)		1,616,318			1,541,676
Mortgage loans on real estate, net of allowance		4,463,197			4,348,046
Policy loans		383,911			384,376
Investment real estate, net of accumulated depreciation of $265,937 and $259,578		586,316			593,417
Short-term investments		411,949			192,226
Other invested assets		115,474			113,550
Total investments		20,541,797			20,227,952
Cash and cash equivalents		296,233			289,338
Investments in unconsolidated affiliates		505,970			490,476
Accrued investment income		180,305			180,323
Reinsurance recoverables		372,545			401,709
Prepaid reinsurance premiums		62,787			63,026
Premiums due and other receivables		313,187			296,930
Deferred policy acquisition costs		1,298,486			1,294,443
Property and equipment, net		118,241			116,028
Current tax receivable		64,683			61,423
Other assets		146,543			169,962
Separate account assets		949,786			941,612
Total assets	$	24,850,563		$	24,533,222
LIABILITIES
Future policy benefits
Life	$	2,955,637		$	2,939,308
Annuity		1,287,122			1,277,220
Accident and health		59,289			60,308
Policyholders’ account balances		11,171,953			11,068,775
Policy and contract claims		1,298,471			1,303,925
Unearned premium reserve		845,464			823,938
Other policyholder funds		321,443			318,620
Liability for retirement benefits		149,130			152,496
Notes payable		139,674			136,080
Deferred tax liabilities, net		413,359			367,487
Other liabilities		521,325			481,958
Separate account liabilities		949,786			941,612
Total liabilities		20,112,653			19,871,727
EQUITY
American National stockholders’ equity:
Common stock, $1.00 par value, - Authorized 50,000,000, Issued 30,832,449 and 30,832,449 Outstanding 26,927,115 and 26,914,516 shares		30,832			30,832
Additionalpaid-in capital		17,992			16,406
Accumulated other comprehensive income		513,457			455,899
Retained earnings		4,268,578			4,250,818
Treasury stock, at cost		(101,595	)		(101,777	)
Total American National stockholders’ equity		4,729,264			4,652,178
Noncontrolling interest		8,646			9,317
Total equity		4,737,910			4,661,495
Total liabilities and equity	$	24,850,563		$	24,533,222

See accompanying notes to the consolidated financial statements.    

3

AMERICAN NATIONAL INSURANCE COMPANY    

CONSOLIDATED STATEMENTS OF OPERATIONS    

(Unaudited and in thousands, except share and per share data)    

	Three months ended March 31,
	2017			2016
PREMIUMS AND OTHER REVENUE
Premiums
Life	$	77,474		$	75,117
Annuity		29,809			70,208
Accident and health		37,039			42,313
Property and casualty		327,450			303,361
Other policy revenues		63,452			64,347
Net investment income		228,503			196,054
Net realized investment gains		14,008			9,062
Other-than-temporary impairments		(6,783	)		(3,476	)
Other income		8,845			7,984
Total premiums and other revenues		779,797			764,970
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits
Life		99,108			100,771
Annuity		43,662			81,247
Claims incurred
Accident and health		24,528			32,292
Property and casualty		227,530			211,958
Interest credited to policyholders’ account balances		96,008			76,527
Commissions for acquiring and servicing policies		125,491			112,884
Other operating expenses		130,194			130,376
Change in deferred policy acquisition costs		(9,487	)		(4,593	)
Total benefits, losses and expenses		737,034			741,462
Income before federal income tax and equity in earnings of unconsolidated affiliates		42,763			23,508
Less: Provision (benefit) for federal income taxes
Current		(1,204	)		(4,714	)
Deferred		14,276			644
Total provision (benefit) for federal income taxes		13,072			(4,070	)
Equity in earnings of unconsolidated affiliates		9,500			937
Net income		39,191			28,515
Less:Net loss attributable to noncontrolling interest, net of tax		(649	)		(801	)
Net income attributable to American National	$	39,840		$	29,316
Amounts available to American National common stockholders
Earnings per share
Basic	$	1.48		$	1.09
Diluted		1.48			1.09
Cash dividends to common stockholders		0.82			0.80
Weighted average common shares outstanding		26,899,648			26,909,511
Weighted average common shares outstanding and dilutive potential common shares		26,972,128			26,965,967

See accompanying notes to the consolidated financial statements.    

4

AMERICAN NATIONAL INSURANCE COMPANY    

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME     

(Unaudited and in thousands)    

	Three months ended March 31,
	2017			2016
Net income	$	39,191		$	28,515
Other comprehensive income, net of tax
Change in net unrealized gains on securities		55,912			51,973
Foreign currency transaction and translation adjustments		112			(12	)
Defined benefit pension plan adjustment		1,534			1,879
Other comprehensive income, net of tax		57,558			53,840
Total comprehensive income		96,749			82,355
Less: Comprehensive loss attributable to noncontrolling interest		(649	)		(801	)
Total comprehensive income attributable to American National	$	97,398		$	83,156
AMERICAN NATIONAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited and in thousands)
	Three months ended March 31,
	2017			2016
Common Stock
Balance at beginning and end of the period	$	30,832		$	30,832
AdditionalPaid-In Capital
Balance as of January 1,		16,406			13,689
Reissuance of treasury shares		1,379			1,841
Amortization of restricted stock		207			210
Balance at end of the period		17,992			15,740
Accumulated Other Comprehensive Income
Balance as of January 1,		455,899			352,620
Other comprehensive income		57,558			53,840
Balance at end of the period		513,457			406,460
Retained Earnings
Balance as of January 1,		4,250,818			4,157,184
Net income attributable to American National		39,840			29,316
Cash dividends to common stockholders		(22,080	)		(21,531	)
Balance at end of the period		4,268,578			4,164,969
Treasury Stock
Balance as of January 1,		(101,777	)		(102,043	)
Reissuance of treasury shares		182			262
Balance at end of the period		(101,595	)		(101,781	)
Noncontrolling Interest
Balance as of January 1,		9,317			10,189
Contributions		224			—
Distributions		(246	)		—
Net loss attributable to noncontrolling interest		(649	)		(801	)
Balance at end of the period		8,646			9,388
Total Equity	$	4,737,910		$	4,525,608

See accompanying notes to the consolidated financial statements.     

5

AMERICAN NATIONAL INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)

	Three months ended March 31,
	2017			2016
				(As Revised)
OPERATING ACTIVITIES
Net income	$	39,191		$	28,515
Adjustments to reconcile net income to net cash provided by operating activities
Net realized investment gains		(14,008	)		(9,062	)
Other-than-temporary impairments		6,783			3,476
Amortization (accretion) of premiums, discounts and loan origination fees		(2,661	)		161
Net capitalized interest on policy loans and mortgage loans		(8,368	)		(6,820	)
Depreciation		14,981			12,752
Interest credited to policyholders’ account balances		96,008			76,527
Charges to policyholders’ account balances		(63,452	)		(64,347	)
Deferred federal income tax expense		14,276			644
Equity in earnings of unconsolidated affiliates		(9,500	)		(937	)
Distributions from equity method investments		410			317
Changes in
Policyholder liabilities		39,136			54,761
Deferred policy acquisition costs		(9,487	)		(4,593	)
Reinsurance recoverables		29,163			27,348
Premiums due and other receivables		(16,257	)		(5,108	)
Prepaid reinsurance premiums		239			12,082
Accrued investment income		18			6,865
Current tax receivable/payable		(3,260	)		(12,777	)
Liability for retirement benefits		(3,366	)		(5,621	)
Other, net		233			16,628
Net cash provided by operating activities		110,079			130,811
INVESTING ACTIVITIES
Proceeds from sale/maturity/prepayment of
Held-to-maturity securities		203,445			116,940
Available-for-sale securities		118,007			120,761
Investment real estate		3,911			—
Mortgage loans		104,007			125,983
Policy loans		12,885			13,610
Other invested assets		14,404			4,592
Disposals of property and equipment		1,408			8,349
Distributions from unconsolidated affiliates		2,639			4,972
Payment for the purchase/origination of
Held-to-maturity securities		(28,356	)		(80,091	)
Available-for-sale securities		(138,132	)		(325,867	)
Investment real estate		(7,829	)		(9,710	)
Mortgage loans		(212,561	)		(332,093	)
Policy loans		(6,201	)		(5,868	)
Other invested assets		(7,577	)		(5,294	)
Additions to property and equipment		(10,588	)		(13,442	)
Contributions to unconsolidated affiliates		(14,748	)		(40,351	)
Change in short-term investments		(219,723	)		148,306
Change in collateral held for derivatives		14,062			(1,696	)
Other, net		15,649			(3,564	)
Net cash used in investing activities		(155,298	)		(274,463	)
FINANCING ACTIVITIES
Policyholders’ account deposits		393,369			435,506
Policyholders’ account withdrawals		(322,746	)		(324,504	)
Change in notes payable		3,593			7,539
Dividends to stockholders		(22,080	)		(21,531	)
Payments to noncontrolling interest		(22	)		—
Net cash provided by financing activities		52,114			97,010
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		6,895			(46,642	)
Beginning of the period		289,338			310,930
End of the period	$	296,233		$	264,288

See accompanying notes to the consolidated financial statements.

6

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Nature of Operations

American National Insurance Company and its consolidated subsidiaries (collectively “American National” or “the Company”) offer a broad spectrum of insurance products, including individual and group life insurance, annuities, health insurance, and property and casualty insurance. Business is conducted in all 50 states, the District of Columbia and Puerto Rico.

Note 2 – Summary of Significant Accounting Policies and Practices

The consolidated financial statements and notes thereto have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and are reported in U.S. currency. American National consolidates entities that are wholly-owned and those in which American National owns less than 100% but controls, as well as variable interest entities in which American National is the primary beneficiary. Intercompany balances and transactions with consolidated entities have been eliminated. Investments in unconsolidated affiliates are accounted for using the equity method of accounting. Certain amounts in prior years have been reclassified to conform to current year presentation.

The interim consolidated financial statements and notes herein are unaudited and reflect all adjustments which management considers necessary for the fair presentation of the interim consolidated statements of financial position, operations, comprehensive income, changes in stockholders’ equity, and cash flows.

The interim consolidated financial statements and notes should be read in conjunction with the annual consolidated financial statements and notes thereto included in American National’s Annual Report on Form10-K as of and for the year ended December 31, 2016. The consolidated results of operations for the interim periods should not be considered indicative of results to be expected for the full year.

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

7

Note 2 – Summary of Significant Accounting Policies and Practices – (Continued)

Revision to Previously Reported Amounts

Correction of an Immaterial Error. During the fourth quarter of 2016, the Company revised previously reported amounts to include cash held in a bank custody account representing collateral provided to us by third parties for equity-option derivative transactions. For details, see Note 7, Derivative Instruments, of the Notes to the Consolidated Financial Statements. In accordance with Staff Accounting Bulletin (“SAB”) No. 99,Materiality,and SAB No. 108,Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, management evaluated the materiality of the error from qualitative and quantitative perspectives, and concluded the error was immaterial to the current and prior periods. The correction of the immaterial error revised the consolidated statements of financial position and statements of cash flows as disclosed in our 2016 Annual Report on Form10-K filed with the SEC on March 10, 2017. There was no revision to the consolidated statements of operations, comprehensive income or changes in equity.

The Company has revised prior period amounts in the Consolidated Statements of Cash Flows included herein to reflect the immaterial correction of an error.

Financial statement amounts previously reported were revised as shown below (in thousands):

	As Reported			As Revised			Effect of Change
Three months ended March 31, 2016
Statement of Cash Flow
Change in collateral held for derivatives		—			(1,696	)		(1,696	)
Other investing activities, net		90			(3,564	)		(3,654	)
Net cash used in investing activities		(269,113	)		(274,463	)		(5,350	)
Net decrease in cash and cash equivalents		(41,292	)		(46,642	)		(5,350	)
Cash at beginning of period		190,237			310,930			120,693
Cash at end of period		148,945			264,288			115,343

8

Note 3 – Recently Issued Accounting Pronouncements

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

In May 2014, the FASB issued guidance that will supersede most existing revenue recognition requirements in GAAP. Insurance contracts generally are excluded from the scope of the guidance. For those contracts which are impacted, the transaction price is attributed to the underlying performance obligations in the contract and revenue is recognized as the entity satisfies the performance obligations and transfers control of a good or service to the customer. The standard is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company intends to adopt the standard effective January 1, 2018. Since the majority of our revenue sources are insurance related and accordingly, not in scope of the standard, we do not expect the adoption of the standard to be material to the Company’s results of operations or financial position.

In January 2016, the FASB issued guidance that will change certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The new guidance requires that equity investments in unconsolidated entities be measured at fair value and that changes in fair value are recognized through earnings. When the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk will be recognized separately in other comprehensive income. The guidance also simplifies the impairment assessment of equity investments and eliminates the disclosure requirements for methods and significant assumptions used to estimate fair value of financial instruments that are measured at amortized cost on the statement of financial position. The standard is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017. The Company is currently evaluating the impact of adoption to the Company’s results of operations and financial position.

In February 2016, the FASB issued guidance that will require significant changes to the statement of financial position of lessees. With certain limited exceptions, lessees will need to recognize virtually all of their leases on the statement of financial position, by recording aright-of-use asset and a lease liability. Lessor accounting is less affected by the standard, but has been updated to align with certain changes in the lessee model and the new revenue recognition standard. The standard is effective for annual periods and interim periods within those annual periods beginning after December 15, 2018. We are currently quantifying the expected gross up of our balance sheet for a right of use asset and a lease liability as required. Since the majority of our lease activity is as a lessor, we do not expect the adoption of the standard to be material to the Company’s results of operations or financial position.

In June 2016, the FASB issued guidance that will significantly change how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The guidance will replace the current “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. Foravailable-for-sale debt securities, entities will be required to record allowances rather than reduce the carrying amount, as they do under the current other-than-temporary impairment model. The standard is effective for annual periods and interim periods within those annual periods beginning after December 15, 2019. The Company must develop appropriate models to measure expected credit losses to begin determining the impact of adopting the standard on our results of operations or financial position.

In March 2017, the FASB issued guidance on the presentation of net periodic pension and postretirement benefit costs. The guidance requires the service cost component to be reported in the same line item as other compensation costs. All other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside of income from operations. The standard is effective for annual periods, including interim periods within those annual periods beginning after December 15, 2017. The Company plans to adopt the standard effective January 1, 2018. Considering the Company’s defined benefit pension plans are frozen, this guidance is not expected to have a material impact to the Company’s results of operations or financial position.

9

Note 4 – Investment in Securities

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

	March 31, 2017
	Cost or Amortized Cost		Gross Unrealized Gains			Gross Unrealized (Losses)			Fair Value
Fixed maturity securities, bondsheld-to-maturity
U.S. states and political subdivisions	$	280,313	$	17,040		$	(31	)	$	297,322
Foreign governments		4,046		654			—			4,700
Corporate debt securities		6,556,897		259,433			(24,005	)		6,792,325
Residential mortgage-backed securities		219,452		13,245			(1,095	)		231,602
Collateralized debt securities		929		50			—			979
Other debt securities		2,293		81			—			2,374
Total bondsheld-to-maturity		7,063,930		290,503			(25,131	)		7,329,302
Fixed maturity securities, bondsavailable-for-sale
U.S. treasury and government		25,012		573			(28	)		25,557
U.S. states and political subdivisions		923,873		23,846			(4,533	)		943,186
Foreign governments		5,000		1,545			—			6,545
Corporate debt securities		4,753,437		165,866			(21,255	)		4,898,048
Residential mortgage-backed securities		17,556		3,656	��		(360	)		20,852
Collateralized debt securities		3,515		732			(2	)		4,245
Other debt securities		1,942		327			—			2,269
Total bondsavailable-for-sale		5,730,335		196,545			(26,178	)		5,900,702
Equity securities
Common stock		728,445		871,476			(7,294	)		1,592,627
Preferred stock		19,334		4,357			—			23,691
Total equity securities		747,779		875,833			(7,294	)		1,616,318
Total investments in securities	$	13,542,044	$	1,362,881		$	(58,603	)	$	14,846,322
	December 31, 2016
	Cost or Amortized Cost		Gross Unrealized Gains			Gross Unrealized (Losses)			Fair Value
Fixed maturity securities, bondsheld-to-maturity
U.S. states and political subdivisions	$	301,994	$	17,190		$	(102	)	$	319,082
Foreign governments		4,057		659			—			4,716
Corporate debt securities		6,711,508		253,191			(38,721	)		6,925,978
Residential mortgage-backed securities		229,758		14,112			(1,185	)		242,685
Collateralized debt securities		1,290		64			—			1,354
Other debt securities		2,778		99			—			2,877
Total bondsheld-to-maturity		7,251,385		285,315			(40,008	)		7,496,692
Fixed maturity securities, bondsavailable-for-sale
U.S. treasury and government		25,062		594			(16	)		25,640
U.S. states and political subdivisions		945,431		21,170			(6,378	)		960,223
Foreign governments		5,000		1,567			—			6,567
Corporate debt securities		4,666,096		145,716			(31,049	)		4,780,763
Residential mortgage-backed securities		18,588		2,267			(342	)		20,513
Collateralized debt securities		5,574		821			(3	)		6,392
Other debt securities		3,233		—			(55	)		3,178
Total bondsavailable-for-sale		5,668,984		172,135			(37,843	)		5,803,276
Equity securities
Common stock		713,099		810,611			(5,195	)		1,518,515
Preferred stock		19,334		3,889			(62	)		23,161
Total equity securities		732,433		814,500			(5,257	)		1,541,676
Total investments in securities	$	13,652,802	$	1,271,950		$	(83,108	)	$	14,841,644

10

Note 4 – Investment in Securities – (Continued)

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

	March 31, 2017
	BondsHeld-to-Maturity				BondsAvailable-for-Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	498,640	$	508,925	$	260,406	$	262,820
Due after one year through five years		3,461,225		3,647,898		1,444,496		1,521,792
Due after five years through ten years		2,934,087		2,995,118		3,451,498		3,539,874
Due after ten years		164,127		172,237		568,935		571,225
Without single maturity date		5,851		5,124		5,000		4,991
Total	$	7,063,930	$	7,329,302	$	5,730,335	$	5,900,702

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

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

	Three months ended March 31,
	2017		2016
Proceeds from sales ofavailable-for-sale securities	$	27,723	$	15,705
Gross realized gains		10,826		5,067
Gross realized losses		6		124

Gains and losses are determined using specific identification of the securities sold. During the three months ended March 31, 2017, bonds with a carrying value of $15,000,000 transferred fromheld-to-maturity toavailable-for-sale after a significant deterioration in the issuers’ credit worthiness became evident. A realized loss of $6,000,000 was recorded in 2017 on the bond that was transferred, due to an other-than-temporary impairment. During the three months ended March 31, 2016 there were no bonds transferred fromheld-to-maturity toavailable-for-sale.

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

	Three months ended March 31,
	2017			2016
Bondsavailable-for-sale	$	36,075		$	119,802
Equity securities		59,296			(2,308	)
Change in net unrealized gains on securities during the year		95,371			117,494
Adjustments for
Deferred policy acquisition costs		(5,444	)		(31,463	)
Participating policyholders’ interest		(4,971	)		(6,012	)
Deferred federal income tax expense		(29,044	)		(28,046	)
Change in net unrealized gains on securities, net of tax	$	55,912		$	51,973

11

Note 4 – Investment in Securities – (Continued)

The gross unrealized losses and fair value of the investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are shown below (in thousands):

	March 31, 2017
	Less than 12 months					12 Months or more					Total
	Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value
Fixed maturity securities, bondsheld-to-maturity
U.S. states and political subdivisions	$	(31	)	$	1,185	$	—		$	—	$	(31	)	$	1,185
Corporate debt securities		(10,535	)		757,780		(13,470	)		141,272		(24,005	)		899,052
Residential mortgage-backed securities		(483	)		22,420		(612	)		9,044		(1,095	)		31,464
Total bondsheld-to-maturity		(11,049	)		781,385		(14,082	)		150,316		(25,131	)		931,701
Fixed maturity securities, bondsavailable-for-sale
U.S. treasury and government		(28	)		21,462		—			—		(28	)		21,462
U.S. states and political subdivisions		(4,531	)		181,906		(2	)		121		(4,533	)		182,027
Corporate debt securities		(12,327	)		770,718		(8,928	)		102,882		(21,255	)		873,600
Residential mortgage-backed securities		(218	)		12,404		(142	)		3,183		(360	)		15,587
Collateralized debt securities		—			161		(2	)		133		(2	)		294
Total bondsavailable-for-sale		(17,104	)		986,651		(9,074	)		106,319		(26,178	)		1,092,970
Equity securities
Common stock		(7,294	)		51,557		—			—		(7,294	)		51,557
Total equity securities		(7,294	)		51,557		—			—		(7,294	)		51,557
Total	$	(35,447	)	$	1,819,593	$	(23,156	)	$	256,635	$	(58,603	)	$	2,076,228

	December 31, 2016
	Less than 12 months					12 Months or more					Total
	Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value
Fixed maturity securities, bonds held-to-maturity
U.S. states and political subdivisions	$	(102	)	$	18,886	$	—		$	—	$	(102	)	$	18,886
Corporate debt securities		(18,110	)		971,361		(20,611	)		186,262		(38,721	)		1,157,623
Residential mortgage-backed securities		(558	)		22,806		(627	)		10,248		(1,185	)		33,054
Total bondsheld-to-maturity		(18,770	)		1,013,053		(21,238	)		196,510		(40,008	)		1,209,563
Fixed maturity securities, bonds available-for-sale
U.S. treasury and government		(16	)		10,640		—			—		(16	)		10,640
U.S. states and political subdivisions		(6,376	)		282,141		(2	)		122		(6,378	)		282,263
Corporate debt securities		(19,828	)		917,215		(11,221	)		126,584		(31,049	)		1,043,799
Residential mortgage-backed securities		(204	)		12,420		(138	)		3,982		(342	)		16,402
Collateralized debt securities		—			1		(3	)		146		(3	)		147
Other Debt Securities		(55	)		3,178		—			—		(55	)		3,178
Total bondsavailable-for-sale		(26,479	)		1,225,595		(11,364	)		130,834		(37,843	)		1,356,429
Equity securities
Common stock		(5,195	)		53,068		—			—		(5,195	)		53,068
Preferred stock		(62	)		4,324		—			—		(62	)		4,324
Total equity securities		(5,257	)		57,392		—			—		(5,257	)		57,392
Total	$	(50,506	)	$	2,296,040	$	(32,602	)	$	327,344	$	(83,108	)	$	2,623,384

As of March 31, 2017, the securities with unrealized losses including those exceeding one year were not deemed to be other-than-temporarily impaired. American National has the ability and intent to hold those securities until a market price recovery or maturity. It is notmore-likely-than-not that American National will be required to sell them prior to recovery, and recovery is expected in a reasonable period of time. It is possible an issuer’s financial circumstances may be different in the future, which may lead to a different impairment conclusion in future periods.

12

Note 4 – Investment in Securities – (Continued)

The following table identifies the total bonds distributed by credit quality rating (in thousands, except percentages):

	March 31, 2017							December 31, 2016
	Amortized		Estimated		% of Fair			Amortized		Estimated		% of Fair
	Cost		Fair Value		Value			Cost		Fair Value		Value
AAA	$	665,323	$	690,687		5.2	%	$	667,561	$	691,296		5.2	%
AA		1,359,941		1,410,360		10.7			1,393,137		1,440,667		10.8
A		4,429,266		4,595,314		34.7			4,538,471		4,696,909		35.3
BBB		5,733,653		5,936,130		44.9			5,758,560		5,931,112		44.6
BB and below		606,082		597,513		4.5			562,640		539,984		4.1
Total	$	12,794,265	$	13,230,004		100.0	%	$	12,920,369	$	13,299,968		100.0	%

Equity securities by market sector distribution are shown below:

	March 31, 2017			December 31, 2016
Consumer goods		20.7	%		20.4	%
Energy and utilities		10.1			11.1
Finance		21.5			22.1
Healthcare		12.9			12.7
Industrials		8.9			9.0
Information technology		18.3			17.1
Other		7.6			7.6
Total		100.0	%		100.0	%

Note 5 – Mortgage Loans

Generally, commercial mortgage loans are secured by first liens on income-producing real estate. American National attempts to maintain a diversified portfolio by considering the location of the underlying collateral. The distribution based on carrying amount of mortgage loans by location is as follows:

	March 31, 2017			December 31, 2016
East North Central		16.0	%		16.2	%
East South Central		4.1			3.7
Mountain		10.6			10.6
Pacific		18.8			17.6
South Atlantic		14.5			15.1
West South Central		29.4			31.0
Other		6.6			5.8
Total		100.0	%		100.0	%

For the three months ended March 31, 2017, American National did not foreclose on any loans, and two loans with a total recorded investment of $4,225,000, were in the process of foreclosure. For the year ended December 31, 2016, American National did not foreclose on any loans, and one loan with a recorded investment of $1,940,000, was in the process of foreclosure. American National sold no loans during the three months ended March 31, 2017 and no loans during the year ended December 31, 2016.

13

Note 5 – Mortgage Loans – (Continued)

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

	30-59 Days Past Due		60-89 Days Past Due		More Than 90 Days		Total		Current		Total
March 31, 2017											Amount			Percent
Industrial	$	16,671	$	—	$	—	$	16,671	$	765,356	$	782,027			17.5
Office		—		—		6,059		6,059		1,566,237		1,572,296			35.1
Retail		—		—		—		—		687,173		687,173			15.3
Other		49,000		—		—		49,000		1,386,817		1,435,817			32.1
Total	$	65,671	$	—	$	6,059	$	71,730	$	4,405,583	$	4,477,313			100.0
Allowance for loan losses												(14,116	)
Total, net of allowance											$	4,463,197
December 31, 2016
Industrial	$	—	$	2,300	$	—	$	2,300	$	744,472	$	746,772			17.1
Office		—		—		6,059		6,059		1,541,880		1,547,939			35.5
Retail		—		—		—		—		736,121		736,121			16.9
Other		20,179		9,280		—		29,459		1,300,245		1,329,704			30.5
Total	$	20,179	$	11,580	$	6,059	$	37,818	$	4,322,718	$	4,360,536			100.0
Allowance for loan losses												(12,490	)
Total, net of allowance											$	4,348,046

Total mortgage loans are net of unamortized discounts of $177,000 and $233,000 and unamortized origination fees of $32,133,000 and $33,019,000 at March 31, 2017 and December 31, 2016, respectively. No unearned income is included in these amounts.

Allowance for Credit Losses

A loan is considered impaired when it is probable that all amounts due will not be collected according to the contractual terms of the loan agreement. Mortgage loans with temporary difficulties are not considered impaired when the borrower has the financial capacity to fund revenue shortfalls from the properties for the foreseeable future. Individual valuation allowances are established for impaired loans to reduce the carrying value to the fair value of the collateral. Loans not evaluated individually for collectability are segregated by property-type and location, and allowance factors are applied. These factors are developed based on our historical loss experience adjusted for the expected trend in the rate of foreclosure losses. Allowance factors are higher for loans of certain property types and in certain regions based on loss experience or a blended historical loss factor.

The change in allowance for credit losses in mortgage loans is shown below (in thousands, except number of loans):

	Collectively Evaluated for Impairment							Individually Impaired						Total
	Number of Loans			Recorded Investment		Valuation Allowance		Number of Loans		Recorded Investment		Valuation Allowance		Number of Loans		Recorded Investment		Valuation Allowance
Beginning balance, 2017		430		$	4,358,596	$	11,488		2	$	1,940	$	1,002		432	$	4,360,536	$	12,490
Change in allowance		—			—		302		—		—		1,324		—		—		1,626
Change in recorded investment		(1	)		100,376		—		1		2,285		—		—		102,661		—
Ending balance at March 31, 2017		429		$	4,458,972	$	11,790		3	$	4,225	$	2,326		432	$	4,463,197	$	14,116

14

Note 5 – Mortgage Loans – (Continued)

Troubled Debt Restructurings

American National has granted concessions which are classified as troubled debt restructurings to certain mortgage loan borrowers. Concessions are generally one of, or a combination of, a delay in payment of principal or interest, a reduction of the contractual interest rate or an extension of the maturity date. American National considers the amount, timing and extent of concessions in determining any impairment or changes in the specific allowance for loan losses recorded in connection with a troubled debt restructuring. The carrying value after specific allowance, before and after modification in a troubled debt restructuring, may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment.

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

	Three months ended March 31,
	2017						2016
	Number of loans		Recorded investment pre- modification		Recorded investment post modification		Number of loans		Recorded investment pre- modification		Recorded investment post modification
Other		5	$	24,801	$	24,801		—		—		—
Total		5	$	24,801	$	24,801		—	$	—	$	—

There are $8,000,000 of commitments to lend additional funds to debtors whose loans have been modified in troubled debt restructuring, and there have been no defaults on modified loans during the periods presented.

Note 6 – Real Estate and Other Investments

Investment real estate by property-type and geographic distribution are as follows:

	March 31, 2017			December 31, 2016
Industrial		9.1	%		9.2	%
Office		38.3			37.8
Retail		37.0			37.2
Other		15.6			15.8
Total		100.0	%		100.0	%
	March 31, 2017			December 31, 2016
East North Central		8.8	%		8.8	%
East South Central		3.4			3.4
Mountain		12.0			12.0
Pacific		6.6			6.1
South Atlantic		13.2			13.0
West South Central		52.0			52.2
Other		4.0			4.5
Total		100.0	%		100.0	%

15

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

American National regularly invests in real estate partnerships and joint ventures. American National frequently participates in the design of these entities with the sponsor, but in most cases, its involvement is limited to financing. Through analysis performed by American National, some of these partnerships and joint ventures have been determined to be variable interest entities (“VIEs”). In certain instances, in addition to an economic interest in the entity, American National holds the power to direct the most significant activities of the entity and is deemed the primary beneficiary or consolidator of the entity. The assets of the consolidated VIEs are restricted and must first be used to settle their liabilities. Creditors or beneficial interest holders of these VIEs have no recourse to the general credit of American National, as American National’s obligation is limited to the amount of its committed investment. American National has not provided financial or other support to the VIEs in the form of liquidity arrangements, guarantees, or other commitments to third parties that may affect the fair value or risk of its variable interest in the VIEs in 2017 or 2016.

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

	March 31, 2017		December 31, 2016
Investment real estate	$	157,389	$	173,816
Short-term investments		1,001		1
Cash and cash equivalents		4,182		6,099
Other receivables		6,504		6,456
Other assets		13,337		8,820
Total assets of consolidated VIEs	$	182,413	$	195,192
Notes payable	$	139,674	$	136,080
Other liabilities		8,395		10,037
Total liabilities of consolidated VIEs	$	148,069	$	146,117

The notes payable in the consolidated statements of financial position pertain to the borrowings of the consolidated VIEs. The liability of American National relating to notes payable of the consolidated VIEs is limited to the amount of its direct or indirect investment in the respective ventures, which totaled $31,263,000 and $31,795,000 at March 31, 2017 and December 31, 2016, respectively. The total of notes payable, $139,674,000, is long-term and consists of four notes with the following interest rates: one note at 4.0%, one note at LIBOR, one note at 90-Day LIBOR plus LIBOR margin, and one note at Prime Rate. Two notes mature in 2018, one note matures in 2021, and one note matures in 2022.

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

	March 31, 2017				December 31, 2016
	Carrying Amount		Maximum Exposure to Loss		Carrying Amount		Maximum Exposure to Loss
Investment in unconsolidated affiliates	$	336,400	$	336,400	$	323,933	$	323,933
Mortgage loans		527,686		527,686		481,799		481,799
Accrued investment income		1,792		1,792		1,919		1,919

As of March 31, 2017, one real estate investment with a carrying value of $16,229,000 was classified as held for sale.

16

Note 7 – Derivative Instruments

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

		March 31, 2017						December 31, 2016
Derivatives Not Designated as Hedging Instruments	Location in the Consolidated Statements of Financial Position	Number of Instruments		Notional Amounts		Estimated Fair Value		Number of Instruments		Notional Amounts		Estimated Fair Value
Equity-indexed options	Other invested assets		440	$	1,463,500	$	174,258		442	$	1,414,100	$	156,479
Equity-indexed embedded derivative	Policyholders’ account balances		64,891		1,365,000		346,634		62,481		1,289,800		314,330

		Gains (Losses) Recognized in Income on Derivatives
Derivatives Not Designated as Hedging Instruments	Location in the Consolidated Statements of Operations	Three months ended March 31,
		2017			2016
Equity-indexed options	Net investment income	$	23,133		$	(3,639	)
Equity-indexed embedded derivative	Interest credited to policyholders’ account balances		(25,127	)		2,552

17

Note 7 – Derivative Instruments – (Continued)

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

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

			March 31, 2017
Counterparty	Moody/S&P Rating		Options Fair Value		Collateral Held		Collateral Amounts used to Offset Exposure		Excess and Restricted Collateral		Exposure Net of Collateral
Barclays		Baa2/BBB	$	37,302	$	37,103	$	37,103	$	—	$	199
Citigroup		Baa1/BBB+		2,337		—		—		—		2,337
Goldman-Sachs		A3/BBB+		1,535		1,400		1,400		—		135
ING		Baa1/A-		32,433		28,620		28,620		—		3,813
JP Morgan		A3/A-		174		—		—		—		174
Morgan Stanley		A3/BBB+		17,861		18,020		17,861		159		—
NATIXIS*		A2/A		27,721		27,460		—		27,460		27,721
SunTrust		Baa1/BBB+		23,313		23,190		23,122		68		191
Wells Fargo		A2/A		31,582		31,440		31,404		36		178
		Total	$	174,258	$	167,233	$	139,510	$	27,723	$	34,748
			December 31, 2016
Counterparty	Moody/S&P Rating		Options Fair Value		Collateral Held		Collateral Amounts used to Offset Exposure		Excess and Restricted Collateral		Exposure Net of Collateral
Barclays		Baa2/BBB	$	33,839	$	35,063	$	33,839	$	1,224	$	—
Citigroup		Baa1/BBB+		2,249		—		—		—		2,249
Goldman-Sachs		A3/BBB+		1,452		1,400		1,400		—		52
ING		Baa1/A-		29,609		26,430		26,430		—		3,179
JP Morgan		A3/A-		163		—		—		—		163
Morgan Stanley		A3/BBB+		17,864		17,680		17,680		—		184
NATIXIS*		A2/A		24,804		26,620		—		26,620		24,804
SunTrust		Baa1/BBB+		19,559		19,960		19,559		401		—
Wells Fargo		A2/A		26,940		26,540		26,540		—		400
		Total	$	156,479	$	153,693	$	125,448	$	28,245	$	31,031

* Collateral Restrictions

18

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

Net investment income is shown below (in thousands):

	Three months ended March 31,
	2017			2016
Bonds	$	134,350		$	140,193
Equity securities		8,732			9,279
Mortgage loans		57,704			48,002
Real estate		(1,195	)		(1,874	)
Options		23,133			(3,639	)
Other invested assets		5,779			4,093
Total	$	228,503		$	196,054

Realized investment gains (losses) are shown below (in thousands):

	Three months ended March 31,
	2017			2016
Bonds	$	3,504		$	2,739
Equity securities		11,360			4,865
Mortgage loans		(1,626	)		1,492
Real estate		788			—
Other invested assets		(18	)		(34	)
Total	$	14,008		$	9,062

Other-than-temporary impairment losses are shown below (in thousands):

	Three months ended March 31,
	2017			2016
Bonds	$	(6,000	)	$	—
Equity securities		(783	)	$	(3,476	)
Total	$	(6,783	)	$	(3,476	)

19

Note 9 – Fair Value of Financial Instruments

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

	March 31, 2017				December 31, 2016
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Fixed maturity securities, bonds held-to-maturity	$	7,063,930	$	7,329,302	$	7,251,385	$	7,496,692
Fixed maturity securities, bonds available-for-sale		5,900,702		5,900,702		5,803,276		5,803,276
Equity securities		1,616,318		1,616,318		1,541,676		1,541,676
Equity-indexed options		174,258		174,258		156,479		156,479
Mortgage loans on real estate, net of allowance		4,463,197		4,529,216		4,348,046		4,435,530
Policy loans		383,911		383,911		384,376		384,376
Short-term investments		411,949		411,949		192,226		192,226
Separate account assets		949,786		949,786		941,612		941,612
Total financial assets	$	20,964,051	$	21,295,442	$	20,619,076	$	20,951,867
Financial liabilities
Investment contracts	$	8,800,231	$	8,800,231	$	8,785,412	$	8,785,412
Embedded derivative liability for equity-indexed contracts		346,634		346,634		314,330		314,330
Notes payable		139,674		139,674		136,080		136,080
Separate account liabilities		949,786		949,786		941,612		941,612
Total financial liabilities	$	10,236,325	$	10,236,325	$	10,177,434	$	10,177,434

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

Level 1 Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 Quoted prices in markets that are not active or inputs that are observable directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect American National’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models and third-party evaluation, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Fixed Maturity Securities and Equity Options—American National utilizes a pricing service to estimate fair value measurements. The estimates of fair value for most fixed maturity securities, including municipal bonds, provided by the pricing service are disclosed as Level 2 measurements as the estimates are based on observable market information rather than market quotes.

20

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

The pricing service utilizes market quotations for fixed maturity securities that have quoted prices in active markets. Since fixed maturity securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value measurements for these securities using its proprietary pricing applications, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Additionally, an option adjusted spread model is used to develop prepayment and interest rate scenarios.

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

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

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

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

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

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

Embedded Derivative—The embedded derivative liability for equity-indexed contracts is measured at fair value and is recalculated each reporting period using equity option pricing models. To validate the assumptions used to price the embedded derivative liability, American National measures and compares embedded derivative returns against the returns of equity options held to hedge the liability cash flows.

21

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

The significant unobservable input used to calculate the fair value of the embedded derivatives is equity option implied volatility. An increase in implied volatility will result in an increase in the value of the equity-indexed embedded derivatives, all other things being equal. At March 31, 2017 and December 31, 2016, the one year implied volatility used to estimate embedded derivative value was 13.9% and 16.5%, respectively.

Other Financial Instruments—Other financial instruments classified as Level 3 measurements, as there is little or no market activity, are as follows:

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

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

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

22

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

Quantitative Disclosures

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

	Fair Value Measurement as of March 31, 2017
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
Fixed maturity securities, bonds held-to-maturity
U.S. states and political subdivisions	$	297,322	$	—	$	297,322	$	—
Foreign governments		4,700		—		4,700		—
Corporate debt securities		6,792,325		—		6,760,638		31,687
Residential mortgage-backed securities		231,602		—		230,719		883
Collateralized debt securities		979		—		—		979
Other debt securities		2,374		—		—		2,374
Total bonds held-to-maturity		7,329,302		—		7,293,379		35,923
Fixed maturity securities, bonds available-for-sale
U.S. treasury and government		25,557		—		25,557		—
U.S. states and political subdivisions		943,186		—		940,721		2,465
Foreign governments		6,545		—		6,545		—
Corporate debt securities		4,898,048		—		4,887,184		10,864
Residential mortgage-backed securities		20,852		—		16,852		4,000
Collateralized debt securities		4,245		—		4,245		—
Other debt securities		2,269		—		2,269		—
Total bonds available-for-sale		5,900,702		—		5,883,373		17,329
Equity securities
Common stock		1,592,627		1,592,610		17		—
Preferred stock		23,691		23,691		—		—
Total equity securities		1,616,318		1,616,301		17		—
Options		174,258		—		—		174,258
Mortgage loans on real estate		4,529,216		—		4,529,216		—
Policy loans		383,911		—		—		383,911
Short-term investments		411,949		—		411,949		—
Separate account assets		949,786		—		949,786		—
Total financial assets	$	21,295,442	$	1,616,301	$	19,067,720	$	611,421
Financial liabilities
Investment contracts	$	8,800,231	$	—	$	—	$	8,800,231
Embedded derivative liability for equity-indexed contracts		346,634		—		—		346,634
Notes payable		139,674		—		—		139,674
Separate account liabilities		949,786		—		949,786		—
Total financial liabilities	$	10,236,325	$	—	$	949,786	$	9,286,539

23

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

	Fair Value Measurement as of December 31, 2016
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
Fixed maturity securities, bonds held-to-maturity
U.S. states and political subdivisions	$	319,082	$	—	$	319,082	$	—
Foreign governments		4,716		—		4,716		—
Corporate debt securities		6,925,978		—		6,875,015		50,963
Residential mortgage-backed securities		242,685		—		241,779		906
Collateralized debt securities		1,354		—		—		1,354
Other debt securities		2,877		—		—		2,877
Total bonds held-to-maturity		7,496,692		—		7,440,592		56,100
Fixed maturity securities, bonds available-for-sale
U.S. treasury and government		25,640		—		25,640		—
U.S. states and political subdivisions		960,223		—		957,748		2,475
Foreign governments		6,567		—		6,567		—
Corporate debt securities		4,780,763		—		4,773,516		7,247
Residential mortgage-backed securities		20,513		—		17,909		2,604
Collateralized debt securities		6,392		—		4,454		1,938
Other debt securities		3,178		—		3,178		—
Total bonds available-for-sale		5,803,276		—		5,789,012		14,264
Equity securities
Common stock		1,518,515		1,518,515		—		—
Preferred stock		23,161		23,161		—		—
Total equity securities		1,541,676		1,541,676		—		—
Options		156,479		—		—		156,479
Mortgage loans on real estate		4,435,530		—		4,435,530		—
Policy loans		384,376		—		—		384,376
Short-term investments		192,226		—		192,226		—
Separate account assets		941,612		—		941,612		—
Total financial assets	$	20,951,867	$	1,541,676	$	18,798,972	$	611,219
Financial liabilities
Investment contracts	$	8,785,412	$	—	$	—	$	8,785,412
Embedded derivative liability for equity-indexed contracts		314,330		—		—		314,330
Notes payable		136,080		—		—		136,080
Separate account liabilities		941,612		—		941,612		—
Total financial liabilities	$	10,177,434	$	—	$	941,612	$	9,235,822

24

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

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

	Level 3
	Three months ended March 31,
	Assets						Liability
	Investment Securities			Equity-Indexed Options			Embedded Derivative
Beginning balance, 2017	$	14,264		$	156,479		$	314,330
Total realized and unrealized investment losses included in other comprehensive income		(4,467	)		—			—
Net fair value change included in realized gains (losses)		—			—			—
Net gain for derivatives included in net investment income		—			23,058			—
Net change included in interest credited		—			—			25,127
Purchases, sales and settlements or maturities
Purchases		—			7,552			—
Sales		(1,957	)		—			—
Settlements or maturities		(3,010	)		(12,831	)		—
Premiums less benefits		—			—			7,177
Carry value transfers in		15,000			—			—
Gross transfers into Level 3		382			—			—
Gross transfers out of Level 3		(2,883	)		—			—
Ending balance at March 31, 2017	$	17,329		$	174,258		$	346,634
Beginning balance, 2016	$	20,130		$	123,007		$	242,412
Total realized and unrealized investment gains included in other comprehensive income		159			—			—
Net fair value change included in realized gains (losses)		—			—			—
Net loss for derivatives included in net investment income		—			(3,639	)		—
Net change included in interest credited		—			—			(2,552	)
Purchases, sales and settlements or maturities
Purchases		—			5,293			—
Sales		—			—			—
Settlements or maturities		(13	)		(900	)		—
Premiums less benefits		—			—			18,407
Gross transfers into Level 3		1,413			—			—
Gross transfers out of Level 3		—			—			—
Ending balance at March 31, 2016	$	21,689		$	123,761		$	258,267

Within the net gain (loss) for derivatives included in net investment income were unrealized gains of $17,028,000, and $5,401,000 relating to assets still held at March 31, 2017, and 2016, respectively.

There were no transfers between Level 1 and Level 2 fair value hierarchies. The transfers into Level 3 during the three months ended March 31, 2017 and 2016 were the result of existing securities no longer being priced by the third-party pricing service at the end of the period and unless information is obtained from the brokers that indicate observable inputs were used in their pricing, there are not enough observable inputs to enable American National to classify the securities priced by the brokers as anything other than Level 3. American National’s valuation of these securities involves judgment regarding assumptions market participants would use including quotes from independent brokers. The inputs used by the brokers include recent transactions in the security, similar bonds with same name, ratings, maturity and structure, external dealer quotes in the security, Bloomberg evaluated pricing and prior months pricing. None of them are observable to American National as of March 31, 2017. The transfers out of Level 3 during the three months ended March 31, 2017 were securities being priced by the third-party service at the end of the period, using inputs that are observable or derived from market data, which resulted in classification of these assets as Level 2.

25

Note 10 – Deferred Policy Acquisition Costs

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

	Life			Annuity			Accident & Health			Property & Casualty			Total
Beginning balance, 2017	$	745,840		$	394,208		$	40,620		$	113,775		$	1,294,443
Additions		29,046			17,846			2,871			70,064			119,827
Amortization		(21,189	)		(15,215	)		(4,203	)		(69,733	)		(110,340	)
Effect of change in unrealized gains on available-for-sale securities		(3,137	)		(2,307	)		—			—			(5,444	)
Net change		4,720			324			(1,332	)		331			4,043
Ending balance at March 31, 2017	$	750,560		$	394,532		$	39,288		$	114,106		$	1,298,486

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

Note 11 – Liability for Unpaid Claims and Claim Adjustment Expenses

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

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

	Three months ended March 31,
	2017			2016
Unpaid claims balance, beginning	$	1,140,723		$	1,104,302
Less reinsurance recoverables		216,903			217,337
Net beginning balance		923,820			886,965
Incurred related to
Current		282,862			252,781
Prior years		(29,054	)		(7,806	)
Total incurred claims		253,808			244,975
Paid claims related to
Current		107,669			101,995
Prior years		127,397			129,200
Total paid claims		235,066			231,195
Net balance		942,562			900,745
Plus reinsurance recoverables		195,836			202,386
Unpaid claims balance, ending	$	1,138,398		$	1,103,131

The net and gross reserve calculations have shown favorable development as a result of favorable loss emergence compared to what was implied by the loss development patterns used in the original estimation of losses in prior years. Estimates for ultimate incurred claims attributable to insured events of prior years decreased by approximately $29,054,000 during the first three months of 2017 and decreased by approximately $7,806,000 during the first three months of 2016. This was a reflection of lower-than-anticipated losses in the personal auto, business owner and commercial package policy lines of business in 2017.

For short-duration health insurance claims, the total of IBNR plus expected development on reported claims included in the liability for unpaid claims and claim adjustment expenses at March 31, 2017 was $20,833,000.

26

Note 12 – Federal Income Taxes

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

	Three months ended March 31,
	2017						2016
	Amount			Rate			Amount			Rate
Income tax on pre-tax income	$	18,292			35.0	%	$	8,556			35.0	%
Tax-exempt investment income		(1,832	)		(3.5	)		(1,972	)		(8.1	)
Deferred tax change		(767	)		(1.5	)		(10,167	)		(41.6	)
Dividend exclusion		(1,842	)		(3.5	)		(2,347	)		(9.6	)
Miscellaneous tax credits, net		(2,257	)		(4.3	)		(2,251	)		(9.2	)
Low income housing tax credit expense		1,253			2.4			1,294			5.3
Other items, net		181			0.3			257			1.0
Provision for federal income tax before interest expense		13,028			24.9			(6,630	)		(27.2	)
Interest expense		44			0.1			2,560			10.5
Total	$	13,072			25.0	%	$	(4,070	)		(16.7	)%

American National made no income tax payments during the three months ended March 31, 2017, and made $5,952,000 in income tax payments for the same period in 2016.

Management believes that sufficient taxable income will be achieved over time to utilize the deferred tax assets in the consolidated federal tax return; therefore, no valuation allowance was recorded as of March 31, 2017 and 2016. There are no ordinary loss tax carryforwards that will expire by December 31, 2017.

American National’s federal income tax returns for years 2013 to 2016 and years 2005 to 2009 are subject to examination by the Internal Revenue Service. In the opinion of management, all prior year deficiencies have been paid or adequate provisions have been made for any tax deficiencies that may be upheld. No provision for penalties was established; however, management accrued an additional $44,000 in interest, net of tax, during 2017 relating to a dispute with the Internal Revenue Service. Management does not believe there are any uncertain tax benefits that could be recognized within the next twelve months that would decrease American National’s effective tax rate.

27

Note 13 – Accumulated Other Comprehensive Income

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

	Net Unrealized Gains (Losses) on Securities			Defined Benefit Pension Plan Adjustments			Foreign Currency Adjustments			AOCI
Beginning balance, 2017	$	547,138		$	(88,603	)	$	(2,636	)	$	455,899
Amounts reclassified from AOCI (net of tax benefit $1,547 and expense $826)		(2,873	)		1,534			—			(1,339	)
Unrealized holding gains arising during the period (net of tax expense $34,927)		64,864			—			—			64,864
Unrealized adjustment to DAC (net of tax benefit $2,596)		(2,848	)		—			—			(2,848	)
Unrealized gains on investments attributable to participating policyholders’ interest (net of tax benefit $1,740)		(3,231	)		—			—			(3,231	)
Foreign currency adjustment (net of tax expense $60)		—			—			112			112
Ending balance at March 31, 2017	$	603,050		$	(87,069	)	$	(2,524	)	$	513,457
Beginning balance, 2016	$	453,434		$	(97,889	)	$	(2,925	)	$	352,620
Amounts reclassified from AOCI (net of tax benefit $1,107 and expense $1,012)		(2,057	)		1,879			—			(178	)
Unrealized holding gains arising during the period (net of tax expense $42,230)		78,429			—			—			78,429
Unrealized adjustment to DAC (net of tax benefit $10,972)		(20,491	)		—			—			(20,491	)
Unrealized gains on investments attributable to participating policyholders’ interest (net of tax benefit $2,104)		(3,908	)		—			—			(3,908	)
Foreign currency adjustment (net of tax benefit $6)		—			—			(12	)		(12	)
Ending balance at March 31, 2016	$	505,407		$	(96,010	)	$	(2,937	)	$	406,460

Note 14 – Stockholders’ Equity and Noncontrolling Interests

American National has one class of common stock with a par value of $1.00 per share and 50,000,000 authorized shares. The amounts outstanding at the dates indicated are shown below:

	March 31, 2017			December 31, 2016
Common stock
Shares issued		30,832,449			30,832,449
Treasury shares		(3,905,334	)		(3,917,933	)
Outstanding shares		26,927,115			26,914,516
Restricted shares		(76,000	)		(76,000	)
Unrestricted outstanding shares		26,851,115			26,838,516

Stock-based compensation

American National has one stock-based compensation plan, which allows for grants of Non-Qualified Stock Options, Stock Appreciation Rights (“SAR”), Restricted Stock (“RS”) Awards, Restricted Stock Units (“RSU”), Performance Awards, Incentive Awards or any combination thereof. This plan is administered by the American National Board Compensation Committee. Incentive awards under this plan are made to officers meeting established performance objectives. All awards are subject to review and approval by the Board Compensation Committee both at the time of setting applicable performance objectives and at payment of the awards. The number of shares available for grants under the plan cannot exceed 2,900,000 shares, and no more than 200,000 shares may be granted to any one individual in any calendar year. Grants are made to certain officers and directors as compensation and to align their interests with those of other shareholders.

28

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

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

	SAR				RS Shares				RS Units
	Shares		Weighted-Average Grant Date Fair Value		Shares		Weighted-Average Grant Date Fair Value		Units			Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2016		6,153	$	113.36		76,000	$	110.73		100,445		$	105.97
Granted		—		—		—		—		—			—
Exercised		—		—		—		—		(53,796	)		107.51
Forfeited		—		—		—		—		—			—
Expired		—		—		—		—		—			—
Outstanding at March 31, 2017		6,153	$	113.36		76,000	$	110.73		46,649		$	104.20

	SAR			RS Shares		RS Units
Weighted-average contractual remaining life (in years)		0.69			2.88		1.46
Exercisable shares		6,153			N/A		N/A
Weighted-average exercise price	$	113.36		$	110.73	$	104.20
Weighted-average exercise price exercisable shares		113.36			N/A		N/A
Compensation expense (credit)
Three months ended March 31, 2017	$	(35,000	)	$	207,000	$	130,000
Three months ended March 31, 2016		33,000			210,000		4,102,000
Fair value of liability award
March 31, 2017	$	44,000			N/A	$	16,914,000
December 31, 2016		213,000			N/A		23,634,000

The SARs give the holder the right to cash compensation based on the difference between the stock price on the grant date and the stock price on the exercise date. The SARs vest at a rate of 20% per year for five years and expire five years after vesting.

RS awards entitle the participant to full dividend and voting rights. Each RS share awarded has the value of one share of restricted stock and vests 10 years from the grant date. Unvested shares are restricted as to disposition, and are subject to forfeiture under certain circumstances. Compensation expense is recognized over the vesting period. The restrictions on these awards lapse after 10 years and most of these awards feature a graded vesting schedule in the case of the retirement, death or disability of an award holder. Restricted stock awards for 350,334 shares have been granted at an exercise price of zero, of which 76,000 shares are unvested.

RSU awards allow the recipient of the awards to settle the vested RSUs in either shares of American National’s common stock or cash. RSUs granted vest after a one-year or three-year graded vesting requirement or over a shorter period as a result of death, disability or retirement after age 65.

29

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

Earnings per share

Basic earnings per share were calculated using a weighted average number of shares outstanding. Diluted earnings per share include RS and RSU award shares.

	Three months ended March 31,
	2017		2016
Weighted average shares outstanding		26,899,648		26,909,511
Incremental shares from RS awards and RSUs		72,480		56,456
Total shares for diluted calculations		26,972,128		26,965,967
Net income attributable to American National (in thousands)	$	39,840	$	29,316
Basic earnings per share	$	1.48	$	1.09
Diluted earnings per share		1.48		1.09

Statutory Capital and Surplus

Risk Based Capital (“RBC”) is a measure insurance regulators use to evaluate the capital adequacy of American National Insurance Company and its insurance subsidiaries. RBC is calculated using formulas applied to certain financial balances and activities that consider, among other things, investment risks related to the type and quality of investments, insurance risks associated with products and liabilities, interest rate risks and general business risks. Insurance companies that do not maintain capital and surplus at a level at least 200% of the authorized control level RBC are required to take certain actions. At March 31, 2017 and December 31, 2016, American National Insurance Company’s statutory capital and surplus was $3,013,270,000 and $2,985,909,000, respectively. American National Insurance Company and each of its insurance subsidiaries had statutory capital and surplus at March 31, 2017 and December 31, 2016, substantially above 200% of the authorized control level.

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

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

One of American National’s insurance subsidiaries has been granted a permitted practice from the Missouri Department of Insurance to record as the valuation of its investment in a wholly-owned subsidiary that is the attorney-in-fact for a Texas domiciled insurer, the statutory capital and surplus of the Texas domiciled insurer. This permitted practice increases the statutory capital and surplus of both American National Insurance Company and the Missouri domiciled insurance subsidiary by $66,089,000 and $67,115,000 at March 31, 2017 and March 31, 2016, respectively. The statutory capital and surplus of both American National Insurance Company and the Missouri domiciled insurance subsidiary would have remained substantially above the company action level RBC had it not used the permitted practice.

30

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

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

	March 31, 2017		December 31, 2016
Statutory capital and surplus
Life insurance entities	$	1,938,251	$	1,921,171
Property and casualty insurance entities		1,084,896		1,074,525
	Three months ended March 31,
	2017		2016
Statutory net income
Life insurance entities	$	2,467	$	3,927
Property and casualty insurance entities		6,811		4,548

Dividends

American National Insurance Company’s payment of dividends to stockholders is restricted by insurance law. The restrictions require life insurance companies to maintain minimum amounts of capital and surplus, and in the absence of special approval, limit the payment of dividends to the greater of the prior year’s statutory net income from operations, or 10% of prior year statutory surplus. American National Insurance Company is permitted to pay total dividends of $298,591,000 during 2017, without prior approval of the Texas Department of Insurance. Similar restrictions on amounts that can transfer in the form of dividends, loans, or advances to American National Insurance Company apply to its insurance subsidiaries.

Noncontrolling interests

American National County Mutual Insurance Company (“County Mutual”) is a mutual insurance company that is owned by its policyholders. American National has a management agreement that effectively gives it control of County Mutual. As a result, County Mutual is included in the consolidated financial statements of American National. Policyholder interests in the financial position of County Mutual are reflected as noncontrolling interest of $6,750,000 at March 31, 2017 and December 31, 2016.

American National Insurance Company and its subsidiaries exercise significant control or ownership of various joint ventures, resulting in their consolidation into American National’s consolidated financial statements. The interests of the other partners in the consolidated joint ventures are shown as noncontrolling interests of $1,896,000 and $2,567,000 at March 31, 2017 and December 31, 2016, respectively.

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Note 15 – Segment Information

Management organizes the business into five operating segments:

• Life—markets whole, term, universal, indexed and variable life insurance on a national basis primarily through career, multiple-line, and independent agents as well as direct marketing channels.

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

• Health—primary lines of business are Medicare supplement, stop loss, other supplemental health products and credit disability insurance. Health products are typically distributed through independent agents and managing general underwriters.

• Property and Casualty—writes personal, agricultural and targeted commercial coverages and credit-related property insurance. These products are primarily sold through multiple-line and independent agents.

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

The accounting policies of the segments are the same as those described in Note 2 to American National’s 2016 annual report on Form 10-K. All revenues and expenses specifically attributable to policy transactions are recorded directly to the appropriate operating segment. Revenues and expenses not specifically attributable to policy transactions are allocated to each segment as follows:

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

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

• Expenses are allocated based upon various factors, including premium and commission ratios of the operating segments.

The following summarizes the results of operations measured as the income before federal income taxes, and equity in earnings of unconsolidated affiliates by operating segments (in thousands):

	Three months ended March 31,
	2017		2016
Life	$	7,487	$	(3,481	)
Annuity		23,753		17,971
Health		2,057		(634	)
Property and Casualty		2,423		6,990
Corporate and Other		7,043		2,662
Total	$	42,763	$	23,508

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Note 16 – Commitments and Contingencies

Commitments

American National had aggregate commitments at March 31, 2017, to purchase, expand or improve real estate, to fund fixed interest rate mortgage loans, and to purchase other invested assets of $988,951,000 of which $715,013,000 is expected to be funded in 2017 with the remainder funded in 2018 and beyond.

American National has a $100,000,000 short-term variable rate borrowing facility containing a $55,000,000 sub-feature for the issuance of letters of credit. Borrowings under the facility are at the discretion of the lender and would be used only for funding working capital requirements. The combination of borrowings and outstanding letters of credit cannot exceed $100,000,000 at any time. As of March 31, 2017 and December 31, 2016, the outstanding letters of credit were $9,548,000 and $9,473,000, respectively, and there were no borrowings on this facility. This facility expires on October 30, 2017. American National expects it will be renewed on substantially equivalent terms upon expiration.

Guarantees

American National has guaranteed bank loans for customers of a third-party marketing operation. The bank loans are used to fund premium payments on life insurance policies issued by American National. The loans are secured by the cash values of the life insurance policies. If the customer were to default on a bank loan, American National would be obligated to pay off the loan. As the cash values of the life insurance policies always equal or exceed the balance of the loans, management does not foresee any loss on these guarantees. The total amount of the guarantees outstanding as of March 31, 2017, was approximately $206,376,000, while the total cash value of the related life insurance policies was approximately $210,985,000.

Litigation

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

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

One-Time Pension Payout Window

The one-time window offering to terminated, vested participants of our qualified defined benefit pension plans allowing participants to take a lump sum or annuity payout of their pension benefit, closed in March 2017. Payments to participants that elected to take a lump sum payout were made from pension plan assets in April, 2017. A portion of the pension actuarial loss included in Accumulated Other Comprehensive Income will be recognized as pension costs in proportion to the reduction of the pension plans’ total benefit obligations. The after-tax expense expected to be recognized in the second quarter is estimated as $5,000,000.

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Note 17 – Related Party Transactions

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

		Dollar Amount of Transactions				Amount due to (from) American National
		Three months ended March 31,				March 31, 2017				December 31, 2016
Related Party	Financial Statement Line Impacted	2017		2016
Gal-Tex Hotel Corporation	Mortgage loan on real estate	$	373	$	347	$	3,383		��	$	3,756
Gal-Tex Hotel Corporation	Net investment income		66		92		20				23
Greer, Herz & Adams, LLP	Other operating expenses		2,527		2,550		(401	)			(283	)

Mortgage Loans to Gal-Tex Hotel Corporation (“Gal-Tex”): American National holds a first mortgage loan originated in 1999, with an interest rate of 7.25% and final maturity date of April 1, 2019 issued to a subsidiary of Gal-Tex, which is collateralized by a hotel property in San Antonio, Texas. This loan is current as to principal and interest payments.

Transactions with Greer, Herz & Adams, LLP: Irwin M. Herz, Jr. is an American National advisory director and a Partner with Greer, Herz & Adams, LLP, which serves as American National’s General Counsel.

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

Set forth on the following pages is management’s discussion and analysis (“MD&A”) of financial condition and results of operations for the three months ended March 31, 2017 and 2016 of American National Insurance Company and its subsidiaries (referred to in this document as “we”, “our”, “us”, or the “Company”). This information should be read in conjunction with our consolidated financial statements included in Item 1, Financial Statements (unaudited), of this Form 10-Q.

Forward-Looking Statements

This document contains forward-looking statements that reflect our estimates and assumptions related to business, economic, competitive and legislative developments. Forward-looking statements generally are indicated by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “estimates,” “will” or words of similar meaning and include, without limitation, statements regarding the outlook of our business and expected financial performance. Forward-looking statements are not guarantees of future performance and involve various risks and uncertainties. Moreover, forward-looking statements speak only as of the date made, and we undertake no obligation to update them. Certain important factors could cause our actual results to differ, possibly materially, from our expectations or estimates. These factors are described in greater detail in Item IA, Risk Factors, in our 2016 Annual Report on Form 10-K filed with the SEC on March 10, 2017, and they include among others:

• Economic & Investment Risk Factors

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

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

• lack of liquidity for certain of our investments;

• risk of investment losses and defaults;

• Operational Risk Factors

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

• potential ineffectiveness of our risk management policies and procedures;

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

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

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

• the material weakness in our internal controls over financial reporting, as discussed in Item 4 below;

• Catastrophic Event Risk Factors

• natural or man-made catastrophes, pandemic disease, or other events resulting in increased claims activity from catastrophic loss of life or property;

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

• Marketplace Risk Factors

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

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

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

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• Litigation and Regulation Risk Factors

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

• significant changes in government regulation;

• changes in tax law;

• changes in statutory or U.S. generally accepted accounting principles (“GAAP”), practices or policies;

• Reinsurance and Counterparty Risk Factors

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

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

• Other Risk Factors

• potentially adverse rating agency actions; and

• control of our company by a small number of stockholders.

Revision to Previously Reported Amounts

Correction of an Immaterial Error. During the fourth quarter of 2016, the Company revised previously reported amounts to include cash held in a bank custody account representing collateral provided to us by third parties for equity-option derivative transactions. In accordance with Staff Accounting Bulletin (“SAB”) No. 99,Materiality,and SAB No. 108,Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, management evaluated the materiality of the error from qualitative and quantitative perspectives, and concluded the error was immaterial to the current and prior periods. The correction of the immaterial error revised the consolidated statements of financial position and statements of cash flows as disclosed in our 2016 Annual Report on Form 10-K filed with the SEC on March 10, 2017. Detail regarding the revision amounts is included in Part I, Item 1, Note 2 - Summary of Significant Accounting Policies and Practices, of the Notes to the Unaudited Consolidated Financial Statements.

Overview

Chartered in 1905, we are a diversified insurance and financial services company offering a broad spectrum of insurance products in all 50 states, the District of Columbia and Puerto Rico. Our headquarters are in Galveston, Texas.

General Trends

American National had no material changes to the general trends, as discussed in the MD&A included in our 2016 Annual Report on Form 10-K filed with the SEC on March 10, 2017.

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Critical Accounting Estimates

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

For a discussion of our critical accounting estimates, see the MD&A in our 2016 Annual Report on Form 10-K filed with the SEC on March 10, 2017. There have been no material changes in accounting policies since December 31, 2016.

Recently Issued Accounting Pronouncements

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

Consolidated Results of Operations

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

	Three months ended March 31,
	2017			2016			Change
Premiums and other revenues
Premiums	$	471,772		$	490,999		$	(19,227	)
Other policy revenues		63,452			64,347			(895	)
Net investment income		228,503			196,054			32,449
Realized investments gains (losses), net		7,225			5,586			1,639
Other income		8,845			7,984			861
Total premiums and other revenues		779,797			764,970			14,827
Benefits, losses and expenses
Policyholder benefits		142,770			182,018			(39,248	)
Claims incurred		252,058			244,250			7,808
Interest credited to policyholders’ account balances		96,008			76,527			19,481
Commissions for acquiring and servicing policies		125,491			112,884			12,607
Other operating expenses		130,194			130,376			(182	)
Change in deferred policy acquisition costs(1)		(9,487	)		(4,593	)		(4,894	)
Total benefits and expenses		737,034			741,462			(4,428	)
Income before other items and federal income taxes	$	42,763		$	23,508		$	19,255

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

A positive net change indicates less expense was amortized and represents an increase to expenses in the period indicated.

Consolidated earnings increased during the three months ended March 31, 2017 compared to 2016 primarily due to an increase in life earnings with a higher return on invested assets and an increase in annuity earnings.

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Life

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

	Three months ended March 31,
	2017			2016			Change
Premiums and other revenues
Premiums	$	77,474		$	75,117		$	2,357
Other policy revenues		59,909			61,608			(1,699	)
Net investment income		62,209			54,184			8,025
Other income		616			593			23
Total premiums and other revenues		200,208			191,502			8,706
Benefits, losses and expenses
Policyholder benefits		99,108			100,771			(1,663	)
Interest credited to policyholders’ account balances		15,405			16,085			(680	)
Commissions for acquiring and servicing policies		34,810			29,794			5,016
Other operating expenses		51,255			51,379			(124	)
Change in deferred policy acquisition costs(1)		(7,857	)		(3,046	)		(4,811	)
Total benefits and expenses		192,721			194,983			(2,262	)
Income before other items and federal income taxes	$	7,487		$	(3,481	)	$	10,968

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

A positive net change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.

Earnings increased during the three months ended March 31, 2017 compared to 2016 primarily due to a higher return on invested assets. In addition, an expense was incurred in 2016 relating to certain policies that lapsed with insufficient value to cover their outstanding policy loan balances.

Premiums and other revenues

Premiums increased during the three months ended March 31, 2017 compared to 2016 primarily due to continued growth in renewal premium on our traditional life products. Other policy revenues include mortality charges, earned policy service fees and surrender charges on interest-sensitive life insurance policies.

Life insurance sales

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

	Three months ended March 31,
	2017		2016		Change
Traditional Life	$	14,265	$	13,539	$	726
Universal Life		5,325		4,158		1,167
Indexed UL		5,909		5,078		831
Total Recurring	$	25,499	$	22,775	$	2,724
Single and excess	$	601	$	423	$	178
Credit life		1,009		880		129

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Life insurance sales are based on the total yearly premium that insurance companies would expect to receive if all recurring premium policies would remain in force, plus 10% of single and excess premiums and 15% of credit life premium. Life insurance sales measure activity associated with gaining new insurance business in the current period, and includes deposits received related to interest sensitive life and universal life-type products.

GAAP premium revenues are associated with policies sold in current and prior periods, and deposits received related to interest sensitive life and universal life-type products are recorded in a policyholder account which is reflected as a liability. Therefore, a reconciliation of premium revenues and insurance sales is not meaningful.

Life insurance sales increased for all major lines during the three months ended March 31, 2017 compared to 2016.

Benefits, losses and expenses

Policyholder benefits decreased during the three months ended March 31, 2017 compared to 2016 primarily due to an expense incurred in 2016 relating to certain policies that lapsed with insufficient value to cover their outstanding policy loan balances.

Commissions increased during the three months ended March 31, 2017 compared to 2016 commensurate with the increase in sales.

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

	Three months ended March 31,
	2017			2016			Change
Acquisition cost capitalized	$	29,046		$	25,217		$	3,829
Amortization of DAC		(21,189	)		(22,171	)		982
Change in DAC	$	7,857		$	3,046		$	4,811

Policy in-force information

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

	March 31, 2017		December 31, 2016		Change
Life insurance in-force
Traditional life	$	68,728,895	$	67,649,433	$	1,079,462
Interest-sensitive life		28,288,115		27,971,646		316,469
Total life insurance in-force	$	97,017,010	$	95,621,079	$	1,395,931

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

	March 31, 2017		December 31, 2016		Change
Number of policies in-force
Traditional life		1,830,555		1,841,359		(10,804	)
Interest-sensitive life		225,400		222,845		2,555
Total number of policies		2,055,955		2,064,204		(8,249	)

Total life insurance in-force increased during the three months ended March 31, 2017 compared to December 31, 2016, while the total number of policies decreased for the same periods, reflecting the transition to policies with higher face amounts.

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Annuity

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

	Three months ended March 31,
	2017			2016			Change
Premiums and other revenues
Premiums	$	29,809		$	70,208		$	(40,399	)
Other policy revenues		3,543			2,739			804
Net investment income		139,677			116,896			22,781
Other income		665			960			(295	)
Total premiums and other revenues		173,694			190,803			(17,109	)
Benefits, losses and expenses
Policyholder benefits		43,662			81,247			(37,585	)
Interest credited to policyholders’ account balances		80,603			60,442			20,161
Commissions for acquiring and servicing policies		17,284			21,908			(4,624	)
Other operating expenses		11,023			13,158			(2,135	)
Change in deferred policy acquisition costs(1)		(2,631	)		(3,923	)		1,292
Total benefits and expenses		149,941			172,832			(22,891	)
Income before other items and federal income taxes	$	23,753		$	17,971		$	5,782

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

A positive net change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.

Earnings increased during the three months ended March 31, 2017 compared to 2016 primarily due to increased assets, as measured by account value and reserves, leading to an increase in margins earned on net investment income. Additionally, lower than expected surrenders in 2017 led to less DAC amortization expense.

Premiums and other revenues

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

	Three months ended March 31,
	2017		2016		Change
Fixed deferred annuity	$	147,202	$	184,156	$	(36,954	)
Single premium immediate annuity		36,177		78,612		(42,435	)
Equity-indexed deferred annuity		132,901		141,979		(9,078	)
Variable deferred annuity		20,306		19,889		417
Total premium and deposits		336,586		424,636		(88,050	)
Less: Policy deposits		306,777		354,428		(47,651	)
Total earned premiums	$	29,809	$	70,208	$	(40,399	)

Annuity premiums were down in the first quarter 2017 compared to 2016 primarily in the fixed deferred annuity and SPIA products. These reductions are attributed to the competitiveness of our interest crediting rates, primarily in the early part of the first quarter 2017. Sales strengthened during the first quarter led by the fixed deferred annuity product.

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We monitor account values and changes in those values as a key indicator of performance in our Annuity segment. Shown below are the changes in account values (in thousands):

	Three months ended March 31,
	2017			2016
Fixed deferred and equity-indexed annuity
Account value, beginning of period	$	9,118,350		$	8,880,448
Net inflows		212,995			253,769
Surrenders		(199,701	)		(202,981	)
Fees		(1,882	)		(1,506	)
Interest credited		79,001			57,558
Account value, end of period		9,208,763			8,987,288
Single premium immediate annuity
Reserve, beginning of period		1,566,440			1,398,481
Net inflows		(8,110	)		38,768
Interest and mortality		15,136			14,031
Reserve, end of period		1,573,466			1,451,280
Variable deferred annuity
Account value, beginning of period		392,345			417,821
Net inflows		17,004			19,070
Surrenders		(40,037	)		(24,499	)
Fees		(1,155	)		(1,167	)
Change in market value and other		20,454			(3,468	)
Account value, end of period		388,611			407,757
Total account value, end of period	$	11,170,840		$	10,846,325

Benefits, losses and expenses

Policyholder benefits consist of annuity payments and reserve increases for SPIA contracts. Reserve increases are highly correlated to the sales volume of SPIA contracts. The decrease in the level of benefits for the three months ended March 31, 2017 was commensurate with decreases in SPIA premium relative to prior year.

Commissions decreased during the three months ended March 31, 2017 compared to 2016 driven by the decrease in annuity sales.

Other operating expenses decreased during three months ended March 31, 2017 compared to 2016 as annuity volume decreased.

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

	Three months ended March 31,
	2017			2016			Change
Acquisition cost capitalized	$	17,846		$	20,946		$	(3,100	)
Amortization of DAC		(15,215	)		(17,023	)		1,808
Change in DAC	$	2,631		$	3,923		$	(1,292	)

The change in DAC decreased during the three months ended March 31, 2017 compared to 2016 due to a decrease in capitalization which is primarily driven by the decrease in commissions.

The amortization of DAC as a percentage of gross profits is an important ratio for the Annuity segment. Changes in this ratio reflect the impact of emerging experience. The ratios for the three months ended March 31, 2017 and 2016 were 30.8% and 34.7% respectively. The favorable decrease in the 2017 ratio is due to lower than expected surrenders in 2017.

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Options and Derivatives

Net investment income without equity-indexed options or “option return” remained relatively flat for the three months ended March 31, 2017 compared to 2016.

The S&P 500 Index increased by approximately 5.5% and 0.8% in the three months ended March 31, 2017 and 2016, respectively. This change in index performance led to an increase in the option return of $23.2 million during the three months ended March 31, 2017 compared to 2016, offset by a $24.7 million increase in the related equity-indexed embedded derivative for a net decrease in earnings of $1.5 million.

The following table summarizes the incremental impact of the investment performance of “option return” on net investment income, and the impact of the equity-indexed annuity embedded derivatives to interest credited to policyholder’s account balances (in thousands):

	Three months ended March 31,
	2017		2016			Change
Net investment income
Without option return	$	119,501	$	119,953		$	(452	)
Option return		20,176		(3,057	)		23,233
Interest credited to policy account balances
Without embedded derivatives		58,210		62,751			(4,541	)
Equity-indexed annuity embedded derivatives		22,393		(2,309	)		24,702

Health

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

	Three months ended March 31,
	2017		2016			Change
Premiums and other revenues
Premiums	$	37,039	$	42,313		$	(5,274	)
Net investment income		2,507		2,449			58
Other income		4,346		4,179			167
Total premiums and other revenues		43,892		48,941			(5,049	)
Benefits, losses and expenses
Claims incurred		24,528		32,292			(7,764	)
Commissions for acquiring and servicing policies		5,890		4,878			1,012
Other operating expenses		10,085		10,832			(747	)
Change in deferred policy acquisition costs(1)		1,332		1,573			(241	)
Total benefits and expenses		41,835		49,575			(7,740	)
Income before other items and federal income taxes	$	2,057	$	(634	)	$	2,691

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

A positive net change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.

Premiums decreased and earnings increased during the three months ended March 31, 2017 compared to 2016, primarily due to the absence of group major medical plans with losses that were not renewed effective January 1, 2017.

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Premiums and other revenues

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

	Three months ended March 31,
	2017				2016
Medicare Supplement	$	16,451	44.4	%	$	17,640	41.7	%
Credit accident and health		4,768	12.9			2,791	6.6
MGU		4,513	12.2			3,419	8.1
Supplemental insurance		6,219	16.8			5,257	12.4
Medical expense		3,213	8.7			3,700	8.7
Group health		623	1.7			8,231	19.5
All other		1,252	3.3			1,275	3.0
Total	$	37,039	100.0	%	$	42,313	100.0	%

Earned premiums decreased during the three months ended March 31, 2017 compared to 2016 primarily due to the non-renewal of a group health plan included in 2016 health results. Credit accident and health increased primarily due to the onboarding of new producers writing new credit business. Supplement Insurance increased due to increased sales in group worksite health benefit programs.

Our in-force certificates or policies as of the dates indicated are as follows:

	Three months ended March 31,
	2017				2016
Medicare Supplement		33,690	7.0	%		34,365	6.5	%
Credit accident and health		189,038	39.5			196,104	37.2
MGU		157,582	32.8			179,406	34.1
Supplemental insurance		49,937	10.4			61,097	11.6
Medical expense		2,126	0.4			2,477	0.5
Group health		14,915	3.1			16,756	3.2
All other		32,812	6.8			36,408	6.9
Total		480,100	100.0	%		526,613	100.0	%

Total in-force policies decreased during the three months ended March 31, 2017 compared to 2016, primarily due to the decrease in the MGU line, Supplemental Insurance, and continued shrinkage of the closed Medical Expense and All Other blocks. Although Supplemental Insurance sales began to increase, policy counts decreased due to termination of a large accidental death and dismemberment group coverage with low coverage amounts.

Benefits, losses and expenses

Claims incurred decreased during the three months ended March 31, 2017 compared to 2016 due to the non-renewal of a group health plan included in 2016 health results.

Commissions increased slightly during the three months ended March 31, 2017 compared to 2016 primarily due to increased sales in Credit accident and health and Supplemental Insurance.

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Change in Deferred Policy Acquisition Costs

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

	Three months ended March 31,
	2017			2016			Change
Acquisition cost capitalized	$	2,871		$	3,980		$	(1,109	)
Amortization of DAC		(4,203	)		(5,553	)		1,350
Change in DAC	$	(1,332	)	$	(1,573	)	$	241

Property and Casualty

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

	Three months ended March 31,
	2017			2016			Change
Premiums and other revenues
Net premiums written	$	350,112		$	313,345		$	36,767
Net premiums earned	$	327,450		$	303,361		$	24,089
Net investment income		14,040			14,912			(872	)
Other income		1,938			990			948
Total premiums and other revenues		343,428			319,263			24,165
Benefits, losses and expenses
Claims incurred		227,530			211,958			15,572
Commissions for acquiring and servicing policies		67,508			56,306			11,202
Other operating expenses		46,298			43,206			3,092
Change in deferred policy acquisition costs(1)		(331	)		803			(1,134	)
Total benefits and expenses		341,005			312,273			28,732
Income before other items and federal income taxes	$	2,423		$	6,990		$	(4,567	)
Loss ratio		69.5	%		69.9	%		(0.4	)
Underwriting expense ratio		34.7			33.1			1.6
Combined ratio		104.2	%		103.0	%		1.2
Impact of catastrophe events on combined ratio		8.2			7.4			0.8
Combined ratio without impact of catastrophe events		96.0	%		95.6	%		0.4
Gross catastrophe losses	$	26,772		$	22,327		$	4,445
Net catastrophe losses		26,775			22,143			4,632

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

A positive net change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.

Property and Casualty results decreased during the three months ended March 31, 2017 compared to 2016 primarily due to increased catastrophe losses impacting the homeowners and agribusiness lines.

Premiums and other revenues

Net premiums written and earned increased during three months ended March 31, 2017 compared to 2016 for all major lines of business. The largest increases were in the personal automobile and other commercial lines of business.

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Benefits, losses and expenses

Claims incurred increased during the three months ended March 31, 2017 compared to 2016, as a result of increases in catastrophe losses as well as non-catastrophe property losses.

Commissions for acquiring and servicing policies increased during the three months ended March 31, 2017 compared to 2016, primarily as result of the premium growth as well as the mix of products.

Operating expenses increased during the three months ended March 31, 2017 compared to 2016, as a result of costs related to growth initiatives.

Products

Our Property and Casualty segment consists of: (i) Personal products, marketed primarily to individuals, representing 53.9% of net premiums written; (ii) Commercial products, which focus primarily on agricultural and other markets, representing 33.8% of net premiums written; and (iii) Credit-related property insurance products, which are marketed to and through financial institutions and retailers, representing 12.3% of net premiums written.

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Personal Products

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

	Three months ended March 31,
	2017			2016			Change
Net premiums written
Automobile	$	122,865		$	110,043		$	12,822
Homeowner		54,456			49,879			4,577
Other Personal		11,465			10,944			521
Total net premiums written	$	188,786		$	170,866		$	17,920
Net premiums earned
Automobile	$	112,949		$	103,869		$	9,080
Homeowner		58,925			55,959			2,966
Other Personal		10,507			10,366			141
Total net premiums earned	$	182,381		$	170,194		$	12,187
Loss ratio
Automobile		75.2	%		81.8	%		(6.6	)%
Homeowner		78.1			65.3			12.8
Other Personal		55.3			34.2			21.1
Personal line loss ratio		75.0	%		73.5	%		1.5	%
Combined Ratio
Automobile		99.7	%		109.0	%		(9.3	)%
Homeowner		114.9			95.2			19.7
Other Personal		98.8			62.1			36.7
Personal line combined ratio		104.6	%		101.6	%		3.0	%

Automobile: Net premiums written and earned increased in our personal automobile line during the three months ended March 31, 2017 compared to 2016, due to an increase of policies in force and rate increases. The loss and combined ratio decreased during the three months ended March 31, 2017 compared to 2016 primarily due to the decrease in a frequency and severity of claims and catastrophe losses compared to prior year.

Homeowners: Net premiums written and earned increased during the three months ended March 31, 2017 compared to 2016 primarily due to increased sales of homeowner products to renters. The loss and combined ratios increased during the three months ended March 31, 2017 compared to 2016, due to an increase in catastrophe claim activity compared to the prior year.

Other Personal: These products include watercraft, rental-owner and umbrella coverages for individuals seeking to protect their personal property and liability not covered within their home and auto policies. The loss and combined ratios increased during the three months ended March 31, 2017 compared to 2016 due to an umbrella claim re-designation from personal lines to commercial lines during 2016. The 2017 results reflect a return to what has been a typical loss ratio.

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Commercial Products

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

	Three months ended March 31,
	2017			2016			Change
Net premiums written
Other Commercial	$	54,150		$	45,612		$	8,538
Agricultural Business		34,480			32,908			1,572
Automobile		29,779			27,964			1,815
Total net premiums written	$	118,409		$	106,484		$	11,925
Net premiums earned
Other Commercial	$	44,962		$	38,709		$	6,253
Agricultural Business		33,663			31,888			1,775
Automobile		23,979			22,696			1,283
Total net premiums earned	$	102,604		$	93,293		$	9,311
Loss ratio
Other Commercial		54.6	%		69.5	%		(14.9	)
Agricultural Business		87.2			79.6			7.6
Automobile		69.5			74.1			(4.6	)
Commercial line loss ratio		68.8	%		74.1	%		(5.3	)
Combined ratio
Other Commercial		88.7	%		101.8	%		(13.1	)
Agricultural Business		125.4			118.0			7.4
Automobile		94.8			99.0			(4.2	)
Commercial line combined ratio		102.2	%		106.6	%		(4.4	)

Other Commercial: Net premiums written and earned increased during the three months ended March 31, 2017 compared to 2016 primarily due to increased sales of mortgage security insurance and workers’ compensation. The decrease in the loss and combined ratios for the three months ended March 31, 2017 compared to 2016 are primarily due to decreased claim activity on the workers compensation and business owners’ lines of business.

Agricultural Business: Our agricultural business product allows policyholders to customize and cover their agriculture exposure using a package policy which includes coverage for residences and household contents, farm buildings and building contents, personal and commercial liability and personal property. Net premiums written and earned increased during the three months ended March 31, 2017 compared to 2016 primarily as a result of improved rate adequacy. The loss and combined ratios increased during the three months ended March 31, 2017 compared to 2016 primarily due to an increase in catastrophe losses as well as non-catastrophe property losses.

Commercial Automobile: Net premiums written and earned increased during the three months ended March 31, 2017 compared to 2016, primarily due to improved rate adequacy. The loss and combined ratios decreased during the three months ended March 31, 2017 compared to 2016 primarily due to a decrease in the average severity of losses.

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Credit Products

Credit-related property product results for the periods indicated were as follows (in thousands, except percentages):

	Three months ended March 31,
	2017			2016			Change
Net premiums written	$	42,917		$	35,995		$	6,922
Net premiums earned		42,465			39,874			2,591
Loss ratio		47.5	%		44.7	%		2.8	%
Combined ratio		106.7	%		102.5	%		4.2	%

Credit-related property products are offered on automobiles, furniture and appliances in connection with the financing of those items. These policies pay an amount if the insured property is lost or damaged and the amount paid is not directly related to an event affecting the consumer’s ability to pay the debt.

Net written and earned premiums increased during the three months ended March 31, 2017 compared to 2016 primarily due to increases in our Collateral Protection and debt cancellation business. The loss and combined ratio increased during the three months ended March 31, 2017 compared to 2016 primarily due to an increase in claims in our Guaranteed Auto Protection (GAP) business.

Corporate and Other

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

	Three months ended March 31,
	2017			2016			Change
Other revenues
Net investment income	$	10,070		$	7,613		$	2,457
Realized investment gains (losses), net		7,225			5,586			1,639
Other Income		1,280			1,262			18
Total other revenues		18,575			14,461			4,114
Benefits, losses and expenses
Commissions		(1	)		(2	)		1
Other operating expenses		11,533			11,801			(268	)
Total benefits, losses and expenses		11,532			11,799			(267	)
Income before other items and federal income taxes	$	7,043		$	2,662		$	4,381

Earnings increased during the three months ended March 31, 2017 compared to 2016 primarily due to an increase in net investment income. The increase in net investment income is primarily attributable to real estate investments.

Investments

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

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

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

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

	March 31, 2017				December 31, 2016
Bonds held-to-maturity, at amortized cost	$	7,063,930	34.3	%	$	7,251,385	35.8	%
Bonds available-for-sale, at fair value		5,900,702	28.7			5,803,276	28.7
Equity securities, at fair value		1,616,318	7.9			1,541,676	7.6
Mortgage loans, net of allowance		4,463,197	21.7			4,348,046	21.5
Policy loans		383,911	1.9			384,376	1.9
Investment real estate, net of accumulated depreciation		586,316	2.9			593,417	2.9
Short-term investments		411,949	2.0			192,226	1.0
Other invested assets		115,474	0.6			113,550	0.6
Total investments	$	20,541,797	100.0	%	$	20,227,952	100.0	%

The increase in our total investments at March 31, 2017 compared to 2016 was primarily a result of the purchase of bonds available-for-sale, increased mortgage loan activity and an increase in short-term investments.

Bonds—We allocate most of our fixed maturity securities to support our insurance business. At March 31, 2017, our fixed maturity securities had an estimated fair value of $13.2 billion, which was $0.4 billion, or 3.4%, above amortized cost. At December 31, 2016, our fixed maturity securities had an estimated fair value of $13.3 billion, which was $0.4 billion, or 2.9%, above amortized cost. The estimated fair value for securities due in one year or less increased from $0.7 billion as of December 31, 2016 to $0.8 billion as of March 31, 2017, primarily as a result of maturities. For additional information regarding total bonds by credit quality rating refer to Note 4, Investments in Securities, of the Notes to the Unaudited Consolidated Financial Statements.

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

Mortgage Loans— We invest in commercial mortgage loans that are diversified by property-type and geography. Generally, mortgage loans are secured by first liens on income-producing real estate with a loan-to-value ratio of up to 75%. Mortgage loans are carried at outstanding principal balances, adjusted for any unamortized premium or discount, deferred fees or expenses, and net of allowances. The weighted average coupon yield on the principal funded for mortgage loans was 4.7% at March 31, 2017 and December 31, 2016, respectively.

Policy Loans—For certain life insurance products, policyholders may borrow funds using the policy’s cash value as collateral. The maximum amount of the policy loan depends upon the policy’s surrender value. As of March 31, 2017, we had $383.9 million in policy loans with a loan to surrender value of 64.0%, and at December 31, 2016, we had $384.4 million in policy loans with a loan to surrender value of 64.6%. Interest rates on policy loans primarily range from 3.0% to 12.0% per annum. Policy loans may be repaid at any time by the policyholder and have priority to any claims on the policy. If the policyholder fails to repay the policy loan, funds are withdrawn from the policy’s benefits.

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

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

Net Investment Income and Net Realized Gains (Losses)

Net investment income increased $32.4 million during the three months ended March 31, 2017 compared to 2016 primarily due to an increase in unrealized gains of equity-indexed options as a result of increases in the S&P 500. Equity-indexed options are recorded at fair value with changes in fair value recorded as investment income.

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

Net realized gains increased $4.9 million during the three months ended March 31, 2017 compared to 2016. Other-than-temporary impairment on investment securities increased $3.3 million during three months ended March 31, 2017 compared to 2016.

Net Unrealized Gains and Losses

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

	March 31, 2017			December 31, 2016			Change
Held-to-Maturity
Gains	$	290,503		$	285,315		$	5,188
Losses		(25,131	)		(40,008	)		14,877
Net Gain		265,372			245,307			20,065
Available-for-Sale (1)
Gains		1,072,378			986,635			85,743
Losses		(33,472	)		(43,100	)		9,628
Net Gain		1,038,906			943,535			95,371
Total	$	1,304,278		$	1,188,842		$	115,436

⁽¹⁾  Includes bonds and equity securities

The net change in the unrealized gains on fixed maturity securities between December 31, 2016 and March 31, 2017 is primarily attributable to the decrease in interest rates. The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position.

The net unrealized gains of our equity securities were $868.5 million and $809.2 million at March 31, 2017 and December 31, 2016, respectively. The increase is attributable to favorable market conditions.

Liquidity

Our liquidity requirements have been and are expected to continue to be met by funds from operations, comprised of premiums received from our customers, collateral for derivative transactions, and investment income. The primary use of cash has been and is expected to continue to be payment of policyholder benefits and claims incurred. Current and expected patterns of claim frequency and severity may change from period to period but continue to be within historical norms. Management considers our current liquidity position to be sufficient to meet anticipated demands over the next twelve months. Our contractual obligations are not expected to have a significant negative impact to cash flow from operations.

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Changes in interest rates during 2017 and market expectations for potentially higher rates through 2018, may lead to an increase in the volume of annuity contracts, which may be partially offset by increases in surrenders. Our defined benefit plans are frozen and currently adequately funded; however, low interest rates, increased longevity of participants, and rising Pension Benefit Guaranty Corporation (PBGC) premiums may cause us to increase our funding of the plans. Future contributions to our defined benefit plans are not expected to significantly impact cash flow and are expected to enhance overall funded status of plans. No unusually large capital expenditures are expected in the next 12-24 months. We have paid dividends to stockholders for over 110 consecutive years and expect to continue this trend. There are no other known trends or uncertainties regarding product pricing, changes in product lines or rising costs that are expected to have a significant impact to cash flows from operations.

Funds received as premium payments and deposits are generally invested in bonds and commercial mortgages. Funds are invested with the intent that income from the investments and proceeds from the maturities will meet our ongoing cash flow needs. We historically have not had to liquidate invested assets in order to cover cash flow needs. We believe our portfolio of highly liquid available-for-sale investment securities, including equity securities, is sufficient to meet future liquidity needs as necessary.

The Company holds collateral to offset exposure from its derivative counterparties. Cash flows associated with collateral received from counterparties change as the market value of the underlying derivative contract changes. As the value of a derivative asset declines or increases, the collateral requirements would also decline or increase respectively. For more information, see Note 7, Derivative Instruments, of the Notes to the Unaudited Consolidated Financial Statements.

Our cash and cash equivalents and short-term investment position increased from $481.6 million at December 31, 2016 to $708.2 million at March 31, 2017.

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

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

Capital Resources

Our capital resources are summarized below (in thousands):

	March 31, 2017		December 31, 2016
American National stockholders’ equity, excluding accumulated other comprehensive income, net of tax (“AOCI”)	$	4,215,807	$	4,196,279
AOCI		513,457		455,899
Total American National stockholders’ equity	$	4,729,264	$	4,652,178

We have notes payable relating to borrowings by real estate joint ventures that we consolidate into our financial statements that are not part of our capital resources. The lenders for the notes payable have no recourse against us in the event of default by the joint ventures. Therefore, the liability we have for these notes payable is limited to our investment in the respective ventures, which totaled $31.3 million and $31.8 million at March 31, 2017 and December 31, 2016, respectively.

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

	Three months ended March 31, 2017
	Capital and Retained Earnings			AOCI		Total
Net income attributable to American National	$	39,840		$	—	$	39,840
Dividends to shareholders		(22,080	)		—		(22,080	)
Change in net unrealized gains		—			55,912		55,912
Defined benefit pension plan adjustment		—			1,534		1,534
Foreign currency transaction and translation adjustment		—			112		112
Other		1,768			—		1,768
Total	$	19,528		$	57,558	$	77,086

Statutory Capital and Surplus and Risk-based Capital

Statutory capital and surplus is the capital of our insurance companies reported in accordance with accounting practices prescribed or permitted by the applicable state insurance departments. RBC is calculated using formulas applied to certain financial balances and activities that consider, among other things, investment risks related to the type and quality of investments, insurance risks associated with products and liabilities, interest rate risks and general business risks. Insurance companies that do not maintain capital and surplus at a level of at least 200% of the authorized control level RBC are required to take certain actions. At March 31, 2017 and December 31, 2016, American National Insurance Company’s statutory capital and surplus was $3,013,270,000 and $2,985,909,000, respectively. American National Insurance Company and each of its insurance subsidiaries had statutory capital and surplus at March 31, 2017 and December 31, 2016, substantially above 200% of the authorized control level.

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

Contractual Obligations

Our future cash payments associated with claims and claims adjustment expenses, life, annuity and disability obligations, contractual obligations pursuant to operating leases for office space and equipment, and notes payable have not materially changed since December 31, 2016. We expect to have the capacity to pay our obligations as they come due.

One-Time Pension Payout Window

The one-time window offering to terminated, vested participants of our qualified defined benefit pension plans allowing participants to take a lump sum or annuity payout of their pension benefit, closed in March 2017. Payments to participants that elected to take a lump sum payout were made from pension plan assets in April, 2017. A portion of the pension actuarial loss included in Accumulated Other Comprehensive Income will be recognized as pension costs in proportion to the reduction of the pension plans’ total benefit obligations. The after-tax expense expected to be recognized in the second quarter is estimated as $5,000,000.

Off-Balance Sheet Arrangements

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

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Related-Party Transactions

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risks have not changed materially from those disclosed in our 2016 Annual Report on Form 10-K filed with the SEC on March 10, 2017.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2017. Based upon that evaluation and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of March 31, 2017, the design and operation of the Company’s disclosure controls and procedures were not effective because of the two material weaknesses disclosed in our 2016 Annual Report on Form 10-K. No additional material weaknesses in the Company’s disclosure controls and procedures were identified in the current evaluation.

Changes in Internal Control Over Financial Reporting

Management has monitored the internal controls over financial reporting, including any material changes to the internal control over financial reporting. There were no changes in the Company’s internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting, other than changes in internal control related to the two material weaknesses identified in our Annual Report on form 10-K for the year ended December 31, 2016 as described below.

Remediation Actions

The Company is committed to remediating the material weaknesses in a timely manner. We have developed a remediation plan and are executing changes in our financial reporting processes and related internal controls to address the material weaknesses in internal control over financial reporting identified in our Annual Report on form 10-K for the year ended December 31, 2016. Specifically, we have begun and intend to continue to implement and monitor the following actions to accumulate adequate evidence over a reasonable period of time to determine that new or modified processes, procedures, controls and oversight relating to such controls are operating effectively.

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Deferred Income Taxes

• Engaging tax advisors to assist with enhancing internal controls over financial reporting for income taxes and developing and implementing a remediation plan;

• Hiring accountants with more expertise in federal income taxes and providing additional income tax accounting training to tax and financial personnel;

• Working with the investing and operating areas to enhance the quality of information, analysis, review and documentation provided to the tax department; and

• Reviewing the new tax processes and system, including controls, with necessary Company personnel, including relevant internal bodies responsible for testing internal controls.

Equity Option Derivatives Collateral

• Requiring notice of relevant facts from the investment area to Corporate Controllers when new investment arrangements or types are contemplated;

• In the event of any such new investment arrangements or types, requiring the Corporate Controllers area (with outside assistance when appropriate) to determine if existing accounting processes and policies are adequate and to specify new accounting processes as appropriate; and

• Verifying that the approved accounting is installed and operational by necessary Company personnel, including relevant internal bodies responsible for testing internal controls.

While management believes that significant progress has been made in enhancing internal controls as of March 31, 2017 and in the period since, the material weaknesses have not been fully remediated due to insufficient time to fully implement and assess the design and operating effectiveness of the related controls. Management, with oversight from the Company’s Audit Committee, will continue the process to enhance internal controls throughout 2017 and will make any further changes management deems appropriate.

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PART II– OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

There have been no material changes with respect to the risk factors as previously disclosed in our 2016 Annual Report on Form 10-K filed with the SEC on March 10, 2017.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

ITEM 5. OTHER INFORMATION

None

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ITEM 6. EXHIBITS

Exhibit Number	Basic Documents
3.1	Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit No. 3.1 to the registrant’s Registration Statement on Form 10-12B filed April 10, 2009).
3.2	Amended and Restated Bylaws (incorporated by reference to Exhibit No. 3.2 to the registrant’s Current Report on Form 8-K filed July 31, 2015).
31.1	Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification of the principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
101	The following unaudited financial information from American National Insurance Company’s Quarterly Report on Form 10-Q for three months ended March 31, 2017 formatted in eXtensible Business Reporting Language (“XBRL”): (i) Consolidated Statements of Financial Position, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Changes in Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to the Unaudited Consolidated Financial Statements.

SIGNATURES

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

By:	/s/ James E. Pozzi
	Name:	James E. Pozzi
	Title:	President and
		Chief Executive Officer
By:	/s/ John J. Dunn, Jr.
	Name:	John J. Dunn, Jr.,
	Title:	Executive Vice President,
		Chief Financial Officer

Date: May 8, 2017

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