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American National Insurance Co – ‘10-Q’ for 6/30/19

On:  Tuesday, 8/6/19, at 2:26pm ET   ·   For:  6/30/19   ·   Accession #:  904163-19-10   ·   File #:  1-34280

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  As Of               Filer                 Filing    For·On·As Docs:Size

 8/06/19  American National Insurance Co    10-Q        6/30/19  103:19M

Quarterly Report   —   Form 10-Q   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                    HTML   2.67M 
 2: EX-10.10    Material Contract                                   HTML     39K 
 3: EX-31.1     Certification -- §302 - SOA'02                      HTML     36K 
 4: EX-31.2     Certification -- §302 - SOA'02                      HTML     36K 
 5: EX-32.1     Certification -- §906 - SOA'02                      HTML     34K 
12: R1          Document and Entity Information                     HTML     84K 
13: R2          Consolidated Statements of Financial Position       HTML    170K 
14: R3          Consolidated Statements of Financial Position       HTML     53K 
                (Parenthetical)                                                  
15: R4          Consolidated Statements of Operations               HTML    151K 
16: R5          Consolidated Statements of Comprehensive Income     HTML     63K 
                (Loss)                                                           
17: R6          Consolidated Statements of Changes in Equity        HTML     90K 
18: R7          Consolidated Statements of Cash Flows               HTML    181K 
19: R8          Nature of Operations                                HTML     34K 
20: R9          Summary of Significant Accounting Policies and      HTML     35K 
                Practices                                                        
21: R10         Recently Issued Accounting Pronouncements           HTML     50K 
22: R11         Investment in Securities                            HTML    351K 
23: R12         Mortgage Loans                                      HTML    187K 
24: R13         Real Estate and Other Investments                   HTML     98K 
25: R14         Derivative Instruments                              HTML    171K 
26: R15         Net Investment Income and Realized Investment       HTML     82K 
                Gains (Losses)                                                   
27: R16         Fair Value of Financial Instruments                 HTML    382K 
28: R17         Deferred Policy Acquisition Costs                   HTML     59K 
29: R18         Liability for Unpaid Claims and Claim Adjustment    HTML     57K 
                Expenses                                                         
30: R19         Federal Income Taxes                                HTML    103K 
31: R20         Accumulated Other Comprehensive Income (Loss)       HTML     84K 
32: R21         Stockholders' Equity and Noncontrolling Interests   HTML    153K 
33: R22         Segment Information                                 HTML    330K 
34: R23         Commitments and Contingencies                       HTML     44K 
35: R24         Related Party Transactions                          HTML     53K 
36: R25         Subsequent Events                                   HTML     34K 
37: R26         Summary of Significant Accounting Policies and      HTML     44K 
                Practices (Policies)                                             
38: R27         Investment in Securities (Tables)                   HTML    358K 
39: R28         Mortgage Loans (Tables)                             HTML    188K 
40: R29         Real Estate and Other Investments (Tables)          HTML    102K 
41: R30         Derivative Instruments (Tables)                     HTML    177K 
42: R31         Net Investment Income and Realized Investment       HTML     86K 
                Gains (Losses) (Tables)                                          
43: R32         Fair Value of Financial Instruments (Tables)        HTML    368K 
44: R33         Deferred Policy Acquisition Costs (Tables)          HTML     60K 
45: R34         Liability for Unpaid Claims and Claim Adjustment    HTML     54K 
                Expenses (Tables)                                                
46: R35         Federal Income Taxes (Tables)                       HTML    100K 
47: R36         Accumulated Other Comprehensive Income (Loss)       HTML     84K 
                (Tables)                                                         
48: R37         Stockholders' Equity and Noncontrolling Interests   HTML    156K 
                (Tables)                                                         
49: R38         Segment Information (Tables)                        HTML    326K 
50: R39         Related Party Transactions (Tables)                 HTML     50K 
51: R40         Nature of Operations - Additional Information       HTML     32K 
                (Detail)                                                         
52: R41         Summary of Significant Accounting Policies and      HTML     33K 
                Practices - Additional Information (Detail)                      
53: R42         Recently Issued Accounting Pronouncements -         HTML     68K 
                Additional Information (Detail)                                  
54: R43         Investment in Securities - Investments in           HTML     90K 
                Securities (Detail)                                              
55: R44         Investment in Securities - Maturities of            HTML     93K 
                Investments (Detail)                                             
56: R45         Investment in Securities - Proceeds from Available  HTML     38K 
                for Sale Securities and Realized Gain Loss                       
                (Detail)                                                         
57: R46         Investment in Securities - Additional Information   HTML     35K 
                (Detail)                                                         
58: R47         Investment in Securities - Change in Net            HTML     61K 
                Unrealized Gains (Losses) on Securities (Detail)                 
59: R48         Investment in Securities - Gross Unrealized Losses  HTML    105K 
                and Fair Value of Investment Securities (Detail)                 
60: R49         Investment in Securities - Bond by Credit Quality   HTML     55K 
                Rating Distribution (Detail)                                     
61: R50         Investment in Securities - Equity Securities by     HTML     51K 
                Market Sector Distribution (Detail)                              
62: R51         Mortgage Loans - Distribution Based on Carrying     HTML     52K 
                Amount of Mortgage Loans by Location (Detail)                    
63: R52         Mortgage Loans - Additional Information (Detail)    HTML     51K 
64: R53         Mortgage Loans - Age Analysis of Past Due Loans     HTML     80K 
                (Detail)                                                         
65: R54         Mortgage Loans - Change in Allowance for Credit     HTML     75K 
                Losses in Mortgage Loans (Detail)                                
66: R55         Mortgage Loans Mortgage Loans - Schedule of         HTML     47K 
                Troubled Debt Restructuring Mortgage Loan                        
                Information (Details)                                            
67: R56         Real Estate and Other Investments - Investment      HTML     63K 
                Real Estate by Property-Type and Geographic                      
                Distribution (Detail)                                            
68: R57         Real Estate and Other Investments - Assets and      HTML     61K 
                Liabilities Related to VIEs (Detail)                             
69: R58         Real Estate and Other Investments - Additional      HTML     36K 
                Information (Detail)                                             
70: R59         Real Estate and Other Investments - Schedule of     HTML     51K 
                Long-term Notes Payable of Consolidated VIEs                     
                (Detail)                                                         
71: R60         Real Estate and Other Investments - Carrying        HTML     44K 
                Amount and Maximum Exposure to Loss Related to                   
                VIEs (Detail)                                                    
72: R61         Derivative Instruments - Schedule of Derivative     HTML     54K 
                Instruments Reported in Financial Position                       
                (Detail)                                                         
73: R62         Derivative Instruments - Schedule of Derivative     HTML     41K 
                Instruments Reported in Statements of Operations                 
                (Detail)                                                         
74: R63         Derivative Instruments - Schedule of Information    HTML    104K 
                Regarding Company's Exposure to Credit Loss on the               
                Options Holds (Detail)                                           
75: R64         Net Investment Income and Realized Investment       HTML     48K 
                Gains (Losses) - Summary of Net Investment Income                
                (Detail)                                                         
76: R65         Net Investment Income and Realized Investment       HTML     45K 
                Gains (Losses) - Summary of Realized Investment                  
                Gains (Losses) (Detail)                                          
77: R66         Net Investment Income and Realized Investment       HTML     36K 
                Gains (Losses) - Summary of Other Than Temporary                 
                Impairment Losses (Details)                                      
78: R67         Fair Value of Financial Instruments - Carrying      HTML    104K 
                Amount and Fair Value of Financial Instruments                   
                (Detail)                                                         
79: R68         Fair Value of Financial Instruments - Additional    HTML     40K 
                Information (Detail)                                             
80: R69         Fair Value of Financial Instruments - Schedule of   HTML     52K 
                Significant Unobservable Inputs Used to Calculate                
                Level 3 Fair Value of Embedded Derivatives within                
                Policyholder Contract Deposits (Detail)                          
81: R70         Fair Value of Financial Instruments - Quantitative  HTML    190K 
                Disclosures Regarding Fair Value Hierarchy                       
                Measurements (Detail)                                            
82: R71         Fair Value of Financial Instruments - Financial     HTML     77K 
                Instruments Measured at Fair Value on Recurring                  
                Basis Using (Level 3) Inputs (Detail)                            
83: R72         Deferred Policy Acquisition Costs - Deferred        HTML     61K 
                Policy Acquisition Costs (Detail)                                
84: R73         Liability for Unpaid Claims and Claim Adjustment    HTML     65K 
                Expenses - Liability for Unpaid Claims and Claim                 
                Adjustment Expenses (Detail)                                     
85: R74         Liability for Unpaid Claims and Claim Adjustment    HTML     39K 
                Expenses - Additional Information (Detail)                       
86: R75         Federal Income Taxes - Effective Income Tax         HTML     92K 
                Reconciliation (Detail)                                          
87: R76         Federal Income Taxes - Additional Information       HTML     44K 
                (Detail)                                                         
88: R77         Accumulated Other Comprehensive Income (Loss) -     HTML     88K 
                Components of Other Comprehensive Income (Detail)                
89: R78         Stockholders' Equity and Noncontrolling Interests   HTML    107K 
                - Additional Information (Detail)                                
90: R79         Stockholders' Equity and Noncontrolling Interests   HTML     42K 
                - Common Stock, Amounts Outstanding (Detail)                     
91: R80         Stockholders' Equity and Noncontrolling Interests   HTML     82K 
                - Stock-Based Compensation Information (Detail)                  
92: R81         Stockholders' Equity and Noncontrolling Interests   HTML     57K 
                - Summary of Basic and Diluted Earnings Per Share                
                (Detail)                                                         
93: R82         Stockholders' Equity and Noncontrolling Interests   HTML     42K 
                - Statutory Capital and Surplus and Net Income of                
                Insurance Entities in Accordance with Statutory                  
                Accounting Practices (Detail)                                    
94: R83         Segment Information - Additional Information        HTML     33K 
                (Detail)                                                         
95: R84         Segment Information - Summary of Results of         HTML    113K 
                Operations Measured as Income Before Federal                     
                Income Taxes and Other Items by Operating Segments               
                (Detail)                                                         
96: R85         Commitments and Contingencies - Additional          HTML     56K 
                Information (Detail)                                             
97: R86         Related Party Transactions - Related Party          HTML     53K 
                Transactions (Detail)                                            
98: R87         Related Party Transactions - Additional             HTML     46K 
                Information (Detail)                                             
99: R88         Subsequent Events - Additional Information          HTML     39K 
                (Detail)                                                         
101: XML         IDEA XML File -- Filing Summary                      XML    197K  
11: XML         XBRL Instance -- anat-63019x10q_htm                  XML   6.35M 
100: EXCEL       IDEA Workbook of Financial Reports                  XLSX    131K  
 7: EX-101.CAL  XBRL Calculations -- anat-20190630_cal               XML    455K 
 8: EX-101.DEF  XBRL Definitions -- anat-20190630_def                XML   1.02M 
 9: EX-101.LAB  XBRL Labels -- anat-20190630_lab                     XML   2.56M 
10: EX-101.PRE  XBRL Presentations -- anat-20190630_pre              XML   1.60M 
 6: EX-101.SCH  XBRL Schema -- anat-20190630                         XSD    249K 
102: JSON        XBRL Instance as JSON Data -- MetaLinks              533±   851K  
103: ZIP         XBRL Zipped Folder -- 0000904163-19-000010-xbrl      Zip    465K  


‘10-Q’   —   Quarterly Report
Document Table of Contents

Page (sequential)   (alphabetic) Top
 
11st Page  –  Filing Submission
"Table of Contents
"Part I -- Financial Information
"FINANCIAL STATEMENTS (Unaudited)
"Consolidated Statements of Financial Position as of June 30, 2019 and December 31, 2018
"Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018
"Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2019 and 2018
"Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2019 and 2018
"Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018
"Notes to the Unaudited Consolidated Financial Statements
"Management's Discussion and Analysis of Financial Condition and Results of Operations
"Quantitative and Qualitative Disclosures About Market Risk
"Controls and Procedures
"Part Ii -- Other Information
"Legal Proceedings
"Risk Factors
"Unregistered Sales of Equity Securities and Use of Proceeds
"Defaults Upon Senior Securities
"Mine Safety Disclosures
"Exhibit Index

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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
FORM  i 10-Q
 
 i 
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended  i June 30, 2019
or
 i 
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Commission File No.  i 001-34280
 
 
americannationallogo.jpg 
American National Insurance Company
(Exact name of registrant as specified in its charter)
 
 
 i Texas
 
 i 74-0484030
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 i One Moody Plaza
 i Galveston,  i Texas  i 77550-7999
(Address of principal executive offices) (Zip Code)
( i 409)  i 763-4661
(Registrant’s telephone number, including area code)
 
 
 
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class 
 
Trading Symbol
 
Name of Each Exchange on which Registered
 i Common Stock, par value $1.00
 
 i ANAT
 
 i NASDAQ
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.       i 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).       i 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:
 i Large accelerated filer
 
  
Accelerated filer
 
Non-accelerated filer
 
  
Smaller reporting company
 
 i 
Emerging growth company
 
 i 
  
 
 
 
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   i     No  
As of July 31, 2019, there were  i 26,887,200 shares of the registrant’s voting common stock, $1.00 par value per share, outstanding.


Table of Contents

AMERICAN NATIONAL INSURANCE COMPANY
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
ITEM 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
 
 
 
 
 
ITEM 1.
 
 
 
ITEM 1A.
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
ITEM 5.
 
 
 
ITEM 6.




2

Table of Contents

AMERICAN NATIONAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Unaudited and in thousands, except share data)
 
 
ASSETS
 
 
 
Fixed maturity, bonds held-to-maturity, at amortized cost (Fair value $8,668,599 and $8,130,084)
$
 i 8,394,157

 
$
 i 8,211,449

Fixed maturity, bonds available-for-sale, at fair value (Amortized cost $6,609,357 and $6,261,621)
 i 6,842,917

 
 i 6,215,563

Equity securities, at fair value (Cost $685,095 and $714,504)
 i 1,672,394

 
 i 1,530,228

Mortgage loans on real estate, net of allowance
 i 5,014,710

 
 i 5,124,707

Policy loans
 i 377,669

 
 i 376,254

Investment real estate, net of accumulated depreciation of $280,597 and $267,920
 i 582,756

 
 i 587,516

Short-term investments
 i 597,183

 
 i 206,760

Other invested assets
 i 54,018

 
 i 50,087

Total investments
 i 23,535,804

 
 i 22,302,564

Cash and cash equivalents
 i 312,835

 
 i 268,164

Investments in unconsolidated affiliates
 i 622,587

 
 i 571,897

Accrued investment income
 i 197,574

 
 i 188,630

Reinsurance recoverables
 i 437,152

 
 i 427,475

Prepaid reinsurance premiums
 i 50,994

 
 i 53,622

Premiums due and other receivables
 i 364,018

 
 i 345,705

Deferred policy acquisition costs
 i 1,486,347

 
 i 1,497,261

Property and equipment, net of accumulated depreciation of $245,609 and $236,922
 i 106,694

 
 i 109,472

Current tax receivable
 i 

 
 i 8,855

Prepaid pension
 i 61,587

 
 i 57,117

Other assets
 i 181,627

 
 i 163,222

Separate account assets
 i 1,028,961

 
 i 918,369

Total assets
$
 i 28,386,180

 
$
 i 26,912,353

LIABILITIES
 
 
 
Future policy benefits
 
 
 
Life
$
 i 3,065,431

 
$
 i 3,047,421

Annuity
 i 1,569,789

 
 i 1,524,006

Health
 i 50,372

 
 i 51,347

Policyholders’ account balances
 i 13,089,053

 
 i 12,461,833

Policy and contract claims
 i 1,477,780

 
 i 1,481,294

Unearned premium reserve
 i 953,324

 
 i 908,856

Other policyholder funds
 i 348,638

 
 i 318,948

Liability for retirement benefits
 i 72,448

 
 i 73,631

Notes payable
 i 159,577

 
 i 137,963

Deferred tax liabilities, net
 i 373,700

 
 i 264,185

Current tax payable
 i 1,370

 
 i 

Other liabilities
 i 428,155

 
 i 452,985

Separate account liabilities
 i 1,028,961

 
 i 918,369

Total liabilities
 i 22,618,598

 
 i 21,640,838

EQUITY
 
 
 
American National stockholders’ equity:
 
 
 
Common stock, $1.00 par value, - Authorized 50,000,000, Issued 30,832,449 and 30,832,449
Outstanding 26,887,200 and 26,885,449 shares
 i 30,832

 
 i 30,832

Additional paid-in capital
 i 20,971

 
 i 20,694

Accumulated other comprehensive income (loss)
 i 86,852

 
( i 99,738
)
Retained earnings
 i 5,727,649

 
 i 5,413,952

Treasury stock, at cost
( i 108,469
)
 
( i 108,492
)
Total American National stockholders’ equity
 i 5,757,835

 
 i 5,257,248

Noncontrolling interest
 i 9,747

 
 i 14,267

Total equity
 i 5,767,582

 
 i 5,271,515

Total liabilities and equity
$
 i 28,386,180

 
$
 i 26,912,353

See accompanying notes to the unaudited consolidated financial statements.



3

Table of Contents

AMERICAN NATIONAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited and in thousands, except share and per share data)
 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
PREMIUMS AND OTHER REVENUES
 
 
 
 
 
 
 
Premiums
 
 
 
 
 
 
 
Life
$
 i 86,087

 
$
 i 84,595

 
$
 i 172,555

 
$
 i 165,971

Annuity
 i 56,222

 
 i 67,228

 
 i 96,129

 
 i 137,844

Health
 i 42,224

 
 i 48,870

 
 i 80,905

 
 i 89,885

Property and casualty
 i 371,739

 
 i 360,047

 
 i 742,920

 
 i 712,020

Other policy revenues
 i 75,146

 
 i 71,138

 
 i 149,394

 
 i 142,477

Net investment income
 i 257,730

 
 i 246,741

 
 i 550,076

 
 i 455,410

Net realized investment gains (losses)
( i 2,937
)
 
 i 5,007

 
 i 10

 
 i 6,051

Other-than-temporary impairments
( i 6,968
)
 
 i 

 
( i 6,968
)
 
 i 

Net gains on equity securities
 i 67,060

 
 i 57,162

 
 i 273,437

 
 i 23,992

Other income
 i 10,374

 
 i 11,283

 
 i 21,912

 
 i 21,796

Total premiums and other revenues
 i 956,677

 
 i 952,071

 
 i 2,080,370

 
 i 1,755,446

BENEFITS, LOSSES AND EXPENSES
 
 
 
 
 
 
 
Policyholder benefits
 
 
 
 
 
 
 
Life
 i 104,462

 
 i 96,958

 
 i 213,927

 
 i 195,504

Annuity
 i 72,788

 
 i 82,103

 
 i 131,549

 
 i 166,849

Claims incurred
 
 
 
 
 
 
 
Health
 i 26,708

 
 i 32,310

 
 i 52,475

 
 i 60,450

Property and casualty
 i 271,608

 
 i 280,126

 
 i 509,752

 
 i 522,616

Interest credited to policyholders’ account balances
 i 123,687

 
 i 105,731

 
 i 264,921

 
 i 176,276

Commissions for acquiring and servicing policies
 i 141,295

 
 i 149,737

 
 i 279,940

 
 i 294,433

Other operating expenses
 i 129,533

 
 i 123,947

 
 i 263,143

 
 i 254,341

Change in deferred policy acquisition costs
( i 17,308
)
 
( i 20,116
)
 
( i 23,939
)
 
( i 37,082
)
Total benefits, losses and expenses
 i 852,773

 
 i 850,796

 
 i 1,691,768

 
 i 1,633,387

Income before federal income tax and other items
 i 103,904

 
 i 101,275

 
 i 388,602

 
 i 122,059

Less: Provision for federal income taxes
 
 
 
 
 
 
 
Current
 i 14,231

 
 i 15,638

 
 i 28,011

 
 i 13,533

Deferred
 i 7,717

 
 i 6,319

 
 i 61,314

 
 i 9,613

Total provision for federal income taxes
 i 21,948

 
 i 21,957

 
 i 89,325

 
 i 23,146

Income after federal income tax
 i 81,956

 
 i 79,318

 
 i 299,277

 
 i 98,913

Equity in earnings of unconsolidated affiliates
 i 16,790

 
 i 6,421

 
 i 57,250

 
 i 5,876

Other components of net periodic pension costs, net of tax
( i 871
)
 
( i 1,677
)
 
( i 1,785
)
 
( i 2,469
)
Net income
 i 97,875

 
 i 84,062

 
 i 354,742

 
 i 102,320

Less: Net loss attributable to noncontrolling interest, net of tax
( i 965
)
 
( i 77
)
 
( i 2,315
)
 
( i 596
)
Net income attributable to American National
$
 i 98,840

 
$
 i 84,139

 
$
 i 357,057

 
$
 i 102,916

Amounts available to American National common stockholders
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 
 
Basic
$
 i 3.68

 
$
 i 3.13

 
$
 i 13.28

 
$
 i 3.83

Diluted
 i 3.67

 
 i 3.12

 
 i 13.28

 
 i 3.82

Cash dividends to common stockholders
 i 0.82

 
 i 0.82

 
 i 1.64

 
 i 1.64

Weighted average common shares outstanding
 i 26,881,700

 
 i 26,883,276

 
 i 26,883,699

 
 i 26,886,196

Weighted average common shares outstanding and dilutive potential common shares
 i 26,888,964

 
 i 26,910,257

 
 i 26,889,936

 
 i 26,933,123

See accompanying notes to the unaudited consolidated financial statements.

4

Table of Contents

AMERICAN NATIONAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited and in thousands)
 
Three months ended June 30,
 
 
Six months ended June 30,
 
2019
 
2018
 
 
2019
 
2018
Net income
$
 i 97,875

 
$
 i 84,062

 
 
$
 i 354,742

 
$
 i 102,320

Other comprehensive income (loss), net of tax
 
 
 
 
 
 
 
 
  Change in net unrealized gains (losses) on securities
 i 98,360

 
( i 36,388
)
 
 
 i 183,874

 
( i 127,721
)
  Foreign currency transaction and translation adjustments
 i 746

 
( i 134
)
 
 
 i 590

 
( i 500
)
  Defined benefit pension plan adjustment
 i 1,495

 
 i 1,601

 
 
 i 2,911

 
 i 2,390

Total other comprehensive income (loss), net of tax
 i 100,601

 
( i 34,921
)
 
 
 i 187,375

 
( i 125,831
)
Total comprehensive income (loss)
 i 198,476

 
 i 49,141

 
 
 i 542,117

 
( i 23,511
)
Less: Comprehensive loss attributable to noncontrolling interest
( i 965
)
 
( i 77
)
 
 
( i 2,315
)
 
( i 596
)
Total comprehensive income (loss) attributable to American National
$
 i 199,441

 
$
 i 49,218

 
 
$
 i 544,432

 
$
( i 22,915
)
See accompanying notes to the unaudited consolidated financial statements.


5

Table of Contents

AMERICAN NATIONAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited and in thousands)
 
Common Stock
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Retained Earnings
 
Treasury Stock
 
Noncontrolling Interest
 
Total Equity
$
 i 30,832

 
$
 i 20,694

 
$
( i 99,738
)
 
$
 i 5,413,952

 
$
( i 108,492
)
 
$
 i 14,267

 
$
 i 5,271,515

Reissuance of treasury shares

 
 i 237

 

 

 
 i 23

 

 
 i 260

Amortization of restricted stock

 
 i 20

 

 

 

 

 
 i 20

Cumulative effect of accounting change

 

 
( i 785
)
 
 i 785

 

 

 
 i 

Other comprehensive income

 

 
 i 86,774

 

 

 

 
 i 86,774

Net income attributable to American National

 

 

 
 i 258,217

 

 

 
 i 258,217

Cash dividends to common stockholders

 

 

 
( i 22,101
)
 

 

 
( i 22,101
)
Contributions

 

 

 

 

 
 i 3

 
 i 3

Distributions

 

 

 

 

 
( i 419
)
 
( i 419
)
Net loss attributable to noncontrolling interest

 

 

 

 

 
( i 1,350
)
 
( i 1,350
)
Balance at March 31, 2019
$
 i 30,832

 
$
 i 20,951

 
$
( i 13,749
)
 
$
 i 5,650,853

 
$
( i 108,469
)
 
$
 i 12,501

 
$
 i 5,592,919

Amortization of restricted stock

 
 i 20

 

 

 

 

 
 i 20

Other comprehensive income

 

 
 i 100,601

 

 

 

 
 i 100,601

Net income attributable to American National

 

 

 
 i 98,840

 

 

 
 i 98,840

Cash dividends to common stockholders

 

 

 
( i 22,044
)
 

 

 
( i 22,044
)
Contributions

 

 

 

 

 
 i 168

 
 i 168

Distributions

 

 

 

 

 
( i 1,957
)
 
( i 1,957
)
Net loss attributable to noncontrolling interest

 

 

 

 

 
( i 965
)
 
( i 965
)
Balance at June 30, 2019
$
 i 30,832

 
$
 i 20,971

 
$
 i 86,852

 
$
 i 5,727,649

 
$
( i 108,469
)
 
$
 i 9,747

 
$
 i 5,767,582

See accompanying notes to the unaudited consolidated financial statements.


6

Table of Contents

AMERICAN NATIONAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited and in thousands)
 
Common Stock
 
Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Retained Earnings
 
Treasury Stock
 
Noncontrolling Interest
 
Total Equity
$
 i 30,832

 
$
 i 19,193

 
$
 i 642,216

 
$
 i 4,656,134

 
$
( i 101,616
)
 
$
 i 9,012

 
$
 i 5,255,771

Reissuance of treasury shares

 
 i 675

 

 

 
 i 70

 

 
 i 745

Amortization of restricted stock

 
 i 201

 

 

 

 

 
 i 201

Cumulative effect of accounting changes

 

 
( i 637,376
)
 
 i 697,307

 

 

 
 i 59,931

Other comprehensive loss

 

 
( i 90,910
)
 

 

 

 
( i 90,910
)
Net income attributable to American National

 

 

 
 i 18,777

 

 

 
 i 18,777

Cash dividends to common stockholders

 

 

 
( i 22,089
)
 

 

 
( i 22,089
)
Distributions

 

 

 

 

 
( i 397
)
 
( i 397
)
Net loss attributable to noncontrolling interest

 

 

 

 

 
( i 519
)
 
( i 519
)
Balance at March 31, 2018
$
 i 30,832

 
$
 i 20,069

 
$
( i 86,070
)
 
$
 i 5,350,129

 
$
( i 101,546
)
 
$
 i 8,096

 
$
 i 5,221,510

Reissuance of treasury shares

 
 i 498

 

 

 
( i 6,946
)
 

 
( i 6,448
)
Amortization of restricted stock

 
 i 83

 

 

 

 

 
 i 83

Cumulative effect of accounting changes

 

 
 i 10,257

 
( i 10,256
)
 

 

 
 i 1

Other comprehensive loss

 

 
( i 34,921
)
 

 

 

 
( i 34,921
)
Net income attributable to American National

 

 

 
 i 84,139

 

 

 
 i 84,139

Cash dividends to common stockholders

 

 

 
( i 22,047
)
 

 

 
( i 22,047
)
Contributions

 

 

 

 

 

 
 i 

Distributions

 

 

 

 

 
( i 173
)
 
( i 173
)
Net loss attributable to noncontrolling interest

 

 

 

 

 
( i 77
)
 
( i 77
)
Balance at June 30, 2018
$
 i 30,832

 
$
 i 20,650

 
$
( i 110,734
)
 
$
 i 5,401,965

 
$
( i 108,492
)
 
$
 i 7,846

 
$
 i 5,242,067

See accompanying notes to the unaudited consolidated financial statements.

7

Table of Contents

AMERICAN NATIONAL INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS 
(Unaudited and in thousands)
 
Six months ended June 30,
 
2019
 
2018
OPERATING ACTIVITIES
 
 
 
Net income
$
 i 354,742

 
$
 i 102,320

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
Net realized investment gains
( i 10
)
 
( i 6,051
)
Other-than-temporary impairments
 i 6,968

 
 i 

Accretion of premiums, discounts and loan origination fees
( i 2,547
)
 
( i 4,736
)
Net capitalized interest on policy loans and mortgage loans
( i 18,397
)
 
( i 20,555
)
Depreciation
 i 30,621

 
 i 25,783

Interest credited to policyholders’ account balances
 i 264,921

 
 i 176,276

Charges to policyholders’ account balances
( i 149,394
)
 
( i 142,477
)
Deferred federal income tax expense
 i 61,314

 
 i 9,613

Equity in earnings of unconsolidated affiliates
( i 57,250
)
 
( i 5,876
)
Distributions from equity method investments
 i 64,224

 
 i 371

Changes in
 
 
 
Policyholder liabilities
 i 120,652

 
 i 205,125

Deferred policy acquisition costs
( i 23,939
)
 
( i 37,082
)
Reinsurance recoverables
( i 9,677
)
 
( i 17,543
)
Premiums due and other receivables
( i 18,313
)
 
( i 46,680
)
Prepaid reinsurance premiums
 i 2,627

 
 i 7,835

Accrued investment income
( i 8,945
)
 
( i 3,559
)
Current tax receivable/payable
 i 10,223

 
 i 43,453

Liability for retirement benefits
( i 1,969
)
 
( i 2,479
)
Fair value of option securities
( i 89,608
)
 
( i 7,534
)
Fair value of equity securities
( i 273,437
)
 
( i 23,992
)
Other, net
( i 31,034
)
 
 i 1,911

    Net cash provided by operating activities
 i 231,772

 
 i 254,123

INVESTING ACTIVITIES
 
 
 
Proceeds from sale/maturity/prepayment of
 
 
 
Held-to-maturity securities
 i 299,968

 
 i 395,053

Available-for-sale securities
 i 164,925

 
 i 277,143

Equity securities
 i 149,397

 
 i 24,369

Investment real estate
 i 6,713

 
 i 11,577

Mortgage loans
 i 405,768

 
 i 219,153

Policy loans
 i 22,873

 
 i 28,747

Other invested assets
 i 41,262

 
 i 50,238

Disposals of property and equipment
 i 69

 
 i 

Distributions from unconsolidated affiliates
 i 37,309

 
 i 10,105

Payment for the purchase/origination of
 
 
 
Held-to-maturity securities
( i 647,367
)
 
( i 780,263
)
Available-for-sale securities
( i 355,920
)
 
( i 317,902
)
Equity securities
( i 18,280
)
 
( i 36,894
)
Investment real estate
( i 19,520
)
 
( i 23,640
)
Mortgage loans
( i 283,312
)
 
( i 561,586
)
Policy loans
( i 12,033
)
 
( i 12,886
)
Other invested assets
( i 38,768
)
 
( i 46,212
)
Additions to property and equipment
( i 9,494
)
 
( i 8,825
)
Contributions to unconsolidated affiliates
( i 111,620
)
 
( i 56,907
)
Change in short-term investments
( i 390,423
)
 
 i 355,880

Change in collateral held for derivatives
 i 83,169

 
( i 1,532
)
Other, net
 i 1,397

 
( i 5,739
)
    Net cash used in investing activities
( i 673,887
)
 
( i 480,121
)
FINANCING ACTIVITIES
 
 
 
Policyholders’ account deposits
 i 1,288,581

 
 i 973,556

Policyholders’ account withdrawals
( i 776,888
)
 
( i 636,727
)
Change in notes payable
 i 21,614

 
( i 728
)
Dividends to stockholders
( i 44,145
)
 
( i 44,136
)
Payments to noncontrolling interest
( i 2,376
)
 
( i 570
)
    Net cash provided by financing activities
 i 486,786

 
 i 291,395

NET INCREASE IN CASH AND CASH EQUIVALENTS
 i 44,671

 
 i 65,397

Beginning of the period
 i 268,164

 
 i 375,837

End of the period
$
 i 312,835

 
$
 i 441,234

See accompanying notes to the unaudited consolidated financial statements.


8

Table of Contents

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 –  i Nature of Operations
American National Insurance Company and its consolidated subsidiaries (collectively “American National” or the Company) offer 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  i 50 states, the District of Columbia and Puerto Rico.

Note 2 –  i Summary of Significant Accounting Policies and Practices
 i 

The consolidated financial statements and notes thereto have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and are reported in U.S. currency.  i American National consolidates entities that are wholly-owned and those in which American National owns less than  i 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 are accounted for using the equity method of accounting.  i Certain amounts in prior years have been reclassified to conform to current year presentation.

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

The interim consolidated financial statements and notes should be read in conjunction with the annual consolidated financial statements and notes thereto included in American National’s Annual Report on Form 10-K as of and for the year ended December 31, 2018. The consolidated results of operations for the interim periods should not be considered indicative of results to be expected for the full year.

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

Note 3 –  i Recently Issued Accounting Pronouncements

Adoption of New Accounting Standards

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, "Revenue from Contracts with Customers"
that superseded most existing revenue recognition requirements in GAAP. Insurance contracts generally are excluded from the scope of the guidance. For those contracts which are impacted, the transaction price is attributed to the underlying performance obligations in the contract and revenue is recognized as the entity satisfies the performance obligations and transfers control of a good or service to the customer. The Company’s revenues include premiums, other policy revenues, net investment income, realized investment gains, and other income. Other income includes fee income which is recognized when obligations under the terms specified within a contract with a customer are either (1) satisfied at a point in time or (2) based upon the progress of completion measured over a period of time as the obligation is performed using the input method. The Company adopted the standard on its required effective date of January 1, 2018 using the modified retrospective approach. The majority of our revenue sources are insurance related and not in the scope of the guidance. The adoption of the standard did not have a material impact on the Company’s consolidated financial position, results of operations, equity or cash flows as of the adoption date or for the six months ended June 30, 2019.

9

Table of Contents

Note 3 – Recently Issued Accounting Pronouncements - (Continued)

In January 2016, the FASB issued ("ASU") 2016-01, "Financial Instruments", which changed certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The new guidance requires that equity investments, other than those accounted for under the equity method or those that result in consolidation of the investee, be measured at fair value with the changes in fair value recognized through earnings. When the fair value option has been elected for financial liabilities, changes in fair value due to instrument-specific credit risk will be recognized separately in other comprehensive income. The guidance also simplifies the impairment assessment of equity investments and eliminates the disclosure requirements for methods and significant assumptions used to estimate fair value of financial instruments that are measured at amortized cost on the statement of financial position. The Company adopted the standard on its required effective date of January 1, 2018 using a modified retrospective approach. Upon adoption, cumulative unrealized gains on equity securities, net of tax, of $ i 667.7 million, partially offset by $ i 30.4 million participating policyholders’ interest, net of tax, related to unrealized gains and losses on equity securities, were reclassified from accumulated other comprehensive income to retained earnings. In April 2018, an additional $ i 10.2 million deferred policy acquisition cost adjustment, net of tax, related to net unrealized gains and losses on equity securities, was reclassified from accumulated other comprehensive income to retained earnings. The change in net gains on equity securities increased earnings by $ i 216.0 million and $ i 19.0 million, net of tax, for the six months ended June 30, 2019 and 2018, respectively.
In October of 2016, the FASB issued ASU 2016-16, “Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory,” which requires an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. Prior guidance prohibited the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset was sold to an outside party. The Company adopted the standard on its required effective date of January 1, 2018 using a modified retrospective approach. Upon adoption, a liability was released and retained earnings increased by $ i 59.9 million.
In February 2016, the FASB issued ASU 2016-02, “Leases,” that required significant changes to the statement of financial position of lessees. The new standard required lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase by the lessee. This classification is used to determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months, regardless of their classification. Lessor accounting was less affected by the standard but was updated to align with certain changes in the lessee model and the new revenue recognition standard. The Company adopted the standard on its required effective date of January 1, 2019 using the effective date method, which required a cumulative-effect adjustment to the opening balance of retained earnings. We elected certain practical expedients permitted under the transition guidance. Upon adoption, the Company recorded a right-of-use asset and liability of $ i 13.1 million.
In February 2018, the FASB issued ASU 2018-02, “Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,” which allows for a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The standard was adopted on its required effective date of January 1, 2019 and resulted in a $ i 0.8 million increase in retained earnings and a corresponding decrease to accumulated other comprehensive income.

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

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments,” which will significantly change 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 will replace the current “incurred loss” approach with an “expected loss” model for instruments measured at amortized cost. For available-for-sale debt securities, entities will be required to record allowances rather than a direct write down of the investment, as required by the current other-than-temporary impairment model. The standard also requires additional disclosures. This standard will become effective for the Company for all annual and interim periods beginning January 1, 2020. The Company is in the process of determining the impact of adopting the standard on our results of operations and financial position.


10

Table of Contents

Note 3 – Recently Issued Accounting Pronouncements - (Continued)

In August 2018, the FASB issued ASU 2018-12, “Insurance: Targeted Improvements to the Accounting for Long-Duration Contracts,” that seeks to improve financial reporting for insurance companies that issue long-duration contracts. The guidance will improve the timeliness of recognizing changes in the liability for future policy benefits for traditional and limited payment long-duration contracts and will modify the rate used to discount future cash flows. The guidance will also simplify and improve accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts, 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, 2021. This standard could have a material impact on our results of operations and financial position. The FASB met on July 17, 2019 and proposed delaying the effective date of ASU 2018-12 until January 1, 2022. This proposal is pending final adoption.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement: Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement,” guidance that modifies the disclosure requirements on fair value measurements. Certain disclosure requirements are removed, modified or added to improve the relevancy of the fair value measurement disclosures. The new standard will become effective for the Company for all interim and annual periods beginning January 1, 2020. The Company does not expect the adoption of this guidance to have a material impact on the results of operations or financial position.

In August 2018, the FASB issued ASU 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-General: Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans,” which 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 that are considered relevant. This standard will become effective for all annual periods beginning January 1, 2021. The Company does not expect the adoption of this standard to have a material impact on our results of operations or financial position.

In August 2018, the FASB issued ASU 2018-15 “Intangibles-Goodwill and Other-Internal-Use Software: Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,” which seeks to align the requirements for capitalizing implementation costs incurred in a cloud computing arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Current GAAP does not specifically address the implementation costs of a cloud computing arrangement that is service contract. This standard will become effective for the Company for all interim and annual periods beginning January 1, 2021. The Company is in the process of determining the impact of adopting the standard.

11

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Note 4 – Investment in Securities

 i  i 
The cost or amortized cost and fair value of investments in securities are shown below (in thousands):
 
 
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
(Losses)
 
Fair Value
Fixed maturity securities, bonds held-to-maturity
 
 
 
 
 
 
 
U.S. states and political subdivisions
$
 i 207,563

 
$
 i 7,146

 
$
( i 52
)
 
$
 i 214,657

Foreign governments
 i 3,934

 
 i 492

 
 i 

 
 i 4,426

Corporate debt securities
 i 7,849,211

 
 i 267,162

 
( i 10,580
)
 
 i 8,105,793

Residential mortgage-backed securities
 i 205,408

 
 i 8,109

 
( i 737
)
 
 i 212,780

Collateralized debt securities
 i 127,892

 
 i 2,944

 
( i 43
)
 
 i 130,793

Other debt securities
 i 149

 
 i 1

 
 i 

 
 i 150

         Total bonds held-to-maturity
 i 8,394,157

 
 i 285,854

 
( i 11,412
)
 
 i 8,668,599

Fixed maturity securities, bonds available-for-sale
 
 
 
 
 
 
 
U.S. treasury and government
 i 28,300

 
 i 489

 
( i 44
)
 
 i 28,745

U.S. states and political subdivisions
 i 1,063,172

 
 i 42,859

 
 i 

 
 i 1,106,031

Foreign governments
 i 5,000

 
 i 1,361

 
 i 

 
 i 6,361

Corporate debt securities
 i 5,479,173

 
 i 203,949

 
( i 16,576
)
 
 i 5,666,546

Residential mortgage-backed securities
 i 24,006

 
 i 848

 
( i 169
)
 
 i 24,685

Collateralized debt securities
 i 9,706

 
 i 843

 
 i 

 
 i 10,549

         Total bonds available-for-sale
 i 6,609,357

 
 i 250,349

 
( i 16,789
)
 
 i 6,842,917

Total investments in securities
$
 i 15,003,514

 
$
 i 536,203

 
$
( i 28,201
)
 
$
 i 15,511,516


 
 
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
(Losses)
 
Fair Value
Fixed maturity securities, bonds held-to-maturity
 
 
 
 
 
 
 
U.S. states and political subdivisions
$
 i 245,360

 
$
 i 5,840

 
$
( i 301
)
 
$
 i 250,899

Foreign governments
 i 3,961

 
 i 469

 
 i 

 
 i 4,430

Corporate debt securities
 i 7,640,891

 
 i 58,772

 
( i 150,834
)
 
 i 7,548,829

Residential mortgage-backed securities
 i 315,306

 
 i 7,237

 
( i 2,633
)
 
 i 319,910

Collateralized debt securities
 i 5,214

 
 i 71

 
 i 

 
 i 5,285

Other debt securities
 i 717

 
 i 14

 
 i 

 
 i 731

         Total bonds held-to-maturity
 i 8,211,449

 
 i 72,403

 
( i 153,768
)
 
 i 8,130,084

Fixed maturity securities, bonds available-for-sale
 
 
 
 
 
 
 
U.S. treasury and government
 i 28,304

 
 i 338

 
( i 243
)
 
 i 28,399

U.S. states and political subdivisions
 i 848,228

 
 i 16,827

 
( i 3,025
)
 
 i 862,030

Foreign governments
 i 5,000

 
 i 1,210

 
 i 

 
 i 6,210

Corporate debt securities
 i 5,345,579

 
 i 41,812

 
( i 103,573
)
 
 i 5,283,818

Residential mortgage-backed securities
 i 31,735

 
 i 424

 
( i 497
)
 
 i 31,662

Collateralized debt securities
 i 2,775

 
 i 675

 
( i 6
)
 
 i 3,444

         Total bonds available-for-sale
 i 6,261,621

 
 i 61,286

 
( i 107,344
)
 
 i 6,215,563

Total investments in securities
$
 i 14,473,070

 
$
 i 133,689

 
$
( i 261,112
)
 
$
 i 14,345,647


 / 



 / 

12

Table of Contents

Note 4 – Investment in Securities – (Continued)

 i 
The amortized cost and fair value, by contractual maturity, of fixed maturity securities are shown below (in thousands):
 
 
Bonds Held-to-Maturity
 
Bonds Available-for-Sale
 
Amortized Cost
 
Fair Value
 
Amortized Cost
 
Fair Value
Due in one year or less
$
 i 430,988

 
$
 i 436,069

 
$
 i 243,111

 
$
 i 245,596

Due after one year through five years
 i 4,033,584

 
 i 4,153,917

 
 i 3,211,961

 
 i 3,313,108

Due after five years through ten years
 i 3,099,228

 
 i 3,223,700

 
 i 2,513,056

 
 i 2,623,952

Due after ten years
 i 830,357

 
 i 854,913

 
 i 641,229

 
 i 660,261

  Total
$
 i 8,394,157

 
$
 i 8,668,599

 
$
 i 6,609,357

 
$
 i 6,842,917


 / 
Actual maturities differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Residential and commercial mortgage-backed securities, which are not due at a single maturity, have been allocated to their respective categories based on the year of final contractual maturity.
 i 
Proceeds from sales of available-for-sale securities, with the related gross realized gains and losses, are shown below (in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Proceeds from sales of fixed maturity available-for-sale securities
$
 i 

 
$
 i 42,932

 
$
 i 285

 
$
 i 90,113

Gross realized gains
 i 

 
 i 11,123

 
 i 

 
 i 12,547

Gross realized losses
 i 

 
( i 32
)
 
( i 23
)
 
( i 587
)

 / 
Gains and losses are determined using specific identification of the securities sold. During the six months ended June 30, 2019 and 2018, bonds below investment grade with a carrying value of $ i 157,939,000 and $ i 34,850,000, respectively, were transferred from held-to-maturity to available-for-sale after a deterioration in the issuers’ credit worthiness.  i No realized loss was recorded in 2019 or 2018.
 i 
The components of the change in net unrealized gains (losses) on debt securities are shown below (in thousands):
 
Six months ended June 30,
 
2019
 
2018
Bonds available-for-sale: change in unrealized gains (losses)
$
 i 279,618

 
$
( i 210,413
)
Adjustments for
 
 
 
Deferred policy acquisition costs
( i 34,853
)
 
 i 41,962

Participating policyholders’ interest
( i 12,811
)
 
 i 11,924

Deferred federal income tax benefit (expense)
( i 48,080
)
 
 i 28,806

Change in net unrealized gains (losses) on debt securities, net of tax
$
 i 183,874

 
$
( i 127,721
)
The components of the change in net gains on equity securities are shown below (in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Unrealized gains on equity securities
$
 i 51,933

 
$
 i 46,087

 
$
 i 254,955

 
$
 i 11,862

Net gains on equity securities sold
 i 15,127

 
 i 11,075

 
 i 18,482

 
 i 12,130

Net gains on equity securities
$
 i 67,060

 
$
 i 57,162

 
$
 i 273,437

 
$
 i 23,992



 / 

13

Table of Contents

Note 4 – Investment in Securities – (Continued)

 i 
The gross unrealized losses and fair value of the investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are shown below (in thousands):
 
 
Less than 12 months
 
12 months or more
 
Total
 
Unrealized
(Losses)
 
Fair
Value
 
Unrealized
(Losses)
 
Fair
Value
 
Unrealized
(Losses)
 
Fair
Value
Fixed maturity securities, bonds held-to-maturity
 
 
 
 
 
 
 
 
 
 
 
U.S. states and political subdivisions
$
 i 

 
$
 i 

 
$
( i 52
)
 
$
 i 2,613

 
$
( i 52
)
 
$
 i 2,613

Corporate debt securities
( i 1,661
)
 
 i 137,818

 
( i 8,919
)
 
 i 436,089

 
( i 10,580
)
 
 i 573,907

Residential mortgage-backed securities
( i 19
)
 
 i 7,368

 
( i 718
)
 
 i 36,651

 
( i 737
)
 
 i 44,019

Collateralized debt securities
( i 39
)
 
 i 10,771

 
( i 4
)
 
 i 917

 
( i 43
)
 
 i 11,688

         Total bonds held-to-maturity
( i 1,719
)
 
 i 155,957

 
( i 9,693
)
 
 i 476,270

 
( i 11,412
)
 
 i 632,227

Fixed maturity securities, bonds available-for-sale
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury and government
 i 

 
 i 

 
( i 44
)
 
 i 11,124

 
( i 44
)
 
 i 11,124

U.S. states and political subdivisions
 i 

 
 i 1,808

 
 i 

 
 i 

 
 i 

 
 i 1,808

Corporate debt securities
( i 1,338
)
 
 i 91,488

 
( i 15,238
)
 
 i 371,471

 
( i 16,576
)
 
 i 462,959

Residential mortgage-backed securities
 i 

 
 i 

 
( i 169
)
 
 i 1,820

 
( i 169
)
 
 i 1,820

         Total bonds available-for-sale
( i 1,338
)
 
 i 93,296

 
( i 15,451
)
 
 i 384,415

 
( i 16,789
)
 
 i 477,711

Total
$
( i 3,057
)
 
$
 i 249,253

 
$
( i 25,144
)
 
$
 i 860,685

 
$
( i 28,201
)
 
$
 i 1,109,938


 
 
Less than 12 months
 
12 months or more
 
Total
 
Unrealized
(Losses)
 
Fair
Value
 
Unrealized
(Losses)
 
Fair
Value
 
Unrealized
(Losses)
 
Fair
Value
Fixed maturity securities, bonds held-to-maturity
 
 
 
 
 
 
 
 
 
 
 
U.S. states and political subdivisions
$
( i 301
)
 
$
 i 22,605

 
$
 i 

 
$
 i 

 
$
( i 301
)
 
$
 i 22,605

Corporate debt securities
( i 90,931
)
 
 i 2,969,461

 
( i 59,903
)
 
 i 1,063,679

 
( i 150,834
)
 
 i 4,033,140

Residential mortgage-backed securities
( i 703
)
 
 i 58,119

 
( i 1,930
)
 
 i 57,661

 
( i 2,633
)
 
 i 115,780

         Total bonds held-to-maturity
( i 91,935
)
 
 i 3,050,185

 
( i 61,833
)
 
 i 1,121,340

 
( i 153,768
)
 
 i 4,171,525

Fixed maturity securities, bonds available-for-sale
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury and government
( i 29
)
 
 i 9,741

 
( i 214
)
 
 i 13,478

 
( i 243
)
 
 i 23,219

U.S. states and political subdivisions
( i 1,274
)
 
 i 119,987

 
( i 1,751
)
 
 i 61,992

 
( i 3,025
)
 
 i 181,979

Corporate debt securities
( i 65,492
)
 
 i 2,383,548

 
( i 38,081
)
 
 i 572,600

 
( i 103,573
)
 
 i 2,956,148

Residential mortgage-backed securities
( i 54
)
 
 i 6,034

 
( i 443
)
 
 i 13,515

 
( i 497
)
 
 i 19,549

Collateralized debt securities
( i 2
)
 
 i 158

 
( i 4
)
 
 i 100

 
( i 6
)
 
 i 258

         Total bonds available-for-sale
( i 66,851
)
 
 i 2,519,468

 
( i 40,493
)
 
 i 661,685

 
( i 107,344
)
 
 i 3,181,153

Total
$
( i 158,786
)
 
$
 i 5,569,653

 
$
( i 102,326
)
 
$
 i 1,783,025

 
$
( i 261,112
)
 
$
 i 7,352,678


 / 
As of June 30, 2019, the securities with unrealized losses including those exceeding one year were not deemed to be other-than-temporarily impaired. American National has the ability and intent to hold those securities until a market price recovery or maturity. It is not more-likely-than-not that American National will be required to sell them prior to recovery, and recovery is expected in a reasonable period of time. It is possible an issuer’s financial circumstances may be different in the future, which may lead to a different impairment conclusion in future periods.

14

Table of Contents

Note 4 – Investment in Securities – (Continued)

 i 
The following table identifies the total bonds distributed by credit quality rating (in thousands, except percentages):
 
 
 
Amortized
Cost
 
Estimated
Fair Value
 
% of Fair
Value
 
Amortized
Cost
 
Estimated
Fair Value
 
% of Fair
Value
AAA
$
 i 771,497

 
$
 i 798,910

 
 i 5.2
%
 
$
 i 690,009

 
$
 i 702,531

 
 i 4.9
%
AA
 i 1,302,861

 
 i 1,348,881

 
 i 8.7

 
 i 1,326,947

 
 i 1,336,380

 
 i 9.3

A
 i 5,597,573

 
 i 5,803,852

 
 i 37.4

 
 i 5,350,316

 
 i 5,314,589

 
 i 37.0

BBB
 i 6,873,228

 
 i 7,109,627

 
 i 45.8

 
 i 6,584,478

 
 i 6,507,212

 
 i 45.4

BB and below
 i 458,355

 
 i 450,246

 
 i 2.9

 
 i 521,320

 
 i 484,935

 
 i 3.4

Total
$
 i 15,003,514

 
$
 i 15,511,516

 
 i 100.0
%
 
$
 i 14,473,070

 
$
 i 14,345,647

 
 i 100.0
%

 / 
 i 
Equity securities by market sector distribution are shown below:
 
 
Consumer goods
 i 20.9
%
 
 i 21.1
%
Energy and utilities
 i 9.1

 
 i 8.2

Finance
 i 18.1

 
 i 18.1

Healthcare
 i 13.4

 
 i 13.5

Industrials
 i 8.0

 
 i 9.0

Information technology
 i 22.7

 
 i 22.6

Other
 i 7.8

 
 i 7.5

        Total
 i 100.0
%
 
 i 100.0
%

 / 
Note 5 - Mortgage Loans
Generall i y, commercial mortgage loans are secured by first liens on income-producing real estate. American National attempts to maintain a diversified portfolio by considering the location of the underlying collateral.  i The distribution based on carrying amount of mortgage loans by location is as follows: / 
 
 
East North Central
 i 12.5
%
 
 i 13.9
%
East South Central
 i 2.6

 
 i 2.8

Mountain
 i 21.6

 
 i 20.0

Pacific
 i 17.3

 
 i 16.2

South Atlantic
 i 12.5

 
 i 12.1

West South Central
 i 26.0

 
 i 27.2

Other
 i 7.5

 
 i 7.8

Total
 i 100.0
%
 
 i 100.0
%

During the six months ended June 30, 2019, American National foreclosed on  i one loan with a total recorded investment of $ i 7,363,000 and  i one loan with a total recorded investment of $ i 8,644,000 was in the process of foreclosure. For the year ended December 31, 2018, American National foreclosed on  i four loans with a total recorded investment of $ i 22,608,000, and  i one loan with a total recorded investment of $ i 7,363,000 was in the process of foreclosure. American National did not sell any loans during the six months ended June 30, 2019 or during the year ended December 31, 2018.

15

Table of Contents

Note 5 - Mortgage Loans - (Continued)

 i 
The age analysis of past due loans is shown below (in thousands):
 
30-59 Days
 
60-89 Days
 
More Than
 
 
 
 
 
Total
Past Due
 
Past Due
 
90 Days
 
Total
 
Current
 
Amount
 
Percent
Industrial
$
 i 

 
$
 i 

 
$
 i 

 
$
 i 

 
$
 i 571,320

 
$
 i 571,320

 
 i 11.3
%
Office
 i 

 
 i 

 
 i 8,644

 
 i 8,644

 
 i 1,660,163

 
 i 1,668,807

 
 i 33.1

Retail
 i 

 
 i 

 
 i 

 
 i 

 
 i 875,078

 
 i 875,078

 
 i 17.4

Other
 i 

 
 i 

 
 i 

 
 i 

 
 i 1,920,927

 
 i 1,920,927

 
 i 38.2

Total
$
 i 

 
$
 i 

 
$
 i 8,644

 
$
 i 8,644

 
$
 i 5,027,488

 
$
 i 5,036,132

 
 i 100.0
%
Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
( i 21,422
)
 
 
Total, net of allowance
 
 
 
 
 
 
 
 
 
 
$
 i 5,014,710

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Industrial
$
 i 

 
$
 i 

 
$
 i 

 
$
 i 

 
$
 i 761,294

 
$
 i 761,294

 
 i 14.8
%
Office
 i 

 
 i 

 
 i 

 
 i 

 
 i 1,747,926

 
 i 1,747,926

 
 i 34.0

Retail
 i 

 
 i 

 
 i 

 
 i 

 
 i 896,429

 
 i 896,429

 
 i 17.4

Other
 i 

 
 i 4,000

 
 i 18,888

 
 i 22,888

 
 i 1,717,503

 
 i 1,740,391

 
 i 33.8

Total
$
 i 

 
$
 i 4,000

 
$
 i 18,888

 
$
 i 22,888

 
$
 i 5,123,152

 
$
 i 5,146,040

 
 i 100.0
%
Allowance for loan losses
 
 
 
 
 
 
 
 
 
 
( i 21,333
)
 
 
Total, net of allowance
 
 
 
 
 
 
 
 
 
 
$
 i 5,124,707

 
 

 / 
There were  i no unamortized purchase discounts as of June 30, 2019 or during the year ended December 31, 2018. Total mortgage loans were net of unamortized origination fees of $ i 29,356,000 and $ i 31,586,000 at June 30, 2019 and December 31, 2018, respectively. No unearned income is included in these amounts.
Allowance for Credit Losses
A loan is considered impaired when it is probable that all amounts due will not be collected according to the contractual terms of the loan agreement. Mortgage loans with temporary difficulties are not considered impaired when the borrower has the financial capacity to fund revenue shortfalls from the properties for the foreseeable future. Individual valuation allowances are established for impaired loans to reduce the carrying value to the fair value of the collateral. Loans not evaluated individually for collectability are segregated by property-type and location, and allowance factors are applied. These factors are developed based on historical loss experience adjusted for the expected trend in the rate of foreclosure losses. Allowance factors are higher for loans of certain property types and in certain regions based on loss experience or a blended historical loss factor.
 i 
The change in allowance for credit losses in mortgage loans is shown below (in thousands, except number of loans):
 
Collectively Evaluated for Impairment
 
Individually Impaired
 
Total
 
Number of
Loans
 
Recorded
Investment
 
Valuation
Allowance
 
Number of
Loans
 
Recorded
Investment
 
Valuation
Allowance
 
Number of
Loans
 
Recorded
Investment
 
Valuation
Allowance
Beginning balance at January 1, 2019
 i 449

 
$
 i 5,128,417

 
$
 i 18,607

 
 i 2

 
$
 i 17,623

 
$
 i 2,726

 
 i 451

 
$
 i 5,146,040

 
$
 i 21,333

Change in allowance

 

 
( i 179
)
 

 

 
 i 268

 

 

 
 i 89

Net change in recorded investment
( i 9
)
 
( i 101,423
)
 

 
 i 

 
( i 8,485
)
 

 
( i 9
)
 
( i 109,908
)
 

Ending balance at June 30, 2019
 i 440

 
$
 i 5,026,994

 
$
 i 18,428

 
 i 2

 
$
 i 9,138

 
$
 i 2,994

 
 i 442

 
$
 i 5,036,132

 
$
 i 21,422


 / 

16

Table of Contents

Note 5 - Mortgage Loans - (Continued)

Troubled Debt Restructurings
American National has granted concessions which are classified as troubled debt restructurings to certain mortgage loan borrowers. Concessions are generally one of, or a combination of, a delay in payment of principal or interest, a reduction of the contractual interest rate or an extension of the maturity date. American National considers the amount, timing and extent of concessions in determining any impairment or changes in the specific allowance for loan losses recorded in connection with a troubled debt restructuring. The carrying value after specific allowance, before and after modification in a troubled debt restructuring, may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment.
 i 
Troubled debt restructuring mortgage loan information is as follows (in thousands, except number of loans):
 
 
Six months ended June 30,
 
 
2019
 
2018
 
 
Number of Loans
 
Recorded
Investment 
Pre-Modification
 
Recorded
Investment 
Post Modification
 
Number of Loans
 
Recorded
Investment 
Pre-Modification
 
Recorded
Investment 
Post Modification
Office
 
 i 1

 
$
 i 9,331

 
$
 i 9,331

 
 i 

 
$
 i 

 
$
 i 

Retail
 
 i 2

 
 i 40,249

 
 i 40,249

 
 i 

 
 i 

 
 i 

Industrial
 
 i 4

 
 i 20,595

 
 i 20,595

 
 i 

 
 i 

 
 i 

Total
 
 i 7

 
$
 i 70,175

 
$
 i 70,175

 
 i 

 
$
 i 

 
$
 i 


 / 
There were  i seven loans determined to be a troubled debt restructuring for the six months ended June 30, 2019. There are commitments of $ i 4,042,000 to lend additional funds to  i two debtors whose loans have been modified in a troubled debt restructuring during the periods presented.
Note 6 –  i Real Estate and Other Investments
 i 
Investment real estate by property-type and geographic distribution are as follows:
 
 
Industrial
 i 12.8
%
 
 i 13.1
%
Office
 i 38.0

 
 i 37.3

Retail
 i 37.6

 
 i 37.0

Other
 i 11.6

 
 i 12.6

Total
 i 100.0
%
 
 i 100.0
%
 
 
East North Central
 i 5.6
%
 
 i 5.6
%
East South Central
 i 6.0

 
 i 5.4

Mountain
 i 12.0

 
 i 11.9

Pacific
 i 7.2

 
 i 7.3

South Atlantic
 i 15.1

 
 i 13.8

West South Central
 i 52.5

 
 i 53.8

Other
 i 1.6

 
 i 2.2

Total
 i 100.0
%
 
 i 100.0
%

 / 


American National regularly invests in real estate partnerships and joint ventures. American National frequently participates in the design of these entities with the sponsor, but in most cases, our involvement is limited to financing. Through analysis performed by American National, some of these partnerships and joint ventures have been determined to be variable interest entities (“VIEs”). In certain instances, in addition to an economic interest in the entity, American National holds the power to direct the most significant activities of the entity and is deemed the primary beneficiary or consolidator of the entity. The assets of the consolidated VIEs are restricted and must first be used to settle their liabilities. Creditors or beneficial interest holders of these VIEs have no recourse to the general credit of American National, as American National’s obligation is limited to the amount of its committed investment. American National has not provided financial or other support to the VIEs in the form of liquidity arrangements, guarantees, or other commitments to third parties that may affect the fair value or risk of its variable interest in the VIEs in 2019 or 2018.




17

Table of Contents

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


 i 
The assets and liabilities relating to the VIEs included in the consolidated financial statements are as follows (in thousands):
 
 
Investment real estate
$
 i 135,235

 
$
 i 141,843

Short-term investments
 i 501

 
 i 500

Cash and cash equivalents
 i 10,697

 
 i 10,392

Other receivables
 i 3,721

 
 i 3,939

Other assets
 i 12,261

 
 i 13,231

Total assets of consolidated VIEs
$
 i 162,415

 
$
 i 169,905

Notes payable
$
 i 159,577

 
$
 i 137,963

Other liabilities
 i 4,755

 
 i 7,145

Total liabilities of consolidated VIEs
$
 i 164,332

 
$
 i 145,108


 / 
The notes payable in the consolidated statements of financial position pertain to the borrowings of the consolidated VIEs. The liability of American National relating to notes payable of the consolidated VIEs is limited to the amount of its direct or indirect investment in the respective ventures, which totaled $ i 7,195,000 and $ i 26,635,000 at June 30, 2019 and December 31, 2018, respectively.
 i 
The total long-term notes payable of the consolidated VIEs consists of the following (in thousands):
Interest rate
 
Maturity
 
 
LIBOR
 
2020
 
$
 i 10,842

 
$
 i 10,834

4.18% fixed
 
2024
 
 i 65,501

 
 i 42,399

4% fixed
 
2022
 
 i 83,234

 
 i 84,730

Total
 
 
 
$
 i 159,577

 
$
 i 137,963


 / 

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.  i The carrying amount and maximum exposure to loss relating to unconsolidated VIEs follows (in thousands):
 
 
 
Carrying
Amount
 
Maximum
Exposure
to Loss
 
Carrying
Amount
 
Maximum
Exposure
to Loss
Investment in unconsolidated affiliates
$
 i 322,901

 
$
 i 322,901

 
$
 i 330,730

 
$
 i 330,730

Mortgage loans
 i 623,141

 
 i 623,141

 
 i 633,533

 
 i 633,533

Accrued investment income
 i 2,114

 
 i 2,114

 
 i 2,191

 
 i 2,191


As of June 30, 2019,  i two real estate investments with a carrying value of $ i 22,842,000 met the criteria as held-for-sale.


18

Table of Contents

Note 7 – Derivative Instruments

American  i 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.  i The detail of derivative instruments is shown below (in thousands, except number of instruments):  / 
 
Derivatives Not Designated
as Hedging Instruments
 
Location in the Consolidated
Statements of Financial Position
 
 
 
 
Number of
Instruments
 
Notional
Amounts
 
Estimated
Fair Value
 
Number of
Instruments
 
Notional
Amounts
 
Estimated
Fair Value
 
 
Equity-indexed options
 
Other invested assets
 
 i 484

 
$
 i 2,498,744

 
$
 i 231,044

 
 i 493

 
$
 i 2,391,000

 
$
 i 148,006

 
Equity-indexed embedded derivative
 
Policyholders’ account balances
 
 i 96,014

 
 i 2,455,001

 
 i 695,676

 
 i 90,440

 
 i 2,327,769

 
 i 596,075


 i 
Derivatives Not Designated
as Hedging Instruments
 
Location in the Consolidated
Statements of Operations
 
Gains (Losses) Recognized in Income on Derivatives
 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Equity-indexed options
 
Net investment income
 
$
 i 23,125

 
$
 i 21,778

 
$
 i 89,610

 
$
 i 7,633

Equity-indexed embedded derivative
 
Interest credited to policyholders’
 account balances
 
( i 36,255
)
 
( i 17,599
)
 
( i 94,411
)
 
( i 4,163
)

 / 

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 consolidated statements of financial position as an offset to “Other invested assets” with an associated payable to “Other liabilities” for excess collateral.

 i 
Information regarding the Company’s exposure to credit loss on the options it holds is presented below (in thousands):
 
 
 
 
Counterparty
 
Moody/S&P
Rating
 
Options Fair
Value
 
Collateral  Held in Cash
 
Collateral Held in Invested Assets
 
Total
Collateral Held
 
Collateral Amounts used to Offset Exposure
 
Excess Collateral
 
Exposure Net of Collateral
Barclays
 
Baa3/BBB
 
$
 i 53,790

 
$
 i 25,393

 
$
 i 28,000

 
$
 i 53,393

 
$
 i 53,393

 
$
 i 

 
$
 i 397

Credit Suisse
 
Baa2/BBB+
 
 i 1,223

 
 i 1,150

 
 i 

 
 i 1,150

 
 i 1,150

 
 i 

 
 i 73

Goldman-Sachs
 
A3/BBB+
 
 i 909

 
 i 670

 
 i 

 
 i 670

 
 i 670

 
 i 

 
 i 239

ING
 
Baa1/A-
 
 i 28,382

 
 i 12,830

 
 i 16,000

 
 i 28,830

 
 i 28,382

 
 i 448

 
 i 

Morgan Stanley
 
A3/BBB+
 
 i 26,538

 
 i 17,516

 
 i 9,000

 
 i 26,516

 
 i 26,516

 
 i 

 
 i 22

NATIXIS*
 
A1/A+
 
 i 38,289

 
 i 38,700

 
 i 

 
 i 38,700

 
 i 38,289

 
 i 411

 
 i 

SunTrust
 
Baa1/BBB+
 
 i 48,347

 
 i 32,350

 
 i 17,000

 
 i 49,350

 
 i 48,320

 
 i 1,030

 
 i 27

Wells Fargo
 
A2/A-
 
 i 33,566

 
 i 18,550

 
 i 15,000

 
 i 33,550

 
 i 33,313

 
 i 237

 
 i 253

       Total
 
 
 
$
 i 231,044

 
$
 i 147,159

 
$
 i 85,000

 
$
 i 232,159

 
$
 i 230,033

 
$
 i 2,126

 
$
 i 1,011

 
 
 
 
Counterparty
 
Moody/S&P
Rating
 
Options Fair
Value
 
Collateral  Held in Cash
 
Collateral Held in Invested Assets
 
Total
Collateral Held
 
Collateral Amounts used to Offset Exposure
 
Excess Collateral
 
Exposure Net of Collateral
Barclays
 
Baa3/BBB
 
$
 i 38,905

 
$
 i 11,063

 
$
 i 28,041

 
$
 i 39,104

 
$
 i 38,905

 
$
 i 199

 
$
 i 

Goldman-Sachs
 
A3/BBB+
 
 i 615

 
 i 670

 
 i 

 
 i 670

 
 i 615

 
 i 55

 
 i 

ING
 
Baa1/A-
 
 i 24,183

 
 i 7,960

 
 i 16,023

 
 i 23,983

 
 i 23,983

 
 i 

 
 i 200

Morgan Stanley
 
A3/BBB+
 
 i 11,649

 
 i 2,046

 
 i 9,013

 
 i 11,059

 
 i 11,059

 
 i 

 
 i 590

NATIXIS*
 
A1/A+
 
 i 26,786

 
 i 27,610

 
 i 

 
 i 27,610

 
 i 26,786

 
 i 824

 
 i 

SunTrust
 
Baa1/BBB+
 
 i 23,488

 
 i 6,520

 
 i 17,025

 
 i 23,545

 
 i 23,464

 
 i 81

 
 i 24

Wells Fargo
 
A2/A-
 
 i 22,380

 
 i 7,030

 
 i 15,022

 
 i 22,052

 
 i 22,052

 
 i 

 
 i 328

       Total
 
 
 
$
 i 148,006

 
$
 i 62,899

 
$
 i 85,124

 
$
 i 148,023

 
$
 i 146,864

 
$
 i 1,159

 
$
 i 1,142

*
Includes collateral restrictions.    

 / 

19

Table of Contents

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

 i  i 
Net investment income is shown below (in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Bonds
$
 i 150,907

 
$
 i 142,529

 
$
 i 298,464

 
$
 i 282,624

Dividends on equity securities
 i 9,015

 
 i 10,898

 
 i 17,307

 
 i 20,338

Mortgage loans
 i 63,158

 
 i 58,999

 
 i 126,357

 
 i 122,867

Real estate
 i 4,508

 
 i 4,212

 
 i 6,363

 
 i 8,495

Options
 i 23,125

 
 i 21,778

 
 i 89,610

 
 i 7,633

Other invested assets
 i 7,017

 
 i 8,325

 
 i 11,975

 
 i 13,453

Total
$
 i 257,730

 
$
 i 246,741

 
$
 i 550,076

 
$
 i 455,410


 / 
 i 
Net realized investment gains (losses) are shown below (in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Bonds
$
 i 2,611

 
$
 i 6,070

 
$
 i 5,213

 
$
 i 6,737

Mortgage loans
( i 544
)
 
( i 856
)
 
( i 89
)
 
( i 554
)
Real estate
( i 2,728
)
 
( i 197
)
 
( i 2,886
)
 
( i 114
)
Other invested assets
( i 2,276
)
 
( i 10
)
 
( i 2,228
)
 
( i 18
)
Total
$
( i 2,937
)
 
$
 i 5,007

 
$
 i 10

 
$
 i 6,051

Other-than-temporary impairment losses are shown below (in thousands):
 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Bonds
$
( i 6,968
)
 
$
 i 

 
$
( i 6,968
)
 
$
 i 


 / 
 / 


20

Table of Contents

Note 9 – Fair Value of Financial Instruments

 i  i 
The carrying amount and fair value of financial instruments are shown below (in thousands):
 
 
 
Carrying
Amount
 
Fair Value
 
Carrying
Amount
 
Fair Value
Financial assets
 
 
 
 
 
 
 
      Fixed maturity securities, bonds held-to-maturity
$
 i 8,394,157

 
$
 i 8,668,599

 
$
 i 8,211,449

 
$
 i 8,130,084

      Fixed maturity securities, bonds available-for-sale
 i 6,842,917

 
 i 6,842,917

 
 i 6,215,563

 
 i 6,215,563

Equity securities
 i 1,672,394

 
 i 1,672,394

 
 i 1,530,228

 
 i 1,530,228

Equity-indexed options
 i 231,044

 
 i 231,044

 
 i 148,006

 
 i 148,006

Mortgage loans on real estate, net of allowance
 i 5,014,710

 
 i 5,127,595

 
 i 5,124,707

 
 i 5,049,468

Policy loans
 i 377,669

 
 i 377,669

 
 i 376,254

 
 i 376,254

Short-term investments
 i 597,183

 
 i 597,183

 
 i 206,760

 
 i 206,760

Separate account assets ($1,012,462 and $905,824 included in fair value hierarchy)
 i 1,028,961

 
 i 1,028,961

 
 i 918,369

 
 i 918,369

Separately managed accounts
 i 30,655

 
 i 30,655

 
 i 16,532

 
 i 16,532

                Total financial assets
$
 i 24,189,690

 
$
 i 24,577,017

 
$
 i 22,747,868

 
$
 i 22,591,264

Financial liabilities
 
 
 
 
 
 
 
Investment contracts
$
 i 10,444,204

 
$
 i 10,444,204

 
$
 i 10,003,990

 
$
 i 10,003,990

Embedded derivative liability for equity-indexed contracts
 i 695,676

 
 i 695,676

 
 i 596,075

 
 i 596,075

Notes payable
 i 159,577

 
 i 159,577

 
 i 137,963

 
 i 137,963

Separate account liabilities ($1,012,462 and $905,824 included in fair value hierarchy)
 i 1,028,961

 
 i 1,028,961

 
 i 918,369

 
 i 918,369

                Total financial liabilities
$
 i 12,328,418

 
$
 i 12,328,418

 
$
 i 11,656,397

 
$
 i 11,656,397


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

21

Table of Contents

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

The pricing service utilizes market quotations for fixed maturity securities that have quoted prices in active markets. Since fixed maturity securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value measurements for these securities using its proprietary pricing applications, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Additionally, an option adjusted spread model is used to develop prepayment and interest rate scenarios.
The pricing service evaluates each asset class based on relevant market information, credit information, perceived market movements and sector news. The market inputs utilized in the pricing evaluation, listed in the approximate order of priority, include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and economic events. The extent of the use of each market input depends on the asset class and the market conditions. Depending on the security, the priority of the use of inputs may change or some market inputs may not be relevant. For some securities, additional inputs may be necessary.
American National has reviewed the inputs and methodology used and the techniques applied by the pricing service to produce quotes that represent the fair value of a specific security. The review confirms that the pricing service is utilizing information from observable transactions or a technique that represents a market participant’s assumptions. American National does not adjust quotes received from the pricing service. The pricing service utilized by American National has indicated that they will only produce an estimate of fair value if there is objectively verifiable information available.
American National holds a small amount of private placement debt and fixed maturity securities that have characteristics that make them unsuitable for matrix pricing. For these securities, a quote from an independent broker (typically a market maker) is obtained. Due to the disclaimers on the quotes that indicate that the price is indicative only, American National includes these fair value estimates in Level 3.
For securities priced using a quote from an independent broker, such as the equity-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 estimate of fair value is received from the pricing service. The service utilizes similar methodologies to price preferred stocks as it does for fixed maturity securities. 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.
Separate account assets and liabilities—Separate account assets and liabilities are funds that are held separate from the general assets and liabilities of American National and that represent 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 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. 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 consolidated financial statements.
The separate account assets included on the quantitative disclosures fair value hierarchy table is made up of short-term investments, equity securities, and fixed maturity securities of available-for-sale bonds. 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.

22

Table of Contents

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

The separate account assets account also includes cash and cash equivalents, investments in unconsolidated affiliates, 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.
Embedded Derivative— The amounts reported within policyholder contract deposits include equity linked interest crediting rates based on the S&P 500 index within index 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 will have the inverse effect decreasing the fair value.
Mortality rate assumptions vary by age and by 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 June 30, 2019 and December 31, 2018, the one year implied volatility used to estimate embedded derivative value was  i 13.3% and  i 23.2%, respectively.
Fair values of indexed life and annuity liabilities are calculated using the discounted cash flow technique.  i 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
 
 
 
Unobservable Input
 
 
Indexed Annuities
$
 i 680.5

 
$
 i 592.8

 
Lapse Rate
 
1-70%
 
1-70%
 
 
 
 
 
Mortality Multiplier
 
90-100%
 
90-100%
 
 
 
 
 
Equity Volatility
 
 13-30%
 
19-26%
Indexed Life
 i 15.2

 
 i 3.3

 
Equity Volatility
 
 13-30%
 
19-26%



23

Table of Contents

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

Quantitative Disclosures
The fair value hierarchy measurements of the financial instruments are shown below (in thousands):
 
Assets and Liabilities Carried at Fair Value by Hierarchy Level as of June 30, 2019
 
Total
Fair Value
 
Level 1
 
Level 2
 
Level 3
Financial assets
 
 
 
 
 
 
 
Fixed maturity securities, bonds available-for-sale
 
 
 
 
 
 
 
U.S. treasury and government
$
 i 28,745

 
$
 i 

 
$
 i 28,745

 
$
 i 

U.S. states and political subdivisions
 i 1,106,031

 
 i 

 
 i 1,106,031

 
 i 

Foreign governments
 i 6,361

 
 i 

 
 i 6,361

 
 i 

Corporate debt securities
 i 5,666,546

 
 i 

 
 i 5,662,313

 
 i 4,233

Residential mortgage-backed securities
 i 24,685

 
 i 

 
 i 24,685

 
 i 

Collateralized debt securities
 i 10,549

 
 i 

 
 i 10,549

 
 i 

                  Total bonds available-for-sale
 i 6,842,917

 
 i 

 
 i 6,838,684

 
 i 4,233

Equity securities
 
 
 
 
 
 
 
Common stock
 i 1,651,398

 
 i 1,651,285

 
 i 

 
 i 113

Preferred stock
 i 20,996

 
 i 20,996

 
 i 

 
 i 

Total equity securities
 i 1,672,394

 
 i 1,672,281

 
 i 

 
 i 113

Options
 i 231,044

 
 i 

 
 i 

 
 i 231,044

Short-term investments
 i 597,183

 
 i 

 
 i 597,183

 
 i 

Separate account assets
 i 1,012,462

 
 i 253,053

 
 i 759,409

 
 i 

Total financial assets
$
 i 10,356,000

 
$
 i 1,925,334

 
$
 i 8,195,276

 
$
 i 235,390

Financial liabilities
 
 
 
 
 
 
 
Embedded derivative liability for equity-indexed contracts
$
 i 695,676

 
$
 i 

 
$
 i 

 
$
 i 695,676

Separate account liabilities
 i 1,012,462

 
 i 253,053

 
 i 759,409

 
 i 

Total financial liabilities
$
 i 1,708,138

 
$
 i 253,053

 
$
 i 759,409

 
$
 i 695,676


 
Assets and Liabilities Carried at Fair Value by Hierarchy Level as of December 31, 2018
 
Total
Fair Value
 
Level 1
 
Level 2
 
Level 3
Financial assets
 
 
 
 
 
 
 
Fixed maturity securities, bonds available-for-sale
 
 
 
 
 
 
 
U.S. treasury and government
$
 i 28,399

 
$
 i 

 
$
 i 28,399

 
$
 i 

U.S. states and political subdivisions
 i 862,030

 
 i 

 
 i 862,030

 
 i 

Foreign governments
 i 6,210

 
 i 

 
 i 6,210

 
 i 

Corporate debt securities
 i 5,283,818

 
 i 

 
 i 5,279,585

 
 i 4,233

Residential mortgage-backed securities
 i 31,662

 
 i 

 
 i 31,662

 
 i 

Collateralized debt securities
 i 3,444

 
 i 

 
 i 3,444

 
 i 

Total bonds available-for-sale
 i 6,215,563

 
 i 

 
 i 6,211,330

 
 i 4,233

Equity securities
 
 
 
 
 
 
 
Common stock
 i 1,509,186

 
 i 1,509,073

 
 i 

 
 i 113

Preferred stock
 i 21,042

 
 i 21,042

 
 i 

 
 i 

Total equity securities
 i 1,530,228

 
 i 1,530,115

 
 i 

 
 i 113

Options
 i 148,006

 
 i 

 
 i 

 
 i 148,006

Short-term investments
 i 206,760

 
 i 

 
 i 206,760

 
 i 

Separate account assets
 i 905,824

 
 i 227,448

 
 i 678,376

 
 i 

Total financial assets
$
 i 9,006,381

 
$
 i 1,757,563

 
$
 i 7,096,466

 
$
 i 152,352

Financial liabilities
 
 
 
 
 
 
 
Embedded derivative liability for equity-indexed contracts
$
 i 596,075

 
$
 i 

 
$
 i 

 
$
 i 596,075

Separate account liabilities
 i 905,824

 
 i 227,448

 
 i 678,376

 
 i 

Total financial liabilities
$
 i 1,501,899

 
$
 i 227,448

 
$
 i 678,376

 
$
 i 596,075




24

Table of Contents

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

 i 
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 June 30, 2019
 
Six months ended June 30, 2019
 
Assets
 
Liability
 
Assets
 
Liability
 
Investment
Securities
 
Equity-Indexed
Options
 
Embedded
Derivative
 
Investment
Securities
 
Equity-Indexed
Options
 
Embedded
Derivative
Beginning balance at January 1, 2019
$
 i 4,346

 
$
 i 216,156

 
$
 i 668,485

 
$
 i 4,346

 
$
 i 148,006

 
$
 i 596,075

Net gain for derivatives included in net investment
 income
 i 

 
 i 23,125

 
 i 

 
 i 

 
 i 89,610

 
 i 

Net change included in interest credited
 i 

 
 i 

 
 i 36,255

 
 i 

 
 i 

 
 i 94,411

Purchases, sales and settlements or maturities
 
 
 
 
 
 
 
 
 
 
 
Purchases
 i 

 
 i 21,412

 
 i 

 
 i 

 
 i 38,768

 
 i 

Settlements or maturities
 i 

 
( i 29,649
)
 
 i 

 
 i 

 
( i 45,340
)
 
 i 

Premiums less benefits
 i 

 
 i 

 
( i 9,064
)
 
 i 

 
 i 

 
 i 5,190

Ending balance at June 30, 2019
$
 i 4,346

 
$
 i 231,044

 
$
 i 695,676

 
$
 i 4,346

 
$
 i 231,044

 
$
 i 695,676

Beginning balance at January 1, 2018
$
 i 

 
$
 i 204,308

 
$
 i 535,641

 
$
 i 

 
$
 i 220,190

 
$
 i 512,526

Net gain for derivatives included in net investment
 income
 i 

 
 i 21,712

 
 i 

 
 i 

 
 i 7,567

 
 i 

Net change included in interest credited
 i 

 
 i 

 
 i 17,599

 
 i 

 
 i 

 
 i 4,163

Purchases, sales and settlements or maturities
 
 
 
 
 
 
 
 
 
 
 
Purchases
 i 

 
 i 26,084

 
 i 

 
 i 

 
 i 43,012

 
 i 

Settlements or maturities
 i 

 
( i 34,763
)
 
 i 

 
 i 

 
( i 53,428
)
 
 i 

Premiums less benefits
 i 

 
 i 

 
 i 39,673

 
 i 

 
 i 

 
 i 76,224

Ending balance at June 30, 2018
$
 i 

 
$
 i 217,341

 
$
 i 592,913

 
$
 i 

 
$
 i 217,341

 
$
 i 592,913


 / 
Within the net gain (loss) for derivatives included in net investment income were unrealized gains of $ i 84,756,000 and unrealized losses of $ i 18,321,000, relating to assets still held at June 30, 2019, and 2018, respectively.
There were  i no transfers between Level 1 and Level 2 fair value hierarchies during the periods presented. Unless information is obtained from the brokers that indicate observable inputs were used in their pricing, there are not enough observable inputs to enable American National to classify the securities priced by the brokers as other than Level 3. American National’s valuation of these securities involves judgment regarding assumptions market participants would use including quotes from independent brokers. The inputs used by the brokers include recent transactions in the security, similar bonds with same name, ratings, maturity and structure, external dealer quotes in the security, Bloomberg evaluated pricing and prior months pricing. None of them are observable to American National as of June 30, 2019.

Fair Value Information About Financial Instruments Not Measured at Fair Value

Information about fair value estimates for financial instruments not measured at fair values is discussed below:
Mortgage Loans—The fair value of mortgage loans is estimated using discounted cash flow analyses on a loan by loan basis by applying a discount rate to expected cash flows from future installment and balloon payments. The discount rate takes into account general market trends and specific credit risk trends for the individual loan. Factors used to arrive at the discount rate include inputs from spreads based on U.S. Treasury notes and the loan’s credit quality, region, property type, lien priority, payment type and current status.
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.

25

Table of Contents

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

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


26

Table of Contents

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

 i 
The carrying value and estimated fair value of financial instruments not recorded at fair value on a recurring basis but required to be disclosed were as follows:
 
 
FV Hierarchy Level
 
Carrying
Amount
 
Fair Value
Financial assets
 
 
 
 
 
Fixed maturity securities, bonds held-to-maturity
 
 
 
 
 
U.S. states and political subdivisions
Level 2
 
$
 i 207,563

 
$
 i 214,657

Foreign governments
Level 2
 
 i 3,934

 
 i 4,426

Corporate debt securities
Level 2 & 3
 
 i 7,849,211

 
 i 8,105,793

Residential mortgage-backed securities
Level 2
 
 i 205,408

 
 i 212,780

Collateralized debt securities
Level 2
 
 i 127,892

 
 i 130,793

Other debt securities
Level 2
 
 i 149

 
 i 150

Total fixed maturity securities, bonds held-to-maturity
 
 
 i 8,394,157

 
 i 8,668,599

Mortgage loans on real estate, net allowance
Level 3
 
 i 5,014,710

 
 i 5,127,595

Policy loans
Level 3
 
 i 377,669

 
 i 377,669

Separately managed accounts
Level 3
 
 i 30,655

 
 i 30,655

Total financial assets
 
 
$
 i 13,817,191

 
$
 i 14,204,518

Financial liabilities
 
 
 
 
 
Investment contracts
Level 3
 
$
 i 10,444,204

 
$
 i 10,444,204

Notes payable
Level 3
 
 i 159,577

 
 i 159,577

Total financial liabilities
 
 
$
 i 10,603,781

 
$
 i 10,603,781


 
 
FV Hierarchy Level
 
Carrying
Amount
 
Fair Value
Financial assets
 
 
 
 
 
Fixed maturity securities, bonds held-to-maturity
 
 
 
 
 
U.S. states and political subdivisions
Level 2
 
$
 i 245,360

 
$
 i 250,899

Foreign governments
Level 2
 
 i 3,961

 
 i 4,430

Corporate debt securities
Level 2
 
 i 7,640,891

 
 i 7,548,829

Residential mortgage-backed securities
Level 2
 
 i 315,306

 
 i 319,910

Collateralized debt securities
Level 2
 
 i 5,214

 
 i 5,285

Other debt securities
Level 2
 
 i 717

 
 i 731

Total fixed maturity securities, bonds held-to-maturity
 
 
 i 8,211,449

 
 i 8,130,084

Mortgage loans on real estate, net allowance
Level 3
 
 i 5,124,707

 
 i 5,049,468

Policy loans
Level 3
 
 i 376,254

 
 i 376,254

Separately managed accounts
Level 3
 
 i 16,532

 
 i 16,532

Total financial assets
 
 
$
 i 13,728,942

 
$
 i 13,572,338

Financial liabilities
 
 
 
 
 
Investment contracts
Level 3
 
$
 i 10,003,990

 
$
 i 10,003,990

Notes payable
Level 3
 
 i 137,963

 
 i 137,963

Total financial liabilities
 
 
$
 i 10,141,953

 
$
 i 10,141,953


 / 

27

Table of Contents

Note 10 – Deferred Policy Acquisition Costs

 i  i 
Deferred policy acquisition costs are shown below (in thousands):
 
Life
 
Annuity
 
Health
 
Property
& Casualty
 
Total
Beginning balance at January 1, 2019
$
 i 839,133

 
$
 i 499,588

 
$
 i 33,960

 
$
 i 124,580

 
$
 i 1,497,261

Additions
 i 64,419

 
 i 48,168

 
 i 6,544

 
 i 158,129

 
 i 277,260

Amortization
( i 50,379
)
 
( i 40,779
)
 
( i 7,205
)
 
( i 154,958
)
 
( i 253,321
)
Effect of change in unrealized gains on available-for-sale debt securities
( i 9,809
)
 
( i 25,044
)
 
 i 

 
 i 

 
( i 34,853
)
Net change
 i 4,231

 
( i 17,655
)
 
( i 661
)
 
 i 3,171

 
( i 10,914
)
Ending balance at June 30, 2019
$
 i 843,364

 
$
 i 481,933

 
$
 i 33,299

 
$
 i 127,751

 
$
 i 1,486,347


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

Note 11 –  i 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 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 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.
 i 
Information regarding the liability for unpaid claims is shown below (in thousands): 
 
Six months ended June 30,
 
2019
 
2018
Unpaid claims balance, beginning
$
 i 1,305,396

 
$
 i 1,218,824

Less reinsurance recoverables
 i 254,466

 
 i 241,302

Net beginning balance
 i 1,050,930

 
 i 977,522

Incurred related to
 
 
 
Current
 i 591,073

 
 i 586,516

Prior years
( i 30,691
)
 
( i 2,501
)
Total incurred claims
 i 560,382

 
 i 584,015

Paid claims related to
 
 
 
Current
 i 272,650

 
 i 261,019

Prior years
 i 276,738

 
 i 268,116

Total paid claims
 i 549,388

 
 i 529,135

Net balance
 i 1,061,924

 
 i 1,032,402

Plus reinsurance recoverables
 i 249,245

 
 i 255,684

Unpaid claims balance, ending
$
 i 1,311,169

 
$
 i 1,288,086


 / 
 i The net and gross reserve calculations have shown favorable development as a result of favorable loss emergence compared to what was implied by the loss development patterns used in the original estimation of losses in prior years. Estimates for ultimate incurred claims attributable to insured events of prior years decreased by approximately $ i 30,691,000 during the first six months of 2019 and decreased by approximately $ i 2,501,000 during the same period in 2018. The favorable development in 2019 was a reflection of lower-than-anticipated 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 June 30, 2019 was approximately $ i 23,627,000.


28

Table of Contents

Note 12 – Federal Income Taxes

 i  i 
A reconciliation of the effective tax rate to the statutory federal tax rate is shown below (in thousands, except percentages):
 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
 
Amount
 
Rate
 
Amount
 
Rate
 
Amount
 
Rate
 
Amount
 
Rate
Income tax expense before tax on equity in earnings of unconsolidated affiliates
$
 i 21,819

 
 i 18.1
 %
 
$
 i 21,267

 
 i 20.0
 %
 
$
 i 81,606

 
 i 18.3
 %
 
$
 i 25,632

 
 i 20.0
 %
Tax on equity in earnings of unconsolidated affiliates
 i 3,526

 
 i 2.9

 
 i 1,348

 
 i 1.0

 
 i 12,023

 
 i 2.7

 
 i 1,234

 
 i 1.0

Total expected income tax expense at the statutory rate
 i 25,345

 
 i 21.0

 
 i 22,615

 
 i 21.0

 
 i 93,629

 
 i 21.0

 
 i 26,866

 
 i 21.0

Tax-exempt investment income
( i 1,109
)
 
( i 0.9
)
 
( i 836
)
 
( i 0.8
)
 
( i 1,918
)
 
( i 0.4
)
 
( i 1,679
)
 
( i 1.3
)
Deferred tax change
 i 

 
 i 

 
( i 600
)
 
( i 0.6
)
 
 i 

 
 i 

 
( i 909
)
 
( i 0.7
)
Dividend exclusion
( i 860
)
 
( i 0.7
)
 
( i 1,001
)
 
( i 0.9
)
 
( i 1,781
)
 
( i 0.4
)
 
( i 1,986
)
 
( i 1.6
)
Miscellaneous tax credits, net
( i 3,299
)
 
( i 2.7
)
 
( i 2,529
)
 
( i 2.3
)
 
( i 4,991
)
 
( i 1.1
)
 
( i 4,742
)
 
( i 3.7
)
Low income housing tax credit expense
 i 1,783

 
 i 1.5

 
 i 1,252

 
 i 1.2

 
 i 2,941

 
 i 0.6

 
 i 2,504

 
 i 2.0

Change in valuation allowance
 i 165

 
 i 0.1

 
 i 2,700

 
 i 2.5

 
 i 165

 
 i 

 
 i 2,700

 
 i 2.1

Other items, net
( i 77
)
 
( i 0.1
)
 
 i 356

 
 i 0.3

 
 i 1,280

 
 i 0.3

 
 i 392

 
 i 0.3

Provision for federal income taxes
$
 i 21,948

 
 i 18.2
 %
 
$
 i 21,957

 
 i 20.4
 %
 
$
 i 89,325

 
 i 20.0
 %
 
$
 i 23,146

 
 i 18.1
 %
 / 
American National made income tax payments of $ i 40,440,000 and $ i 14,135,000 during the six months ended June 30, 2019 and 2018, respectively.

As of June 30, 2019, American National has an alternative minimum tax (“AMT”) credit carryforward of $ i 6,933,000, a general business credit carryforward of $ i 758,000 and capital loss carryforwards of $ i 656,000. AMT credit carryforwards may be utilized to offset regular tax liability. If not utilized, the credits are fully refundable by 2021. The general business credits and capital loss carryforwards will expire in 2038 and 2022, respectively, if not utilized.

 / 
 i American National’s federal income tax returns for years 2015 to 2017 are subject to examination by the Internal Revenue Service. Tax returns for 2013 and 2014 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. The audit is in its preliminary phase. 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 June 30, 2019, American National had no provision for uncertain tax positions and no provision for penalties or interest were established. In addition, management does not believe there are any uncertain tax benefits that could be recognized within the next twelve months that would impact American National’s effective tax rate.



29

Table of Contents

Note 13 – Accumulated Other Comprehensive Income (Loss)

 i  i 
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, 2019
$
( i 42,469
)
 
$
( i 54,236
)
 
$
( i 3,033
)
 
$
( i 99,738
)
Amounts reclassified from AOCI (net of tax expense $565 and $774)
 i 2,126

 
 i 2,911

 

 
 i 5,037

Unrealized holding gains arising during the period (net of tax expense $58,322)
 i 219,402

 

 

 
 i 219,402

Unrealized adjustment to DAC (net of tax benefit $7,320)
( i 27,533
)
 

 

 
( i 27,533
)
Unrealized gains on investments attributable to participating policyholders’ interest (net of tax benefit $2,690)
( i 10,121
)
 

 

 
( i 10,121
)
Foreign currency adjustment (net of tax expense $157)

 

 
 i 590

 
 i 590

Cumulative effect of changes in accounting
 i 16,166

 
( i 16,493
)
 
( i 458
)
 
( i 785
)
Ending balance at June 30, 2019
$
 i 157,571

 
$
( i 67,818
)
 
$
( i 2,901
)
 
$
 i 86,852

Beginning balance at January 1, 2018
$
 i 716,878

 
$
( i 72,772
)
 
$
( i 1,890
)
 
$
 i 642,216

Amounts reclassified from AOCI (net of tax benefit $462 and expense $635)
( i 1,740
)
 
 i 2,390

 

 
 i 650

Unrealized holding losses arising during the period (net of tax benefit $39,660)
( i 168,551
)
 

 

 
( i 168,551
)
Unrealized adjustment to DAC (net of tax expense $8,812)
 i 33,150

 

 

 
 i 33,150

Unrealized losses on investments attributable to participating policyholders’ interest (net of tax expense $2,504)
 i 9,420

 

 

 
 i 9,420

Foreign currency adjustment (net of tax benefit $133)

 

 
( i 500
)
 
( i 500
)
Cumulative effect of changes in accounting (net of tax benefit $334,955)
( i 627,119
)
 

 

 
( i 627,119
)
Ending balance at June 30, 2018
$
( i 37,962
)
 
$
( i 70,382
)
 
$
( i 2,390
)
 
$
( i 110,734
)

 / 
 / 
Note 14 – Stockholders’ Equity and Noncontrolling Interests

American i  National has one class of common stock with a par value of $ i 1.00 per share and  i 50,000,000 authorized shares.  i The amounts outstanding at the dates indicated are shown below:
 
 
Common stock
 
 
 
Shares issued
 i 30,832,449

 
 i 30,832,449

Treasury shares
( i 3,945,249
)
 
( i 3,947,000
)
Outstanding shares
 i 26,887,200

 
 i 26,885,449

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

 
 i 26,875,449


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

30

Table of Contents

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

 i 
SAR, RS and RSU information for the periods indicated are shown below:
 
SAR
 
RS Shares
 
RS Units
 
Shares
 
Weighted-Average
Grant Date
Fair Value
 
Shares
 
Weighted-Average
Grant Date
Fair Value
 
Units
 
Weighted-Average
Grant Date
Fair Value
Outstanding at December 31, 2018
 i 335

 
$
 i 84.41

 
 i 10,000

 
$
 i 80.05

 
 i 18,316

 
$
 i 111.12

Granted

 

 

 

 
 i 8,250

 
 i 113.19

Exercised

 

 

 

 
( i 18,316
)
 
 i 111.12

Forfeited

 

 

 

 

 

Expired
( i 269
)
 
 i 77.90

 

 

 

 

Outstanding at June 30, 2019
 i 66

 
$
 i 110.83

 
 i 10,000

 
$
 i 80.05

 
 i 8,250

 
$
 i 113.19

 
SAR
 
RS Shares
 
RS Units
Weighted-average contractual remaining life (in years)
 i 0.84

 
 i 3.67

 
 i 0.84

Exercisable shares
 i 66

 
N/A

 
N/A

Weighted-average exercise price
$
 i 110.83

 
$
 i 80.05

 
$
 i 111.12

Weighted-average exercise price exercisable shares
 i 110.83

 
N/A

 
N/A

Compensation expense (credit)
 
 
 
 
 
Three months ended June 30, 2019
$
( i 12,000
)
 
$
 i 20,000

 
$
 i 578,000

Three months ended June 30, 2018
( i 5,000
)
 
 i 83,000

 
 i 760,000

Six months ended June 30, 2019
$
( i 15,000
)
 
$
 i 40,000

 
$
 i 941,000

Six months ended June 30, 2018
( i 34,000
)
 
 i 284,000

 
 i 549,000

Fair value of liability award
 
 
 
 
 
$
 i 1,000

 
N/A

 
$
 i 961,000

 i 33,000

 
N/A

 
 i 2,426,000


 / 
The SARs give the holder the right to cash compensation based on the difference between the stock price on the grant date and the stock price on the exercise date. The SARs vest at a rate of  i 20% per year for  i five years and expire  i five years after vesting.
RS awards entitle the participant to full dividend and voting rights. Each RS share awarded has the value of one share of restricted stock and vests  i 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  i 10 years and most of these awards feature a graded vesting schedule in the case of the retirement, death or disability of an award holder. Restricted stock awards for  i 350,334 shares have been granted at an exercise price of  i zero, of which  i 10,000 shares are unvested.
RSU awards to our directors and advisory directors vest after one-year or upon earlier death, disability or retirement from service after age 65. Upon vesting, RSU awards are settled in cash based upon the market price of our common stock on the date of vesting.
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.
 i 
 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Weighted average shares outstanding
 i 26,881,700

 
 i 26,883,276

 
 i 26,883,699

 
 i 26,886,196

Incremental shares from RS awards and RSUs
 i 7,264

 
 i 26,981

 
 i 6,237

 
 i 46,927

Total shares for diluted calculations
 i 26,888,964

 
 i 26,910,257

 
 i 26,889,936

 
 i 26,933,123

Net income attributable to American National (in thousands)
$
 i 98,840

 
$
 i 84,139

 
$
 i 357,057

 
$
 i 102,916

Basic earnings per share
$
 i 3.68

 
$
 i 3.13

 
$
 i 13.28

 
$
 i 3.83

Diluted earnings per share
$
 i 3.67

 
$
 i 3.12

 
$
 i 13.28

 
$
 i 3.82





 / 

31

Table of Contents

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

Statutory Capital and Surplus
Risk Based Capital (“RBC”) is a measure insurance regulators use to evaluate the capital adequacy of American National Insurance Company and its insurance subsidiaries. RBC is calculated using formulas applied to certain financial balances and activities that consider, among other things, investment risks related to the type and quality of investments, insurance risks associated with products and liabilities, interest rate risks and general business risks. Insurance companies that do not maintain capital and surplus at a level at least  i 200% of the authorized control level RBC are required to take certain actions. At June 30, 2019 and December 31, 2018, American National Insurance Company’s statutory capital and surplus was $ i 3,403,062,000 and $ i 3,162,808,000, respectively. American National Insurance Company and each of its insurance subsidiaries had statutory capital and surplus at June 30, 2019 and December 31, 2018, substantially above  i 200% of the authorized control level.
American National and its insurance subsidiaries prepare statutory-basis financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of the state of domicile, which include certain components of the National Association of Insurance Commissioners’ Codification of Statutory Accounting Principles (“NAIC Codification”). NAIC Codification is intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting practices continue to be established by individual state laws and permitted practices. Modifications by the various state insurance departments may impact the statutory capital and surplus of American National Insurance Company and its insurance subsidiaries.
Statutory accounting differs from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions, and valuing securities on a different basis. In addition, certain assets are not admitted under statutory accounting principles and are charged directly to surplus.
One of American National’s insurance subsidiaries has been granted a permitted practice from the Missouri Department of Insurance to record as the valuation of its investment in a wholly-owned subsidiary that is the attorney-in-fact for a Texas domiciled insurer, the statutory capital and surplus of the Texas domiciled insurer. This permitted practice increases the statutory capital and surplus of both American National Insurance Company and the Missouri domiciled insurance subsidiary by $ i 66,699,000 and $ i 69,787,000 at June 30, 2019 and December 31, 2018, respectively. The statutory capital and surplus of both American National Insurance Company and the Missouri domiciled insurance subsidiary would have remained substantially above the Company action level RBC had it not used the permitted practice.

32

Table of Contents

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

 i 
The statutory capital and surplus and net income of our life and property and casualty insurance entities in accordance with statutory accounting practices are shown below (in thousands):
 
 
 
Statutory capital and surplus
 
 
 
 
Life insurance entities
 
$
 i 2,146,806

 
$
 i 1,989,586

Property and casualty insurance entities
 
 i 1,268,057

 
 i 1,183,913

 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Statutory net income (loss)
 
 
 
 
 
 
 
Life insurance entities
$
 i 12,782

 
$
 i 12,850

 
$
 i 5,698

 
$
 i 16,113

Property and casualty insurance entities
 i 12,344

 
( i 3,828
)
 
 i 50,464

 
 i 9,230


 / 
Dividends
We paid a dividend of $ i 0.82 for the three months ended June 30, 2019 and December 31, 2018. We expect to continue to pay regular cash dividends, although there is no assurance as to future dividends because they depend on future earnings, capital requirements and financial conditions.
 i American National Insurance Company’s payment of dividends to stockholders is restricted by insurance law. The restrictions require life insurance companies to maintain minimum amounts of capital and surplus, and in the absence of special approval, limit the payment of dividends to the greater of the prior year’s statutory net income from operations, or 10% of prior year statutory surplus. American National Insurance Company is permitted without prior approval of the Texas Department of Insurance to pay total dividends of $ i 316,281,000 during 2019. Similar restrictions on amounts that can transfer in the form of dividends, loans, or advances to American National Insurance Company apply to its insurance subsidiaries.
Noncontrolling interests
American National County Mutual Insurance Company (“County Mutual”) is a mutual insurance company owned by its policyholders. American National has a management agreement that effectively gives it control of County Mutual. As a result, County Mutual is included in the consolidated financial statements of American National. Policyholder interests in the financial position of County Mutual are reflected as noncontrolling interest of $ i 6,750,000 at June 30, 2019 and December 31, 2018.
American National Insurance Company and its subsidiaries exercise control or ownership of various joint ventures, resulting in their consolidation into American National’s consolidated financial statements. The interests of the other partners in the consolidated joint ventures are shown as noncontrolling interests of $ i 2,997,000 and $ i 7,517,000 at June 30, 2019 and December 31, 2018, respectively.


33

Table of Contents

Note 15 – Segment Information

 i 
Management organizes the business into  i five operating segments:
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—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—consists of Medicare Supplement, stop loss, other supplemental health products and credit disability insurance. Products are typically distributed through independent agents and managing general underwriters.
Property and Casualty—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—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 of American National’s 2018 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.
 / 

34

Table of Contents

Note 15 – Segment Information – (Continued)

 i 
The results of operations measured as the income before federal income tax and other items by operating segments are summarized below (in thousands):
 
Three months ended June 30, 2019
 
 
 
 
 
 
 
Property
 
Corporate
 
 
 
Life
 
Annuity
 
Health
 
& Casualty
 
& Other
 
Total
PREMIUMS AND OTHER REVENUES
 
 
 
 
 
 
 
 
 
 
 
Premiums
$
 i 86,087

 
$
 i 56,222

 
$
 i 42,224

 
$
 i 371,739

 
$
 i 

 
$
 i 556,272

Other policy revenues
 i 70,610

 
 i 4,536

 
 i 

 
 i 

 
 i 

 
 i 75,146

Net investment income
 i 63,916

 
 i 155,355

 
 i 2,376

 
 i 16,706

 
 i 19,377

 
 i 257,730

Net realized investment losses
 i 

 
 i 

 
 i 

 
 i 

 
( i 9,905
)
 
( i 9,905
)
Net gains on equity securities
 i 

 
 i 

 
 i 

 
 i 

 
 i 67,060

 
 i 67,060

Other income
 i 469

 
 i 574

 
 i 5,534

 
 i 2,830

 
 i 967

 
 i 10,374

Total premiums and other revenues
 i 221,082

 
 i 216,687

 
 i 50,134

 
 i 391,275

 
 i 77,499

 
 i 956,677

BENEFITS, LOSSES AND EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits
 i 104,462

 
 i 72,788

 
 i 

 
 i 

 
 i 

 
 i 177,250

Claims incurred
 i 

 
 i 

 
 i 26,708

 
 i 271,608

 
 i 

 
 i 298,316

Interest credited to policyholders’ account balances
 i 15,197

 
 i 108,490

 
 i 

 
 i 

 
 i 

 
 i 123,687

Commissions for acquiring and servicing policies
 i 40,881

 
 i 23,139

 
 i 8,692

 
 i 68,583

 
 i 

 
 i 141,295

Other operating expenses
 i 46,669

 
 i 13,349

 
 i 10,707

 
 i 49,681

 
 i 9,127

 
 i 129,533

Change in deferred policy acquisition costs
( i 9,205
)
 
( i 4,369
)
 
( i 146
)
 
( i 3,588
)
 
 i 

 
( i 17,308
)
Total benefits, losses and expenses
 i 198,004

 
 i 213,397

 
 i 45,961

 
 i 386,284

 
 i 9,127

 
 i 852,773

Income before federal income tax and other items
$
 i 23,078

 
$
 i 3,290

 
$
 i 4,173

 
$
 i 4,991

 
$
 i 68,372

 
$
 i 103,904

 
Three months ended June 30, 2018
 
 
 
 
 
 
 
Property
 
Corporate
 
 
 
Life
 
Annuity
 
Health
 
& Casualty
 
& Other
 
Total
PREMIUMS AND OTHER REVENUES
 
 
 
 
 
 
 
 
 
 
 
Premiums
$
 i 84,595

 
$
 i 67,228

 
$
 i 48,870

 
$
 i 360,047

 
$
 i 

 
$
 i 560,740

Other policy revenues
 i 67,231

 
 i 3,907

 
 i 

 
 i 

 
 i 

 
 i 71,138

Net investment income
 i 61,082

 
 i 148,710

 
 i 2,263

 
 i 15,493

 
 i 19,193

 
 i 246,741

Net realized investment gains
 i 

 
 i 

 
 i 

 
 i 

 
 i 5,007

 
 i 5,007

Net gains on equity securities
 i 

 
 i 

 
 i 

 
 i 

 
 i 57,162

 
 i 57,162

Other income
 i 512

 
 i 631

 
 i 6,809

 
 i 2,264

 
 i 1,067

 
 i 11,283

Total premiums and other revenues
 i 213,420

 
 i 220,476

 
 i 57,942

 
 i 377,804

 
 i 82,429

 
 i 952,071

BENEFITS, LOSSES AND EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits
 i 96,958

 
 i 82,103

 
 i 

 
 i 

 
 i 

 
 i 179,061

Claims incurred
 i 

 
 i 

 
 i 32,310

 
 i 280,126

 
 i 

 
 i 312,436

Interest credited to policyholders’ account balances
 i 21,046

 
 i 84,685

 
 i 

 
 i 

 
 i 

 
 i 105,731

Commissions for acquiring and servicing policies
 i 39,391

 
 i 30,355

 
 i 9,126

 
 i 70,865

 
 i 

 
 i 149,737

Other operating expenses
 i 48,189

 
 i 11,853

 
 i 10,090

 
 i 45,166

 
 i 8,649

 
 i 123,947

Change in deferred policy acquisition costs
( i 7,249
)
 
( i 8,811
)
 
 i 506

 
( i 4,562
)
 
 i 

 
( i 20,116
)
Total benefits, losses and expenses
 i 198,335

 
 i 200,185

 
 i 52,032

 
 i 391,595

 
 i 8,649

 
 i 850,796

Income (loss) before federal income tax and other items
$
 i 15,085

 
$
 i 20,291

 
$
 i 5,910

 
$
( i 13,791
)
 
$
 i 73,780

 
$
 i 101,275

 / 

35

Table of Contents

Note 15 – Segment Information – (Continued)

 
Six months ended June 30, 2019
 
 
 
 
 
 
 
Property
 
Corporate
 
 
 
Life
 
Annuity
 
Health
 
& Casualty
 
& Other
 
Total
PREMIUMS AND OTHER REVENUES
 
 
 
 
 
 
 
 
 
 
 
Premiums
$
 i 172,555

 
$
 i 96,129

 
$
 i 80,905

 
$
 i 742,920

 
$
 i 

 
$
 i 1,092,509

Other policy revenues
 i 140,854

 
 i 8,540

 
 i 

 
 i 

 
 i 

 
 i 149,394

Net investment income
 i 132,672

 
 i 346,066

 
 i 4,796

 
 i 31,728

 
 i 34,814

 
 i 550,076

Net realized investment losses
 i 

 
 i 

 
 i 

 
 i 

 
( i 6,958
)
 
( i 6,958
)
Net gains on equity securities
 i 

 
 i 

 
 i 

 
 i 

 
 i 273,437

 
 i 273,437

Other income
 i 1,145

 
 i 1,263

 
 i 10,919

 
 i 5,552

 
 i 3,033

 
 i 21,912

Total premiums and other revenues
 i 447,226

 
 i 451,998

 
 i 96,620

 
 i 780,200

 
 i 304,326

 
 i 2,080,370

BENEFITS, LOSSES AND EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits
 i 213,927

 
 i 131,549

 
 i 

 
 i 

 
 i 

 
 i 345,476

Claims incurred
 i 

 
 i 

 
 i 52,475

 
 i 509,752

 
 i 

 
 i 562,227

Interest credited to policyholders’ account balances
 i 35,516

 
 i 229,405

 
 i 

 
 i 

 
 i 

 
 i 264,921

Commissions for acquiring and servicing policies
 i 78,623

 
 i 50,005

 
 i 15,570

 
 i 135,742

 
 i 

 
 i 279,940

Other operating expenses
 i 95,647

 
 i 25,823

 
 i 21,699

 
 i 101,566

 
 i 18,408

 
 i 263,143

Change in deferred policy acquisition costs
( i 14,040
)
 
( i 7,389
)
 
 i 661

 
( i 3,171
)
 
 i 

 
( i 23,939
)
Total benefits, losses and expenses
 i 409,673

 
 i 429,393

 
 i 90,405

 
 i 743,889

 
 i 18,408

 
 i 1,691,768

Income before federal income tax and other items
$
 i 37,553

 
$
 i 22,605

 
$
 i 6,215

 
$
 i 36,311

 
$
 i 285,918

 
$
 i 388,602

 
Six months ended June 30, 2018
 
 
 
 
 
 
 
Property
 
Corporate
 
 
 
Life
 
Annuity
 
Health
 
& Casualty
 
& Other
 
Total
PREMIUMS AND OTHER REVENUES
 
 
 
 
 
 
 
 
 
 
 
Premiums
$
 i 165,971

 
$
 i 137,844

 
$
 i 89,885

 
$
 i 712,020

 
$
 i 

 
$
 i 1,105,720

Other policy revenues
 i 134,962

 
 i 7,515

 
 i 

 
 i 

 
 i 

 
 i 142,477

Net investment income
 i 118,850

 
 i 262,190

 
 i 4,617

 
 i 31,354

 
 i 38,399

 
 i 455,410

Net realized investment gains
 i 

 
 i 

 
 i 

 
 i 

 
 i 6,051

 
 i 6,051

Net gains on equity securities
 i 

 
 i 

 
 i 

 
 i 

 
 i 23,992

 
 i 23,992

Other income
 i 1,267

 
 i 1,356

 
 i 11,966

 
 i 4,327

 
 i 2,880

 
 i 21,796

Total premiums and other revenues
 i 421,050

 
 i 408,905

 
 i 106,468

 
 i 747,701

 
 i 71,322

 
 i 1,755,446

BENEFITS, LOSSES AND EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits
 i 195,504

 
 i 166,849

 
 i 

 
 i 

 
 i 

 
 i 362,353

Claims incurred
 i 

 
 i 

 
 i 60,450

 
 i 522,616

 
 i 

 
 i 583,066

Interest credited to policyholders’ account balances
 i 37,311

 
 i 138,965

 
 i 

 
 i 

 
 i 

 
 i 176,276

Commissions for acquiring and servicing policies
 i 78,911

 
 i 60,359

 
 i 15,142

 
 i 140,021

 
 i 

 
 i 294,433

Other operating expenses
 i 99,139

 
 i 23,172

 
 i 20,448

 
 i 92,967

 
 i 18,615

 
 i 254,341

Change in deferred policy acquisition costs
( i 13,692
)
 
( i 17,684
)
 
 i 1,594

 
( i 7,300
)
 
 i 

 
( i 37,082
)
Total benefits, losses and expenses
 i 397,173

 
 i 371,661

 
 i 97,634

 
 i 748,304

 
 i 18,615

 
 i 1,633,387

Income (loss) before federal income tax and other items
$
 i 23,877

 
$
 i 37,244

 
$
 i 8,834

 
$
( i 603
)
 
$
 i 52,707

 
$
 i 122,059




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Note 16 – Commitments and Contingencies

 i 
Commitments

American National and its subsidiaries lease insurance sales office space, technological equipment, and automobiles. The remaining long-term lease commitments at June 30, 2019 were approximately $ i 18,093,000.

American National had aggregate commitments at June 30, 2019, to purchase, expand or improve real estate, to fund fixed interest rate mortgage loans, and to purchase other invested assets of $ i 1,136,972,000 of which $ i 558,493,000 is expected to be funded in 2019 with the remainder funded in 2020 and beyond.

American National has a $ i 100,000,000 short-term variable rate borrowing facility containing a $ i 55,000,000 sub-feature for the issuance of letters of credit. Borrowings under the facility are at the discretion of the lender and would be used only for funding working capital requirements. The combination of borrowings and outstanding letters of credit cannot exceed $ i 100,000,000 at any time. As of June 30, 2019 and December 31, 2018, the outstanding letters of credit were $ i 4,006,000 and $ i 2,995,000, respectively, and there were no borrowings on this facility. This facility expires on  i October 31, 2019.

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. As membership requires the ownership of member stock, the Company purchased $ i 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 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 June 30, 2019, certain collateralized mortgage obligations (CMO’s) with a fair value of approximately $ i 136.2 million were on deposit with the FHLB as collateral for amounts subject to funding agreements. The deposited securities are included in bonds held-to-maturity on the Company’s consolidated statements of financial position.

Guarantees

American National has guaranteed bank loans for customers of a third-party marketing operation. The bank loans are used to fund premium payments on life insurance policies issued by American National. The loans are secured by the cash values of the life insurance policies. If the customer were to default on a bank loan, American National would be obligated to pay off the loan. As the cash values of the life insurance policies always equal or exceed the balance of the loans, management does not foresee any loss on these guarantees. The total amount of the guarantees outstanding as of June 30, 2019, was approximately $ i 136,074,000, while the total cash value of the related life insurance policies was approximately $ i 142,021,000.

Litigation

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

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


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Note 17 – Related Party Transactions

 i 
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.  i The impact on the consolidated financial statements of significant related party transactions is shown below (in thousands):
 
 
 
 
Dollar Amount of Transactions
 
 
 
 
 
 
Six months ended June 30,
 
Amount due to (from) American National
Related Party
 
Financial Statement Line Impacted
 
2019
 
2018
 
 
Gal-Tex Hotel Corporation
 
Mortgage loan on real estate
 
$
 i 576

 
$
 i 809

 
$
 i 

 
$
 i 576

Gal-Tex Hotel Corporation
 
Net investment income
 
 i 9

 
 i 68

 
 i 

 
 i 3

Greer, Herz & Adams, LLP
 
Other operating expenses
 
 i 5,896

 
 i 5,379

 
( i 494
)
 
( i 329
)

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  i 7.25% and final maturity date of  i 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  i 34.0% of Gal-Tex and  i 22.75% of American National, and the Libbie Shearn Moody Trust owns  i 50.2% of Gal-Tex and  i 37.0% of American National.
Transactions with Greer, Herz & Adams, LLP: Irwin M. Herz, Jr. is a director on the American National Board of Directors and a Partner with Greer, Herz & Adams, LLP, which serves as American National’s General Counsel.
 / 
Note 18 –  i Subsequent events

On July 1, 2019, the Company sold investment real estate in a consolidated joint venture. Total proceeds from the sale were approximately $ i 27.4 million, and we recognized a pre-tax gain on this sale of approximately $ i 19.0 million. This gain will be recognized in "Net realized investment gains" in the third quarter consolidated statements of operations.

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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 six months ended June 30, 2019 and 2018 of American National Insurance Company and its subsidiaries (referred to in this document as “we”, “our”, “us”, or the “Company”). This information should be read in conjunction with our consolidated financial statements included in Item 1, Financial Statements (unaudited), of this Form 10-Q.

Forward-Looking Statements
This document contains forward-looking statements that reflect our estimates and assumptions related to business, economic, competitive and legislative developments. Forward-looking statements generally are indicated by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “estimates,” “will” or words of similar meaning and include, without limitation, statements regarding the outlook of our business and expected financial performance. Forward-looking statements are not guarantees of future performance and involve various risks and uncertainties. Moreover, forward-looking statements speak only as of the date made, and we undertake no obligation to update them. Certain important factors could cause our actual results to differ, possibly materially, from our expectations or estimates. These factors are described in greater detail in Item IA, Risk Factors, in our 2018 Annual Report on Form 10-K filed with the SEC on February 28, 2019 and they include among others:
Economic & Investment Risk Factors
the 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;
risk of investment losses and defaults;
Operational Risk Factors
differences between actual experience regarding mortality, morbidity, persistency, expense, surrenders and investment returns, and our assumptions for product pricing, establishing liabilities and reserves or for other purposes;
potential ineffectiveness of our risk management policies and procedures;
changes in our experience related to deferred policy acquisition costs;
failures or limitations of our computer, information security and administration systems;
potential employee error or misconduct, which may result in fraud or adversely affect the execution and administration of our policies and claims;
potential ineffectiveness of our internal controls over financial reporting;
Catastrophic Event Risk Factors
natural or man-made catastrophes, pandemic disease, or other events resulting in increased claims activity from catastrophic loss of life or property;
the effects of unanticipated events on our disaster recovery and business continuity planning;

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Table of Contents

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 our reputation;
significant changes in government regulation;
changes in tax law;
changes in statutory or U.S. generally accepted accounting principles (“GAAP”), practices or policies;
Reinsurance and Counterparty Risk Factors
potential changes in the availability, affordability, adequacy and collectability of reinsurance protection;
potential default or failure to perform by the counterparties to our reinsurance arrangements and derivative instruments;
Other Risk Factors
potentially adverse rating agency actions;
control of our company by a small number of stockholders; and
advances in medical technology and testing, which may increase our adverse selection risk.
Overview
Chartered in 1905, we are a diversified insurance and financial services company offering a broad spectrum of insurance products in all 50 states, the District of Columbia and Puerto Rico. Our headquarters are in Galveston, Texas.
General Trends
American National had no material changes to the general trends discussed in the MD&A included in our 2018 Annual Report on Form 10-K filed with the SEC on February 28, 2019.
Critical Accounting Estimates
The unaudited interim consolidated financial statements have been prepared in conformity with GAAP. In addition to GAAP, insurance companies apply specific SEC regulations when preparing the consolidated financial statements. The preparation of the consolidated financial statements and notes requires us to make estimates and assumptions that affect the amounts reported. Actual results could differ from results reported using those estimates and assumptions. Our accounting policies inherently require the use of 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 consolidated financial statements.
For a discussion of our critical accounting estimates, see the MD&A in our 2018 Annual Report on Form 10-K filed with the SEC on February 28, 2019. There have been no material changes in accounting policies since December 31, 2018.
Recently Issued Accounting Pronouncements
Refer to Note 3, Recently Issued Accounting Pronouncements, of the Notes to the Unaudited Consolidated Financial Statements in Item 1.

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Consolidated Results of Operations
The following sets forth the consolidated results of operations (in thousands):
 
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
PREMIUMS AND OTHER REVENUES
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
556,272

 
$
560,740

 
$
(4,468
)
 
$
1,092,509

 
$
1,105,720

 
$
(13,211
)
Other policy revenues
 
75,146

 
71,138

 
4,008

 
149,394

 
142,477

 
6,917

Net investment income
 
257,730

 
246,741

 
10,989

 
550,076

 
455,410

 
94,666

Net realized investments gains (losses)
 
(9,905
)
 
5,007

 
(14,912
)
 
(6,958
)
 
6,051

 
(13,009
)
Net gains on equity securities
 
67,060

 
57,162

 
9,898

 
273,437

 
23,992

 
249,445

Other income
 
10,374

 
11,283

 
(909
)
 
21,912

 
21,796

 
116

Total premiums and other revenues
 
956,677

 
952,071

 
4,606

 
2,080,370

 
1,755,446

 
324,924

BENEFITS, LOSSES AND EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits
 
177,250

 
179,061

 
(1,811
)
 
345,476

 
362,353

 
(16,877
)
Claims incurred
 
298,316

 
312,436

 
(14,120
)
 
562,227

 
583,066

 
(20,839
)
Interest credited to policyholders’ account balances
 
123,687

 
105,731

 
17,956

 
264,921

 
176,276

 
88,645

Commissions for acquiring and servicing policies
 
141,295

 
149,737

 
(8,442
)
 
279,940

 
294,433

 
(14,493
)
Other operating expenses
 
129,533

 
123,947

 
5,586

 
263,143

 
254,341

 
8,802

Change in deferred policy acquisition costs (1)
 
(17,308
)
 
(20,116
)
 
2,808

 
(23,939
)
 
(37,082
)
 
13,143

Total benefits, losses and expenses
 
852,773

 
850,796

 
1,977

 
1,691,768

 
1,633,387

 
58,381

Income before federal income taxes other items
 
$
103,904

 
$
101,275

 
$
2,629

 
$
388,602

 
$
122,059

 
$
266,543

 
(1)
A negative amount of net change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.
A positive amount of net change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.
Income before other items and federal income taxes (“Earnings”)
Earnings increased during the three and six months ended June 30, 2019 compared to 2018 primarily due to an increase in net gains on equity securities, as well as improvements in the earnings generated from our Property and Casualty and Life Segments.



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Table of Contents

Life
Life segment financial results for the periods indicated were as follows (in thousands):
 
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
PREMIUMS AND OTHER REVENUES
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
86,087

 
$
84,595

 
$
1,492

 
$
172,555

 
$
165,971

 
$
6,584

Other policy revenues
 
70,610

 
67,231

 
3,379

 
140,854

 
134,962

 
5,892

Net investment income
 
63,916

 
61,082

 
2,834

 
132,672

 
118,850

 
13,822

Other income
 
469

 
512

 
(43
)
 
1,145

 
1,267

 
(122
)
Total premiums and other revenues
 
221,082

 
213,420

 
7,662

 
447,226

 
421,050

 
26,176

BENEFITS, LOSSES AND EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits
 
104,462

 
96,958

 
7,504

 
213,927

 
195,504

 
18,423

Interest credited to policyholders’ account balances
 
15,197

 
21,046

 
(5,849
)
 
35,516

 
37,311

 
(1,795
)
Commissions for acquiring and servicing policies
 
40,881

 
39,391

 
1,490

 
78,623

 
78,911

 
(288
)
Other operating expenses
 
46,669

 
48,189

 
(1,520
)
 
95,647

 
99,139

 
(3,492
)
Change in deferred policy acquisition costs (1)
 
(9,205
)
 
(7,249
)
 
(1,956
)
 
(14,040
)
 
(13,692
)
 
(348
)
Total benefits, losses and expenses
 
198,004

 
198,335

 
(331
)
 
409,673

 
397,173

 
12,500

Income before federal income taxes and other items
 
$
23,078

 
$
15,085

 
$
7,993

 
$
37,553

 
$
23,877

 
$
13,676


(1)
A negative amount of net change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.
A positive amount of net change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.
Earnings
The increase in life earnings during the three and six months ended June 30, 2019 is primarily attributable to improved mortality experience compared to the same time periods year over year.  This improved mortality experience leads to larger reserve increases resulting in growth of the asset base earning net investment income.
Premiums and other revenues
Premiums increased during the three and six months ended June 30, 2019 compared to 2018 primarily due to continued growth in renewal premium on traditional life products.
Other policy revenues increased during the three and six months ending June 30, 2019 primarily due to higher cost of insurance charges and earned policy services fees as the size of our interest sensitive block continues to grow, through increased sales and aging of the in-force.

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Table of Contents

Life insurance sales
The following table presents life insurance sales as measured by annualized premium, a non-GAAP measure used by the insurance industry, which allows a comparison of new policies sold by an insurance company during the period (in thousands):
 
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Traditional Life
 
$
14,711

 
$
15,367

 
$
(656
)
 
$
28,698

 
$
30,489

 
$
(1,791
)
Universal Life
 
7,557

 
6,195

 
1,362

 
13,697

 
12,104

 
1,593

Indexed UL
 
9,035

 
7,821

 
1,214

 
17,001

 
15,284

 
1,717

Total recurring
 
$
31,303

 
$
29,383

 
$
1,920

 
$
59,396

 
$
57,877

 
$
1,519

Single and excess (1)
 
$
482

 
$
752

 
$
(270
)
 
$
915

 
$
1,214

 
$
(299
)
Credit life (1)
 
2,855

 
2,202

 
653

 
5,468

 
4,178

 
1,290

Total annualized premium
 
$
34,640

 
$
32,337

 
$
2,303

 
$
65,779

 
$
63,269

 
$
2,510

 
(1)
These are weighted amounts representing 10% of single and excess premiums and 44% and 31% of Credit Life premiums for 2019 and 2018, respectively.
Life insurance sales are based on the total yearly premium that insurance companies would expect to receive if all recurring premium policies would remain in force, plus 10% of single and excess premiums and 31% of Credit Life premium. Life insurance sales measure activity associated with gaining new insurance business in the current period, and includes deposits received related to interest sensitive life and universal life-type products. GAAP premium revenues, 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.
Life insurance sales increased during the three and six months ended June 30, 2019 compared to 2018 primarily due to increased Universal Life and Indexed Universal Life sales, respectively.
Benefits, losses and expenses
Policyholder benefits increased during the three and six months ended June 30, 2019 compared to 2018. An improvement in mortality experience was more than offset by an increase in traditional life reserves.

The following table presents the components of the change in DAC (in thousands):
 
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Acquisition cost capitalized
 
$
33,656

 
$
32,953

 
$
703

 
$
64,419

 
$
65,577

 
$
(1,158
)
Amortization of DAC
 
(24,451
)
 
(25,704
)
 
1,253

 
(50,379
)
 
(51,885
)
 
1,506

Change in DAC
 
$
9,205

 
$
7,249

 
$
1,956

 
$
14,040

 
$
13,692

 
$
348



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Table of Contents

Policy in-force information
The following table summarizes changes in the Life segment’s in-force amounts (in thousands):
 
 
 
 
Change
Life insurance in-force
 
 
 
 
 
 
Traditional life
 
$
81,545,128

 
$
78,872,533

 
$
2,672,595

Interest-sensitive life
 
32,757,720

 
31,483,582

 
1,274,138

Total life insurance in-force
 
$
114,302,848

 
$
110,356,115

 
$
3,946,733

The following table summarizes changes in the Life segment’s number of policies in-force:
 
 
 
 
Change
Number of policies in-force
 
 
 
 
 
 
Traditional life
 
1,744,941

 
1,763,028

 
(18,087
)
Interest-sensitive life
 
249,856

 
243,447

 
6,409

Total number of policies in-force
 
1,994,797

 
2,006,475

 
(11,678
)
Total life insurance in-force increased during the six months ended June 30, 2019 compared to December 31, 2018 despite a reduction of policies in-force due to the increased sales of higher face amount policies.

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Annuity
Annuity segment financial results for the periods indicated were as follows (in thousands):
 
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
PREMIUMS AND OTHER REVENUES
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
56,222

 
$
67,228

 
$
(11,006
)
 
$
96,129

 
$
137,844

 
$
(41,715
)
Other policy revenues
 
4,536

 
3,907

 
629

 
8,540

 
7,515

 
1,025

Net investment income
 
155,355

 
148,710

 
6,645

 
346,066

 
262,190

 
83,876

Other income
 
574

 
631

 
(57
)
 
1,263

 
1,356

 
(93
)
Total premiums and other revenues
 
216,687

 
220,476

 
(3,789
)
 
451,998

 
408,905

 
43,093

BENEFITS, LOSSES AND EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
Policyholder benefits
 
72,788

 
82,103

 
(9,315
)
 
131,549

 
166,849

 
(35,300
)
Interest credited to policyholders’ account balances
 
108,490

 
84,685

 
23,805

 
229,405

 
138,965

 
90,440

Commissions for acquiring and servicing policies
 
23,139

 
30,355

 
(7,216
)
 
50,005

 
60,359

 
(10,354
)
Other operating expenses
 
13,349

 
11,853

 
1,496

 
25,823

 
23,172

 
2,651

Change in deferred policy acquisition costs (1)
 
(4,369
)
 
(8,811
)
 
4,442

 
(7,389
)
 
(17,684
)
 
10,295

Total benefits, losses and expenses
 
213,397

 
200,185

 
13,212

 
429,393

 
371,661

 
57,732

Income before federal income taxes and other items
 
$
3,290

 
$
20,291

 
$
(17,001
)
 
$
22,605

 
$
37,244

 
$
(14,639
)

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

Earnings
The decrease in earnings from our Annuity segment for the second quarter and first half of 2019 compared to the same periods in 2018, was primarily attributable to a reduction in the margins on our fixed and indexed annuity products. The margins on our fixed annuity products were reduced primarily from spread compression resulting from a declining portfolio yield. Also, the margins on our indexed annuity products experienced unfavorable mark-to-market volatility related to interest rate decreases in the second quarter that outweighed the impact of a favorable effect of equity markets.
Premiums and other revenues
Annuity premium and deposit amounts received are shown below (in thousands):
 
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Fixed deferred annuity
 
$
311,269

 
$
86,768

 
$
224,501

 
$
832,517

 
$
165,894

 
$
666,623

Single premium immediate annuity
 
77,879

 
85,412

 
(7,533
)
 
134,008

 
165,224

 
(31,216
)
Equity-indexed deferred annuity
 
106,098

 
304,839

 
(198,741
)
 
206,844

 
578,610

 
(371,766
)
Variable deferred annuity
 
16,012

 
17,075

 
(1,063
)
 
32,111

 
32,747

 
(636
)
Total premium and deposits
 
511,258

 
494,094

 
17,164

 
1,205,480

 
942,475

 
263,005

Less: Policy deposits
 
455,036

 
426,866

 
28,170

 
1,109,351

 
804,631

 
304,720

Total earned premiums
 
$
56,222

 
$
67,228

 
$
(11,006
)
 
$
96,129

 
$
137,844

 
$
(41,715
)
Sales increased during the three and six months ended June 30, 2019 driven by an increase in fixed deferred products partially offset by a decline in equity-indexed products. Deferred products are deposit type contracts and do not contribute to earned premiums. Earned premiums consist of single premium immediate annuity sales, which decreased during the three and six months ended June 30, 2019 compared to 2018.

45

Table of Contents

Shown below are the changes in reserves (in thousands):
 
 
Six months ended June 30,
 
 
2019
 
2018
Fixed deferred annuity
 
 
 
 
Reserve, beginning of period
 
$
6,773,603

 
$
7,108,254

Premiums
 
832,517

 
165,894

Net flows other than surrenders
 
(117,126
)
 
(136,040
)
Surrenders
 
(453,917
)
 
(296,713
)
Fees
 
(1,516
)
 
(1,677
)
Interest and mortality
 
101,243

 
97,492

Reserve, end of period
 
7,134,804

 
6,937,210

Equity-indexed annuity
 
 
 
 
Reserves, beginning period
 
3,668,645

 
2,934,430

Premiums
 
206,844

 
578,610

Net flows other than surrenders
 
(16,946
)
 
(20,852
)
Surrenders
 
(85,951
)
 
(67,996
)
Fees
 
(1,922
)
 
(1,985
)
Interest and mortality
 
126,454

 
39,243

Reserve, end of period
 
3,897,124

 
3,461,450

Single premium immediate annuity
 
 
 
 
Reserve, beginning of period
 
1,826,137

 
1,691,502

Premiums
 
134,008

 
165,224

Net flows other than premiums
 
(106,973
)
 
(101,600
)
Interest and mortality
 
29,896

 
28,920

Reserve, end of period
 
1,883,068

 
1,784,046

Variable deferred annuity
 
 
 
 
Account value, beginning of period
 
332,898

 
381,903

Premiums
 
32,111

 
32,747

Net flows other than premiums and surrenders
 
987

 
124

Surrenders
 
(42,217
)
 
(50,417
)
Fees
 
(2,338
)
 
(2,306
)
Change in market value and other
 
48,712

 
8,403

Reserve, end of period
 
370,153

 
370,454

Total reserve, end of period
 
$
13,285,149

 
$
12,553,160


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Table of Contents

Benefits, losses and expenses
Policyholder benefits consist of annuity payments and reserve increases for SPIA contracts. Reserve increases are highly correlated to the sales volume of SPIA contracts, which explains the change in benefits for the three and six months ended June 30, 2019 compared to 2018.
Commissions decreased during the three and six months ended June 30, 2019 compared to 2018 driven by a decrease in sales of equity-indexed products, which have a higher commission rate.
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 June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Acquisition cost capitalized
 
$
23,091

 
$
30,174

 
$
(7,083
)
 
$
48,168

 
$
59,691

 
$
(11,523
)
Amortization of DAC
 
(18,722
)
 
(21,363
)
 
2,641

 
(40,779
)
 
(42,007
)
 
1,228

Change in DAC
 
$
4,369

 
$
8,811

 
$
(4,442
)
 
$
7,389

 
$
17,684

 
$
(10,295
)
The change in DAC decreased during the three and six months ended June 30, 2019 compared to 2018 due to lower commissions.
Interest Margin
As mentioned earlier, fixed annuity margins compressed as a result of declining portfolio yield, and this emerged gradually over the past two quarters. Indexed margins experienced unfavorable mark-to-market volatility related to interest rate decreases in the second quarter that outweighed the favorable effect of stock market growth in the first quarter. 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 June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Fixed annuity
 
 
 
 
 
 
 
 
 
 
 
 
Fixed investment income
 
$
97,099

 
$
96,066

 
$
1,033

 
$
191,491

 
$
192,316

 
$
(825
)
Interest credited and mortality
 
(67,746
)
 
(63,301
)
 
(4,445
)
 
(131,139
)
 
(126,412
)
 
(4,727
)
Interest and mortality margin
 
29,353

 
32,765

 
(3,412
)
 
60,352

 
65,904

 
(5,552
)
Equity-indexed annuity
 
 
 
 
 
 
 
 
 
 
 
 
Fixed investment income
 
37,692

 
32,980

 
4,712

 
74,715

 
63,266

 
11,449

Option return
 
20,565

 
19,664

 
901

 
79,861

 
6,607

 
73,254

Interest credited and mortality
 
(54,213
)
 
(35,253
)
 
(18,960
)
 
(126,454
)
 
(39,243
)
 
(87,211
)
Interest and mortality margin
 
4,044

 
17,391

 
(13,347
)
 
28,122

 
30,630

 
(2,508
)
Variable annuity
 
 
 
 
 
 
 
 
 
 
 
 
Separate account management fees
 
1,041

 
1,066

 
(25
)
 
2,016

 
2,141

 
(125
)
Interest and mortality margin
 
1,041

 
1,066

 
(25
)
 
2,016

 
2,141

 
(125
)
Total interest and mortality margin
 
$
34,438

 
$
51,222

 
$
(16,784
)
 
$
90,490

 
$
98,675

 
$
(8,185
)

47

Table of Contents

Health
Health segment financial results for the periods indicated were as follows (in thousands):
 
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
PREMIUMS AND OTHER REVENUES
 
 
 
 
 
 
 
 
 
 
 
 
Premiums
 
$
42,224

 
$
48,870

 
$
(6,646
)
 
$
80,905

 
$
89,885

 
$
(8,980
)
Net investment income
 
2,376

 
2,263

 
113

 
4,796

 
4,617

 
179

Other income
 
5,534

 
6,809

 
(1,275
)
 
10,919

 
11,966

 
(1,047
)
Total premiums and other revenues
 
50,134

 
57,942

 
(7,808
)
 
96,620

 
106,468

 
(9,848
)
BENEFITS, LOSSES AND EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
Claims incurred
 
26,708

 
32,310

 
(5,602
)
 
52,475

 
60,450

 
(7,975
)
Commissions for acquiring and servicing policies
 
8,692

 
9,126

 
(434
)
 
15,570

 
15,142

 
428

Other operating expenses
 
10,707

 
10,090

 
617

 
21,699

 
20,448

 
1,251

Change in deferred policy acquisition costs (1)
 
(146
)
 
506

 
(652
)
 
661

 
1,594

 
(933
)
Total benefits, losses and expenses
 
45,961

 
52,032

 
(6,071
)
 
90,405

 
97,634

 
(7,229
)
Income before federal income taxes and other items
 
$
4,173

 
$
5,910

 
$
(1,737
)
 
$
6,215

 
$
8,834

 
$
(2,619
)
 
(1)
A negative amount of net change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.
A positive amount of net change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.
Earnings
Earnings decreased during the three and six months ended June 30, 2019 compared to 2018, primarily due to a reduction in premium and a slight increase in operating expense.

Premiums and other revenues
Health earned premiums for the periods indicated were as follows (in thousands, except percentages):
 
 
Three months ended June 30,
 
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
 
2019
 
2018
 
Change
Medicare Supplement
 
$
18,870

 
$
17,638

 
$
1,232

 
 
$
37,229

 
$
34,904

 
$
2,325

MGU
 
8,562

 
15,635

 
(7,073
)
 
 
14,986

 
23,002

 
(8,016
)
Supplemental insurance
 
5,434

 
6,657

 
(1,223
)
 
 
10,889

 
13,314

 
(2,425
)
Credit Health
 
4,582

 
4,425

 
157

 
 
8,983

 
8,915

 
68

Medical expense
 
2,411

 
2,809

 
(398
)
 
 
4,847

 
5,683

 
(836
)
All other
 
2,365

 
1,706

 
659

 
 
3,971

 
4,067

 
(96
)
Total
 
$
42,224

 
$
48,870

 
$
(6,646
)
 
 
$
80,905

 
$
89,885

 
$
(8,980
)
Earned premiums decreased during the three and six months ended June 30, 2019 compared to 2018. The termination of two MGU programs led to the decrease in MGU premium. Group health premiums decreased due to the absence of a group health plan that was not renewed.

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Table of Contents

Health claims incurred for the periods indicated were as follows (in thousands):
 
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Medicare Supplement
 
$
15,282

 
$
13,451

 
$
1,831

 
$
30,418

 
$
26,667

 
$
3,751

MGU
 
6,665

 
13,992

 
(7,327
)
 
12,761

 
20,462

 
(7,701
)
Supplemental insurance
 
2,261

 
1,971

 
290

 
4,272

 
4,337

 
(65
)
Credit Health
 
437

 
1,110

 
(673
)
 
1,473

 
2,362

 
(889
)
Medical expense
 
1,262

 
2,046

 
(784
)
 
2,363

 
3,603

 
(1,240
)
All other
 
801

 
(260
)
 
1,061

 
1,188

 
3,019

 
(1,831
)
Total
 
$
26,708

 
$
32,310

 
$
(5,602
)
 
$
52,475

 
$
60,450

 
$
(7,975
)
Benefits, losses and expenses
Claims incurred decreased during the three and six months ended June 30, 2019 compared to 2018 largely driven by lower MGU claims correlated with the decrease in premiums along with the absence of a group health plan that was not renewed.

Commissions decreased during the three months ended June 30, 2019 compared to 2018 primarily due to lower MGU premiums. Commissions increased during the six months ended June 30, 2019 compared to 2018 primarily due to higher commissions in the Credit Health 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 June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Acquisition cost capitalized
 
$
3,457

 
$
3,119

 
$
338

 
$
6,544

 
$
5,931

 
$
613

Amortization of DAC
 
(3,311
)
 
(3,625
)
 
314

 
(7,205
)
 
(7,525
)
 
320

Change in DAC
 
$
146

 
$
(506
)
 
$
652

 
$
(661
)
 
$
(1,594
)
 
$
933



49

Table of Contents

Property and Casualty
Property and Casualty segment financial results for the periods indicated were as follows (in thousands, except percentages):
 
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
PREMIUMS AND OTHER REVENUES
 
 
 
 
 
 
 
 
 
 
 
 
Net premiums written
 
$
403,977

 
$
395,676

 
$
8,301

 
$
789,653

 
$
775,181

 
$
14,472

Net premiums earned
 
$
371,739

 
$
360,047

 
$
11,692

 
$
742,920

 
$
712,020

 
$
30,900

Net investment income
 
16,706

 
15,493

 
1,213

 
31,728

 
31,354

 
374

Other income
 
2,830

 
2,264

 
566

 
5,552

 
4,327

 
1,225

Total premiums and other revenues
 
391,275

 
377,804

 
13,471

 
780,200

 
747,701

 
32,499

BENEFITS, LOSSES AND EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
Claims incurred
 
271,608

 
280,126

 
(8,518
)
 
509,752

 
522,616

 
(12,864
)
Commissions for acquiring and servicing policies
 
68,583

 
70,865

 
(2,282
)
 
135,742

 
140,021

 
(4,279
)
Other operating expenses
 
49,681

 
45,166

 
4,515

 
101,566

 
92,967

 
8,599

Change in deferred policy acquisition costs (1)
 
(3,588
)
 
(4,562
)
 
974

 
(3,171
)
 
(7,300
)
 
4,129

Total benefits, losses and expenses
 
386,284

 
391,595

 
(5,311
)
 
743,889

 
748,304

 
(4,415
)
Income (Loss) before federal income taxes and other items
 
$
4,991

 
$
(13,791
)
 
$
18,782

 
$
36,311

 
$
(603
)
 
$
36,914

Loss ratio
 
73.1
%
 
77.8
%
 
(4.7
)%
 
68.6
%
 
73.4
%
 
(4.8
)%
Underwriting expense ratio
 
30.8

 
31.0

 
(0.2
)
 
31.5

 
31.7

 
(0.2
)
Combined ratio
 
103.9
%
 
108.8
%
 
(4.9
)%
 
100.1
%
 
105.1
%
 
(5.0
)%
Impact of catastrophe events on combined ratio
 
7.7

 
11.8

 
(4.1
)
 
5.9

 
7.1

 
(1.2
)
Combined ratio without impact of catastrophe events
 
96.2
%
 
97.0
%
 
(0.8
)%
 
94.2
%
 
98.0
%
 
(3.8
)%
Gross catastrophe losses
 
$
28,234

 
$
42,529

 
$
(14,295
)
 
$
44,004

 
$
50,831

 
$
(6,827
)
Net catastrophe losses
 
$
28,616

 
$
42,121

 
$
(13,505
)
 
$
44,210

 
$
53,003

 
$
(8,793
)
 
(1)
A negative amount of net change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.
A positive amount of net change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.
Earnings
Property and Casualty earnings increased during the three and six months ended June 30, 2019 compared to 2018. The largest increases were in the personal lines of business, primarily due to lower catastrophe losses during the three months ended June 30, 2019 and lower catastrophe and non-catastrophe losses during the six months ended June 30, 2019.
Premiums and other revenues
Net premiums written and earned increased for all major personal and commercial lines of business during the three and six months ended June 30, 2019 compared to 2018. The largest increase in net earned premiums for the three and six month periods was in the personal auto line of business.
Benefits, losses and expenses
Claims decreased during the three and six months ended June 30, 2019 compared to 2018 due to decreases in catastrophe losses, particularly in the personal auto and homeowners lines of business.

Commissions decreased during the three and six months ended June 30, 2019 compared to 2018 primarily due to a decrease in Collateral Protection Insurance ("CPI") business.

Operating expenses increased during the three and six months ended June 30, 2019 compared to 2018, but were a lower percentage of earned premiums.





50

Table of Contents

Products
Our Property and Casualty segment consists of: (i) Personal products, marketed primarily to individuals, representing 58.0% of net premiums written; (ii) Commercial products, focused primarily on agricultural and other business related markets, representing 35.0% of net premiums written; and (iii) Credit-related property insurance products, marketed to and through financial institutions and retailers, representing 7.0% of net premiums written.

Personal Products
Personal Products results for the periods indicated were as follows (in thousands, except percentages):
 
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Net premiums written
 
 
 
 
 
 
 
 
 
 
 
 
Automobile
 
$
140,913

 
$
139,878

 
$
1,035

 
$
287,222

 
$
281,737

 
$
5,485

Homeowner
 
78,513

 
75,759

 
2,754

 
140,181

 
134,478

 
5,703

Other Personal
 
14,651

 
13,098

 
1,553

 
27,959

 
25,472

 
2,487

Total net premiums written
 
$
234,077

 
$
228,735

 
$
5,342

 
$
455,362

 
$
441,687

 
$
13,675

Net premiums earned
 
 
 
 
 
 
 
 
 
 
 
 
Automobile
 
$
139,583

 
$
134,179

 
$
5,404

 
$
277,191

 
$
262,141

 
$
15,050

Homeowner
 
68,711

 
65,257

 
3,454

 
136,351

 
128,668

 
7,683

Other Personal
 
13,035

 
11,756

 
1,279

 
25,652

 
23,085

 
2,567

Total net premiums earned
 
$
221,329

 
$
211,192

 
$
10,137

 
$
439,194

 
$
413,894

 
$
25,300

Loss ratio
 
 
 
 
 
 
 
 
 
 
 
 
Automobile
 
75.9
%
 
78.3
%
 
(2.4
)%
 
71.6
%
 
77.4
%
 
(5.8
)%
Homeowner
 
81.6

 
95.7

 
(14.1
)
 
73.3

 
80.5

 
(7.2
)
Other Personal
 
59.9

 
69.2

 
(9.3
)
 
58.8

 
69.9

 
(11.1
)
Personal line loss ratio
 
76.6
%
 
83.1
%
 
(6.5
)%
 
71.4
%
 
78.0
%
 
(6.6
)%
Combined Ratio
 
 
 
 
 
 
 
 
 
 
 
 
Automobile
 
99.1
%
 
101.2
%
 
(2.1
)%
 
94.9
%
 
100.8
%
 
(5.9
)%
Homeowner
 
117.5

 
128.6

 
(11.1
)
 
109.3

 
114.8

 
(5.5
)
Other Personal
 
103.2

 
105.1

 
(1.9
)
 
104.1

 
107.1

 
(3.0
)
Personal line combined ratio
 
105.1
%
 
109.9
%
 
(4.8
)%
 
99.9
%
 
105.5
%
 
(5.6
)%

Automobile: Net premiums written and earned increased in our personal automobile line during the three and six months ended June 30, 2019 compared to 2018 due to rate increases. The loss and combined ratios decreased during the three and six months ended June 30, 2019 compared to 2018 primarily due to decreased catastrophe claim activity and increased premium.

Homeowners: Net premiums written and earned increased during the three and six months ended June 30, 2019 compared to 2018 primarily due to increased sales to renters, as well as rate increases. The loss and combined ratio decreased during the three and six months ended June 30, 2019 compared to 2018 due to a decrease in catastrophe losses and increased premium.

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. The loss and combined ratio decreased during the three and six months ended June 30, 2019 compared to 2018 primarily due to a decrease in non-catastrophe related claims and an increase in premium.





51

Table of Contents

Commercial Products
Commercial Products results for the periods indicated were as follows (in thousands, except percentages):
 
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Net premiums written
 
 
 
 
 
 
 
 
 
 
 
 
Other Commercial
 
$
64,832

 
$
62,221

 
$
2,611

 
$
125,746

 
$
121,442

 
$
4,304

Agricultural Business
 
43,294

 
40,735

 
2,559

 
81,297

 
76,809

 
4,488

Automobile
 
34,652

 
31,385

 
3,267

 
69,134

 
63,299

 
5,835

Total net premiums written
 
$
142,778

 
$
134,341

 
$
8,437

 
$
276,177

 
$
261,550

 
$
14,627

Net premiums earned
 
 
 
 
 
 
 
 
 
 
 
 
Other Commercial
 
$
54,982

 
$
51,564

 
$
3,418

 
$
109,781

 
$
101,541

 
$
8,240

Agricultural Business
 
37,399

 
35,572

 
1,827

 
74,006

 
70,267

 
3,739

Automobile
 
28,531

 
26,282

 
2,249

 
56,014

 
51,841

 
4,173

Total net premiums earned
 
$
120,912

 
$
113,418

 
$
7,494

 
$
239,801

 
$
223,649

 
$
16,152

Loss ratio
 
 
 
 
 
 
 
 
 
 
 
 
Other Commercial
 
55.7
%
 
47.1
%
 
8.6
 %
 
50.3
%
 
51.0
%
 
(0.7
)%
Agricultural Business
 
71.2

 
82.3

 
(11.1
)
 
76.6

 
82.0

 
(5.4
)
Automobile
 
82.5

 
101.7

 
(19.2
)
 
77.9

 
83.2

 
(5.3
)
Commercial line loss ratio
 
66.9
%
 
70.8
%
 
(3.9
)%
 
64.8
%
 
68.2
%
 
(3.4
)%
Combined ratio
 
 
 
 
 
 
 
 
 
 
 
 
Other Commercial
 
89.0
%
 
79.6
%
 
9.4
 %
 
83.8
%
 
83.6
%
 
0.2
 %
Agricultural Business
 
107.5

 
119.9

 
(12.4
)
 
113.7

 
120.4

 
(6.7
)
Automobile
 
107.2

 
125.8

 
(18.6
)
 
103.0

 
107.6

 
(4.6
)
Commercial line combined ratio
 
99.0
%
 
103.0
%
 
(4.0
)%
 
97.5
%
 
100.7
%
 
(3.2
)%

Other Commercial: Other commercial products primarily relate to workers compensation and business owners lines of business. Net premiums written and earned increased during the three and six months ended June 30, 2019 compared to 2018 primarily due to the addition of our Investor Property Protection line of business as well as increased sales of business owners insurance. The increase in the loss and combined ratios for the three months ended June 30, 2019 compared to 2018 is primarily due to claim activity on the Investor Property Protection business. Overall, the loss and combined ratios for the six months ended June 30, 2019 were in line with 2018.

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 during the three and six months ended June 30, 2019 compared to 2018 due to an increase in policies in force. The loss and combined ratios decreased during the three and six months ended June 30, 2019 compared to 2018 primarily due to lower catastrophe losses.

Commercial Automobile: Net premiums written and earned increased during the three and six months ended June 30, 2019 compared to 2018 primarily due to an increase in policies in force and rate increases. The loss and combined ratios improved during the three and six months ended June 30, 2019 compared to 2018 primarily due to a decrease in non-catastrophe related claims.


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Table of Contents

Credit Products
Credit-related property product results for the periods indicated were as follows (in thousands, except percentages):
 
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
Net premiums written
 
$
27,122

 
$
32,600

 
$
(5,478
)
 
$
58,114

 
$
71,944

 
$
(13,830
)
Net premiums earned
 
29,498

 
35,437

 
(5,939
)
 
63,925

 
74,477

 
(10,552
)
Loss ratio
 
71.5
%
 
68.5
%
 
3.0
 %
 
63.8
%
 
63.7
%
 
0.1
 %
Combined ratio
 
115.3
%
 
120.4
%
 
(5.1
)%
 
111.6
%
 
116.2
%
 
(4.6
)%

Credit-related property products are offered on automobiles, furniture and appliances in connection with the financing of those items. These policies pay an amount if the insured property is lost or damaged and the amount paid is not directly related to an event affecting the consumer’s ability to pay the debt.
Net written and earned premiums decreased during the three and six months ended June 30, 2019 compared to 2018 primarily due to a decrease in Collateral Protection Insurance ("CPI") business. The combined ratios decreased for the three and six months ended June 30, 2019 compared to 2018 primarily due to lower commission expense relating to the decrease in CPI business.
Corporate and Other
Corporate and Other segment financial results for the periods indicated were as follows (in thousands):
 
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
 
 
2019
 
2018
 
Change
 
2019
 
2018
 
Change
OTHER REVENUES
 
 
 
 
 
 
 
 
 
 
 
 
Net investment income
 
$
19,377

 
$
19,193

 
$
184

 
$
34,814

 
$
38,399

 
$
(3,585
)
Net realized investment gains (losses)
 
(9,905
)
 
5,007

 
(14,912
)
 
(6,958
)
 
6,051

 
(13,009
)
Net gains on equity securities
 
67,060

 
57,162

 
9,898

 
273,437

 
23,992

 
249,445

Other Income
 
967

 
1,067

 
(100
)
 
3,033

 
2,880

 
153

Total other revenues
 
77,499

 
82,429

 
(4,930
)
 
304,326

 
71,322

 
233,004

BENEFITS, LOSSES AND EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
Other operating expenses
 
9,127

 
8,649

 
478

 
18,408

 
18,615

 
(207
)
Total benefits, losses and expenses
 
9,127

 
8,649

 
478


18,408

 
18,615

 
(207
)
Income before federal income taxes and other items
 
$
68,372

 
$
73,780

 
$
(5,408
)
 
$
285,918

 
$
52,707

 
$
233,211


Earnings
Earnings increased during the three and six months ended June 30, 2019 compared to 2018 primarily due to an increase in net gains on equity securities resulting from favorable market conditions reflected in the S&P 500 index.


53

Table of Contents

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 and Management Risk 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):
 
 
 
Fixed maturity, bond held-to-maturity, at amortized cost
 
$
8,394,157

 
35.7
%
 
$
8,211,449

 
36.8
%
Fixed maturity, bond available-for-sale, at fair value
 
6,842,917

 
29.1

 
6,215,563

 
27.9

Equity securities, at fair value
 
1,672,394

 
7.1

 
1,530,228

 
6.9

Mortgage loans on real estate, net of allowance
 
5,014,710

 
21.3

 
5,124,707

 
23.0

Policy loans
 
377,669

 
1.6

 
376,254

 
1.7

Investment real estate, net of accumulated depreciation
 
582,756

 
2.5

 
587,516

 
2.6

Short-term investments
 
597,183

 
2.5

 
206,760

 
0.9

Other invested assets
 
54,018

 
0.2

 
50,087

 
0.2

Total investments
 
$
23,535,804

 
100.0
%
 
$
22,302,564

 
100.0
%
The increase in our total investments at June 30, 2019 compared to year-end 2018 was primarily the result of an increase in short-term investments and bonds available-for-sale. These increases were somewhat offset by a reduction in mortgage loans.

Bonds—We allocate most of our fixed maturity securities to support our insurance business. At June 30, 2019, our fixed maturity securities had an estimated fair value of $15.5 billion, which was $0.5 billion, or 3.4%, above amortized cost. At December 31, 2018, our fixed maturity securities had an estimated fair value of $14.3 billion, which was $0.1 billion, or 0.9%, below amortized cost. The estimated fair value for securities due in one year or less was $0.7 billion as of June 30, 2019 and $0.5 billion as of December 31, 2018. For additional information regarding total bonds by credit quality rating refer to Note 4, Investments in Securities, of the Notes to the Unaudited Consolidated Financial Statements.
Equity Securities—We invest in companies publicly traded on national U.S. stock exchanges. See Note 4, Investments in Securities, of the Notes to the Unaudited Consolidated Financial Statements for the cost, gross unrealized gains and losses, and fair value of the equity securities.
Mortgage Loans— We invest in commercial mortgage loans that are diversified by property-type and geography. Generally, mortgage loans are secured by first liens on income-producing real estate with a loan-to-value ratio of up to 75%. Mortgage loans are 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 4.9% at June 30, 2019 and December 31, 2018, respectively. For additional information regarding mortgage loans refer to Note 5, Mortgage Loans, of the Notes to the Unaudited Consolidated Financial Statements.

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Table of Contents

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 June 30, 2019, we had $377.7 million in policy loans with a loan to surrender value of 65%, and at December 31, 2018, we had $376.3 million in policy loans with a loan to surrender value of approximately 60%. Interest rates on policy loans primarily range from 3.0% to 12.0% per annum. Policy loans may be repaid at any time by the policyholder and have priority to any claims on the policy. If the policyholder fails to repay the policy loan, funds are withdrawn from the policy’s benefits.

Investment Real Estate—We invest in commercial real estate where positive cash flows and/or appreciation in value is expected. Real estate may be owned directly by our insurance companies or non-insurance affiliates or indirectly in joint ventures with real estate developers or investors we determine share our perspective regarding risk and return relationships. The carrying value of real estate is stated at cost, less accumulated depreciation and impairments, if any. Depreciation is provided over the estimated useful lives of the properties.
Short-Term Investments—Short-term investments are primarily commercial paper rated A2 or P2 or better by Standard & Poor’s and Moody’s, respectively. The amount fluctuates depending on our view of the desirability of investing in the available long-term investment opportunities and our liquidity needs, including mortgage investment-funding commitments.
Net Investment Income and Net Realized Gains (Losses)
Net investment income increased $94.7 million during the six months ended June 30, 2019 compared to 2018 primarily due to gains on options from an improvement in the S&P 500 Index.
Interest income on mortgage loans is accrued on the principal amount of the loan at the contractual interest rate. Accretion of discounts is recorded using the effective yield method. Interest income, accretion of discounts and prepayment fees are reported in net investment income. Interest is not accrued on loans generally more than 90 days past due or when the collection of interest is not considered probable. Loans in foreclosure are placed on non-accrual status. Interest received on non-accrual status mortgage loans is included in net investment income in the period received.
Net realized investment gains decreased $13.0 million during the six months ended June 30, 2019 compared to 2018. The decrease in net realized gains in 2019 was primarily attributable to other-than-temporary impairment losses on bonds.
Net Unrealized Gains and Losses
The unrealized gains and losses of our fixed maturity securities investment portfolio are shown below (in thousands):
 
 
 
 
Change
Held-to-Maturity
 
 
 
 
 
 
Gains
 
$
285,854

 
$
72,403

 
$
213,451

Losses
 
(11,412
)
 
(153,768
)
 
142,356

Net gains (losses)
 
274,442

 
(81,365
)
 
355,807

Available-for-Sale
 
 
 
 
 
 
Gains
 
250,349

 
61,286

 
189,063

Losses
 
(16,789
)
 
(107,344
)
 
90,555

Net gains (losses)
 
233,560

 
(46,058
)
 
279,618

Total
 
$
508,002

 
$
(127,423
)
 
$
635,425

The net change in the unrealized gains on fixed maturity securities between June 30, 2019 and December 31, 2018 is primarily attributable to the decrease in benchmark ten-year interest rates, which were 2.0% and 2.7% respectively. The Company does not expect to be required to sell any of the securities in an unrealized loss position.

55

Table of Contents

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

Increasing interest rates may lead to an increase in the volume of annuity contracts sold, which may be partially offset by increases in surrenders.

Our defined benefit plans are frozen and currently adequately funded; however, low interest rates, increased longevity of participants, and rising Pension Benefit Guaranty Corporation (“PBGC”) premiums may cause us to increase our funding of the plans. Additionally, due to changes in the tax law, there was an opportunity to realize tax savings on contributions made before September 15, 2018. Consequently, a $60 million contribution was made before the aforementioned deadline. This contribution did not significantly impact cash flow and resulted in an overfunded status on our qualified pension plan. No unusually large capital expenditures are expected in the next 12-24 months. We have paid dividends to stockholders for over 110 consecutive years and expect to continue this trend.
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. We believe our portfolio of highly liquid available-for-sale investment securities, including equity securities, is sufficient to meet future liquidity needs as necessary. Deposits of certain securities under the Company’s membership with the Federal Home Loan Bank of Dallas (“FHLB”) provided approximately $153 million of borrowing capacity as of June 30, 2019 should we require additional liquidity resources.
The Company holds collateral of $232.2 million at June 30, 2019 to offset exposure from its derivative counterparties. Cash flows associated with collateral received from counterparties change as the market value of the underlying derivative contract changes.

Our cash and cash equivalents and short-term investment position increased from $474.9 million at December 31, 2018 to $910.0 million at June 30, 2019. The increase primarily relates to an increase in commercial paper to fund additional investments and other operating requirements.
A downgrade or a potential downgrade in our financial strength ratings could result in a loss of business and could adversely affect our cash flows from operations.
Further information regarding additional sources or uses of cash is described in Note 16, Commitments and Contingencies, of the Notes to the Unaudited Consolidated Financial Statements.

Capital Resources
Our capital resources are summarized below (in thousands):
 
 
 
American National stockholders’ equity, excluding accumulated other comprehensive income, net of tax (“AOCI”)
 
$
5,670,983

 
$
5,356,986

Accumulated other comprehensive income (loss)
 
86,852

 
(99,738
)
Total American National stockholders’ equity
 
$
5,757,835

 
$
5,257,248

We have notes payable relating to borrowings by real estate joint ventures that we consolidate into our financial statements that are not part of our capital resources. The lenders for the notes payable have no recourse against us in the event of default by the joint ventures. Therefore, the liability we have for these notes payable is limited to our investment in the respective ventures, which totaled $7.2 million and $26.6 million at June 30, 2019 and December 31, 2018, respectively.

56

Table of Contents

The changes in our capital resources are summarized below (in thousands):
 
 
 
 
 
Capital and
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
 
Capital and
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Net income attributable to American National
 
$
357,057

 
$

 
$
357,057

 
$
158,995

 
$

 
$
158,995

Dividends to shareholders
 
(44,145
)
 

 
(44,145
)
 
(88,228
)
 

 
(88,228
)
Change in net unrealized gains (losses) on debt securities
 

 
183,874

 
183,874

 

 
(136,261
)
 
(136,261
)
Foreign currency transaction and translation adjustment
 

 
590

 
590

 

 
(900
)
 
(900
)
Defined benefit pension plan adjustment
 

 
2,911

 
2,911

 

 
22,326

 
22,326

Cumulative effect of accounting change
 
785

 
(785
)
 

 
687,051

 
(627,119
)
 
59,932

Other
 
300

 

 
300

 
(5,375
)
 

 
(5,375
)
Total
 
$
313,997

 
$
186,590


$
500,587

 
$
752,443

 
$
(741,954
)
 
$
10,489

Statutory Capital and Surplus and Risk-based Capital
Statutory capital and surplus is the capital of our insurance companies reported in accordance with accounting practices prescribed or permitted by the applicable state insurance departments. RBC is calculated using formulas applied to certain financial balances and activities that consider, among other things, investment risks related to the type and quality of investments, insurance risks associated with products and liabilities, interest rate risks and general business risks. Insurance companies that do not maintain capital and surplus at a level of at least 200% of the authorized control level RBC are required to take certain actions. At June 30, 2019 and December 31, 2018, American National Insurance Company’s statutory capital and surplus was $3,403,062,000 and $3,162,808,000, respectively. American National Insurance Company and each of its insurance subsidiaries had statutory capital and surplus at June 30, 2019 and December 31, 2018 substantially above 200% of the authorized control level.
The achievement of long-term growth will require growth in American National Insurance Company’s and our insurance subsidiaries’ statutory capital and surplus. Our subsidiaries may obtain additional statutory capital through various sources, such as retained statutory earnings or equity contributions from us.
Contractual Obligations
Our future cash payments associated with claims and claims adjustment expenses, life, annuity and disability obligations, contractual obligations pursuant to operating leases for office space and equipment, and notes payable have not materially changed since December 31, 2018. We expect to have the capacity to pay our obligations as they come due.
Off-Balance Sheet Arrangements
We have off-balance sheet arrangements relating to third-party marketing operation bank loans as discussed in Note 16, Commitments and Contingencies, of the Notes to the Unaudited Consolidated Financial Statements. We could be exposed to a liability for these loans, which are supported by the cash value of the underlying insurance contracts. The cash value of the life insurance policies is designed to always equal or exceed the balance of the loans. Accordingly, management does not foresee any material loss related to these arrangements.
Related-Party Transactions
We have various agency, consulting and service arrangements with individuals and entities considered to be related parties. Each of these arrangements has been reviewed and approved by our Audit Committee, which retains final decision-making authority for these transactions. The amounts involved, both individually and in the aggregate, with these arrangements are not material to any segment or to our overall operations. For additional details see Note 17, Related Party Transactions, of the Notes to the Unaudited Consolidated Financial Statements.



57

Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk has not changed materially from those disclosed in our 2018 Annual Report on form 10-K filed with the SEC on February 28, 2019.

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 June 30, 2019. Based upon that evaluation and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2019, 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 six months ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART IIOTHER INFORMATION

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

ITEM 1A. RISK FACTORS
There have been no material changes with respect to the risk factors as previously disclosed in our 2018 Annual Report on Form 10-K filed with the SEC on February 28, 2019.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None

ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable

ITEM 5. OTHER INFORMATION
None


58

Table of Contents

ITEM 6.
EXHIBITS
Exhibit
Number
  
Basic Documents
 
 
3.1
  
 
 
3.2
  
 
 
10.10
 
 
 
 
31.1
  
 
 
31.2
  
 
 
32.1
  
 
 
101
  
The following unaudited financial information from American National Insurance Company’s Quarterly Report on Form 10-Q for six months ended June 30, 2019 formatted in eXtensible Business Reporting Language (“XBRL”): (i) Consolidated Statements of Financial Position, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to the Unaudited Consolidated Financial Statements. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
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:
 
Name:
 
Title:
 
President and Chief Executive Officer
 
 
By:
 
Name:
 
Timothy A.Walsh
Title:
 
Executive Vice President, CFO, Treasurer and ML and P&C Operations
Date: August 6, 2019


59

Dates Referenced Herein   and   Documents Incorporated by Reference

This ‘10-Q’ Filing    Date    Other Filings
1/1/22
1/1/21
1/1/20
10/31/19
Filed on:8/6/19
7/31/19
7/17/19
7/1/19
For Period end:6/30/1913F-HR
4/1/19
3/31/1910-Q,  13F-HR
2/28/1910-K
1/1/19
12/31/1810-K,  13F-HR,  5
9/15/18
6/30/1810-Q,  13F-HR
3/31/1810-Q,  13F-HR
1/1/18
12/31/1710-K,  13F-HR,  5
 List all Filings 


3 Subsequent Filings that Reference this Filing

  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 4/18/22  American National Group Inc.      10-K/A     12/31/21   13:2.1M
 2/25/22  American National Group Inc.      10-K       12/31/21  156:35M
 3/04/21  American National Group Inc.      10-K       12/31/20  155:35M
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