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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2021

  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: 000-55522

NATIONAL WESTERN LIFE GROUP, INC.
(Exact name of Registrant as specified in its charter)

Delaware  47-3339380
(State or Other Jurisdiction of Incorporation)  (IRS Employer Identification No.)
 
10801 N. Mopac Expy Bldg 3
Austin,Texas 
78759(512)836-1010
(Address of Principal Executive Offices) (Zip Code) (Telephone Number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:
Title of each class to be so registered:Trading Symbol Name of each exchange on which
each class is to be registered:
Class A Common Stock, $0.01 par valueNWLI The NASDAQ Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 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 and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). : Yes    No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.  See definition of "accelerated filer." "large accelerated filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated filer    Accelerated filer      Non-accelerated filer (Do not check if a smaller reporting company)    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 November 5, 2021, the number of shares of Registrant's common stock outstanding was: Class A – 3,436,020 and  Class B - 200,000.


Table of Contents
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TABLE OF CONTENTS
 Page
September 30, 2021 (Unaudited) and December 31, 2020
For the Three Months Ended September 30, 2021 and 2020 (Unaudited)
For the Nine Months Ended September 30, 2021 and 2020 (Unaudited)
For the Three Months Ended September 30, 2021 and 2020 (Unaudited)
For the Nine Months Ended September 30, 2021 and 2020 (Unaudited)
For the Three Months Ended September 30, 2021 and 2020 (Unaudited)
For the Nine Months Ended September 30, 2021 and 2020 (Unaudited)
For the Nine Months Ended September 30, 2021 and 2020 (Unaudited)
2

Table of Contents
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

 (Unaudited) 
ASSETSSeptember 30,
2021
December 31,
2020
Investments:  
Debt securities available-for-sale, at fair value (cost: $8,795,673 and $9,874,543)
$9,364,083 10,770,923 
Debt securities trading, at fair value (cost: $1,076,099 and $0)
1,085,654  
Mortgage loans, net of allowance for credit losses ($3,956 and $2,486), ($6,439 and $0 at fair value)
462,882 332,521 
Policy loans71,668 74,083 
Derivatives, index options82,390 132,821 
Equity securities, at fair value (cost: $12,079 and $12,069)
21,186 17,744 
Other long-term investments124,772 104,113 
Total investments11,212,635 11,432,205 
Cash and cash equivalents540,226 581,059 
Deferred policy acquisition costs539,294 382,080 
Deferred sales inducements71,677 43,845 
Value of business acquired156,259 162,968 
Cost of reinsurance92,578 102,840 
Accrued investment income91,842 88,323 
Federal income tax receivable9,485 10,408 
Amounts recoverable from reinsurer1,580,907 1,709,232 
Other assets126,739 135,310 
Total assets$14,421,642 14,648,270 

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
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NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)

 (Unaudited) 
LIABILITIES AND STOCKHOLDERS’ EQUITYSeptember 30,
2021
December 31,
2020
LIABILITIES:  
Future policy benefits:  
Universal life and annuity contracts$9,001,837 9,035,316 
   Traditional life reserves904,803 898,103 
Other policyholder liabilities132,029 138,480 
Funds withheld liability1,540,384 1,697,591 
Deferred Federal income tax liability117,486 145,126 
Other liabilities168,869 193,904 
Total liabilities11,865,408 12,108,520 
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS’ EQUITY:  
Common stock:  
Class A - $0.01 par value; 7,500,000 shares authorized; 3,436,020 issued and outstanding in 2021 and 2020
34 34 
Class B - $0.01 par value; 200,000 shares authorized, issued, and outstanding in 2021 and 2020
2 2 
Additional paid-in capital41,716 41,716 
Accumulated other comprehensive income260,036 395,421 
Retained earnings2,254,446 2,102,577 
Total stockholders’ equity2,556,234 2,539,750 
Total liabilities and stockholders' equity$14,421,642 14,648,270 

Note:  The Condensed Consolidated Balance Sheet at December 31, 2020 has been derived from the audited Consolidated Financial Statements as of that date.

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

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NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Three Months Ended September 30, 2021 and 2020
(Unaudited)
(In thousands, except per share amounts)

 20212020
Premiums and other revenues:  
Universal life and annuity contract charges$32,850 40,303 
Traditional life premiums22,244 22,693 
Net investment income88,970 129,679 
Other revenues5,806 3,977 
Net realized investment gains:  
Total other-than-temporary impairment (“OTTI”) gains 1 
Portion of OTTI (gains) recognized in other comprehensive income (1)
Net OTTI recognized in earnings  
Other net investment gains5,011 6,050 
Total net realized investment gains5,011 6,050 
Total revenues154,881 202,702 
Benefits and expenses:  
Life and other policy benefits70,633 26,940 
Amortization of deferred transaction costs(8,389)50,800 
Universal life and annuity contract interest11,663 85,879 
Other operating expenses30,793 25,754 
Total benefits and expenses104,700 189,373 
Earnings before Federal income taxes50,181 13,329 
Federal income taxes10,341 2,504 
Net earnings$39,840 10,825 
Basic earnings per share:  
Class A$11.27 $3.06 
Class B$5.63 $1.53 
Diluted earnings per share:  
Class A$11.27 $3.06 
Class B$5.63 $1.53 

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).






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NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
(In thousands, except per share amounts)
 20212020
Premiums and other revenues:  
Universal life and annuity contract charges$101,799 112,478 
Traditional life premiums66,940 68,956 
Net investment income411,589 261,894 
Other revenues17,254 15,217 
Net realized investment gains:  
Total other-than-temporary impairment (“OTTI”) gains 5 
Portion of OTTI (gains) recognized in other comprehensive income (5)
Net OTTI recognized in earnings  
Other net investment gains9,842 12,660 
Total net realized investment gains9,842 12,660 
Total revenues607,424 471,205 
Benefits and expenses:  
Life and other policy benefits144,426 94,005 
Amortization of deferred transaction costs46,723 111,937 
Universal life and annuity contract interest134,481 119,625 
Other operating expenses90,596 74,730 
Total benefits and expenses416,226 400,297 
Earnings before Federal income taxes191,198 70,908 
Federal income taxes39,329 13,732 
Net earnings$151,869 57,176 
Basic earnings per share:  
Class A$42.95 $16.17 
Class B$21.47 $8.08 
Diluted earnings per share:  
Class A$42.95 $16.17 
Class B$21.47 $8.08 

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
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NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months Ended September 30, 2021 and 2020
(Unaudited)
(In thousands)

 20212020
Net earnings$39,840 10,825 
Other comprehensive income, net of effects of deferred costs and taxes:  
Unrealized gains (losses) on securities:  
Net unrealized holding gains (losses) arising during period(21,319)24,357 
Net unrealized liquidity gains (losses) 1 
Reclassification adjustment for net amounts included in net earnings(3,970)(702)
Net unrealized gains (losses) on securities(25,289)23,656 
Foreign currency translation adjustments(96)85 
Benefit plans:  
Amortization of net prior service cost and net gain (loss)1,934 (2,066)
Other comprehensive income (loss)(23,451)21,675 
Comprehensive income$16,389 32,500 

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).


























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NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
(In thousands)
 20212020
Net earnings$151,869 57,176 
Other comprehensive income, net of effects of deferred costs and taxes:  
Unrealized gains (losses) on securities:  
Net unrealized holding gains (losses) arising during period(132,118)53,569 
Net unrealized liquidity gains (losses) 2 
Reclassification adjustment for net amounts included in net earnings(8,899)(2,670)
Net unrealized gains (losses) on securities(141,017)50,901 
Foreign currency translation adjustments(172)(46)
Benefit plans:  
Amortization of net prior service cost and net gain (loss)5,804 (6,199)
Other comprehensive income (loss)(135,385)44,656 
Comprehensive income$16,484 101,832 


See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
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NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Three Months Ended September 30, 2021 and 2020
(Unaudited)
(In thousands)

 20212020
Common stock:  
Balance at beginning of period$36 36 
Balance at end of period36 36 
Additional paid-in capital:  
Balance at beginning of period41,716 41,716 
Balance at end of period41,716 41,716 
Accumulated other comprehensive income:  
Unrealized gains (losses) on non-impaired securities:  
Balance at beginning of period303,013 97,909 
Change in unrealized gains (losses) during period, net of tax(25,289)23,655 
Balance at end of period277,724 121,564 
Unrealized losses on impaired held-to-maturity securities:  
Balance at beginning of period (3)
Amortization 1 
Balance at end of period (2)
Unrealized losses on impaired available-for-sale securities:  
Balance at beginning of period (2)
Balance at end of period$ (2)
Continued on Next Page
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NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY (continued)
For the Three Months Ended September 30, 2021 and 2020
(Unaudited)
(In thousands)
20212020
Foreign currency translation adjustments:  
Balance at beginning of period5,040 4,970 
Change in translation adjustments during period(96)85 
Balance at end of period4,944 5,055 
Benefit plan liability adjustment:  
Balance at beginning of period(24,566)(19,785)
Amortization of net prior service cost and net gain (loss), net of tax1,934 (2,066)
Balance at end of period(22,632)(21,851)
Accumulated other comprehensive income at end of period260,036 104,764 
Retained earnings:  
Balance at beginning of period2,214,606 2,057,889 
Net earnings39,840 10,825 
Balance at end of period 2,254,446 2,068,714 
Total stockholders' equity$2,556,234 2,215,230 

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).






















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NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
(In thousands)
 20212020
Common stock:  
Balance at beginning of period$36 36 
Balance at end of period36 36 
Additional paid-in capital:  
Balance at beginning of period41,716 41,716 
Balance at end of period
41,716 41,716 
Accumulated other comprehensive income:  
Unrealized gains (losses) on non-impaired securities:  
Balance at beginning of period418,741 70,665 
Change in unrealized gains (losses) during period, net of tax(141,017)50,899 
Balance at end of period277,724 121,564 
Unrealized losses on impaired held to maturity securities:  
Balance at beginning of period (4)
Amortization 4 
Change in shadow deferred policy acquisition costs (2)
Balance at end of period (2)
Unrealized losses on impaired available for sale securities:  
Balance at beginning of period (2)
Balance at end of period (2)
Continued on Next Page
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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY (continued)
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
(In thousands)
20212020
Foreign currency translation adjustments:  
Balance at beginning of period5,116 5,101 
Change in translation adjustments during period(172)(46)
Balance at end of period4,944 5,055 
Benefit plan liability adjustment:  
Balance at beginning of period(28,436)(15,652)
Amortization of net prior service cost and net loss, net of tax5,804 (6,199)
Balance at end of period(22,632)(21,851)
Accumulated other comprehensive income at end of period260,036 104,764 
Retained earnings:  
Balance at beginning of period2,102,577 2,014,570 
Cumulative effect of change in accounting principle, net of tax (Note 2) (3,032)
Net earnings151,869 57,176 
Balance at end of period2,254,446 2,068,714 
Total stockholders' equity$2,556,234 2,215,230 

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
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NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
(In thousands)
 20212020
Cash flows from operating activities:  
Net earnings$151,869 57,176 
Adjustments to reconcile net earnings to net cash from operating activities:  
Universal life and annuity contract interest134,481 119,625 
Surrender charges and other policy revenues(19,900)(21,219)
Realized (gains) losses on investments(9,842)(12,660)
Accretion/amortization of discounts and premiums, investments1,887 1,580 
Depreciation and amortization9,803 8,892 
Increase (decrease) in estimated credit losses on investments1,470 2,930 
(Increase) decrease in value of debt securities trading(9,556) 
(Increase) decrease in value of equity securities(3,714)3,107 
(Increase) decrease in value of derivative options(70,474)34,866 
(Increase) decrease in deferred policy acquisition and sales inducement costs, and value of business acquired(28,871)75,604 
(Increase) decrease in accrued investment income(3,519)(32)
(Increase) decrease in reinsurance recoverable128,325 9,758 
(Increase) decrease in cost of reinsurance10,262  
(Increase) decrease in other assets(5,563)(1,012)
Increase (decrease) in liabilities for future policy benefits(103,396)(5,288)
Increase (decrease) in other policyholder liabilities(6,451)8,785 
Increase (decrease) in Federal income tax liability923 (4,550)
Increase (decrease) in deferred Federal income tax8,349 5,224 
Increase (decrease) in funds withheld liability(157,207) 
Increase (decrease) in other liabilities(31,539)(3,391)
Net cash provided by (used in) operating activities(2,663)279,395 
Cash flows from investing activities:  
Proceeds from sales of:  
Debt securities available-for-sale1,153,113  
Other investments26,166 5,786 
Proceeds from maturities, redemptions, and prepayments of:  
Debt securities held-to-maturity 619,984 
Debt securities available-for-sale1,143,075 240,398 
Debt securities trading18,958  
  Other investments20,195 9,753 
Derivatives, index options155,142 84,778 
Purchases of:  
Debt securities held-to-maturity (318,138)
Debt securities available-for-sale(1,128,594)(181,162)
Continued on Next Page
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
(In thousands)
20212020
Debt securities trading(1,092,445) 
Equity securities(10,592)(1,019)
Derivatives, index options(34,494)(51,318)
Other investments(41,928)(23,268)
Property, equipment, and other productive assets(8,143)(7,223)
Principal payments on mortgage loans19,927 6,022 
Cost of mortgage loans acquired(151,402)(41,530)
Decrease (increase) in policy loans2,415 4,294 
Other (increases) decreases to funds withheld(71,077) 
Net cash provided by investing activities316 347,357 
Cash flows from financing activities:  
Deposits to account balances for universal life and annuity contracts479,063 348,583 
Return of account balances on universal life and annuity contracts(517,027)(721,496)
Principal payments under finance lease obligation(303)(280)
Net cash provided by (used in) financing activities(38,267)(373,193)
Effect of foreign exchange(219)(59)
Net increase (decrease) in cash, cash equivalents, and restricted cash(40,833)253,500 
Cash, cash equivalents, and restricted cash at beginning of period581,059 253,525 
Cash, cash equivalents and restricted cash at end of period$540,226 507,025 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:  
Cash paid during the period for:  
Interest$56 56 
Income taxes$30,042 13,229 
Noncash operating activities:
Net deferral and amortization of sales inducements$4,576 (12,755)

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).


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NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1) CONSOLIDATION AND BASIS OF PRESENTATION

The accompanying unaudited Condensed Consolidated Financial Statements 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. Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements. In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments necessary to present fairly the financial position and results of operations of National Western Life Group, Inc. ("NWLGI") and its wholly owned subsidiaries (collectively, the “Company”), on a basis consistent with the prior audited consolidated financial statements, as of September 30, 2021, and for the three and nine months ended September 30, 2021 and September 30, 2020. Such adjustments are of a normal recurring nature. Certain reclasses of prior year balances have been made for comparison. In addition, certain segment information disclosed in Note 6 has been revised. The results of operations for the nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year. It is recommended that these Condensed Consolidated Financial Statements be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020 which is accessible free of charge through the Company's internet site at www.nwlgi.com or the Securities and Exchange Commission internet site at www.sec.gov. The Condensed Consolidated Balance Sheet at December 31, 2020 has been derived from the audited consolidated financial statements as of that date.

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of NWLGI and its wholly owned subsidiaries: National Western Life Insurance Company ("NWLIC" or "National Western"), Regent Care San Marcos Holdings, LLC, NWL Services, Inc., and N.I.S. Financial Services, Inc. ("NIS"). National Western's wholly owned subsidiaries include The Westcap Corporation, NWL Financial, Inc., NWLSM, Inc., Braker P III, LLC, and Ozark National Life Insurance Company ("Ozark National"). All significant intercorporate transactions and accounts have been eliminated in consolidation.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates in the accompanying Condensed Consolidated Financial Statements include: (1) liabilities for future policy benefits, (2) valuation of derivative instruments, (3) recoverability and amortization of deferred policy acquisition costs ("DPAC"), deferred sales inducements ("DSI"), the value of business acquired ("VOBA"), and the cost of reinsurance ("COR"), (4) valuation allowances for deferred tax assets, (5) goodwill, (6) allowances for credit losses on debt securities and mortgage loans, and (7) commitments and contingencies.

As a result of executing a funds withheld coinsurance agreement at December 31, 2020, the Company implemented accounting policies related to trading debt securities and the embedded derivative on reinsurance in its financial statements. Trading securities represent debt securities that are included in the fund assets withheld as part of the funds withheld coinsurance agreements to support the policyholder liability obligations ceded to the reinsurer. Trading debt securities are reported in the accompanying Condensed Consolidated Financial Statements at their fair values with changes in their fair values reflected as a component of Net investment income in the Condensed Consolidated Statements of Earnings. Since these trading debt securities pertain to investment activities related to coinsurance agreements rather than as an income strategy based on active trading, they are classified as investing activities in the Condensed Consolidated Statements of Cash Flows. Under the terms of the coinsurance funds withheld agreement, while the assets are withheld, the associated interest and credit risk of these assets are transferred to the reinsurer creating an embedded derivative on reinsurance in the funds withheld liability. Accordingly, the Company is required to bifurcate the embedded derivative from the host contract in accordance with ASC 815-15. The bifurcated embedded derivative on reinsurance is computed as the fair value unrealized gain (loss) on the underlying funds withheld assets. This amount is included as a component of the funds withheld liability balance reported on the Condensed Consolidated Balance Sheets, with changes in the embedded derivative on reinsurance reported in Net investment income (loss) in the Condensed Consolidated Statements of Earnings. The embedded derivative on reinsurance is classified as a Level 2 financial instrument in the fair value hierarchy because its valuation input is the fair value market adjustments on the underlying Level 2 debt securities. See Note (10) Fair Values of Financial Instruments for further details of fair value disclosures. In the Condensed Consolidated Statements of Cash Flows, changes in the funds withheld liability are reported as operating activities. Realized gains on funds withheld assets are transferred to the reinsurer and reported as investing activities in the Condensed Consolidated Statements of Cash Flows.
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NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


The table below shows the net unrealized gains and losses on available-for-sale securities that were reclassified out of accumulated other comprehensive income for the three and nine months ended September 30, 2021 and September 30, 2020.

Affected Line Item in the Condensed Consolidated Statements of EarningsAmount Reclassified From Accumulated Other Comprehensive Income
Three Months Ended September 30,Nine Months Ended September 30,
2021202020212020
(In thousands)
Other net investment gains$5,025 889 11,265 3,380 
Earnings before Federal income taxes5,025 889 11,265 3,380 
Federal income taxes1,055 187 2,366 710 
Net earnings$3,970 702 8,899 2,670 


(2) NEW ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements not yet adopted

In August 2018, the FASB issued ASU 2018-12 Financial Services-Insurance (Topic 944) - Targeted Improvements to the Accounting for Long-Duration Contracts. This update is aimed at improving the Codification as it relates to long-duration contracts which will improve the timeliness of recognizing changes in the liability for future policy benefits, simplify accounting for certain market-based options, simplify the amortization of deferred acquisition costs, and improve the effectiveness of required disclosures. Amendments include the following:

A. Require insurance entity to (1) review and update assumptions used to measure cash flows at least annually (with changes recognized in net income) and (2) update discount rate assumption at each reporting date (with changes recognized in other comprehensive income).

B. Require insurance entity to measure all market risk benefits associated with deposit (i.e. account balance) contracts at fair value, with change in fair value attributable to change in instrument-specific credit risk recognized in other comprehensive income.

C. Simplify amortization of deferred acquisition costs and other balances amortized in proportion to premiums, gross profits, or gross margins and require those balances be amortized on constant level basis over expected term of related contract. Deferred acquisition costs are required to be written off for unexpected contract terminations but are not subject to impairment test.

D. Require insurance entity to add disclosures of disaggregated rollforwards of beginning to ending balances of the liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities, and deferred acquisition costs. Insurance entity must also disclose information about significant inputs, judgments, assumptions, and methods used in measurement, including changes in those inputs, judgments, and assumptions, and the effect of those changes on measurement.

These updates are required to be applied retrospectively to the earliest period presented in the financial statements for fiscal periods beginning after December 15, 2022, with early adoption permitted. The Company has performed a preliminary gap analysis and created a roadmap for implementation of this standard by the effective date and is evaluating the impact of the new guidance on its Consolidated Financial Statements.
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NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Accounting pronouncements adopted

In December 2019, the FASB issued ASU 2019-12 Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740), which simplifies various aspects of the income tax accounting guidance and will be applied using different approaches depending on the specific amendment. The amendments are effective for fiscal periods beginning after December 15, 2020. Earlier adoption was permitted. The adoption of this ASU did not have a material effect on the results of operations or financial position of the Company.

In June 2016, the FASB released ASU 2016-13, Financial Instruments - Credit Losses, which revises the credit loss recognition criteria for certain financial assets measured at amortized cost. The new guidance replaces the existing incurred loss recognition model with an expected loss recognition model ("CECL"). The objective of the CECL model is for the reporting entity to recognize its estimate of current expected credit losses for affected financial assets in a valuation allowance deducted from the amortized cost basis of the related financial assets that results in presenting the net carrying value of the financial assets at the amount expected to be collected. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments - Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. The amendments in this Update add clarification and correction to ASU 2016-13 around expected recoveries for purchased financial assets with credit deterioration, transition relief for troubled debt restructurings, disclosures related to accrued interest receivables, and financial assets secured by collateral maintenance provisions. The guidance for these pronouncements was effective for interim and annual periods beginning after December 15, 2019, and for most affected instruments required adoption using a modified retrospective approach, with a cumulative effect adjustment recorded to beginning retained earnings. Effective January 1, 2020, the Company adopted the expected loss recognition model related to mortgage loans, debt securities held-to-maturity, and reinsurance recoverable using a modified retrospective approach. The change in accounting, net of tax, of $3.0 million was recorded as a charge to retained earnings in the first quarter of 2020 reflecting initial allowance for estimated credit losses balances of $1.2 million on mortgage loans and $3.3 million on debt securities held to maturity. The estimated credit losses for reinsurance recoverable were immaterial to the financial statements, but are monitored quarterly for any changes. Refer to Note (9) Investments for more information. Certain disclosures required by ASU 2016-13 are not included in the Consolidated Financial Statements as the impact of this standard was not material.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not, or are not believed by management to, have a material impact on the Company’s present or future Consolidated Financial Statements.


(3) STOCKHOLDERS' EQUITY

Robert L. Moody, Sr., through the Robert L. Moody Revocable Trust, controls 99.0% of the total outstanding shares of the Company's Class B common stock as of September 30, 2021. Holders of the Company's Class A common stock elect one-third of the Board of Directors of the Company, and holders of the Class B common stock elect the remainder. Any cash or in-kind dividends paid on each share of Class B common stock are limited to one-half of the cash or in-kind dividends paid on each share of Class A common stock. In the event of liquidation of the Company, the Class A stockholders will receive the par value of their shares; then the Class B stockholders shall receive the par value of their shares; and the remaining net assets of the Company shall be divided between the stockholders of both Class A and Class B stock based upon the number of shares held.

As the sole owner of National Western, all dividends declared by National Western are payable entirely to NWLGI and are eliminated in consolidation. National Western is restricted by state insurance laws as to dividend amounts which may be paid to stockholders without prior approval from the Colorado Division of Insurance. The restrictions are based on the lesser of statutory earnings from operations, excluding capital gains, or 10% of statutory surplus of National Western as of the previous year-end. Under these guidelines the maximum dividend payment which may be made without prior approval in 2021 is $10.0 million.

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NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Ozark National is similarly restricted under the state insurance laws of Missouri as to dividend amounts which may be paid to stockholders without prior approval to the greater of 10.0% of the statutory surplus of the company from the preceding year-end or the company's net gain from operations, excluding capital gains, from the prior calendar year. Based upon this restriction, the maximum dividend payment which may be made in 2021 without prior approval is $20.0 million. All dividends declared by Ozark National are payable entirely to NWLIC as the sole owner and are eliminated in consolidation.
National Western did not declare or pay cash dividends to NWLGI during the nine months ended September 30, 2021 and 2020. NWLGI also did not declare or pay cash dividends on its common shares during the nine months ended September 30, 2021 and 2020.


(4) EARNINGS PER SHARE

Basic earnings per share of common stock are computed by dividing net earnings available to each class of common stockholders on an as if distributed basis by the weighted-average number of common shares outstanding for the period. Diluted earnings per share, by definition, reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock, that then shared in the distributed earnings of each class of common stock. U.S. GAAP requires a two-class presentation for the Company's two classes of common stock. The Company currently has no share-based compensation awards outstanding that could be redeemed for shares of common stock.

Net earnings for the periods shown below are allocated between Class A shares and Class B shares based upon (1) the proportionate number of shares issued and outstanding as of the end of the period, and (2) the per share dividend rights of the two classes under the Company's Restated Certificate of Incorporation (the Class B dividend per share is equal to one-half the Class A dividend per share).

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NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 Three Months Ended September 30,
 20212020
 Class AClass BClass AClass B
 (In thousands except per share amounts)
Numerator for Basic and Diluted Earnings Per Share:    
Net earnings$39,840  10,825  
Dividends - Class A shares    
Dividends - Class B shares    
Undistributed earnings$39,840  10,825  
Allocation of net earnings:    
Dividends$    
Allocation of undistributed earnings38,713 1,127 10,519 306 
Net earnings$38,713 1,127 10,519 306 
Denominator:    
Basic earnings per share - weighted-average shares3,436 200 3,436 200 
Effect of dilutive stock options    
Diluted earnings per share - adjusted weighted-average shares for assumed conversions3,436 200 3,436 200 
Basic earnings per share$11.27 5.63 3.06 1.53 
Diluted earnings per share$11.27 5.63 3.06 1.53 
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NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 Nine Months Ended September 30,
 20212020
 Class AClass BClass AClass B
(In thousands except per share amounts)
Numerator for Basic and Diluted Earnings Per Share:    
Net earnings$151,869  57,176  
Dividends - Class A shares    
Dividends - Class B shares    
Undistributed earnings$151,869  57,176  
Allocation of net earnings:    
Dividends$    
Allocation of undistributed earnings147,574 4,295 55,560 1,616 
Net earnings$147,574 4,295 55,560 1,616 
Denominator: