Table of Contents

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 30, 20202021
or
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File No. 001-39369
anat-20210930_g1.jpg
American National Group, Inc.
(Exact name of registrant as specified in its charter)
(formerly American National Insurance Company)

Delaware30-1221711
(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 SymbolName of Each Exchange on which Registered
Common Stock, par value $0.01ANATNASDAQ
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, 2020,2021, there werewere 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
ITEM 1.
3
4
5
6
8
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
19
Note 6 - Real Estate and Other Investments
22
Note 7 – Derivative Instruments
24
Note 8 – Net Investment Income and Realized Investment Gains (Losses)
26
Note 9 – Fair Value of Financial Instruments
27
Note 10 – Deferred Policy Acquisition Costs
35
Note 11 – Liability for Unpaid Claims and Claim Adjustment Expenses
35
Note 12 – Federal Income Taxes
36
Note 13 – Accumulated Other Comprehensive Income (Loss)
36
Note 14 – Stockholders’ Equity and Noncontrolling Interests
37
Note 15 – Segment Information
40
Note 16 – Commitments and Contingencies
43
Note 17 – Related Party Transactions
44
ITEM 2.
4145
ITEM 3.
6571
ITEM 4.
6671
ITEM 1.
6671
ITEM 1A.
6671
ITEM 6.
6772
SIGNATURES
73



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AMERICAN NATIONAL GROUP, INC.
(formerly AMERICAN NATIONAL INSURANCE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)
(In thousands, except share data)
September 30, 2020December 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 20195,176,474 5,097,017 
Policy loans374,387 379,657 
Investment real estate, net of accumulated depreciation of $266,697 in 2020 and $256,757 in 2019514,076 551,219 
Short-term investments800,793 425,321 
Other invested assets103,030 76,569 
Total investments23,748,150 23,587,089 
Cash and cash equivalents884,083 452,001 
Investments in unconsolidated affiliates827,364 705,721 
Accrued investment income211,655 200,856 
Reinsurance recoverables, net of allowance for credit losses of $14,845 in 2020 and allowance for recoverables loss of $8,220 in 2019477,904 411,830 
Prepaid reinsurance premiums40,574 44,669 
Premiums due and other receivables372,535 341,924 
Deferred policy acquisition costs1,400,440 1,423,007 
Property and equipment, net of accumulated depreciation of $276,047 in 2020 and $257,907 in 2019117,892 106,303 
Prepaid pension87,908 78,990 
Other assets187,665 171,285 
Separate account assets1,092,574 1,073,891 
Total assets$29,448,744 $28,597,566 
LIABILITIES
Future policy benefits
Life$3,123,027 $3,087,578 
Annuity1,573,480 1,571,263 
Health50,143 49,886 
Policyholders’ account balances12,869,130 12,957,989 
Policy and contract claims1,596,729 1,489,979 
Unearned premium reserve983,113 933,559 
Other policyholder funds362,187 361,059 
Liability for retirement benefits61,043 67,435 
Notes payable154,788 157,997 
Deferred tax liabilities, net414,206 394,528 
Current tax payable5,173 9,757 
Federal Home Loan Bank advances500,000 0 
Other liabilities510,337 446,882 
Separate account liabilities1,092,574 1,073,891 
Total liabilities23,295,930 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 2019269 30,832 
Additional paid-in capital47,689 21,011 
Accumulated other comprehensive income194,706 99,518 
Retained earnings5,903,843 5,946,857 
Treasury stock, at cost0 (108,469)
Total American National stockholders’ equity6,146,507 5,989,749 
Noncontrolling interest6,307 6,014 
Total stockholders' equity6,152,814 5,995,763 
Total liabilities and stockholders' equity$29,448,744 $28,597,566 

September 30, 2021December 31, 2020
ASSETS
Fixed maturity, bonds held-to-maturity, at amortized cost, net of allowance for credit losses of $13,492 in 2021 and $12,442 in 2020 (Fair value $7,747,031 in 2021 and $7,983,181 in 2020)$7,277,801 $7,354,970 
Fixed maturity, bonds available-for-sale, at fair value (Allowance for credit losses of $4,529 in 2021 and $7,482 in 2020) (Amortized cost $8,207,687 in 2021 and $7,073,142 in 2020)8,573,081 7,597,180 
Equity securities, at fair value (Cost $838,872 in 2021 and $754,625 in 2020)2,383,478 2,070,766 
Mortgage loans on real estate, net of allowance for credit losses of $106,897 in 2021 and $125,703 in 20205,002,978 5,242,531 
Policy loans364,960 373,014 
Real estate and real estate partnerships, net of accumulated depreciation of $282,248 in 2021 and $269,626 in 2020926,154 960,572 
Investment funds814,527 477,135 
Short-term investments536,621 1,028,379 
Other invested assets123,337 94,415 
Total investments26,002,937 25,198,962 
Cash and cash equivalents504,465 339,947 
Accrued investment income207,473 216,389 
Reinsurance recoverables, net of allowance for credit losses of $15,196 in 2021 and $14,353 in 2020443,756 414,359 
Prepaid reinsurance premiums44,098 42,804 
Premiums due and other receivables402,054 351,972 
Deferred policy acquisition costs1,448,905 1,360,211 
Property and equipment, net of accumulated depreciation of $297,807 in 2021 and $281,738 in 2020133,447 121,578 
Current tax receivable23,913 — 
Prepaid pension91,214 80,526 
Other assets155,780 155,600 
Separate account assets1,260,427 1,185,467 
Total assets$30,718,469 $29,467,815 
LIABILITIES
Future policy benefits
Life$3,194,176 $3,149,067 
Annuity1,608,952 1,617,774 
Health47,017 49,658 
Policyholders’ account balances13,632,812 12,812,155 
Policy and contract claims1,668,898 1,575,288 
Unearned premium reserve1,032,713 956,343 
Other policyholder funds363,729 358,601 
Liability for retirement benefits81,268 70,254 
Notes payable150,378 153,703 
Deferred tax liabilities, net516,331 478,347 
Current tax payable— 10,372 
Federal Home Loan Bank advance— 250,000 
Other liabilities407,954 335,219 
Separate account liabilities1,260,427 1,185,467 
Total liabilities23,964,655 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 2020269 269 
Additional paid-in capital47,742 47,683 
Accumulated other comprehensive income127,159 222,170 
Retained earnings6,571,202 6,188,148 
Total American National stockholders’ equity6,746,372 6,458,270 
Noncontrolling interest7,442 7,297 
Total stockholders' equity6,753,814 6,465,567 
Total liabilities and stockholders' equity$30,718,469 $29,467,815 
See accompanying notes to the unaudited condensed consolidated financial statements.

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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,
 2020201920202019
PREMIUMS AND OTHER REVENUES
Premiums
Life$101,182 $93,079 $282,368 $265,634 
Annuity27,960 41,305 69,413 137,434 
Health40,934 40,676 126,965 121,581 
Property and casualty391,388 382,784 1,152,749 1,125,704 
Other policy revenues79,344 76,784 238,736 226,178 
Net investment income254,256 246,620 656,888 796,696 
Net realized investment gains17,387 31,933 25,474 31,943 
Other-than-temporary impairments0 0 0 (6,968)
Change in investment credit loss(4,175)0 (101,163)0 
Net gains on equity securities152,147 8,589 118,397 282,026 
Other income9,683 10,730 31,152 32,642 
Total premiums and other revenues1,070,106 932,500 2,600,979 3,012,870 
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits
Life153,957 113,652 389,364 327,579 
Annuity46,424 59,699 126,209 191,248 
Claims incurred
Health27,933 28,567 89,544 81,042 
Property and casualty258,412 280,695 768,682 790,447 
Interest credited to policyholders’ account balances128,946 106,782 271,406 371,703 
Commissions for acquiring and servicing policies138,365 128,689 409,290 408,629 
Other operating expenses126,413 128,502 385,516 391,645 
Change in deferred policy acquisition costs(8,387)1,548 (14,762)(22,391)
Total benefits, losses and expenses872,063 848,134 2,425,249 2,539,902 
Income before federal income tax and other items198,043 84,366 175,730 472,968 
Less: Provision for federal income taxes
Current20,789 4,433 31,578 32,444 
Deferred23,123 18,042 2,863 79,356 
Total provision for federal income taxes43,912 22,475 34,441 111,800 
Income after federal income tax154,131 61,891 141,289 361,168 
Equity in earnings of unconsolidated affiliates17,029 45,075 19,114 102,325 
Other components of net periodic pension benefit (costs), net of tax543 (1,023)1,471 (2,808)
Net income171,703 105,943 161,874 460,685 
Less: Net income attributable to noncontrolling interest, net of tax651 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 
Diluted6.36 3.43 5.99 16.71 
Weighted average common shares outstanding26,877,200 26,881,700 26,879,178 26,883,025 
Weighted average common shares outstanding and dilutive potential common shares26,884,758 26,888,172 26,887,874 26,889,338 

 Three months ended September 30,Nine months ended September 30,
 2021202020212020
PREMIUMS AND OTHER REVENUES
Premiums
Life$104,802 $101,182 $306,365 $282,368 
Annuity18,698 27,960 63,436 69,413 
Health36,201 40,934 108,914 126,965 
Property and Casualty426,887 391,388 1,235,778 1,152,749 
Other policy revenues88,687 79,344 265,749 238,736 
Net investment income261,140 271,285 828,520 676,002 
Net realized investment gains20,138 17,387 49,979 25,474 
(Increase) decrease in investment credit loss5,969 (4,175)25,562 (101,163)
Net gains on equity securities681 152,147 267,425 118,397 
Other income12,026 9,683 32,813 31,152 
Total premiums and other revenues975,229 1,087,135 3,184,541 2,620,093 
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits
Life161,633 153,957 447,309 389,364 
Annuity29,222 46,424 116,662 126,209 
Claims incurred
Health23,935 27,933 74,376 89,544 
Property and Casualty299,956 258,412 824,697 768,682 
Interest credited to policyholders’ account balances82,251 128,946 301,274 271,406 
Commissions for acquiring and servicing policies171,219 138,365 488,817 409,290 
Other operating expenses151,971 126,413 435,380 385,516 
Change in deferred policy acquisition costs(7,088)(8,387)(64,049)(14,762)
Total benefits, losses and expenses913,099 872,063 2,624,466 2,425,249 
Income before federal income tax and other items62,130 215,072 560,075 194,844 
Less: Provision (benefit) for federal income taxes
Current12,624 20,789 50,811 31,578 
Deferred(814)23,123 62,499 2,863 
Total provision for federal income taxes11,810 43,912 113,310 34,441 
Income after federal income tax50,320 171,160 446,765 160,403 
Other components of net periodic pension benefit, net of tax917 543 2,778 1,471 
Net income51,237 171,703 449,543 161,874 
Less: Net income attributable to noncontrolling interest, net of tax189 651 346 721 
Net income attributable to American National$51,048 $171,052 $449,197 $161,153 
Amounts available to American National common stockholders
Earnings per share
Basic$1.90 $6.36 $16.71 $6.00 
Diluted1.90 6.36 16.71 5.99 
Weighted average common shares outstanding26,877,200 26,877,200 26,877,200 26,879,178 
Weighted average common shares outstanding and dilutive potential common shares26,884,582 26,884,758 26,884,700 26,887,874 
See accompanying notes to the unaudited condensed consolidated financial statements.

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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,
 2020201920202019
Net income$171,703 $105,943 $161,874 $460,685 
Other comprehensive income (loss), net of tax
  Change in net unrealized gains (losses) on securities28,573 (2,569)89,946 181,305 
  Foreign currency transaction and translation adjustments371 (293)(214)297 
  Defined benefit pension plan adjustment1,851 1,454 5,456 4,365 
Total other comprehensive income (loss), net of tax30,795 (1,408)95,188 185,967 
Total comprehensive income202,498 104,535 257,062 646,652 
Less: Comprehensive income attributable to noncontrolling interest651 13,759 721 11,444 
Total comprehensive income attributable to American National$201,847 $90,776 $256,341 $635,208 

 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Net income$51,237 $171,703 $449,543 $161,874 
Other comprehensive income (loss), net of tax
  Change in net unrealized gains (losses) on securities(46,717)28,573 (103,585)89,946 
  Foreign currency transaction and translation adjustments(297)371 122 (214)
  Defined benefit pension plan adjustment2,322 1,851 8,452 5,456 
Total other comprehensive income (loss), net of tax(44,692)30,795 (95,011)95,188 
Total comprehensive income6,545 202,498 354,532 257,062 
Less: Comprehensive income attributable to noncontrolling interest189 651 346 721 
Total comprehensive income attributable to American National$6,356 $201,847 $354,186 $256,341 
See accompanying notes to the unaudited condensed consolidated financial statements.


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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 StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTreasury StockNoncontrolling InterestTotal 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 StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsNoncontrolling InterestTotal 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— — — — — — 
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 
Amortization of restricted stock— 20 — — — 20 
Other comprehensive loss— — (44,692)— — (44,692)
Net income attributable to American National— — — 51,048 — 51,048 
Cash dividends to common stockholders (declared per share of $0.82)— — — (22,048)— (22,048)
Contributions— — — — 64 64 
Distributions— — — — 195 195 
Net income attributable to noncontrolling interest— — — — 189 189 
Balance at September 30, 2021$269 $47,742 $127,159 $6,571,202 $7,442 $6,753,814 
See accompanying notes to the unaudited condensed consolidated financial statements.


6
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 StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTreasury StockNoncontrolling InterestTotal 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 StockAdditional Paid-In CapitalAccumulated Other Comprehensive Income (Loss)Retained EarningsTreasury StockNoncontrolling InterestTotal 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 
Reclassification of par value due to reorganization(26,618)26,618 — — — — — 
Retirement of treasury shares(3,945)— — (104,524)108,469 — — 
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— — — — — — — 
Distributions— — — — — (599)(599)
Net income attributable to noncontrolling interest— — — — — 651 651 
Balance at September 30, 2020$269 $47,689 $194,706 $5,903,843 $— $6,307 $6,152,814 
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,
 20202019
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 impairments0 6,968 
Change in investment credit loss101,163 0 
Accretion of premiums, discounts and loan origination fees12,457 (3,862)
Net capitalized interest on policy loans and mortgage loans(22,596)(25,719)
Depreciation39,389 40,760 
Interest credited to policyholders’ account balances271,406 371,703 
Charges to policyholders’ account balances(238,736)(226,178)
Deferred federal income tax expense2,863 79,356 
Equity in earnings of unconsolidated affiliates(19,114)(102,325)
Distributions from unconsolidated affiliates45,233 103,128 
Changes in:
Policyholder liabilities187,393 168,352 
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 premiums4,095 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 securities2,200 (95,885)
Fair value of equity securities(118,397)(282,026)
Other, net(17,352)(13,282)
    Net cash provided by operating activities251,043 395,196 
INVESTING ACTIVITIES
Proceeds from sale/maturity/prepayment of:
Held-to-maturity securities1,167,417 502,141 
Available-for-sale securities803,665 329,489 
Equity securities79,623 178,817 
Investment real estate45,645 64,459 
Mortgage loans313,009 626,449 
Policy loans40,502 33,096 
Other invested assets98,975 53,350 
Disposals of property and equipment16 69 
Distributions from unconsolidated affiliates39,190 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)

 Nine months ended September 30,
 20212020
OPERATING ACTIVITIES
Net income$449,543 $161,874 
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment gains(49,979)(25,474)
Increase (decrease) in investment credit loss(25,562)101,163 
Accretion of premiums, discounts and loan origination fees12,971 12,457 
Net capitalized interest on policy loans and mortgage loans(24,130)(22,596)
Depreciation38,211 39,389 
Fair value of option securities(70,434)2,200 
Fair value of equity securities(267,425)(118,397)
Interest credited to policyholders’ account balances301,274 271,406 
Charges to policyholders’ account balances(265,749)(238,736)
Deferred federal income tax expense62,499 2,863 
Income from equity method investments(111,307)(19,114)
Distributions from unconsolidated affiliates89,625 45,233 
Changes in:
Policyholder liabilities252,913 187,393 
Deferred policy acquisition costs(64,049)(14,762)
Reinsurance payables(29,397)(66,074)
Premiums due and other receivables(50,082)(30,611)
Prepaid reinsurance premiums(1,294)4,095 
Accrued investment income8,916 (10,799)
Current tax receivable(34,285)(4,711)
Liability for retirement benefits11,025 (8,404)
Other, net41,075 (17,352)
    Net cash provided by operating activities274,359 251,043 
INVESTING ACTIVITIES
Proceeds from sale/maturity/prepayment of:
Held-to-maturity securities965,803 1,167,417 
Available-for-sale securities920,882 803,665 
Equity securities51,159 79,623 
Real estate and real estate partnerships19,976 45,645 
Mortgage loans727,848 313,009 
Policy loans40,038 40,502 
Other invested assets170,386 98,975 
Disposals of property and equipment65 16 
Distributions from real estate and real estate partnerships92,815 224 
Distributions from investment funds84,997 38,966 
Payment for the purchase/origination of:
Held-to-maturity securities(882,092)(351,036)
Available-for-sale securities(2,058,148)(1,027,856)
Equity securities(80,188)(101,090)
Real estate and real estate partnerships(8,328)(12,232)
Mortgage loans(450,916)(466,472)
Policy loans(14,974)(17,196)
Other invested assets(120,900)(83,820)
Additions to property and equipment(28,003)(29,799)
Contributions to real estate and real estate partnerships(89,200)(56,578)
Contributions to investment funds(401,467)(147,170)
Change in short-term investments491,758 (375,472)
Change in collateral held for derivatives(8,946)(43,816)
Other, net2,454 (2,816)
    Net cash used in investing activities(574,981)(127,311)

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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,
20202019
FINANCING ACTIVITIES
Policyholders’ account deposits905,424 1,559,231 
Policyholders’ account withdrawals(1,026,953)(1,126,580)
Proceeds from Federal Home Loan Bank borrowings500,000 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 activities308,350 366,725 
NET INCREASE IN CASH AND CASH EQUIVALENTS432,082 168,143 
Cash and cash equivalents at beginning of the period452,001 268,164 
Cash and cash equivalents at end of the period$884,083 $436,307 
Supplemental cash flow information:
Interest paid$512 $0 
Income taxes paid, net30,800 58,940 

Nine months ended September 30,
20212020
FINANCING ACTIVITIES
Policyholders’ account deposits$1,722,108 $905,424 
Policyholders’ account withdrawals(936,976)(1,026,953)
Proceeds from Federal Home Loan Bank borrowings— 500,000 
Repayment of Federal Home Loan Bank borrowings(250,000)— 
Change in notes payable(3,325)(3,209)
Dividends to stockholders(66,143)(66,140)
Payments to noncontrolling interest(524)(772)
    Net cash provided by financing activities465,140 308,350 
NET INCREASE IN CASH AND CASH EQUIVALENTS164,518 432,082 
Cash and cash equivalents at beginning of the period339,947 452,001 
Cash and cash equivalents at end of the period$504,465 $884,083 
Supplemental cash flow information:
Interest paid$328 $512 
Income taxes paid, net82,911 30,800 
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” ("ANAT" or the "Company"), and ANAT replaced ANICO as the publicly held company. Consequently, all filings with the Securities and Exchange Commission from July 2, 2020 forward will be filed by ANAT under CIK No. 0001801075. 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”) 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.

On August 6, 2021, ANAT entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Brookfield 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.

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 amountsChanges in prior years have been reclassifiedperiod presentation were made to conform to the current yearperiod presentation.

The interimDuring 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 of unconsolidated affiliates" to "Net investment income." For the three and notes herein are unauditednine months ended September 30, 2020, $17.0 million and reflect all adjustments which management considers necessary for$19.1 million were reclassified, with no impact to net income. We also reclassified the fair presentation ofrelated 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

StandardDescriptionEffective Date and Method of AdoptionImpact 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 AdoptionAdjustment to Adopt ASC 326Balance 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 funds0 1,526 1,526 
Other liabilities0 (3,126)(3,126)
Total$(27,380)$(42,408)$(69,788)

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Note 3 – Recently Issued Accounting Pronouncements – (Continued)
Future Adoption of New Accounting Standards—The FASB issued the following accounting guidance relevant to American National:
StandardDescriptionEffective Date and Method of AdoptionImpact on Financial Statements
ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration ContractsThe 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 PlansThe 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 TaxesThe 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 becomebecame 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 ourto the Company's Condensed Consolidated Financial Statements or Notes to the Condensed Consolidated Financial Statements.
Future Adoption of New Accounting Standards—The Financial Accounting Standards Board issued the following accounting guidance relevant to American National:

StandardDescriptionEffective Date and Method of AdoptionImpact on Financial Statements
ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration ContractsThe 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 of adoption 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 ReportingThe amendments in this updateguidance 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 updateguidance 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 exposureThe inventory of LIBOR exposures has been completed and is primarily limited to floating rate bonds, alternative investments, and borrowings within joint venture investments. Some of the contracts included in these categories will mature prior to December 31, 2021, the start of LIBOR andrates cessations. The transition from LIBOR is expected to result in an immaterial impact to the impact this standard would have onCompany's Condensed Consolidated Financial Statements or Notes to the Condensed Consolidated Financial Statements. We expect to have our evaluation of exposure completed by December 31, 2020.





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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 LossesFair Value
Fixed maturity, bonds held-to-maturity
U.S. states and political subdivisions$106,908 $4,278 $(3)$0 $111,183 
Foreign governments3,865 429 0 0 4,294 
Corporate debt securities7,315,879 567,282 (32,659)(18,510)7,831,992 
Residential mortgage-backed securities146,173 5,589 (1,434)(35)150,293 
Collateralized debt securities151,013 4,704 (1,922)(2,946)150,849 
         Total bonds held-to-maturity7,723,838 582,282 (36,018)(21,491)8,248,611 
Fixed maturity, bonds available-for-sale
U.S. treasury and government32,017 543 (1)0 32,559 
U.S. states and political subdivisions1,028,802 69,994 (37)0 1,098,759 
Foreign governments14,992 1,602 0 0 16,594 
Corporate debt securities5,664,288 410,495 (35,150)(7,437)6,032,196 
Residential mortgage-backed securities26,292 1,256 (70)(194)27,284 
Collateralized debt securities27,975 892 (64)(7)28,796 
         Total bonds available-for-sale6,794,366 484,782 (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 

 September 30, 2021
 Cost or Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance for Credit LossesFair Value
Fixed maturity, bonds held-to-maturity
U.S. treasury and government$12,320 $— $(157)$— $12,163 
U.S. states and political subdivisions108,155 2,226 (2,059)— 108,322 
Foreign governments14,403 240 (110)— 14,533 
Corporate debt securities6,995,994 479,215 (14,470)(11,977)7,448,762 
Residential mortgage-backed securities54,319 3,395 (448)(506)56,760 
Collateralized debt securities106,102 1,697 (299)(1,009)106,491 
         Total bonds held-to-maturity7,291,293 486,773 (17,543)(13,492)7,747,031 
Fixed maturity, bonds available-for-sale
U.S. treasury and government25,880 180 (56)— 26,004 
U.S. states and political subdivisions1,029,345 53,553 (2,394)(16)1,080,488 
Foreign governments5,000 980 — — 5,980 
Corporate debt securities6,905,556 341,990 (24,882)(3,569)7,219,095 
Residential mortgage-backed securities32,321 602 (84)(257)32,582 
Collateralized debt securities209,585 688 (654)(687)208,932 
         Total bonds available-for-sale8,207,687 397,993 (28,070)(4,529)8,573,081 
Total investments in fixed maturity$15,498,980 $884,766 $(45,613)$(18,021)$16,320,112 

December 31, 2019 December 31, 2020
Cost or
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
(Losses)		Allowance for Credit LossesFair Value Cost or Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance for Credit LossesFair Value
Fixed maturity, bonds held-to-maturityFixed maturity, bonds held-to-maturityFixed maturity, bonds held-to-maturity
U.S. treasury and governmentU.S. treasury and government$7,733 $11 $— $— $7,744 
U.S. states and political subdivisionsU.S. states and political subdivisions$165,109 $5,005 $0 $— $170,114 U.S. states and political subdivisions109,445 4,101 (11)— 113,535 
Foreign governmentsForeign governments3,907 442 0 — 4,349 Foreign governments3,851 374 — — 4,225 
Corporate debt securitiesCorporate debt securities8,099,098 332,410 (6,539)— 8,424,969 Corporate debt securities6,992,095 623,233 (9,117)(7,475)7,598,736 
Residential mortgage-backed securitiesResidential mortgage-backed securities237,516 6,460 (1,148)— 242,828 Residential mortgage-backed securities114,579 5,065 (1,464)(452)117,728 
Collateralized debt securitiesCollateralized debt securities125,631 1,146 (347)— 126,430 Collateralized debt securities139,709 6,864 (845)(4,515)141,213 
Total bonds held-to-maturity Total bonds held-to-maturity8,631,261 345,463 (8,034)— 8,968,690  Total bonds held-to-maturity7,367,412 639,648 (11,437)(12,442)7,983,181 
Fixed maturity, bonds available-for-saleFixed maturity, bonds available-for-saleFixed maturity, bonds available-for-sale
U.S. treasury and governmentU.S. treasury and government29,505 441 (5)— 29,941 U.S. treasury and government28,766 418 (1)— 29,183 
U.S. states and political subdivisionsU.S. states and political subdivisions1,030,309 47,865 (9)— 1,078,165 U.S. states and political subdivisions1,066,627 73,976 (145)— 1,140,458 
Foreign governmentsForeign governments5,000 1,287 0 — 6,287 Foreign governments14,995 1,393 — — 16,388 
Corporate debt securitiesCorporate debt securities5,338,007 251,408 (12,795)— 5,576,620 Corporate debt securities5,887,756 471,205 (17,207)(7,275)6,334,479 
Residential mortgage-backed securitiesResidential mortgage-backed securities23,405 739 (201)— 23,943 Residential mortgage-backed securities20,544 964 (29)(188)21,291 
Collateralized debt securitiesCollateralized debt securities9,444 686 (1)— 10,129 Collateralized debt securities54,454 1,040 (94)(19)55,381 
Total bonds available-for-sale Total bonds available-for-sale6,435,670 302,426 (13,011)— 6,725,085  Total bonds available-for-sale7,073,142 548,996 (17,476)(7,482)7,597,180 
Total investments in fixed maturityTotal 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 


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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-MaturityBonds Available-for-Sale
 Amortized CostFair ValueAmortized CostFair Value
Due in one year or less$778,789 $789,231 $368,975 $374,081 
Due after one year through five years2,947,159 3,133,068 3,230,219 3,410,019 
Due after five years through ten years3,096,745 3,379,567 2,307,855 2,504,782 
Due after ten years901,145 946,745 887,317 947,306 
Total$7,723,838 $8,248,611 $6,794,366 $7,236,188 

 September 30, 2021
 Bonds Held-to-MaturityBonds Available-for-Sale
 Amortized CostFair ValueAmortized CostFair Value
Due in one year or less$730,763 $742,347 $441,452 $446,036 
Due after one year through five years2,547,132 2,713,348 3,153,728 3,347,317 
Due after five years through ten years3,046,253 3,272,173 2,663,455 2,801,606 
Due after ten years967,145 1,019,163 1,949,052 1,978,122 
Total$7,291,293 $7,747,031 $8,207,687 $8,573,081 

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,
 2020201920202019
Proceeds from sales of fixed maturity, bonds available-for-sale$32,859 $14,921 $164,372 $15,205 
Gross realized gains212 56 624 56 
Gross realized losses(73)0 (4,145)(23)

 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Proceeds from sales of fixed maturity, bonds available-for-sale$5,907 $32,859 $31,080 $164,372 
Gross realized gains— 212 59 624 
Gross realized losses— (73)— (4,145)

Gains and losses are determined using specific identification of the securities sold. There was no transfer of bonds from held-to-maturity to available-for-sale during the nine months ended September 30, 2021. During the nine months ended September 30, 2020, and 2019, bonds below investment grade with a carrying value of $88,711,000 and $157,939,000 respectively,$88.7 million, were transferred from held-to-maturity to available-for-sale after a deterioration in the issuers’issuers' creditworthiness.

In accordance with various regulations, American National has bonds on deposit with regulating authorities with a carrying value of $48.1 million and $47.7 million at September 30, 2021 and December 31, 2020, respectively. In addition, American National has pledged bonds in connection with agreements and transactions, such as financing and reinsurance agreements. The carrying value of bonds pledged was $70.9 million and $111.0 million at September 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,
 20202019
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 

 Nine months ended September 30,
 20212020
Bonds available-for-sale: change in unrealized gains (losses)$(161,597)$160,045 
Adjustments for
Deferred policy acquisition costs24,645 (37,329)
Participating policyholders’ interest5,458 (7,962)
Deferred federal income tax benefit (expense)27,909 (24,808)
Change in net unrealized gains (losses) on debt securities, net of tax$(103,585)$89,946 

The components of the change in net gains on equity securities are shown below (in thousands):
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
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 September 30,Nine months ended September 30,
 2021202020212020
Unrealized gains on equity securities$397 $154,104 $269,536 $119,296 
Net gains (losses) on equity securities sold284 (1,957)(2,111)(899)
Net gains on equity securities$681 $152,147 $267,425 $118,397 




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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 months12 months or moreTotal
 Number of issuesGross
Unrealized
(Losses)		Fair
Value		Number of issuesGross
Unrealized
(Losses)		Fair
Value		Number of issuesGross
Unrealized
(Losses)		Fair
Value
Fixed maturity, bonds available-for-sale
U.S. treasury and government1 $(1)$2,868 0 $0 $0 1 $(1)$2,868 
U.S. states and political subdivisions2 (37)5,484 0 0 0 2 (37)5,484 
Corporate debt securities86 (22,857)533,271 11 (12,293)49,002 97 (35,150)582,273 
Residential mortgage-backed securities1 (70)7,000 3 0 613 4 (70)7,613 
Collateralized debt securities1 (62)8,008 1 (2)157 2 (64)8,165 
Total91 $(23,027)$556,631 15 $(12,295)$49,772 106 $(35,322)$606,403 

 September 30, 2021
 Less than 12 months12 months or moreTotal
 Number of IssuesGross Unrealized LossesFair ValueNumber of IssuesGross Unrealized LossesFair ValueNumber of IssuesGross Unrealized LossesFair Value
Fixed maturity, bonds available-for-sale
U.S. treasury and government8 $(49)$17,451 1 $(7)$2,861 9 $(56)$20,312 
U.S. states and political subdivisions15 (1,888)68,227 1 (506)4,752 16 (2,394)72,979 
Corporate debt securities168 (22,525)1,341,169 15 (2,357)65,833 183 (24,882)1,407,002 
Residential mortgage-backed securities2 (81)13,468 2 (3)528 4 (84)13,996 
Collateralized debt securities22 (602)158,176 2 (52)4,455 24 (654)162,631 
Total215 $(25,145)$1,598,491 21 $(2,925)$78,429 236 $(28,070)$1,676,920 

December 31, 2020
 Less than 12 months12 months or moreTotal
 Number of IssuesGross Unrealized LossesFair ValueNumber of IssuesGross Unrealized LossesFair ValueNumber of IssuesGross Unrealized LossesFair Value
Fixed maturity, bonds available-for-sale
U.S. treasury and government1 $(1)$2,868 — $— $— 1 $(1)$2,868 
U.S. states and political subdivisions2 (145)10,205 — — — 2 (145)10,205 
Corporate debt securities43 (8,507)270,249 8 (8,700)13,270 51 (17,207)283,519 
Residential mortgage-backed securities1 (21)1,391 3 (8)593 4 (29)1,984 
Collateralized debt securities3 (93)12,752 1 (1)158 4 (94)12,910 
Total50 $(8,767)$297,465 12 $(8,709)$14,021 62 $(17,476)$311,486 

December 31, 2019
 Less than 12 months12 months or moreTotal
 Number of issuesGross
Unrealized
(Losses)		Fair
Value		Number of issuesGross
Unrealized
(Losses)		Fair
Value		Number of issuesGross
Unrealized
(Losses)		Fair
Value
Fixed maturity, bonds available-for-sale
U.S. treasury and government0 $0 $0 5 $(5)$8,299 5 $(5)$8,299 
U.S. states and political subdivisions2 (9)1,733 0 0 0 2 (9)1,733 
Corporate debt securities22 (5,257)94,942 25 (7,538)132,626 47 (12,795)227,568 
Residential mortgage-backed securities1 (9)10,169 3 (192)722 4 (201)10,891 
Collateralized debt securities1 (1)159 0 0 0 1 (1)159 
Total26 $(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 Oil, Gas and Coal exploration, production, and refining sector.

Equity securities by market sector distribution are shown below, based on fair value:
September 30, 2020December 31, 2019
Consumer goods20.7 %18.9 %
Energy and utilities5.1 8.0 
Finance20.4 18.0 
Healthcare15.7 13.0 
Industrials6.5 7.6 
Information technology27.2 25.0 
Other4.4 9.5 
        Total100.0 %100.0 %

September 30, 2021December 31, 2020
Consumer goods16.8 %19.3 %
Energy and utilities5.6 5.2 
Finance24.5 21.6 
Healthcare14.0 15.0 
Industrials7.2 7.4 
Information technology26.7 27.1 
Other5.2 4.4 
        Total100.0 %100.0 %


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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 maturityheld-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 expectedinvestment credit loss.

No accrued interest receivables were written off as of September 30, 2020.2021.

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Note 4 – Investment in Securities – (Continued)


The rollforward of the allowance for credit losses for bonds held-to-maturity is shown below (in thousands):
Foreign GovernmentsCorporate Debt SecuritiesCollateralized Debt SecuritiesResidential Mortgage Backed SecuritiesTotal
Allowance for credit losses
Cumulative adjustment at January 1, 2020$4 $(18,563)$(2,968)$(137)$(21,664)
Purchases0 (622)(323)0 (945)
Disposition0 6,901 106 134 7,141 
Provision1 (6,117)199 0 (5,917)
Balance at March 31, 20205 (18,401)(2,986)(3)(21,385)
Purchases0 (116)0 0 (116)
Disposition0 200 0 0 200 
Provision(5)(1,565)454 3 (1,113)
Balance at June 30, 20200 (19,882)(2,532)0 (22,414)
Purchases0 (4)(6)0 (10)
Disposition0 1,607 0 0 1,607 
Provision0 (231)(408)(35)(674)
Balance at September 30, 2020$0 $(18,510)$(2,946)$(35)$(21,491)

Corporate Debt SecuritiesCollateralized Debt SecuritiesResidential Mortgage Backed SecuritiesTotal
Balance at January 1, 2021$(7,475)$(4,515)$(452)$(12,442)
Purchases(228)— — (228)
Disposition125 — — 125 
Provision(4,215)(2,004)(90)(6,309)
Balance at March 31, 2021$(11,793)$(6,519)$(542)$(18,854)
Purchases(974)— — (974)
Disposition104 551 — 655 
Provision(2,289)4,244 16 1,971 
Balance at June 30, 2021$(14,952)$(1,724)$(526)$(17,202)
Purchases(101)— — (101)
Disposition194 — — 194 
Provision2,882 715 20 3,617 
Balance at September 30, 2021$(11,977)$(1,009)$(506)$(13,492)


Foreign GovernmentsCorporate Debt SecuritiesCollateralized Debt SecuritiesResidential Mortgage Backed SecuritiesTotal
Balance at January 1, 2020$4 $(18,563)$(2,968)$(137)$(21,664)
Purchases— (622)(323)— (945)
Disposition— 6,901 106 134 7,141 
Provision1 (6,117)199 — (5,917)
Balance at March 31, 2020$5 $(18,401)$(2,986)$(3)$(21,385)
Purchases— (116)— — (116)
Disposition— 200 — — 200 
Provision(5)(1,565)454 3 (1,113)
Balance at June 30, 2020$— $(19,882)$(2,532)$— $(22,414)
Purchases— (4)(6)— (10)
Disposition— 1,607 — — 1,607 
Provision— (231)(408)(35)(674)
Balance at September 30, 2020$— $(18,510)$(2,946)$(35)$(21,491)

16
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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 SecuritiesCollateralized Debt SecuritiesResidential Mortgage Backed SecuritiesTotal
Allowance for credit losses
Beginning balance at January 1, 2020$0 $0 $0 $0 
Allowance on securities that had an allowance recorded in a previous period(12,499)(236)(130)(12,865)
Balance at March 31, 2020(12,499)(236)(130)(12,865)
Increase in allowance related to purchases(73)0 0 (73)
Reduction in allowance related to disposition7 0 3 10 
Allowance on securities that had an allowance recorded in a previous period10,017 155 (83)10,089 
Allowance on securities where credit losses were not previously recorded(1,276)0 0 (1,276)
Balance at June 30, 2020(3,824)(81)(210)(4,115)
Increase in allowance related to purchases(28)0 0 (28)
Reduction in allowance related to disposition33 0 0 33 
Allowance on securities that had an allowance recorded in a previous period1,153 74 16 1,243 
Allowance on securities where credit losses were not previously recorded(4,771)0 0 (4,771)
Balance at September 30, 2020$(7,437)$(7)$(194)$(7,638)

U.S. Treasury and GovernmentU.S. State and Political SubdivisionsCorporate Debt SecuritiesCollateralized Debt SecuritiesResidential Mortgage Backed SecuritiesTotal
Balance at January 1, 2021$— $— $(7,275)$(19)$(188)$(7,482)
Allowance on securities that had an allowance recorded in a previous period— — (733)(488)(10)(1,231)
Allowance on securities where credit losses were not previously recorded(3)— — — — (3)
Balance at March 31, 2021$(3)$— $(8,008)$(507)$(198)$(8,716)
Increase in allowance related to purchases— — (981)(192)— (1,173)
Reduction in allowance related to disposition— — 4,039 182 — 4,221 
Allowance on securities that had an allowance recorded in a previous period3 — 1,181 87 (5)1,266 
Allowance on securities where credit losses were not previously recorded— (8)(720)(26)(2)(756)
Balance at June 30, 2021$— $(8)$(4,489)$(456)$(205)$(5,158)
Increase in allowance related to purchases— — (2,177)(346)— (2,523)
Reduction in allowance related to disposition— — 56 — — 56 
Allowance on securities that had an allowance recorded in a previous period— 8 3,339 238 (3)3,582 
Allowance on securities where credit losses were not previously recorded— (16)(298)(123)(49)(486)
Balance at September 30, 2021$— $(16)$(3,569)$(687)$(257)$(4,529)

The change
Corporate Debt SecuritiesCollateralized Debt SecuritiesResidential Mortgage Backed SecuritiesTotal
Balance at January 1, 2020$— $— $— $— 
Allowance on securities that had an allowance recorded in a previous period(12,499)(236)(130)(12,865)
Balance at March 31, 2020$(12,499)$(236)$(130)$(12,865)
Increase in allowance related to purchases(73)— — (73)
Reduction in allowance related to disposition7 — 3 10 
Allowance on securities that had an allowance recorded in a previous period10,017 155 (83)10,089 
Allowance on securities where credit losses were not previously recorded(1,276)— — (1,276)
Balance at June 30, 2020$(3,824)$(81)$(210)$(4,115)
Increase in allowance related to purchases(28)— — (28)
Reduction in allowance related to disposition33 — — 33 
Allowance on securities that had an allowance recorded in a previous period1,153 74 16 1,243 
Allowance on securities where credit losses were not previously recorded(4,771)— — (4,771)
Balance at September 30, 2020$(7,437)$(7)$(194)$(7,638)


17
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Note 4 – Investment 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.Securities – (Continued)


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. Information is also gathered regarding the asset performance of held-to-maturity bonds. 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-maturityAAAAAABBBBB and belowTotal
U.S. state and political subdivisions$29,996 $64,232 $7,893 $0 $4,787 $106,908 
Foreign governments0 2,831 1,034 0 0 3,865 
Corporate debt securities1,951 276,131 3,074,717 3,859,811 103,269 7,315,879 
Residential mortgage backed securities61,850 0 0 0 84,323 146,173 
Collateralized debt securities0 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 

September 30, 2021
Amortized cost of bonds held-to-maturity by credit rating
Fixed maturity, bonds held-to-maturityAAAAAABBBBB and belowTotal
U.S. treasury and government$— $12,320 $— $— $— $12,320 
U.S. state and political subdivisions14,867 52,852 9,193 25,853 5,390 108,155 
Foreign governments— 13,385 1,018 — — 14,403 
Corporate debt securities31,259 401,106 3,240,129 3,230,894 92,606 6,995,994 
Collateralized debt securities— — 67,866 33,339 4,897 106,102 
Residential mortgage backed securities— 53,031 — — 1,288 54,319 
Total$46,126 $532,694 $3,318,206 $3,290,086 $104,181 $7,291,293 

December 31, 2019December 31, 2020
Amortized cost of bonds held-to-maturity by credit ratingAmortized cost of bonds held-to-maturity by credit rating
Fixed maturity, bonds held-to-maturityFixed maturity, bonds held-to-maturityAAAAAABBBBB and belowTotalFixed maturity, bonds held-to-maturityAAAAAABBBBB and belowTotal
U.S. treasury and governmentU.S. treasury and government$— $7,733 $— $— $— $7,733 
U.S. state and political subdivisionsU.S. state and political subdivisions$58,539 $76,542 $24,260 $500 $5,268 $165,109 U.S. state and political subdivisions25,831 43,964 34,893 — 4,757 109,445 
Foreign governmentsForeign governments0 2,861 1,046 0 0 3,907 Foreign governments— 2,820 1,031 — — 3,851 
Corporate debt securitiesCorporate debt securities2,729 407,070 3,637,144 4,031,931 20,224 8,099,098 Corporate debt securities1,956 262,830 2,976,571 3,647,496 103,242 6,992,095 
Collateralized debt securitiesCollateralized debt securities— — 107,795 31,914 — 139,709 
Residential mortgage backed securitiesResidential mortgage backed securities87,003 0 51,771 0 98,742 237,516 Residential mortgage backed securities— 112,995 — — 1,584 114,579 
Collateralized debt securities0 0 109,233 16,398 0 125,631 
TotalTotal$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.

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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):
September 30, 2021December 31, 2020
September 30, 2020December 31, 2019AmountPercentageAmountPercentage
East North CentralEast North Central$724,667 14.0 %$667,150 13.1 %East North Central$736,044 14.7 %$783,614 14.9 %
East South CentralEast South Central147,385 2.8 144,887 2.8 East South Central112,150 2.3 146,052 2.8 
MountainMountain1,245,404 24.1 1,200,434 23.6 Mountain1,243,779 24.9 1,284,555 24.5 
PacificPacific830,697 16.1 852,574 16.7 Pacific797,586 15.9 806,426 15.4 
South AtlanticSouth Atlantic626,014 12.1 621,875 12.2 South Atlantic550,256 11.0 619,405 11.8 
West South CentralWest South Central1,284,656 24.8 1,272,522 25.0 West South Central1,247,386 24.9 1,313,848 25.1 
OtherOther317,651 6.1 337,575 6.6 Other315,777 6.3 288,631 5.5 
TotalTotal$5,176,474 100.0 %$5,097,017 100.0 %Total$5,002,978 100.0 %$5,242,531 100.0 %

As of September 30, 20202021 and December 31, 2019,2020, loans in foreclosure and loans foreclosed are as follows (in thousands, except number of loans):
September 30, 2020December 31, 2019September 30, 2021December 31, 2020
Foreclosure and foreclosedForeclosure and foreclosedNumber of LoansRecorded InvestmentNumber of LoansRecorded InvestmentForeclosure and foreclosedNumber of LoansRecorded InvestmentNumber of LoansRecorded Investment
In foreclosureIn foreclosure4$24,498 2$13,345 In foreclosure— $— 1 $5,168 
Filed for bankruptcy*Filed for bankruptcy*19,230 0 0 Filed for bankruptcy*— — 1 9,230 
Total in foreclosureTotal in foreclosure5$33,728 2$13,345 Total in foreclosure— $— 2 $14,398 
ForeclosedForeclosed1$4,511 2$16,008 Foreclosed— $— 2$8,603 
*Borrower filed for bankruptcy after foreclosure proceedings had begunbegun.

The age analysis of past due loans is shown below (in thousands, except percentages):
 30-59 Days Past Due60-89 Days Past DueMore Than 90 Days Past DueTotalCurrentTotal
September 30, 2020AmountPercent
Apartment$0 $0 $0 $0 $469,903 $469,903 8.9 %
Hotel0 45,386 0 45,386 858,893 904,279 17.1 
Industrial0 0 9,260 9,260 765,337 774,597 14.7 
Office39,392 0 9,230 48,622 1,511,988 1,560,610 29.5 
Retail0 0 5,000 5,000 801,198 806,198 15.2 
Other0 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 %
Hotel0 0 0 0 901,044 901,044 17.6 
Industrial0 13,076 4,091 17,167 589,722 606,889 11.9 
Office22,870 0 0 22,870 1,587,591 1,610,461 31.5 
Retail0 0 4,122 4,122 843,466 847,588 16.5 
Other11,759 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 Due60-89 Days Past DueMore Than 90 Days Past DueTotalCurrentTotal
September 30, 2021AmountPercentage
Apartment$— $— $— $— $506,243 $506,243 9.9 %
Hotel— — — — 923,268 923,268 18.1 
Industrial— — — — 904,189 904,189 17.7 
Office— — — — 1,412,399 1,412,399 27.6 
Parking— — — — 362,168 362,168 7.1 
Retail— — — — 740,439 740,439 14.5 
Storage— — — — 139,186 139,186 2.7 
Other— 2,258 — 2,258 119,725 121,983 2.4 
Total$— $2,258 $— $2,258 $5,107,617 $5,109,875 100.0 %
Allowance for credit losses(106,897)
Total, net of allowance$5,002,978 
December 31, 2020
Apartment$— $— $— $— $557,159 $557,159 10.5 %
Hotel30,315 30,158 — 60,473 853,522 913,995 17.0 
Industrial14,930 — 5,168 20,098 836,105 856,203 15.9 
Office24,804 — 9,230 34,034 1,522,197 1,556,231 29.0 
Parking48,825 29,355 — 78,180 286,107 364,287 6.8 
Retail4,991 — 25,779 30,770 760,907 791,677 14.7 
Storage— — — — 165,561 165,561 3.1 
Other— — — — 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 
1819
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Note 5 – Mortgage Loans – (Continued)


As a result of the economic impact associated with COVID-19, as of September 30, 2020, 92American National modified 93 loans with a total balance of $1.6 billion primarily related to hotels, retailduring the second and parking operationsthird quarters of 2020. These modifications were modified. The termsin 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 provisionprovisions 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 33 of these loans with a total balance of $739.7 million were made during 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 $45had an aggregate deferred interest of $8.0 million is over 60 days past due. All other loans are current under their modified terms.
as of September 30, 2021.
There were 0no unamortized purchase discounts as of September 30, 20202021 and December 31, 2019.2020. Total mortgage loans were net of unamortized origination fees of $27,001,000$24.5 million and $29,294,000$26.1 million at September 30, 20202021 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 notcould change significantly, or may increase ifbased 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,
20202019
Number of LoansRecorded Investment Pre-ModificationRecorded Investment Post ModificationNumber of LoansRecorded Investment Pre- ModificationRecorded Investment Post Modification
Office7 $76,201 $76,201 1 $9,271 $9,271 
Retail6 79,911 79,911 2 41,354 41,354 
Industrial2 11,473 11,473 0 0 0 
Hotel34 811,007 811,007 0 0 0 
Parking13 168,740 168,740 0 0 0 
Other5 119,738 119,738 0 0 0 
Total67 $1,267,070 $1,267,070 3 $50,625 $50,625 

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.

Loans determined to be troubled debt restructures during the periods presented is as follows (in thousands, except number of loans):

Nine months ended September 30,
20212020
Number of LoansRecorded Investment Pre-ModificationRecorded Investment Post-ModificationNumber of LoansRecorded Investment Pre-ModificationRecorded Investment Post-Modification
Office3 $44,828 $44,828 7 $76,201 $76,201 
Retail3 32,711 32,711 6 79,911 79,911 
Industrial— — — 2 11,473 11,473 
Hotel— — — 34 811,007 811,007 
Parking1 9,716 9,716 13 168,740 168,740 
Storage1 8,947 8,947 — — — 
Other— — — 5 119,738 119,738 
Total8 $96,202 $96,202 67 $1,267,070 $1,267,070 

As of September 30, 2021, a total of 74 loans with a recorded investment of $1.4 billion were designated a troubled debt restructure. There are no commitments to lend additional funds to debtors whose loans have been modified in a troubled debt restructuring during the periods presented. The decrease in loans determined to be a troubled debt restructuring in the nine months ended September 30, 2021 is primarily attributable to improved economic conditions after lifting of COVID-19 related restrictions.


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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 expectedcredit losses per ASC 326, at the effective date will beis 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 balanceBalance at January 1, 2021$(125,703)
Provision(885)
Balance at March 31, 2021$(126,588)
Provision17,630 
Balance at June 30, 2021$(108,958)
Provision2,061 
Balance at September 30, 2021$(106,897)
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)
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Note 5 – Mortgage Loans – (Continued)
The change in allowance for the nine months ended September 30, 20202021 was primarily driven by a favorable response of the economic disruption caused by COVID-19.hospitality and retail industries to re-opening of the economy and resulting increases in travel and brick-and-mortar shopping.

The asset and allowance balances for credit losses for mortgage loans by property-type are shown below (in thousands):
September 30, 2020
Asset BalanceAllowance
Apartment$465,221 $(4,682)
Hotel859,119 (45,160)
Industrial771,951 (2,646)
Office1,534,903 (25,707)
Retail795,164 (11,034)
Parking352,435 (11,129)
Other397,681 (12,558)
Total$5,176,474 $(112,916)

September 30, 2021December 31, 2020
Asset BalanceAllowanceAsset BalanceAllowance
Apartment$506,243 $(2,241)$557,159 $(8,845)
Hotel923,268 (43,365)913,995 (45,596)
Industrial904,189 (5,043)856,203 (2,516)
Office1,412,399 (30,022)1,556,231 (33,373)
Parking362,168 (17,018)364,287 (18,178)
Retail740,439 (6,823)791,677 (10,856)
Storage139,186 (610)165,561 (2,509)
Other121,983 (1,775)163,121 (3,830)
Total$5,109,875 $(106,897)$5,368,234 $(125,703)


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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 typeproperty-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
20202019201820172016PriorTotal
Apartment$402 $136,436 $46,267 $180,656 $68,664 $37,478 $469,903 
Hotel0 59,402 204,094 219,597 148,078 273,834 905,005 
Industrial168,467 178,797 134,431 46,676 124,259 121,967 774,597 
Office6,564 58,345 195,201 345,425 312,693 642,382 1,560,610 
Retail49,111 41,145 104,694 80,577 161,720 368,951 806,198 
Parking28,684 13,787 30,523 8,700 169,715 122,757 374,166 
Other19,879 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
20212020201920182017PriorTotal
Apartment$1,697 $69,866 $254,562 $22,166 $120,436 $37,516 $506,243 
Hotel— 33,010 88,011 203,828 218,931 379,488 923,268 
Industrial125,914 269,948 153,789 113,858 38,406 202,274 904,189 
Office2,759 31,598 60,917 198,379 316,907 801,839 1,412,399 
Parking— 28,658 13,803 26,970 8,498 284,239 362,168 
Retail4,672 69,132 38,831 72,046 74,557 481,201 740,439 
Storage— 27,430 48,360 37,354 17,095 8,947 139,186 
Other24,466 — 21,656 30,046 1,650 44,165 121,983 
Total$159,508 $529,642 $679,929 $704,647 $796,480 $2,239,669 $5,109,875 
Allowance for credit losses(106,897)
Total, net of allowance$5,002,978 

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 30, 2020,2021, no commercial loans of $23,490,000 were past due over 90 days and areor in nonaccrualnon-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 30, 2020,2021, we have included a $13,429,000$6.7 million liability in other liabilities on the condensed consolidated statements of financial position based on unfunded loan commitments of $660,924,000.
20
Table of Contents$839.5 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, 2020December 31, 2019
Industrial$40,970 8.0 %$68,809 12.5 %
Office218,005 42.4 219,490 39.8 
Retail211,464 41.1 215,800 39.1 
Other43,637 8.5 47,120 8.6 
Total$514,076 100.0 %$551,219 100.0 %

September 30, 2021December 31, 2020
AmountPercentageAmountPercentage
Hotel$56,817 6.1 %$67,857 7.1 %
Industrial130,546 14.1 132,757 13.8 
Land38,564 4.2 51,220 5.3 
Office281,120 30.4 299,500 31.2 
Retail272,665 29.4 268,588 28.0 
Apartments133,977 14.5 120,847 12.6 
Other12,465 1.3 19,803 2.0 
Total$926,154 100.0 %$960,572 100.0 %
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 September 30, 2020December 31, 2019
East North Central$32,455 6.3 %$32,539 5.9 %
East South Central33,123 6.4 34,248 6.2 
Mountain66,330 12.9 68,498 12.4 
Pacific39,000 7.6 40,462 7.3 
South Atlantic72,802 14.2 83,552 15.2 
West South Central253,200 49.3 278,833 50.6 
Other17,166 3.3 13,087 2.4 
Total$514,076 100.0 %$551,219 100.0 %
Note 6 – Real Estate and Other Investments – (Continued)


 September 30, 2021December 31, 2020
AmountPercentageAmountPercentage
East North Central$100,276 10.8 %$81,310 8.5 %
East South Central60,771 6.6 65,302 6.8 
Mountain122,528 13.2 133,233 13.9 
Pacific113,520 12.3 127,421 13.3 
South Atlantic73,807 8.0 97,801 10.1 
West South Central445,499 48.1 434,722 45.3 
Other9,753 1.0 20,783 2.1 
Total$926,154 100.0 %$960,572 100.0 %

As of September 30, 2021, no 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 partiesthird-parties that may affect the fair value or risk of its variable interest in the VIEs in 20202021 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, 2020December 31, 2019
Investment real estate$133,152 $134,534 
Short-term investments500 500 
Cash and cash equivalents5,634 11,155 
Other receivables3,704 3,673 
Other assets13,153 15,355 
Total assets of consolidated VIEs$156,143 $165,217 
Notes payable$154,788 $157,997 
Other liabilities6,526 9,731 
Total liabilities of consolidated VIEs$161,314 $167,728 

September 30, 2021December 31, 2020
Real estate and real estate partnerships$128,746 $131,405 
Investment funds50,000 — 
Short-term investments500 500 
Cash and cash equivalents9,441 8,070 
Premiums due and other receivables2,929 3,484 
Other assets11,784 13,796 
Total assets of consolidated VIEs$203,400 $157,255 
Notes payable$150,378 $153,703 
Other liabilities7,003 8,490 
Total liabilities of consolidated VIEs$157,381 $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 30, 20202021 and December 31, 2019,2020, respectively.

The total long-term notes payable of the consolidated VIEs consists of the following (in thousands):
Interest rateMaturitySeptember 30, 2020December 31, 2019
LIBOR2021$10,819 $10,836 
4% fixed202279,363 81,709 
4.18% fixed202464,606 65,452 
Total$154,788 $157,997 

Interest rateMaturitySeptember 30, 2021December 31, 2020
LIBOR2023$10,819 $10,819 
4% fixed202276,123 78,565 
4.18% fixed202463,436 64,319 
Total$150,378 $153,703 


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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, 2020December 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 loans721,899 721,899 657,528 657,528 
Accrued investment income5,154 5,154 2,198 2,198 

As
 September 30, 2021December 31, 2020
 Carrying AmountMaximum Exposure to LossCarrying AmountMaximum Exposure to Loss
Real estate and real estate partnerships$349,007 $349,007 $368,588 $368,588 
Mortgage loans on real estate715,410 715,410 722,917 722,917 
Accrued investment income3,557 3,557 4,980 4,980 

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

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

The Company’s total investment in investment funds and other partnerships, of which substantially all are limited liability companies ("LLCs") or limited partnerships, was comprised of $814.5 million and $477.1 million at September 30, 2021 and December 31, 2020, 1 real estate investment with a carrying value of $3,364,000 met the criteria as held-for-sale.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 InstrumentsLocation in the Condensed Consolidated Statements of Financial PositionSeptember 30, 2020December 31, 2019
Number of
Instruments		Notional
Amounts		Estimated
Fair Value		Number of
Instruments		Notional
Amounts		Estimated
Fair Value
Equity-indexed optionsOther invested assets456 $2,761,300 $213,782 473 $2,654,600 $256,005 
Equity-indexed embedded derivativePolicyholders’ account balances108,958 2,625,029 693,780 101,950 2,527,205 731,552 

Derivatives Not Designated as Hedging InstrumentsDerivatives Not Designated as Hedging InstrumentsLocation in the Condensed Consolidated Statements of OperationsGains (Losses) Recognized in Income on DerivativesDerivatives Not Designated as Hedging InstrumentsLocation in the Condensed Consolidated Statements of Financial PositionSeptember 30, 2021December 31, 2020
Three months ended September 30,Nine months ended September 30,Number of InstrumentsNotional AmountsEstimated Fair ValueNumber of InstrumentsNotional AmountsEstimated Fair Value
2020201920202019
Equity-indexed optionsEquity-indexed optionsNet investment income$38,738 $6,278 $(2,200)$95,888 Equity-indexed optionsOther invested assets454 $3,357,400 $229,690 455 $2,867,600 $242,201 
Equity-indexed embedded derivativeEquity-indexed embedded derivativeInterest credited to policyholders’ account balances(44,792)(11,462)(17,702)(105,873)Equity-indexed embedded derivativePolicyholders’ account balances120,467 3,267,671 767,920 112,103 2,748,540 705,013 
Derivatives Not Designated as Hedging InstrumentsLocation in the Condensed Consolidated Statements of OperationsGains (Losses) Recognized in Income on Derivatives
Three months ended September 30,Nine months ended September 30,
2021202020212020
Equity-indexed optionsNet investment income$1,365 $38,738 $70,434 $(2,200)
Equity-indexed embedded derivativeInterest credited to policyholders’ account balances9,607 (44,792)(45,542)(17,702)

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
CounterpartyMoody/S&P
Rating		Options Fair
Value		Collateral  Held in CashCollateral Held in Invested AssetsTotal
Collateral Held		Collateral Amounts used to Offset ExposureExcess CollateralExposure
Net of
Collateral
BarclaysBaa2/BBB$42,627 $24,033 $18,100 $42,133 $42,133 $0 $494 
Credit SuisseBaa2/BBB+7,936 7,670 0 7,670 7,670 0 266 
Goldman-SachsA3/BBB+1,095 910 0 910 910 0 185 
INGBaa1/A-20,858 10,770 10,300 21,070 20,858 212 0 
Morgan StanleyA3/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 
TruistA3/A-52,586 40,740 11,000 51,740 51,728 12 858 
Wells FargoA2/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 

  September 30, 2021
CounterpartyMoody/S&P RatingOptions Fair ValueCollateral Held in CashCollateral Held in Invested AssetsTotal Collateral HeldCollateral Amounts Used to Offset ExposureExcess CollateralExposure Net of Collateral
Bank of AmericaA2/A-$676 $390 $— $390 $390 $— $286 
BarclaysBaa2/BBB41,501 24,233 18,100 42,333 41,501 832 — 
Credit SuisseBaa1/BBB+25,194 26,360 — 26,360 25,194 1,166 — 
INGBaa1/A-12,171 2,100 10,300 12,400 12,171 229 — 
Morgan StanleyA1/BBB+59,145 54,516 5,700 60,216 59,145 1,071 — 
NATIXIS*A1/A25,731 26,170 — 26,170 25,731 439 — 
TruistA3/A-32,235 21,890 11,000 32,890 32,235 655 — 
Wells FargoA1/BBB+33,037 24,180 9,900 34,080 33,037 1,043 — 
       Total$229,690 $179,839 $55,000 $234,839 $229,404 $5,435 $286 

 December 31, 2019  December 31, 2020
CounterpartyCounterpartyMoody/S&P
Rating		Options Fair
Value		Collateral  Held in CashCollateral Held in Invested AssetsTotal
Collateral Held		Collateral Amounts used to Offset ExposureExcess CollateralExposure
Net of
Collateral		CounterpartyMoody/S&P RatingOptions Fair ValueCollateral Held in CashCollateral Held in Invested AssetsTotal Collateral HeldCollateral Amounts Used to Offset ExposureExcess CollateralExposure Net of Collateral
BarclaysBarclaysBaa3/BBB$54,583 $27,343 $28,000 $55,343 $54,583 $760 $0 BarclaysBaa2/BBB$51,489 $31,513 $18,100 $49,613 $49,613 $— $1,876 
Credit SuisseCredit SuisseBaa2/BBB+7,117 7,390 0 7,390 7,009 381 108 Credit SuisseBaa1/BBB+9,447 8,680 — 8,680 8,680 — 767 
Goldman-SachsGoldman-SachsA3/BBB+1,053 930 0 930 930 0 123 Goldman-SachsA3/BBB+1,227 1,170 — 1,170 1,170 — 57 
INGINGBaa1/A-30,330 14,940 16,000 30,940 30,330 610 0 INGBaa1/A-20,606 10,450 10,300 20,750 20,606 144 — 
Morgan StanleyMorgan StanleyA3/BBB+34,988 25,926 9,000 34,926 34,926 0 62 Morgan StanleyA2/BBB+37,406 30,616 5,700 36,316 36,316 — 1,090 
NATIXIS*NATIXIS*A1/A+29,918 30,200 0 30,200 29,918 282 0 NATIXIS*A1/A+30,567 30,720 — 30,720 30,567 153 — 
SunTrustA3/A-60,360 41,720 17,000 58,720 58,645 75 1,715 
TruistTruistA3/A-52,127 43,960 11,000 54,960 52,127 2,833 — 
Wells FargoWells FargoA2/A-37,656 24,110 15,000 39,110 37,656 1,454 0 Wells FargoA2/BBB+39,332 29,370 9,900 39,270 39,270 — 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 assetsassets.

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


Net investment income is shown below (in thousands):
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
Bonds$138,743 $154,322 $426,624 $452,786 
Equity securities7,905 7,985 23,671 25,292 
Mortgage loans61,561 64,753 181,334 191,110 
Real estate(121)1,005 3,326 7,310 
Equity-indexed options38,738 6,278 (2,200)95,888 
Other invested assets7,430 12,277 24,133 24,310 
Total$254,256 $246,620 $656,888 $796,696 

 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Bonds$132,725 $138,743 $392,838 $426,624 
Equity securities8,316 7,905 24,116 23,671 
Mortgage loans60,722 61,561 199,910 181,334 
Real estate and real estate partnerships15,796 5,091 44,725 20,360 
Investment funds32,962 11,817 71,950 2,080 
Equity-indexed options1,365 38,738 70,434 (2,200)
Other invested assets9,254 7,430 24,547 24,133 
Total$261,140 $271,285 $828,520 $676,002 

Net investment income from equity method investments, comprised of real estate partnerships and investment funds was $46.4 million and $17.0 million for the three months ended September 30, 2021 and 2020 and $109.3 million and $19.1 million for the nine months ended September 30, 2021 and 2020, respectively.

Net realized investment gains (losses) are shown below (in thousands):
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
Bonds$6,117 $6,075 $15,547 $11,288 
Mortgage loans0 (2,097)0 (2,186)
Real estate11,265 27,388 9,951 24,502 
Other invested assets5 567 (24)(1,661)
Total$17,387 $31,933 $25,474 $31,943 

 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Bonds$22,939 $6,117 $42,106 $15,547 
Mortgage loans— — (768)— 
Real estate and real estate partnerships(1,705)11,265 9,387 9,951 
Other invested assets(1,096)5 (746)(24)
Total$20,138 $17,387 $49,979 $25,474 

Net realized investment gains (losses) by transaction type are shown below (in thousands):
Three months ended September 30,Nine months ended September 30,
2020201920202019
Sales$11,417 $28,518 $7,799 $27,756 
Calls and maturities5,986 6,100 19,131 11,029 
Paydowns(7)(81)(61)206 
Impairments0 (2,590)(1,276)(7,290)
Loss allowance0 (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,
2020201920202019
Bonds$0 $0 $0 $(6,968)
Three months ended September 30,Nine months ended September 30,
2021202020212020
Sales$(1,209)$11,417 $11,716 $7,799 
Calls and maturities23,081 5,986 41,657 19,131 
Paydowns(142)(7)390 (61)
Impairments(1,380)— (3,413)(1,276)
Other(212)(9)(371)(119)
Total$20,138 $17,387 $49,979 $25,474 

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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, 2020December 31, 2019
Carrying
Amount		Fair ValueCarrying
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-sale7,236,188 7,236,188 6,725,085 6,725,085 
Equity securities1,840,855 1,840,855 1,700,960 1,700,960 
Equity-indexed options213,782 213,782 256,005 256,005 
Mortgage loans on real estate, net of allowance5,176,474 5,381,157 5,097,017 5,309,005 
Policy loans374,387 374,387 379,657 379,657 
Short-term investments800,793 800,793 425,321 425,321 
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 accounts62,052 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 contracts693,780 693,780 731,552 731,552 
Notes payable154,788 154,788 157,997 157,997 
Federal Home Loan Bank advances500,000 500,000 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 

 September 30, 2021December 31, 2020
Carrying AmountFair ValueCarrying AmountFair Value
Financial assets
Fixed maturity, bonds held-to-maturity$7,277,801 $7,747,031 $7,354,970 $7,983,181 
      Fixed maturity, bonds available-for-sale8,573,081 8,573,081 7,597,180 7,597,180 
Equity securities2,383,478 2,383,478 2,070,766 2,070,766 
Equity-indexed options, included in other invested assets229,690 229,690 242,201 242,201 
Mortgage loans on real estate, net of allowance5,002,978 5,241,982 5,242,531 5,451,152 
Policy loans364,960 364,960 373,014 373,014 
Short-term investments536,621 536,621 1,028,379 1,028,379 
Separate account assets ($1,223,525 and $1,153,702 included in fair value hierarchy)1,260,427 1,260,427 1,185,467 1,185,467 
Separately managed accounts, included in other invested assets97,157 97,157 64,424 64,424 
                Total financial assets$25,726,193 $26,434,427 $25,158,932 $25,995,764 
Financial liabilities
Investment contracts$10,794,070 $10,794,070 $10,101,764 $10,101,764 
Embedded derivative liability for equity-indexed contracts767,920 767,920 705,013 705,013 
Notes payable150,378 150,378 153,703 153,703 
Federal Home Loan Bank advance— — 250,000 250,227 
Separate account liabilities ($1,223,525 and $1,153,702 included in fair value hierarchy)1,260,427 1,260,427 1,185,467 1,185,467 
                Total financial liabilities$12,972,795 $12,972,795 $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.


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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/dealerpricing 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 brokerpricing 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.

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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 representNational. 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 nine months ended September 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 30, 20202021 and December 31, 2019,2020, the one year implied volatility used to estimate embedded derivative value was 22.6%20.9% 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, 2020December 31, 2019Unobservable InputSeptember 30, 2020December 31, 2019
Indexed Annuities$677.0 $706.5 Lapse Rate1-70%1-70%
Mortality Multiplier90-100%90-100%
Equity Volatility17-56%11-46%
Indexed Life16.7 18.4 Equity Volatility17-56%11-46%

 Fair Value Range
 September 30, 2021December 31, 2020Unobservable InputSeptember 30, 2021December 31, 2020
Security type
Embedded derivative
Indexed Annuities$741.5 $670.8 Lapse Rate1-50%1-50%
Mortality Multiplier100%100%
Equity Volatility14-67%16-69%
Indexed Life26.4 34.2 Equity Volatility14-67%16-69%

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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 1Level 2Level 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 subdivisions1,098,759 0 1,098,759 0 
Foreign governments16,594 0 16,594 0 
Corporate debt securities6,032,196 0 5,913,834 118,362 
Residential mortgage-backed securities27,284 0 27,284 0 
Collateralized debt securities28,796 0 28,796 0 
                  Total bonds available-for-sale7,236,188 0 7,117,826 118,362 
Equity securities
Common stock1,822,813 1,822,656 0 157 
Preferred stock18,042 17,575 0 467 
Total equity securities1,840,855 1,840,231 0 624 
Options213,782 0 0 213,782 
Short-term investments800,793 0 800,793 0 
Separate account assets1,062,762 275,667 787,095 0 
Separately managed accounts62,052 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 liabilities1,062,762 275,667 787,095 0 
Total financial liabilities$1,756,542 $275,667 $787,095 $693,780 

 Assets and Liabilities Carried at Fair Value by Hierarchy Level at September 30, 2021
 Total Fair ValueLevel 1Level 2Level 3
Financial assets
Fixed maturity, bonds available-for-sale
U.S. treasury and government$26,004 $26,004 $— $— 
U.S. states and political subdivisions1,080,488 — 1,080,488 — 
Foreign governments5,980 — 5,980 — 
Corporate debt securities7,219,095 — 7,050,921 168,174 
Residential mortgage-backed securities32,582 — 32,582 — 
Collateralized debt securities208,932 — 208,932 — 
Total bonds available-for-sale8,573,081 26,004 8,378,903 168,174 
Equity securities
Common stock2,337,313 2,335,668 — 1,645 
Preferred stock46,165 13,136 — 33,029 
Total equity securities2,383,478 2,348,804 — 34,674 
Options229,690 — — 229,690 
Short-term investments536,621 — 536,621 — 
Separate account assets1,223,525 351,433 872,092 — 
Separately managed accounts97,157 — — 97,157 
Total financial assets$13,043,552 $2,726,241 $9,787,616 $529,695 
Financial liabilities
Embedded derivative for equity-indexed contracts$767,920 $— $— $767,920 
Notes payable150,378 — — 150,378 
Separate account liabilities1,223,525 351,433 872,092 — 
Total financial liabilities$2,141,823 $351,433 $872,092 $918,298 

 Assets and Liabilities Carried at Fair Value by Hierarchy Level as of December 31, 2019
 Total
Fair Value		Level 1Level 2Level 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 subdivisions1,078,165 0 1,078,165 0 
Foreign governments6,287 0 6,287 0 
Corporate debt securities5,576,620 0 5,531,776 44,844 
Residential mortgage-backed securities23,943 0 23,943 0 
Collateralized debt securities10,129 0 10,129 0 
Total bonds available-for-sale6,725,085 0 6,680,241 44,844 
Equity securities
Common stock1,682,149 1,681,686 0 463 
Preferred stock18,811 18,811 0 0 
Total equity securities1,700,960 1,700,497 0 463 
Options256,005 0 0 256,005 
Short-term investments425,321 0 425,321 0 
Separate account assets1,049,938 271,575 778,363 0 
Separately managed accounts50,503 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 liabilities1,049,938 271,575 778,363 0 
Total financial liabilities$1,781,490 $271,575 $778,363 $731,552 

 Assets and Liabilities Carried at Fair Value by Hierarchy Level at December 31, 2020
 Total Fair ValueLevel 1Level 2Level 3
Financial assets
Fixed maturity, bonds available-for-sale
U.S. treasury and government$29,183 $— $29,183 $— 
U.S. states and political subdivisions1,140,458 — 1,140,458 — 
Foreign governments16,388 — 16,388 — 
Corporate debt securities6,334,479 — 6,224,042 110,437 
Residential mortgage-backed securities21,291 — 21,291 — 
Collateralized debt securities55,381 — 55,381 — 
Total bonds available-for-sale7,597,180 — 7,486,743 110,437 
Equity securities
Common stock2,055,229 2,054,789 — 440 
Preferred stock15,537 14,909 — 628 
Total equity securities2,070,766 2,069,698 — 1,068 
Options242,201 — — 242,201 
Short-term investments1,028,379 — 1,028,379 — 
Separate account assets1,153,702 309,425 844,277 — 
Separately managed accounts64,424 — — 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 $— $— $705,013 
Notes payable153,703 — — 153,703 
Separate account liabilities1,153,702 309,425 844,277 — 
Total financial liabilities$2,012,418 $309,425 $844,277 $858,716 
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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, 2020Nine months ended September 30, 2020
 AssetsLiabilityAssetsLiability
Investment
Securities		Equity-Indexed
Options		Separately Managed AccountsEmbedded
Derivative		Investment
Securities		Equity-Indexed
Options		Separately Managed AccountsEmbedded
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 income0 38,738 0 0 0 (2,200)0 0 
Net change included in interest credited0 0 0 44,792 0 0 0 17,702 
Net fair value change included in other comprehensive income6 0 3,663 0 4 0 (397)0 
Purchases, sales and settlements or maturities
Purchases15,222 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 maturities0 (35,699)0 0 0 (97,718)0 0 
Premiums less benefits0 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, 2019Nine months ended September 30, 2019
AssetsLiabilityAssetsLiability
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 income0 6,278 0 0 0 95,888 0 0 
Net change included in interest credited0 0 0 11,462 0 0 0 105,873 
Net fair value change included in other comprehensive income0 0 0 0 0 0 (2)0 
Purchases, sales and settlements or maturities
Purchases463 17,029 9,438 0 463 55,797 23,563 0 
Sales(113)(13,397)0 0 (113)(13,397)0 0 
Settlements or maturities0 (16,770)0 0 0 (62,110)0 0 
Premiums less benefits0 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 September 30, 2021Nine months ended September 30, 2021
 AssetsLiabilityAssetsLiability
Investment SecuritiesEquity-Indexed OptionsSeparately Managed AccountsEmbedded DerivativeInvestment SecuritiesEquity-Indexed OptionsSeparately Managed AccountsEmbedded Derivative
Beginning balance$137,790 $260,053 $77,904 $776,430 $111,505 $242,201 $64,424 $705,013 
Net gain for derivatives included in net investment income— 1,365 — — — 70,434 — — 
Net change included in interest credited— — — (9,607)— — — 45,542 
Net fair value change included in other comprehensive income541 — (195)— 2,422 — 427 — 
Purchases, sales and settlements or maturities
Purchases72,443 23,487 23,250 — 118,623 69,917 45,961 — 
Sales(5,907)— (3,802)— (29,162)— (13,655)— 
Settlements or maturities— (55,215)— — — (152,862)— — 
Premiums less benefits— — — 1,097 — — — 17,365 
Gross transfers into Level 3— — — — 1,479 — — — 
Gross transfers out of Level 3(2,019)— — — (2,019)— — — 
Ending balance at September 30, 2021$202,848 $229,690 $97,157 $767,920 $202,848 $229,690 $97,157 $767,920 
Level 3
Three months ended September 30, 2020Nine months ended September 30, 2020
AssetsLiabilityAssetsLiability
Investment SecuritiesEquity-Indexed OptionsSeparately Managed AccountsEmbedded DerivativeInvestment SecuritiesEquity-Indexed OptionsSeparately Managed AccountsEmbedded 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— 38,738 — — — (2,200)— — 
Net change included in interest credited— — — 44,792 — — — 17,702 
Net fair value change included in other comprehensive income6 — 3,663 — 4 — (397)— 
Purchases, sales and settlements or maturities
Purchases15,222 19,257 7,421 — 124,390 57,695 16,463 — 
Sales(380)— (569)— (50,715)— (4,517)— 
Settlements or maturities— (35,699)— — — (97,718)— — 
Premiums less benefits— — — (26,982)— — — (55,474)
Ending balance at September 30, 2020$118,986 $213,782 $62,052 $693,780 $118,986 $213,782 $62,052 $693,780 

Within the net gain (loss) for derivatives included in net investment income were unrealized losses of $20.7 million and unrealized gains of $38,788,407 and $79,991,000,$38.8 million, relating to assets still held at September 30, 20202021 and 2019,2020, respectively.

There were no transfers between Level 1 and 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 September 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.
29
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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 September 30, 2021Valuation TechniqueUnobservable InputRange/Weighted Average
Security type
Investment securities
Common stock$1,645 
Guideline public company method (1)
Recurring Revenue Multiple (2)
7.75x
Option pricing method
LTM EBITDA Multiple (3)
20x
Preferred stock33,029 Guideline public company method
LTM Revenue Multiple (4)
5.50x
Priced at costLTM EBITDA Multiple5.30x
Term (years)2.08
Volatility55.00 %
Bonds168,174 Priced at costCoupon rate2.65-9.75%
Separately managed accounts97,157 Discounted cash flows (yield analysis)Discount rate6.78-15.53%
Market transactionN/AN/A

Fair Value at December 31, 2020Valuation TechniqueUnobservable InputRange/Weighted Average
Security type
Investment securities
Common stock$440 Option pricing methodTerm (years)2.83
Volatility45.00 %
Market transactionN/A N/A
Preferred stock628 Option pricing methodTerm (years)2.83
Volatility45.00 %
Market transactionN/AN/A
Bonds110,437 Priced at costCoupon rate2.72-8.00%
Separately managed accounts64,424 Discounted cash flows (yield analysis)Discount rate7.25-14.71%
Market transactionN/AN/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.
(4)LTM EBITDA multiple valuation metric shows revenue 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.
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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 valuesvalue 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 minusnet 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 advancesAdvance—The Federal Home Loan Bank advances areadvance was carried at outstanding principal balance. The fair value of the advances areadvance 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 LevelCarrying
Amount		Fair Value
Financial assets
Fixed maturity, bonds held-to-maturity
U.S. states and political subdivisionsLevel 2$106,908 $111,183 
Foreign governmentsLevel 23,865 4,294 
Corporate debt securitiesLevel 27,297,369 7,831,992 
Residential mortgage-backed securitiesLevel 2146,138 150,293 
Collateralized debt securitiesLevel 2148,067 150,849 
Total fixed maturity, bonds held-to-maturity7,702,347 8,248,611 
Mortgage loans on real estate, net of allowanceLevel 35,176,474 5,381,157 
Policy loansLevel 3374,387 374,387 
Total financial assets$13,253,208 $14,004,155 
Financial liabilities
Investment contractsLevel 3$10,167,018 $10,167,018 
Notes payableLevel 3154,788 154,788 
Federal Home Loan Bank advancesLevel 3500,000 500,000 
Total financial liabilities$10,821,806 $10,821,806 

 September 30, 2021
FV Hierarchy LevelCarrying AmountFair Value
Financial assets
Fixed maturity, bonds held-to-maturity
U.S. Treasury and governmentLevel 1$12,320 $12,163 
U.S. states and political subdivisionsLevel 2108,155 108,322 
Foreign governmentsLevel 214,403 14,533 
Corporate debt securitiesLevel 26,984,017 7,448,762 
Residential mortgage-backed securitiesLevel 253,813 56,760 
Collateralized debt securitiesLevel 2105,093 106,491 
Total fixed maturity, bonds held-to-maturity7,277,801 7,747,031 
Mortgage loans on real estate, net of allowanceLevel 35,002,978 5,241,982 
Policy loansLevel 3364,960 364,960 
Total financial assets$12,645,739 $13,353,973 
Financial liabilities
Investment contractsLevel 3$10,794,070 $10,794,070 
Notes payableLevel 3150,378 150,378 
Total financial liabilities$10,944,448 $10,944,448 

December 31, 2019 December 31, 2020
FV Hierarchy LevelCarrying
Amount		Fair ValueFV Hierarchy LevelCarrying AmountFair Value
Financial assetsFinancial assetsFinancial assets
Fixed maturity, bonds held-to-maturityFixed maturity, bonds held-to-maturityFixed maturity, bonds held-to-maturity
U.S. treasury and governmentU.S. treasury and governmentLevel 2$7,732 $7,744 
U.S. states and political subdivisionsU.S. states and political subdivisionsLevel 2$165,109 $170,114 U.S. states and political subdivisionsLevel 2109,445 113,535 
Foreign governmentsForeign governmentsLevel 23,907 4,349 Foreign governmentsLevel 23,851 4,225 
Corporate debt securitiesCorporate debt securitiesLevel 28,099,098 8,424,969 Corporate debt securitiesLevel 26,981,597 7,595,712 
Corporate debt securitiesCorporate debt securitiesLevel 33,024 3,024 
Residential mortgage-backed securitiesResidential mortgage-backed securitiesLevel 2237,516 242,828 Residential mortgage-backed securitiesLevel 2114,127 117,728 
Collateralized debt securitiesCollateralized debt securitiesLevel 2125,631 126,430 Collateralized debt securitiesLevel 2135,194 141,213 
Total fixed maturity, bonds held-to-maturityTotal fixed maturity, bonds held-to-maturity8,631,261 8,968,690 Total fixed maturity, bonds held-to-maturity7,354,970 7,983,181 
Mortgage loans on real estate, net of allowanceMortgage loans on real estate, net of allowanceLevel 35,097,017 5,309,005 Mortgage loans on real estate, net of allowanceLevel 35,242,531 5,451,152 
Policy loansPolicy loansLevel 3379,657 379,657 Policy loansLevel 3373,014 373,014 
Total financial assetsTotal financial assets$14,107,935 $14,657,352 Total financial assets$12,970,515 $13,807,347 
Financial liabilitiesFinancial liabilitiesFinancial liabilities
Investment contractsInvestment contractsLevel 3$10,254,959 $10,254,959 Investment contractsLevel 3$10,101,764 $10,101,764 
Notes payableNotes payableLevel 3157,997 157,997 Notes payableLevel 3153,703 153,703 
Federal Home Loan Bank advanceFederal Home Loan Bank advanceLevel 2250,000 250,227 
Total financial liabilitiesTotal 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):
LifeAnnuityHealthProperty
& Casualty		Total
Beginning balance at January 1, 2020$852,900 $415,380 $32,578 $122,149 $1,423,007 
Additions100,210 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 change27,474 (58,078)582 7,455 (22,567)
Ending balance at September 30, 2020$880,374 $357,302 $33,160 $129,604 $1,400,440 

LifeAnnuityHealthProperty & CasualtyTotal
Beginning balance at January 1, 2021$896,208 $309,056 $32,885 $122,062 $1,360,211 
Additions122,234 78,775 9,211 275,071 485,291 
Amortization(80,995)(65,037)(11,907)(263,303)(421,242)
Effect of change in unrealized gains on available-for-sale debt securities6,939 17,706 — — 24,645 
Net change48,178 31,444 (2,696)11,768 88,694 
Ending balance at September 30, 2021$944,386 $340,500 $30,189 $133,830 $1,448,905 

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):
 
 Nine months ended September 30,
 20212020
Unpaid claims balance, beginning$1,354,213 $1,322,837 
Less: Reinsurance recoverables243,084 246,447 
Net beginning balance1,111,129 1,076,390 
Incurred related to
Current960,748 904,890 
Prior years(65,493)(53,090)
Total incurred claims895,255 851,800 
Paid claims related to
Current512,515 495,325 
Prior years335,065 334,054 
Total paid claims847,580 829,379 
Net balance1,158,804 1,098,811 
Plus: Reinsurance recoverables277,109 286,188 
Unpaid claims balance, ending$1,435,913 $1,384,999 
 Nine months ended September 30,
 20202019
Unpaid claims balance, beginning$1,322,837 $1,305,225 
Less: Reinsurance recoverables246,447 254,466 
Net beginning balance1,076,390 1,050,759 
Incurred related to
Current904,890 917,048 
Prior years(53,090)(47,048)
Total incurred claims851,800 870,000 
Paid claims related to
Current495,325 482,729 
Prior years334,054 370,807 
Total paid claims829,379 853,536 
Net balance1,098,811 1,067,223 
Plus: Reinsurance recoverables286,188 247,174 
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$65.5 million during the first nine months of 20202021 and decreased by $47,048,000$53.1 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, 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.

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 30, 20202021 and December 31, 20192020 was $20,419,000$18.3 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,
 2020201920202019
 AmountRateAmountRateAmountRateAmountRate
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 affiliates3,576 1.7 9,465 7.3 4,014 2.1 21,488 3.7 
Total expected income tax expense at the statutory rate45,165 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 exclusion10 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 expense997 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 allowance11 0 70 0.1 134 0.1 235 0 
Other items, net1,022 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 September 30,Nine months ended September 30,
 2021202020212020
 AmountRateAmountRateAmountRateAmountRate
Total expected income tax expense at the statutory rate$13,048 21.0 %$45,165 21.0 %$117,616 21.0 %$40,917 21.0 %
Tax-exempt investment income(1,182)(1.9)(1,062)(0.5)(3,465)(0.6)(3,149)(1.6)
Dividend exclusion(1,127)(1.8)10 — (2,719)(0.5)(2,295)(1.2)
Tax credits, net(782)(1.3)(2,127)(1.0)(3,747)(0.7)(6,056)(3.1)
Low income housing tax credit expense955 1.5 997 0.5 3,843 0.7 3,753 1.9 
Change in valuation allowance580 0.9 11 — 613 0.1 134 0.1 
Other items, net318 0.6 918 0.4 1,169 0.2 1,137 0.6 
Total$11,810 19.0 %$43,912 20.4 %$113,310 20.2 %$34,441 17.7 %

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

American National’s federal income tax returns for tax years 2016 and 2018 to 20182020 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 30, 2020,2021, American National had no provision for uncertain tax positions and no provisionprovision for penalties or interest were established.interest. In addition, management does not believebelieve 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 accounting16,164 (16,491)(458)(785)
Ending balance at September 30, 2019$155,000 $(66,362)$(3,194)$85,444 

Net Unrealized Gains (Losses) on SecuritiesDefined Benefit Pension Plan AdjustmentsForeign Currency AdjustmentsAccumulated 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 $6,493 and expense $2,247)(24,424)8,452 — (15,972)
Unrealized holding losses arising during the period (net of tax benefit $27,364)(102,943)— — (102,943)
Unrealized adjustment to DAC (net of tax expense $5,175)19,470 — — 19,470 
Unrealized losses on investments attributable to participating policyholders’ interest (net of tax expense $1,146)4,312 — — 4,312 
Foreign currency adjustment (net of tax expense $32)
— — 122 122 
Ending balance at September 30, 2021$188,581 $(58,678)$(2,744)$127,159 
Net Unrealized Gains (Losses) on SecuritiesDefined Benefit Pension Plan AdjustmentsForeign Currency AdjustmentsAccumulated 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 

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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 dateEach issued and outstanding share of the holding company reorganization, ANAT retired 3,945,249 shares ofCompany's common stock that were heldwill be converted into the right to receive $190.00 in treasury at ANICO priorcash without interest pursuant to the reorganization.Merger Agreement with Brookfield Reinsurance. Refer to Note 1, Nature of Operations, for more information. The number of shares outstanding at the dates indicated are shown below:
September 30, 2020December 31, 2019September 30, 2021December 31, 2020
Common stockCommon stockCommon stock
Shares issuedShares issued26,887,200 30,832,449 Shares issued26,887,200 26,887,200 
Treasury shares0 (3,945,249)
Outstanding shares26,887,200 26,887,200 
Restricted sharesRestricted shares(10,000)(10,000)Restricted shares(10,000)(10,000)
Unrestricted outstanding sharesUnrestricted outstanding shares26,877,200 26,877,200 Unrestricted outstanding shares26,877,200 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. 8,250During the second quarter of 2021, 10,197 of such cash-settled RSUs were granted during the third quarter of 2020 and are currentlyremain outstanding at September 30, 2021 as shown in the table below.
SAR,
RS and RSU information for the periods indicated are shown below:
SARRS SharesRSUs RS SharesRSUs
SharesWeighted-Average
Grant Date
Fair Value		SharesWeighted-Average
Grant Date
Fair Value		UnitsWeighted-Average
Grant Date
Fair Value		 SharesWeighted-Average Grant Date Fair ValueUnitsWeighted-Average Grant Date Fair Value
Outstanding at December 31, 201966 $110.83 10,000 $80.05 8,250 $113.19 
Outstanding at December 31, 2020Outstanding at December 31, 202010,000 $80.05 8,250 $75.35 
GrantedGranted— — — — 8,250 75.35 Granted— — 10,197 113.35 
ExercisedExercised— — — — (8,250)113.19 Exercised— — (8,250)75.35 
ForfeitedForfeited— — — — — — Forfeited— — — — 
ExpiredExpired(66)110.83 — — — — Expired— — — — 
Outstanding at September 30, 20200 $0 10,000 $80.05 8,250 $75.35 
Outstanding at September 30, 2021Outstanding at September 30, 202110,000 $80.05 10,197 $113.35 

SARRS SharesRSUsSARRS SharesRSUs
Weighted-average contractual remaining life (in years)Weighted-average contractual remaining life (in years)02.420.58Weighted-average contractual remaining life (in years)0.001.420.58
Exercisable sharesExercisable shares0 N/AN/AExercisable shares— N/AN/A
Weighted-average exercise priceWeighted-average exercise price$0 $0 $75.35 Weighted-average exercise price$— $80.05 $113.35 
Weighted-average exercise price exercisable sharesWeighted-average exercise price exercisable shares0 N/AN/AWeighted-average exercise price exercisable shares— N/AN/A
Compensation expense (credit)Compensation expense (credit)Compensation expense (credit)
Three months ended September 30, 2021Three months ended September 30, 2021$— $20,000 $464,000 
Three months ended September 30, 2020Three months ended September 30, 2020$0 $20,000 $360,000 Three months ended September 30, 2020— 20,000 360,000 
Three months ended September 30, 20191,000 20,000 154,000 
Nine months ended September 30, 2021Nine months ended September 30, 2021$— $60,000 $1,815,000 
Nine months ended September 30, 2020Nine months ended September 30, 2020$(1,000)$60,000 $176,000 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 
Fair value of liability awardFair value of liability awardFair value of liability award
September 30, 2020$0 N/A$557,000 
December 31, 20191,000 N/A971,000 
September 30, 2021September 30, 2021$— N/A$1,928,000 
December 31, 2020December 31, 2020— N/A793,000 

The SARs givegave 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 vestvested at a rate of 20% per year for five years and expireexpired 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.holder or change in control. Restricted stock awards for 350,334 shares have been granted at an exercise price of 0,zero, of which 10,000 shares are unvested.

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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-yearone-year or earlier upon death, disability or retirement from service after age 65.65 or change in control. During the twelve months ended December 31, 2020, 8,250 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 vestand 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.

Pursuant to the Merger Agreement with Brookfield Reinsurance, each outstanding and unvested restricted share award and restricted stock unit award will vest and be converted into the right to receive cash payment equal to $190.00 multiplied by the total number of shares of common stock subject to such award prior to the effective date of the merger with Brookfield Reinsurance. Refer to Note 1, Nature of Operations, for more information.

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,
 2020201920202019
Weighted average shares outstanding26,877,200 26,881,700 26,879,178 26,883,025 
Incremental shares from RS awards and RSUs7,558 6,472 8,696 6,313 
Total shares for diluted calculations26,884,758 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 September 30,Nine months ended September 30,
 2021202020212020
Weighted average shares outstanding26,877,200 26,877,200 26,877,200 26,879,178 
Incremental shares from RS awards7,382 7,558 7,500 8,696 
Total shares for diluted calculations26,884,582 26,884,758 26,884,700 26,887,874 
Net income attributable to American National (in thousands)$51,048 $171,052 $449,197 $161,153 
Basic earnings per share$1.90 $6.36 $16.71 $6.00 
Diluted earnings per share$1.90 $6.36 $16.71 $5.99 

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%100% of the authorized controlcompany action level RBC are required to take certain actions. At September 30, 20202021 and December 31, 2019, American National Insurance Company’s2020, ANICO's statutory capital and surplus was $3,488,293,000$3.7 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 itsthe company action level. All of our other insurance subsidiaries had statutory capital and surplus at September 30, 20202021 and December 31, 2019,2020, above 200% of the authorized controlcompany action level, except for ANPAC Louisiana Insurance Company ("ANPLA"). At September 30, 2021 and December 31, 2020, ANPLA's statutory capital and surplus was $42.1 million and $68.5 million respectively, which resulted in an RBC level of 119% 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 theeach 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 itsour 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.
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Note 14 – Stockholders’ Equity and Noncontrolling Interests – (Continued)


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$67.0 million and $70,339,000$75.3 million at September 30, 20202021 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 actionauthorized control level RBC had it not used the permitted practice.

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):
September 30, 2020December 31, 2019September 30, 2021December 31, 2020
Statutory capital and surplusStatutory capital and surplusStatutory capital and surplus
Life insurance entitiesLife insurance entities$2,120,222 $2,159,770 Life insurance entities$2,189,438 $2,188,808 
Property and casualty insurance entitiesProperty and casualty insurance entities1,379,711 1,329,782 Property and casualty insurance entities1,567,841 1,463,179 

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Note 14 – Stockholders’ Equity and Noncontrolling Interests – (Continued)
Three months ended September 30,Nine months ended September 30, Three months ended September 30,Nine months ended September 30,
2020201920202019 2021202020212020
Statutory net income (loss)Statutory net income (loss)Statutory net income (loss)
Life insurance entitiesLife insurance entities$(11,638)$26,498 $13,036 $32,196 Life insurance entities$(16,116)$(11,638)$(67,290)$13,036 
Property and casualty insurance entitiesProperty and casualty insurance entities33,816 15,626 69,094 66,090 Property and casualty insurance entities10,825 33,816 67,976 69,094 

Dividends

Dividends are paid on a quarterly basis. We paid a quarterly dividend of $0.82 per share for each quarter during the nine months ended September 30, 20202021 and September 30, 2019, respectively. We2020, and we expect to continue to pay regular quarterly cash dividends, not to exceed $0.82 per share, prior to the completion of the merger with Brookfield Reinsurance, although there is no assurance as to future dividends because they depend on future earnings, capital requirements and financial conditions. Refer to Note 1, Nature of Operations, for more information regarding the Merger Agreement with Brookfield Reinsurance.
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. TheThese restrictions requireare 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 Companysurplus, 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 in2021 and subject to the formterms and conditions of dividends, loans, or advances to American National Insurance Company apply to its insurance subsidiaries.the Merger Agreement with Brookfield Reinsurance.

Noncontrolling InterestsInterest

American National County Mutual Insurance Company (“County Mutual”) is a mutual insurance company owned by its policyholders. American National Insurance CompanyANICO 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 30, 20202021 and December 31, 2019.2020, respectively.

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 $0.6 million and a noncontrolling deficit of $443,000 and $736,000$0.9 million at September 30, 20202021 and December 31, 2019,2020, respectively.

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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.underwriters ("MGU").
•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.

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 annual report on Form 10-K. All revenues and expenses specifically attributable to policy transactions are recorded directly to the appropriate operating segment. Revenues and expenses not specifically attributable to policy transactions are allocated to each segment as follows:
•Recurring income from bonds and mortgage loans is allocated based on the assets allocated to each line of business at the average yield available from these assets.
•Net investment income from all other assets is allocated to the insurance segments in accordance with the amount of capital allocated to each segment, with the remainder recorded in the Corporate and Other segment.
•Expenses are charged to segments through direct identification and allocations based upon various factors.


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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
PropertyCorporate
 LifeAnnuityHealth& Casualty& OtherTotal
PREMIUMS AND OTHER REVENUES
Premiums$101,182 $27,960 $40,934 $391,388 $0 $561,464 
Other policy revenues75,317 4,027 0 0 0 79,344 
Net investment income69,235 163,125 2,033 16,049 3,814 254,256 
Net realized investment gains0 0 0 0 17,387 17,387 
Change in investment credit loss0 0 0 0 (4,175)(4,175)
Net gains on equity securities0 0 0 0 152,147 152,147 
Other income358 733 4,971 3,079 542 9,683 
Total premiums and other revenues246,092 195,845 47,938 410,516 169,715 1,070,106 
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits153,957 46,424 0 0 0 200,381 
Claims incurred0 0 27,933 258,412 0 286,345 
Interest credited to policyholders’ account balances24,522 104,424 0 0 0 128,946 
Commissions for acquiring and servicing policies41,974 16,119 7,608 72,664 0 138,365 
Other operating expenses45,080 12,115 10,013 48,576 10,629 126,413 
Change in deferred policy acquisition costs(15,499)8,555 (542)(901)— (8,387)
Total benefits, losses and expenses250,034 187,637 45,012 378,751 10,629 872,063 
Income (loss) before federal income tax and other items$(3,942)$8,208 $2,926 $31,765 $159,086 $198,043 

 Three months ended September 30, 2021
 LifeAnnuityHealthProperty & CasualtyCorporate & OtherTotal
PREMIUMS AND OTHER REVENUES
Premiums$104,802 $18,698 $36,201 $426,887 $— $586,588 
Other policy revenues83,331 5,356 — — — 88,687 
Net investment income63,379 132,236 1,941 15,929 47,655 261,140 
Net realized investment gains— — — — 20,138 20,138 
Decrease in investment credit loss— — — — 5,969 5,969 
Net gains on equity securities— — — — 681 681 
Other income431 972 6,045 3,863 715 12,026 
Total premiums and other revenues251,943 157,262 44,187 446,679 75,158 975,229 
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits161,633 29,222 — — — 190,855 
Claims incurred— — 23,935 299,956 — 323,891 
Interest credited to policyholders’ account balances10,180 72,071 — — — 82,251 
Commissions for acquiring and servicing policies50,461 24,865 6,010 89,883 — 171,219 
Other operating expenses51,114 14,653 11,294 53,364 21,546 151,971 
Change in deferred policy acquisition costs(13,311)8,982 311 (3,070)— (7,088)
Total benefits, losses and expenses260,077 149,793 41,550 440,133 21,546 913,099 
Income (loss) before federal income tax and other items$(8,134)$7,469 $2,637 $6,546 $53,612 $62,130 

Three months ended September 30, 2019 Three months ended September 30, 2020
PropertyCorporate
LifeAnnuityHealth& Casualty& OtherTotal LifeAnnuityHealthProperty & CasualtyCorporate & OtherTotal
PREMIUMS AND OTHER REVENUESPREMIUMS AND OTHER REVENUESPREMIUMS AND OTHER REVENUES
PremiumsPremiums$93,079 $41,305 $40,676 $382,784 $0 $557,844 Premiums$101,182 $27,960 $40,934 $391,388 $— $561,464 
Other policy revenuesOther policy revenues72,446 4,338 0 0 0 76,784 Other policy revenues75,317 4,027 — — — 79,344 
Net investment incomeNet investment income61,961 141,684 2,381 16,357 24,237 246,620 Net investment income69,235 163,125 2,033 16,049 20,843 271,285 
Net realized investment gainsNet realized investment gains0 0 0 0 31,933 31,933 Net realized investment gains— — — — 17,387 17,387 
Increase in investment credit lossIncrease in investment credit loss— — — — (4,175)(4,175)
Net gains on equity securitiesNet gains on equity securities0 0 0 0 8,589 8,589 Net gains on equity securities— — — — 152,147 152,147 
Other incomeOther income441 653 5,021 3,137 1,478 10,730 Other income358 733 4,971 3,079 542 9,683 
Total premiums and other revenuesTotal premiums and other revenues227,927 187,980 48,078 402,278 66,237 932,500 Total premiums and other revenues246,092 195,845 47,938 410,516 186,744 1,087,135 
BENEFITS, LOSSES AND EXPENSESBENEFITS, LOSSES AND EXPENSESBENEFITS, LOSSES AND EXPENSES
Policyholder benefitsPolicyholder benefits113,652 59,699 0 0 0 173,351 Policyholder benefits153,957 46,424 — — — 200,381 
Claims incurredClaims incurred0 0 28,567 280,695 0 309,262 Claims incurred— — 27,933 258,412 — 286,345 
Interest credited to policyholders’ account balancesInterest credited to policyholders’ account balances22,045 84,737 0 0 0 106,782 Interest credited to policyholders’ account balances24,522 104,424 — — — 128,946 
Commissions for acquiring and servicing policiesCommissions for acquiring and servicing policies42,023 13,368 7,405 65,893 0 128,689 Commissions for acquiring and servicing policies41,974 16,119 7,608 72,664 — 138,365 
Other operating expensesOther operating expenses46,873 12,264 9,504 50,111 9,750 128,502 Other operating expenses45,080 12,115 10,013 48,576 10,629 126,413 
Change in deferred policy acquisition costsChange in deferred policy acquisition costs(5,080)7,006 258 (636)0 1,548 Change in deferred policy acquisition costs(15,499)8,555 (542)(901)— (8,387)
Total benefits, losses and expensesTotal benefits, losses and expenses219,513 177,074 45,734 396,063 9,750 848,134 Total benefits, losses and expenses250,034 187,637 45,012 378,751 10,629 872,063 
Income before federal income tax and other items$8,414 $10,906 $2,344 $6,215 $56,487 $84,366 
Income (loss) before federal income tax and other itemsIncome (loss) before federal income tax and other items$(3,942)$8,208 $2,926 $31,765 $176,115 $215,072 

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Note 15 – Segment Information – (Continued)

Nine months ended September 30, 2020 Nine months ended September 30, 2021
PropertyCorporate
LifeAnnuityHealth& Casualty& OtherTotal LifeAnnuityHealthProperty & CasualtyCorporate & OtherTotal
PREMIUMS AND OTHER REVENUESPREMIUMS AND OTHER REVENUESPREMIUMS AND OTHER REVENUES
PremiumsPremiums$282,368 $69,413 $126,965 $1,152,749 $0 $1,631,495 Premiums$306,365 $63,436 $108,914 $1,235,778 $— $1,714,493 
Other policy revenuesOther policy revenues227,083 11,653 0 0 0 238,736 Other policy revenues248,366 17,383 — — — 265,749 
Net investment incomeNet investment income188,455 394,508 6,480 48,171 19,274 656,888 Net investment income203,401 449,456 6,028 47,167 122,468 828,520 
Net realized investment gainsNet realized investment gains0 0 0 0 25,474 25,474 Net realized investment gains— — — — 49,979 49,979 
Change in investment credit loss0 0 0 0 (101,163)(101,163)
Decrease in investment credit lossDecrease in investment credit loss— — — — 25,562 25,562 
Net gains on equity securitiesNet gains on equity securities0 0 0 0 118,397 118,397 Net gains on equity securities— — — — 267,425 267,425 
Other incomeOther income1,534 2,166 15,001 9,656 2,795 31,152 Other income1,311 2,760 16,032 10,138 2,572 32,813 
Total premiums and other revenuesTotal premiums and other revenues699,440 477,740 148,446 1,210,576 64,777 2,600,979 Total premiums and other revenues759,443 533,035 130,974 1,293,083 468,006 3,184,541 
BENEFITS, LOSSES AND EXPENSESBENEFITS, LOSSES AND EXPENSESBENEFITS, LOSSES AND EXPENSES
Policyholder benefitsPolicyholder benefits389,364 126,209 0 0 0 515,573 Policyholder benefits447,309 116,662 — — — 563,971 
Claims incurredClaims incurred0 0 89,544 768,682 0 858,226 Claims incurred— — 74,376 824,697 — 899,073 
Interest credited to policyholders’ account balancesInterest credited to policyholders’ account balances47,820 223,586 0 0 0 271,406 Interest credited to policyholders’ account balances53,276 247,998 — — — 301,274 
Commissions for acquiring and servicing policiesCommissions for acquiring and servicing policies122,728 38,024 22,792 225,746 0 409,290 Commissions for acquiring and servicing policies142,278 77,833 18,561 250,145 — 488,817 
Other operating expensesOther operating expenses137,065 35,737 30,118 151,660 30,936 385,516 Other operating expenses147,381 39,718 31,769 157,926 58,586 435,380 
Change in deferred policy acquisition costsChange in deferred policy acquisition costs(34,872)28,147 (582)(7,455)0 (14,762)Change in deferred policy acquisition costs(41,239)(13,738)2,696 (11,768)— (64,049)
Total benefits, losses and expensesTotal benefits, losses and expenses662,105 451,703 141,872 1,138,633 30,936 2,425,249 Total benefits, losses and expenses749,005 468,473 127,402 1,221,000 58,586 2,624,466 
Income before federal income tax and other itemsIncome before federal income tax and other items$37,335 $26,037 $6,574 $71,943 $33,841 $175,730 Income before federal income tax and other items$10,438 $64,562 $3,572 $72,083 $409,420 $560,075 

Nine months ended September 30, 2019 Nine months ended September 30, 2020
PropertyCorporate
LifeAnnuityHealth& Casualty& OtherTotal LifeAnnuityHealthProperty & CasualtyCorporate & OtherTotal
PREMIUMS AND OTHER REVENUESPREMIUMS AND OTHER REVENUESPREMIUMS AND OTHER REVENUES
PremiumsPremiums$265,634 $137,434 $121,581 $1,125,704 $0 $1,650,353 Premiums$282,368 $69,413 $126,965 $1,152,749 $— $1,631,495 
Other policy revenuesOther policy revenues213,300 12,878 0 0 0 226,178 Other policy revenues227,083 11,653 — — — 238,736 
Net investment incomeNet investment income194,633 487,750 7,177 48,085 59,051 796,696 Net investment income188,455 394,508 6,480 48,171 38,388 676,002 
Net realized investment gainsNet realized investment gains0 0 0 0 24,975 24,975 Net realized investment gains— — — — 25,474 25,474 
Increase in investment credit lossIncrease in investment credit loss— — — — (101,163)(101,163)
Net gains on equity securitiesNet gains on equity securities0 0 0 0 282,026 282,026 Net gains on equity securities— — — — 118,397 118,397 
Other incomeOther income1,586 1,916 15,940 8,689 4,511 32,642 Other income1,534 2,166 15,001 9,656 2,795 31,152 
Total premiums and other revenuesTotal premiums and other revenues675,153 639,978 144,698 1,182,478 370,563 3,012,870 Total premiums and other revenues699,440 477,740 148,446 1,210,576 83,891 2,620,093 
BENEFITS, LOSSES AND EXPENSESBENEFITS, LOSSES AND EXPENSESBENEFITS, LOSSES AND EXPENSES
Policyholder benefitsPolicyholder benefits327,579 191,248 0 0 0 518,827 Policyholder benefits389,364 126,209 — — — 515,573 
Claims incurredClaims incurred0 0 81,042 790,447 0 871,489 Claims incurred— — 89,544 768,682 — 858,226 
Interest credited to policyholders’ account balancesInterest credited to policyholders’ account balances57,561 314,142 0 0 0 371,703 Interest credited to policyholders’ account balances47,820 223,586 — — — 271,406 
Commissions for acquiring and servicing policiesCommissions for acquiring and servicing policies120,646 63,373 22,975 201,635 0 408,629 Commissions for acquiring and servicing policies122,728 38,024 22,792 225,746 — 409,290 
Other operating expensesOther operating expenses142,520 38,087 31,203 151,677 28,158 391,645 Other operating expenses137,065 35,737 30,118 151,660 30,936 385,516 
Change in deferred policy acquisition costsChange in deferred policy acquisition costs(19,120)(383)919 (3,807)0 (22,391)Change in deferred policy acquisition costs(34,872)28,147 (582)(7,455)— (14,762)
Total benefits, losses and expensesTotal benefits, losses and expenses629,186 606,467 136,139 1,139,952 28,158 2,539,902 Total benefits, losses and expenses662,105 451,703 141,872 1,138,633 30,936 2,425,249 
Income before federal income tax and other itemsIncome before federal income tax and other items$45,967 $33,511 $8,559 $42,526 $342,405 $472,968 Income before federal income tax and other items$37,335 $26,037 $6,574 $71,943 $52,955 $194,844 

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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 30, 20202021 were approximately $10,876,000.$7.0 million.

American National had aggregate commitments at September 30, 20202021 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$2.1 billion of which $328,144,000$708.5 million is expected to be funded in 20202021 with the remainder funded in 20212022 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. Asin the amount of $3.5 million as of September 30, 20202021 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 30, 2020,2021, certain municipal bonds and collateralized mortgage obligations (CMO’s) with a fair value of approximately $84.1$32.1 million and commercial mortgage loans of approximately $1.4 billion were on deposit with the FHLB as collateral for borrowing. As of September 30, 2020,2021, the collateral provided borrowing capacity for the $500 million in outstanding advances as well asof approximately $564 million in additional borrowing capacity.$990.6 million. 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 AmountInterest RateMaturity Date
At September 30, 2020
FHLB advance, fixed rate*$250,000 0.25 %10/13/2020
FHLB advance, fixed rate250,000 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 NationalANICO 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 NationalANICO 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 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.$142.1 million.

Restrictions of the Merger Agreement limit the Company's ability, without Brookfield Reinsurance's consent, to 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. Refer to Part I, Item 2, MD&A, Introductory Note Regarding Pending Merger for more information.


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Note 16 – Commitments and Contingencies – (Continued)

Litigation

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

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 ImpactedThree months ended September 30,Nine months ended September 30,Amount due to (from) American National
Related Party2020201920202019September 30, 2020December 31, 2019
Gal-Tex Hotel CorporationMortgage loan on real estate$0 $0 $0 $576 $0 $0 
Gal-Tex Hotel CorporationNet investment income0 0 0 9 0 0 
Greer, Herz & Adams, LLPOther operating expenses3,033 3,129 10,127 9,025 (558)(519)

  Dollar Amount of Transactions
 Financial Statement Line ImpactedThree months ended September 30,Nine months ended September 30,Amount due from American National
Related Party2021202020212020September 30, 2021December 31, 2020
Greer, Herz & Adams, LLPOther operating expenses$3,184 $3,033 $10,276 $10,127 $(496)$(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.

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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 months ended September 30, 20202021 and 20192020 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 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.

The completion of the Merger is also subject to antitrust clearance (or termination of the applicable waiting period) from the U.S. Department of Justice or Federal Trade Commission. On August 27, 2021, the Company and Brookfield Reinsurance filed the required notifications for antitrust clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 ("HSR Act"). The waiting period under the HSR Act expired on September 27, 2021.

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. As a result, after those stockholder consents were delivered, the Company's board of directors no longer had the right to consider unsolicited competing acquisition proposals from third parties or to exercise a "fiduciary out" and no such third party proposal has been received.


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

Mailing of Information Statement and Appraisal Rights. On September 17, 2021, the Company began mailing the definitive information statement and appraisal rights notice to the Company's stockholders, and that document is available in the EDGAR system on the SEC's website at www.sec.gov. As disclosed in the definitive information statement, any stockholder who wished to demand appraisal rights for its shares was required to deliver its demand no later than October 7, 2021, the 20th day after the information statement was first mailed to stockholders. Prior to that deadline, the Company received only one purported appraisal demand, which was submitted by the owner of 2,000 shares of common stock (less than 0.01% of the Company's outstanding shares).

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.

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;
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•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. Because, as disclosed above, (i) the required stockholder approval for the Merger has been obtained, (ii) the information statement and appraisal rights notice has been sent to stockholders and (iii) the HSR Act waiting period has expired, the only remaining significant closing condition is the receipt of the required regulatory approval from the insurance authorities in Texas, Missouri, New York, Louisiana and California. On September 3, 2021, Brookfield Reinsurance made the required Form A filings with each of these state insurance regulators, and those regulators are reviewing the filings. The Merger is expected to close in the first half of 2022. However, because state insurance regulatory approval remains outstanding, the Company cannot provide assurance the Merger will be completed on the terms or timeline currently contemplated, or at all.

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 20192020 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.


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

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.

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

•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;
•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 asstate 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 companyCompany by a small number of stockholders; and
•advancesanti-takeover provisions in medical technologyour 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 testing, which may increase our adverse selection risk.
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.

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

•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
•potential ineffectiveness of our internal controls over financial reporting.

COVID-19 Response
On
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 takencontinue 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 workworking 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.
•We are developing return-to-office programs as we transition through the different reopening situations at our locations. At the end2021 piloted 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 whodeveloped 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 ofcontinually refining our employeesreturn-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 allJune, we gradually re-introduced more employees to wear face coverings when they enter our buildings, in common areasoffice 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.

NoAlthough since the onset of the pandemic we have been able to maintain our business operations, no assurance can be given that these actions will continue to 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 duringMarch 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 loansdirect and equity indexed options. Significant volatility in financial markets resulted in increased credit allowances established for mortgage loans andindirect 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 relatedmortality 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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Sales growthOverview

American National Group, Inc. ("ANAT") is a family of companies that has, on a consolidated GAAP basis, $30.7 billion in our operating segments was negatively impacted by stay-at-home ordersassets, $23.9 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
30, 2021. American National Insurance Company ("ANICO"), founded in 1905 and headquartered in Galveston, Texas, and itsother 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 insuranceIn 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 quarter of 2020,2021, American National had no material changes to the general trends discussed in the MD&A included in our 20192020 Annual Report on Form 10-K filed with the SEC on February 28, 2020.March 4, 2021. However, please see the "COVID-19 Response" 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 with Brookfield Reinsurance.

Anticipated Sale of Equity Securities Portfolio

We have recently received the required corporate approval to sell our equity securities portfolio before the end of 2021. That approval follows our assessment, including by our board of directors and senior management, of market conditions and the potential for changes in the U.S. federal corporate income tax rate. As of October 29, 2021, the total fair value of our equity securities portfolio was $2.4 billion.

We expect that the sale of the equity securities portfolio, and the reinvestment of the proceeds primarily in fixed income investments, will have a positive impact on our net investment income and cash flows, as well as on the Risk Based Capital of our insurance company subsidiaries that currently hold equity security investments.

The sale of the equity securities is expected to generate a taxable gain and will not have a significant impact on our stockholders' equity. We do expect it to impact net income, as future non-cash earnings from net gains (losses) from the change in fair value of equity securities will be significantly reduced once these securities are sold.

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 20192020 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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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, 
 20202019Change20202019Change
PREMIUMS AND OTHER REVENUES
Premiums$561,464 $557,844 $3,620 $1,631,495 $1,650,353 $(18,858)
Other policy revenues79,344 76,784 2,560 238,736 226,178 12,558 
Net investment income254,256 246,620 7,636 656,888 796,696 (139,808)
Net realized investments gains17,387 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 securities152,147 8,589 143,558 118,397 282,026 (163,629)
Other income9,683 10,730 (1,047)31,152 32,642 (1,490)
Total premiums and other revenues1,070,106 932,500 137,606 2,600,979 3,012,870 (411,891)
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits200,381 173,351 27,030 515,573 518,827 (3,254)
Claims incurred286,345 309,262 (22,917)858,226 871,489 (13,263)
Interest credited to policyholders’ account balances128,946 106,782 22,164 271,406 371,703 (100,297)
Commissions for acquiring and servicing policies138,365 128,689 9,676 409,290 408,629 661 
Other operating expenses126,413 128,502 (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 expenses872,063 848,134 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 September 30, Nine months ended September 30, 
 20212020Change20212020Change
PREMIUMS AND OTHER REVENUES
Premiums$586,588 $561,464 $25,124 $1,714,493 $1,631,495 $82,998 
Other policy revenues88,687 79,344 9,343 265,749 238,736 27,013 
Net investment income261,140 271,285 (10,145)828,520 676,002 152,518 
Net realized investments gains20,138 17,387 2,751 49,979 25,474 24,505 
(Increase) decrease in investment credit loss5,969 (4,175)10,144 25,562 (101,163)126,725 
Net gains on equity securities681 152,147 (151,466)267,425 118,397 149,028 
Other income12,026 9,683 2,343 32,813 31,152 1,661 
Total premiums and other revenues975,229 1,087,135 (111,906)3,184,541 2,620,093 564,448 
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits190,855 200,381 (9,526)563,971 515,573 48,398 
Claims incurred323,891 286,345 37,546 899,073 858,226 40,847 
Interest credited to policyholders’ account balances82,251 128,946 (46,695)301,274 271,406 29,868 
Commissions for acquiring and servicing policies171,219 138,365 32,854 488,817 409,290 79,527 
Other operating expenses151,971 126,413 25,558 435,380 385,516 49,864 
Change in deferred policy acquisition costs (1)
(7,088)(8,387)1,299 (64,049)(14,762)(49,287)
Total benefits, losses and expenses913,099 872,063 41,036 2,624,466 2,425,249 199,217 
Income before federal income taxes and other items$62,130 $215,072 $(152,942)$560,075 $194,844 $365,231 
(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, 20202021 to 2019
Earnings increased primarily due to the following:
•Increase in net gains on equity securities resulting from favorable market conditions
The increase in earnings was partially offset due to the following:
•Increase in claim experience in our Life segment2020

Comparison of the nine months ended September 30, 2020 to 2019
Earnings decreased primarily due to the following:
•A decrease in net gains on equity securities as a result of less favorable market conditions for equity securities
•A decrease in Life segment earnings driven by an overall increase in mortality
•A decrease in Property and Casualty segment earnings resulting from unfavorablelosses from Hurricane Ida and an increase in claim frequency in our personal automobile products

Comparison of the nine months ended September 30, 2021 to 2020

Earnings increased primarily due to the following:
•An increase in net gains on equity securities due to favorable market conditions for equity securities in 2021 and the negative impact that the pandemic had on the market values of equity securities in 2020
•Favorable change in expected investment credit loss due to improvement in our commercial mortgage loans driven by GDP growth and improved economic outlook
•An increase in the allowance for credit lossesnet investment income driven by higher investment income from mortgage loan profit participation and prepayment income and investment funds
The increase in earnings was partially offset due to the economic disruptions causedfollowing:
•A decrease in Life segment earnings driven by thean overall increase in mortality which includes claims directly and indirectly attributable to COVID-19 pandemic


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Life

Life segment financial results for the periods indicated were as follows (in thousands):
 Three months ended September 30, Nine months ended September 30, 
 20202019Change20202019Change
PREMIUMS AND OTHER REVENUES
Premiums$101,182 $93,079 $8,103 $282,368 $265,634 $16,734 
Other policy revenues75,317 72,446 2,871 227,083 213,300 13,783 
Net investment income69,235 61,961 7,274 188,455 194,633 (6,178)
Other income358 441 (83)1,534 1,586 (52)
Total premiums and other revenues246,092 227,927 18,165 699,440 675,153 24,287 
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits153,957 113,652 40,305 389,364 327,579 61,785 
Interest credited to policyholders’ account balances24,522 22,045 2,477 47,820 57,561 (9,741)
Commissions for acquiring and servicing policies41,974 42,023 (49)122,728 120,646 2,082 
Other operating expenses45,080 46,873 (1,793)137,065 142,520 (5,455)
Change in deferred policy acquisition costs(1)
(15,499)(5,080)(10,419)(34,872)(19,120)(15,752)
Total benefits, losses and expenses250,034 219,513 30,521 662,105 629,186 32,919 
Income (loss) before federal income taxes and other items$(3,942)$8,414 $(12,356)$37,335 $45,967 $(8,632)

 Three months ended September 30, Nine months ended September 30, 
 20212020Change20212020Change
PREMIUMS AND OTHER REVENUES
Premiums$104,802 $101,182 $3,620 $306,365 $282,368 $23,997 
Other policy revenues83,331 75,317 8,014 248,366 227,083 21,283 
Net investment income63,379 69,235 (5,856)203,401 188,455 14,946 
Other income431 358 73 1,311 1,534 (223)
Total premiums and other revenues251,943 246,092 5,851 759,443 699,440 60,003 
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits161,633 153,957 7,676 447,309 389,364 57,945 
Interest credited to policyholders’ account balances10,180 24,522 (14,342)53,276 47,820 5,456 
Commissions for acquiring and servicing policies50,461 41,974 8,487 142,278 122,728 19,550 
Other operating expenses51,114 45,080 6,034 147,381 137,065 10,316 
Change in deferred policy acquisition costs (1)
(13,311)(15,499)2,188 (41,239)(34,872)(6,367)
Total benefits, losses and expenses260,077 250,034 10,043 749,005 662,105 86,900 
Income (loss) before federal income taxes and other items$(8,134)$(3,942)$(4,192)$10,438 $37,335 $(26,897)
(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, 20202021 to 20192020

Earnings for our Life segment decreased primarily due to the following:
•An increase in policyholder benefits due to improvement in the participating policyholder share of change in investment credit loss, primarily associated with mortgage loans
•Annual assumption review resulting in an unlocking expense due to an expected increase in future mortality
The decrease in earnings was partially offset by the following:
•Improved persistency resulting in an increase in premiums and other policy revenues

Comparison of the nine months ended September 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 assumptionsCOVID-19
The decrease in earnings was partially offset by the following:
•IncreaseImproved persistency 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 salesInsurance 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 September 30, Nine months ended September 30, 
20202019Change20202019Change 20212020Change20212020Change
Traditional lifeTraditional life$16,073 $13,711 $2,362 $46,056 $42,409 $3,647 Traditional life$15,578 $16,071 $(493)$48,674 $46,056 $2,618 
Universal lifeUniversal life7,859 7,062 797 20,613 20,759 (146)Universal life7,097 7,859 (762)23,371 20,613 2,758 
Indexed ULIndexed UL8,328 9,980 (1,652)21,972 26,981 (5,009)Indexed UL9,299 8,328 971 25,991 21,972 4,019 
Total recurringTotal recurring32,260 30,753 1,507 88,641 90,149 (1,508)Total recurring31,974 32,258 (284)98,036 88,641 9,395 
Single and excess (1)
Single and excess (1)
387 420 (33)852 1,334 (482)
Single and excess (1)
523 387 136 1,368 852 516 
Credit life (1)
Credit life (1)
2,015 2,691 (676)6,063 8,159 (2,096)
Credit life (1)
2,044 2,015 29 5,765 6,063 (298)
Total annualized premiumTotal annualized premium$34,662 $33,864 $798 $95,556 $99,642 $(4,086)Total annualized premium$34,541 $34,660 $(119)$105,169 $95,556 $9,613 
(1)  These are weightedWeighted amounts representing 10% ofwith 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 months ended September 30, 2020 compared to 2019 primarily due to higher traditional life sales. Total Life sales decreased during the nine months ended September 30, 20202021 compared to 2019 primarily due to lower Indexed Universal Life and Credit2020. Life sales which we believe was due to thewere impacted in 2020 by stay-at-home orders and economic uncertainty fromrelated to COVID-19.

Policy in-force informationIn-force Information

The following table summarizes changes in the Life segment’s in-force amounts (in thousands):
September 30, 2020December 31, 2019ChangeSeptember 30, 2021December 31, 2020Change
Life insurance in-forceLife insurance in-forceLife insurance in-force
Traditional lifeTraditional life$89,919,097 $84,129,193 $5,789,904 Traditional life$96,834,072 $91,920,577 $4,913,495 
Interest-sensitive lifeInterest-sensitive life35,616,434 33,975,092 1,641,342 Interest-sensitive life38,243,519 36,326,621 1,916,898 
Total life insurance in-forceTotal life insurance in-force$125,535,531 $118,104,285 $7,431,246 Total life insurance in-force$135,077,591 $128,247,198 $6,830,393 

The following table summarizes changes in the Life segment’s number of policies in-force:
September 30, 2020December 31, 2019ChangeSeptember 30, 2021December 31, 2020Change
Number of policies in-forceNumber of policies in-forceNumber of policies in-force
Traditional lifeTraditional life1,846,338 1,911,305 (64,967)Traditional life1,716,003 1,832,536 (116,533)
Interest-sensitive lifeInterest-sensitive life265,982 256,146 9,836 Interest-sensitive life279,188 269,668 9,520 
Total number of policies in-forceTotal number of policies in-force2,112,320 2,167,451 (55,131)Total number of policies in-force1,995,191 2,102,204 (107,013)

Life insurance in-force increased during the nine months ended September 30, 20202021 compared to December 31, 20192020 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, 
 20202019Change20202019Change
Acquisition cost capitalized$(34,498)$(34,393)$(105)$(100,210)$(98,812)$(1,398)
Amortization of DAC18,999 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 reductionfollowing 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 September 30, Nine months ended September 30, 
 20212020Change20212020Change
Acquisition cost capitalized$(41,586)$(34,498)$(7,088)$(122,234)$(100,210)$(22,024)
Amortization of DAC28,275 18,999 9,276 80,995 65,338 15,657 
Change in DAC$(13,311)$(15,499)$2,188 $(41,239)$(34,872)$(6,367)
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Annuity

Annuity segment financial results for the periods indicated were as follows (in thousands):
 Three months ended September 30,Nine months ended September 30,
 20202019Change20202019Change
PREMIUMS AND OTHER REVENUES
Premiums$27,960 $41,305 $(13,345)$69,413 $137,434 $(68,021)
Other policy revenues4,027 4,338 (311)11,653 12,878 (1,225)
Net investment income163,125 141,684 21,441 394,508 487,750 (93,242)
Other income733 653 80 2,166 1,916 250 
Total premiums and other revenues195,845 187,980 7,865 477,740 639,978 (162,238)
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits46,424 59,699 (13,275)126,209 191,248 (65,039)
Interest credited to policyholders’ account balances104,424 84,737 19,687 223,586 314,142 (90,556)
Commissions for acquiring and servicing policies16,119 13,368 2,751 38,024 63,373 (25,349)
Other operating expenses12,115 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 expenses187,637 177,074 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 September 30,Nine months ended September 30,
 20212020Change20212020Change
PREMIUMS AND OTHER REVENUES
Premiums$18,698 $27,960 $(9,262)$63,436 $69,413 $(5,977)
Other policy revenues5,356 4,027 1,329 17,383 11,653 5,730 
Net investment income132,236 163,125 (30,889)449,456 394,508 54,948 
Other income972 733 239 2,760 2,166 594 
Total premiums and other revenues157,262 195,845 (38,583)533,035 477,740 55,295 
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits29,222 46,424 (17,202)116,662 126,209 (9,547)
Interest credited to policyholders’ account balances72,071 104,424 (32,353)247,998 223,586 24,412 
Commissions for acquiring and servicing policies24,865 16,119 8,746 77,833 38,024 39,809 
Other operating expenses14,653 12,115 2,538 39,718 35,737 3,981 
Change in deferred policy acquisition costs (1)
8,982 8,555 427 (13,738)28,147 (41,885)
Total benefits, losses and expenses149,793 187,637 (37,844)468,473 451,703 16,770 
Income before federal income taxes and other items$7,469 $8,208 $(739)$64,562 $26,037 $38,525 
(1)A positivenegative amount of net change indicates lessmore expense was deferred than amortized and represents an increasea decrease to expenses in the period indicated.

Comparison of the three months ended September 30, 20202021 to 20192020

Earnings for our Annuity segment decreasedremained consistent; however, there were offsetting variances as follows:
•Decline in net investment income and interest credited for equity-indexed annuity products due to less favorable market conditions

Comparison of the nine months ended September 30, 2021 to 2020

Earnings for our Annuity segment increased primarily due to the following:
•Annual assumption review resulting in unlocking on our fixed deferred annuity block due to decrease in long-term interest rate assumptions
•Higher interest credited on indexed annuities
The decrease in earnings was partially offset by 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, 2020Favorable mark-to-market impact to 2019
Earnings for our Annuity segment decreased primarilyequity-indexed annuity reserves due to the following:
•An increase in reserves for indexed annuity products due to mark-to-market based adjustments attributable to lowerhigher interest rates and unfavorable equity market conditions
•Annual assumption review resulting in unlocking on ourLower DAC amortization for fixed deferred annuity blockproducts due to decreasean increase in long-termestimated gross profits driven by higher projected future interest rate assumptionsrates 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, 
 20202019Change20202019Change
Fixed deferred annuity$126,820 $77,342 $49,478 $318,629 $909,859 $(591,230)
Single premium immediate annuity36,217 50,815 (14,598)92,327 184,823 (92,496)
Equity-indexed deferred annuity95,105 74,876 20,229 230,485 281,720 (51,235)
Variable deferred annuity16,816 18,400 (1,584)46,673 50,511 (3,838)
Total premium and deposits274,958 221,433 53,525 688,114 1,426,913 (738,799)
Less: Policy deposits246,998 180,128 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 September 30, Nine months ended September 30, 
 20212020Change20212020Change
Fixed deferred annuity$241,621 $126,820 $114,801 $716,544 $318,629 $397,915 
Single premium immediate annuity20,721 36,217 (15,496)73,703 92,327 (18,624)
Equity-indexed deferred annuity195,088 95,105 99,983 627,085 230,485 396,600 
Variable deferred annuity16,906 16,816 90 46,740 46,673 67 
Total premium and deposits474,336 274,958 199,378 1,464,072 688,114 775,958 
Less: Policy deposits455,638 246,998 208,640 1,400,636 618,701 781,935 
Total earned premiums$18,698 $27,960 $(9,262)$63,436 $69,413 $(5,977)

Annuity premium and deposits decreasedincreased primarily for equity-indexed and fixed deferred products during the nine months ended September 30, 2020 compared to 2019. The low interest rate environment and choices we made on setting crediting rates, coupled with the economic impact attributable to COVID-19 and significant reduction 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, 2020.2021 compared to 2020 reflecting improved competitiveness of the product.

Change in Deferred Policy Acquisition Costs

The change in DAC represents acquisition costs capitalized less the amortization of existing DAC, which is calculated in proportion to expected gross profits. The following shows the components of the change in DAC (in thousands):
 Three months ended September 30, Nine months ended September 30, 
 20202019Change20202019Change
Acquisition cost capitalized$(14,899)$(13,611)$(1,288)$(37,217)$(61,779)$24,562 
Amortization of DAC23,454 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 $4.9 million decrease in DAC.
 Three months ended September 30, Nine months ended September 30, 
 20212020Change20212020Change
Acquisition cost capitalized$(24,864)$(14,899)$(9,965)$(78,775)$(37,217)$(41,558)
Amortization of DAC33,846 23,454 10,392 65,037 65,364 (327)
Change in DAC$8,982 $8,555 $427 $(13,738)$28,147 $(41,885)

The change in acquisition costs capitalized for the nine months ended September 30, 2020 strongly correlates with the2021 relates to increased commissions from sales. The change in commissions, which declined dueamortization of DAC for the three months ended September 30, 2021 was primarily related to lower salesan annual review and unlocking of assumptions. The change in amortization for the first halfnine months ended September 30, 2021 includes the unlocking effects largely offset by the effects of the year.


increases in interest rates.
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Shown below are the changes in account valuesreserve (in thousands):
 Nine months ended September 30,
 20202019
Fixed deferred annuity
Reserve, beginning of period$6,893,174 $6,773,603 
Premiums318,629 909,859 
Death and other benefits(162,750)(180,120)
Surrenders(417,390)(617,457)
Fees(754)(2,237)
Interest and mortality141,895 153,272 
Reserve, end of period6,772,804 7,036,920 
Equity-indexed annuity
Reserve, beginning of period3,985,166 3,668,645 
Premiums230,485 281,720 
Death and other benefits(35,891)(29,426)
Surrenders(258,140)(135,281)
Fees(2,443)(2,833)
Interest and mortality77,996 157,517 
Reserve, end of period3,997,173 3,940,342 
Single premium immediate annuity
Reserve, beginning of period1,874,942 1,826,137 
Premiums92,327 184,823 
Payments(162,248)(161,161)
Interest and mortality53,741 47,245 
Reserve, end of period1,858,762 1,897,044 
Variable deferred annuity
Account value, beginning of period385,736 332,898 
Premiums46,673 50,511 
Other flows637 152 
Surrenders(60,605)(61,314)
Fees(3,301)(3,562)
Change in market value and other21,154 48,607 
Reserve, end of period390,294 367,292 
Total reserve, end of period$13,019,033 $13,241,598 

 Nine months ended September 30,
 20212020
Fixed deferred annuity
Reserve, beginning of period$6,635,203 $6,893,174 
Premiums716,544 318,629 
Death and other benefits(181,806)(162,750)
Surrenders(360,943)(417,390)
Fees(1,265)(754)
Interest and mortality140,217 141,895 
Reserve, end of period6,947,950 6,772,804 
Equity-indexed annuity
Reserve, beginning of period4,097,013 3,985,166 
Premiums627,085 230,485 
Death and other benefits(42,260)(35,891)
Surrenders(222,928)(258,140)
Fees(2,390)(2,443)
Interest and mortality103,248 77,996 
Reserve, end of period4,559,768 3,997,173 
Single premium immediate annuity
Reserve, beginning of period1,851,955 1,874,942 
Premiums73,703 92,327 
Payments(149,091)(162,248)
Interest and mortality44,560 53,741 
Reserve, end of period1,821,127 1,858,762 
Variable deferred annuity
Reserve, beginning of period418,510 385,736 
Premiums46,740 46,673 
Other flows103 637 
Surrenders(60,965)(60,605)
Fees(3,870)(3,301)
Change in market value and other38,243 21,154 
Reserve, end of period438,761 390,294 
Total reserve, end of period$13,767,606 $13,019,033 


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


Interest and Mortality Margin

Margins were relatively flatincreased during the three months ended September 30, 2020 compared to 2019. Margins decreased during theand nine months ended September 30, 20202021 compared to 20192020 due to spread compression on fixed annuities and unfavorablefavorable changes in mark-to-market reserves for indexed annuities dueand a $13.8 million decrease in indexed annuity reserve related to mark-to-market adjustmentsmodeling refinements, including a related offsetting $12.4 million reduction in the first quarter this year.DAC. 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, 
 20202019Change20202019Change
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 margin27,383 28,168 (785)83,538 88,519 (4,981)
Equity-indexed annuity
Fixed investment income39,634 38,471 1,163 119,685 113,186 6,499 
Option return31,471 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 margin14,974 13,075 1,899 37,337 41,197 (3,860)
Variable annuity
Separate account management fees1,078 1,085 (7)3,021 3,101 (80)
Interest and mortality margin1,078 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)

 Three months ended September 30, Nine months ended September 30, 
 20212020Change20212020Change
Fixed annuity
Fixed investment income$87,310 $92,020 $(4,710)$263,653 $279,175 $(15,522)
Interest credited and mortality(65,984)(64,637)(1,347)(184,777)(195,637)10,860 
Interest and mortality margin21,326 27,383 (6,057)78,876 83,538 (4,662)
Equity-indexed annuity
Fixed investment income43,840 39,634 4,206 128,478 119,685 8,793 
Option return1,087 31,471 (30,384)57,325 (4,352)61,677 
Interest credited and mortality(12,486)(56,131)43,645 (103,248)(77,996)(25,252)
Interest and mortality margin32,441 14,974 17,467 82,555 37,337 45,218 
Variable annuity
Separate account management fees1,202 1,078 124 3,739 3,021 718 
Interest and mortality margin1,202 1,078 124 3,739 3,021 718 
Total interest and mortality margin$54,969 $43,435 $11,534 $165,170 $123,896 $41,274 

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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, 
 20202019Change20202019Change
PREMIUMS AND OTHER REVENUES
Premiums$40,934 $40,676 $258 $126,965 $121,581 $5,384 
Net investment income2,033 2,381 (348)6,480 7,177 (697)
Other income4,971 5,021 (50)15,001 15,940 (939)
Total premiums and other revenues47,938 48,078 (140)148,446 144,698 3,748 
BENEFITS, LOSSES AND EXPENSES
Claims incurred27,933 28,567 (634)89,544 81,042 8,502 
Commissions for acquiring and servicing policies7,608 7,405 203 22,792 22,975 (183)
Other operating expenses10,013 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 expenses45,012 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)

 Three months ended September 30, Nine months ended September 30, 
 20212020Change20212020Change
PREMIUMS AND OTHER REVENUES
Premiums$36,201 $40,934 $(4,733)$108,914 $126,965 $(18,051)
Net investment income1,941 2,033 (92)6,028 6,480 (452)
Other income6,045 4,971 1,074 16,032 15,001 1,031 
Total premiums and other revenues44,187 47,938 (3,751)130,974 148,446 (17,472)
BENEFITS, LOSSES AND EXPENSES
Claims incurred23,935 27,933 (3,998)74,376 89,544 (15,168)
Commissions for acquiring and servicing policies6,010 7,608 (1,598)18,561 22,792 (4,231)
Other operating expenses11,294 10,013 1,281 31,769 30,118 1,651 
Change in deferred policy acquisition costs (1)
311 (542)853 2,696 (582)3,278 
Total benefits, losses and expenses41,550 45,012 (3,462)127,402 141,872 (14,470)
Income before federal income taxes and other items$2,637 $2,926 $(289)$3,572 $6,574 $(3,002)
(1) A negativepositive amount of net change indicates moreless expense was deferred than amortized and represents a decreasean increase to expenses in the period indicated.

Comparison of the three months ended September 30, 20202021 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 plan2020

Comparison of the nine months ended September 30, 2020 to 2019
Earnings for our Health segment decreased primarily due to the following:
•Higher loss ratioPolicy lapses in our Supplemental insurance block, primarily driven by increased claim severity on the legacy master cancer planMedicare Supplement line of business, resulting in a reduction in premiums and an increase in deferred policy acquisition costs ("DAC") amortization
•AHigher loss ratio for Medical Expense, legacy long-term care and Credit disability products
The decrease in earnings was mostly offset due to the following:
•Increased fee income from various MGU earnings resulting from anprograms and a non-recurring 2020 increase in our allowance for uncollectible reinsurance receivables

Comparison of the nine months ended September 30, 2021 to 2020

Earnings for our Health segment decreased primarily due to the following:
•Additional expense related to policy processing revisions, as well as an increase in short-term disability claims in our Worksite line of business
•Policy lapses in our Medicare Supplement line of business, resulting in a reduction in premiums and an increase in DAC amortization
The decrease in earnings was partially offset by:by the following:
•Favorable reserve changes for legacy long-term care products due to anreleases, increased fee income from various MGU programs and a non-recurring 2020 increase in claim terminationsallowance for uncollectible reinsurance receivables

•

Improved claim experience in the Supplemental health line of business
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Health earned premiums for the periods indicated were as follows (in thousands):
 Three months ended September 30,Nine months ended September 30,
 20202019Change20202019Change
Medicare Supplement$21,137 $19,982 $1,155 $64,336 $57,211 $7,125 
MGU4,702 6,358 (1,656)16,306 21,344 (5,038)
Supplemental insurance4,417 5,344 (927)14,152 16,233 (2,081)
Credit Health3,460 4,492 (1,032)11,196 13,475 (2,279)
Medical expense2,075 2,374 (299)6,468 7,221 (753)
Worksite3,808 766 3,042 10,800 2,451 8,349 
Group health505 441 64 1,303 1,426 (123)
All other830 919 (89)2,404 2,220 184 
Total$40,934 $40,676 $258 $126,965 $121,581 $5,384 

Increased sales
 Three months ended September 30,Nine months ended September 30,
 20212020Change20212020Change
Medicare Supplement$17,310 $21,137 $(3,827)$54,567 $64,336 $(9,769)
MGU4,839 4,702 137 15,777 16,306 (529)
Supplemental insurance3,539 4,417 (878)10,684 14,152 (3,468)
Credit Health3,350 3,460 (110)9,893 11,196 (1,303)
Medical expense1,880 2,075 (195)5,687 6,468 (781)
Worksite4,056 3,808 248 8,681 10,800 (2,119)
Group health484 505 (21)1,343 1,303 40 
All other743 830 (87)2,282 2,404 (122)
Total$36,201 $40,934 $(4,733)$108,914 $126,965 $(18,051)

Policy lapses as a result of rate increases drove a decrease in late 2019 drove premium growth inpremiums for Medicare Supplement. Similarly, Worksite premium increasedSupplement during 2021. In addition, Supplemental insurance premiums decreased during the nine months ended September 30, 2021 due to a reduction in sales across all product lines, primarily in short-term medical. Worksite premiums decreased for the additionnine months ended September 30, 2021 as a result of a large group. The decline in MGU premium is driven by the completion of prior treaties for a large MGU program that is inactive for 2020.revisions to policy processing.

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

Three months ended September 30,Nine months ended September 30, Three months ended September 30,Nine months ended September 30,
20202019Change20202019Change 20212020Change20212020Change
Medicare SupplementMedicare Supplement$15,969 $16,096 $(127)$50,695 $46,514 $4,181 Medicare Supplement$13,188 $15,969 $(2,781)$42,288 $50,695 $(8,407)
MGUMGU5,947 6,029 (82)15,556 18,790 (3,234)MGU2,942 5,947 (3,005)12,149 15,556 (3,407)
Supplemental insuranceSupplemental insurance2,226 2,192 34 8,029 6,464 1,565 Supplemental insurance1,614 2,226 (612)4,838 8,029 (3,191)
Credit HealthCredit Health1,072 1,020 52 2,328 2,493 (165)Credit Health1,552 1,072 480 3,092 2,328 764 
Medical expenseMedical expense807 1,665 (858)5,918 3,950 1,968 Medical expense1,214 807 407 4,458 5,918 (1,460)
WorksiteWorksite2,144 261 1,883 4,898 1,186 3,712 Worksite2,818 2,144 674 6,550 4,898 1,652 
Group healthGroup health23 464 (441)898 394 504 Group health287 23 264 241 898 (657)
All otherAll other(255)840 (1,095)1,222 1,251 (29)All other320 (255)575 760 1,222 (462)
TotalTotal$27,933 $28,567 $(634)$89,544 $81,042 $8,502 Total$23,935 $27,933 $(3,998)$74,376 $89,544 $(15,168)
Favorable claim experience
Medicare Supplement claims decreased for the three and nine months ended September 30, 2020 is2021 driven by policy lapses. In addition, claim experience for our Medical Expense and Supplemental health lines of business improved during the aforementionednine months ended September 30, 2021 and was partially offset by an increase in claim terminations and resulting claim reserve releases inshort-term disability claims from our legacy long-term care products.Worksite line of business.

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,  Three months ended September 30, Nine months ended September 30, 
20202019Change20202019Change 20212020Change20212020Change
Acquisition cost capitalizedAcquisition cost capitalized$(4,534)$(1,085)$(3,449)$(12,117)$(7,629)$(4,488)Acquisition cost capitalized$(3,327)$(4,534)$1,207 $(9,211)$(12,117)$2,906 
Amortization of DACAmortization of DAC3,992 1,343 2,649 11,535 8,548 2,987 Amortization of DAC3,638 3,992 (354)11,907 11,535 372 
Change in DACChange in DAC$(542)$258 $(800)$(582)$919 $(1,501)Change in DAC$311 $(542)$853 $2,696 $(582)$3,278 

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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 September 30, Nine months ended September 30, 
 20202019Change20202019Change
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 income16,049 16,357 (308)48,171 48,085 86 
Other income3,079 3,137 (58)9,656 8,689 967 
Total premiums and other revenues410,516 402,278 8,238 1,210,576 1,182,478 28,098 
BENEFITS, LOSSES AND EXPENSES
Claims incurred258,412 280,695 (22,283)768,682 790,447 (21,765)
Commissions for acquiring and servicing policies72,664 65,893 6,771 225,746 201,635 24,111 
Other operating expenses48,576 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 expenses378,751 396,063 (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 ratio66.0 %73.3 %(7.3)%66.7 %70.2 %(3.5)%
Underwriting expense ratio30.7 30.1 0.6 32.1 31.0 1.1 
Combined ratio96.7 %103.4 %(6.7)%98.8 %101.2 %(2.4)%
Impact of catastrophe events on combined ratio8.1 9.6 (1.5)11.5 7.2 4.3 
Combined ratio without impact of catastrophe events88.6 %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 September 30, Nine months ended September 30, 
 20212020Change20212020Change
PREMIUMS AND OTHER REVENUES
Net premiums written$442,061 $397,780 $44,281 $1,313,885 $1,211,444 $102,441 
Net premiums earned$426,887 $391,388 $35,499 $1,235,778 $1,152,749 $83,029 
Net investment income15,929 16,049 (120)47,167 48,171 (1,004)
Other income3,863 3,079 784 10,138 9,656 482 
Total premiums and other revenues446,679 410,516 36,163 1,293,083 1,210,576 82,507 
BENEFITS, LOSSES AND EXPENSES
Claims incurred299,956 258,412 41,544 824,697 768,682 56,015 
Commissions for acquiring and servicing policies89,883 72,664 17,219 250,145 225,746 24,399 
Other operating expenses53,364 48,576 4,788 157,926 151,660 6,266 
Change in deferred policy acquisition costs (1)
(3,070)(901)(2,169)(11,768)(7,455)(4,313)
Total benefits, losses and expenses440,133 378,751 61,382 1,221,000 1,138,633 82,367 
Income before federal income taxes and other items$6,546 $31,765 $(25,219)$72,083 $71,943 $140 
Loss and loss adjustment expense ratio70.3 %66.0 %4.3 %66.7 %66.7 %— %
Underwriting expense ratio32.8 30.7 2.1 32.1 32.1 — 
Combined ratio103.1 %96.7 %6.4 %98.8 %98.8 %— %
Less: Impact of catastrophe events on combined ratio15.6 10.2 5.4 11.7 13.5 (1.8)
Combined ratio without impact of catastrophe events87.5 %86.5 %1.0 %87.1 %85.3 %1.8 %
Gross catastrophe losses$83,479 $80,054 $3,425 $150,479 $180,410 $(29,931)
Net catastrophe losses$57,139 $27,141 $29,998 $120,664 $127,179 $(6,515)
(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, 20202021 to 20192020
Earnings for our Property and Casualty segment increaseddecreased primarily due to the following:
•An improvementPrimarily as a result of losses from Hurricane Ida and an increase in the combinedloss and loss adjustment expense ratio fordue to an increase in claim frequency in our personal autoautomobile products attributable to fewerprimarily as miles driven by policyholders and favorable claim development
•Although gross catastrophe losseshave increased those losses were partially mitigated through reinsurance coverages which resulted in a decrease in net catastrophe losses

Comparison of the nine months ended September 30, 20202021 to 20192020
Earnings for our Property and Casualty segment increasedwas in line with the prior year primarily due to the following:
•An improvementImprovement in the combined ratio for oureach product line except for personal auto products attributable to fewer miles driven by policyholdersautomobile and favorable claim developmentworkers compensation
The increase in earnings was partially offset primarily by the following:
•Significantly higher catastrophe losses, havingAn increase in the greatestloss and loss adjustment expense ratio for our personal automobile products primarily due to an increase in claim frequency compared to the prior year due to the lessening impact on our homeowners loss ratioof COVID-19

Additional information:Information
•Net premiums written and earned for the first nine months were reduced by COVID-19 relief policy credits as follows:
◦$0.5 million for auto policyholders totaling $17.7 million;personal automobile policies in the third quarter of 2021 compared to $0.7 million for personal automobile policies in 2020
◦$1.9 million for personal automobile policies for the first nine months of 2021 compared to $16.8 million for personal autoautomobile policies and $0.9 million for commercial auto policies. The policy credits were based on 10%-15% of monthly premiumsautomobile policies in 2020
•The increase in commissions expense for the third quarter and first nine months was primarily dueattributable to thean increase in premiums written and an increase in contingent commissions due to the improvement in the loss ratios for theour Specialty Markets Group products
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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%52% of net premiums written; (ii) Commercial products, focused primarily on agricultural and other business related markets, representing 31% of net premiums written; and (iii) Specialty Markets Group products, marketed through independent managing general agents and managing general underwriters, representing 14%17% 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, 
 20202019Change20202019Change
Net premiums written
Automobile$142,702 $145,574 $(2,872)$408,509 $432,796 $(24,287)
Homeowner77,267 71,718 5,549 215,854 197,055 18,799 
Other Personal13,668 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)
Homeowner66,472 63,508 2,964 200,354 185,177 15,177 
Other Personal13,142 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
Automobile57.9 %72.7 %(14.8)%58.6 %71.9 %(13.3)%
Homeowner101.3 %110.0 %(8.7)%102.0 %89.0 %13.0 %
Other Personal51.6 %59.1 %(7.5)%63.0 %59.6 %3.4 %
Personal line loss and loss adjustment expense ratio70.7 %82.8 %(12.1)%72.6 %76.2 %(3.6)%
Combined Ratio
Automobile79.1 %95.3 %(16.2)%82.9 %95.0 %(12.1)%
Homeowner132.4 %139.7 %(7.3)%133.3 %120.4 %12.9 %
Other Personal79.2 %103.2 %(24.0)%95.1 %104.2 %(9.1)%
Personal line combined ratio95.3 %108.6 %(13.3)%99.5 %102.9 %(3.4)%

 Three months ended September 30, Nine months ended September 30, 
 20212020Change20212020Change
Net premiums written
Automobile$135,703 $142,702 $(6,999)$408,366 $408,509 $(143)
Homeowner83,636 77,267 6,369 230,817 215,854 14,963 
Other Personal13,678 13,668 10 41,341 40,032 1,309 
Total net premiums written$233,017 $233,637 $(620)$680,524 $664,395 $16,129 
Net premiums earned
Automobile$134,786 $139,155 $(4,369)$403,217 $397,088 $6,129 
Homeowner73,270 66,472 6,798 215,786 200,354 15,432 
Other Personal13,323 13,142 181 39,148 37,922 1,226 
Total net premiums earned$221,379 $218,769 $2,610 $658,151 $635,364 $22,787 
Loss and loss adjustment expense ratio
Automobile72.0 %57.9 %14.1 %68.8 %58.6 %10.2 %
Homeowner111.3 %101.3 %10.0 %94.8 %102.0 %(7.2)%
Other Personal51.6 %51.6 %— %55.9 %63.0 %(7.1)%
Personal lines loss and loss adjustment expense ratio83.7 %70.7 %13.0 %76.7 %72.6 %4.1 %
Combined Ratio
Automobile96.4 %79.1 %17.3 %93.1 %82.9 %10.2 %
Homeowner142.0 %132.4 %9.6 %124.8 %133.3 %(8.5)%
Other Personal81.8 %79.2 %2.6 %86.0 %95.1 %(9.1)%
Personal lines combined ratio110.6 %95.3 %15.3 %103.1 %99.5 %3.6 %

Comparison of 20202021 to 20192020

Automobile: COVID-19 relief policy credits decreased netNet premiums written and earned for the third quarter by $0.7 million and net premiums written for the first nine months bydecreased primarily due to fewer policies in-force. Net premiums earned for the first nine months increased primarily due to COVID-19 relief policy credits of $1.9 million in 2021 compared to $16.8 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 improvedincreased for the third quarter and first nine months primarily due to a decreasean increase in loss and loss adjustment expenses incurred, largely attributableclaim frequency compared to fewer miles driven by policyholdersthe prior year due to shelter-in-place orders and favorable claim development.the lessening impact of COVID-19.

HomeownersHomeowner: Net premiums written and earned increased for the third quarter and first nine months primarily due to rate increases. The loss and loss adjustment expense and combined ratios improvedincreased for the third quarter due to decreasedan increase in catastrophe losses and increaseddecreased for the first nine months due to increasedrate increases and decreases in catastrophe losses due to multiple wind and hail storms.non-catastrophe losses. Catastrophe losses, decreasednet of reinsurance, increased by $10.7$20.0 million, to $18.6 million from $29.1$38.6 million in the third quarter compared to $18.6 million in 2020, and increaseddecreased by $27.7$3.1 million, to $83.3$80.2 million from $55.6 million infor the first nine months in 2020 compared to 2019.$83.3 million in 2020.

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



losses.
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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, 
 20202019Change20202019Change
Net premiums written
Agricultural Business$40,201 $38,783 $1,418 $127,679 $120,080 $7,599 
Automobile27,700 27,925 (225)102,078 97,059 5,019 
Business Owner17,893 16,685 1,208 62,674 56,295 6,379 
Workers Compensation12,935 14,414 (1,479)56,202 60,000 (3,798)
Other Commercial7,920 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 
Automobile32,492 29,495 2,997 93,790 85,510 8,280 
Business Owner19,498 17,918 1,580 56,935 51,110 5,825 
Workers Compensation17,634 19,137 (1,503)52,709 56,542 (3,833)
Other Commercial8,310 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 Business47.8 %64.7 %(16.9)%56.3 %72.5 %(16.2)%
Automobile84.9 %82.9 %2.0 %73.1 %79.7 %(6.6)%
Business Owner81.5 %50.1 %31.4 %85.9 %55.7 %30.2 %
Workers Compensation63.5 %57.7 %5.8 %60.5 %48.3 %12.2 %
Other Commercial67.8 %34.8 %33.0 %62.9 %43.4 %19.5 %
Commercial line loss and loss adjustment expense ratio67.3 %63.6 %3.7 %66.8 %65.4 %1.4 %
Combined ratio
Agricultural Business85.6 %100.6 %(15.0)%93.8 %109.3 %(15.5)%
Automobile105.7 %107.8 %(2.1)%95.7 %104.6 %(8.9)%
Business Owner115.9 %88.6 %27.3 %120.8 %94.8 %26.0 %
Workers Compensation79.6 %74.3 %5.3 %77.7 %66.2 %11.5 %
Other Commercial106.9 %76.9 %30.0 %102.8 %85.9 %16.9 %
Commercial line combined ratio96.7 %94.3 %2.4 %96.9 %96.6 %0.3 %

 Three months ended September 30, Nine months ended September 30, 
 20212020Change20212020Change
Net premiums written
Agricultural Business$45,364 $40,201 $5,163 $140,111 $127,679 $12,432 
Automobile31,144 27,700 3,444 111,607 102,078 9,529 
Business Owner19,689 17,893 1,796 67,931 62,674 5,257 
Workers Compensation13,909 12,935 974 56,948 56,202 746 
Other Commercial8,636 7,920 716 29,174 26,664 2,510 
Total net premiums written$118,742 $106,649 $12,093 $405,771 $375,297 $30,474 
Net premiums earned
Agricultural Business$44,387 $40,145 $4,242 $128,886 $119,605 $9,281 
Automobile34,474 32,492 1,982 100,112 93,790 6,322 
Business Owner21,331 19,498 1,833 61,705 56,935 4,770 
Workers Compensation18,049 17,634 415 52,394 52,709 (315)
Other Commercial9,102 8,310 792 27,010 24,704 2,306 
Total net premiums earned$127,343 $118,079 $9,264 $370,107 $347,743 $22,364 
Loss and loss adjustment expense ratio
Agricultural Business54.2 %47.8 %6.4 %53.2 %56.3 %(3.1)%
Automobile70.2 %84.9 %(14.7)%66.1 %73.1 %(7.0)%
Business Owner76.8 %81.5 %(4.7)%77.5 %85.9 %(8.4)%
Workers Compensation78.1 %63.5 %14.6 %66.9 %60.5 %6.4 %
Other Commercial71.1 %67.8 %3.3 %53.3 %62.9 %(9.6)%
Commercial lines loss and loss adjustment expense ratio66.9 %67.3 %(0.4)%62.7 %66.8 %(4.1)%
Combined ratio
Agricultural Business90.8 %85.6 %5.2 %89.1 %93.8 %(4.7)%
Automobile93.3 %105.7 %(12.4)%88.3 %95.7 %(7.4)%
Business Owner111.2 %115.9 %(4.7)%111.2 %120.8 %(9.6)%
Workers Compensation93.7 %79.6 %14.1 %82.4 %77.7 %4.7 %
Other Commercial111.7 %106.9 %4.8 %93.9 %102.8 %(8.9)%
Commercial lines combined ratio96.8 %96.7 %0.1 %92.0 %96.9 %(4.9)%

Comparison of 20202021 to 20192020

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 quarter and first nine months primarily due to rate increases and an increase in policies in-force. The lossin-force and loss adjustment expense and combined ratios improved for the third quarter and first nine months primarily due to fewer claims as well as favorable prior year severity development.
Commercial Automobile: Net premiums written and earned increased for the third quarter and first nine months and net premiums written increased for the first nine months primarily due to rate increases and an increase in policies in-force. The loss and loss adjustment expense ratio increased for the third quarter primarily due to an increase in allocated loss adjustment expense reserves. The combined ratio improved for the third quarter primarily due to improvement in the expense ratio. The loss and loss adjustment expense and combined ratios improved for the first nine months primarily due to a decrease in claim frequency as policyholders drove fewer miles due to shelter-in-place orders.
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 quarter and first nine months primarily due to rate increases and an increase in policies in-force.increases. The loss and loss adjustment expense and combined ratios increased for the third quarter primarily due to a increase in catastrophe losses and improved the first nine months primarily due to a decrease in catastrophe losses. Catastrophe losses, net of reinsurance, increased by $4.0 million, to $6.3 million in the third quarter compared to $2.3 million in 2020, and decreased by $3.6 million, to $14.5 million for the first nine months compared to $18.1 million in 2020.

Commercial Automobile: Net premiums written and earned increased for the third quarter and first nine months primarily due to unfavorablerate increases. The loss and loss adjustment expense ratio and combined ratio improved for the third quarter and first nine months primarily due to favorable prior year claim development.development and rate increases.
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Workers Compensation
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 decreased increased for the third quarter and first nine months primarily due to increases in policies in-force and rate decreases.increases. The loss and loss adjustment expense and combined ratios improved for the third quarter and first nine months primarily due to a decrease in allocated loss adjustment expense reserves.

Workers Compensation: Net premiums written increased for the third quarter primarily due to the severity of claimsa decrease in ceded premiums for reinsurance coverage. The loss and loss adjustment expense and combined ratio increased for the third quarter and first nine months primarily due to an increase in the severity of claims and an increase in allocated loss adjustment expense reserves.claim severity.

Other Commercial: Other commercial products primarily provide umbrella and other liability coverages. Net premiums written and earned decreasedincreased for the third quarter and first nine months primarily due to an increase in ceded premiumspremium for reinsurance coverage.umbrella products. The loss and loss adjustment expense and combined ratios increased for the third quarter primarily due to an increase in allocated loss adjustment expense reserves and improved for the first nine months primarily due to an increase infavorable 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, 
 20202019Change20202019Change
Net premiums written$57,494 $53,505 $3,989 $171,752 $149,245 $22,507 
Net premiums earned54,539 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 September 30, Nine months ended September 30, 
 20212020Change20212020Change
Net premiums written$90,301 $57,494 $32,807 $227,589 $171,752 $55,837 
Net premiums earned78,165 54,539 23,626 207,519 169,641 37,878 
Loss and loss adjustment expense ratio37.4 %44.5 %(7.1)%42.6 %44.5 %(1.9)%
Combined ratio92.1 %102.6 %(10.5)%97.3 %99.8 %(2.5)%

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 quarter and first nine 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 products. The loss and loss adjustment expense and combined ratios decreasedimproved for the third quarter and first nine months primarily due to the improvement of loss ratios on Guaranteed Asset Protection (“GAP”) products and IPP.lower losses for Credit GAP products.
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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, 
 20202019Change20202019Change
OTHER REVENUES
Net investment income$3,814 $24,237 $(20,423)$19,274 $59,051 $(39,777)
Realized investment gains17,387 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 securities152,147 8,589 143,558 118,397 282,026 (163,629)
Other income542 1,478 (936)2,795 4,511 (1,716)
Total other revenues169,715 66,237 103,478 64,777 370,563 (305,786)
BENEFITS, LOSSES AND EXPENSES
Other operating expenses10,629 9,750 879 30,936 28,158 2,778 
Total benefits, losses and expenses10,629 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 September 30, Nine months ended September 30, 
 20212020Change20212020Change
OTHER REVENUES
Net investment income$47,655 $20,843 $26,812 $122,468 $38,388 $84,080 
Realized investment gains20,138 17,387 2,751 49,979 25,474 24,505 
(Increase) decrease in investment credit loss5,969 (4,175)10,144 25,562 (101,163)126,725 
Net gains on equity securities681 152,147 (151,466)267,425 118,397 149,028 
Other income715 542 173 2,572 2,795 (223)
Total other revenues75,158 186,744 (111,586)468,006 83,891 384,115 
BENEFITS, LOSSES AND EXPENSES
Other operating expenses21,546 10,629 10,917 58,586 30,936 27,650 
Total benefits, losses and expenses21,546 10,629 10,917 58,586 30,936 27,650 
Income before federal income taxes and other items$53,612 $176,115 $(122,503)$409,420 $52,955 $356,465 

Comparison of the three months ended September 30, 20202021 to 20192020

Earnings for our Corporate and Other segment decreased primarily due to the following:
•A decrease in net gains on equity securities as a result of less favorable market conditions for equity securities
•An increase in operating expenses due to Merger-related expenses

Comparison of the nine months ended September 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 due to more favorable market conditions in 2021 compared to the negative impact on the fair values of equity securities from the pandemic in 2020
•Favorable change in investment credit loss due to improvement in our commercial mortgage loans driven by GDP growth and positive economic outlook
•An increase in net investment income driven by increases in investment income from mortgage loan profit participation and prepayment income and investment funds
The increase in earnings was partially offset by the following:
•A decrease in net investment income driven by bonds, mortgage loans and real estate
•A decrease 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 toby 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 investment credit lossoperating expenses due to economic disruptions caused by COVID-19
•A decrease in net investment income driven by bonds, mortgage loansretirement benefit and real estate


Merger-related expenses
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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, 2020December 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 value7,236,188 30.5 6,725,085 28.5 
Equity securities, at fair value1,840,855 7.8 1,700,960 7.2 
Mortgage loans on real estate, net of allowance5,176,474 21.8 5,097,017 21.6 
Policy loans374,387 1.6 379,657 1.6 
Investment real estate, net of accumulated depreciation514,076 2.2 551,219 2.3 
Short-term investments800,793 3.4 425,321 1.8 
Other invested assets103,030 0.3 76,569 0.4 
Total investments$23,748,150 100.0 %$23,587,089 100.0 %

 September 30, 2021December 31, 2020
Fixed maturity, bond held-to-maturity, at amortized cost$7,277,801 28.0 %$7,354,970 29.2 %
Fixed maturity, bond available-for-sale, at fair value8,573,081 32.9 7,597,180 30.1 
Equity securities, at fair value2,383,478 9.2 2,070,766 8.2 
Mortgage loans on real estate, net of allowance5,002,978 19.2 5,242,531 20.8 
Policy loans364,960 1.4 373,014 1.5 
Real estate and real estate partnerships, net of accumulated depreciation926,154 3.6 960,572 3.8 
Investment funds814,527 3.1 477,135 1.9 
Short-term investments536,621 2.1 1,028,379 4.1 
Other invested assets123,337 0.5 94,415 0.4 
Total investments$26,002,937 100.0 %$25,198,962 100.0 %

The increase in our total investments at September 30, 20202021 compared to year-end 20192020 was primarily the result of increasesan 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 30, 2021, our fixed maturity securities had an estimated fair value of $16.3 billion, which was $0.8 billion, or 5.4%, above amortized cost. At December 31, 2020, our fixed maturity securities had an estimated fair value of $15.5$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 billion and $1.1 billion as of September 30, 20202021 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 investhave invested 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. However, we intend to sell nearly all of our equity securities portfolio prior to the end of 2021. For additional information please see the Anticipated Sale of Equity Securities Portfolio discussion in the General Trends section above.

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 30, 20202021 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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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 30, 2020,2021, we had $374.4$365.0 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 toover 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 optionspooled 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 collateralizednet of collateral provided by counterparties; such collateral is restricted to the Company’s use. OtherAdditionally, 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 $139.8increased $152.5 million during the nine months ended September 30, 20202021 compared to 20192020 primarily due to losseshigher gains on options from a declinean improvement in the S&P 500 Index.Index, and an increase in income from mortgage loan profit participation and prepayment income, real estate partnerships 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 nonaccrualnon-accrual status. Interest received on nonaccrualnon-accrual status mortgage loans is included in net investment income in the period received.

Net realized investment gains decreased $6.5increased $24.5 million during the nine months ended September 30, 20202021 compared to 20192020 primarily attributable to decreased sales of real estate.bond call activity. Net realized investment gains (losses) are shown below (in thousands):
 Three months ended September 30,Nine months ended September 30,
 2020201920202019
Bonds$6,117 $6,075 $15,547 $11,288 
Mortgage loans0 (2,097)0 (2,186)
Real estate11,265 27,388 9,951 24,502 
Other invested assets5 567 (24)(1,661)
Total$17,387 $31,933 $25,474 $31,943 

 Three months ended September 30,Nine months ended September 30,
 2021202020212020
Bonds$22,939 $6,117 $42,106 $15,547 
Mortgage loans— — (768)— 
Real estate and real estate partnerships(1,705)11,265 9,387 9,951 
Other invested assets(1,096)5 (746)(24)
Total$20,138 $17,387 $49,979 $25,474 


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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, 2020December 31, 2019Change
Held-to-Maturity
Gains$582,282 $345,463 $236,819 
Losses(36,018)(8,034)(27,984)
Net gains546,264 337,429 208,835 
Available-for-Sale
Gains484,782 302,426 182,356 
Losses(35,322)(13,011)(22,311)
Net gains449,460 289,415 160,045 
Total$995,724 $626,844 $368,880 

September 30, 2021December 31, 2020Change
Held-to-maturity
Gains$486,773 $639,648 $(152,875)
Losses(17,543)(11,437)(6,106)
Net gains469,230 628,211 (158,981)
Available-for-sale
Gains397,993 548,996 (151,003)
Losses(28,070)(17,476)(10,594)
Net gains369,923 531,520 (161,597)
Total$839,153 $1,159,731 $(320,578)

The net change in the unrealized gains on fixed maturity securities between September 30, 20202021 and December 31, 20192020 is primarily attributable to the decreaseincrease in benchmark ten-year interest rates, which were 0.7%1.5% 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.

The primary use of cash has been and is expected to continue to be the payment of policyholder benefits and claims incurred. Current and expected patterns of claim frequency and severity may change from period to period but continue to be within historical norms. Management considers our current liquidity position to be sufficient to meet anticipated demands over the next twelve months.

Our contractual obligations are not expected to have a significant negative impact to cash flows from operations. American National has agreed to pay our financial advisor in connection with the Merger, Citigroup Global Markets Inc. ("Citi"), for its Merger-related services an aggregate fee of $40.0 million, of which $3.0 million was paid upon delivery of Citi’s opinion related to the Merger on August 6, 2021 and the remaining $37.0 million is payable contingent upon consummation of the Merger, which has not been reflected in the condensed consolidated statement of operations. In addition, the Company agreed to reimburse Citi for expenses, including fees and expenses of counsel, and to indemnify Citi and related parties against certain liabilities, including liabilities under federal securities laws, arising from Citi’s engagement.

In April 2020, the Company borrowed $500$500.0 million from the Federal Home Loan Bank of Dallas' COVID-19 Relief Advance Program. OneAs of September 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 fullrepaid on its maturity date of October 13, 2020.
We are monitoring ourApril 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 withthrough the FHLB provideat September 30, 2021 was approximately $816 million of additional available credit to us as of October 28, 2020.$990.6 million.

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 mostall 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 disruption2022; however, current uncertainties relating to the COVID-19 pandemic has nothave caused the Companyus 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.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)


We have consistently paid dividends to our stockholders for over 110 consecutive years and expect to continue this trend.tradition prior to the completion of the Merger. 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 disruptionsuncertainties 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 investment portfolio has been significantly impacted by volatility associated with COVID-19, and likely will continue to be, at this time, weWe believe our portfolio of highly liquid bonds, available-for-sale includinginvestment 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 byimpact 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 termswere 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 ofprovisions 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 33 of these loans with a total balance of $739.7 million were made during 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 $8.0 million as of September 30, 2021. As of September 30, 2021, a total of 74 loans with a recorded investment of $1.4 billion were designated a troubled debt restructure. There are no commitments to lend additional funds to debtors whose loans have been modified in a troubled debt restructuring during the periods presented. The decrease in loans determined to be a troubled debt restructuring in the nine months ended September 30, 2021 is primarily attributable to improved economic conditions after lifting of COVID-19 related restrictions.

The Company holds collateral of $210.6$234.8 million at September 30, 20202021 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 increaseddecreased from $877.3 million$1.4 billion at December 31, 20192020 to $1.7$1.0 billion at September 30, 2020.2021. The increase in liquiditydecrease primarily relates to an increasea 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. A.M. Best has placed American National’s issuer credit and financial strength ratings under review with developing implications and S&P Global Ratings has placed the ratings on CreditWatch with negative implications due to the pending Merger with Brookfield Reinsurance.

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, 2020December 31, 2019
American National stockholders’ equity, excluding accumulated other comprehensive income (“AOCI”), net of tax$5,951,801 $5,890,231 
Accumulated other comprehensive income194,706 99,518 
Total American National stockholders’ equity$6,146,507 $5,989,749 

September 30, 2021December 31, 2020
American National stockholders’ equity, excluding accumulated other comprehensive income (“AOCI”), net of tax$6,619,213 $6,236,100 
Accumulated other comprehensive income127,159 222,170 
Total American National stockholders’ equity$6,746,372 $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 theseof American National relating to notes payable of the consolidated VIEs is limited to ourthe amount of its direct or indirect investment in the respective ventures, which totaled $3.1 million and $4.3$3.0 million at September 30, 20202021 and December 31, 2019, respectively.
The changes in our capital resources are summarized below (in thousands):
 September 30, 2020December 31, 2019
Capital and
Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		TotalCapital 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)— 
Other60 — 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):

 September 30, 2021December 31, 2020
Capital and Retained EarningsAccumulated Other Comprehensive Income (Loss)TotalCapital and Retained EarningsAccumulated Other Comprehensive Income (Loss)Total
Net income attributable to American National$449,197 $— $449,197 $467,505 $— $467,505 
Dividends to shareholders(66,143)— (66,143)(88,190)— (88,190)
Change in net unrealized gains (losses) on debt securities— (103,585)(103,585)— 134,315 134,315 
Foreign currency transaction and translation adjustment— 122 122 — 235 235 
Defined benefit pension plan adjustment— 8,452 8,452 — (11,898)(11,898)
Cumulative effect of accounting change (1)
— — — (33,500)— (33,500)
Other59 — 59 54 — 54 
Total$383,113 $(95,011)$288,102 $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%100% of the authorized controlcompany action level RBC are required to take certain actions. At September 30, 20202021 and December 31, 2019, American National Insurance Company’s2020, ANICO’s statutory capital and surplus was $3,488,293,000$3.7 billion and $3,477,727,000,$3.6 billion, respectively. American National Insurance CompanyANICO and each of itsour other insurance subsidiaries had statutory capital and surplus at September 30, 20202021 and December 31, 20192020 above 200% of the authorized controlcompany action level, except for ANPAC Louisiana Insurance Company ("ANPLA").

At September 30, 2021 and December 31, 2020, ANPLA's statutory capital and surplus was $42.1 million and $68.5 million respectively, which resulted in an RBC level of 119% 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 in ANPLA 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, the Company had $500 million in 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 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 disclosedthe description in our 20192020 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.

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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 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 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 30, 20202021 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, Financial Statements, 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

Please see the "Factors Relating to the Proposed Transaction with Brookfield Reinsurance" in the "Introductory Note Regarding Pending Merger" at the beginning of Item 2 above. There have been no other material changes to the "Risk Factors"Risk Factors discussion in Item 1A of our 20192020 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 NumberDescription
2.1
2.2
3.1
3.2
3.3
3.4
10.1110.1*
31.1
31.2
32.1
101.INSXBRL 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.SCHXBRL Taxonomy Extension Schema Document.
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.
101.LABXBRL Taxonomy Extension Label Linkbase Document.
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.
104Cover 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. WalshBrody J. Merrill
Name: Timothy A.WalshBrody J. Merrill
Title: ExecutiveSenior Vice President, CFO,Chief Financial Officer and Treasurer and ML and P&C Operations

Date: November 4, 20202021

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