Trillium Variable Annuity Account of Great-West Life & Annuity Insurance Company

Annual Statement as of and for the Year Ended December 31, 2020 and Report of Independent Registered Public Accounting Firm

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Contract Owners of Trillium Variable Annuity Account and the Board of Directors of Great-West Life & Annuity Insurance Company

Opinion on the Financial Statements

We have audited the accompanying statements of assets and liabilities of the investment divisions listed in Appendix A of the Trillium Variable Annuity Account of Great-West Life & Annuity Insurance Company (the “Series Account”) as of December 31, 2020, the related statements of operations and changes in net assets for the periods indicated in Appendix A, and the related notes. In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the investment divisions constituting the Series Account as of December 31, 2020, and the results of their operations and the changes in their net assets for each of the periods indicated in Appendix A, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Series Account’s management. Our responsibility is to express an opinion on the Series Account’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Series Account in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Series Account is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Series Account’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with mutual fund companies. We believe that our audits provide a reasonable basis for our opinion.

/s/ DELOITTE & TOUCHE LLP

Denver, Colorado

May 3, 2021

We have served as the auditor of one or more Great-West investment company separate accounts since 1981.

TRILLIUM VARIABLE ANNUITY ACCOUNT OF GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Report of Independent Registered Public Accounting Firm

APPENDIX A

Investment division	Statement of assets and liabilities	Statement of operations	Statements of changes in net assets
COLUMBIA VARIABLE PORTFOLIO - MID CAP GROWTH FUND	December 31, 2020	For the year ended December 31, 2020	For each of the two years in the period ended December 31, 2020
COLUMBIA VARIABLE PORTFOLIO - SELECT LARGE-CAP VALUE FUND	December 31, 2020	For the year ended December 31, 2020	For each of the two years in the period ended December 31, 2020
COLUMBIA VARIABLE PORTFOLIO - SELECT SMALLER-CAP VALUE FUND	December 31, 2020	For the year ended December 31, 2020	For each of the two years in the period ended December 31, 2020
COLUMBIA VARIABLE PORTFOLIO - SELIGMAN GLOBAL TECHNOLOGY FUND	December 31, 2020	For the year ended December 31, 2020	For each of the two years in the period ended December 31, 2020
GREAT-WEST BOND INDEX FUND	December 31, 2020	For the year ended December 31, 2020	For each of the two years in the period ended December 31, 2020
GREAT-WEST GOVERNMENT MONEY MARKET FUND	December 31, 2020	For the year ended December 31, 2020	For each of the two years in the period ended December 31, 2020
GREAT-WEST INTERNATIONAL GROWTH FUND	December 31, 2020	For the year ended December 31, 2020	For each of the two years in the period ended December 31, 2020

TRILLIUM VARIABLE ANNUITY ACCOUNT OF

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

STATEMENT OF ASSETS AND LIABILITIES

DECEMBER 31, 2020

	INVESTMENT DIVISIONS
	COLUMBIA VARIABLE PORTFOLIO - MID CAP GROWTH FUND		COLUMBIA VARIABLE PORTFOLIO - SELECT LARGE CAP VALUE FUND		COLUMBIA VARIABLE PORTFOLIO - SELECT SMALLER-CAP VALUE FUND		COLUMBIA VARIABLE PORTFOLIO - SELIGMAN GLOBAL TECHNOLOGY FUND		GREAT-WEST BOND INDEX FUND		GREAT-WEST GOVERNMENT MONEY MARKET FUND		GREAT-WEST INTERNATIONAL GROWTH FUND
ASSETS:
Investments at fair value (1)	$	2,803,172	$	2,064,878	$	790,366	$	48,575,217	$	441,234	$	3,898,741	$	346,025
Total assets	2,803,172		2,064,878		790,366		48,575,217		441,234		3,898,742		346,025
LIABILITIES:
Payable on units of the account	94		66		24		1,481		16		154		12
Other payables	94		66		24		1,481		16		154		12
Total liabilities	188		132		48		2,962		32		308		24
NET ASSETS	$	2,802,985	$	2,064,746	$	790,318	$	48,572,255	$	441,201	$	3,898,434	$	346,001
NET ASSETS REPRESENTED BY:
Accumulation units	$	2,802,985	2,064,746		$	790,318	$	48,572,255	$	441,201	$	3,898,434	$	346,001
ACCUMUALATION UNITS OUTSTANDING	15,544		87,062		39,827		329,638		36,208		431,965		15,570
UNIT VALUE (ACCUMULATION)	$	180.34	$	23.72	$	19.84	147.36		$	12.19	$	9.03	$	22.22
(1) Cost of investments:	$	1,264,898	$	1,138,865	$	468,640	$	31,352,512	$	418,825	$	3,898,741	$	264,058
Shares of investments:	62,348		69,689		28,930		1,539,627		29,182		3,898,741		21,532
The accompanying notes are an integral part of these financial statements.													(Concluded)

TRILLIUM VARIABLE ANNUITY ACCOUNT OF

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2020

	INVESTMENT DIVISIONS
	COLUMBIA VARIABLE PORTFOLIO - MID CAP GROWTH FUND			COLUMBIA VARIABLE PORTFOLIO - SELECT LARGE CAP VALUE FUND			COLUMBIA VARIABLE PORTFOLIO - SELECT SMALLER-CAP VALUE FUND			COLUMBIA VARIABLE PORTFOLIO - SELIGMAN GLOBAL TECHNOLOGY FUND			GREAT-WEST BOND INDEX FUND		GREAT-WEST GOVERNMENT MONEY MARKET FUND
INVESTMENT INCOME:
Dividends	$			$			$			$	0		$	6,416	$	10,627
EXPENSES:
Mortality and expense risk	24,244			18,108			7,118			379,030			4,658		41,087
NET INVESTMENT INCOME (LOSS)	(24,244		)	(18,108		)	(7,118		)	(379,030		)	1,759		(30,460		)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on sale of fund shares	259,322			161,534			66,464			22,878			9,506		(13,564		)
Realized gain distributions										2,979,486			5,883
Net realized gain (loss) on investments	259,322			161,534			66,464			3,002,364			15,389		(13,564		)
Change in net unrealized appreciation (depreciation) on investments	483,575			(70,364		)	(50,483		)	12,314,338			7,470		0
Net realized and unrealized gain (loss) on investments	742,897			91,170			15,981			15,316,701			22,859		(13,563		)
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	718,653		$	73,062		$	8,864		$	14,937,671		$	24,618	$	(44,024	)

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

TRILLIUM VARIABLE ANNUITY ACCOUNT OF

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

STATEMENT OF OPERATIONS

YEAR ENDED DECEMBER 31, 2020

	INVESTMENT DIVISIONS
	GREAT-WEST INTERNATIONAL GROWTH FUND
INVESTMENT INCOME:
Dividends	$
EXPENSES:
Mortality and expense risk	2,859
NET INVESTMENT INCOME (LOSS)	(2,859		)
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on sale of fund shares	334
Realized gain distributions	3,022
Net realized gain (loss) on investments	3,356
Change in net unrealized appreciation (depreciation)  on investments	70,464
Net realized and unrealized gain (loss) on investments	73,820
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS	$	70,961

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

TRILLIUM VARIABLE ANNUITY ACCOUNT OF

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

STATEMENT OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31, 2020 AND 2019

	INVESTMENT DIVISIONS
	COLUMBIA VARIABLE PORTFOLIO - MID CAP GROWTH FUND						COLUMBIA VARIABLE PORTFOLIO - SELECT LARGE CAP VALUE FUND						COLUMBIA VARIABLE PORTFOLIO - SELECT SMALLER-CAP VALUE FUND
	2020			2019			2020			2019			2020			2019
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss)	$	(24,244	)	$	(29,887	)	$	(18,108	)	$	(26,473	)	$	(7,118	)	$	(12,952	)
Net realized gain (loss) on investments	259,322			95,990			161,534			129,075			66,464			70,211
Change in net unrealized appreciation (depreciation) on investments	483,575			513,637			(70,364		)	320,512			(50,483		)	82,287
Increase (decrease) in net assets resulting from operations	718,653			579,740			73,062			423,114			8,864			139,546
CONTRACT TRANSACTIONS:
Proceeds from units sold	120			220
Transfers for contract benefits and terminations	(241,603		)	(118,112		)	(217,126		)	(85,061		)	(94,142		)	(62,391		)
Net transfers	(102,117		)	222,400			89,412			42,850			(49,436		)	(34,172		)
Contract maintenance charges	(68		)	(732		)	(84		)	(935		)	(65		)	(530		)
Increase (decrease) in net assets resulting from contract transactions	(343,668		)	103,776			(127,799		)	(43,146		)	(143,642		)	(97,093		)
Total increase (decrease) in net assets	374,985			683,516			(54,736		)	379,968			(134,779		)	42,453
NET ASSETS:
Beginning of period	2,428,000			1,744,484			2,119,482			1,739,514			925,097			882,644
End of period	$	2,802,985		$	2,428,000		$	2,064,746		$	2,119,482		$	790,318		$	925,097
CHANGES IN UNITS OUTSTANDING:
Units issued	1,142			2,343			9,220			8,782			1,775			2,352
Units redeemed	(3,577		)	(1,583		)	(16,521		)	(11,219		)	(12,141		)	(7,761		)
Net increase (decrease)	(2,436		)	760			(7,301		)	(2,437		)	(10,366		)	(5,409		)

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

TRILLIUM VARIABLE ANNUITY ACCOUNT OF

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

STATEMENT OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31, 2020 AND 2019

	INVESTMENT DIVISIONS
	COLUMBIA VARIABLE PORTFOLIO -SELIGMAN GLOBAL TECHNOLOGY FUND						GREAT-WEST BOND INDEX FUND						GREAT-WEST GOVERNMENT MONEY MARKET FUND
	2020			2019			2020			2019			2020			2019
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss)	$	(379,030	)	$	(452,344	)	$	1,759		$	(2,153	)	$	(30,460	)	$	12,763
Net realized gain (loss) on investments	3,002,364			4,824,976			15,389			20,553			(13,564		)
Change in net unrealized appreciation (depreciation) on investments	12,314,338			9,072,390			7,470			16,055			0
Increase (decrease) in net assets resulting from operations	14,937,672			13,445,022			24,618			34,455			(44,024		)	12,763
CONTRACT TRANSACTIONS:
Proceeds from units sold	5,812			7,169									358			3,283
Transfers for contract benefits and terminations	(2,574,336		)	(2,931,167		)	(23,907		)				(470,847		)	(229,030		)
Net transfers	(823,033		)	(65,090		)	(14,273		)	(18,031		)	754,920			96,686
Contract maintenance charges	(615		)	(3,374		)	(75		)	(212		)	(305		)	(1,843		)
Increase (decrease) in net assets resulting from contract transactions	(3,392,173		)	(2,992,462		)	(38,255		)	(18,243		)	284,126			(130,904		)
Total increase (decrease) in net assets	11,545,499			10,452,560			(13,637		)	16,212			240,102			(118,141		)
NET ASSETS:
Beginning of period	37,026,756			26,574,196			454,838			438,626			3,658,332			3,776,473
End of period	$	48,572,255		$	37,026,756		$	441,201		454,838			$	3,898,434		3,658,332
CHANGES IN UNITS OUTSTANDING:
Units issued	3,210			1,777			9,029			24,430			124,154			12,859
Units redeemed	(35,788		)	(37,711		)	(12,267		)	(25,530		)	(93,027		)	(27,214		)
Net increase (decrease)	(32,578		)	(35,934		)	(3,238		)	(1,100		)	31,128			(14,355		)

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

TRILLIUM VARIABLE ANNUITY ACCOUNT OF

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

STATEMENT OF CHANGES IN NET ASSETS

YEARS ENDED DECEMBER 31, 2020 AND 2019

	INVESTMENT DIVISIONS
	GREAT-WEST INTERNATIONAL  GROWTH FUND
	2020			2019
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss)	$	(2,859	)	$	(2,589	)
Net realized gain (loss) on investments	3,356			(3,676		)
Change in net unrealized appreciation (depreciation) on investments	70,464			65,087
Increase (decrease) in net assets resulting from operations	70,961			58,822
CONTRACT TRANSACTIONS:
Proceeds from units sold
Transfers for contract benefits and terminations	(20,608		)	(23,086		)
Net transfers	13,222			57,819
Contract maintenance charges	(7		)	(63		)
Increase (decrease) in net assets resulting from contract transactions	(7,393		)	34,670
Total increase (decrease) in net assets	63,568			93,492
NET ASSETS:
Beginning of period	282,433			188,941
End of period	$	346,001		$	282,433
CHANGES IN UNITS OUTSTANDING:
Units issued	851			3,385
Units redeemed	(1,366		)	(1,526		)
Net increase (decrease)	(515		)	1,859

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

TRILLIUM VARIABLE ANNUITY ACCOUNT OF

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2020

1.ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

The Trillium Variable Annuity Account (the Series Account), formerly, Variable Annuity Account 2 Series Account, a separate account of Great-West Life & Annuity Insurance Company (the Company), is registered as a unit investment trust under the Investment Company Act of 1940, as amended, and exists in accordance with regulations of the Colorado Division of Insurance. It was established to receive and invest premium payments under variable annuity policies that are no longer being sold. The Series Account consists of numerous investment divisions (Investment Divisions), each being treated as an individual accounting entity for financial reporting purposes, and each investing all of its investible assets in the named underlying mutual fund. There are currently no participants receiving an annuity payout.

Under applicable insurance law, the assets and liabilities of each of the Investment Divisions of the Series Account are clearly identified and distinguished from the Company’s other assets and liabilities. The portion of the Series Account’s assets applicable to the reserves and other contract liabilities with respect to the Series Account is not chargeable with liabilities arising out of any other business the Company may conduct.

The outbreak of the novel strain of coronavirus, specifically identified as ‘COVID-19’, has resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which include the implementation of travel bans, self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Investment Divisions in future periods.

The preparation of financial statements and financial highlights of each of the Investment Divisions in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and financial highlights and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Series Account is an investment company and, therefore, applies specialized accounting guidance in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 “Financial Services — Investment Companies” (ASC Topic 946). The following is a summary of the significant accounting policies of the Series Account.

Security Valuation

Mutual fund investments held by the Investment Divisions are valued at the reported net asset values of such underlying mutual funds, which value their investment securities at fair value.

The Series Account classifies its valuations into three levels based upon the observability of inputs to the valuation of the Series Account’s investments. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. Classification is based on the lowest level of input significant to the fair value measurement. The three levels are defined as follows:

Level 1 — Unadjusted quoted prices for identical securities in active markets.

Level 2 — Inputs other than quoted prices included in Level 1 that are observable either directly or indirectly. These may include quoted prices for similar assets in active markets.

Level 3 — Unobservable inputs to the extent observable inputs are not available and may include prices obtained from single broker quotes. Unobservable inputs reflect the reporting entity’s own assumptions and would be based on the best information available under the circumstances.

As of December 31, 2020, the only investments of each of the Investment Divisions of the Series Account were in underlying mutual funds that are actively traded, therefore 100% of the investments are valued using Level 1 inputs.

Fund of Funds Structure Risk

Since the Series Account invests directly in underlying funds, all risks associated with the eligible underlying funds apply to the Series Account. To the extent the Series Account invests more of its assets in one underlying fund than another, the Series Account will have greater exposure to the risks of the underlying fund.

Security Transactions and Investment Income

Transactions are recorded on the trade date. Realized gains and losses on sales of investments are determined on the basis of identified cost. Dividend income is recorded on the ex-dividend date and the amounts distributed to the Investment Division for its share of dividends are reinvested in additional full and fractional shares of the related mutual funds.

Federal Income Taxes

The operations of each of the Investment Divisions of the Series Account are included in the federal income tax return of the Company, which is taxed as a life insurance company under the provisions of the Internal Revenue Code (IRC). The Company is included in the consolidated federal tax return of Great-West Lifeco U.S. Inc. Under the current provisions of the IRC, the Company does not expect to incur federal income taxes on the earnings of each of the Investment Divisions of the Series Account to the extent the earnings are credited under the contracts. Based on this, no charge is being made currently to the Series Account for federal income taxes. The Company will periodically review the status of the federal income tax policy in the event of changes in the tax law. A charge may be made in future years for any federal income taxes that would be attributable to the contracts.

Proceeds from Units Sold

Proceeds from units sold from contract owners by the Company are credited as accumulation units, and are reported as Contract Transactions on the Statement of Changes in Net Assets of the applicable Investment Divisions.

Net Transfers

Net transfers include transfers between Investment Divisions of the Series Account as well as transfers between other investment options of the Company, not included in the Series Account.

2.PURCHASES AND SALES OF INVESTMENTS

The cost of purchases and proceeds from sales of investments for the year ended December 31, 2020 were as follows:

Investment Division	Purchases		Sales
Columbia Variable Portfolio - Mid Cap Growth Fund	$	164,632	$	532,823
Columbia Variable Portfolio - Select Large-Cap Value Fund	183,053		329,233
Columbia Variable Portfolio - Select Smaller-Cap Value Fund	29,980		180,869
Columbia Variable Portfolio - Seligman Global Technology Fund	3,291,243		4,087,110
Great-West Bond Index Fund	110,290		149,740
Great-West Government Money Market Fund	1,139,142		885,846
Great-West International Growth Fund	16,335		26,617

3.EXPENSES AND RELATED PARTY TRANSACTIONS

Contract Maintenance Charges

The Company deducts an annual maintenance charge of $30, which is made directly to contract owner accounts through the redemption of units, for each contract. The maintenance charge, which is recorded as Contract maintenance charges in the accompanying Statement of Changes in Net Assets of the applicable Investment Divisions, is waived on certain contracts.

Deductions for Premium Taxes

The Company deducts from each contribution any applicable state premium tax, which currently range from 0% to 3.5%. This charge is netted with Proceeds from units sold on the Statement of Changes in Net Assets of the applicable Investment Divisions.

Charges Incurred for Surrenders

The Company may deduct from each participant’s account a maximum fee of 6% of an amount withdrawn that is deemed to be premium. This charge is recorded as Transfers for contract benefits and terminations on the Statement of Changes in Net Assets of the applicable Investment Divisions.

Transfer Fees

The Company deducts from each participant’s account a fee of $25 for each transfer between Investment Divisions in excess of 12 transfers in any calendar year. This charge is recorded as Transfers for contract benefits and terminations on the Statement of Changes in Net Assets of the applicable Investment Divisions.

Deductions for Assumption of Mortality and Expense Risks

The Company assumes mortality and expense risks related to the operations of the Series Account and it deducts a daily charge equal to an effective annual rate of 1.25% of the unit value of each Investment Division. In addition, an effective annual rate of 0.15% of each Investment Division is deducted as daily administration fees. These charges are recorded as Mortality and expense risk in the Statement of Operations of the applicable Investment Divisions.

Related Party Transactions

Great-West Funds, Inc., funds of which are underlying certain Investment Divisions, is a registered investment company affiliated with the Company. Great-West Capital Management, LLC (GWCM), a wholly owned subsidiary of the Company, serves as investment adviser to Great-West Funds, Inc. Fees are assessed against the average daily net assets of the portfolios of Great-West Funds, Inc. to compensate GWCM for investment advisory services.

4.SUBSEQUENT EVENTS

Management has reviewed all events subsequent to December 31, 2020 including the estimates inherent in the process of preparing these financial statements through the date the financial statements were issued, May 3, 2021. No subsequent events requiring adjustments or disclosures have occurred.

5.FINANCIAL HIGHLIGHTS

For each Investment Division, the accumulation units outstanding, net assets, investment income ratio, expense ratio (excluding expenses of the underlying funds), total return and accumulation unit fair values for each year or period ended December 31 are included on the following pages. The unit values in the Financial Highlights are calculated based on the net assets and accumulation units outstanding as of December 31 of each year presented and may differ from the unit value reflected on the Statement of Assets and Liabilities due to rounding.

The Expense Ratio represents the annualized contract expenses of the respective Investment Divisions of the Series Account, consisting of mortality and expense charges, for each period indicated. The ratio includes only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund have been excluded.

The Total Return amounts represent the total return for the periods indicated, including changes in the value of the underlying fund and expenses assessed through the reduction of unit values. These returns do not include any expenses assessed through the redemption of units. When a new Investment Division is added to the Series Account, the calculation of the total return is for the period of operations as presented in the Statement of Operations for each Investment Division.

The Investment Income Ratio represents the dividends, excluding distributions of capital gains, received by the Investment Division from the underlying mutual fund divided by average net assets during the period. It is not annualized for periods less than one year. The ratio excludes those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the Investment Division is affected by the timing of the declaration of dividends by the underlying fund in which the Investment Division invests.

TRILLIUM VARIABLE ANNUITY ACCOUNT OF

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

FINANCIAL HIGHLIGHTS	At December 31					For the year or period ended December 31
INVESTMENT DIVISIONS	Units (000s)	Unit Fair Value		Net Assets (000s)		Investment Income Ratio		Expense Ratio		Total Return
COLUMBIA VARIABLE PORTFOLIO - MID CAP GROWTH FUND
2020	16	$	180.34	$	2,803	0.00	%	1.40	%	33.54	%
2019	18	$	135.04	$	2,428	0.00	%	1.40	%	33.30	%
2018	17	$	101.31	$	1,744	0.00	%	1.40	%	(6.1	)%
2017	19	$	107.89	$	2,080	0.00	%	1.40	%	21.28	%
2016	20	$	88.96	$	1,799	0.00	%	1.40	%	0.87	%
COLUMBIA VARIABLE PORTFOLIO - SELECT LARGE-CAP VALUE FUND
2020	87	$	23.72	$	2,065	0.00	%	1.40	%	5.60	%
2019	94	$	22.46	$	2,119	0.00	%	1.40	%	24.99	%
2018	97	$	17.97	$	1,740	0.00	%	1.40	%	(13.45	)%
2017	99	$	20.76	$	2,066	0.00	%	1.40	%	19.29	%
2016	113	$	17.41	$	1,975	0.00	%	1.40	%	18.30	%
COLUMBIA VARIABLE PORTFOLIO - SELECT SMALLER-CAP VALUE FUND
2020	40	$	19.84	$	790	0.00	%	1.40	%	7.68	%
2019	50	$	18.43	$	925	0.00	%	1.40	%	16.11	%
2018	56	$	15.87	$	883	0.00	%	1.40	%	(13.81	)%
2017	58	$	18.42	$	1,077	0.00	%	1.40	%	10.73	%
2016	78	$	16.63	$	1,301	0.00	%	1.40	%	12.37	%
COLUMBIA VARIABLE PORTFOLIO - SELIGMAN GLOBAL TECHNOLOGY FUND
2020	330	$	147.36	$	48,572	0.00	%	1.40	%	44.16	%
2019	362	$	102.22	$	37,027	0.00	%	1.40	%	53.16	%
2018	398	$	66.74	$	26,574	0.00	%	1.40	%	(9.44	)%
2017	427	$	73.70	$	31,439	0.00	%	1.40	%	33.34	%
2016	451	$	55.27	$	24,927	0.00	%	1.40	%	17.73	%
GREAT-WEST BOND INDEX FUND
2020	36	$	12.19	$	441	1.57	%	1.40	%	5.69	%
2019	39	$	11.53	$	455	1.02	%	1.40	%	6.59	%
2018	41	$	10.82	$	439	1.34	%	1.40	%	(1.8	)%
2017	42	$	11.02	$	467	1.05	%	1.40	%	1.62	%
2016	41	$	10.84	$	445	0.96	%	1.40	%	0.53	%
GREAT-WEST GOVERNMENT MONEY MARKET FUND
2020	432	$	9.03	$	3,899	0.28	%	1.40	%	(1.14	)%
2019	401	$	9.13	$	3,658	1.74	%	1.40	%	0.34	%
2018	415	$	9.10	$	3,776	1.38	%	1.40	%	(0.02	)%
2017	410	$	9.10	$	3,726	0.40	%	1.40	%	(0.99	)%
2016	443	$	9.19	$	4,068	0.00	%	1.40	%	(1.38	)%
GREAT-WEST INTERNATIONAL GROWTH FUND
2020	16	$	22.22	$	346	0.00	%	1.40	%	26.56	%
2019	16	$	17.56	$	282	0.16	%	1.40	%	32.21	%
2018	14	$	13.28	$	189	0.00	%	1.40	%	(18.04	)%
2017	12	$	16.20	$	186	1.24	%	1.40	%	24.87	%
2016	8	$	12.98	$	100	0.22	%	1.40	%	(1.68	)%

AUDITED FINANCIAL REPORT

Great-West Life & Annuity

Audited Annual Statutory Report

Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus as of December 31, 2020 and 2019 and

Related Statutory Statements of Operations

Changes in Capital and Surplus and Cash Flows for Each of the Three Years in the Period Ended December 31, 2020 and Report of Independent Registered Public Accounting Firm

Index to Financial Statements, Notes, and Schedules

	Page   Number
Independent Auditors’ Report	3
Statutory Financial Statements at December 31, 2020, and 2019 and for the Years Ended December 31, 2020, 2019, and 2018
Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus	5
Statutory Statements of Operations	7
Statutory Statements of Changes in Capital and Surplus	8
Statutory Statements of Cash Flows	9
Notes to the Statutory Financial Statements	11
Note 1 - Organization and Significant Accounting Policies	11
Note 2 - Accounting Changes	24
Note 3 - Related Party Transactions	24
Note 4 - Summary of Invested Assets	27
Note 5 - Fair Value Measurements	37
Note 6 - Non-Admitted Assets	41
Note 7 - Premiums Deferred and Uncollected	42
Note 8 - Business Combination and Goodwill	42
Note 9 - Reinsurance	42
Note 10 - Aggregate Reserves	47
Note 11 - Liability for Unpaid Claims and Claim Adjustment Expenses	50
Note 12 - Commercial Paper	50
Note 13 - Separate Accounts	50
Note 14 - Capital and Surplus, Dividend Restrictions, and Other Matters	54
Note 15 - Federal Income Taxes	56
Note 16 - Employee Benefit Plans	61
Note 17 - Share-based Compensation	65
Note 18 - Participating Insurance	68
Note 19 - Concentrations	68
Note 20 - Commitments and Contingencies	68
Note 21 - Subsequent Events	70
Supplemental Schedules	71

2

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors and Stockholder of

Great-West Life & Annuity Insurance Company

Greenwood Village, Colorado

We have audited the accompanying statutory-basis financial statements of Great-West Life & Annuity Insurance Company (the “Company”) (a wholly-owned subsidiary of GWL&A Financial Inc.), which comprise the statutory statements of admitted assets, liabilities, and capital and surplus as of December 31, 2020 and 2019, and the related statutory statements of operations, changes in capital and surplus, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes to the statutory-basis financial statements.

Management’s Responsibility for the Statutory-Basis Financial Statements

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

Auditors’ Responsibility

Our responsibility is to express an opinion on these statutory-basis financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statutory-basis financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the statutory-basis financial statements. The procedures selected depend on the auditor’s judgment including the assessment of the risks of material misstatement of the statutory-basis financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the statutory-basis financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the statutory-basis financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis for Adverse Opinion on Accounting Principles Generally Accepted in the United States of America

As described in Note 1 to the statutory-basis financial statements, the statutory-basis financial statements are prepared by the Company using the accounting practices prescribed or permitted by the Colorado Division of Insurance, which is a basis of accounting other than accounting principles generally accepted in the United States of America, to meet the requirements of the Colorado Division of Insurance.

The effects on the statutory-basis financial statements of the variances between the statutory-basis of accounting described in Note 1 to the statutory-basis financial statements and accounting

3

principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.

Adverse Opinion on Accounting Principles Generally Accepted in the United States of America

In our opinion, because of the significance of the matter described in the Basis for Adverse Opinion on Accounting Principles Generally Accepted in the United States of America paragraph, the statutory-basis financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of Great-West Life & Annuity Insurance Company as of December 31, 2020 and 2019, or the results of its operations or its cash flows for each of the three years in the period ended December 31, 2020.

Opinion on Statutory Basis of Accounting

In our opinion, the statutory-basis financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities, and capital and surplus of Great-West Life & Annuity Insurance Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years ended December 31, 2020, in accordance with accounting practices prescribed or permitted by the Colorado Division of Insurance, as described in Note 1 to the statutory-basis financial statements.

Emphasis of Matter

The Company engages in various related-party transaction with affiliates under common control as discussed in Note 1 to the statutory financial statements. The accompanying statutory financial statements are not necessarily indicative of the conditions that would have existed or the results of operations that would prevail if the Company had been operated as an unaffiliated company. Our opinion is not modified with respect to this matter.

Report on Supplemental Schedules

Our 2020 audit was conducted for the purpose of forming an opinion on the 2020 statutory-basis financial statements as a whole. The supplemental schedule of investment risk interrogatories, the supplemental summary investment schedule, the supplemental schedule of selected financial data, and the supplemental schedule regarding reinsurance contracts with risk-limiting features as of and for the year ended December 31, 2020 are presented for purposes of additional analysis and are not a required part of the 2020 statutory-basis financial statements. These schedules are the responsibility of the Company’s management and were derived from and relate directly to the underlying accounting and other records used to prepare the statutory-basis financial statements. Such schedules have been subjected to the auditing procedures applied in our audit of the 2020 statutory-basis financial statements and certain additional procedures, including comparing and reconciling such schedules directly to the underlying accounting and other records used to prepare the statutory-basis financial statements or to the statutory-basis financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, such schedules are fairly stated in all material respects in relation to the 2020 statutory-basis financial statements as a whole.

/s/ DELOITTE & TOUCHE LLP

Denver, Colorado

April 1, 2021

We have served as the Company’s auditor since 1981

4

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus

December 31, 2020 and 2019

(In Thousands, Except Share Amounts)

	December 31,
	2020		2019
Admitted assets:
Cash and invested assets:
Bonds	$	25,712,083	$	13,803,525
Preferred stock		119,687		—
Common stock		223,883		144,888
Mortgage loans (net of allowances of $745 and $745)		4,123,666		2,692,690
Real estate occupied by the company		41,951		43,283
Real estate held for the production of income		1,825		1,365
Contract loans		3,874,206		3,995,291
Cash, cash equivalents and short-term investments		3,470,914		818,328
Securities lending collateral assets		206,811		303,282
Other invested assets		750,477		402,891
Total cash and invested assets		38,525,503		22,205,543
Investment income due and accrued		267,276		192,278
Premiums deferred and uncollected		16,256		15,199
Reinsurance recoverable		80,249		37,806
Funds held or deposited with reinsured companies		6,760,741		—
Current federal income taxes recoverable		70,655		44,457
Deferred income taxes		125,959		97,203
Due from parent, subsidiaries and affiliates		94,584		63,595
Other assets		669,038		490,832
Assets from separate accounts		28,455,204		25,634,438
Total admitted assets	$	75,065,465	$	48,781,351

See notes to statutory financial statements. Continued

5

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus

December 31, 2020 and 2019

(In Thousands, Except Share Amounts)

	December 31,
	2020			2019
Liabilities, capital and surplus:
Liabilities:
Aggregate reserves for life policies and contracts	$	36,087,118		$	19,638,498
Liability for deposit-type contracts		5,215,962			60,296
Life and accident and health policy and contract claims		65,785			44,258
Provision for policyholders’ dividends		18,324			24,111
Liability for premiums received in advance		2			2
Unearned investment income		121			59
Asset valuation reserve		202,003			194,032
Interest maintenance reserve		678,773			(2,006	)
Due to parent, subsidiaries and affiliates		16,578			77,613
Commercial paper		98,983			99,900
Payable under securities lending agreements		206,811			303,282
Other liabilities		1,858,504			1,265,123
Liabilities from separate accounts		28,455,194			25,634,428
Total liabilities		72,904,158			47,339,596
Commitments and contingencies (see Note 20)
Capital and surplus:
Preferred stock, $1 par value, 50,000,000 shares authorized; none issued and outstanding		—			—
Common stock, $1 par value; 50,000,000 shares authorized; 16,859,018 shares issued and outstanding		16,859			7,320
Surplus notes		921,980			395,811
Gross paid in and contributed surplus		3,782,019			714,300
Unassigned funds		(2,559,551	)		324,324
Total capital and surplus		2,161,307			1,441,755
Total liabilities, capital and surplus	$	75,065,465		$	48,781,351

See notes to statutory financial statements. Concluded

6

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Statutory Statements of Operations

Years Ended December 31, 2020, 2019 and 2018

(In Thousands)

	Year Ended December 31,
	2020			2019			2018
Income:
Premium income and annuity consideration	$	12,831,872		$	(5,366,421	)	$	7,592,609
Net investment income		948,344			1,099,451			1,307,387
Amortization of interest maintenance reserve		39,141			8,280			24,863
Commission and expense allowances on reinsurance ceded		172,698			265,105			5,211
Fee income from separate accounts		62,302			101,629			160,573
Reserve adjustment on reinsurance ceded		7,157,573			(592,883	)		(1,975,763	)
Miscellaneous income		41,467			267,637			250,272
Total income		21,253,397			(4,217,202	)		7,365,152
Expenses:
Death benefits		92,253			204,509			380,057
Annuity benefits		95,252			155,286			228,530
Disability benefits and benefits under accident and health policies		76			17,762			41,719
Surrender benefits		3,842,313			4,403,521			5,895,938
Increase (decrease) in aggregate reserves for life and accident and health policies and contracts		16,448,620			(8,139,385	)		917,510
Other benefits		8,722			6,208			10,528
Total benefits		20,487,236			(3,352,099	)		7,474,282
Commissions		2,222,528			162,942			196,489
Other insurance expenses		371,028			496,310			488,250
Net transfers from separate accounts		(809,028	)		(1,328,143	)		(1,112,465	)
Interest maintenance reserve reinsurance activity		661,450			(512,033	)		—
Total benefit and expenses		22,933,214			(4,533,023	)		7,046,556
Net (loss) gain from operations before dividends to policyholders, federal income taxes and realized capital gains (losses)		(1,679,817	)		315,821			318,596
Dividends to policyholders		18,497			23,461			31,276
Net (loss) gain from operations after dividends to policyholders and before federal income taxes and net realized capital gains (losses)		(1,698,314	)		292,360			287,320
Federal income tax (benefit) expense		(20,260	)		(98,467	)		(17,604	)
Net (loss) gain from operations before net realized capital gains (losses)		(1,678,054	)		390,827			304,924
Net realized capital (losses) gains less capital gains tax and transfers to interest maintenance reserve		(16,958	)		(8,022	)		10,576
Net (loss) income	$	(1,695,012	)	$	382,805		$	315,500

See notes to statutory financial statements.

7

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Statutory Statements of Changes in Capital and Surplus

Years Ended December 31, 2020, 2019 and 2018

(In Thousands)

	Year Ended December 31,
	2020			2019			2018
Capital and surplus, beginning of year	$	1,441,755		$	1,326,919		$	1,129,509
Net (loss) income		(1,695,012	)		382,805			315,500
Dividends to stockholder		(357,752	)		(639,801	)		(152,295	)
Change in net unrealized capital (losses) gains, net of income taxes		(288,936	)		57,398			(11,491	)
Change in minimum pension liability, net of income taxes		(1,589	)		(4,209	)		3,824
Change in asset valuation reserve		(7,971	)		10,360			(846	)
Change in non-admitted assets		(708,501	)		92,424			28,921
Change in net deferred income taxes		256,714			(129,400	)		(40,732	)
Capital paid-in		9,539			—			—
Surplus paid-in		3,067,719			4,029			4,093
Change in surplus as a result of reinsurance		(83,521	)		537,566			—
Change in capital and surplus as a result of separate accounts		—			(428	)		(208	)
Change in unrealized foreign exchange capital gains (losses)		2,693			(20	)		(1,125	)
Change in surplus notes		526,169			(195,888	)		51,769
Net change in capital and surplus for the year		719,552			114,836			197,410
Capital and surplus, end of year	$	2,161,307		$	1,441,755		$	1,326,919

See notes to statutory financial statements.

8

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Statutory Statements of Cash Flows

Years Ended December 31, 2020, 2019 and 2018

(In Thousands)

	Year Ended December 31,
	2020			2019			2018
Operating activities:
Premium income, net of reinsurance	$	6,588,902		$	3,654,066		$	5,352,630
Investment income received, net of investment expenses paid		809,931			962,732			1,136,338
Other miscellaneous income received		59,348			577,059			160,008
Benefit and loss related payments, net of reinsurance		(3,803,044	)		(4,542,350	)		(6,417,233	)
Net transfers from separate accounts		816,837			1,375,094			1,097,423
Commissions, other expenses and taxes paid		(2,758,668	)		(526,161	)		(644,838	)
Dividends paid to policyholders		(24,228	)		(30,537	)		(38,959	)
Federal income taxes (paid) received, net		(18,530	)		5,267			(38,241	)
Net cash provided by operating activities		1,670,548			1,475,170			607,128
Investing activities:
Proceeds from investments sold, matured or repaid:
Bonds		2,794,468			2,430,562			3,351,579
Stocks		53			19,187			3,704
Mortgage loans		295,116			343,441			357,545
Other invested assets		38,065			19,597			25,233
Net gains on cash, cash equivalents and short-term investments		83			5			—
Miscellaneous proceeds		544,448			24,100			22,212
Cost of investments acquired:
Bonds		(6,396,829	)		(2,770,357	)		(3,398,701	)
Stocks		(221,630	)		(3,585	)		(38,742	)
Mortgage loans		(89,330	)		(114,542	)		(697,245	)
Real estate		(2,724	)		(9,052	)		(4,319	)
Other invested assets		(905,616	)		(46,617	)		(36,870	)
Miscellaneous applications		(274,834	)		—			(39,654	)
Net change in contract loans and premium notes		127,912			(3,120	)		(1,355	)
Net cash used in investing activities		(4,090,818	)		(110,381	)		(456,613	)
Financing and miscellaneous activities:
Surplus notes		527,500			(195,000	)		51,410
Capital and paid in surplus		3,076,665			3,130			3,325
Deposit-type contracts, net		1,963,991			(5,399	)		(18,908	)
Dividends to stockholder		(357,752	)		(639,801	)		(152,295	)
Funds (repaid) borrowed, net		(916	)		1,041			(1,027	)
Other		(136,621	)		60,135			(45,670	)
Net cash provided by (used in) financing and miscellaneous activities		5,072,867			(775,894	)		(163,165	)
Net increase (decrease) in cash, cash equivalents and short-term investments and restricted cash		2,652,597			588,895			(12,650	)
Cash, cash equivalents and short-term investments and restricted cash:
Beginning of year		818,329			229,434			242,084
End of year	$	3,470,926		$	818,329		$	229,434

The cash, cash equivalents and short-term investments and restricted cash balance includes $12 and $1 of restricted cash as of December 31, 2020 and 2019, respectively, which is non-admitted and not included in the Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus.

9

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Statutory Statements of Cash Flows

Years Ended December 31, 2020, 2019 and 2018

(In Thousands)

	Year Ended December 31,
	2020		2019		2018
Non-cash investing and financing transactions during the year:
Share-based compensation expense	$	593	$	899	$	768
Fair value of assets acquired in settlement of bonds		—		—		28,815

In 2020, non-cash transfers of $9,848 million of assets and liabilities occurred as a part of the MassMutual transaction. In 2019, non-cash transfers of $8,938 million of assets and liabilities occurred as a part of the Protective transaction. Refer to Note 9 for further information on the MassMutual and Protective transactions.

See notes to statutory financial statements. Concluded

10

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

1. Organization and Significant Accounting Policies

Great-West Life & Annuity Insurance Company (the “Company” or “GWL&A”) is a direct wholly-owned subsidiary of GWL&A Financial Inc. (“GWL&A Financial”), a holding company. GWL&A Financial is a direct wholly-owned subsidiary of Great-West Lifeco U.S. LLC (“Lifeco U.S.”) and an indirect wholly-owned subsidiary of Great-West Lifeco Inc. (“Lifeco”), a Canadian holding company. The Company offers a wide range of retirement and investment products to individuals, businesses and other private and public organizations throughout the United States. The Company is an insurance company domiciled in the State of Colorado and is subject to regulation by the Colorado Division of Insurance (“Division”).

The Company is authorized to engage in the sale of life insurance, accident and health insurance and annuities. It is qualified to do business in all states in the United States, except New York, and in the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands. The Company is also a licensed reinsurer in New York.

Effective December 31, 2020, the Company completed the acquisition, via indemnity reinsurance (“the MassMutual transaction”), of the retirement services business of Massachusetts Mutual Life Insurance Company (“MassMutual”). The Company has now assumed the economics and risks associated with the reinsurance business. Per the transaction agreement, the Company acquired statutory assets equal to liabilities. The business assumed is primarily group annuities. See Note 9 for further discussion of the MassMutual transaction.

Effective June 1, 2019, the Company completed the sale, via indemnity reinsurance (the “Protective transaction”), of substantially all of its individual life insurance and annuity business to Protective Life Insurance Company (“Protective”) who now assumes the economics and risks associated with the reinsured business. Per the transaction agreement, the Company transferred statutory assets equal to liabilities. The business transferred included bank-owned and corporate-owned life insurance, single premium life insurance, individual annuities as well as closed block life insurance and annuities. The Company retained a block of life insurance, predominantly participating policies which are now administered by Protective, as well as a closed reinsurance acquired block. Post-transaction, the Company focuses on the defined contribution retirement and asset management markets. See Note 9 for further discussion of the Protective transaction.

The statutory financial statements have been prepared from the separate records maintained by the Company and may not necessarily be indicative of the conditions that would have existed or the results of operations if the Company had been operated as an unaffiliated company.

Accounting policies and use of estimates

The Company prepares its statutory financial statements in conformity with accounting practices prescribed or permitted by the Division. The Division requires that insurance companies domiciled in the State of Colorado prepare their statutory financial statements in accordance with the National Association of Insurance Commissioners Accounting Practices and Procedures Manual (“NAIC SAP”), subject to any deviations prescribed or permitted by the State of Colorado Insurance Commissioner.

The only prescribed deviation that impacts the Company allows the Company to account for certain separate account products at book value instead of fair value. The Division has not permitted the Company to adopt any accounting practices that have an impact on the Company’s statutory financial statements as compared to NAIC SAP or the Division’s prescribed accounting practices. There is no impact to either capital and surplus or net income as a result of the prescribed accounting practice.

Statutory accounting principles vary in some respects from accounting principles generally accepted in the United States of America (“GAAP”). The more significant of these differences are as follows:

11

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

• Bonds, including loan-backed and structured securities (collectively referred to as “bonds”), are carried at statutory adjusted carrying value in accordance with the National Association of Insurance Commissioners (“NAIC”) designation of the security. Carrying value is amortized cost, unless the bond is either (a) designated as a six, in which case it is the lower of amortized cost or fair value or (b) required to be carried at fair value due to the structured securities ratings methodology. Under GAAP, bonds are carried at amortized cost for securities classified as held-to-maturity and fair value for securities classified as available-for-sale and held-for-trading.

• Redeemable preferred stocks are carried at statutory carrying value in accordance with the NAIC designation of the security. Carrying value is amortized cost, unless the redeemable preferred stock is designated a four to six, in which case it is reported at the lower of amortized cost or fair value. Under GAAP, redeemable preferred stocks are carried at amortized cost for securities classified as held-to-maturity and fair value for securities classified as available-for-sale and held-for-trading.

• Short-term investments include all investments whose remaining maturities, at the time of acquisition, are three months to one year. Under GAAP, short-term investments include securities purchased with investment intent and with remaining maturities, at the time of acquisition, of one year or less.

• As prescribed by the NAIC, the asset valuation reserve (“AVR”) is computed in accordance with a prescribed formula and represents a provision for possible non-interest related fluctuations in the value of bonds, equity securities, mortgage loans, real estate and other invested assets. Changes to the AVR are charged or credited directly to unassigned surplus. This type of reserve is not necessary or required under GAAP.

• As prescribed by the NAIC, the interest maintenance reserve (“IMR”) consists of net accumulated unamortized realized capital gains and losses, net of income taxes, on sales or interest related impairments of bonds and derivative investments attributable to changes in the general level of interest rates. Such gains or losses are initially deferred and then amortized into income over the remaining period to maturity, based on groupings of individual securities sold in five-year bands. An IMR asset is generally designated as a non-admitted asset and is recorded as a reduction to capital and surplus. Under GAAP, realized gains and losses are recognized in income in the period in which a security is sold.

• As prescribed by the NAIC, an other-than-temporary impairment (“OTTI”) is recorded (a) if it is probable that the Company will be unable to collect all amounts due according to the contractual terms in effect at the date of acquisition, (b) if the Company has the intent to sell the investment or (c) for non-interest related declines in value and where the Company does not have the intent and ability at the reporting date, to hold the bond until its recovery. Under GAAP, if either (a) management has the intent to sell a bond investment or (b) it is more likely than not the Company will be required to sell a bond investment before its anticipated recovery, a charge is recorded in net realized investment losses equal to the difference between the fair value and cost or amortized cost basis of the security. If management does not intend to sell the security and it is not more likely than not the Company will be required to sell the bond investment before recovery of its amortized cost basis, but the present value of the cash flows expected to be collected (discounted at the effective interest rate implicit in the bond investment prior to impairment) is less than the amortized cost basis of the bond investment (referred to as the credit loss portion), an OTTI is considered to have occurred.

Under GAAP, total OTTI is bifurcated into two components: the amount related to the credit loss, which is recognized in current period earnings through realized capital losses; and the amount attributed to other factors (referred to as the non-credit portion), which is recognized as a separate component in accumulated other comprehensive income (loss). As prescribed by the NAIC, non-interest related OTTI is only bifurcated on loan-backed and structured securities. Factors related to interest and other components do not have a financial statement impact and are disclosed in “Unrealized losses and OTTI” in the notes to the statutory financial statements.

• Derivatives that qualify for hedge accounting are carried at the same valuation method as the underlying hedged asset, while derivatives that do not qualify for hedge accounting are carried at fair value. Under GAAP, all derivatives, regardless of

12

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

hedge accounting treatment, are recorded on the balance sheet in other assets or other liabilities at fair value. As prescribed by the NAIC, for those derivatives which qualify for hedge accounting, the change in the carrying value or cash flow of the derivative is recorded consistently with how the changes in the carrying value or cash flow of the hedged asset, liability, firm commitment or forecasted transaction are recorded. Under GAAP, if the derivative is designated as a cash flow hedge, the effective portions of the changes in the fair value of the derivative are recorded in accumulated other comprehensive income and are recognized in the income statements when the hedged item affects earnings. Changes in fair value resulting from foreign currency translations are recorded in either AOCI or net investment income, consistent with where they are recorded on the underlying hedged asset or liability. Changes in the fair value, including changes resulting from foreign currency translations, of derivatives not eligible for hedge accounting or where hedge accounting is not elected and the over effective portion of cash flow hedges are recognized in investment gains (losses) as a component of net income in the period of the change. Realized foreign currency transactional gains and losses on derivatives subject to hedge accounting are recorded in net investment income, whereas those on derivatives not subject to hedge accounting are recorded in investment gains (losses). As prescribed by the NAIC, upon termination of a derivative that qualifies for hedge accounting, the gain or loss is recognized in income in a manner that is consistent with the hedged item. Alternatively, if the item being hedged is subject to IMR, the gain or loss on the hedging derivative is realized and is subject to IMR upon termination. Under GAAP, gains or losses on terminated contracts that are effective hedges are recorded in earnings in net investment income or other comprehensive income. The gains or losses on terminated contracts where hedge accounting is not elected, or contracts that are not eligible for hedge accounting, are recorded in investment gains (losses).

• The Company enters into dollar repurchase agreements with third party broker-dealers. The Company does not enter into these types of transactions for liquidity purposes, but rather for yield enhancement on its investment portfolio. The dollar repurchase trading strategy involves the sale of securities, with a simultaneous agreement to repurchase similar securities at a future date at an agreed-upon price. If the assets to be repurchased are the same, or substantially the same, as the assets transferred, the transactions are accounted for as secured borrowings. Transactions that do not meet the secured borrowing requirements are accounted for as bond purchases and sales. Under GAAP, these transactions are recorded as forward settling to be announced (“TBA”) securities that are accounted for as derivative instruments, but hedge accounting is not elected as the Company does not regularly accept delivery of such securities when issued.

• Acquisition costs, such as commissions and other costs incurred in connection with acquiring new business, are charged to operations as incurred, rather than deferred and amortized over the lives of the related contracts as under GAAP.

• Deferred income taxes are recorded using the asset and liability method in which deferred tax assets and liabilities are recorded for expected future tax consequences of events that have been recognized in either the Company’s statutory financial statements or tax returns. Deferred income tax assets are subject to limitations prescribed by statutory accounting principles. The change in deferred income taxes is treated as a component of the change in unassigned funds, whereas under GAAP deferred taxes are included in the determination of net income.

• Certain assets, including various receivables, furniture and equipment and prepaid assets, are designated as non-admitted assets and are recorded as a reduction to capital and surplus, whereas they are recorded as assets under GAAP.

• For statutory accounting, business combinations must either create a parent-subsidiary relationship (statutory purchase) or there must be an exchange of equity with one surviving entity (statutory merger). Under GAAP, an integrated set of activities and assets that are capable of being conducted and managed for the purpose of providing economic benefits to its investors can meet the definition of a business. As such, under GAAP, certain reinsurance agreements could be accounted for as a business acquisition.

• For statutory purchases, the excess of the cost of acquiring an entity over the Company’s share of the book value of the acquired entity is recorded as goodwill which is admissible subject to limitations and is amortized over the period in which the Company benefits economically, not to exceed ten years. For statutory mergers, no acquisition is recognized because it

13

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

is accomplished without exchanging resources. As such, the recorded assets, liabilities, and surplus of the acquired company (adjusted to conform to statutory accounting principles) will be carried forward into the combined company. Under GAAP in a business combination, the excess of the cost of acquiring an entity over the acquisition-date fair value of identifiable assets acquired and liabilities assumed is allocated between goodwill, indefinite-lived intangible assets and definite-lived intangible assets. Goodwill and indefinite-lived intangible assets are not amortized and definite-lived intangible assets are amortized over their estimated useful lives under GAAP.

• Aggregate reserves for life policies and contracts are based on statutory mortality and interest requirements and without consideration of withdrawals, which differ from reserves established under GAAP that are based on assumptions using Company experience for mortality, interest, and withdrawals.

• Surplus notes are reflected as a component of capital and surplus, whereas under GAAP they are reflected as a liability.

• The policyholder’s share of net income on participating policies that has not been distributed to participating policyholders is included in capital and surplus in the statutory financial statements. For GAAP, these amounts are reported as a liability with a charge to net income.

• Changes in separate account values from cash transactions are recorded as premium income and benefit expenses whereas they do not impact the statement of operations under GAAP and are presented only as increases or decreases to account balances.

• Benefit payments and the related decrease in policy reserves are recorded as expenses for all contracts subjecting the Company to any mortality risk. Under GAAP, such benefit payments for life and annuity contracts without significant mortality risks are recorded as direct reductions to the policy reserve liability.

• Premium receipts and the related increase in policy reserves are recorded as revenues and expenses, respectively, for all contracts subjecting the Company to any mortality risk. Under GAAP, such premium receipts for life and annuity contracts without significant mortality risks are recorded as direct credits to the policy reserve liability.

• Comprehensive income and its components are not presented in the statutory financial statements.

• The Statutory Statement of Cash Flows is presented based on a prescribed format for statutory reporting. For purposes of presenting statutory cash flows, cash includes short-term investments. Under GAAP, the statement of cash flows is typically presented based on the indirect method and cash excludes short-term investments.

• For statutory accounting purposes, policy and contract liabilities ceded to reinsurers are reported as reductions of the related reserves. Losses generated in certain reinsurance transaction are recognized immediately in income, with gains reported as a separate component of surplus and amortized over the remaining life of the business. As prescribed by the Department, ceded reserves are limited to the amount of direct reserves. Under GAAP, ceded future policy benefits and contract owner liabilities are reported as reinsurance recoverables. Only those reinsurance recoverable balances deemed probable of recovery are reflected as assets on the balance sheet and are stated net of allowance for uncollectible reinsurance, which are charged to earnings. Cost of reinsurance (i.e. the net cash flows which include reinsurance premiums, ceding commissions, etc.) are deferred and amortized over the remaining life of the business.

The preparation of financial statements in conformity with statutory accounting principles requires the Company’s management to make a variety of estimates and assumptions. These estimates and assumptions affect, among other things, the reported amounts of admitted assets and liabilities, the disclosure of contingent liabilities and the reported amounts of revenues and expenses. Significant estimates are required to account for items and matters such as, but not limited to, the valuation of investments and

14

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

derivatives in the absence of quoted market values, impairment of investments and derivatives, valuation of policy benefit liabilities and the valuation of deferred tax assets. Actual results could differ from those estimates.

Impact of COVID-19 on significant judgments, estimates and assumptions

Beginning in January 2020, the outbreak of a virus known as COVID-19 and ensuing global pandemic have resulted in travel and border restrictions, quarantines, supply chain disruptions, lower consumer demand and significant market uncertainty. In the first quarter of 2020, global financial markets experienced material and rapid declines and significant volatility; however, following March 31, 2020, the markets have experienced recoveries. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 pandemic continues to be unknown at this time, as is the efficacy of the government and central bank interventions. The results of the Company reflect management’s judgments regarding the impact of prevailing market conditions.

Significant statutory accounting policies

Investments

Investments are reported as follows:

• In accordance with the NAIC SAP, the adjusted carrying value amounts of certain assets are gross of non-admitted assets.

• Bonds are carried at statutory adjusted carrying value in accordance with the NAIC designation of the security. Carrying value is amortized cost, unless the bond is either (a) designated as a six, in which case it is the lower of amortized cost or fair value or (b) required to be carried at fair value due to the structured securities ratings methodology. The Company recognizes the acquisition of its public bonds on a trade date basis and its private placement investments on a funding date basis. Bonds containing call provisions, except make-whole call provisions, are amortized to the call or maturity value/date which produces the lowest asset value. Make-whole call provisions, which allow the bond to be called at any time, are not considered in determining the timeframe for amortizing the premium or discount unless the Company has information indicating the issuer is expected to invoke the make-whole call provision.

Premiums and discounts are recognized as a component of net investment income using the effective interest method. Realized gains and losses not subject to IMR, including those from foreign currency translations, are included in net realized capital gains (losses).

The recognition of income on certain investments (e.g. loan-backed securities, including mortgage-backed and asset-backed securities) is dependent upon market conditions, which may result in prepayments and changes in amounts to be earned. Prepayments on all mortgage-backed and asset-backed securities are monitored monthly, and amortization of the premium and/or the accretion of the discount associated with the purchase of such securities are adjusted by such prepayments. Prepayment assumptions are based on the average of recent historical prepayments and are obtained from broker/dealer survey values or internal estimates. These assumptions are consistent with the current interest rate and economic environment. Significant changes in estimated cash flows from the original purchase assumptions are accounted for using the retrospective method.

• Mortgage loans consist primarily of domestic commercial collateralized loans and are carried at their unpaid principal balances adjusted for any unamortized premiums or discounts, allowances for credit losses, and foreign currency translations. Interest income is accrued on the unpaid principal balance for all loans, except for loans on non-accrual status. Premiums and discounts are amortized to net investment income using the effective interest method. Prepayment penalty and origination fees are recognized in net investment income upon receipt.

15

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The Company actively manages its mortgage loan portfolio by completing ongoing comprehensive analysis of factors such as debt service coverage ratios, loan-to-value ratios, payment status, default or legal status, annual collateral property evaluations and general market conditions. On a quarterly basis, the Company reviews the above primary credit quality indicators in its internal risk assessment of loan impairment and credit loss. Management’s risk assessment process is subjective and includes the categorization of all loans, based on the above mentioned credit quality indicators, into one of the following categories:

• Performing - generally indicates the loan has standard market risk and is within its original underwriting guidelines.

• Non-performing - generally indicates there is a potential for loss due to the deterioration of financial/monetary default indicators or potential foreclosure. Due to the potential for loss, these loans are evaluated for impairment.

The adequacy of the Company’s allowance for credit loss is reviewed quarterly. The determination of the calculation and the adequacy of the mortgage allowance for credit loss and mortgage impairments involve judgments that incorporate qualitative and quantitative Company and industry mortgage performance data. Management’s periodic evaluation and assessment of the adequacy of the mortgage allowance for credit loss and the need for mortgage impairments is based on known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the fair value of the underlying collateral, composition of the loan portfolio, current economic conditions, loss experience and other relevant factors. Loans included in the non-performing category and other loans with certain substandard credit quality indicators are individually reviewed to determine if a specific impairment is required. Risk is mitigated primarily through first position collateralization, guarantees, loan covenants and borrower reporting requirements. Since the Company does not originate or hold uncollateralized mortgages, loans are generally not deemed fully uncollectable. Generally, unrecoverable amounts are written off during the final stage of the foreclosure process.

Loan balances are considered past due when payment has not been received based on contractually agreed upon terms. The accrual of interest is discontinued when concerns exist regarding the realization of loan principal or interest. The Company resumes interest accrual on loans when a loan returns to current status or under new terms when loans are restructured or modified.

On a quarterly basis, any loans with terms that were modified during that period are reviewed to determine if the loan modifications constitute a troubled debt restructuring (“TDR”). In evaluating whether a loan modification constitutes a TDR, it must be determined that the modification is a significant concession and the debtor is experiencing financial difficulties.

Additionally, the Company considers the temporary relief granted by the Statutory Accounting Principles Working Group (“SAPWG”) in response to the Coronavirus, Aid, Relief, and Economic Security Act (the “CARES Act”). The relief gives temporary statutory exception for impairment assessment on bank loans, mortgage loans and investment products with underlying mortgage loans due to situations as a result of COVID-19 including the forbearance or modification of mortgage loan payments. SAPWG also granted practical expedients in determining whether a modification is a concession (insignificant) or if it is a TDR. The provisions of these guidance are applicable through the earlier of January 1, 2022, or 60 days after the date on which the national emergency concerning COVID–19 terminates.

• Real estate properties held for the production of income are valued at depreciated cost less encumbrances. Real estate is depreciated on a straight-line basis over the estimated life of the building or term of the lease for tenant improvements.

• Real estate properties occupied by the Company are carried at depreciated cost unless the carrying amount of the asset is deemed to be unrecoverable. The Company includes in both net investment income and other operating expenses an amount for rent relating to real estate properties occupied by the Company. Rent is derived from consideration of the repairs,

16

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

expenses, taxes, interest and depreciation incurred. The reasonableness of the amount of rent recorded is verified by comparison to rent received from other like properties in the same area.

• Limited partnership interests are included in other invested assets and are accounted for using either net asset value per share (“NAV”) as a practical expedient to fair value. The Company uses NAV as a practical expedient on partnership interests in investment companies where it has a minor equity interest and no significant influence over the entity’s operations.

• Redeemable preferred stocks are carried at statutory carrying value in accordance with the NAIC designation of the security. Carrying value is amortized cost, unless the redeemable preferred stock is designated a four to six, in which case it is reported at the lower of amortized cost or fair value.

• Common stocks, other than stocks of subsidiaries and stocks of the Federal Home Loan Bank (“FHLB”), are recorded at fair value based on the most recent closing price of the common stock as quoted on its exchange. Common stocks of the FHLB are reported at cost. Related party mutual funds, which are carried at fair value, are also included in common stocks. The net unrealized gain or loss on common stocks is reported as a component of surplus.

Investments in subsidiaries are carried on the equity basis with unrealized changes in value recorded in surplus and dividends received recorded in investment income.

• Contract loans are carried at their unpaid balance. Contract loans are fully collateralized by the cash surrender value of the associated insurance policy.

• Short-term investments include all investments whose remaining maturities, at the time of acquisition, are three months to one year. Cash equivalent investments include all investments whose remaining maturities, at the time of acquisition, are three months or less. Both short-term and cash equivalent investments, excluding money market mutual funds, are stated at amortized cost, which approximates fair value. Cash equivalent investments also include highly liquid money market funds that are traded in an active market and are carried at fair value.

• The Company enters into reverse repurchase agreements with third party broker-dealers for the purpose of enhancing the total return on its investment portfolio. The repurchase trading strategy involves the purchase of securities, with a simultaneous agreement to resell similar securities at a future date at an agreed-upon price. Securities purchased under these agreements are accounted for as secured borrowings, and are reported at amortized cost in cash, cash equivalents and short-term investments.

Under these tri-party repurchase agreements, the designated custodian takes possession of the underlying collateral on the Company’s behalf, which is required to be cash or government securities. The fair value of the securities is monitored and additional collateral is obtained, where appropriate, to protect against credit exposure. The collateral cannot be sold or repledged and has not been recorded on the Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus.

The Company enters into dollar repurchase agreements with third party broker-dealers. The Company does not enter into these types of transactions for liquidity purposes, but rather for yield enhancement on its investment portfolio. The dollar repurchase trading strategy involves the sale of securities, with a simultaneous agreement to repurchase similar securities at a future date at an agreed-upon price. If the assets to be repurchased are the same, or substantially the same, as the assets transferred, the transactions are accounted for as secured borrowings. Transactions that do not meet the secured borrowing requirements are accounted for as bond purchases and sales. Proceeds of the sale are reinvested in other securities and may enhance the current yield and total return. The difference between the sales price and the future repurchase price is recorded as an adjustment to net investment income. During the period between the sale and repurchase, the Company will not be entitled to receive interest and principal payments on the securities sold. Losses may arise from changes in the value of the securities or if the counterparty enters bankruptcy proceedings or becomes insolvent. In such cases, the Company’s right to

17

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

repurchase the security may be restricted. Amounts owed to brokers under these arrangements are included as a liability in repurchase agreements.

The Company participates in a securities lending program in which the Company lends securities that are held as part of its general account investment portfolio to third parties. The Company does not enter into these types of transactions for liquidity purposes, but rather for yield enhancement on its investment portfolio. The borrower can return and the Company can request the loaned securities be returned at any time. The Company maintains ownership of the securities at all times and is entitled to receive from the borrower any payments for interest received on such securities during the loan term. Securities lending transactions are accounted for as secured borrowings. The securities on loan are included within bonds and short-term investments in the accompanying Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus. The securities lending agent indemnifies the Company against borrower risk, meaning that the lending agent agrees contractually to replace securities not returned due to a borrower default. The Company generally requires initial cash collateral in an amount greater than or equal to 102% of the fair value of domestic securities loaned and 105% of foreign securities loaned. Such collateral is used to replace the securities loaned in event of default by the borrower. Some cash collateral is reinvested in money market funds or short-term repurchase agreements which are also collateralized by U.S. Government or U.S. Government Agency securities. Reinvested cash collateral is reported in securities lending reinvested collateral assets, with a corresponding liability in payable for securities lending collateral. Collateral that cannot be sold or repledged is excluded from the Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus.

• Surplus notes, which are recorded in other invested assets, are carried at statutory carrying value in accordance with the NAIC designation of the security. Carrying value is amortized cost, unless the surplus note is designated a NAIC three to six, in which case it is reported at the lower of amortized cost or fair value.

• The Company’s OTTI accounting policy requires that a decline in the value of a bond below its cost or amortized cost basis be assessed to determine if the decline is other-than-temporary. An OTTI is recorded (a) if it is probable that the Company will be unable to collect all amounts due according to the contractual terms in effect at the date of acquisition, (b) if the Company has the intent to sell the investment or (c) for non-interest related declines in value and where the Company does not have the intent and ability at the reporting date, to hold the bond until its recovery. Management considers a wide range of factors, as described below, regarding the bond issuer and uses its best judgment in evaluating the cause of the decline in its estimated fair value and in assessing the prospects for near-term recovery. Inherent in management’s evaluation of the bond are assumptions and estimates about the operations and ability to generate future cash flows. While all available information is taken into account, it is difficult to predict the ultimate recoverable amount from a distressed or impaired bond.

Considerations used by the Company in the impairment evaluation process include, but are not limited to, the following:

• The extent to which estimated fair value is below cost;

• Whether the decline in fair value is attributable to specific adverse conditions affecting a particular instrument, its issuer, an industry or geographic area;

• The length of time for which the estimated fair value has been below cost;

• Downgrade of a bond investment by a credit rating agency;

• Deterioration of the financial condition of the issuer;

• The payment structure of the bond investment and the likelihood of the issuer being able to make payments in the future; and

• Whether dividends have been reduced or eliminated or scheduled interest payments have not been made.

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GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

For loan-backed and structured securities, if management does not intend to sell the bond and has the intent and ability to hold the bond until recovery of its amortized cost basis, but the present value of the cash flows expected to be collected (discounted at the effective interest rate implicit in the bond prior to impairment) is less than the amortized cost basis of the bond (referred to as the non-interest loss portion), an OTTI is considered to have occurred. In this instance, total OTTI is bifurcated into two components: the amount related to the non-interest loss is recognized in current period earnings through realized capital gains (losses); and the amount attributed to other factors does not have any financial impact and is disclosed only in the notes to the statutory financial statements. The calculation of expected cash flows utilized during the impairment evaluation process are determined using judgment and the best information available to the Company including default rates, credit ratings, collateral characteristics and current levels of subordination.

For bonds not backed by other loans or assets, if management does not intend to sell the bond and has the intent and ability to hold but does not expect to recover the entire cost basis, an OTTI is considered to have occurred. A charge is recorded in net realized capital gains (losses) equal to the difference between the fair value and cost or amortized cost basis of the bond. After the recognition of an OTTI, the bond is accounted for as if it had been purchased on the measurement date of the OTTI, with an amortized cost basis equal to the previous amortized cost basis less the OTTI recognized in net income. The difference between the new amortized cost basis and the expected future cash flows is accreted into net investment income. The Company continues to estimate the present value of cash flows expected to be collected over the life of the bond.

Fair value

Certain assets and liabilities are recorded at fair value on the Company’s Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus. The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company categorizes its assets and liabilities measured at fair value into a three level hierarchy, based on the priority of the inputs to the respective valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The Company’s assets and liabilities have been categorized based upon the following fair value hierarchy:

• Level 1 inputs which are utilized for general and separate account assets and liabilities, utilize observable, quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Financial assets utilizing Level 1 inputs include certain mutual funds.

• Level 2 inputs utilize other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs, which are utilized for general and separate account assets and liabilities, include quoted prices for similar assets and liabilities in active markets and inputs, other than quoted prices, that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. The fair values for some Level 2 securities are obtained from pricing services. The inputs used by the pricing services are reviewed at least quarterly or when the pricing vendor issues updates to its pricing methodology. For general and separate account assets and liabilities, inputs include benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, evaluated bids, offers and reference data including market research publications. Additional inputs utilized for assets and liabilities classified as Level 2 are:

^○  Derivative instruments - trading activity, swap curves, credit spreads, currency volatility, net present value of cash flows and news sources.

^○  Separate account assets and liabilities - various index data and news sources, amortized cost (which approximates fair value), trading activity, swap curves, credit spreads, recovery rates, restructuring, net present value of cash flows

19

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

and quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

• Level 3 inputs are unobservable and include situations where there is little, if any, market activity for the asset or liability. In general, the prices of Level 3 securities are obtained from single broker quotes and internal pricing models. If the broker’s inputs are largely unobservable, the valuation is classified as a Level 3. Broker quotes are validated through an internal analyst review process, which includes validation through known market conditions and other relevant data, as noted below. Internal models are usually cash flow based utilizing characteristics of the underlying collateral of the security such as default rate and other relevant data.

The fair value of certain investments in the separate accounts and limited partnerships are estimated using net asset value per share as a practical expedient and are excluded from the fair value hierarchy levels in Note 5. These net asset values are based on the fair value of the underlying investments, less liabilities.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Overall, transfers between levels are attributable to a change in the observability of inputs. Assets and liabilities are transferred to a lower level in the hierarchy when a significant input cannot be corroborated with market observable data. This may occur when market activity decreases and underlying inputs cannot be observed, current prices are not available, and/or when there are significant variances in quoted prices, thereby affecting transparency. Assets and liabilities are transferred to a higher level in the hierarchy when circumstances change such that a significant input can be corroborated with market observable data. This may be due to a significant increase in market activity including recent trades, a specific event, or one or more significant input(s) becoming observable.

In some instances, securities are priced using external broker quotes. In most cases, when broker quotes are used as pricing inputs, more than one broker quote is obtained. External broker quotes are reviewed internally by comparing the quotes to similar securities in the public market and/or to vendor pricing, if available. Additionally, external broker quotes are compared to market reported trade activity to ascertain whether the price is reasonable, reflective of the current market prices, and takes into account the characteristics of the Company’s securities.

Derivative financial instruments

The Company enters into derivative transactions which include the use of interest rate swaps, interest rate swaptions, cross-currency swaps, foreign currency forwards, U.S. government treasury futures contracts, Eurodollar futures contracts, futures on equity indices and interest rate swap futures. The Company uses these derivative instruments to manage various risks, including interest rate and foreign currency exchange rate risk associated with its invested assets and liabilities. Derivative instruments are not used for speculative reasons. Certain of the Company’s over-the-counter (“OTC”) derivatives are cleared and settled through a central clearing counterparty while others are bilateral contracts between the Company and a counterparty.

Derivatives are reported as other invested assets or other liabilities. Although some derivatives are executed under a master netting arrangement, the Company does not offset in the Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus the carrying value of those derivative instruments and the related cash collateral or net derivative receivables and payables executed with the same counterparty under the same master netting arrangement. Derivatives that qualify for hedge accounting treatment are valued using the valuation method (either amortized cost or fair value) consistent with the underlying hedged asset or liability. At inception of a derivative transaction, the hedge relationship and risk management objective is documented and the

20

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

designation of the derivative is determined based on specific criteria of the transaction. Derivatives where hedge accounting is either not elected, or that are not eligible for hedge accounting, are stated at fair value with changes in fair value recognized in unassigned surplus in the period of change. Investment gains and losses generally result from the termination of derivative contracts prior to expiration and are generally recognized in net income and may be subject to IMR.

The Company uses derivative financial instruments for risk management purposes associated with certain invested assets and policy liabilities. Derivatives are used to (a) hedge the economic effects of interest rate and stock market movements on the Company’s guaranteed lifetime withdrawal benefit (“GLWB”) liability, (b) hedge the economic effect of a large increase in interest rates on the Company’s general account life insurance, group pension liabilities and certain separate account life insurance liabilities, (c) hedge the economic risks of other transactions such as future asset acquisitions or dispositions, the timing of liability pricing, currency risks on non-U.S. dollar denominated assets, and (d) convert floating rate assets or debt obligations to fixed rate assets or debt obligations for asset/liability management purposes.

The Company controls the credit risk of its derivative contracts through credit approvals, limits, monitoring procedures and in many cases, requiring collateral. The Company’s exposure is limited to the portion of the fair value of derivative instruments that exceeds the value of the collateral held and not to the notional or contractual amounts of the derivatives.

Derivatives in a net asset position may have cash or securities pledged as collateral to the Company in accordance with the collateral support agreements with the counterparty. This collateral is held in a custodial account for the benefit of the Company. Unrestricted cash collateral is included in other assets and the obligation to return it is included in other liabilities. The cash collateral is reinvested in a government money market fund. Securities pledged to the Company generally consist of U.S. government or U.S. government agency securities and are not recorded on the Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus.

Cash collateral pledged by the Company is included in other assets.

The Company may purchase a financial instrument that contains a derivative embedded in the financial instrument. Contracts that do not in their entirety meet the definition of a derivative instrument, may contain “embedded” derivative instruments implicit or explicit terms that affect some or all of the cash flows or the value of other exchanges required by the contract in a manner similar to a derivative instrument. An embedded derivative instrument shall not be separated from the host contract and accounted for separately as a derivative instrument.

Funds held or deposited with reinsured companies

Funds held by reinsurers are receivables from ceding entities. Interest earned on the funds withheld receivable are included as a component of aggregate write-ins for miscellaneous income.

Goodwill

Goodwill, resulting from acquisitions of subsidiaries that are reported in common stock and other invested assets, is amortized to unrealized capital gains/(losses) over the period in which the Company benefits economically, not to exceed ten years. Goodwill resulting from assumption reinsurance is reported in goodwill and is amortized to other insurance expenses over the period in which the Company benefits economically, not to exceed ten years. Admissible goodwill is limited in the aggregate to 10% of the Company’s adjusted capital and surplus. The Company tests goodwill for impairment annually or more frequently if events or circumstances indicate that there may be justification for conducting an interim test. If the carrying value of goodwill exceeds its fair value, the excess is recognized as impairment and recorded as a realized loss in the period in which the impairment is identified. There were no impairments of goodwill recognized during the years ended December 31, 2020, 2019 and 2018.

21

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

Reinsurance

Reinsurance premiums, commissions, expense reimbursements, and reserves related to reinsured business are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Reserves are based on the terms of the reinsurance contracts and are consistent with the risks assumed. Life contract premiums and benefits ceded to other companies have been reported as a reduction of the premium revenue and benefit expense. Life contract premiums and benefits assumed from other companies have been reported as an increase in premium revenue and benefit expense. Invested assets and reserved ceded or assumed on deposit type contracts are accounted for using deposit accounting. The Company establishes a receivable for amounts due from reinsurers for claims paid and other amounts recoverable under the terms of the reinsurance contract.

Cash value of company owned life insurance

The Company is the owner and beneficiary of life insurance policies which are included in Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus at their cash surrender values. At December 31, 2020, the investments underlying variable life insurance policies utilize various fund structures, with underlying investment characteristics of 23% equity, 42% fixed income, 32% cash and short terms, and 3% other. At December 31, 2019, the investments underlying variable life insurance policies utilize various fund structures, with underlying investment characteristics of 9% equity, 34% fixed income, and 57% cash and short terms.

Net investment income

Interest income from bonds is recognized when earned. Interest income on contract loans is recognized in net investment income at the contract interest rate when earned. All investment income due and accrued with amounts that are deemed uncollectible or that are over 90 days past due, including mortgage loans in default (“in process of foreclosure”), is not included in investment income. Amounts over 90 days past due are non-admitted assets and are recorded as a reduction to unassigned surplus. Real estate due and accrued income is excluded from net investment income if its collection is uncertain.

Net realized capital gains (losses)

Realized capital gains and losses are reported as a component of net income and are determined on a specific identification basis. Interest-related gains and losses are primarily subject to IMR, while non-interest related gains and losses are primarily subject to AVR. Realized capital gains and losses also result from the termination of derivative contracts prior to expiration and may be subject to IMR.

Policy reserves

Life insurance and annuity policy reserves with life contingencies are computed on the basis of statutory mortality and interest requirements and without consideration for withdrawals. Annuity contract reserves without life contingencies are computed on the basis of statutory interest requirements.

Policy reserves for life insurance are valued in accordance with the provision of applicable statutory regulations. Life insurance reserves are determined principally using the Commissioner’s Reserve Valuation Method, using the statutory mortality and interest requirements, without consideration for withdrawals. Some policies contain a surrender value in excess of the reserve as legally computed. This excess is calculated and recorded on a policy-by-policy basis.

Premium stabilization reserves are calculated for certain policies to reflect the Company’s estimate of experience refunds and interest accumulations on these policies. The reserves are invested by the Company. The income earned on these investments is accumulated in this reserve and is used to mitigate future premium rate increases for such policies.

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GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The cost of reinsurance related to long-duration contracts is accounted for over the life of the underlying reinsured policies using assumptions consistent with those used to account for the underlying policies.

Policy and contract claims include provisions for reported life and health claims in process of settlement, valued in accordance with the terms of the related policies and contracts, as well as provisions for claims incurred but not reported based primarily on prior experience of the Company. As such, amounts are estimates, and the ultimate liability may differ from the amount recorded. Any changes in estimates will be reflected in the results of operations when additional information becomes known.

The liabilities for health claim reserves are determined using historical run-out rates, expected loss ratios and statistical analysis. The Company provides for significant claim volatility in areas where experience has fluctuated. The liabilities represent estimates of the ultimate net cost of all reported and unreported claims which are unpaid at year-end. Those estimates are subject to considerable variability in claim severity and frequency. The estimates are continually reviewed and adjusted as necessary as experience develops or new information becomes known; such adjustments are included in current operations.

Premium, fee income and expenses

Life insurance premiums are recognized when due. Annuity considerations are recognized as revenue when received. Accident and health premiums are earned ratably over the terms of the related insurance and reinsurance contracts or policies. Life and accident and health insurance premiums received in advance are recorded as a liability and recognized as income when the premiums become earned. Fees from assets under management, assets under administration, shareholder servicing, mortality and expense risk charges, administration and record-keeping services and investment advisory services are recognized when earned in fee income or other income. Expenses incurred in connection with acquiring new insurance business, including acquisition costs such as sales commissions, are charged to operations as incurred.

Income taxes

The Company is included in the consolidated federal income tax return of Lifeco U.S. The federal income tax expense reported in the Statutory Statements of Operations represent income taxes provided on income that is currently taxable, excluding tax on net realized capital gains and losses. A net deferred tax asset is included in the Statutory Statement of Admitted Assets, Liabilities, Capital and Surplus which is recorded using the asset and liability method in which deferred tax assets and liabilities are recorded for expected future tax consequences of events that have been recognized in either the Company’s statutory financial statements or tax returns. Deferred income tax assets are subject to limitations prescribed by statutory accounting principles. The change in deferred income taxes is treated as a component of the change in unassigned funds.

23

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

2. Accounting Changes

Changes in Accounting Principles

In 2009, the NAIC introduced Principle-Based Reserving (“PBR”) as a new method for calculating life insurance policy reserves. In cases where the PBR reserve is higher, it will replace the historic formulaic measure with one that more accurately reflects the risks of highly complex products. PBR is effective for 2017; however, companies are permitted to delay implementation until January 1, 2020. The Company adopted this standard on January 1, 2020, which did not have a material effect on the Company’s financial statements.

In 2020, SAPWG adopted a revised SSAP 32R, Preferred Stock, and a corresponding Issue Paper No. 164, Preferred Stock. The revised SSAP improves the definition of preferred stock, revises the measurement guidance based on the type and terms of preferred stock held, and clarifies the impairment and dividend recognition guidance. The standard was adopted with an effective date of January 1, 2021 with early adoption permitted. The Company early adopted this revision and the adoption of this standard did not have a material effect on the Company’s financial statements.

3. Related Party Transactions

In the normal course of business the Company enters into agreements with related parties whereby it provides and/or receives record-keeping services, investment advisory services, and tax-related services, as well as corporate support services which include general and administrative services, information technology services, sales and service support and marketing services. The following table presents revenue earned, expenses incurred and expense reimbursement from insurance and non-insurance related parties for services provided and/or received pursuant to the service agreements. These amounts, in accordance with the terms of the contracts, are based upon market price, estimated costs incurred or resources expended as determined by number of policies, certificates in-force, administered assets or other similar drivers.

On January 1, 2020, the Company and its subsidiaries implemented an organizational change to simplify its corporate structure and affiliated transactions. The transaction included the following changes impacting the Company:

• Substantially all employees of GWL&A and its other subsidiaries were transferred to the Empower.

• Empower assumed all recordkeeping related revenues either by direct assignment of contracts or through a transition services agreement between Empower, GWL&A, and GWL&A’s subsidiaries.

• Substantially all vendor contracts were assigned to Empower.

• Empower entered into an administrative services agreement whereby it provides corporate and other shared services to GWL&A and its affiliates and is reimbursed for expenses incurred.

• Empower acquired assets and assumed liabilities from GWL&A and GWL&A’s subsidiaries including furniture, equipment, and software, deferred contract costs, certain other current assets including prepaid assets, and certain other liabilities including employee-related benefit and payroll liabilities and GWL&A’s post-retirement medical plan. The assets acquired and liabilities assumed by Empower were settled in cash based on their value under International Financial Reporting Standards (“IFRS”). Any differences between the value of the assets and liabilities on an IFRS basis and a Statutory basis were settled by dividends or capital contributions between entities.

24

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

		Year Ended December 31,									Financial
Description	Related party	2020			2019			2018			statement line
Provides corporate support service	Insurance affiliates: Great-West Life & Annuity Insurance Company of New York (“GWL&A NY”)(1),The Canada Life Assurance Company (“CLAC”)(2) and Great-West Life Assurance Company (“Great-West Life”)(2)	$	(14,626	)	$	(23,958	)	$	(15,522	)		Other insurance benefits and expenses
	Non-insurance affiliates: Empower(1), Advised Assets Group, LLC (“AAG”)(1), Great-West Capital Management, LLC (“GWCM”)(1), Great-West Trust Company, LLC (“GWTC”)(1), GWFS Equities, Inc. (“GWFS”)(1),Great-West Financial Retirement Plan Services (“Great-West RPS”)(1) and MAM Holding Inc. (2)		—			(151,179	)		(142,424	)
	Total		(14,626	)		(175,137	)		(157,946	)
Receives corporate support services	Non-insurance affiliate: Empower(1)		332,652			—			—			Other insurance benefits and expenses
Provides recordkeeping fees under temporary service agreement for recordkeeping agreements not yet transferred to Empower	Non-insurance affiliate: Empower(1)		(194,795	)		—			—			Fee income
Receives commissions under temporary service agreement for recordkeeping agreements not yet transferred to Empower	Non-insurance and insurance affiliates: Empower(1), GWL&A NY (1)		(77,139	)		—			—			Commissions
Provides marketing, distribution and administrative services to certain underlying funds and/or mutual funds	Non-insurance affiliate: GWFS(1)		7,101			172,702			198,976			Other income
Provides record-keeping services	Non-insurance affiliates: GWTC(1)		—			45,101			38,200			Other income
	Non-insurance related party: Great-West Funds(4)		20,506			61,194			65,281
	Total		20,506			106,295			103,481
Receives record-keeping services	Insurance affiliate: GWL&A NY(1)		(1,460	)		(2,328	)		(2,551	)		Other income
	Non-insurance affiliates: Empower(1)and GWTC(1)		(15,339	)		(388,302	)		(342,803	)
	Total		(16,799	)		(390,630	)		(345,354	)
Receives custodial services	Non-insurance affiliate: GWTC(1)		—			(13,526	)		(12,410	)		Other income
Receives reimbursement from tax sharing indemnification related to state and local tax liabilities	Non-insurance affiliate: Putnam Investments LLC (“Putnam”) (3)		16,282			9,733			9,140			Other income

⁽¹⁾ A wholly-owned subsidiary of GWL&A

⁽²⁾ An indirect wholly-owned subsidiary of Lifeco

⁽³⁾ A wholly-owned subsidiary of Lifeco U.S.

⁽⁴⁾ An open-end management investment company, a related party of GWL&A

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GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The Company’s separate accounts invest in shares of Great-West Funds, Inc. and Putnam Funds, which are affiliates of the Company and shares of other non-affiliated mutual funds and government and corporate bonds. The Company’s separate accounts include mutual funds or other investment options that purchase guaranteed interest annuity contracts issued by the Company. During the years ended December 31, 2020, 2019 and 2018, these purchases totaled $330,974, $224,708 and $169,857 respectively. As the general account investment contracts are also included in the separate account balances in the accompanying statutory statements of admitted assets, liabilities, capital and surplus, the Company has included the separate account assets and liabilities of $249,802 and $288,076 at December 31, 2020 and 2019, respectively, which is also included in the assets and liabilities of the general account at those dates.

During June of 2018, the Company invested $35,000 to fund the initial creation of five mutual funds offered by its subsidiary, GWCM. When the funds met certain targets for customer investment, the Company began redeeming its interests. The remaining investments were $17,679 and $15,546 at December 31, 2020 and 2019, respectively.

The following table summarizes amounts due from parent and affiliates:

			December 31,
Related party	Indebtedness	Due date	2020		2019
Empower(1)	On account	On demand	$	46,104	$	—
GWFS(1)	On account	On demand		34,743		34,625
CLAC(2)	On account	On demand		—		11,630
GWTC(1)	On account	On demand		290		7,807
AAG(1)	On account	On demand		—		5,141
GWCM(1)	On account	On demand		—		1,610
GWL&A NY(1)	On account	On demand		214		1,470
Great-West RPS(1)	On account	On demand		3		700
Great-West South Carolina (“GWSC”)(1)	On account	On demand		7,351		509
Putnam(3)	On account	On demand		4,951		103
Other related party receivables	On account	On demand		928		—
Total			$	94,584	$	63,595
(1) A wholly-owned subsidiary of GWL&A (2) An indirect wholly-owned subsidiary of Lifeco (3) A wholly-owned subsidiary of Lifeco U.S. The following table summarizes amounts due to parent and affiliates:
			December 31,
Related party	Indebtedness	Due date	2020		2019
Empower(1)	On account	On demand	$	—	$	76,024
CLAC(2)	On account	On demand		683		917
Personal Capital Corporation(1)	On account	On demand		15,473		—
Other related party payables	On account	On demand		422		672
Total			$	16,578	$	77,613

⁽¹⁾ A wholly-owned subsidiary of GWL&A

⁽²⁾ An indirect wholly-owned subsidiary of Lifeco

Included in current federal income taxes recoverable at December 31, 2020 and 2019 is $73,029 and $45,900, respectively, of income tax receivable from Lifeco U.S. related to the consolidated income tax return filed by Lifeco U.S.

26

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The Company received/(paid) cash payments of $12,506, $2,727 and ($42,577) from its subsidiary, GWSC, in 2020, 2019 and 2018 respectively, under the terms of its tax sharing agreement. The amount paid in 2018 is for the utilization of GWSC’s operating loss carryforward amounts which were fully utilized as of that year. Additionally, during the years ended December 31, 2020, 2019 and 2018, the Company received interest income of $1,661, $2,085 and $2,527 respectively, from GWSC relating to the tax sharing agreement.

During the year ended December 31, 2020, the Company received dividends and return of capital of $142,500 and $7,000, respectively, from its subsidiaries, the largest being $61,000 from AAG. During the year ended December 31, 2019, the Company received dividends and return of capital of $108,803 and $12,497, respectively, from its subsidiaries, the largest being $40,000 from Empower. During the year ended December 31, 2018, the Company received dividends and return of capital of $106,000 and $680 respectively, from its subsidiaries, the largest being $42,000 from AAG.

During the years ended December 31, 2020 and 2019, the Company paid cash dividends to GWL&A Financial in the amounts of $357,752 and $639,801 respectively.

The Company and GWL&A NY have an agreement whereby the Company has committed to provide GWL&A NY financial support related to the maintenance of adequate regulatory surplus and liquidity.

4. Summary of Invested Assets

Investments in bonds consist of the following:

	December 31, 2020
	Book/adjusted     carrying value		Gross unrealized gains		Gross unrealized losses		Fair value
U.S. government	$	159,577	$	1,744	$	226	$	161,095
All other governments		11,113		—		—		11,113
U.S. states, territories and possessions		654,122		97,055		—		751,177
Political subdivisions of states and territories		378,996		23,006		—		402,002
Industrial and miscellaneous		18,019,556		916,950		13,489		18,923,017
Parent, subsidiaries and affiliates		6,433		—		—		6,433
Hybrid securities		151,305		1,800		9,372		143,733
Loan-backed and structured securities		6,330,981		156,801		12,050		6,475,732
Total bonds	$	25,712,083	$	1,197,356	$	35,137	$	26,874,302
	December 31, 2019
	Book/adjusted carrying value		Gross unrealized gains		Gross unrealized losses		Fair value
U.S. government	$	11,076	$	1,446	$	—	$	12,522
U.S. states, territories and possessions		656,713		85,867		—		742,580
Political subdivisions of states and territories		204,355		18,098		—		222,453
Industrial and miscellaneous		8,024,719		453,056		2,842		8,474,933
Parent, subsidiaries and affiliates		10,810		—		—		10,810
Hybrid securities		165,032		147		14,831		150,348
Loan-backed and structured securities		4,730,820		77,213		11,915		4,796,118
Total bonds	$	13,803,525	$	635,827	$	29,588	$	14,409,764

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GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The book/adjusted carrying value and estimated fair value of bonds and assets receiving bond treatment, based on estimated cash flows, are shown in the table below. Actual maturities will likely differ from these projections because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	December 31, 2020
	Book/adjusted     carrying value		Fair value
Due in one year or less	$	1,359,756	$	1,374,606
Due after one year through five years		6,086,988		6,430,238
Due after five years through ten years		8,531,983		8,990,876
Due after ten years		4,257,648		4,458,122
Loan-backed and structured securities		6,330,981		6,475,732
Total bonds	$	26,567,356	$	27,729,574

Loan-backed and structured securities include those issued by U.S. government and U.S. agencies.

The following table summarizes information regarding the sales of securities:

	Years ended December 31,
	2020		2019                           2018
Consideration from sales	$	15,627,075	$	18,741,779	$	12,788,008
Gross realized gains from sales		81,504		511,103		32,672
Gross realized losses from sales		7,045		46,129		30,960

At December 31, 2019, consideration from sales include securities transferred to Protective as part of the Protective transaction (see Note 9 for additional information).

Unrealized losses on bonds

The following tables summarize gross unrealized investment losses including the non-credit-related portion of OTTI losses, by class of investment:

	December 31, 2020
	Less than twelve months				Twelve months or longer				Total
Bonds:	Fair value		Unrealized loss and OTTI		Fair value		Unrealized loss and OTTI		Fair value		Unrealized loss and OTTI
U.S. government	$	149,402	$	226	$	—	$	—	$	149,402	$	226
Industrial and miscellaneous		1,216,567		13,291		246,659		12,808		1,463,226		26,099
Hybrid securities		23,981		1,199		77,882		8,173		101,863		9,372
Loan-backed and structured securities		672,983		7,412		314,125		6,800		987,108		14,212
Total bonds	$	2,062,933	$	22,128	$	638,666	$	27,781	$	2,701,599	$	49,909
Total number of securities in an unrealized loss position				168				47				215

28

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

	December 31, 2019
	Less than twelve months				Twelve months or longer				Total
Bonds:	Fair value		Unrealized loss and OTTI		Fair value		Unrealized loss and OTTI		Fair value		Unrealized loss and OTTI
Industrial and miscellaneous		435,115		2,113		620,988		36,363		1,056,103		38,476
Hybrid securities		12,402		93		116,868		14,739		129,270		14,832
Loan-backed and structured securities		745,246		4,367		585,239		9,796		1,330,485		14,163
Total bonds	$	1,192,763	$	6,573	$	1,323,095	$	60,898	$	2,515,858	$	67,471
Total number of securities in an unrealized loss position				95				102				197

Bonds - Total unrealized losses and OTTI decreased by $17,562, or 26%, from December 31, 2019 to December 31, 2020. The decrease in unrealized losses was in industrial and miscellaneous as well as hybrid securities, and was primarily driven by higher valuations as a result of lower interest rates at December 31, 2020 compared to December 31, 2019. This decrease was offset by increases in the less than twelve month category of all asset categories, and reflects an increase in interest rates during fourth quarter of 2020 resulting in lower valuations of these bonds.

Total unrealized losses greater than twelve months decreased by $33,117 from December 31, 2019 to December 31, 2020. Industrial and miscellaneous account for 46%, or $12,808 of the unrealized losses and OTTI greater than twelve months at December 31, 2020. The majority of these bonds continue to be designated as investment grade. Management does not have the intent to sell these assets; therefore, an OTTI was not recognized in net income.

Loan-backed and structured securities account for 24%, or $6,800, of the unrealized losses and OTTI greater than twelve months at December 31, 2020. Of the $6,800 of unrealized losses and OTTI over twelve months on loan-backed and structured securities, 94% or $6,412 are on securities which continue to be designated as investment grade. The present value of cash flows expected to be collected is not less than amortized cost and management does not have the intent to sell these assets; therefore, an OTTI was not recognized in net income.

Loan-backed and structured securities

The Company had a concentration in loan-backed and structured securities of 16% and 21% of total invested assets at December 31, 2020 and 2019, respectively.

Derivative financial instruments

Derivative transactions are generally entered into pursuant to International Swaps and Derivatives Association (“ISDA”) Master Agreements with approved counterparties that provide for a single net payment to be made by one party to the other on a daily basis, periodic payment dates, or at the due date, expiration, or termination of the agreement.

The ISDA Master Agreements contain provisions that would allow the counterparties to require immediate settlement of all derivative instruments in a net liability position if the Company were to default on any debt obligations over a certain threshold. The aggregate fair value, inclusive of accrued income and expense, of derivative instruments with credit-risk-related contingent features that were in a net liability position was $128,238 and $68,046 as of December 31, 2020 and 2019, respectively. The Company had pledged collateral related to these derivatives of $7,181 and $5,022 as of December 31, 2020 and 2019, respectively, in the normal course of business. If the credit-risk-related contingent features were triggered on December 31, 2020 the fair value of assets that could be required to settle the derivatives in a net liability position was $121,057.

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GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

At December 31, 2020 and 2019, the Company had pledged $7,181 and $5,022, respectively, of unrestricted cash collateral to counterparties in the normal course of business, while other counterparties had pledged $54,302 unrestricted cash and securities collateral and $71,130 of unrestricted cash collateral to the Company to satisfy collateral netting arrangements, respectively.

At December 31, 2020 and 2019, the Company had pledged U.S. Treasury bills in the amount of $5,334 and $2,331, respectively, with a broker as collateral for futures contracts.

Types of derivative instruments and derivative strategies

Interest rate contracts

Cash flow hedges

Interest rate swap agreements are used to convert the interest rate on certain debt securities and debt obligations from a floating rate to a fixed rate.

Not designated as hedging instruments

The Company enters into certain transactions in which derivatives are hedging an economic risk but hedge accounting is either not elected or the transactions are not eligible for hedge accounting. These derivative instruments include: exchange-traded interest rate swap futures, OTC interest rate swaptions, OTC interest rate swaps, exchange-traded Eurodollar interest rate futures and treasury interest rate futures. Certain of the Company’s OTC derivatives are cleared and settled through a central clearing counterparty while others are bilateral contracts between the Company and a counterparty.

The derivative instruments mentioned above are economic hedges and used to manage risk. These transactions are used to offset changes in liabilities including those in variable annuity products, hedge the economic effect of a large increase in interest rates, manage the potential variability in future interest payments due to a change in credited interest rates and the related change in cash flows due to increased surrenders, and manage interest rate risks of forecasted acquisitions of bonds and forecasted liability pricing.

Foreign currency contracts

Cross-currency swaps and foreign currency forwards are used to manage the foreign currency exchange rate risk associated with investments denominated in other than U.S. dollars. The Company uses cross-currency swaps to convert interest and principal payments on foreign denominated debt instruments into U.S. dollars. Cross-currency swaps may be designated as cash flow hedges; however, some are not eligible for hedge accounting. The Company uses foreign currency forwards to reduce the risk of foreign currency exchange rate changes on proceeds received on sales of foreign denominated debt instruments; however, hedge accounting is not elected.

Equity contracts

The Company uses futures on equity indices to offset changes in GLWB liabilities; however, they are not eligible for hedge accounting.

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GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The following tables summarize derivative financial instruments:

	December 31, 2020
	Notional amount		Net book/adjusted carrying value (1)			Fair value (2)
Hedge designation/derivative type:
Derivatives designated as hedges:
Cash flow hedges:
Interest rate swaps	$	22,300	$	—		$	10,705
Cross-currency swaps		875,569		(4,071	)		9,352
Total derivatives designated as hedges		897,869		(4,071	)		20,057
Derivatives not designated as hedges:
Interest rate swaps		1,040,944		11,326			11,449
Futures on equity indices		2,957		1,172			1
Interest rate futures		10,500		4,162			—
Interest rate swaptions		174,000		34			34
Cross-currency swaps		541,142		23,084			21,234
Foreign currency forwards		1,510,024		(26	)		(26	)
Total derivatives not designated as hedges		3,279,567		39,752			32,692
Total cash flow hedges, and derivatives not designated as hedges	$	4,177,436	$	35,681		$	52,749

⁽¹⁾ The book/adjusted carrying value excludes accrued income and expense. The book/adjusted carrying value of all derivatives in an asset position is reported within other invested assets and the book/adjusted carrying value of all derivatives in a liability position is reported within other liabilities in the Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus.

⁽²⁾ The fair value includes accrued income and expense.

	December 31, 2019
	Notional amount		Net book/adjusted carrying value (1)		Fair value (2)
Hedge designation/derivative type:
Derivatives designated as hedges:
Cash flow hedges:
Interest rate swaps	$	22,300	$	—	$	8,385
Cross-currency swaps		880,490		35,372		38,370
Total cash flow hedges		902,790		35,372		46,755
Derivatives not designated as hedges:
Interest rate swaps		933,930		2,078		1,487
Futures on equity indices		6,890		545		(17	)
Interest rate futures		22,600		1,786		2
Interest rate swaptions		186,550		20		20
Cross-currency swaps		541,142		21,894		20,442
Total derivatives not designated as hedges		1,691,112		26,323		21,934
Total cash flow hedges and derivatives not designated as hedges	$	2,593,902	$	61,695	$	68,689

⁽¹⁾ The book/adjusted carrying value excludes accrued income and expense. The book/adjusted carrying value of all derivatives in an asset position is reported within other invested assets and the book/adjusted carrying value of all derivatives in a liability position is reported within other liabilities in the Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus.

⁽²⁾ The fair value includes accrued income and expense.

31

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The following table presents net unrealized gains/(losses) on derivatives not designated as hedging instruments as reported in the Statutory Statements of Changes in Capital and Surplus:

	Net unrealized gain (loss) on derivatives recognized in surplus
	Year Ended December 31,
	2020		2019		2018
Derivatives not designated as hedging instruments:
Interest rate swaps	$	7,306	$	13,954	$	(8,039)
Interest rate swaptions		180		123		198
Futures on equity indices		94		(241)		297
Interest rate futures		6		(132)		159
Cross-currency swaps		(3,975)		(8,396)		32,525
Foreign currency forwards		(20)		—		—
Total	$	3,591	$	5,308	$	25,140

Securities lending

Securities with a cost or amortized cost of $199,546 and $296,583, and estimated fair values of $201,848 and $297,018 were on loan under the program at December 31, 2020 and 2019, respectively.

The following table summarizes securities on loan by category:

	December 31,				December 31,
	2020				2019
	Book/adjusted carrying value		Fair value		Book/adjusted carrying value		Fair value
Hybrid securities	$	—	$	—	$	2,224	$	2,028
Industrial and miscellaneous		78,553		80,855		15,734		16,365
U.S. government		120,993		120,993		278,625		278,625
	$	199,546	$	201,848	$	296,583	$	297,018

The Company’s securities lending agreements are open agreements meaning the borrower can return and the Company can recall the loaned securities at any time.

The Company received cash of $206,811 and $303,282 as collateral at December 31, 2020 and 2019, respectively. This cash was reinvested into money market funds and short-term repurchase agreements which are collateralized by U.S. government or U.S. government agency securities and mature in under 30 days.

Reverse repurchase agreements

The Company had short-term reverse repurchase agreements with book/adjusted carrying values of $2,900 and $3,300 at December 31, 2020 and December 31, 2019, respectively, with maturities of 2 days to 1 week. The fair value of securities acquired under the tri-party agreement and held on the Company’s behalf was $2,958 and $3,366 at December 31, 2020 and December 31, 2019, respectively.

32

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

Restricted assets

The following tables summarize investments on deposit or trust accounts controlled by various state insurance departments in accordance with statutory requirements as well as other deposits and collateral pledged by the Company:

	December 31, 2020
	Gross (Admitted & Non-admitted) Restricted																			Percentage
	Total General Account (G/A)		G/A Supporting S/A Activity		Total Separate Account (S/A) Restricted Assets		S/A Assets Supporting G/A Activity		Total		Total From Prior Year		Increase/ (Decrease)			Total Non- admitted Restricted		Total Admitted Restricted		Gross (Admitted & Non- admitted) Restricted  to Total Assets		Admitted Restricted to Total Admitted Assets
Restricted Asset Category:
Collateral held under security lending arrangements	$	206,811	$	—	$	—	$	—	$	206,811	$	303,282	$	(96,471	)	$	—	$	206,811		0.27%		0.28%
Subject to reverse repurchase agreements		2,900		—		—		—		2,900		3,300		(400	)		—		2,900		0.00%		0.00%
FHLB capital stock		500		—		—		—		500		—		500			—		500		0.00%		0.00%
On deposit with states		4,264		—		—		—		4,264		4,294		(30	)		—		4,264		0.01%		0.01%
On deposit with other regulatory bodies		554		—		—		—		554		579		(25	)		—		554		0.00%		0.00%
Pledged as collateral not captured in other categories:
Futures margin deposits		5,334		—		1,411		—		6,745		2,330		4,415			—		6,745		0.01%		0.01%
Derivative cash collateral		7,181		—		271		—		7,452		5,022		2,430			—		7,452		0.01%		0.01%
Other restricted assets		1,175		—		—		—		1,175		1,218		(43	)		—		1,175		0.00%		0.00%
Total Restricted Assets	$	228,719	$	—	$	1,682	$	—	$	230,401	$	320,025	$	(89,624	)	$	—	$	230,401		0.30%		0.31%

33

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

	December 31, 2019
	Gross (Admitted & Non-admitted) Restricted																			Percentage
	Total General Account (G/A)		G/A Supporting S/A Activity		Total Separate Account (S/A) Restricted Assets		S/A Assets Supporting G/A Activity		Total		Total From Prior Year		Increase/ (Decrease)			Total Non- admitted Restricted		Total Admitted Restricted		Gross (Admitted & Non- admitted) Restricted  to Total Assets		Admitted Restricted to Total Admitted Assets
Restricted Asset Category:
Collateral held under security lending arrangements	$	303,282	$	—	$	—	$	—	$	303,282	$	45,102	$	258,180		$	—	$	303,282		0.62%		0.62%
Subject to reverse repurchase agreements		3,300		—		—		—		3,300		11,200		(7,900	)		—		3,300		0.01%		0.01%
Subject to dollar repurchase agreements		—		—		—		—		—		688,765		(688,765	)		—		—		0.00%		0.00%
On deposit with states		4,294		—		—		—		4,294		4,443		(149	)		—		4,294		0.01%		0.01%
On deposit with other regulatory bodies		579		—		—		—		579		603		(24	)		—		579		0.00%		0.00%
Pledged as collateral not captured in other categories:
Futures margin deposits		2,330		—		—		—		2,330		8,197		(5,867	)		—		2,330		0.01%		0.01%
Other collateral		—		—		—		—		—		5,320		(5,320	)		—		—		0.00%		0.00%
Derivative cash collateral		5,022		—		—		—		5,022		30,220		(25,198	)		—		5,022		0.01%		0.01%
Other restricted assets		1,218		—		—		—		1,218		1,259		(41	)		—		1,218		0.00%		0.00%
Total Restricted Assets	$	320,025	$	—	$	—	$	—	$	320,025	$	795,109	$	(475,084	)	$	—	$	320,025		0.66%		0.66%

Net investment income

The following table summarizes net investment income:

	Years Ended December 31,
	2020			2019                         2018
Bonds	$	474,967		$	621,993		$	822,645
Preferred stock		3			—			—
Common stock		151			455			221
Mortgage loans		107,249			158,678			169,415
Real estate		28,964			27,577			26,557
Contract loans		197,843			200,298			199,507
Cash, cash equivalents and short-term investments		5,862			16,409			4,749
Derivative instruments		18,840			16,915			16,308
Other invested assets		155,506			121,675			125,821
Miscellaneous		5,303			4,462			1,896
Gross investment income		994,688			1,168,462			1,367,119
Expenses		(46,344	)		(69,011	)		(59,732	)
Net investment income	$	948,344		$	1,099,451		$	1,307,387

The amount of interest incurred and charged to investment expense during the years ended December 31, 2020, 2019 and 2018 was $17,078, $33,188 and $22,070, respectively.

34

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The following table summarizes net realized capital gains (losses) on investments net of federal income tax and interest maintenance reserve transfer:

	Year Ended December 31,
	2020			2019			2018
Net realized capital gains (losses), before federal income tax	$	59,961		$	574,372		$	4,905
Less: Federal income tax		12,592			120,618			1,030
Net realized capital gains (losses), before IMR transfer		47,369			453,754			3,875
Net realized capital gains (losses) transferred to IMR, net of federal income tax of $17,100, $122,750 and ($1,781), respectively		64,327			461,776			(6,701	)
Net realized capital gains (losses), net of federal income tax expense (benefit) of ($4,508), ($2,133) and 2,811, respectively, and IMR transfer	$	(16,958	)	$	(8,022	)	$	10,576

Interest maintenance reserve

The following table summarizes activity in the interest maintenance reserve:

	Year ended December 31,
	2020
Reserve as of December 31, 2019	$	(7,864)
Transferred into IMR, net of taxes		64,327
IMR reinsurance activity		661,451
Balance before amortization		717,914
Amortization released to Statement of Operations		(39,141)
Reserve as of December 31, 2020	$	678,773

Concentrations

The Company had the following bond concentrations based on total invested assets:

	Concentration by type
	December 31,
	2020	2019
Industrial and miscellaneous	58%	51%
	Concentration by industry
	December 31,
	2020	2019
Financial services	14%	13%

Mortgage loans

The recorded investment of the commercial mortgage loan portfolio categorized as performing was $4,124,412 and $2,693,435, of which $1,634,389 and $0 were loan participation agreements as of December 31, 2020 and 2019, respectively. These mortgages were current as of December 31, 2020 and 2019.

35

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The maximum lending rates for commercial mortgage loans originated during the years ended December 31, 2020 and 2019 were 3.50% and 4.70%, respectively. The minimum lending rates for commercial mortgage loans originated during the years ended December 31, 2020 and 2019 were 2.45% and 4.05%, respectively.

During 2020 and 2019, the maximum percentage of any one loan to the value of security at the time of the loan, exclusive of insured or guaranteed or purchase money mortgages, was 59% and 64%, respectively.

The balance in the commercial mortgage provision allowance was $745 as of December 31, 2020 and 2019. There was no provision activity for the years ended December 31, 2020 and 2019.

The following tables present concentrations of the total commercial mortgage portfolio:

	Concentration by type
	December 31,
	2020	2019
Multi-family	49%	44%
Industrial	15%	19%
Office	13%	18%
Retail	13%	12%
Other	10%	7%
	100%	100%
	Concentration by geographic area
	December 31,
	2020	2019
Pacific	36%	33%
East North Central	17%	20%
South Atlantic	13%	14%
Middle Atlantic	11%	8%
Other	10%	8%
West South Central	7%	10%
Mountain	6%	7%
	100%	100%

36

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

5. Fair Value Measurements

The following tables summarize the fair value hierarchy for all financial instruments and invested assets:

					Fair Value Measurements at Reporting Date
Type of financial instrument					December 31, 2020
Assets:	Aggregate     fair value		Admitted assets and     liabilities		(Level 1)		(Level 2)		(Level 3)		Net Asset   Value (NAV)		Total   (All Levels)
Bonds	$	26,874,302	$	25,712,083	$	—	$	26,865,559	$	8,743	$	—	$	26,874,302
Preferred stock		119,684		119,687		—		119,684		—		—		119,684
Common stock		20,240		20,240		19,740		500		—		—		20,240
Mortgage loans		4,263,386		4,123,666		—		4,263,386		—		—		4,263,386
Real estate		227,336		43,776		—		227,336		—		—		227,336
Cash, cash equivalents and short-term investments		3,470,912		3,470,914		2,612,741		858,171		—		—		3,470,912
Contract loans		3,874,206		3,874,206		—		3,874,206		—		—		3,874,206
Other long-term invested assets		244,393		235,484		—		93,637		—		150,756		244,393
Securities lending reinvested collateral assets		206,811		206,811		62,050		144,761		—		—		206,811
Collateral under derivative counterparty collateral agreements		43,689		43,689		43,689		—		—		—		43,689
Other collateral		1,130		1,130		1,130		—		—		—		1,130
Receivable for securities		87,076		84,973		—		87,076		—		—		87,076
Derivative instruments		180,996		160,628		10		180,986		—		—		180,996
Separate account assets		28,571,811		28,455,204		14,406,648		13,741,300		—		423,863		28,571,811
Total assets	$	68,185,972	$	66,552,491	$	17,146,008	$	50,456,602	$	8,743	$	574,619	$	68,185,972
Liabilities:
Deposit-type contracts	$	4,562,617	$	5,215,962	$	—	$	4,562,617	$	—	$	—	$	4,562,617
Commercial paper		98,983		98,983		—		98,983		—		—		98,983
Payable under securities lending agreements		206,811		206,811		62,050		144,761		—		—		206,811
Collateral under derivative counterparty collateral agreements		36,450		36,450		36,450		—		—		—		36,450
Other collateral		1,130		1,130		1,130		—		—		—		1,130
Payable for securities		1,277,598		1,277,598		—		1,277,598		—		—		1,277,598
Derivative instruments		128,246		130,281		8		128,238		—		—		128,246
Separate account liabilities		853,042		853,042		70		852,972		—		—		853,042
Total liabilities	$	7,164,877	$	7,820,257	$	99,708	$	7,065,169	$	—	$	—	$	7,164,877

37

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

					Fair Value Measurements at Reporting Date
Type of financial instrument					December 31, 2019
Assets:	Aggregate     fair value		Admitted assets and     liabilities		(Level 1)		(Level 2)		(Level 3)		Net Asset   Value (NAV)		Total   (All Levels)
Bonds	$	14,409,764	$	13,803,525	$	—	$	14,395,297	$	14,467	$	—	$	14,409,764
Common Stock		20,249		20,249		20,249		—		—		—		20,249
Mortgage loans		2,742,188		2,692,690		—		2,742,188		—		—		2,742,188
Real estate		137,700		44,648		—		—		137,700		—		137,700
Cash, cash equivalents and short-term investments		818,328		818,328		298,720		519,608		—		—		818,328
Contract loans		3,995,291		3,995,291		—		3,995,291		—		—		3,995,291
Other long-term invested assets		128,287		120,934		—		38,070		—		90,217		128,287
Securities lending collateral assets		303,282		303,282		33,164		270,118		—		—		303,282
Collateral under derivative counterparty collateral agreements		76,212		76,212		76,212		—		—		—		76,212
Other collateral		504		504		504		—		—		—		504
Receivable for securities		6,853		5,313		—		6,853		—		—		6,853
Derivative instruments		136,753		124,254		3		136,750		—		—		136,753
Separate account assets		25,690,576		25,634,438		13,992,067		11,326,204		—		372,305		25,690,576
Total assets	$	48,465,987	$	47,639,668	$	14,420,919	$	33,430,379	$	152,167	$	462,522	$	48,465,987
Liabilities:
Deposit-type contracts	$	57,672	$	60,296	$	—	$	57,672	$	—	$	—	$	57,672
Commercial paper		99,900		99,900		—		99,900		—		—		99,900
Payable under securities lending agreements		303,282		303,282		33,164		270,118		—		—		303,282
Collateral under derivative counterparty collateral agreements		71,130		71,130		71,130		—		—		—		71,130
Other collateral		504		504		504		—		—		—		504
Payable for securities		733,150		733,150		—		733,150		—		—		733,150
Derivative instruments		68,064		62,559		19		68,045		—		—		68,064
Separate account liabilities		346,182		346,182		66		346,116		—		—		346,182
Total liabilities	$	1,679,884	$	1,677,003	$	104,883	$	1,575,001	$	—	$	—	$	1,679,884

Bonds, preferred and common stock

The fair values for bonds, preferred and common stock are generally based upon evaluated prices from independent pricing services. In cases where these prices are not readily available, fair values are estimated by the Company. To determine estimated fair value for these instruments, the Company generally utilizes discounted cash flow models with market observable pricing inputs such as spreads, average life, and credit quality. Fair value estimates are made at a specific point in time, based on available market information and judgments about financial instruments, including estimates of the timing and amounts of expected future cash flows and the credit standing of the issuer or counterparty.

Mortgage loans

Mortgage loan fair value estimates are generally based on discounted cash flows. A discount rate matrix is used where the discount rate valuing a specific mortgage generally corresponds to that mortgage’s remaining term and credit quality. Management believes the discount rate used is comparable to the credit, interest rate, term, servicing costs, and risks of loans similar to the portfolio loans that the Company would make today given its internal pricing strategy.

38

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

Real estate

The estimated fair value for real estate is based on the unadjusted appraised value which includes factors such as comparable property sales, property income analysis, and capitalization rates.

Cash, cash equivalents, short-term investments, collateral receivable and payable under securities lending agreements, receivable and payable for securities, and commercial paper

The amortized cost of cash, cash equivalents, short-term investments, collateral receivable and payable under securities lending agreements, receivable and payable for securities, and commercial paper is a reasonable estimate of fair value due to their short-term nature and the high credit quality of the issuers, counterparties and obligor. Cash equivalent investments also include money market funds that are valued using unadjusted quoted prices in active markets.

Contract loans

The Company believes the fair value of contract loans approximates book value. Contract loans are funds provided to contract holders in return for a claim on the contract. The funds provided are limited to the cash surrender value of the underlying contract. The nature of contract loans is to have a negligible default risk as the loans are fully collateralized by the value of the contract. Contract loans do not have a stated maturity and the balances and accrued interest are repaid either by the contractholder or with proceeds from the contract. Due to the collateralized nature of contract loans and unpredictable timing of repayments, the Company believes the fair value of contract loans approximates carrying value.

Other long-term invested assets

The fair values of other long-term invested assets are based on the specific asset type. Other invested assets that are held as bonds, such as surplus notes, are primarily valued the same as bonds.

Limited partnership interests represent the Company’s minority ownership interests in pooled investment funds. These funds employ varying investment strategies that primarily make private equity investments across diverse industries and geographical focuses. The net asset value, determined using the partnership financial statement reported capital account adjusted for other relevant information, which may impact the exit value of the investments, is used as a practical expedient to estimate fair value. Distributions by these investments are generated from investment gains, from operating income generated by the underlying investments of the funds and from liquidation of the underlying assets of the funds, which are estimated to be liquidated over the next one to 10 years. In the absence of permitted sales of its ownership interest, the Company will be redeemed out of the partnership interests through distributions.

Collateral under derivative counterparty collateral agreements and other collateral

Included in other assets is cash collateral received from or pledged to counterparties and included in other liabilities is the obligation to return the cash collateral to the counterparties. The carrying value of the collateral is a reasonable estimate of fair value.

Derivative instruments

The estimated fair values of OTC derivatives, primarily consisting of cross-currency swaps, foreign currency forwards, interest rate swaps and interest rate swaptions, are the estimated amount the Company would receive or pay to terminate the agreements at the end of each reporting period, taking into consideration current interest rates and other relevant factors.

39

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

Separate account assets and liabilities

Separate account assets and liabilities primarily include investments in mutual funds, unregistered funds, most of which are not subject to redemption restrictions, bonds, and short-term securities. Mutual funds and unregistered funds are recorded at net asset value, which approximates fair value, on a daily basis. The bond and short-term investments are valued in the same manner, and using the same pricing sources and inputs as the bond and short-term investments of the Company.

Deposit-type contracts

Fair values for liabilities under deposit-type insurance contracts are estimated using discounted liability calculations, adjusted to approximate the effect of current market interest rates for the assets supporting the liabilities

Fair value hierarchy

The following tables present information about the Company’s financial assets and liabilities carried at fair value and indicates the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value:

	Fair Value Measurements at Reporting Date
	December 31, 2020
							Net Asset Value		Total
Assets:	(Level 1)		(Level 2)		(Level 3)		(NAV)		(All Levels)
Common stock
Mutual funds	$	17,679	$	—	$	—	$	—	$	17,679
Industrial and miscellaneous		2,061		—		—		—		2,061
Other invested assets
Limited partnerships		—		—		—		150,756		150,756
Derivatives
Interest rate swaps		—		86,984		—		—		86,984
Cross-currency swaps		—		37,028		—		—		37,028
Interest rate swaptions		—		34		—		—		34
Foreign currency forwards		—		2,670		—		—		2,670
Separate account assets (1)		14,351,361		12,467,593		—		423,863		27,242,817
Total assets	$	14,371,101	$	12,594,309	$	—	$	574,619	$	27,540,029
Liabilities:
Derivatives
Interest rate swaps	$	—	$	75,535	$	—	$	—	$	75,535
Cross-currency swaps		—		15,794		—		—		15,794
Foreign currency forwards		—		2,695		—		—		2,695
Separate account liabilities (1)		70		852,972		—		—		853,042
Total liabilities	$	70	$	946,996	$	—	$	—	$	947,066

⁽¹⁾ Includes only separate account investments which are carried at the fair value of the underlying invested assets or liabilities owned by the separate accounts.

40

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

	Fair Value Measurements at Reporting Date
	December 31, 2019
							Net Asset Value		Total
Assets:	(Level 1)		(Level 2)		(Level 3)		(NAV)		(All Levels)
Common stock
Mutual funds	$	15,545	$	—	$	—	$	—	$	15,545
Industrial and miscellaneous		4,704		—		—		—		4,704
Other invested assets
Limited partnerships		—		—		—		90,217		90,217
Derivatives
Interest rate swaps		—		36,516		—		—		36,516
Cross-currency swaps		—		35,457		—		—		35,457
Interest rate swaptions		—		20		—		—		20
Separate account assets (1)		13,935,424		10,123,099		—		372,305		24,430,828
Total assets	$	13,955,673	$	10,195,092	$	—	$	462,522	$	24,613,287
Liabilities:
Derivatives
Interest rate swaps	$	—	$	35,029	$	—	$	—	$	35,029
Cross-currency swaps		—		15,015		—		—		15,015
Separate account liabilities (1)		66		346,116		—		—		346,182
Total liabilities	$	66	$	396,160	$	—	$	—	$	396,226

⁽¹⁾ Include only separate account investments which are carried at the fair value of the underlying invested assets or liabilities owned by the separate accounts.

6.   Non-Admitted Assets

The following table summarizes the Company’s non-admitted assets:

	December 31, 2020						December 31, 2019
Type	Asset		Non- admitted asset		Admitted asset		Asset		Non- admitted asset		Admitted asset
Cash, cash equivalents and short-term investments		3,470,926		12		3,470,914		818,329		1		818,328
Other invested assets		1,294,506		544,029		750,477		403,986		1,095		402,891
Premiums deferred and uncollected		16,338		82		16,256		15,273		74		15,199
Deferred income taxes		457,205		331,246		125,959		205,256		108,053		97,203
Due from parent, subsidiaries and affiliate		155,676		61,092		94,584		118,239		54,644		63,595
Other prepaid assets		2,206		2,206		—		22,712		22,712		—
Capitalized internal use software		—		—		—		37,917		37,917		—
Furniture, fixtures and equipment		5,914		5,914		—		5,095		5,095		—
Reinsurance recoverable		80,435		186		80,249		37,806		—		37,806
Other assets		671,151		2,113		669,038		499,620		8,788		490,832

The following table summarizes the Company’s aggregate Statement of Admitted Assets, Liabilities, Capital and Surplus values of all subsidiary, controlled and affiliated entities (“SCA”), except insurance SCA entities as follows:

	December 31, 2020						December 31, 2019
Type	Asset		Non- admitted asset		Admitted asset		Asset		Non- admitted asset		Admitted asset
Common stock	$	13,662	$	—	$	13,662	$	13,537	$	—	$	13,537
Other invested assets		813,421		544,029		269,392		156,119		1,095		155,024

41

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

7.   Premiums Deferred and Uncollected

The following table summarizes the Company’s ordinary and group life insurance premiums and annuity considerations deferred and uncollected, both gross and net of loading:

	December 31, 2020				December 31, 2019
Type	Gross		Net of loading		Gross		Net of loading
Ordinary renewal business	$	18,063	$	16,256	$	16,888	$	15,199
Total	$	18,063	$	16,256	$	16,888	$	15,199

8.   Business Combination and Goodwill

Goodwill that arises as a result of the acquisition of subsidiary limited liability companies is included in other invested assets in the accompanying Statutory Statement of Admitted Assets, Liabilities and Capital.

On August 29, 2014, the Company completed the acquisition of all of the voting equity interests in the J.P. Morgan Retirement Plan Services (“RPS”) large-market recordkeeping business. This transaction was accounted for as a statutory purchase. Goodwill of $51,098 was recorded in other invested assets, which is being amortized over 10 years. At December 2020 and 2019, the Company has $0 and $23,846, respectively, of admitted goodwill related to this acquisition. During each of the years ended December 31, 2020, 2019 and 2018, the Company recorded $5,110, $5,109 and $5,110, respectively, of goodwill amortization related to this acquisition.

On August 17, 2020, the Company completed the acquisition of all of the voting equity interests in the Personal Capital Corporation, an industry-leading registered investment adviser and digital wealth manager. This transaction was accounted for as a statutory acquisition. Goodwill of $819,403 was recorded in other invested assets, which is being amortized over 10 years. At December 2020 and 2019, the Company has $277,474 and $0, respectively, of admitted goodwill related to this acquisition. During each of the years ended December 31, 2020, 2019 and 2018, the Company recorded $27,313, $0 and $0, respectively, of goodwill amortization related to this acquisition.

Purchased Entity	Acquisition date		Cost of acquired entity		Original amount of admitted goodwill		Admitted goodwill as of December 31, 2020		Amount of goodwill amortized for the year ended December 31, 2020		Admitted goodwill as a % of SCA book/adjusted carrying value, gross of admitted goodwill
Retirement Plan Services		August 29, 2014	$	64,169	$	51,098	$	—	$	5,110		—%
Personal Capital Corporation		August 17, 2020	$	854,190	$	819,403	$	277,474	$	27,313		70.8%

9. Reinsurance

In the normal course of its business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding risks to other insurance enterprises under excess coverage and coinsurance contracts. The Company retains an initial maximum of $3,500 of coverage per individual life. This initial retention limit of $3,500 may increase due to automatic policy increases in coverage at a maximum rate of $175 per annum, with an overall maximum increase in coverage of $1,000. Effective June 1, 2019, all risks on non-participating policies within the above retention limits were ceded to Protective.

42

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

Ceded reinsurance contracts do not relieve the Company from its obligations to policyholders. The failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities or economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. Additionally, Protective, which represents the Company’s most significant ceded reinsurance relationship, is an authorized reinsurer and the Protective transaction is secured by assets held in a trust.

The Company assumes risk from approximately 40 insurers and reinsurers by participating in yearly renewable term and coinsurance pool agreements. When assuming risk, the Company seeks to generate revenue while maintaining reciprocal working relationships with these partners as they also seek to limit their exposure to loss on any single life.

Maximum capacity to be retained by the Company is dictated at the treaty level and is monitored annually to ensure the total risk retained on any one life is limited to a maximum retention of $4,500.

The Company did not have any write-offs for uncollectible reinsurance receivables during the years ended December 31, 2020, 2019 and 2018 for losses incurred, loss adjustment expenses incurred or premiums earned.

The Company does not have any uncollectible reinsurance, commutation of ceded reinsurance, or certified reinsurer downgraded of status subject to revocation.

On December 31, 2020 the Company completed the acquisition, via indemnity reinsurance, of the retirement services business of Massachusetts Mutual Life Insurance Company. The MassMutual transaction impacted the following financial statement lines, excluding the non-admitted deferred tax asset (in millions):

43

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus	December 31,
	2020
Admitted assets:
Cash and invested assets:
Bonds	$	7,855
Preferred stock		120
Mortgage loans		1,634
Other invested assets		132
Total cash and invested assets		9,741
Investment income due and accrued		64
Funds held or deposited with reinsured companies		6,761
Other assets		129
Total admitted assets	$	16,695
	December 31,
	2020
Liabilities, capital and surplus:
Liabilities:
Aggregate reserves for life policies and contracts	$	14,716
Liability for deposit-type contracts		3,183
Interest maintenance reserve		662
Other liabilities		113
Total liabilities		18,674
Capital and surplus:
Unassigned funds		(1,979	)
Total capital and surplus		(1,979	)
Total liabilities, capital and surplus	$	16,695
Statutory Statements of Operations	December 31,
	2020
Income:
Premium income and annuity consideration	$	15,567
Total income		15,567
Expenses:
Increase in aggregate reserves for life and accident and health policies and contracts		14,716
Total benefits		14,716
Commissions		2,168
Interest maintenance reserve reinsurance activity		662
Total benefit and expenses		17,546
Net loss from operations before federal income taxes	$	(1,979	)

44

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The Company received a capital contribution from parent of $2.8 billion to finance the transaction, as mentioned in Note 14.

Effective June 1, 2019, the Company terminated various related party reinsurance agreements and completed the sale, via indemnity reinsurance, of substantially all of its individual life insurance and annuity business to Protective. The Protective transaction impacted the following financial statement lines, excluding the non-admitted deferred tax asset (in millions):

45

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus	December 31,
	2019
Admitted assets:
Cash and invested assets:
Bonds	$	(7,302	)
Mortgage loans		(1,288	)
Contract loans		(24	)
Cash, cash equivalents and short-term investments		722
Other invested assets		(235	)
Total cash and invested assets		(8,127	)
Investment income due and accrued		(89	)
Premiums deferred and uncollected		(10	)
Reinsurance recoverable		25
Current federal income taxes recoverable		(1	)
Deferred income taxes		(21	)
Other assets		(3	)
Total admitted assets	$	(8,226	)
	December 31,
	2019
Liabilities, capital and surplus:
Liabilities:
Aggregate reserves for life policies and contracts	$	(8,287	)
Aggregate reserves for accident and health policies		(288	)
Liability for deposit-type contracts		(127	)
Life and accident and health policy and contract claims		(74	)
Provision for policyholders’ dividends		(63	)
Interest maintenance reserve		(66	)
Other liabilities		(33	)
Total liabilities		(8,938	)
Capital and surplus:
Gross paid in and contributed surplus		712
Total capital and surplus		712
Total liabilities, capital and surplus	$	(8,226	)
Statutory Statements of Operations	December 31,
	2019
Income:
Premium income and annuity consideration	$	(9,147	)
Commission and expense allowances on reinsurance ceded		154
Total income		(8,993	)

46

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

Expenses:
Decrease in aggregate reserves for life and accident and health policies and contracts		(8,575	)
Total benefits		(8,575	)
Net transfers from separate accounts		59
Interest maintenance reserve release		(512	)
Total benefit and expenses		(9,028	)
Net gain from operations before federal income taxes		35
Federal income tax benefit		(118	)
Net income	$	153

10. Aggregate Reserves

Aggregate reserves are computed in accordance with the Commissioner’s Annuity Reserve Valuation Method (“CARVM”) and the Commissioner’s Reserve Valuation Method (“CRVM”), the standard statutory reserving methodologies.

The significant assumptions used to determine the liability for future life insurance benefits are as follows:

Interest	- Life Insurance	2.25% to 6.00%
	- Annuity Funds	1% to 11.25%
	- Disability	2.50% to 6.00%
Mortality	- Life Insurance	Various valuation tables, primarily including 1941, 1958, 1980 and 2001 Commissioners Standard Ordinary (“CSO”) tables, and American Experience
	- Annuity Funds	Various annuity valuation tables, primarily including the GA 1951, 71, 83a and 2012 Individual Annuitant Mortality (“IAM”), Group Annuity Reserve (“GAR”) 94, 1971 and 1983 Group Annuity Mortality (“GAM”), and Annuity 2000
Morbidity	- Disability	1970 Intercompany DISA Group Disability Tables

The Company waives deduction of deferred fractional premiums upon the death of the insured. When surrender values exceed aggregate reserves, excess cash value reserves are held.

Policies issued at premium corresponding to ages higher than the true ages are valued at the rated-up ages. Policies providing for payment at death during certain periods of an amount less than the full amount of insurance, being policies subject to liens, are valued as if the full amount is payable without any deduction.

For policies issued with, or subsequently subject to, an extra premium payable annually, an extra reserve is held. The extra premium reserve is the unearned gross extra premium payable during the year if the policies are rated for reasons other than medical impairments. For medical impairments, the extra premium reserve is calculated as the excess of the reserve based on rated mortality over that based on standard mortality. All substandard annuities are valued at their true ages.

At December 31, 2020 and 2019, the Company had $3,766,969 and $3,925,596, respectively of insurance in force for which the gross premiums are less than the net premiums according to the standard valuation set by the Division.

Tabular interest, tabular interest on funds not involving life contingencies and tabular cost have been determined from the basic data for the calculation of aggregate reserves. Tabular less actual reserves released has been determined from basic data for the calculation of aggregate reserves and the actual reserves released.

47

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The withdrawal characteristics of annuity reserves and deposit liabilities are as follows:

	December 31, 2020
	General Account		Separate Account with Guarantees		Separate Account Non- Guaranteed		Total		Percent of Total Gross
Subject to discretionary withdrawal:
With market value adjustment	$	13,534,241	$	—	$	—	$	13,534,241		25.2	%
At book value less current surrender charges of 5% or more		820,107		—		—		820,107		1.5	%
At fair value		2,558,655		7,785,289		11,517,720		21,861,664		40.4	%
Total with adjustment or at market value		16,913,003		7,785,289		11,517,720		36,216,012		67.1	%
At book value without adjustment (minimal or no charge adjustment)		2,473,434		—		—		2,473,434		4.6	%
Not subject to discretionary withdrawal		15,266,932		—		—		15,266,932		28.3	%
Total gross		34,653,369		7,785,289		11,517,720		53,956,378		100.0	%
Reinsurance ceded		74,724		—		—		74,724
Total, net	$	34,578,645	$	7,785,289	$	11,517,720	$	53,881,654

	December 31, 2019
	General Account		Separate Account with Guarantees		Separate Account Non- Guaranteed		Total		Percent of Total Gross
Subject to discretionary withdrawal:
With market value adjustment	$	915,098	$	—	$	—	$	915,098		3.0%
At book value less current surrender charges of 5% or more		817,144		—		—		817,144		2.7%
At fair value		—		6,358,077		11,528,947		17,887,024		58.0%
Total with adjustment or at market value		1,732,242		6,358,077		11,528,947		19,619,266		63.7%
At book value without adjustment (minimal or no charge adjustment)		97,837		—		—		97,837		0.3%
Not subject to discretionary withdrawal		11,091,699		—		—		11,091,699		36.0%
Total gross		12,921,778		6,358,077		11,528,947		30,808,802		100.0%
Reinsurance ceded		71,124		—		—		71,124
Total, net	$	12,850,654	$	6,358,077	$	11,528,947	$	30,737,678

48

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The withdrawal characteristics of life reserves are as follows:

	December 31, 2020
	General Account						Separate Account - Nonguaranteed
Subject to discretionary withdrawal, surrender values, or policy loans:	Account Value		Cash Value		Reserve		Account Value		Cash Value		Reserve
Universal life	$	6,603,854	$	6,920,255	$	6,952,077	$	—	$	—	$	—
Other permanent cash value life insurance		—		6,845,366		7,160,342		—		—		—
Variable universal life		274,843		279,968		280,000		7,579,331		7,579,331		7,579,331
Not subject to discretionary withdrawal or no cash values:
Term policies without cash value		N/A		N/A		151,345		—		—		—
Accidental death benefits		N/A		N/A		466		—		—		—
Disability - active lives		N/A		N/A		1,093		—		—		—
Disability - disabled lives		N/A		N/A		117,509		—		—		—
Miscellaneous reserves		N/A		N/A		28,188		—		—		—
Total, gross		6,878,697		14,045,589		14,691,020		7,579,331		7,579,331		7,579,331
Reinsurance ceded		6,878,697		7,643,139		7,966,585		—		—		—
Total, net of reinsurance ceded	$	—	$	6,402,451	$	6,724,435	$	7,579,331	$	7,579,331	$	7,579,331

	December 31, 2019
	General Account						Separate Account - Nonguaranteed
Subject to discretionary withdrawal, surrender values, or policy loans:	Account Value		Cash Value		Reserve		Account Value		Cash Value		Reserve
Universal life	$	6,618,888	$	6,617,437	$	6,595,652	$	—	$	—	$	—
Other permanent cash value life insurance		—		6,949,889		7,306,841		—		—		—
Variable universal life		240,230		243,868		244,301		7,063,894		7,063,894		7,063,894
Not subject to discretionary withdrawal or no cash values:
Term policies without cash value		N/A		N/A		164,921		—		—		—
Accidental death benefits		N/A		N/A		1,195		—		—		—
Disability - active lives		N/A		N/A		1,078		—		—		—
Disability - disabled lives		N/A		N/A		126,059		—		—		—
Miscellaneous reserves		N/A		N/A		29,945		—		—		—
Total, gross		6,859,118		13,811,194		14,469,992		7,063,894		7,063,894		7,063,894
Reinsurance ceded		6,859,118		7,330,812		7,621,851		—		—		—
Total, net of reinsurance ceded	$	—	$	6,480,382		6,848,141	$	7,063,894	$	7,063,894	$	7,063,894

49

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

11. Liability for Unpaid Claims and Claim Adjustment Expenses

Activity in the accident and health liability for unpaid claims and for claim adjustment expenses included in aggregate reserve for life policies and contracts and accident and health policies, excluding unearned premium reserves, is summarized as follows:

	2020		2019
Balance, January 1, net of reinsurance of $284,531 and $19,082	$	794	$	247,529
Incurred related to:
Current year		252		9,941
Prior year		2,018		(217,477	)
Total incurred		2,270		(207,536	)
Paid related to:
Current year		—		(9,807	)
Prior year		—		(29,392	)
Total paid		—		(39,199	)
Balance, December 31, net of reinsurance of $282,922 and $284,531	$	3,064	$	794

Reserves for incurred claims and claim adjustment expenses attributable to insured events of prior years has changed by $2,018 and ($217,477) during the years ended December 31, 2020 and 2019, respectively. The change in the prior year was primarily due to the Protective transaction, with no comparable amount in the current year.

12. Commercial Paper

The Company has a commercial paper program that is partially supported by a $50,000 credit facility agreement. The commercial paper has been given a rating of A-1+ by Standard & Poor’s Ratings Services and a rating of P-1 by Moody’s Investors Service, each being the highest rating available. The Company’s issuance of commercial paper is not used to fund daily operations and does not have a significant impact on the Company’s liquidity.

The following table provides information regarding the Company’s commercial paper program:

	December 31,
	2020		2019
Face value	$	98,983	$	99,900
Carrying value	$	98,983	$	99,900
Interest expense paid	$	1,007	$	2,874
Effective interest rate		0.22% - 0.27%		1.8% - 2.1%
Maturity range (days)		21 - 26		13 - 24

13. Separate Accounts

The Company utilizes separate accounts to record and account for assets and liabilities for particular lines of business and/or transactions. The Company reported assets and liabilities from the following product lines into a separate account:

• Individual Annuity Product

• Group Annuity Product

• Variable Life Insurance Product

• Hybrid Ordinary Life Insurance Product

• Individual Indexed-Linked Annuity Product

50

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

In accordance with the domiciliary state procedures for approving items within the separate account, the separate account classification of the following items are supported by Colorado Insurance Code Section 10-7-402:

• Individual Annuity

• Group Annuity

• Variable Life Insurance Product

The following items are supported by direct approval by the Commissioner:

• Hybrid Ordinary Life Insurance Product

• Group Annuity - Custom Stable Value Asset Funds

• Variable Life Insurance Product

• Individual Indexed-Linked Annuity Product

The Company’s separate accounts invest in shares of Great-West Funds, Inc. and Putnam Funds, open-end management investment companies, which are affiliates of the Company, and shares of other non-affiliated mutual funds and government and corporate bonds.

Some assets within each of the Company’s separate accounts are considered legally insulated whereas others are not legally insulated from the general account. The legal insulation of the separate accounts prevents such assets from being generally available to satisfy claims resulting from the general account.

At December 31, 2020 and 2019, the Company’s separate account assets that are legally insulated from the general account claims are $28,447,693 and $25,632,375.

As of December 31, 2020 and 2019, $11,612,824 and $11,266,373, respectively, were ceded under Modified Coinsurance to Protective. While the Company holds the respective asset and liability under the Modified Coinsurance agreement, the economics are ceded to Protective, resulting in no impact to net income.

As of December 31, 2020 and 2019, $61,774,539 and $0, respectively, were acquired under modified coinsurance from MassMutual. While MassMutual holds the respective asset and liability under the modified coinsurance agreement, the economics are assumed by the Company.

Some separate account liabilities are guaranteed by the general account. In accordance with the guarantees provided, if the investment proceeds are insufficient to cover the rate of return guaranteed for the product, the policyholder proceeds will be remitted by the general account. To compensate the general account for the risk taken, the separate account has paid risk charges of $11,325, $11,649, $11,608, $12,581 and $12,961 for the years ended December 31, 2020, 2019, 2018, 2017 and 2016, respectively. No separate account guarantees were paid by the general account for the years ending December 31, 2020, 2019, 2018, 2017 and 2016, respectively.

Separate accounts with guarantees

The Government Guaranteed Funds are separate accounts investing in fixed income securities backed by the credit of the U.S. Government, its agencies or its instrumentalities.

The Stable Asset Funds invest in investment-grade corporate bonds in addition to the above mentioned securities.

51

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The Company also has separate accounts comprised of assets underlying variable universal life policies issued privately to accredited investors. The accounts invest in investment grade fixed income securities.

The Individual Indexed-Linked Annuity Product provides returns based on the performance of one or more indices and invests in fixed income securities. The returns from these securities are invested in derivative instruments which mimic the returns of select indices. There is also a return of premium death benefit guarantee to policyholders.

The Government Guaranteed Funds and Stable Asset Funds have a guaranteed minimum crediting rate of at least 0%. All of the above separate accounts provide a book value guarantee. Some of them also provide a death benefit of the greater of account balance or premium paid.

Distributions to a participant are based on the participant’s account balance and are permitted for the purpose of paying a benefit to a participant. Distributions for purposes other than paying a benefit to a participant may be restricted. Participants’ distributions are based on the amount of their account balance, whereas, distributions as a result of termination of the group annuity contract are based on net assets attributable to the contract and can be made to the group through (1) transfer of the underlying securities and any remaining cash balance, or (2) transfer of the cash balance after sale of the Fund’s securities.

Most guaranteed separate account assets and related liabilities are carried at fair value. Certain separate account assets are carried at book value based on the prescribed deviation from the Division.

Non-guaranteed separate accounts

The non-guaranteed separate accounts include unit investment trusts or series accounts that invest in diversified open-end management investment companies. These separate account assets and related liabilities are carried at fair value.

The investments in shares are valued at the closing net asset value as determined by the appropriate fund/portfolio at the end of each day. The net investment experience of the separate account is credited directly to the policyholder and can be positive or negative. Some of the separate accounts provide an incidental death benefit of the greater of the policyholder’s account balance or premium paid and some provide an incidental annual withdrawal benefit for the life of the policyholder. Certain contracts contain provisions relating to a contingent deferred sales charge. In such contracts, charges will be made for total or partial surrender of a participant annuity account in excess of the “free amount” before the retirement date by a deduction from a participant’s account. The “free amount” is an amount equal to 10% of the participant account value at December 31 of the calendar year prior to the partial or total surrender.

52

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The following tables provide information regarding the Company’s separate accounts:

	Year Ended December 31, 2020
	Non-indexed guaranteed less than/equal to 4%		Non-guaranteed separate account		Total
Premiums, considerations or deposits	$	403,703	$	949,333	$	1,353,036
Reserves
For accounts with assets at:
Fair value	$	8,767,847	$	16,897,365	$	25,665,212
Amortized cost		1,187,709		—		1,187,709
Total reserves	$	9,955,556	$	16,897,365	$	26,852,921
By withdrawal characteristics:
At fair value	$	8,767,847	$	16,897,365	$	25,665,212
At book value without fair value adjustment and with current surrender charge less than 5%		1,187,709		—		1,187,709
Total subject to discretionary withdrawals	$	9,955,556	$	16,897,365	$	26,852,921
	Year Ended December 31, 2019
	Non-indexed guaranteed less than/equal to 4%		Non-guaranteed separate account		Total
Premiums, considerations or deposits	$	528,618	$	1,274,716	$	1,803,334
Reserves
For accounts with assets at:
Fair value	$	7,315,010	$	16,440,747	$	23,755,757
Amortized cost		1,168,009		—		1,168,009
Total reserves	$	8,483,019	$	16,440,747	$	24,923,766
By withdrawal characteristics:
At fair value	$	7,315,010	$	16,440,747	$	23,755,757
At book value without fair value adjustment and with current surrender charge less than 5%		1,168,009		—		1,168,009
Total subject to discretionary withdrawals	$	8,483,019	$	16,440,747	$	24,923,766

53

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

A reconciliation of the amounts transferred to and from the separate accounts is presented below:

	Year Ended December 31,
	2020			2019			2018
Transfers as reported in the Summary of Operations of the separate account statement:
Transfers to separate accounts	$	1,353,036		$	1,803,334		$	2,621,510
Transfers from separate accounts		(1,759,730	)		(4,226,616	)		(5,198,817	)
Net transfers from separate accounts		(406,694	)		(2,423,282	)		(2,577,307	)
Reconciling adjustments:
Net transfer of reserves to separate accounts		(412,121	)		1,203,800			1,464,314
Miscellaneous other		(1,137	)		836			528
CARVM allowance reinsured		(8,545	)		70,071			—
Reinsurance		19,469			(179,568	)		—
Net transfers as reported in the Statements of Operations	$	(809,028	)	$	(1,328,143	)	$	(1,112,465	)

14. Capital and Surplus, Dividend Restrictions, and Other Matters

The payment of principal and interest under all surplus notes can be made only with prior written approval of the Commissioner of Insurance of the State of Colorado. Such payments are payable only out of surplus funds of the Company and only if at the time of such payment, and after giving effect to the making thereof, the financial condition of the Company is such that its surplus would not fall below two and one-half times the authorized control level as required by the most recent risk-based capital calculations.

On November 15, 2004, the Company issued a surplus note in the face amount of $195,000 to GWL&A Financial. The proceeds were used to redeem a $175,000 surplus note issued May 4, 1999 and for general corporate purposes. The surplus note bears interest at the rate of 6.675% and was due November 14, 2034. On December 9, 2019 the Company used proceeds from the ceding commission earned on the Protective transaction to redeem the surplus note balance in full. The carrying amount of the surplus note was $0 and $0 at December 31, 2020 and 2019, respectively. Interest paid on the note was $0 for the year ended December 31, 2020 and $13,016 for the years ended December 31, 2019 and 2018, respectively, bringing total interest paid from inception to December 31, 2020 to $195,243. The amount of unapproved principal and interest was $0 at December 31, 2020 and 2019.

On December 29, 2017, the Company issued a surplus note in the face amount and carrying amount of $12,000 to GWL&A Financial Inc. The proceeds were used for general corporate purposes. The surplus note bears an interest rate of 3.5% per annum. The note matures of December 29, 2027. Interest paid on the note during 2020, 2019 and 2018 amounted to $420, $420 and $420, respectively, bringing total interest paid from inception to December 31, 2020 to $1,262. The amount of unapproved principal and interest was $0 at December 31, 2020.

On May 17, 2018, the Company issued a surplus note in the face amount and carrying amount of $346,218 to GWL&A Financial Inc. The proceeds were used to redeem the $333,400 surplus note issued in 2006 and for general corporate purposes. The surplus note bears an interest rate of 4.881% per annum. The note matures on May 17, 2048. Interest paid on the note during 2020, 2019, and 2018 amounted to $16,899, $16,899 and $10,515, respectively, bringing total interest paid from inception to December 31, 2020 to $44,313. The amount of unapproved principal and interest was $0 at December 31, 2020.

In the first quarter of 2018, the Company realized a $39,921 after tax gain on an interest rate swap that hedged the existing $333,400 surplus note. The Company adjusted the basis of the hedged item, in this case the surplus note, for the amount of the after tax gain. Further, the Company accounted for the redemption of the $333,400 surplus note and the issuance of the $346,218 surplus note in the second quarter as debt modification instead of debt extinguishment. Therefore, the after tax swap gain will be

54

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

amortized into income over the 30 year life of the new surplus note. Amortization of the gain during 2020, 2019 and 2018 amounted to $1,331, $1,330 and $998, respectively bringing the total amortization from inception to December 31, 2020 amounted to $3,659, leaving an unamortized balance of $36,262 in surplus as part of the surplus note amounts.

On August 12, 2020, the Company issued a surplus note in the face amount and carrying amount of $527,500 to GWL&A Financial Inc. The proceeds were used to finance the Personal Capital transaction. The surplus note bears an interest rate of 1.260% per annum. The note matures on August 12, 2025. Interest paid on the note during 2020 and 2019 amounted to $0 and $0, respectively, bringing total interest paid from inception to December 31, 2020 to $0. The amount of unapproved principal and interest were $0 at December 31, 2020.

As of the fourth quarter of 2020, the Company had received capital contributions of $3.1 billion from GWL&A Financial Inc. The proceeds were used to finance the Personal Capital and MassMutual transactions.

As an insurance company domiciled in the State of Colorado, the Company is required to maintain a minimum of $2,000 of capital and surplus. In addition, the maximum amount of dividends which can be paid to stockholders by insurance companies domiciled in the State of Colorado, without prior approval of the Insurance Commissioner, is subject to restrictions relating to statutory capital and surplus and statutory net gain from operations. The Company may not pay a dividend during the year ended December 31, 2021, without the prior approval of the Colorado Insurance Commissioner due to large dividends paid in 2019 and the net loss related to the MassMutual ceding commission in 2020. Prior to any payment of dividends, the Company provides notice to the Colorado Insurance Commissioner. Dividends are non-cumulative and paid as determined by the Board of Directors, subject to the limitations described above. During the years ended December 31, 2020, 2019 and 2018 the Company paid dividends to GWL&A Financial Inc, totaling $357,752, $639,801, and $152,295, respectively.

The portion of unassigned funds (surplus) represented or (reduced) by each of the following items is:

	December 31,
	2020			2019
Current year net (loss) income	$	(1,695,012	)	$	382,805
Unrealized (losses) gains		(76,064	)		210,179
Deferred income taxes		256,714			(129,400	)
Non-admitted assets		(946,880	)		(238,379	)
Surplus as regards reinsurance		454,045			537,566
Asset valuation reserve		(202,003	)		(194,032	)
Dividends		(357,752	)		(639,801	)
Other		7,401			395,386
Total unassigned funds	$	(2,559,551	)	$	324,324

Risk-based capital (“RBC”) is a regulatory tool for measuring the minimum amount of capital appropriate for a life, accident and health organization to support its overall business operations in consideration of its size and risk profile. The Division requires the Company to maintain minimum capital and surplus equal to the company action level as calculated in the RBC model. The Company exceeds the required amount.

55

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

15. Federal Income Taxes

The following table presents the components of the net admitted deferred tax asset:

	December 31, 2020									December 31, 2019									Change
	Ordinary			Capital			Total			Ordinary			Capital			Total			Ordinary			Capital			Total
Gross deferred tax assets	$	481,393		$	—		$	481,393		$	224,934		$	—		$	224,934		$	256,459		$	—		$	256,459
Valuation allowance adjustment		—			—			—			—			—			—			—			—			—
Adjusted gross deferred tax asset		481,393			—			481,393			224,934			—			224,934			256,459			—			256,459
Deferred tax assets non-admitted		(340,176	)		8,930			(331,246	)		(109,435	)		1,382			(108,053	)		(230,741	)		7,548			(223,193	)
Net admitted deferred tax asset		141,217			8,930			150,147			115,499			1,382			116,881			25,718			7,548			33,266
Gross deferred tax liabilities		(15,258	)		(8,930	)		(24,188	)		(18,296	)		(1,382	)		(19,678	)		3,038			(7,548	)		(4,510	)
Net admitted deferred tax asset	$	125,959		$	—		$	125,959		$	97,203		$	—		$	97,203		$	28,756		$	—		$	28,756

The Company admits deferred tax assets pursuant to paragraphs 11.a, 11.b.i, 11.b.ii, and 11.c, in SSAP No. 101. The following table presents the amount of deferred tax asset admitted under each component of SSAP No. 101:

	December 31, 2020						December 31, 2019						Change
	Ordinary		Capital		Total		Ordinary		Capital		Total		Ordinary			Capital		Total
(a) Federal income taxes paid in prior years recoverable through loss carrybacks	$	—	$	—	$	—	$	—	$	—	$	—	$	—		$	—	$	—
(b) Adjusted gross deferred tax assets expected to be realized (excluding the amount of deferred tax assets from (a) above) after application of the threshold limitation (lesser of (i) and (ii) below)		125,959		—		125,959		97,203		—		97,203		28,756			—		28,756
(i) Adjusted gross deferred tax assets expected to be realized following the balance sheet date		125,959		—		125,959		97,203		—		97,203		28,756			—		28,756
(ii) Adjusted gross deferred tax assets expected allowed per limitation threshold		—		—		304,773		—		—		201,129		—			—		103,644
(c) Adjusted gross deferred tax assets (excluding the amount of deferred tax assets from (a) and (b) above) offset by gross deferred tax liabilities		15,258		8,930		24,188		18,296		1,382		19,678		(3,038	)		7,548		4,510
Total deferred tax assets admitted as a result of the application of SSAP No. 101	$	141,217	$	8,930	$	150,147	$	115,499	$	1,382	$	116,881	$	25,718		$	7,548	$	33,266

The following table presents the threshold limitations utilized in the admissibility of deferred tax assets under paragraph 11.b of SSAP No. 101:

	2020		2019
Ratio percentage used to determine recovery period and threshold limitation amount		918.28%		1247.01%
Amount of adjusted capital and surplus used to determine recovery period and threshold limitation	$	2,031,818	$	1,340,863

56

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The following table presents the impact of tax planning strategies:

	December 31, 2020                      December 31, 2019												Change
	Ordinary			Capital			Ordinary			Capital			Ordinary			Capital
Adjusted gross deferred tax asset	$	481,393		$	—		$	224,934		$	—		$	256,459		$	—
% of adjusted gross deferred tax asset by character attributable to tax planning strategies		—	%		—	%		—	%		—	%		—	%		—	%
Net admitted adjusted gross deferred tax assets	$	141,217		$	8,930		$	115,499		$	1,382		$	25,718		$	7,548
% of net admitted adjusted gross deferred tax asset by character attributable to tax planning strategies		—	%		—	%		—	%		—	%		—	%		—	%

The Company’s tax planning strategies do not include the use of reinsurance.

There are no temporary differences for which deferred tax liabilities are not recognized.

The components of current income taxes incurred include the following:

	Year Ended December 31,
	2020			2019			Change
Current income tax	$	(20,260	)	$	(98,474	)	$	78,214
Federal income tax on net capital gains		12,592			120,618			(108,026	)
Total	$	(7,668	)	$	22,144		$	(29,812	)
	Year Ended December 31,
	2019			2018			Change
Current income tax	$	(98,474	)	$	(17,604	)	$	(80,870	)
Federal income tax on net capital gains		120,618			1,030			119,588
Total	$	22,144		$	(16,574	)	$	38,718

57

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The tax effects of temporary differences, which give rise to the deferred income tax assets and liabilities are as follows:

	December 31,
Deferred income tax assets:	2020			2019			Change
Ordinary:
Reserves	$	38,987		$	33,451		$	5,536
Investments		1,784			2,025			(241	)
Pension accrual		11			—			11
Provision for dividends		2,168			2,334			(166	)
Fixed assets		1,792			3,320			(1,528	)
Compensation and benefit accrual		20,843			23,408			(2,565	)
Receivables - non-admitted		13,737			16,568			(2,831	)
Tax credit carryforward		111,979			114,265			(2,286	)
Ceding commission-reinsurance		270,929			—			270,929
Other		19,163			29,563			(10,400	)
Total ordinary gross deferred tax assets		481,393			224,934			256,459
Valuation allowance adjustment		—			—			—
Total adjusted ordinary gross deferred tax assets		481,393			224,934			256,459
Non-admitted ordinary deferred tax assets		(340,176	)		(109,435	)		(230,741	)
Admitted ordinary deferred tax assets		141,217			115,499			25,718
Capital:								—
Investments		—			—			—
Total capital gross deferred tax assets		—			—			—
Valuation allowance adjustment		—			—			—
Total adjusted gross capital deferred tax assets		—			—			—
Non-admitted capital deferred tax assets		8,930			1,382			7,548
Admitted capital deferred tax assets		8,930			1,382			7,548
Total admitted deferred tax assets	$	150,147		$	116,881		$	33,266
Deferred income tax liabilities:
Ordinary:
Investments	$	(547	)	$	—		$	(547	)
Premium receivable		(3,414	)		(3,192	)		(222	)
Policyholder reserves		(10,931	)		(14,089	)		3,158
Experience refunds		—			—			—
Other		(366	)		(1,015	)		649
Total ordinary deferred tax liabilities		(15,258	)		(18,296	)		3,038
Capital
Investments	$	(8,930	)	$	(1,382	)	$	(7,548	)
Total capital deferred tax liabilities		(8,930	)		(1,382	)		(7,548	)
Total deferred tax liabilities	$	(24,188	)	$	(19,678	)	$	(4,510	)
Net admitted deferred income tax asset	$	125,959		$	97,203		$	28,756

58

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The change in deferred income taxes reported in surplus before consideration of non-admitted assets is comprised of the following components:

	December 31,
	2020			2019			Change
Total deferred income tax assets	$	481,393		$	224,934		$	256,459
Total deferred income tax liabilities		(24,188	)		(19,678	)		(4,510	)
Net deferred income tax asset	$	457,205		$	205,256			251,949
Tax effect of unrealized capital gains (losses)								5,187
Other surplus								(422	)
Change in net deferred income tax							$	256,714
	December 31,
	2019			2018			Change
Total deferred income tax assets	$	224,934		$	371,710		$	(146,776	)
Total deferred income tax liabilities		(19,678	)		(31,065	)		11,387
Net deferred income tax asset	$	205,256		$	340,645			(135,389	)
Tax effect of unrealized capital gains (losses)								7,108
Other surplus								(1,119	)
Change in net deferred income tax							$	(129,400	)

The provision for federal income taxes and change in deferred income taxes differ from that which would be obtained by applying the statutory federal income tax rate of 21% to income before income taxes. The significant items causing this difference are as follows:

	December 31,
	2020			2019			2018
Income tax expense at statutory rate		$                (356,646	)	$	61,396		$	60,337
Earnings from subsidiaries		(30,013	)		(22,849	)		(22,003	)
Swap gain on debt refinancing		—			—			8,175
Ceding commission from Protective, net of transaction expenses		(17,540	)		112,889			—
Dividend received deduction		(5,553	)		(6,161	)		(6,657	)
Tax adjustment for interest maintenance reserve		130,717			(1,739	)		(5,221	)
Interest maintenance reserve release on Protective transaction		—			(107,527	)		—
Prior year adjustment		552			(1,695	)		(4,124	)
Tax effect on non-admitted assets		4,884			3,425			(3,476	)
Tax credits		(2,963	)		(3,660	)		(2,901	)
Income tax on realized capital gain (loss)		12,592			120,618			1,030
Tax contingency		931			1,129			(607	)
Other		(1,343	)		(4,282	)		(395	)
Total	$	(264,382	)	$	151,544		$	24,158
	2020			2019			2018
Federal income taxes incurred	$	(7,668	)	$	22,144		$	(16,574	)
Change in net deferred income taxes		(256,714	)		129,400			40,732
Total income taxes	$	(264,382	)	$	151,544		$	24,158

59

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

As of December 31, 2020, the Company had no operating loss carryforwards.

As of December 31, 2020, the Company has Guaranteed Federal Low Income Housing tax credit carryforwards of $111,979. These credits will begin to expire in 2031.

As of December 31, 2020, the Company has foreign tax credit carryforwards of $0.

The following are income taxes incurred in prior years that will be available for recoupment in the event of future net losses:

Year Ended December 31, 2020	$	20,366
Year Ended December 31, 2019		132,977
Year Ended December 31, 2018		4,146

The Company has no deposits admitted under Section 6603 of the Internal Revenue Code.

The Company’s federal income tax return is consolidated with the following entities (the “U.S. Consolidated Group”):

Great-West Lifeco U.S. LLC

GWFS Equities, Inc.

GWL&A Financial Inc.

Great-West Life & Annuity Insurance Company of South Carolina

Great-West Life & Annuity Insurance Company of New York

Putnam Investments, LLC

Putnam Acquisition Financing, Inc.

Putnam Retail Management, LP

Putnam Retail Management GP, Inc.

Putnam Investor Services, Inc.

PanAgora Holdings, Inc

PanAgora Asset Management, Inc.

Putnam Advisory Holdings, LLC

Putnam Advisory Holdings II, LLC

Empower Retirement, LLC

Advised Assets Group, LLC

Great-West Trust Company, LLC

Great-West Capital Management, LLC

Personal Capital Corporation

Personal Capital Advisors Corporation

Personal Capital Services Corporation

Personal Capital Technology Corporation

The Company, GWL&A NY and GWSC (“GWLA Subgroup”) are life insurance companies who form a life subgroup under the consolidated return regulations. These regulations determine whether the taxable income or losses of this subgroup may offset or be offset with the taxable income or losses of other non-life entities.

The GWLA Subgroup accounts for income taxes on the modified separate return method on each of their separate company, statutory financial statements. Under this method, current and deferred tax expense or benefit is determined on a standalone basis; however the Company also considers taxable income or losses from other members of the GWLA Subgroup when determining its deferred tax assets and liabilities, and in evaluating the realizability of its deferred tax assets.

60

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The method of settling income tax payables and receivables (“Tax Sharing Agreement”) among the U.S. consolidated group is subject to a written agreement approved by the Board of Directors, whereby settlement is made on a separate return basis (i.e., the amount that would be due to or from a jurisdiction had an actual separate return been filed) except for the current utilization of any net operating losses and other tax attributes by members of the U.S. Consolidated Group, which can lead to receiving a payment when none would be received from the jurisdiction had a real separate tax return been required. The GWLA Subgroup has a policy of settling intercompany balances as soon as practical after the filing of the federal consolidated return or receipt of the income tax refund from the Internal Revenue Service (“I.R.S.”).

The Company determines income tax contingencies in accordance with Statement of Statutory Accounting Principles No. 5R, Liabilities, Contingencies and Impairments of Assets (“SSAP No. 5R”) as modified by SSAP No. 101. As of December 31, 2020 the amount of tax contingencies computed in accordance with SSAP No. 5R is $0, with the exception of interest and penalties. The Company does not expect a significant increase in tax contingencies within the 12 month period following the balance sheet date.

The Company recognizes accrued interest and penalties related to tax contingencies in current income tax expense. During the years ended December 31, 2020 and 2019, the Company recognized approximately $931 and $1,129 of expense from interest and penalties related to the uncertain tax positions. The Company had $2,374 and $1,443 accrued for the payment of interest and penalties at December 31, 2020 and 2019, respectively.

The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company’s parent, with which it files a consolidated federal income tax return, is under examination for tax years 2007 through 2014 with respect to foreign tax credit refund claims. Tax Years 2015 through 2019 are open to federal examination by the Internal Revenue Service. The Company does not expect significant increases or decreases to unrecognized tax benefits relating to federal, state or local audits.

The Company does not have any foreign operations as of the periods ended December 31, 2020 and December 31, 2019 and therefore is not subject to the tax on Global Intangible Low-Taxed Income.

16. Employee Benefit Plans

Post-Retirement Medical and Supplemental Executive Retirement Plans

Previously, the Company sponsored an unfunded Post-Retirement Medical Plan (the “Medical Plan”) that provided health benefits to retired employees who are not Medicare eligible. The Medical Plan is contributory and contains other cost sharing features which may be adjusted annually for the expected general inflation rate. The Company’s policy is to fund the cost of the Medical Plan benefits in amounts determined at the discretion of management. Effective January 1, 2020, the Company transferred the Medical Plan to its subsidiary, Empower.

The Company provides Supplemental Executive Retirement Plans to certain key executives. These plans provide key executives with certain benefits upon retirement, disability or death based upon total compensation. The Company has purchased individual life insurance policies with respect to each employee covered by these plans. The Company is the owner and beneficiary of the insurance contracts.

A December 31 measurement date is used for the employee benefit plans.

61

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The following tables provide a reconciliation of the changes in the benefit obligations, fair value of plan assets and the underfunded status for the Company’s Post-Retirement Medical and Supplemental Executive Retirement plans:

	Post-Retirement Medical Plan						Supplemental Executive Retirement Plan						Total
	Year Ended December 31,						Year Ended December 31,						Year Ended December 31,
	2020			2019			2020			2019			2020			2019
Change in projected benefit obligation:
Benefit obligation, January 1	$	22,696		$	19,539		$	40,801		$	37,562		$	63,497		$	57,101
Service cost		—			1,435			—			—			—			1,435
Interest cost		—			825			1,175			1,510			1,175			2,335
Actuarial (gain) loss		—			2,059			2,753			4,109			2,753			6,168
Regular benefits paid		—			(1,162	)		(2,566	)		(2,380	)		(2,566	)		(3,542	)
Benefit obligation transferred to Empower		(22,696	)		—			—			—			(22,696	)		—
Benefit obligation and under funded status, December 31	$	—		$	22,696		$	42,163		$	40,801		$	42,163		$	63,497
Accumulated benefit obligation		—		$	22,696			42,163			40,801			42,163		$	63,497
	Post-Retirement Medical Plan						Supplemental Executive Retirement Plan						Total
	Year Ended December 31,						Year Ended December 31,						Year Ended December 31,
	2020			2019			2020			2019			2020			2019
Change in plan assets:
Fair Value of plan assets, January 1	$	—		$	—		$	—		$	—		$	—		$	—
Employer contributions		—			1,162			2,566			2,380			2,566			3,542
Regular Benefits paid		—			(1,162	)		(2,566	)		(2,380	)		(2,566	)		(3,542	)
Fair Value of plan assets, December 31	$	—		$	—		$	—		$	—		$	—		$	—

The following table presents amounts recognized in the Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus for the Company’s Post-Retirement Medical and Supplemental Executive Retirement plans:

	Post-Retirement Medical Plan					Supplemental Executive Retirement Plan						Total
	December 31,					December 31,						December 31,
	2020		2019			2020			2019			2020			2019
Amounts recognized in the Statutory Statements of Admitted Assets, Liabilities, Capital and Surplus:
Accrued benefit liability	$	—	$	(22,224	)	$	(38,349	)	$	(39,470	)	$	(38,349	)	$	(61,694	)
Liability for pension benefits		—		(472	)		(3,814	)		(1,331	)		(3,814	)		(1,803	)
Total other liabilities	$	—	$	(22,696	)	$	(42,163	)	$	(40,801	)	$	(42,163	)	$	(63,497	)
Unassigned surplus (deficit)	$	—	$	(472	)	$	(3,814	)	$	(1,331	)	$	(3,814	)	$	(1,803)

62

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The following table presents amounts not yet recognized in the statements of financial position for the Company’s Post-Retirement Medical and Supplemental Executive Retirement plans:

	Post-Retirement Medical Plan					Supplemental Executive Retirement Plan						Total
	December 31,					December 31,						December 31,
	2020		2019			2020			2019			2020			2019
Unrecognized net actuarial gain (loss)	$	—	$	2,869		$	(3,515	)	$	(732	)	$	(3,515	)	$	2,137
Unrecognized prior service cost		—		(3,341	)		(299	)		(599	)		(299	)		(3,940	)

The following table presents amounts in unassigned funds recognized as components of net periodic benefit cost for the Company’s Post-Retirement Medical and Supplemental Executive Retirement plans:

	Post-Retirement Medical Plan						Supplemental Executive Retirement Plan						Total
	Year Ended December 31,						Year Ended December 31,						Year Ended December 31,
	2020			2019			2020			2019			2020			2019
Items not yet recognized as component of net periodic cost on January 1,	$	(472	)	$	995		$	(1,331	)	$	2,529		$	(1,803	)	$	3,524
Transferred to Empower		472			—			—			—			472			—
Prior service cost recognized in net periodic cost		—			817			299			299			299			1,116
(Gain) loss recognized in net periodic cost		—			(225	)		(29	)		(50	)		(29	)		(275	)
Gain (loss) arising during the year		—			(2,059	)		(2,753	)		(4,109	)		(2,753	)		(6,168	)
Items not yet recognized as component of net periodic cost on December 31	$	—		$	(472	)	$	(3,814	)	$	(1,331	)	$	(3,814	)	$	(1,803	)

The following table provides information regarding amounts in unassigned funds that are expected to be recognized as components of net periodic benefit costs during the year ended December 31, 2021:

	Post-Retirement Medical Plan		Supplemental Executive Retirement Plan			Total
Net actuarial gain	$	—	$	(29	)	$	(29	)
Prior service cost		—		299			299

The expected benefit payments for the Company’s Supplemental Executive Retirement plan for the years indicated are as follows:

	2021		2022		2023		2024		2025		2026 through 2030
Supplemental executive retirement plan		2,567		10,282		5,756		2,179		1,962		8,382

63

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

The following table presents the components of net periodic cost (benefit):

	Post-Retirement Medical Plan								Supplemental Executive Retirement Plan									Total
	Year Ended December 31,								Year Ended December 31,									Year Ended December 31,
	2020		2019			2018			2020			2019			2018			2020			2019			2018
Components of net periodic cost (benefit):
Service cost	$	—	$	1,435		$	1,425		$	—		$	—		$	—		$	—		$	1,435		$	1,425
Interest cost		—		825			703			1,175			1,510			1,356			1,175			2,335			2,059
Amortization of unrecognized prior service cost		—		817			817			299			299			324			299			1,116			1,141
Amortization of gain from prior periods		—		(225	)		(82	)		(29	)		(50	)		(45	)		(29	)		(275	)		(127	)
Net periodic cost	$	—	$	2,852		$	2,863		$	1,445		$	1,759		$	1,635		$	1,445		$	4,611		$	4,498

The following tables present the assumptions used in determining benefit obligations of the Post-Retirement Medical and the Supplemental Executive Retirement plans at December 31, 2020 and 2019:

	Post-Retirement Medical Plan
	December 31,
	2020	2019
Discount rate	N/A	3.16%
Initial health care cost trend	N/A	6.00%
Ultimate health care cost trend	N/A	5.00%
Year ultimate trend is reached	N/A	2024
	Supplemental Executive Retirement Plan
	December 31,
	2020	2019
Discount rate	2.09%	2.98%
Rate of compensation increase	N/A	N/A

During 2020, the Company adopted the Society of Actuaries Morality Improvement Scale (MP-2020).

During 2019, the Company adopted the Society of Actuaries Morality Improvement Scale (MP-2019).

The following tables present the weighted average interest rate assumptions used in determining the net periodic benefit/cost of the Post-Retirement Medical and the Supplemental Executive Retirement plans:

	Post-Retirement Medical Plan
	Year Ended December 31,
	2020	2019
Discount rate	N/A	4.34%
Initial health care cost trend	N/A	6.25%
Ultimate health care cost trend	N/A	5.00%
Year ultimate trend is reached	N/A	2024

64

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

	Supplemental Executive Retirement Plan
	Year Ended December 31,
	2020	2019
Discount rate	2.98%	4.16%
Rate of compensation increase	N/A	N/A

The discount rate has been set based on the rates of return on high-quality fixed-income investments currently available and expected to be available during the period the benefits will be paid. In particular, the yields on bonds rated AA or better on the measurement date have been used to set the discount rate.

Beginning December 31, 2012, the Company began participation in the pension plan sponsored by GWL&A Financial. During 2017, that plan froze all future benefit accruals for pension-eligible participants as of December 31, 2017. The Company’s share of net expense for the pension plan was $7,806, $14,842 and $3,057 during the years ended December 31, 2020, 2019 and 2018.

The Company offers unfunded, non-qualified deferred compensation plans to a select group of executives, management and highly compensated individuals. Participants defer a portion of their compensation and realize potential market gains / losses or interest on the amount deferred. The programs are not qualified under Section 401 of the Internal Revenue Code. Participant balances, which are included in Other liabilities in the accompanying statutory financial statements, are $49,595 and $41,792 at December 31, 2020 and 2019, respectively.

Previously, the Company sponsored a qualified defined contribution benefit plan covering all employees. Under this plan, employees may contribute a percentage of their annual compensation to the plan up to certain maximums, as defined by the plan and by the Internal Revenue Service (“IRS”). Effective January 1, 2020, the Company transferred the qualified defined contribution benefit plan to its subsidiary, Empower Retirement, LLC. Previously, the Company matched a percentage of employee contributions in cash. The Company recognized $0, $24,955 and $11,935 in expense related to this plan for the years ended December 31, 2020, 2019 and 2018, respectively.

17. Share-Based Compensation

Equity Awards

Lifeco, of which the Company is an indirect wholly-owned subsidiary, maintains the Great-West Lifeco Inc. Stock Option Plan (the “Lifeco plan”) that provides for the granting of options on its common shares to certain of its officers and employees and those of its subsidiaries, including the Company. Options are granted with exercise prices not less than the average market price of the shares on the five days preceding the date of the grant. The Lifeco plan provides for the granting of options with varying terms and vesting requirements with vesting commencing on the first anniversary of the grant, exercisable within 10 years from the date of grant. Compensation expense is recognized in the Company’s financial statements over the vesting period of these stock options using the accelerated method of recognition.

Termination of employment prior to the vesting of the options results in the forfeiture of the unvested options, unless otherwise determined by the Human Resources Committee. At its discretion, the Human Resources Committee may vest the unvested options of retiring option holders, with the options exercisable within five years from the date of retirement. In such event, the Company accelerates the recognition period to the date of retirement for any unrecognized share-based compensation cost related thereto and recognizes it in its earnings at that time.

65

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

Liability Awards

The Company maintains a Performance Share Unit Plan (“PSU plan”) for officers and employees of the Company. Under the PSU plan, “performance share units” are granted to certain of its officers and employees of the Company. Each performance unit has a value equal to one share of Lifeco common stock and is subject to adjustment for cash dividends paid to Lifeco stockholders, Company earnings results as well as stock dividends and splits, consolidations and the like that affect shares of Lifeco common stock outstanding.

If the performance share units vest, they are payable in cash equal to the average closing price of Lifeco common stock for the 20 trading days prior to the date following the last day of the three-year performance period. The estimated fair value of the performance unit is based on the average closing price of Lifeco common stock for the 20 trading days prior to the grant. The performance share units generally vest in their entirety at the end of the three years performance period based on continued service. The PSU plan contains a provision that permits all unvested performance share units to become vested upon death or retirement. Changes in the fair value of the performance share units that occur during the vesting period is recognized as compensation cost over that period.

Performance share units are settled in cash and are recorded as liabilities until payout is made. Unlike share-settled awards, which have a fixed grant-date fair value, the fair value of unsettled or unvested liabilities awards is remeasured at the end of each reporting period based on the change in fair value of one share of Lifeco common stock. The liability and corresponding expense are adjusted accordingly until the award is settled.

Compensation Expense Related to Share-Based Compensation

The compensation expense related to share-based compensation was as follows:

	Year Ended December 31,
	2020		2019		2018
Lifeco Stock Plan	$	593	$	899	$	768
Performance Share Unit Plan		6,431		15,458		5,388
Total compensation expense	$	7,024	$	16,357	$	6,156
Income tax benefits	$	1,465	$	3,414	$	1,243

During the year ended December 31, 2020, 2019 and 2018, the Company had $48, $(67) and $26 respectively, income tax benefits (expense) realized from stock options exercised.

The following table presents the total unrecognized compensation expense related to share-based compensation at December 31, 2020 and the expected weighted average period over which these expenses will be recognized:

	Expense		Weighted average       period (years)
Lifeco Stock Plan	$	709		1.4
Performance Share Unit Plan		5,562		1.2

66

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

Equity Award Activity

During the year ended December 31, 2020, Lifeco did not grant stock options to employees of the Company.

The following table summarizes the status of, and changes in, the Lifeco plan options granted to Company employees which are outstanding. The options granted relate to underlying stock traded in Canadian dollars on the Toronto Stock Exchange; therefore, the amounts, which are presented in United States dollars, will fluctuate as a result of exchange rate fluctuations.

				Weighted average
	Shares under       option			Exercise price     (Whole dollars)		Remaining contractual     term (Years)	Aggregate     intrinsic value (1)
Outstanding, January 1, 2020		3,450,130		$	25.03
Granted		—			—
Exercised		(210,900	)		20.78
Cancelled and expired		(67,760	)		25.89
Outstanding, December 31, 2020		3,171,470			25.95	5.5	$	1,362
Vested and expected to vest, December 31, 2020		3,171,470			25.89	5.5		1,362
Exercisable, December 31, 2020		2,170,850			26.11	4.6		1,332

⁽¹⁾ The aggregate intrinsic value is calculated as the difference between the market price of Lifeco common shares on December 31, 2020 and the exercise price of the option (only if the result is positive) multiplied by the number of options.

The following table presents additional information regarding stock options under the Lifeco plan:

	Year Ended December 31,
	2020		2019		2018
Weighted average fair value of options granted		NA	$	2.32	$	0.95
Intrinsic value of options exercised (1)		1,097		3,282		345
Fair value of options vested		911		1,358		1,115

⁽¹⁾ The intrinsic value of options exercised is calculated as the difference between the market price of Lifeco common shares on the date of exercise and the exercise price of the option multiplied by the number of options exercised.

There were no options granted during 2020. The fair value of the options granted during the years ended December 31, 2019 and 2018 was estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	Year Ended December 31,
	2020		2019			2018
Dividend yield		NA		5.46	%		4.55	%
Expected volatility		NA		19.68	%		9.01	%
Risk free interest rate		NA		1.83	%		2.03	%
Expected duration (years)		NA		6.0			6.0

67

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

Liability Award Activity

The following table summarizes the status of, and changes in, the Performance Share Unit Plan units granted to Company employees which are outstanding:

	Performance Units
Outstanding, January 1, 2020		1,156,384
Granted		67,511
Forfeited		(7,063	)
Paid		(258,005	)
Outstanding, December 31, 2020		958,827
Vested and expected to vest, December 31, 2020		958,827

The cash payment in settlement of the Performance Share Unit Plan units was $8,569, $5,815 and $4,104 for the years ended December 31, 2020, 2019 and 2018, respectively.

18. Participating Insurance

Individual life insurance premiums paid, net of reinsurance, under individual life insurance participating policies were 55%, (1)%, and 1% of total individual life insurance premiums earned during the years ended December 31, 2020, 2019 and 2018 respectively. The Company accounts for its policyholder dividends based upon the three-factor formula. The Company paid dividends in the amount of $18,497, $23,461 and $31,276 to its policyholders during the years ended December 31, 2020, 2019 and 2018, respectively.

19. Concentrations

No customer accounted for 10% or more of the Company’s revenues during the year ended December 31, 2020. In addition, the Company is not dependent upon a single customer or a few customers. The loss of business from any one, or a few, independent brokers or agents would not have a material adverse effect on the Company or any of its business agents.

20. Commitments and Contingencies

Future Contractual Obligations

The following table summarizes the Company’s estimated future contractual obligations:

	Payment due by period
	2021		2022		2023		2024		2025		Thereafter		Total
Surplus notes - principal (1)	$	—	$	—	$	—	$	—	$	527,500	$	358,219	$	885,719
Surplus notes - interest (2)		23,965		23,965		23,965		23,965		22,304		381,066		499,230
Investment purchase obligations (3)		492,805								1,125		5,000		498,930
Operating leases (4)		6,488		3,727		3,234		3,185		2,814		19,145		38,593
Other liabilities (5)		5,241		22,732		18,381		4,804		5,262		27,882		84,302
Total	$	528,499	$	50,424	$	45,580	$	31,954	$	559,005	$	791,312	$	2,006,774

⁽¹⁾ Surplus notes principal - Represents contractual maturities of principal due to the Company’s parent, GWL&A Financial, under the terms of three long-term surplus notes. The amounts shown in this table differ from the amounts included in the

68

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

Company’s Statement of Admitted Assets, Liabilities, Capital and Surplus because of the $36,262 of unamortized debt modification gain as discussed in Footnote 14.

⁽²⁾ Surplus notes interest - All surplus notes bear interest at a fixed rate through maturity. The interest payments shown in this table are calculated based upon the contractual rates in effect on December 31, 2020.

⁽³⁾ Investment purchase obligations - The Company makes commitments to fund partnership interests, mortgage loans, and other investments in the normal course of its business. As the timing of the fulfillment of the commitment to fund partnership interests cannot be predicted, such obligations are presented in the less than one year category. The timing of the funding of mortgage loans is based on the expiration date of the commitment. The amounts of these unfunded commitments at December 31, 2020 and 2019 were $498,930 and $131,651, of which $447,515 and $120,990 were related to limited partnership interests. Related party transactions comprise of $94,803 and $0 of the unfunded limited partnership interests at December 31, 2020 and 2019, respectively. At December 31, 2020 and 2019, $492,805 and $131,651 were due within one year, $1,125 and $0 were due within four to five years, and $5,000 and $0 were due after five years.

⁽⁴⁾ Operating leases - The Company is obligated to make payments under various non-cancelable operating leases, primarily for office space. Contractual provisions exist that could increase the lease obligations presented, including operating expense escalation clauses. Management does not consider the impact of any such clauses to be material to the Company’s operating lease obligations. Rent expense for the years ended December 31, 2020, 2019 and 2018 were $25,324, $33,473 and $27,768 respectively.

From time to time, the Company enters into agreements or contracts, including capital leases, to purchase goods or services in the normal course of its business. However, these agreements and contracts are not material and are excluded from the table above.

⁽⁵⁾    Other liabilities - Other liabilities include those other liabilities which represent contractual obligations not included elsewhere in the table above. If the timing of the payment of any other liabilities was sufficiently uncertain, the amounts were included in the less than one year category. Other liabilities presented in the table above include:

• Expected benefit payments for the Company’s supplemental executive retirement plan through 2027

• Unrecognized tax benefits

• Miscellaneous purchase obligations to acquire goods and services

• Sport partner sponsorship payments

• Personal Capital Corporation contingent payment consideration

As part of the Personal Capital Corporation acquisition, the Company included contingent consideration based on the potential achievement of certain key metrics. An initial contingent consideration earn-out value of $20 million represents management’s best estimate, and it could be up to $175 million based on the achievement of growth in assets under management metrics defined in the Merger Agreement, payable following measurements through December 31, 2021 and December 31, 2022

Originally entered into on March 1, 2018 and as amended on July 7, 2020, the Company has a revolving credit facility agreement in the amount of $50,000 for general corporate purposes. The credit facility has an expiration date of March 1, 2023. Interest accrues at a rate dependent on various conditions and terms of borrowings. The agreement requires, among other things, the Company to maintain a minimum adjusted net worth, of $673,000, as defined in the credit facility agreement (compiled on the unconsolidated statutory accounting basis prescribed by the NAIC), at any time. The Company was in compliance with all covenants at December 31, 2020 and 2019. At December 31, 2020 and 2019 there were no outstanding amounts related to the current and prior credit facilities.

69

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Notes to Statutory Financial Statements

(In Thousands, Except Share Amounts)

In addition, the Company has other letters of credit with a total amount of $8,595, renewable annually for an indefinite period of time. At December 31, 2020 and 2019, there were no outstanding amounts related to those letters of credit.

In October 2020, the Company became a member of the FHLB of Topeka. FHLB provides access to billions of low-cost funding dollars to banks, credit unions, insurance companies and community development financial institutions in the United States. At December 31, 2020, the Company had an estimated borrowing capacity of approximately $2,500,000. All borrowings must be collateralized and the required collateral amount is based on the type of investment securities pledged. No amount was borrowed as of December 31, 2020. Additionally, the Company was required to purchase FHLB of Topeka stock and, at December 31, 2020 owns $500 of Class A stock which are currently not eligible for redemption.

Contingencies

From time to time, the Company may be threatened with, or named as a defendant in, lawsuits, arbitrations, and administrative claims. Any such claims that are decided against the Company could harm the Company’s business. The Company is also subject to periodic regulatory audits and inspections which could result in fines or other disciplinary actions. Unfavorable outcomes in such matters may result in a material impact on the Company’s financial position, results of operations, or cash flows.

The Company is defending lawsuits relating to the costs and features of certain of its retirement or fund products. Management believes the claims are without merit and will defend these actions. Based on the information known, these actions will not have a material adverse effect on the financial position of the Company.

The liabilities transferred and ceding commission received at the closing of the Protective transaction were subject to future adjustments. In October 2019, Protective Life provided the Company with its listing of proposed adjustments with respect to the liabilities transferred, which the Company formally objected to in December 2019. In November 2020, the parties reached resolution and settled cash for adjustments which did not have a material effect on the consolidated financial position of the Company and no further adjustments are expected.

The Company is involved in other various legal proceedings that arise in the ordinary course of its business. In the opinion of management, after consultation with counsel, the likelihood of loss from the resolution of these proceedings is remote and/or the estimated loss is not expected to have a material effect on the Company’s financial position, results of its operations, or cash flows.

The Company and GWL&A NY have an agreement whereby the Company has committed to provide financial support to GWL&A NY related to the maintenance of adequate regulatory surplus and liquidity. The Company is obligated to invest in shares of GWL&A NY in order for GWL&A NY to maintain the capital and surplus at the greater of 1) $6,000, 2) 200% of GWL&A NY RBC minimum capital requirements if GWL&A NY total assets are less than $3,000,000 or 3) 175% of GWL&A NY RBC minimum capital requirements if GWL&A NY total assets are $3,000,000 or more. There is no limitation on the maximum potential future payments under the guarantee. The Company has no liability at December 31, 2020 and 2019 for obligations under the guarantee.

21.  Subsequent Events

Management has evaluated subsequent events for potential recognition or disclosure in the Company’s statutory financial statements through April 1, 2021, the date on which they were issued. On February 3, 2021, the Company’s Board of Directors declared a dividend of $100,000. The dividend was paid on March 29, 2021 to the Company’s sole shareholder, GWL&A Financial. Prior to the payment of this dividend, the Company received approval from the Colorado Insurance Commissioner.

70

SUPPLEMENTAL SCHEDULES

(See Independent Auditors’ Report)

71

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Supplemental Schedule of Selected Statutory Financial Data

As of and for the Year Ended December 31, 2020

(In Thousands)

Investment income earned:
U.S. Government bonds	$	1,631
Other bonds (unaffiliated)		472,771
Bonds of affiliates		564
Preferred stocks (unaffiliated)		3
Common stocks (unaffiliated)		151
Mortgage loans		107,249
Real estate		28,964
Contract loans		197,843
Cash, cash equivalents and short-term investments		5,862
Derivative instruments		18,840
Other invested assets		155,506
Aggregate write-ins for investment income		5,303
Gross investment income	$	994,687
Real estate owned - Book value less encumbrances:	$	43,776
Mortgage loans - Book value:
Commercial mortgages	$	4,124,412
Mortgage loans by standing - Book value:
Good standing	$	4,124,412
Other long-term invested assets - Statement value:	$	504,876
Bonds and stocks of parents, subsidiaries and affiliates - Book value:
Bonds	$	6,433
Common stocks	$	62,550
Bonds and short-term investments by maturity and NAIC designation:
Bonds by maturity - Statement value:
Due within one year or less	$	1,833,337
Over 1 year through 5 years		8,459,940
Over 5 years through 10 years		10,905,977
Over 10 years through 20 years		3,262,440
Over 20 years		2,105,662
Total by maturity		$26,567,356

72

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Supplemental Schedule of Selected Statutory Financial Data

As of and for the Year Ended December 31, 2020

(In Thousands)

Bonds and short-term investments by NAIC designation - Statement value:
NAIC 1	$	14,774,212
NAIC 2		11,083,416
NAIC 3		661,042
NAIC 4		46,004
NAIC 5		2,312
NAIC 6		370
Total by NAIC designation	$	26,567,356
Total bonds publicly traded	$	14,796,022
Total bonds privately placed	$	11,771,334
Preferred stocks - Statement value	$	119,687
Common stocks - Market value	$	223,883
Short-term investments - Book value	$	408,168
Options, caps and floors owned - Statement value	$	34
Collar, swap and forward agreements open - Statement value	$	30,313
Futures contracts open - Current value	$	5,334

73

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Supplemental Schedule of Selected Statutory Financial Data

As of and for the Year Ended December 31, 2020

(In Thousands)

Life insurance in-force:
Ordinary	$	3,588,007
Group life		—
Life insurance policies with disability provisions in-force:
Ordinary	$	9,504
Group life		18,617,777
Supplementary contracts in-force:
Ordinary - not involving life contingencies:
Amount on deposit	$	—
Income payable		—
Ordinary - involving life contingencies:
Income payable		—
Group - not involving life contingencies:
Amount on deposit		—
Income payable		—
Group - involving life contingencies:
Income payable		125
Annuities:
Ordinary:
Immediate - amount of income payable	$	49
Deferred - fully paid account balance		318
Deferred - not fully paid - account balance		—
Group:
Certificates - amount of income payable	$	60,137
Certificates - fully paid account balance		1,489
Certificates - not fully paid account balance		31,651,605
Accident and health insurance - equivalent premiums in-force:
Group	$	—
Deposit funds and dividend accumulations
Deposit funds - account balance		28,062
Deposit accumulations - account balance		18,257
Claim payments:
Group accident and health:
2020	$	5,078
2019		9,460
2018		5,486
2017		2,786
2016		2,829
Prior		16,848

74

GREAT-WEST LIFE & ANNUITY INSURANCE COMPANY

Supplemental Schedule of Selected Statutory Financial Data

As of and for the Year Ended December 31, 2020

(In Thousands)

Supplemental Schedule of the Annual Audit Report

Supplemental Schedule Regarding Reinsurance Contracts with Risk-Limiting Features

Reinsurance contracts subject to Appendix A-791—Life and Health Reinsurance Agreements of the NAIC Accounting Practices and Procedures Manual:

The Company has not entered into, renewed or amended reinsurance contracts on or after January 1, 1996, which include risk-limiting features, as described in SSAP No. 61R—Life, Deposit-Type and Accident and Health Reinsurance (SSAP No. 61R). Deposit accounting, as described in SSAP No. 61R was not applied for reinsurance contracts, which include risk-limiting features since the Company does not have applicable contracts.

Reinsurance contracts NOT subject to Appendix A-791—Life and Health Reinsurance Agreements of the NAIC Accounting Practices and Procedures Manual:

The Company has not applied reinsurance accounting, as described in in SSAP No. 61R, to reinsurance contracts entered into, renewed or amended on or after January 1, 1996, which include risk-limiting features, as described in SSAP No. 61R since the Company does not have applicable contracts. As such, the reinsurance reserve credit, as described in SSAP No. 61R, was not reduced.

Payments to reinsurers (excluding reinsurance contracts with a federal or state facility):

The Company has not entered into, renewed or amended reinsurance contracts on or after January 1, 1996, which contain provisions that allow (1) the reporting of losses or settlements with the reinsurer to occur less frequently than quarterly or (2) payments due from the reinsurer to not be made in cash within ninety days of the settlement date unless there is no activity during the period.

The Company has not entered into, renewed or amended reinsurance contracts on or after January 1, 1996, which contain a payment schedule, accumulating retentions from multiple years or any features inherently designed to delay timing of the reimbursement to the ceding company.

Reinsurance contracts NOT subject to Appendix A-791—Life and Health Reinsurance Agreements of the NAIC Accounting Practices and Procedures Manual and NOT yearly-renewable term that meet the risk transfer requirements under SSAP No. 61R:

The Company has not reflected reinsurance reserve credit for any reinsurance contracts entered into, renewed or amended on or after January 1, 1996 for the following:

a. Assumption reinsurance

b. Non-proportional reinsurance that does not result in significant surplus relief

The Company does not prepare financial information under generally accepted accounting principles (“GAAP”). As such, the Company has not ceded any risk during the period ended December 31, 2020 under any reinsurance contracts entered into, renewed or amended on or after January 1, 1996, that applies reinsurance accounting, as described under SSAP No. 61R for statutory accounting principles (SAP) and applies deposit accounting under GAAP.

The Company has not ceded any risk during the period ended December 31, 2020 under any reinsurance contracts entered into, renewed or amended on or after January 1, 1996, accounted for as reinsurance under GAAP and as a deposit under SSAP No. 61R.

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