Penn Mutual Variable Annuity Account III

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PricewaterhouseCoopers LLP,

2001 Market Street, Suite 1800,
Philadelphia, PA 19103
+1 (267) 330 3000

www.pwc.com

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of The Penn Mutual Life Insurance Company

and the Contract Owners of Penn Mutual Variable Annuity Account III

Opinions on the Financial Statements

We have audited the accompanying statements of assets and liabilities of Money Market Fund, Limited Maturity Bond Fund, Quality Bond Fund, High Yield Bond Fund, Flexibly Managed Fund, Balanced Fund, Large Growth Stock Fund, Large Cap Growth Fund, Large Core Growth Fund, Large Cap Value Fund, Large Core Value Fund, Index 500 Fund, Mid Cap Growth Fund, Mid Cap Value Fund, Mid Core Value Fund, SMID Cap Growth Fund, SMID Cap Value Fund, Small Cap Growth Fund, Small Cap Value Fund, Small Cap Index Fund, Developed International Index Fund, International Equity Fund, Emerging Markets Equity Fund, Real Estate Securities Fund, Aggressive Allocation Fund, Moderately Aggressive Allocation Fund, Moderate Allocation Fund, Moderately Conservative Allocation Fund, and Conservative Allocation Fund (hereafter collectively referred to as the “subaccounts”) of Penn Mutual Variable Annuity Account III as of December 31, 2025, the related statements of operations for the year then ended, and the statements of changes in net assets for each of the two years in the period ended December 31, 2025, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the subaccounts of Penn Mutual Variable Annuity Account III as of December 31, 2025, the results of each of their operations for the year then ended, and the changes in each of their net assets for each of the two years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinions

These financial statements are the responsibility of The Penn Mutual Life Insurance Company’s management. Our responsibility is to express an opinion on the financial statements of each of the subaccounts of Penn Mutual Variable Annuity Account III 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 each of the subaccounts of Penn Mutual Variable Annuity Account III 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 of these financial statements 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 are free of material misstatement, whether due to error or fraud.

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

STATEMENTS OF ASSETS AND LIABILITIES — DECEMBER 31, 2025


	Money Market Fund		Limited Maturity Bond Fund		Quality Bond Fund		High Yield Bond Fund		Flexibly Managed Fund
Assets:
Investments at fair value	$	86,824,750	$	42,486,711	$	136,029,610	$	90,158,120	$	4,514,725,114
Dividends receivable		—		—		—		—		—
Receivable for securities sold		—		—		31,038		163,621		2,634,011

Liabilities:
Due to The Penn Mutual Life Insurance Company		—		—		—		—		—
Payable for securities purchased		9,792		25,989		—		—		—

Total Net Assets	$	86,814,958	$	42,460,722	$	136,060,648	$	90,321,741	$	4,517,359,125


TOTAL NET ASSETS REPRESENTED BY:
Net Assets of Contract owners:
Commander/Enhanced Credit VA	$	10,799,661	$	7,161,161	$	22,268,288	$	16,053,244	$	429,534,423
Diversifier II/Optimizer/Retirement Planner VA		3,136,947		2,086,289		3,806,175		5,919,699		176,999,750
Inflation Protector Variable Annuity		4,434,457		2,491,113		10,041,083		5,373,262		338,369,356
Pennant Select		6,302,428		3,190,163		8,947,619		5,131,576		165,703,380
PennFreedom		13,571,342		6,861,052		30,408,506		12,412,445		597,838,546
Smart Foundation Flex		7,485,376		4,264,242		12,548,979		7,235,538		398,083,946
Smart Foundation Plus		15,148,051		8,741,112		19,217,784		15,909,614		867,361,516
Smart Foundation VA		25,936,696		7,665,590		28,822,214		22,221,120		1,542,716,042
Smart Foundation Advisory VA		—		—		—		65,243		752,166

Total Net Assets	$	86,814,958	$	42,460,722	$	136,060,648	$	90,321,741	$	4,517,359,125


Accumulation of Unit Values:
Commander/Enhanced Credit VA	$	11.21	$	15.29	$	20.09	$	37.63	$	105.67

Diversifier II/Optimizer/Retirement Planner VA	$	23.45	$	19.59	$	46.06	$	136.02	$	649.98

Inflation Protector Variable Annuity	$	9.04	$	10.63	$	11.67	$	19.99	$	41.44

Pennant Select	$	11.26	$	15.50	$	20.36	$	38.14	$	107.10

PennFreedom	$	9.92	$	13.40	$	16.75	$	35.77	$	75.76

Smart Foundation Flex	$	9.25	$	10.66	$	10.95	$	18.60	$	36.89

Smart Foundation Plus	$	9.32	$	10.73	$	11.02	$	18.73	$	37.14

Smart Foundation VA	$	9.58	$	11.04	$	11.34	$	19.26	$	38.20

Smart Foundation Advisory VA	$	11.23	$	12.44	$	12.04	$	16.20	$	25.38


Number of Shares		86,814,958		2,769,780		7,770,454		4,382,423		37,748,468
Cost of Investments	$	86,814,958	$	37,881,848	$	126,462,820	$	69,812,154	$	2,067,616,695

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

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

STATEMENTS OF ASSETS AND LIABILITIES — DECEMBER 31, 2025

(continued)


	Balanced Fund		Large Growth Stock Fund		Large Cap Growth Fund		Large Core Growth Fund		Large Cap Value Fund
Assets:
Investments at fair value	$	52,217,230	$	272,065,548	$	47,935,503	$	59,087,385	$	83,875,642
Dividends receivable		—		—		—		—		—
Receivable for securities sold		39,275		108,097		81,754		8,419		213,052

Liabilities:
Due to The Penn Mutual Life Insurance Company		—		—		—		—		—
Payable for securities purchased		—		—		—		—		—

Total Net Assets	$	52,256,505	$	272,173,645	$	48,017,257	$	59,095,804	$	84,088,694


TOTAL NET ASSETS REPRESENTED BY:
Net Assets of Contract owners:
Commander/Enhanced Credit VA	$	8,368,962	$	34,514,201	$	6,598,670	$	6,554,251	$	11,311,437
Diversifier II/Optimizer/Retirement Planner VA		6,364,724		30,958,745		1,800,757		14,697,054		18,007,682
Inflation Protector Variable Annuity		2,666,216		5,169,729		1,027,055		924,862		1,275,012
Pennant Select		4,535,965		14,114,759		3,221,021		5,321,778		6,294,468
PennFreedom		6,507,669		34,522,899		6,665,419		6,540,015		18,956,091
Smart Foundation Flex		4,917,338		15,860,054		2,431,924		1,649,987		3,990,786
Smart Foundation Plus		9,095,812		59,080,895		12,237,687		7,425,698		12,519,648
Smart Foundation VA		9,799,819		77,952,363		14,034,724		15,982,159		11,733,570
Smart Foundation Advisory VA		—		—		—		—		—

Total Net Assets	$	52,256,505	$	272,173,645	$	48,017,257	$	59,095,804	$	84,088,694


Accumulation of Unit Values:
Commander/Enhanced Credit VA	$	33.10	$	37.75	$	41.60	$	31.81	$	38.30

Diversifier II/Optimizer/Retirement Planner VA*	$	33.97	$	264.69	$	43.11	$	32.64	$	163.56

Inflation Protector Variable Annuity	$	31.29	$	64.50	$	47.04	$	37.84	$	34.27

Pennant Select	$	33.39	$	38.26	$	42.10	$	32.08	$	38.82

PennFreedom	$	32.81	$	53.35	$	41.11	$	31.53	$	36.33

Smart Foundation Flex	$	27.97	$	56.55	$	43.91	$	33.83	$	31.62

Smart Foundation Plus	$	28.16	$	56.95	$	44.22	$	34.07	$	31.84

Smart Foundation VA	$	28.96	$	58.56	$	45.48	$	35.04	$	32.74

Smart Foundation Advisory VA	$	22.22	$	34.98	$	34.12	$	23.90	$	21.83


Number of Shares		1,289,011		2,468,695		978,746		1,461,321		1,498,640
Cost of Investments	$	29,560,524	$	149,998,910	$	32,469,051	$	47,002,657	$	47,388,706

*	The accumulated unit value for Diversifier II Non-Qualified in the Large Growth Stock Fund is $262.5

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

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

STATEMENTS OF ASSETS AND LIABILITIES — DECEMBER 31, 2025

(continued)


	Large Core Value Fund		Index 500 Fund		Mid Cap Growth Fund		Mid Cap Value Fund		Mid Core Value Fund
Assets:
Investments at fair value	$	65,342,508	$	539,348,353	$	74,947,789	$	51,398,544	$	35,338,756
Dividends receivable		—		—		—		—		—
Receivable for securities sold		432,172		585,227		—		123,063		—

Liabilities:
Due to The Penn Mutual Life Insurance Company		—		—		—		—		—
Payable for securities purchased		—		—		661,849		—		56,384

Total Net Assets	$	65,774,680	$	539,933,580	$	74,285,940	$	51,521,607	$	35,282,372


TOTAL NET ASSETS REPRESENTED BY:
Net Assets of Contract owners:
Commander/Enhanced Credit VA	$	11,251,466	$	56,537,074	$	10,871,254	$	8,308,279	$	5,574,270
Diversifier II/Optimizer/Retirement Planner VA		7,963,545		25,980,584		6,055,885		6,002,256		1,303,317
Inflation Protector Variable Annuity		1,462,748		36,537,919		834,792		1,043,892		1,007,320
Pennant Select		5,251,596		22,959,999		5,584,209		3,301,051		2,713,247
PennFreedom		16,627,733		64,798,418		14,998,914		10,419,406		11,177,933
Smart Foundation Flex		3,524,514		32,650,193		3,214,260		4,820,183		1,759,151
Smart Foundation Plus		5,556,975		146,199,614		16,151,854		7,998,834		4,067,274
Smart Foundation VA		14,136,103		154,269,779		16,574,772		9,627,706		7,679,860
Smart Foundation Advisory VA		—		—		—		—		—

Total Net Assets	$	65,774,680	$	539,933,580	$	74,285,940	$	51,521,607	$	35,282,372


Accumulation of Unit Values:
Commander/Enhanced Credit VA	$	29.98	$	58.63	$	27.36	$	46.87	$	43.65

Diversifier II/Optimizer/Retirement Planner VA	$	30.77	$	93.92	$	60.88	$	62.26	$	45.23

Inflation Protector Variable Annuity	$	34.94	$	60.21	$	37.07	$	25.49	$	35.48

Pennant Select	$	30.24	$	59.43	$	27.71	$	47.50	$	44.17

PennFreedom	$	29.72	$	63.23	$	43.81	$	39.00	$	43.14

Smart Foundation Flex	$	33.09	$	52.65	$	32.48	$	23.38	$	31.07

Smart Foundation Plus	$	33.32	$	53.02	$	32.71	$	23.54	$	31.29

Smart Foundation VA	$	34.27	$	54.53	$	33.63	$	24.21	$	32.17

Smart Foundation Advisory VA	$	22.56	$	33.44	$	25.34	$	14.96	$	18.53


Number of Shares		1,738,232		8,652,782		1,895,533		1,464,098		851,409
Cost of Investments	$	41,014,825	$	294,944,174	$	62,055,998	$	33,907,341	$	25,726,874

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

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

STATEMENTS OF ASSETS AND LIABILITIES — DECEMBER 31, 2025

(continued)


	SMID Cap Growth Fund		SMID Cap Value Fund		Small Cap Growth Fund		Small Cap Value Fund		Small Cap Index Fund
Assets:
Investments at fair value	$	53,445,636	$	31,387,536	$	57,801,001	$	88,529,712	$	60,330,536
Dividends receivable		—		—		—		—		—
Receivable for securities sold		431,285		—		382,052		336,003		23,501

Liabilities:
Due to The Penn Mutual Life Insurance Company		—		—		—		—		—
Payable for securities purchased		—		15,588		—		—		—

Total Net Assets	$	53,876,921	$	31,371,948	$	58,183,053	$	88,865,715	$	60,354,037


TOTAL NET ASSETS REPRESENTED BY:
Net Assets of Contract owners:
Commander/Enhanced Credit VA	$	2,989,947	$	3,208,941	$	11,385,402	$	17,213,519	$	3,500,460
Diversifier II/Optimizer/Retirement Planner VA		816,692		552,931		6,205,841		8,994,002		549,888
Inflation Protector Variable Annuity		2,028,606		2,218,702		533,102		1,941,966		6,536,123
Pennant Select		3,397,616		2,202,234		4,313,667		6,577,513		2,123,357
PennFreedom		12,513,698		8,070,770		8,685,017		26,331,005		9,534,728
Smart Foundation Flex		4,052,778		2,399,266		2,017,540		4,992,459		7,048,734
Smart Foundation Plus		10,805,662		3,908,228		14,525,421		11,817,457		11,232,143
Smart Foundation VA		17,271,922		8,810,876		10,517,063		10,997,794		19,828,604
Smart Foundation Advisory VA		—		—		—		—		—

Total Net Assets	$	53,876,921	$	31,371,948	$	58,183,053	$	88,865,715	$	60,354,037


Accumulation of Unit Values:
Commander/Enhanced Credit VA	$	41.28	$	33.89	$	43.48	$	73.11	$	30.92

Diversifier II/Optimizer/Retirement Planner VA	$	42.37	$	34.79	$	83.05	$	109.43	$	31.74

Inflation Protector Variable Annuity	$	39.22	$	31.37	$	33.24	$	33.23	$	33.33

Pennant Select	$	41.64	$	34.19	$	44.07	$	74.10	$	31.19

PennFreedom	$	40.93	$	33.60	$	26.44	$	56.57	$	30.65

Smart Foundation Flex	$	34.74	$	28.85	$	32.08	$	28.00	$	29.07

Smart Foundation Plus	$	34.98	$	29.05	$	32.31	$	28.20	$	29.28

Smart Foundation VA	$	35.98	$	29.88	$	33.22	$	29.00	$	30.11

Smart Foundation Advisory VA	$	24.55	$	16.80	$	23.30	$	16.88	$	18.81


Number of Shares		1,023,498		729,750		774,947		1,536,406		1,540,430
Cost of Investments	$	49,056,975	$	23,379,232	$	39,448,981	$	57,241,184	$	43,513,686

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

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

STATEMENTS OF ASSETS AND LIABILITIES — DECEMBER 31, 2025

(continued)


	Developed International Index Fund		International Equity Fund		Emerging Markets Equity Fund		Real Estate Securities Fund		Aggressive Allocation Fund
Assets:
Investments at fair value	$	55,525,626	$	127,223,918	$	42,920,372	$	51,438,986	$	50,462,684
Dividends receivable		—		—		—		—		—
Receivable for securities sold		443,465		—		581,026		—		4,853

Liabilities:
Due to The Penn Mutual Life Insurance Company		—		—		—		—		—
Payable for securities purchased		—		1,186,301		—		450,826		—

Total Net Assets	$	55,969,091	$	126,037,617	$	43,501,398	$	50,988,160	$	50,467,537


TOTAL NET ASSETS REPRESENTED BY:
Net Assets of Contract owners:
Commander/Enhanced Credit VA	$	3,761,581	$	29,341,013	$	8,746,882	$	9,241,860	$	6,444,232
Diversifier II/Optimizer/Retirement Planner VA		759,765		13,222,806		1,648,781		2,731,364		362,749
Inflation Protector Variable Annuity		6,960,370		3,540,536		1,423,211		3,001,754		6,728,227
Pennant Select		2,870,456		10,087,897		3,645,874		3,228,654		3,335,459
PennFreedom		11,973,479		31,630,023		13,908,892		10,570,852		7,670,224
Smart Foundation Flex		5,522,859		7,317,677		2,411,392		4,144,631		6,089,301
Smart Foundation Plus		9,323,096		14,226,172		5,039,614		7,053,134		6,462,573
Smart Foundation VA		14,797,485		16,671,493		6,676,752		11,015,911		13,374,772
Smart Foundation Advisory VA		—		—		—		—		—

Total Net Assets	$	55,969,091	$	126,037,617	$	43,501,398	$	50,988,160	$	50,467,537


Accumulation of Unit Values:
Commander/Enhanced Credit VA	$	18.45	$	33.42	$	10.67	$	45.48	$	26.68

Diversifier II/Optimizer/Retirement Planner VA	$	18.94	$	75.71	$	10.95	$	47.12	$	27.39

Inflation Protector Variable Annuity	$	20.26	$	22.00	$	10.24	$	26.51	$	28.29

Pennant Select	$	18.61	$	33.87	$	10.76	$	46.02	$	26.91

PennFreedom	$	18.29	$	42.29	$	10.58	$	44.94	$	26.45

Smart Foundation Flex	$	21.66	$	20.41	$	11.11	$	23.58	$	26.29

Smart Foundation Plus	$	21.81	$	20.55	$	11.19	$	23.74	$	26.48

Smart Foundation VA	$	22.43	$	21.13	$	11.51	$	24.42	$	27.23

Smart Foundation Advisory VA	$	19.79	$	19.07	$	12.79	$	16.49	$	20.20


Number of Shares		2,388,779		2,773,715		3,210,435		1,491,754		1,507,394
Cost of Investments	$	37,118,243	$	86,891,152	$	39,424,806	$	39,770,100	$	31,383,999

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

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

STATEMENTS OF ASSETS AND LIABILITIES — DECEMBER 31, 2025

(continued)


	Moderately Aggressive Allocation Fund		Moderate Allocation Fund		Moderately Conservative Allocation Fund		Conservative Allocation Fund
Assets:
Investments at fair value	$	169,753,389	$	173,532,986	$	68,014,446	$	37,446,828
Dividends receivable		—		—		—		—
Receivable for securities sold		66,350		127,312		24,136		16,559

Liabilities:
Due to The Penn Mutual Life Insurance Company		—		—		—		—
Payable for securities purchased		—		—		—		—

Total Net Assets	$	169,819,739	$	173,660,298	$	68,038,582	$	37,463,387


TOTAL NET ASSETS REPRESENTED BY:
Net Assets of Contract owners:
Commander/Enhanced Credit VA	$	23,728,321	$	27,071,203	$	8,114,526	$	5,951,761
Diversifier II/Optimizer/Retirement Planner VA		1,089,891		1,663,221		564,981		360,106
Inflation Protector Variable Annuity		23,138,438		21,624,255		5,123,312		2,097,363
Pennant Select		12,446,492		18,725,694		6,281,627		2,560,069
PennFreedom		32,746,302		33,622,831		11,330,126		5,099,809
Smart Foundation Flex		28,593,743		23,277,964		6,379,818		2,320,168
Smart Foundation Plus		21,816,614		22,164,058		22,037,887		14,677,723
Smart Foundation VA		26,259,938		25,511,072		8,206,305		4,396,388
Smart Foundation Advisory VA		—		—		—		—

Total Net Assets	$	169,819,739	$	173,660,298	$	68,038,582	$	37,463,387


Accumulation of Unit Values:
Commander/Enhanced Credit VA	$	27.12	$	22.63	$	19.24	$	15.84

Diversifier II/Optimizer/Retirement Planner VA	$	27.84	$	23.23	$	19.75	$	16.25

Inflation Protector Variable Annuity	$	26.26	$	22.07	$	18.26	$	14.53

Pennant Select	$	27.36	$	22.83	$	19.41	$	15.97

PennFreedom	$	26.89	$	22.44	$	19.08	$	15.70

Smart Foundation Flex	$	24.42	$	20.58	$	17.18	$	13.92

Smart Foundation Plus	$	24.59	$	20.72	$	17.30	$	14.01

Smart Foundation VA	$	25.29	$	21.31	$	17.79	$	14.41

Smart Foundation Advisory VA	$	19.55	$	17.69	$	15.93	$	14.15


Number of Shares		5,010,910		6,164,725		2,856,364		1,915,306
Cost of Investments	$	96,240,445	$	100,826,403	$	52,565,364	$	32,372,786

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

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

STATEMENTS OF OPERATIONS — FOR THE YEAR ENDED DECEMBER 31, 2025


	Money Market Fund			Limited Maturity Bond Fund			Quality Bond Fund			High Yield Bond Fund			Flexibly Managed Fund
Net Investment Income (Loss):
Dividends	$	3,670,800		$	—		$	—		$	—		$	—

Expense:
Mortality and expense risk charges		1,343,144			560,878			1,848,973			1,200,256			61,372,286
Contract administration charges		147,970			60,066			203,259			127,378			6,630,007

Net investment income (loss)		2,179,686			(620,944	)		(2,052,232	)		(1,327,634	)		(68,002,293	)


Net Realized and Unrealized Gains (Losses) on Investments:
Realized gain (loss) from redemption of fund shares		—			1,244,394			2,549,022			6,116,542			484,601,384
Realized gains distributions		—			—			—			—			—

Net realized gain (loss) from investment transactions		—			1,244,394			2,549,022			6,116,542			484,601,384
Net change in unrealized gain (loss) of investments		—			1,269,361			7,621,345			1,573,135			35,168,729

Net realized and unrealized gain (loss) on investments		—			2,513,755			10,170,367			7,689,677			519,770,113

Net increase (decrease) in net assets resulting from operations	$	2,179,686		$	1,892,811		$	8,118,135		$	6,362,043		$	451,767,820


	Balanced Fund			Large Growth Stock Fund			Large Cap Growth Fund			Large Core Growth Fund			Large Cap Value Fund
Net Investment Income (Loss):
Dividends	$	—		$	—		$	—		$	—		$	—

Expense:
Mortality and expense risk charges		690,623			3,550,571			618,901			765,889			1,110,342
Contract administration charges		69,029			359,900			67,619			67,261			100,189

Net investment income (loss)		(759,652	)		(3,910,471	)		(686,520	)		(833,150	)		(1,210,531	)


Net Realized and Unrealized Gains (Losses) on Investments:
Realized gain (loss) from redemption of fund shares		5,554,946			32,678,383			3,259,862			2,446,161			9,536,736
Realized gains distributions		—			—			—			—			—

Net realized gain (loss) from investment transactions		5,554,946			32,678,383			3,259,862			2,446,161			9,536,736
Net change in unrealized gain (loss) of investments		987,846			5,475,412			1,168,181			2,340,529			(1,469,112	)

Net realized and unrealized gain (loss) on investments		6,542,792			38,153,795			4,428,043			4,786,690			8,067,624

Net increase (decrease) in net assets resulting from operations	$	5,783,140		$	34,243,324		$	3,741,523		$	3,953,540		$	6,857,093


	Large Core Value Fund			Index 500 Fund			Mid Cap Growth Fund			Mid Cap Value Fund			Mid Core Value Fund
Net Investment Income (Loss):
Dividends	$	—		$	—		$	—		$	—		$	—

Expense:
Mortality and expense risk charges		842,695			6,801,393			1,074,353			695,164			474,317
Contract administration charges		85,636			724,611			112,978			69,912			52,400

Net investment income (loss)		(928,331	)		(7,526,004	)		(1,187,331	)		(765,076	)		(526,717	)


Net Realized and Unrealized Gains (Losses) on Investments:
Realized gain (loss) from redemption of fund shares		5,903,815			50,354,023			7,844,014			3,427,518			2,924,284
Realized gains distributions		—			—			—			—			—

Net realized gain (loss) from investment transactions		5,903,815			50,354,023			7,844,014			3,427,518			2,924,284
Net change in unrealized gain (loss) of investments		1,596,271			32,631,036			(7,020,284	)		(65,883	)		109,472

Net realized and unrealized gain (loss) on investments		7,500,086			82,985,059			823,730			3,361,635			3,033,756

Net increase (decrease) in net assets resulting from operations	$	6,571,755		$	75,459,055		$	(363,601	)	$	2,596,559		$	2,507,039

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

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

STATEMENTS OF OPERATIONS — FOR THE YEAR ENDED DECEMBER 31, 2025

(continued)


	SMID Cap Growth Fund			SMID Cap Value Fund			Small Cap Growth Fund			Small Cap Value Fund			Small Cap Index Fund
Net Investment Income (Loss):
Dividends	$	—		$	—		$	—		$	—		$	—

Expense:
Mortality and expense risk charges		725,013			446,025			780,162			1,168,552			789,629
Contract administration charges		80,876			49,682			79,555			120,488			86,963

Net investment income (loss)		(805,889	)		(495,707	)		(859,717	)		(1,289,040	)		(876,592	)


Net Realized and Unrealized Gains (Losses) on Investments:
Realized gain (loss) from redemption of fund shares		2,858,627			3,499,047			5,229,727			7,886,064			4,248,830
Realized gains distributions		—			—			—			—			—

Net realized gain (loss) from investment transactions		2,858,627			3,499,047			5,229,727			7,886,064			4,248,830
Net change in unrealized gain (loss) of investments		(1,927,166	)		(2,723,358	)		(421,012	)		1,153,046			2,305,606

Net realized and unrealized gain (loss) on investments		931,461			775,689			4,808,715			9,039,110			6,554,436

Net increase (decrease) in net assets resulting from operations	$	125,572		$	279,982		$	3,948,998		$	7,750,070		$	5,677,844


	Developed International Index Fund			International Equity Fund			Emerging Markets Equity Fund			Real Estate Securities Fund			Aggressive Allocation Fund
Net Investment Income (Loss):
Dividends	$	—		$	—		$	—		$	—		$	—

Expense:
Mortality and expense risk charges		704,220			1,761,401			552,845			724,183			682,856
Contract administration charges		77,246			181,446			61,119			77,936			75,758

Net investment income (loss)		(781,466	)		(1,942,847	)		(613,964	)		(802,119	)		(758,614	)


Net Realized and Unrealized Gains (Losses) on Investments:
Realized gain (loss) from redemption of fund shares		3,676,791			13,343,772			37,587			4,499,227			4,639,545
Realized gains distributions		—			—			—			—			—

Net realized gain (loss) from investment transactions		3,676,791			13,343,772			37,587			4,499,227			4,639,545
Net change in unrealized gain (loss) of investments		10,122,229			(1,398,224	)		10,538,674			(3,169,397	)		1,334,433

Net realized and unrealized gain (loss) on investments		13,799,020			11,945,548			10,576,261			1,329,830			5,973,978

Net increase (decrease) in net assets resulting from operations	$	13,017,554		$	10,002,701		$	9,962,297		$	527,711		$	5,215,364


	Moderately Aggressive Allocation Fund			Moderate Allocation Fund			Moderately Conservative Allocation Fund			Conservative Allocation Fund
Net Investment Income (Loss):
Dividends	$	—		$	—		$	—		$	—

Expense:
Mortality and expense risk charges		2,366,864			2,411,600			938,486			527,003
Contract administration charges		260,129			266,524			102,515			57,766

Net investment income (loss)		(2,626,993	)		(2,678,124	)		(1,041,001	)		(584,769	)


Net Realized and Unrealized Gains (Losses) on Investments:
Realized gain (loss) from redemption of fund shares		16,246,553			17,094,941			4,606,745			1,944,095
Realized gains distributions		—			—			—			—

Net realized gain (loss) from investment transactions		16,246,553			17,094,941			4,606,745			1,944,095
Net change in unrealized gain (loss) of investments		3,458,681			1,858,357			1,639,462			1,174,231

Net realized and unrealized gain (loss) on investments		19,705,234			18,953,298			6,246,207			3,118,326

Net increase (decrease) in net assets resulting from operations	$	17,078,241		$	16,275,174		$	5,205,206		$	2,533,557

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

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

STATEMENTS OF CHANGES IN NET ASSETS — FOR THE YEARS ENDED DECEMEBER 31, 2025 AND 2024


	Money Market Fund						Limited Maturity Bond Fund						Quality Bond Fund
	2025			2024			2025			2024			2025			2024
Operations:
Net investment income (loss)	$	2,179,686		$	3,454,368		$	(620,944	)	$	(683,167	)	$	(2,052,232	)	$	(2,207,261	)
Net realized gains (losses) from investment transactions		—			—			1,244,394			1,117,116			2,549,022			1,752,451
Net change in unrealized gain (loss) of investments		—			—			1,269,361			1,438,304			7,621,345			1,894,895

Net increase (decrease) in net assets resulting from operations		2,179,686			3,454,368			1,892,811			1,872,253			8,118,135			1,440,085

Variable Annuity Activities:
Purchase payments		3,035,311			3,357,852			1,837,887			477,458			3,331,559			3,028,523
Surrender benefits		(68,433,042	)		(71,661,311	)		(7,698,404	)		(10,799,972	)		(20,564,912	)		(17,886,321	)
Net transfers		36,338,759			73,567,369			4,159,754			7,133,939			5,319,852			8,082,845
Payments for supplementary contracts without life contingency		—			—			—			—			—			—
Payments for supplementary contracts with life contingency		—			—			—			—			—			—
Contract administration charges		(1,130,014	)		(1,309,214	)		(420,124	)		(473,983	)		(1,414,905	)		(1,512,077	)
Annuity benefits		(1,622,697	)		(1,627,128	)		(649,169	)		(413,667	)		(3,466,037	)		(2,272,802	)

Net increase (decrease) in net assets resulting from variable annuity activities		(31,811,683	)		2,327,568			(2,770,056	)		(4,076,225	)		(16,794,443	)		(10,559,832	)

Total increase (decrease) in net assets		(29,631,997	)		5,781,936			(877,245	)		(2,203,972	)		(8,676,308	)		(9,119,747	)
Net Assets:
Beginning of year		116,446,955			110,665,019			43,337,967			45,541,939			144,736,956			153,856,703

End of year	$	86,814,958		$	116,446,955		$	42,460,722		$	43,337,967		$	136,060,648		$	144,736,956


	High Yield Bond Fund						Flexibly Managed Fund						Balanced Fund
	2025			2024			2025			2024			2025			2024
Operations:
Net investment income (loss)	$	(1,327,634	)	$	(1,416,695	)	$	(68,002,293	)	$	(70,376,020	)	$	(759,652	)	$	(785,017	)
Net realized gains (losses) from investment transactions		6,116,542			5,965,216			484,601,384			448,699,660			5,554,946			4,943,568
Net change in unrealized gain (loss) of investments		1,573,135			1,389,651			35,168,729			109,703,393			987,846			2,645,557

Net increase (decrease) in net assets resulting from operations		6,362,043			5,938,172			451,767,820			488,027,033			5,783,140			6,804,108

Variable Annuity Activities:
Purchase payments		493,923			853,636			64,834,188			122,322,290			167,292			862,336
Surrender benefits		(14,632,257	)		(14,554,562	)		(561,471,112	)		(521,959,421	)		(6,139,997	)		(6,130,935	)
Net transfers		7,508,429			5,618,024			1,217,957			18,827,795			964,849			812,979
Payments for supplementary contracts without life contingency		—			—			—			—			—			—
Payments for supplementary contracts with life contingency		—			—			—			—			—			—
Contract administration charges		(908,355	)		(977,945	)		(48,146,648	)		(50,105,986	)		(471,778	)		(489,004	)
Annuity benefits		(1,160,777	)		(1,332,782	)		(60,974,798	)		(52,891,635	)		(1,690,700	)		(623,086	)

Net increase (decrease) in net assets resulting from variable annuity activities		(8,699,037	)		(10,393,629	)		(604,540,413	)		(483,806,957	)		(7,170,334	)		(5,567,710	)

Total increase (decrease) in net assets		(2,336,994	)		(4,455,457	)		(152,772,593	)		4,220,076			(1,387,194	)		1,236,398
Net Assets:
Beginning of year		92,658,735			97,114,192			4,670,131,718			4,665,911,642			53,643,699			52,407,301

End of year	$	90,321,741		$	92,658,735		$	4,517,359,125		$	4,670,131,718		$	52,256,505		$	53,643,699

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

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

STATEMENTS OF CHANGES IN NET ASSETS — FOR THE YEARS ENDED DECEMEBER 31, 2025 AND 2024

(continued)


	Large Growth Stock Fund						Large Cap Growth Fund						Large Core Growth Fund
	2025			2024			2025			2024			2025			2024
Operations:
Net investment income (loss)	$	(3,910,471	)	$	(3,867,664	)	$	(686,520	)	$	(685,667	)	$	(833,150	)	$	(875,682	)
Net realized gains (losses) from investment transactions		32,678,383			31,688,642			3,259,862			5,794,708			2,446,161			3,487,728
Net change in unrealized gain (loss) of investments		5,475,412			35,559,841			1,168,181			1,190,672			2,340,529			9,353,402

Net increase (decrease) in net assets resulting from operations		34,243,324			63,380,819			3,741,523			6,299,713			3,953,540			11,965,448

Variable Annuity Activities:
Purchase payments		2,830,194			6,736,424			606,424			2,104,755			623,561			814,020
Surrender benefits		(24,235,941	)		(24,568,175	)		(4,040,160	)		(3,962,557	)		(6,484,899	)		(4,799,987	)
Net transfers		(12,260,871	)		(3,598,464	)		2,625,140			(3,677,656	)		(899,123	)		(3,307,291	)
Payments for supplementary contracts without life contingency		—			—			—			—			—			—
Payments for supplementary contracts with life contingency		—			—			—			—			—			—
Contract administration charges		(2,353,070	)		(2,364,396	)		(447,846	)		(449,709	)		(480,665	)		(502,133	)
Annuity benefits		(2,417,492	)		(4,907,063	)		(713,674	)		(161,367	)		(467,875	)		(238,110	)

Net increase (decrease) in net assets resulting from variable annuity activities		(38,437,180	)		(28,701,674	)		(1,970,116	)		(6,146,534	)		(7,709,001	)		(8,033,501	)

Total increase (decrease) in net assets		(4,193,856	)		34,679,145			1,771,407			153,179			(3,755,461	)		3,931,947
Net Assets:
Beginning of year		276,367,501			241,688,356			46,245,850			46,092,671			62,851,265			58,919,318

End of year	$	272,173,645		$	276,367,501		$	48,017,257		$	46,245,850		$	59,095,804		$	62,851,265


	Large Cap Value Fund						Large Core Value Fund						Index 500 Fund
	2025			2024			2025			2024			2025			2024
Operations:
Net investment income (loss)	$	(1,210,531	)	$	(1,321,678	)	$	(928,331	)	$	(1,008,100	)	$	(7,526,004	)	$	(7,013,914	)
Net realized gains (losses) from investment transactions		9,536,736			9,547,724			5,903,815			7,590,613			50,354,023			47,675,060
Net change in unrealized gain (loss) of investments		(1,469,112	)		1,637,560			1,596,271			269,503			32,631,036			54,709,772

Net increase (decrease) in net assets resulting from operations		6,857,093			9,863,606			6,571,755			6,852,016			75,459,055			95,370,918

Variable Annuity Activities:
Purchase payments		1,026,550			1,012,648			421,392			491,835			3,866,719			10,548,980
Surrender benefits		(9,712,044	)		(10,163,893	)		(5,961,709	)		(7,332,114	)		(48,457,030	)		(36,751,908	)
Net transfers		(816,115	)		(2,681,767	)		(179,918	)		(3,907,820	)		19,891,722			13,385,263
Payments for supplementary contracts without life contingency		—			—			—			—			—			—
Payments for supplementary contracts with life contingency		—			—			—			—			—			—
Contract administration charges		(580,097	)		(615,971	)		(557,997	)		(601,186	)		(5,113,209	)		(4,826,809	)
Annuity benefits		(1,028,250	)		(901,525	)		(957,449	)		(396,312	)		(4,225,494	)		(4,061,698	)

Net increase (decrease) in net assets resulting from variable annuity activities		(11,109,956	)		(13,350,508	)		(7,235,681	)		(11,745,597	)		(34,037,292	)		(21,706,172	)

Total increase (decrease) in net assets		(4,252,863	)		(3,486,902	)		(663,926	)		(4,893,581	)		41,421,763			73,664,746
Net Assets:
Beginning of year		88,341,557			91,828,459			66,438,606			71,332,187			498,511,817			424,847,071

End of year	$	84,088,694		$	88,341,557		$	65,774,680		$	66,438,606		$	539,933,580		$	498,511,817

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

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

STATEMENTS OF CHANGES IN NET ASSETS — FOR THE YEARS ENDED DECEMEBER 31, 2025 AND 2024

(continued)


	Mid Cap Growth Fund						Mid Cap Value Fund						Mid Core Value Fund
	2025			2024			2025			2024			2025			2024
Operations:
Net investment income (loss)	$	(1,187,331	)	$	(1,392,187	)	$	(765,076	)	$	(850,276	)	$	(526,717	)	$	(590,477	)
Net realized gains (losses) from investment transactions		7,844,014			9,416,915			3,427,518			3,601,623			2,924,284			3,532,180
Net change in unrealized gain (loss) of investments		(7,020,284	)		(7,034,942	)		(65,883	)		3,829,317			109,472			(205,260	)

Net increase (decrease) in net assets resulting from operations		(363,601	)		989,786			2,596,559			6,580,664			2,507,039			2,736,443

Variable Annuity Activities:
Purchase payments		800,045			2,699,269			520,569			916,271			331,061			295,806
Surrender benefits		(8,922,586	)		(7,938,946	)		(5,702,039	)		(5,990,199	)		(4,177,365	)		(4,675,659	)
Net transfers		(4,758,165	)		(6,615,311	)		(659,308	)		(3,600,511	)		(818,626	)		(1,560,778	)
Payments for supplementary contracts without life contingency		—			—			—			—			—			—
Payments for supplementary contracts with life contingency		—			—			—			—			—			—
Contract administration charges		(742,978	)		(874,231	)		(427,333	)		(470,942	)		(402,318	)		(444,498	)
Annuity benefits		(595,055	)		(746,800	)		(585,505	)		(331,161	)		(371,169	)		(433,083	)

Net increase (decrease) in net assets resulting from variable annuity activities		(14,218,739	)		(13,476,019	)		(6,853,616	)		(9,476,542	)		(5,438,417	)		(6,818,212	)

Total increase (decrease) in net assets		(14,582,340	)		(12,486,233	)		(4,257,057	)		(2,895,878	)		(2,931,378	)		(4,081,769	)
Net Assets:
Beginning of year		88,868,280			101,354,513			55,778,664			58,674,542			38,213,750			42,295,519

End of year	$	74,285,940		$	88,868,280		$	51,521,607		$	55,778,664		$	35,282,372		$	38,213,750


	SMID Cap Growth Fund						SMID Cap Value Fund						Small Cap Growth Fund
	2025			2024			2025			2024			2025			2024
Operations:
Net investment income (loss)	$	(805,889	)	$	(886,780	)	$	(495,707	)	$	(548,355	)	$	(859,717	)	$	(947,336	)
Net realized gains (losses) from investment transactions		2,858,627			5,884,778			3,499,047			2,564,158			5,229,727			6,049,802
Net change in unrealized gain (loss) of investments		(1,927,166	)		1,115,158			(2,723,358	)		814,031			(421,012	)		1,917,185

Net increase (decrease) in net assets resulting from operations		125,572			6,113,156			279,982			2,829,834			3,948,998			7,019,651

Variable Annuity Activities:
Purchase payments		717,174			3,317,070			459,194			800,239			1,231,335			2,204,763
Surrender benefits		(4,940,906	)		(5,326,949	)		(3,428,759	)		(3,917,824	)		(6,247,048	)		(5,530,274	)
Net transfers		(203,902	)		(4,008,953	)		(1,921,830	)		(718,112	)		(2,790,324	)		(6,730,611	)
Payments for supplementary contracts without life contingency		—			—			—			—			—			—
Payments for supplementary contracts with life contingency		—			—			—			—			—			—
Contract administration charges		(629,284	)		(687,932	)		(389,442	)		(420,682	)		(522,716	)		(568,186	)
Annuity benefits		(350,282	)		(523,221	)		(374,155	)		(199,578	)		(491,869	)		(360,206	)

Net increase (decrease) in net assets resulting from variable annuity activities		(5,407,200	)		(7,229,985	)		(5,654,992	)		(4,455,957	)		(8,820,622	)		(10,984,514	)

Total increase (decrease) in net assets		(5,281,628	)		(1,116,829	)		(5,375,010	)		(1,626,123	)		(4,871,624	)		(3,964,863	)
Net Assets:
Beginning of year		59,158,549			60,275,378			36,746,958			38,373,081			63,054,677			67,019,540

End of year	$	53,876,921		$	59,158,549		$	31,371,948		$	36,746,958		$	58,183,053		$	63,054,677

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

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

STATEMENTS OF CHANGES IN NET ASSETS — FOR THE YEARS ENDED DECEMEBER 31, 2025 AND 2024

(continued)


	Small Cap Value Fund						Small Cap Index Fund						Developed International Index Fund
	2025			2024			2025			2024			2025			2024
Operations:
Net investment income (loss)	$	(1,289,040	)	$	(1,438,625	)	$	(876,592	)	$	(914,051	)	$	(781,466	)	$	(764,363	)
Net realized gains (losses) from investment transactions		7,886,064			7,787,666			4,248,830			3,923,909			3,676,791			2,520,334
Net change in unrealized gain (loss) of investments		1,153,046			(302,918	)		2,305,606			2,288,632			10,122,229			(1,032,555	)

Net increase (decrease) in net assets resulting from operations		7,750,070			6,046,123			5,677,844			5,298,490			13,017,554			723,416

Variable Annuity Activities:
Purchase payments		662,799			1,552,320			117,928			353,737			190,124			284,710
Surrender benefits		(10,781,848	)		(9,463,091	)		(5,509,455	)		(3,867,809	)		(4,148,793	)		(4,321,850	)
Net transfers		(2,132,352	)		(5,437,403	)		(365,232	)		(344,506	)		(324,777	)		2,028,309
Payments for supplementary contracts without life contingency		—			—			—			—			—			—
Payments for supplementary contracts with life contingency		—			—			—			—			—			—
Contract administration charges		(766,269	)		(858,258	)		(730,759	)		(752,360	)		(685,640	)		(659,082	)
Annuity benefits		(779,852	)		(1,786,908	)		(451,092	)		(397,934	)		(485,540	)		(326,231	)

Net increase (decrease) in net assets resulting from variable annuity activities		(13,797,522	)		(15,993,340	)		(6,938,610	)		(5,008,872	)		(5,454,626	)		(2,994,144	)

Total increase (decrease) in net assets		(6,047,452	)		(9,947,217	)		(1,260,766	)		289,618			7,562,928			(2,270,728	)
Net Assets:
Beginning of year		94,913,167			104,860,384			61,614,803			61,325,185			48,406,163			50,676,891

End of year	$	88,865,715		$	94,913,167		$	60,354,037		$	61,614,803		$	55,969,091		$	48,406,163


	International Equity Fund						Emerging Markets Equity Fund						Real Estate Securities Fund
	2025			2024			2025			2024			2025			2024
Operations:
Net investment income (loss)	$	(1,942,847	)	$	(2,109,657	)	$	(613,964	)	$	(668,543	)	$	(802,119	)	$	(922,482	)
Net realized gains (losses) from investment transactions		13,343,772			12,012,762			37,587			(411,717	)		4,499,227			7,044,849
Net change in unrealized gain (loss) of investments		(1,398,224	)		(3,171,434	)		10,538,674			(1,166,986	)		(3,169,397	)		(2,857,146	)

Net increase (decrease) in net assets resulting from operations		10,002,701			6,731,671			9,962,297			(2,247,246	)		527,711			3,265,221

Variable Annuity Activities:
Purchase payments		792,002			1,427,226			406,069			304,853			952,406			929,340
Surrender benefits		(15,633,219	)		(14,677,397	)		(4,543,714	)		(4,759,698	)		(7,150,736	)		(7,458,360	)
Net transfers		(2,541,892	)		(2,584,084	)		(3,665,816	)		858,358			(504,702	)		(4,383,756	)
Payments for supplementary contracts without life contingency		—			—			—			—			—			—
Payments for supplementary contracts with life contingency		—			—			—			—			—			—
Contract administration charges		(1,242,429	)		(1,344,964	)		(475,349	)		(519,849	)		(592,598	)		(651,517	)
Annuity benefits		(1,421,442	)		(2,203,246	)		(279,927	)		(289,173	)		(912,058	)		(1,103,044	)

Net increase (decrease) in net assets resulting from variable annuity activities		(20,046,980	)		(19,382,465	)		(8,558,737	)		(4,405,509	)		(8,207,688	)		(12,667,337	)

Total increase (decrease) in net assets		(10,044,279	)		(12,650,794	)		1,403,560			(6,652,755	)		(7,679,977	)		(9,402,116	)
Net Assets:
Beginning of year		136,081,896			148,732,690			42,097,838			48,750,593			58,668,137			68,070,253

End of year	$	126,037,617		$	136,081,896		$	43,501,398		$	42,097,838		$	50,988,160		$	58,668,137

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

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

STATEMENTS OF CHANGES IN NET ASSETS — FOR THE YEARS ENDED DECEMEBER 31, 2025 AND 2024

(continued)


	Aggressive Allocation Fund						Moderately Aggressive Allocation Fund						Moderate Allocation Fund
	2025			2024			2025			2024			2025			2024
Operations:
Net investment income (loss)	$	(758,614	)	$	(810,352	)	$	(2,626,993	)	$	(2,793,420	)	$	(2,678,124	)	$	(2,938,620	)
Net realized gains (losses) from investment transactions		4,639,545			5,223,317			16,246,553			15,627,670			17,094,941			17,049,556
Net change in unrealized gain (loss) of investments		1,334,433			1,074,467			3,458,681			3,949,162			1,858,357			356,541

Net increase (decrease) in net assets resulting from operations		5,215,364			5,487,432			17,078,241			16,783,412			16,275,174			14,467,477

Variable Annuity Activities:
Purchase payments		655,991			141,892			1,648,260			1,080,911			1,166,597			2,192,202
Surrender benefits		(6,473,289	)		(5,472,140	)		(20,812,008	)		(18,955,076	)		(23,306,855	)		(25,381,520	)
Net transfers		572,488			(2,207,329	)		(4,853,391	)		(3,391,401	)		(1,517,174	)		(884,902	)
Payments for supplementary contracts without life contingency		—			—			—			—			—			—
Payments for supplementary contracts with life contingency		—			—			—			—			—			—
Contract administration charges		(631,888	)		(666,781	)		(2,129,752	)		(2,221,244	)		(2,454,284	)		(2,645,483	)
Annuity benefits		(386,000	)		(1,111,851	)		(821,459	)		(1,704,048	)		(3,563,520	)		(2,038,140	)

Net increase (decrease) in net assets resulting from variable annuity activities		(6,262,698	)		(9,316,209	)		(26,968,350	)		(25,190,858	)		(29,675,236	)		(28,757,843	)

Total increase (decrease) in net assets		(1,047,334	)		(3,828,777	)		(9,890,109	)		(8,407,446	)		(13,400,062	)		(14,290,366	)
Net Assets:
Beginning of year		51,514,871			55,343,648			179,709,848			188,117,294			187,060,360			201,350,726

End of year	$	50,467,537		$	51,514,871		$	169,819,739		$	179,709,848		$	173,660,298		$	187,060,360


	Moderately Conservative Allocation Fund						Conservative Allocation Fund
	2025			2024			2025			2024
Operations:
Net investment income (loss)	$	(1,041,001	)	$	(1,140,253	)	$	(584,769	)	$	(634,072	)
Net realized gains (losses) from investment transactions		4,606,745			4,536,878			1,944,095			1,834,042
Net change in unrealized gain (loss) of investments		1,639,462			907,663			1,174,231			561,402

Net increase (decrease) in net assets resulting from operations		5,205,206			4,304,288			2,533,557			1,761,372

Variable Annuity Activities:
Purchase payments		2,245,172			2,804,448			2,231,400			1,757,453
Surrender benefits		(7,618,949	)		(8,801,679	)		(7,639,981	)		(7,363,806	)
Net transfers		(1,307,106	)		1,841,143			2,987,181			1,970,900
Payments for supplementary contracts without life contingency		—			—			—			—
Payments for supplementary contracts with life contingency		—			—			—			—
Contract administration charges		(741,471	)		(801,650	)		(354,507	)		(405,676	)
Annuity benefits		(2,299,445	)		(2,629,727	)		(1,675,321	)		(1,294,858	)

Net increase (decrease) in net assets resulting from variable annuity activities		(9,721,799	)		(7,587,465	)		(4,451,228	)		(5,335,987	)

Total increase (decrease) in net assets		(4,516,593	)		(3,283,177	)		(1,917,671	)		(3,574,615	)
Net Assets:
Beginning of year		72,555,175			75,838,352			39,381,058			42,955,673

End of year	$	68,038,582		$	72,555,175		$	37,463,387		$	39,381,058

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

PENN MUTUAL VARIABLE ANNUITY ACCOUNT III

Notes to Financial Statements — December 31, 2025

Note 1. Organization

Penn Mutual Variable Annuity Account III (“Account III”) was established by The Penn Mutual Life Insurance Company (“Penn Mutual”) under the provisions of the Pennsylvania Insurance Law. Account III is registered under the Investment Company Act of 1940, as amended, as a unit investment trust. Account III offers units to variable annuity contract owners to provide for the accumulation of value and for the payment of annuities. Account III contains contracts of the Diversifier II, Optimizer, Commander, Penn Freedom, Enhanced Credit Variable Annuity, Pennant Select, Retirement Planner VA, Inflation Protector, Smart Foundation Flex, Smart Foundation Plus, Smart Foundation VA and Smart Foundation Advisory VA variable annuity products. Under applicable insurance law, the assets and liabilities of Account III are legally segregated from Penn Mutual’s other assets and liabilities.

Note 2. Significant Accounting Policies

The preparation of the accompanying financial statements and notes are in accordance with accounting principles generally accepted in the United States of America, which requires management to make estimates and assumptions that affect the reported values of assets and liabilities and the reported amounts from operations and contract transactions during the reporting period. Actual results could differ significantly with those estimates.

The significant accounting policies of Account III are as follows:

Investments — Assets of Account III are invested into subaccounts which are invested in shares of Penn Series Funds, Inc. (“Penn Series”), an affiliated entity of Penn Mutual: Money Market, Limited Maturity Bond, Quality Bond, High Yield Bond, Flexibly Managed, Balanced, Large Growth Stock, Large Cap Growth, Large Core Growth, Large Cap Value, Large Core Value, Index 500, Mid Cap Growth, Mid Cap Value, Mid Core Value, SMID Cap Growth, SMID Cap Value, Small Cap Growth, Small Cap Value, Small Cap Index, Developed International Index, International Equity, Emerging Markets Equity, Real Estate Securities, Aggressive Allocation, Moderately Aggressive Allocation, Moderate Allocation, Moderately Conservative Allocation and Conservative Allocation.

Penn Series is an open-end diversified management investment companies.

The investment in shares of these funds or portfolios is carried at fair market value as determined by the underlying net asset value of the respective funds or portfolios. Investment transactions are accounted for on a trade date basis. The resulting net unrealized gains (losses) are reflected in the Statements of Operations. Realized gains (losses) from securities transactions are determined for federal income tax and for financial reporting purposes on the FIFO cost basis.

The amounts shown as receivable for securities sold and payable for securities purchased on the Statements of Assets and Liabilities reflect transactions that occurred on the last business day of the reporting period. These amounts will be deposited to or withdrawn from the separate account in accordance with the contract owners’ instructions on the first business day subsequent to the close of the period presented.

All dividend distributions received from the underlying Penn Series Funds are reinvested in additional shares of these Funds and are recorded by Account III on the ex-dividend date. The Penn Series Funds have utilized consent dividends to effectively distribute income for income tax purposes. Account III consents to treat these amounts as dividend income for tax purposes although they are not paid by the underlying Penn Series Funds. Therefore, no dividend income is recorded in the statements of operations related to such consent dividends.

For the year ended December 31, 2025, consent dividends in Account III were:


	Consent Dividends
Money Market Fund		—
Limited Maturity Bond Fund		1,793,457
Quality Bond Fund		5,809,933
High Yield Bond Fund		5,447,831

Note 2. Significant Accounting Policies (continued)


	Consent Dividends
Flexibly Managed Fund		680,380,027
Balanced Fund		7,968,953
Large Growth Stock Fund		36,926,307
Large Cap Growth Fund		2,332,797
Large Core Growth Fund		—
Large Cap Value Fund		5,869,826
Large Core Value Fund		2,188,613
Index 500 Fund		43,766,237
Mid Cap Growth Fund		564,348
Mid Cap Value Fund		2,381,340
Mid Core Value Fund		2,826,794
SMID Cap Growth Fund		809,592
SMID Cap Value Fund		1,426,625
Small Cap Growth Fund		6,020,198
Small Cap Value Fund		7,477,593
Small Cap Index Fund		3,851,908
Developed International Index Fund		3,905,604
International Equity Fund		14,325,338
Emerging Markets Equity Fund		430,997
Real Estate Securities Fund		2,643,420
Aggressive Allocation Fund		8,373,649
Moderately Aggressive Allocation Fund		26,399,031
Moderate Allocation Fund		23,978,626
Moderately Conservative Allocation Fund		7,457,646
Conservative Allocation Fund		3,439,260

Federal Income Taxes — The operations of Account III are included in the federal income tax return of Penn Mutual, which is taxed as a life insurance company under the provisions of the Internal Revenue Code (“IRC”). Under the current provisions of the IRC, Penn Mutual does not expect to incur federal income taxes on the earnings of Account III to the extent the earnings are credited under the contracts. Based on this, there is no charge to Account III for federal income taxes. Penn Mutual will review, as needed, the status of this policy in the event of changes in the tax law. A charge may be made in future years for any federal income taxes that would be attributable to the contracts.

Under the provisions of Section 817(h) of the IRC, a variable annuity contract will not be treated as an annuity contract for federal tax purposes for any period unless the investments of the segregated asset account on which the contract is based are adequately diversified. The IRC 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. Account III satisfies the current requirements of the regulations, and Penn Mutual intends that Account III will continue to meet such requirements.

Fair Value Measurement — 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. Fair value measurement is based on assumptions market participants would make in pricing an asset or liability. The inputs to valuation techniques used to measure fair value are prioritized by establishing a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to prices derived from unobservable inputs. An asset or liability’s classification within the fair value hierarchy is based on the lowest level of significant input to its fair value measurement. Account III has categorized its assets and liabilities into the three-level fair value hierarchy based upon the priority of the inputs. The following summarizes the types of assets and liabilities included within the three-level hierarchy:

Level 1 — Fair value is based on unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. These generally provide the most reliable evidence and are used to measure fair value whenever available. Active markets are defined as having the following for the measured asset/liability: i) many transactions, ii) current prices, iii) price quotes not varying substantially among market makers, iv) narrow bid/ask spreads and v) most information publicly available. Prices are obtained from readily available sources for market transactions involving identical assets or liabilities.

Note 2. Significant Accounting Policies (continued)

Level 2 — Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. In circumstances where prices from pricing services are reviewed for reasonability but cannot be validated to observable market data as noted above, these security values are recorded in Level 3 in our fair value hierarchy.

Level 3 — Fair value is based on significant inputs that are unobservable for the asset or liability. These are typically less liquid fixed maturity securities with very limited trading activity. Prices are determined using valuation methodologies such as option pricing models, discounted cash flow models and other similar techniques. Prices may also be based upon non-binding quotes from brokers or other market makers that are reviewed for reasonableness, based on Penn Mutual’s understanding of the market.

The fair value of all the investments in Account III are at net asset values and the investments are considered actively traded and fall within Level 1.

Note 3. Purchases and Sales of Investments

The following table shows aggregate cost of shares purchased and proceeds of shares sold for each fund or portfolio for the period ended December 31, 2025:


	Purchases		Sales
Money Market Fund	$	53,317,019	$	86,619,817
Limited Maturity Bond Fund		5,846,037		9,237,036
Quality Bond Fund		7,860,819		26,707,494
High Yield Bond Fund		6,424,284		16,450,956
Flexibly Managed Fund		3,774,114		676,316,820
Balanced Fund		1,095,924		9,025,910
Large Growth Stock Fund		7,556,798		49,904,449
Large Cap Growth Fund		3,793,319		6,449,955
Large Core Growth Fund		1,798,905		10,341,057
Large Cap Value Fund		2,870,568		15,191,055
Large Core Value Fund		2,029,632		10,193,644
Index 500 Fund		19,433,595		60,996,891
Mid Cap Growth Fund		2,256,191		17,662,260
Mid Cap Value Fund		1,553,499		9,172,190
Mid Core Value Fund		1,001,926		6,967,061
SMID Cap Growth Fund		2,853,311		9,066,399
SMID Cap Value Fund		1,554,133		7,704,832
Small Cap Growth Fund		2,156,967		11,837,306
Small Cap Value Fund		2,393,919		17,480,481
Small Cap Index Fund		2,799,134		10,614,336
Developed International Index Fund		2,672,487		8,908,579
International Equity Fund		5,626,247		27,616,071
Emerging Markets Equity Fund		713,584		9,886,285
Real Estate Securities Fund		2,541,657		11,551,465
Aggressive Allocation Fund		2,657,096		9,678,409
Moderately Aggressive Allocation Fund		1,565,895		31,161,239
Moderate Allocation Fund		1,554,062		33,907,421
Moderately Conservative Allocation Fund		2,943,685		13,706,486
Conservative Allocation Fund		5,627,854		10,663,850

Note 4. Related Party Transactions and Contract Charges

Penn Mutual received $183,928,566 and $191,478,674 from Account III for mortality and risk expense, contract administration and certain other charges for the years ended December 31, 2025 and 2024. These amounts charged include those assessed through a reduction in unit values as well as those assessed through the redemption of units. Additionally, Penn Series pays Penn Mutual and its affiliates fees for investment advisory and administrative services.

Note 4. Related Party Transactions and Contract Charges (continued)

Certain product charges are reflected as a reduction in the unit values. These are stated as a percentage of the account value as follows:


Products	Mortality & Risk Expense			Contract Administration
Diversifier II / Optimizer		1.25	%		None
Commander		1.25	%		0.15	%
Penn Freedom		1.30	%		0.15	%
Enhanced Credit Variable Annuity		1.25	%		0.15	%
Pennant Select		1.20	%		0.15	%
Retirement Planner VA		1.25	%		None
Inflation Protector Variable Annuity		1.50	%		0.15	%
Smart Foundation Flex		1.50	%		0.15	%
Smart Foundation Plus		1.45	%		0.15	%
Smart Foundation VA		1.25	%		0.15	%
Smart Foundation Advisory VA		0.25	%		0.15	%

Certain product charges are reflected as a redemption of units held by the contract owner. These are as follows:


Products		Annual Contract Charge
Diversifier II / Optimizer		$30 maximum
Commander		If Variable Account Value is < $100,000, the lesser of $40 or 2% of the Variable Account Value
Penn Freedom		If Variable Account Value is < $100,000, the lesser of $40 or 2% of the Variable Account Value
Enhanced Credit Variable Annuity		If Variable Account Value is < $100,000, the lesser of $40 or 2% of the Variable Account Value
Pennant Select		If Variable Account Value is < $100,000, the lesser of $40 or 2% of the Variable Account Value
Retirement Planner VA		The lesser of $30 or 2% of the Variable Account Value
Inflation Protector Variable Annuity		If Variable Account Value is < $50,000, the lesser of $40 or 2% of the Variable Account Value
Smart Foundation Flex		If Variable Account Value is < $50,000, the lesser of $40 or 2% of the Variable Account Value
Smart Foundation Plus		If Variable Account Value is < $50,000, the lesser of $40 or 2% of the Variable Account Value
Smart Foundation VA		If Variable Account Value is < $50,000, the lesser of $40 or 2% of the Variable Account Value
Smart Foundation Advisory VA		If Variable Account Value is < $50,000, the lesser of $40 or 2% of the Variable Account Value


Products		Surrender Charge
Diversifier II / Optimizer		Maximum charge of 7% of purchase payments received. Charges do not apply after 10 years.
Commander		Maximum charge of 1% of purchase payments received. Charges do not apply after 1 year since the purchase payment.
Penn Freedom		Maximum charge of 8% of purchase payments received. Charges do not apply after 4 years.
Enhanced Credit Variable Annuity		Maximum charge of 8% of purchase payments received. Charges do not apply after 9 years since the purchase payment.
Pennant Select		Maximum charge of 7% of purchase payments received. Charges do not apply after 7 years since the purchase payment.
Retirement Planner VA		Maximum charge of 7% of purchase payments received. Charges do not apply after 10 years.
Inflation Protector Variable Annuity		Maximum charge of 8% of purchase payments received. Charges do not apply after 4 years since the purchase payment.

Note 4. Related Party Transactions and Contract Charges (continued)


Products		Surrender Charge
Smart Foundation Flex		Maximum charge of 8% of purchase payments received. Charges do not apply after 4 years since the purchase payment.
Smart Foundation Plus		Maximum charge of 8% of purchase payments received. Charges do not apply after 9 years since the purchase payment.
Smart Foundation VA		Maximum charge of 8% of purchase payments received. Charges do not apply after 7 years since the purchase payment.
Smart Foundation Advisory VA		Maximum charge of 3% of purchase payments received. Charges do not apply after 3 years since the purchase payment.

Premium taxes on purchase payments are withheld from payments prior to the purchase of units. Currently, state premium taxes on purchase payments range from 0.00% to 4.00%.

Note 5. Accumulation Units

The accumulation units are as follows:


	December 31, 2025							December 31, 2024
Subaccount	Units Issued		Units Redeemed			Ending Unit Balance		Units Issued		Units Redeemed			Ending Unit Balance
Money Market Fund		5,594,849		(8,925,530	)		8,658,232		10,666,268		(10,292,978	)		11,988,913
Limited Maturity Bond Fund		538,496		(755,387	)		3,435,808		974,338		(1,314,577	)		3,652,699
Quality Bond Fund		634,644		(1,917,357	)		9,738,701		896,155		(1,578,490	)		11,021,414
High Yield Bond Fund		320,632		(682,660	)		3,617,277		260,962		(697,085	)		3,979,305
Flexibly Managed Fund		83,452		(13,507,603	)		96,502,278		1,342,492		(11,792,760	)		109,926,429
Balanced Fund		42,180		(290,066	)		1,696,779		92,280		(304,866	)		1,944,665
Large Growth Stock Fund		152,909		(921,862	)		4,776,730		286,659		(923,019	)		5,545,683
Large Cap Growth Fund		94,302		(142,046	)		1,101,557		100,502		(266,698	)		1,149,301
Large Core Growth Fund		57,623		(304,909	)		1,776,921		23,779		(300,220	)		2,024,207
Large Cap Value Fund		89,970		(335,255	)		2,004,397		41,232		(392,383	)		2,249,682
Large Core Value Fund		70,900		(318,969	)		2,094,777		46,493		(464,140	)		2,342,846
Index 500 Fund		424,796		(1,069,039	)		9,465,656		747,560		(1,183,366	)		10,109,899
Mid Cap Growth Fund		69,500		(490,156	)		2,148,878		95,582		(491,874	)		2,569,534
Mid Cap Value Fund		61,255		(306,358	)		1,594,871		58,974		(403,511	)		1,839,974
Mid Core Value Fund		31,410		(182,063	)		930,737		30,785		(232,933	)		1,081,390
SMID Cap Growth Fund		85,972		(236,645	)		1,436,386		127,943		(326,319	)		1,587,059
SMID Cap Value Fund		51,570		(237,946	)		998,493		72,612		(225,249	)		1,184,869
Small Cap Growth Fund		75,255		(330,958	)		1,607,983		64,696		(404,209	)		1,863,686
Small Cap Value Fund		71,711		(412,393	)		1,906,967		97,116		(520,646	)		2,247,649
Small Cap Index Fund		109,649		(362,059	)		1,990,533		159,562		(351,747	)		2,242,943
Developed International Index Fund		149,291		(461,797	)		2,738,565		202,067		(386,873	)		3,051,071
International Equity Fund		192,797		(908,960	)		4,099,307		161,777		(837,386	)		4,815,470
Emerging Markets Equity Fund		75,947		(974,591	)		4,010,355		477,311		(958,886	)		4,908,999
Real Estate Securities Fund		87,741		(351,017	)		1,603,769		102,594		(515,714	)		1,867,045
Aggressive Allocation Fund		108,378		(355,074	)		1,873,398		23,094		(420,941	)		2,120,094
Moderately Aggressive Allocation Fund		70,894		(1,169,719	)		6,564,862		94,454		(1,200,753	)		7,663,687
Moderate Allocation Fund		84,666		(1,522,748	)		7,964,278		139,693		(1,614,651	)		9,402,360
Moderately Conservative Allocation Fund		179,745		(737,252	)		3,755,235		316,617		(755,971	)		4,312,742
Conservative Allocation Fund		417,458		(711,910	)		2,546,628		374,206		(741,610	)		2,841,080

Note 6. Financial Highlights

Account III is a funding vehicle for a number of variable annuity products, which have unique combinations of features and fees that are charged against the contract owner’s account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. The Net Assets calculation in the table below excludes the accrual balance related to the “Due to The Penn Mutual Life Insurance Company” line in the Statement of Assets and Liabilities.

Note 6. Financial Highlights (continued)

The following table was developed by determining which products offered within Account III have the lowest and highest total return. Only product designs within each subaccount that has units outstanding during the respective periods were considered when determining the lowest and highest total return. The summary may not reflect the minimum and maximum contract charges offered within Account III as contract owners may not have selected all available and applicable contract options.

January 1, 2025

December 31, 2025

For the Year or Period ended December 31, 2025

Subaccount

Unit Value

Units

Unit Value

Net Assets

Investment
Income
Ratio*(%)

Expense
Ratio**(%)

Total
Return***(%)

Money Market Fund

8.86 to 22.9

8,658,232

9.04 to 23.45

86,814,958

3.64

0.40 to 1.65

1.99 to 3.27

Limited Maturity Bond Fund

10.18 to 18.69

3,435,808

10.63 to 19.59

42,460,722

—

0.40 to 1.65

4.43 to 5.74

Quality Bond Fund

10.35 to 43.36

9,738,701

10.95 to 46.06

136,060,648

—

0.40 to 1.65

5.8 to 7.13

High Yield Bond Fund

14.94 to 126.5

3,617,277

16.2 to 136.02

90,321,741

—

0.40 to 1.65

7.09 to 8.44

Flexibly Managed Fund

22.76 to 587.81

96,502,278

25.38 to 649.98

4,517,359,125

—

0.40 to 1.65

10.14 to 11.52

Balanced Fund

19.68 to 30.34

1,696,779

22.22 to 33.97

52,256,505

—

0.40 to 1.65

11.51 to 12.91

Large Growth Stock Fund

30.47 to 232.5

4,776,730

34.98 to 264.69

272,173,645

—

0.40 to 1.65

13.39 to 14.82

Large Cap Growth Fund

31.2 to 43.56

1,101,557

34.12 to 47.04

48,017,257

—

0.40 to 1.65

8.01 to 9.36

Large Core Growth Fund

22.09 to 35.41

1,776,921

23.9 to 37.84

59,095,804

—

0.40 to 1.65

6.87 to 8.22

Large Cap Value Fund

19.93 to 150.56

2,004,397

21.83 to 163.56

84,088,694

—

0.40 to 1.65

8.2 to 9.56

Large Core Value Fund

20.19 to 31.67

2,094,777

22.56 to 34.94

65,774,680

—

0.40 to 1.65

10.35 to 11.74

Index 500 Fund

28.58 to 80.96

9,465,656

33.44 to 93.92

539,933,580

—

0.40 to 1.65

15.55 to 17

Mid Cap Growth Fund

25.22 to 61.13

2,148,878

25.34 to 60.88

74,285,940

—

0.40 to 1.65

-0.8 to 0.45

Mid Cap Value Fund

14.06 to 59.03

1,594,871

14.96 to 62.26

51,521,607

—

0.40 to 1.65

5.05 to 6.37

Mid Core Value Fund

17.12 to 42.14

930,737

18.53 to 45.23

35,282,372

—

0.40 to 1.65

6.9 to 8.25

SMID Cap Growth Fund

24.17 to 42.07

1,436,386

24.55 to 42.37

53,876,921

—

0.40 to 1.65

0.33 to 1.59

SMID Cap Value Fund

16.44 to 34.33

998,493

16.8 to 34.79

31,371,948

—

0.40 to 1.65

0.92 to 2.19

Small Cap Growth Fund

21.53 to 77.39

1,607,983

23.3 to 83.05

58,183,053

—

0.40 to 1.65

6.88 to 8.22

Small Cap Value Fund

15.29 to 100.02

1,906,967

16.88 to 109.43

88,865,715

—

0.40 to 1.65

8.97 to 10.34

Small Cap Index Fund

16.86 to 30.25

1,990,533

18.81 to 33.33

60,354,037

—

0.40 to 1.65

10.17 to 11.56

Developed International Index Fund

14.21 to 17.41

2,738,565

18.29 to 22.43

55,969,091

—

0.40 to 1.65

28.47 to 30.08

International Equity Fund

17.59 to 70.42

4,099,307

19.07 to 75.71

126,037,617

—

0.40 to 1.65

7.08 to 8.43

Emerging Markets Equity Fund

8.12 to 10.01

4,010,355

10.24 to 12.79

43,501,398

—

0.40 to 1.65

26.22 to 27.8

Real Estate Securities Fund

16.19 to 46.64

1,603,769

16.49 to 47.12

50,988,160

—

0.40 to 1.65

0.63 to 1.9

Aggressive Allocation Fund

18.03 to 25.57

1,873,398

20.2 to 28.29

50,467,537

—

0.40 to 1.65

10.66 to 12.05

Moderately Aggressive Allocation Fund

17.53 to 25.17

6,564,862

19.55 to 27.84

169,819,739

—

0.40 to 1.65

10.16 to 11.55

Moderate Allocation Fund

15.98 to 21.16

7,964,278

17.69 to 23.23

173,660,298

—

0.40 to 1.65

9.35 to 10.72

Moderately Conservative Allocation Fund

14.61 to 18.26

3,755,235

15.93 to 19.75

68,038,582

—

0.40 to 1.65

7.73 to 9.08

Conservative Allocation Fund

13.04 to 15.17

2,546,628

13.92 to 16.25

37,463,387

—

0.40 to 1.65

6.71 to 8.05

January 1, 2024

December 31, 2024

For the Year or Period ended December 31, 2024

Subaccount

Unit Value

Units

Unit Value

Net Assets

Investment
Income
Ratio*(%)

Expense
Ratio**(%)

Total
Return***(%)

Money Market Fund

8.61 to 22.16

11,988,913

8.86 to 22.9

116,446,955

4.54

0.40 to 1.65

2.94 to 4.25

Limited Maturity Bond Fund

9.8 to 17.91

3,652,699

10.18 to 18.69

43,337,967

—

0.40 to 1.65

3.9 to 5.21

Quality Bond Fund

10.27 to 42.89

11,021,414

10.35 to 43.36

144,736,956

—

0.40 to 1.65

0.71 to 1.98

High Yield Bond Fund

13.91 to 118.76

3,979,305

14.94 to 126.5

92,658,735

—

0.40 to 1.65

6.09 to 7.43

Flexibly Managed Fund

20.32 to 529.36

109,926,429

22.76 to 587.81

4,670,131,718

—

0.40 to 1.65

10.6 to 11.99

Balanced Fund

17.15 to 26.67

1,944,665

19.68 to 30.34

53,643,699

—

0.40 to 1.65

13.31 to 14.74

Large Growth Stock Fund

23.69 to 182.29

5,545,683

30.47 to 232.5

276,367,501

—

0.40 to 1.65

27.03 to 28.64

Large Cap Growth Fund

26.98 to 38.15

1,149,301

31.2 to 43.56

46,245,850

—

0.40 to 1.65

14.17 to 15.62

Large Core Growth Fund

18.04 to 29.28

2,024,207

22.09 to 35.41

62,851,265

—

0.40 to 1.65

20.94 to 22.47

Large Cap Value Fund

17.78 to 135.46

2,249,682

19.93 to 150.56

88,341,557

—

0.40 to 1.65

10.7 to 12.1

Large Core Value Fund

18.17 to 28.87

2,342,846

20.19 to 31.67

66,438,606

—

0.40 to 1.65

9.71 to 11.09

Index 500 Fund

23.03 to 65.79

10,109,899

28.58 to 80.96

498,511,817

—

0.40 to 1.65

22.56 to 24.11

Mid Cap Growth Fund

24.78 to 60.56

2,569,534

25.22 to 61.13

88,868,280

—

0.40 to 1.65

0.53 to 1.8

Mid Cap Value Fund

12.46 to 52.75

1,839,974

14.06 to 59.03

55,778,664

—

0.40 to 1.65

11.44 to 12.85

Mid Core Value Fund

15.86 to 39.37

1,081,390

17.12 to 42.14

38,213,750

—

0.40 to 1.65

6.6 to 7.95

SMID Cap Growth Fund

21.63 to 37.97

1,587,059

24.17 to 42.07

59,158,549

—

0.40 to 1.65

10.35 to 11.75

Note 6. Financial Highlights (continued)

January 1, 2024

December 31, 2024

For the Year or Period ended December 31, 2024

Subaccount

Unit Value

Units

Unit Value

Net Assets

Investment
Income
Ratio*(%)

Expense
Ratio**(%)

Total
Return***(%)

SMID Cap Value Fund

15.07 to 31.74

1,184,869

16.44 to 34.33

36,746,958

—

0.40 to 1.65

7.71 to 9.07

Small Cap Growth Fund

19.15 to 69.43

1,863,686

21.53 to 77.39

63,054,677

—

0.40 to 1.65

11.02 to 12.42

Small Cap Value Fund

14.24 to 93.94

2,247,649

15.29 to 100.02

94,913,167

—

0.40 to 1.65

6.05 to 7.39

Small Cap Index Fund

15.29 to 27.76

2,242,943

16.86 to 30.25

61,614,803

—

0.40 to 1.65

8.94 to 10.32

Developed International Index Fund

14.06 to 17.22

3,051,071

14.21 to 17.41

48,406,163

—

0.40 to 1.65

0.89 to 2.16

International Equity Fund

16.7 to 67.41

4,815,470

17.59 to 70.42

136,081,896

—

0.40 to 1.65

4.04 to 5.35

Emerging Markets Equity Fund

8.57 to 10.44

4,908,999

8.12 to 10.01

42,097,838

—

0.40 to 1.65

-5.32 to - 4.12

Real Estate Securities Fund

15.27 to 44.39

1,867,045

16.19 to 46.64

58,668,137

—

0.40 to 1.65

4.65 to 5.97

Aggressive Allocation Fund

16.15 to 23.19

2,120,094

18.03 to 25.57

51,514,871

—

0.40 to 1.65

10.25 to 11.64

Moderately Aggressive Allocation Fund

15.85 to 22.95

7,663,687

17.53 to 25.17

179,709,848

—

0.40 to 1.65

9.22 to 10.6

Moderate Allocation Fund

14.7 to 19.63

9,402,360

15.98 to 21.16

187,060,360

—

0.40 to 1.65

7.33 to 8.69

Moderately Conservative Allocation Fund

13.66 to 17.22

4,312,742

14.61 to 18.26

72,555,175

—

0.40 to 1.65

5.59 to 6.92

Conservative Allocation Fund

12.44 to 14.53

2,841,080

13.04 to 15.17

39,381,058

—

0.40 to 1.65

4.01 to 5.32

January 1, 2023

December 31, 2023

For the Year or Period ended December 31, 2023

Subaccount

Unit Value

Units

Unit Value

Net Assets

Investment
Income
Ratio*(%)

Expense
Ratio**(%)

Total

Return***(%)

Money Market Fund

8.38 to 21.47

11,615,623

8.61 to 22.16

110,673,992

4.38

0.40 to 1.65

2.79 to 4.07

Limited Maturity Bond Fund

9.31 to 16.96

3,992,938

9.8 to 17.91

45,545,604

—

0.40 to 1.65

5.22 to 6.54

Quality Bond Fund

9.78 to 40.67

11,703,749

10.27 to 42.89

153,869,079

—

0.40 to 1.65

5.04 to 6.36

High Yield Bond Fund

12.56 to 108.13

4,415,428

13.91 to 118.76

97,121,970

—

0.40 to 1.65

9.4 to 10.77

Flexibly Managed Fund

17.2 to 452.03

120,376,697

20.32 to 529.36

4,666,289,177

—

0.40 to 1.65

16.64 to 18.1

Balanced Fund

14.61 to 22.92

2,157,251

17.15 to 26.67

52,411,485

—

0.40 to 1.65

15.92 to 17.37

Large Growth Stock Fund

16.14 to 125.3

6,182,043

23.69 to 182.29

241,707,582

—

0.40 to 1.65

44.9 to 46.72

Large Cap Growth Fund

21.88 to 31.31

1,315,497

26.98 to 38.15

46,096,374

—

0.40 to 1.65

21.82 to 23.35

Large Core Growth Fund

13.38 to 21.98

2,300,648

18.04 to 29.28

58,923,832

—

0.40 to 1.65

33.17 to 34.84

Large Cap Value Fund

15.98 to 122.81

2,600,833

17.78 to 135.46

91,835,584

—

0.40 to 1.65

9.86 to 11.24

Large Core Value Fund

16.85 to 27.09

2,760,493

18.17 to 28.87

71,337,768

—

0.40 to 1.65

6.54 to 7.88

Index 500 Fund

18.37 to 52.93

10,545,705

23.03 to 65.79

424,881,466

—

0.40 to 1.65

23.81 to 25.36

Mid Cap Growth Fund

20.75 to 51.15

2,965,826

24.78 to 60.56

101,362,559

—

0.40 to 1.65

17.94 to 19.42

Mid Cap Value Fund

11.23 to 47.96

2,184,511

12.46 to 52.75

58,679,223

—

0.40 to 1.65

9.56 to 10.93

Mid Core Value Fund

15.03 to 37.64

1,283,538

15.86 to 39.37

42,298,879

—

0.40 to 1.65

4.2 to 5.51

SMID Cap Growth Fund

19.05 to 33.73

1,785,435

21.63 to 37.97

60,280,251

—

0.40 to 1.65

12.12 to 13.52

SMID Cap Value Fund

12.97 to 27.55

1,337,506

15.07 to 31.74

38,376,174

—

0.40 to 1.65

14.78 to 16.22

Small Cap Growth Fund

16.21 to 59.26

2,203,199

19.15 to 69.43

67,024,861

—

0.40 to 1.65

16.71 to 18.17

Small Cap Value Fund

12.83 to 85.37

2,671,179

14.24 to 93.94

104,868,679

—

0.40 to 1.65

9.59 to 10.97

Small Cap Index Fund

13.2 to 24.28

2,435,128

15.29 to 27.76

61,330,216

—

0.40 to 1.65

14.33 to 15.77

Developed International Index Fund

12.17 to 14.89

3,235,877

14.06 to 17.22

50,681,033

—

0.40 to 1.65

15.31 to 16.76

International Equity Fund

14.55 to 59.23

5,491,079

16.7 to 67.41

148,744,415

—

0.40 to 1.65

13.36 to 14.79

Emerging Markets Equity Fund

8.57 to 10.31

5,390,574

8.57 to 10.44

48,754,472

—

0.40 to 1.65

0.01 to 1.26

Real Estate Securities Fund

13.72 to 40.21

2,280,165

15.27 to 44.39

68,075,721

—

0.40 to 1.65

9.96 to 11.34

Aggressive Allocation Fund

14.05 to 20.43

2,517,941

16.15 to 23.19

55,348,165

—

0.40 to 1.65

13.5 to 14.93

Moderately Aggressive Allocation Fund

13.9 to 20.3

8,769,986

15.85 to 22.95

188,132,744

—

0.40 to 1.65

12.58 to 13.99

Moderate Allocation Fund

13.09 to 17.63

10,877,318

14.7 to 19.63

201,367,130

—

0.40 to 1.65

10.93 to 12.32

Moderately Conservative Allocation Fund

12.39 to 15.75

4,752,096

13.66 to 17.22

75,844,565

—

0.40 to 1.65

8.9 to 10.27

Conservative Allocation Fund

11.45 to 13.49

3,208,484

12.44 to 14.53

42,959,178

—

0.40 to 1.65

7.24 to 8.58

January 1, 2022

December 31, 2022

For the Year or Period ended December 31, 2022

Subaccount

Unit Value

Units

Unit Value

Net Assets

Investment
Income
Ratio*(%)

Expense
Ratio**(%)

Total
Return***(%)

Money Market Fund

8.49 to 21.68

13,658,794

8.38 to 21.47

125,111,114

0.25

0.40 to 1.65

-1.37 to -0.13

Limited Maturity Bond Fund

9.91 to 17.98

4,934,043

9.31 to 16.96

53,205,969

—

0.40 to 1.65

-6.04 to -4.86

Quality Bond Fund

11.51 to 47.68

12,347,044

9.78 to 40.67

155,874,935

—

0.40 to 1.65

-15.04 to -13.98

Note 6. Financial Highlights (continued)

January 1, 2022

December 31, 2022

For the Year or Period ended December 31, 2022

Subaccount

Unit Value

Units

Unit Value

Net Assets

Investment
Income
Ratio*(%)

Expense
Ratio**(%)

Total
Return***(%)

High Yield Bond Fund

13.45 to 116.84

5,059,320

12.56 to 108.13

100,741,790

—

0.40 to 1.65

-7.82 to -6.67

Flexibly Managed Fund

19.66 to 520.86

125,135,586

17.2 to 452.03

4,202,419,988

—

0.40 to 1.65

-13.56 to -12.47

Balanced Fund

17.58 to 27.81

2,317,805

14.61 to 22.92

48,567,614

—

0.40 to 1.65

-17.93 to -16.9

Large Growth Stock Fund

26.8 to 209.76

6,619,697

16.14 to 125.3

177,342,224

—

0.40 to 1.65

-40.5 to -39.76

Large Cap Growth Fund

27.18 to 39.39

1,528,786

21.88 to 31.31

43,828,910

—

0.40 to 1.65

-20.51 to -19.51

Large Core Growth Fund

28.88 to 48.06

2,538,321

13.38 to 21.98

48,702,231

—

0.40 to 1.65

-54.26 to -53.68

Large Cap Value Fund

16.76 to 129.87

2,950,118

15.98 to 122.81

93,577,230

—

0.40 to 1.65

-5.81 to -4.63

Large Core Value Fund

17.48 to 28.46

3,223,319

16.85 to 27.09

78,160,438

—

0.40 to 1.65

-4.8 to -3.61

Index 500 Fund

22.57 to 65.59

10,480,460

18.37 to 52.93

342,595,786

—

0.40 to 1.65

-19.62 to -18.61

Mid Cap Growth Fund

30.05 to 74.7

3,223,580

20.75 to 51.15

93,036,516

—

0.40 to 1.65

-31.81 to -30.95

Mid Cap Value Fund

11.95 to 51.46

2,416,695

11.23 to 47.96

59,324,927

—

0.40 to 1.65

-7.18 to -6.01

Mid Core Value Fund

15.32 to 38.68

1,539,933

15.03 to 37.64

48,190,139

—

0.40 to 1.65

-3.09 to -1.88

SMID Cap Growth Fund

26.75 to 47.75

1,854,308

19.05 to 33.73

55,799,949

—

0.40 to 1.65

-29.65 to -28.76

SMID Cap Value Fund

15.49 to 33.19

1,506,087

12.97 to 27.55

37,549,830

—

0.40 to 1.65

-17.34 to -16.3

Small Cap Growth Fund

21.48 to 79.2

2,448,539

16.21 to 59.26

63,876,137

—

0.40 to 1.65

-25.48 to -24.54

Small Cap Value Fund

15.11 to 101.38

2,980,799

12.83 to 85.37

106,245,770

—

0.40 to 1.65

-16.13 to -15.07

Small Cap Index Fund

16.79 to 31.27

2,515,237

13.2 to 24.28

55,318,961

—

0.40 to 1.65

-22.35 to -21.38

Developed International Index Fund

14.58 to 17.84

3,453,802

12.17 to 14.89

46,503,681

—

0.40 to 1.65

-16.71 to -15.66

International Equity Fund

18.68 to 76.7

6,239,051

14.55 to 59.23

147,847,119

—

0.40 to 1.65

-23.09 to -22.12

Emerging Markets Equity Fund

11.38 to 13.51

5,882,730

8.57 to 10.31

53,096,486

—

0.40 to 1.65

-24.67 to -23.73

Real Estate Securities Fund

18.45 to 54.54

2,519,114

13.72 to 40.21

68,008,105

—

0.40 to 1.65

-26.57 to -25.65

Aggressive Allocation Fund

16.69 to 24.58

2,663,671

14.05 to 20.43

51,480,880

—

0.40 to 1.65

-16.88 to -15.83

Moderately Aggressive Allocation Fund

16.32 to 24.04

9,369,487

13.9 to 20.3

178,624,396

—

0.40 to 1.65

-15.87 to -14.82

Moderate Allocation Fund

15.25 to 20.71

12,536,165

13.09 to 17.63

208,915,044

—

0.40 to 1.65

-15.22 to -14.16

Moderately Conservative Allocation Fund

14.02 to 17.98

5,406,868

12.39 to 15.75

79,243,450

—

0.40 to 1.65

-12.74 to -11.65

Conservative Allocation Fund

12.76 to 15.16

3,574,480

11.45 to 13.49

44,521,581

—

0.40 to 1.65

-11.33 to -10.22

January 1, 2021

December 31, 2021

For the Year or Period ended December 31, 2021

Subaccount

Unit Value

Units

Unit Value

Net Assets

Investment
Income
Ratio*(%)

Expense
Ratio**(%)

Total

Return***(%)

Money Market Fund

$8.63 to 21.95

14,577,178

8.49 to 21.68

135,482,807

0.01

0.40 to 1.65

-1.63 to -0.39

Limited Maturity Bond Fund

10.04 to 18.14

5,411,708

9.91 to 17.98

62,591,718

—

0.40 to 1.65

-1.27 to -0.03

Quality Bond Fund

11.79 to 48.61

14,163,538

11.51 to 47.68

210,295,104

—

0.40 to 1.65

-2.32 to -1.09

High Yield Bond Fund

12.85 to 112.55

5,489,805

13.45 to 116.84

120,069,067

—

0.40 to 1.65

3.40 to 4.70

Flexibly Managed Fund

16.68 to 445.88

127,192,159

19.66 to 520.86

5,014,759,792

—

0.40 to 1.65

16.35 to 17.81

Balanced Fund

15.25 to 24.33

2,501,555

17.58 to 27.81

63,972,905

—

0.40 to 1.65

13.87 to 15.31

Large Growth Stock Fund

23.11 to 182.42

7,460,504

26.8 to 209.76

331,897,918

—

0.40 to 1.65

14.53 to 15.97

Large Cap Growth Fund

21.68 to 31.82

1,255,825

27.18 to 39.39

45,143,486

—

0.40 to 1.65

23.79 to 25.35

Large Core Growth Fund

30.18 to 50.86

2,621,481

28.88 to 48.06

109,296,004

—

0.40 to 1.65

-5.51 to -4.32

Large Cap Value Fund

13.16 to 102.83

3,009,885

16.76 to 129.87

102,722,001

—

0.40 to 1.65

25.79 to 27.37

Large Core Value Fund

14.1 to 23.25

3,282,786

17.48 to 28.46

83,081,211

—

0.40 to 1.65

22.43 to 23.96

Index 500 Fund

17.66 to 51.77

9,610,642

22.57 to 65.59

393,743,308

—

0.40 to 1.65

26.19 to 27.78

Mid Cap Growth Fund

25.86 to 64.84

3,532,390

30.05 to 74.7

149,016,867

—

0.40 to 1.65

14.74 to 16.19

Mid Cap Value Fund

10.06 to 43.69

2,627,565

11.95 to 51.46

69,936,888

—

0.40 to 1.65

17.32 to 18.79

Mid Core Value Fund

12.49 to 31.8

1,435,468

15.32 to 38.68

46,648,483

—

0.40 to 1.65

21.15 to 22.67

SMID Cap Growth Fund

24.93 to 44.88

1,951,925

26.75 to 47.75

83,555,088

—

0.40 to 1.65

5.97 to 7.3

SMID Cap Value Fund

11.47 to 24.79

1,659,127

15.49 to 33.19

49,904,673

—

0.40 to 1.65

33.36 to 35.04

Small Cap Growth Fund

19.84 to 73.79

2,701,924

21.48 to 79.2

95,151,754

—

0.40 to 1.65

6.90 to 8.25

Small Cap Value Fund

11.98 to 81.05

3,199,554

15.11 to 101.38

137,245,551

—

0.40 to 1.65

24.59 to 26.16

Small Cap Index Fund

14.74 to 27.8

2,380,582

16.79 to 31.27

67,441,019

—

0.40 to 1.65

12.48 to 13.90

Developed International Index Fund

13.38 to 16.36

3,464,865

14.58 to 17.84

55,526,963

—

0.40 to 1.65

8.73 to 10.1

International Equity Fund

16.71 to 69.21

6,717,679

18.68 to 76.7

207,149,436

—

0.40 to 1.65

10.39 to 11.78

Emerging Markets Equity Fund

12.26 to 14.38

6,516,243

11.38 to 13.51

77,831,280

—

0.40 to 1.65

-7.17 to -6.00

Real Estate Securities Fund

12.98 to 38.7

2,619,070

18.45 to 54.54

96,764,015

—

0.40 to 1.65

40.37 to 42.13

Aggressive Allocation Fund

14.4 to 21.46

2,853,967

16.69 to 24.58

66,272,913

—

0.40 to 1.65

14.51 to 15.95

Note 6. Financial Highlights (continued)

January 1, 2021

December 31, 2021

For the Year or Period ended December 31, 2021

Subaccount

Unit Value

Units

Unit Value

Net Assets

Investment
Income
Ratio*(%)

Expense
Ratio**(%)

Total

Return***(%)

Moderately Aggressive Allocation Fund

14.21 to 21.11

10,133,192

16.32 to 24.04

229,557,725

—

0.40 to 1.65

13.44 to 14.87

Moderate Allocation Fund

13.75 to 18.84

13,923,926

15.25 to 20.71

273,400,769

—

0.40 to 1.65

9.5 to 10.88

Moderately Conservative Allocation Fund

12.96 to 16.76

5,798,212

14.02 to 17.98

97,213,079

—

0.40 to 1.65

6.86 to 8.20

Conservative Allocation Fund

12.26 to 14.68

3,936,131

12.76 to 15.16

55,439,782

—

0.40 to 1.65

2.81 to 4.10

These ratios represent the dividends, excluding distributions of capital gains, received by the subaccounts within Account III from the underlying mutual fund, net of management fees and expenses assessed by the fund manager, divided by the average net assets of the respective subaccounts. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reduction in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying funds in which the subaccount invests and, to the extent the underlying fund utilizes consent dividend rather than paying dividends in cash or reinvested shares, Account III does not record investment income.

These ratios represent the annualized contract expenses of the subaccount, consisting primarily of mortality and expense charges, for each period indicated. The ratios include 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 subaccount are excluded.

***

These ratios represent the total return for the periods indicated, including changes in the value of the underlying subaccount, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period and reflects a range of actual product total returns.

Note 7. Subsequent Events

Management has evaluated events subsequent to December 31, 2025 and through the Account III Financial Statement date of issuance of April 15, 2026.

LOGO

PricewaterhouseCoopers LLP,

2001 Market Street, Suite 1800,

Philadelphia, PA 19103

+1 (267) 330 3000

www.pwc.com

Report of Independent Auditors

To the Board of Trustees of

The Penn Mutual Life Insurance Company

Opinions

We have audited the accompanying statutory financial statements of The Penn Mutual Life Insurance Company (the “Company”), which comprise the statutory statements of admitted assets, liabilities and surplus as of December 31, 2025 and 2024, and the related statutory statements of operations, of changes in surplus, and of cash flows for the years then ended, including the related notes (collectively referred to as 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 surplus of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in accordance with the accounting practices prescribed or permitted by the Pennsylvania Insurance Department described in Note 1.

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 accompanying financial statements do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2025 and 2024, or the results of its operations or its cash flows for the years then ended.

Basis for Opinions

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US 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 audit. 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 1 to the financial statements, the financial statements are prepared by the Company on the basis of the accounting practices prescribed or permitted by the Pennsylvania Insurance Department, which is a basis of accounting other than accounting principles generally accepted in the United States of America.

LOGO

The effects on the financial statements of the variances between the statutory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.

Responsibilities of Management for the Financial Statements

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

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date the financial statements are available to be 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 US 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 US GAAS, we:

•

Exercise professional judgment and maintain professional skepticism throughout the audit.

•

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, no such opinion is expressed.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

($ in Thousands)

Statements of Admitted Assets, Liabilities and Surplus


As of December 31,	2025		2024

ADMITTED ASSETS
Bonds	$	19,095,858	$	18,137,108
Stocks:
Preferred		52,416		57,988
Common — affiliated		1,352,785		1,095,726
Common — unaffiliated		18,836		15,494
Real estate		10,205		10,350
Policy loans		1,453,509		1,136,960
Cash, cash equivalents and short-term investments		627,612		387,909
Alternative assets		1,110,211		1,089,817
Derivatives		1,014,436		1,350,153
Other invested assets		811,089		636,611

TOTAL INVESTMENTS		25,546,957		23,918,116

Investment income due and accrued		239,286		212,366
Premiums due and deferred		168,590		167,669
Deferred tax asset		163,691		213,512
Corporate owned life insurance		323,257		299,426
Amounts recoverable from reinsurers		26,651		9,955
Other assets		426,734		430,826
Separate account assets		8,613,768		8,774,945

TOTAL ASSETS	$	35,508,934	$	34,026,815


LIABILITIES
Reserves and funds for payment of insurance and annuity benefits	$	17,357,374	$	16,842,581
Dividends to policyholders payable in the following year		302,971		267,090
Policy claims in process		120,425		117,402
Asset valuation reserve		371,339		327,038
Drafts outstanding		59,734		42,438
Funds held under coinsurance		2,550,398		1,643,193
Federal income taxes payable		—		83,803
Other liabilities		773,398		613,581
Derivatives		1,155,341		1,422,829
Separate account liabilities		8,613,768		8,774,945

TOTAL LIABILITIES		31,304,748		30,134,900


SURPLUS
Surplus notes		892,185		891,807
Unassigned surplus		3,312,002		3,000,109

TOTAL SURPLUS		4,204,187		3,891,916

TOTAL LIABILITIES AND SURPLUS	$	35,508,935	$	34,026,816

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


2025 Statutory Financial Statements			Page 1

($ in Thousands)

Statements of Cash Flows


For the Years Ended December 31,	2025			2024

OPERATIONS
Premium and annuity considerations	$	2,188,840		$	2,437,609
Net investment income		1,250,563			1,311,250
Other revenue		275,505			278,396

CASH PROVIDED BY OPERATIONS		3,714,908			4,027,255

Benefits paid		2,229,215			2,308,034
Commissions and operating expenses		683,734			613,338
Net transfers from separate accounts		(889,980	)		(848,158	)
Dividends to policyholders		19,960			17,006
Taxes refunded on operating income and realized investment losses		163,986			47,177

CASH USED IN OPERATIONS		2,206,915			2,137,397

NET CASH PROVIDED BY OPERATIONS		1,507,993			1,889,858


INVESTMENT ACTIVITIES
Investments sold, matured or repaid:
Bonds		4,423,444			5,162,763
Preferred and common stocks		48,204			119,009
Alternative assets, real estate and other invested assets		(1,267,725	)		169,865
Other		2,360,000			2,360,000
Derivatives		70,303			385,899
Miscellaneous proceeds		(65,690	)		(373,899	)

NET PROCEEDS FROM INVESTMENTS SOLD, MATURED OR REPAID		5,568,536			7,823,637

Cost of investments acquired:
Bonds		5,359,824			9,080,289
Preferred and common stock		187,616			146,392
Alternative assets, real estate and other invested assets		937,944			388,911
Derivatives		0			(6,446	)
Miscellaneous applications		241,153			403,866

TOTAL COST OF INVESTMENTS ACQUIRED		6,726,537			10,013,012

Net increase in policy loans		(285,529	)		(251,235	)

NET CASH USED IN INVESTMENT ACTIVITIES		(1,443,530	)		(2,440,610	)


FINANCING AND MISCELLANEOUS
Net deposits on deposit-type contracts		54,812			390,704
Other cash applied, net		120,428			83,716

NET CASH PROVIDED BY FINANCING AND MISCELLANEOUS		175,240			474,420

NET CHANGE IN CASH AND SHORT-TERM INVESTMENTS		239,703			(76,332	)

Cash, cash equivalents and short-term investments:
Beginning of year		387,909			464,241

End of year	$	627,612		$	387,909

Supplemental Disclosure of Cash Flow Information for Non-Cash Transactions:
Non-cash acquisitions	$	—		$	(42,029	)
Premiums paid from benefits, dividends, policy loans and waivers	$	306,595		$	262,938
Common stock acquired as a return of capital/dividend	$	22,096		$	8,697
Non-cash disposals	$	194,929		$	46,140
Reinsurance emerging earnings	$	—		$	269,798

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


Page 4		The Penn Mutual Life Insurance Company

($ in Thousands)

Notes to Financial Statements

Note 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

NATURE OF OPERATIONS The Penn Mutual Life Insurance Company (the “Company”) is a mutual life insurance company domiciled in Pennsylvania, that concentrates primarily on the sale of individual life insurance and annuity products. The primary products that the Company currently markets are traditional whole life, one year non-renewable and level term, variable universal life, immediate annuities and deferred annuities, both fixed and variable. The Company markets its products through a network of closely affiliated and independent financial professionals. The Company is licensed to write business in forty-nine states and the District of Columbia.

BASIS OF PRESENTATION The accompanying financial statements of the Company have been prepared in conformity with the National Association of Insurance Commissioner’s (“NAIC”) Practices and Procedures manual and with statutory accounting practices prescribed or permitted by the Pennsylvania Insurance Department (collectively “SAP” or “statutory accounting principles”). Prescribed statutory accounting practices include publications of the NAIC, state laws, regulations and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. The Company currently has no permitted practices.

Statutory accounting principles are different in some respects from U.S. Generally Accepted Accounting Principles (“GAAP”). The more significant differences between statutory accounting principles and GAAP are as follows:

(a)

under SAP, policy acquisition costs, such as commissions, and other costs incurred in connection with acquiring new insurance contracts, are expensed when incurred; under GAAP, such costs are generally deferred and amortized over the expected life of the underlying insurance contracts on a constant-level basis at a grouped contract level that approximates straight-line amortization on an individual contract basis;

(b)

statutory policy reserves are based upon the methods prescribed in the Valuation Manual, whereas GAAP reserves would generally be based upon the net level premium method, with estimates of future mortality, morbidity and interest assumptions;

(c)

bonds are generally carried at amortized cost, whereas GAAP would generally report bonds at fair value;

(d)

undistributed earnings from alternative assets are included in unrealized gains and losses, whereas GAAP would reflect these changes as net investment income;

(e)

deferred income taxes, which provide for book versus tax temporary differences, are subject to limitation and are charged to surplus, whereas GAAP would generally include the change in deferred taxes in net income;

(f)

payments received for universal and variable life insurance products and variable annuities are reported as premium income and changes in reserves, whereas GAAP would treat these payments as deposits to policyholders’ account balances;

(g)

assets are reported at “admitted asset” value and “nonadmitted assets” are excluded through a charge against surplus, whereas GAAP would record these assets net of any valuation allowance;

(h)

majority-owned subsidiaries are accounted for using the equity method. The Penn Insurance and Annuity Company (“PIA”), Vantis Life Insurance Company (“Vantis”), The Penn Insurance and Annuity Company of New York (“PIANY”), Janney Montgomery Scott, LLC (“JMS”) through November 29, 2024, Hornor Townsend & Kent, LLC (“HTK”) through August 1, 2025, Penn Mutual Asset Management, LLC (“PMAM”), 1847 Financial, LLC (“1847FIN”) and 1847 Insurance Captive, LLC (“1847IC”) are admitted assets. 1847 Select Ventures, LLC (“1847SV”), and MyWorth LLC (“MyWorth”) are non-admitted assets. Under GAAP, these majority-owned subsidiaries would be consolidated;

(i)

the Company’s investment in Penn Mutual Asset Management Multi-Series Funds Series A and B and the Penn Mutual AM Strategic Income Fund (collectively “PMAM’s Private Funds/PMUBX”) is accounted for using the equity method. Under GAAP, the Company’s investment would be treated as a variable interest entity and consolidated, with noncontrolling interest portions separately reported.

(j)

surplus notes are reported in surplus, whereas GAAP would report these notes as debt. Costs associated with the issuance of these notes are expensed, whereas GAAP would capitalize these expenses and amortize them into income over the life of the notes;

(k)

reinsurance reserve credits are reported as a reduction of policyholders’ reserves and liabilities for deposit-type contracts, whereas GAAP would report these balances as an asset;


2025 Statutory Financial Statements			Page 5

($ in Thousands)

(l)

an asset valuation reserve (“AVR”) is reported as a contingency reserve to stabilize surplus against fluctuations in the carrying value of stocks, real estate investments, partnerships, limited liability companies (“LLCs”), low income housing tax credit (“LIHTC”) investments and certain credit related derivative instruments as well as credit-related declines in the value of bonds, whereas under U.S. GAAP, a separate reserve like the AVR is not established; instead, credit-related declines are recognized through impairment charges or fair value adjustments that directly affect earnings or other comprehensive income;

(m)

changes in the fair value of unaffiliated common stock are recorded as changes in unrealized gains/(losses) in surplus, whereas GAAP recognizes the changes through realized capital gains/(losses);

(n)

changes in the fair value of perpetual preferred stock are recorded as changes in unrealized gains/(losses) in surplus, whereas GAAP recognizes the changes through realized capital gains/(losses);

(o)

after-tax realized capital gains and losses that result from changes in the overall level of interest rates for all types of fixed-income investments and interest-related hedging activities are deferred into the interest maintenance reserve (“IMR”) and amortized into investment income over the remaining life of the investment sold, whereas GAAP would report these gains and losses in income as a component of revenue when the related securities are sold or called;

(p)

changes in the fair value of derivative financial instruments are recorded as changes in surplus, unless deemed an effective hedge when it is carried at amortized cost with no resulting changes in fair value. Changes in fair value for GAAP would be reported as income for ineffective cash flow hedges and fair value hedges; changes in fair value for GAAP would be reported as other comprehensive income for effective cash flow hedges;

(q)

comprehensive income is not presented, whereas GAAP would present changes in unrealized capital gains and losses, changes in funded status of pension and postretirement plans and foreign currency translations as other comprehensive income;

(r)

embedded derivatives are recorded as part of the underlying contract, whereas GAAP would identify and bifurcate certain embedded derivatives and market risk benefits from the underlying contract or security and account for them separately;

(s)

policyholder dividends are recognized when declared, whereas GAAP would recognize these over the term of the related policies;

(t)

investments in Federal Home Loan Bank stock are reported as an investment in common stock, unaffiliated, whereas GAAP would report these within other invested assets;

(u)

identification of other-than-temporary impairment (“OTTI”) uses an “intent and ability to hold” criteria, whereas GAAP would use and “intent and ability not to sell” criteria.

CORRECTION OF ERRORS The Company identified an overstatement in prior years’ deferred tax asset related to its reinsurance transactions. The correction of the error was recorded in accordance with SSAP No. 3 – Accounting Changes and Corrections of Error and is reflected as a decrease in unassigned funds of $71,199 on the Statements of Changes in Surplus.

RECLASSIFICATIONS Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications had no impact on capital and surplus or net income in the prior year.

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES The preparation of financial statements requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Those estimates are inherently subject to change and actual results could differ from those estimates. Included among the material reported amounts and disclosures that require extensive use of estimates are:

◇

Carrying value of certain invested assets and derivatives

◇

Liabilities for reserves and funds for the payment of insurance and annuity benefits

◇

Accounting for income taxes and valuation of deferred income tax assets and liabilities and unrecognized tax benefits

◇

Litigation and other contingencies

◇

Pension and other postretirement and postemployment benefits


Page 6		The Penn Mutual Life Insurance Company

($ in Thousands)

INVESTMENTS Bonds with an NAIC designation of 1 to 5 are valued at amortized cost. All other bonds are valued at the lower of cost or fair value. Fair value is determined using an external pricing service or management’s pricing models.

For fixed income securities that do not have a fixed schedule of payment, including asset-backed and mortgage-backed securities, the effect on amortization or accretion is revalued three times a year based on the current estimated cash flows. Prepayment assumptions are based on borrower constraints and economic incentives such as original term, age and coupon of the loan as affected by the interest rate environment. Cash flow assumptions for structured securities are obtained from broker dealer survey values or internal estimates. These assumptions are consistent with the current interest rate and economic environment.

The Company has adopted a principles-based definition of a bond for the classification and reporting of its investments. A security is classified as a bond if it represents a creditor relationship, contains a fixed schedule for future payments and is either an issuer credit obligation or an asset-backed security. To determine whether a security meets the principles-based definition of a bond, management performs a qualitative assessment focusing on the security’s underlying economic characteristics including but not limited to creditor relationship, fixed payments and source of repayment. The adoption of this guidance did not have a significant impact on the Company’s financial statements.

Preferred Stock Highest-quality, high-quality or medium quality redeemable preferred stock (NAIC designations 1 to 3) shall be valued at amortized cost. All other redeemable preferred stocks (NAIC designations 4 to 6) shall be reported at the lower of amortized cost or fair value. Perpetual preferred stock shall be valued at fair value, not to exceed any currently effective call price. Fair value is determined using an external pricing service or management’s pricing model.

Common Stock of the Company’s insurance affiliates are carried at their underlying audited statutory surplus on the Statements of Admitted Assets, Liabilities, and Surplus.

Unaffiliated common stock is carried at fair value. The investment in capital stock of the Federal Home Loan Bank of Pittsburgh (“FHLB-PGH”) is carried at par, which approximates fair value.

Dividends are recognized in net investment income on the ex-dividend date. Other changes in carrying value are recognized as changes in unrealized gains or losses in surplus.

Real Estate is carried at depreciated cost. Depreciated cost is adjusted for impairments whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable, with the impairment being included in realized capital losses. Depreciation is calculated using the straight-line method over the estimated useful life of the real estate holding, not to exceed 40 years. Depreciation expense is included in net investment income.

Policy Loans are carried at the aggregate balance of unpaid principal and capitalized interest.

Cash, Cash Equivalents and Short-Term Investments Cash equivalents include investments purchased with maturities of three months or less and money market mutual funds. Short-term investments, which are carried at amortized cost and approximate fair value, consist of investments purchased with maturities greater than three months, and less than or equal to 12 months.

Alternative Assets consist primarily of limited partnerships. The Company accounts for the value of its investments at their underlying GAAP equity. Dividends and income distributions from limited partnerships are recorded as investment income. Undistributed earnings are included in the unrealized gains and losses balance and are reflected in surplus, net of deferred taxes. Distributions that are recorded as a return of capital reduce the carrying value of the limited partnership investment. Due to the timing of the valuation data received from the partnership, these investments are reported in accordance with the most recent valuations received, which are primarily on a one quarter lag.


2025 Statutory Financial Statements			Page 7

($ in Thousands)

specific derivatives depends on whether the financial instrument is designated and qualifies as a highly effective hedge. Derivatives used in hedging transactions that meet the criteria of a highly effective hedge are reported and valued in a manner that is consistent with the instrument being hedged. These derivatives are carried at amortized cost with no resulting changes in fair value. Derivatives used in risk management transactions that do not meet the criteria of an effective hedge are accounted for at fair value, with changes in fair value recorded in unrealized capital gains/(losses). Derivatives with a positive fair value or carrying value are reported as admitted assets. Derivatives with a negative fair value or carrying value are reported as liabilities. Realized gains and losses that are recognized upon termination or maturity of the derivatives used in economic hedges of interest rate and currency risk of the fixed income portfolio, regardless of accounting treatment, are transferred, net of taxes, to the IMR. All other realized gains and losses are recognized in net income upon maturity or termination of the derivative contracts.

The Company entered into certain interest rate swaps that qualify for hedge accounting. These swaps are used to hedge the impact of changing interest rates on the value of specific municipal bonds.

The Company may enter into interest rate swaps, total return swaps, inflation swaps, financial futures and equity options to hedge risks associated with the offering of equity market-based guarantees in the Company’s annuity and indexed universal life insurance product portfolio that do not meet the criteria of an effective hedge.

The Company may enter into interest rate caps, credit default swaps, and interest rate swaps, that are carried at fair value. The Company may use interest rate caps and payer swaps, a type of interest rate swap, to manage risk associated with rising interest rates. Credit default swaps protect the Company from a decline in credit quality of a specified security. Receiver swaps, a type of interest rate swap, protect the Company from credit risk in the fixed income portfolio. These do not meet the criteria of an effective hedge.

The Company does not engage in derivative financial instrument transactions for speculative purposes.

Other Invested Assets The Company invests in LIHTC investments, which generate tax credits for investing in affordable housing projects. Investments in LIHTC are included in other invested assets and are accounted for under the proportional amortized cost method. The delayed equity contributions for these investments are unconditional and legally binding and therefore, have been recognized as a liability. LIHTC investments are reviewed for OTTI, which is accounted for as a realized loss.

The Company invests in tax equity credit investments, which generate tax credits for investing in renewable energy projects. Investments in tax equity credit investments are included in other invested assets and are accounted for under the proportional amortized cost method.

Other invested assets also include an investment in an unaffiliated mortgage fund, notes receivable carried at book value from PMAM and 1847SV, receivables for unsettled investment transactions and debt securities that do not meet the definition of a bond valued at the lower of cost or fair value.

OTTI EVALUATION Bonds, mortgage-backed and asset-backed securities The Company considers an impairment to be OTTI if: (a) the Company’s intent is to sell, (b) the Company will more likely than not be required to sell, (c) the Company does not have the intent and ability to hold the security for a period of time sufficient to recover the amortized cost basis or (d) the Company does not expect to recover the entire amortized cost basis. The Company conducts a periodic management review of all bonds including those in default, not-in-good standing or otherwise designated by management. The Company also considers other qualitative and quantitative factors in determining the existence of OTTI including, but not limited to, unrealized loss trend analysis and significant short-term changes in value, default rates, delinquency rates, percentage of nonperforming loans, prepayments and severities. If the impairment is other-than-temporary, the non-interest loss portion of the impairment is recorded through realized losses and the interest related portion of the loss is disclosed in the notes to the financial statements.


Page 8		The Penn Mutual Life Insurance Company

($ in Thousands)

The non-interest portion is determined based on the Company’s “best estimate” of future cash flows discounted to a present value using the appropriate yield. The difference between the present value of the best estimate of cash flows and the amortized cost is the non-interest loss. The remaining difference between the amortized cost and the fair value is the interest loss.

Equity Securities OTTI — Equity securities with market value to book value ratio below 80% are further evaluated; while the Company will impair any lot of equity securities in an unrealized loss position for more than 12 consecutive months by more than 10% without further evaluation. Any such impairments are accounted for as a realized loss.

Alternative Assets OTTI — The Company’s evaluation for OTTI takes into consideration the remaining life of a partnership and the performance of the underlying assets when evaluating the facts and circumstances surrounding the recovery of the cost for a partnership. Any such impairments are accounted for as a realized loss.

LIHTC OTTI — For LIHTC investments, OTTI is determined by comparing the book value of the investment with the present value of future tax benefits. The investment is written down if the book value is higher than the present value and the impairment is accounted for as a realized loss.

INVESTMENT INCOME DUE AND ACCRUED Investment income due and accrued consists primarily of interest and dividends. Interest is recognized on an accrual basis and dividends are recorded as earned on the ex-dividend date. Due and accrued income is not recorded on: (a) bonds in default; (b) bonds delinquent more than 90 days or where collection of interest is improbable; and (c) policy loan interest due and accrued in excess of the cash surrender value of the underlying contract.

PREMIUMS DUE AND DEFERRED Deferred premium is the portion of premium not earned at the reporting date, net of loading. Loading is an amount obtained by subtracting the net premium from the gross premium and generally includes allowances for acquisition costs and other expenses. Deferred premium adjusts for the overstatement created in the calculation of reserves as the reserve computation assumes the entire year’s net premium is collected annually at the beginning of the policy year and does not take into account installment or modal payments.

Uncollected premium is gross premium that is due and unpaid as of the reporting date, net of loading and nonadmitted receivables that are greater than 90 days in age. Net premium is the amount used in the calculation of reserves. The change in loading is included as an expense and is not shown as a reduction to premium income. The deferred and uncollected amounts and loading were as follows at December 31:


	2025											2024

	New			Renewal			Group		Total			New			Renewal			Group		Total
Uncollected premium	$	192		$	47,017			NA				$	141		$	49,174			NA
Uncollected loading		(189	)		(16,657	)		NA					(139	)		(14,103	)		NA

Net uncollected	$	3		$	30,360		$	65	$	30,428		$	2		$	35,071		$	78	$	35,151

Deferred premium	$	13,048		$	161,259			NA				$	13,296		$	157,267			NA
Deferred loading		(12,644	)		(18,878	)		NA					(12,901	)		(20,466	)		NA

Net deferred	$	404		$	142,381		$	2	$	142,787		$	395		$	136,801		$	2	$	137,198

Subtotal — net deferred and uncollected										173,215											172,349
Nonadmitted										(4,625	)										(4,680	)

Premiums due and deferred , net									$	168,590										$	167,669


2025 Statutory Financial Statements			Page 9

($ in Thousands)

allocation agreements. The provision for federal income taxes is computed in accordance with the section of the Internal Revenue Code applicable to life insurance companies and is based on income that is currently taxable.

Uncertain tax positions (“UTPs”) are established when the merits of a tax position are evaluated against certain measurement and recognition tests. UTP changes are reflected as a component of income taxes. The Company currently has no UTPs.

Deferred income tax assets and liabilities are established to reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. These deferred tax assets or liabilities are measured by using the enacted tax rates expected to apply to taxable income in the period in which the deferred tax liabilities or assets are expected to be settled or realized. Changes in the deferred tax balances are reported as adjustments to surplus. Deferred tax assets, after the consideration of any necessary valuation allowance, in excess of statutory limits are treated as nonadmitted assets and charged to surplus.

CORPORATE OWNED LIFE INSURANCE The Company purchases life insurance policies on certain officers and employees on which the Company is designated as the beneficiary. The Company recognizes the cash surrender value of the policies as an asset on the Statements of Admitted Assets, Liabilities and Surplus. Changes in the cash surrender value of the policies are recorded as an adjustment to the premiums paid for the insurance coverage, which is recognized as part of interest credited to policyholders within Benefits paid to policyholders and beneficiaries on the Statements of Operations.

Included in the total corporate owned life insurance owned by the Company are a block of policies issued by PIA. As of December 31, 2025 and 2024, the cash surrender values of those policies held by the Company were $19,973 and $20,404, respectively.

The cash surrender values for investments in the corporate owned life insurance are as follows at December 31:


	2025		2024

Equity funds	$	223,396	$	119,774
Money market funds		77,849		157,231
Other		22,013		22,421

Total	$	323,258	$	299,426

REINSURANCE In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance enterprises or reinsurers under excess coverage and coinsurance contracts. The Company has set its retention limit for acceptance of risk on life insurance policies at various levels up to $10,000 for single life and $20,000 for joint lives effective March 1, 2024. Prior to March 1, 2024, these limits were $7,500 for single life and $10,000 for joint lives.

In addition to excess coverage and coinsurance contracts, the Company also utilizes other forms of reinsurance such as coinsurance funds withheld and coinsurance/modified coinsurance. As of December 31, 2025 and 2024, the Company had $2,550,398 and $1,643,193 of funds held under coinsurance liabilities, respectively.

Reinsurance does not relieve the Company of its primary liability and, as such, failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the risk transfer of its reinsurance contracts as well as the financial strength of potential reinsurers. The Company regularly monitors the financial condition and ratings of its existing reinsurers to ensure that amounts due from reinsurers are collectible.

Insurance liabilities are reported net of the effects of reinsurance. Estimated reinsurance recoverables are recognized in a manner consistent with the liabilities related to the underlying reinsured contracts.

OTHER ASSETS Computer equipment and packaged software is reported at a cost of $89,692 and $83,072, less accumulated depreciation of $83,155 and $81,117 at December 31, 2025 and 2024, respectively. Computer


Page 10		The Penn Mutual Life Insurance Company

($ in Thousands)

equipment and packaged software is depreciated using the straight-line method over the lesser of its useful life or three years. Depreciation expense on computer equipment and packaged software charged to operations in 2025 and 2024 was $2,190 and $2,063, respectively. Furniture is depreciated on a straight-line basis over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the remaining life of the lease. Building and property improvements are depreciated in accordance with the expected useful life.

Other assets also includes receivables related to federal income taxes, centrally cleared derivative transactions, receivables for collateral remitted to counterparties and amounts due from affiliates under the terms of service agreements.

As of December 31, 2025 and 2024, the Company had $217,105 and $288,464 of negative (disallowed) IMR in aggregate and in the general account, respectively.

As of December 31, 2025 and 2024, the Company had $217,105 and $288,464 of negative (disallowed) IMR admitted in the general account, respectively.

As of December 31, 2025 and 2024, the Company’s calculated adjusted capital and surplus was $3,632,970 and $3,387,984, respectively.

As of December 31, 2025 and 2024, the percentage of adjusted general capital and surplus for which the admitted disallowed IMR represents was 6% and 9%, respectively.

The following represents allocated gains/(losses) deferred to the IMR from derivatives as of :


	December 31, 2025			December 31, 2024

Realized capital gains	$	—		$	—
Realized capital (losses)		(309,593	)		(293,830	)

Total allocated (losses) to IMR from derivatives	$	(309,593	)	$	(293,830	)

SEPARATE ACCOUNT ASSETS AND LIABILITIES The Company has separate account assets and liabilities representing segregated funds administered and invested by the Company primarily for the benefit of variable life insurance policyholders and variable annuity contractholders. The assets of each account are legally segregated and are generally not subject to claims that arise out of any other business of the Company. The separate accounts have varying investment objectives.

Separate account assets are stated at the fair value of the underlying assets, which are shares of mutual funds. The value of the assets in the separate accounts reflects the actual investment performance of the respective accounts and is not guaranteed by the Company. The liability is reported at contract value and represents the policyholders’ interest in the account and includes accumulated net investment income and realized and unrealized capital gains/(losses) on the assets. The investment income and realized capital gains/(losses) from separate account assets accrue to the policyholders and are not included in the Statements of Operations. Mortality, policy administration, surrender charges assessed and asset management fees charged against the accounts are included in Other revenue in the accompanying Statements of Operations.

The Company has variable annuity contracts in the separate accounts in which the Company provides various forms of guarantees to benefit the related contract holders called Guaranteed Minimum Death Benefits (“GMDB”), Guaranteed Minimum Accumulated Benefits (“GMAB”), GMAB/Guaranteed Minimum Withdrawal Benefits (“GMWB”) and GMWB with inflation protection. In accordance with guarantees provided, if the investment proceeds in the separate accounts are insufficient to cover the guarantees for the product, the policyholder proceeds will be remitted by the general account.


2025 Statutory Financial Statements			Page 11

($ in Thousands)

prescribed by SAP, benefit plan assets, certain investments in partnerships for which financial audits are not performed, certain other receivables, advances and prepayments and uncollected premiums greater than 90 days from the due date. Such amounts are excluded from the Statements of Admitted Assets, Liabilities and Surplus.

RESERVES AND FUNDS FOR THE PAYMENT OF INSURANCE AND ANNUITY BENEFITS Policyholders’ reserves provide amounts adequate to discharge estimated future obligations in excess of estimated future premium on policies in-force. Any adjustments that are made to the reserve balances are reflected in the Statements of Operations in the year in which such adjustments are made, with the exception of changes in valuation bases that are accounted for as charges or credits to surplus.

Reserves and funds for the payment of future life and annuity benefits are developed using actuarial methods based on statutory mortality and interest requirements. Reserves for life insurance contracts are developed using accepted actuarial methods computed principally on the net level, modified preliminary term or CRVM methods using the 1941, 1958, 1980, 2001, and 2017 Commissioners’ Standard Ordinary (“CSO”) Mortality and American Experience Tables and assumed interest rates ranging from 2.25% to 4.50%. Reserves for substandard policies are computed using multiples of the respective underlying mortality tables. The Company has universal life contracts with secondary guarantee features. The Company establishes reserves according to Actuarial Guideline XXXVIII, unless otherwise noted.

Reserves for Term and Single Life UL with secondary guarantee features are based on the methodology specified by the Life Principle-Based Reserve approach (“VM-20”), starting with 2017 policy issue years. Reserves for Single and Joint Life IUL are based on the same VM-20 methodology starting with 2018 policy issue years. Reserves for all other life insurance products are based on the same VM-20 methodology starting with 2020 policy issue years. VM-20 specifies the final reserve as the greater of the Net Premium Reserve (“NPR”), Deterministic Reserve (“DR”) and Stochastic Reserve (“SR”). The NPR is a formulaic reserve with prescribed assumptions, including the 2017 CSO Mortality Tables. The DR is based on a single path, deterministic projection with prudent estimate assumptions, including margins for uncertainty. The SR is based on the Conditional Tail Expectation 70 (“CTE70”) of 1,000 stochastically generated interest rate return scenarios with prudent estimate assumptions, including margins for uncertainty.

Reserves for fixed individual annuity contracts are developed using accepted actuarial methods computed principally under the Commissioners’ Annuity Reserve Valuation Method using applicable interest rates and mortality tables, primarily on the 1949, 1971, 1983, 2000, and 2012 Individual Annuity Mortality Tables and rates ranging from 1.00% to 13.25%.

The Company waives deduction of deferred fractional premium at death and returns any portion of the final premium beyond the date of death. Reserves are computed using continuous functions to reflect these practices. Surrender values are not promised in excess of the legally computed reserves.

The Company also has deferred variable annuity contracts containing GMDB, GMAB and GMWB features. The Company establishes reserves according to the methodology specified by Principle-Based Reserves for Variable Annuities (“VM-21”).

Reserves for group annuity contracts are developed using accepted actuarial methods computed principally on the 1971 and 1983 Group Annuity Mortality Tables and 1994 Group Annuity Reserving Tables with assumed interest rates ranging from 5.00% to 11.25%. Approximately 1% of reserves use an assumed interest rate greater than 10%.

The Company had $2,071,977 and $2,042,420 as of December 31, 2025 and 2024, respectively, of insurance in force for which the gross premiums are less than the net premiums according to the standards of valuation set by the Commonwealth of Pennsylvania.

The tabular interest has been determined from the basic data for the calculation of policy reserves. The tabular less actual reserves released have been determined by formula.


Page 12		The Penn Mutual Life Insurance Company

($ in Thousands)

certain structured settlement annuities are based on account value or accepted actuarial methods using applicable interest rates. Fair value is estimated by discounting future cash flows using current market rate.

The tabular interest for funds not involving life contingencies is determined as the change in reserves less funds added during the year less other increases plus funds withdrawn during the year.

POLICYHOLDERS’ DIVIDENDS The liability for policyholders’ dividends includes the estimated amount of annual dividends and settlement dividends to be paid to policyholders in the following year. Policyholders’ dividends incurred are recorded in the Statements of Operations. Dividends expected to be paid to policyholders in the following year are approved annually by the Company’s Board of Trustees. The allocation of these dividends to policyholders reflects the relative contribution of each group of participating policies to surplus and considers, among other factors, investment returns, mortality and morbidity experience, expenses and income tax charges.

POLICY CLAIMS IN PROCESS Policy claims in process include provisions for payments to be made on reported claims and claims incurred but not reported.

INTEREST MAINTENANCE RESERVE The IMR captures the realized capital gains/(losses) that result from changes in the overall level of interest rates and amortizes them into income over the calendar years to expected maturity. As of December 31, 2025 and 2024, the Company maintained a negative IMR of $217,105 and $288,464, respectively, an admitted asset in accordance with the NAIC’s INT 23-01T guidance, which provides limited-time exception guidance to SSAP No. 7.

ASSET VALUATION RESERVE The AVR is a contingency reserve to stabilize surplus against fluctuations in the statement value of common stocks, real estate investments, partnerships, LIHTC investments, and LLCs as well as non-interest related declines in the value of bonds and certain derivatives. The AVR is reported in the Statements of Admitted Assets, Liabilities and Surplus and the change in AVR is reported in the Statements of Changes in Surplus.

DRAFTS OUTSTANDING Drafts outstanding that have not been presented for payment are recorded as a liability.

OTHER LIABILITIES Other liabilities primarily include accruals for general and operating expenses, life insurance premiums received in advance of the due date, net transfers due from the separate accounts and liabilities related to postretirement benefit plans in an underfunded position.

BENEFIT PLANS The Company recognizes a liability for the funded status of defined benefit pension (2024) and postretirement (2025 and 2024) plans where the projected benefit obligation exceeds plan assets (underfunded). With the termination of the funded qualified non-contributory defined benefit pension plan in 2024, the excess plan assets are now funding the Company’s defined contribution plan and are recognized as nonadmitted assets.

CONTINGENCIES Amounts related to contingencies are accrued if it is probable that a liability has been incurred and an amount is reasonably estimable. Regarding litigation, management evaluates whether there are incremental legal or other costs directly associated with the ultimate resolution of the matter that are reasonably estimable and, if so, includes these costs in the accrual.

RISK-BASED CAPITAL Life insurance companies are subject to certain risk-based capital (“RBC”) requirements as specified by the NAIC. Under those requirements, minimum amounts of statutory surplus are required to be maintained based on various risk factors related to it. At December 31, 2025, the Company’s surplus exceeds these minimum levels.

SURPLUS NOTES On April 29, 2021, the Company issued a Surplus Note (“2021 Note”) at par with a principal balance of $500,000. The 2021 Note bears interest at 3.80% and has a maturity date of April 29, 2061. The 2021 Note was issued pursuant to Rule 144A under the Securities Act of 1933, as amended and are administered by a U.S. bank as registrar/paying agent. Interest on the 2021 Note is scheduled to be paid semiannually on June 15 and December 15 of each year. Interest paid on the 2021 Note was $19,000 and $19,000 for the years ended December 31, 2025 and 2024, respectively. Total interest paid since the issuance of the 2021 Note is $87,928.


2025 Statutory Financial Statements			Page 13

($ in Thousands)

was issued pursuant to Rule 144A under the Securities Act of 1933, as amended and are administered by a U.S. bank as registrar/paying agent. Interest on the 2010 Note is scheduled to be paid semiannually on March 31 and September 30 of each year. At December 31, 2025 and 2024, the amortized cost basis of the 2010 Note was $193,780 and $193,542, respectively. Interest paid on the 2010 Note was $15,250 and $15,250 for the years ended December 31, 2025 and 2024, respectively. Total interest paid since the issuance of the 2010 Note is $247,813.

On June 23, 2004, the Company issued a Surplus Note (“2004 Note”) with a principal balance of $200,000, at a discount of $3,260. The 2004 Note bears interest at 6.65%, and has a maturity date of June 15, 2034. The 2004 Note was issued pursuant to Rule 144A under the Securities Act of 1933, as amended and are administered by a U.S. bank as registrar/paying agent. Interest on the 2004 Note is scheduled to be paid semiannually on April 1 and October 1 of each year. At December 31, 2025 and 2024, the amortized cost basis of the 2004 Note was $198,405 and $198,265, respectively. Interest paid on the 2004 Note was $13,300 and $13,300 for the years ended December 31, 2025 and 2024, respectively. Total interest paid since the issuance of the 2004 Note is $296,220.

The recognition of interest expense on surplus notes requires prior approval for payment from the Pennsylvania Insurance Department.

PREMIUM AND RELATED EXPENSE RECOGNITION Life insurance premium revenue is generally recognized as revenue on the gross basis when due from the policyholders under the terms of the insurance contract. Annuity premium on policies with life contingencies is recognized as revenue when received. Both premium and annuity considerations are recorded net of reinsurance premiums. Commissions and other costs related to issuance of new policies, and policy maintenance and settlement costs are charged to current operations when incurred. Surrender fee charges on certain life and annuity products are recorded as a reduction of benefits. Benefit payments are reported net of the amounts received from reinsurers.

The Company accounts for deposit-type contracts (those that do not subject the Company to mortality or morbidity risk) under the deposit method. Amounts received from and payments to policyholders related to these contracts are recorded directly against the related policy reserves. Interest credited to policyholder accounts is reflected in Benefits paid to policyholders and beneficiaries. Fees charged to policyholder accounts are reflected in Other revenue.

RESERVE ADJUSTMENTS ON REINSURANCE CEDED Reserve adjustments on reinsurance ceded represent the difference between the reserve increases received from reinsurers and the investment income earned on the assets backing the reserves under reinsurance agreements structured as coinsurance/modified coinsurance reinsurance (“co/modco”).

OTHER REVENUE Other revenue includes commission and expense allowances recognized by the Company pursuant to reinsurance agreements, deferred reinsurance gains as well as miscellaneous income relating to coinsurance/modified coinsurance/funds withheld reinsurance agreements entered into with third parties. Other revenue also includes fees charged to policyholders.

OPERATING EXPENSES Operating expenses, including costs of acquiring new insurance policies, are generally charged to expense as incurred.

OTHER EXPENSES Other expenses primarily includes amounts paid to reinsurers relating to interest earned on the funds withheld assets held by the Company under reinsurance agreements structured as funds withheld and co/modco reinsurance.

REALIZED AND UNREALIZED CAPITAL GAINS AND LOSSES Realized capital gains and losses, net of taxes, exclude gains and losses transferred to the IMR. Realized capital gains and losses are recognized in net income and are determined using the specific identification method.

All after-tax realized capital gains and losses that result from changes in the overall level of interest rates for all types of fixed-income investments and interest-related derivative activities for derivatives backing assets are transferred to the IMR and amortized into net investment income using the grouped method over the remaining life of the investment sold or, in the case of derivative financial instruments, over the remaining life of the underlying asset.


Page 14		The Penn Mutual Life Insurance Company

($ in Thousands)

Unrealized capital gains and losses, net of deferred federal income taxes, are recorded as a change in surplus.

FEDERAL HOME LOAN BANK BORROWINGS The Company is a member of the FHLB-PGH, which provides access to collateralized advances, collateralized funding agreements and other FHLB-PGH products. Collateralized advances from the FHLB-PGH are classified as borrowed money, and Other liabilities on the Statements of Admitted Assets, Liabilities and Surplus. Collateralized funding agreements issued to the FHLB-PGH are classified as liabilities for deposit-type funds and are recorded within Reserves and funds for payment of insurance and annuity benefits. FHLB-PGH is a first-priority secured creditor.

The Company’s membership in FHLB-PGH requires the ownership of member stock, and borrowings from FHLB-PGH require the purchase of FHLB-PGH activity based stock in an amount equal to 4% of the outstanding borrowings. All FHLB-PGH stock purchased by the Company is classified as restricted general account investments within Common stock — unaffiliated. The Company’s borrowing capacity is determined by the lesser of the assets available to be pledged as collateral to FHLB-PGH or 10% of the Company’s prior period admitted general account assets. The fair value of the qualifying assets pledged as collateral by the Company must be maintained at certain specified levels of the borrowed amount, which can vary, depending on the nature of the assets pledged. The Company’s agreement allows for the substitution of assets and the advances are pre-payable. Current borrowings are subject to prepayment penalties.

Borrowings from the FHLB-PGH are classified as funding agreements. As of December 31, 2025, there were $300,000 in outstanding borrowings and the maximum borrowed during the year was $1,250,000. As of December 31, 2024, there were $300,000 in outstanding borrowings and the maximum borrowed during the year was $1,450,000.

NEW ACCOUNTING STANDARDS

In August 2023, the NAIC adopted INT 23-01T, Disallowed IMR (“INT 23-01T”). INT 23-01T provides optional, limited-term guidance for the assessment of disallowed IMR for up to 10% of adjusted general account capital and surplus. An insurer’s capital and surplus must first be adjusted to exclude certain “soft assets” including net positive goodwill, electronic data processing equipment and operating system software, net deferred tax assets and admitted disallowed IMR. An insurer will only be able to admit the negative IMR if the insurer’s risk-based capital is over 300% authorized control level after adjusting to remove the assets described above.

As adopted, negative IMR may be admitted first in the insurer’s general account and then, if all disallowed IMR in the general account is admitted and the percentage limit is not reached, to the separate account proportionately between insulated and noninsulated accounts. If the insurer can demonstrate historical practice in which acquired gains from derivatives were also revered to IMR (as liabilities) and amortized, there is no exclusion for derivative losses. To the extent the Company’s IMR balance is a net negative, the effects of INT 23-01T will be reflected in the Company’s financial position, results of operations and financial statement disclosures. The Company has adopted this guidance, and the adoption resulted in an admitted disallowed IMR of $217,105 and $288,464 as of December 31, 2025 and 2024, respectively.

The Company has adopted SSAP No. 94, State and Federal Tax Credits. This guidance, effective as of January 1, 2025, expanded the scope of SSAP No. 94R to include all state and federal tax credits and provides new guidance on the accounting, recognition, and reporting for state and federal tax credits. The adoption of this guidance did not have a significant impact on the Company’s financial statements.

The Company has adopted the updated SSAP No. 26R, Bonds, which introduces a principles-based definition for what constitutes a bond for statutory accounting purposes. Under the revised guidance, a bond is defined as any security that: (1) represents a creditor relationship, and (2) has a fixed schedule for one or more future payments. These securities are further categorized as either an issuer credit obligation or an asset-backed security. The adoption of this guidance did not have a significant impact on the Company’s financial statements.

Note 3. INVESTMENTS

The Company maintains a diversified investment portfolio. Investment policies limit concentration in any asset class (except for U.S. Treasury and U.S. Government guaranteed securities), geographic region, industry group, economic characteristic, investment quality or individual investment.


2025 Statutory Financial Statements			Page 15

($ in Thousands)

BONDS AND PREFERRED STOCK The following summarizes the admitted value and estimated fair value of the Company’s investment in bonds and preferred stock as of December 31:


			Gross Unrealized Capital
2025	Admitted Value		Gains		Losses		Estimated Fair Value

Issuer Credit Obligation (ICO):
U.S. Governments	$	81,255	$	83	$	1,259	$	80,079
Other U.S. Governments		16,580		202		41		16,741
Foreign Sovereign		74,082		2,424		1,812		74,694
Municipal — General		207,381		1,834		13,332		195,883
Municipal — Special Revenue		972,227		9,308		68,930		912,605
Project Finance		76,315		1,019		5,593		71,741
Industrial and Miscellaneous		9,171,167		138,544		482,472		8,827,239
Single Entity-Backed		175,616		2,177		9,042		168,751
SVO-Identified Bond ETFs		85,309		—		—		85,309
BDCs, Closed-End Funds & REITs		176,142		1,671		9,060		168,753
Bank Loans		47,038		2		556		46,484
Other Credit Obligations		66,520		672		2,591		64,601

Total ICO		11,149,632		157,936		594,688		10,712,880
Asset-backed Securities (ABS):
Residential Mortgage-Backed Securities		3,139,341		55,258		27,379		3,167,220
Commercial Mortgage-Backed Securities		2,647,109		38,679		31,850		2,653,938
CLOs, CBOs, and CDOs		989,945		1,847		3,474		988,318
Other Financial Asset-Backed Securities		1,139,242		21,268		30,949		1,129,561
Lease-Backed Securities		30,589		893		1,860.00		29,622

Total ABS		7,946,226		117,945		95,512		7,968,659
Preferred Stock		52,416		4,907		6,775		50,548

Total Bonds and Preferred Stocks	$	19,148,274	$	280,788	$	696,975	$	18,732,087


			Gross Unrealized Capital
2024	Admitted Value		Gains		Losses		Estimated Fair Value

US Governments	$	1,231,301	$	5,404	$	25,811	$	1,210,894
Other Governments		30,429		—		1,771		28,658
States, Territories and Possessions		33,142		343		829		32,656
Political Subdivisions		200,805		587		19,899		181,493
Special Revenue		916,313		4,284		81,791		838,806
Industrial and Miscellaneous		7,960,107		72,091		592,733		7,439,465
Residential Mortgage-backed Securities		2,061,811		7,649		58,724		2,010,736
Commercial Mortgage-backed Securities		2,299,701		15,430		47,986		2,267,145
Asset-backed Securities		2,898,484		12,644		59,665		2,851,463
Hybrid Securities		484,675		7,327		10,119		481,883

Total Bonds		18,137,108		125,776		899,328		17,363,556
Preferred Stock		57,988		4,311		6,202		56,097

Total Bonds and Preferred Stock	$	18,195,096	$	130,087	$	905,530	$	17,419,653


Page 16		The Penn Mutual Life Insurance Company

($ in Thousands)

Included in the December 31, 2025 and 2024 amounts above in admitted value and estimated fair value for Residential Mortgage-Back Securities are $226 and $229, respectively, of subprime mortgages.

The following table summarizes the admitted value and estimated fair value of debt securities as of December 31, 2025 by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties. Securities that are not due on a single maturity are included as of the final maturity.


	Admitted Value		Estimated Fair Value

Due in one year or less	$	178,817	$	179,566
Due after one year through five years		985,947		1,008,230
Due after five years through ten years		1,654,482		1,688,649
Due after ten years		8,330,386		7,836,435
Asset-backed Securities (ABS):
Residential Mortgage-Backed Securities⁽¹⁾		3,139,341		3,167,220
Commercial Mortgage-Backed Securities⁽¹⁾		2,647,109		2,653,938
CLOs, CBOs, and CDOs⁽¹⁾		989,945		988,318
Other Financial Asset-Backed Securities⁽¹⁾		1,139,242		1,129,561
Lease-Backed Securities⁽¹⁾		30,589		29,622

Total Bonds		19,095,858		18,681,539
Preferred Stock		52,416		50,548

Total Bonds and Preferred Stock	$	19,148,274	$	18,732,087

(1) Includes U.S. Agency structured securities

Asset-backed securities consist of commercial and residential mortgage pass-through holdings and securities backed by various forms of collateral, with the largest being collateralized loan obligations. These securities follow a structured principal repayment schedule and are rated investment grade, other than $1,070,362 primarily in asset-backed securities that do not follow a structured principal repayment schedule. The mortgage and other asset-backed securities portfolios are presented separately in the maturity schedule due to the potential for prepayment. The weighted average life of this portfolio is 11.9 years.

At December 31, 2025, the largest industry concentration of the Company’s portfolio was investments in the Electric-Integrated sector of $829,145, representing 4% of the total debt securities portfolio.

UNREALIZED LOSSES ON INVESTMENTS Management has determined that the unrealized losses on the Company’s investments in equity and fixed maturity securities at December 31, 2025 are temporary in nature.


2025 Statutory Financial Statements			Page 17

($ in Thousands)

The following tables are an analysis of the fair values and gross unrealized losses aggregated by bond category and length of time that the securities were in a continuous unrealized loss position as of December 31:


	Less than 12 months				Greater than 12 months				Total
2025	Fair Value		Gross Unrealized Capital Loss		Fair Value		Gross Unrealized Capital Loss		Fair Value		Gross Unrealized Capital Loss		Number of Securities

Issuer Credit Obligation (ICO):
U.S. Governments	$	66,858	$	1,059	$	1,668	$	200	$	68,526	$	1,259		5
Other U.S. Governments		4,959		41		—		—		4,959		41		1
Foreign Sovereign		7,477		286		9,712		1,526		17,189		1,812		6
Municipal — General		16,085		107		80,228		13,225		96,313		13,332		31
Municipal — Special Revenue		172,903		1,290		334,529		67,640		507,432		68,930		151
Project Finance		11,443		78		27,611		5,515		39,054		5,593		17
Industrial and Miscellaneous		1,622,135		35,851		3,184,242		446,621		4,806,377		482,472		1,420
Single Entity-Backed		14,732		795		98,426		8,247		113,158		9,042		44
SVO-Identified Bond ETFs		85,309		—		—		—		85,309		—		2
BDCs, Closed-End Funds & REITs		2,991		1		72,634		9,059		75,625		9,060		24
Bank Loans		7,412		556		—		—		7,412		556		5
Other Credit Obligations		24,757		1,669		14,172		922		38,929		2,591		11

Total ICO		2,037,061		41,733		3,823,222		552,955		5,860,283		594,688		1,717
Asset-backed Securities (ABS):
Residential Mortgage-Backed Securities		544,695		2,022		491,650		25,357		1,036,345		27,379		201
Commercial Mortgage-Backed Securities		350,590		4,993		573,865		26,857		924,455		31,850		265
CLOs, CBOs, and CDOs		270,116		1,168		112,226		2,306		382,342		3,474		55
Other Financial Asset-Backed Securities		153,754		3,088		298,633		27,861		452,387		30,949		128
Lease-Backed Securities		—		—		18,603		1,860		18,603		1,860		13

Total ABS		1,319,155		11,271		1,494,977		84,241		2,814,132		95,512		662
Preferred Stock		5,335		180		33,670		6,595		39,005		6,775		15

Total Bonds and Preferred Stock	$	3,361,551	$	53,184	$	5,351,869	$	643,791	$	8,713,420	$	696,975		2,394


Page 18		The Penn Mutual Life Insurance Company

($ in Thousands)


	interest portion				Greater than 12 months				Total
2024	Fair Value		Gross Unrealized Capital Loss		Fair Value		Gross Unrealized Capital Loss		Fair Value		Gross Unrealized Capital Loss		Number of Securities

US Governments	$	703,975	$	21,134	$	20,846	$	4,677	$	724,821	$	25,811		162
Other Governments		23,210		1,219		5,448		552		28,658		1,771		7
States, Territories and Possessions		16,405		717		1,346		112		17,751		829		9
Political Subdivisions		72,551		3,514		62,859		16,385		135,410		19,899		46
Special Revenue		377,167		13,131		283,457		68,660		660,624		81,791		232
Industrial and Miscellaneous		3,620,331		160,146		2,003,843		432,587		5,624,174		592,733		2,380
Residential Mortgage-backed Securities		1,271,808		29,116		325,753		29,608		1,597,561		58,724		341
Commercial Mortgage-backed Securities		964,831		19,299		482,010		28,687		1,446,841		47,986		672
Asset-backed Securities		672,230		11,363		613,664		48,302		1,285,894		59,665		604
Hybrid Securities		155,287		3,693		101,705		6,426		256,992		10,119		140

Total Bonds		7,877,795		263,332		3,900,931		635,996		11,778,726		899,328		4,593
Preferred Stock		25,623		3,011		16,456		3,191		42,079		6,202		20

Total Bonds and Preferred Stock	$	7,903,418	$	266,343	$	3,917,387	$	639,187	$	11,820,805	$	905,530		4,613

interest portion

Included in the December 31, 2025 and 2024 amounts above is the interest portion of impairments which were taken during the year, on securities of $216 and $166, respectively.

COMMON STOCK — UNAFFILIATED The following summarizes the cost and estimated fair value of the Company’s investment in unaffiliated common stock:


			Gross Unrealized Capital
	Cost		Gains		Losses		Estimated Fair Value

December 31, 2025	$	18,731	$	243	$	138	$	18,836
December 31, 2024	$	15,677	$	—	$	183	$	15,494

The following presents the gross unrealized capital losses and fair values for unaffiliated common stock with unrealized capital losses.


	Less than 12 months				Greater than 12 Months				Total
	Fair Value		Gross Unrealized Capital Losses		Fair Value		Gross Unrealized Capital Losses		Fair Value		Gross Unrealized Capital Losses

December 31, 2025	$	1,301	$	138	$	—	$	—	$	1,301	$	138
December 31, 2024	$	408	$	183	$	—	$	—	$	408	$	183


2025 Statutory Financial Statements			Page 19

($ in Thousands)

The amount of unrealized capital losses on the Company’s investment in unaffiliated common stock is attributable to 2 individual securities. As of December 31, 2025, there were no unaffiliated common stock securities impairments.

Federal Home Loan Bank The Company’s investment in the FHLB-PGH Class B Membership Capital Stock as of December 31, 2025 and 2024 was $4,701 and $3,086, respectively. The Company also invested $12,000 and $12,000 in FHLB-PGH Activity Stock as of December 31, 2025 and 2024, respectively. The Class B Membership Capital Stock held by the Company is subject to written notices of requests for redemption followed by a five year waiting period.

The Company’s borrowing capacity with the FHLB-PGH was $2,525,187 and $2,097,075, as of December 31, 2025 and 2024 respectively.

The following represents the amount of collateral required to be pledged to the FHLB-PGH, and the maximum amount of collateral pledged as of:


	December 31, 2025		Maximum during 2025		December 31, 2024		Maximum during 2024

Carrying value	$	2,214,341	$	2,524,011	$	1,200,222	$	1,947,346
Fair value		2,233,289		2,530,293		1,185,471		1,928,758

The amount of interest expense on borrowings classified as funding agreements for the years ended December 31, 2025 and 2024 was $32,619 and $31,332, respectively.

RESTRICTED ASSETS AND SPECIAL DEPOSITS The Company maintains assets on deposit with governmental authorities or trustees as required by certain state insurance laws. The Company also receives and pledges collateral for derivative contracts and FHLB in the form of cash and securities. Capital stock was purchased as a requirement to participate in the FHLB lending program.


Balance Sheet Classification	Type	2025		2024

Bonds	Collateral — FHLB	$	2,214,341	$	1,200,222
Bonds	Reinsurance — Funds Withheld		2,398,360		1,578,725
Bonds	Reinsurance — Modified Coinsurance		6,246,726		5,725,649
Bonds	New York 109 trust agreement		4,115,113		4,123,039
Bonds	Collateral — Derivatives		73,416		219,883
Bonds	State deposit		3,305		3,318
Preferred stocks	Reinsurance — Funds Withheld		7,847		15,086
Preferred stocks	Reinsurance — Modified Coinsurance		38,198		—
Common stocks unaffiliated	FHLB Stock		16,701		—
Alternative Assets	Reinsurance — Modified Coinsurance		190,094		—
Cash, cash equivalents and short-term investments	Reinsurance — Funds Withheld		93,605		—
Cash, cash equivalents and short-term investments	State deposit		927		927

Total Restricted Assets		$	15,398,633	$	12,866,849

OTHER THAN TEMPORARY IMPAIRMENTS For the years ended December 31, 2025 and 2024, other than temporary investment losses amounted to $17,979 and $0, respectively.

REAL ESTATE Investments in real estate consist of the Company’s home office property. During 2024, based on an independent appraisal for its home office property, the Company recorded an impairment loss of $11,425. This loss


Page 20		The Penn Mutual Life Insurance Company

($ in Thousands)

was reflected in the net realized capital (losses)/gains on the Statements of Income. No impairment losses were recorded in 2025. As of December 31, 2025 and 2024, accumulated depreciation on real estate amounted to $6,235 and $6,090, respectively.

As of December 31, 2025, none of these investments exceed 10% of the Company’s admitted assets. The Company recognized realized losses of $27,216 and $8,343 for the years ended December 31, 2025 and 2024, respectively, associated with other-than-temporary impairments of certain alternative assets.

Unfunded commitments for alternative assets were $821,782 and $588,775 for the years ended December 31, 2025 and 2024, respectively.

The Company recognized $(22) and $11 realized gains/(losses) for the years ended December 31, 2025 and 2024 associated with liquidations of the Company’s interest in alternative assets.

OTHER INVESTED ASSETS The components of other invested assets as of December 31, 2025 and 2024 were as follows:


December 31,	2025		2024

LIHTC	$	93,879	$	103,074
Tax Credit Fund		9,772		—
Receivable for securities		241,249		97
Notes receivable — affiliates		65,039		279,015
Investments in affiliates		193,333		125,918
PMAM’s Private Funds/PMUBX		—		127,125
Investment in unaffiliated mortgage fund		206,435		—
Other		1,382		1,382

Total Other Invested Assets	$	811,089	$	636,611

Other invested assets include notes receivable carried at book value from PMAM and 1847SV, investments in HTK, PMAM, 1847IC, 1847FIN, and PMAM’s Private Funds/PMUBX, receivables for unsettled investment transactions as well as an investment in an unaffiliated mortgage fund.

Unfunded commitments for unaffiliated mortgage fund were $75,000 and $0 for the years ended December 31, 2025 and 2024, respectively.

Low Income Housing Tax Credits The Company has no LIHTC properties under regulatory review at December 31, 2025 and 2024. There were no write-downs due to forfeiture of eligibility and there were no impairments for 2025 or 2024.

Commitments of $37,362 and $63,759 for the years ended December 31, 2025 and 2024, respectively, have been recorded in Other liabilities related to unconditional and legally binding delayed equity contributions associated with investments in LIHTC.

The Company’s LIHTC activity for the years ended December 31, 2025 and 2024 is as follows:


December 31,	2025			2024

LIHTC Tax Credits	$	12,383		$	7,989
LIHTC Investments Balance		179,486			199,503
LIHTC Amortization		(85,607	)		(96,429	)
LIHTC Other Returns		—			—


2025 Statutory Financial Statements			Page 21

($ in Thousands)

The aggregate schedule of tax credits expected to be generated in each of the subsequent five years and thereafter is as follows:


December 31,	Transferable Tax Credits		Non-transferable Tax Credits

2026	$	—	$	14,403
2027		—		14,695
2028		—		14,128
2029		—		13,037
2030		—		13,105
Thereafter		—		51,744

Total	$	—	$	121,112

Tax Equity Credit Investment The Company has no investments under regulatory review as of December 31, 2025. There were no impairments and all commitments were recognized as of December 31, 2025.

The Company’s Tax Equity Investment activity for the years ended December 31, 2025 and 2024 is as follows:


December 31,	2025		2024

Tax Equity Investment Credits	$	69,414	$	—
Tax Equity Investment Balance		9,772		—
Tax Equity Amortization		65,210		—
Tax Equity Other Returns		—		—

There are no tax equity investment credits in subsequent years.

NET INVESTMENT INCOME AND REALIZED CAPITAL GAINS/(LOSSES) The following table summarizes the major categories of net investment income for the years ended:


December 31,	2025			2024

Income:
Bonds and preferred stock	$	1,077,096		$	852,984
Common stock — unaffiliated		3,630			1,967
Real estate		—			3,588
Policy loans		66,478			58,543
Alternative assets		97,515			110,466
Other invested assets		24,118			272,212
Tax credits		(65,210	)		—
Other		36,517			20,934
Derivatives		35,859			(16,887	)
IMR amortization		(16,770	)		(20,183	)

Total investment income		1,259,233			1,283,624

Expenses:
Surplus note interest		47,928			47,901
Depreciation of real estate		145			1,279
Other investment expenses		29,309			19,759

Total investment expenses		77,382			68,939

Net Investment Income	$	1,181,851		$	1,214,685


Page 22		The Penn Mutual Life Insurance Company

($ in Thousands)

There was no nonadmitted accrued investment income at December 31, 2025 and 2024.

Included in the table above (Bonds and preferred stock) for 2025 is $8,305 of investment income attributable to securities disposed of as a result of a callable feature, spread over 20 securities.

Proceeds from the sale of bonds, preferred stock and common stock, and related gross realized gains and losses on those sales were as follows for the years ended December 31:


			2025						2024

	Proceeds From Sales		Gross Realized Gains		Gross Realized Losses		Proceeds From Sales		Gross Realized Gains		Gross Realized Losses
Bonds	$	2,420,325	$	80,928	$	7,599	$	3,347,824	$	8,257	$	424,894
Preferred stock		—		—		—		1,050		—		54
Common stock		7,204		465		25		70,364		4,624		6,922

Realized capital gains/(losses) are reported net of federal income taxes and amounts transferred to the IMR as follows for the years ended:


December 31,	2025			2024

Realized capital gains	$	28,612		$	833,174
Less amount transferred to IMR		69,101			(405,865	)
Less Taxes:
Transferred to IMR		(14,511	)		85,232
Capital gains		16,828			209,935

Net Realized Capital (Losses)/Gains	$	(42,806	)	$	943,872

Portions of realized capital gains and losses that were determined to be interest related were transferred to the IMR.

On July 19, 2024, the Company entered into a Securities Purchase Agreement (“the Agreement”) with a non-affiliated entity for the sale of JMS. As part of the transaction, the purchasing entity assumed $615,000 in subordinated loans and the $50,000 line of credit with the Company. The sale closed on November 29, 2024 with a pre-tax realized capital gain of $1,596,534, which is recognized in Net realized capital gains on the Statements of Operations. Pre-tax earnings for JMS at the time of sale were $157,736. In 2025, pursuant to the terms of the Agreement, the company recognized an additional $29,259 in net realized capital gains on the Statements of Operations.

There were no NAIC designation 3 or below, or unrated securities sold during the year ended December 31, 2025 and reacquired within 30 days of the sale date.

Note 4. SEPARATE ACCOUNTS

Separate Accounts Registered with the SEC The Company maintains separate accounts that are registered with the Securities and Exchange Commission (“SEC”) for its individual variable life and annuity products with assets of $8,612,384 and $8,771,606 at December 31, 2025 and 2024, respectively. The assets for these separate accounts, which are carried at fair value, represent investments in shares of the Company’s Penn Series Funds and other non-proprietary funds.

Separate Accounts Not Registered with the SEC The Company also maintains separate accounts, which are not registered with the SEC, with assets of $1,384 and $3,339 at December 31, 2025 and 2024, respectively. While the product itself is not registered with the SEC, the underlying assets are comprised of SEC registered mutual funds. The assets in these separate accounts are carried at fair value.


2025 Statutory Financial Statements			Page 23

($ in Thousands)

Information regarding the Separate accounts of the Company, all of which are nonguaranteed, is as follows:


Years Ended December 31,	2025		2024

Premiums, considerations and deposits	$	148,656	$	231,604
Reserves at December 31, at market value		8,495,550		8,638,549
Subject to discretionary withdrawal at market value		8,495,550		8,638,549

The following table reconciles the amounts transferred to and from the separate accounts as reported in the financial statements of the separate accounts to the amount reported in the Statements of Operations:


Years Ended December 31,	2025			2024

Transfers as reported in the financial statements of the separate accounts:
Transfers to separate accounts	$	148,656		$	231,604
Transfers from separate accounts		(1,020,457	)		(1,094,588	)

Transfers as reported in the Statements of Operations	$	(871,801	)	$	(862,984	)

The Company utilizes separate accounts to record and account for assets and liabilities for particular lines of business and transactions. The Company reports assets and liabilities from variable life and annuity product lines into a separate account.

The assets of the separate accounts, which are legally insulated from the general account, are comprised of the following product mix as of December 31:


Product Description	2025		2024

Enhanced Deferred Individual Annuity	$	6,873,438	$	7,128,596
Single Life Variable Universal Life		1,070,911		991,048
Basic Deferred Individual Annuity		351,401		345,649
Joint Life Variable Universal Life		316,634		306,313
Deferred Group Annuity		1,384		3,339

Total	$	8,613,768	$	8,774,945

Certain separate account liabilities are guaranteed by the general account. To compensate the general account for the risk taken on a direct basis, the separate account paid risk charges to the general account totaling $75,525 and $78,529 for the years ended December 31, 2025 and 2024, respectively and $384,597 for the five-year period between 2021 and 2025.

For the years ended December 31, 2025 and 2024, the general account of the Company has paid $1,714 and $1,438, respectively, towards separate account guarantees on a direct basis, and $7,798 cumulatively over the last five years.

Note 5. DERIVATIVES

The Company utilizes derivatives to achieve its risk management goals. Exposure to risk is monitored and analyzed as part of the Company’s asset/liability management process, which focuses on risks that impact liquidity, capital and income. The Company may enter into derivative transactions to hedge exposure to interest rate, credit, liability, currency and cash flow risks.

If entered into, the Company’s use of interest rate caps is designed to manage risk associated with rising interest rates. Credit default swaps protect the Company from a decline in credit quality of a specified security resulting in bankruptcy or the failure to pay. The Company may use “to be announced” forward contracts to gain exposure to the investment risk and return of mortgage-backed securities.


Page 24		The Penn Mutual Life Insurance Company

($ in Thousands)

The Company uses currency swaps to reduce market risks from changes in foreign exchange rates.

The Company uses interest rate swaps, interest rate futures, treasury swaps, treasury forwards and swaptions to reduce market risks from changes in interest rates; the Company uses inflation swaps as an economic hedge to reduce inflation risk associated with inflation-indexed liabilities.

Total return swaps, equity options and equity futures are used to hedge the Company’s liability risk exposure to declines in the equity markets.

When entering into a derivative transaction, there are several risks, including but not limited to basis risk, credit risk and market risk. Basis risk is the exposure to loss from imperfectly matched positions, and is monitored and minimized by modifying or terminating the transaction. Credit risk is the exposure to loss as a result of default or a decline in credit rating of a counterparty. Credit risk is addressed by establishing and monitoring guidelines on the amount of exposure to any particular counterparty. Market risk is the adverse effect that a change in interest rates, currency rates, implied volatility rates or a change in certain equity indexes or instruments has on the value of a financial instrument. The Company manages the market risk by establishing and monitoring limits as to the types and degree of risk that may be undertaken. Also, the Company requires that an International Swaps and Derivatives Association Master Agreement govern all Over-the-Counter (“OTC”) derivative contracts. In addition, certain swaps are traded through a central clearing house to effectively manage counterparty risk.

The Company does not enter into financing-type derivative premium arrangements; premiums are paid or received upfront.

Derivative Instruments Designated and Qualifying as Hedging Instruments

The Company purchased certain interest rate swaps that qualify for hedge accounting. These swaps are used to hedge the impact of changing interest rates on the value of specific municipal bonds. As these are derivatives in a highly effective hedge, they are carried at cost. At termination/expiration, a realized gain/(loss) amount, net of the cost basis, is recognized. In the event that the hedge fails to qualify as being highly effective at any of the accounting measurement points, the hedge will be considered ineffective and the derivative will be marked to market and the associated change will be recognized as an unrealized gain/(loss).

The following table presents the notional values, fair values and carrying values of derivative instruments designated and qualifying as hedging instruments. Derivative instruments with carrying values showing a gain are reported as admitted assets and Derivative instruments with carrying values showing a loss are reported in Other liabilities.


December 31,	2025						2024
	Notional Value		Fair Value				Notional Value		Fair Value
	Notional Value		Gain		(Loss)		Notional Value		Gain		(Loss)

Interest rate swaps	$	33,500	$	1,865	$	—	$	33,500	$	1,842	$	—

Total designated and qualifying as hedges	$	33,500	$	1,865	$	—	$	33,500	$	1,842	$	—

The impact of these derivative instruments reported on the Statements of Operations for the years ended December 31, 2025 and 2024 is reported in the table below:


Years Ended December 31,	2025				2024
	Net Investment Income		Realized Capital Losses		Net Investment Income		Realized Capital Gains/(Losses)
Interest rate swaps	$	221	$	—	$	543	$	—

Total	$	221	$	—	$	543	$	—


2025 Statutory Financial Statements			Page 25

($ in Thousands)

Derivative Instruments Not Designated and Not Qualifying as Hedging Instruments

The following table presents the notional and fair values of derivative financial instruments not designated and not qualifying as hedging instruments. Derivative instruments with carrying values showing a gain are reported as admitted assets and Derivative instruments with carrying values showing a loss are reported as liabilities. For the derivative instruments shown below, fair values equal carrying values except for futures. The carrying value for futures is the initial margin, which was $27,728 and $20,982 at December 31, 2025 and 2024, respectively.


December 31,	2025							2024
	Notional Value		Fair Value					Notional Value		Fair Value
	Notional Value		Gain		(Loss)			Notional Value		Gain		(Loss)

Currency swaps	$	23,263	$	373	$	(48	)	$	23,263	$	3,187	$	—
Equity futures		456,651		244		—			404,245		22		—
Equity options		341,795		3,035		(76,124	)		516,629		10,336		(60,711	)
Inflation swaps		115,000		1,148		(1,148	)		215,000		1,531		(1,545	)
Interest rate swaps		12,177,900		981,908		(964,177	)		11,028,300		1,065,113		(1,010,969	)
Swaptions		—		—		—			290,000		3,949		(3,727	)
Total return swaps		203,809		—		(110,355	)		2,865,280		245,033		(345,043	)
Treasury forwards		200,000		—		(3,489	)		20,000		—		(834	)

Total	$	13,518,418	$	986,708	$	(1,155,341	)	$	15,362,717	$	1,329,171	$	(1,422,829	)

The impact of these derivative instruments reported on the Statements of Operations for the years ended December 31, 2025 and 2024 is reported in the table below:


Years Ended December 31,	2025					2024
	Net Investment Income		Realized Capital Gains/(Losses)⁽¹⁾			Net Investment Income			Realized Capital Gains/(Losses)⁽¹⁾

Currency swaps	$	651	$	(73	)	$	808		$	(7	)
Equity options		—		54,076			—			54,263
Equity futures		—		(3,547	)		—			(35,983	)
Inflation swaps		1,294		—			—			1,304
Interest rate futures		—		(1	)		—			254
Interest rate swaps		19,036		6,886			(26,722	)		(102,298	)
Swaptions		—		(65	)		—			7,649
Total return swaps		14,657		(77,590	)		8,484			(240,338	)
Treasury forwards		—		401			—			(4,703	)

Total	$	35,638	$	(19,913	)	$	(17,430	)	$	(319,859	)

1	$74 and (6,119) of the realized capital gains/(losses) were transferred to the IMR for the years ended December 31, 2025 and 2024, respectively.


Page 26		The Penn Mutual Life Insurance Company

($ in Thousands)

The change in unrealized capital gains/(losses) for derivative instruments are as follows for the years ended December 31:


	2025			2024

Currency swaps	$	(2,862	)	$	846
Equity futures		11,404			(13,133	)
Equity options		(19,167	)		(18,535	)
Inflation swaps		14			2,769
Interest rate futures		—			(100	)
Interest rate swaps		(36,412	)		151,234
Swaptions		(158	)		(393	)
Total return swaps		(10,345	)		114,658
Treasury forwards		(2,654	)		1,175

Total	$	(60,180	)	$	238,521

The Company offers a variety of variable annuity contracts with GMAB or GMWB (described further in Note 4). The contractholders may elect to invest in equity funds. Adverse changes in the equity markets expose the Company to losses if the changes result in contractholder’s account balances falling below the guaranteed minimum. To mitigate the risk associated with these liabilities, the Company enters into various derivative instruments. The changes in value of the derivative instruments will offset a portion of the changes in the annuity accounts relative to changes in the equity market.

CREDIT RISK The Company is exposed to credit related losses in the event of non-performance by counterparties to derivative financial instruments. In order to minimize credit risk, the Company and its derivative counterparties require collateral to be posted in the amount owed under each transaction, subject to minimum transfer amounts that are functions of the counterparty’s credit rating. As of December 31, 2025 and 2024, the Company was fully collateralized thereby eliminating the potential for a loss. Additionally, certain agreements with counterparties allow for contracts in a positive position to be offset by contracts in a negative position. This right of offset also reduces the Company’s exposure. As of December 31, 2025 and 2024, the Company pledged net collateral of $187,808 and $309,103, respectively, in the form of securities and cash. The cash received from held collateral that is not invested in an interest bearing money market fund is invested mainly in fixed income securities.

As of December 31, 2025 and 2024, the Company pledged collateral for futures contracts of $27,728 and $20,982, respectively, in the form of cash. Notional or contractual amounts of derivative financial instruments provide a measure of involvement in these types of transactions and do not represent the amounts exchanged between the parties engaged in the transaction. The amounts exchanged are determined by reference to the notional amounts and other terms of the derivative financial instruments.

Note 6. FAIR VALUE OF FINANCIAL INSTRUMENTS AND OFF-BALANCE SHEET RISK

FAIR VALUE MEASUREMENT 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. Fair value measurement is based on assumptions market participants would make in pricing an asset or liability. Inputs to valuation techniques to measure fair value are prioritized by establishing a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to prices derived from unobservable inputs. An asset or liability’s classification within the fair value hierarchy is based on the lowest level of significant input to its fair value measurement.

The Company has categorized its assets and liabilities into the three-level fair value hierarchy based upon the priority of the inputs. The following summarizes the types of assets and liabilities included within the three-level hierarchy:

Level 1

Fair value is based on unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. These generally provide the most reliable evidence and are used to measure fair value whenever available. Active markets are defined as


2025 Statutory Financial Statements			Page 27

($ in Thousands)

having the following for the measured asset/liability: i) many transactions, ii) current prices, iii) price quotes not varying substantially among market makers, iv) narrow bid/ask spreads and v) most information publicly available. Prices are obtained from readily available sources for market transactions involving identical assets and liabilities.

Level 2

Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. Prices for assets classified as Level 2 are primarily provided by an independent pricing service or are internally priced using observable inputs. In circumstances where prices from pricing services are reviewed for reasonability but cannot be corroborated to observable market data as noted above, these security values are recorded in Level 3 in the fair value hierarchy.

Level 3

Fair value is based on significant inputs that are unobservable for the asset or liability. These inputs reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability. These are typically less liquid fixed maturity securities with very limited trading activity. Prices are determined using valuation methodologies such as option pricing models, discounted cash flow models, market approach and other similar techniques. Prices may be based upon non-binding quotes from brokers or other market makers that are reviewed for reasonableness, based on the Company’s understanding of the market but are not further corroborated with other additional observable market information.

The determination of fair value, which for certain assets and liabilities is dependent on the application of estimates and assumptions, can have a significant impact on the Company’s results of operations. The following sections describe the valuation methodologies used to determine fair values as well as the key estimates and assumptions surrounding certain assets and liabilities, measured at fair value on a recurring basis that could have a significant impact on the Company’s results of operations or involve the use of significant unobservable inputs.

The fair value process is monitored on a monthly basis by financial and investment professionals who utilize additional subject matter experts as applicable. The purpose is to monitor the Company’s asset valuation policies and procedures by ensuring objective and reliable valuation practices and pricing of financial instruments, as well as addressing fair valuation issues, changes to valuation methodologies and pricing sources. To assess the continuing appropriateness of third party pricing service security valuations, the Company regularly monitors the prices and reviews price variance reports. In addition, the Company performs an initial and ongoing review of the third party pricing services methodologies and reviews inputs and assumptions used for a sample of securities on a periodic basis. Pricing challenges are raised on valuations considered not reflective of market and are monitored by the Company.

BONDS The fair values of the Company’s debt securities are generally based on quoted market prices or prices obtained from independent pricing services or internally developed pricing.

Consistent with the fair value hierarchy described above, securities with quoted market prices or corroborated valuations from pricing services are generally reflected within Level 2. Inputs considered to be standard for valuations by the independent pricing service include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data and industry and economic events.

In order to validate reasonability of valuations received from independent pricing services, prices are reviewed by investment professionals through comparison with directly observed recent market trades or color or by comparison of significant inputs used by the pricing service to the Company’s observations of those inputs in the market. In circumstances where prices from independent pricing services are reviewed for reasonability but cannot be corroborated to observable market data as noted above, these security values are recorded in Level 3 in the Company’s fair value hierarchy. Under certain conditions, the Company may conclude pricing information received from third party pricing services is not reflective of market activity and may over-ride that information with a valuation that utilizes market information and activity. These securities are recorded in Level 2 in the Company’s fair value hierarchy. As of December 31, 2025, there were 6 debt securities priced in this manner, which are carried at amortized cost of $26,503 and have a fair value of 24,926. As of December 31, 2024, there were no debt securities priced in this manner.


Page 28		The Penn Mutual Life Insurance Company

($ in Thousands)

In circumstances where market data such as quoted market prices or vendor pricing is not available, estimated fair value is calculated using internal estimates based on significant observable inputs are used to determine fair value. Inputs considered in developing internal pricing vary by type of security; however generally include: public debt, industrial comparables, underlying assets, credit ratings, yield curves, type of deal structure, collateral performance, loan characteristics and various indices, as applicable. Internally priced securities using significant observable inputs are classified within Level 2 of the fair value hierarchy which generally include the Company’s investments in privately-placed corporate securities and investments in certain structured securities that are priced using observable market data. Inputs considered for these securities generally include: public corporate bond spreads, industry sectors, average life, internal ratings, security structure, liquidity spreads, credit spreads and yield curves, as applicable. If the discounted cash flow model incorporates significant unobservable inputs, these securities would be reflected within Level 3 in the Company’s fair value hierarchy.

In circumstances where significant observable inputs are not available, estimated fair value is calculated by using unobservable inputs. These inputs reflect the Company’s assumptions about the inputs market participants would use in pricing the asset, and are therefore included in Level 3 in the Company’s fair value hierarchy. Circumstances where observable market data is not available may include events such as market illiquidity and credit events related to the security.

EQUITY SECURITIES Equity securities consist principally of investments in common and preferred stock of publicly traded companies, exchange traded funds, closed-end funds and FHLB-PGH capital stock.

Common Stock The fair values of most publicly traded common stock are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the Company’s fair value hierarchy. Fair value for the FHLB capital stock approximates par value and is classified within Level 3 of the Company’s fair value hierarchy.

Preferred Stock The fair values of publicly traded preferred stock are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the Company’s fair value hierarchy. The fair values of non-exchange traded preferred equity securities are based on prices obtained from independent pricing services. Accordingly, these securities are classified within Level 2 of the Company’s fair value hierarchy. Preferred stock that is priced using less observable inputs are generally classified within Level 3 of the fair value hierarchy.

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Short-term investments and cash equivalents carried at Level 1 consist of money market funds and investments purchased with maturities less than or equal to 12 months. These are carried at amortized cost and approximate fair value.

DERIVATIVE INSTRUMENTS The fair values of derivative contracts are determined based on quoted prices in active exchanges or prices provided by counterparties, exchanges or clearing members as applicable, utilizing valuation models. The fair values of derivative contracts can be affected by changes in interest rates, foreign exchange rates, commodity prices, credit spreads, market volatility, expected returns and liquidity as well as other factors.

Derivative positions traded in the OTC and cleared OTC derivative markets, where fair value is determined by third party independent services, are classified within Level 2. These investments include: interest rate swaps, currency swaps, Treasury swaps, interest rate caps, total return swaps, swaptions, equity options, futures, inflation swaps, forward contracts and credit default swaps. OTC derivatives classified within Level 2 are valued using models generally accepted in the financial services industry that use actively quoted or observable market input values from external market data providers, broker-dealer quotations, third-party pricing vendors, discounted cash flow models and/or recent trading activity. Prices are reviewed by investment professionals through comparison with directly observed recent market trades, comparison with valuations estimated through use of valuation models maintained on an industry standard analytical and valuation platform or comparison of all significant inputs used by the pricing service to observations of those inputs in the market.

SEPARATE ACCOUNT ASSETS Separate account assets primarily consist of mutual funds. The fair value of mutual funds is based upon quoted prices in an active market, resulting in classification within Level 1 of the Company’s fair value hierarchy.


2025 Statutory Financial Statements			Page 29

($ in Thousands)

The following table presents the financial instruments carried at fair value by caption on the Statements of Admitted Assets, Liabilities and Surplus and by valuation hierarchy (as described above).


December 31, 2025	FV Level 1		FV Level 2			FV Level 3		Total

Assets:
Bonds:
Corporate	$	—	$	3,303		$	—	$	3,303
Commercial MBS		—		273			—		273
Asset-backed securities		—		1,611			—		1,611
SVO Identified Funds		85,309		—			—		85,309

Total Bonds		85,309		5,187			—		90,496
Preferred Stock		20,482		—			6,078		26,560
Common stock — unaffiliated		2,135		—			16,701		18,836
Derivatives:
Futures		—		27,972			—		27,972
Options		—		3,035			—		3,035
Swaps		—		983,429			—		983,429

Total derivatives		—		1,014,436			—		1,014,436

Total investments		107,926		1,019,623			22,779		1,150,328
Separate account assets⁽¹⁾		8,613,768		—			—		8,613,768

Total assets	$	8,721,694	$	1,019,623		$	22,779	$	9,764,096

Liabilities:
Derivatives:
Options	$	—	$	(76,124	)	$	—	$	(76,124	)
Forwards		—		(3,488	)		—		(3,488	)
Swaps		—		(1,075,729	)		—		(1,075,729	)

Total liabilities	$	—	$	(1,155,341	)	$	—	$	(1,155,341	)

(1)

Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract value and not fair value in the Company’s Statements of Admitted Assets, Liabilities and Surplus.


Page 30		The Penn Mutual Life Insurance Company

($ in Thousands)


December 31, 2024	FV Level 1		FV Level 2			FV Level 3		Total

Assets:
Bonds:
Residential MBS	$	—	$	51		$	—	$	51
Asset-backed securities		—		1,061			—		1,061

Total Bonds		—		1,112			—		1,112
Preferred Stock		25,936		—			6,196		32,132
Common stock — unaffiliated		408		—			15,086		15,494
Derivatives:
Futures		—		22			—		22
Options		—		14,285			—		14,285
Swaps		—		1,335,846			—		1,335,846

Total derivatives		—		1,350,153			—		1,350,153

Total investments		26,344		1,351,265			21,282		1,398,891
Separate account assets⁽¹⁾		8,774,945		—			—		8,774,945

Total assets	$	8,801,289	$	1,351,265		$	21,282	$	10,173,836

Liabilities:
Derivatives:
Options	$	—	$	(64,437	)	$	—	$	(64,437	)
Forwards		—		(834	)		—		(834	)
Swaps		—		(1,357,558	)		—		(1,357,558	)

Total liabilities	$	—	$	(1,422,829	)	$	—	$	(1,422,829	)

(1)

CHANGES IN LEVEL 3 RECURRING FAIR VALUE MEASUREMENTS When a determination is made to classify a financial instrument within Level 3, the determination is based upon the significance of the unobservable parameters to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources); accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.

The Company recognizes transfers into Level 3 as of the end of the period in which the circumstances leading to the transfer occurred. The Company recognizes transfers out of Level 3 at the beginning of a period in which the circumstances leading to the transfer occurred.

There were no financial instruments transferred into or out of Level 3 for the years ended December 31, 2025 and 2024.


2025 Statutory Financial Statements			Page 31

($ in Thousands)

The tables below include a rollforward of the Statements of Admitted Assets, Liabilities and Surplus amounts for the years ended December 31, 2025 and 2024 (including the change in fair value), for financial instruments classified by the Company within Level 3 of the valuation hierarchy.


	Preferred Stock			Common Stock			Total

Balance January 1, 2025	$	6,196		$	15,086		$	21,282
Transfers in		—			—			—
Transfers out		—			—			—
Total gains or losses (realized/ unrealized) included in:
Income/(loss)		—			—			—
Surplus		—			—			—
Amortization/accretion		—			—			—
Purchases/(sales):
Purchases		—			37,615			37,615
(Sales)		(118	)		(36,000	)		(36,118	)

Balance, December 31, 2025	$	6,078		$	16,701		$	22,779


	Preferred Stock		Common Stock		Total

Balance January 1, 2024	$	—	$	3,075	$	3,075
Transfers in		6,196		—		6,196
Transfers out		—		—		—
Total gains or losses (realized/ unrealized) included in:
Income/(loss)		—		—		—
Surplus		—		—		—
Amortization/accretion		—		—		—
Purchases/(sales):
Purchases		—		12,011		12,011
(Sales)		—		—		—

Balance, December 31, 2024	$	6,196	$	15,086	$	21,282

The following summarizes the fair value, valuation techniques and significant unobservable inputs of the Level 3 fair value measurements that were developed as of December 31, 2025:

Fair Value

Valuation Technique

Significant
Unobservable Inputs

Rate/Range or /
weighted avg.

Assets:

Investments

Preferred stock

6,078

Independent pricing source

Not available

N/A

Common stock:

FHLB Stock

16,701

Set by issuer-FHLB-PGH⁽¹⁾

Not available

N/A

Total investments

22,779

(1)	Fair Value approximates carrying value. The par value of the FHLB capital stock is $100 and set by the FHLB. The capital stock is issued, redeemed and repurchased at par.


Page 32		The Penn Mutual Life Insurance Company

($ in Thousands)

The following tables summarizes the aggregate fair value for all financial instruments and the level within the fair value hierarchy in which the fair value measurements in their entirety fall, for which it is practicable to estimate fair value, at December 31:


2025	Aggregate Fair Value		Admitted Value		Level 1		Level 2		Level 3

Financial Assets:
Bonds	$	18,681,539	$	19,095,858	$	152,771	$	18,324,047	$	204,721
Preferred stock		50,548		52,416		44,470		—		6,078
Common stock-unaffiliated		18,836		18,836		2,135		—		16,701
Cash and short-term investments		627,612		627,612		627,612		—		—
Derivatives		1,014,436		1,014,436		—		1,014,436		—
Separate account assets		8,613,768		8,613,768		8,613,768		—		—
Financial Liabilities:
Investment-type contracts
Individual annuities	$	3,240,546	$	3,305,640	$	—	$	—	$	3,240,546
Derivatives		1,155,341		1,155,341		—		1,155,341		—
Separate account liabilities		8,613,768		8,613,768		8,613,768		—		—


2024	Aggregate Fair Value		Admitted Value		Level 1		Level 2		Level 3

Financial Assets:
Bonds	$	17,363,556	$	18,137,108	$	386,355	$	16,764,113	$	213,088
Redeemable preferred stock		56,097		57,988		49,901		—		6,196
Common stock-unaffiliated		15,494		15,494		408		—		15,086
Cash and short-term investments		387,909		387,909		387,909		—		—
Derivatives		1,350,153		1,350,153		—		1,350,153		—
Separate account assets		8,774,945		8,774,945		8,774,945		—		—
Financial Liabilities:
Investment-type contracts
Individual annuities	$	3,055,111	$	3,182,028	$	—	$	—	$	3,055,111
Derivatives		1,422,829		1,422,829		—		1,422,829		—
Separate Account liabilities		8,774,945		8,774,945		8,774,945		—		—


2025 Statutory Financial Statements			Page 33

($ in Thousands)

Life reserves of $387,965 with surrender charges of 5% or more as of December 31, 2025 will have less than a 5% surrender charge in 2026.


	General Account						Separate Account
2024	Account Value		Cash Value		Reserve		Account Value		Cash Value		Reserve

Subject to Discretionary Withdrawal, Surrender Values, or Policy Loans:
Universal Life	$	247,985	$	246,837	$	248,960	$	—	$	—	$	—
Universal Life with Secondary Guarantees		1,957,443		1,907,817		5,020,443		—		—		—
Indexed Universal Life with Secondary Guarantees		1,552,926		1,546,179		1,745,301		—		—		—
Other Permanent Cash Value Life Insurance		—		8,823,112		9,874,756		—		—		—
Variable Universal Life		384,255		366,306		364,455		1,297,360		1,279,737		1,279,737
Miscellaneous Reserves		—		—		23,406		—		—		—

Not Subject to Discretionary Withdrawal or No Cash Values:
Term Policies without Cash Value		—		—		396,563		—		—		—
Accidental Death Benefits		—		—		282		—		—		—
Disability — Active Lives		—		—		31,400		—		—		—
Disability — Disabled Lives		—		—		13,017		—		—		—
Miscellaneous Reserves		—		—		174,016		—		—		—

Total		4,142,609		12,890,251		17,892,599		1,297,360		1,279,737		1,279,737
Less: Reinsurance ceded		2,642,112		2,609,910		4,859,083		—		—		—

Net	$	1,500,497	$	10,280,341	$	13,033,516	$	1,297,360	$	1,279,737	$	1,279,737

Note 8. RESERVES AND FUNDS FOR PAYMENT OF ANNUITY BENEFITS

The Company’s separate accounts are non-guaranteed. The withdrawal characteristics of the Company’s annuity actuarial reserves and deposit-type contracts are illustrated below as of December 31:


2025	General Account		Separate Account		Total		% of Total

Subject to discretionary withdrawal-with adjustments:
With fair value adjustment	$	—	$	—	$	—		—	%
At book value less surrender charges		218,994		—		218,994		2	%
At fair value		—		7,127,387		7,127,387		64	%

Subtotal		218,994		7,127,387		7,346,381		66	%

At book value — without adjustment		1,818,313		—		1,818,313		16	%
Not subject to discretionary withdrawal		1,990,301		—		1,990,301		18	%

Total annuity reserves and deposit liabilities gross		4,027,608		7,127,387		11,154,995		100	%

Less: Reinsurance ceded		125,820		—		125,820

Total Annuity Reserves and Deposit Liabilities, Net	$	3,901,788	$	7,127,387	$	11,029,175


2025 Statutory Financial Statements			Page 35

($ in Thousands)

Annuity and deposit-type contract reserves of $7,440 with surrender charges of 5% or more as of December 31, 2025 will have less than a 5% surrender charge in 2026.


2024	General Account		Separate Account		Total		% of Total

Subject to discretionary withdrawal-with adjustments:
With fair value adjustment	$	—	$	—	$	—		—	%
At book value less surrender charges		235,501		—		235,501		2	%
At fair value		—		7,358,795		7,358,795		65	%

Subtotal		235,501		7,358,795		7,594,296		67	%

At book value — without adjustment		1,847,652		—		1,847,652		16	%
Not subject to discretionary withdrawal		1,852,214		17		1,852,231		16	%

Total annuity reserves and deposit liabilities gross		3,935,367		7,358,812		11,294,179		100	%

Less: Reinsurance ceded		135,407		—		135,407

Total Annuity Reserves and Deposit Liabilities, Net	$	3,799,960	$	7,358,812	$	11,158,772

The following summarizes total annuity actuarial reserves and liabilities for deposit-type contracts at December 31:


	2025		2024

Statutory Statements of Admitted Assets, Liabilities and Surplus:
Policyholders’ reserves — group annuities	$	114,981	$	126,705
Policyholders’ reserves — individual annuities		2,732,679		2,665,237
Liabilities for deposit-type contracts		1,049,068		994,257
VM-21 reserves		5,060		13,761

Subtotal		3,901,788		3,799,960

Separate Account Annual Statement:
Annuities		7,127,387		7,358,812
Supplementary contracts with life contingencies		—		—
Other annuity contract-deposit-funds		—		—

Subtotal		7,127,387		7,358,812

Total Reserves	$	11,029,175	$	11,158,772

As of December 31, 2025 and 2024, the Company has recorded reserves of $302,676 and $302,637, respectively, related to outstanding borrowings from the FHLB-PGH classified as funding agreements.

The Company has variable annuity contracts containing GMDB provisions that provide a specified minimum return upon death as follows:

RETURN OF PREMIUM provides the greater of the account value or total deposits made to the contract less any partial withdrawals and assessments, which is referred to as “net purchase payments.” This guarantee is a standard death benefit on all individual variable annuity products.

STEP-UP provides a variable death benefit equal to the greater of the account value and the highest variable account value adjusted for withdrawals and transfers from any prior contract anniversary date.

RISING FLOOR provides a variable death benefit equal to the greater of the current account value and the variable purchase payments accumulated at a set rate and adjusted for withdrawals and transfers.


Page 36		The Penn Mutual Life Insurance Company

($ in Thousands)

The following table summarizes the account values and net amount at risk (death benefit in excess of account value), net of reinsurance for variable annuity contracts with guarantees invested in the separate account as of December 31:


	2025		2024

Account value	$	6,751,691	$	6,975,138
Net amount at risk		15,402		30,304

The Company has variable annuity contracts that have GMAB, GMWB, and GMAB/GMWB Rider options. The Company also has fixed indexed annuity contracts that have GMWB Rider options. The GMAB provides for a return of principal at the end of a specified period. The GMAB/GMWB combination rider allows for guaranteed withdrawals from a benefit base after a selected waiting period. The GMWB riders are also available with inflation or death benefit protection. The benefit base is calculated as the maximum of principal increase at a roll up rate less any partial withdrawals during the accumulation phase, the current account value and the highest anniversary value over the first ten years. The withdrawal amount is stated as a percentage of the benefit base and varies based on whether the annuitant selects lifetime withdrawals or a specified period. One version of this rider has an inflation adjustment applied to the Guaranteed Withdrawal Amount.

The following table summarizes the account values for the different benefit types as of December 31, 2025:


Rider Type	Contracts		Fund Value		Cash Value

GMAB		1,428	$	304,317	$	295,475
GMWB		9,589		2,732,524		2,687,948
GMWB w/ DB		847		223,998		218,971
GMWB w/ inflation		8,385		2,105,161		2,079,808
GMWB w/ inflation w/ DB		259		61,414		60,611
GMAB/GMWB		1,611		319,271		317,900

Total		22,119	$	5,746,685	$	5,660,713

The following table summarizes the account values for the different benefit types as of December 31, 2024:


Rider Type	Contracts		Fund Value		Cash Value

GMAB		1,555	$	299,700	$	289,142
GMWB		10,583		2,874,573		2,819,408
GMWB w/ DB		944		229,641		223,333
GMWB w/ inflation		9,120		2,180,922		2,151,599
GMWB w/ inflation w/ DB		278		62,768		61,707
GMAB/GMWB		1,766		345,117		343,598

Total		24,246	$	5,992,721	$	5,888,787

Variable annuity reserves for living and death benefits are based on the methodology specified in Valuation Manual – 21: Requirements for Principle-Based Reserves for Variable Annuities (“VM-21”), which specifies the reserve as the Company Stochastic Reserve plus the Additional Standard Projection Amount. The individual policy reserve is floored at cash surrender value. The Company Stochastic Reserve is based on the Conditional Tail Expectation (“CTE”) 70% of 1,000 stochastically generated interest rate and equity return scenarios. Prudent estimate assumptions including margins for uncertainty are used to calculate the Company Stochastic Reserve. Key assumptions needed in valuing the liability include full withdrawals, partial withdrawals, mortality, the Consumer Price Index, investment management fees and revenue sharing, expenses, fund allocations and other policyholder behavior. The Additional Standard Projection Amount requires prescribed assumptions to be used in place of


2025 Statutory Financial Statements			Page 37

($ in Thousands)

Company assumptions for most key assumptions. The reserve also requires the projection of in-force general account assets and assets from reinvested cash flows. The key assumptions needed in valuing the assets, including the maximum reinvestment earned rate spreads and default rates, are prescribed. In addition, the method for projecting interest rates and equity returns is prescribed for both the Company Stochastic Reserve calculation and the Additional Standard Projection Amount calculation. The final reserve balance for policies that fall within the scope of VM-21, which covers both Living and Death Benefit guarantees, is $6,660,049 and $6,872,854, as of December 31, 2025 and 2024, respectively. During 2025 and 2024, there were $400 and $(900), respectively, in reserves released as a result of the annual assumption review.

Fixed indexed annuity reserves for living benefits are based on the methodology specified in Actuarial Guideline XXXV, which specifies the reserve as the sum of the non-elective benefit reserve and the elective benefit reserve. The elective benefit reserve is calculated using the elective benefit path that results in the highest present value of future benefits. The final reserve balance for policies that fall within the scope of Actuarial Guideline XXXV is $50,189 and $54,174, as of December 31, 2025 and 2024, respectively.

Note 9. BENEFIT PLANS

The Company has maintained both funded and unfunded non-contributory defined benefit pension plans covering eligible employees. The Company also maintains other postretirement benefit plans (health care plans) covering eligible existing retirees. The Company uses a measurement date of December 31 for all plans.

QUALIFIED PENSION PLAN The Company sponsored a funded qualified non-contributory defined benefit pension plan covering eligible employees. The Company’s policy was to fund qualified pension costs in accordance with the Employee Retirement Income Security Act (“ERISA”) of 1974 and maintained the option to increase its contribution above the minimum based upon an evaluation of the Company’s tax and cash positions and the funded status of the plan.

The Company approved the freezing of benefits under its qualified pension plan effective December 31, 2005. Therefore, no further benefits were accrued for participants.

The Company’s Board of Trustees approved the termination of its frozen qualified pension plan on May 31, 2024. The Company offered the option of receiving a lump sum payment to certain participants with vested qualified benefits in lieu of receiving monthly annuity payments. The Company transferred the remainder of the Plan’s pension obligation to a third-party insurance provider by purchasing a group annuity contract which was fully funded directly by plan assets. The third-party insurance provider assumed the obligation to pay future pension benefits and to provide administrative services beginning on January 1, 2025.

NONQUALIFIED PENSION PLANS The Company also sponsored unfunded nonqualified pension plans covering eligible employees.

The Company approved the freezing of benefits under its nonqualified Tax Equity and Fiscal Responsibility Act (“TEFRA”) plan effective December 31, 2005. Therefore, no further benefits were accrued for participants under this plan.

On December 30, 2024, the Company approved amendments to terminate the unfunded nonqualified pension plans. The remaining participants were paid in compliance with United States Internal Revenue Code Section 409A during December, 2025.

OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS The Company provides certain life insurance and health care benefits (“other postretirement healthcare plans”) for its existing retired employees and financial professionals, and their beneficiaries and covered dependents.

On December 5, 2023, the Company approved an amendment to close the other postretirement healthcare plans to new retirees effective December 31, 2023. Therefore, no new retired employees or financial professionals are eligible to join the plan.

OTHER PLANS The Company has non-qualified deferred compensation plans that permit eligible key employees, financial professionals and trustees to defer portions of their compensation to these plans. Certain Company


Page 38		The Penn Mutual Life Insurance Company

($ in Thousands)

contributions in excess of allowable qualified plan limits may also be credited to these plans. Company contributions are recorded as expenses and earnings/(losses) on investments are recorded to interest credited to policyholder funds in the Statements of Income and Changes in Surplus.

Projected benefit obligations for defined benefit plans represent the present value of pension benefits earned as of the measurement date projected for estimated salary increases to an assumed date with respect to retirement, termination, disability or death.

The following table sets forth the plans’ change in projected benefit obligation of the defined benefit pension and other postretirement healthcare plans as of December 31:


	Pension Plans						Other Postretirement Healthcare Plans
	2025			2024			2025			2024

Change in projected benefit obligation
Projected benefit obligation at beginning of year	$	15,949		$	148,759		$	7,335		$	12,905
Interest cost		705			6,166			352			383
Actuarial loss/(gain)		9,523			3,190			11			(2,144	)
Benefits paid		(2,196	)		(11,680	)		(784	)		1,051
Plan amendment		—			—			—			(4,860	)
Settlements		(23,981	)		(130,486	)		—			—

Projected benefit obligation at end of year	$	—		$	15,949		$	6,914		$	7,335

The weighted-average assumption used to measure the actuarial present value of the projected benefit obligation was as follows as of December 31:


	Other Postretirement Healthcare Plans
	2025			2024

Discount rate		5.11	%		5.52	%

The discount rate is determined at the annual measurement date of the plans and is therefore subject to change each year. The rate reflects prevailing market rates for high quality fixed-income debt instruments with maturities corresponding to expected duration of the benefit obligations on the measurement date. The rate is used to discount the future cash flows of benefits obligations back to the measurement date.

The assumed health care cost trend rates used in determining the benefit obligation for the other postretirement healthcare plans were as follows as of December 31:


	2025						2024
	Pre-65			Post-65			Pre-65			Post-65

Health care cost trend rate assumed for next year		6.50	%		6.50	%		6.50	%		6.50	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		5.00	%		5.00	%		5.00	%		5.00	%
Year that the rate reaches the ultimate trend rate		2033			2033			2031			2031

PLAN ASSETS The change in plan assets of the benefit plans and other postretirement healthcare plans represents a reconciliation of beginning and ending balances of the fair value of the plan assets used to fund future benefit payments.


2025 Statutory Financial Statements			Page 39

($ in Thousands)

The following table sets forth the change in plan assets as of December 31:


	Pension Plans						Other Postretirement Healthcare Plans
	2025			2024			2025			2024

Change in plan assets:
Fair value of plans assets at beginning of year	$	—		$	207,399		$	—		$	—
Actual return on plan assets		—			3,877			—			—
Employer contribution		26,178			2,202			784			(1,051	)
Benefits paid		(2,196	)		(11,680	)		(784	)		1,051
Settlements		(23,982	)		(130,486	)		—			—
Transfer of excess assets		—			(71,312	)		—			—

Fair value of plan assets at end of year	$	—		$	—		$	—		$	—

AMOUNTS RECOGNIZED IN THE STATEMENTS OF ADMITTED ASSETS, LIABILITIES AND SURPLUS

The funded status of the defined benefit pension plans and other postretirement healthcare plans is a comparison of the projected benefit obligations to the assets related to the respective plan, if any. The difference between the two represents amounts that have been appropriately recognized as expenses in prior periods that appear as the net amount recognized or represent amounts that will be recognized as expenses in the future through the amortization of the unrecognized net actuarial gains or losses and unrecognized prior service costs or credits.

The following table sets forth the funded status of the plans as of December 31, 2025 and 2024 as of the measurement date:


	Pension Plans					Other Postretirement Healthcare Plans
	2025		2024			2025			2024

Benefit obligation	$	—	$	(15,949	)	$	(6,914	)	$	(7,335	)

Funded status	$	—	$	(15,949	)	$	(6,914	)	$	(7,335	)

The funded status reconciles to amounts reported in the Statement of Admitted Assets, Liabilities and Surplus as follows as of December 31:


	Pension Plans					Other Postretirement Healthcare Plans
	2025		2024			2025			2024

Accrued benefit cost and liability for benefits recognized (other liabilities)	$	—		(15,949	)		(6,914	)		(7,335	)

Funded status	$	—	$	(15,949	)	$	(6,914	)	$	(7,335	)


Page 40		The Penn Mutual Life Insurance Company

($ in Thousands)

The breakout of the fair value of plan assets, projected benefit obligation and accumulated benefit obligation for plans in an underfunded status, where the projected benefit obligation exceeded the fair value of plan assets was as follows as of December 31:


	Underfunded Pension Plans
	2025		2024

Projected benefit obligation	$	—	$	(15,949	)

Funded status		—		(15,949	)

Accumulated benefit obligation	$	—	$	(15,949	)

SURPLUS ITEMS NOT YET RECOGNIZED The amounts in surplus that have not yet been recognized as part of net periodic benefit cost/(credit) were as follows as of December 31:


	Pension Plans				Other Postretirement Healthcare Plans
	2025		2024		2025			2024

Unrecognized prior service cost	$	—	$	—	$	(3,837	)	$	(4,349	)
Unrecognized actuarial (gain)/loss		—		6,734		(4,276	)		(4,656	)

Total	$	—	$	6,734	$	(8,113	)	$	(9,005	)

The following represents activity relating to amounts recognized in surplus or included in the remaining unrecognized transition liability from the adoption of SSAP No. 92, Accounting for Postretirement Benefits Other Than Pensions, during the years ended December 31, 2025 and 2024, including reclassification adjustments for those amounts recognized as components of net periodic benefit cost/(credit), for the years ended December 31:


	Pension Benefits						Other Postretirement Healthcare Plans
	2025			2024			2025			2024

Items not yet recognized as a component of net periodic benefit cost/(credit) — prior year	$	6,734		$	44,842		$	(9,005	)	$	(2,858	)
Net prior service cost arising during the period		—			—			—			(4,860	)
Net prior service (cost)/credit recognized to net periodic benefit cost/(credit)		—			(17	)		511			511
Net prior service cost (credit) from Plan Termination recognized to net periodic benefit cost		—			(67	)		—			—
Net actuarial loss/(gain) arising during the period		9,523			10,140			11			(2,144	)
Net actuarial (loss) recognized to net periodic benefit cost/(credit)		(406	)		(1,576	)		370			346
Net actuarial gains (losses) from Settlement recognized to net periodic benefit cost		(15,851	)		(46,588	)		—			—

Items not yet recognized as a component of net periodic benefit cost — current year	$	—		$	6,734		$	(8,113	)	$	(9,005	)


2025 Statutory Financial Statements			Page 41

($ in Thousands)

NET PERIODIC BENEFIT COST/(CREDIT) The components of net periodic benefit cost/(credit) were as follows for the years ended December 31:


	Pension Plans					Other Postretirement Healthcare Plans
	2025		2024			2025			2024

Interest cost	$	705	$	6,166		$	352		$	383
Expected return on plan assets		—		(10,826	)		—			—
Amortization of prior service cost/(credit)		—		17			(511	)		(511	)
Amortization of actuarial losses/(gains)		406		1,576			(370	)		(346	)
Settlements		15,851		46,655			—			—

Total net periodic benefit cost/(credit)	$	16,962	$	43,588		$	(529	)	$	(474	)

The weighted-average assumptions used to determine net periodic benefit cost/(credit) were as follows for the years ended December 31:


	Pension Plans					Other Postretirement Healthcare Plans
	2025		2024			2025			2024

Discount rate for benefit obligations		N/A		N/A			5.11	%		5.52	%
Expected return on plan assets		N/A		6.00	%		—			—

The assumed health care cost trend rates used in determining net periodic benefit cost were as follows for the years ended December 31:


	2025						2024
	Pre-65			Post-65			Pre-65			Post-65

Health care cost trend rate assumed for next year		6.50	%		6.50	%		6.50	%		6.50	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)		5.00	%		5.00	%		5.00	%		5.00	%
Year that the rate reaches the ultimate trend rate		2033			2033			2031			2031

ACTUAL CONTRIBUTIONS AND BENEFITS The contributions made and the benefits paid from the plans at December 31 were as follows:


	Pension Benefits						Other Benefits
	2025			2024			2025			2024

Employer Contributions	$	26,178		$	2,202		$	784		$	(1,051	)
Benefits Paid		(2,196	)		(11,680	)		(784	)		1,051
Settlements		(23,982	)		(130,486	)		—			—

CASH FLOWS With the termination of the Company’s qualified pension plan during 2024, there are no funding requirements under ERISA.

In 2026, the Company expects to contribute to the other postretirement healthcare plans in amounts equal to the expected benefit costs of approximately $816.


Page 42		The Penn Mutual Life Insurance Company

($ in Thousands)

The estimated future benefit payments are based on the same assumptions as used to measure the benefit obligations as of December 31, 2025 and 2024. The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:


	Other Post Retirement Healthcare Plans

2026	$	816
2027		776
2028		719
2029		681
2030		634
Years 2031-2033		2,580

DEFINED CONTRIBUTION PLANS The Company maintains three defined contribution pension plans for substantially all of its employees and full-time financial professionals. For two plans, designated contributions of up to 6% of annual compensation are eligible to be matched by the Company. Contributions for the third plan are based on tiered earnings of full-time financial professionals. For the years ended December 31, 2025, and 2024, the expense recognized for these plans was $7,920 and $9,665, respectively.

With the termination of the Company’s qualified pension plan during 2024, the excess plan assets were transferred directly to the Company’s defined contribution plan administrator to be used for future non-elective contributions. These assets are non-admitted and are excluded from the Statements of Admitted Assets, Liabilities and Surplus.

Note 10. FEDERAL INCOME TAXES

The Company follows SSAP No. 101 — Income Taxes, A Replacement of SSAP No. 10R and SSAP No. 10 (“SSAP 101”). SSAP 101 includes a calculation for the limitation of gross deferred tax assets for insurers that maintain a minimum of 300% of their authorized control level RBC computed without net deferred tax assets. The Company exceeded the 300% minimum RBC requirement at December 31, 2025, and 2024.

The Company is required to evaluate the recoverability of deferred tax assets and to establish a valuation allowance if necessary to reduce the deferred tax asset 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. In evaluating the need for a valuation allowance, the Company considers many factors, including: (1) the nature of the deferred tax assets and liabilities; (2) whether they are ordinary or capital; (3) the timing of their reversal; (4) taxable income in prior carryback years as well as projected taxable income exclusive of reversing temporary differences and carryforwards; (5) the length of time that carryovers can be utilized; (6) unique tax rules that would impact the utilization of the deferred tax assets; and (7) any tax planning strategies that the Company would employ to avoid a tax benefit from expiring unused; although the realization is not assured, management believes it is more likely than not that the deferred tax assets, will be realized. The Company has not recorded a valuation allowance as of December 31, 2025, and 2024.

The components of deferred tax assets (“DTA”) and deferred tax liabilities (“DTL”) recognized by the Company are as follows as of December 31:


Description				2025									2024

	Ordinary			Capital			Total			Ordinary			Capital			Total
Gross DTAs	$	467,717		$	14,351		$	482,068		$	503,519		$	9,941		$	513,460
Statutory valuation allowance		—			—			—			—			—			—

Adjusted gross DTAs		467,717			14,351			482,068			503,519			9,941			513,460
DTAs nonadmitted		(144,385	)		—			(144,385	)		(114,312	)		—			(114,312	)

Subtotal admitted adjusted DTA		323,332			14,351			337,683			389,207			9,941			399,148
Gross DTLs		(112,701	)		(61,291	)		(173,992	)		(109,745	)		(75,891	)		(185,636	)

Net admitted DTA/(DTL)	$	210,631		$	(46,940	)	$	163,691		$	279,462		$	(65,950	)	$	213,512


2025 Statutory Financial Statements			Page 43

($ in Thousands)

The changes in components of DTAs and DTLs recognized by the Company are as follows:


Description	Changes During 2025

	Ordinary			Capital		Total
Gross DTAs	$	(35,802	)	$	4,410	$	(31,392	)
Statutory valuation allowance		—			—		—

Adjusted gross DTAs		(35,802	)		4,410		(31,392	)
DTAs nonadmitted		(30,073	)		—		(30,073	)

Subtotal admitted adjusted DTA		(65,875	)		4,410		(61,465	)
Gross DTLs		(2,956	)		14,600		11,644

Net admitted DTA/(DTL)	$	(68,831	)	$	19,010	$	(49,821	)

Admitted DTAs are comprised of the following admission components based on paragraph 11 of SSAP No. 101 as of December 31:


Description			2025						2024

	Ordinary		Capital		Total		Ordinary		Capital		Total
Admitted DTA 3 Years:
Federal income taxes that can be recovered:
Remaining adjusted gross DTAs expected to be realized in 3 years (lesser of 1 or 2):	$	149,340	$	14,351	$	163,691	$	203,571	$	9,941	$	213,512
1. Adjusted gross DTA expected to be realized		149,340		14,351		163,691		203,571		9,941		213,512
2. Adjusted gross DTA allowed per limitation threshold		—		—		602,725		—		—		548,880
Adjusted gross DTA offset by existing DTLs		173,992		—		173,992		185,636		—		185,636

Total admitted DTA realized within 3 years	$	323,332	$	14,351	$	337,683	$	389,207	$	9,941	$	399,148


Description	Changes during 2025

	Ordinary			Capital		Total
Admitted DTA 3 years:
Federal income taxes that can be recovered:
Remaining adjusted gross DTAs expected to be realized within 3 years (lesser of 1 or 2):	$	(54,229	)	$	4,410	$	(49,819	)
1. Adjusted gross DTA expected to be realized		(54,229	)		4,410		(49,819	)
2. Adjusted gross DTA allowed per limitation threshold		—			—		—
Adjusted gross DTA offset by existing DTLs		(11,644	)		—		(11,644	)

Total admitted DTA realized within 3 years	$	(65,873	)	$	4,410	$	(61,463	)

The authorized control level RBC and total adjusted capital computed without net deferred tax assets utilized when determining the amount of admissible net deferred tax assets was as follows:


December 31	2025			2024

Ratio percentage used to determine recovery period and threshold limitation amount		606	%		605	%
Amount of adjusted capital and surplus used to determine recovery period and threshold limitation	$	4,682,912		$	4,245,118


Page 44		The Penn Mutual Life Insurance Company

($ in Thousands)

The tax effects of temporary differences that give rise to significant portions of the DTAs and DTLs are as follows as of December 31:


	2025			2024			Change

DTAs resulting in book/tax differences in:
Ordinary:
Future policy benefits	$	151,677		$	154,296		$	(2,619	)
DAC		223,472			202,121			21,351
Deferred compensation		63,834			45,192			18,642
Nonadmitted assets		18,583			21,320			(2,737	)
PML reserve financing		—			36,343			(36,343	)
PML reinsurance		—			34,856			(34,856	)
Other — ordinary		10,151			9,391			760

Subtotal — Gross ordinary DTAs		467,717			503,519			(35,802	)
Statutory valuation allowance		—			—			—
Nonadmitted ordinary DTAs		(144,385	)		(114,312	)		(30,073	)

Admitted ordinary DTAs		323,332			389,207			(65,875	)
Capital:
OTTI on investments		14,351			9,941			4,410

Other — Capital		—						—

Subtotal — Gross capital DTAs		14,351			9,941			4,410
Statutory valuation allowance
Nonadmitted capital DTAs		—			—			—

Admitted capital DTAs		14,351			9,941			4,410

Admitted DTAs		337,683			399,148			(61,465	)
DTLs resulting in book/tax differences in:
Ordinary:
Investments — ordinary		(98,493	)		(83,733	)		(14,760	)
Future policy benefits — 8 year spread		—			(6,097	)		6,097
Other		(14,208	)		(19,915	)		5,707

Ordinary DTLs		(112,701	)		(109,745	)		(2,956	)
Capital:
Alternative asset investments		(60,106	)		(58,133	)		(1,973	)
Net unrealized investment gains		(1,185	)		(17,758	)		16,573

Capital DTLs		(61,291	)		(75,891	)		14,600

DTLs		(173,992	)		(185,636	)		11,644

Net deferred tax asset	$	163,691		$	213,512		$	(49,821	)


Page 46		The Penn Mutual Life Insurance Company

($ in Thousands)

The change in 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 within the Statements of Changes in Surplus:


	2025			2024			Change

Total deferred tax assets	$	482,068		$	513,460		$	(31,392	)
Total deferred tax liabilities		(173,992	)		(185,636	)		11,644
Statutory valuation allowance		—			—			—

Net deferred tax asset	$	308,076		$	327,824		$	(19,748	)
Tax effect of unrealized gains/(losses)								(15,602	)
Tax effect of postretirement liability								1,996
SSAP 3 Adjustment								71,199

Change in net deferred income tax							$	37,845

The provision for federal income taxes incurred is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The significant items causing the differences as of December 31, 2025 are as follows:


Description	Amount			Tax Effect			Effective Tax Rate

Income before taxes	$	194,491		$	40,843			21.00	%
Separate account dividend received deduction		(17,028	)		(3,576	)		-1.84	%
LIHTC		—			(10,306	)		-5.30	%
Executive benefits		(27,679	)		(5,813	)		-2.99	%
IMR amortization		16,770			3,522			1.81	%
Dividends received deduction		(967	)		(203	)		-0.10	%
Reinsurance		195,926			41,145			21.15	%
Other		65,680			13,796			7.10	%
Federal Tax Credits		—			(70,615	)		-36.31	%

Total	$	427,193		$	8,793			4.52	%

Federal income tax expense incurred				$	29,810			15.33	%
FIT expense/(benefit) on realized capital gains/losses					2,317			1.19	%
FIT in IMR gains/losses					14,511			7.46	%
Change in net deferred income tax					(37,845	)		-19.46	%

Total statutory taxes				$	8,793			4.52	%

The effective tax rate is primarily driven by the following components: (1) the separate account dividends received deduction, (2) low income housing tax credits and (3) federal tax credits (4) reinsurance (5) executive benefits.

The Company utilized $118,211 of the total credits available at December 31, 2025. The Company has no LIHTC credits available as of December 31, 2025.

The Company has $254,000 in carryback capacity for 2025, 2024 and 2023 that is available for recoupment in the event of future net capital losses.

The Company has not made any deposits regarding the suspension of running interest (protective deposits) pursuant to Internal Revenue Code Section 6603.

The Company’s federal income tax return is consolidated with its majority owned subsidiaries listed below. The method of tax allocation among the companies is subject to a written agreement, whereby the tax allocation is made on a benefits for loss basis. The tax share agreement allows for each direct Subsidiary of Parent that owns stock of another Subsidiary to be treated as the Intermediate Parent of the Intermediate Parent Group.


2025 Statutory Financial Statements			Page 47

($ in Thousands)

A listing of the companies included in the consolidated return is as follows:

Penn Insurance & Annuity Company

PIA Reinsurance Company of Delaware I

Vantis Life Insurance Company

Penn Insurance and Annuity Company of New York

Tax years 2022 and subsequent are subject to audit by the Internal Revenue Service.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits, as a component of tax expense. During the years ended December 31, 2025 and 2024, the Company did not recognize or accrue penalties or interest.

The Company has no tax loss contingencies for which it is reasonably possible that the total liability will significantly increase within the next twelve months of the reporting date.

On August 16, 2022, the Inflation Reduction Act of 2022 (“Act”) was passed by the US Congress and signed into law by President Biden. The Act includes a new corporate alternative minimum tax (“CAMT”) for tax years beginning after December 31, 2022. The Company has determined that they are a non-applicable reporting entity in 2025.

The Company early adopted SSAP94 as of December 31, 2024. These revisions expanded the scope of SSAP No. 94R to include all state and federal tax credits and provide new guidance on the accounting recognition and reporting for the state and federal tax credits.

On July 4, 2025, the One Big Beautiful Bill Act (“2025 Act”) was enacted into law for tax years beginning in 2025. There was no material impact on the Company’s financial statements as a result of this new act.

Note 11. REINSURANCE

The Company has assumed and ceded reinsurance on certain life and annuity contracts under various agreements. Reinsurance ceded permits recovery of a portion of losses from reinsurers.

The table below highlights the reinsurance amounts shown in the accompanying financial statements.


	Direct		Assumed		Ceded		Net Amount

December 31, 2025:
Premium and annuity considerations	$	2,747,899	$	14,383	$	2,149,100	$	613,182
Reserves and funds for payment of insurance and annuity benefits		23,797,461		2,950		6,443,037		17,357,374

December 31, 2024:
Premium and annuity considerations	$	2,912,515	$	15,239	$	2,093,627	$	834,127
Reserves and funds for payment of insurance and annuity benefits		22,044,721		2,051		5,204,191		16,842,581

The agreement generated an after-tax gain of $238,580, that was a direct increase to surplus. This agreement was recaptured on October 1, 2024 with a resulting loss of $151,327, inclusive of emerging earnings of $238,580.

The Company entered into a coinsurance funds withheld agreement with an authorized, non-affiliated reinsurer, effective September 30, 2017, to coinsure an existing block of whole life policies on a 20% quota share basis. In addition to the whole life policies, this agreement reinsured on a YRT basis, certain Universal Life policies on an 85% quota share basis. The agreement generated an after-tax gain of $61,750, that was a direct increase to surplus. The


Page 48		The Penn Mutual Life Insurance Company

($ in Thousands)

agreement was amended on April 1, 2020 and generated an additional after-tax gain of $19,750, that was a direct increase to surplus. This agreement was recaptured on October 1, 2024 with a resulting loss of $12,794, inclusive of emerging earnings of $16,632.

The Company has entered into an indemnity reinsurance agreement with a single non-affiliated reinsurer, whereby the Company cedes its risk associated with the Disability Income line of business. Under the agreement, 95% of the assets and liabilities were transferred to the reinsurer, and the assets were placed in a trust that names the Company as beneficiary. As of December 31, 2025 and 2024, the Company had a related reserve credit of $163,057 and $168,619, respectively, which was secured by investment grade securities with a market value of $279,151 and $259,390, respectively, held in trust.

The Company entered into a coinsurance funds withheld agreement with a certified, non-affiliated reinsurer, effective December 31, 2025, to coinsure an existing block of Term and Universal Life policies on a quota share basis. The agreement generated an after-tax gain of $160,376, that was a direct increase to surplus.

INTERCOMPANY REINSURANCE The Company maintains various reinsurance agreements with affiliates. The following table summarizes premium and reserves balances associated with such agreements as of and for the years ended December 31:


			Assumed/(Ceded)
			2025						2024
	Affiliate		Premium			Reserves			Premium			Reserves

Coinsurance modified coinsurance		PIANY	$	(9,022	)	$	(217,631	)	$	(10,878	)	$	(216,662	)
YRT — Over retention		PIANY		4,976			1,794			4,248			1,321
Coinsurance funds withheld		PIA		(39,040	)		(2,417,361	)		(731,255	)		(2,347,132	)
Coinsurance — Inforce		PIA		(11,927	)		(643,251	)		(17,959	)		(617,324	)
Coinsurance		PIA		(57,926	)		(1,425,272	)		(56,769	)		(1,344,814	)
YRT — Over retention		PIA		6,436			864			5,626			790
YRT — Over retention		Vantis		133			98			93			86

Total			$	(106,370	)	$	(4,700,759	)	$	(806,894	)	$	(4,523,735	)

Coinsurance modified coinsurance The Company ceded to PIANY an inforce block of New York issued variable universal life and variable deferred annuity policies. The Company ceded 100% of the insurance risk, gross of inuring reinsurance.

YRT — Over retention The Company assumes from PIANY the policies that result in retention greater than $300 per life, up to $10,000.

Coinsurance funds withheld At December 31, 2014, the Company entered into a contract to cede reserves pursuant to transactions subject to the requirements of Section 7 of the NAIC XXX and AXXX Reinsurance Model Regulation. PIA contemporaneously reinsured the policies to PIAre I, an authorized, affiliated reinsurer. The agreement generated an after-tax gain of $173,062, that was a direct increase to surplus and is amortized into income as earnings emerge.

Effective October 1, 2024, this agreement was amended and restated to increase the ceded reserves for this in-force block. PIA contemporaneously reinsured the increased ceded reserves to PIAre I, an authorized, affiliated reinsurer. The amended and restated agreement generated an additional after-tax gain of $165,981, that was a direct increase to surplus and is amortized into income as earnings emerge.

Coinsurance — Inforce Effective January 1, 2015, the Company ceded to PIA an inforce block of single life index universal life policies. The Company ceded 100% of the risk, net of inuring reinsurance. The after-tax gain of $20,814 was a direct increase to surplus and has been fully amortized into income.


2025 Statutory Financial Statements			Page 49

($ in Thousands)

Coinsurance The Company cedes certain insurance risks to PIA on a coinsurance basis.

YRT — Over retention The Company assumed from PIA policies issued after October 1, 2006 and before October 1, 2014 that resulted in retention greater than $1,000 per life.

YRT — Over retention Effective April 12, 2021, the Company assumed from Vantis a quota share of 90% for term policies and 50% for whole life policies. If Vantis reaches its retention limit of $300 per life, the Company’s share is 100% of the excess up to $10,000.

Note 12. RELATED PARTIES

The Company holds revolving loan agreements with affiliates.


Affiliate	Effective Date	Maturity Date	Maximum Dollar Amount		Current Interest Rate

PMAM	July 1, 2019	July 2039	$	100,000	Market Based at time of draw
PMAM	August 31, 2021	August 2041	$	100,000	Market Based at time of draw
PMAM	June 22, 2022	June 2042	$	100,000	Market Based at time of draw
PMAM	November 4, 2024	November 2044	$	300,000	Market Based at time of draw
HTK	July 31, 2023	July 2042	$	20,000	Market Based at time of draw
1847SV	May 15, 2024	April 2029	$	100,000	Market Based at time of draw

The Company recorded $30,825 and $67,529 in interest income on these notes for the years ended December 31, 2025 and 2024, respectively. At December 31, 2025 and 2024, the Company had outstanding principal receivables of $65,039 and $279,015 and interest receivables of $5,794 and $6,788, respectively, relating to these agreements.

1847IC currently provides Fidelity Bond, Cyber and Medical Stop Loss insurance coverages to the Company and its affiliates.

1847SV was established in 2024 to make select capital investments.

1847FIN was established in 2024 as a distribution entity within the Company’s enterprise.

The Company entered into Selling and Sales Support Agreements with 1847FIN, a wholly-owned subsidiary of the Company, in 2025 for the distribution of annuity and life insurance contracts. During 2025, the Company recorded $131,611 in expense associated with this agreement. At December 31, 2025 the Company reported $4,606 as amount due to 1847FIN.

The Company’s investment in PMAM’s Private Funds/PMUBX at December 31, 2025 and 2024 of $0 and $127,125, respectively, represents a significant influence, and are considered affiliates.

The Company’s unconsolidated subsidiaries had combined assets of $18,242,580 and $15,911,253 and combined liabilities of $16,696,173 and $14,694,155 as of December 31, 2025 and 2024, respectively. There was no goodwill or intangible assets in the admitted value of the Company’s subsidiaries at December 31, 2025 and 2024, respectively.

The Company’s unconsolidated subsidiaries had combined net income of $107,060 and $48,573 for the years ended December 31, 2025 and 2024, respectively.

The Company’s non-insurance subsidiaries had combined balance sheet values (gross, admitted and non-admitted) of $193,324, $193,346 and $22, respectively at December 31, 2025 and $125,937, $125,919 and $18, respectively at December 31, 2024.


Page 50		The Penn Mutual Life Insurance Company

($ in Thousands)

The Company made the following capital contributions and returns of capital for 2025 and 2024, respectively:


December 31	2025				2024
	Capital Contributions		Return of Capital		Capital Contributions		Return of Capital

PIA	$	150,000	$	—	$	70,000		—
myWorth		25		—		—		—
1847Fin		331,772		308,700		10		—
1847SV		—		—		10		—

With the exception of the Company’s contribution of its investment in HTK to 1847FIN of $21,772, all capital contributions and returns of capital were in the form of cash.

Under a variety of intercompany agreements, the Company provides its subsidiaries with administrative services, leases, and accounting services. For 2025 and 2024, the total expenses incurred by subsidiaries under these agreements were $117,284 and $98,149, respectively. The net amount due to the Company was $80,282 and $21,776 at December 31, 2025 and December 31, 2024, respectively. Under the terms of an investment management agreement, the Company incurred expenses from PMAM of $26,002 and $21,786 for 2025 and 2024, respectively.

Note 13. COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES

LITIGATION The Company and its subsidiaries are involved in litigation arising in and out of the normal course of business, which seek both compensatory and punitive damages. In addition, the regulators within the insurance and brokerage industries continue to focus on market conduct and compliance issues. While the Company is not aware of any actions or allegations that should reasonably give rise to a material adverse impact to the Company’s financial position or liquidity, the outcome of litigation cannot be foreseen with certainty.

For some matters, the Company is able to estimate a possible range of loss. For such matters in which a loss is probable, an accrual has been made. For matters where the Company, however, believes a loss is reasonably possible, but not probable, no accrual is required. For matters for which an accrual has been made, but there remains a reasonably possible range of loss in excess of the amounts accrued or for matters where no accrual is required, the Company develops an estimate of the unaccrued amounts of the reasonably possible range of losses.

GUARANTY FUNDS The Company is subject to insurance guaranty fund laws in the states in which it does business. These laws assess insurance companies amounts to be used to pay benefits to policyholders and policy claimants of insolvent insurance companies. Many states allow these assessments to be credited against future premium taxes. The liability for estimated guaranty fund assessments net of applicable premium tax credits as December 31, 2025 and 2024 was $175, respectively. The Company monitors sales materials and compliance procedures and makes extensive efforts to minimize any potential liabilities in this area. The Company believes such assessments in excess of amounts accrued will not materially impact its financial statement position, results of operation or liquidity.

LEASES The Company has entered into leases, primarily for field offices.

As of December 31, 2025 future minimum payments under noncancellable leases are as follows:


For the year ending:

2026	$	761
2027		379
2028		233
2029		119
Thereafter		—

Rent expense was $531 and $6,884 during the years ended December 31, 2025 and 2024, respectively.


2025 Statutory Financial Statements			Page 51

LOGO

Report of Independent Auditors

To the Board of Trustees of

The Penn Mutual Life Insurance Company

Opinions

We have audited the accompanying statutory financial statements of The Penn Mutual Life Insurance Company (the “Company”), which comprise the statements of admitted assets, liabilities and surplus as of December 31, 2023 and 2022, and the related statements of income, changes in surplus and cash flows for the years then ended, including the related notes (collectively referred to as 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 surplus of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in accordance with the accounting practices prescribed or permitted by the Pennsylvania Insurance Department described in Note 1.

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 accompanying financial statements do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2023 and 2022, or the results of its operations or its cash flows for the years then ended.

Basis for Opinions

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

LOGO

Responsibilities of Management for the Financial Statements

Auditors’ Responsibilities for the Audit of the Financial Statements

In performing an audit in accordance with US GAAS, we:

•

Exercise professional judgment and maintain professional skepticism throughout the audit.

•

($ In Thousands)

Statements of Admitted Assets, Liabilities and Surplus


As of December 31,	2023		2022

ADMITTED ASSETS
Bonds	$	14,731,578	$	13,672,878
Stocks:
Preferred		47,867		51,966
Common — affiliated		1,004,684		869,747
Common — unaffiliated		70,420		42,557
Real estate		28,249		29,654
Policy loans		859,986		553,785
Cash and short-term investments		464,241		376,029
Alternative assets		1,105,180		1,188,539
Derivatives		1,271,132		1,172,035
Other invested assets		1,231,889		1,024,353

TOTAL INVESTMENTS		20,815,226		18,981,543

Investment income due and accrued		198,372		155,217
Premiums due and deferred		160,145		151,969
Deferred tax asset		203,156		255,575
Corporate owned life insurance		244,248		228,074
Amounts recoverable from reinsurers		51,551		43,359
Other assets		253,197		66,746
Separate account assets		8,803,569		8,091,620

TOTAL ASSETS	$	30,729,464	$	27,974,103


LIABILITIES
Reserves and funds for payment of insurance and annuity benefits	$	14,138,339	$	12,932,817
Dividends to policyholders payable in the following year		202,919		165,192
Policy claims in process		116,712		75,682
Interest maintenance reserve		11,987		8,726
Asset valuation reserve		345,042		339,347
Drafts outstanding		45,991		41,043
Funds held under coinsurance		1,894,475		1,769,348
Other liabilities		688,887		582,032
Derivatives		1,617,001		1,318,483
Separate account liabilities		8,803,569		8,091,620

TOTAL LIABILITIES		27,864,922		25,324,290


CAPITAL AND SURPLUS
Surplus notes		891,456		891,130
Unassigned surplus		1,973,086		1,758,683

TOTAL CAPITAL AND SURPLUS		2,864,542		2,649,813

TOTAL LIABILITIES AND CAPITAL AND SURPLUS	$	30,729,464	$	27,974,103

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


2023 Statutory Financial Statements			Page 1

($ In Thousands)

Statements of Cash Flows


For the Years Ended December 31,	2023			2022

OPERATIONS
Premium and annuity considerations	$	2,427,959		$	2,246,744
Net investment income		932,334			882,090
Other revenue		267,668			247,308

CASH PROVIDED BY OPERATIONS		3,627,961			3,376,142

Benefits paid		1,684,407			1,413,880
Commissions and operating expenses		620,960			607,042
Net transfers from separate accounts		(439,498	)		(216,850	)
Dividends to policyholders		15,115			14,912
Taxes refunded on operating income and realized investment losses		(28,339	)		(138,888	)

CASH USED IN OPERATIONS		1,852,645			1,680,096

NET CASH PROVIDED BY OPERATIONS		1,775,316			1,696,046


INVESTMENT ACTIVITIES
Investments sold, matured or repaid:
Bonds		1,532,520			1,460,296
Preferred and common stocks		36,957			67,724
Alternative assets, real estate and other invested assets		15,849			300,229
Derivatives		15,363			139,322
Miscellaneous proceeds		3,937			(16,943	)

NET PROCEEDS FROM INVESTMENTS SOLD, MATURED OR REPAID		1,604,626			1,950,628

Cost of investments acquired:
Bonds		2,695,461			3,145,343
Preferred and common stock		82,384			149,456
Alternative assets, real estate and other invested assets		152,759			410,701
Derivatives		35,545			16,942
Miscellaneous applications		(34,893	)		(13,914	)

TOTAL COST OF INVESTMENTS ACQUIRED		2,931,256			3,708,528

Net increase in policy loans		(282,531	)		(76,420	)

NET CASH USED IN INVESTMENT ACTIVITIES		(1,609,161	)		(1,834,320	)


FINANCING AND MISCELLANEOUS
Net (withdrawals)/deposits on deposit-type contracts		(24,694	)		119,502
Other cash applied, net		(53,249	)		(8,952	)

NET CASH (USED IN)/PROVIDED BY FINANCING AND MISCELLANEOUS		(77,943	)		110,550

NET CHANGE IN CASH AND SHORT-TERM INVESTMENTS		88,212			(27,724	)

Cash and short-term investments:
Beginning of year		376,029			403,753

End of year	$	464,241		$	376,029

…continued -


Page 4		The Penn Mutual Life Insurance Company

($ In Thousands)

Notes to Financial Statements

Note 1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

NATURE OF OPERATIONS The Penn Mutual Life Insurance Company (the “Company” or “PML”) is a mutual life insurance company domiciled in Pennsylvania, that concentrates primarily on the sale of individual life insurance and annuity products. The primary products that the Company currently markets are traditional whole life, one year non-renewable and level term, variable universal life, immediate annuities and deferred annuities, both fixed and variable. The Company markets its products through a network of career and independent financial professionals. The Company is licensed to write business in forty-nine states and the District of Columbia.

BASIS OF PRESENTATION The accompanying financial statements of the Company have been prepared in conformity with the National Association of Insurance Commissioner’s (“NAIC”) Practices and Procedures manual and with statutory accounting practices prescribed or permitted by the Pennsylvania Insurance Department (collectively “SAP” or “statutory accounting principles”). Prescribed statutory accounting practices include publications of the NAIC, state laws, regulations, and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. The Company currently has no permitted practices.

(a)

certain acquisition costs, such as commissions and other variable costs, that are directly related to the successful acquisition of new business, are charged to current operations as incurred, whereas GAAP would generally capitalize these expenses and amortize them based on profit emergence over the expected life of the policies or over premium payment period;

(b)

statutory policy reserves are based upon the Commissioners’ Reserve Valuation Method (“CRVM”) or net level premium method and prescribed statutory mortality, morbidity and interest assumptions, whereas GAAP reserves would generally be based upon the net level premium method or the estimated gross margin method, with estimates of future mortality, morbidity, and interest assumptions;

(c)

bonds are generally carried at amortized cost, whereas GAAP would generally report bonds at fair value;

(d)

undistributed earnings from alternative assets are included in unrealized gains and losses, whereas GAAP would treat these changes as net investment income;

(e)

(f)

(g)

assets are reported at “admitted asset” value, and “nonadmitted assets” are excluded through a charge against surplus, whereas GAAP would record these assets net of any valuation allowance;

(h)

majority-owned subsidiaries are accounted for using the equity method. The Penn Insurance and Annuity Company (“PIA”), Vantis Life Insurance Company (“Vantis”), The Penn Insurance and Annuity Company of New York (“PIANY”), Janney Montgomery Scott (“JMS”), LLC, Hornor Townsend & Kent, LLC (“HTK”), Penn Mutual Asset Management, LLC (“PMAM”), and 1847 Insurance Captive, LLC (“1847”) are admitted assets. Under GAAP, these majority-owned subsidiaries would be consolidated;

(i)

(j)

(k)

reinsurance reserve credits are reported as a reduction of policyholders’ reserves and liabilities for deposit-type contracts, whereas GAAP would report these balances as an asset;


Page 6		The Penn Mutual Life Insurance Company

($ In Thousands)

(l)

(m)

changes in the fair value of unaffiliated common stock are recorded as changes in surplus, whereas GAAP recognizes the changes through realized capital gains/(losses);

(n)

changes in fair value of perpetual preferred stock are recorded as changes in surplus, whereas GAAP recognizes the changes through realized capital gains/(losses);

(o)

(p)

changes in the fair value of the derivative financial instruments are recorded as changes in surplus, unless deemed an effective hedge when it is carried at amortized cost with no resulting changes in fair value. Changes in fair value for GAAP would be reported as income for ineffective cash flow hedges and effective fair value hedges; changes in fair value for GAAP would be reported as other comprehensive income for effective cash flow hedges;

(q)

comprehensive income is not presented, whereas GAAP would present changes in unrealized capital gains and losses, changes in funded status of pension and postretirement plans, and foreign currency translations as other comprehensive income;

(r)

embedded derivatives are recorded as part of the underlying contract, whereas GAAP would identify and bifurcate certain embedded derivatives from the underlying contract or security and account for them separately;

(s)

policyholder dividends are recognized when declared, whereas GAAP would recognize these over the term of the related policies;

(t)

investments in Federal Home Loan Bank stock are reported as an investment in common stock, unaffiliated, whereas GAAP would report these within other invested assets.

(u)

Changes in the cash surrender value of the policies are recorded as an adjustment to the premiums paid for the insurance coverage, which is recognized as part of the interest credited to policyholders within Benefits paid to policyholders and beneficiaries.

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES The preparation of financial statements requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Those estimates are inherently subject to change and actual results could differ from those estimates. Included among the material reported amounts and disclosures that require extensive use of estimates are:

◇

Carrying value of certain invested assets and derivatives

◇

Liabilities for reserves and funds for payment of insurance and annuity benefits

◇

Accounting for income taxes and valuation of deferred income tax assets and liabilities and unrecognized tax benefits

◇

Litigation and other contingencies

◇

Pension and other postretirement and postemployment benefits

For fixed income securities that do not have a fixed schedule of payments and where market valuations are not readily available, the effect on amortization or accretion is revalued periodically based on the current estimated


2023 Statutory Financial Statements			Page 7

($ In Thousands)

cash flows. Prepayment assumptions are based on borrower constraints and economic incentives such as original term, age, and coupon of the loan as affected by the interest rate environment. Cash flow assumptions for structured securities are obtained from broker dealer survey values or internal estimates. These assumptions are consistent with the current interest rate and economic environment.

Common Stock of the Company’s insurance affiliates are carried at their underlying audited statutory surplus on the Statement of Admitted Assets, Liabilities, and Surplus.

Unaffiliated common stock is carried at fair value. The investment in capital stock of the Federal Home Loan Bank of Pittsburgh (“FHLB-PGH”) is carried at par, which approximates fair value. See the “Federal Home Loan Bank Borrowings” caption within this footnote for additional information on FHLB-PGH.

Dividends are recognized in net investment income on the ex-dividend date. Other changes in the carrying value of affiliates are recognized as changes in unrealized gains or losses in surplus.

Real Estate Real Estate occupied by the Company is carried at depreciated cost. Depreciated cost is adjusted for impairments whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable, with the impairment being included in realized capital losses. Depreciation is calculated using the straight-line method over the estimated useful life of the real estate holding, not to exceed 40 years. Depreciation expense is included in net investment income.

Policy Loans Policy Loans are carried at the aggregate balance of unpaid principal and interest.

Cash, Cash Equivalents and Short-term investments Cash Equivalents include investments purchased with maturities of three months or less and money market mutual funds. Short-term investments, which are carried at amortized cost and approximate fair value, consist of investments purchased with maturities greater than three months and less than or equal to 12 months.

Alternative Assets Alternative Assets consists primarily of limited partnerships. The Company accounts for the value of its investments at their underlying GAAP equity. Dividends and income distributions from limited partnerships are recorded as investment income. Undistributed earnings are included in the unrealized gains and losses balance and are reflected in surplus, net of deferred taxes. Distributions that are recorded as a return of capital reduce the carrying value of the limited partnership investment. Due to the timing of the valuation data received from the partnership, these investments are reported in accordance with the most recent valuations received, which are primarily on a one quarter lag.

Derivatives The Company may utilize derivative financial instruments in the normal course of business to manage risk, in conjunction with its management of assets and liabilities and interest rate risk. The accounting treatment of specific derivatives depends on whether the financial instrument is designated and qualifies as a highly effective hedge. Derivatives used in hedging transactions that meet the criteria of a highly effective hedge are reported and valued in a manner that is consistent with the instrument being hedged. The change in fair value of these derivatives is recognized as an unrealized capital gain/(loss) until they are closed, at which time they are recorded in realized capital gains/(losses). Derivatives used in risk management transactions that do not meet the criteria of an effective hedge are accounted for at fair value, with changes in fair value recorded in unrealized capital gains/(losses). Derivatives with a positive fair value or carrying value are reported as admitted assets. Derivatives with a negative fair value or carrying value are reported in Other liabilities. Realized gains and losses that are recognized upon termination or maturity of the derivatives used in economic hedges of interest rate and currency risk of the fixed income portfolio, regardless of accounting treatment, are transferred, net of taxes, to the IMR. All other realized gains and losses are recognized in net income upon maturity or termination of the derivative contracts.


Page 8		The Penn Mutual Life Insurance Company

($ In Thousands)

Investment income is recorded on an accrual basis. Amounts payable or receivable under total return, currency, credit default, interest rate and inflation swap agreements are recognized as investment income or expense when incurred. The Company does not engage in derivative financial instrument transactions for speculative purposes.

Other invested assets also include notes receivable carried at book value from PMAM, JMS, HTK, ISP, PMAM, 1847, PMAM’s Private Funds/PMUBX and receivables for unsettled investment transactions. In 2022 changes in Private Funds/ PMUBX resulted in an opening surplus adjustment.

OTTI EVALUATION Bonds, mortgage-backed and asset-backed securities The Company considers an impairment to be other-than-temporary if: (a) the Company’s intent is to sell, (b) the Company will more likely than not be required to sell, (c) the Company does not have the intent and ability to hold the security for a period of time sufficient to recover the amortized cost basis, or (d) the Company does not expect to recover the entire amortized cost basis. The Company conducts a periodic management review of all bonds including those in default, not-in-good standing, or otherwise designated by management. The Company also considers other qualitative and quantitative factors in determining the existence of OTTI including, but not limited to, unrealized loss trend analysis and significant short-term changes in value, default rates, delinquency rates, percentage of nonperforming loans, prepayments, and severities. If the impairment is other-than-temporary, the non-interest loss portion of the impairment is recorded through realized losses, and the interest related portion of the loss is disclosed in the notes to the financial statements.

Equity Securities OTTI — The Company will impair any lot of equity securities in an unrealized loss position for more than 12 consecutive months by more than 10%. Any such impairments are accounted for as a realized loss.

LIHTC OTTI — For LIHTC investments, OTTI is determined by comparing the book value of the investment with the present value of future tax benefits. The investment is written down if the book value is higher than the present value, and the impairment is accounted for as a realized loss.


2023 Statutory Financial Statements			Page 9

($ In Thousands)

Due and accrued income is not recorded on: (a) bonds in default; (b) bonds delinquent more than 90 days or where collection of interest is improbable; and (c) policy loan interest due and accrued in excess of the cash surrender value of the underlying contract.


				2023											2022

	New			Renewal			Group		Total			New			Renewal			Group		Total
Uncollected premium	$	1,726		$	46,757			NA				$	168		$	40,671			NA
Uncollected loading		(1,681	)		(13,722	)		NA					(165	)		(11,304	)		NA

Net uncollected	$	45		$	33,035		$	59	$	33,139		$	3		$	29,367		$	108	$	29,478

Deferred premium	$	20,961		$	146,579			NA				$	17,080		$	133,281			NA
Deferred loading		(20,068	)		(15,962	)		NA					(16,310	)		(8,156	)		NA

Net deferred	$	893		$	130,617		$	2	$	131,512		$	770		$	125,125		$	3	$	125,898

Subtotal — gross deferred and uncollected										164,651											155,376
Nonadmitted										(4,506	)										(3,407	)

Premiums due and deferred , net									$	160,145										$	151,969

FEDERAL INCOME TAX The Company files a consolidated federal income tax return with its insurance and non-insurance subsidiaries. Each subsidiary’s tax liability or refund is accrued on a separate company basis. The Company reimburses subsidiaries for losses utilized in the consolidated return based on inter-company tax allocation agreements. The provision for federal income taxes is computed in accordance with the section of the Internal Revenue Code applicable to life insurance companies and is based on income that is currently taxable.

Deferred income tax assets and liabilities are established to reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. These deferred tax assets or liabilities are measured by using the enacted tax rates expected to apply to taxable income in the period in which the deferred tax liabilities or assets are expected to be settled or realized. Changes in the deferred tax balances are reported as adjustments to surplus. Deferred tax assets in excess of the statutory limits are treated as nonadmitted assets and charged to surplus.

CORPORATE OWNED LIFE INSURANCE The Company purchases life insurance policies on certain officers and employees on which the Company is designated as the beneficiary. The Company recognizes the cash surrender value of the policies as an asset on the Statement of Admitted Assets, Liabilities and Surplus. Changes in the cash surrender value of the policies are recorded as an adjustment to the premiums paid for the insurance coverage, which is recognized as part of interest credited to policyholders within Benefits paid to policyholders and beneficiaries on the Statements of Income and Changes in Surplus.


Page 10		The Penn Mutual Life Insurance Company

($ In Thousands)

Included in the total corporate owned life insurance owned by the Company are a block of policies issued by PIA. As of December 31, 2023 and 2022, the cash surrender values of those policies held by the Company were $21,625 and $21,436, respectively.

The cash surrender values for investments in the corporate owned life insurance are as follow at December 31:


	2023		2022

Equity funds	$	122,182	$	156,539
Bond funds		1,870		3,171
Money market funds		96,601		43,561
Other		23,595		24,803

Total	$	244,248	$	228,074

In addition to excess coverage and coinsurance contracts, the Company also utilizes other forms of reinsurance such as coinsurance funds withheld and coinsurance/modified coinsurance.

Reinsurance does not relieve the Company of its primary liability and, as such, failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the risk transfer of its reinsurance contracts and the financial strength of potential reinsurers. The Company regularly monitors the financial condition and ratings of its existing reinsurers to ensure that amounts due from reinsurers are collectible.

OTHER ASSETS Computer equipment and packaged software is reported at a cost of $82,556 and $82,353, less accumulated depreciation of $79,065 and $76,858 at December 31, 2023 and 2022, respectively. Computer equipment and packaged software is depreciated using the straight-line method over the lesser of its useful life or three years. Depreciation expense on computer equipment and packaged software charged to operations in 2023 and 2022 was $3,065 and $4,154, respectively. Furniture is depreciated on a straight-line basis over the estimated useful lives of the related assets. Leasehold improvements are depreciated over the remaining life of the lease. Building and property improvements are depreciated in accordance with the expected useful life.

Other assets also includes receivables related to federal income taxes, centrally cleared derivative transactions, receivables for collateral remitted to counterparties, and amounts due from affiliates under the terms of service agreements.

SEPARATE ACCOUNT ASSETS AND LIABILITIES The Company has separate account assets and liabilities representing segregated funds administered and invested by the Company primarily for the benefit of variable life insurance policyholders and annuity and pension contractholders, including the Company’s benefit plans. The assets of each account are legally segregated and are generally not subject to claims that arise out of any other business of the Company. The Separate accounts have varying investment objectives.

Separate account assets are stated at the fair value of the underlying assets, which are shares of mutual funds. The value of the assets in the Separate accounts reflects the actual investment performance of the respective accounts and is not guaranteed by the Company. The liability is reported at contract value and represents the policyholders’ interest in the account and includes accumulated net investment income and realized and unrealized capital gains/(losses) on the assets. The investment income and realized capital gains/(losses) from separate account assets accrue to the policyholders and are not included in the Statements of Income. Mortality, policy administration, surrender charges assessed and asset management fees charged against the accounts are included in other revenue in the accompanying Statements of Income and Changes in Surplus.


2023 Statutory Financial Statements			Page 11

($ In Thousands)

The Company issues variable annuity contracts in the separate accounts in which the Company provides various forms of guarantees to benefit the related contract holders called Guaranteed Minimum Death Benefits (“GMDB”), Guaranteed Minimum Accumulated Benefits (“GMAB”), GMAB/Guaranteed Minimum Withdrawal Benefits (“GMWB”), and GMWB with inflation protection. In accordance with guarantees provided, if the investment proceeds in the separate accounts are insufficient to cover the guarantees for the product, the policyholder proceeds will be remitted by the general account.

NONADMITTED ASSETS Assets designated as nonadmitted by the NAIC include furniture, certain electronic data processing equipment, unamortized software, the amount of the deferred tax asset that is in excess of limits prescribed by SAP, the pension plan assets, certain investments in partnerships for which financial audits are not performed, certain other receivables, advances and prepayments, certain negative IMR balances, and uncollected premiums greater than 90 days from the due date. Such amounts are excluded from the Statements of Admitted Assets, Liabilities and Surplus.

RESERVES AND FUNDS FOR THE PAYMENT OF INSURANCE AND ANNUITY BENEFITS Policyholders’ reserves provide amounts adequate to discharge estimated future obligations in excess of estimated future premium on policies in-force. Any adjustments that are made to the reserve balances are reflected in the Statements of Income in the year in which such adjustments are made, with the exception of changes in valuation bases that are accounted for as charges or credits to surplus.

Reserves and funds for the payment of future life and annuity benefits are developed using actuarial methods based on statutory mortality and interest requirements. Reserves for life insurance contracts are developed using accepted actuarial methods computed principally on the net level, modified preliminary term or CRVM methods using the 1941, 1958, 1980, 2001, and 2017 Commissioners’ Standard Ordinary (“CSO”) Mortality and American Experience Tables and assumed interest rates ranging from 2.25% to 4.50%. Reserves for substandard policies are computed using multiples of the respective underlying mortality tables. In 2023, The Company moved to the 2017 CSO mortality table as the underlying mortality basis for all Whole Life business issued from 2017 through 2019. As a result, the Company recognized a change in valuation basis through an adjustment to surplus for $216,831. The Company has universal life contracts with secondary guarantee features. The Company establishes reserves according to Actuarial Guideline XXXVIII, unless otherwise noted.

Reserves for Term and Single Life UL with secondary guarantee features are based on the methodology specified by the Life Principle-Based Reserve approach (“VM-20”), starting with 2017 policy issue years. Reserves for Single and Joint Life IUL are based on the same VM-20 methodology starting with 2018 policy issue years. Reserves for all other life insurance products are based on the same VM-20 methodology starting with 2020 policy issue years. VM-20 specifies the final reserve as the greater of the Net Premium Reserve (“NPR”), Deterministic Reserve (“DR”) and Stochastic Reserve (“SR”). The NPR is a formulaic reserve with prescribed assumptions, including the 2017 CSO Mortality Tables. The DR is based on a single path, deterministic projection with prudent estimate assumptions, including margins for uncertainty. The SR is based on the Conditional Tail Expectation 70 (“CTE70”) of 1000 stochastically generated interest rate return scenarios with prudent estimate assumptions, including margins for uncertainty.


Page 12		The Penn Mutual Life Insurance Company

($ In Thousands)

Reserves for group annuity contracts are developed using accepted actuarial methods computed principally on the 1971 and 1983 Group Annuity Mortality Tables and 1994 Group Annuity Reserving Tables with assumed interest rates ranging from 4.50% to 11.25%. Approximately 1% of reserves use an assumed interest rate greater than 10%.

The Company had $1,991,791 and $2,180,642 as of December 31, 2023 and December 31, 2022, respectively, of insurance in force for which the gross premiums are less than the net premiums according to the standards of valuation set by the Commonwealth of Pennsylvania.

The tabular interest has been determined from the basic data for the calculation of policy reserves. The tabular less actual reserves released have been determined by formula.

LIABILITIES FOR DEPOSIT-TYPE CONTRACTS Reserves for funding agreements, dividend accumulations, 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. Fair value is estimated by discounting future cash flows using current market rate.

The tabular interest for funds not involving life contingencies is determined as the change in reserves less funds added during the year less other increases, plus funds withdrawn during the year.

POLICYHOLDERS’ DIVIDENDS The liability for policyholders’ dividends includes the estimated amount of annual dividends and settlement dividends to be paid to policyholders in the following year. Policyholders’ dividends incurred are recorded in the Statements of Income. Dividends expected to be paid to policyholders in the following year are approved annually by the Company’s Board of Trustees. The allocation of these dividends to policyholders reflects the relative contribution of each group of participating policies to surplus and considers, among other factors, investment returns, mortality and morbidity experience, expenses, and income tax charges.

POLICY CLAIMS IN PROCESS Policy claims in process include provisions for payments to be made on reported claims and claims incurred but not reported.

ASSET VALUATION RESERVE The AVR is a contingency reserve to stabilize surplus against fluctuations in the statement value of common stocks, real estate investments, partnerships, LIHTC investments, and LLCs as well as non-interest related declines in the value of bonds and certain derivatives. The AVR is reported in the Statements of Admitted Assets, Liabilities and Surplus, and the change in AVR is reported in the Statements of Income and Changes in Surplus.

DRAFTS OUTSTANDING Drafts outstanding that have not been presented for payment are recorded as a liability.

OTHER LIABILITIES Other liabilities primarily include accruals for general and operating expense, life insurance premiums received in advance of the due date, net transfers due from the separate accounts, and liabilities related to postretirement benefit plans in an underfunded position.

BENEFIT PLANS The Company recognizes a liability for the funded status of defined benefit pension and postretirement plans where the projected benefit obligation exceeds plan assets (underfunded) and nonadmits assets for the funded status of defined benefit pension and postretirement plans where the fair value of plan assets exceed the projected benefit obligation (overfunded).


2023 Statutory Financial Statements			Page 13

($ In Thousands)

maintained based on various risk factors related to it. At December 31, 2023, the Company’s surplus exceeds these minimum levels.

SURPLUS NOTES On April 29, 2021, the Company issued a Surplus Note (“2021 Note”) at par with a principal balance of $500,000. The 2021 Note bears interest at 3.80%, and has a maturity date of April 29, 2061. The 2021 Note was issued pursuant to Rule 144A under the Securities Act of 1933, as amended and are administered by a U.S. bank as registrar/ paying agent. Interest on the 2021 Note is scheduled to be paid semiannually on June 15 and December 15 of each year. Interest paid on the 2021 Note was $19,000 and $19,000 for the year ended December 31, 2023 and December 31, 2022, respectively. Total interest paid since the issuance of the 2021 Note is $49,928.

On July 1, 2010, the Company issued a Surplus Note (“2010 Note”) with a principal balance of $200,000, at a discount of $8,440. The 2010 Note bears interest at 7.625%, and has a maturity date of June 15, 2040. The 2010 Note was issued pursuant to Rule 144A under the Securities Act of 1933, as amended and are administered by a U.S. bank as registrar/ paying agent. Interest on the 2010 Note is scheduled to be paid semiannually on March 31 and September 30 of each year. At December 31, 2023 and December 31, 2022, the amortized cost basis of the 2010 Note was $193,322 and $193,119, respectively. Interest paid on the 2010 Note was $15,250 and $15,250 for the years ended December 31, 2023 and December 31, 2022, respectively. Total interest paid since the issuance of the 2010 Note is $217,313.

On June 23, 2004, the Company issued a Surplus Note (“2004 Note”) with a principal balance of $200,000, at a discount of $3,260. The 2004 Note bears interest at 6.65%, and has a maturity date of June 15, 2034. The 2004 Note was issued pursuant to Rule 144A under the Securities Act of 1933, as amended and are administered by a U.S. bank as registrar/ paying agent. Interest on the 2004 Note is scheduled to be paid semiannually on April 1 and October 1 of each year. At December 31, 2023 and December 31, 2022, the amortized cost basis of the 2004 Note was $198,134 and $198,011, respectively. Interest paid on the 2004 Note was $13,300 and $13,300 for the years ended December 31, 2023 and December 31, 2022, respectively. Total interest paid since the issuance of the 2004 Note is $269,620.

The recognition of interest expense on surplus notes requires prior approval for payment from the Pennsylvania Insurance Department.

The Company accounts for deposit-type contracts (those that do not subject the Company to mortality or morbidity risk) under the deposit method. Amounts received from and payments to policyholders related to these contracts are recorded directly against the related policy reserves. Interest credited to policyholder accounts is reflected in benefits paid to policyholders and beneficiaries. Fees charged to policyholder accounts are reflected in Other revenue.

OTHER REVENUE Other revenue includes commission and expense allowances recognized by the Company pursuant to reinsurance agreements, as well as reserve adjustments relating to coinsurance/modified coinsurance/funds withheld reinsurance agreements entered into with third parties. Other revenue also includes fees charged to policyholders.


Page 14		The Penn Mutual Life Insurance Company

($ In Thousands)

REALIZED AND UNREALIZED CAPITAL GAINS AND LOSSES Realized capital gains and losses, net of taxes, excludes gains and losses transferred to the IMR. Realized capital gains and losses are recognized in net income and are determined using the specific identification method.

Unrealized capital gains and losses, net of deferred federal income taxes, are recorded as a change in surplus.

FEDERAL HOME LOAN BANK BORROWINGS The Company is a member of the FHLB-PGH, which provides access to collateralized advances, collateralized funding agreements, and other FHLB-PGH products. Collateralized advances from the FHLB-PGH are classified as borrowed money. Collateralized funding agreements issued to the FHLB-PGH are classified as liabilities for deposit-type funds and are recorded within Reserves and funds for payment of insurance and annuity benefits. FHLB-PGH is a first-priority secured creditor.

Borrowings from the FHLB-PGH are classified as funding agreements. As of December 31, 2023, there were $- in outstanding borrowings and the maximum borrowed during the year was $100,000. As of December 31, 2022, there were $100,000 in outstanding borrowings and the maximum borrowed during the year was $350,000.

NEW ACCOUNTING STANDARDS

The NAIC adopted INT 23-01T, which is an interpretation that prescribes limited-time, optional, statutory accounting guidance as an exception to the existing guidance detailed in SSAP No. 7 “Asset Valuation Reserve and Interest Maintenance Reserve”. Under the INT, reporting entities are allowed to admit negative IMR if certain criteria are met. The Company did not admit any negative IMR at December 31, 2023 in its Statement of Admitted Assets, Liabilities and Capital and Surplus.

Note 3. INVESTMENTS


2023 Statutory Financial Statements			Page 15

($ In Thousands)

BONDS AND PREFERRED STOCK The following summarizes the admitted value and estimated fair value of the Company’s investment in bonds and preferred stock as of December 31:


			Gross Unrealized Capital
2023	Admitted Value		Gains		Losses		Estimated Fair Value

US Governments	$	743,055	$	5,629	$	28,959	$	719,725
Other Governments		6,000		—		421		5,579
States, Territories and Possessions		52,024		795		1,780		51,039
Political Subdivisions		333,437		1,916		39,122		296,231
Special Revenue		1,263,235		12,298		150,093		1,125,440
Industrial and Miscellaneous		6,266,287		96,851		590,260		5,772,878
Residential Mortgage-backed Securities		1,269,830		11,345		104,693		1,176,482
Commercial Mortgage-backed Securities		1,646,019		10,254		89,179		1,567,094
Asset-backed Securities		2,877,937		12,254		90,820		2,799,371
Hybrid Securities		273,348		1,523		19,048		255,823
SVO Identified Funds		406		148		148		406

Total Bonds		14,731,578		153,013		1,114,523		13,770,068
Preferred Stock		47,867		3,306		4,799		46,374

Total Bonds and Preferred Stock	$	14,779,445	$	156,319	$	1,119,322	$	13,816,442


			Gross Unrealized Capital
2022	Admitted Value		Gains		Losses		Estimated Fair Value

US Governments	$	986,748	$	848	$	57,713	$	929,883
Other Governments		6,000		—		159		5,841
States, Territories and Possessions		49,872		501		2,970		47,403
Political Subdivisions		322,436		1,145		50,207		273,374
Special Revenue		1,129,580		6,395		184,526		951,449
Industrial and Miscellaneous		5,965,201		53,504		774,515		5,244,190
Residential Mortgage-backed Securities		940,165		1,412		112,482		829,095
Commercial Mortgage-backed Securities		1,682,775		3,650		124,535		1,561,890
Asset-backed Securities		2,311,423		7,405		143,669		2,175,159
Hybrid Securities		275,254		771		27,733		248,292
SVO Identified Funds		388		—		—		388
Bank Loans		3,036		67		27		3,076

Total Bonds		13,672,878		75,698		1,478,536		12,270,040
Preferred Stock		51,966		4,354		8,056		48,264

Total Bonds and Preferred Stock	$	13,724,844	$	80,052	$	1,486,592	$	12,318,304

Included in admitted value and estimated fair value for Residential mortgage-backed securities above are $231 and $122, respectively, of subprime mortgages.


Page 16		The Penn Mutual Life Insurance Company

($ In Thousands)


Balance Sheet Classification	Type	2023		2022

Debt securities — Available for sale	Collateral — FHLB	$	—	$	489,304
Debt securities — Available for sale	Reinsurance agreements		6,550,200		5,251,909
Debt securities — Available for sale	New York 109 trust agreement		4,132,960		4,122,950
Debt securities — Available for sale	Collateral — Derivatives		345,678		217,127
Debt securities — Available for sale	State deposit		3,315		3,345
Equity securities — Common stock unaffiliated	FHLB Stock		3,075		6,753
Equity securities — Common stock unaffiliated	Reinsurance agreements		14,188		13,324
Cash	State deposit		927		927

Total Restricted Assets		$	11,050,343	$	10,105,639

The following table summarizes the admitted value and estimated fair value of debt securities as of December 31, 2023 by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties. Securities that are not due on a single maturity are included as of the final maturity.


	Admitted Value		Estimated Fair Value

Due in one year or less	$	152,019	$	150,408
Due after one year through five years		1,562,259		1,546,257
Due after five years through ten years		1,348,148		1,333,711
Due after ten years		5,875,365		5,196,746
Residential Mortgage-backed Securities⁽¹⁾		1,269,830		1,176,482
Commercial Mortgage-backed Securities⁽¹⁾		1,646,019		1,567,094
Asset-backed Securities⁽¹⁾		2,877,937		2,799,370

Total Bonds		14,731,578		13,770,068
Preferred Stock		47,867		46,374

Total Bonds and Preferred Stock	$	14,779,445	$	13,816,442


(1) Includes U.S. Agency structured securities

Mortgage and other asset-backed securities consist of commercial and residential mortgage pass-through holdings, securities backed by various forms of collateral, with the largest being collateralized loan obligations. These securities follow a structured principal repayment schedule and are rated investment grade, other than $104,660, primarily in asset-backed securities. The mortgage and other asset-backed securities portfolios are presented separately in the maturity schedule due to the potential for prepayment. The weighted average life of this portfolio is 5.5 years.

At December 31, 2023, the largest industry concentration of the Company’s portfolio was investments in the Electric-Integrated sector of $675,870, representing 5% of the total debt securities portfolio.


2023 Statutory Financial Statements			Page 17

($ In Thousands)

CREDIT LOSS ROLLFORWARD The following represents a rollforward of the cumulative credit loss component of OTTI loss recognized in earnings on fixed maturity securities still held for which a portion of the OTTI loss was not recognized in earnings:


As of December 31,	2023			2022

Balance, beginning of period	$	11,267		$	8,169
Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period		(2,463	)		(316	)
Credit loss impairments previously recognized on securities impaired to fair value during the period		—			—
Credit loss impairments recognized in the current period on securities not previously impaired		—			3,414
Additional credit loss impairments recognized in the current period on securities previously impaired		—			—

Balance, end of period	$	8,804		$	11,267

UNREALIZED LOSSES ON INVESTMENTS Management has determined that the unrealized losses on the Company’s investments in equity and fixed maturity securities at December 31, 2023 are temporary in nature.


	Less than 12 months				Greater than 12 months				Total
2023	Fair Value		Gross Unrealized Capital Loss		Fair Value		Gross Unrealized Capital Loss		Fair Value		Gross Unrealized Capital Loss		Number of Securities

US Governments	$	11,821	$	653	$	320,644	$	28,306	$	332,465	$	28,959		54
Other Governments		—		—		5,580		421		5,580		421		2
States, Territories and Possessions		—		—		20,848		1,780		20,848		1,780		11
Political Subdivisions		2,258		304		207,624		38,818		209,882		39,122		75
Special Revenue		24,996		745		796,438		149,348		821,434		150,093		327
Industrial and Miscellaneous		68,704		4,047		3,961,309		586,213		4,030,013		590,260		2,021
Residential Mortgage-backed Securities		155,916		11,277		805,811		93,416		961,727		104,693		256
Commercial Mortgage-backed Securities		130,888		6,544		1,073,550		82,635		1,204,438		89,179		542
Asset-backed Securities		317,267		7,190		1,556,463		83,630		1,873,730		90,820		601
Hybrid Securities		—		—		232,017		19,048		232,017		19,048		80
SVO Identified Funds		—		—		406		148		406		148		—

Total Bonds	$	711,850	$	30,760	$	8,980,690	$	1,083,763	$	9,692,540	$	1,114,523		3,969
Preferred Stock		4,863		138		39,209		4,661		44,072		4,799		18

Total Bonds and Preferred Stocks	$	716,713	$	30,898	$	9,019,899	$	1,088,424	$	9,736,612	$	1,119,322		3,987


Page 18		The Penn Mutual Life Insurance Company

($ In Thousands)


	Less than 12 months				Greater than 12 months				Total
2022	Fair Value		Gross Unrealized Capital Loss		Fair Value		Gross Unrealized Capital Loss		Fair Value		Gross Unrealized Capital Loss		Number of Securities

US Governments	$	187,333	$	6,647	$	692,906	$	51,066	$	880,239	$	57,713		61
Other Governments		841		159		—		—		841		159		2
States, Territories and Possessions		32,320		2,970		—		—		32,320		2,970		10
Political Subdivisions		156,007		25,253		60,526		24,954		216,533		50,207		544
Special Revenue		550,467		84,550		238,000		99,976		788,467		184,526		298
Industrial and Miscellaneous		3,649,910		484,842		725,904		289,673		4,375,814		774,515		1,950
Residential Mortgage-backed Securities		569,522		54,718		246,767		57,764		816,289		112,482		222
Commercial Mortgage-backed
Securities		1,264,993		93,979		182,923		30,556		1,447,916		124,535		492
Asset-backed Securities		1,030,166		64,692		857,933		78,977		1,888,099		143,669		465
Hybrid Securities		217,691		24,775		15,917		2,958		233,608		27,733		80
Bank Loans		1,203		27		—		—		1,203		27		2

Total Bonds	$	7,660,453	$	842,612	$	3,020,876	$	635,924	$	10,681,329	$	1,478,536		4,126
Preferred Stock		41,549		6,729		6,526		1,327		48,075		8,056		26

Total Bonds and Preferred Stocks	$	7,702,002	$	849,341	$	3,027,402	$	637,251	$	10,729,404	$	1,486,592		4,152

Included in the December 31, 2023 and 2022 amounts above is the interest portion of other-than-temporary impairments on securities of $1,094 and $1,228, respectively.

COMMON STOCK — UNAFFILIATED The following summarizes the cost and estimated fair value of the Company’s investment in unaffiliated common stock:


			Gross Unrealized Capital
	Cost		Gains		Losses		Estimated Fair Value

December 31, 2023	$	68,085	$	5,156	$	2,821	$	70,420
December 31, 2022	$	47,329	$	1,651	$	6,423	$	42,557


2023 Statutory Financial Statements			Page 19

($ In Thousands)

The following presents the gross unrealized capital losses and fair values for unaffiliated common stock with unrealized capital losses.


	Less than 12 months				Greater than 12 Months				Total
	Fair Value		Gross Unrealized Capital Losses		Fair Value		Gross Unrealized Capital Losses		Fair Value		Gross Unrealized Capital Losses

December 31, 2023	$	10,949	$	1,427	$	14,907	$	1,394	$	25,856	$	2,821
December 31, 2022	$	9,483	$	1,759	$	13,467	$	4,664	$	22,950	$	6,423

The amount of unrealized capital losses on the Company’s investment in unaffiliated common stock is spread over 22 individual securities. As of December 31, 2023, there were 2 unaffiliated common stock securities that were priced below 80% of the security’s cost. Out of those 2 securities, 1 was impaired totaling $1,961.

Federal Home Loan Bank The Company’s investment in the FHLB-PGH Class B Membership Capital Stock as of December 31, 2023 and 2022 was $3,075 and $2,753, respectively. The Company also invested $0 and $4,000 in FHLB-PGH Activity Stock as of December 31, 2023 and 2022, respectively. The Class B Membership Capital Stock held by the Company is subject to written notices of requests for redemption followed by a five year waiting period.

As of December 31, 2023 and 2022, the Company’s borrowing capacity with the FHLB-PGH was $1,240,364 and $910,080, respectively.

The following represents the amount of collateral required to be pledged to the FHLB-PGH, and the maximum amount of collateral pledged is as follows:


	December 31, 2023		Maximum during 2023		December 31, 2022		Maximum during 2022

Carrying value	$	—	$	482,456	$	489,304	$	573,764
Fair value		—		431,230		432,986		538,930

The amount of interest expense on borrowings classified as funding agreements for the years ended December 31, 2023 and 2022 was $705 and $3,930, respectively.

OTHER THAN TEMPORARY IMPAIRMENTS For the year ended December 31, 2023, the Company did not recognize any other than temporary impairments on any asset-backed security. For the year ended December 31, 2022, the Company recognized an other than temporary impairment on an asset-backed security as follows:


	Amortized Cost Prior to OTTI		OTTI				Fair Value
December 31, 2022	Amortized Cost Prior to OTTI		Interest		Non-Interest		Fair Value

Intent to sell	$	—	$	—	$	—	$	—
Lack of intent to hold to recovery		—		—		—		—
Expected PV of cash flows less than cost		4,091		—		3,414		677

Total other-than-temporary impairments	$	4,091	$	—	$	3,414	$	677

REAL ESTATE Investments in real estate consist of the Company’s home office property. As of December 31, 2023 and 2022, accumulated depreciation on real estate amounted to $32,016 and $30,611, respectively.


Page 20		The Penn Mutual Life Insurance Company

($ In Thousands)

ALTERNATIVE ASSETS The investment values of alternative assets are provided per the partnerships’ capital account statements. The Company’s interest cannot be redeemed; insteadPML distributions from each fund result from the liquidation of the underlying assets. The period over which unredeemable investments are expected to be liquidated ranges from 5 to 10 years. As of December 31, 2023, none of these investments exceeds 10% of the Company’s admitted assets. The Company recognized realized losses of $3,660 and $434 for the years ended December 31, 2023 and 2022, respectively, associated with other-than-temporary impairments of certain alternative assets.

Unfunded commitments for alternative assets were $315,738 and $323,119 for the years ended December 31, 2023 and 2022, respectively.

OTHER INVESTED ASSETS The components of other invested assets as of December 31, 2023 and 2022 were as follows:


December 31,	2023		2022

LIHTC	$	111,638	$	68,024
Receivable for securities		84		794
Notes receivable — affiliates		708,000		650,000
Investments in affiliates		292,120		195,458
Investment in Private Funds/PMUBX		118,665		108,695
Other		1,382		1,382

Total other invested assets	$	1,231,889	$	1,024,353

Other invested assets also include notes receivable carried at book value from PMAM and JMS, investments in JMS, HTK, ISP, PMAM, 1847, and PMAM’s Private Funds/PMUBX, as well as receivables for unsettled investment transactions. In 2022 changes in Private Funds/PMUBX resulted in an opening surplus adjustment.

Low Income Housing Tax Credits The Company has no LIHTC properties under regulatory review at December 31, 2023 and 2022. There were no write-downs due to forfeiture of eligibility and there were no impairments for 2023 or 2022.

Commitments of $94,521 and $53,452 for the years ended December 31, 2023 and 2022, respectively, have been recorded in Other liabilities related to unconditional and legally binding delayed equity contributions associated with investments in LIHTC. The Company has unexpired tax credits with remaining lives ranging between 1 and 13 years and required holding periods for its LIHTC investments between 6 and 17 years.


2023 Statutory Financial Statements			Page 21

($ In Thousands)

NET INVESTMENT INCOME AND REALIZED CAPITAL GAINS/(LOSSES) The following table summarizes the major categories of net investment income for the years ended:


December 31,	2023			2022

Income:
Bonds and preferred stock	$	674,197		$	557,331
Common stock — unaffiliated		3,499			3,134
Common stock — affiliated		—			8,202
Real estate		3,588			3,588
Policy loans		34,884			23,969
Alternative assets		81,330			118,835
Other invested assets		147,671			183,544
Other		17,792			5,241
Derivatives		(9,607	)		1,211
IMR amortization		(16,320	)		(11,637	)

Total investment income		937,034			893,418

Expenses:
Surplus note interest		47,876			47,853
Depreciation of real estate		1,406			1,436
Other investment expenses		18,236			23,829

Total investment expenses		67,518			73,118

Net Investment Income	$	869,516		$	820,300

Included in the table above (Bonds and preferred stock) for 2023 is $221 of investment income attributable to securities disposed of as a result of a callable feature, spread over 2 securities.

During 2023 and 2022, proceeds from sales of bonds, preferred stock, and common stocks, and related gross realized gains and losses on those sales were as follows for the years ended December 31:


			2023						2022

	Proceeds From Sales		Gross Realized Gains		Gross Realized Losses		Proceeds From Sales		Gross Realized Gains		Gross Realized Losses
Bonds	$	460,503	$	442	$	15,200	$	629,451	$	2,668	$	53,846
Preferred stock		5,741		12		183		15,440		—		1,440
Common stock		27,306		3,827		3,061		30,537		568		15,420

There was no nonadmitted accrued investment income at December 31, 2023 and 2022. As of December 31, 2023, there were 10 common stock impairments totaling $13,056.

Realized capital gains are reported net of federal income taxes and amounts transferred to the IMR as follows for the years ended:


December 31,	2023			2022

Realized capital (losses)/gains	$	(9,116	)	$	48,264
Less amount transferred to IMR		(16,531	)		(20,360	)
Less Taxes:
Transferred to IMR		3,472			4,277
Capital gains		(5,035	)		(15,461	)

Net Realized Capital Gains	$	8,978		$	79,808


Page 22		The Penn Mutual Life Insurance Company

($ In Thousands)

Portions of realized capital gains and losses that were determined to be interest related were transferred to the IMR.

There were no NAIC designation 3 or below, or unrated securities sold during the year ended December 31, 2023 and reacquired within 30 days of the sale date.

Note 4. SEPARATE ACCOUNTS

Separate Accounts Registered with the SEC The Company maintains separate accounts that are registered with the Securities Exchange Commission (“SEC”) for its individual variable life and annuity products with assets of $8,665,714 and $7,900,397 at December 31, 2023 and 2022, respectively. The assets for these separate accounts, which are carried at fair value, represent investments in shares of the Company’s Penn Series Funds and other non-proprietary funds.

Separate Accounts Not Registered with the SEC The Company also maintains separate accounts, which are not registered with the SEC, with assets of $137,855 and $191,223 at December 31, 2023 and 2022, respectively. While the product itself is not registered with the SEC, the underlying assets are comprised of SEC registered mutual funds. The assets in these separate accounts are carried at fair value.

Information regarding the Separate accounts of the Company, all of which are nonguaranteed, is as follows:


Years Ended December 31,	2023		2022

Premiums, considerations and deposits	$	252,351	$	325,968
Reserves at December 31, at market value		8,681,384		7,972,530
Subject to discretionary withdrawal at market value		8,681,384		7,972,530


Years Ended December 31,	2023			2022

Transfers as reported in the financial statements of the separate accounts:
Transfers to separate accounts	$	252,351		$	325,968
Transfers from separate accounts		(694,612	)		(544,287	)

Transfers as reported in the Statements of Income	$	(442,261	)	$	(218,319	)

The assets of the separate accounts, which are legally insulated from the general account, are comprised of the following product mix as of December 31:


Product Description	2023		2022

Enhanced Deferred Individual Annuity	$	7,132,944	$	6,557,955
Single Life Variable Universal Life		905,427		778,099
Basic Deferred Individual Annuity		342,562		310,285
Joint Life Variable Universal Life		284,781		254,058
Deferred Group Annuity		137,855		191,223

Total	$	8,803,569	$	8,091,620


2023 Statutory Financial Statements			Page 23

($ In Thousands)

Certain separate account liabilities are guaranteed by the general account. To compensate the general account for the risk taken on a direct basis, the separate account paid risk charges to the general account totaling $80,088 and $79,020 for the years ended December 31, 2023 and 2022, respectively and $359,683 for the five-year period between 2019 and 2023.

For the years ended December 31, 2023 and 2022, the general account of the Company has paid $1,583 and $2,345, respectively, towards separate account guarantees on a direct basis, and $6,267 cumulatively over the last five years.

Note 5. DERIVATIVES

The Company utilizes derivatives to achieve its risk management goals. Exposure to risk is monitored and analyzed as part of the Company’s asset/liability management process, which focuses on risks that impact liquidity, capital, and income. The Company may enter into derivative transactions to hedge exposure to interest rate, credit, liability, currency, and cash flow risks. The Company uses swaps, swaptions, futures, forward contracts, caps and options to mitigate these risks.

The Company may enter into interest rate caps, interest rate and equity futures, credit default swaps, currency swaps, forward contracts, interest rate and treasury swaps, inflation swaps and equity options that do not qualify for hedge accounting.

The Company uses currency swaps to reduce market risks from changes in foreign exchange rates.

Total return swaps, equity options and equity futures are used to hedge the Company’s liability risk exposure to declines in the equity markets.

When entering into a derivative transaction, there are several risks, including but not limited to basis risk, credit risk, and market risk. Basis risk is the exposure to loss from imperfectly matched positions, and is monitored and minimized by modifying or terminating the transaction. Credit risk is the exposure to loss as a result of default or a decline in credit rating of a counterparty. Credit risk is addressed by establishing and monitoring guidelines on the amount of exposure to any particular counterparty. Market risk is the adverse effect that a change in interest rates, currency rates, implied volatility rates, or a change in certain equity indexes or instruments has on the value of a financial instrument. The Company manages the market risk by establishing and monitoring limits as to the types and degree of risk that may be undertaken. Also, the Company requires that an International Swaps and Derivatives Association Master Agreement govern all Over-the-Counter (“OTC”) derivative contracts. In addition, interest rate swaps are centrally cleared through an exchange.

Derivative Instruments Designated and Qualifying as Hedging Instruments

During 2023, the Company purchased certain interest rate swaps that qualify for hedge accounting. These swaps are used to hedge the impact of changing interest rates on the value of specific municipal bonds. As these are derivatives in a highly effective hedge, they are carried at cost. At termination/expiration, a realized gain/(loss) amount, net of the cost basis, is recognized. In the event that the hedge fails to qualify as being highly effective at any of the accounting measurement points, the hedge will be considered ineffective and the derivative will be marked to market and the associated change will be recognized as unrealized gain/(loss).


Page 24		The Penn Mutual Life Insurance Company

($ In Thousands)

reported as admitted assets and Derivative instruments with carrying values showing a loss are reported in Other liabilities.

Derivative Instruments Designated and Qualifying as Hedging Instruments are as follows:


December 31,			2023
	Notional Value		Fair Value					Carrying Value
	Notional Value		Gain		(Loss)			Gain		(Loss)

Fair value hedges:
Interest rate swaps	$	33,500	$	—	$	(913	)	$	—	$	—

Total designated and qualifying as hedges	$	33,500	$	—	$	(913	)	$	—	$	—


Years Ended December 31,	2023				2022
	Net Investment Income		Realized Capital Losses		Net Investment Income		Realized Capital Gains/(Losses)

Cash flow hedges:
Call spreads	$	—	$	—	$	—	$	—
Fair value hedges:
Interest rate swaps		236		—		—		—

Total	$	236	$	—	$	—	$	—

The following table presents the notional and fair values of derivative financial instruments that did not qualify for hedge accounting. Fair values showing a gain are reported as admitted assets. Fair values showing a loss are reported in liabilities. For the derivative instruments shown below, fair values equal carrying values except for futures. The carrying value for futures is the initial margin, which was $15,920 and $14,328 at December 31, 2023 and 2022, respectively.

Derivative Instruments Not Designated and Not Qualifying as Hedging Instruments are as follows:


December 31,			2023							2022
	Notional Value		Fair Value					Notional Value		Fair Value
	Notional Value		Gain		(Loss)			Notional Value		Gain		(Loss)

Currency swaps	$	23,263	$	2,341	$	—		$	23,263	$	3,812	$	—
Equity futures		445,112		1,133		—			181,474		795		—
Equity options		1,566,439		25,728		(68,755	)		1,029,370		2,647		(1,044	)
Inflation swaps		540,000		223		(3,005	)		260,000		4,891		(6,092	)
Interest rate futures		56,445		487		—			78,008		155		—
Interest rate swaps		16,829,800		989,307		(1,086,463	)		11,075,800		1,038,767		(968,314	)
Swaptions		1,650,000		308		(6,415	)		1,170,000		3,024		(4,763	)
Total return swaps		3,254,576		235,685		(450,353	)		5,325,845		103,616		(324,832	)
Treasury forwards		42,000		—		(2,010	)		147,000		—		(13,438	)

Total	$	24,407,635	$	1,255,212	$	(1,617,001	)	$	19,290,760	$	1,157,707	$	(1,318,483	)


2023 Statutory Financial Statements			Page 25

($ In Thousands)


Ye ars Ended December 31,	2023						2022
	Net Investment Income			Realized Capital Gains/(Losses)			Net Investment Income			Realized Capital Gains/(Losses)

Currency swaps	$	781		$	(18	)	$	877		$	84
Equity options		—			20,444			—			(18,004	)
Equity futures		—			(8,223	)		—			(4,221	)
Inflation swaps		391			6,454			4,318			850
Interest rate futures		—			1,420			—			(399	)
Interest rate swaps		(41,271	)		234,190			(15,085	)		174,545
Swaptions		—			10,110			—			939
Total return swaps		30,255			(237,378	)		9,876			13,767
Treasury forwards		—			(12,417	)		—			(16,874	)
Treasury swaps		—			—			1,225			(30,226	)

Total	$	(9,844	)	$	14,582		$	1,211		$	120,461

1	$35 and $— of the realized capital gains/(losses) were transferred to the IMR for the years ended December 31, 2023 and 2022, respectively.

The change in unrealized capital (losses)/gains for derivative instruments are as follows for the years ended December 31:


	2023			2022

Currency swaps	$	(1,471	)	$	1,453
Equity options		(19,735	)		(13,197	)
Inflation swaps		(5,706	)		(925	)
Interest rate swaps		(176,695	)		(151,869	)
Swaptions		1,638			(854	)
Total return swaps		6,549			150,295
Treasury forwards		11,429			(12,614	)
Treasury swaps		—			23,704

Total	$	(183,991	)	$	(4,007	)

CREDIT RISK The Company is exposed to credit related losses in the event of non-performance by counterparties to derivative financial instruments. In order to minimize credit risk, the Company and its derivative counterparties require collateral to be posted in the amount owed under each transaction, subject to minimum transfer amounts that are functions of the counterparty’s credit rating. As of December 31, 2023 and 2022, the Company was fully collateralized thereby eliminating the potential for an accounting loss. Additionally, certain agreements with counterparties allow for contracts in a positive position to be offset by contracts in a negative position. This right of offset also reduces the Company’s exposure. As of December 31, 2023 and 2022, the Company pledged net collateral of $533,412 and $209,739, respectively, in the form of securities and cash. The cash received from held collateral that is not invested in an interest bearing money market fund is invested mainly in fixed income securities.

As of December 31, 2023 and 2022, the Company pledged collateral for futures contracts of $15,920 and $5,277, respectively, in the form of cash. Notional or contractual amounts of derivative financial instruments provide a


Page 26		The Penn Mutual Life Insurance Company

($ In Thousands)

measure of involvement in these types of transactions and do not represent the amounts exchanged between the parties engaged in the transaction. The amounts exchanged are determined by reference to the notional amounts and other terms of the derivative financial instruments.

Note 6. FAIR VALUE OF FINANCIAL INSTRUMENTS AND OFF-BALANCE-SHEET RISK


Level 1		Fair value is based on unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. These generally provide the most reliable evidence and are used to measure fair value whenever available. Active markets are defined as having the following for the measured asset/liability: i) many transactions, ii) current prices, iii) price quotes not varying substantially among market makers, iv) narrow bid/ask spreads and v) most information publicly available. Prices are obtained from readily available sources for market transactions involving identical assets and liabilities.
Level 2		Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. Prices for assets classified as Level 2 are primarily provided by an independent pricing service or are internally priced using observable inputs. In circumstances where prices from pricing services are reviewed for reasonability but cannot be corroborated to observable market data as noted above, these security values are recorded in Level 3 in the fair value hierarchy.
Level 3		Fair value is based on significant inputs that are unobservable for the asset or liability. These inputs reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability. These are typically less liquid fixed maturity securities with very limited trading activity. Prices are determined using valuation methodologies such as option pricing models, discounted cash flow models, market approach and other similar techniques. Prices may be based upon non-binding quotes from brokers or other market makers that are reviewed for reasonableness, based on the Company’s understanding of the market but are not further corroborated with other additional observable market information.

The fair value process is monitored on a monthly basis by financial and investment professionals who utilize additional subject matter experts as applicable. The purpose is to monitor the Company’s asset valuation policies and procedures by ensuring objective and reliable valuation practices and pricing of financial instruments, as well as addressing fair valuation issues, changes to valuation methodologies and pricing sources. To assess the continuing appropriateness of third party pricing service security valuations, the Company regularly monitors the prices and reviews price variance reports. In addition, the Company performs an initial and ongoing review of the third party pricing services methodologies, reviews inputs and assumptions used for a sample of securities on a periodic basis. Pricing challenges are raised on valuations considered not reflective of market and are monitored by the Company.


2023 Statutory Financial Statements			Page 27

($ In Thousands)

BONDS The fair values of the Company’s debt securities are generally based on quoted market prices or prices obtained from independent pricing services or internally developed pricing.

In order to validate reasonability of valuations received from independent pricing services, prices are reviewed by investment professionals through comparison with directly observed recent market trades or color or by comparison of significant inputs used by the pricing service to the Company’s observations of those inputs in the market. In circumstances where prices from independent pricing services are reviewed for reasonability but cannot be corroborated to observable market data as noted above, these security values are recorded in Level 3 in the Company’s fair value hierarchy. Under certain conditions, the Company may conclude pricing information received from third party pricing services is not reflective of market activity and may over-ride that information with a valuation that utilizes market information and activity. These securities are recorded in Level 2 in the Company’s fair value hierarchy. As of December 31, 2023, there were 2 debt securities carried at fair value of $221 that were valued in this manner. As of December 31, 2022, there was 1 debt security carried at fair value of $4,867 that was valued in this manner.

The Company’s Level 3 debt securities generally include certain structured securities priced using one or multiple broker quotes, asset backed trust preferred debt, auction rate securities, and certain public and private debt securities priced based on observable and unobservable inputs.

Significant inputs used in valuing the Company’s Level 3 debt securities include: issue specific credit adjustments, illiquidity premiums, estimation of future collateral performance cash flows, default rate assumptions, acquisition cost, market activity for securities considered comparable and non-binding quotes from certain market participants. Certain of these inputs are considered unobservable, as not all market participants will have access to this data.


Page 28		The Penn Mutual Life Insurance Company

($ In Thousands)

The Company’s exchange traded futures are valued using quoted prices in active markets and are classified within Level 1 of the Company’s fair value hierarchy.

Derivative positions traded in the OTC and cleared OTC derivative markets, where fair value is determined by third party independent services, are classified within Level 2. These investments include: interest rate swaps, currency swaps, Treasury swaps, interest rate caps, total return swaps, swaptions, equity options, inflation swaps, forward contracts, and credit default swaps. OTC derivatives classified within Level 2 are valued using models generally accepted in the financial services industry that use actively quoted or observable market input values from external market data providers, broker-dealer quotations, third-party pricing vendors, discounted cash flow models and/or recent trading activity. Prices are reviewed by investment professionals through comparison with directly observed recent market trades, comparison with valuations estimated through use of valuation models maintained on an industry standard analytical and valuation platform, or comparison of all significant inputs used by the pricing service to observations of those inputs in the market.

The following table presents the financial instruments carried at fair value by caption on the Statements of Admitted Assets, Liabilities and Surplus and by valuation hierarchy (as described above).


December 31, 2023	FV Level 1		FV Level 2			FV Level 3		Total

Assets:
Bonds:
Commercial MBS	$	—	$	1,450		$	—	$	1,450
SVO Identified Funds		406		—			—		406

Total Bonds		406		1,450			—		1,856
Preferred Stock		24,706		5,305			—		30,011
Common stock — unaffiliated		67,345		—			3,075		70,420
Derivatives:
Futures		17,540		—			—		17,540
Options		—		26,036			—		26,036
Swaps		—		1,227,556			—		1,227,556

Total derivatives		17,540		1,253,592			—		1,271,132

Total investments		109,997		1,260,347			3,075		1,373,419
Separate account assets		8,803,569		—			—		8,803,569

Total assets	$	8,913,566	$	1,260,347		$	3,075	$	10,176,988

Liabilities:
Derivatives:
Options	$	—	$	(68,755	)	$	—	$	(68,755	)
Forwards		—		(2,010	)		—		(2,010	)
Swaps		—		(1,546,236	)		—		(1,546,236	)

Total liabilities	$	—	$	(1,617,001	)	$	—	$	(1,617,001	)


2023 Statutory Financial Statements			Page 29

($ In Thousands)

The following table presents the financial instruments carried at fair value by caption on the Statements of Admitted Assets, Liabilities and Surplus and by valuation hierarchy (as described above).


December 31, 2022	FV Level 1		FV Level 2			FV Level 3		Total

Assets:
Bonds:
Commercial MBS	$	—	$	1,438		$	—	$	1,438
SVO Identified Funds		388		—			—		388

Total Bonds		388		1,438			—		1,826
Preferred Stock		23,182		4,972			937		29,091
Common stock – unaffiliated		35,793		—			6,764		42,557
Derivatives:
Futures		950		—			—		950
Options		—		2,647			—		2,647
Swaps		—		1,154,110			—		1,154,110

Total derivatives		950		1,156,757			—		1,157,707

Total investments		60,313		1,163,167			7,701		1,231,181
Separate account assets		8,091,620		—			—		8,091,620

Total assets	$	8,151,933	$	1,163,167		$	7,701	$	9,322,801

Liabilities:
Derivatives:
Options	$	—	$	(1,044	)	$	—	$	(1,044	)
Forwards		—		(13,438	)		—		(13,438	)
Swaps		—		(1,304,001	)		—		(1,304,001	)

Total liabilities	$	—	$	(1,318,483	)	$	—	$	(1,318,483	)

There were 0 securities transferred out of Level 3 for the year ended December 31, 2023.


Page 30		The Penn Mutual Life Insurance Company

($ In Thousands)

The tables below include a rollforward of the Statements of Admitted Assets, Liabilities and Surplus amounts for the years ended December 31, 2023 and 2022 (including the change in fair value), for financial instruments classified by the Company within Level 3 of the valuation hierarchy.


	Preferred Stock			Common Stock			Total Assets

Balance January 1, 2023	$	937		$	6,764		$	7,701
Transfers in		—			—			—
Transfers out		—			—			—
Total gains or losses (realized/ unrealized) included in:
Income/(loss)		—			—			—
Surplus		—			—			—
Amortization/Accretion		—			—			—
Purchases/(sales):
Purchases		—			—			—
(Sales)		(937	)		(3,689	)		(4,626	)

Balance, December 31, 2023	$	—		$	3,075		$	3,075


	Preferred Stock			Common Stock			Total Assets

Balance January 1, 2022		$6,687		$	4,871		$	11,558
Transfers in		—			—			—
Transfers out		(5,000	)		—			(5,000	)
Total gains or losses (realized/ unrealized) included in:
Income/(loss)		—			—			—
Surplus		—			—			—
Amortization/Accretion		—			—			—
Purchases/(sales):
Purchases		—			1,893			1,893
(Sales)		(750	)		—			(750	)

Balance, December 31, 2022		$937		$	6,764		$	7,701

The following summarizes the fair value, valuation techniques and significant unobservable inputs of the Level 3 fair value measurements that were developed as of December 31, 2023:

Fair Value

Valuation Technique

Significant
Unobservable Inputs

Rate/Range or /
weighted avg.

Assets:

Investments

Preferred stock

—

Cost

Not available

N/A

Common stock:

Unaffiliated

—

Cost

Not available

N/A

FHLB Stock

3,075

Set by issuer-FHLB-PGH

⁽¹⁾

Not available

N/A

Total investments

3,075

(1)	Fair Value approximates carrying value. The par value of the FHLB capital stock is $100 and set by the FHLB. The capital stock is issued, redeemed and repurchased at par.


2023 Statutory Financial Statements			Page 31

($ In Thousands)

The following tables summarizes the aggregate fair value for all financial instruments and the level within the fair value hierarchy, in which the fair value measurements in their entirety fall, for which it is practicable to estimate fair value, at December 31:


2023	Aggregate Fair Value		Admitted Value		Level 1		Level 2		Level 3

Financial Assets:
Bonds	$	13,770,068	$	14,731,578	$	507,768	$	13,071,105	$	191,195
Preferred stock		46,374		47,867		41,069		5,305		—
Common stock-unaffiliated		70,420		70,420		67,345		—		3,075
Cash and short-term investments		464,241		464,241		464,241		—		—
Derivatives		1,271,132		1,271,132		17,540		1,253,592		—
Separate Account assets		8,803,569		8,803,569		8,803,569		—		—

Financial Liabilities:
Investment-Type Contracts
Individual annuities	$	2,741,564	$	2,832,281	$	—	$	—	$	2,741,564
Derivatives		—		—		—		—		—
Separate Account liabilities		8,803,569		8,803,569		8,803,569		—		—


2022	Aggregate Fair Value		Admitted Value		Level 1		Level 2		Level 3

Financial Assets:
Bonds	$	12,270,040	$	13,672,878	$	743,570	$	11,342,670	$	183,800
Redeemable preferred stock		48,264		51,966		38,496		8,832		936
Common stock-unaffiliated		42,557		42,557		35,793		—		6,764
Cash and short-term investments		376,029		376,029		376,029		—		—
Derivatives		1,157,706		1,172,035		950		1,156,756		—
Separate Account assets		8,091,620		8,091,620		8,091,620		—		—

Financial Liabilities:
Investment-Type Contracts
Individual annuities	$	2,495,955	$	2,552,277	$	—	$	—	$	2,495,955
Derivatives		1,318,483		1,318,483		—		1,318,483		—
Separate Account liabilities		8,091,620		8,091,620		8,091,620		—		—


Page 32		The Penn Mutual Life Insurance Company

($ in Thousands)

Note 7. LIFE RESERVES BY WITHDRAWAL CHARACTERISTICS

The withdrawal characteristics of the Company’s life reserves are illustrated below as of December 31:


	General Account						Separate Account
December 31, 2023	Account Value		Cash Value		Reserve		Account Value		Cash Value		Reserve

Subject to Discretionary Withdrawal,
Surrender Values, or Policy Loans:
Universal Life	$	263,845	$	262,687	$	264,941	$	—	$	—	$	—
Universal Life with Secondary
Guarantees		1,973,433		1,912,661		4,845,901		—		—		—
Indexed Universal Life with
Secondary Guarantees		1,466,858		1,454,060		1,642,075		—		—		—
Other Permanent Cash Value Life
Insurance		—		7,748,789		8,595,424		—		—		—
Variable Universal Life		336,307		319,163		317,456		1,182,435		1,174,230		1,174,230
Miscellaneous Reserves		—		—		22,489		—		—		—

Not Subject to Discretionary
Withdrawal or No Cash Values:
Term Policies without Cash Value		—		—		392,146		—		—		—
Accidental Death Benefits		—		—		225		—		—		—
Disability — Active Lives		—		—		35,226		—		—		—
Disability — Disabled Lives		—		—		13,250		—		—		—
Miscellaneous Reserves		—		—		84,165		—		—		—

Total		4,040,443		11,697,360		16,213,298		1,182,435		1,174,230		1,174,230
Less: Reinsurance ceded		3,230,984		3,174,907		5,262,855		—		—		—

Net	$	809,459	$	8,522,453	$	10,950,443	$	1,182,435	$	1,174,230	$	1,174,230

Life reserves of $367,561 with surrender charges of 5% or more as of December 31, 2023 will have less than a 5% surrender charge in 2024.


2023 Statutory Financial Statements			Page 33

($ in Thousands)


	General Account						Separate Account
December 31, 2022	Account Value		Cash Value		Reserve		Account Value		Cash Value		Reserve

Subject to Discretionary Withdrawal,
Surrender Values, or Policy Loans:
Universal Life	$	342,279	$	341,283	$	344,474	$	—	$	—	$	—
Universal Life with Secondary
Guarantees		1,961,941		1,888,725		4,673,352		—		—		—
Indexed Universal Life with
Secondary Guarantees		1,443,753		1,422,171		1,594,470		—		—		—
Other Permanent Cash Value Life
Insurance		—		6,633,446		7,565,081		—		—		—
Variable Universal Life		298,965		283,928		281,476		1,031,034		1,021,846		1,021,846
Miscellaneous Reserves		—		—		28,473		—		—		—

Not Subject to Discretionary
Withdrawal or No Cash Values:
Term Policies without Cash Value		—		—		391,249		—		—		—
Accidental Death Benefits		—		—		225		—		—		—
Disability — Active Lives		—		—		31,595		—		—		—
Disability — Disabled Lives		—		—		13,610		—		—		—
Miscellaneous Reserves		—		—		69,203		—		—		—

Total		4,046,938		10,569,553		14,993,208		1,031,034		1,021,846		1,021,846
Less: Reinsurance ceded		3,266,725		3,190,539		5,097,291		—		—		—

Net	$	780,213	$	7,379,014	$	9,895,917	$	1,031,034	$	1,021,846	$	1,021,846

Note 8. RESERVES AND FUNDS FOR PAYMENT OF ANNUITY BENEFITS

The Company’s separate accounts are non-guaranteed. The withdrawal characteristics of the Company’s annuity actuarial reserves and deposit-type contracts are illustrated below as of December 31:


2023	General Account		Separate Account		Total		% of Total

Subject to discretionary withdrawal-with adjustments:
With fair value adjustment	$	—	$	—	$	—		—	%
At book value less surrender charges		251,995		—		251,995		2	%
At fair value		—		7,372,385		7,372,385		68	%

Subtotal		251,995		7,372,385		7,624,380		70	%

At book value — without adjustment		1,552,590		—		1,552,590		14	%
Not subject to discretionary withdrawal		1,516,043		134,783		1,650,826		15	%

Total annuity reserves and deposit liabilities gross		3,320,628		7,507,168		10,827,796		100	%

Less: Reinsurance ceded		142,487		—		142,487

Total Annuity Reserves and Deposit Liabilities, Net	$	3,178,141	$	7,507,168	$	10,685,309


Page 34		The Penn Mutual Life Insurance Company

($ in Thousands)

Annuity and deposit-type contract reserves of $4,649 with surrender charges of 5% or more as of December 31, 2023 will have less than a 5% surrender charge in 2024.


2022	General Account		Separate Account		Total		% of Total

Subject to discretionary withdrawal-with adjustments:
With fair value adjustment	$	—	$	—	$	—		—	%
At book value less surrender charges		198,904		—		198,904		2	%
At fair value		—		6,762,724		6,762,724		67	%

Subtotal		198,904		6,762,724		6,961,628		69	%

At book value — without adjustment		1,778,423		—		1,778,423		18	%
Not subject to discretionary withdrawal		1,219,375		187,961		1,407,336		14	%

Total annuity reserves and deposit liabilities gross		3,196,702		6,950,685		10,147,387		100	%

Less: Reinsurance ceded		168,822		—		168,822

Total Annuity Reserves and Deposit Liabilities, Net	$	3,027,880	$	6,950,685	$	9,978,565

The following summarizes total annuity actuarial reserves and liabilities for deposit-type contracts at December 31:


	2023		2022

Statutory Statements of Admitted Assets, Liabilities and Surplus:
Policyholders’ reserves — group annuities	$	139,051	$	151,609
Policyholders’ reserves — individual annuities		2,411,825		2,163,661
Liabilities for deposit-type contracts		603,553		628,247
VM-21 reserves		23,712		84,363

Subtotal		3,178,141		3,027,880

Separate Account Annual Statement:
Annuities		7,507,168		6,950,685
Supplementary contracts with life contingencies		—		—
Other annuity contract-deposit-funds		—		—

Subtotal		7,507,168		6,950,685

Total Reserves	$	10,685,309	$	9,978,565

As of December 31, 2023 and 2022, the Company has recorded reserves of $- and $100,263, respectively, related to outstanding borrowings from the FHLB-PGH classified as funding agreements.

The Company has variable annuity contracts containing GMDB provisions that provide a specified minimum return upon death as follows:


2023 Statutory Financial Statements			Page 35

($ in Thousands)


	2023		2022

Account value	$	6,973,547	$	6,395,190
Net amount at risk		82,767		328,912

The Company has variable annuity contracts that have GMAB, GMWB, and GMAB/GMWB Rider options. The Company also has fixed indexed annuity contracts that have GMWB Rider options. The GMAB provides for a return of principal at the end of a ten-year period. The GMAB/GMWB combination rider allows for guaranteed withdrawals from a benefit base after a selected waiting period. The GMWB riders are also available with inflation or death benefit protection. The benefit base is calculated as the maximum of principal increase at a roll up rate less any partial withdrawals during the accumulation phase, the current account value, and the highest anniversary value over the first ten years. The withdrawal amount is stated as a percentage of the benefit base and varies based on whether the annuitant selects lifetime withdrawals or a specified period. One version of this rider has an inflation adjustment applied to the Guaranteed Withdrawal Amount.

The following table summarizes the account values for the different benefit types as of December 31, 2023:


Rider Type	Contracts		Fund Value		Cash Value

GMAB		1,624	$	283,169	$	273,599
GMWB		11,456		2,886,842		2,830,990
GMWB w/ DB		1,012		227,514		221,070
GMWB w/ inflation		9,695		2,188,828		2,167,414
GMWB w/ inflation w/ DB		279		61,001		59,959
GMAB/GMWB		1,945		363,782		363,629

Total		26,011	$	6,011,136	$	5,916,661

The following table summarizes the account values for the different benefit types as of December 31, 2022:


Rider Type	Contracts		Fund Value		Cash Value

GMAB		1,624	$	245,587	$	236,610
GMWB		11,689		2,628,664		2,571,329
GMWB w/ DB		991		196,031		189,974
GMWB w/ inflation		10,070		2,064,335		2,042,028
GMWB w/ inflation w/ DB		260		53,116		52,158
GMAB/GMWB		2,123		368,769		368,580

Total		26,757	$	5,556,502	$	5,460,679

Variable annuity reserves for living and death benefits are based on the methodology specified in Valuation Manual – 21: Requirements for Principle-Based Reserves for Variable Annuities (VM-21), which specifies the reserve as the Company Stochastic Reserve plus the Additional Standard Projection Amount. The individual policy reserve is floored at cash surrender value. The Company Stochastic Reserve is based on the Conditional Tail Expectation (“CTE”) 70% of 1,000 stochastically generated interest rate and equity return scenarios. Prudent estimate assumptions including margins for uncertainty are used to calculate the Company Stochastic Reserve. Key assumptions needed in valuing the liability include full withdrawals, partial withdrawals, mortality, the Consumer Price Index, investment management fees and revenue sharing, expenses, fund allocations and other policyholder behavior. The Additional Standard Projection Amount requires prescribed assumptions to be used in place of


Page 36		The Penn Mutual Life Insurance Company

($ in Thousands)

Company assumptions for most key assumptions. The reserve also requires the projection of in-force general account assets and assets from reinvested cash flows. The key assumptions needed in valuing the assets, including the maximum reinvestment earned rate spreads and default rates, are prescribed. In addition, the method for projecting interest rates and equity returns is prescribed for both the Company Stochastic Reserve calculation and the Additional Standard Projection Amount calculation. The final reserve balance for policies that fall within the scope of VM-21, which covers both Living and Death Benefit guarantees, is $6,892,559 and $6,373,834, as of December 31, 2023 and 2022, respectively. During 2023 and 2022, there were $2,993 and $2,373 reserves released as a result of the annual assumption review.

Fixed indexed annuity reserves for living benefits are based on the methodology specified in Actuarial Guideline XXXV, which specifies the reserve as the sum of the non-elective benefit reserve and the elective benefit reserve. The elective benefit reserve is calculated using the elective benefit path that results in the highest present value of future benefits. The final reserve balance for policies that fall within the scope of Actuarial Guideline XXXV is $60,252 and $64,912, as of December 31, 2023 and 2022, respectively.

Note 9. BENEFIT PLANS

The Company maintains both funded and unfunded non-contributory defined benefit pension plans covering all eligible employees. The Company also has other postretirement benefit plans (health care plans) covering eligible existing retirees and limited other eligible employees. The Company uses a measurement date of December 31 for all plans.

PENSION PLANS The Company has both funded (“qualified pension plan”) and unfunded (“nonqualified pension plans”) non-contributory defined benefit pension plans covering all eligible employees (collectively, the “pension plans”). The Company’s policy is to fund qualified pension costs in accordance with the Employee Retirement Income Security Act (“ERISA”) of 1974. The Company may increase its contribution above the minimum based upon an evaluation of the Company’s tax and cash positions and the plan’s funded status.

The Company approved the freezing of benefits under its qualified pension plan and nonqualified Tax Equity and Fiscal Responsibility Act (“TEFRA”) pension plans. Therefore, no further benefits are accrued for participants.

OTHER POSTRETIREMENT AND POSTEMPLOYMENT BENEFITS The Company provides certain life insurance and health care benefits (“other postretirement healthcare plans”) for its retired employees and financial professionals, and their beneficiaries and covered dependents.

OTHER PLANS The Company has non-qualified deferred compensation plans that permit eligible key employees, financial professionals, and trustees to defer portions of their compensation to these plans. Certain Company contributions in excess of allowable qualified plan limits may also be credited to these plans. Company contributions are recorded as expenses and earnings/(losses) on investments are recorded to interest credited to policyholder funds in the Statements of Income and Changes in Surplus.

BENEFIT OBLIGATIONS Accumulated benefit obligations represent the present value of pension benefits earned as of the measurement date based on service and compensation and do not take into consideration future salary increases. Projected benefit obligations for defined benefit plans represent the present value of pension benefits earned as of the measurement date projected for estimated salary increases to an assumed date with respect to retirement, termination, disability or death.


2023 Statutory Financial Statements			Page 37

($ in Thousands)

The following table sets forth the plans’ change in projected benefit obligation of the defined benefit pension and other postretirement plans as of December 31:


	Pension Plans						Other Postretirement Healthcare Plans
	2023			2022			2023			2022

Change in projected benefit obligation
Projected benefit obligation at beginning of year	$	147,378		$	195,103		$	11,012		$	16,913
Service cost		—			—			247			231
Interest cost		7,612			4,440			649			320
Actuarial loss/(gain)		5,435			(40,804	)		3,992			(5,156	)
Benefits paid		(11,666	)		(11,361	)		(2,995	)		(1,296	)

Projected benefit obligation at end of year	$	148,759		$	147,378		$	12,905		$	11,012

The discount rate was 5.14% at December 31, 2023 and 5.49% at December 31, 2022, which resulted in an actuarial loss on the benefit obligation for the Pension Plans during 2023.

The discount rate was 5.19% at December 31, 2023 and 5.53% at December 31, 2022, which resulted in an actuarial loss on the benefit obligation for Other Postretirement Healthcare Plans during 2023.

The weighted-average assumptions used to measure the actuarial present value of the projected benefit obligation were as follows as of December 31:

Pension Plans


For the Years Ended December 31,	2025			2024

REVENUE
Premium and annuity considerations	$	613,182		$	834,127
Net investment income		1,181,851			1,214,685
Reserve adjustments on reinsurance ceded		379,881			1,426,117
Other revenue		394,352			687,643

TOTAL REVENUE		2,569,266			4,162,572


BENEFITS AND EXPENSES
Benefits paid to policyholders and beneficiaries		1,811,669			1,874,530
Increase in reserves for payment of future insurance and annuity benefits		507,679			2,316,184
Commissions		155,807			229,714
Operating expenses		387,497			324,595
Other expenses		99,200			144,118
Net transfers from separate accounts		(871,801	)		(862,984	)

TOTAL BENEFITS AND EXPENSES		2,090,051			4,026,157

GAIN FROM OPERATIONS BEFORE DIVIDENDS AND FEDERAL INCOME TAX BENEFIT		479,215			136,415


Dividends to policyholders		313,334			278,121

GAIN/(LOSS) FROM OPERATIONS BEFORE FEDERAL INCOME TAX BENEFIT		165,881			(141,706	)


Federal income tax expense/(benefit)		29,810			(52,735	)

LOSS FROM OPERATIONS		136,071			(88,971	)


Net realized capital (losses)/ gains, net of tax		(42,806	)		943,872

NET INCOME	$	93,265		$	854,901


For the Years Ended December 31,	2025			2024

SURPLUS
Beginning of Year	$	3,891,916		$	2,864,542
SSAP 3 adjustment		(71,199	)		—

Surplus, beginning of year		3,820,717			2,864,542
Net income		93,265			854,901
Change in:
Reinsurance		195,926			(103,817	)
Asset valuation reserve		(44,301	)		18,004
Net unrealized capital gains, net of tax		110,826			159,748
Net deferred income tax		37,845			99,931
Funded status of postretirement plans, net of tax		7,507			34,933
Surplus notes		378			351
Change in valuation basis		—			—
Valuation basis		—			—
Nonadmitted assets		(17,976	)		(36,677	)

Change in surplus		383,470			1,027,374

Surplus, end of year	$	4,204,187		$	3,891,916


	*Page*

Statements of Admitted Assets, Liabilities and Surplus		1

Statements of Operations		2

Statements of Changes in Surplus		3

Statements of Cash Flows		4

*Notes to Financial Statements*

Note 1. Nature of Operations and Basis of Presentation		5

Note 2. Summary of Significant Accounting Policies		6

Note 3. Investments		15

Note 4. Separate Accounts		23

Note 5. Derivatives		24

Note 6. Fair Value of Financial Instruments and Off-Balance Sheet Risk		27

Note 7. Life Reserves by Withdrawal Characteristics		34

Note 8. Reserves and Funds for Payment of Annuity Benefits		35

Note 9. Benefit Plans		38

Note 10. Federal Income Taxes		43

Note 11. Reinsurance		48

Note 12. Related Parties		50

Note 13. Commitments, Contingencies and Uncertainties		51

Note 14. Subsequent Events		52


	*Page*

Statements of Admitted Assets, Liabilities and Surplus		1

Statements of Income		2

Statements of Changes in Surplus		3

Statements of Cash Flows		4

*Notes to Financial Statements*

Note 1. Nature of Operations and Basis of Presentation		6

Note 2. Summary of Significant Accounting Policies		7

Note 3. Investments		15

Note 4. Separate Accounts		23

Note 5. Derivatives		24

Note 6. Fair Value of Financial Instruments and Off-Balance Sheet Risk		27

Note 7. Life Reserves by Withdrawal Characteristics		33

Note 8. Reserve for Payment of Annuity Benefits		34

Note 9. Benefit Plans		37

Note 10. Federal Income Taxes		43

Note 11. Reinsurance		48

Note 12. Related Parties		50

Note 13. Commitments, Contingencies and Uncertainties		51

Note 14. Subsequent Events		51


Asset Category	FV Level 1		FV Level 2		FV Level 3		Total

Equity funds	$	386	$	—	$	—	$	386
Bond funds		128,302		72,229		—		200,531
Money market funds		6,482		—		—		6,482

Total	$	135,170	$	72,229	$	—	$	207,399


	2023 Target Allocation			2022 Target Allocation			Percentage of Plan Assets As of December 31,
Asset Category							2023			2022

Equity funds		—	%		40.0	%		0.2	%		30.1	%
Bond funds		100.0	%		60.0	%		96.7	%		66.2	%
Money market funds		—	%		—	%		3.1	%		3.7	%

Total		100.0	%		100.0	%		100.0	%		100.0	%


	Overfunded Pension Plans						Underfunded Pension Plans
	2023			2022			2023			2022

Projected benefit obligation	$	(132,182	)	$	(130,084	)	$	(16,577	)	$	(17,294	)
Fair value of plan assets		207,399			194,033			—			—

Funded Status		75,217			63,949			(16,577	)		(17,294	)

Accumulated benefit obligation	$	(132,182	)	$	(130,084	)	$	(16,577	)	$	(17,294	)


	Pension Plans		Other Post Retirement Healthcare Plans

2024	$	11,886	$	1,071
2025		11,845		1,086
2026		11,867		1,105
2027		11,905		1,147
2028		11,795		1,139
Years 2029-2033		56,279		5,214


Description	Changes during 2023

	Ordinary			Capital		Total
Gross DTAs/(DTLs)	$	(29,971	)	$	22,191	$	(7,780	)

Adjusted gross DTAs		(29,971	)		22,191		(7,780	)
Adjusted gross DTAs nonadmitted		(34,401	)		—		(34,401	)

Subtotal admitted adjusted DTA/(DTL)		(64,372	)		22,191		(42,181	)
Gross DTL		(33,363	)		23,125		(10,238	)

Net admitted DTA/(DTL)	$	(97,735	)	$	45,316	$	(52,419	)


Description	Amount			Tax Effect			Effective Tax Rate

Income before Taxes	$	114,647		$	24,076			21.00	%
Income from Affiliates		(96,963	)		(20,362	)		(17.76	)%
Separate Account Dividend Received Deduction		(16,653	)		(3,497	)		(3.05	)%
LIHTC		—			(3,837	)		(3.35	)%
Executive Benefits		(16,400	)		(3,444	)		(3.00	)%
IMR Tax Adjustment		16,320			3,427			2.99	%
Dividends Received Deduction		(2,155	)		(452	)		(0.39	)%
Change in Valuation Basis		216,831			45,534			39.72	%
Other		(13,148	)		(2,761	)		(2.27	)%

Total	$	202,479		$	38,684			33.88	%

Federal income taxes incurred				$	(30,413	)		(26.53	)%
FIT expense/(benefit) on realized capital gains/losses					(1,563	)		(1.36	)%
FIT in IMR gains/losses					(3,472	)		(3.02	)%
Change in net deferred income tax					74,132			64.80	%

Total Statutory Taxes				$	38,684			33.88	%


For the year ending:

2024	$	6,989
2025		6,101
2026		3,871
2027		480
Thereafter		239