Table of Contents

 

Delaware Life Variable Account E

Financial Statements as of and for the Year Ended December 31, 2023 and

Report of Independent Registered Public Accounting Firm

 

 


Table of Contents

DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

Index

December 31, 2023

 

 

     Page(s)  

Report of Independent Registered Public Accounting Firm

     1-2  
Financial Statements:   

Statement of Assets and Liabilities

     3-4  

Statements of Operations

     5-7  

Statements of Changes in Net Assets

     8-11  

Notes to the Financial Statements

     12-18  

 


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Report of Independent Registered Public Accounting Firm

To the Board of Directors of Delaware Life Insurance Company and the Contract Owners of Delaware Life Variable Account E:

Opinion on the Financial Statements

We have audited the accompanying statements of assets and liabilities of the Sub-Accounts listed in the Appendix that comprise Delaware Life Variable Account E (the Separate Account), as of December 31, 2023, the related statements of operations and changes in net assets for the periods indicated in the Appendix, and the related notes (collectively, the financial statements) and the financial highlights for each of the years or periods in the three-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Sub-Accounts as of December 31, 2023, the results of their operations and changes in their net assets for the periods indicated in the Appendix, and the financial highlights for each of the years or periods in the three-year period then ended, in conformity with U.S. generally accepted accounting principles. The financial highlights for each of the years or periods ended on or prior to December 31, 2020 were audited by other independent registered public accountants whose report, dated April 28, 2021, expressed an unqualified opinion on those financial highlights.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Sub-Accounts’ management. Our responsibility is to express an opinion on these 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 Sub-Accounts 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. 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. Such procedures also included confirmation of securities owned as of December 31, 2023, by correspondence with the transfer agent of the underlying mutual funds; when replies were not received from the transfer agent, we performed other auditing procedures. 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. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We have served as the auditor of Delaware Life Insurance Company’s Separate Accounts since 2021.

Hartford, Connecticut

April 23, 2024


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Appendix

MFS U.S. Government Money Market Portfolio Initial Class Sub-Account (MD8) (1)

MFS VIT Total Return Series Initial Class Sub-Account (M07) (1)

MFS VIT II Blended Research Core Equity Portfolio I Class Sub-Account (MB6) (1)

MFS VIT II Global Governments Portfolio I Class Sub-Account (MC4) (1)

MFS VIT II Government Securities Portfolio I Class Sub-Account (M96) (1)

MFS VIT II High Yield Portfolio I Class Sub-Account (MA6) (1)

MFS VIT II Massachusetts Investors Growth Stock Portfolio I Class Sub-Account (MD6) (1)

 

(1)

Statement of assets and liabilities as of December 31, 2023, the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the three-year period then ended. Financial highlights for the years or periods ended on or prior to December 31, 2020 were audited by other independent registered public accountants.


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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

STATEMENT OF ASSETS AND LIABILITIES

DECEMBER 31, 2023

 

 

            Assets      Liabilities         
     Shares      Cost      Investments
at fair value
     Total assets      Payable to
Sponsor
     Net Assets  

MFS U.S. Government Money Market Portfolio Initial Class Sub-Account (MD8)

     643,622      $ 643,622      $ 643,622      $ 643,622      $ 28      $ 643,594  

MFS VIT Total Return Series Initial Class Sub-Account (M07)

     245,909        5,648,382        5,719,834        5,719,834        251        5,719,583  

MFS VIT II Blended Research Core Equity Portfolio I Class Sub-Account (MB6)

     210,702        10,931,187        11,683,409        11,683,409        512        11,682,897  

MFS VIT II Global Governments Portfolio I Class Sub-Account (MC4)

     2,634        28,609        23,210        23,210        1        23,209  

MFS VIT II Government Securities Portfolio I Class Sub-Account (M96)

     57,161        717,499        621,344        621,344        27        621,317  

MFS VIT II High Yield Portfolio I Class Sub-Account (MA6)

     202,492        1,098,764        1,012,460        1,012,460        44        1,012,416  

MFS VIT II Massachusetts Investors Growth Stock Portfolio I Class Sub-Account (MD6)

     948,166        18,537,331        21,456,994        21,456,994        939        21,456,055  

 

The accompanying notes are an integral part of these financial statements.

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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)

DECEMBER 31, 2023

 

 

     Units      Net Assets  

MD8

     31,866      $ 643,594  

M07

     311,484        5,719,583  

MB6

     49,004        11,682,897  

MC4

     770        23,209  

M96

     15,507        621,317  

MA6

     13,629        1,012,416  

MD6

     403,774        21,456,055  

 

The accompanying notes are an integral part of these financial statements.

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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2023

 

 

 

     MD8
Sub-Account
    M07
Sub-Account
    MB6
Sub-Account
 

Income:

      

Dividend income

   $ 28,459     $ 110,564     $ 146,933  

Expenses:

      

Mortality and expense risk charges

     (3,800     (32,364     (62,232

Administrative expense and distribution charges and other

     (1,264     (10,766     (20,684
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     23,395       67,434       64,017  
  

 

 

   

 

 

   

 

 

 

Net realized and change in unrealized gains (losses):

      

Net realized gains (losses) on sale of investments

     —        9,197       40,446  

Realized gain distributions

     —        230,273       825,613  
  

 

 

   

 

 

   

 

 

 

Net realized gains (losses)

     —        239,470       866,059  
  

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation)

     —        197,810       1,609,338  
  

 

 

   

 

 

   

 

 

 

Net realized and change in unrealized gains (losses)

     —        437,280       2,475,397  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) from operations

   $ 23,395     $ 504,714     $ 2,539,414  
  

 

 

   

 

 

   

 

 

 

 

The accompanying notes are an integral part of these financial statements.

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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEAR ENDED DECEMBER 31, 2023

 

 

     MC4
Sub-Account
    M96
Sub-Account
    MA6
Sub-Account
 

Income:

      

Dividend income

   $ —      $ 9,274     $ 55,105  

Expenses:

      

Mortality and expense risk charges

     (139     (3,820     (6,427

Administrative expense and distribution charges and other

     (47     (1,272     (2,140
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (186     4,182       46,538  
  

 

 

   

 

 

   

 

 

 

Net realized and change in unrealized gains (losses):

      

Net realized gains (losses) on sale of investments

     (2,455     (26,112     (47,325

Realized gain distributions

     —        —        —   
  

 

 

   

 

 

   

 

 

 

Net realized gains (losses)

     (2,455     (26,112     (47,325
  

 

 

   

 

 

   

 

 

 

Net change in unrealized appreciation (depreciation)

     3,330       42,975       117,652  
  

 

 

   

 

 

   

 

 

 

Net realized and change in unrealized gains (losses)

     875       16,863       70,327  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) from operations

   $ 689     $ 21,045     $ 116,865  
  

 

 

   

 

 

   

 

 

 

 

The accompanying notes are an integral part of these financial statements.

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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

STATEMENTS OF OPERATIONS (CONTINUED)

FOR THE YEAR ENDED DECEMBER 31, 2023

 

 

     MD6
Sub-Account
 

Income:

  

Dividend income

   $ 58,146  

Expenses:

  

Mortality and expense risk charges

     (118,983

Administrative expense and distribution charges and other

     (39,564
  

 

 

 

Net investment income (loss)

     (100,401
  

 

 

 

Net realized and change in unrealized gains (losses):

  

Net realized gains (losses) on sale of investments

     861,469  

Realized gain distributions

     1,005,953  
  

 

 

 

Net realized gains (losses)

     1,867,422  
  

 

 

 

Net change in unrealized appreciation (depreciation)

     2,387,774  
  

 

 

 

Net realized and change in unrealized gains (losses)

     4,255,196  
  

 

 

 

Net increase (decrease) from operations

   $ 4,154,795  
  

 

 

 

 

The accompanying notes are an integral part of these financial statements.

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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

STATEMENTS OF CHANGES IN NET ASSETS

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

 

 

     MD8 Sub-Account     M07 Sub-Account  
     December 31,     December 31,     December 31,     December 31,  
     2023     2022     2023     2022  

Operations:

        

Net investment income (loss)

   $ 23,395     $ 2,811     $ 67,434     $ 51,624  

Net realized gains (losses)

     —        —        239,470       522,958  

Net change in unrealized appreciation (depreciation)

     —        —        197,810       (1,216,254
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) from operations

     23,395       2,811       504,714       (641,672
  

 

 

   

 

 

   

 

 

   

 

 

 

Contract Owner Transactions:

        

Transfers between Sub-Accounts
(including the Fixed Account), net

     79       229,534       139       (23

Contract Loans

     3,791       (603     (6,724     50,853  

Withdrawals and surrenders

     —        (21,362     (21,792     —   

Charges for life insurance protection

     (12,810     (12,731     (33,633     (33,649

Death benefits

     —        —        (192,820     (207,739
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) from contract owner transactions

     (8,940     194,838       (254,830     (190,558
  

 

 

   

 

 

   

 

 

   

 

 

 

Total increase (decrease) in net assets

     14,455       197,649       249,884       (832,230

Net assets at beginning of year

     629,139       431,490       5,469,699       6,301,929  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net assets at end of year

   $ 643,594     $ 629,139     $ 5,719,583     $ 5,469,699  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

The accompanying notes are an integral part of these financial statements.

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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

 

 

     MB6 Sub-Account     MC4 Sub-Account  
     December 31,     December 31,     December 31,     December 31,  
     2023     2022     2023     2022  

Operations:

        

Net investment income (loss)

   $ 64,017     $ 37,286     $ (186   $ 324  

Net realized gains (losses)

     866,059       2,476,061       (2,455     (1,908

Net change in unrealized appreciation (depreciation)

     1,609,338       (4,679,561     3,330       (7,843
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) from operations

     2,539,414       (2,166,214     689       (9,427
  

 

 

   

 

 

   

 

 

   

 

 

 

Contract Owner Transactions:

        

Transfers between Sub-Accounts
(including the Fixed Account), net

     331       1,932       —        —   

Contract Loans

     (1,439     (5,435     —        —   

Withdrawals and surrenders

     —        (317,124     —        (4,964

Charges for life insurance protection

     (48,228     (51,596     (153     (2,729

Death benefits

     (302,414     (1,283,941     (12,422     —   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) from contract owner transactions

     (351,750     (1,656,164     (12,575     (7,693
  

 

 

   

 

 

   

 

 

   

 

 

 

Total increase (decrease) in net assets

     2,187,664       (3,822,378     (11,886     (17,120

Net assets at beginning of year

     9,495,233       13,317,611       35,095       52,215  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net assets at end of year

   $ 11,682,897     $ 9,495,233     $ 23,209     $ 35,095  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

The accompanying notes are an integral part of these financial statements.

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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

 

 

     M96 Sub-Account     MA6 Sub-Account  
     December 31,     December 31,     December 31,     December 31,  
     2023     2022     2023     2022  

Operations:

        

Net investment income (loss)

   $ 4,182     $ 10,228     $ 46,538     $ 60,217  

Net realized gains (losses)

     (26,112     (33,689     (47,325     (59,094

Net change in unrealized appreciation (depreciation)

     42,975       (95,847     117,652       (197,246
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) from operations

     21,045       (119,308     116,865       (196,123
  

 

 

   

 

 

   

 

 

   

 

 

 

Contract Owner Transactions:

        

Transfers between Sub-Accounts
(including the Fixed Account), net

     (15     (3     —        (228,616

Contract Loans

     (3,189     (225     (547     (97,941

Withdrawals and surrenders

     (45,904     (46,256     (199,355     (5,770

Charges for life insurance protection

     (14,989     (14,252     (12,038     (13,184

Death benefits

     (35,045     (131,613     (65,872     (378,814
  

 

 

   

 

 

   

 

 

   

 

 

 

Net increase (decrease) from contract owner transactions

     (99,142     (192,349     (277,812     (724,325
  

 

 

   

 

 

   

 

 

   

 

 

 

Total increase (decrease) in net assets

     (78,097     (311,657     (160,947     (920,448

Net assets at beginning of year

     699,414       1,011,071       1,173,363       2,093,811  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net assets at end of year

   $ 621,317     $ 699,414     $ 1,012,416     $ 1,173,363  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

The accompanying notes are an integral part of these financial statements.

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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

 

 

     MD6 Sub-Account  
     December 31,     December 31,  
     2023     2022  

Operations:

    

Net investment income (loss)

   $ (100,401   $ (141,127

Net realized gains (losses)

     1,867,422       3,895,137  

Net change in unrealized appreciation (depreciation)

     2,387,774       (8,627,607
  

 

 

   

 

 

 

Net increase (decrease) from operations

     4,154,795       (4,873,597
  

 

 

   

 

 

 

Contract Owner Transactions:

    

Transfers between Sub-Accounts
(including the Fixed Account), net

     3,306       2,959  

Contract Loans

     (209,032     (69,124

Withdrawals and surrenders

     (46,415     (180,164

Charges for life insurance protection

     (125,440     (125,280

Death benefits

     (1,074,431     (1,221,703
  

 

 

   

 

 

 

Net increase (decrease) from contract owner transactions

     (1,452,012     (1,593,312
  

 

 

   

 

 

 

Total increase (decrease) in net assets

     2,702,783       (6,466,909

Net assets at beginning of year

     18,753,272       25,220,181  
  

 

 

   

 

 

 

Net assets at end of year

   $ 21,456,055     $ 18,753,272  
  

 

 

   

 

 

 

 

The accompanying notes are an integral part of these financial statements.

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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

NOTES TO FINANCIAL STATEMENTS

FOR THE YEAR ENDED DECEMBER 31, 2023

 

1. BUSINESS AND ORGANIZATION

Delaware Life Variable Account E (the “Variable Account”) is a separate account of Delaware Life Insurance Company (the “Sponsor”). The Variable Account was established on December 3, 1985 as a funding vehicle for the single premium variable life insurance contracts (the “Contracts”) issued by the Sponsor. The Variable Account is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended, as a unit investment trust existing in accordance with the regulations of the Delaware Insurance Department and is an investment company. Accordingly, the Variable Account follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 Financial Services – Investment Companies.

The assets of the Variable Account are divided into “Sub-Accounts”. Each Sub-Account is invested in shares of a specific mutual fund (collectively the “Funds”), or series thereof, registered under the Investment Company Act of 1940, as amended. The contract owners of the Variable Account direct the deposits into the Sub-Accounts of the Variable Account.

Under applicable insurance law, the assets and liabilities of the Variable Account are clearly identified and distinguished from the Sponsor’s other assets and liabilities. Assets applicable to the Variable Account are not chargeable with liabilities arising out of any other business the Sponsor may conduct.

There were no Sub-Accounts held by the contract owners of the Variable Account that had name changes, commenced, merged or were closed during the current year.

There were no Sub-Accounts held by the contract owners of the Variable Account with commencement dates earlier than the past five years, but for which the first activity occurred within the last five years. 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires the Sponsor’s management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.

Investment Valuation and Transactions

Investments made in mutual funds are carried at fair value and are valued at their closing net asset value as determined by the respective mutual fund, which in turn value their investments at fair value, as of December 31, 2023. Transactions are recorded on a trade date basis. Realized gains and losses on sales of investments are determined on the first in, first out basis. Dividend income and realized gain distributions are reinvested in additional fund shares and recognized on the ex-dividend date.

 

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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Units

The number of units credited is determined by dividing the dollar amount allocated to a Sub-Account by the unit value for that Sub-Account for the period during which the purchase payment was received. The unit value for each Sub-Account is established at $10.00 for the first period of that Sub-Account and is subsequently measured based on the performance of the investments and the contract charges selected by the contract holder, as discussed in Note 5.

Purchase Payments

Upon issuance of new contracts, the initial purchase payment is credited to the contract in the form of units. All subsequent purchase payments are applied using the unit values for the period during which the purchase payment is received.

Transfers

Transfers between Sub-Accounts requested by contract owners are recorded in the new Sub-Account upon receipt of the redemption proceeds at the net asset value at the time of receipt. In addition, transfers can be made between the Sub-Accounts and the “Fixed Account”. The Fixed Account is part of the general account of the Sponsor in which purchase payments or contract values may be allocated or transferred.

Withdrawals and Surrender

The contract owner may surrender the contract and receive the contract cash surrender value at any time while the insured is living and the contract is in force. The cash surrender value will vary in accordance with investment performance of the Sub-Accounts and is equal to the contact account value less any contract loan and any applicable surrender charge. Partial surrenders are not permitted.

Death Benefits

The amount of death benefit is equal to the greater of the guaranteed insurance amount or the adjusted insurance amount. The guaranteed insurance amount is based on the amount of the premium payment and the age of the insured on the contract date plus any age rating using the 1980 Commissioners’ Standard Ordinary Mortality Table C and an assumed interest rate of six percent. The adjusted insurance amount is a stated multiple of the contract’s account value. The multiple is based on the insured’s age (excluding any age rating) at the beginning of the contract year. Representative multiples are between 2.50 and 1.00 based on the corresponding insured age of 0 to 95. The amount of death benefit is determined as of the end of the valuation period during which the death of the insured occurs.

Contract Loans

Contract holders are permitted to borrow against the cash value of their accounts. The loan proceeds are deducted from the Variable Account and recorded in the Sponsor’s general account as an asset.

Federal Income Taxes

The operations of the Variable Account are part of the operations of the Sponsor and are not taxed separately. The Sponsor qualifies for the federal income tax treatment granted to life insurance companies under Subchapter L of the Internal Revenue Code (the “Code”). Under existing federal income tax law, investment income and realized gain distributions earned by the Variable Account on contract owner reserves are not taxable, and therefore, no provision has been made for federal income taxes. In the event of a change in applicable tax law, the Sponsor will review this policy and if necessary a provision may be made in future years.

 

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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Use of Estimates

The preparation of financial statements in conformity with GAAP requires Sponsor’s management to make estimates and assumptions that affect the reported amounts of income and expenses during the period. The most significant estimate is the fair value measurement of investments. Actual results could vary from the amounts derived from Sponsor management’s estimates.

Subsequent events

The Sponsor’s management has evaluated events subsequent to December 31, 2023, noting that there are no subsequent events requiring accounting adjustments or disclosure.

3. FAIR VALUE MEASUREMENTS

The Sub-Accounts’ investments are carried at fair value. Fair value is an exit price, representing the amount that would be received from a sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value (i.e., Level 1, 2 and 3). Level 1 inputs are observable inputs that reflect quoted prices for identical assets or liabilities in active markets that the Variable Account has the ability to access at the measurement date. Level 2 inputs are observable inputs, other than quoted prices included in Level 1, for the asset or liability or prices for similar assets and liabilities. Level 3 inputs are unobservable inputs reflecting the reporting entity’s estimates of the assumptions that market participants would use in pricing the asset or liability. Topic 820 requires that a fair value measurement technique include an adjustment for risks inherent in a particular valuation technique (such as a pricing model) and/or the risks inherent in the inputs to the model, if market participants would also include such an adjustment.

The Variable Account has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into the three-level hierarchy described above. If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.

The Variable Account uses the Funds’ closing net asset value to determine the fair value of its Sub-Accounts. As of December 31, 2023, the net assets held in the Variable Account were categorized as Level 1 assets under the Topic 820 hierarchy levels. There were no Level 2 or 3 investments in the Variable Account during the year ended December 31, 2023. There were no transfers between levels during the year ended December 31, 2023.

 

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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

 

 

4. RELATED-PARTY TRANSACTIONS

The Sponsor provides administrative services necessary for the operation of the Variable Account. The Sponsor absorbs all organizational expenses including the fees of registering the Variable Account and its contracts for distribution under federal and state securities laws.

5. CONTRACT CHARGES

Mortality and expense risk charges

Charges for mortality and expense risks are based on the value of the Sub-Account and are deducted daily from the Variable Account to cover the risks assumed by the Sponsor. The deductions are transferred periodically to the Sponsor. At December 31, 2023, the deduction is at an effective annual rate of 0.60%. The Mortality and expense risk charges are reported in the Statements of Operations.

Administration charges

An account administration fee is deducted from the Variable Account to reimburse the Sponsor for certain administrative expenses. The administrative charge is deducted daily at an effective annual rate of 0.20% based on the value of the contract. These charges are reported in the Statements of Operations.

Charges for Life Insurance Protection

On the monthly anniversary of the contract, the cost of insurance is deducted from each Sub-Account through redemption of units to cover the anticipated cost of providing life insurance. The charge is based on the length of time a policy has been in force and other factors, including issue age, sex and rating class of the insured, and will not exceed the guaranteed maximum monthly cost of insurance rates based on the 1980 Commissioner’s standard ordinary smoker and non-smoker mortality rates. These charges are reported in the Statements of Changes in Net Assets.

Premium Taxes

A deduction, when applicable, is made for premium taxes or similar state or local taxes. It is currently the policy of the Sponsor to make this deduction from the premium payment.

6. INVESTMENT PURCHASES AND SALES

The cost of purchases and proceeds from sales of investments for the year ended December 31, 2023 were as follows:

 

     Purchases      Sales  

M07

   $ 341,069      $ 298,061  

MB6

     976,061        437,877  

MC4

     —         12,761  

M96

     9,377        104,326  

MA6

     55,159        286,415  

MD6

     1,065,471        1,611,405  

MD8

     32,408        17,939  

 

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Table of Contents

DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

 

7. CHANGES IN UNITS OUTSTANDING

The changes in units outstanding for the year ended December 31, 2023 were as follows:

 

     Units
Issued
     Units
Redeemed
     Net
Increase
(Decrease)
 

MD8

     525        981        (456

M07

     1,899        16,784        (14,885

MB6

     160        1,938        (1,778

MC4

     1        413        (412

M96

     1,224        3,753        (2,529

MA6

     1,008        4,994        (3,986

MD6

     6,344        36,727        (30,383

The changes in units outstanding for the year ended December 31, 2022 were as follows:

 

     Units
Issued
     Units
Redeemed
     Net
Increase
(Decrease)
 

MD8

     12,035        1,962        10,073  

M07

     2,998        13,919        (10,921

MB6

     3,498        12,066        (8,568

MC4

     —         262        (262

M96

     133        4,792        (4,659

MA6

     127        10,416        (10,289

MD6

     6,064        39,585        (33,521

8. TAX DIVERSIFICATION REQUIREMENTS

Under the provisions of Section 817(h) of the Code, a variable life contract, other than a pension plan contract, is not treated as a life contract for federal tax purposes for any period in which the investments of the segregated asset account on which the contract is based are not adequately diversified. The Code provides that the “adequately diversified” requirement may be met if the underlying investments satisfy either a statutory safe harbor test or diversification requirements set forth in regulations issued by the Secretary of Treasury. The Sponsor believes that the Variable Account satisfies the current requirements of the regulations, and it intends that the Variable Account will continue to meet such requirements.

 

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Table of Contents

DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

 

9. FINANCIAL HIGHLIGHTS

 

     At December 31,      For the years ended December 31,  
     Units      Unit
Value4
     Net
Assets
     Investment
Income
Ratio1
    Expense
Ratio2
    Total
Return3
 

MD8

               

2023

     31,866      $ 20.1980      $ 643,594        4.48     0.80     3.76

2022

     32,322        19.4654        629,139        1.28       0.80       0.37  

2021

     22,249        19.3935        431,490        —        0.80       (0.79

2020

     23,528        19.5488        459,945        0.26       0.80       (0.58

2019

     31,580        19.6623        620,929        1.57       0.80       0.83  

M07

               

2023

     311,484        18.3632        5,719,583        2.05       0.80       9.57  

2022

     326,369        16.7596        5,469,699        1.72       0.80       (10.30

2021

     337,290        18.6840        6,301,929        1.68       0.80       13.21  

2020

     408,455        16.5040        6,741,130        2.31       0.80       8.94  

2019

     417,215        15.1495        6,320,605        2.34       0.80       19.43  

MB6

               

2023

     49,004        238.4184        11,682,897        1.41       0.80       27.51  

2022

     50,782        186.9835        9,495,233        1.13       0.80       (16.67

2021

     59,350        224.3919        13,317,611        1.14       0.80       28.50  

2020

     66,753        174.6266        11,656,764        1.65       0.80       14.42  

2019

     70,215        152.6154        10,715,939        1.50       0.80       28.15  

MC4

               

2023

     770        30.1386        23,209        —        0.80       1.51  

2022

     1,182        29.6898        35,095        1.55       0.80       (17.89

2021

     1,444        36.1584        52,215        2.45       0.80       (8.16

2020

     1,922        39.3728        75,656        1.08       0.80       9.72  

2019

     4,040        35.8836        144,977        2.73       0.80       5.24  

M96

               

2023

     15,507        40.0674        621,317        1.46       0.80       3.32  

2022

     18,036        38.7799        699,414        2.05       0.80       (12.95

2021

     22,695        44.5504        1,011,071        2.13       0.80       (2.67

2020

     31,660        45.7716        1,449,110        2.89       0.80       5.53  

2019

     38,301        43.3716        1,661,192        3.01       0.80       5.68  

MA6

               

2023

     13,629        74.2850        1,012,416        5.14       0.80       11.52  

2022

     17,615        66.6131        1,173,363        5.13       0.80       (11.22

2021

     27,904        75.0354        2,093,811        4.95       0.80       2.66  

2020

     28,282        73.0881        2,067,063        5.82       0.80       4.25  

2019

     24,802        70.1081        1,738,854        5.44       0.80       13.90  

 

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DELAWARE LIFE VARIABLE ACCOUNT E

(A Separate Account of Delaware Life Insurance Company)

9. FINANCIAL HIGHLIGHTS (CONTINUED)

 

     At December 31,      For the years ended December 31,  
     Units      Unit
Value4
     Net
Assets
     Investment
Income
Ratio1
    Expense
Ratio2
    Total
Return3
 

MD6

               

2023

     403,774      $ 53.1411      $ 21,456,055        0.29     0.80     23.02

2022

     434,157        43.1956        18,753,272        0.10       0.80       (19.90

2021

     467,678        53.9264        25,220,181        0.25       0.80       24.97  

2020

     470,070        43.1507        20,283,883        0.46       0.80       21.55  

2019

     486,946        35.4998        17,286,511        0.58       0.80       38.84  

 

1 

Represents the dividends, excluding distributions of capital gains, received by the Sub-Account from the underlying mutual fund, which are net of management fees assessed by the fund manager, divided by the average net assets. The ratio excludes those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Sub-Account is affected by the timing of the declaration of dividends by the underlying mutual fund in which the Sub-Accounts invest.

2 

Ratio represents the contract expenses of the Sub-Account, consisting primarily of mortality and expense charges and administrative expense charges. The ratio includes only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying mutual fund are excluded.

3 

Ratio represents the total return for the year indicated, including changes in the value of the underlying mutual fund. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in reduction in the total return presented. The total return is calculated for each period indicated or from the effective date through the end of the reporting period.

4 

These unit values are not a direct calculation of net assets over the number of units allocated to the Sub-Account.

 

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Table of Contents

Delaware Life Insurance Company

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

Report of Independent Auditors

Statutory Financial Statements as of

December 31, 2023 and 2022 and for the Years Ended

December 31, 2023, 2022 and 2021


Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

 

 

 

TABLE OF CONTENTS

  
     Page  

Report of Independent Auditors

     1  

Statutory Statements of Admitted Assets, Liabilities, and Capital and Surplus

     4  

Statutory Statements of Operations

     6  

Statutory Statements of Changes in Capital and Surplus

     7  

Statutory Statements of Cash Flow

     8  

Notes to the Statutory Financial Statements

     10  


Table of Contents

Independent Auditors’ Report

The Board of Directors

Delaware Life Insurance Company:

Opinions

We have audited the financial statements of Delaware Life Insurance Company (the Company), which comprise the statutory statements of admitted assets, liabilities, and capital and surplus as of December 31, 2023 and 2022, and the related statutory statements of operations, changes in capital and surplus, and cash flow for each of the years in the three-year period ended December 31, 2023, and the related notes to the financial statements.

Unmodified Opinion on Statutory Basis of Accounting

In our opinion, the accompanying 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 flow for each of the years in the three-year period ended December 31, 2023 in accordance with accounting practices prescribed or permitted by the Delaware Department of Insurance described in Note 2.

Adverse Opinion on U.S. Generally Accepted Accounting Principles

In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles section of our report, the financial statements do not present fairly, in accordance with U.S. generally accepted accounting principles, 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 years in the three-year period ended December 31, 2023.

Basis for Opinions

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the 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 audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles

As described in Note 2 to the financial statements, the financial statements are prepared by the Company using accounting practices prescribed or permitted by the Delaware Department of Insurance, which is a basis of accounting other than U.S. generally accepted accounting principles. Accordingly, the financial statements are not intended to be presented in accordance with U.S. generally accepted accounting principles. The effects on the financial statements of the variances between the statutory accounting practices described in Note 2 and U.S. generally accepted accounting principles, although not reasonably determinable, are presumed to be material and pervasive.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting practices prescribed or permitted by the Delaware Department of Insurance. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the 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 financial statements are issued.


Table of Contents

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ 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 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 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 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 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.

/s/ KPMG LLP

Hartford, Connecticut

April 22, 2024

 

2


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3


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DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES, AND CAPITAL AND SURPLUS

AS OF DECEMBER 31, 2023 AND 2022 (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

 

 

 

Admitted Assets    2023      2022  

General Account assets:

     

Bonds

   $ 18,134,460      $ 14,325,528  

Preferred stocks

     802,140        1,121,391  

Common stocks

     162,439        303,211  

Mortgage loans

     1,721,502        1,387,817  

Contract loans

     351,919        353,608  

Derivatives

     575,141        609,047  

Other invested assets

     1,493,229        1,234,843  

Mortgage escrow funds

     16,129        9,140  

Receivables for securities

     127,334        286,580  

Cash, cash equivalents and short-term investments

     3,859,773        3,141,676  
  

 

 

    

 

 

 

Total cash and invested assets

     27,244,066        22,772,841  

Accrued investment income

     480,307        344,590  

Amounts recoverable from reinsurers

     16,753        11,343  

Other amounts receivable under reinsurance contracts

     9,021        2,426  

Reinsurance deposit asset

     76,063        174,387  

Net deferred tax asset

     176,589        39,949  

Receivables from parent, subsidiaries and affiliates

     185,277        124,534  

Admitted disallowed interest maintenance reserve

     140,735        —   

Other assets

     34,245        29,503  
  

 

 

    

 

 

 

Total General Account assets

     28,363,056        23,499,573  

Separate Account assets

     17,727,809        17,680,811  
  

 

 

    

 

 

 

Total admitted assets

   $ 46,090,865      $ 41,180,384  
  

 

 

    

 

 

 

 

(continued)

 

4


Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

STATUTORY STATEMENTS OF ADMITTED ASSETS, LIABILITIES, AND CAPITAL AND SURPLUS

AS OF DECEMBER 31, 2023 AND 2022 (IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

 

 

 

Liabilities and Capital and Surplus    2023     2022  

General Account liabilities:

    

Aggregate reserve for life and annuity contracts

   $ 21,040,253     $ 17,305,820  

Liability for deposit-type contracts

     1,979,497       1,562,961  

Contract claims

     32,738       37,646  

Other amounts payable on reinsurance

     147,653       15,233  

Interest maintenance reserve

     —        16,243  

Asset valuation reserve

     282,462       147,618  

Funds held under reinsurance treaties with unauthorized and certified reinsurers

     260,713       256,195  

Funds held under coinsurance

     106,269       191,505  

Commissions to agents due or accrued

     38,164       13,135  

General expenses due or accrued

     29,468       34,017  

Transfers from Separate Accounts due or (accrued), net

     (195,531     (113,545

Payable for securities

     1,122,769       1,152,825  

Payable to parent, subsidiaries, and affiliates

     59,679       27,149  

Derivatives

     435,850       458,298  

Current federal and foreign income taxes

     81,263       23,631  

Remittances and items not allocated

     232,460       66,421  

Derivative collateral payable

     64,282       —   

Other liabilities

     82,818       59,777  
  

 

 

   

 

 

 

Total General Account liabilities

     25,800,807       21,254,929  

Separate Account liabilities

     17,727,809       17,680,809  
  

 

 

   

 

 

 

Total liabilities

     43,528,616       38,935,738  

Capital and surplus:

    

Common capital stock, $1,000 par value – 10,000 shares authorized; 6,437 shares issued and outstanding

     6,437       6,437  

Surplus notes

     390,213       390,213  

Gross paid in and contributed surplus

     1,590,920       1,475,920  

Unassigned funds

     433,944       372,076  

Special surplus funds

     140,735       —   
  

 

 

   

 

 

 

Total surplus

     2,555,812       2,238,209  
  

 

 

   

 

 

 

Total capital and surplus

     2,562,249       2,244,646  
  

 

 

   

 

 

 

Total liabilities, capital and surplus

   $ 46,090,865     $ 41,180,384  
  

 

 

   

 

 

 

See accompanying notes to statutory financial statements.

 

5


Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

STATUTORY STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 (IN THOUSANDS)

 

 

 

     2023     2022     2021  

Premiums and other revenues:

      

Premiums and annuity considerations

   $ 5,446,325     $ 2,436,071     $ 2,292,669  

Considerations for supplementary contracts with life contingencies

     33,719       26,204       29,963  

Net investment income

     1,243,794       1,117,986       891,589  

Commissions and expense allowances on reinsurance ceded

     103,237       104,874       108,257  

Reserve adjustments on reinsurance ceded

     (964,497     (897,173     (1,306,501

Income from fees associated with investment management, administration and contract guarantees from Separate Accounts

     312,625       336,073       377,490  

Investment (expense) on reinsurance deposit asset

     (261,142     (154,844     (416,413

Reinsurance experience refund

     54,437       105,218       116,031  

Assets transferred on coinsurance

     (118,857     —        —   

Other income

     62,955       51,986       60,852  
  

 

 

   

 

 

   

 

 

 

Total premiums and other revenues

     5,912,596       3,126,395       2,153,937  

Benefits paid or provided:

      

Death benefits

     131,919       154,335       176,117  

Annuity benefits

     381,780       345,465       324,008  

Health benefits

     51       1,639       1,086  

Surrender benefits and withdrawals for life contracts

     2,039,161       1,295,060       1,423,589  

Interest and adjustments on contract or deposit-type contract funds

     53,499       60,691       23,609  

Payments on supplementary contracts with life contingencies

     43,820       45,362       46,079  

Increase in aggregate reserves for life and accident and health contracts

     3,734,433       1,245,954       862,341  
  

 

 

   

 

 

   

 

 

 

Total benefits paid or provided

     6,384,663       3,148,506       2,856,829  

Commissions on premiums, annuity considerations and deposit-type contract funds

     115,453       188,091       286,433  

Commissions and expense allowances on reinsurance assumed

     116       118       117  

General insurance expenses

     296,678       278,295       239,504  

Insurance taxes, licenses and fees, excluding federal income taxes

     6,903       6,119       5,995  

Net transfers from Separate Accounts net of reinsurance

     (983,184     (833,857     (1,231,685

Investment (income) expense on funds held

     (180,512     47,393       (241,024

Expense (income) under hedging program with affiliate

     (49,423     —        —   

Other expenses (income)

     382       63       (14
  

 

 

   

 

 

   

 

 

 

Total benefits and expenses

     5,591,076       2,834,728       1,916,155  

Gain from operations before federal income tax expense and net realized capital gains (losses)

     321,520       291,667       237,782  

Federal income tax expense (benefit), excluding tax on capital gains (losses)

     183,751       46,564       (3,242
  

 

 

   

 

 

   

 

 

 

Gain from operations before net realized capital gains (losses)

     137,769       245,103       241,024  

Net realized capital gains (losses) less capital gains tax and transfers to the interest maintenance reserve

     7,207       14,186       (25,644
  

 

 

   

 

 

   

 

 

 

Net income

   $ 144,976     $ 259,289     $ 215,380  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to statutory financial statements.

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

STATUTORY STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 (IN THOUSANDS)

 

 

 

    Capital
stock
    Surplus
notes
    Gross paid-
in and
contributed
surplus
    Unassigned
funds
    Special
surplus
funds
    Total  

Balances at December 31, 2020

  $ 6,437     $ 557,500     $ 777,939     $ 256,670     $ —      $ 1,598,546  

Net income

    —        —        —        215,380       —        215,380  

Change in net unrealized investment gains (losses), net of taxes

    —        —        —        (252,870     —        (252,870

Change in net unrealized foreign exchange capital gain (loss)

    —        —        —        (4,216     —        (4,216

Change in net deferred income tax

    —        —        —        (9,504     —        (9,504

Change in nonadmitted assets

    —        —        —        33,569       —        33,569  

Change in liability for reinsurance in unauthorized and certified companies

    —        —        —        649       —        649  

Change in asset valuation reserve

    —        —        —        56,244       —        56,244  

Change in surplus notes

    —        (167,287     —        —        —        (167,287

Paid in capital

    —        —        647,981       —        —        647,981  

Dividends paid to stockholders

    —        —        —        (200,000     —        (200,000

Prior period adjustment net of tax

    —        —        —        (7,023     —        (7,023

Investment income on funds held - unrealized

    —        —        —        165,444       —        165,444  

Other capital changes

    —        —        —        (571     —        (571
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at December 31, 2021

  $ 6,437     $ 390,213     $ 1,425,920     $ 253,772     $ —      $ 2,076,342  

Net income

    —        —        —        259,289       —        259,289  

Change in net unrealized investment gains (losses), net of taxes

    —        —        —        (345,740     —        (345,740

Change in net unrealized foreign exchange capital gain (loss)

    —        —        —        (10,232     —        (10,232

Change in net deferred income tax

    —        —        —        26,762       —        26,762  

Change in nonadmitted assets

    —        —        —        2,654       —        2,654  

Change in asset valuation reserve

    —        —        —        66,457       —        66,457  

Paid in capital

    —        —        50,000       —        —        50,000  

Dividends paid to stockholders

    —        —        —        (100,000     —        (100,000

Prior period adjustment net of tax

    —        —        —        33,174       —        33,174  

Investment income on funds held - unrealized

    —        —        —        185,983       —        185,983  

Other capital changes

    —        —        —        (43     —        (43
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at December 31, 2022

  $ 6,437     $ 390,213     $ 1,475,920     $ 372,076     $ —      $ 2,244,646  

Net income

    —        —        —        144,976       —        144,976  

Change in net unrealized investment gains (losses), net of taxes

    —        —        —        42,836       —        42,836  

Change in net unrealized foreign exchange capital gain (loss)

    —        —        —        4,621       —        4,621  

Change in net deferred income tax

    —        —        —        141,057       —        141,057  

Change in nonadmitted assets

    —        —        —        (13,668     —        (13,668

Change in asset valuation reserve

    —        —        —        (134,844     —        (134,844

Paid in capital

    —        —        115,000       —        —        115,000  

Prior period adjustment net of tax

    —        —        —        3,780       —        3,780  

Investment income on funds held - unrealized

    —        —        —        7,939       —        7,939  

Admitted disallowed interest maintenance reserve

    —        —        —        (140,735     140,735       —   

Other capital changes

    —        —        —        5,906       —        5,906  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at December 31, 2023

  $ 6,437     $ 390,213     $ 1,590,920     $ 433,944     $ 140,735     $ 2,562,249  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

See accompanying notes to statutory financial statements.

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

STATUTORY STATEMENTS OF CASH FLOW

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 (IN THOUSANDS)

 

 

 

     2023     2022     2021  

Cash flow from operating activities:

      

Premiums and annuity considerations collected net of reinsurance

   $ 5,753,440     $ 2,824,909     $ 2,660,490  

Net investment income received

     1,258,847       1,086,575       1,084,347  

Miscellaneous income

     377,825       389,289       439,383  
  

 

 

   

 

 

   

 

 

 

Total receipts

     7,390,112       4,300,773       4,184,220  

Benefits and loss related payments

     (3,729,563     (2,960,471     (3,409,491

Net transfers from Separate Accounts

     901,198       829,715       1,207,730  

Commissions, expenses paid and aggregate write-ins for deductions

     (361,428     (502,314     (533,179

Federal and foreign income taxes recovered (paid)

     (108,685     (11,000     27,515  
  

 

 

   

 

 

   

 

 

 

Total payments

     (3,298,478     (2,644,070     (2,707,425
  

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     4,091,634       1,656,703       1,476,795  
  

 

 

   

 

 

   

 

 

 

Cash flow from investing activities:

      

Proceeds from investments sold, matured, repaid or received:

      

Bonds

     877,630       2,998,524       4,986,107  

Stocks

     875,522       381,570       599,109  

Mortgage loans

     175,963       332,138       196,789  

Other Invested Assets

     139,135       351,593       40,559  

Net gains or (losses) on cash, cash equivalents and short-term investments

     —        —        (11

Miscellaneous proceeds

     129,189       235,472       440,989  
  

 

 

   

 

 

   

 

 

 

Total investment proceeds

     2,197,439       4,299,297       6,263,542  

Cost of investments acquired:

      

Bonds

     (4,861,590     (4,182,569     (5,496,463

Stocks

     (354,704     (89,351     (850,942

Mortgage loans

     (500,124     (757,256     (696,196

Other Invested Assets

     (345,015     (74,038     (328,732

Miscellaneous applications

     (190,874     (80,612     (184,607
  

 

 

   

 

 

   

 

 

 

Total cost of investments acquired

     (6,252,307     (5,183,826     (7,556,940

Net decrease in contract loans and premium notes

     1,731       19,540       18,996  
  

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (4,053,137     (864,989     (1,274,402
  

 

 

   

 

 

   

 

 

 

Cash flow from financing and miscellaneous activities:

      

Bilateral loan agreement with affiliate

     175,000       (215,217     93,000  

Net deposits on deposit-type contracts and other liabilities

     416,536       199,557       421,507  

Capital and paid in surplus

     115,000       50,000       479,249  

Dividends paid to stockholders

     —        (100,000     (200,000

Other cash provided (applied)

     (26,936     16,424       1,746  
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing and miscellaneous activities

     679,600       (49,236     795,502  
  

 

 

   

 

 

   

 

 

 

Net change in cash, cash equivalents and short-term investments

     718,097       742,478       997,895  

Cash, cash equivalents, and short-term investments:

      

Beginning of year

     3,141,676       2,399,198       1,401,303  
  

 

 

   

 

 

   

 

 

 

End of year

   $ 3,859,773     $ 3,141,676     $ 2,399,198  
  

 

 

   

 

 

   

 

 

 

 

(continued)

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

STATUTORY STATEMENTS OF CASH FLOW

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021 (IN THOUSANDS)

 

 

 

Supplemental disclosures of noncash transactions:

 

     2023      2022      2021  

Exchanges and transfers of invested assets

   $ 707,035      $ 218,534      $ 729,264  

Modified coinsurance reserve adjustment - net (including premium, miscellaneous income, and benefits)

     964,497        897,173        1,306,501  

Capitalized interest

     29,255        36,536        —   

Surplus note exchanges

     84,801        —         —   

Payable to subsidiary for SSAP 72 capital contribution

     —         —         35,000  

Transfer Lackawanna Casualty to Clear Spring PC Holdings

     —         —         169,037  

Surplus note and related interest forgiveness/capital contribution

     —         —         168,732  

Subsidiary return of capital - invested assets and related accrued interest transferred

     —         —         7,167  

See accompanying notes to statutory financial statements.

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

1.

Organization

Delaware Life Insurance Company (the “Company”), is a stock life insurance company incorporated under the laws of Delaware. The Company is a direct, wholly-owned subsidiary of DLIC Sub-Holdings, LLC (“DLSH”), a Delaware limited liability company, and an indirect subsidiary of Group 1001 Insurance Holdings, LLC. DLSH was formed in the first quarter of 2022 as a new holding company subsidiary of the Company’s former parent, DLIC Holdings, LLC (“DLH”) (formerly known as Group One Thousand One, LLC).

The Company is licensed to transact business in 49 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The business of the Company includes the issuance, administration, and servicing of a variety of wealth accumulation products, protection products, and institutional investment contracts. These products include individual and group fixed and variable annuities, individual and group variable life insurance, individual universal life insurance, funding agreements, and group life and disability insurance.

In the normal course of business, the Company reinsures portions of its individual life insurance, annuity, and group insurance exposure with both affiliated and unaffiliated companies using indemnity reinsurance agreements.

 

2.

Summary of Significant Accounting Policies

Basis of Presentation - Accounting Practices

The accompanying financial statements of the Company are presented on the basis of accounting principles prescribed or permitted by the Delaware Department of Insurance (the “Department”). The Department recognizes only statutory accounting practices prescribed or permitted by the State of Delaware for determining and reporting the financial condition and results of operations of an insurance company and for determining its solvency under Delaware’s insurance laws. The National Association of Insurance Commissioners’ (“NAIC’s”) Accounting Practices and Procedures Manual (“NAIC SAP”) has been adopted as a component of prescribed or permitted accounting principles by the State of Delaware. The Company has no permitted or prescribed practices that differ from NAIC SAP.

There was no difference in the Company’s net income (loss) or capital and surplus between NAIC SAP and practices prescribed and permitted by the State of Delaware as of December 31, 2023 and 2022 and for the years ended December 31, 2023, 2022, and 2021.

Accounting principles and procedures of the NAIC, as prescribed or permitted by the Department, comprise a basis of accounting other than accounting principles generally accepted in the United States of America (“GAAP”). The effects on the financial statements of the differences between NAIC SAP and GAAP are not reasonably determinable and are presumed to be material. The primary differences between GAAP and NAIC SAP can be summarized as follows:

 

   

The Asset Valuation Reserve (“AVR”) and Interest Maintenance Reserve (“IMR”) are eliminated with unrealized gains and losses reported directly in equity and realized gains and losses reported in income;

 

   

Certain assets designated under NAIC SAP as “nonadmitted assets” are included in the GAAP balance sheet rather than excluded from assets in the statutory balance sheet;

 

   

Certain policy acquisition costs and sales inducements are deferred and amortized over the estimated life of the policies for GAAP rather than charged to operations as incurred;

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

   

Policy and contract reserves for traditional life insurance are based on best estimates of expected mortality, morbidity, persistency and interest for GAAP rather than based on prescribed methodologies;

 

   

Policy reserves on universal life and certain investment products are reported at account value, including additional liabilities for certain guaranteed benefits such as lifetime income benefit riders valued using actuarial assumptions for GAAP, rather than using prescribed statutory methodologies under NAIC SAP;

 

   

Certain premiums for life and annuity contracts are recognized as deposits for GAAP rather than recorded as premiums in the period received;

 

   

Investments in wholly owned insurance subsidiaries, other entities under the control of the Company, and certain variable interest entities are consolidated in the Company’s financial statements under GAAP rather than being carried at the Company’s share of the underlying audited GAAP equity or statutory surplus of a domestic insurance subsidiary;

 

   

The carrying value of investments in subsidiaries is adjusted for any unamortized goodwill as provided for in Statement of Statutory Accounting Principles (“SSAP”) No. 68, Business Combinations and Goodwill (“SSAP No. 68”). Admissibility of goodwill is subject to certain limitations, and is amortized to unrealized gains and losses. Goodwill includes direct costs of an acquisition that are expensed under GAAP. Amortization of goodwill is elective for private companies under GAAP and is amortized to expense.

 

   

For equity method investments under GAAP, investee earnings and losses are reported in income and dividends of undistributed earnings reduce the carrying value of the investment. Under NAIC SAP, investee earnings and losses are reported as a change in unrealized gain/loss in capital and surplus, while dividends of accumulated undistributed earnings are reported in investment income;

 

   

Bonds designated as available for sale and trading securities are reported at fair value for GAAP with unrealized gains and losses reported in equity and income, respectively, rather than at amortized cost (or lower of cost or market for bonds with NAIC designations of 6);

 

   

An allowance for credit losses is established for available for sale securities under the current expected loss model under GAAP rather than being evaluated for other-than-temporary-impairment (“OTTI”) with impairments recorded as a direct write-down of the security’s cost basis for NAIC SAP;

 

   

Equity/fund investments such as mutual funds and exchange traded funds are classified as equity securities and reported at fair value with changes in fair value reported in earnings under GAAP. Under NAIC SAP, certain equity/fund investments identified by the NAIC’s Securities Valuation Office (the “SVO”) qualify for special bond treatment and are reported using the systematic valuation method;

 

   

All equity securities, excluding equity method investments, are carried at fair value with changes in fair value reported in earnings for GAAP rather than as unrealized gains and losses in capital and surplus for NAIC SAP;

 

   

Certain reinsurance transactions are accounted for as financing transactions under GAAP and as reinsurance for NAIC SAP. Assets and liabilities are reported gross of reinsurance for GAAP and net of reinsurance for NAIC SAP;

 

   

The statements of cash flow reconcile to changes in cash, cash equivalents, and restricted cash for GAAP. Under NAIC SAP, the Statutory Statements of Cash Flow reconcile to changes in cash, cash equivalents, and short-term investments with original maturities of one year or less. A reconciliation of net income to net cash provided by operating activities is not required;

 

11


Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

   

Generally, changes in deferred taxes are reported as a component of net income under GAAP. Under NAIC SAP, changes in deferred taxes are direct adjustments to surplus and separately reported in the Statutory Statements of Changes in Capital and Surplus;

 

   

Money market funds are classified as short-term investments under GAAP and cash equivalents under NAIC SAP;

 

   

Certain contracts with a market value adjustment (“MVA”) feature are classified within the Company’s General Account under GAAP, but are classified within the Company’s non-insulated Separate Accounts under NAIC SAP.

 

   

Contracts that contain an embedded derivative, including fixed index annuities, are bifurcated from the host contract and accounted for separately under GAAP. Under NAIC SAP, contracts that contain an embedded derivative are not bifurcated and are accounted for as part of the host contract;

 

   

Surplus notes designated as available for sale are reported at fair value for GAAP rather than at amortized cost for surplus notes with an NAIC designation of 1 or 2. Surplus notes with an NAIC designation of 3-6 are reported at the lower of amortized cost or fair value; and

 

   

The majority of derivatives are carried at fair value on both a GAAP and NAIC SAP basis. Unrealized gains and losses on derivatives are recognized in income for GAAP purposes and are recognized in surplus on a statutory basis. The Company designates derivatives as hedges on a limited basis which results in unrealized gains and losses on those derivatives being recognized in income.

Use of Estimates

The preparation of the Company’s statutory-basis financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. The most significant estimates are those used in determining the fair value of financial instruments, allowance for loan losses, aggregate reserves for life policies and annuity contracts, deferred income taxes, provision for income taxes, and OTTI of investments.

Significant Accounting Policies

The following is a summary of significant accounting policies followed by the Company in preparing the accompanying statutory-basis financial statements:

Investments

In the normal course of business, the Company enters into transactions involving various types of financial instruments, including cash equivalents, short-term investments, debt and equity securities, mortgage loans, and derivatives. These instruments involve credit risk and also may be subject to risk of loss due to interest rate fluctuations. The Company evaluates and monitors each financial instrument individually and, when appropriate, obtains collateral or other security to minimize potential losses. For securities in an unrealized loss position, management has the positive intent and ability to hold the securities until recovery. All securities are accounted for as of the date the investments are purchased or sold (the trade date).

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

Bonds

Investments in bonds, mortgage-backed securities (“MBS”), and asset-backed securities (“ABS”) are stated at amortized cost using the scientific method. Where the NAIC designation of the bond has fallen to 6 and the fair value has fallen below amortized cost, they are stated at fair value. Adjustments to the value of MBS and ABS securities based on changes in cash flows, including those related to changes in prepayment assumptions, are made retrospectively. As part of this process, the NAIC appointed a third-party vendor for each security type to develop a revised NAIC designation methodology. The ratings for residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”) are determined by comparing the insurer’s carrying value divided by the remaining par value to price ranges provided by the third-party vendor corresponding to each NAIC designation. Comparisons are initially made to the model based on amortized cost. Where the resulting designation is NAIC 6 per the model, further comparison based on fair value is required, which in some cases, results in a higher final NAIC designation.

The definition of structured securities under SSAP No. 43R, Loan Backed and Structured Securities—Revised (“SSAP No. 43R”) includes certain types of ABS and MBS securities that do not follow the revised rating methodology described above, including, but not limited to, equipment trust certificates, credit tenant loans, 5*/6* securities, interest-only securities, and those with SVO assigned NAIC designations. Interest income on bonds, MBS, and ABS is recognized when earned based upon estimated principal repayments, if applicable. For bonds subject to prepayment risk, yields are recalculated and asset balances adjusted periodically so that expected return on future cash flows matches the expected return over the life of the investment from acquisition. If the collection of all contractual cash flows is not probable, an OTTI may be indicated. The process of analyzing securities for an OTTI adjustment is further described in Note 4.

Preferred Stocks

Preferred stocks are stated in accordance with guidance provided in SSAP No. 32R, Investments in Preferred Stock. Perpetual preferred stocks and mandatory convertible preferred stocks are reported at fair value and cannot exceed effective call price. Redeemable preferred stocks are stated at amortized cost unless they have an NAIC designation of 4, 5, or 6. Redeemable preferred stocks with an NAIC designation of 4, 5, or 6 are stated at the lower of amortized cost or fair value.

Common Stocks

Unaffiliated common stocks are stated at fair value, with changes in unrealized gains or losses credited or charged directly to unassigned surplus, net of tax. Affiliated common stocks are carried based on the underlying audited statutory equity of the investee for insurance subsidiaries and audited GAAP equity for non-insurance subsidiaries. The Company accounts for its investments in subsidiaries in accordance with SSAP No. 97, Investments in Subsidiary, Controlled and Affiliated Entities.

Mortgage Loans

Mortgage loans are stated at unpaid principal balances, net of provisions for estimated losses. Mortgage loans acquired at a premium or discount are carried at amortized cost using the effective interest rate method, net of provisions for estimated losses. Purchases and sales of mortgage loans are recognized or unrecognized in the Company’s Statutory Statements of Admitted Assets, Liabilities and Capital and Surplus on the loan’s trade date. Transaction costs on mortgage loans are capitalized on initial recognition and are recognized in the Company’s Statutory Statements of Operations using the effective interest rate method. Mortgage loans, which primarily include commercial first mortgages, are diversified by property type and geographic area throughout the United States. Mortgage loans are collateralized by the related properties and the Company regularly assesses the value of the collateral.

 

13


Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

A mortgage loan is considered impaired when it is probable that the principal or interest is not collectible in accordance with the contractual terms of the loan. When a mortgage loan is classified as impaired, allowances for credit losses are established to adjust the carrying value of the loan to its net recoverable amount. A specific allowance for loan loss is established for an impaired loan if the present value of expected cash flows discounted at the loan’s effective interest rate, or the fair value of the collateral less cost to sell, is less than the recorded amount of the loan. The full extent of impairment in the mortgage portfolio cannot be assessed solely by reviewing loans individually. A general allowance for loan loss is established based on an assessment of past loss experience on groups of loans with similar characteristics and current economic conditions. While management believes that it uses the best information available to establish loan loss allowances, future adjustments may become necessary if economic conditions differ from the assumptions used in calculating them.

Interest income is recognized on mortgage loans when the collection of contractually specified future cash flows is probable, in which case interest income is recorded in accordance with the effective interest rate method. Interest income is not recognized on impaired mortgage loans and these mortgage loans are placed in a non-accrual status when the collection of contractually specified future cash flows is not probable, in which case cash receipts are applied in the following order: first against the carrying value of the loan, then against the provision, and then to income. The accrual of interest resumes when the collection of contractually specified future cash flows becomes probable based on certain facts and circumstances.

Changes in allowances for losses are recorded as changes in unrealized gains and losses to surplus. Once the conditions causing impairment improve and future payments are reasonably assured, the mortgages are no longer classified as impaired and the Company resumes accrual of income. However, if the original terms of the contract have been changed resulting in the Company providing an economic concession to the borrower at below market rates, then the mortgage is reclassified as restructured. If the conditions causing impairment do not improve and future payments remain unassured, the Company typically derecognizes the asset through disposition or foreclosure. Uncollectible collateral-dependent loans are written off through realized losses for any difference between the carrying value and amount received for the underlying property at the time of disposition or foreclosure.

Receivable/Payable for Securities

The Company has entered into agreements to purchase or sell certain securities as of December 31, 2023, and 2022 that have not yet settled and are recorded as a receivable or payable at the purchase or sale price with gains or losses on sales recorded in the Company’s Statements of Operations.

Other Invested Assets

Other invested assets are primarily comprised of limited partnerships, limited liability companies, collateral loans, surplus notes, non-rated residual equity tranches, residential reverse mortgages, and low income housing tax credits (“LIHTCs”). Investments in limited partnerships and limited liability companies are stated based on the underlying audited GAAP equity of the investee in accordance with SSAP No. 48, Joint Ventures, Partnerships and Limited Liability Companies (“SSAP No. 48”). The Company’s share of undistributed earnings and losses of the investee are included in unrealized gains and losses of the Company. Distributions received from the investee are recognized in investment income when declared to the extent that they are not in excess of undistributed accumulated earnings attributable to the investee. Distributions declared in excess of undistributed accumulated earnings attributable to the investee reduce the carrying amount of the investments. Collateral loans are carried at unpaid principal balance. Surplus notes with an NAIC designation of 1 or 2 are carried at amortized cost, while surplus notes with an NAIC designation of 3 to 6 are carried at lower of amortized cost or fair value. Reverse mortgages are valued in accordance with the Statements of Statutory Accounting Principles SSAP No. 39, Reverse Mortgages, which allows the Company to carry these securities at remaining principal balances. Income on reverse mortgages is recognized using the effective yield method based on the contractual interest rate and anticipated repayment of the mortgage. LIHTCs are accounted for in accordance with SSAP No. 93, Low Income Housing Tax Credit Property Investments.

 

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DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

Cash, Cash Equivalents, and Short-Term Investments

Cash, cash equivalents, and short-term investments are liquid assets. The Company’s cash equivalents primarily include commercial paper and money market instruments, which have an original term to maturity of less than three months. The carrying value for cash, cash equivalents, and short-term investments is stated at amortized cost, which approximates fair value, unless the NAIC designation is 6, in which case the asset is carried at the lower of amortized cost or market. Short-term investments, with the exception of money market instruments which are carried at fair value per SSAP No. 2R, Cash, Cash Equivalents, Drafts and Short-Term Investments, include bonds with a term to maturity exceeding three months, but less than one year on the date of acquisition.

Contract Loans

Contract loans are carried at the amount of unpaid principal balance. Contract loans are collateralized by the related insurance policy and do not exceed the net cash surrender value of such policy.

Derivatives

As part of the Company’s overall risk management strategy, the Company uses over-the-counter (“OTC”) and listed options, exchange-traded futures, currency forwards, currency swaps, interest rate swaps, and swaptions. Derivatives are accounted for in accordance with SSAP No. 86, Derivatives.

Interest rate swaps are employed for duration matching purposes, in replication transactions, and to hedge the guaranteed minimum living benefit offered in some of the Company’s variable annuity policies. Interest rate swaps are reported at fair value except those used in replication transactions which are reported at amortized cost. Changes in fair value are recorded as unrealized gains/losses within surplus.

The Company utilizes listed put and call options and exchange-traded futures on the Standard & Poor’s 500 Composite Stock Price Index (the “S&P 500 Index”) and other indices to hedge against stock market exposure inherent in the mortality and expense risk charges and guaranteed minimum death and living benefit features of the Company’s variable annuities. These options are reported at fair value. Changes in fair value for options are recorded in unrealized gains/losses within surplus. The daily cash variation margin settlements for futures are recorded as a component of net investment income.

The Company also purchases OTC and listed call options and exchange-traded futures on the S&P 500 Index and other indices to economically hedge its obligations under certain fixed index annuity (“FIA”) contracts. The interest credited on these products is based on the changes in the indices. These instruments are purchased directly or through the Company’s wholly owned investment subsidiary, DL Investment Holdings 2016-1, LLC (“DLIH 2016-1”). Options purchased and held by the Company are reported at fair value with changes in fair value recorded in unrealized gains/losses within surplus. The daily cash variation margin settlements for futures are recorded as a component of net investment income. Income distributions from DLIH 2016-1 are reported as a component of net investment income.

The Company uses currency swaps and currency forwards to hedge against the risk of fluctuations in foreign currency exchange rates. Currency swaps and currency forwards are reported at fair value. Changes in fair value are recorded as unrealized gains/losses within surplus. Swaptions are utilized by the Company to hedge exposure to interest rate risk. At the trade date of a swaption, a premium is paid to the counterparty and recorded as an asset. At expiration, swaptions either cash settle for value, settle into an interest rate swap, or expire worthless. Swaptions are reported at fair value and changes in fair value are recorded in unrealized gains/losses within surplus.

 

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DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

Repurchase Agreements and Reverse Repurchase Agreements

The Company participates in repurchase agreements where the Company sells securities and simultaneously agrees to repurchase the same or substantially the same securities at a stated price on a specified date. The Company accounts for repurchase agreements as short-term borrowings reported as liabilities under payable for securities.

The Company also participates in reverse repurchase agreements where the Company purchases securities and simultaneously agrees to resell the same or substantially the same securities at a stated price on a specified date. The Company accounts for the amount paid for securities under the reverse repurchase agreements as short-term investments.

Net Investment Income and Accrued Investment Income

Investment income is recorded when earned. Dividends are recorded on the ex-dividend date.

Accrued investment income is comprised of accrued interest on bonds, preferred stock, short-term investments, mortgage loans, contract loans, other invested assets, and dividends declared but not yet received on common stock. Accrued investment income more than 90 days past due is nonadmitted and reported as a direct reduction of surplus in the Statutory Statements of Changes in Capital and Surplus, with the exception of mortgage loans. Accrued investment income on mortgage loans is recorded as investment income when such interest is deemed collectible, except for interest that is 180 days past due.

Investment Capital Gains and Losses

Realized capital gains and losses are determined on the basis of specific identification method. Realized capital losses also include valuation adjustments for impairments of bonds, mortgage loans, common and preferred stocks, and other investments that have experienced a decline in fair value that management considers to be “other-than-temporary.” In determining whether impairments are other-than-temporary, management considers the size of the excess of carrying value over fair value, the likelihood and expected timing of a recovery in value, the credit quality and financial condition of the issuer, management’s intent to sell when a decline is due to interest rates, and management’s intent and ability to hold the investment until maturity or a recovery in the investment’s fair value.

For loan-backed securities, the determination of OTTI is based on an estimate of the non-interest loss, which is recognized in the net realized capital losses in the Statutory Statements of Operations. To the extent the Company determines that a non-structured security, corporate bond, common stock, preferred stock, or mortgage loan is deemed to be OTTI, the difference between the cost of the security and fair value is recorded as a realized loss and the carrying amount of the investment is written down to its estimated fair value through realized capital losses. In accordance with SSAP No. 43R, securities with OTTI are required to be written down to fair value only if the Company intends to sell or cannot assert the intent and ability to hold the investment until its anticipated recovery. However, if the Company can assert the intent and ability to hold the investment until its anticipated recovery, the valuation adjustment is based on the discounted future expected cash flows of the security discounted at the securities original effective interest rate. Realized capital gains and losses as reported in the Statutory Statements of Operations are net of any capital gains tax (or benefit) and exclude any deferrals to the IMR of interest-rate related capital gains or losses.

Unrealized capital gains and losses include changes in the fair value of common stocks, interest rate swaps, currency swaps, currency forwards, certain bonds and preferred stocks, and change in the equity method share of the accumulated earnings of limited liability companies and partnerships and are reported net of any related changes in deferred taxes. Changes in unrealized capital gains and losses are reported in the Statutory Statements of Changes in Capital and Surplus.

 

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DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

Nonadmitted Assets

For statutory accounting purposes, certain assets are designated as nonadmitted assets (e.g., affiliated common stocks of entities that are not audited, electronic data processing equipment, furniture and equipment, and a portion of accrued investment income). The Company had $45,659 and $31,991 in nonadmitted assets as of December 31, 2023 and 2022, respectively.

Policy Reserves and Liabilities for Deposit-Type Contracts

Policy reserves and liabilities consist of deposit-type contracts and life and annuity policy reserves.

Life and Annuity Policy Reserves

The reserves for life insurance policies and annuity contracts are computed in accordance with presently accepted actuarial standards, and are based on actuarial assumptions and methods (including use of published mortality tables and prescribed interest rates) which produce reserves at least as great as those required by law and/or contract provisions. Annuity reserves are calculated in accordance with the Commissioner’s Annuity Reserve Valuation Method and Actuarial Guidelines 33 and 35, as applicable.

Liabilities for unpaid claims consist of the estimated amount payable for claims reported but not yet settled and an estimate of claims incurred but not reported. These liabilities include estimates of the expenses that will be incurred in connection with the payment of benefits. The amounts reported are based upon historical experience, adjusted for trends and current circumstances. Management believes that the recorded liability is sufficient to provide for the associated claims adjustment expenses. Revisions of these estimates are included in operations in the year such adjustments are determined to be required.

Unpaid losses and claims adjustment expenses for health insurance contracts include an amount determined from individual case estimates and loss reports, if necessary. An amount based on past experience and current payment trends is estimated for losses incurred but not reported. Such liabilities are necessarily based on assumptions and estimates and, while management believes the amount is adequate, the ultimate liability may be in excess of or less than the amount provided. The methods for making such estimates and for establishing the resulting liabilities are continually reviewed and any adjustments are reflected in the period determined.

Deposit-Type Contracts

Liabilities for funding agreements, premium deposit funds, investment-type contracts such as supplementary contracts not involving life contingencies, and certain structured settlement annuities are based on account value or accepted actuarial methods using applicable interest rates.

Contract Claims

The liability for policy and contract claims is based upon the estimated ultimate cost of settling the claims, using past experience adjusted for current trends, and any other factors that modify past experience.

 

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DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

Asset Valuation Reserve and Interest Maintenance Reserve

The Company is required to maintain an IMR and AVR. The IMR is used to defer realized capital gains and losses, net of any income tax, on fixed income investments and derivatives that are attributable to changes in interest rates. Net realized capital gains and losses deferred to the IMR are amortized into investment income over the estimated remaining term to maturity of the investment sold. Beginning in 2023, negative IMR is admitted in accordance with the guidelines established by the NAIC’s Statutory Accounting Principles Working Group (“SAPWG”) in their interpretive guidance within INT 23-01, Net Negative (Disallowed) Interest Maintenance Reserve (“INT 23-01”).

As of December 31, 2023, the Company had $140,735 and $11,045 of negative IMR recorded in its General Account and non-insulated Separate Account, respectively. The amount admitted in the General Account was reported as an asset within the Company’s Statutory Statement of Admitted Assets, Liabilities, and Capital and Surplus. The Company’s calculated adjusted capital and surplus for purposes of determining negative IMR allowed to be admitted using information from the Company’s most recently filed statement with the Department was $2,195,524. The General Account admitted negative IMR represents 6.4% of the Company’s General Account adjusted capital and surplus. The Separate Account negative IMR recognized as an asset represents 0.5% of the Company’s General Account adjusted capital and surplus.

Fixed income investments generating IMR losses comply with the Company’s documented investment or liability management policies. The Company has no derivative activity included in IMR. There were no temporary and transitory timing issues or events that caused IMR losses to not be reflective of reinvestment activities. Asset sales generating negative IMR were not compelled by liquidity pressures.

The AVR represents a reserve for invested asset valuation using a formula prescribed by the NAIC. The AVR is intended to protect surplus by absorbing declines in the value of the Company’s investments that are not related to changes in interest rates. Increases or decreases in the AVR are reported as direct adjustments to surplus in the Statutory Statements of Changes in Capital and Surplus.

Income Taxes

The Company accounts for current and deferred income taxes and recognizes reserves for income tax contingencies in accordance with SSAP No. 101, Income Taxes (“SSAP No. 101”). Under the applicable asset and liability method for recording deferred income taxes, deferred tax assets (“DTAs”), net of any nonadmitted portion, and deferred tax liabilities (“DTLs”) are recognized for the future tax consequences attributable to differences between the statutory financial statement carrying amounts of existing assets and liabilities and their respective tax basis. DTAs and DTLs are measured using the enacted tax rates on which those temporary differences are expected to be recovered or settled. The change in deferred taxes is charged or credited directly to surplus. Gross DTAs are first reduced by a statutory valuation allowance, if deemed appropriate. The Company then determines the admissibility of the remaining net DTAs, after valuation allowance, subject to admissibility limitations set forth in NAIC SAP.

Reinsurance

Certain of the Company’s individual life insurance, annuity, and group insurance policies are reinsured on a coinsurance and funds held coinsurance basis with both affiliated and unaffiliated companies using indemnity reinsurance agreements. The Company accounts for funds held under coinsurance in accordance with SSAP No. 61R, Life, Deposit-Type and Accident and Health Reinsurance (“SSAP No. 61R”). The amounts withheld by the Company under these arrangements are recorded as liabilities on the Statutory Statements of Admitted Assets, Liabilities, and Capital and Surplus.

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

Reinsurance premiums, claims and claim adjustment expenses are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. The Company remains contingently liable for the liabilities ceded in the event the reinsurers are unable to meet their obligations under the reinsurance agreements. To limit the possibility of such losses, the Company evaluates the financial condition of its reinsurers and monitors its concentration of credit risk.

Amounts recoverable and payable under reinsurance agreements include amounts recoverable or due related to net settlements with assumed, ceded, and retrocedent activity.

The following accounting applies to coinsurance arrangements with funds withheld:

Ceding Entity

Premiums paid or payable to the reinsurer reduce premium income. Policy benefit payments paid by the reinsurer reduce reported policy benefits. Expense allowances paid by the reinsurer are reported separately in the Statutory Statements of Operations as they are incurred. A net reduction to policy reserves is taken for the portion of the obligation assumed by the reinsurer. Any funds withheld by the ceding entity are recorded as a separate liability.

Assuming Entity

Premiums received or receivable by the reinsurer increase premium income. Policy benefit payments paid by the reinsurer increase the reported policy benefits. Expense allowances paid by the reinsurer are reported separately in the Statutory Statements of Operations when payable. The reinsurer records its share of the statutory policy reserves attributable to the business identified in the reinsurance agreement. Any funds withheld by the ceding entity are recorded as a separate asset by the assuming entity. Non-IMR gains and losses are recorded through net investment income by the assuming entity.

Separate Accounts

The assets and liabilities of the separate accounts shown in the Statutory Statements of Admitted Assets, Liabilities, and Capital and Surplus are reported at fair value or, if there is no readily available market, in accordance with the valuation procedures in the applicable contract. These represent funds that are segregated and maintained for the benefit of separate account contract holders.

Premiums and Annuity Considerations

Annuity considerations are recognized as revenue when received. Premiums for traditional life insurance products are recognized as revenue when due and are recognized over the premium-paying period of the related policies. Considerations for deposit-type contracts, which do not have any life contingencies, are recorded directly to the related liability.

Assets Transferred on Coinsurance

On December 6, 2023, and effective December 31, 2023, the Company entered into a reinsurance agreement with its wholly owned subsidiary, Delaware Life and Annuity Company (“DLAC”), to cede a block of multi-year guaranteed annuity (“MYGA”) contracts on a coinsurance basis. The assets transferred to DLAC under this agreement are recorded as a reduction to income in the Statutory Statements of Operations.

Commissions and Expense Allowances

Expenses incurred in connection with acquiring new insurance business are charged to operations as incurred in accordance with SSAP No. 71, Policy Acquisition Costs and Commissions (“SSAP No. 71”).

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

Expense (Income) Under Hedging Program With Affiliate

In accordance with the terms of the Hedging Program Agreement between the Company and DLIH 2016-1, the Company pays a service fee that is settled in conjunction with a liability option impact on a quarterly basis. Settlements related to this agreement are recorded as an increase or decrease to expenses in the Statutory Statements of Operations.

New and Adopted Accounting Pronouncements

Revisions to SSAP No. 71 were adopted with an effective date of December 31, 2021. The revisions modified SSAP No. 71 such that an insurance entity cannot use levelized commission arrangements to delay establishment of a liability regardless of how the arrangement is structured with regards to policy persistency or timing of payment. The Company reviewed its commission programs as a result of the adoption of changes to SSAP No. 71, which apply to contracts in effect as of December 31, 2021. As a result, the Company made one-time, accelerated payments totaling $72,000 in settlement of all material levelized commission arrangements. The settlements are reported in the Statutory Statement of Operations as commissions on premiums, annuity considerations, and deposit-type contract funds (direct business only). As of December 31, 2021, the Company had no material levelized commission arrangements.

Revisions to INT 23-01 were adopted with an effective date of August 13, 2023 to provide limited-time exception guidance to SSAP No. 7, Asset Valuation Reserve and Interest Maintenance Reserve, and the annual statement instruction for the reporting of net negative (disallowed) IMR. The revisions allow for an insurer to admit negative IMR up to 10% of adjusted capital and surplus when its Risk-Based Capital (“RBC”) is greater than 300% after adjustment to remove admitted positive goodwill, electronic data processing equipment and operating system software, DTAs, and admitted IMR. As a result of these revisions, the Company reported $140,735 of admitted negative IMR within the Statutory Statement of Admitted Assets, Liabilities, and Capital and Surplus as of December 31, 2023. The Company also recognized $11,045 of negative IMR as an asset within the Company’s non-insulated Separate Account.

Correction of Errors

During 2023, the Company discovered an error related to a reinsurance agreement with an affiliate under which the Company cedes risks associated with certain of the Company’s in-force corporate-owned variable universal life insurance and private placement variable universal life insurance policies on a combination coinsurance and coinsurance with funds-held basis. The error resulted in other amounts receivable under reinsurance and miscellaneous income being understated as of the year-ended December 31, 2022. This error has been corrected and recorded, net of tax, in the Statutory Statements of Capital and Surplus in the amount of $3,780.

During 2022, the Company discovered an error related to the calculation of investment income on certain bond investments, which resulted in accrued investment income and net investment income being understated. This error has been adjusted and recorded, net of tax, in the Statutory Statements of Capital and Surplus in the amount of $36,786.

During 2022, the Company discovered an error related to the carrying value of certain other invested assets whereby certain of these assets were not carried at the lower of cost or fair value, resulting in other invested assets and the asset valuation reserve being overstated. This error has been adjusted and recorded, net of tax, in the Statutory Statements of Capital and Surplus in the amount of $(3,612).

During 2021, the Company discovered an error related to the calculation of actuarial reserves. This error has been adjusted and recorded, net of tax, as a decrease to surplus in the Statutory Statements of Capital and Surplus in the amount of $7,023.

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

3.

Related Party Transactions

Investments in Affiliates and Related Parties

The Company has significant transactions with and investments in affiliates and other related parties. The purpose of these investments is to generate investment returns in line with the Company’s overall investment strategy. All investments in affiliated entities and related parties are valued in accordance with the accounting policies described in Note 2 unless otherwise noted below.

The table below shows the respective amounts held with affiliates, including investments in subsidiaries, at December 31, 2023 and 2022, with respect to the following financial statement captions:

 

     Carrying Value
December 31,
                  
     2023      2022  

Cash Equivalent

   $ 186,000      $ 59,803  

Short-Term Investments

     557,833        536,030  

Bonds

     343,021        343,021  

Preferred Stocks

     241,130        243,199  

Common Stocks

     21,549        169,831  

Other Invested Assets

     513,021        352,141  
  

 

 

    

 

 

 

Total

   $ 1,862,554      $ 1,704,025  
  

 

 

    

 

 

 

During 2023, Clear Spring Health Insurance Company (“CSHIC”), an affiliate, borrowed $155,000 from the Company in the form of a demand promissory note. $95,000 of the amount borrowed was repaid during the year and, as of December 31, 2023, the Company holds a cash equivalent of $60,000, which reflects the outstanding balance of the demand promissory note. There was no borrowing or repayment activity during 2022.

Short-term investments in affiliates primarily relate to investments in Wright STF III, LLC (“Wright”). During 2023, the Company had $530,500 of acquisitions of short-term investments/cash equivalents in Wright, offset by $532,500 of proceeds from sales/maturities which decreased the prior year balance of affiliated short-term investments of $532,500 to $530,500 as of December 31, 2023. During 2022, the Company had $606,500 of acquisitions of short-term investments/cash equivalents in Wright, offset by $449,000 of proceeds from sales/maturities which increased the prior year balance of affiliated short-term investments of $375,000 to $532,500 as of December 31, 2022. The Company recorded $22,029, $6,400, and $13,800 of investment income and the average yield on these short-term investments was 6.04%, 4.91%, and 5.47% in 2023, 2022, and 2021, respectively.

DL Investment Holdings 2015-1, LLC (“DLIH 2015-1”) is an affiliated investment holding company with both common and preferred units. The Company owns all 255,000 issued and outstanding Series A Preferred Units (the “Preferred Units”) with a par value of $255,000. The Preferred Units are non-voting member units that entitle the Company to a 6% yield that compounds quarterly with distributions that take priority over common unit distributions. As of December 31, 2023 and 2022, the carrying value of the Preferred Units was $241,130 and $243,199, respectively.

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

The Company’s investment in subsidiaries is reflected in the common stock total above and is comprised of the Company’s investment in Delaware Life Reinsurance (U.S.) Corp. (“DLOK”), DL Reinsurance Company (“DLRC”), DLAC, and Clarendon Insurance Agency, Inc (“Clarendon”). The decrease in the carrying value of the Company’s common stock investment in subsidiaries was primarily driven by the sale of Delaware Life Insurance Company of New York (“DLNY”) (formerly a wholly-owned subsidiary of the Company) to Nassau Financial Group, L.P. in July 2023. The cash proceeds of the sale were $184,859 and the Company’s surplus increased by $18,525 as a result of the sale due to a $28,081 realized gain partially offset by the reversal of cumulative unrealized gains of $9,556. Additionally, during 2023, the Company’s investment in DLOK was fully nonadmitted.

The Company’s investments in subsidiaries reflected in common stock as of December 31, 2023 and 2022 were as follows:

 

     Carrying Value as of December 31,         

Entity

   2023      2022  

Clarendon

   $ 1,454      $ 1,454  

DLOK

     —         4,119  

DLRC

     4,066        3,862  

DLAC

     16,029        —   

DLNY

     —         160,396  
  

 

 

    

 

 

 

Total

   $ 21,549      $ 169,831  

The Company owns controlling membership interests in the following limited liability companies, which are carried as other invested assets: Clear Spring PC Holdings, LLC (“CSPCH”); Ellendale Insurance Agency, LLC (“Ellendale”); DLIH 2016-1; and DL Investment Holdings 2016-2, LLC (“DLIH 2016-2”). During 2021, the Company’s share of losses of one such entity, Ellendale, exceeded the investment value before being nonadmitted. Therefore, in accordance with SSAP No. 48, the Company ceased equity method accounting. This had no impact to the surplus of the Company since the value of Ellendale was nonadmitted prior to 2021.

In February 2022, the Company sold its wholly-owned non-insurance holding company, Clear Spring Health Holdings, LLC (“CSHH”), to DLSH. The proceeds of the sale were $195,300 and the Company’s surplus increased by $151,789 as a result of the sale due to the reversal of cumulative unrealized losses of $143,892 and a $7,898 realized gain.

The Company’s investments in subsidiaries reflected in other invested assets as of December 31, 2023 and 2022 were as follows:

 

     Carrying Value as of December 31,         

Entity

   2023      2022  

DLIH 2016-1

   $ 202,024      $ 79,012  

DLIH 2016-2

     33,292        26,138  

CSPCH

     232,705        246,991  
  

 

 

    

 

 

 

Total

   $ 468,021      $ 352,141  

In addition to the investments in affiliates and related parties included in the tables above, the Company held investments for which a related party was a beneficial owner totaling $217,758 as of December 31, 2023 and 2022.

 

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DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

During 2023 and 2022, the Company made the following capital contributions to subsidiaries:

 

Entity

   2023      2022                   

DLIH 2016-2

   $ 100      $ 5,016  

DLIH 2016-1

     150,000        —   

DLAC

     23,000        —   

Goodwill

The Company carries goodwill in the investment value of subsidiaries related to direct statutory purchases and indirect purchases of downstream insurance subsidiaries by noninsurance holding company subsidiaries. Admitted goodwill is limited to 10% of adjusted capital and surplus under SSAP No. 68.

On December 30, 2020, the Company purchased 200 units of its 80% owned subsidiary, CSPCH, representing the 20% minority interest previously held by a third party. Clear Spring Property and Casualty Company (“CSP&C”) is an indirect wholly-owned subsidiary of CSPCH. The goodwill related to this purchase is shown in the table below. Additional goodwill from the original purchase of CSP&C by downstream non-insurance holding companies is not shown in the table below but is embedded in the Company’s investment value of CSPCH.

On April 1, 2019, the Company acquired Clear Spring Casualty Insurance Company (“CSCIC”), formerly known as Lackawanna Casualty Company, a worker’s compensation insurance company, and its subsidiaries, Clear Spring American Insurance Company (“CSAIC”), formerly known as Lackawanna American Insurance Company, and Clear Spring National Insurance Company (“CSNIC”), formerly known as Lackawanna National Insurance Company. On December 30, 2021, the Company contributed its direct investment in CSCIC to CSPCH at the statutory value of CSCIC. CSPCH subsequently contributed CSCIC at its statutory value to CSP&C through a wholly-owned intermediary non-insurance holding company. As such, the goodwill reported in the table below for CSCIC is reflected in the Company’s book value of CSPCH as of December 31, 2023, in addition to the goodwill noted above.

The transactions described above were each accounted for as a statutory purchase by the Company and are reported in the table below. Indirect goodwill derived from the purchase of CSP&C by CSPCH is not considered a statutory purchase by the Company and is excluded from the table below. Total goodwill related to CSPCH and CSP&C from all sources reflected in the book value of CSPCH as of December 31, 2023 was $38,284, representing 16.5% of the total book value, and is inclusive of $1,897 of indirect goodwill referenced above. A summary of the Company’s goodwill related to statutory purchases is as follows:

 

Purchased entity

  

Acquisition date

   Cost of
acquired
entity
     Original
amount of
goodwill
     Original
amount of
admitted
goodwill
     Admitted
goodwill as
of the
reporting
date
     Amount of
goodwill
amortized
during the
reporting
period
     Book Value
of SCA
     Admitted
goodwill as
a % of SCA
BACV,
gross of
admitted
goodwill
 

CSCIC/CSPCH*

   4/1/2019    $ 171,728      $ 61,162      $ 61,162      $ 32,110      $ 6,116      $ 232,705        13.8%  

CSPCH

   12/30/2020    $ 12,200      $ 8,553      $ 8,553      $ 4,277      $ 1,426      $ 232,705        1.8%  

 

  *

Unamortized goodwill from the Company’s statutory purchase of CSCIC is shown in the table above as a percentage of the book value of CSPCH.

 

23


Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

Dividends/Distributions

Refer to Note 17 for disclosure of dividends paid by the Company and capital contributions received by the Company.

During 2023, 2022, and 2021, the Company recognized the following dividends and distributions from subsidiaries:

 

Date

  

Entity

   Amount     

Form

  

Asset Description

December 22, 2023

   DLIH 2016-1    $ 75,000      Return of capital    Cash

May 18, 2022

   DLNY      54,026      Dividend    Cash

December 12, 2022

   DLNY      200,000      Extraordinary dividend (a)    Cash

August 9, 2021

   DLIH 2016-1      30,000      Dividend    Cash

November 9, 2021

   DLIH 2016-1      20,000      Dividend    Cash

October 14, 2021

   Delaware Life 1099 Reporting Company, LLC      30      Return of capital    Cash

October 26, 2021

   DLNY      58,232      Dividend    Cash

December 15, 2021

   DLOK      13,000      Return of capital    Invested assets and cash

December 31, 2021

   DLIH 2016-1      23,000      Dividend    Accrual (b)

 

  (a)

In accordance with SSAP No. 72, Surplus and Quasi-Reorganizations (“SSAP No. 72”), $900 recognized as dividend income and $199,100 recognized as a return of capital.

  (b)

Receivable reflected in Investment Income Due and Accrued as of December 31, 2021.

In addition to the above distributions, on December 29, 2023 and December 30, 2022, the Company accrued $15,604 of preferred dividends from DLIH 2015-1. The 2023 accrued distribution was subsequently received in cash by the Company on January 5, 2024.

Debt and Surplus Note Transactions

During 2023 and 2022, Group 1001 Finance, LLC (“Group 1001 Finance”) purchased $189,699 and $29,801, respectively, of interests in the Company’s surplus notes that were previously issued by the Company to an unrelated party. Refer to Note 17 for additional details.

The Company entered into a $200,000 bilateral loan agreement with its affiliate, Clear Spring Life and Annuity Company (“CSLAC”), dated June 1, 2022. The initial terms of the agreement provided for an interest rate at LIBOR plus 1.15%. During 2023, the interest rate was amended to be stated at the Secured Overnight Financing Rate (“SOFR”) plus 1.21%. The repayment of principal and interest is due on demand. During 2023, CSLAC borrowed $115,000 under the agreement, and repaid the full amount borrowed. The Company had $0 due from CSLAC under the bilateral loan agreement as of December 31, 2023 and 2022.

The Company entered into a $100,000 bilateral loan agreement with DLIH 2016-1 dated March 31, 2021. In 2022, the bilateral loan agreement was increased to $200,000. The initial terms of the agreement provided for an interest rate at LIBOR plus 1.15%. During 2023, the interest rate was amended to be stated at SOFR plus 1.21%. The repayment of principal and interest is due on demand. The Company had $52,000 due to DLIH 2016-1 as of December 31, 2023 and $123,000 due from DLIH 2016-1 as of December 31, 2022 under this agreement.

 

24


Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

In November 2020, R.V.I. Guaranty Co., Ltd. (“RVI”), an affiliate, entered into a $20,000 revolving loan note (the “RVI Note”) with the Company. The initial terms of the note provided for an interest rate at LIBOR plus 150 basis points. During 2023, the interest rate was amended to be stated at SOFR plus 1.21%. There were no amounts outstanding under the RVI Note as of December 31, 2023 and 2022.

Agreements and Other Transactions with Affiliates and Related Parties

The Company has entered into various affiliate and related-party agreements. The following agreements had material transactions during the years ended December 31, 2023, 2022 and 2021:

The Company has an administrative services agreement with Clarendon pursuant to which the Company provides services and facilities in connection with Clarendon’s business of supporting the wholesale distribution of the Company’s variable insurance and annuity products. The Company also has a principal underwriter’s agreement dated April 1, 2002 with Clarendon, pursuant to which Clarendon serves as principal underwriter and distributor for all variable insurance and annuity products issued by the Company. There were equal and offsetting amounts incurred under these two agreements.

A federal tax allocation agreement has been implemented with Group 1001, Inc. as the common parent of an affiliated group of companies as described in Note 16.

The Company has a services and resource sharing agreement between the Company and Group 1001 Resources, LLC (“G1001 Resources”), pursuant to which G1001 Resources provides certain services and resources to the Company, including personnel for finance, legal, compliance, human resources, administrative, information technology and other operational support functions. Gross amounts allocated under this agreement amounted to $81,905, $84,900, and $94,450 for the years ended December 31, 2023, 2022, and 2021, respectively.

Effective January 1, 2019, the Company had an Amended and Restated Master Agency Agreement (the “First Amended Agreement”) between the Company and Delaware Life Marketing, LLC (“DLM”), pursuant to which DLM provides certain distribution and agent management services to the Company. On September 1, 2021, the First Amended Agreement was superseded by the Second Amended and Restated Master Agency Agreement (“Second Amended Agreement”) executed between the Company and DLM. The Company incurred commission expenses under the First Amended Agreement totaling $48,423 for the eight months ended August 31, 2021. On September 1, 2021, the Company began paying heaped commissions to DLM which were expensed as incurred. The commission expenses incurred during the remaining four months of 2021 totaled $71,912, including a one-time, accelerated payment of $41,000 made by the Company in settlement of the First Amended Agreement. At least annually, and in accordance with the Second Amended Agreement, the Company reviews the agreement for compliance with agreed-upon limits. As a result of this analysis, commission expense was reduced by $130,835, $0, and $0, which was refundable to the Company as of December 31, 2023, 2022, and 2021, respectively. This amount was owed by DLM to the Company as of December 31, 2023. Under the Second Amended Agreement, the Company incurred commission expenses, net of refunds, of $57,832 and $109,716 as of December 31, 2023 and 2022, respectively.

Under the Second Amended Agreement with DLM, the Company also began paying marketing fees as an allowance for advertising, marketing, bonuses, and other expenses related to the promotion and sales of certain products of the Company, and these fees totaled $60,000, $60,000, and $20,000 for the years ended December 31, 2023, 2022, and 2021, respectively. Other fees paid for services by the Company to DLM totaled $25,568, $22,854, and $18,155 for the years ended December 31, 2023, 2022, and 2021, respectively.

In September 2021, the Company issued the $41,000 promissory note to DLM related to a one-time accelerated commission payment in settlement of the First Amended Agreement. The interest rate on the promissory note was 8%. The Company repaid DLM the $41,000 plus $900 of interest in December 2021.

 

25


Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

The Company has a services agreement with Insurance Management Services, LLC (“IMS”), formerly known as Guggenheim Insurance Services, LLC, whereby IMS provides certain personnel, facilities, systems and equipment in conjunction with the provision of accounting and general services, insurance services, and other advisory services to the Company. Expenses incurred under this agreement amounted to $30,000, $30,000, and $50,000 for the years ended December 31, 2023, 2022, and 2021, respectively.

The Company and DLIH 2016-1 initiated a hedging program arrangement in 2019 whereby DLIH 2016-1 engages in certain hedging activities related to the Company’s FIA contracts. Under this arrangement, the Company routinely transfers new FIA equity options to DLIH 2016-1 at fair value and processes settlements on behalf of DLIH 2016-1. All economic rights and responsibilities of the equity options transferred belong to DLIH 2016-1. DLIH 2016-1 purchases equity futures and manages both the options and futures to more efficiently monitor the hedging risks associated with the Company’s FIA products.

Effective October 1, 2023, the Company entered into a second Hedging Program Agreement with DLIH 2016-1. Under this agreement, the Company pays DLIH 2016-1 a service fee that is settled in conjunction with a liability option impact on a quarterly basis. The net impact of service fees and liability option impact during 2023 was $49,423, and, as of December 31, 2023, the Company was owed this full amount from DLIH 2016-1 under this agreement.

Effective January 1, 2022, the Company entered into a licensing agreement with Group 1001 IP Solutions, LLC (formerly, Group 1001 Innovation Solutions, LLC) to support the administration of information technology assets and vendor relationships of the Company. Expenses incurred under this agreement were $38,302, $14,394, and $0 for the years ended December 31, 2023, 2022, and 2021, respectively.

The Company had $135,781 and $124,534 due from affiliates, $7,679 and $27,149 due to affiliates, and $8,525 and $9,009 included in general expenses due or accrued to other related parties as of December 31, 2023 and 2022, respectively, under the terms of various management and services contracts which provide for cash settlements on a quarterly or more frequent basis.

The Company has an amended and restated investment management agreement with Guggenheim Partners Investment Management, LLC (“GPIM”), whereby GPIM provides investment management services for certain of the Company’s investments. GPIM managed $201,335 and $207,034 of the Company’s investments with related parties as of December 31, 2023 and 2022.

During 2023, the Company purchased securities with a book value of $313,574 and accrued interest of $2,751 from CSLAC at fair market value. The Company paid cash of $315,884 for these purchases. Additionally, during 2023, the Company sold securities with a book value of $95,557 and accrued interest of $504 to CSLAC at fair market value. The Company received cash proceeds of $92,314 and recognized a loss of $3,747 on the sale. The fair value of the assets acquired and sold was determined in accordance with the Company’s and CSLAC’s established asset pricing methodologies.

Reinsurance Agreements

The Company has reinsurance agreements with certain subsidiaries and affiliates. Refer to Note 10 for disclosures related to these agreements.

Guarantees

Pursuant to an agreement effective January 20, 2017, the Company guarantees punctual payment to Merrill Lynch Professional Clearing Corp. (“ML Pro”) and certain affiliates of ML Pro (collectively, the “Guaranteed Parties”) by certain subsidiaries of the Company that may be added to the guaranty (collectively, the “ML Customers”), in connection with accounts the ML Customers have with the Guaranteed Parties. The obligations of the Company under the guaranty agreement are limited to $300,000. There was no liability accrued for this guaranty at December 31, 2023 and 2022.

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

In 2018, CSP&C entered into a lease agreement for an office in Boca Raton, Florida that expires in March 2026. The Company is a guarantor of the lease which has future minimum lease commitments of approximately $1,069 as of December 31, 2023.

In 2022, an affiliate, PSA Realty Company, entered into a lease agreement for an office in Ft. Lauderdale, Florida with a termination date of April 30, 2030 and two agreements for office spaces in Waltham, Massachusetts with termination dates of October 31, 2029 and October 31, 2030, respectively, for which the Company is the guarantor. Future minimum lease payments for these three agreements totaled $16,416 as of December 31, 2023.

As a requirement under a Master Receivables Purchase Agreement (the “RPA”) between CSHIC and Société Générale Factoring S.A. (“SGF”) dated October 4, 2021, the Company guarantees the performance and observance of all obligations and covenants by CSHIC. Under the RPA, CSHIC proposes the sale of certain eligible receivables for purchase by SGF at a discounted rate. CSHIC is required to repurchase any ineligible receivables sold to SGF. The guarantee would require payment by the Company if CSHIC was unable to repurchase any ineligible receivables sold. There was no liability accrued for this guaranty at December 31, 2023 and 2022.

The Company is a co-borrower under a short-term money market facility (the “ST Facility”) with Société Générale (“SocGen”). The Company and CSHIC were co-borrowers under the ST Facility until August 23, 2022. At that time, as part of a corporate financing strategy, Group 1001 Finance, an affiliate, was added via an amendment (the “Amended ST Facility”) to the original ST Facility. As part of the strategy, CSHIC was removed as a borrower and no longer has the ability to directly borrow from the Amended ST Facility or incur any liability related to the Amended ST Facility. Group 1001 Finance, as borrower, has authority to borrow up to $350,000 to be used for general corporate purposes. Group 1001 Finance and the Company have a reimbursement agreement in place, whereby Group 1001 Finance will reimburse the Company in the event that the Company makes any payment in support of Group 1001 Finance under the Amended ST Facility. In addition, Group 1001 Finance will pay the Company a support fee calculated based on the average daily balance of Group 1001 Finance borrowings under the Amended ST Facility.

During 2020, a syndicated credit facility arranged by BMO Capital Markets Corp. and consisting of three bank lenders (the “BMO Facility”) was provided to CSHH and its then wholly-owned subsidiary, CSHIC, with a maximum borrowing of $125,000 as of December 31, 2021. Pursuant to the BMO Facility and a related separate fee letter, the Company guarantees all principal and interest obligations of CSHH and CSHIC, and is subject to certain covenants related to RBC and surplus. As of December 31, 2023 and 2022, CSHIC borrowings under the facility were $125,000.

Pursuant to a Letter of Credit Facility Agreement (the “LCFA”) between the Company and its former indirect subsidiary, Clear Spring Health (SC), Inc. (“CSH(SC)”), the Federal Home Loan Bank of Indianapolis (“FHLB”) issued the Company an irrevocable $1,000 LOC effective July 1, 2021 on behalf of an unrelated party in respect of potential obligations of CSH(SC). Under the LCFA, CSH(SC) is unconditionally responsible to reimburse the Company for the full amount of any drawdown from the LOC by the beneficiary. CSH(SC) pays the Company a facility fee as compensation for the arrangement.

Effective February 24, 2022, a support and reimbursement agreement was executed between the Company and CSHH, whereby a market based fee is paid to the Company to compensate it for the guarantees provided by the Company. This agreement remains in effect after the sale of CSHH to DLSH.

The Company has committed to contribute capital to CSP&C as needed to maintain a certain RBC level. No capital contributions have been made by the Company under this agreement.

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

The Company authorized a wholly-owned subsidiary, DLIH 2016-2, to enter into a Société Générale credit facility (the “SG Facility”) with a maximum borrowing amount of $225,000 as part of its investment program. Pursuant to the SG Facility, the Company is required to pledge collateral to support borrowings. The pledged collateral secures obligations of a non-recourse guarantee by the Company, which is limited to the pledge of collateral assets. The Company may be required to make equity capital contributions to DLIH 2016-2 from time to time. As of December 31, 2023 and 2022, DLIH 2016-2 had borrowed $163,820 and $162,820, respectively, under the SG Facility.

 

4.

Bonds and Equity Investments

The carrying value and fair value of investments in bonds and equity securities as of December 31, 2023 and 2022 are as follows:

 

     December 31, 2023  
     Carrying
Value
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair Value
 

Bonds:

           

U.S. Governments

   $ 655,852      $ 931      $ (21,543    $ 635,240  

All Other Governments

     17,200        453        (1,887      15,766  

States, Territories and Possessions (Direct and Guaranteed)

     546        —         (52      494  

U.S. Political Subdivisions of States, Territories and Possessions (Direct and Guaranteed)

     23,618        27        (5,214      18,431  

U.S. Special Revenue and Special Assessment Obligations and all Non-Guaranteed Obligations of Agencies and Authorities of Governments and Their Political Subdivisions

     1,102,480        25,953        (93,049      1,035,384  

Industrial and Miscellaneous (Unaffiliated)

     15,836,658        64,204        (992,758      14,908,104  

Hybrid Securities

     153,270        —         (11,592      141,678  

Parents, Subsidiaries and Affiliates

     343,021        —         (17,499      325,522  

SVO Identified Exchange Traded Funds

     1,815        —         (216      1,599  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Bonds

   $ 18,134,460      $ 91,568      $ (1,143,810    $ 17,082,218  
  

 

 

    

 

 

    

 

 

    

 

 

 

Preferred Stocks

   $ 802,140      $ 7,322      $ (10,220    $ 799,242  
  

 

 

    

 

 

    

 

 

    

 

 

 
     Cost      Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair Value
 

Common Stocks (Unaffiliated) (a)

   $ 143,693      $ 1,131      $ (3,934    $ 140,890  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

     December 31, 2022  
     Carrying
Value
     Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair Value
 

Bonds:

           

U.S. Governments

   $ 386,265      $ 42      $ (32,478    $ 353,828  

All Other Governments

     12,373        4        (2,047      10,331  

States, Territories and Possessions (Direct and Guaranteed)

     553        —         (55      499  

U.S. Political Subdivisions of States, Territories and Possessions (Direct and Guaranteed)

     23,560        —         (5,919      17,641  

U.S. Special Revenue and Special Assessment Obligations and all Non-Guaranteed Obligations of Agencies and Authorities of Governments and Their Political Subdivisions

     710,702        16,667        (100,108      627,261  

Industrial and Miscellaneous (Unaffiliated)

     12,675,744        22,169        (1,345,960      11,351,954  

Hybrid Securities

     171,489        —         (16,524      154,965  

Parents, Subsidiaries and Affiliates

     343,021        —         (45,987      297,033  

SVO Identified Exchange Traded Funds

     1,821        —         (297      1,523  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Bonds

   $ 14,325,528      $ 38,882      $ (1,549,375    $ 12,815,035  
  

 

 

    

 

 

    

 

 

    

 

 

 

Preferred Stocks

   $ 1,121,391      $ —       $ (48,661    $ 1,072,730  
  

 

 

    

 

 

    

 

 

    

 

 

 
     Cost      Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair Value
 

Common Stocks (Unaffiliated) (a)

   $ 136,389      $ 1,644      $ (4,653    $ 133,380  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (a)

Excludes affiliated common stock with an equity method carrying value of $21,549 and $169,831 as of December 31, 2023 and 2022, respectively.

Expected maturities differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties. The carrying value and fair value of bonds, including those that are classified as short-term investments, other than ABS and MBS, as of December 31, 2023 by contractual maturity are as follows:

 

     December 31, 2023                   
     Carrying
Value
     Estimated
Fair Value
 

Due in one year or less

   $ 797,522      $ 791,228  

Due after one year through five years

     3,570,496        3,469,258  

Due after five years through ten years

     4,387,156        4,071,134  

Due after ten years

     3,707,450        3,233,523  
  

 

 

    

 

 

 

SVO identified exchange traded funds

     1,815        1,599  
  

 

 

    

 

 

 

Total before mortgage and other asset-backed securities

     12,464,439        11,566,742  
  

 

 

    

 

 

 

Mortgage and other asset-backed securities

     5,771,205        5,616,620  
  

 

 

    

 

 

 

Total

   $ 18,235,644      $ 17,183,362  
  

 

 

    

 

 

 

 

29


Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

The table above includes short-term bonds, which are classified as short-term investments, with a carrying value and fair value of $101,184 and $101,144, respectively, at December 31, 2023.

Investment-grade bonds were 95.9% and 95.8% of the Company’s total bonds as of December 31, 2023 and 2022, respectively.

Exposure to any single issuer is less than 10% of net admitted assets.

Other-than-temporary Impairment

The Company recognizes and measures OTTI for loan-backed and structured securities (“LBSS”) in accordance with SSAP No. 43R. In accordance with SSAP No. 43R, if the fair value of a LBSS is less than its amortized cost basis at the Statutory Statements of Admitted Assets, Liabilities and Capital and Surplus date, the Company assesses whether the impairment is an OTTI. When an OTTI has occurred, the amount of OTTI recognized in earnings is the difference between the amortized cost basis of the security and the present value of its expected future cash flows, discounted at the effective interest rate implicit in the security.

If the Company intends to sell the LBSS, or if it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, an OTTI is considered to have occurred. The amount of the OTTI recognized is the difference between the amortized cost basis and the fair value of the security. In accordance with SSAP No. 43R, the amount of OTTI that is non-interest related shall be recorded through the AVR, and the amount of the OTTI that is interest related shall be recorded through the IMR.

If the Company does not intend to sell the LBSS, or if it is not more likely than not that it will be required to sell the security before recovery of its amortized cost basis, the Company performs cash-flow based testing to determine if the present value of its expected future cash flows discounted at the effective interest rate implicit in the security is less than its amortized cost basis.

Estimating future cash flows is a quantitative and qualitative process that incorporates information received from third parties, along with assumptions and judgments about the future performance of the underlying collateral.

Losses incurred on the respective portfolios are based on loss models using assumptions about key systematic risks, such as unemployment rates and housing prices, and loan-specific information, such as delinquency rates and loan-to-value ratios.

There was $73 in OTTI recorded in 2023 and no OTTI recorded in 2022 and 2021 on LBSS held as of December 31, 2023, 2022, and 2021, respectively, pursuant to SSAP No. 43R.

If the fair value of a bond, other than those subject to SSAP No. 43R, is less than its amortized cost basis at the Statements of Admitted Assets, Liabilities and Capital and Surplus date, the Company assesses whether the impairment is an OTTI. OTTI has occurred when it is probable that all amounts due according to the contractual terms will not be collected or when a decision to sell the bond at an amount below its carrying value has been made. When an OTTI has occurred, the amount of OTTI recognized in earnings is the difference between the amortized cost basis of the security and its fair value.

If the Company does not intend to sell the bond, or if it is not more likely than not that it will be required to sell the security before recovery of its amortized cost basis, the Company employs a portfolio monitoring process to identify securities that are OTTI.

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

The Company performs quarterly procedures in determining whether a security is other than temporarily impaired. The process involves a screening of all securities with a fair value less than the amortized cost basis. As part of this screening, the Company also incorporates a monitor and watch list maintained by investment managers. Inclusion in this list may be driven by heightened risk of particular sectors driven by macro events or credit events on individual issuers or particular investments, such as a ratings downgrade. Based on the evidence, securities identified may be subject to further review to evaluate issuer-specific facts and circumstances, such as the issuer’s ability to meet current and future interest and principal payments, an evaluation of the issuer’s financial position and its near-term recovery prospects, difficulties being experienced by an issuer’s parent or affiliate, and management’s assessment of the outlook for the issuer’s sector. Upon completion of this screening process, the relevant information is provided to the Company’s Asset Valuation Committee, which is composed of investment and finance professionals, to exercise judgment and conclude on whether there is OTTI.

Should it be determined that a security is other than temporarily impaired, the Company records a loss through an appropriate adjustment in carrying value. A summary of impairments incurred by the Company for the years ended December 31, 2023, 2022, and 2021 is as follows:

 

     For the years ended
December 31
         
     2023      2022      2021  

Bonds (Including those subject to SSAP No. 43R)

   $ 2,217      $ 6,600      $ 4,300  

Solar tax credit investments

     —         —         9,700  

Intent to sell other invested assets

     —         —         30,000  

Residual equity tranches

     25,110        —         3,000  

Equity interests

     8,250        —         7,700  

There are inherent risks and uncertainties in management’s evaluation of securities for OTTI. These risks and uncertainties include factors both external and internal to the Company, such as general economic conditions, an issuer’s financial condition or near-term recovery prospects, market interest rates, unforeseen events which affect one or more issuers or industry sectors, and portfolio management parameters, including asset mix, interest rate risk, portfolio diversification, duration matching, and greater-than-expected liquidity needs. All of these factors could impact management’s evaluation of securities for OTTI.

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

The following tables analyze the Company’s investment positions with unrealized losses, segmented by type of security and period of continuous unrealized loss, as of December 31, 2023 and 2022:

 

    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

    13     $ 146,600     $ (738     22     $ 360,065     $ (20,805     35     $ 506,665     $ (21,543

All Other Governments

    3       2,977       (8     8       6,842       (1,879     11       9,819       (1,887

U.S. States, Territories and Possessions (Direct and Guaranteed)

    —        —        —        2       494       (52     2       494       (52

U.S. Political Subdivisions of States, Territories and Possessions

    —        —        —        42       17,842       (5,214     42       17,842       (5,214

U.S. Special Revenue and Special Assessment Obligations

    22       34,734       (523     406       616,456       (92,526     428       651,190       (93,049

Industrial and Miscellaneous (Unaffiliated)

    185       1,987,192       (66,965     1,545       8,036,186       (925,793     1,730       10,023,378       (992,758

Hybrid Securities

    3       4,241       (15     56       134,735       (11,577     59       138,976       (11,592

Parent, Subsidiaries and Affiliates

    1       65,961       (60     2       259,561       (17,439     3       325,522       (17,499

SVO Identified Exchange Traded Funds

    —        —        —        3       1,599       (216     3       1,599       (216
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Bonds

    227     $ 2,241,705     $ (68,309     2,086     $ 9,433,780     $ (1,075,501     2,313     $ 11,675,485     $ (1,143,810
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Preferred Stocks

    3     $ 292,169     $ (5,983     6     $ 143,314     $ (4,237     9     $ 435,483     $ (10,220
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Common Stocks (Unaffiliated)

    2     $ 5,095     $ —        3     $ 16,150     $ (3,934     5     $ 21,245     $ (3,934
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

32


Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

    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

    11     $ 58,650     $ (4,993     13     $ 294,385     $ (27,485     24     $ 353,035     $ (32,478

All Other Governments

    3       4,619       (1,108     4       2,725       (939     7       7,344       (2,047

U.S. States, Territories and Possessions (Direct and Guaranteed)

    2       499       (55     —        —        —        2       499       (55

U.S. Political Subdivisions of States, Territories and Possessions (Direct and Guaranteed)

    19       8,779       (2,170     21       8,862       (3,749     40       17,641       (5,919

U.S. Special Revenue and Special Assessment Obligations and all Non- Guaranteed Obligations of Agencies and Authorities of Governments and Their Political Subdivisions

    196       313,252       (31,261     170       222,420       (68,847     366       535,672       (100,108

Industrial and Miscellaneous (Unaffiliated)

    1,187       5,947,384       (656,774     440       3,352,666       (689,185     1,627       9,300,050       (1,345,959

Hybrid Securities

    34       133,505       (11,555     9       18,940       (4,969     43       152,445       (16,524

Parent, Subsidiaries and Affiliates

    3       297,033       (45,988     —        —        —        3       297,033       (45,988

SVO Identified Exchange Traded Funds

    2       831       (155     1       692       (142     3       1,523       (297
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Bonds

    1,457     $ 6,764,552     $ (754,059     658     $ 3,900,690     $ (795,316     2,115     $ 10,665,242     $ (1,549,375
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Preferred Stocks

    7     $ 789,078     $ (46,860     3     $ 6,199     $ (1,801     10     $ 795,277     $ (48,661
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Common Stocks (Unaffiliated)

    2     $ 15,401     $ (4,644     1     $ 30     $ (9     3     $ 15,431     $ (4,653
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The unrealized losses of $1,143,810 on bonds as of December 31, 2023 are primarily attributable to higher interest rates and wider spread levels. As disclosed above, the Company’s bond portfolio was composed of 95.9% of investment-grade bonds as of December 31, 2023, which did not materially change from the 95.8% held at December 31, 2022. Full repayment of principal and interest is expected. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than par, which will equal amortized cost at maturity. Because the Company did not intend to sell these investments or lack the ability to hold them to recovery at December 31, 2023, these investments were not considered other-than-temporarily impaired.

5GI Securities

Securities with NAIC designation of 5GI are deemed to possess the credit characteristics of, and incur the regulatory treatment associated with, securities assigned an NAIC 5 designation. The Company’s overall exposure to 5GI securities was as shown below:

 

     Number of 5GI Securities      Carry Value      Aggregate Fair Value  

Investment

   12/31/2023      12/31/2022      12/31/2023      12/31/2022      12/31/2023      12/31/2022  

Bonds - Unaffiliated

     12        —       $ 10,280      $ —       $ 10,216      $ —   

Preferred Stock - Affiliated

     1        1      $ 241,130      $ 243,199      $ 241,130      $ 243,199  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

     13        1      $ 251,410      $ 243,199      $ 251,346      $ 243,199  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

5.

Mortgage Loans

The Company invests in commercial and residential first mortgage loans primarily in the United States. Investments are diversified by property type and geographic area in order to manage credit risk. The Company monitors the condition of the mortgage loans in its portfolio.

In those cases where mortgages have been restructured, appropriate allowances for losses are made. In those cases where, in management’s judgment, the mortgage loan’s value is impaired, appropriate losses are recorded.

The following table shows the geographic distribution of the carrying value of the Company’s mortgage loan portfolio as of December 31, 2023 and 2022:

 

     2023      2022  
     Carrying value      Percentage of total      Carrying value      Percentage of total  

Geographic region:

           

East

   $ 460,208        27%      $ 389,791        28%  

Midwest

     216,119        12%        117,104        9%  

South

     838,775        49%        418,297        30%  

West

     208,860        12%        465,085        33%  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,723,962        100%      $ 1,390,277        100%  
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company originated 23 and 294 mortgage loans in 2023 and 2022, respectively, and made additional investments after acquisition each year with a total cost of new loans of $381,778 and $757,778, respectively. Minimum and maximum rates of the new loans ranged from 4.76% to 12.00% and 3.27% to 9.52% in 2023 and 2022, respectively. During the years ended December 31, 2023 and 2022, the Company did not reduce interest rates on any outstanding mortgage loans. Mortgage loans are collateralized by the related properties. At the time the original loan was made during 2023, the loan to value ratio (“LTV”) was no more than 75.4% for commercial mortgages, and there were no new residential loans made during 2023. At the time the original loan was made during 2022, the LTV was no more than 100.1% of the property’s value for residential mortgages and 80.6% for commercial mortgages.

A mortgage loan is considered impaired when it is probable that the principal or interest is not collectible in accordance with the contractual terms of the loan. The allowance for credit losses is estimated using the present value of expected cash flows discounted at the loan’s effective interest rate or the fair value of the collateral. A specific allowance for loan loss is established for an impaired loan if the present value of expected cash flows discounted at the loan’s effective interest rate, or the fair value of the loan collateral, less cost to sell, is less than the recorded amount of the loan. The Company did not have a specific allowance for loan loss at December 31, 2023 and 2022. A general allowance for loan loss is established based on an assessment of past loss experience on groups of loans with similar characteristics and current economic conditions. The general allowance for loan loss was $2,460 at December 31, 2023 and 2022. While management believes that it uses the best information available to establish allowances, future adjustments may become necessary if economic conditions differ from the assumptions used in calculating them. At December 31, 2023 and 2022, the Company individually and collectively evaluated loans with a net carrying value of $1,721,502 and $1,387,817, respectively.

As of December 31, 2023 and 2022, the Company held no restructured loans. Should the Company hold any troubled debt, the Company may modify the terms of a loan by adjusting the interest rate, extending the maturity date, or both.

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

Delinquency status is determined based upon the occurrence of a missed contract payment. There were 5 loans totaling $2,764 past due greater than 90 days at December 31, 2023 and there were 11 loans totaling $1,105 past due greater than 90 days at December 31, 2022.

The Company accrues interest income on impaired loans to the extent it is deemed collectible. Otherwise, receipts on non-performing loans are not recognized as interest income until the loan is no longer impaired, is sold, or is otherwise made whole. Any cash collected during the period where the loan is impaired is applied to lower its carrying value. Other information is as follows:

 

     Residential      Commercial                
     Insured      All Other      Insured      All Other      Mezzanine      Total  
December 31, 2023                  

Recorded Investment

                 

Current

   $ —       $ 166,920      $ —       $ 1,455,803      $ 44,625      $ 1,667,348  

30 - 59 Days Past Due

     —         1,360        —         16,805        —         18,165  

60 - 89 Days Past Due

     —         314        —         35,371        —         35,685  

90 - 179 Days Past Due

     —         2,505        —         —         —         2,505  

180 + Days Past Due

     —         259        —         —         —         259  

Accruing Interest 90-179 Days Past Due

                 

Recorded Investment

   $ —       $ 2,505      $ —       $ —       $ —       $ 2,505  

Interest Accrued

     —         57        —         —         —         57  

Accruing Interest 180+ Days Past Due

                 

Recorded Investment

   $ —       $ 259      $ —       $ —       $ —       $ 259  

Interest Accrued

     —         26        —         —         —         26  

Interest Reduced

                 

Recorded Investment

   $ —       $ —       $ —       $ —       $ —       $ —   

Number of Loans

     —         —         —         —         —         —   

Percent Reduced

     —         —         —         —         —         —   

Participant or Co-lender in a Mortgage Loan Agreement

   $ —       $ —       $ —       $ 101,295      $ —       $ 101,295  

 

35


Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

     Residential      Commercial                
     Insured      All
Other
     Insured      All Other      Mezzanine      Total  

December 31, 2022

                 

Recorded Investment

                 

Current

   $ —       $ 75,678      $ —       $ 1,022,491      $ 26,871      $ 1,125,040  

30 - 59 Days Past Due

     —         100,206        —         140,271        —         240,477  

60 - 89 Days Past Due

     —         2,775        —         20,880        —         23,655  

90 - 179 Days Past Due

     —         866        —         —         —         866  

180 + Days Past Due

     —         239        —         —         —         239  

Accruing Interest 90-179 Days Past Due

                 

Recorded Investment

   $ —       $ 866      $ —       $ —       $ —       $ —   

Interest Accrued

     —         22        —         —         —         —   

Accruing Interest 180+ Days Past Due

                 

Recorded Investment

   $ —       $ 239      $ —       $ —       $ —       $ —   

Interest Accrued

     —         13        —         —         —         —   

Interest Reduced

                 

Recorded Investment

   $ —       $ —       $ —       $ —       $ —       $ —   

Number of Loans

     —         —         —         —         —         —   

Percent Reduced

     —         —         —         —         —         —   

Participant or Co-lender in a Mortgage Loan Agreement

   $ —       $ —       $ —       $ —       $ —       $ —   

The Company had no investments in impaired loans during 2023 or 2022.

Information regarding the Company’s allowance for credit losses is as follows at December 31, 2023 and 2022:

 

     2023      2022     

   

Balance at Beginning of Period

   $ 2,460      $ 2,460  

Additions Charged to Operations

     —         —   

Recoveries of Amounts Previously Charged Off

     —         —   
  

 

 

    

 

 

 

Balance at End of Period

   $ 2,460      $ 2,460  
  

 

 

    

 

 

 

The Company did not have any mortgage loans derecognized as a result of foreclosure during 2023 or 2022.

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

The credit quality of the Company’s mortgage loans is assessed by the debt service coverage ratio (“DSC”) and LTV. LTV is calculated using the most recently available appraisal value divided by the carrying value. LTV is calculated at the time of origination and updated annually. The DSC is calculated as the net operating income divided by the total debt service, and is updated annually. The following tables show the recorded gross investment of the Company’s mortgage loans aggregated by LTV and DSC as of December 31, 2023 and 2022:

 

     2023  
     Debt Service Coverage Ratio  
     >1.2x      1.0x to < 1.2x      <1.0x      Total  

Loan to Value Ratio

           

0%-59.99%

   $ 119,755      $ 486,046      $ 292,174      $ 897,975  

60%-69.99%

     140,200        159,776        51,225        351,201  

70%-79.99%

     77,448        97,900        98,691        274,039  

80% or greater

     6,360        —         23,029        29,389  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total (*)

   $ 343,763      $ 743,722      $ 465,119      $ 1,552,604  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     2022  
     Debt Service Coverage Ratio  
     >1.2x      1.0x to < 1.2x      <1.0x      Total  

Loan to Value Ratio

           

0%-59.99%

   $ 90,431      $ 421,565      $ 192,420      $ 704,416  

60%-69.99%

     142,717        117,030        33,847        293,594  

70%-79.99%

     69,950        55,526        66,025        191,501  

80% or greater

     —         —         21,002        21,002  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total (*)

   $ 303,098      $ 594,121      $ 313,294      $ 1,210,513  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

  (*)

excludes residential mortgages of $171,358 and $179,764 as of December 31, 2023 and 2022, respectively.

 

6.

Repurchase Agreements and Reverse Repurchase Agreements Transactions Accounted for as Secured Borrowing

Repurchase Agreements Transactions Accounted for as Secured Borrowing

The Company opportunistically uses repurchase transactions in conjunction with its liquidity management program to temporarily provide short-term liquidity from time-to-time as needed and determined by the Company. Using repurchase transactions to meet short-term liquidity needs positions the Company to be prepared to execute on opportunistic investments as they arise. The collateral posted by the Company is subject to fair value change and a decline in fair value could require the Company to post additional collateral to the counterparty. This risk is mitigated by the Company’s internal policy of limiting repurchase transactions to 5.0% of its available collateral. Potential liquidity risks arising from a duration mismatch between the collateral and repurchase transaction are mitigated by the Company’s other sources of liquidity, such as monthly principal and interest payments, premium sales by the Company, and other lines of credit established by the Company. The Company typically receives cash for its repurchase transactions; however, the Company has received United States Treasuries on occasion. In the case of United State Treasuries, the Company monitors the price of the Treasury collateral to ensure the Company is adequately collateralized.

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

An overview of the Company’s repurchase agreements as of December 31, 2023 is as follows:

Type of Repurchase Trades Used:

 

     FIRST
QUARTER
   SECOND
QUARTER
   THIRD
QUARTER
   FOURTH
QUARTER

Bilateral (YES/NO)

   Yes    Yes    Yes    Yes

Tri-Party (YES/NO)

   No    No    No    No

Original (Flow) & Residual Maturity:

 

     FIRST
QUARTER
     SECOND
QUARTER
     THIRD
QUARTER
     FOURTH
QUARTER
 

Maximum Amount

           

Open - No Maturity

   $ —       $ —       $ 561      $ —   

Overnight

     —         —         —         —   

2 Days to 1 Week

     —         —         —         —   

> 1 Week to 1 Month

     100,561        202,222        —         —   

> 1 Month to 3 Months

     150,232        265,837        424,040        440,595  

> 3 Months to 1 Year

     277,379        209,950        348,935        375,442  

> 1 Year

     —         —         —         —   

Ending Balance

           

Open - No Maturity

   $ —       $ —       $ 561      $ —   

Overnight

     —         —         —         —   

2 Days to 1 Week

     —         —         —         —   

> 1 Week to 1 Month

     100,561        202,222        —         —   

> 1 Month to 3 Months

     150,232        265,837        424,040        440,595  

> 3 Months to 1 Year

     277,379        209,950        348,935        375,442  

> 1 Year

     —         —         —         —   

Securities “Sold” Under Repurchase - Secured Borrowing:

 

     FIRST
QUARTER
     SECOND
QUARTER
     THIRD
QUARTER
     FOURTH
QUARTER
 

Maximum Amount

           

BACV

     XXX        XXX        XXX      $ 816,037  

Nonadmitted - Subset of BACV

     XXX        XXX        XXX        —   

Fair Value

   $ 590,797      $ 754,596      $ 899,498      $ 944,653  

Ending Balance

           

BACV

     XXX        XXX        XXX      $ 816,037  

Nonadmitted - Subset of BACV

     XXX        XXX        XXX        —   

Fair Value

   $ 590,797      $ 754,596      $ 899,498      $ 944,653  

BACV = Book-Adjusted Carrying Value

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

Securities Sold Under Repurchase - Secured Borrowing by NAIC Designation:

 

     NONE      NAIC 1      NAIC 2      NAIC 3      NAIC 4      NAIC 5      NAIC 6      Nonadmitted  

Bonds - BACV

   $ —       $ 464,785      $ 351,252      $ —       $ —       $ —       $ —       $ —   

Bonds - FV

     —         522,807        421,846        —         —         —         —         —   

LB & SS - BACV

     —         —         —         —         —         —         —         —   

LB & SS - FV

     —         —         —         —         —         —         —         —   

Preferred Stock - BACV

     —         —         —         —         —         —         —         —   

Preferred Stock - FV

     —         —         —         —         —         —         —         —   

Common Stock

     —         —         —         —         —         —         —         —   

Total Assets - BACV

   $ —       $ 464,785      $ 351,252      $ —       $ —       $ —       $ —       $ —   

Total Assets - FV

   $ —       $ 522,807      $ 421,846      $ —       $ —       $ —       $ —       $ —   

FV = Fair Value

                       

Collateral Received - Secured Borrowing:

 

     FIRST
QUARTER
     SECOND
QUARTER
     THIRD
QUARTER
     FOURTH
QUARTER
 

Maximum Amount

           

Cash

   $ —       $ —       $ —       $ —   

Securities (FV)

     617,797        799,596        1,024,498        1,109,653  

Nonadmitted

     —         —         —         —   

Ending Balance

           

Cash

   $ —       $ —       $ —       $ —   

Securities (FV)

     617,797        799,596        1,024,498        1,109,653  

Nonadmitted

     —         —         —         —   

Cash & Non-Cash Collateral Received - Secured Borrowing by NAIC Designation:

 

     NONE      NAIC 1      NAIC 2      NAIC 3      NAIC 4      NAIC 5      NAIC 6      Nonadmitted  

Cash

   $ —       $ 165,000      $ —       $ —       $ —       $ —       $ —       $ —   

Bonds - FV

     —         522,807        421,846        —         —         —         —         —   

LB & SS - FV

     —         —         —         —         —         —         —         —   

Preferred Stock - FV

     —         —         —         —         —         —         —         —   

Common Stock

     —         —         —         —         —         —         —         —   

Mortgage Loans - FV

     —         —         —         —         —         —         —         —   

Real Estate - FV

     —         —         —         —         —         —         —         —   

Derivatives - FV

     —         —         —         —         —         —         —         —   

Other Invested Assets - FV

     —         —         —         —         —         —         —         —   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Collateral Assets - FV

   $ —       $ 687,807      $ 421,846      $ —       $ —       $ —       $ —       $ —   

 

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Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

Allocation of Aggregate Collateral by Remaining Contractual Maturity:

 

     Fair Value             

Overnight and Continuous

   $ —   

30 Days or Less

     968,436  

31 to 90 Days

     141,217  

> 90 Days

     —   

Reverse Repurchase Agreements Transactions Accounted for as Secured Borrowing

The Company engages in a reverse repurchase agreement program. This program is intended to provide opportunistic, short-term financing to counterparties. Each repurchase agreement entered into is governed by the terms of the Master Repurchase Agreement (“MRA”) as agreed to between the parties. Under the terms of the MRA, the Company purchases investments from the counterparty and the counterparty agrees to repurchase the same, or similar investments, back from the Company on a specified date at a specified price. On the maturity date, the Company may elect to enter into a new repurchase agreement with that same counterparty. The Company’s decision to do so will be dependent on its liquidity needs and assessment of the counterparty, as well as the collateral’s performance.

As a risk mitigant, the Company requires its counterparties to post collateral in excess of the loan amount, otherwise known as over collateralization. The amount of over collateralization is up to the Company’s discretion, but will not be less than 102%. On average, the Company has required over collateralization of 120%. The short duration of the repurchase agreements and the over collateralization required by the Company mitigate potential financial risks associated with these transactions.

An overview of the Company’s reverse repurchase agreements as of December 31, 2023 is as follows:

Type of Repurchase Trades Used:

 

     FIRST
QUARTER
   SECOND
QUARTER
   THIRD
QUARTER
   FOURTH
QUARTER

Bilateral (Yes/No)

   Yes    Yes    Yes    Yes

Tri-Party (Yes/No)

   No    No    No    No

 

40


Table of Contents

DELAWARE LIFE INSURANCE COMPANY

(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)

NOTES TO STATUTORY FINANCIAL STATEMENTS AS OF DECEMBER 31, 2023 AND 2022 AND

FOR THE YEARS ENDED DECEMBER 31, 2023, 2022 AND 2021

(In thousands of dollars, except per share data)

 

 

 

Original (Flow) & Residual Maturity:

 

     FIRST
QUARTER
     SECOND
QUARTER
     THIRD
QUARTER
     FOURTH
QUARTER
 

Maximum Amount

           

Open - No Maturity

   $ —       $ —       $ —       $ —   

Overnight

     —         —         —         —   

2 Days to 1 Week

     —         —         —         —   

> 1 Week to 1 Month

     55,653        148,330        —         —   

> 1 Month to 3 Months

     387,775        314,200        275,000        125,000  

> 3 Months to 1 Year

     837,530        629,178        1,032,707        1,122,707  

> 1 Year

     —         —         —         —   

Ending Balance

           

Open - No Maturity

   $ —       $ —       $ —       $ —   

Overnight

     —         —         —         —   

2 Days to 1 Week

     —         —         —         —   

> 1 Week to 1 Month

     55,653        148,330        —         —   

> 1 Month to 3 Months

     387,775        314,220        275,000        125,000  

> 3 Months to 1 Year

     837,530        629,178        1,032,707        1,122,707  

> 1 Year

     —         —         —         —   

Fair Value of Securities Acquired Under Repurchase - Secured Borrowing:

 

     FIRST
QUARTER
     SECOND
QUARTER
     THIRD
QUARTER
     FOURTH
QUARTER
 

Maximum Amount

   $ 1,648,572      $ 1,400,264      $ 1,323,589      $ 1,264,324  

Ending Balance

     1,648,572        1,400,264        1,323,589        1,264,324  

Securities Acquired Under Repurchase - Secured Borrowing by NAIC Designation:

 

     NONE      NAIC 1      NAIC 2      NAIC 3      NAIC 4      NAIC 5      NAIC 6      Nonadmitted  

Bonds - FV

   $ 1,264,324      $ —       $ —       $ —       $ —       $ —       $ —       $ —   

LB & SS - FV

     —         —         —         —         —         —         —         —   

Preferred Stock - FV

     —         —         —         —         —         —         —         —   

Common Stock

     —         —         —         —         —         —         —         —   

Mortgage Loans - FV

     —         —         —         —         —         —         —         —   

Real Estate - FV

     —         —         —         —         —         —         —         —   

Derivatives - FV

     —         —         —         —         —         —         —         —   

Other Invested Assets - FV

     —         —         —         —         —         —         —         —