Transamerica Advisors Life Insurance Earnings 2018-09-30

Balance Sheet	Income Statement	Cash Flow

10-Q 1 talic-10q_20180930.htm 10-Q talic-10q_20180930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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, 2018

Commission File No. 33-26322

TRANSAMERICA ADVISORS LIFE

INSURANCE COMPANY

(Exact name of Registrant as specified in its charter)

Arkansas

91-1325756

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

4333 Edgewood Road, NE

Cedar Rapids, Iowa 52499-0001

(Address of Principal Executive Offices)

(800) 346-3677

(Registrant’s telephone no. including area code)

Securities registered pursuant to Section 12(b) or 12(g) of the Act: None

Former name, former address and former fiscal year, if changed since last report: Not Applicable

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 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 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. ☐

Indicated by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common 250,000

REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) and (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

TABLE OF CONTENTS

PART I. Financial Information	2
Item 1. Financial Statements	2
BALANCE SHEETS	2
STATEMENTS OF INCOME (LOSS)	4
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)	5
STATEMENTS OF STOCKHOLDER’S EQUITY	6
STATEMENTS OF CASH FLOWS	7
NOTES TO FINANCIAL STATEMENTS (unaudited)	9
Note 1. Summary of Significant Accounting Policies	9
Note 2. Fair Value of Financial Instruments	12
Note 3. Investments	20
Note 4. Value of Business Acquired, Deferred Policy Acquisition Costs and Deferred Sales Inducements	32
Note 5. Variable Contracts Containing Guaranteed Benefits	33
Note 6. Income Taxes	34
Note 7. Accumulated Other Comprehensive Income	36
Note 8. Stockholder’s Equity and Statutory Accounting Principles	38
Note 9. Reinsurance	39
Note 10. Related Party Transactions	39
Note 11. Commitments and Contingencies	41
Note 12. Segment Information	42
Item 2. Management’s Narrative Analysis of Results of Operations	44
Item 3. Quantitative and Qualitative Disclosures About Market Risk	61
Item 4. Controls and Procedures	61
PART II Other Information	61
Item 1. Legal Proceedings	61
Item 1A. Risk Factors	61
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3. Defaults upon Senior Securities	62
Item 4. Mine Safety Disclosures	62
Item 5. Other Information	62
Item 6. Exhibits	62
EXHIBIT INDEX	63
SIGNATURES	64

FINAL

PART I. Financial Information

Item 1. Financial Statements

TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY

(A WHOLLY-OWNED SUBSIDIARY OF TRANSAMERICA CORPORATION)

BALANCE SHEETS


	September 30,		December 31,
(dollars in thousands, except share data)	2018		2017
	(unaudited)
ASSETS
Investments
Fixed maturity available-for-sale securities, at estimated fair value
(amortized cost: 2018 - $1,173,737; 2017 - $1,418,128)	$	1,224,520	$	1,548,638
Equity available-for-sale securities, at estimated fair value
(cost: 2018 - $0; 2017 - $25,473)		-		28,497
Equity securities, at estimated fair value
(cost: 2018 - $25,473; 2017 - $0)		27,687		-
Limited partnerships		1,184		1,375
Mortgage loans on real estate		26,013		24,962
Policy loans		590,689		608,183
Derivative assets		10,788		8,212
Total investments		1,880,881		2,219,867
Cash and cash equivalents		276,020		270,307
Accrued investment income		27,907		33,303
Deferred policy acquisition costs		27,836		30,207
Deferred sales inducements		6,325		6,867
Value of business acquired		209,360		201,299
Goodwill		2,800		2,800
Income tax asset		1,483		-
Reinsurance receivables		1,090		239
Receivable for investments sold - net		292		-
Other assets		38,746		37,777
Recoverable of ceded guaranteed minimum income benefit embedded derivatives, at fair value		9,321		25,325
Separate Accounts assets		5,561,785		5,793,834
Total Assets	$	8,043,846	$	8,621,825

See Notes to Financial Statements

TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY

(A WHOLLY-OWNED SUBSIDIARY OF TRANSAMERICA CORPORATION)

BALANCE SHEETS - Continued


	September 30,			December 31,
(dollars in thousands, except share data)	2018			2017
	(unaudited)
LIABILITIES AND STOCKHOLDER’S EQUITY
Liabilities
Policyholder liabilities and accruals
Policyholder account balances	$	1,006,666		$	1,041,903
Future policy benefits		388,515			411,654
Claims and claims settlement expenses		36,960			37,679
Total policyholder liabilities and accruals		1,432,141			1,491,236
Payables for collateral under securities loaned, reverse repurchase agreements and derivatives		204,553			248,561
Checks not yet presented for payment		907			6,061
Derivative liabilities		344			2,226
Income tax liability		3,417			1,934
Affiliated payables - net		9,566			6,148
Affiliated short-term note payable		-			10,000
Reinsurance payables		184			194
Payable for investments purchased - net		-			93
Other liabilities		14,327			18,097
Separate Accounts liabilities		5,561,785			5,793,834
Total Liabilities		7,227,224			7,578,384

Stockholder’s Equity
Common stock ($10 par value; authorized 1,000,000 shares;
issued and outstanding: 250,000 shares)		2,500			2,500
Additional paid-in capital		1,381,038			1,378,311
Accumulated other comprehensive income, net of taxes		17,653			80,499
Retained Earnings (Deficit)		(584,569	)		(417,869	)
Total Stockholder’s Equity		816,622			1,043,441
Total Liabilities and Stockholder’s Equity	$	8,043,846		$	8,621,825

See Notes to Financial Statements

TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY

(A WHOLLY-OWNED SUBSIDIARY OF TRANSAMERICA CORPORATION)

STATEMENTS OF INCOME (LOSS)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(dollars in thousands)	2018			2017			2018			2017
	(unaudited)						(unaudited)
Revenues
Policy charge revenue	$	35,978		$	37,454		$	109,365		$	112,299
Net investment income (loss)		22,364			27,427			68,863			81,788
Net realized investment gains (losses)
Net realized investment gains (losses), excluding other-than-temporary impairment losses on securities		84			4,711			8,970			6,926
Net realized investment gains (losses)		84			4,711			8,970			6,926
Net derivative gains (losses)		(15,168	)		(9,239	)		(41,644	)		(40,007	)
Total Revenues		43,258			60,353			145,554			161,006

Benefits and Expenses
Interest credited to policyholder liabilities		12,661			13,207			40,835			39,560
Policy benefits (net of reinsurance recoveries:
2018 - $182; $3,035; 2017 - $212; $1,385)		(2,403	)		(963	)		33,973			1,436
Amortization (accretion) of deferred policy acquisition costs		1,200			1,139			2,404			2,876
Amortization (accretion) of value of business acquired		1,809			11,295			11,236			16,513
Insurance, General and Administrative Expenses		9,542			9,739			26,829			25,159
Total Benefits and Expenses		22,809			34,417			115,277			85,544
Income (Loss) Before Taxes		20,449			25,936			30,277			75,462
Income Tax Expense (Benefit)		-			-			-			575
Net Income (Loss)	$	20,449		$	25,936		$	30,277		$	74,887

See Notes to Financial Statements

TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY

(A WHOLLY-OWNED SUBSIDIARY OF TRANSAMERICA CORPORATION)

STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(dollars in thousands)	2018			2017			2018			2017
	(unaudited)						(unaudited)

Net Income (Loss)	$	20,449		$	25,936		$	30,277		$	74,887

Other Comprehensive Income (Loss)
Net unrealized gains (losses) on available-for-sale securities
Net unrealized holding gains (losses) arising during the period		(8,868	)		1,592			(66,678	)		26,039
Reclassification adjustment for (gains) losses included in net income (loss)		(1,212	)		-			(13,572	)		(79	)
		(10,080	)		1,592			(80,250	)		25,960
Net unrealized gains (losses) on cash flow hedges
Net unrealized gains (losses) on cash flow hedges arising during the period		66			(1,803	)		(1,050	)		888
Reclassification adjustment for (gains) losses included in net income (loss)		165			63			1,562			683
		231			(1,740	)		512			1,571
Net unrealized other-than-temporary impairments on securities
Change in previously recognized unrealized other-than-temporary impairments		591			407			524			1,076
		591			407			524			1,076
Adjustments
Value of business acquired		6,319			(780	)		19,391			(4,739	)
Total other comprehensive income (loss), net of taxes		(2,939	)		(521	)		(59,823	)		23,868
Comprehensive Income (Loss)	$	17,510		$	25,415		$	(29,546	)	$	98,755

See Notes to Financial Statements

TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY

(A WHOLLY-OWNED SUBSIDIARY OF TRANSAMERICA CORPORATION)

STATEMENTS OF STOCKHOLDER’S EQUITY

	Nine Months Ended			Twelve Months Ended
	September 30,			December 31,
(dollars in thousands)	2018			2017
	(unaudited)
Common Stock	$	2,500		$	2,500

Additional Paid-in Capital
Balance at beginning of period	$	1,378,311		$	1,425,816
Capital contributions from Transamerica Corporation		2,727			-
Return of capital to Transamerica Corporation		-			(47,505	)
Balance at end of period	$	1,381,038		$	1,378,311

Accumulated Other Comprehensive Income
Balance at beginning of period	$	80,499		$	55,350
Cumulative effect adjustment (a)		(3,023	)		-
Adjusted balance at beginning of period		77,476			55,350
Total other comprehensive income (loss), net of taxes		(59,823	)		25,149
Balance at end of period	$	17,653		$	80,499

Retained Earnings (Deficit)
Balance at beginning of period	$	(417,869	)	$	(377,274	)
Cumulative effect adjustment (a)		3,023			-
Adjusted balance at beginning of period		(414,846	)		(377,274	)
Net income (loss)		30,277			99,405
Cash dividend paid to Transamerica Corporation		(200,000	)		(140,000	)
Balance at end of period	$	(584,569	)	$	(417,869	)

Total Stockholder's Equity	$	816,622		$	1,043,441

(a)

See Notes to Financial Statements – Note 1, Summary of Significant Accounting Policies, Current Accounting Guidance, for discussion on the adjustment relating to Accounting Standards Update (“ASU”) 2016-01.

See Notes to Financial Statements

TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY

(A WHOLLY-OWNED SUBSIDIARY OF TRANSAMERICA CORPORATION)

STATEMENTS OF CASH FLOWS

	Nine Months Ended
	September 30,
(dollars in thousands)	2018			2017
	(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	30,277		$	74,887
Adjustments to reconcile net income (loss) to net cash and cash equivalents provided by operating activities:
Change in deferred policy acquisition costs		2,371			2,859
Change in deferred sales inducements		542			671
Change in value of business acquired		11,236			16,513
Change in benefit reserves, net of change in ceded reinsurance recoverable		(7,901	)		(40,083	)
Change in income tax accruals		-			575
Change in claims and claims settlement expenses		(719	)		6,324
Change in other operating assets and liabilities - net		(5,986	)		(8,366	)
Change in checks not yet presented for payment		(5,154	)		1,417
Amortization (accretion) of investments		(502	)		(929	)
Interest credited to policyholder liabilities		40,835			39,560
Net derivative (gains) losses		41,644			40,007
Net realized investment (gains) losses		(8,970	)		(6,926	)
Change in unrealized (gains) losses related to limited partnerships		(20	)		(2,999	)
Change in unrealized (gains) losses related to equity securities		809			-
Net cash and cash equivalents provided by/(used in) operating activities		98,462			123,510

CASH FLOWS FROM INVESTING ACTIVITIES
Sales of available-for-sale securities and mortgage loans		264,464			243,669
Maturities of available-for-sale securities and mortgage loans		148,358			139,435
Purchases of available-for-sale securities and mortgage loans		(159,433	)		(356,979	)
Sales of limited partnerships		211			97,497
Purchases of limited partnerships		-			(66,065	)
Cash received in connection with derivatives		38,215			50,677
Cash paid in connection with derivatives		(85,560	)		(91,553	)
Proceeds from the maturity or prepayment of policy loans		49,503			51,465
Payments for the origination of policy loans		(32,009	)		(32,319	)
Net settlement on futures contracts		(1,122	)		525
Net cash and cash equivalents provided by/(used in) investing activities	$	222,627		$	36,352

See Notes to Financial Statements

TRANSAMERICA ADVISORS LIFE INSURANCE COMPANY

(A WHOLLY-OWNED SUBSIDIARY OF TRANSAMERICA CORPORATION)

STATEMENTS OF CASH FLOWS - Continued

10-Q	2018-09-30	Filed 2018-11-14
10-Q	2018-06-30	Filed 2018-08-14
10-Q	2018-03-31	Filed 2018-05-14
10-K	2017-12-31	Filed 2018-03-29
10-Q	2017-09-30	Filed 2017-11-14
10-Q	2017-06-30	Filed 2017-08-14
10-Q	2017-03-31	Filed 2017-05-12
10-K	2016-12-31	Filed 2017-03-30
10-Q	2016-09-30	Filed 2016-11-14
10-Q	2016-06-30	Filed 2016-08-12
10-Q	2016-03-31	Filed 2016-05-13
10-K	2015-12-31	Filed 2016-04-15
10-Q	2015-09-30	Filed 2015-11-12
10-Q	2015-06-30	Filed 2015-08-13
10-Q	2015-03-31	Filed 2015-05-15
10-K	2014-12-31	Filed 2015-04-15
10-Q	2014-09-30	Filed 2014-11-14
10-Q	2014-06-30	Filed 2014-08-13
10-Q	2014-03-31	Filed 2014-05-14
10-K	2013-12-31	Filed 2014-03-27
10-Q	2013-09-30	Filed 2013-11-13
10-Q	2013-06-30	Filed 2013-08-13
10-Q	2013-03-31	Filed 2013-05-13
10-K	2012-12-31	Filed 2013-03-28
10-Q	2012-09-30	Filed 2012-11-13
10-Q	2012-06-30	Filed 2012-08-13
10-Q	2012-03-31	Filed 2012-05-11
10-K	2011-12-31	Filed 2012-03-29
10-Q	2011-09-30	Filed 2011-11-14
10-Q	2011-06-30	Filed 2011-08-12
10-Q	2011-03-31	Filed 2011-05-12
10-K	2010-12-31	Filed 2011-03-25
10-Q	2010-09-30	Filed 2010-11-12
10-Q	2010-06-30	Filed 2010-08-12
10-Q	2010-03-31	Filed 2010-05-13
10-K	2009-12-31	Filed 2010-03-25

EX-31.1	talic-ex311_8.htm
EX-31.2	talic-ex312_7.htm
EX-32.1	talic-ex321_6.htm
EX-32.2	talic-ex322_9.htm

TALIC 10Q Quarterly Report

Transamerica Advisors Life Insurance Earnings 2018-09-30