0001635984-22-000027.txt : 20220809 0001635984-22-000027.hdr.sgml : 20220809 20220809153713 ACCESSION NUMBER: 0001635984-22-000027 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 81 CONFORMED PERIOD OF REPORT: 20220630 FILED AS OF DATE: 20220809 DATE AS OF CHANGE: 20220809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: National Western Life Group, Inc. CENTRAL INDEX KEY: 0001635984 STANDARD INDUSTRIAL CLASSIFICATION: LIFE INSURANCE [6311] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55522 FILM NUMBER: 221147976 BUSINESS ADDRESS: STREET 1: C/O NATIONAL WESTERN LIFE INSURANCE CO. STREET 2: PO BOX 209080 CITY: AUSTIN STATE: TX ZIP: 78720-9080 BUSINESS PHONE: (512) 719-0143 MAIL ADDRESS: STREET 1: C/O NATIONAL WESTERN LIFE INSURANCE CO. STREET 2: PO BOX 209080 CITY: AUSTIN STATE: TX ZIP: 78720-9080 10-Q 1 nwli-20220630.htm 10-Q nwli-20220630
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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, 2022

  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE 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)

Securities registered pursuant to Section 12 (b) of the Act:
Title of each class to be so registered:Trading Symbol Name of each exchange on which
each class is to be registered:
Class A Common Stock, $0.01 par valueNWLI The NASDAQ Stock Market LLC

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 5, 2022, the number of shares of Registrant's common stock outstanding was: Class A – 3,436,020 and  Class B - 200,000.


nwli-20220630_g1.jpg
TABLE OF CONTENTS
 Page
June 30, 2022 (Unaudited) and December 31, 2021
For the Three Months Ended June 30, 2022 and 2021 (Unaudited)
For the Six Months Ended June 30, 2022 and 2021 (Unaudited)
For the Three Months Ended June 30, 2022 and 2021 (Unaudited)
For the Six Months Ended June 30, 2022 and 2021 (Unaudited)
For the Three Months Ended June 30, 2022 and 2021 (Unaudited)
For the Six Months Ended June 30, 2022 and 2021 (Unaudited)
For the Six Months Ended June 30, 2022 and 2021 (Unaudited)
2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

 (Unaudited) 
ASSETSJune 30,
2022
December 31,
2021
Investments:  
Debt securities available-for-sale, at fair value (cost: $8,723,242 and $8,604,250)
$8,160,952 9,068,946 
Debt securities trading, at fair value (cost: $1,055,106 and $1,066,108)
909,647 1,077,438 
Mortgage loans, net of allowance for credit losses ($2,573 and $2,987), ($18,738 and 8,469 at fair value)
511,936 487,304 
Policy loans71,443 71,286 
Derivatives, index options6,071 101,622 
Equity securities, at fair value (cost: $16,351 and $16,549)
22,121 28,217 
Other long-term investments158,859 137,670 
Total investments9,841,029 10,972,483 
Cash and cash equivalents530,559 714,624 
Deferred policy acquisition costs882,537 569,839 
Deferred sales inducements122,390 78,136 
Value of business acquired149,962 154,499 
Cost of reinsurance84,175 89,686 
Accrued investment income84,920 84,394 
Federal income tax receivable16,855  
Deferred federal income tax asset21,245  
Amounts recoverable from reinsurer1,452,562 1,539,919 
Other assets116,135 126,609 
Total assets$13,302,369 14,330,189 

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’ EQUITYJune 30,
2022
December 31,
2021
LIABILITIES:  
Future policy benefits:  
Universal life and annuity contracts$8,778,832 9,003,275 
   Traditional life reserves912,368 909,712 
Other policyholder liabilities142,181 134,338 
Funds withheld liability1,208,219 1,485,267 
Deferred Federal income tax liability 101,166 
Federal income tax payable 2,331 
Other liabilities165,220 154,409 
Total liabilities11,206,820 11,790,498 
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS’ EQUITY:  
Common stock:  
Class A - $0.01 par value; 7,500,000 shares authorized; 3,436,020 issued and outstanding in 2022 and 2021
34 34 
Class B - $0.01 par value; 200,000 shares authorized, issued, and outstanding in 2022 and 2021
2 2 
Additional paid-in capital41,716 41,716 
Accumulated other comprehensive income (loss)(295,138)215,953 
Retained earnings2,348,935 2,281,986 
Total stockholders’ equity2,095,549 2,539,691 
Total liabilities and stockholders' equity$13,302,369 14,330,189 

Note:  The Condensed Consolidated Balance Sheet at December 31, 2021 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, 2022 and 2021
(Unaudited)
(In thousands, except per share amounts)

 20222021
Premiums and other revenues:  
Universal life and annuity contract charges$32,692 34,060 
Traditional life premiums21,647 22,112 
Net investment income55,474 156,544 
Other revenues5,578 6,034 
Net realized investment gains:  
Other net investment gains1,766 3,415 
Total net realized investment gains1,766 3,415 
Total revenues117,157 222,165 
Benefits and expenses:  
Life and other policy benefits35,177 35,904 
Amortization of deferred transaction costs27,756 25,123 
Universal life and annuity contract interest(13,801)69,973 
Other operating expenses30,321 28,468 
Total benefits and expenses79,453 159,468 
Earnings before Federal income taxes37,704 62,697 
Federal income taxes6,939 12,798 
Net earnings$30,765 49,899 
Basic earnings per share:  
Class A$8.70 $14.11 
Class B$4.35 $7.06 
Diluted earnings per share:  
Class A$8.70 $14.11 
Class B$4.35 $7.06 

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, 2022 and 2021
(Unaudited)
(In thousands, except per share amounts)

 20222021
Premiums and other revenues:  
Universal life and annuity contract charges$65,343 68,949 
Traditional life premiums43,980 44,696 
Net investment income125,198 322,619 
Other revenues11,375 11,448 
Net realized investment gains:  
Other net investment gains5,560 4,831 
Total net realized investment gains5,560 4,831 
Total revenues251,456 452,543 
Benefits and expenses:  
Life and other policy benefits77,076 73,793 
Amortization of deferred transaction costs56,772 55,112 
Universal life and annuity contract interest(28,606)122,818 
Other operating expenses62,903 59,803 
Total benefits and expenses168,145 311,526 
Earnings before Federal income taxes83,311 141,017 
Federal income taxes16,362 28,989 
Net earnings$66,949 112,028 
Basic earnings per share:  
Class A$18.93 $31.68 
Class B$9.47 $15.84 
Diluted earnings per share:  
Class A$18.93 $31.68 
Class B$9.47 $15.84 


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, 2022 and 2021
(Unaudited)
(In thousands)

 20222021
Net earnings$30,765 49,899 
Other comprehensive income (loss), net of effects of deferred costs and taxes:  
Unrealized gains (losses) on available-for-sale securities:  
Net unrealized holding gains (losses) arising during period(232,914)41,396 
Reclassification adjustment for net amounts included in net earnings(1,395)(3,810)
Net unrealized gains (losses) on securities(234,309)37,586 
Foreign currency translation adjustments(22)(71)
Benefit plans:  
Amortization of net prior service cost and net gain1,134 1,935 
Other comprehensive income (loss)(233,197)39,450 
Comprehensive income (loss)$(202,432)89,349 

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, 2022 and 2021
(Unaudited)
(In thousands)

 20222021
Net earnings$66,949 112,028 
Other comprehensive income, net of effects of deferred costs and taxes:  
Unrealized gains (losses) on available-for-sale securities:  
Net unrealized holding gains (losses) arising during period(509,523)(110,799)
Reclassification adjustment for net amounts included in net earnings(4,127)(4,929)
Net unrealized gains (losses) on securities(513,650)(115,728)
Foreign currency translation adjustments291 (76)
Benefit plans:  
Amortization of net prior service cost and net gain2,268 3,870 
Other comprehensive income (loss)(511,091)(111,934)
Comprehensive income (loss)$(444,142)94 


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, 2022 and 2021
(Unaudited)
(In thousands)

 20222021
Common stock:  
Balance at beginning of period$36 36 
Balance at end of period36 36 
Additional paid-in capital:  
Balance at beginning of period41,716 41,716 
Balance at end of period41,716 41,716 
Accumulated other comprehensive income (loss):  
Unrealized gains (losses) on debt securities available-for-sale:  
Balance at beginning of period(53,121)265,427 
Change in unrealized gains (losses) during period, net of tax(234,309)37,586 
Balance at end of period(287,430)303,013 
Foreign currency translation adjustments:  
Balance at beginning of period5,413 5,111 
Change in translation adjustments during period(22)(71)
Balance at end of period5,391 5,040 
Benefit plan liability adjustment:  
Balance at beginning of period(14,233)(26,501)
Amortization of net prior service cost and net gain, net of tax1,134 1,935 
Balance at end of period(13,099)(24,566)
Accumulated other comprehensive income (loss) at end of period(295,138)283,487 
Retained earnings:  
Balance at beginning of period2,318,170 2,164,706 
Net earnings30,765 49,899 
Balance at end of period 2,348,935 2,214,605 
Total stockholders' equity$2,095,549 2,539,844 

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



9

NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 2022 and 2021
(Unaudited)
(In thousands)
 20222021
Common stock:  
Balance at beginning of period$36 36 
Balance at end of period36 36 
Additional paid-in capital:  
Balance at beginning of period41,716 41,716 
Balance at end of period
41,716 41,716 
Accumulated other comprehensive income (loss):  
Unrealized gains (losses) on non-impaired securities:  
Balance at beginning of period226,220 418,741 
Change in unrealized gains (losses) during period, net of tax(513,650)(115,728)
Balance at end of period(287,430)303,013 
Foreign currency translation adjustments:  
Balance at beginning of period5,100 5,116 
Change in translation adjustments during period291 (76)
Balance at end of period5,391 5,040 
Benefit plan liability adjustment:  
Balance at beginning of period(15,367)(28,436)
Amortization of net prior service cost and net loss, net of tax2,268 3,870 
Balance at end of period(13,099)(24,566)
Accumulated other comprehensive income (loss) at end of period(295,138)283,487 
Retained earnings:  
Balance at beginning of period2,281,986 2,102,577 
Net earnings66,949 112,028 
Balance at end of period2,348,935 2,214,605 
Total stockholders' equity$2,095,549 2,539,844 

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
10

NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2022 and 2021
(Unaudited)
(In thousands)
 20222021
Cash flows from operating activities:  
Net earnings$66,949 112,028 
Adjustments to reconcile net earnings to net cash from operating activities:  
Universal life and annuity contract interest(28,606)122,818 
Surrender charges and other policy revenues(9,761)(13,301)
Realized (gains) losses on investments(5,560)(4,831)
Accretion/amortization of discounts and premiums, investments(1,734)945 
Depreciation and amortization6,896 6,631 
Increase (decrease) in estimated credit losses on investments(413)752 
(Increase) decrease in value of debt securities trading156,791 (10,271)
(Increase) decrease in value of equity securities4,600 (3,698)
(Increase) decrease in value of derivative options76,624 (68,190)
(Increase) decrease in deferred policy acquisition and sales inducement costs, and value of business acquired24,380 2,876 
(Increase) decrease in accrued investment income(526)467 
(Increase) decrease in reinsurance recoverable87,357 79,375 
(Increase) decrease in cost of reinsurance5,511 7,131 
(Increase) decrease in other assets434 (2,485)
Increase (decrease) in liabilities for future policy benefits43,768 (95,970)
Increase (decrease) in other policyholder liabilities7,843 (4,063)
Increase (decrease) in Federal income tax liability(19,186)16,438 
Increase (decrease) in deferred Federal income tax13,449 (635)
Increase (decrease) in funds withheld liability(277,048)(103,571)
Increase (decrease) in other liabilities(12,479)(36,690)
Net cash provided by operating activities139,289 5,756 
Cash flows from investing activities:  
Proceeds from sales of:  
Debt securities available-for-sale39,254 1,099,043 
Debt securities trading17,183  
Other investments2,804 10,853 
Proceeds from maturities, redemptions, and prepayments of:  
Debt securities available-for-sale565,415 782,008 
Debt securities trading69,983 8,102 
  Other investments16,138 9,685 
Derivatives, index options46,412 108,397 
Purchases of:  
Debt securities available-for-sale(690,390)(928,573)
Continued on Next Page
11


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For the Six Months Ended June 30, 2022 and 2021
(Unaudited)
(In thousands)
20222021
Debt securities trading(75,581)(1,064,566)
Equity securities(890)(10,543)
Derivatives, index options(26,377)(22,483)
Other investments(33,704)(30,908)
Property, equipment, and other productive assets(764)(4,823)
Principal payments on mortgage loans18,872 8,053 
Cost of mortgage loans acquired(44,139)(70,308)
Decrease (increase) in policy loans(157)2,443 
Other (increases) decreases to funds withheld(424)(69,377)
Net cash provided by (used in) investing activities(96,365)(172,997)
Cash flows from financing activities:  
Deposits to account balances for universal life and annuity contracts210,438 329,742 
Return of account balances on universal life and annuity contracts(437,626)(347,434)
Principal payments under finance lease obligation(169)(197)
Net cash provided by (used in) financing activities(227,357)(17,889)
Effect of foreign exchange368 (96)
Net increase (decrease) in cash, cash equivalents, and restricted cash(184,065)(185,226)
Cash, cash equivalents, and restricted cash at beginning of period714,624 581,059 
Cash, cash equivalents and restricted cash at end of period$530,559 395,833 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:  
Cash paid during the period for:  
Interest$37 19 
Income taxes$22,138 13,085 
Noncash operating activities:
Net deferral and amortization of sales inducements$(2,213)3,659 

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


12


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 complete annual financial statements. In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments necessary to present fairly the financial position and results of operations of National Western Life Group, Inc. ("NWLGI") and its wholly owned subsidiaries (collectively, the “Company”), on a basis consistent with the prior audited consolidated financial statements, as of June 30, 2022, and for the three and six months ended June 30, 2022 and June 30, 2021. Such adjustments are of a normal recurring nature. Certain reclasses of prior year balances have been made for comparison. The results of operations for the six months ended June 30, 2022 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, 2021 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, 2021 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"). 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 ("DPAC"), deferred sales inducements ("DSI"), the value of business acquired ("VOBA"), and the cost of reinsurance ("COR"), (4) valuation allowances for deferred tax assets, (5) goodwill, (6) allowances for credit losses on debt securities and mortgage loans, and (7) commitments and contingencies.

As a result of executing a funds withheld coinsurance agreement at December 31, 2020, the Company implemented accounting policies related to trading debt securities and the embedded derivative on reinsurance in its financial statements. Trading securities represent debt securities that are included in the fund assets withheld as part of the funds withheld coinsurance agreements to support the policyholder liability obligations ceded to the reinsurer. Trading debt securities are reported in the accompanying Condensed Consolidated Financial Statements at their fair values with changes in their fair values reflected as a component of Net investment income in the Condensed Consolidated Statements of Earnings. Since these trading debt securities pertain to investment activities related to coinsurance agreements rather than as an income strategy based on active trading, they are classified as investing activities in the Condensed Consolidated Statements of Cash Flows. Under the terms of the coinsurance funds withheld agreement, while the assets are withheld, the associated interest and credit risk of these assets are transferred to the reinsurer creating an embedded derivative on reinsurance in the funds withheld liability. Accordingly, the Company is required to bifurcate the embedded derivative from the host contract in accordance with ASC 815-15. The bifurcated embedded derivative on reinsurance is computed as the fair value unrealized gain (loss) on the underlying funds withheld assets. This amount is included as a component of the funds withheld liability balance reported on the Condensed Consolidated Balance Sheets, with changes in the embedded derivative on reinsurance reported in Net investment income in the Condensed Consolidated Statements of Earnings.

13


NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The table below shows the net 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, 2022 and June 30, 2021.

Affected Line Item in the Condensed Consolidated Statements of EarningsAmount Reclassified From Accumulated Other Comprehensive Income
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
(In thousands)
Other net investment gains$1,766 4,823 5,224 6,239 
Earnings before Federal income taxes1,766 4,823 5,224 6,239 
Federal income taxes371 1,013 1,097 1,310 
Net earnings$1,395 3,810 4,127 4,929 


(2) NEW ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements not yet adopted

In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-12 Financial Services-Insurance (Topic 944) - Targeted Improvements to the Accounting for Long-Duration Contracts ("LDTI"). This update pertains to long-duration contracts and improving the timeliness of recognizing changes in the liability for future policy benefits, simplifying accounting for certain market-based options, simplifying the amortization of deferred policy acquisition costs, and improving the effectiveness of required disclosures. Amendments include the following:

A. Require an 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 assumptions at each quarterly reporting date with the impact recognized in other comprehensive income ("OCI").

B. Require an insurance entity to measure all market risk benefits, which are contracts or contract features that provide protection to the policyholder from capital market risk, associated with deposit (i.e. account balance) contracts at fair value. The periodic change in fair value attributable to change in instrument-specific credit risk is recognized in OCI.

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

D. Require an insurance entity to add disclosures of disaggregated rollforwards of significant insurance liabilities and other account balances (i.e. beginning to ending balances of the liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities, and deferred acquisition costs). The 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.

14


NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In November 2020, the FASB released ASU 2020-11 Financial Services – Insurance (Topic 944). The amendments in this update deferred the effective date of adoption of ASU 2018-12 for all entities by one year. In particular, for publicly traded business entities, adoption of LDTI was made effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Accordingly, the Company's required adoption date is January 1, 2023. To date, the Company has: (1) performed a preliminary gap analysis identifying contracts and contract features in scope of this guidance, (2) identified the actuarial models, systems and processes to be updated, (3) identified and gathered cash flow data to be extracted from the Company's policy administrative systems necessary for implementation of this standard, (4) developed valuation models specific to LDTI for valuation date calculations integrating historical cash flows, and (5) established work streams for evaluating and finalizing key accounting policies, determining the impact to financial reporting charts of account, and developing the format and content of the new required disclosures.

Adoption of this standard will significantly change the accounting and reporting for the Company's insurance and annuity products. As the Company progresses through its implementation of the requirements of the standard, it will be better able to assess the impact to its Consolidated Financial Statements.

In March 2022, the FASB released ASU 2022-02 Financial Instruments – Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures. The amendments in this Update eliminate the accounting guidance for troubled-debt restructurings (TDRs) by creditors in Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors, but enhances disclosure requirements for certain loan modifications in which the debtor is experiencing financial difficulties. Additionally, the amendments in this Update require public business entities to disclose current-period gross write offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost. The updates are required to be applied prospectively beginning in fiscal years after December 15, 2022, including interim periods within those fiscal years. The Company does not expect this guidance to have a material impact on the Consolidated Financial Statements and related disclosures upon adoption.

Accounting pronouncements adopted

In December 2019, the FASB issued ASU 2019-12 Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740), which simplified various aspects of the income tax accounting guidance and is applied using different approaches depending on the specific amendment. The amendments were effective for fiscal periods beginning after December 15, 2020. Earlier adoption was permitted. The adoption of this ASU in 2021 did not have a material effect on the results of operations or financial position of the Company.

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

Robert L. Moody, Sr., through the Robert L. Moody Revocable Trust, controls 99.0% of the total outstanding shares of the Company's Class B common stock as of June 30, 2022. Holders of the Company's Class A common stock elect one-third of the Board of Directors of the Company, and holders of the Class B common stock elect the remainder. Any cash or in-kind dividends paid on each share of Class B common stock are limited to one-half of the cash or in-kind dividends paid on each share of Class A common stock. In the event of liquidation of the Company, the Class A stockholders will receive the par value of their shares; then the Class B stockholders shall receive the par value of their shares; and the remaining net assets of the Company shall be divided between the stockholders of both Class A and Class B stock based upon the number of shares held.

As the sole owner of National Western, all dividends declared by National Western are payable entirely to NWLGI and are eliminated in consolidation. National Western 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, or 10% of statutory surplus of National Western as of the previous year-end. Under these guidelines, the maximum dividend payment which may be made without prior approval in 2022 is $64.4 million. During the six months ended June 30, 2022, National Western declared and paid a $2.0 million dividend to NWLGI. National Western did not declare or pay cash dividends to NWLGI during the six months ended June 30, 2021.

15


NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 10.0% of the statutory surplus of the company from the preceding 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 2022 without prior approval is $18.6 million. All dividends declared by Ozark National are payable entirely to NWLIC as the sole owner and are eliminated in consolidation. Ozark National did not declare or pay cash dividends to NWLIC during the six months ended June 30, 2022 and 2021.

NWLGI did not declare or pay cash dividends on its common shares during the six months ended June 30, 2022 and 2021.


(4) EARNINGS PER SHARE

Basic earnings per share of common stock are computed by dividing net earnings 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 earnings for the periods shown below are 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).

16


NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 Three Months Ended June 30,
 20222021
 Class AClass BClass AClass B
 (In thousands except per share amounts)
Numerator for Basic and Diluted Earnings Per Share:    
Net earnings$30,765  49,899  
Dividends - Class A shares    
Dividends - Class B shares    
Undistributed earnings$30,765  49,899  
Allocation of net earnings:    
Dividends$    
Allocation of undistributed earnings29,895 870 48,488 1,411 
Net earnings$29,895 870 48,488 1,411 
Denominator:    
Basic earnings per share - weighted-average shares3,436 200 3,436 200 
Effect of dilutive stock options    
Diluted earnings per share - adjusted weighted-average shares for assumed conversions3,436 200 3,436 200 
Basic earnings per share$8.70 4.35 14.11 7.06 
Diluted earnings per share$8.70 4.35 14.11 7.06 
17


NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 Six Months Ended June 30,
 20222021
 Class AClass BClass AClass B
(In thousands except per share amounts)
Numerator for Basic and Diluted Earnings Per Share:    
Net earnings$66,949  112,028  
Dividends - Class A shares    
Dividends - Class B shares    
Undistributed earnings$66,949  112,028  
Allocation of net earnings:    
Dividends$    
Allocation of undistributed earnings65,056 1,893 108,860 3,168 
Net earnings$65,056 1,893 108,860 3,168 
Denominator:    
Basic earnings per share - weighted-average shares3,436 200 3,436 200 
Effect of dilutive stock options    
Diluted earnings per share - adjusted weighted-average shares for assumed conversions3,436 200 3,436 200 
Basic earnings per share$18.93 9.47 31.68 15.84 
Diluted earnings per share$