National Western Life Group, Inc. Announces 2023 Full Year and Fourth Quarter Earnings
- None.
- Decrease in consolidated net earnings compared to 2022 due to LDTI accounting standard
- Impact on pretax earnings from changes in Market Risk Benefits liability
Insights
The reported consolidated net earnings of National Western Life Group, Inc. signify a substantial decrease from the previous year, which is a critical point of interest for stakeholders and investors. The decline from $246.5 million to $94.4 million represents a shift that warrants a closer examination of the underlying factors. One significant element is the adoption of the new LDTI accounting standard, which has led to a restatement of financial figures and introduced volatility in reported earnings due to the fair value measurement of Market Risk Benefits.
It is vital to understand that the LDTI changes the way insurance contracts are reported, which can lead to substantial swings in reported earnings, as evidenced by the $200 million swing in pretax earnings. This volatility can affect investor perception and stock price, despite the company's operational gains, such as improved investment returns and mortality experience. The increase in equity award expenses, tied to the company's stock price rise, also played a role in the earnings report.
Furthermore, the proposed merger with Prosperity Life Group is a strategic move that could lead to synergies and expanded market reach. However, the approval of the merger is pending regulatory consent, which introduces an element of uncertainty. The successful integration of the two entities will be crucial for realizing the anticipated benefits and should be monitored closely by investors.
The life insurance industry is characterized by long-term contracts and investment activities that can be significantly impacted by changes in accounting standards, such as LDTI. National Western Life Group's experience highlights the importance of these standards on financial reporting and investor relations. The company's performance in operational areas, including investment returns and mortality rates, suggests a strong underlying business performance that has been overshadowed by accounting changes.
Additionally, the substantial increase in the company's book value per share to $670.99 indicates a solid financial position, which is a positive sign for investors. The company's consolidated total assets and life insurance in force also reflect a healthy financial status and growth potential in the life insurance sector.
The pending merger with Prosperity Life Group could potentially alter the competitive landscape and the company's market share. The successful completion of the merger is expected to bring about operational efficiencies and a broader product portfolio, which could be beneficial in the long-term. However, the integration process will be key in realizing these potential benefits.
The transition to the LDTI accounting standard represents a significant compliance milestone for National Western Life Group, Inc. It is essential for investors to recognize that such transitions not only affect the presentation of financial results but also have implications for corporate governance and risk management. Compliance with new standards requires meticulous planning and execution and the company's ability to navigate these changes is indicative of robust internal controls and financial management practices.
The merger with Prosperity Life Group is subject to regulatory approvals, which are critical checkpoints in the insurance industry due to the sector's highly regulated nature. The outcome of these regulatory reviews can have a decisive impact on the merger's timeline and success. Investors should be aware of the legal complexities and the time frame involved in obtaining such approvals, as they can affect the realization of merger benefits and influence the company's strategic direction.
The Company's reported results were prepared in accordance with the liability accounting methodology required under the Accounting for Long-Duration Contracts ("LDTI") accounting standard effective for publicly traded companies in 2023. A retrospective transition date of January 1, 2021 was elected and financial statements for the years ended December 31, 2022 and 2021 were restated. The Company's pretax earnings for the years ended December 31, 2023 and 2022 include an expense/(benefit) of
Commenting on the reported results, Mr. Moody noted, "The new accounting standard produced a swing in pretax earnings in excess of
Mr. Moody added, "Stockholders of National Western Life Group, Inc. overwhelmingly voted to approve the merger agreement at a special stockholders meeting held in January. We are steadily working through the remaining required conditions to closing, most notably the approval of various insurance regulators, and continue to expect to close the deal in the first half of 2024."
National Western Life Group, Inc. is the parent organization of National Western Life Insurance Company, which is the parent organization of Ozark National Life Insurance Company, both stock life insurance companies in aggregate offering a broad portfolio of individual universal life, whole life and term insurance plans, as well as annuity products. At December 31, 2023, the Company maintained consolidated total assets of
Caution Regarding Forward-Looking Statements:
This press release contains statements which are or may be viewed as forward-looking within the meaning of The Private Securities Litigation Reform Act of 2005. Forward-looking statements relate to future operations, strategies, financial results or other developments, and are subject to assumptions, risks, and uncertainties. These risks and uncertainties also include, (1) the timing of completion of the proposed merger (the "Proposed Transaction") contemplated by the Company's October 8, 2023 merger agreement (the "Merger Agreement") with S. USA Life Insurance Company, Inc. ("S.USA") and its direct wholly owned subsidiary ("PGH Merger Inc.") is uncertain; (2) the conditions to the closing of the Proposed Transaction may not be satisfied; (3) regulatory approvals required for the Proposed Transaction may not be obtained, or required regulatory approvals may delay the Proposed Transaction or result in the imposition of conditions that could have a material adverse effect on the Company or S.USA or cause certain conditions to the closing to not be satisfied, which could result in the termination of the Merger Agreement; (4) the business of the Company or S.USA could suffer as a result of uncertainty surrounding the Proposed Transaction; (5) events, changes or other circumstances could occur that could give rise to the termination of the Merger Agreement; (6) there are risks related to disruption of management's attention from the ongoing business operations of the Company or S.USA due to the Proposed Transaction; (7) the announcement or pendency of the Proposed Transaction could affect the relationships of the Company or S.USA with its clients, and operating results and business generally, including its ability to retain and attract employees; (8) the outcome of any legal proceedings initiated against the Company or S.USA following the announcement of the Proposed Transaction could adversely affect the Company or S.USA, including their ability to consummate the Proposed Transaction; and (9) the Company or S.USA mat be adversely affected by other economic, business, and/or competitive factors as well as management's response to any of the factors described in this paragraph. The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the risk factors included in the Company's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q and other documents of the Company on file with the SEC. The Company does not undertake any obligation to update, correct or otherwise revise any forward-looking statements. All subsequent written and oral forward-looking statements attributable to the Company and/or any person acting on its behalf are expressly qualified in their entirety by this section.
Summary of Consolidated Financial Results (Unaudited) | Three Months Ended | Twelve Months Ended | ||||||
(In thousands except per share data) | December 31, | December 31, | ||||||
2023 | 2022 | 2023 | 2022 | |||||
Revenues: | ||||||||
Revenues, excluding investment and index option gains | $ | 172,620 | 158,985 | 636,879 | 640,545 | |||
Realized and unrealized gains (losses) on index options | 35,366
| 2,308 | 40,612 | (86,866) | ||||
Realized gains (losses) on investments | (117) | 50 | 25,859 | 6,355 | ||||
Total revenues | 207,869 | 161,343 | 703,350 | 560,034 | ||||
Benefits and expenses: | ||||||||
Life and other policy benefits | 34,213 | 41,173 | 117,648 | 128,654 | ||||
Policy benefit remeasurement (gains) and losses | — | — | 8,360 | 9,827 | ||||
Market risk benefits expense | 61,397 | 14,320 | 68,130 | (135,749) | ||||
Amortization of deferred transaction costs | 19,735 | 21,053 | 83,335 | 88,602 | ||||
Universal life and annuity contract interest | 52,255 | 20,374 | 104,996 | 22,840 | ||||
Other operating expenses | 61,639 | 43,526 | 191,196 | 135,817 | ||||
Total benefits and expenses | 229,239 | 140,446 | 573,665 | 249,991 | ||||
Earnings (loss) before income taxes | (21,370) | 20,897 | 129,685 | 310,043 | ||||
Income tax expense (benefit) | (9,135) | 3,663 | 35,255 | 63,532 | ||||
Net earnings (loss) | $ | (12,235) | 17,234 | 94,430 | 246,511 | |||
Net earnings (loss) attributable to Class A shares | $ | (11,889) | 16,746 | 91,759 | 239,540 | |||
Diluted Earnings (Loss) Per Class A Share | $ | (3.46) | 4.87 | 26.71 | 69.71 | |||
Diluted Weighted Average Class A Shares | 3,436 | 3,436 | 3,436 | 3,436 | ||||
December 31, | December 31, | |||||||
2023 | 2022 | |||||||
Book value per share | $ | 670.99 | 602.56 | |||||
Less: Per share impact of accumulated other comprehensive income (loss) | (88.72) | (131.52) | ||||||
Book value per share, excluding accumulated other comprehensive income (loss) * | $ | 759.71 | 734.08 | |||||
* | Book value per share excluding accumulated other comprehensive income (loss) is a non-GAAP financial measure. Accumulated other comprehensive income (loss) totaled |
Investor Relations Contact:
Brian M. Pribyl - Senior Vice President, Chief Financial Officer and Treasurer
(512) 836-1010
bpribyl@nwlic.com
www.nwlgi.com
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SOURCE National Western Life Group, Inc.
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