As of
September 30, 2017 December 31, 2016
(Dollars In Thousands)
Assets

Fixed maturities, at fair value (amortized cost: 2017 - $40,887,859; 2016 - $39,645,111) $ 40,571,237
$ 37,996,577
Fixed maturities, at amortized cost (fair value: 2017 - $2,796,603; 2016 - $2,733,340) 2,730,995
2,770,177
Equity securities, at fair value (cost: 2017 - $726,605; 2016 - $729,951) 744,176
716,017
Mortgage loans (related to securitizations: 2017 - $245,202; 2016 - $277,964) 6,528,890
6,132,125
Investment real estate, net of accumulated depreciation (2017 - $113; 2016 - $252) 4,572
8,060
Policy loans 1,625,960
1,650,240
Other long-term investments 1,133,234
856,410
Short-term investments 422,685
315,834
Total investments 53,761,749
50,445,440
Cash 199,633
214,439
Accrued investment income 494,959
480,689
Accounts and premiums receivable 125,696
132,826
Reinsurance receivables 4,920,048
5,070,185
Deferred policy acquisition costs and value of business acquired 2,164,450
2,024,524
Goodwill 793,470
793,470
Other intangibles, net of accumulated amortization (2017 - $126,604; 2016 - $79,183) 672,912
687,348
Property and equipment, net of accumulated depreciation (2017 - $18,822; 2016 - $16,573) 107,779
103,706
Other assets 358,324
275,965
Income tax receivable 87,013
96,363
Assets related to separate accounts

Variable annuity 13,763,971
13,244,252
Variable universal life 996,375
895,925
Total assets $ 78,446,379
$ 74,465,132

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED CONDENSED BALANCE SHEETS

~~(Unaudited)~~(continued)


	As of
	March 31, 2021		December 31, 2020
	(Unaudited)
	(Dollars In Millions)
Liabilities
Future policy benefits and claims	$	53,619	$	54,107
Unearned premiums	798		782
Total policy liabilities and accruals	54,417		54,889
Stable value product account balances	6,655		6,056
Annuity account balances	15,679		15,478
Other policyholders’ funds	1,515		1,865
Other liabilities	5,023		5,536
Income tax payable	112		85
Deferred income taxes	1,302		1,779
Debt	0		1
Subordinated debt	110		110
Secured financing liabilities	987		496
Liabilities related to separate accounts
Variable annuity	12,699		12,378
Variable universal life	1,646		1,287
Reinsurance assumed	13,444		13,325
Total liabilities	113,589		113,285
Commitments and contingencies - Note 11	0		0
Shareowner’s equity
Preferred Stock; $1 par value, shares authorized: 2,000; Liquidation preference: $2,000	0		0
Common Stock, $1 par value, shares authorized and issued: 2021 and 2020 - 5,000,000	5		5
Additional paid-in-capital	8,525		8,525
Retained earnings	1,649		1,547
Accumulated other comprehensive income (loss):
Net unrealized gains (losses) on investments, net of income tax: (2021 - $469; 2020 - $946)	1,764		3,558
Net unrealized gains (losses) on investments with an allowance for credit losses, net of income tax: (2021 - $1; 2020 - $(1))	3		(2)
Accumulated gain (loss) - derivatives, net of income tax: (2021 - $(2); 2020 - $(2))	(6)		(8)
Total shareowner’s equity	11,940		13,625
Total liabilities and shareowner’s equity	$	125,529	$	126,910

~~(continued)~~

See Notes to Consolidated Condensed Financial Statements

As of
September 30, 2017 December 31, 2016
(Dollars In Thousands)
Liabilities

Future policy benefits and claims $ 30,800,565
$ 30,510,242
Unearned premiums 775,935
761,937
Total policy liabilities and accruals 31,576,500
31,272,179
Stable value product account balances 4,793,890
3,501,636
Annuity account balances 10,813,795
10,642,115
Other policyholders’ funds 1,265,500
1,165,749
Other liabilities 2,127,410
1,436,091
Deferred income taxes 2,173,504
1,790,961
Debt 1,495
—
Non-recourse funding obligations 2,938,005
2,973,829
Secured financing liabilities 599,556
802,721
Liabilities related to separate accounts

Variable annuity 13,763,971
13,244,252
Variable universal life 996,375
895,925
Total liabilities 71,050,001
67,725,458
Commitments and contingencies - Note 11

Shareowner’s equity

Preferred Stock; $1 par value, shares authorized: 2,000; Liquidation preference: $2 2
2
Common Stock, $1 par value, shares authorized and issued: 2017 and 2016 - 5,000,000 5,000
5,000
Additional paid-in-capital 7,378,496
7,422,407
Retained earnings (deficit) 113,153
(32,695 )
Accumulated other comprehensive income (loss):

Net unrealized gains (losses) on investments, net of income tax: (2017 - $(54,512); 2016 - $(349,242)) (101,243 ) (648,592 )
Net unrealized losses relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (2017 - $(27); 2016 - $(3,864)) (50 ) (7,175 )
Accumulated gain (loss) - derivatives, net of income tax: (2017 - $549; 2016 - $391) 1,020
727
Total shareowner’s equity 7,396,378
6,739,674
Total liabilities and shareowner’s equity $ 78,446,379
$ 74,465,132

Table of Contents

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED CONDENSED STATEMENTS OF SHAREOWNER’S EQUITY

(Unaudited)


	Preferred Stock		Common Stock		Additional Paid-In-Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareowner’s Equity
	(Dollars In Millions)
Balance, December 31, 2020	$	0	$	5	$	8,525	$	1,547	$	3,548	$	13,625
Net income							102				102
Other comprehensive loss									(1,787)		(1,787)
Comprehensive loss											(1,685)

Balance, March 31, 2021	$	0	$	5	$	8,525	$	1,649	$	1,761	$	11,940


















	Preferred Stock		Common Stock		Additional Paid-In-Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Shareowner’s Equity
	(Dollars In Millions)
Balance, December 31, 2019	$	0	$	5	$	8,405	$	1,451	$	1,413	$	11,274
Net income							(129)				(129)
Other comprehensive loss									(1,478)		(1,478)
Comprehensive loss											(1,607)
Capital contributions					20						20
Cumulative effect adjustments							(138)				(138)
Balance, March 30, 2020	$	0	$	5	$	8,425	$	1,184	$	(65)	$	9,549

See Notes to Consolidated Condensed Financial Statements

Preferred
Stock

Common
Stock

Additional
Paid-In-Capital

Retained
Earnings
(Deficit)

Accumulated
Other
Comprehensive
Income (Loss)

Total
Shareowner’s
Equity
(Dollars In Thousands)
Balance, December 31, 2016 $ 2
$ 5,000
$ 7,422,407
$ (32,695 ) $ (655,040 ) $ 6,739,674
Net income for the nine months ended September 30, 2017

264,937

264,937
Other comprehensive income

554,767
554,767
Comprehensive income for the nine months ended September 30, 2017

819,704
Return of capital (43,911 ) (43,911 )
Dividends paid to the parent company (119,089 ) (119,089 )
Balance, September 30, 2017 $ 2
$ 5,000
$ 7,378,496
$ 113,153
$ (100,273 ) $ 7,396,378

Table of Contents

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)


	For The Three Months Ended March 31,
	2021		2020
	(Dollars In Millions)
Cash flows from operating activities
Net income (loss)	$	102	$	(129)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Realized (gains) losses	(127)		301
Amortization of DAC and VOBA	105		54
Capitalization of DAC	(139)		(107)
Depreciation and amortization expense	20		19
Deferred income tax	(17)		65
Accrued income tax	43		(93)
Interest credited to universal life and investment products	390		411
Policy fees assessed on universal life and investment products	(453)		(448)
Change in reinsurance receivables	(53)		(149)
Change in accrued investment income and other receivables	(40)		14
Change in policy liabilities and other policyholders’ funds of traditional life and health products	(69)		(211)
Trading securities:
Maturities and principal reductions of investments	31		26
Sale of investments	144		123
Cost of investments acquired	(151)		(179)
Other net change in trading securities	(32)		2
Amortization of premiums and accretion of discounts on investments and commercial mortgage loans	68		84
Change in other liabilities	(139)		353
Other, net	24		28
Net cash (used in) provided by operating activities	$	(293)	$	164

See Notes to Consolidated Condensed Financial Statements

Table of Contents

PROTECTIVE LIFE INSURANCE COMPANY

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(continued)


	For The Three Months Ended March 31,
	2021		2020
	(Dollars In Millions)
Cash flows from investing activities
Maturities and principal reductions of investments, available-for-sale	$	2,197	$	820
Sale of investments, available-for-sale	1,513		967
Cost of investments acquired, available-for-sale	(4,669)		(2,587)

Commercial mortgage loans:
New lendings	(358)		(355)
Repayments	268		226

Change in policy loans, net	17		18
Change in other long-term investments, net	(206)		302
Change in short-term investments, net	(164)		321
Net unsettled security transactions	100		(151)
Purchase of property, equipment, and intangibles	(7)		(9)


Net cash used in investing activities	$	(1,309)	$	(448)
Cash flows from financing activities


Secured financing liabilities	491		(268)
Capital contributions from parent	0		20
Deposits to universal life and investment contracts	1,865		1,549
Withdrawals from universal life and investment contracts	(843)		(786)
Other financing activities, net	(2)		(1)
Net cash provided by financing activities	$	1,511	$	514
Change in cash	(91)		230
Cash at beginning of period	656		213
Cash at end of period	$	565	$	443

See Notes to Consolidated Condensed Financial Statements

For The
Nine Months Ended
September 30,
2017 2016
(Dollars In Thousands)
Cash flows from operating activities
Net income $ 264,937
$ 404,712
Adjustments to reconcile net income to net cash provided by operating activities:

Realized investment (gains) losses 33,125
(263,740 )
Amortization of DAC and VOBA 48,505
95,810
Capitalization of DAC (251,472 ) (246,073 )
Depreciation and amortization expense 48,591
37,974
Deferred income tax 82,835
231,631
Accrued income tax 9,350
(147,185 )
Interest credited to universal life and investment products 507,229
532,998
Policy fees assessed on universal life and investment products (1,004,829 ) (935,702 )
Change in reinsurance receivables 150,137
122,616
Change in accrued investment income and other receivables (1,498 ) (76,837 )
Change in policy liabilities and other policyholders’ funds of traditional life and health products (282,841 ) (171,016 )
Trading securities:

Maturities and principal reductions of investments 131,563
93,397
Sale of investments 195,733
390,412
Cost of investments acquired (277,423 ) (438,886 )
Other net change in trading securities 9,357
47,879
Amortization of premiums and accretion of discounts on investments and mortgage loans 232,694
308,030
Change in other liabilities 181,696
383,921
Other, net (61,295 ) (74,798 )
Net cash provided by operating activities $ 16,394
$ 295,143

~~PROTECTIVE LIFE INSURANCE COMPANY~~

~~CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~

~~(continued)~~

Table of Contents

For The
Nine Months Ended
September 30,
2017 2016
(Dollars In Thousands)
Cash flows from investing activities

Maturities and principal reductions of investments, available-for-sale $ 541,024
$ 984,510
Sale of investments, available-for-sale 1,302,130
1,541,458
Cost of investments acquired, available-for-sale (3,232,925 ) (3,839,376 )
Change in investments, held-to-maturity 36,000
(2,185,000 )
Mortgage loans:

New lendings (1,081,226 ) (944,025 )
Repayments 644,189
648,109
Change in investment real estate, net 3,679
2,905
Change in policy loans, net 24,280
43,425
Change in other long-term investments, net (282,688 ) (105,972 )
Change in short-term investments, net (106,888 ) 59,225
Net unsettled security transactions 349,544
52,292
Purchase of property, equipment, and intangibles (34,067 ) (8,891 )
Amounts received from reinsurance transaction —
325,800
Net cash used in investing activities $ (1,836,948 ) $ (3,425,540 )
Cash flows from financing activities

Issuance (repayment) of non-recourse funding obligations (35,984 ) 2,173,700
Secured financing liabilities (198,165 ) (218,728 )
Dividends/Return of capital to parent company (162,999 ) (420,000 )
Investment product deposits and change in universal life deposits 3,901,051
3,509,315
Investment product withdrawals (1,698,062 ) (1,718,670 )
Other financing activities, net (93 ) —
Net cash provided by financing activities $ 1,805,748
$ 3,325,617
Change in cash (14,806 ) 195,220
Cash at beginning of period 214,439
212,358
Cash at end of period $ 199,633
$ 407,578

PROTECTIVE LIFE INSURANCE COMPANY

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(Unaudited)

1.BASIS OF PRESENTATION

Basis of Presentation

Protective Life Insurance Company (the “Company”), a stock life insurance company, was founded in 1907. The Company is a wholly owned subsidiary of Protective Life Corporation (“PLC”), an insurance holding company. On February 1, 2015, PLC became a wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan (now known as Dai-ichi Life Holdings, Inc., “Dai-ichi Life”), when DL Investment (Delaware), Inc., a wholly owned subsidiary of Dai-ichi Life, merged with and into ~~PLC. Prior to February 1, 2015, PLC’s stock was publicly traded on the New York Stock Exchange. Subsequent to the Merger date,~~ PLC ~~and the Company remain as SEC registrants within the United States.~~(the “Merger”). The Company markets individual life insurance, credit life and disability insurance, guaranteed investment contracts, guaranteed funding agreements, fixed and variable annuities, and extended service contracts throughout the United States. The Company also maintains a separate segment devoted to the acquisition of insurance policies from other companies. PLC is a holding company with subsidiaries that provide financial services through the production, distribution, and administration of insurance and investment products.

These consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for the interim periods presented herein. Such accounting principles differ from statutory reporting practices used by insurance companies in reporting to state regulatory authorities. Accordingly, they do not include all of the disclosures required by GAAP for complete financial statements. In the opinion of management, the accompanying consolidated condensed financial statements reflect all adjustments (consisting only of normal recurring items) necessary for a fair ~~statement~~presentation of the results for the interim periods presented. Operating results for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021, are not necessarily indicative of the results of operations that may be expected for the year ending December 31, ~~2017.~~2021. The year-end consolidated condensed financial data included herein was derived from audited financial statements but this report does not include all disclosures required by ~~GAAP within this report.~~GAAP. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

The operating results of companies in the insurance industry have historically been subject to significant fluctuations due to changing competition, economic conditions, interest rates, investment performance, insurance ratings, claims, persistency, and other factors.

Shades Creek Captive Insurance Company (“Shades Creek”) was a direct wholly owned insurance subsidiary of PLC through December 31, 2020. On January 1, 2021, Shades Creek was merged with and into the Company, with the Company being the surviving entity. The Company accounted for the transaction pursuant to Accounting Standards Codification (“ASC”) 805-50 “Transactions between Entities under Common Control”. The transferred assets and liabilities of Shades Creek were recorded by the Company at their carrying value at the date of transfer. In accordance with ASC 805-50, all prior financial information has been recast to reflect this transaction as of the earliest period presented under common control, January 1, 2020.

Beginning in the first quarter of 2020, the outbreak of COVID-19 created significant economic and social disruption and impacted various operational and financial aspects of the Company’s business. Since the initial declines at the beginning of the pandemic, equity markets have largely recovered. However, the pandemic continues to impact the Company’s earnings based on, amongst other factors, the volume and severity of claims related to COVID-19 and the financial disruption caused by the pandemic, which could impact the Company’s investment portfolio.

Entities Included

The consolidated condensed financial statements in this report include the accounts of Protective Life Insurance Company and ~~its~~ affiliate companies in which the Company holds a majority voting or economic interest. Intercompany balances and transactions have been eliminated.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Significant Accounting Policies

For a full description of the Company's significant accounting policies, ~~see~~refer to Note 2 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020. There were no significant changes to the ~~Company's~~Company’s accounting policies during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2021.

Table of Contents

Accounting Pronouncements Recently Adopted

~~ASU~~Accounting Standards Update (“ASU” or “Update”) No. ~~2017-04-Intangibles-Goodwill and Other~~2019-12 – Income Taxes (Topic ~~350)~~740): Simplifying the ~~Test~~Accounting for ~~Goodwill Impairment.~~ This Update simplifies the goodwill impairment test by re-defining the concept of goodwill impairment as the condition that exists when the carrying amount of a reporting unit exceeds its fair value. The Update eliminates “Step 2” of the current goodwill impairment test, which requires entities to determine goodwill impairment by calculating the implied fair value of goodwill by remeasuring to fair value the assets and liabilities of a reporting unit as if that reporting unit had been acquired in a business combination. The Company elected to adopt the amendments in the Update in the first quarter of 2017, and will apply the revised guidance to impairment tests conducted after January 1, 2017. Application of the revised guidance did not impact the Company’s financial position or results of operations and will simplify its annual goodwill impairment test, which is generally conducted in the fourth quarter. For more details regarding the Company’s goodwill assessment process, please refer to Note 9, ~~Goodwill~~.

~~ASU No. 2015-09 - Financial Services-Insurance (Topic 944): Disclosures about Short-Duration Contracts.~~ Income Taxes. The amendments in this Update require additional disclosures for short-duration contracts issued by insurance entities. The additional disclosures focus on the liability for unpaid claims and claim adjustment expenses and include incurred and paid claims development information by accident year in tabular form, along with a reconciliation of this informationremove certain exceptions to the ~~statement of financial position. For accident years included~~general principles in ~~the development tables, the~~Topic 740 related to intraperiod tax allocations, interim tax calculations, and outside basis differences. The amendments also ~~require disclosure~~clarify and amend guidance in certain other areas of the total incurred-but-not-reported liabilities and expected development on reported claims, along with claims frequency information unless impracticable. Finally, the amendments require disclosure of the historical average annual percentage payout of incurred claims. With the exception of the current reporting period, claims development information may be presented as supplementary information. The Update is effective for annual periods beginning after December 15, 2015 and interim periods beginning after December 15, 2016. The additional disclosures introducedTopic 740 in ~~this Update have not been provided, as the short-duration lines of business~~order to ~~which they apply are not material to the Company’s financial statements.~~

~~Accounting Pronouncements Not Yet Adopted~~

~~ASU No. 2014-09 - Revenue from Contracts with Customers (Topic 606).~~ This Update provides for significant revisions to the recognition of revenue from contracts with customers across various industries. Under the new guidance, entities are required to apply a prescribed 5-step process to depict the transfer of promised goods or services to customerseliminate diversity in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The accounting for revenues associated with insurance products is not within the scope of this Update. The Update was originally effective for annual and interim periods beginning after December 15, 2016. However, in August 2015, the FASB issued ASU No. 2015-14 - ~~Revenues from Contracts with Customers: Deferral of the Effective Date~~, to defer the effective date of ASU No. 2014-09 by one year to annual and interim periods beginning after December 15, 2017. The Company will adopt this Update using the modified retrospective approach via a cumulative effect adjustment to retained earnings as of January 1, 2018. The amendments in the Update, along with clarifying updates issued subsequent to ASU 2014-09, will impact some of the Company's smaller lines of business, specifically revenues at the Company's affiliated broker dealers and insurance agency, and certain revenues associated with the Company's Asset Protection products. However, the cumulative effect adjustment related to the Company's adoption of the revised guidance is limited to the Company's Asset Protection segment. Based on its current projections, the Company estimates that the cumulative effect adjustment as of January 1, 2018 will result in a decrease in retained earnings between $68 million and $78 million. Several application questions remain outstanding, most notably interpretive positions regarding the Update's application to certain of the Company's warranty products. The Company will also implement minor changes to its accounting and disclosures with respect to the non-insurance lines of business referenced above to ensure compliance with the revised guidance.

~~ASU No. 2016-01 - Financial Instruments - Recognition and Measurement of Financial Assets and Financial Liabilities.~~ The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Most notably, the Update requires that equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) be measured at fair value with changes in fair value recognized in net income. The Update also introduces a single-step impairment model for equity investments without a readily determinable fair value. Additionally, the Update requires changes in instrument-specific credit risk for fair value option liabilities to be recorded in other comprehensive income.practice. The amendments in this Update are effective for ~~annual and interim periods~~public business entities in fiscal years beginning after December 15, 2017 and will be applied on a modified retrospective basis. The Company will record a cumulative-effect adjustment at the date of adoption (January 1, 2018) transferring unrealized gains and losses on available-for-sale equity securities to retained earnings from accumulated other comprehensive income. The impact of this adjustment (had it been recorded on September 30, 2017), net of income tax, would have resulted in a $11.4 million increase to retained earnings. The Company expects to complete its review of applicable policies and procedures to ensure compliance with the revised guidance.

~~ASU No. 2016-02 - Leases.~~ The amendments in this Update address certain aspects of recognition, measurement, presentation, and disclosure of leases. The most significant change will relate to the accounting model used by lessees. The Update will require all leases with terms greater than 12 months to be recorded on the balance sheet in the form of a lease asset and liability. The lease asset and liability will be measured at the present value of the minimum lease payments less any upfront payments or fees. The Update also requires numerous disclosure changes for which the Company is assessing the impact. The amendments in the Update are effective for annual2020, and interim periods ~~beginning after December 15, 2018~~within those fiscal years. The adoption of this Update did not have a material impact on ~~a modified retrospective basis. The Company has completed an inventory of all leases in~~ the ~~organization~~Company’s operations and ~~is currently assessing the impact of the Update and updating internal processes to ensure compliance with the revised guidance.~~financial results.

Accounting Pronouncements Not Yet Adopted

ASU No. ~~2016-13~~2018-12 - Financial ~~Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments.~~ ~~The amendments in this Update introduce a new current expected credit loss (“CECL”) model~~Services - Insurance (Topic 944): Targeted Improvements to Accounting for certain financial assets, including mortgage loans and reinsurance receivables. The new model will not apply to debt securities classified as available-for-sale. For assets within the scope of the new model, an entity will recognize as an allowance against earnings its estimate of the contractual cash flows not expected to be collected on day one of the asset’s acquisition. The allowance may be reversed through earnings if a security recovers in value. This differs from the current impairment model, which requires recognition of credit losses when they have been incurred and recognizes a security’s subsequent recovery in value in other comprehensive income. The Update also makes targeted changes to the current impairment model for available-for-sale debt securities, which comprise the majority of the Company’s invested assets. Similar to the CECL model, credit loss impairments will be recorded in an allowance against earnings that may be reversed for subsequent recoveries in value.Long-Duration Contracts. The amendments in this Update are designed to make improvements to the existing recognition, measurement, presentation, and disclosure requirements for certain long-duration contracts issued by an insurance company. The new amendments require insurance entities to provide a more current measure of the liability for future policy benefits for traditional and limited-payment contracts by regularly refining the liability for actual past experience and updated future assumptions. This differs from current requirements where assumptions are locked-in at contract issuance for these contract types. In addition, the updated liability will be discounted using an upper-medium grade (low-credit-risk) fixed income instrument yield that reflects the characteristics of the liability which differs from currently used rates based on the invested assets supporting the liability. In addition, the amendments introduce new requirements to assess market-based insurance contract options and guarantees for Market Risk Benefits and measure them at fair value. This Update also requires insurance entities to amortize deferred acquisition costs on a constant-level basis over the expected life of the contract. Finally, this Update requires new disclosures including liability rollforwards and information about significant inputs, judgments, assumptions, and methods used in the measurement. In November 2020, FASB issued ASU No. 2020-11 - Financial Services - Insurance (Topic 944); Effective Date and Early Application which deferred the effective ~~for annual and interim~~date to periods beginning after December 15, ~~2019 on a modified retrospective basis.~~2022. The Company is currently reviewing its policies, processes, and ~~processes~~applicable systems to ~~ensure compliance with the requirements in this Update, upon adoption, and assessing~~determine the impact this standard will have on its operations and financial results.

~~ASU No. 2016-15 - Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments.~~ The amendments in this Update are intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. Specific transactions addressed in the new guidance include:Debt prepayment/extinguishment costs, contingent consideration payments, proceeds from the settlement of corporate-owned life insurance policies, and distributions received from equity method investments. The Update does not introduce any new accounting or financial reporting requirements, and is effective for annual and interim periods beginning after December 15, 2018 using the retrospective method. The Company is reviewing its policies and processes to ensure compliance with the requirements in this Update, upon adoption.

~~ASU No. 2016-18 - Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Task Force).~~ The amendments in this update provide guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows, thereby reducing diversity in practice related to the presentation of these amounts. The amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Update is effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company expects to complete its review of applicable policies and procedures to ensure compliance with the revised guidance.

~~ASU No. 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business.~~ The purpose of this update is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments in the Update provide a specific test by which an entity may determine whether an acquisition involves a set of assets or a business. The amendments in the Update are to be applied prospectively for periods beginning after December 15, 2017. The Company has reviewed the revised requirements, and does not anticipate that the changes will impact its policies or recent conclusions related to its acquisition activities.

~~ASU No. 2017-07 - Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost.~~ The amendments in this update require entities to disaggregate the current-service-cost component from other components of net benefit cost and present it with other current compensation costs in the income statement. The other components of net benefit cost must be presented outside of income from operations if that subtotal is presented. In addition, the Update requires entities to disclose the income statement lines that contain the other components if they are not presented on appropriately described separate lines. The amendments in this update are effective for interim and annual periods beginning after December 15, 2017. As provided for in the ASU, the Company expects to apply the provisions of the statement retrospectively for components of net periodic pension costs and prospectively for capitalization of the service costs component of net periodic costs and net periodic postretirement benefits. The Update will not impact the Company’s financial position or results of operations. The Company is reviewing its policies and processes to ensure compliance with the requirements in this Update, upon adoption.

~~ASU No. 2017-08 - Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.~~ The amendments in this update require that premiums on callable debt securities be amortized to the first call date. This is a change from current guidance, under which premiums are amortized to the maturity date of the security. The amendments are effective for annual and interim periods beginning after December 31, 2018, and early adoption is permitted. Transition will be through a modified retrospective approach in which the cumulative effect of application is recorded to retained earnings at the beginning of the annual period in which an entity adopts the revised guidance. The Company is currently reviewing its systems and processes to determine whether early adoption of the revised guidance is practicable.

~~ASU No. 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.~~ The amendments in this update are designed to permit hedge accounting to be applied to a broader range of hedging strategies as well as to more closely align hedge accounting and risk management objectives. Specific provisions include requiring changes in the fair value of a hedging instrument be recorded in the same income statement line as the hedged item when it affects earnings. In addition, after a hedge has initially qualified as an effective hedge the Update permits the use of a qualitative hedge effectiveness test in subsequent periods. The amendments in this Update are effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. The Company is currently assessing the impact this standard will have on its operations and financial results.

3.~~MONY CLOSED BLOCK OF BUSINESS~~

In 1998, MONY Life Insurance Company (“MONY”) converted from a mutual insurance company to a stock corporation (“demutualization”). In connection with its demutualization, an accounting mechanism known as a closed block (the “Closed Block”) was established for certain individuals’ participating policies in force as of the date of demutualization. Assets, liabilities, and earnings of the Closed Block are specifically identified to support its participating policyholders. The Company acquired the Closed Block in conjunction with the acquisition of MONY in 2013.

Assets allocated to the Closed Block inure solely to the benefit of each Closed Block’s policyholders and will not revert to the benefit of MONY or the Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of MONY’s general account, any of MONY’s separate accounts or any affiliate of MONY without the approval of the Superintendent of The New York State Department of Financial Services (the “Superintendent”). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the general account.

The excess of Closed Block liabilities over Closed Block assets (adjusted to exclude the impact of related amounts in accumulated other comprehensive income (loss) (“AOCI”)) at the acquisition date of October 1, 2013, represented the estimated maximum future post-tax earnings from the Closed Block that would be recognized in income from continuing operations over the period the policies and contracts in the Closed Block remain in force. In connection with the acquisition of MONY, the Company developed an actuarial calculation of the expected timing of MONY’s Closed Block’s earnings as of October 1, 2013.

If the actual cumulative earnings from the Closed Block are greater than the expected cumulative earnings, only the expected earnings will be recognized in the Company’s net income. Actual cumulative earnings in excess of expected cumulative earnings at any point in time are recorded as a policyholder dividend obligation because they will ultimately be paid to Closed Block policyholders as an additional policyholder dividend unless offset by future performance that is less favorable than originally expected. If a policyholder dividend obligation has been previously established and the actual Closed Block earnings in a subsequent period are less than the expected earnings for that period, the policyholder dividend obligation would be reduced (but not below zero). If, over the period the policies and contracts in the Closed Block remain in force, the actual cumulative earnings of the Closed Block are less than the expected cumulative earnings, only actual earnings would be recognized in income from continuing operations. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside the Closed Block.

Many expenses related to Closed Block operations, including amortization of VOBA, are charged to operations outside of the Closed Block; accordingly, net revenues of the Closed Block do not represent the actual profitability of the Closed Block operations. Operating costs and expenses outside of the Closed Block are, therefore, disproportionate to the business outside of the Closed Block.

~~Summarized financial information for the Closed Block as of September 30, 2017, and December 31, 2016 is as follows:~~

As of
September 30, 2017 December 31, 2016
(Dollars In Thousands)
Closed block liabilities

Future policy benefits, policyholders’ account balances and other policyholder liabilities $ 5,814,527
$ 5,896,355
Policyholder dividend obligation 136,004
31,932
Other liabilities 76,176
40,007
Total closed block liabilities 6,026,707
5,968,294
Closed block assets

Fixed maturities, available-for-sale, at fair value $ 4,549,322
$ 4,440,105
Mortgage loans on real estate 130,521
201,088
Policy loans 707,293
712,959
Cash 148,612
108,270
Other assets 141,740
135,794
Total closed block assets 5,677,488
5,598,216
Excess of reported closed block liabilities over closed block assets 349,219
370,078
Portion of above representing accumulated other comprehensive income:

Net unrealized investment gains (losses) net of policyholder dividend obligation: $(55,231) and $(197,450); and net of income tax: $19,331 and $69,107 —
—
Future earnings to be recognized from closed block assets and closed block liabilities $ 349,219
$ 370,078

~~Reconciliation of the policyholder dividend obligation is as follows:~~

For The
Nine Months Ended
September 30,
2017 2016
(Dollars In Thousands)
Policyholder dividend obligation, beginning of period $ 31,932
$ —
Applicable to net revenue (losses) (38,147 ) (36,707 )
Change in net unrealized investment gains (losses) allocated to the policyholder dividend obligation 142,219
300,814
Policyholder dividend obligation, end of period $ 136,004
$ 264,107

~~Closed Block revenues and expenses were as follows:~~

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
Revenues

Premiums and other income $ 40,962
$ 44,043
$ 128,697
$ 135,282
Net investment income 50,780
53,582
153,481
156,458
Net investment gains 341
326
448
963
Total revenues 92,083
97,951
282,626
292,703
Benefits and other deductions

Benefits and settlement expenses 81,721
88,143
249,319
260,227
Other operating expenses 621
537
1,216
2,214
Total benefits and other deductions 82,342
88,680
250,535
262,441
Net revenues before income taxes 9,741
9,271
32,091
30,262
Income tax expense 3,409
3,245
11,232
10,591
Net revenues $ 6,332
$ 6,026
$ 20,859
$ 19,671

4.INVESTMENT OPERATIONS

Net realized gains (losses) ~~for all other investments~~ are summarized as follows:


	For The Three Months Ended September 30,						For The Nine Months Ended September 30,							For The Three Months Ended March 31,
	2017			2016			2017			2016				2021		2020
	(Dollars In Thousands)													(Dollars In Millions)
Fixed maturities	$	1,042		$	1,665		$	10,482		$	24,097		Fixed maturities	$	30	$	39
Equity securities	(352		)	—			(1,398		)	36			Equity securities	(8)		(43)
Impairments	(273		)	(3,308		)	(8,259		)	(6,892		)
Modco trading portfolio	19,399			23,995			93,181			178,353
Modco trading portfolios													Modco trading portfolios	(137)		(124)
Change in net expected credit losses - fixed maturities													Change in net expected credit losses - fixed maturities	5		(52)
Commercial mortgage loans													Commercial mortgage loans	56		(95)
Other investments	(1,939		)	(1,508		)	(7,739		)	(7,842		)	Other investments	0		(1)
Total realized gains (losses) - investments	$	17,877		$	20,844		$	86,267		$	187,752
Realized gains (losses) - investments													Realized gains (losses) - investments	(54)		(276)
Realized gains (losses) - derivatives(1)													Realized gains (losses) - derivatives(1)	181		(25)
Realized gains (losses)													Realized gains (losses)	$	127	$	(301)

(1) See Note 5, Derivative Financial Instruments													(1) See Note 5, Derivative Financial Instruments

The fair value of the GLWB embedded derivative is sensitive to changes in the discount rate which includes the Company’s nonperformance risk, volatility, lapse, and mortality assumptions. The volatility assumption is an observable input as it is based on market inputs. The Company’s nonperformance risk, lapse, and mortality are unobservable. An increase in the unobservable assumptions would result in a decrease in the fair value of the liability and conversely, if there is a decrease in the assumptions the fair value would increase. The fair value is also dependent on the assumed policyholder utilization of the GLWB where an increase in assumed utilization would result in an increase in the fair value of the liability and conversely, if there is a decrease in the assumption, the fair value would decrease.

The fair value of the FIA account balance liability is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the FIA embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in discount rate and non-performance risk and decreases with increases in the discount rate and non-performance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

The fair value of the FIA embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the FIA embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and nonperformance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

The fair value of the IUL embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the IUL embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and non-performance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended ~~September 30, 2017,~~March 31, 2021, for which the Company has used significant unobservable inputs (Level 3):


			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																		Total Gains (losses) included in Operations related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Operations		Included in Other Comprehensive Income (Loss)		Included in Operations		Included in Other Comprehensive Income (Loss)		Purchases		Sales		Issuances		Settlements		Transfers in/out of Level 3		Other		Ending Balance
	(Dollars In Millions)
Assets:
Fixed maturity securities AFS

Commercial mortgage-backed securities	$	32	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	0	$	32	$	0
Other asset-backed securities	435		0		5		0		0		0		0		0		0		0		0		440		0



Corporate securities	1,432		0		1		0		(46)		10		(32)		0		0		41		0		1,406		0
Total fixed maturity securities - available-for-sale	1,899		0		6		0		(46)		10		(32)		0		0		41		0		1,878		0
Fixed maturity securities - trading


Other asset-backed securities	71		2		0		(1)		0		9		0		0		0		20		0		101		1


Other government-related securities	0		0		0		0		0		0		0		0		0		16		0		16		0
Corporate securities	18		0		0		(1)		0		0		(1)		0		0		(5)		0		11		0
Total fixed maturity securities - trading	89		2		0		(2)		0		9		(1)		0		0		31		0		128		1
Total fixed maturity securities	1,988		2		6		(2)		(46)		19		(33)		0		0		72		0		2,006		1
Equity securities	101		0		0		0		0		33		(6)		0		0		(5)		0		123		0
Other long-term investments(1)	298		36		0		(45)		0		0		0		0		0		0		0		289		(9)

Total investments	2,387		38		6		(47)		(46)		52		(39)		0		0		67		0		2,418		(8)
Total assets measured at fair value on a recurring basis	$	2,387	$	38	$	6	$	(47)	$	(46)	$	52	$	(39)	$	0	$	0	$	67	$	0	$	2,418	$	(8)
Liabilities:
Annuity account balances(2)	$	67	$	0	$	0	$	(1)	$	0	$	0	$	0	$	0	$	2	$	0	$	0	$	66	$	0
Other liabilities(1)	$	2,239	$	571	$	0	$	(18)	$	0	$	0	$	0	$	0	$	0	$	0	$	0	1,686		553
Total liabilities measured at fair value on a recurring basis	$	2,306	$	571	$	0	$	(19)	$	0	$	0	$	0	$	0	$	2	$	0	$	0	$	1,752	$	553

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

Total
Realized and Unrealized
Gains

Total
Realized and Unrealized
Losses
Total Gains (losses) included in Earnings related to Instruments still held at
the
Reporting
Date

Beginning
Balance

Included
in
Earnings

Included
in
Other
Comprehensive
Income

Included
in
Earnings

Included
in
Other
Comprehensive
Income
Purchases Sales Issuances Settlements
Transfers
in/out of
Level 3
Other
Ending
Balance

(Dollars In Thousands)
Assets:

Fixed maturity securities available-for-sale

Residential mortgage-backed securities $ 11,862
$ —
$ 83
$ —
$ —
$ —
$ —
$ —
$ —
$ (11,944 ) $ (1 ) $ —
$ —
Commercial mortgage-backed securities —
—
—
—

—
—
—
—
—
—
—
—
Other asset-backed securities 552,963
—
1,682
—
(2,285 ) 100
(109 ) —
—
—
798
553,149
—
Corporate securities 662,654
—
8,301
—
(2,222 ) 5,071
(42,242 ) —
—
(5,486 ) (1,523 ) 624,553
—
Total fixed maturity securities - available-for-sale 1,227,479
—
10,066
—
(4,507 ) 5,171
(42,351 ) —
—
(17,430 ) (726 ) 1,177,702
—
Fixed maturity securities - trading

Other asset-backed securities 54,923
—
—
(353 ) —
—
(19,188 ) —
—
—
108
35,490
(209 )
Corporate securities 5,520
27
—
—
—
—
—
—
—
—
(23 ) 5,524
27
Total fixed maturity securities - trading 60,443
27
—
(353 ) —
—
(19,188 ) —
—
—
85
41,014
(182 )
Total fixed maturity securities 1,287,922
27
10,066
(353 ) (4,507 ) 5,171
(61,539 ) —
—
(17,430 ) (641 ) 1,218,716
(182 )
Equity securities 65,686
—
—
—
—
—
(170 ) —
—
—
—
65,516
—
Other long-term investments⁽¹⁾
93,245
56,491
—
(2 ) —
—
—
—
—
—
—
149,734
56,489
Total investments 1,446,853
56,518
10,066
(355 ) (4,507 ) 5,171
(61,709 ) —
—
(17,430 ) (641 ) 1,433,966
56,307
Total assets measured at fair value on a recurring basis $ 1,446,853
$ 56,518
$ 10,066
$ (355 ) $ (4,507 ) $ 5,171
$ (61,709 ) $ —
$ —
$ (17,430 ) $ (641 ) $ 1,433,966
$ 56,307
Liabilities:

Annuity account balances⁽²⁾
$ 86,094
$ —
$ —
$ (977 ) $ —
$ —
$ —
$ 9
$ 2,052
—
$ —
$ 85,028
$ —
Other liabilities⁽¹⁾
532,763
6,702
—
(35,235 ) —
—
—
—
—
—
—
561,296
(28,533 )
Total liabilities measured at fair value on a recurring basis $ 618,857
$ 6,702
$ —
$ (36,212 ) $ —
$ —
$ —
$ 9
$ 2,052
$ —
$ —
$ 646,324
$ (28,533 )

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

For the three months ended ~~September 30, 2017,~~March 31, 2021, there were no$79 million of securities transferred into Level 3.

~~For the three months ended September 30, 2017,~~ ~~$17.4 million~~ ~~of securities were transferred into~~3 from Level 2. ~~This amount was transferred from Level 3.~~ These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods but were priced internally using significant unobservable inputs where market observable inputs were not available ~~in previous periods but were priced by independent pricing services or brokers~~ as of ~~September 30, 2017.~~

~~For the three months ended September 30, 2017, there were~~ ~~no securities transferred from Level 2 to Level 1.~~March 31, 2021.

For the three months ended ~~September 30, 2017,~~March 31, 2021, there were ~~no securities transferred from Level 1.~~

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the nine months ended September 30, 2017, for which the Company has used significant unobservable inputs (Level 3):

Total
Realized and Unrealized
Gains

Total
Realized and Unrealized
Losses
Total Gains (losses) included in Earnings related to Instruments still held at
the
Reporting
Date

Beginning
Balance

Included
in
Earnings

Included
in
Other
Comprehensive
Income

Included
in
Earnings

Included
in
Other
Comprehensive
Income
Purchases Sales Issuances Settlements
Transfers
in/out of
Level 3
Other
Ending
Balance

(Dollars In Thousands)
Assets:

Fixed maturity securities available-for-sale

Residential mortgage-backed securities $ 3
$ —
$ 83
$ —
$ —
$ 11,862
$ (3 ) $ —
$ —
$ (11,944 ) $ (1 ) $ —
$ —
Commercial mortgage-backed securities —
—
—
—
—
—
—
—
—
—
—
—
—
Other asset-backed securities 562,604
—
5,212
—
(7,374 ) 100
(2,135 ) —
—
(6,643 ) 1,385
553,149
—
Corporate securities 664,046
—
26,099
—
(2,764 ) 85,822
(135,192 ) —
—
(10,353 ) (3,105 ) 624,553
—
Total fixed maturity securities - available-for-sale 1,226,653
—
31,394
—
(10,138 ) 97,784
(137,330 ) —
—
(28,940 ) (1,721 ) 1,177,702
—
Fixed maturity securities - trading

Other asset-backed securities 84,563
3,679
—
(1,154 ) —
—
(52,516 ) —
—
—
918
35,490
3,397
Corporate securities 5,492
101
—
—
—
—
—
—
—
—
(69 ) 5,524
101
Total fixed maturity securities - trading 90,055
3,780
—
(1,154 ) —
—
(52,516 ) —
—
—
849
41,014
3,498
Total fixed maturity securities 1,316,708
3,780
31,394
(1,154 ) (10,138 ) 97,784
(189,846 ) —
—
(28,940 ) (872 ) 1,218,716
3,498
Equity securities 65,786
1
—
—
—
—
(274 ) —
—
3
—
65,516
2
Other long-term investments⁽¹⁾
115,516
62,467
—
(28,249 ) —
—
—
—
—
—
—
149,734
34,218
Total investments 1,498,010
66,248
31,394
(29,403 ) (10,138 ) 97,784
(190,120 ) —
—
(28,937 ) (872 ) 1,433,966
37,718
Total assets measured at fair value on a recurring basis $ 1,498,010
$ 66,248
$ 31,394
$ (29,403 ) $ (10,138 ) $ 97,784
$ (190,120 ) $ —
$ —
$ (28,937 ) $ (872 ) $ 1,433,966
$ 37,718
Liabilities:

Annuity account balances⁽²⁾
$ 87,616
$ —
$ —
$ (2,973 ) $ —
$ —
$ —
$ 402
$ 5,963
—
$ —
$ 85,028
$ —
Other liabilities⁽¹⁾
405,803
21,982
—
(177,475 ) —
—
—
—
—
—
—
561,296
(155,493 )
Total liabilities measured at fair value on a recurring basis $ 493,419
$ 21,982
$ —
$ (180,448 ) $ —
$ —
$ —
$ 402
$ 5,963
$ —
$ —
$ 646,324
$ (155,493 )

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

~~For the nine months ended September 30, 2017, there were an immaterial amount~~$12 million of securities transferred into Level 3.

~~For the nine months ended September 30, 2017, $28.9 million of securities were transferred into Level 2. This amount was transferred~~2 from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in the previous periods, but were priced by independent pricing services or brokers as of September 30, 2017.

~~For the nine months ended September 30, 2017, there were no securities transferred from Level 2 to Level 1.~~

~~For the nine months ended September 30, 2017, there were no securities transferred from Level 1.~~

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the three months ended ~~September 30, 2016,~~March 31, 2020, for which the Company has used significant unobservable inputs (Level 3):


			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																		Total Gains (losses) included in Operations related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Operations		Included in Other Comprehensive Income (Loss)		Included in Operations		Included in Other Comprehensive Income (Loss)		Purchases		Sales		Issuances		Settlements		Transfers in/out of Level 3		Other		Ending Balance
	(Dollars In Millions)
Assets:
Fixed maturity securities AFS

Commercial mortgage-backed securities	$	10	$	0	$	1	$	0	$	(1)	$	0	$	0	$	0	$	0	$	0	$	0	$	10	$	0
Other asset-backed securities	421		0		0		0		(7)		0		0		0		0		22		0		436		0



Corporate securities	1,374		0		2		0		(76)		24		(50)		0		0		7		(1)		1,280		0
Total fixed maturity securities - available-for-sale	1,805		0		3		0		(84)		24		(50)		0		0		29		(1)		1,726		0
Fixed maturity securities - trading


Other asset-backed securities	65		0		0		(2)		0		2		0		0		0		0		0		65		(2)



Corporate securities	11		0		0		0		0		2		0		0		0		0		0		13		0
Total fixed maturity securities - trading	76		0		0		(2)		0		4		0		0		0		0		0		78		(2)
Total fixed maturity securities	1,881		0		3		(2)		(84)		28		(50)		0		0		29		(1)		1,804		(2)
Equity securities	73		0		0		0		0		0		0		0		0		0		0		73		0
Other long-term investments(1)	210		14		0		(57)		0		0		0		0		(4)		0		0		163		(48)

Total investments	2,164		14		3		(59)		(84)		28		(50)		0		(4)		29		(1)		2,040		(50)
Total assets measured at fair value on a recurring basis	$	2,164	$	14	$	3	$	(59)	$	(84)	$	28	$	(50)	$	0	$	(4)	$	29	$	(1)	$	2,040	$	(50)
Liabilities:
Annuity account balances(2)	$	70	$	0	$	0	$	(1)	$	0	$	0	$	0	$	0	$	2	$	0	$	0	$	69	$	0
Other liabilities(1)	1,018		189		0		(433)		0		0		0		0		0		0		0		1,262		(244)
Total liabilities measured at fair value on a recurring basis	$	1,088	$	189	$	0	$	(434)	$	0	$	0	$	0	$	0	$	2	$	0	$	0	$	1,331	$	(244)

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

Total
Realized and Unrealized
Gains

Total
Realized and Unrealized
Losses
Total Gains (losses) included in Earnings related to Instruments still held at
the
Reporting
Date

Beginning
Balance

Included
in
Earnings

Included
in
Other
Comprehensive
Income

Included
in
Earnings

Included
in
Other
Comprehensive
Income
Purchases Sales Issuances Settlements
Transfers
in/out of
Level 3
Other
Ending
Balance

(Dollars In Thousands)
Assets:

Fixed maturity securities available-for-sale

Residential mortgage-backed securities $ 3
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ 3
$ —
Commercial mortgage-backed securities —
—
6
—
—
23,559
—
—
—
—
(6 ) 23,559
—
Other asset-backed securities 533,141
—
23,350
—
(19 ) —
(12 ) —
—
—
(3,231 ) 553,229
—
Corporate securities 783,143
—
9,324
—
(3,335 ) 28,327
(26,001 ) —
—
(36,237 ) (1,825 ) 753,396
—
Total fixed maturity securities - available-for-sale 1,316,287
—
32,680
—
(3,354 ) 51,886
(26,013 ) —
—
(36,237 ) (5,062 ) 1,330,187
—
Fixed maturity securities - trading

Other asset-backed securities 151,964
3,260
—
(71 ) —
—
(9,366 ) —
—
—
46
145,833
3,189
Corporate securities 16,587
381
—
—
—
—
—
—
—
(11,243 ) (26 ) 5,699
42
Total fixed maturity securities - trading 168,551
3,641
—
(71 ) —
—
(9,366 ) —
—
(11,243 ) 20
151,532
3,231
Total fixed maturity securities 1,484,838
3,641
32,680
(71 ) (3,354 ) 51,886
(35,379 ) —
—
(47,480 ) (5,042 ) 1,481,719
3,231
Equity securities 66,526
—
—
—
—
—
—
—
—
—
—
66,526
—
Other long-term investments⁽¹⁾
62,920
25,674
—
(1,445 ) —
—
—
—
—
—
—
87,149
24,229
Total investments 1,614,284
29,315
32,680
(1,516 ) (3,354 ) 51,886
(35,379 ) —
—
(47,480 ) (5,042 ) 1,635,394
27,460
Total assets measured at fair value on a recurring basis $ 1,614,284
$ 29,315
$ 32,680
$ (1,516 ) $ (3,354 ) $ 51,886
$ (35,379 ) $ —
$ —
$ (47,480 ) $ (5,042 ) $ 1,635,394
$ 27,460
Liabilities:

Annuity account balances⁽²⁾
$ 88,820
$ —
$ —
$ (735 ) $ —
$ —
$ —
$ 279
$ 2,226
$ —
$ 1,249
$ 88,857
$ —
Other liabilities⁽¹⁾
581,046
22,275
—
(46,056 ) —
—
—
—
—
—
—
604,827
(23,781 )
Total liabilities measured at fair value on a recurring basis $ 669,866
$ 22,275
$ —
$ (46,791 ) $ —
$ —
$ —
$ 279
$ 2,226
$ —
$ 1,249
$ 693,684
$ (23,781 )

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

For the three months ended ~~September 30, 2016,~~March 31, 2020, there were ~~no securities transferred into Level 3.~~

~~For the three months ended September 30, 2016, there were $47.5~~$30 million of securities transferred into Level ~~2. This amount was transferred from Level~~ 3. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods but were priced internally using significant unobservable inputs where market observable inputs were not available ~~in previous periods but were priced by independent pricing services or brokers~~ as of ~~September 30, 2016.~~March 31, 2020.

For the three months ended ~~September 30, 2016,~~March 31, 2020, there were ~~no securities transferred from Level 2 to Level 1.~~

~~For the three months ended September 30, 2016, there were no securities transferred from Level 1.~~

The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the nine months ended September 30, 2016, for which the Company has used significant unobservable inputs (Level3):

Total
Realized and Unrealized
Gains

Total
Realized and Unrealized
Losses
Total Gains (losses) included in Earnings related to Instruments still held at
the
Reporting
Date

Beginning
Balance

Included
in
Earnings

Included
in
Other
Comprehensive
Income

Included
in
Earnings

Included
in
Other
Comprehensive
Income
Purchases Sales Issuances Settlements
Transfers
in/out of
Level 3
Other
Ending
Balance

(Dollars In Thousands)
Assets:

Fixed maturity securities available-for-sale

Residential mortgage-backed securities $ 3
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ 3
$ —
Commercial mortgage-backed securities —
—
6
—
—
23,559
—
—
—
—
(6 ) 23,559
—
Other asset-backed securities 587,031
6,859
24,119
—
(21,426 ) 9,597
(58,461 ) —
—
7,457
(1,947 ) 553,229
—
Corporate securities 902,119
925
40,435
(4,135 ) (10,316 ) 53,885
(107,866 ) —
—
(114,189 ) (7,462 ) 753,396
—
Total fixed maturity securities - available-for-sale 1,489,153
7,784
64,560
(4,135 ) (31,742 ) 87,041
(166,327 ) —
—
(106,732 ) (9,415 ) 1,330,187
—
Fixed maturity securities - trading

Other asset-backed securities 152,912
5,310
—
(1,013 ) —
—
(11,578 ) —
—
172
30
145,833
4,294
Corporate securities 18,225
713
—
(259 ) —
10,908
(4,071 ) —
—
(19,722 ) (95 ) 5,699
283
Total fixed maturity securities - trading 171,137
6,023
—
(1,272 ) —
10,908
(15,649 ) —
—
(19,550 ) (65 ) 151,532
4,577
Total fixed maturity securities 1,660,290
13,807
64,560
(5,407 ) (31,742 ) 97,949
(181,976 ) —
—
(126,282 ) (9,480 ) 1,481,719
4,577
Equity securities 66,504
—
—
—
—
22
—
—
—
—
—
66,526
—
Other long-term investments⁽¹⁾
68,384
46,166
—
(28,830 ) —
1,429
—
—
—
—
—
87,149
17,336
Total investments 1,795,178
59,973
64,560
(34,237 ) (31,742 ) 99,400
(181,976 ) —
—
(126,282 ) (9,480 ) 1,635,394
21,913
Total assets measured at fair value on a recurring basis $ 1,795,178
$ 59,973
$ 64,560
$ (34,237 ) $ (31,742 ) $ 99,400
$ (181,976 ) $ —
$ —
$ (126,282 ) $ (9,480 ) $ 1,635,394
$ 21,913
Liabilities:

Annuity account balances⁽²⁾
$ 92,512
$ —
$ —
$ (1,831 ) $ —
$ —
$ —
$ 529
$ 7,264
$ —
$ 1,249
$ 88,857
$ —
Other liabilities⁽¹⁾
375,848
37,860
—
(266,839 ) —
—
—
—
—
—
—
604,827
(228,979 )
Total liabilities measured at fair value on a recurring basis $ 468,360
$ 37,860
$ —
$ (268,670 ) $ —
$ —
$ —
$ 529
$ 7,264
$ —
$ 1,249
$ 693,684
$ (228,979 )

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.

~~For the~~ ~~nine months ended September 30, 2016, there were~~ ~~$71.3 million~~ of0 securities transferred into Level 3.

~~For the~~ ~~nine months ended September 30, 2016~~, ~~$197.6 million~~ ~~of securities were transferred into Level 2. This amount was transferred~~2 from Level 3. These transfers resulted from securities that were priced internally using significant unobservable inputs where market observable inputs were not available in previous periods but were priced by independent pricing services or brokers as of September 30, 2016.

~~For the~~ ~~nine months ended September 30, 2016~~, ~~$12.2 million~~ ~~of securities were transferred from Level 2 to Level 1.~~

~~For the~~ ~~nine months ended September 30, 2016~~, ~~$0.1 million~~ ~~of securities were transferred from Level 1.~~

Total realized and unrealized gains (losses) on Level 3 assets and liabilities are ~~primarily~~ reported in either realized ~~investment~~ gains (losses) within the consolidated condensed statements of income ~~(loss)~~ or other comprehensive income (loss) within shareowner’s equity based on the appropriate accounting treatment for the item.

Purchases, sales, issuances, and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily relates to purchases and sales of fixed maturity securities and issuances and settlements of fixed indexed annuities.

The Company reviews the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur. The asset transfers

~~in the table(s) above primarily related to positions moved from Level 3 to Level 2 as the Company determined that certain inputs were observable.~~

~~The~~ amount of total gains (losses) for assets and liabilities still held as of the reporting date primarily represents changes in fair value of trading securities and certain derivatives that exist as of the reporting date and the change in fair value of fixed indexed annuities.

Estimated Fair Value of Financial Instruments

The carrying amounts and estimated fair values of the Company’s financial instruments as of the periods shown below are as follows:


		As of
		March 31, 2021				December 31, 2020
	Fair Value Level	Carrying Amounts		Fair Values		Carrying Amounts		Fair Values
		(Dollars In Millions)
Assets:
Commercial mortgage loans(1)	3	$	10,137	$	10,862	$	10,006	$	10,788
Policy loans	3	1,576		1,576		1,593		1,593
Other long-term investments(2)	2	1,190		1,251		1,186		1,283
Liabilities:
Stable value product account balances	3	$	6,655	$	6,762	$	6,056	$	6,231
Future policy benefits and claims(3)	3	1,545		1,567		1,580		1,603
Other policyholders’ funds(4)	3	105		112		102		108
Debt:(5)
Subordinated funding obligations	3	$	110	$	112	$	110	$	121

Except as noted below, fair values were estimated using quoted market prices.
(1) The carrying amount is net of allowance for credit losses.
(2) Other long-term investments represents a Modco receivable, which is related to invested assets such as fixed income and structured securities, which are legally owned by the ceding company. The fair value is determined in a manner consistent with other similar invested assets held by the Company.
(3) Single premium immediate annuity without life contingencies.
(4) Supplementary contracts without life contingencies.
(5) Excludes immaterial capital lease obligations.

As of
September 30, 2017 December 31, 2016

Fair Value
Level

Carrying
Amounts
Fair Values
Carrying
Amounts
Fair Values
(Dollars In Thousands)
Assets:

Mortgage loans on real estate 3 $ 6,528,890
$ 6,486,449
$ 6,132,125
$ 5,930,992
Policy loans 3 1,625,960
1,625,960
1,650,240
1,650,240
Fixed maturities, held-to-maturity⁽¹⁾
3 2,730,995
2,796,603
2,770,177
2,733,340
Liabilities:

Stable value product account balances 3 $ 4,793,890
$ 4,816,919
$ 3,501,636
$ 3,488,877
Future policy benefits and claims⁽²⁾
3 222,079
222,079
221,634
221,658
Other policyholders' funds⁽³⁾
3 132,565
133,347
135,367
136,127

Debt:⁽⁴⁾

Non-recourse funding obligations⁽⁵⁾
3 $ 2,938,005
$ 3,000,293
$ 2,973,829
$ 2,939,387

Except as noted below, fair values were estimated using quoted market prices.
(1) Securities purchased from unconsolidated affiliates, Red Mountain LLC and Steel City LLC.
(2) Single premium immediate annuity without life contingencies.
(3) Supplementary contracts without life contingencies.
(4) Excludes capital lease obligations of $1.5 million.
(5) As of September 30, 2017, $2.7 billion in carrying amount and fair value related to non-recourse funding obligations issued by Golden Gate and Golden Gate V. As of December 31, 2016, $2.7 billion in carrying amount and fair value related to non-recourse funding obligations issued by Golden Gate and Golden Gate V.

~~Fair Value Measurements~~

~~Mortgage loans on real estate~~

The Company estimates the fair value of mortgage loans using an internally developed model. This model includes inputs derived by the Company based on assumed discount rates relative to the Company’s current mortgage loan lending rate and an expected cash flow analysis based on a review of the mortgage loan terms. The model also contains the Company’s determined representative risk adjustment assumptions related to credit and liquidity risks.

~~Policy loans~~

The Company believes the fair value of policy loans approximates book value. Policy loans are funds provided to policy holders in return for a claim on the policy. The funds provided are limited to the cash surrender value of the underlying policy. The nature of policy loans is to have a negligible default risk as the loans are fully collateralized by the value of the policy. Policy loans do not have a stated maturity and the balances and accrued interest are repaid either by the policyholder or with proceeds from the policy. Due to the collateralized nature of policy loans and unpredictable timing of repayments, the Company believes the fair value of policy loans approximates carrying value.

~~Fixed maturities, held-to-maturity~~

The Company estimates the fair value of its fixed maturity, held-to-maturity securities using internal discounted cash flow models. The discount rates used in the model are based on a current market yield for similar financial instruments.

~~Stable value product and other investment contract balances~~

~~The Company estimates the fair value of stable value product account balances and other investment contract balances (included in~~ ~~Future policy benefits and claims~~ ~~as well as~~ ~~Other policyholder funds~~ ~~line items on our balance sheet) using models based on discounted expected cash flows. The discount rates used in the models are based on a current market rate for similar financial instruments.~~

~~Non-recourse funding obligations~~

The Company estimates the fair value of its non-recourse funding obligations using internal discounted cash flow models. The discount rates used in the model are based on a current market yield for similar financial instruments.

6.5.DERIVATIVE FINANCIAL INSTRUMENTS

Types of Derivative Instruments and Derivative Strategies

The Company utilizes a risk management strategy that incorporates the use of derivative financial instruments to reduce exposure to certain risks, including but not limited to, interest rate risk, currency exchange risk, volatility risk, and equity market risk. These strategies are developed through the Company’s analysis of data from financial simulation models and other internal and industry sources, and are then incorporated into the Company’s risk management program.

Derivative instruments expose the Company to credit and market risk and could result in material changes from period to period. The Company attempts to minimize its credit risk by entering into transactions with highly rated counterparties. The Company manages the market risk by establishing and monitoring limits as to the types and degrees of risk that may be undertaken. The Company monitors its use of derivatives in connection with its overall asset/liability management programs and risk management strategies. In addition, all derivative programs are monitored by our risk management department.

~~Derivatives Related to Interest Rate Risk Management~~

~~Derivative instruments that are used as part~~For a full description of the Company’s ~~interest rate risk management strategy include interest rate swaps, interest rate futures, interest rate caps,~~derivatives instruments and ~~interest rate swaptions.~~

~~Derivatives Related~~accounting policies, refer to ~~Foreign Currency Exchange Risk Management~~

Derivative instruments that are used as part of the Company's foreign currency exchange risk management strategy include foreign currency swaps, foreign currency futures, foreign equity futures, and foreign equity options.

~~Derivatives Related to Risk Mitigation of Certain Annuity Contracts~~

~~The Company may use the following types of derivative contracts to mitigate its exposure to certain guaranteed benefits related to VA contracts and fixed indexed annuities:~~

•~~Foreign Currency Futures~~

•~~Variance Swaps~~

•~~Interest Rate Futures~~

•~~Equity Options~~

•~~Equity Futures~~

•~~Credit Derivatives~~

•~~Interest Rate Swaps~~

•~~Interest Rate Swaptions~~

•~~Volatility Futures~~

•~~Volatility Options~~

•~~Funds Withheld Agreement~~

•~~Total Return Swaps~~

~~Other Derivatives~~

The Company and certain of its subsidiaries have derivatives with PLC. These derivatives consist of an interest support agreement, YRT premium support agreements, and portfolio maintenance agreements with PLC.

~~The Company has a funds withheld account that consists of various derivative instruments held by us that is used to hedge the GLWB and GMDB riders. The economic performance of derivatives~~Note 6 in the ~~funds withheld account is ceded to Shades Creek. The funds withheld account is accounted~~Company’s Form 10-K for ~~as a derivative financial instrument.~~

~~Accounting for Derivative Instruments~~

~~The Company records its derivative financial instruments in~~ the consolidated balance sheet in “other long-term investments” and “other liabilities” in accordance with GAAP, which requires that all derivative instruments be recognized in the balance sheet at fair value. The change in the fair value of derivative financial instruments is reported either in the statement of income or in other comprehensive income (loss), depending upon whether it qualified for and also has been properly identified as being part of a hedging relationship, and also on the type of hedging relationship that exists.

For a derivative financial instrument to be accounted for as an accounting hedge, it must be identified and documented as such on the date of designation. For cash flow hedges, the effective portion of their realized gain or loss is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged item impacts earnings. Any remaining gain or loss, the ineffective portion, is recognized in current earnings. For fair value hedge derivatives, their gain or loss as well as the offsetting loss or gain attributable to the hedged risk of the hedged item is recognized in current earnings. Effectiveness of the Company’s hedge relationships is assessed on a quarterly basis.

The Company reports changes in fair values of derivatives that are not part of a qualifying hedge relationship through earnings in the period of change. Changes in the fair value of derivatives that are recognized in current earnings are reported in “Realized investment gains (losses)-Derivative financial instruments.”year ended December 31, 2020.

Derivative Instruments Designated and Qualifying as Hedging Instruments

Cash-Flow Hedges

•To hedge a fixed rate note denominated in a foreign currency, the Company entered into a fixed-to-fixed foreign currency swap in order to hedge the foreign currency exchange risk associated with the note. The cash flows received on the swap are identical to the cash ~~flow~~flows paid on the note.

•To hedge a floating rate note, the Company entered into an interest rate swap to exchange the floating rate on the note for a fixed rate in order to hedge the interest rate risk associated with the note. The cash flows received on the swap are identical to the cash flow variability paid on the note.

Table of Contents

Derivative Instruments Not Designated and Not Qualifying as Hedging Instruments

The Company uses various other derivative instruments for risk management purposes that do not qualify for hedge accounting treatment. Changes in the fair value of these derivatives are recognized in ~~earnings~~ realized gains (losses) during the period of change.

~~Derivatives Related to Variable Annuity Contracts~~

The Company uses equity futures, equity options, total return swaps, interest rate futures, interest rate swaps, interest rate swaptions, currency futures, volatility futures, volatility options, and variance swaps to mitigate the risk related to certain guaranteed minimum benefits, including GLWB, within its VA products. In general, the cost of such benefits varies with the level of equity and interest rate markets, foreign currency levels, and overall volatility.

~~The Company markets certain VA products with a GLWB rider. The GLWB component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.~~

The Company has a funds withheld account that consists of various derivative instruments held by the Company that are used to hedge the GLWB and GMDB riders. The economic performance of derivatives in the funds withheld account is ceded to Shades Creek. The funds withheld account is accounted for as a derivative financial instrument.

~~Derivatives Related to Fixed Annuity Contracts~~

The Company uses equity futures and options to mitigate the risk within its fixed indexed annuity products. In general, the cost of such benefits varies with the level of equity markets and overall volatility.

~~The Company markets certain fixed indexed annuity products. The FIA component is considered an embedded derivative as it is, not considered to be clearly and closely related to the host contract.~~

~~Derivatives Related to Indexed Universal Life Contracts~~

~~The Company uses equity, futures, and options to mitigate the risk within its indexed universal life products. In general, the cost of such benefits varies with the level of equity markets.~~

~~The Company markets certain IUL products. The IUL component is considered an embedded derivative as it is, not considered to be clearly and closely related to the host contract.~~

~~Other Derivatives~~

The Company and certain of its subsidiaries have an interest support agreement, two YRT premium support agreements, and three portfolio maintenance agreements with PLC. The Company entered into three separate portfolio maintenance agreements, two in October 2012 and one in January 2016.

~~The Company uses various swaps and other types of derivatives to manage risk related to other exposures.~~

The Company is involved in various modified coinsurance and funds withheld arrangements which contain embedded derivatives. Changes in their fair value are recorded in current period earnings. The investment portfolios that support the related modified coinsurance reserves and funds withheld arrangements had fair value changes which substantially offset the gains or losses on these embedded derivatives.

The following table sets forth realized ~~investments~~ gains ~~and losses~~(losses) - derivatives for the periods shown:

Realized ~~investment~~ gains (losses) - derivative financial instruments


	For The Three Months Ended March 31,
	2021		2020
	(Dollars In Millions)
Derivatives related to VA contracts:
Interest rate futures	$	9	$	1
Equity futures	(8)		31
Currency futures	6		12
Equity options	(46)		280

Interest rate swaps	(297)		409
Total return swaps	(69)		140
Embedded derivative - GLWB	405		(935)

Total derivatives related to VA contracts	0		(62)
Derivatives related to FIA contracts:
Embedded derivative	3		39
Funds withheld derivative	(3)		0
Equity futures	1		(8)
Equity options	23		(60)
Other derivatives	(1)		0
Total derivatives related to FIA contracts	23		(29)
Derivatives related to IUL contracts:
Embedded derivative	21		0
Equity futures	0		(2)
Equity options	3		(14)
Total derivatives related to IUL contracts	24		(16)
Embedded derivative - Modco reinsurance treaties	127		75
Derivatives with PLC(1)	0		(2)
Other derivatives	7		9
Total realized gains (losses) - derivatives	$	181	$	(25)

(1) The Company and certain of its subsidiaries had an interest support agreement, YRT premium support agreements, and portfolio maintenance agreements with PLC through October 1, 2020. These agreements were terminated and a new portfolio maintenance agreement was entered into with PLC on that date.

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
Derivatives related to VA contracts:

Interest rate futures - VA $ 549
$ (7,002 ) $ 16,746
$ 62,065
Equity futures - VA (25,959 ) (41,836 ) (75,389 ) (66,392 )
Currency futures - VA (6,092 ) 934
(22,366 ) 5,888
Equity options - VA (23,307 ) (36,482 ) (76,376 ) (23,410 )
Interest rate swaptions - VA (292 ) (229 ) (2,423 ) (3,212 )
Interest rate swaps - VA 5,342
14,737
31,331
221,884
Total return swaps - VA (8,057 ) —
(9,675 ) —
Embedded derivative - GLWB 485
24,150
(13,306 ) (108,545 )
Funds withheld derivative 35,821
53,834
103,746
63,886
Total derivatives related to VA contracts (21,510 ) 8,106
(47,712 ) 152,164
Derivatives related to FIA contracts:

Embedded derivative - FIA (18,606 ) (14,486 ) (40,351 ) (15,938 )
Equity futures - FIA 66
2,236
161
4,269
Volatility futures - FIA —
—
—
—
Equity options - FIA 11,242
6,583
29,511
1,756
Total derivatives related to FIA contracts (7,298 ) (5,667 ) (10,679 ) (9,913 )
Derivatives related to IUL contracts:

Embedded derivative - IUL (297 ) 7,136
(10,958 ) 6,302
Equity futures - IUL 58
101
(878 ) (71 )
Equity options - IUL 1,975
1,607
6,437
1,821
Total derivatives related to IUL contracts 1,736
8,844
(5,399 ) 8,052
Embedded derivative - Modco reinsurance treaties (19,746 ) (24,187 ) (90,314 ) (105,362 )
Derivatives with PLC⁽¹⁾
52,077
13,387
34,671
31,098
Other derivatives 43
49
41
(51 )
Total realized gains (losses) - derivatives $ 5,302
$ 532
$ (119,392 ) $ 75,988

(1) These derivatives include the Interest, YRT premium support, and portfolio maintenance agreements between certain of the Company’s subsidiaries and PLC.

Table of Contents

The following table presents the components of the gain or loss on derivatives that qualify as a cash flow hedging relationship. ~~The Company did not have any derivatives that qualified as a cash flow hedging relationships for the three and nine months ended September 30, 2016:~~

Gain (Loss) on Derivatives in Cash Flow Hedging Relationship


	Amount of Gains (Losses) Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives		Amount and Location of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)		Amount and Location of Gains (Losses) Recognized in Income (Loss) on Derivatives
	(Effective Portion)		(Effective Portion)		(Ineffective Portion)
			Benefits and settlement expenses		Realized gains (losses) - derivatives
	(Dollars In Millions)
For The Three Months Ended March 31, 2021
Foreign currency swaps	$	2	$	0	$	0

Total	$	2	$	0	$	0






For The Three Months Ended March 31, 2020
Foreign currency swaps	$	(5)	$	0	$	0
Interest rate swaps	(1)		(1)		0
Total	$	(6)	$	(1)	$	0

Amount of Gains (Losses)
Deferred in
Accumulated Other
Comprehensive Income
(Loss) on Derivatives

Amount and Location of
Gains (Losses)
Reclassified from
Accumulated Other
Comprehensive Income
(Loss) into Income (Loss)

Amount and Location of
(Losses) Recognized in
Income (Loss) on
Derivatives
(Effective Portion) (Effective Portion) (Ineffective Portion)

Benefits and settlement
expenses

Realized investment
gains (losses)
(Dollars In Thousands)
For The Three Months Ended September 30, 2017

Foreign currency swaps $ 1,273
$ (38 ) $ —
Total $ 1,273
$ (38 ) $ —

For The Nine Months Ended September 30, 2017

Foreign currency swaps $ 55
$ (396 ) $ —
Total $ 55
$ (396 ) $ —

Based on expected cash flows of the underlying hedged items, the Company expects to reclassify ~~$0.5~~$1 million out of accumulated other comprehensive income (loss) into ~~earnings~~ realized gains (losses) during the next twelve months.

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The table below presents information about the nature and accounting treatment of the Company’s primary derivative financial instruments and the location in and effect on the consolidated condensed financial statements for the periods presented below:


	As of
	March 31, 2021				December 31, 2020
	Notional Amount		Fair Value		Notional Amount		Fair Value
	(Dollars In Millions)
Other long-term investments



Derivatives not designated as hedging instruments:
Interest rate swaps	$	1,448	$	104	$	1,478	$	185
Total return swaps	361		8		158		2
Derivatives with PLC(1)	4,272		0		4,076		0
Embedded derivative - Modco reinsurance treaties	1,478		68		1,249		101
Embedded derivative - GLWB	3,073		161		2,067		138
Embedded derivative - FIA	355		60		335		60
Interest rate futures	990		20		690		4
Equity futures	146		2		203		4
Currency futures	200		3		0		0
Equity options	7,887		1,198		7,208		1,142


	$	20,210	$	1,624	$	17,464	$	1,636
Other liabilities
Cash flow hedges:

Foreign currency swaps	$	117	$	7	$	117	$	10
Derivatives not designated as hedging instruments:
Interest rate swaps	1,384		0		1,354		0
Total return swaps	926		13		1,003		15
Embedded derivative - Modco reinsurance treaties	2,691		229		2,911		389
Funds withheld derivative	770		12		661		10
Embedded derivative - GLWB	6,744		579		7,749		960
Embedded derivative - FIA	4,084		643		3,889		633
Embedded derivative - IUL	379		179		357		201
Interest rate futures	383		15		415		3
Equity futures	106		2		190		5
Currency futures	0		0		264		4
Equity options	6,107		916		5,499		834
Other	338		56		304		55
	$	24,029	$	2,651	$	24,713	$	3,119

(1) The Company and certain of its subsidiaries had an interest support agreement, YRT premium support agreements, and portfolio maintenance agreements with PLC through October 1, 2020. These agreements were terminated and a new portfolio maintenance agreement was entered into with PLC on that date.

As of
September 30, 2017 December 31, 2016

Notional
Amount

Fair
Value

Notional
Amount

Fair
Value
(Dollars In Thousands)
Other long-term investments

Cash flow hedges:
Foreign currency swaps $ 117,178
$ 10,125
$ 117,178
$ 132
Derivatives not designated as hedging instruments:

Interest rate swaps 1,365,000
59,641
1,135,000
71,644
Total return swaps —
—
—
—
Derivatives with PLC⁽¹⁾
2,839,296
83,549
2,808,807
48,878
Embedded derivative - Modco reinsurance treaties 64,444
1,008
64,123
2,573
Embedded derivative - GLWB 2,023,387
65,176
2,045,529
64,064
Interest rate futures 531,447
2,267
102,587
894
Equity futures 46,334
333
654,113
5,805
Currency futures 186,047
4,010
340,058
7,883
Equity options 4,846,984
364,936
3,944,444
328,908
Interest rate swaptions 225,000
81
225,000
2,503
Other 157
191
212
149
$ 12,245,274
$ 591,317
$ 11,437,051
$ 533,433
Other liabilities

Cash flow hedges:
Foreign currency swaps $ 497,500
$ 267
$ —
$ —
Derivatives not designated as hedging instruments:

Interest rate swaps 347,330
3,151
575,000
10,208
Embedded derivative - Modco reinsurance treaties 2,408,832
209,334
2,450,692
141,301
Funds withheld derivative 1,762,013
50,523
1,557,237
91,267
Embedded derivative - GLWB 1,958,688
85,502
1,849,400
71,082
Embedded derivative - FIA 1,845,942
197,378
1,496,346
147,368
Embedded derivative - IUL 150,277
69,081
103,838
46,051
Interest rate futures 606,501
6,401
993,842
6,611
Equity futures 340,041
14,854
102,667
2,907
Currency futures 115,382
1,958
—
—
Equity options 3,055,206
203,451
2,590,160
157,253
$ 13,087,712
$ 841,900
$ 11,719,182
$ 674,048

(1) These derivatives include the Interest, YRT premium support, and portfolio maintenance agreements between certain of the Company’s subsidiaries and PLC.

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7.6. OFFSETTING OF ASSETS AND LIABILITIES

Certain of the Company’s derivative instruments are subject to enforceable master netting arrangements that provide for the net settlement of all derivative contracts between the Company and a counterparty in the event of default or upon the occurrence of certain termination events. Collateral support agreements associated with each master netting arrangement provide that the Company will receive or pledge financial collateral in the event either minimum thresholds, or in certain cases ratings levels, have been reached. Additionally, certain of the Company’s repurchase agreements provide for net settlement on termination of the agreement. Refer to Note 10, Debt and Other Obligations for details of the Company’s repurchase agreement programs.

Collateral received includes both cash and non-cash collateral. Cash collateral received by the Company is recorded on the consolidated condensed balance sheet as “cash”, with a corresponding amount recorded in “other liabilities” to represent the Company’s obligation to return the collateral. Non-cash collateral received by the Company is not recognized on the consolidated condensed balance sheet unless the Company exercises its right to sell or re-pledge the underlying asset. There was no fair value of non-cash collateral received as of March 31, 2021 or as of December 31, 2020.

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The tables below present the derivative instruments by assets and liabilities ~~subject to master netting agreements~~for the Company as of ~~September 30, 2017.~~March 31, 2021:


	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Balance Sheets		Net Amounts of Assets Presented in the Balance Sheets		Gross Amounts Not Offset in the Balance Sheets
							Financial Instruments		Collateral Received		Net Amount
	(Dollars In Millions)
Offsetting of Assets
Derivatives:
Free-Standing derivatives	$	1,335	$	0	$	1,335	$	950	$	316	$	69
Total derivatives, subject to a master netting arrangement or similar arrangement	1,335		0		1,335		950		316		69
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	68		0		68		0		0		68
Embedded derivative - GLWB	161		0		161		0		0		161
Embedded derivative - FIA	60		0		60		0		0		60

Total derivatives, not subject to a master netting arrangement or similar arrangement	289		0		289		0		0		289
Total derivatives	1,624		0		1,624		950		316		358
Total Assets	$	1,624	$	0	$	1,624	$	950	$	316	$	358


	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Balance Sheets		Net Amounts of Liabilities Presented in the Balance Sheets		Gross Amounts Not Offset in the Balance Sheets
							Financial Instruments		Collateral Posted		Net Amount
	(Dollars In Millions)
Offsetting of Liabilities
Derivatives:
Free-Standing derivatives	$	953	$	0	$	953	$	950	0		$	3
Total derivatives, subject to a master netting arrangement or similar arrangement	953		0		953		950		0		3
Derivatives, not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	229		0		229		0		0		229
Funds withheld derivative	12		0		12		0		0		12
Embedded derivative - GLWB	579		0		579		0		0		579
Embedded derivative - FIA	643		0		643		0		0		643
Embedded derivative - IUL	179		0		179		0		0		179
Other	56		0		56		0		0		56
Total derivatives, not subject to a master netting arrangement or similar arrangement	1,698		0		1,698		0		0		1,698
Total derivatives	2,651		0		2,651		950		0		1,701
Repurchase agreements(1)	854		0		854		0		0		854
Total Liabilities	$	3,505	$	0	$	3,505	$	950	$	0	$	2,555

(1) Borrowings under repurchase agreements are for a term less than 90 days.

Gross
Amounts of
Recognized
Assets

Gross
Amounts
Offset in the
Statement of
Financial
Position

Net Amounts
of Assets
Presented in
the
Statement of
Financial
Position

Gross Amounts Not Offset
in the Statement of
Financial Position

Financial
Instruments

Collateral
Received
Net Amount
(Dollars In Thousands)
Offsetting of Assets

Derivatives:

Free-Standing derivatives $ 441,393
$ —
$ 441,393
$ 211,435
$ 102,913
$ 127,045
Total derivatives, subject to a master netting arrangement or similar arrangement 441,393
—
441,393
211,435
102,913
127,045
Derivatives not subject to a master netting arrangement or similar arrangement

Embedded derivative - Modco reinsurance treaties 1,008
—
1,008
—
—
1,008
Embedded derivative - GLWB 65,176
—
65,176
—
—
65,176
Derivatives with PLC 83,549
—
83,549
—
—
83,549
Other 191
—
191
—
—
191
Total derivatives, not subject to a master netting arrangement or similar arrangement 149,924
—
149,924
—
—
149,924
Total derivatives 591,317
—
591,317
211,435
102,913
276,969
Total Assets $ 591,317
$ —
$ 591,317
$ 211,435
$ 102,913
$ 276,969

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Gross
Amounts of
Recognized
Liabilities

Gross
Amounts
Offset in the
Statement of
Financial
Position

Net Amounts
of Liabilities
Presented in
the
Statement of
Financial
Position

Gross Amounts Not Offset
in the Statement of
Financial Position

Financial
Instruments

Collateral
Posted
Net Amount
(Dollars In Thousands)
Offsetting of Liabilities

Derivatives:

Free-Standing derivatives $ 230,082
$ —
$ 230,082
$ 211,435
$ 18,647
$ —
Total derivatives, subject to a master netting arrangement or similar arrangement 230,082
—
230,082
211,435
18,647
—
Derivatives, not subject to a master netting arrangement or similar arrangement

Embedded derivative - Modco reinsurance treaties 209,334
—
209,334
—
—
209,334
Funds withheld derivative 50,523
—
50,523
—
—
50,523
Embedded derivative - GLWB 85,502
—
85,502
—
—
85,502
Embedded derivative - FIA 197,378
—
197,378
—
—
197,378
Embedded derivative - IUL 69,081
—
69,081
—
—
69,081
Total derivatives, not subject to a master netting arrangement or similar arrangement 611,818
—
611,818
—
—
611,818
Total derivatives 841,900
—
841,900
211,435
18,647
611,818
Repurchase agreements⁽¹⁾
493,785
—
493,785
—
—
493,785
Total Liabilities $ 1,335,685
$ —
$ 1,335,685
$ 211,435
$ 18,647
$ 1,105,603

(1) Borrowings under repurchase agreements are for a term less than 90 days.

The tables below present the derivative instruments by assets and liabilities for the Company as of December 31, ~~2016.~~2020.


	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Balance Sheets		Net Amounts of Assets Presented in the Balance Sheets		Gross Amounts Not Offset in the Balance Sheets
							Financial Instruments		Collateral Received		Net Amount
	(Dollars In Millions)
Offsetting of Assets
Derivatives:
Free-Standing derivatives	$	1,337	$	0	$	1,337	$	865	$	290	$	182
Total derivatives, subject to a master netting arrangement or similar arrangement	1,337		0		1,337		865		290		182
Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	101		0		101		0		0		101
Embedded derivative - GLWB	138		0		138		0		0		138

Embedded derivative - FIA	60		0		60		0		0		60
Total derivatives, not subject to a master netting arrangement or similar arrangement	299		0		299		0		0		299
Total derivatives	1,636		0		1,636		865		290		481
Total Assets	$	1,636	$	0	$	1,636	$	865	$	290	$	481

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															Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Balance Sheets			Net Amounts of Liabilities Presented in the Balance Sheets		Gross Amounts Not Offset in the Balance Sheets
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Assets Presented in the Statement of Financial Position		Gross Amounts Not Offset in the Statement of Financial Position											Financial Instruments			Collateral Posted		Net Amount
					Financial Instruments			Collateral Received		Net Amount			(Dollars In Millions)
	(Dollars In Thousands)
Offsetting of Assets
Offsetting of Liabilities														Offsetting of Liabilities
Derivatives:														Derivatives:
Free-Standing derivatives	$	417,769	$	—		$	417,769	$	171,384	$	100,890	$	145,495	Free-Standing derivatives	$	871	$	0		$	871	$	865	$	4	$	2
Total derivatives, subject to a master netting arrangement or similar arrangement	417,769		—			417,769		171,384		100,890		145,495		Total derivatives, subject to a master netting arrangement or similar arrangement	871		0			871		865		4		2
Derivatives not subject to a master netting arrangement or similar arrangement														Derivatives not subject to a master netting arrangement or similar arrangement
Embedded derivative - Modco reinsurance treaties	2,573		—			2,573		—		—		2,573		Embedded derivative - Modco reinsurance treaties	389		0			389		0		0		389
Funds withheld derivative														Funds withheld derivative	10		0			10		0		0		10
Embedded derivative - GLWB	64,064		—			64,064		—		—		64,064		Embedded derivative - GLWB	960		0			960		0		0		960
Derivatives with PLC	48,878		—			48,878		—		—		48,878
Embedded derivative - FIA														Embedded derivative - FIA	633		0			633		0		0		633
Embedded derivative - IUL														Embedded derivative - IUL	201		0			201		0		0		201
Other	149		—			149		—		—		149		Other	55		0			55		0		0		55
Total derivatives, not subject to a master netting arrangement or similar arrangement	115,664		—			115,664		—		—		115,664		Total derivatives, not subject to a master netting arrangement or similar arrangement	2,248		0			2,248		0		0		2,248
Total derivatives	533,433		—			533,433		171,384		100,890		261,159		Total derivatives	3,119		0			3,119		865		4		2,250
Total Assets	$	533,433	$	—		$	533,433	$	171,384	$	100,890	$	261,159
Repurchase agreements(1)														Repurchase agreements(1)	0		0			0		0		0		0
Total Liabilities														Total Liabilities	$	3,119	$	0		$	3,119	$	865	$	4	$	2,250

(1) Borrowings under repurchase agreements are for a term less than 90 days.														(1) Borrowings under repurchase agreements are for a term less than 90 days.

Gross
Amounts of
Recognized
Liabilities

Gross
Amounts
Offset in the
Statement of
Financial
Position

Net Amounts
of Liabilities
Presented in
the
Statement of
Financial
Position

Gross Amounts Not Offset
in the Statement of
Financial Position

Financial
Instruments

Collateral
Posted
Net Amount
(Dollars In Thousands)
Offsetting of Liabilities

Derivatives:

Free-Standing derivatives $ 176,979
$ —
$ 176,979
$ 171,384
$ 5,595
$ —
Total derivatives, subject to a master netting arrangement or similar arrangement 176,979
—
176,979
171,384
5,595
—
Derivatives not subject to a master netting arrangement or similar arrangement

Embedded derivative - Modco reinsurance treaties 141,301
—
141,301
—
—
141,301
Funds withheld derivative 91,267
—
91,267
—
—
91,267
Embedded derivative - GLWB 71,082
—
71,082
—
—
71,082
Embedded derivative - FIA 147,368
—
147,368
—
—
147,368
Embedded derivative - IUL 46,051
—
46,051
—
—
46,051
Total derivatives, not subject to a master netting arrangement or similar arrangement 497,069
—
497,069
—
—
497,069
Total derivatives 674,048
—
674,048
171,384
5,595
497,069
Repurchase agreements⁽¹⁾
797,721
—
797,721
—
—
797,721
Total Liabilities $ 1,471,769
$ —
$ 1,471,769
$ 171,384
$ 5,595
$ 1,294,790

(1) Borrowings under repurchase agreements are for a term less than 90 days.

8.7.COMMERCIAL MORTGAGE LOANS

~~Mortgage Loans~~

The Company invests a portion of its investment portfolio in commercial mortgage loans. As of ~~September 30, 2017,~~March 31, 2021, the Company’s commercial mortgage loan holdings were ~~approximately~~$~~6.5~~10.3 billion, or $10.1 billion net of allowance for credit losses. The Company has specialized in making loans on credit-oriented commercial properties, credit-anchored strip shopping centers, senior living facilities, and apartments. The Company’s underwriting procedures relative to its commercial mortgage loan portfolio are based, in the Company’s view, on a conservative and disciplined approach. The Company concentrates on a small number of commercial real estate asset types associated with the necessities of life (retail, multi-family, senior living, professional office buildings, and warehouses). The Company believes that these asset types tend to weather economic downturns better than other commercial asset classes in which it has chosen not to participate. The Company believes this disciplined approach has helped to maintain a relatively low delinquency and foreclosure rate throughout its history. The majority of the ~~Company's~~Company’s commercial mortgage loans portfolio was underwritten by the Company. From time to time, the Company may acquire loans in conjunction with an acquisition.

The ~~Company's~~Company’s commercial mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, and net of ~~valuation allowances.~~the allowance for credit losses. Interest income is accrued on the principal amount of the loan based on the ~~loan's~~loan’s contractual interest rate. Amortization of premiums and ~~accretion of~~ discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts and prepayment fees are reported in net investment ~~income~~.income.

Certain of the commercial mortgage loans have call options that occur within the next ~~12 years~~.9 years. However, if interest rates were to significantly increase, the Company may be unable to exercise the call options on its existing commercial mortgage loans commensurate with the significantly increased market rates. As of ~~September 30, 2017,~~March 31, 2021, assuming the loans are called at their next call dates, ~~approximately $54.7~~$168 million of principal would become due for the remainder of ~~2017, $976.2~~2021, $538 million in ~~2018~~2022 through ~~2022, $124.6~~2026 and $10 million in ~~2023~~2027 through ~~2027, and $9.9 million thereafter.~~2029.

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The Company offers a type of commercial mortgage loan under which the Company will permit a loan-to-value ratio of up to 85% in exchange for a participating interest in the cash flows from the underlying real estate. As of ~~September 30, 2017,~~March 31, 2021 and December 31, ~~2016, approximately $715.2~~2020, $774 million and ~~$595.2~~$806 million,, respectively, of the Company’s total commercial mortgage loans principal balance have this participation feature. Cash flows received as a result of this participation feature are recorded as interest income. During the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016,~~2020, the Company recognized ~~$14.2 million, $25.7 million~~, ~~$3.3~~ $7 million and ~~$15.8~~$16 million,, respectively, of ~~participating~~participation commercial mortgage loan income.

As of ~~September 30, 2017, approximately~~ ~~$3.1~~March 31, 2021 and December 31, 2020, $1 million and $3 million, respectively, of invested assets consisted of ~~nonperforming mortgage loans, restructured mortgage loans, or~~commercial mortgage loans that were nonperforming, restructured or foreclosed and ~~were~~ converted to real estate properties. The Company does not expect these investments to adversely affect its liquidity or ability to maintain proper matching of assets and liabilities. ~~During~~For all commercial mortgage loans, the ~~nine months ended September 30, 2017, the Company recognized two~~impact of troubled debt restructurings is reflected in our investment balance and in the allowance for commercial mortgage loan credit losses.

During the three months ended March 31, 2021 and 2020, the Company did not recognize any troubled debt restructurings transactions, respectively, as a result of ~~the Company~~ granting ~~a concession~~concessions to ~~a borrower~~borrowers which included loan terms unavailable from other lenders. ~~These concessions were the result of agreements between the creditor and the debtor.~~ The Company did not identify any loans whose principal was permanently impaired during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2021 or during the three months ended March 31, 2020.

The ~~Company’s~~ Company provides certain relief under the Coronavirus Aid Relief, and Economic Security Act (“the CARES Act”) under its COVID-19 Commercial Mortgage Loan Program (the “Loan Modification Program”). During the three months ended March 31, 2021, the Company modified 7 loans under the Loan Modification Program, representing $143 million in unpaid principal balance. As of March 31, 2021, since the inception of the CARES Act, there were 295 total loans modified under the Loan Modification Program, representing $2.2 billion in unpaid principal balance. At March 31, 2021, $1.7 billion of these loans have resumed regular principal and interest payments in accordance with the terms of the modification agreements. The modifications under this program include agreements to defer principal payments only and/or to defer principal and interest payments for a specified period of time. None of these modifications were considered troubled debt restructurings.

The amortized cost basis of the Company's commercial mortgage loan ~~portfolio consists~~receivables by origination year, net of ~~two categories~~the allowance, for credit losses is as follows:


	Term Loans Amortized Cost Basis by Origination Year
	2021		2020		2019		2018		2017		Prior		Total
	(Dollars In Millions)
As of March 31, 2021
Commercial mortgage loans:
Performing	$	314	$	1,443	$	2,391	$	1,560	$	1,344	$	3,255	$	10,307
Non-performing	0		0		0		0		0		1		1
Amortized cost	$	314	$	1,443	$	2,391	$	1,560	$	1,344	$	3,256	$	10,308
Allowance for credit losses	(2)		(18)		(35)		(34)		(31)		(51)		(171)
Total commercial mortgage loans	$	312	$	1,425	$	2,356	$	1,526	$	1,313	$	3,205	$	10,137


	Term Loans Amortized Cost Basis by Origination Year
	2020		2019		2018		2017		2016		Prior		Total
	(Dollars In Millions)
As of December 31, 2020
Commercial mortgage loans:
Performing	$	1,463	$	2,442	$	1,577	$	1,344	$	943	$	2,458	$	10,227
Non-performing	0		0		0		0		0		1		1
Amortized cost	$	1,463	$	2,442	$	1,577	$	1,344	$	943	$	2,459	$	10,228
Allowance for credit losses	(21)		(46)		(55)		(37)		(25)		(38)		(222)
Total commercial mortgage loans	$	1,442	$	2,396	$	1,522	$	1,307	$	918	$	2,421	$	10,006

The following tables provide a comparative view of ~~loans: 1) those not subject to a pooling~~the key credit quality indicators of the Loan-to-Value and ~~servicing agreement and 2) those subject to a contractual pooling and servicing agreement. As~~Debt Service Coverage Ratio (“DSCR”):

Table of ~~September 30, 2017, $3.1~~Contents


	As of March 31, 2021					As of December 31, 2020
	Amortized Cost		% of Total		DSCR (2)	Amortized Cost		% of Total		DSCR (2)
	(Dollars In Millions)
Loan-to-Value(1)
Greater than 75%	$	393	4	%	0.05	$	399	4	%	0.05
50% - 75%	6,504		63	%	1.02	6,557		64	%	1.04
Less than 50%	3,411		33	%	0.67	3,272		32	%	0.63
Total commercial mortgage loans	$	10,308	100	%	1.74	$	10,228	100	%	1.72

(1) The loan-to-value ratio compares the current unpaid principal of the loan to the estimated fair value of the underlying property collateralizing the loan. Our weighted average loan-to-value ratio was 54% at March 31, 2021 and 54% at December 31, 2020.
(2) The debt service coverage ratio compares a property’s net operating income to its debt service payments, including principal and interest. Our weighted average debt service coverage ratio for March 31, 2021 and December 31, 2020 was 1.74x and 1.72x, respectively.

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The ACL decreased by $58 million of mortgage loans not subject to a pooling and servicing agreement were nonperforming mortgage loans, restructured, or mortgage loans that were foreclosed and were converted to real estate properties. The Company did not foreclose on any nonperforming loans not subject to a pooling and servicing agreement during the ~~nine~~three months ended ~~September 30, 2017.~~

AsMarch 31, 2021, primarily as a result of ~~September 30, 2017, none~~improvement in the macroeconomic forecasts, as a result of COVID-19, used in the measurement of the ~~loans subject to a pooling and servicing agreement were nonperforming or restructured. The Company did not foreclose on any nonperforming loans subject to a pooling and servicing agreement during~~ACL since the ~~nine months ended September 30, 2017.~~initial allowance was established.


	As of and For The Three Months Ended March 31, 2021		As of and For The Year Ended December 31, 2020
	(Dollars In Millions)
Allowance for Funded Commercial Mortgage Loan Credit Losses
Beginning balance	$	222	$	5
Cumulative effect adjustment	0		80
Charge offs	0		0
Recoveries	(5)		(3)
Provision	(46)		140
Ending balance	$	171	$	222

Allowance for Unfunded Commercial Mortgage Loan Commitments Credit Losses
Beginning balance	$	22	$	0
Cumulative effect adjustment	0		10
Charge offs	0		0
Recoveries	0		0
Provision	(7)		12
Ending balance	$	15	$	22

As of ~~September 30, 2017, and December~~March 31, ~~2016,~~2021, the Company had ~~an allowance for mortgage~~a total of 1 loan ~~credit losses~~ of ~~$1.1~~$1 million that was 90 days and ~~$0.7 million, respectively. Due to the Company’s loss experience and nature~~greater delinquent. As of ~~the loan portfolio,~~December 31, 2020, the Company ~~believes~~had a total of 1 loan of $1 million that a collectively evaluated allowance would be inappropriate. The Company believes an allowance calculated through an analysis of specific loans that are believed to have a higher risk of credit impairment provides a more accurate presentation of expected losses in the portfolio and is consistent with the applicable guidance for loan impairments in ASC Subtopic 310. Since the Company uses the specific identification method for calculating the allowance, it is necessary to review the economic situation of each borrower to determine those that have higher risk of credit impairment. The Company has a team of professionals that monitors borrower conditions such as payment practices, borrower credit, operating performance, and property conditions, as well as ensuring the timely payment of property taxes and insurance. Through this monitoring process, the Company assesses the risk of each loan. When issues are identified, the severity of the issues are assessed and reviewed for possible credit impairment. If a loss is probable, an expected loss calculation is performed and an allowance is established for that loan based on the expected loss. The expected loss is calculated as the excess carrying value of a loan over either the present value of expected future cash flows discounted at the loan’s original effective interest rate, or the current estimated fair value of the loan’s underlying collateral. A loan may be subsequently charged off at such point that the Company no longer expects to receive cash payments, the present value of future expected payments of the renegotiated loan is less than the current principal balance, or at such time that the Company is party to foreclosure or bankruptcy proceedings associated with the borrower and does not expect to recover the principal balance of the loan.

A charge off is recorded by eliminating the allowance against the mortgage loan and recording the renegotiated loan or the collateral property related to the loan as investment real estate on the balance sheet, which is carried at the lower of the appraised fair value of the property or the unpaid principal balance of the loan, less estimated selling costs associated with the property.

For The Nine Months Ended
September 30, 2017
(Dollars In Thousands)
Beginning balance, December 31, 2016 $ 724
Charge offs (5,653 )
Recoveries (731 )
Provision 6,715
Ending balance, September 30, 2017 $ 1,055

~~It is the Company’s policy to cease to carry accrued interest on loans that are over 90~~was 60-89 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. If a loan becomes over 90 days delinquent, it is the Company’s general policy to initiate foreclosure proceedings unless a workout arrangement to bring the loan current is in place. For loans subject to a pooling and servicing agreement, there are certain additional restrictions and/or requirements related to workout proceedings, and as such, these loans may have different attributes and/or circumstances affecting the status of delinquency or categorization of those in nonperforming status. An analysis of the delinquent loans is shown in the following chart.

Greater
30-59 Days 60-89 Days than 90 Days Total
As of September 30, 2017 Delinquent Delinquent Delinquent Delinquent
(Dollars In Thousands)
Commercial mortgage loans $ 2,293
$ —
$ 869
$ 3,162
Number of delinquent commercial mortgage loans 2
—
1
3

As of December 31, 2016
Commercial mortgage loans $ 3,669
$ —
$ —
$ 3,669
Number of delinquent commercial mortgage loans 4
—
—
4

The Company’s commercial mortgage loan portfolio consists of commercial mortgage loans that are collateralized by real estate. Due to the collateralized nature of the loans, any assessment of impairment and ultimate loss given a default on the loans is based upon a consideration of the estimated fair value of the real estate.

The Company limits accrued interest income on ~~impaired~~ loans to 90ninety days of interest. ~~Once accrued interest on the impaired loan is received,~~For loans in nonaccrual status, interest income is recognized on a cash basis. For ~~information regarding impaired loans, please refer~~the three months ended March 31, 2021, an immaterial amount of accrued interest was excluded from the amortized cost basis pursuant to the ~~following chart:~~ Company's nonaccrual policy.

As of March 31, 2021, the Company had 1 loan in a nonaccrual status with an allowance recorded. The recorded investment, unpaid principal balance, and average recorded investment was $1 million. As of December 31, 2020, the Company had 1 loan in a nonaccrual status with no related allowance recorded. The recorded investment, unpaid principal balance, and average recorded investment was $1 million.

Unpaid Average Interest Cash Basis
Recorded Principal Related Recorded Income Interest
As of September 30, 2017 Investment Balance Allowance Investment Recognized Income
(Dollars In Thousands)
Commercial mortgage loans:

With no related allowance recorded $ —
$ —
$ —
$ —
$ —
$ —
With an allowance recorded 1,924
1,924
1,055
1,924
18
27

As of December 31, 2016

Commercial mortgage loans:

With no related allowance recorded $ —
$ —
$ —
$ —
$ —
$ —
With an allowance recorded 1,819
1,819
724
1,819
96
96

~~Mortgage~~Commercial mortgage loans that were modified in a troubled debt restructuring as of ~~September 30, 2017~~December 31, 2020 is shown below. The Company did not have any commercial mortgage loans that were modified in a troubled debt restructuring as of March 31, 2021.


	Number of Contracts	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
	(Dollars In Millions)




As of December 31, 2020
Troubled debt restructuring:
Commercial mortgage loans	2	$	2	$	2

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8.MONY CLOSED BLOCK OF BUSINESS

Assets allocated to the Closed Block inure solely to the benefit of the Closed Block’s policyholders and will not revert to the benefit of MONY or the Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of MONY’s general account, any of MONY’s separate accounts or any affiliate of MONY without the approval of the Superintendent of The New York State Department of Financial Services (the “Superintendent”). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the general account.

Summarized financial information for the Closed Block as of March 31, 2021 and December 31, ~~2016~~2020 is as follows:


	As of
	March 31, 2021		December 31, 2020
	(Dollars In Millions)
Closed block liabilities
Future policy benefits, policyholders’ account balances and other policyholder liabilities	$	5,377	$	5,406
Policyholder dividend obligation	234		580
Other liabilities	23		7
Total closed block liabilities	5,634		5,993
Closed block assets
Fixed maturities, available-for-sale, at fair value	4,530		4,903

Commercial mortgage loans	65		68
Policy loans	587		596
Cash and other invested assets	80		46
Other assets	96		91
Total closed block assets	5,358		5,704
Excess of reported closed block liabilities over closed block assets	276		289
Portion of above representing accumulated other comprehensive income:
Net unrealized gains (losses) - net of policyholder dividend obligation: 2021 - $147 and 2020- $493; and net of income tax: 2021 - $(31) and 2020 - $(104)	0		0
Future earnings to be recognized from closed block assets and closed block liabilities	$	276	$	289

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Reconciliation of the policyholder dividend obligation is as follows:


	For The Three Months Ended March 31,
	2021		2020
	(Dollars In Millions)
Policyholder dividend obligation, beginning balance	$	580	$	279
Applicable to net revenue (losses)	1		(7)
Change in net unrealized gains (losses) - allocated to the policyholder dividend obligation	(347)		(198)
Policyholder dividend obligation, ending balance	$	234	$	74

Closed Block revenues and expenses were as follows:


	For The Three Months Ended March 31,
	2021		2020
	(Dollars In Millions)
Revenues
Premiums and other income	$	34	$	35
Net investment income	48		51
Net realized gains (losses)	23		0
Total revenues	105		86
Benefits and other deductions
Benefits and settlement expenses	89		78
Other operating expenses	0		0
Total benefits and other deductions	89		78
Net revenues before income taxes	16		8
Income tax expense	3		2
Net revenues	$	13	$	6

9.REINSURANCE

Number of
Contracts

Pre-Modification
Outstanding
Recorded
Investment

Post-Modification
Outstanding
Recorded
Investment
(Dollars In Thousands)
As of September 30, 2017
Troubled debt restructuring:
Commercial mortgage loans 2 $ 1,134
$ 1,134

As of December 31, 2016

Troubled debt restructuring:
Commercial mortgage loans 1 $ 468
$ 468
Allowance for Credit Losses – Reinsurance Receivables

9.~~GOODWILL~~

The ~~balance~~Company establishes an allowance for current expected credit losses related to amounts receivable from reinsurers (the “Reinsurance ACL”). Changes in the Reinsurance ACL are recognized as a component of ~~goodwill for~~benefits and settlement expenses. The Reinsurance ACL is remeasured on a quarterly basis using an internally developed probability of default (“PD”) and loss given default (“LGD”) model. Key inputs to the calculation are a conditional probability of insurer liquidation by issuer credit rating and exposure at default derived from a runoff projection of ceded reserves by reinsurer to forecast future loss amounts. Management’s position is that the rate of return implicit in the financial asset (i.e. the ceded reserves) is associated with the discount rate used to value the underlying insurance reserves; that is, the rate of return on the asset portfolio(s) supporting the reserves. For reinsurance receivable exposures that do not share similar risk characteristics with other receivables, including those associated with counterparties that have experienced significant credit deterioration, the Company measures the allowance for credit losses individually, based on facts and circumstances associated with the specific reinsurer or transaction.

As of March 31, 2021 and December 31, 2020, the Reinsurance ACL was $90 million and $94 million respectively. There were 0 write-offs or recoveries during the three months ended March 31, 2021 and 2020.

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The Company had total reinsurance receivables of $4.6 billion as of ~~September 30, 2017 was $793.5 million. There has been no change to goodwill during~~March 31, 2021, which includes both ceded policy benefit reserves and receivables for claims. Receivables for claims represented 13% of total reinsurance receivables as of March 31, 2021. Receivables for claims are short-term in nature, and generally carry minimal credit risk. Of reserves ceded as of March 31, 2021, 76% were receivables from reinsurers rated by A.M. Best Company. Of the ~~nine months ended September 30, 2017.~~

~~Accounting for goodwill requires an estimate of the future profitability of the associated lines of business to assess the recoverability of the capitalized acquisition goodwill.~~total rated by A.M. Best, 75% were rated A+ or better, 13% were rated A, and 11% were rated A- or lower. The Company ~~evaluates~~monitors the ~~carrying value~~concentration of goodwill at the segment (or reporting unit) level at least annually and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to: 1) a significant adverse change in legal factors or in business climate, 2) unanticipated competition, or 3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired,credit risk the Company ~~first determines through qualitative analysis whether relevant events and circumstances indicate that it is more likely than not that segment goodwill balances are impaired~~has with any reinsurer, as ofwell as the testing date. If it is determined that it is more likely than not that impairment exists, the Company compares its estimate of the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. The Company utilizes a fair value measurement (which includes a discounted cash flows analysis) to assess the carrying value of the reporting units in consideration of the recoverability of the goodwill balance assigned to each reporting unit as of the measurement date. The Company’s material goodwill balances are attributable to certainfinancial condition of its ~~operating segments (which are each considered to be reporting units). The cash flows used to determine the fair value~~reinsurers, on an ongoing basis. Certain of the Company’s ~~reporting units~~reinsurance receivables are ~~dependent on a number~~supported by letters of significant assumptions. The Company’s estimates, which consider a market participant view of fair value, are subject to change given the inherent uncertainty in predicting future results and cash flows, which are impacted by such things as policyholder behavior, competitor pricing, capital limitations, new product introductions, and specific industry and market conditions.credit, funds held or trust agreements.

The balance recognized as goodwill is not amortized, but is reviewed for impairment on an annual basis, or more frequently as events or circumstances may warrant, including those circumstances which would more likely than not reduce the fair value of the Company’s reporting units below its carrying amount. During the fourth quarter of 2016, the Company performed its annual evaluation of goodwill based on information as of October 1, 2016, and determined that no adjustment to impair goodwill was necessary. During the nine months ended September 30, 2017, the Company did not identify any events or circumstances which would indicate that the fair value of its operating segments would have declined below their book value, either individually or in the aggregate.

10.DEBT AND OTHER OBLIGATIONS

~~The~~Under a revolving line of credit arrangement (the “Credit Facility”), the Company has the ability to borrow on an unsecured basis ~~under a Credit Facility~~ up to an aggregate principal amount of ~~$1.0~~$1 billion. The Company has the right in certain circumstances to request that the commitment under the Credit Facility be increased up to a maximum principal amount of ~~$1.25~~$2 billion. Balances outstanding under the Credit Facility accrue interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC’s Senior Debt, or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent’s Prime rate, (y) 0.50% above the Funds ~~rate,~~Rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC’s Senior Debt. The Credit Facility also provided for a facility fee at a rate that varies with the ratings of PLC’s Senior Debt and that is calculated on the aggregate amount of commitments under the Credit Facility, whether used or unused. The annual facility fee rate is 0.125% of the aggregate principal amount. The Credit Facility provides that PLC is liable for the full amount of any obligations for borrowings or letters of credit, including those of the Company, under the Credit Facility. The maturity date of the Credit Facility is ~~February 2, 2020.~~May 3, 2023. The Company is not aware of any non-compliance with the financial debt covenants of the Credit Facility as of ~~September 30, 2017.~~March 31, 2021. PLC had an outstanding balance of ~~$170.0~~$385 million, ~~bearing interest at a rate of LIBOR plus 1.00%~~ as of ~~September 30, 2017.~~

~~Non-RecourseFunding Obligations~~

~~Non-recourse funding obligations~~March 31, 2021. PLC had a $190 million outstanding ~~as of September 30, 2017, on a consolidated basis, are shown in the following table:~~

Issuer Outstanding Principal
Carrying Value⁽¹⁾

Maturity
Year

Year-to-Date
Weighted-Avg
Interest Rate
(Dollars In Thousands)
Golden Gate Captive Insurance Company⁽²⁾⁽³⁾
$ 2,040,000
$ 2,040,000
2039 4.75 %
Golden Gate II Captive Insurance Company 278,949
228,855
2052 2.92 %
Golden Gate V Vermont Captive Insurance Company⁽²⁾⁽³⁾
605,000
666,729
2037 5.12 %
MONY Life Insurance Company⁽³⁾
1,091
2,421
2024 6.19 %
Total $ 2,925,040
$ 2,938,005

(1) Carrying values include premiums and discounts and do not represent unpaid principal balances.
(2) Obligations are issued to non-consolidated subsidiaries of PLC. These obligations collateralize certain held-to-maturity securities issued by wholly owned subsidiaries of the Company.
(3) Fixed rate obligations.

~~Non-recourse funding obligations outstanding~~balance as of December 31, ~~2016, on a consolidated basis, are shown in the following table:~~

Issuer Outstanding Principal
Carrying Value⁽¹⁾

Maturity
Year

Year-to-Date
Weighted-Avg
Interest Rate
(Dollars In Thousands)
Golden Gate Captive Insurance Company⁽²⁾⁽³⁾
$ 2,116,000
$ 2,116,000
2039 4.75 %
Golden Gate II Captive Insurance Company 278,949
227,338
2052 1.30 %
Golden Gate V Vermont Captive Insurance Company⁽²⁾⁽³⁾
565,000
628,025
2037 5.12 %
MONY Life Insurance Company⁽³⁾
1,091
2,466
2024 6.19 %
Total $ 2,961,040
$ 2,973,829

(1) Carrying values include premiums and discounts and do not represent unpaid principal balances.
(2) Obligations are issued to non-consolidated subsidiaries of PLC. These obligations collateralize certain held-to-maturity securities issued by wholly owned subsidiaries of the Company.
(3) Fixed rate obligations.
2020.

Secured Financing Transactions

Repurchase Program Borrowings

While the Company anticipates that the cash flows of its operating subsidiaries will be sufficient to meet its investment commitments and operating cash needs in a normal credit market environment, the Company recognizes that investment commitments scheduled to be funded may, from time to time, exceed the funds then available. Therefore, the Company has established repurchase agreement programs for certain of its insurance subsidiaries to provide liquidity when needed. The Company expects that the rate received on its investments will equal or exceed its borrowing rate. Under this program, the Company may, from time to time, sell an investment security at a specific price and agree to repurchase that security at another specified price at a later date. These borrowings are typically for a term less than 90 days. The market value of securities to be repurchased is monitored and collateral levels are adjusted where appropriate to protect the counterparty against credit exposure. Cash received is invested in fixed maturity securities, and the agreements ~~provided~~provide for net settlement in the event of default or on termination of the agreements. As of ~~September 30, 2017,~~March 31, 2021, the fair value of securities pledged under the repurchase program was ~~$549.8~~$917 million, and the repurchase obligation of ~~$493.8~~$854 million was included in the Company’s consolidated condensed balance sheets (at an average borrowing rate of ~~118~~15 basis points). During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2021, the maximum balance outstanding at any one point in time related to these programs was ~~$981.3~~$1,077 million. The average daily balance was ~~$546.2~~$347 million (at an average borrowing rate of 8917 basis points) during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2021. As of December 31, ~~2016,~~2020, the fair value of securities pledged under the repurchase program was ~~$861.7~~$452 million, and the repurchase obligation of ~~$797.7~~$437 million was included in the ~~Company's~~Company’s consolidated condensed balance sheets (at an average borrowing rate of 6515 basis points). During ~~2016,~~2020, the maximum balance outstanding at any one point in time related to these programs was ~~$1,065.8~~$825 million. The average daily balance was ~~$505.4~~$143 million (at an average borrowing rate of 4433 basis points) during the year ended December 31, ~~2016.~~2020.

Securities Lending

The Company participates in securities lending, primarily as an investment yield enhancement, whereby securities that are held as investments are loaned out to third parties for short periods of time. The Company requires ~~initial~~ collateral ofat least equal to 102% of the ~~market~~fair value of the loaned securities to be separately maintained. The loaned securities’ ~~market~~fair value is monitored on a daily ~~basis.~~basis and collateral is adjusted accordingly. The Company maintains ownership of the securities at all times and is entitled to receive from the borrower any payments for interest received on such securities during the loan term. Securities lending transactions are accounted for as secured borrowings. As of ~~September 30, 2017,~~March 31, 2021 and December 31, 2020, securities with a ~~market~~fair value of ~~$100.2~~$129 million and $57 million, respectively, were loaned under this program. As collateral for the loaned securities, the Company receives cash which is primarily reinvested in short-term repurchase agreements, which are also collateralized by U.S. Government or U.S. Government Agency securities, and government money market funds. These investments ~~which~~ are recorded in ~~“short-term investments”~~short-term investments with a corresponding liability recorded in ~~“secured~~secured financing ~~liabilities”~~liabilities to account for its obligation to return the collateral. As of ~~September 30, 2017,~~March 31, 2021 and December 31, 2020, the fair value of the collateral related to this

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program was ~~$105.8~~$133 million and $59 million and the Company has an obligation to return ~~$105.8~~$133 million and $59 million of collateral to the securities ~~borrowers.~~borrowers, respectively.

The following table provides the ~~amount by asset class of securities~~fair value of collateral pledged for repurchase agreements, ~~and securities that have been loaned as part of securities lending transactions~~grouped by asset class as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016:~~2020:

Repurchase Agreements, Securities Lending Transactions, and Repurchase-to-Maturity Transactions

Accounted for as Secured Borrowings


	Remaining Contractual Maturity of the Agreements
	As of March 31, 2021
	(Dollars In Millions)
	Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions
U.S. Treasury and agency securities	$	843	$	74	$	0	$	0	$	917






Total repurchase agreements and repurchase-to-maturity transactions	843		74		0		0		917
Securities lending transactions



Corporate securities	123		0		0		0		123
Equity securities	5		0		0		0		5
Redeemable preferred stocks	1		0		0		0		1


Total securities lending transactions	129		0		0		0		129
Total securities	$	972	$	74	$	0	$	0	$	1,046

Remaining Contractual Maturity of the Agreements
As of September 30, 2017
(Dollars In Thousands)

Overnight and
Continuous
Up to 30 days 30-90 days
Greater Than
90 days
Total
Repurchase agreements and repurchase-to-maturity transactions

U.S. Treasury and agency securities $ 322,986
$ 20,006
$ —
$ —
$ 342,992
Mortgage loans 206,796
—
—
—
206,796
Total repurchase agreements and repurchase-to-maturity transactions 529,782
20,006
—
—
549,788
Securities lending transactions
Corporate securities 97,385
—
—
—
97,385
Equity securities 2,621
—
—
—
2,621
Preferred stock 174
—
—
—
174
Total securities lending transactions 100,180
—
—
—
100,180
Total securities $ 629,962
$ 20,006
$ —
$ —
$ 649,968

Repurchase Agreements, Securities Lending Transactions, and Repurchase-to-Maturity Transactions

Accounted for as Secured Borrowings


	Remaining Contractual Maturity of the Agreements
	As of December 31, 2020
	(Dollars In Millions)
	Overnight and Continuous		Up to 30 days		30-90 days		Greater Than 90 days		Total
Repurchase agreements and repurchase-to-maturity transactions
U.S. Treasury and agency securities	$	366	$	86	$	0	$	0	$	452






Total repurchase agreements and repurchase-to-maturity transactions	366		86		0		0		452
Securities lending transactions



Fixed maturity securities	49		0		0		0		49
Equity securities	7		0		0		0		7
Redeemable preferred stocks	1		0		0		0		1


Total securities lending transactions	57		0		0		0		57
Total securities	$	423	$	86	$	0	$	0	$	509

Golden Gate Captive Insurance Company

On October 1, 2020, Golden Gate Captive Insurance Company (“Golden Gate”), a Vermont special purpose financial insurance company and a wholly owned subsidiary of PLICO, entered into a transaction with a term of 20 years, that may be extended to a maximum of 25 years, to finance up to $5 billion of “XXX” and “AXXX” reserves related to the term life insurance business and universal life insurance with secondary guarantee business that is reinsured to Golden Gate by PLICO and West Coast Life Insurance Company, an indirect wholly owned subsidiary, pursuant to an Excess of Loss Reinsurance Agreement (the “XOL Agreement”) with Hannover Life Reassurance Company of America (Bermuda) Ltd., The Canada Life Assurance Company (Barbados Branch) and RGA Reinsurance Company (Barbados) Ltd. (collectively, the “Retrocessionaires”). The transaction is “non-recourse” to the Company, WCL, and PLICO, meaning that none of these companies are liable to reimburse the Retrocessionaires for any XOL payments required to be made. As of March 31, 2021, the XOL Asset backing the difference in statutory and economic reserve liabilities was $4.492 billion.

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Remaining Contractual Maturity of the Agreements
As of December 31, 2016
(Dollars In Thousands)

Overnight and
Continuous
Up to 30 days 30-90 days
Greater Than
90 days
Total
Repurchase agreements and repurchase-to-maturity transactions

U.S. Treasury and agency securities $ 357,705
$ 23,758
$ —
$ —
$ 381,463
State and municipal securities —
—
—
—
—
Other asset-backed securities —
—
—
—
—
Corporate securities —
—
—
—
—
Equity securities —
—
—
—
—
Non-U.S. sovereign debt —
—
—
—
—
Mortgage loans 480,269
—
—
—
480,269
Total securities $ 837,974
$ 23,758
$ —
$ —
$ 861,732

11.COMMITMENTS AND CONTINGENCIES

The Company has entered into indemnity agreements with each of its current directors other than those that are employees of Dai-ichi Life that provide, among other things and subject to certain limitations, a contractual right to indemnification to the fullest extent permissible under the law. The Company has agreements with certain of its officers providing up to $10 million in indemnification. These obligations are in addition to the customary obligation to indemnify officers and directors contained in the Company’s governance documents.

The Company leases administrative and marketing office space as well as various office equipment. Most leases have terms ranging from two years to twenty-five years. Leases with an initial term of 12 months or less are not recorded on the consolidated condensed balance sheet. The Company accounts for lease components separately from non-lease components (e.g., common area maintenance). Certain of the Company’s lease agreements include options to renew at the Company’s discretion. Management has concluded that the Company is not reasonably certain to elect any of these renewal options. The Company will use the interest rates received on its funding agreement backed notes as the collateralized discount rate when calculating the present value of remaining lease payments when the rate implicit in the lease is unavailable.

Under the insurance guaranty fund laws in most states, insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. From time to time, companies may be asked to

contribute amounts beyond prescribed limits. It is possible that the Company could be assessed with respect to product lines not offered by the Company. In addition, legislation may be introduced in various states with respect to guaranty fund assessment laws related to insurance products, including long term care insurance and other specialty products, that increases the cost of future assessments or alters future premium tax offsets received in connection with guaranty fund assessments. The Company cannot predict the amount, nature or timing of any future assessments or legislation, any of which could have a material and adverse impact on the ~~Company's~~Company’s financial condition or results of operations.

A number of civil jury verdicts have been returned against insurers, broker-dealers, and other providers of financial services involving sales, refund or claims practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or persons with whom the insurer does business, and other matters. Often these lawsuits have resulted in the award of substantial judgments that are disproportionate to the actual damages, including material amounts of punitive and non-economic compensatory damages. In some states, juries, judges, and arbitrators have substantial discretion in awarding punitive and non-economic compensatory damages which creates the potential for unpredictable material adverse judgments or awards in any given lawsuit or arbitration. Arbitration awards are subject to very limited appellate review. In addition, in some class action and other lawsuits, companies have made material settlement payments. The financial services and insurance industries in particular are also sometimes the target of law enforcement and regulatory investigations relating to the numerous laws and regulations that govern such companies. Some companies have been the subject of law enforcement or regulatory actions or other actions resulting from such investigations. The Company, in the ordinary course of business, is involved in such matters.

The Company establishes liabilities for litigation and regulatory actions when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. For matters where a loss is believed to be reasonably possible, but not probable, no liability is established. For such matters, the Company may provide an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. The Company reviews relevant information with respect to litigation and regulatory matters on a quarterly and annual basis and updates its established liabilities, disclosures, and estimates of reasonably possible losses or range of loss based on such reviews.

~~The Company and certain~~Certain of ~~its~~the Company’s insurance subsidiaries, as well as certain other insurance companies for which the Company has coinsured blocks of life insurance and annuity policies, are under audit for compliance with the unclaimed property laws of a number of states. The audits are being conducted on behalf of the treasury departments or unclaimed property administrators in such states. The focus of the audits is on whether there have been unreported deaths, maturities, or policies that have exceeded limiting age with respect to which death benefits or other payments under life insurance or annuity policies should be treated as unclaimed property that should be escheated to the state. The Company is presently unable to estimate the reasonably possible loss or range of loss that may result from the audits due to a number of factors, including ~~uncertainty as to the legal theory or theories that may give rise to liability,~~ the early stages of the audits being conducted, and ~~with respect to one block of life insurance policies that is co-insured by a subsidiary of the Company,~~ uncertainty as to whether the Company or other companies are responsible for the liabilities, if any, arising in connection with ~~such~~certain co-insured policies. The Company will continue to monitor the matter for any developments that would make the loss contingency associated with the audits reasonably estimable.

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Advance Trust & Life Escrow Services, LTA, as Securities Intermediary of Life Partners Position Holder Trust v. Protective Life Insurance Company, Case No. 2:18-CV-01290, is a putative class action that was filed on August 13, 2018 in the United States District Court for the Northern District of Alabama. Plaintiff alleges that the Company required policyholders to pay unlawful and excessive cost of insurance charges. Plaintiff seeks to represent all owners of universal life and variable universal life policies issued or administered by the Company or its predecessors that provide that cost of insurance rates are to be determined based on expectations of future mortality experience. The plaintiff seeks class certification, compensatory damages, pre-judgment and post-judgment interest, costs, and other unspecified relief. The Company is vigorously defending this matter and cannot predict the outcome of or reasonably estimate the possible loss or range of loss that might result from this litigation.

Scottish Re (U.S.), Inc. ("SRUS") was placed in rehabilitation on March 6, 2019 by the State of Delaware. Under the related order, the Insurance Commissioner of the State of Delaware has been appointed the receiver of SRUS and provided with authority to conduct and continue the business of SRUS in the interest of its cedents, creditors, and stockholder. The order was accompanied by an injunction requiring the continued payment of reinsurance premiums to SRUS and temporarily prohibiting cedents, including the Company, from offsetting premiums payable against receivables from SRUS. On June 20, 2019, the Delaware Court of Chancery entered an order approving a Revised Offset Plan, which allows cedents, including the Company, to offset premiums under certain circumstances.

A proposed Rehabilitation Plan (“Rehabilitation Plan”) was filed by the Receiver on June 30, 2020. The Rehabilitation Plan presents the following two options to each cedent: (1) remain in business with SRUS and be governed by the Rehabilitation Plan, or (2) recapture business ceded to SRUS. Due to SRUS’s financial status, neither option would pay 100% of outstanding claims. Certain financial terms and conditions will be imposed on the cedents based on the election made, the type of business ceded, the manner in which the business is collateralized, and the amount of losses sustained by a cedent. On October 9, 2020, the Receiver filed a proposed order setting forth a schedule to present the Rehabilitation Plan for Court approval, which order contemplated possible modifications to the Rehabilitation Plan to be filed with the Court by March 16, 2021. On January 15, 2021, the Receiver circulated a draft Amended Rehabilitation Plan (“Amended Plan”) with interested parties. The majority of the substance and form of the original Rehabilitation Plan, including its two option structure described above, remained in place. On March 16, 2021, the Receiver filed a draft Amended Plan, which contains the same proposed revisions as the draft he previously circulated on January 15, 2021. Later on March 19, 2021, the Receiver filed a proposed order asking the Court to revise the schedule to push back dates, including the deadline that the Receiver must file any modifications to the Amended Plan to May 3, 2021. A group of interested parties separately filed a Motion to Appoint a Special Master, and at the hearing on the Motion, held on March 26, 2021, the Court suspended all deadlines in the case to allow the Receiver and interested parties to meet and confer on a number of topics for 30 days. A joint status report was filed with the Court on May 7, 2021. It is anticipated that a new scheduling order will be entered in the near future.

The Company continues to monitor SRUS and ~~certain of its subsidiaries are under a targeted multi-state examination with respect to their claims paying practices and their use~~the actions of the ~~U.S. Social Security Administration’s Death Master File or similar databases (a “Death Database”)~~receiver through discussions with legal counsel and review of publicly available information. An allowance for credit losses related to ~~identify unreported deaths~~SRUS is included in ~~their life insurance policies, annuity contracts and retained asset accounts. There is no clear basis in previously existing law~~the overall reinsurance allowance for requiring a life insurer to search for unreported deaths in order to determine whether a benefit is owed, and substantial legal authority exists to support the position that the prevailing industry practice was lawful. A numbercredit losses. As of life insurers, however, have entered into settlement or consent agreements with state insurance regulators under which the life insurers agreed to implement procedures for periodically comparing their life insurance and annuity contracts and retained asset accounts against a Death Database, treating confirmed deaths as giving rise to a death benefit under their policies, locating beneficiaries and paying them the benefits and interest, escheating the benefits and interest to the state if the beneficiary could not be found, and paying penalties to the state, if required. It has been publicly reported that the life insurers have paid administrative and/or examination fees to the insurance regulators in connection with the settlement or consent agreements. The Company believes that insurance regulators could demand from the Company administrative and/or examination fees relating to the targeted multi-state examination. Based on publicly reported payments by other life insurers, the CompanyMarch 31, 2021, management does not believe ~~such fees, if assessed, would~~that the ultimate outcome of the rehabilitation process will have a material ~~effect~~impact on ~~its~~our financial ~~statements.~~position or results of operations.

~~12.EMPLOYEE BENEFIT PLANS~~

~~Components of the net periodic benefit cost of PLC's defined benefit pension plan for the three and nine months ended September 30, 2017 and 2016, are as follows:~~

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
Defined
Benefit
Pension
Plan

Excess
Benefit
Plan Defined
Benefit
Pension
Plan
Excess
Benefit
Plan Defined
Benefit
Pension
Plan Excess
Benefit
Plan
Defined
Benefit
Pension
Plan

Excess
Benefit
Plan
(Dollars In Thousands)
Service cost — benefits earned during the period $ 3,348
$ 334
$ 2,906
$ 311
$ 10,044
$ 1,002
$ 8,717
$ 1,102
Interest cost on projected benefit obligation 2,191
297
2,737
299
6,573
891
8,210
1,054
Expected return on plan assets (3,352 ) —
(3,605 ) —
(10,056 ) —
(10,816 ) —
Amortization of prior service cost —
—
—
—
—
—
—
—
Amortization of actuarial losses —
118
—
64
—
354
—
114
Preliminary net periodic benefit cost 2,187
749
2,038
674
6,561
2,247
6,111
2,270
Settlement/curtailment expense —
—
—
635
—
—
—
2,135
Total net periodic benefit costs $ 2,187
$ 749
$ 2,038
$ 1,309
$ 6,561
$ 2,247
$ 6,111
$ 4,405

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During the nine months ended September 30, 2017, PLC contributed $43.5 million to its defined benefit pension plan for the 2016 plan year. PLC will make contributions in future periods as necessary to at least satisfy minimum funding requirements. PLC may also make additional contributions in future periods to maintain an adjusted funding target attainment percentage (“AFTAP”) of at least 80% and to avoid certain Pension Benefit Guaranty Corporation (“PBGC”) reporting triggers.

~~13.~~12.ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following tables summarize the changes in the accumulated balances for each component of accumulated other comprehensive income (loss) (“AOCI”) as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016.~~2020.

Changes in Accumulated Other Comprehensive Income (Loss) by Component

Unrealized
Gains and Losses
on Investments⁽²⁾

Accumulated
Gain and Loss
Derivatives

Total
Accumulated
Other
Comprehensive
Income (Loss)
(Dollars In Thousands, Net of Tax)
Beginning Balance, December 31, 2016 $ (655,767 ) $ 727
$ (655,040 )
Other comprehensive income (loss) before reclassifications 547,885
36
547,921
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings 7,125
—
7,125
Amounts reclassified from accumulated other comprehensive income (loss)⁽¹⁾
(536 ) 257
(279 )
Net current-period other comprehensive income (loss) 554,474
293
554,767
Ending Balance, September 30, 2017 $ (101,293 ) $ 1,020
$ (100,273 )

(1) See Reclassification table below for details.
(2) As of September 30, 2017, net unrealized losses reported in AOCI were offset by $93.6 million due to the impact those net unrealized losses would have had on certain of the Company’s insurance assets and liabilities if the net unrealized losses had been recognized in net income.

~~Changes in Accumulated Other Comprehensive Income (Loss) by Component~~

Unrealized
Gains and Losses
on Investments⁽²⁾

Accumulated
Gain and Loss
Derivatives

Total
Accumulated
Other
Comprehensive
Income (Loss)
(Dollars In Thousands, Net of Tax)
Beginning Balance, December 31, 2015 $ (1,246,391 ) $ —
$ (1,246,391 )
Other comprehensive income (loss) before reclassifications 606,848
688
607,536
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings (6,782 ) —
(6,782 )
Amounts reclassified from accumulated other comprehensive income (loss)⁽¹⁾
(9,442 ) 39
(9,403 )
Net current-period other comprehensive income (loss) 590,624
727
591,351
Ending Balance, December 31, 2016 $ (655,767 ) $ 727
$ (655,040 )

(1) See Reclassification table below for details.
(2) As of December 31, 2015 and December 31, 2016, net unrealized losses reported in AOCI were offset by $623.0 million and $424.1 million, respectively, due to the impact those net unrealized losses would have had on certain of the Company’s insurance assets and liabilities if the net unrealized losses had been recognized in net income.


	Unrealized Gains and Losses on Investments(2)		Accumulated Gain and Loss on Derivatives		Total Accumulated Other Comprehensive Income (Loss)
	(Dollars In Millions, Net of Tax)
Balance, December 31, 2019	$	1,421	$	(8)	$	1,413
Other comprehensive income (loss) before reclassifications	2,048		(2)		2,046
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings	24		0		24
Amounts reclassified from accumulated other comprehensive income (loss)(1)	63		2		65

Balance, December 31, 2020	3,556		(8)		3,548
Other comprehensive income (loss) before reclassifications	(1,767)		2		(1,765)
Other comprehensive income (loss) on investments in net expected credit losses	5		0		5
Amounts reclassified from accumulated other comprehensive income (loss)(1)	(27)		0		(27)

Balance, March 31, 2021	$	1,767	$	(6)	$	1,761

(1) See Reclassifications Out of Accumulated Other Comprehensive Income (Loss) table below for details.
(2) As of March 31, 2021 and December 31, 2020, net unrealized gains reported in AOCI were offset by $(1.0) billion and $(2.0) billion, respectively, due to the impact those net unrealized losses would have had on certain of the Company’s insurance assets and liabilities if the net unrealized losses had been recognized in net income.

The following tables summarize the reclassifications amounts out of AOCI for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~2020.

Reclassifications Out of Accumulated Other Comprehensive Income (Loss)


		For The Three Months Ended March 31,
Gains (losses) in net income:	Affected Line Item in the Consolidated Condensed Statements of Income	2021		2020
		(Dollars In Millions)

Derivative instruments	Benefits and settlement expenses, net of reinsurance ceded(1)	$	0	$	(1)
	Tax (expense) benefit	0		0
		$	0	$	(1)

Unrealized gains and losses on available-for-sale securities	Realized gains (losses) - investments	$	30	$	39
	Change in net expected credit losses - fixed maturities	5		(52)

	Tax (expense) benefit	(8)		3
		$	27	$	(10)

(1) See Note 5, Derivative Financial Instruments for additional information

For The Three Months Ended September 30, 2017 Amount
Reclassified
from Accumulated
Other Comprehensive
Income (Loss) Affected Line Item in the
Consolidated Condensed Statements of Income
(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit⁽¹⁾
$ (38 ) Benefits and settlement expenses, net of reinsurance ceded
(38 ) Total before tax
14
Tax (expense) or benefit
$ (24 ) Net of tax
Unrealized gains and losses on available-for-sale securities

Net investment gains (losses) $ 690
Realized investment gains (losses): All other investments
Impairments recognized in earnings (273 ) Net impairment losses recognized in earnings
417
Total before tax
(146 ) Tax (expense) or benefit
$ 271
Net of tax

(1) See Note 6, Derivative Financial Instruments for additional information

~~Reclassifications Out~~Table of ~~Accumulated Other Comprehensive Income (Loss)~~

Contents

For The Nine Months Ended September 30, 2017 Amount
Reclassified
from Accumulated
Other Comprehensive
Income (Loss) Affected Line Item in the
Consolidated Condensed Statements of Income
(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit⁽¹⁾
$ (396 ) Benefits and settlement expenses, net of reinsurance ceded
(396 ) Total before tax
139
Tax (expense) or benefit
$ (257 ) Net of tax
Unrealized gains and losses on available-for-sale securities

Net investment gains (losses) $ 9,084
Realized investment gains (losses): All other investments
Impairments recognized in earnings (8,259 ) Net impairment losses recognized in earnings
825
Total before tax
(289 ) Tax (expense) or benefit
$ 536
Net of tax

(1) See Note 6, Derivative Financial Instruments for additional information

~~Reclassifications Out of Accumulated Other Comprehensive Income (Loss)~~

For The Three Months Ended September 30, 2016 Amount
Reclassified
from Accumulated
Other Comprehensive
Income (Loss) Affected Line Item in the
Consolidated Condensed Statements of Income
(Dollars In Thousands)
Unrealized gains and losses on available-for-sale securities

Net investment gains (losses) $ 1,665
Realized investment gains (losses): All other investments
Impairments recognized in earnings (3,308 ) Net impairment losses recognized in earnings
(1,643 ) Total before tax
575
Tax (expense) or benefit
$ (1,068 ) Net of tax

~~Reclassifications Out of Accumulated Other Comprehensive Income (Loss)~~

For The Nine Months Ended September 30, 2016 Amount
Reclassified
from Accumulated
Other Comprehensive
Income (Loss) Affected Line Item in the
Consolidated Condensed Statements of Income
(Dollars In Thousands)
Unrealized gains and losses on available-for-sale securities

Net investment gains (losses) $ 24,133
Realized investment gains (losses): All other investments
Impairments recognized in earnings (6,892 ) Net impairment losses recognized in earnings
17,241
Total before tax
(6,035 ) Tax (expense) or benefit
$ 11,206
Net of tax

~~14.INCOME TAXES~~

In 2012, the IRS proposed favorable and unfavorable adjustments to the Company's 2003 through 2007 reported taxable income. The Company protested certain unfavorable adjustments and sought resolution at the IRS' Appeals Division. In October 2015, Appeals accepted the Company's earlier proposed settlement offer. In September 2015, the IRS proposed favorable and unfavorable adjustments to the Company's 2008 through 2011 reported taxable income. The Company agreed to these adjustments. In April 2017, a routine review by Congress’ Joint Committee on Taxation, was finalized without change and the Company expects to receive an approximate $6.2 million net refund in a future period.

~~The resulting net adjustment to the Company's current income taxes for the years 2003 through 2011 will not materially affect the Company or its effective tax rate.~~

In July 2016, the IRS proposed favorable and unfavorable adjustments to the Company's 2012 and 2013 reported taxable income. The Company agreed to these adjustments. The resulting settlement paid in September 2016 did not materially impact the Company or its effective tax rate.

There have been no material changes to the balance of unrecognized tax benefits, where the changes impact earnings, during the quarter ending September 30, 2017. The Company believes that in the next twelve months, none of the unrecognized tax benefits at September 30, 2017 will be significantly increased or reduced.

In general, the Company is no longer subject to income tax examinations by taxing authorities for tax years that began before 2014. Nevertheless, certain of these pre-2014 years have pending U.S. tax refunds. Due to their size, these refunds were reviewed by Congress' Joint Committee on Taxation. In April 2017, the Company received notification that the Joint Committee review was complete and that no changes were made. The underlying federal statutes of limitations are expected to close in due course on or before September 30, 2018. Furthermore, due to the aforementioned IRS adjustments to the Company's pre-2014 taxable income, the Company is amending certain of its 2003 through 2013 state income tax returns. Such amendments will cause such years to remain open, pending the states' acceptances of the returns.

During the year ended December 31, 2016, the Company entered into a reinsurance transaction. This transaction generated an operating loss on the Company’s consolidated 2016 U.S. income tax return. The Company has evaluated its ability to carry this loss back to receive refunds of previously-paid taxes, plus utilize the remaining loss in future years. The Company expects to receive refunds for substantially all of the U.S. income taxes that it paid in 2014 and 2015, as well as fully utilize the remaining operating loss carryforward during the carryforward period. Based on the Company’s current assessment of future taxable income, including available tax planning opportunities, the Company anticipates that it is more likely than not that it will generate sufficient taxable income to realize all of its material deferred tax assets. The Company did not record a valuation allowance against its material deferred tax assets as of September 30, 2017 and December 31, 2016.

The Company used its respective estimates of its annual 2017 and 2016 incomes in computing its effective income tax rates for the three and nine months ended September 30, 2017 and 2016. The effective tax rates for the three and nine months ended September 30, 2017 and 2016, were 29.5% and 31.4%, 22.2% and 31.4% respectively.

~~15.~~13.OPERATINGSEGMENTS

The Company has several operating segments, each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. The Company periodically evaluates its operating segments ~~as prescribed in the ASC Segment Reporting Topic,~~ and makes adjustments to its segment reporting as needed. A brief description of each segment follows.

•The Retail Life ~~Marketing~~and Annuity segment primarily markets fixed universal life (“UL”), indexed universal life ~~("IUL"~~(“IUL”), variable universal life (“VUL”), level premium term insurance (“traditional”), bank-owned life insurance (“BOLI”), ~~and level premium term~~corporate-owned life insurance (“~~traditional”~~COLI”), fixed annuity, and variable annuity (“VA”) products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, independent marketing organizations, and affinity groups.

•The Acquisitions segment focuses on acquiring, converting, and servicing policies and contracts acquired from other companies. The segment’s primary focus is on life insurance policies and annuity products that were sold to individuals. ~~The level of the~~Additionally, this segment’s acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. Policies acquired through the Acquisitions segment are typically blocks of business where no new policies are being ~~marketed. Therefore~~marketed, however, some recent acquisitions have included ongoing new business activities. Ongoing new product sales written by the Company from these acquisitions are included in the Retail Life and Annuity segment. As a result, earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage unless new acquisitions are made.

~~The Annuities segment markets fixed and VA products. These products are primarily sold through broker-dealers, financial institutions, and independent agents and brokers.~~

•The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. This segment also issues funding agreements to the FHLB, and markets guaranteed investment contracts (“GICs”) to 401(k) and other qualified retirement savings plans. The Company also has an unregistered funding agreement-backed notes program which provides for offers of notes to both domestic and international institutional investors.

•The Asset Protection segment markets extended service contracts, ~~guaranteed asset protection (“GAP”)~~GAP products, credit life and disability insurance, and other specialized ancillary products to protect consumers’ investments in automobiles and recreational vehicles. GAP ~~covers~~products are designed to cover the difference between the scheduled loan pay-off amount and an asset’s actual cash value in the case of a total loss. Each type of specialized ancillary product protects against damage or other loss to a particular aspect of the underlying asset.

•The Corporate and Other segment primarily consists of net investment income on assets supporting our equity capital, unallocated corporate overhead and expenses not attributable to the segments above. This segment includes earnings from several non-strategic or runoff lines of business, various financing and investment-related transactions, and the operations of several small subsidiaries.

The ~~Company's~~Company’s management and Board of Directors analyzes and assesses the operating performance of each segment using ~~"pre-tax~~pre-tax adjusted operating income (loss)" and ~~"after-tax~~after-tax adjusted operating income (loss)". Consistent with GAAP accounting guidance for segment reporting, pre-tax adjusted operating income (loss) is the ~~Company's~~Company’s measure of segment performance. Pre-tax adjusted operating income (loss) is calculated by adjusting ~~"income~~income (loss) before income ~~tax"~~tax, by excluding the following items:

•realized gains and losses on investments and derivatives,

•changes in the GLWB embedded derivatives exclusive of the portion attributable to the economic cost of the GLWB,

•actual GLWB incurred claims,

•immediate impacts from changes in current market conditions on estimates of future profitability on variable annuity and variable universal life products, including impacts on deferred acquisition cost (“DAC”), value of business acquired (“VOBA”), reserves and other items, and

•the amortization of DAC, VOBA, and certain policy liabilities that is impacted by the exclusion of these items.

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After-tax adjusted operating income (loss) is derived from pre-tax adjusted operating income (loss) with the inclusion of income tax expense or benefits associated with pre-tax adjusted operating income. Income tax expense or benefits is allocated to the items excluded from pre-tax adjusted operating income (loss) at the statutory federal income tax rate for the associated period. Income tax expense or benefits allocated to after-tax adjusted operating income (loss) can vary period to period based on changes in the Company’s effective income tax rate.

Pre-tax adjusted operating income (loss) and after-tax adjusted operating income (loss) presented below are non-GAAP financial measures. The items excluded from adjusted operating income (loss) are important to understanding the overall results of operations. During the period ended March 31, 2021, the Company began excluding from pre-tax and after-tax adjusted operating income (loss) the impacts on DAC, VOBA, reserves and other items due to changes in estimated profitability of variable annuity and variable universal life products as a result of changes in current market conditions. Management believes this change enhances the understanding of the underlying performance trends of these products. Pre-tax adjusted operating income (loss) and after-tax adjusted operating income (loss) are not substitutes for income before income taxes or net income (loss), respectively. These measures may not be comparable to similarly titled measures reported by other companies. The Company believes that pre-tax and after-tax adjusted operating income (loss) enhances ~~management's~~management’s and the Board of ~~Directors'~~Directors’ understanding of the ongoing operations, the underlying profitability of each segment, and helps facilitate the allocation of resources.

In determining the components of the pre-tax adjusted operating income (loss) for each segment, premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC and VOBA are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Realized ~~investment~~ gains (losses) and other operating expenses are allocated to the segments in a manner that most appropriately reflects the operations of that segment. Investments and other assets are allocated based on statutory policy liabilities net of associated statutory policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable.

In filings prior to the Company's 2016 Form 10-K, "Pre-tax adjusted operating income (loss)" was referred to as "Pre-tax operating income", "Operating income before tax", or "Segment operating income". In addition, we referred to "After-tax adjusted operating income (loss)" as "After-tax operating income" or "Operating earnings". The definition of these labels remains unchanged, but the Company has modified the labels to provide further clarity that these measures are non-GAAP measures.

There were no significant intersegment transactions during the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016.~~

2020.

The following tables present a summary of results and reconciles pre-tax adjusted operating income (loss) to consolidated income before income tax and net income:

Table of Contents


	For The Three Months Ended September 30,						For The Nine Months Ended September 30,							For The Three Months Ended March 31,
	2017			2016			2017			2016				2021		2020
	(Dollars In Thousands)													(Dollars In Millions)
Revenues													Revenues
Life Marketing	$	397,096		$	382,224		$	1,174,048		$	1,148,121
Retail Life and Annuity													Retail Life and Annuity	$	773	$	532
Acquisitions	375,819			391,017			1,164,650			1,269,672			Acquisitions	789		799
Annuities	110,870			139,265			357,589			546,378
Stable Value Products	49,933			27,380			132,863			83,519			Stable Value Products	81		37
Asset Protection	93,799			79,030			277,433			229,128			Asset Protection	71		74
Corporate and Other	77,875			34,872			109,628			111,714			Corporate and Other	(1)		(1)
Total revenues	$	1,105,392		$	1,053,788		$	3,216,211		$	3,388,532		Total revenues	$	1,713	$	1,441
Pre-tax Adjusted Operating Income (Loss)													Pre-tax Adjusted Operating Income (Loss)			s
Life Marketing	$	10,798		(512		)	55,217			$	37,712
Retail Life and Annuity													Retail Life and Annuity	$	(17)	$	(11)
Acquisitions	62,880			70,157			184,825			184,095			Acquisitions	77		75
Annuities	51,779			43,033			130,128			135,789
Stable Value Products	27,992			14,700			74,258			44,326			Stable Value Products	31		25
Asset Protection	5,187			4,099			13,812			12,496			Asset Protection	14		12
Corporate and Other	(38,054		)	(46,509		)	(107,741		)	(111,499		)	Corporate and Other	(51)		(41)
Pre-tax adjusted operating income	120,582			84,968			350,499			302,919			Pre-tax adjusted operating income	54		60
Realized (losses) gains on investments and derivatives	45,400			9,299			35,413			286,907
Non-operating income (loss)													Non-operating income (loss)	73		(219)
Income before income tax	165,982			94,267			385,912			589,826			Income before income tax	127		(159)
Income tax expense	(49,016		)	(20,965		)	(120,975		)	(185,114		)	Income tax expense	(25)		30
Net income	$	116,966		$	73,302		$	264,937		$	404,712		Net income	$	102	$	(129)

Pre-tax adjusted operating income	$	120,582		$	84,968		$	350,499		$	302,919		Pre-tax adjusted operating income	$	54	$	60
Adjusted operating income tax (expense) benefit	(33,126		)	(17,710		)	(108,580		)	(84,697		)
Adjusted operating income tax expense													Adjusted operating income tax expense	(9)		(16)
After-tax adjusted operating income	87,456			67,258			241,919			218,222			After-tax adjusted operating income	45		44
Realized (losses) gains on investments and derivatives	45,400			9,299			35,413			286,907
Income tax benefit (expense) on adjustments	(15,890		)	(3,255		)	(12,395		)	(100,417		)
Non-operating income (loss)													Non-operating income (loss)	73		(219)
Income tax (expense) benefit on adjustments													Income tax (expense) benefit on adjustments	(16)		46
Net income	$	116,966		$	73,302		$	264,937		$	404,712		Net income	$	102	$	(129)

Realized investment (losses) gains:
Derivative financial instruments	$	5,302		$	532		$	(119,392	)	$	75,988
All other investments	18,150			24,152			94,526			194,644
Net impairment losses recognized in earnings	(273		)	(3,308		)	(8,259		)	(6,892		)
Less: related amortization⁽¹⁾	(12,123		)	21,532			(38,570		)	4,409
Non-operating income (loss)													Non-operating income (loss)
Derivative gains (losses)													Derivative gains (losses)	$	181	$	(25)
Investment gains (losses)													Investment gains (losses)	(54)		(276)
VA/VUL market impacts(1)													VA/VUL market impacts(1)	8		0
Less: related amortization(2)													Less: related amortization(2)	87		(59)
Less: VA GLWB economic cost	(10,098		)	(9,455		)	(29,968		)	(27,576		)	Less: VA GLWB economic cost	(25)		(23)
Realized (losses) gains on investments and derivatives	$	45,400		$	9,299		$	35,413		$	286,907
Total non-operating income (loss)													Total non-operating income (loss)	$	73	$	(219)

(1) Includes amortization of DAC/VOBA and benefits and settlement expenses that are impacted by realized gains (losses).
(1) Represents the immediate impacts on DAC, VOBA, reserves, and other non-cash items in current period results due to changes in current market conditions on estimates of profitability, which are excluded from pre-tax and after-tax adjusted operating income (loss) beginning in Q1 of 2021.													(1) Represents the immediate impacts on DAC, VOBA, reserves, and other non-cash items in current period results due to changes in current market conditions on estimates of profitability, which are excluded from pre-tax and after-tax adjusted operating income (loss) beginning in Q1 of 2021.
(2) Includes amortization of DAC/VOBA and benefits and settlement expenses that are impacted by realized gains (losses).													(2) Includes amortization of DAC/VOBA and benefits and settlement expenses that are impacted by realized gains (losses).

Table of Contents

Operating Segment Assets
As of September 30, 2017
(Dollars In Thousands)

Life
Marketing
Acquisitions Annuities
Stable Value
Products
Investments and other assets $ 14,700,306
$ 19,681,306
$ 20,442,345
$ 4,664,251
DAC and VOBA 1,295,708
77,157
752,540
7,605
Other intangibles 286,444
35,187
173,450
8,222
Goodwill 200,274
14,524
336,677
113,813
Total assets $ 16,482,732
$ 19,808,174
$ 21,705,012
$ 4,793,891


	For The Three Months Ended March 31,
	2021		2020
	(Dollars In Millions)
Net investment income
Retail Life and Annuity	$	266	$	253
Acquisitions	399		416
Stable Value Products	63		63
Asset Protection	6		8
Corporate and Other	(14)		14
Total net investment income	$	720	$	754

Amortization of DAC and VOBA
Retail Life and Annuity	$	87	$	(14)
Acquisitions	2		52
Stable Value Products	1		1
Asset Protection	15		15
Corporate and Other	0		0
Total amortization of DAC and VOBA	$	105	$	54


	Operating Segment Assets
	As of March 31, 2021
	(Dollars In Millions)
	Retail Life & Annuity		Acquisitions		Stable Value Products
Investments and other assets	$	41,555	$	54,851	$	6,525
DAC and VOBA	2,635		892		10
Other intangibles	359		32		6
Goodwill	559		24		114
Total assets	$	45,108	$	55,799	$	6,655


	Asset Protection		Corporate and Other		Total Consolidated
Investments and other assets	$	906	$	16,629	$	120,466
DAC and VOBA	170		0		3,707
Other intangibles	98		35		530
Goodwill	129		0		826
Total assets	$	1,303	$	16,664	$	125,529


	Operating Segment Assets
	As of December 31, 2020
	(Dollars In Millions)
	Retail Life & Annuity		Acquisitions		Stable Value Products
Investments and other assets	$	39,874	$	55,628	$	5,928
DAC and VOBA	2,480		762		8
Other intangibles	367		33		6
Goodwill	559		24		114
Total assets	$	43,280	$	56,447	$	6,056

Table of Contents


	Asset Protection		Corporate and Other		Total Consolidated			Asset Protection		Corporate and Other		Total Consolidated
Investments and other assets	$	735,538	$	14,591,801	$	74,815,547	Investments and other assets	$	881	$	19,813	$	122,124
DAC and VOBA	31,440		—		2,164,450		DAC and VOBA	170		0		3,420
Other intangibles	135,895		33,714		672,912		Other intangibles	101		33		540
Goodwill	128,182		—		793,470		Goodwill	129		0		826
Total assets	$	1,031,055	$	14,625,515	$	78,446,379	Total assets	$	1,281	$	19,846	$	126,910

Table of $33.1 million, offset by lower ceded traditional life premiums of $16.9 million. Ceded traditional life premiums for the nine months ended September 30, 2017, decreased from the nine months ended September 30, 2016, primarily due to post level term activity.Contents

Ceded benefits and settlement expenses were lower for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, due to lower ceded claims and reserves. Traditional ceded benefits decreased $36.3 million for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to lower ceded reserves. Universal life ceded benefits decreased $14.1 million for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, due to a decrease in ceded claims, partially offset by an increase in ceded reserves. Ceded universal life claims were $18.0 million lower for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, driven by fewer high dollar claims during the current year.

~~Ceded amortization of DAC and VOBA decreased slightly for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016.~~

~~Ceded other operating expenses reflect the impact of reinsurance allowances net of amounts deferred.~~

Acquisitions

Segment Results of Operations

Segment results were as follows:


	For The Three Months Ended March 31,				Percent
	2021		2020		Change
	(Dollars In Millions)
REVENUES
Gross premiums and policy fees	$	442	$	381	16.0%
Reinsurance ceded	(66)		(23)		n/m
Net premiums and policy fees	376		358		5.0%
Net investment income	399		416		(4.1)%
Realized gains (losses)	(3)		(3)		—%
Other income	7		50		(86.0)%
Total operating revenues	779		821		(5.1)%
BENEFITS AND EXPENSES
Benefits and settlement expenses	644		671		(4.0)%
Amortization of VOBA	(2)		11		n/m
Other operating expenses	60		64		(6.3)%
Operating benefits and expenses	702		746		(5.9)%
PRE-TAX ADJUSTED OPERATING INCOME	77		75		2.7%
Non-operating income (loss)
Realized gains (losses)	10		(22)		n/m
Related benefits and settlement expenses	(27)		(6)		n/m
Related amortization of VOBA	(5)		(41)		n/m
VA/VUL market impacts(1)	3		—		n/m
Total non-operating income (loss)	(19)		(69)		n/m
INCOME BEFORE INCOME TAX	$	58	$	6	n/m

(1) Represents the immediate impacts on DAC, VOBA, reserves and other non-cash items in current period results due to changes in current market conditions on estimates of profitability, which are excluded from pre-tax and after-tax adjusted operating income (loss) beginning in Q1 of 2021.
N/M - we define n/m as not meaningful for increases or decreases greater than 100%.

Table of Contents

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
REVENUES

Gross premiums and policy fees $ 270,303
$ 280,598
$ 828,252
$ 877,215
Reinsurance ceded (78,647 ) (81,457 ) (239,785 ) (259,284 )
Net premiums and policy fees 191,656
199,141
588,467
617,931
Net investment income 181,714
190,890
561,632
567,559
Other income 2,515
2,771
8,350
8,223
Total operating revenues 375,885
392,802
1,158,449
1,193,713
Realized gains (losses) - investments 19,675
22,825
95,135
182,428
Realized gains (losses) - derivatives (19,741 ) (24,610 ) (88,934 ) (106,469 )
Total revenues 375,819
391,017
1,164,650
1,269,672
BENEFITS AND EXPENSES

Benefits and settlement expenses 286,035
293,616
894,509
913,344
Amortization of VOBA (453 ) (836 ) (3,362 ) 8,256
Other operating expenses 27,423
29,865
82,477
88,018
Operating benefits and expenses 313,005
322,645
973,624
1,009,618
Amortization related to benefits and settlement expenses 2,603
2,807
7,109
8,495
Amortization of VOBA related to realized gains (losses) - investments (27 ) (44 ) (183 ) (40 )
Total benefits and expenses 315,581
325,408
980,550
1,018,073
INCOME BEFORE INCOME TAX 60,238
65,609
184,100
251,599
Less: realized gains (losses) (66 ) (1,785 ) 6,201
75,959
Less: amortization related to benefits and settlement expenses (2,603 ) (2,807 ) (7,109 ) (8,495 )
Less: related amortization of VOBA 27
44
183
40
PRE-TAX ADJUSTED OPERATING INCOME $ 62,880
$ 70,157
$ 184,825
$ 184,095

The following table summarizes key data for the Acquisitions segment:

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
Average Life Insurance In-Force⁽¹⁾

Traditional $ 225,506,328
$ 241,585,970
$ 229,375,136
$ 231,957,799
Universal life 27,216,155
29,401,602
27,725,925
29,863,714
$ 252,722,483
$ 270,987,572
$ 257,101,061
$ 261,821,513
Average Account Values

Universal life $ 4,194,821
$ 4,253,363
$ 4,203,635
$ 4,279,809
Fixed annuity⁽²⁾
3,545,906
3,550,366
3,523,691
3,567,036
Variable annuity 1,194,958
1,174,310
1,181,037
1,185,166
$ 8,935,685
$ 8,978,039
$ 8,908,363
$ 9,032,011
Interest Spread - Fixed Annuities

Net investment income yield 3.97 % 3.95 % 3.99 % 3.97 %
Interest credited to policyholders 3.29 % 3.25 % 3.27 % 3.28 %
Interest spread⁽³⁾
0.68 % 0.70 % 0.72 % 0.69 %

(1) Amounts are not adjusted for reinsurance ceded.
(2) Includes general account balances held within variable annuity products and is net of coinsurance ceded.
(3) Earned rates exclude portfolios supporting modified coinsurance and crediting rates exclude 100% cessions.


	For The Three Months Ended March 31,						Percent
	2021			2020			Change
	(Dollars In Millions)
Average Life Insurance In-Force(1)
Traditional	$	232,140		$	250,648		(7.4)%
Universal life	68,163			67,618			0.8%
	$	300,303		$	318,266		(5.6)%
Average Account Values
Universal life(2)	$	15,424		$	15,549		(0.8)%
Variable universal life	8,887			7,280			22.1%
Fixed annuity(2)	9,711			10,494			(7.5)%
Variable annuity	5,462			4,532			20.5%
	$	39,484		$	37,855		4.3%
Interest Spread - Fixed Annuities
Net investment income yield	3.98		%	3.95		%
Interest credited to policyholders	3.47		%	3.28		%
Interest spread(3)	0.51		%	0.67		%

(1) Amounts are not adjusted for reinsurance ceded.
(2) Includes general account balances held within variable products and is net of reinsurance ceded. Excludes structured annuity products.
(3) Interest spread on average general account values
N/M - we define n/m as not meaningful for increases or decreases greater than 100%.

For The Three Months Ended ~~September 30, 2017,~~March 31, 2021 as compared to The Three Months Ended ~~September 30, 2016~~March 31, 2020

Pre-tax adjusted operating income

Pre-tax adjusted operating income was ~~$62.9~~$77 million, ~~for the three months ended September 30, 2017, a decrease~~an increase of ~~$7.3~~$2 million ~~as compared to the three months ended September 30, 2016,~~which was primarily ~~due to the~~driven by favorable unlocking, favorable mortality on payout annuities, and decreased expenses, partially offset by increased traditional life and universal life claims and expected runoff of the in-force blocks of business. For the three months ended September 30, 2017, the segment recorded unfavorable prospective unlocking of $3.7 million as compared to favorable $1.2 million of prospective unlocking for the three months ended September 30, 2016.

Operating revenues

Net premiums and policy fees ~~decreased $7.5~~increased $18 million, ~~or 3.8%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily~~ due to a change in the classification of certain policy fees, partially offset by lower traditional life net premiums during the first quarter of 2020 due to fluctuations in the number of policies entering their post level period at the end of 2019 and expected runoff of the in-force blocks of business.

Net investment income decreased ~~$9.2~~$17 million ~~for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016.~~

~~Total benefits and expenses~~

Total benefits and expenses decreased $9.8 million, or 3.0%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. The decrease was primarily due to the expected runoff of the in-force blocks of business, partly offset by unfavorable mortality experience and higher amortization of VOBA.

~~For The Nine Months Ended September 30, 2017, as compared to The Nine Months Ended September 30, 2016~~

~~Pre-tax adjusted operating income~~

Pre-tax adjusted operating income was $184.8 million for the nine months ended September 30, 2017, an increase of $0.7 million as compared to the nine months ended September 30, 2016, primarily due to lower operating expenses and VOBA amortization, partially offset by the expected runoff of the in-force blocks of business. For the nine months ended September 30, 2017, the segment recorded unfavorable prospective unlocking of $3.7 million.

~~Operating revenues~~

Net premiums and policy fees decreased $29.5 million, or 4.8%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to the expected runoff of the in-force blocks of business. Net investment income decreased $5.9 million, or 1.0%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to expected runoff of the in-force blocks of business. Also, other income decreased $43 million due to a change in the classification of certain policy fees and a $15 million one-time gain in the prior year.

~~Total benefits and~~Operating expenses

~~Total benefits~~

Benefits and settlement expenses decreased ~~$37.5~~$27 million, ~~or 3.7%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. The decrease was primarily~~ due to ~~improved mortality experience~~a decrease in reserve changes in the traditional life block due to fluctuations in the number of policies entering their post level period at the end of 2019, a decrease in payout annuity reserves due to increased deaths, a favorable change in unlocking, and ~~lower amortization of VOBA, as well as the~~ expected runoff of the in-force blocks of business. This decrease was partly offset by higher traditional and universal life claims and higher annuity credited interest.

~~Reinsurance~~VOBA amortization decreased $13 million primarily due to favorable unlocking. Segment results were negatively impacted by $1 million of unfavorable unlocking in 2021, as compared to $12 million of unfavorable unlocking in the prior year.

Table of Contents

Other operating expenses decreased $4 million primarily due to lower acquisition expense, lower maintenance and overhead expenses, lower taxes, and lower interest expense. This decrease was partly offset by higher commission expense during the current period.

Reinsurance

The Acquisitions segment currently reinsures portions of both its life and annuity in-force. The cost of reinsurance to the segment is reflected in the chart shown below. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies of our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020.

Impact of reinsurance

Reinsurance impacted the Acquisitions segment line items as shown in the following table:

Acquisitions Segment

Line Item Impact of Reinsurance


	For The Three Months Ended March 31,				Percent
	2021		2020		Change
	(Dollars In Millions)
REVENUES
Reinsurance ceded	$	(66)	$	(23)	n/m
BENEFITS AND EXPENSES
Benefits and settlement expenses	(80)		(10)		n/m

Other operating expenses	(7)		(7)		—%
Total benefits and expenses	(87)		(17)		n/m

NET IMPACT OF REINSURANCE(1)	$	21	$	(6)	n/m

(1) Assumes no investment income on reinsurance. Foregone investment income would substantially reduce the favorable impact of reinsurance.
N/M - we define n/m as not meaningful for increases or decreases greater than 100%.

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
REVENUES

Reinsurance ceded $ (78,647 ) $ (81,457 ) $ (239,785 ) $ (259,284 )
BENEFITS AND EXPENSES

Benefits and settlement expenses (53,233 ) (65,188 ) (207,339 ) (199,412 )
Amortization of value of business acquired (183 ) (130 ) (440 ) (325 )
Other operating expenses (9,710 ) (10,389 ) (29,272 ) (32,379 )
Total benefits and expenses (63,126 ) (75,707 ) (237,051 ) (232,116 )

NET IMPACT OF REINSURANCE⁽¹⁾
$ (15,521 ) $ (5,750 ) $ (2,734 ) $ (27,168 )

(1) Assumes no investment income on reinsurance. Foregone investment income would substantially reduce the favorable impact of reinsurance.

The segment’s reinsurance programs do not materially impact the other income line of ~~the~~our income statement. In addition, net investment income generally has no direct impact on reinsurance cost. However, by ceding business to the assuming companies, we forgo investment income on the reserves ceded to the assuming companies. Conversely, the assuming companies will receive investment income on the reserves assumed which will increase the assuming companies’ profitability on business assumed from the Company. For business ceded under modified coinsurance arrangements, the amount of investment income attributable to the assuming company is included as part of the overall change in policy reserves and, as such, is reflected in benefit and settlement expenses. The net investment income impact to us and the assuming companies has not been quantified as it is not fully reflected in our consolidated financial statements.

For The ~~net impact of reinsurance was less favorable by $9.8 million for the three months ended September 30, 2017,~~Three Months Ended March 31, 2021, as compared to the three months ended September 30, 2016, primarily due to lower ceded benefits and expenses. For the three months ended September 30, 2017, ceded revenues decreased by $2.8 million, while ceded benefits and expenses decreased by $12.6 million primarily due to lower ceded claims.The Three Months Ended March 31, 2020

The net impact of reinsurance was more favorable by $24.4 million for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to lower ceded revenues and higher ceded benefits and expenses. For the nine months ended September 30, 2017, ceded revenues decreased by $19.5 million, while ceded benefits and expenses increased by $4.9$27 million primarily due to higher ceded ~~claims.~~

~~Annuities~~

~~Segment Results~~benefits and expenses of ~~Operations~~

~~Segment results were as follows:~~

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
REVENUES

Gross premiums and policy fees $ 38,259
$ 37,560
$ 114,294
$ 109,571
Reinsurance ceded (19,569 ) (20,138 ) (59,446 ) (60,232 )
Net premiums and policy fees 18,690
17,422
54,848
49,339
Net investment income 78,903
81,747
235,468
239,668
Realized gains (losses) - derivatives (10,098 ) (9,455 ) (29,968 ) (27,576 )
Other income 41,950
41,312
125,920
118,477
Total operating revenues 129,445
131,026
386,268
379,908
Realized gains (losses) - investments 135
(3,655 ) (256 ) (3,357 )
Realized gains (losses) - derivatives, net of economic cost (18,710 ) 11,894
(28,423 ) 169,827
Total revenues 110,870
139,265
357,589
546,378
BENEFITS AND EXPENSES

Benefits and settlement expenses 52,889
60,199
159,346
157,735
Amortization of DAC/VOBA (11,741 ) (6,913 ) (11,647 ) (15,211 )
Other operating expenses 36,518
34,707
108,441
101,595
Operating benefits and expenses 77,666
87,993
256,140
244,119
Amortization related to benefits and settlement expenses 1,157
220
3,569
3,190
Amortization of DAC/VOBA related to realized gains (losses) - investments (15,887 ) 12,026
(39,753 ) (11,949 )
Total benefits and expenses 62,936
100,239
219,956
235,360
INCOME BEFORE INCOME TAX 47,934
39,026
137,633
311,018
Less: realized gains (losses) - investments 135
(3,655 ) (256 ) (3,357 )
Less: realized gains (losses) - derivatives, net of economic cost (18,710 ) 11,894
(28,423 ) 169,827
Less: amortization related to benefits and settlement expenses (1,157 ) (220 ) (3,569 ) (3,190 )
Less: related amortization of DAC/VOBA 15,887
(12,026 ) 39,753
11,949
PRE-TAX ADJUSTED OPERATING INCOME $ 51,779
$ 43,033
$ 130,128
$ 135,789

~~The following tables summarize key data for the Annuities segment:~~

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
Sales⁽¹⁾

Fixed annuity $ 246,914
$ 180,889
$ 806,432
$ 561,425
Variable annuity 87,045
154,731
323,650
479,828
$ 333,959
$ 335,620
$ 1,130,082
$ 1,041,253
Average Account Values

Fixed annuity⁽²⁾
$ 8,297,792
$ 8,162,296
$ 8,188,092
$ 8,202,283
Variable annuity 13,082,417
12,534,520
12,977,656
12,261,077
$ 21,380,209
$ 20,696,816
$ 21,165,748
$ 20,463,360
Interest Spread - Fixed Annuities⁽³⁾

Net investment income yield 3.73 % 3.76 % 3.68 % 3.69 %
Interest credited to policyholders 2.53
2.66
2.52
2.67
Interest spread 1.20 % 1.10 % 1.16 % 1.02 %

(1) Sales are measured based on the amount of purchase payments received less surrenders occurring within twelve months of the purchase payments.
(2) Includes general account balances held within VA products.
(3) Interest spread on average general account values.

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
Derivatives related to VA contracts:

Interest rate futures - VA $ 549
$ (7,002 ) $ 16,746
$ 62,065
Equity futures - VA (25,959 ) (41,836 ) (75,389 ) (66,392 )
Currency futures - VA (6,092 ) 934
(22,366 ) 5,888
Equity options - VA (23,307 ) (36,482 ) (76,376 ) (23,410 )
Interest rate swaptions - VA (292 ) (229 ) (2,423 ) (3,212 )
Interest rate swaps - VA 5,342
14,737
31,331
221,884
Total return swaps - VA (8,057 ) —
(9,675 ) —
Embedded derivative - GLWB⁽¹⁾
485
24,150
(13,306 ) (108,545 )
Funds withheld derivative 35,821
53,834
103,746
63,886
Total derivatives related to VA contracts (21,510 ) 8,106
(47,712 ) 152,164
Derivatives related to FIA contracts:

Embedded derivative - FIA (18,606 ) (14,486 ) (40,351 ) (15,938 )
Equity futures - FIA 66
2,236
161
4,269
Volatility futures - FIA —
—
—
—
Equity options - FIA 11,242
6,583
29,511
1,756
Total derivatives related to FIA contracts (7,298 ) (5,667 ) (10,679 ) (9,913 )
VA GLWB economic cost⁽²⁾
10,098
9,455
29,968
27,576
Realized gains (losses) - derivatives, net of economic cost $ (18,710 ) $ 11,894
$ (28,423 ) $ 169,827

(1) Includes impact of nonperformance risk of $0.3 million and $(11.6) million for the three and nine months ended September 30, 2017 and $(1.7) million and $9.2 million for the three and nine months ended September 30, 2016.
(2) Economic cost is the long-term expected average cost of providing the product benefit over the life of the policy based on product pricing assumptions. These include assumptions about the economic/market environment, and elective and non-elective policy owner behavior (e.g. lapses, withdrawal timing, mortality, etc.).

As of
September 30, 2017 December 31, 2016
(Dollars In Thousands)
GMDB - Net amount at risk⁽¹⁾
$ 72,809
$ 102,710
GMDB Reserves 24,118
24,734
GLWB and GMAB Reserves 20,326
7,018
Account value subject to GLWB rider 9,657,797
9,486,773
GLWB Benefit Base 10,566,159
10,559,907
GMAB Benefit Base 3,313
3,770
S&P 500® Index 2,519
2,239

(1) Guaranteed benefits in excess of contract holder account balance.

~~For The Three Months Ended September 30, 2017, as compared to The Three Months Ended September 30, 2016~~

~~Pre-tax adjusted operating income~~

~~Pre-tax adjusted operating income was $51.8~~$70 million for the three months ended September 30, 2017, as compared to $43.0 million for the three months ended September 30, 2016, an increase of $8.7 million, or 20.3%. This variance was primarily the result of favorable unlocking, growth in VA fee income, and a favorable change in SPIA mortality. Segment results were positively impacted by $13.0 million of favorable unlocking for the three months ended September 30, 2017, as compared to $5.7 million of favorable unlocking for the three months ended September 30, 2016.

~~Operating revenues~~

~~Segment operating revenues decreased $1.6 million, or 1.2%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily~~ due to ~~lower investment income~~higher ceded claims in the universal life and traditional life blocks and higher ~~GLWB economic cost~~ceded reserves in the ~~VA line of business. Those impacts were partially~~traditional life block due to post level activity, which was partly offset by higher ~~policy fees and other income from~~ceded revenue of $43 million in the VA line of business. Average fixed account balances increased 1.7% and average variable account balances increased 4.4% for the three months ended September 30, 2017 as compared to the three months ended September 30, 2016.

~~Benefits and settlement expenses~~

Benefits and settlement expenses decreased $7.3 million, or 12.1%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. This decrease was primarily the result of a favorable change in SPIA mortality, lower credited interest and a favorable change in unlocking. Included in benefits and settlement expenses was $0.1 million of favorable unlocking for the three months ended September 30, 2017, as compared to $0.9 million of unfavorable unlocking for the three months ended September 30, 2016.

~~Amortization of DAC and VOBA~~

DAC and VOBA amortization favorably changed by $4.8 million for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. The favorable changes in DAC and VOBA amortization were primarilytraditional life block due to favorable unlocking from lower lapse assumptions. DAC and VOBA unlocking for the three months ended September 30, 2017, was $12.9 million favorable as compared to $6.6 million favorable for the three months ended September 30, 2016.

~~Other operating expenses~~

Other operating expenses increased $1.8 million, or 5.2%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016 due to higher non-deferred acquisition expense, maintenance and overhead, and non-deferred commission expense.

~~Sales~~

Total sales decreased $1.7 million, or 0.5%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. Sales of variable annuities decreased $67.7 million, or 43.7%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily due to disruptionsfluctuations in the ~~broader market driven by regulatory rule changes~~number of policies entering their post level period at the end of 2019. These policies cause fluctuations in reinsurance premiums between periods for those contracts that enter the grace period and ~~the relative competitiveness~~subsequently lapse.

Table of our product within the market. Sales of fixed annuities increased by $66.0 million, or 36.5%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily due to an increase in single premium deferred annuities (“SPDA”) sales.

~~For The Nine Months Ended September 30, 2017, as compared to The Nine Months Ended September 30, 2016~~

~~Pre-tax adjusted operating income~~

Pre-tax adjusted operating income was $130.1 million for the nine months ended September 30, 2017, as compared to $135.8 million for the nine months ended September 30, 2016, a decrease of $5.7 million, or 4.2%. This variance was primarily the result of an unfavorable change in SPIA mortality and higher non-deferred expenses, partially offset by increased interest spreads, growth in VA fee income, and favorable unlocking. Segment results were positively impacted by $14.9 million of favorable unlocking for the nine months ended September 30, 2017, as compared to $6.7 million of favorable unlocking for the nine months ended September 30, 2016.

~~Operating revenues~~

Segment operating revenues increased $6.4 million, or 1.7%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to higher policy fees and other income from the VA line of business. Those increases were partially offset by higher GLWB economic cost in the VA line of business and lower investment income. Average fixed account balances decreased 0.2% and average variable account balances increased 5.8% for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016.

~~Benefits and settlement expenses~~

Benefits and settlement expenses increased $1.6 million, or 1.0%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. This increase was primarily the result of an unfavorable change in SPIA mortality partially offset by lower credited interest. Included in benefits and settlement expenses was $0.2 million of favorable unlocking for the nine months ended September 30, 2017, as compared to $0.1 million of unfavorable unlocking for the nine months ended September 30, 2016.

~~Amortization of DAC and VOBA~~

DAC and VOBA amortization unfavorably changed by $3.6 million, or 23.4%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. The unfavorable changes in normal DAC and VOBA amortization were primarily due to higher fee income in the VA line of business and the runoff of negative VOBA in the fixed annuity lines of business. These changes were partially offset by a favorable change in unlocking. DAC and VOBA unlocking for the nine months ended September 30, 2017, was $14.7 million favorable as compared to $6.8 million favorable for the nine months ended September 30, 2016.

~~Other operating expenses~~

Other operating expenses increased $6.8 million, or 6.7%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. Increases in non-deferred acquisition expense and commission expenses were offset by lower non-deferred maintenance and overhead expense.

~~Sales~~

Total sales increased $88.8 million, or 8.5%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. Sales of variable annuities decreased $156.2 million, or 32.5% for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to disruptions in the broader market driven by regulatory rule changes and the relative competitiveness of our product within the market. Sales of fixed annuities increased by $245.0 million, or 43.6%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to an increase in SPDA sales.

~~Reinsurance~~

During the year ended December 31, 2013, the Annuity segment began reinsuring certain risks associated with the GLWB and GMDB riders to Shades Creek Captive Insurance Company (“Shades Creek”), a direct wholly owned subsidiary of PLC. The cost of reinsurance to the segment is reflected in the chart shown below. The impact of the Shades Creek reinsurance arrangement for the three month period ending March 31, 2013, was eliminated in consolidation. Prior to April 1, 2013, we paid as a dividend all of Shades Creek’s outstanding common stock to its parent, PLC. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, ~~Summary of Significant Accounting Policies~~ ~~of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.~~

~~Impact of reinsurance~~

~~Reinsurance impacted the Annuities segment line items as shown in the following table:~~

~~Annuities Segment~~

~~Line Item Impact of Reinsurance~~

Contents

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
REVENUES

Reinsurance ceded $ (19,569 ) $ (20,138 ) $ (59,446 ) $ (60,232 )
Realized gains (losses) - derivatives 11,161
11,298
33,560
33,834
Total operating revenues (8,408 ) (8,840 ) (25,886 ) (26,398 )
Realized gains (losses) - derivatives, net of economic cost 24,406
(24,268 ) 72,784
167,805
Total revenues 15,998
(33,108 ) 46,898
141,407
BENEFITS AND EXPENSES

Benefits and settlement expenses (217 ) (8 ) (191 ) (1,412 )
Amortization of DAC/VOBA —
—
—
—
Other operating expenses (453 ) (481 ) (1,379 ) (1,461 )
Operating benefits and expenses (670 ) (489 ) (1,570 ) (2,873 )
Amortization of deferred policy acquisition costs related to realized gain (loss) investments —
—
—
—
Total benefit and expenses (670 ) (489 ) (1,570 ) (2,873 )
NET IMPACT OF REINSURANCE $ 16,668
$ (32,619 ) $ 48,468
$ 144,280

~~The table above does not reflect the impact of reinsurance on our net investment income. The net investment income impact to us and the assuming company has been quantified and is immaterial. The Annuities segment’s reinsurance programs do not materially impact the “other income” line of our income statement.~~

~~The net impact of reinsurance was~~ ~~favorable by $16.7 million for the three months ended September 30, 2017, as compared to the unfavorable net impact of $32.6 million for the three months ended September 30, 2016.~~

~~The net impact of reinsurance was favorable by $48.5~~ ~~million for the nine months ended~~ ~~September~~ ~~30, 2017, as compared to the favorable net impact of $144.3 million for the nine months ended~~ ~~September~~ ~~30, 2016.~~

Stable Value Products

Segment Results of Operations

Segment results were as follows:

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
REVENUES

Net investment income $ 49,962
$ 27,033
$ 130,816
$ 76,008
Other income —
176
—
176
Total operating revenues 49,962
27,209
130,816
76,184
Realized gains (losses) (29 ) 171
2,047
7,335
Total revenues 49,933
27,380
132,863
83,519
BENEFITS AND EXPENSES

Benefits and settlement expenses 19,121
11,413
51,074
29,133
Amortization of deferred policy acquisition costs 607
359
1,613
713
Other operating expenses 2,242
737
3,871
2,012
Total benefits and expenses 21,970
12,509
56,558
31,858
INCOME BEFORE INCOME TAX 27,963
14,871
76,305
51,661
Less: realized gains (losses) (29 ) 171
2,047
7,335
PRE-TAX ADJUSTED OPERATING INCOME $ 27,992
$ 14,700
$ 74,258
$ 44,326


	For The Three Months Ended March 31,				Percent
	2021		2020		Change
	(Dollars In Millions)
REVENUES
Net investment income	$	63	$	63	—%
Other income	—		—		—%
Total operating revenues	63		63		—%
BENEFITS AND EXPENSES
Benefits and settlement expenses	30		36		(16.7)%
Amortization of DAC	1		1		—%
Other operating expenses	1		1		—%
Total benefits and expenses	32		38		(15.8)%
PRE-TAX ADJUSTED OPERATING INCOME	31		25		24.0%
Add: realized gains (losses)	18		(26)		n/m
INCOME (LOSS) BEFORE INCOME TAX	$	49	$	(1)	n/m

N/M - we define n/m as not meaningful for increases or decreases greater than 100%.

The following table summarizes key data for the Stable Value Products segment:


	For The Three Months Ended September 30,						For The Nine Months Ended September 30,							For The Three Months Ended March 31,						Percent
	2017			2016			2017			2016				2021			2020			Change
	(Dollars In Thousands)													(Dollars In Millions)
Sales⁽¹⁾													Sales(1)
GIC	$	50,000		$	4,800		$	107,000		$	61,800		GIC	$	—		$	3		n/m
GFA	900,000			650,000			1,650,000			1,550,000			GFA	875			500			75.0%
	$	950,000		$	654,800		$	1,757,000		$	1,611,800			$	875		$	503		74.0%

Average Account Values	$	4,184,418		$	2,928,148		$	3,947,056		$	2,524,249		Average Account Values	$	6,624		$	5,670		16.8%
Ending Account Values	$	4,793,890		$	3,412,041		$	4,793,890		$	3,412,041		Ending Account Values	$	6,655		$	5,886		13.1%

Operating Spread													Operating Spread
Net investment income yield	4.79		%	3.71		%	4.43		%	4.08		%	Net investment income yield	3.83		%	4.42		%
Other income yield	—			0.02			—			0.01

Interest credited	1.83			1.56			1.73			1.55			Interest credited	1.81			2.53
Operating expenses	0.28			0.15			0.18			0.14			Operating expenses	0.10			0.10
Operating spread	2.68		%	2.02		%	2.52		%	2.40		%	Operating spread	1.92		%	1.79		%

Adjusted operating spread⁽²⁾	1.49		%	1.82		%	1.73		%	1.78		%	Adjusted operating spread(2)	1.65		%	1.28		%

(1) Sales are measured at the time the purchase payments are received.	(1) Sales are measured at the time the purchase payments are received.												(1) Sales are measured at the time the purchase payments are received.
(2) Excludes participating mortgage loan income.
(2) Excludes participation commercial mortgage loan income.													(2) Excludes participation commercial mortgage loan income.
N/M - we define n/m as not meaningful for increases or decreases greater than 100%.													N/M - we define n/m as not meaningful for increases or decreases greater than 100%.

For The Three Months Ended ~~September 30, 2017,~~March 31, 2021, as compared to The Three Months Ended ~~September 30, 2016~~March 31, 2020

Pre-tax adjusted operating income

Table of Contents

Pre-tax adjusted operating income ~~was $28.0~~increased $6 million ~~and increased $13.3 million, or 90.4%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. The increase in adjusted operating earnings~~which primarily resulted from an increase in adjusted operating spread and higher average account values, partially offset by a decrease in ~~addition to an increase in participating~~participation commercial mortgage loan income. ~~Participating~~Participation commercial mortgage loan income for the three months ended ~~September 30, 2017,~~March 31, 2021, was ~~$12.4~~$4 million as compared to ~~$1.3~~$7 million for the three months ended ~~September 30, 2016.~~March 31, 2020. The adjusted operating spread, which excludes ~~participating~~participation commercial mortgage loan income, ~~decreased~~increased by 3337 basis points for the three months ended ~~September 30, 2017,~~March 31, 2021, from the prior year, due primarily to ~~an increase~~a decrease in credited ~~interest.~~

~~For The Nine Months Ended September 30, 2017, as compared to The Nine Months Ended September 30, 2016~~

~~Pre-tax adjusted operating income~~

Pre-tax adjusted operating income was $74.3 million and increased $29.9 million, or 67.5%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. The increase in adjusted operating earnings primarily resulted from an increaseinterest, partially offset by a decrease in average account values in addition to an increase in participating mortgage income. Participating mortgage income for the nine months ended September 30, 2017, was $23.6 million as compared to $10.5 million for the nine months ended September 30, 2016. The adjusted operating spread, which excludes participating income, decreased by five basis points for the nine months ended September 30, 2017, from the prior year, due primarily to an increase in credited interest.yields on investments.

Table of Contents

Asset Protection

Segment Results of Operations

Segment results were as follows:


	For The Three Months Ended March 31,				Percent
	2021		2020		Change
	(Dollars In Millions)
REVENUES
Gross premiums and policy fees	$	74	$	75	(1.3)%
Reinsurance ceded	(46)		(46)		—%
Net premiums and policy fees	28		29		(3.4)%
Net investment income	6		8		(25.0)%
Other income	37		37		—%

Total operating revenues	71		74		(4.1)%
BENEFITS AND EXPENSES
Benefits and settlement expenses	17		21		(19.0)%
Amortization of DAC/VOBA	15		15		—%
Other operating expenses	25		26		(3.8)%
Total benefits and expenses	57		62		(8.1)%
INCOME BEFORE INCOME TAX	14		12		16.7%

PRE-TAX ADJUSTED OPERATING INCOME	$	14	$	12	16.7%

N/M - we define n/m as not meaningful for increases or decreases greater than 100%.

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
REVENUES

Gross premiums and policy fees $ 79,595
$ 68,987
$ 243,160
$ 205,133
Reinsurance ceded (27,751 ) (25,417 ) (88,695 ) (74,942 )
Net premiums and policy fees 51,844
43,570
154,465
130,191
Net investment income 5,642
4,431
16,352
12,944
Other income 36,319
31,029
106,622
85,993
Total operating revenues 93,805
79,030
277,439
229,128
  Realized gains (losses) - investments (6 ) —
(6 ) —
       Total revenues 93,799
79,030
277,433
229,128
BENEFITS AND EXPENSES

Benefits and settlement expenses 31,608
26,611
94,017
77,722
Amortization of DAC/VOBA 4,357
5,152
13,965
16,310
Other operating expenses 52,653
43,168
155,645
122,600
Total benefits and expenses 88,618
74,931
263,627
216,632
INCOME BEFORE INCOME TAX 5,181
4,099
13,806
12,496
  Less: realized gains (losses) - investments
(6 ) —
(6 ) —
PRE-TAX ADJUSTED OPERATING INCOME $ 5,187
$ 4,099
$ 13,812
$ 12,496

The following table summarizes key data for the Asset Protection segment:


	For The Three Months Ended March 31,						Percent
	2021			2020			Change
	(Dollars In Millions)
Sales(1)
Credit insurance	$	—		$	2		n/m
Service contracts	106			95			11.6	%
GAP	20			18			11.1	%
	$	126		$	115		9.6	%
Loss Ratios(2)
Credit insurance	15.2		%	45.1		%
Service contracts	59.3			59.2
GAP	98.5			121.0

(1) Sales are based on the amount of single premiums and fees received
(2) Incurred claims as a percentage of earned premiums

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
Sales⁽¹⁾

Credit insurance $ 3,880
$ 5,444
$ 11,759
$ 16,975
Service contracts 113,508
93,569
325,707
259,753
GAP 26,965
27,413
86,565
79,508
$ 144,353
$ 126,426
$ 424,031
$ 356,236
Loss Ratios⁽²⁾

Credit insurance 9.8 % 33.5 % 19.2 % 32.9 %
Service contracts 39.3
47.1
38.8
46.3
GAP 123.1
107.5
122.5
106.1

(1) Sales are based on the amount of single premiums and fees received
(2) Incurred claims as a percentage of earned premiums

Table of Contents

For The Three Months Ended ~~September 30, 2017,~~March 31, 2021, as compared to The Three Months Ended ~~September 30, 2016~~March 31, 2020

Pre-tax adjusted operating income

Pre-tax adjusted operating income ~~was $5.2~~increased $2 million ~~representing~~due to an increase of $1.1 million, or 26.5%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. Service contract earnings increased $2.1 million primarily due to favorable loss ratios and the acquisition of US Warranty in the ~~fourth quarter of 2016. Credit insurance earnings increased $0.3 million primarily~~GAP product line due to lower loss ~~ratios. Earnings from the GAP product line decreased $1.3 million primarily resulting from higher loss~~ ratios, ~~somewhat~~ offset by ~~additional~~a decrease in the service contract earnings due to lower investment income ~~provided by US Warranty.~~and higher expenses.

Net premiums and policy fees

Net premiums and policy fees ~~increased $8.3~~decreased $1 million ~~or 19.0%, for the three months ended September 30, 2017, as compared~~due to ~~the three months ended September 30, 2016. Service~~a decrease in service contract premiums ~~increased $5.3 million primarily~~ due to ~~the addition of US Warranty business, somewhat offset by~~ higher ceded premiums and a decrease in ~~existing distribution channels.~~ GAP premiums ~~increased $3.5 million primarily due to higher premium rates on existing business and the addition of US Warranty business. Credit insurance premiums decreased $0.5 million~~ as a result of lower ~~sales.~~

~~Other income~~

~~Other income increased $5.3 million, or 17.0%, for~~sales in prior periods and the ~~three months ended September 30, 2017, as compared~~related impact to ~~the three months ended September 30, 2016 primarily due to the addition of US Warranty business in the service contract and GAP lines.~~earned premiums.

Benefits and settlement expenses

Benefits and settlement expenses ~~increased $5.0 million, or 18.8%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. GAP claims increased $6.0~~decreased $4 million due to ~~higher loss ratios and the acquisition~~a decrease in GAP claims of US Warranty. Credit insurance claims decreased $0.8 million due primarily to lower loss ratios and lower volume. Service contract claims decreased $0.2 million due to lower loss ratios, mostly offset by the addition of claims from the US Warranty line.$3 million.

~~Amortization of DAC and VOBA and Other operating expenses~~

Amortization of DAC and VOBA was $0.8 million, or 15.4%, lower for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily due to decreased amortization of in-force VOBA in the GAP product line and lower volume in the credit product line. Other operating expenses were $9.5 million, or 22.0%, higher for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily due to the acquisition of US Warranty.

Sales

Total segment sales increased $17.9 million, or 14.2%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. Service contract sales increased $19.9 million due to the additional volume provided by US Warranty. Credit insurance sales decreased $1.6 million due to decreasing demand for the product. GAP sales decreased $0.4 million due to lower production in existing distribution channels offset by additional sales from US Warranty.

~~For The Nine Months Ended September 30, 2017, as compared to The Nine Months Ended September 30, 2016~~

~~Pre-tax adjusted operating income~~

Pre-tax adjusted operating income was $13.8 million, representing an increase of $1.3 million, or 10.5%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. Service contract earnings increased $5.8 million primarily due to favorable loss ratios and the acquisition of US Warranty in the fourth quarter of 2016. Credit insurance earnings increased $0.7 million primarily due to lower loss ratios. Earnings from the GAP product line decreased $5.2 million primarily resulting from higher loss ratios, somewhat offset by additional income provided by US Warranty.

~~Net premiums and policy fees~~

Net premiums and policy fees increased $24.3 million, or 18.6%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. Service contract premiums increased $14.4 million primarily due to the addition of US Warranty business, somewhat offset by higher ceded premiums in existing distribution channels. GAP premiums increased $11.2 million primarily due to higher premium rates on existing business and the addition of US Warranty business. Credit insurance premiums decreased $1.3 million as a result of lower sales.

~~Other income~~

Other income increased $20.6 million, or 24.0%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to the addition of US Warranty business in the service contract and GAP lines.

~~Benefits and settlement expenses~~

Benefits and settlement expenses increased $16.3 million, or 21.0%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. GAP claims increased $18.9 million due to higher loss ratios and the acquisition of US Warranty. Credit insurance claims decreased $1.6$11 million, due primarily to ~~lower loss ratios~~an increase in service contract sales of $11 million and ~~lower volume. Service contract claims decreased $1.0~~GAP sales of $2 million ~~primarily due to lower loss ratios, somewhat offset by the addition of claims from the US Warranty line.~~

~~Amortization of DAC and VOBA and Other operating expenses~~

Amortization of DAC and VOBA was $2.3 million, or 14.4%, lower for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to decreased amortization of in-force VOBA in the GAP product line and lower volume in the credit product line. Other operating expenses were $33.0 million higher for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarilymostly due to the ~~acquisition~~positive impact of ~~US Warranty.~~

~~Sales~~

~~Total segment~~increased auto sales. Credit sales ~~increased $67.8 million, or 19.0%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. Service contract sales increased $66.0~~decreased $2 million due to additional volume provided by US Warranty. GAP sales increased $7.1 million due to higher sales in existing distribution channels and US Warranty. Credit insurance sales decreased $5.2 million due to decreasing demand fordiscontinuing the ~~product.~~product line.

Reinsurance

The majority of the Asset Protection segment’s reinsurance activity relates to the cession of single premium credit life and credit accident and health insurance, vehicle service contracts, and guaranteed asset protection insurance to producer affiliated reinsurance companies (“PARCs”). These arrangements are coinsurance contracts ceding the business on a first dollar quota share basis at 100% to limit ~~our~~the segment’s exposure and allow the PARCs to share in the underwriting income of the product. Reinsurance contracts do not relieve usthe Asset Protection segment from ~~our~~ obligations to ~~our~~ policyholders. We also carry a catastrophic reinsurance policy for our GAP program. Losses incurred as a result of the recent hurricanes are covered under this policy. We believe losses from these catastrophes, net of reinsurance, will have an immaterial impact on our results of operations. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies, to ~~our~~the Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020.

Impact of Reinsurance

Reinsurance impacted the Asset Protection segment line items as shown in the following table:

Asset Protection Segment

Line Item Impact of Reinsurance

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
REVENUES

Reinsurance ceded $ (27,751 ) $ (25,417 ) $ (88,695 ) $ (74,942 )
BENEFITS AND EXPENSES

Benefits and settlement expenses (22,428 ) (16,717 ) (57,176 ) (51,096 )
Amortization of DAC/VOBA (566 ) (272 ) (1,545 ) (669 )
Other operating expenses (1,064 ) (1,452 ) (3,990 ) (4,432 )
Total benefits and expenses (24,058 ) (18,441 ) (62,711 ) (56,197 )
NET IMPACT OF REINSURANCE⁽¹⁾
$ (3,693 ) $ (6,976 ) $ (25,984 ) $ (18,745 )

(1) Assumes no investment income on reinsurance. Foregone investment income would substantially change the impact of reinsurance.


	For The Three Months Ended March 31,				Percent
	2021		2020		Change
	(Dollars In Millions)
REVENUES
Reinsurance ceded	$	(46)	$	(46)	—%
BENEFITS AND EXPENSES
Benefits and settlement expenses	(19)		(21)		(9.5)%
Amortization of DAC/VOBA	(1)		(1)		—%
Other operating expenses	(1)		(1)		—%
Total benefits and expenses	(21)		(23)		(8.7)%
NET IMPACT OF REINSURANCE(1)	$	(25)	$	(23)	8.7%

(1) Assumes no investment income on reinsurance. Foregone investment income would substantially change the impact of reinsurance.
N/M - we define n/m as not meaningful for increases or decreases greater than 100%.

For The Three Months Ended ~~September 30, 2017,~~March 31, 2021, as compared to The Three Months Ended ~~September 30, 2016~~March 31, 2020

Reinsurance premiums ceded ~~increased $2.3 million, or 9.2%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. The increase was~~remained flat primarily due to an increase in ceded service contract ~~and GAP premiums.~~

Benefits and settlement expenses ceded increased $5.7 million, or 34.2%, for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016. The increase was primarily duepremiums related to higher ~~ceded losses in the GAP product lines,~~service contract premium volume, somewhat offset by a decrease in ceded ~~losses in the~~ credit ~~product line.~~insurance premiums.

Table of Contents

Amortization of DAC and VOBA ceded increased $0.3 million for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, primarily as the result of ceded activity in the GAP product lines. Other operating expenses ceded decreased $0.4 million for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016.

Net investment income has no direct impact on reinsurance cost. However, by ceding business to the assuming companies, we forgo investment income on the reserves ceded. Conversely, the assuming companies will receive investment income on the reserves assumed which generally will increase the assuming companies’ profitability on business we cede. The net investment income impact to us and the assuming companies has not been quantified as it is not reflected in our consolidated financial statements.

~~For The Nine Months Ended September 30, 2017, as compared to The Nine Months Ended September 30, 2016~~

Reinsurance premiums ceded increased $13.8 million, or 18.4%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. The increase was primarily due to an increase in ceded service contract and GAP premiums, partially offset by lower ceded premiums in the credit product line.

Benefits and settlement expenses ceded ~~increased $6.1~~decreased $2 million ~~or 11.9%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. The increase was~~ primarily due to ~~higher~~lower ceded losses in the GAP product ~~lines, somewhat offset by a decrease in ceded losses in the service contract and credit product~~ line.

~~Amortization~~

Table of DAC and VOBA ceded increased $0.9 million for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, as the result of ceded activity in all product lines. Other operating expenses ceded decreased $0.4 million for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016.Contents

Corporate and Other

Segment Results of Operations

Segment results were as follows:

For The
Three Months Ended
September 30, For The
Nine Months Ended
September 30,
2017 2016 2017 2016
(Dollars In Thousands)
REVENUES

Gross premiums and policy fees $ 3,118
$ 3,400
$ 9,658
$ 10,606
Reinsurance ceded 11
(60 ) (70 ) (201 )
Net premiums and policy fees 3,129
3,340
9,588
10,405
Net investment income 24,385
16,114
72,515
71,446
Other income 479
141
804
576
Total operating revenues 27,993
19,595
82,907
82,427
Realized gains (losses) - investments (2,232 ) 1,418
(6,612 ) (2,866 )
Realized gains (losses) - derivatives 52,114
13,859
33,333
32,153
Total revenues 77,875
34,872
109,628
111,714
BENEFITS AND EXPENSES

Benefits and settlement expenses 4,271
5,404
11,085
14,180
Amortization of DAC/VOBA —
—
—
—
Other operating expenses 61,776
60,700
179,563
179,746
Total benefits and expenses 66,047
66,104
190,648
193,926
INCOME (LOSS) BEFORE INCOME TAX 11,828
(31,232 ) (81,020 ) (82,212 )
Less: realized gains (losses) - investments (2,232 ) 1,418
(6,612 ) (2,866 )
Less: realized gains (losses) - derivatives 52,114
13,859
33,333
32,153
PRE-TAX ADJUSTED OPERATING INCOME (LOSS) $ (38,054 ) $ (46,509 ) $ (107,741 ) $ (111,499 )


	For The Three Months Ended March 31,				Percent
	2021		2020		Change
	(Dollars In Millions)
REVENUES
Gross premiums and policy fees	$	3	$	3	—%
Reinsurance ceded	—		—		—%
Net premiums and policy fees	3		3		—
Net investment income	(14)		14		n/m
Other income	—		—		—%
Total operating revenues	(11)		17		n/m
BENEFITS AND EXPENSES
Benefits and settlement expenses	5		3		66.7%
Amortization of DAC/VOBA	—		—		—%
Other operating expenses	35		55		(36.4)%
Total benefits and expenses	40		58		(31.0)%
PRE-TAX ADJUSTED OPERATING INCOME (LOSS)	(51)		(41)		24.4%
Add: realized gains (losses)	10		(18)		n/m
INCOME (LOSS) BEFORE INCOME TAX	$	(41)	$	(59)	(30.5)%

N/M - we define n/m as not meaningful for increases or decreases greater than 100%.

For The Three Months Ended ~~September 30, 2017,~~March 31, 2021 as compared to The Three Months Ended ~~September 30, 2016~~March 31, 2020

Pre-tax adjusted operating income (loss)

Pre-tax adjusted operating loss was ~~$38.1~~$51 million for the three months ended ~~September 30, 2017,~~March 31, 2021, as compared to a pre-tax adjusted operating loss of ~~$46.5~~$41 million for the three months ended ~~September 30, 2016.~~March 31, 2020. The ~~increase~~increased operating loss was primarily due to ~~an increase~~a decrease in ~~invested assets and~~ investment ~~yields.~~income, partially offset by decreased operating expenses.

Operating revenues

Net investment income for the segment ~~increased $8.3~~decreased $28 million ~~or 51.3% for the three months ended September 30, 2017, as compared~~ to ~~the three months ended September 30, 2016. The increase in net investment income~~an expense of $14 million, which was primarily ~~due~~attributable to ~~an increase~~decreased held-to-maturity income related to investments extinguished in ~~invested assets and~~2020. The held-to-maturity income previously offset the investment ~~yields.~~expenses that are not allocated to other segments.

Total benefits and expenses

Total benefits and expenses decreased ~~$0.1~~$18 million, ~~for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016,~~ primarily due to ~~increases in corporate overhead expenses, offset by a decrease in benefits and settlement expenses.~~reduced interest expense as the non-recourse funding obligations were redeemed October 1, 2020.

~~For The Nine Months Ended September 30, 2017, as compared to The Nine Months Ended September 30, 2016~~

~~Pre-tax adjusted operating income (loss)~~

~~Pre-tax adjusted operating loss was $107.7 million for the nine months ended September 30, 2017, as compared to a pre-tax adjusted operating loss~~

Table of ~~$111.5 million for the nine months ended September 30, 2016. The increase was primarily due to a $3.1 million decrease in benefits and settlement expenses.~~Contents

~~Operating revenues~~

Net investment income for the segment increased $1.1 million or 1.5% for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016. The increase in net investment income was primarily due to an increase in invested assets and investment yields.

~~Total benefits and expenses~~

Total benefits and expenses decreased $3.3 million or 1.7%, for the nine months ended September 30, 2017, as compared to the nine months ended September 30, 2016, primarily due to a decrease in benefits and settlement expenses.

CONSOLIDATED INVESTMENTS

As of ~~September 30, 2017,~~March 31, 2021, our investment portfolio was ~~approximately $53.8~~$86.2 billion. The types of assets in which we may invest are influenced by various state insurance laws which prescribe qualified investment assets. Within the parameters of these laws, we invest in assets giving consideration to such factors as liquidity and capital needs, investment quality, investment return, matching of assets and liabilities, and the overall composition of the investment portfolio by asset type and credit exposure. ~~We do not have material exposure to financial guarantee insurance companies with respect to our investment portfolio.~~

Within our fixed maturity investments, we maintain portfolios classified as “available-for-sale”, and “trading”~~, and “held-to-maturity”~~. We purchase our available-for-sale investments with the intent to hold to maturity by purchasing investments that match future cash flow needs. However, we may sell any of our available-for-sale and trading investments to maintain proper matching of assets and liabilities. Accordingly, we classified ~~$37.9~~$67.2 billion, or ~~87.5%~~96.0%, of our fixed maturities as “available-for-sale” as of ~~September 30, 2017.~~March 31, 2021. These securities are carried at fair value on our consolidated ~~condensed~~ balance sheets. Changes in fair value for our available-for-sale portfolio, net of tax and the related impact on certain insurance assets and liabilities, are recorded directly to shareowner’s equity. Declines in fair value that are ~~other-than-temporary~~due to credit losses are recorded as realized ~~losses~~gains (losses) in the consolidated condensed statements of ~~income, net of any applicable non-credit component~~income. Credit losses are recorded in realized gains (losses) with a corresponding adjustment to the allowance for credit losses, except that the credit losses recognized cannot exceed the difference between the book value and fair value of the ~~loss, which is~~security as of the date of the analysis. In future periods, recoveries in the present value of expected cash flows are recorded as a reversal of the previously recognized allowance for credit losses with an offsetting adjustment to ~~other comprehensive income (loss)~~ realized gains (losses).

Trading securities are carried at fair value and changes in fair value are recorded on the income statement as they occur. Our trading portfolio accounted for $2.7 billion, or ~~6.2%~~3.9%, of our fixed maturities and ~~$44.3~~$109 million of short-term investments as of ~~September 30, 2017.~~March 31, 2021. Changes in fair value on the Modco trading portfolios, including gains and losses from sales, are passed to third party reinsurers through the contractual terms of the related reinsurance arrangements. Partially offsetting these amounts are corresponding changes in the fair value of the embedded derivative associated with the underlying reinsurance arrangement.

Fixed maturities with respect to which we have both the positive intent and ability to hold to maturity are classified as “held-to-maturity”. We classified $2.7 billion, or 6.3%, of our fixed maturities as “held-to-maturity” as of September 30, 2017. These securities are carried at amortized cost on our consolidated condensed balance sheets.

Fair values for private, non-traded securities are determined as follows: 1) we obtain estimates from independent pricing services and 2) we estimate fair value based upon a comparison to quoted issues of the same issuer or issues of other issuers with similar terms and risk characteristics. We analyze the independent pricing services valuation methodologies and related inputs, including an assessment of the observability of market inputs. Upon obtaining this information related to fair value, management makes a determination as to the appropriate valuation amount. For more information about the fair values of our investments please refer to Note 5, 4, Fair Value of Financial Instruments, to the financial statements.

The following table presents the reported values of our invested assets:


										As of
	As of									March 31, 2021				December 31, 2020
	September 30, 2017				December 31, 2016					(Dollars In Millions)
	(Dollars In Thousands)
Publicly issued bonds (amortized cost: 2017 - $31,112,813; 2016 - $30,387,712)	$	30,792,711	57.3	%	$	29,049,505	57.6	%
Privately issued bonds (amortized cost: 2017 - $12,408,451; 2016 - $11,929,228)	12,414,452		23.1		11,627,422		23.0
Preferred stock (amortized cost: 2017 - $97,590; 2016 - $98,348)	95,069		0.2		89,827		0.3
Publicly issued bonds (amortized cost: 2021 - $44,098; 2020 - $44,169)									Publicly issued bonds (amortized cost: 2021 - $44,098; 2020 - $44,169)	$	46,884	54.4	%	$	49,571	56.0	%
Privately issued bonds (amortized cost: 2021 - $22,049; 2020 - $21,332)									Privately issued bonds (amortized cost: 2021 - $22,049; 2020 - $21,332)	22,748		26.4		22,817		25.8
Redeemable preferred stocks (amortized cost: 2021 - $224; 2020 - $196)									Redeemable preferred stocks (amortized cost: 2021 - $224; 2020 - $196)	227		0.3		207		0.2
Fixed maturities	43,302,232		80.6	%	40,766,754		80.9	%	Fixed maturities	69,859		81.1	%	72,595		82.0	%
Equity securities (cost: 2017 - $726,605; 2016 - $729,951)	744,176		1.4		716,017		1.4
Mortgage loans	6,528,890		12.2		6,132,125		12.2
Equity securities (cost: 2021 - $717; 2020 - $635)									Equity securities (cost: 2021 - $717; 2020 - $635)	741		0.9		667		0.8
Commercial mortgage loans									Commercial mortgage loans	10,137		11.7		10,006		11.3
Investment real estate	4,572		—		8,060		—		Investment real estate	10		—		10		—
Policy loans	1,625,960		3.0		1,650,240		3.3		Policy loans	1,576		1.8		1,593		1.8
Other long-term investments	1,133,234		2.0		856,410		1.7		Other long-term investments	3,223		3.7		3,241		3.7
Short-term investments	422,685		0.8		315,834		0.5		Short-term investments	661		0.8		462		0.4
Total investments	$	53,761,749	100.0	%	$	50,445,440	100.0	%	Total investments	$	86,207	100.0	%	$	88,574	100.0	%

Included in the preceding table are $2.7 billion and ~~$2.6~~$2.9 billion of fixed maturities and ~~$44.3~~$109 million and ~~$52.6~~$76 million of short-term investments classified as trading securities as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, respectively. All of the fixed maturities in the trading portfolio are invested assets that are held pursuant to Modco arrangements under which the economic risks and benefits of the investments are passed to third party reinsurers. ~~Also included above are $2.7 billion and $2.8 billion~~

Table of ~~securities classified as held-to-maturity as of September 30, 2017 and December 31, 2016, respectively.~~Contents

Fixed Maturity Investments

As of ~~September 30, 2017,~~March 31, 2021, our fixed maturity investment holdings were ~~approximately $43.3~~$69.9 billion. The approximate percentage distribution of our fixed maturity investments by quality rating is as follows:


	As of									As of
Rating	September 30, 2017				December 31, 2016				Rating	March 31, 2021				December 31, 2020
	(Dollars In Thousands)									(Dollars In Millions)
AAA	$	5,629,870	13.0	%	$	5,230,763	12.8	%	AAA	$	9,236	13.2	%	$	9,497	13.1	%
AA	3,574,375		8.3		3,473,989		8.5		AA	6,926		9.9		7,337		10.1
A	13,525,368		31.2		12,663,569		31.1		A	22,427		32.0		24,372		33.6
BBB	15,692,234		36.2		14,408,537		35.4		BBB	28,600		41.0		28,654		39.5
Below investment grade	2,149,390		5.0		2,219,719		5.4		Below investment grade	2,670		3.9		2,735		3.7
Not rated⁽¹⁾	2,730,995		6.3		2,770,177		6.8
	$	43,302,232	100.0	%	$	40,766,754	100.0	%		$	69,859	100.0	%	$	72,595	100.0	%

(1) Our "not rated" securities are $2.7 billion or 6.3% of our fixed maturity investments, of held-to-maturity securities issued by affiliates of the Company which are considered variable interest entities ("VIE's") and are discussed in Note 4, Investment Operations, to the consolidated condensed financial statements. We are not the primary beneficiary of these entities and thus these securities are not eliminated in consolidation. These securities are collateralized by non-recourse funding obligations issued by captive insurance companies that are wholly owned subsidiaries of the Company.

We use various Nationally Recognized Statistical Rating Organizations’ (“NRSRO”) ratings when classifying securities by quality ratings. When the various NRSRO ratings are not consistent for a security, we use the second-highest convention in assigning the rating. When there are no such published ratings, we assign a rating based on the statutory accounting rating system if such ratings are available.

The distribution of our fixed maturity investments by type is as follows:


	As of
Type	March 31, 2021				December 31, 2020
	(Dollars In Millions)
Corporate securities	$	52,130	74.6	%	$	53,967	74.3	%
Residential mortgage-backed securities	7,084		10.1		6,877		9.5
Commercial mortgage-backed securities	2,638		3.8		2,748		3.8
Other asset-backed securities	1,710		2.4		1,741		2.4
U.S. government-related securities	995		1.4		1,606		2.2
Other government-related securities	674		1.0		747		1.0
States, municipals, and political subdivisions	4,401		6.3		4,702		6.5
Redeemable preferred stocks	227		0.4		207		0.3
Total fixed income portfolio	$	69,859	100.0	%	$	72,595	100.0	%

Table of Contents

As of
Type September 30, 2017 December 31, 2016
(Dollars In Thousands)
Corporate securities $ 30,997,847
$ 28,849,238
Residential mortgage-backed securities 2,445,431
2,144,634
Commercial mortgage-backed securities 2,037,706
1,932,180
Other asset-backed securities 1,333,280
1,411,617
U.S. government-related securities 1,320,547
1,295,120
Other government-related securities 316,347
300,938
States, municipals, and political subdivisions 2,025,010
1,973,022
Preferred stock 95,069
89,828
Securities issued by affiliates 2,730,995
2,770,177
Total fixed income portfolio $ 43,302,232
$ 40,766,754

The industry segment composition of our fixed maturity securities is presented in the following table:

As of
September 30, 2017
% Fair
Value
As of
December 31, 2016
% Fair
Value
(Dollars In Thousands)
Banking $ 4,325,558
10.0 % $ 3,811,588
9.3 %
Other finance 78,844
0.2
83,895
0.2
Electric utility 3,971,429
9.2
3,925,147
9.6
Energy 3,954,918
9.1
3,887,736
9.5
Natural gas 720,472
1.6
603,149
1.5
Insurance 3,633,259
8.4
3,185,237
7.8
Communications 1,706,316
3.9
1,651,600
4.1
Basic industrial 1,618,765
3.7
1,533,516
3.8
Consumer noncyclical 3,806,559
8.8
3,465,299
8.5
Consumer cyclical 1,136,256
2.6
1,041,805
2.6
Finance companies 146,817
0.3
139,050
0.3
Capital goods 1,847,034
4.3
1,773,467
4.4
Transportation 1,163,590
2.7
1,136,666
2.7
Other industrial 224,436
0.5
200,605
0.5
Brokerage 842,474
2.0
760,585
1.9
Technology 1,766,941
4.1
1,534,297
3.8
Real estate 83,513
0.2
122,058
0.3
Other utility 65,735
0.2
83,366
0.2
Commercial mortgage-backed securities 2,037,706
4.8
1,932,180
4.7
Other asset-backed securities 1,333,280
3.1
1,411,617
3.5
Residential mortgage-backed non-agency securities 1,690,281
3.9
1,414,859
3.5
Residential mortgage-backed agency securities 755,150
1.7
729,775
1.8
U.S. government-related securities 1,320,547
3.0
1,295,120
3.2
Other government-related securities 316,347
0.7
300,938
0.7
State, municipals, and political divisions 2,025,010
4.7
1,973,022
4.8
Securities issued by affiliates 2,730,995
6.3
2,770,177
6.8
Total $ 43,302,232
100.0 % $ 40,766,754
100.0 %


	As of March 31, 2021		% Fair Value		As of December 31, 2020		% Fair Value
	(Dollars In Millions)
Banking	$	7,743	11.1	%	$	7,752	10.7	%
Other finance	992		1.4		959		1.3
Electric utility	5,492		7.9		5,792		8.0
Energy	4,480		6.4		4,756		6.6
Natural gas	1,182		1.7		1,275		1.8
Insurance	5,832		8.3		6,022		8.3
Communications	2,866		4.1		2,967		4.1
Basic industrial	2,444		3.5		2,532		3.5
Consumer noncyclical	6,964		10.0		7,374		10.2
Consumer cyclical	2,684		3.8		2,833		3.9
Finance companies	351		0.5		319		0.4
Capital goods	3,526		5.0		3,648		5.0
Transportation	2,069		3.0		2,236		3.1
Other industrial	678		1.0		691		1.0
Brokerage	1,816		2.6		1,786		2.5
Technology	2,644		3.8		2,596		3.6
Real estate	549		0.8		587		0.8
Other utility	45		0.1		48		—
Commercial mortgage-backed securities	2,638		3.8		2,748		3.8
Other asset-backed securities	1,710		2.4		1,741		2.4
Residential mortgage-backed non-agency securities	5,611		8.0		5,607		7.7
Residential mortgage-backed agency securities	1,473		2.1		1,270		1.8
U.S. government-related securities	995		1.4		1,607		2.0
Other government-related securities	674		1.0		747		1.0
State, municipals, and political divisions	4,401		6.3		4,702		6.5
Total	$	69,859	100.0	%	$	72,595	100.0	%

The total Modco trading portfolio fixed maturities by rating is as follows:


	As of					As of
Rating	September 30, 2017		December 31, 2016		Rating	March 31, 2021				December 31, 2020
	(Dollars In Thousands)					(Dollars In Millions)
AAA	$	351,042	$	341,364	AAA	$	277	10.3	%	$	340	11.9	%
AA	293,864		301,258		AA	258		9.6		268		9.4
A	867,936		849,286		A	845		31.3		909		31.8
BBB	927,524		884,850		BBB	1,187		43.9		1,205		42.1
Below investment grade	240,713		263,102		Below investment grade	134		4.9		140		4.8
Total Modco trading fixed maturities	$	2,681,079	$	2,639,860
						$	2,701	100.0	%	$	2,862	100.0	%

A portion of our bond portfolio is invested in residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”), and other asset-backed securities (collectively referred to as asset-backed securities or “ABS”). ABS are securities that are backed by a pool of assets. These holdings as of ~~September 30, 2017,~~March 31, 2021, were ~~approximately $5.8~~$11.4 billion. Mortgage-backed securities (“MBS”) are constructed from pools of mortgages and may have cash flow volatility as a result of changes in the rate at which prepayments of principal occur with respect to the underlying loans. Excluding limitations on access to lending and other extraordinary economic conditions, prepayments of principal on the underlying loans can be expected to accelerate with decreases in market interest rates and diminish with increases in interest rates.

Table of Contents

The following tables include the percentage of our collateral grouped by rating category and categorizes the estimated fair value by year of security origination for our Prime, Non-Prime, Commercial, and Other asset-backed securities as of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016~~:2020.


	As of March 31, 2021
	Prime(1)						Non-Prime(1)						Commercial						Other asset-backed						Total
	Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized
	Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost
	(Dollars In Millions)
Rating $
AAA	$	5,549		$	5,508		$	2		$	2		$	1,497		$	1,439		$	530		$	515		$	7,578		$	7,464
AA	1			1			—			—			586			570			279			270			866			841
A	1,470			1,478			8			6			438			427			716			711			2,632			2,622
BBB	6			6			1			1			103			101			163			158			273			266
Below	19			20			28			26			14			19			22			25			83			90
	$	7,045		$	7,013		$	39		$	35		$	2,638		$	2,556		$	1,710		$	1,679		$	11,432		$	11,283

Rating %
AAA	78.8		%	78.5		%	4.7		%	5.1		%	56.7		%	56.3		%	31.0		%	30.7		%	66.3		%	66.2		%
AA	—			—			0.2			0.3			22.2			22.3			16.3			16.1			7.6			7.5
A	20.8			21.1			19.7			18.0			16.7			16.7			41.9			42.3			23.0			23.1
BBB	0.1			0.1			3.5			3.7			3.9			4.0			9.5			9.4			2.4			2.4
Below	0.3			0.3			71.9			72.9			0.5			0.7			1.3			1.5			0.7			0.8
	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

Estimated Fair Value of Security by Year of Security Origination
2017 and prior	$	2,097		$	2,047		$	39		$	35		$	2,402		$	2,331		$	1,454		$	1,426		$	5,992		$	5,839
2018	762			744			—			—			145			135			142			142			1,049			1,021
2019	816			804			—			—			73			71			64			63			953			938
2020	1,912			1,927			—			—			14			15			30			28			1,956			1,970
2021	1,458			1,491			—			—			4			4			20			20			1,482			1,515
Total	$	7,045		$	7,013		$	39		$	35		$	2,638		$	2,556		$	1,710		$	1,679		$	11,432		$	11,283

(1) Included in Residential Mortgage-Backed securities.

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		As of September 30, 2017																															As of December 31, 2020
		Prime⁽¹⁾						Non-Prime⁽¹⁾						Commercial						Other asset-backed						Total							Prime(1)						Non-Prime(1)						Commercial						Other asset-backed						Total
		Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized				Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized
		Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost				Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost
		(Dollars In Millions)																															(Dollars In Millions)
Rating $																																Rating $
AAA		$	2,106.0		$	2,103.2		$	—		$	—		$	1,240.2		$	1,248.7		$	643.4		$	648.4		$	3,989.6		$	4,000.3		AAA	$	5,541		$	5,420		$	2		$	2		$	1,596		$	1,514		$	543		$	527		$	7,682		$	7,463
AA		1.6			1.6			—			—			518.2			526.8			115.2			108.2			635			636.6			AA	—			—			—			—			587			570			277			268			864			838
A		2.4			2.4			21.8			22.0			275.9			276.7			478.1			476.5			778.2			777.6			A	1,268			1,228			8			7			469			449			731			727			2,476			2,411
BBB		1.6			1.6			3.0			3.1			3.4			3.4			19.8			19.8			27.8			27.9			BBB	4			4			1			1			85			86			164			158			254			249
Below		96.5			95.6			212.4			211.0			—			—			76.8			76.2			385.7			382.8			Below	24			24			29			27			11			19			26			29			90			99
		$	2,208.1		$	2,204.4		$	237.2		$	236.1		$	2,037.7		$	2,055.6		$	1,333.3		$	1,329.1		$	5,816.3		$	5,825.2			$	6,837		$	6,676		$	40		$	37		$	2,748		$	2,638		$	1,741		$	1,709		$	11,366		$	11,060

Rating %																																Rating %
AAA		95.3		%	95.4		%	—		%	—		%	60.9		%	60.7		%	48.2		%	48.8		%	68.6		%	68.7		%	AAA	81.1		%	81.2		%	5.3		%	5.6		%	58.1		%	57.4		%	31.2		%	30.8		%	67.6		%	67.5		%
AA		0.1			0.1			—			—			25.4			25.6			8.6			8.1			10.9			10.9			AA	—			—			0.2			0.2			21.4			21.6			15.9			15.7			7.6			7.6
A		0.1			0.1			9.2			9.3			13.5			13.5			35.9			35.9			13.4			13.3			A	18.5			18.3			19.7			18.2			17.0			17.0			42.0			42.6			21.8			21.7
BBB		0.1			0.1			1.3			1.3			0.2			0.2			1.5			1.5			0.5			0.5			BBB	0.1			0.1			2.8			2.9			3.1			3.3			9.4			9.2			2.2			2.3
Below		4.4			4.3			89.5			89.4			—			—			5.8			5.7			6.6			6.6			Below	0.3			0.4			72.0			73.1			0.4			0.7			1.5			1.7			0.8			0.9
		100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%		100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

Estimated Fair Value of Security by Year of Security Origination	Estimated Fair Value of Security by Year of Security Origination																															Estimated Fair Value of Security by Year of Security Origination
2013 and prior		$	930.0		$	925.1		$	237.2		$	236.1		$	1,041.9		$	1,050.9		$	819.6		$	820.1		$	3,028.7		$	3,032.2
2014		196.4			193.9			—			—			235.3			240.0			31.8			32.4			463.5			466.3
2015		463.0			462.6			—			—			213.2			211.1			53.6			52.2			729.8			725.9
2016		228.3			232.8			—			—			449.7			455.7			249.0			246.1			927.0			934.6
2016 and prior																																2016 and prior	$	1,701		$	1,647		$	38		$	35		$	2,238		$	2,167		$	1,069		$	1,044		$	5,046		$	4,893
2017		390.4			390.0			—			—			97.6			97.9			179.3			178.3			667.3			666.2			2017	737			711			2			2			270			249			402			397			1,411			1,359
2018																																2018	1,001			970			—			—			151			136			148			148			1,300			1,254
2019																																2019	1,070			1,045			—			—			75			71			92			91			1,237			1,207
2020																																2020	2,328			2,303			—			—			14			15			30			29			2,372			2,347
Total		$	2,208.1		$	2,204.4		$	237.2		$	236.1		$	2,037.7		$	2,055.6		$	1,333.3		$	1,329.1		$	5,816.3		$	5,825.2		Total	$	6,837		$	6,676		$	40		$	37		$	2,748		$	2,638		$	1,741		$	1,709		$	11,366		$	11,060

(1) Included in Residential Mortgage-Backed securities.
(1) Included in Residential Mortgage-Backed securities																																(1) Included in Residential Mortgage-Backed securities

As of December 31, 2016

Prime⁽¹⁾

Non-Prime⁽¹⁾
Commercial Other asset-backed Total
Fair Amortized Fair Amortized Fair Amortized Fair Amortized Fair Amortized
Value Cost Value Cost Value Cost Value Cost Value Cost
(Dollars In Millions)
Rating $
AAA $ 1,758.6
$ 1,770.6
$ —
$ —
$ 1,165.8
$ 1,184.6
$ 727.3
$ 732.6
$ 3,651.7
$ 3,687.8
AA 3.1
3.1
—
—
500.7
515.8
125.2
117.8
629.0
636.7
A 2.8
2.9
0.5
0.5
255.9
260.1
426.4
428.6
685.6
692.1
BBB 2.2
2.2
1.8
1.9
9.8
9.8
34.6
34.7
48.4
48.6
Below 118.1
117.9
257.5
260.1
—
—
98.1
96.9
473.7
474.9
$ 1,884.8
$ 1,896.7
$ 259.8
$ 262.5
$ 1,932.2
$ 1,970.3
$ 1,411.6
$ 1,410.6
$ 5,488.4
$ 5,540.1

Rating %
AAA 93.3 % 93.4 % — % — % 60.3 % 60.1 % 51.5 % 51.9 % 66.5 % 66.3 %
AA 0.2
0.2
—
—
25.9
26.2
8.9
8.4
11.5
11.7
A 0.1
0.1
0.2
0.2
13.3
13.2
30.2
30.4
12.5
12.6
BBB 0.1
0.1
0.7
0.7
0.5
0.5
2.5
2.5
0.9
0.9
Below 6.3
6.2
99.1
99.1
—
—
6.9
6.8
8.6
8.5
100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %

Estimated Fair Value of Security by Year of Security Origination
2012 and prior $ 845.2
$ 845.2
$ 259.8
$ 262.5
$ 825.5
$ 837.1
$ 828.7
$ 828.9
$ 2,759.2
$ 2,773.7
2013 166.5
168.0
—
—
226.5
230.9
98.6
98.8
491.6
497.7
2014 203.8
203.8
—
—
234.1
242.7
168.4
168.4
606.3
614.9
2015 461.2
464.6
—
—
209.9
210.5
66.2
64.6
737.3
739.7
2016 208.1
215.1
—
—
436.2
449.1
249.7
249.9
894.0
914.1
Total $ 1,884.8
$ 1,896.7
$ 259.8
$ 262.5
$ 1,932.2
$ 1,970.3
$ 1,411.6
$ 1,410.6
$ 5,488.4
$ 5,540.1

(1) Included in Residential Mortgage-Backed securities

The majority of our RMBS holdings as of ~~September 30, 2017,~~March 31, 2021, were super senior or senior bonds in the capital structure. Our total non-agency portfolio has a weighted-average life of ~~10.15~~ ~~years.~~ The2.7 years. The following table categorizes the weighted-average life for our non-agency portfolio, by category of material holdings, as of ~~September 30, 2017:~~

March 31, 2021:


		Weighted-Average
Non-agency portfolio		Life

Prime		2.66

Sub-prime		~~Weighted-Average~~
~~Non-agency portfolio~~	~~Life~~

~~Prime~~	~~10.83~~
~~Alt-A~~	~~2.63~~
~~Sub-prime~~	~~2.27~~2.28

Commercial Mortgage Loans

We invest a portion of our investment portfolio in commercial mortgage loans. As of ~~September 30, 2017,~~March 31, 2021 our commercial mortgage loan holdings were ~~approximately $6.5 billion.~~$10.3 billion, $10.1 billion net of allowance for credit losses. We have specialized in making loans on ~~either~~ credit-oriented commercial properties, or credit-anchored strip shopping centers, senior living facilities, and apartments. Our underwriting procedures relative to our commercial loan portfolio are based, in our view, on a conservative and disciplined approach. We concentrate on a small number of commercial real estate asset types associated with the necessities of life (retail, multi-family, senior living, professional office buildings, and warehouses). We believe that these asset types tend to weather economic downturns better than other commercial asset classes in which we have chosen not to participate. We believe this disciplined approach has helped to maintain a relatively low delinquency and foreclosure rate throughout our history. The majority of our commercial mortgage ~~loans~~loan portfolio was underwritten ~~and funded~~ by us. From time to time, we may acquire loans in conjunction with an acquisition.

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Our commercial mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, and net of ~~valuation allowances.~~an allowance for credit losses. Interest income is accrued on the principal amount of the loan based on the loan’s contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts, and prepayment fees are reported in net investment income.

Certain of the commercial mortgage loans have call options that occur within the next 129 years. However, if interest rates were to significantly increase, we may be unable to exercise the call options on our existing commercial mortgage loans commensurate with the significantly increased market rates. As of ~~September 30, 2017,~~March 31, 2021, assuming the loans are called at their next call dates, ~~approximately $54.7~~$168 million of principal would become due for the remainder of ~~2017, $976.2~~2021, $538 million in ~~2018~~2022 through ~~2022, $124.6~~2026, and $10 million in ~~2023~~2027 through ~~2027, and $9.9 million thereafter.~~2029.

We offer a type of commercial mortgage loan under which we will permit a loan-to-value ratio of up to 85% in exchange for a ~~participating~~participation interest in the cash flows from the underlying real estate. As of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016, approximately $715.2~~2020, $774 million and ~~$595.2~~$806 million, respectively, of our total commercial mortgage loans principal balance have this participation feature. Cash flows received as a result of this participation feature are recorded as interest income. During the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2021 and ~~2016, we~~2020, the Company recognized ~~$14.2 million, $25.7 million, $3.3~~$7 million and ~~$15.8~~$16 million respectively, of ~~participating~~participation commercial mortgage loan income.

The following table includes a breakdown of our commercial mortgage loan portfolio:


Commercial Mortgage Loan Portfolio Profile
	As of March 31, 2021			As of December 31, 2020
	(Dollars In Millions)
Total number of loans	1,803			1,827
Total amortized cost	$	10,308		$	10,228
Total unpaid principal balance	$	10,237		$	10,148
Allowance for credit losses - funded commercial mortgage loans	$	(171)		$	(222)
Average loan size	$	6		$	6

Weighted-average amortization	21.6 years			21.4 years
Weighted-average coupon	4.29		%	4.34		%
Weighted-average LTV	54.13		%	53.91		%
Weighted-average debt coverage ratio	1.74			1.72

Total number of unfunded commitments	122			117
Total unfunded commitments balance	$	1,064		$	801
Allowance for credit losses - unfunded commitments	$	(15)		$	(22)

We record commercial mortgage loans net of an allowance for credit losses. This allowance is calculated ~~through analysis of specific loans that have indicators of potential impairment~~and recorded at a loan level, based on ~~current information~~analysis and ~~events.~~input data for loans with similar risk characteristics. As of ~~September 30, 2017~~March 31, 2021 and December 31, ~~2016,~~2020, there were ~~$1.1~~allowances for commercial mortgage loan and unfunded commitment credit losses of $186 million and ~~$0.7~~$245 million, ~~of allowances for mortgage loan credit losses,~~ respectively.

While our commercial mortgage loans do not have quoted market values, as of ~~September 30, 2017,~~March 31, 2021 we estimated the fair value of our commercial mortgage loans to be ~~$6.5~~$10.9 billion (using an internal fair value model which calculates the value of most loans by using the ~~loan's~~loan’s discounted cash flows to the ~~loan's~~loan’s call or maturity date), which was ~~approximately 0.63% less~~5.37% more than the amortized cost, less any related loan loss reserve.

At the time of origination, our commercial mortgage lending criteria targets that the loan-to-value ratio on each commercial mortgage loan is 75% or less. We target projected rental payments from credit anchors (i.e., excluding rental payments from smaller local tenants) of 70% of the property’s projected operating expenses and debt service.

As of ~~September 30, 2017, approximately $3.1~~March 31, 2021, and December 31, 2020 we had $1 million and $3 million, respectively, of invested assets that consisted of ~~nonperforming mortgage loans, restructured mortgage loans, or~~commercial mortgage loans that were commercial mortgage loans that were nonperforming, restructured or foreclosed and ~~were~~ converted to real estate properties. ~~We do~~The Company does not expect these investments to adversely affect ~~our~~ its

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liquidity or ability to maintain proper matching of assets and liabilities. ~~During the nine months ended September 30, 2017, certain mortgage loan transactions occurred that would have been accounted for as troubled debt restructurings.~~ For all commercial mortgage loans, the impact of troubled debt restructurings is reflected in our investment balance and in the allowance for commercial mortgage loan credit losses.

During the ~~nine~~three months ended ~~September 30, 2017, we recognized two~~March 31, 2021 the Company did not recognize any troubled debt restructurings transactions. During the year ended December 31, 2020, the Company recognized four troubled debt restructurings transactions as a result of ~~the Company~~ granting concessions to borrowers which included loan terms unavailable from other lenders. These concessions were the result of agreements between the creditor and the debtor. WeThe Company did not identify any loans whose principal was permanently impaired during the ~~nine~~three months ended ~~September 30, 2017.~~March 31, 2021.

Our mortgage loan portfolio consists of two categories of loans: 1) those not subject to a pooling and servicing agreement and 2) those subject to a contractual pooling and servicing agreement. As of September 30, 2017, $3.1 million of mortgage loans not subject to a pooling and servicing agreement were nonperforming mortgage loans, restructured, or mortgage loans that were foreclosed and were converted to real estate properties. We did not foreclose on any nonperforming loans not subject to a pooling and servicing agreement during the nine months ended September 30, 2017.

As of September 30, 2017, none of the loans subject to a pooling and servicing agreement were nonperforming or restructured. We did not foreclose on any nonperforming loans subject to a pooling and servicing agreement during the nine months ended September 30, 2017.

~~We do not expect these investments to adversely affect our liquidity or ability to maintain proper matching of assets and liabilities.~~

It is our policy to cease to carry accrued interest on loans that are over 90 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. If a loan becomes over 90 days delinquent, it is our general policy to initiate foreclosure proceedings unless a workout arrangement to bring the loan current is in place. ~~For loans subject~~

We use the same methodology and assumptions to ~~a pooling and servicing agreement, there are certain additional restrictions and/or requirements related to workout proceedings, and~~estimate the allowance for credit losses for unfunded loan commitments as ~~such, these loans may have different attributes and/or circumstances affecting the status of delinquency or categorization of those in nonperforming status.~~for funded commercial mortgage loan receivables.

Unrealized Gains and Losses — Available-for-Sale Securities

The information presented below relates to investments at a certain point in time and is not necessarily indicative of the status of the portfolio at any time after ~~September 30, 2017,~~March 31, 2021, the balance sheet date. Information about unrealized gains and losses is subject to rapidly changing conditions, including volatility of financial markets and changes in interest rates. Management considers a number of factors in determining if an unrealized loss is ~~other-than-temporary,~~related to a credit loss, including the expected cash to be collected and the intent, likelihood, and/or ability to hold the security until recovery. Consistent with our long-standing practice, we do not utilize a “bright line test” to determine ~~other-than-temporary impairments.~~whether a credit loss has occurred. On a quarterly basis, we perform an analysis on every security with an unrealized loss to determine ~~if an other-than-temporary impairment~~whether a credit loss has occurred. This analysis includes reviewing several metrics including collateral, expected cash flows, ratings, and liquidity. Furthermore, since the timing of recognizing realized gains and losses is largely based on management’s decisions as to the timing and selection of investments to be sold, the tables and information provided below should be considered within the context of the overall unrealized gain/(loss) position of the portfolio. We had an overall net unrealized ~~loss~~gain of ~~$299.1 million,~~$3.5 billion, prior to tax and the related impact of certain insurance assets and liabilities offsets, as of ~~September 30, 2017,~~March 31, 2021, and an overall net unrealized ~~loss~~gain of ~~$1.7~~$6.9 billion as of December 31, ~~2016.~~2020.

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For fixed maturity ~~and equity~~ securities held that are in an unrealized loss position as of ~~September 30, 2017,~~March 31, 2021, the fair value, amortized cost, unrealized loss, allowance for expected credit losses (“ACL”), and total time period that the security has been in an unrealized loss position are presented in the table below:


	Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		ACL		% ACL		Unrealized Loss		% Unrealized Loss
	(Dollars In Millions)
<= 90 days	$	9,879	84.3	%	$	10,209	83.8	%	$	—	0.1	%	$	(330)	71.2	%
>90 days but <= 180 days	338		2.9		362		3.0		—		—		(24)		5.1
>180 days but <= 270 days	200		1.7		217		1.8		—		—		(17)		3.5
>270 days but <= 1 year	406		3.5		429		3.5		(1)		31.1		(22)		4.7
>1 year but <= 2 years	222		1.9		239		2.0		—		3.3		(17)		3.7
>2 years but <= 3 years	211		1.8		220		1.8		(1)		31.9		(8)		1.6
>3 years but <= 4 years	71		0.6		77		0.6		(1)		7.7		(5)		1.1
>4 years but <= 5 years	69		0.6		70		0.6		—		—		(1)		0.3
>5 years	311		2.7		353		2.9		(1)		25.9		(41)		8.8
Total	$	11,707	100.0	%	$	12,176	100.0	%	$	(4)	100.0	%	$	(465)	100.0	%

Fair
Value

% Fair
Value

Amortized
Cost

% Amortized
Cost

Unrealized
Loss

% Unrealized
Loss
(Dollars In Thousands)
<= 90 days $ 5,209,656
23.5 % $ 5,245,600
22.8 % $ (35,944 ) 4.2 %
>90 days but <= 180 days 228,235
1.0
233,182
1.0
(4,947 ) 0.6
>180 days but <= 270 days 266,193
1.2
274,333
1.2
(8,140 ) 0.9
>270 days but <= 1 year 6,695,661
30.2
6,883,790
29.9
(188,129 ) 21.8
>1 year but <= 2 years 788,434
3.6
827,655
3.6
(39,221 ) 4.6
>2 years but <= 3 years 8,982,590
40.5
9,567,918
41.5
(585,328 ) 67.9
>3 years but <= 4 years —
—
—
—
—
—
>4 years but <= 5 years —
—
—
—
—
—
>5 years —
—
—
—
—
—
Total $ 22,170,769
100.0 % $ 23,032,478
100.0 % $ (861,709 ) 100.0 %

The ~~book value~~range of ~~our investment portfolio was marked to fair value~~maturity dates for securities in an unrealized loss position as of ~~February 1, 2015,~~March 31, 2021, varies, with 8.0% maturing in ~~conjunction with~~less than 5 years, 22.5% maturing between 5 and 10 years, and 69.5% maturing after 10 years. The following table shows the ~~Dai-ichi Merger which resulted~~credit rating of securities in ~~the elimination of previously~~an unrealized ~~gains and losses from accumulated other comprehensive income. The level of interest rates~~loss position as of February 1, 2015, resulted in an increase in the carrying value of our investments. Since February 1, 2015 interest rates have increased resulting in net unrealized losses in our investment portfolio.March 31, 2021:


							%								%
S&P or Equivalent	Fair		%		Amortized		Amortized						Unrealized		Unrealized
Designation	Value		Fair Value		Cost		Cost		ACL		% ACL		Loss		Loss
	(Dollars In Millions)
AAA/AA/A	$	6,599	56.4	%	$	6,832	56.1	%	$	—	—	%	$	(233)	50.3	%
BBB	4,406		37.6		4,584		37.6		—		—		(178)		38.0
Investment grade	11,005		94.0	%	11,416		93.7	%	—		—	%	(411)		88.3	%
BB	649		5.6		701		5.8		(1)		7.8		(51)		11.1
B	40		0.3		45		0.4		(2)		59.8		(3)		0.6
CCC or lower	13		0.1		14		0.1		(1)		32.4		—		—
Below investment grade	702		6.0	%	760		6.3	%	(4)		100.0	%	(54)		11.7	%
Total	$	11,707	100.0	%	$	12,176	100.0	%	$	(4)	100.0	%	$	(465)	100.0	%

As of ~~September 30, 2017,~~March 31, 2021, the Barclays Investment Grade Index was priced at 9889 bps versus a 10 year average of ~~178~~131 bps. Similarly, the Barclays High Yield Index was priced at ~~370~~357 bps versus a 10 year average of ~~656~~502 bps. As of ~~September 30, 2017,~~March 31, 2021, the five, ten, and thirty-year U.S. Treasury obligations were trading at levels of ~~1.9%~~0.9%, ~~2.3%~~1.7%, and ~~2.9%~~2.4%, as compared to 10 year averages of ~~1.7%~~1.5%, ~~2.6%~~2.1%, and ~~3.5%~~2.9%, respectively.

As of ~~September 30, 2017, 93.2%~~March 31, 2021, 88.3% of the unrealized loss was associated with securities that were rated investment grade. We have examined the performance of the underlying collateral and cash flows and expect that our investments will continue to perform in accordance with their contractual terms. Factors such as credit enhancements within the deal structures and the underlying collateral performance/characteristics support the recoverability of the investments. Based on the factors discussed, we doconcluded than an allowance for credit losses was not ~~consider these unrealized loss positions to be other-than-temporary.~~necessary. However, from time to time, we may sell securities in the ordinary course of managing our portfolio to meet diversification, credit quality, yield enhancement, asset/liability management, and liquidity requirements.

Table of Contents

Expectations that investments in mortgage-backed and asset-backed securities will continue to perform in accordance with their contractual terms are based on assumptions that a market participant would use in determining the current fair value. It is reasonably possible that the underlying collateral of these investments will perform worse than current market expectations and that such an event may lead to adverse changes in the cash flows on our holdings of these types of securities. This could lead to potential future write-downs within our portfolio of mortgage-backed and asset-backed securities. Expectations that our investments in corporate securities and/or debt obligations will continue to perform in accordance with their contractual terms are based on evidence gathered through our normal credit surveillance process. Although we do not anticipate such events, it is reasonably possible that issuers of our investments in corporate securities will perform worse than current expectations. Such events may lead us to recognize potential future write-downs within our portfolio of corporate securities. It is also possible that such unanticipated events would lead us to dispose of those certain holdings and recognize the effects of any such market movements in our financial statements.

As of ~~September 30, 2017, there~~March 31, 2021, we held a total of 845 positions that were ~~estimated gross~~in an unrealized loss position. Included in that amount were 66 positions of below investment grade securities with a fair value of $702 million that were in an unrealized loss position. Total unrealized losses ~~of $1.6 million~~ related to ~~our mortgage-backed~~below investment grade securities ~~collateralized by Alt-A mortgage loans.~~were $54 million, $36 million of which had been in an unrealized loss position for more than twelve months. Below investment grade securities in an unrealized loss position were 0.8% of invested assets.

As of March 31, 2021, securities in an unrealized loss position that were rated as below investment grade represented 6.0% of the total fair value and 11.7% of the total unrealized loss. We have the ability and intent to hold these securities to maturity. After a review of each security and its expected cash flows, we believe the decline in fair value to be non-credit related.

The following table includes the fair value, amortized cost, unrealized loss, ACL, and total time period that the security has been in an unrealized loss position for all below investment grade securities as of March 31, 2021:


	Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		ACL		% ACL		Unrealized Loss		% Unrealized Loss
	(Dollars In Millions)
<= 90 days	$	291	41.4	%	$	303	39.8	%	$	—	—	%	$	(12)	22.6	%
>90 days but <= 180 days	—		—		—		—		—		—		—		—
>180 days but <= 270 days	16		2.3		17		2.3		—		—		(1)		2.0
>270 days but <= 1 year	74		10.5		80		10.5		(1)		31.0		(5)		8.5
>1 year but <= 2 years	87		12.3		98		12.9		—		3.3		(11)		21.8
>2 years but <= 3 years	17		2.5		19		2.5		(1)		31.9		(1)		0.3
>3 years but <= 4 years	59		8.4		65		8.5		(1)		7.8		(5)		9.4
>4 years but <= 5 years	—		—		—		—		—		—		—		—
>5 years	158		22.6		178		23.5		(1)		26.0		(19)		35.4
Total	$	702	100.0	%	$	760	100.0	%	$	(4)	100.0	%	$	(54)	100.0	%

We have no material concentrations of issuers or guarantors of fixed maturity securities. The industry segment composition of all securities in an unrealized loss position held as of ~~September 30, 2017,~~March 31, 2021, is presented in the following table:

Table of Contents


	Fair Value			% Fair Value		Amortized Cost		% Amortized Cost		Unrealized Loss			% Unrealized Loss			Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		ACL		% ACL		Unrealized Loss		% Unrealized Loss
	(Dollars In Thousands)															(Dollars In Millions)
Banking	$	1,429,518		6.4	%	$	1,454,211	6.3	%	$	(24,693	)	2.9	%	Banking	$	1,112	9.5	%	$	1,156	9.5	%	$	—	—	%	$	(44)	9.5	%
Other finance	64,248			0.3		67,224		0.3		(2,976		)	0.3		Other finance	182		1.6		193		1.6		—		—		(11)		2.4
Electric utility	3,042,067			13.7		3,209,920		13.9		(167,853		)	19.6		Electric utility	1,491		12.7		1,542		12.7		—		—		(51)		11.0
Energy	1,593,681			7.2		1,678,339		7.3		(84,658		)	9.8		Energy	741		6.3		795		6.5		—		—		(54)		11.6
Natural gas	588,544			2.7		619,028		2.7		(30,484		)	3.5		Natural gas	285		2.4		292		2.4		—		—		(7)		1.5
Insurance	2,233,906			10.1		2,309,425		10.1		(75,519		)	8.8		Insurance	774		6.6		806		6.6		—		—		(32)		6.9
Communications	1,193,926			5.4		1,271,226		5.5		(77,300		)	9.0		Communications	318		2.8		335		2.7		(1)		25.0		(16)		3.4
Basic industrial	722,518			3.3		756,203		3.3		(33,685		)	3.9		Basic industrial	248		2.1		258		2.1		—		—		(10)		2.2
Consumer noncyclical	2,084,423			9.4		2,159,773		9.4		(75,350		)	8.7		Consumer noncyclical	904		7.7		946		7.8		—		—		(42)		9.0
Consumer cyclical	638,620			2.9		664,752		2.9		(26,132		)	3.0		Consumer cyclical	524		4.5		553		4.5		—		—		(29)		6.2
Finance companies	27,413			0.1		29,411		0.1		(1,998		)	0.2		Finance companies	74		0.6		77		0.6		—		—		(3)		0.6
Capital goods	1,021,495			4.6		1,062,302		4.6		(40,807		)	4.7		Capital goods	438		3.7		452		3.7		—		—		(14)		3.0
Transportation	709,108			3.2		741,336		3.2		(32,228		)	3.7		Transportation	162		1.4		169		1.4		—		—		(7)		1.5
Other industrial	151,884			0.7		161,350		0.7		(9,466		)	1.1		Other industrial	68		0.6		70		0.6		—		—		(2)		0.4
Brokerage	356,436			1.6		364,591		1.6		(8,155		)	0.9		Brokerage	336		2.9		350		2.9		—		—		(14)		3.0
Technology	606,540			2.7		628,821		2.7		(22,281		)	2.6		Technology	254		2.2		267		2.2		—		—		(13)		2.8
Real estate	35,526			0.5		35,851		0.2		(325		)	—		Real estate	5		—		5		—		—		—		—		—
Other utility	16,257			0.1		17,094		0.1		(837		)	0.1		Other utility	13		0.1		13		0.1		—		—		—		—
Commercial mortgage-backed securities	1,418,123			6.4		1,442,043		6.3		(23,920		)	2.8		Commercial mortgage-backed securities	276		2.4		289		2.4		(2)		50.0		(11)		2.4
Other asset-backed securities	372,844			1.7		386,332		1.7		(13,488		)	1.6		Other asset-backed securities	319		2.7		324		2.7		(1)		25.0		(4)		0.9
Residential mortgage-backed non-agency securities	789,874			3.6		802,612		3.5		(12,738		)	1.5		Residential mortgage-backed non-agency securities	1,818		15.5		1,843		15.1		—		—		(25)		5.4
Residential mortgage-backed agency securities	334,309			1.5		338,686		1.5		(4,377		)	0.5		Residential mortgage-backed agency securities	780		6.7		813		6.7		—		—		(33)		7.1
U.S. government-related securities	1,176,479			5.3		1,202,812		5.2		(26,333		)	3.1		U.S. government-related securities	438		3.7		475		3.9		—		—		(37)		8.0
Other government-related securities	128,539			0.6		135,374		0.6		(6,835		)	0.8		Other government-related securities	65		0.6		68		0.6		—		—		(3)		0.6
States, municipals, and political divisions	1,434,491			6.0		1,493,762		6.3		(59,271		)	6.9		States, municipals, and political divisions	82		0.7		85		0.7		—		—		(3)		0.6
Total	$	22,170,769	��	100.0	%	$	23,032,478	100.0	%	$	(861,709	)	100.0	%	Total	$	11,707	100.0	%	$	12,176	100.0	%	$	(4)	100.0	%	$	(465)	100.0	%

We have no material concentrations of issuers or guarantors of fixed maturity securities. The industry segment composition of all securities in an unrealized loss position held as of December 31, ~~2016,~~2020, is presented in the following table:

Table of Contents


	Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		Unrealized Loss			% Unrealized Loss			Fair Value		% Fair Value		Amortized Cost		% Amortized Cost		ACL		% ACL		Unrealized Loss		% Unrealized Loss
	(Dollars In Thousands)														(Dollars In Millions)
Banking	$	3,085,937	10.6	%	$	3,193,541	10.3	%	$	(107,604	)	5.8	%	Banking	$	163	5.1	%	$	165	5.0	%	$	—	—	%	$	(2)	1.2	%
Other finance	65,883		0.2		69,729		0.2		(3,846		)	0.2		Other finance	95		3.0		103		3.1		—		—		(8)		6.3
Electric utility	3,412,425		11.7		3,727,811		12.0		(315,386		)	16.9		Electric utility	221		7.0		231		6.9		—		0.6		(10)		7.6
Energy	2,710,110		9.3		2,888,563		9.3		(178,453		)	9.6		Energy	431		13.7		482		14.6		(16)		68.2		(35)		26.9
Natural gas	542,654		1.9		593,355		1.9		(50,701		)	2.7		Natural gas	14		0.4		14		0.4		—		1.0		—		0.2
Insurance	2,857,406		9.8		3,094,076		10.0		(236,670		)	12.7		Insurance	87		2.8		100		3.1		—		—		(13)		10.0
Communications	1,463,373		5.0		1,604,670		5.2		(141,297		)	7.6		Communications	54		1.6		56		1.6		(2)		8.3		—		(0.4)
Basic industrial	1,149,208		3.9		1,236,848		4.0		(87,640		)	4.7		Basic industrial	—		—		—		—		—		—		—		—
Consumer noncyclical	2,626,590		9.0		2,811,825		9.1		(185,235		)	10.0		Consumer noncyclical	188		5.9		193		5.8		—		—		(5)		3.9
Consumer cyclical	764,236		2.6		808,112		2.6		(43,876		)	2.4		Consumer cyclical	243		7.6		256		7.6		—		—		(13)		10.4
Finance companies	64,490		0.2		69,077		0.2		(4,587		)	0.2		Finance companies	1		0.1		2		0.1		—		—		(1)		0.7
Capital goods	1,392,879		4.8		1,479,146		4.8		(86,267		)	4.6		Capital goods	32		1.0		33		1.0		—		—		(1)		1.0
Transportation	948,991		3.3		1,012,504		3.3		(63,513		)	3.4		Transportation	153		4.8		161		4.8		—		—		(8)		5.1
Other industrial	163,993		0.6		176,558		0.6		(12,565		)	0.7		Other industrial	18		0.6		18		0.5		—		—		—		0.1
Brokerage	512,377		1.8		546,116		1.8		(33,739		)	1.8		Brokerage	39		1.2		41		1.2		—		—		(2)		1.3
Technology	946,890		3.2		1,001,064		3.2		(54,174		)	2.9		Technology	52		1.6		55		1.6		—		—		(3)		1.9
Real estate	126,156		0.5		131,715		0.4		(5,559		)	0.3
Other utility	17,326		0.1		18,516		0.1		(1,190		)	0.1

Commercial mortgage-backed securities	1,526,727		5.3		1,567,329		5.1		(40,602		)	2.2		Commercial mortgage-backed securities	293		9.2		316		9.5		(4)		15.7		(19)		15.1
Other asset-backed securities	500,497		1.7		521,195		1.7		(20,698		)	1.1		Other asset-backed securities	472		14.9		480		14.4		(1)		6.2		(7)		5.1
Residential mortgage-backed non-agency securities	956,524		3.3		975,895		3.2		(19,371		)	1.1		Residential mortgage-backed non-agency securities	292		9.2		293		8.8		—		—		(1)		0.9
Residential mortgage-backed agency securities	265,996		0.9		271,920		0.9		(5,924		)	0.3		Residential mortgage-backed agency securities	103		3.2		103		3.1		—		—		—		—
U.S. government-related securities	1,237,945		4.2		1,278,400		4.1		(40,455		)	2.2		U.S. government-related securities	312		5.1		315		5.0		—		—		(3)		1.3
Other government-related securities	177,805		0.6		192,602		0.6		(14,797		)	0.8		Other government-related securities	26		0.8		27		0.8		—		—		(1)		0.8
States, municipals, and political divisions	1,610,621		5.5		1,716,179		5.4		(105,558		)	5.7		States, municipals, and political divisions	39		1.2		39		1.1		—		—		—		0.6
Total	$	29,127,039	100.0	%	$	30,986,746	100.0	%	$	(1,859,707	)	100.0	%	Total	$	3,328	100.0	%	$	3,483	100.0	%	$	(23)	100.0	%	$	(132)	100.0	%

The range of maturity dates for securities in an unrealized loss position as of September 30, 2017, varies, with 14.8% maturing in less than 5 years,15.9% maturing between 5 and 10 years, and 69.3% maturing after 10 years. The following table shows the credit rating of securities in an unrealized loss position as of September 30, 2017:

S&P or Equivalent Fair % Fair Amortized % Amortized Unrealized % Unrealized
Designation Value Value Cost Cost Loss Loss
(Dollars In Thousands)
AAA/AA/A $ 13,603,854
61.4 % $ 14,042,579
61.0 % $ (438,725 ) 50.9 %
BBB 7,911,314
35.6
8,275,499
35.8
(364,185 ) 42.3
Investment grade 21,515,168
97.0 % 22,318,078
96.8 % (802,910 ) 93.2 %
BB 351,575
1.6
377,677
1.6
(26,102 ) 3.0
B 220,235
1.0
249,675
1.1
(29,440 ) 3.4
CCC or lower 83,791
0.4
87,048
0.5
(3,257 ) 0.4
Below investment grade 655,601
3.0 % 714,400
3.2 % (58,799 ) 6.8 %
Total $ 22,170,769
100.0 % $ 23,032,478
100.0 % $ (861,709 ) 100.0 %

Table of September 30, 2017, we held a total of 1,742 positions that were in an unrealized loss position. Included in that amount were 89 positions of below investment grade securities with a fair value of $655.6 million that were in an unrealized loss position. Total unrealized losses related to below investment grade securities were $58.8 million, $52.5 million of which had beenContents

~~in an unrealized loss position for more than twelve months. Below investment grade securities in an unrealized loss position were 1.2% of invested assets.~~

~~We have the ability and intent to hold these securities to maturity. After a review of each security and its expected cash flows, we believe the decline in market value to be temporary.~~

The following table includes the fair value, amortized cost, unrealized loss, and total time period that the security has been in an unrealized loss position for all below investment grade securities as of September 30, 2017:

Fair
Value

% Fair
Value

Amortized
Cost

% Amortized
Cost

Unrealized
Loss

% Unrealized
Loss
(Dollars In Thousands)
<= 90 days $ 124,880
19.0 % $ 127,412
17.8 % $ (2,532 ) 4.3 %
>90 days but <= 180 days 23,503
3.6
24,306
3.4
(803 ) 1.4
>180 days but <= 270 days 1,320
0.2
1,609
0.2
(289 ) 0.5
>270 days but <= 1 year 54,312
8.3
56,972
8.0
(2,660 ) 4.5
>1 year but <= 2 years 15,142
2.3
15,742
2.2
(600 ) 1.0
>2 years but <= 3 years 436,444
66.6
488,359
68.4
(51,915 ) 88.3
>3 years but <= 4 years —
—
—
—
—
—
>4 years but <= 5 years —
—
—
—
—
—
>5 years —
—
—
—
—
—
Total $ 655,601
100.0 % $ 714,400
100.0 % $ (58,799 ) 100.0 %

Risk Management and Impairment Review

We monitor the overall credit quality of our portfolio within established guidelines. The following table includes our available-for-sale fixed maturities by credit rating as of ~~September 30, 2017:~~March 31, 2021:


			Percent of					Percent of
Rating	Fair Value		Fair Value		Rating	Fair Value		Fair Value
	(Dollars In Thousands)					(Dollars In Millions)
AAA	$	5,278,828	13.9	%	AAA	$	8,959	13.3	%
AA	3,280,511		8.7		AA	6,668		9.9
A	12,657,431		33.4		A	21,582		32.1
BBB	14,764,710		39.0		BBB	27,413		40.9
Investment grade	35,981,480		95.0		Investment grade	64,622		96.2
BB	1,362,934		3.6		BB	2,376		3.5
B	301,763		0.8		B	129		0.2
CCC or lower	243,981		0.6		CCC or lower	31		0.1
Below investment grade	1,908,678		5.0		Below investment grade	2,536		3.8
Total	$	37,890,158	100.0	%	Total	$	67,158	100.0	%

Not included in the table above are ~~$2.4~~$2.6 billion of investment grade and ~~$240.7~~$134 million of below investment grade fixed maturities classified as trading ~~securities and $2.7 billion of fixed maturities classified as held-to-maturity.~~

securities.

Limiting bond exposure to any creditor group is another way we manage credit risk. We held no credit default swaps on the positions listed below as of ~~September 30, 2017.~~March 31, 2021. The following table summarizes our ten largest fixed maturity exposures to an individual creditor group as of ~~September 30, 2017:~~March 31, 2021:

Fair Value of
Funded Unfunded Total
Creditor Securities Exposures Fair Value
(Dollars In Millions)
Federal Home Loan Bank $ 230.3
$ —
$ 230.3
The Southern Co. 215.7
—
215.7
Duke Energy Corp 207.3
—
207.3
AT&T Inc. 206.7
—
206.7
JP Morgan Chase & Co 199.5
6.6
206.1
Wells Fargo & Co. 200.3
—
200.3
Morgan Stanley 198.5
—
198.5
Exelon Corp 196.7
—
196.7
Goldman Sachs Group 195.3
—
195.3
HSBC Holdings PLC 194.3
—
194.3
Total $ 2,044.6
$ 6.6
$ 2,051.2


	Fair Value of
	Funded		Unfunded		Total
Creditor	Securities		Exposures		Fair Value
	(Dollars In Millions)
Berkshire Hathaway Inc	$	290	$	—	$	290
JP Morgan Chase & Co	281		12		293
UnitedHealth Group Inc	269		—		269
Federal Home Loan Bank	282		—		282
AT&T Inc	281		—		281
Verizon Communications Inc	275		—		275
Wells Fargo & Co	272		—		272
HSBC Holdings Plc	267		1		268
TIAA Board of Overseers	266		—		266
Apple Inc	265		—		265
Total	$	2,748	$	13	$	2,761

Determining whether a decline in the current fair value of invested assets is ~~an other-than-temporary decline in value~~a credit loss is both objective and subjective, and can involve a variety of assumptions and estimates, particularly for investments that are not actively traded in established markets. We review our positions on a monthly basis for possible credit concerns and review our current exposure, credit enhancement, and delinquency experience.

Management considers a number of factors when determining the impairment status of individual securities. These include the economic condition of various industry segments and geographic locations and other areas of identified risks. Since it is possible for the impairment of one investment to affect other investments, we engage in ongoing risk management to safeguard against and limit any further risk to our investment portfolio. Special attention is given to correlative risks within specific industries, related parties, and business markets.

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For certain securitized financial assets with contractual cash flows, including RMBS, CMBS, and other asset-backed securities (collectively referred to as asset-backed securities or “ABS”), GAAP requires us to periodically update our best estimate of cash flows over the life of the security. If the fair value of a securitized financial asset is less than its cost or amortized cost and there has been a decrease in the present value of the expected cash flows since the last revised estimate, ~~considering both timing and amount, an other-than-temporary impairment charge~~a credit loss is recognized. Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third party sources along with certain internal assumptions and judgments regarding the future performance of the underlying collateral. Projections of expected future cash flows may change based upon new information regarding the performance of the underlying collateral. In addition, we consider our intent and ability to retain a temporarily depressed security until recovery.

~~Securities in an unrealized loss position are reviewed at least quarterly~~

For securities which the Company has the intent and ability to determine if an other-than-temporary impairment is present based on certain quantitative and qualitative factors. We consider a number of factors in determining whether the impairment is other-than-temporary. These include, but are not limited to: 1) actions taken by rating agencies, 2) default by the issuer, 3) the significance of the decline, 4) an assessment of our intent to sellhold the security ~~(including a more likely than not assessment of whether we will be required to sell~~until the security) before recovering the security’s amortized cost, 5) the time period during which the decline has occurred, 6) an economic analysis of the issuer’s industry, and 7) the financial strength, liquidity, and recoverability of the issuer. Management performs a security-by-security review each quarter in evaluating the need for any other-than-temporary impairments. Although no set formula is used in this process, the investment performance, collateral position, and continued viability of the issuer are significant measures considered, along with an analysis regarding our expectations for recovery of the ~~security’s entire~~ amortized cost basis, ~~through~~analysis of expected cash flows is used to measure the ~~receipt~~amount of the credit loss, if any, and the Company uses the effective interest rate implicit in the security at the date of acquisition to discount expected cash flows. For floating rate securities, the Company’s policy is to lock in the interest rate at the first instance of an impairment. Estimates of expected cash flows are not probability-weighted, but will reflect the Company’s best estimate based on past events, current conditions, and reasonable and supportable forecasts of future events. To the extent the amortized cost basis of the security exceeds the present value of future cash ~~flows.~~flows expected to be collected, this difference represents a credit loss. Credit losses are recorded in current earnings with a corresponding adjustment to the allowance for credit losses, except that the credit loss recognized cannot exceed the difference between the book value and fair value of the security as of the date of the analysis. In future periods, recoveries in the present value of expected cash flows are recorded in current earnings as a reversal of the previously recognized allowance for credit losses. Based on our analysis, for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2021, we recognized ~~approximately $0.3~~$5 million ~~and $8.3 million, respectively,~~ of credit ~~related impairments on investment securities~~gains in ~~an unrealized loss position that were other-than-temporarily impaired resulting in a charge to~~ earnings.

There are certain risks and uncertainties associated with determining whether declines in fair values are ~~other-than-temporary.~~the result of credit losses. These include significant changes in general economic conditions and business markets, trends in certain industry segments, interest rate fluctuations, rating agency actions, changes in significant accounting estimates and assumptions, commission of fraud, and legislative actions. We continuously monitor these factors as they relate to the investment portfolio in determining the status of each investment.

We have deposits with certain financial institutions which exceed federally insured limits. We have reviewed the creditworthiness of these financial institutions and believe that there is minimal risk of a material loss.

Certain European countries have experienced varying degrees of financial stress, which could have a detrimental impact on regional or global economic conditions and on sovereign and non-sovereign obligations. The chart shown below includes our non-sovereign fair value exposures in these countries as of ~~September 30, 2017.~~March 31, 2021. As of ~~September 30, 2017,~~March 31, 2021, we had no material unfunded exposure and had no material direct sovereign exposure.

Table of ~~September 30, 2017~~

Contents

1-50 bps More than
Minimum Guaranteed Interest Rate At above 50 bps
Account Value MGIR MGIR above MGIR Total
(Dollars In Millions)
Universal Life Insurance

>2% - 3% $ 203
$ 1,197
$ 2,044
$ 3,444
>3% - 4% 4,160
997
8
5,165
>4% - 5% 2,001
13
1
2,015
>5% - 6% 201
—
—
201
Subtotal 6,565
2,207
2,053
10,825
Fixed Annuities

1% $ 614
$ 205
$ 360
$ 1,179
>1% - 2% 500
358
72
930
>2% - 3% 1,939
64
5
2,008
>3% - 4% 257
—
—
257
>4% - 5% 274
—
—
274
>5% - 6% 3
—
—
3
Subtotal 3,587
627
437
4,651
Total $ 10,152
$ 2,834
$ 2,490
$ 15,476

Percentage of Total 66 % 18 % 16 % 100 %

March 31, 2021


				1-50 bps			More than
	At			above			50 bps
	MGIR			MGIR			above MGIR			Total
	(Account Value In Millions)
Crediting Rate
Universal Life Insurance
2%	$	8		$	856		$	2,398		$	3,262
>2% - 3%	5,567			822			1,127			7,516
>3% - 4%	7,495			400			36			7,931
>4% - 5%	2,235			387			173			2,795
>5% - 6%	315			—			—			315
Subtotal	15,620			2,465			3,734			21,819
Fixed Annuities
1%	$	289		$	792		$	1,892		$	2,973
>1% - 2%	511			208			2,181			2,900
>2% - 3%	1,411			50			5			1,466
>3% - 4%	262			—			—			262
>4% - 5%	251			—			—			251
>5% - 6%	—			—			—			—
Subtotal	2,724			1,050			4,078			7,852
Total	$	18,344		$	3,515		$	7,812		$	29,671

Percentage of Total	62		%	12		%	26		%	100		%

Credited Rate Summary

~~As of~~ December 31, ~~2016~~2020


				1-50 bps			More than
	At			above			50 bps
	MGIR			MGIR			above MGIR			Total
	(Account Value In Millions)
Crediting Rate
Universal Life Insurance
2%	$	—		$	143		$	2,176		$	2,319
>2% - 3%	4,032			1,482			1,244			6,758
>3% - 4%	9,487			472			36			9,995
>4% - 5%	2,261			386			172			2,819
>5% - 6%	316			—			—			316
Subtotal	16,096			2,483			3,628			22,207
Fixed Annuities
1%	$	273		$	654		$	1,975		$	2,902
>1% - 2%	517			215			2,185			2,917
>2% - 3%	1,436			52			4			1,492
>3% - 4%	265			—			—			265
>4% - 5%	251			—			—			251
>5% - 6%	—			—			—			—
Subtotal	2,742			921			4,164			7,827
Total	$	18,838		$	3,404		$	7,792		$	30,034

Percentage of Total	63		%	11		%	26		%	100		%

1-50 bps More than
Minimum Guaranteed Interest Rate At above 50 bps
Account Value MGIR MGIR above MGIR Total
(Dollars In Millions)
Universal Life Insurance

>2% - 3% $ 202
$ 1,133
$ 2,023
$ 3,358
>3% - 4% 4,001
1,191
11
5,203
>4% - 5% 1,928
14
—
1,942
>5% - 6% 208
—
—
208
Subtotal 6,339
2,338
2,034
10,711
Fixed Annuities

1% $ 670
$ 153
$ 114
$ 937
>1% - 2% 535
463
103
1,101
>2% - 3% 2,056
68
7
2,131
>3% - 4% 267
—
—
267
>4% - 5% 281
—
—
281
>5% - 6% 3
—
—
3
Subtotal 3,812
684
224
4,720
Total $ 10,151
$ 3,022
$ 2,258
$ 15,431

Percentage of Total 66 % 19 % 15 % 100 %

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We are active in mitigating the impact of a continued low interest rate environment through product design, as well as adjusting crediting rates on current in-force policies and contracts. We also manage interest rate and reinvestment risks through our asset/liability management process. Our asset/liability management programs and procedures involve the monitoring of asset and liability durations; cash flow testing under various interest rate scenarios; and the regular rebalancing of assets and liabilities with respect to yield, credit and market risk, and cash flow characteristics. These programs also incorporate the use of derivative financial instruments primarily to reduce our exposure to interest rate risk, inflation risk, currency exchange risk, volatility risk, and equity market risk.

IMPACT OF INFLATION

Inflation increases the need for life insurance. Many policyholders who once had adequate insurance programs may increase their life insurance coverage to provide the same relative financial benefit and protection. Higher interest rates may result in higher sales of certain of our investment products.

The higher interest rates that have traditionally accompanied inflation could also affect our operations. Policy loans increase as policy loan interest rates become relatively more attractive. As interest rates increase, disintermediation of stable value and annuity account balances and individual life policy cash values may increase. The ~~market~~fair value of our fixed-rate, long-term investments may decrease, we may be unable to implement fully the interest rate reset and call provisions of our commercial mortgage loans, and our ability to make attractive commercial mortgage loans, including ~~participating~~participation commercial mortgage loans, may decrease. In addition, ~~participating~~participation commercial mortgage loan income may decrease. The difference between the interest rate earned on investments and the interest rate credited to life insurance and investment products may also be adversely affected by rising interest rates. During the periods covered by this report, we believe inflation has not had a material impact on our business.

RECENTLY ISSUED ACCOUNTING STANDARDS

See Note 2, Summary of Significant Accounting Policies, to the consolidated condensed financial statements for information regarding recently issued accounting standards.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

See Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, ~~“Liquidity and Capital Resources” and Part II, Item 1A,~~ “Market Risk ~~Factors, of this report for market risk disclosures.~~Exposures”.

Item 4.Controls and Procedures

(a) Disclosure controls and procedures

In order to ensure that the information the Company must disclose in its filings with the Securities and Exchange Commission is recorded, processed, summarized, and reported on a timely basis, the Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as such term is defined in ~~Rules 13a-15(e) and~~Rule 13a -15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”))~~, except as otherwise noted below.~~. Based on their evaluation as of March 31, 2021, the end of the period covered by this Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were ~~effective.~~ effective at the reasonable assurance level.

It should be noted that any system of controls, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of any control system is based in part upon certain judgments, including the costs and benefits of controls and the likelihood of future events. Because of these and other inherent limitations of control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within the Company have been detected.

In conducting our evaluation of the effectiveness of internal control over financial reporting as of September 30, 2017, we have excluded USWC Holding Company and its subsidiaries ("US Warranty") and the internal controls relating to the administrative systems and processes being provided by third parties for the acquired business. US Warranty was acquired on December 1, 2016 and its revenues and income were immaterial to the Company's results of operations for the nine month period ended September 30, 2017.

(b)Changes in internal control over financial reporting

During the ~~third~~second quarter of ~~2017,~~2019, the Company ~~implemented components~~began the conversion and integration of ~~SAP’s enterprise resource planning ("ERP") solution, which includes a new general ledger, a new consolidation system, and new~~administrative processing into its internal control over financial reporting ~~tools.~~for Great West & Annuity Insurance Company and certain of its affiliates (“GWL&A”) acquired on June 1, 2019. The ~~upgraded ERP system represents a~~conversion to the Company’s operating environment was still in process, but not yet completed as of March 31, 2021. The Company has, therefore, included in its internal controls over financial reporting certain additional controls associated with the GWL&A systems ~~improvement initiative designed~~that have not yet been integrated into the Company’s operating environment.

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Other than the considerations noted in the paragraph above, there were no changes in the Company’s internal control over financial reporting during the three months ended March 31, 2021, that have materially affected, or are reasonably likely to ~~provide more effective management of our business operations as we continue to grow in size and scale. This initiative was not undertaken in response to any identified deficiency in~~materially affect, the Company’s internal control over financial reporting. The Company’s internal controls exist within a dynamic environment and the Company continually strives to improve its internal controls and procedures to enhance the quality of its financial reporting.

There were no other changes in the Company’s internal control over financial reporting during the nine months ended September 30, 2017, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

Item 1A. Risk Factors

The operating results of companies in the insurance industry have historically been subject to significant fluctuations. The factors which could affect the Company’s future results include, but are not limited to, general economic conditions and known trends and uncertainties. In addition to other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A, Risk Factors, in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016,~~2020, which could materially affect the Company’s business, financial condition, or future results of operations which are discussed more fully below.

~~General Risk Factors~~

Risks Related to the COVID-19 Pandemic

The ~~Company's~~novel coronavirus (COVID-19) global pandemic has adversely impacted the Company’s business, and the ultimate effect on its business, results of operations, and financial condition will depend on future developments that are highly uncertain, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

Beginning in 2020, the global pandemic related to the novel coronavirus, COVID-19, began to impact the worldwide economy and the Company’s results of operations. Because of the size and breadth of this pandemic, all of the direct and indirect consequences of COVID-19 are not yet known and may not emerge for some time. The COVID-19 pandemic has created a higher risk of mortality, negatively impacted the U.S. and global economy, created significant volatility and disruption in capital markets, significantly increased unemployment levels, and fueled concerns that it will lead to a severe global recession. In addition, the pandemic has resulted in temporary closures of many businesses and schools and the imposition of social distancing and sheltering in place requirements in many states and local communities. As a result, the Company’s ability to sell products through its regular channels and the demand for its products and services could be significantly impacted. The extent to which the COVID-19 pandemic could continue to impact the Company’s business, results of operations, or financial condition will depend on future developments which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the efficacy of mass vaccinations, the impact of COVID-19 variants, and actions taken by governmental authorities and other third parties in response to the pandemic.

Risks presented by the ongoing effects of the COVID-19 pandemic include the following:

•Premiums, Policy Fees, and Contractholder Liabilities. The impact of COVID-19 on general economic activity may negatively impact the Company’s premiums, policy fees, other revenues, and its liabilities for certain life and annuity policy/contracts. The degree and type of the impact will depend on the extent and duration of the economic contraction, as well as potential equity market and interest rate volatility associated with the economic environment.

•Claims and Claims Expense. As a result of the pandemic and ensuing conditions, the Company has experienced, and it may continue to experience, an elevated incidence and level of life insurance claims. The Company expects to incur higher claims expense in our life insurance and deferred annuity businesses, partially offset by lower life contingent payments in its payout annuity and structured settlement businesses, as a result of COVID-19 due to increases in mortality. In addition, the anticipated and unknown risks related to COVID-19 may cause additional uncertainty in the process of estimating claims expense reserves. For example, the behavior of claimants and policyholders may change in unexpected ways, and actions taken by governmental bodies, both legislative and regulatory, in reaction to COVID-19 and their related impacts are hard to predict. The Company is also subject to credit risk in our insurance operations (both with respect to policyholder receivables and reinsurance receivables) which may be exacerbated in times of economic distress. A prolonged continuation of the pandemic or a significant and protracted increase in claims could have a material and adverse effect on our business, results of operations, or financial condition.

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•Investments. The disruption in the financial markets related to COVID-19 has and may continue to adversely affect certain portions of the Company’s investment portfolio, specifically resulting in lower investment income and returns, and lead to further impairments, credit spread widening, credit quality deterioration, ratings downgrades, equity market declines, and the need to establish additional reserves for potential losses related to its commercial mortgage portfolio. Additionally, higher volatility in the equity and credit markets increases hedging costs. There is uncertainty regarding future treasury rates and risk spreads, which may lead to lower investment returns and difficulty forecasting financial results. Disruption in financial markets may also influence overall market liquidity and availability of assets for sale and purchase.

•Legislative and/or Regulatory Action. Federal, state, and local government actions to address and contain the impact of COVID-19 may adversely affect us. Many state insurance departments have required and some are requiring insurers to extend the time allowed for premium payments to avoid the canceling of policies. While many of these consumer accommodations have already expired, they vary in requirements and effective dates, which make it difficult to anticipate exact financial impacts. If these extensions continue, premium waivers may significantly exceed the Company’s expectations, and its earnings may be negatively ~~affected should actual experience differ~~impacted. If policyholder lapse and surrender rates or premium waivers significantly exceed the Company’s expectations, the Company may need to change its assumptions, models, or reserves.

•Operational Disruptions and Heightened Cybersecurity Risks. Currently, approximately 90% of the Company’s employees are working remotely with only a limited number of employees working at certain facilities. The current period of Companywide remote work arrangements could introduce additional operational risk, including but not limited to cybersecurity risks, and it could impair the Company’s ability to effectively manage its business. Additionally, over the course of 2021, the Company plans to transition its workforce from ~~management's assumptions~~the current period of Companywide remote work arrangements back to site-based, hybrid, and ~~estimates.~~virtual work arrangements, which could create short-term operational pressure during the transition.

In addition, a significant interruption of the ~~conduct~~Company’s or third-party system capabilities could result in a deterioration of its ability to write and process new business, provide customer service, pay claims in a timely manner, or perform other necessary administrative and business functions. Having shifted to remote working arrangements, the Company ~~makes certain assumptions regarding mortality, morbidity, persistency, expenses, interest rates, equity markets, tax, business mix, casualty, contingent~~is more dependent on remote internet and telecommunications services, and it potentially faces a heightened risk of cybersecurity attacks and data security incidents.

•Financial Reporting and Controls. Currently, the Company does not expect COVID-19 to affect its ability to timely and accurately account for the assets and liabilities ~~investment performance, and other factors appropriate to the type of business it expects to experience~~on its balance sheet; however, this could change in future periods. ~~These assumptions are~~Market dislocations, decreases in observable market activity, or unavailability of information arising, in each case, from the spread of COVID-19, may restrict the Company’s access to key inputs used to ~~estimate~~derive certain estimates and assumptions made in connection with financial reporting or otherwise. Restricted access to such inputs may make the ~~amounts~~Company’s financial statement balances and estimates and assumptions used to run its business subject to greater variability and subjectivity. It is possible that the lingering effects of ~~deferred policy acquisition costs, policy liabilities~~COVID-19 could cause the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause the Company to perform an intangible asset impairment test and ~~accruals, future earnings, and various components~~result in an impairment charge being recorded for that period. Although the Company has not experienced a negative effect on its internal controls over financial reporting due to COVID-19, it may experience a negative effect in the future. Further, as the vast majority of the ~~Company's balance sheet. These assumptions~~Company’s employees are ~~also used in the operation of the Company's business in making decisions crucial~~currently working from home, new processes, procedures, and controls could be required to ~~the success of the Company, including the pricing of acquisitions and products. The Company's actual experience, as well as~~respond to changes in ~~estimates, is used~~its business environment. Should any key employees become ill from COVID-19 and unable to ~~prepare~~work, the ~~Company's financial statements. To the extent the Company's actual experience and changes in estimates differ from original estimates, the Company's financial condition~~Company’s ability to operate its internal controls may be adversely affected.

~~Mortality, morbidity,~~•Reliance on the Performance of Third Parties. The Company relies on outside parties, including independent third-party distribution channels, data processing servicers, and ~~casualty assumptions incorporate underlying assumptions about many factors. Such factors may include, for example, how~~investment fund managers, among others. While the Company closely monitors the business continuity activities of these third parties, successful implementation and execution of their business continuity strategies are largely outside of its control. If one or more of these third parties experience operational failures as a ~~product is distributed, for what purpose~~result of the ~~product is purchased,~~impacts from the ~~mix~~spread of ~~customers purchasing~~COVID-19 and governmental reactions thereto, or claim that they cannot perform due to a force majeure, the ~~products, persistency and lapses, future progress in~~Company’s business, results of operations, or financial condition could be adversely impacted.

Any of the fields of health and medicine, and the projected level of used vehicle values. Actual mortality, morbidity, and/or casualty experience may differ from expectations. In addition, continued activity in the viatical, stranger-owned, and/or life settlement industryabove events could cause, contribute to, or exacerbate the ~~Company's level~~risks and uncertainties enumerated in this report, and could materially adversely affect the Company’s business, results of ~~lapses~~operations, or financial condition. The Company has implemented risk management and business continuity plans, performed stress testing, and taken other precautions with respect to ~~differ~~the COVID-19 global pandemic. However, such measures may not adequately protect the Company’s business from the full impacts of the pandemic.

The Company’s reinsurers could fail to meet assumed obligations, attempt to increase rates, or terminate

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agreements or be subject to adverse developments that could affect the Company.

The Company and its ~~assumptions about premium persistency~~insurance subsidiaries cede material amounts of insurance and ~~lapses, which~~transfer related assets to other insurance companies through reinsurance. However, notwithstanding the transfer of related assets or other issues, the Company remains liable with respect to ceded insurance should any reinsurer fail to meet the assumed obligations. Therefore, the failure, insolvency, or inability or unwillingness to pay under the terms of the reinsurance agreement with the Company of one or more of the Company’s reinsurers could negatively impact the ~~Company's performance.~~Company’s earnings and financial position.

The ~~calculations~~Company’s results and its ability to compete are affected by the availability and cost of reinsurance. Premium rates charged by the Company ~~uses~~are based, in part, on the assumption that reinsurance will be available at a certain cost. Certain reinsurers have attempted to ~~estimate various components of its balance sheet~~or may attempt to increase the rates they charge the Company for reinsurance, including rates for new policies the Company is issuing and statements of income are necessarily complex and involve analyzing and interpreting large quantities of data. The Company currently employs various techniques for such calculations and relies, in certain instances, on third partiesrates related to ~~make or assist in making such calculations. From time to time it develops and implements more sophisticated administrative systems and procedures capable of facilitating~~

~~the calculation of more precise estimates. The systems and procedures~~policies that the Company ~~develops and the Company's reliance upon third parties could result in errors in the calculations that impact our financial statements or affect our financial condition.~~

Assumptions and estimates involve judgment, and by their nature are imprecise and subject to changes and revisions over time. Accordingly, the Company’s results may be affected, positively or negatively, from time to time, by actual results differing from assumptions, by changes in estimates, and by changes resulting from implementing more sophisticated administrative systems and procedures that facilitate the calculation of more precise estimates.

has already issued. The ~~Company may not realize its anticipated financial results from its acquisitions strategy.~~

The Company’s Acquisitions segment focuses on the acquisitions of companies and business operations, and the coinsurance of blocks of insurance business, all of which have increased the Company’s earnings. However, there can be no assurance that the Company will have future suitable opportunities for, or sufficient capital available to fund, such transactions. If our competitors have access to capital on more favorable terms or at a lower cost, our ability to compete for acquisitions may be diminished. In addition, there can be no assurance that the Company will be able to realize any projected operating efficiencies or achieve the anticipated financial results from such transactions.

The Company may be unable to complete an acquisition transaction. Completion of an acquisition transaction may be more costly or take longer than expected, or may have a different or more costly financing structure than initially contemplated. In addition, the Company may not be able to ~~complete or manage multiple acquisition transactions at~~increase the same time, or the completion of such transactions may be delayed or be more costly than initially contemplated. The Company, its affiliates, or other parties to the transaction may be unable to obtain regulatory approvals required to complete an acquisition transaction. If the Company identifiespremium rates it charges for policies it has already issued, and ~~completes suitable acquisitions,~~for competitive reasons it may not be able to ~~successfully integrate~~raise the ~~business~~premium rates it charges for new policies to offset the increase in rates charged by reinsurers. If the cost of reinsurance were to increase, if reinsurance were to become unavailable, if alternatives to reinsurance were not available to the Company, or if a ~~timely or cost-effective manner, or retain key personnel and business relationships necessary~~reinsurer should fail to ~~achieve anticipated financial results.~~ meet its obligations, the Company could be adversely affected.

The number of life reinsurers has remained relatively constant in recent years. If the reinsurance market contracts in the future, the Company’s ability to continue to offer its products on terms favorable to it could be adversely impacted.

In addition, ~~there~~reinsurers may be unforeseen liabilities that arise in connection with businesses or blocks of insurance business that the Company acquires or reinsures. Additionally, in connection with its acquisition transactions that involve reinsurance, the Company assumes, or otherwise becomes responsible for, the obligations of policies and other liabilities of other insurers. Any regulatory, legal, financial, or other adverse development affecting the other insurer could also have an adverse effect on the Company.

~~Risks Related to the Financial Environment~~

~~The Company's use of derivative financial instruments within its risk management strategy may not be effective or sufficient.~~

~~The Company uses derivative financial instruments within its risk management strategy to mitigate risks to which it is exposed, including risks related to~~face challenges regarding illiquid credit and/or ~~equity market and/or interest rate levels, foreign exchange, or volatility on its fixed indexed annuity~~capital markets, investment downgrades, rating agency downgrades, deterioration of general economic conditions, and ~~variable annuity products and associated guaranteed benefit features. The Company may also use derivative~~other factors negatively impacting the financial ~~instruments within its risk management strategy to mitigate risks arising from its~~services industry. If reinsurers, including those with significant exposure to ~~investments in individual issuers or sectors of issuers~~international markets and ~~to mitigate the adverse effects of interest rate levels or volatility on its overall financial condition or results of operations.~~

These derivative financial instruments may not effectively offset the changes in the carrying value of the exposures due to, among other things, the time lag between changes in the value of such exposures and the changes in the value of the derivative financial instruments purchased by the Company, extreme credit and/or equity market and/or interest rate levels or volatility, contract holder behavior that differs from the Company’s expectations, and basis risk.

The use of derivative financial instruments by the Company generally to hedge various risks that impact GAAP earnings may have an adverse impact on the level of statutory capital and risk-based capital ratios, because earnings under the Company's hedging programEuropean Union member states, are ~~recognized differently under GAAP and statutory accounting methods.~~

The Company may also choose not to hedge, in whole or in part, these or other risks that it has identified, due to, for example, the availability and/or cost of a suitable derivative financial instrument. In addition, the Company may fail to identify risks, or the magnitude thereof, to which it is exposed. The Company is also exposed to the risk that its use of derivative financial instruments within its risk management strategy may not be properly designed and/or may not be properly implemented as designed.

~~The Company is subject to the risk that its derivative counterparties or clearinghouse may fail or refuse~~unable to meet their obligations, the Company would be adversely impacted.

The Company has implemented a reinsurance program through the use of captive reinsurers. Under these arrangements, a captive owned by the Company serves as the reinsurer, and the consolidated books and tax returns of the Company reflect a liability consisting of the full reserve amount attributable to the reinsured business. The success of the Company’s captive reinsurance program is dependent on a number of factors outside the control of the Company, ~~which may~~including, but not limited to, continued access to financial solutions, a favorable regulatory environment, and the overall tax position of the Company. If the captive reinsurance program is not successful, the Company’s financial condition could be adversely impacted

Compliance with existing and emerging privacy regulations could result in ~~associated derivative financial instruments~~increased compliance costs and/or lead to ~~be ineffective or inefficient.~~

~~The above factors, either alone or~~changes in ~~combination, may~~business practices and policies, and any failure to protect the confidentiality of consumer information could adversely affect our reputation and have a material adverse effect on ~~the Company's~~our business, financial condition and results of operations.

The ~~Company's securities lending program may subject~~collection and maintenance of personal data from consumers, beneficiaries, agents, employees, and other consumers, including personally identifiable non-public financial and health information, subjects the Company to regulation under various federal and state privacy laws. These laws require that the Company institute certain policies and procedures in its business to safeguard its consumers personal data improper use or disclosure. The laws vary by jurisdiction, and it is expected that additional regulations will continue to be enacted. In November 2020, California passed the California Privacy Rights Act, which will augment and expand the California Consumer Privacy Act. In March 2021, Virginia passed the Consumer Data Protection Act, which will create similar consumer rights and business responsibilities. These laws will become effective in January 2023. Complying with these and other existing, emerging and changing privacy requirements could cause the Company to incur substantial costs or require it to ~~liquidity~~change its business practices and policies. Non-compliance could result in monetary penalties or significant legal liability.

Many of the associates who conduct the Company’s business have access to, and routinely process, personal information of customers, beneficiaries, agents, employees, and other ~~risks.~~consumers through a variety of media, including information technology systems. The Company relies on various internal processes and controls to protect the confidentiality of consumer information that is accessible to, or in the possession of, its associates. It is possible that an associate could, intentionally or unintentionally, disclose or misappropriate confidential consumer information or Company data could be the subject of a cybersecurity attack. If the Company fails to maintain adequate internal controls or if its associates fail to comply with its policies and procedures, misappropriation or intentional or unintentional inappropriate disclosure or misuse of consumer information could occur. Such internal control inadequacies or non-compliance could materially damage the Company’s reputation or lead to regulatory, civil or criminal investigations and penalties.

The Company depends on the ability of its subsidiaries to transfer funds to it to meet its obligations.

Table of Contents

The Company ~~maintains a securities lending program~~owns insurance companies. A portion of the Company’s funding comes from dividends from its operating subsidiaries, revenues from services rendered to subsidiaries, investment income, and external financing. These funding sources support the Company’s general corporate needs including its debt service. If the funding the Company receives from its subsidiaries is insufficient for it to fund its debt service and other obligations, it may be required to raise funds through the incurrence of debt, or the sale of assets.

The states in which ~~securities~~the Company’s subsidiaries are ~~loaned~~domiciled impose certain restrictions on the subsidiaries’ ability to ~~third parties, including brokerage firms~~pay dividends and ~~commercial banks. The borrowers~~make other payments to the Company. State insurance regulators may prohibit the payment of ~~the Company's securities provide the Company with collateral, typically in cash, which it separately maintains. The Company invests the collateral in~~dividends or other ~~securities, including primarily short-term government repo and money market funds. Securities loaned under the program may be returned~~payments to the Company by its subsidiaries if they determine that the ~~borrower at any time, requiring~~payments could be adverse to the ~~Company to return the related cash collateral.~~insurance subsidiary or its policyholders or contract holders. In some cases, the Company may use the cash collateral provided to purchase other securities to be held as invested collateral, and the maturity of such securities may exceed the term of the securities loaned under the program and/or the market value of such securities may fall belowaddition, the amount of ~~cash collateral~~surplus that the ~~Company~~Company’s subsidiaries could pay as dividends is ~~obligated to return to the borrower of the Company's loaned securities. If the Company is required to return significant amounts~~

of cash collateral on short notice and is forced to sell the securities held as invested collateral to meet the obligation, the Company may have difficulty selling such securities in a timely manner and/or the Company may be forced to sell the securities in a volatile or illiquid market for less than it otherwise would have been able to realize under normal market conditions. In addition, the Company's ability to sell securities held as invested collateral may be restricted under stressful market and economic conditions in which liquidity deteriorates.

~~The amount of statutory capital or risk-based capital that the Company has and~~constrained by the amount of ~~statutory capital or risk-based capital that it must~~surplus they hold to maintain ~~its~~their financial strength ~~and credit~~ ratings, ~~and meet other requirements can vary significantly from time to time and such amounts are sensitive to a number of factors outside of the Company’s control.~~

The Company primarily conducts business through licensed insurance company subsidiaries. Insurance regulators have established regulations that provide minimum capitalization requirements based on risk-based capital formulas for life and property and casualty companies. The risk-based capital formula for life insurance companies establishes capital requirements relating to insurance, business, asset, interest rate, and certain other risks. The risk-based capital formula for property and casualty companies establishes capital requirements relating to asset, credit, underwriting, and certain other risks.

In any particular year, statutory surplus amounts and risk-based capital ratios may increase or decrease depending on a variety of factors, including, but not limited to, the amount of statutory income or losses generated by the Company’s insurance subsidiaries (which itself is sensitive to equity market and credit market conditions), the amount of additional capital its insurance subsidiaries must hold to support business growth, changes in the Company’s statutory reserve requirements, the Company’s ability to secure capital market solutions to provide ~~statutory reserve relief, changes in equity market levels, the value~~an additional layer of certain fixed-income and equity securities in its investment portfolio, the credit ratings of investments held in its portfolio, including those issued by, or explicitly or implicitly guaranteed by, a government, the value of certain derivative instruments, changes in interest rates, foreign currency exchange rates or tax rates, credit market volatility, changes in consumer behavior, and changes to the NAIC risk-based capital formula. Most of these factors are outside of the Company’s control. The Company’s financial strength and credit ratings are significantly influenced by the statutory surplus amounts and risk-based capital ratios of its insurance company subsidiaries. Rating agencies may implement changes to their internal models that have the effect of increasing or decreasing the amount of statutory capital the Company must hold in order to maintain its current ratings. In addition, rating agencies may downgrade the investments held in the Company’s portfolio, which could result in a reduction of the Company’s capital and surplus and/or its risk-based capital ratio.

~~In scenarios of equity market declines, the amount of additional statutory reserves or risk-based capital the Company is required to hold~~margin for its variable product guarantees may increase at a rate greater than the rate of change of the markets. Increases in reserves or risk-based capital could result in a reduction to the Company’s capital, surplus, and/or risk-based capital ratio. Also, in environments where there is not a correlative relationship between interest rates and spreads, the Company’s market value adjusted annuity product can have a material adverse effect on the Company’s statutory surplus position.

~~Industry and Regulatory Related Risks~~

~~The business of the Company is highly regulated and is subject to routine audits, examinations and actions by regulators, law enforcement agencies and self-regulatory organizations.~~

The Company is subject to government regulation in each of the states in which it conducts business. In many instances, the regulatory models emanate from the National Association of Insurance Commissioners (“NAIC”). Such regulation is vested in state agencies having broad administrative and in some instances discretionary power dealing with many aspects of the Company’s business, which may include, among other things, premium rates and increases thereto, underwriting practices, reserve requirements, marketing practices, advertising, privacy, cybersecurity, policy forms, reinsurance reserve requirements, insurer use of captive reinsurance companies, acquisitions, mergers, capital adequacy, claims practices and the remittance of unclaimed property. In addition, some state insurance departments may enact rules or regulations with extra-territorial application, effectively extending their jurisdiction to areas such as permitted insurance company investments that are normally the province of an insurance company’s domiciliary state regulator.

At any given time, a number of financial, market conduct, or other examinations or audits of the Company’s subsidiaries may be ongoing. It is possible that any examination or audit may result in payments of fines and penalties, payments to customers, or both, as well as changes in systems or procedures, any of which could have a material adverse effect on the Company’s financial condition or results of operations.

The Company’s insurance subsidiaries are required to obtain state regulatory approval for rate increases for certain health insurance products. The Company’s profits may be adversely affected if the requested rate increases are not approved in full by regulators in a timely fashion.

State insurance regulators and the NAIC regularly re-examine existing laws and regulations applicable to insurance companies and their products. Changes in these laws and regulations, or in interpretations thereof, are often made for the benefit of the consumer and may lead to additional expense for the insurer and, thus, could have a material adverse effect on the Company’s financial condition and results of operations. At the federal level, the executive branch may issue executive orders or take other action with respect to life insurance matters, and bills are routinely introduced in both chambers of the United States Congress that could affect life insurers. In the past, Congress has considered legislation that would impact insurance companies in numerous ways, such as providing for an optional federal charter or a federal presence for insurance, preempting state law in certain respects regarding the regulation of reinsurance, increasing federal oversight in areas such as consumerrisk protection and ~~solvency regulation,~~for future investment in our businesses.

setting tax rates, and other matters. The Company cannot predict whether or in what form legislation will be enacted and, if so, whether the enacted legislation will positively or negatively affect the Company or whether any effects will be material.

~~The Company may be subject to regulations~~

Table of ~~or regulations influenced by, international regulatory authorities or initiatives.~~Contents

The NAIC and the Company’s state regulators may be influenced by the initiatives of international regulatory bodies, and those initiatives may not translate readily into the legal system under which U.S. insurers must operate. There is increasing pressure to conform to international standards due to the globalization of the business of insurance and the most recent financial crisis. In addition to developments at the NAIC and in the United States, the Financial Stability Board (“FSB”), consisting of representatives of national financial authorities of the G20 nations, and the G20 have issued a series of proposals intended to produce significant changes in how financial companies, particularly companies that are members of large and complex financial groups, should be regulated.

The International Association of Insurance Supervisors (“IAIS”), at the direction of the FSB, has published an evolving methodology for identifying “global systemically important insurers” (“G-SIIs”) and high-level policy measures that will apply to G-SIIs. The FSB, working with national authorities and the IAIS, has designated nine insurance groups as G-SIIs. The IAIS is working on the policy measures which include higher capital requirements and enhanced supervision. Although neither the Company nor Dai-ichi Life has been designated as a G-SII, the list of designated insurers will be updated annually by the FSB. It is possible that the greater size and reach of the combined group as a result of the Company becoming a subsidiary of Dai-ichi Life, or a change in the methodologies or their application, could lead to the combined group’s designation as a G-SII.

The IAIS is also in the process of developing a common framework for the supervision of internationally active insurance groups (“IAIGs”), which is targeted to be implemented in 2019. The framework, which is currently under discussion, may include a global capital measurement standard for insurance groups deemed to be IAIGs that could exceed the sum of state or other local capital requirements. In addition, the IAIS is developing a model framework for the supervision of IAIGs that contemplates “group wide supervision” across national boundaries and legal entities, which could require each IAIG to conduct its own risk and solvency assessment to monitor and manage its overall solvency. It is likely that, as a result of the Merger, the combined group will be deemed an IAIG, in which case it may be subject to supervision requirements and capital measurement standards beyond those applicable to any competitors who are not designated as an IAIG.

The Company’s sole stockholder, Dai-ichi Life, is also subject to regulation by the Japanese Financial Services Authority (“JFSA”). Under applicable laws and regulations, Dai-ichi Life is required to provide notice to or obtain the consent of the JFSA prior to taking certain actions or engaging in certain transactions, either directly or indirectly through its subsidiaries, including the Company and its consolidated subsidiaries, which could limit the ability of the Company to engage in certain transactions or business initiatives.

While it is not yet known how or the extent to which the Company will be impacted by these regulations, the Company may experience increased costs of compliance, increased disclosure, less flexibility in capital management, and more burdensome regulation and capital requirements for specific lines of business. In addition, such regulations could impact the business of the Company and its reserve and capital requirements, financial condition or results of operations.

~~NAIC actions, pronouncements and initiatives may affect the Company’s product profitability, reserve and capital requirements, financial condition or results of operations.~~

Although some NAIC pronouncements, particularly as they affect accounting, reserving and risk-based capital issues, may take effect automatically without affirmative action taken by the states, the NAIC is not a governmental entity and its processes and procedures do not comport with those to which governmental entities typically adhere. Therefore, it is possible that actions could be taken by the NAIC that become effective without the procedural safeguards that would be present if governmental action was required. In addition, with respect to some financial regulations and guidelines, states sometimes defer to the interpretation of the insurance department of a non-domiciliary state. Neither the action of the domiciliary state nor the action of the NAIC is binding on a non-domiciliary state. Accordingly, a state could choose to follow a different interpretation. The Company is also subject to the risk that compliance with any particular regulator’s interpretation of a legal, accounting or actuarial issue may result in non-compliance with another regulator’s interpretation of the same issue, particularly when compliance is judged in hindsight. There is an additional risk that any particular regulator’s interpretation of a legal, accounting or actuarial issue may change over time to the Company’s detriment, or that changes to the overall legal or market environment may cause the Company to change its practices in ways that may, in some cases, limit its growth or profitability. Statutes, regulations, interpretations, and instructions may be applied with retroactive impact, particularly in areas such as accounting, reserve and risk-based capital requirements. Also, regulatory actions with prospective impact can potentially have a significant impact on currently sold products.

The NAIC has announced more focused inquiries on certain matters that could have an impact on the Company’s financial condition and results of operations. Such inquiries concern, for example, insurer use of captive reinsurance companies, variable annuity reserves and capital treatment, certain aspects of insurance holding company reporting and disclosure, reinsurance, cybersecurity practices, liquidity assessment, and risk-based capital calculations. In addition, the NAIC continues to consider various initiatives to change and modernize its financial and solvency requirements and regulations. It has adopted principles-based reserving methodologies for life insurance and annuity reserves, but additional formulas and/or guidance relevant to the new standard are being developed. The NAIC is also considering changes to accounting and risk-based capital regulations, risk-based capital calculations, governance practices of insurers, and other items. Additionally, the NAIC is studying a group capital calculation that would aggregate required capital across U.S.-based insurance groups. The Company cannot currently estimate what impact these more focused inquiries or proposed changes, if they occur, will have on its product mix, product profitability, reserve and capital requirements, financial condition or results of operations.

The Company’s use of captive reinsurance companies to finance statutory reserves related to its term and universal life products and to reduce volatility affecting its variable annuity products may be limited or adversely affected by regulatory action, pronouncements and interpretations.

The Company currently uses affiliated captive reinsurance companies in various structures to finance certain statutory reserves based on a regulation entitled “Valuation of Life Insurance Policies Model Regulation,” commonly known as “Regulation XXX,” and a supporting guideline entitled “The Application of the Valuation of Life Insurance Policies Model Regulation,” commonly known as “Guideline AXXX,” which are associated with term life insurance and universal life insurance with secondary guarantees, respectively, as well as to reduce the volatility in statutory risk-based capital associated with certain guaranteed minimum withdrawal and death benefit riders associated with certain of the Company’s variable annuity products.

The NAIC has adopted Actuarial Guideline XLVIII ("AG48") and the substantially similar "Term and Universal Life Insurance Reserve Financing Model Regulation" (the "Reserve Model") which establish national standards for new reserve financing arrangements for term life insurance and universal life insurance with secondary guarantees. AG48 and the Reserve Model govern collateral requirements for captive reinsurance arrangements. In order to obtain reserve credit, AG48 and the Reserve Model require a minimum level of funds, consisting of primary and other securities, to be held by or on behalf of ceding insurers as security under each captive life reinsurance treaty. As a result of AG48 and the Reserve Model, the implementation of new captive structures in the future may be less capital efficient, lead to lower product returns and/or increased product pricing, or result in reduced sales of certain products. In some circumstances, AG48 and the Reserve Model could impact the Company’s ability to engage in certain reinsurance transactions with non-affiliates.

The Financial Condition (E) Committee of the NAIC established a Variable Annuity Issues Working Group ("VAIWG") in 2015 to oversee the NAIC’s efforts to study and address regulatory issues resulting in variable annuity captive reinsurance transactions. The VAIWG developed a Framework for Change (the “Framework”) which was adopted in 2015. The Framework suggests numerous changes to current NAIC rules and regulations that are intended to decrease incentives for insurers to establish variable annuities captives, which changes could potentially be applied to both in-force and new business. The Framework proposes that various NAIC groups consider and adopt recommended changes to current rules and regulations (with a likely effective date in 2019) and that, upon adoption, domestic regulators request that insurers ceding business to variable annuity captives recapture such business and dissolve such captives. The VAIWG received a draft proposal for changes in late 2016 and is reviewing the proposal’s possible impact. If the proposal is adopted, changes in the regulation of variable annuities and variable annuity captives could adversely affect our future financial condition and results of operations.

The NAIC adopted revisions to the Part A Laws and Regulations Preamble (the "Preamble") of the NAIC Financial Regulation Standards and Accreditation Program that includes within the definition of “multi-state insurer” certain insurer-owned captives and special purpose vehicles that are single-state licensed but assume reinsurance from cedants operating in multiple states. The revised definition subjects certain captives, including XXX/AXXX captives, variable annuity and long-term care captives, to all of the accreditation standards applicable to other traditional multi-state insurers, including standards related to capital and surplus requirements, risk-based capital requirements, investment laws and credit for reinsurance laws. Although we do not expect the revised definition to affect our existing life insurance captives (or our ability to engage in life insurance captive transactions in the future), such application will likely prevent us from engaging in variable annuity captive transactions on the same or a similar basis as in the past and, if applied retroactively, would likely cause us to recapture business from and unwind our existing variable annuity captive (“VA Captive”).

While the recapture of business from our existing VA Captive, caused either by actions of the VAIWG or the effect of the Preamble, would not have a material adverse effect on the Company given current market conditions, in the future the Company could experience fluctuations in its risk-based capital ratio due to market volatility if it were prohibited from engaging in similar transactions or required to unwind its existing VA Captive, which could adversely affect our future financial condition and results of operations.

Any regulatory action or change in interpretation that materially adversely affects the Company’s use or materially increases the Company’s cost of using captives or reinsurers for the Affected Business, either retroactively or prospectively, could have a material adverse impact on the Company’s financial condition or results of operations. If the Company were required to discontinue its use of captives for intercompany reinsurance transactions on a retroactive basis, adverse impacts would include early termination fees payable to third party finance providers with respect to certain structures, diminished capital position and higher cost of capital. Additionally, finding alternative means to support policy liabilities efficiently is an unknown factor that would be dependent, in part, on future market conditions and the Company’s ability to obtain required regulatory approvals. On a prospective basis, discontinuation of the use of captives could impact the types, amounts and pricing of products offered by the Company’s insurance subsidiaries.

Laws, rules and regulations promulgated in connection with the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act may adversely affect the results of operations or financial condition of the Company.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) enacted in July 2010 made sweeping changes to the regulation of financial services entities, products and markets. Certain provisions of Dodd-Frank are or may become applicable to the Company, its competitors or those entities with which the Company does business. Such provisions include, but are not limited to: the establishment of consolidated federal regulation and resolution authority over systemically important financial services firms, the establishment of the Federal Insurance Office, changes to the regulation and standards applicable to broker-dealers and investment advisors, changes to the regulation of reinsurance, changes to regulations affecting the rights of shareowners, and the imposition of additional regulation over credit rating agencies, and the imposition of concentration limits on financial institutions that restrict the amount of credit that may be extended to a single person or entity. Since the enactment of Dodd-Frank, many regulations have been enacted and others are likely to be adopted in the future that will have an impact upon the Company. Dodd-Frank also created the Financial Stability Oversight Council (the “FSOC”), which has issued a final rule and interpretive guidance setting forth the methodology by which it will determine whether a non-bank financial company is a systemically important financial institution (“SIFI”). A non-bank financial company, such as the Company, that is designated as a SIFI by the FSOC will become subject to supervision by the Board of Governors of the Federal Reserve System (the “Federal Reserve”). The Company is not currently supervised by the Federal Reserve as a SIFI. Such supervision could impact the Company’s requirements relating to capital, liquidity, stress testing, limits on counterparty credit exposure, compliance and governance, early remediation in the event of financial weakness and other prudential matters, and in other ways the Company currently cannot anticipate. FSOC-designated non-bank financial companies will also be required to prepare resolution plans, so-called “living wills,” that set out how they could most efficiently be liquidated if they endangered the U.S. financial system or the broader economy. The FSOC has conducted multiple rounds of SIFI designation consideration and continues to make changes to its process for designating a company as a SIFI. The FSOC has made SIFI designations, and the Company was not designated as such. However, the Company could be considered and designated at any time. The Company is at this time unable to predict the impact on an entity that is supervised as a SIFI by the Federal Reserve Board. The Company is not able to predict whether the capital requirements or other requirements imposed on SIFIs may impact the requirements applicable to the Company even if it is not designated as a SIFI. The uncertainty about regulatory requirements could influence the Company’s product line or other business decisions with respect to some product lines.

Additionally, Dodd-Frank created the Consumer Financial Protection Bureau (“CFPB”), an independent division of the Department of Treasury with jurisdiction over credit, savings, payment, and other consumer financial products and services, but excluding investment products already regulated by the United States Securities and Exchange Commission (the “SEC”) or the U.S. Commodity Futures Trading Commission. The CFPB has supervisory authority over certain non-banks whose activities or products it determines pose risks to consumers, and issued a rule in 2016 amending regulations under the Home Mortgage Disclosure Act that requires the Company to, among other things, collect and disclose extensive data related to its lending practices. At this time, the rule relates to reporting data relative to Company loans made on multi-family apartments, seniors living housing, manufactured housing communities and any mixed-use properties which contain a residential component. It is unclear at this time how burdensome compliance with this or other rules promulgated under the Home Mortgage Disclosure Act will become.

Certain of the Company’s subsidiaries sell products that may be regulated by the CFPB. CFPB continues to bring enforcement actions involving a growing number of issues, including actions brought jointly with state Attorneys General, which could directly or indirectly affect the Company or any of its subsidiaries. Additionally, the CFPB is exploring the possibility of helping Americans manage their retirement savings and is considering the extent of its authority in that area. The Company is unable at this time to predict the impact of these activities on the Company.

Dodd-Frank includes a framework of regulation of over-the-counter (“OTC”) derivatives markets that requires clearing of certain types of transactions which have been or are currently traded OTC by the Company. The types of transactions required to be cleared are expected to increase in the future. In addition, new variation margin requirements applicable to derivatives transactions that are not required to be cleared became effective in September 2017. The increase of transactions required to be cleared and the application of new margin requirements for uncleared derivatives transactions may result in additional costs to the Company. Increased margin requirements on the Company’s part, combined with restrictions on securities that will qualify as eligible collateral, could continue to reduce its liquidity and require an increase in its holdings of cash and government securities with lower yields causing a reduction in income. The Company uses derivative financial instruments to mitigate a wide range of risks in connection with its businesses, including those arising from its fixed and variable annuity products with guaranteed benefit features. The derivative clearing requirements of Dodd-Frank could continue to increase the cost of the Company’s risk mitigation and expose it to the risk of a default by a clearinghouse with respect to the Company’s cleared derivative transactions.

Numerous provisions of Dodd-Frank require the adoption of implementing rules and/or regulations. The process of adopting such implementing rules and/or regulations have in some instances been delayed beyond the timeframes imposed by Dodd-Frank. Until the various final regulations are promulgated pursuant to Dodd-Frank, the full impact of the regulations on the Company will remain unclear. In addition, Dodd-Frank mandates multiple studies, which could result in additional legislation or regulation applicable to the insurance industry, the Company, its competitors or the entities with which the Company does business. Legislative or regulatory requirements imposed by or promulgated in connection with Dodd-Frank may impact the Company in many ways, including but not limited: placing the Company at a competitive disadvantage relative to its competition or other financial services entities, changing the competitive landscape of the financial services sector and/or the insurance industry, making it more expensive for the Company to conduct its business, requiring the reallocation of significant company resources to government affairs, legal and compliance-related activities, or causing historical market behavior or statistics utilized by the Company in connection with its efforts to manage risk and exposure to no longer be predictive of future risk and exposure or

~~otherwise have a material adverse effect on the overall business climate as well as the Company’s financial condition and results of operations.~~

Regulations issued by the Department of Labor on April 6, 2016, expanding the definition of “investment advice fiduciary” under ERISA and creating and revising several prohibited transaction exemptions for investment activities in light of that expanded definition, may have a material adverse impact on our ability to sell annuities and other products, to retain in-force business and on our financial condition or results of operations.

Broker-dealers, insurance agencies and other financial institutions sell the Company’s annuities to employee benefit plans governed by provisions of the Employee Retirement Income Security Act (“ERISA”) and Individual Retirement Accounts (“IRAs”) that are governed by similar provisions under the Internal Revenue Code (the “Code”). Consequently, our activities and those of the firms that sell the Company’s products are subject to restrictions that require ERISA fiduciaries to perform their duties solely in the interests of ERISA plan participants and beneficiaries, and that prohibit ERISA fiduciaries from causing a covered plan or retirement account to engage in certain prohibited transactions absent an exemption. In general, the prohibited transaction provisions of ERISA and the Code restrict the receipt of compensation from third parties in connection with the provision of investment advice to ERISA plans and participants and IRAs.

On April 6, 2016, the Department of Labor issued new regulations expanding the definition of “investment advice fiduciary” under ERISA. These new regulations increased the number of circumstances in which the Company and broker-dealers, insurance agencies and other financial institutions that sell the Company’s products could be deemed a fiduciary when providing investment advice with respect to ERISA plans or IRAs. The Department of Labor also issued amendments to long-standing exemptions from the provisions of ERISA and the Code that permit fiduciaries to engage in certain types of transactions (“Prohibited Transaction Exemptions”) and adopted new Prohibited Transaction Exemptions. These amended and new Prohibited Transaction Exemptions appear to increase significantly the conditions that must be satisfied by fiduciaries in order to receive traditional forms of commission, such as sales commissions, for sales of insurance products to ERISA plans, plan participants and IRAs.

The expanded definition of “investment advice fiduciary” and certain regulations related to new and revised Prohibited Transaction Exemptions went into effect on June 9, 2017, allowing fiduciaries to rely on the Prohibited Transaction Exemptions provided that they adhere to certain required Impartial Conduct Standards. The implementation of additional conditions applicable to the Prohibited Transaction Exemptions with which fiduciaries must comply has been delayed until July 1, 2019 and may be impacted, along with the current definition of “investment advice fiduciary”, by public comments solicited pursuant to the Department of Labor’s Request for Information. Responses to the Request for Information may also result in the adoption of new Prohibited Transaction Exemptions or additional conditions applicable to existing exemption requirements.

There remains significant uncertainty surrounding the final form that these regulations may take. Our current distributors may continue to move forward with their plans to limit the number of products they offer, including the types of products offered by the Company. The Company may find it necessary to change sales representative and/or broker compensation, to limit the assistance or advice it can provide to owners of the Company’s annuities, to replace or engage additional distributors, or otherwise change the manner in which it designs and supports sales of its annuities. In addition, the Company continues to incur expenses in connection with initial and ongoing compliance obligations with respect to such rules, and in the aggregate these expenses may be significant. The foregoing could have a material adverse impact on our ability to sell annuities and other products, to retain in-force business, and on our financial condition or results of operations.

The Company may be subject to regulation, investigations, enforcement actions, fines and penalties imposed by the SEC, FINRA and other federal and international regulators in connection with its business operations.

Certain life insurance policies, contracts, and annuities offered by the Company are subject to regulation under the federal securities laws administered by the SEC. The federal securities laws contain regulatory restrictions and criminal, administrative, and private remedial provisions. From time to time, the SEC and the Financial Industry Regulatory Authority (“FINRA”) examine or investigate the activities of broker-dealers and investment advisors, including the Company’s affiliated broker-dealers and investment advisors. These examinations or investigations often focus on the activities of the registered representatives and registered investment advisors doing business through such entities and the entities’ supervision of those persons. It is possible that any examination or investigation could lead to enforcement action by the regulator and/or may result in payments of fines and penalties, payments to customers, or both, as well as changes in systems or procedures of such entities, any of which could have a material adverse effect on the Company’s financial condition or results of operations.

In June of 2017, the Chairman of the SEC requested public comments on a series of questions focused on (1) the current regulatory framework for broker-dealers and investment advisers, (2) the current state of the market for retail advice, and (3) market trends. The SEC will consider these views as it determines future steps, including potential rulemaking, related to standards of conduct applicable to broker-dealers and investment advisers. In this request the Chairman also welcomed the opportunity to engage with the Department of Labor as the SEC moves forward with its examination of the standards of conduct applicable to broker-dealers, investment advisers and matters related thereto.

FINRA has also issued a report addressing how its member firms might identify and address conflicts of interest including conflicts related to the introduction of new products and services and the compensation of the member firms’ associated persons. These regulatory initiatives could have an impact on Company operations and the manner in which broker-dealers and investment advisers distribute the Company’s products.

The Company may also be subject to regulation by governments of the countries in which it currently does, or may in the future, do, business, as well as regulation by the U.S. Government with respect to its operations in foreign countries, such as

the Foreign Corrupt Practices Act. Penalties for violating the various laws governing the Company’s business in other countries may include restrictions upon business operations, fines and imprisonment, both within the U.S. and abroad. U.S. enforcement of anti-corruption laws continues to increase in magnitude, and penalties may be substantial.

The Company is subject to conditions and requirements set forth in the Telephone Consumer Protection Act (“TCPA”), which places restrictions on the use of automated telephone and facsimile machines. Class action lawsuits alleging violations of the act have been filed against a number of companies, including life insurance carriers. These class action lawsuits contain allegations that defendant carriers were vicariously liable for the alleged wrongful conduct of agents who violated the TCPA. Some of the class actions have resulted in substantial settlements against other insurers. Any such actions against the Company could result in a material adverse effect upon our financial condition or results of operations.

Other types of regulation that could affect the Company and its subsidiaries include, but are not limited to, insurance company investment laws and regulations, state statutory accounting and reserving practices, antitrust laws, minimum solvency requirements, enterprise risk requirements, state securities laws, federal privacy laws, cybersecurity regulation, technology and data regulations, insurable interest laws, federal anti-money laundering and anti-terrorism laws, employment and immigration laws (including laws in Alabama where over half of the Company’s employees are located), and because the Company owns and operates real property, state, federal, and local environmental laws. Under some circumstances, severe penalties may be imposed for breach of these laws.

The Company cannot predict what form any future changes to laws and/or regulations affecting participants in the financial services sector and/or insurance industry, including the Company and its competitors or those entities with which it does business, may take, or what effect, if any, such changes may have.

Item 6.Exhibits



Exhibit
Number						Document
~~3(a)~~*3.1						~~2011~~2020 Amended and Restated Charter of Protective Life Insurance Company dated as of ~~June 27, 2011, incorporated by reference to~~December 30, 2020, filed as Exhibit ~~3(a)~~3.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2011~~2020, filed March ~~29, 2012~~30, 2021 (No. 001-31901).
~~3(b)~~*3.2						~~2011~~2020 Amended and Restated By-Laws of Protective Life Insurance Company dated as of ~~June 27, 2011, incorporated by reference to~~December 30, 2020, filed as Exhibit ~~3(b)~~3.2 to the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2011~~2020, filed March ~~29, 2012~~30, 2021 (No. 001-31901).
12*10.1†						~~Consolidated Earnings Ratio.~~Amended and Restated Protective Life Corporation Annual Incentive Plan, effective January 1, 2021, filed as Exhibit 10.11(e) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed March 30, 2021 (No. 001-31901).
~~31(a)~~*10.2†						Amended and Restated Protective Life Corporation Long-Term Incentive Plan, amended and restated as of February 25, 2021, filed as Exhibit 10.12(e) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed March 30, 2021 (No. 001-31901).
*10.3†						2021 Parent-Based Award Letter of Protective Life Corporation, filed as Exhibit 10.14(a)(1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed March 30, 2021 (No. 001-31901).
*10.4†						2021 Parent-Based Award Provisions of Protective Life Corporation, filed as Exhibit 10.14(a)(2) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed March 30, 2021 (No. 001-31901).
*10.5†						2021 Performance Units Award Letter (for key officers) of Protective Life Corporation, filed as Exhibit 10.15(a)(1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed March 30, 2021 (No. 001-31901).
*10.6†						2021 Performance Units Award Letter (enhanced) (for key officers) of Protective Life Corporation, filed as Exhibit 10.15(a)(2) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed March 30, 2021 (No. 001-31901).
*10.7†						2021 Performance Units Provision (for key officers) of Protective Life Corporation, filed as Exhibit 10.15(a)(3) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed March 30, 2021 (No. 001-31901).
*10.8†						2021 Restricted Units Award Letter (for key officers) of Protective Life Corporation, filed as Exhibit 10.16(a)(1) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed March 30, 2021 (No. 001-31901).
*10.9†						2021 Restricted Units Provisions of Protective Life Corporation, filed as Exhibit 10.16(a)(2) to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed March 30, 2021 (No. 001-31901).
10.10†						2021 Long-Term Incentive Plan Awards Acceptance Form, filed herewith.
31.1						Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
~~31(b)~~31.2						Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
~~32(a)~~32.1						Certification Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~32(b)~~32.2						Certification Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~101~~101.INS						~~Financial statements from~~XBRL Instance Document - the ~~quarterly report on Form 10-Q of Protective Life Insurance Company for~~instance document does not appear in the ~~quarter ended September 30, 2017, filed on November 14, 2017 formatted~~Interactive Data file because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as inline XBRL and contained in XBRL: (i) the Consolidated Condensed Statements of Income, (ii) the Consolidated Condensed Statements of Comprehensive Income, (iii) the Consolidated Condensed Balance Sheets, (iv) the Consolidated Condensed Statements of Shareowner’s Equity, (v) the Consolidated Condensed Statements of Cash Flows, and (iv) the Notes to Consolidated Condensed Financial Statements.Exhibit 101)

*						Incorporated by Reference.
†						Management contract or compensatory plan or arrangement

*Incorporated by Reference.

Table of Contents

SIGNATURE

Pursuant to the requirements ~~of Section 13 or 15(d)~~ of the Securities Exchange Act of 1934, the ~~Company~~registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	PROTECTIVE LIFE INSURANCE COMPANY


Date: ~~November~~May 14, ~~2017~~2021		By:	/s/ PAUL R. WELLS
			Paul R. Wells
			~~Senior Vice President,~~ Chief Accounting Officer
			~~and Controller~~

~~116~~



~~TENNESSEE~~Tennessee						63-0169720
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification Number)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A



		Page
	PART I

Item 1.	Financial Statements (unaudited):
	Consolidated Condensed Statements of Income (Loss) For The Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	2
	Consolidated Condensed Statements of Comprehensive ~~Income~~Loss For The Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~2020	3
	Consolidated Condensed Balance Sheets as of ~~September 30, 2017~~March 31 , 202 1 and December 31, ~~2016~~20 20	4
	Consolidated Condensed ~~Statement~~Statements of Shareowner’s Equity For The ~~Nine~~ Three Months Ended ~~September 30, 2017~~March 31 , 202 1 and 20 20	6
	Consolidated Condensed ~~Statements~~State ments of Cash Flows For The ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2021 and ~~2016~~20 2 0	7
	Notes to Consolidated Condensed Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5647
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	~~106~~91
Item 4.	Controls and Procedures	~~107~~91

	PART II

Item 1A.	Risk Factors	~~107~~92
Item 6.	Exhibits	~~115~~96
	Signature	~~116~~97



	For The Three Months Ended September 30,						For The Nine Months Ended September 30,
	2017			2016			2017			2016
	(Dollars In Thousands)
Securities in an unrealized gain position:
Fair value (proceeds)	$	121,459		$	167,272		$	566,064		$	987,048
Gains realized	$	1,933		$	3,223		$	14,967		$	31,004

Securities in an unrealized loss position⁽¹⁾:
Fair value (proceeds)	$	37,186		$	7,105		$	121,450		$	67,688
Losses realized	$	(1,243	)	$	(1,558	)	$	(5,884	)	$	(6,871	)

(1) The Company made the decision to exit these holdings in conjunction with its overall asset liability management process.


	Available-for-Sale
	Amortized Cost		Fair Value
	(Dollars In Millions)
Due in one year or less	$	1,626	$	1,642
Due after one year through five years	12,386		12,921
Due after five years through ten years	13,803		14,580
Due after ten years	35,855		38,015
	$	63,670	$	67,158


As of September 30, 2017	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI⁽¹⁾
As of March 31, 2021													As of March 31, 2021	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Expected Credit Losses		Fair Value
	(Dollars In Thousands)													(Dollars In Millions)
Fixed maturities:													Fixed maturities:
Residential mortgage-backed securities	$	2,178,344	$	22,141	$	(17,116	)	$	2,183,369	$	16		Residential mortgage-backed securities	$	6,872	$	89	$	(58)	$	0	$	6,903
Commercial mortgage-backed securities	1,909,921		6,052		(23,920		)	1,892,053		—			Commercial mortgage-backed securities	2,346		92		(11)		(2)		2,425
Other asset-backed securities	1,186,463		17,692		(13,488		)	1,190,667		—			Other asset-backed securities	1,505		36		(4)		(1)		1,536
U.S. government-related securities	1,317,910		1,256		(26,333		)	1,292,833		—			U.S. government-related securities	980		17		(37)		0		960
Other government-related securities	251,040		8,075		(6,835		)	252,280		—			Other government-related securities	591		54		(3)		0		642
States, municipals, and political subdivisions	1,756,865		6,416		(59,272		)	1,704,009		(93		)	States, municipals, and political subdivisions	3,821		301		(3)		0		4,119
Corporate securities	29,511,875		475,788		(704,556		)	29,283,107		—			Corporate securities	47,342		3,364		(348)		(1)		50,357
Preferred stock	94,362		376		(2,898		)	91,840		—
Redeemable preferred stocks													Redeemable preferred stocks	213		4		(1)		0		216
	38,206,780		537,796		(854,418		)	37,890,158		(77		)		63,670		3,957		(465)		(4)		67,158
Equity securities	721,496		24,861		(7,291		)	739,066
Short-term investments	378,429		—		—			378,429					Short-term investments	552		0		0		0		552
	$	39,306,705	$	562,657	$	(861,709	)	$	39,007,653	$	(77	)		$	64,222	$	3,957	$	(465)	$	(4)	$	67,710

As of December 31, 2016	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Total OTTI Recognized in OCI⁽¹⁾
	(Dollars In Thousands)
Fixed maturities:
Residential mortgage-backed securities	$	1,904,165	$	10,737	$	(25,295	)	$	1,889,607	$	(9	)
Commercial mortgage-backed securities	1,820,644		2,455		(40,602		)	1,782,497		—
Other asset-backed securities	1,210,490		21,741		(20,698		)	1,211,533		—
U.S. government-related securities	1,308,192		422		(40,455		)	1,268,159		—
Other government-related securities	251,197		1,526		(14,797		)	237,926		—
States, municipals, and political subdivisions	1,760,837		1,224		(105,558		)	1,656,503		—
Corporate securities	28,655,364		151,383		(1,582,098		)	27,224,649		(11,030		)
Preferred stock	94,362		—		(8,519		)	85,843		—
	37,005,251		189,488		(1,838,022		)	35,356,717		(11,039		)
Equity securities	722,868		7,751		(21,685		)	708,934		—
Short-term investments	263,185		—		—			263,185		—
	$	37,991,304	$	197,239	$	(1,859,707	)	$	36,328,836	$	(11,039	)

(1) These amounts are included in the gross unrealized gains and gross unrealized losses columns above.



	Available-for-sale				Held-to-maturity
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars In Thousands)
Due in one year or less	$	772,655	$	773,331	$	—	$	—
Due after one year through five years	6,278,517		6,310,854		—		—
Due after five years through ten years	7,537,131		7,567,040		—		—
Due after ten years	23,618,477		23,238,933		2,730,995		2,796,603
	$	38,206,780	$	37,890,158	$	2,730,995	$	2,796,603


	For The Three Months Ended March 31,
	2021								2020
	Corporate Securities		CMBS		ABS		Total		Corporate Securities		ABS		Total
	(Dollars In Millions)
Beginning Balance	$	18	$	4	$	1	$	23	$	0	$	0	$	0
Additions for securities for which allowance was not previously recorded	0		0		0		0		52		0		52
Adjustments on previously recorded allowances due to change in expected cash flows	(1)		(2)		0		(3)		0		0		0
Reductions on previously recorded allowances due to disposal of security in the current period	0		0		0		0		0		0		0
Write-offs of previously recorded allowances due to intent or requirement to sell	(16)		0		0		(16)		0		0		0
Ending Balance	$	1	$	2	$	1	$	4	$	52	$	0	$	52


	Less Than 12 Months				12 Months or More				Total
	Fair Value		Unrealized Loss		Fair Value		Unrealized Loss		Fair Value		Unrealized Loss
	(Dollars In Millions)
Residential mortgage-backed securities	$	2,586	$	(58)	$	12	$	0	$	2,598	$	(58)
Commercial mortgage-backed securities	247		(9)		29		(2)		276		(11)
Other asset-backed securities	182		(3)		137		(1)		319		(4)
U.S. government-related securities	438		(37)		0		0		438		(37)
Other government-related securities	65		(3)		0		0		65		(3)
States, municipals, and political subdivisions	78		(3)		4		0		82		(3)
Corporate securities	7,213		(280)		702		(68)		7,915		(348)
Redeemable preferred stocks	14		(1)		0		0		14		(1)
	$	10,823	$	(394)	$	884	$	(71)	$	11,707	$	(465)



As of September 30, 2017	Amortized Cost		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value		Total OTTI Recognized in OCI
	(Dollars In Thousands)
Fixed maturities:
Securities issued by affiliates:
Red Mountain LLC	$	690,995	$	—	$	(17,305	)	$	673,690	$	—
Steel City LLC	2,040,000		82,913		—			2,122,913		—
	$	2,730,995	$	82,913	$	(17,305	)	$	2,796,603	$	—

As of December 31, 2016	Amortized Cost		Gross Unrecognized Holding Gains		Gross Unrecognized Holding Losses			Fair Value		Total OTTI Recognized in OCI
	(Dollars In Thousands)
Fixed maturities:
Securities issued by affiliates:
Red Mountain LLC	$	654,177	$	—	$	(67,222	)	$	586,955	$	—
Steel City LLC	2,116,000		30,385		—			2,146,385		—
	$	2,770,177	$	30,385	$	(67,222	)	$	2,733,340	$	—


a.	~~Quoted prices for similar assets or liabilities in active markets~~


b.	~~Quoted prices for identical or similar assets or liabilities in non-active markets~~


c.	~~Inputs other than quoted market prices that are observable~~


d.	~~Inputs that are derived principally from or corroborated by observable market data through correlation or other means.~~


	Measurement Category	Level 1		Level 2		Level 3		Total
		(Dollars In Millions)
Assets:
Fixed maturity securities - AFS
Residential mortgage-backed securities	4	$	0	$	6,903	$	0	$	6,903
Commercial mortgage-backed securities	4	0		2,393		32		2,425
Other asset-backed securities	4	0		1,096		440		1,536
U.S. government-related securities	4	483		477		0		960
State, municipals, and political subdivisions	4	0		4,119		0		4,119
Other government-related securities	4	0		642		0		642
Corporate securities	4	0		48,951		1,406		50,357
Redeemable preferred stocks	4	150		66		0		216
Total fixed maturity securities - AFS		633		64,647		1,878		67,158
Fixed maturity securities - trading
Residential mortgage-backed securities	3	0		181		0		181
Commercial mortgage-backed securities	3	0		213		0		213
Other asset-backed securities	3	0		74		101		175
U.S. government-related securities	3	28		7		0		35
State, municipals, and political subdivisions	3	0		282		0		282
Other government-related securities	3	0		16		16		32
Corporate securities	3	0		1,761		11		1,772
Redeemable preferred stocks	3	11		0		0		11
Total fixed maturity securities - trading		39		2,534		128		2,701
Total fixed maturity securities		672		67,181		2,006		69,859
Equity securities	3	618		0		123		741
Other long-term investments(1)	3 & 4	64		1,271		289		1,624
Short-term investments	3	484		177		0		661
Total investments		1,838		68,629		2,418		72,885
Cash	3	565		0		0		565
Assets related to separate accounts
Variable annuity	3	12,699		0		0		12,699
Variable universal life	3	1,646		0		0		1,646
Total assets measured at fair value on a recurring basis		$	16,748	$	68,629	$	2,418	$	87,795
Liabilities:
Annuity account balances(2)	3	$	0	$	0	$	66	$	66
Other liabilities(1)	3 & 4	26		939		1,686		2,651
Total liabilities measured at fair value on a recurring basis		$	26	$	939	$	1,752	$	2,717

Measurement category 3 represents fair value through net income (loss) and 4 represents fair value through other comprehensive income (loss).
(1) Includes certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.



	Fair Value As of September 30, 2017		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	553,005	Liquidation	Liquidation value	$90 - $97 ($95.02)
			Discounted cash flow	Liquidity premium	0.51% - 1.29% (0.96%)
				Paydown rate	10.75% - 12.75% (11.34%)
Corporate securities	615,576		Discounted cash flow	Spread over treasury	0.35% - 4.35% (1.57%)
Liabilities:⁽¹⁾
Embedded derivatives - GLWB⁽²⁾	$	20,336	Actuarial cash flow model	Mortality	91.1% to 106.6% of Ruark 2015 ALB Table
				Lapse	0.3% - 15%, depending on product/duration/funded status of guarantee
				Utilization	99%. 10% of policies have a one-time over-utilization of 400%
				Nonperformance risk	0.12% - 0.86%
Embedded derivative - FIA	197,378		Actuarial cash flow model	Expenses	$146 per policy
				Asset Earned Rate	4.08% - 4.66%
				Withdrawal rate	1.5% prior to age 70, 100% of the RMD for ages 70+
				Mortality	1994 MGDB table with company experience
				Lapse	1.0% - 30.0%, depending on duration/surrender charge period
				Nonperformance risk	0.12% - 0.86%
Embedded derivative - IUL	69,081		Actuarial cash flow model	Mortality	34% - 152% of 2015
					VBT Primary Tables
				Lapse	0.5% - 10%, depending on
					duration/distribution channel
					and smoking class
				Nonperformance risk	0.12% - 0.86%

(1) Excludes modified coinsurance arrangements.
(2) The fair value for the GLWB embedded derivative is presented as a net liability.



	Fair Value As of December 31, 2016		Valuation Technique	Unobservable Input	Range (Weighted Average)
	(Dollars In Thousands)
Assets:
Other asset-backed securities	$	553,308	Liquidation	Liquidation value	$88 - $97.25 ($95.04)
Corporate securities	638,279		Discounted cash flow	Spread over treasury	0.31% - 4.50% (2.04%)
Liabilities:⁽¹⁾
Embedded derivatives - GLWB⁽²⁾	$	7,031	Actuarial cash flow model	Mortality	91.1% to 106.6% of Ruark 2015 ALB Table
				Lapse	0.3% - 15%, depending on product/duration/funded status of guarantee
				Utilization	99%. 10% of policies have a one-time over-utilization of 400%
				Nonperformance risk	0.18% - 1.09%
Embedded derivative - FIA	147,368		Actuarial cash flow model	Expenses	$126 per policy
				Asset Earned Rate	4.08% - 4.66%
				Withdrawal rate	1% prior to age 70, 100% of the RMD for ages 70+
				Mortality	1994 MGDB table with company experience
				Lapse	2.0% - 40.0%, depending on duration/surrender charge period
				Nonperformance risk	0.18% - 1.09%
Embedded derivative - IUL	46,051		Actuarial cash flow model	Mortality	38% - 153% of 2015 VBT Primary Tables
				Lapse	0.5% - 10.0%, depending on duration/distribution channel and smoking class
				Nonperformance risk	0.18% - 1.09%

(1) Excludes modified coinsurance arrangements.
(2) The fair value for the GLWB embedded derivative is presented as a net liability.



			Total Realized and Unrealized Gains				Total Realized and Unrealized Losses																							Total Gains (losses) included in Earnings related to Instruments still held at the Reporting Date
	Beginning Balance		Included in Earnings		Included in Other Comprehensive Income		Included in Earnings			Included in Other Comprehensive Income			Purchases		Sales			Issuances		Settlements		Transfers in/out of Level 3			Other			Ending Balance
	(Dollars In Thousands)
Assets:
Fixed maturity securities available-for-sale
Residential mortgage-backed securities	$	11,862	$	—	$	83	$	—		$	—		$	—	$	—		$	—	$	—	$	(11,944	)	$	(1	)	$	—	$	—
Commercial mortgage-backed securities	—		—		—		—						—		—			—		—		—			—			—		—
Other asset-backed securities	552,963		—		1,682		—			(2,285		)	100		(109		)	—		—		—			798			553,149		—
Corporate securities	662,654		—		8,301		—			(2,222		)	5,071		(42,242		)	—		—		(5,486		)	(1,523		)	624,553		—
Total fixed maturity securities - available-for-sale	1,227,479		—		10,066		—			(4,507		)	5,171		(42,351		)	—		—		(17,430		)	(726		)	1,177,702		—
Fixed maturity securities - trading
Other asset-backed securities	54,923		—		—		(353		)	—			—		(19,188		)	—		—		—			108			35,490		(209		)
Corporate securities	5,520		27		—		—			—			—		—			—		—		—			(23		)	5,524		27
Total fixed maturity securities - trading	60,443		27		—		(353		)	—			—		(19,188		)	—		—		—			85			41,014		(182		)
Total fixed maturity securities	1,287,922		27		10,066		(353		)	(4,507		)	5,171		(61,539		)	—		—		(17,430		)	(641		)	1,218,716		(182		)
Equity securities	65,686		—		—		—			—			—		(170		)	—		—		—			—			65,516		—
Other long-term investments⁽¹⁾	93,245		56,491		—		(2		)	—			—		—			—		—		—			—			149,734		56,489
Total investments	1,446,853		56,518		10,066		(355		)	(4,507		)	5,171		(61,709		)	—		—		(17,430		)	(641		)	1,433,966		56,307
Total assets measured at fair value on a recurring basis	$	1,446,853	$	56,518	$	10,066	$	(355	)	$	(4,507	)	$	5,171	$	(61,709	)	$	—	$	—	$	(17,430	)	$	(641	)	$	1,433,966	$	56,307
Liabilities:
Annuity account balances⁽²⁾	$	86,094	$	—	$	—	$	(977	)	$	—		$	—	$	—		$	9	$	2,052	—			$	—		$	85,028	$	—
Other liabilities⁽¹⁾	532,763		6,702		—		(35,235		)	—			—		—			—		—		—			—			561,296		(28,533		)
Total liabilities measured at fair value on a recurring basis	$	618,857	$	6,702	$	—	$	(36,212	)	$	—		$	—	$	—		$	9	$	2,052	$	—		$	—		$	646,324	$	(28,533	)

(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.



	Amount of Gains (Losses) Deferred in Accumulated Other Comprehensive Income (Loss) on Derivatives		Amount and Location of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income (Loss) into Income (Loss)			Amount and Location of (Losses) Recognized in Income (Loss) on Derivatives
	(Effective Portion)		(Effective Portion)			(Ineffective Portion)
			Benefits and settlement expenses			Realized investment gains (losses)
	(Dollars In Thousands)
For The Three Months Ended September 30, 2017
Foreign currency swaps	$	1,273	$	(38	)	$	—
Total	$	1,273	$	(38	)	$	—

For The Nine Months Ended September 30, 2017
Foreign currency swaps	$	55	$	(396	)	$	—
Total	$	55	$	(396	)	$	—



	For The Nine Months Ended
	September 30, 2017
	(Dollars In Thousands)
Beginning balance, December 31, 2016	$	724
Charge offs	(5,653		)
Recoveries	(731		)
Provision	6,715
Ending balance, September 30, 2017	$	1,055



					Greater
	30-59 Days		60-89 Days		than 90 Days		Total
As of September 30, 2017	Delinquent		Delinquent		Delinquent		Delinquent
	(Dollars In Thousands)
Commercial mortgage loans	$	2,293	$	—	$	869	$	3,162
Number of delinquent commercial mortgage loans	2		—		1		3

As of December 31, 2016
Commercial mortgage loans	$	3,669	$	—	$	—	$	3,669
Number of delinquent commercial mortgage loans	4		—		—		4



			Unpaid				Average		Interest		Cash Basis
	Recorded		Principal		Related		Recorded		Income		Interest
As of September 30, 2017	Investment		Balance		Allowance		Investment		Recognized		Income
	(Dollars In Thousands)
Commercial mortgage loans:
With no related allowance recorded	$	—	$	—	$	—	$	—	$	—	$	—
With an allowance recorded	1,924		1,924		1,055		1,924		18		27

As of December 31, 2016
Commercial mortgage loans:
With no related allowance recorded	$	—	$	—	$	—	$	—	$	—	$	—
With an allowance recorded	1,819		1,819		724		1,819		96		96



Issuer	Outstanding Principal		Carrying Value⁽¹⁾		Maturity Year	Year-to-Date Weighted-Avg Interest Rate
	(Dollars In Thousands)
Golden Gate Captive Insurance Company⁽²⁾⁽³⁾	$	2,040,000	$	2,040,000	2039	4.75	%
Golden Gate II Captive Insurance Company	278,949		228,855		2052	2.92	%
Golden Gate V Vermont Captive Insurance Company⁽²⁾⁽³⁾	605,000		666,729		2037	5.12	%
MONY Life Insurance Company⁽³⁾	1,091		2,421		2024	6.19	%
Total	$	2,925,040	$	2,938,005

(1) Carrying values include premiums and discounts and do not represent unpaid principal balances.
(2) Obligations are issued to non-consolidated subsidiaries of PLC. These obligations collateralize certain held-to-maturity securities issued by wholly owned subsidiaries of the Company.
(3) Fixed rate obligations.



	Unrealized Gains and Losses on Investments⁽²⁾			Accumulated Gain and Loss Derivatives		Total Accumulated Other Comprehensive Income (Loss)
	(Dollars In Thousands, Net of Tax)
Beginning Balance, December 31, 2016	$	(655,767	)	$	727	$	(655,040	)
Other comprehensive income (loss) before reclassifications	547,885			36		547,921
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings	7,125			—		7,125
Amounts reclassified from accumulated other comprehensive income (loss)⁽¹⁾	(536		)	257		(279		)
Net current-period other comprehensive income (loss)	554,474			293		554,767
Ending Balance, September 30, 2017	$	(101,293	)	$	1,020	$	(100,273	)

(1) See Reclassification table below for details.
(2) As of September 30, 2017, net unrealized losses reported in AOCI were offset by $93.6 million due to the impact those net unrealized losses would have had on certain of the Company’s insurance assets and liabilities if the net unrealized losses had been recognized in net income.



For The Three Months Ended September 30, 2017	Amount Reclassified from Accumulated Other Comprehensive Income (Loss)			Affected Line Item in the Consolidated Condensed Statements of Income
	(Dollars In Thousands)
Gains and losses on derivative instruments
Net settlement (expense)/benefit⁽¹⁾	$	(38	)	Benefits and settlement expenses, net of reinsurance ceded
	(38		)	Total before tax
	14			Tax (expense) or benefit
	$	(24	)	Net of tax
Unrealized gains and losses on available-for-sale securities
Net investment gains (losses)	$	690		Realized investment gains (losses): All other investments
Impairments recognized in earnings	(273		)	Net impairment losses recognized in earnings
	417			Total before tax
	(146		)	Tax (expense) or benefit
	$	271		Net of tax

(1) See Note 6, Derivative Financial Instruments for additional information



	Operating Segment Assets As of September 30, 2017
	(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	14,700,306	$	19,681,306	$	20,442,345	$	4,664,251
DAC and VOBA	1,295,708		77,157		752,540		7,605
Other intangibles	286,444		35,187		173,450		8,222
Goodwill	200,274		14,524		336,677		113,813
Total assets	$	16,482,732	$	19,808,174	$	21,705,012	$	4,793,891



	Operating Segment Assets As of December 31, 2016
	(Dollars In Thousands)
	Life Marketing		Acquisitions		Annuities		Stable Value Products
Investments and other assets	$	14,050,905	$	19,679,690	$	20,076,818	$	3,373,646
DAC and VOBA	1,218,944		106,532		655,618		5,455
Other intangibles	300,664		37,103		183,449		8,722
Goodwill	200,274		14,524		336,677		113,813
Total assets	$	15,770,787	$	19,837,849	$	21,252,562	$	3,501,636


	For The Three Months Ended March 30,				Percent
	2021		2020		Change
	(Dollars In Millions)
REVENUES
Reinsurance ceded	$	(205)	$	33	n/m

Other income	(1)		—		n/m
Total operating revenues	(206)		33		n/m
Realized gains (losses)	(4)		—		n/m
Total revenues	(210)		33		n/m
BENEFITS AND EXPENSES
Benefits and settlement expenses	(263)		76		n/m
Amortization of DAC/VOBA	(1)		(1)		—%
Other operating expenses(1)	(45)		(51)		(11.8)%
Operating benefits and expenses	(309)		24		n/m
Benefits and settlement expenses related to realized gains (losses)	1		(2)		n/m
Amortization of DAC/VOBA related to realized gains (losses)	(1)		5		n/m
Total benefits and expenses	(309)		27		n/m
NET IMPACT OF REINSURANCE	$	99	$	6	n/m


(1) Other operating expenses ceded per the income statement are equal to reinsurance allowances recognized after capitalization.
N/M - we define n/m as not meaningful for increases or decreases greater than 100%.



	As of September 30, 2017		% Fair Value		As of December 31, 2016		% Fair Value
	(Dollars In Thousands)
Banking	$	4,325,558	10.0	%	$	3,811,588	9.3	%
Other finance	78,844		0.2		83,895		0.2
Electric utility	3,971,429		9.2		3,925,147		9.6
Energy	3,954,918		9.1		3,887,736		9.5
Natural gas	720,472		1.6		603,149		1.5
Insurance	3,633,259		8.4		3,185,237		7.8
Communications	1,706,316		3.9		1,651,600		4.1
Basic industrial	1,618,765		3.7		1,533,516		3.8
Consumer noncyclical	3,806,559		8.8		3,465,299		8.5
Consumer cyclical	1,136,256		2.6		1,041,805		2.6
Finance companies	146,817		0.3		139,050		0.3
Capital goods	1,847,034		4.3		1,773,467		4.4
Transportation	1,163,590		2.7		1,136,666		2.7
Other industrial	224,436		0.5		200,605		0.5
Brokerage	842,474		2.0		760,585		1.9
Technology	1,766,941		4.1		1,534,297		3.8
Real estate	83,513		0.2		122,058		0.3
Other utility	65,735		0.2		83,366		0.2
Commercial mortgage-backed securities	2,037,706		4.8		1,932,180		4.7
Other asset-backed securities	1,333,280		3.1		1,411,617		3.5
Residential mortgage-backed non-agency securities	1,690,281		3.9		1,414,859		3.5
Residential mortgage-backed agency securities	755,150		1.7		729,775		1.8
U.S. government-related securities	1,320,547		3.0		1,295,120		3.2
Other government-related securities	316,347		0.7		300,938		0.7
State, municipals, and political divisions	2,025,010		4.7		1,973,022		4.8
Securities issued by affiliates	2,730,995		6.3		2,770,177		6.8
Total	$	43,302,232	100.0	%	$	40,766,754	100.0	%



S&P or Equivalent	Fair		% Fair		Amortized		% Amortized		Unrealized			% Unrealized
Designation	Value		Value		Cost		Cost		Loss			Loss
	(Dollars In Thousands)
AAA/AA/A	$	13,603,854	61.4	%	$	14,042,579	61.0	%	$	(438,725	)	50.9	%
BBB	7,911,314		35.6		8,275,499		35.8		(364,185		)	42.3
Investment grade	21,515,168		97.0	%	22,318,078		96.8	%	(802,910		)	93.2	%
BB	351,575		1.6		377,677		1.6		(26,102		)	3.0
B	220,235		1.0		249,675		1.1		(29,440		)	3.4
CCC or lower	83,791		0.4		87,048		0.5		(3,257		)	0.4
Below investment grade	655,601		3.0	%	714,400		3.2	%	(58,799		)	6.8	%
Total	$	22,170,769	100.0	%	$	23,032,478	100.0	%	$	(861,709	)	100.0	%


					Total Gross							Total Gross
	Non-sovereign Debt				Funded			Non-sovereign Debt				Funded
Financial Instrument and Country	Financial		Non-financial		Exposure		Financial Instrument and Country	Financial		Non-financial		Exposure
	(Dollars In Millions)							(Dollars In Millions)
Securities:							Securities:
United Kingdom	$	623.4	$	768.5	$	1,391.9	United Kingdom	$	1,336	$	1,354	$	2,690
France							France	705		437		1,142
Netherlands	227.6		249.0		476.6		Netherlands	375		322		697
France	134.4		226.5		360.9
Germany							Germany	205		810		1,015
Switzerland	220.3		112.2		332.5		Switzerland	428		152		580
Germany	149.9		150.4		300.3
Spain	22.7		228.2		250.9		Spain	190		349		539
Belgium	—		202.9		202.9		Belgium	—		194		194
Sweden	129.1		20.6		149.7
Norway	—		99.3		99.3		Norway	4		120		124
Luxembourg	—		61.3		61.3
Finland							Finland	126		—		126
Ireland	—		58.2		58.2		Ireland	63		124		187
Italy	—		41.3		41.3		Italy	41		153		194
Luxembourg							Luxembourg	—		35		35
Sweden							Sweden	—		52		52
Denmark							Denmark	71		—		71
Portugal							Portugal	—		24		24
Total securities	1,507.4		2,218.4		3,725.8		Total securities	3,544		4,126		7,670
Derivatives:							Derivatives:
Germany	41.4		—		41.4		Germany	39		—		39
United Kingdom	12.5		—		12.5		United Kingdom	214		—		214
Switzerland	3.9		—		3.9		Switzerland	27		—		27
France	1.7		—		1.7		France	47		—		47
Total derivatives	59.5		—		59.5		Total derivatives	327		—		327
Total securities	$	1,566.9	$	2,218.4	$	3,785.3	Total securities	$	3,871	$	4,126	$	7,997


	Proceeds		% Proceeds		Realized Loss			% Realized Loss			Proceeds		% Proceeds		Realized Loss		% Realized Loss
	(Dollars In Thousands)										(Dollars In Millions)
<= 90 days	$	33,154	27.3	%	$	(2,872	)	48.8	%	<= 90 days	$	—	—	%	$	—	—	%
>90 days but <= 180 days	25,614		21.1		(225		)	3.8		>90 days but <= 180 days	—		—		—		—
>180 days but <= 270 days	5,888		4.8		(173		)	2.9		>180 days but <= 270 days	—		—		—		—
>270 days but <= 1 year	14,560		12.0		(524		)	8.9		>270 days but <= 1 year	—		—		—		—
>1 year	42,234		34.8		(2,090		)	35.6		>1 year	8		100.0		(1)		100.0
Total	$	121,450	100.0	%	$	(5,884	)	100.0	%	Total	$	8	100.0	%	$	(1)	100.0	%


								For The Three Months Ended March 31,
	For The Nine Months Ended September 30,							2021		2020
	2017			2016				(Dollars In Millions)
	(Dollars In Thousands)
Net cash provided by operating activities	$	16,394		$	295,143
Net cash (used in) provided by operating activities							Net cash (used in) provided by operating activities	$	(293)	$	164
Net cash used in investing activities	(1,836,948		)	(3,425,540		)	Net cash used in investing activities	(1,309)		(448)
Net cash provided by financing activities	1,805,748			3,325,617			Net cash provided by financing activities	1,511		514
Total	$	(14,806	)	$	195,220		Total	$	(91)	$	230



			Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(Dollars In Thousands)
Non-recourse funding obligations⁽¹⁾	$	5,025,873	$	265,022	$	619,962	$	671,297	$	3,469,592
Stable value products⁽²⁾	5,069,209		963,785		2,262,606		1,693,271		149,547
Operating leases⁽³⁾	30,270		4,621		8,450		7,367		9,832
Home office lease⁽⁴⁾	77,552		2,048		75,504		—		—
Mortgage loan and investment commitments	852,091		759,062		93,029		—		—
Secured financing liabilities⁽⁵⁾	599,593		599,593		—		—		—
Policyholder obligations⁽⁶⁾	42,259,849		1,593,574		3,431,619		3,439,037		33,795,619
Total	$	53,914,437	$	4,187,705	$	6,491,170	$	5,810,972	$	37,424,590

(1) Non-recourse funding obligations include all undiscounted principal amounts owed and expected future interest payments due over the term of the notes. Of the total undiscounted cash flows, $1.8 billion relates to the Golden Gate V transaction. These cash outflows are matched and predominantly offset by the cash inflows Golden Gate V receives from notes issued by a nonconsolidated variable interest entity. Additionally, $2.8 billion relates to the Golden Gate transaction that occurred in Q1 2016. These cash outflows are matched and predominantly offset by the cash inflows Golden Gate receives from notes issued by nonconsolidated entity and third parties. The remaining amounts are associated with the Golden Gate II notes held by third parties as well as certain obligations assumed with the acquisition of MONY Life Insurance Company.
(2) Anticipated stable value products cash flows including interest.
(3) Includes all lease payments required under operating lease agreements.
(4) The lease payments shown assume we exercise our option to purchase the building at the end of the lease term. Additionally, the payments due by the periods above were computed based on the terms of the renegotiated lease agreement, which was entered in December 2013.
(5) Represents secured borrowings and accrued interest as part of our repurchase program as well as liabilities associated with securities lending transactions.
(6) Estimated contractual policyholder obligations are based on mortality, morbidity, and lapse assumptions comparable to our historical experience, modified for recent observed trends. These obligations are based on current balance sheet values and include expected interest crediting, but do not incorporate an expectation of future market growth, or future deposits. Due to the significance of the assumptions used, the amounts presented could materially differ from actual results. As variable separate account obligations are legally insulated from general account obligations, the variable separate account obligations will be fully funded by cash flows from variable separate account assets. We expect to fully fund the general account obligations from cash flows from general account investments.



				1-50 bps			More than
Minimum Guaranteed Interest Rate	At			above			50 bps
Account Value	MGIR			MGIR			above MGIR			Total
	(Dollars In Millions)
Universal Life Insurance
>2% - 3%	$	203		$	1,197		$	2,044		$	3,444
>3% - 4%	4,160			997			8			5,165
>4% - 5%	2,001			13			1			2,015
>5% - 6%	201			—			—			201
Subtotal	6,565			2,207			2,053			10,825
Fixed Annuities
1%	$	614		$	205		$	360		$	1,179
>1% - 2%	500			358			72			930
>2% - 3%	1,939			64			5			2,008
>3% - 4%	257			—			—			257
>4% - 5%	274			—			—			274
>5% - 6%	3			—			—			3
Subtotal	3,587			627			437			4,651
Total	$	10,152		$	2,834		$	2,490		$	15,476

Percentage of Total	66		%	18		%	16		%	100		%