KMA Variable Account
Financial Statements as of and for the Year Ended December 31, 2023 and Report
of Independent Registered Public Accounting Firm
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
December 31, 2023
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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 KMA Variable Account:
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 KMA Variable Account (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 Companys Separate Accounts since 2021.
Hartford, Connecticut
April 23, 2024
Columbia Variable PortfolioDividend Opportunity Fund Class 1 Sub-Account (C25) (1)
Columbia Variable PortfolioGovernment Money Market Fund Class 1 Sub-Account (C75) (1)
Columbia Variable PortfolioLarge Cap Growth Fund Class 1 Sub-Account (C59) (1)
Columbia Variable PortfolioOverseas Core Fund Class 1 Sub-Account (C37) (1)
Columbia Variable PortfolioSmall Company Growth Fund Class 1 Sub-Account (C72) (1)
Columbia Variable PortfolioStrategic Income Fund Class 1 Sub-Account (151) (1)
Columbia Variable PortfolioU.S. Government Mortgage Fund Class 1 Sub-Account (C69) (1)
Allspring Core Plus Bond Fund (Class A) Sub-Account (W44) (1)
Allspring Discovery Mid Cap Growth Fund (Class A) Sub-Account (W43) (2)
Allspring Money Market Fund (Class A) Sub-Account (W45) (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. |
(2) | Statement of changes in net assets for the year ended December 31, 2022. |
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2023
Assets | Liabilities | |||||||||||||||||||||||||||||||
Shares | Cost | Investment at fair value |
Receivable from Sponsor |
Dividend Receivable |
Total assets | Payable to Sponsor |
Net Assets | |||||||||||||||||||||||||
Columbia Variable PortfolioDividend Opportunity Fund Class 1 Sub-Account (C25) |
174,341 | $ | 3,477,372 | $ | 6,841,146 | $ | 21,214 | $ | | $ | 6,862,360 | $ | | $ | 6,862,360 | |||||||||||||||||
Columbia Variable PortfolioGovernment Money Market Fund Class 1 Sub-Account (C75) |
11,070,221 | 11,070,221 | 11,070,221 | | 1,531 | 11,071,752 | 103,875 | 10,967,877 | ||||||||||||||||||||||||
Columbia Variable PortfolioLarge Cap Growth Fund Class 1 Sub-Account (C59) |
411,467 | 6,948,024 | 15,339,494 | | | 15,339,494 | 165,049 | 15,174,445 | ||||||||||||||||||||||||
Columbia Variable PortfolioOverseas Core Fund Class 1 Sub-Account (C37) |
134,323 | 1,809,069 | 1,793,214 | | | 1,793,214 | 30,036 | 1,763,178 | ||||||||||||||||||||||||
Columbia Variable PortfolioSmall Company Growth Fund Class 1 Sub-Account (C72) |
878,353 | 12,791,634 | 10,232,813 | 152,900 | | 10,385,713 | | 10,385,713 | ||||||||||||||||||||||||
Columbia Variable PortfolioStrategic Income Fund Class 1 Sub-Account (151) |
521,308 | 2,110,145 | 1,928,841 | 21,164 | | 1,950,005 | | 1,950,005 | ||||||||||||||||||||||||
Columbia Variable PortfolioU.S. Government Mortgage Fund Class 1 Sub-Account (C69) |
107,857 | 1,112,943 | 963,159 | | | 963,159 | 2,586 | 960,573 | ||||||||||||||||||||||||
Allspring Core Plus Bond Fund (Class A) Sub-Account (W44) |
579 | 7,050 | 6,568 | | | 6,568 | 221 | 6,347 | ||||||||||||||||||||||||
Allspring Discovery Mid Cap Growth Fund (Class A) Sub-Account (W43) ¹ |
| | | | | | | | ||||||||||||||||||||||||
Allspring Money Market Fund (Class A) Sub-Account (W45) |
7,566 | 7,566 | 7,566 | | | 7,566 | 254 | 7,312 |
1 | This Sub-Account is active but had a zero balance as of December 31, 2023, therefore it is not displayed on the Statements of Operations. |
The accompanying notes are an integral part of these financial statements.
- 3 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
STATEMENT OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 2023
Units | Value Applicable to Owners of Deferred Variable Annuity Contracts |
Reserve for Variable Annuities |
Net Assets | |||||||||||||
C25 |
298,646 | 6,612,248 | 250,112 | $ | 6,862,360 | |||||||||||
C75 |
1,155,576 | 9,583,012 | 1,384,865 | 10,967,877 | ||||||||||||
C59 |
368,001 | 14,123,659 | 1,050,786 | 15,174,445 | ||||||||||||
C37 |
129,762 | 1,676,311 | 86,867 | 1,763,178 | ||||||||||||
C72 |
65,173 | 9,070,520 | 1,315,193 | 10,385,713 | ||||||||||||
151 |
53,972 | 1,711,241 | 238,764 | 1,950,005 | ||||||||||||
C69 |
96,923 | 824,239 | 136,334 | 960,573 | ||||||||||||
W44 |
501 | | 6,347 | 6,347 | ||||||||||||
W43 |
| | | | ||||||||||||
W45 |
780 | | 7,312 | 7,312 |
The accompanying notes are an integral part of these financial statements.
- 4 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
FOR THE YEAR ENDED DECEMBER 31, 2023
C25 Sub-Account |
C75 Sub-Account |
C59 Sub-Account |
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Income: |
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Dividend income |
$ | | $ | 535,993 | $ | | ||||||
Expenses: |
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Mortality and expense risk charges |
(84,887 | ) | (140,977 | ) | (172,158 | ) | ||||||
Distribution charges |
(9,357 | ) | (13,411 | ) | (16,876 | ) | ||||||
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Net investment income (loss) |
(94,244 | ) | 381,605 | (189,034 | ) | |||||||
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Net realized and change in unrealized gains (losses): |
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Net realized gains (losses) on sale of investments |
636,846 | | 1,783,035 | |||||||||
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Net realized gains (losses) |
636,846 | | 1,783,035 | |||||||||
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Net change in unrealized appreciation (depreciation) |
(307,488 | ) | | 3,214,970 | ||||||||
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Net realized and change in unrealized gains (losses) |
329,358 | | 4,998,005 | |||||||||
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Net increase (decrease) in net assets from operations |
$ | 235,114 | $ | 381,605 | $ | 4,808,971 | ||||||
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The accompanying notes are an integral part of these financial statements.
- 5 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2023
C37 Sub-Account |
C72 Sub-Account |
151 Sub-Account |
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Income: |
||||||||||||
Dividend income |
$ | 33,963 | $ | | $ | 70,651 | ||||||
Expenses: |
||||||||||||
Mortality and expense risk charges |
(21,711 | ) | (115,378 | ) | (23,284 | ) | ||||||
Distribution charges |
(2,313 | ) | (11,094 | ) | (2,150 | ) | ||||||
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Net investment income (loss) |
9,939 | (126,472 | ) | 45,217 | ||||||||
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|
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Net realized and change in unrealized gains (losses): |
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Net realized gains (losses) on sale of investments |
(21,295 | ) | (663,236 | ) | (47,393 | ) | ||||||
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Net realized gains (losses) |
(21,295 | ) | (663,236 | ) | (47,393 | ) | ||||||
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|
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Net change in unrealized appreciation (depreciation) |
242,698 | 2,950,336 | 153,251 | |||||||||
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|
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Net realized and change in unrealized gains (losses) |
221,403 | 2,287,100 | 105,858 | |||||||||
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Net increase (decrease) in net assets from operations |
$ | 231,342 | $ | 2,160,628 | $ | 151,075 | ||||||
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The accompanying notes are an integral part of these financial statements.
- 6 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 2023
C69 Sub-Account |
W44 Sub-Account |
W45 Sub-Account |
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Income: |
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Dividend income |
$ | 27,441 | $ | 275 | $ | 379 | ||||||
Expenses: |
||||||||||||
Mortality and expense risk charges |
(12,219 | ) | (69 | ) | (80 | ) | ||||||
Distribution charges |
(1,162 | ) | | | ||||||||
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Net investment income (loss) |
14,060 | 206 | 299 | |||||||||
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Net realized and change in unrealized gains (losses): |
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Net realized gains (losses) on sale of investments |
(33,577 | ) | (105 | ) | | |||||||
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Net realized gains (losses) |
(33,577 | ) | (105 | ) | | |||||||
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Net change in unrealized appreciation (depreciation) |
59,527 | 218 | | |||||||||
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Net realized and change in unrealized gains (losses) |
25,950 | 113 | | |||||||||
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Net increase (decrease) in net assets from operations |
$ | 40,010 | $ | 319 | $ | 299 | ||||||
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The accompanying notes are an integral part of these financial statements.
- 7 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
C25 Sub-Account | C75 Sub-Account | |||||||||||||||
December 31, 2023 |
December 31, 2022 |
December 31, 2023 |
December 31, 2022 |
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Operations: |
||||||||||||||||
Net investment income (loss) |
$ | (94,244 | ) | $ | (108,721 | ) | $ | 381,605 | $ | (25,404 | ) | |||||
Net realized gains (losses) |
636,846 | 902,585 | | | ||||||||||||
Net change in unrealized appreciation (depreciation) |
(307,488 | ) | (1,032,634 | ) | | | ||||||||||
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Increase (decrease) from operations |
235,114 | (238,770 | ) | 381,605 | (25,404 | ) | ||||||||||
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Contract Owner Transactions: |
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Accumulation Activity: |
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Purchase payments received |
139,533 | 112,504 | 110,381 | 344,383 | ||||||||||||
Transfers between Sub-Accounts (including the Fixed Account), net |
85,144 | 87,484 | (20,917 | ) | 59,775 | |||||||||||
Withdrawals, surrenders, annuitizations and contract charges |
(888,048 | ) | (1,275,530 | ) | (1,549,565 | ) | (2,604,957 | ) | ||||||||
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Net increase (decrease) from contract owner transactions |
(663,371 | ) | (1,075,542 | ) | (1,460,101 | ) | (2,200,799 | ) | ||||||||
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Annuitization Activity: |
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Annuitizations |
66,364 | 24,580 | 133,016 | 307,275 | ||||||||||||
Annuity payments and contract charges |
(38,073 | ) | (38,409 | ) | (211,637 | ) | (253,402 | ) | ||||||||
Transfers between Sub-Accounts, net |
(3,145 | ) | (3,470 | ) | (7,967 | ) | (8,270 | ) | ||||||||
Adjustments to annuity reserves |
5,914 | 4,935 | 1,477 | 77,740 | ||||||||||||
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Net annuitization activity |
31,060 | (12,364 | ) | (85,111 | ) | 123,343 | ||||||||||
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Total increase (decrease) in net assets |
(397,197 | ) | (1,326,676 | ) | (1,163,607 | ) | (2,102,860 | ) | ||||||||
Net assets at beginning of year |
7,259,557 | 8,586,233 | 12,131,484 | 14,234,344 | ||||||||||||
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Net assets at end of year |
$ | 6,862,360 | $ | 7,259,557 | $ | 10,967,877 | $ | 12,131,484 | ||||||||
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The accompanying notes are an integral part of these financial statements.
- 8 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
C59 Sub-Account | C37 Sub-Account | |||||||||||||||
December 31, 2023 |
December 31, 2022 |
December 31, 2023 |
December 31, 2022 |
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Operations: |
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Net investment income (loss) |
$ | (189,034 | ) | $ | (207,467 | ) | $ | 9,939 | $ | (9,664 | ) | |||||
Net realized gains (losses) |
1,783,035 | 1,913,072 | (21,295 | ) | 101,258 | |||||||||||
Net change in unrealized appreciation (depreciation) |
3,214,970 | (8,252,227 | ) | 242,698 | (440,566 | ) | ||||||||||
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Increase (decrease) from operations |
4,808,971 | (6,546,622 | ) | 231,342 | (348,972 | ) | ||||||||||
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Contract Owner Transactions: |
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Accumulation Activity: |
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Purchase payments received |
98,989 | 65,431 | 18,748 | 2,815 | ||||||||||||
Transfers between Sub-Accounts (including the Fixed Account), net |
(73,900 | ) | 50,589 | 2,516 | (6,869 | ) | ||||||||||
Withdrawals, surrenders, annuitizations and contract charges |
(1,985,601 | ) | (1,949,085 | ) | (152,111 | ) | (141,849 | ) | ||||||||
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Net increase (decrease) from contract owner transactions |
(1,960,512 | ) | (1,833,065 | ) | (130,847 | ) | (145,903 | ) | ||||||||
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Annuitization Activity: |
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Annuitizations |
202,738 | 71,230 | 689 | | ||||||||||||
Annuity payments and contract charges |
(156,202 | ) | (136,519 | ) | (9,373 | ) | (10,007 | ) | ||||||||
Transfers between Sub-Accounts, net |
| | (2,209 | ) | (2,355 | ) | ||||||||||
Adjustments to annuity reserves |
(103,663 | ) | (16,731 | ) | (5,659 | ) | (639 | ) | ||||||||
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Net annuitization activity |
(57,127 | ) | (82,020 | ) | (16,552 | ) | (13,001 | ) | ||||||||
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Total increase (decrease) in net assets |
2,791,332 | (8,461,707 | ) | 83,943 | (507,876 | ) | ||||||||||
Net assets at beginning of year |
12,383,113 | 20,844,820 | 1,679,235 | 2,187,111 | ||||||||||||
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Net assets at end of year |
$ | 15,174,445 | $ | 12,383,113 | $ | 1,763,178 | $ | 1,679,235 | ||||||||
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The accompanying notes are an integral part of these financial statements.
- 9 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
C72 Sub-Account | 151 Sub-Account | |||||||||||||||
December 31, 2023 |
December 31, 2022 |
December 31, 2023 |
December 31, 2022 |
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Operations: |
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Net investment income (loss) |
$ | (126,472 | ) | $ | (145,490 | ) | $ | 45,217 | $ | 35,644 | ||||||
Net realized gains (losses) |
(663,236 | ) | 3,799,450 | (47,393 | ) | 134 | ||||||||||
Net change in unrealized appreciation (depreciation) |
2,950,336 | (9,766,090 | ) | 153,251 | (355,098 | ) | ||||||||||
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Increase (decrease) from operations |
2,160,628 | (6,112,130 | ) | 151,075 | (319,320 | ) | ||||||||||
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Contract Owner Transactions: |
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Accumulation Activity: |
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Purchase payments received |
59,807 | 35,081 | 16,903 | | ||||||||||||
Transfers between Sub-Accounts (including the Fixed Account), net |
(8,252 | ) | (244,149 | ) | 22,804 | 52,664 | ||||||||||
Withdrawals, surrenders, annuitizations and contract charges |
(956,617 | ) | (1,958,349 | ) | (230,164 | ) | (311,257 | ) | ||||||||
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Net increase (decrease) from contract owner transactions |
(905,062 | ) | (2,167,417 | ) | (190,457 | ) | (258,593 | ) | ||||||||
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Annuitization Activity: |
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Annuitizations |
314,693.00 | | 7,086 | 10,900 | ||||||||||||
Annuity payments and contract charges |
(175,650 | ) | (148,967 | ) | (36,304 | ) | (58,498 | ) | ||||||||
Transfers between Sub-Accounts, net |
(619 | ) | (631 | ) | (3,217 | ) | (3,606 | ) | ||||||||
Adjustments to annuity reserves |
35,003 | (52,959 | ) | 6,230 | 695 | |||||||||||
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Net annuitization activity |
173,427 | (202,557 | ) | (26,205 | ) | (50,509 | ) | |||||||||
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Total increase (decrease) in net assets |
1,428,993 | (8,482,104 | ) | (65,587 | ) | (628,422 | ) | |||||||||
Net assets at beginning of year |
8,956,720 | 17,438,824 | 2,015,592 | 2,644,014 | ||||||||||||
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Net assets at end of year |
$ | 10,385,713 | $ | 8,956,720 | $ | 1,950,005 | $ | 2,015,592 | ||||||||
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The accompanying notes are an integral part of these financial statements.
- 10 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
C69 Sub-Account | W44 Sub-Account | |||||||||||||||
December 31, 2023 |
December 31, 2022 |
December 31, 2023 |
December 31, 2022 |
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Operations: |
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Net investment income (loss) |
$ | 14,060 | $ | 8,834 | $ | 206 | $ | 131 | ||||||||
Net realized gains (losses) |
(33,577 | ) | (22,677 | ) | (105 | ) | (70 | ) | ||||||||
Net change in unrealized appreciation (depreciation) |
59,527 | (191,950 | ) | 218 | (1,420 | ) | ||||||||||
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Increase (decrease) from operations |
40,010 | (205,793 | ) | 319 | (1,359 | ) | ||||||||||
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Contract Owner Transactions: |
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Accumulation Activity: |
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Purchase payments received |
| 13,040 | | | ||||||||||||
Transfers between Sub-Accounts (including the Fixed Account), net |
706 | (1,376 | ) | | | |||||||||||
Withdrawals, surrenders, annuitizations and contract charges |
(130,050 | ) | (214,388 | ) | | | ||||||||||
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Net increase (decrease) from contract owner transactions |
(129,344 | ) | (202,724 | ) | | | ||||||||||
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Annuitization Activity: |
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Annuitizations |
49,342 | 6,801 | | | ||||||||||||
Annuity payments and contract charges |
(30,209 | ) | (36,162 | ) | (741 | ) | (783 | ) | ||||||||
Transfers between Sub-Accounts, net |
(477 | ) | (516 | ) | | | ||||||||||
Adjustments to annuity reserves |
(12,133 | ) | (2,989 | ) | 99 | 167 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net annuitization activity |
6,523 | (32,866 | ) | (642 | ) | (616 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total increase (decrease) in net assets |
(82,811 | ) | (441,383 | ) | (323 | ) | (1,975 | ) | ||||||||
Net assets at beginning of year |
1,043,384 | 1,484,767 | 6,670 | 8,645 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net assets at end of year |
$ | 960,573 | $ | 1,043,384 | $ | 6,347 | $ | 6,670 | ||||||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
- 11 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022
W43 Sub-Account | W45 Sub-Account | |||||||||||||||
December 31, 2023 |
December 31, 2022 |
December 31, 2023 |
December 31, 2022 |
|||||||||||||
Operations: |
||||||||||||||||
Net investment income (loss) |
$ | | $ | (132 | ) | $ | 299 | $ | 29 | |||||||
Net realized gains (losses) |
| (4,666 | ) | | | |||||||||||
Net change in unrealized appreciation (depreciation) |
| (8,101 | ) | | | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Increase (decrease) from operations |
| (12,899 | ) | 299 | 29 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Contract Owner Transactions: |
||||||||||||||||
Accumulation Activity: |
||||||||||||||||
Purchase payments received |
| | | | ||||||||||||
Transfers between Sub-Accounts (including the Fixed Account), net |
| 309 | | | ||||||||||||
Withdrawals, surrenders, annuitizations and contract charges |
| | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net increase (decrease) from contract owner transactions |
| 309 | | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Annuitization Activity: |
||||||||||||||||
Annuitizations |
| | | | ||||||||||||
Annuity payments and contract charges |
| (26,748 | ) | (912 | ) | (917 | ) | |||||||||
Transfers between Sub-Accounts, net |
| | | | ||||||||||||
Adjustments to annuity reserves |
| (270 | ) | 120 | 109 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net annuitization activity |
| (27,018 | ) | (792 | ) | (808 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total increase (decrease) in net assets |
| (39,608 | ) | (493 | ) | (779 | ) | |||||||||
Net assets at beginning of year |
| 39,608 | 7,805 | 8,584 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net assets at end of year |
$ | | $ | | $ | 7,312 | $ | 7,805 | ||||||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
- 12 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
FOR THE YEAR ENDED DECEMBER 31, 2023
1. BUSINESS AND ORGANIZATION
KMA Variable Account (the Variable Account) is a separate account of Delaware Life Insurance Company (the Sponsor), and was established as a funding vehicle for individual variable annuity 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. Except for Keystone-100 contract holders whose contract series were issued prior to May 1, 1986, pursuant to Section 457 of the Internal Revenue Code, the eligible fund options for the annuity contracts are as follows:
Columbia Funds Variable Insurance Trust (the Trust)
Columbia Variable PortfolioDividend Opportunity Fund, (Class 1)
Columbia Variable PortfolioGovernment Money Market Fund, (Class 1)
Columbia Variable PortfolioLarge Cap Growth Fund, (Class 1)
Columbia Variable PortfolioOverseas Core Fund, (Class 1)
Columbia Variable PortfolioSmall Company Growth Fund, (Class 1)
Columbia Variable PortfolioStrategic Income Fund, (Class 1)
Columbia Variable PortfolioU.S. Government Mortgage Fund, (Class 1)
The following eligible fund options are only available for Keystone-100 contract holders:
Allspring Core Plus Bond Fund, (Class A)
Allspring Discovery Mid Cap Growth Fund, (Class A)
Allspring Money Market Fund, (Class A)
Under applicable insurance law, the assets and liabilities of the Variable Account are clearly identified and distinguished from the Sponsors 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, merged, or commenced 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.
- 13 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
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 Sponsors 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.
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
At any time during the accumulation phase (the period before the first annuity payment), the contract owner may elect to receive a cash withdrawal payment under the contract. If the contract owner requests a full withdrawal, the contract owner will receive the value of their account at the end of period, less the contract maintenance charge for the current contract year and any applicable withdrawal charge.
If the contract owner requests a partial withdrawal, the contract owner will receive the amount requested less any applicable withdrawal charge and the account value will be reduced by the amount requested. Any requests for partial withdrawals that would result in the value of the contract owners account being reduced to an amount less than the contract maintenance charge for the current contract year is treated as a request for a full withdrawal.
- 14 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Annuitization
On the annuity commencement date, the contracts accumulation account is canceled and its adjusted value is applied to provide an annuity. The adjusted value will be equal to the value of the accumulation account for the period that ends immediately before the annuity commencement date, reduced by any applicable premium taxes or similar taxes and a proportionate amount of the contract maintenance charge.
Annuity Payments
The amount of the first variable annuity payment is determined in accordance with the annuity payment rates found in the contract.
The number of units to be credited in respect of a particular Sub-Account is determined by dividing that portion of the first variable annuity payment attributable to that Sub-Account by the annuity unit value of that Sub-Account for the period that ends immediately before the annuity commencement date. The number of units of each Sub-Account credited to the contract then remains fixed, unless an exchange of units is made. The dollar amount of each variable annuity payment after the first may increase, decrease or remain constant, depending on the investment performance of the Sub-Accounts.
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.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires Sponsors management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the period. The most significant estimates are the fair value measurement of investments and the calculation of reserve for variable annuities. Actual results could vary from the amounts derived from Sponsor managements estimates.
Subsequent events
The Sponsors management has evaluated events subsequent to December 31, 2023, noting that there are no subsequent events requiring accounting adjustments or disclosure.
- 15 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
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 entitys 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.
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.
Contracts sold to persons who are officers, directors, or employees of the Sponsor, trustees or officers of the Trust, employees of the investment advisor or sub-investment advisor of the Trust are not subject to a contract maintenance charge, sales charge or the contingent deferred sales charges and have a mortality and expense risk charge of 0.35% per year.
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 from the Variable Account at the end of each valuation period to cover the risks assumed by the Sponsor. The deductions are transferred periodically to the Sponsor. As of December 31, 2023, the deduction is at an effective annual rate between 1.00% and 1.35% of average separate account assets for non-affiliated contractholders. These charges are reflected in the Statements of Operations.
Sales charge
A daily sales charge is deducted as part of the calculation of the Accumulation Unit values at an effective annual rate of 0.15% of the average daily net asset value of the Sub-Account. The Accumulation Unit is the unit of measurement for the calculation of the Variable Account value. The sales charge is not deducted during the annuity period, which is when guaranteed payments are paid out to the annuitant. The daily sales charge is designed to compensate the Sponsor for certain sale distribution expenses and is reflected in the Distribution charges line on the Statements of Operations.
Certificate maintenance charge
Each year on the account anniversary date, an annual $36 certificate maintenance charge is deducted from the Variable Account to reimburse the Sponsor for certain administrative expenses. This charge is reflected in the Withdrawals, surrenders, annuitizations and contract charges line on the Statements of Changes in Net Assets.
- 16 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
5. CONTRACT CHARGES (CONTINUED)
Surrender charges
The Sponsor does not deduct a sales charge from purchase payments. However, a surrender charge (contingent deferred sales charge) may be deducted to cover certain expenses relating to the sale of the contract if the contract holder requests a full withdrawal prior to reaching the pay-out phase. In no event shall the aggregate surrender charges exceed 7% of the portion of the amount the contract participant surrenders that represents purchase payments made during the seven years immediately preceding the request for surrender. These charges are reflected in the Withdrawals, surrenders, annuitizations and contract charges line on 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 when incurred.
6. RESERVE FOR VARIABLE ANNUITIES
Reserve for variable annuities represents the actuarial present value of future contract benefits for those contract holders who are in the payout phase of their contract and chose the variable payout option. Determined at issue, annuity reserves are calculated using the 1983 Individual Annuitant Mortality Table, Annuity 2000 Table or 2012 Individual Annuitant Mortality Table and an assumed interest rate of 3.0% unless the annuitant elects otherwise, in which case the rate may vary from 3.0% to 6.0%, as regulated by the laws of the respective states. The mortality tables utilized are subject to change in conjunction with changes in the tables currently adopted by the National Association of Insurance Commissioners. The mortality risk is fully borne by the Sponsor and may result in additional amounts being transferred into the variable annuity account by the Sponsor to cover greater longevity of annuities than expected. Required adjustments to the reserves are accomplished by transfers to or from the Sponsor.
7. 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 | |||||||
C25 |
$ | 317,354 | $ | 1,051,762 | ||||
C75 |
742,625 | 1,910,524 | ||||||
C59 |
337,119 | 2,442,733 | ||||||
C37 |
53,000 | 186,909 | ||||||
C72 |
574,304 | 1,469,773 | ||||||
151 |
155,833 | 334,594 | ||||||
C69 |
71,118 | 170,814 | ||||||
W44 |
275 | 810 | ||||||
W45 |
379 | 992 |
- 17 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
8. 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) |
||||||||||
C25 |
15,853 | 45,091 | (29,238 | ) | ||||||||
C75 |
31,234 | 195,983 | (164,749 | ) | ||||||||
C59 |
11,436 | 65,238 | (53,802 | ) | ||||||||
C37 |
1,963 | 12,849 | (10,886 | ) | ||||||||
C72 |
2,704 | 8,038 | (5,334 | ) | ||||||||
151 |
2,581 | 9,288 | (6,707 | ) | ||||||||
C69 |
5,293 | 17,264 | (11,971 | ) | ||||||||
W44 |
| 61 | (61 | ) | ||||||||
W45 |
| 95 | (95 | ) |
The changes in units outstanding for the year ended December 31, 2022 were as follows:
Units Issued |
Units Redeemed |
Net Increase (Decrease) |
||||||||||
C25 |
18,350 | 69,087 | (50,737 | ) | ||||||||
C75 |
152,458 | 395,893 | (243,435 | ) | ||||||||
C59 |
32,213 | 88,867 | (56,654 | ) | ||||||||
C37 |
3,579 | 16,535 | (12,956 | ) | ||||||||
C72 |
1,532 | 15,034 | (13,502 | ) | ||||||||
151 |
4,707 | 13,829 | (9,122 | ) | ||||||||
C69 |
3,647 | 25,889 | (22,242 | ) | ||||||||
W44 |
| 63 | (63 | ) | ||||||||
W43 |
15 | 869 | (854 | ) | ||||||||
W45 |
| 98 | (98 | ) |
9. TAX DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Code, a variable annuity contract, other than a pension plan contract, is not treated as an annuity 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.
- 18 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
10. FINANCIAL HIGHLIGHTS
The summary of units outstanding, unit value (some of which may be rounded), net assets, investment income ratios, expense ratios (excluding expenses of the underlying mutual funds) and the total return, for each of the five years in the period ended December 31, is as follows:
At December 31, | For the years ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
Units | Unit Value4 | Net Assets | Investment Income Ratio1 |
Expense Ratio lowest to highest2 |
Total Return3 | |||||||||||||||||||||||||||||||||||||||||||
C545 |
||||||||||||||||||||||||||||||||||||||||||||||||
2019 |
309,069 | 55.2490 | to | 65.3306 | 22,165,133 | 1.99 | 0.35 | to | 1.39 | 20.71 | to | 19.46 | ||||||||||||||||||||||||||||||||||||
C25 |
||||||||||||||||||||||||||||||||||||||||||||||||
2023 |
298,646 | 24.0333 | to | 22.8619 | 6,862,360 | | 1.00 | to | 1.39 | 4.05 | to | 3.64 | ||||||||||||||||||||||||||||||||||||
2022 |
327,884 | 23.0980 | to | 22.0587 | 7,259,557 | | 1.00 | to | 1.39 | (2.09 | ) | to | (2.47 | ) | ||||||||||||||||||||||||||||||||||
2021 |
378,621 | 23.5912 | to | 22.6185 | 8,586,233 | | 1.00 | to | 1.39 | 24.91 | to | 24.42 | ||||||||||||||||||||||||||||||||||||
2020 |
423,623 | 18.8864 | to | 18.1791 | 7,700,096 | | 1.00 | to | 1.39 | 0.14 | to | (0.25 | ) | |||||||||||||||||||||||||||||||||||
2019 |
449,565 | 18.8594 | to | 18.2251 | 8,200,051 | | 1.00 | to | 1.39 | 22.84 | to | 22.35 | ||||||||||||||||||||||||||||||||||||
C75 |
||||||||||||||||||||||||||||||||||||||||||||||||
2023 |
1,155,576 | 10.6434 | to | 9.5240 | 10,967,877 | 4.61 | 0.35 | to | 1.39 | 4.36 | to | 3.28 | ||||||||||||||||||||||||||||||||||||
2022 |
1,320,325 | 10.1986 | to | 9.2212 | 12,131,484 | 1.13 | 0.35 | to | 1.39 | 0.85 | to | (0.19 | ) | |||||||||||||||||||||||||||||||||||
2021 |
1,563,760 | 10.1123 | to | 9.2385 | 14,234,344 | 0.02 | 0.35 | to | 1.39 | (0.33 | ) | to | (1.36 | ) | ||||||||||||||||||||||||||||||||||
2020 |
1,904,451 | 10.1458 | to | 9.3660 | 17,642,736 | 0.12 | 0.35 | to | 1.39 | (0.05 | ) | to | (1.08 | ) | ||||||||||||||||||||||||||||||||||
2019 |
284,700 | 10.1504 | to | 9.4685 | 2,576,599 | 1.90 | 0.35 | to | 1.39 | 1.54 | to | 0.48 | ||||||||||||||||||||||||||||||||||||
C59 |
||||||||||||||||||||||||||||||||||||||||||||||||
2023 |
368,001 | 47.3581 | to | 41.5083 | 15,174,445 | | 0.35 | to | 1.39 | 42.67 | to | 41.20 | ||||||||||||||||||||||||||||||||||||
2022 |
421,803 | 33.1952 | to | 29.3977 | 12,383,113 | | 0.35 | to | 1.39 | (31.62 | ) | to | (32.33 | ) | ||||||||||||||||||||||||||||||||||
2021 |
478,457 | 48.5474 | to | 43.4431 | 20,844,820 | | 0.35 | to | 1.39 | 28.28 | to | 26.95 | ||||||||||||||||||||||||||||||||||||
2020 |
512,864 | 37.8445 | to | 34.2193 | 17,581,062 | | 0.35 | to | 1.39 | 34.26 | to | 32.87 | ||||||||||||||||||||||||||||||||||||
2019 |
506,289 | 26.6502 | to | 25.7539 | 13,101,405 | | 1.00 | to | 1.39 | 34.55 | to | 34.02 | ||||||||||||||||||||||||||||||||||||
C37 |
||||||||||||||||||||||||||||||||||||||||||||||||
2023 |
129,762 | 14.4992 | to | 13.7923 | 1,763,178 | 1.92 | 1.24 | to | 1.39 | 14.50 | to | 14.05 | ||||||||||||||||||||||||||||||||||||
2022 |
140,648 | 12.6632 | to | 12.0933 | 1,679,235 | 0.84 | 1.00 | to | 1.39 | (15.52 | ) | to | (15.85 | ) | ||||||||||||||||||||||||||||||||||
2021 |
153,604 | 14.9899 | to | 14.3717 | 2,187,111 | 1.28 | 1.00 | to | 1.39 | 8.87 | to | 8.44 | ||||||||||||||||||||||||||||||||||||
2020 |
216,398 | 13.7686 | to | 13.2529 | 2,850,660 | 1.69 | 1.00 | to | 1.39 | 8.03 | to | 7.61 | ||||||||||||||||||||||||||||||||||||
2019 |
239,056 | 12.7449 | to | 12.3161 | 2,931,515 | 2.11 | 1.00 | to | 1.39 | 24.23 | to | 23.74 | ||||||||||||||||||||||||||||||||||||
C72 |
||||||||||||||||||||||||||||||||||||||||||||||||
2023 |
65,173 | 109.4917 | to | 137.4740 | 10,385,713 | | 0.35 | to | 1.39 | 26.19 | to | 24.89 | ||||||||||||||||||||||||||||||||||||
2022 |
70,507 | 86.7679 | to | 110.0777 | 8,956,720 | | 0.35 | to | 1.39 | (35.99 | ) | to | (36.65 | ) | ||||||||||||||||||||||||||||||||||
2021 |
84,009 | 135.5548 | to | 173.7701 | 17,438,824 | | 0.35 | to | 1.39 | (3.24 | ) | to | (4.24 | ) | ||||||||||||||||||||||||||||||||||
2020 |
91,506 | 140.0958 | to | 181.4712 | 19,671,530 | | 0.35 | to | 1.39 | 70.52 | to | 68.76 | ||||||||||||||||||||||||||||||||||||
2019 |
105,608 | 82.1556 | to | 107.5332 | 13,807,658 | | 0.35 | to | 1.39 | 40.20 | to | 38.75 |
- 19 -
KMA VARIABLE ACCOUNT
(A Separate Account of Delaware Life Insurance Company)
10. FINANCIAL HIGHLIGHTS (CONTINUED)
At December 31, | For the years ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||
Units | Unit Value4 | Net Assets | Investment Income Ratio1 |
Expense Ratio lowest to highest2 |
Total Return3 | |||||||||||||||||||||||||||||||||||||||||||
151 |
||||||||||||||||||||||||||||||||||||||||||||||||
2023 |
53,972 | $ | 38.1529 | to | $ | 35.3099 | $ | 1,950,005 | 3.65 | % | 1.00 | % | to | 1.39 | % | 8.59 | % | to | 8.16 | % | ||||||||||||||||||||||||||||
2022 |
60,679 | 35.1352 | to | 32.6452 | 2,015,592 | 2.89 | 1.00 | to | 1.39 | (12.25 | ) | to | (12.59 | ) | ||||||||||||||||||||||||||||||||||
2021 |
69,801 | 40.0384 | to | 37.3476 | 2,644,014 | 5.23 | 1.00 | to | 1.39 | 1.08 | to | 0.68 | ||||||||||||||||||||||||||||||||||||
2020 |
76,640 | 39.6118 | to | 37.0956 | 2,875,592 | 3.68 | 1.00 | to | 1.39 | 5.76 | to | 5.34 | ||||||||||||||||||||||||||||||||||||
2019 |
76,247 | 37.4561 | to | 35.2158 | 2,716,635 | 3.71 | 1.00 | to | 1.39 | 9.28 | to | 8.85 | ||||||||||||||||||||||||||||||||||||
C69 |
||||||||||||||||||||||||||||||||||||||||||||||||
2023 |
96,923 | 10.3936 | to | 9.8870 | 960,573 | 2.76 | 1.00 | to | 1.39 | 4.65 | to | 4.24 | ||||||||||||||||||||||||||||||||||||
2022 |
108,894 | 9.9313 | to | 9.4845 | 1,043,384 | 2.10 | 1.00 | to | 1.39 | (14.99 | ) | to | (15.32 | ) | ||||||||||||||||||||||||||||||||||
2021 |
131,136 | 11.6824 | to | 11.2008 | 1,484,767 | 2.00 | 1.00 | to | 1.39 | (1.93 | ) | to | (2.32 | ) | ||||||||||||||||||||||||||||||||||
2020 |
158,936 | 11.9126 | to | 11.4666 | 1,834,342 | 2.64 | 1.00 | to | 1.39 | 4.04 | to | 3.63 | ||||||||||||||||||||||||||||||||||||
2019 |
175,712 | 11.4495 | to | 11.0645 | 1,951,703 | 2.77 | 1.00 | to | 1.39 | 5.68 | to | 5.26 | ||||||||||||||||||||||||||||||||||||
W44 |
||||||||||||||||||||||||||||||||||||||||||||||||
2023 |
501 | 13.1123 | 6,347 | 3.99 | 1.00 | 5.41 | ||||||||||||||||||||||||||||||||||||||||||
2022 |
562 | 12.4398 | 6,670 | 2.63 | 1.00 | (14.83 | ) | |||||||||||||||||||||||||||||||||||||||||
2021 |
625 | 14.6059 | 8,645 | 1.59 | 1.00 | (1.15 | ) | |||||||||||||||||||||||||||||||||||||||||
2020 |
691 | 14.7756 | 9,621 | 2.39 | 1.00 | 10.19 | ||||||||||||||||||||||||||||||||||||||||||
2019 |
760 | 13.4086 | 11,597 | 3.13 | 1.00 | 8.03 | ||||||||||||||||||||||||||||||||||||||||||
W436 |
||||||||||||||||||||||||||||||||||||||||||||||||
2022 |
| 26.7182 | | | 1.00 | (42.50 | ) | |||||||||||||||||||||||||||||||||||||||||
2021 |
854 | 46.4659 | 39,608 | | 1.00 | 2.07 | ||||||||||||||||||||||||||||||||||||||||||
2020 |
1,820 | 45.5258 | 82,763 | | 1.00 | 56.75 | ||||||||||||||||||||||||||||||||||||||||||
2019 |
2,824 | 29.0434 | 81,971 | | 1.00 | 39.27 | ||||||||||||||||||||||||||||||||||||||||||
W45 |
||||||||||||||||||||||||||||||||||||||||||||||||
2023 |
780 | 9.7038 | 7,312 | 4.69 | 1.00 | 3.76 | ||||||||||||||||||||||||||||||||||||||||||
2022 |
875 | 9.3518 | 7,805 | 1.33 | 1.00 | 0.38 | ||||||||||||||||||||||||||||||||||||||||||
2021 |
973 | 9.3161 | 8,584 | 0.01 | 1.00 | (0.98 | ) | |||||||||||||||||||||||||||||||||||||||||
2020 |
1,076 | 9.4084 | 9,537 | 0.38 | 1.00 | (0.62 | ) | |||||||||||||||||||||||||||||||||||||||||
2019 |
1,183 | 9.4671 | 12,744 | 1.89 | 1.00 | 0.82 |
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 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 using the unit value of the beginning period that corresponds to the lowest or highest ending period unit value disclosed. The total returns are presented as a range of maximum to minimum values based on the product grouping representing the corresponding lowest to highest expense ratio amounts. |
4 | The unit values are presented as a range of maximum to minimum values based on the product grouping representing the corresponding lowest to highest expense ratio amounts. Some unit values may be outside of the range due to timing of the related Sub-Account levels commencement date. Unit values of product pricing levels with zero units during the period are excluded when determining the range. |
5 | Columbia Variable Portfolio - Asset Allocation Fund Class 1 Sub-Account (C54) merged into Sub-Account C75 on April 24, 2020. |
6 | Sub-Account W43 is active but has had zero balance since 2022. |
- 20 -
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
DELAWARE LIFE INSURANCE COMPANY
(A Wholly-Owned Subsidiary of DLIC Sub-Holdings, LLC)
Page | ||||
1 | ||||
Statutory Statements of Admitted Assets, Liabilities, and Capital and Surplus |
4 | |||
6 | ||||
7 | ||||
8 | ||||
10 |
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 Companys ability to continue as a going concern for one year after the date that the financial statements are issued.
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 Companys 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 Companys 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
[This page intentionally left blank.]
3
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
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
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.
6
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.
7
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)
8
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.
9
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 Companys 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 Delawares insurance laws. The National Association of Insurance Commissioners (NAICs) 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 Companys 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; |
10
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 Companys financial statements under GAAP rather than being carried at the Companys 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 securitys 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 NAICs 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
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 Companys General Account under GAAP, but are classified within the Companys 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 Companys 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).
12
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 insurers 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 SecuritiesRevised (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 Companys Statutory Statements of Admitted Assets, Liabilities and Capital and Surplus on the loans trade date. Transaction costs on mortgage loans are capitalized on initial recognition and are recognized in the Companys 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
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 loans 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 Companys 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 Companys 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.
14
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 Companys 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 Companys 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 Companys 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 & Poors 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 Companys 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 Companys 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.
15
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, managements intent to sell when a decline is due to interest rates, and managements intent and ability to hold the investment until maturity or a recovery in the investments 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.
16
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 Commissioners 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.
17
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 NAICs 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 Companys Statutory Statement of Admitted Assets, Liabilities, and Capital and Surplus. The Companys calculated adjusted capital and surplus for purposes of determining negative IMR allowed to be admitted using information from the Companys most recently filed statement with the Department was $2,195,524. The General Account admitted negative IMR represents 6.4% of the Companys General Account adjusted capital and surplus. The Separate Account negative IMR recognized as an asset represents 0.5% of the Companys General Account adjusted capital and surplus.
Fixed income investments generating IMR losses comply with the Companys 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 Companys 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 Companys 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.
18
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).
19
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 Companys 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 Companys 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.
20
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 Companys 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.
21
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 Companys investment in subsidiaries is reflected in the common stock total above and is comprised of the Companys 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 Companys 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 Companys 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 Companys investment in DLOK was fully nonadmitted.
The Companys 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 Companys 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 Companys 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 Companys 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.
22
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 Companys investment value of CSPCH.
On April 1, 2019, the Company acquired Clear Spring Casualty Insurance Company (CSCIC), formerly known as Lackawanna Casualty Company, a workers 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 Companys 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 Companys 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 Companys statutory purchase of CSCIC is shown in the table above as a percentage of the book value of CSPCH. |
23
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 Companys 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
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 Clarendons business of supporting the wholesale distribution of the Companys variable insurance and annuity products. The Company also has a principal underwriters 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
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 Companys 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 Companys 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 Companys investments. GPIM managed $201,335 and $207,034 of the Companys 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 Companys and CSLACs 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.
26
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.
27
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 | |||||||
|
|
|
|
|
|
|
|
28
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
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 Companys 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.
30
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 issuers ability to meet current and future interest and principal payments, an evaluation of the issuers financial position and its near-term recovery prospects, difficulties being experienced by an issuers parent or affiliate, and managements assessment of the outlook for the issuers sector. Upon completion of this screening process, the relevant information is provided to the Companys 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 managements evaluation of securities for OTTI. These risks and uncertainties include factors both external and internal to the Company, such as general economic conditions, an issuers 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 managements evaluation of securities for OTTI.
31
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 Companys 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
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 Companys 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 Companys 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 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
33
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 managements judgment, the mortgage loans value is impaired, appropriate losses are recorded.
The following table shows the geographic distribution of the carrying value of the Companys 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 propertys 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 loans 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 loans 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.
34
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
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 Companys 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.
36
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 Companys 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 Companys 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 Companys 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 Companys 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.
37
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 Companys 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
38
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 | $ | | $ | | $ | | $ | | $ | |
39
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 Companys decision to do so will be dependent on its liquidity needs and assessment of the counterparty, as well as the collaterals 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 Companys 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 Companys 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
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 |
| | | | | | | | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total Assets |
$ | 1,264,324 | $ | | $ | | $ | | $ | | $ | | $ | | $ | |
41
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)
Collateral Pledged - Secured Borrowing:
FIRST QUARTER |
SECOND QUARTER |
THIRD QUARTER |
FOURTH QUARTER |
|||||||||||||
Maximum Amount |
||||||||||||||||
Cash |
$ | | $ | | $ | 10,206 | $ | 2,957 | ||||||||
Securities (FV) |
1,648,572 | 1,400,264 | 1,323,589 | 1,264,324 | ||||||||||||
Nonadmitted |
| | | | ||||||||||||
Ending Balance |
||||||||||||||||
Cash |
$ | | $ | | $ | 10,206 | $ | 2,957 | ||||||||
Securities (FV) |
1,648,572 | 1,400,264 | 1,323,589 | 1,264,324 | ||||||||||||
Nonadmitted |
| | | |
The Company had no repurchase agreement transactions or reverse repurchase agreement transactions accounted for as a sale.
7. | Investment Gains and Losses |
Realized capital gains and losses on bonds, preferred stock, mortgages, and interest rate swaps, which relate to changes in the general level of interest rates, are charged or credited to the IMR, net of tax, and amortized into operations over the remaining contractual life of the security sold. Realized gains and losses from all other investments are reported, net of tax, in the Statutory Statements of Operations but are not included in the computation of net gain from operations.
Changes in unrealized gains and losses on investments are reported as a component of Capital and Surplus, net of deferred income taxes.
Reported realized gains and losses for the years ended December 31, 2023, 2022, and 2021, respectively, are summarized as follows:
Years Ended December 31, | ||||||||||||||
2023 | 2022 | 2021 | ||||||||||||
Realized gains (losses): |
||||||||||||||
Bonds |
$ | (158,598 | ) | $ | (11,794 | ) | $ | 15,403 | ||||||
Preferred stocks |
(7,246 | ) | (1 | ) | | |||||||||
Common stocks |
28,081 | 824 | | |||||||||||
Mortgage loans |
(31 | ) | (397 | ) | 109 | |||||||||
Derivatives |
(63,921 | ) | 2,397 | 1,429 | ||||||||||
Other invested assets |
(24,778 | ) | 10,047 | (22,220 | ) | |||||||||
Cash, cash equivalents and short-term investments |
(6 | ) | | (11 | ) | |||||||||
Reinsurance realized gains (losses) |
59,814 | 5,970 | (5,515 | ) | ||||||||||
|
|
|
|
|
|
|||||||||
Subtotal |
(166,685 | ) | 7,046 | (10,805 | ) | |||||||||
Less capital gains tax expense (benefit) |
(18,439 | ) | 3 | 9,400 | ||||||||||
|
|
|
|
|
|
|||||||||
Net realized gains (losses) |
(148,246 | ) | 7,043 | (20,205 | ) | |||||||||
|
|
|
|
|
|
|||||||||
Less gains (losses) transferred to IMR (net of taxes) |
(155,453 | ) | (7,143 | ) | 5,439 | |||||||||
|
|
|
|
|
|
|||||||||
Net realized gains (losses) after tax and IMR transfer |
$ | 7,207 | $ | 14,186 | $ | (25,644 | ) | |||||||
|
|
|
|
|
|
42
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)
Proceeds from sales of investments in bonds and stocks (excluding maturity proceeds) during 2023, 2022, and 2021 were $1,584,172, $3,428,161, and $6,094,103, respectively, including non-cash transactions of $585,134, $217,169, and $608,671, respectively. Gross gains of $32,519, $4,182, and $71,996, respectively, and gross losses of $159,815, $15,118, and $24,252 were realized on those sales during 2023, 2022, and 2021, respectively.
Unrealized gains and losses and related deferred capital gains tax are as follows:
Years Ended December 31, | ||||||||||||||
2023 | 2022 | 2021 | ||||||||||||
Changes in Net Unrealized Capital Gains (Losses): |
||||||||||||||
Bonds |
$ | (118 | ) | $ | (648 | ) | $ | (268 | ) | |||||
Preferred stocks |
3,129 | (21,496 | ) | (317 | ) | |||||||||
Common stocks (unaffiliated) |
868 | (2,906 | ) | (6,010 | ) | |||||||||
Common stocks (affiliated) |
(6,723 | ) | (84,618 | ) | (11,121 | ) | ||||||||
Derivatives |
(5,718 | ) | (171,549 | ) | (146,178 | ) | ||||||||
Other invested assets |
55,814 | (69,586 | ) | (76,149 | ) | |||||||||
|
|
|
|
|
|
|||||||||
Subtotal |
47,252 | (350,803 | ) | (240,043 | ) | |||||||||
Deferred capital gains tax |
4,416 | (5,063 | ) | 12,827 | ||||||||||
|
|
|
|
|
|
|||||||||
Total |
$ | 42,836 | $ | (345,740 | ) | $ | (252,870 | ) | ||||||
|
|
|
|
|
|
8. | Net Investment Income |
Major categories of net investment income for the years ended December 31, 2023, 2022, and 2021, respectively, are summarized as follows:
Years Ended December 31, | ||||||||||||||
2023 | 2022 | 2021 | ||||||||||||
Income: |
||||||||||||||
Bonds |
$ | 963,014 | $ | 734,930 | $ | 708,700 | ||||||||
Preferred stocks |
27,470 | 61,886 | 70,439 | |||||||||||
Common stocks |
36,809 | 59,143 | 64,466 | |||||||||||
Mortgage loans |
109,675 | 71,115 | 33,130 | |||||||||||
Contract loans |
14,952 | 15,604 | 16,073 | |||||||||||
Derivative instruments |
(178,156 | ) | (15,494 | ) | (195,644 | ) | ||||||||
Other invested assets |
69,754 | 100,589 | 139,557 | |||||||||||
Cash, cash equivalents and short-term investments |
203,442 | 97,041 | 100,653 | |||||||||||
Other investment income |
69,385 | 63,292 | 32,306 | |||||||||||
|
|
|
|
|
|
|||||||||
Total gross investment income |
1,316,345 | 1,188,106 | 969,680 | |||||||||||
Interest expense on surplus notes |
(30,236 | ) | (46,061 | ) | (42,688 | ) | ||||||||
Investment expenses |
(44,345 | ) | (28,495 | ) | (44,168 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Net investment income before amortization of IMR |
1,241,764 | 1,113,550 | 882,824 | |||||||||||
Amortization of IMR |
1,787 | 4,436 | 8,765 | |||||||||||
|
|
|
|
|
|
|||||||||
Net investment income |
$ | 1,243,551 | $ | 1,117,986 | $ | 891,589 | ||||||||
|
|
|
|
|
|
43
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 Companys policy is to exclude investment income due and accrued with amounts that are over 90 days past due or where the collection of interest is uncertain. The Company had investment income due and accrued excluded from surplus of $58 and $12, respectively, for the years ended December 31, 2023 and 2022. The Company did not have investment income due and accrued excluded from surplus for the year ended December 31, 2021.
The cumulative amount of paid-in-kind interest included in principal balances was $27,105, $36,243, and $3,670 for the years ended December 31, 2023, 2022, and 2021, respectively. The Company holds investments in trust notes that allow for deferred interest. The Company recorded deferred interest of $92,154, $71,643, and $52,250 during 2023, 2022, and 2021, respectively.
9. | Derivatives |
The Company uses derivatives for hedging or replication purposes. Interest rate swaps are mainly employed for hedging guaranteed minimum living benefits for certain variable annuity contracts and for duration matching purposes.
Options and swaptions are used to hedge equity and interest exposure embedded in the Companys fixed, FIA, and variable annuity products. Futures are used to hedge equity exposure included in FIAs, as well as the guaranteed minimum death and living benefit features of the Companys variable annuities. Currency forwards and swaps are used to hedge changes in foreign currency exchange (FX) rates.
Interest rate swaps, options, swaptions, and currency swaps are reported at fair value, with the unrealized gain or loss reported as an adjustment to surplus if not designated an effective hedge. All futures are marked to market and settled on a daily basis, with the gain or loss reported as a component of net investment income (loss).
The Company uses options to hedge the equity exposure embedded in its FIA products with the Morgan Stanley Global Opportunities Index (MSGO), OTC options on the S&P 500, the Deutsche Bank Cash Return on Capital Invested (CROCI) Sectors III Index, the Deutsche Bank Momentum Asset Allocator (MAA) indices, the Barclays First Trust Capital Strength Barclays 5% Index (FTCS), and the RBA Select Equity Yield CIBC 5% Index (RBEY). Fair value changes in the options embedded within the annuity contract are recorded through income. The Company purchases certain of these options through its investment subsidiary, DLIH 2016-1, which is accounted for in accordance with SSAP No. 48.
Market risk is the risk of loss due to market price changes of the derivative instrument or the underlying security or index. To mitigate this risk, the Company matches the market sensitivity of the hedge with the market sensitivity of the underlying asset or liability being hedged.
Credit risk is the counterparty credit risk or risk of loss as a result of default or a decline in market value stemming from a credit downgrade of the counterparty to the derivative transaction. The Company minimizes this risk by entering into derivatives only with counterparties that meet certain criteria, by utilizing standardized agreements, and by limiting counterparty concentrations.
All derivative transactions are covered under standardized contractual agreements with counterparties, all of which include credit-related contingent features. Certain counterparty relationships also may include supplementary agreements with tailored terms, such as additional triggers for early terminations, acceptable practices related to cross-transaction netting, and minimum thresholds for determining collateral.
44
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)
Credit-related triggers include failure to pay or deliver on an obligation past certain grace periods, bankruptcy, or the downgrade of credit ratings to below a stipulated level. These triggers apply to both the Company and its counterparty.
At December 31, 2023 and 2022, the Company pledged $103,151 and $252,005, respectively, in U.S. Treasury securities, corporate bonds, and cash as collateral to counterparties. At December 31, 2023 and 2022, counterparties pledged to the Company $88,105 and $72,599, respectively, in collateral comprised of cash, U.S. Treasury securities and corporate bonds.
The Companys underlying notional or principal amounts associated with open derivatives positions were as follows:
Outstanding at December 31, 2023 |
||||||||||||||||||
Notional Principal Amounts |
Fair Value/ Statement Value |
Amortized Cost |
Unrealized Gain (Loss) |
|||||||||||||||
Interest Rate Swaps |
$ | 8,229,758 | $ | 159,917 | $ | | $ | 159,917 | ||||||||||
Equity Future Forwards |
915,800 | (11,391 | ) | | (11,391 | ) | ||||||||||||
FX Forwards |
83,455 | (2,587 | ) | | (2,587 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 9,229,013 | $ | 145,939 | $ | | $ | 145,939 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Outstanding at December 31, 2022 |
||||||||||||||||||
Notional Principal Amounts |
Fair Value/ Statement Value |
Amortized Cost |
Unrealized Gain (Loss) |
|||||||||||||||
Interest Rate Swaps |
$ | 8,479,323 | $ | 155,239 | $ | | $ | 155,239 | ||||||||||
FX Forwards |
71,837 | (3,153 | ) | | (3,153 | ) | ||||||||||||
Payor Swaptions |
75,000 | 1,165 | 1,665 | (500 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 8,626,160 | $ | 153,251 | $ | 1,665 | $ | 151,586 | ||||||||||
|
|
|
|
|
|
|
|
At December 31, 2023 and 2022, open futures contracts had a notional value of $1,846,766 and $2,514,227 and a fair value of $(339) and $3,736, respectively. These amounts did not include the component of variation margin that had already been cash settled. The Company did not have derivative contracts with financing premiums during 2023 or 2022.
10. | Reinsurance |
The Company participates in reinsurance with other insurance companies to limit the loss exposure on certain risks associated with its products. Reinsurance ceded contracts do not relieve the Company from its obligations to policyholders. The Company remains liable to its policyholders for the portion reinsured to the extent that any reinsurer does not meet the obligations assumed under the reinsurance agreement. To minimize its exposure to significant losses from reinsurer insolvencies, the Company regularly evaluates the financial condition of its reinsurers and monitors concentrations of credit risk. Management believes that any liability arising from this exposure is unlikely. The Company had no uncollectible reinsurance balances written off and no commutation of ceded reinsurance during the years ended December 31, 2023, 2022, and 2021, respectively.
The Company has agreements with several unrelated companies, which provide for reinsurance of portions of the net amount at risk under certain of the Companys individual and group life insurance policies. These amounts are reinsured on either a monthly renewable term, yearly renewable term, or coinsurance basis.
45
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 coinsurance with funds withheld agreement with an unrelated reinsurer which provides reinsurance related to optional guaranteed lifetime withdrawal benefit riders under certain FIA contracts.
The Company has a coinsurance and modified coinsurance agreement, under which it ceded certain in-force variable annuity base contracts to an unaffiliated reinsurer. For the years ended December 31, 2023, 2022, and 2021, premiums ceded under the agreement were $273,442, $362,627, and $337,883, respectively, and benefits ceded (including policy surrenders) were $1,082,509, $1,050,937, and $1,421,138, respectively.
The Company has a reinsurance agreement with DLRC in which the Company cedes certain risks associated with the Companys variable annuity contracts and associated riders on a combination modified coinsurance and funds withheld coinsurance basis to DLRC (the VA Treaty). The VA Treaty transfers hedging risks to DLRC but does not transfer insurance risks. Therefore, the treaty is accounted for using deposit accounting. As a result, certain gains (losses) previously accounted for as other changes in capital and surplus, net investment income (loss), and net realized capital gains (losses) are accounted for as investment income (loss) on reinsurance deposit asset. Hedging risk is defined as changes in unrealized hedging instrument gains or losses, realized gains and losses on dispositions of hedging instruments, and investment income or loss from hedging instruments. Investment expense (income) on funds held represents amounts paid or received on hedging instruments that were ceded under the DLRC treaties. Ceded realized gains and losses are reported in Net realized capital gains (losses). Investment income (expense) on funds held - unrealized represents the unrealized gain or loss for the period on hedging instruments that has been ceded to DLRC. Investment income (loss) on reinsurance deposit asset represents the net gains and losses on all hedging instruments ceded under the VA Treaty.
A summary of the pretax impacts of the VA Treaty on the Companys Statutory Statements of Operations and Statutory Statements of Changes in Capital and Surplus for the years ended December 31, 2023, 2022, and 2021 is as follows:
Treaty Impacts | ||||||||||||||
2023 | 2022 | 2021 | ||||||||||||
Statements of Operations |
||||||||||||||
Investment Income (Loss) on Reinsurance Deposit Asset |
$ | (261,142 | ) | $ | (154,844 | ) | $ | (416,413 | ) | |||||
|
|
|
|
|
|
|||||||||
Total Revenue |
(261,142 | ) | (154,844 | ) | (416,413 | ) | ||||||||
Investment (Income) Expense on Funds Held |
(193,389 | ) | 37,109 | (251,714 | ) | |||||||||
|
|
|
|
|
|
|||||||||
Total Policyholder Benefits and Expenses |
(193,389 | ) | 37,109 | (251,714 | ) | |||||||||
Net Realized Capital (Losses) Gains |
59,814 | 5,970 | (745 | ) | ||||||||||
|
|
|
|
|
|
|||||||||
Net (Loss) |
(7,939 | ) | (185,983 | ) | (165,444 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Statements of Changes in Capital and Surplus |
||||||||||||||
Investment Income on Funds Held - Unrealized |
7,939 | 185,983 | 165,444 | |||||||||||
|
|
|
|
|
|
|||||||||
Net Change in Capital and Surplus from VA Treaty (excluding reinsurance fee) |
$ | | $ | | $ | | ||||||||
|
|
|
|
|
|
In addition, the Company recognized a reinsurance deposit accounting asset of $76,063 and $174,387 at December 31, 2023 and 2022, respectively, and a corresponding amount in funds held under coinsurance liability.
46
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 reinsurance agreement with Delaware Life Reinsurance (Barbados) Corp. (Barbco), an affiliate, under which it cedes risks associated with certain of the Companys 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 Company also has a reinsurance agreement with Barbco under which it cedes mortality risks associated with certain of the Companys in-force bank-owned variable universal life insurance policies on a yearly renewable term basis.
The Company had liabilities for the funds held under the coinsurance with funds held treaty with Barbco of $260,713 and $256,195 at December 31, 2023 and 2022, respectively.
On December 6, 2023, and effective December 31, 2023, the Company entered into a reinsurance agreement with DLAC to cede a block of MYGA contracts on a coinsurance basis. Pursuant to the agreement, the Company ceded a 10% quota share of the activity associated with the MYGAs, including initial statutory reserves totaling $118,857 at December 31, 2023. In exchange for the initial statutory reserves, the Company agreed to transfer assets totaling $118,857 to DLAC within thirty (30) days of the agreements effective date. DLAC agreed to pay the Company a $6,700 ceding commission, payable within fifteen (15) days of the agreements effective date.
The effects of reinsurance on premiums and benefits (excluding policy surrenders) were as follows:
Years Ended December 31, | ||||||||||||||
2023 | 2022 | 2021 | ||||||||||||
Premiums and Annuity Considerations: |
||||||||||||||
Direct |
$ | 5,803,753 | $ | 2,883,622 | $ | 2,729,435 | ||||||||
Ceded - Affiliated |
(49,873 | ) | (54,453 | ) | (74,645 | ) | ||||||||
Ceded - Non-affiliated |
(307,555 | ) | (393,098 | ) | (362,121 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Net Premiums and Annuity Considerations |
$ | 5,446,325 | $ | 2,436,071 | $ | 2,292,669 | ||||||||
|
|
|
|
|
|
|||||||||
Insurance and Other Individual Policy Benefits and Claims: |
||||||||||||||
Direct |
$ | 949,977 | $ | 955,376 | $ | 1,075,786 | ||||||||
Assumed - Non-affiliated |
3,082 | 4,523 | 2,728 | |||||||||||
Ceded - Affiliated |
(44,762 | ) | (54,896 | ) | (84,391 | ) | ||||||||
Ceded - Non-affiliated |
(350,727 | ) | (358,202 | ) | (446,834 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Net Policy Benefits and Claims |
$ | 557,570 | $ | 546,801 | $ | 547,289 | ||||||||
|
|
|
|
|
|
In addition to the reinsurance activity disclosed in the table above, the transfer of assets by the Company to DLAC as part of the coinsurance agreement between the two companies was recorded as a reduction to income on the Statutory Statements of Operations.
11. | Reserves |
The reserves for life insurance 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 and methodologies) which produce reserves at least as great as those required by law and contract provisions.
47
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)
Deduction of deferred fractional premiums upon death of the insured and return of any portion of the final premium for the period beyond the date of death are not applicable to the business of the Company. Surrender values are not promised in excess of reserves legally computed.
For policies with annual extra premiums, additional reserves are held equal to one-half the extra premium. Extra premiums on single premium policies are amortized over ten years. Policies issued with premiums corresponding to ages higher than the true ages are valued at the rated-up ages. Policies issued subject to a lien are valued as if the full amount were payable without any deduction. For interest-sensitive policies, substandard risks are reflected in the cost of insurance charges.
As of December 31, 2023 and 2022, the Company had $5,901 and $8,524, respectively, of insurance in force, for which gross premiums were less than the net premiums according to the standard of valuation required by the State of Delaware. Premium deficiency reserves to cover the above insurance totaled of $2,855 and $2,975 as of December 31, 2023 and 2022, respectively.
The Tabular Interest has been determined by formula as described in the NAIC instructions, except for some business which is determined from basic policy data for reserving. The Tabular less Actual Reserve Released has been determined by formula as described in the NAIC instructions. The Tabular Cost has been determined by formula as described in the NAIC instructions, except for universal life products which use cost of insurance and some business which uses basic policy data for reserving. The Tabular Interest on Funds not Involving Life Contingencies was determined from the interest credited to the deposits, except for certain guaranteed interest contracts which are determined by formula as described in the NAIC instructions.
Other than normal updates of reserves, there were no significant reserve changes for the year ended December 31, 2023. The details for other changes in reserves for the years ended December 31, 2023 and 2022 are as follows:
2023 | 2022 | |||||||||||||||||||||||
Item |
Total | Ordinary Individual Annuities |
Group Annuities |
Total | Ordinary Individual Annuities |
Group Annuities |
||||||||||||||||||
Asset/Liability analysis |
$ | | $ | | $ | | $ | (33,400 | ) | $ | (5,000 | ) | $ | (28,400 | ) | |||||||||
Reserves ceded on coinsurance agreement |
(118,857 | ) | (118,857 | ) | | | | | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total change |
$ | (118,857 | ) | $ | (118,857 | ) | $ | | $ | (33,400 | ) | $ | (5,000 | ) | $ | (28,400 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
48
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)
12. | Withdrawal Characteristics of Annuity Actuarial Reserves and Deposit-Type Liabilities |
As of December 31, 2023, the withdrawal characteristics of the Companys individual and group annuity reserves and deposit-type contracts are summarized as follows:
Individual Annuities | December 31, 2023 | |||||||||||||||||||
General Account |
Separate Account with Guarantees |
Separate Account Non-guaranteed |
Total | % of Total | ||||||||||||||||
Subject to Discretionary Withdrawal: |
||||||||||||||||||||
With Market Value Adjustment |
$ | 18,188,596 | $ | 154,691 | $ | | $ | 18,343,287 | 84.5% | |||||||||||
At Book Value Less Current Surrender Charge of 5% or More |
805,364 | | | 805,364 | 3.7% | |||||||||||||||
At Fair Value |
| | 1,109,874 | 1,109,874 | 5.1% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total with Adjustment or at Market Value |
18,993,960 | 154,691 | 1,109,874 | 20,258,525 | 93.3% | |||||||||||||||
At Book Value Without Adjustment (Minimal or no Charge or Adjustment) |
1,202,619 | | | 1,202,619 | 5.5% | |||||||||||||||
Not Subject to Discretionary Withdrawal |
222,480 | | 42,205 | 264,685 | 1.2% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total (Gross: Direct and Assumed) |
20,419,059 | 154,691 | 1,152,079 | 21,725,829 | 100.0% | |||||||||||||||
Reinsurance Ceded |
275,074 | | | 275,074 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total (Net) |
$ | 20,143,985 | $ | 154,691 | $ | 1,152,079 | $ | 21,450,755 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Amount included at book value less surrender charge of 5% or more that will be at book value without adjustment in the next year |
$ | 116 | $ | | $ | | $ | 116 | ||||||||||||
|
|
|
|
|
|
|
|
49
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)
Group Annuities | December 31, 2023 | |||||||||||||||||||
General Account |
Separate Account with Guarantees |
Separate Account Non-guaranteed |
Total | % of Total | ||||||||||||||||
Subject to Discretionary Withdrawal: |
||||||||||||||||||||
With Market Value Adjustment |
$ | | $ | 114,680 | $ | | $ | 114,680 | 1.5% | |||||||||||
At Book Value Less Current Surrender Charge of 5% or More |
| | | | % | |||||||||||||||
At Fair Value |
| | 7,222,652 | 7,222,652 | 95.8% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total with Adjustment or at Market Value |
$ | | $ | 114,680 | $ | 7,222,652 | $ | 7,337,332 | 97.3% | |||||||||||
At Book Value Without Adjustment (Minimal or no Charge or Adjustment) |
31,290 | | | 31,290 | 0.4% | |||||||||||||||
Not Subject to Discretionary Withdrawal |
176,489 | | | 176,489 | 2.3% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total (Gross: Direct and Assumed) |
$ | 207,779 | $ | 114,680 | $ | 7,222,652 | $ | 7,545,111 | 100.0% | |||||||||||
Reinsurance Ceded |
39,732 | | | 39,732 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total (Net) |
$ | 168,047 | $ | 114,680 | $ | 7,222,652 | $ | 7,505,379 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Amount included at book value less surrender charge of 5% or more that will be at book value without adjustment in the next year |
$ | | $ | | $ | | $ | | ||||||||||||
|
|
|
|
|
|
|
|
Deposit-Type Contracts (no life contingencies) | December 31, 2023 | |||||||||||||||||||
General Account |
Separate Account with Guarantees |
Separate Account Non-guaranteed |
Total | % of Total | ||||||||||||||||
Subject to Discretionary Withdrawal: |
||||||||||||||||||||
With Market Value Adjustment |
$ | | $ | | $ | | $ | | % | |||||||||||
At Book Value Less Current Surrender Charge of 5% or More |
| | | | % | |||||||||||||||
At Fair Value |
| | 323,124 | 323,124 | 14.0% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total with Adjustment or at Market Value |
$ | | $ | | $ | 323,124 | $ | 323,124 | 14.0% | |||||||||||
At Book Value Without Adjustment (Minimal or no Charge or Adjustment) |
| | | | % | |||||||||||||||
Not Subject to Discretionary Withdrawal |
1,982,424 | | | 1,982,424 | 86.0% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total (Gross: Direct and Assumed) |
$ | 1,982,424 | $ | | $ | 323,124 | $ | 2,305,548 | 100.0% | |||||||||||
Reinsurance Ceded |
2,927 | | | 2,927 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total (Net) |
$ | 1,979,497 | $ | | $ | 323,124 | $ | 2,302,621 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Amount included at book value less surrender charge of 5% or more that will be at book value without adjustment in the next year |
$ | | $ | | $ | | $ | | ||||||||||||
|
|
|
|
|
|
|
|
50
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)
Below is the reconciliation of the annuity actuarial reserves, deposit-type contract funds, and other liabilities without life or disability contingencies from the General Account and Separate Accounts of the Company as of December 31, 2023:
December 31, 2023 | ||||
Life & Accident & Health Annual Statement: |
||||
Exhibit 5, Annuities Section, Total (net) |
$ | 20,124,813 | ||
Exhibit 5, Supplementary Contracts with Life Contingencies Section, Total (net) |
187,219 | |||
Exhibit 7, Deposit-Type Contracts |
1,979,497 | |||
|
|
|||
Subtotal General Account |
$ | 22,291,529 | ||
Separate Account Annual Statement: |
||||
Exhibit 3, Annuities Section, Total (net) |
$ | 8,601,897 | ||
Exhibit 3, Supplementary Contracts with Life Contingencies Section, Total (net) |
42,205 | |||
Other contract deposit funds |
323,124 | |||
|
|
|||
Subtotal Separate Account |
$ | 8,967,226 | ||
|
|
|||
Combined Total |
$ | 31,258,755 | ||
|
|
As of December 31, 2022, the withdrawal characteristics of the Companys individual and group annuity reserves and deposit-type contracts are summarized as follows:
Individual Annuities | December 31, 2022 | |||||||||||||||||||
General Account |
Separate Account with Guarantees |
Separate Account Non-guaranteed |
Total | % of Total | ||||||||||||||||
Subject to Discretionary Withdrawal: |
||||||||||||||||||||
With Market Value Adjustment |
$ | 14,128,826 | $ | 189,858 | $ | | $ | 14,318,684 | 81.7% | |||||||||||
At Book Value Less Current Surrender Charge of 5% or More |
910,212 | | | 910,212 | 5.2% | |||||||||||||||
At Fair Value |
| | 882,810 | 882,810 | 5.0% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total with Adjustment or at Market Value |
$ | 15,039,038 | $ | 189,858 | $ | 882,810 | $ | 16,111,706 | 91.9% | |||||||||||
At Book Value Without Adjustment (Minimal or no Charge or Adjustment) |
1,163,930 | | | 1,163,930 | 6.6% | |||||||||||||||
Not Subject to Discretionary Withdrawal |
232,893 | | 32,937 | 265,830 | 1.5% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total (Gross: Direct and Assumed) |
$ | 16,435,861 | $ | 189,858 | $ | 915,747 | $ | 17,541,466 | 100.0% | |||||||||||
Reinsurance Ceded |
121,234 | | | 121,234 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total (Net) |
$ | 16,314,627 | $ | 189,858 | $ | 915,747 | $ | 17,420,232 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Amount included at book value less surrender charge of 5% or more that will be at book value without adjustment in the next year |
$ | 96,024 | $ | | $ | | $ | 96,024 | ||||||||||||
|
|
|
|
|
|
|
|
51
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)
Group Annuities | December 31, 2022 | |||||||||||||||||||
General Account |
Separate Account with Guarantees |
Separate Account Non-guaranteed |
Total | % of Total |
||||||||||||||||
Subject to Discretionary Withdrawal: |
||||||||||||||||||||
With Market Value Adjustment |
$ | | $ | 141,814 | $ | | $ | 141,814 | 1.8% | |||||||||||
At Book Value Less Current Surrender Charge of 5% or More |
| | | | % | |||||||||||||||
At Fair Value |
| | 7,333,470 | 7,333,470 | 95.2% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total with Adjustment or at Market Value |
$ | | $ | 141,814 | $ | 7,333,470 | $ | 7,475,284 | 97.1% | |||||||||||
At Book Value Without Adjustment (Minimal or no Charge or Adjustment) |
34,579 | | | 34,579 | 0.4% | |||||||||||||||
Not Subject to Discretionary Withdrawal |
190,760 | | | 190,760 | 2.5% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total (Gross: Direct and Assumed) |
$ | 225,339 | $ | 141,814 | $ | 7,333,470 | $ | 7,700,623 | 100.0% | |||||||||||
Reinsurance Ceded |
18,232 | | | 18,232 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total (Net) |
$ | 207,107 | $ | 141,814 | $ | 7,333,470 | $ | 7,682,391 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Amount included at book value less surrender charge of 5% or more that will be at book value without adjustment in the next year |
$ | | $ | | $ | | $ | | ||||||||||||
|
|
|
|
|
|
|
|
Deposit-Type Contracts (no life contingencies) | December 31, 2022 | |||||||||||||||||||
General Account |
Separate Account with Guarantees |
Separate Account Non-guaranteed |
Total 12/31/2021 |
% of Total |
||||||||||||||||
Subject to Discretionary Withdrawal: |
||||||||||||||||||||
With Market Value Adjustment |
$ | | $ | | $ | | $ | | % | |||||||||||
At Book Value Less Current Surrender Charge of 5% or More |
| | | | % | |||||||||||||||
At Fair Value |
| | 315,786 | 315,786 | 16.8% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total with Adjustment or at Market Value |
$ | | $ | | $ | 315,786 | $ | 315,786 | 16.8% | |||||||||||
At Book Value Without Adjustment (Minimal or no Charge or Adjustment) |
| | | | % | |||||||||||||||
Not Subject to Discretionary Withdrawal |
1,566,381 | | | 1,566,381 | 83.2% | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total (Gross: Direct and Assumed) |
$ | 1,566,381 | $ | | $ | 315,786 | $ | 1,882,167 | 100.0% | |||||||||||
Reinsurance Ceded |
3,420 | | | 3,420 | ||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Total (Net) |
$ | 1,562,961 | $ | | $ | 315,786 | $ | 1,878,747 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Amount included at book value less surrender charge of 5% or more that will be at book value without adjustment in the next year |
$ | | $ | | $ | | $ | | ||||||||||||
|
|
|
|
|
|
|
|
52
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)
Below is the reconciliation of the annuity actuarial reserves, deposit-type contract funds, and other liabilities without life or disability contingencies from the General Account and Separate Accounts of the Company as of December 31, 2022:
December 31, 2022 | ||||||
Life & Accident & Health Annual Statement: |
||||||
Exhibit 5, Annuities Section, Total (net) |
$ | 16,325,955 | ||||
Exhibit 5, Supplementary Contracts with Life Contingencies Section, Total (net) |
195,779 | |||||
Exhibit 7, Deposit-Type Contracts |
1,562,961 | |||||
|
|
|||||
Subtotal General Account |
$ | 18,084,695 | ||||
Separate Account Annual Statement: |
||||||
Exhibit 3, Annuities Section, Total (net) |
$ | 8,547,953 | ||||
Exhibit 3, Supplementary Contracts with Life Contingencies Section, Total (net) |
32,937 | |||||
Other contract deposit funds |
315,786 | |||||
|
|
|||||
Subtotal Separate Account |
$ | 8,896,676 | ||||
|
|
|||||
Combined Total |
$ | 26,981,371 | ||||
|
|
53
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)
13. | Analysis of Life Actuarial Reserves by Withdrawal Characteristics |
The amounts of account value, cash value and reserve breakouts of life insurance by withdrawal characteristics for General Account products and Separate Account non-guaranteed products are shown in the tables below as of December 31, 2023 or 2022. The Company had no life Separate Account products with guarantees at December 31, 2023 or 2022.
December 31, 2023 | ||||||||||||||
General Account | Account Value |
Cash Value |
Reserve | |||||||||||
Subject to discretionary withdrawal, surrender values, or policy loans: |
||||||||||||||
Term Policies with Cash Value |
$ | | $ | | $ | | ||||||||
Universal Life |
33,600 | 31,252 | 35,236 | |||||||||||
Universal Life with Secondary Guarantees |
| | | |||||||||||
Indexed Universal Life |
| | | |||||||||||
Indexed Universal Life with Secondary Guarantees |
| | | |||||||||||
Indexed Life |
| | | |||||||||||
Other Permanent Cash Value Life Insurance |
| | | |||||||||||
Variable Life |
14,614 | 14,614 | 14,614 | |||||||||||
Variable Universal Life |
401,236 | 402,990 | 403,849 | |||||||||||
Miscellaneous Reserves |
602,888 | 602,036 | 603,074 | |||||||||||
Not subject to discretionary withdrawal or no cash values |
||||||||||||||
Term Policies with Cash Value |
| | 144 | |||||||||||
Accidental Death Benefits |
| | | |||||||||||
Disability - Active Lives |
| | 7 | |||||||||||
Disability - Disabled Lives |
| | 295 | |||||||||||
Miscellaneous Reserves |
| | 7,576 | |||||||||||
|
|
|
|
|
|
|||||||||
Total (gross: direct + assumed) |
$ | 1,052,338 | $ | 1,050,892 | $ | 1,064,795 | ||||||||
|
|
|
|
|
|
|||||||||
Reinsurance Ceded |
294,988 | 296,293 | 317,845 | |||||||||||
|
|
|
|
|
|
|||||||||
Total (net) |
$ | 757,350 | $ | 754,599 | $ | 746,950 | ||||||||
|
|
|
|
|
|
54
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, 2023 | ||||||||||||||
Separate Account Non Guaranteed | Account Value |
Cash Value |
Reserve | |||||||||||
Subject to discretionary withdrawal, surrender values, or policy loans: |
||||||||||||||
Term Policies with Cash Value |
$ | | $ | | $ | | ||||||||
Universal Life |
| | | |||||||||||
Universal Life with Secondary Guarantees |
| | | |||||||||||
Indexed Universal Life |
| | | |||||||||||
Indexed Universal Life with Secondary Guarantees |
| | | |||||||||||
Indexed Life |
| | | |||||||||||
Other Permanent Cash Value Life Insurance |
| | | |||||||||||
Variable Life |
46,186 | 46,186 | 46,186 | |||||||||||
Variable Universal Life |
7,640,044 | 7,640,044 | 7,641,444 | |||||||||||
Miscellaneous Reserves |
| | | |||||||||||
Not subject to discretionary withdrawal or not cash values |
||||||||||||||
Term Policies with Cash Value |
| | | |||||||||||
Accidental Death Benefits |
| | | |||||||||||
Disability - Active Lives |
| | | |||||||||||
Disability - Disabled Lives |
| | | |||||||||||
Miscellaneous Reserves |
| | | |||||||||||
|
|
|
|
|
|
|||||||||
Total (gross: direct + assumed) |
$ | 7,686,230 | $ | 7,686,230 | $ | 7,687,630 | ||||||||
|
|
|
|
|
|
|||||||||
Reinsurance Ceded |
| | | |||||||||||
|
|
|
|
|
|
|||||||||
Total (net) |
$ | 7,686,230 | $ | 7,686,230 | $ | 7,687,630 | ||||||||
|
|
|
|
|
|
Below is a reconciliation of the life reserves from the General Account and Separate Accounts of the Company as of December 31, 2023:
December 31, 2023 |
| |||||
Life & Accident & Health Annual Statement: |
||||||
Exhibit 5, Life Insurance Section, Total (net) |
$ | 738,114 | ||||
Exhibit 5, Disability - Active Lives Section, Total (net) |
7 | |||||
Exhibit 5, Disability - Disabled Lives Section, Total (net) |
295 | |||||
Exhibit 5, Miscellaneous Reserves Section, Total (net) |
8,534 | |||||
|
|
|||||
Subtotal General Account |
$ | 746,950 | ||||
|
|
|||||
Separate Account Annual Statement: |
||||||
Exhibit 3, Life Insurance Section, Total (net) |
$ | 7,687,630 | ||||
|
|
|||||
Subtotal Separate Account |
$ | 7,687,630 | ||||
|
|
|||||
Combined Total |
$ | 8,434,580 | ||||
|
|
55
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 | ||||||||||||||
General Account | Account Value |
Cash Value |
Reserve | |||||||||||
Subject to discretionary withdrawal, surrender values, or policy loans: |
||||||||||||||
Term Policies with Cash Value |
$ | | $ | | $ | | ||||||||
Universal Life |
35,980 | 33,675 | 37,766 | |||||||||||
Universal Life with Secondary Guarantees |
| | | |||||||||||
Indexed Universal Life |
| | | |||||||||||
Indexed Universal Life with Secondary Guarantees |
| | | |||||||||||
Indexed Life |
| | | |||||||||||
Other Permanent Cash Value Life Insurance |
| | | |||||||||||
Variable Life |
13,671 | 13,671 | 13,671 | |||||||||||
Variable Universal Life |
401,407 | 403,354 | 404,642 | |||||||||||
Miscellaneous Reserves |
640,448 | 639,842 | 640,965 | |||||||||||
Not subject to discretionary withdrawal or not cash values |
||||||||||||||
Term Policies with Cash Value |
XXX | XXX | 198 | |||||||||||
Accidental Death Benefits |
XXX | XXX | | |||||||||||
Disability - Active Lives |
XXX | XXX | 7 | |||||||||||
Disability - Disabled Lives |
XXX | XXX | 360 | |||||||||||
Miscellaneous Reserves |
XXX | XXX | 9,777 | |||||||||||
|
|
|
|
|
|
|||||||||
Total (gross: direct + assumed) |
$ | 1,091,506 | $ | 1,090,542 | $ | 1,107,386 | ||||||||
|
|
|
|
|
|
|||||||||
Reinsurance Ceded |
295,323 | 296,555 | 319,825 | |||||||||||
|
|
|
|
|
|
|||||||||
Total (net) |
$ | 796,183 | $ | 793,987 | $ | 787,561 | ||||||||
|
|
|
|
|
|
56
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 | ||||||||||||||
Separate Account Non-Guaranteed | Account Value |
Cash Value |
Reserve | |||||||||||
Subject to discretionary withdrawal, surrender values, or policy loans: |
||||||||||||||
Term Policies with Cash Value |
$ | | $ | | $ | | ||||||||
Universal Life |
| | | |||||||||||
Universal Life with Secondary Guarantees |
| | | |||||||||||
Indexed Universal Life |
| | | |||||||||||
Indexed Universal Life with Secondary Guarantees |
| | | |||||||||||
Indexed Life |
| | | |||||||||||
Other Permanent Cash Value Life Insurance |
| | | |||||||||||
Variable Life |
40,889 | 40,889 | 40,889 | |||||||||||
Variable Universal Life |
7,544,051 | 7,544,051 | 7,542,961 | |||||||||||
Miscellaneous Reserves |
| | | |||||||||||
Not subject to discretionary withdrawal or not cash values |
||||||||||||||
Term Policies with Cash Value |
XXX | XXX | | |||||||||||
Accidental Death Benefits |
XXX | XXX | | |||||||||||
Disability - Active Lives |
XXX | XXX | | |||||||||||
Disability - Disabled Lives |
XXX | XXX | | |||||||||||
Miscellaneous Reserves |
XXX | XXX | | |||||||||||
|
|
|
|
|
|
|||||||||
Total (gross: direct + assumed) |
$ | 7,584,940 | $ | 7,584,940 | $ | 7,583,850 | ||||||||
|
|
|
|
|
|
|||||||||
Reinsurance Ceded |
| | | |||||||||||
|
|
|
|
|
|
|||||||||
Total (net) |
$ | 7,584,940 | $ | 7,584,940 | $ | 7,583,850 | ||||||||
|
|
|
|
|
|
Below is a reconciliation of the life reserves from the General Account and Separate Accounts of the Company as of December 31, 2022:
December 31, 2022 | ||||||
Life & Accident & Health Annual Statement: |
||||||
Exhibit 5, Life Insurance Section, Total (net) |
$ | 776,486 | ||||
Exhibit 5, Disability - Active Lives Section, Total (net) |
7 | |||||
Exhibit 5, Disability - Disabled Lives Section, Total (net) |
360 | |||||
Exhibit 5, Miscellaneous Reserves Section, Total (net) |
10,708 | |||||
|
|
|||||
Subtotal General Account |
$ | 787,561 | ||||
|
|
|||||
Separate Account Annual Statement: |
||||||
Exhibit 3, Life Insurance Section, Total (net) |
$ | 7,583,850 | ||||
|
|
|||||
Subtotal Separate Account |
$ | 7,583,850 | ||||
|
|
|||||
Combined Total |
$ | 8,371,411 | ||||
|
|
57
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)
14. | Separate Accounts |
The Company has established insulated Separate Accounts applicable to various classes of contracts providing for variable benefits. Contracts for which funds are invested in insulated variable separate accounts include individual and group life and annuity contracts. The assets (securities) in these insulated accounts are carried at fair value and the investment risk associated with such assets is retained by the contract holder. These variable products provide minimum death benefits and, in certain annuity contracts, minimum accumulation income or withdrawal benefits. The minimum guaranteed benefit reserves associated with the insulated Separate Accounts are reported in Aggregate reserve for life and annuity contracts in the Companys Statutory Statements of Admitted Assets, Liabilities and Capital and Surplus.
The Company has also established non-insulated Separate Accounts for certain contracts that include an MVA feature associated with fixed rates, including for amounts allocated to the fixed portion of certain combination fixed and variable deferred annuity contracts. The assets in the variable deferred annuity Separate Account are carried at fair value. For some MVA contracts, the assets in the fixed deferred annuity Separate Account are carried on a General Account basis. The assets of the non-insulated Separate Account are not legally insulated and can be used by the Company to satisfy claims resulting from the General Account.
The Company earns separate account fees for providing administrative services and bearing the mortality and the other guaranteed benefit risks related to variable contracts. Net investment income, capital gains and losses, and changes in mutual fund asset values in variable Separate Accounts are allocated to policyholders and therefore are not reflected in the Companys Statutory Statements of Operations for the General Account.
For the current reporting year, the Company reported assets and liabilities from the following products in a Separate Account:
| Delaware Life Variable Life |
| Delaware Life Variable Annuity |
| Delaware Life Market Value Adjusted Annuity |
The legal insulation of the Separate Account assets prevents such assets from being generally available to satisfy claims resulting from the General Account. The Separate Account classification of legally insulated versus not legally insulated is supported by Section 2932 of the Delaware Insurance Code.
The assets legally insulated and non-legally insulated from the General Account as of December 31, 2023 and 2022 were attributable to the following products:
December 31, 2023 | ||||||||||||||
Product |
Legally Insulated Assets |
Not - Legally Insulated Assets |
Total | |||||||||||
Variable Life |
$ | 8,568,227 | $ | | $ | 8,568,227 | ||||||||
Variable Annuity |
8,737,714 | | 8,737,714 | |||||||||||
MVA Annuity |
| 421,868 | 421,868 | |||||||||||
|
|
|
|
|
|
|||||||||
Total |
$ | 17,305,941 | $ | 421,868 | $ | 17,727,809 | ||||||||
|
|
|
|
|
|
58
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 | ||||||||||||||
Product |
Legally Insulated Assets |
Not - Legally Insulated Assets |
Total | |||||||||||
Variable Life |
$ | 8,686,763 | $ | | $ | 8,686,763 | ||||||||
Variable Annuity |
8,593,077 | | 8,593,077 | |||||||||||
MVA Annuity |
| 400,971 | 400,971 | |||||||||||
|
|
|
|
|
|
|||||||||
Total |
$ | 17,279,840 | $ | 400,971 | $ | 17,680,811 | ||||||||
|
|
|
|
|
|
Separate Account liabilities are determined in accordance with prescribed actuarial methodologies, which approximate the fair value of the related assets less applicable surrender charges. The resulting surplus is recorded in the Statutory Statements of Operations for the General Account as a component of Net transfers (from) or to Separate Accounts net of reinsurance. The variable Separate Accounts are non-guaranteed Separate Accounts, wherein the policyholder assumes substantially all the investment risks and rewards. MVA Separate Accounts are guaranteed separate accounts, wherein the Company contractually guarantees either a minimum return or account value to the policyholder. In accordance with the guarantees provided, if the investment proceeds are insufficient to cover the rate of return guaranteed for the product, the policyholder proceeds will be remitted by the General Account.
To compensate the General Account for the risk associated with separate account guarantees, risk charges of $182,305, $192,357, and $203,590 were received by the General Account from the Separate Accounts during the years ended December 31, 2023, 2022, and 2021, respectively.
For the years ended December 31, 2023, 2022, and 2021, the Companys General Account paid $85,397, $104,861, and $117,874 for Separate Account guarantees, respectively.
The Company does not engage in securities lending transactions within its Separate Accounts.
59
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 analysis of the separate account reserves as of December 31, 2023 and 2022 is as follows:
December 31, 2023 | ||||||||||||||
Nonindexed Guarantee Less than/ Equal to 4% |
Nonguaranteed Separate Accounts |
Total | ||||||||||||
Premiums, Considerations or Deposits |
$ | (2,913 | ) | $ | 310,103 | $ | 307,190 | |||||||
Reserves at December 31, 2023 |
||||||||||||||
For Accounts with Assets at: |
||||||||||||||
Fair Value |
114,680 | 16,385,486 | 16,500,166 | |||||||||||
Amortized Cost |
154,690 | | 154,690 | |||||||||||
|
|
|
|
|
|
|||||||||
Total Reserves |
$ | 269,370 | $ | 16,385,486 | $ | 16,654,856 | ||||||||
|
|
|
|
|
|
|||||||||
By Withdrawal Characteristics: |
||||||||||||||
With Market Value Adjustment |
$ | 269,370 | $ | | $ | 269,370 | ||||||||
At Book Value Without Market Value Adjustment and with current surrender charge of 5% or more |
| 569,857 | 569,857 | |||||||||||
At Fair Value |
| 15,773,424 | 15,773,424 | |||||||||||
|
|
|
|
|
|
|||||||||
Subtotal |
269,370 | 16,343,281 | 16,612,651 | |||||||||||
Not Subject to Discretionary Withdrawal |
| 42,205 | 42,205 | |||||||||||
|
|
|
|
|
|
|||||||||
Total |
$ | 269,370 | $ | 16,385,486 | $ | 16,654,856 | ||||||||
|
|
|
|
|
|
60
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 | ||||||||||||||
Nonindexed Guarantee Less than/ equal to 4% |
Nonguaranteed Separate Accounts |
Total | ||||||||||||
Premiums, Considerations or Deposits |
$ | 15,133 | $ | 367,516 | $ | 382,649 | ||||||||
Reserves at December 31, 2022 |
||||||||||||||
For Accounts with Assets at: |
||||||||||||||
Fair Value |
141,814 | 16,148,853 | 16,290,667 | |||||||||||
Amortized Cost |
189,858 | | 189,858 | |||||||||||
|
|
|
|
|
|
|||||||||
Total Reserves |
$ | 331,672 | $ | 16,148,853 | $ | 16,480,525 | ||||||||
|
|
|
|
|
|
|||||||||
By Withdrawal Characteristics: |
||||||||||||||
With Market Value Adjustment |
$ | 331,672 | $ | | $ | 331,672 | ||||||||
At Book Value Without Market Value Adjustment and with current surrender charge of 5% or more |
| 373,163 | 373,163 | |||||||||||
At Fair Value |
| 15,742,753 | 15,742,753 | |||||||||||
|
|
|
|
|
|
|||||||||
Subtotal |
331,672 | 16,115,916 | 16,447,588 | |||||||||||
Not Subject to Discretionary Withdrawal |
| 32,937 | 32,937 | |||||||||||
|
|
|
|
|
|
|||||||||
Total |
$ | 331,672 | $ | 16,148,853 | $ | 16,480,525 | ||||||||
|
|
|
|
|
|
Below is the reconciliation of Net Transfers from Separate Accounts net of reinsurance in the Statutory Statements of Operations of the Company:
Years Ended December 31, | ||||||||||||||
2023 | 2022 | 2021 | ||||||||||||
Transfers to Separate Accounts |
$ | 307,190 | $ | 382,649 | $ | 448,113 | ||||||||
Transfers from Separate Accounts |
(1,290,374 | ) | (1,216,506 | ) | (1,679,798 | ) | ||||||||
|
|
|
|
|
|
|||||||||
Net Transfers from Separate Accounts net of reinsurance in the Statement of Operations |
$ | (983,184 | ) | $ | (833,857 | ) | $ | (1,231,685 | ) | |||||
|
|
|
|
|
|
61
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)
15. | Fair Value of Financial Instruments |
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and therefore, represents an exit price. Fair value estimates are significantly affected by the assumptions used, including the discount rate and estimates of future cash flow. Although fair value estimates are calculated using assumptions that management believes are appropriate, changes in assumptions could cause these estimates to vary materially. In that regard, certain level 3 derived fair value estimates cannot be substantiated by comparison to independent markets and, in some cases, could not be realized in the immediate settlement of the instruments. Certain financial liabilities (including non-investment type insurance contracts) and all nonfinancial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value to the Company.
The Companys financial assets and liabilities have been classified, for disclosure purposes, based on a hierarchy defined by SSAP No. 100R, Fair Value (SSAP No. 100R). The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). An assets or a liabilitys classification is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3). The levels of the fair hierarchy are as follows:
Level 1: Fair value is based on unadjusted quoted prices for identical assets or liabilities in active markets accessible at the measurement date.
Level 2: Fair value is based on quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads, and yield curves.
Level 3: Fair value is based on valuations derived from techniques in which one or more significant inputs are unobservable (supported by little or no market activity). Unobservable inputs reflect the Companys best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instruments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. From time to time, there may be movements between levels as inputs become more or less observable, which may depend on several factors including the activity of the market for the specific security, the activity of the market for similar securities, the level of risk spreads and the source of the information from which we obtain the information. Transfers in or out of any level are measured as of the beginning of the period. Pursuant to SSAP No. 100R, the Company is permitted to utilize net asset value (NAV) as a practical expedient to fair value for certain investments that qualify for such treatment. Investments reported at NAV are separately identified in the table below.
62
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)
Valuation of Financial Instruments Held at Fair Value by Fair Value Hierarchy Levels
The following tables present the Companys assets and liabilities measured at fair value in the Statutory Statements of Admitted Assets, Liabilities, and Capital and Surplus as of December 31, 2023 and 2022:
December 31, 2023 | ||||||||||||||||||||
Description for Each Class of Asset or Liability |
Level 1 | Level 2 | Level 3 | Net Asset Value (NAV) |
Total | |||||||||||||||
Assets at fair value: |
||||||||||||||||||||
Cash, cash equivalents and short-term investments |
||||||||||||||||||||
Government - Treasury |
$ | | $ | 1,699 | $ | | $ | | $ | 1,699 | ||||||||||
Bonds |
||||||||||||||||||||
Hybrid securities |
| 2,702 | | | 2,702 | |||||||||||||||
Industrial and miscellaneous |
| 11,150 | | | 11,150 | |||||||||||||||
Preferred Stocks |
||||||||||||||||||||
Industrial and miscellaneous |
| 27,237 | | | 27,237 | |||||||||||||||
Parent, subsidiaries and affiliates |
| 241,130 | | | 241,130 | |||||||||||||||
Common Stocks |
||||||||||||||||||||
Industrial and miscellaneous |
16,115 | 16,000 | 20,112 | 3,194 | 55,421 | |||||||||||||||
Other Invested Assets |
||||||||||||||||||||
Industrial and miscellaneous |
| 21,437 | 21,493 | | 42,930 | |||||||||||||||
Derivative assets |
||||||||||||||||||||
Interest rate contracts |
564,194 | | | | 564,194 | |||||||||||||||
Equity contracts |
2,569 | 135 | | | 2,704 | |||||||||||||||
FX contracts |
| | 67 | | 67 | |||||||||||||||
Separate Accounts assets (a) (b) |
12,742,594 | 3,189,851 | 291,900 | 121,382 | 16,345,727 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets at fair value/NAV |
$ | 13,325,472 | $ | 3,511,341 | $ | 333,572 | $ | 124,576 | $ | 17,294,961 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities at fair value: |
||||||||||||||||||||
Derivative liabilities |
||||||||||||||||||||
Interest rate contracts |
$ | (416,702 | ) | $ | | $ | | $ | | $ | (416,702 | ) | ||||||||
Equity contracts |
(306 | ) | (11,526 | ) | | | (11,832 | ) | ||||||||||||
FX contracts |
| | (2,654 | ) | | (2,654 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities at fair value |
$ | (417,008 | ) | $ | (11,526 | ) | $ | (2,654 | ) | $ | | $ | (431,188 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
63
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 | ||||||||||||||||||||
Description for Each Class of Asset or Liability |
Level 1 | Level 2 | Level 3 | NAV | Total | |||||||||||||||
Assets at fair value: |
||||||||||||||||||||
Bonds |
||||||||||||||||||||
Hybrid securities |
$ | | $ | 2,519 | $ | | $ | | $ | 2,519 | ||||||||||
Industrial and miscellaneous |
| 223 | 2,999 | | 3,222 | |||||||||||||||
Preferred Stocks |
||||||||||||||||||||
Industrial and miscellaneous |
| 34,254 | | | 34,254 | |||||||||||||||
Parent, subsidiaries and affiliates |
| 243,199 | | | 243,199 | |||||||||||||||
Common Stocks |
||||||||||||||||||||
Industrial and miscellaneous |
15,399 | 90,022 | 27,959 | | 133,380 | |||||||||||||||
Other Invested Assets |
||||||||||||||||||||
Industrial and miscellaneous |
| 62,971 | 2,071 | | 65,042 | |||||||||||||||
Derivative assets |
||||||||||||||||||||
Interest rate contracts |
592,295 | 2,045 | | | 594,340 | |||||||||||||||
Equity contracts |
6,128 | | | | 6,128 | |||||||||||||||
Foreign exchange contracts |
| | 52 | | 52 | |||||||||||||||
Separate Accounts assets (a)(b) |
10,455,406 | 4,913,419 | 270,387 | 114,778 | 15,753,990 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total assets at fair value |
$ | 11,069,228 | $ | 5,348,652 | $ | 303,468 | $ | 114,778 | $ | 16,836,126 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Liabilities at fair value: |
||||||||||||||||||||
Derivative liabilities |
||||||||||||||||||||
Interest rate contracts |
$ | (336,952 | ) | $ | (111,913 | ) | $ | | $ | | $ | (448,865 | ) | |||||||
Equity contracts |
(59 | ) | | | | (59 | ) | |||||||||||||
Foreign exchange contracts |
| | (3,205 | ) | | (3,205 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total liabilities at fair value |
$ | (337,011 | ) | $ | (111,913 | ) | $ | (3,205 | ) | $ | | $ | (452,129 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
(a) | Separate account invested assets are typically carried at fair value. In instances where market risk is guaranteed by the Company, bonds and preferred stocks are carried at amortized cost based on their respective NAIC designation. Separate account assets also exclude $1,102,527 and $1,660,215 of investment income and receivables due at December 31, 2023 and 2022, respectively. Separate account liabilities include derivative liabilities carried at fair value. |
(b) | Includes assets with a fair value of $121,382 and $114,778 at December 31, 2023 and 2022 respectively, in hedge funds, private equities, and other alternative investments for which fair value is measured at NAV using the practical expedient. These investments are not quoted on a securities exchange or in the over-the-counter market. As of December 31, 2023 or 2022, there were no unfunded commitments. The investments have liquidity restrictions consisting of notice periods (typically 60 days), redemption schedules (typically quarterly) and hold backs (typically 3% of the investment is held back until the next annual audit is completed). The redemption period may be extended if there is a delay in liquidating underlying holdings within an investment. The investments are within the policyholders separate accounts so any fluctuation in NAV will result in a corresponding change in the policyholder reserve liability and therefore will have no impact on income. |
None of the Companys assets measured at fair value transferred between Levels 1 and 2 during the years ended December 31, 2023 and December 31, 2022.
64
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 are a reconciliation of the beginning and ending balances for assets and liabilities measured at fair value which were categorized as Level 3 for the years ended December 31, 2023 and 2022:
2023 | Balance at January 1, 2023 |
Transfers Into Level 3 |
Transfers Out of Level 3 |
Total Gains and (Losses) Included in Net Income |
Total Gains and (Losses) Included in Surplus |
Purchases | Issuances | Sales | Settlements | Ending Balance at December 31, 2023 |
||||||||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||||||||||||||
Common Stocks - Unaffiliated |
$ | 27,959 | $ | 3 | $ | (4,791 | ) | $ | | $ | 152 | $ | 69 | $ | | $ | (3,280 | ) | $ | | $ | 20,112 | ||||||||||||||||||
Bonds |
||||||||||||||||||||||||||||||||||||||||
Industrial and miscellaneous - unaffiliated |
2,999 | 11,461 | (7,596 | ) | 786 | 866 | | | (8,516 | ) | | | ||||||||||||||||||||||||||||
Other Invested Assets |
2,071 | 32,701 | | (724 | ) | (6,492 | ) | | | (6,063 | ) | | 21,493 | |||||||||||||||||||||||||||
Derivative Assets |
52 | | | 7,111 | 16 | | | | (7,112 | ) | 67 | |||||||||||||||||||||||||||||
Separate Accounts Assets |
270,387 | 5,792 | (20,426 | ) | 502 | 14,380 | 94,986 | | (72,489 | ) | (1,232 | ) | 291,900 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total Assets |
$ | 303,468 | $ | 49,957 | $ | (32,813 | ) | $ | 7,675 | $ | 8,922 | $ | 95,055 | $ | | $ | (90,348 | ) | $ | (8,344 | ) | $ | 333,572 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Liabilities: |
||||||||||||||||||||||||||||||||||||||||
FX Contracts |
$ | (3,205 | ) | $ | | $ | | $ | (9,874 | ) | $ | 551 | $ | | $ | | $ | | $ | 9,874 | $ | (2,654 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total Liabilities |
$ | (3,205 | ) | $ | | $ | | $ | (9,874 | ) | $ | 551 | $ | | $ | | $ | | $ | 9,874 | $ | (2,654 | ) | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 | Balance at January 1, 2022 |
Transfers Into Level 3 |
Transfers Out of Level 3 |
Total Gains and (Losses) Included in Net Income |
Total Gains and (Losses) Included in Surplus |
Purchases | Issuances | Sales | Settlements | Ending Balance at December 31, 2022 |
||||||||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||||||||||||||
Preferred Stocks |
||||||||||||||||||||||||||||||||||||||||
Industrial and Miscellaneous - unaffiliated |
$ | 19,948 | $ | | $ | | $ | | $ | 52 | $ | | $ | | $ | (20,000 | ) | $ | | $ | | |||||||||||||||||||
Parent, Subsidiaries and Affiliates |
255,000 | | (255,000 | ) | | | | | | | | |||||||||||||||||||||||||||||
Common Stocks - Unaffiliated |
82,215 | 1,365 | (50,086 | ) | 824 | 1,686 | 210 | | (8,255 | ) | | 27,959 | ||||||||||||||||||||||||||||
Bonds |
||||||||||||||||||||||||||||||||||||||||
Industrial and miscellaneous - unaffiliated |
825 | 7,438 | | (5,434 | ) | 170 | | | | | 2,999 | |||||||||||||||||||||||||||||
Other Invested Assets |
41,731 | | (30,399 | ) | 10 | (3,680 | ) | | | (5,591 | ) | | 2,071 | |||||||||||||||||||||||||||
Derivative Assets |
990 | | | 18,975 | (938 | ) | | | | (18,975 | ) | 52 | ||||||||||||||||||||||||||||
Separate Accounts Assets |
289,981 | 6,014 | (6,635 | ) | (1,342 | ) | (28,355 | ) | 80,732 | | (11,393 | ) | (58,615 | ) | 270,387 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total Assets |
$ | 690,690 | $ | 14,817 | $ | (342,120 | ) | $ | 13,033 | $ | (31,065 | ) | $ | 80,942 | $ | | $ | (45,239 | ) | $ | (77,590 | ) | $ | 303,468 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Liabilities: |
||||||||||||||||||||||||||||||||||||||||
FX Contracts |
$ | (140 | ) | $ | | $ | | $ | (6,827 | ) | $ | (3,065 | ) | $ | | $ | | $ | | $ | 6,827 | $ | (3,205 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Total Liabilities |
$ | (140 | ) | $ | | $ | | $ | (6,827 | ) | $ | (3,065 | ) | $ | | $ | | $ | | $ | 6,827 | $ | (3,205 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company transfers assets into or out of Level 3 at fair value as of the beginning of the reporting period. Transfers made were the result of changes in the level of observability of inputs used to price the assets or liabilities or changes in NAIC designations.
At the beginning of each reporting period, the Company evaluates whether or not any event has occurred or circumstances have changed that would cause an instrument to be transferred between levels.
65
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)
Derivative values in the above tables are presented on a gross basis.
Quantitative Information about Level 3 Fair Value Measurements
The following tables provide quantitative information about the significant unobservable inputs used for recurring assets measured at fair value in the Statutory Statements of Admitted Assets, Liabilities, and Capital and Surplus categorized within Level 3 for the years ended December 31, 2023 or 2022:
December 31, 2023 |
||||||||||||||||
Valuation Techniques |
Significant Unobservable |
Fair Value |
Range | Weighted Average |
||||||||||||
Common Stocks |
Trade Price | Pricing Valuation Multiple/ Discount Rate | $ | 20,079 | 0-1000 | 389 | ||||||||||
External Model | Net Asset Value | 33 | 1 | 1 | ||||||||||||
Other Invested Assets |
External Model | External Cashflows/Spreads | 16,503 | 0-2 | 1 | |||||||||||
Matrix Pricing | Quoted Prices | 4,990 | 1 | 1 | ||||||||||||
Separate Accounts Assets |
Matrix Pricing | Spreads | 1,241 | 90-105 | 100 | |||||||||||
Market Pricing | Spreads | 566 | 38 | 38 | ||||||||||||
Market Pricing | Spreads | 284,805 | 50-113 | 96 | ||||||||||||
Market Pricing | Quoted Prices | 5,288 | 89-100 | 92 | ||||||||||||
|
|
|||||||||||||||
Total Assets |
$ | 333,505 | ||||||||||||||
|
|
December 31, 2022 |
||||||||||||||||
Valuation Techniques |
Significant Unobservable |
Fair Value |
Range | Weighted Average |
||||||||||||
Bonds - Unaffiliated - Industrial & Misc. |
External Model | Spreads | $ | 2,999 | 17-24 | 19 | ||||||||||
Common Stocks |
Trade Price | Pricing Valuation Multiple / Discount Rate | 23,286 | 0-1000 | 335 | |||||||||||
External Model | External Cashflows | 4,672 | 0-2 | 1 | ||||||||||||
Other Invested Assets |
External Model | Spreads | 2,071 | 0-1 | | |||||||||||
Separate Accounts Assets |
Matrix Pricing | Spreads | 2,059 | 86-90 | 13 | |||||||||||
Market Pricing | Spreads | 10,833 | 40-110 | 73 | ||||||||||||
Matrix Pricing | Spreads | 250,975 | 0-100 | 91 | ||||||||||||
Market Pricing | Quoted Prices | 760 | 17-90 | 2 | ||||||||||||
Market Pricing | Quoted Prices | 5,760 | 91-100 | 93 | ||||||||||||
|
|
|||||||||||||||
Total Assets |
$ | 303,415 | ||||||||||||||
|
|
There were no significant changes made in valuation techniques during 2023 and 2022.
The above unobservable input tables above do not include immaterial balances related to derivatives which totaled $67 and $52 as of December 31, 2023 and December 31, 2022, respectively.
66
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)
Aggregate Fair Value of all Financial Instruments
For financial instruments, the carrying value and fair value or NAV, including level within the fair value hierarchy, at December 31, 2023 and 2022 were as follows:
December 31, 2023 | ||||||||||||||||||||||||||||
Type of Financial Instrument |
Aggregate Fair Value |
Carrying Value |
Level 1 | Level 2 | Level 3 | NAV | Not Practicable (Carrying Value) |
|||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||
Cash, cash equivalents and short-term investments |
$ | 3,859,737 | $ | 3,859,773 | $ | 1,128,103 | $ | 2,731,634 | | $ | | $ | | |||||||||||||||
Bonds |
17,082,218 | 18,134,460 | 1,599 | 16,876,810 | 203,809 | | | |||||||||||||||||||||
Preferred stocks |
799,242 | 802,140 | | 799,242 | | | | |||||||||||||||||||||
Common stocks (b) |
140,890 | 140,890 | 16,115 | 101,469 | 20,112 | 3,194 | | |||||||||||||||||||||
Mortgage loans, net of allowance |
1,617,888 | 1,721,502 | | 1,617,888 | | | | |||||||||||||||||||||
Derivatives - swaps and forwards |
577,253 | 572,489 | 577,051 | 135 | 67 | | | |||||||||||||||||||||
Derivatives - futures |
2,652 | 2,652 | 2,652 | | | | | |||||||||||||||||||||
Contract loans |
354,125 | 351,919 | | | 354,125 | | | |||||||||||||||||||||
Other invested assets (a) (b) |
807,216 | 825,554 | | 780,819 | 26,397 | | | |||||||||||||||||||||
Separate account assets |
16,605,957 | 16,625,283 | 12,762,461 | 3,427,797 | 294,317 | 121,382 | | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total Assets |
$ | 41,847,178 | $ | 43,036,662 | $ | 14,487,981 | $ | 26,335,794 | $ | 898,827 | $ | 124,576 | $ | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Liabilities: |
||||||||||||||||||||||||||||
Liabilities for deposit-type contracts |
$ | (1,933,048 | ) | $ | (1,979,497 | ) | $ | | $ | | $ | (1,933,048 | ) | $ | | $ | | |||||||||||
Derivatives - swaps and forwards |
(431,315 | ) | (432,859 | ) | (417,135 | ) | (11,526 | ) | (2,654 | ) | | | ||||||||||||||||
Derivatives - futures |
(2,991 | ) | (2,991 | ) | (2,991 | ) | | | | | ||||||||||||||||||
Separate account liabilities |
(232,124 | ) | (323,124 | ) | | | (232,124 | ) | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total Liabilities |
$ | (2,599,478 | ) | $ | (2,738,471 | ) | $ | (420,126 | ) | $ | (11,526 | ) | $ | (2,167,826 | ) | $ | | $ | | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
67
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 | ||||||||||||||||||||||||||||
Type of Financial Instrument |
Aggregate Fair Value |
Carrying Value |
Level 1 | Level 2 | Level 3 | NAV | Not Practicable (Carrying Value) |
|||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||
Bonds |
$ | 12,815,035 | $ | 14,325,528 | $ | 1,523 | $ | 12,476,378 | $ | 337,134 | $ | | $ | | ||||||||||||||
Preferred stocks |
1,072,730 | 1,121,391 | | 1,072,730 | | | | |||||||||||||||||||||
Common stocks (b) |
133,380 | 133,380 | 15,399 | 90,022 | 27,959 | | | |||||||||||||||||||||
Mortgage loans, net of allowance |
1,297,783 | 1,387,817 | | 1,297,783 | | | | |||||||||||||||||||||
Contract loans |
333,437 | 353,608 | | | 333,437 | | | |||||||||||||||||||||
Derivatives options and swaptions |
1,165 | 1,165 | | 1,165 | | | | |||||||||||||||||||||
Derivatives swaps and forwards |
605,124 | 601,601 | 604,193 | 880 | 51 | | | |||||||||||||||||||||
Derivatives futures |
6,281 | 6,281 | 6,281 | | | | | |||||||||||||||||||||
Other invested assets (a) (b) |
723,497 | 748,755 | | 667,975 | 55,522 | | | |||||||||||||||||||||
Cash, cash equivalents and short-term investments |
3,141,676 | 3,141,676 | 784,641 | 2,357,035 | | | | |||||||||||||||||||||
Separate account assets |
15,980,121 | 16,010,235 | 10,461,469 | 5,126,913 | 276,961 | 114,778 | | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 36,110,229 | $ | 37,831,437 | $ | 11,873,506 | $ | 23,090,881 | $ | 1,031,064 | $ | 114,778 | $ | | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Liabilities: |
||||||||||||||||||||||||||||
Liability for deposit-type contracts |
$ | (1,476,681 | ) | $ | (1,562,961 | ) | $ | | $ | | $ | (1,476,681 | ) | $ | | $ | | |||||||||||
Derivatives swaps and forwards |
(453,038 | ) | (455,752 | ) | (334,465 | ) | (115,369 | ) | (3,204 | ) | | | ||||||||||||||||
Derivatives - futures |
(2,546 | ) | (2,546 | ) | (2,546 | ) | | | | | ||||||||||||||||||
Separate account liabilities |
(315,784 | ) | (315,784 | ) | | | (315,784 | ) | | | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total liabilities |
$ | (2,248,049 | ) | $ | (2,337,043 | ) | $ | (337,011 | ) | $ | (115,369 | ) | $ | (1,795,669 | ) | $ | | $ | | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) | As of December 31, 2023 and 2022, there were $190,986 and $211,779 of unfunded commitments for limited partnership investments, respectively. The investments have liquidity restrictions consisting of either general partner approval or no ability for early redemption. |
(b) | The common stock line in the tables above exclude equity method investments with carry values of $21,549 and $169,831 as of December 31, 2023 and 2022, respectively. The other invested assets line in the tables above exclude equity method investments with carry values of $667,674 and $486,088 as of December 31, 2023 and 2022, respectively. |
The methods and assumptions that the Company uses in determining the estimated fair value of its financial instruments are summarized below:
Bonds - The Company determines the fair value of its publicly-traded fixed maturity securities using three primary pricing methods: third-party pricing services, non-binding broker quotes, and pricing models. Prices are first sought from third-party pricing services, with the remaining unpriced securities priced using one of the other two methods. Third-party pricing services derive the security prices through recently reported trades for identical or similar securities with adjustments for trading volumes and market observable information through the reporting date. In the event that there are no recent market trades, pricing services and brokers may use pricing models to develop a security price based on future expected cash flows discounted at an estimated market rate using collateral performance and vintages. The Company generally does not adjust quotes or prices obtained from brokers or pricing services.
Structured securities, such as ABS, RMBS and CMBS, are priced using third-party pricing services, a fair value model, or independent broker quotations. Typical inputs used by these three pricing methods include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids and/or estimated cash flows and prepayment speeds. In addition, estimates of expected future prepayments are factors in determining the price of ABS, RMBS and CMBS.
68
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)
These estimates are based on the underlying collateral and structure of the security, as well as prepayment speeds previously experienced in the market at interest rate levels projected for the underlying collateral. Actual prepayment experience may vary from these estimates.
For privately-placed fixed maturity securities, fair values are estimated using model prices or broker quotes. A portion of privately-placed fixed maturity securities (typically SEC Rule 144A securities) are priced using market prices. Also, a small subset of privately-placed fixed maturity securities are priced using matrix applications which take into account credit spreads for a variety of public and private securities of similar credit risk, maturity, prepayment, and liquidity characteristics.
The Companys ability to liquidate positions in privately-placed fixed securities and mortgages could be impacted to a significant degree by the lack of an actively-traded market. Although the Company believes that its estimates reasonably reflect the fair value of those instruments, its key assumptions about risk-free interest rates, risk premiums, performance of underlying collateral (if any), and other factors may not reflect those of an active market.
Preferred and common stocks - The fair value of the Companys equity securities not accounted for under the equity method is first based on quoted market prices. Similar to fixed maturity securities, the Company uses pricing services and broker quotes to price equity securities for which a quoted market price is not available.
Mortgage loans on real estate - The fair value of mortgage loans is estimated by discounting future cash flows using current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.
Derivatives - The fair values of swaps, swaptions, and forwards are based on current settlement values, dealer quotes, and market prices. Fair values of options and futures are also based on dealer quotes and market prices.
Contract loans - The fair value of policy loans is determined by estimating future policy loan cash flows and discounting the cash flows at a current market interest rate.
Other invested assets - Other invested assets include renewable energy tax credits, surplus debentures, non-rated residual tranches on asset-backed securities, and collateral loans. The fair values of surplus notes are obtained from third-party pricing services. Collateral loans are carried at amortized cost using pricing methods similar to private placements.
Cash, cash equivalents, and short-term investments - The carrying value for cash, cash equivalents, and short-term investments approximates fair value due to the short-term nature and liquidity of the balances.
Separate Accounts - The estimated fair value of Separate Account assets and liabilities is determined using the same methodology described in Note 14. The difference between Separate Account assets and liabilities reflected in the chart above and the total recognized in the Statutory Statements of Admitted Assets, Liabilities and Capital and Surplus represents amounts that are attributable to non-financial instruments.
Deposit-type contracts - The fair values of the Companys General Account liabilities under investment-type contracts (insurance and annuity contracts that do not involve mortality or morbidity risks) is estimated using discounted cash flow analyses or surrender values. Those contracts that are deemed to have short-term guarantees have a carrying amount equal to their estimated fair value.
69
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)
16. | Federal Income Taxes |
The Inflation Reduction Act (IRA) was enacted on August 16, 2022 and included a new corporate alternative minimum tax (CAMT). The IRA and CAMT are effective for tax years beginning after 2022. The Company is a non-applicable reporting entity as it relates to the CAMT.
The components of the Companys DTAs and DTLs as of December 31, 2023 and December 31, 2022 were as follows:
December 31, 2023 | December 31, 2022 | Change | ||||||||||||||||||||||||||||||||||
Description |
Ordinary | Capital | Total | Ordinary | Capital | Total | Ordinary | Capital | Total | |||||||||||||||||||||||||||
Gross deferred tax assets |
$ | 224,890 | $ | 80,137 | $ | 305,027 | $ | 114,648 | $ | 45,114 | $ | 159,762 | $ | 110,242 | $ | 35,023 | $ | 145,265 | ||||||||||||||||||
Statutory valuation allowance adjustments |
| | | | | | | | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Adjusted gross deferred tax assets |
224,890 | 80,137 | 305,027 | 114,648 | 45,114 | 159,762 | 110,242 | 35,023 | 145,265 | |||||||||||||||||||||||||||
Deferred tax assets nonadmitted |
| | | | | | | | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Subtotal net admitted deferred tax assets |
224,890 | 80,137 | 305,027 | 114,648 | 45,114 | 159,762 | 110,242 | 35,023 | 145,265 | |||||||||||||||||||||||||||
Deferred tax liabilities |
65,299 | 63,139 | 128,438 | 62,801 | 57,012 | 119,813 | 2,498 | 6,127 | 8,625 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Net admitted deferred tax assets / (Net deferred tax liabilities) |
$ | 159,591 | $ | 16,998 | $ | 176,589 | $ | 51,847 | $ | (11,898 | ) | $ | 39,949 | $ | 107,744 | $ | 28,896 | $ | 136,640 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides component amounts of the Companys calculation by tax character in accordance with paragraphs 11.a, 11.b.i, 11.b.ii and 11.c of SSAP No. 101:
December 31, 2023 | December 31, 2022 | Change | ||||||||||||||||||||||||||||||||||
Description | Ordinary | Capital | Total | Ordinary | Capital | Total | Ordinary | Capital | Total | |||||||||||||||||||||||||||
Federal income taxes paid in prior years recoverable through loss carrybacks |
$ | | $ | | $ | | $ | | $ | 16,958 | $ | 16,958 | $ | | $ | (16,958 | ) | $ | (16,958 | ) | ||||||||||||||||
Adjusted gross deferred tax assets expected to be realized after application of the threshold limitation |
165,618 | 26,600 | 192,218 | 49,635 | 12,862 | 62,497 | 115,983 | 13,738 | 129,721 | |||||||||||||||||||||||||||
Adjusted gross deferred tax assets expected to be realized following the balance sheet date |
165,618 | 26,600 | 192,218 | 49,635 | 12,862 | 62,497 | 115,983 | 13,738 | 129,721 | |||||||||||||||||||||||||||
Adjusted gross deferred tax assets allowed per limitation threshold |
| | 352,224 | XXX | XXX | 323,831 | XXX | XXX | 28,393 | |||||||||||||||||||||||||||
Adjusted gross deferred tax assets offset by gross deferred tax liabilities |
59,272 | 53,537 | 112,809 | 65,013 | 15,294 | 80,307 | (5,741 | ) | 38,243 | 32,502 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Deferred tax assets admitted as the result of application of SSAP No. 101. |
$ | 224,890 | $ | 80,137 | $ | 305,027 | $ | 114,648 | $ | 45,114 | $ | 159,762 | $ | 110,242 | $ | 35,023 | $ | 145,265 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
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)
Description |
2023 | 2022 | ||||||||
Ratio Percentage Used To Determine Recovery Period And Threshold Limitation Amount |
823 | % | 841 | % | ||||||
Amount Of Adjusted Capital And Surplus Used To Determine Recovery Period And Threshold Limitation Above |
$ | 2,348,158 | $ | 2,158,872 |
The following table provides the impact of tax planning strategies on adjusted gross and net admitted DTAs, as used in the Companys SSAP No. 101 calculation.
December 31, 2023 | December 31, 2022 | Change | ||||||||||||||||||||||
Description | Ordinary | Capital | Ordinary | Capital | Ordinary | Capital | ||||||||||||||||||
Adjusted gross deferred tax assets |
$ | 224,890 | $ | 80,137 | $ | 114,648 | $ | 45,114 | $ | 110,242 | $ | 35,023 | ||||||||||||
Percentage of adjusted gross deferred tax assets by tax character attributable to the impact of tax planning strategies |
| % | | % | | % | | % | | % | | % | ||||||||||||
Net admitted adjusted gross deferred tax assets |
$ | 224,890 | $ | 80,137 | $ | 114,648 | $ | 45,114 | $ | 110,242 | $ | 35,023 | ||||||||||||
Percentage of net admitted assets by tax character because of the impact of tax planning strategies |
| % | | % | | % | | % | | % | | % |
The Companys tax planning strategies do not include the use of reinsurance.
The Company had no temporary differences for which a DTL was not established.
The following tables provide the significant components of the Companys income taxes incurred and the changes in DTAs and DTLs.
December 31, 2023 |
December 31, 2022 |
December 31, 2021 |
||||||||||||
Current Income Tax |
||||||||||||||
Federal Income Tax Expense (Benefit) from Operations |
$ | 183,751 | $ | 46,564 | $ | (3,242 | ) | |||||||
Federal Income Tax (Benefit) Expense on Net Capital Gains |
(18,439 | ) | 3 | 9,400 | ||||||||||
|
|
|
|
|
|
|||||||||
Current Income Tax Expense |
$ | 165,312 | $ | 46,567 | $ | 6,158 | ||||||||
|
|
|
|
|
|
71
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 significant components of the Companys DTAs and DTLs as of December 31, 2023 and 2022 were as follows:
December 31, 2023 |
December 31, 2022 |
Change | ||||||||||||
Deferred Tax Assets: |
||||||||||||||
Ordinary |
||||||||||||||
Policyholder Reserves |
$ | 166,071 | $ | 69,139 | $ | 96,932 | ||||||||
Investments |
2,402 | 2,392 | 10 | |||||||||||
Deferred Acquisition Costs |
46,394 | 34,143 | 12,251 | |||||||||||
Fixed assets |
1,300 | 1,087 | 213 | |||||||||||
Compensation and benefits accrual |
1,432 | 2,134 | (702 | ) | ||||||||||
Receivables - nonadmitted |
5,013 | 3,663 | 1,350 | |||||||||||
Other |
2,278 | 2,090 | 188 | |||||||||||
|
|
|
|
|
|
|||||||||
Total Ordinary Deferred Tax Assets |
$ | 224,890 | $ | 114,648 | $ | 110,242 | ||||||||
Statutory Valuation Allowance Adjustment |
| | | |||||||||||
Nonadmitted |
| | | |||||||||||
|
|
|
|
|
|
|||||||||
Admitted Ordinary Deferred Tax Assets |
$ | 224,890 | $ | 114,648 | $ | 110,242 | ||||||||
Capital |
||||||||||||||
Investments |
$ | 47,173 | $ | 45,114 | $ | 2,059 | ||||||||
Net capital loss carry-forward |
32,964 | | 32,964 | |||||||||||
|
|
|
|
|
|
|||||||||
Subtotal |
80,137 | 45,114 | 35,023 | |||||||||||
Statutory Valuation Allowance Adjustment |
| | | |||||||||||
Nonadmitted |
| | | |||||||||||
|
|
|
|
|
|
|||||||||
Admitted Capital Deferred Tax Assets |
80,137 | 45,114 | 35,023 | |||||||||||
|
|
|
|
|
|
|||||||||
Admitted Deferred Tax Assets |
$ | 305,027 | $ | 159,762 | $ | 145,265 | ||||||||
|
|
|
|
|
|
|||||||||
Deferred Tax Liabilities: |
||||||||||||||
Ordinary |
||||||||||||||
Investments |
$ | 45,990 | $ | 39,400 | $ | 6,590 | ||||||||
Fixed Assets |
552 | 771 | (219 | ) | ||||||||||
Policyholder Reserves |
18,757 | 22,628 | (3,871 | ) | ||||||||||
Other |
| 2 | (2 | ) | ||||||||||
|
|
|
|
|
|
|||||||||
Subtotal |
$ | 65,299 | $ | 62,801 | $ | 2,498 | ||||||||
Capital |
||||||||||||||
Investments |
63,139 | 57,012 | 6,127 | |||||||||||
|
|
|
|
|
|
|||||||||
Subtotal |
63,139 | 57,012 | 6,127 | |||||||||||
|
|
|
|
|
|
|||||||||
Deferred Tax Liabilities |
$ | 128,438 | $ | 119,813 | $ | 8,625 | ||||||||
|
|
|
|
|
|
|||||||||
Net Admitted Deferred Tax Assets / Deferred Tax Liabilities |
$ | 176,589 | $ | 39,949 | $ | 136,640 | ||||||||
|
|
|
|
|
|
72
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 change in net deferred income taxes is comprised of the following (this analysis is exclusive of nonadmitted assets as the change in nonadmitted assets is reported separately from the change in net deferred income taxes in the surplus section of the Annual Statement):
Description |
December 31, 2023 | December 31, 2022 | Change | |||||||||||
Total Deferred Tax Assets |
$ | 305,027 | $ | 159,762 | $ | 145,265 | ||||||||
Total Deferred Tax Liabilities |
128,438 | 119,814 | 8,624 | |||||||||||
|
|
|
|
|
|
|||||||||
Net Deferred Tax Assets / Deferred Tax Liabilities |
$ | 176,589 | $ | 39,948 | $ | 136,641 | ||||||||
Statutory Valuation Allowance |
| | | |||||||||||
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Net Deferred Tax Assets / Deferred Tax Liabilities |
$ | 176,589 | $ | 39,948 | $ | 136,641 | ||||||||
Tax Effect of Unrealized (Gains)/Losses |
4,416 | |||||||||||||
Prior Period Adjustment |
| |||||||||||||
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Change in Net Deferred Income Tax |
$ | 141,057 | ||||||||||||
|
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The provision for federal income taxes incurred for the current year is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The significant items causing this difference for the years ended December 31, 2023, 2022, and 2021 were as follows:
December 31, 2023 | December 31, 2022 | December 31, 2021 | ||||||||||||||||||||||||||||||||||
Description |
Amount | Tax Effect @ 21% |
Effective Tax Rate |
Amount | Tax Effect @ 21% |
Effective Tax Rate |
Amount | Tax Effect @ 21% |
Effective Tax Rate |
|||||||||||||||||||||||||||
Net Income Before Taxes |
$ | 154,835 | $ | 32,515 | 21.0 | % | $ | 298,712 | $ | 62,730 | 21.0 | % | $ | 226,978 | $ | 47,665 | 21.0 | % | ||||||||||||||||||
Investment Related |
(38,296 | ) | (8,042 | ) | (5.1 | )% | (778 | ) | (163 | ) | (0.1 | )% | (80,240 | ) | (16,850 | ) | (7.4 | )% | ||||||||||||||||||
Exhibit 5a adjustment |
| | | % | | | | % | (3,373 | ) | (708 | ) | (0.3 | )% | ||||||||||||||||||||||
Change in Non-admitted assets |
(13,668 | ) | (2,870 | ) | (1.9 | )% | 2,647 | 556 | 0.2 | % | 2,676 | 562 | 0.3 | % | ||||||||||||||||||||||
Tax Credit Adjustment |
(12,405 | ) | (2,605 | ) | (1.7 | )% | (10,943 | ) | (2,298 | ) | (0.8 | )% | (56,265 | ) | (11,816 | ) | (5.2 | )% | ||||||||||||||||||
Tax Differences in Wholly Owned Subsidiaries |
24,846 | 5,218 | 3.4 | % | (214,556 | ) | (45,057 | ) | (15.1 | )% | (3,866 | ) | (812 | ) | (0.4 | )% | ||||||||||||||||||||
Other |
189 | 40 | | % | 19,229 | 4,038 | 1.4 | % | (11,327 | ) | (2,379 | ) | (1.1 | )% | ||||||||||||||||||||||
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Total Statutory Income Taxes |
$ | 24,256 | 15.7 | % | $ | 19,806 | 6.6 | % | $ | 15,662 | 6.9 | % | ||||||||||||||||||||||||
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Federal Income Taxes Incurred |
$ | 165,312 | 106.8 | % | $ | 46,567 | 15.6 | % | $ | 6,158 | 2.7 | % | ||||||||||||||||||||||||
Change in Net Deferred Income Taxes |
(141,057 | ) | (91.1 | )% | (26,762 | ) | (9.0 | )% | 9,504 | 4.2 | % | |||||||||||||||||||||||||
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Total Statutory Income Taxes |
$ | 24,255 | 15.7 | % | $ | 19,805 | 6.6 | % | $ | 15,662 | 6.9 | % | ||||||||||||||||||||||||
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73
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)
As of December 31, 2023, the Company did not have any net operating loss carry-forwards.
As of December 31, 2023, the Company had $156,971 of capital loss carry-forwards, which will expire, if not utilized, in 2028.
The Company had no income taxes incurred in the current and prior years that will be available for recoupment in the event of future net losses.
The Company has no deposits admitted under Section 6603 of the Internal Revenue Code.
The application of SSAP No.101 requires a company to evaluate the recoverability of DTAs and, if necessary, to establish a valuation allowance to reduce the DTA to an amount which is more likely than not to be realized. Considerable judgment is required in determining whether a valuation allowance is necessary and, if so, the amount of such valuation allowance. Although the realization is not assured, management believes it is more likely than not that DTAs will be realized. Therefore, the Company did not record a valuation allowance as of December 31, 2023 and December 31, 2022.
Tax years prior to 2020 are closed for audit or examination under the applicable statute of limitations. The Company is not currently under examination by the Internal Revenue Service. The Company does not believe it has any uncertain tax positions for its federal income tax return that would be material to its financial condition, results of operations, or cash flows. Therefore, the Company did not record a liability for unrecognized tax positions (UTPs) as of December 31, 2023 and 2022.
The Company is part of an affiliated group of companies that will file a consolidated federal income tax return for 2023. The following companies are included in the consolidated return filing:
| Group 1001, Inc. |
| Group 1001 Insurance Holdings, LLC |
| Group 1001 Services, Inc. |
| Delaware Life (Bermuda) Holdings, Inc. |
| Delaware Life Insurance Company |
| Delaware Life Insurance Company of New York |
| Delaware Life and Annuity Company |
| DL Reinsurance Company |
| Clarendon Insurance Agency, Inc. |
| Clear Spring Health Insurance Company |
| Delaware Life Reinsurance (U.S.) Corp. |
| Clear Spring Health (CO), Inc. |
| Clear Spring Health (GA), Inc. |
| Clear Spring Health (SC), Inc. |
| Clear Spring Health Community Care, Inc. |
| Clear Spring Health (VA), Inc. |
| Clear Spring Health of Illinois, Inc. |
| Clear Spring Health Holdings, LLC |
| Clear Spring Health Management Services, LLC |
| Clear Spring Casualty Insurance Company |
| Clear Spring American Insurance Company |
| Clear Spring National Insurance Company |
| Clear Spring PC Acquisition Corp. |
| Clear Spring PC Holdings, LLC |
| Clear Spring Property and Casualty Company |
| Evolution of Sport, Inc. |
| R.V.I. Holdings, LLC |
| R.V.I America Corp. |
| R.V.I. Analytical Services, Inc. |
| Transition Services, Inc. |
| R.V.I. Services Co., Inc. |
| R.V.I. Guaranty Co., Ltd. |
| R.V.I. America Insurance Company |
A written tax allocation agreement has been approved, or is pending approval, by the state of domicile of each participating insurance company. Allocation is based upon separate return calculations with current credit (benefit) given for losses and tax attributes that are utilized by the consolidated group.
74
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)
17. | Capital and Surplus and Dividend Restrictions |
As of December 31, 2023 and 2022, the Company was authorized to issue 10,000 shares of common stock with a par value of $1,000 per share; 6,437 shares of common stock were issued and outstanding. The Company is not authorized to issue preferred stock.
The Company is subject to certain statutory and regulatory restrictions imposed by the State of Delaware on insurance companies which limits the amount of cash dividends that may be paid to the stockholders. Under Delaware law, cash dividends may be paid only from earned surplus. Additionally, the maximum aggregate amount of ordinary dividends that the Company may declare or pay during any twelve-month period is the greater of: (1) 10% of its statutory surplus, or (2) net gains from operations before net realized capital gains (losses) provided that unassigned surplus is positive and sufficient to cover the payment, each as reported in the prior years Annual Statement, unless written approval is obtained from the Department granting a greater amount (i.e., an extraordinary dividend). In addition, no dividend may be paid in excess of unassigned funds. At December 31, 2023, the Company reported surplus as regards policyholders of $2,555,812, net gains from operations (before realized capital gains) of $137,769, and unassigned surplus of $433,943. As of December 31, 2023, the Company may declare an ordinary dividend to shareholders without prior approval from the Department in the maximum amount of $255,581.
In June 2023, the Company received a capital contribution of $115,000 from DLSH and paid no dividends. The Company paid an ordinary dividend of $100,000 to DLSH in April 2022 and received a capital contribution of $50,000 from DLSH in December 2022. The Company paid an ordinary dividend of $200,000 to DLH and received a capital contribution of $479,200 from DLH in 2021.
The Company had no special surplus funds in 2022. During 2023, the Company reclassified $140,735 from unassigned funds to aggregate write-ins for special surplus funds in accordance with the interpretive guidance established within INT 23-01.
Surplus Notes
As of December 31, 2023 and 2022, the Company had $390,213 of surplus notes outstanding. During 2013, the Company entered into an agreement with Deutsche Bank Trust Company Americas (DBTCA), pursuant to which the surplus notes were taken into custody by DBTCA on behalf of the holders of the surplus notes (the Noteholders). DBTCA collects all surplus note payments and distributes such funds to the Noteholders.
75
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 details of outstanding surplus notes were as follows as of and for the years ended December 31, 2023 and 2022:
2023 | ||||||||||||||||||||||||||||||||||||
Item Number |
Date Issued |
Interest Rate |
Original Issue Amount of Note |
Carrying Value of Note |
Current Year Principal Paid |
Life-To-Date Principal Paid |
Current Year Interest Expense Recognized |
Life-To-Date Interest Expense Recognized |
Date of Maturity |
|||||||||||||||||||||||||||
1000 |
12/22/97 | 8.625 | % | $ | 250,000 | $ | 20,713 | $ | | $ | 229,287 | $ | 1,786 | $ | 532,871 | 11/06/27 | ||||||||||||||||||||
1001 |
11/06/22 | 7.750 | % | 85,500 | 85,500 | | | 6,626 | 7,639 | 11/06/52 | ||||||||||||||||||||||||||
1002 |
11/06/22 | 7.750 | % | 24,587 | 24,587 | | | 1,905 | 2,197 | 11/06/52 | ||||||||||||||||||||||||||
1003 |
11/06/22 | 7.750 | % | 24,612 | 24,612 | | | 1,907 | 2,199 | 11/06/52 | ||||||||||||||||||||||||||
2000 |
12/15/95 | 7.750 | % | 150,000 | | 77,301 | 150,000 | 2,995 | 253,791 | 12/15/52 | ||||||||||||||||||||||||||
2002 |
06/15/23 | 7.750 | % | 52,301 | 52,301 | | | 2,027 | 2,027 | 12/15/52 | ||||||||||||||||||||||||||
2003 |
06/15/23 | 7.750 | % | 5,200 | 5,200 | | | 202 | 202 | 12/15/52 | ||||||||||||||||||||||||||
2004 |
06/15/23 | 7.750 | % | 4,000 | 4,000 | | | 155 | 155 | 12/15/52 | ||||||||||||||||||||||||||
2005 |
06/15/23 | 7.750 | % | 500 | 500 | | | 19 | 19 | 12/15/52 | ||||||||||||||||||||||||||
2006 |
06/15/23 | 7.750 | % | 1,750 | 1,750 | | | 68 | 68 | 12/15/52 | ||||||||||||||||||||||||||
2007 |
06/15/23 | 7.750 | % | 1,000 | 1,000 | | | 39 | 39 | 12/15/52 | ||||||||||||||||||||||||||
2008 |
06/15/23 | 7.750 | % | 500 | 500 | | | 19 | 19 | 12/15/52 | ||||||||||||||||||||||||||
2009 |
06/15/23 | 7.750 | % | 3,000 | 3,000 | | | 116 | 116 | 12/15/52 | ||||||||||||||||||||||||||
2010 |
06/15/23 | 7.750 | % | 4,950 | 4,950 | | | 192 | 192 | 12/15/52 | ||||||||||||||||||||||||||
2011 |
06/15/23 | 7.750 | % | 2,000 | 2,000 | | | 78 | 78 | 12/15/52 | ||||||||||||||||||||||||||
2012 |
06/15/23 | 7.750 | % | 500 | 500 | | | 19 | 19 | 12/15/52 | ||||||||||||||||||||||||||
2013 |
06/15/23 | 7.750 | % | 250 | 250 | | | 10 | 10 | 12/15/52 | ||||||||||||||||||||||||||
2014 |
06/15/23 | 7.750 | % | 250 | 250 | | | 10 | 10 | 12/15/52 | ||||||||||||||||||||||||||
2015 |
06/15/23 | 7.750 | % | 100 | 100 | | | 4 | 4 | 12/15/52 | ||||||||||||||||||||||||||
2016 |
06/15/23 | 7.750 | % | 500 | 500 | | | 19 | 19 | 12/15/52 | ||||||||||||||||||||||||||
2017 |
06/15/23 | 7.750 | % | 500 | 500 | | | 19 | 19 | 12/15/52 | ||||||||||||||||||||||||||
3000 |
12/15/95 | 7.626 | % | 150,000 | 150,000 | | | 11,439 | 311,515 | 12/15/52 | ||||||||||||||||||||||||||
4000 |
12/15/95 | 7.750 | % | 7,500 | | 7,500 | 7,500 | 291 | 12,535 | 12/15/52 | ||||||||||||||||||||||||||
4001 |
06/15/23 | 7.750 | % | 7,500 | 7,500 | | | 291 | 291 | 12/15/52 | ||||||||||||||||||||||||||
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Total |
XXX | XXX | $ | 777,000 | $ | 390,213 | $ | 84,801 | $ | 386,787 | $ | 30,236 | $ | 1,126,034 | XXX | |||||||||||||||||||||
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76
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
Item Number |
Date Issued |
Interest Rate |
Original Issue Amount of Note |
Carrying Value of Note |
Current Year Principal Paid |
Life-To-Date Principal Paid |
Current Year Interest Expense Recognized |
Life-To-Date Interest Expense Recognized |
Date of Maturity |
|||||||||||||||||||||||||||
1000 |
12/22/97 | 8.625 | % | $ | 250,000 | $ | 20,713 | $ | 134,699 | $ | 229,287 | $ | 13,225 | $ | 531,514 | 11/06/27 | ||||||||||||||||||||
1001 |
12/15/22 | 7.750 | % | 85,500 | 85,500 | | | | | 11/06/52 | ||||||||||||||||||||||||||
1002 |
12/15/22 | 7.750 | % | 24,587 | 24,587 | | | | | 11/06/52 | ||||||||||||||||||||||||||
1003 |
12/15/22 | 7.750 | % | 24,612 | 24,612 | | | | | 11/06/52 | ||||||||||||||||||||||||||
2000 |
12/15/95 | 7.750 | % | 150,000 | 77,301 | | 72,699 | 4,809 | 250,795 | 12/15/52 | ||||||||||||||||||||||||||
3000 |
12/15/95 | 7.626 | % | 150,000 | 150,000 | | | 11,439 | 300,076 | 12/15/52 | ||||||||||||||||||||||||||
4000 |
12/15/95 | 7.750 | % | 7,500 | 7,500 | | | 467 | 12,245 | 12/15/52 | ||||||||||||||||||||||||||
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|||||||||||||||||||
Total |
XXX | XXX | $ | 692,199 | $ | 390,213 | $ | 134,699 | $ | 301,986 | $ | 29,940 | $ | 1,094,630 | XXX | |||||||||||||||||||||
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The proceeds from the issuance of the surplus notes were not used to purchase an asset directly or indirectly from the Noteholders. The surplus notes were not issued as part of a transaction whereby the principal or interest payments are contractually linked to other assets or agreements. There were no surplus note interest or principal payments subject to administrative offsetting provisions.
The surplus notes and accrued interest thereon are subordinate to payments due to policyholders, claimants, and beneficiaries, as well as all other classes of creditors other than the Noteholders. After payment in full of certain obligations set forth in Section 5918 of the Delaware Insurance Code, and prior to any payment to a common shareholder in respect of such shareholders ownership interest in the Company, the holder of a surplus note is entitled to receive payment in full. The Company has no preferred stockholders. Any redemption of a surplus note is subject to the prior written consent of the Department.
During 2022, $134,699 of interests in item 1000 held by Security Benefit Life Insurance Company (Security Benefit) were canceled in exchange for three new notes issued by the Company, each with an interest rate of 7.75% and a maturity date of November 6, 2052 (items 1001, 1002 and 1003 in the above tables). The remaining interest in the amount of $20,713 in item 1000 is held solely by the Lange Trust with an interest rate of 8.625% and a maturity date of November 6, 2027. During 2023, Group 1001 Finance, an affiliate of the Company, purchased $134,699 of interests in the notes listed as item 1001, 1002, and 1003 in the above tables from Security Benefit. As of December 31, 2023, the interests in items 1001, 1002, and 1003 were held solely by Group 1001 Finance.
77
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 2022, the interest rate on item 2000 in the above tables was changed to 7.75% and the maturity date was extended to December 15, 2052. Effective December 15, 2022 and April 28, 2023, Group 1001 Finance purchased $22,301 and $55,000, respectively, of the surplus note held by Security Benefit. On June 15, 2023, $77,301 of interests in item 2000 held by Group 1001 Finance were canceled in exchange for sixteen new notes issued by the Company, each with an interest rate of 7.75% and a maturity date of December 15, 2052 (items 2002 thru 2017 in the above tables). As of December 31, 2023, the interest in item 2002 was held solely by Group 1001 Finance. As of December 31, 2023, the interests in items 2003 thru 2017 were held by the following unaffiliated entities:
Item Number(s) |
Noteholder |
Carry Value of Note(s) | ||||||
2003, 2004, 2005 |
Horace Mann Life Insurance Company | $ | 9,700 | |||||
2006 |
Gleaner Life Insurance Society | 1,750 | ||||||
2007 |
Puritan Life Insurance Company of America | 1,000 | ||||||
2008, 2009 |
Physicians Mutual Insurance Company | 3,500 | ||||||
2010, 2013 |
Investors Heritage Life Insurance Company | 5,200 | ||||||
2011, 2012 |
Capital Avenue Reinsurance LLC | 2,500 | ||||||
2014 |
Reliance Standard Life Insurance Company | 250 | ||||||
2015 |
HMO Louisiana Inc. | 100 | ||||||
2016 |
Louisiana Health Service & Indemnity Company | 500 | ||||||
2017 |
Factory Mutual Insurance Company | 500 |
Interests in the surplus note in the amount of $150,000, listed as item 3000 in the above tables, are held by Midland National Life Insurance Company (Midland National) and North American Company for Life and Health (North American), which are both considered related parties of the Company. Midland National and North American hold interests in the amounts of $100,000 and $50,000, respectively. During 2022, the maturity date of this note was extended to December 15, 2052.
The surplus note in the amount of $7,500, listed as item 4000 in the above tables, was held by Security Benefit until December 15, 2022. Effective on this date, Group 1001 Finance purchased the full amount of this surplus note from Security Benefit. During 2022, the interest rate was changed to 7.75% and the maturity date of this note was extended to December 15, 2052. On June 15, 2023, $7,500 of interest in item 4000 held by Group 1001 Finance was canceled in exchange for a new note issued by the Company with an interest rate of 7.75% and a maturity date of December 15, 2052 (item 4001 in the tables above). As of December 31, 2023, the interest in item 4001 is held solely by Group 1001 Finance.
The Company incurred $30,236, $29,940, and $42,688 of interest on the surplus notes for the years ended December 31, 2023, 2022, and 2021, respectively. Each accrual and payment of interest on the surplus notes may be made only with the prior approval of the Delaware Insurance Commissioner and only to the extent the Company has sufficient surplus earnings to make such payment. The Company received approval for all surplus note interest and principal payments and the related interest accrual in the amount of $2,669 at December 31, 2023 and 2022.
The surplus notes and accrued interest thereon are subordinate to payments due to policyholders, claimants, and beneficiaries, as well as all other classes of creditors other than surplus note holders.
After payment in full of certain obligations set forth in 18 Del. Code Ann. tit. 59, § 5918, and prior to any payment to a common shareholder in respect of such shareholders ownership interest in the Company, the holder of a surplus note is entitled to receive payment in full of all principal and interest amounts owing. The Company has no preferred stockholders.
78
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)
Risk-Based Capital
Life and health insurance companies are subject to certain RBC requirements as specified by the NAIC. The RBC requirements provide a method for measuring the minimum acceptable amount of adjusted capital that a life insurer should have, as determined under statutory accounting principles, taking into account the risk characteristics of its investments and products. The Company exceeded the minimum RBC requirements at December 31, 2023 and 2022.
18. | Commitments and Contingent Liabilities |
Lease Commitments
Effective January 1, 2021, the Company entered into a lease agreement with Group 1001 Indiana Holdings, LLC to occupy office space in Zionsville, Indiana. The lease has an expiration date of December 31, 2035 and an option to renew the lease agreement for up to a five-year period. Rental expenses under this lease for 2023 and 2022 were $2,644 and $1,610, respectively. The rent expense recorded in 2023 under this lease is inclusive of a $1,000 assessment for use of certain additional benefits in excess of, and consistent with, those received under this lease.
During 2022 and 2023, the Company leased office space in Waltham, Massachusetts under a lease with an original expiration date of April 30, 2023 for three premises within an office building known as 1601 Trapelo Road. The termination date of the lease was amended during 2022 and 2023, along with certain other terms and conditions in both the Second Amendment and the Third Amendment, respectively. Upon execution of the Second Amendment, affiliates of the landlord and an affiliate of the Company simultaneously entered into new lease agreements for two separate office spaces in Waltham, Massachusetts. One of the original premises at 1601 Trapelo Road terminated on June 30, 2023. The remaining two premises terminated on November 1, 2023, the date per the Second Amendment that corresponded with the commencement/occupancy of one of the new leases. Rent expenses during 2023, 2022, and 2021 were $1,485, $2,421, and $2,166, respectively, under this lease and were partially reimbursed by affiliates.
Effective February 2, 2022, the Company entered into an additional sublease agreement with PSA Realty Company (PSA Realty) to occupy office space in Ft. Lauderdale, Florida, once renovations of the office were completed. The sublease agreement expires no later than one day prior to the primary lease expiration. Rental expenses under this sublease in 2023 and 2022 were $157 and $0, respectively.
Effective October 13, 2022, the Company entered into two sublease agreements
with PSA Realty to occupy two separate office spaces in Waltham, Massachusetts, once renovations on each office space were completed in 2023. The primary leases for the office spaces known as 10 CityPoint and 230 CityPoint are seven-year and
eight-year leases, respectively, each with an option to renew for five additional years. The subleases expire no later than one day prior to the expiration of the primary leases. Combined rental expenses under these subleases in 2023 were $527, and
the Company was partially reimbursed by an affiliate.
79
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)
At December 31, 2023, the minimum aggregate lease commitments, for the next five years and thereafter, were as follows:
Operating Leases |
||||||
Year ended December 31: |
||||||
2024 |
$ | 3,851 | ||||
2025 |
3,593 | |||||
2026 |
3,518 | |||||
2027 |
3,595 | |||||
2028 |
3,672 | |||||
Thereafter |
16,665 | |||||
|
|
|||||
Total |
$ | 34,894 | ||||
|
|
Contingent Commitments
The Company had unfunded commitments for limited partnership investments of $190,986 and $211,779 and commitments for funding future fixed income and preferred stock investments of $1,578,427 and $1,011,581 as of December 31, 2023, and 2022, respectively. The Company also had $140,204 and $159,982 of outstanding mortgage loan commitments on real estate as of December 31, 2023 and 2022, respectively.
Guaranty Fund Assessments
Under insurance guaranty fund laws in each state, the District of Columbia and Puerto Rico, insurers licensed to do business can be assessed by state insurance guaranty associations for certain obligations of insolvent insurance companies to policyholders and claimants. Most of these laws provide, however, that an assessment may be excused or deferred if it would threaten an insurers solvency and further provide annual limits on such assessments. Part of the assessments paid by the Company pursuant to these laws may be used as credits for a portion of the associated premium taxes.
Various insolvencies reported by the National Organization of Life and Health Insurance Guaranty Associations will result in retrospective, premium-based guaranty fund assessments against the Company. Based on the best information available, the Company has recorded an accrued liability of $2,970 and $2,995 for guaranty fund assessments as of December 31, 2023 and 2022, respectively. The Company does not know the period over which the guaranty fund assessments may be paid.
As of December 31, 2023 and 2022, the Company did not have any guaranty fund liabilities or assets related to assessments from insolvencies of entities that wrote long-term care contracts.
The Company has not established any asset for premium tax credits or policy surcharges as their recoveries are not estimable.
Litigation and Other Matters
The Company is involved in various lawsuits in the normal course of business. The status of these legal actions is actively monitored by management. If management believed, based on available information, that an adverse outcome upon resolution of a given legal action was probable and the amount of that adverse outcome was reasonably estimable, a loss would be recognized and a related liability recorded. The Company is not aware of any contingent liabilities arising from litigation or other matters that could have a material effect upon the financial condition, results of operations, or cash flows of the Company.
80
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)
Pledged or Restricted Assets
The following assets were restricted (including pledged assets) at December 31, 2023 and 2022:
Gross (Admitted & Nonadmitted) Restricted | Percentage | |||||||||||||||||||||||||||||||||||||||
Restricted Asset Category |
Total General Account (G/A) |
G/A Supporting S/A Activity |
Total Separate Account (S/A) Restricted Assets |
S/A Assets Supporting G/A Activity |
2023 Total | 2022 Total | Increase/ (Decrease) |
Total 2023 Admitted Restricted |
Gross Restricted Total Assets |
Admitted Restricted to Total Admitted Assets |
||||||||||||||||||||||||||||||
Subject to Repurchase Agreements |
$ | 816,037 | $ | | $ | | $ | | $ | 816,037 | $ | 778,740 | $ | 37,297 | $ | 816,037 | 1.77% | 1.77% | ||||||||||||||||||||||
Subject to Reverse Repurchase Agreements |
1,247,707 | | | | 1,247,707 | 1,048,957 | 198,750 | 1,247,707 | 2.70% | 2.71% | ||||||||||||||||||||||||||||||
FHLB Capital Stock |
71,460 | | | | 71,460 | 50,086 | 21,374 | 71,460 | 0.15% | 0.16% | ||||||||||||||||||||||||||||||
On Deposit with States |
4,181 | | | | 4,181 | 4,145 | 36 | 4,181 | 0.01% | 0.01% | ||||||||||||||||||||||||||||||
Pledged as Collateral to FHLB (Including Securities and Commercial Mortgage Loans) |
2,110,097 | | | | 2,110,097 | 1,496,904 | 613,193 | 2,110,097 | 4.57% | 4.58% | ||||||||||||||||||||||||||||||
Pledged as collateral not captured in other categories |
177,683 | | | | 177,683 | 353,878 | (176,195 | ) | 177,683 | 0.39% | 0.39% | |||||||||||||||||||||||||||||
Other Restricted Assets |
18,031 | | | | 18,031 | 11,501 | 6,530 | 18,031 | 0.04% | 0.04% | ||||||||||||||||||||||||||||||
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Total Restricted Assets |
$ | 4,445,196 | $ | | $ | | $ | | $ | 4,445,196 | $ | 3,744,211 | $ | 700,985 | $ | 4,445,196 | 9.63% | 9.66% | ||||||||||||||||||||||
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The following were assets pledged as collateral not captured in other categories, including assets backing funding agreements (contracts that share similar characteristics, such as reinsurance and derivatives, are reported in the aggregate) at December 31, 2023 and 2022:
Gross Restricted | Percentage | |||||||||||||||||||||||||||||||||||||||
Description of Assets |
Total General Account (G/A) |
G/A Supporting S/A Activity |
Total Separate Account (S/A) Restricted Assets |
S/A Assets Supporting G/A Activity |
2023 Total | 2022 Total | Increase/ (Decrease) |
Total 2023 Admitted Restricted |
Gross Restricted Total Assets |
Admitted Restricted to Total Admitted Assets |
||||||||||||||||||||||||||||||
Bond collateral to Société Générale |
$ | 176,883 | $ | | $ | | $ | | 176,883 | $ | 176,875 | $ | 8 | $ | 176,883 | 0.38% | 0.38% | |||||||||||||||||||||||
Derivative collateral |
800 | | | | 800 | 145,140 | (144,340 | ) | 800 | % | % | |||||||||||||||||||||||||||||
Repo Collateral |
| | | | | 31,863 | (31,863 | ) | | % | % | |||||||||||||||||||||||||||||
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Total |
$ | 177,683 | $ | | $ | | $ | | $ | 177,683 | $ | 353,878 | $ | (176,195 | ) | $ | 177,683 | 0.38% | 0.38% | |||||||||||||||||||||
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81
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 were other restricted assets pledged as collateral in other categories (contracts that share similar characteristics, such as reinsurance and derivatives, are reported in the aggregate) at December 31, 2023 and 2022:
Gross Restricted | Percentage | |||||||||||||||||||||||||||||||||||||||
Description of Assets |
Total General Account (G/A) |
G/A Supporting S/A Activity |
Total Separate Account (S/A) Restricted Assets |
S/A Assets Supporting G/A Activity |
2023 Total | 2022 Total | Increase/ (Decrease) |
Total 2023 Admitted Restricted |
Gross Restricted Total Assets |
Admitted Restricted to Total Admitted Assets |
||||||||||||||||||||||||||||||
Restricted Cash - Tax Escrow |
$ | 1,902 | $ | | $ | | $ | | $ | 1,902 | 2,361 | $ | (459 | ) | $ | 1,902 | % | % | ||||||||||||||||||||||
Mortgage Escrow |
16,129 | | | | 16,129 | 9,140 | 6,989 | 16,129 | 0.03% | 0.03% | ||||||||||||||||||||||||||||||
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Total |
$ | 18,031 | $ | | $ | | $ | | $ | 18,031 | $ | 11,501 | $ | 6,530 | $ | 18,031 | 0.03% | 0.03% | ||||||||||||||||||||||
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19. | Federal Home Loan Bank |
The Company is a member of the FHLB. Through its membership, the Company utilizes funding agreements issued to the FHLB consistent with its other investment spread operations and considers these funds policyholder liabilities. From time to time, the Company also uses FHLB funds for operations; any funds obtained from the FHLB for use in the Companys general operations are accounted for as borrowed money. The Company has determined its estimated maximum borrowing capacity with the FHLB as $1,683,708 as of December 31, 2023. The Company calculated this amount in accordance with its current collateral pledged to the FHLB.
The FHLB issued a LOC to the Company on behalf of an unrelated party effective July 1, 2021, with a maximum credit amount of $1,000 and an expiration date of December 31, 2021. A new LOC was issued to the Company on behalf of the same unrelated party effective December 1, 2021, with a maximum credit amount of $1,000 and expiration date of June 30, 2022. No amounts were drawn on either LOC during 2023 or 2022. Collateral related to the LOC is included in the disclosures below.
FHLB Capital Stock
Aggregate Totals:
As of December 31, 2023 | Total | General Account |
Separate Accounts |
|||||||||||
Membership Stock - Class A |
$ | | $ | | $ | | ||||||||
Membership Stock - Class B |
7 | 7 | | |||||||||||
Activity Stock |
69,203 | 69,203 | | |||||||||||
Excess Stock |
2,250 | 2,250 | | |||||||||||
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Aggregate Total |
$ | 71,460 | $ | 71,460 | $ | | ||||||||
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Actual or Estimated Borrowing Capacity as Determined by the Insurer |
$ | 1,683,708 | $ | | $ | | ||||||||
As of December 31, 2022 |
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Membership Stock - Class A |
$ | | $ | | $ | | ||||||||
Membership Stock - Class B |
5,000 | 5,000 | | |||||||||||
Activity Stock |
45,085 | 45,085 | | |||||||||||
Excess Stock |
1 | 1 | | |||||||||||
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Aggregate Total |
$ | 50,086 | $ | 50,086 | $ | | ||||||||
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Actual or Estimated Borrowing Capacity as Determined by the Insurer |
$ | 1,158,585 | XXX | XXX |
Membership Stock (Class A and B) Eligible and Not Eligible for Redemption:
Membership stock |
Current Year Total |
Not Eligible for Redemption |
Less Than 6 Months |
6 months to Less Than 1 Year |
1 to Less Than 3 Years |
3 to 5 Years | ||||||||||||||||||
Class A |
$ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||
Class B |
7 | 7 | | | | |
82
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)
Collateral Pledged to FHLB
Amount Pledged as of Reporting Date:
Fair Value |
Carrying Value |
Aggregate Total Borrowing |
||||||||||||
Current Year General Account Total Collateral Pledged |
$ | 1,966,287 | $ | 2,110,097 | $ | 1,538,000 | ||||||||
Current Year Separate Accounts Total Collateral Pledged |
| | | |||||||||||
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Current Year Total General and Separate Accounts Total Collateral Pledged |
$ | 1,966,287 | $ | 2,110,097 | $ | 1,538,000 | ||||||||
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Prior Year End Total General and Separate Accounts Total Collateral Pledged |
$ | 1,354,091 | $ | 1,496,904 | $ | 1,113,000 | ||||||||
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Maximum Amount Pledged During Reporting Period:
Fair Value |
Carrying Value |
Amount Borrowed at Time of Maximum Collateral |
||||||||||||
Current Year General Account Maximum Collateral Pledged |
$ | 1,966,287 | $ | 2,110,097 | $ | 1,538,000 | ||||||||
Current Year Separate Accounts Maximum Collateral Pledged |
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Current Year Total General and Separate Accounts Maximum Collateral Pledged |
$ | 1,966,287 | $ | 2,110,097 | $ | 1,538,000 | ||||||||
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Prior Year End Total General and Separate Accounts Total Collateral Pledged |
$ | 1,354,091 | $ | 1,496,904 | $ | 1,113,000 | ||||||||
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Borrowing from FHLB
Amount as of Reporting Date:
As of December 31, 2023 | Total | General Account |
Separate Accounts |
Funding Agreements Reserves Established |
||||||||||||
Debt |
$ | | $ | | $ | | XXX | |||||||||
Funding Agreements |
1,538,000 | 1,538,000 | | 1,475,607 | ||||||||||||
Other |
| | | XXX | ||||||||||||
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Aggregate Total |
$ | 1,538,000 | $ | 1,538,000 | $ | | $ | 1,475,607 | ||||||||
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As of December 31, 2022 | ||||||||||||||||
Debt |
$ | | $ | | $ | | XXX | |||||||||
Funding Agreements |
1,113,000 | 1,113,000 | | 1,046,812 | ||||||||||||
Other |
| | | XXX | ||||||||||||
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Aggregate Total |
$ | 1,113,000 | $ | 1,113,000 | $ | | $ | 1,046,812 | ||||||||
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83
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)
Maximum Amount During Reporting Period:
Total | General Account |
Separate Accounts |
||||||||||||
Debt |
$ | | $ | | $ | | ||||||||
Funding Agreements |
1,588,000 | 1,588,000 | | |||||||||||
Other |
| | | |||||||||||
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Aggregate Total |
$ | 1,588,000 | $ | 1,588,000 | $ | | ||||||||
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FHLB - Prepayment Obligations
Does the Company have prepayment Obligations under the following arrangements? (YES/NO) |
||||
Debt |
No | |||
Funding Agreements |
Yes | |||
Other |
No |
20. | Subsequent Events |
The Company has evaluated events and transactions that occurred from January 1, 2024 to April 22, 2024, the date these financial statements were available to be issued. There have been no Type I or Type II events or transactions that occurred subsequent to December 31, 2023 having a material effect on the financial statements, except as discussed below.
On January 11, 2024, the Company received $6,700 in cash from DLAC in settlement of the Companys ceding commission receivable. On January 24, 2024, the Company paid $118,673 of securities and $184 of cash to DLAC in settlement of the Companys reinsurance payable.
84