Note 14 – Stockholders’ Equity and Noncontrolling Interests

American National has one class of common stock with a par value of $1.00 per share and 50,000,000 authorized shares. The amounts outstanding at the dates indicated are shown below:


	September 30,			December 31,
	2015			2014
Common stock
Shares issued		30,832,449			30,832,449
Treasury shares		(3,940,947	)		(3,960,507	)

Outstanding shares		26,891,502			26,871,942
Restricted shares		(76,000	)		(142,667	)

Unrestricted outstanding shares		26,815,502			26,729,275

Stock-based compensation

American National has one stock-based compensation plan, which allows for grants of Non-Qualified Stock Options, Stock Appreciation Rights (“SAR”), Restricted Stock (“RS”) Awards, Restricted Stock Units (“RSU”), Performance Awards, Incentive Awards or any combination thereof. This plan is administered by the American National Board Compensation Committee. Incentive awards under this plan are made to officers meeting established performance objectives. All awards are subject to review and approval both at the time of setting applicable performance objectives and at payment of the awards. The number of shares available for grants under the plan cannot exceed 2,900,000 shares, and no more than 200,000 shares may be granted to any one individual in any calendar year. Grants are made to certain officers and directors as compensation and to align their interests with those of other shareholders.

SAR, RS and RSU information for the periods indicated are shown below:


	SAR					RS Shares					RS Units
	Shares			Weighted- Average Grant Date Fair Value		Shares			Weighted- Average Grant Date Fair Value		Units			Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2014		54,930		$	114.86		142,667		$	107.39		128,214		$	95.82

Granted		—			—		—			—		83,093			104.75
Exercised		(116	)		73.97		(66,667	)		103.58		(72,093	)		90.85
Forfeited		—			—		—			—		(281	)		105.02
Expired		(16,646	)		114.57		—			—		—			—

Outstanding at September 30, 2015		38,168		$	115.11		76,000		$	110.73		138,933		$	103.73


	SAR			RS Shares		RS Units
Weighted-average contractual remaining life (in years)		1.44			3.71		1.95
Exercisable shares		38,154			N/A		N/A
Weighted-average exercise price	$	115.11		$	110.73	$	103.73
Weighted-average exercise price exercisable shares		115.12			N/A		N/A
Compensation expense (credit)
Three months ended September 30, 2015	$	(14,000	)	$	282,000	$	1,114,000
Three months ended September 30, 2014		(19,000	)		496,000		522,000
Nine months ended September 30, 2015		(82,000	)		935,000		5,421,000
Nine months ended September 30, 2014		(33,000	)		2,577,000		6,447,000
Fair value of liability award
September 30, 2015	$	27,000			N/A	$	19,134,000
December 31, 2014		167,000			N/A		16,301,000

The SARs give the holder the right to cash compensation based on the difference between the stock price on the grant date and the stock price on the exercise date. The SARs vest at a rate of 20% per year for five years and expire five years after vesting.

RS awards entitle the participant to full dividend and voting rights. Each RS share awarded has the value of one share of restricted stock and vests 10 years from the grant date. Unvested shares are restricted as to disposition, and are subject to forfeiture under certain circumstances. Compensation expense is recognized over the vesting period. The restrictions on these awards lapse after 10 years and these awards feature a graded vesting schedule in the case of the retirement of an award holder. Restricted stock awards for 350,334 shares have been granted at an exercise price of zero, of which 76,000 shares are unvested.

RSU awards allow the recipient of the awards to settle the vested RSUs in either shares of American National’s common stock or cash. RSUs vest after a three-year graded vesting requirement or over a shorter period as a result of death, disability or retirement after age 65.

Earnings per share

Basic earnings per share were calculated using a weighted average number of shares outstanding. Diluted earnings per share include RS and RSU award shares.


	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
			(As Adjusted)				(As Adjusted)
Weighted average shares outstanding		26,899,683		26,805,535		26,865,359		26,800,835
Incremental shares from RS awards and RSUs		63,952		105,972		80,027		118,579

Total shares for diluted calculations		26,963,635		26,911,507		26,945,386		26,919,414


Net income attributable to American National (in thousands)	$	42,013	$	66,939	$	180,048	$	176,367
Basic earnings per share	$	1.56	$	2.50	$	6.70	$	6.58
Diluted earnings per share		1.56		2.49		6.68		6.55

Statutory Capital and Surplus

Risk Based Capital (“RBC”) is a measure insurance regulators use to evaluate the capital adequacy of American National Insurance Company and its insurance subsidiaries. RBC is calculated using formulas applied to certain financial balances and activities that consider, among other things, investment risks related to the type and quality of investments, insurance risks associated with products and liabilities, interest rate risks and general business risks. Insurance companies that do not maintain capital and surplus at a level at least 200% of the authorized control level RBC are required to take certain actions. At September 30, 2015 and December 31, 2014, American National Insurance Company’s statutory capital and surplus was $2,924,950,000 and $2,879,154,000, respectively. American National Insurance Company and each of its insurance subsidiaries had statutory capital and surplus at September 30, 2015 and December 31, 2014, substantially above 200% of the authorized control level.

American National and its insurance subsidiaries prepare statutory-basis financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of the state of domicile which include certain components of the National Association of Insurance Commissioners’ Codification of Statutory Accounting Principles (“NAIC Codification”). NAIC Codification is intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting practices continue to be established by individual state laws and permitted practices. Modifications by the various state insurance departments may impact the statutory capital and surplus of American National Insurance Company and its insurance subsidiaries.

Statutory accounting differs from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions, and valuing securities on a different basis. In addition, certain assets are not admitted under statutory accounting principles and are charged directly to surplus.

One of American National’s insurance subsidiaries has been granted a permitted practice from the Missouri Department of Insurance to record as the valuation of its investment in a wholly-owned subsidiary that is the attorney-in-fact for a Texas domiciled insurer, the statutory capital and surplus of the Texas domiciled insurer. This permitted practice increases the statutory capital and surplus of both American National Insurance Company and the Missouri domiciled insurance subsidiary by $66,042,000 and $60,732,000 at September 30, 2015 and September 30, 2014, respectively. Additionally, the statutory capital and surplus of both American National Insurance Company and the Missouri domiciled insurance subsidiary would have remained substantially above the company action level RBC had it not used the permitted practice.

The statutory capital and surplus and net income of our life and property and casualty insurance entities in accordance with statutory accounting practices are shown below (in thousands):


	September 30, 2015		December 31, 2014
Statutory capital and surplus
Life insurance entities	$	1,927,011	$	1,904,128
Property and casualty insurance entities		1,006,622		984,155


	Three months ended September 30,				Nine months ended September 30,
	2015		2014		2015		2014
Statutory net income
Life insurance entities	$	21,990	$	43,447	$	101,232	$	139,564
Property and casualty insurance entities		29,253		22,718		43,190		44,852

Dividends

American National Insurance Company’s payment of dividends to stockholders is restricted by statutory regulations. The restrictions require life insurance companies to maintain minimum amounts of capital and surplus, and in the absence of special approval, limit the payment of dividends to the greater of the prior year’s statutory net income from operations, or 10% of prior year statutory surplus. American National Insurance Company is permitted to pay total dividends of $287,915,000 during 2015, without prior approval of the Texas Department of Insurance. Similar restrictions on amounts that can transfer in the form of dividends, loans, or advances to American National Insurance Company apply to its insurance subsidiaries.

Noncontrolling interests

American National County Mutual Insurance Company (“County Mutual”) is a mutual insurance company that is owned by its policyholders. American National has a management agreement that effectively gives it control of County Mutual. As a result, County Mutual is included in the consolidated financial statements of American National. Policyholder interests in the financial position of County Mutual are reflected as noncontrolling interest of $6,750,000 at September 30, 2015 and December 31, 2014.

American National Insurance Company and its subsidiaries exercise significant control or ownership of various joint ventures, resulting in their consolidation into American National’s consolidated financial statements. The interests of the other partners in the consolidated joint ventures are shown as noncontrolling interests of $4,521,000 and $5,634,000 at September 30, 2015 and December 31, 2014, respectively.