AMERITAS LIFE OF NY
SEPARATE ACCOUNT VA
FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023
AND FOR EACH OF THE PERIODS IN THE TWO YEARS THEN ENDED
AND REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Policyowners of Ameritas Life of NY Separate Account VA
and the Board of Directors of Ameritas Life Insurance Corp. of New York
Lincoln, Nebraska
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statements of net assets of each of the subaccounts listed in Note 1 which comprise Ameritas Life of NY Separate Account VA (the “Account”) as of December 31, 2023, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of each of the subaccounts constituting the Account as of December 31, 2023, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Account's management. Our responsibility is to express an opinion on the subaccounts’ financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Account in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The subaccounts are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the subaccounts’ internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2023, by correspondence with the custodians. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
March 12, 2024
We have served as the Account’s auditor since 2001.
This page left intentionally blank.
FS-3 |
The accompanying notes are an integral part of these financial statements.
FS-4 |
AMERITAS LIFE OF NY
SEPARATE ACCOUNT VA
FOR THE PERIODS ENDED DECEMBER 31
Calvert | |||||||
Mid Cap | |||||||
2023 | |||||||
STATEMENTS OF OPERATIONS | |||||||
Investment income: | |||||||
Dividend distributions received | $ | - | |||||
Mortality and expense risk charge | (1) | ||||||
Net investment income(loss) | (1) | ||||||
Realized gain(loss) on investments: | |||||||
Net realized gain distributions | - | ||||||
Net realized gain(loss) on sale of fund shares | (96) | ||||||
Net realized gain(loss) | (96) | ||||||
Change in unrealized appreciation/depreciation | 106 | ||||||
Net increase(decrease) in net assets resulting | |||||||
from operations | $ | 9 | |||||
Mid Cap | |||||||
STATEMENTS OF CHANGES IN NET ASSETS | 2023 | 2022 | |||||
Increase(decrease) in net assets from operations: | |||||||
Net investment income(loss) | $ | (1) | $ | (5) | |||
Net realized gain(loss) | (96) | 121 | |||||
Net change in unrealized appreciation/depreciation | 106 | (254) | |||||
Net increase(decrease) in net assets resulting | |||||||
from operations | 9 | (138) | |||||
Net increase(decrease) from policyowner transactions: | |||||||
Payments received from policyowners | - | - | |||||
Subaccounts transfers (including fixed account), net | 8 | - | |||||
Transfers for policyowner benefits and terminations | (461) | - | |||||
Policyowner maintenance charges | - | - | |||||
Net increase(decrease) from policyowner transactions | (453) | - | |||||
Total increase(decrease) in net assets | (444) | (138) | |||||
Net assets at beginning of period | 548 | 686 | |||||
Net assets at end of period | $ | 104 | $ | 548 | |||
The accompanying notes are an integral part of these financial statements. |
FS-5 |
Summit | ||||||||||||||||
EAFE Intl. | S&P 500 | Barclays | ||||||||||||||
2023 | 2023 | 2023 | ||||||||||||||
$ | 2 | $ | 1,071 | $ | 6 | |||||||||||
(1) | (1,074) | (3) | ||||||||||||||
1 | (3) | 3 | ||||||||||||||
- | 3,955 | - | ||||||||||||||
42 | 901 | (130) | ||||||||||||||
42 | 4,856 | (130) | ||||||||||||||
(29) | 11,919 | 168 | ||||||||||||||
$ | 14 | $ | 16,772 | $ | 41 | |||||||||||
EAFE Intl. | S&P 500 | Barclays | ||||||||||||||
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||
$ | 1 | $ | 9 | $ | (3) | $ | (98) | $ | 3 | $ | 23 | |||||
42 | 1 | 4,856 | 6,199 | (130) | (1) | |||||||||||
(29) | (69) | 11,919 | (23,492) | 168 | (222) | |||||||||||
14 | (59) | 16,772 | (17,391) | 41 | (200) | |||||||||||
- | - | - | - | - | - | |||||||||||
3 | - | 34 | - | (9) | - | |||||||||||
(278) | - | (3,039) | - | (1,091) | - | |||||||||||
- | - | - | - | - | - | |||||||||||
(275) | - | (3,005) | - | (1,100) | - | |||||||||||
(261) | (59) | 13,767 | (17,391) | (1,059) | (200) | |||||||||||
326 | 385 | 71,980 | 89,371 | 1,290 | 1,490 | |||||||||||
$ | 65 | $ | 326 | $ | 85,747 | $ | 71,980 | $ | 231 | $ | 1,290 | |||||
FS-6 |
AMERITAS LIFE OF NY
SEPARATE ACCOUNT VA
FOR THE PERIODS ENDED DECEMBER 31
Fidelity | |||||||
Growth SC2 | |||||||
2023 | |||||||
STATEMENTS OF OPERATIONS | |||||||
Investment income: | |||||||
Dividend distributions received | $ | 4 | |||||
Mortality and expense risk charge | (1,603) | ||||||
Net investment income(loss) | (1,599) | ||||||
Realized gain(loss) on investments: | |||||||
Net realized gain distributions | 5,693 | ||||||
Net realized gain(loss) on sale of fund shares | 458 | ||||||
Net realized gain(loss) | 6,151 | ||||||
Change in unrealized appreciation/depreciation | 29,114 | ||||||
Net increase(decrease) in net assets resulting | |||||||
from operations | $ | 33,666 | |||||
Growth SC2 | |||||||
STATEMENTS OF CHANGES IN NET ASSETS | 2023 | 2022 | |||||
Increase(decrease) in net assets from operations: | |||||||
Net investment income(loss) | $ | (1,599) | $ | (1,144) | |||
Net realized gain(loss) | 6,151 | 8,719 | |||||
Net change in unrealized appreciation/depreciation | 29,114 | (41,781) | |||||
Net increase(decrease) in net assets resulting | |||||||
from operations | 33,666 | (34,206) | |||||
Net increase(decrease) from policyowner transactions: | |||||||
Payments received from policyowners | - | - | |||||
Subaccounts transfers (including fixed account), net | - | - | |||||
Transfers for policyowner benefits and terminations | - | - | |||||
Policyowner maintenance charges | - | - | |||||
Net increase(decrease) from policyowner transactions | - | - | |||||
Total increase(decrease) in net assets | 33,666 | (34,206) | |||||
Net assets at beginning of period | 98,919 | 133,125 | |||||
Net assets at end of period | $ | 132,585 | $ | 98,919 | |||
The accompanying notes are an integral part of these financial statements. |
FS-7 |
Fidelity | ||||||||||||||||
Inv. Bond | ||||||||||||||||
Overseas SC2 | SC2 | Money Market | ||||||||||||||
2023 | 2023 | 2023 | ||||||||||||||
$ | - | $ | - | $ | - | |||||||||||
- | - | - | ||||||||||||||
- | - | - | ||||||||||||||
- | - | - | ||||||||||||||
- | - | - | ||||||||||||||
- | - | - | ||||||||||||||
- | - | - | ||||||||||||||
$ | - | $ | - | $ | - | |||||||||||
Overseas SC2 | Inv. Bond SC2 | Money Market | ||||||||||||||
2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |||||||||||
$ | - | $ | - | $ | - | $ | - | $ | - | $ | (100) | |||||
- | - | - | - | - | - | |||||||||||
- | - | - | - | - | - | |||||||||||
- | - | - | - | - | (100) | |||||||||||
- | - | - | - | - | - | |||||||||||
- | - | - | - | - | - | |||||||||||
- | - | - | - | - | (15,257) | |||||||||||
- | - | - | - | - | - | |||||||||||
- | - | - | - | - | (15,257) | |||||||||||
- | - | - | - | - | (15,357) | |||||||||||
- | - | - | - | - | 15,357 | |||||||||||
$ | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||
FS-8 |
AMERITAS LIFE OF NY SEPARATE ACCOUNT VA NOTES TO FINANCIAL STATEMENTS FOR THE PERIODS ENDED DECEMBER 31, 2023 AND 2022 |
1. ORGANIZATION
Ameritas Life of NY Separate Account VA (the “Account”) began operations during 2001. It operates as a separate investment account within Ameritas Life Insurance Corp. of New York (the “Company”), a wholly owned subsidiary of Ameritas Life Insurance Corp. The assets of the Account are held by the Company and are segregated from all of the Company’s other assets and are used only to support the variable annuity products issued by the Company.
Management believes these financial statements should be read in conjunction with the policyowner statements and policy and fund prospectuses.
The Account is registered under the Investment Company Act of 1940, as amended, as a unit investment trust. The Account is made up of variable investment options called subaccounts for which accumulation units are separately maintained. Each subaccount corresponds to a single underlying non-publicly traded portfolio issued through a fund series. At December 31, 2023 there are eight subaccounts available within the Account listed as follows:
Calvert Research and Management | Fidelity Management & Research | |||||||||
(Advisor) (See Note 3) | Company LLC | |||||||||
Calvert (Fund Series short cite) | Fidelity | |||||||||
*Mid Cap | *Growth SC2 | |||||||||
*Overseas SC2 | ||||||||||
Summit | *Inv. Bond SC2 | |||||||||
*EAFE Intl | *Money Market | |||||||||
*S&P 500 | ||||||||||
*Barclay | ||||||||||
Note: The above chart references the fund series and subaccount short cites from the Statements of Net Assets.
FS-9 |
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The financial statements included herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for variable annuity separate accounts registered as unit investment trusts.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
INVESTMENTS
The assets of the subaccounts are carried at the net asset value of the underlying portfolios, adjusted for the accrual of dividends. The value of the policyowners’ units corresponds to the investment in the underlying subaccounts. The availability of investment portfolio and subaccount options may vary between products. Share transactions and security transactions are accounted for on a trade date basis.
Income from dividends and gains from realized gain distributions are recorded on the ex-distribution date. Realized gains and losses on the sales of investments represent the difference between the proceeds from sales of investments by the subaccounts and the cost of such shares, which is determined on a weighted average cost basis.
FAIR VALUE MEASUREMENTS
The accounting guidance on fair value measurements establishes a framework for measuring fair value and expands disclosures about fair value measurements. It also defines fair value as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. The fair value measurement guidance applies to all assets and liabilities that are measured and reported on a fair value basis and enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. Each asset and liability carried at fair value is classified into one of the following categories:
· | Level 1 – Quoted market prices in active markets for identical assets or liabilities. |
· | Level 2 – Observable market based inputs or unobservable inputs that are corroborated by market data. |
· | Level 3 – Unobservable inputs that are not corroborated by market data. |
Each subaccount invests in shares of open-ended mutual funds, which calculate a daily net asset value based on the value of the underlying securities in its portfolios. As a result, and as required by law, pricing information is provided on an ongoing basis. Shares of open end mutual funds are purchased and redeemed at their quoted daily net asset values as reported by the fund companies at the close of each business day. On that basis, the fair value measurements of all shares held by the Account are reported as Level 1 assets.
FEDERAL AND STATE INCOME TAXES
The operations of the Account form a part of and are taxed with the operations of the Company. The Company is taxed as a life insurance company under Subchapter L of the Internal Revenue Code. Under existing federal income tax law, separate account investment income and capital gains are not taxed to the extent they are applied to increase reserves under a contract issued in connection with the Account. Investment income and realized capital gains and losses on assets of the Account are automatically applied to increase or decrease reserves under the contract. Accordingly, no provision for federal income taxes or unrecognized tax benefits are reflected in these financial statements.
FS-10 |
3. RELATED PARTIES
Ameritas Investment Partners, Inc., an affiliate of the Company, provides sub-advisor services to certain portfolios of the Summit funds for a fee. These fees are reflected in the daily value of the underlying portfolio share price. The fee is computed separately for each underlying portfolio on daily average net assets, at an annual rate, as of December 31, 2023 and 2022, as follows:
Sub-Advisor Fee % | |||
S&P 500 | .050 | ||
Barclays | .050 |
4. PURCHASES AND SALES OF INVESTMENTS |
The cost of purchases and proceeds from sales of investments in the subaccounts for the period ended December 31, 2023 were as follows:
|
Purchases | Sales | |||||||
Calvert: | ||||||||
Mid Cap | $ | - | $ | 454 | ||||
Summit: | ||||||||
EAFE Intl. | 1 | 276 | ||||||
S&P 500 | 5,025 | 4,079 | ||||||
Barclays | 6 | 1,103 | ||||||
Fidelity: | ||||||||
Growth SC2 | 5,697 | 1,603 | ||||||
Overseas SC2 | - | - | ||||||
Inv. Bond SC2 | - | - | ||||||
Money Market | - | - |
FS-11 |
5. FINANCIAL HIGHLIGHTS
The unit value, units, net assets, investment income ratio (“Inv. Income Ratio”), expense ratio and total return (certain of which are defined below) are included in the following table (amounts have been rounded). Total returns, unit values and expense ratios in this table may not be applicable to all policies.
Inv. Income Ratio – The Inv. Income Ratio represents the dividend distributions received divided by average daily net assets. This ratio excludes the mortality and expense risk charge and is affected by the timing of the declaration of dividends by the underlying fund portfolio.
Expense Ratio – The Expense Ratio represents the annualized contract expenses of the subaccounts for the period indicated and includes only those expenses that are charged through a reduction of the unit value. Included in this category are mortality and expense charges. During the year ended December 31, 2023, these fees range between .95 percent and 1.40 percent (annualized) of net assets, depending on the product selected. Expenses of the underlying fund portfolios and charges made directly to policyowner accounts through the redemption of units are excluded. For this separate account, charges made through the redemption of units ranged up to $36 per policy annually and/or as rider charges taken as a percent of net assets ranged up to .25 percent (annualized), depending on the product and options selected.
Total Return – The Total Return represents the change in the unit value reported year-to-date; however, subaccounts which commenced during a year, as shown in Note 1, are based on shorter return periods. These percentages do not include any expenses assessed through the redemption of units. As the total return is presented as a range of minimum to maximum values, based on the product grouping representing the minimum and maximum expense ratio amounts, some individual contract total returns are not within the ranges presented.
FS-12 |
5. FINANCIAL HIGHLIGHTS, continued
At December 31 | For the Periods Ended December 31 | |||||||||||||
Net | Inv. | |||||||||||||
Unit | Assets | Income | Expense | Total | ||||||||||
Value ($) | Units | ($) | Ratio % | Ratio % | Return % | |||||||||
Min | Max | Min | Max | Min | Max | |||||||||
Calvert: | ||||||||||||||
Mid Cap | ||||||||||||||
2023 | 83.19 | 83.19 | 1 | 104 | - | 0.95 | 0.95 | 10.94 | 10.94 | |||||
2022 | 74.99 | 74.99 | 7 | 548 | - | 0.95 | 0.95 | (20.14) | (20.14) | |||||
2021 | 93.90 | 93.90 | 7 | 686 | 0.15 | 0.95 | 0.95 | 14.17 | 14.17 | |||||
2020 | 82.25 | 82.25 | 7 | 601 | 0.39 | 0.95 | 0.95 | 11.29 | 11.29 | |||||
2019 | 73.90 | 73.90 | 7 | 540 | 0.41 | 0.95 | 0.95 | 30.27 | 30.27 | |||||
Summit: | ||||||||||||||
EAFE Intl. | ||||||||||||||
2023 | 120.07 | 120.07 | 1 | 65 | 1.68 | 0.95 | 0.95 | 17.61 | 17.61 | |||||
2022 | 102.10 | 102.10 | 3 | 326 | 3.65 | 0.95 | 0.95 | (15.43) | (15.43) | |||||
2021 | 120.72 | 120.72 | 3 | 385 | 1.86 | 0.95 | 0.95 | 9.84 | 9.84 | |||||
2020 | 109.90 | 109.90 | 3 | 350 | 3.32 | 0.95 | 0.95 | 6.70 | 6.70 | |||||
2019 | 103.00 | 103.00 | 3 | 328 | 2.63 | 0.95 | 0.95 | 20.05 | 20.05 | |||||
S&P 500 | ||||||||||||||
2023 | 297.24 | 304.92 | 288 | 85,747 | 1.38 | 0.95 | 1.40 | 24.20 | 24.82 | |||||
2022 | 239.33 | 244.28 | 300 | 71,980 | 1.24 | 0.95 | 1.40 | (19.48) | (19.11) | |||||
2021 | 297.22 | 302.01 | 300 | 89,371 | 1.34 | 0.95 | 1.40 | 26.64 | 27.20 | |||||
2020 | 234.69 | 237.43 | 300 | 70,554 | 1.73 | 0.95 | 1.40 | 16.46 | 17.00 | |||||
2019 | 201.52 | 202.92 | 300 | 60,569 | 1.82 | 0.95 | 1.40 | 29.35 | 29.93 | |||||
Barclays | ||||||||||||||
2023 | 57.23 | 57.23 | 4 | 231 | 1.35 | 0.95 | 0.95 | 4.96 | 4.96 | |||||
2022 | 54.53 | 54.53 | 24 | 1,290 | 2.74 | 0.95 | 0.95 | (13.43) | (13.43) | |||||
2021 | 62.98 | 62.98 | 24 | 1,490 | 2.40 | 0.95 | 0.95 | (2.78) | (2.78) | |||||
2020 | 64.78 | 64.78 | 24 | 1,533 | 2.85 | 0.95 | 0.95 | 6.31 | 6.31 | |||||
2019 | 60.94 | 60.94 | 24 | 1,442 | 3.20 | 0.95 | 0.95 | 7.34 | 7.34 | |||||
Fidelity: | ||||||||||||||
Growth SC2 | ||||||||||||||
2023 | 167.37 | 167.37 | 792 | 132,585 | - | 1.40 | 1.40 | 34.03 | 34.03 | |||||
2022 | 124.87 | 124.87 | 792 | 98,919 | 0.35 | 1.40 | 1.40 | (25.69) | (25.69) | |||||
2021 | 168.05 | 168.05 | 792 | 133,125 | - | 1.40 | 1.40 | 21.20 | 21.20 | |||||
2020 | 138.65 | 138.65 | 792 | 109,835 | 0.04 | 1.40 | 1.40 | 41.57 | 41.57 | |||||
2019 | 97.94 | 97.94 | 792 | 77,583 | 0.05 | 1.40 | 1.40 | 32.14 | 32.14 |
FS-13 |
5. FINANCIAL HIGHLIGHTS, continued
At December 31 | For the Periods Ended December 31 | |||||||||||||
Net | Inv. | |||||||||||||
Unit | Assets | Income | Expense | Total | ||||||||||
Value ($) | Units | ($) | Ratio % | Ratio % | Return % | |||||||||
Min | Max | Min | Max | Min | Max | |||||||||
Fidelity, continued: | ||||||||||||||
Overseas SC2 | ||||||||||||||
2023 | - | - | - | - | - | - | - | - | - | |||||
2022 | - | - | - | - | - | - | - | - | - | |||||
2021 | - | - | - | - | - | - | - | - | - | |||||
2020 | - | - | - | - | - | - | - | - | - | |||||
2019 | - | - | - | - | - | - | - | - | - | |||||
Inv. Bond SC2 | ||||||||||||||
2023 | - | - | - | - | - | - | - | - | - | |||||
2022 | - | - | - | - | - | - | - | - | - | |||||
2021 | - | - | - | - | - | - | - | - | - | |||||
2020 | - | - | - | - | - | - | - | - | - | |||||
2019 | - | - | - | - | - | - | - | - | - | |||||
Money Market | ||||||||||||||
2023 | - | - | - | - | - | - | - | - | - | |||||
2022 | - | - | - | - | - | - | - | - | - | |||||
2021 | 1.00 | 1.00 | - | - | - | 0.95 | 0.95 | (0.82) | (0.82) | |||||
2020 | 0.98 | 0.98 | 15,650 | 15,357 | 0.36 | 0.95 | 0.95 | (0.63) | (0.63) | |||||
2019 | 0.99 | 0.99 | 22,812 | 22,528 | 2.02 | 0.95 | 0.95 | 1.05 | 1.05 |
FS-14 |
6. CHANGES IN UNITS OUTSTANDING
The changes in units outstanding for the periods ended December 31 were as follows:
The changes in units outstanding were as follows: | ||||
2023 | 2022 | |||
Calvert: | ||||
Mid Cap | ||||
Units issued | - | - | ||
Units redeemed | (6) | - | ||
Net increase(decrease) | (6) | - | ||
Summit: | ||||
EAFE Intl. | ||||
Units issued | 1 | - | ||
Units redeemed | (3) | - | ||
Net increase(decrease) | (2) | - | ||
S&P 500 | ||||
Units issued | - | - | ||
Units redeemed | (12) | - | ||
Net increase(decrease) | (12) | - | ||
Barclays | ||||
Units issued | - | - | ||
Units redeemed | (20) | - | ||
Net increase(decrease) | (20) | - | ||
Fidelity: | ||||
Growth SC2 | ||||
Units issued | - | - | ||
Units redeemed | - | - | ||
Net increase(decrease) | - | - | ||
Overseas SC2 | ||||
Units issued | - | - | ||
Units redeemed | - | - | ||
Net increase(decrease) | - | - | ||
Inv. Bond SC2 | ||||
Units issued | - | - | ||
Units redeemed | - | - | ||
Net increase(decrease) | - | - | ||
Money Market | ||||
Units issued | - | - | ||
Units redeemed | - | - | ||
Net increase(decrease) | - | - |
FS-15 |
AMERITAS LIFE INSURANCE
CORP. OF NEW YORK
________________
STATUTORY BASIS FINANCIAL STATEMENTS AS OF
DECEMBER 31, 2023 AND 2022 AND FOR EACH OF THE
THREE YEARS ENDED DECEMBER 31, 2023
SUPPLEMENTAL SCHEDULES AS OF AND FOR THE
YEAR ENDED DECEMBER 31, 2023
AND INDEPENDENT AUDITOR'S REPORT
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Ameritas Life Insurance Corp. of New York
Lincoln, Nebraska
Opinions
We have audited the statutory-basis financial statements of Ameritas Life Insurance Corp. of New York (the "Company"), which comprise the balance sheets - statutory basis of December 31, 2023 and 2022, and the related summary of operations and changes in capital and surplus - statutory basis and statements of cash flows - statutory basis for each of the three years in the period ended December 31, 2023, and the related notes to the financial statements - statutory basis (collectively referred to as the “statutory-basis financial statements”).
Unmodified Opinion on Statutory-Basis of Accounting
In our opinion, the accompanying statutory-basis financial statements present fairly, in all material respects, the admitted assets, liabilities, and capital and surplus of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in accordance with the accounting practices prescribed or permitted by the New York State Department of Financial Services described in Note 1 to the statutory-basis financial statements.
Adverse Opinion on Accounting Principles Generally Accepted in the United States of America
In our opinion, because of the significance of the matter described in the Basis for Adverse Opinion on Accounting Principles Generally Accepted in the United States of America section of our report, the statutory-basis financial statements do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2023 and 2022, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2023.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Statutory-Basis Financial Statements section of our report. We are required to be independent of the Company, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Basis for Adverse Opinion on Accounting Principles Generally Accepted in the United States of America
As described in Note 1 to the statutory-basis financial statements, the statutory-basis financial statements are prepared by the Company using the accounting practices prescribed or permitted by the New York State Department of Financial Services, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to meet the requirements of the New York State Department of Financial Services. The effects on the statutory-basis financial statements of the variances between the statutory-basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material and pervasive.
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Responsibilities of Management for the Statutory-Basis Financial Statements
Management is responsible for the preparation and fair presentation of the statutory-basis financial statements in accordance with the accounting practices prescribed or permitted by the New York State Department of Financial Services. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of statutory-basis financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the statutory-basis financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the statutory-basis financial statements are issued.
Auditor’s Responsibilities for the Audit of the Statutory-Basis Financial Statements
Our objectives are to obtain reasonable assurance about whether the statutory-basis financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the statutory-basis financial statements.
In performing an audit in accordance with GAAS, we:
• | Exercise professional judgment and maintain professional skepticism throughout the audit. |
• | Identify and assess the risks of material misstatement of the statutory-basis financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the statutory-basis financial statements. |
• | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed. |
• | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the statutory-basis financial statements. |
• | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
Reporting on Supplemental Schedules
Our 2023 audit was conducted for the purpose of forming an opinion on the 2023 statutory-basis financial statements as a whole. The supplemental schedule of investment risks interrogatories, the supplemental summary investment schedule, and the supplemental schedule of selected financial data as of and for the year ended December 31, 2023, are presented for purposes of additional analysis and are not a required part of the 2023 statutory-basis financial statements. These schedules are the responsibility of the Company's management and were derived from and relate directly to the underlying accounting and other records used to prepare the statutory-basis financial statements. Such schedules have been subjected to the auditing procedures applied in our audit of the 2023 statutory-basis financial statements and certain additional procedures, including comparing and reconciling such schedules directly to the underlying accounting and other records used to prepare the statutory-basis financial statements or to the statutory-basis financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America.
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In our opinion, such schedules are fairly stated in all material respects in relation to the 2023 statutory-basis financial statements as a whole.
/s/ Deloitte & Touche LLP
Omaha, Nebraska
March 21, 2024
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AMERITAS LIFE INSURANCE CORP. OF NEW YORK | |||
Balance Sheets - Statutory Basis | |||
(in thousands, except shares) | |||
December 31 | |||
2023 | 2022 | ||
ADMITTED ASSETS | |||
Bonds | $ 1,027,455 | $ 994,300 | |
Common stocks | 1,710 | 1,712 | |
Mortgage loans | 219,950 | 236,677 | |
Cash, cash equivalents, and short-term investments | 10,936 | 24,289 | |
Loans on insurance contracts | 40,679 | 33,163 | |
Derivative assets | 11,506 | 3,742 | |
Other investments | 11,119 | 11,183 | |
Total Cash and Invested Assets | 1,323,355 | 1,305,066 | |
Investment income due and accrued | 11,037 | 10,281 | |
Deferred and uncollected premiums | 9,730 | 8,625 | |
Net deferred income tax asset | 6,148 | 6,089 | |
Reinsurance receivables | 7,572 | 5,869 | |
Reinsurance premium refund (Note 1) | 3,253 | 3,127 | |
Other admitted assets | 1,671 | 1,706 | |
Separate account assets | 461,332 | 392,212 | |
Total Admitted Assets | $ 1,824,098 | $ 1,732,975 | |
LIABILITIES, CAPITAL AND SURPLUS | |||
Reserves for life, accident and health policies | $ 1,140,363 | $ 1,107,858 | |
Deposit-type funds | 34,707 | 35,218 | |
Reserves for unpaid claims | 9,730 | 7,257 | |
Dividends payable to policyholders | 764 | 685 | |
Interest maintenance reserve | 3,353 | 4,143 | |
Accrued commissions, expenses and insurance taxes | 2,479 | 2,474 | |
Asset valuation reserve | 12,367 | 11,279 | |
Reinsurance payables | 9,503 | 7,537 | |
Funds held under coinsurance – affiliate | 37,096 | 38,068 | |
Payable to affiliates | 3,029 | 3,177 | |
Federal income tax payable – affiliate | 372 | 769 | |
Other liabilities | 15,598 | 6,989 | |
Separate account liabilities | 461,332 | 392,212 | |
Total Liabilities | 1,730,693 | 1,617,666 | |
Common stock, par value $1,000 per share; 2,000 shares authorized, | |||
issued and outstanding | 2,000 | 2,000 | |
Additional paid in capital | 186,202 | 186,202 | |
Unassigned surplus | (94,797) | (72,893) | |
Total Capital and Surplus | 93,405 | 115,309 | |
Total Liabilities, Capital and Surplus | $ 1,824,098 | $ 1,732,975 |
The accompanying notes are an integral part of the statutory basis financial statements.
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AMERITAS LIFE INSURANCE CORP. OF NEW YORK | |||||
Summary of Operations and Changes in Capital and Surplus – Statutory Basis | |||||
(in thousands) | |||||
Years Ended December 31 | |||||
2023 | 2022 | 2021 | |||
Premiums and Other Revenue | |||||
Premiums, net | $ 171,068 | $ 180,062 | $ 167,293 | ||
Premium income – assumed modco reinsurance – affiliate | 11,843 | (38,186) | 1,003 | ||
Net investment income | 54,607 | 49,989 | 54,763 | ||
Commissions and expense allowances on reinsurance ceded | 2,212 | 2,356 | 2,893 | ||
Separate account reserve transfer assumed – affiliate | 4,138 | 15,257 | 17,356 | ||
Miscellaneous income | 5,461 | 5,449 | 6,566 | ||
Total Premiums and Other Revenue | 249,329 | 214,927 | 249,874 | ||
Expenses | |||||
Benefits to policyholders | 173,712 | 195,288 | 226,850 | ||
Modco reinsurance adjustment – affiliate | 11,843 | (38,186) | 1,003 | ||
Change in reserves for life, accident and health policies | 32,505 | 21,769 | (13,561) | ||
Commissions | 12,235 | 12,041 | 12,504 | ||
General insurance expenses | 29,365 | 30,548 | 28,599 | ||
Taxes, licenses and fees | 2,861 | 3,315 | 3,416 | ||
Net transfers to (from) separate accounts | 6,725 | (11,988) | (43,228) | ||
Total Expenses | 269,246 | 212,787 | 215,583 | ||
Gain (Loss) from Operations before Dividends, Federal Income Tax | |||||
Expense and Net Realized Capital Losses | (19,917) | 2,140 | 34,291 | ||
Dividends to policyholders | 764 | 687 | 643 | ||
Gain (Loss) from Operations before Federal Income Tax | |||||
Expense and Net Realized Capital Losses | (20,681) | 1,453 | 33,648 | ||
Federal income tax expense | 381 | 877 | 672 | ||
Gain (Loss) from Operations before Net Realized Capital Losses | (21,062) | 576 | 32,976 | ||
Net realized capital losses, net of taxes | (113) | (136) | (25) | ||
Net Income (Loss) | (21,175) | 440 | 32,951 | ||
Unassigned surplus | |||||
Change in unrealized gains (losses), net of tax | 1,950 | (2,087) | 160 | ||
Change in net deferred income taxes | 5,571 | 1,023 | (5,778) | ||
Change in nonadmitted assets | (5,930) | (2,083) | 5,399 | ||
Change in liability for reinsurance in unauthorized companies | (1,232) | (112) | (182) | ||
Change in asset valuation reserve | (1,088) | (1,307) | (870) | ||
Net Change in Capital and Surplus | (21,904) | (4,126) | 31,680 | ||
Capital and Surplus at the Beginning of the Year | 115,309 | 119,435 | 87,755 | ||
Capital and Surplus at the End of Year | $ 93,405 | $ 115,309 | $ 119,435 |
The accompanying notes are an integral part of the statutory basis financial statements.
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AMERITAS LIFE INSURANCE CORP. OF NEW YORK | |||||
Statement of Cash Flows - Statutory Basis | |||||
(in thousands) | |||||
Years Ended December 31 | |||||
2023 | 2022 | 2021 | |||
OPERATING ACTIVITIES | |||||
Premium collected net of reinsurance | $ 171,006 | $ 175,958 | $ 170,484 | ||
Net investment income received | 53,665 | 48,900 | 54,116 | ||
Separate account reserve transfer assumed – affiliate | 2,931 | 15,812 | 16,590 | ||
Miscellaneous income | 7,618 | 7,659 | 9,731 | ||
Benefits paid to policyholders | (168,843) | (188,858) | (232,353) | ||
Commissions, expenses and taxes paid | (46,710) | (44,822) | (46,563) | ||
Dividends paid to policyholders | (685) | (636) | (849) | ||
Net transfers from (to) separate accounts | (6,740) | 11,955 | 43,331 | ||
Federal income taxes received (paid) | (761) | 1,314 | (513) | ||
Net Cash from Operating Activities | 11,481 | 27,282 | 13,974 | ||
INVESTING ACTIVITIES | |||||
Proceeds from investments sold, matured or repaid | 71,036 | 124,762 | 173,018 | ||
Cost of investments acquired | (84,703) | (146,332) | (209,348) | ||
Net change in loans on insurance contracts | (7,486) | (2,492) | (753) | ||
Net Cash from Investing Activities | (21,153) | (24,062) | (37,083) | ||
FINANCING AND MISCELLANEOUS ACTIVITIES | |||||
Change in deposit-type funds | (512) | 326 | (306) | ||
Other miscellaneous, net | (3,169) | 3,355 | (4,766) | ||
Net Cash from Financing and Miscellaneous Activities | (3,681) | 3,681 | (5,072) | ||
Net Change in Cash, Cash Equivalents and Short-Term | |||||
Investments | (13,353) | 6,901 | (28,181) | ||
Cash, Cash Equivalents and Short-Term Investments | |||||
– Beginning of Year | 24,289 | 17,388 | 45,569 | ||
Cash, Cash Equivalents and Short-Term Investments | |||||
– End of Year | $ 10,936 | $ 24,289 | $ 17,388 | ||
Non-cash transactions from investing activities: | |||||
Exchanges of bonds and stocks | $ 22 | $ 2,521 | $ 299 |
The accompanying notes are an integral part of the statutory basis financial statements.
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AMERITAS LIFE INSURANCE CORP. OF NEW YORK
Notes to Financial Statements - Statutory Basis
For the Years Ended December 31, 2023, 2022 and 2021
(in thousands)
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Ameritas Life Insurance Corp. of New York (the Company or Ameritas NY), a stock life insurance company domiciled in the State of New York, is a wholly-owned subsidiary of Ameritas Life Insurance Corp. (Ameritas Life). Ameritas Life is a wholly-owned subsidiary of Ameritas Holding Company (AHC), and AHC is a wholly-owned subsidiary of Ameritas Mutual Holding Company (AMHC). AMHC is a mutual insurance holding company. Owners of designated policies have membership interest in AMHC, while contractual rights remain with the Company. AHC also wholly owns Ameritas Investment Partners, Inc. (AIP), an advisor providing investment management services to the Company.
Ameritas Life is an insurance company domiciled in the State of Nebraska. In addition to the Company, Ameritas Life owns Ameritas Investment Company, LLC (AIC), a broker dealer, Variable Contract Agency LLC (VCA), an insurance agency, and Ameritas Advisory Services LLC (AAS), a registered investment advisor. Effective October 31, 2022, BlueStar Retirement Services, Inc. was liquidated with net assets distributed to Ameritas Life. Effective October 1, 2023, Select Benefits Group, LLC was liquidated with net assets distributed to Ameritas Life.
The Company’s insurance operations consist of life and health insurance, annuity, group pensions and retirement contracts as well as group dental and vision products issued in the State of New York.
Basis of Presentation
The accompanying financial statements of the Company have been prepared in accordance with accounting practices prescribed or permitted by the New York State Department of Financial Services (New York Department). Accounting practices and procedures of the National Association of Insurance Commissioners (NAIC) as prescribed or permitted by the New York Department comprise a comprehensive basis of accounting (NAIC SAP) other than accounting principles generally accepted in the United States of America (GAAP). NAIC SAP has been adopted as a component of prescribed or permitted practices by the New York Department with modifications as the State of New York has adopted certain prescribed accounting practices that differ from those found in NAIC SAP (NY Reg 172). Specifically New York adopted NAIC SSAP No. 61, Life, Deposit-type and Accident and Health Reinsurance with the following addition: If a ceding insurer that receives credit for reinsurance by way of deduction from its reserve liability remits the associated reinsurance premiums for coverage beyond the paid-to-date of the policy, the ceding insurer may record an asset for the portion of the gross reinsurance premium that provides reinsurance coverage for the period from the next policy premium due date to the earlier of 1) the end of the policy year or 2) the next reinsurance premium due date. The asset shall be admitted as a write-in asset to the extent that the reinsurer must refund premiums to the ceding insurer in the event of either the termination of the ceded policy or the termination of the reinsurance agreement. The Company recognized assets of $3,253 and $3,127 at December 31, 2023 and 2022, respectively, related to the refund of reinsurance premiums on the Balance Sheets – Statutory Basis.
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NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES, (continued)
A reconciliation of the Company’s net income (loss) and capital and surplus between NAIC SAP and the New York Department is shown below:
December 31 | |||||
2023 | 2022 | 2021 | |||
Net income (loss) New York basis | $ (21,175) | $ 440 | $ 32,951 | ||
New York Prescribed Practices that increase (decrease) NAIC SAP | |||||
NY Reg 172 | 34 | (1) | (206) | ||
Net income (loss) NAIC SAP | $ (21,209) | $ 441 | $ 33,157 | ||
Statutory Surplus New York basis | $ 93,405 | $ 115,309 | $ 119,435 | ||
New York Prescribed Practices that (decrease) NAIC SAP | |||||
NY Reg 172 | (2,365) | (2,400) | (2,399) | ||
Statutory Capital and Surplus, NAIC SAP | $ 95,770 | $ 117,709 | $ 121,834 |
The impact of the New York prescribed accounting practices had an immaterial impact on the Company’s Risk Based Capital.
The preparation of financial statements in accordance with statutory accounting practices requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein. Material estimates susceptible to significant change include reserves, income taxes, investment values, and other-than-temporary impairments (OTTI).
Current NAIC SAP practices vary from GAAP. The more significant variances between NAIC SAP and GAAP are as follows:
Under NAIC SAP, investments in bonds are generally reported at amortized cost, with certain NAIC designated securities reported at the lower of amortized cost or fair value and adjustments to fair value reported directly in surplus. Under GAAP, bonds are carried either at amortized cost or fair value based on their classifications. Under GAAP, bonds designated as held-to-maturity based on the Company’s intent and ability to hold to maturity would be carried at amortized cost. Bonds designated as available-for-sale would be carried at fair value with net unrealized holding gains and losses reported in other comprehensive income. Bonds designated as trading would be carried at fair value with net unrealized holding gains and losses reported in income. Redeemable preferred stock would be carried at fair value with changes in unrealized gains and losses recognized in income.
Under NAIC SAP, for bonds other than loan-backed and structured securities, if the Company has the intent to sell an impaired security, the cost basis of the security is written down to fair value. If the Company does not have the intent to sell, but it is determined that a decline in fair value is other-than-temporary, the cost basis of the security is written down to fair value. Under GAAP, if the Company has the intent to sell or will more likely than not be required to sell before recovery of its cost basis, the cost basis of the security is written down to fair value. If the Company does not have the intent to sell and it is not more likely than not to be required to sell before recovery of its cost basis, the cost basis must be written down to discounted cash flows with the remaining unrealized loss, if applicable, recognized in other comprehensive income.
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NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES, (continued)
Under NAIC SAP, all loan-backed and structured securities are adjusted for the effects of changes in prepayment assumptions on the related accretion of discount or amortization of premium of such securities using either the retrospective or prospective method, applied consistently by asset class. If the Company has the intent to sell an impaired security, the cost basis of the security is written down to fair value. If the Company does not have the intent to sell and it is determined that a decline in fair value is other-than-temporary, the cost basis of the security is written down to the discounted cash flows. Under GAAP, all securities, purchased or retained, that represent beneficial interests in securitized assets, other than high credit quality securities, are adjusted using the prospective method when there is a change in estimated future cash flows. If the Company has the intent to sell or will more likely than not be required to sell before recovery of its cost basis, the cost basis must be written down to fair value. If the Company does not have the intent to sell and it is not more likely than not to be required to sell before recovery of its cost basis, the cost basis must be written down to discounted cash flows through an allowance, with the remaining unrealized loss, if applicable, recognized in other comprehensive income. Changes in the allowance for credit-related impairment are recorded through income.
Investments in unaffiliated common stocks are stated at fair value with changes in fair value recognized in unrealized gains (losses) on investments, a component of surplus. Under GAAP, common stocks are carried at fair value with changes in unrealized gains and losses recognized in income.
The asset valuation reserve (AVR) and interest maintenance reserve (IMR) are established only on the statutory financial statements.
Under NAIC SAP, derivative instruments that meet the criteria of an effective hedge are valued and reported in a manner that is consistent with the hedged asset or liability and embedded derivatives are not accounted for separately from the host contract. Also, the change in fair value of open derivative instruments that do not meet the criteria of an effective hedge is recorded as an unrealized gain or loss in surplus. Under GAAP, all derivatives are reported on the balance sheets at fair value. Changes in fair value of derivatives, to the extent they are effective at offsetting hedged risk are recorded through either income or equity, depending on the nature of the hedge. An embedded derivative within a contract that is not clearly and closely related to the economic characteristics and risks of the host contract is accounted for separately from the host contract and reported at fair value.
Acquisition costs, such as commissions and other costs directly related to acquiring new business, are charged to operations as incurred under NAIC SAP. Under GAAP, acquisition costs are capitalized and charged to operations as the revenues or expected gross profits are recognized.
Under NAIC SAP, amounts that represent revenue for services to be provided in future periods are reported as revenue when received. Under GAAP, amounts would be reported as a liability and amortized into revenue using the same assumptions used to amortize deferred policy acquisition costs.
Certain assets designated as nonadmitted are excluded from the accompanying Balance Sheets – Statutory Basis and are charged directly to unassigned surplus. Under GAAP, these assets would be included in the balance sheets, net of any valuation allowance.
Under NAIC SAP, Universal Life and Annuity revenues consist of the entire premium received and benefits represent the death benefits paid and the change in policy reserves. Under GAAP, revenues are comprised of contract charges and fees which are recognized when assessed against the policyholder account balance.
Policy reserves for Life, Accident and Health policies are based on methods prescribed by the NAIC, which include mortality and interest assumptions without consideration for lapses or withdrawals. Under GAAP, policy reserves are based on the Company’s estimates of morbidity, mortality, lapse, and interest assumptions.
Under NAIC SAP, policyholder dividends are recognized when declared. Under GAAP, policyholder dividends would be for dividends that have accrued as of the financial statement date based on the best available estimate of the amount of dividends to be paid.
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NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES, (continued)
Under NAIC SAP, a liability for reinsurance balances is provided for unsecured policy reserves ceded to reinsurers unauthorized by license to assume such business. Changes to those amounts are credited or charged directly to unassigned surplus. Under GAAP, no such amounts are recorded.
Reinsurance recoverables on unpaid losses are reported as a reduction of policy reserves, while under GAAP, they are reported as an asset.
NAIC SAP requires an amount be recorded for deferred taxes as a component of surplus, however, there are limitations as to the amount of deferred tax assets that may be reported as admitted assets that are not applicable under GAAP. Under NAIC SAP, both the valuation allowance determination and admission calculation are made based on a separate company basis.
Under NAIC SAP, cash, cash equivalents and short-term investments represent cash balances and investments with remaining maturities when purchased of one year or less. Under GAAP, cash and cash equivalents include investments with remaining maturities when purchased of three months or less. Under GAAP, short-term investments are reported as a component of fixed maturity or equity investment balances.
Comprehensive income and its components are not presented under NAIC SAP.
Significant statutory accounting practices are as follows:
Investments
Investments are stated at amounts prescribed by the NAIC which are as follows: bonds not backed by other loans and SVO identified investments are stated at amortized cost and loan-backed bonds and structured securities are stated at amortized cost using the interest method including anticipated prepayments at the date of purchase. Significant changes in estimated cash flows from the original purchase assumptions are reviewed monthly. Prepayment assumptions for loan-backed bonds and structured securities are obtained from broker dealer survey values or internal estimates based on characteristics of similar products, consistent with the current interest rate and economic environment. The retrospective adjustment method is used to value all loan-backed and structured securities and non-agency structured securities of high credit quality. The prospective method is used to value structured securities with significant changes in cash flow, or of lower credit quality. All bonds with a NAIC designation of 6 are stated at the lower of amortized cost or fair value.
Common stock is generally reported at fair value. The Federal Home Loan Bank (FHLB) common stock is carried at cost. The change in the carrying value is generally recorded as a change in unrealized gains (losses) on investments, a component of unassigned surplus.
Mortgage loans are stated at the unpaid principal balance less unamortized discounts or plus unamortized premiums. The Company records a reserve for losses on mortgage loans as part of the AVR and mortgage loans are written down if deemed impaired.
Cash and cash equivalents consist of cash-in-bank, cash-in-transit, money market mutual funds and all highly liquid securities with remaining maturity of three months or less. Money market mutual funds are stated at amortized cost which approximates fair value. Short-term investments presented in the Balance Sheets – Statutory Basis consist of all investments that have a maturity date of one year or less at the date acquired and are stated at amortized cost, which approximates fair value.
Loans on insurance contracts are stated at the aggregate unpaid principal balance. The excess of the unpaid balance of the loan over the cash surrender value is considered a nonadmitted asset.
Other investments are surplus debentures that are carried under the amortized cost method.
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NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES, (continued)
The Company purchases and sells Exchange traded call options (Exchange traded index call options) based on the Standard & Poor's 500 Stock Index to hedge equity index universal life contracts. The Company has purchased and written Exchange traded index call options that expire through December 20, 2024. The Company paid and received initial fees (the option premium) to enter the option contracts. The purchased Exchange traded index call options give the Company the right to receive cash at settlement if the closing index value is above the strike price, while the written Exchange traded index call options require the Company to pay cash at settlement if the closing index value is above the strike price.
The Company is exposed to credit-related losses in the event of nonperformance by counter-parties to the call options. To minimize this risk, the Company only enters into listed contracts guaranteed by the Chicago Board Options Exchange. The credit exposure is limited to the fair value of the net call options of $4,398 and $1,801 at December 31, 2023 and 2022, respectively. The Company may be required to post collateral to the brokering bank for the Exchange traded index call options. At December 31, 2023 and 2022, no collateral was required to be posted to the brokering bank under the terms of the option contract. The notional amount of the options at December 31, 2023 and 2022 was ($5,575) and ($5,850), respectively.
The options are carried at their fair value and are reflected as derivative assets and other liabilities in the Balance Sheets – Statutory Basis. The amount reported in other liabilities for options was $7,109 and $1,941 at December 31, 2023 and 2022, respectively. Changes in the fair value of expired options are reflected in net investment income in the Summary of Operations and Changes in Capital and Surplus – Statutory Basis. The total gain from expired options of $526, ($1,346) and $2,348 was recorded in net investment income for the years ended December 31, 2023, 2022, and 2021, respectively. Changes in the fair value of open options that do not meet the requirements of an effective hedge are reflected in the change in unrealized gains (losses), net of tax in the Summary of Operations and Changes in Capital and Surplus – Statutory Basis and totaled $2,468, ($2,642) and $203 for the years ended December 31, 2023, 2022, and 2021, respectively.
Investment income consists primarily of interest and dividends. Interest is recognized on an accrual basis and dividends are recorded as earned at the ex-dividend date. Interest income on loan-backed and structured securities is determined on the effective yield method based on estimated principal repayments. Accrual of income is suspended for bonds and mortgage loans that are in default or when the receipt of interest payments is in doubt. Realized capital gains and losses are determined on a specific identification basis and recorded in operations.
Accrued interest more than 180 days past due deemed collectible on mortgage loans in default is nonadmitted. All other investment income due and accrued, excluding loans on insurance contracts, with amounts over 90 days past due is nonadmitted. There were no accrued interest amounts excluded from unassigned surplus at December 31, 2023 and 2022, respectively.
If the Company has the intent to sell an impaired security, the cost basis of the security is written down to fair value. For bond investments other than loan-backed and structured securities, if the Company does not have the intent to sell, but it is determined that a decline in fair value is other-than-temporary, the cost basis of the security is written down to fair value. For loan-backed and structured security investments, if the Company does not have the intent to sell and it is determined that a decline in fair value is other-than-temporary, the cost basis of the security is written down to the discounted estimated future cash flows. All write downs are recorded as a realized loss. For unaffiliated common stocks and other investments carried at fair value, unrealized gains and losses resulting from differences between the cost and carrying amount of these investments are credited or charged directly to unassigned surplus.
Nonadmitted Assets
In accordance with NAIC SAP, certain assets, designated as nonadmitted assets, are excluded from the Balance Sheets – Statutory Basis and are charged directly to unassigned surplus. Nonadmitted assets consist primarily of a portion of deferred income tax assets, loans on insurance contracts, advances to agents, unearned annualized commissions and other assets not specifically identified as an admitted asset within NAIC SAP. Total nonadmitted assets were $24,740 and $18,810 at December 31, 2023, and 2022, respectively.
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NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES, (continued)
Reserves for Life, Accident and Health Policies, and Deposit-type Funds
Life policy reserves provide amounts adequate to discharge estimated future obligations in excess of estimated future premiums on policies in force. Reserves for traditional, flexible premium and variable life insurance are computed principally by using the Commissioners' Reserve Valuation Method (CRVM) or the Net Level Premium Method with assumed interest rates and mortality as prescribed by regulatory authorities, or the PBR method under which the company holds the higher of the Net Premium reserve, the Deterministic reserve or the Stochastic reserves which considers a wide range of future economic conditions using justified company experience factors, such as mortality, lapses and expenses with prescribed rule-based requirements and regulatory guardrails. Reserves for fixed annuities are calculated using the Commissioners’ Annuity Reserve Valuation Method (CARVM) with appropriate statutory interest and mortality assumptions. Reserves for variable annuities are calculated in conformance with section VM-21 of the Valuation Manual (VM-21). VM-21 requires the determination of reserves based on the combination of a conditional tail expectation 70 (CTE 70) stochastic amount and a possible additional standard projection amount. The additional standard projection amount is based on the Prescribed Projections Amount (PPA). Both the CTE 70 stochastic amount and PPA are based on a wide range of future economic conditions. The CTE 70 reflects prudent estimate assumptions and the PPA uses prescribed assumptions in place of certain prudent estimate assumptions.
Tabular interest, tabular less actual reserves released and tabular cost for all life contracts are determined based upon statutory regulations. Other policy reserves are established and maintained on the basis of published mortality tables using assumed interest rates and valuation methods as prescribed by the New York Department.
Reserves for unpaid individual accident and health disability contracts claims, the present value of amounts not yet due on claim reserves is a first principles-type calculation based on a seriatim listing of open disability claims. All termination rate and interest discounting assumptions adhere to minimum NAIC Standards. The adequacy of these reserves is demonstrated annually using follow-up studies as defined in the Actuarial Standard of Practice No. 5, Section 3.6. In addition, the present value of future payments relative to all incurred but unreported claims is based on historical study using past monthly earned premiums times the planned loss ratio times the anticipated percent of claims outstanding, and expressed as a percentage times tabular reserves, including a provision for litigated claims.
Reserves for deposit-type funds are equal to deposits received and interest credited to the benefit of policyholders, less withdrawals that represent a return to the policyholder. For the determination of tabular interest to deposit-type funds, the valuation interest rate, which varies by issue year, is multiplied by the average funds in force during the year subject to such valuation interest rate.
Reserve for Unpaid Claims
The reserves for unpaid group and individual dental and vision claims are estimated using historical claim lags, with adjustments based on the current level of pending/unprocessed claims, and relative to the historical levels during the time period used to generate claim lag factors. The reserves for unpaid claims for group and individual dental and vision insurance includes claims in course of settlement and incurred but not reported claims. Claim adjustment expenses corresponding to the unpaid claims are accounted for by adding an additional load to the reserve for unpaid claims. To the extent the ultimate liability differs from the amounts recorded, such differences are reflected in operations when additional information becomes known.
Reserves for unpaid life claims include claims reported and unpaid and claims not yet reported, which is estimated based upon historical experience. As such amounts are necessarily estimates, the ultimate liability will differ from the amount recorded and will be reflected in operations when additional information becomes known.
Dividends to Policyholders
Dividends are provided based on dividend formulas approved by the Board of Directors of the Company in accordance with actuarially determined dividend scales. Dividends to policyholders are reflected in the Summary of Operations and Changes in Capital and Surplus - Statutory Basis at amounts estimated to be paid or credited to policyholders during the subsequent year on the policy anniversary dates. A portion of the Company’s business has been issued on a participating basis. The amount of insurance in force on individual life participating policies was $977,436 or 7.2% and $922,922 or 7.0% of the individual life policies in force as of December 31, 2023 and 2022, respectively.
12 |
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES, (continued)
Accrued Separate Account Transfers
Accrued separate account transfers primarily consist of the amount of policyholder account values over modified reserves used in the separate account, such as the use of CARVM and CRVM.
Asset Valuation and Interest Maintenance Reserves
The AVR is a required appropriation of unassigned surplus to provide for possible losses that may occur on certain investments of the Company. The reserve is computed based on holdings of all investments and realized and unrealized gains and losses, other than those resulting from interest rate changes. Changes in the reserve are charged or credited to unassigned surplus.
The IMR is calculated based on the prescribed methods developed by the NAIC. Realized gains and losses, net of tax, resulting from interest rate changes on fixed income investments are deferred and credited to this reserve. These gains and losses are then amortized into net investment income over what would have been the remaining years to maturity of the underlying investment. Amortization included in net investment income was $838, $1,397 and $1,884 for 2023, 2022 and 2021, respectively.
Recognition of Premium Revenues and Related Costs
Life premiums are recognized as revenue when premiums are due. Annuity considerations are recognized as income when received. Health premiums are earned ratably over the terms of the related insurance and reinsurance contracts or policies. Consideration received on deposit-type funds, which do not contain life contingencies, is recorded directly to the related liability.
Expenses incurred in connection with acquiring new insurance business, including acquisition costs such as sales commissions, are charged to operations as incurred.
Reinsurance
Reinsurance premiums and claims are accounted for on bases consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums, benefits, reserves for life, accident and health policies, and reserves for unpaid claims are reported net of reinsured amounts. In a modified coinsurance arrangement, the ceding company retains the assets with respect to the policies reinsured and also retains and records the associated reserves. The assuming company does not reflect the assets or reserves in its balance sheet.
Income Taxes
The Company files a life/non-life consolidated tax return with AMHC and AMHC eligible affiliates. The Company’s income tax allocation is based upon a written agreement which uses a modified separate return method. The modified separate return method adjusts the separate return method so that the net operating losses (or other current or deferred tax attributes) are characterized as realized by the Company when those attributes are realized (or realizable) by the consolidated group.
The Company is subject to tax-related audits in the normal course of operations. The Company records a contingency reserve for tax-related matters when it is more likely than not that a liability has been incurred and the amount of the loss can be reasonably estimated. The tax contingency reserves are evaluated based upon the facts and circumstances that exist at each reporting measurement. Adjustments may result from new information, resolution of an issue with the taxing authorities, or changes in laws or regulations. There was no reserve for tax related contingencies at December 31, 2023 and 2022.
The Company is subject to taxation in the United States and New York. In 2018, the Internal Revenue Service (IRS) started a limited scope examination of the AMHC consolidated federal income tax return for tax year 2015. Additionally, the 2017 net operating loss carryback claim filed amending tax years 2015 and 2016 are currently under examination as part of the Joint Committee on Taxation process. This examination has reached the IRS Appeals process and any potential tax changes required are not expected to be material. Due to the IRS examinations, the Company has extended the statute of limitations for tax years 2015 and 2016. The Company is no longer subject to examinations by tax authorities for years before 2015.
13 |
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES, (continued)
Separate Accounts
Separate account assets and liabilities reported in the accompanying financial statements represent funds that are separately administered, principally for variable annuity, variable life and group annuity contracts and for which the contract holders, rather than the Company, bear the investment risk. Separate account contract holders have no claim against the assets of the general account of the Company. Investment income and gains and losses from these accounts accrue directly to contract holders and are not included in the accompanying financial statements.
Net asset values and changes in net asset values of separate account assets generally accrue directly to the contract holders and are not included in the Company’s revenues and expenses or surplus.
Vulnerability due to Certain Concentrations
The Company operates in a business environment which is subject to various risks and uncertainties. Such risks and uncertainties include, but are not limited to, interest rate risk, market risk, credit risk and legal and regulatory changes, including policies and related impacts from pandemics or other public health issues (such as the COVID-19 pandemic). Furthermore, the market for deferred annuities and interest-sensitive life insurance is enhanced by the tax incentives available under current law. Any legislative changes that lessen these incentives are likely to negatively impact the demand for these products. The demand for life insurance products that are used to address a customer’s estate planning needs may be impacted to the extent any legislative changes occur to the current estate tax laws.
Accounting Pronouncements
In August 2023, the NAIC issued Interpretation 23-01 which provides optional, limited-time guidance allowing the admittance of net negative (disallowed) IMR up to 10% of adjusted capital and surplus. The guidance was effective immediately and will be automatically nullified on January 1, 2026. There was no impact in 2023 to the Company from the adoption of this guidance.
In August 2023, the NAIC issued Statement of Statutory Accounting Principles (SSAP) No. 26R - Bonds and SSAP No. 43R - Asset-Backed Securities which prescribe a principles-based definition for identifying whether security structures should be reported as long-term bonds. The amended guidance provides criteria for distinguishing bonds from other types of investments. The guidance is effective on January 1, 2025. The Company is currently evaluating the impact of this guidance on its financial position and results of operations.
In December 2023, the NAIC issued SSAP No. 2R - Cash, Cash Equivalents, Drafts, and Short-Term Investments to further restrict the investments that are permitted for cash equivalent or short-term reporting. The guidance is effective on January 1, 2025. The Company is currently evaluating the impact of this guidance on its financial position and results of operations.
Bonds
The cost or amortized cost and estimated fair value of bonds by type are summarized as follows:
December 31, 2023 | ||||
Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |
U.S. Government | $ 9,477 | $ 3 | $ (578) | $ 8,902 |
Special revenue and special assessment obligations and all non-guaranteed obligations of agencies and authorities of governments and their political subdivisions | 27,601 | 96 | (1,480) | 26,217 |
Hybrid securities | 2,049 | — | (265) | 1,784 |
Industrial and miscellaneous (unaffiliated) | 988,328 | 7,563 | (91,900) | 903,991 |
Total bonds | $ 1,027,455 | $ 7,662 | $ (94,223) | $ 940,894 |
14 |
NOTE 2 – INVESTMENTS, (continued)
December 31, 2022 | ||||
Cost or Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |
U.S. Government | $ 10,827 | $ 1 | $ (634) | $ 10,194 |
Special revenue and special assessment obligations and all non-guaranteed obligations of agencies and authorities of governments and their political subdivisions | 29,365 | — | (1,789) | 27,576 |
Hybrid securities | 2,049 | — | (381) | 1,668 |
Industrial and miscellaneous (unaffiliated) | 952,059 | 1,869 | (120,715) | 833,213 |
Total bonds | $ 994,300 | $ 1,870 | $ (123,519) | $ 872,651 |
The cost or amortized cost and estimated fair value of bonds at December 31, 2023 by contractual maturity are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Cost or Amortized Cost | Fair Value | |
Due in one year or less | $ 22,825 | $ 22,564 |
Due after one year through five years | 192,728 | 187,111 |
Due after five years through ten years | 197,434 | 186,306 |
Due after ten years | 596,954 | 528,666 |
Bonds with multiple repayment dates | 17,514 | 16,247 |
Total bonds | $ 1,027,455 | $ 940,894 |
Proceeds from the sales of bonds were $904, $30,310 and $17,898 for the years ended December 31, 2023, 2022 and 2021, respectively.
Realized capital gains (losses) are as follows:
Years Ended December 31 | ||||
2023 | 2022 | 2021 | ||
Bonds: | ||||
Gross realized capital gains on sales | $ 8 | $ 142 | $ 418 | |
Gross realized capital losses on sales | (13) | (296) | (48) | |
Net realized capital gains (losses) on sales | (5) | (154) | 370 | |
Other, including impairments and net gain on dispositions | ||||
other than sales | (77) | (173) | 7 | |
Total bonds | (82) | (327) | 377 | |
Other investments | — | 25 | 6 | |
Realized capital gains (losses) before federal income taxes and transfer to IMR | (82) | (302) | 383 | |
Realized capital gains (losses) transferred to IMR | 61 | (130) | 415 | |
Federal income tax benefit | (30) | (36) | (7) | |
Net realized capital losses | $ (113) | $ (136) | $ (25) |
The Company has entered into an agreement with the FHLB of New York to enhance investment yields through investment spread strategies and to provide for liquidity needs, if a future need for immediate liquidity arises. The agreement provides for advances (lines of credit) up to $30,947 to the Company in return for the purchase of asset-based membership stock equal to 0.1% of assets, with a $360 maximum, plus an additional activity-based stock purchase equal to 4.5% of the dollar amount of any outstanding advances. As part of the agreement, $1,710 and $1,712 in stock was owned at December 31, 2023 and 2022, respectively. Excluding the funding agreements, the Company had no outstanding balance related to the line of credit at any time during 2023 and 2022.
15 |
NOTE 2 – INVESTMENTS, (continued)
The amount of FHLB capital stock held, in aggregate, and classified as of December 31, 2023 and 2022 is as follows:
General Account | ||
2023 | 2022 | |
Membership stock - class B | $ 360 | $ 362 |
Activity stock | 1,350 | 1,350 |
Aggregate total | $ 1,710 | $ 1,712 |
Actual or estimated borrowing capacity as determined by the insurer | $ 30,947 | $ 32,237 |
As of December 31, 2023 and 2022, the Company did not have any FHLB membership stock listed above eligible for redemption.
As of December 31, 2023 and 2022, the Company had $30,000 of funding agreements outstanding with the FHLB. There are $33,503 and $36,808 of bonds pledged as collateral at December 31, 2023 and 2022, respectively. The assets and reserves related to the funding agreements are reported in the general account as the Company’s strategy is to increase investment income to the general account from the investment spread strategy. The related reserves of $30,116 and $30,099 are reported in deposit-type funds on the Balance Sheets – Statutory Basis as of December 31, 2023 and 2022, respectively.
The values of the bonds pledged as collateral to the FHLB and the total aggregate borrowing by the Company as of December 31 is as follows:
General Account | ||
2023 | 2022 | |
Fair value | $ 31,673 | $ 34,641 |
Carrying value | 33,503 | 36,808 |
Aggregate total borrowing - funding agreements | 30,000 | 30,000 |
The maximum amount of collateral pledged to the FHLB during December 31 is as follows:
General Account | ||
2023 | 2022 | |
Fair value | $ 34,713 | $ 44,496 |
Carrying value | 36,353 | 43,018 |
Amount borrowed at time of maximum collateral - funding agreements | 30,000 | 30,000 |
There are prepayment penalties on the Company's funding agreements.
16 |
NOTE 2 – INVESTMENTS, (continued)
Restricted Assets
A detailed summary of restricted assets (including pledged assets) primarily bonds at cost or amortized cost is as follows:
December 31, 2023 | |||||||
Gross Restricted | Percentage | ||||||
Restricted Asset Category | Total Current Year | Total Prior Year | Increase/ (Decrease) | Total Nonadmitted Restricted | Total Current Year Admitted Restricted | Gross Restricted to Total Assets | Admitted Restricted to Total Admitted Assets |
FHLB capital stock | $ 1,710 | $ 1,712 | $ (2) | $ — | $ 1,710 | 0.1 % | 0.1 % |
Bonds on deposit with states | 507 | 509 | (2) | — | 507 | 0.0 % | 0.0 % |
Pledged as collateral to | |||||||
FHLB (including assets | |||||||
backing agreements) | 33,503 | 36,808 | (3,305) | — | 33,503 | 1.8 % | 1.8 % |
Total Restricted Assets | $ 35,720 | $ 39,029 | $ (3,309) | $ — | $ 35,720 | 1.9 % | 1.9 % |
December 31, 2022 | |||||||
Restricted Asset Category | Gross Restricted | Percentage | |||||
Total Current Year | Total Prior Year | Increase/ (Decrease) | Total Nonadmitted Restricted | Total Current Year Admitted Restricted | Gross Restricted to Total Assets | Admitted Restricted to Total Admitted Assets | |
FHLB capital stock | $ 1,712 | $ 1,713 | $ (1) | $ — | $ 1,712 | 0.1 % | 0.1 % |
Bonds on deposit with states | 509 | 510 | (1) | — | 509 | 0.0 % | 0.0 % |
Pledged as collateral to | |||||||
FHLB (including assets | |||||||
backing agreements) | 36,808 | 43,889 | (7,081) | — | 36,808 | 2.1 % | 2.1 % |
Total Restricted Assets | $ 39,029 | $ 46,112 | $ (7,083) | $ — | $ 39,029 | 2.2 % | 2.2 % |
An aging of unrealized losses on the Company’s investments in bonds were as follows:
December 31, 2023 | |||||||||
Less than 12 Months | 12 Months or More | Total | |||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||
Bonds: | |||||||||
U.S. Governments | $ 96 | $ — | $ 8,805 | $ 578 | $ 8,901 | $ 578 | |||
Special revenue and special | |||||||||
assessment obligations and all non- | |||||||||
guaranteed obligations of agencies | |||||||||
and authorities of governments and | |||||||||
their political subdivisions | 5,032 | 130 | 21,185 | 1,350 | 26,217 | 1,480 | |||
Hybrid securities | — | — | 1,784 | 265 | 1,784 | 265 | |||
Industrial and miscellaneous | |||||||||
(unaffiliated) | 130,212 | 868 | 748,352 | 91,032 | 878,564 | 91,900 | |||
Total | $ 135,340 | $ 998 | $ 780,126 | $ 93,225 | $ 915,466 | $ 94,223 |
17 |
NOTE 2 – INVESTMENTS, (continued)
December 31, 2022 | |||||||||
Less than 12 Months | 12 Months or More | Total | |||||||
Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||
Bonds: | |||||||||
U.S. Governments | $ 8,946 | $ 531 | $ 1,248 | $ 103 | $ 10,194 | $ 634 | |||
Special revenue and special | |||||||||
assessment obligations and all non- | |||||||||
guaranteed obligations of agencies | |||||||||
and authorities of governments and | |||||||||
their political subdivisions | 25,468 | 1,295 | 2,109 | 494 | 27,577 | 1,789 | |||
Hybrid securities | — | — | 1,669 | 381 | 1,669 | 381 | |||
Industrial and miscellaneous | |||||||||
(unaffiliated) | 565,637 | 55,492 | 241,991 | 65,223 | 807,628 | 120,715 | |||
Total | $ 600,051 | $ 57,318 | $ 247,017 | $ 66,201 | $ 847,068 | $ 123,519 |
The unrealized losses related to bonds in 2023 and 2022 reported above were partially due to liquidity and market-related considerations. The Company considers various factors when considering if a decline is other-than-temporary, including the size of the unrealized loss, deterioration in ratings, industry conditions or factors related to a geographic area that are negatively affecting a security, violation of loan covenants, overall financial condition of the issuer and the Company’s intention and ability to sell or hold the security for a period of time sufficient to allow for a recovery in value. The Company has determined that such declines were temporary in nature.
The Company considers various factors when considering if a decline in the fair value of a common stock security is other-than-temporary, including but not limited to the magnitude of the unrealized loss; the volatility of the investment; analyst recommendations, price targets and NAIC ratings; opinions of the Company’s investment managers; market liquidity; and the Company’s intentions to sell or ability to hold the investments until recovery. Based on an evaluation of these factors, the Company did not record any realized losses for other-than-temporary impairments on unaffiliated common stocks during 2023, 2022 and 2021.
The Company’s bond and short-term investment portfolios are predominantly comprised of investment grade securities. At December 31, 2023 and 2022, bonds at book/adjusted carrying value totaling $23,768 and $28,078, respectively, (2.3% and 2.8%, respectively, of the total bond and short-term portfolios) are considered below investment grade. Securities are classified as below investment grade by utilizing rating criteria established by the NAIC. The Company did not recognize any other-than-temporary impairments on loan-backed and structured security investments in 2023.
A summary of loan-backed and structured security investments included in industrial and miscellaneous (unaffiliated) with unrealized losses for which an other-than-temporary impairment has not been recognized is as follows:
December 31, 2023 | |||||||
Unrealized Less Than 12 Months | Unrealized 12 Months or More | ||||||
Amortized Cost | Fair Value | Unrealized Losses | Amortized Cost | Fair Value | Unrealized Losses | ||
Structured securities | $ 8,859 | $ 8,710 | $ (149) | $ 137,517 | $ 127,153 | $ (10,364) | |
December 31, 2022 | |||||||
Unrealized Less Than 12 Months | Unrealized 12 Months or More | ||||||
Amortized Cost | Fair Value | Unrealized Losses | Amortized Cost | Fair Value | Unrealized Losses | ||
Structured securities | $ 120,661 | $ 111,527 | $ (9,134) | $ 41,568 | $ 36,499 | $ (5,069) |
18 |
NOTE 2 – INVESTMENTS, (continued)
Mortgage Loans
For the commercial mortgage loans held by the Company, debt service coverage ratio (DSCR) is considered a key credit quality indicator for loans that are income dependent while loan to value and borrower financial strength are considered key credit quality indicators for borrower-occupied loans. Debt service coverage ratios compare a property’s net operating income to the borrower’s principal and interest payments. Loan to value and debt service coverage ratios are updated annually or as warranted by economic conditions or impairment considerations.
Debt service coverage ratios for income dependent mortgage loans on commercial real estate are summarized as follows:
December 31 | |||
2023 | 2022 | ||
DSCR distribution | |||
Below 1.0 | $ 7,300 | $ 6,650 | |
1.0 - 1.2 | 15,289 | 18,698 | |
1.2 - 1.5 | 34,674 | 48,853 | |
Greater than 1.5 | 161,714 | 161,086 | |
Total | $ 218,977 | $ 235,287 |
Mortgage loans with DSCR below 1.0 that are not considered impaired primarily relate to instances where the borrower has the financial capacity to fund the revenue shortfalls from the properties for the foreseeable future, the decrease in cash flows is considered temporary, or there are other risk mitigating factors.
Loan to value for borrower-occupied commercial real estate mortgage loans is summarized as follows:
December 31 | |||
2023 | 2022 | ||
Loan to value | |||
Below 60% | $ 715 | $ 1,121 | |
60-75% | 258 | 269 | |
Total | $ 973 | $ 1,390 |
An aging analysis of the commercial mortgage loans held by the Company is summarized as follows:
December 31 | |||
2023 | 2022 | ||
Recorded investment (all) | |||
Current | $ 219,950 | $ 236,677 | |
30-59 days past due | — | — | |
60-89 days past due | — | — | |
90-179 days past due | — | — | |
180+ days past due | — | — | |
Participant or co-lender in a mortgage | |||
Recorded investment | $ 219,550 | $ 236,066 |
At December 31, 2023, the average size of an individual commercial mortgage loan was $351. The Company's commercial mortgage loan policy is to obtain a first mortgage lien and to require a loan to value ratio of 75% or less at acquisition. The Company's policy for commercial loans is to recognize due and accrued interest income on impaired loans if deemed collectible. Due and accrued interest income deemed collectible on impaired loans over 180 days past due is nonadmitted. As of December 31, 2023, the maximum and minimum rates of interest in the Company's commercial mortgage loan portfolio were 7.85% and 2.85%.
19 |
NOTE 2 – INVESTMENTS, (continued)
In 2023 and 2022, the Company had 16 and 60 commercial loans acquired or with additions to existing loans totaling $4,941 and $33,404 at the maximum rate of interest of 7.85% and 7.35% and the minimum rate of interest of 4.50% and 3.20%, respectively. No other categories of mortgage loans were acquired.
Commercial mortgage loans are evaluated individually for impairment. At December 31, 2023, 2022 and 2021, the Company did not have any impaired mortgage loans or interest income on impaired mortgage loans. The Company had no investment in impaired loans with or without credit losses as of December 31, 2023 and 2022. In 2023 and 2022, the Company had no mortgage loans derecognized as a result of foreclosure.
Offsetting and Netting of Assets and Liabilities
As of December 31, 2023 and 2022, the Company held no call options subject to netting.
Net Investment Income
Major categories of net investment income by class of investment are summarized below.
Years Ended December 31 | |||||||
2023 | 2022 | 2021 | |||||
Income: | |||||||
Bonds | $ 42,348 | $ 38,434 | $ 39,028 | ||||
Common stocks | 142 | 91 | 80 | ||||
Mortgage loans | 9,794 | 10,886 | 11,342 | ||||
Loans on insurance contracts | 1,675 | 1,517 | 1,465 | ||||
Short-term investments | 970 | 311 | 5 | ||||
Derivatives | 526 | (1,346) | 2,348 | ||||
Other investments | 576 | 514 | 487 | ||||
Amortization of interest maintenance reserve | 838 | 1,397 | 1,884 | ||||
Gross investment income | 56,869 | 51,804 | 56,639 | ||||
Total investment expenses | 2,262 | 1,815 | 1,876 | ||||
Net investment income | $ 54,607 | $ 49,989 | $ 54,763 | ||||
The Company had securities sold, redeemed or otherwise disposed of as a result of a callable feature (including make whole call provisions) during 2023 and 2022, of which the total number of CUSIPs sold, disposed or otherwise redeemed was 2 and 35, respectively. The aggregate amount of investment income generated as a result of prepayment penalties and/or acceleration fees collected from called securities was $77 and $333, respectively.
Fair Value Measurements
Included in various investment related lines in the financial statements are certain financial instruments carried at fair value. Other financial instruments are periodically measured at fair value, such as when impaired, or, for certain bonds when carried at the lower of cost or market. The fair value of an asset is the amount at which that asset could be bought or sold in a current transaction between willing parties, that is, other than in a forced or liquidation sale.
Fair values are based on quoted market prices when available. When market prices are not available, fair value is generally estimated using discounted cash flow analyses, incorporating current market inputs for similar financial instruments with comparable terms and credit quality (matrix pricing). In instances where there is little or no market activity for the same or similar instruments, the Company estimates fair value using methods, models and assumptions that management believes market participants would use to determine a current transaction price. These valuation techniques involve some level of management estimation and judgment which becomes significant with increasingly complex instruments or pricing models. Where appropriate, adjustments are included to reflect the risk inherent in a particular methodology, model or input used.
20 |
NOTE 2 – INVESTMENTS, (continued)
The Company’s financial assets and liabilities carried at fair value have been classified, for disclosure purposes, based on a hierarchy defined by Fair Value Measurements as defined under NAIC SAP. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). An asset’s classification is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3). The levels of the fair value hierarchy are as follows:
Level 1 – Values are unadjusted quoted prices for identical assets or liabilities in active markets accessible at the measurement date.
Level 2 – Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads and yield curves.
Level 3 – Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs reflect the Company’s best estimate of what hypothetical market participants would use to determine a transaction price for the asset at the reporting date.
Net asset value (NAV) – Separate account assets are measured at fair value using the NAV per share (or its equivalent) practical expedient and have not been classified in the fair value hierarchy.
The following tables provide information about the Company’s financial assets and liabilities measured and reported at fair value or NAV:
December 31, 2023 | |||||
Level 1 | Level 2 | Level 3 | Net Asset Value | Total | |
Assets at fair value/net asset value | |||||
Derivative assets | |||||
Exchange traded index call options | $ 11,506 | $ — | $ — | $ — | $ 11,506 |
Total derivatives | 11,506 | — | — | — | 11,506 |
Separate account assets | — | — | — | 461,332 | 461,332 |
Total assets at fair value/net asset value | $ 11,506 | $ — | $ — | $ 461,332 | $ 472,838 |
Liabilities at fair value | |||||
Derivative liabilities | |||||
Exchange traded index call options | $ 7,109 | $ — | $ — | $ — | $ 7,109 |
Total liabilities at fair value | $ 7,109 | $ — | $ — | $ — | $ 7,109 |
December 31, 2022 | |||||
Level 1 | Level 2 | Level 3 | Net Asset Value | Total | |
Assets at fair value/net asset value | |||||
Derivative assets | |||||
Exchange traded index call options | $ 3,742 | $ — | $ — | $ — | $ 3,742 |
Total derivatives | $ 3,742 | $ — | $ — | $ — | $ 3,742 |
Separate account assets | $ — | $ — | $ — | $ 392,212 | $ 392,212 |
Total assets at fair value/net asset value | $ 3,742 | $ — | $ — | $ 392,212 | $ 395,954 |
Liabilities at fair value | |||||
Derivative liabilities | |||||
Exchange traded index call options | $ 1,941 | $ — | $ — | $ — | $ 1,941 |
Total liabilities at fair value | $ 1,941 | $ — | $ — | $ — | $ 1,941 |
21 |
NOTE 2 – INVESTMENTS, (continued)
The valuation techniques used to measure the fair values by type of investment in the above table are as follows:
Level 1 – Financial Assets and Liabilities
These assets and liabilities include exchange traded index call options. Unadjusted quoted prices for these securities are provided to the Company by independent pricing services. Derivative asset and liability valuations are based on quoted prices in active markets for identical securities.
Level 2 – Financial Assets and Liabilities
There were no financial assets measured at fair value in Level 2 at December 31, 2023 and 2022.
Level 3 - Financial Assets
There were no financial assets measured at fair value in Level 3 at December 31, 2023 and 2022.
NAV – Financial Assets
Separate account assets represent NAVs as a practical expedient received from fund managers who stand ready to transact at the quoted values. The funds in the separate account assets are considered open-end mutual funds, meaning that the fund is ready to redeem its shares at any time and offers its shares for sale to the public, either through retail outlets or through institutional investors continuously. For institutional funds, NAVs are received daily from fund managers, and the managers stand ready to transact at these quoted amounts. The Company, on behalf of the contract holders, transacts in these funds on a daily basis as part of the separate account trading activity. There are no unfunded commitments in the separate account assets.
The Company had no financial instruments carried at fair value for which the Company used significant unobservable inputs (Level 3) to determine fair value measurements for the years ended December 31, 2023 and 2022.
The tables below reflect the fair values or NAV and book/adjusted carrying values of all admitted assets and liabilities that are financial instruments excluding those accounted for under the equity method. The Company had no financial instruments that were determined it was not practicable to calculate fair value. The Company had no investments measured using NAV instead of fair value in which the investment may be sold below NAV or significant restrictions in the liquidation of the investment held at NAV. The fair values are also categorized into the three-level fair value hierarchy as described previously.
22 |
NOTE 2 – INVESTMENTS, (continued)
December 31, 2023 | |||||||
Fair Value | Book /Adjusted Carrying Value | Level 1 | Level 2 | Level 3 | Net Asset Value | ||
Assets: | |||||||
Bonds | $ 940,894 | $ 1,027,455 | $ — | $ 672,703 | $ 268,191 | $ — | |
Common stocks | 1,710 | 1,710 | — | 1,710 | — | — | |
Mortgage loans | 203,282 | 219,950 | — | — | 203,282 | — | |
Cash, cash equivalents and | |||||||
short-term investments | 10,936 | 10,936 | 10,936 | — | — | — | |
Loans on insurance contracts | 34,609 | 40,679 | — | — | 34,609 | — | |
Derivative assets | 11,506 | 11,506 | 11,506 | — | — | — | |
Other investments | 10,137 | 11,119 | — | 9,271 | 866 | — | |
Investment income due and accrued | 11,037 | 11,037 | 11,037 | — | — | — | |
Separate account assets | — | 461,332 | — | — | — | 461,332 | |
Total financial assets | $ 1,224,111 | $ 1,795,724 | $ 33,479 | $ 683,684 | $ 506,948 | $ 461,332 | |
Liabilities: | |||||||
Deposit-type funds | $ 34,577 | $ 34,707 | $ — | $ — | $ 34,577 | $ — | |
Derivative related liabilities | 7,109 | 7,109 | 7,109 | — | — | — | |
Separate account liabilities | — | 461,332 | — | — | — | 461,332 | |
Total financial liabilities | $ 41,686 | $ 503,148 | $ 7,109 | $ — | $ 34,577 | $ 461,332 |
December 31, 2022 | |||||||
Fair Value | Book /Adjusted Carrying Value | Level 1 | Level 2 | Level 3 | Net Asset Value | ||
Assets: | |||||||
Bonds | $ 872,652 | $ 994,300 | $ — | $ 631,890 | $ 240,762 | $ — | |
Common stocks | 1,712 | 1,712 | — | 1,712 | — | — | |
Mortgage loans | 214,534 | 236,676 | — | — | 214,534 | — | |
Cash, cash equivalents and | |||||||
short-term investments | 24,289 | 24,289 | 24,289 | — | — | — | |
Loans on insurance contracts | 30,068 | 33,163 | — | — | 30,068 | — | |
Derivative assets | 3,742 | 3,742 | 3,742 | — | — | — | |
Other investments | 9,892 | 11,183 | — | 9,028 | 864 | — | |
Investment income due and accrued | 10,281 | 10,281 | 10,281 | — | — | — | |
Separate account assets | — | 392,212 | — | — | — | 392,212 | |
Total financial assets | $ 1,167,170 | $ 1,707,558 | $ 38,312 | $ 642,630 | $ 486,228 | $ 392,212 | |
Liabilities: | |||||||
Deposit-type funds | $ 34,989 | $ 35,218 | $ — | $ — | $ 34,989 | $ — | |
Derivative liabilities | 1,941 | 1,941 | 1,941 | — | — | — | |
Separate account liabilities | — | 392,212 | — | — | — | 392,212 | |
Total financial liabilities | $ 36,930 | $ 429,371 | $ 1,941 | $ — | $ 34,989 | $ 392,212 |
23 |
NOTE 2 – INVESTMENTS, (continued)
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments:
Bonds: The fair values for bonds are based on quoted market prices, where available. For bonds not actively traded, fair values are estimated using values obtained from independent pricing services or internally derived based on expected future cash flows using a current market rate applicable to the yield, credit quality and maturity of the investments. The fair values of loan-backed and structured securities are estimated using values obtained from independent pricing services or internally derived based on expected future cash flows using a current market rate applicable to the yield, credit quality and maturity of the investments. Bonds priced based on observable market information are assigned to Level 2. Bonds priced based on uncorroborated broker quotes, unobservable market inputs or internal valuations are assigned to Level 3.
Common stocks: For stock in FHLB carrying amount approximates fair value and as such is assigned to Level 2.
Mortgage loans: The fair value of commercial mortgage loans is primarily determined by estimating expected future cash flows and discounting the cash flows using current interest rates for similar mortgage loans with similar credit risk.
Cash, cash equivalents and short-term investments, and investment income due and accrued: The carrying amounts for these instruments approximate their fair values due to the short maturity of these investments.
Loans on insurance contracts: The fair values for loans on insurance contracts are estimated using discounted cash flow analysis at interest rates currently offered for similar loans. Loans on insurance contracts with similar characteristics are aggregated for purposes of the calculations.
Derivative assets and liabilities: Exchange traded index call options are classified as Level 1 since the valuation is based on quoted prices in active markets for identical securities.
Other investments: For other investments not actively traded, fair values are estimated using values obtained from independent pricing services or internally derived based on expected future cash flows using a current market rate applicable to the yield, credit quality and maturity of the investments. Other investments priced based on observable market information are assigned to Level 2. Other investments priced based on uncorroborated broker quotes, unobservable market inputs or internal valuations are assigned to Level 3.
Deposit-type funds: Deposit-type funds are valued using discounted cash flow calculations, based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued.
Separate account assets and liabilities: Separate account assets represent NAV as a practical expedient received from fund managers who stand ready to transact at the quoted values. Separate account liabilities are carried at the value of the underlying assets.
The application of NAIC SAP requires a company to evaluate the recoverability of gross deferred tax assets and to establish a valuation allowance if necessary to reduce the gross deferred tax asset to an amount which is more likely than not to be realized (adjusted gross deferred tax asset). Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance the Company considers many factors including: (1) the nature of the deferred tax assets and liabilities; (2) whether they are ordinary or capital; (3) the timing of their reversals; (4) taxable capital gains in prior carry back years as well as projected taxable earnings exclusive of reversing temporary differences and carry forwards; (5) the length of time that carryovers can be utilized; (6) unique tax rules that would impact the utilization of the deferred tax assets; and (7) tax planning strategies that the Company would employ to avoid a tax benefit from expiring unused. Based on an evaluation of the above factors, management believes it more likely than not that the adjusted gross deferred tax assets will be realized.
24 |
NOTE 3 - INCOME TAXES, (continued)
The components of the net deferred tax asset as of December 31, 2023 are as follows:
Ordinary | Capital | Total | |
Gross deferred tax assets | $ 31,268 | $ 35 | $ 31,303 |
Statutory valuation allowance adjustment | — | — | — |
Adjusted gross deferred tax assets | 31,268 | 35 | 31,303 |
Deferred tax assets nonadmitted | 21,307 | 35 | 21,342 |
Subtotal net admitted deferred tax assets | 9,961 | — | 9,961 |
Deferred tax liabilities | (3,813) | — | (3,813) |
Net admitted deferred tax assets | $ 6,148 | $ — | $ 6,148 |
The amount of admitted adjusted gross deferred tax assets under each component of NAIC SAP as of December 31, 2023 is:
Ordinary | Capital | Total | |
Admission calculation components - NAIC SAP | |||
Federal income taxes paid in prior years recoverable through loss carrybacks | $ — | $ — | $ — |
Adjusted gross deferred tax assets expected to be realized | |||
(excluding the amount of deferred tax assets from above) | |||
After application of the threshold limitation | $ 6,148 | $ — | $ 6,148 |
Adjusted gross deferred tax assets expected to be realized following | |||
the balance sheet date | $ 6,148 | $ — | $ 6,148 |
Adjusted gross deferred tax assets allowed per limitation threshold | xxx | xxx | $ 13,089 |
Adjusted gross deferred tax assets offset by gross deferred tax liabilities | $ 3,813 | $ — | $ 3,813 |
Deferred tax assets admitted as the result of application of NAIC SAP | $ 9,961 | $ — | $ 9,961 |
The components of the net deferred tax asset as of December 31, 2022 are as follows:
Ordinary | Capital | Total | |
Gross deferred tax assets | $ 26,291 | $ 22 | $ 26,313 |
Statutory valuation allowance adjustment | — | — | — |
Adjusted gross deferred tax assets | 26,291 | 22 | 26,313 |
Deferred tax assets nonadmitted | 16,326 | 22 | 16,348 |
Subtotal net admitted deferred tax assets | 9,965 | — | 9,965 |
Deferred tax liabilities | (3,876) | — | (3,876) |
Net admitted deferred tax assets | $ 6,089 | $ — | $ 6,089 |
25 |
NOTE 3 - INCOME TAXES, (continued)
The amount of admitted adjusted gross deferred tax assets under each component of NAIC SAP as of December 31, 2022 is:
Ordinary | Capital | Total | |
Admission calculation components - NAIC SAP | |||
Federal income taxes paid in prior years recoverable through loss carrybacks | $ — | $ — | $ — |
Adjusted gross deferred tax assets expected to be realized | |||
(excluding the amount of deferred tax assets from above) | |||
After application of the threshold limitation | $ 6,089 | $ — | $ 6,089 |
Adjusted gross deferred tax assets expected to be realized following | |||
the balance sheet date | $ 6,089 | $ — | $ 6,089 |
Adjusted gross deferred tax assets allowed per limitation threshold | xxx | xxx | $ 16,383 |
Adjusted gross deferred tax assets offset by gross deferred tax liabilities | 3,876 | $ — | $ 3,876 |
Deferred tax assets admitted as the result of application of NAIC SAP | $ 9,965 | $ — | $ 9,965 |
The changes in the components of the net deferred tax asset from December 31, 2022 to December 31, 2023 are as follows:
Ordinary | Capital | Total | |
Gross deferred tax assets | $ 4,977 | $ 13 | $ 4,990 |
Statutory valuation allowance adjustment | — | — | — |
Adjusted gross deferred tax assets | 4,977 | 13 | 4,990 |
Deferred tax assets nonadmitted | 4,981 | 13 | 4,994 |
Subtotal net admitted deferred tax assets | (4) | — | (4) |
Deferred tax liabilities | 63 | — | 63 |
Net deferred tax liability | $ 59 | $ — | $ 59 |
Ordinary | Capital | Total | |
Admission calculation components - NAIC SAP | |||
Federal income taxes paid in prior years recoverable through loss carrybacks | $ — | $ — | $ — |
Adjusted gross deferred tax assets expected to be realized | |||
(excluding the amount of deferred tax assets from above) | |||
After application of the threshold limitation | $ 59 | $ — | $ 59 |
Adjusted gross deferred tax assets expected to be realized following | |||
the balance sheet date | $ 59 | $ — | $ 59 |
Adjusted gross deferred tax assets allowed per limitation threshold | XXX | XXX | $ (3,294) |
Adjusted gross deferred tax assets offset by gross deferred tax liabilities | $ (63) | $ — | $ (63) |
Deferred tax assets admitted as the result of application of NAIC SAP | $ (4) | $ — | $ (4) |
The Company used the following amounts in determining deferred tax asset admissibility:
2023 | 2022 | |
Ratio percentage used to determine recovery period and | ||
Ratio percentage used to determine recovery period and threshold limitation amount | 633 % | 547 % |
Amount of adjusted capital and surplus used to determine | ||
recovery period and threshold limitation above | $ 87,257 | $ 109,220 |
26 |
NOTE 3 - INCOME TAXES, (continued)
The impact of tax planning strategies as of December 31, 2023 is as follows:
Ordinary | Capital | |
Determination of adjusted gross deferred tax assets and net admitted deferred tax | ||
assets by tax character as a percentage | ||
Adjusted Gross DTAs amount from above | $ 31,268 | $ 35 |
Percentage of adjusted gross DTAs by tax character attributable to the impact of | ||
tax planning strategies | — % | — % |
Net Admitted Adjusted Gross DTAs amount from above | $ 9,961 | $ — |
Percentage of net admitted adjusted gross DTAs by tax character admitted because | ||
of the impact of tax planning strategies | — % | — % |
The impact of tax planning strategies as of December 31, 2022 is as follows:
Ordinary | Capital | |
Determination of adjusted gross deferred tax assets and net admitted deferred tax | ||
assets by tax character as a percentage | ||
Adjusted Gross DTAs amount from above | $ 26,291 | $ 22 |
Percentage of adjusted gross DTAs by tax character attributable to the impact of | ||
tax planning strategies | — % | — % |
Net Admitted Adjusted Gross DTAs amount from above | $ 9,965 | $ — |
Percentage of net admitted adjusted gross DTAs by tax character admitted because | ||
of the impact of tax planning strategies | — % | — % |
The changes in the impact of tax planning strategies from December 31, 2022 to December 31, 2023 are as follows:
Ordinary | Capital | |
Determination of adjusted gross deferred tax assets and net admitted deferred tax | ||
assets by tax character as a percentage | ||
Adjusted Gross DTAs amount from above | $ 4,977 | $ 13 |
Percentage of adjusted gross DTAs by tax character attributable to the impact of | ||
tax planning strategies | — % | — % |
Net Admitted Adjusted Gross DTAs amount from above | $ (4) | $ — |
Percentage of net admitted adjusted gross DTAs by tax character admitted because | ||
of the impact of tax planning strategies | — % | — % |
The provision for incurred federal income taxes on earnings is:
Years ended December 31 | |||
2023 | 2022 | 2021 | |
Federal | $ 381 | $ 877 | $ 672 |
Federal income tax on net capital gains | (17) | (64) | 80 |
Federal income tax incurred | $ 364 | $ 813 | $ 752 |
27 |
NOTE 3 - INCOME TAXES, (continued)
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
December 31 | Change | Change | |||
2023 | 2022 | 2021 | from 2022 | from 2021 | |
Deferred tax assets: | |||||
Ordinary | |||||
Discounting of unpaid losses | $ 5 | $ 5 | $ 5 | $ — | $ — |
Unearned premium reserve | 7 | 7 | 8 | — | (1) |
Policyholder reserves | 21,018 | 16,518 | 15,394 | 4,500 | 1,124 |
Deferred acquisition costs | 8,524 | 8,529 | 8,618 | (5) | (89) |
Policyholder dividends accrual | 160 | 144 | 133 | 16 | 11 |
Receivables - nonadmitted | 714 | 517 | 517 | 197 | — |
Other (including items <5% of total | |||||
ordinary tax assets) | 840 | 571 | 541 | 269 | 30 |
Subtotal | 31,268 | 26,291 | 25,216 | 4,977 | 1,075 |
Nonadmitted deferred tax assets | 21,307 | 16,326 | 14,248 | 4,981 | 2,078 |
Admitted ordinary deferred tax assets | 9,961 | 9,965 | 10,968 | (4) | (1,003) |
Capital | |||||
Investments | 35 | 22 | 18 | 13 | 4 |
Subtotal | 35 | 22 | 18 | 13 | 4 |
Nonadmitted | 35 | 22 | 18 | 13 | 4 |
Admitted deferred tax assets | $ 9,961 | $ 9,965 | $ 10,968 | $ (4) | $ (1,003) |
December 31 | Change | Change | |||
2023 | 2022 | 2021 | from 2022 | from 2021 | |
Deferred tax liabilities: | |||||
Ordinary | |||||
Investments | $ 219 | $ 251 | $ 383 | $ (32) | $ (132) |
Deferred and uncollected premium | 2,524 | 2,289 | 2,370 | 235 | (81) |
Policyholder reserves | 652 | 976 | 1,299 | (324) | (323) |
Unearned commissions | 418 | 360 | 324 | 58 | 36 |
Subtotal | 3,813 | 3,876 | 4,376 | (63) | (500) |
Capital | — | — | — | — | — |
Deferred tax liabilities | 3,813 | 3,876 | 4,376 | (63) | (500) |
Net deferred tax assets | $ 6,148 | $ 6,089 | $ 6,592 | $ 59 | $ (503) |
The change in the net admitted deferred tax assets was $59, $(503) and $(464) for the years ended December 31, 2023, 2022 and 2021, respectively. The change in nonadmitted deferred tax assets of $4,994, $2,082 and $(5,358), respectively, was included in change in nonadmitted assets in the Summary of Operations and Changes in Capital and Surplus - Statutory Basis for the years ended December 31, 2023, 2022 and 2021, respectively.
28 |
NOTE 3 - INCOME TAXES, (continued)
The change in net deferred income taxes as of December 31 are as follows:
2023 | 2022 | Change | |
Total gross deferred tax assets | $ 31,303 | $ 26,313 | $ 4,990 |
Total deferred tax liabilities | 3,813 | 3,876 | (63) |
Net deferred tax asset | $ 27,490 | $ 22,437 | 5,053 |
Tax effect of change in unrealized gains | 518 | ||
Change in net deferred income tax | $ 5,571 | ||
2022 | 2021 | Change | |
Total gross deferred tax assets | $ 26,313 | $ 25,234 | $ 1,079 |
Total deferred tax liabilities | 3,876 | 4,376 | (500) |
Net deferred tax asset | $ 22,437 | $ 20,858 | 1,579 |
Tax effect of change in unrealized losses | (556) | ||
Change in net deferred income tax | $ 1,023 | ||
2021 | 2020 | Change | |
Total gross deferred tax assets | $ 25,234 | $ 31,633 | $ (6,399) |
Total deferred tax liabilities | 4,376 | 4,953 | (577) |
Net deferred tax asset | $ 20,858 | $ 26,680 | (5,822) |
Tax effect of change in unrealized gains | 44 | ||
Change in net deferred income tax | $ (5,778) |
29 |
NOTE 3 - INCOME TAXES, (continued)
The provision for federal income taxes incurred is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The significant items causing this difference as of December 31, 2023, 2022 and 2021 were as follows:
2023 | 2022 | 2021 | |
Net gain (loss) from operations before income taxes | $ (20,681) | $ 1,453 | $ 33,648 |
Net realized capital losses before income taxes | (82) | (302) | 384 |
Change in unauthorized reinsurance | (1,232) | (112) | (182) |
Total pre-tax statutory income (loss) | (21,995) | 1,039 | 33,850 |
Change in nonadmitted assets | (937) | (2) | 43 |
IMR amortization | (838) | (1,397) | (1,884) |
Tax-exempt income | (736) | (564) | (868) |
Non-deductible expense | 48 | 78 | 17 |
Other | 9 | 324 | 83 |
Subtotal | (24,449) | (522) | 31,241 |
Statutory tax rate | 0.21 | 0.21 | 0.21 |
Subtotal | (5,134) | (110) | 6,561 |
Tax credits | (73) | (100) | (31) |
Total statutory income taxes | $ (5,207) | $ (210) | $ 6,530 |
Federal and foreign income tax incurred | $ 364 | $ 813 | $ 752 |
Change in deferred income tax | (5,571) | (1,023) | 5,778 |
Total statutory income taxes | $ (5,207) | $ (210) | $ 6,530 |
At December 31, 2023 the Company did not have any net operating loss, net capital and/or alternative minimum tax carryforwards. The amount of federal income taxes which is available for recoupment in the event of future capital losses is $845, $257, and $226 for the tax years of 2021, 2022, and 2023, respectively. There were no deposits admitted under Internal Revenue Code §6033.
The Company joins in a consolidated federal income tax return filed by AMHC with AHC, Ameritas Life and AIP.
The Company has no tax loss contingencies for which it is reasonably possible that the total liability will significantly increase within twelve months of the reporting date.
The Inflation Reduction Act was enacted on August 16, 2022, and included a new corporate alternative minimum tax (CAMT) which is effective for tax years beginning after 2022. The Company is a nonapplicable reporting entity that does not reasonably expect to be an applicable corporation subject to CAMT as a member of a tax-controlled group of corporations in 2023.
30 |
NOTE 4 - INFORMATION CONCERNING PARENT, SUBSIDIARIES, AFFILIATES AND RELATED PARTIES
The Company received no capital contributions from its parent in 2023, 2022 and 2021, respectively.
The Company's variable life and annuity products are distributed through AIC. Policies placed by this affiliate generated commission expense of $90, $70 and $75 for the years ended December 31, 2023, 2022 and 2021, respectively.
The Company had a $25,000 unsecured line of credit from AHC which terminated on May 1, 2023. The Company established a $50,000 unsecured line of credit from ALIC on April 1, 2023, which is due to expire on March 31, 2024. The Company had no balances outstanding at any time during 2023, 2022 and 2021.
The Company reported the following amounts due from/(to) the below listed affiliates at December 31, 2023 and 2022 which were recorded in other admitted assets and payables to affiliates in the Balance Sheets - Statutory Basis. The balances are settled monthly on a net basis.
2023 | 2022 | ||
Ameritas Holding Company | $ (51) | $ (93) | |
Ameritas Investment Company, LLC | (52) | (52) | |
Ameritas Life Insurance Corp. | (2,926) | (3,032) | |
Ameritas Investment Partners, Inc. | 1 | — | |
Total | $ (3,028) | $ (3,177) |
The Company's affiliates provide technical, financial, legal and marketing support to the Company under a general cost sharing agreement. The cost of these services to the Company for the years ended December 31, 2023, 2022 and 2021 was $23,385, $22,058 and $22,191, respectively. In addition, the Company receives investment advisory services from an affiliate. Costs related to this agreement, which are included in investment expenses, totaled $1,353, $1,346 and $1,329 for the years ended December 31, 2023, 2022 and 2021, respectively.
The Company participates in a closed multiple employer non-contributory defined benefit plan (the Pension Plan) sponsored by AHC. Plan assets and liabilities are held in separate accounts of Ameritas Life. The expense for the Pension Plan was paid entirely by AHC.
NOTE 6 - DIVIDEND RESTRICTIONS AND SURPLUS
The Company is subject to regulation by the New York Department, which restricts the advancement of funds to parent and affiliated companies as well as the amount of dividends that may be paid without prior approval. Dividend payments to the stockholder by the Company cannot exceed the lesser of 10% of surplus as of the preceding year-end or the statutory net gain from operations for the previous calendar year, without prior approval from the New York Department. Based on this limitation, the Company would not be able to pay any dividends in 2024 without prior approval. No dividends were paid to parent or affiliated companies in 2023, 2022 or 2021.
Unassigned surplus represents the undistributed and unappropriated amount of surplus at the statement date. The cumulative effect related to the portion of unassigned surplus represented or reduced by each is as follows as of December 31:
2023 | 2022 | 2021 | |||
Unrealized capital gains (losses), net of taxes | $ 978 | $ (972) | $ 1,115 | ||
Nonadmitted asset values | (24,740) | (18,810) | (16,727) | ||
Asset valuation reserve | (12,367) | (11,279) | (9,972) | ||
Liability for reinsurance in unauthorized companies | (2,185) | (953) | (841) |
31 |
NOTE 7 - COMMITMENTS AND CONTINGENCIES
At December 31, 2023, the Company had outstanding agreements to fund mortgages totaling $1,540. In addition at December 31, 2023, the Company has committed to invest $1,000 in bonds in subsequent years. These transactions are in the normal course of operations and are not reflected in the accompanying statutory basis financial statements. The Company’s exposure to credit loss is represented by the contractual notional amount of these instruments. The Company uses the same credit policies and collateral requirements in making commitments and conditional obligations as it does for on-balance sheet instruments.
At December 31, 2023 and 2022, the Company had FHLB lines of credit available up to $947 and $2,337, respectively. The Company had no outstanding balance as of December 31, 2023 and 2022 related to these lines of credit.
Guaranty Funds Assessments
As a condition of doing business, all states and jurisdictions have adopted laws requiring membership in life and health guaranty funds. Member companies are subject to assessments each year based on life, health or annuity premiums collected in the state. In some states these assessments may be applied against premium taxes. For 2023, 2022 and 2021, the charge to operations related to these assessments did not have a material financial impact. The Company recorded no amounts for the estimated liability and related asset for future guaranty fund assessments at December 31, 2023 and 2022, respectively, based on data provided by the National Organization of Life & Health Guaranty Associations.
A reconciliation of assets recognized from paid and accrued premium tax offsets and policy surcharges, which are included in other admitted assets on the Balance Sheets - Statutory Basis as of December 31, 2023 and 2022 are as follows:
2023 | 2022 | |
Assets recognized from paid and accrued premium tax offsets and policy surcharges as of prior year end | $ 5 | $ 5 |
Decreases during the year | ||
Premium tax offset applied | (2) | (2) |
Increases during the year | ||
Assessment paid | 2 | 2 |
Assets recognized from paid and accrued premium tax offsets and policy surcharges as of current year end | $ 5 | $ 5 |
The Company had no liabilities, contingencies and assessments for long-term care insolvencies related guaranty funds liabilities and assets as of December 31, 2023.
Litigation and Regulatory Examination
From time to time, the Company is subject to litigation and regulatory examination in the normal course of business. Management does not believe that the Company is party to any such pending litigation or examination which would have a material adverse effect on its financial condition or results of its operations. There were no claims (per claim or claimant) where amounts were paid to settle related extra contractual obligations or bad faith claims resulting from lawsuits during 2023 and 2022.
Uncollectibility of Assets
The Company had admitted assets of $1,011 and $1,106 at December 31, 2023 and 2022, respectively, in accounts receivable for uninsured plans included in other admitted assets on the Balance Sheets – Statutory Basis. The Company routinely assesses the collectibility of these receivables. Based upon Company experience, less than 1% of the balance may become uncollectible and the potential loss is not material to the Company’s financial condition.
32 |
NOTE 8 - GAIN OR LOSS TO THE REPORTING ENTITY FROM UNINSURED ACCIDENT AND HEALTH PLANS
ASC Plans
The gain (loss) from operations from administrative services contract (ASC) uninsured plans which is reported within general insurance expenses in the Summary of Operations and Changes in Capital and Surplus – Statutory Basis is as follows for the years ended December 31:
2023 | 2022 | 2021 | |||
Gross reimbursement for medical cost incurred | $ 15,520 | $ 13,582 | $ 13,203 | ||
Other income or expenses (including interest paid to or received from plans) | 1,017 | 1,023 | 946 | ||
Gross expenses incurred (claims and administrative) | 16,537 | 14,605 | 14,149 | ||
Net gain (loss) from operations | $ (4) | $ 37 | $ 17 |
The Company leases office space for a field agency office expiring in 2024. This lease includes an allocation of maintenance costs, which varies with levels of operating expense. Rental expense under this lease totaled $71, $71 and $160 in 2023, 2022 and 2021, respectively.
Future minimum lease payments under noncancellable operating leases consisted of the following at December 31, 2023:
Year | Amount |
2024 | $ 157 |
2025 | — |
2026 | — |
2027 | — |
2028 | — |
2029 and thereafter | — |
Total | $ 157 |
NOTE 10 - MANAGING GENERAL AGENTS AND THIRD-PARTY ADMINISTRATORS
The Company has a third-party administrator, for which direct premiums written exceeded 5% of total capital and surplus. The third-party administrator administers group accident and health business, does not have an exclusive contract, and has been granted the authority for premium collection and binding authority. The total amount of direct premiums administered by the third-party administrator was $10,708, $10,771, and $10,951 for the years ended December 31, 2023, 2022 and 2021. The Company had various other third party administrators and managing general agents during these periods, however their direct premiums written did not exceed 5% of total capital and surplus. The total amount of direct premiums written by third party administrators was $15,120, $16,208 and $15,948 for the years ended December 31, 2023, 2022 and 2021.
The Company has evaluated events subsequent to December 31, 2023 and through March 21, 2024, the date the financial statements were available to be issued.
33 |
NOTE 12 - REINSURANCE
In the ordinary course of business, the Company assumes and cedes reinsurance with other insurers and reinsurers. These arrangements provide greater diversification of business and limit the maximum net loss potential on large or hazardous risks. These reinsured risks are treated in the financial statements as risks for which the Company is not liable. Accordingly, policy liabilities and accruals, including incurred but not reported claims, are reported in the financial statements net of reinsurance assumed and ceded. A contingent liability exists with respect to the amount of such reinsurance in the event that the reinsuring companies are unable to meet their obligations. Reinsurance of risk does not discharge the primary liability of the Company, the Company remains contingently liable with respect to any reinsurance ceded, and this contingency would become an actual liability in the event that the assuming company becomes unable to meet its obligation under the reinsurance treaty.
At December 31, 2022, the Company determined that certain balances related to a reinsurer under an order of rehabilitation would most likely be uncollectible, and as such had recorded a contingent liability of $3,572. Per a liquidation order effective September 30, 2023, the Company recaptured this previously ceded business. The impacts from the liquidation order resulted in the recording of a $1,766 recoverable at December 31, 2023 as an estimate of settlement from the reinsurer's estate. This recoverable consists of $1,552 for paid claims and $215 for waived and unearned premiums. Waived and unearned premiums are nonadmitted. Death benefits in the Summary of Operations were reduced by the amount of the recoverable for paid claims, and premiums and annuity considerations for life and accident and health contracts in the Summary of Operations were reduced by the amount of the recoverable for waived and unearned premiums.
The Company conducts reinsurance business with Ameritas Life and other non-affiliated companies. No policies issued by the Company have been reinsured with a foreign company.
The reinsurance premiums, net are included in the premium income, net in the Summary of Operations and Changes in Capital and Surplus - Statutory Basis. Reinsurance premium transactions with affiliated and other non-affiliated companies are summarized as follows:
Years Ended December 31 | |||||
2023 | 2022 | 2021 | |||
Assumed | $ 7,393 | $ 8,784 | $ 10,806 | ||
Ceded | (26,828) | (26,596) | (27,255) | ||
Reinsurance premiums, net | $ (19,435) | $ (17,812) | $ (16,449) |
The following is a summary of affiliated transactions through reinsurance operations:
Years Ended December 31 | |||||
2023 | 2022 | 2021 | |||
Premium income: | |||||
Assumed | $ 5,800 | $ 7,198 | $ 8,967 | ||
Ceded | 2,289 | 2,266 | 2,463 | ||
Benefits to policyholders: | |||||
Assumed | 12,880 | 24,006 | 32,316 | ||
Ceded | 2,287 | 672 | 1,907 | ||
Reserves for life, accident and health policies: | |||||
Assumed | 83,541 | 84,677 | 83,810 | ||
Ceded | 42,693 | 43,724 | 43,549 |
No reinsurance contracts with risk-limiting features were identified for disclosure in any year.
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NOTE 13 - CHANGES IN UNPAID CLAIMS AND CLAIM ADJUSTMENT EXPENSES
The change in the liability for unpaid accident and health claims and claim adjustment expenses, which is reported in reserves for unpaid claims and reserves for life, accident and health policies in the Balance Sheets - Statutory Basis, is summarized as follows:
2023 | 2022 | 2021 | |
Total reserve for unpaid claims at January 1 | $ 19,179 | $ 21,544 | $ 20,162 |
Less reinsurance assumed | (14,949) | (16,663) | (18,489) |
Plus reinsurance ceded | 12,450 | 13,360 | 11,847 |
Direct balance | 16,680 | 18,241 | 13,520 |
Incurred related to: | |||
Current year | 30,170 | 29,374 | 33,343 |
Prior year | 2,448 | (2,870) | 152 |
Total incurred | 32,618 | 26,504 | 33,495 |
Paid related to: | |||
Current year | 25,450 | 24,726 | 25,946 |
Prior year | 3,156 | 3,339 | 2,828 |
Total paid | 28,606 | 28,065 | 28,774 |
Direct balance | 20,692 | 16,680 | 18,241 |
Plus reinsurance assumed | 13,551 | 14,949 | 16,663 |
Less reinsurance ceded | (13,866) | (12,450) | (13,360) |
Total reserve for unpaid claims at December 31 | $ 20,377 | $ 19,179 | $ 21,544 |
As a result of (favorable)/unfavorable settlement of prior years' estimated claims, the provision for claims and claim adjustment expenses (decreased)/increased by $2,448, $(2,870) and $152 for the year ended December 31, 2023, 2022 and 2021, respectively. During 2023 and 2021, unfavorable claim runout for disability products was partially offset by favorable claim runout for group dental products. During 2022, favorable claim runout occurred for both disability income and group dental products. There was no change in methodologies nor assumptions used in calculating the liability for unpaid losses and loss adjustment expenses for the year ended December 31, 2023, 2022, and 2021.
The Company paid and incurred assumed and ceded reinsurance claims as follows:
2023 | 2022 | 2021 | |
Paid assumed reinsurance claims | $ 3,408 | $ 3,807 | $ 4,359 |
Incurred assumed reinsurance claims | $ 2,010 | $ 2,091 | $ 2,532 |
Paid ceded reinsurance claims | $ 1,596 | $ 1,672 | $ 1,511 |
Incurred ceded reinsurance claims | $ 3,012 | $ 762 | $ 3,026 |
Anticipated salvage and subrogation are not included in the Company’s determination of the liability for unpaid claims/losses.
NOTE 14 - RESERVES FOR LIFE, ACCIDENT AND HEALTH POLICIES
The Company waives deduction of deferred fractional premiums due upon death of the insured and returns any portion of the final premium beyond the date of death on traditional business. Surrender values are not provided in excess of legally computed reserves.
Additional premiums are charged for policies issued on substandard lives according to underwriting classification. Reserves for substandard policies are included in the reserves for life, accident and health policies as reflected on the Balance Sheets – Statutory Basis. The corresponding reserves held on such policies are calculated using the same interest rate as standard policies, but employ mortality rates which are multiples of standard mortality.
35 |
NOTE 14 - RESERVES FOR LIFE, ACCIDENT AND HEALTH POLICIES, (continued)
As of December 31, 2023 and 2022, respectively, the Company had $1,276,804 and $271,277 of insurance in force for which the gross premiums are less than the net premiums according to the standard valuation set by the New York Department. Reserves to cover the above insurance totaled $8,501 and $5,856 at December 31, 2023 and 2022, respectively. Included in this total, as of December 31, 2023 and 2022, the Company had $95,527 and $105,701, respectively, of universal life insurance in force for which the guaranteed maturity premiums are less than the CRVM renewal net premiums. Additional reserves for this purpose totaled $4,649 and $5,062, at December 31, 2023 and 2022.
NOTE 15 - ANALYSIS OF ANNUITY RESERVES AND DEPOSIT-TYPE FUNDS BY WITHDRAWAL CHARACTERISTICS
Withdrawal characteristics of annuity reserves and deposit-type funds at December 31 are as follows:
2023 | ||||
General Account | Separate Account Non-guaranteed | Total | % of Total | |
Individual Annuities: | ||||
Subject to discretionary withdrawal: | ||||
With fair value adjustment | $ — | $ — | $ — | — % |
At book value less current surrender | ||||
charge of 5% or more | 1,697 | — | 1,697 | 1.7 % |
At fair value | — | 219 | 219 | 0.2 % |
Total with adjustment or at fair value | 1,697 | 219 | 1,916 | 1.9 % |
At book value without adjustment | ||||
(minimal or no charge) | 94,825 | — | 94,825 | 92.4 % |
Not subject to discretionary withdrawal | 5,876 | — | 5,876 | 5.7 % |
Total gross | 102,398 | 219 | 102,617 | 100.0 % |
Reinsurance ceded | — | — | — | |
Total individual annuity reserves | $ 102,398 | $ 219 | $ 102,617 | |
Amount included in at book value less current surrender charge of 5% or more that will move to at book value without adjustment (minimal or no charge adjustment) in the year after the statement date: | $ 332 | $ — | $ 332 |
36 |
NOTE 15 - ANALYSIS OF ANNUITY RESERVES AND DEPOSIT-TYPE FUNDS BY WITHDRAWAL CHARACTERISTICS, (continued)
2023 | ||||
General Account | Separate Account Non-guaranteed | Total | % of Total | |
Group Annuities: | ||||
Subject to discretionary withdrawal: | ||||
With fair value adjustment | $ 48,894 | $ — | $ 48,894 | 7.0 % |
At book value less current surrender | ||||
charge of 5% or more | — | — | — | — % |
At fair value | — | 408,869 | 408,869 | 58.9 % |
Total with adjustment or at fair value | 48,894 | 408,869 | 457,763 | 65.9 % |
At book value without adjustment | ||||
(minimal or no charge) | 233,808 | — | 233,808 | 33.7 % |
Not subject to discretionary withdrawal | 2,770 | — | 2,770 | 0.4 % |
Total gross | 285,472 | 408,869 | 694,341 | 100.0 % |
Reinsurance ceded | — | — | — | |
Total group annuity reserves | $ 285,472 | $ 408,869 | $ 694,341 | |
Amount included in at book value less current surrender charge of 5% or more that will move to at book value without adjustment (minimal or no charge adjustment) in the year after the statement date: | $ — | $ — | $ — |
Deposit-type Funds (no life contingencies): | ||||
Subject to discretionary withdrawal: | ||||
With fair value adjustment | $ — | $ — | $ — | — % |
At book value less current surrender | ||||
charge of 5% or more | — | — | — | — % |
At fair value | — | 51,902 | 51,902 | 59.6 % |
Total with adjustment or at fair value | — | 51,902 | 51,902 | 59.6 % |
At book value without adjustment | ||||
(minimal or no charge or adjustment) | 1,109 | — | 1,109 | 1.3 % |
Not subject to discretionary withdrawal | 34,107 | — | 34,107 | 39.2 % |
Total gross | 35,216 | 51,902 | 87,118 | 100.1 % |
Reinsurance ceded | 509 | — | 509 | |
Total deposit-type funds | $ 34,707 | $ 51,902 | $ 86,609 | |
Amount included in at book value less current surrender charge of 5% or more that will move to at book value without adjustment (minimal or no charge adjustment) in the year after the statement date: | $ — | $ — | $ — | |
Total annuity reserves and deposit-type funds | $ 422,577 | $ 460,990 | $ 883,567 |
37 |
NOTE 15 - ANALYSIS OF ANNUITY RESERVES AND DEPOSIT-TYPE FUNDS BY WITHDRAWAL CHARACTERISTICS, (continued)
2022 | ||||
General Account | Separate Account Non-guaranteed | Total | % of Total | |
Individual Annuities: | ||||
Subject to discretionary withdrawal: | ||||
With fair value adjustment | $ — | $ — | $ — | 0.0 % |
At book value less current surrender | ||||
charge of 5% or more | 1,311 | — | 1,311 | 1.2 % |
At fair value | — | 173 | 173 | 0.1 % |
Total with adjustment or at fair value | 1,311 | 173 | 1,484 | 1.3 % |
At book value without adjustment | ||||
(minimal or no charge) | 104,315 | — | 104,315 | 93.8 % |
Not subject to discretionary withdrawal | 5,425 | — | 5,425 | 4.9 % |
Total gross | 111,051 | 173 | 111,224 | 100.0 % |
Reinsurance ceded | — | — | — | |
Total individual annuity reserves | $ 111,051 | $ 173 | $ 111,224 | |
Amount included in at book value less current surrender charge of 5% or more that will move to at book value without adjustment (minimal or no charge adjustment) in the year after the statement date: | $ 232 | $ — | $ 232 |
Group Annuities: | ||||
Subject to discretionary withdrawal: | ||||
With fair value adjustment | $ 45,500 | $ — | $ 45,500 | 7.1 % |
At book value less current surrender | ||||
charge of 5% or more | — | — | — | 0.0 % |
At fair value | — | 341,575 | 341,575 | 53.4 % |
Total with adjustment or at fair value | 45,500 | 341,575 | 387,075 | 60.5 % |
At book value without adjustment | ||||
(minimal or no charge) | 249,836 | — | 249,836 | 39.1 % |
Not subject to discretionary withdrawal | 2,852 | — | 2,852 | 0.4 % |
Total gross | 298,188 | 341,575 | 639,763 | 100.0 % |
Reinsurance ceded | — | — | — | |
Total group annuity reserves | $ 298,188 | $ 341,575 | $ 639,763 |
Deposit-type Funds (no life contingencies): | ||||
Subject to discretionary withdrawal: | ||||
At fair value | — | 50,175 | 50,175 | 58.4 % |
Total with adjustment or at fair value | — | 50,175 | 50,175 | 58.4 % |
At book value without adjustment | ||||
(minimal or no charge) | 1,453 | — | 1,453 | 1.7 % |
Not subject to discretionary withdrawal | 34,287 | — | 34,287 | 39.9 % |
Total gross | 35,740 | 50,175 | 85,915 | 100.0 % |
Reinsurance ceded | 522 | — | 522 | |
Total deposit-type funds | $ 35,218 | $ 50,175 | $ 85,393 | |
Amount included in at book value less current surrender charge of 5% or more that will move to at book value without adjustment (minimal or no charge adjustment) in the year after the statement date: | $ — | $ — | $ — | |
Total annuity reserves and deposit-type funds | $ 444,457 | $ 391,923 | $ 836,380 |
38 |
NOTE 15 - ANALYSIS OF ANNUITY RESERVES AND DEPOSIT-TYPE FUNDS BY WITHDRAWAL CHARACTERISTICS, (continued)
The following information is obtained from the applicable Exhibit in the Company’s December 31 Annual Statements and related Separate Accounts Annual Statements, both of which are filed with the New York Department, and are provided to reconcile annuity reserves and deposit-type funds to amounts reported in the Balance Sheets – Statutory Basis as of December 31:
2023 | 2022 | ||
Life and Accident and Health Annual Statement: | |||
Exhibit 5, Annuities Section, Total (net) | $ 386,888 | $ 408,269 | |
Exhibit 5, Supplementary Contracts with Life Contingencies, Total (net) | 982 | 970 | |
Exhibit 7, Deposit-Type Contracts, Line 14, Column 1 | 34,707 | 35,218 | |
422,577 | 444,457 | ||
Separate Accounts Annual Statement: | |||
Exhibit 3, Line 0299999, Column 2 | 409,088 | 341,748 | |
Other contact deposit funds | 51,902 | 50,175 | |
Subtotal | 460,990 | 391,923 | |
Total | $ 883,567 | $ 836,380 |
39 |
NOTE 16 - ANALYSIS OF LIFE ACTUARIAL RESERVES BY WITHDRAWAL CHARACTERISTICS
Withdrawal characteristics of life insurance account value, cash value and reserves as of December 31 are as follows:
2023 | |||||||
General Account | Separate Account Nonguaranteed | ||||||
Account Value | Cash Value | Reserve | Account Value | Cash Value | Reserve | ||
Subject to discretionary withdrawal, surrender values, or policy loans: | |||||||
Universal life | $ 91,878 | $ 91,874 | $ 95,995 | $ — | $ — | $ — | |
Universal life with secondary guarantees | 146,218 | 121,348 | 328,349 | — | — | — | |
Indexed universal life | — | — | — | — | — | — | |
Indexed universal life with secondary guarantees | 108,156 | 90,604 | 103,925 | — | — | — | |
Other permanent cash value life insurance | — | 118,916 | 179,384 | — | — | — | |
Variable universal life | 5,586 | 5,926 | 5,600 | 343 | — | 343 | |
Not subject to discretionary withdrawal or no cash values: | |||||||
Term policies without cash value | XXX | XXX | 99,695 | XXX | XXX | — | |
Accidental death benefits | XXX | XXX | 29 | XXX | XXX | — | |
Disability - active lives | XXX | XXX | 3,118 | XXX | XXX | — | |
Disability - disabled lives | XXX | XXX | 1,281 | XXX | XXX | — | |
Miscellaneous reserves | XXX | XXX | 45,012 | XXX | XXX | — | |
Total gross | 351,838 | 428,668 | 862,388 | 343 | — | 343 | |
Reinsurance ceded | — | — | 135,804 | — | — | — | |
Total life reserves | $ 351,838 | $ 428,668 | $ 726,584 | $ 343 | — | $ 343 |
2022 | |||||||
General Account | Separate Account Nonguaranteed | ||||||
Account Value | Cash Value | Reserve | Account Value | Cash Value | Reserve | ||
Subject to discretionary withdrawal, surrender values, or policy loans: | |||||||
Universal life | $ 94,696 | $ 94,691 | $ 98,830 | $ — | $ — | $ — | |
Universal life with secondary guarantees | 145,079 | 118,600 | 315,681 | — | — | — | |
Indexed universal life | — | — | — | — | — | — | |
Indexed universal life with secondary guarantees | 97,499 | 81,033 | 92,490 | — | — | — | |
Other permanent cash value life insurance | — | 109,566 | 169,531 | — | — | — | |
Variable universal life | 4,898 | 5,180 | 4,907 | 289 | — | 289 | |
Not subject to discretionary withdrawal or no cash values: | |||||||
Term policies without cash value | XXX | XXX | 100,614 | XXX | XXX | — | |
Accidental death benefits | XXX | XXX | 26 | XXX | XXX | — | |
Disability - active lives | XXX | XXX | 3,078 | XXX | XXX | — | |
Disability - disabled lives | XXX | XXX | 1,323 | XXX | XXX | — | |
Miscellaneous reserves | XXX | XXX | 28,144 | XXX | XXX | — | |
Total gross | 342,172 | 409,070 | 814,624 | 289 | — | 289 | |
Reinsurance ceded | — | — | 141,701 | — | — | — | |
Total life reserves | $ 342,172 | $ 409,070 | $ 672,923 | $ 289 | $ — | $ 289 |
40 |
NOTE 16 - ANALYSIS OF LIFE ACTUARIAL RESERVES BY WITHDRAWAL CHARACTERISTICS, (continued)
The following information is obtained from the applicable Exhibit in the Company’s December 31 Annual Statements and related Separate Accounts Annual Statements, both of which are filed with the New York Department, and is provided to reconcile life reserves to amounts reported in the Balance Sheets – Statutory Basis as of December 31:
2023 | 2022 | ||
Life and Accident and Health Annual Statement: | |||
Exhibit 5, Life Insurance Section, Total (net) | $ 679,639 | $ 643,060 | |
Exhibit 5, Accidental Death Benefits Section, Total (net) | 22 | 19 | |
Exhibit 5, Disability - Active Lives Section, Total (net) | 1,047 | 904 | |
Exhibit 5, Disability - Disabled Lives Section, Total (net) | 1,016 | 1,064 | |
Exhibit 5, Miscellaneous Reserves Section, Total (net) | 44,860 | 27,876 | |
726,584 | 672,923 | ||
Separate Accounts Annual Statement: | |||
Exhibit 3, Line 0199999, Column 2 | 343 | 289 | |
343 | 289 | ||
Total | $ 726,927 | $ 673,212 |
NOTE 17 - PREMIUM AND ANNUITY CONSIDERATIONS DEFERRED AND UNCOLLECTED
Deferred and uncollected life insurance premiums and annuity considerations at December 31 are as follows:
2023 | 2022 | |||
Type | Gross | Net of Loading | Gross | Net of Loading |
Ordinary new business | $ 1,205 | $ 445 | $ 1,319 | $ 72 |
Ordinary renewal | 1,689 | 3,184 | 1,469 | 2,752 |
Total | $ 2,894 | $ 3,629 | $ 2,788 | $ 2,824 |
Separate accounts held by the Company offer no investment experience guarantees and relate to individual variable life and annuity policies, group annuity contracts and group funding agreements of a nonguaranteed return nature, as approved by the state of domicile pursuant to the Company’s certificate of authority. The net investment experience of the separate accounts is credited directly to the policyholder and can be positive or negative. The assets and liabilities of the account are legally separated or insulated from other Company assets and liabilities. The assets of the separate account are carried at NAV.
Variable life and annuities provide an incidental death benefit of the greater of account value or premium paid. The Company offers a policy with a step up minimum guaranteed death benefit option and a guaranteed lifetime withdrawal benefit. The minimum guaranteed death benefit reserve and the guaranteed lifetime withdrawal benefit reserve is held in reserves for life, accident and health policies line of the Balance Sheets – Statutory Basis.
The Company utilizes separate accounts to record and account for assets and liabilities for particular lines of business and/or transactions. As of December 31, 2023 and 2022, the Company reported assets and liabilities from variable universal life, variable annuities, funding agreements and group annuities product lines in a separate account. In accordance with the products/transactions recorded within the separate account, assets are considered legally insulated from the general account. As of December 31, 2023 and 2022, the Company’s Separate Accounts included legally insulated assets of $461,332 and $392,212, respectively.
41 |
NOTE 18 - SEPARATE ACCOUNTS, (continued)
The Company does not engage in securities lending transactions within the separate account.
Information regarding the nonguaranteed separate accounts of the Company is as follows:
2023 | 2022 | 2021 | |
For the year ended December 31: | |||
Premiums, considerations or deposits | $ 60,326 | $ 71,469 | $ 59,900 |
At December 31: | |||
Reserves by valuation basis | |||
For accounts with assets at: | |||
Fair value1 | $ 461,332 | $ 392,212 | |
Reserves subject to discretionary withdrawal: | |||
At fair value | $ 461,332 | $ 392,212 | |
Total included in “Separate account liabilities” in the | |||
Balance Sheets – Statutory Basis | $ 461,332 | $ 392,212 |
Following is a reconciliation of net transfers to (from) separate accounts at December 31:
2023 | 2022 | 2021 | |
Transfers as reported in the Statements of Income and | |||
Changes in Surplus of the Separate Accounts Statement: | |||
Transfers to the separate accounts1 | $ 56,393 | $ 67,467 | $ 55,391 |
Transfers from the separate accounts | (49,675) | (79,461) | (98,640) |
Net transfers from separate accounts | 6,718 | (11,994) | (43,249) |
Reconciling adjustments: | |||
Modco reinsurance agreement | 7 | 6 | 21 |
Net transfers from separate accounts in the Summary of | |||
Operations and Changes in Capital and Surplus –Statutory | |||
Basis of the Company | $ 6,725 | $ (11,988) | $ (43,228) |
1There are no assumption reinsurance transfers in any year.
NOTE 19 - RECONCILING ITEMS TO ANNUAL STATEMENT
During 2023, the Company reversed an impairment related to a ceded reinsurer previously under rehabilitation (see Note 12). Certain reclassifications have been made to these financial statements from those filed with the New York Department. The reclassifications detailed below reflect the Summary of Operations impact from the impairment reversal. There was no overall impact to Total Expenses or Surplus as filed.
As Filed | Reclassification Adjustment | Audited Financial Statements | |
Change in reserves for life, accident and health policies | 35,514 | (3,009) | 32,505 |
General insurance expenses | 26,356 | 3,009 | 29,365 |
42 |