NWLGI(US:NWLI)2023-03-14 23:19Regulatory and Economic Environment - National Western Life Group, Inc. discontinued accepting applications for international life insurance products from foreign nationals outside the U.S. in 2018[203]. - The current economic environment forecasts for 2023 range from muted growth scenarios to potential recessions, impacting personal incomes and financial protection plans[207]. - The company maintains a capital position substantially above regulatory and rating agency requirements to cushion against unexpected economic fluctuations[210]. - Interest rates have been historically low, making it challenging for insurers to achieve competitive pricing on products while meeting minimum interest rate guarantees[208]. Financial Performance - Total revenues for the year ended December 31, 2022, were $558.4 million, a decrease of 32.3% from $824.1 million in 2021[227]. - Net investment income (excluding derivatives) was $351.2 million in 2022, up from $345.8 million in 2021, indicating a growth of 1.3%[234]. - The company ceded net investment income of $67.2 million to reinsurers in 2022, compared to $55.1 million in 2021, marking an increase of 22.3%[240]. - The Company reported net realized and unrealized losses of $(86.9) million in 2022, contrasting with gains of $120.7 million in 2021, indicating significant market volatility[279]. - The Company reported pre-tax earnings in Other Operations of $20.6 million in 2022, down from $24.2 million in 2021, a decrease of 14.9%[369]. Investment Activities - The company’s investment activities are integral to its insurance operations, with anticipated yields reflected in premium rates and contract liabilities[219]. - The debt securities portfolio decreased to $8.7 billion at December 31, 2022, down from $10.1 billion at December 31, 2021, representing a decline of 13.8%[235]. - The weighted average yield on the debt securities portfolio was approximately 3.76% at December 31, 2022, compared to 4.21% in 2021[235]. - The investment portfolio decreased by 13% to $9.6 billion at December 31, 2022, compared to $11.0 billion at December 31, 2021, primarily due to unrealized losses[374]. - The Company holds predominantly agency mortgage-backed securities to manage risks associated with interest-sensitive liabilities, significantly reducing prepayment and extension risks through investments in collateralized mortgage obligations (CMO) with predictable cash flow patterns[382]. Policy and Claims Management - The liability for future policy benefits represents estimates of the present value of expected benefit payments, net of future net premium collections[217]. - Life and other policy benefits decreased to $159,470,000 in 2022 from $187,577,000 in 2021[263]. - The average net claim for National Western life insurance in 2022 was $65,900, a 7% increase from $61,900 in 2021[263]. - The total incurred death claims in 2022 were $35.9 million, down from $39.6 million in 2021, representing a decrease of 9.4%[363]. - The average face value of policies in force was approximately $33,300 as of December 31, 2022, with a total of 171,915 policies representing $5.7 billion of life insurance coverage[361]. Operational Expenses - Other operating expenses increased to $135.8 million in 2022 from $126.6 million in 2021, driven by higher general administrative and compensation expenses[288]. - The Company’s compensation expenses rose to $46.9 million in 2022, up from $40.2 million in 2021, reflecting increased staffing and operational costs[288]. - General administrative expenses for 2022 were $15.1 million for software costs, an increase from $13.8 million in 2021 and $12.6 million in 2020[289]. - Share-based compensation expense rose significantly to $15.2 million in 2022 from $5.8 million in 2021, driven by an increase in the Company's Class A Common Stock price to $281.00[290]. Segment Performance - Segment earnings from domestic life insurance operations decreased to $1,030 thousand in 2022 from $2,548 thousand in 2021[295]. - Total premiums and other revenues for domestic life insurance operations fell to $77,143 thousand in 2022, down from $141,405 thousand in 2021[297]. - International life insurance segment total premiums and other revenues decreased to $77.867 million in 2022 from $131.407 million in 2021, a decline of approximately 40.6%[313]. - Annuity segment total premiums and other revenues decreased to $251.454 million in 2022 from $390.417 million in 2021, a decline of approximately 35.6%[333]. Risk Management - The company's maximum risk exposure per insured life is capped at $500,000 through reinsurance, ensuring controlled risk management[323]. - The Company has no direct holdings of debt securities with operations in Russia, Ukraine, or Belarus, mitigating geopolitical risk exposure[390]. - The Company closely monitors below investment grade holdings, reviewing performance indicators to manage potential credit deterioration risks[390].