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Policyholder Liabilities | 6 Months Ended
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Jun. 30, 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 six months ended June 30, 2023 and year ended December 31, 2022 is as follows:
|  |  | Present Value of Expected Future Policy Benefits
|  |  | Six Months Ended June 30, 2023 |  | Year Ended December 31, 2022
|  |  | (Dollars in thousands)
Balance, beginning of period |  |  | $ | 318,677 |  |  | $ | 402,305 |
Beginning balance at original discount rate |  |  | 342,453 |  |  | 352,708 |
Effect of changes in cash flow assumptions |  |  | — |  |  | 1,277 |
Effect of actual variances from expected experience |  |  | (1,341) |  |  | (1,941) |
Adjusted beginning of year balance |  |  | 341,112 |  |  | 352,044 |
Issuances |  |  | 4,899 |  |  | 16,072 |
Interest accrual |  |  | 7,055 |  |  | 14,664 |
Benefit payments |  |  | — |  |  | — |
Net premiums collected |  |  | — |  |  | — |
Derecognition (lapses) |  |  | (19,501) |  |  | (40,327) |
Ending balance at original discount rate |  |  | 333,565 |  |  | 342,453 |
Effect of changes in discount rate assumptions |  |  | (24,331) |  |  | (23,776) |
Balance, end of period |  |  | $ | 309,234 |  |  | $ | 318,677 |
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:
| June 30, 2023 |  | December 31, 2022
| (Dollars in thousands)
Liability for future policy benefits | $ | 309,234 |  |  | $ | 318,677 |
Deferred profit liability | 19,926 |  |  | 19,223 |
| 329,160 |  |  | 337,900 |
Less: Reinsurance recoverable | (1,639) |  |  | (1,259) |
Net liability for future policy benefits, after reinsurance recoverable | $ | 327,521 |  |  | $ | 336,641 |
The weighted-average liability duration of the liability for future policy benefits is as follows:
| June 30, 2023 |  | December 31, 2022
SPIA With Life Contingency: |  |  |
Weighted-average liability duration of the liability for future policy benefits (years) | 7.13 |  | 6.78
The following table presents the amount of undiscounted expected future benefit payments and expected gross premiums:
| June 30, 2023 |  | December 31, 2022
| (Dollars in thousands)
SPIA With Life Contingency: |  |  |
Expected future benefit payments | $ | 453,722 |  |  | $ | 467,627 |
Expected future gross premiums | — |  |  | — |
The amount of revenue and interest associated with the liability for future policy benefits recognized in the statement of operations for the six months ended June 30, 2023 and year ended December 31, 2022 is as follows:
|  |  | Six Months Ended June 30, 2023 |  | Year Ended December 31, 2022
|  |  |  |  | Gross Premiums or Assessments |  | Interest Expense |  | Gross Premiums or Assessments |  | Interest Expense
|  |  |  |  | (Dollars in thousands)
SPIA With Life Contingency |  |  |  |  | $ | 5,233 |  |  | $ | 7,023 |  |  | $ | 16,994 |  |  | $ | 14,613 |
Total |  |  |  |  | $ | 5,233 |  |  | $ | 7,023 |  |  | $ | 16,994 |  |  | $ | 14,613 |
The weighted-average interest rate is as follows:
| June 30, 2023 |  | December 31, 2022
Interest accretion rate | 4.26 | % |  | 4.25 | %
Current discount rate | 5.46 | % |  | 5.37 | %
Market Risk Benefits The balances of and changes in the liability for market risk benefits (MRB) for the six months ended June 30, 2023 and year ended December 31, 2022 is as follows:
|  |  | Six Months Ended June 30, 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 period |  |  |  |  | $ | 37,863 |  |  | $ | 2,187,758 |  |  | $ | 78,411 |  |  | $ | 2,557,378 |
Balance, beginning of period, before effect of changes in the instrument-specific credit risk |  |  |  |  | 44,355 |  |  | 2,453,169 |  |  | 77,731 |  |  | 2,310,437 |
Issuances |  |  |  |  | — |  |  | 161,757 |  |  | 376 |  |  | 59,452 |
Interest accrual |  |  |  |  | 1,313 |  |  | 78,354 |  |  | 1,349 |  |  | 72,551 |
Attributed fees collected |  |  |  |  | 584 |  |  | 60,972 |  |  | 1,270 |  |  | 125,168 |
Benefits payments |  |  |  |  | — |  |  | — |  |  | — |  |  | — |
Effect of changes in interest rates |  |  |  |  | 372 |  |  | 8,175 |  |  | (19,421) |  |  | (952,265) |
Effect of changes in equity markets |  |  |  |  | — |  |  | (66,590) |  |  | — |  |  | 186,618 |
Effect of changes in equity index volatility |  |  |  |  | — |  |  | (63,759) |  |  | — |  |  | 241,563 |
Actual policyholder behavior different from expected behavior |  |  |  |  | — |  |  | — |  |  | — |  |  | — |
Effect of changes in future expected policyholder behavior |  |  |  |  | 1,127 |  |  | 1,972 |  |  | 602 |  |  | 46,567 |
Effect of changes in other future expected assumptions |  |  |  |  | — |  |  | — |  |  | (17,552) |  |  | 363,078 |
Balance, end of period, before effect of changes in the instrument-specific credit |  |  |  |  | 47,751 |  |  | 2,634,050 |  |  | 44,355 |  |  | 2,453,169 |
Effect of changes in the instrument-specific credit risk |  |  |  |  | (6,272) |  |  | (236,727) |  |  | (6,492) |  |  | (265,411) |
Balance, end of period |  |  |  |  | 41,479 |  |  | 2,397,323 |  |  | 37,863 |  |  | 2,187,758 |
Reinsured MRB, end of period |  |  |  |  | 11,326 |  |  | 702,398 |  |  | 10,656 |  |  | 593,959 |
Balance, end of period, net of reinsurance |  |  |  |  | $ | 30,153 |  |  | $ | 1,694,925 |  |  | $ | 27,207 |  |  | $ | 1,593,799 |
Net amount at risk (a) |  |  |  |  | $ | 266,173 |  |  | $ | 11,575,916 |  |  | $ | 258,826 |  |  | $ | 10,987,198 |
Weighted average attained age of contract holders (years) |  |  |  |  | 70 |  | 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:
| June 30, 2023
| Asset |  | Liability |  | Net Liability
| (Dollars in thousands)
Fixed Index Annuities | $ | 231,005 |  |  | $ | 2,628,328 |  |  | $ | 2,397,323 |
Fixed Rate Annuities | 3,465 |  |  | 44,944 |  |  | 41,479 |
Total | $ | 234,470 |  |  | $ | 2,673,272 |  |  | $ | 2,438,802 |
| 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 six months ended June 30, 2023 and year ended December 31, 2022:
|  |  | Six Months Ended June 30, 2023 |  | Year Ended December 31, 2022
|  |  |  |  | Fixed Rate Annuities |  | Fixed Index Annuities |  | Fixed Rate Annuities |  | Fixed Index Annuities
|  |  |  |  | (Dollars in thousands)
Ceded MRB |  |  |  |  |  |  |  |  |  |  |
Balance, beginning of period |  |  |  |  | $ | 10,656 |  |  | $ | 593,959 |  |  | $ | — |  |  | $ | 156,931 |
Write-off related to in-force ceded reinsurance |  |  |  |  | — |  |  | — |  |  | 10,091 |  |  | 334,835 |
Issuances |  |  |  |  | — |  |  | 114,216 |  |  | — |  |  | 36,036 |
Interest accrual |  |  |  |  | 286 |  |  | 16,447 |  |  | 104 |  |  | 7,598 |
Attributed fees collected |  |  |  |  | 19 |  |  | 13,451 |  |  | 28 |  |  | 23,745 |
Benefits payments |  |  |  |  | — |  |  | — |  |  | — |  |  | — |
Effect of changes in interest rates |  |  |  |  | 154 |  |  | 4,455 |  |  | 135 |  |  | (171,948) |
Effect of changes in equity markets |  |  |  |  | — |  |  | (29,194) |  |  | 118 |  |  | 43,799 |
Effect of changes in equity index volatility |  |  |  |  | — |  |  | (12,929) |  |  | — |  |  | 34,278 |
Actual policyholder behavior different from expected behavior |  |  |  |  | — |  |  | — |  |  | — |  |  | — |
Effect of changes in future expected policyholder behavior |  |  |  |  | 211 |  |  | 1,993 |  |  | 180 |  |  | 12,598 |
Effect of changes in other future expected assumptions |  |  |  |  | — |  |  | — |  |  | — |  |  | 116,087 |
Balance, end of period |  |  |  |  | $ | 11,326 |  |  | $ | 702,398 |  |  | $ | 10,656 |  |  | $ | 593,959 |
Net amount at risk (a) |  |  |  |  | $ | 74,282 |  |  | $ | 2,761,134 |  |  | $ | 72,350 |  |  | $ | 2,402,964 |
Weighted average attained age of contract holders (years) |  |  |  |  | 70 |  | 70 |  | 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:
| June 30, 2023
| Asset |  | Liability |  | Net Asset
| (Dollars in thousands)
Fixed Index Annuities | $ | 744,734 |  |  | $ | 42,336 |  |  | $ | 702,398 |
Fixed Rate Annuities | 11,735 |  |  | 409 |  |  | 11,326 |
Total | $ | 756,469 |  |  | $ | 42,745 |  |  | $ | 713,724 |
| 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:
| June 30, 2023
| Fair Value |  | Valuation Technique |  | Significant Inputs and Assumptions |  | Range |  | Weighted Average
| (in thousands) |  |  |  |  |  |  |  |
Market risk benefits | $ | 2,438,802 |  |  | Discounted cash flow |  | Utilization (a) |  | 0.04% - 78.75% |  | 4.12%
Ceded market risk benefits | 713,724 |  |  |  |  | Option budget (b) |  | 1.65% - 2.50% |  | 2.32%
|  |  |  |  | Risk-free interest rate (c) |  | 2.52% - 5.38% |  | 3.27%
|  |  |  |  | Nonperformance risk (d) |  | 0.53% - 3.10% |  | 2.54%
| 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 six months ended June 30, 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:
|  |  | Six Months Ended June 30, 2023 |  | Year Ended December 31, 2022
|  |  |  |  | Fixed Rate Annuities |  | Fixed Index Annuities |  | Fixed Rate Annuities |  | Fixed Index Annuities
|  |  |  |  | (Dollars in thousands)
Balance, beginning of period |  |  |  |  | $ | 6,589,577 |  |  | $ | 53,826,234 |  |  | $ | 6,860,060 |  |  | $ | 55,003,305 |
Issuances |  |  |  |  | 534,191 |  |  | 2,763,039 |  |  | 159,570 |  |  | 3,001,738 |
Premiums received |  |  |  |  | 618 |  |  | 74,613 |  |  | 4,811 |  |  | 170,493 |
Policy charges |  |  |  |  | (3,655) |  |  | (163,063) |  |  | (6,587) |  |  | (272,604) |
Surrenders and withdrawals |  |  |  |  | (443,810) |  |  | (2,392,211) |  |  | (574,590) |  |  | (3,945,504) |
Benefit payments |  |  |  |  | (6,542) |  |  | (404,942) |  |  | (11,328) |  |  | (727,847) |
Interest credited |  |  |  |  | 80,653 |  |  | 339,864 |  |  | 151,762 |  |  | 599,259 |
Other |  |  |  |  | (4,667) |  |  | (3,296) |  |  | 5,879 |  |  | (2,606) |
Balance, end of period |  |  |  |  | $ | 6,746,365 |  |  | $ | 54,040,238 |  |  | $ | 6,589,577 |  |  | $ | 53,826,234 |
Weighted-average crediting rate |  |  |  |  | 2.43 | % |  | 1.26 | % |  | 2.28 | % |  | 1.11 | %
Net amount at risk (a) |  |  |  |  | $ | 266,173 |  |  | $ | 11,575,916 |  |  | $ | 258,826 |  |  | $ | 10,987,198 |
Cash surrender value |  |  |  |  | $ | 6,354,283 |  |  | $ | 49,813,318 |  |  | $ | 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:
| June 30, 2023 |  | December 31, 2022
| (Dollars in thousands)
Fixed index annuities policyholder account balances | $ | 54,040,238 |  |  | $ | 53,826,234 |
Fixed rate annuities policyholder account balances | 6,746,365 |  |  | 6,589,577 |
Embedded derivative adjustment (b) | (1,284,548) |  |  | (1,996,640) |
Liability for future policy benefits | 309,234 |  |  | 318,677 |
Deferred profit liability | 19,926 |  |  | 19,223 |
Other | 25,462 |  |  | 24,765 |
Total | $ | 59,856,677 |  |  | $ | 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:
| June 30, 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% |  | $ | — |  |  | $ | 695,154 |  |  | $ | 464,407 |  |  | $ | 654,267 |  |  | $ | 1,813,828 |
| 0.50% - 1.00% |  | 2,470,011 |  |  | 1,093,223 |  |  | 2,214,702 |  |  | 106,894 |  |  | 5,884,830 |
| 1.00% - 1.50% |  | 48,145 |  |  | 9,350 |  |  | — |  |  | — |  |  | 57,495 |
| 1.50% - 2.00% |  | 50 |  |  | — |  |  | — |  |  | — |  |  | 50 |
| 2.00% - 2.50% |  | 129,460 |  |  | 85,536 |  |  | 8 |  |  | — |  |  | 215,004 |
| 2.50% - 3.00% |  | 865,320 |  |  | 15 |  |  | 202 |  |  | — |  |  | 865,537 |
| Greater than 3.00% |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
| Allocated to index strategies |  |  |  |  |  |  |  |  |  | 45,203,494 |
Total |  |  | $ | 3,512,986 |  |  | $ | 1,883,278 |  |  | $ | 2,679,319 |  |  | $ | 761,161 |  |  | $ | 54,040,238 |
Fixed Rate Annuities | 0.00% - 0.50% |  | $ | 148 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 148 |
| 0.50% - 1.00% |  | 54,489 |  |  | 185,377 |  |  | 3,960,356 |  |  | 992,706 |  |  | 5,192,928 |
| 1.00% - 1.50% |  | 458,488 |  |  | 234 |  |  | — |  |  | — |  |  | 458,722 |
| 1.50% - 2.00% |  | 363,889 |  |  | 33,907 |  |  | 233,549 |  |  | 213 |  |  | 631,558 |
| 2.00% - 2.50% |  | 19,249 |  |  | 23 |  |  | — |  |  | — |  |  | 19,272 |
| 2.50% - 3.00% |  | 385,318 |  |  | 7,201 |  |  | — |  |  | — |  |  | 392,519 |
| Greater than 3.00% |  | 51,218 |  |  | — |  |  | — |  |  | — |  |  | 51,218 |
Total |  |  | $ | 1,332,799 |  |  | $ | 226,742 |  |  | $ | 4,193,905 |  |  | $ | 992,919 |  |  | $ | 6,746,365 |
| 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 |  |  | $ | 407,426 |  |  | $ | 314,929 |  |  | $ | 1,184,711 |
| 0.50% - 1.00% |  | 2,421,795 |  |  | 1,098,332 |  |  | 2,258,992 |  |  | 77,901 |  |  | 5,857,020 |
| 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 |  |  |  |  |  |  |  |  |  | 45,550,513 |
Total |  |  | $ | 3,546,181 |  |  | $ | 1,670,284 |  |  | $ | 2,666,426 |  |  | $ | 392,830 |  |  | $ | 53,826,234 |
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 |  |  | $ | 1,302,336 |  |  | $ | 307,960 |  |  | $ | 4,277,256 |  |  | $ | 702,025 |  |  | $ | 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://www.xbrl.org/2003/role/disclosureRef -Topic 944 -SubTopic 40 -Name Accounting Standards Codification -Section 65 -Paragraph 2 -Subparagraph (u) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480016/944-40-65-2 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 944 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//944/tableOfContent + Details
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