Reinsurance and Policy Provisions

12 Months Ended

Dec. 31, 2019

Reinsurance and Policy Provisions [Abstract]

Reinsurance and Policy Provisions [Text Block]

Reinsurance and Policy Provisions

Reinsurance

In the normal course of business, we seek to limit our exposure to loss on any single insured or event and to recover a portion of benefits paid by ceding a portion of our exposure to other insurance companies. Our reinsurance coverage for life insurance varies according to the age and risk classification of the insured with current retention limits ranging up to $1.0 million of coverage per individual life. Certain term life products are reinsured on a first dollar quota share basis. We do not use financial or surplus relief reinsurance. We have assumed closed blocks of certain life and annuity business through coinsurance and modified coinsurance agreements.

Farm Bureau Life may cede certain losses under an annual 100% quota share accidental death reinsurance agreement. Coverage includes all acts of terrorism including those of a nuclear, chemical or biological origin. Coverage is subject to an annual aggregate retention of $17.0 million. A maximum occurrence limit of $50.0 million per aircraft applies to policies written on agents of the Company who are participating in company-sponsored incentive trips. Additionally, a $200.0 million occurrence limit applies to employees in the home office building, net of reinsurance on group life policies. All other occurrence catastrophes are unlimited in amount.

Reinsurance contracts do not relieve us of our obligations to policyholders. To the extent that reinsuring companies are later unable to meet their obligations under reinsurance agreements, our insurance subsidiaries would be liable for these obligations, and payment of these obligations could result in losses. To limit the possibility of such losses, we evaluate the financial condition of our reinsurers and monitor concentrations of credit risk. No allowance for uncollectible amounts has been established against our asset for reinsurance recoverable since none of our receivables are deemed to be uncollectible.

Ceded reinsurance reduces our revenues by the amount that we pay for premium or forego in product charges and reduces our benefits and expenses by reimbursements of claims by our reinsurers. Assumed reinsurance adds to our premiums or product charges and to benefits and expenses related to the business we assume. These impacts are shown in the table below.

Impact of Reinsurance on our Financial Statements
	Year ended December 31,
	2019		2018		2017
	(Dollars in thousands)
Ceded (reductions to financial statement items):
Premiums and product charges	$	31,363	$	32,450	$	32,922
Insurance benefits	20,759		21,358		24,159
Allowances for expenses and commissions	2,899		4,231		4,548
Assumed (additions to financial statement items):
Premiums and product charges	2,546		2,508		2,637
Insurance benefits	7,437		2,752		6,356
Allowances for expenses and commissions	1,340		1,410		1,543

Reinsurance in Force and Percentage of Direct Life Insurance in Force
	Year ended December 31,
	2019				2018
	(Dollars in millions)
Ceded reinsurance	$	13,771	21.0	%	$	14,030	21.8	%
Assumed reinsurance	431		0.7	%	455		0.7	%

Policy Provisions

Analysis of the Value of Insurance in Force Acquired

	Year ended December 31,
	2019			2018			2017
	(Dollars in thousands)
Balance at beginning of year	$	17,263		$	19,430		$	21,608
Amortization per fixed schedule	(2,141		)	(2,167		)	(2,178		)
Balance at end of year	15,122			17,263			19,430
Impact of net unrealized investment gains and losses	(12,498		)	(6,878		)	(14,870		)
Value of insurance in force acquired	$	2,624		$	10,385		$	4,560

We amortize the value of insurance in force based on a fixed amortization schedule. Net amortization for the next five years is expected to be as follows: 2020 - $2.2 million; 2021 - $2.0 million; 2022 - $2.0 million; 2023 - $2.0 million; and 2024 - $1.0 million.

Certain variable annuity and variable universal life contracts in our separate accounts and in variable business we have assumed through reinsurance partners have minimum interest guarantees on funds deposited in our general account. In addition, we have certain variable annuity contracts that include a) guaranteed minimum death benefits (GMDB), b) an incremental death benefit (IDB) rider that pays a percentage of the gain on the contract upon the death of the contract holder, and/or c) a guaranteed minimum income benefit (GMIB) that provides monthly income to the contract holder after the eighth policy year.

GMDB, IDB and GMIB Net Amount at Risk by Type of Guarantee
	December 31, 2019				December 31, 2018
	Separate Account Balance		Net Amount at Risk		Separate Account Balance		Net Amount at Risk
	(Dollars in thousands)
Guaranteed minimum death benefit:
Return of net deposits	$	166,055	$	362	$	147,567	$	430
Return the greater of highest anniversary value or net deposits	287,518		9,936		252,361		29,146
Incremental death benefit	259,735		62,411		228,863		53,727
Guaranteed minimum income benefit	25,137		1		24,357		37
Total			$	72,710			$	83,340

The separate account assets are primarily comprised of stock and bond mutual funds. The net amount at risk for these contracts is based on the amount by which GMDB, IDB or GMIB exceeds account value. The reserve for GMDBs, IDBs or GMIBs, determined using modeling techniques and industry mortality assumptions, that is included in future policy benefits, totaled $8.3 million at December 31, 2019 and $7.7 million at December 31, 2018. The weighted average age of the contract holders with GMDB, IDB or GMIB rider exposure was 68 years at December 31, 2019 and 58 years at December 31, 2018. This average age fluctuates due to the small pool of participants that move in and out of exposure dependent upon market performance and terminations. Benefits paid for GMDBs, IDBs and GMIBs totaled $0.2 million for 2019, $0.2 million for 2018 and $0.8 million for 2017.