NET INVESTMENT INCOME - INSURANCE |
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 June 30, | | Six Months Ended June 30, | | 2022 | | 2021 | | 2022 | | 2021 | Fixed maturity securities – interest and other income | $ | 745,346 | | | $ | 528,523 | | | $ | 1,436,639 | | | $ | 880,063 | | Mortgage and other loan receivables | 373,563 | | | 246,951 | | | 697,704 | | | 369,417 | | Investments in transportation and other leased assets | 66,714 | | | 52,944 | | | 134,393 | | | 89,687 | | Investments in renewable energy | 44,419 | | | 33,136 | | | 69,637 | | | 33,932 | | Investments in real estate | 29,954 | | | 4,443 | | | 33,857 | | | 5,527 | | Short-term and other investment income | 29,800 | | | 13,606 | | | 50,497 | | | 18,719 | | Income assumed from funds withheld receivable at interest | 23,497 | | | 19,640 | | | 43,102 | | | 33,113 | | Policy loans | 7,055 | | | 17,088 | | | 14,966 | | | 18,935 | | Equity securities – dividends and other income | — | | | (257) | | | — | | | (741) | | Income ceded to funds withheld payable at interest | (238,761) | | | (83,699) | | | (418,463) | | | (113,538) | | Gross investment income | 1,081,587 | | | 832,375 | | | 2,062,332 | | | 1,335,114 | | Less investment expenses: | | | | | | | | Investment management and administration | 95,656 | | | 67,723 | | | 208,787 | | | 101,669 | | Transportation and renewable energy asset depreciation and maintenance | 48,856 | | | 46,909 | | | 102,809 | | | 70,418 | | Interest expense on derivative collateral and repurchase agreements | 5,186 | | | 1,246 | | | 6,242 | | | 1,749 | | Net investment income | $ | 931,889 | | | $ | 716,497 | | | $ | 1,744,494 | | | $ | 1,161,278 | |
NET INVESTMENT-RELATED GAINS (LOSSES) - INSURANCE Net investment-related gains (losses) from insurance operations primarily consists of (i) realized gains and (losses) from the disposal of investments, (ii) unrealized gains and (losses) from investments held for trading, equity securities, real estate investments accounted for under investment company accounting, and investments 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-related gains (losses) were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | 2022 | | 2021 | | 2022 | | 2021 | Realized gains (losses) on equity investments | $ | — | | | $ | 22,882 | | | $ | — | | | $ | 25,125 | | Realized gains (losses) on available-for-sale fixed maturity debt securities | (287,373) | | | (27,634) | | | (530,723) | | | (73,274) | | Credit loss allowances on available-for-sale securities | (6,442) | | | 46,447 | | | (17,044) | | | 25,096 | | Credit loss allowances on mortgage and other loan receivables | (12,298) | | | 2,337 | | | (38,383) | | | (181,304) | | Allowances on unfunded commitments | (10,168) | | | 2,914 | | | (3,378) | | | (11,695) | | | | | | | | | | Unrealized gains (losses) on fixed maturity securities classified as trading | (989,678) | | | 319,942 | | | (2,028,124) | | | 2,890 | | Unrealized gains (losses) on investments recognized under the fair-value option | (38,435) | | | 59,587 | | | (40,928) | | | 47,421 | | Unrealized gains (losses) on real estate investments recognized at fair value under investment company accounting | 45,396 | | | 10,267 | | | 123,088 | | | 10,267 | | Net gains (losses) on derivative instruments | 855,366 | | | (119,226) | | | 1,715,100 | | | 29,306 | | Realized gains (losses) on funds withheld at interest, payable portfolio | 28,727 | | | (11,734) | | | 2,340 | | | (19,112) | | Realized gains (losses) on funds withheld at interest, receivable portfolio | (22,162) | | | 7,263 | | | 3,438 | | | 7,617 | | Other realized gains (losses) | 10,741 | | | 13,513 | | | 19,608 | | | 8,519 | | Net investment-related gains (losses) | $ | (426,326) | | | $ | 326,558 | | | $ | (795,006) | | | $ | (129,144) | |
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 fixed maturity securities held by Global Atlantic:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2022 | | Six Months Ended June 30, 2022 | | Corporate | | Structured | | Total | | Corporate | | Structured | | Total | Balance, as of beginning of period | $ | 5,000 | | | $ | 91,908 | | | $ | 96,908 | | | $ | 3,238 | | | $ | 84,895 | | | $ | 88,133 | | Initial impairments for credit losses recognized on securities not previously impaired | — | | | 20,197 | | | 20,197 | | | 122 | | | 35,955 | | | 36,077 | | Initial credit loss allowance recognized on purchased credit deteriorated ("PCD") securities | — | | | 567 | | | 567 | | | — | | | 707 | | | 707 | | Accretion of initial credit loss allowance on PCD securities | — | | | 391 | | | 391 | | | — | | | 868 | | | 868 | | Reductions due to sales (or maturities, pay downs or prepayments) during the period of securities previously identified as credit impaired | — | | | (2,015) | | | (2,015) | | | — | | | (4,459) | | | (4,459) | | | | | | | | | | | | | | Net additions / reductions for securities previously impaired | 2,842 | | | (16,597) | | | (13,755) | | | 4,482 | | | (23,515) | | | (19,033) | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, as of end of period | $ | 7,842 | | | $ | 94,451 | | | $ | 102,293 | | | $ | 7,842 | | | $ | 94,451 | | | $ | 102,293 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2021 | | Six Months Ended June 30, 2021 | | Corporate | | Structured | | Total | | Corporate | | Structured | | Total | Balance, as of beginning of period(1) | $ | — | | | $ | 140,252 | | | $ | 140,252 | | | $ | — | | | $ | 120,895 | | | $ | 120,895 | | Initial impairments for credit losses recognized on securities not previously impaired | — | | | 186 | | | 186 | | | — | | | 27,609 | | | 27,609 | | Initial credit loss allowance recognized on purchased credit deteriorated ("PCD") securities | — | | | 5,406 | | | 5,406 | | | — | | | 5,628 | | | 5,628 | | Accretion of initial credit loss allowance on PCD securities | — | | | — | | | — | | | — | | | 321 | | | 321 | | Reductions due to sales (or maturities, pay downs or prepayments) during the period of securities previously identified as credit impaired | — | | | (7,565) | | | (7,565) | | | — | | | (10,102) | | | (10,102) | | | | | | | | | | | | | | Net additions / reductions for securities previously impaired | — | | | (46,633) | | | (46,633) | | | — | | | (52,705) | | | (52,705) | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, as of end of period | $ | — | | | $ | 91,646 | | | $ | 91,646 | | | $ | — | | | $ | 91,646 | | | $ | 91,646 | |
(1)Includes securities designated as purchased credit impaired 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 June 30, 2022 | | Six Months Ended June 30, 2022 | | 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 | $ | 81,536 | | | $ | 87,583 | | | $ | 231,043 | | | $ | 400,162 | | | $ | 65,970 | | | $ | 72,082 | | | $ | 236,025 | | | $ | 374,077 | | Net provision (release) | 22,408 | | | 8,611 | | | (18,721) | | | 12,298 | | | 37,974 | | | 24,112 | | | (23,703) | | | 38,383 | | | | | | | | | | | | | | | | | | Charge-offs | — | | | — | | | (575) | | | (575) | | | — | | | — | | | (575) | | | (575) | | | | | | | | | | | | | | | | | | Balance, as of end of period | $ | 103,944 | | | $ | 96,194 | | | $ | 211,747 | | | $ | 411,885 | | | $ | 103,944 | | | $ | 96,194 | | | $ | 211,747 | | | $ | 411,885 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, 2021 | | Six Months Ended June 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) | $ | 80,056 | | | $ | 78,739 | | | $ | 145,105 | | | $ | 303,900 | | | $ | 58,203 | | | $ | 62,056 | | | $ | — | | | $ | 120,259 | | Net provision (release) | (21,801) | | | (3,002) | | | 22,466 | | | (2,337) | | | 52 | | | 13,681 | | | 167,571 | | | 181,304 | | Loans purchased with credit deterioration | — | | | 799 | | | 838 | | | 1,637 | | | — | | | 799 | | | 838 | | | 1,637 | | Charge-offs | — | | | — | | | (5,274) | | | (5,274) | | | — | | | — | | | (5,274) | | | (5,274) | | | | | | | | | | | | | | | | | | Balance, as of end of period | $ | 58,255 | | | $ | 76,536 | | | $ | 163,135 | | | $ | 297,926 | | | $ | 58,255 | | | $ | 76,536 | | | $ | 163,135 | | | $ | 297,926 | |
(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 available-for-sale ("AFS") fixed maturity securities were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended June 30, | | Six Months Ended June 30, | | 2022 | | 2021 | | 2022 | | 2021 | AFS fixed maturity securities: | | | | | | | | Proceeds from voluntary sales | $ | 3,933,957 | | | $ | 3,423,122 | | | $ | 10,062,242 | | | $ | 5,326,242 | | Gross gains | 1,254 | | | 16,469 | | | 10,196 | | | 21,245 | | Gross losses | (286,576) | | | (22,132) | | | (532,447) | | | (73,104) | |
INSURANCE INTANGIBLES, UNEARNED REVENUE RESERVES AND UNEARNED FRONT-END LOADSThe following reflects the changes to the deferred policy acquisition costs ("DAC") asset:
| | | | | | | | | | | | | Six Months Ended June 30, | | 2022 | | 2021 | Balance, as of beginning of period | $ | 447,886 | | | $ | — | | Acquisition/reinsurance | — | | | 1,271 | | Deferrals | 244,180 | | | 202,037 | | Amortized to expense during the period(1) | (40,781) | | | (5,331) | | Adjustment for unrealized investment-related losses (gains) during the period | (27,409) | | | 1,892 | | Balance, as of end of period | $ | 623,876 | | | $ | 199,869 | |
(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:
| | | | | | | | | | | | | Six Months Ended June 30, | | 2022 | | 2021 | Balance, as of beginning of period | $ | 959,263 | | | $ | 1,024,520 | | Amortized to expense during the period(1) | (34,232) | | | (30,247) | | | | | | Balance, as of end of period | $ | 925,031 | | | $ | 994,273 | |
(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:
| | | | | | | | | | | | | Six Months Ended June 30, | | 2022 | | 2021 | Balance, as of beginning of period | $ | 1,118,716 | | | $ | 1,273,414 | | Amortized to expense during the period(1) | (69,542) | | | (76,087) | | Balance, as of end of period | $ | 1,049,174 | | | $ | 1,197,327 | |
(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):
| | | | | | | | | | | | | Six Months Ended June 30, | | 2022 | | 2021 | Balance, as of beginning of period | $ | 33,603 | | | $ | — | | Deferrals | 34,753 | | | 25,004 | | Amortized to revenue during the period(1) | (14,076) | | | (1,508) | | Adjustment for unrealized investment-related gains during the period | (54,280) | | | (434) | | Balance, as of end of period | $ | — | | | $ | 23,062 | |
(1) These amounts are reported within policy fees in the consolidated statements of operations.
|