

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended June 30, 2015



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

For the transition period from __________ to __________

Commission File Number: 2-17039


NATIONAL WESTERN LIFE INSURANCE COMPANY
(Exact name of Registrant as specified in its charter)



COLORADO	84-0467208
(State of Incorporation)	(I.R.S. Employer Identification Number)

850 EAST ANDERSON LANE
AUSTIN, TEXAS 78752-1602	(512) 836-1010
(Address of Principal Executive Offices)	(Telephone Number)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes x No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated file" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer x Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of August 6, 2015, the number of shares of Registrant's common stock outstanding was: Class A – 3,436,166 and Class B - 200,000.



TABLE OF CONTENTS
	Page

Part I. Financial Information:	3

Item 1. Financial Statements	3

Condensed Consolidated Balance Sheets June 30, 2015 (Unaudited) and December 31, 2014	3

Condensed Consolidated Statements of Earnings For the Three Months Ended June 30, 2015 and 2014 (Unaudited)	5

Condensed Consolidated Statements of Earnings For the Six Months Ended June 30, 2015 and 2014 (Unaudited)	6

Condensed Consolidated Statements of Comprehensive Income (Loss) For the Three Months Ended June 30, 2015 and 2014 (Unaudited)	7

Condensed Consolidated Statements of Comprehensive Income For the Six Months Ended June 30, 2015 and 2014 (Unaudited)	8

Condensed Consolidated Statements of Changes in Stockholders' Equity For the Six Months Ended June 30, 2015 and 2014 (Unaudited)	9

Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2015 and 2014 (Unaudited)	11

Notes to Condensed Consolidated Financial Statements (Unaudited)	13

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	47

Item 3. Quantitative and Qualitative Disclosures About Market Risk	83

Item 4. Controls and Procedures	83

Part II. Other Information:	83

Item1. Legal Proceedings	83

Item1A. Risk Factors	83

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	84

Item 4. Removed and Reserved	84

Item 6. Exhibits	84

Signatures	85

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)



	(Unaudited)
ASSETS	June 30, 2015		December 31, 2014

Investments:
Securities held to maturity, at amortized cost (fair value: $7,370,596 and $7,175,443)	$	7,121,439	6,841,543
Securities available for sale, at fair value (cost: $2,740,993 and $2,590,074)	2,840,589		2,728,680
Mortgage loans, net of allowance for possible losses ($650 and $650)	132,261		149,503
Policy loans	61,933		63,645
Derivatives, index options	72,527		114,287
Other long-term investments	28,961		28,774

Total investments	10,257,710		9,926,432

Cash and cash equivalents	71,710		277,078
Deferred policy acquisition costs	826,083		802,919
Deferred sales inducements	156,371		159,766
Accrued investment income	99,438		96,127
Federal income tax receivable	7,546		—
Other assets	96,436		89,570

Total assets	$	11,515,294	11,351,892

See accompanying notes to condensed consolidated financial statements (unaudited).

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)



	(Unaudited)
LIABILITIES AND STOCKHOLDERS’ EQUITY	June 30, 2015		December 31, 2014

LIABILITIES:

Future policy benefits:
Universal life and annuity contracts	$	9,484,080	9,384,297
Traditional life reserves	137,451		138,225
Other policyholder liabilities	143,781		139,222
Deferred Federal income tax liability	40,001		31,675
Federal income tax payable	—		3,336
Other liabilities	117,853		98,817

Total liabilities	9,923,166		9,795,572

COMMITMENTS AND CONTINGENCIES (Note 8)

STOCKHOLDERS’ EQUITY:

Common stock:
Class A - $1 par value; 7,500,000 shares authorized; 3,436,166 issued and outstanding in 2015 and 2014	3,436		3,436
Class B - $1 par value; 200,000 shares authorized, issued, and outstanding in 2015 and 2014	200		200
Additional paid-in capital	38,116		38,116
Accumulated other comprehensive income	27,410		41,786
Retained earnings	1,522,966		1,472,782

Total stockholders’ equity	1,592,128		1,556,320

Total liabilities and stockholders' equity	$	11,515,294	11,351,892

Note: The Condensed Consolidated Balance Sheet at December 31, 2014 has been derived from the audited Consolidated Financial Statements as of that date.

See accompanying notes to condensed consolidated financial statements (unaudited).

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

For the Three Months Ended June 30, 2015 and 2014

(Unaudited)

(In thousands, except per share amounts)



	2015			2014

Premiums and other revenues:
Universal life and annuity contract charges	$	38,345		38,217
Traditional life premiums	5,162			5,169
Net investment income	102,259			155,179
Other revenues	5,194			5,211
Net realized investment gains (losses):
Total other-than-temporary impairment (“OTTI”) gains (losses)	(2		)	—
Portion of OTTI (gains) losses recognized in other comprehensive income	(105		)	—
Net OTTI losses recognized in earnings	(107		)	—
Other net investment gains (losses)	4,365			3,065
Total net realized investment gains (losses)	4,258			3,065

Total revenues	155,218			206,841

Benefits and expenses:
Life and other policy benefits	16,120			14,796
Amortization of deferred policy acquisition costs	28,070			27,258
Universal life and annuity contract interest	49,431			102,429
Other operating expenses	18,802			19,500

Total benefits and expenses	112,423			163,983

Earnings before Federal income taxes	42,795			42,858

Federal income taxes	13,937			13,675

Net earnings	$	28,858		29,183

Basic earnings per share:
Class A	$	8.16		$	8.26
Class B	$	4.08		$	4.13

Diluted earnings per share:
Class A	$	8.16		$	8.25
Class B	$	4.08		$	4.13

See accompanying notes to condensed consolidated financial statements (unaudited).

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

For the Six Months Ended June 30, 2015 and 2014

(Unaudited)

(In thousands, except per share amounts)



	2015			2014

Premiums and other revenues:
Universal life and annuity contract charges	$	75,658		76,222
Traditional life premiums	9,509			9,440
Net investment income	202,182			263,630
Other revenues	10,523			10,974
Net realized investment gains (losses):
Total other-than-temporary impairment (“OTTI”) gains (losses)	158			(32		)
Portion of OTTI (gains) losses recognized in other comprehensive income	(265		)	(3		)
Net OTTI losses recognized in earnings	(107		)	(35		)
Other net investment gains (losses)	5,343			4,613
Total net realized investment gains (losses)	5,236			4,578

Total revenues	303,108			364,844

Benefits and expenses:
Life and other policy benefits	35,386			27,759
Amortization of deferred policy acquisition costs	55,722			55,837
Universal life and annuity contract interest	98,470			165,365
Other operating expenses	39,312			42,963

Total benefits and expenses	228,890			291,924

Earnings before Federal income taxes	74,218			72,920

Federal income taxes	24,034			23,911

Net earnings	$	50,184		49,009

Basic earnings per share:
Class A	$	14.19		$	13.86
Class B	$	7.10		$	6.93

Diluted earnings per share:
Class A	$	14.19		$	13.86
Class B	$	7.10		$	6.93

See accompanying notes to condensed consolidated financial statements (unaudited).

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

For the Three Months Ended June 30, 2015 and 2014

(Unaudited)

(In thousands)



	2015			2014

Net earnings	$	28,858		29,183

Other comprehensive income (loss), net of effects of deferred costs and taxes:
Unrealized gains (losses) on securities:
Net unrealized holding gains (losses) arising during period	(21,202		)	10,892
Net unrealized liquidity gains (losses)	32			28
Reclassification adjustment for net amounts included in net earnings	(1,855		)	(1,946	)

Net unrealized gains (losses) on securities	(23,025		)	8,974

Foreign currency translation adjustments	(53		)	(122	)

Benefit plans:
Amortization of net prior service cost and net gain (loss)	(304		)	(175	)

Other comprehensive income (loss)	(23,382		)	8,677

Comprehensive income (loss)	$	5,476		37,860

See accompanying notes to condensed consolidated financial statements (unaudited).

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Six Months Ended June 30, 2015 and 2014

(Unaudited)

(In thousands)



	2015			2014

Net earnings	$	50,184		49,009

Other comprehensive income, net of effects of deferred costs and taxes:
Unrealized gains (losses) on securities:
Net unrealized holding gains (losses) arising during period	(11,830		)	21,894
Net unrealized liquidity gains (losses)	93			51
Reclassification adjustment for net amounts included in net earnings	(2,020		)	(2,371	)

Net unrealized gains (losses) on securities	(13,757		)	19,574

Foreign currency translation adjustments	(12		)	(633	)

Benefit plans:
Amortization of net prior service cost and net gain (loss)	(607		)	(351	)

Other comprehensive income (loss)	(14,376		)	18,590

Comprehensive income (loss)	$	35,808		67,599

See accompanying notes to condensed consolidated financial statements (unaudited).

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY For the Six Months Ended June 30, 2015 and 2014 (Unaudited) (In thousands)

	2015			2014

Common stock:
Balance at beginning of period	$	3,636		3,635
Shares exercised under stock option plan	—			1

Balance at end of period	3,636			3,636

Additional paid-in capital:
Balance at beginning of period	38,116			37,767
Shares exercised under stock option plan	—			349

Balance at end of period	38,116			38,116

Accumulated other comprehensive income:
Unrealized gains on non-impaired securities:
Balance at beginning of period	54,229			46,693
Change in unrealized gains (losses) during period, net of tax	(13,850		)	19,523

Balance at end of period	40,379			66,216

Unrealized losses on impaired held to maturity securities:
Balance at beginning of period	(1,262		)	(1,287	)
Amortization	172			117
Other-than-temporary impairments, non-credit, net of tax	—			—
Additional credit loss on previously impaired securities	—			—
Change in shadow deferred policy acquisition costs	(79		)	(67	)

Balance at end of period	(1,169		)	(1,237	)

Unrealized losses on impaired available for sale securities:
Balance at beginning of period	(1		)	(2	)
Other-than-temporary impairments, non-credit, net of tax	—			—
Change in shadow deferred policy acquisition costs	—			(1	)
Recoveries, net of tax	—			2

Balance at end of period	(1		)	(1	)

	Continued on Next Page

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(continued) For the Six Months Ended June30, 2015 and 2014 (Unaudited) (In thousands)

	2015			2014

Foreign currency translation adjustments:
Balance at beginning of period	2,685			3,241
Change in translation adjustments during period	(12		)	(633		)

Balance at end of period	2,673			2,608

Benefit plan liability adjustment:
Balance at beginning of period	(13,865		)	(10,565		)
Amortization of net prior service cost and net loss, net of tax	(607		)	(351		)

Balance at end of period	(14,472		)	(10,916		)

Accumulated other comprehensive income at end of period	27,410			56,670

Retained earnings:
Balance at beginning of period	1,472,782			1,368,466
Net earnings	50,184			49,009
Stockholder dividends	—			—

Balance at end of period	1,522,966			1,417,475

Total stockholders' equity	$	1,592,128		$	1,515,897

See accompanying notes to condensed consolidated financial statements (unaudited).

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 2015 and 2014 (Unaudited) (In thousands)

	2015			2014

Cash flows from operating activities:
Net earnings	$	50,184		49,009
Adjustments to reconcile net earnings to net cash from operating activities:
Universal life and annuity contract interest	98,470			165,365
Surrender charges and other policy revenues	(8,302		)	(9,104	)
Realized (gains) losses on investments	(5,236		)	(4,578	)
Accretion/amortization of discounts and premiums, investments	102			(465	)
Depreciation and amortization	1,671			1,741
(Increase) decrease in value of derivatives	17,069			(45,799	)
(Increase) decrease in deferred policy acquisition and sales inducement costs	(2,190		)	(6,062	)
(Increase) decrease in accrued investment income	(3,311		)	(449	)
(Increase) decrease in other assets	(6,938		)	(1,635	)
Increase (decrease) in liabilities for future policy benefits	2,588			1,344
Increase (decrease) in other policyholder liabilities	4,558			7,127
Increase (decrease) in Federal income taxes liability	(10,882		)	(13,501	)
Increase (decrease) in deferred Federal income tax	15,735			12,517
Increase (decrease) in other liabilities	4,658			(2,806	)
Other, net	—			(1	)

Net cash provided by operating activities	158,176			152,703

Cash flows from investing activities:
Proceeds from sales of:
Securities held to maturity	—			—
Securities available for sale	13,131			5,334
Other investments	—			1,016
Proceeds from maturities and redemptions of:
Securities held to maturity	257,063			360,420
Securities available for sale	163,057			102,813
Derivatives, index options	64,619			105,268
Purchases of:
Securities held to maturity	(534,663		)	(477,353	)
Securities available for sale	(310,637		)	(195,023	)
Derivatives, index options	(40,977		)	(33,610	)
Other investments	(420		)	(296	)
Net change in short-term investments	—			—

	Continued on Next Page

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, (continued) For the Six Months Ended June 30, 2015 and 2014 (Unaudited) (In thousands)

	2015			2014

Principal payments on mortgage loans	18,962			10,240
Cost of mortgage loans acquired	(1,632		)	(29,611		)
Decrease (increase) in policy loans	1,712			981
Other, net	—			2

Net cash used in investing activities	(369,785		)	(149,819		)

Cash flows from financing activities:
Deposits to account balances for universal life and annuity contracts	452,124			460,611
Return of account balances on universal life and annuity contracts	(445,871		)	(450,565		)
Issuance of common stock under stock option plan	—			350

Net cash provided by (used in) financing activities	6,253			10,396

Effect of foreign exchange	(12		)	(633		)

Net increase (decrease) in cash and cash equivalents	(205,368		)	12,647
Cash and cash equivalents at beginning of period	277,078			120,859

Cash and cash equivalents at end of period	$	71,710		$	133,506

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:
Interest	$	20		20
Income taxes	$	22,647		24,416

Noncash operating activities:
Deferral of sales inducements	$	(6,895	)	(4,851		)

See accompanying notes to condensed consolidated financial statements (unaudited).

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


(1)	CONSOLIDATION AND BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for annual financial statements. In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of National Western Life Insurance Company and its subsidiaries (“Company” or "National Western") as of June 30, 2015, and the results of its operations and its cash flows for the for the three and six months ended June 30, 2015 and 2014. The results of operations for the six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the full year. It is recommended that these condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014 and are accessible free of charge through the Company's internet site at www.nationalwesternlife.com or the Securities and Exchange Commission internet site at www.sec.gov. The condensed consolidated balance sheet at December 31, 2014 has been derived from the audited consolidated financial statements as of that date.

The accompanying unaudited condensed consolidated financial statements include the accounts of National Western Life Insurance Company and its wholly-owned subsidiaries: The Westcap Corporation, NWL Investments, Inc., NWL Services, Inc., NWL Financial, Inc., NWLSM, Inc. and Regent Care San Marcos Holdings, LLC. All significant intercorporate transactions and accounts have been eliminated in consolidation.

The preparation of financial statements in accordance with U.S. generally accepted accounting principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates in the accompanying condensed consolidated financial statements include (1) liabilities for future policy benefits, (2) valuation of derivative instruments, (3) recoverability and amortization of deferred policy acquisition costs, (4) valuation allowances for deferred tax assets, (5) other-than-temporary impairment losses on debt securities, (6) commitments and contingencies, and (7) valuation allowances for mortgage loans and real estate.

The table below shows the unrealized gains and losses on available-for-sale securities that were reclassified out of accumulated other comprehensive income for the three and six months ended June 30, 2015 and 2014.



Affected Line Item in the Statements of Earnings	Amount Reclassified From Accumulated Other Comprehensive Income
	Three Months Ended June 30,				Six months ended June 30,
	2015			2014	2015		2014
	(In thousands)

Other net investment gains (losses)	$	2,961		2,993	3,215		3,682
Net OTTI losses recognized in earnings	(107		)	—	(107	)	(35	)
Earnings before Federal income taxes	2,854			2,993	3,108		3,647
Federal income taxes	999			1,047	1,088		1,276

Net earnings	$	1,855		1,946	2,020		2,371

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


(2)	NEW ACCOUNTING PRONOUNCEMENTS

In July 2013, the FASB issued guidance to amend the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The new guidance states that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as reduction to deferred tax assets for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. This guidance is effective for annual reporting periods beginning on or after December 15, 2013 and interim periods within those annual periods. The Company adopted this guidance as of January 1, 2014 and the adoption did not have an effect on the deferred tax asset or liability classification on the Company's balance sheet and did not result in any additional disclosures to the financial statements.

In June 2014, the FASB issued guidance that applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. It requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition and follows existing accounting guidance for the treatment of performance conditions. The standard will be effective for annual periods and interim periods within those annual periods beginning after December 15, 2015, with early adoption permitted. The Company’s current employee share-based plans do not require performance targets and the adoption of this guidance is not expected to have a material impact on the Company’s financial position or results of operations.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants ("AICPA"), and the SEC are not believed by management to, have a material impact on the Company’s present or future consolidated financial statements.


(3)	STOCKHOLDERS' EQUITY

The Company is restricted by state insurance laws as to dividend amounts which may be paid to stockholders without prior approval from the Colorado Division of Insurance. The restrictions are based on the greater of statutory earnings from operations excluding capital gains or 10% of statutory surplus of the Company. The maximum dividend payment which may be made without prior approval in 2015 is $118.2 million. The Company did not declare or pay cash dividends on its common stocks during the six months ended June 30, 2015 and 2014.

On April 6, 2015, the Company, National Western Life Group, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Newco”), and NWLIC MergerCo, Inc., a Colorado corporation and wholly-owned subsidiary of Newco (“MergerCo”), entered into an Agreement and Plan of Merger (the “Reorganization Agreement”), that provides for the merger (the “Merger”) of the Company with MergerCo, with the Company surviving the Merger as a wholly-owned subsidiary of Newco. The Merger provides for the conversion of each share of Class A common stock, par value $1.00 per share, of the Company and each share of Class B common stock, par value $1.00 per share, of the Company issued and outstanding immediately prior to the effective time of the Merger, into one duly issued, fully paid and non-assessable share of Class A common stock, par value $0.01 per share, of Newco ("Newco Class A Stock") or Class B common stock, par value $0.01 per share, of Newco, respectively (collectively with the other transactions contemplated by the Reorganization Agreement, the “Reorganization”). In addition, each outstanding option to acquire, or SARs relating to, shares of the Company's Class A Stock would automatically convert into an option to acquire, or SARs relating to, on the same terms and conditions, an identical number of shares of Newco Class A Stock.

Upon completion of the Reorganization, Newco, a Delaware corporation, would, in effect, replace the Company, a Colorado corporation, as the publicly held corporation traded on the NASDAQ Global Select Market under the symbol “NWLI”, and the holders of the Company's Class A Stock and Class B Stock would hold the same number of shares and same ownership percentage

of Newco after the Reorganization as they held of the Company immediately prior to the Reorganization. The directors of Newco immediately following the Reorganization would be the same individuals who were directors of the Company immediately prior to the Reorganization.

The Reorganization Agreement is subject to specified conditions, including approval by the Company's shareholders, which was granted at the Annual Meeting of Shareholders (the "Annual Meeting") on Friday, June 19, 2015. It is currently expected that the Reorganization will be completed in the latter part of 2015 once the other conditions set forth in the Reorganization Agreement are satisfied.

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


(4)	EARNINGS PER SHARE

Basic earnings per share of common stock are computed by dividing net income by the weighted-average basic common shares outstanding during the period. Diluted earnings per share assumes the issuance of common shares applicable to stock options in the denominator.



	Three Months Ended June 30,
	2015			2014
	Class A		Class B	Class A	Class B
	(In thousands except per share amounts)

Numerator for Basic and Diluted Earnings Per Share:
Net income	$	28,858		29,183
Dividends - Class A shares	—			—
Dividends - Class B shares	—			—

Undistributed income	$	28,858		29,183

Allocation of net income:
Dividends	$	—	—	—	—
Allocation of undistributed income	28,042		816	28,358	825

Net income	$	28,042	816	28,358	825

Denominator:
Basic earnings per share - weighted-average shares	3,436		200	3,435	200
Effect of dilutive stock options	1		—	2	—

Diluted earnings per share - adjusted weighted-average shares for assumed conversions	3,437		200	3,437	200

Basic Earnings Per Share	$	8.16	4.08	8.26	4.13

Diluted Earnings Per Share	$	8.16	4.08	8.25	4.13

Stock options that were outstanding during the three months ended June 30, 2015 and 2014, but were not included in the computation of diluted earnings per share because the effect was anti-dilutive, were approximately 20,800 and 22,300, respectively.

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NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



	Six Months Ended June 30,
	2015			2014
	Class A		Class B	Class A	Class B
	(In thousands except per share amounts)

Numerator for Basic and Diluted Earnings Per Share:
Net income	$	50,184		49,009
Dividends - Class A shares	—			—
Dividends - Class B shares	—			—

Undistributed income	$	50,184		49,009

Allocation of net income:
Dividends	$	—	—	—	—
Allocation of undistributed income	48,765		1,419	47,623	1,386

Net income	$	48,765	1,419	47,623	1,386

Denominator:
Basic earnings per share - weighted-average shares	3,436		200	3,435	200
Effect of dilutive stock options	1		—	2	—

Diluted earnings per share - adjusted weighted-average shares for assumed conversions	3,437		200	3,437	200

Basic Earnings Per Share	$	14.19	7.10	13.86	6.93

Diluted Earnings Per Share	$	14.19	7.10	13.86	6.93

Stock options that were outstanding during the six months ended June 30, 2015 and 2014, but were not included in the computation of diluted earnings per share because the effect was anti-dilutive were approximately 21,300 and 22,300, respectively.

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(UNAUDITED)


(5)	PENSION AND OTHER POSTRETIREMENT PLANS


(A)	Defined Benefit Pension Plans

The Company sponsors a qualified defined benefit pension plan covering employees enrolled prior to 2008. The plan provides benefits based on the participants' years of service and compensation. The Company makes annual contributions to the plan that complies with the minimum funding provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). On October 19, 2007, the Company's Board of Directors approved an amendment to freeze the Pension Plan as of December 31, 2007. The freeze ceased future benefit accruals to all participants and closed the plan to any new participants. In addition, all participants became immediately 100% vested in their accrued benefits as of that date. Fair values of plan assets and liabilities are measured as of the prior December 31 for each respective year. The following table summarizes the components of net periodic benefit cost.



	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2015			2014		2015		2014
	(In thousands)

Service cost	$	51		42		102		84
Interest cost	246			239		492		479
Expected return on plan assets	(330		)	(319	)	(660	)	(639	)
Amortization of prior service cost	1			1		2		2
Amortization of net loss	196			106		392		211

Net periodic benefit cost	$	164		69		328		137

The service costs shown in the above table represent plan expenses expected to be paid out of plan assets. Under clarification provided by the Pension Protection Act, plan expenses paid from plan assets are to be included in the plan's service cost component.

The Company's minimum required contribution for the 2015 plan year is $0.0 million. The Company had no remaining contribution payable for the 2014 plan year as of June 30, 2015. As of June 30, 2015, the Company had contributed a total of $0.0 million to the plan for the 2015 and 2014 plan years.

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

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

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(UNAUDITED)

The following table summarizes the components of net periodic benefit costs for the Chairman and President's nonqualified defined benefit plans.



	Three Months Ended			Six Months Ended
	June 30,			June 30,
	2015		2014	2015	2014
	(In thousands)

Service cost	$	64	74	128	147
Interest cost	219		251	438	502
Amortization of prior service cost	15		14	30	29
Amortization of net loss	379		324	757	647

Net periodic benefit cost	$	677	663	1,353	1,325

The Company expects to contribute $2.0 million to these plans in 2015. As of June 30, 2015, the Company has contributed $0.9 million to the plans.


(B)	Defined Benefit Postretirement Healthcare Plans

The Company sponsors two healthcare plans to provide postretirement benefits to certain fully-vested individuals. The following table summarizes the components of net periodic benefit costs.



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015	2014
	(In thousands)

Interest cost	$	33	27		65	55
Amortization of prior service cost	26		26		52	52
Amortization of net loss	15		(1	)	30	(2	)

Net periodic benefit cost	$	74	52		147	105

The Company expects to contribute minimal amounts to the plan in 2015.

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(UNAUDITED)


(6)	SEGMENT AND OTHER OPERATING INFORMATION

The Company defines its reportable operating segments as domestic life insurance, international life insurance, and annuities. These segments are organized based on product types and geographic marketing areas. A summary of segment information for the quarters ended June 30, 2015 and June 30, 2014 is provided below.



Selected Segment Information:
	Domestic Life Insurance		International Life Insurance		Annuities	All Others	Totals
					(In thousands)

June 30, 2015
Condensed Consolidated Balance Sheet Items:
Deferred policy acquisition costs and sales inducements	$	70,561	254,785		657,108	—	982,454
Total segment assets	811,768		1,247,941		9,000,323	264,269	11,324,301
Future policy benefits	702,621		954,684		7,964,226	—	9,621,531
Other policyholder liabilities	11,846		16,398		115,537	—	143,781

Three Months Ended
June 30, 2015
Condensed Consolidated Income Statements:
Premiums and contract revenues	$	7,937	29,364		6,206	—	43,507
Net investment income	8,005		8,785		79,509	5,960	102,259
Other revenues	4		(25	)	4	5,211	5,194

Total revenues	15,946		38,124		85,719	11,171	150,960

Life and other policy benefits	3,882		5,587		6,651	—	16,120
Amortization of deferred acquisition costs	1,698		5,163		21,209	—	28,070
Universal life and annuity contract interest	5,460		6,927		37,044	—	49,431
Other operating expenses	3,442		5,212		5,434	4,714	18,802
Federal income taxes (benefit)	467		4,932		4,961	2,086	12,446

Total expenses	14,949		27,821		75,299	6,800	124,869

Segment earnings (loss)	$	997	10,303		10,420	4,371	26,091

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



	Domestic Life Insurance			International Life Insurance	Annuities	All Others	Totals
					(In thousands)

Six months ended
June 30, 2015
Condensed Consolidated Income Statements:
Premiums and contract revenues	$	14,424		59,697	11,046	—	85,167
Net investment income	15,170			17,399	158,745	10,868	202,182
Other revenues	20			61	19	10,423	10,523

Total revenues	29,614			77,157	169,810	21,291	297,872

Life and other policy benefits	8,995			11,792	14,599	—	35,386
Amortization of deferred acquisition costs	4,879			4,513	46,330	—	55,722
Universal life and annuity contract interest	10,399			14,057	74,014	—	98,470
Other operating expenses	7,157			11,134	11,612	9,409	39,312
Federal income taxes (benefit)	(584		)	11,477	7,484	3,824	22,201

Total expenses	30,846			52,973	154,039	13,233	251,091

Segment earnings (loss)	$	(1,232	)	24,184	15,771	8,058	46,781

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



Selected Segment Information:
	Domestic Life Insurance		International Life Insurance	Annuities	All Others	Totals
				(In thousands)

June 30, 2014
Condensed Consolidated Balance Sheet Items:
Deferred policy acquisition costs and sales inducements	$	57,354	238,211	638,108	—	933,673
Total segment assets	670,565		1,229,589	8,749,666	274,434	10,924,254
Future policy benefits	581,946		934,791	7,776,048	—	9,292,785
Other policyholder liabilities	13,259		12,399	124,056	—	149,714

Three Months Ended
June 30, 2014
Condensed Consolidated Income Statements:
Premiums and contract revenues	$	7,065	29,663	6,658	—	43,386
Net investment income	10,902		16,911	122,666	4,700	155,179
Other revenues	3		60	3	5,145	5,211

Total revenues	17,970		46,634	129,327	9,845	203,776

Life and other policy benefits	1,423		1,668	11,705	—	14,796
Amortization of deferred acquisition costs	1,780		8,808	16,670	—	27,258
Universal life and annuity contract interest	8,158		15,659	78,612	—	102,429
Other operating expenses	3,992		4,835	5,824	4,849	19,500
Federal income taxes (benefit)	851		4,963	5,227	1,561	12,602

Total expenses	16,204		35,933	118,038	6,410	176,585

Segment earnings (loss)	$	1,766	10,701	11,289	3,435	27,191

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)



	Domestic Life Insurance		International Life Insurance	Annuities	All Others	Totals
				(In thousands)

Six months ended
June 30, 2014
Condensed Consolidated Income Statements:
Premiums and contract revenues	$	15,230	58,771	11,661	—	85,662
Net investment income	17,185		27,629	209,283	9,533	263,630
Other revenues	21		301	40	10,612	10,974

Total revenues	32,436		86,701	220,984	20,145	360,266

Life and other policy benefits	3,915		6,703	17,141	—	27,759
Amortization of deferred acquisition costs	4,180		15,553	36,104	—	55,837
Universal life and annuity contract interest	13,263		25,864	126,238	—	165,365
Other operating expenses	8,271		11,860	12,920	9,912	42,963
Federal income taxes (benefit)	916		8,722	9,329	3,342	22,309

Total expenses	30,545		68,702	201,732	13,254	314,233

Segment earnings (loss)	$	1,891	17,999	19,252	6,891	46,033

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Reconciliations of segment information to the Company's condensed consolidated financial statements are provided below.



	Three Months Ended June 30,			Six Months Ended June 30,
	2015		2014	2015	2014
	(In thousands)

Premiums and Other Revenues:
Premiums and contract revenues	$	43,507	43,386	85,167	85,662
Net investment income	102,259		155,179	202,182	263,630
Other revenues	5,194		5,211	10,523	10,974
Realized gains (losses) on investments	4,258		3,065	5,236	4,578

Total condensed consolidated premiums and other revenues	$	155,218	206,841	303,108	364,844



	Three Months Ended June 30,			Six Months Ended June 30,
	2015		2014	2015	2014
	(In thousands)

Federal Income Taxes:
Total segment Federal income taxes	$	12,446	12,602	22,201	22,309
Taxes on realized gains (losses) on investments	1,491		1,073	1,833	1,602

Total condensed consolidated Federal income taxes	$	13,937	13,675	24,034	23,911



	Three Months Ended June 30,			Six Months Ended June 30,
	2015		2014	2015	2014
	(In thousands)

Net Earnings:
Total segment earnings	$	26,091	27,191	46,781	46,033
Realized gains (losses) on investments, net of taxes	2,767		1,992	3,403	2,976

Total condensed consolidated net earnings	$	28,858	29,183	50,184	49,009

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(UNAUDITED)



	June 30,
	2015		2014
	(In thousands)

Assets:
Total segment assets	$	11,324,301	10,924,254
Other unallocated assets	190,993		171,827

Total condensed consolidated assets	$	11,515,294	11,096,081


(7)	SHARE-BASED PAYMENTS

The Company had a stock and incentive plan ("1995 Plan") which provided for the grant of any or all of the following types of awards to eligible employees: (1) stock options, including incentive stock options and nonqualified stock options; (2) stock appreciation rights, in tandem with stock options or freestanding; (3) restricted stock; and, (4) performance awards. The 1995 Plan began on April 21, 1995, and was amended on June 25, 2004 to extend the termination date to April 20, 2010. The number of shares of Class A, $1.00 par value, common stock which were allowed to be issued under the 1995 Plan, or as to which stock appreciation rights ("SARs") or other awards were allowed to be granted, could not exceed 300,000. Effective June 20, 2008, the Company's shareholders approved a 2008 Incentive Plan (“2008 Plan”). The 2008 Plan is substantially similar to the 1995 Plan and authorized an additional number of Class A, $1.00 par value, common stock shares eligible for issue not to exceed 300,000. These shares may be authorized and unissued shares. The Company has issued only nonqualified stock options and SARs under these plans.

All of the employees of the Company and its subsidiaries are eligible to participate in the current 2008 Plan (as well as previously in the expired 1995 Plan). In addition, directors of the Company are eligible to receive the same types of awards as employees except that they are not eligible to receive incentive stock options. Company directors, including members of the Compensation and Stock Option Committee, are eligible for nondiscretionary stock options. The directors' grants vest 20% annually following one full year of service to the Company from the date of grant. The employees' grants vest 20% annually following three full years of service to the Company from the date of grant. All grants issued expire after ten years. No awards were issued during the first six months of 2015 or 2014.

Effective during March 2006, the Company adopted and implemented a limited stock buy-back program with respect to the 1995 Plan which provides option holders the additional alternative of selling shares acquired through the exercise of options directly back to the Company. Option holders may elect to sell such acquired shares back to the Company at any time within ninety (90) days after the exercise of options at the prevailing market price as of the date of notice of election. The buy-back program did not alter the terms and conditions of the 1995 Plan; however, the program necessitated a change in accounting from the equity classification to the liability classification.

In August 2008, the Company implemented another limited stock buy-back program, substantially similar to the 2006 program, for shares issued under the 2008 Plan.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company uses the current fair value method to measure compensation cost. As of June 30, 2015 and 2014, the liability balance was $7.3 million and $7.7 million, respectively. A summary of shares available for grant and activity is detailed below.



		Options Outstanding
	Shares Available For Grant	Shares		Weighted- Average Exercise Price

Stock Options:
Balance at January 1, 2015	291,000	29,768		$	242.48
Exercised	—	—		$	—
Forfeited	—	(1,000	)	$	255.13
Expired	—	—		$	—
Stock options granted	—	—		$	—

Balance at June 30, 2015	291,000	28,768		$	242.04



	Stock Appreciation Rights Outstanding
	Awards		Weighted- Average Exercise Price

Stock Appreciation Rights:
Balance at January 1, 2015	92,186		$	157.71
Exercised	(3,975	)	$	143.19
Forfeited	—		$	—
Granted	—		$	—

Balance at June 30, 2015	88,211		$	158.36

Stock options and SARs shown as forfeited in the above tables represent vested and unvested awards not exercised by plan participants prior to their termination from the Company. Forfeited stock options during the six months ended June 30, 2015 were awarded under the 1995 Plan. As the 1995 Plan terminated during calendar year 2010, the forfeited shares are not shown as being added back to the "Shares Available For Grant" balance.

The total intrinsic value of SARs exercised was $0.4 million and $0.7 million for the six months ended June 30, 2015 and 2014, respectively. The total share-based liabilities paid for the exercised SARs were $0.4 million and $0.6 million for the six months ended June 30, 2015 and 2014, respectively. The total fair value of stock options and SARs vested during the six months ended June 30, 2015 and 2014 was $0.6 million and $0.6 million, respectively. For the six months ended June 30, 2015 and 2014, the total cash received from the exercise of stock options under the Plans was $0 million and $0.2 million, respectively.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following table summarizes information about stock options and SARs outstanding at June 30, 2015.



	Options/SARs Outstanding
	Number Outstanding		Weighted- Average Remaining Contractual Life	Number Exercisable

Exercise prices:
$255.13 (options)	20,768		2.8 years	20,768
$208.05 (options)	8,000		3.0 years	8,000
$236.00 (SARs)	250		3.1 years	200
$114.64 (SARs)	23,943		3.6 years	19,764
$132.56 (SARs)	29,518		6.5 years	8,704
$210.22 (SARs)	34,500		8.4 years	1,800

Totals	116,979			59,236

Aggregate intrinsic value (in thousands)	$	7,408		$	3,703

The aggregate intrinsic value in the table above is based on the closing stock price of $239.49 per share on June 30, 2015.

In estimating the fair value of the options outstanding at June 30, 2015 and December 31, 2014, the Company employed the Black-Scholes option pricing model with assumptions detailed below.



	June 30, 2015		December 31, 2014

Expected term of options	2.8 to 8.4 years		3.3 to 9.0 years
Expected volatility:
Range	21.14% to 37.77%		19.67% to 37.75%
Weighted-average	23.96	%	22.91	%
Expected dividend yield	0.15	%	0.13	%
Risk-free rate:
Range	0.22% to 1.54%		0.13% to 1.62%
Weighted-average	0.52	%	0.56	%

The Company reviewed the contractual term relative to the options as well as perceived future behavior patterns of exercise. Volatility is based on the Company’s historical volatility over the expected term of the option’s expected exercise date.

The pre-tax compensation cost (benefit) recognized in the financial statements related to the two plans defined above was $(0.8) million and $(1.6) million for the three and six months ended June 30, 2015 compared to $0.8 million and $2.5 million for the three and six months ended June 30, 2014. The related tax (expense)/benefit recognized was $0.3 million and $0.6 million for the three and six months ended June, 2015 and 2014 compared to $(0.3) million and $(0.8) million for the three and six months ended June 30, 2014.

As of June 30, 2015, the total compensation cost related to nonvested options not yet recognized was $1.8 million. This amount is expected to be recognized over a weighted-average period of 2.0 years. The Company recognizes compensation cost over the graded vesting periods.

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(UNAUDITED)


(8)	COMMITMENTS AND CONTINGENCIES

(A) Legal Proceedings

In the normal course of business, the Company is involved or may become involved in various legal actions in which claims for alleged economic and punitive damages have been or may be asserted, some for substantial amounts. In recent years, carriers offering life insurance and annuity products have faced litigation, including class action lawsuits, alleging improper product design, improper sales practices, and similar claims. The Company has been a defendant over the past several years in two such class action lawsuits. Given the uncertainty involved in these types of actions, the ability to make a reliable evaluation of the likelihood of an unfavorable outcome or an estimate of the amount of or range of potential loss is endemic to the particular circumstances and evolving developments of each individual matter on its own merits.

The Company resolved a class action lawsuit pending since June 12, 2006, in the U.S. District Court for the Southern District of California. The case is titled In Re National Western Life Insurance Deferred Annuities Litigation. The complaint asserted claims for RICO violations, Financial Elder Abuse, Violation of Cal. Bus. & Prof. Code 17200, et seq, Violation of Cal. Bus. & Prof. Code 17500, et seq, Breach of Fiduciary Duty, Aiding and Abetting Breach of Fiduciary Duty, Fraudulent Concealment, Cal. Civ. Code 1710, et seq, Breach of the Duty of Good Faith and Fair Dealing, and Unjust Enrichment and Imposition of Constructive Trust. On July 12, 2010 the Court certified a nationwide class of policyholders under the RICO allegation and a California class under all of the remaining causes of action except breach of fiduciary duty. The parties entered into a Settlement and Release Agreement in August of 2013 ("Settlement") which was finally approved by the Court on February 11, 2014. On February 12, 2014, the Court issued a redacted final approval order granting the Motion for Final Approval of Class Action Settlement. The Settlement became final and non-appealable on April 12, 2014. The Settlement Agreement and Plaintiffs' Request for Attorneys' Fees and Costs were approved by the Court, and the Company paid the Court-approved amount of attorneys’ fees and costs in April 2014. The Company also made certain payments to surrendered and annuitized policyholders in June 2014. In addition, the Company agreed to provide bonuses on annuitization for active policyholders who choose a 10-year or a 20-year certain and life settlement option. The Company had held reserves of $6.5 million for the matter which approximated the ultimate settlement amounts described above.

On October 26, 2011 the Brazilian Superintendence of Private Insurance (“SUSEP”) attempted to serve the Company with a subpoena regarding an administrative proceeding initiated by SUSEP in which it alleged that the Company was operating as an insurance company in Brazil without due authorization. The Company had been informed that SUSEP was attempting to impose a penal fine of approximately $6.0 billion on the Company. SUSEP unsuccessfully attempted to serve the Company with notice regarding this matter. The Company does not transact business in Brazil and has no officers, employees, property, or assets in Brazil. The Company believes that SUSEP has no jurisdiction over the Company, that SUSEP's attempts at service of process were invalid, and that any penal fine would be unenforceable. For the reasons described above, the Company does not believe that this matter meets the definition of a material pending legal proceeding as such term is defined in Item 103 of Regulation S-K but has included the foregoing description solely due to the purported amount of the fine sought at that time.

Although there can be no assurances, at the present time, the Company does not anticipate that the ultimate liability arising from such other potential, pending, or threatened legal actions will have a material adverse effect on the financial condition or operating results of the Company.

Separately, the Brazilian authorities have commenced an investigation into possible violations of Brazilian criminal law in connection with the issuance of the Company's insurance policies to Brazilian residents, and in assistance of such investigation a Commissioner appointed by the U.S. District Court for the Western District of Texas has issued a subpoena upon the Company to provide information relating to such possible violations. No conclusion can be drawn at this time as to the outcome of this investigation or how such outcome may impact the Company's business, results of operations, or financial condition. The Company continues to cooperate with the relevant governmental authorities in regard to this matter.

(B) Financial Instruments

In order to meet the financing needs of its customers in the normal course of business, the Company is a party to financial instruments with off-balance sheet risk. These financial instruments are commitments to extend credit which involve elements of credit and interest rate risk in excess of the amounts recognized in the condensed consolidated balance sheet.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit is represented by the contractual amounts, assuming that the amounts are fully advanced and that collateral or other security is of no value. Commitments to extend credit are legally binding agreements to lend to a customer that generally have fixed expiration dates or other termination clauses and may require payment of a fee. Commitments do not necessarily represent future liquidity requirements, as some could expire without being drawn upon. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. The Company controls the credit risk of these transactions through credit approvals, limits, and monitoring procedures.

The Company had $2.8 million commitments to extend credit relating to mortgage loans at June 30, 2015. The Company evaluates each customer's creditworthiness on a case-by-case basis.


(9)	INVESTMENTS


(A)	Investment Gains and Losses

The table below presents realized investment gains and losses, excluding impairment losses, for the periods indicated.



	Three Months Ended June 30,					Six Months Ended June 30,
	2015			2014		2015		2014
	(In thousands)

Available for sale debt securities:
Realized gains on disposal	$	2,985		2,985		3,198		3,677
Realized losses on disposal	(65		)	(14	)	(74	)	(22	)
Held to maturity debt securities:
Realized gains on disposal	1,404			32		2,128		814
Realized losses on disposal	—			(6	)	—		(17	)
Equity securities realized gains (losses)	41			23		91		27
Real estate gains (losses)	—			45		—		134

Totals	$	4,365		3,065		5,343		4,613

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The Company uses the specific identification method in computing realized gains and losses. For the three and six months ended June 30, 2015 the percentage of gains on bonds due to the call of securities was 94% and 91%, respectively. This includes calls out of the Company's available for sale portfolio of debt securities.

The table below presents net impairment losses recognized in earnings for the periods indicated.



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015			2014	2015		2014
	(In thousands)

Total other-than-temporary impairment gains (losses) on debt securities	$	105		—	265		(4	)
Portion of loss (gain) recognized in comprehensive income	(105		)	—	(265	)	(3	)

Net impairment losses on debt securities recognized in earnings	—			—	—		(7	)
Equity securities impairments	(107		)	—	(107	)	(28	)

Totals	$	(107	)	—	(107	)	(35	)

The table below presents a roll forward of credit losses on securities for which the Company also recorded non-credit other-than-temporary impairments in other comprehensive loss.



	Three Months Ended June 30, 2015		Six Months Ended June 30, 2015		Twelve Months Ended December 31, 2014
			(In thousands)

Beginning balance, cumulative credit losses related to other-than-temporary impairments	$	2,278	2,298		2,472
Reductions for securities sold during current period	—		(20	)	(181	)
Additions for credit losses not previously recognized in other-than-temporary impairments	—		—		7

Ending balance, cumulative credit losses related to other-than-temporary impairments	$	2,278	2,278		2,298

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)


(B)	Debt and Equity Securities

The table below presents amortized costs and fair values of securities held to maturity at June 30, 2015.



	Securities Held to Maturity
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)

Debt securities:
U.S. agencies	$	15,038	517	(137	)	15,418
U.S. Treasury	1,923		369	—		2,292
States and political subdivisions	439,504		26,535	(2,536	)	463,503
Foreign governments	—		—	—		—
Public utilities	1,010,342		53,640	(4,433	)	1,059,549
Corporate	4,056,712		153,167	(37,448	)	4,172,431
Mortgage-backed	1,575,798		62,921	(8,333	)	1,630,386
Home equity	18,380		4,574	—		22,954
Manufactured housing	3,742		321	—		4,063

Totals	$	7,121,439	302,044	(52,887	)	7,370,596

The table below presents amortized costs and fair values of securities available for sale at June 30, 2015.



	Securities Available for Sale
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)

Debt securities:
States and political subdivisions	$	588	—	(53	)	535
Foreign governments	9,943		482	—		10,425
Public utilities	150,042		8,407	(480	)	157,969
Corporate	2,512,794		105,156	(22,270	)	2,595,680
Mortgage-backed	42,184		3,734	—		45,918
Home equity	11,381		199	(8	)	11,572
Manufactured housing	1,411		43	—		1,454
	2,728,343		118,021	(22,811	)	2,823,553

Equity securities	12,650		4,637	(251	)	17,036

Totals	$	2,740,993	122,658	(23,062	)	2,840,589

Table of Contents

NATIONAL WESTERN LIFE INSURANCE COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The table below presents amortized costs and fair values of securities held to maturity at December 31, 2014.



	Securities Held to Maturity
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)

Debt securities:
U.S. agencies	$	10,061	705	—		10,766
U.S. Treasury	1,920		409	—		2,329
States and political subdivisions	432,186		31,417	(336	)	463,267
Public utilities	978,847		67,836	(757	)	1,045,926
Corporate	3,754,222		183,650	(18,591	)	3,919,281
Mortgage-backed	1,640,582		68,726	(4,164	)	1,705,144
Home equity	18,886		4,734	(57	)	23,563
Manufactured housing	4,839		328	—		5,167

Totals	$	6,841,543	357,805	(23,905	)	7,175,443

The table below presents amortized costs and fair values of securities available for sale at December 31, 2014.



	Securities Available for Sale
	Amortized Cost		Gross Unrealized Gains	Gross Unrealized Losses		Fair Value
	(In thousands)

Debt securities:
States and political subdivisions	$	589	—	(36	)	553
Foreign governments	9,939		386	—		10,325
Public utilities	169,179		10,163	(126	)	179,216
Corporate	2,334,700		128,280	(8,961	)	2,454,019
Mortgage-backed	48,674		4,116	—		52,790
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NATIONAL WESTERN LIFE INSURANCE CO 10-Q