INSURANCE INTANGIBLES, UNEARNED REVENUE RESERVES AND UNEARNED FRONT-END LOADS |
NET INVESTMENT INCOME - INSURANCE Net investment income for Global Atlantic is comprised primarily of interest income, including amortization of premiums and accretion of discounts, based on yields that change due to expectations in projected cash flows, dividend income from common and preferred stock, earnings from investments accounted for under equity method accounting, and lease income on other investments.
The components of net investment income were as follows:
| | | | | | | | | | | | | | | | | Three Months Ended | | Nine Months Ended | | | September 30, 2021 | | September 30, 2021 | | | | | | Fixed maturity securities – interest and other income | | $ | 632,314 | | | $ | 1,512,377 | | Mortgage and other loan receivables | | 247,917 | | | 617,334 | | Investments in transportation and other leased assets | | 56,317 | | | 146,004 | | Short-term and other investment income | | 23,285 | | | 41,349 | | Policy loans | | 3,203 | | | 22,138 | | Investments in real estate | | 4,501 | | | 10,028 | | Investments in renewable energy | | 62,468 | | | 96,400 | | Equity securities – dividends and other income | | 764 | | | 23 | | Income from (to) funds withheld at interest | | (135,632) | | | (216,057) | | Gross investment income | | 895,137 | | | 2,229,596 | | Less investment expenses: | | | | | Investment management and administration | | 88,789 | | | 190,458 | | Transportation and renewable energy asset depreciation and maintenance | | 47,331 | | | 117,749 | | Interest expense on derivative collateral and repurchase agreements | | 636 | | | 1,730 | | Net investment income | | $ | 758,381 | | | $ | 1,919,659 | |
NET INVESTMENT GAINS (LOSSES) - INSURANCE Net investment (losses) gains from insurance operations primarily consists out of (i) realized gains and (losses) from the disposal of investments, (ii) unrealized gains and (losses) from investments held for trading, equity securities, or with fair value remeasurements recognized in earnings as a result of the election of a fair-value option, (iii) unrealized gains and (losses) on funds withheld at interest, (iv) unrealized gains and (losses) from derivatives not designated in an hedging relationship, and (v) allowances for credit losses, and other impairments of investments.
Net investment gains (losses) were as follows: | | | | | | | | | | | | | | | Three Months Ended | | Nine Months Ended | | | September 30, 2021 | | September 30, 2021 | | | | | | Equity securities and other investments | | $ | 359,101 | | | $ | 431,728 | | Derivatives | | 40,792 | | | 70,098 | | Trading fixed maturity securities | | (141,683) | | | (197,047) | | Allowance for credit losses on mortgage and other loan receivables | | (69,386) | | | (250,690) | | AFS fixed maturity securities | | (15,231) | | | (88,233) | | Allowance for losses on AFS fixed maturity securities | | (3,809) | | | 21,287 | | Allowance for loan commitment losses provision | | (3,677) | | | (15,372) | | Mortgage and other loans receivables | | (2,905) | | | 15,527 | | Funds withheld receivable at interest | | (1,075) | | | 45,685 | | Net investment gains (losses) | | $ | 162,127 | | | $ | 32,983 | |
Allowance for credit losses
Available-for-sale fixed maturity securities
The table below presents a roll-forward of the allowance for credit losses recognized for available-for-sale fixed maturity securities held by Global Atlantic: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 | | | Corporate | | Structured | | Total | | Corporate | | Structured | | Total | | | | | | | | | | | | | | Balance, as of beginning of period(1) | | $ | — | | | $ | 91,646 | | | $ | 91,646 | | | $ | — | | | $ | 120,895 | | | $ | 120,895 | | Initial impairments for credit losses recognized on securities not previously impaired | | — | | | 19,921 | | | 19,921 | | | — | | | 47,530 | | | 47,530 | | Initial credit loss allowance recognized on PCD securities | | — | | | 1,576 | | | 1,576 | | | — | | | 7,204 | | | 7,204 | | Accretion of initial credit loss allowance on PCD securities | | — | | | 1,879 | | | 1,879 | | | — | | | 2,200 | | | 2,200 | | Reductions due to sales (or maturities, pay downs or prepayments) during the period of securities previously identified as credit impaired | | — | | | (2,510) | | | (2,510) | | | — | | | (12,612) | | | (12,612) | | | | | | | | | | | | | | | Net additions / reductions for securities previously impaired | | — | | | (16,112) | | | (16,112) | | | — | | | (68,817) | | | (68,817) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, as of end of period | | $ | — | | | $ | 96,400 | | | $ | 96,400 | | | $ | — | | | $ | 96,400 | | | $ | 96,400 | |
(1)Includes securities designated as purchased credit deteriorated as of the time of the acquisition of Global Atlantic.
Mortgage and other loan receivables
Changes in the allowance for credit losses on mortgage and other loan receivables held by Global Atlantic are summarized below:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 | | | Commercial Mortgage Loans | | Residential Mortgage Loans | | Consumer and Other Loan Receivables | | Total | | Commercial Mortgage Loans | | Residential Mortgage Loans | | Consumer and Other Loan Receivables | | Total | Balance, as of beginning of period (1) | | $ | 58,255 | | | $ | 76,536 | | | $ | 163,135 | | | $ | 297,926 | | | $ | 58,203 | | | $ | 62,056 | | | $ | — | | | $ | 120,259 | | Net provision (release) | | 17,750 | | | (2,793) | | | 54,429 | | | 69,386 | | | 17,802 | | | 10,888 | | | 222,000 | | | 250,690 | | Loans purchased with credit deterioration | | — | | | — | | | — | | | — | | | — | | | 799 | | | 838 | | | 1,637 | | Charge-offs | | — | | | (3,162) | | | 5,274 | | | 2,112 | | | — | | | (3,162) | | | — | | | (3,162) | | | | | | | | | | | | | | | | | | | Balance, as of end of period | | $ | 76,005 | | | $ | 70,581 | | | $ | 222,838 | | | $ | 369,424 | | | $ | 76,005 | | | $ | 70,581 | | | $ | 222,838 | | | $ | 369,424 | |
(1) Includes loans designated as purchased credit deteriorated as of the time of the acquisition of Global Atlantic. Proceeds and gross gains and losses from voluntary sales
The proceeds from voluntary sales and the gross gains and losses on those sales of AFS fixed maturity securities were as follows:
| | | | | | | | | | | | | | | | | Three Months Ended September 30, 2021 | | Nine Months Ended September 30, 2021 | AFS fixed maturity securities: | | | | | Proceeds from voluntary sales | | $ | 7,440,645 | | | $ | 12,766,887 | | Gross gains | | 16,816 | | | 38,061 | | Gross losses | | (30,086) | | | (103,190) | |
INSURANCE INTANGIBLES, UNEARNED REVENUE RESERVES AND UNEARNED FRONT-END LOADSThe following reflects the changes to the deferred policy acquisition costs ("DAC") asset: | | | | | | | | | | | Nine Months Ended | | | September 30, 2021 | Balance, as of GA Acquisition Date | | $ | — | | Acquisition/reinsurance | | 51,322 | | Deferrals | | 259,203 | | Amortized to expense during the period(1) | | (13,016) | | Adjustment for unrealized investment losses (gains) during the period | | 4,907 | | Balance, as of end of period | | $ | 302,416 | |
(1) These amounts are reported within amortization of policy acquisition costs in the consolidated statements of operations.
The following reflects the changes to the value of business acquired ("VOBA") asset: | | | | | | | | | | | Nine Months Ended | | | September 30, 2021 | Balance, as of GA Acquisition Date | | $ | 1,024,520 | | Amortized to expense during the period(1) | | (47,866) | | | | | Balance, as of end of period | | $ | 976,654 | |
(1) These amounts are reported within amortization of policy acquisition costs in the consolidated statements of operations.
The following reflects the changes to the negative VOBA liability:
| | | | | | | | | | | Nine Months Ended | | | September 30, 2021 | Balance, as of Acquisition Date | | $ | 1,273,414 | | Amortized to expense during the period(1) | | (118,291) | | Balance, as of end of period | | $ | 1,155,123 | |
(1) These amounts are reported within amortization of policy acquisition costs in the consolidated statements of operations.
The following reflects the changes to the unearned revenue reserve ("URR") and unearned front-end load ("UFEL):
| | | | | | | | | | | Nine Months Ended | | | September 30, 2021 | Balance, as of GA Acquisition Date | | $ | — | | Deferrals | | 41,000 | | Amortized to expense during the period(1) | | (1,302) | | Adjustment for unrealized investment losses during the period | | (4,100) | | Balance, as of end of period | | $ | 35,598 | |
(1) These amounts are reported within policy fees in the consolidated statements of operations.
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