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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number : 001-31911
American Equity Investment Life Holding Company
(Exact name of registrant as specified in its charter)
Iowa 42-1447959
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
6000 Westown Parkway
West Des Moines, Iowa 50266
(Address of principal executive offices, including zip code)
(515) 221-0002
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common stock, par value $1 AEL New York Stock Exchange
Depositary Shares, each representing a 1/1,000th interest in a share of 5.95% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series A AELPRA New York Stock Exchange
Depositary Shares, each representing a 1/1,000th interest in a share of 6.625% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series B AELPRB New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 2, 2022, there were 87,638,191 shares of the registrant's common stock, $1 par value, outstanding.



TABLE OF CONTENTS
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share and per share data)
June 30, 2022 December 31, 2021
(Unaudited)
Assets
Investments:
Fixed maturity securities, available for sale, at fair value (amortized cost of $48,468,027 as of 2022 and $46,999,183 as of 2021; allowance for credit losses of $6,187 as of 2022 and $2,846 as of 2021)
$ 45,323,775  $ 51,305,943 
Mortgage loans on real estate (net of allowance for credit losses of $32,388 as of 2022 and $24,024 as of 2021)
6,228,616  5,687,998 
Real estate investments related to consolidated variable interest entities 672,475  337,939 
Derivative instruments 200,781  1,277,480 
Other investments (2022 and 2021 include $548,576 and $168,711 related to consolidated variable interest entities)
2,112,169  1,767,144 
Total investments 54,537,816  60,376,504 
Cash and cash equivalents (2022 and 2021 include $33,525 and $23,763 related to consolidated variable interest entities)
1,287,225  4,508,982 
Coinsurance deposits (net of allowance for credit losses of $6,644 as of 2022 and $2,264 as of 2021)
8,600,297  8,850,608 
Accrued investment income (2022 and 2021 include $1,378 and $3 related to consolidated variable interest entities)
492,539  445,097 
Deferred policy acquisition costs 3,474,319  2,222,769 
Deferred sales inducements 2,380,288  1,546,073 
Deferred income taxes 76,936  — 
Income taxes recoverable 135,241  166,586 
Other assets (2022 and 2021 include $4,430 and $1,524 related to consolidated variable interest entities)
678,605  232,490 
Total assets $ 71,663,266  $ 78,349,109 
Liabilities and Stockholders' Equity
Liabilities:
Policy benefit reserves $ 62,280,575  $ 65,477,778 
Other policy funds and contract claims 522,763  226,844 
Notes payable 496,552  496,250 
Subordinated debentures 78,584  78,421 
Deferred income taxes —  541,972 
Funds withheld for reinsurance liabilities 2,936,366  3,124,740 
Other liabilities (2022 and 2021 include $75,176 and $20,168 related to consolidated variable interest entities)
1,465,040  2,079,977 
Total liabilities 67,779,880  72,025,982 
Stockholders' equity:
Preferred stock, Series A; par value $1 per share; $400,000 aggregate liquidation preference; 20,000 shares authorized; issued and outstanding: 2022 and 2021 - 16,000 shares
16  16 
Preferred stock, Series B; par value $1 per share; $300,000 aggregate liquidation preference; 12,000 shares authorized; issued and outstanding: 2022 and 2021 - 12,000 shares
12  12 
Common stock; par value $1 per share; 200,000,000 shares authorized; issued and outstanding:
     2022 - 90,168,512 shares (excluding 19,220,002 treasury shares);
     2021 - 92,513,517 shares (excluding 9,936,715 treasury shares)
90,169  92,514 
Additional paid-in capital 1,507,601  1,614,374 
Accumulated other comprehensive income (loss) (1,387,968) 1,848,789 
Retained earnings 3,672,387  2,767,422 
Total stockholders' equity attributable to American Equity Investment Life Holding Company 3,882,217  6,323,127 
Noncontrolling interests 1,169  — 
Total stockholders' equity 3,883,386  6,323,127 
Total liabilities and stockholders' equity $ 71,663,266  $ 78,349,109 
See accompanying notes to unaudited consolidated financial statements.
2

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
2022 2021 2022 2021
Revenues:
Premiums and other considerations $ 3,831  $ 14,595  $ 13,909  $ 27,808 
Annuity product charges 55,514  63,759  107,869  123,841 
Net investment income 592,308  499,320  1,159,731  996,510 
Change in fair value of derivatives (506,181) 500,880  (983,700) 897,185 
Net realized losses on investments (33,272) (3,114) (46,399) (7,697)
Other revenue 9,195  —  17,784  — 
Total revenues 121,395  1,075,440  269,194  2,037,647 
Benefits and expenses:
Insurance policy benefits and change in future policy benefits 7,091  15,828  19,729  32,252 
Interest sensitive and index product benefits 234,855  812,981  607,517  1,289,576 
Amortization of deferred sales inducements 90,446  (12,520) 233,991  110,455 
Change in fair value of embedded derivatives (885,984) 273,713  (2,279,633) (8,700)
Interest expense on notes payable 6,461  6,394  12,886  12,787 
Interest expense on subordinated debentures 1,346  1,326  2,663  2,652 
Amortization of deferred policy acquisition costs 142,354  (16,906) 367,780  186,917 
Other operating costs and expenses 59,923  65,050  118,043  120,915 
Total benefits and expenses (343,508) 1,145,866  (917,024) 1,746,854 
Income (loss) before income taxes 464,903  (70,426) 1,186,218  290,793 
Income tax expense (benefit) 104,327  (15,732) 259,419  62,803 
Net income (loss) 360,576  (54,694) 926,799  227,990 
Less: Net income (loss) available to noncontrolling interests (4) —  (4) — 
Net income (loss) available to American Equity Investment Life Holding Company stockholders 360,580  (54,694) 926,803  227,990 
Less: Preferred stock dividends 10,919  10,919  21,838  21,838 
Net income (loss) available to American Equity Investment Life Holding Company common stockholders $ 349,661  $ (65,613) $ 904,965  $ 206,152 
Earnings (loss) per common share $ 3.78  $ (0.69) $ 9.56  $ 2.16 
Earnings (loss) per common share - assuming dilution $ 3.74  $ (0.69) $ 9.46  $ 2.15 
Weighted average common shares outstanding (in thousands):
Earnings (loss) per common share 92,544  94,801  94,693  95,265 
Earnings (loss) per common share - assuming dilution 93,375  95,379  95,652  95,795 
See accompanying notes to unaudited consolidated financial statements.
3

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in thousands)
(Unaudited)
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
2022 2021 2022 2021
Net income (loss) $ 360,576  $ (54,694) $ 926,799  $ 227,990 
Other comprehensive income (loss):
Change in net unrealized investment gains/losses (1) (1,824,723) 657,759  (4,088,638) (222,750)
Reclassification of unrealized investment gains/losses to net income (loss) (1) (12,968) (1,240) (12,145) (4,651)
Other comprehensive income (loss) before income tax (1,837,691) 656,519  (4,100,783) (227,401)
Income tax effect related to other comprehensive income (loss) 386,017  (137,868) 864,026  47,755 
Other comprehensive income (loss) (1,451,674) 518,651  (3,236,757) (179,646)
Comprehensive income (loss) $ (1,091,098) $ 463,957  $ (2,309,958) $ 48,344 
(1)Net of related adjustments to amortization of deferred sales inducements, deferred policy acquisition costs and policy benefit reserves.
See accompanying notes to unaudited consolidated financial statements.
4

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Noncontrolling
Interest
Total
Stockholders'
Equity
For the three months ended June 30, 2022
Balance at March 31, 2022 $ 28  $ 95,020  $ 1,689,606  $ 63,706  $ 3,322,726  $ 1,084  $ 5,172,170 
Net income (loss) for period —  —  —  —  360,580  (4) 360,576 
Other comprehensive loss —  —  —  (1,451,674) —  —  (1,451,674)
Share-based compensation —  —  824  —  —  —  824 
Issuance of common stock —  94  1,210  —  —  —  1,304 
Treasury stock acquired, common —  (4,945) (184,039) —  —  —  (188,984)
Dividends on preferred stock —  —  —  —  (10,919) —  (10,919)
Contributions from noncontrolling interests —  —  —  —  —  89  89 
Balance at June 30, 2022 $ 28  $ 90,169  $ 1,507,601  $ (1,387,968) $ 3,672,387  $ 1,169  $ 3,883,386 
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income
Retained
Earnings
Noncontrolling
Interest
Total
Stockholders'
Equity
For the three months ended June 30, 2021
Balance at March 31, 2021 $ 28  $ 95,483  $ 1,687,669  $ 1,505,260  $ 2,640,320  $ —  $ 5,928,760 
Net loss for period —  —  —  —  (54,694) —  (54,694)
Other comprehensive income —  —  —  518,651  —  —  518,651 
Share-based compensation —  —  8,860  —  —  —  8,860 
Issuance of common stock —  57  97  —  —  —  154 
Treasury stock acquired, common —  (2,986) (92,091) —  —  —  (95,077)
Dividends on preferred stock —  —  —  —  (10,919) —  (10,919)
Balance at June 30, 2021 $ 28  $ 92,554  $ 1,604,535  $ 2,023,911  $ 2,574,707  $ —  $ 6,295,735 
5

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Noncontrolling
Interest
Total
Stockholders'
Equity
For the six months ended June 30, 2022
Balance at December 31, 2021 $ 28  $ 92,514  $ 1,614,374  $ 1,848,789  $ 2,767,422  $ —  $ 6,323,127 
Net income (loss) for period —  —  —  —  926,803  (4) 926,799 
Other comprehensive loss —  —  —  (3,236,757) —  —  (3,236,757)
Share-based compensation
—  —  6,420  —  —  —  6,420 
Issuance of common stock —  7,052  245,790  —  —  —  252,842 
Treasury stock acquired, common —  (9,397) (358,983) —  —  —  (368,380)
Dividends on preferred stock —  —  —  —  (21,838) —  (21,838)
Contributions from noncontrolling interests —  —  —  —  —  1,173  1,173 
Balance at June 30, 2022 $ 28  $ 90,169  $ 1,507,601  $ (1,387,968) $ 3,672,387  $ 1,169  $ 3,883,386 
Preferred
Stock
Common
Stock
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income
Retained
Earnings
Noncontrolling
Interest
Total
Stockholders'
Equity
For the six months ended June 30, 2021
Balance at December 31, 2020 $ 28  $ 95,721  $ 1,681,127  $ 2,203,557  $ 2,368,555  $ —  $ 6,348,988 
Net income for period —  —  —  —  227,990  —  227,990 
Other comprehensive loss —  —  —  (179,646) —  —  (179,646)
Share-based compensation
—  —  13,156  —  —  —  13,156 
Issuance of common stock —  459  4,701  —  —  —  5,160 
Treasury stock acquired, common —  (3,626) (94,449) —  —  —  (98,075)
Dividends on preferred stock —  —  —  —  (21,838) —  (21,838)
Balance at June 30, 2021 $ 28  $ 92,554  $ 1,604,535  $ 2,023,911  $ 2,574,707  $ —  $ 6,295,735 
See accompanying notes to unaudited consolidated financial statements.
6

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended 
 June 30,
2022 2021
Operating activities
Net income $ 926,799  $ 227,990 
Adjustments to reconcile net income to net cash provided by operating activities:
Interest sensitive and index product benefits 607,517  1,289,576 
Amortization of deferred sales inducements 233,991  110,455 
Annuity product charges (107,869) (123,841)
Change in fair value of embedded derivatives (2,279,633) (8,700)
Change in traditional life and accident and health insurance reserves (16,585) 11,340 
Policy acquisition costs deferred (104,913) (180,158)
Amortization of deferred policy acquisition costs 367,780  186,917 
Provision for depreciation and other amortization 10,264  2,771 
Amortization of discounts and premiums on investments (4,711) 15,444 
Realized gains/losses on investments 46,399  7,697 
Distributions from equity method investments 2,204  9,934 
Change in fair value of derivatives 983,700  (897,185)
Deferred income taxes 245,118  27,386 
Share-based compensation 6,420  13,156 
Change in accrued investment income (47,442) 689 
Change in income taxes recoverable/payable 31,345  (40,157)
Change in other assets (29,655) 233 
Change in other policy funds and contract claims 293,303  (9,728)
Change in collateral held for derivatives (1,051,808) 156,410 
Change in funds withheld from reinsurers 213,493  — 
Change in other liabilities 84,036  (149,371)
Other (97,383) (26,614)
Net cash provided by operating activities 312,370  624,244 
Investing activities
Sales, maturities, or repayments of investments:
Fixed maturity securities, available for sale 3,456,943  2,533,134 
Mortgage loans on real estate 1,082,235  265,375 
Derivative instruments 373,481  1,169,965 
Other investments 354,056  5,582 
Acquisitions of investments:
Fixed maturity securities, available for sale (4,883,166) (2,102,899)
Mortgage loans on real estate (1,664,966) (398,515)
Real estate investments acquired (361,820) (258,237)
Derivative instruments (393,783) (363,423)
Other investments (589,861) (390,678)
Purchases of property, furniture and equipment (8,327) (9,788)
Net cash provided by (used in) investing activities (2,635,208) 450,516 
7

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)
(Unaudited)
Six Months Ended 
 June 30,
2022 2021
Financing activities
Receipts credited to annuity policyholder account balances $ 1,666,306  $ 3,585,604 
Coinsurance deposits 45,108  497,397 
Return of annuity policyholder account balances (2,449,267) (2,614,942)
Acquisition of treasury stock (368,380) (98,075)
Proceeds from issuance of common stock, net 252,842  5,160 
Change in checks in excess of cash balance (23,690) 677 
Dividends paid on preferred stock (21,838) (21,838)
Net cash provided by (used in) financing activities (898,919) 1,353,983 
Increase (decrease) in cash and cash equivalents (3,221,757) 2,428,743 
Cash and cash equivalents at beginning of period 4,508,982  9,095,522 
Cash and cash equivalents at end of period $ 1,287,225  $ 11,524,265 
Supplemental disclosures of cash flow information
Cash paid during period for:
Interest expense $ 15,000  $ 15,000 
Income taxes —  75,574 
Income tax refunds received 16,877  — 
Non-cash operating activity:
Deferral of sales inducements 46,688  49,662 
See accompanying notes to unaudited consolidated financial statements.




8

AMERICAN EQUITY INVESTMENT LIFE HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(Unaudited)
1. Significant Accounting Policies
Consolidation and Basis of Presentation
The accompanying consolidated financial statements of American Equity Investment Life Holding Company ("we", "us", "our" or the "Company") have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. The consolidated financial statements include variable interest entities (“VIE”) in which we are the primary beneficiary. All of the adjustments in the consolidated financial statements are normal recurring items which are necessary to present fairly our financial position and results of operations on a basis consistent with the prior audited consolidated financial statements. Operating results for the three and six month periods ended June 30, 2022 are not necessarily indicative of the results that may be expected for any other period, including for the year ended December 31, 2022. All significant intercompany accounts and transactions have been eliminated. The preparation of financial statements requires management estimates and assumptions using subjective and complex judgments that frequently require assumptions about matters that are inherently uncertain. Our actual results could differ from these estimates. For further information related to a description of areas of judgment and estimates and other information necessary to understand our financial position and results of operations, refer to the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the year ended December 31, 2021.
Federal Home Loan Bank
During the first quarter of 2022, American Equity Investment Life Insurance Company (“American Equity Life”) became a member of the Federal Home Loan Bank (“FHLB”) which provides access to collateralized borrowings and other FHLB products. We may also issue funding agreements to the FHLB. Both the collateralized borrowings and funding agreements require us to pledge qualified assets as collateral. Obligations arising from funding agreements are used in investment spread activities and reported in Other policy funds and contract claims on the Consolidated Balance Sheets. See Note 8 - Commitments and Contingencies for more information on the funding agreements issued. Entering into FHLB membership, borrowings and funding agreements requires the ownership of FHLB stock and the pledge of assets as collateral. See Note 2 - Fair Value of Financial Instruments and Note 8 - Commitments and Contingencies for more information on the common stock purchased and assets pledged as collateral.
Derivative Instruments
During the second quarter of 2022, we entered into interest rate swaps which were designated as fair value hedges. A fair value hedge is a hedge of the exposure to changes in the fair value of a recognized asset or liability, or of an unrecognized firm commitment, that are attributable to a particular risk. The accounting for a fair value hedge is determined at hedge inception. Hedge accounting can be applied if, at inception, and throughout the hedging period, the changes in the fair value of the derivative are highly effective at offsetting the changes in fair value of the hedged asset, liability or unrecognized firm commitment that are attributable to the risk being hedged. When hedge accounting is applied, the change in fair value of the hedged asset, liability or unrecognized firm commitment attributable to the hedged risk are reported in the same line item in the Consolidated Statements of Operations as the changes in fair value of the derivative instrument. For fair value hedges of fixed maturity securities, the change in fair value attributable to the risk being hedged is recognized in the Change in fair value of derivatives line item of the Consolidated Statements of Operations. For any change in fair value of our interest rate swaps that are excluded from hedge effectiveness, we have elected to recognize the change immediately in earnings rather than amortizing over the life of the hedge.
At hedge inception, we formally document our risk management objective and strategy for entering into hedging relationships for any fair value hedge. We also quantitatively test for hedge effectiveness using statistical regression analysis on both a prospective and retrospective basis. The results of the testing determine whether we have a highly effective hedging relationship and can apply hedge accounting.
Adopted Accounting Pronouncements
There were no accounting pronouncements that were adopted during the current period.
9

New Accounting Pronouncements
In August 2018, the FASB issued an ASU that revises certain aspects of the measurement models and disclosure requirements for long duration insurance and investment contracts. The FASB’s objective in issuing this ASU is to improve, simplify, and enhance the accounting for long-duration contracts. The revisions include updating cash flow assumptions in the calculation of the liability for traditional life products, introducing the term ‘market risk benefit’ (“MRB”) and requiring all contract features meeting the definition of an MRB to be measured at fair value with the change in fair value recognized in net income excluding the change in fair value related to our own-credit risk which is recognized in AOCI and simplifying the method used to amortize deferred policy acquisition costs and deferred sales inducements to a constant level basis over the expected term of the related contracts rather than based on actual and estimated gross profits and enhancing disclosure requirements. While this ASU is effective for us January 1, 2023, the transition date (the remeasurement date) is January 1, 2021. We will adopt the guidance on a modified retrospective basis related to the future policy benefit and deferred acquisition costs. The guidance for market risk benefits will be applied retrospectively.
While we continue to evaluate the impact of adopting this standard, we expect the adoption to have a material impact to our financial condition, results of operations, statements of cash flows, and disclosures. The estimated impact to stockholders' equity at January 1, 2021 is an increase between $1.5 billion and $2.0 billion, with most of this impact reflected in accumulated other comprehensive income ("AOCI"). The impact to retained earnings is expected to be less than $100.0 million.
The most significant drivers of the transition adjustment include changes related to MRBs including the impacts of our own-credit risk adjustment and removal of the deferred acquisition cost, deferred sales inducement, and policy benefit reserve balances recorded in AOCI related to changes in unrealized appreciation (depreciation) on available for sale fixed maturity securities.
We have created a governance framework and implementation plan for the adoption of this standard. We have designed and have started implementing internal controls related to the new processes created as part of implementing the updated standard. We will continue to refine the controls through the implementation date.
10

2. Fair Values of Financial Instruments
The following sets forth a comparison of the carrying amounts and fair values of our financial instruments:
June 30, 2022 December 31, 2021
Carrying
Amount
Fair Value Carrying
Amount
Fair Value
(Dollars in thousands)
Assets
Fixed maturity securities, available for sale $ 45,323,775  $ 45,323,775  $ 51,305,943  $ 51,305,943 
Mortgage loans on real estate 6,228,616  6,032,745  5,687,998  5,867,227 
Real estate investments 672,475  672,475  337,939  337,939 
Derivative instruments 200,781  200,781  1,277,480  1,277,480 
Other investments 2,112,169  2,170,169  1,767,144  1,767,144 
Cash and cash equivalents 1,287,225  1,287,225  4,508,982  4,508,982 
Coinsurance deposits 8,600,297  8,013,371  8,850,608  7,938,292 
Liabilities
Policy benefit reserves 61,895,423  56,347,523  65,076,041  56,375,076 
Single premium immediate annuity (SPIA) benefit reserves 221,970  231,419  226,207  235,891 
Other policy funds - FHLB 300,000  300,000  —  — 
Notes payable 496,552  494,045  496,250  569,485 
Subordinated debentures 78,584  90,850  78,421  93,721 
Fair value is the price that would be received to sell an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants at the measurement date. The objective of a fair value measurement is to determine that price for each financial instrument at each measurement date. We meet this objective using various methods of valuation that include market, income and cost approaches.
We categorize our financial instruments into three levels of fair value hierarchy based on the priority of inputs used in determining fair value. The hierarchy defines the highest priority inputs (Level 1) as quoted prices in active markets for identical assets or liabilities. The lowest priority inputs (Level 3) are our own assumptions about what a market participant would use in determining fair value such as estimated future cash flows. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, a financial instrument's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument. We categorize financial assets and liabilities recorded at fair value in the consolidated balance sheets as follows:
Level 1 - Quoted prices are available in active markets for identical financial instruments as of the reporting date. We do not adjust the quoted price for these financial instruments, even in situations where we hold a large position and a sale could reasonably impact the quoted price.
Level 2 - Quoted prices in active markets for similar financial instruments, quoted prices for identical or similar financial instruments in markets that are not active; and models and other valuation methodologies using inputs other than quoted prices that are observable.
Level 3 - Models and other valuation methodologies using significant inputs that are unobservable for financial instruments and include situations where there is little, if any, market activity for the financial instrument. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in Level 3 are securities for which no market activity or data exists and for which we used discounted expected future cash flows with our own assumptions about what a market participant would use in determining fair value.
Transfers of securities among the levels occur at times and depend on the type of inputs used to determine fair value of each security.
11

Our assets and liabilities which are measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 are presented below based on the fair value hierarchy levels:
Total
Fair Value
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(Dollars in thousands)
June 30, 2022
Assets
Fixed maturity securities, available for sale:
U.S. Government and agencies $ 186,491  $ 32,922  $ 153,569  $ — 
States, municipalities and territories 4,390,844  —  4,390,844  — 
Foreign corporate securities and foreign governments 969,883  —  969,883  — 
Corporate securities 29,825,798  —  29,748,072  77,726 
Residential mortgage backed securities 1,391,707  —  1,391,707  — 
Commercial mortgage backed securities 4,188,392  —  4,188,392  — 
Other asset backed securities 4,370,660  —  4,306,110  64,550 
Other investments 593,181  9,008  584,173  — 
Real estate investments 672,475  —  —  672,475 
Derivative instruments 200,781  —  200,781  — 
Cash and cash equivalents 1,287,225  1,287,225  —  — 
$ 48,077,437  $ 1,329,155  $ 45,933,531  $ 814,751 
Liabilities
Funds withheld liability - embedded derivative $ (404,228) $ —  $ (404,228) $ — 
Fixed index annuities - embedded derivatives 5,836,312  —  —  5,836,312 
$ 5,432,084  $ —  $ (404,228) $ 5,836,312 
December 31, 2021
Assets
Fixed maturity securities, available for sale:
U.S. Government and agencies $ 1,078,746  $ 32,737  $ 1,046,009  $ — 
States, municipalities and territories 3,927,201  —  3,927,201  — 
Foreign corporate securities and foreign governments 402,545  —  402,545  — 
Corporate securities 34,660,234  32,700  34,627,534  — 
Residential mortgage backed securities 1,125,049  —  1,125,049  — 
Commercial mortgage backed securities 4,840,311  —  4,840,311  — 
Other asset backed securities 5,271,857  —  5,271,857  — 
Other investments 12,226  —  5,877  6,349 
Real estate investments 337,939  —  —  337,939 
Derivative instruments 1,277,480  —  1,277,480  — 
Cash and cash equivalents 4,508,982  4,508,982  —  — 
$ 57,442,570  $ 4,574,419  $ 52,523,863  $ 344,288 
Liabilities
Funds withheld liability - embedded derivative $ (2,362) $ —  $ (2,362) $ — 
Fixed index annuities - embedded derivatives 7,964,961  —  —  7,964,961 
$ 7,962,599  $ —  $ (2,362) $ 7,964,961 
12

The following methods and assumptions were used in estimating the fair values of financial instruments during the periods presented in these consolidated financial statements.
Fixed maturity securities
The fair values of fixed maturity securities in an active and orderly market are determined by utilizing independent pricing services. The independent pricing services incorporate a variety of observable market data in their valuation techniques, including:
reported trading prices,
benchmark yields,
broker-dealer quotes,
benchmark securities,
bids and offers,
credit ratings,
relative credit information, and
other reference data.
The independent pricing services also take into account perceived market movements and sector news, as well as a security's terms and conditions, including any features specific to that issue that may influence risk and marketability. Depending on the security, the priority of the use of observable market inputs may change as some observable market inputs may not be relevant or additional inputs may be necessary.
The independent pricing services provide quoted market prices when available. Quoted prices are not always available due to market inactivity. When quoted market prices are not available, the third parties use yield data and other factors relating to instruments or securities with similar characteristics to determine fair value for securities that are not actively traded. We generally obtain one value from our primary external pricing service. In situations where a price is not available from this service, we may obtain quotes or prices from additional parties as needed. Market indices of similar rated asset class spreads are considered for valuations and broker indications of similar securities are compared. Inputs used by the broker include market information, such as yield data and other factors relating to instruments or securities with similar characteristics. Valuations and quotes obtained from third party commercial pricing services are non-binding and do not represent quotes on which one may execute the disposition of the assets.
We validate external valuations at least quarterly through a combination of procedures that include the evaluation of methodologies used by the pricing services, comparison of the prices to a secondary pricing source, analytical reviews and performance analysis of the prices against trends, and maintenance of a securities watch list. Additionally, as needed we utilize discounted cash flow models or perform independent valuations on a case-by-case basis using inputs and assumptions similar to those used by the pricing services. Although we do identify differences from time to time as a result of these validation procedures, we did not make any significant adjustments as of June 30, 2022 and December 31, 2021.
Mortgage loans on real estate
Mortgage loans on real estate are not measured at fair value on a recurring basis. The fair values of mortgage loans on real estate are calculated using discounted expected cash flows using competitive market interest rates currently being offered for similar loans. The fair values of impaired mortgage loans on real estate that we have considered to be collateral dependent are based on the fair value of the real estate collateral (based on appraised values) less estimated costs to sell. The inputs utilized to determine fair value of all mortgage loans are unobservable market data (competitive market interest rates); therefore, fair value of mortgage loans falls into Level 3 in the fair value hierarchy.
Real estate investments
The fair values of residential real estate investments are initially calculated based on the cost to purchase the properties and subsequently calculated based on a discounted cash flow methodology. Under the discounted cash flow method, net operating income is forecasted assuming a 10-year hold period commencing as of the valuation date. An additional year is forecast in order to determine the residual sale price at the end of the hold period, using a residual (terminal) capitalization rate. The significant inputs into the fair value calculation under the discounted cash flow method include the residual capitalization rate and discount rate. These inputs are unobservable market data; therefore, fair value of residential real estate investments falls into Level 3 in the fair value hierarchy. At June 30, 2022, the residual capitalization rates used in the fair value calculations ranged from 4.75% to 6.50% with an average rate of 5.45%. At June 30, 2022, the discount rates used in the fair value calculations ranged from 6.00% to 7.75% with an average rate of 6.70%.
Derivative instruments
The fair values of our call options are based upon the amount of cash that we will receive to settle each derivative instrument on the reporting date. These amounts are determined by our investment team using industry accepted valuation models and are adjusted for the nonperformance risk of each counterparty net of any collateral held. Inputs include market volatility and risk free interest rates and are used in income valuation techniques in arriving at a fair value for each option contract. The nonperformance risk for each counterparty is based upon its credit default swap rate. We have no performance obligations related to the call options purchased to fund our fixed index annuity policy liabilities.
13

The fair values of our pay fixed/receive float interest rate swaps are determined using internal valuation models that generate discounted expected future cash flows by constructing a projected Secured Overnight Financing Rate (SOFR) curve over the term of the swap.
Other investments
Equity securities and short-term debt securities with maturities of greater than three months but less than twelve months when purchased are the only financial instruments included in other investments that are measured at fair value on a recurring basis. The fair value for these investments are determined using the same methods discussed above for fixed maturity securities. Financial instruments included in other investments that are not measured at fair value on a recurring basis are FHLB common stock, equity method investments, short-term loans, company owned life insurance ("COLI") and a consolidated variable interest entity. FHLB common stock is carried at cost which approximates fair value. FHLB common stock was $22.0 million as of June 30, 2022 and falls within Level 2 of the fair value hierarchy. The fair values for most of our equity method investments are obtained from third parties and are determined using a variety of valuation techniques, including discounted cash flow analysis, valuation multiples analysis for comparable investments and appraisal values. As the risk spread and liquidity discount are unobservable market inputs, the fair value of our equity method investments falls within Level 3 of the fair value hierarchy. The fair value for one of our equity method investments is based on earnings multiples derived by comparing valuations of similar entities relative to earnings data. The fair value of this equity method investment falls within Level 3 of the fair value hierarchy. The fair value of equity method investments was $868.5 million and $520.1 million as of June 30, 2022 and December 31, 2021, respectively. Due to the short-term nature of the investments, the fair value of a portion of our short-term loans approximates the carrying value. The fair value of short-term loans was $177.4 million and $320.0 million as of June 30, 2022 and December 31, 2021, respectively. Our short-term loans fall within Level 2 of the fair value hierarchy. The fair value of our COLI approximates the cash surrender value of the policies and falls within Level 2 of the fair value hierarchy. The fair value of COLI was $391.2 million and $384.3 million as of June 30, 2022 and December 31, 2021, respectively. Our consolidated variable interest entity is an investment in one investment company real estate fund that invests in operating entities which hold multifamily real estate properties. The fair value of our variable interest entity was $56.5 million as of June 30, 2022 and falls within Level 3 of the fair value hierarchy. The fair value was obtained from a third party and is based on the fair value of the underlying real estate held by the various operating entities. The real estate is initially calculated based on the cost to purchase the properties and subsequently calculated based on a discounted cash flow methodology. Based on the timing of the purchases, the fair value as of June 30, 2022 was based on cost.
Cash and cash equivalents
Amounts reported in the consolidated balance sheets for these instruments are reported at their historical cost which approximates fair value due to the nature of the assets assigned to this category.
Policy benefit reserves, coinsurance deposits and SPIA benefit reserves
The fair values of the liabilities under contracts not involving significant mortality or morbidity risks (principally deferred annuities), are stated at the cost we would incur to extinguish the liability (i.e., the cash surrender value) as these contracts are generally issued without an annuitization date. The coinsurance deposits related to the annuity benefit reserves have fair values determined in a similar fashion. For period-certain annuity benefit contracts, the fair value is determined by discounting the benefits at the interest rates currently in effect for newly issued immediate annuity contracts. We are not required to and have not estimated the fair value of the liabilities under contracts that involve significant mortality or morbidity risks, as these liabilities fall within the definition of insurance contracts that are exceptions from financial instruments that require disclosures of fair value. Policy benefit reserves, coinsurance deposits and SPIA benefit reserves are not measured at fair value on a recurring basis. All of the fair values presented within these categories fall within Level 3 of the fair value hierarchy as most of the inputs are unobservable market data.
Other policy funds - FHLB
The fair values of the Company's funding agreements with the FHLB are estimated using discounted cash flow calculations based on interest rates currently being offered for similar agreements with similar maturities.
Notes payable
The fair values of our senior unsecured notes are based upon quoted market prices and are categorized as Level 2 within the fair value hierarchy. Notes payable are not remeasured at fair value on a recurring basis.
Subordinated debentures
Fair values for subordinated debentures are estimated using discounted cash flow calculations based principally on observable inputs including our incremental borrowing rates, which reflect our credit rating, for similar types of borrowings with maturities consistent with those remaining for the debt being valued. These fair values are categorized as Level 2 within the fair value hierarchy. Subordinated debentures are not measured at fair value on a recurring basis.
14

Funds withheld liability - embedded derivative
We estimate the fair value of the embedded derivative based on the fair value of the assets supporting the funds withheld payable under modified coinsurance reinsurance agreements. The fair value of the embedded derivative is classified as Level 2 based on valuation methods used for the assets held supporting the reinsurance agreements.
Fixed index annuities - embedded derivatives
We estimate the fair value of the embedded derivative component of our fixed index annuity policy benefit reserves at each valuation date by (i) projecting policy contract values and minimum guaranteed contract values over the expected lives of the contracts and (ii) discounting the excess of the projected contract value amounts at the applicable risk free interest rates adjusted for our nonperformance risk related to those liabilities. The projections of policy contract values are based on our best estimate assumptions for future policy growth and future policy decrements. Our best estimate assumptions for future policy growth include assumptions for the expected index credit on the next policy anniversary date which are derived from the fair values of the underlying call options purchased to fund such index credits and the expected costs of annual call options we will purchase in the future to fund index credits beyond the next policy anniversary. The projections of minimum guaranteed contract values include the same best estimate assumptions for policy decrements as were used to project policy contract values.
Within this determination we have the following significant unobservable inputs: 1) the expected cost of annual call options we will purchase in the future to fund index credits beyond the next policy anniversary and 2) our best estimates for future policy decrements, primarily lapse, partial withdrawal and mortality rates. As of both June 30, 2022 and December 31, 2021, we utilized an estimate of 2.10% for the expected cost of annual call options, which is based on estimated long-term account value growth and a historical review of our actual option costs.
Our best estimate assumptions for lapse, partial withdrawal and mortality rates are based on our actual experience and our outlook as to future expectations for such assumptions. These assumptions, which are consistent with the assumptions used in calculating deferred policy acquisition costs and deferred sales inducements, are reviewed on a quarterly basis and are updated as our experience develops and/or as future expectations change. The following table presents average lapse rate and partial withdrawal rate assumptions, by contract duration, used in estimating the fair value of the embedded derivative component of our fixed index annuity policy benefit reserves at each reporting date:
Average Lapse Rates Average Partial Withdrawal Rates
Contract Duration (Years) June 30, 2022 December 31, 2021 June 30, 2022 December 31, 2021
1 - 5
3.19% 3.04% 2.19% 2.19%
6 - 10
2.99% 2.84% 2.24% 2.26%
11 - 15
4.07% 4.47% 2.07% 2.14%
16 - 20
9.48% 8.93% 1.25% 1.33%
20+
4.93% 4.93% —% —%
Lapse rates are generally expected to increase as surrender charge percentages decrease for policies without a lifetime income benefit rider. Lapse expectations reflect a significant increase in the year in which the surrender charge period on a contract ends.
15

The following table provides a reconciliation of the beginning and ending balances for our Level 3 assets and liabilities, which are measured at fair value on a recurring basis using significant unobservable inputs for the three and six months ended June 30, 2022 and 2021:
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
2022 2021 2022 2021
(Dollars in thousands)
Fixed maturity securities, available for sale - Corporate securities
Beginning balance $ —  $ —  $ —  $ — 
Transfers in 77,726  —  77,726  — 
Ending balance $ 77,726  $ —  $ 77,726  $ — 
Fixed maturity securities, available for sale - Other asset backed securities
Beginning balance $ —  $ —  $ —  $ — 
Transfers in 64,550  —  64,550  — 
Ending balance $ 64,550  $ —  $ 64,550  $ — 
Other investments
Beginning balance $ 3,867  $ —  $ 6,349  $ — 
Transfers out (3,867) —  (3,867) — 
Included in net income —  —  (2,482) — 
Ending balance $ —  $ —  $ —  $ — 
Real estate investments
Beginning balance $ 510,188  $ —  $ 337,939  $ — 
Purchases and sales, net 135,478  258,237  303,566  258,237 
Change in fair value 26,809  —  30,970  — 
Ending balance $ 672,475  $ 258,237  $ 672,475  $ 258,237 
Fixed index annuities - embedded derivatives
Beginning balance $ 6,770,915  $ 7,680,951  $ 7,964,961  $ 7,938,281 
Premiums less benefits (50,594) 577,729  63,483  697,520 
Change in fair value, net (884,009) 126,084  (2,192,132) (251,037)
Ending balance $ 5,836,312  $ 8,384,764  $ 5,836,312  $ 8,384,764 
Transfers into Level 3 during the three and six months ended June 30, 2022 were the result of changes in observable pricing information for certain fixed maturity securities.
The fair value of our fixed index annuities embedded derivatives is net of coinsurance ceded of $888.9 million and $1,245.0 million as of June 30, 2022 and December 31, 2021, respectively. Change in fair value, net for each period in our embedded derivatives is included in Change in fair value of embedded derivatives in the unaudited Consolidated Statements of Operations.
Certain derivatives embedded in our fixed index annuity contracts are our most significant financial instrument measured at fair value that are categorized as Level 3 in the fair value hierarchy. The contractual obligations for future annual index credits within our fixed index annuity contracts are treated as a "series of embedded derivatives" over the expected life of the applicable contracts. We estimate the fair value of these embedded derivatives at each valuation date by the method described above under fixed index annuities - embedded derivatives. The projections of minimum guaranteed contract values include the same best estimate assumptions for policy decrements as were used to project policy contract values.
The most sensitive assumption in determining policy liabilities for fixed index annuities is the rates used to discount the excess projected contract values. As indicated above, the discount rate reflects our nonperformance risk. If the discount rates used to discount the excess projected contract values at June 30, 2022, were to increase by 100 basis points, the fair value of the embedded derivatives would decrease by $398.7 million recorded through operations as a decrease in the change in fair value of embedded derivatives and there would be a corresponding decrease of $154.5 million to our combined balance for deferred policy acquisition costs and deferred sales inducements recorded through operations as an increase in amortization of deferred policy acquisition costs and deferred sales inducements. A decrease by 100 basis points in the discount rates used to discount the excess projected contract values would increase the fair value of the embedded derivatives by $457.5 million recorded through operations as an increase in the change in fair value of embedded derivatives and there would be a corresponding increase of $180.3 million to our combined balance for deferred policy acquisition costs and deferred sales inducements recorded through operations as a decrease in amortization of deferred policy acquisition costs and deferred sales inducements.
16

3. Investments
At June 30, 2022 and December 31, 2021, the amortized cost and fair value of fixed maturity securities were as follows:
Amortized
Cost (1)
Gross
Unrealized
Gains
Gross
Unrealized
Losses (2)
Allowance for Credit Losses Fair Value
(Dollars in thousands)
June 30, 2022
Fixed maturity securities, available for sale:
U.S. Government and agencies $ 178,840  $ 8,766  $ (1,115) $ —  $ 186,491 
States, municipalities and territories 4,598,477  124,362  (330,161) (1,834) 4,390,844 
Foreign corporate securities and foreign governments 1,010,706  20,888  (61,711) —  969,883 
Corporate securities 32,126,999  349,020  (2,646,478) (3,743) 29,825,798 
Residential mortgage backed securities 1,425,997  27,669  (61,349) (610) 1,391,707 
Commercial mortgage backed securities 4,442,850  1,804  (256,262) —  4,188,392 
Other asset backed securities 4,684,158  1,070  (314,568) —  4,370,660 
$ 48,468,027  $ 533,579  $ (3,671,644) $ (6,187) $ 45,323,775 
December 31, 2021
Fixed maturity securities, available for sale:
U.S. Government and agencies $ 1,046,029  $ 32,841  $ (124) $ —  $ 1,078,746 
States, municipalities and territories 3,495,563  437,456  (3,042) (2,776) 3,927,201 
Foreign corporate securities and foreign governments 380,646  22,742  (843) —  402,545 
Corporate securities 31,084,629  3,614,047  (38,442) —  34,660,234 
Residential mortgage backed securities 1,056,778  70,434  (2,093) (70) 1,125,049 
Commercial mortgage backed securities 4,708,878  149,152  (17,719) —  4,840,311 
Other asset backed securities 5,226,660  95,304  (50,107) —  5,271,857 
$ 46,999,183  $ 4,421,976  $ (112,370) $ (2,846) $ 51,305,943 
(1)Amortized cost excludes accrued interest receivable of $440.6 million and $400.7 million as of June 30, 2022 and December 31, 2021, respectively.
(2)Gross unrealized losses are net of allowance for credit losses.
The amortized cost and fair value of fixed maturity securities at June 30, 2022, by contractual maturity are shown below. Actual maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. All of our mortgage and other asset backed securities provide for periodic payments throughout their lives and are shown below as separate lines.
Available for sale
Amortized
Cost
Fair Value
(Dollars in thousands)
Due in one year or less $ 1,686,367  $ 1,686,971 
Due after one year through five years 7,352,839  7,220,079 
Due after five years through ten years 6,868,184  6,538,477 
Due after ten years through twenty years 11,135,170  10,777,240 
Due after twenty years 10,872,462  9,150,249 
37,915,022  35,373,016 
Residential mortgage backed securities 1,425,997  1,391,707 
Commercial mortgage backed securities 4,442,850  4,188,392 
Other asset backed securities 4,684,158  4,370,660 
$ 48,468,027  $ 45,323,775 
17

Net unrealized gains (losses) on available for sale fixed maturity securities reported as a separate component of stockholders' equity were comprised of the following:
June 30, 2022 December 31, 2021
(Dollars in thousands)
Net unrealized gains (losses) on available for sale fixed maturity securities $ (3,148,156) $ 4,309,606 
Adjustments for assumed changes in amortization of deferred policy acquisition costs, deferred sales inducements and policy benefit reserves 1,363,110  (1,993,869)
Deferred income tax valuation allowance reversal 22,534  22,534 
Deferred income tax expense 374,544  (489,482)
Net unrealized gains (losses) reported as accumulated other comprehensive income (loss) $ (1,387,968) $ 1,848,789 
The National Association of Insurance Commissioners ("NAIC") assigns designations to fixed maturity securities. These designations range from Class 1 (highest quality) to Class 6 (lowest quality). In general, securities are assigned a designation based upon the ratings they are given by the Nationally Recognized Statistical Rating Organizations ("NRSRO’s"). The NAIC designations are utilized by insurers in preparing their annual statutory statements. NAIC Class 1 and 2 designations are considered "investment grade" while NAIC Class 3 through 6 designations are considered "non-investment grade." Based on the NAIC designations, we had 98% of our fixed maturity portfolio rated investment grade at both June 30, 2022 and December 31, 2021, respectively.
The following table summarizes the credit quality, as determined by NAIC designation, of our fixed maturity portfolio as of the dates indicated:
June 30, 2022 December 31, 2021
NAIC
Designation
Amortized
Cost (a)
Fair
Value (a)
Amortized
Cost
Fair
Value
(Dollars in thousands)
1 $ 26,879,226  $ 25,453,818  $ 26,157,531  $ 28,785,839 
2 18,180,556  16,967,885  19,758,594  21,396,020 
3 706,018  630,715  909,311  941,210 
4 124,688  117,336  133,070  147,160 
5 56,931  40,995  16,496  15,357 
6 34,570  27,334  24,181  20,357 
$ 45,981,989  $ 43,238,083  $ 46,999,183  $ 51,305,943 
(a)Excludes fixed maturity securities related to reinsurance business ceded under a modified coinsurance agreement with a fair value of $2,085,692 and an amortized cost of $2,486,038.
18

The following table shows our investments' gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities (consisting of 3,862 and 1,427 securities, respectively) have been in a continuous unrealized loss position, at June 30, 2022 and December 31, 2021:
Less than 12 months 12 months or more Total
Fair Value Unrealized
Losses (1)
Fair Value Unrealized
Losses (1)
Fair Value Unrealized
Losses (1)
(Dollars in thousands)
June 30, 2022
Fixed maturity securities, available for sale:
U.S. Government and agencies $ 39,342  $ (1,115) $ —  $ —  $ 39,342  $ (1,115)
States, municipalities and territories 2,492,772  (329,239) 20,104  (2,756) 2,512,876  (331,995)
Foreign corporate securities and foreign governments 539,487  (59,797) 3,376  (1,914) 542,863  (61,711)
Corporate securities 20,887,402  (2,624,093) 66,655  (26,128) 20,954,057  (2,650,221)
Residential mortgage backed securities 882,665  (58,688) 32,265  (3,271) 914,930  (61,959)
Commercial mortgage backed securities 3,888,178  (247,155) 70,629  (9,107) 3,958,807  (256,262)
Other asset backed securities 2,751,314  (151,508) 1,544,074  (163,060) 4,295,388  (314,568)
$ 31,481,160  $ (3,471,595) $ 1,737,103  $ (206,236) $ 33,218,263  $ (3,677,831)
December 31, 2021
Fixed maturity securities, available for sale:
U.S. Government and agencies $ 760,977  $ (124) $ —  $ —  $ 760,977  $ (124)
States, municipalities and territories 168,942  (2,468) 15,711  (3,350) 184,653  (5,818)
Foreign corporate securities and foreign governments 42,861  (843) —  —  42,861  (843)
Corporate securities 2,375,603  (30,070) 116,819  (8,372) 2,492,422  (38,442)
Residential mortgage backed securities 250,964  (1,408) 26,917  (755) 277,881  (2,163)
Commercial mortgage backed securities 784,464  (5,500) 142,224  (12,219) 926,688  (17,719)
Other asset backed securities 1,351,324  (11,345) 1,771,182  (38,762) 3,122,506  (50,107)
$ 5,735,135  $ (51,758) $ 2,072,853  $ (63,458) $ 7,807,988  $ (115,216)
(1)Unrealized losses have not been reduced to reflect the allowance for credit losses of $6.2 million and $2.8 million as of June 30, 2022 and December 31, 2021, respectively.
The unrealized losses at June 30, 2022 are principally related to the timing of the purchases of certain securities, which carry less yield than those available at June 30, 2022. Approximately 97% and 85% of the unrealized losses on fixed maturity securities shown in the above table for June 30, 2022 and December 31, 2021, respectively, are on securities that are rated investment grade, defined as being the highest two NAIC designations.
We expect to recover our amortized cost on all securities except for those securities on which we recognized an allowance for credit loss. In addition, because we did not have the intent to sell fixed maturity securities with unrealized losses and it was not more likely than not that we would be required to sell these securities prior to recovery of the amortized cost, which may be maturity, we did not write down these investments to fair value through the consolidated statements of operations.
Changes in net unrealized gains/losses on investments for the three and six months ended June 30, 2022 and 2021 are as follows:
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
2022 2021 2022 2021
(Dollars in thousands)
Fixed maturity securities available for sale carried at fair value $ (3,443,391) $ 1,186,175  $ (7,457,762) $ (475,186)
Adjustment for effect on other balance sheet accounts:
Deferred policy acquisition costs, deferred sales inducements and policy benefit reserves 1,605,700  (529,656) 3,356,979  247,785 
Deferred income tax asset/liability 386,017  (137,868) 864,026  47,755 
1,991,717  (667,524) 4,221,005  295,540 
Change in net unrealized gains/losses on investments carried at fair value $ (1,451,674) $ 518,651  $ (3,236,757) $ (179,646)
Proceeds from sales of available for sale fixed maturity securities for the six months ended June 30, 2022 and 2021 were $2.1 billion and $420.4 million, respectively. Scheduled principal repayments, calls and tenders for available for sale fixed maturity securities for the six months ended June 30, 2022 and 2021 were $1.3 billion and $2.1 billion, respectively.
19

Net realized losses on investments for the three and six months ended June 30, 2022 and 2021, are as follows:
Three Months Ended 
 June 30,
Six Months Ended 
 June 30,
2022 2021 2022 2021
(Dollars in thousands)
Available for sale fixed maturity securities:
Gross realized gains $ 507  $ 4,062  $ 3,972  $ 6,429 
Gross realized losses (24,053) (7,951) (26,059) (16,147)
Net credit loss (provision) release (5,498) 1,260  (12,854) (177)
(29,044) (2,629) (34,941) (9,895)
Mortgage loans on real estate:
Decrease (increase) in allowance for credit losses (3,348) 1,933  (8,593) 4,448 
Recovery of specific allowance 229  —  229  — 
Loss on sale of mortgage loans (1,109) (2,418) (3,094) (2,250)
(4,228) (485) (11,458) 2,198 
$ (33,272) $ (3,114) $ (46,399) $ (7,697)
Realized losses on available for sale fixed maturity securities in 2022 and 2021 were realized primarily due to strategies to reposition the fixed maturity security portfolio that result in improved net investment income, credit risk or duration profiles as they pertain to our asset liability management. Realized gains and losses on sales are determined on the basis of specific identification of investments based on the trade date.
We review and analyze all investments on an ongoing basis for changes in market interest rates and credit deterioration. This review process includes analyzing our ability to recover the amortized cost basis of each investment that has a fair value that is materially lower than its amortized cost and requires a high degree of management judgment and involves uncertainty. The evaluation of securities for credit loss is a quantitative and qualitative process, which is subject to risks and uncertainties.
We have a policy and process to identify securities that could potentially have credit loss. This process involves monitoring market events and other items that could impact issuers. The evaluation includes but is not limited to such factors as:
the extent to which the fair value has been less than amortized cost or cost;
whether the issuer is current on all payments and all contractual payments have been made as agreed;
the remaining payment terms and the financial condition and near-term prospects of the issuer;
the lack of ability to refinance due to liquidity problems in the credit market;
the fair value of any underlying collateral;
the existence of any credit protection available;
our intent to sell and whether it is more likely than not we would be required to sell prior to recovery for debt securities;
consideration of rating agency actions; and
changes in estimated cash flows of mortgage and asset backed securities.
We determine whether an allowance for credit loss should be established for debt securities by assessing pertinent facts and circumstances surrounding each security. Where the decline in fair value of debt securities is attributable to changes in market interest rates or to factors such as market volatility, liquidity and spread widening, and we anticipate recovery of all contractual or expected cash flows, we do not consider these investments to have credit loss because we do not intend to sell these investments and it is not more likely than not we will be required to sell these investments before a recovery of amortized cost, which may be maturity.
If we intend to sell a debt security or if it is more likely than not that we will be required to sell a debt security before recovery of its amortized cost basis, credit loss has occurred and the difference between amortized cost and fair value will be recognized as a loss in operations.
If we do not intend to sell and it is not more likely than not we will be required to sell the debt security but also do not expect to recover the entire amortized cost basis of the security, a credit loss would be recognized in operations for the amount of the expected credit loss. We determine the amount of expected credit loss by calculating the present value of the cash flows expected to be collected discounted at each security's acquisition yield based on our consideration of whether the security was of high credit quality at the time of acquisition. The difference between the present value of expected future cash flows and the amortized cost basis of the security is the amount of credit loss recognized in operations. The recognized credit loss is limited to the total unrealized loss on the security (i.e., the fair value floor).
The determination of the credit loss component of a mortgage backed security is based on a number of factors. The primary consideration in this evaluation process is the issuer's ability to meet current and future interest and principal payments as contractually stated at time of purchase. Our review of these securities includes an analysis of the cash flow modeling under various default scenarios considering independent third party benchmarks, the seniority of the specific tranche within the structure of the security, the composition of the collateral and the actual default, loss severity and prepayment experience exhibited. With the input of third party assumptions for default projections, loss severity and prepayment expectations, we evaluate the cash flow projections to determine whether the security is performing in accordance with its contractual obligation.
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We utilize models from a leading structured product software specialist serving institutional investors. These models incorporate each security's seniority and cash flow structure. In circumstances where the analysis implies a potential for principal loss at some point in the future, we use the "best estimate" cash flow projection discounted at the security's effective yield at acquisition to determine the amount of our potential credit loss associated with this security. The discounted expected future cash flows equates to our expected recovery value. Any shortfall of the expected recovery when compared to the amortized cost of the security will be recorded as credit loss.
The determination of the credit loss component of a corporate bond is based on the underlying financial performance of the issuer and their ability to meet their contractual obligations. Considerations in our evaluation include, but are not limited to, credit rating changes, financial statement and ratio analysis, changes in management, significant changes in credit spreads, breaches of financial covenants and a review of the economic outlook for the industry and markets in which they trade. In circumstances where an issuer appears unlikely to meet its future obligation, an estimate of credit loss is determined. Credit loss is calculated using default probabilities as derived from the credit default swaps markets in conjunction with recovery rates derived from independent third party analysis or a best estimate of credit loss. This credit loss rate is then incorporated into a present value calculation based on an expected principal loss in the future discounted at the yield at the date of purchase and compared to amortized cost to determine the amount of credit loss associated with the security.
We do not measure a credit loss allowance on accrued interest receivable as we write off any accrued interest receivable balance to net investment income in a timely manner when we have concerns regarding collectability.
Amounts on available for sale fixed maturities that are deemed to be uncollectible are written off and removed from the allowance for credit loss. A write-off may also occur if we intend to sell a security or when it is more likely than not we will be required to sell the security before the recovery of its amortized cost.
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The following table provides a rollforward of the allowance for credit loss:
Three Months Ended June 30, 2022
States, Municipalities and
Territories
Corporate Securities Residential Mortgage Backed Securities Total
(Dollars in thousands)
Beginning balance $ 2,009  $ 3,825  $ 743  $ 6,577 
Additions for credit losses not previously recorded —  —  295  295 
Change in allowance on securities with previous allowance (175) (82) —  (257)
Reduction for securities sold during the period —  —  (428) (428)
Recoveries of amounts previously written off —  —  —  — 
Ending balance $ 1,834  $ 3,743  $ 610  $ 6,187 
Three Months Ended June 30, 2021
States, Municipalities and
Territories
Corporate Securities Residential Mortgage Backed Securities Total
(Dollars in thousands)
Beginning balance $ 2,791  $ 55,715  $ 1,192  $ 59,698 
Additions for credit losses not previously recorded —  —  —  — 
Change in allowance on securities with previous allowance 556  (402) 22  176 
Reduction for securities sold during the period —  (44,248) —  (44,248)
Recoveries of amounts previously written off —  (342) (1,094) (1,436)
Ending balance $ 3,347  $ 10,723  $ 120  $ 14,190 
Six Months Ended June 30, 2022
States, Municipalities and
Territories
Corporate Securities Residential Mortgage Backed Securities Total
(Dollars in thousands)
Beginning balance $ 2,776  $ —  $ 70  $ 2,846 
Additions for credit losses not previously recorded —  3,825  631  4,456 
Change in allowance on securities with previous allowance (942) (82) 337  (687)
Reduction for securities sold during the period —  —  (428) (428)
Recoveries of amounts previously written off —  —  —  — 
Ending balance $ 1,834  $ 3,743  $ 610  $ 6,187 
Six Months Ended June 30, 2021
States, Municipalities and
Territories
Corporate Securities Residential Mortgage Backed Securities Total
(Dollars in thousands)
Beginning balance $ 2,844  $ 60,193  $ 1,734  $ 64,771 
Additions for credit losses not previously recorded —  705  111  816 
Change in allowance on securities with previous allowance 503  925  (631) 797 
Reduction for securities sold during the period —  (50,758) —  (50,758)
Recoveries of amounts previously written off —  (342) (1,094) (1,436)
Ending balance $ 3,347  $ 10,723  $ 120  $ 14,190 
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4. Mortgage Loans on Real Estate
Our financing receivables consist of the following three portfolio segments: commercial mortgage loans, agricultural mortgage loans and residential mortgage loans. Our mortgage loan portfolios are summarized in the following table. There were commitments outstanding of $345.1 million at June 30, 2022.
June 30, 2022 December 31, 2021
(Dollars in thousands)
Commercial mortgage loans:
Principal outstanding $ 3,608,959  $ 3,633,131 
Deferred fees and costs, net (5,681) (4,629)
Amortized cost 3,603,278  3,628,502 
Valuation allowance (24,244) (17,926)
Commercial mortgage loans, carrying value 3,579,034  3,610,576 
Agricultural mortgage loans:
Principal outstanding 568,180  408,135 
Deferred fees and costs, net (1,716) (1,136)
Amortized cost 566,464  406,999 
Valuation allowance (664) (519)
Agricultural mortgage loans, carrying value 565,800  406,480 
Residential mortgage loans:
Principal outstanding 2,051,305  1,652,910 
Deferred fees and costs, net 1,654  1,468 
Unamortized discounts and premiums, net 38,303  22,143 
Amortized cost 2,091,262  1,676,521 
Valuation allowance (7,480) (5,579)
Residential mortgage loans, carrying value 2,083,782  1,670,942 
Mortgage loans, carrying value $ 6,228,616