UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended ~~September~~June 30, ~~2020~~2021


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

Commission File No. 001-39369

American National Group, Inc.

(Exact name of registrant as specified in its charter)

~~(formerly American National Insurance Company)~~


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

One Moody Plaza

Galveston, Texas 77550-7999

(Address of principal executive offices) (Zip Code)

(409) 763-4661

(Registrant’s telephone number, including area code)

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

Title of Each Class

Trading Symbol

Name of Each Exchange on which Registered

Common Stock, par value $0.01

ANAT

NASDAQ

~~Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No~~

~~Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Sections 15(d) of the Exchange Act. ☐ Yes ☒ No~~

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

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

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

Large accelerated filer

☒☐

Accelerated filer

☐☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of ~~October 29, 2020,~~July 30, 2021, there w~~ere~~were 26,887,200 shares of the registrant’s voting common stock, $0.01 par value per share, outstanding.

Table of Contents

AMERICAN NATIONAL GROUP, INC.

TABLE OF CONTENTS



	PART I – FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS:

	Condensed Consolidated Statements of Financial Position as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 (unaudited)	3

	Condensed Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)	4

	Condensed Consolidated Statements of Comprehensive Income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)	5

	Condensed Consolidated Statements of Changes in Equity for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)	6

	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 (unaudited)	8

	Notes to the Condensed Consolidated Financial Statements (unaudited)	10

	Note 1 – Nature of Operations	10

	Note 2 – Summary of Significant Accounting Policies and Practices	10

	Note 3 – Recently Issued Accounting Pronouncements	11

	Note 4 – Investment in Securities	12

	Note 5 – Mortgage Loans	18

	Note 6 - Real Estate and Other Investments	21

	Note 7 – Derivative Instruments	23

	Note 8 – Net Investment Income and Realized Investment Gains (Losses)	25

	Note 9 – Fair Value of Financial Instruments	26

	Note 10 – Deferred Policy Acquisition Costs	34

	Note 11 – Liability for Unpaid Claims and Claim Adjustment Expenses	34

	Note 12 – Federal Income Taxes	35

	Note 13 – Accumulated Other Comprehensive Income (Loss)	35

	Note 14 – Stockholders’ Equity and Noncontrolling Interests	36

	Note 15 – Segment Information	38

	Note 16 – Commitments and Contingencies	41

	Note 17 – Related Party Transactions	42

	Note 18 – Subsequent Event	42



ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	4143

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	6568

ITEM 4.	CONTROLS AND PROCEDURES	6668

	PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	6668

ITEM 1A.	RISK FACTORS	6668









ITEM 6.	EXHIBITS	6769

SIGNATURES		70

Table of Contents

AMERICAN NATIONAL GROUP, INC.

~~(formerly AMERICAN NATIONAL INSURANCE COMPANY)~~

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

(In thousands, except share data)

September 30, 2020 December 31, 2019
ASSETS
Fixed maturity, bonds held-to-maturity, at amortized cost, net of allowance for credit losses of $21,491 in 2020 (Fair value $8,248,611 in 2020 and $8,968,690 in 2019) $ 7,702,347 $ 8,631,261
Fixed maturity, bonds available-for-sale, at fair value (Allowance for credit losses of $7,638 in 2020) (Amortized cost $6,794,366 in 2020 and $6,435,670 in 2019) 7,236,188 6,725,085
Equity securities, at fair value (Cost $734,916 in 2020 and $663,058 in 2019) 1,840,855 1,700,960
Mortgage loans on real estate, net of allowance for credit losses of $112,916 in 2020 and allowance for loan loss of $19,160 in 2019 5,176,474 5,097,017
Policy loans 374,387 379,657
Investment real estate, net of accumulated depreciation of $266,697 in 2020 and $256,757 in 2019 514,076 551,219
Short-term investments 800,793 425,321
Other invested assets 103,030 76,569
Total investments 23,748,150 23,587,089
Cash and cash equivalents 884,083 452,001
Investments in unconsolidated affiliates 827,364 705,721
Accrued investment income 211,655 200,856
Reinsurance recoverables, net of allowance for credit losses of $14,845 in 2020 and allowance for recoverables loss of $8,220 in 2019 477,904 411,830
Prepaid reinsurance premiums 40,574 44,669
Premiums due and other receivables 372,535 341,924
Deferred policy acquisition costs 1,400,440 1,423,007
Property and equipment, net of accumulated depreciation of $276,047 in 2020 and $257,907 in 2019 117,892 106,303
Prepaid pension 87,908 78,990
Other assets 187,665 171,285
Separate account assets 1,092,574 1,073,891
Total assets $ 29,448,744 $ 28,597,566
LIABILITIES
Future policy benefits
Life $ 3,123,027 $ 3,087,578
Annuity 1,573,480 1,571,263
Health 50,143 49,886
Policyholders’ account balances 12,869,130 12,957,989
Policy and contract claims 1,596,729 1,489,979
Unearned premium reserve 983,113 933,559
Other policyholder funds 362,187 361,059
Liability for retirement benefits 61,043 67,435
Notes payable 154,788 157,997
Deferred tax liabilities, net 414,206 394,528
Current tax payable 5,173 9,757
Federal Home Loan Bank advances 500,000 0
Other liabilities 510,337 446,882
Separate account liabilities 1,092,574 1,073,891
Total liabilities 23,295,930 22,601,803
EQUITY
American National Group, Inc. stockholders’ equity:
Common stock, $0.01 par value in 2020 and $1.00 in 2019; 50,000,000 shares authorized; 26,887,200 shares issued and outstanding in 2020 and 30,832,449 shares issued and 26,887,200 outstanding in 2019 269 30,832
Additional paid-in capital 47,689 21,011
Accumulated other comprehensive income 194,706 99,518
Retained earnings 5,903,843 5,946,857
Treasury stock, at cost 0 (108,469)
Total American National stockholders’ equity 6,146,507 5,989,749
Noncontrolling interest 6,307 6,014
Total stockholders' equity 6,152,814 5,995,763
Total liabilities and stockholders' equity $ 29,448,744 $ 28,597,566


	June 30, 2021		December 31, 2020
ASSETS
Fixed maturity, bonds held-to-maturity, at amortized cost, net of allowance for credit losses of $17,202 in 2021 and $12,442 in 2020 (Fair value $7,998,049 in 2021 and $7,983,181 in 2020)	$	7,473,697	$	7,354,970
Fixed maturity, bonds available-for-sale, at fair value (Allowance for credit losses of $5,158 in 2021 and $7,482 in 2020) (Amortized cost $7,630,025 in 2021 and $7,073,142 in 2020)	8,068,795		7,597,180
Equity securities, at fair value (Cost $796,628 in 2021 and $754,625 in 2020)	2,340,508		2,070,766
Mortgage loans on real estate, net of allowance for credit losses of $108,958 in 2021 and $125,703 in 2020	5,028,933		5,242,531
Policy loans	365,855		373,014
Real estate and real estate partnerships, net of accumulated depreciation of $276,880 in 2021 and $269,626 in 2020	926,241		960,572
Investment funds	594,166		477,135
Short-term investments	917,581		1,028,379
Other invested assets	102,387		94,415
Total investments	25,818,163		25,198,962
Cash and cash equivalents	427,149		339,947

Accrued investment income	206,988		216,389
Reinsurance recoverables, net of allowance for credit losses of $14,890 in 2021 and $14,353 in 2020	403,150		414,359
Prepaid reinsurance premiums	42,203		42,804
Premiums due and other receivables	394,992		351,972
Deferred policy acquisition costs	1,429,623		1,360,211
Property and equipment, net of accumulated depreciation of $292,969 in 2021 and $281,738 in 2020	129,141		121,578
Current tax receivable	10,458		0
Prepaid pension	87,652		80,526
Other assets	156,942		155,600
Separate account assets	1,272,247		1,185,467
Total assets	$	30,378,708	$	29,467,815
LIABILITIES
Future policy benefits
Life	$	3,171,348	$	3,149,067
Annuity	1,621,342		1,617,774
Health	47,722		49,658
Policyholders’ account balances	13,372,474		12,812,155
Policy and contract claims	1,589,729		1,575,288
Unearned premium reserve	1,016,907		956,343
Other policyholder funds	363,060		358,601
Liability for retirement benefits	70,953		70,254
Notes payable	151,498		153,703
Deferred tax liabilities, net	528,779		478,347
Current tax payable	0		10,372
Federal Home Loan Bank advance	0		250,000
Other liabilities	403,611		335,219
Separate account liabilities	1,272,247		1,185,467
Total liabilities	23,609,670		23,002,248
EQUITY
American National Group, Inc. stockholders’ equity:
Common stock, $0.01 par value; 50,000,000 shares authorized; 26,887,200 shares issued and outstanding in 2021 and 2020	269		269
Additional paid-in capital	47,722		47,683
Accumulated other comprehensive income	171,851		222,170
Retained earnings	6,542,202		6,188,148

Total American National stockholders’ equity	6,762,044		6,458,270
Noncontrolling interest	6,994		7,297
Total stockholders' equity	6,769,038		6,465,567
Total liabilities and stockholders' equity	$	30,378,708	$	29,467,815

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

AMERICAN NATIONAL GROUP, INC.

~~(formerly AMERICAN NATIONAL INSURANCE COMPANY)~~

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share data)

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
PREMIUMS AND OTHER REVENUES
Premiums
Life $ 101,182 $ 93,079 $ 282,368 $ 265,634
Annuity 27,960 41,305 69,413 137,434
Health 40,934 40,676 126,965 121,581
Property and casualty 391,388 382,784 1,152,749 1,125,704
Other policy revenues 79,344 76,784 238,736 226,178
Net investment income 254,256 246,620 656,888 796,696
Net realized investment gains 17,387 31,933 25,474 31,943
Other-than-temporary impairments 0 0 0 (6,968)
Change in investment credit loss (4,175) 0 (101,163) 0
Net gains on equity securities 152,147 8,589 118,397 282,026
Other income 9,683 10,730 31,152 32,642
Total premiums and other revenues 1,070,106 932,500 2,600,979 3,012,870
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits
Life 153,957 113,652 389,364 327,579
Annuity 46,424 59,699 126,209 191,248
Claims incurred
Health 27,933 28,567 89,544 81,042
Property and casualty 258,412 280,695 768,682 790,447
Interest credited to policyholders’ account balances 128,946 106,782 271,406 371,703
Commissions for acquiring and servicing policies 138,365 128,689 409,290 408,629
Other operating expenses 126,413 128,502 385,516 391,645
Change in deferred policy acquisition costs (8,387) 1,548 (14,762) (22,391)
Total benefits, losses and expenses 872,063 848,134 2,425,249 2,539,902
Income before federal income tax and other items 198,043 84,366 175,730 472,968
Less: Provision for federal income taxes
Current 20,789 4,433 31,578 32,444
Deferred 23,123 18,042 2,863 79,356
Total provision for federal income taxes 43,912 22,475 34,441 111,800
Income after federal income tax 154,131 61,891 141,289 361,168
Equity in earnings of unconsolidated affiliates 17,029 45,075 19,114 102,325
Other components of net periodic pension benefit (costs), net of tax 543 (1,023) 1,471 (2,808)
Net income 171,703 105,943 161,874 460,685
Less: Net income attributable to noncontrolling interest, net of tax 651 13,759 721 11,444
Net income attributable to American National $ 171,052 $ 92,184 $ 161,153 $ 449,241
Amounts available to American National common stockholders
Earnings per share
Basic $ 6.36 $ 3.43 $ 6.00 $ 16.71
Diluted 6.36 3.43 5.99 16.71
Weighted average common shares outstanding 26,877,200 26,881,700 26,879,178 26,883,025
Weighted average common shares outstanding and dilutive potential common shares 26,884,758 26,888,172 26,887,874 26,889,338


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
PREMIUMS AND OTHER REVENUES
Premiums
Life	$	100,784	$	91,670	$	201,563	$	181,186
Annuity	20,497		25,944		44,738		41,453
Health	34,485		42,945		72,713		86,031
Property and casualty	409,486		372,704		808,891		761,361
Other policy revenues	90,523		79,787		177,062		159,392
Net investment income	297,399		273,726		567,380		404,717
Net realized investment gains	10,602		3,939		29,841		8,087

Change in investment credit loss	25,079		(52,310)		19,593		(96,988)
Net gains (losses) on equity securities	170,804		298,825		266,744		(33,750)
Other income	11,035		10,336		20,787		21,469
Total premiums and other revenues	1,170,694		1,147,566		2,209,312		1,532,958
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits
Life	139,516		124,941		285,676		235,407
Annuity	42,723		44,983		87,440		79,785
Claims incurred
Health	26,190		26,726		50,441		61,611
Property and casualty	280,606		280,561		524,741		510,270
Interest credited to policyholders’ account balances	111,236		146,783		219,023		142,460
Commissions for acquiring and servicing policies	163,913		140,490		317,598		270,925
Other operating expenses	149,907		125,177		283,409		259,103
Change in deferred policy acquisition costs	(28,842)		(4,703)		(56,961)		(6,375)
Total benefits, losses and expenses	885,249		884,958		1,711,367		1,553,186
Income (loss) before federal income tax and other items	285,445		262,608		497,945		(20,228)
Less: Provision (benefit) for federal income taxes
Current	22,057		(13,714)		38,187		10,789
Deferred	36,272		65,911		63,313		(20,260)
Total provision (benefit) for federal income taxes	58,329		52,197		101,500		(9,471)
Income (loss) after federal income tax	227,116		210,411		396,445		(10,757)

Other components of net periodic pension benefit, net of tax	917		357		1,861		928
Net income (loss)	228,033		210,768		398,306		(9,829)
Less: Net income attributable to noncontrolling interest, net of tax	57		223		157		70
Net income (loss) attributable to American National	$	227,976	$	210,545	$	398,149	$	(9,899)
Amounts available to American National common stockholders
Earnings (losses) per share
Basic	$	8.48	$	7.83	$	14.81	$	(0.37)
Diluted	8.48		7.83		14.81		(0.37)

Weighted average common shares outstanding	26,877,200		26,878,684		26,877,200		26,880,183
Weighted average common shares outstanding and dilutive potential common shares	26,884,722		26,887,129		26,884,794		26,889,448

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

AMERICAN NATIONAL GROUP, INC.

~~(formerly AMERICAN NATIONAL INSURANCE COMPANY)~~

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Net income $ 171,703 $ 105,943 $ 161,874 $ 460,685
Other comprehensive income (loss), net of tax
  Change in net unrealized gains (losses) on securities 28,573 (2,569) 89,946 181,305
  Foreign currency transaction and translation adjustments 371 (293) (214) 297
  Defined benefit pension plan adjustment 1,851 1,454 5,456 4,365
Total other comprehensive income (loss), net of tax 30,795 (1,408) 95,188 185,967
Total comprehensive income 202,498 104,535 257,062 646,652
Less: Comprehensive income attributable to noncontrolling interest 651 13,759 721 11,444
Total comprehensive income attributable to American National $ 201,847 $ 90,776 $ 256,341 $ 635,208


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Net income (loss)	$	228,033	$	210,768	$	398,306	$	(9,829)
Other comprehensive income (loss), net of tax
Change in net unrealized gains (losses) on securities	49,395		173,776		(56,869)		61,373
Foreign currency transaction and translation adjustments	175		339		419		(585)
Defined benefit pension plan adjustment	2,322		1,849		6,131		3,605
Total other comprehensive income (loss), net of tax	51,892		175,964		(50,319)		64,393
Total comprehensive income	279,925		386,732		347,987		54,564
Less: Comprehensive income attributable to noncontrolling interest	57		223		157		70
Total comprehensive income attributable to American National	$	279,868	$	386,509	$	347,830	$	54,494

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

AMERICAN NATIONAL GROUP, INC.

~~(formerly AMERICAN NATIONAL INSURANCE COMPANY)~~

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

(In thousands, except per share data)

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Noncontrolling Interest Total Equity
Balance at December 31, 2019 $ 30,832 $ 21,011 $ 99,518 $ 5,946,857 $ (108,469) $ 6,014 $ 5,995,763
Amortization of restricted stock — 20 — — — — 20
Cumulative effect of accounting change — — — (34,702) — — (34,702)
Other comprehensive loss — — (111,571) — — — (111,571)
Net loss attributable to American National — — — (220,444) — — (220,444)
Cash dividends to common stockholders (declared per share of $0.82) — — — (22,047) — — (22,047)
Contributions — — — — — 546 546
Distributions — — — — — (323) (323)
Net loss attributable to noncontrolling interest — — — — — (153) (153)
Balance at March 31, 2020 $ 30,832 $ 21,031 $ (12,053) $ 5,669,664 $ (108,469) $ 6,084 $ 5,607,089
Amortization of restricted stock — 20 — — — — 20
Cumulative effect of accounting change — — — 1,199 — — 1,199
Other comprehensive income — — 175,964 — — — 175,964
Net income attributable to American National — — — 210,545 — — 210,545
Cash dividends to common stockholders (declared per share of $0.82) — — —�� (22,047) — — (22,047)
Contributions — — — — — 310 310
Distributions — — — — — (362) (362)
Net income attributable to noncontrolling interest — — — — — 223 223
Balance at June 30, 2020 $ 30,832 $ 21,051 $ 163,911 $ 5,859,361 $ (108,469) $ 6,255 $ 5,972,941
Reclassification of par value due to reorganization (26,618) 26,618 — — — — 0
Retirement of treasury shares (3,945) — — (104,524) 108,469 — 0
Amortization of restricted stock — 20 — — — — 20
Other comprehensive income — — 30,795 — — — 30,795
Net income attributable to American National — — — 171,052 — — 171,052
Cash dividends to common stockholders (declared per share of $0.82) — — — (22,046) — — (22,046)
Contributions — — — — — 0 0
Distributions — — — — — (599) (599)
Net income attributable to noncontrolling interest — — — — — 651 651
Balance at September 30, 2020 $ 269 $ 47,689 $ 194,706 $ 5,903,843 $ 0 $ 6,307 $ 6,152,814


	Common Stock*		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Noncontrolling Interest		Total Equity
Balance at January 1, 2021	$	269	$	47,683	$	222,170	$	6,188,148	$	7,297	$	6,465,567


Amortization of restricted stock	—		19		—		—		—		19

Other comprehensive loss	—		—		(102,211)		—		—		(102,211)
Net income attributable to American National	—		—		—		170,173		—		170,173
Cash dividends to common stockholders (declared per share of $0.82)	—		—		—		(22,048)		—		(22,048)
Contributions	—		—		—		—		259		259
Distributions	—		—		—		—		(380)		(380)
Net income attributable to noncontrolling interest	—		—		—		—		100		100
Balance at March 31, 2021	$	269	$	47,702	$	119,959	$	6,336,273	$	7,276	$	6,511,479


Amortization of restricted stock	—		20		—		—		—		20

Other comprehensive income	—		—		51,892		—		—		51,892
Net income attributable to American National	—		—		—		227,976		—		227,976
Cash dividends to common stockholders (declared per share of $0.82)	—		—		—		(22,047)		—		(22,047)
Contributions	—		—		—		—		—		0
Distributions	—		—		—		—		(339)		(339)
Net income attributable to noncontrolling interest	—		—		—		—		57		57
Balance at June 30, 2021	$	269	$	47,722	$	171,851	$	6,542,202	$	6,994	$	6,769,038

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

See accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

AMERICAN NATIONAL GROUP, INC.

~~(formerly AMERICAN NATIONAL INSURANCE COMPANY)~~

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

(In thousands, except per share data)

Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Treasury Stock Noncontrolling Interest Total Equity
Balance at December 31, 2018 $ 30,832 $ 20,694 $ (99,738) $ 5,413,952 $ (108,492) $ 14,267 $ 5,271,515
Reissuance of treasury shares — 237 — — 23 — 260
Amortization of restricted stock — 20 — — — — 20
Cumulative effect of accounting change — — (785) 785 — — 0
Other comprehensive income — — 86,774 — — — 86,774
Net income attributable to American National — — — 258,217 — — 258,217
Cash dividends to common stockholders (declared per share of $0.82) — — — (22,101) — — (22,101)
Contributions — — — — — 3 3
Distributions — — — — — (419) (419)
Net loss attributable to noncontrolling interest — — — — — (1,350) (1,350)
Balance at March 31, 2019 $ 30,832 $ 20,951 $ (13,749) $ 5,650,853 $ (108,469) $ 12,501 $ 5,592,919
Amortization of restricted stock — 20 — — — — 20
Other comprehensive income — — 100,601 — — — 100,601
Net income attributable to American National — — — 98,840 — — 98,840
Cash dividends to common stockholders (declared per share of $0.82) — — — (22,044) — — (22,044)
Contributions — — — — — 168 168
Distributions — — — — — (1,957) (1,957)
Net loss attributable to noncontrolling interest — — — — — (965) (965)
Balance at June 30, 2019 $ 30,832 $ 20,971 $ 86,852 $ 5,727,649 $ (108,469) $ 9,747 $ 5,767,582
Amortization of restricted stock — 20 — — — — 20
Other comprehensive loss — — (1,408) — — — (1,408)
Net income attributable to American National — — — 92,184 — — 92,184
Cash dividends to common stockholders (declared per share of $0.82) — — — (22,050) — — (22,050)
Contributions — — — — — 56 56
Distributions — — — — — (18,435) (18,435)
Net income attributable to noncontrolling interest — — — — — 13,759 13,759
Balance at September 30, 2019 $ 30,832 $ 20,991 $ 85,444 $ 5,797,783 $ (108,469) $ 5,127 $ 5,831,708


	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock		Noncontrolling Interest		Total Equity
Balance at January 1, 2020	$	30,832	$	21,011	$	99,518	$	5,946,857	$	(108,469)	$	6,014	$	5,995,763


Amortization of restricted stock	—		20		—		—		—		—		20
Cumulative effect of accounting change	—		—		—		(34,702)		—		—		(34,702)
Other comprehensive loss	—		—		(111,571)		—		—		—		(111,571)
Net loss attributable to American National	—		—		—		(220,444)		—		—		(220,444)
Cash dividends to common stockholders (declared per share of $0.82)	—		—		—		(22,047)		—		—		(22,047)
Contributions	—		—		—		—		—		546		546
Distributions	—		—		—		—		—		(323)		(323)
Net loss attributable to noncontrolling interest	—		—		—		—		—		(153)		(153)
Balance at March 31, 2020	$	30,832	$	21,031	$	(12,053)	$	5,669,664	$	(108,469)	$	6,084	$	5,607,089


Amortization of restricted stock	—		20		—		—		—		—		20
Cumulative effect of accounting change	—		—		—		1,199		—		—		1,199
Other comprehensive income	—		—		175,964		—		—		—		175,964
Net income attributable to American National	—		—		—		210,545		—		—		210,545
Cash dividends to common stockholders (declared per share of $0.82)	—		—		—		(22,047)		—		—		(22,047)
Contributions	—		—		—		—		—		310		310
Distributions	—		—		—		—		—		(362)		(362)
Net income attributable to noncontrolling interest	—		—		—		—		—		223		223
Balance at June 30, 2020	$	30,832	$	21,051	$	163,911	$	5,859,361	$	(108,469)	$	6,255	$	5,972,941

See accompanying notes to the unaudited condensed consolidated financial statements.

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AMERICAN NATIONAL GROUP, INC.

~~(formerly AMERICAN NATIONAL INSURANCE COMPANY)~~

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

Nine months ended September 30,
2020 2019
OPERATING ACTIVITIES
Net income $ 161,874 $ 460,685
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment gains (25,474) (31,943)
Other-than-temporary impairments 0 6,968
Change in investment credit loss 101,163 0
Accretion of premiums, discounts and loan origination fees 12,457 (3,862)
Net capitalized interest on policy loans and mortgage loans (22,596) (25,719)
Depreciation 39,389 40,760
Interest credited to policyholders’ account balances 271,406 371,703
Charges to policyholders’ account balances (238,736) (226,178)
Deferred federal income tax expense 2,863 79,356
Equity in earnings of unconsolidated affiliates (19,114) (102,325)
Distributions from unconsolidated affiliates 45,233 103,128
Changes in:
Policyholder liabilities 187,393 168,352
Deferred policy acquisition costs (14,762) (22,391)
Reinsurance recoverables (66,074) (7,318)
Premiums due and other receivables (30,611) (15,989)
Prepaid reinsurance premiums 4,095 2,483
Accrued investment income (10,799) (3,030)
Current tax payable (4,711) (5,335)
Liability for retirement benefits (8,404) (2,956)
Fair value of option securities 2,200 (95,885)
Fair value of equity securities (118,397) (282,026)
Other, net (17,352) (13,282)
Net cash provided by operating activities 251,043 395,196
INVESTING ACTIVITIES
Proceeds from sale/maturity/prepayment of:
Held-to-maturity securities 1,167,417 502,141
Available-for-sale securities 803,665 329,489
Equity securities 79,623 178,817
Investment real estate 45,645 64,459
Mortgage loans 313,009 626,449
Policy loans 40,502 33,096
Other invested assets 98,975 53,350
Disposals of property and equipment 16 69
Distributions from unconsolidated affiliates 39,190 78,014
Payment for the purchase/origination of:
Held-to-maturity securities (351,036) (1,121,049)
Available-for-sale securities (1,027,856) (458,635)
Equity securities (101,090) (49,016)
Investment real estate (12,232) (22,218)
Mortgage loans (466,472) (419,144)
Policy loans (17,196) (19,935)
Other invested assets (83,820) (46,221)
Additions to property and equipment (29,799) (16,094)
Contributions to unconsolidated affiliates (203,748) (194,846)
Change in short-term investments (375,472) (192,188)
Change in collateral held for derivatives (43,816) 75,827
Other, net (2,816) 3,857
Net cash used in investing activities (127,311) (593,778)


	Six months ended June 30,
	2021		2020
OPERATING ACTIVITIES
Net income (loss)	$	398,306	$	(9,829)
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment gains	(29,841)		(8,087)

Change in investment credit loss	(19,593)		96,988
Accretion of premiums, discounts and loan origination fees	7,540		3,851
Net capitalized interest on policy loans and mortgage loans	(17,129)		(14,125)
Depreciation	26,100		26,241
Fair value of option securities	(69,069)		40,938
Fair value of equity securities	(266,744)		33,750
Interest credited to policyholders’ account balances	219,023		142,460
Charges to policyholders’ account balances	(177,062)		(159,392)
Deferred federal income tax expense (benefit)	63,313		(20,260)
Income from equity method investments	(64,698)		(2,085)
Distributions from unconsolidated affiliates	54,345		31,413
Changes in:
Policyholder liabilities	158,941		114,562
Deferred policy acquisition costs	(56,961)		(6,375)
Reinsurance recoverables (payables)	11,209		(20,809)
Premiums due and other receivables	(43,020)		(51,632)
Prepaid reinsurance premiums	601		6,031
Accrued investment income	9,401		(10,412)
Current tax payable (receivable)	(20,830)		3,485
Liability for retirement benefits	1,334		(5,632)
Other, net	(46,966)		(74,733)
Net cash provided by operating activities	138,200		116,348
INVESTING ACTIVITIES
Proceeds from sale/maturity/prepayment of:
Held-to-maturity securities	724,514		689,573
Available-for-sale securities	574,150		501,014
Equity securities	62,761		31,750
Real estate and real estate partnerships	11,119		2,395
Mortgage loans	507,993		164,654
Policy loans	28,440		25,956

Other invested assets	111,276		55,008
Disposals of property and equipment	65		16
Distributions from real estate and real estate partnerships	81,191		4,435
Distributions from investment funds	58,403		22,476
Payment for the purchase/origination of:
Held-to-maturity securities	(841,925)		(336,138)
Available-for-sale securities	(1,073,688)		(840,481)
Equity securities	(49,492)		(78,634)
Real estate and real estate partnerships	(5,289)		(7,040)
Mortgage loans	(266,055)		(326,726)
Policy loans	(9,289)		(12,813)
Other invested assets	(69,180)		(46,373)
Additions to property and equipment	(18,858)		(16,151)
Contributions to real estate and real estate partnerships	(58,482)		(43,415)
Contributions to investment funds	(166,918)		(100,423)
Change in short-term investments	110,798		(75,766)
Change in collateral held for derivatives	18,817		(70,424)
Other, net	(2,688)		(4,322)
Net cash used in investing activities	(272,337)		(461,429)

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AMERICAN NATIONAL GROUP, INC.

~~(formerly AMERICAN NATIONAL INSURANCE COMPANY)~~

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

(In thousands)

Nine months ended September 30,
2020 2019
FINANCING ACTIVITIES
Policyholders’ account deposits 905,424 1,559,231
Policyholders’ account withdrawals (1,026,953) (1,126,580)
Proceeds from Federal Home Loan Bank borrowings 500,000 0
Change in notes payable (3,209) 21,080
Dividends to stockholders (66,140) (66,195)
Payments to noncontrolling interest (772) (20,811)
Net cash provided by financing activities 308,350 366,725
NET INCREASE IN CASH AND CASH EQUIVALENTS 432,082 168,143
Cash and cash equivalents at beginning of the period 452,001 268,164
Cash and cash equivalents at end of the period $ 884,083 $ 436,307
Supplemental cash flow information:
Interest paid $ 512 $ 0
Income taxes paid, net 30,800 58,940


	Six months ended June 30,
	2021		2020
FINANCING ACTIVITIES
Policyholders’ account deposits	$	1,158,341	$	562,041
Policyholders’ account withdrawals	(639,983)		(655,809)
Proceeds from Federal Home Loan Bank borrowings	0		500,000
Repayment of Federal Home Loan Bank borrowings	(250,000)		0
Change in notes payable	(2,205)		(2,126)

Dividends to stockholders	(44,095)		(44,094)
Payments to noncontrolling interest	(719)		(685)
Net cash provided by financing activities	221,339		359,327
NET INCREASE IN CASH AND CASH EQUIVALENTS	87,202		14,246
Cash and cash equivalents at beginning of the period	339,947		452,001
Cash and cash equivalents at end of the period	$	427,149	$	466,247

Supplemental cash flow information:
Interest paid	$	351	$	132
Income taxes paid, net	55,244		3,800

See accompanying notes to the unaudited condensed consolidated financial statements.

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NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Nature of Operations

On July 1, 2020, American National Insurance Company, a Texas insurance company (“ANICO”), completed its previously announced holding company reorganization. As a result of such reorganization, ANICO became a wholly owned subsidiary of American National Group, Inc., a Delaware corporation (“ANAT”), and ANAT replaced ANICO as the publicly held company. Consequently, all filings with the Securities and Exchange Commission (“SEC”) from July 2, 2020 forward will be filed by ANAT under CIK No. 0001801075. For purposes of filing this Form 10-Q for the three and nine months ended September 30, 2020, the accompanying unaudited condensed consolidated financial statements and notes thereto have been titled “American National Group, Inc.” to reflect the current name of the public registrant, with the parenthetical notation “formerly American National Insurance Company” to reflect the reporting entity for the periods covered therein. Upon the effective date of the holding company reorganization, ANAT retired 3,945,249 shares of common stock that were held in treasury at ANICO prior to the reorganization. The amount of retired treasury stock in excess of par value was charged to retained earnings. Before and after the reorganization, the issuer had 50,000,000 authorized shares of common stock and 26,887,200 common shares outstanding. As a result of the reorganization, each share of ANICO common stock, par value $1.00 per share was automatically converted into one duly issued, fully paid and non-assessable share of ANAT common stock, par value $0.01 per share. As a result of the reorganization, the directors and officers of ANICO became directors and officers of ANAT. There is no change in the ultimate ownership of the organization and business operations will continue from our current office locations and companies. ANAT, through its consolidated subsidiaries (collectively “American National” or the ~~"Company”~~“Company”) offers a broad portfolio of insurance products, including individual and group life insurance, annuities, health insurance, and property and casualty insurance. Business is conducted in all 50 states, the District of Columbia and Puerto Rico.

Note 2 – Summary of Significant Accounting Policies and Practices

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

~~The interim~~During the first quarter of 2021, we reclassified the Company's earnings from equity method investments in the condensed consolidated ~~financial~~ statements of operations from "Equity in earnings (losses) of unconsolidated affiliates" to "Net investment income." For the three and ~~notes herein are unaudited~~six months ended June 30, 2020, $(13.6) million and ~~reflect all adjustments which management considers necessary for~~$2.1 million were reclassified, with no impact to net income. We also reclassified the ~~fair presentation of~~related asset balances in the ~~interim~~ condensed consolidated statements of financial position from "Investments in unconsolidated affiliates" to "Real estate and real estate partnerships" and "Investment funds," with no impact to total assets. Management believes these reclassifications result in increased transparency to the users of the financial statements as it relates to the Company's invested assets and the performance of these investments that are tied to the primary operations ~~comprehensive income, changes in equity, and cash flows.~~of the Company.

The interim condensed consolidated financial statements and notes should be read in conjunction with the annual consolidated financial statements and notes thereto included in American National’s Annual Report on Form 10-K as of and for the year ended December 31, ~~2019.~~2020. The condensed consolidated results of operations for the interim periods should not be considered indicative of results to be expected for the full year.

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

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Note 3 – Recently Issued Accounting Pronouncements

Adoption of New Accounting Standards


Standard	Description	Effective Date and Method of Adoption	Impact on Financial Statements
~~ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~	The new standard significantly changes how entities measure credit losses for most financial assets, reinsurance recoverables and certain other instruments that are not measured at fair value through net income. The guidance replaces the current “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. The measurement of credit losses for available-for-sale debt securities measured at fair value is not affected except that credit losses recognized are limited to the amount by which the fair value is below amortized cost, and the credit loss is recognized through a valuation allowance. Previously, the credit loss adjustments for available-for-sale debt securities were recognized through a direct write down of the investment under the other-than-temporary impairment model. The standard also requires additional disclosures.	~~The Company adopted this standard on its required effective date of January 1, 2020 using a modified retrospective transition.~~	Adoption of this guidance resulted in an allowance for credit losses primarily on the commercial mortgage loans and related off-balance sheet unfunded loan commitments, held-to-maturity bonds and reinsurance recoverables. The Company recorded a cumulative effect adjustment to retained earnings of $33.5 million, net of tax, which reduced stockholders' equity. The impact is attributable to a $42.4 million allowance for credit losses on the aforementioned financial assets. See table below for additional detail.

~~As of January 1, 2020, changes related to the adoption of~~ ~~ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASC 326"), had the following effect on assets and liabilities:~~

Pre-ASC 326 Adoption Adjustment to Adopt ASC 326 Balance as of January 1, 2020
Assets:
Allowance for credit losses
Fixed maturity, bonds held-to-maturity, at amortized cost $ 0 $ (21,664) $ (21,664)
Mortgage loans on real estate (19,160) (11,224) (30,384)
Reinsurance recoverables (8,220) (7,920) (16,140)
Liabilities:
Allowance for credit losses
Other policyholder funds 0 1,526 1,526
Other liabilities 0 (3,126) (3,126)
Total $ (27,380) $ (42,408) $ (69,788)

~~Table of Contents~~

~~Note 3 – Recently Issued Accounting Pronouncements – (Continued)~~

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


~~Standard~~	~~Description~~	~~Effective Date and Method of Adoption~~	~~Impact on Financial Statements~~
~~ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts~~	The guidance will improve the timeliness of recognizing changes in the liability for future policy benefits for traditional and limited payment long-duration contracts and will modify the rate used to discount future cash flows. The guidance will also simplify the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts (market risk benefits), simplify the amortization of deferred acquisition costs and add significant qualitative and quantitative disclosures.	This standard will become effective for the Company for all annual and interim periods beginning January 1, 2022. The FASB met on September 30, 2020 and approved delaying the effective date of ASU 2018-12 until January 1, 2023. This proposal is pending final adoption. The guidance allows for one of two adoption methods, a modified retrospective transition or a full retrospective transition except for the changes to accounting for market risk benefits which will require a retrospective transition.	We are currently evaluating the impact of the standard to the Company. Based on the nature of the standard, we expect the impact to be material to our Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements.
~~ASU 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans~~	The new standard modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The guidance removes certain defined benefit pension or other postretirement plan disclosures that are no longer cost beneficial, clarifies the specific requirements for each disclosure and adds disclosure requirements.	~~This standard will become effective for the annual period ending December 31, 2020 using a retrospective transition.~~	~~The Company does not expect the adoption of this standard to have a material impact on our Condensed Consolidated Financial Statements or Notes to the Consolidated Financial Statements.~~
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	The amendments simplify the accounting for income taxes by removing certain exceptions in the existing guidance including those related to intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items. The amendments require that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax as well as other minor changes.	This standard ~~will become~~became effective for the Company for all annual and interim periods beginning January 1, 2021. The new guidance specifies which amendments should be applied prospectively, retrospective to all periods presented or on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption.	The ~~Company does not expect the~~ adoption of this standard todid not have a material impact ~~on our~~to the Company's Condensed Consolidated Financial Statements or Notes to the Condensed Consolidated Financial Statements.

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


Standard	Description	Effective Date and Method of Adoption	Impact on Financial Statements
ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts	The guidance will improve the timeliness of recognizing changes in the liability for future policy benefits for traditional and limited payment long-duration contracts and will modify the rate used to discount future cash flows. The guidance will also simplify the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts (market risk benefits), simplify the amortization of deferred acquisition costs and add significant qualitative and quantitative disclosures.	This standard will become effective for the Company for all annual and interim periods beginning January 1, 2023, which was extended from the previous effective date of January 1, 2022 through the issuance of ASU 2020-11. The guidance allows for one of two adoption methods, a modified retrospective transition or a full retrospective transition except for the changes to accounting for market risk benefits which will require a retrospective transition.	We are currently evaluating the impact of the amendment to the Company. Based on the nature of the standard, we expect the impact to be material to our Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements.


ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting	The amendments in this ~~update~~guidance provide optional expedients and exceptions for applying ~~Generally Accepted Accounting Principles ("GAAP")~~GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The guidance only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.	The amendments in this ~~update~~guidance are effective for all entities as of March 12, 2020 and will sunset through December 31, 2022, at which time the application of exceptions and optional expedients will no longer be permitted.	~~We are evaluating our current exposure~~The inventory of LIBOR exposures has been completed and is primarily limited to ~~LIBOR~~floating rate bonds, alternative investments, and borrowings within joint venture investments. Some of the ~~impact this standard would have on the Condensed Consolidated Financial Statements. We expect~~contracts included in these categories will mature prior to ~~have our evaluation of exposure completed by~~ December 31, ~~2020.~~2021, the start of LIBOR rates cessations. The transition from LIBOR is expected to result in an immaterial impact to the Company.

1211

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Note 4 – Investment in Securities

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

September 30, 2020
Cost or
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
(Losses) Allowance for Credit Losses Fair Value
Fixed maturity, bonds held-to-maturity
U.S. states and political subdivisions $ 106,908 $ 4,278 $ (3) $ 0 $ 111,183
Foreign governments 3,865 429 0 0 4,294
Corporate debt securities 7,315,879 567,282 (32,659) (18,510) 7,831,992
Residential mortgage-backed securities 146,173 5,589 (1,434) (35) 150,293
Collateralized debt securities 151,013 4,704 (1,922) (2,946) 150,849
Total bonds held-to-maturity 7,723,838 582,282 (36,018) (21,491) 8,248,611
Fixed maturity, bonds available-for-sale
U.S. treasury and government 32,017 543 (1) 0 32,559
U.S. states and political subdivisions 1,028,802 69,994 (37) 0 1,098,759
Foreign governments 14,992 1,602 0 0 16,594
Corporate debt securities 5,664,288 410,495 (35,150) (7,437) 6,032,196
Residential mortgage-backed securities 26,292 1,256 (70) (194) 27,284
Collateralized debt securities 27,975 892 (64) (7) 28,796
Total bonds available-for-sale 6,794,366 484,782 (35,322) (7,638) 7,236,188
Total investments in fixed maturity $ 14,518,204 $ 1,067,064 $ (71,340) $ (29,129) $ 15,484,799


	June 30, 2021
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Fixed maturity, bonds held-to-maturity
U.S. treasury and government	$	12,356	$	1	$	(140)	$	0	$	12,217
U.S. states and political subdivisions	111,374		2,879		(1,362)		0		112,891
Foreign governments	14,436		263		(149)		0		14,550
Corporate debt securities	7,183,151		528,273		(10,968)		(14,952)		7,685,504
Residential mortgage-backed securities	62,494		4,049		(436)		(526)		65,581
Collateralized debt securities	107,088		2,181		(239)		(1,724)		107,306
Total bonds held-to-maturity	7,490,899		537,646		(13,294)		(17,202)		7,998,049
Fixed maturity, bonds available-for-sale
U.S. treasury and government	23,899		248		(18)		0		24,129
U.S. states and political subdivisions	1,033,691		61,658		(1,398)		(8)		1,093,943
Foreign governments	5,000		1,070		0		0		6,070
Corporate debt securities	6,397,487		391,587		(10,505)		(4,489)		6,774,080
Residential mortgage-backed securities	32,366		705		(57)		(205)		32,809
Collateralized debt securities	137,582		913		(275)		(456)		137,764
Total bonds available-for-sale	7,630,025		456,181		(12,253)		(5,158)		8,068,795
Total investments in fixed maturity	$	15,120,924	$	993,827	$	(25,547)	$	(22,360)	$	16,066,844


		December 31, 2019											December 31, 2020
		Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)		Allowance for Credit Losses		Fair Value			Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Fixed maturity, bonds held-to-maturity	Fixed maturity, bonds held-to-maturity											Fixed maturity, bonds held-to-maturity
U.S. treasury and government												U.S. treasury and government	$	7,733	$	11	$	0	$	0	$	7,744
U.S. states and political subdivisions	U.S. states and political subdivisions	$	165,109	$	5,005	$	0	$	—	$	170,114	U.S. states and political subdivisions	109,445		4,101		(11)		0		113,535
Foreign governments	Foreign governments	3,907		442		0		—		4,349		Foreign governments	3,851		374		0		0		4,225
Corporate debt securities	Corporate debt securities	8,099,098		332,410		(6,539)		—		8,424,969		Corporate debt securities	6,992,095		623,233		(9,117)		(7,475)		7,598,736
Residential mortgage-backed securities	Residential mortgage-backed securities	237,516		6,460		(1,148)		—		242,828		Residential mortgage-backed securities	114,579		5,065		(1,464)		(452)		117,728
Collateralized debt securities	Collateralized debt securities	125,631		1,146		(347)		—		126,430		Collateralized debt securities	139,709		6,864		(845)		(4,515)		141,213

Total bonds held-to-maturity	Total bonds held-to-maturity	8,631,261		345,463		(8,034)		—		8,968,690		Total bonds held-to-maturity	7,367,412		639,648		(11,437)		(12,442)		7,983,181
Fixed maturity, bonds available-for-sale	Fixed maturity, bonds available-for-sale											Fixed maturity, bonds available-for-sale
U.S. treasury and government	U.S. treasury and government	29,505		441		(5)		—		29,941		U.S. treasury and government	28,766		418		(1)		0		29,183
U.S. states and political subdivisions	U.S. states and political subdivisions	1,030,309		47,865		(9)		—		1,078,165		U.S. states and political subdivisions	1,066,627		73,976		(145)		0		1,140,458
Foreign governments	Foreign governments	5,000		1,287		0		—		6,287		Foreign governments	14,995		1,393		0		0		16,388
Corporate debt securities	Corporate debt securities	5,338,007		251,408		(12,795)		—		5,576,620		Corporate debt securities	5,887,756		471,205		(17,207)		(7,275)		6,334,479
Residential mortgage-backed securities	Residential mortgage-backed securities	23,405		739		(201)		—		23,943		Residential mortgage-backed securities	20,544		964		(29)		(188)		21,291
Collateralized debt securities	Collateralized debt securities	9,444		686		(1)		—		10,129		Collateralized debt securities	54,454		1,040		(94)		(19)		55,381

Total bonds available-for-sale	Total bonds available-for-sale	6,435,670		302,426		(13,011)		—		6,725,085		Total bonds available-for-sale	7,073,142		548,996		(17,476)		(7,482)		7,597,180
Total investments in fixed maturity	Total investments in fixed maturity	$	15,066,931	$	647,889	$	(21,045)	$	—	$	15,693,775	Total investments in fixed maturity	$	14,440,554	$	1,188,644	$	(28,913)	$	(19,924)	$	15,580,361

1312

Table of Contents

Note 4 – Investment in Securities – (Continued)

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

September 30, 2020
Bonds Held-to-Maturity Bonds Available-for-Sale
Amortized Cost Fair Value Amortized Cost Fair Value
Due in one year or less $ 778,789 $ 789,231 $ 368,975 $ 374,081
Due after one year through five years 2,947,159 3,133,068 3,230,219 3,410,019
Due after five years through ten years 3,096,745 3,379,567 2,307,855 2,504,782
Due after ten years 901,145 946,745 887,317 947,306
Total $ 7,723,838 $ 8,248,611 $ 6,794,366 $ 7,236,188


	June 30, 2021
	Bonds Held-to-Maturity				Bonds Available-for-Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	539,074	$	547,151	$	372,425	$	375,685
Due after one year through five years	2,822,945		3,009,237		3,157,541		3,373,610
Due after five years through ten years	3,140,238		3,395,413		2,619,993		2,785,508
Due after ten years	988,642		1,046,248		1,480,066		1,533,992
Total	$	7,490,899	$	7,998,049	$	7,630,025	$	8,068,795

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

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

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Proceeds from sales of fixed maturity, bonds available-for-sale $ 32,859 $ 14,921 $ 164,372 $ 15,205
Gross realized gains 212 56 624 56
Gross realized losses (73) 0 (4,145) (23)


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Proceeds from sales of fixed maturity, bonds available-for-sale	$	13,523	$	85,000	$	25,173	$	131,513
Gross realized gains	59		0		59		412
Gross realized losses	0		0		0		(4,072)

Gains and losses are determined using specific identification of the securities sold. ~~During~~There was no transfer of bonds from held-to-maturity to available-for-sale during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019,~~2020.

In accordance with various regulations, American National has bonds ~~below investment grade~~on deposit with regulating authorities with a carrying value of ~~$88,711,000~~$47.3 million and ~~$157,939,000 respectively, were transferred from held-to-maturity to available-for-sale after a deterioration~~$47.7 million at June 30, 2021 and December 31, 2020, respectively. In addition, American National has pledged bonds in ~~the issuers’ creditworthiness.~~connection with agreements and transactions, such as financing and reinsurance agreements. The carrying value of bonds pledged was $89.0 million and $111.0 million at June 30, 2021 and December 31, 2020, respectively.

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

Nine months ended September 30,
2020 2019
Bonds available-for-sale: change in unrealized gains $ 160,045 $ 326,945
Adjustments for
Deferred policy acquisition costs (37,329) (82,587)
Participating policyholders’ interest (7,962) (14,989)
Deferred federal income tax expense (24,808) (48,064)
Change in net unrealized gains on debt securities, net of tax $ 89,946 $ 181,305


	Six months ended June 30,
	2021		2020
Bonds available-for-sale: change in unrealized gains (losses)	$	(87,592)	$	106,055
Adjustments for
Deferred policy acquisition costs	12,451		(21,240)
Participating policyholders’ interest	3,484		(5,052)
Deferred federal income tax benefit (expense)	14,788		(18,390)
Change in net unrealized gains (losses) on debt securities, net of tax	$	(56,869)	$	61,373

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

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Unrealized gains on equity securities $ 154,104 $ 3,605 $ 119,296 $ 258,209
Net gains (losses) on equity securities sold (1,957) 4,984 (899) 23,817
Net gains on equity securities $ 152,147 $ 8,589 $ 118,397 $ 282,026


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Unrealized gains (losses) on equity securities	$	172,373	$	298,793	$	269,139	$	(34,808)
Net gains (losses) on equity securities sold	(1,569)		32		(2,395)		1,058
Net gains (losses) on equity securities	$	170,804	$	298,825	$	266,744	$	(33,750)

1413

Table of Contents

Note 4 – Investment in Securities – (Continued)

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

September 30, 2020
Less than 12 months 12 months or more Total
Number of issues Gross
Unrealized
(Losses) Fair
Value Number of issues Gross
Unrealized
(Losses) Fair
Value Number of issues Gross
Unrealized
(Losses) Fair
Value
Fixed maturity, bonds available-for-sale
U.S. treasury and government 1 $ (1) $ 2,868 0 $ 0 $ 0 1 $ (1) $ 2,868
U.S. states and political subdivisions 2 (37) 5,484 0 0 0 2 (37) 5,484
Corporate debt securities 86 (22,857) 533,271 11 (12,293) 49,002 97 (35,150) 582,273
Residential mortgage-backed securities 1 (70) 7,000 3 0 613 4 (70) 7,613
Collateralized debt securities 1 (62) 8,008 1 (2) 157 2 (64) 8,165
Total 91 $ (23,027) $ 556,631 15 $ (12,295) $ 49,772 106 $ (35,322) $ 606,403


	June 30, 2021
	Less than 12 months					12 months or more					Total
	Number of Issues	Gross Unrealized Losses		Fair Value		Number of Issues	Gross Unrealized Losses		Fair Value		Number of Issues	Gross Unrealized Losses		Fair Value






Fixed maturity, bonds available-for-sale
U.S. treasury and government	5	$	(18)	$	11,713	0	$	0	$	0	5	$	(18)	$	11,713
U.S. states and political subdivisions	8	(1,398)		43,726		0	0		0		8	(1,398)		43,726
Corporate debt securities	115	(10,280)		637,686		9	(225)		37,955		124	(10,505)		675,641
Residential mortgage-backed securities	1	(55)		13,335		3	(2)		552		4	(57)		13,887
Collateralized debt securities	14	(275)		108,502		0	0		0		14	(275)		108,502

Total	143	$	(12,026)	$	814,962	12	$	(227)	$	38,507	155	$	(12,253)	$	853,469


	December 31, 2020
	Less than 12 months					12 months or more					Total
	Number of Issues	Gross Unrealized Losses		Fair Value		Number of Issues	Gross Unrealized Losses		Fair Value		Number of Issues	Gross Unrealized Losses		Fair Value





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

December 31, 2019
Less than 12 months 12 months or more Total
Number of issues Gross
Unrealized
(Losses) Fair
Value Number of issues Gross
Unrealized
(Losses) Fair
Value Number of issues Gross
Unrealized
(Losses) Fair
Value
Fixed maturity, bonds available-for-sale
U.S. treasury and government 0 $ 0 $ 0 5 $ (5) $ 8,299 5 $ (5) $ 8,299
U.S. states and political subdivisions 2 (9) 1,733 0 0 0 2 (9) 1,733
Corporate debt securities 22 (5,257) 94,942 25 (7,538) 132,626 47 (12,795) 227,568
Residential mortgage-backed securities 1 (9) 10,169 3 (192) 722 4 (201) 10,891
Collateralized debt securities 1 (1) 159 0 0 0 1 (1) 159
Total 26 $ (5,276) $ 107,003 33 $ (7,735) $ 141,647 59 $ (13,011) $ 248,650

Unrealized losses on bonds available-for-sale where an allowance for credit loss was not recorded are due to noncredit related factors caused by market liquidity events related to COVID-19 and the related economic downturn. A number of assumptions and estimates are inherent in evaluating whether an allowance for credit loss is necessary, which include the financial condition, near term and long-term prospects of the issue or issuer, including relevant industry conditions and trends and implications of rating agency actions and offering prices. Based on this evaluation, unrealized losses on bonds available-for-sale where an allowance for credit loss was not recorded were concentrated in the Company's fixed maturity securities within the electronic equipment sector.

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

September 30, 2020 December 31, 2019
Consumer goods 20.7 % 18.9 %
Energy and utilities 5.1 8.0
Finance 20.4 18.0
Healthcare 15.7 13.0
Industrials 6.5 7.6
Information technology 27.2 25.0
Other 4.4 9.5
Total 100.0 % 100.0 %


	June 30, 2021		December 31, 2020
Consumer goods	17.6	%	19.3	%
Energy and utilities	5.7		5.2
Finance	23.2		21.6
Healthcare	14.1		15.0
Industrials	7.6		7.4
Information technology	27.1		27.1
Other	4.7		4.4
Total	100.0	%	100.0	%

1514

Table of Contents

Note 4 – Investment in Securities – (Continued)

Allowance for Credit Losses

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

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

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

No accrued interest receivables were written off as of ~~September~~June 30, ~~2020.~~2021.

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

Foreign Governments Corporate Debt Securities Collateralized Debt Securities Residential Mortgage Backed Securities Total
Allowance for credit losses
Cumulative adjustment at January 1, 2020 $ 4 $ (18,563) $ (2,968) $ (137) $ (21,664)
Purchases 0 (622) (323) 0 (945)
Disposition 0 6,901 106 134 7,141
Provision 1 (6,117) 199 0 (5,917)
Balance at March 31, 2020 5 (18,401) (2,986) (3) (21,385)
Purchases 0 (116) 0 0 (116)
Disposition 0 200 0 0 200
Provision (5) (1,565) 454 3 (1,113)
Balance at June 30, 2020 0 (19,882) (2,532) 0 (22,414)
Purchases 0 (4) (6) 0 (10)
Disposition 0 1,607 0 0 1,607
Provision 0 (231) (408) (35) (674)
Balance at September 30, 2020 $ 0 $ (18,510) $ (2,946) $ (35) $ (21,491)


	Corporate Debt Securities		Collateralized Debt Securities		Residential Mortgage Backed Securities		Total
Allowance for credit losses
Balance at January 1, 2021	$	(7,475)	$	(4,515)	$	(452)	$	(12,442)
Purchases	(228)		0		0		(228)
Disposition	125		0		0		125
Provision	(4,215)		(2,004)		(90)		(6,309)
Balance at March 31, 2021	$	(11,793)	$	(6,519)	$	(542)	$	(18,854)



Purchases	(974)		0		0		(974)
Disposition	104		551		0		655
Provision	(2,289)		4,244		16		1,971

Balance at June 30, 2021	$	(14,952)	$	(1,724)	$	(526)	$	(17,202)


	Foreign Governments		Corporate Debt Securities		Collateralized Debt Securities		Residential Mortgage Backed Securities		Total
Allowance for credit losses
Balance at January 1, 2020	$	4	$	(18,563)	$	(2,968)	$	(137)	$	(21,664)
Purchases	0		(622)		(323)		0		(945)
Disposition	0		6,901		106		134		7,141
Provision	1		(6,117)		199		0		(5,917)

Balance at March 31, 2020	$	5	$	(18,401)	$	(2,986)	$	(3)	$	(21,385)



Purchases	0		(116)		0		0		(116)
Disposition	0		200		0		0		200
Provision	(5)		(1,565)		454		3		(1,113)

Balance at June 30, 2020	$	0	$	(19,882)	$	(2,532)	$	0	$	(22,414)

Table of Contents

Note 4 – Investment in Securities – (Continued)

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


	U.S. Treasury and Government		U.S. State and Political Subdivisions		Corporate Debt Securities		Collateralized Debt Securities		Residential Mortgage Backed Securities		Total
Allowance for credit losses
Balance at January 1, 2021	$	0	$	0	$	(7,275)	$	(19)	$	(188)	$	(7,482)


Allowance on securities that had an allowance recorded in a previous period	0		—		(733)		(488)		(10)		(1,231)
Allowance on securities where credit losses were not previously recorded	(3)		—		0		0		0		(3)

Balance at March 31, 2021	$	(3)	$	0	$	(8,008)	$	(507)	$	(198)	$	(8,716)

Increase in allowance related to purchases	0		—		(981)		(192)		0		(1,173)
Reduction in allowance related to disposition	0		—		4,039		182		0		4,221

Allowance on securities that had an allowance recorded in a previous period	3		—		1,181		87		(5)		1,266



Allowance on securities where credit losses were not previously recorded	0		(8)		(720)		(26)		(2)		(756)


Balance at June 30, 2021	$	0	$	(8)	$	(4,489)	$	(456)	$	(205)	$	(5,158)


	Corporate Debt Securities		Collateralized Debt Securities		Residential Mortgage Backed Securities		Total
Allowance for credit losses
Balance at January 1, 2020	$	0	$	0	$	0	$	0
Allowance on securities that had an allowance recorded in a previous period	(12,499)		(236)		(130)		(12,865)
Balance at March 31, 2020	$	(12,499)	$	(236)	$	(130)	$	(12,865)

Increase in allowance related to purchases	(73)		0		0		(73)
Reduction in allowance related to disposition	7		0		3		10

Allowance on securities that had an allowance recorded in a previous period	10,017		155		(83)		10,089



Allowance on securities where credit losses were not previously recorded	(1,276)		0		0		(1,276)


Balance at June 30, 2020	$	(3,824)	$	(81)	$	(210)	$	(4,115)

Table of Contents

Note 4 – Investment in Securities – (Continued)

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

Corporate Debt Securities Collateralized Debt Securities Residential Mortgage Backed Securities Total
Allowance for credit losses
Beginning balance at January 1, 2020 $ 0 $ 0 $ 0 $ 0
Allowance on securities that had an allowance recorded in a previous period (12,499) (236) (130) (12,865)
Balance at March 31, 2020 (12,499) (236) (130) (12,865)
Increase in allowance related to purchases (73) 0 0 (73)
Reduction in allowance related to disposition 7 0 3 10
Allowance on securities that had an allowance recorded in a previous period 10,017 155 (83) 10,089
Allowance on securities where credit losses were not previously recorded (1,276) 0 0 (1,276)
Balance at June 30, 2020 (3,824) (81) (210) (4,115)
Increase in allowance related to purchases (28) 0 0 (28)
Reduction in allowance related to disposition 33 0 0 33
Allowance on securities that had an allowance recorded in a previous period 1,153 74 16 1,243
Allowance on securities where credit losses were not previously recorded (4,771) 0 0 (4,771)
Balance at September 30, 2020 $ (7,437) $ (7) $ (194) $ (7,638)

The change in allowance for the nine months ended September 30, 2020 was impacted by economic changes due to the COVID-19 pandemic on the bond market. During the third quarter, energy, retail and real estate sectors were impacted and caused the increase in the allowance.

Credit Quality Indicators

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

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

September 30, 2020
Amortized cost of bonds held-to-maturity by credit rating
Fixed maturity, bonds held-to-maturity AAA AA A BBB BB and below Total
U.S. state and political subdivisions $ 29,996 $ 64,232 $ 7,893 $ 0 $ 4,787 $ 106,908
Foreign governments 0 2,831 1,034 0 0 3,865
Corporate debt securities 1,951 276,131 3,074,717 3,859,811 103,269 7,315,879
Residential mortgage backed securities 61,850 0 0 0 84,323 146,173
Collateralized debt securities 0 0 118,921 5,120 26,972 151,013
Total $ 93,797 $ 343,194 $ 3,202,565 $ 3,864,931 $ 219,351 $ 7,723,838


	June 30, 2021
	Amortized cost of bonds held-to-maturity by credit rating
Fixed maturity, bonds held-to-maturity	AAA		AA		A		BBB		BB and below		Total
U.S. treasury and government	$	0	$	12,356	$	0	$	0	$	0	$	12,356
U.S. state and political subdivisions	16,846		55,316		9,772		22,932		6,508		111,374
Foreign governments	0		13,413		1,023		0		0		14,436
Corporate debt securities	31,342		406,543		3,297,317		3,349,258		98,691		7,183,151
Collateralized debt securities	0		0		68,675		33,445		4,968		107,088
Residential mortgage backed securities	0		61,083		0		0		1,411		62,494
Total	$	48,188	$	548,711	$	3,376,787	$	3,405,635	$	111,578	$	7,490,899


		December 31, 2019													December 31, 2020
		Amortized cost of bonds held-to-maturity by credit rating													Amortized cost of bonds held-to-maturity by credit rating
Fixed maturity, bonds held-to-maturity	Fixed maturity, bonds held-to-maturity	AAA		AA		A		BBB		BB and below		Total		Fixed maturity, bonds held-to-maturity	AAA		AA		A		BBB		BB and below		Total
U.S. treasury and government														U.S. treasury and government	$	0	$	7,733	$	0	$	0	$	0	$	7,733
U.S. state and political subdivisions	U.S. state and political subdivisions	$	58,539	$	76,542	$	24,260	$	500	$	5,268	$	165,109	U.S. state and political subdivisions	25,831		43,964		34,893		0		4,757		109,445
Foreign governments	Foreign governments	0		2,861		1,046		0		0		3,907		Foreign governments	0		2,820		1,031		0		0		3,851
Corporate debt securities	Corporate debt securities	2,729		407,070		3,637,144		4,031,931		20,224		8,099,098		Corporate debt securities	1,956		262,830		2,976,571		3,647,496		103,242		6,992,095
Collateralized debt securities														Collateralized debt securities	0		0		107,795		31,914		0		139,709
Residential mortgage backed securities	Residential mortgage backed securities	87,003		0		51,771		0		98,742		237,516		Residential mortgage backed securities	0		112,995		0		0		1,584		114,579
Collateralized debt securities		0		0		109,233		16,398		0		125,631

Total	Total	$	148,271	$	486,473	$	3,823,454	$	4,048,829	$	124,234	$	8,631,261	Total	$	27,787	$	430,342	$	3,120,290	$	3,679,410	$	109,583	$	7,367,412

~~At September 30, 2020, a bond classified as held-to-maturity with an amortized cost of $38,000 was past due on making an interest payment for over 90 days and is in nonaccrual status.~~

Table of Contents

Note 5 – Mortgage Loans

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


											June 30, 2021				December 31, 2020
		September 30, 2020				December 31, 2019					Amount		Percentage		Amount		Percentage
East North Central	East North Central	$	724,667	14.0	%	$	667,150	13.1	%	East North Central	$	726,988	14.4	%	$	783,614	14.9	%
East South Central	East South Central	147,385		2.8		144,887		2.8		East South Central	133,339		2.6		146,052		2.8
Mountain	Mountain	1,245,404		24.1		1,200,434		23.6		Mountain	1,266,147		25.2		1,284,555		24.5
Pacific	Pacific	830,697		16.1		852,574		16.7		Pacific	802,704		16.0		806,426		15.4
South Atlantic	South Atlantic	626,014		12.1		621,875		12.2		South Atlantic	552,216		11.0		619,405		11.8
West South Central	West South Central	1,284,656		24.8		1,272,522		25.0		West South Central	1,214,926		24.2		1,313,848		25.1
Other	Other	317,651		6.1		337,575		6.6		Other	332,613		6.6		288,631		5.5
Total	Total	$	5,176,474	100.0	%	$	5,097,017	100.0	%	Total	$	5,028,933	100.0	%	$	5,242,531	100.0	%

As of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, loans in foreclosure and loans foreclosed are as follows (in thousands, except number of loans):


		September 30, 2020			December 31, 2019				June 30, 2021			December 31, 2020
Foreclosure and foreclosed	Foreclosure and foreclosed	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment		Foreclosure and foreclosed	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
In foreclosure	In foreclosure	4	$	24,498	2	$	13,345	In foreclosure	0	$	0	1	$	5,168
Filed for bankruptcy*	Filed for bankruptcy*	1	9,230		0	0		Filed for bankruptcy*	0	0		1	9,230
Total in foreclosure	Total in foreclosure	5	$	33,728	2	$	13,345	Total in foreclosure	0	$	0	2	$	14,398

Foreclosed	Foreclosed	1	$	4,511	2	$	16,008	Foreclosed	1	$	5,168	2	$	8,603

*Borrower filed for bankruptcy after foreclosure proceedings had ~~begun~~begun.

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

30-59 Days Past Due 60-89 Days Past Due More Than 90 Days Past Due Total Current Total
September 30, 2020 Amount Percent
Apartment $ 0 $ 0 $ 0 $ 0 $ 469,903 $ 469,903 8.9 %
Hotel 0 45,386 0 45,386 858,893 904,279 17.1
Industrial 0 0 9,260 9,260 765,337 774,597 14.7
Office 39,392 0 9,230 48,622 1,511,988 1,560,610 29.5
Retail 0 0 5,000 5,000 801,198 806,198 15.2
Other 0 0 0 0 773,803 773,803 14.6
Total $ 39,392 $ 45,386 $ 23,490 $ 108,268 $ 5,181,122 $ 5,289,390 100.0 %
Allowance for credit losses (112,916)
Total, net of allowance $ 5,176,474
December 31, 2019
Apartment $ 0 $ 0 $ 0 $ 0 $ 416,865 $ 416,865 8.2 %
Hotel 0 0 0 0 901,044 901,044 17.6
Industrial 0 13,076 4,091 17,167 589,722 606,889 11.9
Office 22,870 0 0 22,870 1,587,591 1,610,461 31.5
Retail 0 0 4,122 4,122 843,466 847,588 16.5
Other 11,759 0 0 11,759 721,571 733,330 14.3
Total $ 34,629 $ 13,076 $ 8,213 $ 55,918 $ 5,060,259 $ 5,116,177 100.0 %
Allowance for loan losses (19,160)
Total, net of allowance $ 5,097,017


	30-59 Days Past Due		60-89 Days Past Due		More Than 90 Days Past Due		Total		Current		Total
June 30, 2021											Amount		Percentage
Apartment	$	0	$	0	$	0	$	0	$	529,136	$	529,136	10.3	%
Hotel	0		0		0		0		909,010		909,010		17.7
Industrial	0		2,785		0		2,785		852,210		854,995		16.6
Office	0		0		0		0		1,475,620		1,475,620		28.7
Parking	0		0		0		0		363,024		363,024		7.1
Retail	0		0		0		0		755,827		755,827		14.7
Storage	0		0		0		0		137,042		137,042		2.7
Other	0		0		0		0		113,237		113,237		2.2
Total	$	0	$	2,785	$	0	$	2,785	$	5,135,106	$	5,137,891	100.0	%
Allowance for credit losses											(108,958)
Total, net of allowance											$	5,028,933
December 31, 2020
Apartment	$	0	$	0	$	0	$	0	$	557,159	$	557,159	10.5	%
Hotel	30,315		30,158		0		60,473		853,522		913,995		17.0
Industrial	14,930		0		5,168		20,098		836,105		856,203		15.9
Office	24,804		0		9,230		34,034		1,522,197		1,556,231		29.0
Parking	48,825		29,355		0		78,180		286,107		364,287		6.8
Retail	4,991		0		25,779		30,770		760,907		791,677		14.7
Storage	0		0		0		0		165,561		165,561		3.1
Other	0		0		0		0		163,121		163,121		3.0
Total	$	123,865	$	59,513	$	40,177	$	223,555	$	5,144,679	$	5,368,234	100.0	%
Allowance for credit losses											(125,703)
Total, net of allowance											$	5,242,531

Table of Contents

Note 5 – Mortgage Loans – (Continued)

As a result of the economic impact associated with COVID-19, ~~as of September 30, 2020, 92~~American National modified 93 loans with a total balance of $1.6 billion ~~primarily related to hotels, retail~~during the second and ~~parking operations~~third quarters of 2020. These modifications were ~~modified. The terms~~in the form of ~~the modifications of these loans include~~ forbearance of principal and interest payments for ~~a period of~~ up to six months, extensions of maturity dates, and/or ~~provision~~provisions for interest only payments. OfThe modifications were primarily related to our loans to hotels, retail and parking operations. Due to the ongoing economic stress brought on by the pandemic, additional modifications for 31 of these loans with a total balance of $708.6 million were made in the first and second quarters of 2021. These additional modifications extended the forbearance of principal and interest payments and interest only provisions with a requirement for the payment of at least 20% of the total interest due during the extended modification period. The modified loans ~~1 loan totaling $45~~had an aggregate deferred interest of $13.6 million ~~is over 60 days past due. All other loans are current under their modified terms.~~

as of June 30, 2021.

There were 0 unamortized purchase discounts as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020. Total mortgage loans were net of unamortized origination fees of ~~$27,001,000~~$23.6 million and ~~$29,294,000~~$26.1 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. No unearned income is included in these amounts.

Troubled Debt Restructurings

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

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

Nine months ended September 30,
2020 2019
Number of Loans Recorded Investment Pre-Modification Recorded Investment Post Modification Number of Loans Recorded Investment Pre- Modification Recorded Investment Post Modification
Office 7 $ 76,201 $ 76,201 1 $ 9,271 $ 9,271
Retail 6 79,911 79,911 2 41,354 41,354
Industrial 2 11,473 11,473 0 0 0
Hotel 34 811,007 811,007 0 0 0
Parking 13 168,740 168,740 0 0 0
Other 5 119,738 119,738 0 0 0
Total 67 $ 1,267,070 $ 1,267,070 3 $ 50,625 $ 50,625


	Six months ended June 30,
	2021					2020
	Number of Loans	Recorded Investment Pre- Modification		Recorded Investment Post- Modification		Number of Loans	Recorded Investment Pre- Modification		Recorded Investment Post- Modification
Office	2	$	14,511	$	14,511	0	$	0	$	0
Retail	3	32,703		32,703		3	22,161		22,161

Hotel	0	0		0		11	341,556		341,556
Parking	1	9,735		9,735		0	0		0
Storage	1	8,942		8,942		0	0		0
Other	0	0		0		2	5,776		5,776
Total	7	$	65,891	$	65,891	16	$	369,493	$	369,493

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

There were 7 loans determined to be a troubled debt restructuring for the six months ended June 30, 2021. There are 0 commitments to lend additional funds to debtors whose loans have been modified in a troubled debt restructuring during the periods presented. The increase in loans determined to be a troubled debt restructuring in the six months ended June 30, 2021 is primarily attributable to COVID-19 related loan modifications where the concessions granted were in excess of six-months in duration.

Table of Contents

Note 5 – Mortgage Loans – (Continued)

Allowance for Credit Losses

Mortgage loans on real estate are stated at unpaid principal balance, adjusted for any unamortized discount, deferred expenses and allowances. The allowance for ~~current expected~~credit losses ~~per ASC 326, at the effective date will be~~is based upon the current expected credit loss model. ~~Refer to Note 3, Recently Issued Accounting Pronouncements.~~ The model considers past loss experience, current economic conditions, and reasonable and supportable forecasts of future conditions. Reversion for the allowance calculation is implicit in the models used to determine the allowance. The methodology uses a discounted cash flow approach based on expected cash flows.

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


	Commercial Mortgage Loans
~~Beginning balance~~Balance at January 1, 2021	$	(125,703)




Provision	(885)

Balance at March 31, 2021	$	(126,588)
Provision	17,630
Balance at June 30, 2021	$	(108,958)







	Commercial Mortgage Loans
Balance at January 1, 2020	$	(19,160)



Cumulative adjustment at January 1, 2020	(11,216)
Provision	(29,069)

Balance at March 31, 2020	$	(59,445)
Provision	(52,035)
Balance at June 30, 2020	~~(111,480)~~



~~Provision~~	~~(1,436)~~

~~Balance at September 30, 2020~~	$	~~(112,916)~~(111,480)

~~Table of Contents~~

~~Note 5 – Mortgage Loans – (Continued)~~

The change in allowance for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 was primarily driven by a favorable response of the ~~economic disruption caused~~hospitality and retail industries to re-opening of the economy and resulting increases in travel and brick-and-mortar shopping. This is partially offset by ~~COVID-19.~~general uncertainty in the office sector.

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

September 30, 2020
Asset Balance Allowance
Apartment $ 465,221 $ (4,682)
Hotel 859,119 (45,160)
Industrial 771,951 (2,646)
Office 1,534,903 (25,707)
Retail 795,164 (11,034)
Parking 352,435 (11,129)
Other 397,681 (12,558)
Total $ 5,176,474 $ (112,916)


	June 30, 2021				December 31, 2020
	Asset Balance		Allowance		Asset Balance		Allowance
Apartment	$	529,136	$	(2,902)	$	557,159	$	(8,845)
Hotel	909,010		(43,607)		913,995		(45,596)
Industrial	854,995		(3,066)		856,203		(2,516)
Office	1,475,620		(30,321)		1,556,231		(33,373)
Parking	363,024		(17,414)		364,287		(18,178)
Retail	755,827		(9,127)		791,677		(10,856)
Storage	137,042		(752)		165,561		(2,509)
Other	113,237		(1,769)		163,121		(3,830)
Total	$	5,137,891	$	(108,958)	$	5,368,234	$	(125,703)

Table of Contents

Note 5 – Mortgage Loans – (Continued)

Credit Quality Indicators

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

Amortized Cost Basis by Origination Year
2020 2019 2018 2017 2016 Prior Total
Apartment $ 402 $ 136,436 $ 46,267 $ 180,656 $ 68,664 $ 37,478 $ 469,903
Hotel 0 59,402 204,094 219,597 148,078 273,834 905,005
Industrial 168,467 178,797 134,431 46,676 124,259 121,967 774,597
Office 6,564 58,345 195,201 345,425 312,693 642,382 1,560,610
Retail 49,111 41,145 104,694 80,577 161,720 368,951 806,198
Parking 28,684 13,787 30,523 8,700 169,715 122,757 374,166
Other 19,879 83,671 112,659 54,917 69,994 57,791 398,911
Total $ 273,107 $ 571,583 $ 827,869 $ 936,548 $ 1,055,123 $ 1,625,160 $ 5,289,390
Allowance for loan losses (112,916)
Total, net of allowance $ 5,176,474


	Amortized Cost Basis by Origination Year
	2021		2020		2019		2018		2017		Prior		Total
Apartment	$	0	$	57,122	$	227,547	$	48,329	$	158,631	$	37,507	$	529,136
Hotel	0		28,304		77,703		204,024		219,384		379,595		909,010
Industrial	59,798		268,757		162,251		113,468		38,639		212,082		854,995
Office	2,599		31,701		60,688		199,040		318,829		862,763		1,475,620
Parking	0		28,665		13,799		27,062		8,549		284,949		363,024
Retail	2,566		69,400		38,900		86,549		78,893		479,519		755,827
Storage	0		25,161		48,296		37,548		17,095		8,942		137,042
Other	457		0		21,651		45,941		1,650		43,538		113,237
Total	$	65,420	$	509,110	$	650,835	$	761,961	$	841,670	$	2,308,895	$	5,137,891
Allowance for credit losses													(108,958)
Total, net of allowance													$	5,028,933

Generally, mortgage loans are secured by first liens on income-producing real estate with a loan-to-value ratio of up to 75%. It is the Company's policy to not accrue interest on loans that are 90 days delinquent and where amounts are determined to be uncollectible. At ~~September~~June 30, ~~2020,~~2021, 0 commercial loans ~~of $23,490,000~~ were past due over 90 days ~~and are~~or in ~~nonaccrual~~non-accrual status.

Off-Balance Sheet Credit Exposures

The Company has off-balance sheet credit exposures related to non-cancellable unfunded commitment amounts on commercial mortgage loans. We estimate the allowance for these exposures by applying the allowance rate we computed for each property type to the related outstanding commitment amounts. As of ~~September~~June 30, ~~2020,~~2021, we have included a ~~$13,429,000~~$6.5 million liability in other liabilities on the condensed consolidated statements of financial position based on unfunded loan commitments of ~~$660,924,000.~~

~~Table of Contents~~$625.2 million.

Note 6 –- Real Estate and Other Investments

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

September 30, 2020 December 31, 2019
Industrial $ 40,970 8.0 % $ 68,809 12.5 %
Office 218,005 42.4 219,490 39.8
Retail 211,464 41.1 215,800 39.1
Other 43,637 8.5 47,120 8.6
Total $ 514,076 100.0 % $ 551,219 100.0 %


	June 30, 2021				December 31, 2020
	Amount		Percentage		Amount		Percentage
Hotel	$	59,310	6.4	%	$	67,857	7.1	%
Industrial	133,032		14.4		132,757		13.8
Land	37,916		4.1		51,220		5.3
Office	293,263		31.7		299,500		31.2
Retail	274,469		29.6		268,588		28.0
Apartments	114,881		12.4		120,847		12.6
Other	13,370		1.4		19,803		2.0
Total	$	926,241	100.0	%	$	960,572	100.0	%

Table of Contents

September 30, 2020 December 31, 2019
East North Central $ 32,455 6.3 % $ 32,539 5.9 %
East South Central 33,123 6.4 34,248 6.2
Mountain 66,330 12.9 68,498 12.4
Pacific 39,000 7.6 40,462 7.3
South Atlantic 72,802 14.2 83,552 15.2
West South Central 253,200 49.3 278,833 50.6
Other 17,166 3.3 13,087 2.4
Total $ 514,076 100.0 % $ 551,219 100.0 %
Note 6 – Real Estate and Other Investments – (Continued)


	June 30, 2021				December 31, 2020
	Amount		Percentage		Amount		Percentage
East North Central	$	97,321	10.5	%	$	81,310	8.5	%
East South Central	62,398		6.7		65,302		6.8
Mountain	130,115		14.1		133,233		13.9
Pacific	114,249		12.3		127,421		13.3
South Atlantic	78,878		8.5		97,801		10.1
West South Central	432,707		46.7		434,722		45.3
Other	10,573		1.2		20,783		2.1
Total	$	926,241	100.0	%	$	960,572	100.0	%

As of June 30, 2021, 0 real estate investments met the criteria as held-for-sale.

American National regularly invests in real estate partnerships and joint ventures. American National frequently participates in the design of these joint venture or partnership entities with the sponsor, but in most cases, our involvement is limited to financing. Through analysis performed by American National, some of these partnerships and joint ventures have been determined to be variable interest entities (“VIEs”). In certain instances, in addition to an economic interest in the entity, American National holds the power to direct the most significant activities of the entity and is deemed the primary beneficiary or consolidator of the entity. The assets of the consolidated VIEs are restricted and must first be used to settle their liabilities. Creditors or beneficial interest holders of these VIEs have no recourse to the general credit of American National, as American National’s obligation is limited to the amount of its committed investment. American National has not provided financial or other support to the VIEs in the form of liquidity arrangements, guarantees, or other commitments to ~~third parties~~third-parties that may affect the fair value or risk of its variable interest in the VIEs in ~~2020~~2021 or ~~2019.~~2020.

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

September 30, 2020 December 31, 2019
Investment real estate $ 133,152 $ 134,534
Short-term investments 500 500
Cash and cash equivalents 5,634 11,155
Other receivables 3,704 3,673
Other assets 13,153 15,355
Total assets of consolidated VIEs $ 156,143 $ 165,217
Notes payable $ 154,788 $ 157,997
Other liabilities 6,526 9,731
Total liabilities of consolidated VIEs $ 161,314 $ 167,728


	June 30, 2021		December 31, 2020
Real estate and real estate partnerships	$	129,415	$	131,405
Short-term investments	500		500
Cash and cash equivalents	8,219		8,070
Premiums due and other receivables	2,773		3,484
Other assets	10,635		13,796
Total assets of consolidated VIEs	$	151,542	$	157,255
Notes payable	$	151,498	$	153,703
Other liabilities	5,260		8,490
Total liabilities of consolidated VIEs	$	156,758	$	162,193

The notes payable in the condensed consolidated statements of financial position pertain to the borrowings of the consolidated VIEs. The liability of American National relating to notes payable of the consolidated VIEs is limited to the amount of its direct or indirect investment in the respective ventures, which totaled ~~$3,108,000 and $4,304,000~~$3.0 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, respectively.~~2020.

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

Interest rate Maturity September 30, 2020 December 31, 2019
LIBOR 2021 $ 10,819 $ 10,836
4% fixed 2022 79,363 81,709
4.18% fixed 2024 64,606 65,452
Total $ 154,788 $ 157,997


Interest rate	Maturity	June 30, 2021		December 31, 2020
LIBOR	2021	$	10,819	$	10,819
4% fixed	2022	76,945		78,565
4.18% fixed	2024	63,734		64,319
Total		$	151,498	$	153,703

2122

Table of Contents

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

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

September 30, 2020 December 31, 2019
Carrying
Amount Maximum
Exposure
to Loss Carrying
Amount Maximum
Exposure
to Loss
Investment in unconsolidated affiliates $ 347,554 $ 347,554 $ 332,742 $ 332,742
Mortgage loans 721,899 721,899 657,528 657,528
Accrued investment income 5,154 5,154 2,198 2,198


	June 30, 2021				December 31, 2020
	Carrying Amount		Maximum Exposure to Loss		Carrying Amount		Maximum Exposure to Loss
Real estate and real estate partnerships	$	338,766	$	338,766	$	368,588	$	368,588
Mortgage loans on real estate	680,100		680,100		722,917		722,917
Accrued investment income	4,008		4,008		4,980		4,980

American National’s equity in earnings of ~~September 30, 2020, 1~~ real estate partnerships is the Company’s share of operating earnings and realized gains from investments in real estate joint ventures and other limited partnership interests (“joint ventures”) using the equity method of accounting. In 2021 and 2020, certain joint ventures took advantage of market opportunities to generate realized gains on the sale of real estate held or developed by the ventures.

The Company’s income from and investment ~~with a carrying value~~in each joint venture did not exceed 20% and therefore no separate financial disclosure is required. The Company’s income from, assets held, and investment in each joint venture did not exceed 10% of ~~$3,364,000 met~~operating income before tax. Additionally, American National’s investment in joint ventures is less than 3% of the ~~criteria as held-for-sale.~~Company’s total assets, and investments in individual joint ventures are not considered to be material to the Company in relation to its financial position or ongoing results of operations. Therefore, summarized financial information of equity method investees has not been included.

The Company’s total investment in investment funds and other partnerships, of which substantially all are limited liability companies ("LLCs") or limited partnerships, was comprised of $594.2 million and $477.1 million at June 30, 2021 and December 31, 2020, respectively.

Note 7 – Derivative Instruments

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

Derivatives Not Designated as Hedging Instruments Location in the Condensed Consolidated Statements of Financial Position September 30, 2020 December 31, 2019
Number of
Instruments Notional
Amounts Estimated
Fair Value Number of
Instruments Notional
Amounts Estimated
Fair Value
Equity-indexed options Other invested assets 456 $ 2,761,300 $ 213,782 473 $ 2,654,600 $ 256,005
Equity-indexed embedded derivative Policyholders’ account balances 108,958 2,625,029 693,780 101,950 2,527,205 731,552


Derivatives Not Designated as Hedging Instruments	Location in the Condensed Consolidated Statements of Financial Position	June 30, 2021					December 31, 2020
		Number of Instruments	Notional Amounts		Estimated Fair Value		Number of Instruments	Notional Amounts		Estimated Fair Value

Equity-indexed options	Other invested assets	447	$	3,197,700	$	260,053	455	$	2,867,600	$	242,201
Equity-indexed embedded derivative	Policyholders’ account balances	119,736	3,099,525		776,430		112,103	2,748,540		705,013


Derivatives Not Designated as Hedging Instruments	Derivatives Not Designated as Hedging Instruments	Location in the Condensed Consolidated Statements of Operations	Gains (Losses) Recognized in Income on Derivatives								Derivatives Not Designated as Hedging Instruments	Location in the Condensed Consolidated Statements of Operations		Gains (Losses) Recognized in Income on Derivatives
			Three months ended September 30,				Nine months ended September 30,						Three months ended June 30,				Six months ended June 30,
			2020		2019		2020		2019				2021		2020		2021		2020
Equity-indexed options	Equity-indexed options	Net investment income	$	38,738	$	6,278	$	(2,200)	$	95,888	Equity-indexed options		Net investment income		$	40,242	$	67,157	$	69,069	$	(40,938)
Equity-indexed embedded derivative	Equity-indexed embedded derivative	Interest credited to policyholders’ account balances	(44,792)		(11,462)		(17,702)		(105,873)		Equity-indexed embedded derivative		Interest credited to policyholders’ account balances		(28,460)		(62,491)		(55,149)		27,090

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

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Note 7 – Derivative Instruments – (Continued)

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

September 30, 2020
Counterparty Moody/S&P
Rating Options Fair
Value Collateral Held in Cash Collateral Held in Invested Assets Total
Collateral Held Collateral Amounts used to Offset Exposure Excess Collateral Exposure
Net of
Collateral
Barclays Baa2/BBB $ 42,627 $ 24,033 $ 18,100 $ 42,133 $ 42,133 $ 0 $ 494
Credit Suisse Baa2/BBB+ 7,936 7,670 0 7,670 7,670 0 266
Goldman-Sachs A3/BBB+ 1,095 910 0 910 910 0 185
ING Baa1/A- 20,858 10,770 10,300 21,070 20,858 212 0
Morgan Stanley A3/BBB+ 22,132 15,426 5,700 21,126 21,126 0 1,006
NATIXIS* A1/A+ 30,827 31,030 0 31,030 30,827 203 0
Truist A3/A- 52,586 40,740 11,000 51,740 51,728 12 858
Wells Fargo A2/A- 35,721 25,030 9,900 34,930 34,930 0 791
Total $ 213,782 $ 155,609 $ 55,000 $ 210,609 $ 210,182 $ 427 $ 3,600


		June 30, 2021
Counterparty	Moody/S&P Rating	Options Fair Value		Collateral Held in Cash		Collateral Held in Invested Assets		Total Collateral Held		Collateral Amounts Used to Offset Exposure		Excess Collateral		Exposure Net of Collateral
Barclays	Baa2/BBB	$	48,677	$	30,693	$	18,100	$	48,793	$	48,677	$	116	$	0
Credit Suisse	Baa1/BBB+	26,276		25,400		0		25,400		25,400		0		876

ING	Baa1/A-	16,825		6,430		10,300		16,730		16,730		0		95
Morgan Stanley	A1/BBB+	66,775		59,336		5,700		65,036		65,036		0		1,739
NATIXIS*	A1/A	27,343		27,370		0		27,370		27,343		27		0

Truist	A3/A-	36,037		25,170		11,000		36,170		36,037		133		0
Wells Fargo	A2/BBB+	38,120		28,060		9,900		37,960		37,944		16		176
Total		$	260,053	$	202,459	$	55,000	$	257,459	$	257,167	$	292	$	2,886


			December 31, 2019																December 31, 2020
Counterparty	Counterparty	Moody/S&P Rating	Options Fair Value		Collateral Held in Cash		Collateral Held in Invested Assets		Total Collateral Held		Collateral Amounts used to Offset Exposure		Excess Collateral		Exposure Net of Collateral		Counterparty	Moody/S&P Rating	Options Fair Value		Collateral Held in Cash		Collateral Held in Invested Assets		Total Collateral Held		Collateral Amounts Used to Offset Exposure		Excess Collateral		Exposure Net of Collateral
Barclays	Barclays	Baa3/BBB	$	54,583	$	27,343	$	28,000	$	55,343	$	54,583	$	760	$	0	Barclays	Baa2/BBB	$	51,489	$	31,513	$	18,100	$	49,613	$	49,613	$	0	$	1,876
Credit Suisse	Credit Suisse	Baa2/BBB+	7,117		7,390		0		7,390		7,009		381		108		Credit Suisse	Baa1/BBB+	9,447		8,680		0		8,680		8,680		0		767
Goldman-Sachs	Goldman-Sachs	A3/BBB+	1,053		930		0		930		930		0		123		Goldman-Sachs	A3/BBB+	1,227		1,170		0		1,170		1,170		0		57
ING	ING	Baa1/A-	30,330		14,940		16,000		30,940		30,330		610		0		ING	Baa1/A-	20,606		10,450		10,300		20,750		20,606		144		0

Morgan Stanley	Morgan Stanley	A3/BBB+	34,988		25,926		9,000		34,926		34,926		0		62		Morgan Stanley	A2/BBB+	37,406		30,616		5,700		36,316		36,316		0		1,090
NATIXIS*	NATIXIS*	A1/A+	29,918		30,200		0		30,200		29,918		282		0		NATIXIS*	A1/A+	30,567		30,720		0		30,720		30,567		153		0
SunTrust		A3/A-	60,360		41,720		17,000		58,720		58,645		75		1,715

Truist																	Truist	A3/A-	52,127		43,960		11,000		54,960		52,127		2,833		0
Wells Fargo	Wells Fargo	A2/A-	37,656		24,110		15,000		39,110		37,656		1,454		0		Wells Fargo	A2/BBB+	39,332		29,370		9,900		39,270		39,270		0		62
Total	Total		$	256,005	$	172,559	$	85,000	$	257,559	$	253,997	$	3,562	$	2,008	Total		$	242,201	$	186,479	$	55,000	$	241,479	$	238,349	$	3,130	$	3,852

*Collateral is prohibited from being held in invested ~~assets~~assets.

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

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


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Bonds	$	129,616	$	141,762	$	260,113	$	287,881
Equity securities	8,307		7,919		15,800		15,766
Mortgage loans	68,322		60,445		139,188		119,773
Real estate and real estate partnerships	25,444		2,782		28,929		15,269
Investment funds	17,632		(14,670)		38,988		(9,737)
Equity-indexed options	40,242		67,157		69,069		(40,938)
Other invested assets	7,836		8,331		15,293		16,703
Total	$	297,399	$	273,726	$	567,380	$	404,717

Net investment income ~~is shown below (in thousands):~~from equity method investments, comprised of real estate partnerships and investment funds was $39.7 million and $(13.6) million for the three months ended June 30, 2021 and 2020 and $62.9 million and $2.1 million for the six months ended June 30, 2021 and 2020, respectively.

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Bonds $ 138,743 $ 154,322 $ 426,624 $ 452,786
Equity securities 7,905 7,985 23,671 25,292
Mortgage loans 61,561 64,753 181,334 191,110
Real estate (121) 1,005 3,326 7,310
Equity-indexed options 38,738 6,278 (2,200) 95,888
Other invested assets 7,430 12,277 24,133 24,310
Total $ 254,256 $ 246,620 $ 656,888 $ 796,696

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

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Bonds $ 6,117 $ 6,075 $ 15,547 $ 11,288
Mortgage loans 0 (2,097) 0 (2,186)
Real estate 11,265 27,388 9,951 24,502
Other invested assets 5 567 (24) (1,661)
Total $ 17,387 $ 31,933 $ 25,474 $ 31,943


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Bonds	$	11,468	$	3,952	$	19,167	$	9,430
Mortgage loans	(768)		0		(768)		0
Real estate and real estate partnerships	(101)		(7)		11,092		(1,314)
Other invested assets	3		(6)		350		(29)
Total	$	10,602	$	3,939	$	29,841	$	8,087

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

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Sales $ 11,417 $ 28,518 $ 7,799 $ 27,756
Calls and maturities 5,986 6,100 19,131 11,029
Paydowns (7) (81) (61) 206
Impairments 0 (2,590) (1,276) (7,290)
Loss allowance 0 (12) 0 247
Others (9) (2) (119) (5)
Total $ 17,387 $ 31,933 $ 25,474 $ 31,943

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

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Bonds $ 0 $ 0 $ 0 $ (6,968)


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Sales	$	27	$	0	$	12,925	$	(3,618)
Calls and maturities	11,316		4,025		18,576		13,145
Paydowns	93		(73)		532		(54)
Impairments	(768)		0		(2,033)		(1,276)

Other	(66)		(13)		(159)		(110)
Total	$	10,602	$	3,939	$	29,841	$	8,087

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Note 9 – Fair Value of Financial Instruments

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

September 30, 2020 December 31, 2019
Carrying
Amount Fair Value Carrying
Amount Fair Value
Financial assets
Fixed maturity, bonds held-to-maturity $ 7,702,347 $ 8,248,611 $ 8,631,261 $ 8,968,690
      Fixed maturity, bonds available-for-sale 7,236,188 7,236,188 6,725,085 6,725,085
Equity securities 1,840,855 1,840,855 1,700,960 1,700,960
Equity-indexed options 213,782 213,782 256,005 256,005
Mortgage loans on real estate, net of allowance 5,176,474 5,381,157 5,097,017 5,309,005
Policy loans 374,387 374,387 379,657 379,657
Short-term investments 800,793 800,793 425,321 425,321
Separate account assets ($1,062,762 and $1,049,938 included in fair value hierarchy) 1,092,574 1,092,574 1,073,891 1,073,891
Separately managed accounts 62,052 62,052 50,503 50,503
                Total financial assets $ 24,499,452 $ 25,250,399 $ 24,339,700 $ 24,889,117
Financial liabilities
Investment contracts $ 10,167,018 $ 10,167,018 $ 10,254,959 $ 10,254,959
Embedded derivative liability for equity-indexed contracts 693,780 693,780 731,552 731,552
Notes payable 154,788 154,788 157,997 157,997
Federal Home Loan Bank advances 500,000 500,000 0 0
Separate account liabilities ($1,062,762 and $1,049,938 included in fair value hierarchy) 1,092,574 1,092,574 1,073,891 1,073,891
                Total financial liabilities $ 12,608,160 $ 12,608,160 $ 12,218,399 $ 12,218,399


	June 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Fixed maturity, bonds held-to-maturity	$	7,473,697	$	7,998,049	$	7,354,970	$	7,983,181
Fixed maturity, bonds available-for-sale	8,068,795		8,068,795		7,597,180		7,597,180
Equity securities	2,340,508		2,340,508		2,070,766		2,070,766
Equity-indexed options, included in other invested assets	260,053		260,053		242,201		242,201
Mortgage loans on real estate, net of allowance	5,028,933		5,310,773		5,242,531		5,451,152
Policy loans	365,855		365,855		373,014		373,014
Short-term investments	917,581		917,581		1,028,379		1,028,379
Separate account assets ($1,241,265 and $1,153,702 included in fair value hierarchy)	1,272,247		1,272,247		1,185,467		1,185,467
Separately managed accounts, included in other invested assets	77,904		77,904		64,424		64,424
Total financial assets	$	25,805,573	$	26,611,765	$	25,158,932	$	25,995,764
Financial liabilities
Investment contracts	$	10,553,927	$	10,553,927	$	10,101,764	$	10,101,764
Embedded derivative liability for equity-indexed contracts	776,430		776,430		705,013		705,013
Notes payable	151,498		151,498		153,703		153,703
Federal Home Loan Bank advance	0		0		250,000		250,227
Separate account liabilities ($1,241,265 and $1,153,702 included in fair value hierarchy)	1,272,247		1,272,247		1,185,467		1,185,467
Total financial liabilities	$	12,754,102	$	12,754,102	$	12,395,947	$	12,396,174

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


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

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

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

2526

Table of Contents

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

Valuation Techniques for Financial Instruments Recorded at Fair Value

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

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

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

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

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

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

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

2627

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

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

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

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

No gains or losses were recognized on assets transferred to separate accounts for the six months ended June 30, 2021 and 2020, respectively.

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

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

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

•Equity volatility assumptions begin with current market volatilities and grow to long-term values. Increases to the assumed volatility will increase the fair value of liabilities, as future projections will produce higher increases in the linked index. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, the one year implied volatility used to estimate embedded derivative value was ~~22.6%~~17.5% and ~~11.3%~~17.6%, respectively.

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

Fair Value Range
September 30, 2020 December 31, 2019 Unobservable Input September 30, 2020 December 31, 2019
Indexed Annuities $ 677.0 $ 706.5 Lapse Rate 1-70% 1-70%
Mortality Multiplier 90-100% 90-100%
Equity Volatility 17-56% 11-46%
Indexed Life 16.7 18.4 Equity Volatility 17-56% 11-46%

~~Table of Contents~~

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

~~Quantitative Disclosures~~

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

Assets and Liabilities Carried at Fair Value by Hierarchy Level as of September 30, 2020
Total
Fair Value Level 1 Level 2 Level 3
Financial assets
Fixed maturity, bonds available-for-sale
U.S. treasury and government $ 32,559 $ 0 $ 32,559 $ 0
U.S. states and political subdivisions 1,098,759 0 1,098,759 0
Foreign governments 16,594 0 16,594 0
Corporate debt securities 6,032,196 0 5,913,834 118,362
Residential mortgage-backed securities 27,284 0 27,284 0
Collateralized debt securities 28,796 0 28,796 0
Total bonds available-for-sale 7,236,188 0 7,117,826 118,362
Equity securities
Common stock 1,822,813 1,822,656 0 157
Preferred stock 18,042 17,575 0 467
Total equity securities 1,840,855 1,840,231 0 624
Options 213,782 0 0 213,782
Short-term investments 800,793 0 800,793 0
Separate account assets 1,062,762 275,667 787,095 0
Separately managed accounts 62,052 0 0 62,052
Total financial assets $ 11,216,432 $ 2,115,898 $ 8,705,714 $ 394,820
Financial liabilities
Embedded derivative for equity-indexed contracts $ 693,780 $ 0 $ 0 $ 693,780
Separate account liabilities 1,062,762 275,667 787,095 0
Total financial liabilities $ 1,756,542 $ 275,667 $ 787,095 $ 693,780

Assets and Liabilities Carried at Fair Value by Hierarchy Level as of December 31, 2019
Total
Fair Value Level 1 Level 2 Level 3
Financial assets
Fixed maturity, bonds available-for-sale
U.S. treasury and government $ 29,941 $ 0 $ 29,941 $ 0
U.S. states and political subdivisions 1,078,165 0 1,078,165 0
Foreign governments 6,287 0 6,287 0
Corporate debt securities 5,576,620 0 5,531,776 44,844
Residential mortgage-backed securities 23,943 0 23,943 0
Collateralized debt securities 10,129 0 10,129 0
Total bonds available-for-sale 6,725,085 0 6,680,241 44,844
Equity securities
Common stock 1,682,149 1,681,686 0 463
Preferred stock 18,811 18,811 0 0
Total equity securities 1,700,960 1,700,497 0 463
Options 256,005 0 0 256,005
Short-term investments 425,321 0 425,321 0
Separate account assets 1,049,938 271,575 778,363 0
Separately managed accounts 50,503 0 0 50,503
Total financial assets $ 10,207,812 $ 1,972,072 $ 7,883,925 $ 351,815
Financial liabilities
Embedded derivative for equity-indexed contracts $ 731,552 $ 0 $ 0 $ 731,552
Separate account liabilities 1,049,938 271,575 778,363 0
Total financial liabilities $ 1,781,490 $ 271,575 $ 778,363 $ 731,552


	Fair Value					Range
	June 30, 2021		December 31, 2020		Unobservable Input	June 30, 2021	December 31, 2020
Security type
Embedded derivative
Indexed Annuities	$	737.7	$	670.8	Lapse Rate	1-50%	1-50%
					Mortality Multiplier	100%	100%
					Equity Volatility	14-62%	16-69%
Indexed Life	38.7		34.2		Equity Volatility	14-62%	16-69%

Table of Contents

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

Quantitative Disclosures

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


	Assets and Liabilities Carried at Fair Value by Hierarchy Level at June 30, 2021
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
Fixed maturity, bonds available-for-sale
U.S. treasury and government	$	24,129	$	24,129	$	0	$	0
U.S. states and political subdivisions	1,093,943		0		1,093,943		0
Foreign governments	6,070		0		6,070		0
Corporate debt securities	6,774,080		0		6,640,882		133,198
Residential mortgage-backed securities	32,809		0		32,809		0
Collateralized debt securities	137,764		0		137,764		0
Total bonds available-for-sale	8,068,795		24,129		7,911,468		133,198
Equity securities
Common stock	2,325,845		2,322,722		0		3,123
Preferred stock	14,663		13,194		0		1,469
Total equity securities	2,340,508		2,335,916		0		4,592
Options	260,053		0		0		260,053
Short-term investments	917,581		0		917,581		0
Separate account assets	1,241,265		351,352		889,913		0
Separately managed accounts	77,904		0		0		77,904
Total financial assets	$	12,906,106	$	2,711,397	$	9,718,962	$	475,747
Financial liabilities
Embedded derivative for equity-indexed contracts	$	776,430	$	0	$	0	$	776,430
Notes payable	151,498		0		0		151,498
Separate account liabilities	1,241,265		351,352		889,913		0
Total financial liabilities	$	2,169,193	$	351,352	$	889,913	$	927,928


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

Table of Contents

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

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

Level 3
Three months ended September 30, 2020 Nine months ended September 30, 2020
Assets Liability Assets Liability
Investment
Securities Equity-Indexed
Options Separately Managed Accounts Embedded
Derivative Investment
Securities Equity-Indexed
Options Separately Managed Accounts Embedded
Derivative
Beginning balance $ 104,138 $ 191,486 $ 51,537 $ 675,970 $ 45,307 $ 256,005 $ 50,503 $ 731,552
Net gain (loss) for derivatives included in net investment income 0 38,738 0 0 0 (2,200) 0 0
Net change included in interest credited 0 0 0 44,792 0 0 0 17,702
Net fair value change included in other comprehensive income 6 0 3,663 0 4 0 (397) 0
Purchases, sales and settlements or maturities
Purchases 15,222 19,257 7,421 0 124,390 57,695 16,463 0
Sales (380) 0 (569) 0 (50,715) 0 (4,517) 0
Settlements or maturities 0 (35,699) 0 0 0 (97,718) 0 0
Premiums less benefits 0 0 0 (26,982) 0 0 0 (55,474)
Ending balance at September 30, 2020 $ 118,986 $ 213,782 $ 62,052 $ 693,780 $ 118,986 $ 213,782 $ 62,052 $ 693,780
Level 3
Three months ended September 30, 2019 Nine months ended September 30, 2019
Assets Liability Assets Liability
Investment
Securities Equity-Indexed
Options
Separately Managed Accounts(1)
Embedded
Derivative Investment
Securities Equity-Indexed
Options
Separately Managed Accounts(1)
Embedded
Derivative
Beginning balance $ 4,346 $ 231,044 $ 30,655 $ 695,676 $ 4,346 $ 148,006 $ 16,532 $ 596,075
Net gain for derivatives included in net investment income 0 6,278 0 0 0 95,888 0 0
Net change included in interest credited 0 0 0 11,462 0 0 0 105,873
Net fair value change included in other comprehensive income 0 0 0 0 0 0 (2) 0
Purchases, sales and settlements or maturities
Purchases 463 17,029 9,438 0 463 55,797 23,563 0
Sales (113) (13,397) 0 0 (113) (13,397) 0 0
Settlements or maturities 0 (16,770) 0 0 0 (62,110) 0 0
Premiums less benefits 0 0 0 (15,372) 0 0 0 (10,182)
Ending balance at September 30, 2019 $ 4,696 $ 224,184 $ 40,093 $ 691,766 $ 4,696 $ 224,184 $ 40,093 $ 691,766

~~(1)~~Subsequent to the issuance of the Company's interim condensed consolidated financial statements as of and for the three and nine months ended September 30, 2019, the Company's management determined Separately Managed Accounts were omitted from this disclosure. The amounts included in the disclosure tables above now include disclosures for Separately Managed Accounts for all periods presented.


	Level 3
	Three months ended June 30, 2021								Six months ended June 30, 2021
	Assets						Liability		Assets						Liability
	Investment Securities		Equity-Indexed Options		Separately Managed Accounts		Embedded Derivative		Investment Securities		Equity-Indexed Options		Separately Managed Accounts		Embedded Derivative
Beginning balance	$	128,486	$	253,363	$	66,981	$	740,514	$	111,505	$	242,201	$	64,424	$	705,013


Net gain for derivatives included in net investment income	0		40,242		0		0		0		69,069		0		0
Net change included in interest credited	0		0		0		28,460		0		0		0		55,149
Net fair value change included in other comprehensive income	703		0		28		0		1,881		0		622		0
Purchases, sales and settlements or maturities
Purchases	18,727		26,283		12,639		0		46,180		46,430		22,711		0
Sales	(11,605)		0		(1,744)		0		(23,255)		0		(9,853)		0
Settlements or maturities	0		(59,835)		0		0		0		(97,647)		0		0
Premiums less benefits	0		0		0		7,456		0		0		0		16,268



Gross transfers into Level 3	1,479		0		0		0		1,479		0		0		0
Ending balance at June 30, 2021	$	137,790	$	260,053	$	77,904	$	776,430	$	137,790	$	260,053	$	77,904	$	776,430


	Level 3
	Three months ended June 30, 2020								Six months ended June 30, 2020
	Assets						Liability		Assets						Liability
	Investment Securities		Equity-Indexed Options		Separately Managed Accounts		Embedded Derivative		Investment Securities		Equity-Indexed Options		Separately Managed Accounts		Embedded Derivative
Beginning balance	$	53,853	$	125,988	$	50,489	$	630,952	$	45,307	$	256,005	$	50,503	$	731,552


Net gain (loss) for derivatives included in net investment income	0		67,157		0		0		0		(40,938)		0		0
Net change included in interest credited	0		0		0		62,491		0		0		0		(27,090)
Net fair value change included in other comprehensive income	0		0		(4,046)		0		0		0		(4,060)		0
Purchases, sales and settlements or maturities
Purchases	86,467		24,273		9,042		0		109,169		38,438		9,042		0
Sales	(36,642)		0		(3,948)		0		(50,798)		0		(3,948)		0
Settlements or maturities	0		(25,932)		0		0		0		(62,019)		0		0
Premiums less benefits	0		0		0		(17,473)		0		0		0		(28,492)



Ending balance at June 30, 2020	$	103,678	$	191,486	$	51,537	$	675,970	$	103,678	$	191,486	$	51,537	$	675,970

Within the net gain for derivatives included in net investment income were unrealized gains of ~~$38,788,407~~$12.3 million and ~~$79,991,000,~~$59.9 million, relating to assets still held at ~~September~~June 30, 2021 and 2020, respectively.

There were no transfers between Level 1 and ~~2019, respectively.~~Level 2 fair value hierarchies during the periods presented. American National’s valuation of financial instruments categorized as Level 3 in the fair value hierarchy are based on valuation techniques that use significant inputs that are unobservable or had a decline in market activity that obscured observability. The indicators considered in determining whether a significant decrease in the volume and level of activity for a specific asset has occurred include the level of new issuances in the primary market, trading volume in the secondary market, the level of credit spreads over historical levels, applicable bid-ask spreads, and price consensus among market participants and other pricing sources. The transfers into Level 3 during the three months ended June 30, 2021 were the result of securities not being priced by the third-party service at the end of the period.

Equity Index Options—Certain over the counter equity options are valued using models that are widely accepted in the financial services industry. These are categorized as Level 3 as a result of the significance of non-market observable inputs such as volatility and forward price/dividend assumptions. Other primary inputs include interest rate assumptions (risk-free rate assumptions), and underlying equity quoted index prices for identical or similar assets in markets that exhibit less liquidity relative to those markets.

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

The following summarizes the fair value (in thousands), valuation techniques and unobservable inputs of the Level 3 fair value measurements:

Fair Value at June 30, 2021

Valuation Technique

Unobservable Input

Range/Weighted Average

Security type

Investment securities

Common stock

3,123

Guideline public company method (1)

Recurring Revenue Multiple(2)

LTM EBITDA Multiple(3)

7.6 x

19.3x

Preferred stock

1,469

Guideline public company method

LTM Revenue Multiple
LTM EBITDA Multiple
Term (Years)
Volatility

6.00x

5.00x

2.33

50.00%

Bonds

133,198

Priced at Cost

Coupon Rate

2.70% - 8.00%

Separately managed accounts

77,904

Discounted cash flows (yield analysis)

Market transaction

Discount rate

N/A

6.59% - 101.95%

N/A

Fair Value at December 31, 2020

Valuation Technique

Unobservable Input

Range/Weighted Average

Security type

Investment securities

Common stock

440

Option pricing method

Market transaction

Term (Years)
Volatility

N/A

2.83

45.00%

N/A

Preferred stock

628

Option pricing method

Market transaction

Term (Years)
Volatility

N/A

2.83

45.00%

N/A

Bonds

110,437

Priced at Cost

Coupon Rate

2.72% - 8.00%

Separately managed accounts

64,424

Discounted cash flows (yield analysis)

Market transaction

Discount rate

N/A

7.25% - 14.71%

N/A

(1)Guideline public company method uses price multiples from data on comparable public companies. Multiples are then adjusted to account for differences between what is being valued and comparable firms.

(2)Recurring revenue multiple for the most relevant period of time, measures the value of the equity or a business relative to the revenues it generates.

(3)LTM EBITDA multiple valuation metric shows earnings before interest, taxes, depreciation and amortization adjustments for the past 12 month period.

Investment Securities—These bonds use cost as the best estimate of fair value. They are valued at cost because the value would not change unless there is a fundamental deterioration in the portfolio. There is no observable market valuation price or third-party sources that provide market values for these securities since they are not publicly traded. The common and preferred stock are valued at market transaction, option pricing method, or guideline public company method based on the best available information.

Separately Managed Accounts—The separately managed account manager uses the mid-point of a range from a third-party to price these securities. Discounted cash flows (yield analysis) and market transactions approach are used in the valuation. They use discount rate which is considered an unobservable input.

Table of Contents

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

Fair Value Information About Financial Instruments Not Recorded at Fair Value

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

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

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

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

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

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

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

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

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

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

September 30, 2020
FV Hierarchy Level Carrying
Amount Fair Value
Financial assets
Fixed maturity, bonds held-to-maturity
U.S. states and political subdivisions Level 2 $ 106,908 $ 111,183
Foreign governments Level 2 3,865 4,294
Corporate debt securities Level 2 7,297,369 7,831,992
Residential mortgage-backed securities Level 2 146,138 150,293
Collateralized debt securities Level 2 148,067 150,849
Total fixed maturity, bonds held-to-maturity 7,702,347 8,248,611
Mortgage loans on real estate, net of allowance Level 3 5,176,474 5,381,157
Policy loans Level 3 374,387 374,387
Total financial assets $ 13,253,208 $ 14,004,155
Financial liabilities
Investment contracts Level 3 $ 10,167,018 $ 10,167,018
Notes payable Level 3 154,788 154,788
Federal Home Loan Bank advances Level 3 500,000 500,000
Total financial liabilities $ 10,821,806 $ 10,821,806


	June 30, 2021
	FV Hierarchy Level	Carrying Amount		Fair Value
Financial assets
Fixed maturity, bonds held-to-maturity
U.S. Treasury and government	Level 1	$	12,356	$	12,217
U.S. states and political subdivisions	Level 2	111,374		112,891
Foreign governments	Level 2	14,436		14,550
Corporate debt securities	Level 2	7,168,199		7,685,504
Residential mortgage-backed securities	Level 2	61,969		65,581
Collateralized debt securities	Level 2	105,363		107,306
Total fixed maturity, bonds held-to-maturity		7,473,697		7,998,049
Mortgage loans on real estate, net of allowance	Level 3	5,028,933		5,310,773
Policy loans	Level 3	365,855		365,855

Total financial assets		$	12,868,485	$	13,674,677
Financial liabilities
Investment contracts	Level 3	$	10,553,927	$	10,553,927
Notes payable	Level 3	151,498		151,498

Total financial liabilities		$	10,705,425	$	10,705,425


		December 31, 2019						December 31, 2020
		FV Hierarchy Level	Carrying Amount		Fair Value			FV Hierarchy Level	Carrying Amount		Fair Value
Financial assets	Financial assets						Financial assets
Fixed maturity, bonds held-to-maturity	Fixed maturity, bonds held-to-maturity						Fixed maturity, bonds held-to-maturity
U.S. treasury and government							U.S. treasury and government	Level 2	$	7,732	$	7,744
U.S. states and political subdivisions	U.S. states and political subdivisions	Level 2	$	165,109	$	170,114	U.S. states and political subdivisions	Level 2	109,445		113,535
Foreign governments	Foreign governments	Level 2	3,907		4,349		Foreign governments	Level 2	3,851		4,225
Corporate debt securities	Corporate debt securities	Level 2	8,099,098		8,424,969		Corporate debt securities	Level 2	6,981,597		7,595,712
Corporate debt securities							Corporate debt securities	Level 3	3,024		3,024
Residential mortgage-backed securities	Residential mortgage-backed securities	Level 2	237,516		242,828		Residential mortgage-backed securities	Level 2	114,127		117,728
Collateralized debt securities	Collateralized debt securities	Level 2	125,631		126,430		Collateralized debt securities	Level 2	135,194		141,213

Total fixed maturity, bonds held-to-maturity	Total fixed maturity, bonds held-to-maturity		8,631,261		8,968,690		Total fixed maturity, bonds held-to-maturity		7,354,970		7,983,181
Mortgage loans on real estate, net of allowance	Mortgage loans on real estate, net of allowance	Level 3	5,097,017		5,309,005		Mortgage loans on real estate, net of allowance	Level 3	5,242,531		5,451,152
Policy loans	Policy loans	Level 3	379,657		379,657		Policy loans	Level 3	373,014		373,014

Total financial assets	Total financial assets		$	14,107,935	$	14,657,352	Total financial assets		$	12,970,515	$	13,807,347
Financial liabilities	Financial liabilities						Financial liabilities
Investment contracts	Investment contracts	Level 3	$	10,254,959	$	10,254,959	Investment contracts	Level 3	$	10,101,764	$	10,101,764
Notes payable	Notes payable	Level 3	157,997		157,997		Notes payable	Level 3	153,703		153,703
Federal Home Loan Bank advance							Federal Home Loan Bank advance	Level 2	250,000		250,227
Total financial liabilities	Total financial liabilities		$	10,412,956	$	10,412,956	Total financial liabilities		$	10,505,467	$	10,505,694

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Note 10 – Deferred Policy Acquisition Costs

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

Life Annuity Health Property
& Casualty Total
Beginning balance at January 1, 2020 $ 852,900 $ 415,380 $ 32,578 $ 122,149 $ 1,423,007
Additions 100,210 37,217 12,117 255,497 405,041
Amortization (65,338) (65,364) (11,535) (248,042) (390,279)
Effect of change in unrealized gains on bonds available-for-sale debt (7,398) (29,931) 0 0 (37,329)
Net change 27,474 (58,078) 582 7,455 (22,567)
Ending balance at September 30, 2020 $ 880,374 $ 357,302 $ 33,160 $ 129,604 $ 1,400,440


	Life		Annuity		Health		Property & Casualty		Total
Beginning balance at January 1, 2021	$	896,208	$	309,056	$	32,885	$	122,062	$	1,360,211
Additions	80,648		53,911		5,884		178,089		318,532
Amortization	(52,720)		(31,191)		(8,269)		(169,391)		(261,571)
Effect of change in unrealized gains on available-for-sale debt securities	5,744		6,707		0		0		12,451
Net change	33,672		29,427		(2,385)		8,698		69,412
Ending balance at June 30, 2021	$	929,880	$	338,483	$	30,500	$	130,760	$	1,429,623

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

Note 11 – Liability for Unpaid Claims and Claim Adjustment Expenses

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

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


	Six months ended June 30,
	2021		2020
Unpaid claims balance, beginning	$	1,354,213	$	1,322,837
Less: Reinsurance recoverables	243,084		246,447
Net beginning balance	1,111,129		1,076,390
Incurred related to
Current	617,901		601,691
Prior years	(46,711)		(33,256)
Total incurred claims	571,190		568,435
Paid claims related to
Current	283,893		268,203
Prior years	258,535		267,282
Total paid claims	542,428		535,485
Net balance	1,139,891		1,109,340
Plus: Reinsurance recoverables	241,223		250,378
Unpaid claims balance, ending	$	1,381,114	$	1,359,718

Nine months ended September 30,
2020 2019
Unpaid claims balance, beginning $ 1,322,837 $ 1,305,225
Less: Reinsurance recoverables 246,447 254,466
Net beginning balance 1,076,390 1,050,759
Incurred related to
Current 904,890 917,048
Prior years (53,090) (47,048)
Total incurred claims 851,800 870,000
Paid claims related to
Current 495,325 482,729
Prior years 334,054 370,807
Total paid claims 829,379 853,536
Net balance 1,098,811 1,067,223
Plus: Reinsurance recoverables 286,188 247,174
Unpaid claims balance, ending $ 1,384,999 $ 1,314,397

The net and gross reserve calculations have shown favorable development ~~in 2020~~ as a result of favorable loss emergence compared to what was implied by the loss development patterns used in the original estimation of losses in prior years. Estimates for ultimate incurred claims attributable to insured events of prior years decreased by approximately ~~$53,090,000~~$46.7 million during the first ~~nine~~six months of ~~2020~~2021 and decreased by ~~$47,048,000~~$33.3 million during the same period in ~~2019.~~2020. The favorable development in 2021 was a reflection of lower-than-anticipated settlement of losses arising from commercial automobile, agribusiness, private passenger automobile, guaranteed asset protection waiver, credit property and collateral protection insurance lines of business. The favorable development in 2020 was a reflection of lower-than-anticipated settlement of losses in the private passenger automobile, agribusiness, and workers compensation lines of business. The favorable development for the first nine months in 2019 reflects lower-than-anticipated settlement of losses in the workers compensation and agribusiness lines of business.compensation.

For short-duration health insurance claims, the total of IBNR plus expected development on reported claims included in the liability for unpaid claims and claim adjustment expenses at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 was ~~$20,419,000~~$18.2 million and ~~$21,379,000,~~$20.5 million, respectively.

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Note 12 – Federal Income Taxes

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

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Amount Rate Amount Rate Amount Rate Amount Rate
Income tax expense before tax on equity in earnings of unconsolidated affiliates $ 41,589 19.3 % $ 17,717 13.7 % $ 36,903 18.9 % $ 99,323 17.3 %
Tax on equity in earnings of unconsolidated affiliates 3,576 1.7 9,465 7.3 4,014 2.1 21,488 3.7
Total expected income tax expense at the statutory rate 45,165 21.0 27,182 21.0 40,917 21.0 120,811 21.0
Tax-exempt investment income (1,062) (0.5) (1,027) (0.8) (3,149) (1.6) (2,945) (0.5)
Dividend exclusion 10 0 (817) (0.6) (2,295) (1.2) (2,598) (0.4)
Miscellaneous tax credits, net (2,127) (1.0) (1,521) (1.2) (6,056) (3.1) (6,512) (1.1)
Low income housing tax credit expense 997 0.5 1,324 1.0 3,753 1.9 4,265 0.7
Noncontrolling interest (104) 0 (2,284) (1.8) (104) (0.1) (2,284) (0.4)
Change in valuation allowance 11 0 70 0.1 134 0.1 235 0
Other items, net 1,022 0.4 (452) (0.3) 1,241 0.7 828 0.1
Provision for federal income taxes $ 43,912 20.4 % $ 22,475 17.4 % $ 34,441 17.7 % $ 111,800 19.4 %


	Three months ended June 30,								Six months ended June 30,
	2021				2020				2021				2020
	Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate


Total expected income tax expense (benefit) at the statutory rate	$	59,943	21.0	%	$	55,148	21.0	%	$	104,568	21.0	%	$	(4,248)	21.0	%
Tax-exempt investment income	(1,111)		(0.4)		(1,061)		(0.4)		(2,283)		(0.5)		(2,088)		10.3

Dividend exclusion	(779)		(0.3)		(1,443)		(0.5)		(1,592)		(0.3)		(2,305)		11.4
Tax credits, net	(1,347)		(0.5)		(1,534)		(0.6)		(2,965)		(0.6)		(3,929)		19.4
Low income housing tax credit expense	1,375		0.5		982		0.4		2,888		0.6		2,756		(13.6)

Change in valuation allowance	4		0		12		0		33		0		124		(0.6)


Other items, net	244		0.1		93		0		851		0.2		219		(1.1)


Total	$	58,329	20.4	%	$	52,197	19.9	%	$	101,500	20.4	%	$	(9,471)	46.8	%

As of ~~September~~June 30, ~~2020,~~2021, American National had no material net operating loss or tax credit carryforwards.

American National’s federal income tax returns for tax years 2016 to ~~2018~~2019 are subject to examination by the Internal Revenue Service. Tax returns for 2013 to 2015 are subject to examination with certain limitations. In April 2019, American National received notice from the Internal Revenue Service of its intent to audit tax years 2013 to 2016. In September 2020, American National reached a settlement with the Internal Revenue Service and the audit of tax years 2013, 2014, 2015 and 2016 is now closed. The settlement had no impact on our condensed consolidated statements of financial position or condensed consolidated statements of operations. In the opinion of management, all prior year deficiencies have been paid or adequate provisions have been made for any tax deficiencies that may be upheld.

As of ~~September~~June 30, ~~2020,~~2021, American National had no provision for uncertain tax positions and no provision for penalties or ~~interest were established.~~interest. In addition, management does not believe there are any uncertain tax benefits that could be recognized within the next twelve months that would impact American National’s effective tax rate.

Note 13 – Accumulated Other Comprehensive Income (Loss)

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

Net Unrealized
Gains (Losses)
on Securities Defined
Benefit
Pension Plan
Adjustments Foreign
Currency
Adjustments Accumulated
Other
Comprehensive
Income (Loss)
Beginning balance at January 1, 2020 $ 157,851 $ (55,232) $ (3,101) $ 99,518
Amounts reclassified from AOCI (net of tax benefit $1,179 and expense $1,450) (4,434) 5,456 — 1,022
Unrealized holding gains arising during the period (net of tax expense $34,600) 130,160 — — 130,160
Unrealized adjustment to DAC (net of tax benefit $7,839) (29,490) — — (29,490)
Unrealized gains on investments attributable to participating policyholders’ interest (net of tax benefit $1,672) (6,290) — — (6,290)
Foreign currency adjustment (net of tax benefit $57)
— — (214) (214)
Ending balance at September 30, 2020 $ 247,797 $ (49,776) $ (3,315) $ 194,706
Beginning balance at January 1, 2019 $ (42,469) $ (54,236) $ (3,033) $ (99,738)
Amounts reclassified from AOCI (net of tax expense $401 and $1,160) 1,510 4,365 — 5,875
Unrealized holding gains arising during the period (net of tax expense $68,285) 256,880 — — 256,880
Unrealized adjustment to DAC (net of tax benefit $17,343) (65,244) — — (65,244)
Unrealized gains on investments attributable to participating policyholders’ interest (net of tax benefit $3,148) (11,841) — — (11,841)
Foreign currency adjustment (net of tax expense $79) — — 297 297
Cumulative effect of changes in accounting 16,164 (16,491) (458) (785)
Ending balance at September 30, 2019 $ 155,000 $ (66,362) $ (3,194) $ 85,444


	Net Unrealized Gains (Losses) on Securities		Defined Benefit Pension Plan Adjustments		Foreign Currency Adjustments		Accumulated Other Comprehensive Income (Loss)
Beginning balance at January 1, 2021	$	292,166	$	(67,130)	$	(2,866)	$	222,170
Amounts reclassified from AOCI (net of tax benefit $2,724 and expense $1,630)	(10,249)		6,131		—		(4,118)
Unrealized holding losses arising during the period (net of tax benefit $15,739)	(59,208)		—		—		(59,208)
Unrealized adjustment to DAC (net of tax expense $2,615)	9,836		—		—		9,836
Unrealized losses on investments attributable to participating policyholders’ interest (net of tax expense $732)	2,752		—		—		2,752
Foreign currency adjustment (net of tax expense $111)	—		—		419		419
Ending balance at June 30, 2021	$	235,297	$	(60,999)	$	(2,447)	$	171,851

	Net Unrealized Gains (Losses) on Securities		Defined Benefit Pension Plan Adjustments		Foreign Currency Adjustments		Accumulated Other Comprehensive Income (Loss)
Beginning balance at January 1, 2020	$	157,851	$	(55,232)	$	(3,101)	$	99,518
Amounts reclassified from AOCI (net of tax benefit $448 and expense $959)	(1,687)		3,605		—		1,918
Unrealized holding gains arising during the period (net of tax expense $22,284)	83,831		—		—		83,831
Unrealized adjustment to DAC (net of tax benefit $4,460)	(16,780)		—		—		(16,780)
Unrealized gains on investments attributable to participating policyholders’ interest (net of tax benefit $1,061)	(3,991)		—		—		(3,991)
Foreign currency adjustment (net of tax benefit $156)	—		—		(585)		(585)

Ending balance at June 30, 2020	$	219,224	$	(51,627)	$	(3,686)	$	163,911

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Note 14 – Stockholders’ Equity and Noncontrolling Interests

The holding company reorganization effective July 1, 2020, provided for the automatic conversion of ANICO common stock, par value of $1.00 per share, issued and outstanding immediately prior to the effective time of the reorganization, into one duly issued, fully paid and non-assessable share of the common stock, par value $0.01 per share, of ANAT. ANAT has one class of common stock with a par value $0.01 per share and 50,000,000 authorized shares. ~~Upon the effective date of the holding company reorganization, ANAT retired 3,945,249 shares of common stock that were held in treasury at ANICO prior to the reorganization.~~ The number of shares outstanding at the dates indicated are shown below:


		September 30, 2020	December 31, 2019		June 30, 2021	December 31, 2020
Common stock	Common stock			Common stock
Shares issued	Shares issued	26,887,200	30,832,449	Shares issued	26,887,200	26,887,200
Treasury shares		0	(3,945,249)
Outstanding shares		26,887,200	26,887,200

Restricted shares	Restricted shares	(10,000)	(10,000)	Restricted shares	(10,000)	(10,000)
Unrestricted outstanding shares	Unrestricted outstanding shares	26,877,200	26,877,200	Unrestricted outstanding shares	26,877,200	26,877,200

Stock-based Compensation

American National has made grants of Stock Appreciation Rights (“SAR”), Restricted Stock (“RS”) Awards, and Restricted Stock Units (“RSU”), pursuant to a stock-based compensation plan. The term for granting additional awards under such plan expired in 2019. Pursuant to the plan, grants were made to certain officers meeting established performance objectives, and grants were made to directors as compensation and to align their interests with those of other shareholders. In addition, American National has made grants to directors and advisory directors of RSUs that are cash-settled only, with no provision for conversion to stock. ~~8,250~~10,197 of such cash-settled RSUs were granted during the ~~third~~second quarter of ~~2020~~2021 and ~~are currently~~remain outstanding at June 30, 2021 as shown in the table below.

~~SAR,~~

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


		SAR			RS Shares			RSUs				RS Shares		RSUs
		Shares	Weighted-Average Grant Date Fair Value		Shares	Weighted-Average Grant Date Fair Value		Units	Weighted-Average Grant Date Fair Value				Shares	Weighted-Average Grant Date Fair Value		Units	Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2019		66	$	110.83	10,000	$	80.05	8,250	$	113.19
Outstanding at December 31, 2020											Outstanding at December 31, 2020		10,000	$	80.05	8,250	$	75.35
Granted	Granted	—	—		—	—		8,250	75.35		Granted		—	—		10,197	113.35
Exercised	Exercised	—	—		—	—		(8,250)	113.19		Exercised		—	—		(8,250)	75.35
Forfeited	Forfeited	—	—		—	—		—	—		Forfeited		—	—		0	0
Expired	Expired	(66)	110.83		—	—		—	—		Expired		—	—		0	0
Outstanding at September 30, 2020		0	$	0	10,000	$	80.05	8,250	$	75.35
Outstanding at June 30, 2021											Outstanding at June 30, 2021		10,000	$	80.05	10,197	$	113.35


		SAR		RS Shares		RSUs			SAR		RS Shares		RSUs
Weighted-average contractual remaining life (in years)	Weighted-average contractual remaining life (in years)	0		2.42		0.58		Weighted-average contractual remaining life (in years)	0.00		1.67		0.84
Exercisable shares	Exercisable shares	0		N/A		N/A		Exercisable shares	0		N/A		N/A
Weighted-average exercise price	Weighted-average exercise price	$	0	$	0	$	75.35	Weighted-average exercise price	$	0	$	80.05	$	113.35
Weighted-average exercise price exercisable shares	Weighted-average exercise price exercisable shares	0		N/A		N/A		Weighted-average exercise price exercisable shares	0		N/A		N/A
Compensation expense (credit)	Compensation expense (credit)							Compensation expense (credit)
Three months ended September 30, 2020		$	0	$	20,000	$	360,000
Three months ended September 30, 2019		1,000		20,000		154,000
Nine months ended September 30, 2020		$	(1,000)	$	60,000	$	176,000
Nine months ended September 30, 2019		(14,000)		60,000		1,094,000
Three months ended June 30, 2021								Three months ended June 30, 2021	$	0	$	20,000	$	1,131,000
Three months ended June 30, 2020								Three months ended June 30, 2020	0		20,000		(14,000)
Six months ended June 30, 2021								Six months ended June 30, 2021	$	0	$	40,000	$	1,351,000
Six months ended June 30, 2020								Six months ended June 30, 2020	(1,000)		40,000		(184,000)
Fair value of liability award	Fair value of liability award							Fair value of liability award
September 30, 2020		$	0	N/A		$	557,000
December 31, 2019		1,000		N/A		971,000
June 30, 2021								June 30, 2021	$	0	N/A		$	1,500,000
December 31, 2020								December 31, 2020	0		N/A		793,000

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

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

RSU awards to our directors and advisory directors are settled in cash based upon the market price of our common stock after one-year or earlier upon death, disability or retirement from service after age 65. During the twelve months ended December 31, 2020, 8,250 RSUs were granted and vested on May 1, 2021 and were settled in cash.A new grant of 10,197 RSUs was awarded to directors and advisory directors on May 1, 2021 with one-year cliff vesting which will be settled in cash.

Table of Contents

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

~~RSU awards to our directors and advisory directors are settled in cash based upon the market price of our common stock generally after~~

~~one~~-year or earlier upon death, disability or retirement from service after age 65. RSUs were not granted in May as a result of the uncertainty surrounding the COVID-19 pandemic; however, in August, the Board approved the grant of 8,250 RSUs which will vest on May 1, 2021 and will be settled in cash.

Earnings per Share

Basic earnings per share were calculated using a weighted average number of shares outstanding. Diluted earnings per share include RS ~~and RSU award shares issued in 2019.~~awards. RSUs ~~issued in 2020~~ may only be settled in cash.

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Weighted average shares outstanding 26,877,200 26,881,700 26,879,178 26,883,025
Incremental shares from RS awards and RSUs 7,558 6,472 8,696 6,313
Total shares for diluted calculations 26,884,758 26,888,172 26,887,874 26,889,338
Net income attributable to American National (in thousands) $ 171,052 $ 92,184 $ 161,153 $ 449,241
Basic earnings per share $ 6.36 $ 3.43 $ 6.00 $ 16.71
Diluted earnings per share $ 6.36 $ 3.43 $ 5.99 $ 16.71


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Weighted average shares outstanding	26,877,200		26,878,684		26,877,200		26,880,183
Incremental shares from RS awards and RSUs	7,522		8,445		7,594		9,265
Total shares for diluted calculations	26,884,722		26,887,129		26,884,794		26,889,448
Net income (loss) attributable to American National (in thousands)	$	227,976	$	210,545	$	398,149	$	(9,899)
Basic earnings (losses) per share	$	8.48	$	7.83	$	14.81	$	(0.37)
Diluted earnings (losses) per share	$	8.48	$	7.83	$	14.81	$	(0.37)

Statutory Capital and Surplus

Risk Based Capital (“RBC”) is a measure insurance regulators use to evaluate the capital adequacy of American National's insurance subsidiaries. RBC is calculated using formulas applied to certain financial balances and activities that consider, among other things, investment risks related to the type and quality of investments, insurance risks associated with products and liabilities, interest rate risks and general business risks. Insurance companies that do not maintain capital and surplus at a level at least 200% of the ~~authorized control~~company action level RBC are required to take certain actions. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, American National Insurance Company’s~~2020, ANICO's statutory capital and surplus was ~~$3,488,293,000~~$3.8 billion and ~~$3,477,727,000, respectively. American National Insurance Company and each~~$3.6 billion, respectively, which resulted in an RBC level above 200% of ~~its~~the company action level. All of our other insurance subsidiaries had statutory capital and surplus at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, above 200% of the ~~authorized control~~company action level, except for ANPAC Louisiana Insurance Company ("ANPLA"). At June 30, 2021 and December 31, 2020, ANPLA's statutory capital and surplus was $63.4 million and $68.5 million respectively, which resulted in an RBC level of 179% and 194% of the company action level. This decrease in RBC of ANPLA is primarily driven by an increase in homeowners catastrophe losses impacting the operating results in 2021 and 2020. We are actively managing our homeowners exposure of ANPLA, will continue to monitor the surplus levels and will be addressing rate adequacy through future planned underwriting and rate actions.

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

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

One of American National’s insurance subsidiaries has been granted a permitted practice from the Missouri Department of Insurance to record as the valuation of its investment in a wholly-owned subsidiary that is the attorney-in-fact for a Texas domiciled insurer, the statutory capital and surplus of the Texas domiciled insurer. This permitted practice increases the statutory capital and surplus of both ANICO and American National Lloyds Insurance Company ~~and the Missouri domiciled insurance subsidiary~~ by ~~$73,084,000~~$61.2 million and ~~$70,339,000~~$75.3 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The statutory capital and surplus of both ANICO and American National Lloyds Insurance Company ~~and the Missouri domiciled insurance subsidiary~~ would have remained above the Company action level RBC had it not used the permitted practice.

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

September 30, 2020 December 31, 2019
Statutory capital and surplus
Life insurance entities $ 2,120,222 $ 2,159,770
Property and casualty insurance entities 1,379,711 1,329,782

3537

Table of Contents

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

Three months ended September 30, Nine months ended September 30,
2020 2019 2020 2019
Statutory net income (loss)
Life insurance entities $ (11,638) $ 26,498 $ 13,036 $ 32,196
Property and casualty insurance entities 33,816 15,626 69,094 66,090

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


	June 30, 2021		December 31, 2020
Statutory capital and surplus
Life insurance entities	$	2,283,191	$	2,188,808
Property and casualty insurance entities	1,559,578		1,463,179


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Statutory net income (loss)
Life insurance entities	$	(18,958)	$	(28,301)	$	(51,174)	$	26,674
Property and casualty insurance entities	17,879		(12,975)		57,151		35,278

Dividends

Dividends are paid on a quarterly basis. We paid a quarterly dividend of $0.82 per share for each quarter during the ~~nine~~six months ended ~~September~~June 30, 2021 and June 30, 2020, and ~~September 30, 2019, respectively. We~~we expect to continue to pay regular cash dividends, although there is no assurance as to future dividends because they depend on future earnings, capital requirements and financial conditions.

~~American National Insurance Company’s payment~~

The amount of dividends ~~to its stockholder, American National Group, Inc.~~paid by our insurance company subsidiaries is restricted by insurance law. ~~The~~These restrictions ~~require~~are based, in part, on the prior year’s statutory income and surplus. In general, dividends up to specified levels are considered ordinary and may be paid without prior regulatory approval. Dividends in larger amounts, or extraordinary dividends, are subject to approval by the insurance commissioner of the relevant state of domicile. For example, restrictions applicable to Texas-domiciled life insurance companies ~~to maintain minimum amounts of capital and surplus, and in the absence of special approval,~~like ANICO limit the payment of dividends to the greater of the prior year’s statutory net income from operations, or 10% of prior year statutory ~~surplus. American National Insurance Company~~surplus, in each case determined in accordance with statutory accounting principles. ANICO is permitted without prior approval of the Texas Department of Insurance to pay total dividends of ~~$347,773,000~~$363.9 million during ~~2020. Similar restrictions on amounts that can transfer in the form of dividends, loans, or advances to American National Insurance Company apply to its insurance subsidiaries.~~2021.

Noncontrolling ~~Interests~~Interest

American National County Mutual Insurance Company (“County Mutual”) is a mutual insurance company owned by its policyholders. ~~American National Insurance Company~~ANICO has a management agreement that effectively gives it control of County Mutual. As a result, County Mutual is included in the condensed consolidated financial statements of American National. Policyholder interests in the financial position of County Mutual are reflected as noncontrolling interest of ~~$6,750,000~~$6.8 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

American National Group, Inc. and its subsidiaries exercise control or ownership of various joint ventures, resulting in their consolidation into American National’s condensed consolidated financial statements. The interests of the other partners in the consolidated joint ventures are shown as a noncontrolling interest of $0.2 million and a noncontrolling deficit of ~~$443,000 and $736,000~~$0.9 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

Note 15 – Segment Information

Management organizes the business into 5 operating segments:

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

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

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

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

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

Table of Contents

Note 15 – Segment Information – (Continued)

The accounting policies of the segments are the same as those described in Note 2, Summary of Significant Accounting Policies and Practices, of American National’s ~~2019~~2020 annual report on Form ~~10-K.~~10-K filed with the SEC on March 4, 2021. All revenues and expenses specifically attributable to policy transactions are recorded directly to the appropriate operating segment. Revenues and expenses not specifically attributable to policy transactions are allocated to each segment as follows:

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

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

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

~~Table of Contents~~

~~Note 15 – Segment Information – (Continued)~~

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

Three months ended September 30, 2020
Property Corporate
Life Annuity Health & Casualty & Other Total
PREMIUMS AND OTHER REVENUES
Premiums $ 101,182 $ 27,960 $ 40,934 $ 391,388 $ 0 $ 561,464
Other policy revenues 75,317 4,027 0 0 0 79,344
Net investment income 69,235 163,125 2,033 16,049 3,814 254,256
Net realized investment gains 0 0 0 0 17,387 17,387
Change in investment credit loss 0 0 0 0 (4,175) (4,175)
Net gains on equity securities 0 0 0 0 152,147 152,147
Other income 358 733 4,971 3,079 542 9,683
Total premiums and other revenues 246,092 195,845 47,938 410,516 169,715 1,070,106
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits 153,957 46,424 0 0 0 200,381
Claims incurred 0 0 27,933 258,412 0 286,345
Interest credited to policyholders’ account balances 24,522 104,424 0 0 0 128,946
Commissions for acquiring and servicing policies 41,974 16,119 7,608 72,664 0 138,365
Other operating expenses 45,080 12,115 10,013 48,576 10,629 126,413
Change in deferred policy acquisition costs (15,499) 8,555 (542) (901) — (8,387)
Total benefits, losses and expenses 250,034 187,637 45,012 378,751 10,629 872,063
Income (loss) before federal income tax and other items $ (3,942) $ 8,208 $ 2,926 $ 31,765 $ 159,086 $ 198,043


	Three months ended June 30, 2021

	Life		Annuity		Health		Property & Casualty		Corporate & Other		Total
PREMIUMS AND OTHER REVENUES
Premiums	$	100,784	$	20,497	$	34,485	$	409,486	$	0	$	565,252
Other policy revenues	83,527		6,996		0		0		0		90,523
Net investment income	72,225		163,356		2,004		15,725		44,089		297,399
Net realized investment gains	0		0		0		0		10,602		10,602

Change in investment credit loss	0		0		0		0		25,079		25,079
Net gains on equity securities	0		0		0		0		170,804		170,804
Other income	422		932		5,893		2,786		1,002		11,035
Total premiums and other revenues	256,958		191,781		42,382		427,997		251,576		1,170,694
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	139,516		42,723		0		0		0		182,239
Claims incurred	0		0		26,190		280,606		0		306,796
Interest credited to policyholders’ account balances	23,326		87,910		0		0		0		111,236
Commissions for acquiring and servicing policies	46,397		29,926		6,565		81,025		0		163,913
Other operating expenses	49,226		12,884		9,867		50,676		27,254		149,907
Change in deferred policy acquisition costs	(13,459)		(11,649)		1,531		(5,265)		—		(28,842)
Total benefits, losses and expenses	245,006		161,794		44,153		407,042		27,254		885,249
Income (loss) before federal income tax and other items	$	11,952	$	29,987	$	(1,771)	$	20,955	$	224,322	$	285,445


		Three months ended September 30, 2019													Three months ended June 30, 2020
								Property		Corporate
		Life		Annuity		Health		& Casualty		& Other		Total			Life		Annuity		Health		Property & Casualty		Corporate & Other		Total
PREMIUMS AND OTHER REVENUES	PREMIUMS AND OTHER REVENUES													PREMIUMS AND OTHER REVENUES
Premiums	Premiums	$	93,079	$	41,305	$	40,676	$	382,784	$	0	$	557,844	Premiums	$	91,670	$	25,944	$	42,945	$	372,704	$	0	$	533,263
Other policy revenues	Other policy revenues	72,446		4,338		0		0		0		76,784		Other policy revenues	76,226		3,561		0		0		0		79,787
Net investment income		61,961		141,684		2,381		16,357		24,237		246,620
Net investment income (loss)														Net investment income (loss)	73,645		189,842		2,214		16,037		(8,012)		273,726
Net realized investment gains	Net realized investment gains	0		0		0		0		31,933		31,933		Net realized investment gains	0		0		0		0		3,939		3,939

Change in investment credit loss														Change in investment credit loss	0		0		0		0		(52,310)		(52,310)
Net gains on equity securities	Net gains on equity securities	0		0		0		0		8,589		8,589		Net gains on equity securities	0		0		0		0		298,825		298,825
Other income	Other income	441		653		5,021		3,137		1,478		10,730		Other income	440		795		5,503		2,844		754		10,336
Total premiums and other revenues	Total premiums and other revenues	227,927		187,980		48,078		402,278		66,237		932,500		Total premiums and other revenues	241,981		220,142		50,662		391,585		243,196		1,147,566
BENEFITS, LOSSES AND EXPENSES	BENEFITS, LOSSES AND EXPENSES													BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	Policyholder benefits	113,652		59,699		0		0		0		173,351		Policyholder benefits	124,941		44,983		0		0		0		169,924
Claims incurred	Claims incurred	0		0		28,567		280,695		0		309,262		Claims incurred	0		0		26,726		280,561		0		307,287
Interest credited to policyholders’ account balances	Interest credited to policyholders’ account balances	22,045		84,737		0		0		0		106,782		Interest credited to policyholders’ account balances	25,201		121,582		0		0		0		146,783
Commissions for acquiring and servicing policies	Commissions for acquiring and servicing policies	42,023		13,368		7,405		65,893		0		128,689		Commissions for acquiring and servicing policies	41,287		11,657		7,160		80,386		0		140,490
Other operating expenses	Other operating expenses	46,873		12,264		9,504		50,111		9,750		128,502		Other operating expenses	44,505		11,746		9,476		50,080		9,370		125,177
Change in deferred policy acquisition costs	Change in deferred policy acquisition costs	(5,080)		7,006		258		(636)		0		1,548		Change in deferred policy acquisition costs	(11,535)		12,306		(17)		(5,457)		0		(4,703)
Total benefits, losses and expenses	Total benefits, losses and expenses	219,513		177,074		45,734		396,063		9,750		848,134		Total benefits, losses and expenses	224,399		202,274		43,345		405,570		9,370		884,958
Income before federal income tax and other items		$	8,414	$	10,906	$	2,344	$	6,215	$	56,487	$	84,366
Income (loss) before federal income tax and other items														Income (loss) before federal income tax and other items	$	17,582	$	17,868	$	7,317	$	(13,985)	$	233,826	$	262,608

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Note 15 – Segment Information – (Continued)

Nine months ended September 30, 2020
Property Corporate
Life Annuity Health & Casualty & Other Total
PREMIUMS AND OTHER REVENUES
Premiums $ 282,368 $ 69,413 $ 126,965 $ 1,152,749 $ 0 $ 1,631,495
Other policy revenues 227,083 11,653 0 0 0 238,736
Net investment income 188,455 394,508 6,480 48,171 19,274 656,888
Net realized investment gains 0 0 0 0 25,474 25,474
Change in investment credit loss 0 0 0 0 (101,163) (101,163)
Net gains on equity securities 0 0 0 0 118,397 118,397
Other income 1,534 2,166 15,001 9,656 2,795 31,152
Total premiums and other revenues 699,440 477,740 148,446 1,210,576 64,777 2,600,979
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits 389,364 126,209 0 0 0 515,573
Claims incurred 0 0 89,544 768,682 0 858,226
Interest credited to policyholders’ account balances 47,820 223,586 0 0 0 271,406
Commissions for acquiring and servicing policies 122,728 38,024 22,792 225,746 0 409,290
Other operating expenses 137,065 35,737 30,118 151,660 30,936 385,516
Change in deferred policy acquisition costs (34,872) 28,147 (582) (7,455) 0 (14,762)
Total benefits, losses and expenses 662,105 451,703 141,872 1,138,633 30,936 2,425,249
Income before federal income tax and other items $ 37,335 $ 26,037 $ 6,574 $ 71,943 $ 33,841 $ 175,730



	Six months ended June 30, 2021

	Life		Annuity		Health		Property & Casualty		Corporate & Other		Total
PREMIUMS AND OTHER REVENUES
Premiums	$	201,563	$	44,738	$	72,713	$	808,891	$	0	$	1,127,905
Other policy revenues	165,035		12,027		0		0		0		177,062
Net investment income	140,022		317,220		4,087		31,238		74,813		567,380
Net realized investment gains	0		0		0		0		29,841		29,841
Change in investment credit loss	0		0		0		0		19,593		19,593
Net gains on equity securities	0		0		0		0		266,744		266,744
Other income	880		1,788		9,987		6,275		1,857		20,787
Total premiums and other revenues	507,500		375,773		86,787		846,404		392,848		2,209,312
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	285,676		87,440		0		0		0		373,116
Claims incurred	0		0		50,441		524,741		0		575,182
Interest credited to policyholders’ account balances	43,096		175,927		0		0		0		219,023
Commissions for acquiring and servicing policies	91,817		52,968		12,551		160,262		0		317,598
Other operating expenses	96,267		25,065		20,475		104,562		37,040		283,409
Change in deferred policy acquisition costs	(27,928)		(22,720)		2,385		(8,698)		0		(56,961)
Total benefits, losses and expenses	488,928		318,680		85,852		780,867		37,040		1,711,367
Income before federal income tax and other items	$	18,572	$	57,093	$	935	$	65,537	$	355,808	$	497,945


		Nine months ended September 30, 2019													Six months ended June 30, 2020
								Property		Corporate
		Life		Annuity		Health		& Casualty		& Other		Total			Life		Annuity		Health		Property & Casualty		Corporate & Other		Total
PREMIUMS AND OTHER REVENUES	PREMIUMS AND OTHER REVENUES													PREMIUMS AND OTHER REVENUES
Premiums	Premiums	$	265,634	$	137,434	$	121,581	$	1,125,704	$	0	$	1,650,353	Premiums	$	181,186	$	41,453	$	86,031	$	761,361	$	0	$	1,070,031
Other policy revenues	Other policy revenues	213,300		12,878		0		0		0		226,178		Other policy revenues	151,766		7,626		0		0		0		159,392
Net investment income	Net investment income	194,633		487,750		7,177		48,085		59,051		796,696		Net investment income	119,220		231,383		4,447		32,122		17,545		404,717
Net realized investment gains	Net realized investment gains	0		0		0		0		24,975		24,975		Net realized investment gains	0		0		0		0		8,087		8,087
Net gains on equity securities		0		0		0		0		282,026		282,026
Change in investment credit loss														Change in investment credit loss	0		0		0		0		(96,988)		(96,988)
Net losses on equity securities														Net losses on equity securities	0		0		0		0		(33,750)		(33,750)
Other income	Other income	1,586		1,916		15,940		8,689		4,511		32,642		Other income	1,176		1,433		10,030		6,577		2,253		21,469
Total premiums and other revenues	Total premiums and other revenues	675,153		639,978		144,698		1,182,478		370,563		3,012,870		Total premiums and other revenues	453,348		281,895		100,508		800,060		(102,853)		1,532,958
BENEFITS, LOSSES AND EXPENSES	BENEFITS, LOSSES AND EXPENSES													BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	Policyholder benefits	327,579		191,248		0		0		0		518,827		Policyholder benefits	235,407		79,785		0		0		0		315,192
Claims incurred	Claims incurred	0		0		81,042		790,447		0		871,489		Claims incurred	0		0		61,611		510,270		0		571,881
Interest credited to policyholders’ account balances	Interest credited to policyholders’ account balances	57,561		314,142		0		0		0		371,703		Interest credited to policyholders’ account balances	23,298		119,162		0		0		0		142,460
Commissions for acquiring and servicing policies	Commissions for acquiring and servicing policies	120,646		63,373		22,975		201,635		0		408,629		Commissions for acquiring and servicing policies	80,754		21,905		15,184		153,082		0		270,925
Other operating expenses	Other operating expenses	142,520		38,087		31,203		151,677		28,158		391,645		Other operating expenses	91,985		23,622		20,105		103,084		20,307		259,103
Change in deferred policy acquisition costs	Change in deferred policy acquisition costs	(19,120)		(383)		919		(3,807)		0		(22,391)		Change in deferred policy acquisition costs	(19,373)		19,592		(40)		(6,554)		0		(6,375)
Total benefits, losses and expenses	Total benefits, losses and expenses	629,186		606,467		136,139		1,139,952		28,158		2,539,902		Total benefits, losses and expenses	412,071		264,066		96,860		759,882		20,307		1,553,186
Income before federal income tax and other items		$	45,967	$	33,511	$	8,559	$	42,526	$	342,405	$	472,968
Income (loss) before federal income tax and other items														Income (loss) before federal income tax and other items	$	41,277	$	17,829	$	3,648	$	40,178	$	(123,160)	$	(20,228)

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Note 16 – Commitments and Contingencies

Commitments

American National and its subsidiaries lease insurance sales office space, technological equipment, and automobiles. The remaining long-term lease commitments at ~~September~~June 30, ~~2020~~2021 were approximately ~~$10,876,000.~~$7.5 million.

American National had aggregate commitments at ~~September~~June 30, ~~2020~~2021 to purchase, expand or improve real estate, to fund fixed interest rate mortgage loans, and to purchase other invested assets of ~~$1,362,900,000~~$1.6 billion of which ~~$328,144,000~~$682.7 million is expected to be funded in ~~2020~~2021 with the remainder funded in ~~2021~~2022 and beyond.

American National had a $100,000,000 short-term variable rate borrowing facility containing a $55,000,000 sub-feature for the issuance of letters of credit. Borrowings under the facility were at the discretion of the lender and would be used only for funding working capital requirements. The combination of borrowings and outstanding letters of credit ~~cannot exceed $100,000,000 at any time. As~~in the amount of ~~September~~$3.5 million as of June 30, ~~2020~~2021 and December ~~31, 2019, the outstanding letters of credit were $3,484,000, and there were no borrowings on this facility. This facility expired on October~~ 31, 2020.

Federal Home Loan Bank (FHLB) Agreements

In May 2018, the Company became a member of the Federal Home Loan Bank of Dallas ~~(“FHLB”)~~ to augment its liquidity resources. The Company initially purchased $7.0 million of stock to meet the FHLB’s membership requirement. The FHLB member stock is recorded in other invested assets on the Company’s condensed consolidated statements of financial position. Through its membership, the Company has access to the FHLB’s financial services including advances that provide an attractive funding source for short-term borrowing and for access to other funding agreements. As of ~~September~~June 30, ~~2020,~~2021, certain municipal bonds and collateralized mortgage obligations ~~(CMO’s)~~ with a fair value of approximately ~~$84.1~~$50.0 million and commercial mortgage loans of approximately ~~$1.4~~$1.5 billion were on deposit with the FHLB as collateral for borrowing. As of ~~September~~June 30, ~~2020,~~2021, the collateral provided borrowing capacity ~~for the $500 million in outstanding advances as well as~~of approximately ~~$564 million in additional borrowing capacity.~~$1.1 billion. The deposited securities and commercial mortgage loans are included in the Company’s condensed consolidated statements of financial position within fixed maturity securities and mortgage loans on real estate, net of allowance, respectively.

~~FHLB outstanding advances as of September 30, 2020 are shown below (in thousands, except percentages):~~

Principal Amount Interest Rate Maturity Date
At September 30, 2020
FHLB advance, fixed rate* $ 250,000 0.25 % 10/13/2020
FHLB advance, fixed rate 250,000 0.38 % 4/28/2021

* ~~This advance was repaid in full on its maturity date of October 13, 2020. For more information on the details of this loan repayment, refer to Note 18, Subsequent Events.~~

Guarantees

~~American National~~ANICO has guaranteed bank loans for customers of a third-party marketing operation. The bank loans are used to fund premium payments on life insurance policies issued by ~~American National.~~ANICO. The loans are secured by the cash values of the life insurance policies. If the customer were to default on a bank loan, ~~American National~~ANICO would be obligated to pay off the loan. As the cash values of the life insurance policies always equal or exceed the balance of the loans, management does not foresee any loss on these guarantees. The total amount of the guarantees outstanding as of ~~September~~June 30, ~~2020,~~2021, was approximately ~~$121,379,000,~~$121.4 million, while the total cash value of the related life insurance policies was approximately ~~$142,019,000.~~$141.2 million.

Litigation

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

~~Table of Contents~~

~~Note 16 – Commitments and Contingencies – (Continued)~~

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

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Note 17 – Related Party Transactions

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

Dollar Amount of Transactions
Financial Statement Line Impacted Three months ended September 30, Nine months ended September 30, Amount due to (from) American National
Related Party 2020 2019 2020 2019 September 30, 2020 December 31, 2019
Gal-Tex Hotel Corporation Mortgage loan on real estate $ 0 $ 0 $ 0 $ 576 $ 0 $ 0
Gal-Tex Hotel Corporation Net investment income 0 0 0 9 0 0
Greer, Herz & Adams, LLP Other operating expenses 3,033 3,129 10,127 9,025 (558) (519)


		Dollar Amount of Transactions
	Financial Statement Line Impacted	Three months ended June 30,				Six months ended June 30,				Amount due from American National
Related Party		2021		2020		2021		2020		June 30, 2021		December 31, 2020


Greer, Herz & Adams, LLP	Other operating expenses	$	3,379	$	3,251	$	7,092	$	7,094	$	(652)	$	(441)

~~Mortgage Loans to Gal-Tex Hotel Corporation (“Gal-Tex”)~~: American National held a first mortgage loan which originated in 1999, with an interest rate of 7.25% and final maturity date of April 1, 2019 issued to a subsidiary of Gal-Tex, which was collateralized by a hotel property in San Antonio, Texas. This loan has been paid in full. The Moody Foundation owns 34.0% of Gal-Tex and 22.75% of American National, and the Libbie Shearn Moody Trust owns 50.2% of Gal-Tex and 37.0% of American National.

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

Note 18 – Subsequent ~~Events~~

On April 13, 2020, the Company borrowed from the Federal Home Loan Bank of Dallas' COVID-19 Relief Advance Program. The net amount of the advance was approximately $240 million after a required capital stock purchase of approximately $10 million. The loan has an interest rate of 0.25% with a final maturity date of October 13, 2020. The Company paid this advance in full on its maturity date of October 13, 2020. The capital stock purchased for the advance was not sold and is now considered excess stock left at the Federal Home Loan Bank of Dallas, and it will be available to use for potential future advances.Event

On August 6, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Brookfield Asset Management Reinsurance Partners Ltd. (“Brookfield Reinsurance”) and Freestone Merger Sub Inc. (“Merger Sub”).On the terms and subject to the conditions of the Merger Agreement, at the closing, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving entity, which will become an indirect, wholly-owned subsidiary of Brookfield Reinsurance.

On the terms and subject to the conditions of the Merger Agreement, at the time the Merger becomes effective (the “Effective Time”), each issued and outstanding share of the Company's common stock will be converted into the right to receive $190.00 in cash without interest (the “Merger Consideration”), for total Merger Consideration of approximately $5.1 billion. On the terms and subject to the conditions of the Merger Agreement, at the Effective Time, each outstanding and unvested restricted share award and restricted stock unit award will vest and be converted into the right to receive a cash payment equal to the Merger Consideration multiplied by the total number of shares of common stock subject to such award prior to the Effective Time. The Merger is expected to close in the first half of 2022, subject to regulatory approvals and other customary closing conditions.

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

The following pages provide management’s discussion and analysis (“MD&A”) of financial condition and results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 of American National Group, Inc. and its subsidiaries (referred to in this document as “we,” “our,” “us,” or the “Company”). This information should be read in conjunction with our condensed consolidated financial statements included in Item 1, Financial Statements, of this Form 10-Q.

Introductory Note Regarding Pending Merger

On August 6, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Brookfield Reinsurance Asset Management Reinsurance Partners Ltd. (“Brookfield Reinsurance”), an exempted company limited by shares existing under the laws of Bermuda, and Freestone Merger Sub Inc., a Delaware corporation and an indirect wholly-owned subsidiary of Brookfield Reinsurance (“Merger Sub”). On the terms and subject to the conditions of the Merger Agreement, at the closing, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving entity, which will become an indirect, wholly-owned subsidiary of Brookfield Reinsurance. The Merger was unanimously approved by the Company’s board of directors.

On the terms and subject to the conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of the Company's common stock will be converted into the right to receive $190.00 in cash without interest (the “Merger Consideration”), for total Merger Consideration of approximately $5.1 billion. On the terms and subject to the conditions of the Merger Agreement, at the Effective Time, each outstanding and unvested restricted share award and restricted stock unit award will vest and be converted into the right to receive a cash payment equal to the Merger Consideration multiplied by the total number of shares of common stock subject to such award prior to the Effective Time.

Closing Conditions. The completion of the Merger is subject to satisfaction or waiver of certain closing conditions, including: (i) there being no law or injunction prohibiting consummation of the Merger; (ii) subject to specified materiality standards, the accuracy of the representations and warranties of the other party; and (iii) compliance by the other party in all material respects with its covenants. Brookfield Reinsurance’s and Merger Sub’s obligations are also conditioned upon the absence of a material adverse effect on the Company and the absence of any burdensome condition (as defined in the Merger Agreement) imposed by any regulators as part of the regulatory approval process.

Financing. Brookfield Reinsurance has received an equity commitment letter from Brookfield Asset Management Inc., the aggregate proceeds of which will provide Brookfield Reinsurance with the funds needed to consummate the Merger, including to pay the aggregate Merger Consideration pursuant to the Merger Agreement. The equity commitment will be reduced by the amount of any debt actually funded at closing if and to the extent that such debt financing is used to fund the payment of Merger Consideration. The completion of the Merger is not conditioned on receipt of financing by Brookfield Reinsurance.

Stockholder Approval. The Merger Agreement has already received the requisite stockholder approval required under Delaware law. Under the Company’s certificate of incorporation, stockholders are permitted to take action by majority written consent in lieu of a stockholder meeting. Under the Merger Agreement, the Company agreed to take all actions necessary, immediately after the execution of the Merger Agreement, to seek and obtain stockholder written consents from certain stockholders holding a majority of the outstanding shares of our common stock. These stockholder written consents, representing a majority of the outstanding shares of our common stock, were timely delivered to the Company. No further approval of the stockholders of the Company is required to adopt and approve the Merger Agreement.

Termination Rights and Termination Date. The Merger Agreement contains certain termination rights for both the Company and Brookfield Reinsurance and further provides that, upon termination of the Merger Agreement, under certain circumstances, the Company may be required to pay Brookfield Reinsurance a termination fee equal to $178.5 million. If the Merger has not closed by May 6, 2022 (“Outside Date”), either the Company or Brookfield Reinsurance may terminate the Merger Agreement.However, if the closing has not occurred because (a) any applicable waiting period under any antitrust law relating to the Merger has not expired or been terminated or (b) certain governmental approvals or prior written non-disapprovals have not been obtained, and all other conditions to closing have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing) or waived, the Outside Date will be August 6, 2022.

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

Interim Operating Covenants. The Company has agreed to certain covenants in the Merger Agreement restricting the conduct of its business between the date of the Merger Agreement and the earlier of the Effective Time and the termination of the Merger Agreement. The general effect of these covenants is that, during such interim period, the Company will be limited in its ability to pursue strategic and operational matters outside the ordinary course of business. The Company has agreed that it and its Subsidiaries will conduct their business in the ordinary course consistent with past practice in all material respects and use reasonable best efforts to preserve their business organizations, goodwill and assets, keep available the services of their current key officers and employees, and preserve their present relationships with governmental entities and other key third parties, including customers, reinsurers, distributors, suppliers and other persons with whom the Company and its subsidiaries have business relationships.

In addition, the Company has agreed to specific restrictions relating to the conduct of its business between the date of the Merger Agreement and the earlier of the Effective Time and the termination of the Merger Agreement, including, but not limited to, not to take (or permit any of its subsidiaries to take) the following actions (subject, in each case, to exceptions specified below and in the Merger Agreement or previously disclosed in writing to Brookfield Reinsurance as provided in the Merger Agreement or as consented to in writing in advance by Brookfield Reinsurance (which consent shall not be unreasonably withheld, delayed or conditioned) or as required by law:

•subject to certain limited exceptions, offer, issue, sell, transfer, pledge, dispose of or encumber any shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock or other voting or equity interests of any class or series of the Company or its subsidiaries;

•amend or propose to amend the Company’s or its subsidiaries’ certificate of incorporation, bylaws or other comparable organizational documents, in each case, whether by merger, consolidation or otherwise;

•authorize, recommend, propose, enter into or adopt a plan or agreement of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries;

•subject to certain limited exceptions (including permitting the Company to execute investment portfolio transactions in the ordinary course of business consistent with past practice and in accordance with its existing investment plan and investment guidelines), acquire or agree to acquire any business or any corporation, partnership, association or other business organization or division thereof;

•make or authorize capital expenditures that are, on an individual basis, in excess of 110% of the Company’s capital expenditure budget or in excess of 105% of the aggregate capital expenditure budget, except for (i) planned capital expenditures disclosed to Brookfield Reinsurance at signing of the Merger Agreement and (ii) reasonable emergency capital expenditures (after consultation with Brookfield Reinsurance) necessary to maintain its ability to operate its businesses in the ordinary course or for the safety of individuals, assets or the environment;

•subject to certain limited exceptions, sell, lease, license, transfer, pledge, subject to any encumbrance or otherwise dispose of any of its or their assets or properties;

•incur, guarantee or assume any indebtedness, subject to certain limited exceptions, including investment portfolio transactions in the ordinary course of business consistent with past practice and other incurrences of indebtedness not to exceed $10,000,000 in the aggregate;

•enter into any material contract or reinsurance contract other than in the ordinary course of business consistent with past practice; and

•terminate, amend, modify, assign or waive any material right under any material contract or reinsurance contract except in the ordinary course of business consistent with past practice.

The Merger Agreement permits the Company to continue to pay regular quarterly cash dividends not to exceed $0.82 per share of common stock prior to completion of the Merger.

Anticipated Timing; No Assurance that Closing will Occur. The Merger is expected to close in the first half of 2022. However, the consummation of the Merger is subject to regulatory approval in certain jurisdictions, including Texas, Missouri, New York, Louisiana and California, as well as other conditions set forth in the Merger Agreement, including antitrust clearance (or termination of the applicable waiting period) from the U.S. Department of Justice or Federal Trade Commission. Accordingly, the Company cannot provide assurance the Merger will be completed on the terms or timeline currently contemplated, or at all.

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

The above is a summary of certain material terms of the Merger Agreement and is qualified in its entirety by the terms and conditions of the Merger Agreement, which was filed as an exhibit to the Company’s current report on Form 8-K filed on August 9, 2021.

Caution Regarding Forward-Looking Statements

Certain statements made in this report, including but not limited to the accompanying condensed consolidated financial statements, and the notes thereto appearing in Item 1 herein, Management's Discussion and Analysis of Financial Condition and Results of Operations in this Item 2 ("MD&A"), and the exhibits and financial statement schedules filed as a part hereof or incorporated by reference herein, may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are indicated by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “estimates,” “will” or words of similar meaning, and include, without limitation, statements regarding the outlook of our business and expected financial performance, and statements relating to the COVID-19 pandemic and its effects on the Company. These forward-looking statements are subject to changes and uncertainties which are, in many instances, beyond our control and have been made based upon our assumptions, expectations and beliefs concerning future developments and their potential effect upon us. There can be no assurance that future developments will be in accordance with our expectations, or that the effect of future developments on us will be as anticipated, or that our risk management policies and procedures will be effective, particularly given the uncertainty relating to the COVID-19 pandemic. We do not make public specific projections relating to future earnings, and we do not endorse any projections regarding future performance made by others. Additionally, we do not publicly update or revise forward-looking statements based on the outcome of various foreseeable or unforeseeable events. Forward-looking statements are not guarantees of future performance and involve various risks and uncertainties. There are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including without limitation risks, uncertainties and other factors discussed in Item 1A of our ~~2019~~2020 Form 10-K filed with the SEC on ~~February 28, 2020, as supplemented by the Risk Factors discussion in Part II, Item 1A of our Form 10-Q for the period ending June 30, 2020, filed with the SEC on August 5, 2020,~~March 4, 2021 and elsewhere in this ~~report, such as:~~report.

These forward-looking statements relate to the transaction contemplated by the Merger Agreement (the "Proposed Transaction"), as well as to the Company’s financial and operating performance on a stand-alone basis prior to the consummation of the Merger or if the Merger is not consummated. Important factors that could cause actual results and outcomes to differ materially from those in the forward-looking statements include, but are not limited to those summarized below:

•Factors Relating to the Proposed Transaction with Brookfield Reinsurance

•conditions to the closing of the Proposed Transaction may not be satisfied;

•regulatory approvals required for the Proposed Transaction may not be obtained, or required regulatory approvals may delay the Proposed Transaction or result in the imposition of conditions that could have a material adverse effect on the Company or Brookfield Reinsurance or cause certain conditions to closing not to be satisfied, which could result in the termination of the Merger Agreement;

•the timing of completion of the Proposed Transaction is uncertain;

•the business of the Company or Brookfield Reinsurance could suffer as a result of uncertainty surrounding the Proposed Transaction;

•events, changes or other circumstances could occur that could give rise to the termination of the Merger Agreement;

•there are risks related to disruption of management’s attention from the ongoing business operations of the Company or Brookfield Reinsurance due to the Proposed Transaction;

•the announcement or pendency of the Proposed Transaction could affect the relationships of the Company or Brookfield Reinsurance with its clients, operating results and business generally, including on our ability to retain employees;

•the outcome of any legal proceedings initiated against the Company or Brookfield Reinsurance following the announcement of the Proposed Transaction could adversely affect the Company or Brookfield Reinsurance, including their ability to consummate the Proposed Transaction; and

•the Company or Brookfield Reinsurance may be adversely affected by other economic, business, and/or competitive factors as well as management’s response to any of the aforementioned factors.

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

The foregoing review of important factors related to the Proposed Transaction should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the risk factors included in Brookfield Reinsurance’s Registration Statement on Form F-1 and the Company’s most recent Annual Report on Form 10-K and other documents of the Company and Brookfield Reinsurance on file with the SEC.Neither the Company nor Brookfield Reinsurance undertakes any obligation to update, correct or otherwise revise any forward-looking statements.All subsequent written and oral forward-looking statements attributable to the Company or Brookfield Reinsurance and/or any person acting on behalf of either of them are expressly qualified in their entirety by this paragraph.The information contained on any websites referenced in this Quarterly Report on Form 10-Q is not incorporated by reference into this Quarterly Report on Form 10-Q.

•Economic & Investment ~~Risk~~ Factors

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

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

•lack of liquidity for certain of our investments;

•~~the potential for adverse effects on interest rates and the value of certain assets as a result of the discontinuation of the London Inter-Bank Offered Rate (LIBOR);~~

•risk of investment losses and defaults;

•~~Operational Risk~~ Factors Relating to Our Business and Industry

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

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

•~~potential ineffectiveness of our risk management policies and procedures;~~

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

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

•potentially adverse rating agency actions;

•Information Technology Factors

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

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

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

•~~potential ineffectiveness of our internal controls over financial reporting;~~

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

•Catastrophic Event ~~Risk~~ Factors

•natural or man-made catastrophes ~~pandemic disease such as COVID-19, or other events~~ resulting in increased claims activity from catastrophic loss of life or property;

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

•~~the effects of~~ global climate change;

•Marketplace ~~Risk~~ Factors

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

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

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

•Litigation and Regulation ~~Risk~~ Factors

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

•significant changes in government regulation;

•changes in tax law;

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

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

•Reinsurance and Counterparty ~~Risk~~ Factors

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

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

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

•~~major public health issues, such as~~state law limitations on the ~~novel coronavirus COVID-19;~~

•~~potentially adverse rating agency actions;~~payment of dividends by our subsidiaries, which could limit the amount of dividends we pay;

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

•anti-takeover provisions in our governing documents;

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

•General Factors

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

•potential ineffectiveness of our risk management policies and procedures;

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

•~~advances in medical technology and testing, which may increase~~potential ineffectiveness of our ~~adverse selection risk.~~internal controls over financial reporting.

Many of these risks and uncertainties have been exacerbated by the COVID-19 pandemic, particularly those described in the Economic and Investment Risk Factors, Litigation and Regulation Risk Factors, and Reinsurance and Counterparty Risk Factors.

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

COVID-19 Response

A summary of actions the company has taken in response to COVID-19 through December 31, 2020 is disclosed in our 2020 Annual Report on form 10-K filed with the SEC on March 11, 2020, the World Health Organization formally declared the outbreak of the novel coronavirus COVID-19 to be a pandemic. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, alternative arrangements and shutdowns for business and schools, reduction in business activity, widespread unemployment, and overall economic and financial market instability. Through the third quarter of 2020, American National is for the most part conducting its normal business operations. However, because of the impact of COVID-19 we have approximately 80% of our back-office employees working remotely.

4, 2021. Below is a summary of ~~significant actions we have taken through the date of this report to manage the risks of disruption to business operation from COVID-19:~~subsequent developments in our COVID-19 response:

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

•We are communicating on a regular basis with our board of directors, senior management and employees regarding the ongoing developments of the COVID-19 pandemic. We are communicating through email, company intranet, videos, posters and other signage, an HR email hotline, teleconferences, and online MS Teams meetings.

•~~We have implemented multiple communication avenues to keep our customers, vendors and producers informed, including:~~

•~~Providing regular communications to producers with updates on our operations and service, contacts for support, available resources, and expectations;~~

•~~Engaging in ongoing communications with critical vendors related to their business continuity plans; and~~

•~~Providing an overview of our response to COVID-19 on our corporate website.~~

•We are offering leniency on premium payments and other deadlines, in some cases pursuant to recent regulatory requirements, for customers impacted by the COVID-19 outbreak, as discussed elsewhere in this report.

•We have reduced premiums for some of our property and casualty policies by providing policy credits or exposure adjustments to personal automobile insurance, workers compensation or other commercial policies, in some cases pursuant to regulatory requirements.

•We have assessed our facilities, systems, policies and procedures and have implemented plans to continue critical operations and services while many employees are working off-site. The implementation of these plans across all locations was addressed simultaneously in accordance with standards and procedures for remote access that existed prior to the current challenges COVID-19 has introduced. We also have plans for increasing capacity in critical operations should employees in any of our locations become unavailable to work due to COVID-19 health issues. We are continuing to evaluate our cybersecurity program for the next challenges that COVID-19 is likely to create.

•~~We have provided our employees education and training with respect to cybersecurity issues that may arise relating to COVID-19 and working remotely.~~

•~~We have provided our managers resources on leading virtually, virtual meeting tips and transitioning back to the office.~~

•We deferred salary merit and promotional increases in May 2020. Promotions were effective without compensation adjustments. During the third quarter, the board of directors approved the salary actions that had previously been deferred. Salary merit and promotional increases were paid to employees effective September 15, 2020. The pay was not retroactive.

•~~We have~~ suspended our summer Internship Program for 2020, and ~~plan to resume these efforts~~ in ~~2021.~~

•We2021 are ~~developing return-to-office programs as we transition through the different reopening situations at our locations. At the end~~piloting a program which combines both virtual and in-person elements for a small group of the third quarter of 2020, many of the locations in which we operate had begun to ease restrictions that were in place earlier in the period. However, viral infections in the general population have begun to increase again resulting in resumption of restrictions in certain areas in which we operate. As a result, we have temporarily paused further return-to-office plans at our locations until January 2021.interns.

•We have ~~provided alternatives to employees who~~developed and are ~~working remotely who wish to receive a free flu shot.~~

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

•~~We have taken numerous steps to promote the safety of~~continually refining our ~~employees~~return-to-office plans for our locations. Beginning in ~~keeping current with the local and state mandates and health expert recommendations including:~~

•~~Enhancing cleaning protocols by increasing the cleaning rounds per day and focusing on high touch areas, including door handles, elevator knobs, etc.~~

•Practicing social distancing and promoting safe interactions by not congregating in general areas such as workrooms, breakrooms and copier rooms, refraining from shaking hands, staying 6 feet apart, and keeping in-person meetings short and opting for teleconference, email and phone calls.

•~~Requiring all~~June, we gradually re-introduced more employees to ~~wear face coverings when they enter~~ our ~~buildings, in common areas~~office locations and ~~whenever they are away from their workspace.~~

•~~Providing face masks to all employees, primarily those who are unable to work remotely and those returning to the office.~~

•~~Placed signs regarding social distancing guidelines, wearing of face masks, and washing hands around high traffic areas.~~

•~~Posted social distancing markers and additional signage throughout the buildings as reminders to remain six feet apart.~~

•~~Procured and maintained sufficient supply of hand sanitizer and sanitizing wipes for use at entry points and common areas~~

•~~Arranged chairs in reception areas and other communal seating areas by removing chairs to maintain social distancing.~~

•~~Installed transparent shields in work areas where social distancing cannot be practiced.~~

•~~Adjusted air fan/filtration systems, where possible, to help enhance air flow by letting more fresh air into the buildings, while maintaining adequate comfort levels.~~

•~~Approved procedures for suspected and confirmed employee cases of COVID-19 that include notification, quarantine and cleaning practices that~~ are in ~~line with~~ the ~~current CDC guidelines.~~process of implementing longer-term plans to offer employees hybrid work schedules, where possible.

No assurance can be given that these actions will be successful, nor can we predict the level of disruption that will occur should the COVID-19 pandemic and its related macroeconomic risks continue for an extended period of time. Given this uncertainty, we are unable to quantify with reasonable confidence the expected impact of the COVID-19 pandemic on our future operations, financial condition, liquidity and results of operations. The wide-ranging social, economic and financial consequences of the COVID-19 pandemic and the possible effects of ongoing and future governmental action in response to COVID-19 compound this uncertainty. ~~American National may see an increased level of claims, a reduction in sales, and an increased level of asset impairments during 2020 related to COVID-19.~~ Additional information regarding risks and uncertainties related to the COVID-19 pandemic are set forth in Part II, Item 1A, Risk Factors of our 2020 Form ~~10-Q for the period ending June 30, 2020,~~10-K filed with the SEC on ~~August 5, 2020.~~

~~COVID-19 Update~~

~~Our investment results during~~March 4, 2021. For additional information regarding the ~~first nine months of the year were impacted by the disruption caused by COVID-19. Net investment income was lower primarily on bonds, mortgage loans~~direct and ~~equity indexed options. Significant volatility in financial markets resulted in increased credit allowances established for mortgage loans and~~indirect impact to ~~a lesser extent certain bonds negatively impacted income. Economic disruption as a result of COVID-19 has also resulted in requests for loan modifications from certain mortgage loans borrowers related~~mortality refer to loans with a total carrying amount of $1.6 billion. These loan modifications related primarily to hotels, retail businesses and parking operations. The terms of the modifications of these loans include forbearance of principal and interest payments for a period of up to six months, extensions of maturity dates, and/or provision for interest only payments.

Part I, Item 2, MD&A, Life.

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

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

~~Sales growth~~Overview

American National Group, Inc. ("ANAT") is a family of companies that has, on a consolidated GAAP basis, $30.4 billion in ~~our operating segments was negatively impacted by stay-at-home orders~~assets, $23.6 billion in liabilities and ~~the increased economic uncertainty caused by COVID-19. Additionally, we reduced premiums for some~~$6.8 billion in stockholders’ equity as of our property and casualty policies by providing credit or exposure adjustments to personal automobile insurance, workers compensation or other commercial policies, in some cases pursuant to regulatory requirements.

~~Life claims experience through September 2020 has increased compared to the same period 2019. We are analyzing the increase to determine if it is directly or indirectly related to COVID-19.~~

Loss and loss adjustment expenses in our operating segments included modestly lower loss estimates in certain product lines, primarily personal and commercial automobile due to a decrease in claim frequency as policyholders drove fewer miles due to shelter-in-place orders. In addition, to date we have received 316 business interruption claims related to COVID-19 and have closed 315 of those claims without payment and have one open claim. Our policies generally exclude coverage for damage resulting from a virus or bacteria. However, it is possible that courts, state insurance regulators, or both could require us to extend coverage beyond our policy language and underwriting intent.

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

~~Overview~~

June 30, 2021. American National Insurance Company ("ANICO"), founded in 1905 and headquartered in Galveston, Texas, and ~~its~~other ANAT subsidiaries offer a broad spectrum of products and services, which include life insurance, annuities, property and casualty insurance, health insurance, credit insurance, and pension products. The American National companies operate in all 50 states, the District of Columbia and Puerto Rico. ~~Major insurance~~In addition to ANICO, major subsidiaries include American National Life Insurance Company of Texas, American National Life Insurance Company of New York, American National Property and Casualty Company, Garden State Life Insurance Company, Standard Life and Accident Insurance Company, Farm Family Casualty Insurance Company and United Farm Family Insurance Company.

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

General Trends

During the ~~third~~second quarter of ~~2020,~~2021, American National had no material changes to the general trends discussed in the MD&A included in our ~~2019~~2020 Annual Report on Form 10-K filed with the SEC on ~~February 28, 2020.~~March 4, 2021. However, please see the "COVID-19 ~~Response"~~Response and Update" discussion above for general information about the pandemic's impact on ~~us.~~us, as well as "Introductory Note Regarding Pending Merger" above for general information about the pending merger transaction with Brookfield Reinsurance.

Critical Accounting Estimates

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

For a discussion of our critical accounting estimates, see the MD&A in our ~~2019~~2020 Annual Report on Form 10-K filed with the SEC on ~~February 28, 2020. There have been no changes except as follows.~~

On January 1, 2020, we adopted ASC 326 accounting guidance related to the allowance for credit losses. Refer to Note 3, Recently Issued Accounting Pronouncements. The new standard significantly changes how entities measure credit losses for most financial assets and reinsurance recoverables that are not measured at fair value through net income. The guidance replaces the current “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. Refer to NoteMarch 4, Investment in Securities, and Note 5, Mortgage Loans, of the Notes to the Unaudited Condensed Consolidated Financial Statements in Item 1 for further discussion of the accounting policies and methodologies for establishing the allowance for credit losses.

The accounting estimates relating to the allowance for credit losses over financial assets held at amortized cost have been evaluated and monitored since adoption and management has deemed these estimates to be critical for the following reasons:2021.

•
~~Changes in the provision for credit losses can be material to the financial position and results of operations for the Company;~~

•Estimates relating to the allowance for credit losses require us to project future cash flows, delinquencies, collateral values, occupancy rates, prepayments based on a reasonable and supportable forecast in order to estimate probability of default and the loss given default;

•The allowance for credit losses is also affected by factors outside of our control including, but not limited to, market volatility, deterioration in the credit or prospects of companies and governmental entities, political uncertainty, industry trends, and trends in interest rates;

•Management judgment is required to determine which models, methodologies, and scenario conditions are used to calculate the allowance for credit losses to produce a reasonable estimate that encompasses the expected lifetime credit losses.

Since our estimate for the allowance for credit losses relies on management judgment and is sensitive to factors outside of our control, as noted above, there are inherent uncertainties within the estimates. As a result, the changes in the allowance for credit losses could materially impact our condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

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

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

Condensed Consolidated Results of Operations

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

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
PREMIUMS AND OTHER REVENUES
Premiums $ 561,464 $ 557,844 $ 3,620 $ 1,631,495 $ 1,650,353 $ (18,858)
Other policy revenues 79,344 76,784 2,560 238,736 226,178 12,558
Net investment income 254,256 246,620 7,636 656,888 796,696 (139,808)
Net realized investments gains 17,387 31,933 (14,546) 25,474 24,975 499
Change in investment credit loss (4,175) — (4,175) (101,163) — (101,163)
Net gains on equity securities 152,147 8,589 143,558 118,397 282,026 (163,629)
Other income 9,683 10,730 (1,047) 31,152 32,642 (1,490)
Total premiums and other revenues 1,070,106 932,500 137,606 2,600,979 3,012,870 (411,891)
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits 200,381 173,351 27,030 515,573 518,827 (3,254)
Claims incurred 286,345 309,262 (22,917) 858,226 871,489 (13,263)
Interest credited to policyholders’ account balances 128,946 106,782 22,164 271,406 371,703 (100,297)
Commissions for acquiring and servicing policies 138,365 128,689 9,676 409,290 408,629 661
Other operating expenses 126,413 128,502 (2,089) 385,516 391,645 (6,129)
Change in deferred policy acquisition costs(1)
(8,387) 1,548 (9,935) (14,762) (22,391) 7,629
Total benefits, losses and expenses 872,063 848,134 23,929 2,425,249 2,539,902 (114,653)
Income before federal income taxes and other items $ 198,043 $ 84,366 $ 113,677 $ 175,730 $ 472,968 $ (297,238)


	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
PREMIUMS AND OTHER REVENUES
Premiums	$	565,252	$	533,263	$	31,989	$	1,127,905	$	1,070,031	$	57,874
Other policy revenues	90,523		79,787		10,736		177,062		159,392		17,670
Net investment income	297,399		273,726		23,673		567,380		404,717		162,663
Net realized investments gains	10,602		3,939		6,663		29,841		8,087		21,754

Change in investment credit loss	25,079		(52,310)		77,389		19,593		(96,988)		116,581
Net gains (losses) on equity securities	170,804		298,825		(128,021)		266,744		(33,750)		300,494
Other income	11,035		10,336		699		20,787		21,469		(682)
Total premiums and other revenues	1,170,694		1,147,566		23,128		2,209,312		1,532,958		676,354
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	182,239		169,924		12,315		373,116		315,192		57,924
Claims incurred	306,796		307,287		(491)		575,182		571,881		3,301
Interest credited to policyholders’ account balances	111,236		146,783		(35,547)		219,023		142,460		76,563
Commissions for acquiring and servicing policies	163,913		140,490		23,423		317,598		270,925		46,673
Other operating expenses	149,907		125,177		24,730		283,409		259,103		24,306
Change in deferred policy acquisition costs (1)	(28,842)		(4,703)		(24,139)		(56,961)		(6,375)		(50,586)
Total benefits, losses and expenses	885,249		884,958		291		1,711,367		1,553,186		158,181
Income (loss) before federal income taxes and other items	$	285,445	$	262,608	$	22,837	$	497,945	$	(20,228)	$	518,173

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

Comparison of the three months ended ~~September~~June 30, ~~2020~~2021 to ~~2019~~2020

Earnings increased primarily due to the following:

•~~Increase~~An increase in ~~net gains on equity securities resulting from~~earnings in our Property and Casualty segment due to a reduction in catastrophe losses for our homeowners and agricultural business products

•An increase in earnings in our Annuity segment driven by favorable ~~market conditions~~mark-to-market impact to equity-indexed annuity reserves and lower DAC amortization for fixed deferred products due to interest rates

•Favorable change in expected investment credit loss due to improvements in our commercial mortgage loans driven by economic forecast regarding GDP growth and positive economic outlook

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

•~~Increase~~A decrease in ~~claim experience~~net gains on equity securities due to the financial markets rebounding from the pandemic onset in the first quarter of 2020

•An increase in the combined ratio for our ~~Life segment~~personal auto products due to an increase in claims as policyholders drove more miles due to the lessening impact of COVID-19

Comparison of the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 to ~~2019~~2020

Earnings ~~decreased~~increased primarily due to the following:

•~~A decrease~~An increase in net gains on equity securities ~~resulting from unfavorable~~due to favorable market conditions

•An increase in ~~the allowance for credit losses~~net investment income due to ~~the economic disruptions caused by the COVID-19 pandemic~~higher option gains resulting from favorable market conditions

•Favorable change in expected investment credit loss due to improvements in our commercial mortgage loans driven by economic forecast regarding GDP growth and positive economic outlook

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

Life

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

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
PREMIUMS AND OTHER REVENUES
Premiums $ 101,182 $ 93,079 $ 8,103 $ 282,368 $ 265,634 $ 16,734
Other policy revenues 75,317 72,446 2,871 227,083 213,300 13,783
Net investment income 69,235 61,961 7,274 188,455 194,633 (6,178)
Other income 358 441 (83) 1,534 1,586 (52)
Total premiums and other revenues 246,092 227,927 18,165 699,440 675,153 24,287
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits 153,957 113,652 40,305 389,364 327,579 61,785
Interest credited to policyholders’ account balances 24,522 22,045 2,477 47,820 57,561 (9,741)
Commissions for acquiring and servicing policies 41,974 42,023 (49) 122,728 120,646 2,082
Other operating expenses 45,080 46,873 (1,793) 137,065 142,520 (5,455)
Change in deferred policy acquisition costs(1)
(15,499) (5,080) (10,419) (34,872) (19,120) (15,752)
Total benefits, losses and expenses 250,034 219,513 30,521 662,105 629,186 32,919
Income (loss) before federal income taxes and other items $ (3,942) $ 8,414 $ (12,356) $ 37,335 $ 45,967 $ (8,632)


	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
PREMIUMS AND OTHER REVENUES
Premiums	$	100,784	$	91,670	$	9,114	$	201,563	$	181,186	$	20,377
Other policy revenues	83,527		76,226		7,301		165,035		151,766		13,269
Net investment income	72,225		73,645		(1,420)		140,022		119,220		20,802
Other income	422		440		(18)		880		1,176		(296)
Total premiums and other revenues	256,958		241,981		14,977		507,500		453,348		54,152
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	139,516		124,941		14,575		285,676		235,407		50,269
Interest credited to policyholders’ account balances	23,326		25,201		(1,875)		43,096		23,298		19,798
Commissions for acquiring and servicing policies	46,397		41,287		5,110		91,817		80,754		11,063
Other operating expenses	49,226		44,505		4,721		96,267		91,985		4,282
Change in deferred policy acquisition costs (1)	(13,459)		(11,535)		(1,924)		(27,928)		(19,373)		(8,555)
Total benefits, losses and expenses	245,006		224,399		20,607		488,928		412,071		76,857
Income before federal income taxes and other items	$	11,952	$	17,582	$	(5,630)	$	18,572	$	41,277	$	(22,705)

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

Comparison of the three months ended ~~September~~June 30, ~~2020~~2021 to ~~2019~~2020

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

•Increase in reserves due to improvement in the participating policyholder share of change in credit loss, primarily associated with mortgage loans

•Increase in expenses due to growth in the business and the lower activity related to COVID-19 in 2020

The decrease in earnings was partially offset by the following:

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

•Improved mortality

Comparison of the six months ended June 30, 2021 to 2020

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

•An overall increase in mortality

•~~Annual assumption review resulting in unlocking due~~ which includes claims directly and indirectly attributable to ~~a decrease in long term interest rate assumptions~~COVID-19

The decrease in earnings was partially offset by the following:

•~~Increase~~Improved persistency and an increase in sales, resulting in an increase in premiums and other policy revenues ~~resulting from the persistency and aging of our interest sensitive block of business~~

~~Comparison of the nine months ended September 30, 2020 to 2019~~

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

•~~An overall increase in mortality~~

•~~Annual assumption review resulting in unlocking due to a decrease in long term interest rate assumptions~~

~~The decrease in earnings was partially offset by the following:~~

•~~Decrease in policyholder benefits related to our participating polices resulting from a 2019 increase that was higher than normal~~

•~~Increase in other policy revenues resulting from the persistency and aging of our interest sensitive block of business~~

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

Life ~~insurance sales~~Insurance Sales

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


		Three months ended September 30,						Nine months ended September 30,							Three months ended June 30,						Six months ended June 30,
		2020		2019		Change		2020		2019		Change			2021		2020		Change		2021		2020		Change
Traditional life	Traditional life	$	16,073	$	13,711	$	2,362	$	46,056	$	42,409	$	3,647	Traditional life	$	17,339	$	15,009	$	2,330	$	33,096	$	29,983	$	3,113
Universal life	Universal life	7,859		7,062		797		20,613		20,759		(146)		Universal life	7,877		6,604		1,273		16,253		12,754		3,499
Indexed UL	Indexed UL	8,328		9,980		(1,652)		21,972		26,981		(5,009)		Indexed UL	8,322		6,842		1,480		16,692		13,644		3,048
Total recurring	Total recurring	32,260		30,753		1,507		88,641		90,149		(1,508)		Total recurring	33,538		28,455		5,083		66,041		56,381		9,660
Single and excess (1)	Single and excess (1)	387		420		(33)		852		1,334		(482)		Single and excess (1)	467		263		204		845		465		380
Credit life (1)	Credit life (1)	2,015		2,691		(676)		6,063		8,159		(2,096)		Credit life (1)	2,064		1,865		199		3,721		4,048		(327)
Total annualized premium	Total annualized premium	$	34,662	$	33,864	$	798	$	95,556	$	99,642	$	(4,086)	Total annualized premium	$	36,069	$	30,583	$	5,486	$	70,607	$	60,894	$	9,713

(1) ~~These are weighted~~Weighted amounts ~~representing 10% of~~with single and excess ~~premiums.~~premiums counted at 10%.

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

Total Recurring Life sales increased during the three and six months ended ~~September~~June 30, ~~2020~~2021 compared to ~~2019 primarily due to higher traditional life sales. Total~~2020. Life sales ~~decreased during the nine months ended September 30,~~were impacted in 2020 ~~compared to 2019 primarily due to lower Indexed Universal Life~~by stay-at-home orders and ~~Credit Life sales which we believe was due to the~~ economic uncertainty ~~from~~related to COVID-19.

Policy ~~in-force information~~In-force Information

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


		September 30, 2020		December 31, 2019		Change			June 30, 2021		December 31, 2020		Change
Life insurance in-force	Life insurance in-force							Life insurance in-force
Traditional life	Traditional life	$	89,919,097	$	84,129,193	$	5,789,904	Traditional life	$	95,609,870	$	91,920,577	$	3,689,293
Interest-sensitive life	Interest-sensitive life	35,616,434		33,975,092		1,641,342		Interest-sensitive life	37,626,264		36,326,621		1,299,643
Total life insurance in-force	Total life insurance in-force	$	125,535,531	$	118,104,285	$	7,431,246	Total life insurance in-force	$	133,236,134	$	128,247,198	$	4,988,936

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


		September 30, 2020	December 31, 2019	Change		June 30, 2021	December 31, 2020	Change
Number of policies in-force	Number of policies in-force				Number of policies in-force
Traditional life	Traditional life	1,846,338	1,911,305	(64,967)	Traditional life	1,747,064	1,832,536	(85,472)
Interest-sensitive life	Interest-sensitive life	265,982	256,146	9,836	Interest-sensitive life	276,588	269,668	6,920
Total number of policies in-force	Total number of policies in-force	2,112,320	2,167,451	(55,131)	Total number of policies in-force	2,023,652	2,102,204	(78,552)

Life insurance in-force increased during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to December 31, ~~2019~~2020 despite a reduction of policies in-force due to an increase in sales of higher face amount policies.

Change in Deferred Policy Acquisition Costs

The change in DAC represents acquisition costs capitalized less the amortization of existing DAC.

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
Acquisition cost capitalized $ (34,498) $ (34,393) $ (105) $ (100,210) $ (98,812) $ (1,398)
Amortization of DAC 18,999 29,313 (10,314) 65,338 79,692 (14,354)
Change in DAC $ (15,499) $ (5,080) $ (10,419) $ (34,872) $ (19,120) $ (15,752)

The ~~reduction~~following shows the components of the change in DAC ~~amortization for the three and nine months ended September 30, 2020 relates to the annual assumption review and unlocking and lower gross profits.~~(in thousands):


	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Acquisition cost capitalized	$	(37,392)	$	(32,359)	$	(5,033)	$	(80,648)	$	(65,712)	$	(14,936)
Amortization of DAC	23,933		20,824		3,109		52,720		46,339		6,381
Change in DAC	$	(13,459)	$	(11,535)	$	(1,924)	$	(27,928)	$	(19,373)	$	(8,555)

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

Annuity

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

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
PREMIUMS AND OTHER REVENUES
Premiums $ 27,960 $ 41,305 $ (13,345) $ 69,413 $ 137,434 $ (68,021)
Other policy revenues 4,027 4,338 (311) 11,653 12,878 (1,225)
Net investment income 163,125 141,684 21,441 394,508 487,750 (93,242)
Other income 733 653 80 2,166 1,916 250
Total premiums and other revenues 195,845 187,980 7,865 477,740 639,978 (162,238)
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits 46,424 59,699 (13,275) 126,209 191,248 (65,039)
Interest credited to policyholders’ account balances 104,424 84,737 19,687 223,586 314,142 (90,556)
Commissions for acquiring and servicing policies 16,119 13,368 2,751 38,024 63,373 (25,349)
Other operating expenses 12,115 12,264 (149) 35,737 38,087 (2,350)
Change in deferred policy acquisition costs(1)
8,555 7,006 1,549 28,147 (383) 28,530
Total benefits, losses and expenses 187,637 177,074 10,563 451,703 606,467 (154,764)
Income before federal income taxes and other items $ 8,208 $ 10,906 $ (2,698) $ 26,037 $ 33,511 $ (7,474)


	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
PREMIUMS AND OTHER REVENUES
Premiums	$	20,497	$	25,944	$	(5,447)	$	44,738	$	41,453	$	3,285
Other policy revenues	6,996		3,561		3,435		12,027		7,626		4,401
Net investment income	163,356		189,842		(26,486)		317,220		231,383		85,837
Other income	932		795		137		1,788		1,433		355
Total premiums and other revenues	191,781		220,142		(28,361)		375,773		281,895		93,878
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	42,723		44,983		(2,260)		87,440		79,785		7,655
Interest credited to policyholders’ account balances	87,910		121,582		(33,672)		175,927		119,162		56,765
Commissions for acquiring and servicing policies	29,926		11,657		18,269		52,968		21,905		31,063
Other operating expenses	12,884		11,746		1,138		25,065		23,622		1,443
Change in deferred policy acquisition costs (1)	(11,649)		12,306		(23,955)		(22,720)		19,592		(42,312)
Total benefits, losses and expenses	161,794		202,274		(40,480)		318,680		264,066		54,614
Income before federal income taxes and other items	$	29,987	$	17,868	$	12,119	$	57,093	$	17,829	$	39,264

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

Comparison of the three months ended ~~September~~June 30, ~~2020~~2021 to ~~2019~~2020

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

•~~Annual assumption review resulting in unlocking on our fixed deferred~~Favorable mark-to-market impact to equity-indexed annuity ~~block~~reserves due to ~~decrease in long-term~~ interest ~~rate assumptions~~rates

•~~Higher~~Lower DAC amortization for fixed deferred products due to an increase in estimated gross profits driven by higher projected future interest ~~credited on indexed annuities~~rates compared to previous expectations

~~The decrease in earnings was partially offset by~~

Comparison of the six months ended June 30, 2021 to 2020

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

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

•

~~Comparison of the nine months ended September 30, 2020~~Favorable mark-to-market impact to ~~2019~~

~~Earnings for our Annuity segment decreased primarily~~equity-indexed annuity reserves due to ~~the following:~~

•~~An increase in reserves for indexed annuity products due to mark-to-market based adjustments attributable to lower~~ interest rates ~~and unfavorable equity market conditions~~

•~~Annual assumption review resulting in unlocking on our~~Lower DAC amortization for fixed deferred ~~annuity block~~products due to ~~decrease~~an increase in ~~long-term~~estimated gross profits driven by higher projected future interest ~~rate assumptions~~rates compared to previous expectations

•~~Increased spread compression on fixed annuities due to declining portfolio yield~~

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

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

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
Fixed deferred annuity $ 126,820 $ 77,342 $ 49,478 $ 318,629 $ 909,859 $ (591,230)
Single premium immediate annuity 36,217 50,815 (14,598) 92,327 184,823 (92,496)
Equity-indexed deferred annuity 95,105 74,876 20,229 230,485 281,720 (51,235)
Variable deferred annuity 16,816 18,400 (1,584) 46,673 50,511 (3,838)
Total premium and deposits 274,958 221,433 53,525 688,114 1,426,913 (738,799)
Less: Policy deposits 246,998 180,128 66,870 618,701 1,289,479 (670,778)
Total earned premiums $ 27,960 $ 41,305 $ (13,345) $ 69,413 $ 137,434 $ (68,021)


	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Fixed deferred annuity	$	351,171	$	73,399	$	277,772	$	474,923	$	191,809	$	283,114
Single premium immediate annuity	24,452		33,352		(8,900)		52,982		56,110		(3,128)
Equity-indexed deferred annuity	229,141		77,404		151,737		431,997		135,380		296,617
Variable deferred annuity	15,647		14,176		1,471		29,834		29,857		(23)
Total premium and deposits	620,411		198,331		422,080		989,736		413,156		576,580
Less: Policy deposits	599,914		172,387		427,527		944,998		371,703		573,295
Total earned premiums	$	20,497	$	25,944	$	(5,447)	$	44,738	$	41,453	$	3,285

Annuity premium and deposits ~~decreased~~increased primarily for equity-indexed and fixed deferred products during the ~~nine~~three and six months ended ~~September~~June 30, ~~2020~~2021 compared to ~~2019. The low interest rate environment and choices we made on setting crediting rates, coupled with~~2020 reflecting the ~~economic impact attributable to COVID-19 and significant reduction~~competitiveness of ~~face-to-face interactions with prospective policyholders has resulted in lower sales of fixed deferred annuities during~~ the ~~three and nine months ended September 30, 2020.~~product.

Change in Deferred Policy Acquisition Costs

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

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
Acquisition cost capitalized $ (14,899) $ (13,611) $ (1,288) $ (37,217) $ (61,779) $ 24,562
Amortization of DAC 23,454 20,617 2,837 65,364 61,396 3,968
Change in DAC $ 8,555 $ 7,006 $ 1,549 $ 28,147 $ (383) $ 28,530

The change in amortization for the three and nine months ended September 30, 2020 was primarily due to unlocking assumptions. Long run earned rate assumptions were lowered from 5.75% to 4.75%, which lowered DAC by $7.2 million. This was offset by raising assumed spread targets to match recent trends in renewal rate setting, which raised DAC by $2.3 million. The combined impact of assumptions unlocking was a $4.9 million decrease in DAC.


	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Acquisition cost capitalized	$	(30,423)	$	(10,793)	$	(19,630)	$	(53,911)	$	(22,318)	$	(31,593)
Amortization of DAC	18,774		23,099		(4,325)		31,191		41,910		(10,719)
Change in DAC	$	(11,649)	$	12,306	$	(23,955)	$	(22,720)	$	19,592	$	(42,312)

The change in acquisition costs capitalized for the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 strongly correlates with the change in commissions, which ~~declined~~increased due to higher sales. The amortization of DAC was lower ~~sales~~for the three and six months ended June 30, 2021 due to an increase in ~~the first half of the year.~~estimated gross profits driven by higher projected future interest rates.

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

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

Nine months ended September 30,
2020 2019
Fixed deferred annuity
Reserve, beginning of period $ 6,893,174 $ 6,773,603
Premiums 318,629 909,859
Death and other benefits (162,750) (180,120)
Surrenders (417,390) (617,457)
Fees (754) (2,237)
Interest and mortality 141,895 153,272
Reserve, end of period 6,772,804 7,036,920
Equity-indexed annuity
Reserve, beginning of period 3,985,166 3,668,645
Premiums 230,485 281,720
Death and other benefits (35,891) (29,426)
Surrenders (258,140) (135,281)
Fees (2,443) (2,833)
Interest and mortality 77,996 157,517
Reserve, end of period 3,997,173 3,940,342
Single premium immediate annuity
Reserve, beginning of period 1,874,942 1,826,137
Premiums 92,327 184,823
Payments (162,248) (161,161)
Interest and mortality 53,741 47,245
Reserve, end of period 1,858,762 1,897,044
Variable deferred annuity
Account value, beginning of period 385,736 332,898
Premiums 46,673 50,511
Other flows 637 152
Surrenders (60,605) (61,314)
Fees (3,301) (3,562)
Change in market value and other 21,154 48,607
Reserve, end of period 390,294 367,292
Total reserve, end of period $ 13,019,033 $ 13,241,598

~~Table of Contents~~

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

~~Interest Margin~~

Margins were relatively flat during the three months ended September 30, 2020 compared to 2019. Margins decreased during the nine months ended September 30, 2020 compared to 2019 due to spread compression on fixed annuities and unfavorable changes in reserves for indexed annuities due to mark-to-market adjustments in the first quarter this year. The following table summarizes the interest margin due to the impact of the investment performance, interest credited to policyholder’s account balances, and the end of period assets measured by account balance (in thousands):

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
Fixed annuity
Fixed investment income $ 92,020 $ 97,545 $ (5,525) $ 279,175 $ 289,036 $ (9,861)
Interest credited and mortality (64,637) (69,377) 4,740 (195,637) (200,517) 4,880
Interest and mortality margin 27,383 28,168 (785) 83,538 88,519 (4,981)
Equity-indexed annuity
Fixed investment income 39,634 38,471 1,163 119,685 113,186 6,499
Option return 31,471 5,667 25,804 (4,352) 85,528 (89,880)
Interest credited and mortality (56,131) (31,063) (25,068) (77,996) (157,517) 79,521
Interest and mortality margin 14,974 13,075 1,899 37,337 41,197 (3,860)
Variable annuity
Separate account management fees 1,078 1,085 (7) 3,021 3,101 (80)
Interest and mortality margin 1,078 1,085 (7) 3,021 3,101 (80)
Total interest and mortality margin $ 43,435 $ 42,328 $ 1,107 $ 123,896 $ 132,817 $ (8,921)

~~Table of Contents~~

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

~~Health~~

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

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
PREMIUMS AND OTHER REVENUES
Premiums $ 40,934 $ 40,676 $ 258 $ 126,965 $ 121,581 $ 5,384
Net investment income 2,033 2,381 (348) 6,480 7,177 (697)
Other income 4,971 5,021 (50) 15,001 15,940 (939)
Total premiums and other revenues 47,938 48,078 (140) 148,446 144,698 3,748
BENEFITS, LOSSES AND EXPENSES
Claims incurred 27,933 28,567 (634) 89,544 81,042 8,502
Commissions for acquiring and servicing policies 7,608 7,405 203 22,792 22,975 (183)
Other operating expenses 10,013 9,504 509 30,118 31,203 (1,085)
Change in deferred policy acquisition costs (1)
(542) 258 (800) (582) 919 (1,501)
Total benefits, losses and expenses 45,012 45,734 (722) 141,872 136,139 5,733
Income before federal income taxes and other items $ 2,926 $ 2,344 $ 582 $ 6,574 $ 8,559 $ (1,985)

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

~~Comparison of the three months ended September 30, 2020 to 2019~~

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

•~~Lower loss ratio in our Medical Expense block, primarily attributable to the release of reserves for larger claims~~

•~~Lower loss ratio in our Group insurance line of business, primarily attributable to the receipt of a reinsurer's commutation payment~~

•~~Favorable reserve changes for legacy long-term care products due to an increase in claim terminations~~

~~The increase in earnings was partially offset by:~~

•~~A decrease in MGU earnings resulting from an increase in our allowance for uncollectible reinsurance receivables~~

•~~Higher loss ratio in our Supplemental insurance block, primarily driven by increased claim severity on the legacy master cancer plan~~

~~Comparison of the nine months ended September 30, 2020 to 2019~~

~~Earnings for our Health segment decreased primarily due to the following:~~

•~~Higher loss ratio in our Supplemental insurance block, primarily driven by increased claim severity on the legacy master cancer plan~~

•~~A decrease in MGU earnings resulting from an increase in our allowance for uncollectible reinsurance receivables~~

~~The decrease in earnings was partially offset by:~~

•~~Favorable reserve changes for legacy long-term care products due to an increase in claim terminations~~


	Six months ended June 30,
	2021		2020
Fixed deferred annuity
Reserve, beginning of period	$	6,635,203	$	6,893,174
Premiums	474,923		191,809
Death and other benefits	(119,239)		(104,787)
Surrenders	(253,242)		(240,051)
Fees	(873)		(533)
Interest and mortality	90,124		94,357
Reserve, end of period	6,826,896		6,833,969
Equity-indexed annuity
Reserve, beginning of period	4,097,013		3,985,166
Premiums	431,997		135,380
Death and other benefits	(28,961)		(23,292)
Surrenders	(150,192)		(182,778)
Fees	(1,590)		(1,767)
Interest and mortality	90,762		21,865
Reserve, end of period	4,439,029		3,934,574
Single premium immediate annuity
Reserve, beginning of period	1,851,955		1,874,942
Premiums	52,982		56,110
Payments	(100,266)		(108,815)
Interest and mortality	28,669		36,643
Reserve, end of period	1,833,340		1,858,880
Variable deferred annuity
Reserve, beginning of period	418,510		385,736
Premiums	29,834		29,857
Other flows	663		765
Surrenders	(41,680)		(44,491)
Fees	(2,617)		(2,128)
Change in market value and other	39,986		(3,546)
Reserve, end of period	444,696		366,193
Total reserve, end of period	$	13,543,961	$	12,993,616

Table of Contents

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

~~Health earned premiums~~

Interest and Mortality Margin

Margins increased during the three and six months ended June 30, 2021 compared to 2020 due to favorable changes in mark-to-market reserves for indexed annuities. The following table summarizes the ~~periods indicated were as follows (in thousands):~~

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
Medicare Supplement $ 21,137 $ 19,982 $ 1,155 $ 64,336 $ 57,211 $ 7,125
MGU 4,702 6,358 (1,656) 16,306 21,344 (5,038)
Supplemental insurance 4,417 5,344 (927) 14,152 16,233 (2,081)
Credit Health 3,460 4,492 (1,032) 11,196 13,475 (2,279)
Medical expense 2,075 2,374 (299) 6,468 7,221 (753)
Worksite 3,808 766 3,042 10,800 2,451 8,349
Group health 505 441 64 1,303 1,426 (123)
All other 830 919 (89) 2,404 2,220 184
Total $ 40,934 $ 40,676 $ 258 $ 126,965 $ 121,581 $ 5,384

~~Increased sales in late 2019 drove premium growth in Medicare Supplement. Similarly, Worksite premium increased~~interest margin due to the ~~addition~~impact of ~~a large group. The decline in MGU premium is driven~~the investment performance, interest credited to policyholder’s account balances, and the end of period assets measured by ~~the completion of prior treaties for a large MGU program that is inactive for 2020.~~

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

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
Medicare Supplement $ 15,969 $ 16,096 $ (127) $ 50,695 $ 46,514 $ 4,181
MGU 5,947 6,029 (82) 15,556 18,790 (3,234)
Supplemental insurance 2,226 2,192 34 8,029 6,464 1,565
Credit Health 1,072 1,020 52 2,328 2,493 (165)
Medical expense 807 1,665 (858) 5,918 3,950 1,968
Worksite 2,144 261 1,883 4,898 1,186 3,712
Group health 23 464 (441) 898 394 504
All other (255) 840 (1,095) 1,222 1,251 (29)
Total $ 27,933 $ 28,567 $ (634) $ 89,544 $ 81,042 $ 8,502

Favorable claim experience for the three months ended September 30, 2020 is driven by the aforementioned increase in claim terminations and resulting claim reserve releases in our legacy long-term care products.

~~Change in Deferred Policy Acquisition Costs~~

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

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
Acquisition cost capitalized $ (4,534) $ (1,085) $ (3,449) $ (12,117) $ (7,629) $ (4,488)
Amortization of DAC 3,992 1,343 2,649 11,535 8,548 2,987
Change in DAC $ (542) $ 258 $ (800) $ (582) $ 919 $ (1,501)


	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Fixed annuity
Fixed investment income	$	87,881	$	93,535	$	(5,654)	$	176,343	$	187,155	$	(10,812)
Interest credited and mortality	(59,471)		(64,872)		5,401		(118,793)		(131,000)		12,207
Interest and mortality margin	28,410		28,663		(253)		57,550		56,155		1,395
Equity-indexed annuity
Fixed investment income	42,919		40,352		2,567		84,638		80,051		4,587
Option return	32,555		55,955		(23,400)		56,238		(35,823)		92,061
Interest credited and mortality	(44,830)		(73,883)		29,053		(90,762)		(21,865)		(68,897)
Interest and mortality margin	30,644		22,424		8,220		50,114		22,363		27,751




Variable annuity
Separate account management fees	1,290		1,003		287		2,537		1,943		594
Interest and mortality margin	1,290		1,003		287		2,537		1,943		594
Total interest and mortality margin	$	60,344	$	52,090	$	8,254	$	110,201	$	80,461	$	29,740

Table of Contents

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

~~Property and Casualty~~Health

~~Property and Casualty~~

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

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
PREMIUMS AND OTHER REVENUES
Net premiums written $ 397,780 $ 390,799 $ 6,981 $ 1,211,444 $ 1,180,451 $ 30,993
Net premiums earned $ 391,388 $ 382,784 $ 8,604 $ 1,152,749 $ 1,125,704 $ 27,045
Net investment income 16,049 16,357 (308) 48,171 48,085 86
Other income 3,079 3,137 (58) 9,656 8,689 967
Total premiums and other revenues 410,516 402,278 8,238 1,210,576 1,182,478 28,098
BENEFITS, LOSSES AND EXPENSES
Claims incurred 258,412 280,695 (22,283) 768,682 790,447 (21,765)
Commissions for acquiring and servicing policies 72,664 65,893 6,771 225,746 201,635 24,111
Other operating expenses 48,576 50,111 (1,535) 151,660 151,677 (17)
Change in deferred policy acquisition costs(1)
(901) (636) (265) (7,455) (3,807) (3,648)
Total benefits, losses and expenses 378,751 396,063 (17,312) 1,138,633 1,139,952 (1,319)
Income before federal income taxes and other items $ 31,765 $ 6,215 $ 25,550 $ 71,943 $ 42,526 $ 29,417
Loss and loss adjustment expense ratio 66.0 % 73.3 % (7.3) % 66.7 % 70.2 % (3.5) %
Underwriting expense ratio 30.7 30.1 0.6 32.1 31.0 1.1
Combined ratio 96.7 % 103.4 % (6.7) % 98.8 % 101.2 % (2.4) %
Impact of catastrophe events on combined ratio 8.1 9.6 (1.5) 11.5 7.2 4.3
Combined ratio without impact of catastrophe events 88.6 % 93.8 % (5.2) % 87.3 % 94.0 % (6.7) %
Gross catastrophe losses $ 80,054 $ 36,634 $ 43,420 $ 180,410 $ 80,456 $ 99,954
Net catastrophe losses $ 27,141 $ 36,796 $ (9,655) $ 127,179 $ 81,005 $ 46,174


	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
PREMIUMS AND OTHER REVENUES
Premiums	$	34,485	$	42,945	$	(8,460)	$	72,713	$	86,031	$	(13,318)
Net investment income	2,004		2,214		(210)		4,087		4,447		(360)
Other income	5,893		5,503		390		9,987		10,030		(43)
Total premiums and other revenues	42,382		50,662		(8,280)		86,787		100,508		(13,721)
BENEFITS, LOSSES AND EXPENSES
Claims incurred	26,190		26,726		(536)		50,441		61,611		(11,170)
Commissions for acquiring and servicing policies	6,565		7,160		(595)		12,551		15,184		(2,633)
Other operating expenses	9,867		9,476		391		20,475		20,105		370
Change in deferred policy acquisition costs (1)	1,531		(17)		1,548		2,385		(40)		2,425
Total benefits, losses and expenses	44,153		43,345		808		85,852		96,860		(11,008)
Income (loss) before federal income taxes and other items	$	(1,771)	$	7,317	$	(9,088)	$	935	$	3,648	$	(2,713)

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

Comparison of the three months ended ~~September~~June 30, ~~2020~~2021 to ~~2019~~2020

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

•An ~~improvement~~increase in the ~~combined~~benefit ratio for ~~our personal auto products attributable to fewer miles driven by policyholders and favorable~~Medicare Supplement in 2021 as COVID-19 shelter-in-place protocols drove lower 2020 claim ~~development~~utilization

•~~Although gross catastrophe losses increased, those losses were partially mitigated through reinsurance coverages which resulted~~Revisions to policy processing in our Worksite line of business. The end result was a $3.4 million decrease in due premium assets and the immediate recognition of $0.5 million deferred policy acquisition costs, resulting in a ~~decrease in net catastrophe losses~~$3.9 million loss

Comparison of the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 to ~~2019~~2020

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

•~~An improvement~~Revisions to policy processing in our Worksite line of business. The end result was a $3.4 million decrease in due premium assets and the ~~combined ratio for our personal auto products attributable to fewer miles driven by policyholders and favorable claim development~~immediate recognition of $0.5 million deferred policy acquisition costs, resulting in a $3.9 million loss

The ~~increase~~decrease in earnings was partially offset by the following:

•~~Significantly higher catastrophe losses, having~~Favorable claim experience in the ~~greatest impact on our homeowners loss ratio~~Medical Expense and Supplemental health lines of business

~~Additional information:~~

•Net premiums written and earned for the first nine months were reduced by COVID-19 relief policy credits for auto policyholders totaling $17.7 million; $16.8 million for personal auto policies and $0.9 million for commercial auto policies. The policy credits were based on 10%-15% of monthly premiums

•The increase in commissions expense for the third quarter and first nine months was primarily due to the increase in premiums written and an increase in contingent commissions due to the improvement in the loss ratios for the Specialty Markets Group products

Table of Contents

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

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


	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Medicare Supplement	$	18,433	$	21,624	$	(3,191)	$	37,257	$	43,202	$	(5,945)
MGU	5,753		6,132		(379)		10,938		11,603		(665)
Supplemental insurance	3,256		4,754		(1,498)		7,145		9,735		(2,590)
Credit Health	3,288		3,562		(274)		6,543		7,736		(1,193)
Medical expense	1,851		2,195		(344)		3,807		4,393		(586)
Worksite	607		3,438		(2,831)		4,625		6,992		(2,367)
Group health	510		429		81		859		797		62
All other	787		811		(24)		1,539		1,573		(34)
Total	$	34,485	$	42,945	$	(8,460)	$	72,713	$	86,031	$	(13,318)

Policy lapses as a result of rate increases drove a decrease in premiums for Medicare Supplement in 2021. Worksite premiums decreased as a result of revisions to policy processing. Supplemental insurance premiums decreased due to a reduction in sales across all product lines, primarily in Short Term Medical.

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


	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Medicare Supplement	$	14,874	$	15,023	$	(149)	$	29,100	$	34,727	$	(5,627)
MGU	5,905		4,966		939		9,207		9,609		(402)
Supplemental insurance	1,549		2,645		(1,096)		3,224		5,803		(2,579)
Credit Health	715		528		187		1,540		1,256		284
Medical expense	964		1,085		(121)		3,244		5,110		(1,866)
Worksite	1,599		1,312		287		3,732		2,754		978
Group health	27		326		(299)		(46)		876		(922)
All other	557		841		(284)		440		1,476		(1,036)
Total	$	26,190	$	26,726	$	(536)	$	50,441	$	61,611	$	(11,170)

Favorable claim experience for the six months ended June 30, 2021 is driven by Medicare Supplement rate increases and policy lapses. In addition, claim experience improved in the Medical Expense and Supplemental health lines of business. These favorable developments helped offset an increase in MGU reserves.

Change in Deferred Policy Acquisition Costs

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


	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Acquisition cost capitalized	$	(3,035)	$	(2,205)	$	(830)	$	(5,884)	$	(7,583)	$	1,699
Amortization of DAC	4,566		2,188		2,378		8,269		7,543		726
Change in DAC	$	1,531	$	(17)	$	1,548	$	2,385	$	(40)	$	2,425

Table of Contents

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

Property and Casualty

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


	Three months ended June 30,									Six months ended June 30,
	2021			2020			Change			2021			2020			Change
PREMIUMS AND OTHER REVENUES
Net premiums written	$	446,458		$	406,076		$	40,382		$	871,824		$	813,663		$	58,161
Net premiums earned	$	409,486		$	372,704		$	36,782		$	808,891		$	761,361		$	47,530
Net investment income	15,725			16,037			(312)			31,238			32,122			(884)
Other income	2,786			2,844			(58)			6,275			6,577			(302)
Total premiums and other revenues	427,997			391,585			36,412			846,404			800,060			46,344
BENEFITS, LOSSES AND EXPENSES
Claims incurred	280,606			280,561			45			524,741			510,270			14,471
Commissions for acquiring and servicing policies	81,025			80,386			639			160,262			153,082			7,180
Other operating expenses	50,676			50,080			596			104,562			103,084			1,478
Change in deferred policy acquisition costs (1)	(5,265)			(5,457)			192			(8,698)			(6,554)			(2,144)
Total benefits, losses and expenses	407,042			405,570			1,472			780,867			759,882			20,985
Income (loss) before federal income taxes and other items	$	20,955		$	(13,985)		$	34,940		$	65,537		$	40,178		$	25,359
Loss and loss adjustment expense ratio	68.6		%	75.3		%	(6.7)		%	64.8		%	67.0		%	(2.2)		%
Underwriting expense ratio	30.9			33.5			(2.6)			31.7			32.8			(1.1)
Combined ratio	99.5		%	108.8		%	(9.3)		%	96.5		%	99.8		%	(3.3)		%
Impact of catastrophe events on combined ratio	6.8			23.8			(17.0)			7.9			13.1			(5.2)
Combined ratio without impact of catastrophe events	92.7		%	85.0		%	7.7		%	88.6		%	86.7		%	1.9		%
Gross catastrophe losses	$	30,068		$	87,790		$	(57,722)		$	67,000		$	100,356		$	(33,356)
Net catastrophe losses	$	27,560		$	88,559		$	(60,999)		$	63,526		$	100,038		$	(36,512)

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

Comparison of the three and six months ended June 30, 2021 to 2020

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

•An improvement in the combined ratio for our homeowners and agricultural business products primarily due to a decrease in catastrophe losses

The increase in earnings was partially offset by the following:

•An increase in the combined ratio for our personal auto products as policyholders drove more miles due to the lessening impact of COVID-19

Additional Information

•Net premiums written and earned in the second quarter were reduced by COVID-19 relief policy credits for auto policyholders totaling $1.4 million (personal auto policies) in 2021 and $17.0 million ($16.1 million for personal auto policies and $0.9 million for commercial auto policies) in 2020.

Table of Contents

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

Products

Our Property and Casualty segment consists of: (i) Personal products, marketed primarily to individuals, representing ~~55%~~51% of net premiums written; (ii) Commercial products, focused primarily on agricultural and other business related markets, representing ~~31%~~33% of net premiums written; and (iii) Specialty Markets Group products, marketed through independent managing general agents and managing general underwriters, representing ~~14%~~16% of net premiums written.

Personal Products

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

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
Net premiums written
Automobile $ 142,702 $ 145,574 $ (2,872) $ 408,509 $ 432,796 $ (24,287)
Homeowner 77,267 71,718 5,549 215,854 197,055 18,799
Other Personal 13,668 13,515 153 40,032 39,113 919
Total net premiums written $ 233,637 $ 230,807 $ 2,830 $ 664,395 $ 668,964 $ (4,569)
Net premiums earned
Automobile $ 139,155 $ 142,474 $ (3,319) $ 397,088 $ 419,666 $ (22,578)
Homeowner 66,472 63,508 2,964 200,354 185,177 15,177
Other Personal 13,142 12,487 655 37,922 36,513 1,409
Total net premiums earned $ 218,769 $ 218,469 $ 300 $ 635,364 $ 641,356 $ (5,992)
Loss and loss adjustment expense ratio
Automobile 57.9 % 72.7 % (14.8) % 58.6 % 71.9 % (13.3) %
Homeowner 101.3 % 110.0 % (8.7) % 102.0 % 89.0 % 13.0 %
Other Personal 51.6 % 59.1 % (7.5) % 63.0 % 59.6 % 3.4 %
Personal line loss and loss adjustment expense ratio 70.7 % 82.8 % (12.1) % 72.6 % 76.2 % (3.6) %
Combined Ratio
Automobile 79.1 % 95.3 % (16.2) % 82.9 % 95.0 % (12.1) %
Homeowner 132.4 % 139.7 % (7.3) % 133.3 % 120.4 % 12.9 %
Other Personal 79.2 % 103.2 % (24.0) % 95.1 % 104.2 % (9.1) %
Personal line combined ratio 95.3 % 108.6 % (13.3) % 99.5 % 102.9 % (3.4) %


	Three months ended June 30,									Six months ended June 30,
	2021			2020			Change			2021			2020			Change
Net premiums written
Automobile	$	131,238		$	120,796		$	10,442		$	272,663		$	265,806		$	6,857
Homeowner	81,491			77,337			4,154			147,181			138,587			8,594
Other Personal	13,584			13,378			206			27,662			26,364			1,298
Total net premiums written	$	226,313		$	211,511		$	14,802		$	447,506		$	430,757		$	16,749
Net premiums earned
Automobile	$	134,320		$	120,450		$	13,870		$	268,430		$	257,933		$	10,497
Homeowner	72,321			67,184			5,137			142,516			133,882			8,634
Other Personal	13,073			12,326			747			25,825			24,780			1,045
Total net premiums earned	$	219,714		$	199,960		$	19,754		$	436,771		$	416,595		$	20,176
Loss and loss adjustment expense ratio
Automobile	71.4		%	55.5		%	15.9		%	67.3		%	59.0		%	8.3		%
Homeowner	86.4		%	138.9		%	(52.5)		%	86.4		%	102.3		%	(15.9)		%
Other Personal	67.5		%	83.2		%	(15.7)		%	58.1		%	69.1		%	(11.0)		%
Personal line loss and loss adjustment expense ratio	76.1		%	85.2		%	(9.1)		%	73.0		%	73.5		%	(0.5)		%
Combined Ratio
Automobile	95.5		%	83.3		%	12.2		%	91.5		%	84.9		%	6.6		%
Homeowner	116.5		%	169.1		%	(52.6)		%	116.0		%	133.8		%	(17.8)		%
Other Personal	97.6		%	117.7		%	(20.1)		%	88.1		%	103.5		%	(15.4)		%
Personal line combined ratio	102.5		%	114.3		%	(11.8)		%	99.3		%	101.7		%	(2.4)		%

Comparison of ~~2020~~2021 to ~~2019~~2020

Automobile: Net premiums written and earned increased for the second quarter and first six months primarily due to COVID-19 relief policy credits ~~decreased net premiums written and earned for the third quarter by $0.7~~of $1.4 million ~~and first nine months by $16.8~~in 2021 compared to $16.1 million ~~as previously discussed, as well as exposure changes primarily caused by fewer miles driven due to the impact of COVID-19.~~in 2020. The loss and loss adjustment expense and combined ratios ~~improved~~increased for the ~~third~~second quarter and first ~~nine~~six months primarily due to ~~a decrease~~an increase in ~~loss and loss adjustment expenses incurred, largely attributable~~claims compared to ~~fewer~~the prior year as policyholders drove more miles ~~driven by policyholders~~ due to ~~shelter-in-place orders and favorable claim development.~~the lessening impact of COVID-19.

Homeowners: Net premiums written and earned increased for the ~~third~~second quarter and first ~~nine~~six months primarily due to rate increases. The loss and loss adjustment expense and combined ratios ~~improved~~decreased for the ~~third~~second quarter ~~due to decreased catastrophe losses~~ and ~~increased for the~~ first ~~nine~~six months due to ~~increased~~lower catastrophe ~~losses due to multiple wind and hail storms.~~losses. Catastrophe losses, net of reinsurance, decreased by ~~$10.7~~$39.1 million, to $18.6 million ~~from $29.1~~in the second quarter compared to $57.7 million in ~~the third quarter~~2020, and ~~increased~~decreased by ~~$27.7~~$23.1 million, to ~~$83.3~~$41.6 million ~~from $55.6~~for the first six months compared to $64.7 million in ~~the first nine months in 2020 compared to 2019.~~2020.

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

5759

Table of Contents

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

Commercial Products

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

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
Net premiums written
Agricultural Business $ 40,201 $ 38,783 $ 1,418 $ 127,679 $ 120,080 $ 7,599
Automobile 27,700 27,925 (225) 102,078 97,059 5,019
Business Owner 17,893 16,685 1,208 62,674 56,295 6,379
Workers Compensation 12,935 14,414 (1,479) 56,202 60,000 (3,798)
Other Commercial 7,920 8,681 (761) 26,664 28,808 (2,144)
Total net premiums written $ 106,649 $ 106,488 $ 161 $ 375,297 $ 362,242 $ 13,055
Net premiums earned
Agricultural Business $ 40,145 $ 38,038 $ 2,107 $ 119,605 $ 112,044 $ 7,561
Automobile 32,492 29,495 2,997 93,790 85,510 8,280
Business Owner 19,498 17,918 1,580 56,935 51,110 5,825
Workers Compensation 17,634 19,137 (1,503) 52,709 56,542 (3,833)
Other Commercial 8,310 8,993 (683) 24,704 26,476 (1,772)
Total net premiums earned $ 118,079 $ 113,581 $ 4,498 $ 347,743 $ 331,682 $ 16,061
Loss and loss adjustment expense ratio
Agricultural Business 47.8 % 64.7 % (16.9) % 56.3 % 72.5 % (16.2) %
Automobile 84.9 % 82.9 % 2.0 % 73.1 % 79.7 % (6.6) %
Business Owner 81.5 % 50.1 % 31.4 % 85.9 % 55.7 % 30.2 %
Workers Compensation 63.5 % 57.7 % 5.8 % 60.5 % 48.3 % 12.2 %
Other Commercial 67.8 % 34.8 % 33.0 % 62.9 % 43.4 % 19.5 %
Commercial line loss and loss adjustment expense ratio 67.3 % 63.6 % 3.7 % 66.8 % 65.4 % 1.4 %
Combined ratio
Agricultural Business 85.6 % 100.6 % (15.0) % 93.8 % 109.3 % (15.5) %
Automobile 105.7 % 107.8 % (2.1) % 95.7 % 104.6 % (8.9) %
Business Owner 115.9 % 88.6 % 27.3 % 120.8 % 94.8 % 26.0 %
Workers Compensation 79.6 % 74.3 % 5.3 % 77.7 % 66.2 % 11.5 %
Other Commercial 106.9 % 76.9 % 30.0 % 102.8 % 85.9 % 16.9 %
Commercial line combined ratio 96.7 % 94.3 % 2.4 % 96.9 % 96.6 % 0.3 %


	Three months ended June 30,									Six months ended June 30,
	2021			2020			Change			2021			2020			Change
Net premiums written
Agricultural Business	$	49,974		$	46,496		$	3,478		$	94,747		$	87,478		$	7,269
Automobile	40,397			36,666			3,731			80,463			74,378			6,085
Business Owner	25,155			23,403			1,752			48,242			44,782			3,460
Workers Compensation	22,121			22,254			(133)			43,039			43,267			(228)
Other Commercial	10,464			9,404			1,060			20,538			18,743			1,795
Total net premiums written	$	148,111		$	138,223		$	9,888		$	287,029		$	268,648		$	18,381
Net premiums earned
Agricultural Business	$	43,176		$	40,387		$	2,789		$	84,499		$	79,460		$	5,039
Automobile	33,272			30,832			2,440			65,638			61,297			4,341
Business Owner	20,560			19,024			1,536			40,374			37,438			2,936
Workers Compensation	17,106			17,479			(373)			34,345			35,075			(730)
Other Commercial	9,061			8,304			757			17,908			16,393			1,515
Total net premiums earned	$	123,175		$	116,026		$	7,149		$	242,764		$	229,663		$	13,101
Loss and loss adjustment expense ratio
Agricultural Business	53.5		%	80.9		%	(27.4)		%	52.7		%	60.7		%	(8.0)		%
Automobile	76.7		%	70.1		%	6.6		%	63.8		%	66.8		%	(3.0)		%
Business Owner	78.8		%	81.9		%	(3.1)		%	77.8		%	88.1		%	(10.3)		%
Workers Compensation	65.0		%	65.2		%	(0.2)		%	61.1		%	59.0		%	2.1		%
Other Commercial	53.8		%	52.3		%	1.5		%	44.2		%	60.4		%	(16.2)		%
Commercial line loss and loss adjustment expense ratio	65.6		%	73.8		%	(8.2)		%	60.5		%	66.5		%	(6.0)		%
Combined ratio
Agricultural Business	87.2		%	117.9		%	(30.7)		%	88.3		%	97.9		%	(9.6)		%
Automobile	97.6		%	94.0		%	3.6		%	85.7		%	90.4		%	(4.7)		%
Business Owner	110.7		%	116.7		%	(6.0)		%	111.2		%	123.3		%	(12.1)		%
Workers Compensation	77.9		%	82.4		%	(4.5)		%	76.5		%	76.7		%	(0.2)		%
Other Commercial	91.5		%	90.4		%	1.1		%	84.9		%	100.8		%	(15.9)		%
Commercial line combined ratio	93.0		%	104.0		%	(11.0)		%	89.5		%	97.0		%	(7.5)		%

Comparison of ~~2020~~2021 to ~~2019~~2020

Agricultural Business: Our agricultural business product allows policyholders to customize and cover their agriculture exposure using a package policy, which includes coverage for residences and household contents, farm and ranch buildings and building contents, personal and commercial liability and personal property. Net premiums written and earned increased for the ~~third~~second quarter and first ~~nine~~six months primarily due to ~~rate~~ increases ~~and an increase~~ in policies ~~in-force.~~in-force and rate increases. The loss and loss adjustment expense and combined ratios improved for the ~~third~~second quarter and first ~~nine~~six months primarily due to ~~fewer claims as well as favorable prior year severity development.~~a decrease in catastrophe losses. Catastrophe losses, net of reinsurance, decreased by $12.1 million, to $1.4 million in the second quarter compared to $13.5 million in 2020, and decreased by $7.5 million, to $8.2 million for the first six months compared to $15.7 million in 2020.

Commercial Automobile: Net premiums written and earned increased for the ~~third~~second quarter and first ~~nine months and net premiums written increased for the first nine~~six months primarily due to rate ~~increases and an increase in policies in-force.~~increases. The loss and loss adjustment expense ratio and combined ratio increased for the ~~third~~second quarter primarily due to an increase in ~~allocated loss adjustment expense reserves. The combined ratio improved for~~claims compared to the ~~third quarter primarily~~prior year as policyholders drove more miles compared to the prior year due to ~~improvement in~~ the ~~expense ratio. The loss~~ lessening impact of COVID-19, and ~~loss adjustment expense and combined ratios~~ improved for the first ~~nine~~six months primarily due to favorable prior year claim development and a decrease in claim frequency as policyholders drove fewer miles in the first quarter of 2021 compared to 2020 due to ~~shelter-in-place orders.~~the impact of COVID-19.

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

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

~~Table of Contents~~

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

Workers Compensation: ~~Net premiums written and earned decreased~~The combined ratio improved for the ~~third quarter and first nine months primarily due to rate decreases. The loss and loss adjustment expense and combined ratios increased for the third~~second quarter primarily due to ~~the severity of claims and increased for the first nine months primarily due to~~ an ~~increase~~improvement in the ~~severity of claims and an increase in allocated loss adjustment~~ expense ~~reserves.~~ratio.

Other Commercial: Other commercial products primarily provide umbrella and other liability coverages. Net premiums written and earned ~~decreased~~increased for the ~~third~~second quarter and first ~~nine~~six months primarily due to an increase in ~~ceded premiums~~premium for ~~reinsurance coverage.~~umbrella products. The loss and loss adjustment expense and combined ratios ~~increased~~ for the ~~third quarter and the~~ first ~~nine~~six months improved primarily due to ~~an increase in~~favorable prior year claim ~~severity and frequency.~~development.

Specialty Markets Products

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

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
Net premiums written $ 57,494 $ 53,505 $ 3,989 $ 171,752 $ 149,245 $ 22,507
Net premiums earned 54,539 50,736 3,803 169,641 152,666 16,975
Loss and loss adjustment expense ratio(1)
44.5 % 54.4 % (9.9) % 44.5 % 55.8 % (11.3) %
Combined ratio(1)
102.6 % 101.7 % 0.9 % 99.8 % 104.6 % (4.8) %

~~(1) Ratio does not include fee income~~


	Three months ended June 30,									Six months ended June 30,
	2021			2020			Change			2021			2020			Change
Net premiums written	$	72,034		$	56,342		$	15,692		$	137,287		$	114,258		$	23,029
Net premiums earned	66,596			56,719			9,877			129,354			115,102			14,252

Loss and loss adjustment expense ratio	48.9		%	43.3		%	5.6		%	45.8		%	44.5		%	1.3		%
Combined ratio	101.0		%	99.4		%	1.6		%	100.5		%	98.5		%	2.0		%

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

Comparison of 2021 to 2020

Net written and earned premiums increased for the ~~third~~second quarter and first ~~nine~~six months primarily due to higher production on renters products and the addition of new accounts ~~for Mortgage Security Insurance (“MSI”), Collateral Protection Insurance, and Investor Property Protection (“IPP”~~related to the investor property protection ("IPP") products. The loss and loss adjustment expense and combined ratios ~~decreased~~increased for the ~~third~~second quarter and first ~~nine~~six months primarily due to ~~the improvement of loss ratios on Guaranteed Asset Protection (“GAP”)~~higher losses for renters products and IPP.

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

Corporate and Other

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

Three months ended September 30, Nine months ended September 30,
2020 2019 Change 2020 2019 Change
OTHER REVENUES
Net investment income $ 3,814 $ 24,237 $ (20,423) $ 19,274 $ 59,051 $ (39,777)
Realized investment gains 17,387 31,933 (14,546) 25,474 24,975 499
Change in investment credit loss (4,175) — (4,175) (101,163) — (101,163)
Net gains on equity securities 152,147 8,589 143,558 118,397 282,026 (163,629)
Other income 542 1,478 (936) 2,795 4,511 (1,716)
Total other revenues 169,715 66,237 103,478 64,777 370,563 (305,786)
BENEFITS, LOSSES AND EXPENSES
Other operating expenses 10,629 9,750 879 30,936 28,158 2,778
Total benefits, losses and expenses 10,629 9,750 879 30,936 28,158 2,778
Income before federal income taxes and other items $ 159,086 $ 56,487 $ 102,599 $ 33,841 $ 342,405 $ (308,564)


	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
OTHER REVENUES
Net investment income	$	44,089	$	(8,012)	$	52,101	$	74,813	$	17,545	$	57,268
Realized investment gains	10,602		3,939		6,663		29,841		8,087		21,754

Change in investment credit loss	25,079		(52,310)		77,389		19,593		(96,988)		116,581
Net gains (losses) on equity securities	170,804		298,825		(128,021)		266,744		(33,750)		300,494
Other income	1,002		754		248		1,857		2,253		(396)
Total other revenues	251,576		243,196		8,380		392,848		(102,853)		495,701
BENEFITS, LOSSES AND EXPENSES
Other operating expenses	27,254		9,370		17,884		37,040		20,307		16,733
Total benefits, losses and expenses	27,254		9,370		17,884		37,040		20,307		16,733
Income (loss) before federal income taxes and other items	$	224,322	$	233,826	$	(9,504)	$	355,808	$	(123,160)	$	478,968

Comparison of the three months ended ~~September~~June 30, ~~2020~~2021 to ~~2019~~2020

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

•A decrease in net gains on equity securities due to the financial markets rebounding from the pandemic onset in the first quarter of 2020

The decrease in earnings is partially offset by the following:

•An increase in net investment income driven by increases in investment income from mortgage loan profit participation and prepayment income and investment funds

•Favorable change in expected investment credit loss due to improvements in our commercial mortgage loans driven by economic forecast regarding GDP growth and positive economic outlook

Comparison of the six months ended June 30, 2021 to 2020

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

•An increase in ~~the S&P 500 Index of 8.5% for the three months ended September 30, 2020 compared to a 1.2% increase for the same period in 2019 resulting in an increase in~~ net gains on equity securities

~~The increase in earnings was partially offset by the following:~~

•~~A decrease in net investment income driven by bonds, mortgage loans and real estate~~ due to favorable market conditions

•~~A decrease~~Favorable change in ~~realized investment gains from sales of investments in real estate related joint ventures~~

~~Comparison of the nine months ended September 30, 2020 to 2019~~

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

•~~An increase in the S&P 500 index of 4.1% compared to an increase of 18.7% during the same period in 2019~~

•~~The change in~~expected investment credit loss due to ~~economic disruptions caused by COVID-19~~

•~~A decrease~~improvements in ~~net investment income~~our commercial mortgage loans driven by ~~bonds, mortgage loans~~economic forecast regarding GDP growth and ~~real estate~~

positive economic outlook

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

Investments

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

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

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

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

September 30, 2020 December 31, 2019
Fixed maturity, bond held-to-maturity, at amortized cost $ 7,702,347 32.4 % $ 8,631,261 36.6 %
Fixed maturity, bond available-for-sale, at fair value 7,236,188 30.5 6,725,085 28.5
Equity securities, at fair value 1,840,855 7.8 1,700,960 7.2
Mortgage loans on real estate, net of allowance 5,176,474 21.8 5,097,017 21.6
Policy loans 374,387 1.6 379,657 1.6
Investment real estate, net of accumulated depreciation 514,076 2.2 551,219 2.3
Short-term investments 800,793 3.4 425,321 1.8
Other invested assets 103,030 0.3 76,569 0.4
Total investments $ 23,748,150 100.0 % $ 23,587,089 100.0 %


	June 30, 2021				December 31, 2020
Fixed maturity, bond held-to-maturity, at amortized cost	$	7,473,697	28.9	%	$	7,354,970	29.2	%
Fixed maturity, bond available-for-sale, at fair value	8,068,795		31.3		7,597,180		30.1
Equity securities, at fair value	2,340,508		9.1		2,070,766		8.2
Mortgage loans on real estate, net of allowance	5,028,933		19.4		5,242,531		20.8
Policy loans	365,855		1.4		373,014		1.5
Real estate and real estate partnerships, net of accumulated depreciation	926,241		3.6		960,572		3.8
Investment funds	594,166		2.3		477,135		1.9
Short-term investments	917,581		3.6		1,028,379		4.1
Other invested assets	102,387		0.4		94,415		0.4
Total investments	$	25,818,163	100.0	%	$	25,198,962	100.0	%

The increase in our total investments at ~~September~~June 30, ~~2020~~2021 compared to year-end ~~2019~~2020 was primarily the result of ~~increases~~an increase in held-to-maturity bonds, available-for-sale ~~short term investments,~~bonds and ~~other invested assets. These increases were somewhat offset by a decrease in bonds held-to-maturity.~~equity securities.

Bonds—We allocate most of our fixed maturity securities to support our insurance business. At ~~September~~June 30, 2021, our fixed maturity securities had an estimated fair value of $16.1 billion, which was $1.0 billion, or 6.4%, above amortized cost. At December 31, 2020, our fixed maturity securities had an estimated fair value of ~~$15.5~~$15.6 billion, which was ~~$1.0~~$1.2 billion, or ~~6.8% higher than the amortized cost for the period. At December 31, 2019, our fixed maturity securities had an estimated fair value of $15.7 billion, which was $0.6 billion, or 4.2%~~8.0%, above amortized cost. The estimated fair value for securities due in one year or less was ~~$1.2~~$0.9 billion and $1.1 billion as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019.~~2020, respectively. For additional information regarding total bonds by credit quality rating, refer to Note 4, Investments in Securities, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

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

Mortgage Loans—We invest in commercial mortgage loans that are diversified by property-type and geography. Generally, mortgage loans are secured by first liens on income-producing real estate with a loan-to-value ratio of up to 75%. Mortgage loans are generally carried at outstanding principal balances, adjusted for any unamortized premium or discount, deferred fees or expenses, and net of allowances. The weighted average coupon yield on the principal funded for mortgage loans was 4.7% and 4.8% at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. For additional information regarding mortgage loans refer to Note 5, Mortgage Loans, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

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

Policy Loans—For certain life insurance products, policyholders may borrow funds using the policy’s cash value as collateral. The maximum amount of the policy loan depends upon the policy’s surrender value. As of ~~September~~June 30, ~~2020,~~2021, we had ~~$374.4~~$365.9 million in policy loans with a loan to surrender value of ~~55%~~54%, and at December 31, ~~2019,~~2020, we had ~~$379.7~~$373.0 million in policy loans with a loan to surrender value of approximately 56%. Interest rates on policy loans primarily range from 3.0% to 12.0% per annum. Policy loans may be repaid at any time by the policyholder and have priority to any claims on the policy. If the policyholder fails to repay the policy loan, funds are withdrawn from the policy’s benefits.

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

~~Short-Term~~

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

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

Other Invested Assets—Other invested assets are comprised primarily of ~~equity-indexed options~~pooled loans to mid-sized businesses which are initiated and administered by third-party managers. These loans are carried at fair value. Other invested assets also include equity-indexed options, carried at fair value, ~~and may be collateralized~~net of collateral provided by counterparties; such collateral is restricted to the Company’s use. ~~Other~~Additionally, other invested assets ~~also~~ include ~~tax credit partnerships, Certified Capital Companies (“CAPCO”) investments,~~FHLB capital stock, mineral rights, mezzanine loans and ~~limited liability company interests,~~lease financing arrangements, all of which are carried at cost, less allowance for depletion, where applicable. Investments in separately managed accounts and Federal Home Loan Bank stock are also included in other invested assets and are carried at cost or market value if available from the account manager.cost.

Net Investment Income and Net Realized Gains (Losses)

Net investment income ~~decreased $139.8~~increased $162.7 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to ~~2019~~2020 primarily due to ~~losses~~higher gains on options from ~~a decline~~an improvement in the S&P 500 ~~Index.~~Index, and an increase in income from mortgage loan profit participation and prepayment income, real estate joint ventures and investment funds.

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

Net realized investment gains ~~decreased $6.5~~increased $21.8 million during the ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 compared to ~~2019~~2020 primarily attributable to ~~decreased~~an increase in sales of real ~~estate.~~estate partnership interests and call of bonds. Net realized investment gains (losses) are shown below (in thousands):


	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Bonds	$	11,468	$	3,952	$	19,167	$	9,430
Mortgage loans	(768)		—		(768)		—
Real estate and real estate partnerships	(101)		(7)		11,092		(1,314)
Other invested assets	3		(6)		350		(29)
Total	$	10,602	$	3,939	$	29,841	$	8,087

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

Net Unrealized Gains ~~and Losses~~(Losses)

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

September 30, 2020 December 31, 2019 Change
Held-to-Maturity
Gains $ 582,282 $ 345,463 $ 236,819
Losses (36,018) (8,034) (27,984)
Net gains 546,264 337,429 208,835
Available-for-Sale
Gains 484,782 302,426 182,356
Losses (35,322) (13,011) (22,311)
Net gains 449,460 289,415 160,045
Total $ 995,724 $ 626,844 $ 368,880


	June 30, 2021		December 31, 2020		Change
Held-to-Maturity
Gains	$	537,646	$	639,648	$	(102,002)
Losses	(13,294)		(11,437)		(1,857)
Net gains	524,352		628,211		(103,859)
Available-for-Sale
Gains	456,181		548,996		(92,815)
Losses	(12,253)		(17,476)		5,223
Net gains	443,928		531,520		(87,592)




Total	$	968,280	$	1,159,731	$	(191,451)

The net change in the unrealized gains on fixed maturity securities between ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 is primarily attributable to the ~~decrease~~increase in benchmark ten-year interest rates, which were ~~0.7%~~1.4% and ~~1.9%~~0.9%, respectively. The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position.

Liquidity

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

In April 2020, the Company borrowed ~~$500~~$500.0 million from the Federal Home Loan Bank of Dallas' COVID-19 Relief Advance Program. ~~One~~As of June 30, 2021, there are no advances outstanding; the final advance was ~~approximately $240 million after a required capital stock purchase of approximately $10 million. The loan has an interest rate of 0.25%. The Company paid this advance in full~~repaid on its maturity date of ~~October 13, 2020.~~

~~We are monitoring our~~April 28, 2021. The available liquidity ~~needs closely. Should the Company require additional liquidity, deposits of certain securities and mortgage loans under the Company's membership with~~through the FHLB ~~provide~~at June 30, 2021 was approximately ~~$816 million of additional available credit to us as of October 28, 2020.~~$1.1 billion.

As a result of the impacts of COVID-19, state insurance departments across the country ~~had~~ issued regulations that required us not to cancel policies for non-payment for varying amounts of time but generally for at least 90-day periods which began in March and early April 2020. The cancellation and grace periods have been lifted in ~~most~~all states. ~~At this time, however, our liquidity requirements have been and are expected to continue to be met by funds from operations.~~

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

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

We are currently evaluating the renovation and modernization of our home office facilities. This could result in capital expenditures that could aggregate to approximately ~~$100~~$100.0 million over a three year period beginning in ~~2021. To date, the economic disruption~~2022; however, current uncertainties relating to the COVID-19 pandemic ~~has not~~have caused ~~the Company~~us to ~~lower or~~ delay ~~anticipated spending on capital investment projects.~~this project at this time. There are no other unusually large capital expenditures expected in the next 12-24 months.

We have consistently paid dividends to our stockholders ~~for over 110 consecutive years~~ and expect to continue this ~~trend.~~tradition. There are no other known trends or uncertainties regarding product pricing, changes in product lines or rising costs that are expected to have a significant impact to cash flows from operations, although ~~disruptions~~uncertainties relating to the COVID-19 pandemic could still significantly impact one or more of these items.

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

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

As a result of the economic ~~disruption caused by~~impact associated with COVID-19, weAmerican National modified 9293 loans with a total balance of $1.6 ~~billion.~~billion during the second and third quarters of 2020. These modifications ~~primarily related to hotels, retail and parking operations. The terms~~were in the form of ~~the modifications of these loans include~~ forbearance of principal and interest payments for ~~a period of~~ up to six months, extensions of maturity dates, and/or ~~provision of~~provisions for interest only payments. The modifications were primarily related to our loans to hotels, retail and parking operations. Due to the ongoing economic stress brought on by the pandemic, additional modifications for 31 of these loans with a total balance of $708.6 million were made in the first and second quarters of 2021. These additional modifications extended the forbearance of principal and interest payments and interest only provisions with a requirement for the payment of at least 20% of the total interest due during the extended modification period. The modified loans had an aggregate deferred interest of $13.6 million as of June 30, 2021.

The Company holds collateral of ~~$210.6~~$257.5 million at ~~September~~June 30, ~~2020~~2021 to offset exposure from its derivative counterparties. Cash flows associated with collateral received from counterparties change as the market value of the underlying derivative contract changes.

Our cash and cash equivalents and short-term investment position ~~increased~~decreased from ~~$877.3 million~~$1.4 billion at December 31, ~~2019~~2020 to ~~$1.7~~$1.3 billion at ~~September~~June 30, ~~2020.~~2021. The ~~increase in liquidity~~decrease primarily relates to ~~an increase~~a decrease in ~~money market accounts due to the decline in bond purchases.~~commercial paper.

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

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

Capital Resources

~~Capital Resources~~

Our capital resources are summarized below (in thousands):

September 30, 2020 December 31, 2019
American National stockholders’ equity, excluding accumulated other comprehensive income (“AOCI”), net of tax $ 5,951,801 $ 5,890,231
Accumulated other comprehensive income 194,706 99,518
Total American National stockholders’ equity $ 6,146,507 $ 5,989,749


	June 30, 2021		December 31, 2020
American National stockholders’ equity, excluding accumulated other comprehensive income (“AOCI”), net of tax	$	6,590,193	$	6,236,100
Accumulated other comprehensive income	171,851		222,170
Total American National stockholders’ equity	$	6,762,044	$	6,458,270

We have notes payable relating to borrowings by real estate joint ventures that we consolidate into our financial statements that are not part of our capital resources. The lenders for the notes payable generally have no recourse against us in the event of default by the joint ventures. Therefore, the liability ~~we have for these~~of American National relating to notes payable of the consolidated VIEs is limited to ~~our~~the amount of its direct or indirect investment in the respective ventures, which totaled ~~$3.1 million and $4.3~~$3.0 million at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, respectively.~~

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

September 30, 2020 December 31, 2019
Capital and
Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total Capital and
Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss) Total
Net income attributable to American National $ 161,153 $ — $ 161,153 $ 620,363 $ — $ 620,363
Dividends to shareholders (66,140) — (66,140) (88,243) — (88,243)
Change in net unrealized gains on debt securities — 89,946 89,946 — 184,156 184,156
Foreign currency transaction and translation adjustment — (214) (214) — 390 390
Defined benefit pension plan adjustment — 5,456 5,456 — 15,495 15,495
Cumulative effect of accounting change (33,503) — (33,503) 785 (785) —
Other 60 — 60 340 — 340
Total $ 61,570 $ 95,188 $ 156,758 $ 533,245 $ 199,256 $ 732,501
2020.

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

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


	June 30, 2021						December 31, 2020
	Capital and Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total		Capital and Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Net income attributable to American National	$	398,149	$	—	$	398,149	$	467,505	$	—	$	467,505
Dividends to shareholders	(44,095)		—		(44,095)		(88,190)		—		(88,190)
Change in net unrealized gains on debt securities	—		(56,869)		(56,869)		—		134,315		134,315
Foreign currency transaction and translation adjustment	—		419		419		—		235		235
Defined benefit pension plan adjustment	—		6,131		6,131		—		(11,898)		(11,898)
Cumulative effect of accounting change (1)	—		—		—		(33,500)		—		(33,500)
Other	39		—		39		54		—		54
Total	$	354,093	$	(50,319)	$	303,774	$	345,869	$	122,652	$	468,521

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

Statutory Capital and Surplus and Risk-based Capital

Statutory capital and surplus is the capital of our insurance companies reported in accordance with accounting practices prescribed or permitted by the applicable state insurance departments. RBC is calculated using formulas applied to certain financial balances and activities that consider, among other things, investment risks related to the type and quality of investments, insurance risks associated with products and liabilities, interest rate risks and general business risks. Insurance companies that do not maintain capital and surplus at a level of at least 200% of the authorized control level RBC are required to take certain actions. At ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019, American National Insurance Company’s~~2020, ANICO’s statutory capital and surplus was ~~$3,488,293,000~~$3.8 billion and ~~$3,477,727,000,~~$3.6 billion, respectively. ~~American National Insurance Company~~ANICO and each of ~~its~~our other insurance subsidiaries had statutory capital and surplus at ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 above 200% of the authorized control level, except for ANPAC Louisiana Insurance Company ("ANPLA").

At June 30, 2021 and December 31, 2020, ANPLA's statutory capital and surplus was $63.4 million and $68.5 million respectively, which resulted in an RBC level of 179% and 194% of the company action level. This decrease in RBC of ANPLA is primarily driven by an increase in homeowners catastrophe losses impacting the operating results in 2021 and 2020. We are actively managing our homeowners exposure of ANPLA, will continue to monitor the surplus levels and will be addressing rate adequacy through future planned underwriting and rate actions.

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

Contractual Obligations

Our future cash payments associated with claims and claims adjustment expenses, life, annuity and disability obligations, contractual obligations pursuant to operating leases for office space and equipment, and notes payable have not materially changed since December 31, ~~2019.~~2020. We expect to have the capacity to pay our obligations as they come due.

~~At September 30, 2020,~~

On April 28, 2021, the Company ~~had $500 million~~paid in full an advance outstanding ~~advances~~ with Federal Home Loan Bank. ~~On October 13, 2020, one of these advances totaling $250 million had been paid in full.~~ It is expected that the Company will have sufficient cash flow to meet its current lending commitments. For additional details see Note 16, Commitments and Contingencies ~~and Note 18, Subsequent Events,~~ of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Off-Balance Sheet Arrangements

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

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

Related-Party Transactions

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk has not changed materially from those disclosed in our ~~2019~~2020 Annual Report on form 10-K filed with the SEC on ~~February 28, 2020,~~March 4, 2021, although the recent economic disruptions caused by the COVID-19 pandemic has added greater uncertainty to the credit risk and equity risk that we face.

~~Table of Contents~~

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

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

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of ~~September~~June 30, ~~2020.~~2021. Based upon that evaluation and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September~~June 30, ~~2020,~~2021, the design and operation of the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

Management has monitored the internal controls over financial reporting, including any material changes to the internal control over financial reporting. There were no changes in the Company’s internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended ~~September~~June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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

ITEM 1A. RISK FACTORS

There have been no material changes to the "Risk Factors" discussion in Item 1A of our ~~2019~~2020 Form 10-K filed with the SEC on ~~February 28, 2020, as supplemented by the "Risk Factors" discussion in Part II, Item 1A of our Form 10-Q for the period ending June 30, 2020, filed with the SEC on August 5, 2020.~~

March 4, 2021.

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ITEM 6.						EXHIBITS


Exhibit Number						Description

2.1						Agreement and Plan of Merger, dated February 11, 2020, among American National Insurance Company, a Texas insurance company ("ANICO"), American National Group, Inc., a Delaware corporation ("ANAT"), and AN MergerCo., Inc., a Texas corporation (incorporated by reference to Annex I to the Proxy Statement/Prospectus filed on March 25, 2020).

2.2						Agreement and Plan of Merger, dated as of August 6, 2021, by and among Brookfield Asset Management Reinsurance Partners Ltd., Freestone Merger Sub Inc. and American National Group, Inc. (incorporated by reference to Exhibit 2.1 of the registrant's Current Report on Form 8-K filed on August 9, 2021).

3.1						Amended and Restated Certificate of Incorporation of ~~American National Group. Inc.~~ANAT (incorporated by reference to Annex II of the Proxy Statement/Prospectus filed with the SEC on March 25, 2020).

3.2						Restated Articles of Incorporation, as amended, of ~~American National Insurance Company~~ANICO (incorporated by reference to Exhibit No. 3.1 to the registrant's Registration Statement on Form 10-12B filed April 10, 2009).

3.3						Amended and Restated Bylaws of ~~American National Group, Inc.~~ANAT (incorporated by reference to Annex III of the Proxy Statement/Prospectus filed with the SEC on March 25, 2020)

3.4						Amended and Restated Bylaws of ~~American National Insurance Company~~ANICO (incorporated by reference to Exhibit No. 3.2 to the registrant's Current Report on Form 8-K filed February 23, 2018).

~~10.11~~10.1*						Form of ~~Restricted Stock Unit~~Letter Agreement ~~for Directors (filed herewith)~~amending outstanding book value units granted to certain employees of American National Group, Inc. (incorporated by reference to Exhibit 99.2 of the registrant's Current Report on Form 8-K filed on August 9, 2021).*



31.1						Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2						Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1						Certification of the principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema Document.

101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document.

101.LAB						XBRL Taxonomy Extension Label Linkbase Document.

101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document.

101.DEF						XBRL Taxonomy Extension Definition Linkbase Document.

104						Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

*Management contract or compensatory plan or arrangement.

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SIGNATURES

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


By:						/s/ James E. Pozzi
Name:						James E. Pozzi
Title:						President and Chief Executive Officer

By:						/s/ ~~Timothy A. Walsh~~Brody J. Merrill
Name:						~~Timothy A.Walsh~~Brody J. Merrill
Title:						~~Executive~~Senior Vice President, ~~CFO,~~Chief Financial Officer and Treasurer ~~and ML and P&C Operations~~

Date: ~~November 4, 2020~~August 9, 2021

6870


	Pre-ASC 326 Adoption		Adjustment to Adopt ASC 326		Balance as of January 1, 2020
Assets:
Allowance for credit losses
Fixed maturity, bonds held-to-maturity, at amortized cost	$	0	$	(21,664)	$	(21,664)

Mortgage loans on real estate	(19,160)		(11,224)		(30,384)
Reinsurance recoverables	(8,220)		(7,920)		(16,140)
Liabilities:
Allowance for credit losses
Other policyholder funds	0		1,526		1,526
Other liabilities	0		(3,126)		(3,126)
Total	$	(27,380)	$	(42,408)	$	(69,788)


	September 30, 2020		December 31, 2019
Investment real estate	$	133,152	$	134,534
Short-term investments	500		500
Cash and cash equivalents	5,634		11,155
Other receivables	3,704		3,673
Other assets	13,153		15,355
Total assets of consolidated VIEs	$	156,143	$	165,217
Notes payable	$	154,788	$	157,997
Other liabilities	6,526		9,731
Total liabilities of consolidated VIEs	$	161,314	$	167,728


	Assets and Liabilities Carried at Fair Value by Hierarchy Level as of September 30, 2020
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
Fixed maturity, bonds available-for-sale
U.S. treasury and government	$	32,559	$	0	$	32,559	$	0
U.S. states and political subdivisions	1,098,759		0		1,098,759		0
Foreign governments	16,594		0		16,594		0
Corporate debt securities	6,032,196		0		5,913,834		118,362
Residential mortgage-backed securities	27,284		0		27,284		0
Collateralized debt securities	28,796		0		28,796		0
Total bonds available-for-sale	7,236,188		0		7,117,826		118,362
Equity securities
Common stock	1,822,813		1,822,656		0		157
Preferred stock	18,042		17,575		0		467
Total equity securities	1,840,855		1,840,231		0		624
Options	213,782		0		0		213,782
Short-term investments	800,793		0		800,793		0
Separate account assets	1,062,762		275,667		787,095		0
Separately managed accounts	62,052		0		0		62,052
Total financial assets	$	11,216,432	$	2,115,898	$	8,705,714	$	394,820
Financial liabilities
Embedded derivative for equity-indexed contracts	$	693,780	$	0	$	0	$	693,780
Separate account liabilities	1,062,762		275,667		787,095		0
Total financial liabilities	$	1,756,542	$	275,667	$	787,095	$	693,780


	Net Unrealized Gains (Losses) on Securities		Defined Benefit Pension Plan Adjustments		Foreign Currency Adjustments		Accumulated Other Comprehensive Income (Loss)
Beginning balance at January 1, 2020	$	157,851	$	(55,232)	$	(3,101)	$	99,518
Amounts reclassified from AOCI (net of tax benefit $1,179 and expense $1,450)	(4,434)		5,456		—		1,022
Unrealized holding gains arising during the period (net of tax expense $34,600)	130,160		—		—		130,160
Unrealized adjustment to DAC (net of tax benefit $7,839)	(29,490)		—		—		(29,490)
Unrealized gains on investments attributable to participating policyholders’ interest (net of tax benefit $1,672)	(6,290)		—		—		(6,290)
Foreign currency adjustment (net of tax benefit $57)	—		—		(214)		(214)

Ending balance at September 30, 2020	$	247,797	$	(49,776)	$	(3,315)	$	194,706
Beginning balance at January 1, 2019	$	(42,469)	$	(54,236)	$	(3,033)	$	(99,738)
Amounts reclassified from AOCI (net of tax expense $401 and $1,160)	1,510		4,365		—		5,875
Unrealized holding gains arising during the period (net of tax expense $68,285)	256,880		—		—		256,880
Unrealized adjustment to DAC (net of tax benefit $17,343)	(65,244)		—		—		(65,244)
Unrealized gains on investments attributable to participating policyholders’ interest (net of tax benefit $3,148)	(11,841)		—		—		(11,841)
Foreign currency adjustment (net of tax expense $79)	—		—		297		297
Cumulative effect of changes in accounting	16,164		(16,491)		(458)		(785)
Ending balance at September 30, 2019	$	155,000	$	(66,362)	$	(3,194)	$	85,444


	Principal Amount		Interest Rate		Maturity Date
At September 30, 2020
FHLB advance, fixed rate*	$	250,000	0.25	%	10/13/2020
FHLB advance, fixed rate	250,000		0.38	%	4/28/2021


	September 30, 2020						December 31, 2019
	Capital and Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total		Capital and Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Net income attributable to American National	$	161,153	$	—	$	161,153	$	620,363	$	—	$	620,363
Dividends to shareholders	(66,140)		—		(66,140)		(88,243)		—		(88,243)
Change in net unrealized gains on debt securities	—		89,946		89,946		—		184,156		184,156
Foreign currency transaction and translation adjustment	—		(214)		(214)		—		390		390
Defined benefit pension plan adjustment	—		5,456		5,456		—		15,495		15,495
Cumulative effect of accounting change	(33,503)		—		(33,503)		785		(785)		—
Other	60		—		60		340		—		340
Total	$	61,570	$	95,188	$	156,758	$	533,245	$	199,256	$	732,501