Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2024

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

The unaudited consolidated financial statements and notes thereto, including all prior periods presented, have been prepared under accounting principles generally accepted in the United States of America (“GAAP”). The financial statements are prepared on a going concern basis and have been presented in U.S. dollars (“USD”) rounded to the nearest million unless otherwise indicated. The financial statements should be read in conjunction with the December 31, 2023 audited consolidated financial statements of the Company and accompanying notes included in Exhibit 99.1 of the Form 8-K/A, filed with the SEC on August 27, 2024 and the Form 10-Q filed with the SEC on August 14, 2024. The results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of the results for any subsequent periods or the entire fiscal year ending December 31, 2024. These financial statements reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented in accordance with GAAP.

The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Included among the material (or potentially material) reported amounts and disclosures that require use of estimates are: fair value of certain financial assets including real estate, derivatives, allowances for credit losses, deferred policy acquisition costs (“DAC”), deferred sales inducements (“DSI”), value of business acquired (“VOBA”), goodwill and other intangibles, market risk benefits (“MRB”), future policy benefits (“FPB”), policyholder account balances (“PAB”) including the fair value of embedded derivatives, funds withheld for reinsurance liabilities, pension plans, and income taxes including the recoverability of our deferred tax assets. Such estimates and assumptions are subject to inherent uncertainties, which may result in actual amounts differing from reported amounts.

Reclassification of Prior Year Presentation

As a result of the acquisition of AEL and the increase in significance of certain accounts resulting from the consolidation of AEL, certain previously reported amounts have been reclassified to conform to the current financial statement presentation. These reclassifications had no impact on net income (loss) as reported in the statements of operations, as well as total assets, liabilities or equity in the statements of financial position. The following tables and explanatory notes present adjustments within the statement of financial position as of December 31, 2023 and statement of operating results for the three and nine months ended September 30, 2023 to conform the presentation to that of ANGI’s.


	December 31, 2023
	American National, Historical		Reclassification to Conform Presentation		Notes	American National, Conformed
	(Dollars in millions)
Available-for-sale fixed maturity securities, at fair value	$	13,071	$	(194)	2(b)	$	12,877
Private loans	—		194		2(b)	194
Market risk benefit asset	34		(34)		2(a)	—
Current tax receivable	98		(98)		2(a)	—
Prepaid pension	248		(248)		2(a)	—
Intangible assets	—		44		2(a)	44
Other assets	205		336		2(a)	541
Liability for retirement benefits	26		(26)		2(c)	—
Other liabilities	441		26		2(c)	467
	$	14,123	$	—		$	14,123


	Three Months Ended September 30, 2023
	American National, Historical		Reclassification to Conform Presentation		Notes	American National, Conformed
	(Dollars in millions)
Net investment income	$	339	$	36	2(f), (j)	$	375
Investment related gains (losses)	—		(12)		2(d)	(12)
Net realized investment gains (losses)	(15)		15		2(d)	—
Increase in investment credit loss	20		(20)		2(d)	—
Net gains (losses) on equity securities	(13)		13		2(d)	—

Policyholder benefits and claims incurred	(713)		(4)		2(f)	(717)
Interest credited to policyholders' account balances	(155)		155		2(f)	—
Interest sensitive contract benefits	—		(133)		2(j)	(133)
Amortization of deferred policy acquisition costs, deferred sales inducements, and value of business acquired	—		(136)		2(g), (i)	(136)
Change in fair value of insurance-related derivatives and embedded derivatives	—		(54)		2(f)	(54)
Change in fair value of market risk benefits	14		—		2(j)	14
Future policy benefit remeasurement losses	(4)		4		2(j)	—
Commissions for acquiring and servicing policies	(197)		197		2(h)	—
Other operating expenses	(187)		187		2(e)	—
Operating expenses	—		(147)		2(e), (g), (h), (i)	(147)
Interest expense	—		(27)		2(e)	(27)
Change in deferred policy acquisition	72		(72)		2(i)	—
Other components of net periodic pension benefit (costs), net of tax	2		(2)		2(j)	—
	$	(837)	$	—		$	(837)

	Nine Months Ended September 30, 2023
	American National, Historical		Reclassification to Conform Presentation		Notes	American National, Conformed
	(Dollars in millions)
Net investment income	$	1,062	$	(42)	2(f), (j)	$	1,020
Investment related gains (losses)	—		(32)		2(d)	(32)
Net realized investment gains (losses)	(65)		65		2(d)	—
Increase in investment credit loss	7		(7)		2(d)	—
Net gains (losses) on equity securities	30		(30)		2(d)	—

Policyholder benefits and claims incurred	(2,404)		(2)		2(f)	(2,406)
Interest credited to policyholders' account balances	(431)		431		2(f)	—
Interest sensitive contract benefits	—		(338)		2(j)	(338)
Amortization of deferred policy acquisition costs, deferred sales inducements, and value of business acquired	—		(399)		2(g), (i)	(399)
Change in fair value of insurance-related derivatives and embedded derivatives	—		(54)		2(f)	(54)
Change in fair value of market risk benefits	22		(1)		2(j)	21
Future policy benefit remeasurement losses	(3)		3		2(j)	—
Commissions for acquiring and servicing policies	(590)		590		2(h)	—
Other operating expenses	(556)		556		2(e)	—
Operating expenses	—		(450)		2(e), (g), (h), (i)	(450)
Interest expense	—		(73)		2(e)	(73)
Change in deferred policy acquisition	214		(214)		2(i)	—
Other components of net periodic pension benefit (costs), net of tax	3		(3)		2(j)	—
	$	(2,711)	$	—		$	(2,711)

The historical financial statements of American National were prepared in accordance with U.S. GAAP. The following adjustments have been made to conform the presentation of the historical financial statements of American National to the presentation of ANGI’s financial statements:

(a)“Other assets” is adjusted to include market risk benefits asset, current tax receivable, and prepaid pension. “Intangible assets” have been presented as a separate line item;

(b)The balance related to “Private loans” has been presented as a separate line item;

(c)“Liability for retirement benefits” is reclassified to “Other liabilities”;

(d)Net realized investment gains (losses), increase in investment credit loss, and net gains (losses) on equity securities have been reclassified to “Investment related gains (losses)”;

(e)Other operating expenses have been bifurcated into “Operating expenses” and “Interest expense”;

(f)Mark-to-market gains (losses) on equity-indexed call options is reclassified from “Net investment income” to “Change in fair value of insurance-related derivatives and embedded derivatives” and the embedded derivatives within Policyholders’ Account Balances are reclassified from “Interest credited to policyholders’ account balances” to “Change in fair value of insurance-related derivatives and embedded derivatives”;

(g)Capitalization of deferred policy acquisition costs, deferred sales inducements and value of business acquired has been reclassified to “Operating expenses”. “Amortization of deferred policy acquisition costs, deferred sales inducements and value of business acquired” will only include the amortization expense;

(h)“Commissions for acquiring and servicing policies” is reclassified to “Operating expenses”;

(i)Capitalizations of deferred policy acquisition costs are reclassified from “Change in deferred policy acquisition costs” to “Operating expenses”. Amortization of deferred policy acquisition costs is reclassified from “Change in deferred policy acquisition costs” to “Amortization of deferred policy acquisition costs, deferred sales inducements and value of business acquired”; and

(j)Other reclassifications.

Basis of Consolidation

These financial statements include the accounts of the Company and its consolidated subsidiaries, which are legal entities in which the Company has a controlling financial interest by either holding a majority voting interest or is the primary beneficiary of the variable interest entity (“VIE”). All intra-group transactions, balances, income and expenses are eliminated in full on consolidation. The consolidation assessment, including the determination as to whether an entity qualifies as a VIE or VOE, depends on the specific facts and circumstances for each entity and requires judgment.

The following is a subset of the Company’s significant accounting policies and should be read in conjunction with the Company’s significant accounting policies described in Note 2 of the Company’s December 31, 2023 audited consolidated financial statements and June 30, 2024 Form 10-Q.

Real estate and real estate partnerships comprise investment real estate, as well as real estate joint ventures and other limited partnerships and include VIEs that are accounted for using the equity method of accounting. For certain real estate joint ventures and other limited partnerships, the Company elected the fair value option in accordance with ASC 825, Financial Instruments. These investments are fair valued on a recurring basis with the change in fair value reported in “Net investment income” in the statements of operations. In addition, certain other real estate joint ventures and limited partnership interest are consolidated investment company VIEs in accordance with ASC 946, Financial Services – Investment Companies. These investments are fair valued on a recurring basis with the change in fair value reported in “Net investment income”.

Other invested assets is primarily comprised of derivatives instruments. Derivative instruments are carried at fair value. Derivative instruments predominately include call options used to fund fixed indexed annuity contracts and equity-indexed universal life contracts (“insurance-related derivatives”). Derivative instruments also include foreign exchange forwards that are used to hedge the currency risk associated with investments denominated in foreign currencies. Derivative instruments are recorded at fair value on the acquisition date and subsequently revalued at fair value at each reporting date. Derivative instruments with positive values are recorded as derivative assets within “Other invested assets”. If a derivative is not designated for hedge accounting, changes in the fair value of derivatives are recorded in “Investment related gains (losses)” in the Consolidated Statements of Operations, except for insurance-related derivatives, whose fair value changes are recorded in “Change in fair value of insurance-related derivatives and embedded derivatives”, along with fair value changes from embedded derivatives on related fixed indexed annuity contracts.

Where the Company has a master netting agreement with its counterparty that allows for the netting of the Company’s derivative asset and liability positions, the Company elects to offset such derivative assets and liabilities and present them on a net basis on the Consolidated Statements of Financial Position. Further, in some instances, the Company holds collateral to offset exposure from its counterparties relating to its derivative instruments. The Company elects to offset collateral supporting credit risk that is restricted to the Company’s use for the derivative exposure when a master netting arrangement is in place and all offsetting criteria are met.

Federal Home Loan Bank stock, as well as separately managed accounts, which are portfolios of individual securities such as stocks or bonds, that are managed on behalf of the Company by an investment manager, are also included in other invested assets and are carried at cost or market value if available from the account manager. Other invested assets also include Company owned life insurance, tax credit partnerships and mineral rights less allowance for depletion, where applicable.

Recently Issued Accounting Pronouncements

The Company continues to assess the impacts of the ASUs listed below that have been issued but not yet adopted as of September 30, 2024 on the financial statements. ASUs not listed below were assessed and determined to be either not applicable or insignificant in presentation or amount.

ASU 2023-02 – On March 29, 2023, the FASB issued ASU 2023-02, Investments—Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. The amendments permit reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. In addition, disclosures describing the nature of the investments and related income tax credits and benefits will be required. This ASU was effective on January 1, 2024, to be applied on either a modified retrospective or a retrospective basis subject to certain exceptions, with early adoption permitted. The adoption of this standard did not have a material impact to the Company’s Consolidated Financial Statements or the Notes to the Consolidated Financial Statements.

ASU 2023-07 – On November 27, 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments require the disclosure of significant segment expenses by reportable segment, enhance interim disclosure requirements and clarify circumstances in which an entity can disclose multiple segment measures of profit or loss. This ASU is effective for fiscal periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, to be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of this ASU on its Notes to the Consolidated Financial Statements.

ASU 2023-09 – On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). This ASU is effective for annual periods beginning after December 15, 2024, to be applied prospectively. The Company is currently evaluating the impact of this ASU on its Notes to the Consolidated Financial Statements.