10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

☒     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2019

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OFTHE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 000-55522

NATIONAL WESTERN LIFE GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware	47-3339380
(State or Other Jurisdiction of Incorporation)	(IRS Employer Identification No.)

10801 N. Mopac Expy Bldg 3
Austin,	Texas
78759		(512)	836-1010
(Address of Principal Executive Offices) (Zip Code)		(Telephone Number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:   Yes ☒   No ☐ 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). : Yes ☒   No ☐ 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definition of "accelerated filer." "large accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☒  Accelerated filer  ☐    Non-accelerated filer (Do not check if a smaller reporting company)  ☐  Smaller reporting company ☐  Emerging growth company ☐ 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐    No ☒

As of August 7, 2019, the number of shares of Registrant's common stock outstanding was: Class A – 3,436,020 and  Class B - 200,000.

TABLE OF CONTENTS
	Page
Part I.  Financial Information:	3
Item 1.  Financial Statements	3
Condensed Consolidated Balance Sheets June 30, 2019 (Unaudited) and December 31, 2018	3
Condensed Consolidated Statements of Earnings  For the Three Months Ended June 30, 2019 and 2018 (Unaudited)	5
Condensed Consolidated Statements of Earnings  For the Six Months Ended June 30, 2019 and 2018 (Unaudited)	6
Condensed Consolidated Statements of Comprehensive Income (Loss) For the Three Months Ended June 30, 2019 and 2018 (Unaudited)	7
Condensed Consolidated Statements of Comprehensive Income (Loss) For the Six Months Ended June 30, 2019 and 2018 (Unaudited)	8
Condensed Consolidated Statements of Changes in Stockholders' Equity For the Three Months Ended June 30, 2019 and 2018 (Unaudited)	9
Condensed Consolidated Statements of Changes in Stockholders' Equity For the Six Months Ended June 30, 2019 and 2018 (Unaudited)	11
Condensed Consolidated Statements of Cash Flows  For the Six Months Ended June 30, 2019 and 2018 (Unaudited)	13
Notes to Condensed Consolidated Financial Statements (Unaudited)	15
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations	56
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	96
Item 4.  Controls and Procedures	97
Part II.  Other Information:	97
Item1.  Legal Proceedings	97
Item1A.  Risk Factors	97
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds	97
Item 4.  Removed and Reserved	98
Item 6.  Exhibits	98
Signatures	99

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NATIONAL WESTERN LIFE GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

	(Unaudited)
ASSETS	June 30, 2019		December 31, 2018
Investments:
Debt securities held to maturity, at amortized cost (fair value: $7,589,480 and $7,228,268)	$	7,342,359	7,285,254
Debt securities available for sale, at fair value (cost: $3,265,560 and $3,008,624)	3,375,105		2,946,059
Mortgage loans, net of allowance for possible losses ($675 and $675)	214,295		203,180
Policy loans	80,155		54,724
Derivatives, index options	89,900		14,684
Equity securities, at fair value (cost: $14,227 and $14,329)	19,324		17,491
Other long-term investments	62,214		56,851
Total investments	11,183,352		10,578,243
Cash and cash equivalents	140,802		131,976
Deferred policy acquisition costs	752,565		841,704
Deferred sales inducements	114,548		133,714
Value of business acquired	141,862		—
Accrued investment income	98,556		96,338
Federal income tax receivable	9,937		17,934
Other assets	171,328		131,782
Total assets	$	12,612,950	11,931,691

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

3

NATIONAL WESTERN LIFE GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

	(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY	June 30, 2019		December 31, 2018
LIABILITIES:
Future policy benefits:
Universal life and annuity contracts	$	9,420,315	9,608,850
Traditional life reserves	827,693		135,436
Other policyholder liabilities	141,731		135,694
Deferred Federal income tax liability	47,470		39,384
Other liabilities	120,593		111,550
Total liabilities	10,557,802		10,030,914
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS’ EQUITY:
Common stock:
Class A - $.01 par value; 7,500,000 shares authorized; 3,436,020 issued and outstanding in 2019 and 2018	34		34
Class B - $.01 par value; 200,000 shares authorized, issued, and outstanding in 2019 and 2018	2		2
Additional paid-in capital	41,716		41,716
Accumulated other comprehensive income (loss)	43,462		(37,015	)
Retained earnings	1,969,934		1,896,040
Total stockholders’ equity	2,055,148		1,900,777
Total liabilities and stockholders' equity	$	12,612,950	11,931,691

Note:  The Condensed Consolidated Balance Sheet at December 31, 2018 has been derived from the audited Consolidated Financial Statements as of that date.

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

4

NATIONAL WESTERN LIFE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

For the Three Months Ended June 30, 2019 and 2018

(Unaudited)

(In thousands, except per share amounts)

	2019			2018
Premiums and other revenues:
Universal life and annuity contract charges	$	36,910		39,945
Traditional life premiums	23,810			4,928
Net investment income	128,424			121,802
Other revenues	3,966			5,287
Net realized investment gains (losses):
Total other-than-temporary impairment (“OTTI”) gains (losses)	(5,900		)	3
Portion of OTTI (gains) losses recognized in other comprehensive income	(2		)	(3		)
Net OTTI losses recognized in earnings	(5,902		)	—
Other net investment gains (losses)	5,477			2,696
Total net realized investment gains (losses)	(425		)	2,696
Total revenues	192,685			174,658
Benefits and expenses:
Life and other policy benefits	33,657			17,461
Amortization of deferred policy acquisition costs and value of business acquired	31,411			31,069
Universal life and annuity contract interest	60,139			60,990
Other operating expenses	25,334			24,795
Total benefits and expenses	150,541			134,315
Earnings before Federal income taxes	42,144			40,343
Federal income taxes	8,448			7,877
Net earnings	$	33,696		32,466
Basic earnings per share:
Class A	$	9.53		$	9.18
Class B	$	4.76		$	4.59
Diluted earnings per share:
Class A	$	9.53		$	9.18
Class B	$	4.76		$	4.59

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

5

NATIONAL WESTERN LIFE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

For the Six Months Ended June 30, 2019 and 2018

(Unaudited)

(In thousands, except per share amounts)

	2019			2018
Premiums and other revenues:
Universal life and annuity contract charges	$	74,863		78,465
Traditional life premiums	41,393			9,073
Net investment income	279,755			182,547
Other revenues	10,379			10,284
Net realized investment gains (losses):
Total other-than-temporary impairment (“OTTI”) gains (losses)	(5,897		)	6
Portion of OTTI (gains) losses recognized in other comprehensive income	(5		)	(6		)
Net OTTI losses recognized in earnings	(5,902		)	—
Other net investment gains (losses)	10,106			3,307
Total net realized investment gains (losses)	4,204			3,307
Total revenues	410,594			283,676
Benefits and expenses:
Life and other policy benefits	61,846			38,862
Amortization of deferred policy acquisition costs and value of business acquired	63,575			63,298
Universal life and annuity contract interest	141,055			59,172
Other operating expenses	51,383			48,428
Total benefits and expenses	317,859			209,760
Earnings before Federal income taxes	92,735			73,916
Federal income taxes	18,841			14,575
Net earnings	$	73,894		59,341
Basic earnings per share:
Class A	$	20.90		$	16.78
Class B	$	10.45		$	8.39
Diluted earnings per share:
Class A	$	20.90		$	16.78
Class B	$	10.45		$	8.39

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

6

NATIONAL WESTERN LIFE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended June 30, 2019 and 2018

(Unaudited)

(In thousands)

	2019			2018
Net earnings	$	33,696		32,466
Other comprehensive income (loss), net of effects of deferred costs and taxes:
Unrealized gains (losses) on securities:
Net unrealized holding gains (losses) arising during period	35,401			(15,068	)
Net unrealized liquidity gains (losses)	1			2
Reclassification adjustment for net amounts included in net earnings	3,740			(1,564	)
Net unrealized gains (losses) on securities	39,142			(16,630	)
Foreign currency translation adjustments	(86		)	39
Benefit plans:
Amortization of net prior service cost and net gain (loss)	(504		)	2,801
Other comprehensive income (loss)	38,552			(13,790	)
Comprehensive income (loss)	$	72,248		18,676

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

7

NATIONAL WESTERN LIFE GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Six Months Ended June 30, 2019 and 2018

(Unaudited)

(In thousands)

	2019			2018
Net earnings	$	73,894		59,341
Other comprehensive income, net of effects of deferred costs and taxes:
Unrealized gains (losses) on securities:
Net unrealized holding gains (losses) arising during period	78,144			(49,822	)
Net unrealized liquidity gains (losses)	2			2
Reclassification adjustment for net amounts included in net earnings	2,872			(1,597	)
Net unrealized gains (losses) on securities	81,018			(51,417	)
Foreign currency translation adjustments	467			1,207
Benefit plans:
Amortization of net prior service cost and net gain (loss)	(1,008		)	5,602
Other comprehensive income (loss)	80,477			(44,608	)
Comprehensive income (loss)	$	154,371		14,733

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

8

NATIONAL WESTERN LIFE GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the Three Months Ended June 30, 2019 and 2018 (Unaudited) (In thousands)
	2019			2018
Common stock:
Balance at beginning of period	$	36		36
Shares exercised under stock option plan	—			—
Balance at end of period	36			36
Additional paid-in capital:
Balance at beginning of period	41,716			41,716
Shares exercised under stock option plan	—			—
Balance at end of period	41,716			41,716
Accumulated other comprehensive income:
Unrealized gains (losses) on non-impaired securities:
Balance at beginning of period	11,589			(5,537	)
Change in unrealized gains (losses) during period, net of tax	39,141			(16,632	)
Cumulative effect of change in accounting principle, net of tax	—			—
Balance at end of period	50,730			(22,169	)
Unrealized losses on impaired held to maturity securities:
Balance at beginning of period	(6		)	(10	)
Amortization	2			3
Other-than-temporary impairments, non-credit, net of tax	—			—
Additional credit loss on previously impaired securities	—			—
Change in shadow deferred policy acquisition costs	(1		)	(1	)
Balance at end of period	(5		)	(8	)
Unrealized losses on impaired available for sale securities:
Balance at beginning of period	(2		)	(1	)
Other-than-temporary impairments, non-credit, net of tax	—			—
Change in shadow deferred policy acquisition costs	—			—
Recoveries, net of tax	—			—
Balance at end of period	(2		)	(1	)
	Continued on Next Page

9

NATIONAL WESTERN LIFE GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued) For the Three Months Ended June 30, 2019 and 2018 (Unaudited) (In thousands)
	2019			2018
Foreign currency translation adjustments:
Balance at beginning of period	5,130			4,391
Change in translation adjustments during period	(86		)	39
Balance at end of period	5,044			4,430
Benefit plan liability adjustment:
Balance at beginning of period	(11,801		)	(19,794	)
Amortization of net prior service cost and net loss, net of tax	(504		)	2,801
Balance at end of period	(12,305		)	(16,993	)
Accumulated other comprehensive income (loss) at end of period	43,462			(34,741	)
Retained earnings:
Balance at beginning of period	1,936,238			1,807,430
Net earnings	33,696			32,466
Balance at end of period	1,969,934			1,839,896
Total stockholders' equity	$	2,055,148		1,846,907

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

10

NATIONAL WESTERN LIFE GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the Six Months Ended June 30, 2019 and 2018 (Unaudited) (In thousands)
	2019			2018
Common stock:
Balance at beginning of period	$	36		36
Shares exercised under stock option plan	—			—
Balance at end of period	36			36
Additional paid-in capital:
Balance at beginning of period	41,716			41,716
Shares exercised under stock option plan	—			—
Balance at end of period	41,716			41,716
Accumulated other comprehensive income:
Unrealized gains (losses) on non-impaired securities:
Balance at beginning of period	(30,286		)	33,664
Change in unrealized gains (losses) during period, net of tax	81,016			(51,419	)
Cumulative effect of change in accounting principle, net of tax	—			(4,414	)
Balance at end of period	50,730			(22,169	)
Unrealized losses on impaired held to maturity securities:
Balance at beginning of period	(7		)	(10	)
Amortization	4			5
Other-than-temporary impairments, non-credit, net of tax	—			—
Additional credit loss on previously impaired securities	—			—
Change in shadow deferred policy acquisition costs	(2		)	(3	)
Balance at end of period	(5		)	(8	)
Unrealized losses on impaired available for sale securities:
Balance at beginning of period	(2		)	(1	)
Other-than-temporary impairments, non-credit, net of tax	—			—
Change in shadow deferred policy acquisition costs	—			—
Recoveries, net of tax	—			—
Balance at end of period	(2		)	(1	)
	Continued on Next Page

11

NATIONAL WESTERN LIFE GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (continued) For the Six Months Ended June 30, 2019 and 2018 (Unaudited) (In thousands)
	2019			2018
Foreign currency translation adjustments:
Balance at beginning of period	4,577			3,223
Change in translation adjustments during period	467			1,207
Balance at end of period	5,044			4,430
Benefit plan liability adjustment:
Balance at beginning of period	(11,297		)	(22,595	)
Amortization of net prior service cost and net loss, net of tax	(1,008		)	5,602
Balance at end of period	(12,305		)	(16,993	)
Accumulated other comprehensive income (loss) at end of period	43,462			(34,741	)
Retained earnings:
Balance at beginning of period	1,896,040			1,776,141
Cumulative effect of change in accounting principle, net of tax	—			4,414
Net earnings	73,894			59,341
Balance at end of period	1,969,934			1,839,896
Total stockholders' equity	$	2,055,148		1,846,907

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

12

NATIONAL WESTERN LIFE GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2019 and 2018 (Unaudited) (In thousands)
	2019			2018
Cash flows from operating activities:
Net earnings	$	73,894		59,341
Adjustments to reconcile net earnings to net cash from operating activities:
Universal life and annuity contract interest	141,055			59,172
Surrender charges and other policy revenues	(16,975		)	(19,138	)
Realized (gains) losses on investments	(4,204		)	(3,307	)
Accretion/amortization of discounts and premiums, investments	1,362			(150	)
Depreciation and amortization	5,464			5,932
(Increase) decrease in value of equity securities	(2,338		)	107
(Increase) decrease in value of derivatives	(59,830		)	34,102
(Increase) decrease in deferred policy acquisition and sales inducement costs, and value of business acquired	42,652			21,304
(Increase) decrease in accrued investment income	3,899			(1,861	)
(Increase) decrease in other assets	(2,757		)	(8,071	)
Increase (decrease) in liabilities for future policy benefits	769			1,389
Increase (decrease) in other policyholder liabilities	(7,831		)	5,335
Increase (decrease) in Federal income tax liability	7,895			(16,472	)
Increase (decrease) in deferred Federal income tax	(13,306		)	11,367
Increase (decrease) in other liabilities	(5,862		)	(3,890	)
Net cash provided by operating activities	163,887			145,160
Cash flows from investing activities:
Proceeds from sales of:
Debt securities available for sale	80,528			—
Other investments	34,984			2,220
Proceeds from maturities and redemptions of:
Debt securities held to maturity	310,618			275,670
Debt securities available for sale	137,823			105,678
Derivatives, index options	21,405			105,615
Property and equipment	—			8
Purchases of:
Debt securities held to maturity	(103,710		)	(343,145	)
Debt securities available for sale	(77,118		)	(161,416	)
Equity securities	(295		)	(406	)
Derivatives, index options	(37,089		)	(44,943	)
Other investments	(11,953		)	(586	)
Property and equipment	(1,002		)	(2,988	)
Payment to acquire businesses, net of cash acquired	(189,121		)	—
	Continued on Next Page

13

NATIONAL WESTERN LIFE GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) For the Six Months Ended June 30, 2019 and 2018 (Unaudited) (In thousands)
	2019			2018
Principal payments on mortgage loans	22,252			21,521
Cost of mortgage loans acquired	(33,247		)	(9,895	)
Decrease (increase) in policy loans	2,697			802
Net cash provided by/(used in) investing activities	156,772			(51,865	)
Cash flows from financing activities:
Deposits to account balances for universal life and annuity contracts	187,377			316,906
Return of account balances on universal life and annuity contracts	(499,801		)	(502,834	)
Net cash provided by (used in) financing activities	(312,424		)	(185,928	)
Effect of foreign exchange	591			1,528
Net increase (decrease) in cash and cash equivalents	8,826			(91,105	)
Cash and cash equivalents at beginning of period	131,976			217,624
Cash and cash equivalents at end of period	$	140,802		126,519
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest	$	29		20
Income taxes	$	24,150		19,680
Noncash operating activities:
Deferral of sales inducements	$	(8,822	)	(6,177	)
Noncash investing activities:
Contingent consideration to acquire businesses	$	3,871		—

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

14

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1)  CONSOLIDATION AND BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments necessary to present fairly the financial position of National Western Life Group, Inc. ("NWLGI") and its wholly owned subsidiaries (“Company”) as of June 30, 2019, and the results of its operations and its cash flows for the three and six months ended June 30, 2019 and June 30, 2018. Such adjustments are of a normal recurring nature. The results of operations for the six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year. It is recommended that these Condensed Consolidated Financial Statements be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 which is accessible free of charge through the Company's internet site at www.nwlgi.com or the Securities and Exchange Commission internet site at www.sec.gov. The Condensed Consolidated Balance Sheet at December 31, 2018 has been derived from the audited consolidated financial statements as of that date.

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of NWLGI and its wholly owned subsidiaries: National Western Life Insurance Company ("NWLIC" or "National Western"), Regent Care San Marcos Holdings, LLC, NWL Services, Inc., and N.I.S. Financial Services, Inc. ("NIS"). National Western's wholly owned subsidiaries include The Westcap Corporation, NWL Financial, Inc., NWLSM, Inc., Braker P III, LLC, and Ozark National Life Insurance Company ("Ozark National"). The results of operations for Ozark National and NIS include the five months ended June 30, 2019, subsequent to their acquisition effective January 31, 2019. All significant intercorporate transactions and accounts have been eliminated in consolidation.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates in the accompanying Condensed Consolidated Financial Statements include: (1) liabilities for future policy benefits, (2) valuation of derivative instruments, (3) recoverability and amortization of deferred policy acquisition costs, (4) valuation allowances for deferred tax assets, (5) other-than-temporary impairment losses on debt securities, (6) commitments and contingencies, and (7) valuation allowances for mortgage loans and real estate. During the first six months of 2019, the Company incorporated accounting estimates for business combinations, value of business acquired, and fair value measurement as a result of its acquisition of Ozark National and NIS.

The table below shows the unrealized gains and losses on available-for-sale securities that were reclassified out of accumulated other comprehensive income for the three and six months ended June 30, 2019 and June 30, 2018.

Affected Line Item in the Statements of Earnings	Amount Reclassified From Accumulated Other Comprehensive Income
	Three Months Ended June 30,				Six Months Ended June 30,
	2019			2018	2019		2018
	(In thousands)
Other net investment gains (losses)	$	1,168		1,981	2,267		2,021
Net OTTI losses recognized in earnings	(5,902		)	—	(5,902	)	—
Earnings before Federal income taxes	(4,734		)	1,981	(3,635	)	2,021
Federal income taxes	(994		)	417	(763	)	424
Net earnings	$	(3,740	)	1,564	(2,872	)	1,597

15

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(2)  NEW ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements not yet adopted

On April 25, 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments in this Update add clarification and correction to various aspects of the following guidance previously issued related to financial instruments, based on feedback from stakeholders.

A. ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Areas for improvement. The amendments clarify guidance and implementation around accrued interest, transfers between classifications or categories for loans and debt securities, consideration of recoveries in estimating allowances, reinsurance recoveries, consideration of prepayments and estimated costs to sell when foreclosure is probable. Additionally, the amendments correct certain cross-references.

B. ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities. The amendments clarify the scope of the original Update, and add clarification on the guidance and implementation around fair value disclosure requirements for nonpublic entities, measurement alternatives for equity securities without readily determinable fair values at nonrecurring fair value measurement, remeasurement of equity securities without readily determinable fair values at historical exchange rates, and associated disclosure requirements.

C. ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments clarify the guidance and implementation around partial-term fair value hedges of interest rate risk, amortization of fair value hedge basis adjustments, disclosure of fair value hedge basis adjustments, consideration of the hedged contractually specified interest rate under the hypothetical derivative method, scope for nonpublic entities, and application of a first-payments-received cash flow hedging technique to overall cash flows on a group of variable interest payments.

The amendments contained in this update will be effective for the same fiscal years in which the original ASU becomes effective, or, if already implemented, annual periods beginning after the issuance of this update. The Company will be primarily affected by the clarifications provided to ASU 2016-13, which is still pending adoption.

In August 2018, the FASB issued ASU 2018-12 Financial Services-Insurance (Topic 944) - Targeted Improvements to the Accounting for Long-Duration Contracts. This update is aimed at improving the Codification as it relates to long-duration contracts which will improve the timeliness of recognizing changes in the liability for future policy benefits, simplify accounting for certain market-based options, simplify the amortization of deferred acquisition costs, and improve the effectiveness of required disclosures. Amendments include the following:

A. Require insurance entity to (1) review and update assumptions used to measure cash flows at least annually (with changes recognized in net income) and (2) update discount rate assumption at each reporting date (with changes recognized in other comprehensive income).

B. Require insurance entity to measure all market risk benefits associated with deposit (i.e. account balance) contracts at fair value, with change in fair value attributable to change in instrument-specific credit risk recognized in other comprehensive income.

C. Simplify amortization of deferred acquisition costs and other balances amortized in proportion to premiums, gross profits, or gross margins and require those balances be amortized on constant level basis over expected term of related contract. Deferred acquisition costs are required to be written off for unexpected contract terminations but are not subject to impairment test.

D. Require insurance entity to add disclosures of disaggregated rollforwards of beginning to ending balances of the liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities, and deferred acquisition costs. Insurance entity must also disclose information about significant inputs, judgments, assumptions, and methods used in measurement, including changes in those inputs, judgments, and assumptions, and the effect of those changes on measurement.

16

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

These updates are required to be applied retrospectively to the earliest period presented in the financial statements for periods beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In August 2018, the FASB issued a new Concepts Statement No. 8 Conceptual Framework for Financial Reporting - Chapter 8, Notes to Financial Statements. This was issued as part of a disclosure framework project aimed at improving disclosures in financial statements. This issuance provides conceptual guidance that may be followed when determining items to include as disclosures in the notes to financial statements. In conjunction with this issuance, the FASB also issued two accounting standard updates (“ASU”) which identified a particular FASB Topic and evaluated its disclosures through the new conceptual framework of Concepts Statement No. 8, Chapter 8. This process resulted in the issuance of the following two ASUs.

In August 2018, FASB issued ASU 2018-13 Fair Value Measurement (Topic 820) Disclosure Framework - Changes to the Disclosure requirements for Fair Value Measurement. This update removed disclosures for 1) amount of and reasons for transfers between Level 1 and Level 2 for fair value hierarchy, 2) policy for timing of transfers between levels, 3) valuation process for Level 3 fair value measurements. This update also added disclosure requirement as follows: 1) changes in unrealized gains and losses for the period included in OCI for recurring Level 3 fair value measurements held at end of reporting period; 2) range and weighted average (or other reasonable quantitative measurement) of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments will be effective for interim periods beginning after December 15, 2019. Adoption of the guidance is not expected to have a material effect on the Company’s results of operations or financial position.

In August 2018, FASB issued ASU 2018-14 Compensation-Retirement Benefits - Defined Benefit Plans-General (Subtopic 715-20) Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. This update removed disclosures for 1) amounts in AOCI expected to be recognized as components of net periodic benefit cost over the next fiscal year, 2) amount and timing of plan assets expected to be returned to the employer, 3) related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan, 4) the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of the net periodic benefit costs and (b) benefit obligation for postretirement health care benefits. This update also added disclosures as follow: 1) weighted-average interest crediting rates for cash balance plans and other plans with promised crediting rates, 2) explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. Finally, this update clarified that the following information for defined benefit pension plans should be disclosed: 1) projected benefit obligation (PBO) and fair value of plan assets for plans with PBO in excess of plan assets, 2) accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets. The amendments will be effective for fiscal periods ending after December 31, 2020. Adoption of the guidance is not expected to have a material effect on the Company’s results of operations or financial position.

In June 2016, the FASB released ASU 2016-13, Financial Instruments-Credit Losses, which revises the credit loss recognition criteria for certain financial assets measured at amortized cost. The new guidance replaces the existing incurred loss recognition model with an expected loss recognition model. The objective of the expected credit loss model is for the reporting entity to recognize its estimate of expected credit losses for affected financial assets in a valuation allowance deducted from the amortized cost basis of the related financial assets that results in presenting the net carrying value of the financial assets at the amount expected to be collected. The guidance is effective for interim and annual periods beginning after December 15, 2019, and for most affected instruments must be adopted using a modified retrospective approach, with a cumulative effect adjustment recorded to beginning retained income. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

Recent accounting pronouncements adopted

In August 2018, the SEC released a final rule updating disclosure requirements, Disclosure Update and Simplification, which resulted in the additional interim disclosure of an analysis of changes in stockholders’ equity to be required for the current and comparative quarter and year-to-date interim periods. Registrants are required to provide an analysis of changes in each caption of stockholders’ equity and noncontrolling interests, which will be accompanied by dividends per share and in the aggregate for each class of shares. The disclosure must be presented in the form of a reconciliation, either as a separate statement or in the footnotes. The adoption of this ASU in 2019 did not have a material effect on the results of operations or financial position of the Company as this information in year-to-date format is already provided.

17

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs: Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium. The amortization period for premiums is being shortened to the earliest call date. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The adoption of this ASU in 2019 did not have a material effect on the results of operations or financial position of the Company.

In February 2016, the FASB issued new guidance on leasing transactions (ASU 2016-02, Leases - Topic 842). The new guidance is effective for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and requires a modified retrospective transition approach (subject to optional practical expedients). The new guidance requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months. Leases would be classified as finance or operating leases and both types of leases will be recognized on the balance sheet. Lessor accounting will remain largely unchanged from current guidance except for certain targeted changes. The new guidance will also require new qualitative and quantitative disclosures. Early adoption is permitted. The Company elected to early adopt this guidance in 2018. There was no material impact to the Company’s financial position, results of operations or cash flows as the result of the adoption of this ASU in 2018.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future Consolidated Financial Statements.

(3)  STOCKHOLDERS' EQUITY

NWLIC is restricted by state insurance laws as to dividend amounts which may be paid to stockholders without prior approval from the Colorado Division of Insurance.  The restrictions are based on the lesser of statutory earnings from operations, excluding capital gains, from the prior calendar year or 10% of statutory surplus of the company as of the previous calendar year-end.  Under these guidelines the maximum dividend payment which may be made without prior approval in 2019 is $30.7 million. As the sole owner of NWLIC, all dividends declared by National Western are payable entirely to NWLGI and are eliminated in consolidation.

Ozark National is similarly restricted under the state insurance laws of Missouri as to dividend amounts which may be paid to stockholders without prior approval to the greater of 10% of the statutory surplus of the company from the prior year-end or the company's net gain from operations, excluding capital gains, from the prior calendar year. Based upon this restriction, the maximum dividend payment which may be made in 2019 without prior approval is $20.4 million. As part of the Stock Purchase Agreement dated October 3, 2018, by and between NWLIC and Ozark National's previous owner, the Missouri Department of Insurance granted approval for an extraordinary dividend of $102.7 million to be paid to the prior owner concurrent with the closing of the transaction effective January 31, 2019. Consequently, any additional dividends during 2019 will require prior approval of the Missouri Department of Insurance. As the sole owner of Ozark National, all dividends declared by Ozark National going forward are payable entirely to NWLIC and are eliminated in consolidation.

In the first quarter of 2019, National Western declared and paid a $32.0 million dividend to NWLGI, the proceeds of which were used as part of the cash purchase of NIS. In the first quarter of 2018, National Western declared and paid a $3.0 million dividend to NWLGI. National Western did not declare or pay cash dividends during the three month periods ended June 30, 2019 and 2018. Ozark National did not declare or pay cash dividends on its shares during the five-month period ended June 30, 2019.

NWLGI did not declare or pay cash dividends on its common shares during the six months ended June 30, 2019 and 2018.

18

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(4)  EARNINGS PER SHARE

Basic earnings per share of common stock are computed by dividing net income available to each class of common stockholders on an as if distributed basis by the weighted-average number of common shares outstanding for the period. Diluted earnings per share, by definition, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock, that then shared in the distributed earnings of each class of common stock. U.S. GAAP requires a two-class presentation for the Company's two classes of common stock. The Company currently has no share-based compensation awards outstanding that could be redeemed for shares of common stock.

Net income for the periods shown below is allocated between Class A shares and Class B shares based upon (1) the proportionate number of shares issued and outstanding as of the end of the period, and (2) the per share dividend rights of the two classes under the Company's Restated Certificate of Incorporation (the Class B dividend per share is equal to one-half the Class A dividend per share).

	Three Months Ended June 30,
	2019			2018
	Class A		Class B	Class A	Class B
	(In thousands except per share amounts)
Numerator for Basic and Diluted Earnings Per Share:
Net income	$	33,696		32,466
Dividends - Class A shares	—			—
Dividends - Class B shares	—			—
Undistributed earnings	$	33,696		32,466
Allocation of net income:
Dividends	$	—	—	—	—
Allocation of undistributed income	32,743		953	31,548	918
Net earnings	$	32,743	953	31,548	918
Denominator:
Basic earnings per share - weighted-average shares	3,436		200	3,436	200
Effect of dilutive stock options	—		—	—	—
Diluted earnings per share - adjusted weighted-average shares for assumed conversions	3,436		200	3,436	200
Basic Earnings Per Share	$	9.53	4.76	9.18	4.59
Diluted Earnings Per Share	$	9.53	4.76	9.18	4.59

19

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Six Months Ended June 30,
	2019			2018
	Class A		Class B	Class A	Class B
	(In thousands except per share amounts)
Numerator for Basic and Diluted Earnings Per Share:
Net income	$	73,894		59,341
Dividends - Class A shares	—			—
Dividends - Class B shares	—			—
Undistributed income	$	73,894		59,341
Allocation of net income:
Dividends	$	—	—	—	—
Allocation of undistributed income	71,804		2,090	57,663	1,678
Net income	$	71,804	2,090	57,663	1,678
Denominator:
Basic earnings per share - weighted-average shares	3,436		200	3,436	200
Effect of dilutive stock options	—		—	—	—
Diluted earnings per share - adjusted weighted-average shares for assumed conversions	3,436		200	3,436	200
Basic Earnings Per Share	$	20.90	10.45	16.78	8.39
Diluted Earnings Per Share	$	20.90	10.45	16.78	8.39

20

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(5)  PENSION AND OTHER POSTRETIREMENT PLANS

(A) Defined Benefit Pension Plans

National Western sponsors a qualified defined benefit pension plan covering employees enrolled prior to 2008. The plan provides benefits based on the participants' years of service and compensation. The Company makes annual contributions to the plan that comply with the minimum funding provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). On October 19, 2007, National Western's Board of Directors approved an amendment to freeze the pension plan as of December 31, 2007. The freeze ceased future benefit accruals to all participants and closed the plan to any new participants. In addition, all participants became immediately 100% vested in their accrued benefits as of that date. As participants are no longer earning a credit for service, future qualified defined benefit plan expense is projected to be minimal. Fair values of plan assets and liabilities are measured as of the prior December 31 for each year. The following table summarizes the components of net periodic benefit cost.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019		2018
	(In thousands)
Service cost	$	24		28		48		56
Interest cost	210			225		420		450
Expected return on plan assets	(272		)	(325	)	(544	)	(650	)
Amortization of prior service cost	—			—		—		—
Amortization of net loss	165			131		330		262
Net periodic benefit cost	$	127		59		254		118

The service cost shown above for each period represents plan expenses expected to be paid out of plan assets. Under the clarified rules of the Pension Protection Act, plan expenses paid from plan assets are to be included in the plan's service cost component.

The Company's minimum required contribution for the 2019 plan year is $0.4 million. There was $0.5 million in planned contributions remaining for the 2018 plan year as of June 30, 2019. As of June 30, 2019, the Company had made $0.0 million in contributions to the plan for the 2019 plan year.

The components of net periodic benefit cost including service cost are reported in the line item “Other operating expenses” in the income statement.

National Western also sponsors three non-qualified defined benefit pension plans. The first plan covers certain senior officers and provides benefits based on the participants' years of service and compensation. The primary pension obligations and administrative responsibilities of the plan are maintained by a pension administration firm, which is a subsidiary of American National Insurance Company ("ANICO"), a related party. ANICO has guaranteed the payment of pension obligations under the plan. However, the company has a contingent liability with respect to the plan should these entities be unable to meet their obligations under the existing agreements. Also, the Company has a contingent liability with respect to the plan in the event that a plan participant continues employment with National Western beyond age seventy, the aggregate average annual participant salary increases exceed 10% per year, or any additional employees become eligible to participate in the plan. If any of these conditions are met, the Company would be responsible for any additional pension obligations resulting from these items. Amendments were made to the plan to allow an additional employee to participate and to change the benefit formula for the then Chairman of the Company. As previously mentioned, these additional obligations are a liability to the Company. Effective December 31, 2004, this plan was frozen with respect to the continued accrual of benefits of the then Chairman and the then President of the Company in order to comply with law changes under the American Jobs Creation Act of 2004 ("Act").

21

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Effective July 1, 2005, National Western established a second non-qualified defined benefit plan for the benefit of the then Chairman of the Company.  This plan is intended to provide for post-2004 benefit accruals that mirror and supplement the pre-2005 benefit accruals under the previously discussed non-qualified plan, while complying with the requirements of the Act.

Effective November 1, 2005, National Western established a third non-qualified defined benefit plan for the benefit of the then President of the Company.  This plan is intended to provide for post-2004 benefit accruals that supplement the pre-2005 benefit accruals under the first non-qualified plan as previously discussed, while complying with the requirements of the Act.

The following table summarizes the components of net periodic benefit costs for the non-qualified defined benefit plans.

	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2019		2018	2019	2018
	(In thousands)
Service cost	$	126	90	251	180
Interest cost	256		213	512	426
Amortization of prior service cost	15		15	30	30
Amortization of net loss	348		176	696	352
Net periodic benefit cost	$	745	494	1,489	988

The Company expects to contribute $2.0 million to these plans in 2019.  As of June 30, 2019, the Company has contributed $0.9 million to the plans.

The components of net periodic benefit cost including service cost are reported in the line item “Other operating expenses” in the income statement.

Ozark National and NIS have no defined benefit plans.

(B) Postretirement Employment Plans Other Than Pension

National Western sponsors two healthcare plans that were amended in 2004 to provide postretirement benefits to certain fully-vested individuals.  The plans are unfunded. The following table summarizes the components of net periodic benefit costs.

	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2019		2018	2019	2018
	(In thousands)
Interest cost	$	50	40	99	80
Amortization of prior service cost	13		26	26	52
Amortization of net loss	61		38	122	75
Net periodic benefit cost	$	124	104	247	207

The Company expects to contribute minimal amounts to the plans in 2019. Ozark National and NIS do not offer postemployment benefits.

22

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The components of net periodic benefit cost including service cost are reported in the line item “Other operating expenses” in the income statement.

(6) SEGMENT AND OTHER OPERATING INFORMATION

The Company defines its reportable operating segments as domestic life insurance, international life insurance, annuities, and acquired companies. These segments are organized based on product types, geographic marketing areas, and business groupings. Ozark National and NIS have been combined into the segment "Acquired Businesses" given its inter-related marketing and sales approach which consists of a coordinated sale of a non-participating whole life insurance product (Ozark National) and a mutual fund investment product (NIS). As disclosed in the Company's filings for 2018, National Western discontinued accepting applications for the Company's international products from residents of other countries in May 2018. A fifth category "All Others" primarily includes investments and earnings of non-operating subsidiaries as well as other remaining investments and assets not otherwise supporting specific segment operations.

A summary of segment information as of June 30, 2019 and December 31, 2018 for the Condensed Consolidated Balance Sheet items and for the three and six months ended June 30, 2019 and June 30, 2018 for the Condensed Consolidated Statement of Earnings is provided below.

Condensed Consolidated Balance Sheet Items:

	June 30, 2019
	Domestic Life Insurance		International Life Insurance	Annuities	Acquired Businesses	All Others	Totals
	(In thousands)
Deferred policy acquisition costs, sales inducements, and value of business acquired	$	119,695	217,361	528,241	143,678	—	1,008,975
Total segment assets	1,287,216		1,171,538	8,465,260	953,048	372,642	12,249,704
Future policy benefits	1,108,455		879,742	7,563,354	696,457	—	10,248,008
Other policyholder liabilities	17,239		14,956	94,389	15,147	—	141,731

	December 31, 2018
	Domestic Life Insurance		International Life Insurance	Annuities	Acquired Businesses	All Others	Totals
	(In thousands)
Deferred policy acquisition costs and sales inducements	$	122,661	243,518	609,239	—	—	975,418
Total segment assets	1,215,864		1,211,036	8,791,463	—	370,118	11,588,481
Future policy benefits	1,039,150		894,891	7,810,245	—	—	9,744,286
Other policyholder liabilities	17,439		20,381	97,874	—	—	135,694

23

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Condensed Consolidated Statement of Earnings:

	Three Months Ended June 30, 2019
	Domestic Life Insurance		International  Life Insurance	Annuities	Acquired Businesses	All  Others	Totals
	(In thousands)
Premiums and contract revenues	$	10,706	23,777	5,857	20,380	—	60,720
Net investment income	14,995		9,276	89,572	6,007	8,574	128,424
Other revenues	20		33	64	2,290	1,559	3,966
Total revenues	25,721		33,086	95,493	28,677	10,133	193,110
Life and other policy benefits	3,829		2,959	9,876	16,993	—	33,657
Amortization of deferred policy acquisition costs and value of business acquired	3,307		6,948	18,750	2,406	—	31,411
Universal life and annuity contract interest	12,985		7,337	39,817	—	—	60,139
Other operating expenses	5,017		4,521	9,374	4,491	1,931	25,334
Federal income taxes (benefit)	89		2,014	3,155	956	2,323	8,537
Total expenses	25,227		23,779	80,972	24,846	4,254	159,078
Segment earnings (loss)	$	494	9,307	14,521	3,831	5,879	34,032

24

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Six Months Ended June 30, 2019
	Domestic Life Insurance		International Life Insurance	Annuities	Acquired Businesses	All Others	Totals
	(In thousands)
Premiums and contract revenues	$	21,510	49,840	10,725	34,181	—	116,256
Net investment income	38,494		23,293	192,726	9,983	15,259	279,755
Other revenues	64		54	72	3,731	6,458	10,379
Total revenues	60,068		73,187	203,523	47,895	21,717	406,390
Life and other policy benefits	7,751		5,121	21,306	27,668	—	61,846
Amortization of deferred policy acquisition costs and value of business acquired	6,717		14,242	38,462	4,154	—	63,575
Universal life and annuity contract interest	34,426		19,330	87,299	—	—	141,055
Other operating expenses	9,140		8,785	16,882	7,576	9,000	51,383
Federal income taxes (benefit)	413		5,222	8,038	1,703	2,582	17,958
Total expenses	58,447		52,700	171,987	41,101	11,582	335,817
Segment earnings (loss)	$	1,621	20,487	31,536	6,794	10,135	70,573

	Three Months Ended June 30, 2018
	Domestic Life Insurance		International  Life Insurance	Annuities	Acquired Businesses	All  Others	Totals
	(In thousands)
Premiums and contract revenues	$	10,114	27,461	7,298	—	—	44,873
Net investment income	13,556		10,603	86,915	—	10,728	121,802
Other revenues	—		4	18	—	5,265	5,287
Total revenues	23,670		38,068	94,231	—	15,993	171,962
Life and other policy benefits	5,103		4,534	7,824	—	—	17,461
Amortization of deferred acquisition costs	2,709		7,336	21,024	—	—	31,069
Universal life and annuity contract interest	9,907		7,600	43,483	—	—	60,990
Other operating expenses	5,006		5,628	9,085	—	5,076	24,795
Federal income taxes (benefit)	185		2,516	2,478	—	2,132	7,311
Total expenses	22,910		27,614	83,894	—	7,208	141,626
Segment earnings (loss)	$	760	10,454	10,337	—	8,785	30,336

25

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Six Months Ended June 30, 2018
	Domestic Life Insurance		International Life Insurance	Annuities	Acquired Businesses	All Others	Totals
	(In thousands)
Premiums and contract revenues	$	19,715	55,378	12,445	—	—	87,538
Net investment income	14,219		12,574	140,458	—	15,296	182,547
Other revenues	—		34	37	—	10,213	10,284
Total revenues	33,934		67,986	152,940	—	25,509	280,369
Life and other policy benefits	9,912		10,262	18,688	—	—	38,862
Amortization of deferred acquisition costs	5,384		14,716	43,198	—	—	63,298
Universal life and annuity contract interest	7,046		6,450	45,676	—	—	59,172
Other operating expenses	10,153		11,009	17,020	—	10,246	48,428
Federal income taxes (benefit)	283		5,023	5,576	—	2,999	13,881
Total expenses	32,778		47,460	130,158	—	13,245	223,641
Segment earnings (loss)	$	1,156	20,526	22,782	—	12,264	56,728

Reconciliations of segment information to the Company's Condensed Consolidated Financial Statements are provided below.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019			2018	2019	2018
	(In thousands)
Premiums and Other Revenues:
Premiums and contract revenues	$	60,720		44,873	116,256	87,538
Net investment income	128,424			121,802	279,755	182,547
Other revenues	3,966			5,287	10,379	10,284
Realized gains (losses) on investments	(425		)	2,696	4,204	3,307
Total condensed consolidated premiums and other revenues	$	192,685		174,658	410,594	283,676

26

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Three Months Ended June 30,				Six Months Ended June 30,
	2019			2018	2019	2018
	(In thousands)
Federal Income Taxes:
Total segment Federal income taxes	$	8,537		7,311	17,958	13,881
Taxes on realized gains (losses) on investments	(89		)	566	883	694
Total condensed consolidated Federal income taxes	$	8,448		7,877	18,841	14,575

	Three Months Ended June 30,				Six Months Ended June 30,
	2019			2018	2019	2018
	(In thousands)
Net Earnings:
Total segment earnings	$	34,032		30,336	70,573	56,728
Realized gains (losses) on investments, net of taxes	(336		)	2,130	3,321	2,613
Total condensed consolidated net earnings	$	33,696		32,466	73,894	59,341

	June 30,		December 31,
	2019		2018
	(In thousands)
Assets:
Total segment assets	$	12,249,704	11,588,481
Other unallocated assets	363,246		343,210
Total condensed consolidated assets	$	12,612,950	11,931,691

27

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(7)   SHARE-BASED PAYMENTS

The Company had a stock and incentive plan ("1995 Plan") which provided for the grant of any or all of the following types of awards to eligible employees: (1) stock options, including incentive stock options and nonqualified stock options; (2) stock appreciation rights ("SARs"), in tandem with stock options or freestanding; (3) restricted stock or restricted stock units; and, (4) performance awards. The 1995 Plan began on April 21, 1995, and was amended on June 25, 2004 to extend the termination date to April 20, 2010. The number of shares of Class A, $1.00 par value, common stock which were allowed to be issued under the 1995 Plan, or as to which SARs or other awards were allowed to be granted, could not exceed 300,000. Effective June 20, 2008, the Company's shareholders approved a 2008 Incentive Plan (“2008 Plan”). The 2008 Plan is substantially similar to the 1995 Plan and authorized an additional number of Class A common stock shares eligible for issue not to exceed 300,000. These plans were assumed by NWLGI from National Western pursuant to the terms of the holding company reorganization in 2015. On June 15, 2016, stockholders of NWLGI approved an amended and restated 2008 Plan ("Incentive Plan"), which extended the term of the 2008 Plan for ten years from the date of stockholder approval. The Incentive Plan includes additional provisions, most notably regarding the definition of performance objectives which could be used in the issuance of the fourth type of award noted above (performance awards).

All of the employees of the Company and its subsidiaries are eligible to participate in the current Incentive Plan. In addition, directors of the Company are eligible to receive the same types of awards as employees except that they are not eligible to receive incentive stock options. Company directors, including members of the Compensation and Stock Option Committee, are eligible for nondiscretionary stock options. At the end of 2018, all stock options granted under the 1995 Plan and 2008 Plan had been exercised, forfeited, or expired. SARs granted prior to 2016 vest 20% annually following three years of service following the grant date. Employee SARs granted 2016 forward vest 33.3% annually following one year of service from the date of the grant. Directors' stock option and SARs grants vest 20% annually following one year of service from the date of grant.

Effective during March 2006, the Company adopted and implemented a limited stock buy-back program with respect to the 1995 Plan which provides stock option holders the additional alternative of selling shares acquired through the exercise of options directly back to the Company. Option holders may elect to sell such acquired shares back to the Company at any time within ninety (90) days after the exercise of options at the prevailing market price as of the date of notice of election. The buy-back program did not alter the terms and conditions of the 1995 Plan; however, the program necessitated a change in accounting from the equity classification to the liability classification. In August 2008, the Company implemented another limited stock buy-back program, substantially similar to the 2006 program, for shares issued under the 2008 Plan. These plans were assumed as well by NWLGI from National Western pursuant to the terms of the holding company reorganization.

The Incentive Plan allows for certain other share or unit awards which are solely paid out in cash based on the value of the Company's shares, or changes therein, as well as the financial performance of the Company under pre-determined target performance metrics. Certain awards, such as restricted stock units ("RSUs") provide solely for cash settlement based upon the market price of the Company's Class A common shares, often referred to as "phantom stock-based awards". Unlike share-settled awards, which have a fixed grant-date fair value, the fair value of unsettled or unvested liability awards is remeasured at the end of each reporting period based on the change in fair value of a share. The liability and corresponding expense are adjusted accordingly until the award is settled. For employees, the vesting period for RSUs is 100% at the end of three years from the grant date. The RSUs are payable in cash at the vesting date equal to the closing price of the Company's Class A common shares at that time.

Other awards may involve performance share units ("PSUs") which are units granted at a specified dollar amount per unit, typically linked to the Company's Class A common share price, that are subsequently multiplied by an attained performance factor to derive the number of PSUs to be paid as cash compensation at the vesting date. PSUs also vest three years from the date of grant. For PSUs, the performance period begins the first day of the calendar year in which the PSUs are granted and runs three calendar years. At that time, the three-year performance outcome will be measured against the pre-defined target amounts to determine the number of PSUs earned as compensation which are paid at the closing price of the Company's Class A common shares on the vesting date.

PSU awards covering the three year measurement period ended December 31, 2018 were paid out in the first quarter of 2019. The performance factor during the measurement period used to determine compensation payouts was 93.86% of the pre-defined metric target.

28

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Directors of the Company are eligible to receive RSUs under the Incentive Plan. Unlike RSUs granted to officers, the RSUs granted to directors vest one year from the date of grant. They are payable in cash at the vesting date equal to the closing price of the Company's Class A common shares at that time.

No awards were granted to officers and directors during the six months ended June 30, 2019 and 2018.

The Company uses the current fair value method to measure compensation costs for awards granted under the share-based plans.

As of June 30, 2019 and December 31, 2018, the liability balance was $8.0 million and $11.9 million, respectively. A summary of awards by type and related activity is detailed below.

		Options Outstanding
	Shares Available For Grant	Shares	Weighted- Average Exercise Price
Stock Options:
Balance at January 1, 2019	291,000	—	$	—
Exercised	—	—	$	—
Forfeited	—	—	$	—
Expired	—	—	$	—
Stock options granted	—	—	$	—
Balance at June 30, 2019	291,000	—	$	—

	Liability Awards
	SAR		RSU		PSU
Other Share/Unit Awards:
Balance at January 1, 2019	89,443		13,170		19,122
Exercised	—		(3,051	)	(5,426	)
Forfeited	(1,163	)	(307	)	(616	)
Granted	—		—		—
Balance at June 30, 2019	88,280		9,812		13,080

Stock options, SARs, RSUs, and PSUs shown as forfeited in the above tables represent vested and unvested awards not exercised by plan participants prior to their termination from the Company.

The total intrinsic value of share-based compensation exercised was $2.5 million and $1.9 million for the six months ended June 30, 2019 and 2018, respectively. The total share-based compensation paid was $2.5 million and $1.9 million for the six months ended June 30, 2019 and 2018, respectively. The total fair value of stock options, SARs, RSUs, and PSUs vested during the six months ended June 30, 2019 and 2018 was $2.9 million and $0.8 million, respectively. For the six months ended June 30, 2019 and 2018, the total cash received from the exercise of stock options under the Plans was $0.0 million and $0.0 million, respectively.

29

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following table summarizes information about SARs outstanding at June 30, 2019. There were no options outstanding as of June 30, 2019.

	SARs Outstanding
	Number Outstanding		Weighted- Average Remaining Contractual Life	Number Exercisable
Exercise prices:
$132.56	19,568		2.5 years	19,568
$210.22	25,000		4.5 years	16,400
$216.48	11,649		6.6 years	11,649
$311.16	10,162		7.6 years	6,753
$310.55	203		7.8 years	135
$334.34	9,624		8.4 years	3,247
$303.77	12,074		9.5 years	—
Totals	88,280			57,752
Aggregate intrinsic value (in thousands)	$	4,077		$	3,674

The aggregate intrinsic value in the table above is based on the closing Class A stock price of $257.00 per share on June 30, 2019.

In estimating the fair value of the share-based awards outstanding at June 30, 2019 and December 31, 2018, the Company employed the Black-Scholes option pricing model with assumptions detailed below.

	June 30, 2019		December 31, 2018
Expected term	2.5 to 9.5 years		3.0 to 10.0 years
Expected volatility weighted-average	22.02	%	22.14	%
Expected dividend yield	0.14	%	0.12	%
Risk-free rate weighted-average	1.87	%	2.58	%

The Company reviewed the contractual term relative to the SARs as well as perceived future behavior patterns of exercise. Volatility is based on the Company’s historical volatility over the expected term of the option/SARs expected exercise date.

The pre-tax compensation cost/(benefit) recognized in the financial statements related to these plans was $0.1 million and $(1.4) million for the three and six months ended June 30, 2019 and $1.3 million and $0.7 million for the three and six months ended June 30, 2018, respectively. The related tax expense/(benefit) recognized was $0.0 million and $0.3 million for the three and six months ended June 30, 2019 and $(0.3) million and $(0.1) million for the three and six months ended June 30, 2018, respectively.

As of June 30, 2019, the total compensation cost related to non-vested share-based awards not yet recognized was $3.8 million.  This amount is expected to be recognized over a weighted-average period of 1.3 years.  The Company recognizes compensation cost over the graded vesting periods.

30

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(8) COMMITMENTS AND CONTINGENCIES

(A)  Legal Proceedings

In the normal course of business, the Company is involved or may become involved in various legal actions in which claims for alleged economic and punitive damages have been or may be asserted, some for substantial amounts. In recent years, carriers offering life insurance and annuity products have faced litigation, including class action lawsuits, alleging improper product design, improper sales practices, and similar claims. Given the uncertainty involved in these types of actions, the ability to make a reliable evaluation of the likelihood of an unfavorable outcome or an estimate of the amount of or range of potential loss is endemic to the particular circumstances and evolving developments of each individual matter on its own merits.

On September 28, 2017, a purported shareholder derivative lawsuit was filed in the 122nd District Court of Galveston County, State of Texas entitled Robert L. Moody, Jr. derivatively on behalf of National Western Life Insurance Company and National Western Life Group, Inc. v. Ross Rankin Moody, et al., naming certain current and former directors and current officers as defendants.  The complaint challenges the directors’ oversight of insurance sales to non-U.S. residents and alleges that the defendants breached their fiduciary duties in the conduct of their duties as board members by failing to act (i) on an informed basis and (ii) in good faith or with the honest belief that their actions were in the best interests of the Company.  The complaint sought an undetermined amount of damages, attorneys’ fees and costs, and equitable relief, including the removal of the Company’s Chairman and Chief Executive Officer and other board members and/or officers of the Company.  The Company believes that the claims in the complaint are baseless and without merit, will continue to vigorously defend this lawsuit, and was awarded reimbursement of legal costs and expenses from plaintiff as detailed below.  The Company believes, based on information currently available, that the final outcome of this lawsuit will not have a material adverse effect on the Company’s business, results of operations, or consolidated financial position. The companies and directors filed their respective Pleas to the Jurisdiction ("Pleas") contesting the plaintiff's standing to even pursue this action, along with their Answers, on October 27, 2017. On December 14, 2017, plaintiff filed a Response to the Pleas and on December 21, 2017, the Court heard oral argument on the Pleas. Plaintiff then filed a First Amended Petition on January 11, 2018. The companies and directors filed a Supplement to the Pleas on January 30, 2018, to which plaintiff responded on February 1, 2018, and the companies and directors replied on February 9, 2018. On May 3, 2018, the Court issued a memorandum to all attorneys of record stating that the Court would grant the defendants' Pleas and asked the attorney for defendants to prepare and submit proposed orders/judgments granting the requested relief for consideration by the Court.  The defendants filed such proposed order granting the Pleas on May 7, 2018. On May 16, 2018 the Court issued an Order granting the Pleas and dismissing Robert L. Moody, Jr.’s claims with prejudice, and plaintiff then filed a Motion to Transfer Venue (“MTTV”).  Defendants filed an Application for Fees, seeking to recover defendants’ legal costs and expenses from plaintiff, and a Response to the MTTV on June 8, 2018.  In response plaintiff filed a Motion to Vacate, a Response to the Application for Fees, and his own Request for Attorney’s Fees on July 5, 2018.  Defendants filed a Response to the Motion to Vacate and to plaintiff’s Request for Attorney’s Fees on July 11, 2018, and the Court heard oral arguments on July 16, 2018. Plaintiff filed supplemental briefing in support of his July 5, 2018 filings on July 25, 2018, and defendants filed their response to plaintiff's supplemental briefing on July 27, 2018. On August 8, 2018 the Court issued an Order denying plaintiff's Motion to Vacate. Pursuant to the Court’s instructions, on October 5, 2018, defendants filed an Order Granting Application for Expenses.  Defendants then filed a Motion for Entry of Final Judgment and a Request for Submission Date on Motion for Entry of Final Judgment on October 11, 2018, which the Court set as October 30, 2018.  Plaintiff filed his Objection to Proposed Final Judgment and Objection to Proposed Order on Attorneys’ Fees on October 25, 2018, to which defendants filed a response on October 30, 2018. On November 11, 2018, the Court issued its Final Judgment: ordering Plaintiff to pay the companies $1,314,054 for reasonable and necessary fees and expenses; denying Plaintiff’s Motion to Transfer Venue, and; dismissing Plaintiff’s counterclaim.  Plaintiff has appealed the Court’s Final Judgment and that appeal is pending before the First District Court of Appeals in Houston, TX.

In April of 2019, National Western defended a two week jury trial in which it was alleged that the Company committed actionable Financial Elder Abuse in its issuance of a $100,000 equity indexed annuity to the Plaintiff in the case of Williams v Pantaleoni et al, Case No. 17CV03462, Butte County California Superior Court.  The Court entered an Amended Judgment on the Jury Verdict on July 27, 2019 against the Company in the amount of $14,949 for economic damages and $2.92 million in non-economic and punitive damages. Plaintiff also intends to pursue an award of attorney's fees and costs in the amount of approximately $1 million. The Company intends to vigorously dispute the verdicts and the amounts awarded, and in furtherance of such has filed a Motion for Judgment Notwithstanding Jury Verdict and a Motion for New Trial, and will protect its appellate rights.

31

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Although there can be no assurances, at the present time, the Company does not anticipate that the ultimate liability arising from such other potential, pending, or threatened legal actions will have a material adverse effect on the financial condition or operating results of the Company.

Separately, Brazilian authorities commenced an investigation into possible violations of Brazilian criminal law in connection with the issuance of National Western insurance policies to Brazilian residents, and in assistance of such investigation a Commissioner appointed by the U.S. District Court for the Western District of Texas issued a subpoena in March of 2015 upon National Western to provide information relating to such possible violations. No conclusion can be drawn at this time as to its outcome or how such outcome may impact the Company’s business, results of operations, or financial condition. National Western has cooperated with the relevant governmental authorities in regard to this matter.

(B) Financial Instruments

In order to meet the financing needs of its customers in the normal course of business, the Company is a party to financial instruments with off-balance sheet risk. These financial instruments are commitments to extend credit which involve elements of credit and interest rate risk in excess of the amounts recognized in the Condensed Consolidated Balance Sheets.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amounts, assuming that the amounts are fully advanced and that collateral or other security is of no value. Commitments to extend credit are legally binding agreements to lend to a customer that generally have fixed expiration dates or other termination clauses and may require payment of a fee. Commitments do not necessarily represent future liquidity requirements, as some could expire without being drawn upon. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The Company controls the credit risk of these transactions through credit approvals, limits, and monitoring procedures.

The Company had $14.5 million in commitments to fund new loans and $0.4 million in commitments to extend credit relating to existing loans at June 30, 2019. The Company evaluates each customer's creditworthiness on a case-by-case basis.

(9) INVESTMENTS

(A) Investment Gains and Losses

The table below presents realized investment gains and losses, excluding impairment losses, for the periods indicated.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(In thousands)
Available for sale debt securities:
Realized gains on disposal	$	1,168	1,981		2,351		2,021
Realized losses on disposal	—		—		(84	)	—
Held to maturity debt securities:
Realized gains on disposal	924		734		951		1,305
Realized losses on disposal	—		(19	)	—		(19	)
Real estate gains (losses)	3,385		—		6,888		—
Totals	$	5,477	2,696		10,106		3,307

32

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Disposals in the held to maturity category during the periods shown represent calls initiated by the credit issuer of the debt security. It is the Company's policy to initiate disposals of debt securities in the held to maturity category only in instances in which the credit status of the issuer comes into question and the realization of all or a significant portion of the investment principal of the holding is deemed to be in jeopardy.

Net real estate gains for the six months ended June 30, 2019 primarily pertain to the Company's sale of its nursing home operations in Reno, Nevada and San Marcos, Texas as well as a property sold located in Austin, Texas. The sale of the Reno nursing home was completed effective February 1, 2019 and a gain of $5.7 million was realized on the sale of the land and building associated with the operation. The sale of the San Marcos nursing home was concluded effective May 1, 2019 and the Company recorded a loss of $(2.0) million associated with the sale of the land and building of this operation (an impairment loss on this property of $(2.2) million was recorded in the quarter ended March 31, 2019). The sale of the Company's prior home office completed effective June 7, 2019 realized a gain on the sale of $3.2 million.

The Company uses the specific identification method in computing realized gains and losses. For the three months ended June 30, 2019 and 2018 the percentage of gains on bonds due to the call of securities was 89.4% and 99.0%, respectively. For the six months ended June 30, 2019 and 2018 the percentage of gains on bonds due to the call of securities was 72.6% and 99.7%, respectively. This includes calls out of the Company's available for sale portfolio of debt securities.

The table below presents net impairment losses recognized in earnings for the periods indicated.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019		2018
	(In thousands)
Total other-than-temporary impairment gains (losses) on debt securities	$	(5,900	)	3		(5,897	)	6
Portion of loss (gain) recognized in comprehensive income	(2		)	(3	)	(5	)	(6	)
Net impairment losses on debt securities recognized in earnings	(5,902		)	—		(5,902	)	—
Totals	$	(5,902	)	—		(5,902	)	—

33

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The table below presents a roll forward of credit losses on securities for which the Company also recorded non-credit other-than-temporary impairments in other comprehensive loss.

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019	Year Ended December 31, 2018
	(In thousands)
Beginning balance, cumulative credit losses related to other-than-temporary impairments	$	627	627	627
Reductions for securities sold during current period	—		—	—
Additions for credit losses not previously recognized in other-than-temporary impairments	—		—	—
Ending balance, cumulative credit losses related to other-than-temporary impairments	$	627	627	627

(B) Debt Securities

The table below presents amortized costs and fair values of debt securities held to maturity at June 30, 2019.

	Debt Securities Held to Maturity
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
U.S. agencies	$	121,000	1,818	—		122,818
U.S. Treasury	3,772		162	—		3,934
States and political subdivisions	475,081		18,995	(45	)	494,031
Foreign governments	1,154		44	—		1,198
Public utilities	914,921		30,127	(56	)	944,992
Corporate	4,688,662		163,757	(1,996	)	4,850,423
Commercial mortgage-backed	3,046		58	—		3,104
Residential mortgage-backed	1,131,418		34,876	(704	)	1,165,590
Asset-backed	3,305		85	—		3,390
Totals	$	7,342,359	249,922	(2,801	)	7,589,480

34

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The table below presents amortized costs and fair values of debt securities available for sale at June 30, 2019.

	Debt Securities Available for Sale
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
States and political subdivisions	$	100,781	4,543	(1	)	105,323
Foreign governments	9,978		252	—		10,230
Public utilities	78,919		3,349	—		82,268
Corporate	2,950,597		102,775	(5,764	)	3,047,608
Commercial mortgage-backed	28,931		1,010	—		29,941
Residential mortgage-backed	14,481		1,210	(101	)	15,590
Asset-backed	81,873		2,272	—		84,145
Totals	$	3,265,560	115,411	(5,866	)	3,375,105

The table below presents amortized costs and fair values of securities held to maturity at December 31, 2018.

	Securities Held to Maturity
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
U.S. Treasury	$	1,341	116	—		1,457
States and political subdivisions	457,404		9,764	(2,376	)	464,792
Public utilities	930,629		5,928	(12,944	)	923,613
Corporate	4,715,775		27,652	(87,043	)	4,656,384
Residential mortgage-backed	1,176,216		13,771	(11,932	)	1,178,055
Asset-backed	3,889		88	(10	)	3,967
Totals	$	7,285,254	57,319	(114,305	)	7,228,268

35

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The table below presents amortized costs and fair values of securities available for sale at December 31, 2018.

	Securities Available for Sale
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
States and political subdivisions	$	570	—	(4	)	566
Foreign governments	9,974		30	—		10,004
Public utilities	82,943		1,045	(517	)	83,471
Corporate	2,893,221		15,473	(79,638	)	2,829,056
Residential mortgage-backed	15,947		937	(84	)	16,800
Asset-backed	5,969		193	—		6,162
Totals	$	3,008,624	17,678	(80,243	)	2,946,059

The Company does not consider securities to be other-than-temporarily impaired when the market decline is attributable to factors such as market volatility, liquidity, spread widening and credit quality where it is anticipated that a recovery of all amounts due under the contractual terms of the security will occur and the Company has the intent and ability to hold until recovery or maturity. Based on its review, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2019. The Company monitors the investment portfolio on an ongoing basis for any changes in issuer facts and circumstances that could result in future impairments.

During the three and six months ended June 30, 2019, the Company recorded $5.9 million in other-than-temporary impairments on debt securities on Weatherford International bonds. Weatherford International announced its intention to file Chapter 11 bankruptcy on May 10, 2019 which caused its market price to drop considerably.  Subsequently, on July 1, 2019, Weatherford filed for bankruptcy. Unrealized losses for debt securities held to maturity and debt securities available for sale decreased during the first six months of 2019 primarily due to the downward movement in market interest rates during this period (which increases the market price of debt securities).

Debt Securities balances at June 30, 2019 include Ozark National holdings of $289.7 million in held to maturity and $403.8 million in available for sale. As part of the acquisition effective January 31, 2019 the Company employed purchase accounting procedures in accordance with GAAP which revalued the acquired investment portfolio to their fair values as of the date of the acquisition. These fair values became the book values for Ozark National from that point going forward. Accordingly, unrealized gains and losses for the Ozark National debt securities represent the changes subsequent to the purchase accounting book values established at January 31, 2019.

36

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following table shows the gross unrealized losses and fair values of the Company's held to maturity debt securities by investment category and length of time the individual securities have been in a continuous unrealized loss position at June 30, 2019.

	Debt Securities Held to Maturity
	Less than 12 Months				12 Months or Greater			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(In thousands)
Debt securities:
States and political subdivisions	$	—	—		1,666	(45	)	1,666	(45	)
Public utilities	—		—		11,183	(56	)	11,183	(56	)
Corporate	11,333		(57	)	111,933	(1,939	)	123,266	(1,996	)
Residential mortgage-backed	4,307		(4	)	66,247	(700	)	70,554	(704	)
Total	$	15,640	(61	)	191,029	(2,740	)	206,669	(2,801	)

The following table shows the gross unrealized losses and fair values of the Company's available for sale debt securities by investment category and length of time the individual securities have been in a continuous unrealized loss position at June 30, 2019.

	Debt Securities Available for Sale
	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
Debt securities:
States and political subdivisions	$	479	(1		)	—		—			479		(1		)
Corporate	5,189		(33		)	189,145		(5,731		)	194,334		(5,764		)
Residential mortgage-backed	—		—			845		(101		)	845		(101		)
Total	$	5,668	$	(34	)	$	189,990	$	(5,832	)	$	195,658	$	(5,866	)

37

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following table shows the gross unrealized losses and fair values of the Company's held to maturity investments by investment category and length of time the individual securities have been in a continuous unrealized loss position at December 31, 2018.

	Securities Held to Maturity
	Less than 12 Months				12 Months or Greater			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(In thousands)
Debt securities:
States and political subdivisions	$	88,253	(2,124	)	10,645	(252	)	98,898	(2,376	)
Public utilities	396,980		(8,371	)	98,632	(4,573	)	495,612	(12,944	)
Corporate	2,144,969		(55,125	)	650,401	(31,918	)	2,795,370	(87,043	)
Residential mortgage-backed	202,986		(2,032	)	311,374	(9,900	)	514,360	(11,932	)
Asset-backed	—		—		1,976	(10	)	1,976	(10	)
Total	$	2,833,188	(67,652	)	1,073,028	(46,653	)	3,906,216	(114,305	)

The following table shows the gross unrealized losses and fair values of the Company's available for sale investments by investment category and length of time that the individual securities have been in a continuous unrealized loss position at December 31, 2018.

	Securities Available for Sale
	Less than 12 Months				12 Months or Greater			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(In thousands)
Debt securities:
States and political subdivisions	$	566	(4	)	—	—		566	(4	)
Public utilities	38,903		(517	)	—	—		38,903	(517	)
Corporate	1,468,953		(44,575	)	442,798	(35,063	)	1,911,751	(79,638	)
Residential mortgage-backed	—		—		878	(84	)	878	(84	)
Total	$	1,508,422	(45,096	)	443,676	(35,147	)	1,952,098	(80,243	)

Debt securities. The gross unrealized losses for debt securities are made up of 63 individual issues, or 4.1% of the total debt securities held by the Company at June 30, 2019. The market value of these bonds as a percent of amortized cost approximates 97.9%. Of the 63 securities, 52, or 82.5%, fall in the 12 months or greater aging category; and 59 were rated investment grade at June 30, 2019.

38

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The amortized cost and fair value of investments in debt securities at June 30, 2019, by contractual maturity, are shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Debt Securities Available for Sale			Debt Securities Held to Maturity
	Amortized Cost		Fair Value	Amortized Cost	Fair Value
	(In thousands)
Due in 1 year or less	$	195,368	198,197	359,261	363,189
Due after 1 year through 5 years	1,182,355		1,216,520	3,083,206	3,170,949
Due after 5 years through 10 years	1,539,821		1,594,437	2,299,446	2,390,796
Due after 10 years	222,731		236,275	462,677	492,462
	3,140,275		3,245,429	6,204,590	6,417,396
Mortgage and asset-backed securities	125,285		129,676	1,137,769	1,172,084
Total	$	3,265,560	3,375,105	7,342,359	7,589,480

(C)  Transfer of Securities

During the three and six months ended June 30, 2019 the Company made no transfers from the held to maturity category to securities available for sale.

(D) Mortgage Loans and Real Estate

A financing receivable is a contractual right to receive money on demand or on fixed or determinable dates that is recognized as an asset in a company's statement of financial position. The Company's mortgage, participation and mezzanine loans on real estate are the only financing receivables included in the Condensed Consolidated Balance Sheets.

Credit and default risk is minimized through strict underwriting guidelines and diversification of underlying property types and geographic locations. In addition to being secured by the property, mortgage loans with leases on the underlying property are often guaranteed by the lease payments and also by the borrower. This approach has proved to result in quality mortgage loans with few defaults. Mortgage loan interest income is recognized on an accrual basis with any premium or discount amortized over the life of the loan. Prepayment and late fees are recorded on the date of collection.

Loans in foreclosure, loans considered impaired or loans past due 90 days or more are placed on a non-accrual status. If a mortgage loan is determined to be on non-accrual status, the mortgage loan does not accrue any revenue into the Condensed Consolidated Statements of Earnings. The loan is independently monitored and evaluated as to potential impairment or foreclosure. If delinquent payments are made and the loan is brought current, then the Company returns the loan to active status and accrues income accordingly. The Company had no mortgage loans past due 90 days or more at June 30, 2019 or 2018 and as a result all interest income was recognized at June 30, 2019 and 2018.

39

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following table represents the mortgage loan portfolio by loan-to-value ratio.

	June 30, 2019					December 31, 2018
	Amount			%		Amount			%
	(In thousands)					(In thousands)
Mortgage Loans by Loan-to-Value Ratio (1):
Less than 50%	$	60,831		28.3		$	66,371		32.6
50% to 60%	38,963			18.1		22,610			11.1
60% to 70%	99,009			46.1		102,857			50.4
70% to 80%	16,167			7.5		6,642			3.3
80% to 90%	—			—		5,375			2.6
Greater than 90%	—			—		—			—
Gross balance	214,970			100.0		203,855			100.0
Allowance for possible losses	(675		)	(0.3	)	(675		)	(0.3	)
Totals	$	214,295		99.7		$	203,180		99.7

(1) Loan-to-Value Ratio is determined using the most recent appraised value. Appraisals are required at the time of funding and may be updated if a material change occurs from the original loan agreement.

All mortgage loans are analyzed quarterly in order to monitor the financial quality of these assets. Based on ongoing monitoring, mortgage loans with a likelihood of becoming delinquent are identified and placed on an internal “watch list”. Among the criteria that may indicate a potential problem include: major tenant vacancies or bankruptcies, late payments, and loan relief/restructuring requests. The mortgage loan portfolio is analyzed for the need for a valuation allowance on any loan that is on the internal watch list, in the process of foreclosure or that currently has a valuation allowance.

Mortgage loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. When it is determined that a loan is impaired, a loss is recognized for the difference between the carrying amount of the mortgage loan and the estimated value reduced by the cost to sell. Estimated value is typically based on the loan's observable market price or the fair value of the collateral less cost to sell. Impairments and changes in the valuation allowance are reported in net realized investment gains (losses) in the Condensed Consolidated Statements of Earnings.

The following table represents the mortgage loan allowance for the periods shown.

	June 30, 2019		December 31, 2018
	(In thousands)
Balance, beginning of period	$	675	650
Provision	—		25
Releases	—		—
Balance, end of period	$	675	675

40

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company's direct investments in real estate are not a significant portion of its total investment portfolio and totaled approximately $34.9 million and $35.7 million at June 30, 2019 and December 31, 2018, respectively. Included in the amount at June 30, 2019 is a surface parking property owned by Ozark National which it leases. The value of this real estate investment was appraised at $4.3 million at January 31, 2019 as part of the purchase accounting done as of that date. The Company recognized operating income on real estate properties of approximately $1.4 million and $1.1 million for the first six months of 2019 and 2018, respectively.

(10) FAIR VALUES OF FINANCIAL INSTRUMENTS

For financial instruments, the FASB provides guidance which defines fair value, establishes a framework for measuring fair value under GAAP, and requires additional disclosures about fair value measurements. In compliance with this GAAP guidance, the Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities ("Level 1") and the lowest priority to unobservable inputs ("Level 3"). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded at fair value on the Condensed Consolidated Balance Sheets are categorized as follows:

Level 1: Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. These generally provide the most reliable evidence and are used to measure fair value whenever available. The Company's Level 1 assets are equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets.

Level 2:  Fair value is based upon significant inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable for substantially the full term of the asset or liability through corroboration with observable market data as of the reporting date. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities, model-derived valuations whose inputs are observable or whose significant value drivers are observable and other observable inputs. The Company’s Level 2 assets include fixed maturity debt securities (corporate and private bonds, government or agency securities, asset-backed and mortgage-backed securities).  Valuations are generally obtained from third party pricing services for identical or comparable assets or determined through use of valuation methodologies using observable market inputs.

Level 3:  Fair value is based on significant unobservable inputs which reflect the entity’s or third party pricing service’s assumptions about the assumptions market participants would use in pricing an asset or liability. The Company’s Level 3 assets are over-the-counter derivative contracts. The Company’s Level 3 liabilities consist of share-based compensation obligations, certain product-related embedded derivatives, and contingent consideration in the acquisition of businesses. Valuations are estimated based on non-binding broker prices or internally developed valuation models or methodologies, discounted cash flow models and other similar techniques.

41

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following tables set forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of the date indicated:

	June 30, 2019
	Total		Level 1	Level 2	Level 3
	(In thousands)
Debt securities, available for sale	$	3,375,105	—	3,375,105	—
Equity securities	19,324		19,324	—	—
Derivatives, index options	89,900		—	—	89,900
Total assets	$	3,484,329	19,324	3,375,105	89,900
Policyholder account balances (a)	$	100,638	—	—	100,638
Other liabilities (b)	11,862		—	—	11,862
Total liabilities	$	112,500	—	—	112,500

During the three and six months ended June 30, 2019, the Company made no transfers into or out of Levels 1, 2 or 3.

	December 31, 2018
	Total		Level 1	Level 2	Level 3
	(In thousands)
Debt securities, available for sale	$	2,946,059	—	2,946,059	—
Equity securities	17,491		17,491	—	—
Derivatives, index options	14,684		—	—	14,684
Total assets	$	2,978,234	17,491	2,946,059	14,684
Policyholder account balances (a)	$	44,781	—	—	44,781
Other liabilities (b)	11,923		—	—	11,923
Total liabilities	$	56,704	—	—	56,704

(a)  Represents the fair value of certain product-related embedded derivatives that were recorded at fair value.

(b)  Represents the liability for share-based compensation and contingent consideration for businesses acquired.

42

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following tables present, by pricing source and fair value hierarchy level, the Company’s assets that are measured at fair value on a recurring basis:

	June 30, 2019
	Total			Level 1		Level 2		Level 3
	(In thousands)
Debt securities, available for sale:
Priced by third-party vendors	$	3,375,105		—		3,375,105		—
Priced internally	—			—		—		—
Subtotal	3,375,105			—		3,375,105		—
Equity securities:
Priced by third-party vendors	19,324			19,324		—		—
Priced internally	—			—		—		—
Subtotal	19,324			19,324		—		—
Derivatives, index options:
Priced by third-party vendors	89,900			—		—		89,900
Priced internally	—			—		—		—
Subtotal	89,900			—		—		89,900
Total	$	3,484,329		19,324		3,375,105		89,900
Percent of total	100.0		%	0.6	%	96.8	%	2.6	%

	December 31, 2018
	Total			Level 1		Level 2		Level 3
	(In thousands)
Debt securities, available for sale:
Priced by third-party vendors	$	2,946,059		—		2,946,059		—
Priced internally	—			—		—		—
Subtotal	2,946,059			—		2,946,059		—
Equity securities, available for sale:
Priced by third-party vendors	17,491			17,491		—		—
Priced internally	—			—		—		—
Subtotal	17,491			17,491		—		—
Derivatives, index options:
Priced by third-party vendors	14,684			—		—		14,684
Priced internally	—			—		—		—
Subtotal	14,684			—		—		14,684
Total	$	2,978,234		17,491		2,946,059		14,684
Percent of total	100.0		%	0.6	%	98.9	%	0.5	%

43

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following tables provide additional information about fair value measurements for which significant unobservable (Level 3) inputs were utilized to determine fair value.

	Three Months Ended June 30, 2019
	Debt Securities, Available for Sale		Equity Securities	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Balance at April 1, 2019	$	—	—	71,001		71,001		97,725
Total realized and unrealized gains (losses):
Included in net income	—		—	17,828		17,828		13,704
Purchases, sales, issuances and settlements, net:
Purchases	—		—	19,030		19,030		19,030
Sales	—		—	—		—		—
Issuances	—		—	—		—		—
Settlements	—		—	(17,959	)	(17,959	)	(17,959	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	89,900		89,900		112,500
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	4,350		4,350		—
Benefits and expenses	—		—	—		—		4,614
Total	$	—	—	4,350		4,350		4,614

44

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Three Months Ended June 30, 2018
	Debt Securities, Available for Sale		Equity Securities, Available for Sale	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Balance at April 1, 2018	$	—	—	116,356		116,356		147,502
Total realized and unrealized gains (losses):
Included in net income	—		—	10,292		10,292		10,608
Purchases, sales, issuances and settlements, net:
Purchases	—		—	21,901		21,901		21,901
Sales	—		—	—		—		—
Issuances	—		—	—		—		—
Settlements	—		—	(46,542	)	(46,542	)	(46,998	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	102,007		102,007		133,013
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	20,610		20,610		—
Benefits and expenses	—		—	—		—		21,861
Total	$	—	—	20,610		20,610		21,861

45

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Six Months Ended June 30, 2019
	Debt Securities, Available for Sale		Equity Securities	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Beginning balance, January 1, 2019	$	—	—	14,684		14,684		56,704
Total realized and unrealized gains (losses):
Included in net income	—		—	59,830		59,830		39,232
Purchases, sales, issuances and settlements, net:
Purchases	—		—	36,622		36,622		36,622
Sales	—		—	—		—
Issuances	—		—	—		—		3,700
Settlements	—		—	(21,236	)	(21,236	)	(23,758	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	89,900		89,900		112,500
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	44,814		44,814		—
Other operating expenses	—		—	—		—		43,575
Total	$	—	—	44,814		44,814		43,575

46

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	Six Months Ended June 30, 2018
	Debt Securities, Available for Sale		Equity Securities, Available for Sale	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Beginning balance, January 1, 2018	$	—	—	194,731		194,731		226,401
Total realized and unrealized gains (losses):
Included in net income	—		—	(34,102	)	(34,102	)	(32,820	)
Purchases, sales, issuances and settlements, net:
Purchases	—		—	44,277		44,277		44,277
Sales	—		—	—		—		—
Issuances	—		—	—		—		—
Settlements	—		—	(102,899	)	(102,899	)	(104,845	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	102,007		102,007		133,013
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	(23,727	)	(23,727	)	—
Other operating expenses	—		—	—		—		(23,019	)
Total	$	—	—	(23,727	)	(23,727	)	(23,019	)

47

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following table presents the valuation method for financial assets and liabilities categorized as level 3, as well as the unobservable inputs used in the valuation of those financial instruments:

	June 30, 2019
	Fair Value		Valuation Technique	Unobservable Input
	(In thousands)
Derivatives, index options	$	89,900	Broker prices	Implied volatility
				Inputs from broker proprietary models
Total assets	$	89,900
Policyholder account balances	$	100,638	Deterministic cash flow model	Projected option cost
Other liabilities, share-based compensation	7,991		Black-Scholes model	Expected term, Forfeiture assumptions
Other liabilities, contingent consideration on businesses acquired	3,871		Probabilistic Method	Projected renewal premium
Total liabilities	$	112,500

	December 31, 2018
	Fair Value		Valuation Technique	Unobservable Input
	(In thousands)
Derivatives, index options	$	14,684	Broker prices	Implied volatility
				Inputs from broker proprietary models
Total assets	$	14,684
Policyholder account balances	$	44,781	Deterministic cash flow model	Projected option cost
Other liabilities	11,923		Black-Scholes model	Expected term
				Forfeiture assumptions
Total liabilities	$	56,704

Realized gains (losses) on debt securities are reported in the Condensed Consolidated Statements of Earnings as net investment gains (losses) with liabilities reported as expenses. Unrealized gains (losses) on available for sale debt securities are reported as other comprehensive income (loss) within the stockholders' equity section of the Condensed Consolidated Balance Sheet.

Effective January 1, 2018, the change in fair value of equity securities is reported in the Condensed Consolidated Statement of Earnings as net investment income.

The fair value hierarchy classifications are reviewed each reporting period. Reclassification of certain financial assets and liabilities may result based on changes in the observability of valuation attributes. Reclassifications are reported as transfers into and out of Level 3 at the beginning fair value for the reporting period in which the changes occur.

48

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The carrying amounts and fair values of the Company's financial instruments are as follows:

	June 30, 2019
				Fair Value Hierarchy Level
	Carrying Values		Fair Values	Level 1	Level 2	Level 3
	(In thousands)
ASSETS
Debt securities held to maturity	$	7,342,359	7,589,480	—	7,587,924	1,556
Debt securities available for sale	3,375,105		3,375,105	—	3,375,105	—
Cash and cash equivalents	140,802		140,802	140,802	—	—
Mortgage loans	214,295		225,807	—	—	225,807
Policy loans	80,155		122,556	—	—	122,556
Other loans	13,873		14,047	—	—	14,047
Derivatives, index options	89,900		89,900	—	—	89,900
Equity securities	19,324		19,324	19,324	—	—
Life interest in Libbie Shearn Moody Trust	8,692		12,775	—	—	12,775
LIABILITIES
Deferred annuity contracts	$	7,209,899	6,009,840	—	—	6,009,840
Immediate annuity and supplemental contracts	404,211		426,338	—	—	426,338
Contingent consideration on businesses acquired	3,871		3,871	—	—	3,871

49

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

	December 31, 2018
				Fair Value Hierarchy Level
	Carrying Values		Fair Values	Level 1	Level 2	Level 3
	(In thousands)
ASSETS
Debt securities held to maturity	$	7,285,254	7,228,268	—	7,226,362	1,906
Debt securities available for sale	2,946,059		2,946,059	—	2,946,059	—
Cash and cash equivalents	131,976		131,976	131,976	—	—
Mortgage loans	203,180		202,762	—	—	202,762
Policy loans	54,724		90,802	—	—	90,802
Other loans	12,272		12,709	—	—	12,709
Derivatives, index options	14,684		14,684	—	—	14,684
Equity securities	17,491		17,491	17,491	—	—
Life interest in Libbie Shearn Moody Trust	8,692		12,775	—	—	12,775
LIABILITIES
Deferred annuity contracts	$	7,455,642	6,403,007	—	—	6,403,007
Immediate annuity and supplemental contracts	407,413		415,726	—	—	415,726

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

(11)   DERIVATIVE INVESTMENTS

Fixed-index products provide traditional fixed annuities and universal life contracts with the option to have credited interest rates linked in part to an underlying equity index or a combination of equity indices. The equity return component of such policy contracts is identified separately and accounted for in future policy benefits as embedded derivatives on the Condensed Consolidated Balance Sheets. The remaining portions of these policy contracts are considered the host contracts and are recorded separately as fixed annuity or universal life contracts. The host contracts are accounted for under debt instrument type accounting in which future policy benefits are recorded as discounted debt instruments and accreted, using the effective yield method, to their minimum account values at their projected maturities or termination dates.

The Company purchases over-the-counter index options, which are derivative financial instruments, to hedge the equity return component of its fixed-index annuity and life products. The index options act as hedges to match closely the returns on the underlying index or indices. The amounts which may be credited to policyholders are linked, in part, to the returns of the underlying index or indices. As a result, changes to policyholders' liabilities are substantially offset by changes in the value of the options. Cash is exchanged upon purchase of the index options and no principal or interest payments are made by either party during the option periods. Upon maturity or expiration of the options, cash may be paid to the Company depending on the performance of the underlying index or indices and terms of the contract.

50

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company does not elect hedge accounting relative to these derivative instruments. The index options are reported at fair value in the accompanying Condensed Consolidated Financial Statements. The changes in the values of the index options and the changes in the policyholder liabilities are both reflected in the Condensed Consolidated Statements of Earnings. Any changes relative to the embedded derivatives associated with policy contracts are reflected in contract interest in the Condensed Consolidated Statements of Earnings. Any gains or losses from the sale or expiration of the options, as well as period-to-period changes in values, are reflected as net investment income in the Condensed Consolidated Statements of Earnings.

Although there is credit risk in the event of nonperformance by counterparties to the index options, the Company does not expect any of its counterparties to fail to meet their obligations, given their high credit ratings. In addition, credit support agreements are in place with all counterparties for option holdings in excess of specific limits, which may further reduce the Company's credit exposure.

The tables below present the fair value of derivative instruments as of June 30, 2019 and December 31, 2018, respectively.

	June 30, 2019
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
		(In thousands)			(In thousands)
Derivatives not designated as hedging instruments
Equity index options	Derivatives, Index Options	$	89,900
Fixed-index products				Universal Life and Annuity Contracts	$	100,638
Total		$	89,900		$	100,638

	December 31, 2018
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
		(In thousands)			(In thousands)
Derivatives not designated as hedging instruments
Equity index options	Derivatives, Index Options	$	14,684
Fixed-index products				Universal Life and Annuity Contracts	$	44,781
Total		$	14,684		$	44,781

51

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The table below presents the effect of derivative instruments in the Condensed Consolidated Statements of Earnings for the three months ended June 30, 2019 and 2018.

		June 30, 2019			June 30, 2018
Derivatives Not Designated  As Hedging Instruments	Location of Gain  or (Loss) Recognized In Income on Derivatives	Amount of Gain or  (Loss) Recognized in  Income on Derivatives
		(In thousands)
Equity index options	Net investment income	$	17,828		10,292
Fixed-index products	Universal life and annuity contract interest	(13,439		)	(9,357	)
		$	4,389		935

The table below presents the effect of derivative instruments in the Condensed Consolidated Statements of Earnings for the six months ended June 30, 2019 and 2018.

		June 30, 2019			June 30, 2018
Derivatives Not Designated  As Hedging Instruments	Location of Gain  or (Loss) Recognized In Income on Derivatives	Amount of Gain or  (Loss) Recognized in  Income on Derivatives
		(In thousands)
Equity index options	Net investment income	$	59,830		(34,102	)
Fixed-index products	Universal life and annuity contract interest	(40,470		)	33,528
		$	19,360		(574	)

(12) BUSINESS COMBINATIONS

Effective January 31, 2019, the Company acquired Ozark National Life Insurance Company (“Ozark National”) and N.I.S. Financial Services, Inc. (“NIS”) following the receipt of regulatory approvals. NWLGI and National Western paid cash in an aggregate amount of approximately $205.4 million in exchange for all of the outstanding stock of Ozark National (wholly owned by National Western) and NIS (wholly owned by NWLGI). In addition to the cash price paid, National Western has a contingent liability for an "earn-out payment" based upon the persistency of Ozark National's in force business that was acquired achieving thresholds as specified in the Stock Purchase Agreement ("Agreement"). The earn-out payment from the Company to the seller per the Agreement has a maximum limit of $5.0 million. Using a probabilistic method for valuing contingent consideration, the Company at January 31, 2019 recorded a liability of $3.7 million representing the estimated fair value of the additional consideration estimated to be paid as part of the acquisition. The contingent consideration was subsequently reported at its fair value of $3.9 million as of June 30, 2019, with changes in fair value running through general expenses.

In addition to the purchase price, the Company incurred $3.2 million of acquisition-related costs in 2019, and an additional $1.0 million in acquisition-related costs during the year ended December 31, 2018. In accordance with GAAP, these costs are included in other operating expenses in the Condensed Consolidated Statements of Earnings and are not considered a part of the purchase price.

52

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The acquisition has been accounted for in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Purchase accounting, as defined by ASC 805, requires that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The fair values shown below were determined based on management’s best estimates, employing fair valuation methodologies commonly utilized in preparing financial statements in accordance with GAAP, and are subject to revision for one year following the acquisition date. The excess of the purchase price paid above net tangible assets acquired has been assigned to intangible assets and goodwill. The following table presents the fair values of the net assets acquired as of January 31, 2019.

	January 31, 2019
Assets	Fair value
	(In thousands)
Debt securities held to maturity	$	261,059
Debt securities available for sale	400,719
Policy loans	28,128
Real estate	4,600
Cash and cash equivalents	16,275
Accrued investment income	6,116
Value of business acquired	145,768
Reinsurance recoverables	21,895
Other intangible assets	9,600
Other assets acquired	12,075
Total assets acquired	906,235
Liabilities
Traditional life reserves	691,297
Other policyholder liabilities	13,867
Other liabilities acquired	5,840
	711,004
Net identifiable assets acquired	195,231
Goodwill	13,864
Net assets acquired	$	209,095

53

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Identifiable Intangible Assets

The following table presents the fair value of identifiable intangible assets acquired at January 31, 2019:

	Fair Value		Weighted-Average Amortization Period
	(In thousands)
Trademarks / trade names	$	2,800	15
Internally developed software	3,800		7
Insurance licenses	3,000		NA
	$	9,600

The value of trademarks was estimated using the relief from royalty method, based on the assumption that in lieu of ownership, an organization would be willing to pay a royalty in order to receive the related benefits of using the brand. The value of insurance licenses was estimated using the market approach to value, based on values paid for licenses in recent shell company transactions. The value of internally developed software was estimated using the replacement cost method. These identified intangible assets will be amortized using a straight-line method over their respective amortization periods and will be reviewed annually for impairments.

Value of Business Acquired ("VOBA")

VOBA is a purchase accounting convention for life insurance companies in business combinations based upon an actuarial determination of the difference between the fair value of policyholder liabilities acquired and the same policyholder liabilities measured in accordance with the acquiring company's accounting policies. The difference, referred to as VOBA, is an intangible asset subject to periodic amortization. As of the January 31, 2019 acquisition date, the VOBA balance recorded was $145.8 million. Based upon the remaining unamortized balance as of June 30, 2019, the expected amortization for the next five years is as follows:

	Expected Amortization
	(In thousands)
Remainder of 2019	$	4,596
2020	$	8,725
2021	$	8,282
2022	$	7,897
2023	$	7,552

54

NATIONAL WESTERN LIFE GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Financial Information

Subsequent to the acquisition date of January 31, 2019, Ozark National and NIS total revenues of $48.4 million and net earnings of $7.2 million have been included in Condensed Consolidated Statements of Earnings for the quarter and five months ended June 30, 2019. These results for segment reporting purposes have been combined in the Acquired Businesses segment.

The following unaudited comparative pro forma total revenues and net earnings represent Condensed Consolidated Results of Operations for the Company which assume amounts estimated had the acquisition of Ozark National and NIS by the Company been effective January 1, 2018.

	Three Months Ended June 30,			Six Months Ended June 30
	2019		2018	2019	2018
	(In thousands)
Total revenues	$	192,685	203,421	420,268	341,832
Net earnings	$	33,696	36,120	75,328	67,720

The pro forma amounts shown above include the estimated total revenues and net earnings of the acquired businesses for each period incorporating amortization of identifiable intangible assets acquired and fair value adjustments to acquired invested assets and traditional life insurance reserves.

(13) SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date of filing and no reportable items were identified.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information contained herein or in other written or oral statements made by or on behalf of National Western Life Group, Inc. and its subsidiaries (the "Company") are or may be viewed as forward-looking. Although the Company has taken appropriate care in developing any such information, forward-looking information involves risks and uncertainties that could significantly impact actual results. These risks and uncertainties include, but are not limited to, matters described in the Company's SEC filings such as exposure to market risks, anticipated cash flows or operating performance, future capital needs, and statutory or regulatory related issues. However, as a matter of policy, the Company does not make any specific projections as to future earnings, nor does it endorse any projections regarding future performance that may be made by others. Whether or not actual results differ materially from forward-looking statements may depend on numerous foreseeable and unforeseeable events or developments. Also, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future developments, or otherwise.

Management's discussion and analysis of the financial condition and results of operations (“MD&A”) of National Western Life Group, Inc. ("NWLGI") for the three and six months ended June 30, 2019 follows. Where appropriate, discussion specific to the insurance operations of National Western Life Insurance Company is denoted by "National Western" or "NWLIC". This discussion should be read in conjunction with the Company's Condensed Consolidated Financial Statements and related notes beginning on page 3 of this report and with the 2018 Annual Report filed on Form 10-K with the SEC.

Effective January 31, 2019, the Company's wholly owned subsidiary, National Western, completed its previously announced acquisition of Ozark National Life Insurance Company ("Ozark National") and N.I.S. Financial Services, Inc. ("NIS") following the receipt of regulatory approvals. NWLGI and National Western paid cash in an aggregate amount of approximately $205.4 million in exchange for all of the outstanding stock of Ozark National (wholly owned by National Western) and NIS (wholly owned by NWLGI). The results of Ozark National and NIS for the five-month period ended June 30, 2019 are included in the Company's Condensed Consolidated Financial Statements as of and for the six months ended June 30, 2019 and reference to each is made in this MD&A where appropriate.

Overview

National Western has historically provided life insurance products on a global basis for the savings and protection needs of policyholders and annuity contracts for the asset accumulation and retirement needs of contract holders. As disclosed in the Company's filings during 2018, the Company discontinued accepting applications for its international life insurance products from residents in other countries in May 2018.

The Company accepts funds from policyholders or contract holders and establishes a liability representing future obligations to pay the policy or contract holders and their beneficiaries. To ensure the Company will be able to pay these future commitments, the funds received as premium payments and deposits are invested in high quality investments, primarily fixed income securities.

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Due to the business of accepting funds to pay future obligations in later years and the underlying economics, the relevant factors affecting the Company’s overall business and profitability include the following:

 ● the level of sales and premium revenues collected

 ● persistency of policies and contracts

 ● return on investments sufficient to produce acceptable spread margins over interest crediting rates

 ● investment credit quality which minimizes the risk of default or impairment

 ● levels of policy benefits and costs to acquire business

 ● the level of operating expenses

 ● effect of interest rate changes on revenues and investments including asset and liability matching

 ● maintaining adequate levels of capital and surplus

 ● corporate tax rates and the treatment of financial statement items under tax rules and accounting

 ● actual levels of surrenders, withdrawals, claims and interest spreads

 ● changes in assumptions for amortization of deferred policy acquisition expenses and deferred sales inducements

 ● changes in the fair value of derivative index options and embedded derivatives pertaining to fixed-index life and annuity products

 ● pricing and availability of adequate counterparties for reinsurance and index option contracts

 ● litigation subject to unfavorable judicial development, including the time and expense of litigation

The Company monitors these factors continually as key business indicators. The discussion that follows in this Item 2 includes these indicators and presents information useful to an overall understanding of the Company's business performance for the three and six months ended June 30, 2019, incorporating required disclosures in accordance with the rules and regulations of the Securities and Exchange Commission.

Insurance Operations - Domestic

National Western is currently licensed to do business in all states, except New York, and the District of Columbia. Products marketed are annuities, universal life insurance, fixed-index universal life, and traditional life insurance, which include both term and whole life products. The Company's domestic sales have historically been more heavily weighted toward the Company's annuity products, which include single and flexible premium deferred annuities, single premium immediate annuities, and fixed-index annuities. Most of these annuities can be sold either as tax qualified or non-qualified products. More recently, however, a greater proportion of sales activity has been derived from single premium life insurance products, predominantly those with an equity-index crediting mechanism. Presently, 98% of National Western's domestic life premium sales come from single premium life products. At June 30, 2019, National Western maintained approximately 123,200 annuity contracts in force and 48,400 domestic life insurance policies in force representing nearly $3.3 billion in face amount of coverage.

National Western markets and distributes its domestic products primarily through independent national marketing organizations ("NMOs"). These NMOs assist the company in recruiting, contracting, and managing independent agents. National Western's agents are independent contractors who are compensated on a commission basis. It currently has approximately 25,100 domestic independent agents contracted.

Effective January 31, 2019, domestic insurance operations include the activities of Ozark National. Ozark National is a Missouri domiciled, stock life insurance company currently licensed to conduct business in thirty states. Organized and incorporated in 1964, its largest markets by state are Missouri, Iowa, Minnesota, Nebraska, and Kansas. Ozark National utilizes a unique distribution system to market its flagship Balanced Program which consists of a coordinated sale of a non-participating whole life insurance product with a mutual fund investment product offered through its affiliated broker-dealer, NIS. At June 30, 2019, Ozark National maintained approximately 184,800 life insurance policies in force representing in excess of $6.3 billion in face amount of coverage.

Insurance Operations - International

National Western's international operations had generally focused on foreign nationals in upper socioeconomic classes of other countries. The Company did not conduct business or maintain offices or employees in any other country, but historically did accept applications at its home office in Austin, Texas, and issued policies from there to non-U.S. residents. Insurance products issued were primarily to residents of countries in South America consisting of product offerings not available in the local markets. International life insurance products issued to international residents were almost entirely universal life and traditional life insurance products.

57

As disclosed in the Company's 2018 filings, National Western ceased accepting applications from residents of Venezuela during the first quarter of 2018 due to the unsettled political, economic, civil, and social climate existing in that country. The Company had previously ceased accepting applications from residents of Brazil, Central America, and the Pacific Rim region in the fourth quarter of 2015 and from residents in the Eastern European region, primarily Russian-speaking, during 2017. As reported in 2018 filings, National Western ceased accepting applications for its international products from all remaining foreign residents effective May 11, 2018.

Issuing universal life and traditional life insurance policies to residents of countries in these different regions had provided diversification helping to minimize large fluctuations that could arise due to various economic, political, and competitive pressures occurring from one country to another. These policies also provided diversification of earnings relative to the Company's domestic life insurance segment. The Company's decision to cease accepting applications from residents of the remaining foreign countries was primarily due to the reduced sales activity associated with this segment, the incremental expenses associated with underwriting products in this line of business, and the lower anticipated incremental contribution to profits from new sales. The Company will continue to service and maintain the block of international policies in force. At June 30, 2019, National Western had approximately 53,500 international life insurance policies in force representing approximately $14.5 billion in face amount of coverage.

There were some inherent risks of accepting international applications which are not present within the domestic market that were reduced substantially by the Company in several ways. As previously described, National Western accepted applications from foreign nationals of other countries in upper socioeconomic classes who had substantial financial resources. This targeted customer base, coupled with National Western's conservative underwriting practices, have historically resulted in claims experience, due to natural causes, similar to that in the United States. The Company has minimized exposure to foreign currency risks by requiring payment of premiums and claims in United States dollars. In addition, the Company adopted an extensive anti-money laundering compliance program in order to fully comply with all applicable U.S. anti-money laundering or other illegal activities. All of the above, combined with experience with the international products for over fifty years and the Company's longstanding business relationships, further served to minimize risks.

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SALES

Life Insurance

The following table sets forth information regarding life insurance sales activity as measured by annualized first year premiums. While the figures shown below are in accordance with industry practice and represent the amount of new business sold during the periods indicated, they are considered a non-GAAP financial measure. The Company believes sales are a measure of distribution productivity and are a leading indicator of future revenue trends. However, revenues are driven by sales in prior periods as well as in the current period and therefore, a reconciliation of sales to revenues is not meaningful or determinable.

	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2019		2018	2019	2018
	(In thousands)
Domestic:
Equity-index life	$	5,808	7,195	10,820	12,966
Traditional life	1,760		209	2,651	236
Universal life	82		21	85	29
	7,650		7,425	13,556	13,231
International:
Equity-index life	—		1,859	—	4,081
Traditional life	—		482	—	886
Universal life	—		292	—	582
	—		2,633	—	5,549
Totals	$	7,650	10,058	13,556	18,780

Life insurance sales, as measured by annualized first year premiums, decreased 24% in the second quarter of 2019 as compared to the second quarter of 2018 reflecting the Company's decision to cease accepting applications for new international life insurance policies from international residents during the second quarter of 2018. Within this total, the domestic life insurance line of business sales increased 3% from the comparable results of the second quarter of 2018. In the three months ended June 30, 2019, domestic life insurance sales included $1.7 million from Ozark National representing their traditional life sales activity. For the six months ended June 30, 2019, total life insurance sales declined 28% from 2018 levels again reflecting the decision to cease accepting applications for new international life insurance policies. During the six-month period, domestic life insurance sales increased 2.5% in 2019 which included $2.5 million of traditional life insurance sales from Ozark National subsequent to their acquisition effective January 31, 2019.

National Western's domestic operations life insurance product portfolio includes single premium universal life ("SPUL") and equity-index universal life ("EIUL") products as well as hybrids of the EIUL and SPUL products, combining features of these core products. Equity-index universal life products continue to be the predominant product sold in the domestic life market. Most of these sales are single premium mode products (one year, five year, or ten year) designed for transferring accumulated wealth tax efficiently into life insurance policies with limited underwriting due to lesser net insurance amounts at risk (face amount of the insurance policy less cash premium contributed). These products were designed and implemented several years ago targeting the accumulated savings of the segment of the population entering their retirement years. The wealth transfer life products have been valuable offerings for the Company's distributors as evidenced by their comprising 80% of total domestic life sales in the first six months of 2019.

59

The Company's international life business in the first six months of 2018 consisted of applications submitted by independent contractors of Latin America. These sales came principally from residents of Columbia, Ecuador, Peru, and Chile. As noted previously, the Company ceased accepting new applications for international products from all remaining residents outside the U.S. effective May 11, 2018. The Company had previously ceased accepting applications for its international products from residents in the Pacific Rim, Central America, and Brazil in 2015; from residents in Eastern Europe in 2017; and from residents of Venezuela in the first quarter of 2018. The progressive disengagements were the result of increasing costs associated with this business and reduced profitability due to higher than anticipated mortality experience, lower than expected persistency of policies, and the additional cost structure imposed.

The average new policy face amounts since 2013 are as shown in the following table.

	Average New Policy Face Amount
	NWLIC Domestic	Ozark National	NWLIC International
Year ended December 31, 2013	286,000	—	384,000
Year ended December 31, 2014	286,600	—	382,600
Year ended December 31, 2015	274,500	—	342,500
Year ended December 31, 2016	308,700	—	336,500
Year ended December 31, 2017	317,200	—	306,300
Year ended December 31, 2018	338,400	—	297,100
Six months ended June 30, 2019	377,300	45,800	—

Contracts issued to international residents historically had larger face amounts of life insurance coverage per policy compared to those issued to domestic policyholders. The Company's efforts were directed toward accepting applications from upper socio-economic residents of international countries. The insurance coverage per international life policy witnessed a steady growth until 2015 when National Western ceased accepting applications from residents of several countries. During the same time period, National Western's average face amount of insurance coverage per policy for domestic contracts exhibited an upward trend reflecting the shift in sales toward single premium life products, primarily fixed-index, as part of its wealth transfer strategies for domestic life sales.

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The table below sets forth information regarding domestic life insurance in force for each date presented.

	Insurance In Force as of
	June 30,		December 31,
	2019		2018
	($ in thousands)
National Western
Universal life:
Number of policies	35,350		36,970
Face amounts	$	4,999,240	5,234,160
Traditional life:
Number of policies	29,420		30,490
Face amounts	$	2,809,340	2,975,030
Fixed-index life:
Number of policies	37,130		38,090
Face amounts	$	10,001,040	10,386,020
Total life insurance:
Number of policies	101,900		105,550
Face amounts	$	17,809,620	18,595,210
Ozark National
Total life insurance (all traditional):
Number of policies	184,800		—
Face amounts	$	6,329,840	—

At June 30, 2019, National Western’s face amount of life insurance in force was comprised of $14.5 billion from the international line of business and $3.3 billion from the domestic line of business. At December 31, 2018, these amounts were $15.4 billion and $3.2 billion for the international and domestic lines of business, respectively.

Annuities

The following table sets forth information regarding the Company's annuity sales activity as measured by single and annualized first year premiums. Similar to life insurance sales, these figures are considered a non-GAAP financial measure but are shown in accordance with industry practice and depict National Western's sales productivity.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Fixed-index annuities	$	55,395	104,150	115,618	207,349
Other deferred annuities	4,718		3,415	7,849	7,465
Immediate annuities	1,295		979	1,733	1,389
Totals	$	61,408	108,544	125,200	216,203

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The Company's mix of annuity sales has historically shifted with interest rate levels and the relative performance of the equity market. With the decline in interest rates subsequent to the subprime crisis, sales of fixed-index products have become proportionately greater, generally accounting for 90% or more of all annuity sales the past several years. During the first six months of 2019, this percentage exceeded 92% reflecting the ongoing bull market run in equities since bottoming out in 2009. For all fixed-index products, the Company purchases over the counter call options to hedge the equity return feature. The options are purchased relative to the issuance of the annuity contracts in such a manner to minimize timing risk. Generally, the index return during the indexing period (if the underlying index increases) becomes a component in a formula (set forth in the annuity), the result of which is credited as interest to contract holders electing the index formula crediting method at the beginning of the indexing period. The formula result can never be less than zero with these products. The Company does not deliberately mismatch or under hedge for the equity feature of the products. Fixed-index products also provide the contract holder the alternative to elect a fixed interest rate crediting option.

With the advent of a low interest rate policy engineered by the Federal Reserve in response to the subprime financial crisis, Company management evaluated the potential ramifications of continuing a high level of annuity sales in a depressed interest rate environment. Under the auspices of the Company's enterprise risk management ("ERM") processes, taking into consideration the Federal Reserve's announced intention to maintain interest rates at historically reduced levels over a prolonged period of time, the decision was made to curtail new sales to desired levels in order to minimize the level of assets added at low yield rates. While National Western does not subsidize its interest crediting rates on new policies in order to obtain market share, the Company's ERM considerations determined that managing to a lower level of annuity sales was prudent given the environment.

Annuity sales beginning in 2017 declined further relative to prior year levels reflecting the impact of two regulatory changes. The first was the Department of Labor's "fiduciary rule" on standards for retirement investment advice. The uncertainty associated with the timing and ultimate requirements of the rule served to decrease activity for annuity sales involving qualified funds as insurance carriers, marketing organizations, and independent distributors sought to develop strategies for operating under the fiduciary rule guidelines. The Department of Labor's rule was ultimately vacated in 2018 at the appellate court level. The second change impacting the level of annuity sales occurred late in 2016 when the state of California mandated more restrictive annuity product features for policies sold in the state. This required National Western to refile products complying with the new standards for state approval. California regulators were slow to process and approve product filings received from insurance carriers in the aftermath of imposing these restrictive product features thus eliminating a key market for annuity sales for an extended period of time.

During the second quarter of 2019, National Western replaced its existing Senior Vice President, Chief Marketing Officer and brought in a new individual as Executive Vice President, Chief Marketing Officer with extensive experience in the life insurance industry, particularly involving annuity products and related distribution channels. The impetus for the change was to bring greater expertise to the annuity line of business in order to achieve the Company's sales targets for this segment of the business.

The level of annuity business in force requires a focused discipline on asset/liability analysis. The Company monitors its asset/liability matching within the self-constraints of desired capital levels and risk tolerance. National Western's capital level remains substantially above industry averages and regulatory targets. Management has performed analyses of the capital strain associated with incrementally higher levels of annuity new business and determined that National Western's capital position is more than sufficient to handle an increase in sales activity.

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The following table sets forth information regarding annuities in force for each date presented.

	Annuities In Force as of
	June 30,		December 31,
	2019		2018
	($ in thousands)
Fixed-index annuities
Number of policies	72,130		73,740
GAAP annuity reserves	$	5,605,922	5,771,216
Other deferred annuities
Number of policies	38,080		39,960
GAAP annuity reserves	$	1,491,178	1,584,660
Immediate annuities
Number of policies	12,960		13,210
GAAP annuity reserves	$	351,017	352,418
Total annuities
Number of policies	123,170		126,910
GAAP annuity reserves	$	7,448,117	7,708,294

Impact of Recent Business Environment

The Company's business is generally aided by an economic environment experiencing growth, whether moderate or vibrant, characterized by metrics which indicate improving employment data and increases in personal income.

With regard to the credit market, industry analysts and observers generally agree that a sudden jump in interest rate levels, while presently a highly unlikely scenario, would be harmful to life insurers with interest-sensitive products as it could provide an impetus for abnormal levels of product surrenders and withdrawals at the same time fixed debt securities held by insurers declined in market value. Ultimately, a mix of monetary policy adjustments, fiscal policy, and economic fundamentals will determine the future direction of interest rate movements and the speed of such shifts. It is uncertain what direction and at what pace interest rate movements may occur in the future and what impact, if any, such movements would have on the Company's business, results of operations, cash flows, or financial condition.

The U.S life insurance sector continues to be faced with an interest rate, economic, and regulatory environment making strategic long-term planning decisions more challenging and vulnerable to inaccurate assessments. In an environment such as this, the need for a strong capital position that can cushion against unexpected bumps is critical for stability and ongoing business activity. The Company's operating strategy continues to be focused on maintaining capital levels substantially above regulatory and rating agency requirements. Our business model is predicated upon steady growth in invested assets while managing the block of business within profitability objectives. A key premise of our financial management is maintaining a high quality investment portfolio, well matched in terms of duration with policyholder obligations, that continues to outperform the industry with respect to adverse impairment experience. This discipline enables the Company to sustain resources more than adequate to fund future growth and absorb abnormal periods of cash outflows.

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RESULTS OF OPERATIONS

The Company's Condensed Consolidated Financial Statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). In addition, the Company regularly evaluates operating performance using non-GAAP financial measures which exclude or segregate derivative and realized investment gains and losses from operating revenues. Similar measures are commonly used in the insurance industry in order to assess profitability and results from ongoing operations. The Company believes that the presentation of these non-GAAP financial measures enhances the understanding of the Company's results of operations by highlighting the results from ongoing operations and the underlying profitability factors of the Company's business. The Company excludes or segregates derivative and realized investment gains and losses because such items are often the result of events which may or may not be at the Company's discretion and the fluctuating effects of these items could distort trends in the underlying profitability of the Company's business. Therefore, in the following sections discussing condensed consolidated operations and segment operations, appropriate reconciliations have been included to report information management considers useful in enhancing an understanding of the Company's operations to reportable GAAP balances reflected in the Condensed Consolidated Financial Statements.

Consolidated Operations

Premiums and other revenues.  The following details Company revenues.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019			2018	2019	2018
	(In thousands)
Universal life and annuity contract charges	$	36,910		39,945	74,863	78,465
Traditional life premiums	23,810			4,928	41,393	9,073
Net investment income (excluding derivatives)	110,596			111,510	219,925	216,649
Other revenues	3,966			5,287	10,379	10,284
Operating revenues	175,282			161,670	346,560	314,471
Derivative gain (loss)	17,828			10,292	59,830	(34,102	)
Net realized investment gains (losses)	(425		)	2,696	4,204	3,307
Total revenues	$	192,685		174,658	410,594	283,676

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Universal life and annuity contract charges - Revenues for universal life and annuity contracts were lower for the first six months in 2019 compared to 2018 with the component sources shown below. Revenues for universal life and annuity products consist of policy charges for the cost of insurance, administration charges, surrender charges assessed against policyholder account balances, and amortization of deferred premium loads less reinsurance premiums, as shown in the following table.

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019		2018
	(In thousands)
Contract Revenues:
Cost of insurance and administrative charges	$	31,146		32,211		62,331		64,524
Surrender charges	8,926			10,150		16,975		19,138
Other charges	1,306			2,161		4,437		3,440
Gross contract revenues	41,378			44,522		83,743		87,102
Reinsurance premiums	(4,468		)	(4,577	)	(8,880	)	(8,637	)
Net contract revenues	$	36,910		39,945		74,863		78,465

Cost of insurance charges typically trend with the size of the universal life insurance block in force and the amount of new business issued during the period. Universal life insurance in force declined during the six months ended June 30, 2019 from approximately $15.6 billion at December 31, 2018 to $15.0 billion at June 30, 2019. For the three months ended June 30, 2019, cost of insurance charges decreased to $25.5 million from $26.5 million at June 30, 2018, and for the six months ended June 30, 2019 cost of insurance charges decreased to $51.3 million from $53.3 million at June 30, 2018. Administrative charges pertaining to new business issued declined to $5.6 million for the three months ended June 30, 2019 from $5.7 million for the same period in 2019, and to $11.0 million for the six months ended June 30, 2019 versus $11.3 million for the same period in 2018, due to a lower number of policies issued.

Surrender charges assessed against policyholder account balances upon withdrawal decreased in the first six months of 2019 versus the comparable prior year period. While the Company earns surrender charge income that is assessed upon policy terminations, the Company's overall profitability is enhanced when policies remain in force and additional contract revenues are realized and the Company continues to make an interest rate spread equivalent to the difference it earns on its investments and the amount that it credits to policyholders. In the first six months of 2019, lapse rates on annuity and international life insurance policies were slightly higher than the prior year while lapse rates for domestic life insurance policies decreased somewhat. Surrender charge income recognized is also dependent upon the duration of policies at the time of surrender (i.e. later duration policy surrenders having a lower surrender charge assessed and earlier duration surrenders having a higher surrender charge).

Other charges include the amortization into income of the premium load on single premium life insurance products which is deferred at the inception of the policy. As these products have become a substantial portion of domestic life insurance sales over the past several years, the amortization of accumulated deferrals has surpassed current period premium loads deferred.

Traditional life premiums - Traditional life premiums include the activity of Ozark National for the three and five months ended June 30, 2019. Ozark National's principal product is a non-participating whole life insurance policy with premiums remitted primarily on a monthly basis. The product is sold in tandem with a mutual fund investment product offered through its broker-dealer affiliate, NIS. Traditional life insurance premiums for products such as whole life and term life are recognized as revenues over the premium-paying period. The Company's life insurance sales focus has historically been primarily centered around universal life products, although additional domestic life term products have been added to National Western's portfolio in recent years. The addition of Ozark National's business of repetitive paying permanent life insurance adds an important complement to National Western's life insurance sales. Included in the amount for the quarter and six months ended June 30, 2019 is $18.6 million and $31.5 million, respectively, of life insurance renewal premium from Ozark National. Universal life products, especially National Western's equity indexed universal life products which offer the opportunity for consumers to acquire life insurance protection and receive credited interest linked in part to an outside market index, have been the more popular product offerings in the Company's markets.

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Net investment income - To ensure the Company will be able to honor future commitments to policyholders and provide a financial return, the funds received as premium payments and deposits are invested in high quality investments, primarily fixed maturity debt securities. The income from these investments is closely monitored by the Company due to its significant impact on the business. A detail of net investment income (with and without index option gains and losses) is provided below.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Gross investment income:
Debt and equities	$	101,627	101,776	205,551	201,831
Mortgage loans	2,823		2,859	6,175	5,945
Policy loans	829		741	1,707	1,560
Short-term investments	644		301	1,209	822
Other invested assets	5,249		6,144	6,583	7,203
Total investment income	111,172		111,821	221,225	217,361
Less: investment expenses	576		311	1,300	712
Net investment income (excluding derivatives)	110,596		111,510	219,925	216,649
Derivative gain (loss)	17,828		10,292	59,830	(34,102	)
Net investment income	$	128,424	121,802	279,755	182,547

For the six months ended June 30, 2019, debt and equity securities generated approximately 93% of total net investment income, excluding derivative gain (loss). The Company's strategy is to invest substantially all of its cash flows in fixed debt securities consistent with its guidelines for credit quality, duration, and diversification. The higher level of investment income from debt and equity securities through the second quarter of 2019 versus 2018, reflects the addition of Ozark National which added $9.8 million to the total amount. National Western's debt and equity securities investment income continues to experience higher yielding debt securities maturing or being called by borrowers and being replaced with lower yielding securities in the current interest rate environment. With the acquisition of Ozark National and NIS in the first quarter of 2019, a substantial portion of National Western's investable cash resources was applied toward the purchase of the two companies and then subsequently to pay back line of credit borrowings made to fund a part of the acquisition price. Investment yields on a greatly reduced level of new bond purchases during the first six months of 2019 approximated 4.46%. National Western's weighted average portfolio yield was 3.87% at June 30, 2019. Ozark National's weighted average portfolio yield at June 30, 2019 was 3.56%.

Effective January 1, 2018, new accounting guidance requires that changes in fair values of equity securities be included in the Consolidated Statements of Earnings. For the quarter and six months ended June 30, 2019, unrealized gains of $0.3 million and $1.9 million, respectively, are included in net investment income (in the Debt and equities line item in the above table) reflecting the change in fair value during each period. The corresponding amounts for the three and six months ended June 30, 2018 were $0.4 million and $(0.1) million, respectively. The carrying value of the Company's portfolio of equity securities was $19.3 million at June 30, 2019.

Mortgage loan investment income for the six months ended June 30, 2019 increased versus the comparable period in 2018 reflecting higher yielding loans paying off early and the resultant prepayment fees received. The portfolio balance decreased from $208.2 million at December 31, 2017 to $203.2 million at December 31, 2018 as aggressive interest rates offered by competitors served to hold down new loan originations. The mortgage loan portfolio balance increased to $214.3 million at June 30, 2019 reflecting the Company's loan origination efforts during the competitive lending season (competing mortgage lenders are typically more active during the first calendar half of the year). During the six months ended June 30, 2019 the Company originated new mortgage loans in the amount of $33.2 million compared to $9.9 million in the comparable period of 2018.

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In order to evaluate underlying profitability and results from ongoing operations, net investment income performance is analyzed excluding derivative gain (loss), which is a common practice in the insurance industry.  Net investment income and average invested assets shown below includes cash and cash equivalents. Net investment income performance is summarized as follows:

	Six Months Ended June 30,
	2019			2018
	(In thousands)
Excluding derivatives:
Net investment income	$	219,925		216,649
Average invested assets, at amortized cost	$	10,941,405		10,772,031
Annual yield on average invested assets	4.02		%	4.02	%
Including derivatives:
Net investment income	$	279,755		182,547
Average invested assets, at amortized cost	$	10,993,697		10,920,400
Annual yield on average invested assets	5.09		%	3.34	%

The yield on average invested assets during the first six months of 2019, excluding derivatives, remained level with that of 2018 as yields obtained on new fixed maturity debt securities investments during the first six months of 2019 and the remainder of 2018 continued to increase during this time frame. During 2018, the average yield on bond purchases to fund insurance operations was 4.20% representing a 1.29% spread over treasury rates. National Western insurance operation bond purchases through the second quarter of 2019 had a higher average yield of 4.46% as larger spreads of 1.88% over treasury rates were obtained during this period. Treasury rates decreased in the first six months of 2019, however, the Company was able to make selective purchases of higher yielding securities during this period as a sizable portion of the investable cash flow during the first quarter was being applied toward the repayment of the outstanding borrowings under National Western's line of credit facility.

Bond yield rates on new purchases for National Western during 2018 and the first half of 2019 exceeded the weighted average bond portfolio rate which was 3.97% at December 31, 2017, 3.90% at December 31, 2018, and 3.87% at June 30, 2019. The decreasing trend in the bond portfolio rate in spite of increased yields obtained on new purchases reflects higher yielding securities maturing or being called. The weighted average quality of new purchases during the first six months of 2019 was "BBB+" which matched the average quality of new investments in 2018, 2017, and 2016. The composite duration of purchases during the first six months was slightly longer than that of purchases made in previous years as the Company purchased a higher proportion of investments for its life insurance line of business which has a longer liability duration than that of the annuity line of business. The Company's general investment strategy is to purchase debt securities with maturity dates approximating ten years in the future. Accordingly, an appropriate measure for benchmarking the direction of interest rate levels for the Company's debt security purchases is the ten year treasury bond rate. After ending 2018 at a rate of 2.69%, the daily closing yield of the ten year treasury bond ranged from a low of 2.00% to a high of roughly 2.80% during the first six months of 2019, and ended the second calendar quarter at 2.01%.

The pattern in average invested asset yield, including derivatives, incorporates increases and decreases in the fair value of index options purchased by the Company to support its fixed-index products. Fair values of the purchased call options increased during the first six months of 2019 and decreased during the comparable 2018 period, corresponding to the movement in the S&P 500 Index during these periods (the primary index the Company's fixed-index products employ). Refer to the derivatives discussion below for a more detailed explanation of these instruments.

Other revenues - Other revenues primarily pertain to the Company's two nursing home operations in Reno, Nevada and San Marcos, Texas; the operations of Braker P III ("BP III"), a subsidiary created at the end of 2016 to own and manage a commercial office building BP III acquired; and NIS, the broker-dealer affiliate of Ozark National acquired effective January 31, 2019.

Revenues associated with the nursing operations were $4.4 million and $8.8 million for the six months ended June 30, 2019 and 2018, respectively. As previously reported, the Company closed on the sale of its Reno nursing home operations effective February 1, 2019 and on the sale of its San Marcos nursing home operations effective May 1, 2019. Revenues in the first six months of 2019 include Reno operating revenues for the month of January and net gains from the sale of personal property and equipment of $1.4 million, and San Marcos operating revenues for the period January through April.

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Revenues associated with BP III were $2.0 million and $1.4 million in the first six months of 2019 and 2018, respectively. The increased revenues in 2019 reflect tenant leases that were subsequently entered into. NIS revenues of $3.6 million pertain to operations for the months of February through June of 2019.

Derivative gain (loss) - Index options are derivative financial instruments used to hedge the equity return component of the Company's fixed-index products. Derivative gain or loss includes the amounts realized from the sale or expiration of the options. Since the index options do not meet the requirements for hedge accounting under GAAP, they are marked to fair value on each reporting date and the resulting unrealized gain or loss is also reflected as a component of net investment income.

Gains and losses from index options are substantially due to changes in equity market conditions. Index options are intended to act as hedges to match the returns on the product's underlying reference index and the rise or decline in the index relative to the index level at the time of the option purchase which causes option values to likewise rise or decline. As income from index options fluctuates with the underlying index, the contract interest expense to policyholder accounts for the Company's fixed-index products also fluctuates in a similar manner and direction. For the three and six months ended June 30, 2019 and 2018, the Company recorded realized and unrealized gains/(losses) from index options as shown below.

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019		2018
	(In thousands)
Derivatives:
Unrealized gain (loss)	$	21,770		(17,312	)	82,870		(101,622	)
Realized gain (loss)	(3,942		)	27,604		(23,040	)	67,520
Total gain (loss) included in net investment income	$	17,828		10,292		59,830		(34,102	)
Total contract interest	$	60,139		60,990		141,055		59,172

The economic impact of option performance in the Company's financial statements is not generally determined solely by the option gain or loss included in net investment income as there is a corresponding amount recorded in the contract interest expense line. The Company's profitability with respect to these options is largely dependent upon the purchase cost of the option remaining within the financial budget for acquiring options embedded in the product pricing. Option prices vary with interest rates, volatility, and dividend yields among other things. As option prices vary, the Company manages for the variability by making offsetting adjustments to product caps, participation rates, and management fees. For the periods shown, the Company's option costs have been close to or within the product pricing budgets.

The financial statement investment spread, the difference between investment income and interest credited to contractholders, is subject to variations from option performance during any given period. For example, many of the company's equity-index annuity products provide for the collection of asset management fees. These asset management fees are assessed when returns on expiring options are positive, and they are collected prior to passing any additional returns above the assessed management fees to the policy contractholders. During periods of positive returns, the collected asset management fees serve to increase the financial statement spread by increasing option realized gains reported as investment income in an amount greater than interest credited to policy contractholders which is reported as contract interest expense. Asset management fees collected in the first six months of 2019 and 2018 were approximately $7.6 million and $13.3 million, respectively. For the three months ended June 30, 2019 and 2018, asset management fees collected were $5.9 million and $7.2 million, respectively.

Net realized investment gains (losses) - Realized gains (losses) on investments include proceeds from bond calls, sales and impairment write-downs as well as gains and losses on the sale of real estate property. The net gains reported for the six months ended June 30, 2019 consisted of gross gains of $12.2 million offset by gross losses of $8.0 million. Included in gross gains is $5.7 million from the sale of land and building associated with the nursing home in Reno, Nevada sold effective January 31, 2019, and a $3.2 million gain during the second quarter of 2019 pertaining to the sale of the Company's former home office facility. Included in gross losses is a loss on the sale of the building pertaining to the San Marcos, Texas nursing home which was sold effective May 1, 2019, and an other-than-temporary impairment on a single debt security credit in the amount $5.9 million which the Company recorded during the second quarter of 2019. The net gains reported for the six months ended June 30, 2018 consisted of gross gains of $3.3 million offset by gross losses of $0.0 million.

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The Company records impairment write-downs when a decline in value is considered to be other-than-temporary and full recovery of the investment is not expected. Impairments due to credit factors are recorded in the Company's Condensed Consolidated Statements of Earnings while non-credit (liquidity) impairment losses are included in Condensed Consolidated Statements of Comprehensive Income (Loss). Impairment or valuation write-downs recorded in the Company's Condensed Consolidated Statements of Earnings for the three and six months ended June 30, 2019 and 2018 were as follows.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Impairment or valuation write-downs:
Bonds	$	5,902	—	5,902	—
Equities	—		—	—	—
Mortgage loans	—		—	—	—
Real estate	—		—	—	—
Total	$	5,902	—	5,902	—

The Company previously recorded an impairment of $2.2 million at March 31, 2019 on the real estate property associated with its nursing home operations in San Marcos, Texas based upon a pending agreement to sell the operations. Closing of the sale occurred May 1, 2019, and resulted in a realized loss of $2.0 million.

Benefits and Expenses.  The following table details benefits and expenses.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Life and other policy benefits	$	33,657	17,461	61,846	38,862
Amortization of deferred policy acquisition costs and value of business acquired	31,411		31,069	63,575	63,298
Universal life and annuity contract interest	60,139		60,990	141,055	59,172
Other operating expenses	25,334		24,795	51,383	48,428
Totals	$	150,541	134,315	317,859	209,760

Life and other policy benefits - Death claim benefits, the largest component of policy benefits, were $30.8 million in the first six months of 2019 compared to $20.2 million for the first six months of 2018. Of the amount included in the six months ended June 30, 2019, $15.9 million were associated with National Western business and $14.9 million pertained to Ozark National. Death claim amounts are generally subject to variation from period to period. For the first six months of 2019, the number of National Western life insurance claims decreased 10% from the comparable period in 2018 while the average dollar amount per net claim increased slightly to $44,000 from $42,000. The average net claim for Ozark National during the 2019 period was $16,500. National Western's overall mortality experience has generally been consistent with or better than its product pricing assumptions. Mortality exposure is managed through reinsurance treaties under which the retained maximum net amount at risk on any one life is capped at $500,000. Ozark National's retained maximum net amount at risk is capped at $200,000 under its reinsurance treaties with limited exceptions related to the conversion of child protection and guaranteed insurability riders.

Life and other policy benefits also includes policy liabilities held associated with the Company's traditional life products, including riders such as the guaranteed minimum withdrawal benefit rider ("WBR"), a popular rider to its equity-indexed annuity products. The increase associated with these policy liabilities was $4.4 million and $4.0 million in the quarters ended June 30, 2019 and 2018, respectively, and $9.5 million and $12.0 million, respectively, for the six months then ended. The lower WBR benefit expense in the 2019 six-month period compared to 2018 reflects an unlocking adjustment made in the third quarter of 2018 to update assumptions to current experience.

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Life and other policy benefits in the quarter and six months ended June 30, 2019 includes changes in traditional life reserves and miscellaneous benefit payments associated with Ozark National's operations of $7.6 million and $12.8 million, respectively, reflecting normal business conditions.

Amortization of deferred policy acquisition costs and value of business acquired - Life insurance companies are required to defer certain expenses that vary with, and are primarily related to, the cost of acquiring new business. The majority of these acquisition expenses consist of commissions paid to agents, underwriting costs, and certain marketing expenses. Recognition of these deferred policy acquisition costs (“DPAC”) as an expense in the Condensed Consolidated Financial Statements occurs over future periods in relation to the expected emergence of profits priced into the products sold. This emergence of profits is based upon assumptions regarding premium payment patterns, mortality, persistency, investment performance, and expense patterns. Companies are required to review universal life and annuity contract assumptions periodically to ascertain whether actual experience has deviated significantly from that assumed. If it is determined that a significant deviation has occurred, the emergence of profits pattern is to be "unlocked" and reset based upon the actual experience. DPAC balances are also adjusted each period to reflect current policy lapse or termination rates, expense levels and credited rates on policies compared to anticipated experience (“true-up”) with the adjustment reflected in current period amortization expense. In accordance with GAAP guidance, the Company must also write-off deferred acquisition costs and unearned revenue liabilities upon internal replacement of certain contracts as well as annuitizations of deferred annuities.

The following table identifies the effects of unlocking adjustments on DPAC balances recorded through amortization expense separate from recurring amortization expense components for the three and six months ended June 30, 2019 and 2018.

Amortization of DPAC	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Unlocking adjustments	$	—	—	—	—
Other amortization components	29,127		31,069	59,668	63,298
Totals	$	29,127	31,069	59,668	63,298

The amount for the six months ended June 30, 2019 was comprised of amortization by National Western of $59.4 million and by Ozark National of $0.3 million. Ozark National's deferred policy acquisition cost balance was initiated February 1, 2019 following its acquisition by National Western.

The Company is required to evaluate its emergence of profits continually and management believes that the current amortization patterns of deferred policy acquisition costs are reflective of actual experience. It is the Company's intent, absent intervening events or experience, to annually perform any necessary DPAC balance unlockings in the third calendar quarter of the year.

As the DPAC balance is an asset on the Company's Condensed Consolidated Balance Sheets, GAAP provides for an earned interest return on the unamortized balance each period. The earned interest serves to increase the DPAC balance and reduce other amortization component expense. The rate at which the DPAC balance earns interest is the average credited interest rate on the Company's universal life and annuity policies in force, including credited interest on equity-indexed policies. The amount of earned interest on DPAC balances for the three months ended June 30, 2019 and 2018 was $3.8 million and $6.7 million, respectively, decreasing other amortization component expense. The amount of earned interest on DPAC balances for the six months ended June 30, 2019 and 2018 was $5.6 million and $16.2 million, respectively. The reduced interest amount in the 2019 periods reflect lower returns on equity-index products during these time frames.

As part of the purchase accounting required with the acquisition of Ozark National effective January 31, 2019, the Company recorded an intangible asset of $145.8 million referred to as the value of business acquired ("VOBA"). VOBA represents the difference between the acquired assets and liabilities of Ozark National measured in accordance with the Company's accounting policies and the fair value of these same assets and liabilities. The VOBA balance sheet amount is amortized following a methodology similar to that used for amortizing deferred policy acquisition costs. In the quarter ended June 30, 2019, the Company's VOBA amortization was $2.3 million, and for the five months ended June 30, 2019 the amortization amount was $3.9 million.

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Universal life and annuity contract interest - The Company closely monitors its credited interest rates on interest sensitive policies (National Western products), taking into consideration such factors as profitability goals, policyholder benefits, product marketability, and economic market conditions. As long term interest rates change, the Company's credited interest rates are often adjusted accordingly, taking into consideration the factors described above. The difference between yields earned on investments over policy credited rates is often referred to as the "interest spread".

National Western's approximated average credited rates through the first six months, excluding and including equity-indexed products, were as follows:

	June 30,				June 30,
	2019		2018		2019		2018
	(Excluding fixed-index products)				(Including fixed-index products)
Annuity	1.94	%	2.12	%	2.11	%	0.98	%
Interest sensitive life	3.37	%	3.38	%	6.68	%	2.29	%

Contract interest reported in financial statements also encompasses the performance of the index options associated with the Company's fixed-index products. As previously noted, the market value changes of these derivative features resulted in net realized and unrealized gains/(losses) of $59.8 million and $(34.1) million being included in net investment income for the six months ended June 30, 2019 and 2018, respectively. These amounts consisted of unrealized gains of $82.9 million and realized losses of $(23.0) million for the year-to-date 2019 period, and unrealized losses of $(101.6) million and realized gains of $67.5 million for the comparable 2018 time frame. In the second quarter of 2019, this figure was comprised of unrealized gains totaling $21.8 million offset by realized losses of $(3.9) million. In the second quarter of 2018, the amount was made up of unrealized losses totaling $(17.3) million offset by realized gains of $27.6 million. These returns similarly increased/(decreased) the computed average credited rates for the periods shown above. Policyholders of equity-indexed products cannot receive an interest credit below 0% according to the policy contract terms.

Generally, the impact of the market value change of index options on asset values aligns closely with the movement of the embedded derivative liability held for the company's fixed-index products such that the net effect upon pretax earnings is negligible (i.e. net realized and unrealized gains/(losses) included in net investment income approximate the change in contract interest associated with the corresponding embedded derivative liability change). However, other aspects of the embedded derivatives can cause deviations to occur between the change in index option asset values included in net investment income and the change in the embedded derivative liability included in contract interest. As noted in the discussion of net investment income, the collection of asset management fees in a period can cause investment income to increase marginally higher than contract interest expense since these collected fees are deducted from indexed interest credited to policyholders. During the three months ended June 30, 2019 and 2018, asset management fees collected were $5.9 million and $7.2 million, respectively, and for the six months then ended $7.6 million and $13.3 million, respectively.

Accounting rules require the embedded derivative liability to include a projection of asset management fees estimated to be collected in the succeeding fiscal year. This projection is based upon the most recent performance of the reference equity index. The change in this projection, plus or minus, is included in contract interest for the period being reported on. Increases in projected asset management fees collected reduce contract interest expense while decreases in projected asset management fees collected increase contract interest expense. In the three month periods ended June 30, 2019 and 2018, contract interest was decreased $4.7 million and $0.8 million, respectively, for these projection changes. For the six months ended June 30, 2019 and 2018, contract interest was increased/(decreased) $(20.3) million and $1.7 million, respectively.

Contract interest expense also includes reserve changes for immediate annuities, two tier annuities, excess death benefit reserves, excess annuitizations, and amortization of deferred sales inducement balances. These items are offset by policy charges assessed for policies having the withdrawal benefit rider (WBR). As changes in these items collectively impact contract interest expense, financial statement interest spread is also affected. For the three month periods ended June 30, 2019 and 2018, the changes in these items increased contract interest expense by $7.2 million and $9.1 million, respectively, while for the six months then ended contract interest expense was increased by $16.9 million and $12.9 million, respectively. Included in the amount for the first six months of 2019 is a reserve increase of $6.8 million for excess death benefits, compared to $4.0 million in the same period for 2018, which was higher due to a lower level of universal life death claims being incurred.

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Similar to deferred policy acquisition costs, the Company defers sales inducements in the form of first year credited interest bonuses on annuity products that are directly related to the production of new business. These bonus interest charges are deferred and amortized using the same methodology and assumptions used to amortize other capitalized acquisition costs and the amortization is included in contract interest. In addition, deferred sales inducement balances are also reviewed periodically to ascertain whether actual experience has deviated significantly from that assumed (unlock) and are adjusted to reflect current policy lapse or termination rates, expense levels and credited rates on policies compared to anticipated experience (true-up). These adjustments, plus or minus, are included in contract interest expense. No unlocking adjustments were recorded during the first six months of 2019 or 2018.

Other operating expenses - Other operating expenses consist of general administrative expenses, licenses and fees, commissions not subject to deferral, nursing home expenses, real estate expenses, and compensation costs. These expenses for the three and six months ended June 30, 2019 and 2018 are summarized in the table that follows.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
General insurance expenses	$	9,581	7,242	22,689	15,597
Nursing home expenses	666		3,943	3,240	7,899
Compensation expenses	7,033		7,807	11,992	13,974
Commission expenses	2,718		2,203	4,373	4,525
Real estate expenses	1,265		1,133	2,510	2,347
Brokerage expenses (NIS)	1,184		—	1,912	—
Taxes, licenses and fees	2,887		2,467	4,667	4,086
Totals	$	25,334	24,795	51,383	48,428

In the first six months ended June 30, 2019, general insurance expenses include a $3.25 million broker fee paid in connection with the acquisition of Ozark National and NIS which closed during the period. GAAP precludes this fee from being part of the purchase price for acquiring these businesses. Also included in the 2019 periods are general insurance expenses of Ozark National in the amount of $1.2 million and $2.1 million for the three and six months ended June 30, 2019. General insurance expenses include software amortization expense associated with National Western's proprietary policy administration system which was phased into production over the past couple of years as well as other acquired software. Expenses pertaining to these items were $3.2 million and $3.1 million in the second quarter of 2019 and 2018, respectively, and $6.1 million and $5.6 million in the first half of 2019 and 2018, respectively. This category of expenses also includes employee benefit plan expenses for the various employee health and retirement plans the Company sponsors. Related expenses for the second quarter of 2019 and 2018 were $2.1 million and $1.5 million, respectively, and for the first half of 2019 and 2018 were $4.0 million and $3.0 million, respectively.

Nursing home expenses reflect the operations of the Company's two nursing home operations up through their respective dates of sale. The Reno, Nevada nursing home was sold effective January 31, 2019 while the San Marcos, Texas nursing home sale closed effective May 1, 2019.

Compensation expenses include share-based compensation costs related to outstanding vested and nonvested stock options and stock appreciation rights ("SARs"), restricted stock units ("RSUs") and performance share units ("PSUs"). The related share-based compensation costs move in tandem not only with the number of awards outstanding but also with the movement in the market price of the Company's Class A common stock as a result of marking the stock options, SARs, RSUs, and PSUs to fair value under the liability method of accounting. Consequently, the related expense amount varies positive or negative in any given period. For the three-month periods shown, share-based compensation expense was $0.1 million in 2019 and $1.3 million in 2018 reflecting decreases in the market price of the Company's Class A common shares in these periods. For the six-month periods shown, shared-based compensation expense was $(1.4) million in 2019 and $0.7 million in 2018. The Company's Class A common share price decreased from $300.70 at December 31, 2018 to $257.00 at June 30, 2019, compared to $331.02 at December 31, 2017 and $307.26 at June 30, 2018. No performance share awards were granted in the first six months of 2019 and 2018. Compensation expenses in 2019 include Ozark National related expenses of $0.6 million and $1.0 million in the three and six months ended June 30, 2019.

Real estate expenses pertain to the commercial building operated by Braker P III. The building was acquired at year-end 2016 and the Company relocated to this facility during the fourth quarter of 2017.

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Taxes, licenses and fees include premium taxes and licensing fees paid to state insurance departments, guaranty fund assessments, the company portion of social security and Medicare taxes, real estate taxes, state income taxes, and other state and municipal taxes. Included in the amounts for the three and six months ended June 30, 2019 are Ozark National related expenses of $0.6 million and $1.1 million, respectively.

Federal Income Taxes. Federal income taxes on earnings from operations reflect an effective tax rate of 20.3% for the six months ended June 30, 2019 compared to 19.7% for the six months ended June 30, 2018. The Federal corporate tax rate decreased to 21% effective in 2018 under the Tax Cuts and Jobs Act ("Tax Act") passed in December 2017. The Company's effective tax rate is typically lower than the Federal statutory rate due to tax-exempt investment income related to municipal securities and dividends-received deductions on income from stocks, absent other permanent tax items.

While the Company's overall effective tax rate remains close to the statutory rate level, the Company's current tax expense is elevated due to a provision of the Tax Act which imposed a limitation on the amount of tax reserves a life insurer is able to deduct in arriving at its taxable income. The limitation is the greater of net surrender value or 92.81% of the reserve method prescribed by the National Association of Insurance Commissioners. Implementation of this provision was required as of January 1, 2018 and the Company ultimately determined that the resultant tax reserve adjustment was a decrease of $332.9 million. The Tax Act provided that this tax reserve adjustment could be brought into taxable income ratably over a period of eight (8) years. Based upon the tax reserve adjustment derived, the effect of the Tax Act limiting the tax reserve deductible in the current tax computation serves to increase the Company's taxable income by approximately $41.6 million per year through 2025. At the Federal statutory rate of 21%, the impact upon current tax expense is an increase of approximately $8.7 million per year or approximately $2.2 million each quarter.

Segment Operations

Summary of Segment Earnings

A summary of segment earnings/(losses) for the three and six months ended June 30, 2019 and 2018 is provided below. The segment earnings/(losses) exclude realized gains and losses on investments, net of taxes.

	Domestic Life Insurance		International Life Insurance	Annuities	Acquired Businesses	All Others	Totals
	(In thousands)
Segment earnings (losses):
Three months ended:
June 30, 2019	$	494	9,307	14,521	3,831	5,879	34,032
June 30, 2018	$	760	10,454	10,337	—	8,785	30,336
Six months ended:
June 30, 2019	$	1,621	20,487	31,536	6,794	10,135	70,573
June 30, 2018	$	1,156	20,526	22,782	—	12,264	56,728

73

Domestic Life Insurance Operations

A comparative analysis of results of operations for the Company's domestic life insurance segment is detailed below.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Premiums and other revenues:
Premiums and contract revenues	$	10,706	10,114	21,510	19,715
Net investment income	14,995		13,556	38,494	14,219
Other revenues	20		—	64	—
Total premiums and other revenues	25,721		23,670	60,068	33,934
Benefits and expenses:
Life and other policy benefits	3,829		5,103	7,751	9,912
Amortization of deferred policy acquisition costs	3,307		2,709	6,717	5,384
Universal life insurance contract interest	12,985		9,907	34,426	7,046
Other operating expenses	5,017		5,006	9,140	10,153
Total benefits and expenses	25,138		22,725	58,034	32,495
Segment earnings (loss) before Federal income taxes	583		945	2,034	1,439
Provision (benefit) for Federal income taxes	89		185	413	283
Segment earnings (loss)	$	494	760	1,621	1,156

Revenues from domestic life insurance operations include life insurance premiums on traditional type products and contract revenues from universal life insurance. Revenues from traditional products are simply premiums collected, while revenues from universal life insurance consist of policy charges for the cost of insurance, policy administration fees, and surrender charges assessed during the period. A comparative detail of premiums and contract revenues is provided below.

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019		2018
	(In thousands)
Universal life insurance revenues	$	12,654		11,128		24,797		21,886
Traditional life insurance premiums	811			1,540		2,143		2,613
Reinsurance premiums	(2,759		)	(2,554	)	(5,430	)	(4,784	)
Totals	$	10,706		10,114		21,510		19,715

74

National Western's domestic life insurance in force, in terms of policy count, has been declining for some time. The pace of new policies issued has lagged the number of policies terminated from death or surrender by roughly a two-to-one rate over the past several years. While the in force policy count has declined, the level of insurance in force (face amount of policies) from which contract charge revenue is received has remained relatively constant as new policies issued have substantially higher amounts of insurance compared to those policies terminating. The number of domestic life insurance policies in force has declined from 50,200 at December 31, 2017 to 49,000 at December 31, 2018, and to 48,400 at June 30, 2019. Policy lapse rates in the first six months of 2019 approximated 6.0% compared to 6.5% and 6.0% in 2018 and 2017, respectively.

Universal life insurance revenues are also generated with the issuance of new business based upon amounts per application and percentages of the face amount (volume) of insurance issued. The number of domestic life policies issued in the first six months of 2019 was 26% lower than in the comparable period for 2018 and the volume of insurance issued was 15% less than that in 2018. Universal life insurance revenues also include surrender charge income realized on terminating policies and, in the case of domestic universal life, amortization into income of the premium load on single premium policies which the Company began deferring in 2013. The premium load amortization was $4.4 million and $3.4 million in the six months ended June 30, 2019 and 2018, respectively.

Premiums collected on universal life products are not reflected as revenues in the Company's Condensed Consolidated Statements of Earnings in accordance with GAAP.  Actual domestic universal life premiums collected are detailed below.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Universal life insurance:
First year and single premiums	$	40,224	51,040	75,552	91,398
Renewal premiums	4,479		5,065	9,012	9,764
Totals	$	44,703	56,105	84,564	101,162

During the past several years the Company has achieved some success in growing sales of its domestic life insurance new business. These sales have been substantially weighted toward single premium policies which do not have much in the way of recurring premium payments. These products target wealth transfer strategies involving the movement of accumulated wealth in alternative investment vehicles, including annuities, into life insurance products. As a result, renewal premium levels have not been exhibiting a corresponding level of increase.

Net investment income for this segment of business, excluding derivative gain/(losses), has been gradually increasing due to the increased new business activity described above (single premium policies) and a higher level of investments needed to support the corresponding growth in policy obligations, especially those for single premium policies. The increase in net investment income has been partially muted by lower investment yields from debt security investment purchases during this time frame. Net investment income also includes the gains and losses on index options purchased to back the index crediting mechanism on fixed-index universal products.

A detail of net investment income for domestic life insurance operations is provided below.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Net investment income (excluding derivatives)	$	10,930	10,057	21,523	19,554
Derivative gain (loss)	4,065		3,499	16,971	(5,335	)
Net investment income	$	14,995	13,556	38,494	14,219

75

As seen in the above table, net investment income also includes the gains and losses on index options purchased to back the index crediting mechanism on fixed-index universal products. The gain or loss on index options follows the movement of the S&P 500 Index (the primary index for the Company's fixed-index products) with realized gains or losses being recognized on the anniversary of each index option based upon the S&P 500 Index level at expiration date relative to the index level at the time the index option was purchased, and unrealized gains and losses being recorded for index options outstanding based upon the S&P 500 Index at the balance sheet reporting date as compared to the index level at the time each respective option was purchased.

Life and policy benefits for a smaller block of business are subject to variation from quarter to quarter. Claim count activity during the first six months of 2019 decreased 9% compared to the first six months of 2018 while the average net claim amount (after reinsurance) increased to $31,900 from $25,500. The low face amount per claim relative to current issued amounts of insurance per policy reflects the older block of domestic life insurance policies sold which were final expense type products (i.e. purchased to cover funeral costs). GAAP reporting requires that claims be recorded after any cash value amounts that have been accumulated in the policies. The Company's overall mortality experience for this segment has been better than pricing assumptions.

As noted previously in the discussion of Results of Operations, the Company records true-up adjustments to DPAC balances each period to reflect current policy lapse or termination rates, expense levels and credited rates on policies as compared to anticipated experience with the adjustment reflected in current period amortization expense. To the extent required, the Company may also record unlocking adjustments to DPAC balances. The following table identifies the effects of unlocking adjustments on domestic life insurance DPAC balances recorded through amortization expense separate from recurring amortization expense components for the three and six months ended June 30, 2019 and 2018.

Amortization of DPAC	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Unlocking adjustments	$	—	—	—	—
Other amortization components	3,307		2,709	6,717	5,384
Totals	$	3,307	2,709	6,717	5,384

As shown above, in the three and six months ended June 30, 2019 and 2018, the Company made no unlocking adjustments to its DPAC balance for this segment. In the Consolidated Operations discussion of amortization of deferred acquisition costs it was noted that interest earned on DPAC balances serves to offset (decrease) amortization expense and that the interest rate used is the crediting rate experience during the period. The increase in amortization expense in 2019 relative to 2018 reflects lower interest earned on universal life DPAC balances due to the lower crediting rates resulting from declines in index option returns.

As indicated in the discussion concerning net investment income, contract interest expense includes the fluctuations that are the result of the effect upon the embedded derivative for the performance of underlying equity indices associated with fixed-index universal life products. The amounts realized on purchase call options approximate the amounts the Company credits to policyholders' policies.

76

International Life Insurance Operations

A comparative analysis of results of operations for the Company's international life insurance segment is detailed below.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Premiums and other revenues:
Premiums and contract revenues	$	23,777	27,461	49,840	55,378
Net investment income	9,276		10,603	23,293	12,574
Other revenues	33		4	54	34
Total revenues	33,086		38,068	73,187	67,986
Benefits and expenses:
Life and other policy benefits	2,959		4,534	5,121	10,262
Amortization of deferred policy acquisition costs	6,948		7,336	14,242	14,716
Universal life insurance and annuity contract interest	7,337		7,600	19,330	6,450
Other operating expenses	4,521		5,628	8,785	11,009
Total benefits and expenses	21,765		25,098	47,478	42,437
Segment earnings (losses) before Federal income taxes	11,321		12,970	25,709	25,549
Provision (benefit) for Federal income taxes	2,014		2,516	5,222	5,023
Segment earnings (loss)	$	9,307	10,454	20,487	20,526

As with domestic life operations, revenues from the international life insurance segment include both premiums on traditional type products and contract revenues from universal life insurance. A comparative detail of premiums and contract revenues is provided below.

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019		2018
	(In thousands)
Universal life insurance revenues	$	22,865		26,096		48,220		52,771
Traditional life insurance premiums	2,620			3,389		5,070		6,461
Reinsurance premiums	(1,708		)	(2,024	)	(3,450	)	(3,854	)
Totals	$	23,777		27,461		49,840		55,378

77

In general, universal life revenues and operating earnings are anticipated to emerge in tandem with the amount of life insurance in force. The volume of international life insurance in force, primarily universal life, contracted from $16.6 billion at December 31, 2017 to $15.4 billion at December 31, 2018 and further decreased to $14.5 billion at June 30, 2019. Universal life insurance revenues are also generated with the issuance of new business based upon amounts per application and percentages of the face amount (volume) of insurance issued. As noted previously, the Company ceased accepting new applications from all remaining residents outside of the U.S. in May 2018. The Company had ceased accepting applications from residents of Venezuela during the first quarter of 2018 due to the unsettled political, economic, civil, and social climate existing in that country. Prior to that, the Company had ceased accepting applications from residents of Brazil, Central America, and the Pacific Rim region in the fourth quarter of 2015 and from residents in the Eastern European region, primarily Russian-speaking, during 2017.

A third component of international universal life revenues include surrender charges assessed upon surrender of contracts by policyholders. In 2015, termination activity levels increased in conjunction with the Company's decision to cease accepting application from residents in Brazil and certain other countries resulting in additional surrender charge fee revenues. This activity continued into 2017 but subsided somewhat in 2018. Thus far in 2019, while there has been a slight increase in surrender activity, the resulting additional surrender charge fee revenue has been less due to lower surrender charge fees later in policy contract terms. The following table illustrates National Western's recent international life termination experience.

	Amount in $'s	Annualized Termination Rate
	(millions)
Volume In Force Terminations
Six months ended June 30, 2019	844.3	11.0	%
Year ended December 31, 2018	1,706.3	10.0	%
Year ended December 31, 2017	2,309.7	12.2	%
Year ended December 31, 2016	2,340.6	11.6	%
Year ended December 31, 2015	2,659.1	12.3	%
Year ended December 31, 2014	1,825.5	8.4	%

The higher incidence of terminations that occurred in the 2015 through 2017 time period related to policies with residents of the countries from which the Company discontinued accepting applications. As a result of the higher termination incidence, the Company unlocked its DPAC balances for this segment of the business during 2016 to incorporate a greater lapse assumption, among other things.

As noted previously, premiums collected on universal life products are not reflected as revenues in the Company's Condensed Consolidated Statements of Earnings in accordance with GAAP. Actual international universal life premiums collected are detailed below.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Universal life insurance:
First year and single premiums	$	348	3,724	935	9,062
Renewal premiums	16,767		18,750	33,639	39,297
Totals	$	17,115	22,474	34,574	48,359

National Western's most popular international products were its fixed-index universal life insurance products in which the policyholder could elect to have the interest rate credited to their policy account values linked in part to the performance of an outside equity index. These products issued were not generally available in the local markets when sold. Included in the totals in the above table are collected premiums for fixed-index universal life products of approximately $21.1 million and $31.7 million for the first six months of 2019 and 2018, respectively. The reduced level of renewal premiums during 2019 compared to 2018 corresponds with the decline in policies in force due to reduced sales activity and increased termination activity as discussed above.

78

As previously noted, net investment income and contract interest include period-to-period changes in fair values pertaining to call options purchased to hedge the interest crediting feature on the fixed-index universal life products. With the growth in the fixed-index universal life block of business, the period-to-period changes in fair values of the underlying options have had an increasingly greater impact on net investment income and universal life contract interest. A detail of net investment income for international life insurance operations is provided below.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Net investment income (excluding derivatives)	$	7,716	8,466	15,700	16,901
Derivative gain (loss)	1,560		2,137	7,593	(4,327	)
Net investment income	$	9,276	10,603	23,293	12,574

As seen in the above table, net investment income also includes the gains and losses on index options purchased to back the index crediting mechanism on fixed-index universal products. The gain or loss on index options follows the movement of the S&P 500 Index (the primary index for the Company's fixed-index products) with realized gains or losses being recognized on the anniversary of each index option based upon the S&P 500 Index level at expiration date relative to the index level at the time the index option was purchased, and unrealized gains and losses being recorded for index options outstanding based upon the S&P 500 Index at the balance sheet reporting date as compared to the index level at the time each respective option was purchased.

For liability purposes, the embedded option in the Company's policyholder obligations for this feature is bifurcated and reserved for separately. Accordingly, the impact for the embedded derivative component in the equity-index universal life product is reflected in the contract interest expense for each respective period.

Life and policy benefits primarily consist of death claims on policies. National Western's clientèle for international products are generally wealthy individuals with access to U.S. dollars and quality medical care. Consequently, the amounts of coverage purchased historically tended to be larger amounts. Life and policy benefit expense for the international life segment reflects the larger policies historically purchased, however mortality due to natural causes is comparable to that in the United States. The Company's maximum risk exposure per insured life is capped at $500,000 through reinsurance. The average international life net claim amount (after reinsurance) in the first six months of 2019 decreased to $161,000 from $195,000 in the first six months of 2018 while the number of claims incurred declined 17%.

The Company records true-up adjustments to DPAC balances each period to reflect current policy lapse or termination rates, expense levels, and credited rates on policies as compared to anticipated experience as well as unlocking adjustments as necessary. The following table identifies the effects of unlocking adjustments on international life insurance DPAC balances recorded through amortization expense separate from recurring amortization expense components for the three and six months ended June 30, 2019 and 2018.

Amortization of DPAC	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Unlocking adjustments	$	—	—	—	—
Other amortization components	6,948		7,336	14,242	14,716
Totals	$	6,948	7,336	14,242	14,716

As noted in the table above, in the three and six months ended June 30, 2019 and 2018, the Company made no unlocking adjustments to its DPAC balance for this segment.

79

As indicated in the discussion concerning net investment income, contract interest expense includes fluctuations that are the result of the effect upon the embedded derivative for the performance of underlying equity indices associated with fixed-index universal life products. The amounts realized on purchased call options generally approximate the amounts National Western credits to policyholders.

Annuity Operations

A comparative analysis of results of operations for National Western's annuity segment is detailed below.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Premiums and other revenues:
Premiums and contract revenues	$	5,857	7,298	10,725	12,445
Net investment income	89,572		86,915	192,726	140,458
Other revenues	64		18	72	37
Total revenues	95,493		94,231	203,523	152,940
Benefits and expenses:
Life and other policy benefits	9,876		7,824	21,306	18,688
Amortization of deferred policy acquisition costs	18,750		21,024	38,462	43,198
Annuity contract interest	39,817		43,483	87,299	45,676
Other operating expenses	9,374		9,085	16,882	17,020
Total benefits and expenses	77,817		81,416	163,949	124,582
Segment earnings (loss) before Federal income taxes	17,676		12,815	39,574	28,358
Provision (benefit) for Federal income taxes	3,155		2,478	8,038	5,576
Segment earnings (loss)	$	14,521	10,337	31,536	22,782

Premiums and contract charges primarily consist of surrender charge income recognized on terminated policies. The amount of the surrender charge income recognized is determined by the volume of surrendered contracts as well as the duration of each contract at the time of surrender given the pattern of declining surrender charge rates over time that is common to most annuity contracts. The Company's lapse rate for annuity contracts in the first six months of 2019 was 7.8% which was comparable with the 7.9% rate during the same period in 2018. Annuity contracts with fixed interest rates are more prone to terminate during periods of increases in secular interest rate levels and as contracts approach the end of their surrender charge period.

80

Deposits collected on annuity contracts are not reflected as revenues in the Company's Condensed Consolidated Statements of Earnings in accordance with GAAP. Actual annuity deposits collected for the three and six months ended June 30, 2019 and 2018 are detailed below.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Fixed-index annuities	$	56,663	109,031	118,113	217,891
Other deferred annuities	5,077		5,451	8,677	11,624
Immediate annuities	2,812		1,143	3,780	2,394
Totals	$	64,552	115,625	130,570	231,909

Fixed-index products are more attractive for consumers when interest rate levels remain low and equity markets produce positive returns. Since National Western does not offer variable products or mutual funds, fixed-index products provide an important alternative to the Company's existing fixed interest rate annuity products. Fixed-index annuity deposits as a percentage of total annuity deposits were 90% and 94% for the six months ended June 30, 2019 and 2018, respectively. The percentage of fixed-index products to total annuity sales reflects the low interest rate environment and the ongoing bull market in equities.

Some of the Company's deferred annuity products, including fixed-index annuity products, contain a first year interest bonus ranging from 1% to 7% depending upon the product, in addition to the base first year interest rate. Other products include a premium bonus ranging from 2% to 10% which is credited to the account balance when premiums are applied. These bonus rates are deferred in conjunction with other capitalized policy acquisition costs. The amounts deferred to be amortized over future periods amounted to approximately $1.4 million and $5.1 million during the first six months of 2019 and 2018, respectively. Amortization of deferred sales inducements is included as a component of annuity contract interest as described later in this discussion of Annuity Operations.

A detail of net investment income for annuity operations is provided below.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Net investment income (excluding derivatives)	$	77,369	82,259	157,460	164,898
Derivative gain (loss)	12,203		4,656	35,266	(24,440	)
Net investment income	$	89,572	86,915	192,726	140,458

As seen in the above table, net investment income also includes the gains and losses on index options purchased to back the index crediting mechanism on fixed-index universal products. The gain or loss on index options follows the movement of the S&P 500 Index (the primary index for the Company's fixed-index products) with realized gains or losses being recognized on the anniversary of each index option based upon the S&P 500 Index level at expiration date relative to the index level at the time the index option was purchased, and unrealized gains and losses being recorded for index options outstanding based upon the S&P 500 Index at the balance sheet reporting date as compared to the index level at the time each respective option was purchased.

Since the embedded derivative option in the policies is bifurcated when determining the contract reserve liability, the impact of the market value change of index options on asset values generally aligns closely with the movement of the embedded derivative liability such that the net effect upon pretax earnings is negligible (i.e. net realized and unrealized gains/(losses) included in net investment income approximate the change in contract interest associated with the corresponding embedded derivative liability change). See further discussion below regarding contract interest activity.

81

Consistent with the domestic and international life segments, the Company records true-up adjustments to DPAC balances each period to reflect current policy lapse or termination rates, expense levels and credited rates on policies as compared to anticipated experience as well as unlocking adjustments as necessary. The following table identifies the effects of unlocking adjustments on annuity DPAC balances recorded through amortization expense separate from recurring amortization expense components for the three and six months ended June 30, 2019 and 2018.

Amortization of DPAC	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Unlocking adjustments	$	—	—	—	—
Other amortization components	18,750		21,024	38,462	43,198
Totals	$	18,750	21,024	38,462	43,198

As noted in the table above, in the three and six months ended June 30, 2019 and 2018, the Company made no unlocking adjustments to its DPAC balance for this segment. Amortization of DPAC balances is proportional to estimated expected gross profits ("EGPs") for the line of business. Experience which deviates from the EGPs assumed similarly increases or decreases the amortization of DPAC. With the decline in collected asset management fees in 2019 as compared to 2018 due to lower index option returns, EGPs for the annuity line of business have been less than previously estimated which has produced a slowdown in amortization of DPAC. This is the underlying factor causing amortization in the first six months of 2019 to be lower than that in the comparable 2018 period. In addition, the EGPs of the non-index block of annuity policies have been steadily decreasing with the declining amount of policies in force as well as DPAC unlockings in recent years for unfavorable experience.

Annuity contract interest includes the equity component return associated with the call options purchased to hedge National Western's fixed-index annuities. The detail of fixed-index annuity contract interest as compared to contract interest for all other annuities is as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2019			2018		2019		2018
	(In thousands)
Fixed-index annuities	$	20,686		18,895		49,225		3,118
All other annuities	14,415			21,419		29,253		36,382
Gross contract interest	35,101			40,314		78,478		39,500
Bonus interest deferred and capitalized	(542		)	(2,320	)	(1,405	)	(5,100	)
Bonus interest amortization	5,258			5,489		10,226		11,276
Total contract interest	$	39,817		43,483		87,299		45,676

The fluctuation in reported contract interest amounts for fixed-index annuities is driven by sales levels, the level of the business in force and the effect of positive or negative market returns of option values on projected interest credits. As noted above in the net investment income discussion, the amounts shown for contract interest for fixed-index annuities generally align with the derivative gains/(losses) included in net investment income as the impact of the market change of index options on asset values align closely with the movement of the embedded derivative liability held for these products. As noted in the discussion in the Consolidated Operations section, fewer positive returns on expiring option contracts during the first six months of 2019 led to a lower level of collected asset management fees by National Western. Asset management fees collected are subtracted from contract interest credited to policyholders which serves to lessen the increase in contract interest expense relative to the option gains reported in the Company's net investment income. Asset management fees collected during the three and six months ended June 30, 2019 were $5.9 million and $7.6 million, respectively, compared to $7.2 million and $13.3 million in the corresponding periods of 2018.

82

As previously discussed in the discussion on results for Consolidated Operations, accounting rules require the embedded derivative liability to include a projection of asset management fees estimated to be collected in the succeeding fiscal year (asset management fees are included with fixed-index annuity products). This projection is based upon the most recent performance of the reference equity index. The change in this projection, plus or minus, is included in contract interest for the period being reported on. Increases in projected asset management fees collected reduce contract interest expense while decreases in projected asset management fees collected increase contract interest expense. In the three month periods ended June 30, 2019 and 2018, contract interest was increased/(decreased) $(4.7) million and $(0.8) million, respectively, for these projection changes. For the six months ended June 30, 2019 and 2018, contract interest was increased/(decreased) $(20.3) million and $1.7 million, respectively.

Annuity contract interest includes true-up adjustments for the deferred sales inducement balance which are done each period similar to that done with respect to DPAC balances with the adjustment reflected in current period contract interest expense. To the extent required, the Company may also record unlocking adjustments to deferred sales inducement balances in conjunction with DPAC balance unlockings. The Company made no unlocking adjustments in the first six months of 2019 and 2018.

Acquired Businesses

Effective January 31, 2019, Ozark National and NIS were acquired and their results included in the Condensed Consolidated Financial Statements of the Company. Ozark National and NIS have been combined into a separate segment "Acquired Businesses" given their inter-related marketing and sales approach which consists of a coordinated sale of a non-participating whole life insurance product (Ozark National) and a mutual fund investment product (NIS). An analysis of results of operations for the Company's acquired businesses segment is detailed below.

	Three Months Ended June 30,		Five Months Ended June 30,
	2019		2019
	(In thousands)
Premiums and contract revenues:
Premiums and contract charges	$	20,380	34,181
Net investment income	6,007		9,983
Other revenues	2,290		3,731
Total revenues	28,677		47,895
Benefits and expenses:
Life and other policy benefits	16,993		27,668
Amortization of deferred policy acquisition costs and value of business acquired	2,406		4,154
Other operating expenses	4,491		7,576
Total benefits and expenses	23,890		39,398
Segment earnings (loss) before Federal income taxes	4,787		8,497
Provision (benefit) for Federal income taxes	956		1,703
Segment earnings (loss)	$	3,831	6,794

83

Revenues from acquired businesses principally include life insurance premiums on traditional type products. Unlike universal life, revenues from traditional products are simply life premiums recognized as income over the premium-paying period of the related policies. The detail of premiums is provided below.

	Three Months Ended June 30,		Five Months Ended June 30,
	2019		2019
	(In thousands)
Traditional life insurance premiums	$	20,221	33,988
Other insurance premiums and considerations	121		204
Reinsurance premiums	38		(11	)
Totals	$	20,380	34,181

Ozark National's traditional life block of business at June 30, 2019 included approximately 184,800 policies in force representing in excess of $6.3 billion of life insurance coverage. The repetitive pay nature of Ozark National's business promotes a higher level of persistency with an annualized lapse rate of 4.7% through June 30, 2019.  Traditional life premiums by first year and renewal are detailed below.

	Three Months Ended June 30,		Five Months Ended June 30,
	2019		2019
	(In thousands)
Traditional life insurance premiums:
First year premiums	$	1,671	2,464
Renewal premiums	18,550		31,524
Totals	$	20,221	33,988

Other revenues consists primarily of brokerage revenue of NIS. Brokerage revenues of $3.6 million for the five months ended June 30, 2019 had associated brokerage expense of $1.9 million which is included in Other operating expenses. For the quarter ended June 30, 2019, brokerage revenues were $2.2 million and related brokerage expenses were $1.2 million.

The average face value of Ozark National's policies in force at June 30, 2019 was approximately $34,300. Consequently, life and policy benefits for smaller face amounts are subject to variation from quarter to quarter. Incurred death claims for the five months of operations were $14.9 million representing an average net claim of $16,500. Ozark National's maximum retention on any single insured life is $200,000. The balance of life and policy benefits during the quarter ended June 30, 2019 consists of increases in insurance reserves and payments of other policy benefits.

84

As noted previously in the discussion of Results of Operations, as part of the purchase accounting required with the acquisition of Ozark National effective January 31, 2019, the Company recorded an intangible asset of $145.8 million referred to as the value of business acquired ("VOBA"). VOBA represents the difference between the acquired assets and liabilities of Ozark National measured in accordance with the Company's accounting policies and the fair value of these same assets and liabilities. The VOBA balance sheet amount is amortized following a methodology similar to that used for amortizing deferred policy acquisition costs.

Subsequent to its acquisition effective January 31, 2019, Ozark National began deferring policy acquisition costs and amortizing these deferrals similar to the methodology employed by National Western. The following table identifies the amortization expense of Ozark National's DPAC and VOBA for the three and five months ended June 30, 2019.

Amortization of DPAC and VOBA	Three Months Ended June 30,		Five Months Ended June 30,
	2019		2019
	(In thousands)
Unlocking	$	—	—
VOBA amortization expense	2,284		3,907
DPAC amortization expense	122		247
Totals	$	2,406	4,154

Other Operations

The Company's primary business encompasses its domestic and international life insurance operations, its annuity operations, and its acquired businesses. However, the Company also has small real estate, nursing home, and other investment operations through its wholly owned subsidiaries. Nursing home operations generated $1.2 million and $0.9 million of pre-tax operating earnings in the first six months of 2019 and 2018, respectively. As discussed in the Consolidated Operations section, the Company closed on the sale of its Reno, Nevada nursing home operations effective February 1, 2019, and on the sale of its San Marcos, Texas nursing home operations effective May 1, 2019. Pre-tax operating earnings in the first half of 2019 include Reno operating results for the month of January and net gains from the sale of personal property and equipment of $1.4 million. Likewise, pre-tax operating earnings in the first six months include San Marcos operating results through April and net losses from the sale of personal property and equipment of $(2.0) million.

Pre-tax operating amounts for these periods also include the results of BP III, the entity owning and operating the Company's home office facility in Austin, Texas. BP III incurred pre-tax losses of $(0.5) million and $(0.9) million for the six months ended June 30, 2019 and 2018, respectively.

The remaining pre-tax earnings of $12.0 million and $15.3 million in Other Operations during the six-month periods includes investment income from real estate, municipal bonds, and common and preferred equities held in subsidiary company portfolios principally for tax-advantage purposes. Included in these amounts are semi-annual distributions from a life interest in the Libbie Shearn Moody Trust which is held in NWLSM, Inc. Pre-tax distributions from this trust were $3.6 million and $4.0 million in the six-month periods ended June 30, 2019 and 2018, respectively. Pre-tax earnings for the six months ended June 30, 2019 also include expenses of $3.2 million related to the purchase of Ozark National and NIS.

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INVESTMENTS

General

The Company's investment philosophy emphasizes the careful handling of policyowners' and stockholders' funds to achieve security of principal, to obtain the maximum possible yield while maintaining security of principal, and to maintain liquidity in a measure consistent with current and long-term requirements of the Company.

The Company's overall conservative investment philosophy is reflected in the allocation of its investments, which is detailed below. The Company emphasizes investment grade debt securities.

	June 30, 2019			December 31, 2018
	Carrying Value		%	Carrying Value		%
	(In thousands)			(In thousands)
Debt securities	$	10,717,464	95.9	$	10,231,313	96.7
Mortgage loans	214,295		1.9	203,180		1.9
Policy loans	80,155		0.7	54,724		0.6
Derivatives, index options	89,900		0.8	14,684		0.1
Real estate	34,879		0.3	35,692		0.3
Equity securities	19,324		0.2	17,491		0.2
Other	27,335		0.2	21,159		0.2
Totals	$	11,183,352	100.0	$	10,578,243	100.0

Invested assets at June 30, 2019 include Ozark National and NIS amounts as follows: Debt securities of $693.5 million; Policy loans of $27.3 million; and Real estate of $4.6 million.

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Debt Securities

The Company maintains a diversified portfolio which consists mostly of corporate, mortgage-backed, and public utility fixed income securities. Investments in mortgage-backed securities primarily include U.S. Government agency pass-through securities and collateralized mortgage obligations ("CMO"). The Company's investment guidelines prescribe limitations by type of security as a percent of the total investment portfolio and all holdings were within these threshold limits. As of June 30, 2019 and December 31, 2018, the Company's debt securities portfolio consisted of the following classes of securities:

	June 30, 2019			December 31, 2018
	Carrying Value		%	Carrying Value		%
	(In thousands)			(In thousands)
Corporate	$	7,736,270	72.2	$	7,544,831	73.7
Residential mortgage-backed securities	1,147,008		10.8	1,193,016		11.7
Public utilities	997,189		9.3	1,014,100		9.9
State and political subdivisions	580,404		5.4	457,970		4.5
U.S. agencies	121,000		1.1	—		—
Asset-backed securities	87,450		0.8	10,051		0.1
Commercial mortgage-backed	32,987		0.3	—		—
Foreign governments	11,384		0.1	10,004		0.1
U.S. Treasury	3,772		—	1,341		—
Totals	$	10,717,464	100.0	$	10,231,313	100.0

Substantially all of the Company's investable cash flows are directed toward the purchase of long-term debt securities. The Company's investment policy calls for investing in debt securities that are investment grade, meet quality and yield objectives, and provide adequate liquidity for obligations to policyholders. Debt securities with intermediate maturities are targeted by the Company as they more closely match the intermediate nature of the Company's policy liabilities and provide an appropriate strategy for managing cash flows. Long-term debt securities purchased to fund National Western insurance company operations are summarized below.

	Six Months Ended June 30,			Year Ended December 31,
	2019			2018
	($ In thousands)
Cost of acquisitions	$	104,379		$	737,223
Average credit quality	BBB+			BBB+
Effective annual yield	4.46		%	4.20		%
Spread to treasuries	1.88		%	1.29		%
Effective duration	9.9 years			8.3 years

Rating agencies generally view mortgage-backed securities as having additional risk for insurers holding interest sensitive liabilities given the potential for asset/liability disintermediation. Consequently, the Company holds predominantly agency mortgage-backed securities. Because mortgage-backed securities are subject to prepayment and extension risk, the Company has substantially reduced these risks by investing in collateralized mortgage obligations ("CMO"), which have more predictable cash flow patterns than pass-through securities. These securities, known as planned amortization class I ("PAC I"), very accurately defined maturity ("VADM"), and sequential tranches, are designed to amortize in a more predictable manner than other CMO classes or pass-throughs. The Company does not purchase tranches, such as PAC II and support tranches, that subject the portfolio to greater than average prepayment risk. Using this strategy, the Company can more effectively manage and reduce prepayment and extension risks, thereby helping to maintain the appropriate matching of the Company's assets and liabilities.

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In addition to diversification, an important aspect of the Company's investment approach is managing the credit quality of its investment in debt securities. Thorough credit analysis is performed on potential corporate investments including examination of a company's credit and industry outlook, financial ratios and trends, and event risks. This emphasis is reflected in the high average credit rating of the Company's debt securities portfolio with 99.3%, as of June 30, 2019, held in investment grade securities. In the table below, investments in debt securities are classified according to credit ratings by nationally recognized statistical rating organizations.

	June 30, 2019			December 31, 2018
	Carrying Value		%	Carrying Value		%
	(In thousands)			(In thousands)
AAA	$	129,608	1.2	$	102,240	1.0
AA	2,253,407		21.0	2,083,271		20.4
A	3,354,403		31.3	3,135,471		30.6
BBB	4,904,622		45.8	4,816,117		47.1
BB and other below investment grade	75,424		0.7	94,214		0.9
Totals	$	10,717,464	100.0	$	10,231,313	100.0

The Company's investment guidelines do not allow for the purchase of below investment grade securities.  The investments held in debt securities below investment grade are the result of subsequent downgrades of the securities.  These holdings are further summarized below.

	Below Investment Grade Debt Securities
	Amortized Cost		Carrying Value	Fair Value	% of Invested Assets
	(In thousands, except percentages)
June 30, 2019	$	78,840	75,424	75,556	0.7	%
December 31, 2018	$	102,938	94,214	92,711	0.9	%

The Company's percentage of below investment grade securities as of June 30, 2019 compared with the percentage at December 31, 2018 decreased due to net upgrades of several credit issuers during the period, a security sale, and an other-than-temporary impairment write-down. The Company's holdings of below investment grade securities are relatively small and as a percentage of total invested assets are low compared to industry averages.

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Holdings in below investment grade securities by category as of June 30, 2019 are summarized below, including their comparable fair value as of December 31, 2018 for those debt securities rated below investment grade at June 30, 2019. The Company continually monitors developments in these industries for issues that may affect security valuation.

	Below Investment Grade Debt Securities
	Amortized Cost		Carrying Value	Fair Value	Fair Value
Industry Category	June 30, 2019		June 30, 2019	June 30, 2019	December 31, 2018
	(In thousands)
Asset-backed securities	$	4,126	4,230	4,309	4,297
Residential mortgage-backed	947		845	845	871
Oil & gas	6,103		6,103	6,103	7,995
Manufacturing	57,303		53,898	53,951	51,487
Other	10,361		10,348	10,348	9,250
Totals	$	78,840	75,424	75,556	73,900

The Company closely monitors its below investment grade holdings by reviewing investment performance indicators, including information such as issuer operating performance, debt ratings, analyst reports and other economic factors that may affect these specific investments.  While additional losses are not currently anticipated, based on the existing status and condition of these securities, continued credit deterioration of some securities or the markets in general is possible, which may result in future write-downs.

Generally accepted accounting principles require that investments in debt securities be written down to fair value when declines in value are judged to be other-than-temporary.  Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price methodology). Refer to Note 10, Fair Values of Financial Instruments, of the accompanying Condensed Consolidated Financial Statements for further discussion.

During the six months ended June 30, 2019, the Company recorded one other-than-temporary impairment credit related write-down on a debt security. See Note 9, Investments, of the accompanying Condensed Consolidated Financial Statements for further discussion. Since the Company's adoption of the GAAP guidance on the recognition and accounting for other-than-temporary impairments due to credit loss versus non-credit loss, the Company has recognized a cumulative total of $6.5 million of other-than-temporary impairments of which $6.5 million was deemed credit related and recognized as realized investment losses in earnings, and $0.0 million, net of amortization, was deemed a non-credit related impairment and recognized in other comprehensive income.

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The Company is required to classify its investments in debt securities into one of three categories: (a) trading securities; (b) securities available for sale; or (c) securities held to maturity. The Company purchases securities with the intent to hold to maturity and accordingly does not maintain a portfolio of trading securities. Of the remaining two categories, available for sale and held to maturity, the Company makes a determination on categorization based on various factors including the type and quality of the particular security and how it will be incorporated into the Company's overall asset/liability management strategy. As shown in the table below, 30.8% of the Company's total debt securities, based on fair values, were classified as securities available for sale at June 30, 2019. These holdings in available for sale provide flexibility to the Company to react to market opportunities and conditions and to practice active management within the portfolio to provide adequate liquidity to meet policyholder obligations and other cash needs.

	June 30, 2019
	Fair Value		Amortized Cost	Unrealized Gains (Losses)
	(In thousands)
Debt securities held to maturity	$	7,589,480	7,342,359	247,121
Debt securities available for sale	3,375,105		3,265,560	109,545
Totals	$	10,964,585	10,607,919	356,666

Mortgage Loans and Real Estate

The Company originates loans on high quality, income-producing properties such as shopping centers, freestanding retail stores, office buildings, industrial and sales or service facilities, selected apartment buildings, hotels, and health care facilities.  The location of these properties is typically in major metropolitan areas that offer a potential for property value appreciation. Credit and default risk is minimized through strict underwriting guidelines and diversification of underlying property types and geographic locations.  In addition to being secured by the property, mortgage loans with leases on the underlying property are often guaranteed by the lease payments and also by the borrower.  This approach has proved over time to result in quality mortgage loans with few defaults.  Mortgage loan interest income is recognized on an accrual basis with any premium or discount amortized over the life of the loan.  Prepayment and late fees are recorded on the date of collection.

The Company targets a minimum specified yield on mortgage loan investments determined by reference to currently available debt security instrument yields plus a desired amount of incremental basis points. During the past several years, the low interest rate environment has resulted in fewer loan opportunities being available that meet the Company's required rate of return. Mortgage loans originated by the Company totaled $29.9 million for the year ended December 31, 2018 and $33.2 million for the six months ended June 30, 2019. Principal repayments on mortgage loans for the six months ended June 30, 2019 were $22.3 million.

Loans in foreclosure, loans considered impaired, or loans past due 90 days or more are placed on a non-accrual status.  If a mortgage loan is determined to be on non-accrual status, the mortgage loan does not accrue any revenue into the Condensed Consolidated Statements of Earnings.  The loan is independently monitored and evaluated as to potential impairment or foreclosure.  If delinquent payments are made and the loan is brought current, then the Company returns the loan to active status and accrues income accordingly.  The Company currently has no loans past due 90 days which are accruing interest.

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The Company held net investments in mortgage loans, after allowances for possible losses, totaling $214.3 million and $203.2 million at June 30, 2019 and December 31, 2018, respectively.  The diversification of the portfolio by geographic region and by property type was as follows:

	June 30, 2019					December 31, 2018
	Amount			%		Amount			%
	(In thousands)					(In thousands)
Mortgage Loans by Geographic Region:
West South Central	$	135,019		62.8		$	116,205		57.0
East North Central	20,399			9.5		20,944			10.3
East South Central	8,231			3.8		13,801			6.8
South Atlantic	28,492			13.3		29,829			14.6
West North Central	12,630			5.9		12,751			6.3
Pacific	6,534			3.0		6,626			3.2
Middle Atlantic	2,099			1.0		2,138			1.0
Mountain	1,566			0.7		1,561			0.8
Gross balance	214,970			100.0		203,855			100.0
Allowance for possible losses	(675		)	(0.3	)	(675		)	(0.3	)
Totals	$	214,295		99.7		$	203,180		99.7

	June 30, 2019					December 31, 2018
	Amount			%		Amount			%
	(In thousands)					(In thousands)
Mortgage Loans by Property Type:
Retail	$	89,372		41.6		$	96,075		47.1
Office	69,838			32.5		71,194			34.9
Hotel	14,489			6.7		14,454			7.1
Land/Lots	4,977			2.3		3,498			1.7
All other	36,294			16.9		18,634			9.2
Gross balance	214,970			100.0		203,855			100.0
Allowance for possible losses	(675		)	(0.3	)	(675		)	(0.3	)
Totals	$	214,295		99.7		$	203,180		99.7

The Company's direct investments in real estate are not a significant portion of its total investment portfolio and consist primarily of income-producing properties which are being operated by a wholly owned subsidiary of National Western. The Company's real estate investments totaled approximately $34.9 million and $35.7 million at June 30, 2019 and December 31, 2018, respectively. As part of the acquisition of Ozark National in the first quarter of 2019, real estate investments of $4.6 million were added at their current appraised value. During the second quarter of 2019, the Company's former home office facility, which had a book value of $5.1 million, was sold.

The Company recognized operating income of approximately $1.4 million and $1.1 million on real estate properties in the first six months of 2019 and 2018, respectively. The Company monitors the conditions and market values of these properties on a regular basis and makes repairs and capital improvements to keep the properties in good condition.

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Market Risk

Market risk is the risk of change in market values of financial instruments due to changes in interest rates, currency exchange rates, commodity prices, or equity prices. The most significant market risk exposure for National Western is interest rate risk. Substantial and sustained increases and decreases in market interest rates can affect the profitability of insurance products and fair value of investments. The yield realized on new investments generally increases or decreases in direct relationship with interest rate changes. The fair values of fixed income debt securities correlate to external market interest rate conditions as market values typically increase when market interest rates decline and decrease when market interest rates rise. However, market values may fluctuate for other reasons, such as changing economic conditions, market dislocations or increasing event-risk concerns.

Interest Rate Risk

A gradual increase in interest rates from current levels would generally be a positive development for the Company. Rate increases would be expected to provide incremental net investment income, produce increased sales of fixed rate products, and limit the potential erosion of the Company's interest rate spread on products due to minimum guaranteed crediting rates in products. Alternatively, a rise in interest rates would reduce the fair value of the Company's investment portfolio and if long-term rates rise dramatically within a relatively short time period the Company could be exposed to disintermediation risk. Disintermediation risk is the risk that policyholders will surrender their policies in a rising interest rate environment forcing the Company to liquidate assets when they are in an unrealized loss position.

A decline in interest rates could cause certain mortgage-backed securities in the Company's portfolio to be more likely to pay down or prepay. In this situation, the Company typically will be unable to reinvest the proceeds at comparable yields. Lower interest rates will likely also cause lower net investment income, subject the Company to reinvestment rate risks, and possibly reduce profitability through reduced interest rate margins associated with products with minimum guaranteed crediting rates. Alternatively, the fair value of the Company's investment portfolio will increase when interest rates decline.

The correlation between fair values and interest rates for debt securities is reflected in the tables below.

	June 30, 2019			March 31, 2019		December 31, 2018
	(In thousands except percentages)
Debt securities - fair value	$	10,964,585		10,864,037		10,174,327
Debt securities - amortized cost	$	10,607,919		10,735,714		10,293,878
Fair value as a percentage of amortized cost	103.36		%	101.20	%	98.84	%
Net unrealized gain (loss) balance	$	356,666		128,323		(119,551	)
Ten-year U.S. Treasury bond – (decrease) increase in yield for the period	(0.40		)%	(0.28	)%	0.28	%

	Net Unrealized Gain (Loss) Balance
	At June 30, 2019		At March 31, 2019	At December 31, 2018		Quarter Change in Unrealized Balance	Year-to-date Change in Unrealized Balance
Debt securities held to maturity	$	247,121	100,627	(56,986	)	146,494	304,107
Debt securities available for sale	109,545		27,696	(62,565	)	81,849	172,110
Totals	$	356,666	128,323	(119,551	)	228,343	476,217

Changes in interest rates can have a sizable effect on the fair values of the Company's debt securities. The market interest rate of the ten-year U.S. Treasury bond decreased approximately 68 basis points from 2.69% at year-end 2018 to 2.01% by the end of the first six months of 2019. Therefore the increase in the unrealized balance position of $476.2 million was largely the result of the decrease in interest rates. Given that the majority of the Company's debt securities are classified as held to maturity, which are recorded at amortized cost, changes in fair values have a lesser effect on the Company's Condensed Consolidated Balance Sheet.

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The Company manages interest rate risk principally through ongoing cash flow testing as required for insurance regulatory purposes. Computer models are used to perform cash flow testing under various commonly used stress test interest rate scenarios to determine if existing assets would be sufficient to meet projected liability outflows. Sensitivity analysis allows the Company to measure the potential gain or loss in fair value of its interest-sensitive instruments and to protect its economic value and achieve a predictable spread between what is earned on invested assets and what is paid on liabilities. The Company seeks to minimize the impact of interest risk through surrender charges that are imposed to discourage policy surrenders. Interest rate changes can be anticipated in the computer models and the corresponding risk addressed by management actions affecting asset and liability instruments. However, potential changes in the values of financial instruments indicated by hypothetical interest rate changes will likely be different from actual changes experienced, and the differences could be significant.

The Company has the ability to adjust interest rates, participation rates, and asset management fees and caps, as applicable, in response to changes in investment portfolio yields for a substantial portion of its business in force. The ability to adjust these rates is subject to competitive forces in the market for the Company’s products. Surrender rates could increase and new sales could be negatively affected if crediting rates are not competitive with the rates on competing products offered by other insurance companies and financial service entities. The Company designs its products with features encouraging persistency. Interest sensitive life and annuity products have surrender and withdrawal penalty provisions. Typically, surrender charge rates gradually decrease each year the contract is in force.

The Company performed detailed sensitivity analysis as of December 31, 2018, for its interest rate-sensitive assets and liabilities. The changes in market values of the Company's debt securities in the first six months of 2019 were reasonable given the expected range of results of this analysis.

Credit Risk

The Company is exposed to credit risk through counterparties and within its investment portfolio. Credit risk relates to the uncertainty associated with an obligor's continued ability to make timely payments of principal and interest in accordance with the contractual terms of an instrument or contract. As previously discussed, the Company manages credit risk through established investment credit policies and guidelines which address the quality of creditors and counterparties, concentration limits, diversification practices and acceptable risk levels. These policies and guidelines are regularly reviewed and approved by senior management and National Western's Board of Directors.

In connection with the Company’s use of call options to hedge the equity return component of its fixed-indexed annuity and life products, the Company is exposed to the risk that a counterparty fails to perform under terms of the option contract. The Company purchases one-year option contracts from multiple counterparties and evaluates the creditworthiness of all counterparties prior to the purchase of the contracts. For consideration in contracting with a counterparty, the rating required by the Company is a credit rating of “A” or higher. Accordingly, all options are purchased from nationally recognized financial institutions with a demonstrated performance for honoring their financial obligations and possessing substantial financial capacity. In addition, each counterparty is required to execute a credit support agreement obligating the counterparty to provide collateral to the Company when the fair value of the Company’s exposure to the counterparty exceeds specified amounts. Counterparty credit ratings and credit exposure are monitored continuously by National Western’s Investment Department with adjustments to collateral levels managed as incurred under the credit support agreements.

The Company is also exposed to credit spread risk related to market prices of investment securities and cash flows associated with changes in credit spreads. Credit spread tightening will reduce net investment income associated with new purchases of fixed debt securities and will increase the fair value of the investment portfolio. Credit spread widening will reduce the fair value of the investment portfolio and will increase net investment income on new purchases.

93

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity requirements are met primarily by funds provided from operations. Premium deposits and annuity considerations, investment income, and investment maturities and prepayments are the primary sources of funds while investment purchases, policy benefits in the form of claims, and payments to policyholders and contract holders in connection with surrenders and withdrawals as well as operating expenses are the primary uses of funds. To ensure the Company will be able to pay future commitments, the funds received as premium payments and deposits are invested in high quality investments, primarily fixed income securities. Funds are invested with the intent that the income from investments, plus proceeds from maturities, will meet the ongoing cash flow needs of the Company. The approach of matching asset and liability durations and yields requires an appropriate mix of investments. Although the Company historically has not been put in the position of having to liquidate invested assets to provide cash flow, its investments consist primarily of marketable debt securities that could be readily converted to cash for liquidity needs. Effective October 1, 2018, the Company ("National Western") increased its line of credit facility up to $75 million which it may access for short-term cash needs. As part of the acquisition of Ozark National and NIS effective January 31, 2019, National Western borrowed $75 million to partly fund the closing cash purchase price of $205.5 million. The amounts borrowed were subsequently repaid during the first quarter of 2019 and there were no borrowings outstanding under the line of credit at June 30, 2019.

A primary liquidity concern for life insurers is the risk of an extraordinary level of early policyholder withdrawals, particularly with respect to annuity products whose funds tend to move more rapidly with interest rate changes. The Company includes provisions within its annuity and universal life insurance policies, such as surrender and market value adjustments, that help limit and discourage early withdrawals.

The actual amounts paid by product line in connection with surrenders and withdrawals for the three and six months ended June 30, for each respective year, are noted in the table below.

	Three Months Ended June 30,			Six Months Ended June 30,
	2019		2018	2019	2018
	(In thousands)
Product Line:
Traditional Life	$	4,852	970	9,022	1,605
Universal Life	23,176		25,798	44,493	50,909
Annuities	181,521		179,706	355,507	347,481
Total	$	209,549	206,474	409,022	399,995

The above contractual withdrawals, as well as the level of surrenders experienced, were generally consistent with the Company's assumptions in asset/liability management, and the associated cash outflows did not have an adverse impact on overall liquidity. The amount shown for traditional life in the periods ended June 30, 2019 includes Ozark National cash outflows. Individual life insurance policies are typically less susceptible to withdrawal than annuity reserves and deposit liabilities because policyholders may need to undergo a new underwriting process in order to obtain a new insurance policy elsewhere. Cash flow projections and tests under various market interest rate scenarios and assumptions are performed to assist in evaluating liquidity needs and adequacy. The Company currently expects available liquidity sources and future cash flows to be more than adequate to meet the demand for funds.

Cash flows from the Company's insurance operations have historically been sufficient to meet current needs. Cash flows from operating activities were $163.9 million and $145.2 million for the six months ended June 30, 2019 and 2018, respectively. The Company also has significant cash flows from both scheduled and unscheduled investment security maturities, redemptions, and prepayments. These cash flows totaled $448.4 million and $381.3 million for the six months ended June 30, 2019 and 2018, respectively. Operating and investing activity cash flow items could be reduced if interest rates rise at an accelerated rate in the future. Net cash inflows/(outflows) from the Company's universal life and investment annuity deposit product operations totaled $(312.4) million and $(185.9) million during the six months ended June 30, 2019 and 2018, respectively, reflecting the recent slowdown in annuity sales and slightly higher lapse rate for annuities compared to prior periods.

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Capital Resources

The Company relies on stockholders' equity for its capital resources as there is no long-term debt outstanding and the Company does not anticipate the need for any long-term debt in the near future.  As of June 30, 2019, the Company had no commitments beyond its normal operating and investment activities.

OFF-BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

It is Company practice to not enter into off-balance sheet arrangements or to issue guarantees to third parties, other than in the normal course of issuing insurance contracts. Commitments related to insurance products sold are reflected as liabilities for future policy benefits. Insurance contracts guarantee certain performances by National Western.

Insurance reserves are the means by which life insurance companies determine the liabilities that must be established to assure that future policy benefits are provided for and can be paid. These reserves are required by law and based upon standard actuarial methodologies to ensure fulfillment of commitments guaranteed to policyholders and their beneficiaries, even though the obligations may not be due for many years. Refer to Note 1 in the Notes to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 for a discussion of reserving methods.

The table below summarizes future estimated cash payments under existing contractual obligations.

	Payment Due by Period
	Total		Less Than 1 Year	1 - 3 Years	3 - 5 Years	More Than 5 Years
	(In thousands)
Loan commitments	$	14,900	14,900	—	—	—
Lease obligations	1,255		359	717	179	—
Claims payable (1)	74,680		74,680	—	—	—
Other long-term reserve liabilities reflected on the balance sheet (2)	13,988,298		1,082,894	2,028,158	1,774,023	9,103,223
Total	$	14,079,133	1,172,833	2,028,875	1,774,202	9,103,223

(1) Claims payable include benefit and claim liabilities for life, accident and health policies which the Company believes the amount and timing of the payment is essentially fixed and determinable. Such amounts generally relate to incurred and reported death, critical illness, accident and health claims including an estimate of claims incurred but not reported.

(2)  Other long-term liabilities include estimated life and annuity obligations related to death claims, policy surrenders, policy withdrawals, maturities and annuity payments based on mortality, lapse, annuitization, and withdrawal assumptions consistent with the Company's historical experience. These estimated life and annuity obligations are undiscounted projected cash outflows that assume interest crediting and market growth consistent with assumptions used in amortizing deferred acquisition costs. They do not include any offsets for future premiums or deposits. Other long-term liabilities also include determinable payout patterns related to immediate annuities. Due to the significance of the assumptions used, the actual cash outflows will differ both in amount and timing, possibly materially, from these estimates.

Subsequent to acquiring a commercial office building at the end of 2016 through its wholly owned subsidiary Braker P III, LLC ("BP III"), the Company entered into lease agreements with various tenants for available space not occupied by the Company. Total revenues recorded pertaining to these leases for the three month periods ended June 30, 2019 and 2018 amounted to $1.2 million and $0.8 million, respectively, and for the six months ended amounted to $2.0 million and $1.4 million, respectively. Under their respective terms these leases expire at various dates from 2019 through 2025.

95

The table below summarizes future estimated cash receipts under all existing lease agreements, including those in addition to the BP III lease agreements discussed above.

	Estimated Cash Receipts by Period
	Total		Less Than 1 Year	1 - 3 Years	3 - 5 Years	More Than 5 Years
	(In thousands)
Real estate revenue	$	43,522	5,551	9,946	8,346	19,679

CHANGES IN ACCOUNTING PRINCIPLES AND CRITICAL ACCOUNTING POLICIES

Changes in Accounting Principles

In the first quarter of 2018 the Company implemented ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities. Equity securities are now separately disclosed on the balance sheet and the change in the fair value runs through net investment income. This prospective adjustment resulted in a reclassification of $4.4 million, net of tax, from other comprehensive income to retained earnings as a change in accounting. There were no other changes in accounting principles during the periods reported in this Form 10-Q.

REGULATORY AND OTHER ISSUES

Statutory Accounting Practices

Regulations that affect the Company and the insurance industry are often the result of actions taken by the National Association of Insurance Commissioners ("NAIC"). The NAIC routinely publishes new regulations as model acts or laws which states subsequently adopt as part of their insurance regulations. Currently, the Company is not aware of any NAIC regulatory matter material to its operations or reporting of financial results.

Risk-Based Capital Requirements

The NAIC established risk-based capital ("RBC") requirements to help state regulators monitor the financial strength and stability of life insurers by identifying those companies that may be inadequately capitalized. Under the NAIC's requirements, each insurer must maintain its total capital above a calculated threshold or take corrective measures to achieve the threshold. The threshold of adequate capital is based on a formula that takes into account the amount of risk each company faces on its products and investments. The RBC formula takes into consideration four major areas of risk which are: (i) asset risk which primarily focuses on the quality of investments; (ii) insurance risk which encompasses mortality and morbidity risk; (iii) interest rate risk which involves asset/liability matching issues; and (iv) other business risks.

Statutory laws prohibit public dissemination of certain RBC information. However, both National Western and Ozark National's current statutory capital and surplus are significantly in excess of the current threshold RBC requirements.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

This information is included in Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, in the Investments section.

96

ITEM 4.  CONTROLS AND PROCEDURES

The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act.

There were no changes in the Company's internal controls over financial reporting, as defined in Rules 13a-15(f) and 15d-15(e) under the Exchange Act, during the quarter ended June 30, 2019 that materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting. However, in conjunction with its acquisition of Ozark National Life Insurance Company and N.I.S. Financial Services, Inc. effective January 31, 2019, the Company implemented purchase accounting controls and subsequent financial reporting and disclosure controls and procedures for the purposes of including the results of these two entities in the accompanying Condensed Consolidated Financial Statements of the Company as of and for the six months ended June 30, 2019.

Internal controls over financial reporting change as the Company modifies or enhances its systems and processes to meet business needs. Any significant changes in controls are evaluated prior to implementation to help ensure continued effectiveness of internal controls and the control environment.

PART II.  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Refer to Note 8(A) "Legal Proceedings" of the accompanying Condensed Consolidated Financial Statements included in this Form 10-Q.

ITEM 1A. RISK FACTORS

There have been no substantial changes relative to the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2018.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Effective August 22, 2008, National Western adopted and implemented a limited stock buy-back program associated with the company's 2008 Incentive Plan which provides Option Holders the additional alternative of selling shares acquired through the exercise of options directly back to the company. This program succeeded a similar buy-back program implemented March 10, 2006 associated with the company's 1995 Stock Option and Incentive Plan. Option Holders may elect to sell such acquired shares back to the Company at any time within ninety (90) days after the exercise of options at the prevailing market price as of the date of notice of election. These plans and programs were assumed by National Western Life Group, Inc. from National Western in 2015 pursuant to the terms of the holding company reorganization.

97

Purchased shares are reported in the Company's Condensed Consolidated Financial Statements as authorized and unissued. At December 31, 2018 and June 30, 2019 there were no stock options vested or unvested and outstanding under these plans.

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May yet Be Purchased Under the Plans or Programs
April 1, 2019 through April 30, 2019	—	$	—	N/A	N/A
May 1, 2019 through May 31, 2019	—	$	—	N/A	N/A
June 1, 2019 through June 30, 2019	—	$	—	N/A	N/A
Total	—	$	—	N/A	N/A

ITEM 4.  Removed and Reserved.

ITEM 6.  EXHIBITS

(a) Exhibits

Exhibit 31(a)	-	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 31(b)	-	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32(a)	-	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

98

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NATIONAL WESTERN LIFE GROUP, INC.

(Registrant)

Date:	August 8, 2019	/S/ Ross R. Moody
		Ross R. Moody
		Chairman of the Board, President and
		Chief Executive Officer
		(Authorized Officer)
Date:	August 8, 2019	/S/ Brian M. Pribyl
		Brian M. Pribyl
		Senior Vice President,
		Chief Financial Officer and Treasurer
		(Principal Financial Officer)
		(Principal Accounting Officer)

99

EX-31.A

EXHIBIT 31(a)

CERTIFICATION

I, Ross R. Moody, certify that:

1. I have reviewed this report on Form 10-Q of National Western Life Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter  (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	August 8, 2019	/S/ Ross R. Moody
		Ross R. Moody
		Chairman of the Board, President and
		Chief Executive Officer

EX-31.B

EXHIBIT 31(b)

CERTIFICATION

I, Brian M. Pribyl, certify that:

1. I have reviewed this report on Form 10-Q of National Western Life Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter  (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	August 8, 2019	/S/Brian M. Pribyl
		Brian M. Pribyl
		Senior Vice President,
		Chief Financial Officer and
		Treasurer

EX-32.A

EXHIBIT 32(a)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of National Western Life Group, Inc. ("Company") on Form 10-Q for the period ended June 30, 2019 as filed with the Securities and Exchange Commission on or about the date hereof ("Report"), I, Ross R. Moody, Chairman of the Board, President, and Chief Executive Officer of the Company and I, Brian M. Pribyl, Senior Vice President, Chief Financial Officer, and Treasurer of the Company, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) to my knowledge, the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	August 8, 2019	/S/Ross R. Moody
		Ross R. Moody
		Chairman of the Board, President and
		Chief Executive Officer
		/S/Brian M. Pribyl
		Brian M. Pribyl
		Senior Vice President,
		Chief Financial Officer
		and Treasurer

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2019	Aug. 07, 2019
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2019
Document Transition Report	false
Entity File Number	000-55522
Entity Registrant Name	NATIONAL WESTERN LIFE GROUP, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	47-3339380
Entity Address, Address Line One	10801 N. Mopac Expy Bldg 3
Entity Address, City or Town	Austin,
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	78759
City Area Code	(512)
Local Phone Number	836-1010
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Central Index Key	0001635984
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false
Class A
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding (shares)		3,436,020
Class B
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding (shares)		200,000

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Investments:
Debt securities held to maturity, at amortized cost (fair value: $7,589,480 and $7,228,268)	$ 7,342,359	$ 7,285,254
Debt securities available for sale, at fair value (cost: $3,265,560 and $3,008,624)	3,375,105	2,946,059
Mortgage loans, net of allowance for possible losses ($675 and $675)	214,295	203,180
Policy loans	80,155	54,724
Derivatives, index options	89,900	14,684
Equity securities, at fair value (cost: $14,227 and $14,329)	19,324	17,491
Other long-term investments	62,214	56,851
Total investments	11,183,352	10,578,243
Cash and cash equivalents	140,802	131,976
Deferred policy acquisition costs	752,565	841,704
Deferred sales inducements	114,548	133,714
Value of business acquired	141,862	0
Accrued investment income	98,556	96,338
Federal income tax receivable	9,937	17,934
Other assets	171,328	131,782
Total assets	12,612,950	11,931,691
Future policy benefits:
Universal life and annuity contracts	9,420,315	9,608,850
Traditional life reserves	827,693	135,436
Other policyholder liabilities	141,731	135,694
Deferred Federal income tax liability	47,470	39,384
Other liabilities	120,593	111,550
Total liabilities	10,557,802	10,030,914
COMMITMENTS AND CONTINGENCIES (Note 8)
Common stock:
Additional paid-in capital	41,716	41,716
Accumulated other comprehensive income (loss)	43,462	(37,015)
Retained earnings	1,969,934	1,896,040
Total stockholders’ equity	2,055,148	1,900,777
Total liabilities and stockholders' equity	12,612,950	11,931,691
Class A
Common stock:
Common stock, value outstanding	34	34
Class B
Common stock:
Common stock, value outstanding	$ 2	$ 2

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Debt securities held to maturity - fair value	$ 7,589,480	$ 7,228,268
Debt securities available for sale, amortized cost	3,265,560	3,008,624
Mortgage loans - allowance for possible losses	675	675
Equity securities - cost	$ 14,227	$ 14,329
Class A
STOCKHOLDERS’ EQUITY:
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	7,500,000	7,500,000
Common stock, shares issued (in shares)	3,436,020	3,436,020
Common stock, shares outstanding (in shares)	3,436,020	3,436,020
Class B
STOCKHOLDERS’ EQUITY:
Common stock, par value (usd per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	200,000	200,000
Common stock, shares issued (in shares)	200,000	200,000
Common stock, shares outstanding (in shares)	200,000	200,000

XML

Condensed Consolidated Statements of Earnings - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Premiums and other revenues:
Universal life and annuity contract charges	$ 36,910	$ 39,945	$ 74,863	$ 78,465
Traditional life premiums	23,810	4,928	41,393	9,073
Net investment income	128,424	121,802	279,755	182,547
Other revenues	3,966	5,287	10,379	10,284
Net realized investment gains (losses):
Total other-than-temporary impairment (“OTTI”) gains (losses)	(5,900)	3	(5,897)	6
Portion of OTTI (gains) losses recognized in other comprehensive income	(2)	(3)	(5)	(6)
Net OTTI losses recognized in earnings	(5,902)	0	(5,902)	0
Other net investment gains (losses)	5,477	2,696	10,106	3,307
Total net realized investment gains (losses)	(425)	2,696	4,204	3,307
Total revenues	192,685	174,658	410,594	283,676
Benefits and expenses:
Life and other policy benefits	33,657	17,461	61,846	38,862
Amortization of deferred policy acquisition costs and value of business acquired	31,411	31,069	63,575	63,298
Universal life and annuity contract interest	60,139	60,990	141,055	59,172
Other operating expenses	25,334	24,795	51,383	48,428
Total benefits and expenses	150,541	134,315	317,859	209,760
Earnings before Federal income taxes	42,144	40,343	92,735	73,916
Federal income taxes	8,448	7,877	18,841	14,575
Net earnings	33,696	32,466	73,894	59,341
Class A
Benefits and expenses:
Net earnings	$ 32,743	$ 31,548	$ 71,804	$ 57,663
Basic earnings per share:
Earnings per share, basic (in dollars per share)	$ 9.53	$ 9.18	$ 20.90	$ 16.78
Diluted earnings per share:
Earnings per share, diluted (in dollars per share)	$ 9.53	$ 9.18	$ 20.90	$ 16.78
Class B
Benefits and expenses:
Net earnings	$ 953	$ 918	$ 2,090	$ 1,678
Basic earnings per share:
Earnings per share, basic (in dollars per share)	$ 4.76	$ 4.59	$ 10.45	$ 8.39
Diluted earnings per share:
Earnings per share, diluted (in dollars per share)	$ 4.76	$ 4.59	$ 10.45	$ 8.39

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement of Comprehensive Income [Abstract]
Net earnings	$ 33,696	$ 32,466	$ 73,894	$ 59,341
Unrealized gains (losses) on securities:
Net unrealized holding gains (losses) arising during period	35,401	(15,068)	78,144	(49,822)
Net unrealized liquidity gains (losses)	1	2	2	2
Reclassification adjustment for net amounts included in net earnings	3,740	(1,564)	2,872	(1,597)
Net unrealized gains (losses) on securities	39,142	(16,630)	81,018	(51,417)
Foreign currency translation adjustments	(86)	39	467	1,207
Benefit plans:
Amortization of net prior service cost and net gain (loss)	(504)	2,801	(1,008)	5,602
Other comprehensive income (loss)	38,552	(13,790)	80,477	(44,608)
Comprehensive income (loss)	$ 72,248	$ 18,676	$ 154,371	$ 14,733

XML

Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Total	Common stock	Additional paid-in capital	Accumulated other comprehensive income (loss)	Unrealized gains (losses) on non-impaired securities	Unrealized losses on impaired held to maturity securities	Unrealized losses on impaired available for sale securities	Foreign currency translation adjustments	Benefit plan liability adjustment	Retained earnings
Total stockholders’ equity, beginning of period at Dec. 31, 2017		$ 36	$ 41,716		$ 33,664	$ (10)	$ (1)	$ 3,223	$ (22,595)	$ 1,776,141
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares exercised under stock option plan		0	0
Change in unrealized gains (losses) during period, net of tax	$ (49,822)				(51,419)
Amortization						5
Other-than-temporary impairments, non-credit, net of tax						0
Additional credit loss on previously impaired securities						0
Change in shadow deferred policy acquisition costs						(3)	0
Other-than-temporary impairments, non-credit, net of tax							0
Recoveries, net of tax							0
Change in translation adjustments during period	1,207							1,207
Amortization of net prior service cost and net loss, net of tax	5,602								5,602
Net earnings	59,341									59,341
Total stockholders’ equity, end of period at Jun. 30, 2018	1,846,907	36	41,716	$ (34,741)	(22,169)	(8)	(1)	4,430	(16,993)	1,839,896
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of change in accounting principle, net of tax					0
Total stockholders’ equity, beginning of period at Mar. 31, 2018		36	41,716		(5,537)	(10)	(1)	4,391	(19,794)	1,807,430
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares exercised under stock option plan		0	0
Change in unrealized gains (losses) during period, net of tax	(15,068)				(16,632)
Amortization						3
Other-than-temporary impairments, non-credit, net of tax						0
Additional credit loss on previously impaired securities						0
Change in shadow deferred policy acquisition costs						(1)	0
Other-than-temporary impairments, non-credit, net of tax							0
Recoveries, net of tax							0
Change in translation adjustments during period	39							39
Amortization of net prior service cost and net loss, net of tax	2,801								2,801
Net earnings	32,466									32,466
Total stockholders’ equity, end of period at Jun. 30, 2018	1,846,907	36	41,716	(34,741)	(22,169)	(8)	(1)	4,430	(16,993)	1,839,896
Total stockholders’ equity, beginning of period at Dec. 31, 2018	1,900,777	36	41,716		(30,286)	(7)	(2)	4,577	(11,297)	1,896,040
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares exercised under stock option plan		0	0
Change in unrealized gains (losses) during period, net of tax	78,144				81,016
Amortization						4
Other-than-temporary impairments, non-credit, net of tax						0
Additional credit loss on previously impaired securities						0
Change in shadow deferred policy acquisition costs						(2)	0
Other-than-temporary impairments, non-credit, net of tax							0
Recoveries, net of tax							0
Change in translation adjustments during period	467							467
Amortization of net prior service cost and net loss, net of tax	(1,008)								(1,008)
Net earnings	73,894									73,894
Total stockholders’ equity, end of period at Jun. 30, 2019	2,055,148	36	41,716	43,462	50,730	(5)	(2)	5,044	(12,305)	1,969,934
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect of change in accounting principle, net of tax					0
Total stockholders’ equity, beginning of period at Mar. 31, 2019		36	41,716		11,589	(6)	(2)	5,130	(11,801)	1,936,238
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Shares exercised under stock option plan		0	0
Change in unrealized gains (losses) during period, net of tax	35,401				39,141
Amortization						2
Other-than-temporary impairments, non-credit, net of tax						0
Additional credit loss on previously impaired securities						0
Change in shadow deferred policy acquisition costs						(1)	0
Other-than-temporary impairments, non-credit, net of tax							0
Recoveries, net of tax							0
Change in translation adjustments during period	(86)							(86)
Amortization of net prior service cost and net loss, net of tax	(504)								(504)
Net earnings	33,696									33,696
Total stockholders’ equity, end of period at Jun. 30, 2019	$ 2,055,148	$ 36	$ 41,716	$ 43,462	$ 50,730	$ (5)	$ (2)	$ 5,044	$ (12,305)	$ 1,969,934

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net earnings	$ 73,894	$ 59,341
Adjustments to reconcile net earnings to net cash from operating activities:
Universal life and annuity contract interest	141,055	59,172
Surrender charges and other policy revenues	(16,975)	(19,138)
Realized (gains) losses on investments	(4,204)	(3,307)
Accretion/amortization of discounts and premiums, investments	1,362	(150)
Depreciation and amortization	5,464	5,932
(Increase) decrease in value of equity securities	(2,338)	107
(Increase) decrease in value of derivatives	(59,830)	34,102
(Increase) decrease in deferred policy acquisition and sales inducement costs, and value of business acquired	42,652	21,304
(Increase) decrease in accrued investment income	3,899	(1,861)
(Increase) decrease in other assets	(2,757)	(8,071)
Increase (decrease) in liabilities for future policy benefits	769	1,389
Increase (decrease) in other policyholder liabilities	(7,831)	5,335
Increase (decrease) in Federal income tax liability	7,895	(16,472)
Increase (decrease) in deferred Federal income tax	(13,306)	11,367
Increase (decrease) in other liabilities	(5,862)	(3,890)
Net cash provided by operating activities	163,887	145,160
Proceeds from sales of:
Debt securities available for sale	80,528	0
Other investments	34,984	2,220
Proceeds from maturities and redemptions of:
Debt securities held to maturity	310,618	275,670
Debt securities available for sale	137,823	105,678
Derivatives, index options	21,405	105,615
Property and equipment	0	8
Purchases of:
Debt securities held to maturity	(103,710)	(343,145)
Debt securities available for sale	(77,118)	(161,416)
Equity securities	(295)	(406)
Derivatives, index options	(37,089)	(44,943)
Other investments	(11,953)	(586)
Property and equipment	(1,002)	(2,988)
Payment to acquire businesses, net of cash acquired	(189,121)	0
Principal payments on mortgage loans	22,252	21,521
Cost of mortgage loans acquired	(33,247)	(9,895)
Decrease (increase) in policy loans	2,697	802
Net cash provided by/(used in) investing activities	156,772	(51,865)
Cash flows from financing activities:
Deposits to account balances for universal life and annuity contracts	187,377	316,906
Return of account balances on universal life and annuity contracts	(499,801)	(502,834)
Net cash provided by (used in) financing activities	(312,424)	(185,928)
Effect of foreign exchange	591	1,528
Net increase (decrease) in cash and cash equivalents	8,826	(91,105)
Cash and cash equivalents at beginning of period	131,976	217,624
Cash and cash equivalents at end of period	140,802	126,519
Cash paid (received) during the period for:
Interest	29	20
Income taxes	24,150	19,680
Noncash operating activities:
Deferral of sales inducements	(8,822)	(6,177)
Noncash investing activities:
Contingent consideration to acquire businesses	$ 3,871	$ 0

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Consolidation and Basis of Presentation

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidation and Basis of Presentation

CONSOLIDATION AND BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments necessary to present fairly the financial position of National Western Life Group, Inc. ("NWLGI") and its wholly owned subsidiaries (“Company”) as of June 30, 2019, and the results of its operations and its cash flows for the three and six months ended June 30, 2019 and June 30, 2018. Such adjustments are of a normal recurring nature. The results of operations for the six months ended June 30, 2019 are not necessarily indicative of the results to be expected for the full year. It is recommended that these Condensed Consolidated Financial Statements be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 which is accessible free of charge through the Company's internet site at www.nwlgi.com or the Securities and Exchange Commission internet site at www.sec.gov. The Condensed Consolidated Balance Sheet at December 31, 2018 has been derived from the audited consolidated financial statements as of that date.

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of NWLGI and its wholly owned subsidiaries: National Western Life Insurance Company ("NWLIC" or "National Western"), Regent Care San Marcos Holdings, LLC, NWL Services, Inc., and N.I.S. Financial Services, Inc. ("NIS"). National Western's wholly owned subsidiaries include The Westcap Corporation, NWL Financial, Inc., NWLSM, Inc., Braker P III, LLC, and Ozark National Life Insurance Company ("Ozark National"). The results of operations for Ozark National and NIS include the five months ended June 30, 2019, subsequent to their acquisition effective January 31, 2019. All significant intercorporate transactions and accounts have been eliminated in consolidation.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates in the accompanying Condensed Consolidated Financial Statements include: (1) liabilities for future policy benefits, (2) valuation of derivative instruments, (3) recoverability and amortization of deferred policy acquisition costs, (4) valuation allowances for deferred tax assets, (5) other-than-temporary impairment losses on debt securities, (6) commitments and contingencies, and (7) valuation allowances for mortgage loans and real estate. During the first six months of 2019, the Company incorporated accounting estimates for business combinations, value of business acquired, and fair value measurement as a result of its acquisition of Ozark National and NIS.

The table below shows the unrealized gains and losses on available-for-sale securities that were reclassified out of accumulated other comprehensive income for the three and six months ended June 30, 2019 and June 30, 2018.

Affected Line Item in the Statements of Earnings	Amount Reclassified From Accumulated Other Comprehensive Income
	Three Months Ended June 30,				Six Months Ended June 30,
	2019			2018	2019		2018
	(In thousands)
Other net investment gains (losses)	$	1,168		1,981	2,267		2,021
Net OTTI losses recognized in earnings	(5,902		)	—	(5,902	)	—
Earnings before Federal income taxes	(4,734		)	1,981	(3,635	)	2,021
Federal income taxes	(994		)	417	(763	)	424
Net earnings	$	(3,740	)	1,564	(2,872	)	1,597

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New Accounting Pronouncements

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

New Accounting Pronouncements

NEW ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements not yet adopted

On April 25, 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments in this Update add clarification and correction to various aspects of the following guidance previously issued related to financial instruments, based on feedback from stakeholders.

A. ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Areas for improvement. The amendments clarify guidance and implementation around accrued interest, transfers between classifications or categories for loans and debt securities, consideration of recoveries in estimating allowances, reinsurance recoveries, consideration of prepayments and estimated costs to sell when foreclosure is probable. Additionally, the amendments correct certain cross-references.

B. ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities. The amendments clarify the scope of the original Update, and add clarification on the guidance and implementation around fair value disclosure requirements for nonpublic entities, measurement alternatives for equity securities without readily determinable fair values at nonrecurring fair value measurement, remeasurement of equity securities without readily determinable fair values at historical exchange rates, and associated disclosure requirements.

C. ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments clarify the guidance and implementation around partial-term fair value hedges of interest rate risk, amortization of fair value hedge basis adjustments, disclosure of fair value hedge basis adjustments, consideration of the hedged contractually specified interest rate under the hypothetical derivative method, scope for nonpublic entities, and application of a first-payments-received cash flow hedging technique to overall cash flows on a group of variable interest payments.

The amendments contained in this update will be effective for the same fiscal years in which the original ASU becomes effective, or, if already implemented, annual periods beginning after the issuance of this update. The Company will be primarily affected by the clarifications provided to ASU 2016-13, which is still pending adoption.

In August 2018, the FASB issued ASU 2018-12 Financial Services-Insurance (Topic 944) - Targeted Improvements to the Accounting for Long-Duration Contracts. This update is aimed at improving the Codification as it relates to long-duration contracts which will improve the timeliness of recognizing changes in the liability for future policy benefits, simplify accounting for certain market-based options, simplify the amortization of deferred acquisition costs, and improve the effectiveness of required disclosures. Amendments include the following:

A. Require insurance entity to (1) review and update assumptions used to measure cash flows at least annually (with changes recognized in net income) and (2) update discount rate assumption at each reporting date (with changes recognized in other comprehensive income).

B. Require insurance entity to measure all market risk benefits associated with deposit (i.e. account balance) contracts at fair value, with change in fair value attributable to change in instrument-specific credit risk recognized in other comprehensive income.

C. Simplify amortization of deferred acquisition costs and other balances amortized in proportion to premiums, gross profits, or gross margins and require those balances be amortized on constant level basis over expected term of related contract. Deferred acquisition costs are required to be written off for unexpected contract terminations but are not subject to impairment test.

D. Require insurance entity to add disclosures of disaggregated rollforwards of beginning to ending balances of the liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities, and deferred acquisition costs. Insurance entity must also disclose information about significant inputs, judgments, assumptions, and methods used in measurement, including changes in those inputs, judgments, and assumptions, and the effect of those changes on measurement.

These updates are required to be applied retrospectively to the earliest period presented in the financial statements for periods beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In August 2018, the FASB issued a new Concepts Statement No. 8 Conceptual Framework for Financial Reporting - Chapter 8, Notes to Financial Statements. This was issued as part of a disclosure framework project aimed at improving disclosures in financial statements. This issuance provides conceptual guidance that may be followed when determining items to include as disclosures in the notes to financial statements. In conjunction with this issuance, the FASB also issued two accounting standard updates (“ASU”) which identified a particular FASB Topic and evaluated its disclosures through the new conceptual framework of Concepts Statement No. 8, Chapter 8. This process resulted in the issuance of the following two ASUs.

In August 2018, FASB issued ASU 2018-13 Fair Value Measurement (Topic 820) Disclosure Framework - Changes to the Disclosure requirements for Fair Value Measurement. This update removed disclosures for 1) amount of and reasons for transfers between Level 1 and Level 2 for fair value hierarchy, 2) policy for timing of transfers between levels, 3) valuation process for Level 3 fair value measurements. This update also added disclosure requirement as follows: 1) changes in unrealized gains and losses for the period included in OCI for recurring Level 3 fair value measurements held at end of reporting period; 2) range and weighted average (or other reasonable quantitative measurement) of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments will be effective for interim periods beginning after December 15, 2019. Adoption of the guidance is not expected to have a material effect on the Company’s results of operations or financial position.

In August 2018, FASB issued ASU 2018-14 Compensation-Retirement Benefits - Defined Benefit Plans-General (Subtopic 715-20) Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. This update removed disclosures for 1) amounts in AOCI expected to be recognized as components of net periodic benefit cost over the next fiscal year, 2) amount and timing of plan assets expected to be returned to the employer, 3) related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan, 4) the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of the net periodic benefit costs and (b) benefit obligation for postretirement health care benefits. This update also added disclosures as follow: 1) weighted-average interest crediting rates for cash balance plans and other plans with promised crediting rates, 2) explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. Finally, this update clarified that the following information for defined benefit pension plans should be disclosed: 1) projected benefit obligation (PBO) and fair value of plan assets for plans with PBO in excess of plan assets, 2) accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets. The amendments will be effective for fiscal periods ending after December 31, 2020. Adoption of the guidance is not expected to have a material effect on the Company’s results of operations or financial position.

In June 2016, the FASB released ASU 2016-13, Financial Instruments-Credit Losses, which revises the credit loss recognition criteria for certain financial assets measured at amortized cost. The new guidance replaces the existing incurred loss recognition model with an expected loss recognition model. The objective of the expected credit loss model is for the reporting entity to recognize its estimate of expected credit losses for affected financial assets in a valuation allowance deducted from the amortized cost basis of the related financial assets that results in presenting the net carrying value of the financial assets at the amount expected to be collected. The guidance is effective for interim and annual periods beginning after December 15, 2019, and for most affected instruments must be adopted using a modified retrospective approach, with a cumulative effect adjustment recorded to beginning retained income. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

Recent accounting pronouncements adopted

In August 2018, the SEC released a final rule updating disclosure requirements, Disclosure Update and Simplification, which resulted in the additional interim disclosure of an analysis of changes in stockholders’ equity to be required for the current and comparative quarter and year-to-date interim periods. Registrants are required to provide an analysis of changes in each caption of stockholders’ equity and noncontrolling interests, which will be accompanied by dividends per share and in the aggregate for each class of shares. The disclosure must be presented in the form of a reconciliation, either as a separate statement or in the footnotes. The adoption of this ASU in 2019 did not have a material effect on the results of operations or financial position of the Company as this information in year-to-date format is already provided.

In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs: Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium. The amortization period for premiums is being shortened to the earliest call date. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The adoption of this ASU in 2019 did not have a material effect on the results of operations or financial position of the Company.

In February 2016, the FASB issued new guidance on leasing transactions (ASU 2016-02, Leases - Topic 842). The new guidance is effective for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and requires a modified retrospective transition approach (subject to optional practical expedients). The new guidance requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months. Leases would be classified as finance or operating leases and both types of leases will be recognized on the balance sheet. Lessor accounting will remain largely unchanged from current guidance except for certain targeted changes. The new guidance will also require new qualitative and quantitative disclosures. Early adoption is permitted. The Company elected to early adopt this guidance in 2018. There was no material impact to the Company’s financial position, results of operations or cash flows as the result of the adoption of this ASU in 2018.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future Consolidated Financial Statements.

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Stockholders' Equity

6 Months Ended

Jun. 30, 2019

Stockholders' Equity Note [Abstract]

Stockholders' Equity

STOCKHOLDERS' EQUITY

NWLIC is restricted by state insurance laws as to dividend amounts which may be paid to stockholders without prior approval from the Colorado Division of Insurance.  The restrictions are based on the lesser of statutory earnings from operations, excluding capital gains, from the prior calendar year or 10% of statutory surplus of the company as of the previous calendar year-end.  Under these guidelines the maximum dividend payment which may be made without prior approval in 2019 is $30.7 million. As the sole owner of NWLIC, all dividends declared by National Western are payable entirely to NWLGI and are eliminated in consolidation.

Ozark National is similarly restricted under the state insurance laws of Missouri as to dividend amounts which may be paid to stockholders without prior approval to the greater of 10% of the statutory surplus of the company from the prior year-end or the company's net gain from operations, excluding capital gains, from the prior calendar year. Based upon this restriction, the maximum dividend payment which may be made in 2019 without prior approval is $20.4 million. As part of the Stock Purchase Agreement dated October 3, 2018, by and between NWLIC and Ozark National's previous owner, the Missouri Department of Insurance granted approval for an extraordinary dividend of $102.7 million to be paid to the prior owner concurrent with the closing of the transaction effective January 31, 2019. Consequently, any additional dividends during 2019 will require prior approval of the Missouri Department of Insurance. As the sole owner of Ozark National, all dividends declared by Ozark National going forward are payable entirely to NWLIC and are eliminated in consolidation.

In the first quarter of 2019, National Western declared and paid a $32.0 million dividend to NWLGI, the proceeds of which were used as part of the cash purchase of NIS. In the first quarter of 2018, National Western declared and paid a $3.0 million dividend to NWLGI. National Western did not declare or pay cash dividends during the three month periods ended June 30, 2019 and 2018. Ozark National did not declare or pay cash dividends on its shares during the five-month period ended June 30, 2019.

NWLGI did not declare or pay cash dividends on its common shares during the six months ended June 30, 2019 and 2018.

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Earnings Per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Earnings Per Share

EARNINGS PER SHARE

Basic earnings per share of common stock are computed by dividing net income available to each class of common stockholders on an as if distributed basis by the weighted-average number of common shares outstanding for the period. Diluted earnings per share, by definition, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock, that then shared in the distributed earnings of each class of common stock. U.S. GAAP requires a two-class presentation for the Company's two classes of common stock. The Company currently has no share-based compensation awards outstanding that could be redeemed for shares of common stock.

Net income for the periods shown below is allocated between Class A shares and Class B shares based upon (1) the proportionate number of shares issued and outstanding as of the end of the period, and (2) the per share dividend rights of the two classes under the Company's Restated Certificate of Incorporation (the Class B dividend per share is equal to one-half the Class A dividend per share).

	Three Months Ended June 30,
	2019			2018
	Class A		Class B	Class A	Class B
	(In thousands except per share amounts)
Numerator for Basic and Diluted Earnings Per Share:
Net income	$	33,696		32,466
Dividends - Class A shares	—			—
Dividends - Class B shares	—			—
Undistributed earnings	$	33,696		32,466
Allocation of net income:
Dividends	$	—	—	—	—
Allocation of undistributed income	32,743		953	31,548	918
Net earnings	$	32,743	953	31,548	918
Denominator:
Basic earnings per share - weighted-average shares	3,436		200	3,436	200
Effect of dilutive stock options	—		—	—	—
Diluted earnings per share - adjusted weighted-average shares for assumed conversions	3,436		200	3,436	200
Basic Earnings Per Share	$	9.53	4.76	9.18	4.59
Diluted Earnings Per Share	$	9.53	4.76	9.18	4.59

	Six Months Ended June 30,
	2019			2018
	Class A		Class B	Class A	Class B
	(In thousands except per share amounts)
Numerator for Basic and Diluted Earnings Per Share:
Net income	$	73,894		59,341
Dividends - Class A shares	—			—
Dividends - Class B shares	—			—
Undistributed income	$	73,894		59,341
Allocation of net income:
Dividends	$	—	—	—	—
Allocation of undistributed income	71,804		2,090	57,663	1,678
Net income	$	71,804	2,090	57,663	1,678
Denominator:
Basic earnings per share - weighted-average shares	3,436		200	3,436	200
Effect of dilutive stock options	—		—	—	—
Diluted earnings per share - adjusted weighted-average shares for assumed conversions	3,436		200	3,436	200
Basic Earnings Per Share	$	20.90	10.45	16.78	8.39
Diluted Earnings Per Share	$	20.90	10.45	16.78	8.39

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Pension and Other Postretirement Plans

6 Months Ended

Jun. 30, 2019

Retirement Benefits [Abstract]

Pension and Other Postretirement Plans

PENSION AND OTHER POSTRETIREMENT PLANS

(A) Defined Benefit Pension Plans

National Western sponsors a qualified defined benefit pension plan covering employees enrolled prior to 2008. The plan provides benefits based on the participants' years of service and compensation. The Company makes annual contributions to the plan that comply with the minimum funding provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). On October 19, 2007, National Western's Board of Directors approved an amendment to freeze the pension plan as of December 31, 2007. The freeze ceased future benefit accruals to all participants and closed the plan to any new participants. In addition, all participants became immediately 100% vested in their accrued benefits as of that date. As participants are no longer earning a credit for service, future qualified defined benefit plan expense is projected to be minimal. Fair values of plan assets and liabilities are measured as of the prior December 31 for each year. The following table summarizes the components of net periodic benefit cost.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019		2018
	(In thousands)
Service cost	$	24		28		48		56
Interest cost	210			225		420		450
Expected return on plan assets	(272		)	(325	)	(544	)	(650	)
Amortization of prior service cost	—			—		—		—
Amortization of net loss	165			131		330		262
Net periodic benefit cost	$	127		59		254		118

The service cost shown above for each period represents plan expenses expected to be paid out of plan assets. Under the clarified rules of the Pension Protection Act, plan expenses paid from plan assets are to be included in the plan's service cost component.

The Company's minimum required contribution for the 2019 plan year is $0.4 million. There was $0.5 million in planned contributions remaining for the 2018 plan year as of June 30, 2019. As of June 30, 2019, the Company had made $0.0 million in contributions to the plan for the 2019 plan year.

The components of net periodic benefit cost including service cost are reported in the line item “Other operating expenses” in the income statement.

National Western also sponsors three non-qualified defined benefit pension plans. The first plan covers certain senior officers and provides benefits based on the participants' years of service and compensation. The primary pension obligations and administrative responsibilities of the plan are maintained by a pension administration firm, which is a subsidiary of American National Insurance Company ("ANICO"), a related party. ANICO has guaranteed the payment of pension obligations under the plan. However, the company has a contingent liability with respect to the plan should these entities be unable to meet their obligations under the existing agreements. Also, the Company has a contingent liability with respect to the plan in the event that a plan participant continues employment with National Western beyond age seventy, the aggregate average annual participant salary increases exceed 10% per year, or any additional employees become eligible to participate in the plan. If any of these conditions are met, the Company would be responsible for any additional pension obligations resulting from these items. Amendments were made to the plan to allow an additional employee to participate and to change the benefit formula for the then Chairman of the Company. As previously mentioned, these additional obligations are a liability to the Company. Effective December 31, 2004, this plan was frozen with respect to the continued accrual of benefits of the then Chairman and the then President of the Company in order to comply with law changes under the American Jobs Creation Act of 2004 ("Act").

Effective July 1, 2005, National Western established a second non-qualified defined benefit plan for the benefit of the then Chairman of the Company.  This plan is intended to provide for post-2004 benefit accruals that mirror and supplement the pre-2005 benefit accruals under the previously discussed non-qualified plan, while complying with the requirements of the Act.

Effective November 1, 2005, National Western established a third non-qualified defined benefit plan for the benefit of the then President of the Company.  This plan is intended to provide for post-2004 benefit accruals that supplement the pre-2005 benefit accruals under the first non-qualified plan as previously discussed, while complying with the requirements of the Act.

The following table summarizes the components of net periodic benefit costs for the non-qualified defined benefit plans.

	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2019		2018	2019	2018
	(In thousands)
Service cost	$	126	90	251	180
Interest cost	256		213	512	426
Amortization of prior service cost	15		15	30	30
Amortization of net loss	348		176	696	352
Net periodic benefit cost	$	745	494	1,489	988

The Company expects to contribute $2.0 million to these plans in 2019.  As of June 30, 2019, the Company has contributed $0.9 million to the plans.

The components of net periodic benefit cost including service cost are reported in the line item “Other operating expenses” in the income statement.

Ozark National and NIS have no defined benefit plans.

(B) Postretirement Employment Plans Other Than Pension

National Western sponsors two healthcare plans that were amended in 2004 to provide postretirement benefits to certain fully-vested individuals.  The plans are unfunded. The following table summarizes the components of net periodic benefit costs.

	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2019		2018	2019	2018
	(In thousands)
Interest cost	$	50	40	99	80
Amortization of prior service cost	13		26	26	52
Amortization of net loss	61		38	122	75
Net periodic benefit cost	$	124	104	247	207

The Company expects to contribute minimal amounts to the plans in 2019. Ozark National and NIS do not offer postemployment benefits.

The components of net periodic benefit cost including service cost are reported in the line item “Other operating expenses” in the income statement.

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Segment and Other Operating Information

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Segment and Other Operating Information

SEGMENT AND OTHER OPERATING INFORMATION

The Company defines its reportable operating segments as domestic life insurance, international life insurance, annuities, and acquired companies. These segments are organized based on product types, geographic marketing areas, and business groupings. Ozark National and NIS have been combined into the segment "Acquired Businesses" given its inter-related marketing and sales approach which consists of a coordinated sale of a non-participating whole life insurance product (Ozark National) and a mutual fund investment product (NIS). As disclosed in the Company's filings for 2018, National Western discontinued accepting applications for the Company's international products from residents of other countries in May 2018. A fifth category "All Others" primarily includes investments and earnings of non-operating subsidiaries as well as other remaining investments and assets not otherwise supporting specific segment operations.

A summary of segment information as of June 30, 2019 and December 31, 2018 for the Condensed Consolidated Balance Sheet items and for the three and six months ended June 30, 2019 and June 30, 2018 for the Condensed Consolidated Statement of Earnings is provided below.

Condensed Consolidated Balance Sheet Items:

	June 30, 2019
	Domestic Life Insurance		International Life Insurance	Annuities	Acquired Businesses	All Others	Totals
	(In thousands)
Deferred policy acquisition costs, sales inducements, and value of business acquired	$	119,695	217,361	528,241	143,678	—	1,008,975
Total segment assets	1,287,216		1,171,538	8,465,260	953,048	372,642	12,249,704
Future policy benefits	1,108,455		879,742	7,563,354	696,457	—	10,248,008
Other policyholder liabilities	17,239		14,956	94,389	15,147	—	141,731

	December 31, 2018
	Domestic Life Insurance		International Life Insurance	Annuities	Acquired Businesses	All Others	Totals
	(In thousands)
Deferred policy acquisition costs and sales inducements	$	122,661	243,518	609,239	—	—	975,418
Total segment assets	1,215,864		1,211,036	8,791,463	—	370,118	11,588,481
Future policy benefits	1,039,150		894,891	7,810,245	—	—	9,744,286
Other policyholder liabilities	17,439		20,381	97,874	—	—	135,694

Condensed Consolidated Statement of Earnings:

	Three Months Ended June 30, 2019
	Domestic Life Insurance		International  Life Insurance	Annuities	Acquired Businesses	All  Others	Totals
	(In thousands)
Premiums and contract revenues	$	10,706	23,777	5,857	20,380	—	60,720
Net investment income	14,995		9,276	89,572	6,007	8,574	128,424
Other revenues	20		33	64	2,290	1,559	3,966
Total revenues	25,721		33,086	95,493	28,677	10,133	193,110
Life and other policy benefits	3,829		2,959	9,876	16,993	—	33,657
Amortization of deferred policy acquisition costs and value of business acquired	3,307		6,948	18,750	2,406	—	31,411
Universal life and annuity contract interest	12,985		7,337	39,817	—	—	60,139
Other operating expenses	5,017		4,521	9,374	4,491	1,931	25,334
Federal income taxes (benefit)	89		2,014	3,155	956	2,323	8,537
Total expenses	25,227		23,779	80,972	24,846	4,254	159,078
Segment earnings (loss)	$	494	9,307	14,521	3,831	5,879	34,032

	Six Months Ended June 30, 2019
	Domestic Life Insurance		International Life Insurance	Annuities	Acquired Businesses	All Others	Totals
	(In thousands)
Premiums and contract revenues	$	21,510	49,840	10,725	34,181	—	116,256
Net investment income	38,494		23,293	192,726	9,983	15,259	279,755
Other revenues	64		54	72	3,731	6,458	10,379
Total revenues	60,068		73,187	203,523	47,895	21,717	406,390
Life and other policy benefits	7,751		5,121	21,306	27,668	—	61,846
Amortization of deferred policy acquisition costs and value of business acquired	6,717		14,242	38,462	4,154	—	63,575
Universal life and annuity contract interest	34,426		19,330	87,299	—	—	141,055
Other operating expenses	9,140		8,785	16,882	7,576	9,000	51,383
Federal income taxes (benefit)	413		5,222	8,038	1,703	2,582	17,958
Total expenses	58,447		52,700	171,987	41,101	11,582	335,817
Segment earnings (loss)	$	1,621	20,487	31,536	6,794	10,135	70,573

	Three Months Ended June 30, 2018
	Domestic Life Insurance		International  Life Insurance	Annuities	Acquired Businesses	All  Others	Totals
	(In thousands)
Premiums and contract revenues	$	10,114	27,461	7,298	—	—	44,873
Net investment income	13,556		10,603	86,915	—	10,728	121,802
Other revenues	—		4	18	—	5,265	5,287
Total revenues	23,670		38,068	94,231	—	15,993	171,962
Life and other policy benefits	5,103		4,534	7,824	—	—	17,461
Amortization of deferred acquisition costs	2,709		7,336	21,024	—	—	31,069
Universal life and annuity contract interest	9,907		7,600	43,483	—	—	60,990
Other operating expenses	5,006		5,628	9,085	—	5,076	24,795
Federal income taxes (benefit)	185		2,516	2,478	—	2,132	7,311
Total expenses	22,910		27,614	83,894	—	7,208	141,626
Segment earnings (loss)	$	760	10,454	10,337	—	8,785	30,336

	Six Months Ended June 30, 2018
	Domestic Life Insurance		International Life Insurance	Annuities	Acquired Businesses	All Others	Totals
	(In thousands)
Premiums and contract revenues	$	19,715	55,378	12,445	—	—	87,538
Net investment income	14,219		12,574	140,458	—	15,296	182,547
Other revenues	—		34	37	—	10,213	10,284
Total revenues	33,934		67,986	152,940	—	25,509	280,369
Life and other policy benefits	9,912		10,262	18,688	—	—	38,862
Amortization of deferred acquisition costs	5,384		14,716	43,198	—	—	63,298
Universal life and annuity contract interest	7,046		6,450	45,676	—	—	59,172
Other operating expenses	10,153		11,009	17,020	—	10,246	48,428
Federal income taxes (benefit)	283		5,023	5,576	—	2,999	13,881
Total expenses	32,778		47,460	130,158	—	13,245	223,641
Segment earnings (loss)	$	1,156	20,526	22,782	—	12,264	56,728

Reconciliations of segment information to the Company's Condensed Consolidated Financial Statements are provided below.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019			2018	2019	2018
	(In thousands)
Premiums and Other Revenues:
Premiums and contract revenues	$	60,720		44,873	116,256	87,538
Net investment income	128,424			121,802	279,755	182,547
Other revenues	3,966			5,287	10,379	10,284
Realized gains (losses) on investments	(425		)	2,696	4,204	3,307
Total condensed consolidated premiums and other revenues	$	192,685		174,658	410,594	283,676

	Three Months Ended June 30,				Six Months Ended June 30,
	2019			2018	2019	2018
	(In thousands)
Federal Income Taxes:
Total segment Federal income taxes	$	8,537		7,311	17,958	13,881
Taxes on realized gains (losses) on investments	(89		)	566	883	694
Total condensed consolidated Federal income taxes	$	8,448		7,877	18,841	14,575

	Three Months Ended June 30,				Six Months Ended June 30,
	2019			2018	2019	2018
	(In thousands)
Net Earnings:
Total segment earnings	$	34,032		30,336	70,573	56,728
Realized gains (losses) on investments, net of taxes	(336		)	2,130	3,321	2,613
Total condensed consolidated net earnings	$	33,696		32,466	73,894	59,341

	June 30,		December 31,
	2019		2018
	(In thousands)
Assets:
Total segment assets	$	12,249,704	11,588,481
Other unallocated assets	363,246		343,210
Total condensed consolidated assets	$	12,612,950	11,931,691

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Share-Based Payments

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Share-Based Payments

SHARE-BASED PAYMENTS

The Company had a stock and incentive plan ("1995 Plan") which provided for the grant of any or all of the following types of awards to eligible employees: (1) stock options, including incentive stock options and nonqualified stock options; (2) stock appreciation rights ("SARs"), in tandem with stock options or freestanding; (3) restricted stock or restricted stock units; and, (4) performance awards. The 1995 Plan began on April 21, 1995, and was amended on June 25, 2004 to extend the termination date to April 20, 2010. The number of shares of Class A, $1.00 par value, common stock which were allowed to be issued under the 1995 Plan, or as to which SARs or other awards were allowed to be granted, could not exceed 300,000. Effective June 20, 2008, the Company's shareholders approved a 2008 Incentive Plan (“2008 Plan”). The 2008 Plan is substantially similar to the 1995 Plan and authorized an additional number of Class A common stock shares eligible for issue not to exceed 300,000. These plans were assumed by NWLGI from National Western pursuant to the terms of the holding company reorganization in 2015. On June 15, 2016, stockholders of NWLGI approved an amended and restated 2008 Plan ("Incentive Plan"), which extended the term of the 2008 Plan for ten years from the date of stockholder approval. The Incentive Plan includes additional provisions, most notably regarding the definition of performance objectives which could be used in the issuance of the fourth type of award noted above (performance awards).

All of the employees of the Company and its subsidiaries are eligible to participate in the current Incentive Plan. In addition, directors of the Company are eligible to receive the same types of awards as employees except that they are not eligible to receive incentive stock options. Company directors, including members of the Compensation and Stock Option Committee, are eligible for nondiscretionary stock options. At the end of 2018, all stock options granted under the 1995 Plan and 2008 Plan had been exercised, forfeited, or expired. SARs granted prior to 2016 vest 20% annually following three years of service following the grant date. Employee SARs granted 2016 forward vest 33.3% annually following one year of service from the date of the grant. Directors' stock option and SARs grants vest 20% annually following one year of service from the date of grant.

Effective during March 2006, the Company adopted and implemented a limited stock buy-back program with respect to the 1995 Plan which provides stock option holders the additional alternative of selling shares acquired through the exercise of options directly back to the Company. Option holders may elect to sell such acquired shares back to the Company at any time within ninety (90) days after the exercise of options at the prevailing market price as of the date of notice of election. The buy-back program did not alter the terms and conditions of the 1995 Plan; however, the program necessitated a change in accounting from the equity classification to the liability classification. In August 2008, the Company implemented another limited stock buy-back program, substantially similar to the 2006 program, for shares issued under the 2008 Plan. These plans were assumed as well by NWLGI from National Western pursuant to the terms of the holding company reorganization.

The Incentive Plan allows for certain other share or unit awards which are solely paid out in cash based on the value of the Company's shares, or changes therein, as well as the financial performance of the Company under pre-determined target performance metrics. Certain awards, such as restricted stock units ("RSUs") provide solely for cash settlement based upon the market price of the Company's Class A common shares, often referred to as "phantom stock-based awards". Unlike share-settled awards, which have a fixed grant-date fair value, the fair value of unsettled or unvested liability awards is remeasured at the end of each reporting period based on the change in fair value of a share. The liability and corresponding expense are adjusted accordingly until the award is settled. For employees, the vesting period for RSUs is 100% at the end of three years from the grant date. The RSUs are payable in cash at the vesting date equal to the closing price of the Company's Class A common shares at that time.

Other awards may involve performance share units ("PSUs") which are units granted at a specified dollar amount per unit, typically linked to the Company's Class A common share price, that are subsequently multiplied by an attained performance factor to derive the number of PSUs to be paid as cash compensation at the vesting date. PSUs also vest three years from the date of grant. For PSUs, the performance period begins the first day of the calendar year in which the PSUs are granted and runs three calendar years. At that time, the three-year performance outcome will be measured against the pre-defined target amounts to determine the number of PSUs earned as compensation which are paid at the closing price of the Company's Class A common shares on the vesting date.

PSU awards covering the three year measurement period ended December 31, 2018 were paid out in the first quarter of 2019. The performance factor during the measurement period used to determine compensation payouts was 93.86% of the pre-defined metric target.

Directors of the Company are eligible to receive RSUs under the Incentive Plan. Unlike RSUs granted to officers, the RSUs granted to directors vest one year from the date of grant. They are payable in cash at the vesting date equal to the closing price of the Company's Class A common shares at that time.

No awards were granted to officers and directors during the six months ended June 30, 2019 and 2018.

The Company uses the current fair value method to measure compensation costs for awards granted under the share-based plans.

As of June 30, 2019 and December 31, 2018, the liability balance was $8.0 million and $11.9 million, respectively. A summary of awards by type and related activity is detailed below.

		Options Outstanding
	Shares Available For Grant	Shares	Weighted- Average Exercise Price
Stock Options:
Balance at January 1, 2019	291,000	—	$	—
Exercised	—	—	$	—
Forfeited	—	—	$	—
Expired	—	—	$	—
Stock options granted	—	—	$	—
Balance at June 30, 2019	291,000	—	$	—

	Liability Awards
	SAR		RSU		PSU
Other Share/Unit Awards:
Balance at January 1, 2019	89,443		13,170		19,122
Exercised	—		(3,051	)	(5,426	)
Forfeited	(1,163	)	(307	)	(616	)
Granted	—		—		—
Balance at June 30, 2019	88,280		9,812		13,080

Stock options, SARs, RSUs, and PSUs shown as forfeited in the above tables represent vested and unvested awards not exercised by plan participants prior to their termination from the Company.

The total intrinsic value of share-based compensation exercised was $2.5 million and $1.9 million for the six months ended June 30, 2019 and 2018, respectively. The total share-based compensation paid was $2.5 million and $1.9 million for the six months ended June 30, 2019 and 2018, respectively. The total fair value of stock options, SARs, RSUs, and PSUs vested during the six months ended June 30, 2019 and 2018 was $2.9 million and $0.8 million, respectively. For the six months ended June 30, 2019 and 2018, the total cash received from the exercise of stock options under the Plans was $0.0 million and $0.0 million, respectively.

The following table summarizes information about SARs outstanding at June 30, 2019. There were no options outstanding as of June 30, 2019.

	SARs Outstanding
	Number Outstanding		Weighted- Average Remaining Contractual Life	Number Exercisable
Exercise prices:
$132.56	19,568		2.5 years	19,568
$210.22	25,000		4.5 years	16,400
$216.48	11,649		6.6 years	11,649
$311.16	10,162		7.6 years	6,753
$310.55	203		7.8 years	135
$334.34	9,624		8.4 years	3,247
$303.77	12,074		9.5 years	—
Totals	88,280			57,752
Aggregate intrinsic value (in thousands)	$	4,077		$	3,674

The aggregate intrinsic value in the table above is based on the closing Class A stock price of $257.00 per share on June 30, 2019.

In estimating the fair value of the share-based awards outstanding at June 30, 2019 and December 31, 2018, the Company employed the Black-Scholes option pricing model with assumptions detailed below.

	June 30, 2019		December 31, 2018
Expected term	2.5 to 9.5 years		3.0 to 10.0 years
Expected volatility weighted-average	22.02	%	22.14	%
Expected dividend yield	0.14	%	0.12	%
Risk-free rate weighted-average	1.87	%	2.58	%

The Company reviewed the contractual term relative to the SARs as well as perceived future behavior patterns of exercise. Volatility is based on the Company’s historical volatility over the expected term of the option/SARs expected exercise date.

The pre-tax compensation cost/(benefit) recognized in the financial statements related to these plans was $0.1 million and $(1.4) million for the three and six months ended June 30, 2019 and $1.3 million and $0.7 million for the three and six months ended June 30, 2018, respectively. The related tax expense/(benefit) recognized was $0.0 million and $0.3 million for the three and six months ended June 30, 2019 and $(0.3) million and $(0.1) million for the three and six months ended June 30, 2018, respectively.

As of June 30, 2019, the total compensation cost related to non-vested share-based awards not yet recognized was $3.8 million.  This amount is expected to be recognized over a weighted-average period of 1.3 years.  The Company recognizes compensation cost over the graded vesting periods.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

(A)  Legal Proceedings

In the normal course of business, the Company is involved or may become involved in various legal actions in which claims for alleged economic and punitive damages have been or may be asserted, some for substantial amounts. In recent years, carriers offering life insurance and annuity products have faced litigation, including class action lawsuits, alleging improper product design, improper sales practices, and similar claims. Given the uncertainty involved in these types of actions, the ability to make a reliable evaluation of the likelihood of an unfavorable outcome or an estimate of the amount of or range of potential loss is endemic to the particular circumstances and evolving developments of each individual matter on its own merits.

On September 28, 2017, a purported shareholder derivative lawsuit was filed in the 122nd District Court of Galveston County, State of Texas entitled Robert L. Moody, Jr. derivatively on behalf of National Western Life Insurance Company and National Western Life Group, Inc. v. Ross Rankin Moody, et al., naming certain current and former directors and current officers as defendants.  The complaint challenges the directors’ oversight of insurance sales to non-U.S. residents and alleges that the defendants breached their fiduciary duties in the conduct of their duties as board members by failing to act (i) on an informed basis and (ii) in good faith or with the honest belief that their actions were in the best interests of the Company.  The complaint sought an undetermined amount of damages, attorneys’ fees and costs, and equitable relief, including the removal of the Company’s Chairman and Chief Executive Officer and other board members and/or officers of the Company.  The Company believes that the claims in the complaint are baseless and without merit, will continue to vigorously defend this lawsuit, and was awarded reimbursement of legal costs and expenses from plaintiff as detailed below.  The Company believes, based on information currently available, that the final outcome of this lawsuit will not have a material adverse effect on the Company’s business, results of operations, or consolidated financial position. The companies and directors filed their respective Pleas to the Jurisdiction ("Pleas") contesting the plaintiff's standing to even pursue this action, along with their Answers, on October 27, 2017. On December 14, 2017, plaintiff filed a Response to the Pleas and on December 21, 2017, the Court heard oral argument on the Pleas. Plaintiff then filed a First Amended Petition on January 11, 2018. The companies and directors filed a Supplement to the Pleas on January 30, 2018, to which plaintiff responded on February 1, 2018, and the companies and directors replied on February 9, 2018. On May 3, 2018, the Court issued a memorandum to all attorneys of record stating that the Court would grant the defendants' Pleas and asked the attorney for defendants to prepare and submit proposed orders/judgments granting the requested relief for consideration by the Court.  The defendants filed such proposed order granting the Pleas on May 7, 2018. On May 16, 2018 the Court issued an Order granting the Pleas and dismissing Robert L. Moody, Jr.’s claims with prejudice, and plaintiff then filed a Motion to Transfer Venue (“MTTV”).  Defendants filed an Application for Fees, seeking to recover defendants’ legal costs and expenses from plaintiff, and a Response to the MTTV on June 8, 2018.  In response plaintiff filed a Motion to Vacate, a Response to the Application for Fees, and his own Request for Attorney’s Fees on July 5, 2018.  Defendants filed a Response to the Motion to Vacate and to plaintiff’s Request for Attorney’s Fees on July 11, 2018, and the Court heard oral arguments on July 16, 2018. Plaintiff filed supplemental briefing in support of his July 5, 2018 filings on July 25, 2018, and defendants filed their response to plaintiff's supplemental briefing on July 27, 2018. On August 8, 2018 the Court issued an Order denying plaintiff's Motion to Vacate. Pursuant to the Court’s instructions, on October 5, 2018, defendants filed an Order Granting Application for Expenses.  Defendants then filed a Motion for Entry of Final Judgment and a Request for Submission Date on Motion for Entry of Final Judgment on October 11, 2018, which the Court set as October 30, 2018.  Plaintiff filed his Objection to Proposed Final Judgment and Objection to Proposed Order on Attorneys’ Fees on October 25, 2018, to which defendants filed a response on October 30, 2018. On November 11, 2018, the Court issued its Final Judgment: ordering Plaintiff to pay the companies $1,314,054 for reasonable and necessary fees and expenses; denying Plaintiff’s Motion to Transfer Venue, and; dismissing Plaintiff’s counterclaim.  Plaintiff has appealed the Court’s Final Judgment and that appeal is pending before the First District Court of Appeals in Houston, TX.

In April of 2019, National Western defended a two week jury trial in which it was alleged that the Company committed actionable Financial Elder Abuse in its issuance of a $100,000 equity indexed annuity to the Plaintiff in the case of Williams v Pantaleoni et al, Case No. 17CV03462, Butte County California Superior Court.  The Court entered an Amended Judgment on the Jury Verdict on July 27, 2019 against the Company in the amount of $14,949 for economic damages and $2.92 million in non-economic and punitive damages. Plaintiff also intends to pursue an award of attorney's fees and costs in the amount of approximately $1 million. The Company intends to vigorously dispute the verdicts and the amounts awarded, and in furtherance of such has filed a Motion for Judgment Notwithstanding Jury Verdict and a Motion for New Trial, and will protect its appellate rights.

Although there can be no assurances, at the present time, the Company does not anticipate that the ultimate liability arising from such other potential, pending, or threatened legal actions will have a material adverse effect on the financial condition or operating results of the Company.

Separately, Brazilian authorities commenced an investigation into possible violations of Brazilian criminal law in connection with the issuance of National Western insurance policies to Brazilian residents, and in assistance of such investigation a Commissioner appointed by the U.S. District Court for the Western District of Texas issued a subpoena in March of 2015 upon National Western to provide information relating to such possible violations. No conclusion can be drawn at this time as to its outcome or how such outcome may impact the Company’s business, results of operations, or financial condition. National Western has cooperated with the relevant governmental authorities in regard to this matter.

(B) Financial Instruments

In order to meet the financing needs of its customers in the normal course of business, the Company is a party to financial instruments with off-balance sheet risk. These financial instruments are commitments to extend credit which involve elements of credit and interest rate risk in excess of the amounts recognized in the Condensed Consolidated Balance Sheets.

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amounts, assuming that the amounts are fully advanced and that collateral or other security is of no value. Commitments to extend credit are legally binding agreements to lend to a customer that generally have fixed expiration dates or other termination clauses and may require payment of a fee. Commitments do not necessarily represent future liquidity requirements, as some could expire without being drawn upon. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The Company controls the credit risk of these transactions through credit approvals, limits, and monitoring procedures.

The Company had $14.5 million in commitments to fund new loans and $0.4 million in commitments to extend credit relating to existing loans at June 30, 2019. The Company evaluates each customer's creditworthiness on a case-by-case basis.

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Investments

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Investments

INVESTMENTS

(A) Investment Gains and Losses

The table below presents realized investment gains and losses, excluding impairment losses, for the periods indicated.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(In thousands)
Available for sale debt securities:
Realized gains on disposal	$	1,168	1,981		2,351		2,021
Realized losses on disposal	—		—		(84	)	—
Held to maturity debt securities:
Realized gains on disposal	924		734		951		1,305
Realized losses on disposal	—		(19	)	—		(19	)
Real estate gains (losses)	3,385		—		6,888		—
Totals	$	5,477	2,696		10,106		3,307

Disposals in the held to maturity category during the periods shown represent calls initiated by the credit issuer of the debt security. It is the Company's policy to initiate disposals of debt securities in the held to maturity category only in instances in which the credit status of the issuer comes into question and the realization of all or a significant portion of the investment principal of the holding is deemed to be in jeopardy.

Net real estate gains for the six months ended June 30, 2019 primarily pertain to the Company's sale of its nursing home operations in Reno, Nevada and San Marcos, Texas as well as a property sold located in Austin, Texas. The sale of the Reno nursing home was completed effective February 1, 2019 and a gain of $5.7 million was realized on the sale of the land and building associated with the operation. The sale of the San Marcos nursing home was concluded effective May 1, 2019 and the Company recorded a loss of $(2.0) million associated with the sale of the land and building of this operation (an impairment loss on this property of $(2.2) million was recorded in the quarter ended March 31, 2019). The sale of the Company's prior home office completed effective June 7, 2019 realized a gain on the sale of $3.2 million.

The Company uses the specific identification method in computing realized gains and losses. For the three months ended June 30, 2019 and 2018 the percentage of gains on bonds due to the call of securities was 89.4% and 99.0%, respectively. For the six months ended June 30, 2019 and 2018 the percentage of gains on bonds due to the call of securities was 72.6% and 99.7%, respectively. This includes calls out of the Company's available for sale portfolio of debt securities.

The table below presents net impairment losses recognized in earnings for the periods indicated.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019		2018
	(In thousands)
Total other-than-temporary impairment gains (losses) on debt securities	$	(5,900	)	3		(5,897	)	6
Portion of loss (gain) recognized in comprehensive income	(2		)	(3	)	(5	)	(6	)
Net impairment losses on debt securities recognized in earnings	(5,902		)	—		(5,902	)	—
Totals	$	(5,902	)	—		(5,902	)	—

The table below presents a roll forward of credit losses on securities for which the Company also recorded non-credit other-than-temporary impairments in other comprehensive loss.

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019	Year Ended December 31, 2018
	(In thousands)
Beginning balance, cumulative credit losses related to other-than-temporary impairments	$	627	627	627
Reductions for securities sold during current period	—		—	—
Additions for credit losses not previously recognized in other-than-temporary impairments	—		—	—
Ending balance, cumulative credit losses related to other-than-temporary impairments	$	627	627	627

(B) Debt Securities

The table below presents amortized costs and fair values of debt securities held to maturity at June 30, 2019.

	Debt Securities Held to Maturity
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
U.S. agencies	$	121,000	1,818	—		122,818
U.S. Treasury	3,772		162	—		3,934
States and political subdivisions	475,081		18,995	(45	)	494,031
Foreign governments	1,154		44	—		1,198
Public utilities	914,921		30,127	(56	)	944,992
Corporate	4,688,662		163,757	(1,996	)	4,850,423
Commercial mortgage-backed	3,046		58	—		3,104
Residential mortgage-backed	1,131,418		34,876	(704	)	1,165,590
Asset-backed	3,305		85	—		3,390
Totals	$	7,342,359	249,922	(2,801	)	7,589,480

The table below presents amortized costs and fair values of debt securities available for sale at June 30, 2019.

	Debt Securities Available for Sale
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
States and political subdivisions	$	100,781	4,543	(1	)	105,323
Foreign governments	9,978		252	—		10,230
Public utilities	78,919		3,349	—		82,268
Corporate	2,950,597		102,775	(5,764	)	3,047,608
Commercial mortgage-backed	28,931		1,010	—		29,941
Residential mortgage-backed	14,481		1,210	(101	)	15,590
Asset-backed	81,873		2,272	—		84,145
Totals	$	3,265,560	115,411	(5,866	)	3,375,105

The table below presents amortized costs and fair values of securities held to maturity at December 31, 2018.

	Securities Held to Maturity
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
U.S. Treasury	$	1,341	116	—		1,457
States and political subdivisions	457,404		9,764	(2,376	)	464,792
Public utilities	930,629		5,928	(12,944	)	923,613
Corporate	4,715,775		27,652	(87,043	)	4,656,384
Residential mortgage-backed	1,176,216		13,771	(11,932	)	1,178,055
Asset-backed	3,889		88	(10	)	3,967
Totals	$	7,285,254	57,319	(114,305	)	7,228,268

The table below presents amortized costs and fair values of securities available for sale at December 31, 2018.

	Securities Available for Sale
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
States and political subdivisions	$	570	—	(4	)	566
Foreign governments	9,974		30	—		10,004
Public utilities	82,943		1,045	(517	)	83,471
Corporate	2,893,221		15,473	(79,638	)	2,829,056
Residential mortgage-backed	15,947		937	(84	)	16,800
Asset-backed	5,969		193	—		6,162
Totals	$	3,008,624	17,678	(80,243	)	2,946,059

The Company does not consider securities to be other-than-temporarily impaired when the market decline is attributable to factors such as market volatility, liquidity, spread widening and credit quality where it is anticipated that a recovery of all amounts due under the contractual terms of the security will occur and the Company has the intent and ability to hold until recovery or maturity. Based on its review, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2019. The Company monitors the investment portfolio on an ongoing basis for any changes in issuer facts and circumstances that could result in future impairments.

During the three and six months ended June 30, 2019, the Company recorded $5.9 million in other-than-temporary impairments on debt securities on Weatherford International bonds. Weatherford International announced its intention to file Chapter 11 bankruptcy on May 10, 2019 which caused its market price to drop considerably.  Subsequently, on July 1, 2019, Weatherford filed for bankruptcy. Unrealized losses for debt securities held to maturity and debt securities available for sale decreased during the first six months of 2019 primarily due to the downward movement in market interest rates during this period (which increases the market price of debt securities).

Debt Securities balances at June 30, 2019 include Ozark National holdings of $289.7 million in held to maturity and $403.8 million in available for sale. As part of the acquisition effective January 31, 2019 the Company employed purchase accounting procedures in accordance with GAAP which revalued the acquired investment portfolio to their fair values as of the date of the acquisition. These fair values became the book values for Ozark National from that point going forward. Accordingly, unrealized gains and losses for the Ozark National debt securities represent the changes subsequent to the purchase accounting book values established at January 31, 2019.

The following table shows the gross unrealized losses and fair values of the Company's held to maturity debt securities by investment category and length of time the individual securities have been in a continuous unrealized loss position at June 30, 2019.

	Debt Securities Held to Maturity
	Less than 12 Months				12 Months or Greater			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(In thousands)
Debt securities:
States and political subdivisions	$	—	—		1,666	(45	)	1,666	(45	)
Public utilities	—		—		11,183	(56	)	11,183	(56	)
Corporate	11,333		(57	)	111,933	(1,939	)	123,266	(1,996	)
Residential mortgage-backed	4,307		(4	)	66,247	(700	)	70,554	(704	)
Total	$	15,640	(61	)	191,029	(2,740	)	206,669	(2,801	)

The following table shows the gross unrealized losses and fair values of the Company's available for sale debt securities by investment category and length of time the individual securities have been in a continuous unrealized loss position at June 30, 2019.

	Debt Securities Available for Sale
	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
Debt securities:
States and political subdivisions	$	479	(1		)	—		—			479		(1		)
Corporate	5,189		(33		)	189,145		(5,731		)	194,334		(5,764		)
Residential mortgage-backed	—		—			845		(101		)	845		(101		)
Total	$	5,668	$	(34	)	$	189,990	$	(5,832	)	$	195,658	$	(5,866	)

The following table shows the gross unrealized losses and fair values of the Company's held to maturity investments by investment category and length of time the individual securities have been in a continuous unrealized loss position at December 31, 2018.

	Securities Held to Maturity
	Less than 12 Months				12 Months or Greater			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(In thousands)
Debt securities:
States and political subdivisions	$	88,253	(2,124	)	10,645	(252	)	98,898	(2,376	)
Public utilities	396,980		(8,371	)	98,632	(4,573	)	495,612	(12,944	)
Corporate	2,144,969		(55,125	)	650,401	(31,918	)	2,795,370	(87,043	)
Residential mortgage-backed	202,986		(2,032	)	311,374	(9,900	)	514,360	(11,932	)
Asset-backed	—		—		1,976	(10	)	1,976	(10	)
Total	$	2,833,188	(67,652	)	1,073,028	(46,653	)	3,906,216	(114,305	)

The following table shows the gross unrealized losses and fair values of the Company's available for sale investments by investment category and length of time that the individual securities have been in a continuous unrealized loss position at December 31, 2018.

	Securities Available for Sale
	Less than 12 Months				12 Months or Greater			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(In thousands)
Debt securities:
States and political subdivisions	$	566	(4	)	—	—		566	(4	)
Public utilities	38,903		(517	)	—	—		38,903	(517	)
Corporate	1,468,953		(44,575	)	442,798	(35,063	)	1,911,751	(79,638	)
Residential mortgage-backed	—		—		878	(84	)	878	(84	)
Total	$	1,508,422	(45,096	)	443,676	(35,147	)	1,952,098	(80,243	)

Debt securities. The gross unrealized losses for debt securities are made up of 63 individual issues, or 4.1% of the total debt securities held by the Company at June 30, 2019. The market value of these bonds as a percent of amortized cost approximates 97.9%. Of the 63 securities, 52, or 82.5%, fall in the 12 months or greater aging category; and 59 were rated investment grade at June 30, 2019.

The amortized cost and fair value of investments in debt securities at June 30, 2019, by contractual maturity, are shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Debt Securities Available for Sale			Debt Securities Held to Maturity
	Amortized Cost		Fair Value	Amortized Cost	Fair Value
	(In thousands)
Due in 1 year or less	$	195,368	198,197	359,261	363,189
Due after 1 year through 5 years	1,182,355		1,216,520	3,083,206	3,170,949
Due after 5 years through 10 years	1,539,821		1,594,437	2,299,446	2,390,796
Due after 10 years	222,731		236,275	462,677	492,462
	3,140,275		3,245,429	6,204,590	6,417,396
Mortgage and asset-backed securities	125,285		129,676	1,137,769	1,172,084
Total	$	3,265,560	3,375,105	7,342,359	7,589,480

(C)  Transfer of Securities

During the three and six months ended June 30, 2019 the Company made no transfers from the held to maturity category to securities available for sale.

(D) Mortgage Loans and Real Estate

A financing receivable is a contractual right to receive money on demand or on fixed or determinable dates that is recognized as an asset in a company's statement of financial position. The Company's mortgage, participation and mezzanine loans on real estate are the only financing receivables included in the Condensed Consolidated Balance Sheets.

Credit and default risk is minimized through strict underwriting guidelines and diversification of underlying property types and geographic locations. In addition to being secured by the property, mortgage loans with leases on the underlying property are often guaranteed by the lease payments and also by the borrower. This approach has proved to result in quality mortgage loans with few defaults. Mortgage loan interest income is recognized on an accrual basis with any premium or discount amortized over the life of the loan. Prepayment and late fees are recorded on the date of collection.

Loans in foreclosure, loans considered impaired or loans past due 90 days or more are placed on a non-accrual status. If a mortgage loan is determined to be on non-accrual status, the mortgage loan does not accrue any revenue into the Condensed Consolidated Statements of Earnings. The loan is independently monitored and evaluated as to potential impairment or foreclosure. If delinquent payments are made and the loan is brought current, then the Company returns the loan to active status and accrues income accordingly. The Company had no mortgage loans past due 90 days or more at June 30, 2019 or 2018 and as a result all interest income was recognized at June 30, 2019 and 2018.

The following table represents the mortgage loan portfolio by loan-to-value ratio.

	June 30, 2019					December 31, 2018
	Amount			%		Amount			%
	(In thousands)					(In thousands)
Mortgage Loans by Loan-to-Value Ratio (1):
Less than 50%	$	60,831		28.3		$	66,371		32.6
50% to 60%	38,963			18.1		22,610			11.1
60% to 70%	99,009			46.1		102,857			50.4
70% to 80%	16,167			7.5		6,642			3.3
80% to 90%	—			—		5,375			2.6
Greater than 90%	—			—		—			—
Gross balance	214,970			100.0		203,855			100.0
Allowance for possible losses	(675		)	(0.3	)	(675		)	(0.3	)
Totals	$	214,295		99.7		$	203,180		99.7

(1) Loan-to-Value Ratio is determined using the most recent appraised value. Appraisals are required at the time of funding and may be updated if a material change occurs from the original loan agreement.

All mortgage loans are analyzed quarterly in order to monitor the financial quality of these assets. Based on ongoing monitoring, mortgage loans with a likelihood of becoming delinquent are identified and placed on an internal “watch list”. Among the criteria that may indicate a potential problem include: major tenant vacancies or bankruptcies, late payments, and loan relief/restructuring requests. The mortgage loan portfolio is analyzed for the need for a valuation allowance on any loan that is on the internal watch list, in the process of foreclosure or that currently has a valuation allowance.

Mortgage loans are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. When it is determined that a loan is impaired, a loss is recognized for the difference between the carrying amount of the mortgage loan and the estimated value reduced by the cost to sell. Estimated value is typically based on the loan's observable market price or the fair value of the collateral less cost to sell. Impairments and changes in the valuation allowance are reported in net realized investment gains (losses) in the Condensed Consolidated Statements of Earnings.

The following table represents the mortgage loan allowance for the periods shown.

	June 30, 2019		December 31, 2018
	(In thousands)
Balance, beginning of period	$	675	650
Provision	—		25
Releases	—		—
Balance, end of period	$	675	675

The Company's direct investments in real estate are not a significant portion of its total investment portfolio and totaled approximately $34.9 million and $35.7 million at June 30, 2019 and December 31, 2018, respectively. Included in the amount at June 30, 2019 is a surface parking property owned by Ozark National which it leases. The value of this real estate investment was appraised at $4.3 million at January 31, 2019 as part of the purchase accounting done as of that date. The Company recognized operating income on real estate properties of approximately $1.4 million and $1.1 million for the first six months of 2019 and 2018, respectively.

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Fair Values of Financial Instruments

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Fair Values of Financial Instruments

FAIR VALUES OF FINANCIAL INSTRUMENTS

For financial instruments, the FASB provides guidance which defines fair value, establishes a framework for measuring fair value under GAAP, and requires additional disclosures about fair value measurements. In compliance with this GAAP guidance, the Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities ("Level 1") and the lowest priority to unobservable inputs ("Level 3"). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

Financial assets and liabilities recorded at fair value on the Condensed Consolidated Balance Sheets are categorized as follows:

Level 1: Fair value is based on unadjusted quoted prices in active markets that are accessible to the Company for identical assets or liabilities. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. These generally provide the most reliable evidence and are used to measure fair value whenever available. The Company's Level 1 assets are equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets.

Level 2:  Fair value is based upon significant inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable for substantially the full term of the asset or liability through corroboration with observable market data as of the reporting date. Level 2 inputs include quoted market prices in active markets for similar assets and liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities, model-derived valuations whose inputs are observable or whose significant value drivers are observable and other observable inputs. The Company’s Level 2 assets include fixed maturity debt securities (corporate and private bonds, government or agency securities, asset-backed and mortgage-backed securities).  Valuations are generally obtained from third party pricing services for identical or comparable assets or determined through use of valuation methodologies using observable market inputs.

Level 3:  Fair value is based on significant unobservable inputs which reflect the entity’s or third party pricing service’s assumptions about the assumptions market participants would use in pricing an asset or liability. The Company’s Level 3 assets are over-the-counter derivative contracts. The Company’s Level 3 liabilities consist of share-based compensation obligations, certain product-related embedded derivatives, and contingent consideration in the acquisition of businesses. Valuations are estimated based on non-binding broker prices or internally developed valuation models or methodologies, discounted cash flow models and other similar techniques.

The following tables set forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of the date indicated:

	June 30, 2019
	Total		Level 1	Level 2	Level 3
	(In thousands)
Debt securities, available for sale	$	3,375,105	—	3,375,105	—
Equity securities	19,324		19,324	—	—
Derivatives, index options	89,900		—	—	89,900
Total assets	$	3,484,329	19,324	3,375,105	89,900
Policyholder account balances (a)	$	100,638	—	—	100,638
Other liabilities (b)	11,862		—	—	11,862
Total liabilities	$	112,500	—	—	112,500

During the three and six months ended June 30, 2019, the Company made no transfers into or out of Levels 1, 2 or 3.

	December 31, 2018
	Total		Level 1	Level 2	Level 3
	(In thousands)
Debt securities, available for sale	$	2,946,059	—	2,946,059	—
Equity securities	17,491		17,491	—	—
Derivatives, index options	14,684		—	—	14,684
Total assets	$	2,978,234	17,491	2,946,059	14,684
Policyholder account balances (a)	$	44,781	—	—	44,781
Other liabilities (b)	11,923		—	—	11,923
Total liabilities	$	56,704	—	—	56,704

(a)  Represents the fair value of certain product-related embedded derivatives that were recorded at fair value.

(b)  Represents the liability for share-based compensation and contingent consideration for businesses acquired.

The following tables present, by pricing source and fair value hierarchy level, the Company’s assets that are measured at fair value on a recurring basis:

	June 30, 2019
	Total			Level 1		Level 2		Level 3
	(In thousands)
Debt securities, available for sale:
Priced by third-party vendors	$	3,375,105		—		3,375,105		—
Priced internally	—			—		—		—
Subtotal	3,375,105			—		3,375,105		—
Equity securities:
Priced by third-party vendors	19,324			19,324		—		—
Priced internally	—			—		—		—
Subtotal	19,324			19,324		—		—
Derivatives, index options:
Priced by third-party vendors	89,900			—		—		89,900
Priced internally	—			—		—		—
Subtotal	89,900			—		—		89,900
Total	$	3,484,329		19,324		3,375,105		89,900
Percent of total	100.0		%	0.6	%	96.8	%	2.6	%

	December 31, 2018
	Total			Level 1		Level 2		Level 3
	(In thousands)
Debt securities, available for sale:
Priced by third-party vendors	$	2,946,059		—		2,946,059		—
Priced internally	—			—		—		—
Subtotal	2,946,059			—		2,946,059		—
Equity securities, available for sale:
Priced by third-party vendors	17,491			17,491		—		—
Priced internally	—			—		—		—
Subtotal	17,491			17,491		—		—
Derivatives, index options:
Priced by third-party vendors	14,684			—		—		14,684
Priced internally	—			—		—		—
Subtotal	14,684			—		—		14,684
Total	$	2,978,234		17,491		2,946,059		14,684
Percent of total	100.0		%	0.6	%	98.9	%	0.5	%

The following tables provide additional information about fair value measurements for which significant unobservable (Level 3) inputs were utilized to determine fair value.

	Three Months Ended June 30, 2019
	Debt Securities, Available for Sale		Equity Securities	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Balance at April 1, 2019	$	—	—	71,001		71,001		97,725
Total realized and unrealized gains (losses):
Included in net income	—		—	17,828		17,828		13,704
Purchases, sales, issuances and settlements, net:
Purchases	—		—	19,030		19,030		19,030
Sales	—		—	—		—		—
Issuances	—		—	—		—		—
Settlements	—		—	(17,959	)	(17,959	)	(17,959	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	89,900		89,900		112,500
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	4,350		4,350		—
Benefits and expenses	—		—	—		—		4,614
Total	$	—	—	4,350		4,350		4,614

	Three Months Ended June 30, 2018
	Debt Securities, Available for Sale		Equity Securities, Available for Sale	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Balance at April 1, 2018	$	—	—	116,356		116,356		147,502
Total realized and unrealized gains (losses):
Included in net income	—		—	10,292		10,292		10,608
Purchases, sales, issuances and settlements, net:
Purchases	—		—	21,901		21,901		21,901
Sales	—		—	—		—		—
Issuances	—		—	—		—		—
Settlements	—		—	(46,542	)	(46,542	)	(46,998	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	102,007		102,007		133,013
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	20,610		20,610		—
Benefits and expenses	—		—	—		—		21,861
Total	$	—	—	20,610		20,610		21,861

	Six Months Ended June 30, 2019
	Debt Securities, Available for Sale		Equity Securities	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Beginning balance, January 1, 2019	$	—	—	14,684		14,684		56,704
Total realized and unrealized gains (losses):
Included in net income	—		—	59,830		59,830		39,232
Purchases, sales, issuances and settlements, net:
Purchases	—		—	36,622		36,622		36,622
Sales	—		—	—		—
Issuances	—		—	—		—		3,700
Settlements	—		—	(21,236	)	(21,236	)	(23,758	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	89,900		89,900		112,500
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	44,814		44,814		—
Other operating expenses	—		—	—		—		43,575
Total	$	—	—	44,814		44,814		43,575

	Six Months Ended June 30, 2018
	Debt Securities, Available for Sale		Equity Securities, Available for Sale	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Beginning balance, January 1, 2018	$	—	—	194,731		194,731		226,401
Total realized and unrealized gains (losses):
Included in net income	—		—	(34,102	)	(34,102	)	(32,820	)
Purchases, sales, issuances and settlements, net:
Purchases	—		—	44,277		44,277		44,277
Sales	—		—	—		—		—
Issuances	—		—	—		—		—
Settlements	—		—	(102,899	)	(102,899	)	(104,845	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	102,007		102,007		133,013
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	(23,727	)	(23,727	)	—
Other operating expenses	—		—	—		—		(23,019	)
Total	$	—	—	(23,727	)	(23,727	)	(23,019	)

The following table presents the valuation method for financial assets and liabilities categorized as level 3, as well as the unobservable inputs used in the valuation of those financial instruments:

	June 30, 2019
	Fair Value		Valuation Technique	Unobservable Input
	(In thousands)
Derivatives, index options	$	89,900	Broker prices	Implied volatility
				Inputs from broker proprietary models
Total assets	$	89,900
Policyholder account balances	$	100,638	Deterministic cash flow model	Projected option cost
Other liabilities, share-based compensation	7,991		Black-Scholes model	Expected term, Forfeiture assumptions
Other liabilities, contingent consideration on businesses acquired	3,871		Probabilistic Method	Projected renewal premium
Total liabilities	$	112,500

	December 31, 2018
	Fair Value		Valuation Technique	Unobservable Input
	(In thousands)
Derivatives, index options	$	14,684	Broker prices	Implied volatility
				Inputs from broker proprietary models
Total assets	$	14,684
Policyholder account balances	$	44,781	Deterministic cash flow model	Projected option cost
Other liabilities	11,923		Black-Scholes model	Expected term
				Forfeiture assumptions
Total liabilities	$	56,704

Realized gains (losses) on debt securities are reported in the Condensed Consolidated Statements of Earnings as net investment gains (losses) with liabilities reported as expenses. Unrealized gains (losses) on available for sale debt securities are reported as other comprehensive income (loss) within the stockholders' equity section of the Condensed Consolidated Balance Sheet.

Effective January 1, 2018, the change in fair value of equity securities is reported in the Condensed Consolidated Statement of Earnings as net investment income.

The fair value hierarchy classifications are reviewed each reporting period. Reclassification of certain financial assets and liabilities may result based on changes in the observability of valuation attributes. Reclassifications are reported as transfers into and out of Level 3 at the beginning fair value for the reporting period in which the changes occur.

The carrying amounts and fair values of the Company's financial instruments are as follows:

	June 30, 2019
				Fair Value Hierarchy Level
	Carrying Values		Fair Values	Level 1	Level 2	Level 3
	(In thousands)
ASSETS
Debt securities held to maturity	$	7,342,359	7,589,480	—	7,587,924	1,556
Debt securities available for sale	3,375,105		3,375,105	—	3,375,105	—
Cash and cash equivalents	140,802		140,802	140,802	—	—
Mortgage loans	214,295		225,807	—	—	225,807
Policy loans	80,155		122,556	—	—	122,556
Other loans	13,873		14,047	—	—	14,047
Derivatives, index options	89,900		89,900	—	—	89,900
Equity securities	19,324		19,324	19,324	—	—
Life interest in Libbie Shearn Moody Trust	8,692		12,775	—	—	12,775
LIABILITIES
Deferred annuity contracts	$	7,209,899	6,009,840	—	—	6,009,840
Immediate annuity and supplemental contracts	404,211		426,338	—	—	426,338
Contingent consideration on businesses acquired	3,871		3,871	—	—	3,871

	December 31, 2018
				Fair Value Hierarchy Level
	Carrying Values		Fair Values	Level 1	Level 2	Level 3
	(In thousands)
ASSETS
Debt securities held to maturity	$	7,285,254	7,228,268	—	7,226,362	1,906
Debt securities available for sale	2,946,059		2,946,059	—	2,946,059	—
Cash and cash equivalents	131,976		131,976	131,976	—	—
Mortgage loans	203,180		202,762	—	—	202,762
Policy loans	54,724		90,802	—	—	90,802
Other loans	12,272		12,709	—	—	12,709
Derivatives, index options	14,684		14,684	—	—	14,684
Equity securities	17,491		17,491	17,491	—	—
Life interest in Libbie Shearn Moody Trust	8,692		12,775	—	—	12,775
LIABILITIES
Deferred annuity contracts	$	7,455,642	6,403,007	—	—	6,403,007
Immediate annuity and supplemental contracts	407,413		415,726	—	—	415,726

Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instruments. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. Because no market exists for a portion of the Company's financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

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Derivative Investments

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Investments

DERIVATIVE INVESTMENTS

Fixed-index products provide traditional fixed annuities and universal life contracts with the option to have credited interest rates linked in part to an underlying equity index or a combination of equity indices. The equity return component of such policy contracts is identified separately and accounted for in future policy benefits as embedded derivatives on the Condensed Consolidated Balance Sheets. The remaining portions of these policy contracts are considered the host contracts and are recorded separately as fixed annuity or universal life contracts. The host contracts are accounted for under debt instrument type accounting in which future policy benefits are recorded as discounted debt instruments and accreted, using the effective yield method, to their minimum account values at their projected maturities or termination dates.

The Company purchases over-the-counter index options, which are derivative financial instruments, to hedge the equity return component of its fixed-index annuity and life products. The index options act as hedges to match closely the returns on the underlying index or indices. The amounts which may be credited to policyholders are linked, in part, to the returns of the underlying index or indices. As a result, changes to policyholders' liabilities are substantially offset by changes in the value of the options. Cash is exchanged upon purchase of the index options and no principal or interest payments are made by either party during the option periods. Upon maturity or expiration of the options, cash may be paid to the Company depending on the performance of the underlying index or indices and terms of the contract.

The Company does not elect hedge accounting relative to these derivative instruments. The index options are reported at fair value in the accompanying Condensed Consolidated Financial Statements. The changes in the values of the index options and the changes in the policyholder liabilities are both reflected in the Condensed Consolidated Statements of Earnings. Any changes relative to the embedded derivatives associated with policy contracts are reflected in contract interest in the Condensed Consolidated Statements of Earnings. Any gains or losses from the sale or expiration of the options, as well as period-to-period changes in values, are reflected as net investment income in the Condensed Consolidated Statements of Earnings.

Although there is credit risk in the event of nonperformance by counterparties to the index options, the Company does not expect any of its counterparties to fail to meet their obligations, given their high credit ratings. In addition, credit support agreements are in place with all counterparties for option holdings in excess of specific limits, which may further reduce the Company's credit exposure.

The tables below present the fair value of derivative instruments as of June 30, 2019 and December 31, 2018, respectively.

	June 30, 2019
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
		(In thousands)			(In thousands)
Derivatives not designated as hedging instruments
Equity index options	Derivatives, Index Options	$	89,900
Fixed-index products				Universal Life and Annuity Contracts	$	100,638
Total		$	89,900		$	100,638

	December 31, 2018
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
		(In thousands)			(In thousands)
Derivatives not designated as hedging instruments
Equity index options	Derivatives, Index Options	$	14,684
Fixed-index products				Universal Life and Annuity Contracts	$	44,781
Total		$	14,684		$	44,781

The table below presents the effect of derivative instruments in the Condensed Consolidated Statements of Earnings for the three months ended June 30, 2019 and 2018.

		June 30, 2019			June 30, 2018
Derivatives Not Designated  As Hedging Instruments	Location of Gain  or (Loss) Recognized In Income on Derivatives	Amount of Gain or  (Loss) Recognized in  Income on Derivatives
		(In thousands)
Equity index options	Net investment income	$	17,828		10,292
Fixed-index products	Universal life and annuity contract interest	(13,439		)	(9,357	)
		$	4,389		935

The table below presents the effect of derivative instruments in the Condensed Consolidated Statements of Earnings for the six months ended June 30, 2019 and 2018.

		June 30, 2019			June 30, 2018
Derivatives Not Designated  As Hedging Instruments	Location of Gain  or (Loss) Recognized In Income on Derivatives	Amount of Gain or  (Loss) Recognized in  Income on Derivatives
		(In thousands)
Equity index options	Net investment income	$	59,830		(34,102	)
Fixed-index products	Universal life and annuity contract interest	(40,470		)	33,528
		$	19,360		(574	)

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Business Combinations

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Business Combinations

BUSINESS COMBINATIONS

Effective January 31, 2019, the Company acquired Ozark National Life Insurance Company (“Ozark National”) and N.I.S. Financial Services, Inc. (“NIS”) following the receipt of regulatory approvals. NWLGI and National Western paid cash in an aggregate amount of approximately $205.4 million in exchange for all of the outstanding stock of Ozark National (wholly owned by National Western) and NIS (wholly owned by NWLGI). In addition to the cash price paid, National Western has a contingent liability for an "earn-out payment" based upon the persistency of Ozark National's in force business that was acquired achieving thresholds as specified in the Stock Purchase Agreement ("Agreement"). The earn-out payment from the Company to the seller per the Agreement has a maximum limit of $5.0 million. Using a probabilistic method for valuing contingent consideration, the Company at January 31, 2019 recorded a liability of $3.7 million representing the estimated fair value of the additional consideration estimated to be paid as part of the acquisition. The contingent consideration was subsequently reported at its fair value of $3.9 million as of June 30, 2019, with changes in fair value running through general expenses.

In addition to the purchase price, the Company incurred $3.2 million of acquisition-related costs in 2019, and an additional $1.0 million in acquisition-related costs during the year ended December 31, 2018. In accordance with GAAP, these costs are included in other operating expenses in the Condensed Consolidated Statements of Earnings and are not considered a part of the purchase price.

The acquisition has been accounted for in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. Purchase accounting, as defined by ASC 805, requires that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The fair values shown below were determined based on management’s best estimates, employing fair valuation methodologies commonly utilized in preparing financial statements in accordance with GAAP, and are subject to revision for one year following the acquisition date. The excess of the purchase price paid above net tangible assets acquired has been assigned to intangible assets and goodwill. The following table presents the fair values of the net assets acquired as of January 31, 2019.

	January 31, 2019
Assets	Fair value
	(In thousands)
Debt securities held to maturity	$	261,059
Debt securities available for sale	400,719
Policy loans	28,128
Real estate	4,600
Cash and cash equivalents	16,275
Accrued investment income	6,116
Value of business acquired	145,768
Reinsurance recoverables	21,895
Other intangible assets	9,600
Other assets acquired	12,075
Total assets acquired	906,235
Liabilities
Traditional life reserves	691,297
Other policyholder liabilities	13,867
Other liabilities acquired	5,840
	711,004
Net identifiable assets acquired	195,231
Goodwill	13,864
Net assets acquired	$	209,095

Identifiable Intangible Assets

The following table presents the fair value of identifiable intangible assets acquired at January 31, 2019:

	Fair Value		Weighted-Average Amortization Period
	(In thousands)
Trademarks / trade names	$	2,800	15
Internally developed software	3,800		7
Insurance licenses	3,000		NA
	$	9,600

The value of trademarks was estimated using the relief from royalty method, based on the assumption that in lieu of ownership, an organization would be willing to pay a royalty in order to receive the related benefits of using the brand. The value of insurance licenses was estimated using the market approach to value, based on values paid for licenses in recent shell company transactions. The value of internally developed software was estimated using the replacement cost method. These identified intangible assets will be amortized using a straight-line method over their respective amortization periods and will be reviewed annually for impairments.

Value of Business Acquired ("VOBA")

VOBA is a purchase accounting convention for life insurance companies in business combinations based upon an actuarial determination of the difference between the fair value of policyholder liabilities acquired and the same policyholder liabilities measured in accordance with the acquiring company's accounting policies. The difference, referred to as VOBA, is an intangible asset subject to periodic amortization. As of the January 31, 2019 acquisition date, the VOBA balance recorded was $145.8 million. Based upon the remaining unamortized balance as of June 30, 2019, the expected amortization for the next five years is as follows:

	Expected Amortization
	(In thousands)
Remainder of 2019	$	4,596
2020	$	8,725
2021	$	8,282
2022	$	7,897
2023	$	7,552

Financial Information

Subsequent to the acquisition date of January 31, 2019, Ozark National and NIS total revenues of $48.4 million and net earnings of $7.2 million have been included in Condensed Consolidated Statements of Earnings for the quarter and five months ended June 30, 2019. These results for segment reporting purposes have been combined in the Acquired Businesses segment.

The following unaudited comparative pro forma total revenues and net earnings represent Condensed Consolidated Results of Operations for the Company which assume amounts estimated had the acquisition of Ozark National and NIS by the Company been effective January 1, 2018.

	Three Months Ended June 30,			Six Months Ended June 30
	2019		2018	2019	2018
	(In thousands)
Total revenues	$	192,685	203,421	420,268	341,832
Net earnings	$	33,696	36,120	75,328	67,720

The pro forma amounts shown above include the estimated total revenues and net earnings of the acquired businesses for each period incorporating amortization of identifiable intangible assets acquired and fair value adjustments to acquired invested assets and traditional life insurance reserves.

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Subsequent Events

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

Subsequent events have been evaluated through the date of filing and no reportable items were identified.

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New Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

New Accounting Pronouncements

Recent accounting pronouncements not yet adopted

On April 25, 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments in this Update add clarification and correction to various aspects of the following guidance previously issued related to financial instruments, based on feedback from stakeholders.

A. ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments Areas for improvement. The amendments clarify guidance and implementation around accrued interest, transfers between classifications or categories for loans and debt securities, consideration of recoveries in estimating allowances, reinsurance recoveries, consideration of prepayments and estimated costs to sell when foreclosure is probable. Additionally, the amendments correct certain cross-references.

B. ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Liabilities. The amendments clarify the scope of the original Update, and add clarification on the guidance and implementation around fair value disclosure requirements for nonpublic entities, measurement alternatives for equity securities without readily determinable fair values at nonrecurring fair value measurement, remeasurement of equity securities without readily determinable fair values at historical exchange rates, and associated disclosure requirements.

C. ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments clarify the guidance and implementation around partial-term fair value hedges of interest rate risk, amortization of fair value hedge basis adjustments, disclosure of fair value hedge basis adjustments, consideration of the hedged contractually specified interest rate under the hypothetical derivative method, scope for nonpublic entities, and application of a first-payments-received cash flow hedging technique to overall cash flows on a group of variable interest payments.

The amendments contained in this update will be effective for the same fiscal years in which the original ASU becomes effective, or, if already implemented, annual periods beginning after the issuance of this update. The Company will be primarily affected by the clarifications provided to ASU 2016-13, which is still pending adoption.

In August 2018, the FASB issued ASU 2018-12 Financial Services-Insurance (Topic 944) - Targeted Improvements to the Accounting for Long-Duration Contracts. This update is aimed at improving the Codification as it relates to long-duration contracts which will improve the timeliness of recognizing changes in the liability for future policy benefits, simplify accounting for certain market-based options, simplify the amortization of deferred acquisition costs, and improve the effectiveness of required disclosures. Amendments include the following:

A. Require insurance entity to (1) review and update assumptions used to measure cash flows at least annually (with changes recognized in net income) and (2) update discount rate assumption at each reporting date (with changes recognized in other comprehensive income).

B. Require insurance entity to measure all market risk benefits associated with deposit (i.e. account balance) contracts at fair value, with change in fair value attributable to change in instrument-specific credit risk recognized in other comprehensive income.

C. Simplify amortization of deferred acquisition costs and other balances amortized in proportion to premiums, gross profits, or gross margins and require those balances be amortized on constant level basis over expected term of related contract. Deferred acquisition costs are required to be written off for unexpected contract terminations but are not subject to impairment test.

D. Require insurance entity to add disclosures of disaggregated rollforwards of beginning to ending balances of the liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities, and deferred acquisition costs. Insurance entity must also disclose information about significant inputs, judgments, assumptions, and methods used in measurement, including changes in those inputs, judgments, and assumptions, and the effect of those changes on measurement.

These updates are required to be applied retrospectively to the earliest period presented in the financial statements for periods beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

In August 2018, the FASB issued a new Concepts Statement No. 8 Conceptual Framework for Financial Reporting - Chapter 8, Notes to Financial Statements. This was issued as part of a disclosure framework project aimed at improving disclosures in financial statements. This issuance provides conceptual guidance that may be followed when determining items to include as disclosures in the notes to financial statements. In conjunction with this issuance, the FASB also issued two accounting standard updates (“ASU”) which identified a particular FASB Topic and evaluated its disclosures through the new conceptual framework of Concepts Statement No. 8, Chapter 8. This process resulted in the issuance of the following two ASUs.

In August 2018, FASB issued ASU 2018-13 Fair Value Measurement (Topic 820) Disclosure Framework - Changes to the Disclosure requirements for Fair Value Measurement. This update removed disclosures for 1) amount of and reasons for transfers between Level 1 and Level 2 for fair value hierarchy, 2) policy for timing of transfers between levels, 3) valuation process for Level 3 fair value measurements. This update also added disclosure requirement as follows: 1) changes in unrealized gains and losses for the period included in OCI for recurring Level 3 fair value measurements held at end of reporting period; 2) range and weighted average (or other reasonable quantitative measurement) of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments will be effective for interim periods beginning after December 15, 2019. Adoption of the guidance is not expected to have a material effect on the Company’s results of operations or financial position.

In August 2018, FASB issued ASU 2018-14 Compensation-Retirement Benefits - Defined Benefit Plans-General (Subtopic 715-20) Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. This update removed disclosures for 1) amounts in AOCI expected to be recognized as components of net periodic benefit cost over the next fiscal year, 2) amount and timing of plan assets expected to be returned to the employer, 3) related party disclosures about the amount of future annual benefits covered by insurance and annuity contracts and significant transactions between the employer or related parties and the plan, 4) the effects of a one-percentage-point change in assumed health care cost trend rates on the (a) aggregate of the service and interest cost components of the net periodic benefit costs and (b) benefit obligation for postretirement health care benefits. This update also added disclosures as follow: 1) weighted-average interest crediting rates for cash balance plans and other plans with promised crediting rates, 2) explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. Finally, this update clarified that the following information for defined benefit pension plans should be disclosed: 1) projected benefit obligation (PBO) and fair value of plan assets for plans with PBO in excess of plan assets, 2) accumulated benefit obligation (ABO) and fair value of plan assets for plans with ABOs in excess of plan assets. The amendments will be effective for fiscal periods ending after December 31, 2020. Adoption of the guidance is not expected to have a material effect on the Company’s results of operations or financial position.

In June 2016, the FASB released ASU 2016-13, Financial Instruments-Credit Losses, which revises the credit loss recognition criteria for certain financial assets measured at amortized cost. The new guidance replaces the existing incurred loss recognition model with an expected loss recognition model. The objective of the expected credit loss model is for the reporting entity to recognize its estimate of expected credit losses for affected financial assets in a valuation allowance deducted from the amortized cost basis of the related financial assets that results in presenting the net carrying value of the financial assets at the amount expected to be collected. The guidance is effective for interim and annual periods beginning after December 15, 2019, and for most affected instruments must be adopted using a modified retrospective approach, with a cumulative effect adjustment recorded to beginning retained income. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

Recent accounting pronouncements adopted

In August 2018, the SEC released a final rule updating disclosure requirements, Disclosure Update and Simplification, which resulted in the additional interim disclosure of an analysis of changes in stockholders’ equity to be required for the current and comparative quarter and year-to-date interim periods. Registrants are required to provide an analysis of changes in each caption of stockholders’ equity and noncontrolling interests, which will be accompanied by dividends per share and in the aggregate for each class of shares. The disclosure must be presented in the form of a reconciliation, either as a separate statement or in the footnotes. The adoption of this ASU in 2019 did not have a material effect on the results of operations or financial position of the Company as this information in year-to-date format is already provided.

In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs: Premium Amortization on Purchased Callable Debt Securities, which amends the amortization period for certain purchased callable debt securities held at a premium. The amortization period for premiums is being shortened to the earliest call date. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The adoption of this ASU in 2019 did not have a material effect on the results of operations or financial position of the Company.

In February 2016, the FASB issued new guidance on leasing transactions (ASU 2016-02, Leases - Topic 842). The new guidance is effective for the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and requires a modified retrospective transition approach (subject to optional practical expedients). The new guidance requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months. Leases would be classified as finance or operating leases and both types of leases will be recognized on the balance sheet. Lessor accounting will remain largely unchanged from current guidance except for certain targeted changes. The new guidance will also require new qualitative and quantitative disclosures. Early adoption is permitted. The Company elected to early adopt this guidance in 2018. There was no material impact to the Company’s financial position, results of operations or cash flows as the result of the adoption of this ASU in 2018.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future Consolidated Financial Statements.

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Consolidation and Basis of Presentation (Tables)

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of the unrealized gains and losses on available-for-sale securities that were reclassified out of accumulated other comprehensive income

The table below shows the unrealized gains and losses on available-for-sale securities that were reclassified out of accumulated other comprehensive income for the three and six months ended June 30, 2019 and June 30, 2018.

Affected Line Item in the Statements of Earnings	Amount Reclassified From Accumulated Other Comprehensive Income
	Three Months Ended June 30,				Six Months Ended June 30,
	2019			2018	2019		2018
	(In thousands)
Other net investment gains (losses)	$	1,168		1,981	2,267		2,021
Net OTTI losses recognized in earnings	(5,902		)	—	(5,902	)	—
Earnings before Federal income taxes	(4,734		)	1,981	(3,635	)	2,021
Federal income taxes	(994		)	417	(763	)	424
Net earnings	$	(3,740	)	1,564	(2,872	)	1,597

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Schedule of earnings per share

	Three Months Ended June 30,
	2019			2018
	Class A		Class B	Class A	Class B
	(In thousands except per share amounts)
Numerator for Basic and Diluted Earnings Per Share:
Net income	$	33,696		32,466
Dividends - Class A shares	—			—
Dividends - Class B shares	—			—
Undistributed earnings	$	33,696		32,466
Allocation of net income:
Dividends	$	—	—	—	—
Allocation of undistributed income	32,743		953	31,548	918
Net earnings	$	32,743	953	31,548	918
Denominator:
Basic earnings per share - weighted-average shares	3,436		200	3,436	200
Effect of dilutive stock options	—		—	—	—
Diluted earnings per share - adjusted weighted-average shares for assumed conversions	3,436		200	3,436	200
Basic Earnings Per Share	$	9.53	4.76	9.18	4.59
Diluted Earnings Per Share	$	9.53	4.76	9.18	4.59

	Six Months Ended June 30,
	2019			2018
	Class A		Class B	Class A	Class B
	(In thousands except per share amounts)
Numerator for Basic and Diluted Earnings Per Share:
Net income	$	73,894		59,341
Dividends - Class A shares	—			—
Dividends - Class B shares	—			—
Undistributed income	$	73,894		59,341
Allocation of net income:
Dividends	$	—	—	—	—
Allocation of undistributed income	71,804		2,090	57,663	1,678
Net income	$	71,804	2,090	57,663	1,678
Denominator:
Basic earnings per share - weighted-average shares	3,436		200	3,436	200
Effect of dilutive stock options	—		—	—	—
Diluted earnings per share - adjusted weighted-average shares for assumed conversions	3,436		200	3,436	200
Basic Earnings Per Share	$	20.90	10.45	16.78	8.39
Diluted Earnings Per Share	$	20.90	10.45	16.78	8.39

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Pension and Other Postretirement Plans (Tables)

6 Months Ended

Jun. 30, 2019

Defined Benefit Pension Plans

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

Schedule of net periodic benefit costs

The following table summarizes the components of net periodic benefit cost.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019		2018
	(In thousands)
Service cost	$	24		28		48		56
Interest cost	210			225		420		450
Expected return on plan assets	(272		)	(325	)	(544	)	(650	)
Amortization of prior service cost	—			—		—		—
Amortization of net loss	165			131		330		262
Net periodic benefit cost	$	127		59		254		118

Chairman and President Non-Qualified Defined Benefit Plans

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

Schedule of net periodic benefit costs

The following table summarizes the components of net periodic benefit costs for the non-qualified defined benefit plans.

	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2019		2018	2019	2018
	(In thousands)
Service cost	$	126	90	251	180
Interest cost	256		213	512	426
Amortization of prior service cost	15		15	30	30
Amortization of net loss	348		176	696	352
Net periodic benefit cost	$	745	494	1,489	988

Defined Benefit Postretirement Healthcare Plans

Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]

Schedule of net periodic benefit costs

The following table summarizes the components of net periodic benefit costs.

	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2019		2018	2019	2018
	(In thousands)
Interest cost	$	50	40	99	80
Amortization of prior service cost	13		26	26	52
Amortization of net loss	61		38	122	75
Net periodic benefit cost	$	124	104	247	207

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Segment and Other Operating Information (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Summary of segment information, by quarter

A summary of segment information as of June 30, 2019 and December 31, 2018 for the Condensed Consolidated Balance Sheet items and for the three and six months ended June 30, 2019 and June 30, 2018 for the Condensed Consolidated Statement of Earnings is provided below.

Condensed Consolidated Balance Sheet Items:

	June 30, 2019
	Domestic Life Insurance		International Life Insurance	Annuities	Acquired Businesses	All Others	Totals
	(In thousands)
Deferred policy acquisition costs, sales inducements, and value of business acquired	$	119,695	217,361	528,241	143,678	—	1,008,975
Total segment assets	1,287,216		1,171,538	8,465,260	953,048	372,642	12,249,704
Future policy benefits	1,108,455		879,742	7,563,354	696,457	—	10,248,008
Other policyholder liabilities	17,239		14,956	94,389	15,147	—	141,731

	December 31, 2018
	Domestic Life Insurance		International Life Insurance	Annuities	Acquired Businesses	All Others	Totals
	(In thousands)
Deferred policy acquisition costs and sales inducements	$	122,661	243,518	609,239	—	—	975,418
Total segment assets	1,215,864		1,211,036	8,791,463	—	370,118	11,588,481
Future policy benefits	1,039,150		894,891	7,810,245	—	—	9,744,286
Other policyholder liabilities	17,439		20,381	97,874	—	—	135,694

Condensed Consolidated Statement of Earnings:

	Three Months Ended June 30, 2019
	Domestic Life Insurance		International  Life Insurance	Annuities	Acquired Businesses	All  Others	Totals
	(In thousands)
Premiums and contract revenues	$	10,706	23,777	5,857	20,380	—	60,720
Net investment income	14,995		9,276	89,572	6,007	8,574	128,424
Other revenues	20		33	64	2,290	1,559	3,966
Total revenues	25,721		33,086	95,493	28,677	10,133	193,110
Life and other policy benefits	3,829		2,959	9,876	16,993	—	33,657
Amortization of deferred policy acquisition costs and value of business acquired	3,307		6,948	18,750	2,406	—	31,411
Universal life and annuity contract interest	12,985		7,337	39,817	—	—	60,139
Other operating expenses	5,017		4,521	9,374	4,491	1,931	25,334
Federal income taxes (benefit)	89		2,014	3,155	956	2,323	8,537
Total expenses	25,227		23,779	80,972	24,846	4,254	159,078
Segment earnings (loss)	$	494	9,307	14,521	3,831	5,879	34,032

	Six Months Ended June 30, 2019
	Domestic Life Insurance		International Life Insurance	Annuities	Acquired Businesses	All Others	Totals
	(In thousands)
Premiums and contract revenues	$	21,510	49,840	10,725	34,181	—	116,256
Net investment income	38,494		23,293	192,726	9,983	15,259	279,755
Other revenues	64		54	72	3,731	6,458	10,379
Total revenues	60,068		73,187	203,523	47,895	21,717	406,390
Life and other policy benefits	7,751		5,121	21,306	27,668	—	61,846
Amortization of deferred policy acquisition costs and value of business acquired	6,717		14,242	38,462	4,154	—	63,575
Universal life and annuity contract interest	34,426		19,330	87,299	—	—	141,055
Other operating expenses	9,140		8,785	16,882	7,576	9,000	51,383
Federal income taxes (benefit)	413		5,222	8,038	1,703	2,582	17,958
Total expenses	58,447		52,700	171,987	41,101	11,582	335,817
Segment earnings (loss)	$	1,621	20,487	31,536	6,794	10,135	70,573

	Three Months Ended June 30, 2018
	Domestic Life Insurance		International  Life Insurance	Annuities	Acquired Businesses	All  Others	Totals
	(In thousands)
Premiums and contract revenues	$	10,114	27,461	7,298	—	—	44,873
Net investment income	13,556		10,603	86,915	—	10,728	121,802
Other revenues	—		4	18	—	5,265	5,287
Total revenues	23,670		38,068	94,231	—	15,993	171,962
Life and other policy benefits	5,103		4,534	7,824	—	—	17,461
Amortization of deferred acquisition costs	2,709		7,336	21,024	—	—	31,069
Universal life and annuity contract interest	9,907		7,600	43,483	—	—	60,990
Other operating expenses	5,006		5,628	9,085	—	5,076	24,795
Federal income taxes (benefit)	185		2,516	2,478	—	2,132	7,311
Total expenses	22,910		27,614	83,894	—	7,208	141,626
Segment earnings (loss)	$	760	10,454	10,337	—	8,785	30,336

	Six Months Ended June 30, 2018
	Domestic Life Insurance		International Life Insurance	Annuities	Acquired Businesses	All Others	Totals
	(In thousands)
Premiums and contract revenues	$	19,715	55,378	12,445	—	—	87,538
Net investment income	14,219		12,574	140,458	—	15,296	182,547
Other revenues	—		34	37	—	10,213	10,284
Total revenues	33,934		67,986	152,940	—	25,509	280,369
Life and other policy benefits	9,912		10,262	18,688	—	—	38,862
Amortization of deferred acquisition costs	5,384		14,716	43,198	—	—	63,298
Universal life and annuity contract interest	7,046		6,450	45,676	—	—	59,172
Other operating expenses	10,153		11,009	17,020	—	10,246	48,428
Federal income taxes (benefit)	283		5,023	5,576	—	2,999	13,881
Total expenses	32,778		47,460	130,158	—	13,245	223,641
Segment earnings (loss)	$	1,156	20,526	22,782	—	12,264	56,728

Reconciliation of segment premiums and other revenues to condensed consolidated financial statements

Reconciliations of segment information to the Company's Condensed Consolidated Financial Statements are provided below.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019			2018	2019	2018
	(In thousands)
Premiums and Other Revenues:
Premiums and contract revenues	$	60,720		44,873	116,256	87,538
Net investment income	128,424			121,802	279,755	182,547
Other revenues	3,966			5,287	10,379	10,284
Realized gains (losses) on investments	(425		)	2,696	4,204	3,307
Total condensed consolidated premiums and other revenues	$	192,685		174,658	410,594	283,676

Reconciliation of segment federal income taxes to condensed consolidated financial statements

	Three Months Ended June 30,				Six Months Ended June 30,
	2019			2018	2019	2018
	(In thousands)
Federal Income Taxes:
Total segment Federal income taxes	$	8,537		7,311	17,958	13,881
Taxes on realized gains (losses) on investments	(89		)	566	883	694
Total condensed consolidated Federal income taxes	$	8,448		7,877	18,841	14,575

Reconciliation of segment net earnings to condensed consolidated financial statements

	Three Months Ended June 30,				Six Months Ended June 30,
	2019			2018	2019	2018
	(In thousands)
Net Earnings:
Total segment earnings	$	34,032		30,336	70,573	56,728
Realized gains (losses) on investments, net of taxes	(336		)	2,130	3,321	2,613
Total condensed consolidated net earnings	$	33,696		32,466	73,894	59,341

Reconciliation of segment assets to condensed consolidated financial statements

	June 30,		December 31,
	2019		2018
	(In thousands)
Assets:
Total segment assets	$	12,249,704	11,588,481
Other unallocated assets	363,246		343,210
Total condensed consolidated assets	$	12,612,950	11,931,691

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Share-Based Payments (Tables)

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

Summary of shares available for grant and stock option activity

A summary of awards by type and related activity is detailed below.

		Options Outstanding
	Shares Available For Grant	Shares	Weighted- Average Exercise Price
Stock Options:
Balance at January 1, 2019	291,000	—	$	—
Exercised	—	—	$	—
Forfeited	—	—	$	—
Expired	—	—	$	—
Stock options granted	—	—	$	—
Balance at June 30, 2019	291,000	—	$	—

Schedule of activity

	Liability Awards
	SAR		RSU		PSU
Other Share/Unit Awards:
Balance at January 1, 2019	89,443		13,170		19,122
Exercised	—		(3,051	)	(5,426	)
Forfeited	(1,163	)	(307	)	(616	)
Granted	—		—		—
Balance at June 30, 2019	88,280		9,812		13,080

Summary of information about stock options and SARs outstanding

The following table summarizes information about SARs outstanding at June 30, 2019. There were no options outstanding as of June 30, 2019.

	SARs Outstanding
	Number Outstanding		Weighted- Average Remaining Contractual Life	Number Exercisable
Exercise prices:
$132.56	19,568		2.5 years	19,568
$210.22	25,000		4.5 years	16,400
$216.48	11,649		6.6 years	11,649
$311.16	10,162		7.6 years	6,753
$310.55	203		7.8 years	135
$334.34	9,624		8.4 years	3,247
$303.77	12,074		9.5 years	—
Totals	88,280			57,752
Aggregate intrinsic value (in thousands)	$	4,077		$	3,674

Summary of assumptions employed using Black-Scholes option pricing model

In estimating the fair value of the share-based awards outstanding at June 30, 2019 and December 31, 2018, the Company employed the Black-Scholes option pricing model with assumptions detailed below.

	June 30, 2019		December 31, 2018
Expected term	2.5 to 9.5 years		3.0 to 10.0 years
Expected volatility weighted-average	22.02	%	22.14	%
Expected dividend yield	0.14	%	0.12	%
Risk-free rate weighted-average	1.87	%	2.58	%

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Investments (Tables)

6 Months Ended

Jun. 30, 2019

Investments, Debt and Equity Securities [Abstract]

Realized investment gains and losses, excluding impairment losses

The table below presents realized investment gains and losses, excluding impairment losses, for the periods indicated.

	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
	(In thousands)
Available for sale debt securities:
Realized gains on disposal	$	1,168	1,981		2,351		2,021
Realized losses on disposal	—		—		(84	)	—
Held to maturity debt securities:
Realized gains on disposal	924		734		951		1,305
Realized losses on disposal	—		(19	)	—		(19	)
Real estate gains (losses)	3,385		—		6,888		—
Totals	$	5,477	2,696		10,106		3,307

Schedule of net impairment losses recognized in earnings

The table below presents net impairment losses recognized in earnings for the periods indicated.

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019		2018
	(In thousands)
Total other-than-temporary impairment gains (losses) on debt securities	$	(5,900	)	3		(5,897	)	6
Portion of loss (gain) recognized in comprehensive income	(2		)	(3	)	(5	)	(6	)
Net impairment losses on debt securities recognized in earnings	(5,902		)	—		(5,902	)	—
Totals	$	(5,902	)	—		(5,902	)	—

Credit losses on securities, also recorded non-credit other-than-temporary impairments in other comprehensive loss.

The table below presents a roll forward of credit losses on securities for which the Company also recorded non-credit other-than-temporary impairments in other comprehensive loss.

	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019	Year Ended December 31, 2018
	(In thousands)
Beginning balance, cumulative credit losses related to other-than-temporary impairments	$	627	627	627
Reductions for securities sold during current period	—		—	—
Additions for credit losses not previously recognized in other-than-temporary impairments	—		—	—
Ending balance, cumulative credit losses related to other-than-temporary impairments	$	627	627	627

Schedule of debt securities, available-for-sale securities

The table below presents amortized costs and fair values of securities available for sale at December 31, 2018.

	Securities Available for Sale
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
States and political subdivisions	$	570	—	(4	)	566
Foreign governments	9,974		30	—		10,004
Public utilities	82,943		1,045	(517	)	83,471
Corporate	2,893,221		15,473	(79,638	)	2,829,056
Residential mortgage-backed	15,947		937	(84	)	16,800
Asset-backed	5,969		193	—		6,162
Totals	$	3,008,624	17,678	(80,243	)	2,946,059

The table below presents amortized costs and fair values of debt securities available for sale at June 30, 2019.

	Debt Securities Available for Sale
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
States and political subdivisions	$	100,781	4,543	(1	)	105,323
Foreign governments	9,978		252	—		10,230
Public utilities	78,919		3,349	—		82,268
Corporate	2,950,597		102,775	(5,764	)	3,047,608
Commercial mortgage-backed	28,931		1,010	—		29,941
Residential mortgage-backed	14,481		1,210	(101	)	15,590
Asset-backed	81,873		2,272	—		84,145
Totals	$	3,265,560	115,411	(5,866	)	3,375,105

Schedule of held-to-maturity securities

The table below presents amortized costs and fair values of debt securities held to maturity at June 30, 2019.

	Debt Securities Held to Maturity
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
U.S. agencies	$	121,000	1,818	—		122,818
U.S. Treasury	3,772		162	—		3,934
States and political subdivisions	475,081		18,995	(45	)	494,031
Foreign governments	1,154		44	—		1,198
Public utilities	914,921		30,127	(56	)	944,992
Corporate	4,688,662		163,757	(1,996	)	4,850,423
Commercial mortgage-backed	3,046		58	—		3,104
Residential mortgage-backed	1,131,418		34,876	(704	)	1,165,590
Asset-backed	3,305		85	—		3,390
Totals	$	7,342,359	249,922	(2,801	)	7,589,480

The table below presents amortized costs and fair values of securities held to maturity at December 31, 2018.

	Securities Held to Maturity
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)
Debt securities:
U.S. Treasury	$	1,341	116	—		1,457
States and political subdivisions	457,404		9,764	(2,376	)	464,792
Public utilities	930,629		5,928	(12,944	)	923,613
Corporate	4,715,775		27,652	(87,043	)	4,656,384
Residential mortgage-backed	1,176,216		13,771	(11,932	)	1,178,055
Asset-backed	3,889		88	(10	)	3,967
Totals	$	7,285,254	57,319	(114,305	)	7,228,268

Schedule of gross unrealized losses and fair values of debt securities, available-for-sale investments, continuous unrealized loss position

The following table shows the gross unrealized losses and fair values of the Company's available for sale debt securities by investment category and length of time the individual securities have been in a continuous unrealized loss position at June 30, 2019.

	Debt Securities Available for Sale
	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
	(In thousands)
Debt securities:
States and political subdivisions	$	479	(1		)	—		—			479		(1		)
Corporate	5,189		(33		)	189,145		(5,731		)	194,334		(5,764		)
Residential mortgage-backed	—		—			845		(101		)	845		(101		)
Total	$	5,668	$	(34	)	$	189,990	$	(5,832	)	$	195,658	$	(5,866	)

The following table shows the gross unrealized losses and fair values of the Company's available for sale investments by investment category and length of time that the individual securities have been in a continuous unrealized loss position at December 31, 2018.

	Securities Available for Sale
	Less than 12 Months				12 Months or Greater			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(In thousands)
Debt securities:
States and political subdivisions	$	566	(4	)	—	—		566	(4	)
Public utilities	38,903		(517	)	—	—		38,903	(517	)
Corporate	1,468,953		(44,575	)	442,798	(35,063	)	1,911,751	(79,638	)
Residential mortgage-backed	—		—		878	(84	)	878	(84	)
Total	$	1,508,422	(45,096	)	443,676	(35,147	)	1,952,098	(80,243	)

Schedule of gross unrealized losses and fair values of held-to-maturity investments, continuous unrealized loss position

The following table shows the gross unrealized losses and fair values of the Company's held to maturity debt securities by investment category and length of time the individual securities have been in a continuous unrealized loss position at June 30, 2019.

	Debt Securities Held to Maturity
	Less than 12 Months				12 Months or Greater			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(In thousands)
Debt securities:
States and political subdivisions	$	—	—		1,666	(45	)	1,666	(45	)
Public utilities	—		—		11,183	(56	)	11,183	(56	)
Corporate	11,333		(57	)	111,933	(1,939	)	123,266	(1,996	)
Residential mortgage-backed	4,307		(4	)	66,247	(700	)	70,554	(704	)
Total	$	15,640	(61	)	191,029	(2,740	)	206,669	(2,801	)

The following table shows the gross unrealized losses and fair values of the Company's held to maturity investments by investment category and length of time the individual securities have been in a continuous unrealized loss position at December 31, 2018.

	Securities Held to Maturity
	Less than 12 Months				12 Months or Greater			Total
	Fair Value		Unrealized Losses		Fair Value	Unrealized Losses		Fair Value	Unrealized Losses
	(In thousands)
Debt securities:
States and political subdivisions	$	88,253	(2,124	)	10,645	(252	)	98,898	(2,376	)
Public utilities	396,980		(8,371	)	98,632	(4,573	)	495,612	(12,944	)
Corporate	2,144,969		(55,125	)	650,401	(31,918	)	2,795,370	(87,043	)
Residential mortgage-backed	202,986		(2,032	)	311,374	(9,900	)	514,360	(11,932	)
Asset-backed	—		—		1,976	(10	)	1,976	(10	)
Total	$	2,833,188	(67,652	)	1,073,028	(46,653	)	3,906,216	(114,305	)

Investments classified by contractual maturity date

The amortized cost and fair value of investments in debt securities at June 30, 2019, by contractual maturity, are shown below.  Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Debt Securities Available for Sale			Debt Securities Held to Maturity
	Amortized Cost		Fair Value	Amortized Cost	Fair Value
	(In thousands)
Due in 1 year or less	$	195,368	198,197	359,261	363,189
Due after 1 year through 5 years	1,182,355		1,216,520	3,083,206	3,170,949
Due after 5 years through 10 years	1,539,821		1,594,437	2,299,446	2,390,796
Due after 10 years	222,731		236,275	462,677	492,462
	3,140,275		3,245,429	6,204,590	6,417,396
Mortgage and asset-backed securities	125,285		129,676	1,137,769	1,172,084
Total	$	3,265,560	3,375,105	7,342,359	7,589,480

Schedule of mortgage loans by loan-to-value ratio

The following table represents the mortgage loan portfolio by loan-to-value ratio.

	June 30, 2019					December 31, 2018
	Amount			%		Amount			%
	(In thousands)					(In thousands)
Mortgage Loans by Loan-to-Value Ratio (1):
Less than 50%	$	60,831		28.3		$	66,371		32.6
50% to 60%	38,963			18.1		22,610			11.1
60% to 70%	99,009			46.1		102,857			50.4
70% to 80%	16,167			7.5		6,642			3.3
80% to 90%	—			—		5,375			2.6
Greater than 90%	—			—		—			—
Gross balance	214,970			100.0		203,855			100.0
Allowance for possible losses	(675		)	(0.3	)	(675		)	(0.3	)
Totals	$	214,295		99.7		$	203,180		99.7

(1) Loan-to-Value Ratio is determined using the most recent appraised value. Appraisals are required at the time of funding and may be updated if a material change occurs from the original loan agreement.

Schedule of allowance for mortgage loans

The following table represents the mortgage loan allowance for the periods shown.

	June 30, 2019		December 31, 2018
	(In thousands)
Balance, beginning of period	$	675	650
Provision	—		25
Releases	—		—
Balance, end of period	$	675	675

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Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of assets and liabilities that are measured at fair value on a recurring basis

The following tables set forth the Company’s assets and liabilities that are measured at fair value on a recurring basis as of the date indicated:

	June 30, 2019
	Total		Level 1	Level 2	Level 3
	(In thousands)
Debt securities, available for sale	$	3,375,105	—	3,375,105	—
Equity securities	19,324		19,324	—	—
Derivatives, index options	89,900		—	—	89,900
Total assets	$	3,484,329	19,324	3,375,105	89,900
Policyholder account balances (a)	$	100,638	—	—	100,638
Other liabilities (b)	11,862		—	—	11,862
Total liabilities	$	112,500	—	—	112,500

During the three and six months ended June 30, 2019, the Company made no transfers into or out of Levels 1, 2 or 3.

	December 31, 2018
	Total		Level 1	Level 2	Level 3
	(In thousands)
Debt securities, available for sale	$	2,946,059	—	2,946,059	—
Equity securities	17,491		17,491	—	—
Derivatives, index options	14,684		—	—	14,684
Total assets	$	2,978,234	17,491	2,946,059	14,684
Policyholder account balances (a)	$	44,781	—	—	44,781
Other liabilities (b)	11,923		—	—	11,923
Total liabilities	$	56,704	—	—	56,704

(a)  Represents the fair value of certain product-related embedded derivatives that were recorded at fair value.

(b)  Represents the liability for share-based compensation and contingent consideration for businesses acquired.

Schedule of assets by by pricing source and fair value hierarchy level

The following tables present, by pricing source and fair value hierarchy level, the Company’s assets that are measured at fair value on a recurring basis:

	June 30, 2019
	Total			Level 1		Level 2		Level 3
	(In thousands)
Debt securities, available for sale:
Priced by third-party vendors	$	3,375,105		—		3,375,105		—
Priced internally	—			—		—		—
Subtotal	3,375,105			—		3,375,105		—
Equity securities:
Priced by third-party vendors	19,324			19,324		—		—
Priced internally	—			—		—		—
Subtotal	19,324			19,324		—		—
Derivatives, index options:
Priced by third-party vendors	89,900			—		—		89,900
Priced internally	—			—		—		—
Subtotal	89,900			—		—		89,900
Total	$	3,484,329		19,324		3,375,105		89,900
Percent of total	100.0		%	0.6	%	96.8	%	2.6	%

	December 31, 2018
	Total			Level 1		Level 2		Level 3
	(In thousands)
Debt securities, available for sale:
Priced by third-party vendors	$	2,946,059		—		2,946,059		—
Priced internally	—			—		—		—
Subtotal	2,946,059			—		2,946,059		—
Equity securities, available for sale:
Priced by third-party vendors	17,491			17,491		—		—
Priced internally	—			—		—		—
Subtotal	17,491			17,491		—		—
Derivatives, index options:
Priced by third-party vendors	14,684			—		—		14,684
Priced internally	—			—		—		—
Subtotal	14,684			—		—		14,684
Total	$	2,978,234		17,491		2,946,059		14,684
Percent of total	100.0		%	0.6	%	98.9	%	0.5	%

Schedule of significant unobservable inputs for fair value measurements

The following tables provide additional information about fair value measurements for which significant unobservable (Level 3) inputs were utilized to determine fair value.

	Three Months Ended June 30, 2019
	Debt Securities, Available for Sale		Equity Securities	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Balance at April 1, 2019	$	—	—	71,001		71,001		97,725
Total realized and unrealized gains (losses):
Included in net income	—		—	17,828		17,828		13,704
Purchases, sales, issuances and settlements, net:
Purchases	—		—	19,030		19,030		19,030
Sales	—		—	—		—		—
Issuances	—		—	—		—		—
Settlements	—		—	(17,959	)	(17,959	)	(17,959	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	89,900		89,900		112,500
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	4,350		4,350		—
Benefits and expenses	—		—	—		—		4,614
Total	$	—	—	4,350		4,350		4,614

	Three Months Ended June 30, 2018
	Debt Securities, Available for Sale		Equity Securities, Available for Sale	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Balance at April 1, 2018	$	—	—	116,356		116,356		147,502
Total realized and unrealized gains (losses):
Included in net income	—		—	10,292		10,292		10,608
Purchases, sales, issuances and settlements, net:
Purchases	—		—	21,901		21,901		21,901
Sales	—		—	—		—		—
Issuances	—		—	—		—		—
Settlements	—		—	(46,542	)	(46,542	)	(46,998	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	102,007		102,007		133,013
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	20,610		20,610		—
Benefits and expenses	—		—	—		—		21,861
Total	$	—	—	20,610		20,610		21,861

	Six Months Ended June 30, 2019
	Debt Securities, Available for Sale		Equity Securities	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Beginning balance, January 1, 2019	$	—	—	14,684		14,684		56,704
Total realized and unrealized gains (losses):
Included in net income	—		—	59,830		59,830		39,232
Purchases, sales, issuances and settlements, net:
Purchases	—		—	36,622		36,622		36,622
Sales	—		—	—		—
Issuances	—		—	—		—		3,700
Settlements	—		—	(21,236	)	(21,236	)	(23,758	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	89,900		89,900		112,500
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	44,814		44,814		—
Other operating expenses	—		—	—		—		43,575
Total	$	—	—	44,814		44,814		43,575

	Six Months Ended June 30, 2018
	Debt Securities, Available for Sale		Equity Securities, Available for Sale	Derivatives, Index Options		Total Assets		Other Liabilities
	(In thousands)
Beginning balance, January 1, 2018	$	—	—	194,731		194,731		226,401
Total realized and unrealized gains (losses):
Included in net income	—		—	(34,102	)	(34,102	)	(32,820	)
Purchases, sales, issuances and settlements, net:
Purchases	—		—	44,277		44,277		44,277
Sales	—		—	—		—		—
Issuances	—		—	—		—		—
Settlements	—		—	(102,899	)	(102,899	)	(104,845	)
Transfers into (out of) Level 3	—		—	—		—		—
Balance at end of period	$	—	—	102,007		102,007		133,013
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:
Net investment income	$	—	—	(23,727	)	(23,727	)	—
Other operating expenses	—		—	—		—		(23,019	)
Total	$	—	—	(23,727	)	(23,727	)	(23,019	)

Schedule of quantitative information of Level 3 assets

The following table presents the valuation method for financial assets and liabilities categorized as level 3, as well as the unobservable inputs used in the valuation of those financial instruments:

	June 30, 2019
	Fair Value		Valuation Technique	Unobservable Input
	(In thousands)
Derivatives, index options	$	89,900	Broker prices	Implied volatility
				Inputs from broker proprietary models
Total assets	$	89,900
Policyholder account balances	$	100,638	Deterministic cash flow model	Projected option cost
Other liabilities, share-based compensation	7,991		Black-Scholes model	Expected term, Forfeiture assumptions
Other liabilities, contingent consideration on businesses acquired	3,871		Probabilistic Method	Projected renewal premium
Total liabilities	$	112,500

	December 31, 2018
	Fair Value		Valuation Technique	Unobservable Input
	(In thousands)
Derivatives, index options	$	14,684	Broker prices	Implied volatility
				Inputs from broker proprietary models
Total assets	$	14,684
Policyholder account balances	$	44,781	Deterministic cash flow model	Projected option cost
Other liabilities	11,923		Black-Scholes model	Expected term
				Forfeiture assumptions
Total liabilities	$	56,704

Schedule of carrying amounts and fair values of the Company's financial instruments

The carrying amounts and fair values of the Company's financial instruments are as follows:

	June 30, 2019
				Fair Value Hierarchy Level
	Carrying Values		Fair Values	Level 1	Level 2	Level 3
	(In thousands)
ASSETS
Debt securities held to maturity	$	7,342,359	7,589,480	—	7,587,924	1,556
Debt securities available for sale	3,375,105		3,375,105	—	3,375,105	—
Cash and cash equivalents	140,802		140,802	140,802	—	—
Mortgage loans	214,295		225,807	—	—	225,807
Policy loans	80,155		122,556	—	—	122,556
Other loans	13,873		14,047	—	—	14,047
Derivatives, index options	89,900		89,900	—	—	89,900
Equity securities	19,324		19,324	19,324	—	—
Life interest in Libbie Shearn Moody Trust	8,692		12,775	—	—	12,775
LIABILITIES
Deferred annuity contracts	$	7,209,899	6,009,840	—	—	6,009,840
Immediate annuity and supplemental contracts	404,211		426,338	—	—	426,338
Contingent consideration on businesses acquired	3,871		3,871	—	—	3,871

	December 31, 2018
				Fair Value Hierarchy Level
	Carrying Values		Fair Values	Level 1	Level 2	Level 3
	(In thousands)
ASSETS
Debt securities held to maturity	$	7,285,254	7,228,268	—	7,226,362	1,906
Debt securities available for sale	2,946,059		2,946,059	—	2,946,059	—
Cash and cash equivalents	131,976		131,976	131,976	—	—
Mortgage loans	203,180		202,762	—	—	202,762
Policy loans	54,724		90,802	—	—	90,802
Other loans	12,272		12,709	—	—	12,709
Derivatives, index options	14,684		14,684	—	—	14,684
Equity securities	17,491		17,491	17,491	—	—
Life interest in Libbie Shearn Moody Trust	8,692		12,775	—	—	12,775
LIABILITIES
Deferred annuity contracts	$	7,455,642	6,403,007	—	—	6,403,007
Immediate annuity and supplemental contracts	407,413		415,726	—	—	415,726

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Derivative Investments (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of fair value of derivative instruments

The tables below present the fair value of derivative instruments as of June 30, 2019 and December 31, 2018, respectively.

	June 30, 2019
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
		(In thousands)			(In thousands)
Derivatives not designated as hedging instruments
Equity index options	Derivatives, Index Options	$	89,900
Fixed-index products				Universal Life and Annuity Contracts	$	100,638
Total		$	89,900		$	100,638

	December 31, 2018
	Asset Derivatives			Liability Derivatives
	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
		(In thousands)			(In thousands)
Derivatives not designated as hedging instruments
Equity index options	Derivatives, Index Options	$	14,684
Fixed-index products				Universal Life and Annuity Contracts	$	44,781
Total		$	14,684		$	44,781

Schedule of derivative instruments in the Condensed Consolidated Statements of Earnings

The table below presents the effect of derivative instruments in the Condensed Consolidated Statements of Earnings for the three months ended June 30, 2019 and 2018.

		June 30, 2019			June 30, 2018
Derivatives Not Designated  As Hedging Instruments	Location of Gain  or (Loss) Recognized In Income on Derivatives	Amount of Gain or  (Loss) Recognized in  Income on Derivatives
		(In thousands)
Equity index options	Net investment income	$	17,828		10,292
Fixed-index products	Universal life and annuity contract interest	(13,439		)	(9,357	)
		$	4,389		935

The table below presents the effect of derivative instruments in the Condensed Consolidated Statements of Earnings for the six months ended June 30, 2019 and 2018.

		June 30, 2019			June 30, 2018
Derivatives Not Designated  As Hedging Instruments	Location of Gain  or (Loss) Recognized In Income on Derivatives	Amount of Gain or  (Loss) Recognized in  Income on Derivatives
		(In thousands)
Equity index options	Net investment income	$	59,830		(34,102	)
Fixed-index products	Universal life and annuity contract interest	(40,470		)	33,528
		$	19,360		(574	)

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Business Combinations (Tables)

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Schedule of fair value of net assets acquired

The following table presents the fair values of the net assets acquired as of January 31, 2019.

	January 31, 2019
Assets	Fair value
	(In thousands)
Debt securities held to maturity	$	261,059
Debt securities available for sale	400,719
Policy loans	28,128
Real estate	4,600
Cash and cash equivalents	16,275
Accrued investment income	6,116
Value of business acquired	145,768
Reinsurance recoverables	21,895
Other intangible assets	9,600
Other assets acquired	12,075
Total assets acquired	906,235
Liabilities
Traditional life reserves	691,297
Other policyholder liabilities	13,867
Other liabilities acquired	5,840
	711,004
Net identifiable assets acquired	195,231
Goodwill	13,864
Net assets acquired	$	209,095

Schedule of fair value of identifiable intangible assets acquired

The following table presents the fair value of identifiable intangible assets acquired at January 31, 2019:

	Fair Value		Weighted-Average Amortization Period
	(In thousands)
Trademarks / trade names	$	2,800	15
Internally developed software	3,800		7
Insurance licenses	3,000		NA
	$	9,600

Schedule of expected amortization of VOBA

Based upon the remaining unamortized balance as of June 30, 2019, the expected amortization for the next five years is as follows:

	Expected Amortization
	(In thousands)
Remainder of 2019	$	4,596
2020	$	8,725
2021	$	8,282
2022	$	7,897
2023	$	7,552

Schedule of pro forma total revenues and net earnings

The following unaudited comparative pro forma total revenues and net earnings represent Condensed Consolidated Results of Operations for the Company which assume amounts estimated had the acquisition of Ozark National and NIS by the Company been effective January 1, 2018.

	Three Months Ended June 30,			Six Months Ended June 30
	2019		2018	2019	2018
	(In thousands)
Total revenues	$	192,685	203,421	420,268	341,832
Net earnings	$	33,696	36,120	75,328	67,720

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Consolidation and Basis of Presentation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Other net investment gains (losses)	$ 5,477	$ 2,696	$ 10,106	$ 3,307
Net OTTI losses recognized in earnings	(5,902)	0	(5,902)	0
Earnings before Federal income taxes	42,144	40,343	92,735	73,916
Federal income taxes	8,448	7,877	18,841	14,575
Net earnings	33,696	32,466	73,894	59,341
Unrealized Gains and Losses on Available-for-sale Securities | Amount Reclassified From Accumulated Other Comprehensive Income
Reclassification Adjustment out of Accumulated Other Comprehensive Income on Derivatives [Line Items]
Other net investment gains (losses)	1,168	1,981	2,267	2,021
Net OTTI losses recognized in earnings	(5,902)	0	(5,902)	0
Earnings before Federal income taxes	(4,734)	1,981	(3,635)	2,021
Federal income taxes	(994)	417	(763)	424
Net earnings	$ (3,740)	$ 1,564	$ (2,872)	$ 1,597

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Stockholders' Equity (Details) - USD ($)		3 Months Ended		6 Months Ended
	Jan. 31, 2019	Mar. 31, 2019	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Dividends Payable [Line Items]
Extraordinary dividend paid	$ 102,700,000
National Western
Dividends Payable [Line Items]
Maximum dividend payment which may be paid without prior approval from Colorado Division of Insurance				$ 30,700,000
Dividends declared and paid		$ 32,000,000.0	$ 3,000,000.0	0	$ 0
Ozark National Life Insurance Company
Dividends Payable [Line Items]
Maximum dividend payment which may be paid without prior approval from Colorado Division of Insurance				$ 20,400,000

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Earnings Per Share (EPS Calculation) (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Net income	$ 33,696	$ 32,466	$ 73,894	$ 59,341
Undistributed earnings	33,696	32,466	73,894	59,341
Allocation of net income:
Undistributed earnings	33,696	32,466	73,894	59,341
Net earnings	33,696	32,466	73,894	59,341
Class A
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Net income	32,743	31,548	71,804	57,663
Dividends	0	0	0	0
Undistributed earnings	32,743	31,548	71,804	57,663
Allocation of net income:
Dividends	0	0	0	0
Undistributed earnings	32,743	31,548	71,804	57,663
Net earnings	$ 32,743	$ 31,548	$ 71,804	$ 57,663
Denominator:
Basic earnings per share - weighted-average shares (in shares)	3,436	3,436	3,436	3,436
Effect of dilutive stock options (in shares)	0	0	0	0
Diluted earnings per share - adjusted weighted-average shares for assumed conversions (in shares)	3,436	3,436	3,436	3,436
Basic Earnings Per Share (in dollars per share)	$ 9.53	$ 9.18	$ 20.90	$ 16.78
Diluted Earnings Per Share (in dollars per share)	$ 9.53	$ 9.18	$ 20.90	$ 16.78
Class B
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items]
Net income	$ 953	$ 918	$ 2,090	$ 1,678
Dividends	0	0	0	0
Undistributed earnings	953	918	2,090	1,678
Allocation of net income:
Dividends	0	0	0	0
Undistributed earnings	953	918	2,090	1,678
Net earnings	$ 953	$ 918	$ 2,090	$ 1,678
Denominator:
Basic earnings per share - weighted-average shares (in shares)	200	200	200	200
Effect of dilutive stock options (in shares)	0	0	0	0
Diluted earnings per share - adjusted weighted-average shares for assumed conversions (in shares)	200	200	200	200
Basic Earnings Per Share (in dollars per share)	$ 4.76	$ 4.59	$ 10.45	$ 8.39
Diluted Earnings Per Share (in dollars per share)	$ 4.76	$ 4.59	$ 10.45	$ 8.39

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Pension and Other Postretirement Plans (Details) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019 USD ($) benefit_plan	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($) benefit_plan	Jun. 30, 2018 USD ($)	Dec. 31, 2007
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Number of non-qualified defined benefit pension plans | benefit_plan	3		3
Number of healthcare plans | benefit_plan	2		2
Defined Benefit Pension Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Vesting percentage in accrued benefits from plan freeze					100.00%
Service cost	$ 24	$ 28	$ 48	$ 56
Interest cost	210	225	420	450
Expected return on plan assets	(272)	(325)	(544)	(650)
Amortization of prior service cost	0	0	0	0
Amortization of net loss	165	131	330	262
Net periodic benefit cost	127	59	254	118
Minimum required contribution	400		400
Planned contributions remaining	500		500
Company contributions to plan			0
Chairman and President Non-Qualified Defined Benefit Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Service cost	126	90	251	180
Interest cost	256	213	512	426
Amortization of prior service cost	15	15	30	30
Amortization of net loss	348	176	696	352
Net periodic benefit cost	745	494	1,489	988
Company contributions to plan			900
Company expected contributions to plans in fiscal year	2,000		2,000
Defined Benefit Postretirement Healthcare Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Interest cost	50	40	99	80
Amortization of prior service cost	13	26	26	52
Amortization of net loss	61	38	122	75
Net periodic benefit cost	$ 124	$ 104	$ 247	$ 207
Minimum | Chairman and President Non-Qualified Defined Benefit Plans
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
Aggregate average annual participant salary increase			10.00%

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Segment and Other Operating Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Selected Condensed Consolidated Balance Sheet Items:
Total segment assets	$ 12,612,950		$ 12,612,950		$ 11,931,691
Other policyholder liabilities	141,731		141,731		135,694
Condensed Consolidated Income Statements:
Premiums and contract revenues	60,720	$ 44,873	116,256	$ 87,538
Net investment income	128,424	121,802	279,755	182,547
Other revenues	3,966	5,287	10,379	10,284
Total revenues	192,685	174,658	410,594	283,676
Life and other policy benefits	33,657	17,461	61,846	38,862
Amortization of deferred policy acquisition costs and value of business acquired	31,411	31,069	63,575	63,298
Universal life and annuity contract interest	60,139	60,990	141,055	59,172
Other operating expenses	25,334	24,795	51,383	48,428
Total condensed consolidated Federal income taxes	8,448	7,877	18,841	14,575
Net earnings	33,696	32,466	73,894	59,341
Realized gains (losses) on investments	(425)	2,696	4,204	3,307
Segments
Selected Condensed Consolidated Balance Sheet Items:
Deferred policy acquisition costs, sales inducements, and value of business acquired	1,008,975		1,008,975		975,418
Total segment assets	12,249,704		12,249,704		11,588,481
Future policy benefits	10,248,008		10,248,008		9,744,286
Other policyholder liabilities	141,731		141,731		135,694
Condensed Consolidated Income Statements:
Premiums and contract revenues	60,720	44,873	116,256	87,538
Net investment income	128,424	121,802	279,755	182,547
Other revenues	3,966	5,287	10,379	10,284
Total revenues	193,110	171,962	406,390	280,369
Life and other policy benefits	33,657	17,461	61,846	38,862
Amortization of deferred policy acquisition costs and value of business acquired	31,411	31,069	63,575	63,298
Universal life and annuity contract interest	60,139	60,990	141,055	59,172
Other operating expenses	25,334	24,795	51,383	48,428
Total condensed consolidated Federal income taxes	8,537	7,311	17,958	13,881
Total expenses	159,078	141,626	335,817	223,641
Net earnings	34,032	30,336	70,573	56,728
Segments | Domestic Life Insurance
Selected Condensed Consolidated Balance Sheet Items:
Deferred policy acquisition costs, sales inducements, and value of business acquired	119,695		119,695		122,661
Total segment assets	1,287,216		1,287,216		1,215,864
Future policy benefits	1,108,455		1,108,455		1,039,150
Other policyholder liabilities	17,239		17,239		17,439
Condensed Consolidated Income Statements:
Premiums and contract revenues	10,706	10,114	21,510	19,715
Net investment income	14,995	13,556	38,494	14,219
Other revenues	20	0	64	0
Total revenues	25,721	23,670	60,068	33,934
Life and other policy benefits	3,829	5,103	7,751	9,912
Amortization of deferred policy acquisition costs and value of business acquired	3,307	2,709	6,717	5,384
Universal life and annuity contract interest	12,985	9,907	34,426	7,046
Other operating expenses	5,017	5,006	9,140	10,153
Total condensed consolidated Federal income taxes	89	185	413	283
Total expenses	25,227	22,910	58,447	32,778
Net earnings	494	760	1,621	1,156
Segments | International Life Insurance
Selected Condensed Consolidated Balance Sheet Items:
Deferred policy acquisition costs, sales inducements, and value of business acquired	217,361		217,361		243,518
Total segment assets	1,171,538		1,171,538		1,211,036
Future policy benefits	879,742		879,742		894,891
Other policyholder liabilities	14,956		14,956		20,381
Condensed Consolidated Income Statements:
Premiums and contract revenues	23,777	27,461	49,840	55,378
Net investment income	9,276	10,603	23,293	12,574
Other revenues	33	4	54	34
Total revenues	33,086	38,068	73,187	67,986
Life and other policy benefits	2,959	4,534	5,121	10,262
Amortization of deferred policy acquisition costs and value of business acquired	6,948	7,336	14,242	14,716
Universal life and annuity contract interest	7,337	7,600	19,330	6,450
Other operating expenses	4,521	5,628	8,785	11,009
Total condensed consolidated Federal income taxes	2,014	2,516	5,222	5,023
Total expenses	23,779	27,614	52,700	47,460
Net earnings	9,307	10,454	20,487	20,526
Segments | Annuities
Selected Condensed Consolidated Balance Sheet Items:
Deferred policy acquisition costs, sales inducements, and value of business acquired	528,241		528,241		609,239
Total segment assets	8,465,260		8,465,260		8,791,463
Future policy benefits	7,563,354		7,563,354		7,810,245
Other policyholder liabilities	94,389		94,389		97,874
Condensed Consolidated Income Statements:
Premiums and contract revenues	5,857	7,298	10,725	12,445
Net investment income	89,572	86,915	192,726	140,458
Other revenues	64	18	72	37
Total revenues	95,493	94,231	203,523	152,940
Life and other policy benefits	9,876	7,824	21,306	18,688
Amortization of deferred policy acquisition costs and value of business acquired	18,750	21,024	38,462	43,198
Universal life and annuity contract interest	39,817	43,483	87,299	45,676
Other operating expenses	9,374	9,085	16,882	17,020
Total condensed consolidated Federal income taxes	3,155	2,478	8,038	5,576
Total expenses	80,972	83,894	171,987	130,158
Net earnings	14,521	10,337	31,536	22,782
Segments | Acquired Businesses
Selected Condensed Consolidated Balance Sheet Items:
Deferred policy acquisition costs, sales inducements, and value of business acquired	143,678		143,678		0
Total segment assets	953,048		953,048		0
Future policy benefits	696,457		696,457		0
Other policyholder liabilities	15,147		15,147		0
Condensed Consolidated Income Statements:
Premiums and contract revenues	20,380	0	34,181	0
Net investment income	6,007	0	9,983	0
Other revenues	2,290	0	3,731	0
Total revenues	28,677	0	47,895	0
Life and other policy benefits	16,993	0	27,668	0
Amortization of deferred policy acquisition costs and value of business acquired	2,406	0	4,154	0
Universal life and annuity contract interest	0	0	0	0
Other operating expenses	4,491	0	7,576	0
Total condensed consolidated Federal income taxes	956	0	1,703	0
Total expenses	24,846	0	41,101	0
Net earnings	3,831	0	6,794	0
Segments | All Others
Selected Condensed Consolidated Balance Sheet Items:
Deferred policy acquisition costs, sales inducements, and value of business acquired	0		0		0
Total segment assets	372,642		372,642		370,118
Future policy benefits	0		0		0
Other policyholder liabilities	0		0		0
Condensed Consolidated Income Statements:
Premiums and contract revenues	0	0	0	0
Net investment income	8,574	10,728	15,259	15,296
Other revenues	1,559	5,265	6,458	10,213
Total revenues	10,133	15,993	21,717	25,509
Life and other policy benefits	0	0	0	0
Amortization of deferred policy acquisition costs and value of business acquired	0	0	0	0
Universal life and annuity contract interest	0	0	0	0
Other operating expenses	1,931	5,076	9,000	10,246
Total condensed consolidated Federal income taxes	2,323	2,132	2,582	2,999
Total expenses	4,254	7,208	11,582	13,245
Net earnings	5,879	8,785	10,135	12,264
Other unallocated
Selected Condensed Consolidated Balance Sheet Items:
Total segment assets	363,246		363,246		$ 343,210
Segment Reconciling Items
Condensed Consolidated Income Statements:
Taxes on realized gains (losses) on investments	(89)	566	883	694
Realized gains (losses) on investments, net of taxes	$ (336)	$ 2,130	$ 3,321	$ 2,613

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Share-Based Payments (General Descriptions) (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended			6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Jun. 20, 2008	Jun. 25, 2004
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Requisite service period of awards (in years)				1 year
Period in force, from which option holders may elect to sell back acquired shares				90 days
Performance factor used to determine compensation payout		93.86%
Compensation cost not yet recognized	$ 8.0			$ 8.0		$ 11.9
Pre-tax compensation cost (benefit) recognized	0.1		$ 1.3	(1.4)	$ 0.7
Compensation cost (benefit), tax expense (benefit)	(0.0)		$ (0.3)	0.3	$ (0.1)
Compensation cost related to nonvested options not yet recognized	$ 3.8			$ 3.8
Weighted average period over which the compensation is expected to be recognized				1 year 3 months 18 days
Class A
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, par value (usd per share)	$ 0.01			$ 0.01		$ 0.01
Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Requisite service period of awards (in years)				1 year
1995 Plan | Class A
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock, par value (usd per share)								$ 1.00
Share-based payments, number of shares authorized under plans (in shares)								300,000
2008 Plan | Class A
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based payments, number of shares authorized under plans (in shares)							300,000
Employee Stock Options and Stock Appreciation Rights (SARs), Granted Before 2016 | Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				20.00%
Requisite service period of awards (in years)				3 years
Employee Stock Options and Stock Appreciation Rights (SARs) | Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Requisite service period of awards (in years)				1 year
RSU
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				100.00%
Vesting period (in years)				3 years
PSU
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period (in years)				3 years
Performance period (in years)				3 years
Vesting After Service Period, Year One
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				33.30%
Vesting After Service Period, Year One | Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				20.00%
Vesting After Service Period, Year One | Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				20.00%
Vesting After Service Period, Year One | Employee Stock Options and Stock Appreciation Rights (SARs) | Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				20.00%
Vesting After Service Period, Year Two | Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				20.00%
Vesting After Service Period, Year Two | Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				20.00%
Vesting After Service Period, Year Three | Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				20.00%
Vesting After Service Period, Year Three | Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				20.00%
Vesting After Service Period, Year Four | Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				20.00%
Vesting After Service Period, Year Four | Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				20.00%
Vesting After Service Period, Year Five | Employees
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				20.00%
Vesting After Service Period, Year Five | Director
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage (in percentage)				20.00%
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Extended term (in years)				10 years

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Share-Based Payments (Options and Stock Appreciation Rights Outstanding) (Details) - USD ($) $ / shares in Units, $ in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Shares Available For Grant
Shares Available For Grant, Beginning Balance (in shares)	291,000
Shares Available For Grant, Exercised (in shares)	0
Shares Available For Grant, Forfeited (in shares)	0
Shares Available For Grant, Expired (in shares)	0
Shares Available For Grant, Granted (in shares)	0
Shares Available For Grant, Ending Balance (in shares)	291,000
Shares/Awards
Opening Balance (in shares)	0
Exercised (in shares)	0
Forfeited (in shares)	0
Expired (in shares)	0
Granted (in shares)	0
Ending Balance (in shares)	0
Weighted-Average Exercise Price (usd per share)
Beginning Balance (in usd per share)	$ 0
Exercised (in usd per share)	0
Forfeited (in usd per share)	0
Expired (in usd per share)	0
Granted (in usd per share)	0
Ending Balance (in usd per share)	$ 0
Liability Awards
Total intrinsic value of options exercised	$ 2.5	$ 1.9
Total share-based liabilities paid	2.5	1.9
Fair value of vested awards	2.9	0.8
Cash received from exercise of stock options	$ 0.0	$ 0.0
SAR
Liability Awards
Opening balance (in shares)	89,443
Exercised (in shares)	0
Forfeited (in shares)	(1,163)
Granted (in shares)	0
Closing balance (in shares)	88,280
RSU
Liability Awards
Opening balance (in shares)	13,170
Exercised (in shares)	(3,051)
Forfeited (in shares)	(307)
Granted (in shares)	0
Closing balance (in shares)	9,812
PSU
Liability Awards
Opening balance (in shares)	19,122
Exercised (in shares)	(5,426)
Forfeited (in shares)	(616)
Granted (in shares)	0
Closing balance (in shares)	13,080

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Share-Based Payments (Exercise Range) (Details) $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($) $ / shares shares
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Number Outstanding (in shares)	88,280
Number Outstanding, Aggregate intrinsic value | $	$ 4,077
Number Exercisable (in shares)	57,752
Options Exercisable, Aggregate intrinsic value | $	$ 3,674
Closing stock price (in usd per share) | $ / shares	$ 257.00
SAR | 132.56
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Number Outstanding (in shares)	19,568
Weighted- Average Remaining Contractual Life	2 years 6 months
Number Exercisable (in shares)	19,568
Exercise price (in usd per share) | $ / shares	$ 132.56
SAR | 210.22
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Number Outstanding (in shares)	25,000
Weighted- Average Remaining Contractual Life	4 years 6 months
Number Exercisable (in shares)	16,400
Exercise price (in usd per share) | $ / shares	$ 210.22
SAR | 216.48
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Number Outstanding (in shares)	11,649
Weighted- Average Remaining Contractual Life	6 years 7 months 6 days
Number Exercisable (in shares)	11,649
Exercise price (in usd per share) | $ / shares	$ 216.48
SAR | 311.16
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Number Outstanding (in shares)	10,162
Weighted- Average Remaining Contractual Life	7 years 7 months 6 days
Number Exercisable (in shares)	6,753
Exercise price (in usd per share) | $ / shares	$ 311.16
SAR | 310.55
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Number Outstanding (in shares)	203
Weighted- Average Remaining Contractual Life	7 years 9 months 18 days
Number Exercisable (in shares)	135
Exercise price (in usd per share) | $ / shares	$ 310.55
SAR | 334.34
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Number Outstanding (in shares)	9,624
Weighted- Average Remaining Contractual Life	8 years 4 months 24 days
Number Exercisable (in shares)	3,247
Exercise price (in usd per share) | $ / shares	$ 334.34
SAR | 303.77
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]
Number Outstanding (in shares)	12,074
Weighted- Average Remaining Contractual Life	9 years 6 months
Number Exercisable (in shares)	0
Exercise price (in usd per share) | $ / shares	$ 303.77

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Share-Based Payments (Black Scholes Option Pricing Model Assumptions) (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected dividend yield	0.14%	0.12%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term	2 years 6 months	3 years
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term	9 years 6 months	10 years
Weighted-average
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility, weighted-average	22.02%	22.14%
Risk-free rate, weighted-average	1.87%	2.58%

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Commitments and Contingencies (Details) - USD ($)			6 Months Ended
	Jul. 27, 2019	Nov. 11, 2018	Jun. 30, 2019	Dec. 31, 2018
Loss Contingencies [Line Items]
Derivatives, index options			$ 89,900,000	$ 14,684,000
Williams v Pantaleoni et al
Loss Contingencies [Line Items]
Loss contingency, damages sought			1,000,000
New Loans
Loss Contingencies [Line Items]
Other commitment			14,500,000
Existing Loans
Loss Contingencies [Line Items]
Other commitment			400,000
Pending Litigation | National Western Life Insurance Company and National Western Life Group, Inc. v. Ross Rankin Moody et. al [Member]
Loss Contingencies [Line Items]
Loss contingency, damages awarded		$ 1,314,054
Equity index options | Williams v Pantaleoni et al
Loss Contingencies [Line Items]
Derivatives, index options			$ 100,000
Subsequent Event | Williams v Pantaleoni et al
Loss Contingencies [Line Items]
Loss contingency, compensatory damages awarded	$ 14,949
Loss contingency, punitive damages awarded	$ 2,920,000

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Investments (Investment Gains and Losses) (Details) - USD ($) $ in Thousands				3 Months Ended			6 Months Ended		12 Months Ended
	Jun. 07, 2019	May 01, 2019	Feb. 01, 2019	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Available for sale debt securities:
Realized gains on disposal				$ 1,168		$ 1,981	$ 2,351	$ 2,021
Realized losses on disposal				0		0	(84)	0
Held to maturity debt securities:
Realized gains on disposal				924		734	951	1,305
Realized losses on disposal				0		(19)	0	(19)
Real estate gains (losses)				3,385		0	6,888	0
Totals				$ 5,477		$ 2,696	$ 10,106	$ 3,307
Investments, percentage of gains on bonds, due to calls of securities (in percentage)				89.40%		99.00%	72.60%	99.70%
Total other-than-temporary impairment (“OTTI”) gains (losses)				$ (5,900)		$ 3	$ (5,897)	$ 6
Net OTTI losses recognized in earnings				(5,902)		0	(5,902)	0
Non-Credit Other-than-Temporary Impairment, Credit Losses Recognized in Other Comprehensive Income (Loss) [Roll Forward]
Beginning balance, cumulative credit losses related to other-than-temporary impairments				627	$ 627		627	627	$ 627
Reductions for securities sold during current period				0			0		0
Additions for credit losses not previously recognized in other-than-temporary impairments				0			0		0
Ending balance, cumulative credit losses related to other-than-temporary impairments				627	627		627		$ 627
Debt Securities
Held to maturity debt securities:
Total other-than-temporary impairment (“OTTI”) gains (losses)				(5,900)		3	(5,897)	6
Portion of loss (gain) recognized in comprehensive income				(2)		(3)	(5)	(6)
Net OTTI losses recognized in earnings				$ (5,902)		$ 0	$ (5,902)	$ 0
Nursing Home Operations in Reno, Nevada
Held to maturity debt securities:
Real estate gains (losses)			$ 5,700
Nursing Home Operations, San Marcos, Texas
Held to maturity debt securities:
Real estate gains (losses)		$ (2,000)
Impairment loss					$ 2,200
Nursing Home Operations, Austin, TX
Held to maturity debt securities:
Real estate gains (losses)	$ 3,200

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Investments (Securities Held to Maturity) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Schedule of Held-to-maturity Securities [Line Items]
Total	$ 7,342,359	$ 7,285,254
Gross Unrealized Gains	249,922	57,319
Gross Unrealized Losses	(2,801)	(114,305)
Fair Value	7,589,480	7,228,268
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position [Abstract]
Less than 12 Months, Fair Value	15,640	2,833,188
Less than 12 Months, Unrealized Losses	(61)	(67,652)
12 Months or Greater, Fair Value	191,029	1,073,028
12 Months or Greater, Unrealized Losses	(2,740)	(46,653)
Total, Fair Value	206,669	3,906,216
Total, Unrealized Losses	(2,801)	(114,305)
U.S. agencies
Schedule of Held-to-maturity Securities [Line Items]
Total	121,000
Gross Unrealized Gains	1,818
Gross Unrealized Losses	0
Fair Value	122,818
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position [Abstract]
Total, Unrealized Losses	0
U.S. Treasury
Schedule of Held-to-maturity Securities [Line Items]
Total	3,772	1,341
Gross Unrealized Gains	162	116
Gross Unrealized Losses	0	0
Fair Value	3,934	1,457
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position [Abstract]
Total, Unrealized Losses	0	0
States and political subdivisions
Schedule of Held-to-maturity Securities [Line Items]
Total	475,081	457,404
Gross Unrealized Gains	18,995	9,764
Gross Unrealized Losses	(45)	(2,376)
Fair Value	494,031	464,792
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position [Abstract]
Less than 12 Months, Fair Value	0	88,253
Less than 12 Months, Unrealized Losses	0	(2,124)
12 Months or Greater, Fair Value	1,666	10,645
12 Months or Greater, Unrealized Losses	(45)	(252)
Total, Fair Value	1,666	98,898
Total, Unrealized Losses	(45)	(2,376)
Foreign governments
Schedule of Held-to-maturity Securities [Line Items]
Total	1,154
Gross Unrealized Gains	44
Gross Unrealized Losses	0
Fair Value	1,198
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position [Abstract]
Total, Unrealized Losses	0
Public utilities
Schedule of Held-to-maturity Securities [Line Items]
Total	914,921	930,629
Gross Unrealized Gains	30,127	5,928
Gross Unrealized Losses	(56)	(12,944)
Fair Value	944,992	923,613
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position [Abstract]
Less than 12 Months, Fair Value	0	396,980
Less than 12 Months, Unrealized Losses	0	(8,371)
12 Months or Greater, Fair Value	11,183	98,632
12 Months or Greater, Unrealized Losses	(56)	(4,573)
Total, Fair Value	11,183	495,612
Total, Unrealized Losses	(56)	(12,944)
Corporate
Schedule of Held-to-maturity Securities [Line Items]
Total	4,688,662	4,715,775
Gross Unrealized Gains	163,757	27,652
Gross Unrealized Losses	(1,996)	(87,043)
Fair Value	4,850,423	4,656,384
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position [Abstract]
Less than 12 Months, Fair Value	11,333	2,144,969
Less than 12 Months, Unrealized Losses	(57)	(55,125)
12 Months or Greater, Fair Value	111,933	650,401
12 Months or Greater, Unrealized Losses	(1,939)	(31,918)
Total, Fair Value	123,266	2,795,370
Total, Unrealized Losses	(1,996)	(87,043)
Commercial mortgage-backed
Schedule of Held-to-maturity Securities [Line Items]
Total	3,046
Gross Unrealized Gains	58
Gross Unrealized Losses	0
Fair Value	3,104
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position [Abstract]
Total, Unrealized Losses	0
Residential mortgage-backed
Schedule of Held-to-maturity Securities [Line Items]
Total	1,131,418	1,176,216
Gross Unrealized Gains	34,876	13,771
Gross Unrealized Losses	(704)	(11,932)
Fair Value	1,165,590	1,178,055
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position [Abstract]
Less than 12 Months, Fair Value	4,307	202,986
Less than 12 Months, Unrealized Losses	(4)	(2,032)
12 Months or Greater, Fair Value	66,247	311,374
12 Months or Greater, Unrealized Losses	(700)	(9,900)
Total, Fair Value	70,554	514,360
Total, Unrealized Losses	(704)	(11,932)
Asset-backed
Schedule of Held-to-maturity Securities [Line Items]
Total	3,305	3,889
Gross Unrealized Gains	85	88
Gross Unrealized Losses	0	(10)
Fair Value	3,390	3,967
Debt Securities, Held-to-maturity, Continuous Unrealized Loss Position [Abstract]
Less than 12 Months, Fair Value		0
Less than 12 Months, Unrealized Losses		0
12 Months or Greater, Fair Value		1,976
12 Months or Greater, Unrealized Losses		(10)
Total, Fair Value		1,976
Total, Unrealized Losses	$ 0	$ (10)

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Investments (Securities Available for Sale) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Debt securities:
Total	$ 3,265,560	$ 3,008,624
Gross Unrealized Gains	115,411	17,678
Gross Unrealized Losses	(5,866)	(80,243)
Fair Value	3,375,105	2,946,059
Fair Value
Less than 12 Months	5,668	1,508,422
12 Months or Greater	189,990	443,676
Total	195,658	1,952,098
Unrealized Losses
Less than 12 Months	(34)	(45,096)
12 Months or Greater	(5,832)	(35,147)
Total	(5,866)	(80,243)
States and political subdivisions
Debt securities:
Total	100,781	570
Gross Unrealized Gains	4,543	0
Gross Unrealized Losses	(1)	(4)
Fair Value	105,323	566
Fair Value
Less than 12 Months	479	566
12 Months or Greater	0	0
Total	479	566
Unrealized Losses
Less than 12 Months	(1)	(4)
12 Months or Greater	0	0
Total	(1)	(4)
Foreign governments
Debt securities:
Total	9,978	9,974
Gross Unrealized Gains	252	30
Gross Unrealized Losses	0	0
Fair Value	10,230	10,004
Public utilities
Debt securities:
Total	78,919	82,943
Gross Unrealized Gains	3,349	1,045
Gross Unrealized Losses	0	(517)
Fair Value	82,268	83,471
Fair Value
Less than 12 Months		38,903
12 Months or Greater		0
Total		38,903
Unrealized Losses
Less than 12 Months		(517)
12 Months or Greater		0
Total		(517)
Corporate
Debt securities:
Total	2,950,597	2,893,221
Gross Unrealized Gains	102,775	15,473
Gross Unrealized Losses	(5,764)	(79,638)
Fair Value	3,047,608	2,829,056
Fair Value
Less than 12 Months	5,189	1,468,953
12 Months or Greater	189,145	442,798
Total	194,334	1,911,751
Unrealized Losses
Less than 12 Months	(33)	(44,575)
12 Months or Greater	(5,731)	(35,063)
Total	(5,764)	(79,638)
Commercial mortgage-backed
Debt securities:
Total	28,931
Gross Unrealized Gains	1,010
Gross Unrealized Losses	0
Fair Value	29,941
Residential mortgage-backed
Debt securities:
Total	14,481	15,947
Gross Unrealized Gains	1,210	937
Gross Unrealized Losses	(101)	(84)
Fair Value	15,590	16,800
Fair Value
Less than 12 Months	0	0
12 Months or Greater	845	878
Total	845	878
Unrealized Losses
Less than 12 Months	0	0
12 Months or Greater	(101)	(84)
Total	(101)	(84)
Asset-backed
Debt securities:
Total	81,873	5,969
Gross Unrealized Gains	2,272	193
Gross Unrealized Losses	0	0
Fair Value	$ 84,145	$ 6,162

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Investments (Unrealized Losses) (Details) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019 USD ($) security	Jun. 30, 2019 USD ($) security	Dec. 31, 2018 USD ($)
Available-for-Sale Securities and Held-to-Maturity Securities [Line Items]
Debt securities, held to maturity	$ 7,342,359	$ 7,342,359	$ 7,285,254
Fair Value	3,375,105	3,375,105	2,946,059
Asset-backed
Available-for-Sale Securities and Held-to-Maturity Securities [Line Items]
Securities, other-than-temporarily impaired	5,900	5,900
Debt securities, held to maturity	3,305	3,305	3,889
Fair Value	$ 84,145	$ 84,145	$ 6,162
Debt Securities
Available-for-Sale Securities and Held-to-Maturity Securities [Line Items]
Gross unrealized losses, number of issues | security	63	63
Gross unrealized losses, percentage of total debt	4.10%	4.10%
Gross unrealized losses, market value as a percent of amortized cost	97.90%	97.90%
Gross unrealized losses, number of securities with maturities of 12 months or greater | security	52	52
Gross unrealized losses, number of securities with maturities of 12 months or greater (as a percentage)	82.50%	82.50%
External Credit Rating, Investment Grade | Debt Securities
Available-for-Sale Securities and Held-to-Maturity Securities [Line Items]
Gross unrealized losses, number of securities rated investment grade | security	59	59
Ozark National Life Insurance Company
Available-for-Sale Securities and Held-to-Maturity Securities [Line Items]
Debt securities, held to maturity	$ 289,700	$ 289,700
Fair Value	$ 403,800	$ 403,800

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Investments (Contractual Maturity) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Debt Securities Available for Sale- Amortized Cost
Due in 1 year or less	$ 195,368
Due after 1 year through 5 years	1,182,355
Due after 5 years through 10 years	1,539,821
Due after 10 years	222,731
Amortized Cost	3,140,275
Mortgage and asset-backed securities	125,285
Total	3,265,560	$ 3,008,624
Debt Securities Available for Sale- Fair Value
Due in 1 year or less	198,197
Due after 1 year through 5 years	1,216,520
Due after 5 years through 10 years	1,594,437
Due after 10 years	236,275
Fair Value	3,245,429
Mortgage and asset-backed securities	129,676
Total	3,375,105	2,946,059
Debt Securities Held to Maturity - Amortized Costs
Due in 1 year or less	359,261
Due after 1 year through 5 years	3,083,206
Due after 5 years through 10 years	2,299,446
Due after 10 years	462,677
Amortized Cost	6,204,590
Mortgage and asset-backed securities	1,137,769
Total	7,342,359	7,285,254
Debt Securities Held to Maturity - Fair Value
Due in 1 year or less	363,189
Due after 1 year through 5 years	3,170,949
Due after 5 years through 10 years	2,390,796
Due after 10 years	492,462
Fair Value	6,417,396
Mortgage and asset-backed securities	1,172,084
Total	$ 7,589,480	$ 7,228,268

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Investments (Mortgage Loans and Real Estate) (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Mortgage loan, amount	$ 214,970	$ 203,855
Allowance for possible losses, amount	(675)	(675)
Totals, amount	$ 214,295	$ 203,180
Mortgage loans, percentage	100.00%	100.00%
Allowance for possible losses, percentage	(0.30%)	(0.30%)
Totals, percentage	99.70%	99.70%
Allowance for Loan and Lease Losses [Roll Forward]
Balance, beginning of period	$ 675	$ 650
Provision	0	25
Releases	0	0
Balance, end of period	675	675
Less than 50%
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Mortgage loan, amount	$ 60,831	$ 66,371
Mortgage loans, percentage	28.30%	32.60%
50% to 60%
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Mortgage loan, amount	$ 38,963	$ 22,610
Mortgage loans, percentage	18.10%	11.10%
60% to 70%
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Mortgage loan, amount	$ 99,009	$ 102,857
Mortgage loans, percentage	46.10%	50.40%
70% to 80%
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Mortgage loan, amount	$ 16,167	$ 6,642
Mortgage loans, percentage	7.50%	3.30%
80% to 90%
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Mortgage loan, amount	$ 0	$ 5,375
Mortgage loans, percentage	0.00%	2.60%
Greater than 90%
SEC Schedule, 12-29, Real Estate Companies, Investment in Mortgage Loans on Real Estate [Line Items]
Mortgage loan, amount	$ 0	$ 0
Mortgage loans, percentage	0.00%	0.00%

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Investments (Real Estate) (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jan. 31, 2019	Dec. 31, 2018
Debt Securities, Available-for-sale [Line Items]
Other long-term investments	$ 62,214			$ 56,851
Real Estate
Debt Securities, Available-for-sale [Line Items]
Other long-term investments	34,900			$ 35,700
Operating income from real estate	$ 1,400	$ 1,100
Ozark National Life Insurance Company | Real Estate
Debt Securities, Available-for-sale [Line Items]
Other long-term investments			$ 4,300

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Fair Value of Financial Instruments (Assets and Liabilities Measured on Recurring Basis) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities available for sale	$ 3,375,105	$ 2,946,059
Equity securities	19,324	17,491
Derivatives, index options	89,900	14,684
Total assets	3,484,329	2,978,234
Policyholder account balances	100,638	44,781
Other liabilities	11,862	11,923
Total liabilities	$ 112,500	$ 56,704
Percent of total	100.00%	100.00%
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities available for sale	$ 0	$ 0
Equity securities	19,324	17,491
Derivatives, index options	0	0
Total assets	19,324	17,491
Policyholder account balances	0	0
Other liabilities	0	0
Total liabilities	$ 0	$ 0
Percent of total	0.60%	0.60%
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities available for sale	$ 3,375,105	$ 2,946,059
Equity securities	0	0
Derivatives, index options	0	0
Total assets	3,375,105	2,946,059
Policyholder account balances	0	0
Other liabilities	0	0
Total liabilities	$ 0	$ 0
Percent of total	96.80%	98.90%
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities available for sale	$ 0	$ 0
Equity securities	0	0
Derivatives, index options	89,900	14,684
Total assets	89,900	14,684
Policyholder account balances	100,638	44,781
Other liabilities	11,862	11,923
Total liabilities	$ 112,500	$ 56,704
Percent of total	2.60%	0.50%
Priced by Third-Party Vendors
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities available for sale	$ 3,375,105	$ 2,946,059
Equity securities	19,324	17,491
Derivatives, index options	89,900	14,684
Priced by Third-Party Vendors | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities available for sale	0	0
Equity securities	19,324	17,491
Derivatives, index options	0	0
Priced by Third-Party Vendors | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities available for sale	3,375,105	2,946,059
Equity securities	0	0
Derivatives, index options	0	0
Priced by Third-Party Vendors | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities available for sale	0	0
Equity securities	0	0
Derivatives, index options	89,900	14,684
Priced Internally
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities available for sale	0	0
Equity securities	0	0
Derivatives, index options	0	0
Priced Internally | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities available for sale	0	0
Equity securities	0	0
Derivatives, index options	0	0
Priced Internally | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities available for sale	0	0
Equity securities	0	0
Derivatives, index options	0	0
Priced Internally | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities available for sale	0	0
Equity securities	0	0
Derivatives, index options	$ 0	$ 0

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Fair Value of Financial Instruments (Fair Value Measurements for Level 3 Instruments) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Balance at beginning of period	$ 71,001	$ 116,356	$ 14,684	$ 194,731
Total realized and unrealized gains (losses):
Included in net income	17,828	10,292	59,830	(34,102)
Purchases	19,030	21,901	36,622	44,277
Sales	0	0	0	0
Issuances	0	0	0	0
Settlements	(17,959)	(46,542)	(21,236)	(102,899)
Transfers into (out of) Level 3	0	0	0	0
Balance at end of period	89,900	102,007	89,900	102,007
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	4,350	20,610	44,814	(23,727)
Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Balance at beginning of period	97,725	147,502	56,704	226,401
Total realized and unrealized gains (losses):
Included in net income	13,704	10,608	39,232	(32,820)
Purchases	19,030	21,901	36,622	44,277
Sales	0	0		0
Issuances	0	0	3,700	0
Settlements	(17,959)	(46,998)	(23,758)	(104,845)
Transfers into (out of) Level 3	0	0	0	0
Balance at end of period	112,500	133,013	112,500	133,013
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	4,614	21,861	43,575	(23,019)
Debt Securities, Available for Sale
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Balance at beginning of period	0	0	0	0
Total realized and unrealized gains (losses):
Included in net income	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	0	0
Issuances	0	0	0	0
Settlements	0	0	0	0
Transfers into (out of) Level 3	0	0	0	0
Balance at end of period	0	0	0	0
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	0	0	0	0
Equity Securities
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Balance at beginning of period	0	0	0	0
Total realized and unrealized gains (losses):
Included in net income	0	0	0	0
Purchases	0	0	0	0
Sales	0	0	0	0
Issuances	0	0	0	0
Settlements	0	0	0	0
Transfers into (out of) Level 3	0	0	0	0
Balance at end of period	0	0	0	0
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	0	0	0	0
Derivatives, Index Options
Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Balance at beginning of period	71,001	116,356	14,684	194,731
Total realized and unrealized gains (losses):
Included in net income	17,828	10,292	59,830	(34,102)
Purchases	19,030	21,901	36,622	44,277
Sales	0	0	0	0
Issuances	0	0	0	0
Settlements	(17,959)	(46,542)	(21,236)	(102,899)
Transfers into (out of) Level 3	0	0	0	0
Balance at end of period	89,900	102,007	89,900	102,007
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	4,350	20,610	44,814	(23,727)
Net investment income
Total realized and unrealized gains (losses):
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	4,350	20,610	44,814	(23,727)
Total realized and unrealized gains (losses):
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	0	0	0	0
Net investment income | Debt Securities, Available for Sale
Total realized and unrealized gains (losses):
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	0	0	0	0
Net investment income | Equity Securities
Total realized and unrealized gains (losses):
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	0	0	0	0
Net investment income | Derivatives, Index Options
Total realized and unrealized gains (losses):
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	4,350	20,610	44,814	(23,727)
Benefits and expenses
Total realized and unrealized gains (losses):
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	0	0	0	0
Total realized and unrealized gains (losses):
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	4,614	21,861	43,575	(23,019)
Benefits and expenses | Debt Securities, Available for Sale
Total realized and unrealized gains (losses):
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	0	0	0	0
Benefits and expenses | Equity Securities
Total realized and unrealized gains (losses):
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	0	0	0	0
Benefits and expenses | Derivatives, Index Options
Total realized and unrealized gains (losses):
Change in unrealized gains or losses for the period included in earnings (or changes in net assets) for assets held at the end of the reporting period:	$ 0	$ 0	$ 0	$ 0

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Fair Values of Financial Instruments (Quantitative Information) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value disclosure	$ 3,484,329	$ 2,978,234
Liabilities, fair value disclosure	112,500	56,704
Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value disclosure	89,900	14,684
Liabilities, fair value disclosure	112,500	56,704
Derivatives, Index Options | Broker prices | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value disclosure	89,900	14,684
Policyholder account balances | Deterministic cash flow model | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value disclosure	100,638	44,781
Other liabilities, share-based compensation | Black-Scholes model | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value disclosure	7,991	$ 11,923
Other liabilities, share-based compensation | Probabilistic Method | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Liabilities, fair value disclosure	$ 3,871

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Fair Values of Financial Instruments (Fair Value by Balance Sheet Grouping) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
ASSETS
Debt securities held to maturity	$ 7,589,480	$ 7,228,268
Debt securities available for sale	3,375,105	2,946,059
Derivatives, index options	89,900	14,684
Equity securities	19,324	17,491
Carrying Values
ASSETS
Debt securities held to maturity	7,342,359	7,285,254
Debt securities available for sale	3,375,105
Debt securities available for sale		2,946,059
Cash and cash equivalents	140,802	131,976
Mortgage loans	214,295	203,180
Policy loans	80,155	54,724
Other loans	13,873	12,272
Derivatives, index options	89,900	14,684
Equity securities	19,324	17,491
Life interest in Libbie Shearn Moody Trust	8,692	8,692
LIABILITIES
Deferred annuity contracts	7,209,899	7,455,642
Immediate annuity and supplemental contracts	404,211	407,413
Contingent consideration on businesses acquired	3,871
Fair Values
ASSETS
Debt securities held to maturity	7,589,480	7,228,268
Debt securities available for sale	3,375,105
Debt securities available for sale		2,946,059
Cash and cash equivalents	140,802	131,976
Mortgage loans	225,807	202,762
Policy loans	122,556	90,802
Other loans	14,047	12,709
Derivatives, index options	89,900	14,684
Equity securities	19,324	17,491
Life interest in Libbie Shearn Moody Trust	12,775	12,775
LIABILITIES
Deferred annuity contracts	6,009,840	6,403,007
Immediate annuity and supplemental contracts	426,338	415,726
Contingent consideration on businesses acquired	3,871
Level 1
ASSETS
Debt securities held to maturity	0	0
Debt securities available for sale	0	0
Debt securities available for sale		0
Cash and cash equivalents	140,802	131,976
Mortgage loans	0	0
Policy loans	0	0
Other loans	0	0
Derivatives, index options	0	0
Equity securities	19,324	17,491
Life interest in Libbie Shearn Moody Trust	0	0
LIABILITIES
Deferred annuity contracts	0	0
Immediate annuity and supplemental contracts	0	0
Contingent consideration on businesses acquired	0
Level 2
ASSETS
Debt securities held to maturity	7,587,924	7,226,362
Debt securities available for sale	3,375,105	2,946,059
Debt securities available for sale		2,946,059
Cash and cash equivalents	0	0
Mortgage loans	0	0
Policy loans	0	0
Other loans	0	0
Derivatives, index options	0	0
Equity securities	0	0
Life interest in Libbie Shearn Moody Trust	0	0
LIABILITIES
Deferred annuity contracts	0	0
Immediate annuity and supplemental contracts	0	0
Contingent consideration on businesses acquired	0
Level 3
ASSETS
Debt securities held to maturity	1,556	1,906
Debt securities available for sale	0	0
Debt securities available for sale		0
Cash and cash equivalents	0	0
Mortgage loans	225,807	202,762
Policy loans	122,556	90,802
Other loans	14,047	12,709
Derivatives, index options	89,900	14,684
Equity securities	0	0
Life interest in Libbie Shearn Moody Trust	12,775	12,775
LIABILITIES
Deferred annuity contracts	6,009,840	6,403,007
Immediate annuity and supplemental contracts	426,338	$ 415,726
Contingent consideration on businesses acquired	$ 3,871

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Derivative Investments (Balance Sheet) (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Derivatives, Fair Value [Line Items]
Asset Derivatives	$ 89,900	$ 14,684
Liability Derivatives	100,638	44,781
Derivatives not designated as hedging instruments
Derivatives, Fair Value [Line Items]
Asset Derivatives	89,900	14,684
Liability Derivatives	100,638	44,781
Derivatives not designated as hedging instruments | Equity index options | Derivatives, Index Options
Derivatives, Fair Value [Line Items]
Asset Derivatives	89,900	14,684
Derivatives not designated as hedging instruments | Fixed-index products | Universal Life and Annuity Contracts
Derivatives, Fair Value [Line Items]
Liability Derivatives	$ 100,638	$ 44,781

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Derivative Investments (Statements of Earnings) (Details) - Derivatives not designated as hedging instruments - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Income on Derivatives	$ 4,389	$ 935	$ 19,360	$ (574)
Equity index options | Investment Income
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Income on Derivatives	17,828	10,292	59,830	(34,102)
Fixed-index products | Universal Life and Annuity Contract Interest
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Gain or (Loss) Recognized in Income on Derivatives	$ (13,439)	$ (9,357)	$ (40,470)	$ 33,528

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Business Combinations (Details) - USD ($)		2 Months Ended	3 Months Ended		12 Months Ended
	Jan. 31, 2019	Mar. 31, 2019	Jun. 30, 2019	Mar. 31, 2019	Dec. 31, 2018
Business Acquisition [Line Items]
Value of business acquired			$ 141,862,000		$ 0
Ozark National Life Insurance Company
Business Acquisition [Line Items]
Payments to acquire business	$ 205,400,000
Earn-out payment maximum	5,000,000.0
Contingent consideration on businesses acquired	3,700,000		3,900,000
Acquisition-related costs				$ 3,200,000	$ 1,000,000.0
Value of business acquired	$ 145,800,000
Revenues of acquiree since acquisition date		$ 48,400,000
Net earnings of acquiree since acquisition date			$ 7,200,000

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Business Combinations - Fair Value of Net Assets Acquired (Details) - Ozark National Life Insurance Company $ in Thousands	Jan. 31, 2019 USD ($)
Assets
Debt securities held to maturity	$ 261,059
Debt securities available for sale	400,719
Policy loans	28,128
Real estate	4,600
Cash and cash equivalents	16,275
Accrued investment income	6,116
Value of business acquired	145,768
Reinsurance recoverables	21,895
Other intangible assets	9,600
Other assets acquired	12,075
Total assets acquired	906,235
Liabilities
Traditional life reserves	691,297
Other policyholder liabilities	13,867
Other liabilities acquired	5,840
Total liabilities acquired	711,004
Net identifiable assets acquired	195,231
Goodwill	13,864
Net assets acquired	$ 209,095

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Business Combinations - Fair Value of Intangible Assets Acquired (Details) - Ozark National Life Insurance Company $ in Thousands	Jan. 31, 2019 USD ($)
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets acquired	$ 9,600
Trademarks / trade names
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets acquired	$ 2,800
Weighted-average amortization period	15 years
Internally developed software
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets acquired	$ 3,800
Weighted-average amortization period	7 years
Insurance licenses
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets acquired	$ 3,000

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Business Combinations - Expected Amortization (Details) - Ozark National Life Insurance Company $ in Thousands	Jan. 31, 2019 USD ($)
Acquired Indefinite-lived Intangible Assets [Line Items]
Remainder of 2019	$ 4,596
2020	8,725
2021	8,282
2022	7,897
2023	$ 7,552

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Business Combinations - Pro Forma (Details) - Ozark National Life Insurance Company - USD ($) $ in Thousands	3 Months Ended		5 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Business Acquisition [Line Items]
Total revenues	$ 192,685	$ 203,421	$ 420,268	$ 341,832
Net earnings	$ 33,696	$ 36,120	$ 75,328	$ 67,720

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Label	Element	Value
Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ 0
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	4,414,000
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	0
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ (4,414,000)