Statutory Net Income and Surplus

9 Months Ended

Sep. 30, 2022

Statutory Net Income and Surplus

Statutory Net Income and Surplus

Note 14. Statutory Net Income and Surplus

American Life is required to prepare statutory financial statements in accordance with statutory accounting practices prescribed or permitted by the Nebraska Department of Insurance and the Vermont Department of Insurance. Statutory practices primarily differ from GAAP by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions as well as valuing investments and certain assets and accounting for deferred taxes on a different basis.

The following table represents the net gains or (losses) as filed in the statutory-basis annual statement with the Nebraska Department of Insurance for American Life and the Vermont Department of Insurance for SRC1 and SRC3:

	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2022		2021		2022		2021
American Life	$	(1,836)	$	316	$	16,055	$	2,595
SRC1	$	1,129	$	1,624	$	181	$	(1,430)
SRC3	$	1,951	$	—	$	960	$	—

The following table represents the Capital and Surplus as filed in the statutory-basis annual statement with the Nebraska Department of Insurance for American Life and the Vermont Department of Insurance for SRC1 and SRC3:

(In thousands)	September 30, 2022		December 31, 2021
American Life	$	50,757	$	74,011
SRC1	$	8,597	$	8,415
SRC3	$	5,860	$	3,150

The following tables represent the premium sales as filed in the statutory-basis annual statement with the Nebraska Department of Insurance for American Life and the Vermont Department of Insurance for SRC1 and SRC3:

	Three months ended September 30,				Nine months ended September 30,
(In thousands)	2022		2021		2022		2021
American Life	$	141,602	$	21,386	$	272,218	$	89,632
SRC1	$	-	$	(61)	$	-	$	37,764
SRC3	$	174	$	—	$	23,931	$	—

State insurance laws require American Life to maintain certain minimum capital and surplus amounts on a statutory basis. American Life is subject to regulations that restrict the payment of dividends from statutory surplus and may require prior approval from its domiciliary insurance regulatory authorities. American Life is also subject to risk-based capital (“RBC”) requirements that may further affect its ability to pay dividends. American Life’s statutory capital and surplus as of September 30, 2022, and December 31, 2021, exceeded the amount of statutory capital and surplus necessary to satisfy regulatory requirements, including the RBC requirements as of those dates.

As of December 31, 2020, American Life had an invested asset that was impaired as a result of the fair market of the underlying collateral being valued less that the book value. This was a non-admitted asset for statutory accounting purposes. This asset was held in our modified coinsurance account for a third-party reinsurer, so it was passed through to the reinsurer as a reduction of the investment income earned by the reinsurer. As of March 31, 2021, this invested asset was sold for a loss of $2.4 million that was passed through to the reinsurer as a reduction of its investment income earned.

As of September 30, 2022, and December 31, 2021, American Life did not hold any participating policyholder contracts where dividends were required to be paid.