Policyholders' Liabilities

9 Months Ended

Sep. 30, 2023

POLICYHOLDERS’ LIABILITIES

LIABILITY FOR FUTURE POLICY BENEFITS

The following tables summarize balances of and changes in the liability for future policy benefits for our reporting cohorts: Permanent, which summarizes insurance policies with premiums payable over the lifetime of the policy, and Permanent Limited Pay, which summarizes insurance policies with premiums payable for a limited time after which the policy is fully paid up. Both reporting cohorts include whole life and endowment policies.


September 30, 2023 (In thousands)	Life Insurance				Home Service Insurance
	Permanent		Permanent Limited Pay	Total		Permanent	Permanent Limited Pay	Total
Present Value of Expected Net Premiums
Balance, beginning of year	$	235,228	10,209	245,437		93,508	13,255	106,763
Beginning balance at original discount rate	247,601		10,682	258,283		100,225	14,394	114,619
Effect of changes in cash flow assumptions	(210)		38	(172)		(343)	85	(258)
Effects of actual variances from expected experience	4,156		1,059	5,215		(5,631)	(4,477)	(10,108)
Adjusted beginning of year balance	251,547		11,779	263,326		94,251	10,002	104,253
Issuances	20,918		2,608	23,526		13,854	3,107	16,961
Interest accrual	6,897		248	7,145		3,019	348	3,367
Net premiums collected	(31,480)		(2,004)	(33,484)		(8,909)	2,019	(6,890)
Derecognition and other	567		240	807		475	113	588
Ending balance at original discount rate	248,449		12,871	261,320		102,690	15,589	118,279
Effect of changes in discount rates	(16,380)		(501)	(16,881)		(9,438)	(1,397)	(10,835)
Balance, end of period	$	232,069	12,370	244,439		93,252	14,192	107,444

Present Value of Expected Future Policy Benefits
Balance, beginning of year	$	947,415	195,612	1,143,027		200,351	116,356	316,707
Beginning balance at original discount rate	996,169		208,051	1,204,220		214,188	121,908	336,096
Effect of changes in cash flow assumptions	(389)		(702)	(1,091)		(257)	331	74
Effects of actual variances from expected experience	6,338		3,489	9,827		(5,472)	(1,337)	(6,809)
Adjusted beginning of year balance	1,002,118		210,838	1,212,956		208,459	120,902	329,361
Issuances	21,360		2,798	24,158		13,854	3,115	16,969
Interest accrual	32,470		6,288	38,758		6,987	4,242	11,229
Benefit payments	(63,211)		(16,732)	(79,943)		(12,246)	(4,707)	(16,953)
Derecognition and other	97		42	139		464	109	573
Ending balance at original discount rate	992,834		203,234	1,196,068		217,518	123,661	341,179
Effect of changes in discount rates	(78,072)		(18,778)	(96,850)		(23,934)	(12,670)	(36,604)
Balance, end of period	$	914,762	184,456	1,099,218		193,584	110,991	304,575

Net liability for future policy benefits	$	682,693	172,086	854,779		100,332	96,799	197,131

The Life Insurance segment impact of updating actual experience for the current period contributed to an increase in liabilities primarily due to higher benefits than expected. The Home Service Insurance segment impact of updating actual experience for the current period contributed to an increase in liabilities due to higher premiums collected than expected.


September 30, 2022 (In thousands)	Life Insurance				Home Service Insurance
	Permanent		Permanent Limited Pay	Total		Permanent	Permanent Limited Pay	Total
Present Value of Expected Net Premiums
Balance, beginning of year	$	269,528	4,939	274,467		104,556	10,196	114,752
Beginning balance at original discount rate	246,386		5,093	251,479		90,012	9,532	99,544
Effect of changes in cash flow assumptions	(3,662)		237	(3,425)		4,253	1,214	5,467
Effects of actual variances from expected experience	1,705		401	2,106		(299)	(5,603)	(5,902)
Adjusted beginning of year balance	244,429		5,731	250,160		93,966	5,143	99,109
Issuances	25,049		2,757	27,806		13,886	4,041	17,927
Interest accrual	6,259		32	6,291		2,553	166	2,719
Net premiums collected	(29,835)		455	(29,380)		(8,331)	5,156	(3,175)
Derecognition and other	445		90	535		(655)	117	(538)
Ending balance at original discount rate	246,347		9,065	255,412		101,419	14,623	116,042
Effect of changes in discount rates	(15,999)		(653)	(16,652)		(8,386)	(1,629)	(10,015)
Balance, end of period	$	230,348	8,412	238,760		93,033	12,994	106,027

Present Value of Expected Future Policy Benefits
Balance, beginning of year	$	1,168,282	240,679	1,408,961		266,206	161,715	427,921
Beginning balance at original discount rate	990,921		207,105	1,198,026		205,340	117,425	322,765
Effect of changes in cash flow assumptions	(3,916)		374	(3,542)		4,822	1,765	6,587
Effects of actual variances from expected experience	2,127		3,392	5,519		158	7	165
Adjusted beginning of year balance	989,132		210,871	1,200,003		210,320	119,197	329,517
Issuances	25,567		2,835	28,402		13,900	4,038	17,938
Interest accrual	31,922		6,358	38,280		6,539	4,076	10,615
Benefit payments	(51,604)		(12,483)	(64,087)		(15,058)	(5,277)	(20,335)
Derecognition and other	(30)		12	(18)		(669)	110	(559)
Ending balance at original discount rate	994,987		207,593	1,202,580		215,032	122,144	337,176
Effect of changes in discount rates	(60,876)		(13,695)	(74,571)		(14,624)	(4,985)	(19,609)
Balance, end of period	$	934,111	193,898	1,128,009		200,408	117,159	317,567

Net liability for future policy benefits	$	703,763	185,486	889,249		107,375	104,165	211,540
Plus: Flooring impact	2		—	2		—	—	—

Net liability for future policy benefits, after flooring impact	$	703,765	185,486	889,251		107,375	104,165	211,540

The Life Insurance segment impact of updating actual experience for the current period contributed to an increase in liabilities primarily due to higher benefits paid than expected. The Home Service Insurance segment impact of updating actual experience for the current period contributed to an increase in liabilities due to higher premiums collected than expected.

Net premiums collected is defined as the transactional gross premiums collected in the current period times the net premium ratio. Issuances are calculated as the present value, using the locked-in discount rate, of the expected net premiums or the expected future policy benefits related to new policies issued during the nine months ended September 30, 2023 and 2022. Interest accrual is the interest earned on the beginning present value of either the expected net premiums or the expected future policy benefits using the locked-in discount rate. Benefit payments are the transactional benefits (death, lapse, surrenders and maturities) paid in the current period. Derecognition refers to a subset of the issuances or the present value of future premiums released on new issues that lapsed during the nine months ended September 30, 2023 and 2022 as well as other reconciling items. The effects of actual variances from expected experience lines are primarily impacted by the actual policy cash flows during the period compared to that which was expected in the reserve assumptions. If the net of the two lines is a positive number, the implication is an unfavorable result with policy cash flows less favorable than assumed while a negative number implies a favorable result compared to assumptions. Our policy experience will vary from actual experience in any one period, either favorably or unfavorably.

The following table reconciles the net liability for future policy benefits shown above to the liability for future policy benefits reported in the consolidated balance sheets.


	September 30, 2023				September 30, 2022
(In thousands)	Life Insurance		Home Service Insurance	Consolidated	Life Insurance	Home Service Insurance	Consolidated
Life Insurance
Permanent	$	682,693	100,332	783,025	703,765	107,375	811,140
Permanent limited pay	172,086		96,799	268,885	185,486	104,165	289,651
Deferred profit liability	27,616		26,138	53,754	23,749	23,727	47,476
Other	28,011		13,926	41,937	28,558	13,677	42,235
Total life insurance	910,406		237,195	1,147,601	941,558	248,944	1,190,502
Accident & Health

Other	596		281	877	498	231	729

Total future policy benefit reserves	$	911,002	237,476	1,148,478	942,056	249,175	1,191,231

The following table provides the amount of undiscounted and discounted expected gross premiums and expected future benefit payments for long-term duration contracts.


	September 30, 2023			September 30, 2022
(In thousands)	Life Insurance		Home Service Insurance	Life Insurance	Home Service Insurance
Undiscounted:
Permanent
Expected future gross premiums	$	604,059	459,405	614,123	465,752
Expected future benefit payments	1,483,068		484,239	1,471,197	472,958

Permanent Limited Pay
Expected future gross premiums	47,868		77,544	48,132	74,126
Expected future benefit payments	325,964		320,563	322,184	316,178





Discounted:
Permanent
Expected future gross premiums	$	453,277	261,271	471,719	272,158
Expected future benefit payments	914,762		193,584	934,111	200,408

Permanent Limited Pay
Expected future gross premiums	42,133		51,091	42,441	52,036
Expected future benefit payments	184,456		110,991	193,898	117,159

The following tables summarize the amount of revenue and interest related to long-term duration contracts recognized in the consolidated statement of operations:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2023			2022		2023		2022
(In thousands)	Gross Premiums		Interest Expense	Gross Premiums	Interest Expense	Gross Premiums	Interest Expense	Gross Premiums	Interest Expense
Life Insurance Segment:
Life Insurance
Permanent	$	23,654	8,471	23,751	8,537	68,619	25,573	68,826	25,663
Permanent Limited Pay	3,555		2,308	3,399	2,291	11,333	6,811	10,391	6,946
Other	4,279		—	4,944	—	7,094	—	10,214	—
Less:
Reinsurance	392		—	501	—	1,452	—	1,254	—
Total, net of reinsurance	31,096		10,779	31,593	10,828	85,594	32,384	88,177	32,609
Accident & Health

Other	53		—	104	—	537	—	287	—
Less:
Reinsurance	1		—	1	—	3	—	3	—
Total, net of reinsurance	52		—	103	—	534	—	284	—
Total	$	31,148	10,779	31,696	10,828	86,128	32,384	88,461	32,609

Home Service Insurance Segment:
Life Insurance
Permanent	$	8,372	1,322	8,331	1,319	25,012	3,968	25,079	3,986
Permanent Limited Pay	2,154		1,599	2,136	1,568	6,425	4,777	6,279	4,688
Other	178		—	367	—	1,012	—	1,418	—
Less:
Reinsurance	6		—	4	—	23	—	23	—
Total, net of reinsurance	10,698		2,921	10,830	2,887	32,426	8,745	32,753	8,674
Accident & Health

Other	244		—	196	—	667	—	581	—



Total	$	10,942	2,921	11,026	2,887	33,093	8,745	33,334	8,674

The following table provides the weighted-average durations of the liability for future policy benefits.


	September 30, 2023		September 30, 2022
(In years)	Life Insurance	Home Service Insurance	Life Insurance	Home Service Insurance
Permanent
Duration at original discount rate	7.8	15.7	7.9	15.3
Duration at current discount rate	8.2	15.6	8.6	15.4
Permanent Limited Pay
Duration at original discount rate	7.9	14.3	7.5	14.3
Duration at current discount rate	7.6	14.4	7.6	15.3

The following table provides the weighted-average interest rates for the liability for future policy benefits.


	September 30, 2023				September 30, 2022
	Life Insurance		Home Service Insurance		Life Insurance		Home Service Insurance
Permanent
Interest rate at original discount rate	4.92	%	4.98	%	4.95	%	5.02	%
Interest rate at current discount rate	5.62	%	5.71	%	5.23	%	5.18	%
Permanent Limited Pay
Interest rate at original discount rate	4.29	%	5.05	%	4.31	%	5.06	%
Interest rate at current discount rate	5.60	%	5.71	%	5.17	%	5.17	%

LIABILITY FOR POLICYHOLDERS’ ACCOUNT BALANCES

The following table presents the policyholders' account balances by range of guaranteed minimum crediting rates and the related range of the difference, in basis points, between rates being credited and the respective guaranteed minimums.


	At Guaranteed Minimum		1 Basis Point-50 Basis Points Above	51 Basis Points-150 Basis Points Above	Greater Than 150 Basis Points Above	Total
September 30, 2023 (In thousands)
Range of Guaranteed Minimum Crediting Rates
0.00% - 1.49%	$	746	—	1,138	37,233	39,117
1.50% - 2.99%	30,256		675	63	—	30,994
3.00% - 4.49%	104,304		10	—	—	104,314
Greater or equal to 4.50%	31,374		—	—	—	31,374
Total	$	166,680	685	1,201	37,233	205,799


	At Guaranteed Minimum		1 Basis Point-50 Basis Points Above	51 Basis Points-150 Basis Points Above	Greater Than 150 Basis Points Above	Total
September 30, 2022 (In thousands)
Range of Guaranteed Minimum Crediting Rates
0.00% - 1.49%	$	702	—	827	40,055	41,584
1.50% - 2.99%	22,370		603	30	—	23,003
3.00% - 4.49%	96,932		10	—	—	96,942
Greater or equal to 4.50%	31,762		—	—	—	31,762
Total	$	151,766	613	857	40,055	193,291

The following tables summarize balances of and changes in policyholders' account balances.


September 30, 2023 (In thousands, except for %)	Supplemental Contracts Without Life Contingencies			Fixed Annuity		Dividend Accumulations		Premiums Paid in Advance
Balance, beginning of year	$	32,995		86,807		41,663		34,603
Issuances	16,086			2,160		474		3,200
Premiums received	85			3,273		4,210		659

Interest credited	1,103			1,988		993		948
Other	1			—		—		—
Less:
Surrenders and withdrawals	—			7,647		3,238		6,098
Benefit payments	8,466			—		—		—
Balance, end of period	$	41,804		86,581		44,102		33,312
Weighted-average crediting rates	4.01		%	3.57	%	3.05	%	2.96	%

Cash surrender value	$	41,804		86,581		44,102		33,312


September 30, 2022 (In thousands, except for %)	Supplemental Contracts Without Life Contingencies			Fixed Annuity		Dividend Accumulations		Premiums Paid in Advance
Balance, beginning of year	$	23,950		83,917		37,760		38,875
Issuances	8,787			2,343		435		1,860
Premiums received	57			3,810		4,044		538

Interest credited	769			1,966		897		750
Other	2			—		—		—
Less:
Surrenders and withdrawals	—			5,903		2,653		6,047
Benefit payments	2,866			—		—		—
Balance, end of period	$	30,699		86,133		40,483		35,976
Weighted-average crediting rates	4.08		%	3.60	%	3.07	%	3.05	%

Cash surrender value	$	30,699		86,133		40,483		35,976

The following table reconciles policyholders' account balances shown above to the policyholders' account balances liability in the consolidated balance sheets.


As of September 30, (In thousands)	2023		2022
Annuities:
Supplemental contracts without life contingencies	$	41,804	30,699
Fixed annuity	86,581		86,133
Unearned revenue reserve	1,524		1,619
Other	—		1
Total annuities	$	129,909	118,452







Premiums Paid in Advance:
Premiums paid in advance	$	33,312	35,976
Other	2,141		2,461
Total premiums paid in advance	$	35,453	38,437