Accounting Pronouncements

9 Months Ended

Sep. 30, 2023

Accounting Changes and Error Corrections [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

ACCOUNTING PRONOUNCEMENTS

ACCOUNTING STANDARDS RECENTLY ADOPTED

Impacts at Transition Date

In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2018-12, Financial Services-Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts. The Company adopted ASU 2018-12 for the liability for future policy benefits, DAC and COIA on a modified retrospective basis such that those balances were adjusted to conform to ASU 2018-12 effective January 1, 2021. The following table summarizes the balance of and changes in the liability for future policy benefits, annuity reserves, DAC and COIA due to the adoption of ASU 2018-12.

(In thousands)	Life Insurance		Home Service Insurance	Consolidated
Liability for Future Policy Benefits
Pre-adoption liability as of 12/31/2020	$	987,373	255,513	1,242,886
Change in discount rate assumptions	261,823		108,468	370,291
Effect of reserve changes	6		96	102
Post-adoption liability as of 1/1/2021	$	1,249,202	364,077	1,613,279
Fixed Annuity Liability
Pre-adoption liability as of 12/31/2020	$	60,027	18,277	78,304
Adjustments for the removal of shadow adjustments	—		3,426	3,426
Post-adoption liability as of 1/1/2021	$	60,027	21,703	81,730
Deferred Acquisition Costs
Pre-adoption balance as of 12/31/2020	$	94,771	10,142	104,913
Adjustments for the removal of shadow adjustments	8,270		29,905	38,175
Impact of flooring cohorts at zero	23		12	35
Post adoption balance as of 1/1/2021	$	103,064	40,059	143,123
Cost of Insurance Acquired
Pre-adoption balance as of 12/31/2020	$	1,734	9,807	11,541
Adjustments for the removal of shadow adjustments	—		484	484
Post adoption balance as of 1/1/2021	$	1,734	10,291	12,025

At transition, the Company recorded a charge of $0.1 million to retained earnings, net of tax, primarily from capping net premium ratios for certain policyholder benefit cohorts at 100%, increasing reserves for certain non-premium paying cohorts and flooring certain DAC cohorts at zero. Other comprehensive income ("OCI") was reduced by $316.8 million primarily due to the difference in the discount rate used prior to transition and the discount rate at January 1, 2021. The Company also removed shadow adjustments previously recorded in OCI for the impact of unrealized gains and losses on annuity products that previously amortized unearned revenue, DAC and COIA over expected future gross profits.

Impacts to Previously Reported Results

Adoption of the standard impacted our previously reported consolidated financial results as follows:

(In thousands)	As Previously Reported		Adoption of New Standard	Post Adoption
As of December 31, 2022
Consolidated Balance Sheet
Deferred policy acquisition costs	$	140,167	22,760	162,927
Cost of insurance acquired	10,260		387	10,647
Deferred tax asset, net	2,414		(2,414)	—
Total assets	1,569,970		20,733	1,590,703
Future policy benefit reserves:
Life insurance	1,305,506		(106,859)	1,198,647
Annuities	91,234		(91,234)	—
Policyholders' funds:
Annuities	—		121,422	121,422
Other policyholders' funds	40,497		(32,996)	7,501
Deferred federal income tax liability	—		3,653	3,653
Total liabilities	1,568,927		(106,014)	1,462,913
Retained earnings (accumulated deficit)	(52,203)		68,512	16,309
Accumulated other comprehensive income (loss)	(195,279)		58,235	(137,044)
Total stockholders' equity	1,043		126,747	127,790

(In thousands, except per share amounts)	As Previously Reported		Adoption of New Standard	Post Adoption
For the Three Months Ended September 30, 2022
Consolidated Statement of Operations
Increase (decrease) in future policy benefit reserves	$	7,090	(6,437)	653
Policyholder liability remeasurement (gain) loss	—		396	396
Amortization of deferred policy acquisition costs	7,082		(3,458)	3,624
Amortization of cost of insurance acquired	276		(110)	166
Federal income tax expense (benefit)	344		1,071	1,415
Net income (loss)	(5,131)		8,538	3,407
Basic earnings (losses) per share of Class A common stock	(0.10)		0.17	0.07
Diluted earnings (losses) per share of Class A common stock	(0.10)		0.16	0.06
Consolidated Statement of Comprehensive Income (Loss)
Unrealized holding gains (losses) arising during period	$	(89,713)	1,331	(88,382)
Change in current discount rate for liability for future policy benefits	—		73,214	73,214
Income tax expense (benefit) on other comprehensive income items	(5,079)		4,895	(184)
Other comprehensive income (loss)	(84,591)		69,650	(14,941)
Total comprehensive income (loss)	(89,722)		78,188	(11,534)
For the Nine Months Ended September 30, 2022
Consolidated Statement of Operations
Increase (decrease) in future policy benefit reserves	$	23,037	(18,540)	4,497
Policyholder liability remeasurement (gain) loss	—		1,731	1,731
Amortization of deferred policy acquisition costs	18,869		(8,218)	10,651
Amortization of cost of insurance acquired	775		(329)	446
Federal income tax expense (benefit)	622		2,996	3,618
Net income (loss)	(10,012)		22,360	12,348
Basic earnings (losses) per share of Class A common stock	(0.20)		0.45	0.25
Diluted earnings (losses) per share of Class A common stock	(0.20)		0.44	0.24
Consolidated Statement of Comprehensive Income (Loss)
Unrealized holding gains (losses) arising during period	$	(343,989)	3,311	(340,678)
Change in current discount rate for liability for future policy benefits	—		345,258	345,258
Income tax expense (benefit) on other comprehensive income items	(18,880)		25,042	6,162
Other comprehensive income (loss)	(325,031)		323,527	(1,504)
Total comprehensive income (loss)	(335,043)		345,887	10,844

ACCOUNTING STANDARDS NOT YET ADOPTED

On June 30, 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This standard clarifies that contractual restrictions on equity security sales are not considered part of the security unit of account and, therefore, are not

considered in measuring fair value. In addition, the amendments clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. Disclosures on such restrictions are also required. The amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and are required to be applied prospectively, with any adjustments from the adoption recognized in earnings and disclosed. Early adoption is available. Adoption of this standard will have no impact on our consolidated financial statements.

No other new accounting pronouncements issued or effective during the year had, or is expected to have, a material impact on our consolidated financial statements.