Future policy benefits and related reinsurance recoverable

6 Months Ended

Jun. 30, 2026

Future policy benefits and related reinsurance recoverable

Note 14. Future policy benefits and related reinsurance recoverable

Future policy benefits comprise substantially all obligations to insureds in the Company’s insurance operations. A summary of future policy benefits and reinsurance recoverable are presented below.


As of	June 30, 2026		December 31, 2025
Reinsurance recoverable
Long term care reinsurance	$	444,008	$	452,254
Other	2,231		4,466
Modco investments with Nichol International Reinsurance (S.A.C), Ltd¹	(175,118)		(183,802)
Total reinsurance recoverable	$	271,121	$	272,918

Future policy benefits
Long term care insurance	$	754,067	$	777,412
Other	2,232		4,469
Total future policy benefits	$	756,299	$	781,881

Funds held under reinsurance contracts
Funds held arrangement with Front Street Re¹	$	232,926	$	237,143

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(1)The Company has a coinsurance or Modco with funds withheld arrangement with its two reinsurers. The Modco agreement with Nichol International Reinsurance (S.A.C), Ltd. (formerly known as Vista Life and Casualty Reinsurance Company) dictates that the assets held as collateral are held with the legal right of offset to the related insurance contract liabilities. Therefore, the collateral held for this agreement is netted against the reserves under this contract. The agreement with Front Street Re does not have the legal right of offset therefore the reserves are not presented net of the collateral held, instead they are in the line item “Funds held under reinsurance contracts” in the Condensed Consolidated Statements of Financial Position.

The following tables summarize balances of and changes in future policy benefits reserves:


	Six months ended June 30,
Long-term care	2026		2025
Present value of expected net premiums
Beginning Balance	$	273,395	$	306,206

Beginning balance at locked-in discount rate	297,709		343,705

Effect of actual variances from expected experience	(5,624)		(7,536)
Adjusted balance	292,085		336,169
Interest accrual	3,609		3,655
Net premiums collected	(21,543)		(22,722)

Ending balance at locked-in discount rate	274,151		317,102
Effect of changes in discount rate assumptions	(24,829)		(29,000)
Ending Balance	$	249,322	$	288,102

Present value of Expected Future Policy Benefits
Beginning Balance	$	1,050,807	$	1,071,361

Beginning balance at locked-in discount rate	1,239,275		1,306,356
Change in effect in cashflow assumptions	(4,236)		—
Effect of actual variances from expected experience	(2,624)		5,663
Adjusted balance	1,232,415		1,312,019
Interest accrual	15,361		14,297
Benefit payments	(53,951)		(55,495)
Ending balance at locked-in discount rate	1,193,825		1,270,821
Effect of changes in discount rate assumptions	(190,436)		(207,265)
Ending Balance	$	1,003,389	$	1,063,556
Net future policy benefit reserves ¹	$	754,067	$	775,454

Less: Reinsurance recoverables, net of allowance for credit losses ²	(444,008)		(450,696)
Net future policy benefit reserves, after reinsurance recoverables	$	310,059	$	324,758

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(1)Net future policy benefit reserves excludes $2.2 million and $4.4 million as of June 30, 2026 and June 30, 2025, respectively, of Medico assumed reserves which are 100% ceded.

(2)Reinsurance recoverables, net of allowance for credit losses excludes $2.2 million and $4.4 million of reinsurance recoverable as of June 30, 2026 and June 30, 2025, respectively.

In the first half of 2026, the underlying cash flow assumptions had not been changed for the Medico block. For the Guardian block, claim‑handling costs were separated from maintenance costs and the claim reserve assumption was also updated. These assumption updates resulted in a total of $4.2 million decrease in the liability for future policy benefits for the six months ended June 30, 2026. The effect of actual variances from expected experience for the six months ended June 30, 2026 observed a $3.0 million increase in the liability for future policy benefits, mainly driven by lower than expected future premium receipts.

In the first half of 2025, the underlying cash flow assumptions remained unchanged. The effect of actual variances from expected experience for the six months ended June 30, 2025 observed a $13.0 million increase in the liability for future policy benefits, mainly driven by lower than expected future premium receipts and higher claims.

The following tables provides the amount of undiscounted and discounted expected future gross premiums and expected future benefits and expenses for the LTC line of business:


As of	June 30, 2026				June 30, 2025
Long-term care	Undiscounted		Discounted¹		Undiscounted		Discounted¹

Expected future gross premiums	$	333,391	$	249,322	$	383,493	$	288,102
Benefit payments	$	1,683,289	$	1,003,389	$	1,791,870	$	1,063,556

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(1)Discount was determined using the current discount rate as of June 30, 2026 and June 30, 2025.

The following table provides the weighted-average durations of and weighted-average interest rates for the liability for future policy benefits:



As of	June 30, 2026		June 30, 2025
Weighted-average duration of liability (years) at current rate	9.37		9.75
Weighted-average duration of liability (years) at original rate	10.98		11.43
Weighted-average interest rate at current rate	5.13	%	5.06	%
Weighted-average interest rate at original rate	3.12	%	3.05	%

Note 15. Interest sensitive contract liabilities

The following table shows the outstanding Interest sensitive contract liabilities which represents the policyholder balances for MYGA product line:


	Six months ended June 30,
	2026		2025
Balance, beginning of year	$	363,981	$	334,876
Deposits	—		42,996
Product charges	(286)		(1,582)
Surrenders and withdrawals	(11,158)		(16,023)
Benefit payments	(3,943)		(4,798)
Interest credited	8,468		7,815
Balance, June 30, 2026	$	357,062	$	363,284
Weighted-average annual crediting rate	5.00%		5.00%

At period end:
Cash surrender value	$	331,750	$	335,775

Net amount at risk:
In the event of death ¹	$	357,062	$	363,284

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(1)For benefits that are payable in the event of death, the net amount at risk is defined as the current death benefit which is equal to the current account balances at the Condensed Consolidated Statements of Financial Position date. It represents the amount of the claim that the Company would incur if death claims were filed on all contracts at the Condensed Consolidated Statements of Financial Position date.

MYGA policyholder account balances totaled $357.1 million and $363.3 million, as of June 30, 2026, and June 30, 2025, respectively. The decrease in policyholder account balance for the six months ended June 30, 2026 was primarily attributable to surrenders, withdrawals, benefits and product charges of $15.4 million which was partially offset by interest credited of $8.5 million. For the six months ended June 30, 2025 the increase in policyholder account balances was primarily attributable to $43.0 million of deposits due to the assumption of the NSG MYGA block and $7.8 million interest credited. This increase was partially offset by surrenders, withdrawals, benefits and product charges of $22.4 million for the six months ended June 30, 2025. Interest on policyholder account balances is generally credited at minimum guaranteed rates, primarily between 2% and 7% at both June 30, 2026 and June 30, 2025.