UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2021

or

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File No. 001-39369

American National Group, Inc.

(Exact name of registrant as specified in its charter)

Delaware	30-1221711
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

One Moody Plaza

Galveston, Texas 77550-7999

(Address of principal executive offices) (Zip Code)

(409) 763-4661

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on which Registered
Common Stock, par value $0.01	ANAT	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of July 30, 2021, there were 26,887,200 shares of the registrant’s voting common stock, $0.01 par value per share, outstanding.

AMERICAN NATIONAL GROUP, INC.

TABLE OF CONTENTS

	PART I – FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS:
	Condensed Consolidated Statements of Financial Position as of June 30, 2021 and December 31, 2020 (unaudited)	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020 (unaudited)	5
	Condensed Consolidated Statements of Changes in Equity for the three and six months ended June 30, 2021 and 2020 (unaudited)	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)	8
	Notes to the Condensed Consolidated Financial Statements (unaudited)	10
	Note 1 – Nature of Operations	10
	Note 2 – Summary of Significant Accounting Policies and Practices	10
	Note 3 – Recently Issued Accounting Pronouncements	11
	Note 4 – Investment in Securities	12
	Note 5 – Mortgage Loans	18
	Note 6 - Real Estate and Other Investments	21
	Note 7 – Derivative Instruments	23
	Note 8 – Net Investment Income and Realized Investment Gains (Losses)	25
	Note 9 – Fair Value of Financial Instruments	26
	Note 10 – Deferred Policy Acquisition Costs	34
	Note 11 – Liability for Unpaid Claims and Claim Adjustment Expenses	34
	Note 12 – Federal Income Taxes	35
	Note 13 – Accumulated Other Comprehensive Income (Loss)	35
	Note 14 – Stockholders’ Equity and Noncontrolling Interests	36
	Note 15 – Segment Information	38
	Note 16 – Commitments and Contingencies	41
	Note 17 – Related Party Transactions	42
	Note 18 – Subsequent Event	42
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	43
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	68
ITEM 4.	CONTROLS AND PROCEDURES	68
	PART II – OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS	68
ITEM 1A.	RISK FACTORS	68
ITEM 6.	EXHIBITS	69
SIGNATURES		70

2

AMERICAN NATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED)

(In thousands, except share data)

	June 30, 2021		December 31, 2020
ASSETS
Fixed maturity, bonds held-to-maturity, at amortized cost, net of allowance for credit losses of $17,202 in 2021 and $12,442 in 2020 (Fair value $7,998,049 in 2021 and $7,983,181 in 2020)	$	7,473,697	$	7,354,970
Fixed maturity, bonds available-for-sale, at fair value (Allowance for credit losses of $5,158 in 2021 and $7,482 in 2020) (Amortized cost $7,630,025 in 2021 and $7,073,142 in 2020)	8,068,795		7,597,180
Equity securities, at fair value (Cost $796,628 in 2021 and $754,625 in 2020)	2,340,508		2,070,766
Mortgage loans on real estate, net of allowance for credit losses of $108,958 in 2021 and $125,703 in 2020	5,028,933		5,242,531
Policy loans	365,855		373,014
Real estate and real estate partnerships, net of accumulated depreciation of $276,880 in 2021 and $269,626 in 2020	926,241		960,572
Investment funds	594,166		477,135
Short-term investments	917,581		1,028,379
Other invested assets	102,387		94,415
Total investments	25,818,163		25,198,962
Cash and cash equivalents	427,149		339,947
Accrued investment income	206,988		216,389
Reinsurance recoverables, net of allowance for credit losses of $14,890 in 2021 and $14,353 in 2020	403,150		414,359
Prepaid reinsurance premiums	42,203		42,804
Premiums due and other receivables	394,992		351,972
Deferred policy acquisition costs	1,429,623		1,360,211
Property and equipment, net of accumulated depreciation of $292,969 in 2021 and $281,738 in 2020	129,141		121,578
Current tax receivable	10,458		—
Prepaid pension	87,652		80,526
Other assets	156,942		155,600
Separate account assets	1,272,247		1,185,467
Total assets	$	30,378,708	$	29,467,815
LIABILITIES
Future policy benefits
Life	$	3,171,348	$	3,149,067
Annuity	1,621,342		1,617,774
Health	47,722		49,658
Policyholders’ account balances	13,372,474		12,812,155
Policy and contract claims	1,589,729		1,575,288
Unearned premium reserve	1,016,907		956,343
Other policyholder funds	363,060		358,601
Liability for retirement benefits	70,953		70,254
Notes payable	151,498		153,703
Deferred tax liabilities, net	528,779		478,347
Current tax payable	—		10,372
Federal Home Loan Bank advance	—		250,000
Other liabilities	403,611		335,219
Separate account liabilities	1,272,247		1,185,467
Total liabilities	23,609,670		23,002,248
EQUITY
American National Group, Inc. stockholders’ equity:
Common stock, $0.01 par value; 50,000,000 shares authorized; 26,887,200 shares issued and outstanding in 2021 and 2020	269		269
Additional paid-in capital	47,722		47,683
Accumulated other comprehensive income	171,851		222,170
Retained earnings	6,542,202		6,188,148
Total American National stockholders’ equity	6,762,044		6,458,270
Noncontrolling interest	6,994		7,297
Total stockholders' equity	6,769,038		6,465,567
Total liabilities and stockholders' equity	$	30,378,708	$	29,467,815

See accompanying notes to the unaudited condensed consolidated financial statements.

3

AMERICAN NATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except share and per share data)

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
PREMIUMS AND OTHER REVENUES
Premiums
Life	$	100,784	$	91,670	$	201,563	$	181,186
Annuity	20,497		25,944		44,738		41,453
Health	34,485		42,945		72,713		86,031
Property and casualty	409,486		372,704		808,891		761,361
Other policy revenues	90,523		79,787		177,062		159,392
Net investment income	297,399		273,726		567,380		404,717
Net realized investment gains	10,602		3,939		29,841		8,087
Change in investment credit loss	25,079		(52,310)		19,593		(96,988)
Net gains (losses) on equity securities	170,804		298,825		266,744		(33,750)
Other income	11,035		10,336		20,787		21,469
Total premiums and other revenues	1,170,694		1,147,566		2,209,312		1,532,958
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits
Life	139,516		124,941		285,676		235,407
Annuity	42,723		44,983		87,440		79,785
Claims incurred
Health	26,190		26,726		50,441		61,611
Property and casualty	280,606		280,561		524,741		510,270
Interest credited to policyholders’ account balances	111,236		146,783		219,023		142,460
Commissions for acquiring and servicing policies	163,913		140,490		317,598		270,925
Other operating expenses	149,907		125,177		283,409		259,103
Change in deferred policy acquisition costs	(28,842)		(4,703)		(56,961)		(6,375)
Total benefits, losses and expenses	885,249		884,958		1,711,367		1,553,186
Income (loss) before federal income tax and other items	285,445		262,608		497,945		(20,228)
Less: Provision (benefit) for federal income taxes
Current	22,057		(13,714)		38,187		10,789
Deferred	36,272		65,911		63,313		(20,260)
Total provision (benefit) for federal income taxes	58,329		52,197		101,500		(9,471)
Income (loss) after federal income tax	227,116		210,411		396,445		(10,757)
Other components of net periodic pension benefit, net of tax	917		357		1,861		928
Net income (loss)	228,033		210,768		398,306		(9,829)
Less: Net income attributable to noncontrolling interest, net of tax	57		223		157		70
Net income (loss) attributable to American National	$	227,976	$	210,545	$	398,149	$	(9,899)
Amounts available to American National common stockholders
Earnings (losses) per share
Basic	$	8.48	$	7.83	$	14.81	$	(0.37)
Diluted	8.48		7.83		14.81		(0.37)
Weighted average common shares outstanding	26,877,200		26,878,684		26,877,200		26,880,183
Weighted average common shares outstanding and dilutive potential common shares	26,884,722		26,887,129		26,884,794		26,889,448

See accompanying notes to the unaudited condensed consolidated financial statements.

4

AMERICAN NATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(In thousands)

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Net income (loss)	$	228,033	$	210,768	$	398,306	$	(9,829)
Other comprehensive income (loss), net of tax
Change in net unrealized gains (losses) on securities	49,395		173,776		(56,869)		61,373
Foreign currency transaction and translation adjustments	175		339		419		(585)
Defined benefit pension plan adjustment	2,322		1,849		6,131		3,605
Total other comprehensive income (loss), net of tax	51,892		175,964		(50,319)		64,393
Total comprehensive income	279,925		386,732		347,987		54,564
Less: Comprehensive income attributable to noncontrolling interest	57		223		157		70
Total comprehensive income attributable to American National	$	279,868	$	386,509	$	347,830	$	54,494

See accompanying notes to the unaudited condensed consolidated financial statements.

5

AMERICAN NATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

(In thousands, except per share data)

	Common Stock*		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Noncontrolling Interest		Total Equity
Balance at January 1, 2021	$	269	$	47,683	$	222,170	$	6,188,148	$	7,297	$	6,465,567
Amortization of restricted stock	—		19		—		—		—		19
Other comprehensive loss	—		—		(102,211)		—		—		(102,211)
Net income attributable to American National	—		—		—		170,173		—		170,173
Cash dividends to common stockholders (declared per share of $0.82)	—		—		—		(22,048)		—		(22,048)
Contributions	—		—		—		—		259		259
Distributions	—		—		—		—		(380)		(380)
Net income attributable to noncontrolling interest	—		—		—		—		100		100
Balance at March 31, 2021	$	269	$	47,702	$	119,959	$	6,336,273	$	7,276	$	6,511,479
Amortization of restricted stock	—		20		—		—		—		20
Other comprehensive income	—		—		51,892		—		—		51,892
Net income attributable to American National	—		—		—		227,976		—		227,976
Cash dividends to common stockholders (declared per share of $0.82)	—		—		—		(22,047)		—		(22,047)
Contributions	—		—		—		—		—		—
Distributions	—		—		—		—		(339)		(339)
Net income attributable to noncontrolling interest	—		—		—		—		57		57
Balance at June 30, 2021	$	269	$	47,722	$	171,851	$	6,542,202	$	6,994	$	6,769,038

*Refer to Note 1, Nature of Operations for more information on changes in Common Stock and Treasury Stock resulting from the Company's reorganization effective July 1, 2020.

See accompanying notes to the unaudited condensed consolidated financial statements.

6

AMERICAN NATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

(In thousands, except per share data)

	Common Stock		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock		Noncontrolling Interest		Total Equity
Balance at January 1, 2020	$	30,832	$	21,011	$	99,518	$	5,946,857	$	(108,469)	$	6,014	$	5,995,763
Amortization of restricted stock	—		20		—		—		—		—		20
Cumulative effect of accounting change	—		—		—		(34,702)		—		—		(34,702)
Other comprehensive loss	—		—		(111,571)		—		—		—		(111,571)
Net loss attributable to American National	—		—		—		(220,444)		—		—		(220,444)
Cash dividends to common stockholders (declared per share of $0.82)	—		—		—		(22,047)		—		—		(22,047)
Contributions	—		—		—		—		—		546		546
Distributions	—		—		—		—		—		(323)		(323)
Net loss attributable to noncontrolling interest	—		—		—		—		—		(153)		(153)
Balance at March 31, 2020	$	30,832	$	21,031	$	(12,053)	$	5,669,664	$	(108,469)	$	6,084	$	5,607,089
Amortization of restricted stock	—		20		—		—		—		—		20
Cumulative effect of accounting change	—		—		—		1,199		—		—		1,199
Other comprehensive income	—		—		175,964		—		—		—		175,964
Net income attributable to American National	—		—		—		210,545		—		—		210,545
Cash dividends to common stockholders (declared per share of $0.82)	—		—		—		(22,047)		—		—		(22,047)
Contributions	—		—		—		—		—		310		310
Distributions	—		—		—		—		—		(362)		(362)
Net income attributable to noncontrolling interest	—		—		—		—		—		223		223
Balance at June 30, 2020	$	30,832	$	21,051	$	163,911	$	5,859,361	$	(108,469)	$	6,255	$	5,972,941

See accompanying notes to the unaudited condensed consolidated financial statements.

7

AMERICAN NATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(In thousands)

	Six months ended June 30,
	2021		2020
OPERATING ACTIVITIES
Net income (loss)	$	398,306	$	(9,829)
Adjustments to reconcile net income to net cash provided by operating activities:
Net realized investment gains	(29,841)		(8,087)
Change in investment credit loss	(19,593)		96,988
Accretion of premiums, discounts and loan origination fees	7,540		3,851
Net capitalized interest on policy loans and mortgage loans	(17,129)		(14,125)
Depreciation	26,100		26,241
Fair value of option securities	(69,069)		40,938
Fair value of equity securities	(266,744)		33,750
Interest credited to policyholders’ account balances	219,023		142,460
Charges to policyholders’ account balances	(177,062)		(159,392)
Deferred federal income tax expense (benefit)	63,313		(20,260)
Income from equity method investments	(64,698)		(2,085)
Distributions from unconsolidated affiliates	54,345		31,413
Changes in:
Policyholder liabilities	158,941		114,562
Deferred policy acquisition costs	(56,961)		(6,375)
Reinsurance recoverables (payables)	11,209		(20,809)
Premiums due and other receivables	(43,020)		(51,632)
Prepaid reinsurance premiums	601		6,031
Accrued investment income	9,401		(10,412)
Current tax payable (receivable)	(20,830)		3,485
Liability for retirement benefits	1,334		(5,632)
Other, net	(46,966)		(74,733)
Net cash provided by operating activities	138,200		116,348
INVESTING ACTIVITIES
Proceeds from sale/maturity/prepayment of:
Held-to-maturity securities	724,514		689,573
Available-for-sale securities	574,150		501,014
Equity securities	62,761		31,750
Real estate and real estate partnerships	11,119		2,395
Mortgage loans	507,993		164,654
Policy loans	28,440		25,956
Other invested assets	111,276		55,008
Disposals of property and equipment	65		16
Distributions from real estate and real estate partnerships	81,191		4,435
Distributions from investment funds	58,403		22,476
Payment for the purchase/origination of:
Held-to-maturity securities	(841,925)		(336,138)
Available-for-sale securities	(1,073,688)		(840,481)
Equity securities	(49,492)		(78,634)
Real estate and real estate partnerships	(5,289)		(7,040)
Mortgage loans	(266,055)		(326,726)
Policy loans	(9,289)		(12,813)
Other invested assets	(69,180)		(46,373)
Additions to property and equipment	(18,858)		(16,151)
Contributions to real estate and real estate partnerships	(58,482)		(43,415)
Contributions to investment funds	(166,918)		(100,423)
Change in short-term investments	110,798		(75,766)
Change in collateral held for derivatives	18,817		(70,424)
Other, net	(2,688)		(4,322)
Net cash used in investing activities	(272,337)		(461,429)

8

AMERICAN NATIONAL GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)

(In thousands)

	Six months ended June 30,
	2021		2020
FINANCING ACTIVITIES
Policyholders’ account deposits	$	1,158,341	$	562,041
Policyholders’ account withdrawals	(639,983)		(655,809)
Proceeds from Federal Home Loan Bank borrowings	—		500,000
Repayment of Federal Home Loan Bank borrowings	(250,000)		—
Change in notes payable	(2,205)		(2,126)
Dividends to stockholders	(44,095)		(44,094)
Payments to noncontrolling interest	(719)		(685)
Net cash provided by financing activities	221,339		359,327
NET INCREASE IN CASH AND CASH EQUIVALENTS	87,202		14,246
Cash and cash equivalents at beginning of the period	339,947		452,001
Cash and cash equivalents at end of the period	$	427,149	$	466,247
Supplemental cash flow information:
Interest paid	$	351	$	132
Income taxes paid, net	55,244		3,800

See accompanying notes to the unaudited condensed consolidated financial statements.

9

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Nature of Operations

On July 1, 2020, American National Insurance Company, a Texas insurance company (“ANICO”), completed its previously announced holding company reorganization. As a result of such reorganization, ANICO became a wholly owned subsidiary of American National Group, Inc., a Delaware corporation (“ANAT”), and ANAT replaced ANICO as the publicly held company. Consequently, all filings with the Securities and Exchange Commission (“SEC”) from July 2, 2020 forward will be filed by ANAT under CIK No. 0001801075. Upon the effective date of the holding company reorganization, ANAT retired 3,945,249 shares of common stock that were held in treasury at ANICO prior to the reorganization. The amount of retired treasury stock in excess of par value was charged to retained earnings. Before and after the reorganization, the issuer had 50,000,000 authorized shares of common stock and 26,887,200 common shares outstanding. As a result of the reorganization, each share of ANICO common stock, par value $1.00 per share was automatically converted into one duly issued, fully paid and non-assessable share of ANAT common stock, par value $0.01 per share. As a result of the reorganization, the directors and officers of ANICO became directors and officers of ANAT. There is no change in the ultimate ownership of the organization and business operations will continue from our current office locations and companies. ANAT, through its consolidated subsidiaries (collectively “American National” or the “Company”) offers a broad portfolio of insurance products, including individual and group life insurance, annuities, health insurance, and property and casualty insurance. Business is conducted in all 50 states, the District of Columbia and Puerto Rico.

Note 2 – Summary of Significant Accounting Policies and Practices

The condensed consolidated financial statements and notes thereto have been prepared in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) and are reported in U.S. currency. American National consolidates entities that are wholly-owned and those in which American National owns less than 100% but controls the voting rights, as well as variable interest entities in which American National is the primary beneficiary. Intercompany balances and transactions with consolidated entities have been eliminated. Investments in unconsolidated affiliates, which include real estate partnerships and investment funds, are accounted for using the equity method of accounting. Changes in prior period presentation were made to conform to the current period presentation.

During the first quarter of 2021, we reclassified the Company's earnings from equity method investments in the condensed consolidated statements of operations from "Equity in earnings (losses) of unconsolidated affiliates" to "Net investment income." For the three and six months ended June 30, 2020, $(13.6) million and $2.1 million were reclassified, with no impact to net income. We also reclassified the related asset balances in the condensed consolidated statements of financial position from "Investments in unconsolidated affiliates" to "Real estate and real estate partnerships" and "Investment funds," with no impact to total assets. Management believes these reclassifications result in increased transparency to the users of the financial statements as it relates to the Company's invested assets and the performance of these investments that are tied to the primary operations of the Company.

The interim condensed consolidated financial statements and notes should be read in conjunction with the annual consolidated financial statements and notes thereto included in American National’s Annual Report on Form 10-K as of and for the year ended December 31, 2020. The condensed consolidated results of operations for the interim periods should not be considered indicative of results to be expected for the full year.

The preparation of the condensed consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported consolidated financial statement balances. Actual results could differ from those estimates.

10

Note 3 – Recently Issued Accounting Pronouncements

Adoption of New Accounting Standards

Standard	Description	Effective Date and Method of Adoption	Impact on Financial Statements
ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes	The amendments simplify the accounting for income taxes by removing certain exceptions in the existing guidance including those related to intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items. The amendments require that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax as well as other minor changes.	This standard became effective for the Company for all annual and interim periods beginning January 1, 2021. The new guidance specifies which amendments should be applied prospectively, retrospective to all periods presented or on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption.	The adoption of this standard did not have a material impact to the Company's Condensed Consolidated Financial Statements or Notes to the Condensed Consolidated Financial Statements.

Future Adoption of New Accounting Standards—The FASB issued the following accounting guidance relevant to American National:

Standard	Description	Effective Date and Method of Adoption	Impact on Financial Statements
ASU 2018-12, Financial Services—Insurance (Topic 944): Targeted Improvements to the Accounting for Long-Duration Contracts	The guidance will improve the timeliness of recognizing changes in the liability for future policy benefits for traditional and limited payment long-duration contracts and will modify the rate used to discount future cash flows. The guidance will also simplify the accounting for certain market-based options or guarantees associated with deposit (or account balance) contracts (market risk benefits), simplify the amortization of deferred acquisition costs and add significant qualitative and quantitative disclosures.	This standard will become effective for the Company for all annual and interim periods beginning January 1, 2023, which was extended from the previous effective date of January 1, 2022 through the issuance of ASU 2020-11. The guidance allows for one of two adoption methods, a modified retrospective transition or a full retrospective transition except for the changes to accounting for market risk benefits which will require a retrospective transition.	We are currently evaluating the impact of the amendment to the Company. Based on the nature of the standard, we expect the impact to be material to our Condensed Consolidated Financial Statements and Notes to the Condensed Consolidated Financial Statements.
ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting	The amendments in this guidance provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The guidance only applies to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.	The amendments in this guidance are effective for all entities as of March 12, 2020 and will sunset through December 31, 2022, at which time the application of exceptions and optional expedients will no longer be permitted.	The inventory of LIBOR exposures has been completed and is primarily limited to floating rate bonds, alternative investments, and borrowings within joint venture investments. Some of the contracts included in these categories will mature prior to December 31, 2021, the start of LIBOR rates cessations. The transition from LIBOR is expected to result in an immaterial impact to the Company.

11

Note 4 – Investment in Securities

The cost or amortized cost and fair value of investments in securities are shown below (in thousands):

	June 30, 2021
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Fixed maturity, bonds held-to-maturity
U.S. treasury and government	$	12,356	$	1	$	(140)	$	—	$	12,217
U.S. states and political subdivisions	111,374		2,879		(1,362)		—		112,891
Foreign governments	14,436		263		(149)		—		14,550
Corporate debt securities	7,183,151		528,273		(10,968)		(14,952)		7,685,504
Residential mortgage-backed securities	62,494		4,049		(436)		(526)		65,581
Collateralized debt securities	107,088		2,181		(239)		(1,724)		107,306
Total bonds held-to-maturity	7,490,899		537,646		(13,294)		(17,202)		7,998,049
Fixed maturity, bonds available-for-sale
U.S. treasury and government	23,899		248		(18)		—		24,129
U.S. states and political subdivisions	1,033,691		61,658		(1,398)		(8)		1,093,943
Foreign governments	5,000		1,070		—		—		6,070
Corporate debt securities	6,397,487		391,587		(10,505)		(4,489)		6,774,080
Residential mortgage-backed securities	32,366		705		(57)		(205)		32,809
Collateralized debt securities	137,582		913		(275)		(456)		137,764
Total bonds available-for-sale	7,630,025		456,181		(12,253)		(5,158)		8,068,795
Total investments in fixed maturity	$	15,120,924	$	993,827	$	(25,547)	$	(22,360)	$	16,066,844

	December 31, 2020
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Allowance for Credit Losses		Fair Value
Fixed maturity, bonds held-to-maturity
U.S. treasury and government	$	7,733	$	11	$	—	$	—	$	7,744
U.S. states and political subdivisions	109,445		4,101		(11)		—		113,535
Foreign governments	3,851		374		—		—		4,225
Corporate debt securities	6,992,095		623,233		(9,117)		(7,475)		7,598,736
Residential mortgage-backed securities	114,579		5,065		(1,464)		(452)		117,728
Collateralized debt securities	139,709		6,864		(845)		(4,515)		141,213
Total bonds held-to-maturity	7,367,412		639,648		(11,437)		(12,442)		7,983,181
Fixed maturity, bonds available-for-sale
U.S. treasury and government	28,766		418		(1)		—		29,183
U.S. states and political subdivisions	1,066,627		73,976		(145)		—		1,140,458
Foreign governments	14,995		1,393		—		—		16,388
Corporate debt securities	5,887,756		471,205		(17,207)		(7,275)		6,334,479
Residential mortgage-backed securities	20,544		964		(29)		(188)		21,291
Collateralized debt securities	54,454		1,040		(94)		(19)		55,381
Total bonds available-for-sale	7,073,142		548,996		(17,476)		(7,482)		7,597,180
Total investments in fixed maturity	$	14,440,554	$	1,188,644	$	(28,913)	$	(19,924)	$	15,580,361

12

Note 4 – Investment in Securities – (Continued)

The amortized cost and fair value, by contractual maturity, of fixed maturity securities are shown below (in thousands):

	June 30, 2021
	Bonds Held-to-Maturity				Bonds Available-for-Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	539,074	$	547,151	$	372,425	$	375,685
Due after one year through five years	2,822,945		3,009,237		3,157,541		3,373,610
Due after five years through ten years	3,140,238		3,395,413		2,619,993		2,785,508
Due after ten years	988,642		1,046,248		1,480,066		1,533,992
Total	$	7,490,899	$	7,998,049	$	7,630,025	$	8,068,795

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Residential and commercial mortgage-backed securities, which are not due at a single maturity, have been presented based on the year of final contractual maturity.

Proceeds from sales of bonds available-for-sale, with the related gross realized gains and losses, are shown below (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Proceeds from sales of fixed maturity, bonds available-for-sale	$	13,523	$	85,000	$	25,173	$	131,513
Gross realized gains	59		—		59		412
Gross realized losses	—		—		—		(4,072)

Gains and losses are determined using specific identification of the securities sold. There was no transfer of bonds from held-to-maturity to available-for-sale during the six months ended June 30, 2021 and 2020.

In accordance with various regulations, American National has bonds on deposit with regulating authorities with a carrying value of $47.3 million and $47.7 million at June 30, 2021 and December 31, 2020, respectively. In addition, American National has pledged bonds in connection with agreements and transactions, such as financing and reinsurance agreements. The carrying value of bonds pledged was $89.0 million and $111.0 million at June 30, 2021 and December 31, 2020, respectively.

The components of the change in net unrealized gains (losses) on debt securities are shown below (in thousands):

	Six months ended June 30,
	2021		2020
Bonds available-for-sale: change in unrealized gains (losses)	$	(87,592)	$	106,055
Adjustments for
Deferred policy acquisition costs	12,451		(21,240)
Participating policyholders’ interest	3,484		(5,052)
Deferred federal income tax benefit (expense)	14,788		(18,390)
Change in net unrealized gains (losses) on debt securities, net of tax	$	(56,869)	$	61,373

The components of the change in net gains (losses) on equity securities are shown below (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Unrealized gains (losses) on equity securities	$	172,373	$	298,793	$	269,139	$	(34,808)
Net gains (losses) on equity securities sold	(1,569)		32		(2,395)		1,058
Net gains (losses) on equity securities	$	170,804	$	298,825	$	266,744	$	(33,750)

13

Note 4 – Investment in Securities – (Continued)

The gross unrealized losses and fair value of bonds available-for-sale, aggregated by investment category and length of time individual securities have been in a continuous unrealized loss position due to market factors are shown below (in thousands, except number of issues):

	June 30, 2021
	Less than 12 months					12 months or more					Total
	Number of Issues	Gross Unrealized Losses		Fair Value		Number of Issues	Gross Unrealized Losses		Fair Value		Number of Issues	Gross Unrealized Losses		Fair Value
Fixed maturity, bonds available-for-sale
U.S. treasury and government	5	$	(18)	$	11,713	—	$	—	$	—	5	$	(18)	$	11,713
U.S. states and political subdivisions	8	(1,398)		43,726		—	—		—		8	(1,398)		43,726
Corporate debt securities	115	(10,280)		637,686		9	(225)		37,955		124	(10,505)		675,641
Residential mortgage-backed securities	1	(55)		13,335		3	(2)		552		4	(57)		13,887
Collateralized debt securities	14	(275)		108,502		—	—		—		14	(275)		108,502
Total	143	$	(12,026)	$	814,962	12	$	(227)	$	38,507	155	$	(12,253)	$	853,469

	December 31, 2020
	Less than 12 months					12 months or more					Total
	Number of Issues	Gross Unrealized Losses		Fair Value		Number of Issues	Gross Unrealized Losses		Fair Value		Number of Issues	Gross Unrealized Losses		Fair Value
Fixed maturity, bonds available-for-sale
U.S. treasury and government	1	$	(1)	$	2,868	—	$	—	$	—	1	$	(1)	$	2,868
U.S. states and political subdivisions	2	(145)		10,205		—	—		—		2	(145)		10,205
Corporate debt securities	43	(8,507)		270,249		8	(8,700)		13,270		51	(17,207)		283,519
Residential mortgage-backed securities	1	(21)		1,391		3	(8)		593		4	(29)		1,984
Collateralized debt securities	3	(93)		12,752		1	(1)		158		4	(94)		12,910
Total	50	$	(8,767)	$	297,465	12	$	(8,709)	$	14,021	62	$	(17,476)	$	311,486

A number of assumptions and estimates are inherent in evaluating whether an allowance for credit loss is necessary, which include the financial condition, near term and long-term prospects of the issue or issuer, including relevant industry conditions and trends and implications of rating agency actions and offering prices. Based on this evaluation, unrealized losses on bonds available-for-sale where an allowance for credit loss was not recorded were concentrated in the Company's fixed maturity securities within the electronic equipment sector.

Equity securities by market sector distribution are shown below, based on fair value:

	June 30, 2021		December 31, 2020
Consumer goods	17.6	%	19.3	%
Energy and utilities	5.7		5.2
Finance	23.2		21.6
Healthcare	14.1		15.0
Industrials	7.6		7.4
Information technology	27.1		27.1
Other	4.7		4.4
Total	100.0	%	100.0	%

14

Note 4 – Investment in Securities – (Continued)

Allowance for Credit Losses

Held-to-Maturity Securities—Management measures expected credit losses on bonds held-to-maturity on a qualitative adjustment basis by major security type: corporate bonds, structured products, municipals, specialty products and treasuries. Accrued interest receivable on held-to-maturity debt securities are excluded from the estimate of credit losses. The estimate of expected credit losses considers historical credit loss information that is adjusted for current market conditions and reasonable and supportable economic forecasts based upon a third-party valuation model.

Available-for-Sale Securities—For available-for-sale bonds in an unrealized loss position, the Company first assesses whether it intends to sell the security or will be required to sell the security before recovery of its amortized cost basis. If either of these criteria are met, the security’s amortized cost basis is written down to fair value through income. For bonds available-for-sale that do not meet either indicated criteria, the Company evaluates whether the decline in fair value has resulted from credit events or market factors. In making this assessment, management first calculates the extent to which fair value is less than amortized cost, and then may consider any changes to the rating of the security by a rating agency, and any specific conditions related to the security. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security is compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded through income, limited to the amount fair value is less than amortized cost. Any remaining unrealized loss is recognized in other comprehensive income.

When the discounted cash flow method is used to determine the allowance for credit losses, management's estimates incorporate expected prepayments, if any. Model inputs are considered reasonable and supportable for three years. A mean reversion is applied in years four and five. Credit loss allowance is not measured on accrued interest receivable because the balance is written off to net investment income in a timely manner, within 90 days. Changes in the allowance for credit losses are recognized through the condensed consolidated statement of operations as change in estimated credit loss.

No accrued interest receivables were written off as of June 30, 2021.

The rollforward of the allowance for credit losses for bonds held-to-maturity is shown below (in thousands):

	Corporate Debt Securities		Collateralized Debt Securities		Residential Mortgage Backed Securities		Total
Allowance for credit losses
Balance at January 1, 2021	$	(7,475)	$	(4,515)	$	(452)	$	(12,442)
Purchases	(228)		—		—		(228)
Disposition	125		—		—		125
Provision	(4,215)		(2,004)		(90)		(6,309)
Balance at March 31, 2021	$	(11,793)	$	(6,519)	$	(542)	$	(18,854)
Purchases	(974)		—		—		(974)
Disposition	104		551		—		655
Provision	(2,289)		4,244		16		1,971
Balance at June 30, 2021	$	(14,952)	$	(1,724)	$	(526)	$	(17,202)

	Foreign Governments		Corporate Debt Securities		Collateralized Debt Securities		Residential Mortgage Backed Securities		Total
Allowance for credit losses
Balance at January 1, 2020	$	4	$	(18,563)	$	(2,968)	$	(137)	$	(21,664)
Purchases	—		(622)		(323)		—		(945)
Disposition	—		6,901		106		134		7,141
Provision	1		(6,117)		199		—		(5,917)
Balance at March 31, 2020	$	5	$	(18,401)	$	(2,986)	$	(3)	$	(21,385)
Purchases	—		(116)		—		—		(116)
Disposition	—		200		—		—		200
Provision	(5)		(1,565)		454		3		(1,113)
Balance at June 30, 2020	$	—	$	(19,882)	$	(2,532)	$	—	$	(22,414)

15

Note 4 – Investment in Securities – (Continued)

The rollforward of the allowance for credit losses for available-for-sale debt securities is shown below (in thousands):

	U.S. Treasury and Government		U.S. State and Political Subdivisions		Corporate Debt Securities		Collateralized Debt Securities		Residential Mortgage Backed Securities		Total
Allowance for credit losses
Balance at January 1, 2021	$	—	$	—	$	(7,275)	$	(19)	$	(188)	$	(7,482)
Allowance on securities that had an allowance recorded in a previous period	—		—		(733)		(488)		(10)		(1,231)
Allowance on securities where credit losses were not previously recorded	(3)		—		—		—		—		(3)
Balance at March 31, 2021	$	(3)	$	—	$	(8,008)	$	(507)	$	(198)	$	(8,716)
Increase in allowance related to purchases	—		—		(981)		(192)		—		(1,173)
Reduction in allowance related to disposition	—		—		4,039		182		—		4,221
Allowance on securities that had an allowance recorded in a previous period	3		—		1,181		87		(5)		1,266
Allowance on securities where credit losses were not previously recorded	—		(8)		(720)		(26)		(2)		(756)
Balance at June 30, 2021	$	—	$	(8)	$	(4,489)	$	(456)	$	(205)	$	(5,158)

	Corporate Debt Securities		Collateralized Debt Securities		Residential Mortgage Backed Securities		Total
Allowance for credit losses
Balance at January 1, 2020	$	—	$	—	$	—	$	—
Allowance on securities that had an allowance recorded in a previous period	(12,499)		(236)		(130)		(12,865)
Balance at March 31, 2020	$	(12,499)	$	(236)	$	(130)	$	(12,865)
Increase in allowance related to purchases	(73)		—		—		(73)
Reduction in allowance related to disposition	7		—		3		10
Allowance on securities that had an allowance recorded in a previous period	10,017		155		(83)		10,089
Allowance on securities where credit losses were not previously recorded	(1,276)		—		—		(1,276)
Balance at June 30, 2020	$	(3,824)	$	(81)	$	(210)	$	(4,115)

16

Note 4 – Investment in Securities – (Continued)

Credit Quality Indicators

The Company monitors the credit quality of bonds held-to-maturity through the use of credit ratings, which are updated on a monthly basis. The two traditional metrics for assessing interest rate risks are interest-coverage ratios and capitalization ratios, which can also be used in the assessment of credit risk. These risks are mitigated through the diversification of bond investments. Categories of diversification include credit ratings, geographic locations, maturities, and market sector.

The credit quality indicators for the amortized cost of bonds held-to-maturity are shown below (in thousands):

	June 30, 2021
	Amortized cost of bonds held-to-maturity by credit rating
Fixed maturity, bonds held-to-maturity	AAA		AA		A		BBB		BB and below		Total
U.S. treasury and government	$	—	$	12,356	$	—	$	—	$	—	$	12,356
U.S. state and political subdivisions	16,846		55,316		9,772		22,932		6,508		111,374
Foreign governments	—		13,413		1,023		—		—		14,436
Corporate debt securities	31,342		406,543		3,297,317		3,349,258		98,691		7,183,151
Collateralized debt securities	—		—		68,675		33,445		4,968		107,088
Residential mortgage backed securities	—		61,083		—		—		1,411		62,494
Total	$	48,188	$	548,711	$	3,376,787	$	3,405,635	$	111,578	$	7,490,899

	December 31, 2020
	Amortized cost of bonds held-to-maturity by credit rating
Fixed maturity, bonds held-to-maturity	AAA		AA		A		BBB		BB and below		Total
U.S. treasury and government	$	—	$	7,733	$	—	$	—	$	—	$	7,733
U.S. state and political subdivisions	25,831		43,964		34,893		—		4,757		109,445
Foreign governments	—		2,820		1,031		—		—		3,851
Corporate debt securities	1,956		262,830		2,976,571		3,647,496		103,242		6,992,095
Collateralized debt securities	—		—		107,795		31,914		—		139,709
Residential mortgage backed securities	—		112,995		—		—		1,584		114,579
Total	$	27,787	$	430,342	$	3,120,290	$	3,679,410	$	109,583	$	7,367,412

17

Note 5 – Mortgage Loans

Generally, commercial mortgage loans are secured by first liens on income-producing real estate. American National attempts to maintain a diversified portfolio by considering both the location of the underlying collateral as well as the type of mortgage loan. The geographic categories come from the U.S. Census Bureau's "Census Regions and Divisions of the United States." The distribution based on carrying amount of mortgage loans by location is as follows (in thousands, except percentages):

	June 30, 2021				December 31, 2020
	Amount		Percentage		Amount		Percentage
East North Central	$	726,988	14.4	%	$	783,614	14.9	%
East South Central	133,339		2.6		146,052		2.8
Mountain	1,266,147		25.2		1,284,555		24.5
Pacific	802,704		16.0		806,426		15.4
South Atlantic	552,216		11.0		619,405		11.8
West South Central	1,214,926		24.2		1,313,848		25.1
Other	332,613		6.6		288,631		5.5
Total	$	5,028,933	100.0	%	$	5,242,531	100.0	%

As of June 30, 2021 and December 31, 2020, loans in foreclosure and loans foreclosed are as follows (in thousands, except number of loans):

	June 30, 2021			December 31, 2020
Foreclosure and foreclosed	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
In foreclosure	—	$	—	1	$	5,168
Filed for bankruptcy*	—	—		1	9,230
Total in foreclosure	—	$	—	2	$	14,398
Foreclosed	1	$	5,168	2	$	8,603

*Borrower filed for bankruptcy after foreclosure proceedings had begun.

The age analysis of past due loans is shown below (in thousands, except percentages):

	30-59 Days Past Due		60-89 Days Past Due		More Than 90 Days Past Due		Total		Current		Total
June 30, 2021											Amount		Percentage
Apartment	$	—	$	—	$	—	$	—	$	529,136	$	529,136	10.3	%
Hotel	—		—		—		—		909,010		909,010		17.7
Industrial	—		2,785		—		2,785		852,210		854,995		16.6
Office	—		—		—		—		1,475,620		1,475,620		28.7
Parking	—		—		—		—		363,024		363,024		7.1
Retail	—		—		—		—		755,827		755,827		14.7
Storage	—		—		—		—		137,042		137,042		2.7
Other	—		—		—		—		113,237		113,237		2.2
Total	$	—	$	2,785	$	—	$	2,785	$	5,135,106	$	5,137,891	100.0	%
Allowance for credit losses											(108,958)
Total, net of allowance											$	5,028,933
December 31, 2020
Apartment	$	—	$	—	$	—	$	—	$	557,159	$	557,159	10.5	%
Hotel	30,315		30,158		—		60,473		853,522		913,995		17.0
Industrial	14,930		—		5,168		20,098		836,105		856,203		15.9
Office	24,804		—		9,230		34,034		1,522,197		1,556,231		29.0
Parking	48,825		29,355		—		78,180		286,107		364,287		6.8
Retail	4,991		—		25,779		30,770		760,907		791,677		14.7
Storage	—		—		—		—		165,561		165,561		3.1
Other	—		—		—		—		163,121		163,121		3.0
Total	$	123,865	$	59,513	$	40,177	$	223,555	$	5,144,679	$	5,368,234	100.0	%
Allowance for credit losses											(125,703)
Total, net of allowance											$	5,242,531

18

Note 5 – Mortgage Loans – (Continued)

As a result of the economic impact associated with COVID-19, American National modified 93 loans with a total balance of $1.6 billion during the second and third quarters of 2020. These modifications were in the form of forbearance of principal and interest payments for up to six months, extensions of maturity dates, and/or provisions for interest only payments. The modifications were primarily related to our loans to hotels, retail and parking operations. Due to the ongoing economic stress brought on by the pandemic, additional modifications for 31 of these loans with a total balance of $708.6 million were made in the first and second quarters of 2021. These additional modifications extended the forbearance of principal and interest payments and interest only provisions with a requirement for the payment of at least 20% of the total interest due during the extended modification period. The modified loans had an aggregate deferred interest of $13.6 million as of June 30, 2021.

There were no unamortized purchase discounts as of June 30, 2021 and December 31, 2020. Total mortgage loans were net of unamortized origination fees of $23.6 million and $26.1 million at June 30, 2021 and December 31, 2020, respectively. No unearned income is included in these amounts.

Troubled Debt Restructurings

American National has granted concessions to certain mortgage loan borrowers. Concessions are generally one of, or a combination of, a delay in payment of principal or interest, a reduction of the contractual interest rate or an extension of the maturity date. Loans that have these concessions could be classified as troubled debt restructurings. The carrying value could change based on the expected recovery of the loan, which is evaluated quarterly. Loan modifications executed due to COVID-19 resulting in a total delay of more than six months were evaluated for troubled debt restructured status under current GAAP guidance.

Troubled debt restructuring mortgage loan information is as follows (in thousands, except number of loans):

	Six months ended June 30,
	2021					2020
	Number of Loans	Recorded Investment Pre- Modification		Recorded Investment Post- Modification		Number of Loans	Recorded Investment Pre- Modification		Recorded Investment Post- Modification
Office	2	$	14,511	$	14,511	—	$	—	$	—
Retail	3	32,703		32,703		3	22,161		22,161
Hotel	—	—		—		11	341,556		341,556
Parking	1	9,735		9,735		—	—		—
Storage	1	8,942		8,942		—	—		—
Other	—	—		—		2	5,776		5,776
Total	7	$	65,891	$	65,891	16	$	369,493	$	369,493

American National considers the amount, timing and extent of concessions in determining credit loss allowances for loan losses recorded in connection with a troubled debt restructuring.

There were seven loans determined to be a troubled debt restructuring for the six months ended June 30, 2021. There are no commitments to lend additional funds to debtors whose loans have been modified in a troubled debt restructuring during the periods presented. The increase in loans determined to be a troubled debt restructuring in the six months ended June 30, 2021 is primarily attributable to COVID-19 related loan modifications where the concessions granted were in excess of six-months in duration.

19

Note 5 – Mortgage Loans – (Continued)

Allowance for Credit Losses

Mortgage loans on real estate are stated at unpaid principal balance, adjusted for any unamortized discount, deferred expenses and allowances. The allowance for credit losses is based upon the current expected credit loss model. The model considers past loss experience, current economic conditions, and reasonable and supportable forecasts of future conditions. Reversion for the allowance calculation is implicit in the models used to determine the allowance. The methodology uses a discounted cash flow approach based on expected cash flows.

The rollforward of the allowance for credit losses for mortgage loans is shown below (in thousands):

	Commercial Mortgage Loans
Balance at January 1, 2021	$	(125,703)
Provision	(885)
Balance at March 31, 2021	$	(126,588)
Provision	17,630
Balance at June 30, 2021	$	(108,958)
	Commercial Mortgage Loans
Balance at January 1, 2020	$	(19,160)
Cumulative adjustment at January 1, 2020	(11,216)
Provision	(29,069)
Balance at March 31, 2020	$	(59,445)
Provision	(52,035)
Balance at June 30, 2020	$	(111,480)

The change in allowance for the six months ended June 30, 2021 was primarily driven by a favorable response of the hospitality and retail industries to re-opening of the economy and resulting increases in travel and brick-and-mortar shopping. This is partially offset by general uncertainty in the office sector.

The asset and allowance balances for credit losses for mortgage loans by property-type are shown below (in thousands):

	June 30, 2021				December 31, 2020
	Asset Balance		Allowance		Asset Balance		Allowance
Apartment	$	529,136	$	(2,902)	$	557,159	$	(8,845)
Hotel	909,010		(43,607)		913,995		(45,596)
Industrial	854,995		(3,066)		856,203		(2,516)
Office	1,475,620		(30,321)		1,556,231		(33,373)
Parking	363,024		(17,414)		364,287		(18,178)
Retail	755,827		(9,127)		791,677		(10,856)
Storage	137,042		(752)		165,561		(2,509)
Other	113,237		(1,769)		163,121		(3,830)
Total	$	5,137,891	$	(108,958)	$	5,368,234	$	(125,703)

20

Note 5 – Mortgage Loans – (Continued)

Credit Quality Indicators

Mortgage loans are segregated by property-type and quantitative and qualitative allowance factors are applied. Qualitative factors are developed quarterly based on the pooling of assets with similar risk characteristics and historical loss experience adjusted for the expected trend in the current market environment. Credit losses are pooled by property-type as it represents the most similar and reliable risk characteristics in our portfolio. The amortized cost of mortgage loans by year of origination by property-type are shown below (in thousands):

	Amortized Cost Basis by Origination Year
	2021		2020		2019		2018		2017		Prior		Total
Apartment	$	—	$	57,122	$	227,547	$	48,329	$	158,631	$	37,507	$	529,136
Hotel	—		28,304		77,703		204,024		219,384		379,595		909,010
Industrial	59,798		268,757		162,251		113,468		38,639		212,082		854,995
Office	2,599		31,701		60,688		199,040		318,829		862,763		1,475,620
Parking	—		28,665		13,799		27,062		8,549		284,949		363,024
Retail	2,566		69,400		38,900		86,549		78,893		479,519		755,827
Storage	—		25,161		48,296		37,548		17,095		8,942		137,042
Other	457		—		21,651		45,941		1,650		43,538		113,237
Total	$	65,420	$	509,110	$	650,835	$	761,961	$	841,670	$	2,308,895	$	5,137,891
Allowance for credit losses													(108,958)
Total, net of allowance													$	5,028,933

Generally, mortgage loans are secured by first liens on income-producing real estate with a loan-to-value ratio of up to 75%. It is the Company's policy to not accrue interest on loans that are 90 days delinquent and where amounts are determined to be uncollectible. At June 30, 2021, no commercial loans were past due over 90 days or in non-accrual status.

Off-Balance Sheet Credit Exposures

The Company has off-balance sheet credit exposures related to non-cancellable unfunded commitment amounts on commercial mortgage loans. We estimate the allowance for these exposures by applying the allowance rate we computed for each property type to the related outstanding commitment amounts. As of June 30, 2021, we have included a $6.5 million liability in other liabilities on the condensed consolidated statements of financial position based on unfunded loan commitments of $625.2 million.

Note 6 - Real Estate and Other Investments

The carrying amount of investment real estate, net of accumulated depreciation, and real estate partnerships by property-type and geographic distribution are as follows (in thousands, except percentages):

	June 30, 2021				December 31, 2020
	Amount		Percentage		Amount		Percentage
Hotel	$	59,310	6.4	%	$	67,857	7.1	%
Industrial	133,032		14.4		132,757		13.8
Land	37,916		4.1		51,220		5.3
Office	293,263		31.7		299,500		31.2
Retail	274,469		29.6		268,588		28.0
Apartments	114,881		12.4		120,847		12.6
Other	13,370		1.4		19,803		2.0
Total	$	926,241	100.0	%	$	960,572	100.0	%

21

Note 6 – Real Estate and Other Investments – (Continued)

	June 30, 2021				December 31, 2020
	Amount		Percentage		Amount		Percentage
East North Central	$	97,321	10.5	%	$	81,310	8.5	%
East South Central	62,398		6.7		65,302		6.8
Mountain	130,115		14.1		133,233		13.9
Pacific	114,249		12.3		127,421		13.3
South Atlantic	78,878		8.5		97,801		10.1
West South Central	432,707		46.7		434,722		45.3
Other	10,573		1.2		20,783		2.1
Total	$	926,241	100.0	%	$	960,572	100.0	%

As of June 30, 2021, no real estate investments met the criteria as held-for-sale.

American National regularly invests in real estate partnerships and joint ventures. American National frequently participates in the design of these joint venture or partnership entities with the sponsor, but in most cases, our involvement is limited to financing. Through analysis performed by American National, some of these partnerships and joint ventures have been determined to be variable interest entities (“VIEs”). In certain instances, in addition to an economic interest in the entity, American National holds the power to direct the most significant activities of the entity and is deemed the primary beneficiary or consolidator of the entity. The assets of the consolidated VIEs are restricted and must first be used to settle their liabilities. Creditors or beneficial interest holders of these VIEs have no recourse to the general credit of American National, as American National’s obligation is limited to the amount of its committed investment. American National has not provided financial or other support to the VIEs in the form of liquidity arrangements, guarantees, or other commitments to third-parties that may affect the fair value or risk of its variable interest in the VIEs in 2021 or 2020.

The assets and liabilities relating to the VIEs included in the condensed consolidated financial statements are as follows (in thousands):

	June 30, 2021		December 31, 2020
Real estate and real estate partnerships	$	129,415	$	131,405
Short-term investments	500		500
Cash and cash equivalents	8,219		8,070
Premiums due and other receivables	2,773		3,484
Other assets	10,635		13,796
Total assets of consolidated VIEs	$	151,542	$	157,255
Notes payable	$	151,498	$	153,703
Other liabilities	5,260		8,490
Total liabilities of consolidated VIEs	$	156,758	$	162,193

The notes payable in the condensed consolidated statements of financial position pertain to the borrowings of the consolidated VIEs. The liability of American National relating to notes payable of the consolidated VIEs is limited to the amount of its direct or indirect investment in the respective ventures, which totaled $3.0 million at June 30, 2021 and December 31, 2020.

The total long-term notes payable of the consolidated VIEs consists of the following (in thousands):

Interest rate	Maturity	June 30, 2021		December 31, 2020
LIBOR	2021	$	10,819	$	10,819
4% fixed	2022	76,945		78,565
4.18% fixed	2024	63,734		64,319
Total		$	151,498	$	153,703

22

Note 6 – Real Estate and Other Investments – (Continued)

For other VIEs in which American National is a partner, it is not the primary beneficiary, and these entities are not consolidated, as the major decisions that most significantly impact the economic activities of the VIE require consent of all partners. The carrying amount and maximum exposure to loss relating to unconsolidated VIEs follows (in thousands):

	June 30, 2021				December 31, 2020
	Carrying Amount		Maximum Exposure to Loss		Carrying Amount		Maximum Exposure to Loss
Real estate and real estate partnerships	$	338,766	$	338,766	$	368,588	$	368,588
Mortgage loans on real estate	680,100		680,100		722,917		722,917
Accrued investment income	4,008		4,008		4,980		4,980

American National’s equity in earnings of real estate partnerships is the Company’s share of operating earnings and realized gains from investments in real estate joint ventures and other limited partnership interests (“joint ventures”) using the equity method of accounting. In 2021 and 2020, certain joint ventures took advantage of market opportunities to generate realized gains on the sale of real estate held or developed by the ventures.

The Company’s income from and investment in each joint venture did not exceed 20% and therefore no separate financial disclosure is required. The Company’s income from, assets held, and investment in each joint venture did not exceed 10% of operating income before tax. Additionally, American National’s investment in joint ventures is less than 3% of the Company’s total assets, and investments in individual joint ventures are not considered to be material to the Company in relation to its financial position or ongoing results of operations. Therefore, summarized financial information of equity method investees has not been included.

The Company’s total investment in investment funds and other partnerships, of which substantially all are limited liability companies ("LLCs") or limited partnerships, was comprised of $594.2 million and $477.1 million at June 30, 2021 and December 31, 2020, respectively.

Note 7 – Derivative Instruments

American National purchases over-the-counter equity-indexed options as economic hedges against fluctuations in the equity markets to which equity-indexed products are exposed. These options are not designated as hedging instruments for accounting purposes under GAAP. Equity-indexed contracts include a fixed host universal-life insurance or annuity contract and an equity-indexed embedded derivative. The detail of derivative instruments is shown below (in thousands, except number of instruments):

Derivatives Not Designated as Hedging Instruments	Location in the Condensed Consolidated Statements of Financial Position	June 30, 2021					December 31, 2020
		Number of Instruments	Notional Amounts		Estimated Fair Value		Number of Instruments	Notional Amounts		Estimated Fair Value
Equity-indexed options	Other invested assets	447	$	3,197,700	$	260,053	455	$	2,867,600	$	242,201
Equity-indexed embedded derivative	Policyholders’ account balances	119,736	3,099,525		776,430		112,103	2,748,540		705,013

Derivatives Not Designated as Hedging Instruments	Location in the Condensed Consolidated Statements of Operations	Gains (Losses) Recognized in Income on Derivatives
		Three months ended June 30,				Six months ended June 30,
		2021		2020		2021		2020
Equity-indexed options	Net investment income	$	40,242	$	67,157	$	69,069	$	(40,938)
Equity-indexed embedded derivative	Interest credited to policyholders’ account balances	(28,460)		(62,491)		(55,149)		27,090

The Company’s use of derivative instruments exposes it to credit risk in the event of non-performance by the counterparties. The Company has a policy of only dealing with counterparties it believes are creditworthy and obtaining sufficient collateral where appropriate, as a means of mitigating the financial loss from defaults. The Company holds collateral in cash and notes secured by U.S. government-backed assets. The non-performance risk is the net counterparty exposure based on the fair value of the open contracts, less the fair value of collateral held. The Company maintains master netting agreements with its current active trading partners. As such, a right of offset has been applied to collateral that supports credit risk and has been recorded in the condensed consolidated statements of financial position as an offset to “Other invested assets” with an associated payable to “Other liabilities” for excess collateral.

23

Note 7 – Derivative Instruments – (Continued)

Information regarding the Company’s exposure to credit loss on the options it holds is presented below (in thousands):

		June 30, 2021
Counterparty	Moody/S&P Rating	Options Fair Value		Collateral Held in Cash		Collateral Held in Invested Assets		Total Collateral Held		Collateral Amounts Used to Offset Exposure		Excess Collateral		Exposure Net of Collateral
Barclays	Baa2/BBB	$	48,677	$	30,693	$	18,100	$	48,793	$	48,677	$	116	$	—
Credit Suisse	Baa1/BBB+	26,276		25,400		—		25,400		25,400		—		876
ING	Baa1/A-	16,825		6,430		10,300		16,730		16,730		—		95
Morgan Stanley	A1/BBB+	66,775		59,336		5,700		65,036		65,036		—		1,739
NATIXIS*	A1/A	27,343		27,370		—		27,370		27,343		27		—
Truist	A3/A-	36,037		25,170		11,000		36,170		36,037		133		—
Wells Fargo	A2/BBB+	38,120		28,060		9,900		37,960		37,944		16		176
Total		$	260,053	$	202,459	$	55,000	$	257,459	$	257,167	$	292	$	2,886

		December 31, 2020
Counterparty	Moody/S&P Rating	Options Fair Value		Collateral Held in Cash		Collateral Held in Invested Assets		Total Collateral Held		Collateral Amounts Used to Offset Exposure		Excess Collateral		Exposure Net of Collateral
Barclays	Baa2/BBB	$	51,489	$	31,513	$	18,100	$	49,613	$	49,613	$	—	$	1,876
Credit Suisse	Baa1/BBB+	9,447		8,680		—		8,680		8,680		—		767
Goldman-Sachs	A3/BBB+	1,227		1,170		—		1,170		1,170		—		57
ING	Baa1/A-	20,606		10,450		10,300		20,750		20,606		144		—
Morgan Stanley	A2/BBB+	37,406		30,616		5,700		36,316		36,316		—		1,090
NATIXIS*	A1/A+	30,567		30,720		—		30,720		30,567		153		—
Truist	A3/A-	52,127		43,960		11,000		54,960		52,127		2,833		—
Wells Fargo	A2/BBB+	39,332		29,370		9,900		39,270		39,270		—		62
Total		$	242,201	$	186,479	$	55,000	$	241,479	$	238,349	$	3,130	$	3,852

*Collateral is prohibited from being held in invested assets.

24

Note 8 – Net Investment Income and Realized Investment Gains (Losses)

Net investment income (loss) is shown below (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Bonds	$	129,616	$	141,762	$	260,113	$	287,881
Equity securities	8,307		7,919		15,800		15,766
Mortgage loans	68,322		60,445		139,188		119,773
Real estate and real estate partnerships	25,444		2,782		28,929		15,269
Investment funds	17,632		(14,670)		38,988		(9,737)
Equity-indexed options	40,242		67,157		69,069		(40,938)
Other invested assets	7,836		8,331		15,293		16,703
Total	$	297,399	$	273,726	$	567,380	$	404,717

Net investment income from equity method investments, comprised of real estate partnerships and investment funds was $39.7 million and $(13.6) million for the three months ended June 30, 2021 and 2020 and $62.9 million and $2.1 million for the six months ended June 30, 2021 and 2020, respectively.

Net realized investment gains (losses) are shown below (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Bonds	$	11,468	$	3,952	$	19,167	$	9,430
Mortgage loans	(768)		—		(768)		—
Real estate and real estate partnerships	(101)		(7)		11,092		(1,314)
Other invested assets	3		(6)		350		(29)
Total	$	10,602	$	3,939	$	29,841	$	8,087

Net realized investment gains (losses) by transaction type are shown below (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Sales	$	27	$	—	$	12,925	$	(3,618)
Calls and maturities	11,316		4,025		18,576		13,145
Paydowns	93		(73)		532		(54)
Impairments	(768)		—		(2,033)		(1,276)
Other	(66)		(13)		(159)		(110)
Total	$	10,602	$	3,939	$	29,841	$	8,087

25

Note 9 – Fair Value of Financial Instruments

The carrying amount and fair value of financial instruments are shown below (in thousands):

	June 30, 2021				December 31, 2020
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Fixed maturity, bonds held-to-maturity	$	7,473,697	$	7,998,049	$	7,354,970	$	7,983,181
Fixed maturity, bonds available-for-sale	8,068,795		8,068,795		7,597,180		7,597,180
Equity securities	2,340,508		2,340,508		2,070,766		2,070,766
Equity-indexed options, included in other invested assets	260,053		260,053		242,201		242,201
Mortgage loans on real estate, net of allowance	5,028,933		5,310,773		5,242,531		5,451,152
Policy loans	365,855		365,855		373,014		373,014
Short-term investments	917,581		917,581		1,028,379		1,028,379
Separate account assets ($1,241,265 and $1,153,702 included in fair value hierarchy)	1,272,247		1,272,247		1,185,467		1,185,467
Separately managed accounts, included in other invested assets	77,904		77,904		64,424		64,424
Total financial assets	$	25,805,573	$	26,611,765	$	25,158,932	$	25,995,764
Financial liabilities
Investment contracts	$	10,553,927	$	10,553,927	$	10,101,764	$	10,101,764
Embedded derivative liability for equity-indexed contracts	776,430		776,430		705,013		705,013
Notes payable	151,498		151,498		153,703		153,703
Federal Home Loan Bank advance	—		—		250,000		250,227
Separate account liabilities ($1,241,265 and $1,153,702 included in fair value hierarchy)	1,272,247		1,272,247		1,185,467		1,185,467
Total financial liabilities	$	12,754,102	$	12,754,102	$	12,395,947	$	12,396,174

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability. A fair value hierarchy is used to determine fair value based on a hypothetical transaction at the measurement date from the perspective of a market participant. American National has evaluated the types of securities in its investment portfolio to determine an appropriate hierarchy level based upon trading activity and the observability of market inputs. The classification of assets or liabilities within the fair value hierarchy is based on the lowest level of significant input to its valuation. The input levels are defined as follows:

Level 1	Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2	Quoted prices in markets that are not active or inputs that are observable directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3	Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect American National’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models and third-party evaluation, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

26

Note 9 – Fair Value of Financial Instruments – (Continued)

Valuation Techniques for Financial Instruments Recorded at Fair Value

Fixed Maturity Securities and Equity Options—American National utilizes a pricing service to estimate fair value measurements. The fair value for fixed maturity securities that are disclosed as Level 1 measurements are based on unadjusted quoted market prices for identical assets that are readily available in an active market. The estimates of fair value for most fixed maturity securities, including municipal bonds, provided by the pricing service are disclosed as Level 2 measurements as the estimates are based on observable market information rather than market quotes. The pricing service utilizes market quotations for fixed maturity securities that have quoted prices in active markets. Since fixed maturity securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value measurements for these securities using its proprietary pricing applications, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Additionally, an option adjusted spread model is used to develop prepayment and interest rate scenarios.

The pricing service evaluates each asset class based on relevant market information, credit information, perceived market movements and sector news. The market inputs utilized in the pricing evaluation, listed in the approximate order of priority, include: benchmark yields, reported trades, pricing source quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and economic events. The extent of the use of each market input depends on the asset class and the market conditions. Depending on the security, the priority of the use of inputs may change or some market inputs may not be relevant. For some securities, additional inputs may be necessary.

American National has reviewed the inputs and methodology used and the techniques applied by the pricing service to produce quotes that represent the fair value of a specific security. The review confirms that the pricing service is utilizing information from observable transactions or a technique that represents a market participant’s assumptions. American National does not adjust quotes received from the pricing service. The pricing service utilized by American National has indicated that they will only produce an estimate of fair value if there is objectively verifiable information available.

American National holds a small amount of private placement debt and fixed maturity securities that have characteristics that make them unsuitable for matrix pricing. For these securities, a quote from an independent pricing source (typically a market maker) is obtained. Due to the disclaimers on the quotes that indicate the price is indicative only, American National includes these fair value estimates in Level 3.

For securities priced using a quote from an independent pricing source, such as the equity-indexed options and certain fixed maturity securities, American National uses a market-based fair value analysis to validate the reasonableness of prices received. Price variances above a certain threshold are analyzed further to determine if any pricing issue exists. This analysis is performed quarterly.

Equity Securities—For publicly-traded equity securities, prices are received from a nationally recognized pricing service that are based on observable market transactions, and these securities are classified as Level 1 measurements. For certain preferred stock, current market quotes in active markets are unavailable. In these instances, an estimated fair value is received from the pricing service. The service utilizes similar methodologies to price preferred stocks as it does for fixed maturity securities. If applicable, these estimates would be disclosed as Level 2 measurements. American National tests the accuracy of the information provided by reference to other services annually.

Short-Term Investments—Short-term investments are primarily commercial paper rated A2 or P2 or better by Standard & Poor's and Moody's, respectively. Commercial paper is carried at amortized cost which approximates fair value. These investments are classified as Level 2 measurements.

27

Note 9 – Fair Value of Financial Instruments – (Continued)

Separate Account Assets and Liabilities—Separate account assets and liabilities are funds that are held separate from the general assets and liabilities of American National. Separate account assets include funds representing the investments of variable insurance product contract holders, who bear the investment risk of such funds. Investment income and investment gains and losses from these separate funds accrue to the benefit of the contract holders. American National reports separately, as assets and liabilities, investments held in such separate accounts and liabilities of the separate accounts if (i) such separate accounts are legally recognized; (ii) assets supporting the contract liabilities are legally insulated from American National’s general account liabilities; (iii) investments are directed by the contract holder; and (iv) all investment performance, net of contract fees and assessments, is passed through to the contract holder. In addition, American National's qualified pension plan assets are included in separate accounts. The assets of these accounts are carried at fair value. Deposits, net investment income and realized investment gains and losses for these accounts are excluded from revenues, and related liability increases are excluded from benefits and expenses in the condensed consolidated statements of operations. Separate accounts are established in conformity with insurance laws and are not chargeable with liabilities that arise from any other business of American National.

The separate account assets included on the quantitative disclosures fair value hierarchy table are comprised of short-term investments, equity securities, and fixed maturity bonds available-for-sale. Equity securities are classified as Level 1 measurements. Short-term investments and fixed maturity securities are classified as Level 2 measurements. These classifications for separate account assets reflect the same fair value level methodologies as listed above as they are derived from the same vendors and follow the same process.

The separate account assets also include cash and cash equivalents, investment funds, accrued investment income, and receivables for securities. These are not financial instruments and are not included in the quantitative disclosures of fair value hierarchy table.

No gains or losses were recognized on assets transferred to separate accounts for the six months ended June 30, 2021 and 2020, respectively.

Embedded Derivative—The amounts reported within policyholder contract deposits include equity linked interest crediting rates based on the S&P 500 within indexed annuities and indexed life. The following unobservable inputs are used for measuring the fair value of the embedded derivatives associated with the policyholder contract liabilities:

•Lapse rate assumptions are determined by company experience. Lapse rates are generally assumed to be lower during a contract’s surrender charge period and then higher once the surrender charge period has ended. Decreases to the assumed lapse rates generally increase the fair value of the liability as more policyholders persist to collect the crediting interest pertaining to the indexed product. Increases to the lapse rate assumption decrease the fair value.

•Mortality rate assumptions vary by age and gender based on company and industry experience. Decreases to the assumed mortality rates increase the fair value of the liabilities as more policyholders earn crediting interest. Increases to the assumed mortality rates decrease the fair value as higher decrements reduce the potential for future interest credits.

•Equity volatility assumptions begin with current market volatilities and grow to long-term values. Increases to the assumed volatility will increase the fair value of liabilities, as future projections will produce higher increases in the linked index. At June 30, 2021 and December 31, 2020, the one year implied volatility used to estimate embedded derivative value was 17.5% and 17.6%, respectively.

Fair values of indexed life and annuity liabilities are calculated using the discounted cash flow technique. Shown below are the significant unobservable inputs used to calculate the Level 3 fair value of the embedded derivatives within policyholder contract deposits (in millions, except range percentages):

	Fair Value					Range
	June 30, 2021		December 31, 2020		Unobservable Input	June 30, 2021	December 31, 2020
Security type
Embedded derivative
Indexed Annuities	$	737.7	$	670.8	Lapse Rate	1-50%	1-50%
					Mortality Multiplier	100%	100%
					Equity Volatility	14-62%	16-69%
Indexed Life	38.7		34.2		Equity Volatility	14-62%	16-69%

28

Note 9 – Fair Value of Financial Instruments – (Continued)

Quantitative Disclosures

The fair value hierarchy measurements of the financial instruments are shown below (in thousands):

	Assets and Liabilities Carried at Fair Value by Hierarchy Level at June 30, 2021
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
Fixed maturity, bonds available-for-sale
U.S. treasury and government	$	24,129	$	24,129	$	—	$	—
U.S. states and political subdivisions	1,093,943		—		1,093,943		—
Foreign governments	6,070		—		6,070		—
Corporate debt securities	6,774,080		—		6,640,882		133,198
Residential mortgage-backed securities	32,809		—		32,809		—
Collateralized debt securities	137,764		—		137,764		—
Total bonds available-for-sale	8,068,795		24,129		7,911,468		133,198
Equity securities
Common stock	2,325,845		2,322,722		—		3,123
Preferred stock	14,663		13,194		—		1,469
Total equity securities	2,340,508		2,335,916		—		4,592
Options	260,053		—		—		260,053
Short-term investments	917,581		—		917,581		—
Separate account assets	1,241,265		351,352		889,913		—
Separately managed accounts	77,904		—		—		77,904
Total financial assets	$	12,906,106	$	2,711,397	$	9,718,962	$	475,747
Financial liabilities
Embedded derivative for equity-indexed contracts	$	776,430	$	—	$	—	$	776,430
Notes payable	151,498		—		—		151,498
Separate account liabilities	1,241,265		351,352		889,913		—
Total financial liabilities	$	2,169,193	$	351,352	$	889,913	$	927,928

	Assets and Liabilities Carried at Fair Value by Hierarchy Level at December 31, 2020
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
Fixed maturity, bonds available-for-sale
U.S. treasury and government	$	29,183	$	—	$	29,183	$	—
U.S. states and political subdivisions	1,140,458		—		1,140,458		—
Foreign governments	16,388		—		16,388		—
Corporate debt securities	6,334,479		—		6,224,042		110,437
Residential mortgage-backed securities	21,291		—		21,291		—
Collateralized debt securities	55,381		—		55,381		—
Total bonds available-for-sale	7,597,180		—		7,486,743		110,437
Equity securities
Common stock	2,055,229		2,054,789		—		440
Preferred stock	15,537		14,909		—		628
Total equity securities	2,070,766		2,069,698		—		1,068
Options	242,201		—		—		242,201
Short-term investments	1,028,379		—		1,028,379		—
Separate account assets	1,153,702		309,425		844,277		—
Separately managed accounts	64,424		—		—		64,424
Total financial assets	$	12,156,652	$	2,379,123	$	9,359,399	$	418,130
Financial liabilities
Embedded derivative for equity-indexed contracts	$	705,013	$	—	$	—	$	705,013
Notes payable	153,703		—		—		153,703
Separate account liabilities	1,153,702		309,425		844,277		—
Total financial liabilities	$	2,012,418	$	309,425	$	844,277	$	858,716

29

Note 9 – Fair Value of Financial Instruments – (Continued)

For financial instruments measured at fair value on a recurring basis using Level 3 inputs during the period, a reconciliation of the beginning and ending balances is shown below (in thousands):

	Level 3
	Three months ended June 30, 2021								Six months ended June 30, 2021
	Assets						Liability		Assets						Liability
	Investment Securities		Equity-Indexed Options		Separately Managed Accounts		Embedded Derivative		Investment Securities		Equity-Indexed Options		Separately Managed Accounts		Embedded Derivative
Beginning balance	$	128,486	$	253,363	$	66,981	$	740,514	$	111,505	$	242,201	$	64,424	$	705,013
Net gain for derivatives included in net investment income	—		40,242		—		—		—		69,069		—		—
Net change included in interest credited	—		—		—		28,460		—		—		—		55,149
Net fair value change included in other comprehensive income	703		—		28		—		1,881		—		622		—
Purchases, sales and settlements or maturities
Purchases	18,727		26,283		12,639		—		46,180		46,430		22,711		—
Sales	(11,605)		—		(1,744)		—		(23,255)		—		(9,853)		—
Settlements or maturities	—		(59,835)		—		—		—		(97,647)		—		—
Premiums less benefits	—		—		—		7,456		—		—		—		16,268
Gross transfers into Level 3	1,479		—		—		—		1,479		—		—		—
Ending balance at June 30, 2021	$	137,790	$	260,053	$	77,904	$	776,430	$	137,790	$	260,053	$	77,904	$	776,430
	Level 3
	Three months ended June 30, 2020								Six months ended June 30, 2020
	Assets						Liability		Assets						Liability
	Investment Securities		Equity-Indexed Options		Separately Managed Accounts		Embedded Derivative		Investment Securities		Equity-Indexed Options		Separately Managed Accounts		Embedded Derivative
Beginning balance	$	53,853	$	125,988	$	50,489	$	630,952	$	45,307	$	256,005	$	50,503	$	731,552
Net gain (loss) for derivatives included in net investment income	—		67,157		—		—		—		(40,938)		—		—
Net change included in interest credited	—		—		—		62,491		—		—		—		(27,090)
Net fair value change included in other comprehensive income	—		—		(4,046)		—		—		—		(4,060)		—
Purchases, sales and settlements or maturities
Purchases	86,467		24,273		9,042		—		109,169		38,438		9,042		—
Sales	(36,642)		—		(3,948)		—		(50,798)		—		(3,948)		—
Settlements or maturities	—		(25,932)		—		—		—		(62,019)		—		—
Premiums less benefits	—		—		—		(17,473)		—		—		—		(28,492)
Ending balance at June 30, 2020	$	103,678	$	191,486	$	51,537	$	675,970	$	103,678	$	191,486	$	51,537	$	675,970

Within the net gain for derivatives included in net investment income were unrealized gains of $12.3 million and $59.9 million, relating to assets still held at June 30, 2021 and 2020, respectively.

There were no transfers between Level 1 and Level 2 fair value hierarchies during the periods presented. American National’s valuation of financial instruments categorized as Level 3 in the fair value hierarchy are based on valuation techniques that use significant inputs that are unobservable or had a decline in market activity that obscured observability. The indicators considered in determining whether a significant decrease in the volume and level of activity for a specific asset has occurred include the level of new issuances in the primary market, trading volume in the secondary market, the level of credit spreads over historical levels, applicable bid-ask spreads, and price consensus among market participants and other pricing sources. The transfers into Level 3 during the three months ended June 30, 2021 were the result of securities not being priced by the third-party service at the end of the period.

Equity Index Options—Certain over the counter equity options are valued using models that are widely accepted in the financial services industry. These are categorized as Level 3 as a result of the significance of non-market observable inputs such as volatility and forward price/dividend assumptions. Other primary inputs include interest rate assumptions (risk-free rate assumptions), and underlying equity quoted index prices for identical or similar assets in markets that exhibit less liquidity relative to those markets.

30

Note 9 – Fair Value of Financial Instruments – (Continued)

The following summarizes the fair value (in thousands), valuation techniques and unobservable inputs of the Level 3 fair value measurements:

	Fair Value at June 30, 2021		Valuation Technique	Unobservable Input	Range/Weighted Average
Security type
Investment securities
Common stock	$	3,123	Guideline public company method (1)	Recurring Revenue Multiple(2) LTM EBITDA Multiple(3)	7.6 x 19.3x
Preferred stock	1,469		Guideline public company method	LTM Revenue Multiple LTM EBITDA Multiple Term (Years) Volatility	6.00x 5.00x 2.33 50.00%
Bonds	133,198		Priced at Cost	Coupon Rate	2.70% - 8.00%
Separately managed accounts	77,904		Discounted cash flows (yield analysis) Market transaction	Discount rate N/A	6.59% - 101.95% N/A

	Fair Value at December 31, 2020		Valuation Technique	Unobservable Input	Range/Weighted Average
Security type
Investment securities
Common stock	$	440	Option pricing method Market transaction	Term (Years) Volatility  N/A	2.83 45.00%  N/A
Preferred stock	628		Option pricing method Market transaction	Term (Years) Volatility N/A	2.83 45.00% N/A
Bonds	110,437		Priced at Cost	Coupon Rate	2.72% - 8.00%
Separately managed accounts	64,424		Discounted cash flows (yield analysis)   Market transaction	Discount rate N/A	7.25% - 14.71% N/A

(1)Guideline public company method uses price multiples from data on comparable public companies. Multiples are then adjusted to account for differences between what is being valued and comparable firms.

(2)Recurring revenue multiple for the most relevant period of time, measures the value of the equity or a business relative to the revenues it generates.

(3)LTM EBITDA multiple valuation metric shows earnings before interest, taxes, depreciation and amortization adjustments for the past 12 month period.

Investment Securities—These bonds use cost as the best estimate of fair value. They are valued at cost because the value would not change unless there is a fundamental deterioration in the portfolio. There is no observable market valuation price or third-party sources that provide market values for these securities since they are not publicly traded. The common and preferred stock are valued at market transaction, option pricing method, or guideline public company method based on the best available information.

Separately Managed Accounts—The separately managed account manager uses the mid-point of a range from a third-party to price these securities. Discounted cash flows (yield analysis) and market transactions approach are used in the valuation. They use discount rate which is considered an unobservable input.

31

Note 9 – Fair Value of Financial Instruments – (Continued)

Fair Value Information About Financial Instruments Not Recorded at Fair Value

Information about fair value estimates for financial instruments not measured at fair value is discussed below:

Fixed Maturity Securities—The fair value of bonds held-to-maturity is determined to be consistent with the disclosure under Valuation Techniques for the Financial Instrument Recorded at Fair Value section.

Mortgage Loans—The fair value of mortgage loans is estimated using discounted cash flow analyses on a loan by loan basis by applying a discount rate to expected cash flows from future installment and balloon payments. The discount rate takes into account general market trends and specific credit risk trends for the individual loan. Factors used to arrive at the discount rate include inputs from spreads based on U.S. Treasury notes and the loan’s credit quality, region, property-type, lien priority, payment type and current status.

Policy Loans—The carrying value of policy loans is the outstanding balance plus any accrued interest. Due to the collateralized nature of policy loans such that they cannot be separated from the policy contracts, the unpredictable timing of repayments and the fact that settlement is at outstanding value, American National believes the carrying value of policy loans approximates fair value.

Separately Managed Accounts—The amounts reported in separately managed accounts consist primarily of notes and private equity. These investments are private placements and do not have a readily determinable fair value. The carrying value of the separately managed accounts is cost or market value, if available from the separately managed account manager. Market value is provided by the separately managed account manager in subsequent quarters. American National believes that cost approximates fair value at initial recognition during the quarter of investment.

Investment Contracts—The carrying value of investment contracts is equivalent to the accrued account balance. The accrued account balance consists of deposits, net of withdrawals, net of interest credited, fees and charges assessed and other adjustments. American National believes that the carrying value of investment contracts approximates fair value because the majority of these contracts’ interest rates reset at anniversary.

Notes Payable—Notes payable are carried at outstanding principal balance. The carrying value of the notes payable approximates fair value because the underlying interest rates approximate market rates at the balance sheet date.

Federal Home Loan Bank Advance—The Federal Home Loan Bank advance was carried at outstanding principal balance. The fair value of the advance was obtained from the Federal Home Loan Bank of Dallas.

32

Note 9 – Fair Value of Financial Instruments – (Continued)

The carrying value and estimated fair value of financial instruments not recorded at fair value on a recurring basis are shown below (in thousands):

	June 30, 2021
	FV Hierarchy Level	Carrying Amount		Fair Value
Financial assets
Fixed maturity, bonds held-to-maturity
U.S. Treasury and government	Level 1	$	12,356	$	12,217
U.S. states and political subdivisions	Level 2	111,374		112,891
Foreign governments	Level 2	14,436		14,550
Corporate debt securities	Level 2	7,168,199		7,685,504
Residential mortgage-backed securities	Level 2	61,969		65,581
Collateralized debt securities	Level 2	105,363		107,306
Total fixed maturity, bonds held-to-maturity		7,473,697		7,998,049
Mortgage loans on real estate, net of allowance	Level 3	5,028,933		5,310,773
Policy loans	Level 3	365,855		365,855
Total financial assets		$	12,868,485	$	13,674,677
Financial liabilities
Investment contracts	Level 3	$	10,553,927	$	10,553,927
Notes payable	Level 3	151,498		151,498
Total financial liabilities		$	10,705,425	$	10,705,425

	December 31, 2020
	FV Hierarchy Level	Carrying Amount		Fair Value
Financial assets
Fixed maturity, bonds held-to-maturity
U.S. treasury and government	Level 2	$	7,732	$	7,744
U.S. states and political subdivisions	Level 2	109,445		113,535
Foreign governments	Level 2	3,851		4,225
Corporate debt securities	Level 2	6,981,597		7,595,712
Corporate debt securities	Level 3	3,024		3,024
Residential mortgage-backed securities	Level 2	114,127		117,728
Collateralized debt securities	Level 2	135,194		141,213
Total fixed maturity, bonds held-to-maturity		7,354,970		7,983,181
Mortgage loans on real estate, net of allowance	Level 3	5,242,531		5,451,152
Policy loans	Level 3	373,014		373,014
Total financial assets		$	12,970,515	$	13,807,347
Financial liabilities
Investment contracts	Level 3	$	10,101,764	$	10,101,764
Notes payable	Level 3	153,703		153,703
Federal Home Loan Bank advance	Level 2	250,000		250,227
Total financial liabilities		$	10,505,467	$	10,505,694

33

Note 10 – Deferred Policy Acquisition Costs

Deferred policy acquisition costs (“DAC”) are shown below (in thousands):

	Life		Annuity		Health		Property & Casualty		Total
Beginning balance at January 1, 2021	$	896,208	$	309,056	$	32,885	$	122,062	$	1,360,211
Additions	80,648		53,911		5,884		178,089		318,532
Amortization	(52,720)		(31,191)		(8,269)		(169,391)		(261,571)
Effect of change in unrealized gains on available-for-sale debt securities	5,744		6,707		—		—		12,451
Net change	33,672		29,427		(2,385)		8,698		69,412
Ending balance at June 30, 2021	$	929,880	$	338,483	$	30,500	$	130,760	$	1,429,623

Commissions comprise the majority of the additions to deferred policy acquisition costs.

Note 11 – Liability for Unpaid Claims and Claim Adjustment Expenses

The liability for unpaid claims and claim adjustment expenses (“claims”) for health and property and casualty insurance is included in “Policy and contract claims” in the condensed consolidated statements of financial position and is the amount estimated for incurred but not reported (“IBNR”) claims and claims that have been reported but not settled. The liability for unpaid claims is estimated based upon American National’s historical experience and actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs, less anticipated salvage and subrogation. The effects of the changes are included in the condensed consolidated results of operations in the period in which the changes occur. The time value of money is not taken into account for the purposes of calculating the liability for unpaid claims. There have been no significant changes in methodologies or assumptions used to calculate the liability for unpaid claims and claim adjustment expenses.

Information regarding the liability for unpaid claims is shown below (in thousands):

 

	Six months ended June 30,
	2021		2020
Unpaid claims balance, beginning	$	1,354,213	$	1,322,837
Less: Reinsurance recoverables	243,084		246,447
Net beginning balance	1,111,129		1,076,390
Incurred related to
Current	617,901		601,691
Prior years	(46,711)		(33,256)
Total incurred claims	571,190		568,435
Paid claims related to
Current	283,893		268,203
Prior years	258,535		267,282
Total paid claims	542,428		535,485
Net balance	1,139,891		1,109,340
Plus: Reinsurance recoverables	241,223		250,378
Unpaid claims balance, ending	$	1,381,114	$	1,359,718

The net and gross reserve calculations have shown favorable development as a result of favorable loss emergence compared to what was implied by the loss development patterns used in the original estimation of losses in prior years. Estimates for ultimate incurred claims attributable to insured events of prior years decreased by approximately $46.7 million during the first six months of 2021 and decreased by $33.3 million during the same period in 2020. The favorable development in 2021 was a reflection of lower-than-anticipated settlement of losses arising from commercial automobile, agribusiness, private passenger automobile, guaranteed asset protection waiver, credit property and collateral protection insurance lines of business. The favorable development in 2020 was a reflection of lower-than-anticipated settlement of losses in the private passenger automobile, agribusiness, and workers compensation.

For short-duration health insurance claims, the total of IBNR plus expected development on reported claims included in the liability for unpaid claims and claim adjustment expenses at June 30, 2021 and December 31, 2020 was $18.2 million and $20.5 million, respectively.

34

Note 12 – Federal Income Taxes

A reconciliation of the effective tax rate to the statutory federal tax rate is shown below (in thousands, except percentages):

	Three months ended June 30,								Six months ended June 30,
	2021				2020				2021				2020
	Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate
Total expected income tax expense (benefit) at the statutory rate	$	59,943	21.0	%	$	55,148	21.0	%	$	104,568	21.0	%	$	(4,248)	21.0	%
Tax-exempt investment income	(1,111)		(0.4)		(1,061)		(0.4)		(2,283)		(0.5)		(2,088)		10.3
Dividend exclusion	(779)		(0.3)		(1,443)		(0.5)		(1,592)		(0.3)		(2,305)		11.4
Tax credits, net	(1,347)		(0.5)		(1,534)		(0.6)		(2,965)		(0.6)		(3,929)		19.4
Low income housing tax credit expense	1,375		0.5		982		0.4		2,888		0.6		2,756		(13.6)
Change in valuation allowance	4		—		12		—		33		—		124		(0.6)
Other items, net	244		0.1		93		—		851		0.2		219		(1.1)
Total	$	58,329	20.4	%	$	52,197	19.9	%	$	101,500	20.4	%	$	(9,471)	46.8	%

As of June 30, 2021, American National had no material net operating loss or tax credit carryforwards.

American National’s federal income tax returns for tax years 2016 to 2019 are subject to examination by the Internal Revenue Service. In the opinion of management, all prior year deficiencies have been paid or adequate provisions have been made for any tax deficiencies that may be upheld.

As of June 30, 2021, American National had no provision for uncertain tax positions and no provision for penalties or interest. In addition, management does not believe there are any uncertain tax benefits that could be recognized within the next twelve months that would impact American National’s effective tax rate.

Note 13 – Accumulated Other Comprehensive Income (Loss)

The components of and changes in the accumulated other comprehensive income (“AOCI”), and the related tax effects, are shown below (in thousands):

	Net Unrealized Gains (Losses) on Securities		Defined Benefit Pension Plan Adjustments		Foreign Currency Adjustments		Accumulated Other Comprehensive Income (Loss)
Beginning balance at January 1, 2021	$	292,166	$	(67,130)	$	(2,866)	$	222,170
Amounts reclassified from AOCI (net of tax benefit $2,724 and expense $1,630)	(10,249)		6,131		—		(4,118)
Unrealized holding losses arising during the period (net of tax benefit $15,739)	(59,208)		—		—		(59,208)
Unrealized adjustment to DAC (net of tax expense $2,615)	9,836		—		—		9,836
Unrealized losses on investments attributable to participating policyholders’ interest (net of tax expense $732)	2,752		—		—		2,752
Foreign currency adjustment (net of tax expense $111)	—		—		419		419
Ending balance at June 30, 2021	$	235,297	$	(60,999)	$	(2,447)	$	171,851
	Net Unrealized Gains (Losses) on Securities		Defined Benefit Pension Plan Adjustments		Foreign Currency Adjustments		Accumulated Other Comprehensive Income (Loss)
Beginning balance at January 1, 2020	$	157,851	$	(55,232)	$	(3,101)	$	99,518
Amounts reclassified from AOCI (net of tax benefit $448 and expense $959)	(1,687)		3,605		—		1,918
Unrealized holding gains arising during the period (net of tax expense $22,284)	83,831		—		—		83,831
Unrealized adjustment to DAC (net of tax benefit $4,460)	(16,780)		—		—		(16,780)
Unrealized gains on investments attributable to participating policyholders’ interest (net of tax benefit $1,061)	(3,991)		—		—		(3,991)
Foreign currency adjustment (net of tax benefit $156)	—		—		(585)		(585)
Ending balance at June 30, 2020	$	219,224	$	(51,627)	$	(3,686)	$	163,911

35

Note 14 – Stockholders’ Equity and Noncontrolling Interests

ANAT has one class of common stock with a par value $0.01 per share and 50,000,000 authorized shares. The number of shares outstanding at the dates indicated are shown below:

	June 30, 2021	December 31, 2020
Common stock
Shares issued	26,887,200	26,887,200
Restricted shares	(10,000)	(10,000)
Unrestricted outstanding shares	26,877,200	26,877,200

Stock-based Compensation

American National has made grants of Stock Appreciation Rights (“SAR”), Restricted Stock (“RS”) Awards, and Restricted Stock Units (“RSU”), pursuant to a stock-based compensation plan. The term for granting additional awards under such plan expired in 2019. Pursuant to the plan, grants were made to certain officers meeting established performance objectives, and grants were made to directors as compensation and to align their interests with those of other shareholders. In addition, American National has made grants to directors and advisory directors of RSUs that are cash-settled only, with no provision for conversion to stock. 10,197 of such cash-settled RSUs were granted during the second quarter of 2021 and remain outstanding at June 30, 2021 as shown in the table below.

RS and RSU information for the periods indicated are shown below:

	RS Shares			RSUs
	Shares	Weighted-Average Grant Date Fair Value		Units	Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2020	10,000	$	80.05	8,250	$	75.35
Granted	—	—		10,197	113.35
Exercised	—	—		(8,250)	75.35
Forfeited	—	—		—	—
Expired	—	—		—	—
Outstanding at June 30, 2021	10,000	$	80.05	10,197	$	113.35

	SAR		RS Shares		RSUs
Weighted-average contractual remaining life (in years)	0.00		1.67		0.84
Exercisable shares	—		N/A		N/A
Weighted-average exercise price	$	—	$	80.05	$	113.35
Weighted-average exercise price exercisable shares	—		N/A		N/A
Compensation expense (credit)
Three months ended June 30, 2021	$	—	$	20,000	$	1,131,000
Three months ended June 30, 2020	—		20,000		(14,000)
Six months ended June 30, 2021	$	—	$	40,000	$	1,351,000
Six months ended June 30, 2020	(1,000)		40,000		(184,000)
Fair value of liability award
June 30, 2021	$	—	N/A		$	1,500,000
December 31, 2020	—		N/A		793,000

The SARs gave the holder the right to cash compensation based on the difference between the stock price on the grant date and the stock price on the exercise date. The SARs vested at a rate of 20% per year for five years and expired five years after vesting. All remaining SARs expired on May 1, 2020.

RS awards entitle the participant to full dividend and voting rights. Each RS share awarded has the value of one share of restricted stock and vests 10 years from the grant date. Unvested shares are restricted as to disposition, and are subject to forfeiture under certain circumstances. Compensation expense is recognized over the vesting period. The restrictions on these awards lapse after 10 years and feature a graded vesting schedule in the case of the retirement, death or disability of an award holder. Restricted stock awards for 350,334 shares have been granted at an exercise price of zero, of which 10,000 shares are unvested.

RSU awards to our directors and advisory directors are settled in cash based upon the market price of our common stock after one-year or earlier upon death, disability or retirement from service after age 65. During the twelve months ended December 31, 2020, 8,250 RSUs were granted and vested on May 1, 2021 and were settled in cash. A new grant of 10,197 RSUs was awarded to directors and advisory directors on May 1, 2021 with one-year cliff vesting which will be settled in cash.

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Note 14 – Stockholders’ Equity and Noncontrolling Interests – (Continued)

Earnings per Share

Basic earnings per share were calculated using a weighted average number of shares outstanding. Diluted earnings per share include RS awards. RSUs may only be settled in cash.

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Weighted average shares outstanding	26,877,200		26,878,684		26,877,200		26,880,183
Incremental shares from RS awards and RSUs	7,522		8,445		7,594		9,265
Total shares for diluted calculations	26,884,722		26,887,129		26,884,794		26,889,448
Net income (loss) attributable to American National (in thousands)	$	227,976	$	210,545	$	398,149	$	(9,899)
Basic earnings (losses) per share	$	8.48	$	7.83	$	14.81	$	(0.37)
Diluted earnings (losses) per share	$	8.48	$	7.83	$	14.81	$	(0.37)

Statutory Capital and Surplus

Risk Based Capital (“RBC”) is a measure insurance regulators use to evaluate the capital adequacy of American National's insurance subsidiaries. RBC is calculated using formulas applied to certain financial balances and activities that consider, among other things, investment risks related to the type and quality of investments, insurance risks associated with products and liabilities, interest rate risks and general business risks. Insurance companies that do not maintain capital and surplus at a level at least 200% of the company action level RBC are required to take certain actions. At June 30, 2021 and December 31, 2020, ANICO's statutory capital and surplus was $3.8 billion and $3.6 billion, respectively, which resulted in an RBC level above 200% of the company action level. All of our other insurance subsidiaries had statutory capital and surplus at June 30, 2021 and December 31, 2020, above 200% of the company action level, except for ANPAC Louisiana Insurance Company ("ANPLA"). At June 30, 2021 and December 31, 2020, ANPLA's statutory capital and surplus was $63.4 million and $68.5 million respectively, which resulted in an RBC level of 179% and 194% of the company action level. This decrease in RBC of ANPLA is primarily driven by an increase in homeowners catastrophe losses impacting the operating results in 2021 and 2020. We are actively managing our homeowners exposure of ANPLA, will continue to monitor the surplus levels and will be addressing rate adequacy through future planned underwriting and rate actions.

American National's insurance subsidiaries prepare financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of each subsidiary's state of domicile, which include certain components of the National Association of Insurance Commissioners’ Codification of Statutory Accounting Principles (“NAIC Codification”). NAIC Codification is intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting practices continue to be established by individual state laws and permitted practices. Modifications by the various state insurance departments may impact the statutory capital and surplus of our insurance subsidiaries.

Statutory accounting differs from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions, and valuing securities on a different basis. In addition, certain assets are not admitted under statutory accounting principles and are charged directly to surplus.

One of American National’s insurance subsidiaries has been granted a permitted practice from the Missouri Department of Insurance to record as the valuation of its investment in a wholly-owned subsidiary that is the attorney-in-fact for a Texas domiciled insurer, the statutory capital and surplus of the Texas domiciled insurer. This permitted practice increases the statutory capital and surplus of both ANICO and American National Lloyds Insurance Company by $61.2 million and $75.3 million at June 30, 2021 and December 31, 2020, respectively. The statutory capital and surplus of both ANICO and American National Lloyds Insurance Company would have remained above the Company action level RBC had it not used the permitted practice.

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Note 14 – Stockholders’ Equity and Noncontrolling Interests – (Continued)

The statutory capital and surplus and net income (loss) of our life and property and casualty insurance entities in accordance with statutory accounting practices are shown below (in thousands):

	June 30, 2021		December 31, 2020
Statutory capital and surplus
Life insurance entities	$	2,283,191	$	2,188,808
Property and casualty insurance entities	1,559,578		1,463,179

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Statutory net income (loss)
Life insurance entities	$	(18,958)	$	(28,301)	$	(51,174)	$	26,674
Property and casualty insurance entities	17,879		(12,975)		57,151		35,278

Dividends

Dividends are paid on a quarterly basis. We paid a quarterly dividend of $0.82 per share for each quarter during the six months ended June 30, 2021 and June 30, 2020, and we expect to continue to pay regular cash dividends, although there is no assurance as to future dividends because they depend on future earnings, capital requirements and financial conditions.

The amount of dividends paid by our insurance company subsidiaries is restricted by insurance law. These restrictions are based, in part, on the prior year’s statutory income and surplus. In general, dividends up to specified levels are considered ordinary and may be paid without prior regulatory approval. Dividends in larger amounts, or extraordinary dividends, are subject to approval by the insurance commissioner of the relevant state of domicile. For example, restrictions applicable to Texas-domiciled life insurance companies like ANICO limit the payment of dividends to the greater of the prior year’s statutory net income from operations, or 10% of prior year statutory surplus, in each case determined in accordance with statutory accounting principles. ANICO is permitted without prior approval of the Texas Department of Insurance to pay total dividends of $363.9 million during 2021.

Noncontrolling Interest

American National County Mutual Insurance Company (“County Mutual”) is a mutual insurance company owned by its policyholders. ANICO has a management agreement that effectively gives it control of County Mutual. As a result, County Mutual is included in the condensed consolidated financial statements of American National. Policyholder interests in the financial position of County Mutual are reflected as noncontrolling interest of $6.8 million at June 30, 2021 and December 31, 2020.

American National Group, Inc. and its subsidiaries exercise control or ownership of various joint ventures, resulting in their consolidation into American National’s condensed consolidated financial statements. The interests of the other partners in the consolidated joint ventures are shown as a noncontrolling interest of $0.2 million and a noncontrolling deficit of $0.9 million at June 30, 2021 and December 31, 2020, respectively.

Note 15 – Segment Information

Management organizes the business into five operating segments:

•Life—consists of whole, term, universal, indexed and variable life insurance. Products are primarily sold through career, multiple-line, and independent agents as well as direct marketing channels.

•Annuity—consists of fixed, indexed, and variable annuity products. Products are primarily sold through independent agents, brokers, and financial institutions, along with multiple-line and career agents.

•Health—consists of Medicare Supplement, stop-loss, other supplemental health products and credit disability insurance. Products are typically distributed through independent agents and managing general underwriters.

•Property and Casualty—consists of personal, agricultural and targeted commercial coverages and credit-related property insurance. Products are primarily sold through multiple-line and independent agents or managing general agents.

•Corporate and Other—consists of net investment income from investments and certain expenses not allocated to the insurance segments and revenues and related expenses from non-insurance operations.

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Note 15 – Segment Information – (Continued)

The accounting policies of the segments are the same as those described in Note 2, Summary of Significant Accounting Policies and Practices, of American National’s 2020 annual report on Form 10-K filed with the SEC on March 4, 2021. All revenues and expenses specifically attributable to policy transactions are recorded directly to the appropriate operating segment. Revenues and expenses not specifically attributable to policy transactions are allocated to each segment as follows:

•Recurring income from bonds and mortgage loans is allocated based on the assets allocated to each line of business at the average yield available from these assets.

•Net investment income from all other assets is allocated to the insurance segments in accordance with the amount of capital allocated to each segment, with the remainder recorded in the Corporate and Other segment.

•Expenses are charged to segments through direct identification and allocations based upon various factors.

The results of operations measured as the income (loss) before federal income tax and other items by operating segments are summarized below (in thousands):

	Three months ended June 30, 2021
	Life		Annuity		Health		Property & Casualty		Corporate & Other		Total
PREMIUMS AND OTHER REVENUES
Premiums	$	100,784	$	20,497	$	34,485	$	409,486	$	—	$	565,252
Other policy revenues	83,527		6,996		—		—		—		90,523
Net investment income	72,225		163,356		2,004		15,725		44,089		297,399
Net realized investment gains	—		—		—		—		10,602		10,602
Change in investment credit loss	—		—		—		—		25,079		25,079
Net gains on equity securities	—		—		—		—		170,804		170,804
Other income	422		932		5,893		2,786		1,002		11,035
Total premiums and other revenues	256,958		191,781		42,382		427,997		251,576		1,170,694
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	139,516		42,723		—		—		—		182,239
Claims incurred	—		—		26,190		280,606		—		306,796
Interest credited to policyholders’ account balances	23,326		87,910		—		—		—		111,236
Commissions for acquiring and servicing policies	46,397		29,926		6,565		81,025		—		163,913
Other operating expenses	49,226		12,884		9,867		50,676		27,254		149,907
Change in deferred policy acquisition costs	(13,459)		(11,649)		1,531		(5,265)		—		(28,842)
Total benefits, losses and expenses	245,006		161,794		44,153		407,042		27,254		885,249
Income (loss) before federal income tax and other items	$	11,952	$	29,987	$	(1,771)	$	20,955	$	224,322	$	285,445

	Three months ended June 30, 2020
	Life		Annuity		Health		Property & Casualty		Corporate & Other		Total
PREMIUMS AND OTHER REVENUES
Premiums	$	91,670	$	25,944	$	42,945	$	372,704	$	—	$	533,263
Other policy revenues	76,226		3,561		—		—		—		79,787
Net investment income (loss)	73,645		189,842		2,214		16,037		(8,012)		273,726
Net realized investment gains	—		—		—		—		3,939		3,939
Change in investment credit loss	—		—		—		—		(52,310)		(52,310)
Net gains on equity securities	—		—		—		—		298,825		298,825
Other income	440		795		5,503		2,844		754		10,336
Total premiums and other revenues	241,981		220,142		50,662		391,585		243,196		1,147,566
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	124,941		44,983		—		—		—		169,924
Claims incurred	—		—		26,726		280,561		—		307,287
Interest credited to policyholders’ account balances	25,201		121,582		—		—		—		146,783
Commissions for acquiring and servicing policies	41,287		11,657		7,160		80,386		—		140,490
Other operating expenses	44,505		11,746		9,476		50,080		9,370		125,177
Change in deferred policy acquisition costs	(11,535)		12,306		(17)		(5,457)		—		(4,703)
Total benefits, losses and expenses	224,399		202,274		43,345		405,570		9,370		884,958
Income (loss) before federal income tax and other items	$	17,582	$	17,868	$	7,317	$	(13,985)	$	233,826	$	262,608

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Note 15 – Segment Information – (Continued)

	Six months ended June 30, 2021
	Life		Annuity		Health		Property & Casualty		Corporate & Other		Total
PREMIUMS AND OTHER REVENUES
Premiums	$	201,563	$	44,738	$	72,713	$	808,891	$	—	$	1,127,905
Other policy revenues	165,035		12,027		—		—		—		177,062
Net investment income	140,022		317,220		4,087		31,238		74,813		567,380
Net realized investment gains	—		—		—		—		29,841		29,841
Change in investment credit loss	—		—		—		—		19,593		19,593
Net gains on equity securities	—		—		—		—		266,744		266,744
Other income	880		1,788		9,987		6,275		1,857		20,787
Total premiums and other revenues	507,500		375,773		86,787		846,404		392,848		2,209,312
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	285,676		87,440		—		—		—		373,116
Claims incurred	—		—		50,441		524,741		—		575,182
Interest credited to policyholders’ account balances	43,096		175,927		—		—		—		219,023
Commissions for acquiring and servicing policies	91,817		52,968		12,551		160,262		—		317,598
Other operating expenses	96,267		25,065		20,475		104,562		37,040		283,409
Change in deferred policy acquisition costs	(27,928)		(22,720)		2,385		(8,698)		—		(56,961)
Total benefits, losses and expenses	488,928		318,680		85,852		780,867		37,040		1,711,367
Income before federal income tax and other items	$	18,572	$	57,093	$	935	$	65,537	$	355,808	$	497,945

	Six months ended June 30, 2020
	Life		Annuity		Health		Property & Casualty		Corporate & Other		Total
PREMIUMS AND OTHER REVENUES
Premiums	$	181,186	$	41,453	$	86,031	$	761,361	$	—	$	1,070,031
Other policy revenues	151,766		7,626		—		—		—		159,392
Net investment income	119,220		231,383		4,447		32,122		17,545		404,717
Net realized investment gains	—		—		—		—		8,087		8,087
Change in investment credit loss	—		—		—		—		(96,988)		(96,988)
Net losses on equity securities	—		—		—		—		(33,750)		(33,750)
Other income	1,176		1,433		10,030		6,577		2,253		21,469
Total premiums and other revenues	453,348		281,895		100,508		800,060		(102,853)		1,532,958
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	235,407		79,785		—		—		—		315,192
Claims incurred	—		—		61,611		510,270		—		571,881
Interest credited to policyholders’ account balances	23,298		119,162		—		—		—		142,460
Commissions for acquiring and servicing policies	80,754		21,905		15,184		153,082		—		270,925
Other operating expenses	91,985		23,622		20,105		103,084		20,307		259,103
Change in deferred policy acquisition costs	(19,373)		19,592		(40)		(6,554)		—		(6,375)
Total benefits, losses and expenses	412,071		264,066		96,860		759,882		20,307		1,553,186
Income (loss) before federal income tax and other items	$	41,277	$	17,829	$	3,648	$	40,178	$	(123,160)	$	(20,228)

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Note 16 – Commitments and Contingencies

Commitments

American National and its subsidiaries lease insurance sales office space, technological equipment, and automobiles. The remaining long-term lease commitments at June 30, 2021 were approximately $7.5 million.

American National had aggregate commitments at June 30, 2021 to purchase, expand or improve real estate, to fund fixed interest rate mortgage loans, and to purchase other invested assets of $1.6 billion of which $682.7 million is expected to be funded in 2021 with the remainder funded in 2022 and beyond.

American National had outstanding letters of credit in the amount of $3.5 million as of June 30, 2021 and December 31, 2020.

Federal Home Loan Bank (FHLB) Agreements

In May 2018, the Company became a member of the Federal Home Loan Bank of Dallas to augment its liquidity resources. The Company initially purchased $7.0 million of stock to meet the FHLB’s membership requirement. The FHLB member stock is recorded in other invested assets on the Company’s condensed consolidated statements of financial position. Through its membership, the Company has access to the FHLB’s financial services including advances that provide an attractive funding source for short-term borrowing and for access to other funding agreements. As of June 30, 2021, certain municipal bonds and collateralized mortgage obligations with a fair value of approximately $50.0 million and commercial mortgage loans of approximately $1.5 billion were on deposit with the FHLB as collateral for borrowing. As of June 30, 2021, the collateral provided borrowing capacity of approximately $1.1 billion. The deposited securities and commercial mortgage loans are included in the Company’s condensed consolidated statements of financial position within fixed maturity securities and mortgage loans on real estate, net of allowance, respectively.

Guarantees

ANICO has guaranteed bank loans for customers of a third-party marketing operation. The bank loans are used to fund premium payments on life insurance policies issued by ANICO. The loans are secured by the cash values of the life insurance policies. If the customer were to default on a bank loan, ANICO would be obligated to pay off the loan. As the cash values of the life insurance policies always equal or exceed the balance of the loans, management does not foresee any loss on these guarantees. The total amount of the guarantees outstanding as of June 30, 2021, was approximately $121.4 million, while the total cash value of the related life insurance policies was approximately $141.2 million.

Litigation

American National and certain subsidiaries are defendants in various lawsuits concerning alleged breaches of contracts, various employment matters, allegedly deceptive insurance sales and marketing practices, and miscellaneous other causes of action arising in the ordinary course of operations. Certain of these lawsuits include claims for compensatory and punitive damages. We provide accruals for these items to the extent we deem the losses probable and reasonably estimable. After reviewing these matters with legal counsel, based upon information presently available, management is of the opinion that the ultimate resultant liability, if any, would not have a material adverse effect on American National’s condensed consolidated financial position, liquidity or results of operations; however, assessing the eventual outcome of litigation necessarily involves forward-looking speculation as to judgments to be made by judges, juries and appellate courts in the future.

Such speculation warrants caution, as the frequency of large damage awards, which bear little or no relation to the economic damages incurred by plaintiffs in some jurisdictions, continues to create the potential for an unpredictable judgment in any given lawsuit. These lawsuits are in various stages of development, and future facts and circumstances could result in management changing its conclusions. It is possible that, if the defenses in these lawsuits are not successful, and the judgments are greater than management can anticipate, the resulting liability could have a material impact on our condensed consolidated financial position, liquidity, or results of operations. With respect to the existing litigation, management currently believes that the possibility of a material judgment adverse to American National is remote and no estimate of range can be made for loss contingencies that are at least reasonably possible but not accrued.

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Note 17 – Related Party Transactions

American National has entered into recurring transactions and agreements with certain related parties. These include mortgage loans, management contracts, agency commission contracts, marketing agreements, health insurance contracts, and legal services. The impact on the condensed consolidated financial statements of significant related party transactions is shown below (in thousands):

		Dollar Amount of Transactions
	Financial Statement Line Impacted	Three months ended June 30,				Six months ended June 30,				Amount due from American National
Related Party		2021		2020		2021		2020		June 30, 2021		December 31, 2020
Greer, Herz & Adams, LLP	Other operating expenses	$	3,379	$	3,251	$	7,092	$	7,094	$	(652)	$	(441)

Transactions with Greer, Herz & Adams, LLP: Irwin M. Herz, Jr. is a member of the Board of Directors of American National Group, Inc. and certain of its subsidiaries, and a Partner with Greer, Herz & Adams, LLP, which serves as American National’s General Counsel.

Note 18 – Subsequent Event

On August 6, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Brookfield Asset Management Reinsurance Partners Ltd. (“Brookfield Reinsurance”) and Freestone Merger Sub Inc. (“Merger Sub”). On the terms and subject to the conditions of the Merger Agreement, at the closing, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving entity, which will become an indirect, wholly-owned subsidiary of Brookfield Reinsurance.

On the terms and subject to the conditions of the Merger Agreement, at the time the Merger becomes effective (the “Effective Time”), each issued and outstanding share of the Company's common stock will be converted into the right to receive $190.00 in cash without interest (the “Merger Consideration”), for total Merger Consideration of approximately $5.1 billion. On the terms and subject to the conditions of the Merger Agreement, at the Effective Time, each outstanding and unvested restricted share award and restricted stock unit award will vest and be converted into the right to receive a cash payment equal to the Merger Consideration multiplied by the total number of shares of common stock subject to such award prior to the Effective Time. The Merger is expected to close in the first half of 2022, subject to regulatory approvals and other customary closing conditions.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following pages provide management’s discussion and analysis (“MD&A”) of financial condition and results of operations for the three and six months ended June 30, 2021 and 2020 of American National Group, Inc. and its subsidiaries (referred to in this document as “we,” “our,” “us,” or the “Company”). This information should be read in conjunction with our condensed consolidated financial statements included in Item 1, Financial Statements, of this Form 10-Q.

Introductory Note Regarding Pending Merger

On August 6, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Brookfield Reinsurance Asset Management Reinsurance Partners Ltd. (“Brookfield Reinsurance”), an exempted company limited by shares existing under the laws of Bermuda, and Freestone Merger Sub Inc., a Delaware corporation and an indirect wholly-owned subsidiary of Brookfield Reinsurance (“Merger Sub”). On the terms and subject to the conditions of the Merger Agreement, at the closing, Merger Sub will merge with and into the Company (the “Merger”), with the Company continuing as the surviving entity, which will become an indirect, wholly-owned subsidiary of Brookfield Reinsurance. The Merger was unanimously approved by the Company’s board of directors.

On the terms and subject to the conditions of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of the Company's common stock will be converted into the right to receive $190.00 in cash without interest (the “Merger Consideration”), for total Merger Consideration of approximately $5.1 billion. On the terms and subject to the conditions of the Merger Agreement, at the Effective Time, each outstanding and unvested restricted share award and restricted stock unit award will vest and be converted into the right to receive a cash payment equal to the Merger Consideration multiplied by the total number of shares of common stock subject to such award prior to the Effective Time.

Closing Conditions. The completion of the Merger is subject to satisfaction or waiver of certain closing conditions, including: (i) there being no law or injunction prohibiting consummation of the Merger; (ii) subject to specified materiality standards, the accuracy of the representations and warranties of the other party; and (iii) compliance by the other party in all material respects with its covenants. Brookfield Reinsurance’s and Merger Sub’s obligations are also conditioned upon the absence of a material adverse effect on the Company and the absence of any burdensome condition (as defined in the Merger Agreement) imposed by any regulators as part of the regulatory approval process.

Financing. Brookfield Reinsurance has received an equity commitment letter from Brookfield Asset Management Inc., the aggregate proceeds of which will provide Brookfield Reinsurance with the funds needed to consummate the Merger, including to pay the aggregate Merger Consideration pursuant to the Merger Agreement. The equity commitment will be reduced by the amount of any debt actually funded at closing if and to the extent that such debt financing is used to fund the payment of Merger Consideration. The completion of the Merger is not conditioned on receipt of financing by Brookfield Reinsurance.

Stockholder Approval. The Merger Agreement has already received the requisite stockholder approval required under Delaware law. Under the Company’s certificate of incorporation, stockholders are permitted to take action by majority written consent in lieu of a stockholder meeting. Under the Merger Agreement, the Company agreed to take all actions necessary, immediately after the execution of the Merger Agreement, to seek and obtain stockholder written consents from certain stockholders holding a majority of the outstanding shares of our common stock. These stockholder written consents, representing a majority of the outstanding shares of our common stock, were timely delivered to the Company. No further approval of the stockholders of the Company is required to adopt and approve the Merger Agreement.

Termination Rights and Termination Date. The Merger Agreement contains certain termination rights for both the Company and Brookfield Reinsurance and further provides that, upon termination of the Merger Agreement, under certain circumstances, the Company may be required to pay Brookfield Reinsurance a termination fee equal to $178.5 million. If the Merger has not closed by May 6, 2022 (“Outside Date”), either the Company or Brookfield Reinsurance may terminate the Merger Agreement. However, if the closing has not occurred because (a) any applicable waiting period under any antitrust law relating to the Merger has not expired or been terminated or (b) certain governmental approvals or prior written non-disapprovals have not been obtained, and all other conditions to closing have been satisfied (other than those conditions that by their terms are to be satisfied at the closing, each of which is capable of being satisfied at the closing) or waived, the Outside Date will be August 6, 2022.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Interim Operating Covenants. The Company has agreed to certain covenants in the Merger Agreement restricting the conduct of its business between the date of the Merger Agreement and the earlier of the Effective Time and the termination of the Merger Agreement. The general effect of these covenants is that, during such interim period, the Company will be limited in its ability to pursue strategic and operational matters outside the ordinary course of business. The Company has agreed that it and its Subsidiaries will conduct their business in the ordinary course consistent with past practice in all material respects and use reasonable best efforts to preserve their business organizations, goodwill and assets, keep available the services of their current key officers and employees, and preserve their present relationships with governmental entities and other key third parties, including customers, reinsurers, distributors, suppliers and other persons with whom the Company and its subsidiaries have business relationships.

In addition, the Company has agreed to specific restrictions relating to the conduct of its business between the date of the Merger Agreement and the earlier of the Effective Time and the termination of the Merger Agreement, including, but not limited to, not to take (or permit any of its subsidiaries to take) the following actions (subject, in each case, to exceptions specified below and in the Merger Agreement or previously disclosed in writing to Brookfield Reinsurance as provided in the Merger Agreement or as consented to in writing in advance by Brookfield Reinsurance (which consent shall not be unreasonably withheld, delayed or conditioned) or as required by law:

•subject to certain limited exceptions, offer, issue, sell, transfer, pledge, dispose of or encumber any shares of, or securities convertible into or exchangeable for, or options, warrants, calls, commitments or rights of any kind to acquire, any shares of capital stock or other voting or equity interests of any class or series of the Company or its subsidiaries;

•amend or propose to amend the Company’s or its subsidiaries’ certificate of incorporation, bylaws or other comparable organizational documents, in each case, whether by merger, consolidation or otherwise;

•authorize, recommend, propose, enter into or adopt a plan or agreement of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries;

•subject to certain limited exceptions (including permitting the Company to execute investment portfolio transactions in the ordinary course of business consistent with past practice and in accordance with its existing investment plan and investment guidelines), acquire or agree to acquire any business or any corporation, partnership, association or other business organization or division thereof;

•make or authorize capital expenditures that are, on an individual basis, in excess of 110% of the Company’s capital expenditure budget or in excess of 105% of the aggregate capital expenditure budget, except for (i) planned capital expenditures disclosed to Brookfield Reinsurance at signing of the Merger Agreement and (ii) reasonable emergency capital expenditures (after consultation with Brookfield Reinsurance) necessary to maintain its ability to operate its businesses in the ordinary course or for the safety of individuals, assets or the environment;

•subject to certain limited exceptions, sell, lease, license, transfer, pledge, subject to any encumbrance or otherwise dispose of any of its or their assets or properties;

•incur, guarantee or assume any indebtedness, subject to certain limited exceptions, including investment portfolio transactions in the ordinary course of business consistent with past practice and other incurrences of indebtedness not to exceed $10,000,000 in the aggregate;

•enter into any material contract or reinsurance contract other than in the ordinary course of business consistent with past practice; and

•terminate, amend, modify, assign or waive any material right under any material contract or reinsurance contract except in the ordinary course of business consistent with past practice.

The Merger Agreement permits the Company to continue to pay regular quarterly cash dividends not to exceed $0.82 per share of common stock prior to completion of the Merger.

Anticipated Timing; No Assurance that Closing will Occur. The Merger is expected to close in the first half of 2022. However, the consummation of the Merger is subject to regulatory approval in certain jurisdictions, including Texas, Missouri, New York, Louisiana and California, as well as other conditions set forth in the Merger Agreement, including antitrust clearance (or termination of the applicable waiting period) from the U.S. Department of Justice or Federal Trade Commission. Accordingly, the Company cannot provide assurance the Merger will be completed on the terms or timeline currently contemplated, or at all.

44

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

The above is a summary of certain material terms of the Merger Agreement and is qualified in its entirety by the terms and conditions of the Merger Agreement, which was filed as an exhibit to the Company’s current report on Form 8-K filed on August 9, 2021.

Caution Regarding Forward-Looking Statements

Certain statements made in this report, including but not limited to the accompanying condensed consolidated financial statements, and the notes thereto appearing in Item 1 herein, Management's Discussion and Analysis of Financial Condition and Results of Operations in this Item 2 ("MD&A"), and the exhibits and financial statement schedules filed as a part hereof or incorporated by reference herein, may contain or incorporate by reference information that includes or is based upon forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements generally are indicated by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “estimates,” “will” or words of similar meaning, and include, without limitation, statements regarding the outlook of our business and expected financial performance, and statements relating to the COVID-19 pandemic and its effects on the Company. These forward-looking statements are subject to changes and uncertainties which are, in many instances, beyond our control and have been made based upon our assumptions, expectations and beliefs concerning future developments and their potential effect upon us. There can be no assurance that future developments will be in accordance with our expectations, that the effect of future developments on us will be as anticipated, or that our risk management policies and procedures will be effective, particularly given the uncertainty relating to the COVID-19 pandemic. We do not make public specific projections relating to future earnings, and we do not endorse any projections regarding future performance made by others. Additionally, we do not publicly update or revise forward-looking statements based on the outcome of various foreseeable or unforeseeable events. Forward-looking statements are not guarantees of future performance and involve various risks and uncertainties. There are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including without limitation risks, uncertainties and other factors discussed in Item 1A of our 2020 Form 10-K filed with the SEC on March 4, 2021 and elsewhere in this report.

These forward-looking statements relate to the transaction contemplated by the Merger Agreement (the "Proposed Transaction"), as well as to the Company’s financial and operating performance on a stand-alone basis prior to the consummation of the Merger or if the Merger is not consummated. Important factors that could cause actual results and outcomes to differ materially from those in the forward-looking statements include, but are not limited to those summarized below:

•Factors Relating to the Proposed Transaction with Brookfield Reinsurance

•conditions to the closing of the Proposed Transaction may not be satisfied;

•regulatory approvals required for the Proposed Transaction may not be obtained, or required regulatory approvals may delay the Proposed Transaction or result in the imposition of conditions that could have a material adverse effect on the Company or Brookfield Reinsurance or cause certain conditions to closing not to be satisfied, which could result in the termination of the Merger Agreement;

•the timing of completion of the Proposed Transaction is uncertain;

•the business of the Company or Brookfield Reinsurance could suffer as a result of uncertainty surrounding the Proposed Transaction;

•events, changes or other circumstances could occur that could give rise to the termination of the Merger Agreement;

•there are risks related to disruption of management’s attention from the ongoing business operations of the Company or Brookfield Reinsurance due to the Proposed Transaction;

•the announcement or pendency of the Proposed Transaction could affect the relationships of the Company or Brookfield Reinsurance with its clients, operating results and business generally, including on our ability to retain employees;

•the outcome of any legal proceedings initiated against the Company or Brookfield Reinsurance following the announcement of the Proposed Transaction could adversely affect the Company or Brookfield Reinsurance, including their ability to consummate the Proposed Transaction; and

•the Company or Brookfield Reinsurance may be adversely affected by other economic, business, and/or competitive factors as well as management’s response to any of the aforementioned factors.

45

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

The foregoing review of important factors related to the Proposed Transaction should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the risk factors included in Brookfield Reinsurance’s Registration Statement on Form F-1 and the Company’s most recent Annual Report on Form 10-K and other documents of the Company and Brookfield Reinsurance on file with the SEC. Neither the Company nor Brookfield Reinsurance undertakes any obligation to update, correct or otherwise revise any forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company or Brookfield Reinsurance and/or any person acting on behalf of either of them are expressly qualified in their entirety by this paragraph. The information contained on any websites referenced in this Quarterly Report on Form 10-Q is not incorporated by reference into this Quarterly Report on Form 10-Q.

•Economic & Investment Factors

•difficult conditions in the economy, which may not improve in the near future, and risks related to persistently low or unpredictable interest rates;

•fluctuations in the markets for fixed maturity securities, equity securities, and commercial real estate, which could adversely affect the valuation of our investment portfolio, our net investment income, our retirement expense, and sales of or fees from certain of our products;

•lack of liquidity for certain of our investments;

•risk of investment losses and defaults;

•Factors Relating to Our Business and Industry

•the impact of major public health issues, like COVID-19;

•differences between actual experience regarding mortality, morbidity, persistency, expense, surrenders and investment returns, and our assumptions for product pricing, establishing liabilities and reserves or for other purposes;

•changes in our experience related to deferred policy acquisition costs;

•advances in medical technology and testing, which may increase our adverse selection risk;

•potentially adverse rating agency actions;

•Information Technology Factors

•failures or limitations of our computer, information security and administration systems;

•failure to complete and implement technology initiatives in a timely manner;

•Catastrophic Event Factors

•natural or man-made catastrophes resulting in increased claims activity from catastrophic loss of life or property;

•the effects of global climate change;

•Marketplace Factors

•the highly competitive nature of the insurance and annuity business;

•difficulty in attraction and retention of qualified employees and agents;

•the introduction of alternative healthcare solutions or changes in federal healthcare policy, both of which could impact our supplemental healthcare business;

•Litigation and Regulation Factors

•adverse determinations in litigation or regulatory proceedings which may result in significant financial losses and harm to our reputation;

•significant changes in government regulation;

•changes in tax law;

•changes in statutory or U.S. Generally Accepted Accounting Principles ("GAAP") practices or policies;

46

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

•Reinsurance and Counterparty Factors

•potential changes in the availability, affordability, adequacy and collectability of reinsurance protection;

•potential default or failure to perform by the counterparties to our reinsurance arrangements and derivative instruments;

•Factors Relating to Our Corporate Structure and Ownership of Our Common Stock

•state law limitations on the payment of dividends by our subsidiaries, which could limit the amount of dividends we pay;

•control of our Company by a small number of stockholders;

•anti-takeover provisions in our governing documents;

•the designation in our governing documents of the Delaware Court of Chancery as the exclusive forum for substantially all disputes between our stockholders and us;

•General Factors

•potential employee error or misconduct, which may result in fraud or adversely affect the execution and administration of our policies and claims;

•potential ineffectiveness of our risk management policies and procedures;

•the effects of unanticipated events on our disaster recovery and business continuity planning; and

•potential ineffectiveness of our internal controls over financial reporting.

COVID-19 Response

A summary of actions the company has taken in response to COVID-19 through December 31, 2020 is disclosed in our 2020 Annual Report on form 10-K filed with the SEC on March 4, 2021. Below is a summary of subsequent developments in our COVID-19 response:

•We continue to take steps to protect employees with the goals of maintaining their health and sustaining an adequate workforce, including employees working from home and offering flexibility for employees negotiating scheduling conflicts due to the impacts of COVID-19, such as caring for family, alternative arrangements and shutdowns for business and schools, self-isolation or personal illness, including granting additional paid time off for vaccinations and to address these hardships.

•We suspended our summer Internship Program for 2020, and in 2021 are piloting a program which combines both virtual and in-person elements for a small group of interns.

•We have developed and are continually refining our return-to-office plans for our locations. Beginning in June, we gradually re-introduced more employees to our office locations and are in the process of implementing longer-term plans to offer employees hybrid work schedules, where possible.

No assurance can be given that these actions will be successful, nor can we predict the level of disruption that will occur should the COVID-19 pandemic and its related macroeconomic risks continue for an extended period of time. Given this uncertainty, we are unable to quantify with reasonable confidence the expected impact of the COVID-19 pandemic on our future operations, financial condition, liquidity and results of operations. The wide-ranging social, economic and financial consequences of the COVID-19 pandemic and the possible effects of ongoing and future governmental action in response to COVID-19 compound this uncertainty. Additional information regarding risks and uncertainties related to the COVID-19 pandemic are set forth in Part II, Item 1A, Risk Factors of our 2020 Form 10-K filed with the SEC on March 4, 2021. For additional information regarding the direct and indirect impact to mortality refer to Part I, Item 2, MD&A, Life.

This MD&A should be read in conjunction with our condensed consolidated financial statements and related notes included in Part I, Financial Information, Item 1, Financial Statements.

47

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Overview

American National Group, Inc. ("ANAT") is a family of companies that has, on a consolidated GAAP basis, $30.4 billion in assets, $23.6 billion in liabilities and $6.8 billion in stockholders’ equity as of June 30, 2021. American National Insurance Company ("ANICO"), founded in 1905 and headquartered in Galveston, Texas, and other ANAT subsidiaries offer a broad spectrum of products and services, which include life insurance, annuities, property and casualty insurance, health insurance, credit insurance, and pension products. The American National companies operate in all 50 states, the District of Columbia and Puerto Rico. In addition to ANICO, major subsidiaries include American National Life Insurance Company of Texas, American National Life Insurance Company of New York, American National Property and Casualty Company, Garden State Life Insurance Company, Standard Life and Accident Insurance Company, Farm Family Casualty Insurance Company and United Farm Family Insurance Company.

General Trends

During the second quarter of 2021, American National had no material changes to the general trends discussed in the MD&A included in our 2020 Annual Report on Form 10-K filed with the SEC on March 4, 2021. However, please see the "COVID-19 Response and Update" discussion above for general information about the pandemic's impact on us, as well as "Introductory Note Regarding Pending Merger" above for general information about the pending merger transaction with Brookfield Reinsurance.

Critical Accounting Estimates

The unaudited interim condensed consolidated financial statements have been prepared in conformity with GAAP. In addition to GAAP, insurance companies apply specific SEC regulations when preparing the condensed consolidated financial statements. The preparation of the condensed consolidated financial statements and notes requires us to make estimates and assumptions that affect the amounts reported. Actual results could differ from results reported using those estimates and assumptions. Our accounting policies inherently require the use of judgment relating to a variety of assumptions and estimates, particularly expectations of current and future mortality, morbidity, persistency, expenses, interest rates, and property and casualty loss frequency, severity, claim reporting and settlement patterns. Due to the inherent uncertainty when using the assumptions and estimates, the effect of certain accounting policies under different conditions or assumptions could vary from those reported in the condensed consolidated financial statements.

For a discussion of our critical accounting estimates, see the MD&A in our 2020 Annual Report on Form 10-K filed with the SEC on March 4, 2021.

Recently Issued Accounting Pronouncements

Refer to Note 3, Recently Issued Accounting Pronouncements, of the Notes to the Unaudited Condensed Consolidated Financial Statements in Item 1.

48

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Condensed Consolidated Results of Operations

The following sets forth the condensed consolidated results of operations (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
PREMIUMS AND OTHER REVENUES
Premiums	$	565,252	$	533,263	$	31,989	$	1,127,905	$	1,070,031	$	57,874
Other policy revenues	90,523		79,787		10,736		177,062		159,392		17,670
Net investment income	297,399		273,726		23,673		567,380		404,717		162,663
Net realized investments gains	10,602		3,939		6,663		29,841		8,087		21,754
Change in investment credit loss	25,079		(52,310)		77,389		19,593		(96,988)		116,581
Net gains (losses) on equity securities	170,804		298,825		(128,021)		266,744		(33,750)		300,494
Other income	11,035		10,336		699		20,787		21,469		(682)
Total premiums and other revenues	1,170,694		1,147,566		23,128		2,209,312		1,532,958		676,354
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	182,239		169,924		12,315		373,116		315,192		57,924
Claims incurred	306,796		307,287		(491)		575,182		571,881		3,301
Interest credited to policyholders’ account balances	111,236		146,783		(35,547)		219,023		142,460		76,563
Commissions for acquiring and servicing policies	163,913		140,490		23,423		317,598		270,925		46,673
Other operating expenses	149,907		125,177		24,730		283,409		259,103		24,306
Change in deferred policy acquisition costs (1)	(28,842)		(4,703)		(24,139)		(56,961)		(6,375)		(50,586)
Total benefits, losses and expenses	885,249		884,958		291		1,711,367		1,553,186		158,181
Income (loss) before federal income taxes and other items	$	285,445	$	262,608	$	22,837	$	497,945	$	(20,228)	$	518,173

(1) A negative amount of change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.

Comparison of the three months ended June 30, 2021 to 2020

Earnings increased primarily due to the following:

•An increase in earnings in our Property and Casualty segment due to a reduction in catastrophe losses for our homeowners and agricultural business products

•An increase in earnings in our Annuity segment driven by favorable mark-to-market impact to equity-indexed annuity reserves and lower DAC amortization for fixed deferred products due to interest rates

•Favorable change in expected investment credit loss due to improvements in our commercial mortgage loans driven by economic forecast regarding GDP growth and positive economic outlook

The increase in earnings was partially offset due to the following:

•A decrease in net gains on equity securities due to the financial markets rebounding from the pandemic onset in the first quarter of 2020

•An increase in the combined ratio for our personal auto products due to an increase in claims as policyholders drove more miles due to the lessening impact of COVID-19

Comparison of the six months ended June 30, 2021 to 2020

Earnings increased primarily due to the following:

•An increase in net gains on equity securities due to favorable market conditions

•An increase in net investment income due to higher option gains resulting from favorable market conditions

•Favorable change in expected investment credit loss due to improvements in our commercial mortgage loans driven by economic forecast regarding GDP growth and positive economic outlook

49

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Life

Life segment financial results for the periods indicated were as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
PREMIUMS AND OTHER REVENUES
Premiums	$	100,784	$	91,670	$	9,114	$	201,563	$	181,186	$	20,377
Other policy revenues	83,527		76,226		7,301		165,035		151,766		13,269
Net investment income	72,225		73,645		(1,420)		140,022		119,220		20,802
Other income	422		440		(18)		880		1,176		(296)
Total premiums and other revenues	256,958		241,981		14,977		507,500		453,348		54,152
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	139,516		124,941		14,575		285,676		235,407		50,269
Interest credited to policyholders’ account balances	23,326		25,201		(1,875)		43,096		23,298		19,798
Commissions for acquiring and servicing policies	46,397		41,287		5,110		91,817		80,754		11,063
Other operating expenses	49,226		44,505		4,721		96,267		91,985		4,282
Change in deferred policy acquisition costs (1)	(13,459)		(11,535)		(1,924)		(27,928)		(19,373)		(8,555)
Total benefits, losses and expenses	245,006		224,399		20,607		488,928		412,071		76,857
Income before federal income taxes and other items	$	11,952	$	17,582	$	(5,630)	$	18,572	$	41,277	$	(22,705)

(1)A negative amount of change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.

Comparison of the three months ended June 30, 2021 to 2020

Earnings for our Life segment decreased primarily due to the following:

•Increase in reserves due to improvement in the participating policyholder share of change in credit loss, primarily associated with mortgage loans

•Increase in expenses due to growth in the business and the lower activity related to COVID-19 in 2020

The decrease in earnings was partially offset by the following:

•Improved persistency and an increase in sales, resulting in an increase in premiums and other policy revenues

•Improved mortality

Comparison of the six months ended June 30, 2021 to 2020

Earnings for our Life segment decreased primarily due to the following:

•An overall increase in mortality which includes claims directly and indirectly attributable to COVID-19

The decrease in earnings was partially offset by the following:

•Improved persistency and an increase in sales, resulting in an increase in premiums and other policy revenues

50

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Life Insurance Sales

The following table presents life insurance sales as measured by annualized premium, a statistical measure used by the insurance industry, which allows a comparison of new policies sold by an insurance company during the period (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Traditional life	$	17,339	$	15,009	$	2,330	$	33,096	$	29,983	$	3,113
Universal life	7,877		6,604		1,273		16,253		12,754		3,499
Indexed UL	8,322		6,842		1,480		16,692		13,644		3,048
Total recurring	33,538		28,455		5,083		66,041		56,381		9,660
Single and excess (1)	467		263		204		845		465		380
Credit life (1)	2,064		1,865		199		3,721		4,048		(327)
Total annualized premium	$	36,069	$	30,583	$	5,486	$	70,607	$	60,894	$	9,713

(1)Weighted amounts with single and excess premiums counted at 10%.

Life insurance sales are based on the total yearly premium that insurance companies would expect to receive if all recurring premium policies remain in-force, plus 10% of single and excess premiums. Life insurance sales measure activity associated with gaining new insurance business in the current period, and includes deposits received related to interest sensitive life and universal life-type products. Whereas GAAP premium revenues are associated with policies sold in current and prior periods, and deposits received related to interest sensitive life and universal life-type products are recorded in a policyholder account which is reflected as a liability. Therefore, a reconciliation of premium revenues and insurance sales is not meaningful.

Total Recurring Life sales increased during the three and six months ended June 30, 2021 compared to 2020. Life sales were impacted in 2020 by stay-at-home orders and economic uncertainty related to COVID-19.

Policy In-force Information

The following table summarizes changes in the Life segment’s in-force amounts (in thousands):

	June 30, 2021		December 31, 2020		Change
Life insurance in-force
Traditional life	$	95,609,870	$	91,920,577	$	3,689,293
Interest-sensitive life	37,626,264		36,326,621		1,299,643
Total life insurance in-force	$	133,236,134	$	128,247,198	$	4,988,936

The following table summarizes changes in the Life segment’s number of policies in-force:

	June 30, 2021	December 31, 2020	Change
Number of policies in-force
Traditional life	1,747,064	1,832,536	(85,472)
Interest-sensitive life	276,588	269,668	6,920
Total number of policies in-force	2,023,652	2,102,204	(78,552)

Life insurance in-force increased during the six months ended June 30, 2021 compared to December 31, 2020 despite a reduction of policies in-force due to an increase in sales of higher face amount policies.

Change in Deferred Policy Acquisition Costs

The change in DAC represents acquisition costs capitalized less the amortization of existing DAC. The following shows the components of the change in DAC (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Acquisition cost capitalized	$	(37,392)	$	(32,359)	$	(5,033)	$	(80,648)	$	(65,712)	$	(14,936)
Amortization of DAC	23,933		20,824		3,109		52,720		46,339		6,381
Change in DAC	$	(13,459)	$	(11,535)	$	(1,924)	$	(27,928)	$	(19,373)	$	(8,555)

51

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Annuity

Annuity segment financial results for the periods indicated were as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
PREMIUMS AND OTHER REVENUES
Premiums	$	20,497	$	25,944	$	(5,447)	$	44,738	$	41,453	$	3,285
Other policy revenues	6,996		3,561		3,435		12,027		7,626		4,401
Net investment income	163,356		189,842		(26,486)		317,220		231,383		85,837
Other income	932		795		137		1,788		1,433		355
Total premiums and other revenues	191,781		220,142		(28,361)		375,773		281,895		93,878
BENEFITS, LOSSES AND EXPENSES
Policyholder benefits	42,723		44,983		(2,260)		87,440		79,785		7,655
Interest credited to policyholders’ account balances	87,910		121,582		(33,672)		175,927		119,162		56,765
Commissions for acquiring and servicing policies	29,926		11,657		18,269		52,968		21,905		31,063
Other operating expenses	12,884		11,746		1,138		25,065		23,622		1,443
Change in deferred policy acquisition costs (1)	(11,649)		12,306		(23,955)		(22,720)		19,592		(42,312)
Total benefits, losses and expenses	161,794		202,274		(40,480)		318,680		264,066		54,614
Income before federal income taxes and other items	$	29,987	$	17,868	$	12,119	$	57,093	$	17,829	$	39,264

(1)A negative amount of change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.

Comparison of the three months ended June 30, 2021 to 2020

Earnings for our Annuity segment increased primarily due to the following:

•Favorable mark-to-market impact to equity-indexed annuity reserves due to interest rates

•Lower DAC amortization for fixed deferred products due to an increase in estimated gross profits driven by higher projected future interest rates compared to previous expectations

Comparison of the six months ended June 30, 2021 to 2020

Earnings for our Annuity segment increased primarily due to the following:

•An increase in net investment income due to higher option gains resulting from favorable market conditions

•Favorable mark-to-market impact to equity-indexed annuity reserves due to interest rates

•Lower DAC amortization for fixed deferred products due to an increase in estimated gross profits driven by higher projected future interest rates compared to previous expectations

52

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Annuity premium and deposit amounts received are shown below (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Fixed deferred annuity	$	351,171	$	73,399	$	277,772	$	474,923	$	191,809	$	283,114
Single premium immediate annuity	24,452		33,352		(8,900)		52,982		56,110		(3,128)
Equity-indexed deferred annuity	229,141		77,404		151,737		431,997		135,380		296,617
Variable deferred annuity	15,647		14,176		1,471		29,834		29,857		(23)
Total premium and deposits	620,411		198,331		422,080		989,736		413,156		576,580
Less: Policy deposits	599,914		172,387		427,527		944,998		371,703		573,295
Total earned premiums	$	20,497	$	25,944	$	(5,447)	$	44,738	$	41,453	$	3,285

Annuity premium and deposits increased primarily for equity-indexed and fixed deferred products during the three and six months ended June 30, 2021 compared to 2020 reflecting the competitiveness of the product.

Change in Deferred Policy Acquisition Costs

The change in DAC represents acquisition costs capitalized less the amortization of existing DAC, which is calculated in proportion to expected gross profits. The following shows the components of the change in DAC (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Acquisition cost capitalized	$	(30,423)	$	(10,793)	$	(19,630)	$	(53,911)	$	(22,318)	$	(31,593)
Amortization of DAC	18,774		23,099		(4,325)		31,191		41,910		(10,719)
Change in DAC	$	(11,649)	$	12,306	$	(23,955)	$	(22,720)	$	19,592	$	(42,312)

The change in acquisition costs capitalized for the six months ended June 30, 2021 strongly correlates with the change in commissions, which increased due to higher sales. The amortization of DAC was lower for the three and six months ended June 30, 2021 due to an increase in estimated gross profits driven by higher projected future interest rates.

53

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Shown below are the changes in reserve (in thousands):

	Six months ended June 30,
	2021		2020
Fixed deferred annuity
Reserve, beginning of period	$	6,635,203	$	6,893,174
Premiums	474,923		191,809
Death and other benefits	(119,239)		(104,787)
Surrenders	(253,242)		(240,051)
Fees	(873)		(533)
Interest and mortality	90,124		94,357
Reserve, end of period	6,826,896		6,833,969
Equity-indexed annuity
Reserve, beginning of period	4,097,013		3,985,166
Premiums	431,997		135,380
Death and other benefits	(28,961)		(23,292)
Surrenders	(150,192)		(182,778)
Fees	(1,590)		(1,767)
Interest and mortality	90,762		21,865
Reserve, end of period	4,439,029		3,934,574
Single premium immediate annuity
Reserve, beginning of period	1,851,955		1,874,942
Premiums	52,982		56,110
Payments	(100,266)		(108,815)
Interest and mortality	28,669		36,643
Reserve, end of period	1,833,340		1,858,880
Variable deferred annuity
Reserve, beginning of period	418,510		385,736
Premiums	29,834		29,857
Other flows	663		765
Surrenders	(41,680)		(44,491)
Fees	(2,617)		(2,128)
Change in market value and other	39,986		(3,546)
Reserve, end of period	444,696		366,193
Total reserve, end of period	$	13,543,961	$	12,993,616

54

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Interest and Mortality Margin

Margins increased during the three and six months ended June 30, 2021 compared to 2020 due to favorable changes in mark-to-market reserves for indexed annuities. The following table summarizes the interest margin due to the impact of the investment performance, interest credited to policyholder’s account balances, and the end of period assets measured by account balance (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Fixed annuity
Fixed investment income	$	87,881	$	93,535	$	(5,654)	$	176,343	$	187,155	$	(10,812)
Interest credited and mortality	(59,471)		(64,872)		5,401		(118,793)		(131,000)		12,207
Interest and mortality margin	28,410		28,663		(253)		57,550		56,155		1,395
Equity-indexed annuity
Fixed investment income	42,919		40,352		2,567		84,638		80,051		4,587
Option return	32,555		55,955		(23,400)		56,238		(35,823)		92,061
Interest credited and mortality	(44,830)		(73,883)		29,053		(90,762)		(21,865)		(68,897)
Interest and mortality margin	30,644		22,424		8,220		50,114		22,363		27,751
Variable annuity
Separate account management fees	1,290		1,003		287		2,537		1,943		594
Interest and mortality margin	1,290		1,003		287		2,537		1,943		594
Total interest and mortality margin	$	60,344	$	52,090	$	8,254	$	110,201	$	80,461	$	29,740

55

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Health

Health segment financial results for the periods indicated were as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
PREMIUMS AND OTHER REVENUES
Premiums	$	34,485	$	42,945	$	(8,460)	$	72,713	$	86,031	$	(13,318)
Net investment income	2,004		2,214		(210)		4,087		4,447		(360)
Other income	5,893		5,503		390		9,987		10,030		(43)
Total premiums and other revenues	42,382		50,662		(8,280)		86,787		100,508		(13,721)
BENEFITS, LOSSES AND EXPENSES
Claims incurred	26,190		26,726		(536)		50,441		61,611		(11,170)
Commissions for acquiring and servicing policies	6,565		7,160		(595)		12,551		15,184		(2,633)
Other operating expenses	9,867		9,476		391		20,475		20,105		370
Change in deferred policy acquisition costs (1)	1,531		(17)		1,548		2,385		(40)		2,425
Total benefits, losses and expenses	44,153		43,345		808		85,852		96,860		(11,008)
Income (loss) before federal income taxes and other items	$	(1,771)	$	7,317	$	(9,088)	$	935	$	3,648	$	(2,713)

(1) A positive amount of change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.

Comparison of the three months ended June 30, 2021 to 2020

Earnings for our Health segment decreased primarily due to the following:

•An increase in the benefit ratio for Medicare Supplement in 2021 as COVID-19 shelter-in-place protocols drove lower 2020 claim utilization

•Revisions to policy processing in our Worksite line of business. The end result was a $3.4 million decrease in due premium assets and the immediate recognition of $0.5 million deferred policy acquisition costs, resulting in a $3.9 million loss

Comparison of the six months ended June 30, 2021 to 2020

Earnings for our Health segment decreased primarily due to the following:

•Revisions to policy processing in our Worksite line of business. The end result was a $3.4 million decrease in due premium assets and the immediate recognition of $0.5 million deferred policy acquisition costs, resulting in a $3.9 million loss

The decrease in earnings was partially offset by the following:

•Favorable claim experience in the Medical Expense and Supplemental health lines of business

56

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Health earned premiums for the periods indicated were as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Medicare Supplement	$	18,433	$	21,624	$	(3,191)	$	37,257	$	43,202	$	(5,945)
MGU	5,753		6,132		(379)		10,938		11,603		(665)
Supplemental insurance	3,256		4,754		(1,498)		7,145		9,735		(2,590)
Credit Health	3,288		3,562		(274)		6,543		7,736		(1,193)
Medical expense	1,851		2,195		(344)		3,807		4,393		(586)
Worksite	607		3,438		(2,831)		4,625		6,992		(2,367)
Group health	510		429		81		859		797		62
All other	787		811		(24)		1,539		1,573		(34)
Total	$	34,485	$	42,945	$	(8,460)	$	72,713	$	86,031	$	(13,318)

Policy lapses as a result of rate increases drove a decrease in premiums for Medicare Supplement in 2021. Worksite premiums decreased as a result of revisions to policy processing. Supplemental insurance premiums decreased due to a reduction in sales across all product lines, primarily in Short Term Medical.

Health claims incurred for the periods indicated were as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Medicare Supplement	$	14,874	$	15,023	$	(149)	$	29,100	$	34,727	$	(5,627)
MGU	5,905		4,966		939		9,207		9,609		(402)
Supplemental insurance	1,549		2,645		(1,096)		3,224		5,803		(2,579)
Credit Health	715		528		187		1,540		1,256		284
Medical expense	964		1,085		(121)		3,244		5,110		(1,866)
Worksite	1,599		1,312		287		3,732		2,754		978
Group health	27		326		(299)		(46)		876		(922)
All other	557		841		(284)		440		1,476		(1,036)
Total	$	26,190	$	26,726	$	(536)	$	50,441	$	61,611	$	(11,170)

Favorable claim experience for the six months ended June 30, 2021 is driven by Medicare Supplement rate increases and policy lapses. In addition, claim experience improved in the Medical Expense and Supplemental health lines of business. These favorable developments helped offset an increase in MGU reserves.

Change in Deferred Policy Acquisition Costs

The following table presents the components of the change in DAC (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
Acquisition cost capitalized	$	(3,035)	$	(2,205)	$	(830)	$	(5,884)	$	(7,583)	$	1,699
Amortization of DAC	4,566		2,188		2,378		8,269		7,543		726
Change in DAC	$	1,531	$	(17)	$	1,548	$	2,385	$	(40)	$	2,425

57

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Property and Casualty

Property and Casualty segment financial results for the periods indicated were as follows (in thousands, except percentages):

	Three months ended June 30,									Six months ended June 30,
	2021			2020			Change			2021			2020			Change
PREMIUMS AND OTHER REVENUES
Net premiums written	$	446,458		$	406,076		$	40,382		$	871,824		$	813,663		$	58,161
Net premiums earned	$	409,486		$	372,704		$	36,782		$	808,891		$	761,361		$	47,530
Net investment income	15,725			16,037			(312)			31,238			32,122			(884)
Other income	2,786			2,844			(58)			6,275			6,577			(302)
Total premiums and other revenues	427,997			391,585			36,412			846,404			800,060			46,344
BENEFITS, LOSSES AND EXPENSES
Claims incurred	280,606			280,561			45			524,741			510,270			14,471
Commissions for acquiring and servicing policies	81,025			80,386			639			160,262			153,082			7,180
Other operating expenses	50,676			50,080			596			104,562			103,084			1,478
Change in deferred policy acquisition costs (1)	(5,265)			(5,457)			192			(8,698)			(6,554)			(2,144)
Total benefits, losses and expenses	407,042			405,570			1,472			780,867			759,882			20,985
Income (loss) before federal income taxes and other items	$	20,955		$	(13,985)		$	34,940		$	65,537		$	40,178		$	25,359
Loss and loss adjustment expense ratio	68.6		%	75.3		%	(6.7)		%	64.8		%	67.0		%	(2.2)		%
Underwriting expense ratio	30.9			33.5			(2.6)			31.7			32.8			(1.1)
Combined ratio	99.5		%	108.8		%	(9.3)		%	96.5		%	99.8		%	(3.3)		%
Impact of catastrophe events on combined ratio	6.8			23.8			(17.0)			7.9			13.1			(5.2)
Combined ratio without impact of catastrophe events	92.7		%	85.0		%	7.7		%	88.6		%	86.7		%	1.9		%
Gross catastrophe losses	$	30,068		$	87,790		$	(57,722)		$	67,000		$	100,356		$	(33,356)
Net catastrophe losses	$	27,560		$	88,559		$	(60,999)		$	63,526		$	100,038		$	(36,512)

(1) A negative amount of change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.

Comparison of the three and six months ended June 30, 2021 to 2020

Earnings for our Property and Casualty segment increased primarily due to the following:

•An improvement in the combined ratio for our homeowners and agricultural business products primarily due to a decrease in catastrophe losses

The increase in earnings was partially offset by the following:

•An increase in the combined ratio for our personal auto products as policyholders drove more miles due to the lessening impact of COVID-19

Additional Information

•Net premiums written and earned in the second quarter were reduced by COVID-19 relief policy credits for auto policyholders totaling $1.4 million (personal auto policies) in 2021 and $17.0 million ($16.1 million for personal auto policies and $0.9 million for commercial auto policies) in 2020.

58

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Products

Our Property and Casualty segment consists of: (i) Personal products, marketed primarily to individuals, representing 51% of net premiums written; (ii) Commercial products, focused primarily on agricultural and other business related markets, representing 33% of net premiums written; and (iii) Specialty Markets Group products, marketed through independent managing general agents and managing general underwriters, representing 16% of net premiums written.

Personal Products

Personal Products results for the periods indicated were as follows (in thousands, except percentages):

	Three months ended June 30,									Six months ended June 30,
	2021			2020			Change			2021			2020			Change
Net premiums written
Automobile	$	131,238		$	120,796		$	10,442		$	272,663		$	265,806		$	6,857
Homeowner	81,491			77,337			4,154			147,181			138,587			8,594
Other Personal	13,584			13,378			206			27,662			26,364			1,298
Total net premiums written	$	226,313		$	211,511		$	14,802		$	447,506		$	430,757		$	16,749
Net premiums earned
Automobile	$	134,320		$	120,450		$	13,870		$	268,430		$	257,933		$	10,497
Homeowner	72,321			67,184			5,137			142,516			133,882			8,634
Other Personal	13,073			12,326			747			25,825			24,780			1,045
Total net premiums earned	$	219,714		$	199,960		$	19,754		$	436,771		$	416,595		$	20,176
Loss and loss adjustment expense ratio
Automobile	71.4		%	55.5		%	15.9		%	67.3		%	59.0		%	8.3		%
Homeowner	86.4		%	138.9		%	(52.5)		%	86.4		%	102.3		%	(15.9)		%
Other Personal	67.5		%	83.2		%	(15.7)		%	58.1		%	69.1		%	(11.0)		%
Personal line loss and loss adjustment expense ratio	76.1		%	85.2		%	(9.1)		%	73.0		%	73.5		%	(0.5)		%
Combined Ratio
Automobile	95.5		%	83.3		%	12.2		%	91.5		%	84.9		%	6.6		%
Homeowner	116.5		%	169.1		%	(52.6)		%	116.0		%	133.8		%	(17.8)		%
Other Personal	97.6		%	117.7		%	(20.1)		%	88.1		%	103.5		%	(15.4)		%
Personal line combined ratio	102.5		%	114.3		%	(11.8)		%	99.3		%	101.7		%	(2.4)		%

Comparison of 2021 to 2020

Automobile: Net premiums written and earned increased for the second quarter and first six months primarily due to COVID-19 relief policy credits of $1.4 million in 2021 compared to $16.1 million in 2020. The loss and loss adjustment expense and combined ratios increased for the second quarter and first six months primarily due to an increase in claims compared to the prior year as policyholders drove more miles due to the lessening impact of COVID-19.

Homeowners: Net premiums written and earned increased for the second quarter and first six months primarily due to rate increases. The loss and loss adjustment expense and combined ratios decreased for the second quarter and first six months due to lower catastrophe losses. Catastrophe losses, net of reinsurance, decreased by $39.1 million, to $18.6 million in the second quarter compared to $57.7 million in 2020, and decreased by $23.1 million, to $41.6 million for the first six months compared to $64.7 million in 2020.

Other Personal: These products include coverages for individuals seeking to protect their personal property and liability not covered within their home and auto policies, such as coverages for watercraft, personal umbrella, and rental owners. Net premiums written and earned increased for the second quarter and first six months due to rate increases in the rental owners product. The loss and loss adjustment expense and combined ratios improved for the second quarter and first six months due to fewer non-catastrophe losses.

59

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Commercial Products

Commercial Products results for the periods indicated were as follows (in thousands, except percentages):

	Three months ended June 30,									Six months ended June 30,
	2021			2020			Change			2021			2020			Change
Net premiums written
Agricultural Business	$	49,974		$	46,496		$	3,478		$	94,747		$	87,478		$	7,269
Automobile	40,397			36,666			3,731			80,463			74,378			6,085
Business Owner	25,155			23,403			1,752			48,242			44,782			3,460
Workers Compensation	22,121			22,254			(133)			43,039			43,267			(228)
Other Commercial	10,464			9,404			1,060			20,538			18,743			1,795
Total net premiums written	$	148,111		$	138,223		$	9,888		$	287,029		$	268,648		$	18,381
Net premiums earned
Agricultural Business	$	43,176		$	40,387		$	2,789		$	84,499		$	79,460		$	5,039
Automobile	33,272			30,832			2,440			65,638			61,297			4,341
Business Owner	20,560			19,024			1,536			40,374			37,438			2,936
Workers Compensation	17,106			17,479			(373)			34,345			35,075			(730)
Other Commercial	9,061			8,304			757			17,908			16,393			1,515
Total net premiums earned	$	123,175		$	116,026		$	7,149		$	242,764		$	229,663		$	13,101
Loss and loss adjustment expense ratio
Agricultural Business	53.5		%	80.9		%	(27.4)		%	52.7		%	60.7		%	(8.0)		%
Automobile	76.7		%	70.1		%	6.6		%	63.8		%	66.8		%	(3.0)		%
Business Owner	78.8		%	81.9		%	(3.1)		%	77.8		%	88.1		%	(10.3)		%
Workers Compensation	65.0		%	65.2		%	(0.2)		%	61.1		%	59.0		%	2.1		%
Other Commercial	53.8		%	52.3		%	1.5		%	44.2		%	60.4		%	(16.2)		%
Commercial line loss and loss adjustment expense ratio	65.6		%	73.8		%	(8.2)		%	60.5		%	66.5		%	(6.0)		%
Combined ratio
Agricultural Business	87.2		%	117.9		%	(30.7)		%	88.3		%	97.9		%	(9.6)		%
Automobile	97.6		%	94.0		%	3.6		%	85.7		%	90.4		%	(4.7)		%
Business Owner	110.7		%	116.7		%	(6.0)		%	111.2		%	123.3		%	(12.1)		%
Workers Compensation	77.9		%	82.4		%	(4.5)		%	76.5		%	76.7		%	(0.2)		%
Other Commercial	91.5		%	90.4		%	1.1		%	84.9		%	100.8		%	(15.9)		%
Commercial line combined ratio	93.0		%	104.0		%	(11.0)		%	89.5		%	97.0		%	(7.5)		%

Comparison of 2021 to 2020

Agricultural Business: Our agricultural business product allows policyholders to customize and cover their agriculture exposure using a package policy, which includes coverage for residences and household contents, farm and ranch buildings and building contents, personal and commercial liability and personal property. Net premiums written and earned increased for the second quarter and first six months primarily due to increases in policies in-force and rate increases. The loss and loss adjustment expense and combined ratios improved for the second quarter and first six months primarily due to a decrease in catastrophe losses. Catastrophe losses, net of reinsurance, decreased by $12.1 million, to $1.4 million in the second quarter compared to $13.5 million in 2020, and decreased by $7.5 million, to $8.2 million for the first six months compared to $15.7 million in 2020.

Commercial Automobile: Net premiums written and earned increased for the second quarter and first six months primarily due to rate increases. The loss and loss adjustment expense ratio and combined ratio increased for the second quarter primarily due to an increase in claims compared to the prior year as policyholders drove more miles compared to the prior year due to the lessening impact of COVID-19, and improved for the first six months primarily due to favorable prior year claim development and a decrease in claim frequency as policyholders drove fewer miles in the first quarter of 2021 compared to 2020 due to the impact of COVID-19.

60

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Business Owner: Our business owner product allows policyholders to customize and cover their property and liability exposures using a package policy. Net premiums written and earned increased for the second quarter and first six months primarily due to increases in policies in-force and rate increases. The loss and loss adjustment expense and combined ratios improved for the second quarter and first six months primarily due to a decrease in claim frequency.

Workers Compensation: The combined ratio improved for the second quarter primarily due to an improvement in the expense ratio.

Other Commercial: Other commercial products primarily provide umbrella and other liability coverages. Net premiums written and earned increased for the second quarter and first six months primarily due to an increase in premium for umbrella products. The loss and loss adjustment expense and combined ratios for the first six months improved primarily due to favorable prior year claim development.

Specialty Markets Products

Specialty Markets product results for the periods indicated were as follows (in thousands, except percentages):

	Three months ended June 30,									Six months ended June 30,
	2021			2020			Change			2021			2020			Change
Net premiums written	$	72,034		$	56,342		$	15,692		$	137,287		$	114,258		$	23,029
Net premiums earned	66,596			56,719			9,877			129,354			115,102			14,252
Loss and loss adjustment expense ratio	48.9		%	43.3		%	5.6		%	45.8		%	44.5		%	1.3		%
Combined ratio	101.0		%	99.4		%	1.6		%	100.5		%	98.5		%	2.0		%

Specialty Markets products provide protection to borrowers and the creditors that extend credit to them. Products offer coverage against unpaid indebtedness as a result of death, disability, involuntary unemployment or untimely loss to the collateral securing a personal or mortgage loan. Specialty Markets products also include renters, mortgage security, aviation, and private flood insurance.

Comparison of 2021 to 2020

Net written and earned premiums increased for the second quarter and first six months primarily due to higher production on renters products and the addition of new accounts related to the investor property protection ("IPP") products. The loss and loss adjustment expense and combined ratios increased for the second quarter and first six months primarily due to higher losses for renters products and IPP.

61

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Corporate and Other

Corporate and Other segment financial results for the periods indicated were as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2021		2020		Change		2021		2020		Change
OTHER REVENUES
Net investment income	$	44,089	$	(8,012)	$	52,101	$	74,813	$	17,545	$	57,268
Realized investment gains	10,602		3,939		6,663		29,841		8,087		21,754
Change in investment credit loss	25,079		(52,310)		77,389		19,593		(96,988)		116,581
Net gains (losses) on equity securities	170,804		298,825		(128,021)		266,744		(33,750)		300,494
Other income	1,002		754		248		1,857		2,253		(396)
Total other revenues	251,576		243,196		8,380		392,848		(102,853)		495,701
BENEFITS, LOSSES AND EXPENSES
Other operating expenses	27,254		9,370		17,884		37,040		20,307		16,733
Total benefits, losses and expenses	27,254		9,370		17,884		37,040		20,307		16,733
Income (loss) before federal income taxes and other items	$	224,322	$	233,826	$	(9,504)	$	355,808	$	(123,160)	$	478,968

Comparison of the three months ended June 30, 2021 to 2020

Earnings for our Corporate and Other segment decreased primarily due to the following:

•A decrease in net gains on equity securities due to the financial markets rebounding from the pandemic onset in the first quarter of 2020

The decrease in earnings is partially offset by the following:

•An increase in net investment income driven by increases in investment income from mortgage loan profit participation and prepayment income and investment funds

•Favorable change in expected investment credit loss due to improvements in our commercial mortgage loans driven by economic forecast regarding GDP growth and positive economic outlook

Comparison of the six months ended June 30, 2021 to 2020

Earnings for our Corporate and Other segment increased primarily due to the following:

•An increase in net gains on equity securities due to favorable market conditions

•Favorable change in expected investment credit loss due to improvements in our commercial mortgage loans driven by economic forecast regarding GDP growth and positive economic outlook

62

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Investments

We manage our investment portfolio to optimize the rate of return commensurate with sound and prudent asset selection and to maintain a well-diversified portfolio in support of our products and capital. Our investment operations are regulated primarily by the state insurance departments where our insurance companies are domiciled. Investment activities, including setting investment policies and defining acceptable risk levels, are subject to oversight by our Board of Directors, which is assisted by our Finance Committee, ALM Committee and Enterprise Risk Management Committee.

Our insurance and annuity products are generally supported by investment-grade bonds and commercial mortgage loans. We also invest in equity options as a hedge for our indexed products. We purchase fixed maturity securities and designate them as either held-to-maturity or available-for-sale considering our estimated future cash flow needs. We also monitor the composition of our fixed maturity securities classified as held-to-maturity and available-for-sale and adjust the mix within the portfolio as investments mature or new investments are purchased.

The following summarizes the carrying values of our invested assets by asset class (in thousands, except percentages):

	June 30, 2021				December 31, 2020
Fixed maturity, bond held-to-maturity, at amortized cost	$	7,473,697	28.9	%	$	7,354,970	29.2	%
Fixed maturity, bond available-for-sale, at fair value	8,068,795		31.3		7,597,180		30.1
Equity securities, at fair value	2,340,508		9.1		2,070,766		8.2
Mortgage loans on real estate, net of allowance	5,028,933		19.4		5,242,531		20.8
Policy loans	365,855		1.4		373,014		1.5
Real estate and real estate partnerships, net of accumulated depreciation	926,241		3.6		960,572		3.8
Investment funds	594,166		2.3		477,135		1.9
Short-term investments	917,581		3.6		1,028,379		4.1
Other invested assets	102,387		0.4		94,415		0.4
Total investments	$	25,818,163	100.0	%	$	25,198,962	100.0	%

The increase in our total investments at June 30, 2021 compared to year-end 2020 was primarily the result of an increase in held-to-maturity bonds, available-for-sale bonds and equity securities.

Bonds—We allocate most of our fixed maturity securities to support our insurance business. At June 30, 2021, our fixed maturity securities had an estimated fair value of $16.1 billion, which was $1.0 billion, or 6.4%, above amortized cost. At December 31, 2020, our fixed maturity securities had an estimated fair value of $15.6 billion, which was $1.2 billion, or 8.0%, above amortized cost. The estimated fair value for securities due in one year or less was $0.9 billion and $1.1 billion as of June 30, 2021 and December 31, 2020, respectively. For additional information regarding total bonds by credit quality rating, refer to Note 4, Investments in Securities, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Equity Securities—We invest in the equity securities of companies traded on national U.S. stock exchanges. See Note 4, Investments in Securities, of the Notes to the Unaudited Condensed Consolidated Financial Statements for the unrealized and realized gains and losses of equity securities.

Mortgage Loans—We invest in commercial mortgage loans that are diversified by property-type and geography. Generally, mortgage loans are secured by first liens on income-producing real estate with a loan-to-value ratio of up to 75%. Mortgage loans are generally carried at outstanding principal balances, adjusted for any unamortized premium or discount, deferred fees or expenses, and net of allowances. The weighted average coupon yield on the principal funded for mortgage loans was 4.7% and 4.8% at June 30, 2021 and December 31, 2020, respectively. For additional information regarding mortgage loans refer to Note 5, Mortgage Loans, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Policy Loans—For certain life insurance products, policyholders may borrow funds using the policy’s cash value as collateral. The maximum amount of the policy loan depends upon the policy’s surrender value. As of June 30, 2021, we had $365.9 million in policy loans with a loan to surrender value of 54%, and at December 31, 2020, we had $373.0 million in policy loans with a loan to surrender value of approximately 56%. Interest rates on policy loans primarily range from 3.0% to 12.0% per annum. Policy loans may be repaid at any time by the policyholder and have priority to any claims on the policy. If the policyholder fails to repay the policy loan, funds are withdrawn from the policy’s benefits.

Real Estate and Real Estate Partnerships—We invest in commercial real estate where positive cash flows and/or appreciation in value is expected. Real estate may be owned directly by our insurance companies or non-insurance affiliates or indirectly in joint ventures with real estate developers or investors we determine share our perspective regarding risk and return relationships. The carrying value of real estate is stated at cost, less accumulated depreciation and impairments, if any. Depreciation is provided over the estimated useful lives of the properties. The carrying value of our real estate partnerships is determined by using the equity method of accounting.

Investment Funds—Our investment funds are primarily comprised of senior secured and second lien private loans that are secured by assets, revenues and credit/balance sheet lending. We recognize our share of the fund’s earnings in net investment income on a one-quarter lag under the equity method of accounting. Cash distributions are received from the earnings and from liquidation of underlying investments.

Short-term Investments—Short-term investments are primarily commercial paper rated A2 or P2 or better by Standard & Poor’s and Moody’s, respectively. The amount fluctuates depending on our view of the desirability of investing in the available long-term investment opportunities and our liquidity needs, including mortgage investment-funding commitments.

Other Invested Assets—Other invested assets are comprised primarily of pooled loans to mid-sized businesses which are initiated and administered by third-party managers. These loans are carried at fair value. Other invested assets also include equity-indexed options, carried at fair value, net of collateral provided by counterparties; such collateral is restricted to the Company’s use. Additionally, other invested assets include FHLB capital stock, mineral rights, mezzanine loans and lease financing arrangements, all of which are carried at cost.

Net Investment Income and Net Realized Gains (Losses)

Net investment income increased $162.7 million during the six months ended June 30, 2021 compared to 2020 primarily due to higher gains on options from an improvement in the S&P 500 Index, and an increase in income from mortgage loan profit participation and prepayment income, real estate joint ventures and investment funds.

Interest income on mortgage loans is accrued on the principal amount of the loan at the contractual interest rate. Accretion of discounts is recorded using the effective yield method. Interest income, accretion of discounts and prepayment fees are reported in net investment income. Interest is not accrued on loans generally more than 90 days past due or when the collection of interest is not considered probable. Loans in foreclosure are placed on non-accrual status. Interest received on non-accrual status mortgage loans is included in net investment income in the period received.

Net realized investment gains increased $21.8 million during the six months ended June 30, 2021 compared to 2020 primarily attributable to an increase in sales of real estate partnership interests and call of bonds. Net realized investment gains (losses) are shown below (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Bonds	$	11,468	$	3,952	$	19,167	$	9,430
Mortgage loans	(768)		—		(768)		—
Real estate and real estate partnerships	(101)		(7)		11,092		(1,314)
Other invested assets	3		(6)		350		(29)
Total	$	10,602	$	3,939	$	29,841	$	8,087

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Net Unrealized Gains (Losses)

The unrealized gains and losses of our fixed maturity securities investment portfolio are shown below (in thousands):

	June 30, 2021		December 31, 2020		Change
Held-to-Maturity
Gains	$	537,646	$	639,648	$	(102,002)
Losses	(13,294)		(11,437)		(1,857)
Net gains	524,352		628,211		(103,859)
Available-for-Sale
Gains	456,181		548,996		(92,815)
Losses	(12,253)		(17,476)		5,223
Net gains	443,928		531,520		(87,592)
Total	$	968,280	$	1,159,731	$	(191,451)

The net change in the unrealized gains on fixed maturity securities between June 30, 2021 and December 31, 2020 is primarily attributable to the increase in benchmark ten-year interest rates, which were 1.4% and 0.9%, respectively. The Company does not currently intend to sell nor does it expect to be required to sell any of the securities in an unrealized loss position.

Liquidity

As a result of the holding company reorganization, ANICO became a wholly owned subsidiary of ANAT. ANAT's source of liquidity is solely derived from dividends received from ANICO.

In April 2020, the Company borrowed $500.0 million from the Federal Home Loan Bank of Dallas' COVID-19 Relief Advance Program. As of June 30, 2021, there are no advances outstanding; the final advance was repaid on its maturity date of April 28, 2021. The available liquidity through the FHLB at June 30, 2021 was approximately $1.1 billion.

As a result of the impacts of COVID-19, state insurance departments across the country issued regulations that required us not to cancel policies for non-payment for varying amounts of time but generally for at least 90-day periods which began in March and early April 2020. The cancellation and grace periods have been lifted in all states.

The primary use of cash has been and is expected to continue to be payment of policyholder benefits and claims incurred. Current and expected patterns of claim frequency and severity may change from period to period but continue to be within historical norms. Management considers our current liquidity position to be sufficient to meet anticipated demands over the next twelve months. Our contractual obligations are not expected to have a significant negative impact to cash flows from operations.

Our defined benefit plans are frozen and currently adequately funded; however, low interest rates, increased longevity of participants, and rising Pension Benefit Guaranty Corporation (“PBGC”) premiums may cause us to increase our funding of the plans.

We are currently evaluating the renovation and modernization of our home office facilities. This could result in capital expenditures that could aggregate to approximately $100.0 million over a three year period beginning in 2022; however, current uncertainties relating to the COVID-19 pandemic have caused us to delay this project at this time. There are no other unusually large capital expenditures expected in the next 12-24 months.

We have consistently paid dividends to our stockholders and expect to continue this tradition. There are no other known trends or uncertainties regarding product pricing, changes in product lines or rising costs that are expected to have a significant impact to cash flows from operations, although uncertainties relating to the COVID-19 pandemic could still significantly impact one or more of these items.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Funds received as premium payments and deposits that are not used for liquidity requirements are generally invested in bonds and commercial mortgages. Funds are invested with the intent that income from the investments and proceeds from the maturities will meet our ongoing cash flow needs. We historically have not had to liquidate invested assets in order to cover cash flow needs. Our investment portfolio has been significantly impacted by volatility associated with COVID-19. We believe our portfolio of highly liquid bonds, available-for-sale investment securities, and equity securities, coupled with our ability to borrow funds through the FHLB, are sufficient to meet future liquidity needs as necessary.

As a result of the economic impact associated with COVID-19, American National modified 93 loans with a total balance of $1.6 billion during the second and third quarters of 2020. These modifications were in the form of forbearance of principal and interest payments for up to six months, extensions of maturity dates, and/or provisions for interest only payments. The modifications were primarily related to our loans to hotels, retail and parking operations. Due to the ongoing economic stress brought on by the pandemic, additional modifications for 31 of these loans with a total balance of $708.6 million were made in the first and second quarters of 2021. These additional modifications extended the forbearance of principal and interest payments and interest only provisions with a requirement for the payment of at least 20% of the total interest due during the extended modification period. The modified loans had an aggregate deferred interest of $13.6 million as of June 30, 2021.

The Company holds collateral of $257.5 million at June 30, 2021 to offset exposure from its derivative counterparties. Cash flows associated with collateral received from counterparties change as the market value of the underlying derivative contract changes.

Our cash and cash equivalents and short-term investment position decreased from $1.4 billion at December 31, 2020 to $1.3 billion at June 30, 2021. The decrease primarily relates to a decrease in commercial paper.

A downgrade or a potential downgrade in our financial strength ratings could result in a loss of business and could adversely affect our cash flows from operations.

Further information regarding additional sources or uses of cash is described in Note 16, Commitments and Contingencies, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Capital Resources

Our capital resources are summarized below (in thousands):

	June 30, 2021		December 31, 2020
American National stockholders’ equity, excluding accumulated other comprehensive income (“AOCI”), net of tax	$	6,590,193	$	6,236,100
Accumulated other comprehensive income	171,851		222,170
Total American National stockholders’ equity	$	6,762,044	$	6,458,270

We have notes payable relating to borrowings by real estate joint ventures that we consolidate into our financial statements that are not part of our capital resources. The lenders for the notes payable generally have no recourse against us in the event of default by the joint ventures. Therefore, the liability of American National relating to notes payable of the consolidated VIEs is limited to the amount of its direct or indirect investment in the respective ventures, which totaled $3.0 million at June 30, 2021 and December 31, 2020.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

The changes in our capital resources are summarized below (in thousands):

	June 30, 2021						December 31, 2020
	Capital and Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total		Capital and Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Net income attributable to American National	$	398,149	$	—	$	398,149	$	467,505	$	—	$	467,505
Dividends to shareholders	(44,095)		—		(44,095)		(88,190)		—		(88,190)
Change in net unrealized gains on debt securities	—		(56,869)		(56,869)		—		134,315		134,315
Foreign currency transaction and translation adjustment	—		419		419		—		235		235
Defined benefit pension plan adjustment	—		6,131		6,131		—		(11,898)		(11,898)
Cumulative effect of accounting change (1)	—		—		—		(33,500)		—		(33,500)
Other	39		—		39		54		—		54
Total	$	354,093	$	(50,319)	$	303,774	$	345,869	$	122,652	$	468,521

(1) Result of adoption of ASU-2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.

Statutory Capital and Surplus and Risk-based Capital

Statutory capital and surplus is the capital of our insurance companies reported in accordance with accounting practices prescribed or permitted by the applicable state insurance departments. RBC is calculated using formulas applied to certain financial balances and activities that consider, among other things, investment risks related to the type and quality of investments, insurance risks associated with products and liabilities, interest rate risks and general business risks. Insurance companies that do not maintain capital and surplus at a level of at least 200% of the authorized control level RBC are required to take certain actions. At June 30, 2021 and December 31, 2020, ANICO’s statutory capital and surplus was $3.8 billion and $3.6 billion, respectively. ANICO and each of our other insurance subsidiaries had statutory capital and surplus at June 30, 2021 and December 31, 2020 above 200% of the authorized control level, except for ANPAC Louisiana Insurance Company ("ANPLA").

At June 30, 2021 and December 31, 2020, ANPLA's statutory capital and surplus was $63.4 million and $68.5 million respectively, which resulted in an RBC level of 179% and 194% of the company action level. This decrease in RBC of ANPLA is primarily driven by an increase in homeowners catastrophe losses impacting the operating results in 2021 and 2020. We are actively managing our homeowners exposure of ANPLA, will continue to monitor the surplus levels and will be addressing rate adequacy through future planned underwriting and rate actions.

The achievement of long-term growth will require growth in our insurance subsidiaries’ statutory capital and surplus. Our subsidiaries may obtain additional statutory capital through various sources, such as retained statutory earnings or equity contributions from us.

Contractual Obligations

Our future cash payments associated with claims and claims adjustment expenses, life, annuity and disability obligations, contractual obligations pursuant to operating leases for office space and equipment, and notes payable have not materially changed since December 31, 2020. We expect to have the capacity to pay our obligations as they come due.

On April 28, 2021, the Company paid in full an advance outstanding with Federal Home Loan Bank. It is expected that the Company will have sufficient cash flow to meet its current lending commitments. For additional details see Note 16, Commitments and Contingencies of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Off-Balance Sheet Arrangements

We have off-balance sheet arrangements relating to third-party marketing operation bank loans as discussed in Note 16, Commitments and Contingencies, of the Notes to the Unaudited Condensed Consolidated Financial Statements. We could be exposed to a liability for these loans, which are supported by the cash value of the underlying insurance contracts. The cash value of the life insurance policies is designed to always equal or exceed the balance of the loans. Accordingly, management does not foresee any material loss related to these arrangements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS — (Continued)

Related-Party Transactions

We have various agency, consulting and service arrangements with individuals and entities considered to be related parties. Each of these arrangements has been reviewed and approved by our Audit Committee, which retains final decision-making authority for these transactions. The amounts involved, both individually and in the aggregate, with these arrangements are not material to any segment or to our overall operations. For additional details regarding significant related party transactions, see Note 17, Related Party Transactions, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risk has not changed materially from those disclosed in our 2020 Annual Report on form 10-K filed with the SEC on March 4, 2021, although the recent economic disruptions caused by the COVID-19 pandemic has added greater uncertainty to the credit risk and equity risk that we face.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to provide reasonable assurance that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief

Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of June 30, 2021. Based upon that evaluation and subject to the foregoing, the Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2021, the design and operation of the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

Management has monitored the internal controls over financial reporting, including any material changes to the internal control over financial reporting. There were no changes in the Company’s internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information required for Item 1 is incorporated by reference to the discussion under the heading “Litigation” in Note 16, Commitments and Contingencies, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

ITEM 1A. RISK FACTORS

There have been no material changes to the "Risk Factors" discussion in Item 1A of our 2020 Form 10-K filed with the SEC on March 4, 2021.

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ITEM 6. EXHIBITS

Exhibit Number	Description
2.1	Agreement and Plan of Merger, dated February 11, 2020, among American National Insurance Company, a Texas insurance company ("ANICO"), American National Group, Inc., a Delaware corporation ("ANAT"), and AN MergerCo., Inc., a Texas corporation (incorporated by reference to Annex I to the Proxy Statement/Prospectus filed on March 25, 2020).
2.2	Agreement and Plan of Merger, dated as of August 6, 2021, by and among Brookfield Asset Management Reinsurance Partners Ltd., Freestone Merger Sub Inc. and American National Group, Inc. (incorporated by reference to Exhibit 2.1 of the registrant's Current Report on Form 8-K filed on August 9, 2021).
3.1	Amended and Restated Certificate of Incorporation of ANAT (incorporated by reference to Annex II of the Proxy Statement/Prospectus filed with the SEC on March 25, 2020).
3.2	Restated Articles of Incorporation, as amended, of ANICO (incorporated by reference to Exhibit No. 3.1 to the registrant's Registration Statement on Form 10-12B filed April 10, 2009).
3.3	Amended and Restated Bylaws of ANAT (incorporated by reference to Annex III of the Proxy Statement/Prospectus filed with the SEC on March 25, 2020)
3.4	Amended and Restated Bylaws of ANICO (incorporated by reference to Exhibit No. 3.2 to the registrant's Current Report on Form 8-K filed February 23, 2018).
10.1*	Form of Letter Agreement amending outstanding book value units granted to certain employees of American National Group, Inc. (incorporated by reference to Exhibit 99.2 of the registrant's Current Report on Form 8-K filed on August 9, 2021).
31.1	Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2	Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1	Certification of the principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.
104	Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

*Management contract or compensatory plan or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

By:	/s/ James E. Pozzi
Name:	James E. Pozzi
Title:	President and Chief Executive Officer
By:	/s/ Brody J. Merrill
Name:	Brody J. Merrill
Title:	Senior Vice President, Chief Financial Officer and Treasurer

Date: August 9, 2021

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