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BUSINESS SEGMENTS
 9 Months Ended
Sep. 30, 2023
Segment Reporting [Abstract]  
BUSINESS SEGMENTS
BUSINESS SEGMENTS

We view our operations as three insurance product lines (annuity, health and life) and the investment and fee income segments. Our segments are aligned based on their common characteristics, comparability of profit margins and the way management makes operating decisions and assesses the performance of the business.

Our insurance product line segments (annuity, health and life) include marketing, underwriting and administration of the policies our insurance subsidiaries sell. The business written in each of the three product categories through all of our insurance subsidiaries is aggregated allowing management and investors to assess the performance of each product category. When analyzing profitability of these segments, we use insurance product margin as the measure of profitability, which is: (i) insurance policy income; and (ii) net investment income allocated to the insurance product lines; less (i) insurance policy benefits and interest credited to policyholders; and (ii) amortization, non-deferred commissions and advertising expense. Net investment income is allocated to the product lines using the book yield of investments backing the block of business, which is applied to the average net insurance liabilities for the block in each period. Net insurance liabilities for the purpose of allocating investment income to product lines are equal to: (i) policyholder account balances for annuity products; (ii) total reserves before the fair value adjustments reflected in accumulated other comprehensive income (loss), if applicable, for all other products; less (iii) amounts related to reinsurance business; (iv) deferred acquisition costs; (v) the present value of future profits; and (vi) the value of unexpired options credited to insurance liabilities.

Income from insurance products is the sum of the insurance product margins of the annuity, health and life product lines, less expenses allocated to the insurance lines. It excludes the income from our fee income business, investment income not allocated to product lines, net expenses not allocated to product lines (primarily holding company expenses) and income taxes. Management believes insurance product margin and income from insurance products help provide a better understanding of the business and a more meaningful analysis of the results of our insurance product lines.

We market our products through the Consumer and Worksite Divisions that reflect the customers served by the Company.

The Consumer Division serves individual consumers, engaging with them on the phone, virtually, online, face-to-face with agents, or through a combination of sales channels. This structure unifies consumer capabilities into a single division and integrates the strength of our agent sales forces with one of the largest direct-to-consumer insurance businesses with proven experience in advertising, web/digital and call center support.

The Worksite Division focuses on worksite and group sales for businesses, associations, and other membership groups, interacting with customers at their place of employment and virtually. With a separate Worksite Division, we are bringing a sharper focus to this high-growth business while further capitalizing on the strength of our wholly-owned subsidiary, Optavise, LLC ("Optavise"), a national provider of year-round technology-driven employee benefits management services.

The Consumer and Worksite Divisions are primarily focused on marketing insurance products, several types of which are sold in both divisions and underwritten in the same manner. Sales of group underwritten policies are currently not significant, but are expected to increase within the Worksite Division.

The investment segment involves the management of our capital resources, including investments and the management of corporate debt and liquidity. Our measure of profitability of this segment is the total net investment income not allocated to the insurance products. Investment income not allocated to product lines represents net investment income less: (i) equity returns credited to policyholder account balances; (ii) the investment income allocated to our product lines; (iii) interest expense on notes payable, investment borrowings and financing agreements; (iv) expenses related to the FABN program; and (v) certain expenses related to benefit plans that are offset by special-purpose investment income; plus (vi) the impact of annual option forfeitures related to fixed indexed annuity surrenders. Investment income not allocated to product lines includes investment income on investments in excess of amounts allocated to product lines, investments held by our holding companies, the spread we earn from our Federal Home Loan Bank ("FHLB") investment borrowing and FABN programs and variable components of investment income (including call and prepayment income, adjustments to returns on structured securities due to cash flow changes, income (loss) from company-owned life insurance ("COLI") and alternative investments income not allocated to product lines), net of interest expense on corporate debt and financing agreements. The spread earned from our FHLB investment borrowing and FABN programs includes the investment income on the matched assets less: (i) interest on
investment borrowings related to the FHLB investment borrowing program; (ii) interest credited on funding agreements; and (iii) amortization of deferred acquisition costs related to the FABN program.

Our fee income segment includes the earnings generated from sales of third-party insurance products, services provided by Optavise and the operations of our broker/dealer and registered investment advisor.

Expenses not allocated to product lines include the expenses of our corporate operations, excluding interest expense on debt.

We measure segment performance by excluding total investment gains (losses), changes in fair value of embedded derivative liabilities and MRBs, fair value changes related to the agent deferred compensation plan, income taxes and other non-operating items consisting primarily of earnings attributable to VIEs ("pre-tax operating earnings") because we believe that this performance measure is a better indicator of the ongoing business and trends in our business.  Our primary investment focus is on investment income to support our liabilities for insurance products as opposed to the generation of investment gains (losses), and a long-term focus is necessary to maintain profitability over the life of the business.

Investment gains (losses), changes in fair value of embedded derivative liabilities and MRBs, fair value changes related to the agent deferred compensation plan and other non-operating items consisting primarily of earnings attributable to VIEs depend on market conditions or represent unusual items that do not necessarily relate to the underlying business of our segments.  Investment gains (losses) and changes in fair value of embedded derivative liabilities and MRBs may affect future earnings levels since our underlying business is long-term in nature and changes in our investment portfolio may impact our ability to earn the assumed interest rates needed to maintain the profitability of our business.

Operating information by segment is as follows (dollars in millions):

Three months endedNine months ended
September 30,September 30,
 2023202220232022
Revenues:  
Annuity:  
Insurance policy income$7.2 $6.3 $20.4 $17.1 
Net investment income131.0 121.1 384.1 356.4 
Total annuity revenues138.2 127.4 404.5 373.5 
Health:
Insurance policy income397.8 403.5 1,196.3 1,213.7 
Net investment income74.2 73.3 222.5 219.6 
Total health revenues 472.0 476.8 1,418.8 1,433.3 
Life:
Insurance policy income221.0 213.4 663.1 643.0 
Net investment income36.3 35.4 108.7 106.1 
Total life revenues257.3 248.8 771.8 749.1 
Change in market values of the underlying options supporting the fixed indexed annuity and life products (offset by market value changes credited to policyholder balances)(54.6)(34.9)26.3 (199.2)
Investment income not allocated to product lines86.2 59.6 234.3 187.4 
Fee revenue and other income:
Fee income27.9 30.6 108.6 102.0 
Amounts netted in expenses not allocated to product lines32.1 1.8 35.2 28.9 
Total segment revenues$959.1 $910.1 $2,999.5 $2,675.0 

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Three months endedNine months ended
September 30,September 30,
 2023202220232022
Expenses:
Annuity:
Insurance policy benefits$9.8 $6.5 $29.1 $22.8 
Interest credited53.4 44.8 152.1 128.7 
Amortization and non-deferred commissions18.0 16.0 51.9 45.9 
Total annuity expenses 81.2 67.3 233.1 197.4 
Health:
Insurance policy benefits308.5 310.8 949.3 943.8 
Amortization and non-deferred commissions40.3 42.7 121.6 125.5 
Total health expenses348.8 353.5 1,070.9 1,069.3 
Life:
Insurance policy benefits140.7 138.7 430.7 419.5 
Interest credited 12.1 12.6 36.4 36.3 
Amortization, non-deferred commissions and advertising expense44.7 41.8 139.6 131.4 
Total life expenses197.5 193.1 606.7 587.2 
Allocated expenses 153.2 150.5 460.2 447.5 
Expenses not allocated to product lines24.6 17.9 67.1 56.9 
Market value changes of options credited to fixed indexed annuity and life policyholders(54.6)(34.9)26.3 (199.2)
Amounts netted in investment income not allocated to product lines:
Interest expense 45.1 25.9 122.3 64.3 
Interest credited7.2 7.2 21.6 21.3 
Impact of annual option forfeitures related to fixed indexed annuity surrenders(2.5)1.1 (3.9)— 
Amortization.4 .3 1.2 1.1 
Other expenses (2.4)(2.0)11.2 (18.0)
Expenses netted in fee revenue:
Commissions and other operating expenses30.8 29.2 95.4 87.5 
Total segment expenses829.3 809.1 2,712.1 2,315.3 
Pre-tax measure of profitability:
Annuity margin57.0 60.1 171.4 176.1 
Health margin123.2 123.3 347.9 364.0 
Life margin59.8 55.7 165.1 161.9 
Total insurance product margin240.0 239.1 684.4 702.0 
Allocated expenses(153.2)(150.5)(460.2)(447.5)
Income from insurance products86.8 88.6 224.2 254.5 
Fee income(2.9)1.4 13.2 14.5 
Investment income not allocated to product lines38.4 27.1 81.9 118.7 
Expenses not allocated to product lines7.5 (16.1)(31.9)(28.0)
Operating earnings before taxes 129.8 101.0 287.4 359.7 
Income tax expense on operating income 28.5 23.1 65.2 82.2 
Net operating income $101.3 $77.9 $222.2 $277.5 
A reconciliation of segment revenues and expenses to consolidated revenues and expenses and net income is as follows (dollars in millions):
Three months endedNine months ended
September 30,September 30,
 2023202220232022
Total segment revenues$959.1 $910.1 $2,999.5 $2,675.0 
Total investment losses(29.3)(17.7)(79.2)(99.2)
Revenues related to earnings attributable to VIEs17.7 12.9 56.0 27.4 
Consolidated revenues947.5 905.3 2,976.3 2,603.2 
Total segment expenses829.3 809.1 2,712.1 2,315.3 
Insurance policy benefits - changes in fair value of embedded derivative liabilities and market risk benefits(109.4)(130.6)(94.7)(456.6)
Expenses attributable to VIEs17.8 11.9 54.0 26.2 
Fair value changes related to agent deferred compensation plan(6.8)(12.0)(6.8)(48.7)
Other expenses1.0 (1.0)1.0 (1.0)
Consolidated expenses731.9 677.4 2,665.6 1,835.2 
Income before tax215.6 227.9 310.7 768.0 
Income tax expense on period income48.3 52.0 70.5 175.4 
Net income167.3 $175.9 $240.2 $592.6