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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________________________________________________________________________________________________

FORM 10-K

☒ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, ~~2020~~2021

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 001-31901

PROTECTIVE LIFE INSURANCE COMPANY

(Exact name of registrant as specified in its charter)


Tennessee						63-0169720
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification Number)

2801 Highway 280 South

Birmingham, Alabama 35223

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code (205) 268-1000

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐						Accelerated filer ☐
Non-accelerated filer ☒						Smaller reporting company ☐
						Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

Aggregate market value of the registrant’s voting common stock held by non-affiliates of the registrant as of June 30, ~~2020~~2021: None

Number of shares of Common Stock, $1.00 Par Value, outstanding as of March 214, ~~2021~~2022: 5,000,000

Documents Incorporated by Reference: None

Table of Contents

PROTECTIVE LIFE INSURANCE COMPANY

ANNUAL REPORT ON FORM 10-K

FOR FISCAL YEAR ENDED DECEMBER 31, ~~2020~~2021

TABLE OF CONTENTS


		Page
	PART I
	Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary	2
Item 1.	Business	6
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	40
Item 2.	Properties	40
Item 3.	Legal Proceedings	41
Item 4.	Mine Safety Disclosure - Not Applicable	41
	PART II

Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	42
Item 6.	Reserved	42
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	99
Item 8.	Financial Statements and Supplementary Data	99
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	183
Item 9A.	Controls and Procedures	183
Item 9B.	Other Information	184
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	184
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	185
Item 11.	Executive Compensation	191
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	206
Item 13.	Certain Relationships and Related Transactions and Director Independence	220
Item 14.	Principal Accountant Fees and Services	221
	PART IV
Item 15.	Exhibits, Financial Statement Schedules	222
Item 16.	Form 10-K Summary
	Signatures	229

		Page
	PART I
	Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary	2
Item 1.	Business	6
Item 1A.	Risk Factors	18
Item 1B.	Unresolved Staff Comments	43
Item 2.	Properties	43
Item 3.	Legal Proceedings	44
Item 4.	Mine Safety Disclosure - Not Applicable	44
	PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	45
Item 6.	Selected Financial Data	45
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	101
Item 8.	Financial Statements and Supplementary Data	101
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	188
Item 9A.	Controls and Procedures	188
Item 9B.	Other Information	189
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance	190
Item 11.	Executive Compensation	196
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	211
Item 13.	Certain Relationships and Related Transactions and Director Independence	226
Item 14.	Principal Accountant Fees and Services	227
	PART IV
Item 15.	Exhibits, Financial Statement Schedules	228
Item 16.	Form 10-K Summary
	Signatures	235

Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary

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. The Company provides financial services primarily in the United States through the production, distribution, and administration of insurance and investment products. Unless the context otherwise requires, the “Company,” “we,” “us,” or “our” refers to the consolidated group of Protective Life Insurance Company and its subsidiaries.

In addition to historical information, this Annual Report on Form 10-K and the reports and documents incorporated by reference in this Annual Report on Form 10-K, may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that may predict, forecast, indicate, or imply future results, performance, or achievements instead of historical facts and may contain words like “believe”, “expect”, “estimate”, “project”, “budget”, “forecast”, “anticipate”, “plan”, “will”, “shall”, “may”, and other words, phrases, or expressions with similar meaning. Forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from the results contained in the forward-looking statements, and we cannot give assurances that such statements will prove to be correct. Given these risks and uncertainties, investors should not place undue reliance on forward-~~looking statements as a prediction of actual results. The Company undertakes no obligation to publicly update any forward-~~

Table of Contents

looking statements as a prediction of actual results. The Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise. Important factors that could cause or contribute to differences between forward-looking statements and actual results include risks relating to:

COVID-19 Pandemic

•the ~~novel~~ coronavirus (COVID-19) global pandemic has adversely impacted the Company’s business, and the ultimate effect on its business, results of operations, and financial condition will depend on future developments that are highly uncertain, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic;

Financial Environment

•interest rate fluctuations and sustained periods of low or high interest rates could negatively affect the Company’s interest earnings and spread income, or otherwise impact its business;

•the Company’s ~~investments~~is ~~are~~ subject to market and credit risks, which could be heightened during periods of extreme volatility or disruption in financial and credit markets;

•climate change may adversely affect the Company’s investment portfolio;

•elimination of London Inter-Bank Offered Rate (“LIBOR”) may adversely affect the interest rates on and value of certain derivatives and floating rate securities the Company holds and floating rate securities it has issued, the value and profitability of certain real estate lending and other activities the Company conducts, and any other assets or liabilities whose value is tied to LIBOR;

•~~credit~~climate ~~market~~change ~~volatility~~and orrelated ~~disruption~~legislative ~~could~~and ~~adversely~~regulatory ~~impact~~initiatives may materially affect the Company’s ~~financial~~business ~~condition~~and ormay ~~results~~adversely ~~from~~affect ~~operations~~our investment portfolio;

•~~disruption~~the elimination of London Inter-Bank Offered Rate (“LIBOR”) may adversely affect the ~~capital~~interest rates on and ~~credit~~value ~~markets~~of ~~could~~certain ~~negatively~~derivatives ~~affect~~and floating rate securities we hold and floating rate securities we have issued, the ~~Company’s~~value ~~ability~~and toprofitability ~~meet~~of ~~its~~certain ~~liquidity~~real estate lending and ~~financial~~other ~~needs~~activities we conduct, and any other assets or liabilities whose value is tied to LIBOR;

•equity market volatility could negatively impact the Company’s business;

•the Company’s use of derivative financial instruments within its risk management strategy may not be effective or sufficient;

•the Company’s ability to grow depends in large part upon the continued availability of capital;

•the Company could be forced to sell investments at a loss to cover policyholder withdrawals;

•difficult general economic conditions could materially adversely affect the Company’s business and results of operations;

•the Company could be adversely affected by an inability to access its credit facility or Federal Home Loan Bank (“FHLB”) lending;

•the amount of statutory capital or risk-based capital that the Company has and the amount of statutory capital or risk-based capital that it must hold to maintain its financial strength and credit ratings and meet other requirements can vary significantly from time to time and is sensitive to a number of factors outside of the Company’s control;

•the Company could be adversely affected by a ratings downgrade or other negative action by a rating organization;

•the Company’s securities lending program may subject it to liquidity and other risks;

•the Company’s financial condition or results of operations could be adversely impacted if its assumptions regarding the fair value and future performance of its investments differ from actual experience;

•adverse actions of certain funds or their advisers could have a detrimental impact on the Company’s ability to sell its variable life and annuity products, or maintain current levels of assets in those products;

Industry and Regulation

•the business of the Company is highly regulated and is subject to routine audits, examinations, and actions by regulators, law enforcement agencies, and self-regulatory organizations;

•the Company may be subject to regulations of, or regulations influenced by, international regulatory authorities or initiatives;

•National Association of Insurance Commissioners (“NAIC”) actions, pronouncements and initiatives may affect the Company’s product profitability, reserve and capital requirements, financial condition or results of operations;

•laws, regulations and initiatives related to unreported deaths and unclaimed property and death benefits may result in operational burdens, fines, unexpected payments or escheatments;

•the Company is subject to insurance guaranty fund laws, rules and regulations that could adversely affect its financial condition or results of operations;

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•the Company is subject to insurable interest laws, rules and regulations that could adversely affect its financial condition or results of operations;

•laws, rules and regulations promulgated in connection with the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act may adversely affect the Company’s results of operations or financial condition;

•new and amended regulations regarding the standard of care or standard of conduct applicable to investment professionals, insurance agencies, and financial institutions that recommend or sell annuities or life insurance products may have a material adverse impact on the Company’s ability to sell annuities and other products and to retain in-force business and on its financial condition or results of operations;

•the Company may be subject to regulation, investigations, enforcement actions, fines and penalties imposed by the United States Securities and Exchange Commission (the “SEC”), the Financial Industry Regulatory Authority (“FINRA”) and other federal and international regulators in connection with the Company’s business operations;

•changes to tax law, or interpretations of existing tax law could adversely affect the Company’s ability to compete with non-insurance products or reduce the demand for certain insurance products;

•financial services companies and their subsidiaries are frequently the targets of legal proceedings and increased regulatory scrutiny, including class action litigation, which could result in substantial judgments, and law enforcement investigations;

•if ~~the~~our ~~Company’s~~ business does not perform well, or economic or market conditions change negatively, it may be required to recognize an impairment of its goodwill and/or its indefinite lived intangible assets which could adversely affect the Company’s results of operations or financial condition;

•use of reinsurance introduces variability in the Company’s statements of income;

•the Company’s reinsurers could fail to meet assumed obligations, increase rates, terminate agreements or be subject to adverse developments that could affect it;

•the Company’s policy claims fluctuate from period to period resulting in earnings volatility;

•the Company operates in a mature, highly competitive industry, which could limit its ability to gain or maintain its position in the industry and negatively affect profitability;

•developments in technology may impact the Company’s business;

•the Company’s ability to maintain competitive unit costs is dependent upon the level of new sales and persistency of existing business;

Privacy and Cyber Security

•a disruption or cyberattack affecting the electronic, communication and information technology systems or other technologies of the Company or those on whom the Company relies could adversely affect the Company’s business, financial condition, and results of operations;

•confidential information maintained in the systems of the Company or other parties upon which the Company relies could be compromised or misappropriated as a result of security breaches or other related lapses or incidents, damaging the Company’s business and reputation and adversely affecting its financial condition and results of operations;

•compliance with existing and emerging privacy regulations could result in increased compliance costs and/or lead to changes in business practices and policies, and any failure to protect the confidentiality of consumer information could adversely affect the Company’s reputation and have a material adverse effect on its business, financial condition and results of operations;

Acquisitions, Dispositions or Other Corporate Structural Matters

•the Company may not realize its anticipated financial results from our acquisitions strategy;

•assets allocated to the MONY Closed Block benefit only the holders of certain policies; adverse performance of Closed Block assets or adverse experience of Closed Block liabilities may negatively affect us;

•~~the~~we ~~Company~~depend ~~operates as a holding company and depends~~ on the ability of ~~its~~our subsidiaries to transfer funds to ~~the~~us ~~Company~~ to meet ~~its~~our obligations;

•the Company’s use of affiliate and captive reinsurance companies to finance statutory reserves related to its fixed annuity and term and universal life products and to reduce volatility affecting its variable annuity products may be limited or adversely affected by regulatory action, pronouncements, and interpretations;

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General

•the Company is controlled by Dai-ichi Life, which has the ability to make important decisions affecting ~~its~~our business;

•exposure to risks related to natural and man-made disasters and catastrophes, such as diseases, epidemics, pandemics (including the ~~novel~~ coronavirus, COVID-19), malicious acts, cyberattacks, terrorist acts, and climate change, which could adversely affect the Company’s operations and results;

•the Company’s results and financial condition may be negatively affected should actual experience differ from management’s models, assumptions, or estimates;

•the Company is dependent on the performance of others;

•the Company’s risk management policies, practices, and procedures could leave it exposed to unidentified or unanticipated risks, which could negatively affect the Company’s business or result in losses;

•the Company’s strategies for mitigating risks arising from its day-to-day operations may prove ineffective resulting in a material adverse effect on the Company’s results of operations and financial condition;

•events that damage the Company’s reputation or the reputation of its industry could adversely impact the Company’s business, results of operations, or financial condition;

•the Company may not be able to protect its intellectual property and may be subject to infringement claims;

•the Company may be required to establish a valuation allowance against its deferred tax assets, which could have a material adverse effect on its results of operations, financial condition, and capital position; and

•new accounting rules, changes to existing accounting rules, or the granting of permitted accounting practices to competitors could negatively impact the Company.

For more information about the risks, uncertainties, and other factors that could affect our future results, please refer to Item 1A, Risk Factors, included herein.

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PART I

Item 1. Business

On February 1, 2015, The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan (now known as Dai-ichi Life Holdings, Inc., “Dai-ichi Life”), acquired 100% of PLC’s outstanding shares of common stock through the merger of DL Investment (Delaware), Inc., a Delaware corporation and wholly owned subsidiary of Dai-ichi Life, with and into PLC, with PLC continuing as the surviving entity (the “Merger”). As a result of the Merger, PLC became a direct, wholly owned subsidiary of Dai-ichi Life. Prior to February 1, 2015, PLC’s stock was publicly traded on the New York Stock Exchange. ~~Subsequent~~The ~~to the Merger date, the~~ Company has continued to be an SEC registrant for financial reporting purposes in the United States following the Merger. However, after the filing of this Annual Report on Form 10-K, the Company intends to rely on the exemption provided by Rule 12h-7 under the Securities Exchange Act of 1934 (the “Exchange Act”) to suspend filing reports with the United States Securities and Exchange Commission (the “SEC”) under the Exchange Act. See “Exemption from Periodic Reporting with the SEC” below.

The Company operates 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’s operating segments are Retail Life and Annuity, Acquisitions, Stable Value Products, and Asset Protection. The Company has an additional reporting segment referred to as Corporate and Other which consists of net investment income not assigned to the segments above (including the impact of carrying liquidity) and expenses not attributable to the segments above. This segment also includes earnings from several non-strategic or runoff lines of business, financing and investment-related transactions, and the operations of several small subsidiaries. The Company periodically evaluates its operating segments and makes adjustments to our segment reporting as needed.

Additional information concerning the Company’s operating segments may be found in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 22, Operating Segments to the consolidated financial statements included in this report.

In the following paragraphs, the Company reports sales and other statistical information. These statistics are used to measure the relative progress of its marketing and acquisition efforts, but may not have an immediate impact on reported segment or consolidated adjusted operating income. Sales data for traditional life insurance, other than Single Premium Whole Life (“SPWL”) insurance, is based on annualized premiums. SPWL insurance sales are based on total single premium dollars received in the period. Universal life sales are based on annualized planned premiums, or “target” premiums if lesser, plus 6% of amounts received in excess of target premiums and 10% of single premiums. “Target” premiums for universal life are those premiums upon which full first year commissions are paid. Sales of annuities are measured based on the amount of purchase payments received less surrenders occurring within twelve months of the purchase payments. Stable value contract sales are measured at the time the purchase payments are received. Sales within the Asset Protection segment are based on the amount of single premiums and fees received.

These statistics are derived from various sales tracking and administrative systems and are not derived from the Company’s financial reporting systems or financial statements. These statistics attempt to measure only some of the many factors that may affect future profitability, and therefore, are not intended to be predictive of future profitability.

Business Segments

In the first quarter of 2020, as a result of changes in the way the chief operating decision maker makes decisions about the allocation of resources and assesses the performance of the business, the Company combined two of its former six segments into one segment, Retail Life and Annuity. These changes enable the Company to better serve the needs of its customers and to help achieve the goals of the organization.

Prior period amounts were adjusted retrospectively to reflect the change in our reportable segments.

Retail Life and Annuity

The Retail Life and Annuity segment markets fixed universal life (“UL”), indexed universal life (“IUL”), variable universal life (“VUL”), level premium term insurance (“traditional”), bank-owned life insurance (“BOLI”), corporate-owned life insurance (“COLI”), fixed annuity, and variable annuity (“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.

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The following table presents the Retail Life & Annuity segment’s sales as defined above:

For The Year Ended December 31,	Sales
	(Dollars In Millions)
2020	$	2,957
2021	$	3,737
2020	2,958
2019	2,384
2018	2,606
2017	1,729
2016	1,490

Acquisitions

The Acquisitions segment focuses on acquiring, converting, and servicing policies and contracts from other companies. The segment’s primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the segment’s acquisition activity is predicated upon many factors, including available capital, operating capacity, potential return on capital, and market dynamics. The Company expects acquisition opportunities to continue to be available. However, the Company believes it may face increased competition and evolving capital requirements that may affect the environment and the form of future acquisitions.

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 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 segment’s revenues and earnings may fluctuate from year to year depending upon the level of acquisition activity. In transactions where some marketing activity was included, the Company may cease future marketing efforts, redirect those efforts to another segment of the Company, or elect to continue marketing new policies as a component of other segments.

The Company believes that its focused and disciplined approach to the acquisition process and its experience in the assimilation, conservation, and servicing of acquired policies provides a significant competitive advantage.

Stable Value Products

The Stable Value Products segment sells fixed and floating rate funding agreements directly to the trustees ~~holding~~of municipal bond proceeds, money market funds, bank trust departments, and other institutional investors. The segment also issues funding agreements to institutional investors and the FHLB and markets guaranteed investment contracts (“GICs”) to 401(k) and other qualified retirement savings plans. GICs are contracts which specify a return on funds for a specified period and often provide flexibility for withdrawals at book value in keeping with the benefits provided by the plan. The demand for GICs is related to the relative attractiveness of the “fixed rate” investment option in a 401(k) plan compared to the equity-based investment options which may be available to plan participants. 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 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. The Company's emphasis is on a consistent and disciplined approach to product pricing and asset/liability management, careful underwriting of early withdrawal risks, and maintaining low distribution and administration costs. Most GICs and funding agreements the Company has written have maturities of one to twelve years.

Asset Protection

The Asset Protection segment markets extended service contracts, ~~credit life~~ and ~~disability insurance, and~~ other specialized ancillary products to protect consumers’' investments in automobiles, watercraft, ~~powersports,~~ and recreational vehicles (“"RV”"). In addition, the segment markets a guaranteed asset protection (“"GAP”") product. 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 segment’'s products are primarily marketed through a national network of approximately 64,~~200~~820 automobile, marine, powersports, and RV dealers. A network of direct employee sales representatives and general agents distribute these products to the dealer market.

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The following table presents the insurance and related product sales measured by the amount of single premiums and fees received:

For The Year Ended December 31,	Sales
	(Dollars In Millions)
2020	$	474
2021	$	587
2020	474
2019	481
2018	449
2017	504
2016	467

In ~~2020~~2021, all of the segment’s sales were through the automobile and RV dealer distribution channel and 83approximately 85.17% of the segment’s sales were extended service contracts. A portion of the sales and resulting premiums are reinsured with producer-affiliated reinsurers.

Corporate and Other

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 results of this segment may fluctuate from year to year.

Investments

As of December 31, ~~2020~~2021, the Company’s investment portfolio was $8890.18 billion. The types of assets in which the Company may invest are influenced by various state insurance laws which prescribe qualified investment assets. Within the parameters of these laws, the Company invests in assets giving consideration to such factors as liquidity and capital needs, investment quality, investment return, matching of assets and liabilities, and the overall composition of the investment portfolio by asset type and credit exposure. For further information regarding the Company’s investments, the maturity of and the concentration of risk among the Company’s invested assets, derivative financial instruments, and liquidity, refer to Note 2, Summary of Significant Accounting Policies, Note 4, Investment Operations, and Note 6, Derivative Financial Instruments to the consolidated financial statements included in this report, and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following table presents the investment results:

	Cash, Accrued Investment Income, and Investments as of December 31,		Net Investment Income		Percentage Earned on Average of Cash and Investments	~~Realized~~Net Gains (Losses) - investments and derivatives
	(Dollars In Thousands)
	(Dollars In Millions)
For The Year Ended December 31, 2020	$	89,429,648	$	2,882,963	3.3%	$	(31,127)
For The Year Ended December 31, 2021	$	91,868	$	2,982	3.3%	$	150
For The Year Ended December 31, 2019	85,173,960		2,818,830		3.5%	177,086
For The Year Ended December 31, 2020(1)	89,937		2,889		3.3%	(235)
For The Year Ended December 31, 2018	66,546,973		2,338,902		3.7%	(173,903)
For The Year Ended December 31, 2019(1)	85,471		2,825		3.7%	(59)
For The Year Ended December 31, 2017	54,983,606		1,923,056		3.6%	(25,066)
For The Year Ended December 31, 2018(1)	66,744		2,344		3.8%	(193)
For The Year Ended December 31, 2016	51,140,568		1,823,463		3.6%	122,672
For The Year Ended December 31, 2017(1)	55,236		1,929		3.6%	(151)
(1) Recast from previously reported financials

Commercial Mortgage Loans

The Company invests a portion of its investment portfolio in commercial mortgage loans. As of December 31, ~~2020~~2021, the Company’s commercial mortgage loan holdings were $11 billion, $10.29 billion net of allowance for credit losses. As of December 31, 2020, our commercial mortgage loan holdings were $10.02 billion, $10 billion net of allowance for credit losses. The Company has specialized in making loans on credit-oriented commercial properties~~, credit-anchored strip shopping centers, senior living facilities, and apartments~~. 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 ~~classes~~associated ~~(retail,~~with ~~industrial, senior living, office, and multi-family). With respect to retail,~~ the ~~Company’s focus is on the~~ necessities of life ~~sector.~~(grocery ~~The~~anchored ~~Company~~and ~~believes~~credit ~~that~~tenant ~~this~~ retail, ~~focus~~industrial, ~~along~~multi-family, ~~with~~senior ~~the~~living, ~~other~~and ~~preferred~~credit ~~asset~~tenant classes 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~~medical ~~rate throughout its history. The majority of the Company’s commercial mortgage loan portfolio was underwritten~~

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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 loans in conjunction with an acquisition. For more information regarding the Company’s investment in commercial mortgage loans, refer to Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 8, Commercial Mortgage Loans to the consolidated financial statements included herein.

Ratings

Various Nationally Recognized Statistical Rating Organizations (“rating organizations”) review the financial performance and condition of insurers, including the Company and its insurance subsidiaries, and publish their financial strength ratings as indicators of an insurer’s ability to meet policyholder and contract holder obligations. These ratings are important to maintaining public confidence in an insurer’s products, its ability to market its products and its competitive position. The following table summarizes the current financial strength ratings of the Company and its significant member companies from the major independent rating organizations:

Ratings

A.M. Best

Fitch

Standard & Poor’s

Moody’s

Insurance company financial strength rating:

Protective Life Insurance Company

A+

AA-

West Coast Life Insurance Company

A+

AA-

Protective Life and Annuity Insurance Company

A+

AA-

—

Protective Property & Casualty Insurance Company

—

MONY Life Insurance Company (‘MONY”)

A+

MONY Life Insurance Company (“MONY”)

A+

The Company’s ratings are subject to review and change by the rating organizations at any time and without notice. A downgrade or other negative action by a rating organization with respect to the financial strength ratings of the Company and its insurance subsidiaries could adversely affect sales, relationships with distributors, the level of policy surrenders and withdrawals, the Company’s acquisitions strategy or competitive position in the marketplace, and the cost or availability of reinsurance. The rating agencies may take various actions, positive or negative, with respect to the financial strength ratings of the Company and its insurance subsidiaries, including as a result of the Company’s status as an indirect subsidiary of Dai-ichi Life.

Rating organizations also publish credit ratings for the issuers of debt securities, including PLC. Credit ratings are indicators of a debt issuer’s ability to meet the terms of debt obligations in a timely manner. PLC is an important source of funding for the Company, so its credit ratings may affect the Company’s liquidity. These ratings are important in the debt issuer’s overall ability to access credit markets and other types of liquidity. Ratings are not recommendations to buy the PLC’s securities or products. A downgrade or other negative action by a rating organization with respect to PLC’s credit rating could limit PLC’s access to capital markets or increase the cost of issuing debt, and a downgrade of sufficient magnitude, combined with other negative factors, could require PLC to post collateral. The rating organizations may take various actions, positive or negative, with respect to PLC’s debt ratings, including as a result of PLC’s status as an indirect subsidiary of Dai-ichi Life.

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Life Insurance In-Force

The following tables present life insurance sales by face amount and life insurance in-force:

	For The Year Ended December 31,
	2020		2019		2018		2017		2016
	2021		2020		2019		2018		2017
	(Dollars In Thousands)
	(Dollars In Millions)
New Business Written
Retail Life and Annuity	$	6386,~~067,684~~627	$	4363,~~923,917~~068	$	5943,~~716,949~~924	$	5259,~~154,590~~717	$	4852,~~654,140~~155
Asset Protection	~~190,941~~23		~~302,562~~191		~~373,765~~303		~~483,299~~374		~~646,225~~483
Total	$	6386,~~258,625~~650	$	4463,~~226,479~~259	$	6044,~~090,714~~227	$	5260,~~637,889~~091	$	4952,~~300,365~~638

	As of December 31,
	2020		2019		2018		2017		2016
	2021		2020		2019		2018		2017
	(Dollars In Thousands)
	(Dollars In Millions)
Business Acquired Through Acquisitions	$	—	$	~~83,015,437~~—	$	3183,~~127,401~~015	$	—31,127	$	~~83,285,951~~—
Insurance In-Force at End of Year (1)
Retail Life and Annuity	$	~~686~~745,~~653,422~~034	$	~~655~~686,~~449,865~~653	$	~~641~~655,~~004,417~~450	$	~~613~~641,~~752,209~~004	$	~~590~~613,~~021,218~~752
Acquisitions	~~303~~274,~~850,609~~884		~~322~~303,~~336,035~~851		~~259~~322,~~168,414~~336		~~246~~259,~~499,115~~168		~~263~~246,~~771,251~~499
Asset Protection	~~743,390~~446		~~984,472~~743		~~1,220,801~~984		1,~~466,334~~221		1,~~721,641~~466
Total	$	~~991~~1,~~247~~020,~~421~~364	$	~~978~~991,~~770,372~~247	$	~~901~~978,~~393,632~~770	$	~~861~~901,~~717,658~~393	$	~~855~~861,~~514,110~~717

(1)Reinsurance assumed has been included, reinsurance ceded (2021 - $222,865; 2020 - $244,588~~,150~~; 2019 - $271,~~600,818~~601; 2018 - $302,~~149,614~~150; 2017 - $328,377~~,398; 2016 - $348,994,650~~) has not been deducted.

The ratio of voluntary terminations of individual life insurance to mean individual life insurance in-force, which is determined by dividing the amount of insurance terminated due to lapses during the year by the mean of the insurance in-force at the beginning and end of the year, adjusted for the timing of major acquisitions, is as follows:

As of December 31,	Ratio of Voluntary Termination
2020	5.0	%
2021	4.3	%
2020	5.0
2019	5.0
2018	5.1
2017	4.5
2016	4.9

Investment Products In-Force

The amount of investment products in-force is measured by account balances. The following table includes the stable value products and fixed and variable annuity account balances. A majority of the VA account balances are reported in the Company’s financial statements as liabilities related to separate accounts.

As of December 31,	StableValueProducts		FixedAnnuities		VariableAnnuities
	(Dollars In Thousands)
	(Dollars In Millions)
2020	$	6,056,181	$	15,477,640	$	12,377,571
2021	$	8,526	$	15,846	$	13,648
2019	5,443,752		14,289,907		12,730,090
2020	6,056		15,478		12,378
2018	5,234,731		13,720,081		12,288,919
2019	5,444		14,290		12,730
2017	4,698,371		10,921,190		13,956,071
2018	5,235		13,720		12,289
2016	3,501,636		10,642,115		13,244,252
2017	4,698		10,921		13,956

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Underwriting

The underwriting policies of the Company and its insurance subsidiaries are established by management. With respect to individual insurance, the Company uses information from the application, and in some cases, third party medical information providers, inspection reports, credit reports, motor vehicle records, previous underwriting records, attending physician statements and/or the results of a medical exam, to determine whether a policy should be issued as applied for, other than applied for, or rejected. Substandard risks may be referred to reinsurers for evaluation. The Company does utilize a “simplified issue” approach for certain policies. In the case of “simplified issue” policies, coverage is rejected if the responses to certain health questions contained in the application, or the applicant’s inability to make an unqualified health certification, indicate adverse health of the applicant.

The Company and its insurance subsidiaries generally require blood samples to be drawn with individual insurance applications above certain face amounts based on the applicant’s age. Blood samples are tested for a wide range of chemical values and are screened for antibodies to certain viruses. Applications also contain questions permitted by law regarding certain viruses which must be answered by the proposed insureds.

The Company utilizes an advanced underwriting system, TeleLife®, for certain product lines in its life business. TeleLife® streamlines the application process through a telephonic interview of the applicant, schedules medical exams, accelerates the underwriting process and the ultimate issuance of a policy mostly through electronic means. The Company also introduced a streamlined underwriting approach that utilizes the TeleLife® process and noninvasive risk selection tools to approve some applications without requiring a paramedical exam or lab testing.

The Company’s maximum retention limit on directly issued business is $5,000,000 for any one life on certain of its traditional life and universal life products.

Reinsurance Ceded

The Company and its insurance subsidiaries cede life insurance to other insurance companies. The ceding insurance company remains liable with respect to ceded insurance should any reinsurer fail to meet the obligations assumed by it.

For approximately 10 years prior to mid-2005, the Company entered into reinsurance contracts in which the Company ceded approximately 90% of its newly written traditional life insurance business on a first dollar quota share basis under coinsurance contracts. In mid-2005, the Company substantially discontinued coinsuring its newly written traditional life insurance and moved to yearly renewable term (“YRT”) reinsurance. The amount of insurance retained by the Company on any one life on 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, was increased to $2,000,000 for certain policies. During 2016, the retention amount was increased to $5,000,000.

For approximately 15 years prior to 2012, the Company reinsured 90% of the mortality risk on the majority of its newly written universal life insurance on a YRT basis. During 2012, the Company moved to reinsure only amounts in excess of its $2,000,000 retention, which was increased to $5,000,000 during 2016, for the majority of its newly written universal life and level premium term insurance.

Policy Liabilities and Accruals

The applicable insurance laws under which the Company and its insurance subsidiaries operate require that each insurance company report policy liabilities to meet future obligations on the outstanding policies. These liabilities are calculated in accordance with applicable law. These liabilities along with additional premiums to be received and the compounded interest earned on those premiums are considered to be sufficient to meet the various policy and contract obligations as they mature. These laws specify that the liabilities shall not be less than liabilities calculated using certain named mortality tables and interest rates.

The policy liabilities and accruals carried in the Company’s financial statements presented on the basis of accounting principles generally accepted in the United States of America (“GAAP”) differ from those specified by the laws of the various states and carried in the insurance subsidiaries’ statutory financial statements (presented on the basis of statutory accounting principles mandated by state insurance regulations). For policy liabilities for traditional life, immediate annuity, and health contracts, these differences arise from the use of mortality and morbidity tables and interest rate assumptions which are deemed to be more appropriate for financial reporting purposes than those required for statutory accounting purposes. The GAAP policy liabilities also include lapse assumptions in the calculation and use the net level premium method on all business which generally differs from policy liabilities calculated for statutory financial statements. Policy liabilities for universal life policies, deferred annuity contracts, GICs, and funding agreements are generally carried in the Company’s financial statements at the account value of the policy or contract plus accrued interest. Additional liabilities are held as appropriate for excess benefits above the account value.

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Federal Taxes

In general, existing law exempts policyholders from current taxation on an increase in the value of their life insurance and annuity products during these products’ accumulation phase. This favorable tax treatment gives certain of the Company’s products a competitive advantage over investment products. If tax laws are revised such that there is an elimination or scale-back of this favorable tax treatment, or competing investment products are granted similar tax treatment, then the relative attractiveness of the Company’s products may be reduced or eliminated.

In addition, life insurance products are often used to fund estate tax obligations. Recent and possibly future changes to estate tax law may affect the demand for life insurance products.

The Company and its insurance subsidiaries are generally taxed in the same manner as are other companies in the industry. Certain tax law restrictions prevent the immediate inclusion of recently-acquired life insurance companies in the Company’s consolidated income tax return. Additionally, these restrictions limit the amount of life insurance income that can be offset by non-life insurance losses. Overall, these restrictions may cause the Company’s effective tax rate to increase.

Competition

Life and health insurance is a mature and highly competitive industry. In recent years, the industry’s life insurance sales have been relatively flat, though the aging population has increased the demand for retirement savings products. The Company encounters significant competition in all lines of business, including in the Acquisitions segment.

The Company encounters competition for sales of life insurance and retirement products from other insurance companies, many of which have greater financial resources than the Company and which may have a greater market share, offer a broader range of products, services or features, assume a greater level of risk, have lower operating or financing costs, or have lower profitability expectations. The Company also faces competition from other providers of financial services. Competition could result in, among other things, lower sales or higher lapses of existing products.

The Company’s ability to compete is dependent upon, among other things, its ability to attract and retain distributors to market its insurance and investment products, its ability to develop competitive and profitable products, its ability to maintain low unit costs, and its maintenance of adequate ratings from rating organizations.

As technology evolves, a comparison of a particular product of any company for a particular customer with competing products for that customer is more readily available, which could lead to increased competition as well as agent or customer behavior, including persistency, which differs from past behavior.

The Company encounters competition in its Acquisitions segment from other insurance companies as well as from other types of acquirers, including private equity investors. Many of these competitors may have greater financial resources than the Company and may be willing to assume a greater level of risk, have lower operating or financing costs, or have lower profitability expectations.

Risk Management

Risk management is a critical part of the Company’s business, and the Company has adopted risk management processes in multiple aspects of its operations, including product development and management, business acquisitions, underwriting, investment management, asset-liability management, hedging, and technology. The Company’s Enterprise Risk Management office, under the direction of the Chief Risk Officer, along with other departments, management groups and committees, have responsibilities for managing different risks throughout the Company. Risk management includes the assessment of risk, a decision process which includes determining which risks are acceptable and the monitoring and management of identified risks on an ongoing basis. The primary objectives of these risk management processes are to determine the acceptable level of variations the Company experiences from its expected results and to implement strategies designed to limit such variations to these levels.

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Regulation

State Regulation

The Company is subject to government regulation in each of the states in which it conducts business. In many instances, the regulatory models emanate from the NAIC. Such regulation is vested in state agencies having broad administrative and in some instances discretionary power dealing with many aspects of the Company’s business, which may include, among other things, premium and cost of insurance rates and increases thereto, interest crediting policy, underwriting practices, reserve requirements, marketing practices, advertising, privacy, data security, cybersecurity, policy forms, reinsurance reserve requirements, insurer use of captive reinsurance companies, acquisitions, mergers, capital adequacy, claims practices and the remittance of unclaimed property. In addition, some state insurance departments may enact rules or regulations with extra-territorial application, effectively extending their jurisdiction to areas such as permitted insurance company investments that are normally the province of an insurance company’s domiciliary state regulator.

The Company and its insurance subsidiaries are required to file periodic reports with the regulatory agencies in each of the jurisdictions in which they do business, and their business and accounts are subject to examination by such agencies at any time. Under the rules of the NAIC, insurance companies are examined periodically (generally every three to five years) by one or more of the regulatory agencies on behalf of the states in which they do business. At any given time, a number of financial and/or market conduct examinations of the Company and its subsidiaries may be ongoing. From time to time, regulators raise issues during examinations or audits for the Company and its subsidiaries that could, if determined adversely, have a material adverse impact on the Company. To date, no such insurance department examinations have produced any significant adverse findings regarding any of the Company and any of its insurance company subsidiaries.

Under the insurance guaranty fund laws in most states, insurance companies doing business in the state 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 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.

In addition, many states, including the states in which the Company and its insurance subsidiaries are domiciled, have enacted legislation or adopted regulations regarding insurance holding company systems. These laws require registration of and periodic reporting by insurance companies domiciled within the jurisdiction which control or are controlled by other corporations or persons so as to constitute an insurance holding company system. These laws also affect the acquisition of control of insurance companies as well as transactions between insurance companies and companies controlling them. Most states, including Tennessee, where the Company is domiciled, require administrative approval of the acquisition of control of an insurance company domiciled in the state or the acquisition of control of an insurance holding company whose insurance subsidiary is incorporated in the state. In Tennessee, the acquisition of 10% of the voting securities of an entity is deemed to be the acquisition of control for the purpose of the insurance holding company statute and requires not only the filing of detailed information concerning the acquiring parties and the plan of acquisition, but also administrative approval prior to the acquisition.

The states in which the Company and its insurance subsidiaries are domiciled also impose certain restrictions on the subsidiaries’ ability to pay dividends to the Company. These restrictions are based in part on the prior year’s statutory income and surplus. In general, dividends up to specified levels are considered ordinary and may be paid without prior approval. Dividends in larger amounts are considered extraordinary and are subject to affirmative prior approval by the insurance commissioner of the state of domicile. In addition, certain states may prohibit the payment of dividends from other than the insurance company’s earned surplus. The ~~maximum~~insurance ~~amount~~subsidiaries ~~that~~may ~~would~~pay, ~~qualify~~without asthe ~~ordinary~~approval ~~dividends~~of to the ~~Company~~Insurance byCommissioners ~~its~~of ~~insurance~~the ~~subsidiaries~~state inof ~~2021 is~~domicile, in$136 ~~the~~million ~~aggregate,~~of ~~$453.8~~distributions ~~million~~in 2022. No assurance can be given that more stringent restrictions will not be adopted from time to time by states in which the Company and its insurance subsidiaries are domiciled; such restrictions could have the effect, under certain circumstances, of significantly reducing dividends or other amounts payable to the Company by such subsidiaries without prior approval by state regulatory authorities.

State insurance regulators and the NAIC regularly re-examine existing laws and regulations applicable to insurance companies and their products. Changes in these laws and regulations, or in interpretations thereof, are often made for the benefit of the consumer and may lead to additional expense for the insurer. Furthermore, some NAIC pronouncements, particularly as they affect accounting issues, take effect automatically in various states without affirmative action by those states

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Sales of life insurance policies and annuity contracts offered by the Company are subject to a wide variety of state regulations relating to sales practices. The NAIC finalized revisions to the Suitability in Annuity Transactions Model Regulation which is intended to impose a higher standard of care on insurers who sell annuities. Additionally, several states are considering or have adopted legislation or regulatory measures that would implement new requirements and standards applicable to the sale of annuities and, in some cases, life insurance products. These new and proposed requirements and standards, which vary widely in scope, applicability, and timing of implementation, include requiring insurers, investment advisers, broker-dealer, and/or agents to disclose conflicts of interest to clients or to meet standards that their advice and sales recommendations must be in the customer’s best interest. There remains significant uncertainty surrounding these new and proposed requirements and standards, and the impact they may have on our current distributors and sales of our life insurance policies and annuity contracts.

The insurance laws of U.S. jurisdictions govern the marketplace activities of insurers, affecting the form and content of disclosure to consumers, product illustrations, advertising, product replacement, sales and underwriting practices, and complaint and claims handling, and these provisions are generally enforced through periodic market conduct examinations. Most state insurance laws prohibit insurers from engaging in unfair trade practices. The kinds of practices addressed are (i) misrepresentation and false advertising, (ii) unfair discrimination in premiums and policy benefits, (iii) boycott, coercion and intimidation, (iv) discrimination based on race, color, creed or national origin, sex or marital status, and (v) rebating of premium. In January 2019, the New York Department of Financial Services (“DFS”) issued a circular letter that relates to use by life insurers of data or information sources that are not directly related to the medical condition of the applicant (with certain exclusions), for certain types of underwriting or rating purposes, including as a proxy for traditional medical underwriting. The circular letter generally prohibits life insurers from using such data or information, including algorithms or predictive models, in this fashion unless: (i) the insurer can establish that the data source does not use and is not based in any way on prohibited criteria, such as race, color, creed, etc.; and (ii) this use is not unfairly discriminatory and otherwise complies with the requirements of the New York insurance laws. In addition, the circular letter requires insurers using such data or information, including predictive models, to make certain additional disclosures to consumers.

Federal Regulation

At the federal level, the executive branch or federal agencies may issue orders or take other action with respect to financial services and life insurance matters, and bills are routinely introduced in both chambers of the United States Congress which could affect the Company’s business. In the past, Congress has considered legislation that would impact insurance companies in numerous ways, such as providing for an optional federal charter or a federal presence for insurance, preempting state law in certain respects regarding the regulation of reinsurance, increasing federal oversight in areas such as consumer protection and solvency regulation, setting tax rates, and other matters. The Company cannot predict whether or in what form legislation will be enacted and, if so, the impact of such legislation on the Company.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“the Dodd-Frank Act”) made sweeping changes to the regulation of financial services entities, products and markets. The Dodd-Frank Act directed existing and newly-created government agencies and bodies to perform studies and promulgate a multitude of regulations implementing the law, a process that has substantially advanced but is not yet complete.

Among other things, the Dodd-Frank Act imposed a comprehensive new regulatory regime on the over-the-counter (“OTC”) derivatives marketplace and granted new joint regulatory authority to the SEC and the U.S. Commodity Futures Trading Commission (“CFTC”) over OTC derivatives. In collaboration with U.S. federal banking regulators, the CFTC has adopted regulations which categorize the Company as a “financial end-user” which is thereby required to post and collect margin in a variety of derivatives transactions. Recommendations and reports from entities created under the Dodd-Frank Act, such as the Federal Insurance Office (“FIO”) and the Financial Stability Oversight Council (“FSOC”), could also affect the manner in which insurance and reinsurance are regulated in the U.S. and, thereby, the Company’s business. The Dodd-Frank Act also created the Consumer Financial Protection Bureau (“CFPB”), an independent division of the Department of Treasury with jurisdiction over credit, savings, payment, and other consumer financial products and services, other than investment products already regulated by the SEC or the CFTC. The Company and certain of its subsidiaries sell products that may be regulated by the CFPB.

Sales of life insurance policies and annuity contracts offered by the Company are subject to regulations relating to sales practices adopted by a variety of federal regulatory authorities. Certain annuities and life insurance policies such as variable annuities and variable universal life insurance are regulated under the federal securities laws administered by the SEC. On June 30, 2020, the SEC’s Regulation Best Interest went into effect. Regulation Best Interest relates to the standard of conduct applicable to broker-dealers, investment advisers, and their representatives when making certain recommendations to

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retail customers. Specifically, a broker-dealer is required to act in the best interest of a retail customer when recommending any securities transaction or investment strategy involving securities to the retail customer. Regulation Best Interest also requires broker-dealers and investment advisers to provide each customer with a summary of the nature of the customer’s relationship with the investment professional, and provides a restriction on the use of the terms “adviser” and “advisor” by broker-dealers.

In addition, broker-dealers, insurance agencies and other financial institutions sell the Company’s annuities to employee benefit plans governed by provisions of the Employee Retirement Income Security Act (“ERISA”) and Individual Retirement Accounts (“IRA”) that are governed by similar provisions under the Internal Revenue Code (the “Code”). Consequently, our activities and those of the firms that sell the Company’s products are subject to restrictions that require ERISA fiduciaries to perform their duties solely in the interests of ERISA plan participants and beneficiaries, and that prohibit ERISA fiduciaries from causing a covered plan or retirement account to engage in certain prohibited transactions absent an exemption. Also, on December 31, 2020, the U.S. Department of Labor (“DOL”) issued its final investment advice prohibited transaction exemption, with a February 16, 2021 effective date. The final regulation confirmed the reinstatement of the traditional “five-part test” for determining fiduciary status and established a new prohibited transaction exemption that aligns with the SEC’s Regulation Best Interest.

There remains significant uncertainty surrounding the final form that these regulations may take and the impact they may have on our current distributors and sales of our life insurance policies and annuity contracts. In addition, the Company continues to incur expenses in connection with initial and ongoing compliance obligations with respect to these regulations and in the aggregate these expenses may be significant.

The federal securities laws to which certain of our life insurance policies and annuity contracts are subject contain regulatory restrictions and criminal, administrative, and private remedial provisions. From time to time, the SEC and the FINRA examine or investigate the activities of insurance companies, broker-dealers and investment advisers, including the Company’s affiliated broker-dealers and investment advisers. These examinations or investigations often focus on the activities of the registered representatives and registered investment advisers doing business through such entities and the entities’ supervision of those persons.

The Company is also subject to various federal laws and regulations intended to promote financial transparency and to identify and prevent money laundering and other financial crimes. Under these laws and regulations, the Company is required to maintain certain internal compliance practices, procedures, and controls for verifying the identity of its customers, monitoring for and reporting suspicious transactions, and responding to requests for information from regulatory authorities and law enforcement agencies.

Cyber security and Privacy Regulations

In response to the growing threat of cyber attacks several jurisdictions enacted cybersecurity measures, including the adoption of cybersecurity regulations that, among other things, would require insurance companies to establish and maintain a cybersecurity program and implement and maintain cybersecurity policies and procedures. On October 24, 2017, the NAIC adopted its Insurance Data Security Model Law (the “NAIC Model Law”), which is intended to serve as model legislation for states to enact in order to govern cybersecurity and data protection practices of insurers, insurance agents, and other licensed entities registered under state insurance laws. The NAIC Model Law is not an NAIC accreditation standard. As of December 31, 2020, eleven states (Alabama, Connecticut, Delaware, Indiana, Louisiana, Michigan, Mississippi, New Hampshire, Ohio, South Carolina, and Virginia) have adopted cybersecurity regulations that are based, at least in part, on the NAIC Model Law, and other states are considering adopting regulations based on the NAIC Model Law. Additionally, the DFS issued regulations governing cybersecurity requirements for financial services companies, which became effective in March 2017. The DFS regulations require insurance companies, among others, licensed in New York to assess their specific cyber risk profiles and design cybersecurity programs to address such risks, as well as file annually with DFS a program compliance certification pertaining to their compliance with DFS cybersecurity requirements. The Company continues to monitor whether the other states in which it conducts business, as well as federal governmental agencies, adopt data security laws or regulations.

The Company has implemented information security policies that are designed to address the security of the Company’s information assets, which include personally identifiable information (“PII”) and protected health information (“PHI”), as well as other proprietary and confidential information about the Company, its employees, customers, agents, affiliates, and business partners. Additionally, the Company has an information risk management committee that, among other things, reviews emerging risks and monitors regulatory requirements and industry standards relating to the security of the Company’s information assets, monitors the Company’s cybersecurity initiatives, and approves the Company’s cyber incident response plans. This committee meets regularly, and the Board of Directors receives reports regarding cybersecurity matters. Furthermore, as part of the Company’s information security program, the Company has included security features in its systems

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that are intended to protect the privacy and integrity of the Company’s information assets, including PII and PHI. Notwithstanding these efforts, cyber threats and related legal and regulatory standards applicable to the insurance industry are rapidly evolving, and the Company’s and the Company’s business partners’ and service providers’ systems may continue to be vulnerable to security breaches, viruses, programming errors, and other similar disruptive problems or incidents.

In addition to laws and regulations relating to cyber security, states have proposed or adopted broad privacy laws and regulations that apply to all types of businesses. In June 2018, California adopted the California Consumer Privacy Act (“CCPA”), which grants new data protections and privacy rights to California consumers, which was further expanded in 2020 under the California Consumer Privacy Rights Act (“CPRA”). The CPRA will become effective in January of 2023. As part of the Company’s customer privacy programs, the Company has included processes to respond to requests from consumers with respect to their rights under privacy laws and regulations such as the CCPA. In March 2021, Virginia adopted the Consumer Data Protection Act (the “VCDPA”), which imposes certain restrictions and requirements on businesses that collect consumer data for at least 100,000 consumers in Virginia. The Company continues to monitor whether the other states in which it conducts business, as well as federal governmental agencies, adopt additional customer privacy laws or regulations.

Other Regulation

Other types of regulation that could affect the Company and its subsidiaries include insurance company investment laws and regulations, state statutory accounting practices, tax laws, antitrust laws, minimum solvency requirements, enterprise risk requirements, state securities laws, federal privacy laws, technology and data regulations, insurable interest laws, federal anti-money laundering and anti-terrorism laws, employment and immigration laws and, because the Company owns and operates real property, state, federal, and local environmental laws. The Company may also be subject to regulations influenced by or related to international regulatory authorities or initiatives. PLC’s sole stockholder, Dai-ichi Life, is subject to regulation by the Japanese Financial Services Agency (“JFSA”). Under applicable laws and regulations, Dai-ichi Life is required to provide notice to or obtain the consent of the JFSA prior to taking certain actions or engaging in certain transactions, either directly or indirectly through its subsidiaries, including PLC, the Company, and their respective consolidated subsidiaries. Domestically, the NAIC may be influenced by the initiatives or regulatory structures or schemes of international regulatory bodies, and those initiatives or regulatory structures or schemes may not translate readily into the regulatory structures or schemes of the legal system (including the interpretation or application of standards by juries) under which U.S. insurers must operate. Changes in laws and regulations or in interpretations thereof, or to initiatives or regulatory structures or schemes of international regulatory bodies, which are applicable to the Company could have a significant adverse impact on the Company.

Additional issues related to regulation of the Company and its insurance subsidiaries are discussed in Item 1A, Risk Factors, and in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included herein.

Human Capital Resources

As of December 31, ~~2020~~2021, PLC and the Company had approximately 3,~~263~~585 employees, of which 3,~~177~~510 were full-time and 8670 were part-time employees. Included in the total were approximately 1,~~646~~430 employees in Birmingham, Alabama, of which 1,~~640~~413 were full-time and 612 were part-time employees. None of the Company’s employees are represented by a union and the Company is not a party to any collective bargaining agreements, and we have never experienced any business interruption as a result of labor disputes.

Diversity and Inclusion

The Company believes all people should have the opportunity to thrive. The Company embraces, respects, listens to, and values the diversity of our employees including our varied identities, traditions, heritages, experiences and perspectives. The Company acknowledges and honor the rights of all individuals to mutual respect and acceptance of others without biases based on differences of any kind. The Company aspires to create and maintain an environment that provides its employees an opportunity to fully participate in creating business success. The Company believes that its focus on Diversity and Inclusion gives the Company a competitive advantage, drives employee engagement, and enhances customer satisfaction. The Company is committed to strengthening its diversity and inclusion efforts by growing and developing its people, attracting diverse talent, and supporting strong, diverse communities. This is a significant effort and achieving the Company’s goals will take time.

As part of the Company’s overall governance structure to help it focus on learning, provide accountability, and effectively manage its Diversity and Inclusion work at the Company, the Company created a Diversity and Inclusion Advisory Group in 2018, comprised of employees and leaders across various levels and departments, and an Executive Leadership Team, comprised of our senior most leaders in the organization, including the Company’s CEO. The Advisory Group, with the support of its Executive Leadership Team, developed a three-year Diversity and Inclusion Roadmap, which was approved in 2019, and is currently being implemented. Additionally, in July 2019 the Company’s CEO signed the Action Pledge for Diversity &

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isInclusion. ~~currently~~In ~~being~~2021, ~~implemented.~~the ~~Additionally,~~Company inpiloted ~~July~~new ~~2019~~development ~~the~~programs ~~Company’s~~for ~~CEO~~emerging ~~signed~~leaders ~~the~~focused ~~Action~~on ~~Pledge~~developing ~~for~~a ~~Diversity~~robust &pipeline ~~Inclusion~~of diverse talent. In ~~2020~~addition, ~~all~~in ~~leaders~~2021 ofthe ~~people~~Company ~~participated~~sought into ~~training~~increase toemployee ~~support~~engagement ~~the~~in ~~Company’s~~diversity and inclusion efforts through its diversity month series.

Talent Attraction, Engagement, and Development

The Company believes its people are a critical component for the Company’s long-term success. The Company has strong values and a culture that supports its ability to attract, engage, and retain key talent. The Company actively seeks skillsets and capabilities to support its business and invest in development and succession planning, using a variety of experiences, assessments, feedback, and coaching to ensure the Company has a workforce and leaders prepared for today and tomorrow. The Company routinely engages its employees through its Protective Voices pulse surveys. The feedback the Company receives is reviewed by leadership, shared with employees, and used to create a dialogue that helps shape the Company’s culture and practices.

In 2020, the Company introduced new Leadership Principles in support of its efforts to further build and integrate leadership as a core capability at the Company. These principles enable a common view of leadership integrated with the Company’s aspirations, mission, and values to support its business strategy and future growth. In 2021, the Company introduced its Workplace Flexibility Guidelines to provide greater flexibility to employees further enhancing our ability to attract and retain talent. The guidelines provide for virtual, hybrid, and office work arrangements.

Compensation, Health, and Well-being

The Compensation and Management Succession Committee (the “Compensation Committee”) of PLC’s Board of Directors oversees and ensures the effective compensation of officers and key employees through salaries, incentive compensation and benefits that are internally equitable, externally competitive, and commensurate with the performance of the individual and the Company. The Committee periodically evaluates the Company’s compensation policies to ensure the incentives provided are appropriate, after considering the Company’s business plans, objectives, and risk management policies.

The Company provides various incentive and sales incentive programs for eligible employees to align individual compensation with the Company’s goals and attract and retain talent. These programs include annual cash-based incentive opportunities through the Employee Incentive Plan and Annual Incentive Plan, long-term incentive opportunities through the Long-Term Incentive Plan, individual sales incentive opportunities, and deferred compensation through the non-qualified Deferred Compensation Plan and non-qualified Excess Benefit Plan, as applicable.

The Company also provides employees with the resources to support and improve their well-being. The Company provides competitive benefit plans that deliver value and help employees navigate a complex health and well-being ecosystem. Most employees are covered by contributory major medical, dental, vision, group life, and long-term disability insurance plans. The cost of these benefits to the Company in ~~2020~~2021 was $~~21.7~~24 million. In addition, substantially all employees may participate in a defined benefit pension plan and 401(k) plan offered by PLC. PLC matches employee contributions to its 401(k) plan.

The Company is committed to providing a safe and healthy workplace for employees. For over 30 years, the Company has offered a robust and comprehensive physical and mental well-being program for employees. Depending on the office location, the Company offers access to an onsite gym, an onsite health clinic, ~~health screenings,~~ and other health benefits. The Company also maintains procedures for events such as fires, severe weather, medical emergencies, and active shooters, as well as other important information related to general workforce safety.

COVID-19 Response

Since early 2020, the Company actively implemented ~~procedures~~a number of safety protocols in accordance with guidelines from the Centers for Disease Control (“CDC”) and state and local governments, to safeguard its employee’s wellbeing. ToIn ~~help~~addition ~~support~~to ~~overall wellbeing and slow~~ the ~~spread of the virus, approximately 90% of the~~ Company’s ~~employees~~normal ~~are~~paid ~~now~~time ~~working~~off ~~remotely~~benefits, ~~and~~it ~~the~~has ~~Company~~in ~~provided~~place ~~additional~~a ~~tools~~COVID-19 ~~and~~Paid ~~technology~~Leave Policy to ~~support~~provide ~~their~~financial ~~transition.~~stability ~~For~~to ~~those employees still working in~~ the Company’s ~~offices,~~employees ~~the~~during ~~Company~~this ~~implemented~~period aof ~~daily~~uncertainty. ~~health~~In ~~screening system~~addition, ~~which~~the ~~must~~Company beprovided ~~successfully~~a ~~completed~~vaccine ~~prior~~incentive to ~~entering~~encourage ~~the~~all ~~office. In the office,~~ employees ~~are required~~ to ~~wear~~become ~~masks,~~fully ~~numerous hand sanitizing stations are available, and policies are in place that require social distancing~~vaccinated. InThe ~~addition to the~~ Company’s ~~normal~~will ~~paid~~continue ~~time~~to ~~off~~monitor ~~benefits,~~CDC itrecommendations ~~has~~and ~~also~~conditions ~~implemented~~around aour ~~new~~core ~~COVID-19~~sites ~~Paid~~and ~~Leave~~will ~~Policy~~modify torequirements ~~provide~~as ~~financial~~necessary ~~stability~~ to ~~the~~support ~~Company’s~~overall ~~employees~~wellbeing ~~during~~and ~~this~~slow ~~period~~the spread of ~~uncertainty~~the virus.

Intellectual Property

The Company relies on a combination of intellectual property laws, confidentiality procedures and policies, and contractual provisions to protect its brand and its intellectual property, which includes copyrights, trademarks, patents, domain

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names, and trade secrets. The success of the Company’s business depends on its continued ability to use and protect its intellectual property, including its trademark and service mark portfolio which is composed of both United States registered and common law trademarks and service marks, including the Company’s Protective name and logo. The Company’s intellectual property assets are valuable to the Company in maintaining its brand and marketing its products; thus, the Company maintains and protects its intellectual property assets from infringement and dilution.

Available Information

The Company files reports with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other reports as required. The Company is an electronic filer and the SEC maintains an internet site at https://www.sec.gov that contains the Company’s annual, quarterly, and current reports and other information filed electronically by the Company.

The Company makes available free of charge through its website, https://investor.protective.com, the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC. The information found on the Company’s website is not part of this or any other report filed with or furnished to the SEC.

The Company also makes available to the public current information, including financial information, regarding the Company and its affiliates on the Financial Information page of PLC’s website, www.protective.com. The Company encourages the media and others interested in the Company and its affiliates to review the information posted on PLC’s website. The information found on PLC’s website is not part of this or any other report filed with or furnished to the SEC.

The Company has not adopted its own code of ethics. However, PLC has adopted a Code of Business Conduct, which applies to all directors, officers and employees of PLC and all of its subsidiaries and affiliates, including the Company. The Code of Business Conduct incorporates a code of ethics that applies to the principal executive officer and all financial officers of the Company. The Code of Business Conduct is available on PLC’s website at https://investor.protective.com/leadership-and-governance/bod-and-governance/governance-overview/default.aspx.

Exemption from Reporting with the SEC under the Exchange Act

After the filing of this Annual Report on Form 10-K, the Company will rely on the exemption provided by Rule 12h-7 under the Exchange Act to suspend filing reports with the SEC under the Exchange Act. Rule 12h-7 exempts insurance companies from filing reports with the SEC under the Exchange Act when the insurance company issues certain types of securities that are registered under the Securities Act of 1933 and such products are also regulated under state law. Accordingly, for so long as the Company meets all of the qualifications under Rule 12h-7, following the filing of this Annual Report on Form 10-K, the Company will not file any further annual reports on Form 10-K, quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC.

Item 1A. Risk Factors

The operating results of companies in the insurance industry have historically been subject to significant fluctuations. The factors which could affect the Company’s future results include, but are not limited to, general economic conditions and known trends and uncertainties which are discussed more fully below.

Risks Related to the COVID-19 Pandemic

The ~~novel~~ coronavirus (COVID-19) global pandemic has adversely impacted the Company’s business, and the ultimate effect on its business, results of operations, and financial condition will depend on future developments that are highly uncertain, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

Beginning in 2020, the ~~global~~COVID-19 pandemic ~~related~~created toboth ~~the~~a ~~novel~~public ~~coronavirus,~~health ~~COVID-19,~~crisis ~~began~~in tothe ~~impact~~United ~~the~~States and worldwide ~~economy~~that ~~and~~impacted the Company’s results of operations. The pandemic disrupted people’s lives, pushed hospital systems to their capacity, created a higher risk of mortality, and negatively impacted the U.S. and global economy. Because of the size and breadth of this pandemic, all of the direct and indirect consequences of COVID-19 are not yet known and may not emerge for some time. The spread of COVID-19 ~~pandemic~~ has ~~created~~resulted ain ~~higher~~excess ~~risk~~deaths ofin ~~mortality, negatively impacted~~ the ~~U.S.~~population ~~and~~that ~~global~~can ~~economy,~~be ~~created~~both ~~significant~~directly ~~volatility~~ and ~~disruption~~indirectly inattributed ~~capital markets, significantly increased unemployment levels, and fueled concerns that it will lead~~ to athe ~~severe global recession~~virus. In addition, the pandemic ~~has~~prompted ~~resulted~~lockdowns in ~~temporary~~the ~~closures~~population, ofbusiness ~~many~~shutdowns, ~~businesses~~loss ~~and schools and the imposition~~ of ~~social~~jobs, ~~distancing~~ and ~~sheltering~~reduced insupply ~~place requirements in many states~~ and ~~local communities. As a result, the Company’s ability to sell products through its regular channels and the~~ demand ~~for~~of ~~its~~goods ~~products~~ and services ~~could be significantly impacted~~. The ~~extent~~rollout toof ~~which the~~ COVID-19 ~~pandemic~~vaccines ~~could~~throughout ~~continue~~2021 tomitigated ~~impact~~mortality ~~the~~risk ~~Company’s~~but ~~business,~~new ~~results~~COVID-19 ~~of operations~~variants, orparticularly ~~financial condition will depend on future developments which are highly uncertain and cannot be predicted, including~~ the ~~scope~~Delta and ~~duration~~Omicron ~~of the pandemic~~variants, ~~the~~are ~~efficacy~~still ofcausing ~~mass~~significant ~~vaccinations,~~surges ~~the~~in ~~impact of~~ COVID~~-19~~ ~~variants~~cases, ~~and actions taken by governmental authorities and other third parties in response to the pandemic.~~

Risks presented by the ongoing effects of the COVID-19 pandemic include the following:

•Premiums, Policy Fees, and Contractholder Liabilities. The impact of COVID-19 on general economic activity has and may continue to negatively impact the Company’s premiums, policy fees, other revenues, and its liabilities for certain life and annuity policy/contracts. The degree and type of the impact will depend on the extent and duration of the economic contraction, as well as potential equity market and interest rate volatility associated with the economic environment.

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~~•Claims~~hospitalizations, and ~~Claims~~deaths ~~Expense.~~in ~~As a result of~~ the ~~pandemic~~U.S., ~~and~~especially ~~ensuing~~among ~~conditions,~~ the ~~Company~~unvaccinated. ~~has~~mass ~~experienced,~~vaccinations ~~and~~also itled ~~may continue~~ to ~~experience,~~the anlifting ~~elevated~~of ~~incidence~~lockdowns and ~~level~~started ofa ~~life~~slow ~~insurance~~economic ~~claims~~recovery. The ~~Company~~resulting ~~expects~~increase ~~to incur higher claims expense~~ in ~~our~~consumer ~~life~~demand ~~insurance~~created ~~and~~significant ~~deferred~~challenges ~~annuity~~for ~~businesses,~~supply ~~partially~~chains ~~offset by lower life contingent payments in its payout annuity and structured settlement businesses,~~ as a result of ~~COVID-19~~labor ~~due to increases in mortality. In addition, the anticipated~~ and ~~unknown~~raw ~~risks~~material ~~related to COVID-19 may cause additional uncertainty in the process of estimating claims expense reserves. For example~~shortages, the behavior of claimants and policyholders may change in unexpected ways, and actions taken by governmental bodies, both legislative and regulatory, in reaction to COVID-19 and their related impacts are hard to predict. The Company is also subject to credit risk in our insurance operations (both with respect to policyholder receivables and reinsurance receivables) which ~~may be exacerbated in times of economic distress. A prolonged continuation of the pandemic or a significant and protracted increase in claims~~ could ~~have~~lead ato ~~material~~reduced ~~and~~earnings ~~adverse~~for ~~effect~~many ~~on our business, results of operations, or financial condition~~industries.

~~•Investments.~~ The ~~disruption~~extent into which the ~~financial markets related to~~ COVID-19 ~~has~~pandemic ~~and~~could ~~may~~ continue to ~~adversely~~impact ~~affect certain portions of~~ the Company’s ~~investment portfolio~~business, ~~specifically~~results ~~resulting~~of ~~in lower investment income and returns~~operations, ~~and~~or ~~lead~~financial tocondition ~~further~~will ~~impairments,~~depend ~~credit~~on ~~spread~~future ~~widening,~~developments ~~credit~~which ~~quality~~are ~~deterioration,~~highly ~~ratings~~uncertain ~~downgrades,~~and ~~equity~~cannot ~~market~~be ~~declines~~predicted, ~~and~~including the ~~need~~rate toand ~~establish~~long-term ~~additional~~efficacy ~~reserves~~of ~~for~~vaccinations, ~~potential~~the ~~losses~~impact ~~related~~of tonew ~~its~~COVID-19 ~~commercial~~variants, ~~mortgage~~Long ~~portfolio. Additionally~~COVID, ~~higher~~mortality ~~volatility~~effects inof the ~~equity~~pandemic ~~and~~indirectly ~~credit~~attributed ~~markets~~to ~~increases~~COVID-19, ~~hedging costs. There is uncertainty regarding future treasury rates~~ and ~~risk~~actions ~~spreads,~~taken ~~which~~by ~~may~~governmental ~~lead~~authorities ~~to lower investment returns~~ and ~~difficulty~~other ~~forecasting~~third ~~financial~~parties ~~results. Disruption~~ in ~~financial~~response ~~markets~~to ~~may~~the ~~also influence overall market liquidity and availability of assets for sale and purchase~~pandemic.

~~•Legislative~~Risks ~~and/or~~presented ~~Regulatory~~by ~~Action.~~the ~~Federal,~~ongoing ~~state,~~effects ~~and~~of ~~local government actions to address and contain~~ the ~~impact of~~ COVID-19 ~~may~~pandemic ~~adversely~~include ~~affect us. Many state insurance departments have required and some are requiring insurers to extend~~ the time allowed for premium payments to avoid the canceling of policies. While many of these consumer accommodations have already expired, they varied in requirements and effective dates, which make it difficult to anticipate exact financial impacts. If these extensions continue, premium waivers may significantly exceed the Company’s expectations, and its earnings may be negatively impacted. If policyholder lapse and surrender rates or premium waivers significantly exceed the Company’s expectations, the Company may need to change its assumptions, models, or reserves.following:

•~~Operational~~Premiums, ~~Disruptions~~Policy Fees, and ~~Heightened~~Contractholder ~~Cybersecurity Risks~~Liabilities. The ~~Company’s~~impact ~~operations~~of ~~could~~COVID-19 beon ~~disrupted~~general ifeconomic ~~key~~activity ~~members~~may ofnegatively impact the Company’s ~~senior~~premiums, ~~management~~policy ~~or a significant percentage of our workforce or the workforce of its independent distributors~~fees, ~~agents,~~other ~~brokers~~revenues, orand ~~service~~its ~~providers~~liabilities ~~are~~for ~~unable~~certain tolife ~~continue~~and toannuity ~~work because of illness, government directives, or otherwise~~policy/contracts. ~~Currently,~~The ~~approximately~~degree ~~90%~~and type of the ~~Company’s~~impact ~~employees~~will ~~are~~depend ~~working~~on ~~remotely~~the ~~with~~extent ~~only~~and aduration ~~limited number~~ of ~~employees~~the ~~working~~economic ~~at certain facilities. The current period of companywide remote work arrangements could introduce additional operational risk~~contraction, ~~including~~as ~~but~~well ~~not~~as ~~limited~~potential toequity ~~cybersecurity~~market ~~risks,~~ and ~~impair~~interest ~~the~~rate ~~Company’s~~volatility ~~ability~~associated towith ~~effectively~~the ~~manage~~economic ~~its business~~environment.

In•Claims ~~addition,~~and aClaims ~~significant~~Expense. ~~interruption~~As a result of the pandemic and ensuing conditions, the Company’s orhas ~~third-party~~experienced, ~~system~~and ~~capabilities~~it ~~could~~may ~~result~~continue into aexperience, ~~deterioration~~an elevated incidence and level of ~~its~~life ~~ability~~insurance claims. The Company expects to ~~write~~incur higher claims expense in our life insurance and ~~process~~deferred ~~new~~annuity ~~business~~businesses, ~~provide~~partially ~~customer~~offset ~~service,~~by ~~pay~~lower ~~claims~~life contingent payments in aits ~~timely~~payout ~~manner,~~annuity orand ~~perform~~structured ~~other~~settlement ~~necessary~~businesses, ~~administrative~~as ~~and~~a ~~business~~result ~~functions~~of COVID-19 related mortality. ~~Having~~In ~~shifted~~addition, the anticipated and unknown risks related to ~~remote~~COVID-19 ~~working~~may ~~arrangements~~cause additional uncertainty in the process of estimating claims expense reserves. For example, the ~~Company~~behavior isof ~~more~~claimants ~~dependent~~and onpolicyholders ~~remote~~may ~~internet~~change in unexpected ways, and ~~telecommunications~~actions ~~services~~taken by governmental bodies, both legislative and itregulatory, ~~potentially~~in ~~faces~~reaction ato ~~heightened~~COVID-19 and their related impacts are hard to predict. The Company is also subject to credit risk in our insurance operations (both with respect to policyholder receivables and reinsurance receivables) which may be exacerbated in times of ~~cybersecurity~~economic ~~attacks~~distress. A prolonged continuation of the pandemic or a significant and ~~data~~protracted ~~security~~increase ~~incidents~~in claims could have a material and adverse effect on our business, results of operations, or financial condition.

•~~Financial~~Investments. ~~Reporting~~The ~~and~~disruption ~~Controls.~~in ~~Currently,~~ the ~~Company~~financial ~~does~~markets ~~not~~related ~~expect~~to COVID-19 tohas ~~affect its ability to timely~~ and ~~accurately~~may ~~account~~in ~~for~~ the ~~assets and liabilities on its balance sheet; however, this could change in~~ future ~~periods.~~adversely ~~Market~~affect ~~dislocations,~~certain ~~decreases~~portions ~~in observable market activity, or unavailability~~ of ~~information arising, in each case, from~~ the ~~spread of COVID-19, may restrict the~~ Company’s ~~access~~investment toportfolio, ~~key~~resulting ~~inputs used to derive certain estimates and assumptions made~~ in ~~connection~~lower ~~with~~investment ~~financial~~income ~~reporting or otherwise. Restricted access to such inputs may make the Company’s financial statement balances~~ and ~~estimates~~returns, and ~~assumptions~~lead ~~used~~ to ~~run~~further ~~its~~impairments, ~~business~~credit ~~subject~~spread towidening, ~~greater~~credit ~~variability~~quality ~~and~~deterioration, ~~subjectivity.~~ratings ~~It is possible that the lingering effects of COVID-19 could cause the occurrence of what management would deem to be a triggering event that could~~downgrades, ~~under~~equity ~~certain~~market ~~circumstances~~declines, ~~cause~~and the ~~Company~~need to ~~perform~~establish anadditional ~~intangible~~reserves ~~asset impairment test and result in an impairment charge being recorded~~ for ~~that~~potential ~~period.~~losses ~~Although~~related ~~the~~to ~~Company has not experienced a negative effect on~~ its ~~internal~~commercial ~~controls~~mortgage ~~over~~loan ~~financial~~portfolio. ~~reporting due to COVID-19~~Additionally, ithigher ~~may~~volatility ~~experience a negative effect~~ in the ~~future.~~equity ~~Further,~~and ascredit ~~the~~markets ~~vast~~increases ~~majority~~hedging ofcosts. ~~the~~There ~~Company’s~~is ~~employees~~uncertainty ~~are~~regarding ~~currently~~future ~~working~~treasury ~~from~~rates ~~home,~~and ~~new~~risk ~~processes~~spreads, ~~procedures,~~which ~~and~~may ~~controls~~lead ~~could~~to belower ~~required~~investment toreturns ~~respond~~and todifficulty ~~changes~~forecasting infinancial ~~its~~results. ~~business~~Disruption ~~environment.~~in ~~Should~~financial ~~any~~markets ~~key~~may ~~employees~~also ~~become~~influence ~~ill~~overall ~~from~~market ~~COVID-19~~liquidity and ~~unable~~availability toof ~~work,~~assets ~~the~~for ~~Company’s~~sale ~~ability~~and ~~to operate its internal controls may be adversely affected~~purchase.

•~~Reliance~~Legislative onand/or Regulatory Action. Federal, state, and local government actions to address and contain the ~~Performance~~impact of ~~Third~~COVID-19 ~~Parties~~may adversely affect us. ~~The~~During ~~Company~~the ~~relies~~pandemic, onmany ~~outside~~state ~~parties~~insurance departments extended the time allowed for premium payments to avoid policy cancellations. While most of these consumer accommodations have expired, ~~including~~they ~~independent~~may ~~third-party~~be ~~distribution~~reinstated ~~channels~~upon a resurgence in cases, ~~data~~which ~~processing~~make ~~servicers~~it difficult to anticipate exact financial impacts. Premium waivers as a result of reinstated extensions may significantly exceed the Company’s expectations, and ~~investment~~its ~~fund~~earnings ~~managers~~may be negatively impacted. If policyholder lapse and surrender rates or premium waivers significantly exceed the Company’s expectations, ~~among~~the ~~others~~Company may need to change its assumptions, models, or reserves. Additionally, legislators in some states have introduced or plan to introduce bills that could affect the Company’s ability to underwrite based on an applicant’s COVID-19 vaccination status. While the Company does not collect this data, strict restrictions could negatively impact our future underwriting practices.

•Operational Disruptions and Heightened Cybersecurity Risks. The Company adopted a phased approach to return approximately 44% of its workforce to the office over the course of 2021, while the remaining 56% will continue offsite work arrangements permanently. The current period of transition in work arrangements could introduce additional operational risk, including but not limited to cybersecurity risks, and it could impair the Company’s ability to effectively manage its business. The Company continues to monitor the effects of COVID-19, including the spread of the Delta and Omicron variants, and will take that information into consideration for workforce planning.

In addition, a significant interruption of the Company’s or third-party system capabilities could result in a deterioration of its ability to write and process new business, provide customer service, pay claims in a timely manner, or perform other necessary administrative and business functions. With a partially remote workforce, the Company is more dependent on remote

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~~closely~~internet ~~monitors~~and ~~the~~telecommunications ~~business continuity activities of these third parties~~services, ~~successful implementation~~ and ~~execution~~it ofpotentially ~~their~~faces ~~business continuity strategies are largely outside of its control. If one or more of these third parties experience operational failures as~~ a ~~result~~heightened ofrisk ~~the impacts from the spread~~ of ~~COVID-19~~cybersecurity attacks and ~~governmental~~data ~~reactions~~security ~~thereto, or claim that they cannot perform due to a force majeure, the Company’s business, results of operations, or financial condition could be adversely impacted~~incidents.

~~Any~~Some ofstates ~~the~~have ~~above~~introduced ~~events~~or ~~could~~plan ~~cause, contribute~~ to, orintroduce ~~exacerbate~~bills ~~the~~that ~~risks and uncertainties enumerated in this report, and~~ could ~~materially adversely~~ affect the Company’s ~~business,~~ability ~~results~~to ofrequest ~~operations,~~ or ~~financial~~require ~~condition.~~COVID-19 ~~The~~vaccination ~~Company~~status ~~has~~of ~~implemented~~its ~~risk~~employees ~~management~~or ~~and~~potentially ~~business~~impose ~~continuity~~private ~~plans,~~rights ~~performed~~of ~~stress~~action ~~testing,~~in ~~and~~the ~~taken~~event ~~other~~that ~~precautions~~an ~~with~~individuals’ ~~respect to the~~ COVID-19 ~~global~~vaccination ~~pandemic~~status affects their employment. ~~However~~At this time, ~~such~~these ~~measures~~bills ~~may~~have not ~~adequately~~been ~~protect~~finalized, so the ~~Company’s~~degree ~~business~~to ~~from~~which ~~the~~they ~~full~~could ~~impacts~~impact of the ~~pandemic~~Company is unclear.

•Financial Reporting and Controls. Currently, the Company does not expect COVID-19 to affect its ability to timely and accurately account for the assets and liabilities on its balance sheet; however, this could change in future periods. Market dislocations, decreases in observable market activity, or unavailability of information arising, in each case, from the spread of COVID-19, may restrict the Company’s access to key inputs used to derive certain estimates and assumptions made in connection with financial reporting or otherwise. Restricted access to such inputs may make the Company’s financial statement balances and estimates and assumptions used to run its business subject to greater variability and subjectivity. It is possible that the lingering effects of COVID-19 could cause the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause the Company to perform an intangible asset impairment test and result in an impairment charge being recorded for that period. Further, as the Company’s office-based employees interact with employees working offsite, new processes, procedures, and controls could be required to respond to changes in its business environment.

•Reliance on the Performance of Third Parties. The Company relies on outside parties, including independent third-party distribution channels, data processing servicers, and investment fund managers, among others. While the Company closely monitors the business continuity activities of these third parties, successful implementation and execution of their business continuity strategies are largely outside of our control. If one or more of these third parties experience operational failures as a result of the impacts from the spread of COVID-19 and governmental reactions thereto, or claim that they cannot perform due to a force majeure, the Company’s business, results of operations, or financial condition could be adversely impacted.

Any of the above events could cause, contribute to, or exacerbate the risks and uncertainties enumerated in this report, and could materially adversely affect the Company’s business, results of operations, or financial condition. The Company has implemented risk management and business continuity plans, performed stress testing, and taken other precautions with respect to the COVID-19 global pandemic. However, such measures may not adequately protect the Company’s business from the full impacts of the pandemic

Risks Related to the Financial Environment

Interest rate fluctuations and sustained periods of low or high interest rates could negatively affect the Company’s interest earnings and spread income, or otherwise impact its business.

Significant changes in interest rates expose the Company to the risk of not earning anticipated interest on assets supporting products, or not realizing anticipated spreads between the interest rate earned on investments and the credited interest rates paid on in-force policies and contracts that have significant account balances. Both rising and declining interest rates as well as sustained periods of low interest rates could negatively affect the Company’s interest earnings and spread income.

Lower interest rates may also result in lower sales of certain of the Company’s life insurance and annuity products. Additionally, during periods of declining or low interest rates, certain previously-issued life insurance and annuity products may be relatively more attractive investments to consumers, resulting in increased premium payments on products with flexible premium features, repayment of policy loans, and increased persistency, or a higher percentage of insurance policies remaining in force from year to year during a period when the Company’s investments earn lower returns. Certain of the Company’s life insurance and annuity products guarantee a minimum credited interest rate, and the Company could become unable to earn its spread income or may earn less interest on its investments than it is required to credit to policyholders should interest rates decrease significantly and/or remain low for sustained periods. Additionally, the profitability of certain of the Company’s life insurance products that do not have significant account balances could be reduced should interest rates decrease significantly and/or remain low for sustained periods.

The Company’s expectations for future interest earnings and spreads are important components in amortization of ~~deferred acquisition costs (“~~DAC”) and ~~value of business acquired (“~~VOBA”), and significantly lower interest earnings or spreads may accelerate amortization, thereby reducing net income in the affected reporting period. Lower interest earnings or spreads may also result in increases to certain policyholder benefit reserves held for some of the Company’s ULuniversal life products.

Higher interest rates may create a less favorable environment for the origination of mortgage loans and decrease the investment income the Company receives in the form of prepayment fees, make-whole payments, and mortgage participation income. Higher interest rates would also adversely affect the fair value of fixed-income securities within the Company’s investment portfolio. Higher interest rates may also increase the cost of debt and other obligations of the Company having floating rate or rate reset provisions. During periods of increasing market interest rates, the Company may offer higher crediting rates on interest-sensitive products, such as universal life insurance and fixed annuities, and it may increase crediting rates on in-force products to keep these products competitive. In addition, rapidly-rising interest rates may cause increased policy surrenders, withdrawals from life insurance policies and annuity contracts, and requests for policy loans as policyholders and contract holders shift assets into higher yielding investments. Increases in crediting rates, as well as surrenders and withdrawals, could have an adverse effect on the Company’s financial condition and results of operations, including earnings, equity accumulated other comprehensive income (“AOCI”), and statutory risk-based capital ratios.

Additionally, the Company’s 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) and relationships between risk-adjusted and risk-free interest rates, market liquidity, and other factors. The effectiveness of the Company’s asset/liability management programs and procedures may be negatively affected whenever actual results differ from these assumptions. In general, the Company’s results of operations improve when the yield curve is positively sloped (i.e., when long-term interest rates are higher than short-term interest rates), and will be adversely affected by a flat or negatively-sloped curve.

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~~The~~Higher interest rates may create a less favorable environment for the origination of commercial mortgage loans and decrease the investment income the Company’s ~~investments~~receives ~~are~~in ~~subject~~the toform ~~market~~of prepayment fees, make-whole payments, and ~~credit~~commercial ~~risks~~mortgage loan participation income. ~~These~~Higher ~~risks~~interest rates could bealso ~~heightened~~adversely ~~during~~affect ~~periods~~the fair value of ~~extreme~~fixed-income ~~volatility~~securities within the Company’s investment portfolio and increase the cost of debt and other obligations of the Company having floating rate or ~~disruption~~rate reset provisions. During periods of increasing market interest rates, the Company may offer higher crediting rates on interest-sensitive products, such as universal life insurance and fixed annuities, and it may increase crediting rates on in-force ~~financial~~products to keep these products competitive. In addition, rapidly-rising interest rates may cause increased policy surrenders, withdrawals from life insurance policies and ~~credit~~annuity ~~markets~~contracts, and requests for policy loans as policyholders and contract holders shift assets into higher yielding investments. Increases in crediting rates, as well as surrenders and withdrawals, could have an adverse effect on the Company’s financial condition and results of operations, including earnings, equity AOCI, and statutory risk-based capital ratios.

~~Significant volatility or disruption in domestic or foreign credit markets~~Additionally, ~~including as a result of social or political unrest or instability domestically or abroad, could have several adverse impacts on either~~ the Company’s ~~financial~~asset/liability ~~condition~~management orprograms ~~results~~and ~~from~~procedures ~~operations.~~incorporate ~~The~~assumptions ~~Company’s~~about ~~invested~~the ~~assets~~relationship ~~and~~between ~~derivative~~short-term ~~financial~~and ~~instruments~~long-term ~~are~~interest ~~subject~~rates to(i.e., ~~risks~~the slope of ~~credit~~the ~~defaults~~yield curve) and ~~changes~~relationships inbetween ~~fair~~risk-adjusted ~~values~~and ~~which~~risk-free ~~could~~interest berates, ~~heightened~~market byliquidity, ~~volatility~~and orother ~~disruption~~factors. The ~~factors~~effectiveness ~~affecting~~of the ~~financial~~Company’s asset/liability management programs and ~~credit~~procedures ~~markets~~may ~~could~~be ~~lead~~negatively toaffected ~~credit~~whenever ~~losses~~actual inresults ~~the~~differ ~~Company’s~~from ~~investment~~these ~~portfolio~~assumptions.

The ~~value of the~~ Company’s ~~commercial~~is ~~mortgage~~subject ~~loan~~to ~~portfolio~~market ~~depends~~and incredit ~~part on the financial condition of the tenants occupying the properties that the Company has financed~~risks. ~~The~~These ~~value~~risks ofcould ~~the~~be ~~Company’s~~heightened ~~investment~~during ~~portfolio,~~periods ~~including its portfolio~~ of ~~government~~extreme ~~debt~~volatility ~~obligations, debt obligations of those entities with an express~~ or ~~implied~~disruption ~~governmental guarantee, and debt obligations of other issuers holding a large amount of such obligations, depends~~ in part on the ability of the issuers or guarantors of such debt to maintain their credit ratings and meet their contractual obligations. Factors that may affect the overall default rate on, and fair value of, the Company’s invested assets, derivative financial ~~instruments,~~ and ~~mortgage~~credit loans include interest rate levels, financial market performance, general economic conditions, and conditions affecting certain sectors of the economy, as well as particular circumstances affecting the individual tenants, borrowers, issuers, and guarantorsmarkets.

Significant ~~continued financial and credit market~~ volatility, ~~changes~~or disruption in ~~interest~~domestic ~~rates~~or ~~and~~foreign credit ~~spreads~~, ~~credit defaults~~capital, ~~real~~and ~~estate values, market illiquidity, declines in~~ equity ~~prices~~markets, ~~acts~~including ofas ~~corporate~~a ~~malfeasance,~~result ~~ratings downgrades~~ of ~~the~~social ~~issuers~~ or ~~guarantors~~political ofunrest ~~these~~or ~~investments,~~instability ~~and~~domestically ~~declines in general economic conditions and conditions affecting certain sectors of the economy, either alone~~ or ~~in combination~~abroad, could have aan ~~material~~ adverse impact in several ways on either the Company’s ~~results of operations,~~ financial condition, or ~~cash~~results ~~flows~~from ~~through~~operations. ~~realized~~The ~~losses,~~Company’s ~~changes~~invested inassets ~~the~~and ~~allowance~~derivative ~~for~~financial ~~expected~~instruments ~~credit~~are ~~losses,~~subject ~~changes~~to inrisks ~~unrealized~~of ~~loss~~credit ~~positions,~~defaults and ~~increased~~changes ~~demands~~in onfair ~~capital,~~values ~~including~~which ~~obligations~~could tobe ~~post~~heightened ~~additional~~by ~~capital~~volatility ~~and~~or ~~collateral~~disruption. InThe ~~addition,~~factors ~~market~~affecting ~~volatility can make it difficult for~~ the ~~Company~~financial toand ~~value~~credit ~~certain~~markets ofcould ~~its~~lead ~~assets, especially if trading becomes less frequent. Valuations may include assumptions or estimates that may have significant period-~~to~~-period~~ ~~changes~~credit ~~that~~and ~~could~~other ~~have~~losses anin ~~adverse impact on~~ the Company’s ~~results~~investment ~~of operations or financial condition~~portfolio.

~~Climate~~The ~~change~~Company’s ~~may~~exposure ~~adversely~~to ~~affect~~these ~~our~~markets ~~investment~~presents ~~portfolio.~~a number of risks including:

~~Climate~~•The ~~change~~fair ~~regulation~~value ~~and market forces reacting to climate change may affect the prospects~~ of ~~companies and other entities whose securities~~ the Company’s ~~holds~~invested assets, orderivative ~~its~~financial ~~willingness~~instruments, toand ~~continue~~commercial tomortgage ~~hold~~loans ~~their securities. It~~ may ~~also~~be ~~impact~~affected ~~other~~by ~~counterparties,~~interest ~~including~~rate ~~reinsurers~~levels, ~~and~~financial ~~affect~~market ~~the~~performance, ~~value~~general ofeconomic ~~investments~~conditions, ~~including~~and ~~real~~conditions ~~estate~~affecting ~~investments~~certain ~~the~~sectors ~~Company~~of ~~holds~~the oreconomy, ~~manage~~as ~~for~~well ~~others.~~as ~~The~~particular ~~Company~~circumstances ~~cannot~~affecting ~~predict~~ the ~~long-term~~individual ~~impacts~~tenants, ~~from~~borrowers, ~~climate~~issuers, ~~change~~and ~~or related regulation or market impact~~guarantors.

~~The~~•Changes ~~elimination~~in ~~of LIBOR may adversely affect the~~ interest rates on and ~~value~~credit ofspreads ~~certain~~could ~~derivatives~~increase ~~and~~unrealized ~~floating~~losses ~~rate~~in ~~securities~~ the Company’s ~~holds~~investment portfolio and ~~floating~~could ~~rate~~cause ~~securities~~market ~~the~~price ~~Company has issued, the value~~ and ~~profitability~~cash offlow ~~certain~~variability ~~real~~in ~~estate lending and other activities~~ the Company’s ~~conducts,~~fixed-income ~~and any other assets or liabilities whose value is tied to LIBOR~~instruments.

~~Actions~~•Significant byvolatility ~~regulators~~and ~~have~~lack ~~resulted in the establishment~~ of ~~alternative~~liquidity ~~reference rates to LIBOR~~ in ~~most~~the ~~major~~credit ~~currencies.~~markets Oncould ~~July~~cause ~~27,~~issuers ~~2017,~~of the ~~U.K.~~fixed-income ~~Financial~~securities ~~Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. However, it remains unclear if, how and~~ in ~~what form, LIBOR will continue to exist. The U.S. Federal Reserve, based on~~ the ~~recommendations of the New York Federal Reserve~~Company’s Alternative Reference Rate Committee (constituted of major derivative market participants and their regulators), has begun publishing a Secured Overnight Financing Rate (“SOFR”) which is intended to replace U.S. dollar LIBOR, and SOFR-based investment ~~products~~portfolio ~~have been issued in the U.S. Proposals for alternative reference rates for other currencies have also been announced or have already begun publication. Markets are slowly developing in response~~ to ~~these~~default new rates and questions around liquidity in these rates and how to appropriately adjust these rates to eliminate any economic value transfer at the time of transition remain a significant concern for us and others in the marketplace. The effect of any changes or reforms to LIBOR or discontinuation of LIBOR on ~~new~~either orprincipal ~~existing financial instruments to which the Company has exposure~~ or ~~the~~interest ~~activities~~payments ~~in its businesses will vary depending~~ on ~~(1)~~these existing fallback provisions in individual contracts and (2) whether, how, and when industry participants develop and widely adopt new reference rates and fallbacks for both legacy and new products or instruments. Accordingly, it is difficult to predict the full impact of the transition away from LIBOR on certain derivatives and floating rate securities the Company holds, securities the Company has issued, real estate lending, and other activities the Company conducts, and any other assets or liabilities, as well as contractual rights and obligations, whose value is tied to LIBOR. ~~The value or profitability of these products and instruments may be adversely affected.~~

•The Company’s statutory surplus is impacted by widening credit spreads as a result of the accounting for the assets and liabilities on its fixed MVA annuities. Volatile credit markets could result in statutory separate account asset market value losses.

•Volatility or disruption in the credit markets could impact the Company’s ability to efficiently access financial solutions for purposes of issuing long-term debt for financing purposes, its ability to obtain financial solutions for purposes of supporting certain traditional and UL insurance products for capital management purposes, or result in an increase in the cost of existing securitization structures.

•When the credit and capital markets are disrupted and confidence is eroded the Company may not be able to borrow money, including through the issuance of debt securities, or the cost of borrowing or raising capital may be prohibitively high. If the Company’s internal sources of liquidity are inadequate during such periods, the Company could suffer negative effects from not being able to borrow money, or from having to do so on unfavorable terms. The negative effects could include being forced to sell assets at a loss, a lowering of the Company’s credit ratings and the financial strength ratings of its insurance subsidiaries, and the possibility that customers, lenders, ratings agencies, or regulators develop a negative perception of the Company and its financial prospects.

•Volatility in equity markets may deter prospective purchasers of variable life and annuity products and fixed annuity products that have returns linked to the performance of equity markets and may cause some existing customers to withdraw cash values or reduce investments in those products.

•Equity market volatility can affect the profitability of annuity products with riders, including the estimated cost of providing GMDB and GLWB that incorporate various assumptions about the overall performance of equity markets over certain time periods.

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~~ICE~~•Periods ~~Benchmark~~of ~~Administration~~significant ~~(“IBA”),~~and ~~the~~sustained ~~administrator~~downturns ofin ~~LIBOR,~~equity ~~announced~~markets onor ~~November~~increased ~~30,~~equity ~~2020~~market ~~that~~volatility itcould isresult ~~seeking~~in ~~consultation~~an onincrease ~~its~~in ~~intention~~the tovaluation ~~cease~~of ~~publication~~the offuture ~~several~~policy ~~key~~benefit ~~U.S.~~or ~~dollar~~policyholder ~~LIBOR~~account ~~rates~~balance ~~following~~liabilities ~~June~~associated ~~30,~~with ~~2023.~~such products.

On•The ~~December~~rate 4,of ~~2020,~~amortization ~~IBA published a consultation on its intention to cease publication~~ of ~~one~~DAC ~~week~~ and ~~two month USD LIBOR settings immediately following~~ the ~~LIBOR~~cost ~~publication~~of onproviding ~~December~~GMDB ~~31, 2021~~ and ~~the overnight and 1-~~GLWB, ~~3-,~~which 6-incorporate ~~and~~equity ~~12-month~~market ~~USD~~performance ~~LIBOR settings immediately following the LIBOR publication on June 30~~assumptions, ~~2023.~~could ~~The~~increase ~~consultation~~if ~~closed~~equity onmarket ~~January~~performance ~~25, 2021 and the IBA~~ is ~~expected~~worse tothan ~~share results of the consultation with the Financial Conduct Authority (the “FCA”) and to publish a feedback statement summarizing responses from the consultation in short order~~assumed. The FCA issued a statement in support of the IBA’s USD LIBOR consultation. If the IBA’s plan for USD LIBOR publication is implemented, LIBOR rates for substantially all of the Company’s contracts with exposure to LIBOR would cease publication after June 30, 2023. At this time, it is not possible to predict the implementation of any other reforms to LIBOR that may be enacted in the UK or elsewhere.

~~The~~•Market ~~Alternative~~volatility ~~Reference~~can ~~Rate~~make ~~Committee~~it ofdifficult ~~the~~for ~~New York office of~~ the ~~Board~~Company ofto ~~Governors~~value ofcertain ~~the Federal Reserve (“ARRC”), and the International Swaps and Derivatives Association (“ISDA”), have taken significant steps toward the development~~ of ~~consensus-based~~its ~~fallbacks and alternatives to LIBOR~~assets, ~~which~~especially ~~appear constructive for end-users, such as life insurers. The fallback proposals are intended to minimize disruptions~~ if ~~LIBOR~~trading isbecomes noless ~~longer usable~~frequent. ~~In addition~~Additionally, ~~the~~valuations ~~ISDA~~may ~~has~~include ~~amended~~assumptions ~~and/~~or ~~provided~~estimates a means for amendment through protocol of its applicable standard documentation to implement fallbacks for certain key interbank offered rates (“IBORs”). The fallbacks apply if enumerated temporary, permanent and pre-cessation triggers relating to the relevant IBOR occur. There can be no assurance, however, that ~~the alternative rates and fallbacks will be effective at preventing or mitigating disruption as a result of the transition. Should such disruption occur, it~~ may ~~adversely~~have ~~affect,~~significant ~~among other things, (1) the trading market for LIBOR~~period-~~based securities, including those held in the Company’s investment portfolio, (2) the market for derivative instruments, including those that the Company uses~~ to-period ~~achieve its hedging objectives, and (3) the Company’s ability to issue funding agreements bearing a floating rate of interest~~changes.

~~Credit~~In ~~market~~addition, ~~volatility~~financial ormarkets ~~disruption~~may ~~could~~be adversely ~~impact~~affected by the ~~Company’s~~current ~~financial~~or ~~condition~~anticipated impact of military conflict, including escalating military tension between Russia and Ukraine, terrorism or ~~results~~other ~~from~~geopolitical ~~operations~~events.

~~Changes~~The inrisks ~~interest~~described ~~rates~~above ~~and credit spreads~~ could ~~cause~~have ~~market~~a ~~price~~material ~~and~~adverse ~~cash~~impact ~~flow~~on ~~variability in~~ the ~~fixed-income instruments in the~~ Company’s ~~investment~~results ~~portfolio. A widening~~ of ~~credit~~operations, ~~spreads~~financial ~~will~~condition, ~~increase~~statutory ~~the~~capital ~~unrealized~~ratios, ~~losses~~risk-based incapital ~~the~~ratios, ~~Company’s~~cash ~~investment~~flows ~~portfolio.~~through ~~Significant~~realized ~~volatility~~losses, ~~and~~the ~~lack~~allowance offor ~~liquidity~~expected ~~in the~~ credit ~~markets~~losses, ~~could~~unrealized ~~cause~~loss ~~issuers~~positions, ofand ~~the~~may ~~fixed-income~~cause ~~securities~~increased indemands ~~the Company’s investment portfolio to default~~ on ~~either principal or interest payments on these securities. Additionally~~capital, ~~market~~including ~~price~~obligations ~~valuations~~to ~~may~~post ~~not~~additional ~~accurately~~capital ~~reflect~~and ~~the underlying expected cash flows of securities within the Company’s investment portfolio~~collateral.

~~The~~Climate ~~Company’s~~change ~~statutory~~and ~~surplus~~related islegislative ~~also impacted by widening credit spreads as a result of the accounting for the assets~~ and ~~liabilities~~regulatory oninitiatives ~~its~~may ~~fixed~~materially ~~market~~affect ~~value adjusted (“MVA”) annuities. Statutory separate account assets supporting~~ the ~~fixed MVA annuities are recorded at fair value. In determining the statutory reserve for some fixed MVA annuities, the~~ Company’s isbusiness ~~required~~and tomay ~~use~~adversely ~~current~~affect ~~crediting~~our rates based on U.S. Treasuries. In many capital market scenarios, current crediting rates based on U.S. Treasuries are highly correlated with market rates implicit in the fair value of statutory separate account assets. As a result, the change in the statutory reserve from period to period will likely substantially offset the change in the fair value of the statutory separate account assets. However, in periods of volatile credit markets, actual credit spreads on investment ~~assets may increase sharply for certain sub-sectors of the overall credit market, resulting in statutory separate account asset market value losses~~portfolio. Credit spreads are not consistently fully reflected in crediting rates based on U.S. Treasuries, and the calculation of statutory reserves will not substantially offset the change in fair value of the statutory separate account assets resulting in reductions in statutory surplus. This situation would result in the need to devote significant additional capital to support fixed MVA annuity products.

~~The~~There ~~ability~~are ofconcerns that the ~~Company~~increased tofrequency ~~implement~~and ~~financing~~severity ~~solutions~~of ~~designed~~weather-related tocatastrophes ~~fund~~and aother ~~portion~~losses, ofsuch ~~statutory~~as ~~reserves~~wildfires, onincurred ~~both~~by the ~~traditional~~industry ~~and~~in ~~universal~~recent ~~life~~years ~~blocks~~is indicative of ~~business~~changing isweather ~~dependent~~patterns, ~~upon~~whether ~~factors such~~ as ~~the~~a ~~ratings~~result of ~~the~~global ~~Company,~~climate ~~the~~change ~~size~~caused ofby ~~the~~human ~~blocks~~activities ofor ~~business affected~~otherwise, ~~the~~which ~~mortality~~could ~~experience~~cause ofsuch ~~the~~events ~~Company,~~to ~~the credit markets, and other factors~~persist. The ~~Company~~global ~~cannot~~business ~~predict~~community ~~the~~has ~~continued~~increased ~~availability~~its ofpolitical ~~such~~and ~~solutions~~social orawareness surrounding the ~~form~~issue, ~~that~~and the ~~market~~United ~~may~~States ~~dictate.~~has Toentered ~~the~~into ~~extent~~international ~~that~~agreements ~~such~~in ~~financing~~an ~~solutions~~attempt ~~were~~to ~~desired~~reduce ~~but~~global ~~are~~temperatures, ~~not~~such ~~available,~~as reentering the ~~Company’s~~Paris ~~financial~~Agreement. ~~position~~Further, ~~could~~the beU.S. ~~adversely~~Congress, ~~affected~~state ~~through~~legislatures ~~impacts~~and ~~including,~~federal ~~but~~and ~~not~~state ~~limited~~regulatory agencies continue to, ~~higher~~propose ~~borrowing~~numerous ~~costs,~~initiatives ~~surplus~~to ~~strain,~~supplement ~~lower~~the ~~sales~~global ~~capacity,~~effort ~~and~~to ~~possibly~~combat ~~reduced~~climate ~~earnings~~change.

The Company cannot predict how legal, regulatory and social responses to concerns about global climate change will impact its business or the value of our investments. Climate change regulation and market forces reacting to climate change may affect the prospects of companies and other entities whose securities we hold, or our willingness to continue to hold their securities. It may also impact other counterparties, including reinsurers, and affect the value of investments, including real estate investments we hold or manage for others. We cannot predict the long-term impacts on us from climate change or related regulation or market impact.

The elimination of LIBOR may adversely affect the interest rates on and value of certain derivatives and floating rate securities we hold and floating rate securities we have issued, the value and profitability of certain real estate lending and other activities we conduct, and any other assets or liabilities whose value is tied to LIBOR.

Actions by regulators have resulted in the establishment of alternative reference rates to LIBOR in most major currencies. On July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. On March 5, 2021, the IBA announced that it will cease the publication of one week and two-month U.S. Dollar LIBOR and all non-USD (GBP, EUR, CHF and JPY) LIBOR settings at the end of December 2021, but will extend the publication of the remaining U.S. Dollar LIBOR settings (overnight and one, three, six and 12 month U.S. Dollar LIBOR) until the end of June 2023. U.S. bank regulators have advised banks to cease writing, subject to certain limited exceptions, new U.S. Dollar LIBOR contracts by the end of 2021 and the New York Federal Reserve’s ARCC has identified the SOFR as the recommended risk-free alternative rate for USD LIBOR. The extended cessation date for most USD LIBOR tenors will allow for more time for existing legacy USD LIBOR contracts to mature and provide additional time to continue to prepare for the transition from LIBOR on certain derivatives and floating rate securities the Company holds, securities the Company has issued, real estate lending, and other activities the Company conducts, and any other assets or liabilities, as well as contractual rights and obligations, whose value is tied to LIBOR. The value or profitability of these products and instruments may be adversely affected.

The Company uses LIBOR and other interbank offered rates as interest reference rates in certain of its financial instruments. Existing contract fallback provisions, and whether, how, and when the Company and others develop and adopt alternative reference rates, will influence the effect of any changes to or discontinuation of LIBOR on the Company. The Company is identifying, assessing and monitoring market and regulatory developments, assessing agreement terms, and evaluating operational readiness. The Company is utilizing the International Swaps and Derivatives Association, Inc. (“ISDA”) 2020 IBOR Fallbacks Protocol to address the transition from LIBOR and other interbank offered rates to other risk-free rates in

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~~Disruption~~its ofOTC bilateral derivatives contracts governed under ISDA Master Agreements with trading counterparties. The Company also monitors the ~~capital~~Financial Accounting Standards Board’s, and ~~credit~~U.S. ~~markets~~Treasury ~~could~~Department’s ~~negatively~~updates ~~affect~~on the accounting and tax implications of reference rate reform. The Company’s ~~ability~~continues to ~~meet~~assess current and alternative reference rates’ merits, limitations, risks and suitability for its ~~liquidity~~investment and ~~financing~~insurance ~~needs~~processes.

The Company needs liquidity to meet its obligations to its policyholders and its debt holders, to pay its operating expenses, interest on our debt and dividends on our capital stock, to provide our subsidiaries with cash or collateral, maintain our securities lending activities and to replace certain maturing liabilities. Volatility or disruption in the credit markets could also impact the Company’s ability to efficiently access financial solutions for purposes of issuing long-term debt for financing purposes, its ability to obtain financial solutions for purposes of supporting certain traditional and UL insurance products for capital management purposes, or result in an increase in the cost of existing securitization structures. Without sufficient liquidity, we could be forced to curtail our operations and limit our investments, and our business and financial results may suffer. The Company’s sources of liquidity include insurance premiums, annuity considerations, deposit funds, cash flow from investments and assets, and other income from its operations. In normal credit and capital market conditions, the Company’s sources of liquidity also include a variety of short-term and long-term borrowing arrangements, including issuing debt securities.

The Company’s business is dependent on the capital and credit markets, including confidence in such markets. When the credit and capital markets are disrupted and confidence is eroded the Company may not be able to borrow money, including through the issuance of debt securities, or the cost of borrowing or raising capital may be prohibitively high. If the Company’s internal sources of liquidity are inadequate during such periods, the Company could suffer negative effects from not being able to borrow money, or from having to do so on unfavorable terms. The negative effects could include being forced to sell assets at a loss, a lowering of the Company’s credit ratings and the financial strength ratings of its insurance subsidiaries, and the possibility that customers, lenders, ratings agencies, or regulators develop a negative perception of the Company and its financial prospects, which could lead to further adverse effects on the Company.

Equity market volatility could negatively impact the Company’s business.

Volatility in equity markets may deter prospective purchasers of variable life and annuity products and fixed annuity products that have returns linked to the performance of equity markets and may cause some existing customers to withdraw cash values or reduce investments in those products. The amount of policy fees received from variable products is affected by the performance of the equity markets, increasing or decreasing as markets rise or fall. Decreases in policy fees could materially and adversely affect the profitability of our variable annuity products.

Equity market volatility can also affect the profitability of annuity products with riders. The estimated cost of providing guaranteed minimum death benefits (“GMDB”) and guaranteed living withdrawal benefits (“GLWB”) incorporates various assumptions about the overall performance of equity markets over certain time periods. Periods of significant and sustained downturns in equity markets or increased equity market volatility could result in an increase in the valuation of the future policy benefit or policyholder account balance liabilities associated with such products. While these liabilities are hedged, there still may be a possible resulting negative impact to net income and to the statutory capital and risk-based capital ratios of the Company and its insurance subsidiaries.

The amortization of DAC relating to annuity products and the estimated cost of providing GMDB and GLWB incorporate various assumptions about the overall performance of equity markets over certain time periods. The rate of amortization of DAC and the cost of providing GMDB and GLWB could increase if equity market performance is worse than assumed.

The Company’s use of derivative financial instruments within its risk management strategy may not be effective or sufficient.

The Company uses derivative financial instruments within its risk management strategy to mitigate risks to which it is exposed, including risks related to credit and equity markets, interest rate levels, foreign exchange, and volatility on its fixed indexed annuity and variable annuity products and associated guaranteed benefit features. The Company may also use derivative financial instruments within its risk management strategy to mitigate risks arising from its exposure to investments in individual issuers or sectors of issuers and to mitigate the adverse effects of interest rate levels or volatility on its overall financial condition or results of operations.

These derivative financial instruments may not effectively offset the changes in the carrying value of the exposures due to, among other things, the time lag between changes in the value of such exposures and the changes in the value of the derivative financial instruments purchased by the Company, extreme credit and/or equity market and/or interest rate levels or volatility, contract holder behavior that differs from the Company’s expectations, and basis risk.

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The use of derivative financial instruments by the Company generally to hedge various risks that impact GAAP earnings may have an adverse impact on the level of statutory capital and risk-based capital ratios because earnings are recognized differently under GAAP and statutory accounting methods. The Company may also choose not to hedge, in whole or in part, these or other risks that it has identified, due to, for example, the availability and/or cost of a suitable derivative financial instrument. In addition, the Company may fail to identify risks, or the magnitude of risks, to which it is exposed. The derivative financial instruments used by the Company in its risk management strategy may not be properly designed, may not be properly implemented as designed and/or may be insufficient to hedge the risks in relation to the Company’s obligations. The Company is subject to the risk that its derivative counterparties or clearinghouse may fail or refuse to meet their obligations to the Company, which may result in associated derivative financial instruments becoming ineffective or inefficient.

The above factors, either alone or in combination, may have a material adverse effect on the Company’s financial condition and results of operations.

The Company’s ability to grow depends in large part upon the continued availability of capital.

The Company deploys significant amounts of capital to support its sales and acquisitions efforts. Although the Company believes it has sufficient capital to fund its immediate capital needs, the amount of capital available can vary significantly from period to period due to a variety of circumstances, some of which are not predictable or within the Company’s control. Furthermore, our sole shareowner is not obligated to provide us with additional capital. A lack of sufficient capital could have a material adverse impact on the Company’s financial condition and/or results of operations.

The Company could be forced to sell investments at a loss to cover policyholder withdrawals.

Many of the products offered by the Company allow policyholders and contract holders to withdraw their funds under defined circumstances. The Company manages its liabilities and configures its investment portfolios so as to provide and maintain sufficient liquidity to support expected withdrawal demands and contract benefits and maturities. While the Company owns a significant amount of liquid assets, a certain portion of its assets are relatively illiquid. If the Company experiences unexpected withdrawal or surrender activity, it could exhaust its liquid assets and be forced to liquidate other assets, perhaps at a loss or on other unfavorable terms. If the Company is forced to dispose of assets at a loss or on unfavorable terms, it could have an adverse effect on the Company’s financial condition, the degree of which would vary in relation to the magnitude of the unexpected surrender or withdrawal activity.

Difficult general economic conditions could materially adversely affect the Company’s business and results of operations.

The Company’s business and results of operations could be materially affected by difficult general economic conditions. Stressed economic conditions and volatility and disruptions in capital markets, particular markets or financial asset classes can have an adverse effect on the Company due to the size of the Company’s investment portfolio and the sensitive nature of insurance liabilities to changing market factors. Disruptions in one market or asset class can also spread to other markets or asset classes. Volatility in financial markets can also affect the Company’s business by adversely impacting general levels of economic activity, employment and customer behavior.

Like other financial institutions, and particularly life insurers, the Company may be adversely affected by these conditions. The presence of these conditions could have an adverse impact on the Company by, among other things, decreasing demand for its insurance and investment products, and increasing the level of lapses and surrenders of its policies. The Company and its subsidiaries could also experience additional ratings downgrades from ratings agencies, unrealized losses, significant realized losses, impairments in its investment portfolio, and charges incurred as a result of mark-to-market and fair value accounting principles. If general economic conditions become more difficult, the Company’s ability to access sources of capital and liquidity may be limited.

The Company could be adversely affected by an inability to access its credit facility or FHLB lending.

The Company relies on its credit facility as a potential source of liquidity. The availability of these funds could be critical to the Company’s credit and financial strength ratings and its ability to meet obligations, particularly when alternative sources of credit or liquidity are either difficult to access or costly. The availability of the Company’s credit facility is dependent in part on the ability of the lenders to provide funds under the facility. The Company’s credit facility contains various affirmative and negative covenants and events of default, including covenants requiring the Company to maintain a ~~specified minimum consolidated net worth. The Company’s right to make borrowings under the facility is subject to the~~

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specified minimum consolidated net worth. The Company’s right to make borrowings under the facility is subject to the fulfillment of certain conditions, including its compliance with all covenants. The Company’s failure to comply with the covenants in the credit facility could restrict its ability to access this credit facility when needed. In addition, ~~the Company and~~ certain subsidiaries of the Company are members of the FHLB of Cincinnati, the FHLB of New York, and the FHLB of Atlanta. Membership provides ~~the Company and~~ these subsidiaries with access to FHLB financial services, including advances that provide an attractive funding source for short-term borrowing and for the sale of funding agreements. The ability of ~~the Company or~~ its subsidiaries to access liquidity from the FHLB is impacted by other factors that are dependent on market conditions or policies established by the FHLB. Fluctuations in the fair value of collateral can adversely impact available borrowing capacity. The extent to which membership or the FHLB services are available could be impacted by legislative or regulatory action at the state or federal level.

The Company’s inability to access some or all of the line of credit under the credit facility or its subsidiaries inability to access some or all of the FHLB financial services could lead to downgrades in our credit and financial strength ratings and have a material adverse effect on its liquidity and/or results of operations.

The amount of statutory capital or risk-based capital that the Company has and the amount of statutory capital or risk-based capital that it must hold to maintain its financial strength and credit ratings and meet other requirements can vary significantly from time to time and such amounts are sensitive to a number of factors outside of the Company’s control.

Insurance regulators have established regulations that provide minimum capitalization requirements based on risk-based capital formulas for life and property and casualty companies. The risk-based capital formula for life insurance companies establishes capital requirements relating to insurance, business, asset, interest rate, and certain other risks. The risk-based capital formula for property and casualty companies establishes capital requirements relating to asset, credit, underwriting, and certain other risks.

In any particular year, statutory surplus amounts and risk-based capital ratios may increase or decrease depending on a variety of factors, including, but not limited to, the amount of statutory income or losses generated by the Company and its insurance subsidiaries, the amount of additional capital the Company and its insurance subsidiaries must hold to support business growth, changes in the Company’s statutory reserve requirements, the Company’s ability to secure capital market solutions to provide statutory reserve relief, changes in equity market levels, the value of certain fixed-income and equity securities in its investment portfolio, the credit ratings of investments held in its portfolio, including those issued by, or explicitly or implicitly guaranteed by, a government, the value of certain derivative instruments, changes in interest rates, foreign currency exchange rates or tax rates, credit market volatility, changes in consumer behavior, and changes to the NAIC risk-based capital formulas. Most of these factors are outside of the Company’s control.

~~Proposed~~The ~~changes~~Company’s tofinancial strength and credit ratings are significantly influenced by the ~~NAIC’s~~statutory surplus amounts and risk-based capital ~~formula~~ratios ~~that~~of ~~are~~its ~~currently~~insurance ~~under~~company ~~consideration~~subsidiaries. ~~would~~Rating ~~update~~organizations ~~the~~may ~~factors~~implement ~~used~~changes to ~~calculate~~their ~~required~~internal ~~capital~~models ~~for~~that ~~bonds,~~have ~~real~~the ~~estate,~~effect ~~and~~of ~~life~~increasing ~~insurance~~or ~~risk.~~decreasing ~~While~~the amount of statutory capital the ~~extent~~Company ~~and~~must ~~timing~~hold ofin ~~these~~order ~~proposed~~to ~~changes~~maintain ~~are~~its ~~unknown,~~current ifratings. ~~adopted~~In addition, ~~they~~rating ~~would~~agencies ~~likely~~may ~~increase~~downgrade the investments held in the Company’s ~~required~~portfolio, ~~capital~~which ~~and~~could ~~decrease~~result ~~the~~in ~~statutory~~a ~~risk-based~~reduction ~~capital ratios~~ of the Company’s capital and surplus and/or its ~~subsidiaries~~risk-based capital ratio.

PLC and the Company’s financial strength and credit ratings are significantly influenced by the statutory surplus amounts and risk-based capital ratios of its insurance company subsidiaries. Rating organizations may implement changes to their internal models that have the effect of increasing or decreasing the amount of statutory capital the Company must hold in order to maintain its current ratings. In addition, rating agencies may downgrade the investments held in the Company’s portfolio, which could result in a reduction of the Company’s capital and surplus and/or its risk-based capital ratio.

In scenarios of equity market declines, the amount of additional statutory reserves or risk-based capital the Company is required to hold for its variable product guarantees may increase at a rate greater than the rate of change of the markets. Increases in reserves or risk-based capital could result in a reduction to the Company’s capital, surplus, and/or risk-based capital ratio. Also, in environments where there is not a correlative relationship between interest rates and spreads, the Company’s market value adjusted annuity product can have a material adverse effect on the Company’s statutory surplus position.

A ratings downgrade or other negative action by a rating organization could adversely affect the Company.

Various rating organizations review the financial performance and condition of insurers, including the Company’s ~~and its~~ insurance subsidiaries, and publish their financial strength ratings as indicators of an insurer’s ability to meet policyholder and contract holder obligations. While financial strength ratings are not a recommendation to buy the Company’s securities or products, these ratings are important to maintaining public confidence in the Company, its products, its ability to market its products, and its competitive position. A downgrade or other negative action by a rating organization with respect to the financial strength ratings of the Company’s insurance subsidiaries or the debt ratings of the Company could adversely affect the Company in many ways, including, but not limited to, reducing new sales of insurance and investment products, adversely affecting relationships with distributors and sales agents, increasing the number or amount of policy surrenders and withdrawals of funds, requiring a reduction in prices for the Company’s insurance products and services in order to remain competitive, negatively impacting the Company’s ability to execute its acquisition strategy, and adversely affecting the Company’s ability to obtain reinsurance at a reasonable price, on reasonable terms, or at all. A downgrade of sufficient magnitude could result in the

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Company ~~in many ways~~, including, but not limited to, reducing new sales of insurance and investment products, adversely affecting relationships with distributors and sales agents, increasing the number or amount of policy surrenders and withdrawals of funds, requiring a reduction in prices for the Company’s insurance products and services in order to remain competitive, negatively impacting the Company’s ability to execute its acquisition strategy, and adversely affecting the Company’s ability to obtain reinsurance at a reasonable price, on reasonable terms, or at all. A downgrade of sufficient magnitude could result in the Company, its insurance subsidiaries, or both being required to collateralize reserves, balances, or obligations under certain contractual obligations, including reinsurance, funding, swap, and securitization agreements. A downgrade of sufficient magnitude could also result in the termination of certain funding and swap agreements.

Rating organizations also publish credit ratings for issuers of debt securities, including ~~PLC and~~ the Company. Credit ratings are indicators of a debt issuer’s ability to meet the terms of debt obligations in a timely manner. These ratings are important to ~~PLC and~~ the Company’s overall ability to access credit markets and other types of liquidity. Credit ratings are not recommendations to buy ~~the~~our ~~Company’s~~ securities or products. Downgrades of ~~PLC or~~ the Company’s credit ratings, or an announced potential downgrade or other negative action, could have a material adverse effect on ~~the~~our ~~Company’s~~ financial conditions and results of operations in many ways, including, but not limited to, limiting the Company’s access to capital markets, increasing the cost of debt, impairing our ability to raise capital to refinance maturing debt obligations, limiting its capacity to support its growth and the growth of its insurance subsidiaries, requiring it to pay higher amounts in connection with certain existing or future financing arrangements or transactions, and making it more difficult to maintain or improve the current financial strength ratings of its insurance subsidiaries. A downgrade of sufficient magnitude, in combination with other factors, could require the Company to post collateral pursuant to certain contractual obligations.

Rating organizations assign ratings based upon several factors. While most of the factors relate to the rated company, some of the factors relate to the views of the rating organization, general economic conditions, ratings of parent companies, and other circumstances outside the rated company’s control. Factors identified by rating agencies that could lead to negative rating actions with respect to the Company or its insurance subsidiaries include, but are not limited to, weak growth in earnings, a deterioration of earnings (including deterioration due to spread compression in interest-sensitive lines of business), significant impairments in investment portfolios, heightened financial leverage, lower interest coverage ratios, risk-based capital ratios falling below ratings thresholds, a material reinsurance loss, underperformance of an acquisition, and the rating of a parent company. In addition, rating organizations use various models and formulas to assess the strength of a rated company, and from time to time rating organizations have, in their discretion, altered the models. Changes to the models could impact the rating organizations’ judgment of the rating to be assigned to the rated company. Rating organizations may take various actions, positive or negative, with respect to ~~PLC and~~ the Company’s debt ratings and ~~their~~its financial strength ratings and the financial strength ratings of our insurance subsidiaries, including as a result of our status as a subsidiary of ~~PLC~~the Company, which is a subsidiary of Dai-ichi Life. Any negative action by a rating organization could have a material adverse impact on the Company’s financial condition or results of operations. ~~The Company cannot predict what actions the rating organizations may take, or what actions the Company may take in response to the actions of the rating organizations.~~

The Company’s securities lending program may subject it to liquidity and other risks.

The Company maintains a securities lending program in which securities are loaned to third parties, including brokerage firms and commercial banks. The borrowers of the Company’s securities provide the Company with collateral, typically in cash, which it separately maintains. The Company invests the collateral in other securities, including primarily short-term government repo and money market funds. Securities loaned under the program may be returned to the Company by the borrower at any time, requiring the Company to return the related cash collateral. In some cases, the Company may use the cash collateral provided to purchase other securities to be held as invested collateral, and the maturity of such securities may exceed the term of the securities loaned under the program and/or the fair value of such securities may fall below the amount of cash collateral that the Company is obligated to return to the borrower of the Company’s loaned securities. If the Company is required to return significant amounts of cash collateral on short notice and is forced to sell the securities held as invested collateral to meet the obligation, the Company may have difficulty selling such securities in a timely manner and/or the Company may be forced to sell the securities in a volatile or illiquid market for less than it otherwise would have been able to realize under normal market conditions. In addition, the Company’s ability to sell securities held as invested collateral may be restricted under stressful market and economic conditions in which liquidity deteriorates.

The Company’s financial condition or results of operations could be adversely impacted if the Company’s assumptions regarding the fair value and future performance of its investments differ from actual experience.

The Company makes assumptions regarding the fair value and expected future performance of its investments. Expectations that the Company’s investments in mortgage-backed and asset-backed securities will continue to perform in accordance with their contractual terms are based on assumptions a market participant would use in determining the current fair value and consider the performance of the underlying assets. It is reasonably possible that the underlying collateral of these investments will perform worse than current market expectations and that such reduced performance may lead to adverse changes in the cash flows on the Company’s holdings of these types of securities. In addition, expectations that the Company’s investments in corporate securities and/or debt obligations will continue to perform in accordance with their contractual terms are based on evidence gathered through its normal credit surveillance process. It is possible that issuers of the Company’s investments in corporate securities and/or debt obligations will perform worse than current expectations. The occurrence of any of the foregoing events could lead the Company to recognize write-downs within its portfolio of mortgage and asset-backed securities or its portfolio of corporate securities and/or debt obligations. It is also possible that such unanticipated events would lead the Company to dispose of such investments and recognize the effects of any market movements in its financial statements. The Company also makes certain assumptions when utilizing internal models to value certain of its investments. It is possible that actual results will differ from the Company’s assumptions. Such events could result in a material change in the value of the Company’s investments.

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value and consider the performance of the underlying assets. It is reasonably possible that the underlying collateral of these investments will perform worse than current market expectations and that such reduced performance may lead to adverse changes in the cash flows on the Company’s holdings of these types of securities. In addition, expectations that the Company’s investments in corporate securities and/or debt obligations will continue to perform in accordance with their contractual terms are based on evidence gathered through its normal credit surveillance process. It is possible that issuers of the Company’s investments in corporate securities and/or debt obligations will perform worse than current expectations. The occurrence of any of the foregoing events could lead the Company to recognize write-downs within its portfolio of mortgage and asset-backed securities or its portfolio of corporate securities and/or debt obligations. It is also possible that such unanticipated events would lead the Company to dispose of such investments and recognize the effects of any market movements in its financial statements. The Company also makes certain assumptions when utilizing internal models to value certain of its investments. It is possible that actual results will differ from the Company’s assumptions. Such events could result in a material change in the value of the Company’s investments.

Adverse actions of certain funds or their advisers could have a detrimental impact on the Company’s ability to sell its variable life and annuity products, or maintain current levels of assets in those products.

~~The~~Certain ~~Company and certain~~ of ~~its~~the Company’s insurance subsidiaries have arrangements with various open-end investment companies, or “mutual funds”, and the investment advisers to those mutual funds, to offer the mutual funds as investment options in the Company’s variable life and annuity products. It is possible that the termination of one or more of those arrangements by a mutual fund or its adviser could have a detrimental impact on the Company’s ability to sell its variable life and annuity products, or maintain current levels of assets in those products, which could have a material adverse effect on the Company’s financial condition and/or results of operations.

Industry and Regulatory Related Risks

The business of the Company is highly regulated and is subject to routine audits, examinations, and actions by regulators, law enforcement agencies, and self-regulatory organizations.

The Company and its insurance subsidiaries are subject to regulation by each of the states in which they conduct business. In many instances, the regulatory models emanate from the NAIC. Such regulation is vested in state agencies having broad administrative and, in some instances, discretionary power dealing with many aspects of the Company’s business, which may include, among other things, premium and cost of insurance rates and increases thereto, interest crediting policy, underwriting practices, reserve requirements, marketing practices, advertising, privacy, cybersecurity, policy forms, reinsurance reserve requirements, insurer use of captive reinsurance companies, acquisitions, mergers, capital adequacy, claims practices, and the remittance of unclaimed property. In addition, some state insurance regulators may enact rules or regulations with extra-territorial application, effectively extending their jurisdiction to areas such as permitted insurance company investments that are normally the province of an insurance company’s domiciliary state regulator. Actions by any of the state insurance regulators could have a material adverse effect on the Company’s business, financial condition and results of operations.

At any given time, a number of financial, market conduct, or other examinations or audits of the Company’s subsidiaries may be ongoing. It is possible that any examination or audit may result in payments of fines and penalties, payments to customers, or both, as well as changes in systems or procedures, or restrictions on business activities, any of which could have a material adverse effect on the Company’s business, financial condition and results of operations.

The Company’s insurance subsidiaries are required to obtain state regulatory approval for rate increases for certain health insurance products. The Company’s financial condition and results of operations may be adversely affected if the requested rate increases are not approved in full by regulators in a timely fashion.

State insurance regulators and the NAIC regularly examine existing laws and regulations applicable to insurance companies and their products. Changes in state laws and regulations, or in interpretations thereof, could have a material adverse effect on the Company’s business, financial condition and results of operations.

A number of state treasury departments and administrators of unclaimed property have audited life insurance companies for compliance with state unclaimed property laws, companies’ claims paying practices, and use of a Death Database to identify unreported deaths in their life insurance policies, annuity contracts, and retained asset accounts. The Company and certain of its subsidiaries as well as certain other insurance companies from whom the Company has coinsured blocks of life insurance and annuity policies are subject to such unclaimed property audits. It is possible additional payments and costs resulting from these audits could materially impact the Company’s financial condition and/or results of operations.

The Company’s broker-dealer subsidiaries are also subject to regulation by state securities regulators. In many instances, the state regulatory models emanate from the North American Securities Administrators Association. State securities regulators may bring regulatory or other legal actions against the Company’s broker-dealer subsidiaries if, in their view, our practices, or those of our agents or employees, are improper. These actions can result in substantial fines or penalties, or prohibitions or restrictions on our business activities and could have a material adverse effect on our business, financial condition and results of operations.

27At the federal level, certain of the Company’s insurance subsidiaries and its broker-dealer subsidiaries are subject to regulation by the SEC and the FINRA. Federal laws and regulations generally grant the SEC and FINRA broad administrative powers, including the power to limit or restrict regulated entities from carrying on their businesses in the event that a regulated entity fails to comply with applicable federal laws and regulations. The SEC and FINRA, as well as the DOL and others, have the authority to review our products and business practices and those of our agents, registered representatives, associated

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At the federal level, certain of the Company’s insurance subsidiaries and its broker-dealer subsidiaries are subject to regulation by the SEC and the FINRA. Federal laws and regulations generally grant the SEC and FINRA broad administrative powers, including the power to limit or restrict regulated entities from carrying on their businesses in the event that a regulated entity fails to comply with applicable federal laws and regulations. The SEC and FINRA, as well as the DOL and others, have the authority to review our products and business practices and those of our agents, registered representatives, associated persons, and employees. Adverse action by any of these regulatory bodies against the Company or any of its subsidiaries could have a material adverse effect on the Company’s business, financial condition and results of operations.

The executive branch of the federal government or federal agencies may issue orders or take other action with respect to financial services and life insurance matters, and bills are routinely introduced in both chambers of the United States Congress that could affect the Company and its business. In the past, Congress has considered legislation that would impact insurance companies in numerous ways, such as providing for an optional federal charter or a federal presence for insurance, preempting state law in certain respects regarding the regulation of reinsurance, increasing federal oversight in areas such as consumer protection and solvency regulation, setting tax rates, and other matters. The Company cannot predict whether or in what form administrative actions will take ~~place~~ or legislation will be enacted. Such actions or legislation could, however, ~~could~~ have a material adverse effect on the Company’s business, financial condition and results of operations.

Federal regulatory or governmental bodies may bring regulatory or other legal actions against us if, in their view, our practices, or those of our agents or employees, are improper. These actions can result in substantial fines or penalties, or prohibitions or restrictions on our business activities and could have a material adverse effect on our business, financial condition and results of operations.

The Company may be subject to regulations of, or regulations influenced by, international regulatory authorities or initiatives.

The NAIC and the Company’s state regulators may be influenced by the initiatives of international regulatory bodies, and those initiatives may not translate readily into the legal system under which U.S. insurers must operate. There is increasing pressure to conform to international standards due to the globalization of the business of insurance and the systemic nature of recent financial crises. In addition to developments at the NAIC and in the United States, the ~~Financial Stability Board (“~~FSB”), consisting of representatives of national financial authorities of the G20 nations, and the G20 have issued a series of proposals intended to produce significant changes in how financial companies, particularly companies that are members of large and complex financial groups, should be regulated.

The ~~International Association of Insurance Supervisors (“~~IAIS”), at the direction of the FSB, has published an evolving method for identifying ~~“global systemically important insurers” (“~~G-SIIs”) and high-level policy measures that will apply to G-SIIs. ~~The~~These ~~FSB, working with national authorities and the IAIS, has designated insurance groups as G-SIIs in the past. The IAIS is developing the~~ policy measures ~~which~~ include higher capital requirements and enhanced supervision. The ~~FSB has not published a new list of G-SIIs since 2016 because the~~ IAIS ~~has~~also developed a holistic framework for the assessment and mitigation of systemic risk in the insurance sector (the “Holistic Framework”). The Holistic Framework ~~was approved by the IAIS in November 2019 and is expected to be introduced in countries for assessment beginning in 2020. The Holistic Framework~~ proposes enhanced supervisory and corrective measures and disclosures for any build-up of systemic risk in liquidity risk, macroeconomic exposure, counterparty exposure and substitutability. Since the Holistic Framework is expected to produce an improved system for assessing and mitigating systemic risk in the insurance sector, the FSB has decided to suspend G-SII identification until November 2022, at which point it will review whether to resume or discontinue the G-SII designation system. Although ~~none~~neither ~~of PLC,~~ the Company, ornor Dai-ichi Life has been designated as a G-SII, the list of designated insurers may be updated in the future by the FSB. It is possible that due to the size and reach of the combined Dai-ichi Life group, or a change in the method of identifying G-SIIs, the combined group, including ~~PLC and~~ the Company, could be designated as a G-SII.

The IAIS has also developed ~~a common framework (“~~ComFrame”) for the supervision of ~~internationally active insurance groups (“~~IAIGs”). ~~ComFrame was adopted by the IAIS in November 2019 and is currently in an implementation phase.~~ The ~~IAIS~~details ~~plans~~of tothis ~~integrate into ComFrame a new~~ global capital ~~measurement~~ standard ~~for~~and ~~insurance~~its ~~groups~~applicability ~~deemed~~ to ~~be IAIGs that could exceed~~ the ~~sum~~Company ofare ~~state~~evolving ~~or other local capital requirements~~ and ~~contemplates~~uncertain ~~“group~~at ~~wide~~this ~~supervision” across national boundaries and legal entities~~time, ~~which~~but ~~could require each IAIG to conduct its own risk and solvency assessment to monitor and manage its overall solvency.~~ Dai-ichi Life has been designated an IAIG by JFSA. ~~PLC~~As ~~and~~such, the Company, may be subject to supervision requirements, capital measurement standards, and enhanced disclosures beyond those applicable to any competitors who are not designated as an IAIG.

28The Company’s sole shareowner, Dai-ichi Life, is also subject to regulation by the JFSA. Under applicable laws and regulations, Dai-ichi Life is required to provide notice to or obtain the consent of the JFSA prior to taking certain actions or engaging in certain transactions, either directly or indirectly through its subsidiaries, including the Company, and its consolidated subsidiaries, which could limit the ability of the Company to engage in certain transactions or business initiatives.

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PLC’s sole shareowner, Dai-ichi Life, is also subject to regulation by the JFSA. Under applicable laws and regulations, Dai-ichi Life is required to provide notice to or obtain the consent of the JFSA prior to taking certain actions or engaging in certain transactions, either directly or indirectly through its subsidiaries, including PLC, the Company, and its consolidated subsidiaries, which could limit the ability of the Company to engage in certain transactions or business initiatives.

While it is not yet known how or the extent to which the Company will be impacted by these regulations, the Company may experience increased costs of compliance, increased disclosure, less flexibility in capital management, and more burdensome regulation and capital requirements for specific lines of business. In addition, such regulations could impact the business of the Company and its reserve and capital requirements, financial condition, or results of operations.

NAIC actions, pronouncements and initiatives may affect the Company’s product profitability, reserve and capital requirements, financial condition, or results of operations.

Although some NAIC pronouncements, particularly as they affect accounting, reserving and risk-based capital issues, may take effect automatically without affirmative action taken by the states, the NAIC is not a governmental entity and its processes and procedures do not comport with those to which governmental entities typically adhere. Therefore, it is possible that actions could be taken by the NAIC that become effective without the procedural safeguards that would be present if governmental action was required. In addition, with respect to some financial regulations and guidelines, states sometimes defer to the interpretation of the insurance department of a non-domiciliary state. Neither the action of the non-domiciliary state nor the action of the NAIC is binding on a domiciliary state. Accordingly, a state could choose to follow a different interpretation. The Company is also subject to the risk that compliance with any particular regulator’s interpretation of a legal, accounting, or actuarial issue may result in non-compliance with another regulator’s interpretation of the same issue, particularly when compliance is judged in hindsight. There is an additional risk that any particular regulator’s interpretation of a legal, accounting or actuarial issue may change over time to the Company’s detriment, or that changes to the overall legal or market environment may cause the Company to change its practices in ways that may, in some cases, limit its growth or profitability. Statutes, regulations, interpretations, and instructions may be applied with retroactive impact, particularly in areas such as accounting, reserve and risk-based capital requirements. Also, regulatory actions with prospective impact can potentially have a significant impact on currently sold products.

The NAIC has announced more focused inquiries on certain matters that could have an impact on the Company’s financial condition and results of operations. Such inquiries concern, for example, insurer use of captive reinsurance companies, certain aspects of insurance holding company reporting and disclosure, cybersecurity practices, underwriting practices and potential for disparate impact, liquidity assessment, and risk-based capital calculations. In addition, the NAIC continues to consider various initiatives to change and modernize its financial and solvency requirements and regulations. 27

In the summer of 2020, the NAIC announced the formation of the Special Committee on Race and Insurance. This group is charged with, among other things: conducting research and analyzing the level of diversity and inclusion within the insurance sector; determining whether current practices exist in the insurance sector that potentially disadvantage minorities; and making recommendations regarding next steps. The Special Committee is examining these issues within the regulatory, property and casualty, health, life, and disability space. At this time, it is unclear how the Special Committee’s research and deliberations will affect existing laws, regulations, and practices regarding underwriting factors, risk classification, corporate governance, and other unforeseen applications. Additionally, it is unclear how these efforts will be inspired by and interact with state efforts to address race and insurance issues.

The NAIC has adopted principles-based reserving methodologies for life insurance and variable annuity reserves, but additional formulas and/or guidance relevant to the new standards are being developed. The NAIC’s Life Actuarial (A) Task Force is developing a principles-based framework to change how reserves and risk-based capital for non-variable annuities are determined. For certain products, the new framework would replace the current rules-based methods of determining reserves and risk-based capital with methods that use modeled estimates of future product cash flows under prescribed economic scenarios. The timing and scope of application of the new framework are uncertain. The new framework may apply to both in-force and new non-variable annuity business with material guarantees and may become effective by 2023. The changes could adversely affect our future financial condition and results of operations.

The NAIC’s Executive Committee concluded an agreement in 2020 to develop a new economic scenario generator to replace the current prescribed generator. Use of the new generator’s economic scenarios will be required for the determination of certain principles-based life insurance and annuity reserves and modeled risk-based capital. The timing and effect of using the new generator are uncertain while it is under development. The NAIC targets 2022 for first use of the new generator and may allow a transition period. Changing to a new generator could adversely affect our future financial condition and results of operations.

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governmental action was required. In addition, with respect to some financial regulations and guidelines, states sometimes defer to the interpretation of the insurance department of a non-domiciliary state. Neither the action of the non-domiciliary state nor the action of the NAIC is binding on a domiciliary state. Accordingly, a state could choose to follow a different interpretation. The Company is also subject to the risk that compliance with any particular regulator’s interpretation of a legal, accounting, or actuarial issue may result in non-compliance with another regulator’s interpretation of the same issue, particularly when compliance is judged in hindsight. There is an additional risk that any particular regulator’s interpretation of a legal, accounting or actuarial issue may change over time to the Company’s detriment, or that changes to the overall legal or market environment may cause the Company to change its practices in ways that may, in some cases, limit its growth or profitability. Statutes, regulations, interpretations, and instructions may be applied with retroactive impact, particularly in areas such as accounting, reserve and risk-based capital requirements. Also, regulatory actions with prospective impact can potentially have a significant impact on currently sold products.

The NAIC is also considering changes to accounting and risk-based capital regulations, risk-based capital calculations, governance practices of insurers, and other items. Additionally, the NAIC has developed a group capital calculation that measures capital across U.S.-based insurance groups using an RBC aggregation method with adjustments for all entities within the insurance holding company system. The Company cannot currently estimate what impact these more focused inquiries or proposed changes, if they occur, will have on its product mix, product profitability, reserve and capital requirements, financial condition, or results of operations.

Laws, regulations, and initiatives related to unreported deaths and unclaimed property and death benefits may result in operational burdens, fines, unexpected payments, or escheatments.

Since 2012, various states have enacted laws that require life insurers to search for unreported deaths. The National Conference of Insurance Legislators (“NCOIL”) has adopted the Unclaimed Benefits Act and legislation or regulations have been enacted in numerous states that are similar to the Unclaimed Benefits Act, although each state’s version differs in some respects. The Unclaimed Benefits Act, if adopted by any state, imposes requirements on insurers to periodically compare their life insurance and annuity contracts and retained asset accounts against the U.S. Social Security Administration’s Death Master File or a Death Database, investigate any potential matches to confirm the death and determine whether benefits are due, and to attempt to locate the beneficiaries of any benefits that are due or, if no beneficiary can be located, escheat the benefit to the state as unclaimed property. Other states in which the Company does business may also consider adopting legislation similar to the Unclaimed Benefits Act. The Company cannot predict whether such legislation will be proposed or enacted in additional states.

The Uniform Laws Commission has adopted revisions to the Uniform Unclaimed Property Act in a manner likely to impact state unclaimed property laws and requirements, though it is not clear at this time to what extent or whether requirements will conflict with otherwise imposed search requirements. Other life insurance industry associations and regulatory associations are also considering these matters. Certain states have amended or may amend their unclaimed property laws in a manner which creates additional obligations for life insurance companies. The enactment or amendment of such unclaimed property laws may require the Company to incur significant expenses, including benefits with respect to terminated policies for which no reserves are currently held and unanticipated operational expenses. Any of the foregoing could have a material adverse effect on the Company’s financial condition and results of operations.

A number of state treasury departments and administrators of unclaimed property have audited life insurance companies for compliance with unclaimed property laws, and state insurance regulators have initiated targeted multi-state examinations of life insurance companies with respect to the companies’ claims paying practices and use of a Death Database to identify unreported deaths in their life insurance policies, annuity contracts, and retained asset accounts. There is no clear basis in previously existing law for treating an unreported death as giving rise to a policy benefit that would be subject to unclaimed property procedures. However, a number of life insurers have entered into resolution agreements with state treasury departments and administrators of unclaimed property or settlement or consent agreements with state insurance regulators. The amounts publicly reported to have been paid to beneficiaries, escheated to the states, and/or paid as administrative and/or examination fees to the insurance regulators in connection with the settlement or consent agreements have been substantial.

The Company and certain of its subsidiaries as well as certain other insurance companies from whom the Company has coinsured blocks of life insurance and annuity policies are subject to unclaimed property audits and/or targeted multi-state examinations by insurance regulators similar to those described above. It is possible that the audits, examinations, and/or the enactment of state laws similar to the Unclaimed Benefits Act could result in additional payments to beneficiaries, additional escheatment of funds deemed abandoned under state laws, payment of administrative penalties and/or examination fees to state authorities, and changes to the Company’s procedures for identifying unreported deaths and escheatment of abandoned property. It is possible any such additional payments and any costs related to audits could materially impact the Company’s financial condition and/or results of operations. It is also possible that life insurers, including the Company and other insurance companies from whom the Company has coinsured blocks of life insurance and annuity policies, may be subject to claims, regulatory actions, law enforcement actions, and civil litigation arising from their prior business practices, unclaimed property practices, or related audits and examinations. Any resulting liabilities, payments or costs could be significant and could have a material adverse effect on the Company’s financial condition and/or results of operations.

The Company is subject to insurance guaranty fund laws, rules and regulations that could adversely affect the Company’s financial condition or results of operations.

Under 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 2017, the NAIC adopted revisions to the Life and Health Insurance Guaranty Association Model Act, which has been adopted by thirty-four states as of December 2021 and more state are expected to follow suit. As adopted by the NAIC, the Model Act would result in an increase to the percentage of liabilities attributable to any future long term care provider insolvency that can be assessed to life insurers. 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 differs from the revised Model Act and which increases the cost of future assessments and/or alters future premium tax offsets received in connection with guaranty fund assessments. Additionally, judicial review may affect liquidation orders against insolvent companies, which could impact the guaranty fund system. 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.

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offered by the Company. In 2017, the NAIC adopted revisions to the Life and Health Insurance Guaranty Association Model Act (the “Model Act”), which has been adopted by thirty-three states as of December 2020 and more state are expected to follow suit. As adopted by the NAIC, the Model Act would result in an increase to the percentage of liabilities attributable to any future long term care provider insolvency that can be assessed to life insurers. 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 differs from the revised Model Act and which increases the cost of future assessments and/or alters future premium tax offsets received in connection with guaranty fund assessments. Additionally, judicial review may affect liquidation orders against insolvent companies, which could impact the guaranty fund system. 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.

The Company is subject to insurable interest laws, rules, and regulations that could adversely affect the Company’s financial condition or results of operations.

The purchase of life insurance products is limited by state insurable interest laws, which in most jurisdictions require that the purchaser of life insurance name a beneficiary that has some interest in the sustained life of the insured. To some extent, the insurable interest laws present a barrier to the life settlement, or “stranger-owned” industry, in which a financial entity acquires an interest in life insurance proceeds, and efforts have been made in some states to liberalize the insurable interest laws. To the extent these laws are relaxed, the Company’s lapse assumptions may prove to be incorrect, which could adversely affect the Company’s financial condition or results of operations.

Laws, rules, and regulations promulgated in connection with the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act may adversely affect the results of operations or financial condition of the Company.

The Dodd-Frank Act enacted in July 2010 made sweeping changes to the regulation of financial services entities, products and markets. The Dodd-Frank Act generally provides for enhanced federal supervision of financial institutions, including insurance companies in certain circumstances, and financial activities that represent a systemic risk to financial stability or the economy. Certain provisions of the Dodd-Frank Act are or may become applicable to us, our competitors or those entities with which we do business, including, but not limited to: the establishment of a comprehensive federal regulatory regime with respect to derivatives; the establishment of the Federal Insurance Office; changes to the regulation of broker-dealers and investment advisors; changes to the regulation of reinsurance; the imposition of additional regulation over credit rating agencies; the imposition of concentration limits on financial institutions that restrict the amount of credit that may be extended to a single person or entity; and mandatory on-facility execution and clearing of certain derivative contracts. We cannot predict with certainty how the Dodd-Frank Act will continue to affect the financial markets generally, or impact our business, ratings, results of operations, financial condition or liquidity.

Among other things, the Dodd-Frank Act imposed a comprehensive ~~new~~ regulatory regime on the OTC derivatives marketplace and granted new joint regulatory authority to the SEC and the CFTC over OTC derivatives. ~~While~~Certain ~~the SEC and CFTC continue to promulgate rules required by the Dodd-Frank Act, most rules have been finalized and, as a result, certain~~ of the Company’s derivatives operations are subject to, among other things, new recordkeeping, reporting and documentation requirements and ~~new~~ execution and clearing requirements for certain swap transactions ((currently, certain interest rate swaps and index-based credit default swaps; cleared swaps require the posting of margin to a clearinghouse via a futures commission merchant and, in some case, to the futures commission merchant as well). As a result of the transition to central clearing and the ~~new~~ margin requirements for OTC derivatives, wethe Company will be required to hold more cash and highly liquid securities resulting in lower yields in order to satisfy the projected increase in margin required. In addition, increased capital charges imposed by ~~regulators on non-cash collateral held by bank counterparties and central clearinghouses is expected to result in higher hedging costs, causing a reduction in income from investments.~~

Pursuant to the Dodd-Frank Act, in December 2013, the FIO issued a report on how to modernize and improve the system of insurance regulation in the United States and, in December 2014, the FIO published its report on the breadth and scope of the global reinsurance market. In this reinsurance report, the FIO indicates that reinsurance collateral continues to be at the forefront of its thinking with regard to potential direct federal involvement in insurance regulation. It remains to be seen whether either of the FIO’s reports will affect the manner in which insurance and reinsurance are regulated in the U.S. and therefore affect the Company’s business.28

The CFPB has supervisory authority over certain non-banks whose activities or products it determines pose risks to consumers, and has issued regulations under the Home Mortgage Disclosure Act (the “HMDA”).

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~~The~~regulators ~~Company~~on ~~and~~non-cash ~~certain~~collateral ofheld ~~its~~by ~~subsidiaries~~bank ~~sell~~counterparties ~~products~~and ~~that~~central ~~may~~clearinghouses beis ~~regulated~~expected ~~by the CFPB. The CFPB continues~~ to ~~bring~~result ~~enforcement~~in ~~actions~~higher ~~involving~~hedging ~~a growing number of issues~~costs, ~~including~~causing ~~actions~~a ~~brought~~reduction ~~jointly~~in ~~with~~income ~~state~~from ~~Attorneys General, which could directly or indirectly affect the Company or any of its subsidiaries~~investments. ~~The Company is unable at this time to predict the impact of these activities on the Company.~~

The Dodd-Frank Act authorized the creation of the CFPB, which has supervisory authority over certain non-banks whose activities or products it determines pose risks to consumers. Certain of the Company’s subsidiaries sell products that may be regulated by the CFPB. The CFPB continues to bring enforcement actions involving a growing number of issues, including actions brought jointly with state Attorneys General, which could directly or indirectly affect the Company or any of its subsidiaries. The Company is unable at this time to predict the impact of these activities on the Company.

New and amended regulations regarding the standard of care or standard of conduct applicable to investment professionals, insurance agencies, and financial institutions that recommend or sell annuities or life insurance products may have a material adverse impact on our ability to sell annuities and other products and to retain in-force business and on our financial condition or results of operations.

Sales of life insurance policies and annuity contracts offered by the Company are subject to regulations relating to sales practices adopted by a variety of federal and state regulatory authorities. Certain annuities and life insurance policies such as variable annuities and variable universal life insurance are regulated under the federal securities laws administered by the SEC. On June 5, 2019, the SEC adopted a comprehensive package of rulemakings and interpretations relating to the standard of conduct applicable to broker-dealers, investment advisers, and their representatives when making certain recommendations to retail customers. Regulation Best Interest (“Regulation BI”), a new rule establishing a “best interest” standard of conduct for broker-dealers and their natural associated persons applies when making recommendations to retail customers of any securities transaction or investment strategy involving securities or regarding the opening of an account. Specifically, Regulation BI requires a broker-dealer (or associated person) to act in the retail customer’s best interest and not place its (or his or her) own interests ahead of the retail customer’s interests. In addition to Regulation BI, the SEC also adopted a new rule and amended existing rules to require broker-dealers and registered investment advisers to provide a brief relationship summary to retail investors (“Form CRS Rules”). The Form CRS Rules are intended to assist retail investors with their initial selection of, and ongoing decision to maintain an existing relationship with, a financial professional or firm by summarizing in one place certain specified information about the broker-dealer or investment adviser. The obligations under Regulation BI and Form CRS became effective on June 30, 2020. The rulemaking package also included two interpretations: (i) the investment adviser interpretation, which clarifies certain aspects of the standard of conduct applicable to registered investment advisers under section 206 of the Investment Advisers Act of 1940 (“Advisers Act”), and (ii) the “solely incidental” interpretation, which clarifies the broker-dealer exclusion from the definition of “investment adviser” under section 202 of the Advisers Act.

In addition, broker-dealers, insurance agencies and other financial institutions sell the Company’s annuities to employee benefit plans governed by provisions of the ERISA and IRAs that are governed by similar provisions under the Code. Consequently, our activities and those of the firms that sell the Company’s products are subject to restrictions that require ERISA fiduciaries to perform their duties solely in the interests of ERISA plan participants and beneficiaries, and that prohibit ERISA fiduciaries from causing a covered plan or retirement account to engage in certain prohibited transactions absent an exemption. The DOL issued its fiduciary rule package on June 29, 2020 and published in the Federal Register on July 7, 2020.

The NAIC passed revisions to the Suitability in Annuity Transactions Model Regulation which are intended to impose a higher standard of care on insurers who sell annuities. ~~NAIC’s work largely mirrors the SEC’s Regulation Best Interest, which also introduces a higher standard of care for broker-dealers.~~ Likewise, several states are considering or have adopted legislation or regulatory measures that would implement new requirements and standards applicable to the sale of annuities and, in some cases, life insurance products. While many states are pursuing uniformity through NAIC’s model , these standards can vary widely in scope, applicability, and timing of implementation. The adoption and enactment of these or any revised standards as law or regulation could have a material adverse effect upon the manner in which the Company’s products are sold and impact the overall market for such products.

There remains significant uncertainty surrounding the final form that these regulations may take. Our current distributors may continue to move forward with their plans to limit the number of products they offer, including the types of products offered by the Company. The Company may find it necessary to change sales representative and/or broker compensation, to limit the assistance or advice it can provide to owners of the Company’s annuities, to replace or engage additional distributors, or otherwise change the manner in which it designs, supervises, and supports sales of its annuities and, where applicable, life insurance products. In addition, the Company continues to incur expenses in connection with initial and ongoing compliance obligations with respect to such rules, and in the aggregate these expenses may be significant. Any of the foregoing regulatory, legislative, or judicial measures or the reaction to such activity by consumers or other members of the insurance industry could have a material adverse impact on our ability to sell annuities and other products, to retain in-force business, and on our financial condition or results of operations.

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The Company may be subject to regulation, investigations, enforcement actions, fines and penalties imposed by the SEC, FINRA and other federal and international regulators in connection with its business operations.

Certain life insurance policies, contracts, and annuities offered by the Company are subject to regulation under the federal securities laws administered by the SEC. The federal securities laws contain regulatory restrictions and criminal, administrative, and private remedial provisions. From time to time, the SEC and the FINRA examine or investigate the activities of broker-dealers, insurer’s separate accounts and investment advisors, including the Company’s affiliated broker-dealers and investment advisers. These examinations or investigations often focus on the activities of the registered representatives and registered investment advisers doing business through such entities and the entities’ supervision of those persons. It is possible that any examination or investigation could lead to enforcement action by the regulator and/or may result in payments of fines and penalties, payments to customers, or both, as well as changes in systems or procedures of such entities, any of which could have a material adverse effect on the Company’s financial condition or results of operations.

The Company may also be subject to regulation by governments of the countries in which it currently does, or may in the future, do, business, as well as regulation by the U.S. Government with respect to its operations in foreign countries, such as the Foreign Corrupt Practices Act. Penalties for violating the various laws governing the Company’s business in other countries may include restrictions upon business operations, fines and imprisonment, both within the U.S. and abroad. U.S. enforcement of anti-corruption laws continues to increase in magnitude, and penalties may be substantial.

The Company is subject to conditions and requirements set forth in the ~~Telephone Consumer Protection Act (the “~~TCPA”), which places restrictions on the use of automated telephone and facsimile machines. Class action lawsuits alleging violations of the act have been filed against a number of companies, including life insurance carriers. These class action lawsuits contain allegations that defendant carriers were vicariously liable for the alleged wrongful conduct of agents who violated the TCPA. Some of the class actions have resulted in substantial settlements against other insurers. Any such actions against the Company could result in a material adverse effect upon our financial condition or results of operations.

Other types of regulation that could affect the Company and its subsidiaries include, but are not limited to, insurance company investment laws and regulations, state statutory accounting and reserving practices, antitrust laws, minimum solvency requirements, enterprise risk requirements, state securities laws, federal privacy laws, cybersecurity regulation, technology and data regulations, insurable interest laws, federal anti-money laundering and anti-terrorism laws, employment and immigration laws (including laws in Alabama where over half of the Company’s employees are located), and because the Company owns and operates real property, state, federal, and local environmental laws. Under some circumstances, severe penalties may be imposed for breach of these laws.

The Company cannot predict what form any future changes to laws and/or regulations affecting participants in the financial services sector and/or insurance industry, including the Company and its competitors or those entities with which it does business, may take, or what effect, if any, such changes may have.

The Company’s ability to enter into certain transactions is influenced by how such a transaction might affect Dai-ichi Life’s taxation in Japan.

Changes to tax law, or interpretations of existing tax law could adversely affect the Company and its ability to compete with non-insurance products or reduce the demand for certain insurance products.

In general, the tax law exempts policyholders from current taxation on the increase in value of their life insurance and annuity products during their accumulation phase. This favorable tax treatment provides most of the Company’s products with a competitive advantage over products offered by non-insurance companies. To the extent that the law is revised to either reduce the tax-favored status of life insurance and annuity products, or instead establishes the tax-favored status of competing products, then all life insurance companies, including the Company and its subsidiaries, would be adversely affected regarding the marketability of their products. Furthermore, absent grandfathering, such changes would generally cause increased surrenders of existing life insurance and annuity products. For example, a change in law that further restricts the deductibility of interest expense when a business owns a life insurance product would result in increased surrenders of these products.

The Company is subject to corporate income, excise, franchise, and premium taxes. The tax law provides certain benefits to the Company, such as the dividends-received deduction, the deferral of current taxation on certain financial instruments’ economic income and the current deduction for future policy benefits and claims.

The Company’s transition in 2005 from relying on reinsurance for newly-written traditional life products to reinsuring some of these products’ reserves into its captive insurance companies resulted in a net reduction in its current taxes, offset by an 30

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increase in its deferred taxes. The resulting benefit of reduced current taxes is attributed to the applicable life products and is an important component of the profitability of these products. The Tax Reform Act, with its overall lower tax rate, decreased the tax benefit associated with these products.

Financial services companies and their subsidiaries are frequently the targets of legal proceedings and increased regulatory scrutiny, including class action litigation which could result in substantial judgments, and law enforcement investigations.

A number of judgments have been returned against insurers, broker-dealers, and other providers of financial services involving, among other things, sales, underwriting practices, product design, product disclosure, product administration, denial or delay of benefits, charging excessive or impermissible fees, recommending unsuitable products to customers, breaching fiduciary or other duties to customers, refund or claims practices, alleged agent misconduct, failure to properly supervise representatives, relationships with agents or other persons with whom the company does business, employment-related matters, payment of sales or other contingent commissions, and other matters. Often these legal proceedings have resulted in the award of substantial judgments that are disproportionate to the actual damages, including material amounts of punitive 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 legal proceeding. Arbitration awards are subject to very limited appellate review. In addition, in some legal proceedings, companies have made material settlement payments. In some instances, substantial judgments may be the result of a party’s perceived ability to satisfy such judgments as opposed to the facts and circumstances regarding the claims.

The financial services and insurance industries also are sometimes the target of law enforcement and regulatory investigations and actions relating to the numerous laws and regulations that govern such companies. Resulting publicity about one company may generate inquiries into or litigation against other financial service providers, even those who do not engage in the business lines or practices at issue in the original action. From time to time, the Company receives subpoenas, requests, or other inquiries and responds to them in the ordinary course of business.

Group health coverage issued through associations and credit insurance coverages have received some negative publicity in the media as well as increased regulatory consideration and review and litigation. The Company has a small closed block of group health insurance coverage that was issued to members of an association.

A number of lawsuits and investigations regarding the method of paying claims have been initiated against life insurers. The Company offers payment methods that may be similar to those that have been the subject of such lawsuits and investigations.

The Company, like other financial services companies in the ordinary course of business, and its subsidiaries, including the Company, are involved in legal proceedings and regulatory actions. The occurrence of such matters may become more frequent and/or severe when general economic conditions deteriorate. The Company may be unable to predict the outcome of such matters, whether they will expand into other areas not yet contemplated, whether they will result in changes in regulation, whether activities currently thought to be lawful will be characterized as unlawful, or the impact, if any, of such scrutiny on the financial services and insurance industry or the Company, and may be unable to or provide a reasonable range of potential losses. Given the inherent difficulty in predicting the outcome of such matters, it is possible that an adverse outcome in certain such matters could be material to the Company’s results for any particular reporting period.

If our business does not perform well, or economic and/or market conditions change negatively, we may be required to recognize an impairment of our goodwill and/or our indefinite lived intangible assets which could adversely affect our results of operations or financial condition.

Goodwill is the excess of the purchase price in an acquisition over the estimated fair value of net assets acquired. Goodwill is not amortized but is tested for impairment at least annually or more frequently if events or circumstances such as adverse changes in the business climate indicate that the fair value of the reporting units may be less than the carrying value of those reporting units. We perform our annual goodwill impairment testing during the fourth quarter of each year based upon data as of the close of the third quarter. Impairment testing is performed using the fair value approach, which requires the use of estimates and judgment, at the reporting unit level.

The estimated fair ~~value~~values of the reporting units are impacted by the performance of the business, as well as other inputs used in the fair value calculation, which may be adversely impacted by prolonged market declines or other circumstances. If it is determined that ~~the~~ goodwill has been impaired, we must write down ~~the~~ goodwill by the amount of the impairment, with a corresponding charge to net income. Such write downs ~~could~~ have anoccurred, ~~adverse~~and ~~effect~~may onoccur again in the future. Also, such write downs have adversely affected our results of operations orand financial position, and future write downs may have the same effect. As of December 31, 2021, a non-cash impairment charge of $129 million was recognized as a result of the annual assessment of reporting units within the Retail Life and Annuity segment.

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The Company’s indefinite lived intangible assets represent the value of the Company’s insurance licenses on the date of the merger with Dai-ichi Life. These assets are not amortized but are tested for impairment at least annually or more frequently if events or circumstances indicate that the fair value of the indefinite lived intangibles is less than the carrying value. We perform our annual impairment testing of indefinite lived intangibles during the fourth quarter of each year. Impairment testing is performed using the fair value approach, which requires the use of estimates and judgment. If it is determined that the indefinite lived intangibles have been impaired, we must write them down by the amount of the impairment, with a corresponding charge to net income. Such write downs could have an adverse effect on our results of operations or financial position.

The use of reinsurance introduces variability in the Company’s statements of income.

The timing of premium payments to and receipt of expense allowances from reinsurers differs from the Company’s receipt of customer premium payments and incurrence of expenses. These timing differences introduce variability in certain components of the Company’s statements of income and may also introduce variability in the Company’s quarterly financial results.

The Company’s reinsurers could fail to meet assumed obligations, increase rates, terminate agreements or be subject to adverse developments that could affect the Company.

The Company and its insurance subsidiaries cede material amounts of insurance and transfer related assets to other insurance companies through reinsurance. However, notwithstanding the transfer of related assets or other issues, the Company remains liable with respect to ceded insurance should any reinsurer fail to meet the assumed obligations. Therefore, the failure, insolvency, or inability or unwillingness to pay under the terms of the reinsurance agreement with the Company of one or more of the Company’s reinsurers could negatively impact the Company’s earnings and financial position.

The Company’s results and its ability to compete are affected by the availability and cost of reinsurance. Premium rates charged by the Company are based, in part, on the assumption that reinsurance will be available at a certain cost. Certain reinsurers have attempted to or may attempt to increase the rates they charge the Company for reinsurance, including rates for new policies the Company is issuing and rates related to policies that the Company has already issued. The Company may not be able to increase the premium rates it charges for policies it has already issued, and for competitive reasons it may not be able to raise the premium rates it charges for new policies to offset the increase in rates charged by reinsurers. If the cost of reinsurance were to increase, if reinsurance were to become unavailable, if alternatives to reinsurance were not available to the Company, or if a reinsurer should fail to meet its obligations, the Company could be adversely affected.

The number of life reinsurers has remained relatively constant in recent years. If the reinsurance market contracts in the future, the Company’s ability to continue to offer its products on terms favorable to it could be adversely impacted.

In addition, reinsurers may face challenges regarding illiquid credit and/or capital markets, investment downgrades, rating agency downgrades, deterioration of general economic conditions, and other factors negatively impacting the financial services industry. If reinsurers, including those with significant exposure to international markets ~~and European Union member states,~~ are unable to meet their obligations, the Company would be adversely impacted.

The Company has implemented a reinsurance program through the use of a captive ~~reinsurers~~reinsurer. Under ~~these~~this ~~arrangements~~arrangement, athe captive owned by the Company serves as the reinsurer, and the consolidated books and tax returns of the Company reflect a liability consisting of the full reserve amount attributable to the reinsured business. The success of the Company’s captive reinsurance program is dependent on a number of factors outside the control of the Company, including, but not limited to, continued access to financial solutions, a favorable regulatory environment, and the overall tax position of the Company. If the captive reinsurance program is not successful, the Company’s financial condition could be adversely impacted.

The Company’s policy claims fluctuate from period to period resulting in earnings volatility.

The Company’s results may fluctuate from period to period due to fluctuations in the amount of policy claims received. In addition, certain of the Company’s lines of business may experience higher claims if the economy is growing slowly or in recession, or if equity markets decline. Also, insofar as the Company continues to retain a larger percentage of the risk of newly written life insurance products than it has in the past, its financial results may have greater variability due to fluctuations in mortality results.

~~The Company operates in a mature, highly competitive industry, which could limit its ability to gain or maintain its position in the industry and negatively affect profitability.~~ 32

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The ~~insurance~~Company ~~industry~~operates isin a mature, ~~and~~ highly competitive industry~~. In recent years~~, ~~the industry has experienced reduced growth in life insurance sales. The Company encounters significant competition in all lines of business from other insurance companies, many of~~ which ~~have~~could ~~greater~~limit ~~financial~~its ~~resources~~ability ~~and~~to ~~higher~~gain ~~ratings than the Company and which may have a greater market share, offer a broader range of products, services~~ or ~~features,~~maintain ~~assume~~its aposition greater level of risk, have lower operating or financing costs, or have different profitability expectations than the Company. The Company also faces competition from other providers of financial services. Competition could result in, ~~among other things, lower sales or higher lapses of existing products. Consolidation and expansion among banks, insurance companies, distributors, and other financial service companies with which~~ the ~~Company~~industry ~~does business could also have an adverse effect on the Company’s financial condition~~ and ~~results~~negatively ofaffect operations if such companies require more favorable terms than previously offered to the Company or if such companies elect not to continue to do business with the Company following consolidation or expansionprofitability.

The insurance industry is a mature and highly competitive industry. The Company’s ~~ability~~encounters tosignificant ~~compete~~competition isin ~~dependent~~all ~~upon,~~lines ~~among~~of business from other ~~things~~insurance companies, ~~its~~many ~~ability~~of towhich ~~attract~~have greater financial resources and ~~retain~~higher ~~distribution~~ratings ~~channels~~than tothe Company and which may have a greater market ~~its~~share, ~~insurance~~offer ~~and~~a ~~investment~~broader range of products, ~~its~~services ~~ability~~or tofeatures, ~~develop~~assume ~~competitive~~a ~~and~~greater ~~profitable~~level ~~products~~of risk, ~~its~~have ~~ability~~lower tooperating ~~maintain~~or ~~low~~financing ~~unit~~ costs, ~~and~~or ~~its~~have ~~maintenance~~different ofprofitability ~~adequate~~expectations ~~ratings~~than the Company. The Company also faces competition from ~~rating~~other ~~agencies~~providers of financial services. AsCompetition ~~technology~~could ~~evolves~~result in, ~~comparison~~among ofother athings, ~~particular~~lower ~~product~~sales or higher lapses of ~~any~~existing ~~company~~products. ~~for~~Consolidation aand ~~particular~~expansion ~~customer~~among ~~with~~banks, ~~competing~~insurance ~~products~~companies, ~~for~~distributors, ~~that~~and ~~customer~~other isfinancial ~~more~~service ~~readily~~companies ~~available,~~with which the Company does business could ~~lead~~also tohave ~~increased~~an ~~competition~~adverse aseffect ~~well~~on asthe ~~agent~~Company’s financial condition and results of operations if such companies require more favorable terms than previously offered to the Company or ~~customer~~if ~~behavior,~~such ~~including~~companies ~~persistency~~elect ~~that~~not ~~differs~~to ~~from~~continue ~~past~~to ~~behavior~~do business with the Company following consolidation or expansion.

The Company’s ability to compete is dependent upon, among other things, its ability to attract and retain distribution channels to market its insurance and investment products, its ability to develop competitive and profitable products, its ability to maintain competitive unit costs, and its maintenance of adequate ratings from rating agencies. As technology evolves, comparison of a particular product of any company for a particular customer with competing products for that customer is more readily available, which could lead to increased competition as well as agent or customer behavior, including persistency that differs from past behavior.

Developments in technology may impact our business.

Technological developments and unforeseen changes in technology may impact our business. Technology changes are increasing customer choices about how to interact with companies generally. Evolving customer preferences may drive a need to redesign our products, and our distribution channels and customer service areas may need to change to become more automated and available at the place and time of the customer’s choosing. Additionally, changes in technology may impact our operational effectiveness and could have an adverse effect on our unit cost competitiveness. Such changes have the potential to disrupt our business model.

Technology may also have a significant impact on the companies in which we invest. For example, consumers may change their purchasing behavior to favor online shopping activity, which may adversely affect the value of retail properties in which we invest.

Advancements in medical technologies may also impact our business. For example, genetic testing and the availability of that information unequally to consumers and insurers can result in anti-selection risks if data from genetic testing gives our prospective customers a clearer view into their future health and longevity expectations, allowing them to select products protecting them against likelihoods of mortality or longevity with more precision based on information that is not available to us. Also, advancements in medical technologies that extend lives may challenge our actuarial assumptions, especially in the annuity business

The Company’s ability to maintain competitive unit costs is dependent upon the level of new sales and persistency of existing business.

The Company’s ability to maintain competitive unit costs is dependent upon a number of factors, such as the level of new sales, persistency of existing business, and expense management. A decrease in sales or persistency without a corresponding reduction in expenses may result in higher unit costs. Additionally, a decrease in persistency of existing business may result in ~~fluctuations in the level of DAC or VOBA amortization or~~ higher or more rapid amortization of DAC or VOBA and ~~thus higher unit costs and~~ lower reported earnings. Although many of the Company’s products contain surrender charges, the charges decrease over time and may not be sufficient to cover the unamortized DAC or VOBA with respect to the insurance policy or annuity contract being surrendered. Some of the Company’s products do not contain surrender charge features and such products can be surrendered or exchanged without penalty. A decrease in persistency may also result in higher claims.

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Risks Related to Privacy and Cyber Security

A disruption or cyberattack affecting the electronic, communication and information technology systems or other technologies of the Company or those on whom the Company relies could adversely affect the Company’s business, financial condition, and results of operations.

In conducting its business, the Company relies extensively on various electronic systems, including computer systems, networks, data processing and administrative systems, and communication systems. The Company’s business partners, counterparties, service providers, and distributors also rely on such systems, as do securities exchanges and financial markets that are important to the Company’s ability to conduct its business. These systems or their functionality could be disabled, disrupted, damaged, or destroyed by intentional or unintentional acts or events such as cyberattacks, viruses, sabotage, unauthorized tampering, physical or electronic break-ins or other security breaches, acts of war or terrorism, human error, system failures, failures of power or water supply, or the loss or malfunction of other utilities or services. They may also be disabled, disrupted, damaged, or destroyed by natural events such as storms, tornadoes, fires, floods or earthquakes. Disruption, damage, or destruction of any of these systems could cause the Company or others on whom the Company relies to be unable to conduct business for an extended period of time or could result in significant expenditures to replace, repair, or reinstate functionality, which could materially adversely impact the Company’s business and its financial condition and results of operations.

36While the Company and others on whom it depends try to identify threats and implement measures to protect their systems, such protective measures may not be sufficient. Additionally, the Company may not become aware of sophisticated cyberattacks for some time after they occur, which could increase the Company’s exposure. The Company may have to incur significant costs to address or remediate interruptions, threats, and vulnerabilities in its information and technology systems and to comply with existing and future regulatory requirements related thereto. These risks are heightened as the frequency and sophistication of cyberattacks increase. In February 2022, the New York State Department of Financial Services issued a warning that the Russian invasion of Ukraine significantly elevates the cyber risk for the U.S. financial sector.

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counterparties, service providers, and distributors also rely on such systems, as do securities exchanges and financial markets that are important to the Company’s ability to conduct its business. These systems or their functionality could be disabled, disrupted, damaged, or destroyed by intentional or unintentional acts or events such as cyberattacks, viruses, sabotage, unauthorized tampering, physical or electronic break-ins or other security breaches, acts of war or terrorism, human error, system failures, failures of power or water supply, or the loss or malfunction of other utilities or services. They may also be disabled, disrupted, damaged, or destroyed by natural events such as storms, tornadoes, fires, floods or earthquakes. Disruption, damage, or destruction of any of these systems could cause the Company or others on whom the Company relies to be unable to conduct business for an extended period of time or could result in significant expenditures to replace, repair, or reinstate functionality, which could materially adversely impact the Company’s business and its financial condition and results of operations.

While the Company and others on whom it depends try to identify threats and implement measures to protect their systems, such protective measures may not be sufficient. Additionally, the Company may not become aware of sophisticated cyberattacks for some time after they occur, which could increase the Company’s exposure. The Company may have to incur significant costs to address or remediate interruptions, threats, and vulnerabilities in its information and technology systems and to comply with existing and future regulatory requirements related thereto. These risks are heightened as the frequency and sophistication of cyberattacks increase.

The Company has relationships with vendors, distributors, and other third parties that provide operational and/or information technology services to the Company. Although the Company conducts due diligence, negotiates contractual provisions, and, in many cases, conducts periodic reviews of such third parties to confirm compliance with its information security standards, the failure of such third parties’ computer systems and/or their disaster recovery plans for any reason might cause significant interruptions to the Company’s operations. The Company maintains cyber liability insurance that provides both third-party liability and first party liability coverages, its insurance may not be sufficient to protect us against all losses.

Confidential information maintained in the systems of the Company or other parties upon which the Company relies could be compromised or misappropriated as a result of security breaches or other related lapses or incidents, damaging the Company’s business and reputation and adversely affecting its financial condition and results of operations.

In the course of conducting its business, the Company retains confidential information, including information about its customers and proprietary business and financial information. The Company retains confidential information in various electronic systems, including computer systems, networks, data processing and administrative systems, and communication systems. The Company maintains physical, administrative, and technical safeguards to protect such information and it relies on commercial technologies to maintain the security of its systems and the transmission of such information to other parties, including its business partners, counterparties and service providers. The Company’s business partners, counterparties and service providers likewise maintain confidential information, including, in some cases, customer information, on behalf of the Company. An intentional breach or unintentional compromise of the security measures of the Company or such other parties could result in the disclosure, misappropriation, misuse, alteration, or destruction of the confidential information retained by or on behalf of the Company, or the inability of the Company to conduct business for an indeterminate amount of time. Any of these events or circumstances could damage the Company’s business and adversely affect its financial condition and results of operations by, among other things, causing harm to the Company’s business operations, reputation and customers, deterring customers and others from doing business with the Company, subjecting the Company to significant regulatory, civil, and criminal liability, and requiring the Company to incur significant legal and other expenses.

Despite the Company’s efforts to ensure the integrity of its systems, it is possible that the Company may not be able to anticipate and implement effective preventative or detective measures against security breaches of all types because the techniques used to attack technologies and data systems change frequently or are not recognized until launched and because cyberattacks can originate from a wide variety of sources or parties. Those parties may also attempt to fraudulently induce employees, customers, or other users of the Company’s system, through phishing, phone calls, or other efforts, to deliberately or inadvertently disclose sensitive information in order to gain access to our data or that of the Company’s customers or clients.

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Additionally, cyber threats and related legal and regulatory standards applicable to our business are rapidly evolving and may subject the Company to heightened legal standards, new theories of liability, and material claims and penalties that the Company cannot currently predict or anticipate. As cyber threats and applicable legal standards continue to evolve, the Company may be required to expend significant additional resources to continue to modify or enhance its protective measures and computer systems, and to investigate and remediate any information security vulnerabilities. If the Company experiences cyberattacks or other data security events or other technological failures or lapses, including unauthorized access to, loss of, or acquisition of information collected or maintained by the Company or its business partners or vendors, the Company may be subject to regulatory inquiries or proceedings, litigation or reputational damage, or be required to pay claims, fines, or penalties. Depending on the nature of the information compromised, in the event of a data breach or other unauthorized access to the Company’s customer data, the Company may also have obligations to notify customers about the incident, and the Company may need to provide some form of remedy, such as a subscription to a credit monitoring service, for the individuals affected by the incident. The Company has experienced cyber and data security events in the past, both directly and indirectly through a third-party relationship. None of those events caused the Company material harm or loss, but there can be no assurance that the Company will not suffer such harm or loss in the future.

Compliance with existing and emerging privacy regulations could result in increased compliance costs and/or lead to changes in business practices and policies, and any failure to protect the confidentiality of consumer information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations.

The collection and maintenance of personal data from ~~the~~customers, ~~Company’s~~beneficiaries, agents, employees, and other consumers, including personally identifiable non-public financial and health information, subjects the Company to regulation under various federal and state privacy laws. These laws require that the Company institute certain policies and procedures in its business to safeguard its consumers’ personal data against improper use or disclosure. The ~~laws~~requirements vary by jurisdiction, and it is expected that additional laws and regulations will continue to be enacted. In ~~November~~ 2020, California passed the ~~CPRA~~California Privacy Rights Act, which will augment and expand the California Consumer Privacy Act. ~~The~~In ~~CPRA~~2021, Virginia passed the Consumer Data Protection Act and Colorado passed the Colorado Privacy Act, which will create similar consumer rights and business responsibilities. These laws will become effective in ~~January~~ 2023. Complying with these and other existing, emerging and changing privacy requirements could cause the Company to incur substantial costs or require it to change its business practices and policies. Non-compliance could result in monetary penalties or significant legal liability.

Many of the associates who conduct our business have access to, and routinely process, personal information of consumers through a variety of media, including information technology systems. The Company relies on various internal processes and controls to protect the confidentiality of consumer information that is accessible to, or in the possession of, its associates. It is possible that an associate could, intentionally or unintentionally, disclose or misappropriate confidential consumer information or our data could be the subject of a cybersecurity attack. If the Company fails to maintain adequate internal controls or if its associates fail to comply with its policies and procedures, misappropriation or intentional or unintentional inappropriate disclosure or misuse of consumer information could occur. Such internal control inadequacies or non-compliance could materially damage the Company’s reputation or lead to regulatory, civil or criminal investigations and penalties.

In addition, the Company analyzes customer data to better manage our business. There has been increased scrutiny, including from U.S. state and federal regulators, regarding the use of “big data” techniques such as price optimization. In August 2020, members of the NAIC unanimously adopted guiding principles on artificial intelligence, to inform and articulate general expectations for businesses, professionals and stakeholders across the insurance industry as they implement artificial intelligence tools to facilitate operations. The Company cannot predict what, if any, actions may be taken with regard to “big data,” but any inquiries and limitations could have a material impact on our business, financial condition and results of operations.

Risk Related to Acquisitions, Dispositions or Other Corporate Structural Matters

The Company may not realize its anticipated financial results from its acquisitions strategy.

The Company’s Acquisitions segment focuses on the acquisitions of companies and business operations, and the coinsurance of blocks of insurance business, ~~all of~~ which have increased the Company’s earnings. However, there can be no assurance that the Company will have future suitable opportunities for, or sufficient capital available to fund, such transactions. The Acquisitions segment faces significant competition, and if our competitors have access to capital on more favorable terms or at a lower cost, lower investment return requirements, advantageous tax treatment, or lower risk tolerances, then our ability to compete for acquisitions may be diminished. In addition, there can be no assurance that the Company will be able to realize any projected operating efficiencies or achieve the anticipated financial results from such transactions.

The Company may be unable to complete an acquisition transaction. Completion of an acquisition transaction may be more costly or take longer than expected, or may have a different or more costly financing structure than initially contemplated. In addition, the Company may not be able to complete or manage multiple acquisition transactions at the same time, or the completion of such transactions may be delayed or be more costly than initially contemplated. The Company, its affiliates, or other parties to the transaction may be unable to obtain in a timely manner regulatory approvals required to complete an acquisition transaction. If the Company identifies and completes suitable acquisitions, it may not be able to successfully integrate the business in a timely or cost-effective manner, or retain key personnel and business relationships necessary to achieve anticipated financial results. In addition, a number of risks may arise in connection with businesses or blocks of insurance business that the Company acquires or reinsures, including unforeseen liabilities or asset impairments; rating agency reactions; and regulatory requirements that could impact our operations or capital requirements. Additionally, in connection with its acquisition transactions that involve reinsurance, the Company assumes, or otherwise becomes responsible for, the obligations of policies and other liabilities of other insurers. Any regulatory, legal, financial, or other adverse development affecting the other insurer could also have an adverse effect on the Company.35

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to compete for acquisitions may be diminished. In addition, there can be no assurance that the Company will be able to realize any projected operating efficiencies or achieve the anticipated financial results from such transactions.

Assets allocated to the MONY Closed Block benefit only the holders of certain policies; adverse performance of Closed Block assets or adverse experience of Closed Block liabilities may negatively affect the Company.

On October 1, 2013, the Company completed the acquisition of MONY from AXA Financial, Inc. MONY was converted from a mutual insurance company to a stock corporation in accordance with its Plan of Reorganization dated August 14, 1998, as amended. In connection with its demutualization, the Closed Block was established for the benefit of policyholders who owned certain individual insurance policies of MONY in force as of the date of demutualization.

Assets allocated to the Closed Block inure solely to the benefit of the Closed Block’s policyholders as dividend payments and will not revert to the benefit of the Company. However, if the Closed Block has insufficient funds to make guaranteed policy benefit payments after elimination of dividend payments, such payments must be made from assets outside the Closed Block. Adverse financial or investment performance of the Closed Block, or adverse mortality or lapse experience on policies in the Closed Block, may require MONY to pay policyholder benefits using assets outside the Closed Block, which events could have a material adverse impact on the Company’s financial condition or results of operations and negatively affect the Company’s risk-based capital ratios. In addition, regulatory actions could require payment of dividends to policyholders in a larger amount than is anticipated by the Company, which could have a material adverse impact on the Company.

The Company depends on the ability of its subsidiaries to transfer funds to it to meet its obligations.

The Company owns insurance companies. A portion of the Company’s funding comes from dividends from its operating subsidiaries, revenues from investment, data processing, legal, and management services rendered to subsidiaries, investment income, and external financing. These funding sources support the Company’s general corporate needs including its debt service. If the funding the Company receives from its subsidiaries is insufficient for it to fund its debt service and other obligations, it may be required to raise funds through the incurrence of debt, or the sale of assets.

The states in which the Company’s subsidiaries are domiciled impose certain restrictions on the subsidiaries’ ability to pay dividends and make other payments to the Company. State insurance regulators may prohibit the payment of dividends or other payments to the Company by its subsidiaries if they determine that the payments could be adverse to the insurance subsidiary or its policyholders or contract holders. In addition, the amount of surplus that the Company’s subsidiaries could pay as dividends is constrained by the amount of surplus they hold to maintain their financial strength ratings, to provide an additional layer of margin for risk protection and for future investment in our businesses.

The Company’s use of affiliate and captive reinsurance companies to finance statutory reserves related to its fixed annuity and term and universal life products and to reduce volatility affecting its variable annuity products may be limited or adversely affected by regulatory action, pronouncements, and interpretations.

The Company currently uses a captive reinsurance company to finance certain statutory reserves based on a regulation entitled “Valuation of Life Insurance Policies Model Regulation,” commonly known as “Regulation XXX,” and a supporting guideline entitled “The Application of the Valuation of Life Insurance Policies Model Regulation,” commonly known as “Guideline AXXX,” which are associated with term life insurance and universal life insurance with secondary guarantees, respectively. NAIC and state adoption of Actuarial Guideline XLVIII and the Term and Universal Life Insurance Reserve Financing Model Regulation may make the use of new captive structures in the future less capital efficient and/or lead to lower product returns and could impact the Company’s ability to engage in certain reinsurance transactions with non-affiliates.

The NAIC adopted revisions to the Preamble of the NAIC Financial Regulation Standards and Accreditation Program that includes within the definition of “multi-state insurer” certain insurer-owned captives and special purpose vehicles that are single-state licensed but assume reinsurance from cedants operating in multiple states. The revised definition subjects certain captives, including XXX/AXXX captives, variable annuity and long-term care captives, to all of the accreditation standards applicable to other traditional multi-state insurers, including standards related to capital and surplus requirements, risk-based capital requirements, investment laws, and credit for reinsurance laws. We do not expect the revised definition to affect our existing life insurance captive (or our ability to engage in life insurance captive transactions in the future).36

The Company uses an affiliated Bermuda domiciled reinsurance company, PL Re to reinsure certain fixed annuity business. PL Re is licensed as a Class C entity for affiliate reinsurance and holds reserves based on Bermuda insurance regulations.

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~~required~~Financing toModel ~~discontinue~~Regulation ~~its~~may make the use of ~~captives~~new orcaptive ~~affiliate~~structures ~~reinsurers~~in ~~for~~the ~~intercompany~~future ~~reinsurance~~less ~~transactions on a retroactive basis, adverse impacts would include early termination fees payable to third party finance providers with respect to certain structures, diminished~~ capital ~~position,~~efficient and/or ~~higher~~lead ~~cost of capital. Additionally, finding alternative means~~ to ~~support~~lower ~~policy~~product ~~liabilities~~returns ~~efficiently~~and iscould animpact ~~unknown factor that would be dependent, in part, on future market conditions and~~ the Company’s ability to ~~obtain~~engage ~~required~~in ~~regulatory~~certain ~~approvals.~~reinsurance Ontransactions awith ~~prospective basis, discontinuation of the use of captives or affiliate reinsurers could impact the types, amounts and pricing of products offered by the Company’s subsidiaries~~non-affiliates.

The ~~Company~~NAIC isadopted ~~controlled~~revisions byto ~~Dai~~the Preamble of the NAIC Financial Regulation Standards and Accreditation Program that includes within the definition of “multi-~~ichi~~state ~~Life~~insurer” certain insurer-owned captives and special purpose vehicles that are single-state licensed but assume reinsurance from cedants operating in multiple states. The revised definition subjects certain captives, ~~which~~including ~~has~~XXX/AXXX captives, variable annuity and long-term care captives, to all of the ~~ability~~accreditation standards applicable to ~~make~~other ~~important~~traditional ~~decisions~~multi-state ~~affecting~~insurers, including standards related to capital and surplus requirements, risk-based capital requirements, investment laws, and credit for reinsurance laws. We do not expect the ~~Company’s~~revised ~~business~~definition to affect our existing life insurance captives (or our ability to engage in life insurance captive transactions in the future).

The Company isuses aan ~~wholly~~affiliated ~~owned~~Bermuda ~~subsidiary~~domiciled ofreinsurance ~~PLC~~company, ~~which~~PL inRe ~~turn~~to isreinsure acertain ~~wholly~~fixed ~~owned~~annuity ~~subsidiary of Dai-ichi Life~~business. AsPL ~~the~~Re ~~holder of 100% of PLC’s voting stock, Dai-ichi Life~~ is ~~entitled~~licensed to elect all of the directors of PLC, to approve any action requiring the approval of the holders of PLC’s voting stock, including adopting amendments to its certificate of incorporation and approving mergers or sales of substantially all of its assets (including the assets of the Company), and to prevent any transaction that requires the approval of stockholders. As the sole stockholder of the Company’s parent company, Dai-ichi Life has effective control over its affairs, policies and operations, such as ~~the~~a ~~appointment~~Class ofC ~~management,~~entity ~~future~~for ~~issuances~~affiliate ofreinsurance ~~the Company’s securities, the payments of distributions by the Company, if any, in respect of its common stock, the incurrence of debt by the Company,~~ and ~~the~~holds ~~entering~~reserves ~~into~~based ofon ~~extraordinary~~Bermuda ~~transactions,~~insurance ~~and Dai-ichi Life’s interests may not in all cases be aligned with the interests of investors, including holders of the Company’s debt securities~~regulations. ~~Dai-ichi Life has no obligation to provide the Company with any additional debt or equity financing.~~

Any regulatory action or change in interpretation that materially adversely affects the Company’s use or materially increases the Company’s cost of using captives or reinsurers for the affected business, either retroactively or prospectively, could have a material adverse impact on the Company’s financial condition or results of operations. If the Company were required to discontinue its use of captives or affiliate reinsurers for intercompany reinsurance transactions on a retroactive basis, adverse impacts would include early termination fees payable to third party finance providers with respect to certain structures, diminished capital position, and higher cost of capital. Additionally, finding alternative means to support policy liabilities efficiently is an unknown factor that would be dependent, in part, on future market conditions and the Company’s ability to obtain required regulatory approvals. On a prospective basis, discontinuation of the use of captives or affiliate reinsurers could impact the types, amounts and pricing of products offered by the Company’s subsidiaries.

General Risks

The Company is ~~exposed~~controlled toby ~~risks related to natural and man~~Dai-~~made~~ichi ~~disasters and catastrophes~~Life, ~~such~~which ashas ~~diseases, epidemics, pandemics (including~~ the ~~novel~~ability ~~coronavirus,~~to ~~COVID-19),~~make ~~malicious~~important ~~acts,~~decisions ~~cyberattacks,~~affecting ~~terrorist~~our ~~acts, and climate change, which could adversely affect the Company’s operations and results~~business.

~~While~~As the ~~Company~~holder ~~has~~of ~~obtained~~100% ~~insurance,~~of ~~implemented~~our ~~risk~~voting ~~management and contingency plans~~stock, ~~and~~Dai-ichi ~~taken~~Life ~~preventive~~is ~~measures~~entitled ~~and~~to ~~other~~elect ~~precautions,~~all ~~no predictions~~ of ~~specific~~our ~~scenarios~~directors, ~~can~~to beapprove ~~made~~any ~~and~~action ~~such~~requiring ~~measures may not adequately predict~~ the ~~impact~~approval onof the ~~Company~~holders ~~from~~of ~~such~~our ~~events.~~voting ~~A natural or man-made disaster or catastrophe~~stock, including aadopting ~~severe~~amendments ~~weather~~to orour ~~geological~~certificate ~~event~~of ~~such~~incorporation asand aapproving ~~storm,~~mergers ~~tornado,~~or ~~fire,~~sales ~~flood,~~of ~~earthquake,~~substantially ~~disease,~~all ~~epidemic, pandemic (e.g. the novel coronavirus COVID-19), malicious act, cyberattack, terrorist act, or the effects~~ of ~~climate~~our ~~change~~assets, ~~could~~and ~~cause the Company’s workforce~~ to beprevent ~~unable~~any totransaction ~~engage~~that inrequires ~~operations~~the atapproval ~~one or more~~ of ~~its~~stockholders. ~~facilities~~Dai-ichi orLife ~~result~~has ineffective ~~short-~~control orover ~~long-term~~our ~~interruptions~~affairs, inpolicies ~~the~~and ~~Company’s business~~ operations, ~~any~~such ofas ~~which could be material to~~ the ~~Company’s~~appointment ~~operating~~of ~~results~~management, ~~for~~future aissuances ~~particular period. Certain~~ of ~~these~~our ~~events~~securities, ~~could~~the ~~also~~payments ~~adversely~~of ~~affect~~distributions ~~the~~by ~~mortality~~us, ~~morbidity~~if any, orin ~~other~~respect ~~experience~~ of ~~the~~our ~~Company~~common ~~or its reinsurers and have a significant negative impact on the Company. In addition~~stock, ~~claims arising from~~ the ~~occurrence~~incurrence of ~~such~~debt ~~events~~by orus, ~~conditions~~and ~~could~~the ~~have~~entering ainto ~~material~~of ~~adverse~~extraordinary ~~effect~~transactions, onand ~~the~~Dai-ichi ~~Company~~Life’s ~~financial~~interests ~~condition~~may ~~and~~not ~~results~~in ofall ~~operations.~~cases ~~Such~~be ~~events~~aligned orwith ~~conditions~~the ~~could~~interests ~~also have an adverse effect on lapses and surrenders~~ of ~~existing policies~~investors, asincluding ~~well~~holders ~~as sales~~ of ~~new~~our ~~policies~~debt securities. ~~In addition~~Additionally, ~~such~~our ~~events~~credit oragreement ~~conditions~~and ~~could~~indentures ~~result~~permit inus ato ~~decrease~~pay ordividends ~~halt~~and inmake ~~economic~~other ~~activity~~restricted inpayments ~~large~~to ~~geographic~~Dai-ichi ~~areas,~~Life ~~adversely~~under ~~affecting~~certain ~~the~~circumstances, ~~Company’s business within such geographic areas~~ and~~/or~~ ~~the~~Dai-ichi ~~general~~Life ~~economic~~may ~~climate.~~have ~~Such~~an ~~events~~interest ~~or conditions could also result~~ in ~~additional~~our ~~regulation~~doing orso. ~~restrictions~~Dai-ichi onLife ~~the~~has ~~Company~~no inobligation ~~the~~to ~~conduct~~provide ofus ~~its~~with ~~business.~~any ~~The~~additional ~~possible~~debt ~~macroeconomic effects of such events~~ or ~~conditions~~equity ~~could also adversely affect the Company’s asset portfolio, as well as many other aspects of the Company’s business, financial condition, and results of operations~~financing.

The Company’s ~~results~~is exposed to risks related to natural and ~~financial~~man-made ~~condition~~disasters ~~may~~and becatastrophes, ~~negatively~~such ~~affected~~as ~~should~~diseases, ~~actual~~epidemics, ~~experience~~pandemics ~~differ~~(including ~~from~~the ~~management’s~~coronavirus, ~~models~~COVID-19), ~~assumptions~~malicious acts, orcyberattacks, ~~estimates~~terrorist acts, and climate change, which could adversely affect the Company’s operations and results.

InWhile the ~~conduct~~Company ofhas ~~business~~obtained insurance, implemented risk management and contingency plans, and taken preventive measures and other precautions, no predictions of specific scenarios can be made and such measures may not adequately predict the impact on the Company ~~makes~~from ~~certain~~such ~~assumptions~~events. ~~and~~A ~~utilizes~~natural ~~certain~~or ~~internal~~man-made ~~models~~disaster ~~regarding~~or ~~mortality~~catastrophe, ~~morbidity~~including a severe weather or geological event such as a storm, ~~persistency~~tornado, ~~expenses~~fire, ~~interest~~flood, ~~rates~~earthquake, ~~equity~~disease, ~~markets~~epidemic, ~~tax~~pandemic (e.g. the novel coronavirus COVID-19), ~~business~~malicious ~~mix~~act, ~~casualty~~cyberattack, ~~contingent~~terrorist ~~liabilities~~act, ~~investment~~or ~~performance,~~the ~~and~~effects ~~other~~of ~~factors~~climate ~~appropriate~~change, tocould cause the ~~type~~Company’s ofworkforce ~~business~~to itbe ~~expects~~unable to ~~experience~~engage in ~~future~~operations ~~periods.~~at ~~These~~one ~~assumptions~~or ~~and~~more ~~models~~of ~~are~~its ~~used~~facilities toor ~~estimate~~result ~~the~~in ~~amounts~~short- ofor ~~DAC,~~long-term ~~VOBA,~~interruptions ~~policy~~in ~~liabilities~~the ~~and~~Company’s ~~accruals~~business operations, ~~future~~any ~~earnings,~~of ~~and~~which ~~various~~could ~~components~~be ofmaterial to the Company’s ~~balance~~operating ~~sheet~~results for a particular period. ~~These~~Certain ~~assumptions~~of ~~and~~these ~~models~~events ~~are~~could also ~~used~~adversely inaffect the ~~operation~~mortality, morbidity, or other experience of the Company’s ~~business~~or inits ~~making~~reinsurers ~~decisions~~and ~~crucial~~have toa ~~the~~significant ~~success~~negative ofimpact on the Company. In addition, ~~including~~claims arising from the ~~pricing~~occurrence of ~~acquisitions~~such ~~and~~events ~~products.~~or ~~The~~conditions could have a material adverse effect on the Company’s ~~actual~~financial ~~experience~~condition and results of operations. Such events or conditions could also have an adverse effect on lapses and surrenders of existing policies, as well as ~~changes~~sales inof ~~estimates,~~new ispolicies. ~~used~~In toaddition, ~~prepare~~such ~~the~~events ~~Company’s~~or ~~financial~~conditions ~~statements.~~could Toresult ~~the~~in ~~extent~~a ~~the~~decrease ~~Company’s~~or ~~actual~~halt ~~experience~~in ~~and~~economic ~~changes~~activity in ~~estimates~~large ~~differ~~geographic ~~from~~areas, ~~original~~as ~~estimates,~~well as additional regulation or restrictions on the Company’s ~~financial~~in ~~condition~~the ~~may~~conduct beof ~~adversely~~its ~~affected~~business. The possible macroeconomic effects of such

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~~purchasing~~events ~~the products, persistency and lapses, future progress in the fields of health and medicine, and the projected level of used vehicle values. Actual mortality, morbidity, and/~~or ~~casualty~~conditions ~~experience~~could ~~may~~also ~~differ~~adversely ~~from~~affect ~~expectations derived from~~ the Company’s ~~models.~~asset ~~In addition~~portfolio, ~~continued~~as ~~activity~~well inas ~~the~~many ~~viatical,~~other ~~stranger-owned,~~aspects ~~and/or~~of ~~life settlement industry could cause~~ the Company’s ~~level~~business, offinancial ~~lapses~~condition, ~~to differ from its assumptions about premium persistency~~ and ~~lapses,~~results ~~which~~of ~~could negatively impact the Company’s performance~~operations.

~~Additionally,~~The ~~the calculations the~~ Company’s ~~uses~~results ~~to estimate various components of its balance sheet~~ and ~~statement~~financial ofcondition ~~income~~may ~~are~~be ~~necessarily~~negatively ~~complex~~affected ~~and~~should ~~involve~~actual ~~analyzing~~experience ~~and~~differ ~~interpreting~~from ~~large~~management’s ~~quantities of data. The Company currently employs various techniques for such calculations and relies~~models, ~~in certain instances~~assumptions, ~~on third parties to make~~ or ~~assist in making such calculations. From time to time it develops and implements more sophisticated administrative systems and procedures capable of facilitating the calculation of more precise~~ estimates. The systems and procedures that the Company develops and the Company’s reliance upon third parties could result in errors in the calculations that impact our financial statements or affect our financial condition.

In the conduct of business, the Company makes certain assumptions and utilizes certain internal models regarding mortality, morbidity, persistency, expenses, interest rates, equity markets, tax, business mix, casualty losses, contingent liabilities, investment performance, and other factors appropriate to the type of business it expects to experience in future periods. These assumptions and models are used to estimate the amounts of DAC, VOBA, policy liabilities and accruals, future earnings, and various other components of the Company’s balance sheet. These assumptions and models are also used in the operation of the Company’s business in making decisions crucial to the success of the Company, including the pricing of acquisitions and products. The Company’s actual experience along with estimates of future cash flows are used to prepare the Company’s financial statements. To the extent the Company’s actual experience or estimates of future cash flows differ from original estimates, the Company’s financial condition may be adversely affected.

Mortality, morbidity, and casualty assumptions incorporate underlying assumptions about many factors. Such factors may include, for example, how a product is distributed, for what purpose the product is purchased, the mix of customers purchasing the products, persistency and lapses, future progress in the fields of health and medicine, and the projected level of used vehicle values. Actual mortality, morbidity, and/or casualty experience may differ from expectations derived from the Company’s models. In addition, continued activity in the viatical, stranger-owned, and/or life settlement industry could cause the Company’s level of lapses to differ from its assumptions about premium persistency and lapses, which could negatively impact the Company’s performance.

Additionally, the calculations the Company uses to estimate various components of its balance sheet and statement of income are necessarily complex and involve analyzing and interpreting large quantities of data. The systems and procedures that the Company develops in connection and the Company’s reliance upon third parties could result in errors in the calculations that impact our financial statements or affect our financial condition.

Models, assumptions and estimates involve judgment, and by their nature are imprecise and subject to changes and revisions over time. Accordingly, the Company’s results may be affected, positively or negatively, from time to time, by errors in the design, implementation, or use of its models, actual results differing from assumptions, by changes in estimates, and by changes resulting from implementing more sophisticated administrative systems and procedures that facilitate the calculation of more precise estimates.

The Company is dependent on the performance of others.

The Company’s results may be affected by the performance of others because the Company has entered into various arrangements involving other parties. For example, variable life and annuity deposits are invested in funds managed by third parties, certain modified coinsurance assets are managed by third parties, and the Company enters into derivative transactions with various counterparties and clearinghouses. The Company may rely upon third parties to administer certain portions of its business or business that it reinsures. Any of the other parties upon which the Company depends may default on their obligations to the Company due to bankruptcy, insolvency, lack of liquidity, adverse economic conditions, operational failure, fraud, or other reasons. Such defaults could have a material adverse effect on the Company’s financial condition and results of operations.

Certain of these other parties may act on behalf of the Company or represent the Company in various capacities. Consequently, the Company may be held responsible for obligations that arise from the acts or omissions of these other parties.

Most of the Company’s products are sold through independent third-party distribution channels. There can be no assurance that the terms of these relationships will remain acceptable to us or the distributors, as they are subject to change as a result of business combinations, mergers, consolidation, or changes in business models, compensation arrangements, or new distribution channels. If one or more key distributors terminated their relationship with us, increased the costs of selling our products, or reduced the amount of sales they produce for us, our results of operations could be adversely affected. If we are unsuccessful in attracting and retaining key associates who conduct our business, sales of our products could decline and our results of operations and financial condition could be materially adversely affected.

Because our products are distributed through unaffiliated third-party distributors, we may not be able to fully monitor or control the manner of their distribution despite our training and compliance programs. If our products are distributed by such firms in an inappropriate manner, or to customers for whom they are unsuitable, we may suffer reputational and other harm to our business. In addition, our distributors may also sell our competitors’ products. If our competitors offer products that are more attractive than ours, or pay higher compensation than we do, these distributors may concentrate their efforts on selling our competitors’ products instead of ours.

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firms in an inappropriate manner, or to customers for whom they are unsuitable, we may suffer reputational and other harm to our business. In addition, our distributors may also sell our competitors’ products. If our competitors offer products that are more attractive than ours, or pay higher compensation than we do, these distributors may concentrate their efforts on selling our competitors’ products instead of ours.

The Company’s risk management policies, practices, and procedures could leave it exposed to unidentified or unanticipated risks, which could negatively affect its business or result in losses.

The Company has developed risk management policies and procedures and expects to continue enhancing them in the future. Nonetheless, the Company’s policies and procedures to identify, monitor, and manage both internal and external risks may not predict future exposures, which could be different or significantly greater than expected.

These identified risks may not be the only risks facing the Company. Additional risks and uncertainties not currently known to the Company may adversely affect its business, financial condition and/or results of operations.

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The Company’s strategies for mitigating risks arising from its day-to-day operations may prove ineffective resulting in a material adverse effect on its results of operations and financial condition.

The Company’s performance is highly dependent on its ability to manage risks that arise from a large number of its day-to-day business activities, including, but not limited to, policy pricing, reserving and valuation, underwriting, claims processing, policy administration and servicing, administration of reinsurance, execution of its investment and hedging strategy, financial and tax reporting, and other activities, many of which are very complex. The Company also may rely on third parties for such activities. The Company seeks to monitor and control its exposure to risks arising out of or related to these activities through a variety of internal controls, management review processes, and other mechanisms. However, the occurrence of unanticipated risks, or the occurrence of risks of a greater magnitude than expected, including those arising from a failure in processes, procedures or systems implemented by the Company or a failure on the part of employees or third parties upon which the Company relies in this regard, may have a material adverse effect on the Company’s financial condition or results of operations.

Events that damage our reputation or the reputation of our industry could adversely impact our business, results of operations, or financial condition.

There are events which could harm our reputation, including, but not limited to, regulatory investigations, adverse media commentary, legal proceedings, and cyber or other information security events. Depending on the severity of damage to the Company’s reputation, our sales of new business, and/or retention of existing business could be negatively impacted, and our ability to compete for acquisition transactions or engage in financial transactions may be diminished, all of which could adversely affect our results of operations or financial condition.

As with all financial services companies, the Company’s ability to conduct business is dependent upon consumer confidence in the industry and its products. Actions of competitors and financial difficulties of other companies in the industry could undermine consumer confidence and adversely affect retention of existing business and future sales of the Company’s insurance and investment products.

The Company may not be able to protect its intellectual property and may be subject to infringement claims.

The Company relies on a combination of contractual rights and copyright, trademark, patent, and trade secret laws to establish and protect its intellectual property. Although the Company uses a broad range of measures to protect its intellectual property rights, third parties may infringe or misappropriate its intellectual property. The Company may have to litigate to enforce and protect its copyrights, trademarks, patents, trade secrets, and know-how or to determine their scope, validity, or enforceability, which represents a diversion of resources that may be significant in amount and may not prove successful. The loss of intellectual property protection or the inability to secure or enforce the protection of the Company’s intellectual property assets could have a material adverse effect on its business and ability to compete.

The Company also may be subject to costly litigation in the event that another party alleges its operations or activities infringe upon that party’s intellectual property rights. ~~Third parties may have, or may eventually be issued, patents that could be infringed by the Company’s products, methods, processes, or services.~~ Any ~~party that holds~~ such ~~a patent could make a claim of infringement against the Company. The Company may also be subject to~~ claims ~~by third parties for infringement of copyright~~ and ~~trademarks, violation of trade secrets, or breach of license usage rights. Any such claims and~~ any resulting litigation could result in significant liability for damages. If the Company were found to have infringed third party patent or other intellectual property rights, it could incur substantial liability, and in some circumstances could be enjoined from providing certain products or services to its customers or utilizing and benefiting from certain methods, processes, copyrights, trademarks, trade secrets, or licenses, or alternatively could be required to enter into costly licensing arrangements with third parties, all of which could have a material adverse effect on the Company’s business, results of operations, and financial condition

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alternatively could be required to enter into costly licensing arrangements with third parties, all of which could have a material adverse effect on the Company’s business, results of operations, and financial condition

The Company may be required to establish a valuation allowance against its deferred tax assets, which could have a material adverse effect on the Company’s results of operations, financial condition, and capital position.

Deferred tax assets are attributable to certain differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets represent future savings of taxes which would otherwise be paid in cash. The realization of deferred tax assets is dependent upon the future generation of an amount of taxable income sufficient enough to ensure that the future tax deductions underlying such assets will result in a tax benefit. Realization may also be limited for other reasons, including but not limited to changes in tax rules or regulations. If it is determined that a certain deferred tax asset cannot be realized, then a deferred tax valuation allowance is established, with a corresponding charge to either adjusted operating income or other comprehensive income (depending on the nature of the deferred tax asset).

42Based on the Company’s current assessment of future taxable income, including available tax planning opportunities, it is more likely than not that the Company will generate sufficient taxable income to realize its material deferred tax assets net of any existing valuation allowance. If future events differ from the Company’s current forecasts, an additional valuation allowance will be established, which could have a material adverse effect on the Company’s results of operations, financial condition, or capital position.

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Based on the Company’s current assessment of future taxable income, including available tax planning opportunities, it is more likely than not that the Company will generate sufficient taxable income to realize its material deferred tax assets net of any existing valuation allowance. The Company recognized a valuation allowance of $9.5 million and $9.6 million as of December 31, 2020 and 2019, respectively, related to certain deferred tax assets which are more likely than not to expire unutilized. If future events differ from the Company’s current forecasts, an additional valuation allowance will be established, which could have a material adverse effect on the Company’s results of operations, financial condition, or capital position.

New accounting rules, changes to existing accounting rules, or the granting of permitted accounting practices to competitors could negatively impact the Company.

The Company is required to comply with GAAP. A number of organizations are instrumental in the development and interpretation of GAAP such as the SEC, the Financial Accounting Standards Board (“FASB”), and the American Institute of Certified Public Accountants (“AICPA”). GAAP is subject to constant review by these organizations and others in an effort to address emerging accounting rules and issue interpretative accounting guidance on a continual basis. The Company can give no assurance that future changes to GAAP will not have a negative impact on the Company. GAAP includes the requirement to carry certain assets and liabilities at fair value. These fair values are sensitive to various factors including, but not limited to, interest rate movements, credit spreads, and various other factors. Because of this sensitivity, changes in these fair values may cause increased levels of volatility in the Company’s financial statements.

In addition, the Company’s ~~and its~~ insurance subsidiaries are required to comply with ~~statutory accounting principles (“~~SAP”). SAP and various components of SAP (such as actuarial reserving methodology) are subject to constant review by the NAIC and its task forces and committees as well as state insurance departments in an effort to address emerging issues and otherwise improve or alter financial reporting. Certain NAIC pronouncements related to accounting and reporting matters take effect automatically without affirmative action by the states, and various proposals either are currently or have previously been pending before committees and task forces of the NAIC, some of which, if enacted, would negatively affect the Company. The NAIC is also currently working to reform model regulation in various areas. The Company cannot predict whether or in what form reforms will be enacted by state legislatures and, if so, whether the enacted reforms will positively or negatively affect the Company. In addition, the NAIC Accounting Practices and Procedures manual provides that state insurance departments may permit insurance companies domiciled in the state to depart from SAP by granting them permitted accounting practices. The Company cannot predict whether or when the insurance departments of the states of domicile of its competitors may permit them to utilize advantageous accounting practices that depart from SAP, the use of which is not permitted by the insurance departments of the states of domicile of the Company’s ~~and its~~ insurance subsidiaries. With respect to regulations and guidelines, states sometimes defer to the interpretation of the insurance department of the state of domicile. Neither the action of the domiciliary state nor action of the NAIC is binding on a state. Accordingly, a state could choose to follow a different interpretation. The Company can give no assurance that future changes to SAP or components of SAP or the granting of permitted accounting practices to its competitors will not have a negative impact on the Company. For additional information regarding pending NAIC reforms, please see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

The Company’s home office is located at 2801 Highway 280 South, Birmingham, Alabama. The Company owns three buildings consisting of 620,000 square feet at the home office location. The first building was constructed in 1974, the second ~~building was constructed in 1982, and the third building was constructed in 2004. Parking is provided for approximately 2,594 vehicles.~~

~~The Company leases administrative and marketing office space in various cities with most leases being for periods of two to twenty-five years. The aggregate annualized rent is $4.1 million.~~40

The Company believes its properties are adequate and suitable for the Company’s business as currently conducted and are adequately maintained. The above properties do not include properties the Company owns for investment only.

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building was constructed in 1982, and the third building was constructed in 2004. Parking is provided for approximately 2,594 vehicles.

The Company leases administrative and marketing office space in various cities with most leases being for periods of two to twenty-five years. The aggregate annualized rent is $1 million.

Item 3. Legal Proceedings

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 putative class actions (Beverly Allen v. Protective Life Insurance Company, Civil Action No. 1:20-cv-00530-JLT (E.D. Cal. filed Apr. 14, 2020), and Janice Schmidt v. Protective Life Insurance Company, et al., Civil Action No. 1:21-cv-01784-SAB (E.D. Cal. filed Dec. 17, 2021) in which the plaintiffs claim that defendants’ alleged failure to comply with certain California statutes which address contractual grace periods and lapse notice requirements for certain life insurance policies requires that these policies remain in force. The plaintiffs seek unspecified monetary damages and injunctive relief. No class has been certified in either putative class action. 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 and remanded the case back to the Court of Appeal to review the jury’s original verdict in favor of Protective. In continuing to defend these matters, the 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.

To the knowledge and in the opinion of management, there are no other material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of our properties is the subject.

Item 4. Mine Safety Disclosure — Not Applicable

4441

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PART II

Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The Company is a wholly owned subsidiary of Protective Life Corporation (“PLC”) and, as a result, there is no market for the Company’s common stock.

As of December 31, ~~2020~~2021, $1.48 billion of the Company’s consolidated shareowner’s equity excluding net unrealized gains and losses on investments represented restricted net assets of the Company and its insurance subsidiaries that cannot be transferred to Protective Life Insurance Company in the form of dividends, loans, or advances.

Insurers are subject to various state statutory and regulatory restrictions on the insurers’ ability to pay dividends. In general, dividends up to specific levels are considered ordinary and may be paid thirty days after written notice to the insurance commissioner of the state of domicile unless such commissioner objects to the dividend prior to the expiration of such period. Dividends in larger amounts are considered extraordinary and are subject to affirmative prior approval by such commissioner. The ~~maximum~~insurance ~~amount~~subsidiaries ~~that~~may ~~would~~pay, ~~qualify~~without asthe ~~ordinary~~approval ~~dividends~~of to the ~~Company~~Insurance ~~from~~Commissioners ~~its~~of ~~insurance~~the ~~subsidiaries~~state inof ~~2021~~domicile, is$136 ~~estimated~~million toof bedistributions ~~$453.8~~in ~~million~~2022.

PLC owns all of the preferred stock of the Company’s subsidiary, Protective Life and Annuity Insurance Company (“PLAIC”). PLAIC paid no dividends on its preferred stock in ~~2020~~2021 or ~~2019~~2020. The Company and its subsidiaries may pay cash dividends in the future, subject to their earnings and financial condition and other relevant factors.

Item 6. ~~Selected Financial Data~~Reserved

~~The Company has applied the amendment to Regulation S-K Item 301 which became effective on February 10, 2021.~~42

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our consolidated audited financial statements and related notes included herein.

Item 7 of our Annual Report on Form 10-K generally discusses year-to-year comparisons between the years ended December 31, ~~2020~~2021 and ~~2019~~2020. Discussions of information related to ~~2018~~2019 and year-to-year comparisons between ~~2019~~2020 and ~~2018~~2019 are not included in this Form 10-K. Comparative discussions between ~~2019~~2020 and ~~2018~~2019 can be found in “Item 7 - Management’s Discussions and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for year ended December 31, ~~2019~~2020.

FORWARD-LOOKING STATEMENTS — CAUTIONARY LANGUAGE

This report reviews our financial condition and results of operations, including our liquidity and capital resources. Historical information is presented and discussed, and where appropriate, factors that may affect future financial performance are also identified and discussed. Certain statements made in this report include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that may predict, forecast, indicate, or imply future results, performance, or achievements instead of historical facts and may contain words like “believe”, “expect”, “estimate”, “project”, “budget”, “forecast”, “anticipate”, “plan”, “will”, “shall”, “may”, and other words, phrases, or expressions with similar meaning. Forward-looking statements involve risks and uncertainties, which may cause actual results to differ materially from the results contained in the forward-looking statements, and we cannot give assurances that such statements will prove to be correct. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future developments or otherwise. For more information about the risks, uncertainties, and other factors that could affect our future results, please refer to Item 1A, Risk Factors, included herein.

IMPORTANT INVESTOR INFORMATION

We file reports with the United States Securities and Exchange Commission (the “SEC”), including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other reports as required. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer and the SEC maintains an internet site at www.sec.gov that contains these reports and other information filed electronically by us. We make available through our website, https://investor.protective.com, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC.

We also make available to the public current information, including financial information, regarding the Company and our affiliates on the Financial Information page of our website, https://investor.protective.com. We encourage investors, the media and others interested in us and our affiliates to review the information we post on our website. The information found on our website is not part of this or any other report filed with or furnished to the SEC.

OVERVIEW

Our Business

We are a wholly owned subsidiary of Protective Life Corporation (“PLC”). Founded in 1907, we are the largest operating subsidiary of PLC. On February 1, 2015, PLC became a wholly owned subsidiary of The Dai-ichi Life Insurance Company, Limited, a kabushiki kaisha organized under the laws of Japan (now known as Dai-ichi Life Holdings, Inc., “Dai-ichi Life”), when DL Investment (Delaware), Inc., a wholly owned subsidiary of Dai-ichi Life, merged with and into PLC (the “Merger”). We provide financial services through the production, distribution, and administration of insurance and investment products. Unless the context otherwise requires, the “Company,” “we,” “us,” or “our” refers to the consolidated group of Protective Life Insurance Company and our subsidiaries.

We have several operating segments, each having a strategic focus. An operating segment is distinguished by products, channels of distribution, and/or other strategic distinctions. We periodically evaluate our operating segments and make adjustments to our segment reporting as needed.

In 2020, as a result of changes in the way the chief operating decision maker makes decisions about the allocation of resources and assesses the performance of the business, the Company combined two of its former six segments into one segment, Retail Life and Annuity. These changes enable the Company to better serve the needs of its customers and to help achieve the goals of the organization.

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Prior-period amounts were adjusted retrospectively to reflect the change to our reportable segments.

Our operating segments are Retail Life & Annuity, Acquisitions, Stable Value Products, and Asset Protection. We have an additional reporting segment referred to as Corporate and Other.

•Retail Life and Annuity—We primarily market fixed universal life (“UL”), indexed universal life (“IUL”), variable universal life (“VUL”), level premium term insurance (“traditional”), fixed annuity, and variable annuity (“VA”) products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, independent marketing organizations, and affinity groups.

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(“VA”) products on a national basis primarily through networks of independent insurance agents and brokers, broker-dealers, financial institutions, independent marketing organizations, and affinity groups.

•Acquisitions—We focus on acquiring, converting, and/or servicing policies and contracts from other companies. This segment’s primary focus is on life insurance policies and annuity products that were sold to individuals. The level of the 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 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.

•Stable Value Products—We sell fixed and floating rate funding agreements directly to the trustees of municipal bond proceeds, money market funds, bank trust departments, and other 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. We also have an unregistered funding agreement-backed notes program which provides for offers of notes to both domestic and international institutional investors.

•Asset Protection—We market extended service contracts, guaranteed asset protection (“GAP”) products, ~~credit life~~ and ~~disability insurance, 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.

•Corporate and Other—This 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, financing and investment related transactions, and the operations of several small subsidiaries.

Impact of COVID-19

InBeginning ~~December~~in ~~2019,~~the afirst ~~novel~~quarter ~~strain~~ of ~~coronavirus~~2020, ~~(COVID-19)~~the ~~was~~outbreak ~~reported~~of ~~in Wuhan, China.~~ COVID-19 ~~has~~created ~~since~~significant ~~spread,~~economic and ~~infections~~social ~~have~~disruption ~~been~~in ~~found around~~ the ~~world, including the United States. On March 11, 2020, the World Health Organization declared the outbreak to constitute a pandemic based on the~~ global ~~spread~~economy ~~of the disease, the severity of illnesses it causes,~~ and ~~its~~financial ~~effects on society~~markets. ~~The~~These ~~extent~~events ofimpacted ~~the~~various ~~impact of COVID-19 on our~~ operational and financial ~~performance~~aspects ~~will~~of ~~depend~~the onCompany’s ~~certain~~business ~~developments,~~in ~~including~~2020 ~~the duration~~ and continued ~~spread~~to ofimpact ~~the~~earnings ~~outbreak,~~throughout ~~current~~2021 ~~and~~based ~~future regulatory and private sector responses~~on, ~~which~~amongst ~~may~~other ~~be precautionary~~factors, ~~and~~ the ~~impact~~volume ~~on our customers, workforce,~~ and ~~vendors,~~severity ~~all~~ of ~~which~~claims ~~are~~related ~~uncertain~~to ~~and cannot be predicted. The~~ COVID-19 ~~outbreak is disrupting supply chains~~ and ~~affecting~~the ~~production~~financial ~~and~~disruption ~~sales~~caused ~~across~~by athe ~~range of industries~~pandemic, ~~and~~which it could ~~materially adversely~~ impact the ~~mortality,~~Company’s ~~morbidity,~~investment orportfolio. ~~other~~The ~~experience of the~~ Company orcontinues ~~its~~to ~~reinsurers~~monitor orthe ~~have a material adverse effect on lapses and surrenders of existing policies, as well as sales of new policies. The continued macroeconomic~~ effects of ~~the~~ COVID-19, ~~outbreak~~including ~~could also materially adversely affect~~ the ~~Company’s~~spread ~~asset portfolio, as well as many other aspects~~ of the ~~Company’s~~Delta ~~business, financial condition,~~ and ~~results~~Omicron ~~of operations~~variant.

Retail Life and Annuity segment and Acquisitions segment. The pre-tax adjusted operating income in the Retail Life and Annuity segment and the Acquisitions segment were impacted by the effects of the COVID-19 pandemic on mortality ~~and~~during the ~~equity~~year ~~markets~~ended December 31, 2021. The COVID-19 pandemic has resulted in an increase in claims in both the ~~traditional~~ life insurance and ~~universal~~annuity ~~life~~ blocks. ~~Further,~~The ~~the~~ pandemic ~~has~~will ~~resulted~~continue into ~~significant~~impact ~~volatility~~earnings inbased ~~equity~~on, ~~markets~~amongst ~~which~~other ~~has~~factors, ~~impacted~~the ~~variable~~volume ~~account~~and ~~values.~~severity ~~Declining~~of ~~variable~~claims ~~product~~related ~~account~~to ~~values~~COVID-19 ~~accelerated~~and the ~~amortization~~financial ofdisruption ~~deferred~~caused ~~acquisitions~~by ~~costs~~the ~~(“DAC”) and value of business acquired (“VOBA”)~~pandemic, ~~resulting~~which incould ~~higher~~impact ~~annuity~~the ~~guaranteed~~Company’s ~~benefits,~~investment ~~and~~portfolio. ~~generated~~The ~~lower~~pandemic ~~fee~~has ~~income~~also ~~during~~affected the ~~three~~manner ~~months~~in ~~ended~~which ~~March~~our ~~31,~~Acquisitions ~~2020.~~segment Anconducts ~~improvement~~due indiligence, ~~equity~~negotiates ~~markets~~transactions, ~~since~~works ~~that~~with ~~time~~counterparties ~~has~~and ~~resulted~~integrates acquisitions, in aneach ~~increase~~case inadapting ~~account~~processes ~~values,~~and ~~which~~procedures ~~resulted~~to inreflect the ~~slowing~~increased ofreliance ~~DAC~~on technology and ~~VOBA~~remote ~~amortization~~interactions ~~and~~as a ~~decrease~~result inof ~~guaranteed benefit reserves~~COVID-19.

47Asset Protection segment. The primary impacts from COVID-19 on the Asset Protection segment during 2021 included 1) a significant increase in sales in the first half of 2021 related to pent up demand, partly fueled by large government stimulus payments in 2020 and 2021, while the second half of 2021 saw significant reductions in sales related to constrained auto inventories due to supply chain issues, 2) a reduction in GAP claims as a result of the increase in used car values, and 3) lower general and administrative expenses, especially with respect to travel costs. While current trends remain positive, there remains uncertainty around the potential effect of the COVID-19 pandemic on the segment’s 2022 results, including a potential negative impact on sales 1) if a resurgence in COVID-19 cases result in increased shut downs of economic activity or 2) prolonged supply chain issues such as part and chip shortages continue to cause a reduction in auto production and inventories.

Commercial Mortgage Loans. We provide 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 Mortgage

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AsLoan ~~variable~~Program ~~account~~(the ~~values~~“Loan ~~increase,~~Modification ~~our~~Program”). ~~exposure~~During tothe ~~claims~~year ~~related~~ended toDecember ~~guaranteed~~31, ~~benefits~~2021, ~~have~~we ~~declined~~modified ~~which~~23 ~~resulted~~commercial inmortgage ~~lowering~~loans under the ~~required~~Loan ~~reserves~~Modification ~~associated~~Program, ~~with~~representing ~~these~~$475 ~~guaranteed~~million ~~benefits~~in unpaid principal balance. ~~Additionally~~As of December 31, 2021, since the ~~pandemic~~inception ~~will~~of ~~continue~~the toCARES ~~impact~~Act ~~earnings~~there ~~based~~were on268 total commercial mortgage loans modified under the ~~volume~~Loan ~~and~~Modification ~~severity~~Program, ofrepresenting ~~claims~~$2 billion in ~~the~~unpaid ~~life~~principal ~~insurance~~balance. ~~blocks~~At ~~related~~December to31, ~~COVID-19~~2021, $1.9 ~~The~~billion ~~pandemic~~of ~~has~~these ~~also~~loans ~~affected~~have ~~the~~resumed ~~manner~~regular inprincipal ~~which~~and ~~our~~interest ~~Acquisitions~~payments ~~segment~~in ~~conducts~~accordance ~~due~~with ~~diligence,~~the ~~negotiates~~terms ~~transactions,~~of ~~works~~the ~~with~~modification ~~counterparties~~agreements and ~~integrates~~we ~~acquisitions,~~expect the remaining $69 million in ~~each~~unpaid ~~case~~principal ~~adapting~~on ~~processes~~commercial ~~and~~mortgage ~~procedures~~loans to ~~reflect~~resume scheduled payments in accordance with the ~~increased~~agreed ~~reliance~~upon onterms. ~~technology~~The modifications under this program include agreements to defer principal payments only and/or ~~remote~~to ~~interactions~~defer asprincipal and interest payments for a ~~result~~specified period of ~~COVID-19~~time. None of these modifications were considered troubled debt restructurings.

Asset Protection segment. The primary impacts from COVID-19 on the Asset Protection segment during 2020 included a negative impact on sales due to lower sales in the auto industry, a reduction in vehicle service and GAP claims as a result of the effect of less miles driven and lower general and administrative expenses, especially with respect to travel costs. While current trends remain positive, there remains uncertainty around the potential effect of the COVID-19 pandemic on the segment’s 2021 results, including a potential negative impact on sales if increased COVID-19 cases result in increased shut downs of economic activity.

Corporate Securities. The overall deterioration in the macroeconomic environment as a result of the impact of COVID-19 as well as the continued pressure on commodity prices has negatively affected the values of certain of our investments. The largest impacts have been in the oil & gas, real estate, and consumer and retail industries. For the year ended December 31, 2020, we have recognized $125.5 million of impairments primarily reflecting declines in the value of certain oil and gas securities.

Commercial Mortgage Loans. On March 27, 2020, H.R. 748, the Coronavirus Aid Relief, and Economic Security Act (“the CARES Act”) was signed into legislation. Section 4013 of the CARES Act provides additional relief for certain loan modifications made as a result of the COVID-19 pandemic. Specifically, the CARES Act specifies that a financial institution may suspend the requirements under GAAP with respect to troubled debt restructuring classification and reporting for loan modifications made in response to the COVID-19 pandemic which meet the following criteria: 1) the borrower was not more than 30 days past due as of December 31, 2019 and 2) the modifications are related to arrangements that defer or delay the payment of principal or interest, or change the interest rate on the loan. The relief provided by the CARES Act expected to terminate on December 31, 2020 has been extended to December 31, 2021. Accordingly, the Company provided certain relief under the CARES Act under its COVID-19 Commercial Mortgage Loan Program (the “Loan Modification Program”). During 2020, the Company modified 315 loans under the Loan Modification Program, representing $2.2 billion in unpaid principal balance. As of December 31, 2020, there were 305 loans remaining, representing $2.2 billion in unpaid principal balance. At December 31, 2020, $1.6 billion of these loans have resumed regular principal and interest payments in accordance with the terms of the modification agreements. 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.

RISKS AND UNCERTAINTIES

The factors which could affect our future results include, but are not limited to, general economic conditions and the following risks and uncertainties:

COVID-19 Pandemic

•the ~~novel~~ coronavirus (COVID-19) global pandemic has adversely impacted our business, and the ultimate effect on our business, results of operations, and financial condition will depend on future developments that are highly uncertain, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic;

Financial Environment

•interest rate fluctuations and sustained periods of low or high interest rates could negatively affect our interest earnings and spread income, or otherwise impact our business;

•~~our~~the ~~investments~~Company ~~are~~is subject to market and credit risks, which could be heightened during periods of extreme volatility or disruption in financial and credit markets;

•climate change and related legislative and regulatory initiatives may materially affect the Company’s business and may adversely affect our investment portfolio;

•elimination of London Inter-Bank Offered Rate (“LIBOR”) may adversely affect the interest rates on and value of certain derivatives and floating rate securities we hold and floating rate securities we have issued, the value and profitability of certain real estate lending and other activities we conduct, and any other assets or liabilities whose value is tied to LIBOR;

•~~credit~~climate ~~market~~change ~~volatility~~and orrelated ~~disruption~~legislative ~~could~~and ~~adversely~~regulatory ~~impact~~initiatives ~~our~~may ~~financial~~materially ~~condition~~affect orthe ~~results~~Company’s ~~from~~business ~~operations~~and may adversely affect our investment portfolio;

48•the elimination of LIBOR may adversely affect the interest rate on and value of certain derivatives and floating rate securities we hold and floating rate securities we have issued, the value and profitability of certain real estate lending and other activities we conduct, and any other assets or liabilities whose value is tied to LIBOR;

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•disruption of the capital and credit markets could negatively affect our ability to meet our liquidity and financial needs;

•equity market volatility could negatively impact our business;

•our use of derivative financial instruments within our risk management strategy may not be effective or sufficient;

•our ability to grow depends in large part upon the continued availability of capital;

•we could be forced to sell investments at a loss to cover policyholder withdrawals;

•difficult general economic conditions could materially adversely affect our business and results of operations;

•we could be adversely affected by an inability to access our credit facility or FHLB lending;

•the amount of statutory capital or risk-based capital that we have and the amount of statutory capital or risk-based capital that we must hold to maintain our financial strength and credit ratings and meet other requirements can vary significantly from time to time and is sensitive to a number of factors outside of our control;

•we could be adversely affected by a ratings downgrade or other negative action by a rating organization;

•our securities lending program may subject us to liquidity and other risks;

•our financial condition or results of operations could be adversely impacted if our assumptions regarding the fair value and future performance of our investments differ from actual experience;

•adverse actions of certain funds or their advisers could have a detrimental impact on our ability to sell our variable life and annuity products, or maintain current levels of assets in those products;

Industry and Regulation

•the business of our company is highly regulated and is subject to routine audits, examinations, and actions by regulators, law enforcement agencies, and self-regulatory organizations;

•we may be subject to regulations of, or regulations influenced by, international regulatory authorities or initiatives;

•the National Association of Insurance Commissioners (“NAIC”) actions, pronouncements and initiatives may affect our product profitability, reserve and capital requirements, financial condition or results of operations;

~~•laws, regulations and initiatives related to unreported deaths and unclaimed property and death benefits may result in operational burdens, fines, unexpected payments or escheatments;~~ 45

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•we are subject to insurance guaranty fund laws, rules and regulations that could adversely affect our financial condition or results of operations;

•we are subject to insurable interest laws, rules and regulations that could adversely affect our financial condition or results of operations;

•laws, rules and regulations promulgated in connection with the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) may adversely affect our results of operations or financial condition;

•new and amended regulations regarding the standard of care or standard of conduct applicable to investment professionals, insurance agencies, and financial institutions that recommend or sell annuities or life insurance products may have a material adverse impact on our ability to sell annuities and other products and to retain in-force business and on our financial condition or results of operations;

•we may be subject to regulation, investigations, enforcement actions, fines and penalties imposed by the SEC, the Financial Industry Regulatory Authority (“FINRA”) and other federal and international regulators in connection with our business operations;

•changes to tax law, or interpretations of existing tax law could adversely affect our ability to compete with non-insurance products or reduce the demand for certain insurance products;

•if our business does not perform well, or economic or market conditions change negatively, we may be required to recognize an impairment of our goodwill and indefinite lived intangible assets which could adversely affect our results of operations or financial condition;

•use of reinsurance introduces variability in our statements of income;

•our reinsurers could fail to meet assumed obligations, increase rates, terminate agreements or be subject to adverse developments that could affect us;

•our policy claims fluctuate from period to period resulting in earnings volatility;

•we operate in a mature, highly competitive industry, which could limit our ability to gain or maintain our position in the industry and negatively affect profitability;

•developments in technology may impact our business;

•our ability to maintain competitive unit costs is dependent upon the level of new sales and persistency of existing business;

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Privacy and Cyber Security

•compliance with existing and emerging privacy regulations could result in increased compliance costs and/or lead to changes in business practices and policies, and any failure to protect the confidentiality of consumer information could adversely affect our reputation and have a material adverse effect on our business, financial condition and results of operations;

Acquisitions, Dispositions or Other Corporate Structural Matters

•we may not realize our anticipated financial results from our acquisitions strategy;

•we ~~operate as a holding company and~~ depend on the ability of our subsidiaries to transfer funds to us to meet our obligations;

•our use of affiliate and captive reinsurance companies to finance statutory reserves related to our fixed annuity and term and universal life products and to reduce volatility affecting our variable annuity products may be limited or adversely affected by regulatory action, pronouncements, and interpretations;

General

•~~exposure~~the toCompany ~~risks~~is ~~related~~controlled toby ~~natural and man~~Dai-~~made~~ichi ~~disasters and catastrophes~~Life, ~~such~~which ashas ~~diseases, epidemics, pandemics (including~~ the ~~novel~~ability ~~coronavirus,~~to ~~COVID-19),~~make ~~malicious~~important ~~acts,~~decisions ~~cyberattacks,~~affecting ~~terrorist acts, and climate change, which could adversely affect~~ our ~~operations and results~~business;

•exposure to risks related to natural and man-made disasters and catastrophes, such as diseases, epidemics, pandemics (including the coronavirus, COVID-19), malicious acts, cyberattacks, terrorist acts, and climate change, which could adversely affect our operations and results;

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•our results and financial condition may be negatively affected should actual experience differ from management’s models, assumptions, or estimates;

•we are dependent on the performance of others;

•our risk management policies, practices, and procedures could leave us exposed to unidentified or unanticipated risks, which could negatively affect our business or result in losses;

•our strategies for mitigating risks arising from our day-to-day operations may prove ineffective resulting in a material adverse effect on our results of operations and financial condition;

•events that damage our reputation or the reputation of our industry could adversely impact our business, results of operations, or financial condition;

•we may not be able to protect our intellectual property and may be subject to infringement claims;

•we may be required to establish a valuation allowance against our deferred tax assets, which could have a material adverse effect on our results of operations, financial condition, and capital position; and

•new accounting rules, changes to existing accounting rules, or the granting of permitted accounting practices to competitors could negatively impact the Company.

For more information about the risks, uncertainties, and other factors that could affect our future results, please see Risk Factors, of this report.

CRITICAL ACCOUNTING POLICIES

Our accounting policies require the use of judgments relating to a variety of assumptions and estimates, including, but not limited to expectations of current and future mortality, morbidity, persistency, expenses, and interest rates, as well as expectations around the valuations of investments, securities, and certain intangible assets. Because of the inherent uncertainty when using the assumptions and estimates, the effect of certain accounting policies under different conditions or assumptions could be materially different from those reported in the consolidated financial statements. A discussion of our various critical accounting policies is presented below.

Fair Value of Financial Instruments - The Financial Accounting Standards Board (“FASB”) guidance defines fair value for accounting principles generally accepted in the United States of America (“GAAP”) and establishes a framework for measuring fair value as well as a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. The term “fair value” in this document is defined in accordance with GAAP. The standard describes three levels of inputs that may be used to measure fair value. For more information, refer to Note 2, Summary of Significant Accounting Policies and Note 5, Fair Value of Financial Instruments, to the consolidated financial statements included in this report.

50Available-for-sale securities and trading securities are recorded at fair value, which is primarily based on actively traded markets where prices are based on either direct market quotes or observed transactions. Liquidity is a significant factor in the determination of the fair value for these securities. Market price quotes may not be readily available for some positions or for some positions within a market sector where trading activity has slowed significantly or ceased. These situations are generally triggered by the market’s perception of credit uncertainty regarding a single company or a specific market sector. In these instances, fair value is determined based on limited available market information and other factors, principally from reviewing the issuer’s financial position, changes in credit ratings, and cash flows on the investments. As of December 31, 2021, $2.6 billion of available-for-sale and trading securities, excluding other long-term investments, were classified as Level 3 fair value assets.

For securities that are priced via non-binding independent broker quotations, we assess whether prices received from independent brokers represent a reasonable estimate of fair value through an analysis using internal and external cash flow models developed based on spreads and, when available, market indices. We use a market-based cash flow analysis to validate the reasonableness of prices received from independent brokers. These analytics, which are updated daily, incorporate various metrics (yield curves, credit spreads, prepayment rates, etc.) to determine the valuation of such holdings. As a result of this analysis, if we determine that there is a more appropriate fair value based upon the analytics, the price received from the independent broker is adjusted accordingly. As of December 31, 2021, we did not adjust any prices received from independent brokers.

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~~Note 2~~flows of the derivatives using current and implied future market conditions. These models include market-observable estimates of volatility and interest rates in the determination of fair value. The use of different assumptions may have a material effect on the estimated fair value amounts, ~~Summary~~as well as the amount of ~~Significant~~reported ~~Accounting~~net ~~Policies~~income. ~~and~~In ~~Note 5~~addition, ~~Fair~~measurements ~~Value~~of ineffectiveness of ~~Financial~~hedging ~~Instruments~~relationships are subject to interpretations and estimations, and any differences may result in material changes to our results of operations. The fair values of derivative assets and liabilities include adjustments for market liquidity, counterparty credit quality, and other deal specific factors, where appropriate. The fair values of derivative assets and liabilities traded in the ~~consolidated~~over-the-counter market are determined using quantitative models that require the use of multiple market inputs including interest rates, prices, and indices to generate continuous yield or pricing curves and volatility factors. The predominance of market inputs are actively quoted and can be validated through external sources. Estimation risk is greater for derivative financial ~~statements~~instruments ~~included~~that are either option-based or have longer maturity dates where observable market inputs are less readily available or are unobservable, in ~~this~~which ~~report~~case quantitative based extrapolations of rate, price, or index scenarios are used in determining fair values. As of December 31, 2021, the fair value of derivatives reported on our balance sheet in “other long-term investments” and “other liabilities” was $1.4 billion and $2.8 billion, respectively. Of those derivative assets and liabilities, $295 million and $1.9 billion, respectively, were Level 3 fair values determined by quantitative models.

Available-for-sale securities and trading securities are recorded at fair value, which is primarily based on actively traded markets where prices are based on either direct market quotes or observed transactions. Liquidity is a significant factor in the determination of the fair value for these securities. Market price quotes may not be readily available for some positions or for some positions within a market sector where trading activity has slowed significantly or ceased. These situations are generally triggered by the market’s perception of credit uncertainty regarding a single company or a specific market sector. In these instances, fair value is determined based on limited available market information and other factors, principally from reviewing the issuer’s financial position, changes in credit ratings, and cash flows on the investments. As of December 31, 2020, $2.1 billion of available-for-sale and trading securities, excluding other long-term investments, were classified as Level 3 fair value assets.

For securities that are priced via non-binding independent broker quotations, we assess whether prices received from independent brokers represent a reasonable estimate of fair value through an analysis using internal and external cash flow models developed based on spreads and, when available, market indices. We use a market-based cash flow analysis to validate the reasonableness of prices received from independent brokers. These analytics, which are updated daily, incorporate various metrics (yield curves, credit spreads, prepayment rates, etc.) to determine the valuation of such holdings. As a result of this analysis, if we determine that there is a more appropriate fair value based upon the analytics, the price received from the independent broker is adjusted accordingly. As of December 31, 2020, we did not adjust any prices received from independent brokers.

Derivatives - We utilize 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, inflation risk, currency exchange risk, volatility risk, and equity market risk. Assessing the effectiveness of the hedging programs and evaluating the carrying values of the related derivatives often involve a variety of assumptions and estimates. Derivative financial instruments are valued using exchange prices, independent broker quotations, or pricing valuation models, which utilize market data inputs. The fair values of most of our derivatives are determined using exchange prices or independent broker quotes, but certain derivatives, including embedded derivatives, are valued based upon industry standard models which calculate the present-value of the projected cash flows of the derivatives using current and implied future market conditions. These models include market-observable estimates of volatility and interest rates in the determination of fair value. The use of different assumptions may have a material effect on the estimated fair value amounts, as well as the amount of reported net income. In addition, measurements of ineffectiveness of hedging relationships are subject to interpretations and estimations, and any differences may result in material changes to our results of operations. The fair values of derivative assets and liabilities include adjustments for market liquidity, counterparty credit quality, and other deal specific factors, where appropriate. The fair values of derivative assets and liabilities traded in the over-the-counter market are determined using quantitative models that require the use of multiple market inputs including interest rates, prices, and indices to generate continuous yield or pricing curves and volatility factors. The predominance of market inputs are actively quoted and can be validated through external sources. Estimation risk is greater for derivative financial instruments that are either option-based or have longer maturity dates where observable market inputs are less readily available or are unobservable, in which case quantitative based extrapolations of rate, price, or index scenarios are used in determining fair values. As of December 31, 2020, the fair value of derivatives reported on our balance sheet in “other long-term investments” and “other liabilities” was $1.6 billion and $2.7 billion, respectively. Of those derivative assets and liabilities, $222.0 million and $1.7 billion, respectively, were Level 3 fair values determined by quantitative models.

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 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. Beginning on January 1, 2020, credit losses are recorded in ~~realized~~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 ~~realized~~net gains (losses) - investments and derivatives. See, “Accounting Pronouncements Recently Adopted” below for additional information. 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.

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information. 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 realized gains (losses).

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, on quarterly basis, the Company reviewed investments with unrealized losses for indications of other than temporary impairments. In addition to the factors noted above that are analyzed to determine if impairments are the result of credit losses, the Company also previously considered the duration that the security had been in an unrealized loss position in evaluating the need for any other-than-temporary impairments. Although no set formula was used in this process, the investment performance, collateral position, and continued viability of the issuer were significant measures considered, and in some cases, an analysis regarding the Company’s expectations for recovery of the security’s entire amortized cost basis through the receipt of future cash flows was performed. Once a determination had been made that a specific other-than-temporary impairment existed, the security’s basis was adjusted and an other-than-temporary impairment was recognized. Other-than-temporary impairments to debt securities that the Company did not intend to sell and did not expect to be required to sell before recovering the security’s amortized cost were written down to discounted expected future cash flows (“post impairment cost”) and credit losses were recorded in ~~realized~~net gains (losses) - investments and derivatives. The difference between the securities’ discounted expected future cash flows and the fair value of the securities on the impairment date was recognized in other comprehensive income (loss) as a non-credit portion impairment. When calculating the post impairment cost for residential mortgage-backed securities (“RMBS”), commercial mortgage-backed securities (“CMBS”), and other asset-backed securities (collectively referred to as asset-backed securities or “ABS”), the Company considered all known market data related to cash flows to estimate future cash flows. When calculating the post impairment cost for corporate debt securities, the Company considered all contractual cash flows to estimate expected future cash flows. To calculate the post impairment cost, the expected future cash flows are discounted at the original purchase yield basis.

Our specific accounting policies related to our invested assets are discussed in Note 2, Summary of Significant Accounting Policies, and Note 4, Investment Operations, to the consolidated financial statements. As of December 31, 2020, we held $69.8 billion of available-for-sale investments, including $3.2 billion in investments with a gross unrealized loss of $130.5 million.48

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flows to estimate future cash flows. When calculating the post impairment cost for corporate debt securities, the Company considered all contractual cash flows to estimate expected future cash flows. To calculate the post impairment cost, the expected future cash flows are discounted at the original purchase yield basis.

Our specific accounting policies related to our invested assets are discussed in Note 2, Summary of Significant Accounting Policies, and Note 4, Investment Operations, to the consolidated financial statements. As of December 31, 2021, we held $70.3 billion of available-for-sale investments, including $11.1 billion in investments with a gross unrealized loss of $295 million.

Reinsurance - For each of our reinsurance contracts, we must determine if the contract provides indemnification against loss or liability relating to insurance risk, in accordance with applicable accounting standards. We must review all contractual features, particularly those that may limit the amount of insurance risk to which we are subject or features that delay the timely reimbursement of claims. If we determine that the possibility of a significant loss from insurance risk will occur only under remote circumstances, we record the contract under a deposit method of accounting with the net amount payable/receivable reflected in other reinsurance assets or liabilities on our consolidated balance sheets. Fees earned on the contracts are reflected as other revenues, as opposed to premiums, in our consolidated statements of income.

Our reinsurance is ceded to a diverse group of reinsurers. The collectability of reinsurance is largely a function of the solvency of the individual reinsurers. We perform periodic credit reviews on our reinsurers, focusing on, among other things, financial capacity, stability, trends, and commitment to the reinsurance business. We also require assets in trust, letters of credit, or other acceptable collateral to support balances due from reinsurers not authorized to transact business in the applicable jurisdictions. Despite these measures, a reinsurer’s insolvency, inability, or unwillingness to make payments under the terms of a reinsurance contract could have a material adverse effect on our results of operations and financial condition. As of December 31, ~~2020~~2021, our third party reinsurance receivables amounted to $4.65 billion. These amounts include ceded reserve balances and ceded benefit payments.

We account for reinsurance as required by FASB guidance under the Accounting Standards Codification (“ASC” or “Codification”) Financial Services Topic as applicable. In accordance with this guidance, costs for reinsurance are amortized as a level percentage of premiums for traditional life products and a level percentage of estimated gross profits for universal life products. Accordingly, ceded reserve and deferred acquisition cost balances are established using methodologies consistent with those used in establishing direct policyholder reserves and deferred acquisition costs. Establishing these balances requires the use of various assumptions including investment returns, mortality, persistency, and expenses. The assumptions made for establishing ceded reserves and ceded deferred acquisition costs are consistent with those used for establishing direct policyholder reserves and deferred acquisition costs.

52Assumptions are also made regarding future reinsurance premium rates and allowance rates. Assumptions made for mortality, persistency, and expenses are consistent with those used for establishing direct policyholder reserves and deferred acquisition costs. Assumptions made for future reinsurance premium and allowance rates are consistent with rates provided for in our various reinsurance agreements. For certain of our reinsurance agreements, premium and allowance rates may be changed by reinsurers on a prospective basis, assuming certain contractual conditions are met (primarily that rates are changed for all companies with which the reinsurer has similar agreements). To the extent that future rates are modified, these assumptions would be revised and both current and future results would be affected. For traditional life products, assumption changes generally do not affect current results. For universal life products, assumptions are periodically updated whenever actual experience and/or expectations for the future differ from that assumed. When assumptions are updated for universal life products, changes are reflected in the income statement as part of an “unlocking” process. During the year ended December 31, 2021, we adjusted our estimates of future reinsurance costs in both the Acquisitions and Retail Life and Annuity segments which did not have a material impact on our financial condition or results of operations.

DAC and VOBA - 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 expects to experience in future years. 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 block. For interest sensitive products, the Company uses various amortization bases including expected gross profits (“EGPs”), revenues, or insurance in-force. VOBA amortization included accrued interest credited to account balances of up to approximately 7.86%. VOBA is subject to annual recoverability testing.

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~~establishing~~administration, ~~ceded~~management ~~reserves~~of distribution and ~~ceded~~underwriting ~~deferred~~functions, and product development, are considered non-deferrable acquisition costs and must be expensed in the period incurred.) The recovery of the deferred costs is dependent on the future profitability of the related policies. The amount of future profit is dependent principally on investment returns, mortality, morbidity, persistency, and expenses to administer the business and certain economic variables, such as inflation. These costs are ~~consistent~~amortized ~~with~~over ~~those~~the ~~used~~expected ~~for~~lives ~~establishing~~of ~~direct~~the ~~policyholder~~contracts, ~~reserves~~based on the level and timing of either gross profits or gross premiums, depending on the type of contract. Revisions to estimates result in changes to the amounts expensed in the reporting period in which the revisions are made and could result in the impairment of the asset and a charge to income if estimated future profits are less than the unamortized deferred ~~acquisition~~amounts. ~~costs~~As of December 31, 2021, we had a DAC and VOBA asset of $3.9 billion.

Assumptions are also made regarding future reinsurance premium rates and allowance rates. Assumptions made for mortality, persistency, and expenses are consistent with those used for establishing direct policyholder reserves and deferred acquisition costs. Assumptions made for future reinsurance premium and allowance rates are consistent with rates provided for in our various reinsurance agreements. For certain of our reinsurance agreements, premium and allowance rates may be changed by reinsurers on a prospective basis, assuming certain contractual conditions are met (primarily that rates are changed for all companies with which the reinsurer has similar agreements). To the extent that future rates are modified, these assumptions would be revised and both current and future results would be affected. For traditional life products, assumption changes generally do not affect current results. For universal life products, assumptions are periodically updated whenever actual experience and/or expectations for the future differ from that assumed. When assumptions are updated for universal life products, changes are reflected in the income statement as part of an “unlocking” process. During the year ended December 31, 2020, we adjusted our estimates of future reinsurance costs in both the Acquisitions and Retail Life and Annuity segments, resulting in an approximate $6.7 million unfavorable impact.

DAC and VOBA - 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 expects to experience in future years. 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 block. For interest sensitive products, the Company uses various amortization bases including expected gross profits (“EGPs”), revenues, or insurance in-force. VOBA amortization included accrued interest credited to account balances of up to approximately 6.85%. VOBA is subject to annual recoverability testing.

We incur significant costs in connection with acquiring new insurance business. Portions of these costs, which are determined to be incremental direct costs associated with successfully acquired policies and coinsurance of blocks of policies, are deferred and amortized over future periods. Some examples of acquisition costs that are subject to deferral include commissions, underwriting testing fees, certain direct underwriting costs, and premium taxes. The determination of which costs are deferrable must be made on a contract-level basis. (All other acquisition-related costs, including market research, administration, management of distribution and underwriting functions, and product development, are considered non-deferrable acquisition costs and must be expensed in the period incurred.) The recovery of the deferred costs is dependent on the future profitability of the related policies. The amount of future profit is dependent principally on investment returns, mortality, morbidity, persistency, and expenses to administer the business and certain economic variables, such as inflation. These costs are amortized over the expected lives of the contracts, based on the level and timing of either gross profits or gross premiums, depending on the type of contract. Revisions to estimates result in changes to the amounts expensed in the reporting period in which the revisions are made and could result in the impairment of the asset and a charge to income if estimated future profits are less than the unamortized deferred amounts. As of December 31, 2020, we had a DAC and VOBA asset of $3.4 billion.

We periodically review, at least annually, and update as appropriate our key assumptions on certain life and annuity products including future mortality, expenses, lapses, premium persistency, investment yields, and interest spreads. Changes to these assumptions result in adjustments which increase or decrease DAC and VOBA amortization and/or benefits and expenses.

Goodwill - 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 unit 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.

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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.

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 our reporting units below its carrying amount. During the fourth quarter of ~~2020~~2021, we elected to perform a quantitative assessment of goodwill associated with the reporting units within the Retail Life and Annuity segment and recorded a non-cash impairment charge of $129 million. For the other reporting units, we performed our annual qualitative evaluation of goodwill based on the circumstances that existed as of October 1, ~~2020~~2021, and determined that there was no indication that ~~our~~goodwill ~~segment~~allocated ~~goodwill~~to these reporting units was more likely than not impaired and no adjustment to impair goodwill was necessary. We have assessed whether events have occurred subsequent to October 1, ~~2020~~2021, that would impact our conclusion and no such events were identified. Refer to Note 110, ~~Basis of Presentation~~Goodwill, to the consolidated financial statements included in this report for further information. As of December 31, ~~2020~~2021, we had a goodwill balance of $~~825.5~~697 million.

Insurance Liabilities and Reserves - Establishing an adequate liability for our obligations to policyholders requires the use of 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, premium payment patterns, and other assumptions based on our historical experience, modified as necessary to reflect anticipated trends and to include provisions for possible adverse deviation. Determining liabilities for our property and casualty insurance products also requires the use of assumptions, including the frequency and severity of claims, and the effectiveness of internal processes designed to reduce the level of claims. Our results depend significantly upon the extent to which our actual claims experience is consistent with the assumptions that we used in determining our reserves and pricing our products. Our reserve assumptions and estimates require significant judgment and, therefore, are inherently uncertain. We cannot determine with precision the ultimate amounts that we will pay for actual claims or the timing of those payments. As of December 31, ~~2020~~2021, we had total policy liabilities and accruals of $54.9 billion.

Guaranteed Minimum Death Benefits - We establish liabilities for guaranteed minimum death benefits (“GMDB”) on our VA products. The methods used to estimate the liabilities employ assumptions about mortality and the performance of equity markets. We assume age-based mortality from the Ruark 2015 ALB adjusted table for company experience. Future declines in the equity market would increase our GMDB liability. Differences between the actual experience and the assumptions used result in variances in profit and could result in losses. A portion of our GMDB benefits are subject to a dollar-for-dollar reduction upon withdrawal of related annuity deposits on contracts issued prior to January 1, 2003. We reinsure certain risks associated with the GMDB to Shades Creek Captive Insurance Company (“Shades Creek”), a direct wholly owned insurance subsidiary of PLC. As of December 31, 2020, the GMDB liability, including the impact of reinsurance, was $34.1 million.50

Guaranteed Living Withdrawal Benefits—We establish reserves for guaranteed living withdrawal benefits (“GLWB”) on our 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. We assume 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, 2020, our net GLWB liability held was $403.7 million.

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~~acquisition~~Guaranteed ~~costs~~Minimum Death Benefits - We establish liabilities for guaranteed minimum death benefits (“GMDB”) on our VA products. The methods used to estimate the liabilities employ assumptions about mortality and ~~value~~the performance of ~~business~~equity ~~acquired,~~markets. We assume age-based mortality from the Ruark 2015 ALB adjusted table for company experience. Future declines in the equity market would increase our GMDB liability. Differences between the actual experience and ~~future~~the ~~policy~~assumptions ~~benefits~~used result in variances in profit and ~~claims~~could result in losses. ~~Deferred~~A ~~tax~~portion ~~assets~~of ~~and~~our ~~liabilities~~GMDB benefits are ~~measured~~subject ~~using~~to ~~the~~a ~~enacted~~dollar-for-dollar ~~tax~~reduction ~~rates~~upon ~~expected~~withdrawal toof berelated inannuity ~~effect~~deposits ~~when~~on ~~such~~contracts ~~differences~~issued ~~reverse~~prior to January 1, 2003. As of December 31, 2021, the GMDB liability was $38 million.

Deferred Taxes and Uncertain Tax Positions - Deferred federal income taxes arise from the recognition of temporary differences between the basis of assets and liabilities determined for financial reporting purposes and the basis determined for income tax purposes. Such temporary differences are principally related to net unrealized gains (losses), deferred policy acquisition costs and value of business acquired, and future policy benefits and claims. Deferred tax assets and liabilities are measured using the enacted tax rates expected to be in effect when such differences reverse.

We evaluate deferred tax assets for impairment quarterly at the taxpaying component level within each tax jurisdiction. Deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of such assets will not be realized as future reductions of current taxes. In determining the need for a valuation allowance we consider the reversal of existing temporary differences, future taxable income, and tax planning strategies. The determination of any valuation allowance requires management to make certain judgments and assumptions regarding future operations that are based on our historical experience and our expectations of future performance.

The ASC Income Taxes Topic prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of an expected or actual uncertain income tax return position and provides guidance on disclosure. Additionally, in order for us to recognize any degree of benefit in our financial statements from such a position, there must be a greater than 50 percent chance of success with the relevant taxing authority with regard to that position. In making this analysis, we assume that the taxing authority is fully informed of all of the facts regarding any issue. Our judgments and assumptions regarding uncertain tax positions are subject to change over time due to the enactment of new legislation, the issuance of revised or new regulations or rulings by the various tax authorities, and the issuance of new decisions by the courts.

Contingent Liabilities - The assessment of potential obligations for tax, regulatory, and litigation matters inherently involves a variety of estimates of potential future outcomes. We make such estimates after consultation with our advisors and a review of available facts. However, there can be no assurance that future outcomes will not differ from management’s assessments.

RESULTS OF OPERATIONS

Our management and Board of Directors analyze and assess 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 our measure of segment performance. Pre-tax adjusted operating income (loss) is calculated by adjusting “income (loss) before income tax”, by excluding the following items:

•~~realized~~ gains and losses on investments and derivatives,

•losses from the impairment of intangible assets,

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•changes in the GLWB embedded derivatives exclusive of the portion attributable to the economic cost of the GLWB,

•actual GLWB incurred claims, ~~and~~

•immediate impacts from changes in current market conditions on estimates on 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/Pre-tax adjusted operating income (loss)

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. 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 our 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. ~~Realized~~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 policy liabilities net of associated policy assets, while DAC/VOBA and goodwill are shown in the segments to which they are attributable.

We periodically review and update as appropriate our key assumptions used to measure certain balances related to insurance products, including future mortality, expenses, lapses, premium persistency, benefit utilization, investment yields, interest rates, and separate account fund returns. Changes to these assumptions result in adjustments which increase or decrease DAC and VOBA amortization and/or benefits and expenses. Assumptions may be updated as part of our annual assumption review process, as well as during our quarterly update of historical business activity. This periodic review and updating of Unlocking

55We periodically review and update as appropriate our key assumptions used to measure certain balances related to insurance products, including future mortality, expenses, lapses, premium persistency, benefit utilization, investment yields, interest rates, and separate account fund returns. Changes to these assumptions result in adjustments which increase or decrease DAC and VOBA amortization and/or benefits and expenses. Assumptions may be updated as part of our annual assumption review process, as well as during our quarterly update of historical business activity. This periodic review and updating of assumptions is collectively referred to as “unlocking.” When referring to unlocking the reference is to changes in all balance sheet components associated with these changes. The adjustments associated with unlocking can create significant variability from period to period in the profitability of certain of the Company’s operating segments.

Additional information

Level term policies are policies in which premium rate remains the same for our established level term period (e.g. 20 years). At the end of the level term period, premium rates typically increase significantly and policyholder lapse rates are typically high. Since most of our reinsurance premiums are paid on an annual in advance basis, at each period end, we establish an accrual to adjust for the income effect of policies expected to lapse in the next period. Premiums paid to and refunded by reinsurers are included in reinsurance ceded, while adjustments from the accrual for post level policy lapses are included in the benefits and settlement expenses line in the statements of income (loss). As a result, over time there can be significant volatility in these individual line items due to the impact of business entering the post level period.

Shades Creek Captive Insurance Company

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

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~~assumptions~~being isthe ~~collectively~~surviving ~~referred~~entity. We accounted for the transaction pursuant to asASC 805-50 “~~unlocking.~~Transactions between Entities under Common Control”. ~~When~~The ~~referring~~transferred toassets ~~unlocking~~and ~~the~~liabilities ~~reference~~of isShades toCreek ~~changes~~were inrecorded ~~all~~by ~~balance~~the ~~sheet~~Company ~~components~~at ~~associated~~their ~~with~~carrying ~~these~~value ~~changes.~~at ~~The~~the ~~adjustments~~date ~~associated~~of transfer. In accordance with ~~unlocking~~ASC ~~can~~805-50, ~~create~~all ~~significant~~prior ~~variability~~financial ~~from~~information ~~period~~has tobeen ~~period~~recast into ~~the~~reflect ~~profitability~~this oftransaction ~~certain~~as of the ~~Company’s~~earliest ~~operating~~period ~~segments~~presented under common control, January 1, 2019.

~~Level~~The ~~term~~following ~~policies~~table ~~are~~presents ~~policies~~a insummary ~~which premium rate remains the same for our established level term period (e.g. 20 years). At the end~~ of ~~the~~results ~~level term period, premium rates typically increase significantly~~ and ~~policyholder~~reconciles ~~lapse~~pre-tax ~~rates~~adjusted ~~are~~operating ~~typically high. Since most of our reinsurance premiums are paid on an annual in advance basis, at each period end, we establish an accrual to adjust for the~~ income effect of policies expected to lapse in the next period. Premiums paid to and refunded by reinsurers is included in reinsurance ceded, while adjustments from the accrual for post level policy lapses is included in the benefits and settlement expenses line in the statements of income (loss). ~~As a result, over time there can be significant volatility in these individual line items due~~ to ~~the~~consolidated ~~impact~~income ofbefore ~~business~~income ~~entering~~tax ~~the~~expense ~~post~~and ~~level~~net ~~period.~~income:

The following table presents 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)
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)
Investments 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

	For The Year Ended December 31,
	2020		2019		2018
	(Dollars In Thousands)
Pre-Tax Adjusted Operating Income (Loss)
Retail Life and Annuity	$	65,092	$	118,881	$	115,429
Acquisitions	406,799		346,825		282,715
Stable Value Products	89,610		93,183		102,328
Asset Protection	41,845		37,205		24,371
Corporate and Other	(242,999)		(161,248)		(156,722)
Pre-tax adjusted operating income	360,347		434,846		368,121
Realized gains (losses) and adjustments	53,177		248,602		(120,533)
Income before income tax	413,524		683,448		247,588
Income tax expense (benefit)	71,162		130,464		53,661
Net income	$	342,362	$	552,984	$	193,927
Pre-tax adjusted operating income	$	360,347	$	434,846	$	368,121
Adjusted operating income tax (expense) benefit	(59,995)		(78,257)		(78,973)
After-tax adjusted operating income	300,352		356,589		289,148
Realized gains (losses) and adjustments	53,177		248,602		(120,533)
Income tax (expense) benefit on adjustments	(11,167)		(52,207)		25,312
Net income	$	342,362	$	552,984	$	193,927
Realized gains (losses) and adjustments:
Derivative financial instruments	$	8,679	$	(131,459)	$	79,097
All other investments	(39,806)		308,545		(253,000)
Less: related amortization(1)	(30,362)		(23,021)		(11,856)
Less: VA GLWB economic cost	(53,942)		(48,495)		(41,514)
Realized gains (losses) and adjustments	$	53,177	$	248,602	$	(120,533)

(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.

(12)Includes amortization of DAC/VOBA and benefits and settlement expenses that are impacted by ~~realized~~net gains (losses).

5653

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Retail Life and Annuity

Segment Results of Operations

Segment results were as follows:

	For The Year Ended December 31,
	2020		2019		2018
	2021		2020		2019
	(Dollars In Thousands)
			(Recast)		(Recast)
	(Dollars In Millions)
REVENUES
Gross premiums and policy fees	$	2,~~153,693~~346	$	2,~~278,587~~154	$	2,~~065,223~~279
Reinsurance ceded	(~~681,440~~872)		(~~1,107,312~~613)		(~~950~~1,~~674~~035)
Net premiums and policy fees	1,~~472,253~~474		1,~~171,275~~541		1,~~114,549~~244
Net investment income	1,~~008,016~~110		~~939~~1,~~304~~015		~~888,079~~945
Realized gains (losses)	(42,419)		(41,933)		(41,514)
Net gains (losses) - investments and derivatives	(88)		(80)		(84)
Other income	~~165,125~~187		~~164,355~~165		~~168,602~~164
Total operating revenues	2,~~602,975~~683		2,~~233,001~~641		2,~~129,716~~269
Realized gains (losses)	(35,670)		85,471		(83,745)
Total revenues	2,567,305		2,318,472		2,045,971
BENEFITS AND EXPENSES
Benefits and settlement expenses	2,~~167,121~~320		12,~~753,925~~169		1,~~649,069~~754
Amortization of DAC/VOBA	~~173,477~~176		~~151,606~~173		~~146,845~~153
Other operating expenses	~~197,285~~224		~~208,589~~199		~~218,373~~209
Operating benefits and expenses	2,537,883		2,114,120		2,014,287
Total operating benefits and expenses	2,720		2,541		2,116
Benefits and settlement expenses related to realized gains (losses)	(1,190)		11,467		(13,156)
PRE-TAX ADJUSTED OPERATING INCOME (LOSS)	(37)		100		153
Amortization of DAC/VOBA related to realized gains (losses)	(57,456)		(52,659)		(5,654)
Non-operating income (loss):
Total benefits and expenses	2,479,237		2,072,928		1,995,477
Net gains (losses) - investments and derivatives	140		(201)		(108)
INCOME BEFORE INCOME TAX	88,068		245,544		50,494
Related benefits and settlement expenses	—		1		(11)
Less: realized gains (losses)	(35,670)		85,471		(83,745)
Related amortization of DAC/VOBA	(57)		57		53
Less: related benefits and settlement expenses	1,190		(11,467)		13,156
VA/VUL market impacts	15		—		—
Less: related amortization of DAC/VOBA	57,456		52,659		5,654
Goodwill impairment	(129)		—		—
PRE-TAX ADJUSTED OPERATING INCOME	$	65,092	$	118,881	$	115,429
Total non-operating income (loss)	(31)		(143)		(66)
INCOME (LOSS) BEFORE INCOME TAX	$	(68)	$	(43)	$	87

5754

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The following table summarizes key data for the Retail Life and Annuity segment:

	For The Year Ended December 31,
	2020			2019			2018
	2021			2020			2019
	(Dollars In Thousands)
	(Dollars In Millions)
Sales By Product
Traditional(1)	$	~~261,923~~259		$	~~240,521~~262		$	~~51,505~~241
Universal life(1)	~~84,119~~97			84~~,395~~			~~116,746~~84
Fixed annuity(2)	2,293,619			1,847,938			2,139,616
BOLI/COLI(2)	1,033			—			—
Variable annuity(2)	317,667			210,793			298,314
Fixed annuity(2)	1,372			2,294			1,848
	$	2,957,328		$	2,383,647		$	2,606,181
Variable annuity(2)	976			317			211
	3,737			2,957			2,384
Average Life Insurance In-force(4)
Traditional	$	~~379~~423,~~707,276~~896		$	~~360~~379,~~145,141~~707		$	~~350~~360,~~398,022~~145
Universal life	~~288~~291,~~413,452~~121			~~287~~288,~~343,602~~413			~~278~~287,~~191,468~~344
	$	~~668~~715,~~120,728~~017		$	~~647~~668,~~488,743~~120		$	~~628~~647,~~589,490~~489
Average Account Values
Universal life	$	7,~~681,788~~844		$	7,~~791,409~~682		$	7,~~752,076~~791
Variable universal life(6)	~~850~~1,~~487~~364			~~811,190~~850			~~781,601~~811
Fixed annuity(3)	1012,~~952,387~~092			910,~~850,893~~952			9,~~018,539~~851
Variable annuity	1012,~~895,805~~380			1210,~~061,202~~896			12,~~820,410~~061
	$	3033,~~380,467~~680		$	30,~~514,694~~380		$	30,~~372,626~~514
Interest Spread - Fixed Annuities(5)
Net investment income yield	3.6766		%	3.67		%	3.6467		%
Interest credited to policyholders	2.5037		%	2.5550		%	2.5055		%
Interest spread	1.1729		%	1.1217		%	1.1412		%
	As of December 31,
	2020			2019
	2021			2020
	(Dollars In Thousands)
	(Dollars In Millions)
VA GLWB Benefit Base	$	9,~~816,637~~910		$	9,~~850,644~~817
Account value subject to GLWB rider	$	8,~~034,508~~369		$	8,~~403,428~~035

(1)Sales data for traditional life insurance, other than Single Premium Whole Life (“SPWL”) insurance, is based on annualized premiums. SPWL insurance sales are based on total single premium dollars received in the period. Universal life sales are based on annualized planned premiums, or “target” premiums if lesser, plus 6% of amounts received in excess of target premium and 10% of single premiums. “Target” premiums for universal life are those premiums upon which full first year commissions are paid.

(2)Sales are measured based on the amount of purchase payments received less first year surrenders.

(3)Includes general account balances held within VA products. Fixed annuity account value is net of reinsurance ceded.

(4)Amounts are not adjusted for reinsurance ceded.

(5)Interest spread on average general account values.

(6)Includes general account balances held within VUL products.

~~For~~Annuity ~~The~~Account ~~Year~~Values ~~Ended December 31, 2020 as compared to The Year Ended December 31, 2019~~

~~Pre~~Annuity account values are a significant driver of our operating results, and are primarily driven by net additions (withdrawals) and the impact of market changes. The income we earn on most of our fee-~~tax~~based ~~Adjusted~~products ~~Operating~~varies ~~Income~~with the level of underlying account values as many policy fees are determined by these values. The investment income and interest we credit to policyholders on our spread-based products varies with the level of general account values. To a lesser extent, changes in account values impact our pattern of amortization of DAC and VOBA and general and administrative expenses.

Pre-tax adjusted operating income decreased $53.8 million primarily due to higher claims in the universal life and traditional life blocks, lower universal life net policy fees, and unfavorable unlocking as compared to the prior year, which is partially offset by higher traditional life net premiums, higher investment income on the life blocks, lower expense, and favorable annuity mortality. Segment results were negatively impacted by $60.9 million of unfavorable unlocking for 2020, as compared to an unfavorable $34.4 million of unlocking for the prior year.55

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~~Operating~~Fixed ~~revenues~~Annuities

~~Total~~Fixed ~~operating~~annuity ~~revenues~~account ~~increased~~values ~~$370~~in the rollforward below represent general account reserves for fixed deferred and variable deferred annuities within the annuity account balances line item on the consolidated condensed balance sheet.0 ~~million,~~It oralso 16includes the general account reserves associated with immediate annuity policies within the future policy benefits and claims line item on the consolidated condensed balance sheet.6% ~~driven~~These byreserves acan ~~favorable~~differ ~~impact~~from ~~due~~account tovalue ~~post~~on ~~level~~certain ~~activity~~products. Immediate annuities do not have an account value, but do maintain a GAAP reserve, which is included in the ~~traditional~~below ~~life~~rollforward. ~~blocks~~The entire GAAP reserve for indexed annuities differs from account value due to the bifurcation of the host contract and ~~higher~~the ~~investment~~embedded ~~income,~~derivative. ~~offset~~The bybelow ~~lower~~rollforward ~~universal~~represents ~~life~~the ~~net~~account ~~policy~~value ~~fees~~associated with fixed funds and ~~variable~~reserves ~~annuity~~associated ~~fee~~with ~~income~~the host contract on indexed annuities.

Net premiums and policy fees


	For The Year Ended December 31,
	2021		2020		2019
	(Dollars In Millions)
Fixed Annuities
Beginning total account value	$	11,411	$	10,027	$	9,279
Deposits and sales	1,464		2,257		1,870
Withdrawals and benefits	(1,123)		(1,061)		(1,374)
Policy fees/surrender charges	(36)		(20)		(3)
Interest credited and other activity	290		208		255
Ending account value	$	12,006	$	11,411	$	10,027

~~Net~~Variable premiums and policy fees increased by $301.0 million, or 25.7%, for the year ended December 31, 2020, as compared to the year ended December 31, 2019, due to post level activity in the traditional life block, offset in party by lower universal life net policy fees and variable annuity fee income.Annuities

~~Net~~Variable ~~investment~~annuity ~~income~~account values in the rollforward below represent separate account reserves for variable deferred and immediate annuities. These reserves are a component of the liabilities related to separate accounts line item in the consolidated condensed balance sheet.

Net investment income in the segment increased $68.7 million, or 7.3%, driven by higher liability balances in the annuity and life blocks.


	For The Year Ended December 31,
	2021		2020		2019
	(Dollars In Millions)
Variable Account Value
Beginning balance	$	11,763	$	12,162	$	11,741
Increase (decrease) in VA account values:
Deposits	825		210		220
Surrenders	(1,037)		(994)		(1,138)
Contract holder assessments	(242)		(226)		(241)
Change in market value and other activity	1,606		611		1,580
Ending balance	$	12,915	$	11,763	$	12,162

~~Other~~Pre-Tax ~~income~~Adjusted Operating Income (Loss)

~~Other~~2021 ~~income~~to ~~increased~~2020 $0Annual Comparison.8 ~~million~~Pre-tax ~~due~~adjusted tooperating ~~higher fixed annuity fee~~ income, ~~partially~~decreased ~~offset~~$137 bymillion ~~lower~~primarily VAdriven ~~fee income.~~ by:

~~Benefits~~•Unfavorable ~~and~~mortality ~~settlement expenses~~experience

~~Benefits~~•Unfavorable ~~and~~prospective settlement expenses increased by $413.2 million, or 23.6%, due to a $295.7 million unfavorable change in reserves in the traditional life block due to post level impacts, higher traditional life and universal life claims, and higher annuity credited interest and fixed annuity change in guaranteed benefit reserves and unfavorable unlocking in the universal life block, offset in part by favorable changes in universal life reserves and favorable annuity mortality. Segment results were negatively impacted by $42.4 million of unfavorable unlocking for 2020, as compared to $23.1 million of unfavorable unlocking for the prior year.

~~Amortization~~•Higher ofnet ~~DAC/VOBA~~investment income due to higher liability balances, as well as higher participation income and prepayment fee income on commercial mortgage loans

~~DAC/VOBA~~•Higher ~~amortization~~fee ~~increased~~income ~~$21.9 million, or 14.4%,~~ due to angrowth ~~unfavorable change~~ in ~~unlocking~~VA onaccount the annuity block, and net unfavorable changes in amortization for the traditional life block, offset in part by a favorable change in unlocking on the universal life block. Segment results were negatively impacted by $18.5 million of unfavorable unlocking in 2020, as compared to $11.5 million of unfavorable unlocking in the prior year.balances

~~Other~~•Higher insurance operating expenses

~~Other~~•Growth ~~operating expenses decreased $11.3 million primarily due to higher ceding allowances, lower commission expense, offset by an increase~~ in ~~acquisition~~guaranteed ~~expense,~~benefit ~~increases~~reserves ~~in maintenance and overhead expenses, and higher interest expense on reinsurance ceded.~~

~~Sales~~•Unfavorable impacts due to the exclusion of variable product market impacts from operating income in 2021. In 2021, the operating income definition was revised to exclude the impact of equity market changes on variable products.

~~Sales for the segment increased $573.7 million primarily due to an increase in fixed annuity and variable annuity sales.~~56

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Operating Revenues

2021 to 2020 Annual Comparison. Operating revenues increased $42 million primarily driven by:

•Higher investment income primarily due to higher liability balances, and higher participation income and prepayment fee income on commercial mortgage loans

•Higher annuity fees from the growth in VA account balances due to increases in equity markets and growth in fixed annuity sales with guaranteed benefit riders

•Lower traditional life net premiums of $81 million primarily due to fluctuations in the number of policies entering their post level period at the end of 2019. These policies cause fluctuations in reinsurance premiums between periods for those contracts that enter the grace period and subsequently lapse.

The major categories of net investment income are summarized as follows:


	For The Year Ended December 31,
	2021		2020		2019
			(Recast)		(Recast)
	(Dollars In Millions)
Net Investment Income
Fixed Maturities	$	853	$	783	$	747
Commercial mortgage loans	213		193		176
Commercial mortgage loans participant income	14		13		4
Other, net	30		26		18
Total net investment income	$	1,110	$	1,015	$	945

Operating Benefits and Expenses

2021 to 2020 Annual Comparison. Operating benefits and expenses increased $179 million primarily driven by:

•Higher prospective unlocking of $87 million due to annual assumption updates.

•Unfavorable mortality experience primarily due to the impact of COVID-19

•Higher insurance operating expenses driven by higher acquisition expenses, higher maintenance and overhead, and higher sales and commissions on increased VA account values

•Lower increase in traditional life reserves of $109 million, excluding the impact of mortality experience, primarily due to fluctuations in the number of policies entering their post level period at the end of 2019. These policies cause fluctuations in reinsurance premiums between periods for those contracts that enter the grace period and subsequently lapse, which also results in accruals within benefits and settlement expense to adjust for the income effect of policies expected to lapse in the next period

•Growth in guaranteed benefit reserves due to fixed annuity sales and reserve increases in the universal life block


	For The Year Ended December 31,
	2021		2020		2019
			(Recast)		(Recast)
	(Dollars In Millions)
Benefit and settlement expense
Death claims	$	993	$	784	$	635
Change in life reserves	689		770		535
Life surrenders	14		9		3
Change in annuity guaranteed benefit reserves	41		12		1
Payout annuities mortality variance	(14)		(9)		(2)
Interest credited and other expenses	597		603		582
Total benefits and settlement expenses	$	2,320	$	2,169	$	1,754

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Reinsurance

Currently, the Retail Life and Annuity segment reinsures significant amounts of its life insurance in-force. Pursuant to the underlying reinsurance contracts, reinsurers pay allowances to the segment as a percentage of both first year and renewal premiums. Reinsurance allowances represent the amount the reinsurer is willing to pay for reimbursement of acquisition costs incurred by the direct writer of the business. A portion of reinsurance allowances received is deferred as part of DAC and a portion is recognized immediately as a reduction of other operating expenses. As the non-deferred portion of allowances reduces operating expenses in the period received, these amounts represent a net increase to operating income during that period.

Reinsurance allowances do not affect the methodology used to amortize DAC or the period over which such DAC is amortized. However, they do affect the amounts recognized as DAC amortization. DAC on universal life-type, limited-payment long duration, and investment contracts business is generally amortized based on the estimated gross profits of the policies in-force. Reinsurance allowances are considered in the determination of estimated gross profits, and therefore, impact DAC amortization on these lines of business. Deferred reinsurance allowances on level term business are recorded as ceded DAC, which is amortized over estimated ceded premiums of the policies in-force. Thus, deferred reinsurance allowances may impact DAC amortization. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in this report.

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Impact of reinsurance

Reinsurance impacted the Retail Life and Annuity segment line items as shown in the following table:

Retail Life and Annuity Segment

Line Item Impact of Reinsurance


	For The Year Ended December 31,
	2021		2020		2019
			(Recast)		(Recast)
	(Dollars In Millions)
REVENUES
Reinsurance ceded	$	(872)	$	(613)	$	(1,035)

Other income	(4)		(3)		—
Total operating revenues	(876)		(616)		(1,035)
Net gains (losses) - investments and derivatives	(7)		2		—
Total revenues	(883)		(614)		(1,035)
BENEFITS AND EXPENSES
Benefits and settlement expenses	(1,053)		(566)		(875)
Amortization of DAC/VOBA	(7)		(1)		(6)
Other operating expenses(1)	(191)		(195)		(191)
Operating benefits and expenses	(1,251)		(762)		(1,072)
Benefits and settlement expenses related to gains (losses)	(3)		(1)		—
Amortization of DAC/VOBA related to gains (losses)	(1)		6		4
Total benefits and expenses	(1,255)		(757)		(1,068)
NET IMPACT OF REINSURANCE	$	372	$	143	$	33

	For The Year Ended December 31,
	2020		2019		2018
	(Dollars In Thousands)
REVENUES
Reinsurance ceded	$	(681,440)	$	(1,107,312)	$	(950,674)
Realized gains (losses)	39,930		41,638		43,498
Other income	(2,831)		—		—
Total operating revenues	(644,341)		(1,065,674)		(907,176)
Realized gains (losses)	165,921		194,758		(24,487)
Total revenues	(478,420)		(870,916)		(931,663)
BENEFITS AND EXPENSES
Benefits and settlement expenses	(567,176)		(873,278)		(808,612)
Amortization of DAC/VOBA	(1,369)		(5,741)		(5,609)
Other operating expenses(1)	(196,089)		(193,029)		(170,277)
Operating benefits and expenses	(764,634)		(1,072,048)		(984,498)
Benefits and settlement expenses related to realized gains (losses)	(613)		(8)		(781)
Amortization of DAC/VOBA related to realized gains (losses)	5,846		4,324		3,308
Total benefits and expenses	(759,401)		(1,067,732)		(981,971)
NET IMPACT OF REINSURANCE	$	280,981	$	196,816	$	50,308

(1)Other operating expenses ceded per the income statement are equal to reinsurance allowances recognized after capitalization.

The table above does not reflect the impact of reinsurance on our net investment income. By ceding business to the assuming companies, we forgo investment income on the reserves ceded. Conversely, the assuming companies will receive investment income on the reserves assumed, which will increase the assuming companies’ profitability on the business that we cede. The net investment income impact to us and the assuming companies has not been quantified. The impact of including foregone investment income would be to substantially reduce the favorable net impact of reinsurance reflected above. The Retail Life and Annuity segment’s reinsurance programs do not materially impact the other income line of our income statement.

~~For The Year Ended December 31, 2020 as compared to The Year Ended December 31, 2019~~58

The lower ceded premium and policy fees was caused primarily by lower ceded traditional life premiums of $466.8 million, primarily due to fluctuations in the number of policies entering their post level period during the fourth quarter of 2019. This is partially offset by increases in ceded universal life policy fees.

Ceded benefits and settlement expenses were lower due to lower ceded reserves in the traditional life block due to fluctuations in the number of policies entering their post level period and lower ceded universal life reserves, partially offset by higher universal life ceded claims.

Ceded other operating expenses increased due to higher ceding allowances on the universal life block. Ceded other operating expenses reflect the impact of reinsurance allowances, net of amounts deferred.

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2021 to 2020 Annual Comparison. The change in the net impact of reinsurance was favorable by $229 million primarily driven by:

•Higher ceded traditional life premiums of $248 million primarily due to fluctuations in the number of policies entering their post level period at the end of 2019 that exited their grace period at the beginning of 2020. These post level policies cause fluctuations in reinsurance premiums between periods for those contracts that enter the grace period and subsequently lapse. There is an offsetting increase in ceded benefits due to accruals made to adjust for the income effect of policies expected to lapse

•Higher ceded benefits and settlement expenses caused by an increase in life claims primarily due to COVID-19

•Higher impact of prospective unlocking on UL excess benefit reserves and higher ceded UL and traditional life claims.

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Acquisitions

Segment Results of Operations

Segment results were as follows:

	For The Year Ended December 31,
	2020		2019		2018
	2021		2020		2019
	(Dollars In Thousands)
	(Dollars In Millions)
REVENUES
Gross premiums and policy fees	$	1,~~544,855~~575	$	1,~~465,990~~545	$	1,~~270,045~~466
Reinsurance ceded	(~~228,207~~255)		(~~293,433~~228)		(~~317,730~~293)
Net premiums and policy fees	1,~~316,648~~320		1,~~172,557~~317		~~952~~1,~~315~~173
Net investment income	1,~~648,122~~590		1,~~532,605~~648		1,~~108,218~~533
Realized gains (losses)	(11,523)		(6,562)		—
Net gains (losses) - investments and derivatives	(12)		(12)		(7)
Other income	~~226,878~~39		~~109,617~~226		~~14,313~~110
Total operating revenues	32,~~180,125~~937		23,~~808,217~~179		2,~~074,846~~809
Realized gains (losses)	103,600		93,433		(47,651)
Total revenues	3,283,725		2,901,650		2,027,195
BENEFITS AND EXPENSES
Benefits and settlement expenses	2,~~502,490~~380		2,~~227,528~~502		12,~~629,590~~228
Amortization of VOBA	~~4,071~~9		~~1,695~~4		~~18,843~~2
Other operating expenses	~~266,765~~234		~~232,169~~267		~~143,698~~232
Operating benefits and expenses	2,773,326		2,461,392		1,792,131
Total operating benefits and expenses	2,623		2,773		2,462
Benefits and settlement expenses related to realized gains (losses)	8,910		9,173		7,107
PRE-TAX ADJUSTED OPERATING INCOME	314		406		347
Amortization of VOBA related to realized gains (losses)	19,374		8,998		(153)
Non-operating income (loss)
Total benefits and expenses	2,801,610		2,479,563		1,799,085
Net gains (losses) - investments and derivatives	47		103		93
INCOME BEFORE INCOME TAX	482,115		422,087		228,110
Related benefits and settlement expenses	(35)		(8)		(9)
Less: realized gains (losses)	103,600		93,433		(47,651)
Related amortization of VOBA	(12)		(20)		(9)
Less: related benefits and settlement expenses	(8,910)		(9,173)		(7,107)
VA/VUL market impacts(1)	6		—		—
Less: related amortization of VOBA	(19,374)		(8,998)		153
Total non-operating income	6		75		75
PRE-TAX ADJUSTED OPERATING INCOME	$	406,799	$	346,825	$	282,715
INCOME BEFORE INCOME TAX	$	320	$	481	$	422

6160

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The following table summarizes key data for the Acquisitions segment:

	For The Year Ended December 31,
	2020			2019			2018
	2021			2020			2019
	(Dollars In Thousands)
	(Dollars In Millions)
Average Life Insurance In-Force(1)
Traditional	$	~~244~~222,~~353,757~~168		$	~~247~~244,~~992,309~~354		$	~~226~~247,~~695,252~~992
Universal life	67,~~752,191~~754			5467,~~704,009~~752			3054,~~153,143~~704
	$	~~312~~289,~~105,948~~922		$	~~302~~312,~~696,318~~106		$	~~256~~302,~~848,395~~696
Average Account Values
Universal life(2)	$	15,~~630,757~~190		$	1115,~~235,847~~630		$	411,~~888,598~~236
Variable universal life	89,~~122,360~~119			38,~~821,086~~122			~~267~~3,~~499~~821
Fixed annuity(2)	109,~~187,620~~636			10,~~361,744~~362			610,~~036,478~~550
Variable annuity	5,~~177,542~~585			25,~~710,439~~178			~~544~~2,~~828~~710
	$	39,~~118,279~~530		$	2839,~~129,116~~292		$	1128,~~737,403~~317
Interest Spread - Fixed Annuities
Net investment income yield	3.9893		%	43.0594		%	4.8901		%
Interest credited to policyholders	3.1832			3.2927			43.0025
Interest spread(3)	0.8061		%	0.7667		%	0.8976		%

(1)Amounts are not adjusted for reinsurance ceded.

(2)Includes general account balances held within variable annuity products and is net of coinsurance ceded. ~~Excludes structured annuity products.~~

(3)Interest spread on average general account values.

~~For~~Pre-Tax ~~The~~Adjusted ~~Year~~Operating ~~Ended December 31, 2020 as compared to The Year Ended December 31, 2019~~Income

2021 to 2020 Annual Comparison. Pre-tax adjusted operating income decreased $92 million primarily driven by:

~~Pre-tax~~•Other ~~adjusted operating~~ income ~~increased $60.0 million primarily due to a full year~~ of ~~activity from the GWL&A transaction. GWL&A added~~ $~~154.0~~109 million ofrecorded ~~pre-tax~~in ~~adjusted operating income for~~ 2020, anrelated ~~increase of $98.1 million as compared~~ to the ~~prior~~final ~~year.~~settlement ~~This increase was partially offset by expected run off in the in-force blocks~~ of ~~business.~~prior acquisitions

~~Operating~~•Lower ~~revenues~~investment income due to expected run off of the in-force blocks of business

~~Net~~Operating premiums and policy fees increased $144.1 million primarily due to a full year of GWL&A premiums more than offsetting the expected runoff of the in-force blocks of business. Net investment income increased $115.5 million primarily due to the GWL&A transaction which added $419.7 million of net investment income for 2020, an increase of $179.5 million as compared to the prior year. This was partly offset by the expected runoff of the in-force blocks of business. Other income increased $117.3 million as compared to the prior year which was primarily due to GWL&A which added $109.8 million as compared to the prior year. Revenues

~~Total~~2021 ~~benefits~~to ~~and~~2020 ~~expenses~~Annual Comparison. Operating revenues decreased $242 million primarily driven by:

~~Total~~•Other ~~benefits~~income ~~and~~of ~~expenses increased~~ $~~322.0~~109 million ~~primarily~~recorded ~~due~~in ~~to GWL&A which added $819.8 million of benefits and expenses for~~ 2020, anrelated ~~increase of $378.8 million as compared~~ to the ~~prior~~final ~~year.~~settlement ~~This was partly offset by the expected runoff~~ of ~~the~~prior ~~in-force blocks of business.~~acquisitions

•Lower investment income due to expected run off of the in-force blocks of business

The major categories of net investment income are summarized as follows:


	For The Year Ended December 31,
	2021		2020		2019
	(Dollars In Millions)
Net Investment Income
Fixed Maturities	$	1,430	$	1,469	$	1,391
Commercial mortgage loans	68		79		58
Commercial mortgage loans participant income	—		—		—
Other, net	92		100		84
Total net investment income	1,590		1,648		1,533

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Operating Benefits and Expenses

2021 to 2020 Annual Comparison. Operating benefits and expenses decreased $150 million primarily driven by:

•Favorable mortality experience on the payout annuity block partially offset by unfavorable mortality experience in the life products

•Lower reserves in the group life and accident and health block

•Lower annuity interest credited primarily due to lower fixed annuity account balances

•Lower expenses of $27 million related to system conversion and integration of acquired blocks


	For The Year Ended December 31,
	2021		2020		2019
	(Dollars In Millions)
Benefit and settlement expense
Death claims	$	(1,232)	$	(1,165)	$	(984)
Change in life reserves	125		207		121
Life surrenders	(209)		(283)		(260)
Change in annuity guaranteed benefit reserves	31		(10)		(21)
Payout annuities mortality variance	(22)		(80)		(35)
Interest credited and other expenses	(1,073)		(1,171)		(1,049)
Total benefits and settlement expenses	$	(2,380)	$	(2,502)	$	(2,228)

Reinsurance

The Acquisitions segment currently reinsures portions of both its life and annuity in-force. The cost of reinsurance to the segment is reflected in the chart shown below. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in this report.

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Impact of reinsurance

Reinsurance impacted the Acquisitions segment line items as shown in the following table:

Acquisitions Segment

Line Item Impact of Reinsurance


	For The Year Ended December 31,
	2021		2020		2019
	(Dollars In Millions)
REVENUES
Reinsurance ceded	$	(255)	$	(228)	$	(293)
BENEFITS AND EXPENSES
Benefits and settlement expenses	(262)		(206)		(261)
Amortization of VOBA	(1)		(1)		(1)
Other operating expenses	(27)		(28)		(32)
Total benefits and expenses	(290)		(235)		(294)

NET IMPACT OF REINSURANCE(1)	$	35	$	7	$	1

	For The Year Ended December 31,
	2020		2019		2018
	(Dollars In Thousands)
REVENUES
Reinsurance ceded	$	(228,207)	$	(293,433)	$	(317,730)
BENEFITS AND EXPENSES
Benefits and settlement expenses	(206,152)		(260,905)		(267,998)
Amortization of VOBA	(665)		(971)		(635)
Other operating expenses	(28,581)		(32,495)		(35,940)
Total benefits and expenses	(235,398)		(294,371)		(304,573)
NET IMPACT OF REINSURANCE(1)	$	7,191	$	938	$	(13,157)

(1)Assumes no investment income on reinsurance. Foregone investment income would substantially reduce the favorable impact of reinsurance.

The segment’s reinsurance programs do not materially impact the other income line of the income statement. In addition, net investment income generally has no direct impact on reinsurance cost. However, by ceding business to the assuming companies, we forgo 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. For business ceded under modified coinsurance arrangements, the amount of investment income attributable to the assuming company is included as part of the overall change in policy reserves and, as such, is reflected in benefit and settlement expenses. The net investment income impact to us and the assuming companies has not been quantified as it is not fully reflected in our consolidated financial statements.

The net impact of reinsurance was more favorable by $6.3 million primarily due to lower ceded revenue partly offset by lower ceded benefits and expenses. For the year ended December 31, 2020, ceded revenues decreased by $65.2 million, while ceded benefits and expenses decreased by $54.8 million primarily due to lower benefit and settlement expenses.62

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such, is reflected in benefit and settlement expenses. The net investment income impact to us and the assuming companies has not been quantified as it is not fully reflected in our consolidated financial statements.

2021 to 2020 Annual Comparison. The change in the net impact of reinsurance was favorable by $28 million primarily driven by:

•Higher ceded traditional life premiums due to fluctuations in the number of policies entering their post level period at the end of 2019. These post level policies cause fluctuations in reinsurance premiums between periods for those contracts that enter the grace period and subsequently lapse

•Higher ceded benefits and settlement expenses primarily due to fluctuations in the number of policies entering their post level period at the end of 2019, due to accruals within benefits and settlement expense to adjust for the income effect of policies expected to lapse in the next period

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Stable Value Products

Segment Results of Operations

Segment results were as follows:

	For The Year Ended December 31,
	2020		2019		2018
	2021		2020		2019
	(Dollars In Thousands)
	(Dollars In Millions)
REVENUES
Net investment income	$	~~230,217~~303	$	~~243,775~~230	$	~~217,778~~244
Other income	—		12—		~~296~~—
Total operating revenues	~~230,217~~303		~~243,787~~230		~~218,074~~244
Realized gains (losses)	(53,931)		2,800		1,427
Total revenues	176,286		246,587		219,501
BENEFITS AND EXPENSES
Benefits and settlement expenses	~~133,034~~124		~~144,448~~133		~~109,747~~144
Amortization of DAC	~~3,322~~5		3~~,382~~		3~~,201~~
Other operating expenses	~~4,251~~3		~~2,774~~4		~~2,798~~4
Total benefits and expenses	~~140,607~~132		~~150,604~~140		~~115,746~~151
INCOME BEFORE INCOME TAX	35,679		95,983		103,755
PRE-TAX ADJUSTED OPERATING INCOME	171		90		93
Less: realized gains (losses)	(53,931)		2,800		1,427
Add: net gains (losses) - investments and derivatives	44		(54)		3
PRE-TAX ADJUSTED OPERATING INCOME	$	89,610	$	93,183	$	102,328
INCOME BEFORE INCOME TAX	$	215	$	36	$	96

The following table summarizes key data for the Stable Value Products segment:

	For The Year Ended December 31,
	2020			2019			2018
	2021			2020			2019
	(Dollars In Thousands)
	(Dollars In Millions)
Sales(1)
GIC	$	78,387		$	8,000		$	88,500
GICs	$	—		$	78		$	8
GFA	2,250,000			1,350,000			1,250,000
Funding agreements	4,355			2,250			1,350
	$	24,~~328,387~~355		$	12,~~358,000~~328		$	1,~~338,500~~358
Average Account Values	$	57,~~925,571~~660		$	5,~~607,828~~926		$	45,~~946,953~~608
Ending Account Values	$	68,~~056,181~~526		$	56,~~443,752~~056		$	5,~~234,731~~444
Operating Spread
Net investment income yield	3.8995		%	43.3489		%	4.4034		%
Interest credited	21.2563			2.5725			2.2157
Operating expenses	0.1311			0.1113			0.1211
Operating spread	12.5121		%	1.6651		%	21.0766		%
Adjusted operating spread(2)	1.2858		%	1.3128		%	1.5431		%

(1)Sales are measured at the time the purchase payments are received.

(2)Excludes commercial mortgage loan participation income, the impact of called securities, and the impact of commercial mortgage loan ~~income~~prepayments.

For The Year Ended December 31, 2020 as compared to The Year Ended December 31, 2019

Pre-tax Adjusted Operating Income

Pre-tax adjusted operating income decreased $3.6 million for 2020, as compared to 2019. Participation commercial mortgage loan income was $13.2 million for 2020, as compared to $20.1 million for the prior year. The adjusted operating

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~~spread,~~Pre-Tax ~~which~~Adjusted ~~excludes~~Operating ~~participation commercial mortgage loan income, decreased by 3 basis points for 2020, from the prior year, due primarily to a decrease in yields, partially offset by a decrease in credited interest.~~ Income

2021 to 2020 Annual Comparison. Pre-tax adjusted operating income increased $81 million primarily driven by:

•Increase in net investment income of $36 million due to an increase in participation income and prepayments on commercial mortgage loans and income on called securities

•Increase in net investment income of $27 million due to an increase in the average balance

•Increase in operating income of $18 million due to higher adjusted operating spreads


	For The Year Ended December 31,
	2021		2020		2019
	(Dollars In Millions)
Net Investment Income
Fixed Maturities	$	126	$	107	$	131
Participation commercial mortgage loan income	71		37		96
Commercial mortgage loan income	108		88		20
Other income and expenses	(2)		(2)		(3)
Total net investment income	$	303	$	230	$	244

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Asset Protection

Segment Results of Operations

Segment results were as follows:

For The Year Ended December 31,

2020

2019

2018

2021

2020

2019

(Dollars In Thousands)

(Dollars In Millions)

REVENUES

Gross premiums and policy fees

~~293,352~~291

~~299,765~~293

~~308,527~~300

Reinsurance ceded

(~~185,898~~193)

(~~179,561~~186)

(~~114,591~~180)

Net premiums and policy fees

~~107,454~~98

~~120,204~~107

~~193,936~~120

Net investment income

~~23,379~~20

~~28,291~~23

~~25,070~~28

Other income

~~144,572~~152

~~142,160~~145

~~136,495~~142

Total operating revenues

~~275,405~~270

~~290,655~~275

~~355,501~~290

BENEFITS AND EXPENSES

Benefits and settlement expenses

~~75,468~~59

~~92,655~~75

~~111,249~~93

Amortization of DAC and VOBA

~~65,684~~63

~~62,631~~65

62~~,984~~

Other operating expenses

~~92,408~~108

~~98,164~~94

~~156,897~~98

Total benefits and expenses

~~233,560~~230

~~253,450~~234

~~331,130~~253

INCOME BEFORE INCOME TAX

41,845

37,205

24,371

PRE-TAX ADJUSTED OPERATING INCOME

41,845

37,205

24,371

INCOME BEFORE INCOME TAX

The following table summarizes key data for the Asset Protection segment:

	For The Year Ended December 31,
	2020			2019			2018
	2021			2020			2019
	(Dollars In Thousands)
	(Dollars In Millions)
Sales(1)
Credit insurance	$	~~5,117~~—		$	~~8,675~~5		$	~~11,782~~9
Service contracts	~~393,986~~503			~~393,893~~394			~~370,540~~394
GAP	~~74,899~~84			~~78,291~~75			~~66,748~~78
	$	~~474,002~~587		$	~~480,859~~474		$	~~449,070~~481
Loss Ratios(2)
Credit insurance	3467.49		%	2434.64		%	2724.26		%
Service contracts	6057.97			6460.79			5964.87
GAP	~~111~~63.94			~~126~~111.09			~~140~~126.50

(1)Sales are based on the amount of single premiums and fees received

(2)Incurred claims as a percentage of earned premiums

~~For~~Pre-Tax ~~The~~Adjusted ~~Year~~Operating ~~Ended December 31, 2020 as compared to The Year Ended December 31, 2019~~Income

2021 to 2020 Annual Comparison. Pre-tax ~~Adjusted~~adjusted ~~Operating~~operating ~~Income~~income decreased $1 million primarily driven by:

~~Pre-tax~~•Favorable ~~adjusted~~impact ~~operating income increased $4.6 million, or 12.5%, due to an increase in service contract earnings~~ of ~~$3.4~~lower ~~million, primarily due to favorable~~ loss ratios ~~and lower expenses, somewhat offset by lower investment income. Income~~ from the GAP product line, ~~increased~~due ~~$2.3~~to ~~million primarily resulting from lower loss ratios somewhat offset by~~ higher ~~expenses~~used ~~and~~car ~~credit insurance product lines decreased $1.1 million primarily due to lower volume.~~values

•Higher expenses due to higher sales and commissions in the service contract line

•Increase in sales as a result of positive customer acceptance and gain of market share.

Reinsurance

The majority of the Asset Protection segment’s reinsurance activity relates to the cession of vehicle service contracts, and guaranteed asset protection insurance to producer affiliated reinsurance companies (“PARCs”). These arrangements are coinsurance contracts ceding the business on a first dollar quota share basis generally at 100% to limit the segment’s exposure

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~~Net~~and ~~premiums~~allow ~~and~~the PARCs to share in the underwriting income of the product. Reinsurance contracts do not relieve the Asset Protection segment from obligations to policyholders. The Asset Protection segment also carries a catastrophic reinsurance policy ~~fees~~for the GAP program. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in this report.

Net premiums and policy fees decreased $12.8 million, or 10.6%, due to a decrease in GAP premiums of $6.4 million as a result of lower sales in prior periods and the related impact on earned premiums. Service contract premiums decreased $4.6 million due to higher ceded premiums and credit insurance premiums decreased $1.8 million as a result of declining sales.

Other income

Other income increased $2.4 million, or 1.7%, primarily due to an increase of $3.3 million in the service contract product line due to higher sales in previous years and was partly offset by a decrease of $0.8 million from the GAP product line.

Benefits and settlement expenses

Benefits and settlement expenses decreased $17.2 million, or 18.5%, due to a decrease of $11.1 million and $6.1 million, respectively, of GAP and service contract claims due to lower volumes as a result of discontinuing the relationship with a significant distribution partner and lower loss ratios.

Sales

Total segment sales decreased $6.9 million, or 1.4%. Credit insurance sales decreased $3.6 million due to decreasing demand for the product. GAP sales decreased $3.4 million due to decreased auto sales. Service contract sales increased $0.1 million.

Reinsurance

The majority of the Asset Protection segment’s reinsurance activity relates to the cession of single premium credit life and credit accident and health insurance, vehicle service contracts, and guaranteed asset protection insurance to wholly owned subsidiaries of PLC. The business ceded to PLC’s subsidiaries is then retroceded to producer affiliated reinsurance companies (“PARCs”). These arrangements are coinsurance contracts ceding the business on a first dollar quota share basis generally at 100% to limit the segment’s exposure and allow the PARCs to share in the underwriting income of the product. Reinsurance contracts do not relieve the Asset Protection segment from obligations to policyholders. The Asset Protection segment also carries a catastrophic reinsurance policy for the GAP program. A more detailed discussion of the components of reinsurance can be found in the Reinsurance section of Note 2, Summary of Significant Accounting Policies to our consolidated financial statements included in this report.

Reinsurance impacted the Asset Protection segment line items as shown in the following table:

Asset Protection Segment

Line Item Impact of Reinsurance


	For The Year Ended December 31,
	2021		2020		2019
	(Dollars In Millions)
REVENUES
Reinsurance ceded	$	(193)	$	(186)	$	(180)
BENEFITS AND EXPENSES
Benefits and settlement expenses	(77)		(82)		(81)
Amortization of DAC/VOBA	(5)		(4)		(4)
Other operating expenses	(5)		(5)		(4)
Total benefits and expenses	(87)		(91)		(89)

NET IMPACT OF REINSURANCE(1)	$	(106)	$	(95)	$	(91)

	For The Year Ended December 31,
	2020		2019		2018
	(Dollars In Thousands)
REVENUES
Reinsurance ceded	$	(185,898)	$	(179,561)	$	(116,602)
BENEFITS AND EXPENSES
Benefits and settlement expenses	(81,914)		(80,654)		(74,165)
Amortization of DAC/VOBA	(4,406)		(3,628)		(3,060)
Other operating expenses	(4,739)		(4,300)		(4,465)
Total benefits and expenses	(91,059)		(88,582)		(81,690)
NET IMPACT OF REINSURANCE(1)	$	(94,839)	$	(90,979)	$	(34,912)

(1)Assumes no investment income on reinsurance. Foregone investment income would substantially change the impact of reinsurance.

~~For~~2021 to 2020 Annual Comparison. The ~~Year~~change ~~Ended~~in ~~December 31,~~the ~~2020~~net asimpact ~~compared~~of toreinsurance ~~The~~was ~~Year~~unfavorable ~~Ended~~by ~~December 31,~~$11 ~~2019~~million primarily driven by:

~~Reinsurance~~•Decrease ~~premiums~~in ceded ~~increased~~GAP ~~$6.3~~losses ~~million, or 3.5%, for the year ended December 31, 2020,~~ as ~~compared~~a toresult ~~the~~of ~~year~~lower ~~ended~~loss ~~December 31,~~ratios ~~2019.~~driven ~~GAP~~by ~~ceded~~higher ~~premiums~~used ~~increased~~car ~~$0.9 million, or 3.3%. Service contract ceded premiums increased $7.3 million, or 5.2%. Ceded premiums in the credit line decreased $1.9 million, or 18.8%.~~prices

•Increase in ceded service contract premiums related to higher service contract premium volume

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Benefits and settlement expenses ceded increased $1.3 million, or 1.6%, for the year ended December 31, 2020, as compared to the year ended December 31, 2019. Ceded losses in the service contract line increased $2.5 million and ceded losses in the credit product line increased $0.5 million. The increases were partially offset by a decrease in GAP ceded losses of $1.7 million.

Amortization of DAC and VOBA ceded increased $0.8 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019, mainly as the result of changes in ceded activity in the GAP product lines. Other operating expenses ceded increased $0.4 million, or 10.2%, for the year ended December 31, 2020, as compared to the year ended December 31, 2019 due to higher ceded expenses in the service contract and GAP product lines, mostly offset by lower ceded expenses in the credit product line.

Net investment income has no direct impact on reinsurance cost. However, by ceding business to the assuming companies, the Asset Protection segment forgoes investment income on the assets backing the reserves ceded. Conversely, the assuming companies will receive investment income on the assets backing reserves assumed which generally will increase the assuming companies’ profitability on business ceded. The net investment income impact to the Asset Protection segment and the assuming companies has not been quantified as it is not reflected in the consolidated financial statements.

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Corporate and Other

Segment Results of Operations

Segment results were as follows:

	For The Year Ended December 31,
	2020		2019		2018
	2021		2020		2019
	(Dollars In Thousands)
	(Dollars In Millions)
REVENUES
Gross premiums and policy fees	$	~~11,041~~10	$	11~~,860~~	$	~~12,713~~11
Reinsurance ceded	—		~~(139)~~—		~~(515)~~—
Net premiums and policy fees	~~11,041~~10		11~~,721~~		~~12,198~~11
Net investment income	(~~26,771~~41)		~~74,855~~(27)		~~99,757~~75
Other income	1~~,615~~		~~1,011~~2		1~~,313~~
Total operating revenues	(~~14,115~~30)		~~87,587~~(14)		~~113,268~~87
Realized gains (losses)	8,816		43,877		(2,420)
Total revenues	(5,299)		131,464		110,848
BENEFITS AND EXPENSES
Benefits and settlement expenses	14~~,704~~		~~16,866~~15		17~~,646~~
Amortization of DAC/VOBA	—		—		—
Other operating expenses	~~214,180~~111		~~231,969~~218		~~252,344~~232
Total benefits and expenses	~~228,884~~125		~~248,835~~233		~~269,990~~249
INCOME (LOSS) BEFORE INCOME TAX	(234,183)		(117,371)		(159,142)
PRE-TAX ADJUSTED OPERATING INCOME (LOSS)	(155)		(247)		(162)
Less: realized gains (losses)	8,816		43,877		(2,420)
Add: net gains (losses) - investments and derivatives	19		9		44
PRE-TAX ADJUSTED OPERATING INCOME (LOSS)	$	(242,999)	$	(161,248)	$	(156,722)
INCOME (LOSS) BEFORE INCOME TAX	$	(136)	$	(238)	$	(118)

~~For~~2021 to 2020 Annual Comparison. The ~~Year~~decreased ~~Ended~~pre-tax ~~December 31,~~adjusted operating loss was primarily due to a captive reinsurance company reorganization in 2020 aswhich ~~compared~~included a one-time loss of $70 million related to ~~The~~accelerated ~~Year~~amortization ~~Ended~~and ~~December 31,~~accretion ~~2019~~of premiums and discounts recorded against the fixed maturities and non-recourse funding obligations and a decrease in corporate overhead expense.

~~Pre-tax Adjusted Operating Income (Loss)~~68

Pre-tax adjusted operating loss was $243.0 million for the year ended December 31, 2020, as compared to a pre-tax adjusted operating loss of $161.2 million for the year ended December 31, 2019. The increase in operating loss is primarily due to the Captive Merger, causing $70.4 million of acceleration of amortization of premiums and accretion of discounts recorded against fixed maturities and non-recourse funding obligations and increased corporate overhead expenses, primarily attributable to the Captive Merger.

Operating revenues

Net investment income for the segment decreased $101.6 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019, primarily due to the Captive Merger, causing a decrease in held-to-maturity income due to the acceleration of the amortization of premiums recorded against the held-to-maturity securities as well as a decrease in interest received from these securities, and an increase in investment expenses.

Total benefits and expenses

Total benefits and expenses decreased $20.0 million for the year ended December 31, 2020, as compared to the year ended December 31, 2019. Other operating expenses were lower due to reduced interest expense as the non-recourse funding obligations were redeemed October 1, 2020. This reduction in interest expense was partially offset by an increase in corporate overhead expenses primarily due to restructuring fees associated with the Captive Merger.

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CONSOLIDATED INVESTMENTS

As of December 31, ~~2020~~2021, our investment portfolio was $8890.18 billion. The types of assets in which we may invest are influenced by various state insurance laws which prescribe qualified investment assets. Within the parameters of these laws, we invest in assets giving consideration to such factors as liquidity and capital needs, investment quality, investment return, matching of assets and liabilities, and the overall composition of the investment portfolio by asset type and credit exposure.

Within our fixed maturity investments, we maintain portfolios classified as “available-for-sale”, ~~“trading”,~~ and “~~held-to-maturity~~trading”. We purchase our available-for-sale investments with the intent to hold to maturity by purchasing investments that match future cash flow needs. However, we may sell any of our available-for-sale and trading investments to maintain proper matching of assets and liabilities. Accordingly, we classified $6970.43 billion, or 96.02%, of our fixed maturities as “available-for-sale” as of December 31, ~~2020~~2021. These securities are carried at fair value on our consolidated balance sheets. Changes in fair value for our available-for-sale portfolio, net of tax and the related impact on certain insurance assets and liabilities, are recorded directly to shareowner’s equity. Declines in fair value that are due to credit losses are recorded as ~~realized~~net gains (losses) - investments and derivatives in the consolidated statements of income. Beginning on January 1, 2020, credit losses are recorded in ~~realized~~net gains (losses) - investments and derivatives with a corresponding adjustment to the allowance for credit losses, except that the credit losses 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 ~~realized~~net gains (losses) - investments and derivatives. Prior to January 1, 2020, credit losses were recorded as ~~realized~~net gains (losses) - investments and derivatives in the consolidated statements of income, net of any applicable non-credit component of the loss, which was recorded as an adjustment to other comprehensive income (loss).

Trading securities are carried at fair value and changes in fair value are recorded on the income statement as they occur. Our trading portfolio accounted for $2.98 billion, or 43.08%, of our fixed maturities and $~~76.2~~82 million of short-term investments as of December 31, ~~2020~~2021. Changes in fair value on the Modco trading portfolios, including gains and losses from sales, are passed to third party reinsurers through the contractual terms of the related reinsurance arrangements. Partially offsetting these amounts are corresponding changes in the fair value of the embedded derivative associated with the underlying reinsurance arrangement.

Fixed maturities with respect to which we have both the positive intent and ability to hold to maturity are classified as “held-to-maturity”. As of December 31, 2020, we no longer held fixed maturities classified as “held-to-maturity”.

Fair values for private, non-traded securities are determined as follows: 1) we obtain estimates from independent pricing services and 2) we estimate fair value based upon a comparison to quoted issues of the same issuer or issues of other issuers with similar terms and risk characteristics. We analyze the independent pricing services valuation methodologies and related inputs, including an assessment of the observability of market inputs. Upon obtaining this information related to fair value, management makes a determination as to the appropriate valuation amount. For more information about the fair values of our investments please refer to Note 5, Fair Value of Financial Instruments, to the financial statements.

~~The following table presents the reported values of our invested assets:~~69

	As of December 31,
	2020				2019
	(Dollars In Thousands)
Publicly issued bonds (amortized cost: 2020 - $43,886,905; 2019 - $42,681,872)	$	49,278,078	55.9	%	$	44,737,950	53.1	%
Privately issued bonds (amortized cost: 2020 - $21,273,879; 2019 - $23,310,601)	22,754,914		25.8		24,030,426		28.5
Redeemable preferred stocks (amortized cost: 2020 - $195,796; 2019 - $100,068)	206,935		0.2		99,497		0.1
Fixed maturities	72,239,927		81.9		68,867,873		81.7
Equity securities (cost: 2020 - $634,910; 2019 - $534,463)	666,977		0.8		553,720		0.7
Commercial mortgage loans	10,005,562		11.4		9,379,401		11.1
Investment real estate	10,153		—		10,321		—
Policy loans	1,593,394		1.8		1,675,121		2.0
Other long-term investments	3,164,180		3.6		2,479,520		2.9
Short-term investments	462,415		0.5		1,320,864		1.6
Total investments	$	88,142,608	100.0	%	$	84,286,820	100.0	%

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~~Included~~The infollowing ~~the preceding~~ table ~~are~~presents ~~$2.9~~the ~~billion~~reported ~~and~~values ~~$2.5 billion~~ of ~~fixed~~our maturities and $76.2 million and $91.2 million of short-term investments classified as trading securities as of December 31, 2020 and 2019, respectively. All of the fixed maturities in the trading portfolio are invested assets ~~that are held pursuant to Modco arrangements under which the economic risks and benefits of the investments are passed to third party reinsurers.~~ :


	As of December 31,
	2021				2020
					(Recast)
	(Dollars In Millions)
Publicly issued bonds (amortized cost: 2021 - $44,618; 2020 - $44,168)	$	48,632	53.6	%	$	49,571	56.0	%
Privately issued bonds (amortized cost: 2021 - $23,132; 2020 - $21,332)	24,102		26.6		22,817		25.8
Redeemable preferred stocks (amortized cost: 2021 - $305; 2020 - $196)	314		0.3		207		0.2
Fixed maturities	73,048		80.5		72,595		82.0
Equity securities (cost: 2021 - $804; 2020 - $635)	828		0.9		667		0.7
Commercial mortgage loans	10,863		12.0		10,006		11.3
Policy loans	1,527		1.7		1,593		1.8
Other long-term investments	3,646		4.0		3,251		3.7
Short-term investments	862		0.9		462		0.5
Total investments	$	90,774	100.0	%	$	88,574	100.0	%

Included in the preceding table are $2.8 billion and $2.9 billion of fixed maturities and $82 million and $76 million of short-term investments classified as trading securities as of December 31, 2021 and 2020, respectively. All of the fixed maturities in the trading portfolio are invested assets that are held pursuant to Modco arrangements under which the economic risks and benefits of the investments are passed to third party reinsurers.

Fixed Maturity Investments

As of December 31, ~~2020~~2021, our fixed maturity investment holdings were $7273.20 billion. The approximate percentage distribution of our fixed maturity investments by quality rating is as follows:

	As of December 31,
Rating	~~2020~~2021				~~2019~~2020
	(Dollars in Thousands)
					(Recast)
AAA	$	9,337,162	12.9	%	$	9,371,614	13.6	%
	(Dollars in Millions)
AA	7,318,010		10.1		7,587,879		11.0
AAA	$	9,089	12.4	%	$	9,497	13.1	%
A	24,301,883		33.6		22,861,846		33.2
AA	7,153		9.8		7,337		10.1
BBB	28,552,505		39.5		24,484,792		35.6
A	22,863		31.4		24,372		33.6
Below investment grade	2,730,367		3.9		1,737,861		2.5
BBB	31,361		42.9		28,654		39.5
Not rated(1)	—		—		2,823,881		4.1
Below investment grade	2,582		3.5		2,735		3.7
	$	7273,~~239,927~~048	100.0	%	$	6872,~~867,873~~595	100.0	%

(1) Our “not rated” securities were held-to-maturity securities issued by affiliates of the Company which were considered variable interest entities (“VIE’s”) and are discussed in Note 4, Investment Operations, to the consolidated financial statements. We were not the primary beneficiary of these entities and thus these securities were not eliminated in consolidation. These securities were collateralized by non-recourse funding obligations issued by captive insurance companies that are wholly owned subsidiaries of the Company. As of December 31, 2020, the Company no longer held these securities.

We use various Nationally Recognized Statistical Rating Organizations’ (“NRSRO”) ratings when classifying securities by quality ratings. When the various NRSRO ratings are not consistent for a security, we use the second-highest convention in assigning the rating. When there are no such published ratings, we assign a rating based on the statutory accounting rating system if such ratings are available.

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The distribution of our fixed maturity investments by type is as follows:

	As of December 31,
Type	~~2020~~2021		~~2019~~2020
	(Dollars In Thousands)
			(Recast)
Corporate securities	$	53,799,026	$	48,400,037
	(Dollars In Millions)
Residential mortgage-backed securities	6,867,831		6,140,862
Corporate securities	$	55,574	$	53,967
Commercial mortgage-backed securities	2,720,891		2,840,952
Residential mortgage-backed securities	6,938		6,877
Other asset-backed securities	1,741,097		1,924,596
Commercial mortgage-backed securities	2,516		2,748
U.S. government-related securities	1,457,296		1,079,463
Other asset-backed securities	1,605		1,741
Other government-related securities	746,053		625,944
U.S. government-related securities	841		1,606
States, municipals, and political subdivisions	4,700,798		4,932,641
Other government-related securities	817		747
Redeemable preferred stocks	206,935		99,497
States, municipals, and political subdivisions	4,442		4,702
Securities issued by affiliates	—		2,823,881
Redeemable preferred stocks	315		207
Total fixed income portfolio	$	7273,~~239,927~~048	$	6872,~~867,873~~595

We periodically update our industry segmentation based on an industry accepted index. Updates to this index can result in a change in segmentation for certain securities between periods.

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We periodically update our industry segmentation based on an industry accepted index. Updates to this index can result in a change in segmentation for certain securities between periods.

The industry segment composition of our fixed maturity securities is presented in the following table:

	As of December 31, 2020		% FairValue		As of December 31, 2019		% FairValue
	As of December 31, 2021		% FairValue		As of December 31, 2020		% FairValue
	(Dollars In Thousands)
					(Recast)
Banking	$	7,707,290	10.7	%	$	6,403,157	9.3	%
	(Dollars In Millions)
Other finance	958,907		1.3		969,368		1.4
Banking	$	8,362	11.5	%	$	7,752	10.7	%
Electric utility	5,787,407		8.0		5,447,830		7.9
Other finance	1,018		1.5		959		1.3
Energy	4,750,660		6.6		4,939,246		7.2
Electric utility	5,727		7.8		5,792		8.0
Natural gas	1,274,736		1.8		1,120,052		1.6
Energy	4,574		6.3		4,756		6.6
Insurance	5,996,681		8.3		4,969,799		7.2
Natural gas	1,302		1.8		1,275		1.8
Communications	2,962,432		4.1		2,654,395		3.9
Insurance	6,534		8.9		6,022		8.3
Basic industrial	2,518,850		3.5		2,176,559		3.2
Communications	2,914		4.0		2,967		4.1
Consumer noncyclical	7,353,197		10.2		6,492,483		9.4
Basic industrial	2,655		3.6		2,532		3.5
Consumer cyclical	2,825,829		3.9		2,597,772		3.8
Consumer noncyclical	7,331		10.0		7,374		10.2
Finance companies	319,263		0.4		228,037		0.3
Consumer cyclical	2,862		3.9		2,833		3.9
Capital goods	3,643,191		5.0		3,425,996		5.0
Finance companies	506		0.7		319		0.4
Transportation	2,231,969		3.1		2,128,364		3.1
Capital goods	3,513		4.8		3,648		5.0
Other industrial	689,468		1.0		646,210		0.9
Transportation	2,044		2.8		2,236		3.1
Brokerage	1,773,382		2.5		1,347,694		2.0
Other industrial	686		0.9		691		1.0
Technology	2,576,479		3.6		2,383,634		3.5
Brokerage	2,065		2.8		1,786		2.5
Real estate	587,204		0.8		531,000		0.8
Technology	3,155		4.3		2,596		3.6
Other utility	49,016		0.0		37,938		0.1
Real estate	577		0.8		587		0.8
Commercial mortgage-backed securities	2,720,891		3.8		2,840,952		4.1
Other utility	64		0.1		48		—
Other asset-backed securities	1,741,097		2.4		1,924,596		2.8
Commercial mortgage-backed securities	2,516		3.4		2,748		3.8
Residential mortgage-backed non-agency securities	5,598,000		7.7		5,265,776		7.6
Other asset-backed securities	1,605		2.2		1,741		2.4
Residential mortgage-backed agency securities	1,269,831		1.8		875,086		1.3
Residential mortgage-backed non-agency securities	5,742		7.9		5,607		7.7
U.S. government-related securities	1,457,296		2.0		1,079,463		1.6
Residential mortgage-backed agency securities	1,196		1.6		1,270		1.8
Other government-related securities	746,053		1.0		625,944		0.9
U.S. government-related securities	841		1.2		1,607		2.0
State, municipals, and political subdivisions	4,700,798		6.5		4,932,641		7.1
Other government-related securities	817		1.1		747		1.0
Securities issued by affiliates	—		—		2,823,881		4.0
State, municipals, and political subdivisions	4,442		6.1		4,702		6.5
Total	$	7273,~~239,927~~048	100.0	%	$	6872,~~867,873~~595	100.0	%

The total Modco trading portfolio fixed maturities by rating is as follows:

	As of December 31,
Rating	~~2020~~2021		~~2019~~2020
	(Dollars In Thousands)
	(Dollars In Millions)
AAA	$	~~339,644~~267	$	~~280,067~~340
AA	~~268,381~~274		~~309,165~~268
A	~~909,395~~880		~~834,808~~909
BBB	1,~~204,558~~243		~~979~~1,~~157~~205
Below investment grade	~~140,390~~129		~~124,370~~140
Total Modco trading fixed maturities	$	2,~~862,368~~793	$	2,~~527,567~~862

A portion of our bond portfolio is invested in RMBS, CMBS, and ABS. ABS are securities that are backed by a pool of assets. These holdings as of December 31, ~~2020~~2021, were $11.31 billion. Mortgage-backed securities (“MBS”) are constructed from pools of mortgages and may have cash flow volatility as a result of changes in the rate at which prepayments of principal occur with respect to the underlying loans. Excluding limitations on access to lending and other extraordinary economic conditions, prepayments of principal on the underlying loans can be expected to accelerate with decreases in market interest

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~~conditions,~~rates ~~prepayments~~and diminish with increases in interest rates.The following tables include the percentage of ~~principal~~our oncollateral grouped by rating category and categorize the ~~underlying~~estimated ~~loans~~fair ~~can~~value beby ~~expected~~year toof ~~accelerate~~security ~~with~~origination ~~decreases~~for inour ~~market~~Prime, ~~interest~~Non-Prime, ~~rates~~Commercial, and ~~diminish~~Other ~~with~~asset-backed ~~increases~~securities inas ~~interest~~of ~~rates.~~December 31, 2021 and 2020:

The following tables include the percentage of our collateral grouped by rating category and categorize the estimated fair value by year of security origination for our Prime, Non-Prime, Commercial, and Other asset-backed securities as of December 31, 2020 and 2019:


	As of December 31, 2021
	Prime(1)						Non-Prime(1)						Commercial						Other asset-backed						Total
	Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized			Fair			Amortized
	Value			Cost			Value			Cost			Value			Cost			Value			Cost			Value			Cost
	(Dollars In Millions)
Rating $
AAA	$	5,690		$	5,749		$	1		$	1		$	1,348		$	1,304		$	521		$	509		$	7,560		$	7,563
AA	—			—			—			—			567			555			297			286			864			841
A	1,195			1,206			6			5			460			441			597			594			2,258			2,246
BBB	9			9			1			1			123			122			172			168			305			300
Below	12			13			24			22			18			22			18			18			72			75
	$	6,906		$	6,977		$	32		$	29		$	2,516		$	2,444		$	1,605		$	1,575		$	11,059		$	11,025

Rating %
AAA	82.4		%	82.4		%	3.1		%	3.4		%	53.6		%	53.4		%	32.5		%	32.3		%	68.3		%	68.6		%
AA	—			—			—			—			22.5			22.7			18.5			18.2			7.8			7.6
A	17.3			17.3			18.8			17.2			18.3			18.0			37.2			37.7			20.4			20.4
BBB	0.1			0.1			3.1			3.4			4.9			5.0			10.7			10.7			2.8			2.7
Below	0.2			0.2			75.0			76.0			0.7			0.9			1.1			1.1			0.7			0.7
	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%	100.0		%

Estimated Fair Value of Security by Year of Security Origination
2017 and prior	$	1,236		$	1,217		$	32		$	29		$	2,272		$	2,211		$	1,277		$	1,249		$	4,817		$	4,706
2018	282			278			—			—			145			134			128			127			555			539
2019	363			361			—			—

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