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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 March 31, 2022

  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 May 9, 2022, the number of shares of Registrant's common stock outstanding was: Class A – 3,436,020 and  Class B - 200,000.


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TABLE OF CONTENTS
 Page
March 31, 2022 (Unaudited) and December 31, 2021
For the Three Months Ended March 31, 2022 and 2021 (Unaudited)
For the Three Months Ended March 31, 2022 and 2021 (Unaudited)
For the Three Months Ended March 31, 2022 and 2021 (Unaudited)
For the Three Months Ended March 31, 2022 and 2021 (Unaudited)
2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

 (Unaudited) 
ASSETSMarch 31,
2022
December 31,
2021
Investments:  
Debt securities available-for-sale, at fair value (cost: $8,809,594 and $8,604,250)
$8,715,874 9,068,946 
Debt securities trading, at fair value (cost: $1,076,517 and $1,066,108)
1,014,904 1,077,438 
Mortgage loans, net of allowance for credit losses ($2,816 and $2,987), ($11,120 and 8,469 at fair value)
510,995 487,304 
Policy loans71,620 71,286 
Derivatives, index options44,861 101,622 
Equity securities, at fair value (cost: $16,569 and $16,549)
27,585 28,217 
Other long-term investments145,507 137,670 
Total investments10,531,346 10,972,483 
Cash and cash equivalents499,754 714,624 
Deferred policy acquisition costs740,024 569,839 
Deferred sales inducements103,584 78,136 
Value of business acquired152,462 154,499 
Cost of reinsurance86,571 89,686 
Accrued investment income91,190 84,394 
Federal income tax receivable2,761  
Amounts recoverable from reinsurer1,494,764 1,539,919 
Other assets121,580 126,609 
Total assets$13,824,036 14,330,189 

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
3

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

 (Unaudited) 
LIABILITIES AND STOCKHOLDERS’ EQUITYMarch 31,
2022
December 31,
2021
LIABILITIES:  
Future policy benefits:  
Universal life and annuity contracts$8,890,352 9,003,275 
   Traditional life reserves912,302 909,712 
Other policyholder liabilities145,192 134,338 
Funds withheld liability1,349,050 1,485,267 
Deferred Federal income tax liability41,440 101,166 
Federal income tax payable 2,331 
Other liabilities187,719 154,409 
Total liabilities11,526,055 11,790,498 
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 2022 and 2021
34 34 
Class B - $0.01 par value; 200,000 shares authorized, issued, and outstanding in 2022 and 2021
2 2 
Additional paid-in capital41,716 41,716 
Accumulated other comprehensive income (loss)(61,941)215,953 
Retained earnings2,318,170 2,281,986 
Total stockholders’ equity2,297,981 2,539,691 
Total liabilities and stockholders' equity$13,824,036 14,330,189 

Note:  The Condensed Consolidated Balance Sheet at December 31, 2021 has been derived from the audited Consolidated Financial Statements as of that date.

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

4

NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
For the Three Months Ended March 31, 2022 and 2021
(Unaudited)
(In thousands, except per share amounts)

 20222021
Premiums and other revenues:  
Universal life and annuity contract charges$32,651 34,889 
Traditional life premiums22,333 22,584 
Net investment income69,724 166,075 
Other revenues5,797 5,414 
Net realized investment gains:  
Other net investment gains3,794 1,416 
Total net realized investment gains3,794 1,416 
Total revenues134,299 230,378 
Benefits and expenses:  
Life and other policy benefits41,899 37,889 
Amortization of deferred transaction costs29,016 29,989 
Universal life and annuity contract interest(14,805)52,845 
Other operating expenses32,582 31,335 
Total benefits and expenses88,692 152,058 
Earnings before Federal income taxes45,607 78,320 
Federal income taxes9,423 16,191 
Net earnings$36,184 62,129 
Basic earnings per share:  
Class A$10.23 $17.57 
Class B$5.12 $8.79 
Diluted earnings per share:  
Class A$10.23 $17.57 
Class B$5.12 $8.79 

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





5

NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended March 31, 2022 and 2021
(Unaudited)
(In thousands)

 20222021
Net earnings$36,184 62,129 
Other comprehensive income (loss), net of effects of deferred costs and taxes:  
Unrealized gains (losses) on available-for-sale securities:  
Net unrealized holding gains (losses) arising during period(276,609)(152,195)
Reclassification adjustment for net amounts included in net earnings(2,732)(1,119)
Net unrealized gains (losses) on securities(279,341)(153,314)
Foreign currency translation adjustments313 (5)
Benefit plans:  
Amortization of net prior service cost and net gain1,134 1,935 
Other comprehensive income (loss)(277,894)(151,384)
Comprehensive income (loss)$(241,710)(89,255)

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

























6


NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 2022 and 2021
(Unaudited)
(In thousands)

 20222021
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 (loss):  
Unrealized gains (losses) on debt securities available-for-sale:  
Balance at beginning of period226,220 418,741 
Change in unrealized gains (losses) during period, net of tax(279,341)(153,314)
Balance at end of period(53,121)265,427 
Foreign currency translation adjustments:  
Balance at beginning of period5,100 5,116 
Change in translation adjustments during period313 (5)
Balance at end of period5,413 5,111 
Benefit plan liability adjustment:  
Balance at beginning of period(15,367)(28,436)
Amortization of net prior service cost and net gain, net of tax1,134 1,935 
Balance at end of period(14,233)(26,501)
Accumulated other comprehensive income (loss) at end of period(61,941)244,037 
Retained earnings:  
Balance at beginning of period2,281,986 2,102,577 
Net earnings36,184 62,129 
Balance at end of period 2,318,170 2,164,706 
Total stockholders' equity$2,297,981 2,450,495 

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
7

NATIONAL WESTERN LIFE GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2022 and 2021
(Unaudited)
(In thousands)
 20222021
Cash flows from operating activities:  
Net earnings$36,184 62,129 
Adjustments to reconcile net earnings to net cash from operating activities:  
Universal life and annuity contract interest(14,805)52,845 
Surrender charges and other policy revenues(5,110)(6,134)
Realized (gains) losses on investments(3,794)(1,416)
Accretion/amortization of discounts and premiums, investments(997)464 
Depreciation and amortization3,440 3,159 
Increase (decrease) in estimated credit losses on investments(171)547 
(Increase) decrease in value of debt securities trading72,945 13,952 
(Increase) decrease in value of equity securities653 (1,627)
(Increase) decrease in value of derivative options38,198 (28,023)
(Increase) decrease in deferred policy acquisition and sales inducement costs, and value of business acquired11,222 2,876 
(Increase) decrease in accrued investment income(6,796)(1,848)
(Increase) decrease in reinsurance recoverable45,155 13,534 
(Increase) decrease in cost of reinsurance3,115 3,868 
(Increase) decrease in other assets(329)184 
Increase (decrease) in liabilities for future policy benefits22,652 17,765 
Increase (decrease) in other policyholder liabilities10,854 9,781 
Increase (decrease) in Federal income tax liability(5,092)13,825 
Increase (decrease) in deferred Federal income tax14,145 2,231 
Increase (decrease) in funds withheld liability(136,217)(60,632)
Increase (decrease) in other liabilities(12,545)(41,590)
Net cash provided by operating activities72,707 55,890 
Cash flows from investing activities:  
Proceeds from sales of:  
Debt securities available-for-sale13,030 571,117 
Debt securities trading17,183  
Other investments552 10,608 
Proceeds from maturities, redemptions, and prepayments of:  
Debt securities available-for-sale248,347 384,835 
Debt securities trading46,762 1,309 
  Other investments11,732 4,557 
Derivatives, index options32,304 34,968 
Purchases of:  
Debt securities available-for-sale(414,547)(408,534)
Continued on Next Page
8


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For the Three Months Ended March 31, 2022 and 2021
(Unaudited)
(In thousands)
20222021
Debt securities trading(74,082)(605,828)
Equity securities(155)(10,356)
Derivatives, index options(12,576)(11,511)
Other investments(18,043)(17,208)
Property, equipment, and other productive assets(569)(2,603)
Principal payments on mortgage loans2,440 4,015 
Cost of mortgage loans acquired(26,400)(49,510)
Decrease (increase) in policy loans(334)1,251 
Other (increases) decreases to funds withheld(463)(39,790)
Net cash provided by (used in) investing activities(174,819)(132,680)
Cash flows from financing activities:  
Deposits to account balances for universal life and annuity contracts114,756 169,294 
Return of account balances on universal life and annuity contracts(227,826)(237,814)
Principal payments under finance lease obligation(84)(99)
Net cash provided by (used in) financing activities(113,154)(68,619)
Effect of foreign exchange396 (6)
Net increase (decrease) in cash, cash equivalents, and restricted cash(214,870)(145,415)
Cash, cash equivalents, and restricted cash at beginning of period714,624 581,059 
Cash, cash equivalents and restricted cash at end of period$499,754 435,644 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:  
Cash paid during the period for:  
Interest$19 19 
Income taxes$433 5 
Noncash operating activities:
Net deferral and amortization of sales inducements$(550)2,257 

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


9


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 March 31, 2022, and for the three months ended March 31, 2022 and March 31, 2021. Such adjustments are of a normal recurring nature. Certain reclasses of prior year balances have been made for comparison. The results of operations for the three months ended March 31, 2022 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, 2021 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, 2021 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 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. The value of the embedded derivative at March 31, 2022 and December 31, 2021 was $175.6 million and $84.7 million, respectively.
10


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 months ended March 31, 2022 and March 31, 2021.

Affected Line Item in the Condensed Consolidated Statements of EarningsAmount Reclassified From Accumulated Other Comprehensive Income
Three Months Ended March 31,
20222021
(In thousands)
Other net investment gains$3,458 1,416 
Earnings before Federal income taxes3,458 1,416 
Federal income taxes726 297 
Net earnings$2,732 1,119 


(2) NEW ACCOUNTING PRONOUNCEMENTS

Recent accounting pronouncements not yet adopted

In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-12 Financial Services-Insurance (Topic 944) - Targeted Improvements to the Accounting for Long-Duration Contracts ("LDTI"). This update pertains to long-duration contracts and improving the timeliness of recognizing changes in the liability for future policy benefits, simplifying accounting for certain market-based options, simplifying the amortization of deferred policy acquisition costs, and improving the effectiveness of required disclosures. Amendments include the following:

A. Require an 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 assumptions at each quarterly reporting date with the impact recognized in other comprehensive income ("OCI").

B. Require an insurance entity to measure all market risk benefits, which are contracts or contract features that provide protection to the policyholder from capital market risk, associated with deposit (i.e. account balance) contracts at fair value. The periodic change in fair value attributable to change in instrument-specific credit risk is recognized in OCI.

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

D. Require an insurance entity to add disclosures of disaggregated rollforwards of significant insurance liabilities and other account balances (i.e. beginning to ending balances of the liability for future policy benefits, policyholder account balances, market risk benefits, separate account liabilities, and deferred acquisition costs). The 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.

11


NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
In November 2020, the FASB released ASU 2020-11 Financial Services – Insurance (Topic 944). The amendments in this update deferred the effective date of adoption of ASU 2018-12 for all entities by one year. In particular, for publicly traded business entities, adoption of LDTI was made effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Accordingly, the Company's required adoption date is January 1, 2023. To date, the Company has: (1) performed a preliminary gap analysis identifying contracts and contract features in scope of this guidance, (2) identified the actuarial models, systems and processes to be updated, (3) identified and gathered cash flow data to be extracted from the Company's policy administrative systems necessary for implementation of this standard, (4) developed valuation models specific to LDTI for valuation date calculations integrating historical cash flows, and (5) established work streams for evaluating and finalizing key accounting policies, determining the impact to financial reporting charts of account, and developing the format and content of the new required disclosures.

Adoption of this standard will significantly change the accounting and reporting for the Company's insurance and annuity products. As the Company progresses through its implementation of the requirements of the standard, it will be better able to assess the impact to its Consolidated Financial Statements.

In March 2022, the FASB released ASU 2022-02 Financial Instruments – Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures. The amendments in this Update eliminate the accounting guidance for troubled-debt restructurings (TDRs) by creditors in Subtopic 310-40, Receivables - Troubled Debt Restructurings by Creditors, but enhances disclosure requirements for certain loan modifications in which the debtor is experiencing financial difficulties. Additionally, the amendments in this Update require public business entities to disclose current-period gross write offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20, Financial Instruments - Credit Losses - Measured at Amortized Cost. The updates are required to be applied prospectively beginning in fiscal years after December 15, 2022, including interim periods within those fiscal years. The Company does not expect this guidance to have a material impact on the Consolidated Financial Statements and related disclosures upon adoption.

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 in 2021 did not have a material effect on the results of operations or financial position of the Company.

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 March 31, 2022. 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 2022 is $64.4 million. National Western did not declare or pay cash dividends to NWLGI during the three months ended March 31, 2022 and 2021.

12


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 2022 without prior approval is $18.6 million. All dividends declared by Ozark National are payable entirely to NWLIC as the sole owner and are eliminated in consolidation. Ozark National did not declare or pay cash dividends to NWLIC during the quarters ended March 31, 2022 and 2021.

NWLGI did not declare or pay cash dividends on its common shares during the three months ended March 31, 2022 and 2021.


(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.

13


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

 Three Months Ended March 31,
 20222021
 Class AClass BClass AClass B
 (In thousands except per share amounts)
Numerator for Basic and Diluted Earnings Per Share:    
Net earnings$36,184  62,129  
Dividends - Class A shares    
Dividends - Class B shares    
Undistributed earnings$36,184  62,129  
Allocation of net earnings:    
Dividends$    
Allocation of undistributed earnings35,161 1,023 60,372 1,757 
Net earnings$35,161 1,023 60,372 1,757 
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$10.23 5.12 17.57 8.79 
Diluted earnings per share$10.23 5.12 17.57 8.79 


14


NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(5) PENSION AND OTHER POSTRETIREMENT PLANS

(A)Defined Benefit Pension Plans

National Western sponsors a qualified defined benefit pension plan covering employees enrolled prior to 2008. The plan provides benefits based on the participants' years of service and compensation. The Company makes annual contributions to the plan that comply with the minimum funding provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). On October 19, 2007, National Western's Board of Directors approved an amendment to freeze the pension plan as of December 31, 2007. The freeze ceased future benefit accruals to all participants and closed the plan to any new participants. In addition, all participants became immediately 100% vested in their accrued benefits as of that date. As participants are no longer earning a credit for service, future qualified defined benefit plan expense is projected to be minimal. Fair values of plan assets and liabilities are measured as of the prior December 31 for each year. The following table summarizes the components of net periodic benefit cost.

Three Months Ended
 March 31,
 20222021
 (In thousands)
Service cost$33 30 
Interest cost145 132 
Expected return on plan assets(394)(356)
Amortization of net loss34 134 
Net periodic benefit cost$(182)(60)

The service cost shown above for each period represents plan expenses expected to be paid out of plan assets. Under the clarified rules of the Pension Protection Act, plan expenses paid from plan assets are to be included in the plan's service cost component.

The Company's minimum required contribution for the 2022 plan year is $0.0 million. There was $0.3 million in planned contributions remaining for the 2021 plan year as of March 31, 2022. There was up to $0.3 million in planned contributions remaining for the 2022 plan year as of March 31, 2022. As of March 31, 2022, the Company has made $0.0 million in contributions to the plan for the 2021 plan year and $0.0 million in contributions to the plan for the 2022 plan year.

The components of net periodic benefit cost including service cost are reported in the line item “Other operating expenses” in the Condensed Consolidated Statements of Earnings.

15


NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
National Western also sponsors three non-qualified defined benefit pension plans. The first plan covers certain senior officers and provides benefits based on the participants' years of service and compensation. The primary pension obligations and administrative responsibilities of the plan are maintained by a pension administration firm, which is a subsidiary of American National Group, Inc. ("American National"), a related party. American National has guaranteed the payment of pension obligations under the plan. However, the Company has a contingent liability with respect to the plan should these entities be unable to meet their obligations under the existing agreements. Also, the Company has a contingent liability with respect to the plan in the event that a plan participant continues employment with National Western beyond age seventy, the aggregate average annual participant salary increases exceed 10% per year, or any additional employees become eligible to participate in the plan. If any of these conditions are met, the Company would be responsible for any additional pension obligations resulting from these items. Amendments were made to the plan to allow an additional employee to participate and to change the benefit formula for the then Chairman of the Company. As previously mentioned, these additional obligations are a liability to the Company. Effective December 31, 2004, this plan was frozen with respect to the continued accrual of benefits of the then Chairman and the then President of the Company in order to comply with law changes under the American Jobs Creation Act of 2004 ("Act").

Effective July 1, 2005, National Western established a second non-qualified defined benefit plan for the benefit of the then Chairman of the Company. This plan is intended to provide for post-2004 benefit accruals that mirror and supplement the pre-2005 benefit accruals under the previously discussed non-qualified plan, while complying with the requirements of the Act.

Effective November 1, 2005, National Western established a third non-qualified defined benefit plan for the benefit of the then President of the Company. This plan is intended to provide for post-2004 benefit accruals that supplement the pre-2005 benefit accruals under the first non-qualified plan as previously discussed, while complying with the requirements of the Act.

The following table summarizes the components of net periodic benefit costs for the non-qualified defined benefit plans.

 Three Months Ended
March 31,
 20222021
 (In thousands)
Service cost$260 309 
Interest cost278 261 
Amortization of prior service cost15 15 
Amortization of net loss584 1,282 
Net periodic benefit cost$1,137 1,867 

As the plans are not funded, there is no expected return on plan assets shown in the net periodic benefit cost table above. The Company expects to contribute $2.0 million to these plans in 2022. As of March 31, 2022, the Company has contributed $0.4 million to the plans.

The components of net periodic benefit cost including service cost are reported in the line item “Other operating expenses” in the Condensed Consolidated Statements of Earnings.

Ozark National and NIS have no defined benefit plans.

16


NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(B)Postretirement Employment Plans Other Than Pension

National Western sponsors two healthcare plans that were amended in 2004 to provide postretirement benefits to certain fully-vested individuals. The plans are unfunded. The following table summarizes the components of net periodic benefit costs.

 Three Months Ended
March 31,
 20222021
 (In thousands)
Interest cost$43 37 
Amortization of net loss52 73 
Net periodic benefit cost$95 110 

As the plans are not funded, there is no expected return on plan assets shown in the net periodic benefit cost table above. The Company expects to contribute minimal amounts to the plans in 2022. Ozark National and NIS do not offer postemployment benefits.

The components of net periodic benefit cost including service cost are reported in the line item “Other operating expenses” in the Condensed Consolidated Statements of Earnings.


17


NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(6)SEGMENT AND OTHER OPERATING INFORMATION

The Company defines its reportable operating segments as domestic life insurance, international life insurance, annuities, and ONL and Affiliates. These segments are organized based on product types, geographic marketing areas, and business groupings. Ozark National and NIS have been combined into a separate segment given its inter-related marketing and sales approach which consists of a coordinated sale of a non-participating whole life insurance product (Ozark National) and a mutual fund investment product (NIS). A fifth category "All Others" primarily includes investments and earnings of non-operating subsidiaries as well as other remaining investments and assets not otherwise supporting specific segment operations. In accordance with GAAP guidance for segment reporting, the Company excludes or segregates realized investment gains and losses.

A summary of segment information as of March 31, 2022 and December 31, 2021 for the Condensed Consolidated Balance Sheet items and for the three months ended March 31, 2022 and March 31, 2021 for the Condensed Consolidated Statements of Earnings is provided below.

Condensed Consolidated Balance Sheet Items:
March 31, 2022
 Domestic
Life
Insurance
International
 Life
Insurance
AnnuitiesONL & AffiliatesAll
 Others
Totals
 (In thousands)
Deferred transaction costs$181,937 212,510 523,456 164,738  1,082,641 
Total segment assets1,777,815 992,491 8,945,973 1,061,728 351,950 13,129,957 
Future policy benefits1,537,059 732,265 6,746,899 786,431  9,802,654 
Other policyholder liabilities22,662 12,290 93,674 16,566  145,192 
Funds withheld liability  1,349,050   1,349,050 

December 31, 2021
 Domestic
Life
Insurance
International
 Life
Insurance
AnnuitiesONL & AffiliatesAll
 Others
Totals
 (In thousands)
Deferred transaction costs$150,688 152,340 423,318 165,814  892,160 
Total segment assets1,791,017 975,942 9,187,610 1,115,380 356,716 13,426,665 
Future policy benefits 1,537,482 749,537 6,843,457 782,511  9,912,987 
Other policyholder liabilities20,950 14,268 82,650 16,470  134,338 
Funds withheld liability  1,485,267   1,485,267 

18


NATIONAL WESTERN LIFE GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Condensed Consolidated Statements of Earnings:

Three Months Ended March 31, 2022
 Domestic
Life
Insurance
International
 Life
Insurance
AnnuitiesONL & AffiliatesAll
 Others
Totals
 (In thousands)
Premiums and contract revenues$14,889 17,111 3,552 19,432  54,984 
Net investment income(2,344)(4,247)60,211 6,928 9,176 69,724 
Other revenues26 17 1,233 3,215 1,306 5,797 
Total revenues12,571 12,881 64,996 29,575 10,482 130,505 
Life and other policy benefits6,388 4,701 14,044 16,766  41,899 
Amortization of deferred transaction costs2,830 5,150 18,816 2,220  29,016 
Universal life and annuity contract interest(5,420)(5,721)(3,664)  (14,805)
Other operating expenses7,053 4,860 14,170 4,981 1,518 32,582 
Federal income taxes356 806 4,480 1,128 1,857 8,627 
Total expenses11,207 9,796 47,846 25,095 3,375 97,319 
Segment earnings$1,364 3,085 17,150 4,480 7,107 33,186