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Policyholder Liabilities

3 Months Ended

Mar. 31, 2023

Insurance [Abstract]

Policyholder Liabilities

Policyholder Liabilities

Liability for Future Policy Benefits

The liability for future policy benefits consists only of the liability associated with single premium immediate annuities (SPIA) with life contingencies. As this business has no future expected premiums, the rollforward presented below is the present value of expected future benefits. The balances of and changes in the liability for future policy benefits for the three months ended March 31, 2023 and year ended December 31, 2022 is as follows:

			Present Value of Expected Future Policy Benefits
			Three Months Ended   March 31, 2023						Year Ended December 31, 2022
			(Dollars in thousands)
Balance, beginning of year			$	317,418					$	401,022
Beginning balance at original discount rate			341,071						351,575
Effect of changes in cash flow assumptions			—						1,280
Effect of actual variances from expected experience			(354)						(1,958)
Adjusted beginning of year balance			340,717						350,897
Issuances			2,874						15,766
Interest accrual			3,548						14,613
Benefit payments			—						—
Derecognition (lapses)			(9,818)						(40,205)
Ending balance at original discount rate			337,321						341,071
Effect of changes in discount rate assumptions			(18,859)						(23,653)
Balance, end of period			$	318,462					$	317,418

The reconciliation of the net liability for future policy benefits to the liability for future policy benefits included in policy benefit reserves in the consolidated balance sheets is as follows:

			March 31, 2023						December 31, 2022
			(Dollars in thousands)
Liability for future policy benefits			$	319,895					$	318,677
Deferred profit liability			19,341						19,084
			339,236						337,761
Less: Reinsurance recoverable			(1,433)						(1,259)
Net liability for future policy benefits, after reinsurance recoverable			$	337,803					$	336,502

The weighted-average liability duration of the liability for future policy benefits is as follows:

			March 31, 2023						December 31, 2022
SPIA With Life Contingency:
Weighted-average liability duration of the liability for future policy benefits (years)			7.58						6.78

The following table presents the amount of undiscounted expected future benefit payments and expected gross premiums:

			March 31, 2023						December 31, 2022
			(Dollars in thousands)
SPIA With Life Contingency:
Expected future benefit payments			$	462,201					$	467,627
Expected future gross premiums			—						—

The amount of revenue and interest recognized in the statement of operations for the three months ended March 31, 2023 and year ended December 31, 2022 is as follows:

			Three Months Ended   March 31, 2023												Year Ended December 31, 2022
			Gross Premiums or Assessments						Interest Expense						Gross Premiums or Assessments						Interest Expense
			(Dollars in thousands)
Liability for future policy benefits			$	3,391					$	3,548					$	16,994					$	14,613
Total			$	3,391					$	3,548					$	16,994					$	14,613

The weighted-average interest rate is as follows:

			March 31, 2023						December 31, 2022
			(Dollars in thousands)
Interest accretion rate			4.26		%				4.25		%
Current discount rate			4.95		%				5.37		%

Market Risk Benefits

The balances of and changes in the liability for market risk benefits (MRB) for the three months ended March 31, 2023 and year ended December 31, 2022 is as follows:

			Three Months Ended   March 31, 2023												Year Ended December 31, 2022
			Fixed Rate Annuities						Fixed Index Annuities						Fixed Rate Annuities						Fixed Index Annuities
			(Dollars in thousands)
MRB Liability
Balance, beginning of year			$	37,863					$	2,187,758					$	78,411					$	2,557,379
Balance, beginning of year, before effect of changes in the instrument-specific credit risk			44,355						2,453,169						77,732						2,310,436
Issuances			—						44,841						376						59,452
Interest accrual			607						36,217						1,349						72,551
Attributed fees collected			302						30,041						1,270						125,168
Benefits payments			—						—						—						—
Effect of changes in interest rates			2,973						172,165						(19,421)						(952,265)
Effect of changes in equity markets			—						(16,573)						—						186,618
Effect of changes in equity index volatility			—						(7,760)						—						241,563
Actual policyholder behavior different from expected behavior			—						—						—						—
Effect of changes in future expected policyholder behavior			714						3,738						602						46,567
Effect of changes in other future expected assumptions			—						—						(17,553)						363,079
Balance, end of year, before effect of changes in the instrument-specific credit			48,951						2,715,838						44,355						2,453,169
Effect of changes in the instrument-specific credit risk			(7,795)						(334,113)						(6,492)						(265,411)
Balance, end of year			41,156						2,381,725						37,863						2,187,758
Reinsured MRB, end of period			11,463						674,239						10,656						593,959
Balance, end of period, net of reinsurance			$	29,693					$	1,707,486					$	27,207					$	1,593,799
Net amount at risk (a)			$	262,643					$	11,120,564					$	258,826					$	10,987,198
Weighted average attained age of contract holders (years)			69						71						69						71

(a)Net amount at risk is defined as the current guarantee amount in excess of the current account balance.

The following is a reconciliation of market risk benefits by amounts in an asset position and in a liability position to market risk benefit amounts included in other assets and market risk benefit reserves, respectively, in the Consolidated Balance Sheets:

			March 31, 2023
			Asset						Liability						Net Liability
			(Dollars in thousands)
Fixed Index Annuities			$	226,747					$	2,608,472					$	2,381,725
Fixed Rate Annuities			3,557						44,713						41,156
Total			$	230,304					$	2,653,185					$	2,422,881

			December 31, 2022
			Asset						Liability						Net Liability
			(Dollars in thousands)
Fixed Index Annuities			$	226,294					$	2,414,052					$	2,187,758
Fixed Rate Annuities			3,577						41,440						37,863
Total			$	229,871					$	2,455,492					$	2,225,621

Reinsured Market Risk Benefits

The following table presents the balances and changes in reinsured market risk benefits associated with fixed index annuities for the three months ended March 31, 2023 and year ended December 31, 2022:

			Three Months Ended   March 31, 2023												Year Ended December 31, 2022
			Fixed Rate Annuities						Fixed Index Annuities						Fixed Rate Annuities						Fixed Index Annuities
Ceded MRB			(Dollars in thousands)
Balance, beginning of year			$	10,656					$	593,959					$	—					$	156,931
Write-off related to in-force ceded reinsurance			—						—						10,091						334,835
Issuances			—						32,744						—						36,036
Interest accrual			128						7,136						104						7,598
Attributed fees collected			7						6,106						28						23,745
Benefits payments			—						—						—						—
Effect of changes in interest rates			603						40,846						135						(171,948)
Effect of changes in equity markets			—						(7,043)						118						43,799
Effect of changes in equity index volatility			—						(2,021)						—						34,278
Actual policyholder behavior different from expected behavior			—						—						—						—
Effect of changes in future expected policyholder behavior			69						2,512						180						12,598
Effect of changes in other future expected assumptions			—						—						—						116,087
Balance, end of year			$	11,463					$	674,239					$	10,656					$	593,959
Net amount at risk (a)			$	73,259					$	2,419,275					$	72,350					$	2,402,964
Weighted average attained age of contract holders (years)			70						71						70						71

(a)Net amount at risk is defined as the current guarantee amount in excess of the current account balance.

The following is a reconciliation of reinsurance market risk benefits by amounts in an asset position and in liability position to market risk benefit amounts included in coinsurance deposits and other liabilities, respectively, in the consolidated balance sheets:

			March 31, 2023
			Asset						Liability						Net Asset
			(Dollars in thousands)
Fixed Index Annuities			$	712,734					$	38,495					$	674,239
Fixed Rate Annuities			11,884						421						11,463
Total			$	724,618					$	38,916					$	685,702

			December 31, 2022
			Asset						Liability						Net Asset
			(Dollars in thousands)
Fixed Index Annuities			$	629,611					$	35,652					$	593,959
Fixed Rate Annuities			11,070						414						10,656
Total			$	640,681					$	36,066					$	604,615

Significant Inputs for Fair Value Measurement - Market Risk Benefits

The following tables provides a summary of the significant inputs and assumptions used in the fair value measurements of market risk benefits:

			March 31, 2023
			Fair Value						Valuation Technique						Significant Inputs and Assumptions						Range						Weighted Average
			(in thousands)
Market risk benefits			$	2,422,881					Discounted cash flow						Utilization (a)						0.04% - 78.75%						4.18%
Ceded market risk benefits			685,702												Option budget (b)						1.65% - 2.50%						2.31%
															Risk-free interest rate (c)						2.35% - 4.72%						3.01%
															Nonperformance risk (d)						0.55% - 3.49%						2.71%

			December 31, 2022
			Fair Value						Valuation Technique						Significant Inputs and Assumptions						Range						Weighted Average
			(in thousands)
Market risk benefits			$	2,225,621					Discounted cash flow						Utilization (a)						0.04% - 78.75%						4.24%
Ceded market risk benefits			604,615												Option budget (b)						1.65% - 2.50%						2.31%
															Risk-free interest rate (c)						2.51% - 4.90%						3.31%
															Nonperformance risk (d)						0.06% - 3.27%						2.59%

(a)The utilization assumption represents the percentage of policyholders who will elect to receive lifetime income benefit payments in a given year. A decrease (increase) in the utilization assumption used in the fair value of market risk benefits could lead to favorable (unfavorable) changes in the market risk benefits.

(b)The option budget assumption represents the expected cost of annual call options we will purchases in the future. An increase (decrease) in the option budget assumption used in the fair value of market risk benefits could lead to favorable (unfavorable) changes in the market risk benefits.

(c)The risk-free interest rate assumption impacts the discount rate used in the discounted future cash flow valuation. An increase (decrease) in the risk-free interest rate assumption used in the fair value of market risk benefits could lead to favorable (unfavorable) changes in the market risk benefits.

(d)The nonperformance risk assumption impacts the discount rate used in the discounted future cash flow valuation and includes our own credit risk based on the current market credit spreads for debt-like instruments we have issued and are available in the market. Additionally, the nonperformance risk assumption includes the counterparty credit risk used in the fair value measurement of ceded market risk benefits which is determined using the current market credit spreads based on the counterparty credit rating. An increase (decrease) in the nonperformance risk assumption for own credit risk used in the fair value of market risk benefits could lead to favorable (unfavorable) changes in the market risk benefits. An decrease (increase) in the nonperformance risk assumption for counterparty credit risk used in the fair value of ceded market risk benefits could lead to favorable (unfavorable) changes in the ceded market risk benefits.

There were no notable changes to significant inputs and assumptions used in the fair value measurement of market risk benefits during the three months ended March 31, 2023. During the year ended December 31, 2022, the Company made the following notable changes to significant inputs and assumptions resulting in changes in the fair value measurement of market risk benefits:

•Utilization assumptions were increased resulting in an increase to the market risk benefits liability and a decrease to net income.

•Option budget assumptions were increased resulting in a decrease to the market risk benefits liability and an increase to net income.

Policyholder Account Balances

The following table presents the balances and changes in policyholders’ account balances:

			Three Months Ended   March 31, 2023												Year Ended December 31, 2022
			Fixed Rate Annuities						Fixed Index Annuities						Fixed Rate Annuities						Fixed Index Annuities
			(Dollars in thousands)
Balance, beginning of year			$	6,589,577					$	53,808,184					$	6,860,060					$	55,001,391
Issuances			407,249						926,058						159,570						2,986,223
Premiums received			526						35,046						4,811						170,493
Policy charges			(2,100)						(75,223)						(6,587)						(272,604)
Surrenders and withdrawals			(180,822)						(1,213,070)						(574,590)						(3,945,504)
Benefit payments			(3,290)						(203,524)						(11,328)						(727,847)
Interest credited			38,884						83,963						151,762						598,639
Other			(482)						(313)						5,879						(2,607)
Balance, end of period			$	6,849,542					$	53,361,121					$	6,589,577					$	53,808,184
Weighted-average crediting rate			2.32		%				0.63		%				2.28		%				1.11		%
Net amount at risk (a)			$	262,643					$	11,120,564					$	258,826					$	10,987,198
Cash surrender value			$	6,456,292					$	49,205,688					$	6,208,597					$	49,551,657

(a)Net amount at risk is defined as the current guarantee amount in excess of the current account balance.

The following table presents the reconciliation of policyholders’ account balances to policy benefit reserves in the consolidated balance sheets:

			March 31, 2023						December 31, 2022
			(Dollars in thousands)
Fixed index annuities policyholder account balances			$	53,361,121					$	53,808,184
Fixed rate annuities policyholder account balances			6,849,542						6,589,577
Embedded derivative adjustment (b)			(1,576,129)						(1,996,640)
Liability for future policy benefits			319,895						318,677
Deferred profit liability			19,341						19,084
Other			45,419						42,954
Total			$	59,019,189					$	58,781,836

(b)The embedded derivative adjustment reconciles the account balance to the gross GAAP liability and represents the combination of the host contract and the fair value of the embedded derivatives.

The following table presents the balance of account values by range of guaranteed minimum crediting rates and the related range of the difference, in basis points, between rates being credited to policyholders and the respective guaranteed minimums:

			March 31, 2023
			Range of guaranteed minimum crediting rate						At guaranteed minimum						1 to 50						51 to 150						Greater than 150 basis points above						Total
									(Dollars in thousands)
Fixed Index Annuities			0.00% - 0.50%						$	—					$	545,301					$	443,724					$	406,824					$	1,395,849
			0.50% - 1.00%						2,449,974						1,104,836						2,251,001						89,954						5,895,765
			1.00% - 1.50%						50,601						9,347						—						—						59,948
			1.50% - 2.00%						57						—						—						—						57
			2.00% - 2.50%						132,027						91,276						8						—						223,311
			2.50% - 3.00%						905,663						—						—						—						905,663
			Greater than 3.00%						—						—						—						—						—
			Allocated to index strategies						—						—						—						—						44,880,528
Total									$	3,538,322					$	1,750,760					$	2,694,733					$	496,778					$	53,361,121
Fixed Rate Annuities			0.00% - 0.50%						$	—					$	—					$	—					$	101					$	101
			0.50% - 1.00%						55,547						201,007						3,995,398						1,014,260						5,266,212
			1.00% - 1.50%						453,063						232						—						—						453,295
			1.50% - 2.00%						278,374						93,402						271,181						190						643,147
			2.00% - 2.50%						18,985						23						—						—						19,008
			2.50% - 3.00%						406,972						7,304						—						—						414,276
			Greater than 3.00%						53,503						—						—						—						53,503
Total									$	1,266,444					$	301,968					$	4,266,579					$	1,014,551					$	6,849,542

			December 31, 2022
			Range of guaranteed minimum crediting rate						At guaranteed minimum						1 to 50						51 to 150						Greater than 150 basis points above						Total
									(Dollars in thousands)
Fixed Index Annuities			0.00% - 0.50%						$	—					$	462,356					$	407,031					$	315,324					$	1,184,711
			0.50% - 1.00%						2,421,244						1,098,332						2,258,992						77,901						5,856,469
			1.00% - 1.50%						51,586						9,391						—						—						60,977
			1.50% - 2.00%						57						—						—						—						57
			2.00% - 2.50%						133,059						100,205						8						—						233,272
			2.50% - 3.00%						939,684						—						—						—						939,684
			Greater than 3.00%						—						—						—						—						—
			Allocated to index strategies																														45,533,014
Total									$	3,545,630					$	1,670,284					$	2,666,031					$	393,225					$	53,808,184
Fixed Rate Annuities			0.00% - 0.50%						$	—					$	—					$	—					$	61					$	61
			0.50% - 1.00%						55,458						203,523						4,000,203						701,836						4,961,020
			1.00% - 1.50%						454,728						231						—						—						454,959
			1.50% - 2.00%						281,694						96,767						277,053						189						655,703
			2.00% - 2.50%						21,887						22						—						—						21,909
			2.50% - 3.00%						434,042						7,417						—						—						441,459
			Greater than 3.00%						54,466						—						—						—						54,466
Total									$	1,302,275					$	307,960					$	4,277,256					$	702,086					$	6,589,577

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- Definition

The entire disclosure for long duration contracts. This may include the information pertinent to an understanding of the types of traditional and nontraditional insurance and investment contracts sold and serviced, including the nature and amount of estimated guaranteed obligations pertaining to such contracts and the assumptions underlying such estimated amounts, hedging strategies, and sales inducements offered.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 944
-URI https://asc.fasb.org/topic&trid=2303980

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