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v3.23.3

RECENTLY ADOPTED ACCOUNTING STANDARDS | 9 Months Ended
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Sep. 30, 2023
Accounting Changes and Error Corrections [Abstract] |
RECENTLY ADOPTED ACCOUNTING STANDARDS | RECENTLY ADOPTED ACCOUNTING STANDARDS We adopted ASU 2018-12 effective January 1, 2023. The new guidance: (i) improves the timeliness of recognizing changes in the liability for future benefits and modifies the rate used to discount future cash flows; (ii) simplifies and improves the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts; (iii) simplifies the amortization of deferred acquisition costs; and (iv) requires enhanced disclosures, including disaggregated rollforwards of the liability for future policy benefits, policyholder account liabilities, MRBs and deferred acquisition costs. Additionally, qualitative and quantitative information about expected cash flows, estimates and assumptions is required. The new measurement guidance for traditional and limited-payment contract liabilities and the new guidance for the amortization of deferred acquisition costs was adopted on a modified retrospective transition approach. For contracts in-force at the Transition Date, we continue to use the existing locked-in investment yield interest rate assumption to calculate the net premium ratio, rather than the upper-medium grade fixed-income corporate instrument yield. However, for balance sheet remeasurement purposes, the current upper-medium grade fixed-income corporate instrument yield is used at transition through accumulated other comprehensive income (loss) and subsequently through other comprehensive income. For MRBs, we use the required retrospective application and were able to use hindsight to measure fair value components to the extent assumptions in a prior period are unobservable or otherwise unavailable. We selected the modified retrospective transition method, except for MRBs where we are required to use the full retrospective approach. Pursuant to ASU 2018-12, the account balances subject to the guidance were recast on the Transition Date. The following summarizes the impact of adoption on the Transition Date (dollars in millions):
|  | January 1, 2021
|  | Amounts prior |  |  |  |
|  | to adoption of |  | Effect of |  |
|  | ASU 2018-12 |  | adoption |  | As recast
Present value of future profits |  | $ | 249.4 |  |  | $ | 10.2 |  |  | $ | 259.6 |
Deferred acquisition costs |  | 1,027.8 |  |  | 458.0 |  |  | 1,485.8 |
Reinsurance receivables |  | 4,584.3 |  |  | 144.1 |  |  | 4,728.4 |
Market risk benefit asset |  | — |  |  | 2.5 |  |  | 2.5 |
Income tax assets, net |  | 199.4 |  |  | 607.0 |  |  | 806.4 |
Total assets |  | 35,339.9 |  |  | 1,221.8 |  |  | 36,561.7 |
Policyholder account balances |  | 12,540.6 |  |  | (172.9) |  |  | 12,367.7 |
Future policy benefits |  | 11,744.2 |  |  | 3,960.7 |  |  | 15,704.9 |
Market risk benefit liability |  | — |  |  | 114.8 |  |  | 114.8 |
Liability for policy and contract claims |  | 561.8 |  |  | (470.1) |  |  | 91.7 |
Total liabilities |  | 29,855.7 |  |  | 3,432.5 |  |  | 33,288.2 |
Retained earnings |  | 752.3 |  |  | (130.9) |  | (a) | 621.4 |
Accumulated other comprehensive income (loss) |  | 2,186.1 |  |  | (2,079.8) |  |  | 106.3 |
Total shareholders' equity |  | 5,484.2 |  |  | (2,210.7) |  |  | 3,273.5 |
_____________________ (a) The impact to retained earnings was primarily related to certain long-term care product cohorts where the present value of expected benefits exceeded the reserve at the Transition Date plus the present value of future gross premiums. As a result, the net premium ratio was capped at 100 percent with an immediate increase in the reserve for such cohorts. The following summarizes the impact of adoption on previously reported balances as of December 31, 2022 and as of and for the three and nine months ended September 30, 2022 (dollars in millions, except per share data):
|  | December 31, 2022
|  | As previously |  | Effect of |  |
|  | reported |  | adoption |  | As recast
Present value of future profits |  | $ | 212.2 |  |  | $ | (8.5) |  |  | $ | 203.7 |
Deferred acquisition costs |  | 1,913.4 |  |  | (142.5) |  |  | 1,770.9 |
Reinsurance receivables |  | 4,241.7 |  |  | (18.3) |  |  | 4,223.4 |
Market risk benefit asset |  | — |  |  | 65.3 |  |  | 65.3 |
Income tax assets, net |  | 1,165.5 |  |  | (102.1) |  |  | 1,063.4 |
Total assets |  | 33,339.2 |  |  | (206.1) |  |  | 33,133.1 |
Policyholder account balances |  | 14,858.3 |  |  | 375.9 |  |  | 15,234.2 |
Future policy benefits |  | 11,809.1 |  |  | (568.9) |  |  | 11,240.2 |
Market risk benefit liability |  | — |  |  | 11.3 |  |  | 11.3 |
Liability for policy and contract claims |  | 456.5 |  |  | (392.4) |  |  | 64.1 |
Total liabilities |  | 31,938.4 |  |  | (574.1) |  |  | 31,364.3 |
Retained earnings |  | 1,459.0 |  |  | 232.2 |  |  | 1,691.2 |
Accumulated other comprehensive income (loss) |  | (2,093.1) |  |  | 135.8 |  |  | (1,957.3) |
Total shareholders' equity |  | 1,400.8 |  |  | 368.0 |  |  | 1,768.8 |
|  | Three months ended
|  | September 30, 2022
|  | As previously |  | Effect of |  |
|  | reported |  | adoption |  | As recast
Insurance policy benefits |  | $ | 412.2 |  |  | $ | (16.1) |  |  | $ | 396.1 |
Liability for future policy benefits remeasurement loss |  | — |  |  | (5.0) |  |  | (5.0) |
Change in fair value of market risk benefits |  | — |  |  | (34.9) |  |  | (34.9) |
Amortization |  | 87.5 |  |  | (34.0) |  |  | 53.5 |
Other operating costs and expenses |  | 230.8 |  |  | (.7) |  |  | 230.1 |
Total benefits and expenses |  | 768.1 |  |  | (90.7) |  |  | 677.4 |
Income before income taxes |  | 137.2 |  |  | 90.7 |  |  | 227.9 |
Income tax expense |  | 32.2 |  |  | 19.8 |  |  | 52.0 |
Net income |  | 105.0 |  | 70.9 |  | 175.9 |
Earnings per common share - basic |  | $ | 0.92 |  |  | $ | 0.62 |  |  | $ | 1.54 |
Earnings per common share - diluted |  | 0.91 |  |  | 0.61 |  |  | 1.52 |
|  | Nine months ended
|  | September 30, 2022
|  | As previously |  | Effect of |  |
|  | reported |  | adoption |  | As recast
Insurance policy benefits |  | $ | 1,099.1 |  |  | $ | (66.9) |  |  | $ | 1,032.2 |
Liability for future policy benefits remeasurement loss |  | — |  |  | 2.3 |  |  | 2.3 |
Change in fair value of market risk benefits |  | — |  |  | (117.9) |  |  | (117.9) |
Amortization |  | 279.5 |  |  | (121.0) |  |  | 158.5 |
Other operating costs and expenses |  | 673.5 |  |  | (2.6) |  |  | 670.9 |
Total benefits and expenses |  | 2,141.3 |  |  | (306.1) |  |  | 1,835.2 |
Income before income taxes |  | 461.9 |  |  | 306.1 |  |  | 768.0 |
Income tax expense |  | 108.5 |  |  | 66.9 |  |  | 175.4 |
Net income |  | 353.4 |  | 239.2 |  | 592.6 |
Earnings per common share - basic |  | $ | 3.04 |  |  | $ | 2.06 |  |  | $ | 5.10 |
Earnings per common share - diluted |  | 2.99 |  |  | 2.03 |  |  | 5.02 |
|  | As of September 30, 2022
|  | As previously |  | Effect of |  |
|  | reported |  | adoption |  | As recast
Retained earnings |  | $ | 1,431.9 |  |  | $ | 237.6 |  |  | 1,669.5 |
Accumulated other comprehensive loss |  | (2,165.7) |  |  | 327.9 |  |  | (1,837.8) |
Total shareholders' equity |  | 1,297.9 |  |  | 565.5 |  |  | 1,863.4 |
The following tables detail the January 1, 2021 transition adjustments by providing a rollforward of the ending reported balances as of December 31, 2020 to the opening balances as of January 1, 2021 for insurance-related balances, accumulated other comprehensive income and retained earnings (dollars in millions):
|  | January 1, 2021
|  | Asset accounts
|  | Present value of future profits |  | Deferred acquisition costs |  | Reinsurance receivables |  | Market risk benefit asset |  | Income tax assets, net
Amounts prior to adoption of ASU 2018-12 |  | $ | 249.4 |  |  | $ | 1,027.8 |  |  | $ | 4,584.3 |  |  | $ | — |  |  | $ | 199.4 |
Unwinding amounts related to unrealized gains (losses) |  | 10.2 |  |  | 458.0 |  |  | — |  |  | — |  |  | — |
Changes in measurement of assets |  | — |  |  | — |  |  | (81.6) |  |  | — |  |  | — |
Change in discount rates |  | — |  |  | — |  |  | 225.7 |  |  | — |  |  | — |
Changes in market benefit reserve basis |  | — |  |  | — |  |  | — |  |  | 2.5 |  |  | — |
Tax impacts of changes recognized in accumulated other comprehensive income |  | — |  |  | — |  |  | — |  |  | — |  |  | 570.3 |
Tax impacts of changes recognized in retained earnings |  | — |  |  | — |  |  | — |  |  | — |  |  | 36.7 |
Amounts, as recast |  | $ | 259.6 |  |  | $ | 1,485.8 |  |  | $ | 4,728.4 |  |  | $ | 2.5 |  |  | $ | 806.4 |
|  | January 1, 2021
|  | Liability accounts
|  | Policyholder account balances |  | Future policy benefits |  | Market risk benefit liability |  | Liability for policy and contract claims
Amounts prior to adoption of ASU 2018-12 |  | $ | 12,540.6 |  |  | $ | 11,744.2 |  |  | $ | — |  |  | $ | 561.8 |
Unwinding amounts related to unrealized gains (losses) |  | — |  |  | (197.5) |  |  | — |  |  | — |
Changes in remeasurement of future policy benefits |  | — |  |  | 31.1 |  |  | — |  |  | — |
Changes in classification of liabilities (1) |  | (172.9) |  |  | 643.0 |  |  | — |  |  | (470.1) |
Reclass to market risk benefit liability |  | — |  |  | (66.6) |  |  | 66.6 |  |  | — |
Changes in market risk benefit reserve basis |  | — |  |  | — |  |  | 48.2 |  |  | — |
Change in discount rates |  | — |  |  | 3,550.7 |  |  | — |  |  | — |
Amounts, as recast |  | $ | 12,367.7 |  |  | $ | 15,704.9 |  |  | $ | 114.8 |  |  | $ | 91.7 |
_____________________ (1) Amount includes certain reclassifications to conform with the revised presentation of ASU 2018-12, such as reclassifying claims and benefits payable on long-duration health contracts to the liability for future policy benefits.
|  | January 1, 2021
|  | Shareholders' equity accounts
|  | Accumulated other comprehensive income |  | Retained earnings
Amounts prior to adoption of ASU 2018-12 |  | $ | 2,186.1 |  |  | $ | 752.3 |
Unwinding amounts related to unrealized gains (losses) |  | 665.7 |  |  | — |
Changes in measurement of assets and liabilities |  | — |  |  | (112.7) |
Change in market risk benefit reserve basis |  | 9.2 |  |  | (54.9) |
Tax impacts of changes recognized in retained earnings |  | — |  |  | 36.7 |
Change in discount rates |  | (3,325.0) |  |  | — |
Tax impacts of changes recognized in accumulated other comprehensive income |  | 570.3 |  |  | — |
Amounts, as recast |  | $ | 106.3 |  |  | $ | 621.4 |

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