Protective
Variable Annuity
Separate Account
Financial Statements
December 31, 2021
PROTECTIVE VARIABLE ACCOUNT SEPARATE ACCOUNT
Index
All other schedules to the consolidated financial statements required by Article 7 of Regulation S-X are not required under the related instructions or are inapplicable and therefore have been omitted.
Report of Independent Registered Public Accounting Firm
To the Contract Holders of Protective Variable Annuity Separate Account and the Board of Directors of Protective Life Insurance Company:
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of the subaccounts listed in Appendix A that comprise Protective Variable Annuity Separate Account (the Separate Account) as of December 31, 2021, the related statements of operations for the year or periods described in Appendix A, the statements of changes in net assets for each of the years or periods described in Appendix A, and the related notes (collectively, the financial statements) and the financial highlights for each of the years or periods in the three-year period then ended. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Separate Account as of December 31, 2021, the results of its operations for the year or periods then ended, the changes in its net assets for each of the years or periods in the two-year period then ended, and the financial highlights for each of the years or periods in the three-year period then ended, in conformity with U.S. generally accepted accounting principles. The financial highlights for the years ended December 31, 2018 were audited by other independent registered public accountants whose report, dated April 22, 2019, expressed an unqualified opinion on those financial highlights.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Separate Account's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Separate Account in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Such procedures also included confirmation of securities owned as of December 31, 2021, by correspondence with the underlying mutual funds or their transfer agents. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. We believe that our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We have served as the auditor of one or more Protective Life Insurance Company separate accounts since 2019.
Birmingham, Alabama
April 19, 2022
Appendix A
The statements of assets and liabilities of the subaccounts listed below which comprise Protective Variable Annuity Separate Account were audited as of December 31, 2021. The related statements of operations and changes in net assets were audited according to varying periods as defined in the notes below.
AB VPS Growth And Income B (a)
AB VPS Large Cap Growth B (b)
AB VPS Small Cap Growth B (c)
AB VPS Small/Mid Cap Value B (d)
American Funds IS Asset Allocation Class 2
American Funds IS Asset Allocation Class 4
American Funds IS Capital Income Builder Class 2
American Funds IS Capital Income Builder Class 4
American Funds IS Capital World Growth And Income Fund 2 (ww)
American Funds IS Capital World Growth And Income Fund 4 (uu)
American Funds IS Global Growth Class 2
American Funds IS Global Growth Class 4
American Funds IS Global Small Capitalization Class 2
American Funds IS Global Small Capitalization Class 4
American Funds IS Growth – Income Class 2
American Funds IS Growth – Income Class 4
American Funds IS Growth Class 2
American Funds IS Growth Class 4
American Funds IS High-Income Bond 2 (e)
American Funds IS International Class 2
American Funds IS International Class 4
American Funds IS International Growth And Income 2 (f)
American Funds IS New World Class 2
American Funds IS New World Class 4
American Funds IS The Bond Fund Of America 2 (vv)
American Funds IS The Bond Fund Of America 4 (tt)
American Funds IS U.S. Government Securities Fund 2 (xx)
American Funds IS U.S. Government Securities Fund 4 (yy)
American Funds IS Washington Mutual Investors Fund 2 (rr)
American Funds IS Washington Mutual Investors Fund 4 (ss)
Blackrock 60/40 Target Allocation ETF V.I. Fund (g)
Blackrock Global Allocation V.I. III (h)
Blackrock International V.I. I (i)
Calvert VP SRI Balanced
Clearbridge Variable Dividend Strategy II (j)
Clearbridge Variable Large Cap Growth II (k)
ClearBridge Variable Mid Cap Portfolio Class II
ClearBridge Variable Small Cap Growth II
Columbia VP Balanced 2 (l)
Columbia VP Intermediate Bond 2 (b)
Columbia VP Limited Duration Credit 2 (m)
Columbia VP Select Mid Cap Value 2 (n)
Columbia VP Strategic Income 2 (b)
DFA VA Equity Allocation Portfolio Instl (o)
DFA VA Global Bond (p)
DFA VA Global Moderate Allocation Instl (q)
DFA VA International Small (r)
DFA VA International Value (r)
2
DFA VA Short-Term Fixed (s)
DFA VA US Large Value (s)
DFA VA US Targeted Value (t)
Fidelity Contrafund Portfolio SC2
Fidelity Equity Income SC2
Fidelity Freedom Fund - 2015 Maturity SC2
Fidelity Freedom Fund - 2020 Maturity SC2
Fidelity Growth Portfolio SC2
Fidelity Index 500 Portfolio SC2
Fidelity Investment Grade Bonds SC2
Fidelity Mid Cap SC2
Fidelity VIP Asset Manager Service 2 (u)
Fidelity VIP Balanced Service 2 (b)
Fidelity VIP Bond Index Port (v)
Fidelity VIP Energy Service 2 (w)
Fidelity VIP Fundsmanager 20% Service 2 (x)
Fidelity VIP Health Care Port Service 2 (y)
Fidelity VIP International Index Port (z)
Fidelity VIP Target Volatility Service 2 (aa)
Franklin Dynatech VIP Fund (zz)
Franklin Income VIP CL 2
Franklin Multi-Asset Dynamic Multi-Strat VIT (lll)
Franklin Mutual Global Discovery VIP CL 2
Franklin Mutual Shares VIP CL 2
Franklin Rising Dividend VIP CL 2
Franklin Small Cap Value VIP CL 2
Franklin Small-Mid Cap Growth VIP CL 2
Franklin Strategic Income VIP CL 2
Franklin US Government Securities VIP CL 2
Goldman Sachs Global Trends Allocation Fund SC
Goldman Sachs International Equity Insights
Goldman Sachs International Equity Insights SC
Goldman Sachs Large Cap Value
Goldman Sachs Large Cap Value Fund SC
Goldman Sachs Mid Cap Value
Goldman Sachs Mid Cap Value SC
Goldman Sachs Small Cap Equity Insights
Goldman Sachs Small Cap Equity Insights SC
Goldman Sachs Strategic Growth
Goldman Sachs Strategic Growth SC
Goldman Sachs US Equity Insights
Goldman Sachs US Equity Insights SC
Goldman Sachs VIT Core Fixed Income Fund SC
Goldman Sachs VIT Growth Opportunities SC
Guggenheim Floating Rate Strategies (Series F)
Guggenheim Global Managed Futures Strategy
Guggenheim Long Short Equity
Guggenheim Multi-Hedge Strategies
Invesco V.I. American Franchise I
Invesco V.I. American Franchise II
Invesco V.I. American Value II
Invesco V.I. Balanced Risk Allocation II
Invesco V.I. Capital Appreciation Fund I (aaa)
Invesco V.I. Capital Appreciation Fund II (bbb)
Invesco V.I. Comstock I
Invesco V.I. Comstock II
Invesco V.I. Conservative Balance II (bb) (ccc)
Invesco V.I. Discovery Mid Cap Growth Fund I (cc) (ddd)
Invesco V.I. Discovery Mid Cap Growth Fund II
Invesco V.I. Equity and Income II
Invesco V.I. Global Fund I (eee)
Invesco V.I. Global Fund II (fff)
3
Invesco V.I. Global Real Estate II
Invesco V.I. Global Strategic Income Fund I (ggg)
Invesco V.I. Global Strategic Income Fund II (hhh)
Invesco V.I. Government Securities II
Invesco V.I. Growth & Income I
Invesco V.I. Growth & Income II
Invesco V.I. International Growth II
Invesco V.I. Main Street Fund I (jjj)
Invesco V.I. Main Street Fund II (kkk)
Invesco V.I. Main Street Small Cap Fund II (ddd)
Invesco V.I. Small Cap Equity II
Invesco V.I. U.S. Government Money Portfolio I (iii)
Lord Abbett Bond Debenture VC
Lord Abbett Dividend Growth Fund
Lord Abbett Growth & Income VC
Lord Abbett Growth Opportunities VC
Lord Abbett Mid Cap Stock VC
Lord Abbett Series Fundamental Equity VC
Lord Abbett Series Short Duration Income VC (ee)
MFS Growth Series IC
MFS Growth Series SC
MFS Investors Trust IC
MFS Investors Trust SC
MFS New Discovery IC
MFS New Discovery SC
MFS Research IC
MFS Research SC
MFS Total Return IC
MFS Total Return SC
MFS Utilities IC
MFS Utilities SC
MFS VIT II Emerging Markets Equity SC
MFS VIT II International Value SC
MFS VIT II MA Investors Growth Stock IC
MFS VIT II MA Investors Growth Stock SC
MFS VIT Total Return Bond SC
MFS VIT Value SC
Morgan Stanley VIF, Inc. Global Real Estate II
PIMCO Income Advisor (ff)
PIMCO VIT All Asset Advisor
PIMCO VIT Global Diversified Allocation Portfolio
Pimco VIT High Yield Advance (gg)
PIMCO VIT Long-Term US Government Advisor
PIMCO VIT Low Duration Advisor
PIMCO VIT Real Return Advisor
PIMCO VIT Short-Term Advisor
PIMCO VIT Total Return Advisor
Protective Life Dynamic Allocation Series – Conservative
Protective Life Dynamic Allocation Series – Growth
Protective Life Dynamic Allocation Series – Moderate
Royce Capital Fund Micro-Cap SC
Royce Capital Fund Small-Cap SC
Rydex Commodities Strategy
Rydex Inverse Government Long Bond
T. Rowe Price All-Cap Opportunities Portfolio (e)
T. Rowe Price Blue Chip Growth Portfolio II (hh)
T. Rowe Price Health Sciences Portfolio II (ii)
Templeton Developing Markets VIP CL 2
Templeton Foreign VIP CL 2
Templeton Global Bond VIP Fund CL 2
Templeton Growth VIP CL 2
4
VanEck Global Hard Asset
Vanguard VIF Balanced (jj)
Vanguard VIF Capital Growth (kk)
Vanguard VIF Conservative Allocation (ll)
Vanguard VIF Diversified Val (mm)
Vanguard VIF Equity Income (nn)
Vanguard VIF Equity Index (r)
Vanguard VIF Global Bond Index (s)
Vanguard VIF Growth (oo)
Vanguard VIF High Yield Bond (jj)
Vanguard VIF International (r)
Vanguard VIF Mid-Cap Index (r)
Vanguard VIF Moderate Allocation (r)
Vanguard VIF Money Market (s)
Vanguard VIF Real Estate Index (r)
Vanguard VIF Short Term Invmt Grade (r)
Vanguard VIF Total Bond Mkt Index (pp)
Vanguard VIF Total Intl Stk Mkt Idx (s)
Vanguard VIF Total Stock Mkt Index (pp)
Western Asset Core Plus VIT II (qq)
(a) For the period May 14, 2021 to December 31, 2021.
(b) For the period May 5, 2021 to December 31, 2021.
(c) For the period May 19, 2021 to December 31, 2021.
(d) For the period May 20, 2021 to December 31, 2021.
(e) For the period December 31, 2021 to December 31, 2021.
(f) For the period December 23, 2021 to December 31, 2021.
(g) For the period July 9, 2021 to December 31, 2021.
(h) For the period May 5, 2021 to December 31, 2021.
(i) For the period December 31, 2021 to December 31, 2021.
(j) For the period June 14, 2021 to December 31, 2021.
(k) For the period June 2, 2021 to December 31, 2021.
(l) For the period May 25, 2021 to December 31, 2021.
(m) For the period July 6, 2021 to December 31, 2021.
(n) For the period July 8, 2021 to December 31, 2021.
(o) For the period April 23, 2021 to December 31, 2021..
(p) For the period January 29, 2021 to December 31, 2021.
(q) For the period January 21, 2021 to December 31, 2021.
(r) For the period December 21, 2020 to December 31, 2021.
(s) For the period December 10, 2020 to December 31, 2021.
(t) For the period January 29, 2021 to December 31, 2021.
(u) For the period June 15, 2021 to December 31, 2021.
(v) For the period December 29, 2021 to December 31, 2021.
(w) For the period May 18, 2021 to December 31, 2021.
(x) For the period July 27, 2021 to December 31, 2021.
(y) For the period of July 14, 2021 to December 31, 2021.
(z) For the period December 30, 2021 to December 31, 2021.
(aa) For the period September 20, 2021 to December 31, 2021.
(bb) For the period May 5, 2021 to December 31, 2021.
(cc) For the period April 30, 2020 to December 31, 2021.
(dd) For the period of May 27, 2021 to December 31, 2021.
(ee) For the period August 3, 2021 to December 31, 2021.
(ff) For the period August 16, 2021 to December 31, 2021.
(gg) For the period August 26, 2021 to December 31, 2021.
(hh) For the period of May 14, 2021 to December 31, 2021.
(ii) For the period May 19, 2021 to December 31, 2021.
(jj) For the period December 29, 2020 to December 31, 2021.
(kk) For the period December 11, 2020 to December 31, 2021.
(ll) For the period February 19, 2021 to December 31, 2021.
(mm) For the period March 5, 2021 to December 31, 2021.
(nn) For the period February 19, 2021 to December 31, 2021.
(oo) For the period December 11, 2020 to December 31, 2021.
(pp) For the period November 24, 2020 to December 31, 2021.
(qq) For the period of June 2, 2021 to December 31, 2021.
5
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| Alliance Bernstein Funds | American Funds Insurance Series | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | AB VPS Growth And Income B | AB VPS Large Cap Growth B | AB VPS Small Cap Growth B | AB VPS Small/Mid Cap Value B | American Funds IS Asset Allocation Class 2 | American Funds IS Asset Allocation Class 4 | American Funds IS Capital Income Builder Class 2 | American Funds IS Capital Income Builder Class 4 | American Funds IS Capital World Growth And Income Fund 2 | American Funds IS Capital World Growth And Income Fund 4 | American Funds IS Global Growth Class 2 | American Funds IS Global Growth Class 4 | ||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 147 | $ | 857 | $ | 110 | $ | 358 | $ | 100,507 | $ | 38,782 | $ | 6,985 | $ | 7,377 | $ | 7,143 | $ | 3,791 | $ | 105,373 | $ | 18,614 | ||||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 18 | 141 | 95 | 32 | 267 | 1 | 26 | 35 | 5 | 3 | 19 | 22 | ||||||||||||||||||||||||||||||||||||
| Total assets | 165 | 998 | 205 | 391 | 100,774 | 38,783 | 7,011 | 7,412 | 7,147 | 3,794 | 105,391 | 18,637 | ||||||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 18 | 141 | 95 | 32 | 277 | 1 | 26 | 35 | 5 | 3 | 19 | 22 | ||||||||||||||||||||||||||||||||||||
| Net assets | $ | 147 | $ | 857 | $ | 110 | $ | 358 | $ | 100,498 | $ | 38,782 | $ | 6,985 | $ | 7,377 | $ | 7,143 | $ | 3,791 | $ | 105,373 | $ | 18,614 | ||||||||||||||||||||||||
| Units Outstanding | 13 | 71 | 10 | 32 | 4,164 | 2,356 | 539 | 540 | 508 | 221 | 5,130 | 874 | ||||||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 4 | 10 | 5 | 15 | 3,497 | 1,358 | 574 | 608 | 389 | 210 | 2,345 | 418 | ||||||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 36.12 | $ | 85.67 | $ | 21.35 | $ | 23.17 | $ | 28.74 | $ | 28.56 | $ | 12.16 | $ | 12.14 | $ | 18.38 | $ | 18.04 | $ | 44.94 | $ | 44.57 | ||||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 141 | $ | 830 | $ | 120 | $ | 350 | $ | 66,590 | $ | 32,753 | $ | 6,180 | $ | 6,144 | $ | 6,196 | $ | 3,265 | $ | 70,262 | $ | 12,193 | ||||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
6
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| American Funds Insurance Series | ||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | American Funds IS Global Small Capitalization Class 2 | American Funds IS Global Small Capitalization Class 4 | American Funds IS Growth – Income Class 2 | American Funds IS Growth – Income Class 4 | American Funds IS Growth Class 2 | American Funds IS Growth Class 4 | American Funds IS High-Income Bond 2 | American Funds IS International Class 2 | American Funds IS International Class 4 | American Funds IS International Growth And Income 2 | American Funds IS New World Class 2 | |||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 7,236 | $ | 283 | $ | 14,196 | $ | 18,344 | $ | 54,975 | $ | 67,204 | $ | 25 | $ | 10,508 | $ | 420 | $ | 10 | $ | 9,954 | ||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 3 | - | 9 | 16 | 19 | 8 | 25 | 3 | 1 | - | 3 | |||||||||||||||||||||||||||||||||
| Total assets | 7,239 | 283 | 14,205 | 18,360 | 54,994 | 67,212 | 50 | 10,511 | 420 | 10 | 9,957 | |||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 3 | - | 9 | 16 | 19 | 8 | 25 | 3 | 1 | - | 3 | |||||||||||||||||||||||||||||||||
| Net assets | $ | 7,236 | $ | 283 | $ | 14,196 | $ | 18,344 | $ | 54,975 | $ | 67,204 | $ | 25 | $ | 10,508 | $ | 420 | $ | 10 | $ | 9,954 | ||||||||||||||||||||||
| Units Outstanding | 457 | 17 | 916 | 929 | 2,353 | 2,489 | 2 | 827 | 33 | 1 | 659 | |||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 220 | 9 | 214 | 280 | 435 | 543 | 3 | 465 | 19 | 1 | 316 | |||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 32.94 | $ | 32.96 | $ | 66.44 | $ | 65.57 | $ | 126.28 | $ | 123.79 | $ | 9.98 | $ | 22.60 | $ | 22.31 | $ | 19.38 | $ | 31.48 | ||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 6,160 | $ | 201 | $ | 12,344 | $ | 13,300 | $ | 43,427 | $ | 48,889 | $ | 25 | $ | 9,791 | $ | 397 | $ | 10 | $ | 8,484 | ||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
7
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| American Funds Insurance Series | Blackrock Funds | Calvert Variable Series, Inc. | Legg Mason Partners Variable Equity Trust | |||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | American Funds IS New World Class 4 | American Funds IS The Bond Fund Of America 2 | American Funds IS The Bond Fund Of America 4 | American Funds IS U.S. Government Securities Fund 2 | American Funds IS U.S. Government Securities Fund 4 | American Funds IS Washington Mutual Investors Fund 2 | American Funds IS Washington Mutual Investors Fund 4 | Blackrock 60/40 Target Allocation ETF V.I. Fund | Blackrock Global Allocation V.I. III | Blackrock International V.I. I | Calvert VP SRI Balanced | Clearbridge Variable Dividend Strategy II | ||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 362 | $ | 18,660 | $ | 8,143 | $ | 3,644 | $ | 5,068 | $ | 39,893 | $ | 3,297 | $ | 629 | $ | 862 | $ | 75 | $ | 1,595 | $ | 45 | ||||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 8 | 1 | 8 | 3 | 5 | 13 | - | 294 | 476 | 75 | - | 37 | ||||||||||||||||||||||||||||||||||||
| Total assets | 370 | 18,661 | 8,151 | 3,647 | 5,073 | 39,906 | 3,297 | 923 | 1,338 | 150 | 1,595 | 81 | ||||||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 8 | 1 | 8 | 3 | 5 | 13 | - | 294 | 476 | 75 | - | 37 | ||||||||||||||||||||||||||||||||||||
| Net assets | $ | 362 | $ | 18,660 | $ | 8,143 | $ | 3,644 | $ | 5,068 | $ | 39,893 | $ | 3,297 | $ | 629 | $ | 862 | $ | 75 | $ | 1,595 | $ | 45 | ||||||||||||||||||||||||
| Units Outstanding | 23 | 1,698 | 715 | 336 | 466 | 2,381 | 182 | 57 | 84 | 8 | 46 | 4 | ||||||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 12 | 1,687 | 740 | 316 | 440 | 2,237 | 186 | 45 | 60 | 6 | 574 | 2 | ||||||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 31.24 | $ | 11.06 | $ | 11.01 | $ | 11.53 | $ | 11.52 | $ | 17.83 | $ | 17.71 | $ | 13.94 | $ | 14.38 | $ | 11.88 | $ | 2.78 | $ | 25.72 | ||||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 279 | $ | 19,009 | $ | 8,313 | $ | 3,935 | $ | 5,535 | $ | 31,687 | $ | 2,461 | $ | 670 | $ | 983 | $ | 75 | $ | 1,232 | $ | 44 | ||||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
8
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| Legg Mason Partners Variable Equity Trust | Columbia Funds | DFA Funds | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | Clearbridge Variable Large Cap Growth II | ClearBridge Variable Mid Cap Portfolio Class II | ClearBridge Variable Small Cap Growth II | Columbia VP Balanced 2 | Columbia VP Intermediate Bond 2 | Columbia VP Limited Duration Credit 2 | Columbia VP Select Mid Cap Value 2 | Columbia VP Strategic Income 2 | DFA VA Equity Allocation Portfolio Instl | DFA VA Global Bond | DFA VA Global Moderate Allocation Instl | DFA VA International Small | ||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 131 | $ | 66,543 | $ | 20,778 | $ | 1,552 | $ | 357 | $ | 17 | $ | 83 | $ | 389 | $ | 25 | $ | 696 | $ | 369 | $ | 395 | ||||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 104 | 37 | 349 | 809 | 233 | - | - | 237 | - | 13 | 50 | 13 | ||||||||||||||||||||||||||||||||||||
| Total assets | 235 | 66,580 | 21,127 | 2,361 | 590 | 17 | 83 | 626 | 25 | 709 | 419 | 408 | ||||||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 104 | 37 | 349 | 809 | 233 | - | - | 237 | - | 13 | 50 | 13 | ||||||||||||||||||||||||||||||||||||
| Net assets | $ | 131 | $ | 66,543 | $ | 20,778 | $ | 1,552 | $ | 357 | $ | 17 | $ | 83 | $ | 389 | $ | 25 | $ | 696 | $ | 369 | $ | 395 | ||||||||||||||||||||||||
| Units Outstanding | 11 | 2,032 | 540 | 140 | 36 | 2 | 7 | 39 | 2 | 70 | 28 | 27 | ||||||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 3 | 2,291 | 615 | 37 | 35 | 2 | 2 | 93 | 2 | 67 | 23 | 29 | ||||||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 42.81 | $ | 29.05 | $ | 33.81 | $ | 41.39 | $ | 10.25 | $ | 9.79 | $ | 35.91 | $ | 4.20 | $ | 14.94 | $ | 10.44 | $ | 15.78 | $ | 13.66 | ||||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 127 | $ | 41,815 | $ | 14,786 | $ | 1,516 | $ | 368 | $ | 18 | $ | 77 | $ | 392 | $ | 24 | $ | 707 | $ | 372 | $ | 423 | ||||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
9
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| DFA Funds | Fidelity Variable Insurance Products | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | DFA VA International Value | DFA VA Short-Term Fixed | DFA VA US Large Value | DFA VA US Targeted Value | Fidelity Contrafund Portfolio SC2 | Fidelity Equity Income SC2 | Fidelity Freedom Fund - 2015 Maturity SC2 | Fidelity Freedom Fund - 2020 Maturity SC2 | Fidelity Growth Portfolio SC2 | Fidelity Index 500 Portfolio SC2 | Fidelity Investment Grade Bonds SC2 | Fidelity Mid Cap SC2 | ||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 443 | $ | 445 | $ | 1,472 | $ | 703 | $ | 356,344 | $ | 6,468 | $ | 1,374 | $ | 2,729 | $ | 3,652 | $ | 890,425 | $ | 297,520 | $ | 298,888 | ||||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 16 | 20 | 53 | 18 | 15,850 | 223 | 33 | 119 | 310 | 7,369 | 4,185 | 1,373 | ||||||||||||||||||||||||||||||||||||
| Total assets | 460 | 465 | 1,525 | 721 | 372,193 | 6,691 | 1,407 | 2,848 | 3,961 | 897,795 | 301,705 | 300,261 | ||||||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 16 | 20 | 53 | 18 | 15,849 | 223 | 33 | 119 | 310 | 7,369 | 4,186 | 1,377 | ||||||||||||||||||||||||||||||||||||
| Net assets | $ | 444 | $ | 445 | $ | 1,472 | $ | 703 | $ | 356,344 | $ | 6,468 | $ | 1,374 | $ | 2,729 | $ | 3,652 | $ | 890,425 | $ | 297,519 | $ | 298,885 | ||||||||||||||||||||||||
| Units Outstanding | 31 | 45 | 93 | 36 | 8,858 | 200 | 63 | 118 | 64 | 23,448 | 22,092 | 9,383 | ||||||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 33 | 44 | 44 | 30 | 6,786 | 256 | 96 | 178 | 37 | 1,928 | 22,921 | 7,588 | ||||||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 13.35 | $ | 10.18 | $ | 33.12 | $ | 23.57 | $ | 52.51 | $ | 25.27 | $ | 14.33 | $ | 15.31 | $ | 99.42 | $ | 461.95 | $ | 12.98 | $ | 39.39 | ||||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 450 | $ | 446 | $ | 1,403 | $ | 709 | $ | 219,464 | $ | 5,079 | $ | 1,131 | $ | 2,211 | $ | 2,013 | $ | 531,281 | $ | 292,130 | $ | 236,898 | ||||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
10
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| Fidelity Variable Insurance Products | Franklin Templeton Variable Insurance Products Trust | |||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | Fidelity VIP Asset Manager Service 2 | Fidelity VIP Balanced Service 2 | Fidelity VIP Bond Index Port | Fidelity VIP Energy Service 2 | Fidelity VIP Fundsmanager 20% Service 2 | Fidelity VIP Health Care Port Service 2 | Fidelity VIP International Index Port | Fidelity VIP Target Volatility Service 2 | Franklin Dynatech VIP Fund | Franklin Income VIP CL 2 | Franklin Mutual Global Discovery VIP CL 2 | |||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 77 | $ | 4,441 | $ | 17 | $ | 294 | $ | 562 | $ | 197 | $ | - | $ | 62 | $ | 50,142 | $ | 185,438 | $ | 3,994 | ||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 14 | 2,132 | - | 164 | 121 | 166 | - | 60 | 60 | 420 | 3 | |||||||||||||||||||||||||||||||||
| Total assets | 92 | 6,573 | 17 | 458 | 682 | 363 | - | 122 | 50,202 | 185,858 | 3,997 | |||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 14 | 2,132 | - | 164 | 121 | 166 | - | 60 | 60 | 434 | 3 | |||||||||||||||||||||||||||||||||
| Net assets | $ | 77 | $ | 4,441 | $ | 17 | $ | 294 | $ | 562 | $ | 197 | $ | - | $ | 62 | $ | 50,142 | $ | 185,425 | $ | 3,994 | ||||||||||||||||||||||
| Units Outstanding | 7 | 395 | 2 | 26 | 54 | 18 | 2 | 6 | 1,453 | 8,997 | 320 | |||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 4 | 181 | 2 | 19 | 46 | 5 | 2 | 5 | 4,231 | 11,064 | 204 | |||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 17.81 | $ | 24.52 | $ | 10.98 | $ | 15.69 | $ | 12.14 | $ | 39.89 | $ | 11.41 | $ | 12.71 | $ | 11.85 | $ | 16.76 | $ | 19.61 | ||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 77 | $ | 4,384 | $ | 17 | $ | 279 | $ | 566 | $ | 196 | $ | - | $ | 68 | $ | 41,075 | $ | 165,046 | $ | 3,711 | ||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | |
| The accompanying notes are an integral part of these financial statements | |
11
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| Franklin Templeton Variable Insurance Products Trust | Legg Mason Partners Variable Equity Trust | Goldman Sachs Variable Insurance Trust | ||||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | Franklin Mutual Shares VIP CL 2 | Franklin Rising Dividend VIP CL 2 | Franklin Small Cap Value VIP CL 2 | Franklin Small-Mid Cap Growth VIP CL 2 | Franklin Strategic Income VIP CL 2 | Franklin US Government Securities VIP CL 2 | Franklin Multi-Asset Dynamic Multi-Strat VIT | Goldman Sachs Global Trends Allocation Fund SC | Goldman Sachs International Equity Insights | Goldman Sachs International Equity Insights SC | Goldman Sachs Large Cap Value | Goldman Sachs Large Cap Value Fund SC | Goldman Sachs Mid Cap Value | |||||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 593,152 | $ | 368,756 | $ | 48,020 | $ | 38,855 | $ | 6,665 | $ | 419,390 | $ | 19,309 | $ | 7,291 | $ | 22,277 | $ | 36,780 | $ | 38,637 | $ | 107,947 | $ | 7,163 | ||||||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 912 | 720 | 83 | 134 | 5 | 159 | 2 | - | 168 | 322 | 292 | 492 | 79 | |||||||||||||||||||||||||||||||||||||||
| Total assets | 594,064 | 369,477 | 48,103 | 38,990 | 6,670 | 419,549 | 19,311 | 7,291 | 22,445 | 37,103 | 38,929 | 108,439 | 7,242 | |||||||||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 930 | 723 | 83 | 134 | 5 | 162 | 2 | - | 172 | 322 | 314 | 495 | 79 | |||||||||||||||||||||||||||||||||||||||
| Net assets | $ | 593,134 | $ | 368,754 | $ | 48,020 | $ | 38,855 | $ | 6,665 | $ | 419,387 | $ | 19,309 | $ | 7,291 | $ | 22,272 | $ | 36,780 | $ | 38,616 | $ | 107,945 | $ | 7,163 | ||||||||||||||||||||||||||
| Units Outstanding | 28,009 | 10,145 | 1,576 | 1,059 | 606 | 37,380 | 1,464 | 502 | 1,092 | 2,598 | 932 | 4,368 | 148 | |||||||||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 30,893 | 10,411 | 2,738 | 1,735 | 651 | 36,248 | 1,428 | 567 | 2,432 | 3,998 | 3,875 | 10,816 | 367 | |||||||||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 19.20 | $ | 35.42 | $ | 17.54 | $ | 22.39 | $ | 10.23 | $ | 11.57 | $ | 13.52 | $ | 12.86 | $ | 9.16 | $ | 9.20 | $ | 9.97 | $ | 9.98 | $ | 19.52 | ||||||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 501,912 | $ | 224,422 | $ | 40,828 | $ | 32,895 | $ | 6,821 | $ | 470,806 | $ | 16,039 | $ | 6,622 | $ | 29,935 | $ | 31,907 | $ | 37,775 | $ | 101,852 | $ | 5,748 | ||||||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued | Continued |
| The accompanying notes are an integral part of these financial statements | ||
12
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| Goldman Sachs Variable Insurance Trust | Guggeheim Variable Funds | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | Goldman Sachs Mid Cap Value SC | Goldman Sachs Small Cap Equity Insights | Goldman Sachs Small Cap Equity Insights SC | Goldman Sachs Strategic Growth | Goldman Sachs Strategic Growth SC | Goldman Sachs US Equity Insights | Goldman Sachs US Equity Insights SC | Goldman Sachs VIT Core Fixed Income Fund SC | Goldman Sachs VIT Growth Opportunities SC | Guggenheim Floating Rate Strategies (Series F) | Guggenheim Global Managed Futures Strategy | Guggenheim Long Short Equity | ||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 144,011 | $ | 23,604 | $ | 12,807 | $ | 39,123 | $ | 197,980 | $ | 32,334 | $ | 872 | $ | 32,932 | $ | 57,806 | $ | 3,669 | $ | 378 | $ | 168 | ||||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 102 | 132 | 296 | 150 | 160 | 35 | - | 154 | 67 | 3 | - | - | ||||||||||||||||||||||||||||||||||||
| Total assets | 144,113 | 23,735 | 13,103 | 39,273 | 198,140 | 32,369 | 872 | 33,087 | 57,874 | 3,672 | 378 | 168 | ||||||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 103 | 132 | 296 | 146 | 160 | 32 | - | 154 | 67 | 3 | - | - | ||||||||||||||||||||||||||||||||||||
| Net assets | $ | 144,009 | $ | 23,603 | $ | 12,807 | $ | 39,127 | $ | 197,980 | $ | 32,337 | $ | 872 | $ | 32,932 | $ | 57,806 | $ | 3,669 | $ | 378 | $ | 168 | ||||||||||||||||||||||||
| Units Outstanding | 5,041 | 326 | 358 | 505 | 4,005 | 389 | 18 | 2,895 | 1,310 | 309 | 37 | 12 | ||||||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 7,303 | 1,805 | 991 | 2,353 | 11,963 | 1,612 | 43 | 2,959 | 4,738 | 150 | 23 | 9 | ||||||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 19.72 | $ | 13.08 | $ | 12.93 | $ | 16.63 | $ | 16.55 | $ | 20.06 | $ | 20.23 | $ | 11.13 | $ | 12.20 | $ | 24.40 | $ | 16.25 | $ | 17.71 | ||||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 110,409 | $ | 22,869 | $ | 8,903 | $ | 24,440 | $ | 145,128 | $ | 18,008 | $ | 548 | $ | 31,966 | $ | 76,694 | $ | 3,849 | $ | 451 | $ | 142 | ||||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
13
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| Guggeheim Variable Funds | Invesco Variable Insurance Funds | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | Guggenheim Multi-Hedge Strategies | Invesco V.I. American Franchise I | Invesco V.I. American Franchise II | Invesco V.I. American Value II | Invesco V.I. Balanced Risk Allocation II | Invesco V.I. Capital Appreciation Fund I | Invesco V.I. Capital Appreciation Fund II | Invesco V.I. Comstock I | Invesco V.I. Comstock II | Invesco V.I. Conservative Balance II | Invesco V.I. Discovery Mid Cap Growth Fund I | Invesco V.I. Discovery Mid Cap Growth Fund II | ||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 712 | $ | 7,392 | $ | 3,506 | $ | 93,953 | 71,963 | $ | 10,454 | $ | 71,762 | $ | 25,471 | $ | 174,730 | $ | 1,129 | $ | 4,807 | $ | 40,194 | |||||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 1 | - | 151 | 61 | 89 | - | 282 | 23 | 813 | 167 | 96 | 5,916 | ||||||||||||||||||||||||||||||||||||
| Total assets | 713 | 7,392 | 3,656 | 94,014 | 72,051 | 10,454 | 72,043 | 25,494 | 175,543 | 1,296 | 4,903 | 46,110 | ||||||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 1 | - | 151 | 61 | 89 | - | 281 | 27 | 827 | 167 | 19 | 6,000 | ||||||||||||||||||||||||||||||||||||
| Net assets | $ | 712 | $ | 7,392 | $ | 3,506 | $ | 93,953 | $ | 71,963 | $ | 10,454 | $ | 71,762 | $ | 25,467 | $ | 174,716 | $ | 1,129 | $ | 4,884 | $ | 40,110 | ||||||||||||||||||||||||
| Units Outstanding | 60 | 333 | 115 | 4,000 | 4,135 | 169 | 1,628 | 552 | 4,665 | 107 | 84 | 1,138 | ||||||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 26 | 83 | 42 | 4,724 | 6,821 | 128 | 902 | 1,205 | 8,301 | 62 | 42 | 387 | ||||||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 27.01 | $ | 88.63 | $ | 83.04 | $ | 19.89 | $ | 10.55 | $ | 81.86 | $ | 79.58 | $ | 21.14 | $ | 21.05 | $ | 18.25 | $ | 114.63 | $ | 103.76 | ||||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 627 | $ | 4,373 | $ | 1,354 | $ | 72,191 | $ | 81,539 | $ | 5,496 | $ | 45,533 | $ | 13,319 | $ | 105,914 | $ | 1,147 | $ | 2,524 | $ | 27,296 | ||||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
14
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| Invesco Variable Insurance Funds | ||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | Invesco V.I. Equity and Income II | Invesco V.I. Global Fund I | Invesco V.I. Global Fund II | Invesco V.I. Global Real Estate II | Invesco V.I. Global Strategic Income Fund I | Invesco V.I. Global Strategic Income Fund II | Invesco V.I. Government Securities II | Invesco V.I. Growth & Income I | Invesco V.I. Growth & Income II | Invesco V.I. International Growth II | Invesco V.I. Main Street Fund I | Invesco V.I. Main Street Fund II | ||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 239,784 | $ | 10,142 | $ | 315,578 | $ | 15,180 | $ | 6,478 | $ | 280,436 | $ | 150,617 | $ | 29,162 | $ | 604,210 | $ | 42,582 | $ | 9,113 | $ | 128,947 | ||||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 579 | 12 | 284 | 1 | - | 162 | 280 | 20 | 949 | 723 | - | 31 | ||||||||||||||||||||||||||||||||||||
| Total assets | 240,363 | 10,154 | 315,862 | 15,181 | 6,478 | 280,598 | 150,897 | 29,182 | 605,159 | 43,305 | 9,113 | 128,977 | ||||||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 586 | 4 | 303 | 1 | 2 | 163 | 280 | 28 | 945 | 723 | 2 | 31 | ||||||||||||||||||||||||||||||||||||
| Net assets | $ | 239,777 | $ | 10,150 | $ | 315,560 | $ | 15,180 | $ | 6,476 | $ | 280,436 | $ | 150,617 | $ | 29,154 | $ | 604,214 | $ | 42,582 | $ | 9,111 | $ | 128,947 | ||||||||||||||||||||||||
| Units Outstanding | 8,550 | 140 | 6,841 | 954 | 285 | 17,363 | 13,796 | 736 | 18,938 | 2,480 | 203 | 4,303 | ||||||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 11,668 | 177 | 5,617 | 866 | 1,456 | 60,832 | 13,247 | 1,230 | 25,537 | 1,046 | 254 | 3,655 | ||||||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 20.55 | $ | 57.22 | $ | 56.18 | $ | 17.53 | $ | 4.45 | $ | 4.61 | $ | 11.37 | $ | 23.70 | $ | 23.66 | $ | 40.72 | $ | 35.83 | $ | 35.28 | ||||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 174,082 | $ | 5,154 | $ | 183,384 | $ | 12,509 | $ | 7,181 | $ | 331,285 | $ | 154,324 | $ | 20,422 | $ | 448,327 | $ | 34,202 | $ | 5,615 | $ | 103,513 | ||||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
15
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| Invesco Variable Insurance Funds | Lord Abbett Series Funds, Inc. | MFS Variable Insurance Trust | ||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | Invesco V.I. Main Street Small Cap Fund II | Invesco V.I. Small Cap Equity II | Invesco V.I. U.S. Government Money Portfolio I | Lord Abbett Bond Debenture VC | Lord Abbett Dividend Growth Fund | Lord Abbett Growth & Income VC | Lord Abbett Growth Opportunities VC | Lord Abbett Mid Cap Stock VC | Lord Abbett Series Fundamental Equity VC | Lord Abbett Series Short Duration Income VC | MFS Growth Series IC | |||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 96 | $ | 18,390 | $ | 421,722 | $ | 583,812 | $ | 135,264 | $ | 72,039 | $ | 50,135 | $ | 57,787 | $ | 198,619 | $ | 235 | $ | 7,796 | ||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | - | 32 | 2,263 | 219 | 396 | 446 | 133 | 698 | 136 | 159 | - | |||||||||||||||||||||||||||||||||
| Total assets | 96 | 18,422 | 423,984 | 584,032 | 135,660 | 72,485 | 50,268 | 58,485 | 198,755 | 393 | 7,796 | |||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | - | 32 | 2,264 | 223 | 416 | 446 | 134 | 710 | 138 | 159 | - | |||||||||||||||||||||||||||||||||
| Net assets | $ | 96 | $ | 18,390 | $ | 421,721 | $ | 583,809 | $ | 135,244 | $ | 72,039 | $ | 50,134 | $ | 57,775 | $ | 198,617 | $ | 235 | $ | 7,796 | ||||||||||||||||||||||
| Units Outstanding | 9 | 813 | 99,001 | 29,804 | 4,058 | 2,210 | 1,179 | 1,853 | 7,318 | 24 | 100 | |||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 3 | 846 | 421,722 | 47,464 | 6,673 | 1,799 | 3,662 | 2,062 | 9,877 | 17 | 98 | |||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 30.83 | $ | 21.75 | $ | 1.00 | $ | 12.30 | $ | 20.27 | $ | 40.04 | $ | 13.69 | $ | 28.02 | $ | 20.11 | $ | 14.09 | $ | 79.36 | ||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 95 | $ | 15,109 | $ | 421,722 | $ | 579,135 | $ | 101,722 | $ | 43,060 | $ | 47,868 | $ | 40,355 | $ | 159,881 | $ | 241 | $ | 2,773 | ||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
16
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| MFS Variable Insurance Trust | MFS Variable Insurance Trust II | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | MFS Growth Series SC | MFS Investors Trust IC | MFS Investors Trust SC | MFS New Discovery IC | MFS New Discovery SC | MFS Research IC | MFS Research SC | MFS Total Return IC | MFS Total Return SC | MFS Utilities IC | MFS Utilities SC | MFS VIT II Emerging Markets Equity SC | ||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 54,782 | $ | 7,450 | $ | 56,861 | $ | 3,044 | $ | 57,786 | $ | 6,260 | $ | 4,109 | $ | 19,280 | $ | 53,058 | $ | 1,884 | $ | 25,022 | $ | 299 | ||||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 80 | - | 110 | - | 121 | - | 9 | 26 | 208 | - | 33 | - | ||||||||||||||||||||||||||||||||||||
| Total assets | 54,862 | 7,450 | 56,972 | 3,044 | 57,907 | 6,261 | 4,118 | 19,306 | 53,266 | 1,884 | 25,055 | 299 | ||||||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 80 | 2 | 110 | 1 | 122 | - | 9 | 21 | 221 | - | 34 | - | ||||||||||||||||||||||||||||||||||||
| Net assets | $ | 54,782 | $ | 7,448 | $ | 56,861 | $ | 3,043 | $ | 57,785 | $ | 6,260 | $ | 4,109 | $ | 19,285 | $ | 53,045 | $ | 1,884 | $ | 25,021 | $ | 299 | ||||||||||||||||||||||||
| Units Outstanding | 898 | 155 | 1,366 | 35 | 871 | 120 | 89 | 495 | 1,682 | 33 | 642 | 27 | ||||||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 733 | 167 | 1,293 | 131 | 2,913 | 162 | 108 | 694 | 1,952 | 49 | 666 | 19 | ||||||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 74.74 | $ | 44.72 | $ | 43.97 | $ | 23.30 | $ | 19.84 | $ | 38.59 | $ | 37.92 | $ | 27.78 | $ | 27.18 | $ | 38.31 | $ | 37.58 | $ | 15.76 | ||||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 20,286 | $ | 3,051 | $ | 25,317 | $ | 2,109 | $ | 45,120 | $ | 3,112 | $ | 2,021 | $ | 12,663 | $ | 36,845 | $ | 1,080 | $ | 15,790 | $ | 273 | ||||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
17
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
MFS Variable Insurance Trust II | The Universal Institutional Funds, Inc. | PIMCO Variable Insurance Trust | ||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | MFS VIT II International Value SC | MFS VIT II MA Investors Growth Stock IC | MFS VIT II MA Investors Growth Stock SC | MFS VIT Total Return Bond SC | MFS VIT Value SC | Morgan Stanley VIF, Inc. Global Real Estate II | PIMCO Income Advisor | PIMCO VIT All Asset Advisor | PIMCO VIT Global Diversified Allocation Portfolio | Pimco VIT High Yield Advance | PIMCO VIT Long-Term US Government Advisor | PIMCO VIT Low Duration Advisor | ||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 22,849 | $ | 2,148 | $ | 40,451 | $ | 391,163 | $ | 196,057 | $ | 7,402 | $ | 362 | $ | 7,526 | $ | 6,630 | $ | 127 | $ | 30,193 | $ | 147,419 | ||||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 40 | - | 619 | 167 | 244 | 1 | 288 | 228 | 89 | 104 | 130 | 156 | ||||||||||||||||||||||||||||||||||||
| Total assets | 22,890 | 2,148 | 41,069 | 391,331 | 196,301 | 7,403 | 650 | 7,754 | 6,719 | 231 | 30,323 | 147,576 | ||||||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 40 | - | 619 | 168 | 244 | 1 | 288 | 228 | 89 | 104 | 130 | 156 | ||||||||||||||||||||||||||||||||||||
| Net assets | $ | 22,849 | $ | 2,148 | $ | 40,451 | $ | 391,163 | $ | 196,057 | $ | 7,402 | $ | 362 | $ | 7,526 | $ | 6,630 | $ | 127 | $ | 30,193 | $ | 147,419 | ||||||||||||||||||||||||
| Units Outstanding | 865 | 80 | 1,478 | 29,030 | 5,868 | 457 | 36 | 518 | 446 | 12 | 1,953 | 14,088 | ||||||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 618 | 78 | 1,494 | 29,257 | 8,115 | 714 | 33 | 645 | 639 | 16 | 2,686 | 14,410 | ||||||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 36.96 | $ | 27.57 | $ | 27.07 | $ | 13.37 | $ | 24.16 | $ | 10.36 | $ | 10.91 | $ | 11.66 | $ | 10.37 | $ | 7.94 | $ | 11.24 | $ | 10.23 | ||||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 9,826 | $ | 1,477 | $ | 27,100 | $ | 376,831 | $ | 102,301 | $ | 5,554 | $ | 364 | $ | 6,751 | $ | 6,500 | $ | 127 | $ | 34,276 | $ | 149,696 | ||||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
18
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| PIMCO Variable Insurance Trust | Clayton Street Trust | Royce Capital Fund | Rydex Variable Trust | T. Rowe Funds | ||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | PIMCO VIT Real Return Advisor | PIMCO VIT Short-Term Advisor | PIMCO VIT Total Return Advisor | Protective Life Dynamic Allocation Series – Conservative | Protective Life Dynamic Allocation Series – Growth | Protective Life Dynamic Allocation Series – Moderate | Royce Capital Fund Micro-Cap SC | Royce Capital Fund Small-Cap SC | Rydex Commodities Strategy | Rydex Inverse Government Long Bond | T. Rowe Price All-Cap Opportunities Portfolio | |||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 300,622 | $ | 66,445 | $ | 767,119 | $ | 46,054 | $ | 64,736 | $ | 524,872 | $ | 19,767 | $ | 184,076 | $ | 10 | $ | 8 | $ | 100 | ||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 1,180 | 534 | 3,146 | 7 | 1 | 122 | 25 | 127 | - | - | 100 | |||||||||||||||||||||||||||||||||
| Total assets | 301,802 | 66,979 | 770,265 | 46,061 | 64,737 | 524,994 | 19,792 | 184,203 | 10 | 8 | 200 | |||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 1,184 | 534 | 3,150 | 7 | 1 | 122 | 25 | 130 | - | - | 100 | |||||||||||||||||||||||||||||||||
| Net assets | $ | 300,617 | $ | 66,445 | $ | 767,115 | $ | 46,054 | $ | 64,736 | $ | 524,872 | $ | 19,767 | $ | 184,073 | $ | 10 | $ | 8 | $ | 100 | ||||||||||||||||||||||
| Units Outstanding | 23,187 | 6,407 | 59,431 | 3,608 | 4,163 | 41,543 | 912 | 8,915 | 2 | 2 | 12 | |||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 21,488 | 6,451 | 71,294 | 3,576 | 4,234 | 37,518 | 1,376 | 20,008 | - | - | 3 | |||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 13.99 | $ | 10.30 | $ | 10.76 | $ | 12.88 | $ | 15.29 | $ | 13.99 | $ | 14.37 | $ | 9.20 | $ | 87.09 | $ | 67.72 | $ | 38.68 | ||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 294,968 | $ | 66,166 | $ | 801,965 | $ | 39,493 | $ | 48,206 | $ | 459,545 | $ | 13,827 | $ | 171,335 | $ | 15 | $ | 12 | $ | 100 | ||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
19
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| T. Rowe Funds | Franklin Templeton Variable Insurane Products Trust | VanEck Worldwide Insurance Trust | Vanguard Funds | |||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | T. Rowe Price Blue Chip Growth Portfolio II | T. Rowe Price Health Sciences Portfolio II | Templeton Developing Markets VIP CL 2 | Templeton Foreign VIP CL 2 | Templeton Global Bond VIP Fund CL 2 | Templeton Growth VIP CL 2 | VanEck Global Hard Asset | Vanguard VIF Balanced | Vanguard VIF Capital Growth | Vanguard VIF Conservative Allocation | Vanguard VIF Diversified Val | Vanguard VIF Equity Income | ||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 2,730 | $ | 1,017 | $ | 2,857 | $ | 71,083 | $ | 245,409 | $ | 91,741 | $ | 250 | $ | 832 | $ | 219 | $ | 343 | $ | 80 | $ | 646 | ||||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 1,721 | 641 | - | 150 | 75 | 68 | - | 124 | 9 | 10 | 13 | 3 | ||||||||||||||||||||||||||||||||||||
| Total assets | 4,451 | 1,659 | 2,857 | 71,233 | 245,484 | 91,809 | 250 | 956 | 228 | 353 | 93 | 649 | ||||||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 1,721 | 641 | - | 150 | 76 | 79 | - | 124 | 9 | 10 | 13 | 3 | ||||||||||||||||||||||||||||||||||||
| Net assets | $ | 2,730 | $ | 1,017 | $ | 2,857 | $ | 71,083 | $ | 245,408 | $ | 91,730 | $ | 250 | $ | 832 | $ | 219 | $ | 343 | $ | 80 | $ | 646 | ||||||||||||||||||||||||
| Units Outstanding | 235 | 94 | 223 | 5,308 | 22,014 | 5,600 | 7 | 63 | 15 | 30 | 5 | 44 | ||||||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 54 | 17 | 268 | 5,231 | 18,691 | 7,916 | 9 | 29 | 4 | 12 | 5 | 23 | ||||||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 50.47 | $ | 61.19 | $ | 10.67 | $ | 13.59 | $ | 13.13 | $ | 11.59 | $ | 26.61 | $ | 28.41 | $ | 50.69 | $ | 28.60 | $ | 17.45 | $ | 27.81 | ||||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 2,931 | $ | 1,073 | $ | 2,475 | $ | 78,439 | $ | 333,280 | $ | 89,953 | $ | 154 | $ | 778 | $ | 207 | $ | 337 | $ | 70 | $ | 596 | ||||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
20
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
| Vanguard Funds | ||||||||||||||||||||||||||||||||||||||||||||||||
| ($ in thousands, except Fair Value per Share) | Vanguard VIF Equity Index | Vanguard VIF Global Bond Index | Vanguard VIF Growth | Vanguard VIF High Yield Bond | Vanguard VIF International | Vanguard VIF Mid-Cap Index | Vanguard VIF Moderate Allocation | Vanguard VIF Money Market | Vanguard VIF Real Estate Index | Vanguard VIF Short Term Invmt Grade | Vanguard VIF Total Bond Mkt Index | Vanguard VIF Total Intl Stk Mkt Idx | ||||||||||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||||||||||||||
| Investments at fair value | $ | 944 | $ | 148 | $ | 768 | $ | 139 | $ | 548 | $ | 805 | $ | 664 | $ | 325 | $ | 287 | $ | 1,430 | $ | 1,136 | $ | 546 | ||||||||||||||||||||||||
| Receivable from Protective Life Insurance Company | 40 | 2 | 26 | 10 | 20 | 23 | 78 | 614 | 188 | 196 | 253 | 4 | ||||||||||||||||||||||||||||||||||||
| Total assets | 984 | 150 | 793 | 149 | 568 | 828 | 742 | 939 | 475 | 1,626 | 1,389 | 550 | ||||||||||||||||||||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||||||||||||||
| Payable to Protective Life Insurance Company | 40 | 2 | 26 | 9 | 20 | 23 | 78 | 614 | 188 | 196 | 253 | 4 | ||||||||||||||||||||||||||||||||||||
| Net assets | $ | 944 | $ | 148 | $ | 768 | $ | 139 | $ | 548 | $ | 805 | $ | 664 | $ | 325 | $ | 287 | $ | 1,430 | $ | 1,136 | $ | 546 | ||||||||||||||||||||||||
| Units Outstanding | 60 | 15 | 55 | 13 | 42 | 52 | 54 | 33 | 19 | 142 | 115 | 42 | ||||||||||||||||||||||||||||||||||||
| Shares Owned in each Portfolio | 14 | 7 | 20 | 17 | 14 | 27 | 20 | 325 | 17 | 133 | 93 | 23 | ||||||||||||||||||||||||||||||||||||
| Fair Value per Share | $ | 65.47 | $ | 21.30 | $ | 38.27 | $ | 8.06 | $ | 39.70 | $ | 29.48 | $ | 33.89 | $ | 1.00 | $ | 16.56 | $ | 10.78 | $ | 12.22 | $ | 24.23 | ||||||||||||||||||||||||
| Investment in Fund shares, at Cost | $ | 834 | $ | 150 | $ | 738 | $ | 140 | $ | 576 | $ | 749 | $ | 650 | $ | 325 | $ | 249 | $ | 1,439 | $ | 1,150 | $ | 541 | ||||||||||||||||||||||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
21
Protective Variable Annuity Separate Account
Statement of Assets and Liabilities
As of December 31, 2021
|
Vanguard Funds |
| Legg Mason Partners Variable Equity Trust | |||||
| ($ in thousands, except Fair Value per Share) | Vanguard VIF Total Stock Mkt Index | Western Asset Core Plus VIT II | ||||||
| ASSETS | ||||||||
| Investments at fair value | $ | 1,179 | $ | 2,287 | ||||
| Receivable from Protective Life Insurance Company | 253 | 2,143 | ||||||
| Total assets | 1,432 | 4,430 | ||||||
| LIABILITIES | ||||||||
| Payable to Protective Life Insurance Company | 253 | 2,143 | ||||||
| Net assets | $ | 1,179 | $ | 2,287 | ||||
| Units Outstanding | 77 | 227 | ||||||
| Shares Owned in each Portfolio | 21 | 384 | ||||||
| Fair Value per Share | $ | 56.94 | $ | 5.95 | ||||
| Investment in Fund shares, at Cost | $ | 1,059 | $ | 2,346 | ||||
| Note: Totals may not appear to foot/crossfoot due to rounding. | Concluded |
| The accompanying notes are an integral part of these financial statements | |
22
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
23
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
24
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
25
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
26
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
27
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | |
| The accompanying notes are an integral part of these financial statements | |
28
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued | Continued |
| The accompanying notes are an integral part of these financial statements | ||
29
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
30
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
31
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
32
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
33
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
34
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
35
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
36
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
37
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
38
Protective Variable Annuity Separate Account
Statement of Operations
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Concluded |
| The accompanying notes are an integral part of these financial statements | |
39
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
40
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
41
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
42
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
43
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
44
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | |
| The accompanying notes are an integral part of these financial statements | |
45
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued | Continued |
| The accompanying notes are an integral part of these financial statements | ||
46
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
47
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
48
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
49
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
50
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
51
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
52
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
53
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
54
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Continued |
| The accompanying notes are an integral part of these financial statements | |
55
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2021
| Note: Totals may not appear to foot/crossfoot due to rounding. | Concluded |
| The accompanying notes are an integral part of these financial statements | |
56
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
57
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
58
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
59
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
60
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
61
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
62
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
63
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
64
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
65
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
66
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
| Clayton Street Trust | Legg Mason Partners Variable Equity Trust | Lord Abbett Series Fund, Inc. | ||||||||||||||||||||||||||||||
| ($ in thousands) | Protective Life Dynamic Allocation Series - Conservative | Protective Life Dynamic Allocation Series - Growth | Protective Life Dynamic Allocation Series - Moderate | ClearBridge Variable Mid Cap Portfolio Class II | ClearBridge Variable Small Cap Growth II | QS Legg Mason Dynamic Multi-Strategy VIT II | Lord Abbett Bond Debenture VC | Lord Abbett Dividend Growth Fund | ||||||||||||||||||||||||
| FROM OPERATIONS | ||||||||||||||||||||||||||||||||
| Net investment income (loss) | $ | 42 | $ | 156 | $ | 437 | $ | (508 | ) | $ | (245 | ) | $ | 8 | $ | 14,307 | $ | 54 | ||||||||||||||
| Net realized gain (loss) on investments | 49 | (1,615 | ) | 463 | (2,724 | ) | (186 | ) | 63 | (2,621 | ) | 585 | ||||||||||||||||||||
| Change in net unrealized appreciation (depreciation) on investments | 1,244 | (2,967 | ) | 6,708 | 4,288 | 6,143 | (2,646 | ) | 18,002 | 10,227 | ||||||||||||||||||||||
| Net increase (decrease) in net assets resulting from operations | 1,335 | (4,426 | ) | 7,608 | 1,056 | 5,712 | (2,575 | ) | 29,688 | 10,866 | ||||||||||||||||||||||
| FROM VARIABLE ANNUITY CONTRACT TRANSACTIONS | ||||||||||||||||||||||||||||||||
| Contract owners' net payments | 2,857 | 632 | 69,800 | 740 | 578 | 54 | 6,522 | 2,903 | ||||||||||||||||||||||||
| Contract maintenance fees | (391 | ) | (175 | ) | (3,125 | ) | (565 | ) | (240 | ) | (364 | ) | (7,123 | ) | (1,050 | ) | ||||||||||||||||
| Contract owners' benefits | (2,208 | ) | (3,412 | ) | (9,207 | ) | (5,170 | ) | (2,044 | ) | (2,521 | ) | (52,926 | ) | (7,548 | ) | ||||||||||||||||
| Transfer (to) from other portfolios | 8,086 | (11,075 | ) | 25,590 | (35 | ) | (2,382 | ) | (1,707 | ) | (14,346 | ) | (338 | ) | ||||||||||||||||||
| Net increase (decrease) in net assets resulting from variable annuity contract transactions | 8,344 | (14,030 | ) | 83,058 | (5,030 | ) | (4,088 | ) | (4,538 | ) | (67,873 | ) | (6,033 | ) | ||||||||||||||||||
| Total increase (decrease) in net assets | 9,679 | (18,456 | ) | 90,666 | (3,974 | ) | 1,624 | (7,113 | ) | (38,185 | ) | 4,833 | ||||||||||||||||||||
| NET ASSETS | ||||||||||||||||||||||||||||||||
| Beginning of period | 30,678 | 80,870 | 200,085 | 66,938 | 25,189 | 25,721 | 594,211 | 110,319 | ||||||||||||||||||||||||
| End of period | $ | 40,357 | $ | 62,414 | $ | 290,751 | $ | 62,964 | $ | 26,813 | $ | 18,608 | $ | 556,026 | $ | 115,152 | ||||||||||||||||
Continued
The accompanying notes are an integral part of these financial statements
67
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
68
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
69
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
70
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
71
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
Continued
The accompanying notes are an integral part of these financial statements
72
Protective Variable Annuity Separate Account
Statement of Changes in Net Assets
For the year ended December 31, 2020
The accompanying notes are an integral part of these financial statements
73
(1) Organization
The Protective Variable Annuity Separate Account (“Separate Account”) was established by Protective Life Insurance Company (“Protective Life”) under the provisions of Tennessee law and commenced operations on March 14, 1994. Protective Life is a wholly owned subsidiary of Protective Life Corporation (“PLC”). PLC and its subsidiaries are wholly owned subsidiaries of Dai-ichi Life Holdings, Inc., a kabushiki kaisha organized under the laws of Japan. The Separate Account is an investment account to which net proceeds from individual flexible premium deferred variable annuity contracts (“Contracts”) issued by Protective Life are allocated until maturity or termination of the Contracts. The following is a list of each variable annuity product funded by the Separate Account:
Protective Life has structured the Separate Account into a unit investment trust registered with the U.S. Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended. The Separate Account follows the accounting and reporting guidance in ASC Topic 946, “Financial Services – Investment Companies”.
During the years ended December 31, 2021 and 2020, assets were invested in one hundred and ninety-one.
| AB VPS Growth And Income B (a) | Invesco V.I. American Franchise II |
| AB VPS Large Cap Growth B (b) | Invesco V.I. American Value II |
| AB VPS Small Cap Growth B (c) | Invesco V.I. Balanced Risk Allocation II |
| AB VPS Small/Mid Cap Value B (d) | Invesco V.I. Capital Appreciation Fund I (aaa) |
| American Funds IS Asset Allocation Class 2 | Invesco V.I. Capital Appreciation Fund II (bbb) |
| American Funds IS Asset Allocation Class 4 | Invesco V.I. Comstock I |
| American Funds IS Capital Income Builder Class 2 | Invesco V.I. Comstock II |
| American Funds IS Capital Income Builder Class 4 | Invesco V.I. Conservative Balance II (bb) (ccc) |
| American Funds IS Capital World Growth And Income Fund 2 (ww) | Invesco V.I. Discovery Mid Cap Growth Fund I (cc) (ddd) |
| American Funds IS Capital World Growth And Income Fund 4 (uu) | Invesco V.I. Discovery Mid Cap Growth Fund II |
| American Funds IS Global Growth Class 2 | Invesco V.I. Equity and Income II |
| American Funds IS Global Growth Class 4 | Invesco V.I. Global Fund I (eee) |
| American Funds IS Global Small Capitalization Class 2 | Invesco V.I. Global Fund II (fff) |
| American Funds IS Global Small Capitalization Class 4 | Invesco V.I. Global Real Estate II |
| American Funds IS Growth – Income Class 2 | Invesco V.I. Global Strategic Income Fund I (ggg) |
| American Funds IS Growth – Income Class 4 | Invesco V.I. Global Strategic Income Fund II (hhh) |
| American Funds IS Growth Class 2 | Invesco V.I. Government Securities II |
| American Funds IS Growth Class 4 | Invesco V.I. Growth & Income I |
| American Funds IS High-Income Bond 2 (e) | Invesco V.I. Growth & Income II |
| American Funds IS International Class 2 | Invesco V.I. International Growth II |
| American Funds IS International Class 4 | Invesco V.I. Main Street Fund I (jjj) |
| American Funds IS International Growth And Income 2 (f) | Invesco V.I. Main Street Fund II (kkk) |
| American Funds IS New World Class 2 | Invesco V.I. Main Street Small Cap Fund II (ddd) |
| American Funds IS New World Class 4 | Invesco V.I. Small Cap Equity II |
74
(1) Organization, continued
75
(1) Organization, continued
76
(1) Organization, continued
Net premiums from the Contracts are allocated to the subaccounts in accordance with contract owner instructions and are recorded as variable annuity contract transactions in the statement of changes in net assets. Such amounts are used to provide account funds to pay contract values under the Contracts. Under applicable insurance law, the assets and liabilities of the Separate Account are clearly identified and distinguished from Protective Life’s other assets and liabilities.
Contract owners may allocate some or all of the applicable gross premiums or transfer some or all of the contract value to the Guaranteed Account, which is part of Protective Life’s General Account. The assets of Protective Life’s General Account support its insurance and annuity obligations and are subject to Protective Life’s general liabilities from business operations. The Guaranteed Account’s balance as of December 31, 2021 was approximately $123.6 million.
Beginning in the first quarter of 2020, the outbreak of COVID-19, created significant economic and social disruption and impacted various operational and financial aspects of Protective Life’s business. Certain impacts from COVID-19 continued into 2021, including increased claims in both the life insurance and annuity blocks. The pandemic may continue to impact Protective Life’s earnings based on, amongst other factors, the volume and severity of claims related to COVID-19 and the financial disruption caused by the pandemic, which could impact the Protective Life’s investment portfolio. Management will continue to monitor developments, and their impact on the fair value of the subaccounts in which the Separate Account invest.
(2) Significant Accounting Policies
Investment Valuation
Investments are made and measured in shares and are valued at the net asset values of the respective fund portfolios (“Funds”), whose underlying investments are stated at fair value. The investments of each subaccount are presented net of management fees and other operating expenses incurred by the Funds. Transactions with the Funds are recognized on the trade date.
Net Realized Gains and Losses
Net realized gains and losses on investments include gains and losses on redemptions of the Funds’ shares (determined for each product using the last-in-first-out (LIFO) basis) and capital gain distributions from the Funds.
Dividend Income and Capital Gain Distributions
Dividend income and capital gain distributions are recorded on the ex-dividend date and are reinvested in additional shares of the Funds. Ordinary dividend and capital gain distributions are recognized within net investment income and net realized gains, respectively, as recorded in the financial statements of the Funds.
Net transfers (to) from Subaccounts or Affiliate
Net transfers (to) from affiliate or subaccounts include transfers of all or part of the contract owner’s interest to or from another subaccount or to the General Account of Protective Life.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make various estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Federal Income Taxes
The results of the operations of the Separate Account are included in the federal income tax return of PLC. Under the provisions of the contracts, Protective Life has the right to charge the Separate Account for federal income tax attributable to the Separate Account. No charge has been made against the Separate Account for such tax during the year ended December 31, 2021. Management will periodically review the application of this policy in the event of changes in tax law. Accordingly, a change may be made in future years to consider charges for any federal income taxes that would be attributable to the contracts.
77
(2) Significant Accounting Policies, continued
Annuity Payouts
Net assets allocated to contracts in the annuity payout period are computed according to the Annuity 2000 Mortality Table. The assumed investment return is 5%. The mortality risk is fully borne by Protective Life and may result in additional amounts being transferred into the Separate Account by Protective Life to cover greater longevity of annuitants than expected. Conversely, if amounts allocated exceed amounts required, transfers may be made to Protective Life for the calculated or excess differential. As of December 31, 2021, there are 25 contracts in the annuity payout phase with net assets of approximately $4.1 million.
Risks and Uncertainties
The Separate Account provides for various subaccount investment options in any combination of mutual funds, each of which bears exposure to the market, credit and liquidity risks of the underlying portfolio in which it invests. Due to the level of risk associated with certain investments and the level of uncertainty related to changes in the value of investments, it is at least reasonably possible that changes in risks in the near term could materially affect investment balances, the amounts reported in the statements of assets and liabilities, of operations and of changes in net assets. Accordingly, these financial statements should be read in conjunction with the financial statements and footnotes of the underlying mutual funds identified in Note 1.
(3) Fair Value of Financial Instruments
The Separate Account determines the fair value of its financial instruments based on the fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The Separate Account has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy as outlined within the applicable guidance. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument. As there are no level 3 assets in any period presented, disclosure of transfers between level 3 or disclosure of a reconciliation of level 3 assets is not required. In addition, there are no other financial assets or assets valued on a non-recurring basis.
Financial assets recorded at fair value in the Statement of Assets and Liabilities are categorized as follows:
Level 1: Unadjusted quoted prices for identical assets in an active market.
Level 2: Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly. Level 2 inputs include the following:
a) Quoted prices for similar assets in active markets
b) Quoted prices for identical or similar assets in non-active markets
c) Inputs other than quoted market prices that are observable
d) Inputs that are derived principally from or corroborated by observable market data through correlation or other means.
Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset.
Determination of fair values
The Separate Account determines the fair values of certain financial assets based on quoted market prices. All of the investments in the subaccounts of the Separate Account are classified as Level 1 in the fair value hierarchy and consist of open-ended mutual funds. Participants may, without restriction, transact at the daily net asset value (“NAV”) of the mutual funds. The NAV represents the daily per share value based on the fair value of the underlying portfolio of investments of the respective mutual funds.
78
The Protective Variable Annuity Separate Account
Notes to Financial Statements
December 31, 2021
(4) Changes in Units Outstanding
The change in units outstanding for years or periods ended December 31, 2021 and 2020 were as follows:
| (in thousands) | 2021 | 2020 | ||||||||||||||||||||||
| Subaccount | Units Issued | Units Redeemed | Net Increase (Decrease) | Units Issued | Units Redeemed | Net Increase (Decrease) | ||||||||||||||||||
| AB VPS Growth And Income B* | 13 | 0 | 13 | N/A | N/A | N/A | ||||||||||||||||||
| AB VPS Large Cap Growth B | 76 | 5 | 71 | N/A | N/A | N/A | ||||||||||||||||||
| AB VPS Small Cap Growth B* | 11 | 0 | 10 | N/A | N/A | N/A | ||||||||||||||||||
| AB VPS Small/Mid Cap Value B* | 32 | 0 | 32 | N/A | N/A | N/A | ||||||||||||||||||
| American Funds IS Asset Allocation Class 2 | 999 | 407 | 592 | 785 | 704 | 81 | ||||||||||||||||||
| American Funds IS Asset Allocation Class 4 | 865 | 234 | 631 | 993 | 341 | 652 | ||||||||||||||||||
| American Funds IS Capital Income Builder Class 2 | 252 | 16 | 236 | 85 | 7 | 78 | ||||||||||||||||||
| American Funds IS Capital Income Builder Class 4 | 118 | 66 | 52 | 348 | 150 | 198 | ||||||||||||||||||
| American Funds IS Capital World Growth And Income Fund 2 | 225 | 31 | 194 | 166 | 7 | 159 | ||||||||||||||||||
| American Funds IS Capital World Growth And Income Fund 4 | 86 | 30 | 55 | 114 | 117 | (3 | ) | |||||||||||||||||
| American Funds IS Global Growth Class 2 | 1,343 | 650 | 693 | 614 | 873 | (259 | ) | |||||||||||||||||
| American Funds IS Global Growth Class 4 | 184 | 148 | 36 | 362 | 272 | 90 | ||||||||||||||||||
| American Funds IS Global Small Capitalization Class 2 | 203 | 30 | 173 | 118 | 22 | 96 | ||||||||||||||||||
| American Funds IS Global Small Capitalization Class 4 | 3 | 5 | (2 | ) | 3 | 3 | 0 | |||||||||||||||||
| American Funds IS Growth – Income Class 2 | 663 | 34 | 629 | 194 | 21 | 173 | ||||||||||||||||||
| American Funds IS Growth – Income Class 4 | 236 | 135 | 101 | 931 | 620 | 311 | ||||||||||||||||||
| American Funds IS Growth Class 2 | 1,255 | 151 | 1,104 | 612 | 187 | 425 | ||||||||||||||||||
| American Funds IS Growth Class 4 | 1,074 | 459 | 615 | 2,340 | 1,452 | 888 | ||||||||||||||||||
| American Funds IS High-Income Bond 2 | 2 | - | 2 | N/A | N/A | N/A | ||||||||||||||||||
| American Funds IS International Class 2 | 326 | 34 | 292 | 157 | 42 | 115 | ||||||||||||||||||
| American Funds IS International Class 4 * | 4 | 1 | 3 | 0 | 0 | (0 | ) | |||||||||||||||||
| American Funds IS International Growth And Income 2 | 1 | - | 1 | N/A | N/A | N/A | ||||||||||||||||||
| American Funds IS New World Class 2 | 308 | 33 | 275 | 110 | 46 | 64 | ||||||||||||||||||
| American Funds IS New World Class 4 * | 6 | 6 | (0 | ) | 5 | 1 | 4 | |||||||||||||||||
| American Funds IS The Bond Fund Of America 2 | 1,184 | 43 | 1,141 | 343 | 47 | 296 | ||||||||||||||||||
| American Funds IS The Bond Fund Of America 4 | 336 | 103 | 232 | 404 | 123 | 281 | ||||||||||||||||||
| American Funds IS U.S. Government Securities Fund 2 | 232 | 62 | 170 | 128 | 18 | 110 | ||||||||||||||||||
| American Funds IS U.S. Government Securities Fund 4 | 117 | 319 | (201 | ) | 914 | 327 | 587 | |||||||||||||||||
| American Funds IS Washington Mutual Investors Fund 2 | 981 | 148 | 834 | 519 | 110 | 409 | ||||||||||||||||||
| American Funds IS Washington Mutual Investors Fund 4 | 40 | 26 | 13 | 58 | 26 | 32 | ||||||||||||||||||
| Blackrock 60/40 Target Allocation ETF V.I. Fund | 65 | 8 | 57 | N/A | N/A | N/A | ||||||||||||||||||
| Blackrock Global Allocation V.I. III | 92 | 8 | 84 | N/A | N/A | N/A | ||||||||||||||||||
| Blackrock International V.I. I | 8 | - | 8 | N/A | N/A | N/A | ||||||||||||||||||
| Calvert VP SRI Balanced | 4 | 7 | (3 | ) | 1 | 2 | (1 | ) | ||||||||||||||||
| Clearbridge Variable Dividend Strategy II* | 4 | 0 | 4 | N/A | N/A | N/A | ||||||||||||||||||
| Clearbridge Variable Large Cap Growth II | 11 | 1 | 11 | N/A | N/A | N/A | ||||||||||||||||||
| ClearBridge Variable Mid Cap Portfolio Class II | 234 | 540 | (307 | ) | 2,982 | 3,449 | (467 | ) | ||||||||||||||||
| ClearBridge Variable Small Cap Growth II | 274 | 391 | (117 | ) | 705 | 895 | (190 | ) | ||||||||||||||||
| Columbia VP Balanced 2 | 141 | 1 | 140 | N/A | N/A | N/A | ||||||||||||||||||
| Columbia VP Intermediate Bond 2* | 36 | 0 | 36 | N/A | N/A | N/A | ||||||||||||||||||
| Columbia VP Limited Duration Credit 2 | 2 | - | 2 | N/A | N/A | N/A | ||||||||||||||||||
| Columbia VP Select Mid Cap Value 2* | 7 | 0 | 7 | N/A | N/A | N/A | ||||||||||||||||||
| Columbia VP Strategic Income 2 | 40 | 1 | 39 | N/A | N/A | N/A | ||||||||||||||||||
| DFA VA Equity Allocation Portfolio Instl* | 2 | 0 | 2 | N/A | N/A | N/A | ||||||||||||||||||
| DFA VA Global Bond* | 70 | 0 | 70 | N/A | N/A | N/A | ||||||||||||||||||
| DFA VA Global Moderate Allocation Instl* | 28 | 0 | 28 | N/A | N/A | N/A | ||||||||||||||||||
| DFA VA International Small* | 27 | 0 | 27 | - | - | - | ||||||||||||||||||
| DFA VA International Value* | 31 | 0 | 30 | - | - | - | ||||||||||||||||||
| DFA VA Short-Term Fixed* | 43 | 0 | 43 | 2 | - | 2 | ||||||||||||||||||
| DFA VA US Large Value | 93 | 1 | 92 | 1 | - | 1 | ||||||||||||||||||
| DFA VA US Targeted Value | 37 | 1 | 36 | N/A | N/A | N/A | ||||||||||||||||||
| Fidelity Contrafund Portfolio SC2 | 1,172 | 1,798 | (627 | ) | 6,550 | 8,508 | (1,958 | ) | ||||||||||||||||
| Fidelity Equity Income SC2 | 13 | 52 | (39 | ) | 21 | 62 | (41 | ) | ||||||||||||||||
| Fidelity Freedom Fund - 2015 Maturity SC2 | 16 | 4 | 12 | 4 | 6 | (2 | ) | |||||||||||||||||
| Fidelity Freedom Fund - 2020 Maturity SC2 | 15 | 25 | (10 | ) | 3 | 11 | (8 | ) | ||||||||||||||||
| Fidelity Growth Portfolio SC2 | 5 | 10 | (5 | ) | 20 | 60 | (40 | ) | ||||||||||||||||
| Fidelity Index 500 Portfolio SC2 | 3,315 | 3,338 | (23 | ) | 21,089 | 26,517 | (5,428 | ) | ||||||||||||||||
| Fidelity Investment Grade Bonds SC2 | 4,964 | 2,299 | 2,665 | 3,069 | 3,867 | (798 | ) | |||||||||||||||||
| Fidelity Mid Cap SC2 | 486 | 2,637 | (2,150 | ) | 14,251 | 17,234 | (2,983 | ) | ||||||||||||||||
| Fidelity VIP Asset Manager Service 2* | 7 | 0 | 7 | N/A | N/A | N/A | ||||||||||||||||||
| Fidelity VIP Balanced Service 2 | 404 | 9 | 395 | N/A | N/A | N/A | ||||||||||||||||||
| Fidelity VIP Bond Index Port | 2 | - | 2 | N/A | N/A | N/A | ||||||||||||||||||
*Subaccount had purchases or sales that did not round to one thousand.
Note: Totals may not appear to foot/crossfoot due to rounding.
79
The Protective Variable Annuity Separate Account
Notes to Financial Statements
December 31, 2021
(4) Changes in Units Outstanding, continued
| (in thousands) | 2021 | 2020 | ||||||||||||||||||||||
| Subaccount | Units Issued | Units Redeemed | Net Increase (Decrease) | Units Issued | Units Redeemed | Net Increase (Decrease) | ||||||||||||||||||
| Fidelity VIP Energy Service 2 | 30 | 3 | 26 | N/A | N/A | N/A | ||||||||||||||||||
| Fidelity VIP Fundsmanager 20% Service 2 | 55 | 1 | 54 | N/A | N/A | N/A | ||||||||||||||||||
| Fidelity VIP Health Care Port Service 2 | 20 | 2 | 18 | N/A | N/A | N/A | ||||||||||||||||||
| Fidelity VIP International Index Port | 2 | - | 2 | N/A | N/A | N/A | ||||||||||||||||||
| Fidelity VIP Target Volatility Service 2* | 6 | 0 | 6 | N/A | N/A | N/A | ||||||||||||||||||
| Franklin Dynatech VIP Fund | 640 | 371 | 269 | 1,112 | 1,300 | (188 | ) | |||||||||||||||||
| Franklin Income VIP CL 2 | 505 | 1,462 | (957 | ) | 9,494 | 11,069 | (1,575 | ) | ||||||||||||||||
| Franklin Multi-Asset Dynamic Multi-Strat VIT | 101 | 203 | (102 | ) | 101 | 494 | (393 | ) | ||||||||||||||||
| Franklin Mutual Global Discovery VIP CL 2 | 180 | 40 | 140 | 130 | 142 | (12 | ) | |||||||||||||||||
| Franklin Mutual Shares VIP CL 2 | 1,296 | 6,198 | (4,903 | ) | 35,133 | 36,312 | (1,179 | ) | ||||||||||||||||
| Franklin Rising Dividend VIP CL 2 | 752 | 2,048 | (1,296 | ) | 9,057 | 11,759 | (2,702 | ) | ||||||||||||||||
| Franklin Small Cap Value VIP CL 2 | 293 | 598 | (305 | ) | 1,844 | 1,972 | (128 | ) | ||||||||||||||||
| Franklin Small-Mid Cap Growth VIP CL 2 | 260 | 504 | (245 | ) | 1,157 | 1,317 | (160 | ) | ||||||||||||||||
| Franklin Strategic Income VIP CL 2 | 161 | 43 | 118 | 370 | 45 | 325 | ||||||||||||||||||
| Franklin US Government Securities VIP CL 2 | 6,481 | 4,826 | 1,655 | 3,464 | 7,820 | (4,356 | ) | |||||||||||||||||
| Goldman Sachs Global Trends Allocation Fund SC | 69 | 82 | (13 | ) | 43 | 133 | (90 | ) | ||||||||||||||||
| Goldman Sachs International Equity Insights | 32 | 187 | (155 | ) | 66 | 169 | (103 | ) | ||||||||||||||||
| Goldman Sachs International Equity Insights SC | 266 | 824 | (558 | ) | 1,162 | 1,459 | (297 | ) | ||||||||||||||||
| Goldman Sachs Large Cap Value | 24 | 172 | (148 | ) | 8 | 27 | (19 | ) | ||||||||||||||||
| Goldman Sachs Large Cap Value Fund SC | 42 | 872 | (830 | ) | 1,011 | 1,369 | (358 | ) | ||||||||||||||||
| Goldman Sachs Mid Cap Value | 14 | 26 | (12 | ) | 8 | 27 | (19 | ) | ||||||||||||||||
| Goldman Sachs Mid Cap Value SC | 223 | 1,371 | (1,148 | ) | 9,564 | 10,789 | (1,225 | ) | ||||||||||||||||
| Goldman Sachs Small Cap Equity Insights | 10 | 68 | (58 | ) | 16 | 55 | (39 | ) | ||||||||||||||||
| Goldman Sachs Small Cap Equity Insights SC | 14 | 114 | (100 | ) | 65 | 80 | (15 | ) | ||||||||||||||||
| Goldman Sachs Strategic Growth | 20 | 101 | (82 | ) | 13 | 119 | (106 | ) | ||||||||||||||||
| Goldman Sachs Strategic Growth SC | 229 | 997 | (768 | ) | 3,431 | 4,869 | (1,438 | ) | ||||||||||||||||
| Goldman Sachs US Equity Insights | 11 | 60 | (50 | ) | 6 | 61 | (55 | ) | ||||||||||||||||
| Goldman Sachs US Equity Insights SC | 2 | 4 | (2 | ) | 5 | 7 | (2 | ) | ||||||||||||||||
| Goldman Sachs VIT Core Fixed Income Fund SC | 657 | 245 | 413 | 315 | 399 | (84 | ) | |||||||||||||||||
| Goldman Sachs VIT Growth Opportunities SC | 101 | 365 | (264 | ) | 458 | 978 | (520 | ) | ||||||||||||||||
| Guggenheim Floating Rate Strategies (Series F) | 47 | 77 | (31 | ) | 89 | 217 | (128 | ) | ||||||||||||||||
| Guggenheim Global Managed Futures Strategy | 8 | 160 | (153 | ) | 223 | 202 | 21 | |||||||||||||||||
| Guggenheim Long Short Equity | 5 | 7 | (3 | ) | 1 | 8 | (7 | ) | ||||||||||||||||
| Guggenheim Multi-Hedge Strategies | 7 | 53 | (47 | ) | 58 | 21 | 37 | |||||||||||||||||
| Invesco V.I. American Franchise I | 4 | 66 | (62 | ) | 31 | 60 | (29 | ) | ||||||||||||||||
| Invesco V.I. American Franchise II | 2 | 19 | (17 | ) | 2 | 30 | (28 | ) | ||||||||||||||||
| Invesco V.I. American Value II | 740 | 1,068 | (328 | ) | 4,240 | 4,115 | 125 | |||||||||||||||||
| Invesco V.I. Balanced Risk Allocation II | 401 | 696 | (295 | ) | 334 | 1,162 | (828 | ) | ||||||||||||||||
| Invesco V.I. Capital Appreciation Fund I | 4 | 17 | (13 | ) | 3 | 34 | (31 | ) | ||||||||||||||||
| Invesco V.I. Capital Appreciation Fund II | 80 | 361 | (281 | ) | 1,616 | 2,350 | (734 | ) | ||||||||||||||||
| Invesco V.I. Comstock I | 19 | 85 | (66 | ) | 17 | 91 | (74 | ) | ||||||||||||||||
| Invesco V.I. Comstock II | 367 | 1,284 | (917 | ) | 4,439 | 4,705 | (266 | ) | ||||||||||||||||
| Invesco V.I. Conservative Balance II | 109 | 2 | 107 | N/A | N/A | N/A | ||||||||||||||||||
| Invesco V.I. Discovery Mid Cap Growth Fund I | 4 | 13 | (9 | ) | 45 | 24 | 21 | |||||||||||||||||
| Invesco V.I. Discovery Mid Cap Growth Fund II | 66 | 299 | (233 | ) | 1,751 | 410 | 1,341 | |||||||||||||||||
| Invesco V.I. Equity and Income II | 285 | 1,516 | (1,231 | ) | 10,339 | 12,106 | (1,767 | ) | ||||||||||||||||
| Invesco V.I. Global Fund I | 5 | 17 | (13 | ) | 2 | 19 | (17 | ) | ||||||||||||||||
| Invesco V.I. Global Fund II | 185 | 1,602 | (1,417 | ) | 6,453 | 9,241 | (2,788 | ) | ||||||||||||||||
| Invesco V.I. Global Real Estate II | 183 | 194 | (12 | ) | 2,025 | 2,210 | (185 | ) | ||||||||||||||||
| Invesco V.I. Global Strategic Income Fund I | 15 | 48 | (33 | ) | 15 | 63 | (48 | ) | ||||||||||||||||
| Invesco V.I. Global Strategic Income Fund II | 2,434 | 2,203 | 231 | 975 | 2,755 | (1,780 | ) | |||||||||||||||||
| Invesco V.I. Government Securities II | 3,470 | 1,345 | 2,125 | 2,005 | 1,927 | 78 | ||||||||||||||||||
| Invesco V.I. Growth & Income I | 26 | 96 | (70 | ) | 23 | 140 | (117 | ) | ||||||||||||||||
| Invesco V.I. Growth & Income II | 205 | 5,161 | (4,957 | ) | 38,188 | 40,979 | (2,791 | ) | ||||||||||||||||
| Invesco V.I. International Growth II | 2,242 | 4,179 | (1,938 | ) | 4,814 | 5,927 | (1,113 | ) | ||||||||||||||||
| Invesco V.I. Main Street Fund I | 3 | 28 | (24 | ) | 4 | 42 | (38 | ) | ||||||||||||||||
| Invesco V.I. Main Street Fund II | 1,128 | 674 | 454 | 1,715 | 1,708 | 7 | ||||||||||||||||||
| Invesco V.I. Main Street Small Cap Fund II | 9 | - | 9 | N/A | N/A | N/A | ||||||||||||||||||
| Invesco V.I. Small Cap Equity II | 193 | 320 | (127 | ) | 877 | 980 | (103 | ) | ||||||||||||||||
| Invesco V.I. U.S. Government Money Portfolio I | 49,698 | 35,473 | 14,225 | 531,060 | 533,810 | (2,750 | ) | |||||||||||||||||
| Lord Abbett Bond Debenture VC | 5,116 | 3,366 | 1,750 | 1,716 | 5,455 | (3,739 | ) | |||||||||||||||||
| Lord Abbett Dividend Growth Fund | 794 | 624 | 170 | 1,854 | 2,034 | (180 | ) | |||||||||||||||||
| Lord Abbett Growth & Income VC | 27 | 434 | (407 | ) | 338 | 649 | (311 | ) | ||||||||||||||||
| Lord Abbett Growth Opportunities VC | 258 | 1,210 | (952 | ) | 2,451 | 3,288 | (837 | ) | ||||||||||||||||
| Lord Abbett Mid Cap Stock VC | 101 | 416 | (315 | ) | 1,025 | 1,197 | (172 | ) | ||||||||||||||||
| Lord Abbett Series Fundamental Equity VC | 103 | 1,697 | (1,594 | ) | 15,295 | 16,477 | (1,182 | ) | ||||||||||||||||
*Subaccount had purchases or sales that did not round to one thousand.
Note: Totals may not appear to foot/crossfoot due to rounding.
80
The Protective Variable Annuity Separate Account
Notes to Financial Statements
December 31, 2021
(4) Changes in Units Outstanding, continued
| (in thousands) | 2021 | 2020 | ||||||||||||||||||||||
| Subaccount | Units Issued | Units Redeemed | Net Increase (Decrease) | Units Issued | Units Redeemed | Net Increase (Decrease) | ||||||||||||||||||
| Lord Abbett Series Short Duration Income VC | 50 | 27 | 24 | N/A | N/A | N/A | ||||||||||||||||||
| MFS Growth Series IC | 5 | 20 | (15 | ) | 11 | 24 | (13 | ) | ||||||||||||||||
| MFS Growth Series SC | 43 | 236 | (193 | ) | 63 | 340 | (277 | ) | ||||||||||||||||
| MFS Investors Trust IC | 3 | 24 | (21 | ) | 3 | 40 | (37 | ) | ||||||||||||||||
| MFS Investors Trust SC | 19 | 356 | (337 | ) | 46 | 365 | (319 | ) | ||||||||||||||||
| MFS New Discovery IC | 4 | 7 | (3 | ) | 2 | 8 | (6 | ) | ||||||||||||||||
| MFS New Discovery SC | 45 | 222 | (177 | ) | 38 | 414 | (376 | ) | ||||||||||||||||
| MFS Research IC | 3 | 21 | (17 | ) | 4 | 21 | (17 | ) | ||||||||||||||||
| MFS Research SC | 6 | 20 | (13 | ) | 15 | 29 | (14 | ) | ||||||||||||||||
| MFS Total Return IC | 21 | 86 | (66 | ) | 15 | 94 | (79 | ) | ||||||||||||||||
| MFS Total Return SC | 79 | 244 | (164 | ) | 69 | 349 | (280 | ) | ||||||||||||||||
| MFS Utilities IC* | 0 | 7 | (7 | ) | - | 10 | (10 | ) | ||||||||||||||||
| MFS Utilities SC | 28 | 123 | (95 | ) | 60 | 183 | (123 | ) | ||||||||||||||||
| MFS VIT II Emerging Markets Equity SC | 2 | 4 | (2 | ) | 2 | 12 | (10 | ) | ||||||||||||||||
| MFS VIT II International Value SC | 40 | 197 | (157 | ) | 15 | 284 | (269 | ) | ||||||||||||||||
| MFS VIT II MA Investors Growth Stock IC | 3 | 13 | (10 | ) | 6 | 19 | (13 | ) | ||||||||||||||||
| MFS VIT II MA Investors Growth Stock SC | 14 | 328 | (315 | ) | 23 | 432 | (409 | ) | ||||||||||||||||
| MFS VIT Total Return Bond SC | 3,723 | 3,932 | (208 | ) | 1,568 | 6,119 | (4,551 | ) | ||||||||||||||||
| MFS VIT Value SC | 101 | 1,419 | (1,318 | ) | 525 | 1,138 | (613 | ) | ||||||||||||||||
| Morgan Stanley VIF, Inc. Global Real Estate II | 40 | 119 | (79 | ) | 192 | 163 | 29 | |||||||||||||||||
| PIMCO Income Advisor | 47 | 11 | 36 | N/A | N/A | N/A | ||||||||||||||||||
| PIMCO VIT All Asset Advisor | 38 | 100 | (61 | ) | 834 | 985 | (151 | ) | ||||||||||||||||
| PIMCO VIT Global Diversified Allocation Portfolio | 66 | 91 | (25 | ) | 58 | 129 | (71 | ) | ||||||||||||||||
| Pimco VIT High Yield Advance* | 13 | 0 | 12 | N/A | N/A | N/A | ||||||||||||||||||
| PIMCO VIT Long-Term US Government Advisor | 644 | 503 | 140 | 1,314 | 956 | 358 | ||||||||||||||||||
| PIMCO VIT Low Duration Advisor | 3,731 | 1,436 | 2,296 | 2,161 | 2,148 | 13 | ||||||||||||||||||
| PIMCO VIT Real Return Advisor | 3,165 | 2,980 | 185 | 1,570 | 6,734 | (5,164 | ) | |||||||||||||||||
| PIMCO VIT Short-Term Advisor | 1,449 | 1,308 | 141 | 1,805 | 2,106 | (301 | ) | |||||||||||||||||
| PIMCO VIT Total Return Advisor | 11,476 | 8,052 | 3,424 | 6,727 | 12,750 | (6,023 | ) | |||||||||||||||||
| Protective Life Dynamic Allocation Series – Conservative | 1,100 | 859 | 241 | 1,432 | 656 | 776 | ||||||||||||||||||
| Protective Life Dynamic Allocation Series – Growth | 194 | 830 | (636 | ) | 1,211 | 2,422 | (1,211 | ) | ||||||||||||||||
| Protective Life Dynamic Allocation Series – Moderate | 19,120 | 2,030 | 17,090 | 10,471 | 2,140 | 8,331 | ||||||||||||||||||
| Royce Capital Fund Micro-Cap SC | 98 | 526 | (428 | ) | 1,739 | 2,019 | (280 | ) | ||||||||||||||||
| Royce Capital Fund Small-Cap SC | 307 | 2,649 | (2,342 | ) | 20,077 | 20,212 | (135 | ) | ||||||||||||||||
| Rydex Commodities Strategy | - | 1 | (1 | ) | 1 | - | 1 | |||||||||||||||||
| Rydex Inverse Government Long Bond* | 0 | 0 | 0 | - | - | - | ||||||||||||||||||
| T. Rowe Price All-Cap Opportunities Portfolio | 10 | - | 10 | N/A | N/A | N/A | ||||||||||||||||||
| T. Rowe Price Blue Chip Growth Portfolio II | 242 | 6 | 235 | N/A | N/A | N/A | ||||||||||||||||||
| T. Rowe Price Health Sciences Portfolio II | 99 | 5 | 94 | N/A | N/A | N/A | ||||||||||||||||||
| Templeton Developing Markets VIP CL 2 | 675 | 1,453 | (778 | ) | 1,455 | 1,778 | (323 | ) | ||||||||||||||||
| Templeton Foreign VIP CL 2 | 990 | 2,673 | (1,683 | ) | 3,886 | 4,180 | (294 | ) | ||||||||||||||||
| Templeton Global Bond VIP Fund CL 2 | 4,062 | 2,705 | 1,358 | 2,213 | 4,080 | (1,867 | ) | |||||||||||||||||
| Templeton Growth VIP CL 2 | 521 | 1,869 | (1,347 | ) | 2,332 | 2,934 | (602 | ) | ||||||||||||||||
| VanEck Global Hard Asset | - | 2 | (2 | ) | 2 | - | 2 | |||||||||||||||||
| Vanguard VIF Balanced* | 60 | 0 | 59 | 3 | - | 3 | ||||||||||||||||||
| Vanguard VIF Capital Growth | 15 | 2 | 13 | 2 | - | 2 | ||||||||||||||||||
| Vanguard VIF Conservative Allocation* | 30 | 0 | 30 | N/A | N/A | N/A | ||||||||||||||||||
| Vanguard VIF Diversified Val | 6 | 1 | 5 | N/A | N/A | N/A | ||||||||||||||||||
| Vanguard VIF Equity Income | 47 | 3 | 44 | N/A | N/A | N/A | ||||||||||||||||||
| Vanguard VIF Equity Index | 61 | 1 | 60 | 1 | - | 1 | ||||||||||||||||||
| Vanguard VIF Global Bond Index | 15 | 1 | 14 | 1 | - | 1 | ||||||||||||||||||
| Vanguard VIF Growth | 50 | 1 | 49 | 6 | - | 6 | ||||||||||||||||||
| Vanguard VIF High Yield Bond* | 11 | 0 | 10 | 2 | - | 2 | ||||||||||||||||||
| Vanguard VIF International | 45 | 3 | 42 | - | - | - | ||||||||||||||||||
| Vanguard VIF Mid-Cap Index | 56 | 4 | 52 | - | - | - | ||||||||||||||||||
| Vanguard VIF Moderate Allocation | 63 | 13 | 50 | - | - | - | ||||||||||||||||||
| Vanguard VIF Money Market | 117 | 84 | 32 | - | - | - | ||||||||||||||||||
| Vanguard VIF Real Estate Index | 20 | 1 | 18 | - | - | - | ||||||||||||||||||
| Vanguard VIF Short Term Invmt Grade | 145 | 5 | 141 | 1 | - | 1 | ||||||||||||||||||
| Vanguard VIF Total Bond Mkt Index | 94 | 5 | 88 | 27 | - | 27 | ||||||||||||||||||
| Vanguard VIF Total Intl Stk Mkt Idx | 43 | 1 | 42 | - | - | - | ||||||||||||||||||
| Vanguard VIF Total Stock Mkt Index | 61 | 3 | 57 | 20 | - | 20 | ||||||||||||||||||
| Western Asset Core Plus VIT II | 232 | 5 | 227 | N/A | N/A | N/A | ||||||||||||||||||
*Subaccount had purchases or sales that did not round to one thousand.
Note: Totals may not appear to foot/crossfoot due to rounding.
81
(5)
Investments
The cost of purchases and proceeds from sales of investments, including distributions received and reinvested, for the year ended
December 31, 2021 are as follows:
| (in thousands) | Purchases | Sales | ||||||
| AB VPS Growth And Income B | $ | 142 | $ | 1 | ||||
| AB VPS Large Cap Growth B | 900 | 67 | ||||||
| AB VPS Small Cap Growth B | 126 | 6 | ||||||
| AB VPS Small/Mid Cap Value B | 352 | 2 | ||||||
| American Funds IS Asset Allocation Class 2 | 17,649 | 11,219 | ||||||
| American Funds IS Asset Allocation Class 4 | 14,437 | 3,343 | ||||||
| American Funds IS Capital Income Builder Class 2 | 3,027 | 147 | ||||||
| American Funds IS Capital Income Builder Class 4 | 1,573 | 810 | ||||||
| American Funds IS Capital World Growth And Income Fund 2 | 3,027 | 439 | ||||||
| American Funds IS Capital World Growth And Income Fund 4 | 1,489 | 508 | ||||||
| American Funds IS Global Growth Class 2 | 24,441 | 12,491 | ||||||
| American Funds IS Global Growth Class 4 | 4,037 | 2,746 | ||||||
| American Funds IS Global Small Capitalization Class 2 | 3,150 | 466 | ||||||
| American Funds IS Global Small Capitalization Class 4 | 53 | 99 | ||||||
| American Funds IS Growth – Income Class 2 | 9,051 | 339 | ||||||
| American Funds IS Growth – Income Class 4 | 4,123 | 2,227 | ||||||
| American Funds IS Growth Class 2 | 27,210 | 2,622 | ||||||
| American Funds IS Growth Class 4 | 31,912 | 9,768 | ||||||
| American Funds IS High-Income Bond 2 | 25 | - | ||||||
| American Funds IS International Class 2 | 4,209 | 433 | ||||||
| American Funds IS International Class 4 | 60 | 13 | ||||||
| American Funds IS International Growth And Income 2* | 10 | 0 | ||||||
| American Funds IS New World Class 2 | 4,583 | 494 | ||||||
| American Funds IS New World Class 4 | 91 | 98 | ||||||
| American Funds IS The Bond Fund Of America 2 | 13,288 | 292 | ||||||
| American Funds IS The Bond Fund Of America 4 | 4,056 | 1,132 | ||||||
| American Funds IS U.S. Government Securities Fund 2 | 2,796 | 664 | ||||||
| American Funds IS U.S. Government Securities Fund 4 | 1,870 | 3,527 | ||||||
| American Funds IS Washington Mutual Investors Fund 2 | 13,068 | 1,977 | ||||||
| American Funds IS Washington Mutual Investors Fund 4 | 638 | 439 | ||||||
| Blackrock 60/40 Target Allocation ETF V.I. Fund | 752 | 83 | ||||||
| Blackrock Global Allocation V.I. III | 1,070 | 87 | ||||||
| Blackrock International V.I. I | 75 | - | ||||||
| Calvert VP SRI Balanced | 185 | 226 | ||||||
| Clearbridge Variable Dividend Strategy II* | 45 | 0 | ||||||
| Clearbridge Variable Large Cap Growth II | 136 | 9 | ||||||
| ClearBridge Variable Mid Cap Portfolio Class II | 11,894 | 17,103 | ||||||
| ClearBridge Variable Small Cap Growth II | 10,360 | 16,107 | ||||||
| Columbia VP Balanced 2 | 1,531 | 15 | ||||||
| Columbia VP Intermediate Bond 2 | 369 | 1 | ||||||
*Subaccount had either no purchases or sales that rounded to one thousand
82
(5) Investments, continued
| (in thousands) | Purchases | Sales | ||||||
| Columbia VP Limited Duration Credit 2* | $ | 18 | $ | 0 | ||||
| Columbia VP Select Mid Cap Value 2* | 77 | 0 | ||||||
| Columbia VP Strategic Income 2 | 403 | 11 | ||||||
| DFA VA Equity Allocation Portfolio Instl* | 25 | 0 | ||||||
| DFA VA Global Bond | 707 | 1 | ||||||
| DFA VA Global Moderate Allocation Instl | 374 | 2 | ||||||
| DFA VA International Small | 509 | 89 | ||||||
| DFA VA International Value | 449 | 3 | ||||||
| DFA VA Short-Term Fixed | 429 | 2 | ||||||
| DFA VA US Large Value | 1,408 | 23 | ||||||
| DFA VA US Targeted Value | 730 | 21 | ||||||
| Fidelity Contrafund Portfolio SC2 | 63,006 | 67,136 | ||||||
| Fidelity Equity Income SC2 | 1,171 | 1,659 | ||||||
| Fidelity Freedom Fund - 2015 Maturity SC2 | 360 | 95 | ||||||
| Fidelity Freedom Fund - 2020 Maturity SC2 | 469 | 633 | ||||||
| Fidelity Growth Portfolio SC2 | 985 | 588 | ||||||
| Fidelity Index 500 Portfolio SC2 | 61,760 | 106,101 | ||||||
| Fidelity Investment Grade Bonds SC2 | 60,699 | 19,701 | ||||||
| Fidelity Mid Cap SC2 | 56,117 | 78,544 | ||||||
| Fidelity VIP Asset Manager Service 2 | 78 | 2 | ||||||
| Fidelity VIP Balanced Service 2 | 4,485 | 100 | ||||||
| Fidelity VIP Bond Index Port | 17 | - | ||||||
| Fidelity VIP Energy Service 2 | 316 | 38 | ||||||
| Fidelity VIP Fundsmanager 20% Service 2 | 575 | 9 | ||||||
| Fidelity VIP Health Care Port Service 2 | 223 | 25 | ||||||
| Fidelity VIP International Index Port | 22 | - | ||||||
| Fidelity VIP Target Volatility Service 2* | 68 | 0 | ||||||
| Franklin Dynatech VIP Fund | 17,286 | 14,222 | ||||||
| Franklin Income VIP CL 2 | 14,478 | 28,459 | ||||||
| Franklin Multi-Asset Dynamic Multi-Strat VIT | 1,251 | 2,416 | ||||||
| Franklin Mutual Global Discovery VIP CL 2 | 2,143 | 523 | ||||||
| Franklin Mutual Shares VIP CL 2 | 29,153 | 124,828 | ||||||
| Franklin Rising Dividend VIP CL 2 | 26,569 | 69,291 | ||||||
| Franklin Small Cap Value VIP CL 2 | 7,962 | 17,138 | ||||||
| Franklin Small-Mid Cap Growth VIP CL 2 | 11,407 | 18,547 | ||||||
| Franklin Strategic Income VIP CL 2 | 1,880 | 499 | ||||||
| Franklin US Government Securities VIP CL 2 | 54,673 | 30,294 | ||||||
| Goldman Sachs Global Trends Allocation Fund SC | 1,747 | 1,129 | ||||||
| Goldman Sachs International Equity Insights | 1,612 | 3,701 | ||||||
| Goldman Sachs International Equity Insights SC | 4,923 | 11,032 | ||||||
| Goldman Sachs Large Cap Value | 5,761 | 6,766 | ||||||
| Goldman Sachs Large Cap Value Fund SC | 14,571 | 20,585 | ||||||
| Goldman Sachs Mid Cap Value | 1,498 | 1,164 | ||||||
*Subaccount had either no purchases or sales that rounded to one thousand
83
(5) Investments, continued
| (in thousands) | Purchases | Sales | ||||||
| Goldman Sachs Mid Cap Value SC | $ | 22,257 | $ | 36,065 | ||||
| Goldman Sachs Small Cap Equity Insights | 5,753 | 4,828 | ||||||
| Goldman Sachs Small Cap Equity Insights SC | 3,006 | 3,840 | ||||||
| Goldman Sachs Strategic Growth | 5,701 | 7,155 | ||||||
| Goldman Sachs Strategic Growth SC | 29,315 | 46,056 | ||||||
| Goldman Sachs US Equity Insights | 8,007 | 4,976 | ||||||
| Goldman Sachs US Equity Insights SC | 284 | 166 | ||||||
| Goldman Sachs VIT Core Fixed Income Fund SC | 6,242 | 1,607 | ||||||
| Goldman Sachs VIT Growth Opportunities SC | 12,931 | 15,292 | ||||||
| Guggenheim Floating Rate Strategies (Series F) | 635 | 935 | ||||||
| Guggenheim Global Managed Futures Strategy | 100 | 1,706 | ||||||
| Guggenheim Long Short Equity | 60 | 100 | ||||||
| Guggenheim Multi-Hedge Strategies | 102 | 645 | ||||||
| Invesco V.I. American Franchise I | 959 | 1,427 | ||||||
| Invesco V.I. American Franchise II | 494 | 502 | ||||||
| Invesco V.I. American Value II | 9,775 | 24,169 | ||||||
| Invesco V.I. Balanced Risk Allocation II | 10,250 | 11,518 | ||||||
| Invesco V.I. Capital Appreciation Fund I | 762 | 1,132 | ||||||
| Invesco V.I. Capital Appreciation Fund II | 6,070 | 15,056 | ||||||
| Invesco V.I. Comstock I | 1,156 | 3,789 | ||||||
| Invesco V.I. Comstock II | 10,091 | 45,420 | ||||||
| Invesco V.I. Conservative Balance II | 1,164 | 20 | ||||||
| Invesco V.I. Discovery Mid Cap Growth Fund I | 693 | 741 | ||||||
| Invesco V.I. Discovery Mid Cap Growth Fund II | 6,275 | 10,929 | ||||||
| Invesco V.I. Equity and Income II | 10,652 | 41,285 | ||||||
| Invesco V.I. Global Fund I* | 837 | 1,343 | ||||||
| Invesco V.I. Global Fund II | 19,706 | 71,730 | ||||||
| Invesco V.I. Global Real Estate II | 2,384 | 2,710 | ||||||
| Invesco V.I. Global Strategic Income Fund I | 640 | 1,183 | ||||||
| Invesco V.I. Global Strategic Income Fund II | 34,126 | 20,068 | ||||||
| Invesco V.I. Government Securities II | 33,103 | 8,467 | ||||||
| Invesco V.I. Growth & Income I | 1,272 | 3,684 | ||||||
| Invesco V.I. Growth & Income II | 10,605 | 155,235 | ||||||
| Invesco V.I. International Growth II | 35,625 | 64,641 | ||||||
| Invesco V.I. Main Street Fund I | 635 | 1,191 | ||||||
| Invesco V.I. Main Street Fund II | 22,572 | 20,238 | ||||||
| Invesco V.I. Main Street Small Cap Fund II | 95 | 0 | ||||||
| Invesco V.I. Small Cap Equity II | 4,250 | 7,169 | ||||||
| Invesco V.I. U.S. Government Money Portfolio I | 203,602 | 108,248 | ||||||
| Lord Abbett Bond Debenture VC | 79,551 | 43,068 | ||||||
| Lord Abbett Dividend Growth Fund | 24,683 | 19,897 | ||||||
| Lord Abbett Growth & Income VC | 8,554 | 13,410 | ||||||
*Subaccount had either no purchases or sales that rounded to one thousand
84
(5) Investments, continued
| (in thousands) | Purchases | Sales | ||||||
| Lord Abbett Growth Opportunities VC | $ | 17,609 | $ | 42,884 | ||||
| Lord Abbett Mid Cap Stock VC | 7,691 | 12,264 | ||||||
| Lord Abbett Series Fundamental Equity VC | 10,958 | 43,229 | ||||||
| Lord Abbett Series Short Duration Income VC | 510 | 268 | ||||||
| MFS Growth Series IC | 1,333 | 1,476 | ||||||
| MFS Growth Series SC | 9,501 | 12,762 | ||||||
| MFS Investors Trust IC | 401 | 1,162 | ||||||
| MFS Investors Trust SC | 2,542 | 13,764 | ||||||
| MFS New Discovery IC | 852 | 651 | ||||||
| MFS New Discovery SC | 13,046 | 14,910 | ||||||
| MFS Research IC | 522 | 1,069 | ||||||
| MFS Research SC | 485 | 875 | ||||||
| MFS Total Return IC | 1,986 | 3,427 | ||||||
| MFS Total Return SC | 5,539 | 7,553 | ||||||
| MFS Utilities IC | 115 | 406 | ||||||
| MFS Utilities SC | 1,797 | 4,212 | ||||||
| MFS VIT II Emerging Markets Equity SC | 28 | 54 | ||||||
| MFS VIT II International Value SC | 1,170 | 4,666 | ||||||
| MFS VIT II MA Investors Growth Stock IC | 290 | 291 | ||||||
| MFS VIT II MA Investors Growth Stock SC | 5,463 | 8,339 | ||||||
| MFS VIT Total Return Bond SC | 36,346 | 32,763 | ||||||
| MFS VIT Value SC | 8,132 | 44,076 | ||||||
| Morgan Stanley VIF, Inc. Global Real Estate II | 735 | 1,851 | ||||||
| PIMCO Income Advisor | 474 | 109 | ||||||
| PIMCO VIT All Asset Advisor | 1,330 | 1,462 | ||||||
| PIMCO VIT Global Diversified Allocation Portfolio | 1,472 | 1,271 | ||||||
| Pimco VIT High Yield Advance | 132 | 5 | ||||||
| PIMCO VIT Long-Term US Government Advisor | 14,400 | 7,446 | ||||||
| PIMCO VIT Low Duration Advisor | 32,759 | 9,947 | ||||||
| PIMCO VIT Real Return Advisor | 38,627 | 25,541 | ||||||
| PIMCO VIT Short-Term Advisor | 12,842 | 11,523 | ||||||
| PIMCO VIT Total Return Advisor | 137,813 | 61,724 | ||||||
| Protective Life Dynamic Allocation Series – Conservative | 12,402 | 10,046 | ||||||
| Protective Life Dynamic Allocation Series – Growth | 2,652 | 11,700 | ||||||
| Protective Life Dynamic Allocation Series – Moderate | 209,232 | 18,607 | ||||||
| Royce Capital Fund Micro-Cap SC | 2,713 | 10,575 | ||||||
| Royce Capital Fund Small-Cap SC | 5,322 | 51,328 | ||||||
| Rydex Commodities Strategy* | 0 | 3 | ||||||
| Rydex Inverse Government Long Bond* | 1 | 0 | ||||||
| T. Rowe Price All-Cap Opportunities Portfolio | 100 | - | ||||||
| T. Rowe Price Blue Chip Growth Portfolio II | 3,010 | 80 | ||||||
*Subaccount had either no purchases or sales that rounded to one thousand
85
(5) Investments, continued
| (in thousands) | Purchases | Sales | ||||||
| T. Rowe Price Health Sciences Portfolio II | $ | 1,129 | $ | 53 | ||||
| Templeton Developing Markets VIP CL 2 | 1,533 | 11,803 | ||||||
| Templeton Foreign VIP CL 2 | 10,045 | 31,268 | ||||||
| Templeton Global Bond VIP Fund CL 2 | 29,479 | 17,085 | ||||||
| Templeton Growth VIP CL 2 | 5,784 | 28,345 | ||||||
| VanEck Global Hard Asset | 1 | 56 | ||||||
| Vanguard VIF Balanced | 747 | 5 | ||||||
| Vanguard VIF Capital Growth | 206 | 24 | ||||||
| Vanguard VIF Conservative Allocation | 341 | 3 | ||||||
| Vanguard VIF Diversified Val | 91 | 22 | ||||||
| Vanguard VIF Equity Income | 645 | 47 | ||||||
| Vanguard VIF Equity Index | 840 | 14 | ||||||
| Vanguard VIF Global Bond Index | 151 | 14 | ||||||
| Vanguard VIF Growth | 683 | 12 | ||||||
| Vanguard VIF High Yield Bond | 118 | 3 | ||||||
| Vanguard VIF International | 611 | 38 | ||||||
| Vanguard VIF Mid-Cap Index | 811 | 66 | ||||||
| Vanguard VIF Moderate Allocation | 770 | 160 | ||||||
| Vanguard VIF Money Market | 1,164 | 841 | ||||||
| Vanguard VIF Real Estate Index | 264 | 18 | ||||||
| Vanguard VIF Short Term Invmt Grade | 1,476 | 48 | ||||||
| Vanguard VIF Total Bond Mkt Index | 934 | 53 | ||||||
| Vanguard VIF Total Intl Stk Mkt Idx | 550 | 12 | ||||||
| Vanguard VIF Total Stock Mkt Index | 866 | 47 | ||||||
| Western Asset Core Plus VIT II | 2,396 | 50 | ||||||
86
(6)
Financial Highlights
Protective Life sells a number of variable annuity products that are funded by the Separate Account. These products have unique
combinations of features and fees that are charged against the contract owner’s account. Differences in the fee structures
result in a variety of unit values, expense ratios and total returns. The following tables were developed by determining which
products offered by Protective Life and funded by the Separate Account have the highest and lowest expense ratios. The summaries
may not reflect or directly equate to the minimum and maximum contract charges offered by Protective Life, as contract owners
may not have selected all available and applicable contract options for or during the periods presented.
A summary of the units outstanding, unit fair values, net assets for variable annuity contracts, net investment income ratios,
the expense ratios, excluding expenses of the underlying funds, and total returns for each of the five years in the period ended
December 31, 2021 were as follows:
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| AB VPS Growth And Income B | ||||||||||
| 2021 | 13 | $11.75 | $11.72 | $147 | 0.35% | 0.90% | 1.20% | 5.26% | 4.99% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| AB VPS Large Cap Growth B | ||||||||||
| 2021 | 71 | 10.37 | 13.17 | 857 | 0.00% | 0.65% | 1.20% | -6.33% | 18.92% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| AB VPS Small Cap Growth B | ||||||||||
| 2021 | 10 | 10.65 | 10.56 | 110 | 0.00% | 0.20% | 1.20% | 11.44% | 10.52% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| AB VPS Small/Mid Cap Value B | ||||||||||
| 2021 | 32 | 11.37 | 11.34 | 358 | 0.56% | 0.90% | 1.20% | 5.35% | 5.09% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| American Funds IS Asset Allocation Class 2 | ||||||||||
| 2021 | 4,164 | 28.70 | 26.12 | 100,498 | 1.58% | 0.50% | 1.55% | 14.41% | 13.15% | |
| 2020 | 3,572 | 11.78 | 32.86 | 85,665 | 1.57% | 0.60% | 1.70% | 10.55% | 11.78% | |
| 2019 | 3,490 | 20.77 | 29.46 | 79,883 | 1.96% | 0.60% | 1.70% | 19.17% | 20.50% | |
| 2018 | 3,522 | 17.35 | 24.50 | 67,844 | 1.63% | 0.60% | 1.70% | -6.23% | -5.18% | |
| 2017 | 4,101 | 18.42 | 25.89 | 83,402 | 1.54% | 0.60% | 1.70% | 14.26% | 15.54% | |
| American Funds IS Asset Allocation Class 4 | ||||||||||
| 2021 | 2,356 | 16.28 | 16.95 | 38,782 | 1.52% | 0.90% | 1.20% | 13.69% | 13.35% | |
| 2020 | 1,725 | 14.32 | 14.95 | 25,063 | 1.59% | 1.00% | 1.30% | 10.70% | 11.04% | |
| 2019 | 1,073 | 12.90 | 13.51 | 14,139 | 2.00% | 1.00% | 1.30% | 19.36% | 19.72% | |
| 2018 | 611 | 10.77 | 11.32 | 6,793 | 1.64% | 1.00% | 1.30% | -6.08% | -5.79% | |
| 2017 | 434 | 11.43 | 12.05 | 5,173 | 1.65% | 1.00% | 1.30% | 14.41% | 14.75% | |
| American Funds IS Capital Income Builder Class 2 | ||||||||||
| 2021 | 539 | 12.43 | 13.64 | 6,985 | 3.01% | 0.65% | 0.80% | 14.08% | 13.91% | |
| 2020 | 304 | 10.90 | 11.98 | 3,559 | 2.70% | 0.75% | 0.90% | 3.54% | 3.70% | |
| 2019 | 225 | 11.57 | 11.57 | 2,607 | 2.96% | 0.90% | 0.90% | 16.83% | 16.83% | |
| 2018 | 208 | 9.90 | 9.90 | 2,061 | 3.78% | 0.90% | 0.90% | 7.92% | 7.92% | |
| 2017 | 39 | 10.75 | 10.75 | 420 | 1.68% | 0.90% | 0.90% | 6.93% | 6.93% | |
| American Funds IS Capital Income Builder Class 4 | ||||||||||
| 2021 | 540 | 12.56 | 13.23 | 7,377 | 2.57% | 0.20% | 1.20% | 14.34% | 13.19% | |
| 2020 | 488 | 11.69 | 12.33 | 5,878 | 2.87% | 1.00% | 1.30% | 2.76% | 3.07% | |
| 2019 | 290 | 11.37 | 11.96 | 3,369 | 2.62% | 1.00% | 1.30% | 16.09% | 16.44% | |
| 2018 | 169 | 9.80 | 10.27 | 1,673 | 3.32% | 1.00% | 1.30% | -8.46% | -8.18% | |
| 2017 | 49 | 10.70 | 11.18 | 529 | 2.29% | 1.00% | 1.30% | 6.35% | 11.53% | |
| American Funds IS Capital World Growth And Income Fund 2 | ||||||||||
| 2021 | 508 | 13.30 | 16.66 | 7,143 | 1.93% | 0.65% | 0.80% | 13.92% | 13.74% | |
| 2020 | 314 | 11.68 | 14.65 | 4,029 | 1.34% | 0.75% | 0.90% | 7.75% | 7.92% | |
| 2019 | 155 | 10.82 | 13.59 | 1,990 | 1.80% | 0.75% | 0.90% | 4.92% | 29.96% | |
| 2018 | 98 | 10.46 | 10.46 | 1,026 | 2.83% | 0.90% | 0.90% | -10.45% | 10.45% | |
| 2017 | 16 | 11.68 | 11.68 | 187 | 3.21% | 0.90% | 0.90% | 13.92% | 13.92% | |
| American Funds IS Capital World Growth And Income Fund 4 | ||||||||||
| 2021 | 221 | 13.47 | 16.16 | 3,791 | 1.63% | 0.20% | 1.20% | 14.12% | 12.98% | |
| 2020 | 166 | 14.30 | 15.35 | 2,519 | 0.97% | 1.00% | 1.30% | 7.14% | 7.46% | |
| 2019 | 169 | 13.35 | 14.28 | 2,390 | 2.11% | 1.00% | 1.30% | 29.03% | 29.43% | |
| 2018 | 102 | 10.35 | 11.03 | 1,122 | 2.52% | 1.00% | 1.30% | -11.07% | -10.79% | |
| 2017 | 29 | 11.36 | 12.01 | 356 | 3.86% | 1.00% | 1.30% | 12.20% | 20.86% | |
| American Funds IS Global Growth Class 2 | ||||||||||
| 2021 | 5,130 | 16.46 | 22.60 | 105,373 | 0.34% | 0.65% | 0.80% | 15.55% | 15.37% | |
| 2020 | 4,437 | 14.24 | 19.59 | 84,204 | 0.33% | 0.75% | 0.90% | 29.29% | 29.49% | |
| 2019 | 4,697 | 11.00 | 15.15 | 71,124 | 1.15% | 0.75% | 0.90% | 4.68% | 34.06% | |
| 2018 | 4,911 | 11.30 | 11.30 | 55,496 | 0.73% | 0.90% | 0.90% | -9.87% | -9.87% | |
| 2017 | 4,714 | 12.54 | 12.54 | 59,095 | 0.73% | 0.90% | 0.90% | 30.29% | 30.29% | |
| American Funds IS Global Growth Class 4 | ||||||||||
| 2021 | 874 | 13.76 | 21.64 | 18,614 | 0.22% | 0.20% | 1.20% | 15.79% | 14.63% | |
| 2020 | 838 | 18.40 | 18.88 | 15,643 | 0.15% | 1.00% | 1.30% | 28.48% | 28.87% | |
| 2019 | 747 | 14.28 | 14.69 | 10,918 | 1.00% | 1.00% | 1.30% | 33.12% | 33.53% | |
| 2018 | 696 | 10.69 | 11.04 | 7,656 | 0.58% | 1.00% | 1.30% | -10.42% | -10.15% | |
| 2017 | 615 | 11.90 | 12.32 | 7,571 | 0.64% | 1.00% | 1.30% | 14.10% | 29.42% | |
87
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| American Funds IS Global Small Capitalization Class 2 | ||||||||||
| 2021 | 457 | $15.00 | $17.55 | $7,236 | 0.00% | 0.65% | 0.80% | 5.94% | 5.78% | |
| 2020 | 284 | 14.16 | 16.60 | 4,409 | 0.13% | 0.75% | 0.90% | 28.56% | 28.75% | |
| 2019 | 188 | 11.00 | 12.91 | 2,383 | 0.16% | 0.75% | 0.90% | 4.01% | 30.34% | |
| 2018 | 138 | 9.90 | 9.90 | 1,368 | 0.10% | 1.30% | 1.30% | -11.36% | -11.36% | |
| 2017 | 84 | 11.17 | 11.17 | 942 | 0.44% | 0.90% | 0.90% | 24.77% | 24.77% | |
| American Funds IS Global Small Capitalization Class 4 | ||||||||||
| 2021 | 17 | 13.81 | 16.80 | 283 | 0.00% | 0.20% | 1.20% | 6.11% | 5.04% | |
| 2020 | 20 | 15.99 | 15.99 | 314 | 0.12% | 1.30% | 1.30% | 27.71% | 27.71% | |
| 2019 | 19 | 12.52 | 12.52 | 243 | 0.01% | 1.30% | 1.30% | 29.54% | 29.54% | |
| 2018 | 28 | 9.67 | 9.67 | 270 | 0.03% | 1.30% | 1.30% | -11.97% | -11.97% | |
| 2017 | 19 | 10.98 | 10.98 | 203 | 0.43% | 1.30% | 1.30% | 24.00% | 24.00% | |
| American Funds IS Growth – Income Class 2 | ||||||||||
| 2021 | 916 | 14.99 | 19.22 | 14,196 | 1.39% | 0.65% | 0.80% | 23.17% | 22.98% | |
| 2020 | 287 | 12.17 | 15.63 | 3,905 | 1.42% | 0.75% | 0.90% | 12.52% | 12.69% | |
| 2019 | 114 | 10.80 | 13.89 | 1,582 | 1.82% | 0.75% | 0.90% | 3.72% | 25.00% | |
| 2018 | 96 | 11.11 | 11.11 | 1,071 | 2.37% | 0.90% | 0.90% | -2.67% | -2.67% | |
| 2017 | 19 | 11.42 | 11.42 | 212 | 2.08% | 0.90% | 0.90% | 12.69% | 12.69% | |
| American Funds IS Growth – Income Class 4 | ||||||||||
| 2021 | 929 | 14.18 | 18.63 | 18,344 | 1.00% | 0.20% | 1.20% | 23.43% | 22.19% | |
| 2020 | 828 | 15.25 | 16.27 | 13,411 | 1.48% | 1.00% | 1.30% | 11.78% | 12.12% | |
| 2019 | 518 | 13.64 | 14.51 | 7,471 | 1.93% | 1.00% | 1.30% | 24.22% | 24.60% | |
| 2018 | 268 | 10.98 | 11.65 | 3,102 | 1.89% | 1.00% | 1.30% | -3.34% | -3.04% | |
| 2017 | 79 | 11.36 | 12.01 | 948 | 2.15% | 1.00% | 1.30% | 12.20% | 20.86% | |
| American Funds IS Growth Class 2 | ||||||||||
| 2021 | 2,353 | 20.14 | 32.09 | 54,975 | 0.25% | 0.65% | 0.80% | 21.08% | 20.89% | |
| 2020 | 1,249 | 15.99 | 26.54 | 27,688 | 0.28% | 0.75% | 0.90% | 50.71% | 50.94% | |
| 2019 | 824 | 11.02 | 17.61 | 14,503 | 0.78% | 0.75% | 0.90% | 4.22% | 29.60% | |
| 2018 | 791 | 13.59 | 13.59 | 10,752 | 0.50% | 0.90% | 0.90% | -1.15% | -1.15% | |
| 2017 | 672 | 13.75 | 13.75 | 9,234 | 0.58% | 0.90% | 0.90% | 27.14% | 27.17% | |
| American Funds IS Growth Class 4 | ||||||||||
| 2021 | 2,489 | 15.60 | 30.73 | 67,204 | 0.07% | 0.20% | 1.20% | 21.32% | 20.10% | |
| 2020 | 1,874 | 12.86 | 25.58 | 41,912 | 0.31% | 0.30% | 1.30% | 49.75% | 50.20% | |
| 2019 | 986 | 14.79 | 17.08 | 14,785 | 0.69% | 1.00% | 1.30% | 28.75% | 29.14% | |
| 2018 | 486 | 11.45 | 13.27 | 5,703 | 0.34% | 1.00% | 1.30% | -1.80% | -1.50% | |
| 2017 | 193 | 11.63 | 13.51 | 2,366 | 0.58% | 1.00% | 1.30% | 13.12% | 26.33% | |
| American Funds IS High-Income Bond 2 | ||||||||||
| 2021 | 2 | 10.08 | 10.08 | 25 | 0.00% | 0.65% | 0.65% | 0.00% | 0.00% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| American Funds IS International Class 2 | ||||||||||
| 2021 | 827 | 11.90 | 13.49 | 10,508 | 2.95% | 0.65% | 0.80% | -2.23% | -2.38% | |
| 2020 | 535 | 12.17 | 13.82 | 7,211 | 0.61% | 0.75% | 0.90% | 12.95% | 13.12% | |
| 2019 | 420 | 10.76 | 12.24 | 5,144 | 1.55% | 0.75% | 0.90% | 4.35% | 21.78% | |
| 2018 | 385 | 10.05 | 10.05 | 3,871 | 2.15% | 0.90% | 0.90% | -13.92% | -13.92% | |
| 2017 | 248 | 11.67 | 11.67 | 2,890 | 1.54% | 0.90% | 0.90% | 30.96% | 30.96% | |
| American Funds IS International Class 4 | ||||||||||
| 2021 | 33 | 12.09 | 12.93 | 420 | 2.46% | 0.20% | 1.20% | -2.01% | -2.99% | |
| 2020 | 29 | 13.32 | 13.32 | 392 | 0.39% | 1.30% | 1.30% | 12.18% | 12.18% | |
| 2019 | 30 | 11.88 | 11.88 | 351 | 1.41% | 1.30% | 1.30% | 21.07% | 21.07% | |
| 2018 | 18 | 9.81 | 9.81 | 181 | 2.44% | 1.30% | 1.30% | -14.54% | -14.54% | |
| 2017 | 6 | 11.48 | 11.48 | 74 | 1.84% | 1.30% | 1.30% | 30.19% | 30.19% | |
| American Funds IS International Growth And Income 2 | ||||||||||
| 2021 | 1 | 9.71 | 9.71 | 10 | 0.00% | 0.65% | 0.65% | 1.08% | 1.08% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| American Funds IS New World Class 2 | ||||||||||
| 2021 | 659 | 13.85 | 16.86 | 9,954 | 0.99% | 0.65% | 0.80% | 4.14% | 3.98% | |
| 2020 | 384 | 13.30 | 16.22 | 5,933 | 0.06% | 0.75% | 0.90% | 22.47% | 22.66% | |
| 2019 | 320 | 10.84 | 13.24 | 4,201 | 0.99% | 0.75% | 0.90% | 4.19% | 27.98% | |
| 2018 | 285 | 10.35 | 10.35 | 2,944 | 1.01% | 0.90% | 0.90% | -14.82% | -14.82% | |
| 2017 | 200 | 12.15 | 12.15 | 2,424 | 1.15% | 0.90% | 0.90% | 28.28% | 28.28% | |
| American Funds IS New World Class 4 | ||||||||||
| 2021 | 23 | 12.79 | 16.15 | 362 | 0.65% | 0.20% | 1.20% | 4.32% | 3.27% | |
| 2020 | 23 | 15.64 | 15.64 | 366 | 0.03% | 1.30% | 1.30% | 21.69% | 21.69% | |
| 2019 | 19 | 12.85 | 12.85 | 250 | 0.94% | 1.30% | 1.30% | 27.14% | 27.14% | |
| 2018 | 8 | 10.11 | 10.11 | 80 | 0.80% | 1.30% | 1.30% | -15.37% | -15.37% | |
| 2017 | 6 | 11.94 | 11.94 | 70 | 0.86% | 1.30% | 1.30% | 27.39% | 27.39% | |
88
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| American Funds IS The Bond Fund Of America 2 | ||||||||||
| 2021 | 1,698 | $10.85 | $11.64 | $18,660 | 1.90% | 0.65% | 0.80% | -1.05% | -1.20% | |
| 2020 | 557 | 10.96 | 11.79 | 6,314 | 2.42% | 0.75% | 0.90% | 8.75% | 8.91% | |
| 2019 | 261 | 10.06 | 10.84 | 2,829 | 2.79% | 0.75% | 0.90% | 0.27% | 8.37% | |
| 2018 | 218 | 10.00 | 10.00 | 2,182 | 3.56% | 0.90% | 0.90% | -1.61% | -1.61% | |
| 2017 | 61 | 10.16 | 10.16 | 617 | 2.65% | 0.90% | 0.90% | 1.43% | 1.43% | |
| American Funds IS The Bond Fund Of America 4 | ||||||||||
| 2021 | 715 | 10.13 | 11.28 | 8,143 | 1.41% | 0.20% | 1.20% | -0.88% | -1.88% | |
| 2020 | 482 | 11.49 | 11.73 | 5,619 | 2.34% | 1.00% | 1.30% | 7.96% | 8.29% | |
| 2019 | 201 | 10.65 | 10.83 | 2,164 | 2.87% | 1.00% | 1.30% | 7.66% | 7.99% | |
| 2018 | 122 | 9.89 | 10.03 | 1,219 | 3.39% | 1.00% | 1.30% | -2.18% | -1.88% | |
| 2017 | 29 | 10.11 | 10.22 | 294 | 2.98% | 1.00% | 1.30% | 0.89% | 2.26% | |
| American Funds IS U.S. Government Securities Fund 2 | ||||||||||
| 2021 | 336 | 10.76 | 11.12 | 3,644 | 1.68% | 0.65% | 0.80% | -1.37% | -1.52% | |
| 2020 | 167 | 10.91 | 11.29 | 1,846 | 1.84% | 0.75% | 0.90% | 8.82% | 8.98% | |
| 2019 | 57 | 10.38 | 10.38 | 586 | 2.28% | 0.90% | 0.90% | 4.37% | 4.37% | |
| 2018 | 42 | 9.94 | 9.94 | 414 | 3.02% | 0.90% | 0.90% | -0.18% | -0.18% | |
| 2017 | 3 | 9.96 | 9.96 | 25 | 2.15% | 0.90% | 0.90% | -0.43% | -0.43% | |
| American Funds IS U.S. Government Securities Fund 4 | ||||||||||
| 2021 | 466 | 9.94 | 10.78 | 5,068 | 0.90% | 0.20% | 1.20% | -1.17% | -2.16% | |
| 2020 | 667 | 11.02 | 11.21 | 7,444 | 2.57% | 1.00% | 1.30% | 8.06% | 8.39% | |
| 2019 | 80 | 10.20 | 10.34 | 817 | 2.18% | 1.00% | 1.30% | 3.78% | 4.09% | |
| 2018 | 51 | 9.83 | 9.94 | 500 | 2.75% | 1.00% | 1.30% | -0.81% | -0.51% | |
| 2017 | 14 | 9.91 | 9.99 | 138 | 1.73% | 1.00% | 1.30% | -0.84% | 0.27% | |
| American Funds IS Washington Mutual Investors Fund 2 | ||||||||||
| 2021 | 2,381 | 14.91 | 19.06 | 39,893 | 1.64% | 0.65% | 0.80% | 26.82% | 26.63% | |
| 2020 | 1,548 | 11.75 | 15.05 | 21,924 | 1.71% | 0.75% | 0.90% | 7.71% | 7.87% | |
| 2019 | 1,138 | 10.90 | 13.97 | 15,902 | 2.16% | 0.75% | 0.90% | 4.28% | 20.29% | |
| 2018 | 1,028 | 11.62 | 11.62 | 11,948 | 2.13% | 0.90% | 0.90% | -9.48% | -9.48% | |
| 2017 | 897 | 12.83 | 12.83 | 11,511 | 2.27% | 0.90% | 0.90% | 15.99% | 15.99% | |
| American Funds IS Washington Mutual Investors Fund 4 | ||||||||||
| 2021 | 182 | 14.85 | 18.26 | 3,297 | 1.32% | 0.20% | 1.20% | 27.13% | 25.86% | |
| 2020 | 168 | 14.51 | 14.51 | 2,441 | 1.50% | 1.30% | 1.30% | 7.06% | 7.06% | |
| 2019 | 136 | 13.55 | 13.55 | 1,837 | 2.06% | 1.30% | 1.30% | 19.46% | 19.46% | |
| 2018 | 104 | 11.35 | 11.35 | 1,176 | 1.98% | 1.30% | 1.30% | -10.11% | -10.11% | |
| 2017 | 88 | 12.62 | 12.62 | 1,109 | 2.07% | 1.30% | 1.30% | 15.19% | 15.19% | |
| Blackrock 60/40 Target Allocation ETF V.I. Fund | ||||||||||
| 2021 | 57 | 11.00 | 10.97 | 629 | 1.62% | 0.90% | 1.20% | 3.22% | 2.96% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Blackrock Global Allocation V.I. III | ||||||||||
| 2021 | 84 | 9.85 | 10.49 | 862 | 0.40% | 0.65% | 1.20% | -5.82% | 0.34% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Blackrock International V.I. I | ||||||||||
| 2021 | 8 | 9.39 | 9.39 | 75 | 0.00% | 0.65% | 0.65% | 0.00% | 0.00% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Calvert VP SRI Balanced | ||||||||||
| 2021 | 46 | 30.02 | 33.08 | 1,595 | 1.16% | 0.75% | 1.40% | 14.14% | 13.34% | |
| 2020 | 49 | 26.30 | 31.15 | 1,488 | 1.48% | 0.85% | 1.55% | 13.48% | 14.28% | |
| 2019 | 50 | 23.01 | 27.37 | 1,337 | 1.57% | 0.85% | 1.55% | 22.48% | 23.35% | |
| 2018 | 53 | 18.66 | 22.28 | 1,159 | 1.84% | 0.85% | 1.55% | -4.18% | -3.50% | |
| 2017 | 55 | 19.33 | 23.18 | 1,253 | 1.93% | 0.85% | 1.55% | 9.99% | 11.22% | |
| Clearbridge Variable Dividend Strategy II | ||||||||||
| 2021 | 4 | 12.43 | 12.40 | 45 | 0.98% | 0.90% | 1.20% | 10.96% | 10.68% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Clearbridge Variable Large Cap Growth II | ||||||||||
| 2021 | 11 | 12.45 | 12.42 | 131 | 0.00% | 0.90% | 1.20% | 13.64% | 13.36% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
89
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| ClearBridge Variable Mid Cap Portfolio Class II | ||||||||||
| 2021 | 2,032 | $42.31 | $28.37 | $66,543 | 0.03% | 0.50% | 1.60% | 27.62% | 26.14% | |
| 2020 | 2,339 | 12.27 | 33.16 | 62,964 | 0.03% | 0.60% | 1.75% | 13.09% | 14.41% | |
| 2019 | 2,806 | 19.89 | 28.98 | 66,938 | 0.50% | 0.60% | 1.75% | 30.33% | 31.86% | |
| 2018 | 1,304 | 15.26 | 21.98 | 25,104 | 0.11% | 0.60% | 1.75% | -14.33% | -13.32% | |
| 2017 | 3,437 | 17.81 | 25.36 | 72,310 | 0.19% | 0.60% | 1.75% | 10.59% | 11.88% | |
| ClearBridge Variable Small Cap Growth II | ||||||||||
| 2021 | 540 | 14.71 | 37.77 | 20,778 | 0.00% | 0.20% | 1.60% | 11.98% | 10.35% | |
| 2020 | 657 | 15.32 | 52.71 | 26,813 | 0.00% | 0.60% | 1.75% | 40.42% | 42.05% | |
| 2019 | 847 | 24.38 | 37.10 | 25,189 | 0.00% | 0.60% | 1.75% | 24.34% | 25.79% | |
| 2018 | 493 | 19.60 | 29.49 | 12,305 | 0.00% | 0.60% | 1.75% | 1.39% | 2.59% | |
| 2017 | 962 | 19.33 | 28.75 | 22,706 | 0.00% | 0.60% | 1.75% | 21.75% | 23.17% | |
| Columbia VP Balanced 2 | ||||||||||
| 2021 | 140 | 11.13 | 11.10 | 1,552 | 0.00% | 0.90% | 1.20% | 5.38% | 5.12% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Columbia VP Intermediate Bond 2 | ||||||||||
| 2021 | 36 | 9.95 | 9.93 | 357 | 0.79% | 0.90% | 1.20% | -0.89% | -1.14% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Columbia VP Limited Duration Credit 2 | ||||||||||
| 2021 | 2 | 9.95 | 9.89 | 17 | 0.15% | 0.20% | 0.90% | -1.09% | -1.66% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Columbia VP Select Mid Cap Value 2 | ||||||||||
| 2021 | 7 | 11.83 | 11.76 | 83 | 0.00% | 0.20% | 0.90% | 13.40% | 12.76% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Columbia VP Strategic Income 2 | ||||||||||
| 2021 | 39 | 9.88 | 9.96 | 389 | 0.38% | 0.65% | 1.20% | -1.47% | -0.66% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| DFA VA Equity Allocation Portfolio Instl | ||||||||||
| 2021 | 2 | 15.46 | 15.46 | 25 | 2.01% | 0.20% | 0.20% | 8.40% | 8.40% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| DFA VA Global Bond | ||||||||||
| 2021 | 70 | 9.90 | 9.90 | 696 | 0.71% | 0.20% | 0.20% | -1.31% | -1.31% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| DFA VA Global Moderate Allocation Instl | ||||||||||
| 2021 | 28 | 13.16 | 13.16 | 369 | 1.42% | 0.20% | 0.20% | 10.82% | 10.82% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| DFA VA International Small | ||||||||||
| 2021 | 27 | 14.48 | 14.48 | 395 | 4.86% | 0.20% | 0.20% | 14.22% | 14.22% | |
| 2020 | - | 12.68 | 12.68 | 1,901 | 0.00% | 0.30% | 0.30% | 16.67% | 16.67% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| DFA VA International Value | ||||||||||
| 2021 | 31 | 14.42 | 14.42 | 444 | 7.49% | 0.20% | 0.20% | 17.76% | 17.76% | |
| 2020 | - | 12.25 | 12.25 | 3,773 | 0.00% | 0.30% | 0.30% | 17.27% | 17.27% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| DFA VA Short-Term Fixed | ||||||||||
| 2021 | 45 | 9.94 | 9.94 | 445 | 0.01% | 0.20% | 0.20% | -0.49% | -0.49% | |
| 2020 | 2 | 9.99 | 9.99 | 18,246 | 0.59% | 0.30% | 0.30% | -0.09% | -0.09% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
90
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| DFA VA US Large Value | ||||||||||
| 2021 | 93 | $15.76 | $15.76 | $1,472 | 3.13% | 0.20% | 0.20% | 26.66% | 26.66% | |
| 2020 | 1 | 12.44 | 12.44 | 17,930 | 0.00% | 0.30% | 0.30% | 15.04% | 15.04% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| DFA VA US Targeted Value | ||||||||||
| 2021 | 36 | 19.77 | 19.77 | 703 | 1.30% | 0.20% | 0.20% | 33.43% | 33.43% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Fidelity Contrafund Portfolio SC2 | ||||||||||
| 2021 | 8,858 | 45.37 | 35.28 | 356,344 | 0.03% | 0.50% | 1.60% | 26.75% | 25.28% | |
| 2020 | 9,484 | 13.91 | 50.62 | 319,766 | 0.08% | 0.60% | 1.75% | 27.96% | 29.45% | |
| 2019 | 11,442 | 10.76 | 39.18 | 304,718 | 0.25% | 0.60% | 1.75% | 3.53% | 30.49% | |
| 2018 | 6,258 | 17.06 | 30.09 | 138,954 | 0.40% | 0.60% | 1.75% | -8.28% | -7.20% | |
| 2017 | 14,006 | 18.60 | 32.49 | 313,071 | 0.78% | 0.60% | 1.75% | 19.47% | 20.86% | |
| Fidelity Equity Income SC2 | ||||||||||
| 2021 | 200 | 28.84 | 24.41 | 6,468 | 1.65% | 0.50% | 1.50% | 23.86% | 22.55% | |
| 2020 | 239 | 19.92 | 36.57 | 6,349 | 1.44% | 0.60% | 1.65% | 4.69% | 5.80% | |
| 2019 | 280 | 19.03 | 34.64 | 6,986 | 1.85% | 0.60% | 1.65% | 25.01% | 26.34% | |
| 2018 | 297 | 15.22 | 27.47 | 5,965 | 2.03% | 0.60% | 1.65% | -10.05% | -9.09% | |
| 2017 | 343 | 16.92 | 30.28 | 7,623 | 1.43% | 0.60% | 1.65% | 10.80% | 11.98% | |
| Fidelity Freedom Fund - 2015 Maturity SC2 | ||||||||||
| 2021 | 63 | 21.73 | 18.78 | 1,374 | 0.95% | 0.50% | 1.50% | 6.75% | 5.62% | |
| 2020 | 51 | 17.78 | 26.18 | 1,081 | 1.00% | 0.60% | 1.65% | 11.69% | 12.88% | |
| 2019 | 53 | 15.92 | 23.23 | 991 | 1.81% | 0.60% | 1.65% | 16.03% | 17.27% | |
| 2018 | 58 | 13.72 | 19.85 | 918 | 1.27% | 0.60% | 1.65% | -6.85% | -5.85% | |
| 2017 | 75 | 14.73 | 21.13 | 1,245 | 1.36% | 0.60% | 1.65% | 12.91% | 14.11% | |
| Fidelity Freedom Fund - 2020 Maturity SC2 | ||||||||||
| 2021 | 118 | 22.72 | 19.63 | 2,729 | 0.82% | 0.50% | 1.50% | 8.61% | 7.46% | |
| 2020 | 128 | 18.27 | 28.86 | 2,844 | 1.02% | 0.60% | 1.65% | 12.83% | 14.03% | |
| 2019 | 136 | 16.19 | 25.36 | 2,659 | 1.82% | 0.60% | 1.65% | 17.90% | 19.16% | |
| 2018 | 137 | 13.73 | 21.32 | 2,290 | 1.51% | 0.60% | 1.65% | -7.63% | 6.64% | |
| 2017 | 96 | 14.87 | 22.88 | 1,808 | 1.14% | 0.60% | 1.65% | 14.35% | 15.57% | |
| Fidelity Growth Portfolio SC2 | ||||||||||
| 2021 | 64 | 58.24 | 49.30 | 3,652 | 0.00% | 0.50% | 1.50% | 22.17% | 20.88% | |
| 2020 | 69 | 40.79 | 70.60 | 3,260 | 0.05% | 0.60% | 1.65% | 41.19% | 42.69% | |
| 2019 | 108 | 28.89 | 49.58 | 3,610 | 0.05% | 0.60% | 1.65% | 31.77% | 33.17% | |
| 2018 | 104 | 21.92 | 37.30 | 2,623 | 0.05% | 0.70% | 1.65% | -2.08% | -1.13% | |
| 2017 | 125 | 32.39 | 37.77 | 3,332 | 0.08% | 0.70% | 1.65% | 32.60% | 34.01% | |
| Fidelity Index 500 Portfolio SC2 | ||||||||||
| 2021 | 23,448 | 44.10 | 36.15 | 890,425 | 1.04% | 0.50% | 1.60% | 27.49% | 26.02% | |
| 2020 | 23,472 | 12.65 | 49.15 | 745,454 | 1.36% | 0.60% | 1.75% | 15.89% | 17.24% | |
| 2019 | 28,900 | 10.81 | 42.01 | 804,290 | 2.12% | 0.60% | 1.75% | 3.82% | 30.23% | |
| 2018 | 9,749 | 19.23 | 32.32 | 210,996 | 1.28% | 0.60% | 1.75% | -6.40% | -5.30% | |
| 2017 | 27,652 | 20.54 | 34.20 | 629,068 | 1.65% | 0.60% | 1.75% | 19.29% | 20.68% | |
| Fidelity Investment Grade Bonds SC2 | ||||||||||
| 2021 | 22,092 | 10.11 | 11.86 | 297,519 | 1.87% | 0.20% | 1.60% | -1.19% | -2.63% | |
| 2020 | 19,427 | 10.91 | 17.94 | 272,123 | 2.01% | 0.60% | 1.75% | 7.26% | 8.51% | |
| 2019 | 20,226 | 10.07 | 16.54 | 262,913 | 2.53% | 0.60% | 1.75% | 0.23% | 8.75% | |
| 2018 | 21,633 | 10.56 | 15.21 | 259,462 | 2.28% | 0.60% | 1.75% | -2.53% | -1.39% | |
| 2017 | 21,901 | 10.83 | 15.42 | 269,099 | 2.30% | 0.60% | 1.75% | 2.18% | 3.37% | |
| Fidelity Mid Cap SC2 | ||||||||||
| 2021 | 9,383 | 16.77 | 25.22 | 298,885 | 0.35% | 0.20% | 1.60% | 24.93% | 23.12% | |
| 2020 | 11,533 | 12.66 | 42.72 | 300,209 | 0.34% | 0.60% | 1.75% | 15.81% | 17.16% | |
| 2019 | 14,516 | 17.69 | 36.63 | 323,571 | 0.84% | 0.60% | 1.75% | 21.02% | 22.43% | |
| 2018 | 6,568 | 14.62 | 30.05 | 131,653 | 0.35% | 0.60% | 1.75% | -16.27% | -15.29% | |
| 2017 | 17,087 | 17.46 | 35.64 | 370,920 | 0.48% | 0.60% | 1.75% | 18.44% | 19.82% | |
| Fidelity VIP Asset Manager Service 2 | ||||||||||
| 2021 | 7 | 10.80 | 10.78 | 77 | 1.37% | 0.90% | 1.20% | 2.74% | 2.48% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Fidelity VIP Balanced Service 2 | ||||||||||
| 2021 | 395 | 10.26 | 11.42 | 4,441 | 0.35% | 0.65% | 1.20% | -2.52% | 8.48% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Fidelity VIP Bond Index Port | ||||||||||
| 2021 | 2 | 9.85 | 9.85 | 17 | 0.00% | 0.65% | 0.65% | 0.27% | 0.27% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
91
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| Fidelity VIP Energy Service 2 | ||||||||||
| 2021 | 26 | $11.16 | $11.13 | $294 | 2.56% | 0.90% | 1.20% | 10.05% | 9.77% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Fidelity VIP Fundsmanager 20% Service 2 | ||||||||||
| 2021 | 54 | 10.36 | 10.34 | 562 | 0.74% | 0.90% | 1.20% | 0.54% | 0.29% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Fidelity VIP Health Care Port Service 2 | ||||||||||
| 2021 | 18 | 11.07 | 11.04 | 197 | 0.00% | 0.90% | 1.20% | 2.97% | 2.71% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Fidelity VIP International Index Port | ||||||||||
| 2021 | 2 | 9.71 | 9.71 | 22 | 0.00% | 0.65% | 0.65% | 0.00% | 0.00% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Fidelity VIP Target Volatility Service 2 | ||||||||||
| 2021 | 6 | 11.03 | 11.03 | 62 | 0.00% | 1.20% | 1.20% | 2.62% | 2.62% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Franklin Dynatech VIP Fund | ||||||||||
| 2021 | 1,453 | 46.54 | 36.21 | 50,142 | 0.00% | 0.50% | 1.60% | 15.45% | 14.12% | |
| 2020 | 1,184 | 15.07 | 53.95 | 43,345 | 0.00% | 0.60% | 1.75% | 42.36% | 44.02% | |
| 2019 | 1,372 | 22.29 | 37.53 | 35,750 | 0.00% | 0.60% | 1.75% | 28.87% | 30.38% | |
| 2018 | 690 | 17.29 | 28.85 | 14,377 | 0.00% | 0.60% | 1.75% | 1.32% | 2.52% | |
| 2017 | 1,363 | 17.07 | 22.39 | 27,018 | 0.00% | 0.60% | 1.75% | 24.73% | 26.18% | |
| Franklin Income VIP CL 2 | ||||||||||
| 2021 | 8,997 | 13.13 | 16.46 | 185,425 | 4.73% | 0.20% | 1.60% | 16.40% | 14.72% | |
| 2020 | 9,954 | 10.35 | 24.74 | 179,434 | 3.40% | 0.60% | 1.75% | -1.07% | 0.09% | |
| 2019 | 11,530 | 14.51 | 24.77 | 208,678 | 6.48% | 0.60% | 1.75% | 14.03% | 15.36% | |
| 2018 | 7,916 | 12.72 | 21.52 | 129,560 | 5.91% | 0.60% | 1.75% | -5.99% | -4.88% | |
| 2017 | 14,303 | 13.53 | 22.67 | 239,079 | 4.15% | 0.60% | 1.75% | 7.76% | 9.02% | |
| Franklin Multi-Asset Dynamic Multi-Strat VIT | ||||||||||
| 2021 | 1,464 | 12.07 | 12.82 | 19,309 | 2.32% | 0.90% | 1.60% | 11.52% | 10.68% | |
| 2020 | 1,567 | 10.82 | 12.05 | 18,608 | 1.43% | 1.00% | 1.75% | -9.92% | -9.23% | |
| 2019 | 1,959 | 11.92 | 13.32 | 25,721 | 2.02% | 1.00% | 1.75% | 13.49% | 14.36% | |
| 2018 | 2,199 | 10.43 | 11.68 | 25,349 | 1.57% | 1.00% | 1.75% | -8.88% | -8.18% | |
| 2017 | 2,328 | 11.36 | 12.76 | 29,362 | 1.15% | 1.00% | 1.75% | 11.83% | 12.68% | |
| Franklin Mutual Global Discovery VIP CL 2 | ||||||||||
| 2021 | 320 | 12.06 | 12.33 | 3,994 | 3.29% | 0.65% | 1.20% | 18.24% | 17.58% | |
| 2020 | 180 | 10.20 | 11.03 | 1,938 | 1.91% | 0.75% | 1.30% | -5.70% | -5.18% | |
| 2019 | 192 | 10.76 | 11.66 | 2,169 | 1.58% | 0.75% | 1.30% | 3.63% | 23.25% | |
| 2018 | 124 | 9.06 | 9.47 | 1,147 | 2.71% | 0.90% | 1.30% | -12.38% | -12.02% | |
| 2017 | 96 | 10.34 | 10.77 | 1,010 | 1.19% | 0.60% | 1.75% | 2.66% | 7.52% | |
| Franklin Mutual Shares VIP CL 2 | ||||||||||
| 2021 | 28,009 | 21.74 | 18.88 | 593,134 | 2.90% | 0.50% | 1.60% | 18.45% | 17.09% | |
| 2020 | 32,911 | 10.11 | 26.37 | 597,023 | 1.70% | 0.60% | 1.75% | -6.70% | -5.61% | |
| 2019 | 34,090 | 10.73 | 28.00 | 660,473 | 2.23% | 0.60% | 1.75% | 3.40% | 21.84% | |
| 2018 | 24,488 | 13.95 | 23.02 | 392,976 | 2.94% | 0.60% | 1.75% | -10.66% | -9.61% | |
| 2017 | 42,841 | 15.59 | 25.53 | 760,362 | 2.21% | 0.60% | 1.75% | 6.46% | 7.70% | |
| Franklin Rising Dividend VIP CL 2 | ||||||||||
| 2021 | 10,145 | 15.14 | 32.55 | 368,754 | 0.87% | 0.20% | 1.60% | 26.41% | 24.57% | |
| 2020 | 11,441 | 12.25 | 44.85 | 341,603 | 0.83% | 0.60% | 1.75% | 13.94% | 15.27% | |
| 2019 | 14,143 | 10.64 | 38.99 | 371,083 | 1.59% | 0.60% | 1.75% | 3.55% | 28.46% | |
| 2018 | 9,662 | 18.06 | 30.41 | 205,653 | 1.60% | 0.60% | 1.75% | -6.74% | -5.65% | |
| 2017 | 18,488 | 19.37 | 32.30 | 405,590 | 1.53% | 0.60% | 1.75% | 18.46% | 19.84% | |
| Franklin Small Cap Value VIP CL 2 | ||||||||||
| 2021 | 1,576 | 36.77 | 25.45 | 48,020 | 1.06% | 0.50% | 1.60% | 24.61% | 23.18% | |
| 2020 | 1,881 | 11.43 | 29.50 | 47,671 | 1.05% | 0.60% | 1.75% | 3.35% | 4.56% | |
| 2019 | 2,009 | 19.99 | 28.22 | 49,170 | 0.91% | 0.60% | 1.75% | 24.14% | 25.59% | |
| 2018 | 1,597 | 16.10 | 22.47 | 32,328 | 1.06% | 0.60% | 1.75% | -14.41% | -13.40% | |
| 2017 | 2,608 | 18.81 | 25.94 | 59,518 | 0.51% | 0.60% | 1.75% | 8.72% | 9.99% | |
| Franklin Small-Mid Cap Growth VIP CL 2 | ||||||||||
| 2021 | 1,059 | 43.78 | 33.11 | 38,855 | 0.00% | 0.50% | 1.60% | 9.35% | 8.09% | |
| 2020 | 1,303 | 16.43 | 59.75 | 47,230 | 0.00% | 0.60% | 1.75% | 52.38% | 54.16% | |
| 2019 | 1,464 | 20.10 | 38.84 | 35,347 | 0.00% | 0.60% | 1.75% | 29.14% | 30.65% | |
| 2018 | 806 | 15.57 | 29.79 | 15,829 | 0.00% | 0.60% | 1.75% | -7.03% | -5.94% | |
| 2017 | 1,735 | 16.74 | 31.73 | 34,548 | 0.00% | 0.60% | 1.75% | 19.28% | 20.67% | |
| Franklin Strategic Income VIP CL 2 | ||||||||||
| 2021 | 606 | 10.49 | 10.75 | 6,665 | 3.33% | 0.65% | 1.20% | 1.34% | 0.78% | |
| 2020 | 487 | 10.35 | 11.04 | 5,359 | 6.31% | 0.75% | 1.30% | 2.09% | 2.65% | |
| 2019 | 162 | 10.45 | 10.78 | 1,741 | 4.17% | 0.90% | 1.30% | 6.65% | 7.08% | |
| 2018 | 105 | 9.80 | 10.08 | 1,057 | 2.74% | 0.90% | 1.30% | -3.41% | -3.02% | |
| 2017 | 76 | 10.15 | 10.40 | 790 | 2.78% | 0.90% | 1.30% | 1.09% | 3.52% | |
92
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| Franklin US Government Securities VIP CL 2 | ||||||||||
| 2021 | 37,380 | $13.52 | $9.71 | $419,387 | 2.49% | 0.50% | 1.60% | -2.42% | -3.54% | |
| 2020 | 35,725 | 10.07 | 13.85 | 413,139 | 3.31% | 0.60% | 1.75% | 2.02% | 3.21% | |
| 2019 | 40,081 | 9.87 | 13.42 | 449,989 | 2.89% | 0.60% | 1.75% | -0.14% | 4.60% | |
| 2018 | 45,670 | 9.55 | 12.83 | 491,853 | 2.74% | 0.60% | 1.75% | -1.43% | -0.27% | |
| 2017 | 49,200 | 9.68 | 12.87 | 534,690 | 2.63% | 0.60% | 1.75% | -0.43% | 0.73% | |
| Goldman Sachs Global Trends Allocation Fund SC | ||||||||||
| 2021 | 502 | 14.21 | 14.10 | 7,291 | 0.00% | 0.90% | 1.60% | 15.01% | 14.14% | |
| 2020 | 514 | 12.35 | 12.80 | 6,519 | 0.25% | 1.00% | 1.75% | 2.29% | 3.07% | |
| 2019 | 604 | 11.99 | 12.46 | 7,464 | 1.47% | 1.00% | 1.75% | 9.98% | 10.82% | |
| 2018 | 635 | 10.82 | 11.27 | 7,102 | 0.67% | 1.00% | 1.75% | -6.02% | -5.30% | |
| 2017 | 639 | 11.42 | 11.94 | 7,565 | 0.30% | 1.00% | 1.75% | 11.14% | 11.98% | |
| Goldman Sachs International Equity Insights | ||||||||||
| 2021 | 1,092 | 21.49 | 23.69 | 22,272 | 2.80% | 0.50% | 1.65% | 11.50% | 10.15% | |
| 2020 | 1,247 | 14.52 | 24.14 | 22,861 | 1.41% | 0.60% | 1.80% | 4.89% | 6.17% | |
| 2019 | 1,350 | 13.74 | 22.89 | 23,424 | 2.44% | 0.60% | 1.80% | 16.32% | 17.74% | |
| 2018 | 1,476 | 11.73 | 19.57 | 21,957 | 1.95% | 0.60% | 1.80% | -17.80% | -16.79% | |
| 2017 | 1,620 | 14.17 | 23.67 | 29,100 | 1.85% | 0.60% | 1.80% | 24.34% | 25.85% | |
| Goldman Sachs International Equity Insights SC | ||||||||||
| 2021 | 2,598 | 13.39 | 13.80 | 36,780 | 2.50% | 0.60% | 1.60% | 11.03% | 9.86% | |
| 2020 | 3,156 | 10.81 | 20.90 | 40,321 | 1.19% | 0.70% | 1.75% | 4.68% | 5.80% | |
| 2019 | 3,453 | 10.30 | 19.77 | 41,920 | 2.21% | 0.70% | 1.75% | 16.17% | 17.41% | |
| 2018 | 3,737 | 8.85 | 16.86 | 38,024 | 1.53% | 0.70% | 1.75% | -18.02% | -17.14% | |
| 2017 | 4,472 | 10.77 | 20.37 | 55,115 | 1.70% | 0.70% | 1.75% | 24.01% | 25.33% | |
| Goldman Sachs Large Cap Value | ||||||||||
| 2021 | 932 | 34.24 | 49.55 | 38,616 | 1.14% | 0.50% | 1.65% | 23.39% | 21.90% | |
| 2020 | 1,080 | 23.92 | 45.64 | 36,513 | 1.23% | 0.60% | 1.80% | 2.11% | 3.36% | |
| 2019 | 1,202 | 23.26 | 44.44 | 39,851 | 1.48% | 0.60% | 1.80% | 23.66% | 25.17% | |
| 2018 | 1,397 | 18.67 | 35.74 | 37,305 | 1.29% | 0.60% | 1.80% | -10.11% | -9.01% | |
| 2017 | 1,577 | 20.63 | 39.54 | 46,632 | 1.60% | 0.60% | 1.80% | 7.89% | 9.20% | |
| Goldman Sachs Large Cap Value Fund SC | ||||||||||
| 2021 | 4,368 | 23.38 | 23.51 | 107,945 | 0.88% | 0.60% | 1.60% | 23.06% | 21.76% | |
| 2020 | 5,198 | 17.03 | 29.85 | 104,778 | 1.04% | 0.70% | 1.75% | 1.93% | 3.02% | |
| 2019 | 5,556 | 16.67 | 29.00 | 109,299 | 1.22% | 0.70% | 1.75% | 23.42% | 24.74% | |
| 2018 | 6,613 | 13.48 | 23.27 | 103,634 | 1.00% | 0.70% | 1.75% | -10.33% | -9.36% | |
| 2017 | 7,820 | 15.00 | 25.70 | 136,488 | 1.36% | 0.70% | 1.75% | 7.65% | 8.79% | |
| Goldman Sachs Mid Cap Value | ||||||||||
| 2021 | 148 | 50.29 | 42.46 | 7,163 | 0.47% | 0.50% | 1.65% | 30.17% | 28.60% | |
| 2020 | 160 | 33.01 | 39.92 | 6,009 | 0.55% | 0.60% | 1.80% | 6.45% | 7.75% | |
| 2019 | 179 | 31.01 | 37.08 | 6,248 | 0.82% | 0.60% | 1.80% | 29.16% | 30.74% | |
| 2018 | 201 | 24.01 | 28.39 | 5,381 | 1.34% | 0.60% | 1.80% | -12.08% | -11.00% | |
| 2017 | 226 | 27.31 | 31.93 | 6,819 | 0.71% | 0.60% | 1.80% | 9.08% | 10.41% | |
| Goldman Sachs Mid Cap Value SC | ||||||||||
| 2021 | 5,041 | 32.04 | 25.30 | 144,009 | 0.20% | 0.60% | 1.60% | 29.66% | 28.29% | |
| 2020 | 6,189 | 11.38 | 24.71 | 138,656 | 0.36% | 0.70% | 1.75% | 6.30% | 7.44% | |
| 2019 | 7,414 | 14.96 | 23.00 | 154,879 | 0.76% | 0.70% | 1.75% | 28.88% | 30.25% | |
| 2018 | 3,608 | 11.52 | 17.66 | 59,701 | 0.31% | 0.70% | 1.75% | -12.27% | -11.33% | |
| 2017 | 9,603 | 13.03 | 19.91 | 175,683 | 0.48% | 0.70% | 1.75% | 8.92% | 10.07% | |
| Goldman Sachs Small Cap Equity Insights | ||||||||||
| 2021 | 326 | 40.21 | 73.56 | 23,603 | 0.47% | 0.50% | 1.65% | 23.05% | 21.57% | |
| 2020 | 384 | 26.22 | 67.93 | 22,712 | 0.19% | 0.60% | 1.80% | 6.63% | 7.93% | |
| 2019 | 424 | 24.56 | 63.35 | 23,315 | 0.49% | 0.60% | 1.80% | 22.60% | 24.10% | |
| 2018 | 477 | 20.01 | 51.38 | 21,364 | 0.50% | 0.60% | 1.80% | -10.27% | -9.17% | |
| 2017 | 541 | 22.28 | 56.95 | 26,763 | 0.52% | 0.60% | 1.80% | 9.57% | 10.90% | |
| Goldman Sachs Small Cap Equity Insights SC | ||||||||||
| 2021 | 358 | 36.07 | 40.71 | 12,807 | 0.23% | 0.60% | 1.50% | 22.63% | 21.46% | |
| 2020 | 458 | 26.36 | 44.02 | 13,503 | 0.00% | 0.70% | 1.65% | 6.58% | 7.61% | |
| 2019 | 473 | 24.71 | 40.95 | 13,000 | 0.20% | 0.70% | 1.65% | 22.48% | 23.66% | |
| 2018 | 633 | 20.15 | 33.15 | 14,033 | 0.21% | 0.70% | 1.65% | -10.34% | -9.47% | |
| 2017 | 764 | 22.45 | 36.65 | 18,725 | 0.29% | 0.70% | 1.65% | 9.39% | 10.45% | |
| Goldman Sachs Strategic Growth | ||||||||||
| 2021 | 505 | 63.86 | 98.99 | 39,127 | 0.00% | 0.50% | 1.65% | 21.20% | 19.73% | |
| 2020 | 586 | 41.29 | 92.82 | 37,639 | 0.08% | 0.60% | 1.80% | 37.98% | 39.66% | |
| 2019 | 693 | 29.71 | 66.89 | 31,617 | 0.29% | 0.60% | 1.80% | 33.09% | 34.72% | |
| 2018 | 816 | 22.17 | 49.98 | 27,674 | 0.45% | 0.60% | 1.80% | -2.83% | -1.63% | |
| 2017 | 961 | 22.65 | 51.15 | 33,382 | 0.51% | 0.60% | 1.80% | 28.32% | 29.88% | |
| Goldman Sachs Strategic Growth SC | ||||||||||
| 2021 | 4,005 | 14.93 | 43.86 | 197,980 | 0.00% | 0.20% | 1.60% | 21.19% | 19.43% | |
| 2020 | 4,773 | 15.04 | 61.74 | 199,113 | 0.00% | 0.70% | 1.75% | 37.66% | 39.13% | |
| 2019 | 6,211 | 10.82 | 44.42 | 188,489 | 0.06% | 0.70% | 1.75% | 4.23% | 34.37% | |
| 2018 | 4,077 | 15.71 | 33.09 | 95,954 | 0.00% | 0.70% | 1.75% | -3.06% | -2.02% | |
| 2017 | 8,794 | 16.09 | 33.81 | 205,502 | 0.26% | 0.70% | 1.75% | 28.09% | 29.45% | |
| Goldman Sachs US Equity Insights | ||||||||||
| 2021 | 389 | 48.67 | 90.34 | 32,337 | 0.80% | 0.50% | 1.65% | 28.63% | 27.08% | |
| 2020 | 438 | 30.50 | 79.81 | 28,662 | 0.79% | 0.60% | 1.80% | 15.43% | 16.84% | |
| 2019 | 494 | 26.24 | 68.75 | 27,924 | 1.26% | 0.60% | 1.80% | 22.96% | 24.46% | |
| 2018 | 566 | 21.19 | 55.60 | 25,778 | 1.25% | 0.60% | 1.80% | -7.89% | -6.76% | |
| 2017 | 655 | 22.84 | 60.03 | 31,997 | 1.34% | 0.60% | 1.80% | 21.84% | 23.33% | |
| Goldman Sachs US Equity Insights SC | ||||||||||
| 2021 | 18 | 38.92 | 46.83 | 872 | 0.57% | 0.60% | 1.50% | 28.21% | 26.99% | |
| 2020 | 20 | 27.21 | 47.03 | 740 | 0.58% | 0.70% | 1.65% | 15.39% | 16.50% | |
| 2019 | 22 | 23.55 | 40.41 | 736 | 1.02% | 0.70% | 1.65% | 22.87% | 24.05% | |
| 2018 | 26 | 20.22 | 32.61 | 697 | 1.08% | 0.70% | 1.65% | -7.91% | -7.02% | |
| 2017 | 23 | 21.82 | 35.10 | 688 | 1.22% | 0.70% | 1.65% | 21.77% | 22.94% | |
93
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| Goldman Sachs VIT Core Fixed Income Fund SC | ||||||||||
| 2021 | 2,895 | $9.89 | $11.26 | $32,932 | 1.13% | 0.20% | 1.20% | -2.52% | -3.50% | |
| 2020 | 2,482 | 10.15 | 11.93 | 29,345 | 1.96% | 0.30% | 1.30% | 7.98% | 8.58% | |
| 2019 | 2,565 | 10.80 | 11.01 | 28,074 | 2.56% | 0.90% | 1.30% | 7.59% | 8.02% | |
| 2018 | 2,691 | 10.04 | 10.19 | 27,300 | 3.38% | 0.90% | 1.30% | -2.12% | -1.73% | |
| 2017 | 2,683 | 10.26 | 10.37 | 27,737 | 2.66% | 0.90% | 1.30% | 1.80% | 2.21% | |
| Goldman Sachs VIT Growth Opportunities SC | ||||||||||
| 2021 | 1,310 | 14.16 | 34.76 | 57,806 | 0.00% | 0.20% | 1.60% | 11.14% | 9.53% | |
| 2020 | 1,574 | 15.20 | 46.30 | 63,563 | 0.00% | 0.60% | 1.75% | 41.79% | 43.44% | |
| 2019 | 2,094 | 22.39 | 32.28 | 56,658 | 0.00% | 0.60% | 1.75% | 31.72% | 33.26% | |
| 2018 | 2,160 | 16.99 | 24.22 | 47,420 | 0.00% | 0.60% | 1.75% | -6.02% | -4.92% | |
| 2017 | 2,966 | 18.08 | 25.48 | 67,966 | 0.00% | 0.60% | 1.75% | 24.71% | 26.16% | |
| Guggenheim Floating Rate Strategies (Series F) | ||||||||||
| 2021 | 309 | 11.86 | 11.86 | 3,669 | 2.75% | 0.90% | 0.90% | 1.48% | 1.48% | |
| 2020 | 340 | 11.68 | 11.68 | 3,976 | 4.01% | 1.00% | 1.00% | -0.99% | -0.99% | |
| 2019 | 469 | 11.80 | 11.80 | 5,529 | 3.75% | 1.00% | 1.00% | 6.53% | 6.53% | |
| 2018 | 366 | 11.08 | 11.08 | 4,059 | 2.96% | 1.00% | 1.00% | -1.80% | -1.80% | |
| 2017 | 364 | 11.28 | 11.28 | 4,108 | 3.36% | 1.00% | 1.00% | 2.43% | 2.43% | |
| Guggenheim Global Managed Futures Strategy | ||||||||||
| 2021 | 37 | 10.15 | 10.15 | 378 | 0.00% | 0.90% | 0.90% | -0.07% | -0.07% | |
| 2020 | 190 | 10.16 | 10.16 | 1,929 | 7.53% | 1.00% | 1.00% | 1.57% | 1.57% | |
| 2019 | 168 | 10.00 | 10.00 | 1,685 | 0.36% | 1.00% | 1.00% | 7.06% | 7.06% | |
| 2018 | 39 | 9.34 | 9.34 | 363 | 0.00% | 1.00% | 1.00% | -9.94% | -9.94% | |
| 2017 | 38 | 10.38 | 10.38 | 396 | 1.40% | 1.00% | 1.00% | 7.63% | 7.63% | |
| Guggenheim Long Short Equity | ||||||||||
| 2021 | 12 | 14.02 | 14.02 | 168 | 0.86% | 0.90% | 0.90% | 22.56% | 22.56% | |
| 2020 | 15 | 11.44 | 11.44 | 167 | 0.67% | 1.00% | 1.00% | 3.88% | 3.88% | |
| 2019 | 22 | 11.01 | 11.01 | 243 | 0.49% | 1.00% | 1.00% | 4.48% | 4.48% | |
| 2018 | 29 | 10.54 | 10.54 | 309 | 0.00% | 1.00% | 1.00% | -6.03% | -6.03% | |
| 2017 | 24 | 12.23 | 12.23 | 294 | 0.36% | 1.00% | 1.00% | 13.71% | 13.71% | |
| Guggenheim Multi-Hedge Strategies | ||||||||||
| 2021 | 60 | 11.90 | 11.90 | 712 | 0.00% | 0.90% | 0.90% | 7.02% | 7.02% | |
| 2020 | 106 | 11.12 | 11.12 | 1,183 | 1.66% | 1.00% | 1.00% | 6.32% | 6.32% | |
| 2019 | 70 | 10.46 | 10.46 | 728 | 2.38% | 1.00% | 1.00% | 3.96% | 3.96% | |
| 2018 | 71 | 10.06 | 10.06 | 712 | 0.00% | 1.00% | 1.00% | -6.03% | -6.03% | |
| 2017 | 70 | 10.70 | 10.70 | 754 | 0.00% | 1.00% | 1.00% | 2.64% | 2.64% | |
| Invesco V.I. American Franchise I | ||||||||||
| 2021 | 333 | 24.48 | 19.91 | 7,392 | 0.00% | 0.60% | 1.50% | 11.14% | 10.08% | |
| 2020 | 395 | 18.09 | 22.03 | 7,874 | 0.07% | 0.70% | 1.65% | 40.01% | 41.36% | |
| 2019 | 423 | 12.92 | 15.58 | 6,020 | 0.00% | 0.70% | 1.65% | 34.50% | 35.80% | |
| 2018 | 492 | 9.61 | 11.47 | 5,161 | 0.00% | 0.70% | 1.65% | -5.22% | -4.30% | |
| 2017 | 549 | 10.14 | 11.99 | 6,026 | 0.08% | 0.70% | 1.65% | 25.25% | 26.45% | |
| Invesco V.I. American Franchise II | ||||||||||
| 2021 | 115 | 58.01 | 47.28 | 3,506 | 0.00% | 0.50% | 1.55% | 10.98% | 9.75% | |
| 2020 | 132 | 17.31 | 64.18 | 3,542 | 0.00% | 0.60% | 1.70% | 39.59% | 41.15% | |
| 2019 | 160 | 12.40 | 45.56 | 3,056 | 0.00% | 0.60% | 1.70% | 34.11% | 35.61% | |
| 2018 | 200 | 9.24 | 33.67 | 2,830 | 0.00% | 0.60% | 1.70% | -5.53% | -4.47% | |
| 2017 | 216 | 9.77 | 35.31 | 3,188 | 0.00% | 0.60% | 1.70% | 24.88% | 26.27% | |
| Invesco V.I. American Value II | ||||||||||
| 2021 | 4,000 | 32.89 | 22.03 | 93,953 | 0.24% | 0.50% | 1.60% | 26.86% | 25.40% | |
| 2020 | 4,329 | 11.00 | 25.93 | 86,143 | 0.48% | 0.60% | 1.75% | -0.91% | 0.25% | |
| 2019 | 4,204 | 10.98 | 25.86 | 86,258 | 0.46% | 0.60% | 1.75% | 4.66% | 23.96% | |
| 2018 | 2,775 | 14.47 | 20.86 | 46,167 | 0.25% | 0.60% | 1.75% | -14.40% | -13.39% | |
| 2017 | 4,682 | 16.91 | 24.09 | 90,291 | 0.43% | 0.60% | 1.75% | 7.77% | 9.03% | |
| Invesco V.I. Balanced Risk Allocation II | ||||||||||
| 2021 | 4,135 | 20.57 | 15.46 | 71,963 | 3.01% | 0.50% | 1.60% | 8.61% | 7.35% | |
| 2020 | 4,430 | 14.40 | 18.94 | 71,332 | 6.97% | 0.60% | 1.75% | 8.07% | 9.33% | |
| 2019 | 5,257 | 13.33 | 17.33 | 77,772 | 0.00% | 0.60% | 1.75% | 12.88% | 14.19% | |
| 2018 | 5,849 | 11.81 | 15.17 | 76,342 | 1.33% | 0.60% | 1.75% | -14.40% | -13.39% | |
| 2017 | 6,037 | 12.88 | 16.36 | 85,396 | 3.75% | 0.60% | 1.75% | 7.92% | 9.18% | |
| Invesco V.I. Capital Appreciation Fund I | ||||||||||
| 2021 | 169 | 50.58 | 59.82 | 10,454 | 0.00% | 0.60% | 1.65% | 21.71% | 20.37% | |
| 2020 | 183 | 38.27 | 55.79 | 9,352 | 0.00% | 0.70% | 1.80% | 34.13% | 35.63% | |
| 2019 | 214 | 28.33 | 41.36 | 8,121 | 0.06% | 0.70% | 1.80% | 33.75% | 35.24% | |
| 2018 | 238 | 21.03 | 30.75 | 6,685 | 0.34% | 0.70% | 1.80% | -7.43% | -6.39% | |
| 2017 | 276 | 22.56 | 33.04 | 8,348 | 0.24% | 0.70% | 1.80% | 24.56% | 25.95% | |
| Invesco V.I. Capital Appreciation Fund II | ||||||||||
| 2021 | 1,628 | 48.68 | 57.13 | 71,762 | 0.00% | 0.50% | 1.65% | 21.55% | 20.08% | |
| 2020 | 1,910 | 14.73 | 53.41 | 70,047 | 0.00% | 0.60% | 1.80% | 33.79% | 35.42% | |
| 2019 | 2,644 | 10.90 | 39.70 | 71,944 | 0.00% | 0.60% | 1.80% | 4.46% | 35.03% | |
| 2018 | 1,332 | 16.81 | 29.59 | 28,858 | 0.00% | 0.60% | 1.80% | -7.66% | 6.74% | |
| 2017 | 3,512 | 18.19 | 31.87 | 76,611 | 0.01% | 0.60% | 1.80% | 24.24% | 25.75% | |
94
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| Invesco V.I. Comstock I | ||||||||||
| 2021 | 552 | $51.57 | $40.58 | $25,467 | 1.89% | 0.60% | 1.65% | 32.43% | 30.97% | |
| 2020 | 618 | 30.98 | 38.94 | 21,630 | 2.08% | 0.70% | 1.80% | -2.64% | -1.55% | |
| 2019 | 693 | 31.82 | 39.55 | 24,752 | 1.98% | 0.70% | 1.80% | 23.05% | 24.42% | |
| 2018 | 786 | 25.86 | 31.79 | 22,654 | 1.81% | 0.70% | 1.80% | -13.75% | -12.78% | |
| 2017 | 901 | 29.99 | 36.45 | 29,936 | 2.09% | 0.70% | 1.80% | 15.74% | 17.03% | |
| Invesco V.I. Comstock II | ||||||||||
| 2021 | 4,665 | 37.71 | 38.73 | 174,716 | 1.60% | 0.50% | 1.65% | 32.25% | 30.65% | |
| 2020 | 5,582 | 10.74 | 37.25 | 163,172 | 1.59% | 0.60% | 1.80% | -2.87% | -1.68% | |
| 2019 | 5,848 | 10.94 | 37.93 | 174,628 | 1.78% | 0.60% | 1.80% | 4.40% | 24.19% | |
| 2018 | 4,837 | 16.48 | 30.57 | 126,042 | 1.62% | 0.60% | 1.80% | -13.95% | -12.90% | |
| 2017 | 7,170 | 19.14 | 35.13 | 202,996 | 1.90% | 0.60% | 1.80% | 15.47% | 16.87% | |
| Invesco V.I. Conservative Balance II | ||||||||||
| 2021 | 107 | 10.89 | 10.80 | 1,125 | 0.67% | 0.20% | 1.20% | 4.76% | 3.89% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Invesco V.I. Discovery Mid Cap Growth Fund I | ||||||||||
| 2021 | 84 | 45.84 | 54.12 | 4,884 | 0.00% | 0.60% | 1.65% | 18.27% | 16.96% | |
| 2020 | 94 | 37.53 | 51.95 | 4,638 | 0.03% | 0.70% | 1.80% | 38.16% | 39.71% | |
| 2019 | 73 | 26.90 | 37.39 | 2,580 | 0.00% | 0.70% | 1.80% | 36.86% | 38.39% | |
| 2018 | 86 | 19.47 | 27.17 | 2,233 | 0.00% | 0.70% | 1.80% | -7.78% | -6.74% | |
| 2017 | 96 | 20.91 | 29.29 | 2,700 | 0.03% | 0.70% | 1.80% | 26.48% | 27.69% | |
| Invesco V.I. Discovery Mid Cap Growth Fund II | ||||||||||
| 2021 | 1,138 | 54.60 | 17.29 | 40,110 | 0.00% | 0.50% | 1.60% | 18.08% | 16.72% | |
| 2020 | 1,370 | 14.81 | 116.50 | 47,696 | 0.00% | 0.60% | 1.75% | 37.86% | 39.40% | |
| 2019 | 28 | 24.59 | 46.89 | 892 | 0.00% | 0.60% | 1.80% | 36.51% | 38.18% | |
| 2018 | 28 | 17.88 | 34.00 | 652 | 0.00% | 0.60% | 1.80% | -8.00% | -6.87% | |
| 2017 | 36 | 19.30 | 36.58 | 927 | 0.00% | 0.60% | 1.80% | 26.15% | 27.69% | |
| Invesco V.I. Equity and Income II | ||||||||||
| 2021 | 8,550 | 35.02 | 31.60 | 239,777 | 1.64% | 0.50% | 1.65% | 17.64% | 16.22% | |
| 2020 | 9,781 | 11.51 | 33.07 | 235,750 | 1.86% | 0.60% | 1.80% | 7.68% | 8.99% | |
| 2019 | 11,548 | 17.02 | 30.38 | 255,029 | 2.95% | 0.60% | 1.80% | 17.85% | 19.29% | |
| 2018 | 6,733 | 14.43 | 25.49 | 137,306 | 2.51% | 0.60% | 1.80% | -11.36% | -10.27% | |
| 2017 | 13,848 | 16.28 | 28.44 | 288,949 | 1.43% | 0.60% | 1.80% | 8.79% | 10.12% | |
| Invesco V.I. Global Fund I | ||||||||||
| 2021 | 140 | 68.84 | 69.83 | 10,150 | 0.00% | 0.60% | 1.65% | 14.68% | 13.41% | |
| 2020 | 152 | 55.28 | 69.12 | 9,721 | 0.62% | 0.70% | 1.80% | 25.34% | 26.75% | |
| 2019 | 170 | 43.79 | 54.84 | 8,589 | 0.94% | 0.70% | 1.80% | 29.42% | 30.87% | |
| 2018 | 194 | 33.60 | 42.14 | 7,517 | 1.02% | 0.70% | 1.80% | -14.75% | -13.79% | |
| 2017 | 215 | 39.13 | 49.15 | 9,783 | 0.97% | 0.70% | 1.80% | 34.22% | 35.71% | |
| Invesco V.I. Global Fund II | ||||||||||
| 2021 | 6,841 | 49.17 | 66.74 | 315,560 | 0.00% | 0.50% | 1.65% | 14.48% | 13.10% | |
| 2020 | 8,258 | 13.95 | 66.24 | 336,381 | 0.38% | 0.60% | 1.80% | 25.05% | 26.57% | |
| 2019 | 11,046 | 19.09 | 52.68 | 352,148 | 0.71% | 0.60% | 1.80% | 29.09% | 30.67% | |
| 2018 | 6,854 | 14.78 | 40.58 | 204,556 | 0.92% | 0.60% | 1.80% | -14.96% | -13.91% | |
| 2017 | 14,314 | 17.37 | 47.45 | 410,949 | 0.75% | 0.60% | 1.80% | 33.88% | 35.50% | |
| Invesco V.I. Global Strategic Income Fund I | ||||||||||
| 2021 | 285 | 25.60 | 20.68 | 6,476 | 4.47% | 0.60% | 1.65% | -4.09% | -5.15% | |
| 2020 | 318 | 21.80 | 26.69 | 7,581 | 5.39% | 0.70% | 1.80% | 1.54% | 2.68% | |
| 2019 | 367 | 21.47 | 25.99 | 8,564 | 3.90% | 0.70% | 1.80% | 8.81% | 10.03% | |
| 2018 | 426 | 19.73 | 23.62 | 9,098 | 4.90% | 0.70% | 1.80% | -6.13% | -5.07% | |
| 2017 | 492 | 21.02 | 24.88 | 11,143 | 2.34% | 0.70% | 1.80% | 4.37% | 5.53% | |
| Invesco V.I. Global Strategic Income Fund II | ||||||||||
| 2021 | 17,363 | 18.47 | 19.74 | 280,436 | 4.32% | 0.50% | 1.65% | -4.14% | -5.30% | |
| 2020 | 17,132 | 10.47 | 25.51 | 289,028 | 5.00% | 0.60% | 1.80% | 1.14% | 2.37% | |
| 2019 | 18,912 | 11.03 | 24.94 | 309,886 | 3.44% | 0.60% | 1.80% | 8.62% | 9.94% | |
| 2018 | 21,838 | 10.15 | 22.71 | 327,166 | 4.58% | 0.60% | 1.80% | -6.26% | -5.11% | |
| 2017 | 23,422 | 10.82 | 23.96 | 374,253 | 2.34% | 0.60% | 1.80% | 4.14% | 5.40% | |
| Invesco V.I. U.S. Government Money Portfolio I | ||||||||||
| 2021 | 99,001 | 10.96 | 1.12 | 421,721 | 0.01% | 0.50% | 1.65% | -0.59% | -1.79% | |
| 2020 | 84,777 | 0.91 | 11.03 | 326,367 | 0.32% | 0.60% | 1.80% | -1.59% | -0.38% | |
| 2019 | 87,525 | 0.92 | 11.07 | 330,128 | 1.22% | 0.60% | 1.80% | -0.12% | 1.10% | |
| 2018 | 457,088 | 0.91 | 10.95 | 2,969,385 | 0.83% | 0.60% | 1.80% | -0.48% | 0.74% | |
| 2017 | 92,044 | 0.91 | 10.87 | 377,404 | 0.39% | 0.60% | 1.80% | -1.41% | -0.21% | |
| Invesco V.I. Global Real Estate II | ||||||||||
| 2021 | 954 | 10.99 | 15.93 | 15,180 | 2.68% | 0.65% | 1.60% | 24.50% | 23.25% | |
| 2020 | 965 | 8.83 | 13.94 | 12,573 | 0.84% | 0.75% | 1.75% | -14.09% | -13.22% | |
| 2019 | 1,150 | 13.44 | 16.08 | 17,271 | 5.29% | 0.90% | 1.75% | 20.50% | 21.54% | |
| 2018 | 426 | 11.07 | 13.23 | 5,350 | 5.10% | 0.90% | 1.75% | -7.98% | -7.18% | |
| 2017 | 1,344 | 11.94 | 14.26 | 18,081 | 5.27% | 0.90% | 1.75% | 10.77% | 11.72% | |
| Invesco V.I. Government Securities II | ||||||||||
| 2021 | 13,796 | 9.81 | 10.16 | 150,617 | 2.34% | 0.20% | 1.60% | -2.73% | -4.14% | |
| 2020 | 11,671 | 10.47 | 12.12 | 132,867 | 2.17% | 0.60% | 1.75% | 4.12% | 5.34% | |
| 2019 | 11,593 | 9.95 | 11.51 | 126,240 | 2.16% | 0.60% | 1.75% | -0.32% | 5.12% | |
| 2018 | 12,922 | 9.80 | 10.95 | 134,725 | 1.97% | 0.60% | 1.75% | -1.47% | 0.31% | |
| 2017 | 13,042 | 9.94 | 10.98 | 137,102 | 1.92% | 0.60% | 1.80% | -0.10% | 1.11% | |
95
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| Invesco V.I. Growth & Income I | ||||||||||
| 2021 | 736 | $44.54 | $35.05 | $29,154 | 1.60% | 0.60% | 1.65% | 27.61% | 26.20% | |
| 2020 | 806 | 27.78 | 34.91 | 25,146 | 1.94% | 0.70% | 1.80% | 0.26% | 1.38% | |
| 2019 | 923 | 27.70 | 34.43 | 28,544 | 1.86% | 0.70% | 1.80% | 22.94% | 24.32% | |
| 2018 | 1,042 | 22.53 | 27.70 | 26,054 | 2.12% | 0.70% | 1.80% | -14.95% | -13.99% | |
| 2017 | 1,191 | 26.49 | 32.20 | 34,826 | 1.49% | 0.70% | 1.80% | 12.27% | 13.52% | |
| Invesco V.I. Growth & Income II | ||||||||||
| 2021 | 18,938 | 38.82 | 33.44 | 604,214 | 1.32% | 0.50% | 1.65% | 27.42% | 25.89% | |
| 2020 | 23,895 | 10.91 | 33.38 | 602,185 | 1.30% | 0.60% | 1.80% | 0.02% | 1.24% | |
| 2019 | 26,686 | 19.68 | 33.01 | 662,091 | 1.81% | 0.60% | 1.80% | 22.61% | 24.10% | |
| 2018 | 13,102 | 16.04 | 26.62 | 291,501 | 2.12% | 0.60% | 1.80% | -15.15% | -14.11% | |
| 2017 | 33,288 | 18.90 | 31.03 | 780,598 | 1.27% | 0.60% | 1.80% | 11.99% | 13.35% | |
| Invesco V.I. International Growth II | ||||||||||
| 2021 | 2,480 | 17.52 | 16.20 | 42,582 | 0.92% | 0.50% | 1.60% | 4.97% | 3.76% | |
| 2020 | 4,418 | 12.03 | 16.83 | 73,418 | 1.82% | 0.60% | 1.75% | 11.75% | 13.06% | |
| 2019 | 5,531 | 10.65 | 14.93 | 81,640 | 1.80% | 0.60% | 1.75% | 4.19% | 27.47% | |
| 2018 | 2,612 | 10.67 | 11.75 | 30,426 | 1.04% | 0.60% | 1.65% | -16.61% | -15.72% | |
| 2017 | 6,507 | 12.80 | 13.98 | 90,138 | 1.72% | 0.60% | 1.75% | 20.59% | 21.99% | |
| Invesco V.I. Main Street Fund I | ||||||||||
| 2021 | 203 | 40.69 | 43.02 | 9,111 | 0.70% | 0.60% | 1.65% | 26.68% | 25.28% | |
| 2020 | 227 | 29.59 | 38.55 | 8,118 | 1.35% | 0.70% | 1.80% | 11.89% | 13.15% | |
| 2019 | 265 | 26.25 | 34.26 | 8,432 | 1.11% | 0.70% | 1.80% | 29.71% | 31.16% | |
| 2018 | 298 | 20.10 | 26.27 | 7,269 | 1.22% | 0.70% | 1.80% | -9.55% | -8.53% | |
| 2017 | 342 | 22.06 | 28.88 | 9,180 | 1.34% | 0.70% | 1.80% | 14.81% | 16.09% | |
| Invesco V.I. Main Street Fund II | ||||||||||
| 2021 | 4,303 | 14.89 | 32.36 | 128,947 | 0.53% | 0.20% | 1.60% | 26.85% | 25.01% | |
| 2020 | 3,849 | 12.08 | 42.86 | 105,790 | 1.08% | 0.60% | 1.75% | 11.71% | 13.01% | |
| 2019 | 3,842 | 10.70 | 38.01 | 100,516 | 0.91% | 0.60% | 1.75% | 3.80% | 30.95% | |
| 2018 | 3,244 | 17.90 | 29.08 | 65,184 | 1.03% | 0.60% | 1.75% | -9.71% | -8.65% | |
| 2017 | 4,162 | 19.83 | 31.90 | 92,333 | 1.07% | 0.60% | 1.80% | 14.60% | 15.94% | |
| Invesco V.I. Main Street Small Cap Fund II | ||||||||||
| 2021 | 9 | 10.16 | 11.19 | 96 | 0.04% | 0.65% | 0.90% | -6.20% | 3.23% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Invesco V.I. Small Cap Equity II | ||||||||||
| 2021 | 813 | 16.09 | 23.32 | 18,390 | 0.00% | 0.65% | 1.60% | 19.19% | 18.00% | |
| 2020 | 940 | 13.50 | 21.31 | 18,931 | 0.02% | 0.75% | 1.75% | 24.65% | 25.92% | |
| 2019 | 1,043 | 10.72 | 16.95 | 17,145 | 0.00% | 0.75% | 1.75% | 3.49% | 25.19% | |
| 2018 | 554 | 10.60 | 13.54 | 7,450 | 0.00% | 0.90% | 1.65% | -16.68% | 16.04% | |
| 2017 | 1,069 | 12.64 | 16.12 | 16,795 | 0.00% | 0.90% | 1.75% | 11.74% | 12.71% | |
| Lord Abbett Bond Debenture VC | ||||||||||
| 2021 | 29,804 | 11.27 | 26.17 | 583,809 | 3.10% | 0.20% | 1.65% | 2.97% | 1.42% | |
| 2020 | 28,054 | 10.84 | 31.76 | 556,026 | 3.51% | 0.60% | 1.80% | 5.38% | 6.66% | |
| 2019 | 31,794 | 10.18 | 29.81 | 594,211 | 3.83% | 0.60% | 1.80% | 1.46% | 12.67% | |
| 2018 | 35,640 | 12.74 | 26.48 | 592,127 | 4.26% | 0.60% | 1.80% | -6.40% | 5.25% | |
| 2017 | 38,072 | 13.51 | 27.79 | 672,287 | 4.16% | 0.60% | 1.80% | 7.25% | 8.56% | |
| Lord Abbett Dividend Growth Fund | ||||||||||
| 2021 | 4,058 | 14.88 | 48.46 | 135,244 | 0.71% | 0.20% | 1.65% | 25.24% | 24.47% | |
| 2020 | 3,888 | 11.98 | 47.36 | 115,152 | 0.90% | 0.60% | 1.80% | 13.34% | 14.72% | |
| 2019 | 4,068 | 10.46 | 41.33 | 110,319 | 1.73% | 0.60% | 1.80% | 3.12% | 25.69% | |
| 2018 | 3,530 | 17.32 | 32.91 | 78,067 | 1.65% | 0.60% | 1.80% | -6.40% | 5.25% | |
| 2017 | 4,777 | 18.49 | 34.77 | 111,560 | 1.71% | 0.60% | 1.80% | 16.99% | 18.41% | |
| Lord Abbett Growth & Income VC | ||||||||||
| 2021 | 2,210 | 33.68 | 27.82 | 72,039 | 1.02% | 0.50% | 1.65% | 28.25% | 26.70% | |
| 2020 | 2,617 | 19.29 | 31.47 | 66,910 | 1.49% | 0.60% | 1.80% | 0.85% | 2.08% | |
| 2019 | 2,928 | 19.12 | 30.89 | 73,493 | 1.64% | 0.60% | 1.80% | 20.29% | 21.76% | |
| 2018 | 3,266 | 15.89 | 25.42 | 67,883 | 1.34% | 0.60% | 1.75% | 9.81% | -8.70% | |
| 2017 | 3,830 | 17.60 | 27.90 | 87,445 | 1.26% | 0.60% | 1.80% | 11.35% | 12.70% | |
| Lord Abbett Growth Opportunities VC | ||||||||||
| 2021 | 1,179 | 13.53 | 30.14 | 50,134 | 0.00% | 0.20% | 1.60% | 6.14% | 4.60% | |
| 2020 | 2,131 | 14.78 | 61.25 | 83,665 | 0.00% | 0.60% | 1.75% | 36.94% | 38.54% | |
| 2019 | 2,969 | 21.04 | 44.26 | 84,520 | 0.00% | 0.60% | 1.75% | 33.98% | 35.55% | |
| 2018 | 1,206 | 15.70 | 32.68 | 30,047 | 0.00% | 0.60% | 1.75% | -4.60% | -3.47% | |
| 2017 | 4,040 | 16.46 | 33.89 | 88,278 | 0.00% | 0.60% | 1.75% | 20.77% | 22.18% | |
| Lord Abbett Mid Cap Stock VC | ||||||||||
| 2021 | 1,853 | 33.60 | 28.42 | 57,775 | 0.57% | 0.50% | 1.65% | 27.93% | 26.39% | |
| 2020 | 2,169 | 10.85 | 31.31 | 53,473 | 0.95% | 0.60% | 1.80% | 0.65% | 1.88% | |
| 2019 | 2,341 | 16.28 | 30.79 | 56,947 | 0.97% | 0.60% | 1.80% | 20.44% | 21.91% | |
| 2018 | 2,256 | 13.51 | 25.31 | 46,892 | 0.64% | 0.60% | 1.80% | -16.57% | -15.55% | |
| 2017 | 2,909 | 16.19 | 30.03 | 69,825 | 0.59% | 0.60% | 1.80% | 4.92% | 6.19% | |
| Lord Abbett Series Fundamental Equity VC | ||||||||||
| 2021 | 7,318 | 32.48 | 22.53 | 198,617 | 0.79% | 0.50% | 1.60% | 26.55% | 25.09% | |
| 2020 | 8,911 | 10.76 | 25.67 | 192,293 | 1.07% | 0.60% | 1.75% | -0.01% | 1.16% | |
| 2019 | 10,094 | 18.01 | 25.37 | 215,567 | 1.65% | 0.60% | 1.75% | 19.39% | 20.79% | |
| 2018 | 5,536 | 15.09 | 21.01 | 102,122 | 0.99% | 0.60% | 1.75% | -9.77% | -8.71% | |
| 2017 | 13,068 | 16.72 | 23.01 | 255,340 | 1.01% | 0.60% | 1.75% | 10.61% | 11.90% | |
| Lord Abbett Series Short Duration Income VC | ||||||||||
| 2021 | 24 | 10.01 | 9.93 | 235 | 2.74% | 0.20% | 1.20% | -0.05% | -0.88% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
96
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| MFS Growth Series IC | ||||||||||
| 2021 | 100 | $58.44 | $75.86 | $7,796 | 0.00% | 0.60% | 1.65% | 22.67% | 21.31% | |
| 2020 | 115 | 43.88 | 70.20 | 7,379 | 0.00% | 0.70% | 1.80% | 29.49% | 30.94% | |
| 2019 | 128 | 33.64 | 53.92 | 6,358 | 0.00% | 0.70% | 1.80% | 35.67% | 37.18% | |
| 2018 | 138 | 24.62 | 39.52 | 4,990 | 0.10% | 0.70% | 1.80% | 0.81% | 1.95% | |
| 2017 | 150 | 24.25 | 38.98 | 5,354 | 0.10% | 0.70% | 1.80% | 29.05% | 30.30% | |
| MFS Growth Series SC | ||||||||||
| 2021 | 898 | 79.67 | 45.16 | 54,782 | 0.00% | 0.50% | 1.60% | 22.50% | 21.08% | |
| 2020 | 1,091 | 37.29 | 67.18 | 54,233 | 0.00% | 0.60% | 1.75% | 29.24% | 30.75% | |
| 2019 | 1,368 | 28.86 | 51.72 | 52,134 | 0.00% | 0.60% | 1.80% | 35.30% | 36.95% | |
| 2018 | 1,577 | 21.32 | 38.01 | 44,160 | 0.00% | 0.60% | 1.80% | 0.56% | 1.79% | |
| 2017 | 1,916 | 21.19 | 37.59 | 53,088 | 0.00% | 0.60% | 1.80% | 28.74% | 30.30% | |
| MFS Investors Trust IC | ||||||||||
| 2021 | 155 | 42.57 | 45.58 | 7,448 | 0.63% | 0.60% | 1.65% | 25.93% | 24.53% | |
| 2020 | 176 | 31.13 | 41.09 | 6,771 | 0.58% | 0.70% | 1.80% | 11.82% | 13.07% | |
| 2019 | 212 | 27.65 | 36.54 | 7,288 | 0.70% | 0.70% | 1.80% | 29.22% | 30.66% | |
| 2018 | 240 | 21.24 | 28.12 | 6,339 | 0.66% | 0.70% | 1.80% | -7.20% | -6.15% | |
| 2017 | 270 | 22.73 | 30.13 | 7,660 | 0.72% | 0.70% | 1.80% | 21.14% | 22.49% | |
| MFS Investors Trust SC | ||||||||||
| 2021 | 1,366 | 50.77 | 32.00 | 56,861 | 0.41% | 0.50% | 1.60% | 25.75% | 24.30% | |
| 2020 | 1,703 | 25.75 | 41.89 | 56,467 | 0.39% | 0.60% | 1.75% | 11.61% | 12.92% | |
| 2019 | 2,022 | 23.07 | 37.18 | 59,600 | 0.49% | 0.60% | 1.75% | 28.95% | 30.46% | |
| 2018 | 2,400 | 17.89 | 28.55 | 54,461 | 0.45% | 0.60% | 1.75% | -7.36% | -6.28% | |
| 2017 | 2,845 | 19.31 | 30.53 | 69,445 | 0.55% | 0.60% | 1.75% | 20.88% | 22.29% | |
| MFS New Discovery IC | ||||||||||
| 2021 | 35 | 78.31 | 82.40 | 3,043 | 0.00% | 0.60% | 1.65% | 1.09% | -0.03% | |
| 2020 | 38 | 71.34 | 92.53 | 3,296 | 0.00% | 0.70% | 1.80% | 43.27% | 44.87% | |
| 2019 | 44 | 49.45 | 64.23 | 2,659 | 0.00% | 0.70% | 1.80% | 39.15% | 40.71% | |
| 2018 | 48 | 35.28 | 45.90 | 2,051 | 0.00% | 0.70% | 1.80% | -3.26% | -2.17% | |
| 2017 | 52 | 36.21 | 47.18 | 2,300 | 0.00% | 0.70% | 1.80% | 24.39% | 25.77% | |
| MFS New Discovery SC | ||||||||||
| 2021 | 871 | 62.01 | 30.68 | 57,785 | 0.00% | 0.50% | 1.60% | 0.96% | -0.20% | |
| 2020 | 1,048 | 30.74 | 88.51 | 69,095 | 0.00% | 0.60% | 1.75% | 43.04% | 44.71% | |
| 2019 | 1,424 | 21.49 | 61.57 | 64,809 | 0.00% | 0.60% | 1.80% | 38.74% | 40.43% | |
| 2018 | 1,792 | 15.48 | 44.13 | 58,436 | 0.00% | 0.60% | 1.80% | -3.49% | -2.31% | |
| 2017 | 2,284 | 16.04 | 45.47 | 77,142 | 0.00% | 0.60% | 1.80% | 24.07% | 25.58% | |
| MFS Research IC | ||||||||||
| 2021 | 120 | 46.14 | 49.36 | 6,260 | 0.53% | 0.60% | 1.65% | 23.93% | 22.56% | |
| 2020 | 138 | 34.29 | 45.21 | 5,838 | 0.68% | 0.70% | 1.80% | 14.50% | 15.78% | |
| 2019 | 154 | 29.73 | 39.26 | 5,674 | 0.79% | 0.70% | 1.80% | 30.56% | 32.02% | |
| 2018 | 173 | 22.61 | 29.91 | 4,869 | 0.74% | 0.70% | 1.80% | -6.10% | 5.04% | |
| 2017 | 199 | 23.91 | 31.67 | 5,944 | 1.30% | 0.70% | 1.80% | 21.16% | 22.51% | |
| MFS Research SC | ||||||||||
| 2021 | 89 | 54.93 | 33.18 | 4,109 | 0.33% | 0.50% | 1.60% | 23.77% | 22.34% | |
| 2020 | 102 | 27.12 | 46.54 | 3,854 | 0.49% | 0.60% | 1.75% | 14.28% | 15.62% | |
| 2019 | 116 | 23.73 | 40.33 | 3,800 | 0.60% | 0.60% | 1.75% | 30.29% | 31.81% | |
| 2018 | 137 | 18.22 | 30.66 | 3,420 | 0.74% | 0.60% | 1.75% | -6.30% | -5.20% | |
| 2017 | 169 | 19.44 | 32.41 | 4,475 | 1.11% | 0.60% | 1.75% | 20.93% | 22.33% | |
| MFS Total Return IC | ||||||||||
| 2021 | 495 | 37.96 | 36.91 | 19,285 | 1.82% | 0.60% | 1.65% | 13.32% | 12.07% | |
| 2020 | 561 | 30.85 | 36.97 | 19,408 | 2.11% | 0.70% | 1.80% | 7.84% | 9.05% | |
| 2019 | 639 | 28.41 | 34.10 | 20,408 | 2.36% | 0.70% | 1.80% | 18.22% | 19.54% | |
| 2018 | 729 | 23.86 | 28.68 | 19,571 | 2.25% | 0.70% | 1.80% | -7.57% | -6.44% | |
| 2017 | 807 | 25.56 | 30.77 | 23,270 | 2.34% | 0.70% | 1.80% | 10.29% | 11.52% | |
| MFS Total Return SC | ||||||||||
| 2021 | 1,682 | 29.63 | 35.23 | 53,045 | 1.62% | 0.50% | 1.65% | 13.15% | 11.79% | |
| 2020 | 1,846 | 17.85 | 35.38 | 51,632 | 1.92% | 0.60% | 1.80% | 7.55% | 8.86% | |
| 2019 | 2,126 | 16.58 | 32.71 | 54,427 | 2.15% | 0.60% | 1.80% | 17.96% | 19.40% | |
| 2018 | 2,438 | 14.05 | 27.58 | 52,502 | 1.99% | 0.60% | 1.80% | -7.57% | -6.44% | |
| 2017 | 2,777 | 15.20 | 29.67 | 64,256 | 2.12% | 0.60% | 1.80% | 10.02% | 11.36% | |
| MFS Utilities IC | ||||||||||
| 2021 | 33 | 59.27 | 54.08 | 1,884 | 1.62% | 0.60% | 1.50% | 13.29% | 12.21% | |
| 2020 | 40 | 48.18 | 52.32 | 2,019 | 2.25% | 0.70% | 1.65% | 4.16% | 5.16% | |
| 2019 | 50 | 46.00 | 50.02 | 2,382 | 3.99% | 0.70% | 1.65% | 23.01% | 24.19% | |
| 2018 | 63 | 37.19 | 40.50 | 2,455 | 1.17% | 0.70% | 1.65% | -0.62% | 0.35% | |
| 2017 | 74 | 37.21 | 40.58 | 2,920 | 4.21% | 0.70% | 1.65% | 12.95% | 14.03% | |
| MFS Utilities SC | ||||||||||
| 2021 | 642 | 56.34 | 20.27 | 25,021 | 1.48% | 0.50% | 1.60% | 13.14% | 11.83% | |
| 2020 | 737 | 18.12 | 50.04 | 25,441 | 2.06% | 0.60% | 1.75% | 3.78% | 4.99% | |
| 2019 | 859 | 17.46 | 47.97 | 27,706 | 3.82% | 0.60% | 1.75% | 22.62% | 24.05% | |
| 2018 | 1,058 | 14.24 | 38.92 | 27,588 | 0.86% | 0.60% | 1.75% | -0.96% | 0.20% | |
| 2017 | 1,249 | 14.38 | 39.10 | 33,093 | 4.18% | 0.60% | 1.75% | 12.50% | 13.81% | |
| MFS VIT II Emerging Markets Equity SC | ||||||||||
| 2021 | 27 | 11.29 | 10.49 | 299 | 0.27% | 0.80% | 1.50% | -7.86% | -8.56% | |
| 2020 | 29 | 11.47 | 12.48 | 349 | 2.53% | 0.90% | 1.65% | 8.51% | 9.34% | |
| 2019 | 39 | 10.57 | 11.42 | 430 | 0.40% | 0.90% | 1.65% | 18.20% | 19.10% | |
| 2018 | 48 | 8.94 | 9.60 | 449 | 0.11% | 0.90% | 1.65% | -15.55% | -14.91% | |
| 2017 | 53 | 10.59 | 11.29 | 588 | 0.98% | 0.90% | 1.65% | 35.40% | 36.43% | |
97
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| MFS VIT II International Value SC | ||||||||||
| 2021 | 865 | $26.45 | $25.43 | $22,849 | 0.14% | 0.80% | 1.20% | 9.28% | 8.84% | |
| 2020 | 1,021 | 18.88 | 24.20 | 24,678 | 0.73% | 0.90% | 1.30% | 18.65% | 19.13% | |
| 2019 | 1,290 | 15.86 | 20.32 | 26,178 | 1.49% | 0.90% | 1.30% | 24.02% | 24.52% | |
| 2018 | 1,467 | 12.75 | 16.32 | 23,902 | 0.92% | 0.90% | 1.30% | -10.90% | -10.54% | |
| 2017 | 1,618 | 14.27 | 18.24 | 29,487 | 1.32% | 0.90% | 1.30% | 25.18% | 25.68% | |
| MFS VIT II MA Investors Growth Stock IC | ||||||||||
| 2021 | 80 | 28.17 | 26.12 | 2,148 | 0.24% | 0.60% | 1.65% | 25.09% | 23.71% | |
| 2020 | 90 | 21.11 | 22.52 | 1,951 | 0.42% | 0.70% | 1.80% | 20.06% | 21.47% | |
| 2019 | 103 | 17.54 | 18.51 | 1,845 | 0.60% | 0.70% | 1.80% | 37.44% | 38.97% | |
| 2018 | 118 | 12.77 | 13.32 | 1,536 | 0.60% | 0.70% | 1.80% | -1.01% | 0.10% | |
| 2017 | 135 | 12.90 | 13.30 | 1,765 | 0.66% | 0.70% | 1.80% | 26.12% | 27.53% | |
| MFS VIT II MA Investors Growth Stock SC | ||||||||||
| 2021 | 1,478 | 27.90 | 25.78 | 40,451 | 0.03% | 0.50% | 1.60% | 24.90% | 23.46% | |
| 2020 | 1,793 | 20.88 | 22.34 | 39,387 | 0.21% | 0.60% | 1.75% | 6.28% | 7.53% | |
| 2019 | 2,201 | 17.35 | 18.39 | 39,929 | 0.33% | 0.60% | 1.80% | 37.08% | 38.75% | |
| 2018 | 3,092 | 12.65 | 13.25 | 40,555 | 0.34% | 0.60% | 1.80% | -1.24% | -0.03% | |
| 2017 | 3,815 | 12.81 | 13.26 | 50,192 | 0.42% | 0.60% | 1.80% | 25.81% | 27.33% | |
| MFS VIT Total Return Bond SC | ||||||||||
| 2021 | 29,030 | 14.89 | 11.91 | 391,163 | 2.54% | 0.50% | 1.60% | -1.66% | -2.80% | |
| 2020 | 29,238 | 12.25 | 15.14 | 401,842 | 3.09% | 0.60% | 1.75% | 6.28% | 7.53% | |
| 2019 | 33,789 | 11.53 | 14.08 | 433,094 | 3.16% | 0.60% | 1.75% | 8.00% | 9.26% | |
| 2018 | 39,442 | 10.67 | 12.89 | 464,112 | 3.00% | 0.60% | 1.75% | -3.06% | 1.92% | |
| 2017 | 43,300 | 11.01 | 13.14 | 522,114 | 3.17% | 0.60% | 1.75% | 2.37% | 3.56% | |
| MFS VIT Value SC | ||||||||||
| 2021 | 5,868 | 36.98 | 27.61 | 196,057 | 1.14% | 0.50% | 1.60% | 24.41% | 22.97% | |
| 2020 | 7,186 | 22.45 | 29.72 | 193,873 | 1.23% | 0.60% | 1.75% | 1.42% | 2.60% | |
| 2019 | 7,799 | 22.14 | 28.97 | 205,858 | 1.94% | 0.60% | 1.75% | 27.24% | 28.73% | |
| 2018 | 9,144 | 17.40 | 22.50 | 188,402 | 1.34% | 0.60% | 1.75% | -11.93% | -10.90% | |
| 2017 | 10,465 | 19.76 | 25.25 | 243,337 | 1.70% | 0.60% | 1.75% | 15.30% | 16.65% | |
| Morgan Stanley VIF, Inc. Global Real Estate II | ||||||||||
| 2021 | 457 | 16.26 | 13.78 | 7,402 | 4.03% | 0.50% | 1.60% | 23.09% | 21.67% | |
| 2020 | 536 | 11.33 | 23.35 | 1,330 | 5.87% | 0.60% | 1.75% | -16.34% | -15.36% | |
| 2019 | 506 | 13.54 | 27.64 | 7,949 | 2.70% | 0.60% | 1.75% | 15.99% | 17.35% | |
| 2018 | 534 | 11.68 | 23.60 | 7,266 | 3.24% | 0.60% | 1.75% | -9.81% | -8.75% | |
| 2017 | 623 | 12.95 | 25.92 | 9,382 | 2.46% | 0.60% | 1.75% | 7.80% | 9.05% | |
| PIMCO Income Advisor | ||||||||||
| 2021 | 36 | 10.20 | 10.12 | 362 | 0.75% | 0.20% | 1.20% | 0.29% | -0.53% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| PIMCO VIT All Asset Advisor | ||||||||||
| 2021 | 518 | 12.83 | 14.10 | 7,526 | 11.08% | 0.65% | 1.60% | 15.17% | 14.01% | |
| 2020 | 580 | 11.14 | 13.33 | 7,363 | 3.06% | 0.75% | 1.75% | 6.02% | 7.10% | |
| 2019 | 730 | 10.40 | 12.47 | 8,691 | 4.47% | 0.75% | 1.75% | 2.92% | 10.74% | |
| 2018 | 160 | 10.44 | 11.26 | 1,766 | 2.40% | 0.90% | 1.75% | -7.11% | -6.30% | |
| 2017 | 807 | 11.16 | 12.02 | 9,406 | 4.57% | 0.90% | 1.75% | 11.40% | 12.36% | |
| PIMCO VIT Global Diversified Allocation Portfolio | ||||||||||
| 2021 | 446 | 15.02 | 14.37 | 6,630 | 9.81% | 0.90% | 1.60% | 7.43% | 6.62% | |
| 2020 | 471 | 13.48 | 13.99 | 6,534 | 2.86% | 1.00% | 1.75% | 2.18% | 2.95% | |
| 2019 | 542 | 13.20 | 13.61 | 7,332 | 2.66% | 1.00% | 1.75% | 19.49% | 20.40% | |
| 2018 | 568 | 11.04 | 11.34 | 6,407 | 2.06% | 1.00% | 1.75% | -10.66% | -9.97% | |
| 2017 | 476 | 12.36 | 12.63 | 5,988 | 2.94% | 1.00% | 1.75% | 14.82% | 15.69% | |
| Pimco VIT High Yield Advance | ||||||||||
| 2021 | 12 | 10.31 | 10.28 | 127 | 1.03% | 0.90% | 1.20% | 0.77% | 0.51% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| PIMCO VIT Long-Term US Government Advisor | ||||||||||
| 2021 | 1,953 | 9.16 | 15.14 | 30,193 | 1.45% | 0.20% | 1.60% | -5.17% | -6.54% | |
| 2020 | 1,812 | 11.34 | 20.04 | 30,865 | 1.86% | 0.60% | 1.75% | 15.22% | 16.57% | |
| 2019 | 1,454 | 13.19 | 17.24 | 21,626 | 1.96% | 0.60% | 1.75% | 11.23% | 12.53% | |
| 2018 | 1,407 | 11.75 | 15.36 | 18,486 | 2.23% | 0.60% | 1.75% | -4.19% | -3.07% | |
| 2017 | 1,479 | 12.16 | 15.88 | 20,196 | 2.14% | 0.60% | 1.75% | 6.95% | 8.20% | |
| PIMCO VIT Low Duration Advisor | ||||||||||
| 2021 | 14,088 | 9.94 | 9.56 | 147,419 | 0.43% | 0.20% | 1.60% | -1.32% | -2.76% | |
| 2020 | 11,792 | 9.83 | 11.75 | 126,694 | 1.08% | 0.60% | 1.75% | 1.09% | 2.27% | |
| 2019 | 11,779 | 9.73 | 11.49 | 124,470 | 2.67% | 0.60% | 1.75% | 0.24% | 3.30% | |
| 2018 | 12,259 | 9.53 | 11.13 | 125,907 | 1.83% | 0.60% | 1.75% | -1.52% | -0.36% | |
| 2017 | 12,137 | 9.67 | 11.17 | 125,706 | 1.23% | 0.60% | 1.75% | -0.52% | 0.64% | |
| PIMCO VIT Real Return Advisor | ||||||||||
| 2021 | 23,187 | 11.02 | 11.60 | 300,617 | 4.94% | 0.20% | 1.60% | 5.16% | 3.64% | |
| 2020 | 23,001 | 11.19 | 14.49 | 285,898 | 1.29% | 0.60% | 1.75% | 9.65% | 10.93% | |
| 2019 | 28,164 | 10.13 | 13.06 | 315,853 | 1.57% | 0.60% | 1.75% | 0.62% | 7.68% | |
| 2018 | 32,272 | 9.59 | 12.13 | 337,155 | 2.40% | 0.60% | 1.75% | -4.02% | -2.89% | |
| 2017 | 34,564 | 9.99 | 12.49 | 374,317 | 2.29% | 0.60% | 1.75% | 1.75% | 2.93% | |
98
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| PIMCO VIT Short-Term Advisor | ||||||||||
| 2021 | 6,407 | $10.01 | $9.67 | $66,445 | 0.99% | 0.20% | 1.60% | -0.45% | -1.90% | |
| 2020 | 6,266 | 9.86 | 11.22 | 65,883 | 1.14% | 0.60% | 1.75% | 0.35% | 1.53% | |
| 2019 | 6,567 | 9.82 | 11.05 | 68,362 | 2.36% | 0.60% | 1.75% | 0.90% | 2.08% | |
| 2018 | 7,043 | 9.73 | 10.82 | 72,157 | 2.06% | 0.60% | 1.75% | -0.35% | 0.82% | |
| 2017 | 7,102 | 9.76 | 10.73 | 72,550 | 1.60% | 0.60% | 1.75% | 0.52% | 1.69% | |
| PIMCO VIT Total Return Advisor | ||||||||||
| 2021 | 59,431 | 10.02 | 11.55 | 767,115 | 1.73% | 0.20% | 1.60% | -1.66% | -3.09% | |
| 2020 | 56,007 | 10.19 | 14.75 | 746,621 | 1.97% | 0.30% | 1.75% | 6.64% | 7.89% | |
| 2019 | 62,029 | 10.01 | 13.67 | 770,255 | 2.93% | 0.60% | 1.75% | -0.01% | 7.60% | |
| 2018 | 70,190 | 10.51 | 12.70 | 813,438 | 2.44% | 0.60% | 1.75% | -2.38% | -1.23% | |
| 2017 | 75,131 | 10.77 | 12.86 | 886,921 | 1.95% | 0.60% | 1.75% | 2.98% | 4.18% | |
| Protective Life Dynamic Allocation Series – Conservative | ||||||||||
| 2021 | 3,608 | 11.53 | 12.32 | 46,054 | 0.90% | 0.65% | 1.60% | 7.91% | 6.82% | |
| 2020 | 3,368 | 10.69 | 12.29 | 40,357 | 1.16% | 0.75% | 1.75% | 1.69% | 2.72% | |
| 2019 | 2,591 | 11.35 | 11.98 | 30,678 | 1.56% | 0.90% | 1.75% | 8.05% | 8.98% | |
| 2018 | 2,504 | 10.50 | 10.99 | 27,255 | 1.43% | 0.90% | 1.75% | -3.72% | -2.88% | |
| 2017 | 1,683 | 10.91 | 11.32 | 18,884 | 1.29% | 0.90% | 1.75% | 10.41% | 11.36% | |
| Protective Life Dynamic Allocation Series – Growth | ||||||||||
| 2021 | 4,163 | 15.73 | 14.58 | 64,736 | 0.88% | 0.80% | 1.60% | 19.71% | 18.68% | |
| 2020 | 4,799 | 12.28 | 13.14 | 62,414 | 1.16% | 0.90% | 1.75% | -3.86% | -3.03% | |
| 2019 | 6,010 | 12.77 | 13.55 | 80,870 | 1.37% | 0.90% | 1.75% | 10.04% | 10.99% | |
| 2018 | 5,800 | 11.61 | 12.21 | 70,454 | 1.18% | 0.90% | 1.75% | -5.34% | -4.52% | |
| 2017 | 4,072 | 12.28 | 12.79 | 51,869 | 0.89% | 0.90% | 1.65% | 20.80% | 21.72% | |
| Protective Life Dynamic Allocation Series – Moderate | ||||||||||
| 2021 | 41,543 | 11.88 | 13.02 | 524,872 | 0.78% | 0.65% | 1.60% | 11.48% | 10.36% | |
| 2020 | 24,453 | 10.65 | 12.61 | 290,751 | 1.00% | 0.75% | 1.75% | 0.22% | 1.24% | |
| 2019 | 16,122 | 10.52 | 12.47 | 200,085 | 1.47% | 0.75% | 1.75% | 2.71% | 9.59% | |
| 2018 | 14,357 | 10.84 | 11.38 | 162,928 | 1.30% | 0.90% | 1.75% | -4.09% | -3.26% | |
| 2017 | 9,550 | 11.32 | 11.76 | 112,089 | 0.94% | 0.90% | 1.65% | 13.52% | 14.39% | |
| Royce Capital Fund Micro-Cap SC | ||||||||||
| 2021 | 912 | 26.31 | 16.88 | 19,767 | 0.00% | 0.60% | 1.60% | 28.62% | 27.26% | |
| 2020 | 1,340 | 13.27 | 20.46 | 22,597 | 0.00% | 0.70% | 1.75% | 21.40% | 22.69% | |
| 2019 | 1,619 | 10.93 | 16.67 | 22,304 | 0.00% | 0.70% | 1.75% | 17.15% | 18.40% | |
| 2018 | 873 | 9.33 | 14.08 | 10,886 | 0.00% | 0.70% | 1.75% | -10.88% | -9.92% | |
| 2017 | 2,081 | 10.47 | 15.63 | 27,193 | 0.51% | 0.70% | 1.75% | 3.19% | 4.29% | |
| Royce Capital Fund Small-Cap SC | ||||||||||
| 2021 | 8,915 | 24.85 | 17.57 | 184,073 | 1.17% | 0.50% | 1.60% | 27.68% | 26.20% | |
| 2020 | 11,258 | 9.97 | 19.46 | 183,315 | 0.71% | 0.60% | 1.75% | -8.95% | -7.88% | |
| 2019 | 11,393 | 15.29 | 21.13 | 201,760 | 0.57% | 0.60% | 1.75% | 16.37% | 17.73% | |
| 2018 | 5,325 | 13.14 | 17.95 | 84,530 | 0.18% | 0.60% | 1.75% | -10.11% | -9.05% | |
| 2017 | 14,305 | 14.62 | 19.73 | 238,660 | 0.77% | 0.60% | 1.75% | 3.27% | 4.47% | |
| Rydex Commodities Strategy | ||||||||||
| 2021 | 2 | 4.80 | 4.80 | 10 | 0.00% | 0.90% | 0.90% | 38.15% | 38.15% | |
| 2020 | 3 | 3.47 | 3.47 | 9 | 0.69% | 1.00% | 1.00% | -23.50% | -23.50% | |
| 2019 | 2 | 4.54 | 4.54 | 10 | 1.57% | 1.00% | 1.00% | 14.10% | 14.10% | |
| 2018 | 2 | 3.98 | 3.98 | 9 | 3.60% | 1.00% | 1.00% | -15.98% | -15.98% | |
| 2017 | 2 | 4.74 | 4.74 | 10 | 0.00% | 1.00% | 1.00% | 3.39% | 3.39% | |
| Rydex Inverse Government Long Bond | ||||||||||
| 2021 | 2 | 4.45 | 4.45 | 8 | 0.00% | 0.90% | 0.90% | -0.04% | -0.04% | |
| 2020 | 1 | 4.45 | 4.45 | 6 | 0.25% | 1.00% | 1.00% | -21.88% | -21.88% | |
| 2019 | 1 | 5.70 | 5.70 | 7 | 0.00% | 1.00% | 1.00% | -14.16% | -14.16% | |
| 2018 | 1 | 6.64 | 6.64 | 7 | 0.00% | 1.00% | 1.00% | 2.75% | 2.75% | |
| 2017 | 1 | 6.46 | 6.46 | 7 | 0.00% | 1.00% | 1.00% | -9.79% | -9.79% | |
| T. Rowe Price All-Cap Opportunities Portfolio | ||||||||||
| 2021 | 12 | 10.08 | 10.08 | 100 | 0.00% | 0.65% | 0.65% | 0.00% | 0.00% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| T. Rowe Price Blue Chip Growth Portfolio II | ||||||||||
| 2021 | 235 | 11.82 | 11.72 | 2,730 | 0.00% | 0.20% | 1.20% | 13.50% | 12.56% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| T. Rowe Price Health Sciences Portfolio II | ||||||||||
| 2021 | 94 | 10.88 | 10.85 | 1,017 | 0.00% | 0.90% | 1.20% | 11.42% | 11.14% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
99
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| Templeton Developing Markets VIP CL 2 | ||||||||||
| 2021 | 223 | $11.55 | $12.07 | $2,857 | 1.36% | 0.20% | 1.50% | -6.02% | -7.29% | |
| 2020 | 1,001 | 12.91 | 13.95 | 13,677 | 1.15% | 0.75% | 1.75% | 15.14% | 16.31% | |
| 2019 | 1,323 | 11.21 | 12.02 | 15,632 | 0.71% | 0.90% | 1.75% | 24.48% | 25.56% | |
| 2018 | 222 | 9.07 | 9.58 | 2,107 | 0.36% | 0.90% | 1.65% | -17.19% | 16.56% | |
| 2017 | 1,585 | 10.89 | 11.50 | 17,958 | 1.12% | 0.90% | 1.75% | 37.96% | 39..15% | |
| Templeton Foreign VIP CL 2 | ||||||||||
| 2021 | 5,308 | 14.00 | 10.51 | 71,083 | 2.01% | 0.50% | 1.60% | 3.53% | 2.34% | |
| 2020 | 6,991 | 10.27 | 17.93 | 90,070 | 2.52% | 0.60% | 1.75% | -2.89% | -1.75% | |
| 2019 | 7,284 | 10.57 | 18.29 | 95,813 | 1.57% | 0.60% | 1.75% | 10.56% | 11.85% | |
| 2018 | 6,466 | 9.56 | 16.38 | 77,382 | 2.83% | 0.60% | 1.75% | -16.93% | -15.95% | |
| 2017 | 8,543 | 11.51 | 19.53 | 120,513 | 2.59% | 0.60% | 1.75% | 14.66% | 16.00% | |
| Templeton Global Bond VIP Fund CL 2 | ||||||||||
| 2021 | 22,014 | 15.78 | 8.64 | 245,408 | 0.00% | 0.50% | 1.60% | -5.56% | -6.65% | |
| 2020 | 20,656 | 9.26 | 16.70 | 245,678 | 7.98% | 0.60% | 1.75% | -6.94% | -5.85% | |
| 2019 | 22,523 | 9.95 | 17.74 | 284,602 | 7.02% | 0.60% | 1.75% | 0.23% | 1.40% | |
| 2018 | 24,745 | 9.93 | 18.50 | 309,133 | 0.00% | 0.60% | 1.75% | 0.15% | 1.32% | |
| 2017 | 26,736 | 9.91 | 17.27 | 332,340 | 0.00% | 0.60% | 1.75% | 0.15% | 1.32% | |
| Templeton Growth VIP CL 2 | ||||||||||
| 2021 | 5,600 | 16.52 | 14.83 | 91,730 | 1.16% | 0.50% | 1.60% | 4.24% | 3.04% | |
| 2020 | 6,947 | 11.25 | 24.95 | 110,363 | 2.41% | 0.60% | 1.75% | 3.95% | 5.16% | |
| 2019 | 7,550 | 13.03 | 23.77 | 114,808 | 2.62% | 0.60% | 1.75% | 13.14% | 14.46% | |
| 2018 | 7,005 | 11.50 | 20.81 | 93,093 | 2.11% | 0.60% | 1.75% | -16.35% | -15.36% | |
| 2017 | 8,966 | 13.74 | 24.64 | 141,961 | 1.63% | 0.60% | 1.75% | 16.44% | 17.79% | |
| VanEck Global Hard Asset | ||||||||||
| 2021 | 7 | 37.24 | 32.98 | 250 | 0.42% | 1.10% | 1.65% | 17.44% | 16.78% | |
| 2020 | 9 | 28.24 | 31.71 | 258 | 0.83% | 1.25% | 1.80% | 16.97% | 17.63% | |
| 2019 | 7 | 24.14 | 26.96 | 183 | 0.00% | 1.25% | 1.80% | 9.86% | 10.47% | |
| 2018 | 6 | 21.98 | 24.40 | 140 | 0.00% | 1.25% | 1.80% | -29.57% | -29.18% | |
| 2017 | 8 | 31.21 | 34.45 | 246 | 0.00% | 1.25% | 1.80% | -3.46% | -2.92% | |
| Vanguard VIF Balanced | ||||||||||
| 2021 | 63 | 13.31 | 13.31 | 832 | 1.03% | 0.20% | 0.20% | 18.15% | 18.15% | |
| 2020 | 3 | 11.26 | 11.26 | 36 | 0.00% | 0.30% | 0.30% | 5.49% | 5.49% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Capital Growth | ||||||||||
| 2021 | 15 | 14.53 | 14.53 | 219 | 0.81% | 0.20% | 0.20% | 20.63% | 20.63% | |
| 2020 | 2 | 12.05 | 12.05 | 26 | 0.00% | 0.30% | 0.30% | 10.73% | 10.73% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Conservative Allocation | ||||||||||
| 2021 | 30 | 11.48 | 11.48 | 343 | 0.25% | 0.20% | 0.20% | 4.19% | 4.19% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Diversified Val | ||||||||||
| 2021 | 5 | 16.25 | 16.25 | 80 | 0.78% | 0.20% | 0.20% | 18.46% | 18.46% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Equity Income | ||||||||||
| 2021 | 44 | 14.80 | 14.80 | 645 | 0.06% | 0.20% | 0.20% | 20.01% | 20.01% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Equity Index | ||||||||||
| 2021 | 60 | 15.25 | 15.25 | 945 | 0.32% | 0.20% | 0.20% | 27.92% | 27.92% | |
| 2020 | 1 | 11.92 | 11.92 | (17) | 0.00% | 0.30% | 0.30% | 6.92% | 6.92% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Global Bond Index | ||||||||||
| 2021 | 15 | 9.87 | 9.87 | 148 | 0.96% | 0.20% | 0.20% | -2.23% | -2.23% | |
| 2020 | 1 | 10.10 | 10.10 | 12 | 0.00% | 0.30% | 0.30% | 0.66% | 0.66% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Growth | ||||||||||
| 2021 | 55 | 14.03 | 14.03 | 742 | 0.01% | 0.20% | 0.20% | 16.57% | 16.57% | |
| 2020 | 6 | 12.04 | 12.04 | 93 | 0.00% | 0.30% | 0.30% | 6.48% | 6.48% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
100
(6) Financial Highlights, continued
| As of December 31 | For the year ended December 31 | |||||||||
| Subaccount | Units (000’s) | Unit Fair Value Corresponding to Lowest to Highest Expense Ratio | Net Assets (000’s) | Investment Income Ratio* | Expense
Ratio Lowest ** |
Expense Ratio Highest ** | Total Return Corresponding to Lowest to Highest Expense Ratio*** | |||
| (Low) | (High) | (Low) | (High) | |||||||
| Vanguard VIF High Yield Bond | ||||||||||
| 2021 | 13 | $11.10 | $11.10 | $139 | 5.15% | 0.20% | 0.20% | 3.18% | 3.18% | |
| 2020 | 2 | 10.75 | 10.75 | 24 | 0.00% | 0.30% | 0.30% | 3.60% | 3.60% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF International | ||||||||||
| 2021 | 42 | 12.89 | 12.89 | 547 | 0.06% | 0.20% | 0.20% | -2.27% | -2.27% | |
| 2020 | - | 13.19 | 13.19 | 5 | 0.00% | 0.30% | 0.30% | 18.60% | 18.60% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Mid-Cap Index | ||||||||||
| 2021 | 52 | 15.45 | 15.45 | 804 | 0.47% | 0.20% | 0.20% | 23.33% | 23.33% | |
| 2020 | - | 12.53 | 12.53 | 6 | 0.00% | 0.30% | 0.30% | 14.57% | 14.57% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Moderate Allocation | ||||||||||
| 2021 | 54 | 12.37 | 12.37 | 664 | 0.71% | 0.20% | 0.20% | 9.50% | 9.50% | |
| 2020 | 3 | 11.29 | 11.29 | 36 | 0.00% | 0.30% | 0.30% | 7.06% | 7.06% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Money Market | ||||||||||
| 2021 | 33 | 9.97 | 9.97 | 325 | 0.01% | 0.20% | 0.20% | -0.29% | -0.29% | |
| 2020 | - | 10.00 | 10.00 | 2 | 0.00% | 0.30% | 0.30% | 0.01% | 0.01% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Real Estate Index | ||||||||||
| 2021 | 19 | 15.46 | 15.46 | 287 | 0.35% | 0.20% | 0.20% | 39.58% | 39.58% | |
| 2020 | - | 11.07 | 11.07 | 3 | 0.00% | 0.30% | 0.30% | 6.13% | 6.13% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Short Term Invmt Grade | ||||||||||
| 2021 | 142 | 10.08 | 10.08 | 1,430 | 0.19% | 0.20% | 0.20% | -0.82% | -0.82% | |
| 2020 | 1 | 10.16 | 10.16 | 11 | 0.00% | 0.30% | 0.30% | 0.81% | 0.81% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Total Bond Mkt Index | ||||||||||
| 2021 | 115 | 9.85 | 9.85 | 1,136 | 1.16% | 0.20% | 0.20% | -2.10% | -2.10% | |
| 2020 | 27 | 10.06 | 10.06 | 270 | 0.00% | 0.30% | 0.30% | 0.29% | 0.29% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Total Intl Stk Mkt Idx | ||||||||||
| 2021 | 42 | 12.98 | 12.98 | 546 | 0.57% | 0.20% | 0.20% | 8.16% | 8.16% | |
| 2020 | - | 12.00 | 12.00 | 4 | 0.00% | 0.30% | 0.30% | 14.05% | 14.05% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Vanguard VIF Total Stock Mkt Index | ||||||||||
| 2021 | 77 | 15.26 | 15.26 | 1,179 | 0.74% | 0.20% | 0.20% | 24.83% | 24.83% | |
| 2020 | 20 | 12.22 | 12.22 | 242 | 0.00% | 0.30% | 0.30% | 9.53% | 9.53% | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| Western Asset Core Plus VIT II | ||||||||||
| 2021 | 227 | 10.09 | 10.06 | 2,287 | 2.05% | 0.90% | 1.20% | -0.29% | -0.54% | |
| 2020 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2019 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2018 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
| 2017 | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | N/A | |
* These ratios represent the dividends, excluding distributions of capital gains (both long-term and short-term), received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest.
** These ratios represent the annualized contract expenses of the Separate Account, consisting primarily of mortality and expense risk and admin charges, for each period indicated. These ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund are excluded.
*** These amounts represent the total return for the periods indicated and are not annualized. They include changes in the value of the underlying fund, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses addressed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented.
101
(7) Expenses
The following is a summary of Separate Account expense charges which are assessed either as a direct reduction in unit values or through a redemption of units for all contracts contained within the Separate Account:
Expense Type
|
Range |
Mortality and Expense Risk Charge To compensate Protective Life for assuming mortality and expense risks, a daily mortality and expense risk is assessed through the reduction of unit values. The charge, which comprises Mortality and expense risk and administrative charges within the Statement of Operations, is assessed on an annual basis and calculated as a percent of the average daily net assets and varies depending on the product purchased and the death benefit option selected.
|
0.20% - 1.65%
|
Administrative Charge An annual fee is assessed to reimburse Protective Life for expenses incurred in the administration of the contract and the Separate Account. The charge is assessed through the reduction of unit values and recorded as Contract maintenance fees within the Statement of Changes in Net Assets.
|
0.10% - 0.15%
|
Contract Maintenance Fee This annual charge, which is recorded as Contract maintenance fees within the Statement of Changes in Net Assets, is assessed through the redemption of units and is waived when the account value or purchase payments less surrenders and associated surrender charges equals or exceeds $50,000 - $100,000, depending on the product.
|
$0 - $50
|
Surrender Charge (Contingent Deferred Sales Charge) This charge is assessed as a percent of the amount surrendered and is imposed to reimburse Protective Life for some of the costs of distributing the contracts and recorded as Contract maintenance fees within the Statement of Changes in Net Assets. The percentage charged is assessed through the redemption of units and is based upon the number of full years which have elapsed between the date the contract was purchased and the surrender date.
|
0.00% - 8.50%
|
Transfer Fee Currently there is no fee charged for transfers; however, Protective Life has reserved the right to charge for each transfer after the first 12 transfers in any contract year as a redemption of units.
|
$25
|
102
(7) Expenses, continued
Expense Type
|
Range |
Deferred Sales Charge This charge is assessed as a percentage of cumulative purchase payments and is imposed to reimburse Protective Life for some of the costs of distributing the contracts. The fees are deducted quarterly and assessed through redemption of units and recorded as Contract maintenance fees within the Statement of Changes in Net Assets.
|
0.00% - 0.70%
|
Optional Benefit Fee Optional benefits may be elected by contract owners. These benefits include death benefits and living benefits. The fees for such benefits are deducted monthly and assessed through redemption of units. These fees are calculated on either a “Benefit Base” basis, an “Asset Base” basis, a “Floored Asset Base” basis or a “Net Amount at Risk” basis and recorded as Contract maintenance fees within the Statement of Changes in Nete Assets
|
0.10% - 2.20% on Benefit Base 0.15% - 0.45% on Asset Base 1.0% - 2.2% on Floored Asset Base $0.25 per $1000 - $18.94 per $1000 on Net Amount at Risk. |
(8) Related Party Transactions
Contract owners’ net payments represent premiums received from contract owners less certain deductions made by Protective Life in accordance with the contract terms. These deductions include, where appropriate, tax, surrender, mortality risk and expense and administrative charges. These deductions are made to the individual contracts in accordance with the terms governing each contract as set forth in the Contract.
Protective Life offers a loan privilege to certain contract owners. Such contract owners may obtain loans using the Contract as the only security for the loan. Loans are subject to provisions of The Internal Revenue Code of 1986, as amended, and to applicable retirement program rules. There were no loans outstanding as of December 31, 2021.
(9) Subsequent Events
The Separate Account has evaluated the effects of events subsequent to December 31, 2021, and through the date at which the financial statements were available to be issued. All accounting and disclosure requirements related to subsequent events are included in our financial statements.
103
Report of Independent Registered Public Accounting Firm
To the Shareowner and Board of Directors
Protective Life Insurance Company:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Protective Life Insurance Company and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income (loss), shareowner's equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes and financial statement schedules III to V (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for the recognition and measurement of credit losses as of January 1, 2020 due to the adoption of Accounting Standards Codification (ASC) Topic 326, Financial Instruments — Credit Losses.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
F-1
financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Fair value measurement for embedded derivatives and amortization of deferred policy acquisition costs and value of business acquired for variable annuity and fixed indexed annuity contracts
As discussed in Notes 2, 5, 6 and 9 to the consolidated financial statements, the Company has established policies and procedures for determining the fair value of embedded derivatives for guaranteed living withdrawal benefit riders on variable annuity (VA) contracts and equity market contingent return features on fixed indexed annuity (FIA) contracts and for determining the amortization of deferred policy acquisition costs (DAC) and value of business acquired (VOBA) for VA and FIA contracts. As of December 31, 2021, the recorded balance of the VA and FIA embedded derivatives was $475 million and $595 million, respectively, both of which are classified as Level 3 fair value measurements. The Company's unamortized DAC and VOBA balances are $2,083 million and $1,786 million, respectively, as of December 31, 2021, a portion of each which relates to VA and FIA contracts. The Company estimates the fair value of the VA embedded derivative through the income method of valuation using a valuation model that projects future cash flows using multiple risk neutral stochastic equity scenarios and policyholder behavior assumptions. The Company estimates the fair value of the FIA embedded derivative through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder behavior assumptions. DAC and VOBA associated with VA and FIA contracts are amortized over the lives of the contracts in relation to the present value of estimated gross profits (EGPs).
We identified the evaluation of the fair value measurement for embedded derivatives and amortization of DAC and VOBA for VA and FIA contracts as a critical audit matter. Policyholder behavior assumptions, specifically, benefit utilization (VA contracts) and lapse (VA and FIA contracts), used in the determination of fair value and EGPs, required complex auditor judgment due to the high degree of estimation uncertainty. Specialized skills were needed to evaluate the benefit utilization and lapse assumptions and the impact of those assumptions on the fair values of the VA and FIA embedded derivatives and amortization of DAC and VOBA for VA and FIA contracts.
The following are the primary procedures we performed to address this critical audit matter. We evaluated, with the involvement of actuarial professionals, when appropriate, the design and implementation of certain internal controls over the Company's assumption setting process. This included internal controls related to the determination of the benefit utilization and lapse assumptions. In addition, we involved actuarial professionals with specialized skills and knowledge, who assisted in:
• evaluating the Company's methodology to produce a fair value estimate and amortization of DAC and VOBA compliant with U.S. generally accepted accounting principles
• evaluating the methodology for DAC and VOBA amortization for consistency with generally accepted actuarial methodologies
• comparing the benefit utilization and lapse assumptions used in developing the estimate to the Company's actual historical experience
F-2
• evaluating the Company's decisions to change or not to change the benefit utilization and lapse assumptions based on management's historical experience and industry studies, where available
• ensuring assumptions used by the expert in the valuation of the VA embedded derivative are consistent with those provided by the Company
• developing an estimate of the fair value of the FIA embedded derivative for a select policy based on the assumptions used by the Company and comparing the estimate to the Company's estimate
• recalculating the amortization of DAC and VOBA for selected VA and FIA policies based on the assumptions used by the Company and comparing the estimates to the Company's estimates, and
• evaluating the individual components (including assumptions and market movements) identified in the rollforward of changes in VA and FIA embedded derivative fair values prepared by the Company, for reasonableness of direction and relative amounts.
Fair value measurement of the Retirement reporting unit used in the valuation of goodwill
As discussed in Notes 2 and 10 to the consolidated financial statements, the goodwill balance as of December 31, 2021 was $697 million, of which $430 million related to the Retail Life and Annuity reportable segment, a portion of which related to the Retirement reporting unit. The Company performs goodwill impairment testing on an annual basis and whenever events or changes in circumstances indicate that the carrying value of a reporting unit likely exceeds its fair value. This involves estimating the fair value of the reporting units using a discounted cash flow valuation approach. The goodwill allocated to the Retirement reporting unit was determined to be impaired and an impairment loss of $129 million was recorded.
We identified the evaluation of the fair value measurement of the Retirement reporting unit used in the valuation of goodwill as a critical audit matter. Specifically, the projected cash flows and discount rates applied to the projected cash flows used in the determination of the fair value of the reporting unit required the application of subjective auditor judgment and were challenging to test as they represented subjective determinations of future sales, profitability patterns, existing business runoff patterns, as well as market and economic conditions that were also sensitive to variation. Additionally, the audit effort associated with evaluating the projected cash flows and discount rates required specialized skills and knowledge.
The following are the primary procedures we performed to address this critical audit matter.
• We evaluated the reasonableness of the Company's projected new business cash flows for the Retirement reporting unit, by (1) comparing the sales assumptions to the Company's historical sales to assess the Company's ability to accurately forecast, (2) comparing the sales assumptions to forecasted sales in the industry, and (3) involving an actuarial specialist to evaluate the current pricing assumptions and resulting profitability patterns produced by the actuarial projection system.
• We evaluated the reasonableness of the Company's projected existing business cash flows for the Retirement reporting unit, by involving an actuarial specialist to (1) compare selected actuarial assumptions used in developing the estimate to the Company's actual historical experience and (2) evaluate the existing business runoff patterns for selected products by comparing the patterns to historical experience and expectations of run off patterns based on the nature of the products.
F-3
• In addition, we involved a valuation professional with specialized skills and knowledge, who assisted in evaluating the discount rates used in the valuation, by comparing the inputs to the discount rates to publicly available data for comparable entities and assessing the resulting discount rates utilized by the Company.
/s/ KPMG LLP
We have served as the Company's auditor since 2019.
Birmingham, Alabama
March 18, 2022
F-4
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME
|
For The Years Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Revenues |
|||||||||||||||
|
Gross premiums and policy fees |
$ |
4,222 |
$ |
4,003 |
$ |
4,056 |
|||||||||
|
Reinsurance ceded |
(1,320 |
) |
(1,027 |
) |
(1,508 |
) |
|||||||||
|
Net premiums and policy fees |
2,902 |
2,976 |
2,548 |
||||||||||||
|
Net investment income |
2,982 |
2,889 |
2,825 |
||||||||||||
|
Net gains (losses) — investments and derivatives |
150 |
(235 |
) |
(59 |
) |
||||||||||
|
Other income |
379 |
538 |
417 |
||||||||||||
|
Total revenues |
6,413 |
6,168 |
5,731 |
||||||||||||
|
Benefits and expenses |
|||||||||||||||
|
Benefits and settlement expenses, net of reinsurance ceded: (2021 — $1,423; 2020 — $883; 2019 — $1,244) |
4,924 |
4,901 |
4,256 |
||||||||||||
|
Amortization of deferred policy acquisition costs and value of business acquired |
309 |
208 |
176 |
||||||||||||
|
Other operating expenses, net of reinsurance ceded: (2021 — $223; 2020 — $229; 2019 — $230) |
680 |
782 |
775 |
||||||||||||
|
Goodwill impairment |
129 |
— |
— |
||||||||||||
|
Total benefits and expenses |
6,042 |
5,891 |
5,207 |
||||||||||||
|
Income before income tax |
371 |
277 |
524 |
||||||||||||
|
Income tax expense (benefit) |
|||||||||||||||
|
Current |
132 |
118 |
387 |
||||||||||||
|
Deferred |
(46 |
) |
(75 |
) |
(290 |
) |
|||||||||
|
Total income tax expense |
86 |
43 |
97 |
||||||||||||
|
Net income |
$ |
285 |
$ |
234 |
$ |
427 |
|||||||||
See Notes to Consolidated Financial Statements
F-5
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
For The Years Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Net income |
$ |
285 |
$ |
234 |
$ |
427 |
|||||||||
|
Other comprehensive income (loss): |
|||||||||||||||
|
Change in net unrealized gains (losses) on investments, net of income tax: (2021 — $(294); 2020 — $544; 2019 — $756) |
(1,105 |
) |
2,048 |
2,844 |
|||||||||||
|
Reclassification adjustment for investment amounts included in net income, net of income tax: (2021 — $(11); 2020 — $17; 2019 — $(3)) |
(41 |
) |
63 |
(11 |
) |
||||||||||
|
Change in net unrealized gains (losses) for which a credit loss has been recognized in net income, net of income tax: (2021 — $—; 2020 — $6) |
(1 |
) |
24 |
— |
|||||||||||
|
Change in net unrealized (losses) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings, net of income tax: (2019 — $(1)) |
— |
— |
(4 |
) |
|||||||||||
|
Change in accumulated (loss) gain — derivatives, net of income tax: (2021 — $—; 2020 — $(1); 2019 — $(3)) |
— |
(2 |
) |
(10 |
) |
||||||||||
|
Reclassification adjustment for derivative amounts included in net income, net of income tax: (2021 — $—; 2020 — $1; 2019 — $—) |
1 |
2 |
2 |
||||||||||||
|
Total other comprehensive income (loss) |
(1,146 |
) |
2,135 |
2,821 |
|||||||||||
|
Total comprehensive income (loss) |
$ |
(861 |
) |
$ |
2,369 |
$ |
3,248 |
||||||||
See Notes to Consolidated Financial Statements
F-6
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
|
As of December 31, |
|||||||||||
|
2021 |
2020 |
||||||||||
|
(Recast) |
|||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Assets |
|||||||||||
|
Fixed maturities, at fair value (amortized cost: 2021 — $68,055; 2020 — $65,696; allowance for credit losses: 2021 — $1; 2020 — $23) |
$ |
73,048 |
$ |
72,595 |
|||||||
|
Equity securities, at fair value (cost: 2021 — $804; 2020 — $635) |
828 |
667 |
|||||||||
|
Commercial mortgage loans, net of allowance for credit losses (2021 — $103; 2020 — $222) |
10,863 |
10,006 |
|||||||||
|
Policy loans |
1,527 |
1,593 |
|||||||||
|
Other long-term investments |
3,646 |
3,251 |
|||||||||
|
Short-term investments |
862 |
462 |
|||||||||
|
Total investments |
90,774 |
88,574 |
|||||||||
|
Cash |
390 |
656 |
|||||||||
|
Accrued investment income |
704 |
707 |
|||||||||
|
Accounts and premiums receivable |
121 |
127 |
|||||||||
|
Reinsurance receivables, net of allowance for credit losses (2021 — $92; 2020 — $94) |
4,543 |
4,596 |
|||||||||
|
Deferred policy acquisition costs and value of business acquired |
3,869 |
3,420 |
|||||||||
|
Goodwill |
697 |
826 |
|||||||||
|
Other intangibles, net of accumulated amortization (2021 — $368; 2020 — $312) |
491 |
540 |
|||||||||
|
Property and equipment, net of accumulated depreciation (2021 — $79; 2020 — $61) |
203 |
204 |
|||||||||
|
Other assets |
267 |
271 |
|||||||||
|
Assets related to separate accounts |
|||||||||||
|
Variable annuity |
13,648 |
12,378 |
|||||||||
|
Variable universal life |
1,982 |
1,286 |
|||||||||
|
Reinsurance assumed |
13,883 |
13,325 |
|||||||||
|
Total assets |
$ |
131,572 |
$ |
126,910 |
|||||||
|
Liabilities |
|||||||||||
|
Future policy benefits and claims |
$ |
54,064 |
$ |
54,107 |
|||||||
|
Unearned premiums |
845 |
782 |
|||||||||
|
Total policy liabilities and accruals |
54,909 |
54,889 |
|||||||||
|
Stable value product account balances |
8,526 |
6,056 |
|||||||||
|
Annuity account balances |
15,846 |
15,478 |
|||||||||
|
Other policyholders' funds |
1,820 |
1,865 |
|||||||||
|
Other liabilities |
5,084 |
5,623 |
|||||||||
|
Deferred income taxes |
1,428 |
1,779 |
|||||||||
|
Subordinated debt |
110 |
110 |
|||||||||
|
Secured financing liabilities |
1,572 |
496 |
|||||||||
|
Liabilities related to separate accounts |
|||||||||||
|
Variable annuity |
13,648 |
12,378 |
|||||||||
|
Variable universal life |
1,982 |
1,286 |
|||||||||
|
Reinsurance assumed |
13,883 |
13,325 |
|||||||||
|
Total liabilities |
118,808 |
113,285 |
|||||||||
|
Commitments and contingencies — Note 15 |
|||||||||||
|
Shareowner's equity |
|||||||||||
|
Preferred Stock; $1 par value, shares authorized: 2; Liquidation preference: $2 |
— |
— |
|||||||||
|
Common Stock, $1 par value, shares authorized and issued: 2021 and 2020 — 5,000 |
5 |
5 |
|||||||||
|
Additional paid-in-capital |
8,525 |
8,525 |
|||||||||
|
Retained earnings |
1,832 |
1,547 |
|||||||||
|
Accumulated other comprehensive income (loss): |
|||||||||||
|
Net unrealized gains (losses) on investments, net of income tax: (2021 — $641; 2020 — $946) |
2,412 |
3,558 |
|||||||||
|
Net unrealized losses on investments for which a credit loss has been recognized in earnings, net of income tax: (2021 — $(1); 2020 — $(1)) |
(3 |
) |
(2 |
) |
|||||||
|
Accumulated loss — derivatives, net of income tax: (2021 — $(2); 2020 — $(2)) |
(7 |
) |
(8 |
) |
|||||||
|
Total shareowner's equity |
12,764 |
13,625 |
|||||||||
|
Total liabilities and shareowner's equity |
$ |
131,572 |
$ |
126,910 |
|||||||
See Notes to Consolidated Financial Statements
F-7
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF SHAREOWNER'S EQUITY
|
Preferred Stock |
Common Stock |
Additional Paid-In- Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Total Shareowner's Equity |
||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||||||
|
Balance, December 31, 2018 (Recast) |
$ |
— |
$ |
5 |
$ |
7,555 |
$ |
1,074 |
$ |
(1,408 |
) |
$ |
7,226 |
||||||||||||||
|
Net income |
427 |
427 |
|||||||||||||||||||||||||
|
Other comprehensive income |
2,821 |
2,821 |
|||||||||||||||||||||||||
|
Comprehensive income |
3,248 |
||||||||||||||||||||||||||
|
Cumulative effect adjustments |
(50 |
) |
(50 |
) |
|||||||||||||||||||||||
|
Capital contributions from parent |
850 |
850 |
|||||||||||||||||||||||||
|
Balance, December 31, 2019 (Recast) |
$ |
— |
$ |
5 |
$ |
8,405 |
$ |
1,451 |
$ |
1,413 |
$ |
11,274 |
|||||||||||||||
|
Net income |
234 |
234 |
|||||||||||||||||||||||||
|
Other comprehensive income |
2,135 |
2,135 |
|||||||||||||||||||||||||
|
Comprehensive income |
2,369 |
||||||||||||||||||||||||||
|
Cumulative effect adjustments |
(138 |
) |
(138 |
) |
|||||||||||||||||||||||
|
Capital contributions from parent |
120 |
120 |
|||||||||||||||||||||||||
|
Balance, December 31, 2020 (Recast) |
$ |
— |
$ |
5 |
$ |
8,525 |
$ |
1,547 |
$ |
3,548 |
$ |
13,625 |
|||||||||||||||
|
Net income |
285 |
285 |
|||||||||||||||||||||||||
|
Other comprehensive loss |
(1,146 |
) |
(1,146 |
) |
|||||||||||||||||||||||
|
Comprehensive loss |
(861 |
) |
|||||||||||||||||||||||||
|
Balance, December 31, 2021 |
$ |
— |
$ |
5 |
$ |
8,525 |
$ |
1,832 |
$ |
2,402 |
$ |
12,764 |
|||||||||||||||
See Notes to Consolidated Financial Statements
F-8
PROTECTIVE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
For The Years Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Cash flows from operating activities |
|||||||||||||||
|
Net income |
$ |
285 |
$ |
234 |
$ |
427 |
|||||||||
|
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |
|||||||||||||||
|
Net losses (gains) — investments and derivatives |
(150 |
) |
235 |
59 |
|||||||||||
|
Amortization of deferred acquisition costs and value of business acquired |
309 |
208 |
176 |
||||||||||||
|
Capitalization of deferred acquisition costs |
(550 |
) |
(459 |
) |
(408 |
) |
|||||||||
|
Depreciation and amortization expense |
77 |
79 |
74 |
||||||||||||
|
Deferred income tax |
(46 |
) |
(75 |
) |
(290 |
) |
|||||||||
|
Accrued income tax |
(86 |
) |
35 |
7 |
|||||||||||
|
Interest credited to universal life and investment products |
1,520 |
1,593 |
1,343 |
||||||||||||
|
Goodwill impairment |
129 |
— |
— |
||||||||||||
|
Trading securities purchases, sales, and maturities, net |
10 |
(139 |
) |
97 |
|||||||||||
|
Other, net |
(33 |
) |
— |
— |
|||||||||||
|
Change in: |
|||||||||||||||
|
Policy fees assessed on universal life and investment products |
(1,834 |
) |
(1,798 |
) |
(1,729 |
) |
|||||||||
|
Reinsurance receivables |
52 |
135 |
115 |
||||||||||||
|
Accrued investment income and other receivables |
(12 |
) |
34 |
(3 |
) |
||||||||||
|
Policy liabilities and other policyholders' funds of traditional life and health products |
(487 |
) |
(1,076 |
) |
(544 |
) |
|||||||||
|
Amortization of premiums and accretion of discounts on investments and commercial mortgage loans |
245 |
382 |
319 |
||||||||||||
|
Other liabilities |
39 |
648 |
347 |
||||||||||||
|
Other, net |
(22 |
) |
19 |
188 |
|||||||||||
|
Net cash (used in) provided by operating activities |
(554 |
) |
55 |
178 |
|||||||||||
|
Cash flows from investing activities |
|||||||||||||||
|
Maturities and principal reductions of investments, available-for-sale |
5,859 |
5,281 |
1,983 |
||||||||||||
|
Sale of investments, available-for-sale |
3,106 |
6,248 |
4,246 |
||||||||||||
|
Cost of investments acquired, available-for-sale |
(11,749 |
) |
(13,902 |
) |
(6,427 |
) |
|||||||||
|
Commercial mortgage loans: |
|||||||||||||||
|
New loan originations |
(2,182 |
) |
(1,611 |
) |
(1,323 |
) |
|||||||||
|
Repayments |
1,415 |
749 |
1,017 |
||||||||||||
|
Change in investment real estate, net |
— |
— |
(3 |
) |
|||||||||||
|
Change in policy loans, net |
66 |
82 |
65 |
||||||||||||
|
Change in other long-term investments, net |
(323 |
) |
132 |
(36 |
) |
||||||||||
|
Purchase of other long-term investments |
(500 |
) |
— |
— |
|||||||||||
|
Change in short-term investments, net |
(393 |
) |
870 |
(611 |
) |
||||||||||
|
Net unsettled security transactions |
86 |
141 |
(185 |
) |
|||||||||||
|
Purchase of property, equipment, and intangibles |
(29 |
) |
(29 |
) |
(33 |
) |
|||||||||
|
Payment for business acquisitions, net of cash acquired |
— |
— |
(816 |
) |
|||||||||||
|
Net cash used in investing activities |
(4,644 |
) |
(2,039 |
) |
(2,123 |
) |
|||||||||
|
Cash flows from financing activities |
|||||||||||||||
|
Issuance (repayment) of non-recourse funding obligations |
— |
(330 |
) |
— |
|||||||||||
|
Secured financing liabilities |
1,076 |
160 |
(160 |
) |
|||||||||||
|
Capital contributions from PLC |
— |
120 |
850 |
||||||||||||
|
Deposits to universal life and investments contracts |
7,830 |
6,627 |
5,184 |
||||||||||||
|
Withdrawals from universal life and investment contracts |
(3,924 |
) |
(4,147 |
) |
(3,866 |
) |
|||||||||
|
Other financing activities, net |
(50 |
) |
(3 |
) |
(1 |
) |
|||||||||
|
Net cash provided by financing activities |
4,932 |
2,427 |
2,007 |
||||||||||||
|
Change in cash |
(266 |
) |
443 |
62 |
|||||||||||
|
Cash at beginning of period |
656 |
213 |
151 |
||||||||||||
|
Cash at end of period |
$ |
390 |
$ |
656 |
$ |
213 |
|||||||||
F-9
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Basis of Presentation
Protective Life Insurance Company (the "Company"), a stock life insurance company, was founded in 1907. The Company is a wholly owned subsidiary of Protective Life Corporation ("PLC"), an insurance holding company. PLC is a wholly owned subsidiary of Dai-ichi Life Holdings, Inc., a kabushiki kaisha organized under the laws of Japan ("Dai-ichi Life"). The Company markets individual life insurance, guaranteed investment contracts, guaranteed funding agreements, fixed and variable annuities, and extended service contracts throughout the United States. The Company also maintains a separate segment devoted to the acquisition of insurance policies from other companies. PLC is a holding company with subsidiaries that provide financial services through the production, distribution, and administration of insurance and investment products.
These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Such accounting principles differ from statutory reporting practices used by insurance companies in reporting to state regulatory authorities (see also Note 21, Statutory Reporting Practices and Other Regulatory Matters).
The operating results of companies in the insurance industry have historically been subject to significant fluctuations due to changing competition, economic conditions, interest rates, investment performance, insurance ratings, claims, persistency, and other factors.
During 2020, the Company identified $63 million of certain reclassifications needed to appropriately present amounts related to reinsured vehicle service contracts. Also during 2020, the Company identified $195 million of certain cash flows presented in its investing and financing activities that were determined to be non-cash items. The Company determined that the reclassifications were not material to the financial statements for any period. These amounts have been corrected in the consolidated balance sheets, statements of income, and statements of cash flows for the year ended December 31, 2020 and 2019.
Shades Creek Captive Insurance Company ("Shades Creek") was a direct wholly owned insurance subsidiary of PLC through December 31, 2020. On January 1, 2021, Shades Creek was merged with and into the Company, with the Company being the surviving entity. The Company accounted for the transaction pursuant to Accounting Standards Codification ("ASC") 805-50 "Transactions between Entities under Common Control". The transferred assets and liabilities of Shades Creek were recorded by the Company at their carrying value at the date of transfer. In accordance with ASC 805-50, all prior financial information has been recast to reflect this transaction as of the earliest period presented under common control, January 1, 2019.
The following table presents the changes as a result of the merger of the entity under common control to previously reported amounts in the audited consolidated statements of operations for the years ended December 31, 2020 and 2019 included in the Company's annual report on Form 10-K for the year ended December 31, 2020.
F-10
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION — (Continued)
|
As Reported |
Common Control Entity |
Total (Recast) |
|||||||||||||
|
(In Millions) |
|||||||||||||||
|
For The Year Ended December 31, 2020 |
|||||||||||||||
|
Net income |
$ |
342 |
$ |
(108 |
) |
$ |
234 |
||||||||
|
Total comprehensive income |
$ |
2,471 |
$ |
(102 |
) |
$ |
2,369 |
||||||||
|
For The Year Ended December 31, 2019 |
|||||||||||||||
|
Net income |
$ |
553 |
$ |
(126 |
) |
$ |
427 |
||||||||
|
Total comprehensive income |
$ |
3,365 |
$ |
(117 |
) |
$ |
3,248 |
||||||||
Beginning in the first quarter of 2020, the outbreak of COVID-19 created significant economic and social disruption and impacted various operational and financial aspects of the Company's business. Certain impacts from COVID-19 continued into 2021, including increased claims in both the life insurance and annuity blocks. In addition, the Asset Protection segment had a reduction in sales in the second half of 2021 due to supply chain issues. The pandemic may continue to impact the Company's earnings based on, amongst other factors, the volume and severity of claims related to COVID-19 and the financial disruption caused by the pandemic, which could impact the Company's investment portfolio.
Entities Included
The consolidated financial statements include the accounts of Protective Life Insurance Company and its affiliate companies in which the Company holds a majority voting or economic interest. Intercompany balances and transactions have been eliminated.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The most significant estimates include those used in determining deferred policy acquisition costs ("DAC") and related amortization periods, goodwill recoverability, value of business acquired ("VOBA"), certain investments and certain derivatives fair values, the allowance for credit losses, other-than-temporary impairments, future policy benefits, pension and other postretirement benefits, provisions for income taxes, reserves for contingent liabilities, reinsurance risk transfer assessments, and reserves for losses in connection with unresolved legal matters.
Further, certain estimates and assumptions include the direct and indirect impact of the COVID-19 pandemic on the Company's business, financial condition and results of operations. The economic impact of the pandemic on the Company's business depends on its severity and duration, which in turn depend on highly uncertain factors such as the nature and extent of containment efforts and the timing and efficacy of vaccines. The high level of uncertainty regarding this economic impact means that
F-11
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
management's estimates and assumptions, specifically those related to investments and certain derivatives fair values, the allowance for credit losses, and future policy benefits are subject to change — perhaps substantial change — as the situation develops and new information becomes available.
Significant Accounting Policies
Income Statement
Net Investment Income
Investment income is recognized when earned, net of applicable management or other fees. Investment income on fixed maturity securities includes coupon interest, amortization of any premium and accretion of any discount. Investment income on equity securities includes dividend income and preferred coupons interest.
Investment income on commercial mortgage-backed securities ("CMBS"), residential mortgage-backed securities ("RMBS"), and other asset-backed securities is initially based upon yield, cash flow and prepayment assumptions at the date of purchase. Subsequent revisions in those assumptions are recorded using the retrospective or prospective method. Under the retrospective method used primarily for mortgage-backed and asset-backed securities of high credit quality which cannot be contractually prepaid in such a manner that we would not recover a substantial portion of the initial investment, amortized cost of the security is adjusted to the amount that would have existed had the revised assumptions been in place at the date of purchase. The adjustments to amortized cost are recorded as a charge or credit to net investment income. Under the prospective method, which is used for all other mortgage-backed and asset-backed securities, future cash flows are estimated and interest income is recognized going forward using the new internal rate of return.
Net gains (losses) — investments and derivatives
Net gains (losses) — investments and derivatives includes realized gains and losses from the sale of investments, which are calculated on the basis of specific identification on the trade date. It also includes gains and losses associated with the fair value changes of equity securities and net credit losses. In addition, it includes the gains and losses on free-standing and embedded derivatives.
Other Income
Other income consists primarily of advisory and administration service fees assessed on investment contract holder account values, marketing and distribution fees, rider charges associated with guaranteed benefits, distribution company revenues and other fees. In addition, any gains related to final settlements related to its acquisitions are included in other income.
Balance Sheet
Valuation of Investment Securities
The Company determines the appropriate classification of investment securities at the time of purchase and periodically re-evaluates such designations. Investment securities are classified as either trading, available-for-sale, or held-to-maturity securities. Investment securities classified as trading are recorded
F-12
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
at fair value with changes in fair value recorded in net gains (losses) — investments and derivatives. Investment securities purchased for long term investment purposes are classified as available-for-sale and are recorded at fair value with changes in unrealized gains and losses, net of taxes, reported as a component of other comprehensive income (loss). Investment securities are classified as held-to-maturity when the Company has the intent and ability to hold the securities to maturity and are reported at amortized cost. Interest income on available-for-sale and held-to-maturity securities includes the amortization of premiums and accretion of discounts and are recorded in investment income. As of December 31, 2020, the Company no longer held any held-to-maturity securities.
The fair value of fixed maturity, short-term, and equity securities is determined by management after considering one of three primary sources of information: third party pricing services, non-binding independent broker quotations, or pricing matrices. Security pricing is applied using a "waterfall" approach whereby publicly available prices are first sought from third party pricing services, the remaining unpriced securities are submitted to independent brokers for non-binding prices, or lastly, securities are priced using a pricing matrix. Typical inputs used by these three pricing methods include, but are not limited to: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Based on the typical trading volumes and the lack of quoted market prices for available-for-sale and trading fixed maturities, third party pricing services derive the majority of security prices from observable market inputs such as recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information as outlined above. If there are no recent reported trades, the third party pricing services and brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Certain securities are priced via independent non-binding broker quotations. Where multiple broker quotes are obtained, the Company reviews the quotes and selects the quote that provides the best estimate of the price a market participant would pay for these specific assets in an arm's length transaction. A pricing matrix is used to price securities for which the Company is unable to obtain or effectively rely on either a price from a third party service or an independent broker quotation. Included in the pricing of other asset-backed securities, collateralized mortgage obligations ("CMOs"), and mortgage-backed securities ("MBS") are estimates of the rate of future prepayments of principal and underlying collateral support over the remaining life of the securities. Such estimates are derived based on the characteristics of the underlying structure and rates of prepayments previously experienced at the interest rate levels projected for the underlying collateral. The basis for the cost of securities sold was determined at the Committee on Uniform Securities Identification Procedures ("CUSIP") level on a first in first out basis. The committee supplies a unique nine-character identification, called a CUSIP number, for each class of security approved for trading in the U.S., to facilitate clearing and settlement. These numbers are used when any buy and sell orders are recorded.
Allowance for Credit Losses — Fixed Maturity and Structured Investments
Each quarter the Company reviews investments with unrealized losses to determine whether such impairments are the result of credit losses. The Company analyzes various factors to make such determination including, but are not limited to: 1) actions taken by rating agencies, 2) default by the issuer, 3) the significance of the decline, 4) an assessment of the Company's intent to sell the security (including a more likely than not assessment of whether the Company will be required to sell the security) before recovering the security's amortized cost, 5) an economic analysis of the issuer's
F-13
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
industry, and 6) the financial strength, liquidity, and recoverability of the issuer. Management performs a security by security review each quarter to evaluate whether a credit loss has occurred.
For securities which the Company does not intend to sell and does not expect to be required to sell before recovering the security's amortized cost basis, analysis of expected cash flows is used to measure the amount of the credit loss. To the extent the amortized cost basis of the security exceeds the present value of future cash flows expected to be collected, this difference represents a credit loss. Credit losses are recorded in net gains (losses) — investments and derivatives with a corresponding adjustment to the allowance for credit losses, except that the credit loss recognized cannot exceed the difference between the book value and fair value of the security as of the date of the analysis. In future periods, recoveries in the present value of expected cash flows are recorded as a reversal of the previously recognized allowance for credit losses with an offsetting adjustment to net gains (losses) — investments and derivatives. The Company considers contractual cash flows and all known market data related to cash flows when developing its estimates of expected cash flows. The Company uses the effective interest rate implicit in the security at the date of acquisition to discount expected cash flows. For floating rate securities, the Company's policy is to lock in the interest rate at the first instance of an impairment. Estimates of expected cash flows are not probability-weighted but reflect the Company's best estimate based on past events, current conditions, and reasonable and supportable forecasts of future events. Debt securities that the Company intends to sell or expects to be required to sell before recovery are written down to fair value with the change recognized in net gains (losses) — investments and derivatives.
The Company presents accrued interest receivable separately from other components of the amortized cost basis of its fixed maturity and structured investments and has made an accounting policy election not to measure an allowance for credit losses for accrued interest receivable. The Company's policy is to write off uncollectible accrued interest receivables through a reversal of interest income in the period in which a credit loss is identified.
Prior to January 1, 2020, the Company calculated a valuation allowance based on the analysis of specific loans that were believed to have a higher risk of credit impairment consistent with the applicable guidance for loan impairments in ASC Subtopic 310. Due to the Company's loss experience and nature of the loan portfolio, the Company believed that a collectively evaluated allowance would be inappropriate. Since the Company used the specific identification method for calculating the allowance, it was necessary to review the economic situation of each borrower to determine those that had higher risk of credit impairment. The Company has a team of professionals that monitors borrower conditions such as payment practices, borrower credit, operating performance, and property conditions, as well as ensuring the timely payment of property taxes and insurance. Through this monitoring process, the Company assessed the risk of each loan. When issues were identified, the severity of the issues was assessed and reviewed for possible credit impairment. If a loss was deemed probable, an expected loss calculation was performed and an allowance was established for that loan based on the expected loss. The expected loss was calculated as the excess carrying value of a loan over either the present value of expected future cash flows discounted at the loan's original effective interest rate, or the current estimated fair value of the loan's underlying collateral. A loan could be subsequently charged off at such point that the Company no longer expected to receive cash payments, the present value of future expected payments of the renegotiated loan was less than the current principal balance, or at such time that the Company was party to foreclosure or bankruptcy proceedings associated with the borrower and did not expect to recover the principal balance of the loan.
F-14
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
Corporate-Owned Life Insurance
The Company has purchased corporate-owned life insurance ("COLI") on the lives of certain employees. COLI is carried at the cash surrender value of the policies, which is based upon the underlying fair value of the portfolio of assets. Changes in the cash surrender value are reported currently in earnings. COLI is included in other long-term investments on the Company's balance sheet and the cash surrender value was $710 million and $179 million as of December 31, 2021 and 2020, respectively.
Derivative Financial Instruments
The Company records its derivative financial instruments at fair value in the consolidated balance sheet in other long-term investments and other liabilities. The Company designates derivatives as either a cash flow hedge which hedges the variability of cash flows specific to a recognized asset or liability or forecasted transaction; a fair value hedge, which hedges the fair value of a recognized asset or liability or unrecognized firm commitment; or a derivative that does not qualify for hedge accounting. The Company assesses the effectiveness of a hedge at its inception and subsequently on a quarterly basis. For cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is reported as a component of other comprehensive income (loss) and reclassified into earnings in the same period during which the hedged item impacts earnings. For fair value hedges, their gain or loss as well as the offsetting loss or gain on the hedged item attributable to the hedged risk are recognized in net gains (losses) — investments and derivatives. The Company reports changes in fair values of derivatives that are not part of a qualifying hedge relationship in net gains (losses) — investments and derivatives. For additional information, refer to Note 6, Derivative Financial Instruments.
Commercial Mortgage Loans
The Company's commercial mortgage loans are stated at unpaid principal balance, adjusted for any unamortized premium or discount, and net of the allowance for credit losses ("ACL"). Interest income is accrued on the principal amount of the loan based on the loan's contractual interest rate. Amortization of premiums and discounts is recorded using the effective yield method. Interest income, amortization of premiums and discounts and prepayment fees are reported in net investment income.
Allowance for Credit Losses — Commercial Mortgage Loans and Unfunded Commitments
Effective January 1, 2020, the ACL represents the Company's best estimate of expected credit losses over the contractual term of the loans. The allowance for credit losses for unfunded loan commitments is recognized as a component of other liabilities on the consolidated condensed balance sheet. Changes in the allowance for credit losses for both funded and unfunded commercial mortgage loans are recognized in net gains (losses) — investments and derivatives. Prior to January 1, 2020, the Company calculated a valuation allowance based on the analysis of specific loans that were believed to have a higher risk of credit impairment consistent with the applicable guidance for loan impairments in ASC Subtopic 310.
The Company uses a loan-level probability of default ("PD") and loss given default ("LGD") model to calculate the allowance for credit losses for substantially all of its commercial mortgage loans and unfunded loan commitments. Guidance in FASB ASC Topic 326-20 — Credit Losses requires collective assessment of financial assets with similar risk characteristics. Consistent with this guidance, the
F-15
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
model used by the Company (the "CML Model") incorporates historical default data for a large number of loans with similar characteristics to the Company's commercial mortgage loans in the measurement of the allowance for credit losses. Relevant risk characteristics include debt service coverage ratio ("DSCR"), loan-to-value ratio ("LTV"), geographic location, and property type. This historical default data is applied through the CML Model to forecast loan-level risk parameters including PD and LGD which provide the basis for the determination of expected losses.
The CML Model incorporates both current conditions and reasonable and supportable forecasts when estimating the PD and LGD values that are used as the basis for calculating expected losses. Current conditions are incorporated by considering market-specific information, such as vacancy rates and property prices, to reflect the current position in the market cycle. To incorporate reasonable and supportable forecasts, loan-level risk parameters produced by the CML Model are conditioned by multiple probability-weighted macroeconomic forecast scenarios. CML Model results are also subject to adjustments based on other qualitative considerations to reflect management's best estimate of the impact of future events and circumstances on the ACL.
PDs and LGDs are forecasted over a reasonable and supportable forecast period, which is reassessed on a quarterly basis. After the reasonable and supportable forecast period, the CML Model reverts to the Company's own historical loss history at a portfolio segment level. The historical loss data used for reversion will be assessed annually in the third quarter, along with certain other model inputs and assumptions.
All or a portion of a loan may be written off at such point that a) the Company no longer expects to receive cash payments, b) the present value of future expected payments of a renegotiated loan is less than the current principal balance, or c) at such time that the Company is party to foreclosure or bankruptcy proceedings associated with the borrower and does not expect to recover the principal balance of the loan. A write-off is recorded by eliminating the allowance against the commercial mortgage loan and recording the renegotiated loan or the collateral property related to the loan as investment real estate on the balance sheet, which is carried at the lower of the appraised fair value of the property or the unpaid principal balance of the loan, less estimated selling costs associated with the property.
Certain loans which meet the definition of collateral dependent are identified as part of the Company's ongoing loan surveillance process. Loans are considered to be collateral dependent if foreclosure is deemed probable, or if a borrower is in financial difficulty and repayment is expected to be provided substantially through the operation or sale of the underlying collateral. The ACL for loans identified as collateral dependent is measured based on the fair value of the underlying collateral, less costs to sell.
The Company presents accrued interest receivable separately from other components of the amortized cost basis of its commercial mortgage loans and has made an accounting policy election not to measure an allowance for credit losses for accrued interest receivable. It is the Company's policy to cease to carry accrued interest on loans that are over 90 days delinquent. For loans less than 90 days delinquent, interest is accrued unless it is determined that the accrued interest is not collectible. In each scenario, accrued income is reversed through investment income. Refer to Note 8, Commercial Mortgage Loans, for additional information.
F-16
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
Short-term Investments
Short-term investments primarily consist of highly liquid securities and other investments with remaining maturities of one year or less, but greater than three months, at the time of purchase. These securities and investments are generally carried at fair value or amortized cost that approximates fair value.
Cash
Cash includes all demand deposits reduced by the amount of outstanding checks and drafts. As a result of the Company's cash management system, checks issued from a particular bank but not yet presented for payment may create negative book cash balances with the bank at certain reporting dates. Such negative balances are included in other liabilities and were $178 million and $185 million as of December 31, 2021 and 2020, respectively. The Company has deposits with certain financial institutions which exceed federally insured limits. The Company has reviewed the creditworthiness of these financial institutions and believes there is minimal risk of a material loss.
Policy Loans
Policy loans are stated at unpaid principal balances. Interest income is recorded as earned using the contractual interest rate. Generally, accrued interest is capitalized on the policy's anniversary date. Any unpaid principal and accrued interest is deducted from the cash surrender value or the death benefit prior to settlement of the insurance policy.
Deferred Policy Acquisition Costs ("DAC")
The incremental direct costs associated with successfully acquired insurance policies are deferred to the extent such costs are deemed recoverable from future profits. Such costs include commissions, costs of policy issuance and underwriting and certain other costs that are directly related to the successful acquisition of traditional life and health insurance, credit insurance, universal life insurance, and investment products. DAC is subject to recoverability testing at the end of each accounting period. Traditional life and health insurance acquisition costs are amortized over the premium-payment period of the related policies in proportion to the ratio of annual premium income to the present value of the total anticipated premium income. Credit insurance acquisition costs are being amortized in proportion to earned premium. Acquisition costs for universal life and investment products are amortized over the lives of the policies in relation to the present value of estimated gross profits before amortization. Acquisition costs for stable value contracts are amortized over the term of the contracts using the effective yield method.
The Company makes certain assumptions regarding the mortality, persistency, expenses, and interest rates (equal to the rate used to compute liabilities for future policy benefits, currently 1.00% to 7.86%) the Company expects to experience in future periods when determining the present value of estimated gross profits ("EGPs"). These assumptions are best estimates and are periodically updated whenever actual experience and/or expectations for the future change from that assumed. Additionally, DAC is also impacted by unrealized investment gains (losses) which would have been recognized if such gains and losses had been realized. The Company includes the impact of these credits or charges, net of tax, in accumulated other comprehensive income ("AOCI").
F-17
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
Value of Businesses Acquired ("VOBA")
In conjunction with the Merger and the acquisition of insurance policies or investment contracts, a portion of the purchase price is allocated to the right to receive future gross profits from cash flows and earnings of associated insurance policies and investment contracts. This intangible asset, called VOBA, is based on the actuarially estimated present value of future cash flows from associated insurance policies and investment contracts acquired. The estimated present value of future cash flows used in the calculation of the VOBA is based on certain assumptions, including mortality, persistency, expenses, and interest rates that the Company believes to be those of a market participant. The Company amortizes VOBA in proportion to gross premiums for traditional life products, or estimated gross margins ("EGMs") for participating traditional life products within the MONY Life Insurance Company ("MONY") block. For interest sensitive products, the Company uses various amortization bases including EGPs, revenues, account values, or insurance in-force. VOBA is subject to annual recoverability testing.
Included within the deferred policy acquisition costs and value of business acquired line of the Company's consolidated balance sheets are amounts related to certain contracts or blocks of business that have negative VOBA. These amounts are presented on a net basis with positive VOBA amounts within this line on the Company's consolidated balance sheets. Negative VOBA is amortized over the life of the related policies based on the amount of insurance in-force (for life insurance) or account values (for annuities). Such amortization is recorded in the amortization of deferred policy acquisition costs and value of business acquired line of the Company's consolidated statements of income on a net basis with any positive VOBA amortization.
Other Intangible Assets
Other intangible assets with definite lives are amortized over the estimated useful life of the asset and reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Amortizable intangible assets primarily consist of distribution relationships, trade names, technology, and software. Intangible assets with indefinite lives, primarily insurance licenses, are not amortized, but are reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Software is generally amortized over a three — five year useful life.
Other intangible assets recognized by the Company included the following:
|
As of December 31, |
Estimated |
||||||||||||||
|
2021 |
2020 |
Useful Life |
|||||||||||||
|
(Dollars In Millions) |
(In Years) |
||||||||||||||
|
Distribution relationships |
$ |
314 |
$ |
340 |
14-22 |
||||||||||
|
Trade names |
58 |
65 |
13-17 |
||||||||||||
|
Technology |
56 |
71 |
7-14 |
||||||||||||
|
Other |
31 |
32 |
|||||||||||||
|
Total intangible assets subject to amortization |
459 |
508 |
|||||||||||||
|
Insurance licenses |
32 |
32 |
Indefinite |
||||||||||||
|
Total other intangible assets |
$ |
491 |
$ |
540 |
|||||||||||
Other identified intangible assets were valued using the excess earnings method, relief from royalty method or cost approach, as appropriate.
F-18
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
Amortizable intangible assets will be amortized straight line over their assigned useful lives. The following is a schedule of future estimated aggregate amortization expense:
| Year |
Amount |
||||||
|
(Dollars In Millions) |
|||||||
| 2022 |
$ |
54 |
|||||
| 2023 |
51 |
||||||
| 2024 |
48 |
||||||
| 2025 |
43 |
||||||
| 2026 |
43 |
||||||
Property and Equipment
The Company depreciates its assets using the straight-line method over the estimated useful lives of the assets. The Company's home office is depreciated over twenty-five years, furniture is depreciated over a ten year useful life, office equipment and machines are depreciated over a five year useful life, and computers are depreciated over a four year useful life. Land is not depreciated. Major repairs or improvements are capitalized and depreciated over the estimated useful lives of the assets. Other repairs are expensed as incurred. The cost and related accumulated depreciation of property and equipment sold or retired are removed from the accounts, and resulting gains or losses are included in income. Leases are recorded on the balance sheet as right-of-use assets and liabilities within property and equipment and other liabilities, respectively.
Property and equipment consisted of the following:
|
As of December 31, |
|||||||||||
|
2021 |
2020 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Home office building |
$ |
160 |
$ |
159 |
|||||||
|
Data processing equipment |
39 |
36 |
|||||||||
|
Capital leases |
36 |
25 |
|||||||||
|
Other, principally furniture and equipment |
22 |
20 |
|||||||||
|
Total property and equipment subject to depreciation |
257 |
240 |
|||||||||
|
Accumulated depreciation |
(79 |
) |
(61 |
) |
|||||||
|
Land |
25 |
25 |
|||||||||
|
Total property and equipment |
$ |
203 |
$ |
204 |
|||||||
Separate Accounts
The separate account assets represent funds for which the Company does not bear the investment risk. These assets are carried at fair value and are equal to the separate account liabilities, which represent the policyholder's equity in those assets. The investment income and investment gains and losses on the separate account assets accrue directly to the policyholder. These amounts are reported separately as assets and liabilities related to separate accounts in the accompanying consolidated financial statements. Amounts assessed against policy account balances for the costs of insurance, policy administration, and other services are included in premiums and policy fees in the accompanying consolidated statements of income. Fees are generally based on the daily net assets of the policyholder's account value and recognized as revenue when assessed. Assets and liabilities
F-19
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
related to separate accounts include balances related to separate accounts assumed through reinsurance. These balances relate to variable annuity and variable life policies that we have reinsured on a modified coinsurance basis.
Stable Value Product Account Balances
The Stable Value Products segment sells fixed and floating rate funding agreements directly to qualified institutional investors. The segment also issues funding agreements to the Federal Home Loan Bank ("FHLB"), and markets guaranteed investment contracts ("GICs") to 401(k) and other qualified retirement savings plans. GICs are contracts which specify a return on deposits for a specified period and often provide flexibility for withdrawals at book value in keeping with the benefits provided by the plan.
The Company records its stable value contract liabilities in the consolidated balance sheets in stable value product account balances at the deposit amount plus accrued interest, adjusted for any unamortized premium or discount. Interest on the contracts is accrued based upon contract terms. Any premium or discount is amortized using the effective yield method.
The segment's products complement the Company's overall asset/liability management in that the terms may be tailored to the needs of the Company as the seller of the contracts. Stable value product account balances include GICs and funding agreements the Company has issued. As of December 31, 2021 and 2020, the Company had $6,573 million and $4,032 million, respectively, of stable value product account balances marketed through structured programs. Most GICs and funding agreements the Company has written have maturities of one to twelve years.
As of December 31, 2021, future maturities of stable value products were as follows:
| Year of Maturity |
Amount |
||||||
|
(Dollars In Millions) |
|||||||
| 2022 |
$ |
2,559 |
|||||
| 2023-2024 |
3,551 |
||||||
| 2025-2026 |
1,347 |
||||||
| Thereafter |
1,069 |
||||||
Insurance Liabilities and Reserves
Establishing an adequate liability for the Company's obligations to policyholders requires the use of certain assumptions. Estimating liabilities for future policy benefits on life and health insurance products requires the use of assumptions relative to future investment yields, mortality, morbidity, persistency, and other assumptions based on the Company's historical experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviation. Determining liabilities for the Company's property and casualty insurance products also requires the use of assumptions, including the projected levels of used vehicle prices, the frequency and severity of claims, and the effectiveness of internal processes designed to reduce the level of claims. The Company's results depend significantly upon the extent to which its actual claims experience is consistent with the assumptions the Company used in determining its reserves and pricing its products. The Company's reserve assumptions and estimates require significant judgment and, therefore, are inherently uncertain. The Company cannot determine with precision the ultimate amounts that it will pay for actual claims or the timing of those payments.
F-20
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
Guaranteed Living Withdrawal Benefits
The Company also establishes reserves for guaranteed living withdrawal benefits ("GLWB") on its variable annuity ("VA") products. The GLWB is valued in accordance with FASB guidance under the ASC Derivatives and Hedging Topic which utilizes the valuation technique prescribed by the ASC Fair Value Measurements and Disclosures Topic, which requires the embedded derivative to be recorded at fair value using current interest rates and implied volatilities for the equity indices. The fair value of the GLWB is impacted by equity market conditions and can result in the GLWB embedded derivative being in an overall net asset or net liability position. In times of favorable equity market conditions the likelihood and severity of claims is reduced and expected fee income increases. Since claims are generally expected later than fees, these favorable equity market conditions can result in the present value of fees being greater than the present value of claims, which results in a net GLWB embedded derivative asset. In times of unfavorable equity market conditions the likelihood and severity of claims is increased and expected fee income decreases and can result in the present value of claims exceeding the present value of fees resulting in a net GLWB embedded derivative liability. The methods used to estimate the embedded derivative employ assumptions about mortality, lapses, policyholder behavior, equity market returns, interest rates, and market volatility. The Company assumes age-based mortality from the Ruark 2015 ALB table adjusted for company experience. Differences between the actual experience and the assumptions used result in variances in profit and could result in losses. As of December 31, 2021 and 2020, our net GLWB liability held was $475 million and $822 million, respectively.
Goodwill
The balance recognized as goodwill is not amortized, but is reviewed for impairment on an annual basis, or more frequently as events or circumstances may warrant, including those circumstances which would more likely than not reduce the fair value of the Company's reporting units below its carrying amount. Accounting for goodwill requires an estimate of the future profitability of the associated lines of business within the Company's reporting units to assess the recoverability of the capitalized goodwill. The Company's material goodwill balances are attributable to certain of its reportable segments. Each of the Company's reportable segments are considered separate reporting units, with the exception of the Retail Life and Annuity segment. This reportable segment contains the Protection and Retirement divisions which are considered separate reporting units. The Company evaluates the carrying value of goodwill at the reporting units level at least annually and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Such circumstances could include, but are not limited to: 1) a significant adverse change in legal factors or in business climate, 2) unanticipated competition, or 3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company first determines through qualitative analysis whether relevant events and circumstances indicate that it is more likely than not that a reporting unit's goodwill balances is impaired as of the testing date. If the qualitative analysis does not indicate that an impairment of a reporting unit's goodwill is more likely than not then no other specific quantitative impairment testing is required.
F-21
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
If it is determined that it is more likely than not that impairment exists, the Company performs a quantitative assessment and compares its estimate of the fair value of the reporting unit to which the goodwill is assigned to the reporting unit's carrying amount, including goodwill. The Company utilizes a fair value measurement (which includes a discounted cash flows analysis) to assess the carrying value of the reporting unit in consideration of the recoverability of the goodwill balance assigned to each reporting unit as of the measurement date. The cash flows used to determine the fair value of the Company's reporting units are dependent on a number of significant assumptions. The Company's estimates, which consider a market participant view of fair value, are subject to change given the inherent uncertainty in predicting future results and cash flows, which are impacted by such things as policyholder behavior, competitor pricing, capital limitations, new product introductions, and specific industry and market conditions. See Note 10, Goodwill for additional information on the Company's annual impairment review.
Income Taxes
The Company's income tax returns are included in PLC's consolidated U.S. income tax return.
The Company uses the asset and liability method of accounting for income taxes. Generally, most items in pretax book income are also included in taxable income in the same year. However, some items are recognized for book purposes and for tax purposes in different years or are never recognized for either book or tax purposes. Those differences that will never be recognized for either book or tax purposes are permanent differences (e.g., investment income not subject to tax). As a result, the effective tax rate reflected in the financial statements may differ from the statutory rate reflected in the tax return. Those differences that are reported in different years for book and tax purposes are temporary and will reverse over time (e.g., the valuation of future policy benefits). These temporary differences are accounted for in the intervening periods as deferred tax assets and liabilities. Deferred tax assets generally represent revenue that is taxable before it is recognized in financial income and expenses that are deductible after they are recognized in financial income. Deferred tax liabilities generally represent revenues that are taxable after they are recognized in financial income or expenses or losses that are deductible before they are recognized in financial income. Components of AOCI are presented net of tax, and it is the Company's policy to use the aggregate portfolio approach to clear the disproportionate tax effects that remain in AOCI as a result of tax rate changes and certain other events. Under the aggregate portfolio approach, disproportionate tax effects are cleared only when the portfolio of investments that gave rise to the deferred tax item is sold or otherwise disposed of in its entirety.
The Company evaluates the recoverability of the Company's deferred tax assets and establishes a valuation allowance, if necessary, to reduce the Company's deferred tax assets to an amount that is more likely than not to be realized. Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance the Company may consider many factors, including: (1) the nature of the deferred tax assets and liabilities; (2) whether they are ordinary or capital; (3) in which tax jurisdictions they were generated and the timing of their reversal; (4) taxable income in prior carryback years as well as projected taxable earnings exclusive of reversing temporary differences and
F-22
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
carryforwards; (5) the length of time that carryovers can be utilized in the various taxing jurisdictions; (6) any unique tax rules that would impact the utilization of the deferred tax assets; and (7) any tax planning strategies that the Company would employ to avoid a tax benefit from expiring unused. Although realization is not assured, management believes it is more likely than not that the deferred tax assets, net of valuation allowances, will be realized.
GAAP prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that a company has taken or expects to take on tax returns. The application of this guidance is a two-step process, the first step being recognition. The Company determines whether it is more likely than not, based on the technical merits, that the tax position will be sustained upon examination. If a tax position does not meet the more likely than not recognition threshold, the benefit of that position is not recognized in the financial statements. The second step for the tax positions that meet the more likely than not criteria is measurement. The Company measures the tax position as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate resolution with a taxing authority that has full knowledge of all relevant information. This measurement considers the amounts and probabilities of the outcomes that could be realized upon ultimate settlement using the facts, circumstances, and information available at the reporting date.
The Company's liability for income taxes includes the liability for unrecognized tax benefits, interest and penalties which relate to tax years still subject to review by the Internal Revenue Service ("IRS") or other taxing jurisdictions. Audit periods remain open for review until the statute of limitations expires. Generally, for tax years which produce net operating losses, capital losses or tax credit carryforwards, the statute of limitations does not close until the expiration of the statute of limitations for the tax year in which they are fully utilized. The completion of review or the expiration of the statute of limitations for a given audit period could result in an adjustment to the liability for income taxes. The Company classifies all interest and penalties related to tax uncertainties as income tax expense. Refer to Note 18, Income Taxes, for additional information regarding income taxes.
Policyholder Liabilities, Revenues, and Benefits Expense
Future Policy Benefits and Claims
Liabilities for life and annuity benefit reserves consist of liabilities for traditional life insurance, cash values associated with universal life insurance, immediate annuity benefit reserves, and other benefits associated with life and annuity benefits. The unpaid life claim liabilities consist of current pending claims as well as an estimate of incurred but not reported life insurance claims.
Other policy benefit reserves consist of certain health insurance policies that are in runoff. The unpaid claim liabilities associated with other policy benefits includes current pending claims, the present value of estimated future claim payments for policies currently receiving benefits and an estimate of claims incurred but not yet reported.
Traditional Life, Health, and Credit Insurance Products
Traditional life insurance products consist principally of those products with fixed and guaranteed premiums and benefits, and they include whole life insurance policies, term and term-like life insurance
F-23
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
policies, limited payment life insurance policies, and certain annuities with life contingencies. In accordance with ASC 805, the liabilities for future policy benefits on traditional life insurance products, when combined with the associated VOBA, were recorded at fair value on the date of the Merger. These values, subsequent to the Merger, are computed using assumptions that include interest rates, mortality, lapse rates, expense estimates, and other assumptions based on the Company's experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviation.
Liabilities for future policy benefits on traditional life insurance products have been computed using a net level method including assumptions as to investment yields, mortality, persistency, and other assumptions based on the Company's experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviation. Reserve investment yield assumptions on December 31, 2021, range from approximately 2.50% to 5.50%. The liability for future policy benefits and claims on traditional life, health, and credit insurance products includes estimated unpaid claims that have been reported to us and claims incurred but not yet reported. Policy claims are charged to expense in the period in which the claims are incurred.
Traditional life insurance premiums are recognized as revenue when due. Health and credit insurance premiums are recognized as revenue over the terms of the policies. Benefits and expenses are associated with earned premiums so that profits are recognized over the life of the contracts. This is accomplished by means of the provision for liabilities for future policy benefits and the amortization of DAC and VOBA. Gross premiums in excess of net premiums related to immediate annuities are deferred and recognized over the life of the policy.
Universal Life and Investment Products
Universal life and investment products include universal life insurance, guaranteed investment contracts, guaranteed funding agreements, deferred annuities, and annuities without life contingencies. Premiums and policy fees for universal life and investment products consist of fees that have been assessed against policy account balances for the costs of insurance, policy administration, and surrenders. Such fees are recognized when assessed and earned. Benefit reserves for universal life and investment products represent policy account balances before applicable surrender charges plus certain deferred policy initiation fees that are recognized in income over the term of the policies. Policy benefits and claims that are charged to expense include benefit claims incurred in the period in excess of related policy account balances and interest credited to policy account balances. Interest rates credited to universal life products ranged from 1.0% to 8.75% and investment products ranged from 0.05% to 9.81% in 2021.
The Company establishes liabilities for fixed indexed annuity ("FIA") products. These products are deferred fixed annuities with a guaranteed minimum interest rate plus a contingent return based on equity market performance. The FIA product is considered a hybrid financial instrument under FASB ASC Topic 815 — Derivatives and Hedging which allows the Company to make the election to value the liabilities of these FIA products at fair value. This election was made for the FIA products issued through 2009. These products are no longer being marketed. The future changes in the fair value of the liability for these FIA products are recorded in Benefit and settlement expenses with the liability being recorded in Annuity account balances. For more information regarding the determination of fair
F-24
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
value of annuity account balances please refer to Note 5, Fair Value of Financial Instruments. Premiums and policy fees for these FIA products consist of fees that have been assessed against the policy account balances for surrenders. Such fees are recognized when assessed and earned.
The Company currently markets a deferred fixed annuity with a guaranteed minimum interest rate plus a contingent return based on equity market performance and the products are considered hybrid financial instruments under the FASB's ASC Topic 815 — Derivatives and Hedging. As a result, the Company accounts for the provision that provides for a contingent return based on equity market performance as an embedded derivative. The embedded derivative is bifurcated from the host contract and recorded at fair value in Other liabilities. Changes in the fair value of the embedded derivative are recorded in net gains (losses) — investments and derivatives. For more information regarding the determination of fair value of the FIA embedded derivative refer to Note 5, Fair Value of Financial Instruments. The host contract is accounted for as a universal life ("UL") type insurance contract in accordance with ASC Topic 944 — Financial Services — Insurance and is recorded in Annuity account balances with any discount to the minimum account value being accreted using the effective yield method.
The Company markets universal life products with a guaranteed minimum interest rate plus a contingent return based on equity market performance and the products are considered hybrid financial instruments under the FASB's ASC Topic 815 — Derivatives and Hedging. The Company has not elected to value these indexed universal life ("IUL") products at fair value prior to the Merger date. As a result, the Company accounts for the provision that provides for a contingent return based on equity market performance as an embedded derivative. The embedded derivative is bifurcated from the host contract and recorded at fair value in Other liabilities. Changes in the fair value of the embedded derivative are recorded in net gains (losses) — investments and derivatives. For more information regarding the determination of fair value of the IUL embedded derivative refer to Note 5, Fair Value of Financial Instruments. The host contract is accounted for as a debt instrument in accordance with ASC Topic 944 — Financial Services — Insurance and is recorded in Future policy benefits and claims with any discount to the minimum account value being accreted using the effective yield method. Benefits and settlement expenses include accrued interest and benefit claims incurred during the period.
The Company's accounting policies with respect to variable universal life ("VUL") and VA are identical to those noted above for universal life and investment products except that policy account balances (excluding account balances that earn a fixed rate) are valued at fair value and reported as components of assets and liabilities related to separate accounts.
The Company establishes liabilities for guaranteed minimum death benefits ("GMDB") on its VA products. The methods used to estimate the liabilities employ assumptions about mortality and the performance of equity markets. The Company assumes age-based mortality from the Ruark 2015 ALB table adjusted for company experience. Future declines in the equity market would increase the Company's GMDB liability. Differences between the actual experience and the assumptions used result in variances in profit and could result in losses. A portion of the Company's GMDB is subject to a dollar-for-dollar reduction upon withdrawal of related annuity deposits on contracts issued prior to January 1, 2003. As of December 31, 2021 and 2020, the GMDB reserve was $38 million and $43 million.
F-25
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
Annuity Account Balances and Other Policyholders' Funds
Annuity account balances consists of the fixed account value of deferred annuities and the host contract value of indexed annuities. Other policyholders' funds consists of immediate benefit accounts and supplementary contracts without life contingencies.
Property and Casualty Insurance Products
Property and casualty insurance products include service contract business, surety bonds, and guaranteed asset protection ("GAP"). Premiums and fees associated with service contracts and GAP products are recognized based on expected claim patterns. For all other products, premiums are generally recognized over the terms of the contract on a pro-rata basis. Commissions and fee income associated with other products are recognized as earned when the related services are provided to the customer. Unearned premium reserves are maintained for the portion of the premiums that is related to the unexpired period of the policy. Such reserves are computed by pro rata methods or methods related to anticipated claims. Benefit reserves are recorded when insured events occur. Benefit reserves include case basis reserves for known but unpaid claims as of the balance sheet date as well as incurred but not reported ("IBNR") reserves for claims where the insured event has occurred but has not been reported to the Company as of the balance sheet date. The case basis reserves and IBNR are calculated based on historical experience and on assumptions relating to claim severity and frequency, the level of used vehicle prices, and other factors. These assumptions are modified as necessary to reflect anticipated trends.
Reinsurance
The Company uses reinsurance extensively in certain of its segments and accounts for reinsurance and the recognition of the impact of reinsurance costs in accordance with the ASC Financial Services — Insurance Topic. The following summarizes some of the key aspects of the Company's accounting policies for reinsurance.
Reinsurance Accounting Methodology — Ceded premiums of the Company's traditional life insurance products are treated as an offset to direct premium and policy fee revenue and are recognized when due to the assuming company. Ceded claims are treated as an offset to direct benefits and settlement expenses and are recognized when the claim is incurred on a direct basis. Ceded policy reserve changes are also treated as an offset to benefits and settlement expenses and are recognized during the applicable financial reporting period. Expense allowances paid by the assuming companies which are allocable to the current period are treated as an offset to other operating expenses. Since reinsurance treaties typically provide for allowance percentages that decrease over the lifetime of a policy, allowances in excess of the "ultimate" or final level allowance are capitalized. Amortization of capitalized reinsurance expense allowances representing recovery of acquisition costs is treated as an offset to direct amortization of DAC or VOBA. Amortization of deferred expense allowances is calculated as a level percentage of expected premiums in all durations given expected future lapses and mortality and accretion due to interest.
F-26
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
The Company utilizes reinsurance on certain short duration insurance contracts (primarily issued through the Asset Protection segment). As part of these reinsurance transactions the Company receives reinsurance allowances which reimburse the Company for acquisition costs such as commissions and premium taxes. A ceding fee is also collected to cover other administrative costs and profits for the Company. As a component of reinsurance costs, reinsurance allowances are accounted for in accordance with the relevant provisions of ASC Financial Services — Insurance Topic, which state that reinsurance costs should be amortized over the contract period of the reinsurance if the contract is short-duration. Accordingly, reinsurance allowances received related to short-duration contracts are capitalized and charged to expense in proportion to premiums earned. Ceded unamortized acquisition costs are netted with direct unamortized acquisition costs in the balance sheet.
Ceded premiums and policy fees on the Company's fixed universal life ("UL"), VUL, bank-owned life insurance ("BOLI"), and annuity products reduce premiums and policy fees recognized by the Company. Ceded claims are treated as an offset to direct benefits and settlement expenses and are recognized when the claim is incurred on a direct basis. Ceded policy reserve changes are also treated as an offset to benefits and settlement expenses and are recognized during the applicable valuation period.
Since reinsurance treaties typically provide for allowance percentages that decrease over the lifetime of a policy, allowances in excess of the "ultimate" or final level allowance are capitalized. Amortization of capitalized reinsurance expense allowances are amortized based on future expected gross profits. Assumptions regarding mortality, lapses, and interest rates are continuously reviewed and may be periodically changed. These changes will result in "unlocking" that changes the balance in the ceded deferred acquisition cost and can affect the amortization of DAC and VOBA. Ceded unearned revenue liabilities are also amortized based on expected gross profits. Assumptions are based on the best current estimate of expected mortality, lapses and interest spread.
The Company has also assumed certain policy risks written by other insurance companies through reinsurance agreements. Premiums and policy fees as well as Benefits and settlement expenses include amounts assumed under reinsurance agreements and are net of reinsurance ceded. Assumed reinsurance is accounted for in accordance with ASC Financial Services — Insurance Topic.
Reinsurance Allowances — Long-Duration Contracts — Reinsurance allowances are intended to reimburse the ceding company for some portion of the ceding company's commissions, expenses, and taxes. The amount and timing of reinsurance allowances (both first year and renewal allowances) are contractually determined by the applicable reinsurance contract and do not necessarily bear a relationship to the amount and incidence of expenses actually paid by the ceding company in any given year.
Ultimate reinsurance allowances are defined as the lowest allowance percentage paid by the reinsurer in any policy duration over the lifetime of a universal life policy (or through the end of the level term period for a traditional life policy). Ultimate reinsurance allowances are determined during the negotiation of each reinsurance agreement and will differ between agreements.
F-27
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
The Company determines its "cost of reinsurance" to include amounts paid to the reinsurer (ceded premiums) net of amounts reimbursed by the reinsurer (in the form of allowances). As noted within ASC 944, Financial Services — Insurance Topic, "The difference, if any, between amounts paid for a reinsurance contract and the amount of the liabilities for policy benefits relating to the underlying reinsured contracts is part of the estimated cost to be amortized." The Company's policy is to amortize the cost of reinsurance over the life of the underlying reinsured contracts (for long-duration policies) in a manner consistent with the way in which benefits and expenses on the underlying contracts are recognized. For the Company's long-duration contracts, it is the Company's practice to defer reinsurance allowances as a component of the cost of reinsurance and recognize the portion related to the recovery of acquisition costs as a reduction of applicable unamortized acquisition costs in such a manner that net acquisition costs are capitalized and charged to expense in proportion to net revenue recognized. The remaining balance of reinsurance allowances are included as a component of the cost of reinsurance and those allowances which are allocable to the current period are recorded as an offset to operating expenses in the current period consistent with the recognition of benefits and expenses on the underlying reinsured contracts. This practice is consistent with the Company's practice of capitalizing direct expenses (e.g. commissions), and results in the recognition of reinsurance allowances on a systematic basis over the life of the reinsured policies on a basis consistent with the way in which acquisition costs on the underlying reinsured contracts would be recognized. In some cases reinsurance allowances allocable to the current period may exceed non-deferred direct costs, which may cause net other operating expenses (related to specific contracts) to be negative.
Amortization of Reinsurance Allowances — Reinsurance allowances do not affect the methodology used to amortize DAC and VOBA, or the period over which such DAC and VOBA are amortized. Reinsurance allowances offset the direct expenses capitalized, reducing the net amount that is capitalized. DAC and VOBA on traditional life policies are amortized based on the pattern of estimated gross premiums of the policies in force. Reinsurance allowances do not affect the gross premiums, so therefore they do not impact traditional life amortization patterns. DAC and VOBA on universal life products are amortized based on the pattern of estimated gross profits of the policies in force. Reinsurance allowances are considered in the determination of estimated gross profits, and therefore do impact amortization patterns.
Reinsurance Assets and Liabilities — Claim liabilities and policy benefits are calculated consistently for all policies, regardless of whether or not the policy is reinsured. Once the claim liabilities and policy benefits for the underlying policies are estimated, the amounts recoverable from the reinsurers are estimated based on a number of factors including the terms of the reinsurance contracts, historical payment patterns of reinsurance partners, and the financial strength and credit worthiness of reinsurance partners and recorded as Reinsurance receivables on the balance sheet.
Liabilities for unpaid reinsurance claims are produced from claims and reinsurance system records, which contain the relevant terms of the individual reinsurance contracts. The Company monitors claims due from reinsurers to ensure that balances are settled on a timely basis. Incurred but not reported claims are reviewed to ensure that appropriate amounts are ceded.
The Company analyzes and monitors the credit worthiness of each of its reinsurance partners to minimize collection issues. For newly executed reinsurance contracts with reinsurance companies that
F-28
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
do not meet predetermined standards, the Company requires collateral such as assets held in trusts or letters of credit.
Reinsurance assets and liabilities related to agreements with funds withheld at interest where no net risk is retained by the Company are presented on a net basis. Reinsurance receivables were presented net of approximately $2.3 billion in reinsurance liabilities as of December 31, 2021 and 2020, respectively.
Allowance for Credit Losses — Reinsurance Receivables
The Company establishes an allowance for current expected credit losses related to amounts receivable from reinsurers (the "Reinsurance ACL"). Changes in the Reinsurance ACL are recognized as a component of benefits and settlement expenses. The Reinsurance ACL is remeasured on a quarterly basis using an internally developed probability of default ("PD") and loss given default ("LGD") model. Key inputs to the calculation are a conditional probability of insurer liquidation by issuer credit rating and exposure at default derived from a runoff projection of ceded reserves by reinsurer to forecast future loss amounts. Management's position is that the rate of return implicit in the financial asset (i.e. the ceded reserves) is associated with the discount rate used to value the underlying insurance reserves; that is, the rate of return on the asset portfolio(s) supporting the reserves. For reinsurance receivable exposures that do not share similar risk characteristics with other receivables, including those associated with counterparties that have experienced significant credit deterioration, the Company measures the allowance for credit losses individually, based on facts and circumstances associated with the specific reinsurer or transaction.
As of December 31, 2021 and 2020, the Reinsurance ACL was $92 million and $94 million, respectively. There were no write-offs or recoveries during the year ended December 31, 2021 and 2020.
The Company had total reinsurance receivables of $4.5 billion as of December 31, 2021, which includes both ceded policy benefit reserves and receivables for claims. Receivables for claims represented approximately 11% of total reinsurance receivables as of December 31, 2021. Receivables for claims are short-term in nature, and generally carry minimal credit risk. Of reserves ceded as of December 31, 2021, approximately 84% were receivables from reinsurers rated by A.M. Best Company. Of the total rated by A.M. Best, 54% were rated A+ or better, 16% were rated A, and 30% were rated A- or lower. The Company monitors the concentration of credit risk the Company has with any reinsurer, as well as the financial condition of its reinsurers, on an ongoing basis. Certain of the Company's reinsurance receivables are supported by letters of credit, funds held or trust agreements.
Components of Reinsurance Cost — The following income statement lines are affected by reinsurance cost:
Premiums and policy fees ("reinsurance ceded" on the Company's financial statements) represent consideration paid to the assuming company for accepting the ceding company's risks. Ceded premiums and policy fees increase reinsurance cost.
Benefits and settlement expenses include incurred claim amounts ceded and changes in ceded policy reserves. Ceded benefits and settlement expenses decrease reinsurance cost.
F-29
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)
Amortization of deferred acquisition cost and value of business acquired reflects the amortization of capitalized reinsurance allowances representing recovery of acquisition costs. Ceded amortization decreases reinsurance cost.
Other expenses include reinsurance allowances paid by assuming companies to the Company less amounts representing recovery of acquisition costs. Reinsurance allowances decrease reinsurance cost.
The Company's reinsurance programs do not materially impact the other income line of the Company's income statement. In addition, net investment income generally has no direct impact on the Company's reinsurance cost. However, it should be noted that by ceding business to the assuming companies, the Company forgoes investment income on the reserves ceded to the assuming companies. Conversely, the assuming companies will receive investment income on the reserves assumed which will increase the assuming companies' profitability on business assumed from the Company.
Accounting Pronouncements Recently Adopted
ASU No. 2019-12 — Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this Update remove certain exceptions to the general principles in Topic 740 related to intraperiod tax allocations, interim tax calculations, and outside basis differences. The amendments also clarify and amend guidance in certain other areas of Topic 740 in order to eliminate diversity in practice. The amendments in this Update became effective for public business entities in fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. This Update did not have a material impact on the Company's operations and financial results.
Accounting Pronouncements Not Yet Adopted
ASU No. 2018-12 — Financial Services — Insurance (Topic 944): Targeted Improvements to Accounting for Long-Duration Contracts. The amendments in this Update are designed to make improvements to the existing recognition, measurement, presentation, and disclosure requirements for certain long-duration contracts issued by an insurance company. The new amendments require insurance entities to provide a more current measure of the liability for future policy benefits for traditional and limited-payment contracts by regularly refining the liability for actual past experience and updated future assumptions. This differs from current requirements where assumptions are locked-in at contract issuance for these contract types. In addition, the updated liability will be discounted using an upper-medium grade (low-credit-risk) fixed income instrument yield that reflects the characteristics of the liability which differs from currently used rates based on the invested assets supporting the liability. In addition, the amendments introduce new requirements to assess market-based insurance contract options and guarantees for Market Risk Benefits and measure them at fair value. This Update also requires insurance entities to amortize deferred acquisition costs on a constant-level basis over the expected life of the contract. Finally, this Update requires new disclosures including liability rollforwards and information about significant inputs, judgments, assumptions, and methods used in the measurement. In November 2020, FASB issued ASU No. 2020-11 — Financial Services — Insurance (Topic 944); Effective Date and Early Application which deferred the effective date until the year ending December 31, 2025. The Company is currently reviewing its policies, processes, and applicable systems to determine the impact this standard will have on its operations and financial results.
F-30
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT TRANSACTIONS
Captive Merger
On October 1, 2020, as part of a corporate initiative to consolidate and simplify PLC's reserve financing structures and reduce related financial and operational costs, Golden Gate II Captive Insurance Company ("Golden Gate II"), Golden Gate III Vermont Captive Insurance Company ("Golden Gate III"), Golden Gate IV Vermont Captive Insurance Company ("Golden Gate IV"), and Golden Gate V Vermont Captive Insurance Company ("Golden Gate V"), all of which are wholly owned captive insurance company subsidiaries of the Company (collectively the "Captives") merged with and into (the "Captive Merger") Golden Gate Captive Insurance Company ("Golden Gate"), a Vermont special purpose financial insurance company and a wholly owned subsidiary of the Company.
In conjunction with the Captive Merger, Golden Gate and Steel City, LLC ("Steel City"), a wholly owned subsidiary of PLC, terminated the financing facility into which Golden Gate and Steel City had entered in 2016. This termination included redeeming the fixed maturity securities issued by Steel City to Golden Gate and the non-recourse funding obligation issued by Golden Gate to Steel City. This non cash transaction resulted in a reduction to the carrying value of fixed maturities, at amortized cost on the balance sheet as well as a reduction to the carrying value of non-recourse funding obligations on the balance sheet of $1,858 million. These redemptions did not have an impact on income before taxes. Refer to Note 4, Investment Operations and Note 14, Debt and Other Obligations, for additional detail around the impacted balances.
In conjunction with the Captive Merger, Golden Gate II redeemed the full outstanding principal amount of floating rate non-recourse funding obligations due July 15, 2052. These non-recourse funding obligations were previously marked to fair value in conjunction with the Merger. The redemption required the acceleration of the accretion of the discount associated with the non-recourse funding obligation. The impact of this non-cash acceleration was a $54 million reduction to income before taxes for the year ended December 31, 2020. Additionally, this redemption required a $330 million cash payment, of which $21 million was held by external parties and $309 million was held by nonconsolidated affiliates, to third parties in order to settle the outstanding principal associated with the non-recourse funding obligation. Refer to Note 14, Debt and Other Obligations, for additional detail around the impacted balances.
Also in conjunction with the Captive Merger, Golden Gate V and Red Mountain, LLC ("Red Mountain"), a wholly owned subsidiary of the Company, terminated the financing facility into which Golden Gate V and Red Mountain had entered into in 2012. This termination included redeeming the $822 million of fixed maturity securities issued by Red Mountain to Golden Gate V and the $806 million of non-recourse funding obligation issued by Golden Gate V to Red Mountain. As a result of these redemptions, the amortization of premiums recorded against the fixed maturities and non-recourse funding obligations which were previously marked to fair value in conjunction with the Merger was accelerated. The net impact of this non-cash acceleration of amortization was a $16 million reduction to income before taxes for the year ended December 31, 2020. This net impact was comprised of a reduction to net investment income of $72 million and a reduction to other operating expenses of $56 million. Refer to Note 4, Investment Operations and Note 14, Debt and Other Obligations, for additional detail around the impacted balances.
F-31
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT TRANSACTIONS — (Continued)
Also in conjunction with the Captive Merger, the interest support and YRT premium support agreements that were entered into with PLC by certain of the Company's affiliates were terminated. As discussed in Note 5, Fair Value of Financial Instruments, these agreements met the definition of a derivative financial instrument and were accounted for at fair value in the consolidated financial statements. PLC settled its obligation under these agreements during the fourth quarter of 2020 and made a payment of $135 million to Golden Gate.
On October 1, 2020, immediately following the Captive Merger, Golden Gate entered into a transaction with a term of 20 years, that may be extended to up to 25 years, to finance up to a maximum term of $5 billion of "XXX" and "AXXX" reserves related to the term life insurance business and universal life insurance with secondary guarantee business that is reinsured to Golden Gate by the Company and West Coast Life Insurance Company ("WCL"), an indirect wholly owned subsidiary, pursuant to an Excess of Loss Reinsurance Agreement (the "XOL Agreement") with Hannover Life Reassurance Company of America (Bermuda) Ltd., The Canada Life Assurance Company (Barbados Branch) and RGA Reinsurance Company (Barbados) Ltd. (collectively, the "Retrocessionaires"). Pursuant to the XOL Agreement, in exchange for periodic fees, the Retrocessionaires assume, on an excess of loss basis, the obligation to pay (the "XOL Payments") each quarter the lessor of a) the greater of (i) statutory reserves in excess of economic reserves and (ii) the financed amount and b) if total claims for such quarter exceed the available assets (as set forth in the XOL Agreement) of Golden Gate, the amount of such excess. The transaction is "non-recourse" to PLC, WCL, and the Company, meaning that none of these companies are liable to reimburse the Retrocessionaires for any XOL payments required to be made. As of December 31, 2020, the XOL Asset backing the difference in statutory and economic reserve liabilities was $4.58 billion.
Great-West Life & Annuity Insurance Company
On January 23, 2019, the Company entered into a Master Transaction Agreement (the "GWL&A Master Transaction Agreement") with Great-West Life & Annuity Insurance Company ("GWL&A"), Great-West Life & Annuity Insurance Company of New York ("GWL&A of NY"), The Canada Life Assurance Company ("CLAC") and The Great-West Life Assurance Company ("GWL" and, together with GWL&A, GWL&A of NY and CLAC, the "Sellers"), pursuant to which the Company will acquire via reinsurance (the "Transaction") substantially all of the Sellers' individual life insurance and annuity business (the "GW Individual Life Business").
On June 3, 2019, the Company and PLAIC completed the Transaction (the "GWL&A Closing"). Pursuant to the GWL&A Master Transaction Agreement, the Company and PLAIC entered into reinsurance agreements (the "GWL&A Reinsurance Agreements") and related ancillary documents at the GWL&A Closing. On the terms and subject to the conditions of the GWL&A Reinsurance Agreements, the Sellers ceded to the Company and PLAIC, effective as of the date of the GWL&A Closing, substantially all of the insurance policies related to the Individual Life Business on a 100% indemnity basis net of reinsurance recoveries. The aggregate ceding commission for the reinsurance of the Individual Life Business paid at the GWL&A Closing was $766 million. All policies issued in states other than New York were ceded to the Company under reinsurance agreements between the applicable Seller and the Company, and all policies issued in New York were ceded to PLAIC under a reinsurance agreement between GWL&A of NY and PLAIC. On October 30, 2020, the Company reached a final settlement on all of the remaining pending items from the closing balance sheet. As the
F-32
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT TRANSACTIONS — (Continued)
one year purchase price measurement period had concluded, the Company recognized $94 million in other income during the quarter ended December 31, 2020 related to the final settlement. Of the $94 million, $24 million was a cash settlement and $70 million resulted from reserve adjustments. To support its obligations under the GWL&A Reinsurance Agreements, the Company established trust accounts for the benefit of GWL&A, CLAC and GWL, and PLAIC established a trust account for the benefit of GWL&A of NY. The Sellers retained a block of participating policies, which are administered by the Company.
The GWL&A Master Transaction Agreement and other transaction documents contain certain customary representations and warranties made by each of the parties, and certain customary covenants regarding the Sellers and the Individual Life Business, and provide for indemnification, among other things, for breaches of those representations, warranties, and covenants. The terms of the GWL&A Reinsurance Agreements resulted in an acquisition of the Individual Life Business by PLC in accordance with ASC Topic 805, Business Combinations.
The following table details the final allocation of assets acquired and liabilities assumed from the Individual Life Business reinsurance transaction as of the date of the GWL&A Closing.
|
Fair Value As of June 1, 2019 |
|||||||
|
(Dollars In Millions) |
|||||||
|
Assets |
|||||||
|
Fixed maturities |
$ |
8,698 |
|||||
|
Commercial mortgage loans |
1,386 |
||||||
|
Policy loans |
44 |
||||||
|
Other long-term investments |
1,522 |
||||||
|
Total investments |
11,650 |
||||||
|
Cash |
35 |
||||||
|
Accrued investment income |
101 |
||||||
|
Reinsurance receivables |
— |
||||||
|
Accounts and premiums receivable |
2 |
||||||
|
Value of business acquired |
535 |
||||||
|
Other intangibles |
21 |
||||||
|
Other assets |
6 |
||||||
|
Assets related to separate accounts |
9,583 |
||||||
|
Total assets |
$ |
21,933 |
|||||
|
Liabilities |
|||||||
|
Future policy benefits and claims |
$ |
11,022 |
|||||
|
Annuity account balances |
220 |
||||||
|
Other policyholders' funds |
220 |
||||||
|
Other liabilities |
75 |
||||||
|
Liabilities related to separate accounts |
9,583 |
||||||
|
Total liabilities |
21,120 |
||||||
|
Net assets acquired |
$ |
813 |
|||||
F-33
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. SIGNIFICANT TRANSACTIONS — (Continued)
Assets related to separate accounts and liabilities related to separate accounts represent amounts receivable and payable for variable annuity and variable universal life products reinsured on a modified co-insurance basis.
The following unaudited pro forma condensed consolidated results of operations assumes that the aforementioned transactions of the Individual Life Business were completed as of January 1, 2018. The unaudited pro forma condensed results of operations are presented solely for informational purposes and are not necessarily indicative of the consolidated condensed results of operations that might have been achieved had the transaction been completed as of the date indicated:
|
Unaudited For The Year Ended December 31, |
|||||||||||
|
(Recast) |
|||||||||||
|
2019 |
2018 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Revenue |
$ |
6,165 |
$ |
5,592 |
|||||||
|
Net income |
$ |
444 |
$ |
253 |
|||||||
4. INVESTMENT OPERATIONS
Major categories of net investment income are summarized as follows:
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Fixed maturities |
$ |
2,513 |
$ |
2,481 |
$ |
2,471 |
|||||||||
|
Equity securities |
27 |
24 |
31 |
||||||||||||
|
Commercial mortgage loans |
505 |
443 |
389 |
||||||||||||
|
Investment real estate |
1 |
1 |
1 |
||||||||||||
|
Other investment income |
156 |
139 |
119 |
||||||||||||
|
3,202 |
3,088 |
3,011 |
|||||||||||||
|
Investment expenses |
220 |
199 |
186 |
||||||||||||
|
Net investment income |
$ |
2,982 |
$ |
2,889 |
$ |
2,825 |
|||||||||
F-34
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INVESTMENT OPERATIONS — (Continued)
Net gains (losses) — investments and derivatives are summarized as follows:
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Realized gains (losses) — investments, net |
|||||||||||||||
|
Fixed maturities |
$ |
46 |
$ |
46 |
$ |
48 |
|||||||||
|
Equity securities |
4 |
— |
(3 |
) |
|||||||||||
|
Other investments |
20 |
45 |
9 |
||||||||||||
|
Total realized gains (losses) — investments, net |
70 |
91 |
54 |
||||||||||||
|
Modco trading portfolio |
(103 |
) |
130 |
243 |
|||||||||||
|
Equity securities |
(8 |
) |
13 |
50 |
|||||||||||
|
Change in net expected credit losses — fixed maturities(1) |
6 |
(125 |
) |
— |
|||||||||||
|
Net impairment losses recognized in operations(2) |
— |
— |
(34 |
) |
|||||||||||
|
Commercial mortgage loans |
137 |
(149 |
) |
(4 |
) |
||||||||||
|
Gains (losses) — derivatives, net(3) |
48 |
(195 |
) |
(368 |
) |
||||||||||
|
Net gains (losses) — investments and derivatives |
$ |
150 |
$ |
(235 |
) |
$ |
(59 |
) |
|||||||
(1) Represents net credit losses recognized under FASB ASC 326
(2) Represents other-than-temporary impairment losses recognized in prior periods under FASB ASC 320
(3) Refer to Note 6, Derivative Financial Instruments
The chart below summarizes the sales proceeds and gains (losses) realized on securities classified as AFS.
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Securities in an unrealized gain position: |
|||||||||||||||
|
Sales proceeds |
$ |
1,537 |
$ |
2,000 |
$ |
2,514 |
|||||||||
|
Realized gains |
$ |
47 |
$ |
51 |
$ |
62 |
|||||||||
|
Securities in an unrealized loss position: |
|||||||||||||||
|
Sales proceeds |
$ |
35 |
$ |
34 |
$ |
547 |
|||||||||
|
Realized losses |
$ |
(1 |
) |
$ |
(5 |
) |
$ |
(14 |
) |
||||||
The net gains (losses) from equity securities still held at period end, was ($8) million, $13 million, $50 million for the year ended December 31, 2021, 2020, and 2019, respectively. The Company recognized gains (losses) of $4 million and ($3) million on equity securities sold during the period for the year ended December 31, 2021 and 2020, respectively and immaterial gains for the year ended December 31, 2020.
F-35
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INVESTMENT OPERATIONS — (Continued)
The amortized cost, gross unrealized gains, gross unrealized losses, allowance for expected credit losses, and fair value of the Company's investments classified as AFS are as follows:
|
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Allowance for Expected Credit Losses |
Fair Value |
|||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||
|
As of December 31, 2021 |
|||||||||||||||||||||||
|
Fixed maturities:(1) |
|||||||||||||||||||||||
|
Residential mortgage-backed securities |
$ |
6,876 |
$ |
31 |
$ |
(102 |
) |
$ |
— |
$ |
6,805 |
||||||||||||
|
Commercial mortgage-backed securities |
2,239 |
75 |
(7 |
) |
— |
2,307 |
|||||||||||||||||
|
Other asset-backed securities |
1,391 |
31 |
(2 |
) |
— |
1,420 |
|||||||||||||||||
|
U.S. government-related securities |
821 |
12 |
(25 |
) |
— |
808 |
|||||||||||||||||
|
Other government-related securities |
680 |
75 |
(2 |
) |
— |
753 |
|||||||||||||||||
|
States, municipals, and political subdivisions |
3,747 |
410 |
(1 |
) |
— |
4,156 |
|||||||||||||||||
|
Corporate securities |
49,211 |
4,645 |
(156 |
) |
(1 |
) |
53,699 |
||||||||||||||||
|
Redeemable preferred stocks |
297 |
10 |
— |
— |
307 |
||||||||||||||||||
|
65,262 |
5,289 |
(295 |
) |
(1 |
) |
70,255 |
|||||||||||||||||
|
Short-term investments |
780 |
— |
— |
— |
780 |
||||||||||||||||||
|
$ |
66,042 |
$ |
5,289 |
$ |
(295 |
) |
$ |
(1 |
) |
$ |
71,035 |
||||||||||||
(1) Included in the total above, as of December 31, 2021, the Company had public utility securities that had an amortized cost and fair value of $6.5 billion and $7.0 billion, respectively and foreign government securities that had an amortized cost and fair value of $620 million and $687 million, respectively.
|
As of December 31, 2020 (Recast) |
|||||||||||||||||||||||
|
Fixed maturities:(2) |
|||||||||||||||||||||||
|
Residential mortgage-backed securities |
$ |
6,510 |
$ |
159 |
$ |
(1 |
) |
$ |
— |
$ |
6,668 |
||||||||||||
|
Commercial mortgage-backed securities |
2,429 |
128 |
(19 |
) |
(4 |
) |
2,534 |
||||||||||||||||
|
Other asset-backed securities |
1,546 |
40 |
(7 |
) |
(1 |
) |
1,578 |
||||||||||||||||
|
U.S. government-related securities |
1,492 |
26 |
(3 |
) |
— |
1,515 |
|||||||||||||||||
|
Other government-related securities |
622 |
96 |
(1 |
) |
— |
717 |
|||||||||||||||||
|
States, municipals, and political subdivisions |
3,902 |
519 |
(1 |
) |
— |
4,420 |
|||||||||||||||||
|
Corporate securities |
46,150 |
6,074 |
(99 |
) |
(18 |
) |
52,107 |
||||||||||||||||
|
Redeemable preferred stocks |
183 |
11 |
— |
— |
194 |
||||||||||||||||||
|
62,834 |
7,053 |
(131 |
) |
(23 |
) |
69,733 |
|||||||||||||||||
|
Short-term investments |
386 |
— |
— |
— |
386 |
||||||||||||||||||
|
$ |
63,220 |
$ |
7,053 |
$ |
(131 |
) |
$ |
(23 |
) |
$ |
70,119 |
||||||||||||
(2) Included in the total above, as of December 31, 2020, the Company had public utility securities that had an amortized cost and fair value of $6.3 billion and $7.0 billion, respectively and foreign government securities that had an amortized cost and fair value of $557 million and $644 million, respectively.
F-36
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INVESTMENT OPERATIONS — (Continued)
The Company holds certain investments pursuant to certain modified coinsurance ("Modco") arrangements. The fixed maturities, equity securities, and short-term investments held as part of these arrangements are classified as trading securities. The fair value of the investments held pursuant to these Modco arrangements are as follows:
|
As of December 31, |
|||||||||||
|
2021 |
2020 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Fixed maturities:(1) |
|||||||||||
|
Residential mortgage-backed securities |
$ |
133 |
$ |
209 |
|||||||
|
Commercial mortgage-backed securities |
209 |
214 |
|||||||||
|
Other asset-backed securities |
185 |
163 |
|||||||||
|
U.S. government-related securities |
33 |
91 |
|||||||||
|
Other government-related securities |
64 |
30 |
|||||||||
|
States, municipals, and political subdivisions |
286 |
282 |
|||||||||
|
Corporate securities |
1,875 |
1,860 |
|||||||||
|
Redeemable preferred stocks |
8 |
13 |
|||||||||
|
2,793 |
2,862 |
||||||||||
|
Equity securities |
13 |
20 |
|||||||||
|
Short-term investments |
82 |
76 |
|||||||||
|
$ |
2,888 |
$ |
2,958 |
||||||||
(1) Included in the total above, as of December 31, 2021, the Company had public utility and foreign government securities that had a fair value of $134 million and $44 million, respectively and as of December 31, 2020, the Company had public utility and foreign government securities that had a fair value of $144 million and $30 million, respectively.
The amortized cost and fair value of available-for-sale fixed maturities as of December 31, 2021, by expected maturity, are shown below. Expected maturities of securities without a single maturity date are allocated based on estimated rates of prepayment that may differ from actual rates of prepayment.
|
Available-for-sale |
|||||||||||
|
Amortized Cost |
Fair Value |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Due in one year or less |
$ |
1,707 |
$ |
1,719 |
|||||||
|
Due after one year through five years |
11,046 |
11,453 |
|||||||||
|
Due after five years through ten years |
15,434 |
16,135 |
|||||||||
|
Due after ten years |
37,075 |
40,948 |
|||||||||
|
$ |
65,262 |
$ |
70,255 |
||||||||
F-37
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INVESTMENT OPERATIONS — (Continued)
The following chart is a rollforward of the allowance for expected credit losses on fixed maturities classified as AFS:
|
For The Year Ended December 31, 2021 |
For The Year Ended December 31, 2020 |
||||||||||||||||||||||||||||||||||
|
Corporate Securities |
CMBS |
ABS |
Total |
Corporate Securities |
CMBS |
ABS |
Total |
||||||||||||||||||||||||||||
|
(Dollars In Millions) |
(Dollars In Millions) |
||||||||||||||||||||||||||||||||||
|
Beginning Balance |
$ |
18 |
$ |
4 |
$ |
1 |
$ |
23 |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
|||||||||||||||||||
|
Additions for securities for which an allowance was not previously recorded |
— |
— |
— |
— |
62 |
4 |
1 |
67 |
|||||||||||||||||||||||||||
|
Adjustments on previously recorded allowances due to change in expected cash flows |
(1 |
) |
(4 |
) |
— |
(5 |
) |
20 |
— |
1 |
21 |
||||||||||||||||||||||||
|
Reductions on previously recorded allowances due to disposal of security in the current period |
— |
— |
(1 |
) |
(1 |
) |
(1 |
) |
— |
(1 |
) |
(2 |
) |
||||||||||||||||||||||
|
Write-offs of previously recorded allowances due to intent or requirement to sell |
(16 |
) |
— |
— |
(16 |
) |
(63 |
) |
— |
— |
(63 |
) |
|||||||||||||||||||||||
|
Ending Balance |
$ |
1 |
$ |
— |
$ |
— |
$ |
1 |
$ |
18 |
$ |
4 |
$ |
1 |
$ |
23 |
|||||||||||||||||||
The following table includes the gross unrealized losses and fair value of the Company's AFS fixed maturities, for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2021:
|
Less Than 12 Months |
12 Months or More |
Total |
|||||||||||||||||||||||||
|
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||||||
|
Residential mortgage-backed securities |
$ |
4,615 |
$ |
(102 |
) |
$ |
15 |
$ |
— |
$ |
4,630 |
$ |
(102 |
) |
|||||||||||||
|
Commercial mortgage-backed securities |
129 |
(1 |
) |
88 |
(6 |
) |
217 |
(7 |
) |
||||||||||||||||||
|
Other asset-backed securities |
249 |
(1 |
) |
47 |
(1 |
) |
296 |
(2 |
) |
||||||||||||||||||
|
U.S. government-related securities |
306 |
(13 |
) |
158 |
(12 |
) |
464 |
(25 |
) |
||||||||||||||||||
|
Other government-related securities |
76 |
(2 |
) |
— |
— |
76 |
(2 |
) |
|||||||||||||||||||
F-38
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INVESTMENT OPERATIONS — (Continued)
|
Less Than 12 Months |
12 Months or More |
Total |
|||||||||||||||||||||||||
|
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||||||
|
States, municipalities, and political subdivisions |
$ |
37 |
$ |
(1 |
) |
$ |
4 |
$ |
— |
$ |
41 |
$ |
(1 |
) |
|||||||||||||
|
Corporate securities |
4,841 |
(119 |
) |
515 |
(37 |
) |
5,356 |
(156 |
) |
||||||||||||||||||
|
Redeemable preferred stocks |
20 |
— |
— |
— |
20 |
— |
|||||||||||||||||||||
|
$ |
10,273 |
$ |
(239 |
) |
$ |
827 |
$ |
(56 |
) |
$ |
11,100 |
$ |
(295 |
) |
|||||||||||||
The corporate securities category had gross unrealized losses greater than twelve months of $37 million as of December 31, 2021, excluding losses of $1 million that were considered credit related. These losses are deemed temporary due to positive factors supporting the recoverability of the respective investments. Positive factors considered include credit ratings, the financial health of the issuer, the continued access of the issuer to capital markets, interest rate movement, and other pertinent information.
As of December 31, 2021, the Company had a total of 742 positions that were in an unrealized loss position, including 5 positions for which an allowance for credit losses was established. For unrealized losses for which an allowance for credit losses was not established, the Company does not consider these unrealized loss positions to be credit related. This is based on the aggregate factors discussed previously and because the Company has the ability and intent to hold these investments until the fair values recover. The Company does not intend to sell or expect to be required to sell the securities before recovering the Company's amortized cost of the securities.
The following table includes the gross unrealized losses and fair value of the Company's AFS fixed maturities, for which an allowance for credit losses has not been recorded, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2020:
|
Less Than 12 Months |
12 Months or More |
Total |
|||||||||||||||||||||||||
|
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
||||||||||||||||||||||
|
(Recast) |
|||||||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||||||
|
Residential mortgage-backed securities |
$ |
386 |
$ |
(1 |
) |
$ |
9 |
$ |
— |
$ |
395 |
$ |
(1 |
) |
|||||||||||||
|
Commercial mortgage-backed securities |
263 |
(16 |
) |
30 |
(4 |
) |
293 |
(20 |
) |
||||||||||||||||||
|
Other asset-backed securities |
146 |
(2 |
) |
326 |
(5 |
) |
472 |
(7 |
) |
||||||||||||||||||
|
U.S. government-related securities |
311 |
(3 |
) |
1 |
— |
312 |
(3 |
) |
|||||||||||||||||||
|
Other government-related securities |
19 |
— |
7 |
(1 |
) |
26 |
(1 |
) |
|||||||||||||||||||
|
States, municipalities, and political subdivisions |
34 |
(1 |
) |
5 |
— |
39 |
(1 |
) |
|||||||||||||||||||
F-39
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INVESTMENT OPERATIONS — (Continued)
|
Less Than 12 Months |
12 Months or More |
Total |
|||||||||||||||||||||||||
|
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
Fair Value |
Unrealized Loss |
||||||||||||||||||||||
|
(Recast) |
|||||||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||||||
|
Corporate securities |
$ |
1,063 |
$ |
(33 |
) |
$ |
728 |
$ |
(66 |
) |
$ |
1,791 |
$ |
(99 |
) |
||||||||||||
|
Redeemable preferred stocks |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||
|
$ |
2,222 |
$ |
(56 |
) |
$ |
1,106 |
$ |
(76 |
) |
$ |
3,328 |
$ |
(132 |
) |
|||||||||||||
As of December 31, 2021, the Company had securities in its available-for-sale portfolio which were rated below investment grade with a fair value of $2.5 billion and had an amortized cost of $2.3 billion. In addition, included in the Company's trading portfolio, the Company held $129 million of securities which were rated below investment grade. The Company held $550 million of the below investment grade securities that were not publicly traded.
The change in unrealized gains (losses), net of allowance for expected credit losses and income taxes, on fixed maturities classified as AFS is summarized as follows:
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Fixed maturities |
$ |
(1,523 |
) |
$ |
3,271 |
$ |
4,219 |
||||||||
The Company held $21 million and $28 million of non-income producing securities for the year ended December 31, 2021 and 2020, respectively.
Included in the Company's invested assets are $1.5 billion and $1.6 billion of policy loans as of December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, the interest rates on standard policy loans range from 3.0% to 8.0%.
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company determined the fair value of its financial instruments based on the fair value hierarchy established in FASB guidance referenced in the Fair Value Measurements and Disclosures Topic which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Company has adopted the provisions from the FASB guidance that is referenced in the Fair Value Measurements and Disclosures Topic for non-financial assets and liabilities (such as property and equipment, goodwill, and other intangible assets) that are required to be measured at fair value on a periodic basis. The effect on the Company's periodic fair value measurements for non-financial assets and liabilities was not material.
The Company has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three level hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure fair value fall within different levels of the hierarchy, the category level is based on the lowest priority level input that is significant to the fair value measurement of the instrument.
F-40
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
Financial assets and liabilities recorded at fair value on the consolidated balance sheets are categorized as follows:
• Level 1: Unadjusted quoted prices for identical assets or liabilities in an active market.
• Level 2: Quoted prices in markets that are not active or significant inputs that are observable either directly or indirectly. Level 2 inputs include the following:
a) Quoted prices for similar assets or liabilities in active markets;
b) Quoted prices for identical or similar assets or liabilities in non-active markets;
c) Inputs other than quoted market prices that are observable; and
d) Inputs that are derived principally from or corroborated by observable market data through correlation or other means.
• Level 3: Prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. They reflect management's own estimates about the assumptions a market participant would use in pricing the asset or liability.
The following table presents the Company's hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2021:
|
Measurement Category |
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||
|
Fixed maturity securities — AFS Residential mortgage-backed securities |
4 |
$ |
— |
$ |
6,765 |
$ |
40 |
$ |
6,805 |
||||||||||||||
|
Commercial mortgage-backed securities |
4 |
— |
2,127 |
180 |
2,307 |
||||||||||||||||||
|
Other asset-backed securities |
4 |
— |
905 |
515 |
1,420 |
||||||||||||||||||
|
U.S. government-related securities |
4 |
411 |
397 |
— |
808 |
||||||||||||||||||
|
State, municipalities, and political subdivisions |
4 |
— |
4,156 |
— |
4,156 |
||||||||||||||||||
|
Other government-related securities |
4 |
— |
753 |
— |
753 |
||||||||||||||||||
|
Corporate securities |
4 |
— |
52,117 |
1,582 |
53,699 |
||||||||||||||||||
|
Redeemable preferred stocks |
4 |
307 |
— |
— |
307 |
||||||||||||||||||
|
Total fixed maturity securities — AFS |
718 |
67,220 |
2,317 |
70,255 |
|||||||||||||||||||
|
Fixed maturity securities — trading Residential mortgage-backed securities |
3 |
— |
133 |
— |
133 |
||||||||||||||||||
|
Commercial mortgage-backed securities |
3 |
— |
209 |
— |
209 |
||||||||||||||||||
|
Other asset-backed securities |
3 |
— |
92 |
93 |
185 |
||||||||||||||||||
|
U.S. government-related securities |
3 |
27 |
6 |
— |
33 |
||||||||||||||||||
|
State, municipalities, and political subdivisions |
3 |
— |
286 |
— |
286 |
||||||||||||||||||
|
Other government-related securities |
3 |
— |
48 |
16 |
64 |
||||||||||||||||||
|
Corporate securities |
3 |
— |
1,867 |
8 |
1,875 |
||||||||||||||||||
|
Redeemable preferred stocks |
3 |
8 |
— |
— |
8 |
||||||||||||||||||
|
Total fixed maturity securities — trading |
35 |
2,641 |
117 |
2,793 |
|||||||||||||||||||
F-41
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
|
Measurement Category |
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||
|
Total fixed maturity securities |
$ |
753 |
$ |
69,861 |
$ |
2,434 |
$ |
73,048 |
|||||||||||||||
|
Equity securities |
3 |
633 |
40 |
155 |
828 |
||||||||||||||||||
|
Other long-term investments(1) |
3 |
&4 |
59 |
1,093 |
295 |
1,447 |
|||||||||||||||||
|
Short-term investments |
3 |
683 |
179 |
— |
862 |
||||||||||||||||||
|
Total investments |
2,128 |
71,173 |
2,884 |
76,185 |
|||||||||||||||||||
|
Cash |
3 |
390 |
— |
— |
390 |
||||||||||||||||||
|
Assets related to separate accounts |
|||||||||||||||||||||||
|
Variable annuity |
3 |
13,648 |
— |
— |
13,648 |
||||||||||||||||||
|
Variable universal life |
3 |
1,982 |
— |
— |
1,982 |
||||||||||||||||||
|
Total assets measured at fair value on a recurring basis |
$ |
18,148 |
$ |
71,173 |
$ |
2,884 |
$ |
92,205 |
|||||||||||||||
|
Liabilities: |
|||||||||||||||||||||||
|
Annuity account balances(2) |
3 |
$ |
— |
$ |
— |
$ |
63 |
$ |
63 |
||||||||||||||
|
Other liabilities(1) |
3 |
&4 |
20 |
820 |
1,939 |
2,779 |
|||||||||||||||||
|
Total liabilities measured at fair value on a recurring basis |
$ |
20 |
$ |
820 |
$ |
2,002 |
$ |
2,842 |
|||||||||||||||
Measurement category 3 represents fair value through net income and 4 represents fair value through other comprehensive income (loss).
(1) Includes certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
F-42
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
The following table presents the Company's hierarchy for its assets and liabilities measured at fair value on a recurring basis as of December 31, 2020:
|
Measurement Category |
Level 1 |
Level 2 |
Level 3 |
Total |
|||||||||||||||||||
|
(Recast) |
|||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||
|
Fixed maturity securities — AFS Residential mortgage-backed securities |
4 |
$ |
— |
$ |
6,668 |
$ |
— |
$ |
6,668 |
||||||||||||||
|
Commercial mortgage-backed securities |
4 |
— |
2,502 |
32 |
2,534 |
||||||||||||||||||
|
Other asset-backed securities |
4 |
— |
1,143 |
435 |
1,578 |
||||||||||||||||||
|
U.S. government-related securities |
4 |
1,014 |
501 |
— |
1,515 |
||||||||||||||||||
|
State, municipalities, and political subdivisions |
4 |
— |
4,420 |
— |
4,420 |
||||||||||||||||||
|
Other government-related securities |
4 |
— |
717 |
— |
717 |
||||||||||||||||||
|
Corporate securities |
4 |
— |
50,675 |
1,432 |
52,107 |
||||||||||||||||||
|
Redeemable preferred stocks |
4 |
125 |
69 |
— |
194 |
||||||||||||||||||
|
Total fixed maturity securities — AFS |
1,139 |
66,695 |
1,899 |
69,733 |
|||||||||||||||||||
|
Fixed maturity securities — trading Residential mortgage-backed securities |
3 |
— |
209 |
— |
209 |
||||||||||||||||||
|
Commercial mortgage-backed securities |
3 |
— |
214 |
— |
214 |
||||||||||||||||||
|
Other asset-backed securities |
3 |
— |
92 |
71 |
163 |
||||||||||||||||||
|
U.S. government-related securities |
3 |
79 |
12 |
— |
91 |
||||||||||||||||||
|
State, municipalities, and political subdivisions |
3 |
— |
282 |
— |
282 |
||||||||||||||||||
|
Other government-related securities |
3 |
— |
30 |
— |
30 |
||||||||||||||||||
|
Corporate securities |
3 |
— |
1,842 |
18 |
1,860 |
||||||||||||||||||
|
Redeemable preferred stocks |
3 |
13 |
— |
— |
13 |
||||||||||||||||||
|
Total fixed maturity securities — trading |
92 |
2,681 |
89 |
2,862 |
|||||||||||||||||||
|
Total fixed maturity securities |
1,231 |
69,376 |
1,988 |
72,595 |
|||||||||||||||||||
|
Equity securities |
3 |
566 |
— |
101 |
667 |
||||||||||||||||||
|
Other long-term investments(1) |
3 |
&4 |
52 |
1,285 |
298 |
1,635 |
|||||||||||||||||
|
Short-term investments |
3 |
403 |
59 |
— |
462 |
||||||||||||||||||
|
Total investments |
2,252 |
70,720 |
2,387 |
75,359 |
|||||||||||||||||||
|
Cash |
3 |
656 |
— |
— |
656 |
||||||||||||||||||
|
Assets related to separate accounts Variable annuity |
3 |
12,378 |
— |
— |
12,378 |
||||||||||||||||||
|
Variable universal life |
3 |
1,287 |
— |
— |
1,287 |
||||||||||||||||||
|
Total assets measured at fair value on a recurring basis |
$ |
16,573 |
$ |
70,720 |
$ |
2,387 |
$ |
89,680 |
|||||||||||||||
|
Liabilities: |
|||||||||||||||||||||||
|
Annuity account balances(2) |
3 |
$ |
— |
$ |
— |
$ |
67 |
$ |
67 |
||||||||||||||
|
Other liabilities(1) |
3 |
&4 |
14 |
867 |
2,239 |
3,120 |
|||||||||||||||||
|
Total liabilities measured at fair value on a recurring basis |
$ |
14 |
$ |
867 |
$ |
2,306 |
$ |
3,187 |
|||||||||||||||
Measurement category 3 represents fair value through net income and 4 represents fair value through other comprehensive income (loss).
(1) Includes certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
F-43
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
Determination of Fair Values
The valuation methodologies used to determine the fair values of assets and liabilities reflect market participant assumptions and are based on the application of the fair value hierarchy that prioritizes observable market inputs over unobservable inputs. The Company determines the fair values of certain financial assets and financial liabilities based on quoted market prices, where available. The Company also determines certain fair values based on future cash flows discounted at the appropriate current market rate. Fair values reflect adjustments for counterparty credit quality, the Company's credit standing, liquidity, and where appropriate, risk margins on unobservable parameters. The following is a discussion of the methodologies used to determine fair values for the financial instruments as listed in the above table.
The fair value of fixed maturity, short-term, and equity securities is determined by management after considering one of three primary sources of information: third party pricing services, non-binding independent broker quotations, or pricing matrices. Security pricing is applied using a "waterfall" approach whereby publicly available prices are first sought from third party pricing services, the remaining unpriced securities are submitted to independent brokers for non-binding prices, or lastly, securities are priced using a pricing matrix. Typical inputs used by these three pricing methods include, but are not limited to: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. Third party pricing services price 91.87% of the Company's available-for-sale and trading fixed maturity securities. Based on the typical trading volumes and the lack of quoted market prices for available-for-sale and trading fixed maturities, third party pricing services derive the majority of security prices from observable market inputs such as recent reported trades for identical or similar securities making adjustments through the reporting date based upon available market observable information outlined above. If there are no recent reported trades, the third party pricing services and brokers may use matrix or model processes to develop a security price where future cash flow expectations are developed based upon collateral performance and discounted at an estimated market rate. Certain securities are priced via independent non-binding broker quotations. When using non-binding independent broker quotations, when available the Company obtains two quotes per security. Where multiple broker quotes are obtained, the Company reviews the quotes and selects the quote that provides the best estimate of the price a market participant would pay for these specific assets in an arm's length transaction. A pricing matrix is used to price securities for which the Company is unable to obtain or effectively rely on either a price from a third party pricing service or an independent broker quotation.
The pricing matrix used by the Company begins with current spread levels to determine the market price for the security. The credit spreads, assigned by brokers, incorporate the issuer's credit rating, liquidity discounts, weighted- average of contracted cash flows, risk premium, if warranted, due to the issuer's industry, and the security's time to maturity. The Company uses credit ratings provided by nationally recognized rating agencies.
For securities that are priced via non-binding independent broker quotations, the Company assesses whether prices received from independent brokers represent a reasonable estimate of fair value. The Company's assessment incorporates various metrics (yield curves, credit spreads, prepayment rates, etc.) along with other information available to the Company from both internal and external sources to
F-44
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
determine the valuation of such holdings. As a result of this analysis, if the Company determines there is a more appropriate fair value based upon the analytics, the price received from the independent broker is adjusted accordingly. The Company did not adjust any quotes or prices received from brokers during the years ended December 31, 2021 and 2020.
The Company has analyzed the third party pricing services' valuation methodologies and related inputs and has also evaluated the various types of securities in its investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs that is in accordance with the Fair Value Measurements and Disclosures Topic of the ASC. Based on this evaluation and investment class analysis, each price was classified into Level 1, 2, or 3. Most prices provided by third party pricing services are classified into Level 2 because the significant inputs used in pricing the securities are market observable and the observable inputs are corroborated by the Company. Since the matrix pricing of certain debt securities includes significant non-observable inputs, they are classified as Level 3.
Asset-Backed Securities
This category mainly consists of RMBS, CMBS, and other asset-backed securities (collectively referred to as asset-backed securities or "ABS"). As of December 31, 2021, the Company held $10.2 billion of ABS classified as Level 2. These securities are priced from information provided by a third party pricing service and independent broker quotes. The third party pricing services and brokers mainly value securities using both a market and income approach to valuation. As part of this valuation process they consider the following characteristics of the item being measured to be relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, and 7) credit ratings of the securities.
After reviewing these characteristics of the ABS, the third party pricing service and brokers use certain inputs to determine the value of the security. For ABS classified as Level 2, the valuation would consist of predominantly market observable inputs such as, but not limited to: 1) monthly principal and interest payments on the underlying assets, 2) average life of the security, 3) prepayment speeds, 4) credit spreads, 5) treasury and swap yield curves, and 6) discount margin. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.
As of December 31, 2021, the Company held $828 million of Level 3 ABS, which included $735 million of other asset-backed securities classified as available-for-sale and $93 million of other asset-backed securities classified as trading. These securities are predominantly ARS whose underlying collateral is at least 97% guaranteed by the FFELP. As a result of the ARS market collapse during 2008, the Company prices its ARS using an income approach valuation model. As part of the valuation process the Company reviews the following characteristics of the ARS in determining the relevant inputs: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) types of underlying assets, 4) weighted-average coupon rate of the underlying assets, 5) weighted-average years to maturity of the underlying assets, 6) seniority level of the tranches owned, 7) credit ratings of the securities, 8) liquidity premium, and 9) paydown rate. In periods where market activity increases and there are
F-45
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
transactions at a price that is not the result of a distressed or forced sale we consider those prices as part of our valuation. If the market activity during a period is solely the result of the issuer redeeming positions we consider those transactions in our valuation, but still consider them to be level three measurements due to the nature of the transaction.
Corporate Securities, Redeemable Preferred Stocks, U.S. Government-Related Securities, States, Municipals, and Political Subdivisions, and Other Government Related Securities
As of December 31, 2021, the Company classified $59.6 billion of corporate securities, redeemable preferred stocks, U.S. government-related securities, states, municipals, and political subdivisions, and other government-related securities as Level 2. The fair value of the Level 2 securities is predominantly priced by broker quotes and a third party pricing service. The Company has reviewed the valuation techniques of the brokers and third party pricing service and has determined that such techniques used Level 2 market observable inputs. The following characteristics of the securities are considered to be the primary relevant inputs to the valuation: 1) weighted-average coupon rate, 2) weighted-average years to maturity, 3) seniority, and 4) credit ratings. The Company reviews the methodologies and valuation techniques (including the ability to observe inputs) in assessing the information received from external pricing services and in consideration of the fair value presentation.
The brokers and third party pricing service utilize valuation models that consist of a hybrid methodology that utilizes a cash flow analysis and market approach to valuation. The pricing models utilize the following inputs: 1) principal and interest payments, 2) treasury yield curve, 3) credit spreads from new issue and secondary trading markets, 4) dealer quotes with adjustments for issues with early redemption features, 5) liquidity premiums present on private placements, and 6) discount margins from dealers in the new issue market.
As of December 31, 2021, the Company classified $1.6 billion of securities as Level 3 valuations. Level 3 securities primarily represent investments in illiquid bonds for which no price is readily available. To determine a price, the Company uses a discounted cash flow model with both observable and unobservable inputs. These inputs are entered into an industry standard pricing model to determine the final price of the security. These inputs include: 1) principal and interest payments, 2) coupon rate, 3) sector and issuer level spread over treasury, 4) underlying collateral, 5) credit ratings, 6) maturity, 7) embedded options, 8) recent new issuance, 9) comparative bond analysis, and 10) an illiquidity premium.
Equities
As of December 31, 2021, the Company held $155 million of equity securities classified as Level 3. Of this total, $148 million represents FHLB stock. The Company believes that the cost of the FHLB stock approximates fair value.
Other Long-Term Investments and Other Liabilities
Derivative Financial Instruments
Other long-term investments and other liabilities include free-standing and embedded derivative financial instruments. Refer to Note 6, Derivative Financial Instruments for additional information
F-46
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
related to derivatives. Derivative financial instruments are valued using exchange prices, independent broker quotations, or pricing valuation models, which utilize market data inputs. Excluding embedded derivatives, as of December 31, 2021, 83.9% of derivatives based upon notional values were priced using exchange prices or independent broker quotations. Inputs used to value derivatives include, but are not limited to, interest swap rates, credit spreads, interest rate and equity market volatility indices, equity index levels, and treasury rates. The Company performs monthly analysis on derivative valuations that includes both quantitative and qualitative analyses.
Derivative instruments classified as Level 1 generally include futures and options, which are traded on active exchange markets.
Derivative instruments classified as Level 2 primarily include swaps, options, and swaptions, which are traded over-the-counter. Level 2 also includes certain centrally cleared derivatives. These derivative valuations are determined using independent broker quotations, which are corroborated with observable market inputs.
Derivative instruments classified as Level 3 were embedded derivatives and include at least one significant non-observable input. A derivative instrument containing Level 1 and Level 2 inputs will be classified as a Level 3 financial instrument in its entirety if it has at least one significant Level 3 input.
The Company utilizes derivative instruments to manage the risk associated with certain assets and liabilities. However, the derivative instruments may not be classified within the same fair value hierarchy level as the associated assets and liabilities. Therefore, the changes in fair value on derivatives reported in Level 3 may not reflect the offsetting impact of the changes in fair value of the associated assets and liabilities.
Embedded derivatives are carried at fair value in other long-term investments and other liabilities on the Company's consolidated balance sheet. The changes in fair value of embedded derivatives are recorded as net gains (losses) — investments and derivatives. Refer to Note 6, Derivative Financial Instruments for more information related to each embedded derivatives gains and losses.
The fair value of the GLWB embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using multiple risk neutral stochastic equity scenarios and policyholder behavior assumptions. The risk neutral scenarios are generated using the current swap curve and projected equity volatilities and correlations. The projected equity volatilities are based on a blend of historical volatility and near- term equity market implied volatilities. The equity correlations are based on historical price observations. For policyholder behavior assumptions, expected lapse and utilization assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the Ruark 2015 ALB table with attained age factors varying from 88% — 100% based on company experience. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR plus a credit spread (to represent the Company's non-performance risk). For expected lapse and utilization, assumptions are used and updated for actual experience, as necessary, using an internal predictive model developed by the Company. As a result of using significant unobservable inputs, the GLWB embedded derivative is categorized as Level 3. Policyholder assumptions are reviewed on an annual basis.
F-47
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
The balance of the FIA embedded derivative is impacted by policyholder cash flows associated with the FIA product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the FIA embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality from the 2015 Ruark ALB mortality table, with attained age factors varying from 88% — 100% based on company experience. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company's non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the FIA embedded derivative is categorized as Level 3.
The balance of the indexed universal life ("IUL") embedded derivative is impacted by policyholder cash flows associated with the IUL product that are allocated to the embedded derivative in addition to changes in the fair value of the embedded derivative during the reporting period. The fair value of the IUL embedded derivative is derived through the income method of valuation using a valuation model that projects future cash flows using current index values and volatility, the hedge budget used to price the product, and policyholder assumptions (both elective and non-elective). For policyholder behavior assumptions, expected lapse and withdrawal assumptions are used and updated for actual experience, as necessary. The Company assumes age-based mortality factors varying from 43% — 110% that are applied to the base table, which is defined as 90% of 2015 VBT Primary Tables adjusted for 5.5 years of 2020 SOA HMI. The present value of the cash flows is determined using the discount rate curve, which is based upon LIBOR up to one year and constant maturity treasury rates plus a credit spread (to represent the Company's non-performance risk) thereafter. Policyholder assumptions are reviewed on an annual basis. As a result of using significant unobservable inputs, the IUL embedded derivative is categorized as Level 3.
The Company has assumed and ceded certain blocks of policies under modified coinsurance agreements in which the investment results of the underlying portfolios inure directly to the reinsurers. Funds withheld arrangements related to such agreements contain embedded derivatives that are reported at fair value. Changes in their fair value are reported in net gains (losses) — investments and derivatives. The fair value of embedded derivatives related to funds withheld under modified coinsurance agreements are a function of the unrealized gains or losses on the underlying assets and are calculated in a manner consistent with the terms of the agreements. The investments supporting certain of these agreements are designated as "trading securities"; therefore changes in their fair value are also reported in net gains (losses) — investments and derivatives. The fair value of embedded derivatives is estimated based on market standard valuation methodology and is considered a Level 3 valuation.
In conjunction with the Captive Merger, PLC terminated its interest support, yearly renewable term ("YRT") premium support, and portfolio maintenance agreements with Golden Gate, Golden Gate II, Golden Gate V, and WCL. The interest support agreement provided that PLC would make payments to Golden Gate II if actual investment income on certain of Golden Gate II's asset portfolios fell below a
F-48
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
calculated investment income amount as defined in the interest support agreement, the YRT premium support agreements provided that PLC would make payments to Golden Gate and Golden Gate II in the event that YRT premium rates increased, and the portfolio maintenance agreements provided that PLC would make payments to Golden Gate, Golden Gate V, and WCL in the event of other-than-temporary impairments on investments that exceeded defined thresholds.
As part of the Captive Merger, PLC entered into a new portfolio maintenance agreement with Golden Gate. This agreement meets the definition of a derivative and is accounted for at fair value and is considered Level 3 valuation. The fair value of this derivative is included in Other long-term investments. For information regarding gains on these derivatives please refer to Note 6, Derivative Financial Instruments.
The portfolio maintenance agreement provides that PLC will make payments to Golden Gate in the event of credit losses on investments that exceed defined thresholds. The derivative is valued using an internal discounted cash flow model. The significant unobservable inputs are the projected probability and severity of credit losses used to project future cash flows on the investment portfolios.
The Funds Withheld derivative results from reinsurance agreements with Protective Life Reinsurance Bermuda LTD, a wholly owned subsidiary of PLC ("PL Re") where the economic performance of certain hedging instruments held by the Company are ceded to PL Re. The value of the Funds Withheld derivative is directly tied to the value of the hedging instruments held in the funds withheld accounts. The hedging instruments consist of derivative instruments, the fair values of which are classified as a Level 2 measurement; as such, the fair value of the Funds Withheld derivative has been classified as a Level 2 measurement. The fair value of the Funds Withheld derivative as of December 31, 2021, was a liability of $10 million.
Annuity Account Balances
The Company records a certain legacy block of FIA reserves at fair value. Based on the characteristics of these reserves, the Company believes that the fund value approximates fair value. The fair value measurement of these reserves is considered a Level 3 valuation due to the unobservable nature of the fund values.
Separate Accounts
Separate account variable annuity and variable life assets represent segregated funds that are invested for certain customers which are invested in open-ended mutual funds and are included in Level 1. Investment risks associated with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract value and not fair value in the Company's consolidated balance sheets.
F-49
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
Valuation of Level 3 Financial Instruments
The following table presents the valuation method for material financial instruments included in Level 3 as of December 31, 2021, as well as the unobservable inputs used in the valuation of those financial instruments:
|
Fair Value As of December 31, 2021 |
Valuation Technique |
Unobservable Input |
Range (Weighted Average) |
||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||
|
Assets: |
|||||||||||||||||||
|
Residential mortgage-backed securities |
$ 40 |
Trade Price |
Spread |
1.03% - 1.10% (1.07%) |
|||||||||||||||
|
Commercial mortgage-backed securities |
180 |
Discounted cash flow |
Spread over treasury |
1.04% - 2.47% (1.30%) |
|||||||||||||||
|
Other asset-backed securities |
436 |
Liquidation |
Liquidation value |
$98.63 - $99.75 ($99.07) |
|||||||||||||||
|
Discounted cash flow |
Liquidity premium |
0.11% - 2.14% (1.54%) | |||||||||||||||||
|
|
|
|
Paydown Rate |
11.20% - 13.41% (12.30%) |
|||||||||||||||
|
|
|
|
Liquidation value |
$60.00 - 113.88% (112.92%) |
|||||||||||||||
|
Corporate securities |
1,588 |
Discounted cash flow |
Spread over treasury |
0.00% - 4.00% (1.50%) |
|||||||||||||||
|
Liabilities:(1)(2) |
|||||||||||||||||||
|
Embedded derivatives — GLWB |
$ 475 |
Actuarial cash flow model |
Mortality |
88% to 100% of Ruark 2015 ALB Table |
|||||||||||||||
|
Lapse |
PL-RBA Predictive Model |
||||||||||||||||||
|
|
|
|
Utilization |
PL-RBA Predictive Model |
|||||||||||||||
|
|
|
|
Nonperformance risk |
0.19% - 0.82% |
|||||||||||||||
|
Embedded derivative — FIA |
595 |
Actuarial cash flow model |
Expenses |
$214 per policy |
|||||||||||||||
F-50
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
|
Fair Value As of December 31, 2021 |
Valuation Technique |
Unobservable Input |
Range (Weighted Average) |
||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||
|
|
|
|
Withdrawal rate |
0.4% - 2.4% prior to age 70 RMD for ages 70+ or WB withdrawal rate Assume underutilized RMD for nonWB policies ages 72 - 88 |
|||||||||||||||
|
|
|
|
Mortality |
88% to 100% of Ruark 2015 ALB table |
|||||||||||||||
|
|
|
|
Lapse |
0.2% - 50.0%, depending on duration/surrender charge period. Dynamically adjusted for WB moneyness and projected market rates vs credited rates. |
|||||||||||||||
|
|
|
|
Nonperformance risk |
0.19% - 0.82% |
|||||||||||||||
|
Embedded derivative — IUL |
$ 269 |
Actuarial cash flow model |
Mortality |
43% - 110% of base table (90% of 2015 VBT Primary Tables adjusted for 5.5 years of 2020 SOA HMI) 94% - 248% of duration 8 point in scale 2015 VBT Primary Tables, depending on type of business |
|||||||||||||||
|
|
|
|
Lapse |
0.375% - 7.5%, depending on duration/distribution channel and smoking class |
|||||||||||||||
|
|
|
|
Nonperformance risk |
0.19% - 0.82% |
|||||||||||||||
(1) Excludes modified coinsurance arrangements.
(2) Fair value is presented as a net liability.
The chart above excludes Level 3 financial instruments that are valued using broker quotes and those for which book value approximates fair value. Unobservable inputs were weighted by the relative fair value of instruments, except for other asset-backed securities which were weighted by the relative par amounts.
The Company has considered all reasonably available quantitative inputs as of December 31, 2021, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments
F-51
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
are not shared with the Company. This resulted in $197 million of financial instruments being classified as Level 3 as of December 31, 2021. Of the $197 million, $172 million are other asset-backed securities, $3 million are corporate securities, $16 million are other government securities, and $6 million are equity securities.
In certain cases the Company has determined that book value materially approximates fair value. As of December 31, 2021, the Company held $148 million of financial instruments where book value approximates fair value which are predominantly FHLB stock.
The following table presents the valuation method for material financial instruments included in Level 3, as of December 31, 2020, as well as the unobservable inputs used in the valuation of those financial instruments:
|
Fair Value As of December 31, 2020 |
Valuation Technique |
Unobservable Input |
Range (Weighted Average) |
||||||||||||||||
|
(Recast) (Dollars In Millions) |
|||||||||||||||||||
|
Assets: |
|||||||||||||||||||
|
Commercial mortgage-backed securities |
$ 32 |
Discounted cash flow |
Spread over treasury |
2.78% - 2.92% (2.87%) |
|||||||||||||||
|
Other asset-backed securities |
435 |
Liquidation |
Liquidation value |
$95.00 - $97.00 ($96.19) | |||||||||||||||
|
Discounted cash flow |
Liquidity premium |
0.54% - 2.30% (1.63%) | |||||||||||||||||
|
|
|
|
Paydown Rate |
8.79% - 12.49% (11.39%) | |||||||||||||||
|
Corporate securities |
1,432 |
Discounted cash flow |
Spread over treasury |
0.00% - 4.75% (1.89%) | |||||||||||||||
|
Liabilities:(1)(2) |
|||||||||||||||||||
|
Embedded derivatives — GLWB |
$ 822 |
Actuarial cash flow model |
Mortality |
88% to 100% of Ruark 2015 ALB Table |
|||||||||||||||
|
Lapse |
PL RBA Predictive Model |
||||||||||||||||||
|
|
|
|
Utilization |
PL RBA Predictive Model |
|||||||||||||||
|
|
|
|
Nonperformance risk |
0.19% - 0.81% |
|||||||||||||||
|
Embedded derivative — FIA |
573 |
Actuarial cash flow model |
Expenses |
$207 per policy |
|||||||||||||||
F-52
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
|
Fair Value As of December 31, 2020 |
Valuation Technique |
Unobservable Input |
Range (Weighted Average) |
||||||||||||||||
|
(Recast) (Dollars In Millions) |
|||||||||||||||||||
|
|
|
|
Withdrawal rate |
0.4% - 2.4% prior to age 70 RMD for ages 70+ or WB withdrawal rate. Assume underutilized RMD for non WB policies age 72 - 88 |
|||||||||||||||
|
|
|
|
Mortality |
88% to 100% of Ruark 2015 ALB table |
|||||||||||||||
|
|
|
|
Lapse |
0.2% - 50.0%, depending on duration/surrender charge period. Dynamically adjusted for WB moneyness and projected market rates vs credited rates. |
|||||||||||||||
|
|
|
|
Nonperformance risk |
0.19% - 0.81% |
|||||||||||||||
|
Embedded derivative — IUL |
$ 201 |
Actuarial cash flow model |
Mortality |
36% - 161% of 2015 VBT Primary Tables. 94% - 248% of duration 8 point in scale 2015 VBT Primary Tables, depending on type of business |
|||||||||||||||
|
|
|
|
Lapse |
0.375% - 10%, depending on duration/distribution channel and smoking class |
|||||||||||||||
|
|
|
|
Nonperformance risk |
0.19% - 0.81% |
|||||||||||||||
(1) Excludes modified coinsurance arrangements.
(2) Fair value is presented as a net liability.
The chart above excludes Level 3 financial instruments that are valued using broker quotes and those for which book value approximates fair value.
The Company has considered all reasonably available quantitative inputs as of December 31, 2020, but the valuation techniques and inputs used by some brokers in pricing certain financial instruments are not shared with the Company. This resulted in $116 million of financial instruments being classified
F-53
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
as Level 3 as of December 31, 2020. Of the $116 million, $88 million are other asset backed securities, $17 million are corporate securities, and $11 million are equity securities.
In certain cases the Company determined that book value materially approximates fair value. As of December 31, 2020, the Company held $90 million of financial instruments where book value approximates fair value which are predominantly FHLB stock.
The asset-backed securities classified as Level 3 are predominantly ARS. A change in the paydown rate (the projected annual rate of principal reduction) of the ARS can significantly impact the fair value of these securities. A decrease in the paydown rate would increase the projected weighted average life of the ARS and increase the sensitivity of the ARS' fair value to changes in interest rates. An increase in the liquidity premium would result in a decrease in the fair value of the securities, while a decrease in the liquidity premium would increase the fair value of these securities. The liquidation value for these securities are sensitive to the issuer's available cash flows and ability to redeem the securities, as well as the current holders' willingness to liquidate at the specified price.
The fair value of corporate bonds classified as Level 3 is sensitive to changes in the interest rate spread over the corresponding U.S. Treasury rate. This spread represents a risk premium that is impacted by company specific and market factors. An increase in the spread can be caused by a perceived increase in credit risk of a specific issuer and/or an increase in the overall market risk premium associated with similar securities. The fair values of corporate bonds are sensitive to changes in spread. When holding the treasury rate constant, the fair value of corporate bonds increases when spreads decrease, and decreases when spreads increase.
The fair value of the GLWB embedded derivative is sensitive to changes in the discount rate which includes the Company's nonperformance risk, volatility, lapse, and mortality assumptions. The volatility assumption is an observable input as it is based on market inputs. The Company's nonperformance risk, lapse, and mortality are unobservable. An increase in the three unobservable assumptions would result in a decrease in the fair value of the liability and conversely, if there is a decrease in the assumptions the fair value would increase. The fair value is also dependent on the assumed policyholder utilization of the GLWB where an increase in assumed utilization would result in an increase in the fair value of the liability and conversely, if there is a decrease in the assumption, the fair value would decrease.
The fair value of the FIA embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the FIA embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and nonperformance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.
The fair value of the IUL embedded derivative is predominantly impacted by observable inputs such as discount rates and equity returns. However, the fair value of the IUL embedded derivative is sensitive to non-performance risk, which is unobservable. The value of the liability increases with decreases in the discount rate and non-performance risk and decreases with increases in the discount rate and non-performance risk. The value of the liability increases with increases in equity returns and the liability decreases with a decrease in equity returns.
F-54
(This page has been left blank intentionally.)
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the year ended December 31, 2021, for which the Company has used significant unobservable inputs (Level 3):
|
Total Realized and Unrealized Gains |
Total Realized and Unrealized Losses |
||||||||||||||||||||||
|
Beginning Balance |
Included in Net Income |
Included in Other Comprehensive Income |
Included in Net Income |
Included in Other Comprehensive Income |
|||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||
|
Fixed maturity securities AFS |
|||||||||||||||||||||||
|
Residential mortgage-backed securities |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
|||||||||||||
|
Commercial mortgage-backed securities |
32 |
— |
— |
— |
(2 |
) |
|||||||||||||||||
|
Other asset-backed securities |
435 |
— |
3 |
— |
(1 |
) |
|||||||||||||||||
|
Corporate securities |
1,432 |
— |
11 |
— |
(34 |
) |
|||||||||||||||||
|
Total fixed maturity securities — AFS |
1,899 |
— |
14 |
— |
(37 |
) |
|||||||||||||||||
|
Fixed maturity securities — trading |
|||||||||||||||||||||||
|
Other asset-backed securities |
71 |
— |
3 |
— |
— |
||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Corporate securities |
18 |
— |
— |
— |
(1 |
) |
|||||||||||||||||
|
Total fixed maturity securities — trading |
89 |
— |
3 |
— |
(1 |
) |
|||||||||||||||||
|
Total fixed maturity securities |
1,988 |
— |
17 |
— |
(38 |
) |
|||||||||||||||||
|
Equity securities |
101 |
— |
— |
— |
— |
||||||||||||||||||
|
Other long-term investments(1) |
298 |
185 |
— |
(188 |
) |
— |
|||||||||||||||||
|
Total investments |
2,387 |
185 |
17 |
(188 |
) |
(38 |
) |
||||||||||||||||
|
Total assets measured at fair value on a recurring basis |
$ |
2,387 |
$ |
185 |
$ |
17 |
$ |
(188 |
) |
$ |
(38 |
) |
|||||||||||
|
Liabilities: |
|||||||||||||||||||||||
|
Annuity account balances(2) |
$ |
67 |
$ |
— |
$ |
— |
$ |
(4 |
) |
$ |
— |
||||||||||||
|
Other liabilities(1) |
2,239 |
877 |
— |
(577 |
) |
— |
|||||||||||||||||
|
Total liabilities measured at fair value on a recurring basis |
$ |
2,306 |
$ |
877 |
$ |
— |
$ |
(581 |
) |
$ |
— |
||||||||||||
(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
For the year ended December 31, 2021, there were $336 million of securities transferred into Level 3 from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods but were priced internally using significant unobservable inputs where market observable inputs were not available as of December 31, 2021.
For the year ended December 31, 2021, there were $38 million of securities transferred into Level 2 from Level 3.
F-56
|
Total Gains (losses) included in Net Income Related to |
|||||||||||||||||||||||||||||||||||
|
Purchases |
Sales |
Issuances |
Settlements |
Transfers in/out of Level 3 |
Other |
Ending Balance |
Instruments Still Held at the Reporting Date |
||||||||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||||||||||||||
|
Fixed maturity securities AFS |
|||||||||||||||||||||||||||||||||||
|
Residential mortgage-backed securities |
$ |
40 |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
40 |
$ |
— |
|||||||||||||||||||
|
Commercial mortgage-backed securities |
— |
— |
— |
— |
150 |
— |
180 |
— |
|||||||||||||||||||||||||||
|
Other asset-backed securities |
67 |
(4 |
) |
— |
— |
14 |
1 |
515 |
— |
||||||||||||||||||||||||||
|
Corporate securities |
274 |
(212 |
) |
— |
— |
112 |
(1 |
) |
1,582 |
— |
|||||||||||||||||||||||||
|
Total fixed maturity securities — AFS |
381 |
(216 |
) |
— |
— |
276 |
— |
2,317 |
— |
||||||||||||||||||||||||||
|
Fixed maturity securities — trading |
|||||||||||||||||||||||||||||||||||
|
Other asset-backed securities |
22 |
(19 |
) |
— |
— |
16 |
— |
93 |
— |
||||||||||||||||||||||||||
|
Other government-related securities |
— |
— |
— |
— |
16 |
— |
16 |
— |
|||||||||||||||||||||||||||
|
Corporate securities |
2 |
(6 |
) |
— |
— |
(5 |
) |
— |
8 |
— |
|||||||||||||||||||||||||
|
Total fixed maturity securities — trading |
24 |
(25 |
) |
— |
— |
27 |
— |
117 |
— |
||||||||||||||||||||||||||
|
Total fixed maturity securities |
405 |
(241 |
) |
— |
— |
303 |
— |
2,434 |
— |
||||||||||||||||||||||||||
|
Equity securities |
91 |
(32 |
) |
— |
— |
(5 |
) |
— |
155 |
— |
|||||||||||||||||||||||||
|
Other long-term investments(1) |
— |
— |
— |
— |
— |
— |
295 |
(3 |
) |
||||||||||||||||||||||||||
|
Total investments |
496 |
(273 |
) |
— |
— |
298 |
— |
2,884 |
(3 |
) |
|||||||||||||||||||||||||
|
Total assets measured at fair value on a recurring basis |
$ |
496 |
$ |
(273 |
) |
$ |
— |
$ |
— |
$ |
298 |
$ |
— |
$ |
2,884 |
$ |
(3 |
) |
|||||||||||||||||
|
Liabilities: |
|||||||||||||||||||||||||||||||||||
|
Annuity account balances(2) |
$ |
— |
$ |
— |
$ |
— |
$ |
8 |
$ |
— |
$ |
— |
$ |
63 |
$ |
— |
|||||||||||||||||||
|
Other liabilities(1) |
— |
— |
— |
— |
— |
— |
1,939 |
300 |
|||||||||||||||||||||||||||
|
Total liabilities measured at fair value on a recurring basis |
$ |
— |
$ |
— |
$ |
— |
$ |
8 |
$ |
— |
$ |
— |
$ |
2,002 |
$ |
300 |
|||||||||||||||||||
F-57
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
The following table presents a reconciliation of the beginning and ending balances for fair value measurements for the year ended December 31, 2020, for which the Company has used significant unobservable inputs (Level 3):
|
Total Realized and Unrealized Gains |
Total Realized and Unrealized Losses |
||||||||||||||||||||||
|
Beginning Balance |
Included in Net Income |
Included in Other Comprehensive Income |
Included in Net Income |
Included In Other Comprehensive Income |
|||||||||||||||||||
|
(Recast) (Dollars In Millions) |
|||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||
|
Fixed maturity securities AFS |
|||||||||||||||||||||||
|
Commercial mortgage-backed securities |
$ |
10 |
$ |
— |
$ |
1 |
$ |
— |
$ |
(1 |
) |
||||||||||||
|
Other asset-backed securities |
421 |
— |
8 |
— |
(13 |
) |
|||||||||||||||||
|
Corporate securities |
1,374 |
— |
135 |
— |
(83 |
) |
|||||||||||||||||
|
Total fixed maturity securities — AFS |
1,805 |
— |
144 |
— |
(97 |
) |
|||||||||||||||||
|
Fixed maturity securities — trading |
|||||||||||||||||||||||
|
Other asset-backed securities |
65 |
6 |
— |
(9 |
) |
— |
|||||||||||||||||
|
Corporate securities |
11 |
1 |
— |
— |
— |
||||||||||||||||||
|
Total fixed maturity securities — trading |
76 |
7 |
— |
(9 |
) |
— |
|||||||||||||||||
|
Total fixed maturity securities |
1,881 |
7 |
144 |
(9 |
) |
(97 |
) |
||||||||||||||||
|
Equity securities |
73 |
1 |
— |
— |
— |
||||||||||||||||||
|
Other long-term investments(1) |
292 |
404 |
— |
(300 |
) |
— |
|||||||||||||||||
|
Total investments |
2,246 |
412 |
144 |
(309 |
) |
(97 |
) |
||||||||||||||||
|
Total assets measured at fair value on a recurring basis |
$ |
2,246 |
$ |
412 |
$ |
144 |
$ |
(309 |
) |
$ |
(97 |
) |
|||||||||||
|
Liabilities: |
|||||||||||||||||||||||
|
Annuity account balances(2) |
$ |
70 |
$ |
— |
$ |
— |
$ |
(3 |
) |
$ |
— |
||||||||||||
|
Other liabilities(1) |
1,332 |
926 |
— |
(1,833 |
) |
— |
|||||||||||||||||
|
Total liabilities measured at fair value on a recurring basis |
$ |
1,402 |
$ |
926 |
$ |
— |
$ |
(1,836 |
) |
$ |
— |
||||||||||||
(1) Represents certain freestanding and embedded derivatives.
(2) Represents liabilities related to fixed indexed annuities.
For the year ended December 31, 2020, there were $184 million of securities transferred into Level 3 from Level 2. These transfers resulted from securities that were priced by independent pricing services or brokers in previous periods but were priced internally using significant unobservable inputs where market observable inputs were not available as of December 31, 2020.
For the year ended December 31, 2020, there were $1 million of securities transferred into Level 2 from Level 3.
F-58
|
Total Gains (losses) included in Net Income Related to |
|||||||||||||||||||||||||||||||||||
|
Purchases |
Sales |
Issuances |
Settlements |
Transfers in/out of Level 3 |
Other |
Ending Balance |
Instruments Still Held at the Reporting Date |
||||||||||||||||||||||||||||
|
(Recast) (Dollars In Millions) |
|||||||||||||||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||||||||||||||
|
Fixed maturity securities AFS |
|||||||||||||||||||||||||||||||||||
|
Commercial mortgage-backed securities |
$ |
— |
$ |
— |
$ |
— |
$ |
— |
$ |
22 |
$ |
— |
$ |
32 |
$ |
— |
|||||||||||||||||||
|
Other asset-backed securities |
— |
(2 |
) |
— |
— |
22 |
(1 |
) |
435 |
— |
|||||||||||||||||||||||||
|
Corporate securities |
436 |
(562 |
) |
— |
— |
135 |
(3 |
) |
1,432 |
— |
|||||||||||||||||||||||||
|
Total fixed maturity securities — AFS |
436 |
(564 |
) |
— |
— |
179 |
(4 |
) |
1,899 |
— |
|||||||||||||||||||||||||
|
Fixed maturity securities — trading |
|||||||||||||||||||||||||||||||||||
|
Other asset-backed securities |
12 |
(2 |
) |
— |
— |
(1 |
) |
— |
71 |
2 |
|||||||||||||||||||||||||
|
Corporate securities |
8 |
(2 |
) |
— |
— |
— |
— |
18 |
— |
||||||||||||||||||||||||||
|
Total fixed maturity securities — trading |
20 |
(4 |
) |
— |
— |
(1 |
) |
— |
89 |
2 |
|||||||||||||||||||||||||
|
Total fixed maturity securities |
456 |
(568 |
) |
— |
— |
178 |
(4 |
) |
1,988 |
2 |
|||||||||||||||||||||||||
|
Equity securities |
27 |
(5 |
) |
— |
— |
5 |
— |
101 |
— |
||||||||||||||||||||||||||
|
Other long-term investments(1) |
41 |
(135 |
) |
— |
(4 |
) |
— |
— |
298 |
81 |
|||||||||||||||||||||||||
|
Total investments |
524 |
(708 |
) |
— |
(4 |
) |
183 |
(4 |
) |
2,387 |
83 |
||||||||||||||||||||||||
|
Total assets measured at fair value on a recurring basis |
$ |
524 |
$ |
(708 |
) |
$ |
— |
$ |
(4 |
) |
$ |
183 |
$ |
(4 |
) |
$ |
2,387 |
$ |
83 |
||||||||||||||||
|
Liabilities: |
|||||||||||||||||||||||||||||||||||
|
Annuity account balances(2) |
$ |
— |
$ |
— |
$ |
— |
$ |
6 |
$ |
— |
$ |
— |
$ |
67 |
$ |
— |
|||||||||||||||||||
|
Other liabilities(1) |
— |
— |
— |
— |
— |
— |
2,239 |
(906 |
) |
||||||||||||||||||||||||||
|
Total liabilities measured at fair value on a recurring basis |
$ |
— |
$ |
— |
$ |
— |
$ |
6 |
$ |
— |
$ |
— |
$ |
2,306 |
$ |
(906 |
) |
||||||||||||||||||
F-59
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
Total realized and unrealized gains (losses) on Level 3 assets and liabilities are primarily reported in either net gains (losses) — investments and derivatives within the consolidated statements of income or other comprehensive income within shareowner's equity based on the appropriate accounting treatment for the item.
Purchases, sales, issuances, and settlements, net, represent the activity that occurred during the period that results in a change of the asset or liability but does not represent changes in fair value for the instruments held at the beginning of the period. Such activity primarily relates to purchases and sales of fixed maturity securities and issuances and settlements of fixed indexed annuities.
The Company reviews the fair value hierarchy classifications each reporting period. Changes in the observability of the valuation attributes may result in a reclassification of certain financial assets or liabilities. Such reclassifications are reported as transfers in and out of Level 3 at the beginning fair value for the reporting period in which the changes occur. The asset transfers in the table(s) above primarily related to positions moved from Level 3 to Level 2 as the Company determined that certain inputs were observable.
The amount of total gains (losses) for assets and liabilities still held as of the reporting date primarily represents changes in fair value of trading securities and certain derivatives that exist as of the reporting date and the change in fair value of fixed indexed annuities.
Estimated Fair Value of Financial Instruments
The carrying amounts and estimated fair values of the Company's financial instruments that are not reported at fair value as of the periods shown below are as follows:
|
As of December 31, |
|||||||||||||||||||||||
|
2021 |
2020 |
||||||||||||||||||||||
|
Fair Value Level |
Carrying Amounts |
Fair Values |
Carrying Amounts |
Fair Values |
|||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||
|
Assets: |
|||||||||||||||||||||||
|
Commercial mortgage loans(1) |
3 |
$ |
10,863 |
$ |
11,386 |
$ |
10,006 |
$ |
10,788 |
||||||||||||||
|
Policy loans |
3 |
1,527 |
1,527 |
1,593 |
1,593 |
||||||||||||||||||
|
Other long-term investments(2) |
3 |
1,930 |
1,990 |
1,186 |
1,283 |
||||||||||||||||||
|
Liabilities: |
|||||||||||||||||||||||
|
Stable value product account balances |
3 |
$ |
8,526 |
$ |
8,598 |
$ |
6,056 |
$ |
6,231 |
||||||||||||||
|
Future policy benefits and claims(3) |
3 |
1,457 |
1,504 |
1,580 |
1,603 |
||||||||||||||||||
|
Other policyholders' funds(4) |
3 |
102 |
108 |
102 |
108 |
||||||||||||||||||
|
Debt:(5) |
|||||||||||||||||||||||
|
Subordinated funding obligations |
3 |
$ |
110 |
$ |
116 |
$ |
110 |
$ |
121 |
||||||||||||||
Except as noted below, fair values were estimated using quoted market prices.
(1) The carrying amount is net of allowance for credit losses.
(2) Other long-term investments represents a modco receivable, which is related to invested assets such as fixed income and structured securities, which are legally owned by the ceding company. The fair value is determined in a manner consistent with other similar invested assets held by the Company. In addition, it includes the cash surrender value of the Company's COLI policy.
(3) Single premium immediate annuity without life contingencies.
(4) Supplementary contracts without life contingencies.
(5) Excludes immaterial capital lease obligations.
F-60
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. FAIR VALUE OF FINANCIAL INSTRUMENTS — (Continued)
Fair Value Measurements
Commercial Mortgage Loans
The Company estimates the fair value of commercial mortgage loans using an internally developed model. This model includes inputs derived by the Company based on assumed discount rates relative to the Company's current commercial mortgage loan lending rate and an expected cash flow analysis based on a review of the commercial mortgage loan terms. The model also contains the Company's determined representative risk adjustment assumptions related to credit and liquidity risks.
Policy Loans
The Company believes the fair value of policy loans approximates book value. Policy loans are funds provided to policyholders in return for a claim on the policy. The funds provided are limited to the cash surrender value of the underlying policy. The nature of policy loans is to have a negligible default risk as the loans are fully collateralized by the value of the policy. Policy loans do not have a stated maturity and the balances and accrued interest are repaid either by the policyholder or with proceeds from the policy. Due to the collateralized nature of policy loans and unpredictable timing of repayments, the Company believes the carrying value of policy loans approximates fair value.
Other Long-Term Investments
In addition to free-standing and embedded derivative financial instruments discussed above, other long-term investments includes $1.2 billion of amounts receivable under certain modified coinsurance agreements and $710 million cash surrender value of the Company's COLI policies. The amounts receivable under the modified coinsurance agreements represent funds withheld in connection with certain reinsurance agreements in which the Company acts as the reinsurer. Under the terms of these agreements, assets equal to statutory reserves are withheld and legally owned by the ceding company, and any excess or shortfall is settled periodically. In some cases, these modified coinsurance agreements contain embedded derivatives which are discussed in more detail above. The fair value of amounts receivable under modified coinsurance agreements, including the embedded derivative component, correspond to the fair value of the underlying assets withheld. The COLI amounts are based on the fair value of the underlying assets.
Stable Value Product and Other Investment Contract Balances
The Company estimates the fair value of stable value product account balances and other investment contract balances (included in Future policy benefits and claims as well as Other policyholders' funds line items on our consolidated balance sheet) using models based on discounted expected cash flows. The discount rates used in the models are based on a current market rate for similar financial instruments.
Funding Obligations
The Company estimates the fair value of its subordinated and non-recourse funding obligations using internal discounted cash flow models. The discount rates used in the model are based on a current market yield for similar financial instruments.
F-61
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. DERIVATIVE FINANCIAL INSTRUMENTS
Types of Derivative Instruments and Derivative Strategies
The Company utilizes a risk management strategy that incorporates the use of derivative financial instruments to reduce exposure to certain risks, including but not limited to, interest rate risk, currency exchange risk, volatility risk, and equity market risk. These strategies are developed through the Company's analysis of data from financial simulation models and other internal and industry sources, and are then incorporated into the Company's risk management program.
Derivative instruments expose the Company to credit and market risk and could result in material changes from period to period. The Company attempts to minimize its credit in connection with its overall asset/liability management programs and risk management strategies. In addition, all derivative programs are monitored by our risk management department.
Derivatives Related to Interest Rate Risk Management
Derivative instruments that are used as part of the Company's interest rate risk management strategy include interest rate swaps, interest rate futures, interest rate caps, and interest rate swaptions.
Derivatives Related to Foreign Currency Exchange Risk Management
Derivative instruments that are used as part of the Company's foreign currency exchange risk management strategy include foreign currency swaps, foreign currency futures, foreign equity futures, and foreign equity options.
Derivatives Related to Risk Mitigation of Certain Annuity Contracts
The Company may use the following types of derivative contracts to mitigate its exposure to certain guaranteed benefits related to VA contracts, fixed indexed annuities, and indexed universal life contracts:
• Foreign Currency Futures
• Variance Swaps
• Interest Rate Futures
• Equity Options
• Equity Futures
• Credit Derivatives
• Interest Rate Swaps
• Interest Rate Swaptions
• Volatility Futures
• Volatility Options
• Total Return Swaps
Other Derivatives
PLC terminated its derivatives with Golden Gate, Golden Gate II, Golden Gate V, and WCL as part of the Captive Merger and entered into a new portfolio maintenance agreement with Golden Gate, also as part of the Captive Merger. The derivatives terminated included an interest support agreement, YRT premium support agreements, and portfolio maintenance agreements.
F-62
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)
The Company has funds withheld accounts that consist of various derivative instruments held by us that are used to hedge certain fixed indexed annuity products. The economic performance of derivatives in the funds withheld accounts are ceded PL Re. The funds withheld accounts are accounted for as a derivative financial instrument.
We believe that our asset/liability management programs and procedures and certain product features provide protection against the effects of changes in interest rates under various scenarios. Additionally, we believe our asset/liability management programs and procedures provide sufficient liquidity to enable us to fulfill our obligation to pay benefits under our various insurance and deposit contracts. However, our asset/liability management programs and procedures incorporate assumptions about the relationship between short-term and long-term interest rates (i.e., the slope of the yield curve), relationships between risk-adjusted and risk-free interest rates, market liquidity, spread movements, implied volatility, policyholder behavior, and other factors, and the effectiveness of our asset/liability management programs and procedures may be negatively affected whenever actual results differ from those assumptions.
Accounting for Derivative Instruments
GAAP requires that all derivative instruments be recognized in the balance sheet at fair value. The Company records its derivative financial instruments in the consolidated balance sheet in other long-term investments and other liabilities. The change in the fair value of derivative financial instruments is reported either in the statement of income or in other comprehensive income (loss), depending upon whether it qualified for and also has been properly identified as being part of a hedging relationship, and also on the type of hedging relationship that exists.
It is the Company's policy not to offset assets and liabilities associated with open derivative contracts. However, the Chicago Mercantile Exchange ("CME") rules characterize variation margin transfers as settlement payments, as opposed to adjustments to collateral. As a result, derivative assets and liabilities associated with centrally cleared derivatives for which the CME serves as the central clearing party are presented as if these derivatives had been settled as of the reporting date.
For a derivative financial instrument to be accounted for as an accounting hedge, it must be identified and documented as such on the date of designation. For cash flow hedges, the entire change in the fair value of the hedging instrument included in the assessment of hedge effectiveness is reported as a component of other comprehensive income and reclassified into earnings in the same period during which the hedged item impacts earnings. For fair value hedge derivatives, their gain or loss as well as the offsetting loss or gain attributable to the hedged risk of the hedged item is recognized in current earnings. Effectiveness of the Company's hedge relationships is assessed on a quarterly basis.
The Company reports changes in fair values of derivatives that are not part of a qualifying hedge relationship through operations in the period of change. Changes in the fair value of those derivatives are recognized in net gains (losses) — investments and derivatives.
F-63
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)
Derivative Instruments Designated and Qualifying as Hedging Instruments
Cash-Flow Hedges
• To hedge a fixed rate note denominated in a foreign currency, the Company entered into a fixed-to-fixed foreign currency swap in order to hedge the foreign currency exchange risk associated with the note. The cash flows received on the swap are identical to the cash flows paid on the note.
• To hedge a floating rate note, the Company entered into an interest rate swap to exchange the floating rate on the note for a fixed rate in order to hedge the interest rate risk associated with the note. The cash flows received on the swap are identical to the cash flow variability paid on the note.
Derivative Instruments Not Designated and Not Qualifying as Hedging Instruments
The Company uses various other derivative instruments for risk management purposes that do not qualify for hedge accounting treatment. Changes in the fair value of these derivatives are recognized in net gains (losses) — investments and derivatives during the period of change.
Derivatives Related to Variable Annuity Contracts
• The Company uses equity futures, equity options, total return swaps, interest rate futures, interest rate swaps, interest rate swaptions, currency futures, currency options, volatility futures, volatility options, and variance swaps to mitigate the risk related to certain guaranteed minimum benefits, including GLWB, within its VA products. In general, the cost of such benefits varies with the level of equity and interest rate markets, foreign currency levels, and overall volatility.
• The Company markets certain VA products with a GLWB rider. The GLWB component is considered an embedded derivative, not considered to be clearly and closely related to the host contract.
Derivatives Related to Fixed Indexed Annuity Contracts
• The Company uses equity futures and options to mitigate the risk within its fixed indexed annuity products. In general, the cost of such benefits varies with the level of equity and overall volatility.
• The Company markets certain fixed indexed annuity products. The FIA component is considered an embedded derivative as it is, not considered to be clearly and closely related to the host contract.
• The Company has a funds withheld account that consists of various derivative instruments held by the Company that are used to hedge the fixed indexed annuity products. The economic performance of derivatives in the funds withheld account is ceded to PL Re. The funds withheld account is accounted for as a derivative financial instrument.
Derivatives Related to Indexed Universal Life Contracts
• The Company uses equity futures and options to mitigate the risk within its indexed universal life products. In general, the cost of such benefits varies with the level of equity markets.
F-64
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)
• The Company markets certain IUL products. The IUL component is considered an embedded derivative, as it is not considered to be clearly and closely related to the host contract.
Other Derivatives
• The Company uses various swaps and other types of derivatives to manage risk related to other exposures.
• The Company is involved in various modified coinsurance and funds withheld arrangements which contain embedded derivatives. Changes in their fair value are recorded in net gains (losses) — investments and derivatives. The investment portfolios that support the related modified coinsurance reserves and funds withheld arrangements had fair value changes which substantially offset the gains or losses on these embedded derivatives.
• Certain of the Company and its subsidiaries had an interest support agreement, YRT premium support agreements, and portfolio maintenance agreements with PLC through October 1, 2020. These agreements were terminated as part of the Captive Merger and a new portfolio maintenance agreement was entered into between Golden Gate and PLC on that date.
The following table sets forth net gains and losses for the periods shown:
Gains (losses) — derivative financial instruments
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Derivatives related to VA contracts: |
|||||||||||||||
|
Interest rate futures |
$ |
15 |
$ |
— |
$ |
(20 |
) |
||||||||
|
Equity futures |
(12 |
) |
109 |
5 |
|||||||||||
|
Currency futures |
11 |
(10 |
) |
3 |
|||||||||||
|
Equity options |
(108 |
) |
(30 |
) |
(150 |
) |
|||||||||
|
Interest rate swaps |
(136 |
) |
274 |
230 |
|||||||||||
|
Total return swaps |
(189 |
) |
(49 |
) |
(78 |
) |
|||||||||
|
Embedded derivative — GLWB |
347 |
(404 |
) |
(198 |
) |
||||||||||
|
Total derivatives related to VA contracts |
(72 |
) |
(110 |
) |
(208 |
) |
|||||||||
|
Derivatives related to FIA contracts: |
|||||||||||||||
|
Embedded derivative |
3 |
(69 |
) |
(86 |
) |
||||||||||
|
Funds withheld derivative |
(7 |
) |
(10 |
) |
— |
||||||||||
|
Equity futures |
5 |
(4 |
) |
2 |
|||||||||||
|
Equity options |
72 |
49 |
84 |
||||||||||||
|
Other derivatives |
(3 |
) |
(1 |
) |
— |
||||||||||
|
Total derivatives related to FIA contracts |
70 |
(35 |
) |
— |
|||||||||||
F-65
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Derivatives related to IUL contracts: |
|||||||||||||||
|
Embedded derivative |
$ |
(28 |
) |
$ |
4 |
$ |
(13 |
) |
|||||||
|
Equity futures |
— |
(2 |
) |
— |
|||||||||||
|
Equity options |
16 |
9 |
15 |
||||||||||||
|
Total derivatives related to IUL contracts |
(12 |
) |
11 |
2 |
|||||||||||
|
Embedded derivative — Modco reinsurance treaties |
64 |
(99 |
) |
(187 |
) |
||||||||||
|
Derivatives with PLC(1) |
— |
23 |
27 |
||||||||||||
|
Other derivatives |
(2 |
) |
15 |
(2 |
) |
||||||||||
|
Total gains (losses) — derivatives, net |
$ |
48 |
$ |
(195 |
) |
$ |
(368 |
) |
|||||||
(1) The Company and certain of its subsidiaries had an interest support agreement, YRT premium support agreements, and portfolio maintenance agreements with PLC through October 1, 2020. These agreements were terminated as part of the Captive Merger and a new portfolio maintenance agreement was entered into with PLC on that date.
Based on expected cash flows of the underlying hedged items, the Company expects to reclassify $1 million out of accumulated other comprehensive income (loss) into net gains (losses) — investments and derivatives during the next twelve months.
The table below presents information about the nature and accounting treatment of the Company's primary derivative financial instruments and the location in and effect on the consolidated financial statements for the periods presented below:
|
As of December 31, |
|||||||||||||||||||
|
2021 |
2020 |
||||||||||||||||||
|
Notional Amount |
Fair Value |
Notional Amount |
Fair Value |
||||||||||||||||
|
(Recast) |
|||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||
|
Other long-term investments |
|||||||||||||||||||
|
Derivatives not designated as hedging instruments: |
|||||||||||||||||||
|
Interest rate swaps |
$ |
1,478 |
$ |
72 |
$ |
1,478 |
$ |
185 |
|||||||||||
|
Total return swaps |
239 |
8 |
158 |
2 |
|||||||||||||||
|
Derivatives with PLC(1) |
4,085 |
— |
4,076 |
— |
|||||||||||||||
|
Embedded derivative — Modco reinsurance treaties |
1,268 |
62 |
1,249 |
101 |
|||||||||||||||
|
Embedded derivative — GLWB |
3,066 |
169 |
2,067 |
138 |
|||||||||||||||
|
Embedded derivative — FIA |
398 |
64 |
335 |
60 |
|||||||||||||||
|
Interest rate futures |
561 |
5 |
690 |
4 |
|||||||||||||||
|
Equity futures |
312 |
6 |
203 |
4 |
|||||||||||||||
|
Currency futures |
27 |
— |
— |
— |
|||||||||||||||
|
Equity options |
8,852 |
1,061 |
7,208 |
1,142 |
|||||||||||||||
|
$ |
20,286 |
$ |
1,447 |
$ |
17,464 |
$ |
1,636 |
||||||||||||
F-66
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. DERIVATIVE FINANCIAL INSTRUMENTS — (Continued)
|
As of December 31, |
|||||||||||||||||||
|
2021 |
2020 |
||||||||||||||||||
|
Notional Amount |
Fair Value |
Notional Amount |
Fair Value |
||||||||||||||||
|
(Recast) |
|||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||
|
Other liabilities |
|||||||||||||||||||
|
Cash flow hedges: |
|||||||||||||||||||
|
Foreign currency swaps |
$ |
117 |
$ |
13 |
$ |
117 |
$ |
10 |
|||||||||||
|
Derivatives not designated as hedging instruments: |
|||||||||||||||||||
|
Interest rate swaps |
1,354 |
— |
1,354 |
— |
|||||||||||||||
|
Total return swaps |
1,168 |
39 |
1,003 |
15 |
|||||||||||||||
|
Embedded derivative — Modco reinsurance treaties |
2,974 |
280 |
2,911 |
389 |
|||||||||||||||
|
Funds withheld derivative |
855 |
10 |
661 |
10 |
|||||||||||||||
|
Embedded derivative — GLWB |
6,833 |
644 |
7,749 |
960 |
|||||||||||||||
|
Embedded derivative — FIA |
4,372 |
659 |
3,889 |
633 |
|||||||||||||||
|
Embedded derivative — IUL |
459 |
269 |
357 |
201 |
|||||||||||||||
|
Interest rate futures |
729 |
4 |
415 |
3 |
|||||||||||||||
|
Equity futures |
42 |
1 |
190 |
5 |
|||||||||||||||
|
Currency futures |
158 |
2 |
264 |
4 |
|||||||||||||||
|
Equity options |
7,044 |
771 |
5,499 |
834 |
|||||||||||||||
|
Other |
448 |
87 |
304 |
55 |
|||||||||||||||
|
$ |
26,553 |
$ |
2,779 |
$ |
24,713 |
$ |
3,119 |
||||||||||||
(1) The Company and certain of its subsidiaries had an interest support agreement, YRT premium support agreements, and portfolio maintenance agreements with PLC through October 1, 2020. These agreements were terminated as part of the Captive Merger and a new portfolio maintenance agreement was entered into with PLC on that date.
7. OFFSETTING OF ASSETS AND LIABILITIES
Certain of the Company's derivative instruments are subject to enforceable master netting arrangements that provide for the net settlement of all derivative contracts between the Company and a counterparty in the event of default or upon the occurrence of certain termination events. Collateral support agreements associated with each master netting arrangement provide that the Company will receive or pledge financial collateral in the event either minimum thresholds, or in certain cases ratings levels, have been reached. Additionally, certain of the Company's repurchase agreements provide for net settlement on termination of the agreement. Refer to Note 14, Debt and Other Obligations for details of the Company's repurchase agreement programs.
Collateral received includes both cash and non-cash collateral. Cash collateral received by the Company is recorded on the consolidated balance sheet as "cash", with a corresponding amount recorded in "other liabilities" to represent the Company's obligation to return the collateral. Non-cash collateral received by the Company is not recognized on the consolidated balance sheet unless the Company exercises its right to sell or re-pledge the underlying asset. As of December 31, 2021 and 2020, there was no fair value of non-cash collateral received.
F-67
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. OFFSETTING OF ASSETS AND LIABILITIES — (Continued)
The tables below present the derivative instruments by assets and liabilities for the Company as of December 31, 2021:
|
Gross Amounts of |
Gross Amounts Offset in the |
Net Amounts of Assets Presented in the |
Gross Amounts Not Offset in the Balance Sheet |
||||||||||||||||||||||||
|
Recognized Assets |
Balance Sheet |
Balance Sheet |
Financial Instruments |
Collateral Received |
Net Amount |
||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||||||
|
Offsetting of Derivative Assets |
|||||||||||||||||||||||||||
|
Derivatives: |
|||||||||||||||||||||||||||
|
Free-Standing derivatives |
$ |
1,152 |
$ |
— |
$ |
1,152 |
$ |
806 |
$ |
178 |
$ |
168 |
|||||||||||||||
|
Total derivatives, subject to a master netting arrangement or similar arrangement |
1,152 |
— |
1,152 |
806 |
178 |
168 |
|||||||||||||||||||||
|
Derivatives not subject to a master netting arrangement or similar arrangement |
|||||||||||||||||||||||||||
|
Embedded derivative — Modco reinsurance treaties |
62 |
— |
62 |
— |
— |
62 |
|||||||||||||||||||||
|
Embedded derivative — GLWB |
169 |
— |
169 |
— |
— |
169 |
|||||||||||||||||||||
|
Derivatives with PLC |
— |
— |
— |
— |
— |
— |
|||||||||||||||||||||
|
Embedded derivative — FIA |
64 |
— |
64 |
— |
— |
64 |
|||||||||||||||||||||
|
Total derivatives, not subject to a master netting arrangement or similar arrangement |
295 |
— |
295 |
— |
— |
295 |
|||||||||||||||||||||
|
Total derivatives |
1,447 |
— |
1,447 |
806 |
178 |
463 |
|||||||||||||||||||||
|
Total Assets |
$ |
1,447 |
$ |
— |
$ |
1,447 |
$ |
806 |
$ |
178 |
$ |
463 |
|||||||||||||||
F-68
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. OFFSETTING OF ASSETS AND LIABILITIES — (Continued)
|
Gross Amounts of |
Gross Amounts Offset in the |
Net Amounts of Liabilities Presented in |
Gross Amounts Not Offset in the Balance Sheet |
||||||||||||||||||||||||
|
Recognized Liabilities |
Balance Sheet |
Balance Sheet |
Financial Instruments |
Collateral Posted |
Net Amount |
||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||||||
|
Offsetting of Derivative Liabilities |
|||||||||||||||||||||||||||
|
Derivatives: |
|||||||||||||||||||||||||||
|
Free-Standing derivatives |
$ |
830 |
$ |
— |
$ |
830 |
$ |
806 |
$ |
22 |
$ |
2 |
|||||||||||||||
|
Total derivatives, subject to a master netting arrangement or similar arrangement |
830 |
— |
830 |
806 |
22 |
2 |
|||||||||||||||||||||
|
Derivatives not subject to a master netting arrangement or similar arrangement |
|||||||||||||||||||||||||||
|
Embedded derivative — Modco reinsurance treaties |
280 |
— |
280 |
— |
— |
280 |
|||||||||||||||||||||
|
Funds withheld derivative |
10 |
— |
10 |
— |
— |
10 |
|||||||||||||||||||||
|
Embedded derivative — GLWB |
644 |
— |
644 |
— |
— |
644 |
|||||||||||||||||||||
|
Embedded derivative — FIA |
659 |
— |
659 |
— |
— |
659 |
|||||||||||||||||||||
|
Embedded derivative — IUL |
269 |
— |
269 |
— |
— |
269 |
|||||||||||||||||||||
|
Other |
87 |
— |
87 |
— |
— |
87 |
|||||||||||||||||||||
|
Total derivatives, not subject to a master netting arrangement or similar arrangement |
1,949 |
— |
1,949 |
— |
— |
1,949 |
|||||||||||||||||||||
|
Total derivatives |
2,779 |
— |
2,779 |
806 |
22 |
1,951 |
|||||||||||||||||||||
|
Repurchase agreements(1) |
1,393 |
— |
1,393 |
— |
— |
1,393 |
|||||||||||||||||||||
|
Total Liabilities |
$ |
4,172 |
$ |
— |
$ |
4,172 |
$ |
806 |
$ |
22 |
$ |
3,344 |
|||||||||||||||
(1) Borrowings under repurchase agreements are for a term less than 90 days.
F-69
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. OFFSETTING OF ASSETS AND LIABILITIES — (Continued)
The tables below present the derivative instruments by assets and liabilities for the Company as of December 31, 2020.
|
Gross Amounts of |
Gross Amounts Offset in the |
Net Amounts of Assets Presented in the |
Gross Amounts Not Offset in Balance Sheet |
||||||||||||||||||||||||
|
Recognized Assets |
Balance Sheet |
Balance Sheet |
Financial Instruments |
Collateral Received |
Net Amount |
||||||||||||||||||||||
|
(Recast) |
|||||||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||||||
|
Offsetting of Derivative Assets |
|||||||||||||||||||||||||||
|
Derivatives: |
|||||||||||||||||||||||||||
|
Free-Standing derivatives |
$ |
1,337 |
$ |
— |
$ |
1,337 |
$ |
865 |
$ |
290 |
$ |
182 |
|||||||||||||||
|
Total derivatives, subject to a master netting arrangement or similar arrangement |
1,337 |
— |
1,337 |
865 |
290 |
182 |
|||||||||||||||||||||
|
Derivatives not subject to a master netting arrangement or similar arrangement |
|||||||||||||||||||||||||||
|
Embedded derivative — Modco reinsurance treaties |
101 |
— |
101 |
— |
— |
101 |
|||||||||||||||||||||
|
Embedded derivative — GLWB |
138 |
— |
138 |
— |
— |
138 |
|||||||||||||||||||||
|
Other |
60 |
— |
60 |
— |
— |
60 |
|||||||||||||||||||||
|
Total derivatives, not subject to a master netting arrangement or similar arrangement |
299 |
— |
299 |
— |
— |
299 |
|||||||||||||||||||||
|
Total derivatives |
1,636 |
— |
1,636 |
865 |
290 |
481 |
|||||||||||||||||||||
|
Total Assets |
$ |
1,636 |
$ |
— |
$ |
1,636 |
$ |
865 |
$ |
290 |
$ |
481 |
|||||||||||||||
F-70
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. OFFSETTING OF ASSETS AND LIABILITIES — (Continued)
|
Gross Amounts of |
Gross Amounts Offset in the |
Net Amounts of Liabilities Presented in |
Gross Amounts Not Offset in the Balance Sheet |
||||||||||||||||||||||||
|
Recognized Liabilities |
Balance Sheet |
Balance Sheet |
Financial Instruments |
Collateral Posted |
Net Amount |
||||||||||||||||||||||
|
(Recast) |
|||||||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||||||
|
Offsetting of Derivative Liabilities |
|||||||||||||||||||||||||||
|
Derivatives: |
|||||||||||||||||||||||||||
|
Free-Standing derivatives |
$ |
871 |
$ |
— |
$ |
871 |
$ |
865 |
$ |
4 |
$ |
2 |
|||||||||||||||
|
Total derivatives, subject to a master netting arrangement or similar arrangement |
871 |
— |
871 |
865 |
4 |
2 |
|||||||||||||||||||||
|
Derivatives not subject to a master netting arrangement or similar arrangement |
|||||||||||||||||||||||||||
|
Embedded derivative — Modco reinsurance treaties |
389 |
— |
389 |
— |
— |
389 |
|||||||||||||||||||||
|
Funds withheld derivative |
10 |
— |
10 |
— |
— |
10 |
|||||||||||||||||||||
|
Embedded derivative — GLWB |
960 |
— |
960 |
— |
— |
960 |
|||||||||||||||||||||
|
Embedded derivative — FIA |
633 |
— |
633 |
— |
— |
633 |
|||||||||||||||||||||
|
Embedded derivative — IUL |
201 |
— |
201 |
— |
— |
201 |
|||||||||||||||||||||
|
Other |
55 |
— |
55 |
— |
— |
55 |
|||||||||||||||||||||
|
Total derivatives, not subject to a master netting arrangement or similar arrangement |
2,248 |
— |
2,248 |
— |
— |
2,248 |
|||||||||||||||||||||
|
Total derivatives |
3,119 |
— |
3,119 |
865 |
4 |
2,250 |
|||||||||||||||||||||
|
Repurchase agreements(1) |
437 |
— |
437 |
— |
— |
437 |
|||||||||||||||||||||
|
Total Liabilities |
$ |
3,556 |
$ |
— |
$ |
3,556 |
$ |
865 |
$ |
4 |
$ |
2,687 |
|||||||||||||||
(1) Borrowings under repurchase agreements are for a term less than 90 days.
8. COMMERCIAL MORTGAGE LOANS
The Company invests a portion of its investment portfolio in commercial mortgage loans. As of December 31, 2021, the Company's commercial mortgage loan holdings were $11.0 billion, or $10.9 billion net of allowance for credit losses. As of December 31, 2020, the Company's commercial mortgage loan
F-71
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. COMMERCIAL MORTGAGE LOANS — (Continued)
holdings were $10.2 billion, $10 billion net of allowance for credit losses. The Company specializes in making commercial mortgage loans on credit-oriented commercial properties. The Company's underwriting procedures relative to its commercial mortgage loan portfolio are based, in the Company's view, on a conservative and disciplined approach. The Company concentrates on a small number of commercial real estate asset types associated with the necessities of life (grocery anchored and credit tenant retail, industrial, multi-family, senior living, and credit tenant and medical office). The Company believes that these asset types tend to weather economic downturns better than other commercial asset classes in which it has chosen not to participate. The Company believes this disciplined approach has helped to maintain a relatively low delinquency and foreclosure rate throughout its history. The majority of the Company's commercial mortgage loan portfolio was underwritten by the Company. From time to time, the Company may acquire commercial mortgage loans in conjunction with an acquisition.
The following table includes a breakdown of the Company's commercial mortgage loan portfolio by property type as of December 31:
|
Percentage of Commercial Mortgage Loans |
|||||||||||
|
Type |
2021 |
2020 |
|||||||||
|
Retail |
30.3 |
% |
34.9 |
% |
|||||||
|
Office buildings |
13.8 |
15.1 |
|||||||||
|
Apartments |
17.2 |
12.7 |
|||||||||
|
Warehouses |
16.5 |
16.0 |
|||||||||
|
Senior housing |
17.0 |
16.2 |
|||||||||
|
Other |
5.2 |
5.1 |
|||||||||
|
100.0 |
% |
100.0 |
% |
||||||||
The Company specializes in making commercial mortgage loans on credit-oriented commercial properties. No single tenant's exposure represents more than 0.9% of the commercial mortgage loan portfolio.
The following states represent the primary locations of the Company's commercial mortgage loans as of December 31:
F-72
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. COMMERCIAL MORTGAGE LOANS — (Continued)
During the year ended December 31, 2021, the Company funded $2.0 billion of new commercial mortgage loans, with an average commercial mortgage loan size of $11 million. The average size commercial mortgage loan in the portfolio as of December 31, 2021, was $6 million and the weighted-average interest rate was 4.1%. The largest single commercial mortgage loan at December 31, 2021 was $78 million.
During the year ended December 31, 2020, the Company funded $1.4 billion of new commercial mortgage loans loans, with an average loan size of $8 million. The average size commercial mortgage loan in the portfolio as of December 31, 2020, was $6 million and the weighted-average interest rate was 4.3%. The largest single commercial mortgage loan at December 31, 2020 was $78 million.
During the year ended December 31, 2019, the Company funded $1.2 billion of new commercial mortgage loans, with an average loan size of $8 million. The average size commercial mortgage loan in the portfolio as of December 31, 2019, was $5 million and the weighted-average interest rate was 4.5%. The largest single commercial mortgage loan at December 31, 2019 was $78 million.
Certain of the commercial mortgage loans have call options that occur within the next eight years. However, if interest rates were to significantly increase, the Company may be unable to exercise the call options on its existing commercial mortgage loans commensurate with the significantly increased market rates. Assuming the commercial mortgage loans are called at their next call dates, $116 million would become due in 2022, $379 million in 2023 through 2027, and $6 million in 2028 through 2029.
The Company offers a type of commercial mortgage loan under which the Company will permit a loan-to-value ratio of up to 85% in exchange for a participating interest in the cash flows from the underlying real estate. As of December 31, 2021 and 2020, $600 million and $806 million, respectively, of the Company's total commercial mortgage loans principal balance have this participation feature. Cash flows received as a result of this participation feature are recorded as interest income. During the years ended December 31, 2021, 2020, and 2019, the Company recognized $54 million, $26 million, and $23 million of participation commercial mortgage loan income, respectively.
As of December 31, 2021, the Company did not have any commercial mortgage loans that were nonperforming, restructured, or foreclosed and converted to real estate properties. As of December 31, 2020, $3 million of invested assets consisted of commercial mortgage loans that were nonperforming, restructured or foreclosed and converted to real estate properties. The Company does not expect these investments to adversely affect its liquidity or ability to maintain proper matching of assets and liabilities. For all commercial mortgage loans, the impact of troubled debt restructurings is reflected in our investment balance and in the allowance for commercial mortgage loan credit losses.
During the years ended December 31, 2021, 2020, and 2019, the Company recognized one, four, and four troubled debt restructurings transactions, respectively, as a result of granting concessions to borrowers which included loan terms unavailable from other lenders. These concessions were the result of agreements between the creditor and the debtor. The Company did not identify any commercial mortgage loans whose principal was permanently impaired during the year ended December 31, 2021 and identified one loan that was permanently impaired during the year ended December 31, 2020.
The Company provides certain relief under the Coronavirus Aid Relief, and Economic Security Act (the "CARES Act"), and the Consolidated Appropriations Act (the "CAA") under its COVID-19 Commercial
F-73
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. COMMERCIAL MORTGAGE LOANS — (Continued)
Mortgage Loan Program (the "Loan Modification Program"). During the year ended December 31, 2021, the Company modified 23 commercial mortgage loans under the Loan Modification Program, representing $475 million in unpaid principal balance. As of December 31, 2021, since the inception of the CARES Act, there were 268 total commercial mortgage loans modified under the Loan Modification Program, representing $2.0 billion in unpaid principal balance. At December 31, 2021, $1.9 billion of these loans have resumed regular principal and interest payments in accordance with the terms of the modification agreements and the Company expects the remaining $69 million in unpaid principal on commercial mortgage loans to resume scheduled payments in accordance with the agreed upon terms. The modifications under this program include agreements to defer principal payments only and/or to defer principal and interest payments for a specified period of time. None of these modifications were considered troubled debt restructurings.
As of December 31, 2021 and 2020, the amortized cost basis of the Company's commercial mortgage loan receivables by origination year, net of the allowance, for credit losses is as follows:
F-74
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. COMMERCIAL MORTGAGE LOANS — (Continued)
The following tables provide a comparative view of the key credit quality indicators of the loan-to-value and debt service coverage ratio ("DSCR") as of December 31, 2021 and 2020:
|
As of December 31, 2021 |
As of December 31, 2020 |
||||||||||||||||||||||||||
|
Amortized Cost |
% of Total |
DSCR(2) |
Amortized Cost |
% of Total |
DSCR(2) |
||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||||||
|
Loan-to-value(1) Greater than 75% |
$ |
285 |
3 |
% |
1.32 |
$ |
399 |
4 |
% |
1.29 |
|||||||||||||||||
| 50% - 75% |
7,241 |
66 |
% |
1.59 |
6,557 |
64 |
% |
1.61 |
|||||||||||||||||||
|
Less than 50% |
3,440 |
31 |
% |
2.04 |
3,272 |
32 |
% |
2.01 |
|||||||||||||||||||
|
Total commercial mortgage loans |
$ |
10,966 |
100 |
% |
$ |
10,228 |
100 |
% |
|||||||||||||||||||
(1) The loan-to-value ratio compares the current unpaid principal of the loan to the estimated fair value of the underlying property collateralizing the loan. Our weighted average loan-to-value ratio was 54% at both December 31, 2021 and December 31, 2020.
(2) The debt service coverage ratio compares a property's net operating income to its debt service payments, including principal and interest. Our weighted average debt service coverage ratio for December 31, 2021 and December 31, 2020 was 1.72x and 1.72x, respectively.
The following provides a summary of the rollforward of the allowance for credit losses for funded commercial mortgage loans and unfunded commercial mortgage loan commitments for the periods included.
|
For The Year Ended December 31, 2021 |
For The Year Ended December 31, 2020 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Allowance for Funded Commercial Mortgage Loan Credit Losses |
|||||||||||
|
Beginning balance |
$ |
222 |
$ |
5 |
|||||||
|
Cumulative effect adjustment |
— |
80 |
|||||||||
|
Charge offs |
— |
— |
|||||||||
|
Recoveries |
(7 |
) |
(3 |
) |
|||||||
|
Provision |
(112 |
) |
140 |
||||||||
|
Ending balance |
$ |
103 |
$ |
222 |
|||||||
|
Allowance for Unfunded Commercial Mortgage Loan Commitments Credit Losses |
|||||||||||
|
Beginning balance |
$ |
22 |
$ |
— |
|||||||
|
Cumulative effect adjustment |
— |
10 |
|||||||||
|
Charge offs |
— |
— |
|||||||||
|
Recoveries |
— |
— |
|||||||||
|
Provision |
(17 |
) |
12 |
||||||||
|
Ending balance |
$ |
5 |
$ |
22 |
|||||||
As of December 31, 2021, the Company had one commercial mortgage loan of $28 million that was 30-59 days delinquent. As of December 31, 2020, the Company had one commercial mortgage loan of $1 million that was 60-89 days delinquent.
F-75
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. COMMERCIAL MORTGAGE LOANS — (Continued)
The Company's commercial mortgage loan portfolio consists of commercial mortgage loans that are collateralized by real estate. Due to the collateralized nature of the commercial mortgage loans, any assessment of impairment and ultimate loss given a default on the commercial mortgage loans is based upon a consideration of the estimated fair value of the real estate.
The Company limits accrued interest income on commercial mortgage loans to ninety days of interest. For loans in nonaccrual status, interest income is recognized on a cash basis. For the year ended December 31, 2021, the Company did not have any of accrued interest was excluded from the amortized cost basis pursuant to the Company's nonaccrual policy.
As of December 31, 2021, the Company did not have any commercial mortgage loans in nonaccrual status. As of December 31, 2020, the Company had one commercial mortgage loan in nonaccrual status with no related allowance recorded. The recorded investment, unpaid principal balance, and average recorded investment was $1 million.
9. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED
Deferred Policy Acquisition Costs
The balances and changes in DAC are as follows:
|
As of December 31, |
|||||||||||
|
2021 |
2020 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Balance, beginning of period |
$ |
1,628 |
$ |
1,480 |
|||||||
|
Capitalization of commissions, sales, and issue expenses |
550 |
459 |
|||||||||
|
Amortization |
(200 |
) |
(163 |
) |
|||||||
|
Change due to unrealized gains and losses |
105 |
(152 |
) |
||||||||
|
Implementation of ASU 2016-13 |
— |
4 |
|||||||||
|
Balance, end of period |
$ |
2,083 |
$ |
1,628 |
|||||||
Value of Business Acquired
The balances and changes in VOBA are as follows:
|
As of December 31, |
|||||||||||
|
2021 |
2020 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Balance, beginning of period |
$ |
1,792 |
$ |
2,040 |
|||||||
|
Amortization |
(109 |
) |
(45 |
) |
|||||||
|
Change due to unrealized gains and losses |
80 |
(192 |
) |
||||||||
|
Other |
23 |
(11 |
) |
||||||||
|
Balance, end of period |
$ |
1,786 |
$ |
1,792 |
|||||||
F-76
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. DEFERRED POLICY ACQUISITION COSTS AND VALUE OF BUSINESS ACQUIRED — (Continued)
Based on the balance recorded as of December 31, 2021, the expected amortization of VOBA for the next five years is as follows:
| Years |
Expected Amortization |
||||||
|
(Dollars In Millions) |
|||||||
| 2022 |
$ |
121 |
|||||
| 2023 |
123 |
||||||
| 2024 |
123 |
||||||
| 2025 |
116 |
||||||
| 2026 |
99 |
||||||
10. GOODWILL
The changes in the carrying value of goodwill by segment are as follows:
|
Retail Life and Annuity |
Acquisitions |
Stable Value Products |
Asset Protection |
Total Consolidated |
|||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||
|
Balance as of December 31, 2019 |
$ |
559 |
$ |
24 |
$ |
114 |
$ |
129 |
$ |
826 |
|||||||||||||
|
Balance as of December 31, 2020 |
559 |
24 |
114 |
129 |
826 |
||||||||||||||||||
|
Impairment |
(129 |
) |
— |
— |
— |
(129 |
) |
||||||||||||||||
|
Balance as of December 31, 2021 |
$ |
430 |
$ |
24 |
$ |
114 |
$ |
129 |
$ |
697 |
|||||||||||||
In connection with its annual goodwill impairment testing, the Company elected to perform a quantitative assessment of goodwill associated with the reporting units within the Retail Life and Annuity segment, in which the fair value of each reporting unit was compared to that reporting unit's carrying amount, including goodwill. To estimate the fair value of the reporting units, the Company utilized the income (i.e. discounted cash flow) valuation approach. This quantitative assessment indicated that an impairment existed as of December 31, 2021 within the Retirement reporting unit primarily due to the impact of interest rates and a longer period of sustained equity volatility on the weighted-average cost of capital used to discount the reporting unit's cash flows. Guidance in ASC 350-20, Intangibles-Goodwill and Other, requires that an impairment loss be recognized in the amount that the carrying amount of a reporting unit exceeds its fair value. As a result, the Company recorded a non-cash impairment charge of $129 million.
The Company also performed its annual qualitative evaluation of goodwill with respect to its other reporting units based on the circumstances that existed as of October 1, 2021 and determined that there was no indication that the goodwill was associated with the other reporting units more likely than not impaired and therefore no adjustment to impair goodwill was necessary. The Company has assessed whether events have occurred subsequent to October 1, 2021 that would impact the Company's conclusions and no such events were identified.
F-77
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS
The Company issues variable universal life and VA products through its separate accounts for which investment income and investment gains and losses accrue directly to, and investment risk is borne by, the contract holder. The Company also offers, for our VA products, certain GMDB riders. The most significant of these guarantees involve 1) return of the highest anniversary date account value, or 2) return of the greater of the highest anniversary date account value or the last anniversary date account value compounded at 5% interest or 3) return of premium. The GLWB rider provides the contract holder with protection against certain adverse market impacts on the amount they can withdraw and is classified as an embedded derivative and is carried at fair value on the Company's balance sheet. The VA separate account balances subject to GLWB were $9.2 billion and $8.9 billion as of December 31, 2021 and 2020, respectively. For more information regarding the valuation of and income impact of GLWB, please refer to Note 2, Summary of Significant Accounting Policies, Note 5, Fair Value of Financial Instruments, and Note 6, Derivative Financial Instruments.
The GMDB reserve is calculated by applying a benefit ratio, equal to the present value of total expected GMDB claims divided by the present value of total expected contract assessments, to cumulative contract assessments. This amount is then adjusted by the amount of cumulative GMDB claims paid and accrued interest. Assumptions used in the calculation of the GMDB reserve were as follows: mean investment performance of 6.73%, age-based mortality from the Ruark 2015 ALB table adjusted for company and industry experience, lapse rates determined by a dynamic formula, and an average discount rate of 4.85%. Changes in the GMDB reserve are included in benefits and settlement expenses in the accompanying consolidated statements of income.
The VA separate account balances subject to GMDB were $14.6 billion and $14.8 billion as of December 31, 2021 and 2020, respectively. The total GMDB amount payable based on VA account balances as of December 31, 2021 and 2020, was $85 million and $126 million with a GMDB reserve of $38 million and $43 million, respectively. The average attained age of contract holders as of December 31, 2021 and 2020 for the Company was 73 and 72.
These amounts exclude certain VA business which has been 100% reinsured to Commonwealth Annuity and Life Insurance Company (formerly known as Allmerica Financial Life Insurance and Annuity Company) ("CALIC") under a Modco agreement. The guaranteed amount payable associated with the annuities reinsured to CALIC was $6 million and $6 million, as of December 31, 2021 and 2020, respectively. The average attained age of contract holders as of December 31, 2021 and 2020, was 69 and 69.
Activity relating to GMDB reserves (excluding those 100% ceded under the Modco agreement) is as follows:
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Beginning balance |
$ |
43 |
$ |
46 |
$ |
44 |
|||||||||
|
Great West beginning balance |
— |
— |
7 |
||||||||||||
|
Incurred guarantee benefits |
— |
2 |
(1 |
) |
|||||||||||
|
Less: Paid guarantee benefits |
5 |
5 |
4 |
||||||||||||
|
Ending balance |
$ |
38 |
$ |
43 |
$ |
46 |
|||||||||
F-78
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. CERTAIN NONTRADITIONAL LONG-DURATION CONTRACTS — (Continued)
Account balances of variable annuities with guarantees invested in VA separate accounts are as follows:
|
As of December 31, |
|||||||||||
|
2021 |
2020 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Equity funds |
$ |
9,732 |
$ |
10,425 |
|||||||
|
Fixed income funds |
5,236 |
4,631 |
|||||||||
|
Total |
$ |
14,968 |
$ |
15,056 |
|||||||
Certain of the Company's fixed annuities and universal life products have a sales inducement in the form of a retroactive interest credit ("RIC"). In addition, certain annuity contracts provide a sales inducement in the form of a bonus interest credit. The Company maintains a reserve for all interest credits earned to date. The Company defers the expense associated with the RIC and bonus interest credits each period and amortizes these costs in a manner similar to that used for DAC.
Activity in the Company's deferred sales inducement asset, recorded on the balance sheet in other assets was as follows:
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Deferred asset, beginning of period |
$ |
41 |
$ |
43 |
$ |
40 |
|||||||||
|
Amounts deferred |
3 |
2 |
6 |
||||||||||||
|
Amortization |
(7 |
) |
(4 |
) |
(3 |
) |
|||||||||
|
Deferred asset, end of period |
$ |
37 |
$ |
41 |
$ |
43 |
|||||||||
12. MONY CLOSED BLOCK OF BUSINESS
In 1998, MONY Life Insurance Company ("MONY") converted from a mutual insurance company to a stock corporation ("demutualization"). In connection with its demutualization, an accounting mechanism known as a closed block (the "Closed Block") was established for certain individuals' participating policies in force as of the date of demutualization. Assets, liabilities, and earnings of the Closed Block are specifically identified to support its participating policyholders. The Company acquired the Closed Block in conjunction with the acquisition of MONY in 2013.
Assets allocated to the Closed Block inure solely to the benefit of the Closed Block's policyholders and will not revert to the benefit of MONY or the Company. No reallocation, transfer, borrowing or lending of assets can be made between the Closed Block and other portions of MONY's general account, any of MONY's separate accounts or any affiliate of MONY without the approval of the Superintendent of The New York State Department of Financial Services (the "Superintendent"). Closed Block assets and liabilities are carried on the same basis as similar assets and liabilities held in the general account.
The excess of Closed Block liabilities over Closed Block assets (adjusted to exclude the impact of related amounts in AOCI) at the acquisition date of October 1, 2013, represented the estimated maximum future post-tax earnings from the Closed Block that would be recognized in income from continuing operations over the period the policies and contracts in the Closed Block remain in force. In
F-79
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. MONY CLOSED BLOCK OF BUSINESS — (Continued)
connection with the acquisition of MONY, the Company developed an actuarial calculation of the expected timing of MONY's Closed Block's earnings as of October 1, 2013. Pursuant to the acquisition of the Company by Dai-ichi Life on February 1, 2015, this actuarial calculation of the expected timing of MONY's Closed Block earnings was recalculated and reset on that date, along with the establishment of a policyholder dividend obligation as of such date.
If the actual cumulative earnings from the Closed Block are greater than the expected cumulative earnings, only the expected earnings will be recognized in the Company's net income. Actual cumulative earnings in excess of expected cumulative earnings at any point in time are recorded as a policyholder dividend obligation because they will ultimately be paid to Closed Block policyholders as an additional policyholder dividend unless offset by future performance that is less favorable than originally expected. If a policyholder dividend obligation has been previously established and the actual Closed Block earnings in a subsequent period are less than the expected earnings for that period, the policyholder dividend obligation would be reduced (but not below zero). If, over the period the policies and contracts in the Closed Block remain in force, the actual cumulative earnings of the Closed Block are less than the expected cumulative earnings, only actual earnings would be recognized in income from continuing operations. If the Closed Block has insufficient funds to make guaranteed policy benefit payments, such payments will be made from assets outside the Closed Block.
Many expenses related to Closed Block operations, including amortization of VOBA, are charged to operations outside of the Closed Block; accordingly, net revenues of the Closed Block do not represent the actual profitability of the Closed Block operations. Operating costs and expenses outside of the Closed Block are, therefore, disproportionate to the business outside of the Closed Block.
F-80
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. MONY CLOSED BLOCK OF BUSINESS — (Continued)
Summarized financial information for the Closed Block is as follows:
|
As of December 31, |
|||||||||||
|
2021 |
2020 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Closed block liabilities |
|||||||||||
|
Future policy benefits, policyholders' account balances and other policyholder liabilities |
$ |
5,277 |
$ |
5,406 |
|||||||
|
Policyholder dividend obligation |
401 |
580 |
|||||||||
|
Other liabilities |
10 |
7 |
|||||||||
|
Total closed block liabilities |
5,688 |
5,993 |
|||||||||
|
Closed block assets |
|||||||||||
|
Fixed maturities, available-for-sale, at fair value |
4,633 |
4,903 |
|||||||||
|
Commercial mortgage loans on real estate |
68 |
68 |
|||||||||
|
Policy loans |
557 |
596 |
|||||||||
|
Cash and other invested assets |
73 |
46 |
|||||||||
|
Other assets |
83 |
91 |
|||||||||
|
Total closed block assets |
5,414 |
5,704 |
|||||||||
|
Excess of reported closed block liabilities over closed block assets |
274 |
289 |
|||||||||
|
Portion of above representing accumulated other comprehensive income: |
|||||||||||
|
Net unrealized investments gains (losses) net of policyholder dividend obligation: $323 and $493; and net of income tax: $(68) and $(104) |
— |
— |
|||||||||
|
Future earnings to be recognized from closed block assets and closed block liabilities |
$ |
274 |
$ |
289 |
|||||||
Reconciliation of the policyholder dividend obligation is as follows:
|
For The Year Ended December 31, |
|||||||||||
|
2021 |
2020 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Policyholder dividend obligation, beginning balance |
$ |
580 |
$ |
279 |
|||||||
|
Applicable to net revenue |
(9 |
) |
(25 |
) |
|||||||
|
Change in net unrealized investment gains allocated to policyholder dividend obligation |
(170 |
) |
326 |
||||||||
|
Policyholder dividend obligation, ending balance |
$ |
401 |
$ |
580 |
|||||||
F-81
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. MONY CLOSED BLOCK OF BUSINESS — (Continued)
Closed Block revenues and expenses were as follows:
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Revenues |
|||||||||||||||
|
Premiums and other income |
$ |
144 |
$ |
154 |
$ |
162 |
|||||||||
|
Net investment income |
189 |
202 |
207 |
||||||||||||
|
Net gains (losses) — investments and derivatives |
28 |
(2 |
) |
(2 |
) |
||||||||||
|
Total revenues |
361 |
354 |
367 |
||||||||||||
|
Benefits and other deductions |
|||||||||||||||
|
Benefits and settlement expenses |
342 |
332 |
337 |
||||||||||||
|
Other operating expenses |
1 |
2 |
1 |
||||||||||||
|
Total benefits and other deductions |
343 |
334 |
338 |
||||||||||||
|
Net revenues before income taxes |
18 |
20 |
29 |
||||||||||||
|
Income tax expense |
5 |
4 |
6 |
||||||||||||
|
Net revenues |
$ |
13 |
$ |
16 |
$ |
23 |
|||||||||
13. REINSURANCE
The Company reinsures certain of its risks with (cedes), and assumes risks from, other insurers under yearly renewable term, coinsurance, and modified coinsurance agreements. Under yearly renewable term agreements, the Company reinsures only the mortality risk, while under coinsurance the Company reinsures a proportionate share of all risks arising under the reinsured policy. Under coinsurance, the reinsurer receives a proportionate share of the premiums less commissions and is liable for a corresponding share of all benefit payments. Modified coinsurance is accounted for in a manner similar to coinsurance except that the liability for future policy benefits is held by the ceding company, and settlements are made on a net basis between the companies.
Reinsurance ceded arrangements do not discharge the Company as the primary insurer. Ceded balances would represent a liability of the Company in the event the reinsurers were unable to meet their obligations to us under the terms of the reinsurance agreements. The Company monitors the concentration of credit risk the Company has with any reinsurer, as well as the financial condition of its reinsurers. As of December 31, 2021, the Company had reinsured approximately 22% of the face value of its life insurance in-force. The Company has reinsured approximately 10% of the face value of its life insurance in-force with the following three reinsurers:
• Security Life of Denver Insurance Co. (currently administered by Hannover Re)
• Swiss Re Life & Health America Inc.
• The Lincoln National Life Insurance Co. (currently administered by Swiss Re Life & Health America Inc.)
The Company has not experienced any credit losses for the years ended December 31, 2021, 2020, or 2019 related to these reinsurers. The Company has set limits on the amount of insurance retained on the life of any one person. The amount of insurance retained by the Company on any one life on
F-82
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. REINSURANCE — (Continued)
traditional life insurance was $500,000 in years prior to mid-2005. In 2005, this retention amount was increased to $1,000,000 for certain policies, and during 2008, it was increased to $2,000,000 for certain policies. During 2016, the retention amount was increased to $5,000,000.
Reinsurance premiums, commissions, expense reimbursements, benefits, and reserves related to reinsured long-duration contracts are accounted for over the life of the underlying reinsured contracts using assumptions consistent with those used to account for the underlying contracts. The cost of reinsurance related to short-duration contracts is accounted for over the reinsurance contract period. Amounts recoverable from reinsurers, for both short- and long-duration reinsurance arrangements, are estimated in a manner consistent with the claim liabilities and policy benefits associated with reinsured policies.
The following table presents total net life insurance in-force:
|
As of December 31, |
|||||||||||
|
2021 |
2020 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Direct life insurance in-force |
$ |
829,253 |
$ |
785,197 |
|||||||
|
Amounts assumed from other companies |
191,110 |
206,050 |
|||||||||
|
Amounts ceded to other companies |
(222,865 |
) |
(244,588 |
) |
|||||||
|
Net life insurance in-force |
$ |
797,498 |
$ |
746,659 |
|||||||
|
Percentage of amount assumed to net |
24 |
% |
28 |
% |
|||||||
F-83
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. REINSURANCE — (Continued)
The following table reflects the effect of reinsurance on life, accident/health, and property and liability insurance premiums written and earned:
|
Gross Amount |
Ceded to Other Companies |
Assumed from Other Companies |
Net Amount |
||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||
|
For The Year Ended December 31, 2021 |
|||||||||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||
|
Life insurance |
$ |
2,843 |
$ |
(1,113 |
) |
$ |
1,037 |
$ |
2,767 |
(1) |
|||||||||
|
Accident/health insurance |
32 |
(19 |
) |
28 |
41 |
||||||||||||||
|
Property and liability insurance |
281 |
(188 |
) |
1 |
94 |
||||||||||||||
|
Total |
$ |
3,156 |
$ |
(1,320 |
) |
$ |
1,066 |
$ |
2,902 |
||||||||||
|
For The Year Ended December 31, 2020 (Recast) |
|||||||||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||
|
Life insurance |
$ |
2,661 |
$ |
(826 |
) |
$ |
934 |
$ |
2,769 |
(1) |
|||||||||
|
Accident/health insurance |
37 |
(23 |
) |
90 |
104 |
||||||||||||||
|
Property and liability insurance |
279 |
(178 |
) |
2 |
103 |
||||||||||||||
|
Total |
$ |
2,977 |
$ |
(1,027 |
) |
$ |
1,026 |
$ |
2,976 |
||||||||||
|
For The Year Ended December 31, 2019 (Recast) |
|||||||||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||
|
Life insurance |
$ |
2,853 |
$ |
(1,312 |
) |
$ |
836 |
$ |
2,377 |
(1) |
|||||||||
|
Accident/health insurance |
42 |
(90 |
) |
41 |
(7 |
) |
|||||||||||||
|
Property and liability insurance |
281 |
(106 |
) |
3 |
178 |
||||||||||||||
|
Total |
$ |
3,176 |
$ |
(1,508 |
) |
$ |
880 |
$ |
2,548 |
||||||||||
(1) Includes annuity policy fees of $199 million, $163 million, and $164 million, for the years ended December 31, 2021, 2020, and 2019, respectively.
As of December 31, 2021 and 2020, policy and claim reserves relating to insurance ceded of $4.6 billion and $4.7 billion, respectively, are included in reinsurance receivables. Should any of the reinsurers be unable to meet its obligation at the time of the claim, the Company would be obligated to pay such claims. As of December 31, 2021 and 2020, the Company had paid $157 million and $135 million, respectively, of ceded benefits which are recoverable from reinsurers. In addition, as of December 31, 2021 and 2020, the Company had receivables of $64 million and $64 million, respectively, related to insurance assumed.
The Company's third party reinsurance receivables amounted to $4.5 billion and $4.6 billion as of December 31, 2021 and 2020, respectively. These amounts include ceded reserve balances and
F-84
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. REINSURANCE — (Continued)
ceded benefit payments. The ceded benefit payments are recoverable from reinsurers. The following table sets forth the receivables attributable to our more significant reinsurance partners:
|
As of December 31, |
|||||||||||||||||||
|
2021 |
2020 |
||||||||||||||||||
|
Reinsurance Receivable |
A.M. Best Rating |
Reinsurance Receivable |
A.M. Best Rating |
||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||
|
Security Life of Denver Insurance Company |
$ |
500.5 |
A- |
$ |
548.5 |
NR |
|||||||||||||
|
Swiss Re Life & Health America, Inc. |
480.1 |
A+ |
489.6 |
A+ |
|||||||||||||||
|
Lincoln National Life Insurance Co. |
337.3 |
A+ |
370.7 |
A+ |
|||||||||||||||
|
Somerset Re |
335.1 |
A- |
259.9 |
A- |
|||||||||||||||
|
Transamerica Life Insurance Co. |
226.4 |
A |
240.3 |
A |
|||||||||||||||
|
RGA Reinsurance Company |
204.6 |
A+ |
210.5 |
A+ |
|||||||||||||||
|
American United Life Insurance Company |
187.6 |
A+ |
199.1 |
A+ |
|||||||||||||||
|
Centre Reinsurance (Bermuda) Ltd |
149.3 |
A |
167.3 |
NR |
|||||||||||||||
|
Employers Reassurance Corporation |
139.4 |
B+ |
162.0 |
NR |
|||||||||||||||
|
The Canada Life Assurance Company |
123.2 |
A+ |
134.0 |
A+ |
|||||||||||||||
The Company's reinsurance contracts typically do not have a fixed term. In general, the reinsurers' ability to terminate coverage for existing cessions is limited to such circumstances as material breach of contract or non-payment of premiums by the ceding company. The reinsurance contracts generally contain provisions intended to provide the ceding company with the ability to cede future business on a basis consistent with historical terms. However, either party may terminate any of the contracts with respect to future business upon appropriate notice to the other party.
Generally, the reinsurance contracts do not limit the overall amount of the loss that can be incurred by the reinsurer. The amount of liabilities ceded under contracts that provide for the payment of experience refunds is immaterial.
14. DEBT AND OTHER OBLIGATIONS
Under a revolving line of credit arrangement (the "Credit Facility"), PLC and the Company have the ability to borrow on an unsecured basis up to a combined aggregate principal amount of $1 billion. Under certain circumstances, the Credit Facility allows for a request that the commitment be increased up to a maximum principal amount of $1.5 billion. Balances outstanding under the Credit Facility accrue interest at a rate equal to, at the option of the Borrowers, (i) LIBOR plus a spread based on the ratings of PLC's Senior Debt, or (ii) the sum of (A) a rate equal to the highest of (x) the Administrative Agent's Prime rate, (y) 0.50% above the Funds rate, or (z) the one-month LIBOR plus 1.00% and (B) a spread based on the ratings of PLC's Senior Debt. The Credit Facility also provided for a facility fee at a rate that varies with the ratings of PLC's Senior Debt and that is calculated on the aggregate amount of commitments under the Credit Facility, whether used or unused. The annual facility fee rate is 0.125% of the aggregate principal amount. The Credit Facility provides that PLC is liable for the full amount of any obligations for borrowings or letters of credit, including those of the Company, under the Credit Facility. The maturity date of the Credit Facility is May 3, 2023. The Company is not aware of
F-85
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. DEBT AND OTHER OBLIGATIONS — (Continued)
any non-compliance with the financial debt covenants of the Credit Facility as of December 31, 2021. PLC had an outstanding balance of $275 million and $190 million as of December 31, 2021 and 2020.
During 2018, the Company issued $110 million of Subordinated Funding Obligations as a rate of 3.55% due 2038.
Secured Financing Transactions
Repurchase Program Borrowings
While the Company anticipates that the cash flows of its operating subsidiaries will be sufficient to meet its investment commitments and operating cash needs in a normal credit market environment, the Company recognizes that investment commitments scheduled to be funded may, from time to time, exceed the funds then available. Therefore, the Company has established repurchase agreement programs for certain of its insurance subsidiaries to provide liquidity when needed. The Company expects that the rate received on its investments will equal or exceed its borrowing rate. Under this program, the Company may, from time to time, sell an investment security at a specific price and agree to repurchase that security at another specified price at a later date. These borrowings are typically for a term less than 90 days. The fair value of securities to be repurchased is monitored and collateral levels are adjusted where appropriate to protect the counterparty against credit exposure. Cash received is invested in fixed maturity securities, and the agreements provided for net settlement in the event of default or on termination of the agreements. As of December 31, 2021, the fair value of securities pledged under the repurchase program was $1,503 million and the repurchase obligation of $1,393 million was included in the Company's consolidated balance sheets (at an average borrowing rate of 13 basis points). During the year ended December 31, 2021, the maximum balance outstanding at any one point in time related to these programs was $1,799 million. The average daily balance was $775 million (at an average borrowing rate of 13 basis points) during the year ended December 31, 2021. As of December 31, 2020, the fair value of securities pledged under the repurchase program was $452 million and the repurchase obligation of $437 million was included in the Company's consolidated balance sheets (at an average borrowing rate of 15 basis points). During the year ended December 31, 2020, the maximum balance outstanding at any one point in time related to these programs was $825 million. The average daily balance was $143 million (at an average borrowing rate of 33 basis points) during the year ended December 31, 2020.
Securities Lending
The Company participates in securities lending, primarily as an investment yield enhancement, whereby securities that are held as investments are loaned out to third parties for short periods of time. The Company requires collateral at least equal to 102% of the fair value of the loaned securities to be separately maintained. The loaned securities' fair value is monitored on a daily basis and collateral is adjusted accordingly. The Company maintains ownership of the securities at all times and is entitled to receive from the borrower any payments for interest received on such securities during the loan term. Securities lending transactions are accounted for as secured borrowings. As of December 31, 2021 and 2020, securities with a fair value of $174 million and $57 million were loaned under this program. As collateral for the loaned securities, the Company receives cash, which is primarily reinvested in short term repurchase agreements, which are also collateralized by U.S. Government or U.S. Government Agency securities, and government money market funds. These investments are recorded
F-86
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. DEBT AND OTHER OBLIGATIONS — (Continued)
in "short-term investments" with a corresponding liability recorded in "secured financing liabilities" to account for its obligation to return the collateral. As of December 31, 2021 and 2020, the fair value of the collateral related to this program was $179 million and $59 million, and the Company has an obligation to return $179 million and $59 million, respectively, of collateral to the securities borrowers.
The following table provides the fair value of collateral pledged for repurchase agreements, grouped by asset class, as of December 31, 2021 and 2020:
Repurchase Agreements, Securities Lending Transactions, and Repurchase-to-Maturity Transactions Accounted for as Secured Borrowings
|
Remaining Contractual Maturity of the Agreements |
|||||||||||||||||||||||
|
As of December 31, 2021 |
|||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||
|
Overnight and Continuous |
Up to 30 days |
30-90 days |
Greater Than 90 days |
Total |
|||||||||||||||||||
|
Repurchase agreements and repurchase-to-maturity transactions |
|||||||||||||||||||||||
|
U.S. Treasury and agency securities |
$ |
1,070 |
$ |
— |
$ |
— |
$ |
— |
$ |
1,070 |
|||||||||||||
|
Corporate securities |
69 |
— |
— |
— |
69 |
||||||||||||||||||
|
Commercial mortgage loans |
364 |
— |
— |
— |
364 |
||||||||||||||||||
|
Total repurchase agreements and repurchase-to-maturity transactions |
$ |
1,503 |
$ |
— |
$ |
— |
$ |
— |
$ |
1,503 |
|||||||||||||
|
Securities lending transactions |
|||||||||||||||||||||||
|
Fixed maturity securities |
171 |
— |
— |
— |
171 |
||||||||||||||||||
|
Equity securities |
1 |
— |
— |
— |
1 |
||||||||||||||||||
|
Redeemable preferred stocks |
2 |
— |
— |
— |
2 |
||||||||||||||||||
|
Total securities lending transactions |
174 |
— |
— |
— |
174 |
||||||||||||||||||
|
Total securities |
$ |
1,677 |
$ |
— |
$ |
— |
$ |
— |
$ |
1,677 |
|||||||||||||
F-87
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. DEBT AND OTHER OBLIGATIONS — (Continued)
|
Remaining Contractual Maturity of the Agreements |
|||||||||||||||||||||||
|
As of December 31, 2020 |
|||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||
|
Overnight and Continuous |
Up to 30 days |
30-90 days |
Greater Than 90 days |
Total |
|||||||||||||||||||
|
Repurchase agreements and repurchase-to-maturity transactions |
|||||||||||||||||||||||
|
U.S. Treasury and agency securities |
$ |
366 |
$ |
86 |
$ |
— |
$ |
— |
$ |
452 |
|||||||||||||
|
Commercial mortgage loans |
— |
— |
— |
— |
— |
||||||||||||||||||
|
Total repurchase agreements and repurchase-to-maturity transactions |
$ |
366 |
$ |
86 |
$ |
— |
$ |
— |
$ |
452 |
|||||||||||||
|
Securities lending transactions |
|||||||||||||||||||||||
|
Corporate securities |
49 |
— |
— |
— |
49 |
||||||||||||||||||
|
Equity securities |
7 |
— |
— |
— |
7 |
||||||||||||||||||
|
Redeemable preferred stocks |
1 |
— |
— |
— |
1 |
||||||||||||||||||
|
Total securities lending transactions |
57 |
— |
— |
— |
57 |
||||||||||||||||||
|
Total securities |
$ |
423 |
$ |
86 |
$ |
— |
$ |
— |
$ |
509 |
|||||||||||||
Golden Gate Captive Insurance Company
On October 1, 2020, Golden Gate Captive Insurance Company ("Golden Gate"), a Vermont special purpose financial insurance company and a wholly owned subsidiary of the Company, entered into a transaction with a term of 20 years, that may be extended to a maximum of 25 years, to finance up to $5 billion of "XXX" and "AXXX" reserves related to the term life insurance business and universal life insurance with secondary guarantee business that is reinsured to Golden Gate by the Company and West Coast Life Insurance Company ("WCL"), a wholly owned subsidiary of the Company, pursuant to an Excess of Loss Reinsurance Agreement (the "XOL Agreement") with Hannover Life Reassurance Company of America (Bermuda) Ltd., The Canada Life Assurance Company (Barbados Branch) and RGA Reinsurance Company (Barbados) Ltd. (collectively, the "Retrocessionaires"). The transaction is "non-recourse" to the Company, WCL, and PLC, meaning that none of these companies are liable to reimburse the Retrocessionaires for any XOL payments required to be made. As of December 31, 2021, the XOL Asset backing the difference in statutory and economic reserve liabilities was $4.267 billion.
Other Obligations
The Company routinely receives from or pays to affiliates, under the control of PLC, reimbursements for expenses incurred on one another's behalf. Receivables and payables among affiliates are generally settled monthly.
F-88
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. DEBT AND OTHER OBLIGATIONS — (Continued)
Interest Expense
Interest expense is summarized as follows:
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Subordinated funding obligations |
$ |
3.9 |
$ |
3.9 |
$ |
3.9 |
|||||||||
|
Non-recourse funding obligations, other obligations, and repurchase agreements |
$ |
11 |
$ |
133.2 |
$ |
175.8 |
|||||||||
|
Total interest expense |
$ |
14.9 |
$ |
137.1 |
$ |
179.7 |
|||||||||
15. COMMITMENTS AND CONTINGENCIES
The Company leases administrative and marketing office space as well as various office equipment. Most leases have terms ranging from two to twenty-five years. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. The Company accounts for lease components separately from non-lease components (e.g., common area maintenance). Certain of the Company's lease agreements include options to renew at the Company's discretion. Management has concluded that the Company is not reasonably certain to elect any of these renewal options. The Company will use the interest rates received on its funding agreement backed notes as the collateralized discount rate when calculating the present value of remaining lease payments when the rate implicit in the lease is unavailable.
The Company had rental expense of $1 million, $4 million, and $6 million for the years ended December 31, 2021, 2020, and 2019, respectively. The following is a schedule by year of future minimum rental payments required under these leases:
| Year |
Amount |
||||||
|
(Dollars In Millions) |
|||||||
| 2022 |
$ |
7 |
|||||
| 2023 |
4 |
||||||
| 2024 |
4 |
||||||
| 2025 |
2 |
||||||
| 2026 |
1 |
||||||
| Thereafter |
8 |
||||||
As of December 31, 2021 and 2020, the Company had outstanding commercial mortgage loan commitments of $994 million at an average rate of 3.58% and $801 million at an average rate of 3.90%, respectively.
Under the insurance guaranty fund laws in most states, insurance companies doing business therein can be assessed up to prescribed limits for policyholder losses incurred by insolvent companies. From time to time, companies may be asked to contribute amounts beyond prescribed limits. It is possible that the Company could be assessed with respect to product lines not offered by the Company. In addition, legislation may be introduced in various states with respect to guaranty fund assessment laws related to insurance products, including long term care insurance and other specialty products, that increases the cost of future assessments or alters future premium tax offsets received in connection
F-89
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. COMMITMENTS AND CONTINGENCIES — (Continued)
with guaranty fund assessments. The Company cannot predict the amount, nature or timing of any future assessments or legislation, any of which could have a material and adverse impact on the Company's financial condition or results of operations.
A number of civil jury verdicts have been returned against insurers, broker dealers and other providers of financial services involving sales, refund or claims practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or persons with whom the insurer does business, and other matters. Often these lawsuits have resulted in the award of substantial judgments that are disproportionate to the actual damages, including material amounts of punitive and non-economic compensatory damages. In some states, juries, judges, and arbitrators have substantial discretion in awarding punitive and non-economic compensatory damages which creates the potential for unpredictable material adverse judgments or awards in any given lawsuit or arbitration. Arbitration awards are subject to very limited appellate review. In addition, in some class action and other lawsuits, companies have made material settlement payments. The financial services and insurance industries in particular are also sometimes the target of law enforcement and regulatory investigations relating to the numerous laws and regulations that govern such companies. Some companies have been the subject of law enforcement or regulatory actions or other actions resulting from such investigations. The Company, in the ordinary course of business, is involved in such matters.
The Company establishes liabilities for litigation and regulatory actions when it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated. For matters where a loss is believed to be reasonably possible, but not probable, no liability is established. For such matters, the Company may provide an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. The Company reviews relevant information with respect to litigation and regulatory matters on a quarterly and annual basis and updates its established liabilities, disclosures and estimates of reasonably possible losses or range of loss based on such reviews.
Advance Trust & Life Escrow Services, LTA, as Securities Intermediary of Life Partners Position Holder Trust v. Protective Life Insurance Company, Case No. 2:18-CV-01290, is a putative class action that was filed on August 13, 2018 in the United States District Court for the Northern District of Alabama. Plaintiff alleges that the Company required policyholders to pay unlawful and excessive cost of insurance charges. Plaintiff seeks to represent all owners of universal life and variable universal life policies issued or administered by the Company or its predecessors that provide that cost of insurance rates are to be determined based on expectations of future mortality experience. The plaintiff seeks class certification, compensatory damages, pre-judgment and post-judgment interest, costs, and other unspecified relief. The Company is vigorously defending this matter and cannot predict the outcome of or reasonably estimate the possible loss or range of loss that might result from this litigation.
The Company is currently defending two cases, including one putative class action (Beverly Allen v. Protective Life Insurance Company, Civil Action No. 1:20-cv-00530-JLT) where the plaintiffs generally allege that the defendants failed to comply with certain California statutes which address contractual grace periods and lapse notice requirements for certain life insurance policies. Plaintiffs claim that these statutes apply to life insurance policies that existed before the statutes' effective date. The plaintiffs seek damages and injunctive relief. No class has been certified in Beverly Allen v. Protective Life Insurance Company. In August 2021, the California Supreme Court determined in McHugh v. Protective Life Insurance Company, Case No. D072863, that the statutory requirements apply to life insurance policies issued before the statutes' effective date. In continuing to defend these matters, the
F-90
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. COMMITMENTS AND CONTINGENCIES — (Continued)
Company maintains various defenses to the merits of the plaintiffs' claims and to class certification. However, the Company cannot predict the outcome of or reasonably estimate the possible loss or range of loss that might result from this litigation.
Scottish Re (U.S.), Inc. ("SRUS") was placed in rehabilitation on March 6, 2019 by the State of Delaware. Under the related order, the Insurance Commissioner of the State of Delaware has been appointed the receiver of SRUS (the "Receiver") and provided with authority to conduct and continue the business of SRUS in the interest of its cedents, creditors, and stockholder. The order was accompanied by an injunction requiring the continued payment of reinsurance premiums to SRUS and temporarily prohibiting cedents, including the Company, from offsetting premiums payable against receivables from SRUS. On June 20, 2019, the Delaware Court of Chancery (the "Court") entered an order approving a Revised Offset Plan, which allows cedents, including the Company, to offset premiums under certain circumstances.
A proposed Rehabilitation Plan ("Original Rehabilitation Plan") was filed by the Receiver on June 30, 2020. The Original Rehabilitation Plan presents the following two options to each cedent: 1) remain in business with SRUS and be governed by the Rehabilitation Plan, or 2) recapture business ceded to SRUS. Due to SRUS's financial status, neither option would pay 100% of the Company's outstanding claims. The Original Rehabilitation Plan would impose certain financial terms and conditions on the cedents based on the election made, the type of business ceded, the manner in which the business is collateralized, and the amount of losses sustained by the cedent. On October 9, 2020, the Receiver filed a proposed order setting forth a schedule to present the Original Rehabilitation Plan for Court approval, which order contemplated possible modifications to the Rehabilitation Plan to be filed with the Court by March 16, 2021. The Court approved the order. On March 16, 2021, the Receiver filed a draft Amended Rehabilitation Plan ("Amended Plan"). The majority of the substance and form of the original Rehabilitation Plan, including its two option structure described above, remained in place.
For much of 2020 and into early 2021, a group of interested parties collectively requested certain information and financial data from the Receiver that would allow them to more fully evaluate first the Original Rehabilitation Plan and then the Amended Plan. This group also had a number of conversations with counsel for the Receiver regarding concerns over the Plan. On July 26, 2021, the Receiver shared with interested parties an outline of a Modified Plan, along with a liquidation analysis. While there are significant changes proposed in the Modified Plan (as compared to the Original Rehabilitation Plan and the Amended Plan), much of the economic substance (including not paying claims in full) of the Original Rehabilitation Plan and the Amended Rehabilitation Plan are likely to be included in the Modified Plan.
The Court has yet to rule further or to re-establish a schedule for pre-confirmation procedures or a hearing on confirmation.
The Company continues to monitor SRUS and the actions of the Receiver through discussions with legal counsel and review of publicly available information. An allowance for credit losses related to SRUS is included in the overall reinsurance allowance for credit losses. As of December 31, 2021, management does not believe that the ultimate outcome of the rehabilitation process will have a material impact on our financial position or results of operations
Certain insurance companies for which the Company has coinsured blocks of life insurance and annuity policies, are under audit for compliance with the unclaimed property laws of a number of
F-91
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. COMMITMENTS AND CONTINGENCIES — (Continued)
states. The audits are being conducted on behalf of the treasury departments or unclaimed property administrators in such states. The focus of the audits is on whether there have been unreported deaths, maturities, or policies that have exceeded limiting age with respect to which death benefits or other payments under life insurance or annuity policies should be treated as unclaimed property that should be escheated to the state. The Company is presently unable to estimate the reasonably possible loss or range of loss that may result from the audits due to a number of factors, including the early stages of the audits being conducted, and uncertainty as to whether the Company or other companies are responsible for the liabilities, if any, arising in connection with certain co-insured policies. The Company will continue to monitor the matter for any developments that would make the loss contingency associated with the audits reasonably estimable.
16. SHAREOWNER'S EQUITY
PLC owns all of the 2,000 shares of non-voting preferred stock issued by the Company's subsidiary, PLAIC. The stock pays, when and if declared, noncumulative participating dividends to the extent PLAIC's statutory earnings for the immediately preceding fiscal year exceeded $1 million. In 2021, 2020, and 2019, PLAIC paid no dividends to PLC on its preferred stock.
F-92
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table summarizes the changes in the accumulated balances for each component of AOCI as of December 31, 2021, 2020, and 2019.
Changes in Accumulated Other Comprehensive Income (Loss) by Component
|
Unrealized Gains and Losses on Investments(2) |
Accumulated Gain and Loss on Derivatives |
Total Accumulated Other Comprehensive Income (Loss) |
|||||||||||||
|
(Dollars In Millions, Net of Tax) |
|||||||||||||||
|
Balance, December 31, 2018 (Recast) |
$ |
(1,408 |
) |
$ |
— |
$ |
(1,408 |
) |
|||||||
|
Other comprehensive income (loss) before reclassifications |
2,844 |
(10 |
) |
2,834 |
|||||||||||
|
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in earnings |
(4 |
) |
— |
(4 |
) |
||||||||||
|
Amounts reclassified from accumulated other comprehensive income (loss)(1) |
(11 |
) |
2 |
(9 |
) |
||||||||||
|
Balance, December 31, 2019 (Recast) |
$ |
1,421 |
$ |
(8 |
) |
$ |
1,413 |
||||||||
|
Other comprehensive income (loss) before reclassifications |
2,048 |
(2 |
) |
2,046 |
|||||||||||
|
Other comprehensive income (loss) relating to other-than-temporary impaired investments for which a portion has been recognized in operations |
24 |
— |
24 |
||||||||||||
|
Amounts reclassified from accumulated other comprehensive income (loss)(1) |
63 |
2 |
65 |
||||||||||||
|
Balance, December 31, 2020 (Recast) |
$ |
3,556 |
$ |
(8 |
) |
$ |
3,548 |
||||||||
|
Other comprehensive income (loss) before reclassifications |
(1,105 |
) |
— |
(1,105 |
) |
||||||||||
|
Other comprehensive income (loss) on investments for which a credit loss has been recognized in operations |
(1 |
) |
— |
(1 |
) |
||||||||||
|
Amounts reclassified from accumulated other comprehensive income (loss)(1) |
(41 |
) |
1 |
(40 |
) |
||||||||||
|
Balance, December 31, 2021 |
$ |
2,409 |
$ |
(7 |
) |
$ |
2,402 |
||||||||
(1) See Reclassification table below for details.
(2) As of December 31, 2019, 2020 and 2021, net unrealized losses reported in AOCI were offset by $(777) million, $(2.0) billion and $(1.9) billion, respectively, due to the impact those net unrealized losses would have had on certain of the Company's insurance assets and liabilities if the net unrealized losses had been recognized in net income.
F-93
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) — (Continued)
The following tables summarize the reclassifications amounts out of AOCI for the years ended December 31, 2021, 2020, and 2019.
|
Gains/(losses) in net income: |
Affected Line Item in the Consolidated Statements of Income |
For The Year Ended December 31, |
|||||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||
|
Derivative instruments |
Benefits and settlement expenses, net of reinsurance ceded(1) |
$ |
(1 |
) |
$ |
(3 |
) |
$ |
(2 |
) |
|||||||||
|
Tax (expense) benefit |
— |
1 |
— |
||||||||||||||||
|
$ |
(1 |
) |
$ |
(2 |
) |
$ |
(2 |
) |
|||||||||||
|
Unrealized gains and losses on available-for-sale securities |
Net gains (losses): investments |
$ |
46 |
$ |
46 |
$ |
48 |
||||||||||||
|
Net impairment losses recognized in earnings |
6 |
(125 |
) |
(34 |
) |
||||||||||||||
|
Tax (expense) or benefit |
(11 |
) |
17 |
(3 |
) |
||||||||||||||
|
$ |
41 |
$ |
(62 |
) |
$ |
11 |
|||||||||||||
(1) Refer to Note 6, Derivative Financial Instruments for additional information
18. INCOME TAXES
The Company's effective income tax rate related to continuing operations varied from the maximum federal income tax rate as follows:
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
Statutory federal income tax rate applied to pre-tax income |
21.0 |
% |
21.0 |
% |
21.0 |
% |
|||||||||
|
State income taxes |
0.2 |
(0.4 |
) |
0.5 |
|||||||||||
|
Investment income not subject to tax |
(5.1 |
) |
(3.6 |
) |
(2.1 |
) |
|||||||||
|
Prior period adjustments |
0.5 |
(0.7 |
) |
0.1 |
|||||||||||
|
Goodwill impairment |
7.3 |
— |
— |
||||||||||||
|
Other |
(0.7 |
) |
(0.9 |
) |
(1.0 |
) |
|||||||||
|
23.2 |
% |
15.4 |
% |
18.5 |
% |
||||||||||
The annual provision for federal income tax in these financial statements differs from the annual amounts of income tax expense reported in the respective income tax returns. Certain significant revenues and expenses are appropriately reported in different years with respect to the financial statements and the tax returns.
F-94
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. INCOME TAXES — (Continued)
The components of the Company's income tax are as follows:
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Current income tax expense (benefit): |
|||||||||||||||
|
Federal |
$ |
129 |
$ |
123 |
$ |
378 |
|||||||||
|
State |
3 |
(5 |
) |
9 |
|||||||||||
|
Total current |
$ |
132 |
$ |
118 |
$ |
387 |
|||||||||
|
Deferred income tax expense (benefit): |
|||||||||||||||
|
Federal |
$ |
(44 |
) |
$ |
(79 |
) |
$ |
(284 |
) |
||||||
|
State |
(2 |
) |
4 |
(6 |
) |
||||||||||
|
Total deferred |
$ |
(46 |
) |
$ |
(75 |
) |
$ |
(290 |
) |
||||||
The components of the Company's net deferred income tax liability are as follows:
|
As of December 31, |
|||||||||||
|
2021 |
2020 |
||||||||||
|
(Recast) |
|||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Deferred income tax assets: |
|||||||||||
|
Loss and credit carryforwards |
$ |
168 |
$ |
146 |
|||||||
|
Deferred compensation |
51 |
54 |
|||||||||
|
Deferred policy acquisition costs |
67 |
143 |
|||||||||
|
Valuation allowance |
(10 |
) |
(9 |
) |
|||||||
|
276 |
334 |
||||||||||
|
Deferred income tax liabilities: |
|||||||||||
|
Premium receivables and policy liabilities |
200 |
250 |
|||||||||
|
VOBA and other intangibles |
552 |
582 |
|||||||||
|
Invested assets (other than unrealized gains (losses)) |
264 |
283 |
|||||||||
|
Net unrealized gains on investments |
640 |
945 |
|||||||||
|
Other |
48 |
53 |
|||||||||
|
1,704 |
2,113 |
||||||||||
|
Net deferred income tax liability |
$ |
(1,428 |
) |
$ |
(1,779 |
) |
|||||
The deferred tax assets reported above include certain deferred tax assets related to nonqualified deferred compensation and other employee benefit liabilities that were assumed by AXA and they were not acquired by the Company in connection with the acquisition of MONY. The future tax deductions stemming from these liabilities will be claimed by the Company on MONY's tax returns in its post-acquisition periods. These deferred tax assets have been estimated as of the December 31, 2021 reporting date based on all available information. However, it is possible that these estimates may be adjusted in future reporting periods based on actuarial changes to the projected future payments
F-95
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. INCOME TAXES — (Continued)
associated with these liabilities. Any such adjustments will be recognized by the Company as an adjustment to income tax expense during the period in which they are realized.
The CARES Act, as described in Note 8, Commercial Mortgage Loans, includes tax provisions relevant to businesses. The income tax related impacts of the CARES Act are not material to the Company's consolidated financial statements for the year ended December 31, 2021.
In management's judgment, the gross deferred income tax asset as of December 31, 2021 will more likely than not be fully realized. The Company has recognized a valuation allowance of $10 million and $9 million as of December 31, 2021 and 2020, respectively, related to certain intercompany non-life federal NOL's and state-based future deductible temporary differences that it has determined are more likely than not to expire unutilized. This resulting unfavorable change of $1 million, before the federal benefit of state income taxes, increased income tax expense in 2021 by the same amount.
At December 31, 2021, the Company has intercompany loss carryforwards of $758 million that are available to offset future taxable income of certain non-life subsidiaries under the terms of the tax sharing agreement with PLC. Approximately $23 million of these loss carryforwards will expire between 2036 and 2038 and the remaining loss carryforwards of $735 million have no expiration.
At December 31, 2020, the Company had intercompany loss carryforwards of $658 million that was available to offset future taxable income of certain non-life subsidiaries under the terms of the tax sharing agreement with PLC. $28 million of these loss carryforwards will expire between 2036 and 2037 and the remaining loss carryforwards of $630 million have no expiration.
Included in the deferred income tax assets above are approximately $10 million in state net operating loss carryforwards attributable to certain jurisdictions, which are available to offset future taxable income in the respective state jurisdictions, expiring between 2022 and 2041.
As of December 31, 2021 and 2020, some of the Company's fixed maturities were reported at an unrealized loss, although the net amount is an unrealized gain as of December 31, 2021. If the Company were to realize a tax-basis net capital loss for a year, then such loss could not be deducted against that year's other taxable income. However, such a loss could be carried back and forward against any prior year or future year tax-basis net capital gains. Therefore, the Company has relied upon a prudent and feasible tax-planning strategy regarding its fixed maturities that were reported at an unrealized loss. The Company has the ability and the intent to either hold such fixed maturities to maturity, thereby avoiding a realized loss, or to generate an offsetting realized gain from unrealized gain fixed maturities if such unrealized loss fixed maturities are sold at a loss prior to maturity.
F-96
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
18. INCOME TAXES — (Continued)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|
As of December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Balance, beginning of period |
$ |
2 |
$ |
2 |
$ |
7 |
|||||||||
|
Additions for tax positions of the current year |
— |
— |
— |
||||||||||||
|
Additions for tax positions of prior years |
— |
— |
— |
||||||||||||
|
Reductions of tax positions of prior years: |
|||||||||||||||
|
Changes in judgment |
— |
— |
— |
||||||||||||
|
Settlements during the period |
— |
— |
(5 |
) |
|||||||||||
|
Lapses of applicable statute of limitations |
(2 |
) |
— |
— |
|||||||||||
|
Balance, end of period |
$ |
— |
$ |
2 |
$ |
2 |
|||||||||
Included in the end of period balances above, there were no unrecognized tax benefits for which the ultimate deductibility is certain but for which there is uncertainty about the timing of such deductions. The total amount of unrecognized tax benefits, if recognized, that would affect the effective income tax rate is none, $2 million, and $2 million, for the years ended December 31, 2021, 2020, and 2019, respectively.
Any accrued interest related to the unrecognized tax benefits and other accrued income taxes have been included in income tax expense. There were no amounts included in any period ending in 2021, 2020, or 2019, as PLC maintains responsibility for the interest on unrecognized tax benefits.
The lapse of the 2017 statute of limitations is the reason for the reductions in the unrecognized tax benefits shown in the above chart. In general, the Company is no longer subject to income tax examinations by taxing authorities for tax years that began before 2018.
Due to IRS adjustments to the Company's 2014 through 2016 reported taxable income, the Company has amended certain of its 2014 through 2016 state income tax returns. Such amendments will cause such years to remain open, pending the states' acceptances of the returns.
19. SUPPLEMENTAL CASH FLOW INFORMATION
The following table sets forth supplemental cash flow information:
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Cash paid / (received) during the year: |
|||||||||||||||
|
Interest expense |
$ |
15 |
$ |
177 |
$ |
182 |
|||||||||
|
Income taxes |
236 |
80 |
383 |
||||||||||||
20. RELATED PARTY TRANSACTIONS
The Company provides furnished office space and computers to affiliates through an intercompany agreement. Revenues from this agreement were $9 million, $7 million, and $6 million, for the years ended December 31, 2021, 2020, and 2019, respectively. The Company purchases data processing, legal, investment, and management services from affiliates. The costs of such services were
F-97
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. RELATED PARTY TRANSACTIONS — (Continued)
$330 million, $297 million, and $278 million, for the years ended December 31, 2021, 2020, and 2019, respectively. In addition, the Company has an intercompany payable with affiliates as of December 31, 2021 and 2020 of $49 million and $47 million, respectively. There was a $12 million and $13 million intercompany receivable balance as of December 31, 2021 and 2020, respectively.
Certain corporations with which PLC's directors were affiliated paid us premiums and policy fees or other amounts for various types of insurance and investment products, interest on bonds we own and commissions on securities underwritings in which our affiliates participated. Such amounts were immaterial for the years ended December 31, 2021 and 2020 and $6 million for the year ended December 31, 2019. The Company and/or PLC paid commissions, interest on debt and investment products, and fees to these same corporations totaling $2 million for the year ended December 31, 2019. The Company did not make any payments for the year ended December 31, 2021 and 2020.
The Company has joint venture interests in real estate for which the Company holds the underlying real estate's loan. During 2021, 2020, and 2019, the Company received $7 million, $5 million, and $23 million, respectively, in mortgage loan payments corresponding to the joint venture interests and $16 million in principal was collected on loans that paid off in December 2020.
During the periods ending December 31, 2021, 2020, and 2019, PLC paid a management fee to Dai-ichi Life of $13 million, $12 million, and $11 million, respectively, for certain services provided to the company.
PLC had guaranteed the Company's obligations for borrowings or letters of credit under the revolving line of credit arrangement to which PLC is also a party. PLC had also issued guarantees, entered into support agreements and/or assumed a duty to indemnify its indirect wholly owned captive insurance companies in certain respects. In connection with the Captive Merger on October 1, 2020, certain captive related guarantees, support agreements and indemnification obligations were terminated, amended or replaced.
The Company has agreements with certain of its subsidiaries under which it provides administrative services for a fee. These services include but are not limited to accounting, financial reporting, compliance, policy administration, reserve computations, and projections. In addition, the Company and its subsidiaries pay PLC for investment, legal and data processing services.
The Company and/or certain of its affiliates have reinsurance agreements in place with companies owned by PLC. These agreements relate to certain portions of our service contract business which is included within the Asset Protection segment. These transactions are eliminated at the PLC consolidated level.
The Company has reinsured certain riders related to its fixed and deferred annuity business to PL Re, a wholly owned subsidiary of PLC. PLC owns all of the shares of common stock issued by PL Re.
21. STATUTORY REPORTING PRACTICES AND OTHER REGULATORY MATTERS
The Company and its insurance subsidiaries prepare statutory financial statements for regulatory purposes in accordance with accounting practices prescribed by the National Association of Insurance Commissioners ("NAIC") and the applicable state insurance department laws and regulations. These financial statements vary materially from GAAP. Statutory accounting practices include publications of the NAIC, state laws, regulations, general administrative rules as well as certain permitted accounting
F-98
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. STATUTORY REPORTING PRACTICES AND OTHER REGULATORY MATTERS — (Continued)
practices granted by the respective state insurance department. Generally, the most significant differences are that statutory financial statements do not reflect 1) deferred acquisition costs and VOBA, 2) benefit liabilities that are calculated using Company estimates of expected mortality, interest, and withdrawals, 3) deferred income taxes that are not subject to statutory limits, 4) recognition of realized gains and losses on the sale of securities in the period they are sold, and 5) fixed maturities recorded at fair values, but instead at amortized cost.
Statutory net income for the Company was $426 million, $692 million, and $(625) million for the years ended December 31, 2021, 2020, and 2019, respectively. Statutory capital and surplus for the Company was $5.3 billion and $5.4 billion as of December 31, 2021 and 2020, respectively.
The Company and its insurance subsidiaries are subject to various state statutory and regulatory restrictions on the insurance subsidiaries' ability to pay dividends to the Company and the Company's ability to pay dividends to Protective Life Corporation. In general, dividends up to specified levels are considered ordinary and may be paid without prior approval of the insurance commissioner of the state of domicile. Dividends in larger amounts are considered extraordinary and are subject to affirmative prior approval by such commissioner. The insurance subsidiaries may pay, without the approval of the Insurance Commissioners of the state of domicile, $136 million of distributions in 2022. Additionally, as of December 31, 2021, $1.8 billion of consolidated shareowner's equity, excluding net unrealized gains on investments, represented restricted net assets of the Company and its insurance subsidiaries needed to maintain the minimum capital required by the insurance subsidiaries' respective state insurance departments.
State insurance regulators and the NAIC have adopted risk-based capital ("RBC") requirements for life insurance companies to evaluate the adequacy of statutory capital and surplus in relation to investment and insurance risks. The requirements provide a means of measuring the minimum amount of statutory surplus appropriate for an insurance company to support its overall business operations based on its size and risk profile. A company's risk-based statutory surplus is calculated by applying factors and performing calculations relating to various asset, premium, claim, expense, and reserve items. Regulators can then measure the adequacy of a company's statutory surplus by comparing it to RBC. The Company manages its capital consumption by using the ratio of its total adjusted capital, as defined by the insurance regulators, to the Company's action level RBC (known as the RBC ratio), also defined by insurance regulators. As of December 31, 2021 and 2020, the Company and its insurance subsidiaries all exceeded the minimum RBC requirements.
Additionally, the Company has certain assets that are on deposit with state regulatory authorities and restricted from use. As of December 31, 2021, the Company and its insurance subsidiaries had on deposit with regulatory authorities, fixed maturity and short-term investments with a fair value of $43 million.
The State of Tennessee has adopted certain prescribed accounting practices that differ from those found in NAIC Statutory Accounting Principles ("SAP"). Specifically, Tennessee Insurance Law requires that goodwill arising from the purchase of a subsidiary, controlled or affiliated entity is charged directly to surplus in the year it originates. In NAIC SAP, goodwill in amounts not to exceed 10% of an insurer's capital and surplus may be capitalized and all amounts are amortized as a component of unrealized gains and losses on investments over periods not to exceed 10 years.
F-99
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. STATUTORY REPORTING PRACTICES AND OTHER REGULATORY MATTERS — (Continued)
Certain prescribed and permitted practices impact the statutory surplus of the Company. These practices include the non-admission of goodwill as an asset for statutory reporting.
The favorable (unfavorable) effects on the Company and its statutory surplus, compared to NAIC statutory surplus, from the use of this prescribed practice was as follows:
|
As of December 31, |
|||||||||||
|
2021 |
2020 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Non-admission of goodwill |
$ |
(66 |
) |
$ |
(105 |
) |
|||||
|
Total (net) |
$ |
(66 |
) |
$ |
(105 |
) |
|||||
PLC also has certain permitted practices which are applied at the subsidiary level and do not have a direct impact on the statutory surplus of the Company. These practices include permission to follow the actuarial guidelines of the domiciliary state of the ceding insurer for certain captive reinsurers, accounting for the XOL Asset Value, and a reserve difference related to a captive insurance company.
The favorable (unfavorable) effects on the statutory surplus of the Company and its insurance subsidiaries, compared to NAIC statutory surplus, from the use of these permitted practices were as follows:
|
As of December 31, |
|||||||||||
|
2021 |
2020 |
||||||||||
|
(Dollars In Millions) |
|||||||||||
|
Accounting for XOL Asset Value as an admitted asset |
$ |
4,267 |
$ |
4,579 |
|||||||
|
Reserving based on state specific actuarial practices |
101 |
94 |
|||||||||
|
Reserving difference related to a captive insurance company |
— |
(218 |
) |
||||||||
|
Total (net) |
$ |
4,368 |
$ |
4,455 |
|||||||
22. OPERATING SEGMENTS
The Company has several operating segments, each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. The Company periodically evaluates its operating segments and makes adjustments to its segment reporting as needed. A brief description of each segment follows.
• The Retail Life and Annuity segment primarily markets fixed UL, IUL, VUL, level premium term insurance ("traditional"), fixed annuity, and VA products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, independent distribution organizations, and affinity groups.
• The Acquisitions segment focuses on acquiring, converting, and servicing policies and contracts acquired from other companies. The segment's primary focus is on life insurance policies and annuity products that were sold to individuals. Additionally, this segment's acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. Policies acquired through the Acquisitions segment are typically blocks of business where no new policies are being marketed, however, some recent acquisitions have included ongoing new business activities. Ongoing new product sales written
F-100
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. OPERATING SEGMENTS — (Continued)
by the Company from these acquisitions are included in the Retail Life and Annuity segment. As a result, earnings and account values are expected to decline as the result of lapses, deaths, and other terminations of coverage unless new acquisitions are made.
• The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. This segment also issues funding agreements to the FHLB, and markets GICs to 401(k) and other qualified retirement savings plans. The Company also has an unregistered funding agreement-backed notes program which provides for offers of notes to both domestic and international institutional investors.
• The Asset Protection segment markets extended service contracts, GAP products, and other specialized ancillary products to protect consumers' investments in automobiles and recreational vehicles. GAP products are designed to cover the difference between the scheduled loan pay-off amount and an asset's actual cash value in the case of a total loss. Each type of specialized ancillary product protects against damage or other loss to a particular aspect of the underlying asset. The Company previously marketed a credit life and disability product but exited that market at the beginning of 2021.
• The Corporate and Other segment primarily consists of net investment income on assets supporting our equity capital, unallocated corporate overhead and expenses not attributable to the segments above. This segment includes earnings from several non-strategic or runoff lines of business, various financing and investment related transactions, and the operations of several small subsidiaries.
The Company's management and Board of Directors analyzes and assesses the operating performance of each segment using pre-tax adjusted operating income (loss) and after-tax adjusted operating income (loss). Consistent with GAAP accounting guidance for segment reporting, pre-tax adjusted operating income (loss) is the Company's measure of segment performance. Pre-tax adjusted operating income (loss) is calculated by adjusting income (loss) before income tax, by excluding the following items:
• gains and losses on investments and derivatives,
• losses from the impairment of intangible assets,
• changes in the GLWB embedded derivatives exclusive of the portion attributable to the economic cost of the GLWB,
• actual GLWB incurred claims,
• immediate impacts from changes in current market conditions on estimates of future profitability on variable annuity and variable universal life products, including impacts on DAC, VOBA, reserves and other items, and
• the amortization of DAC, VOBA, and certain policy liabilities that is impacted by the exclusion of these items.
After-tax adjusted operating income (loss) is derived from pre-tax adjusted operating income (loss) with the inclusion of income tax expense or benefits associated with pre-tax adjusted operating income.
F-101
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. OPERATING SEGMENTS — (Continued)
Income tax expense or benefits is allocated to the items excluded from pre-tax adjusted operating income (loss) at the statutory federal income tax rate for the associated period. Income tax expense or benefits allocated to after-tax adjusted operating income (loss) can vary period to period based on changes in the Company's effective income tax rate.
Pre-tax adjusted operating income (loss) and after-tax adjusted operating income (loss) presented below are non-GAAP financial measures. The items excluded from adjusted operating income (loss) are important to understanding the overall results of operations. During the period ended December 31, 2021, the Company began excluding from pre-tax and after-tax adjusted operating income (loss) the impacts on DAC, VOBA, reserves and other items due to changes in estimated profitability of variable annuity and variable universal life products as a result of changes in current market conditions and non-cash charges incurred as a result of the impairment of intangible assets. Management believes this change enhances the understanding of the underlying performance trends of the Company's core operations. Pre-tax adjusted operating income (loss) and after-tax adjusted operating income (loss) are not substitutes for income before income taxes or net income (loss), respectively. These measures may not be comparable to similarly titled measures reported by other companies. Our belief is that pre-tax and after-tax adjusted operating income (loss) enhances management's and the Board of Directors' understanding of the ongoing operations, and the underlying profitability of each segment, and helps facilitate the allocation of resources.
In determining the components of the pre-tax adjusted operating income (loss) for each segment, premiums and policy fees, other income, benefits and settlement expenses, and amortization of DAC and VOBA are attributed directly to each operating segment. Net investment income is allocated based on directly related assets required for transacting the business of that segment. Net gains (losses) — investments and derivatives and other operating expenses are allocated to the segments in a manner that most appropriately reflects the operations of that segment. Investments and other assets are allocated based on statutory policy liabilities net of associated statutory policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable.
There were no significant intersegment transactions during the years ended December 31, 2021, 2020, and 2019.
F-102
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. OPERATING SEGMENTS — (Continued)
The following tables present a summary of results and reconciles pre-tax adjusted operating income (loss) to consolidated income before income tax and net income:
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Revenues |
|||||||||||||||
|
Retail Life and Annuity |
$ |
2,823 |
$ |
2,440 |
$ |
2,161 |
|||||||||
|
Acquisitions |
2,984 |
3,282 |
2,902 |
||||||||||||
|
Stable Value Products |
347 |
176 |
247 |
||||||||||||
|
Asset Protection |
270 |
275 |
290 |
||||||||||||
|
Corporate and Other |
(11 |
) |
(5 |
) |
131 |
||||||||||
|
Total revenues |
$ |
6,413 |
$ |
6,168 |
$ |
5,731 |
|||||||||
|
Pre-tax Adjusted Operating Income (Loss) |
|||||||||||||||
|
Retail Life and Annuity |
$ |
(37 |
) |
$ |
100 |
$ |
153 |
||||||||
|
Acquisitions |
314 |
406 |
347 |
||||||||||||
|
Stable Value Products |
171 |
90 |
93 |
||||||||||||
|
Asset Protection |
40 |
41 |
37 |
||||||||||||
|
Corporate and Other |
(155 |
) |
(247 |
) |
(162 |
) |
|||||||||
|
Pre-tax adjusted operating income |
333 |
390 |
468 |
||||||||||||
|
Non-operating income (loss) |
38 |
(113 |
) |
56 |
|||||||||||
|
Income before income tax |
371 |
277 |
524 |
||||||||||||
|
Income tax expense (benefit) |
86 |
43 |
97 |
||||||||||||
|
Net income |
$ |
285 |
$ |
234 |
$ |
427 |
|||||||||
|
Pre-tax adjusted operating income |
$ |
333 |
$ |
390 |
$ |
468 |
|||||||||
|
Adjusted operating income tax (expense) benefit |
(51 |
) |
(66 |
) |
(86 |
) |
|||||||||
|
After-tax adjusted operating income |
282 |
324 |
382 |
||||||||||||
|
Non-operating income (loss) |
38 |
(113 |
) |
56 |
|||||||||||
|
Income tax (expense) benefit on adjustments |
(35 |
) |
23 |
(11 |
) |
||||||||||
|
Net income |
$ |
285 |
$ |
234 |
$ |
427 |
|||||||||
|
Non-operating income (loss) |
|||||||||||||||
|
Derivative gains (losses), net |
$ |
48 |
$ |
(195 |
) |
$ |
(368 |
) |
|||||||
|
Investment gains (losses), net |
102 |
(40 |
) |
309 |
|||||||||||
|
VA/VUL market impacts(1) |
21 |
— |
— |
||||||||||||
|
Goodwill impairment |
(129 |
) |
— |
— |
|||||||||||
|
Less: related amortization(2) |
104 |
(30 |
) |
(24 |
) |
||||||||||
|
Less: VA GLWB economic cost |
(100 |
) |
(92 |
) |
(91 |
) |
|||||||||
|
Total non-operating income (loss) |
$ |
38 |
$ |
(113 |
) |
$ |
56 |
||||||||
(1) Represents the immediate impacts on DAC, VOBA, reserves, and other non-cash items in current period results due to changes in current market conditions on estimates of profitability, which are excluded from pre-tax and after-tax adjusted operating income (loss) beginning in Q1 of 2021.
(2) Includes amortization of DAC/VOBA and benefits and settlement expenses that are impacted by net gains (losses).
F-103
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. OPERATING SEGMENTS — (Continued)
|
For The Year Ended December 31, |
|||||||||||||||
|
2021 |
2020 |
2019 |
|||||||||||||
|
(Recast) |
(Recast) |
||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Net Investment Income |
|||||||||||||||
|
Retail Life and Annuity |
$ |
1,110 |
$ |
1,015 |
$ |
945 |
|||||||||
|
Acquisitions |
1,590 |
1,648 |
1,533 |
||||||||||||
|
Stable Value Products |
303 |
230 |
244 |
||||||||||||
|
Asset Protection |
20 |
23 |
28 |
||||||||||||
|
Corporate and Other |
(41 |
) |
(27 |
) |
75 |
||||||||||
|
Total net investment income |
$ |
2,982 |
$ |
2,889 |
$ |
2,825 |
|||||||||
|
Amortization of DAC and VOBA |
|||||||||||||||
|
Retail Life and Annuity |
$ |
222 |
$ |
116 |
$ |
100 |
|||||||||
|
Acquisitions |
19 |
24 |
11 |
||||||||||||
|
Stable Value Products |
5 |
3 |
3 |
||||||||||||
|
Asset Protection |
63 |
65 |
62 |
||||||||||||
|
Corporate and Other |
— |
— |
— |
||||||||||||
|
Total amortization of DAC and VOBA |
$ |
309 |
$ |
208 |
$ |
176 |
|||||||||
|
Operating Segments As of December 31, 2021 |
|||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Retail Life and Annuity |
Acquisitions |
Stable Value Products |
|||||||||||||
|
Investments and other assets |
$ |
44,549 |
$ |
54,561 |
$ |
8,392 |
|||||||||
|
DAC and VOBA |
2,806 |
870 |
15 |
||||||||||||
|
Other intangibles |
334 |
29 |
5 |
||||||||||||
|
Goodwill |
430 |
24 |
114 |
||||||||||||
|
Total assets |
$ |
48,119 |
$ |
55,484 |
$ |
8,526 |
|||||||||
|
Asset Protection |
Corporate and Other |
Total Consolidated |
|||||||||||||
|
Investments and other assets |
$ |
950 |
$ |
18,063 |
$ |
126,515 |
|||||||||
|
DAC and VOBA |
178 |
— |
3,869 |
||||||||||||
|
Other intangibles |
90 |
33 |
491 |
||||||||||||
|
Goodwill |
129 |
— |
697 |
||||||||||||
|
Total assets |
$ |
1,347 |
$ |
18,096 |
$ |
131,572 |
|||||||||
F-104
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. OPERATING SEGMENTS — (Continued)
|
Operating Segment Assets As of December 31, 2020 |
|||||||||||||||
|
(Recast) |
|||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||
|
Retail Life and Annuity |
Acquisitions |
Stable Value Products |
|||||||||||||
|
Investments and other assets |
$ |
40,194 |
$ |
55,628 |
$ |
5,928 |
|||||||||
|
DAC and VOBA |
2,480 |
762 |
8 |
||||||||||||
|
Other intangibles |
367 |
33 |
6 |
||||||||||||
|
Goodwill |
559 |
24 |
114 |
||||||||||||
|
Total assets |
$ |
43,600 |
$ |
56,447 |
$ |
6,056 |
|||||||||
|
Asset Protection |
Corporate and Other |
Total Consolidated |
|||||||||||||
|
Investments and other assets |
$ |
881 |
$ |
19,493 |
$ |
122,124 |
|||||||||
|
DAC and VOBA |
170 |
— |
3,420 |
||||||||||||
|
Other intangibles |
101 |
33 |
540 |
||||||||||||
|
Goodwill |
129 |
— |
826 |
||||||||||||
|
Total assets |
$ |
1,281 |
$ |
19,526 |
$ |
126,910 |
|||||||||
23. CONSOLIDATED QUARTERLY RESULTS — UNAUDITED
The Company's unaudited consolidated quarterly operating data for the years ended December 31, 2021 and 2020 is presented below. In the opinion of management, all adjustments (consisting only of normal recurring items) necessary for a fair statement of quarterly results have been reflected in the following data. It is also management's opinion, however, that quarterly operating data for insurance enterprises are not necessarily indicative of results that may be expected in succeeding quarters or years. In order to obtain a more accurate indication of performance, there should be a review of operating results, changes in shareowner's equity, and cash flows for a period of several quarters.
|
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter(1) |
||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||
|
For The Year Ended December 31, 2021 |
|||||||||||||||||||
|
Gross premiums and policy fees |
$ |
1,095 |
$ |
1,026 |
$ |
1,054 |
$ |
1,047 |
|||||||||||
|
Reinsurance ceded |
(317 |
) |
(326 |
) |
(311 |
) |
(366 |
) |
|||||||||||
|
Net premiums and policy fees |
778 |
700 |
743 |
681 |
|||||||||||||||
|
Net investment income |
720 |
742 |
753 |
767 |
|||||||||||||||
|
Net gains (losses) — investments and derivatives |
127 |
(33 |
) |
67 |
(11 |
) |
|||||||||||||
|
Other income |
88 |
100 |
89 |
102 |
|||||||||||||||
|
Total revenues |
1,713 |
1,509 |
1,652 |
1,539 |
|||||||||||||||
|
Total benefits and expenses |
1,586 |
1,308 |
1,593 |
1,555 |
|||||||||||||||
|
Income (loss) before income tax |
127 |
201 |
59 |
(16 |
) |
||||||||||||||
|
Income tax expense |
25 |
39 |
10 |
12 |
|||||||||||||||
|
Net income (loss) |
$ |
102 |
$ |
162 |
$ |
49 |
$ |
(28 |
) |
||||||||||
F-105
PROTECTIVE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23. CONSOLIDATED QUARTERLY RESULTS — UNAUDITED — (Continued)
|
First Quarter |
Second Quarter |
Third Quarter |
Fourth Quarter |
||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||
|
For The Year Ended December 31, 2020 (Recast) |
|||||||||||||||||||
|
Gross premiums and policy fees |
$ |
896 |
$ |
1,009 |
$ |
1,045 |
$ |
1,053 |
|||||||||||
|
Reinsurance ceded |
(36 |
) |
(360 |
) |
(287 |
) |
(344 |
) |
|||||||||||
|
Net premiums and policy fees |
860 |
649 |
758 |
709 |
|||||||||||||||
|
Net investment income |
754 |
742 |
740 |
653 |
|||||||||||||||
|
Net gains (losses) — investments and derivatives |
(301 |
) |
(34 |
) |
111 |
(11 |
) |
||||||||||||
|
Other income |
128 |
111 |
115 |
184 |
|||||||||||||||
|
Total revenues |
1,441 |
1,468 |
1,724 |
1,535 |
|||||||||||||||
|
Total benefits and expenses |
1,600 |
1,294 |
1,564 |
1,433 |
|||||||||||||||
|
Income (loss) before income tax |
(159 |
) |
174 |
160 |
102 |
||||||||||||||
|
Income tax (benefit) expense |
(30 |
) |
32 |
29 |
12 |
||||||||||||||
|
Net income (loss) |
$ |
(129 |
) |
$ |
142 |
$ |
131 |
$ |
90 |
||||||||||
(1) The Company recorded a non-cash impairment charge of $129 million Q4 2021. Refer to Note 10, Goodwill for additional information.
24. SUBSEQUENT EVENTS
The Company has evaluated the effects of events subsequent to December 31, 2021, and through the date we filed our consolidated financial statements with the United States Securities and Exchange Commission. All accounting and disclosure requirements related to subsequent events are included in our consolidated financial statements.
F-106
SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION
PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
|
Segment |
Deferred Policy Acquisition Costs and Value of Businesses Acquired |
Future Policy Benefits and Claims |
Unearned Premiums |
Stable Value Products, Annuity Contracts and Other Policyholders' Funds |
Net Premiums and Policy Fees |
Net Investment Income(1) |
Benefits and Settlement Expenses |
Amortization of Deferred Policy Acquisitions Costs and Value of Businesses Acquired |
Other Operating Expenses(1) |
Premiums Written(2) |
|||||||||||||||||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||||||||||||||||||||||
|
For The Year Ended December 31, 2021 |
|||||||||||||||||||||||||||||||||||||||||||
|
Retail Life and Annuity |
$ |
2,806 |
$ |
19,506 |
$ |
— |
$ |
11,674 |
$ |
1,474 |
$ |
1,110 |
$ |
2,316 |
$ |
222 |
$ |
224 |
$ |
— |
|||||||||||||||||||||||
|
Acquisitions |
870 |
34,478 |
1 |
5,914 |
1,320 |
1,590 |
2,411 |
19 |
234 |
28 |
|||||||||||||||||||||||||||||||||
|
Stable Value Products |
15 |
— |
— |
8,526 |
— |
303 |
124 |
5 |
3 |
— |
|||||||||||||||||||||||||||||||||
|
Asset Protection |
178 |
34 |
843 |
— |
98 |
20 |
59 |
63 |
108 |
97 |
|||||||||||||||||||||||||||||||||
|
Corporate and Other |
— |
46 |
1 |
78 |
10 |
(41 |
) |
14 |
— |
111 |
10 |
||||||||||||||||||||||||||||||||
|
Total |
$ |
3,869 |
$ |
54,064 |
$ |
845 |
$ |
26,192 |
$ |
2,902 |
$ |
2,982 |
$ |
4,924 |
$ |
309 |
$ |
680 |
$ |
135 |
|||||||||||||||||||||||
|
For The Year Ended December 31, 2020 (Recast) |
|||||||||||||||||||||||||||||||||||||||||||
|
Retail Life and Annuity |
$ |
2,480 |
$ |
18,483 |
$ |
— |
$ |
10,914 |
$ |
1,541 |
$ |
1,015 |
$ |
2,168 |
$ |
116 |
$ |
199 |
$ |
— |
|||||||||||||||||||||||
|
Acquisitions |
762 |
35,537 |
2 |
6,361 |
1,317 |
1,648 |
2,510 |
24 |
267 |
90 |
|||||||||||||||||||||||||||||||||
|
Stable Value Products |
8 |
— |
— |
6,056 |
— |
230 |
133 |
3 |
4 |
— |
|||||||||||||||||||||||||||||||||
|
Asset Protection |
170 |
40 |
779 |
— |
107 |
23 |
75 |
65 |
94 |
105 |
|||||||||||||||||||||||||||||||||
|
Corporate and Other |
— |
47 |
1 |
68 |
11 |
(27 |
) |
15 |
— |
218 |
11 |
||||||||||||||||||||||||||||||||
|
Total |
$ |
3,420 |
$ |
54,107 |
$ |
782 |
$ |
23,399 |
$ |
2,976 |
$ |
2,889 |
$ |
4,901 |
$ |
208 |
$ |
782 |
$ |
206 |
|||||||||||||||||||||||
|
For The Year Ended December 31, 2019 (Recast) |
|||||||||||||||||||||||||||||||||||||||||||
|
Retail Life and Annuity |
$ |
2,417 |
$ |
17,674 |
$ |
— |
$ |
9,402 |
$ |
1,244 |
$ |
945 |
$ |
1,765 |
$ |
100 |
$ |
209 |
$ |
— |
|||||||||||||||||||||||
|
Acquisitions |
924 |
36,176 |
2 |
6,387 |
1,173 |
1,533 |
2,237 |
11 |
232 |
42 |
|||||||||||||||||||||||||||||||||
|
Stable Value Products |
5 |
— |
— |
5,444 |
— |
244 |
144 |
3 |
4 |
— |
|||||||||||||||||||||||||||||||||
|
Asset Protection |
174 |
44 |
792 |
— |
120 |
28 |
93 |
62 |
98 |
180 |
|||||||||||||||||||||||||||||||||
|
Corporate and Other |
— |
51 |
1 |
78 |
11 |
75 |
17 |
— |
232 |
12 |
|||||||||||||||||||||||||||||||||
|
Total |
$ |
3,520 |
$ |
53,945 |
$ |
795 |
$ |
21,311 |
$ |
2,548 |
$ |
2,825 |
$ |
4,256 |
$ |
176 |
$ |
775 |
$ |
234 |
|||||||||||||||||||||||
(1) Allocations of Net Investment Income and Other Operating Expenses are based on a number of assumptions and estimates and results would change if different methods were applied.
(2) Excludes Life Insurance.
See the accompanying Report of Independent Registered Public Accounting Firm
S-1
SCHEDULE IV — REINSURANCE
PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
|
Gross Amount |
Ceded to Other Companies |
Assumed from Other Companies |
Net Amount |
Percentage of Amount Assumed to Net |
|||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||
|
For The Year Ended December 31, 2021: |
|||||||||||||||||||||||
|
Life insurance in-force |
$ |
829,253 |
$ |
(222,865 |
) |
$ |
191,110 |
$ |
797,498 |
24.0 |
% |
||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||||||
|
Life insurance |
2,843 |
(1,113 |
) |
1,037 |
2,767 |
(1) |
37.5 |
% |
|||||||||||||||
|
Accident/health insurance |
32 |
(19 |
) |
28 |
41 |
68.3 |
|||||||||||||||||
|
Property and liability insurance |
281 |
(188 |
) |
1 |
94 |
1.1 |
|||||||||||||||||
|
Total |
$ |
3,156 |
$ |
(1,320 |
) |
$ |
1,066 |
$ |
2,902 |
||||||||||||||
|
For The Year Ended December 31, 2020 (Recast): |
|||||||||||||||||||||||
|
Life insurance in-force |
$ |
785,197 |
$ |
(244,588 |
) |
$ |
206,050 |
$ |
746,659 |
27.6 |
% |
||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||||||
|
Life insurance |
2,661 |
(826 |
) |
934 |
2,769 |
(1) |
33.7 |
% |
|||||||||||||||
|
Accident/health insurance |
37 |
(23 |
) |
90 |
104 |
86.5 |
|||||||||||||||||
|
Property and liability insurance |
279 |
(178 |
) |
2 |
103 |
1.9 |
|||||||||||||||||
|
Total |
$ |
2,977 |
$ |
(1,027 |
) |
$ |
1,026 |
$ |
2,976 |
||||||||||||||
|
For The Year Ended December 31, 2019 (Recast): |
|||||||||||||||||||||||
|
Life insurance in-force |
$ |
766,197 |
$ |
(271,601 |
) |
$ |
212,574 |
$ |
707,170 |
30.1 |
% |
||||||||||||
|
Premiums and policy fees: |
|||||||||||||||||||||||
|
Life insurance |
2,853 |
(1,312 |
) |
836 |
2,377 |
(1) |
35.2 |
% |
|||||||||||||||
|
Accident/health insurance |
42 |
(90 |
) |
41 |
(7 |
) |
(585.7 |
) |
|||||||||||||||
|
Property and liability insurance |
281 |
(106 |
) |
3 |
178 |
1.7 |
|||||||||||||||||
|
Total |
$ |
3,176 |
$ |
(1,508 |
) |
$ |
880 |
$ |
2,548 |
||||||||||||||
(1) Includes annuity policy fees of $199 million, $163 million, and $164 million, and for the years ended December 31, 2021, 2020, and 2019, respectively.
See the accompanying Report of Independent Registered Public Accounting Firm
S-2
SCHEDULE V — VALUATION AND QUALIFYING ACCOUNTS
PROTECTIVE LIFE INSURANCE COMPANY AND SUBSIDIARIES
|
Additions |
|||||||||||||||||||||||
|
Description |
Balance at beginning of period |
Charged to costs and expenses |
Charges to other accounts |
Deductions |
Balance at end of period |
||||||||||||||||||
|
(Dollars In Millions) |
|||||||||||||||||||||||
|
As of December 31, 2021 |
|||||||||||||||||||||||
|
Allowance for funded commercial mortgage loan credit losses |
$ |
222 |
$ |
— |
$ |
— |
$ |
(119 |
) |
$ |
103 |
||||||||||||
|
As of December 31, 2020 |
|||||||||||||||||||||||
|
Allowance for funded commercial mortgage loan credit losses |
$ |
5 |
$ |
140 |
$ |
80 |
$ |
(3 |
) |
$ |
222 |
||||||||||||
See the accompanying Report of Independent Registered Public Accounting Firm
S-3