Edgar Filing: AMERICAN NATIONAL INSURANCE CO /TX/

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2015

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

Commission File No. 001- 34280

LOGO

American National Insurance Company

(Exact name of registrant as specified in its charter)

Texas

74-0484030

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

One Moody Plaza

Galveston, Texas 77550-7999

(Address of principal executive offices) (Zip Code)

(409) 763-4661

(Registrant’s telephone number, including area code)

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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

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


Large accelerated filer x		Accelerated filer ¨		Non-accelerated filer ¨		Smaller reporting company ¨

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

As of May 5, 2015, there were 26,894,101 shares of the registrant’s voting common stock, $1.00 par value per share, outstanding.

AMERICAN NATIONAL INSURANCE COMPANY

TABLE OF CONTENTS


	PART I – FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS (Unaudited):

	Consolidated Statements of Financial Position as of March 31, 2015 and December 31, 2014	3

	Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014	4

	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014	5

	Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2015 and 2014	5

	Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014	6

	Notes to the Unaudited Consolidated Financial Statements	7

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	33

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	50

ITEM 4.	CONTROLS AND PROCEDURES	50

	PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	51

ITEM 1A.	RISK FACTORS	51

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	51

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	51

ITEM 4.	MINE SAFETY DISCLOSURES	51

ITEM 5.	OTHER INFORMATION	51

ITEM 6.	EXHIBIT INDEX	52

AMERICAN NATIONAL INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Unaudited and in thousands, except for share and per share data)


	March 31, 2015			December 31, 2014
				(As Adjusted)
ASSETS
Fixed maturity, bonds held-to-maturity, at amortized cost (Fair Value $8,482,362 and $8,652,913)	$	7,969,007		$	8,225,050
Fixed maturity, bonds available-for-sale, at fair value (Amortized cost $4,796,596 and $4,694,716)		5,070,780			4,921,807
Equity securities, at fair value (Cost $756,460 and $739,384)		1,521,619			1,516,978
Mortgage loans on real estate, net of allowance		3,344,260			3,359,586
Policy loans		406,394			405,979
Investment real estate, net of accumulated depreciation of $196,303 and $193,611		501,992			479,062
Short-term investments		520,333			431,000
Other invested assets		216,981			220,255

Total investments		19,551,366			19,559,717

Cash and cash equivalents		170,017			209,455
Investments in unconsolidated affiliates		345,675			311,779
Accrued investment income		184,337			185,943
Reinsurance recoverables		415,872			428,654
Prepaid reinsurance premiums		55,181			56,019
Premiums due and other receivables		295,304			280,587
Deferred policy acquisition costs		1,233,034			1,253,544
Property and equipment, net		117,877			110,794
Current tax receivable		—			8,669
Other assets		175,166			137,856
Separate account assets		992,970			1,001,515

Total assets	$	23,536,799		$	23,544,532

LIABILITIES
Future policy benefits
Life	$	2,787,668		$	2,770,232
Annuity		1,030,933			1,006,748
Accident and health		56,368			58,364
Policyholders’ account balances		10,604,889			10,781,285
Policy and contract claims		1,296,887			1,297,708
Unearned premium reserve		763,636			755,051
Other policyholder funds		356,776			344,090
Liability for retirement benefits		200,060			195,712
Notes payable		116,435			108,177
Current tax liability		24,204			—
Deferred tax liabilities, net		302,505			287,175
Other liabilities		471,914			498,528
Separate account liabilities		992,970			1,001,515

Total liabilities		19,005,245			19,104,585

STOCKHOLDERS’ EQUITY
Common stock, $1.00 par value, - Authorized 50,000,000, Issued 30,832,449 and 30,832,449, Outstanding 26,896,982 and 26,871,942 shares		30,832			30,832
Additional paid-in capital		11,603			9,248
Accumulated other comprehensive income		498,223			490,782
Retained earnings		4,080,915			3,998,642
Treasury stock, at cost		(101,698	)		(101,941	)

Total American National stockholders’ equity		4,519,875			4,427,563
Noncontrolling interest		11,679			12,384

Total stockholders’ equity		4,531,554			4,439,947

Total liabilities and stockholders’ equity	$	23,536,799		$	23,544,532

See accompanying notes to the consolidated financial statements.

AMERICAN NATIONAL INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited and in thousands, except for share and per share data)


	Three months ended March 31,
	2015			2014
				(As Adjusted)
PREMIUMS AND OTHER REVENUE
Premiums
Life	$	72,082		$	71,995
Annuity		41,443			66,936
Accident and health		51,837			55,336
Property and casualty		276,481			270,608
Other policy revenues		57,524			55,927
Net investment income		209,213			218,823
Net realized investment gains		39,302			26,446
Other-than-temporary impairments		(25	)		(975	)
Other income		8,710			7,340

Total premiums and other revenues		756,567			772,436

BENEFITS, LOSSES AND EXPENSES
Policyholder benefits
Life		88,004			91,280
Annuity		54,367			77,452
Claims incurred
Accident and health		31,797			43,929
Property and casualty		192,252			178,512
Interest credited to policyholders’ account balances		75,753			83,412
Commissions for acquiring and servicing policies		93,115			98,435
Other operating expenses		123,458			118,524
Change in deferred policy acquisition costs		6,462			6,424

Total benefits, losses and expenses		665,208			697,968

Income before federal income tax and equity in earnings/losses of unconsolidated affiliates		91,359			74,468

Less: Provision for federal income taxes
Current		15,588			13,781
Deferred		10,298			9,127

Total provision for federal income taxes		25,886			22,908
Equity in earnings (losses) of unconsolidated affiliates, net of tax		36,780			(62	)

Net income		102,253			51,498
Less: Net income attributable to noncontrolling interest, net of tax		(729	)		(756	)

Net income attributable to American National	$	102,982		$	52,254

Amounts available to American National common stockholders
Earnings per share
Basic	$	3.84		$	1.95
Diluted		3.82			1.94
Cash dividends to common stockholders		0.77			0.77
Weighted average common shares outstanding		26,818,215			26,792,281
Weighted average common shares outstanding and dilutive potential common shares		26,964,350			26,925,152

See accompanying notes to the consolidated financial statements.

AMERICAN NATIONAL INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited and in thousands)


	Three months ended March 31,
	2015			2014
				(As Adjusted)
Net income	$	102,253		$	51,498

Other comprehensive income, net of tax
Change in net unrealized gain (losses) on securities		7,836			33,834
Foreign currency transaction and translation adjustments		(1,838	)		(966	)
Defined pension benefit plan adjustment		1,443			717

Other comprehensive income, net of tax		7,441			33,585

Total comprehensive income		109,694			85,083
Less: Comprehensive income (loss) attributable to noncontrolling interest		(729	)		(756	)

Total comprehensive income attributable to American National	$	110,423		$	85,839

AMERICAN NATIONAL INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited and in thousands, except for per share data)


	Three months ended March 31,
	2015			2014
				(As Adjusted)
Common Stock
Balance at beginning and end of the period	$	30,832		$	30,832

Additional Paid-In Capital
Balance as of January 1,		9,248			4,650
Reissuance of treasury shares		1,978			1,621
Amortization of restricted stock		377			505

Balance at end of period		11,603			6,776

Accumulated Other Comprehensive Income
Balance as of January 1,		490,782			413,712
Other comprehensive income		7,441			33,585

Balance at end of the period		498,223			447,297

Retained Earnings
Balance as of January 1,		3,998,644			3,836,112
Net income attributable to American National		102,982			52,254
Cash dividends to common stockholders		(20,711	)		(20,731	)

Balance at end of the period		4,080,915			3,867,635

Treasury Stock
Balance as of January 1,		(101,941	)		(97,441	)
Reissuance of treasury shares		243			222

Balance at end of the period		(101,698	)		(97,219	)

Noncontrolling Interest
Balance as of January 1,		12,384			12,757
Contributions		24			42
Loss attributable to noncontrolling interest		(729	)		(756	)
Cumulative tax adjustment		—			(507	)

Balance at end of the period		11,679			11,536

Total Stockholders’ Equity	$	4,531,554		$	4,266,857

See accompanying notes to the consolidated financial statements.

AMERICAN NATIONAL INSURANCE COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited and in thousands)


	Three months ended March 31,
	2015			2014
				(As Adjusted)
OPERATING ACTIVITIES
Net income	$	102,253		$	51,498
Adjustments to reconcile net income to net cash provided by operating activities
Net realized investment gains		(39,302	)		(26,446	)
Other-than-temporary impairments		25			975
Amortization (accretion) of premiums, discounts and loan origination fees		977			3,400
Net capitalized interest on policy loans and mortgage loans		(7,708	)		(8,298	)
Depreciation		10,896			7,350
Interest credited to policyholders’ account balances		75,753			83,412
Charges to policyholders’ account balances		(57,524	)		(55,927	)
Deferred federal income tax expense		10,298			9,127
Equity in (earnings) losses of unconsolidated affiliates		(36,780	)		62
Distributions from equity method investments		199			2,688
Changes in
Policyholder liabilities		57,193			94,640
Deferred policy acquisition costs		6,462			6,424
Reinsurance recoverables		12,782			4,436
Premiums due and other receivables		(15,042	)		4,245
Prepaid reinsurance premiums		838			3,174
Accrued investment income		1,606			(9,936	)
Current tax receivable/payable		32,873			8,869
Liability for retirement benefits		4,348			(12,854	)
Other, net		(37,413	)		19,224

Net cash provided by operating activities		122,734			186,063

INVESTING ACTIVITIES
Proceeds from sale/maturity/prepayment of
Held-to-maturity securities		319,361			176,063
Available-for-sale securities		120,746			292,496
Investment real estate		10,821			27,650
Mortgage loans		167,304			85,094
Policy loans		13,929			13,357
Other invested assets		6,080			28,700
Disposals of property and equipment		800			157
Distributions from unconsolidated affiliates		24,465			994
Payment for the purchase/origination of
Held-to-maturity securities		(85,733	)		(193,554	)
Available-for-sale securities		(236,077	)		(487,904	)
Investment real estate		(16,533	)		(5,539	)
Mortgage loans		(155,138	)		(81,600	)
Policy loans		(6,134	)		(5,524	)
Other invested assets		(3,729	)		(4,640	)
Additions to property and equipment		(13,580	)		(5,449	)
Contributions to unconsolidated affiliates		(24,668	)		(17,260	)
Change in short-term investments		(89,333	)		249,785
Other, net		12,301			4,225

Net cash provided by investing activities		44,882			77,051

FINANCING ACTIVITIES
Policyholders’ account deposits		212,245			265,636
Policyholders’ account withdrawals		(406,870	)		(455,999	)
Change in notes payable		8,258			(783	)
Dividends to stockholders		(20,711	)		(20,731	)
Proceeds from (payments to) noncontrolling interest		24			42

Net cash used in financing activities		(207,054	)		(211,835	)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(39,438	)		51,279
Beginning of the period		209,455			117,946

End of period	$	170,017		$	169,225

See accompanying notes to the consolidated financial statements.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Nature of Operations

American National Insurance Company and its consolidated subsidiaries (collectively “American National” or “the Company”) offer a broad spectrum of insurance products, including individual and group life insurance, annuities, health insurance, and property and casualty insurance. Business is conducted in all 50 states, the District of Columbia and Puerto Rico.

Note 2 – Summary of Significant Accounting Policies and Practices

The consolidated financial statements and notes thereto have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and are reported in U.S. currency. American National consolidates entities that are wholly-owned and those in which American National owns less than 100% but controls, as well as variable interest entities in which American National is the primary beneficiary. Intercompany balances and transactions with consolidated entities have been eliminated. Investments in unconsolidated affiliates are accounted for using the equity method of accounting. Certain amounts in prior years have been reclassified to conform to current year presentation.

The interim consolidated financial statements and notes herein are unaudited and reflect all adjustments which management considers necessary for the fair presentation of the interim consolidated statements of financial position, operations, comprehensive income, changes in stockholders’ equity, and cash flows.

The interim consolidated financial statements and notes should be read in conjunction with the annual consolidated financial statements and notes thereto included in American National’s Annual Report on Form 10-K as of and for the year ended December 31, 2014. The consolidated results of operations for the interim periods should not be considered indicative of results to be expected for the full year.

The preparation of the consolidated financial statements in conformity with GAAP requires the use of estimates and assumptions that affect the reported consolidated financial statement balances. Actual results could differ from those estimates.

Note 3 – Recently Issued Accounting Pronouncements

Adoption of New Accounting Standards—The Financial Accounting Standards Board (“FASB”) issued the following accounting guidance relevant to American National:

In January 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-01, Accounting for Investments in Qualified Affordable Housing Projects. The new standard allows a proportional amortization approach and treats the net investment performance as a component of income tax expense. Previously, these investments were accounted for under the equity method that records changes to investment value as a component of investment income and generates a deferred tax balance until the investment terminates. American National adopted this standard effective January 1, 2015, with retrospective adoption back to January 1, 2013. Accordingly, upon adoption the investment in unconsolidated affiliates asset was reduced by $7,504,000 with a release of a related deferred tax liability of $2,937,000 resulting in a $4,567,000 reduction in the opening balance of stockholders’ equity at January 1, 2015.

Note 3 – Recently Issued Accounting Pronouncements – (Continued)

Financial statement amounts previously reported were revised as shown below (in thousands):


	As of December 31, 2014
	As Reported			As Adjusted			Effect of Change
Investments in unconsolidated affiliates	$	319,283		$	311,779		$	(7,504	)
Deferred tax liabilities, net		290,112			287,175			(2,937	)
Retained earnings		4,003,209			3,998,642			(4,567	)

	Three months ended March 31, 2014
	As Reported			As Adjusted			Effect of Change
Provision for federal income taxes, current	$	12,360		$	13,781		$	1,421
Equity in earnings (losses) of unconsolidated affiliates, net of tax		(859	)		(62	)		797
Net income attributable to American National		52,878			52,254			(624	)

American National held investments in Qualified Affordable Housing Projects totaling $34,064,000 and $27,595,000 as of March 31, 2015 and December 31, 2014, respectively. For the three month periods ending March 31, 2015 and March 31, 2014, American National recognized tax credits and other tax benefits of $1,923,000 and $1,551,000, respectively, and amortized cost of $1,945,000 and $1,897,000, relating to these investments. At March 31, 2015 American National had commitments to provide additional funding to these investments during the following fiscal years as follows:


Expected year of payment	2015		2016		2017		2018		2019		Total
Equity commitments (in thousands)	$	10,885		4,148		1,314		726		1,078	$	18,151

Future Adoption of New Accounting Standards—The FASB issued the following accounting guidance relevant to American National:

In May 2014, the FASB issued guidance that will supersede most existing revenue recognition requirements in U.S. GAAP. Insurance contracts are excluded from the scope of the new guidance. For those contracts which are impacted by the guidance, the transaction price is attributed to the underlying performance obligations in the contract and revenue is recognized as the entity satisfies the performance obligations and transfers control of a good or service to the customer. The guidance is effective for reporting periods beginning after December 15, 2016 (although the FASB has proposed a delay until 2018) and is to be applied retrospectively. Early adoption before 2017 is not permitted. Expected amendments to the standard include new practical expedients and clarifications to the guidance. The Company is in the process of evaluating the impact of adoption, which is not expected to be material to the Company’s financial statements.

In January 2015, the FASB issued guidance to simplify income statement presentation by eliminating the concept and separate presentation of extraordinary and unusual items. The new guidance is effective for calendar years beginning after December 15, 2015. The impact of the adoption is not expected to be material to the Company’s financial statements.

In February 2015, the FASB issued guidance that amends the consolidation analysis. The guidance modifies the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities. The guidance eliminates the presumption that a general partner should consolidate a limited partnership and affects the consolidation analysis of reporting entities that are involved with VIEs. The amended guidance is effective for reporting periods beginning after December 15, 2015. The impact of the adoption is not expected to be material to the Company’s financial statements.

Note 4 – Investment in Securities

The cost or amortized cost and fair value of investments in securities are shown below (in thousands):


	March 31, 2015
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Fixed maturity securities, bonds held-to-maturity
U.S. states and political subdivisions	$	313,543	$	29,479	$	(37	)	$	342,985
Foreign governments		4,132		1,110		—			5,242
Corporate debt securities		7,311,516		486,417		(28,013	)		7,769,920
Residential mortgage-backed securities		321,700		24,123		(1,045	)		344,778
Commercial mortgage-backed securities		—		—		—			—
Collateralized debt securities		1,935		190		—			2,125
Other debt securities		16,181		1,131		—			17,312

Total bonds held-to-maturity		7,969,007		542,450		(29,095	)		8,482,362

Fixed maturity securities, bonds available-for-sale
U.S. treasury and government		24,051		881		(3	)		24,929
U.S. states and political subdivisions		851,970		38,641		(1,084	)		889,527
Foreign governments		5,000		2,105		—			7,105
Corporate debt securities		3,868,058		239,285		(8,035	)		4,099,308
Residential mortgage-backed securities		37,090		1,964		(297	)		38,757
Collateralized debt securities		10,427		735		(8	)		11,154

Total bonds available-for-sale		4,796,596		283,611		(9,427	)		5,070,780

Equity securities
Common stock		736,727		766,362		(13,234	)		1,489,855
Preferred stock		19,733		12,031		—			31,764

Total equity securities		756,460		778,393		(13,234	)		1,521,619

Total investments in securities	$	13,522,063	$	1,604,454	$	(51,756	)	$	15,074,761


	December 31, 2014
	Cost or Amortized Cost		Gross Unrealized Gains		Gross Unrealized (Losses)			Fair Value
Fixed maturity securities, bonds held-to-maturity
U.S. states and political subdivisions	$	323,053	$	26,800	$	(93	)	$	349,760
Foreign governments		29,130		1,293		—			30,423
Corporate debt securities		7,517,195		424,845		(47,315	)		7,894,725
Residential mortgage-backed securities		336,853		22,317		(1,535	)		357,635
Commercial mortgage-backed securities		—		—		—			—
Collateralized debt securities		2,232		238		—			2,470
Other debt securities		16,587		1,313		—			17,900

Total bonds held-to-maturity		8,225,050		476,806		(48,943	)		8,652,913

Fixed maturity securities, bonds available-for-sale
U.S. treasury and government		22,415		825		(7	)		23,233
U.S. states and political subdivisions		802,846		36,151		(1,381	)		837,616
Foreign governments		5,000		2,021		—			7,021
Corporate debt securities		3,812,771		203,048		(15,770	)		4,000,049
Residential mortgage-backed securities		40,988		1,903		(492	)		42,399
Collateralized debt securities		10,696		863		(70	)		11,489

Total bonds available-for-sale		4,694,716		244,811		(17,720	)		4,921,807

Equity securities
Common stock		719,651		774,650		(7,176	)		1,487,125
Preferred stock		19,733		10,121		(1	)		29,853

Total equity securities		739,384		784,771		(7,177	)		1,516,978

Total investments in securities	$	13,659,150	$	1,506,388	$	(73,840	)	$	15,091,698

Note 4 – Investment in Securities – (Continued)

The amortized cost and fair value, by contractual maturity, of fixed maturity securities are shown below (in thousands):


	March 31, 2015
	Bonds Held-to-Maturity				Bonds Available-for-Sale
	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	763,705	$	778,027	$	347,014	$	355,345
Due after one year through five years		2,022,357		2,235,239		837,834		909,750
Due after five years through ten years		4,796,691		5,054,077		3,063,953		3,237,161
Due after ten years		380,404		409,994		542,795		563,574
Without single maturity date		5,850		5,025		5,000		4,950

Total	$	7,969,007	$	8,482,362	$	4,796,596	$	5,070,780

Actual maturities differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Residential and commercial mortgage-backed securities, which are not due at a single maturity, have been allocated to their respective categories based on the year of final contractual maturity.

Proceeds from sales of available-for-sale securities, with the related gross realized gains and losses, are shown below (in thousands):


	Three months ended March 31,
	2015		2014
Proceeds from sales of available-for-sale securities	$	15,582	$	81,664
Gross realized gains		6,783		19,943
Gross realized losses		—		(2,122	)

Gains and losses are determined using specific identification of the securities sold. During the three months ended March 31, 2015 there were no bonds transferred from held-to-maturity to available-for-sale. During the three months ended March 31, 2014 bonds with a carrying value of $14,818,000, were transferred from held-to-maturity to available-for-sale after a significant deterioration in the issuers’ creditworthiness became evident. Unrealized gains of $339,000 were established following the transfer at fair value.

The components of the change in net unrealized gains (losses) on securities are shown below (in thousands):


	Three months ended March 31,
	2015			2014
Bonds available-for-sale	$	47,093		$	55,574
Equity securities		(12,435	)		15,517

Change in net unrealized gains (losses) on securities during the year		34,658			71,091
Adjustments for
Deferred policy acquisition costs		(14,048	)		(12,638	)
Participating policyholders’ interest		(2,882	)		(4,751	)
Deferred federal income tax expense		(9,892	)		(19,868	)

Change in net unrealized gains (losses) on securities, net of tax	$	7,836		$	33,834

Note 4 – Investment in Securities – (Continued)

The gross unrealized losses and fair value of the investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are shown below (in thousands):


	March 31, 2015
	Less than 12 months					12 Months or more					Total
	Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value
Fixed maturity securities, bonds held-to-maturity
U.S. states and political subdivisions	$	—		$	—	$	(37	)	$	134	$	(37	)	$	134
Corporate debt securities		(14,690	)		501,908		(13,323	)		227,587		(28,013	)		729,495
Residential mortgage-backed securities		(251	)		16,343		(794	)		14,158		(1,045	)		30,501

Total bonds held-to-maturity		(14,941	)		518,251		(14,154	)		241,879		(29,095	)		760,130

Fixed maturity securities, bonds available-for-sale
U.S. treasury and government		(3	)		6,046		—			—		(3	)		6,046
U.S. states and political subdivisions		(895	)		94,492		(189	)		2,817		(1,084	)		97,309
Corporate debt securities		(6,847	)		330,836		(1,188	)		77,730		(8,035	)		408,566
Residential mortgage-backed securities		(190	)		17,862		(107	)		1,569		(297	)		19,431
Collateralized debt securities		(1	)		248		(7	)		319		(8	)		567

Total bonds available-for-sale		(7,936	)		449,484		(1,491	)		82,435		(9,427	)		531,919

Equity securities
Common stock		(13,234	)		72,577		—			—		(13,234	)		72,577
Preferred stock		—			—		—			—		—			—

Total equity securities		(13,234	)		72,577		—			—		(13,234	)		72,577

Total	$	(36,111	)	$	1,040,312	$	(15,645	)	$	324,314	$	(51,756	)	$	1,364,626


	December 31, 2014
	Less than 12 months					12 Months or more					Total
	Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value		Unrealized (Losses)			Fair Value
Fixed maturity securities, bonds held-to-maturity
U.S. states and political subdivisions	$	(37	)	$	3,388	$	(56	)	$	2,465	$	(93	)	$	5,853
Corporate debt securities		(20,575	)		523,766		(26,740	)		662,362		(47,315	)		1,186,128
Residential mortgage-backed securities		(232	)		12,186		(1,303	)		31,163		(1,535	)		43,349

Total bonds held-to-maturity		(20,844	)		539,340		(28,099	)		695,990		(48,943	)		1,235,330

Fixed maturity securities, bonds available-for-sale
U.S. treasury and government		(7	)		14,552		—			—		(7	)		14,552
U.S. states and political subdivisions		(166	)		27,719		(1,215	)		78,851		(1,381	)		106,570
Corporate debt securities		(8,852	)		384,451		(6,918	)		288,808		(15,770	)		673,259
Residential mortgage-backed securities		(170	)		9,386		(322	)		14,042		(492	)		23,428
Collateralized debt securities		(63	)		2,033		(7	)		339		(70	)		2,372

Total bonds available-for-sale		(9,258	)		438,141		(8,462	)		382,040		(17,720	)		820,181

Equity securities
Common stock		(7,176	)		43,907		—			—		(7,176	)		43,907
Preferred stock		(1	)		—		—			—		(1	)		—

Total equity securities		(7,177	)		43,907		—			—		(7,177	)		43,907

Total	$	(37,279	)	$	1,021,388	$	(36,561	)	$	1,078,030	$	(73,840	)	$	2,099,418

As of March 31, 2015, the securities with unrealized losses including those exceeding one year were not deemed to be other-than-temporarily impaired. American National has the ability and intent to hold those securities until a market price recovery or maturity. It is not more-likely-than-not that American National will be required to sell them prior to recovery, and recovery is expected in a reasonable period of time. It is possible an issuer’s financial circumstances may be different in the future, which may lead to a different impairment conclusion in future periods.

Note 4 – Investment in Securities – (Continued)

Bonds distributed by credit quality rating, using both S&P and Moody’s ratings, are shown below:


	March 31, 2015			December 31, 2014
AAA		5.1	%		5.0	%
AA		12.3			12.8
A		39.9			39.4
BBB		39.1			39.5
BB and below		3.6			3.3

Total		100.0	%		100.0	%

Equity securities by market sector distribution are shown below:


	March 31, 2015			December 31, 2014
Consumer goods		21.1	%		20.4	%
Energy and utilities		15.1			13.3
Financials		19.3			19.1
Healthcare		15.0			14.0
Industrials		8.4			8.4
Information technology		15.5			16.2
Other		5.6			8.6

Total		100.0	%		100.0	%

Note 5 – Mortgage Loans

Generally, commercial mortgage loans are secured by first liens on income-producing real estate. American National attempts to maintain a diversified portfolio by considering the property-type and location of the underlying collateral. The distribution based on carrying amount of mortgage loans by property-type and location are as follows:


	March 31, 2015			December 31, 2014
Hotel and motel		10.4	%		10.8	%
Industrial		20.9			20.9
Office		36.8			36.1
Retail		17.5			18.1
Other		14.4			14.1

Total		100.0	%		100.0	%


	March 31, 2015			December 31, 2014
East North Central		19.8	%		19.4	%
East South Central		5.1			5.0
Mountain		11.0			11.0
Pacific		9.6			10.8
South Atlantic		22.6			21.9
West South Central		25.4			24.9
Other		6.5			7.0

Total		100.0	%		100.0	%

As of March 31, 2015, American National had foreclosed on one loan with a recorded investment of $5,945,000; there were no loans foreclosed for the same period in 2014. American National sold no commercial loans for the three months ended March 31, 2015 and 2014.

The credit quality of the mortgage loan portfolio is assessed by evaluating the credit risk of each borrower. A loan is classified as performing or non-performing based on whether all of the contractual terms of the loan have been met.

Note 5 – Mortgage Loans – (Continued)

The age analysis of past due commercial mortgage loans is shown below (in thousands):


March 31, 2015	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Mortgage Loans
March 31, 2015	30-59 Days Past Due		60-89 Days Past Due		Greater Than 90 Days		Total Past Due		Current		Total Mortgage Loans
Industrial	$	—	$	—	$	—	$	—	$	701,712	$	701,712
Office		—		—		13,383		13,383		1,226,713		1,240,096
Retail		—		—		—		—		587,088		587,088
Other		—		—		—		—		833,748		833,748

Total	$	—	$	—	$	13,383	$	13,383	$	3,349,261		3,362,644

Allowance for loan losses												18,384

Mortgage loans on real estate, net of allowance											$	3,344,260

December 31, 2014
Industrial	$	—	$	—	$	—	$	—	$	702,541	$	702,541
Office		—		—		19,327		19,327		1,201,833		1,221,160
Retail		—		—		—		—		615,813		615,813
Other		—		—		—		—		837,932		837,932

Total	$	—	$	—	$	19,327	$	19,327	$	3,358,119	$	3,377,446

Allowance for loan losses												17,860

Mortgage loans on real estate, net of allowance											$	3,359,586

Total mortgage loans are net of unamortized discounts of $608,000 and $658,000 and unamortized origination fees of $14,574,000 and $15,659,000 at March 31, 2015 and December 31, 2014, respectively. No unearned income is included in these amounts.

Allowance for Credit Losses

Loans not evaluated individually for collectability are segregated by property-type and location, and allowance factors are applied. These factors are developed annually and reviewed quarterly based on our historical loss experience adjusted for the expected trend in the rate of foreclosure losses. Allowance factors are higher for loans of certain property types and in certain regions based on loss experience or a blended historical loss factor.

The change in allowance for credit losses in commercial mortgage loans is shown below (in thousands):


	Three months ended March 31,
	Collectively Evaluated for Impairment			Individually Evaluated for Impairment
Beginning balance, 2015	$	12,277		$	5,583
Change in allowance		(1,078	)		1,602

Ending balance, 2015	$	11,199		$	7,185

At March 31, 2015 and December 31, 2014, the recorded investment for loans collectively evaluated for impairment was $3,330,569,000 and $3,321,241,000, respectively, and the recorded investment for loans individually evaluated for impairment was $32,075,000 and $56,205,000, respectively.

Note 5 – Mortgage Loans – (Continued)

Loans individually evaluated for impairment with and without an allowance are shown below (in thousands):


	Three months ended
	March 31, 2015				March 31, 2014
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
With an allowance recorded
Office	$	9,979	$	209	$	—	$	—
Industrial		1,100		37		—		—
Retail		—		—		493		—

Total	$	11,079	$	246	$	493	$	—

Without an allowance recorded
Office	$	20,996	$	341	$	12,377	$	204
Industrial		—		—		2,721		45
Other		—		—		1,410		17

Total	$	20,996	$	341	$	16,508	$	266


	March 31, 2015				December 31, 2014
	Recorded Investment		Unpaid Principal Balance		Recorded Investment		Unpaid Principal Balance
With an allowance recorded
Office	$	9,979	$	13,383	$	26,563	$	31,653
Industrial		1,100		2,702		—
Retail		—		—		—		493

Total	$	11,079	$	16,085	$	26,563	$	32,146

Without an allowance recorded
Office	$	20,996	$	20,996	$	26,941	$	26,941
Industrial		—		—		2,702		2,702

Total	$	20,996	$	20,996	$	29,643	$	29,643

Troubled Debt Restructurings

American National has granted concessions which are classified as troubled debt restructurings to mortgage loan borrowers. Concessions are generally one of, or a combination of, a delay in payment of principal or interest, a reduction of the contractual interest rate or an extension of the maturity date. American National considers the amount, timing and extent of concessions in determining any impairment or changes in the specific allowance for loan losses recorded in connection with a troubled debt restructuring. The carrying value after specific allowance, before and after modification in a troubled debt restructuring, may not change significantly, or may increase if the expected recovery is higher than the pre-modification recovery assessment.

The number of mortgage loans and recorded investment in troubled debt restructuring are as follows:


	Three months ended March 31,
	2015						2014
	Number of contracts		Recorded investment pre- modification		Recorded investment post modification		Number of contracts		Recorded investment pre- modification		Recorded investment post modification
Office		—		—		—		1	$	6,432	$	6,432

There are no commitments to lend additional funds to debtors whose loans have been modified in troubled debt restructuring, and there have been no defaults on modified loans during the periods presented.

Note 6 – Investment Real Estate

Investment real estate by property-type and geographic distribution are as follows:


	March 31, 2015			December 31, 2014
Industrial		12.7	%		13.0	%
Office		27.2			25.0
Retail		43.2			44.1
Other		16.9			17.9

Total		100.0	%		100.0	%


	March 31, 2015			December 31, 2014
East North Central		6.7	%		4.5	%
East South Central		4.2			4.6
Mountain		9.1			9.6
Pacific		6.6			7.1
South Atlantic		11.7			12.2
West South Central		55.7			55.6
Other		6.0			6.4

Total		100.0	%		100.0	%

American National regularly invests in real estate partnerships and joint ventures. American National frequently participates in the design of these entities with the sponsor, but in most cases, its involvement is limited to financing. Through analysis performed by American National, some of these partnerships and joint ventures have been determined to be variable interest entities (“VIEs”). In certain instances, in addition to an economic interest in the entity, American National holds the power to direct the most significant activities of the entity and is deemed the primary beneficiary or consolidator of the entity. The assets of the consolidated VIEs are restricted and must first be used to settle their liabilities. Creditors or beneficial interest holders of these VIEs have no recourse to the general credit of American National, as American National’s obligation is limited to the amount of its committed investment. American National has not provided financial or other support to the VIEs in the form of liquidity arrangements, guarantees, or other commitments to third parties that may affect the fair value or risk of its variable interest in the VIEs in 2015 or 2014.

The assets and liabilities relating to the VIEs included in the consolidated financial statements are as follows (in thousands):


	March 31, 2015		December 31, 2014
Investment real estate	$	153,777	$	140,032
Short-term investments		1		1
Cash and cash equivalents		2,293		2,495
Accrued investment income		—		683
Other receivables		7,998		7,999
Other assets		9,357		8,483

Total assets of consolidated VIEs	$	173,426	$	159,693

Notes payable	$	116,435	$	108,177
Other liabilities		12,287		8,954

Total liabilities of consolidated VIEs	$	128,722	$	117,131

Note 6 – Investment Real Estate – (Continued)

The notes payable in the consolidated statements of financial position pertain to the borrowings of the consolidated VIEs. The liability of American National Insurance Company relating to notes payable of the consolidated VIEs is limited to the amount of its direct or indirect investment in the respective ventures, which totaled $15,031,000 and $15,016,000 at March 31, 2015 and December 31, 2014, respectively. The total long-term portion of notes payable consists of four notes with the following interest rates: 4.0%, prime plus .5%, and two notes with adjusted LIBOR plus LIBOR margin. Of the long-term notes payable, $9,375,000 will mature in 2016, with the remainder maturing beyond 5 years.

For other VIEs in which American National is a partner, it is not the primary beneficiary and these entities were not consolidated, as the major decisions that most significantly impact the economic activities of the VIE require unanimous consent of all partners. The following table presents the carrying amount and maximum exposure to loss relating to unconsolidated VIEs (in thousands):


	March 31, 2015				December 31, 2014
	Carrying Amount		Maximum Exposure to Loss		Carrying Amount		Maximum Exposure to Loss
Investment in unconsolidated affiliates	$	138,667	$	138,667	$	157,620	$	157,620
Mortgage loans		198,272		198,272		172,408		172,408
Accrued investment income		847		847		721		721

As of March 31, 2015, a real estate investment with a carrying value of $4,027,000 was classified as held for sale.

Note 7 – Derivative Instruments

American National purchases over-the-counter equity-indexed options as economic hedges against fluctuations in the equity markets to which equity-indexed products are exposed. Equity-indexed contracts include a fixed host universal-life insurance or annuity contract and an equity-indexed embedded derivative. The detail of derivative instruments is shown below (in thousands, except number of instruments):


		March 31, 2015						December 31, 2014
Derivatives Not Designated as Hedging Instruments	Location in the Consolidated Statements of Financial Position	Number of Instruments		Notional Amounts		Estimated Fair Value		Number of Instruments		Notional Amounts		Estimated Fair Value
Equity-indexed options	Other invested assets		448	$	1,129,800	$	188,006		436	$	1,095,300	$	189,449
Equity-indexed embedded derivative	Policyholders’ account balances		44,085		987,100		208,412		42,287		961,300		208,187


Derivatives Not Designated as Hedging Instruments	Location in the Consolidated Statements of Operations	Gains (Losses) Recognized in Income on Derivatives
		Three months ended March 31,
		2015			2014
Equity-indexed options	Net investment income	$	1,131		$	3,985
Equity-indexed embedded derivative	Interest credited to policyholders’ account balances		(1,196	)		(2,896	)

Note 8 – Net Investment Income and Realized Investment Gains (Losses)

Net investment income is shown below (in thousands):


	Three months ended March 31,
	2015			2014
Bonds	$	143,741		$	151,516
Equity securities		8,467			9,084
Mortgage loans		49,499			51,454
Real estate		(1,753	)		(4,971	)
Options		1,131			3,985
Other invested assets		8,128			7,755

Total	$	209,213		$	218,823

Realized investment gains (losses) are shown below (in thousands):


	Three months ended March 31,
	2015			2014
Bonds	$	1,298		$	16,619
Equity securities		28,627			6,531
Mortgage loans		(524	)		(728	)
Real estate		9,911			4,963
Other invested assets		(10	)		(939	)

Total	$	39,302		$	26,446

Other-than-temporary impairment losses are shown below (in thousands):


	Three months ended March 31,
	2015			2014
Bonds	$	—		$	(41	)
Equity securities		(25	)		(934	)

Total	$	(25	)	$	(975	)

Note 9 – Fair Value of Financial Instruments

The carrying amount and fair value of financial instruments are shown below (in thousands):


	March 31, 2015				December 31, 2014
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Financial assets
Fixed maturity securities, bonds held-to-maturity	$	7,969,007	$	8,482,362	$	8,225,050	$	8,652,913
Fixed maturity securities, bonds available-for-sale		5,070,780		5,070,780		4,921,807		4,921,807
Equity securities		1,521,619		1,521,619		1,516,978		1,516,978
Equity-indexed options		188,006		188,006		189,449		189,449
Mortgage loans on real estate, net of allowance		3,344,260		3,558,237		3,359,586		3,618,944
Policy loans		406,394		406,394		405,979		405,979
Short-term investments		520,333		520,333		431,000		431,000
Separate account assets		992,970		992,970		1,001,515		1,001,515

Total financial assets	$	20,013,369	$	20,740,701	$	20,051,364	$	20,738,585

Financial liabilities
Investment contracts	$	8,705,429	$	8,705,429	$	8,894,747	$	8,894,747
Embedded derivative liability for equity-indexed contracts		208,412		208,412		208,187		208,187
Notes payable		116,435		116,435		108,177		108,177
Separate account liabilities		992,970		992,970		1,001,515		1,001,515

Total financial liabilities	$	10,023,246	$	10,023,246	$	10,212,626	$	10,212,626

Summary

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability. A fair value hierarchy is used to determine fair value based on a hypothetical transaction at the measurement date from the perspective of a market participant. American National has evaluated the types of securities in its investment portfolio to determine an appropriate hierarchy level based upon trading activity and the observability of market inputs. The classification of assets or liabilities within the fair value hierarchy is based on the lowest level of significant input to its valuation. The input levels are defined as follows:


Level 1		Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2		Quoted prices in markets that are not active or inputs that are observable directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities other than quoted prices in Level 1; quoted prices in markets that are not active; or other inputs that are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3		Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities. Unobservable inputs reflect American National’s own assumptions about the assumptions that market participants would use in pricing the asset or liability. Level 3 assets and liabilities include financial instruments whose values are determined using pricing models and third-party evaluation, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Fixed Maturity Securities and Equity Options—American National utilizes a pricing service to estimate fair value measurements. The estimates of fair value for most fixed maturity securities, including municipal bonds, provided by the pricing service are disclosed as Level 2 measurements as the estimates are based on observable market information rather than market quotes.

Note 9 – Fair Value of Financial Instruments – (Continued)

The pricing service utilizes market quotations for fixed maturity securities that have quoted prices in active markets. Since fixed maturity securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value measurements for these securities using its proprietary pricing applications, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings and matrix pricing. Additionally, an option adjusted spread model is used to develop prepayment and interest rate scenarios.

The pricing service evaluates each asset class based on relevant market information, credit information, perceived market movements and sector news. The market inputs utilized in the pricing evaluation, listed in the approximate order of priority, include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and economic events. The extent of the use of each market input depends on the asset class and the market conditions. Depending on the security, the priority of the use of inputs may change or some market inputs may not be relevant. For some securities, additional inputs may be necessary.

American National has reviewed the inputs and methodology used and the techniques applied by the pricing service to produce quotes that represent the fair value of a specific security. The review confirms that the pricing service is utilizing information from observable transactions or a technique that represents a market participant’s assumptions. American National does not adjust quotes received from the pricing service. The pricing service utilized by American National has indicated that they will only produce an estimate of fair value if there is objectively verifiable information available.

American National holds a small amount of private placement debt and fixed maturity securities that have characteristics that make them unsuitable for matrix pricing. For these securities, a quote from an independent broker (typically a market maker) is obtained. Due to the disclaimers on the quotes that indicate that the price is indicative only, American National includes these fair value estimates in Level 3.

For securities priced using a quote from an independent broker, such as the equity options and certain fixed maturity securities, American National uses a market-based fair value analysis to validate the reasonableness of prices received from an independent broker. Price variances above a certain threshold are analyzed further to determine if any pricing issue exists. This analysis is performed quarterly.

Equity Securities—For publicly-traded equity securities, prices are received from a nationally recognized pricing service that are based on observable market transactions, and these securities are classified as Level 1 measurements. For certain preferred stock, current market quotes in active markets are unavailable. In these instances, an estimate of fair value is received from the pricing service. The service utilizes similar methodologies to price preferred stocks as it does for fixed maturity securities. These estimates are disclosed as Level 2 measurements. American National tests the accuracy of the information provided by reference to other services regularly.

Mortgage Loans—The fair value of mortgage loans is estimated using discounted cash flow analyses on a loan by loan basis by applying a discount rate to expected cash flows from future installment and balloon payments. The discount rate takes into account general market trends and specific credit risk trends for the individual loan. Factors used to arrive at the discount rate include inputs from spreads based on U.S. Treasury notes and the loan’s credit quality, region, property type, lien priority, payment type and current status.

Embedded Derivative—The embedded derivative liability for equity-indexed contracts is measured at fair value and is recalculated each reporting period using equity option pricing models. To validate the assumptions used to price the embedded derivative liability, American National measures and compares embedded derivative returns against the returns of equity options held to hedge the liability cash flows.

Note 9 – Fair Value of Financial Instruments – (Continued)

The significant unobservable input used to calculate the fair value of the embedded derivatives is equity option implied volatility. An increase in implied volatility will result in an increase in the value of the equity-indexed embedded derivatives, all other things being equal. At March 31, 2015 and December 31, 2014, the one year implied volatility used to estimate embedded derivative value was 16.7% and 17.3%, respectively.

Other Financial Instruments—Other financial instruments classified as Level 3 measurements, as there is little or no market activity, are as follows:

Policy loans—The carrying value of policy loans is the outstanding balance plus any accrued interest. Due to the collateralized nature of policy loans that it cannot be separated from the policy contract and the unpredictable timing of repayments and that settlement is at outstanding value, American National believes the carrying value of policy loans approximates fair value.

Investment contracts—The carrying value of investment contracts is equivalent to the accrued account balance. The accrued account balance consists of deposits, net of withdrawals, plus or minus interest credited, fees and charges assessed and other adjustments. American National believes that the carrying value of investment contracts approximates fair value because the majority of these contracts’ interest rates reset to current rates offered at anniversary.

Notes payable—Notes payable are carried at outstanding principal balance. The carrying value of the notes payable approximates fair value because the underlying interest rates approximate market rates at the balance sheet date.

Note 9 – Fair Value of Financial Instruments – (Continued)

Quantitative Disclosures

The fair value hierarchy measurements of the financial instruments are shown below (in thousands):


	Fair Value Measurement as of March 31, 2015
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
Fixed maturity securities, bonds held-to-maturity
U.S. states and political subdivisions	$	342,985	$	—	$	342,985	$	—
Foreign governments		5,242		—		5,242		—
Corporate debt securities		7,769,920		—		7,714,782		55,138
Residential mortgage-backed securities		344,778		—		343,826		952
Collateralized debt securities		2,125		—		—		2,125
Other debt securities		17,312		—		12,842		4,470

Total bonds held-to-maturity		8,482,362		—		8,419,677		62,685

Fixed maturity securities, bonds available-for-sale
U.S. treasury and government		24,929		—		24,929		—
U.S. states and political subdivisions		889,527		—		887,027		2,500
Foreign governments		7,105		—		7,105		—
Corporate debt securities		4,099,308		—		4,040,371		58,937
Residential mortgage-backed securities		38,757		—		36,831		1,926
Collateralized debt securities		11,154		—		9,218		1,936

Total bonds available-for-sale		5,070,780		—		5,005,481		65,299

Equity securities
Common stock		1,489,856		1,489,856		—		—
Preferred stock		31,763		31,763		—		—

Total equity securities		1,521,619		1,521,619		—		—

Options		188,006		—		—		188,006
Mortgage loans on real estate		3,558,237		—		3,558,237		—
Policy loans		406,394		—		—		406,394
Short-term investments		520,333		—		520,333		—
Separate account assets		992,970		—		992,970		—

Total financial assets	$	20,740,701	$	1,521,619	$	18,496,698	$	722,384

Financial liabilities
Investment contracts	$	8,705,429	$	—	$	—	$	8,705,429
Embedded derivative liability for equity-indexed contracts		208,412		—		—		208,412
Notes payable		116,435		—		—		116,435
Separate account liabilities		992,970		—		992,970		—

Total financial liabilities	$	10,023,246	$	—	$	992,970	$	9,030,276

Note 9 – Fair Value of Financial Instruments – (Continued)


	Fair Value Measurement as of December 31, 2014
	Total Fair Value		Level 1		Level 2		Level 3
Financial assets
Fixed maturity securities, bonds held-to-maturity
U.S. states and political subdivisions	$	349,760	$	—	$	349,760	$	—
Foreign governments		30,423		—		30,423		—
Corporate debt securities		7,894,725		—		7,833,564		61,161
Residential mortgage-backed securities		357,635		—		356,670		965
Collateralized debt securities		2,470		—		—		2,470
Other debt securities		17,900		—		12,975		4,925

Total bonds held-to-maturity		8,652,913		—		8,583,392		69,521

Fixed maturity securities, bonds available-for-sale
U.S. treasury and government		23,233		—		23,233		—
U.S. states and political subdivisions		837,616		—		835,106		2,510
Foreign governments		7,021		—		7,021		—
Corporate debt securities		4,000,049		—		3,941,925		58,124
Residential mortgage-backed securities		42,399		—		40,473		1,926
Collateralized debt securities		11,489		—		9,616		1,873

Total bonds available-for-sale		4,921,807		—		4,857,374		64,433

Equity securities
Common stock		1,487,125		1,487,125		—		—
Preferred stock		29,853		29,853		—		—

Total equity securities		1,516,978		1,516,978		—		—

Options		189,449		—		—		189,449
Mortgage loans on real estate		3,618,944		—		3,618,944		—
Policy loans		405,979		—		—		405,979
Short-term investments		431,000		—		431,000		—
Separate account assets		1,001,515		—		1,001,515		—

Total financial assets	$	20,738,585	$	1,516,978	$	18,492,225	$	729,382

Financial liabilities
Investment contracts	$	8,894,747	$	—	$	—	$	8,894,747
Embedded derivative liability for equity-indexed contracts		208,187		—		—		208,187
Notes payable		108,177		—		—		108,177
Separate account liabilities		1,001,515		—		1,001,515		—

Total financial liabilities	$	10,212,626	$	—	$	1,001,515	$	9,211,111

Note 9 – Fair Value of Financial Instruments – (Continued)

For financial instruments measured at fair value on a recurring basis using Level 3 inputs during the period, a reconciliation of the beginning and ending balances is shown below (in thousands):


	Level 3
	Three months ended March 31,
	Assets						Liability
	Investment Securities			Equity- Indexed Options			Embedded Derivative
Beginning balance, 2015	$	64,433		$	189,449		$	208,187

Total realized and unrealized investment gains (losses) included in other comprehensive income		937			—			—
Net fair value change included in realized gains (losses)		—			—			—
Net gain (loss) for derivatives included in net investment income		—			(743	)		—
Net change included in interest credited		—			—			1,196
Purchases, sales and settlements or maturities
Purchases		—			3,763			—
Sales		(61	)		—			—
Settlements or maturities		(10	)		(4,463	)		—
Premiums less benefits		—			—			(971	)
Gross transfers into Level 3		—			—			—
Gross transfers out of Level 3		—			—			—

Ending balance March 31, 2015	$	65,299		$	188,006		$	208,412

Beginning balance, 2014	$	48,304		$	164,753		$	148,435
Total realized and unrealized investment gains (losses) included in other comprehensive income		(12,194	)		—			—
Net fair value change included in realized gains (losses)		13,056			—			—
Net gain (loss) for derivatives included in net investment income		—			2,112			—
Net change included in interest credited		—			—			2,896
Purchases, sales and settlements or maturities
Purchases		—			4,673			—
Sales		(37,188	)		—			—
Settlements or maturities		(5	)		(25,391	)		—
Premiums less benefits		—			—			3,860
Gross transfers into Level 3		—			—			—
Gross transfers out of Level 3		—			—			—

Ending balance March 31, 2014	$	11,973		$	146,147		$	155,191

Within the net gain (loss) for derivatives included in net investment income were unrealized gains (losses) of $(3,309,000) and $(11,397,000) relating to assets still held at March 31, 2015 and 2014, respectively.

There were no transfers between fair value hierarchies during the three months ended March 31, 2015 or 2014.

Note 10 – Deferred Policy Acquisition Costs

Deferred policy acquisition costs are shown below (in thousands):


	Life			Annuity			Accident & Health			Property & Casualty			Total
Beginning balance, 2015	$	711,469		$	382,441		$	47,784		$	111,850		$	1,253,544
Additions		25,038			8,955			3,954			55,595			93,542
Amortization		(17,624	)		(20,429	)		(5,079	)		(56,872	)		(100,004	)
Effect of change in unrealized gains on available-for-sale securities		(2,883	)		(11,165	)		—			—			(14,048	)

Net change		4,531			(22,639	)		(1,125	)		(1,277	)		(20,510	)

Ending balance at March 31, 2015	$	716,000		$	359,802		$	46,659		$	110,573		$	1,233,034

Commissions comprise the majority of the additions to deferred policy acquisition costs for each year.

Note 11 – Liability for Unpaid Claims and Claim Adjustment Expenses

The liability for unpaid claims and claim adjustment expenses (“claims”) for accident and health, and property and casualty insurance is included in “Policy and contract claims” in the consolidated statements of financial position and is the amount estimated for claims that have been reported but not settled and IBNR claims. Liability for unpaid claims are estimated based upon American National’s historical experience and actuarial assumptions that consider the effects of current developments, anticipated trends and risk management programs and reduced for anticipated salvage and subrogation. The effects of the changes are included in the consolidated results of operations in the period in which the changes occur.

Information regarding the liability for unpaid claims is shown below (in thousands):


	Three months ended March 31,
	2015			2014
Unpaid claims balance, beginning	$	1,132,395		$	1,096,301
Less reinsurance recoverables		245,906			215,161

Net beginning balance		886,489			881,140

Incurred related to
Current		239,128			229,727
Prior years		(12,100	)		(11,369	)

Total incurred claims		227,028			218,358

Paid claims related to
Current		98,382			94,693
Prior years		124,534			121,876

Total paid claims		222,916			216,569

Net balance		890,601			882,929
Plus reinsurance recoverables		236,370			214,505

Unpaid claims balance, ending	$	1,126,971		$	1,097,434

The net and gross reserve calculations have shown favorable development as a result of favorable loss emergence compared to what was implied by the loss development patterns used in the original estimation of losses in prior years. Estimates for ultimate incurred claims attributable to insured events of prior years decreased by approximately $12,100,000 during the first three months of 2015 and $11,369,000 during the first three months of 2014.

Note 12 – Federal Income Taxes

A reconciliation of the effective tax rate to the statutory federal tax rate is shown below (in thousands, except percentages):


	Three months ended March 31,
	2015						2014
							(As Adjusted)
	Amount			Rate			Amount			Rate
Income tax on pre-tax income	$	31,976			35.0	%	$	26,064			35.0	%
Tax-exempt investment income		(1,879	)		(2.1	)		(1,553	)		(2.1	)
Dividend exclusion		(2,083	)		(2.3	)		(1,888	)		(2.5	)
Miscellaneous tax credits, net		(1,931	)		(2.1	)		(1,551	)		(2.1	)
Low income housing tax credit expense		1,264			1.4			1,421			1.9
Other items, net		(1,461	)		(1.6	)		415			0.6

Total	$	25,886			28.3	%	$	22,908			30.8	%

American National made payments of $370,000 and $808,300 during the three months ended March 31, 2015 and 2014, respectively.

Management believes that a sufficient level of taxable income will be achieved over time to utilize the deferred tax assets in the consolidated federal tax return; therefore, no valuation allowance was recorded as of March 31, 2015 and 2014. There are no ordinary loss tax carryforwards that will expire by December 31, 2015.

The statute of limitations for the examination of federal income tax returns by the Internal Revenue Service for years 2006 to 2009 has been extended. In the opinion of management, all prior year deficiencies have been paid or adequate provisions have been made for any tax deficiencies that may be upheld. No provision for penalties was established, and no interest expense was incurred for 2015 or 2014 relating to uncertain tax positions. Management does not believe there are any uncertain tax benefits that could be recognized within the next twelve months that would decrease American National’s effective tax rate.

Note 13 – Accumulated Other Comprehensive Income (Loss)

The components of and changes in the accumulated other comprehensive income (“AOCI”), and the related tax effects, are shown below (in thousands):


	Net Unrealized Gains/(Losses) on Securities			Defined Benefit Pension Plan Adjustments			Foreign Currency Adjustments			AOCI
Beginning balance, 2015	$	568,151		$	(76,074	)	$	(1,295	)	$	490,782
Amounts reclassified from AOCI (net of tax benefit $7,502 and expense $777)		(21,184	)		1,443			—			(19,741	)
Unrealized holding gains arising during the period (net of tax expense $23,320)		40,024									40,024
Unrealized adjustment to DAC (net of tax benefit $4,917)		(9,131	)								(9,131	)
Unrealized gains on investments attributable to participating policyholders’ interest (net of tax benefit $1,009)		(1,873	)								(1,873	)
Foreign currency adjustment (net of tax expense $990)								(1,838	)		(1,838	)

Ending balance at March 31, 2015	$	575,987		$	(74,631	)	$	(3,133	)	$	498,223

Beginning balance, 2014	$	457,937		$	(43,884	)	$	(341	)	$	413,712
Amounts reclassified from AOCI (net of tax benefit $7,289 and expense $386)		(13,536	)		717			—			(12,819	)
Unrealized holding gains arising during the period (net of tax expense $32,171)		59,745									59,745
Unrealized adjustment to DAC (net of tax benefit $3,351)		(9,287	)								(9,287	)
Unrealized gains on investments attributable to participating policyholders’ interest (net of tax benefit $1,663)		(3,088	)								(3,088	)
Foreign currency adjustment (net of tax benefit $520)								(966	)		(966	)

Ending balance at March 31, 2014	$	491,771		$	(43,167	)	$	(1,307	)	$	447,297

Note 14 – Stockholders’ Equity and Noncontrolling Interests

American National has one class of common stock with a par value of $1.00 per share and 50,000,000 authorized shares. The amounts outstanding at the dates indicated are shown below:


	March 31, 2015			December 31, 2014
Common stock
Shares issued		30,832,449			30,832,449
Treasury shares		(3,935,467	)		(3,960,507	)

Outstanding shares		26,896,982			26,871,942
Restricted shares		(142,667	)		(142,667	)

Unrestricted outstanding shares		26,754,315			26,729,275

Stock-based compensation

American National has one stock-based compensation plan, which allows for grants of Non-Qualified Stock Options, Stock Appreciation Rights (“SAR”), Restricted Stock (“RS”) Awards, Restricted Stock Units (“RSU”), Performance Awards, Incentive Awards or any combination thereof. This plan is administered by the American National Board Compensation Committee. The Board Compensation Committee makes incentive awards under this plan to our executives after meeting established performance objectives. All awards are subject to review and approval by the committee and the Board of Directors, both at the time of setting applicable performance objectives and at the time of payment of the awards. The number of shares available for grants under the plan cannot exceed 2,900,000 shares, and no more than 200,000 shares may be granted to any one individual in any calendar year. Grants are made to certain officers and directors as compensation and to align their interests with those of other shareholders.

SAR, RS and RSU information for the periods indicated is shown below:


	SAR					RS Shares				RS Units
	Shares			Weighted- Average Grant Date Fair Value		Shares		Weighted- Average Grant Date Fair Value		Units			Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2014		54,930		$	114.86		142,667	$	107.39		128,214		$	95.82
Granted		—			—		—		—		83,093			104.75
Exercised		—			—		—		—		(69,761	)		90.43
Forfeited		—			—		—		—		—			—
Expired		(800	)		116.48		—		—		—			—

Outstanding at March 31, 2015		54,130		$	114.83		142,667	$	107.39		141,546		$	103.73


	SAR			RS Shares		RS Units
Weighted-average contractual remaining life (in years)		1.46			3.99		2.34
Exercisable shares		53,947			N/A		—
Weighted-average exercise price	$	114.83		$	107.39	$	103.72
Weighted-average exercise price exercisable shares		114.86			N/A		N/A
Compensation expense (credits)
Three months ended March 31, 2015	$	(77,000	)	$	377,000	$	3,180,000
Three months ended March 31, 2014		(9,000	)		505,000		4,814,000
Fair value of liability award
March 31, 2015	$	32,000			N/A	$	16,867,000
December 31, 2014		167,000			N/A		16,301,000

Note 14 – Stockholders’ Equity and Noncontrolling Interests – (Continued)

The SARs give the holder the right to cash compensation based on the difference between the stock price on the grant date and the stock price on the exercise date. The SARs vest at a rate of 20% per year for five years and expire five years after vesting.

RSU awards allow the recipient of the awards to settle the vested RSUs in either shares of American National’s common stock or cash. RSUs vest after a three-year graded vesting requirement or over a shorter period as a result of death, disability or retirement after age 65.

RS Awards entitle the participant to full dividend and voting rights. Each award has the value of one share of restricted stock and vests 10 years from the grant date. Unvested shares are restricted as to disposition, and are subject to forfeiture under certain circumstances. Compensation expense is recognized over the vesting period. The restrictions on these awards lapse after 10 years, and these awards feature a graded vesting schedule in the case of the retirement of an award holder. Restricted stock for 350,334 shares has been granted at an exercise price of zero, of which 142,667 shares are unvested.

Earnings per share

Basic earnings per share were calculated using a weighted average number of shares outstanding. The Restricted Stock awards and units resulted in diluted earnings per share as follows:


	Three months ended March 31,
	2015		2014
			(As Adjusted)
Weighted average shares outstanding		26,818,215		26,792,281
Incremental shares from RS awards and RSUs		146,135		132,871

Total shares for diluted calculations		26,964,350		26,925,152

Net income attributable to American National (in thousands)	$	102,982	$	52,254

Basic earnings per share	$	3.84	$	1.95
Diluted earnings per share		3.82		1.94

Statutory Capital and Surplus

Risk Based Capital (“RBC”) requirements are measures insurance regulators use to evaluate the capital adequacy of American National Insurance Company and its insurance subsidiaries. RBC is calculated using formulas applied to certain financial balances and activities that consider, among other things, risks related to the type and quality of the invested assets, insurance risks associated with an insurer’s products and liabilities, interest rate risks and general business risks. Insurance companies that do not maintain capital and surplus at a level at least 200% of the authorized control level RBC are required to take certain actions. At March 31, 2015 and December 31, 2014, American National Insurance Company’s statutory capital and surplus was $2,934,396,000 and $2,879,154,000, respectively. American National Insurance Company and each of its insurance subsidiaries had statutory capital and surplus at March 31, 2015 and December 31, 2014, substantially above their authorized control level RBC.

Note 14 – Stockholders’ Equity and Noncontrolling Interests – (Continued)

American National’s insurance subsidiaries prepare statutory-basis financial statements in accordance with statutory accounting practices prescribed or permitted by the insurance department of the state of domicile which include certain components of the National Association of Insurance Commissioners’ Codification of Statutory Accounting Principles (“NAIC Codification”). NAIC Codification is intended to standardize regulatory accounting and reporting to state insurance departments. However, statutory accounting practices continue to be established by individual state laws and permitted practices. Modifications by the various state insurance departments may impact the statutory capital and surplus of American National Insurance Company and its insurance subsidiaries.

Statutory accounting differs from GAAP primarily by charging policy acquisition costs to expense as incurred, establishing future policy benefit liabilities using different actuarial assumptions, and valuing securities on a different basis. In addition, certain assets are not admitted under statutory accounting principles and are charged directly to surplus.

One of American National’s insurance subsidiaries has been granted a permitted practice from the Missouri Department of Insurance to record as the valuation of its investment in a wholly-owned subsidiary that is the attorney-in-fact for a Texas domiciled insurer, the statutory capital and surplus of the Texas domiciled insurer. This permitted practice increases the statutory capital and surplus of both American National Insurance Company and the Missouri domiciled insurance subsidiary by $64,991,000 and $59,732,000 at March 31, 2015 and 2014, respectively. Additionally, the statutory capital and surplus of both American National Insurance Company and the Missouri domiciled insurance subsidiary would have remained substantially above the company action level RBC had it not used the permitted practice.

The statutory capital and surplus and net income (loss) of our life and property and casualty insurance entities in accordance with statutory accounting practices are shown below (in thousands):


	March 31, 2015		December 31, 2014
Statutory capital and surplus
Life insurance entities	$	1,946,457	$	1,904,128
Property and casualty insurance entities		996,996		984,155

	Three months ended March 31,
	2015		2014
Statutory net income
Life insurance entities	$	46,094	$	55,054
Property and casualty insurance entities		15,048		23,176

Dividends

American National Insurance Company’s payment of dividends to stockholders is restricted by statutory regulations. The restrictions require life insurance companies to maintain minimum amounts of capital and surplus, and in the absence of special approval, limit the payment of dividends to the greater of prior year statutory net income from operations on an annual, non-cumulative basis, or 10% of prior year statutory surplus. Under Texas insurance law, American National Insurance Company is permitted to pay total dividends of $287,915,000 during 2015, without prior approval of the Texas Department of Insurance. Similar restrictions on amounts that can transfer in the form of dividends, loans, or advances to American National Insurance Company apply to its insurance subsidiaries.

Note 14 – Stockholders’ Equity and Noncontrolling Interests – (Continued)

Noncontrolling interests

American National County Mutual Insurance Company (“County Mutual”) is a mutual insurance company that is owned by its policyholders. American National has a management agreement that effectively gives it control of County Mutual. As a result, County Mutual is included in the consolidated financial statements of American National. Policyholder interests in the financial position of County Mutual are reflected as noncontrolling interest of $6,750,000 at March 31, 2015 and December 31, 2014.

American National Insurance Company and its subsidiaries exercise significant control or ownership of various joint ventures, resulting in their consolidation into American National’s consolidated financial statements. The interests of the other partners in the consolidated joint ventures are shown as noncontrolling interests of $4,929,000 and $5,634,000 at March 31, 2015 and December 31, 2014, respectively.

Note 15 – Segment Information

Management organizes the business into five operating segments:

•

Life—markets whole, term, universal, indexed and variable life insurance on a national basis primarily through career and multiple-line agents, as well as independent agents and direct marketing channels.

•

Annuity—offers fixed, indexed, and variable annuity products. These products are primarily sold through independent agents, brokers, and financial institutions, along with multiple-line and career agents.

•

Health—primary lines of business are Medicare supplement, stop loss, other supplemental health products and credit disability insurance. Health products are typically distributed through independent agents and managing general underwriters.

•

Property and Casualty—writes personal, agricultural and commercial coverages and credit-related property insurance. These products are primarily sold through multiple-line and independent agents.

•

Corporate and Other—consists of net investment income from investments not allocated to the insurance segments and revenues from non-insurance operations.

The accounting policies of the segments are the same as those described in Note 2 to American National’s annual report on from 10-K. All revenue and expense amounts specifically attributable to policy transactions are recorded directly to the appropriate operating segment. Revenues and expenses not specifically attributable to policy transactions are allocated to each segment as follows:

•

Recurring income from bonds and mortgage loans is allocated based on the assets allocated to each line of business at the average yield available from these assets.

•

Net investment income from all other assets is allocated to the insurance segments in accordance with the amount of capital allocated to each segment, with the remainder recorded in the Corporate and Other business segment.

•

Expenses are allocated based upon various factors, including premium and commission ratios within the respective operating segments.

Note 15 – Segment Information – (Continued)

The following summarizes results of operations by operating segments (in thousands):


	Three months ended March 31,
	2015		2014
Income from continuing operations before federal income taxes, and equity in earnings/losses of unconsolidated affiliates
Life	$	8,199	$	(1,822	)
Annuity		17,113		17,705
Health		7,543		(546	)
Property and Casualty		10,222		29,512
Corporate and Other		48,282		29,619

Total	$	91,359	$	74,468

Note 16 – Commitments and Contingencies

Commitments

American National had aggregate commitments at March 31, 2015, to purchase, expand or improve real estate, to fund fixed interest rate mortgage loans, and to purchase other invested assets of $612,798,000 of which $475,647,000 is expected to be funded in 2015 with the remainder funded in 2016 and beyond.

American National has a $100,000,000 short-term variable rate borrowing facility containing a $55,000,000 sub-feature for the issuance of letters of credit. Borrowings under the facility are at the discretion of the lender and would be used only for funding working capital requirements. The combination of borrowings and outstanding letters of credit cannot exceed $100,000,000 at any time. As of March 31, 2015 and December 31, 2014, the outstanding letters of credit were $12,214,000, and there were no borrowings on this facility to meet liquidity requirements. This facility expires on October 30, 2015. American National expects it will be renewed on substantially equivalent terms upon expiration.

Guarantees

American National has guaranteed bank loans for customers of a third-party marketing operation. The bank loans are used to fund premium payments on life insurance policies issued by American National. The loans are secured by the cash values of the life insurance policies. If the customer were to default on the bank loan, American National would be obligated to pay off the loans. As the cash values of the life insurance policies always equal or exceed the balance of the loans, management does not foresee any loss on these guarantees. The total amount of the guarantees outstanding as of March 31, 2015, was approximately $206,376,000, while the total cash value of the related life insurance policies was approximately $211,247,000.

Litigation

American National and certain subsidiaries, in common with the insurance industry in general, are defendants in various lawsuits concerning alleged breaches of contracts, various employment matters, allegedly deceptive insurance sales and marketing practices, and miscellaneous other causes of action arising in the ordinary course of operations. Certain of these lawsuits include claims for compensatory and punitive damages. We provide accruals for these items to the extent we deem the losses probable and reasonably estimable. After reviewing these matters with legal counsel, based upon information

Note 16 – Commitments and Contingencies – (Continued)

presently available, management is of the opinion that the ultimate resultant liability, if any, would not have a material adverse effect on American National’s consolidated financial position, liquidity or results of operations; however, assessing the eventual outcome of litigation necessarily involves forward-looking speculation as to judgments to be made by judges, juries and appellate courts in the future.

Such speculation warrants caution, as the frequency of large damage awards, which bear little or no relation to the economic damages incurred by plaintiffs in some jurisdictions, continues to create the potential for an unpredictable judgment in any given lawsuit. These lawsuits are in various stages of development, and future facts and circumstances could result in management’s changing its conclusions. It is possible that, if the defenses in these lawsuits are not successful, and the judgments are greater than management can anticipate, the resulting liability could have a material impact on our consolidated financial position, liquidity or results of operations. With respect to the existing litigation, management currently believes that the possibility of a material judgment adverse to American National is remote and no estimate of range can be made for loss contingencies that are at least reasonably possible but not accrued.

Note 17 – Related Party Transactions

American National has entered into recurring transactions and agreements with certain related parties. These include mortgage loans, management contracts, agency commission contracts, marketing agreements, accident and health insurance contracts and legal services. The impact on the consolidated financial statements of the significant related party transactions is shown below (in thousands):


						Amount due to/(from) American National
		Dollar Amount of Transactions				Amount due to/(from) American National
Related Party	Financial Statement Line Impacted	Three months ended March 31,				March 31, 2015			December 31, 2014
Related Party	Financial Statement Line Impacted	2015		2014		March 31, 2015			December 31, 2014
Gal-Tex Hotel Corporation	Mortgage loan on real estate	$	323	$	300	$	6,185		$	6,508
Gal-Tex Hotel Corporation	Net investment income		116		139		37			39
Greer, Herz & Adams, LLP	Other operating expenses		1,964		2,854		(316	)		(309	)

Mortgage Loans to Gal-Tex Hotel Corporation (“Gal-Tex”): American National holds a first mortgage loan originated in 1999, with an interest rate of 7.25% and final maturity date of April 1, 2019 issued to Gal-Tex, which is collateralized by a hotel property in San Antonio, Texas. This loan is current as to principal and interest payments.

Transactions with Greer, Herz & Adams, L.L.P.: Irwin M. Herz, Jr. is an American National advisory director and a Partner with Greer, Herz & Adams, L.L.P., which serves as American National’s General Counsel.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Set forth on the following pages is management’s discussion and analysis (“MD&A”) of financial condition and results of operations for the three months ended March 31, 2015 and 2014 of American National Insurance Company and its subsidiaries (referred to in this document as “we”, “our”, “us”, or the “Company”). This information should be read in conjunction with our consolidated financial statements included in Item 1, Financial Statements (unaudited), of this Form 10-Q.

Forward-Looking Statements

This document contains forward-looking statements that reflect our estimates and assumptions related to business, economic, competitive and legislative developments. Forward-looking statements generally are indicated by words such as “expects,” “intends,” “anticipates,” “plans,” “believes,” “estimates,” “will” or words of similar meaning and include, without limitation, statements regarding the outlook of our business and expected financial performance. Forward-looking statements are not guarantees of future performance and involve various risks and uncertainties. Moreover, forward-looking statements speak only as of the date made, and we undertake no obligation to update them. Certain important factors could cause our actual results to differ, possibly materially, from our expectations or estimates. These factors are described in greater detail in Item IA, Risk Factors, in our 2014 Annual Report on Form 10-K filed with the SEC on February 27^th, 2015, and they include among others:

•

Economic & Investment Risk Factors

•

difficult conditions in the economy, which may not improve in the near future, and risks related to persistently low or unpredictable interest rates;

•

fluctuations in the markets for fixed maturity securities, equity securities, and commercial real estate, which could adversely affect the valuation of our investment portfolio, our net investment income, our retirement expense, and sales of or fees from certain of our products;

•

lack of liquidity for certain of our investments;

•

risk of investment losses and defaults;

•

Operational Risk Factors

•

differences between actual experience regarding mortality, morbidity, persistency, expense, surrenders and investment returns, and our assumptions for establishing liabilities and reserves or for other purposes;

•

potential ineffectiveness of our risk management policies and procedures;

•

changes in our experience related to deferred policy acquisition costs;

•

failures or limitations of our computer, data security and administration systems;

•

potential employee error or misconduct, which may result in fraud or adversely affect the execution and administration of our policies and claims;

•

Catastrophic Event Risk Factors

•

natural or man-made catastrophes, pandemic disease, or other events resulting in increased claims activity from catastrophic loss of life or property;

•

the effects of unanticipated events on our disaster recovery and business continuity planning;

•

Marketplace Risk Factors

•

the highly competitive nature of the insurance and annuity business;

•

potential difficulty in attraction and retention of qualified employees and agents;

•

the introduction of alternative healthcare solutions or changes in federal healthcare policy, both of which could impact our supplement healthcare business;

•

Litigation and Regulation Risk Factors

•

adverse determinations in litigation or regulatory proceedings which may result in significant financial losses and harm our reputation;

•

significant changes in government regulation;

•

changes in tax law;

•

changes in statutory or U.S. generally accepted accounting principles (“GAAP”), practices or policies;

•

Reinsurance and Counterparty Risk Factors

•

potential changes in the availability, affordability and adequacy of reinsurance protection;

•

potential default or failure to perform by the counterparties to our reinsurance arrangements and derivative instruments;

•

Other Risk Factors

•

potentially adverse rating agency actions; and

•

control of our company by a small number of stockholders.

Overview

We are a diversified insurance and financial services company offering a broad spectrum of insurance products. Chartered in 1905, we are headquartered in Galveston, Texas. We operate in all 50 states, the District of Columbia and Puerto Rico.

General Trends

American National had no material changes to the general trends, as discussed in the MD&A included in our 2014 Annual Report on Form 10-K filed with the SEC on February 27, 2015.

Critical Accounting Estimates

The unaudited interim consolidated financial statements have been prepared in conformity with GAAP. In addition to GAAP, insurance companies apply specific SEC regulations when preparing the consolidated financial statements. The preparation of the consolidated financial statements and notes requires us to make estimates and assumptions that affect the amounts reported. Actual results could differ from results reported using those estimates and assumptions. Our accounting policies inherently require the use of judgments relating to a variety of assumptions and estimates, particularly expectations of current and future mortality, morbidity, persistency, expenses, interest rates, and property and casualty loss frequency, severity, claim reporting and settlement patterns. Due to the inherent uncertainty when using the assumptions and estimates, the effect of certain accounting policies under different conditions or assumptions could vary from those reported in the consolidated financial statements.

For a discussion of our critical accounting estimates, see the MD&A in our 2014 Annual Report on Form 10-K filed with the SEC on February 27, 2015. There have been no material changes in accounting policies since December 31, 2014.

Recently Issued Accounting Pronouncements

Refer to Note 3, Recently Issued Accounting Pronouncements, of the Notes to the Unaudited Consolidated Financial Statements in Item 1.

Consolidated Results of Operations

The following sets forth the consolidated results of operations (in thousands):


	Three months ended March 31,
	2015		2014		Change
Premiums and other revenues
Premiums	$	441,843	$	464,875	$	(23,032	)
Other policy revenues		57,524		55,927		1,597
Net investment income		209,213		218,823		(9,610	)
Realized investments gains (losses), net		39,277		25,471		13,806
Other income		8,710		7,340		1,370

Total premiums and other revenues		756,567		772,436		(15,869	)

Benefits, losses and expenses
Policyholder benefits		142,371		168,732		(26,361	)
Claims incurred		224,049		222,441		1,608
Interest credited to policyholders’ account balances		75,753		83,412		(7,659	)
Commissions for acquiring and servicing policies		93,115		98,435		(5,320	)
Other operating expenses		123,458		118,524		4,934
Change in deferred policy acquisition costs ⁽¹⁾		6,462		6,424		38

Total benefits and expenses		665,208		697,968		(32,760	)

Income before other items and federal income taxes	$	91,359	$	74,468	$	16,891

(1)	A negative amount of net change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated. A positive net change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.

Consolidated earnings increased during the three months ended March 31, 2015 compared to 2014 primarily due to higher realized investment gains from the sale of certain real estate properties.

Life

Life segment financial results for the periods indicated were as follows (in thousands):


	Three months ended March 31,
	2015			2014			Change
Premiums and other revenues
Premiums	$	72,082		$	71,995		$	87
Other policy revenues		54,426			51,609			2,817
Net investment income		57,614			57,358			256
Other income		423			337			86

Total premiums and other revenues		184,545			181,299			3,246

Benefits, losses and expenses
Policyholder benefits		88,004			91,280			(3,276	)
Interest credited to policyholders’ account balances		15,788			15,745			43
Commissions for acquiring and servicing policies		27,316			29,463			(2,147	)
Other operating expenses		52,652			51,816			836
Change in deferred policy acquisition costs ⁽¹⁾		(7,414	)		(5,183	)		(2,231	)

Total benefits and expenses		176,346			183,121			(6,775	)

Income before other items and federal income taxes	$	8,199		$	(1,822	)	$	10,021

(1)	A negative amount of net change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated. A positive net change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.

Earnings increased during the three months ended March 31, 2015 compared to 2014 primarily due to lower policyholder benefits and an increase in other policy revenues.

Premiums and other revenues

Premiums increased during the three months ended March 31, 2015 compared to 2014 due to the growth of our traditional life insurance business, although premiums on new policies sold decreased slightly.

Other policy revenues include mortality charges, earned policy service fees and surrender charges on interest-sensitive life insurance policies. The increase during the three months ended March 31, 2015 compared to 2014 in other policy revenue is partially attributable to an increase in surrender charges on interest sensitive life policies.

Life insurance sales

The following table presents life insurance sales as measured by annualized premium, a non-GAAP measure used by the insurance industry, which allows a comparison of new policies sold by an insurance company during the period (in thousands):


	Three months ended March 31,
	2015		2014		Change
Whole life	$	7,096	$	6,728	$	368
Term life		7,102		7,521		(419	)
Universal life		8,393		8,830		(437	)

Total recurring	$	22,591	$	23,079	$	(488	)

Single and excess	$	351	$	455	$	(104	)
Credit life		959		903		56

Life insurance sales are based on the total yearly premium that insurance companies would expect to receive if all recurring premium policies would remain in force, plus 10% of single and excess premiums and 15% of credit life premium. Life insurance sales measure activity associated with gaining new insurance business in the current period whereas GAAP premium revenues are associated with policies sold in current and prior periods; therefore, a reconciliation of premium revenues and insurance sales is not meaningful.

Life insurance sales decreased during the first three months of 2015 compared to 2014. Term and Universal Life sales were lower this year partially offset by higher sales of Whole Life products.

Benefits, losses and expenses

Policyholder benefits decreased during the three months ended March 31, 2015 compared to 2014 primarily due to more normalized claim activity in 2015 when compared to a higher volume of claims, including claims over $500,000, in 2014.

Commissions decreased during the three months ended March 31, 2015 compared to 2014, primarily due to the portion of commissions being paid on renewal premiums, which carry a lower commission rate, being larger.

The following table presents the components of the change in DAC (in thousands):


	Three months ended March 31,
	2015			2014			Change
Acquisition cost capitalized	$	25,038		$	23,288		$	1,750
Amortization of DAC		(17,624	)		(18,105	)		481

Change in DAC	$	7,414		$	5,183		$	2,231

Policy in-force information

The following table summarizes changes in the Life segment’s in-force amounts (in thousands):


	March 31, 2015		December 31, 2014		Change
Life insurance in-force
Traditional life	$	60,551,271	$	59,409,750	$	1,141,521
Interest-sensitive life		26,306,063		26,166,314		139,749

Total life insurance in-force	$	86,857,334	$	85,576,064	$	1,281,270

The following table summarizes changes in the Life segment’s number of policies in-force:


	March 31, 2015		December 31, 2014		Change
Number of policies in-force
Traditional life		1,931,306		1,949,119		(17,813	)
Interest-sensitive life		207,514		205,805		1,709

Total number of policies		2,138,820		2,154,924		(16,104	)

Total life insurance in-force increased during the three months ended March 31, 2015 compared to 2014, while the total number of policies decreased for the same period, reflecting the transition to fewer but larger face amount policies.

Annuity

Annuity segment financial results for the periods indicated were as follows (in thousands):


	Three months ended March 31,
	2015		2014		Change
Premiums and other revenues
Premiums	$	41,443	$	66,936	$	(25,493	)
Other policy revenues		3,098		4,318		(1,220	)
Net investment income		119,662		130,314		(10,652	)
Other income		870		—		870

Total premiums and other revenues		165,073		201,568		(36,495	)

Benefits, losses and expenses
Policyholder benefits		54,367		77,452		(23,085	)
Interest credited to policyholders’ account balances		59,965		67,667		(7,702	)
Commissions for acquiring and servicing policies		9,105		13,564		(4,459	)
Other operating expenses		13,049		17,784		(4,735	)
Change in deferred policy acquisition costs ⁽¹⁾		11,474		7,396		4,078

Total benefits and expenses		147,960		183,863		(35,903	)

Income before other items and federal income taxes	$	17,113	$	17,705	$	(592	)

(1)	A negative amount of net change indicates more expense w as deferred than amortized and represents a decrease to expenses in the period indicated. A positive net change indicates less expense w as deferred than amortized and represents an increase to expenses in the period indicated.

Earnings for the first quarter decreased slightly as lower premiums reflected the challenges of the continued low interest rate environment. This was largely offset by items that fluctuate with changes in premium, such as policyholder benefits, commissions and allocated expenses. Net investment income declined due to maturing bonds and mortgage loans being replaced by new investments purchased with lower interest yields and lower account values.

Premiums and other revenues

Annuity premium and deposit amounts received are shown below (in thousands):


	Three months ended March 31,
	2015		2014		Change
Fixed deferred annuity	$	47,559	$	95,457	$	(47,898	)
Equity-indexed deferred annuity		52,147		50,585		1,562
Single premium immediate annuity		49,610		86,008		(36,398	)
Variable deferred annuity		26,463		34,540		(8,077	)

Total premium and deposits		175,779		266,590		(90,811	)
Less: Policy deposits		134,336		199,654		(65,318	)

Total earned premiums	$	41,443	$	66,936	$	(25,493	)

We monitor account values and changes in those values as a key indicator of performance in our Annuity segment.

Shown below are the changes in account values (in thousands):


	Three months ended March 31,
	2015			2014
Fixed deferred and equity-indexed annuity
Account value, beginning of period	$	8,873,397		$	9,355,946
Net inflows		84,013			104,238
Surrenders		(333,931	)		(343,084	)
Fees		(1,573	)		(2,856	)
Interest credited		58,328			67,460

Account value, end of period	$	8,680,234		$	9,181,704

Single premium immediate annuity
Reserve, beginning of period	$	1,274,664		$	1,144,616
Net inflows		12,880			43,404
Interest and mortality		14,377			7,491

Reserve, end of period	$	1,301,921		$	1,195,511

Variable deferred annuity
Account value, beginning of period	$	494,516		$	489,305
Net inflows		25,551			34,253
Surrenders		(52,014	)		(40,321	)
Fees		(1,429	)		(1,411	)
Change in market value and other		30,663			6,665

Account value, end of period	$	497,287		$	488,491

Deferred and single premium immediate annuity sales decreased during the three months ended March 31, 2015 compared to 2014 due to the benchmark 10 year treasury yield being 50-100 basis points lower in 2015 and accordingly, less attractive interest crediting rates.

Variable deferred annuity net inflows decreased during the three months ended March 31, 2015 compared to 2014. These products have no guaranteed minimum withdrawal benefits. Our total direct exposure on the guaranteed minimum death benefits associated with these products was $0.9 million and $1.4 million as of March 31, 2015 and 2014, respectively. Reinsurance, from reinsurers rated “A” or higher by A.M. Best, reduced the net exposure to $0.2 million and $0.3 million, as of March 31, 2015 and 2014, respectively.

Benefits, losses and expenses

Policyholder benefits consist of annuity payments and reserve increases for SPIA contracts. Reserve increases are highly correlated to the sales volume of SPIA contracts. Sales and benefits decreased for the three months ended March 31, 2015 compared to 2014, driven primarily by the continued low interest rate environment.

Commissions decreased during the three months ended March 31, 2015 compared to 2014 as a result of decreased annuity sales.

Other operating expenses decreased during the three months ended March 31, 2015 compared to 2014 due to lower legal fees in 2015.

The change in DAC represents acquisition costs capitalized less the amortization of existing DAC, which is calculated in proportion to expected gross profits. The following shows the components of the change in DAC (in thousands):


	Three months ended March 31,
	2015			2014			Change
Acquisition cost capitalized	$	8,955		$	12,521		$	(3,566	)
Amortization of DAC		(20,429	)		(19,917	)		(512	)

Change in DAC	$	(11,474	)	$	(7,396	)	$	(4,078	)

The amortization of DAC as a percentage of gross profits is an important ratio for the Annuity segment. Changes in this ratio reflect the impact of emerging experience. For example, if experienced surrenders in the year are higher than what was projected in last year’s DAC calculation, then DAC amortization will tend to increase relative to gross margins. The ratios for the three months ended March 31, 2015 and 2014 were 39.7% and 38.0%, respectively.

Options and Derivatives

The following table reflects the incremental impact of option return to net investment income, and the impact of the equity-indexed annuity embedded derivatives to interest credited to policyholder’s account balances (in thousands):


	Three months ended March 31,
	2015		2014		Change
Net investment income
Without option return	$	118,837	$	126,727	$	(7,890	)
Option return		825		3,587		(2,762	)
Interest credited to policy account balances
Without embedded derivatives		58,958		65,184		(6,226	)
Equity-indexed annuity embedded derivatives		1,007		2,483		(1,476	)

Net investment income without option return decreased during the three months ended March 31, 2015 compared to 2014, primarily due to a lower net investment portfolio yield and aggregate account values.

The option return, as well as the related equity-indexed annuity embedded derivatives, decreased during the three months ended March 31, 2015 compared to 2014, due to the relative change in the S&P 500 Index during the respective periods. These option returns correlate to the 0.4% and 1.3% change in the S&P 500 Index during the three months ended March 31, 2015 and 2014, respectively.

Health

Health segment results for the periods indicated were as follows (in thousands):


	Three months ended March 31,
	2015		2014			Change
Premiums and other revenues
Premiums	$	51,837	$	55,336		$	(3,499	)
Net investment income		2,653		2,938			(285	)
Other income		4,569		4,613			(44	)

Total premiums and other revenues		59,059		62,887			(3,828	)

Benefits, losses and expenses
Claims incurred		31,797		43,929			(12,132	)
Commissions for acquiring and servicing policies		7,191		8,073			(882	)
Other operating expenses		11,403		11,200			203
Change in deferred policy acquisition costs ⁽¹⁾		1,125		231			894

Total benefits and expenses		51,516		63,433			(11,917	)

Income before other items and federal income taxes	$	7,543	$	(546	)	$	8,089

(1)	A negative amount of net change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.

A positive net change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.

Earnings increased during the three months ended March 31, 2015 compared to 2014, due to a decrease in claims incurred, partially offset by a decrease in premiums earned. Claims incurred decreased in 2015 as the volume and average claim size both decreased. The quarter ended March 31, 2014 included a $4.0 million charge relating to now settled reinsurance litigation.

Premiums and other revenues

Health earned premiums for the periods indicated were as follows (in thousands, except percentages):


	Three months ended March 31,
	2015				2014
Medicare Supplement	$	19,863	38.3	%	$	21,993	39.7	%
Medical expense		4,572	8.8			6,221	11.2
Group health		9,370	18.1			10,239	18.5
Credit accident and health		3,270	6.3			3,737	6.8
MGU		5,301	10.2			5,250	9.5
Supplemental Insurance		7,880	15.2			6,159	11.2
All other		1,581	3.1			1,737	3.1

Total	$	51,837	100.0	%	$	55,336	100.0	%

Earned premiums decreased during the three months ended March 31, 2015 compared to 2014 primarily due to the continued contraction of the closed medical expense blocks of business and fewer Medicare Supplement contract sales which is partially attributable to continued changes in the healthcare insurance marketplace.

The number of in-force certificates and policies as of the dates indicated are as follows:


	Three months ended March 31,
	2015				2014
Medicare Supplement		36,878	6.1	%		39,017	6.0	%
Medical expense		3,027	0.5			4,046	0.6
Group		16,856	2.8			16,340	2.5
Credit accident and health		216,684	35.7			229,686	35.4
MGU		226,361	37.3			249,607	38.5
Supplemental Insurance		67,124	11.1			65,911	10.2
All other		40,346	6.5			44,348	6.8

Total		607,276	100.0	%		648,955	100.0	%

Total in-force policies decreased during the three months ended March 31, 2015 compared to 2014, primarily due to a decrease in the MGU line and credit accident and health business. Credit accident and health decreased due to contraction in that market as distributors continued to shift their marketing emphasis to property and casualty products.

Benefits, losses and expenses

Claims incurred decreased as the volume of claims and the average claims size declined. The quarter ended March 31, 2014 included a $4.0 million charge relating to now settled reinsurance litigation.

Change in Deferred Policy Acquisition Costs

The following table presents the components of the change in DAC (in thousands):


	Three months ended March 31,
	2015			2014			Change
Acquisition cost capitalized	$	3,954		$	4,288		$	(334	)
Amortization of DAC		(5,079	)		(4,519	)		(560	)

Change in DAC	$	(1,125	)	$	(231	)	$	(894	)

Property and Casualty

Property and Casualty results for the periods indicated were as follows (in thousands, except percentages):


	Three months ended March 31,
	2015			2014			Change
Premiums and other revenues
Net premiums written	$	286,944		$	276,988		$	9,956

Net premiums earned	$	276,481		$	270,608		$	5,873
Net investment income		14,406			15,183			(777	)
Other income		1,140			1,254			(114	)

Total premiums and other revenues		292,027			287,045			4,982

Benefits, losses and expenses
Claims incurred		192,252			178,512			13,740
Commissions for acquiring and servicing policies		49,503			47,333			2,170
Other operating expenses		38,773			27,708			11,065
Change in deferred policy acquisition costs ⁽¹⁾		1,277			3,980			(2,703	)

Total benefits and expenses		281,805			257,533			24,272

Income before other items and federal income taxes	$	10,222		$	29,512		$	(19,290	)

Loss ratio		69.5	%		66.0	%		3.5
Underwriting expense ratio		32.4			29.4			3.0

Combined ratio		101.9	%		95.4	%		6.5

Impact of catastrophe events on combined ratio		4.5			5.1			(0.6	)

Combined ratio without impact of catastrophe events		97.4	%		90.3	%		(7.1	)

Gross catastrophe losses	$	12,630		$	13,060		$	(430	)
Net catastrophe losses		12,485			13,639			(1,154	)

(1)	A negative amount of net change indicates more expense was deferred than amortized and represents a decrease to expenses in the period indicated.

A positive net change indicates less expense was deferred than amortized and represents an increase to expenses in the period indicated.

Property and Casualty results decreased during the three months ended March 31, 2015 compared to 2014 due to increased claims and other operating expenses.

Premiums and other revenues

Net premiums written and earned increased during the three months ended March 31, 2015 compared to 2014 due to continued changes to improve rate adequacy in our homeowners and commercial lines.

Benefits, losses and expenses

Claims incurred increased during the three months ended March 31, 2015 compared to 2014, as a result of increases in non-catastrophe losses.

Operating expenses increased during the three months ended March 31, 2015 compared to 2014 as a result of costs related to growth initiatives and technology enhancements.

Products

Our Property and Casualty segment consists of: (i) Personal products, marketed primarily to individuals, representing 56.4% of net premiums written (ii) Commercial products, which focus primarily on agricultural and other markets, representing 35.2% of net premiums written and (iii) Credit-related property insurance products, which are marketed to and through financial institutions and retailers, representing 8.4% of net premiums written.

Personal Products

Personal Products results for the periods indicated were as follows (in thousands, except percentages):


	Three months ended March 31,						Change
	2015			2014			Change
Net premiums written
Auto	$	103,675		$	102,110		$	1,565
Homeowner		47,722			48,499			(777	)
Other Personal		10,525			9,584			941

Total net premiums written	$	161,922		$	160,193		$	1,729

Net premiums earned
Auto	$	98,993		$	98,857		$	136
Homeowner		54,692			54,340			352
Other Personal		9,886			8,792			1,094

Total net premiums earned	$	163,571		$	161,989		$	1,582

Loss ratio
Auto		76.6	%		69.8	%		6.8
Homeowner		62.2			68.5			(6.3	)
Other Personal		75.0			40.0			35.0
Personal line loss ratio		71.7	%		67.8	%		3.9
Combined Ratio
Auto		101.9	%		89.5	%		12.4
Homeowner		89.7			89.5			0.2
Other Personal		101.7			55.3			46.4
Personal line combined ratio		97.8	%		87.6	%		10.2

Personal Automobile: Net premiums written and earned increased in our personal automobile line during the three months ended March 31, 2015 compared to 2014, primarily due to improved rate adequacy. The loss and combined ratio increased during the three months ended March 31, 2015 compared to 2014, primarily due to an increase in non-catastrophe winter weather claim activity compared to the prior year.

Homeowners: Net premiums written decreased during the three months ended March 31, 2015 compared to 2014, primarily due to decreased writings in higher risk areas. The loss ratio decreased during the three months ended March 31, 2015 compared to 2014 due to a decline in weather-related losses and a larger share of policies being in areas with less catastrophe risk.

Other Personal: These products include watercraft, rental-owner and umbrella coverages for individuals seeking to protect their personal property and liability not covered within their homeowner and auto policies. The loss ratio increased during the three months ended March 31, 2015 compared to 2014, due to increased claim activity on several lines of business with low per policy premium.

Commercial Products

Commercial Products results for the periods indicated were as follows (in thousands, except percentages):


	Three months ended March 31,
	2015			2014			Change
Net premiums written
Other Commercial	$	44,013		$	40,504		$	3,509
Agribusiness		30,280			29,236			1,044
Auto		26,535			25,173			1,362

Total net premiums written	$	100,828		$	94,913		$	5,915

Net premiums earned
Other Commercial	$	36,378		$	33,393		$	2,985
Agribusiness		29,240			28,998			242
Auto		21,235			19,048			2,187

Total net premiums earned	$	86,853		$	81,439		$	5,414

Loss ratio
Other Commercial		67.2	%		75.4	%		(8.2	)
Agribusiness		87.5			78.6			8.9
Auto		73.3			67.5			5.8
Commercial line loss ratio		75.5	%		74.7	%		0.8
Combined ratio
Other Commercial		96.2	%		109.4	%		(13.2	)
Agribusiness		126.3			120.5			5.8
Auto		99.1			86.4			12.7
Commercial line combined ratio		107.0	%		108.0	%		(1.0	)

Other Commercial: Net premiums written and earned increased during the three months ended March 31, 2015 compared to 2014, primarily due to increased premium per policy in the workers’ compensation and business owners’ lines. Decreases in the loss and combined ratios for the three months ended March 31, 2015 compared to 2014 are primarily due to adverse case reserve development on workers compensation claims in 2014 not recurring in the current quarter.

Agricultural Business: Our agricultural business product allows policyholders to customize and cover their agriculture exposure using a package policy which includes coverage for residences and household contents, farm buildings and building contents, personal and commercial liability and personal property. Net premiums written and earned increased during the three months ended March 31, 2015 compared to 2014 primarily as a result of improved rate adequacy. The loss and combined ratio increased during the three months ended March 31, 2015 compared to March 31, 2014 primarily due to an increase in claims related to severe winter weather in the Northeast as well as an increase in average severity of fire losses.

Commercial Automobile: Net premiums written and earned increased during the three months ended March 31, 2015 compared to 2014, primarily due to improved rate adequacy. The loss and combined ratios increased during the three months ended March 31, 2015 compared to 2014 primarily due to an increase in overall average severity of losses.

Credit Products

Credit-related property product results for the periods indicated were as follows (in thousands, except percentages):


	Three months ended March 31,
	2015			2014			Change
Net premiums written	$	24,194		$	21,882		$	2,312
Net premiums earned		26,057			27,180			(1,123	)
Loss ratio		36.0	%		29.1	%		6.9	%
Combined ratio		107.5	%		103.5	%		4.0	%

Credit-related property products are offered on automobiles, furniture and appliances in connection with the financing of those items. These policies pay an amount if the insured property is lost or damaged and the amount paid is not directly related to an event affecting the consumer’s ability to pay the debt.

Net written premiums increased during the three months ended March 31, 2015 compared to 2014 primarily due to increases in our Guaranteed Auto Protection (GAP) and Collateral Protection business. Net earned premiums have decreased primarily due to an ongoing shift from our GAP Insurance product to a GAP Waiver product.

The loss and combined ratios increased during the three months ended March 31, 2015 compared to 2014 primarily due to an increase in claims in our collateral protection business.

Corporate and Other

Corporate and Other segment financial results for the periods indicated were as follows (in thousands):


	Three months ended March 31,
	2015		2014		Change
Other revenues
Net investment income	$	14,878	$	13,030	$	1,848
Realized investments gains, net		39,277		25,471		13,806
Other Income		1,708		1,136		572

Total other revenues		55,863		39,637		16,226

Benefits, losses and expenses
Commissions		—		2		(2	)
Other operating expenses		7,581		10,016		(2,435	)

Total benefits, losses and expenses		7,581		10,018		(2,437	)

Income before other items and federal income taxes	$	48,282	$	29,619	$	18,663

Earnings increased during the three months ended March 31, 2015 compared to 2014 primarily due to an increase in realized investment gains. The increase in realized gains is attributable to the sale of common stock and the sale of investment real estate property. Other operating expenses decreased due to changes in the levels of allocations amongst segments.

Investments

We manage our investment portfolio to optimize the rate of return commensurate with sound and prudent asset selection and to maintain a well-diversified portfolio. Our investment operations are regulated primarily by the state insurance departments where we or our insurance subsidiaries are domiciled. Investment activities, including setting investment policies and defining acceptable risk levels, are subject to oversight by our Board of Directors, which is assisted by our Finance Committee and Management Risk Committee.

Our insurance and annuity products are primarily supported by investment-grade bonds, and to a lesser extent collateralized mortgage obligations and commercial mortgage loans. We purchase fixed maturity securities and designate them as either held-to-maturity or available-for-sale considering our estimated future cash flow needs.

We also monitor the composition of our fixed maturity securities classified as held-to-maturity and available-for-sale and adjust the mix within the portfolio as investments mature or new investments are purchased.

We invest in commercial mortgage loans when the yield and credit risk compare favorably with fixed maturity securities. Individual residential mortgage loans including sub-prime or Alt A mortgage loans have not been and are not expected to be part of our investment portfolio. We invest in real estate and equity securities based on a risk and reward analysis where we believe there are opportunities for enhanced returns.

The following summarizes the carrying values of our invested assets (other than investments in unconsolidated affiliates) by asset class (in thousands, except percentages):


	March 31, 2015					December 31, 2014
	Amount		Percent			Amount		Percent
Bonds held-to-maturity, at amortized cost	$	7,969,007		40.7	%	$	8,225,050		42.0	%
Bonds available-for-sale, at fair value		5,070,780		25.9			4,921,807		25.2
Equity securities, at fair value		1,521,619		7.8			1,516,978		7.8
Mortgage loans on real estate, net of allowance		3,344,260		17.1			3,359,586		17.2
Policy loans		406,394		2.1			405,979		2.1
Investment real estate, net of accumulated depreciation		501,992		2.6			479,062		2.4
Short-term investments		520,333		2.7			431,000		2.2
Other invested assets		216,981		1.1			220,255		1.1

Total investments	$	19,551,366		100.0	%	$	19,559,717		100.0	%

The decrease in our total investments at March 31, 2015 as compared to December 31, 2014 was primarily a result of lower policyholders’ account balances.

Bonds—We allocate most of our fixed maturity securities to support our insurance business. At March 31, 2015, our fixed maturity securities had an estimated fair value of $13.6 billion, which was $0.8 billion, or 6.2%, above amortized cost. At December 31, 2014, our fixed maturity securities had an estimated fair value of $13.6 billion, which was $0.7 billion, or 5.1%, above amortized cost. Fixed maturity securities’ estimated fair value, due in one year or less, decreased to $1.1 billion as of March 31, 2015 from $1.3 billion as of December 31, 2014, primarily as a result of maturities.

The following table identifies the total bonds by credit quality rating, using both Standard & Poor’s and Moody’s ratings (in thousands, except percentages):


	March 31, 2015						December 31, 2014
	Amortized Cost		Estimated Fair Value		% of Fair Value		Amortized Cost		Estimated Fair Value		% of Fair Value
AAA	$	652,979	$	696,276		5.1	$	637,613	$	676,728		5.0
AA		1,563,576		1,661,751		12.3		1,647,110		1,733,484		12.8
A		5,064,309		5,411,127		39.9		5,060,934		5,348,438		39.4
BBB		4,998,603		5,296,804		39.1		5,121,394		5,363,342		39.5
BB and below		486,136		487,184		3.6		452,715		452,728		3.3

Total	$	12,765,603	$	13,553,142		100.0	$	12,919,766	$	13,574,720		100.0

Mortgage Loans—We invest in commercial mortgage loans that are diversified by property-type and geography to support our insurance business. Generally, mortgage loans are secured by first liens on income-producing real estate with a loan-to-value ratio of up to 75%. Mortgage loans are carried at outstanding principal balances, adjusted for any unamortized premium or discount, deferred fees or expenses, and net of allowances. The weighted average coupon yield on the principal funded for mortgage loans was 4.3% and 4.9% at March 31, 2015 and December 31, 2014, respectively. It is likely that the weighted average yield on funded mortgage loans will decline as loans mature and new loans are originated with lower rates in the current interest rate environment.

Equity Securities—Our equity portfolio is in companies publicly traded on national U.S. stock exchanges; the cost and estimated fair value of the equity securities are as follows (in thousands):


	Cost		Unrealized Gains		Unrealized Losses			Fair Value		% of Fair Value
March 31, 2015
Common stock	$	736,727	$	766,362	$	(13,233	)	$	1,489,856		97.9
Preferred stock		19,733		12,031		(1	)		31,763		2.1

Total	$	756,460	$	778,393	$	(13,234	)	$	1,521,619		100.0

December 31, 2014
Common stock	$	719,651	$	774,650	$	(7,176	)	$	1,487,125		98.0
Preferred stock		19,733		10,121		(1	)		29,853		2.0

Total	$	739,384	$	784,771	$	(7,177	)	$	1,516,978		100.0

Investment Real Estate—We invest in commercial real estate where positive cash flows and/or appreciation in value is expected. Real estate may be owned directly by our insurance companies or non-insurance affiliates or indirectly in joint ventures with real estate developers or investors we determine share our perspective regarding risk and return relationships. The carrying value of real estate is stated at cost, less accumulated depreciation and valuation allowances, if any. Depreciation is provided over the estimated useful lives of the properties.

Short-Term Investments—Short-term investments are primarily commercial paper rated A2/P2 or better by Standard & Poor’s and Moody’s, respectively. The amount fluctuates depending on the available long-term investment opportunities and our liquidity needs, including mortgage investment-funding commitments.

Policy Loans—For certain life insurance products, policyholders may borrow funds using the policy’s cash value as collateral. The maximum amount of the policy loan depends upon the policy’s surrender value. As of March 31, 2015, we had $406.4 million in policy loans with a loan to surrender value of 57.7%, and at March 31, 2014, we had $406.0 million in policy loans with a loan to surrender value of 57.6%. Interest rates on policy loans primarily range from 3.0% to 12.0% per annum. Policy loans may be repaid at any time by the policyholder and have priority to any claims on the policy. If the policyholder fails to repay the policy loan, funds are withdrawn from the policy’s benefits.

Net Investment Income and Net Realized Gains (Losses)

Net investment income decreased $9.6 million during the three months ended March 31, 2015, primarily from decreased interest rates on bonds and mortgage loans of $9.7 million and decreased option income of $2.9 million due to smaller gains on the S&P index, partially offset by improvement in real estate income.

Interest income on mortgage loans is accrued on the principal amount of the loan at the contractual interest rate. Accretion of discounts is recorded using the effective yield method. Interest income, accretion of discounts and prepayment fees are reported in net investment income. Interest is not accrued on loans generally more than 90 days past due or when the collection of interest is not considered probable. Loans in foreclosure are placed on non-accrual status. Interest received on non-accrual status mortgage loans is included in net investment income in the period received.

Net realized gains increased $12.9 million during the three months ended March 31, 2015 compared to 2014. Other-than-temporary impairment on investment securities decreased $1.0 million during the three months ended March 31, 2015 compared to 2014.

Net Unrealized Gains and Losses

The net unrealized gains on available-for-sale securities at March 31, 2015 and December 31, 2014 were $1.04 billion and $1.01 billion, respectively. Unrealized gains or losses on available-for-sale securities are recognized as other comprehensive income or loss which has no impact on earnings. The gross unrealized gains of available-for-sale securities increased $32.4 million to $1.06 billion during the three months ended March 31, 2015, resulting from increases in the value of bonds and equity securities. The gross unrealized losses of available-for-sale securities changed favorably by $2.2 million, going from $24.9 million at December 31, 2014 to $22.8 million at March 31, 2015. The gross unrealized gains of held-to-maturity securities increased $65.6 million to $542.5 million and gross unrealized losses decreased from $48.9 million at December 31, 2014 to $29.1 million in March 31, 2015.

The fair value of our investment securities is affected by various factors, including volatility of financial markets, changes in interest rates and fluctuations in credit spread. We have the ability and intent to hold those securities in unrealized loss positions until a market price recovery or maturity. Further, it is unlikely that we will be required to sell them prior to recovery, and recovery is expected in a reasonable period of time.

Liquidity

Our liquidity requirements have been and are expected to continue to be met by funds from operations, comprised of premiums received from our customers and investment income. The primary use of cash has been and is expected to continue to be payment of policyholder benefits and claims incurred. Current and expected patterns of claim frequency and severity may change from period to period but continue to be within historical norms. Management considers our current liquidity position to be sufficient to meet anticipated demands over the next twelve months. Our contractual obligations are not expected to have a significant negative impact to cash flow from operations.

Changes in interest rates during 2015 and market expectations for potentially higher rates through 2016 will likely lead to increases in the volume of annuity contracts, which may be partially offset by increases in surrenders. Freezing our defined benefit pension plans will lessen the impact of changes in interest rates on our contributions to these plans and future contributions to our defined benefit plans may be smaller than historical contributions. A portion of the contributions will be used for the employer matching contributions to defined contribution retirement plans, which will provide employees with the potential to accumulate assets for retirement. No unusually large capital expenditures are expected in the next 12-24 months and we have paid dividends to stockholders for over 100 consecutive years and expect to continue this trend. There are no other known trends or uncertainties regarding product pricing, changes in product lines or rising costs, which would have a significant impact to cash flows from operations.

To ensure we will be able to continue to pay future commitments, the funds received as premium payments and deposits are invested in bonds and commercial mortgages. Funds are invested with the intent that income from the investments and proceeds from the maturities will meet our ongoing cash flow needs. We historically have not had to liquidate invested assets in order to cover cash flow needs. We believe our portfolio of highly liquid available-for-sale investment securities including equity securities is sufficient to meet future liquidity needs as necessary.

Our cash and cash equivalents and short-term investment position was $690.4 million at March 31, 2015 compared to $640.5 million at December 31, 2014, respectively. The increase relates to an increase in short-term investments partially offset by a decrease in cash and cash equivalents as we look to minimize purchases of long term bonds beyond those needed to manage our longer term life and annuity related policyholder liabilities.

A downgrade or a potential downgrade in our financial strength ratings could result in a loss of business and could adversely affect our cash flow from operations.

Capital Resources

Our capital resources are summarized below (in thousands):


	March 31, 2015		December 31, 2014
American National stockholders’ equity, excluding accumulated other comprehensive income, net of tax (“AOCI”)	$	4,021,652	$	3,936,781
AOCI		498,223		490,782

Total American National stockholders’ equity	$	4,519,875	$	4,427,563

We have notes payable relating to borrowings by real estate joint ventures that we consolidate into our financial statements that are not part of our capital resources. The lenders for the notes payable have no recourse against us in the event of default by the joint ventures. Therefore, the liability we have for these notes payable is limited to our investment in the respective ventures, which totaled $14.0 million at March 31, 2015 and $15.0 million at December 31, 2014, respectively.

The changes in our capital resources are summarized below (in thousands):


	Three months ended March 31, 2015
Net income attributable to American National	$	102,982
Increase in net unrealized gains		7,836
Defined benefit pension plan adjustment		1,443
Dividends to shareholders		(20,711	)
Other		762

Total	$	92,312

During the three months ended March 31, 2015, the change in our capital resources increased compared to March 31, 2014 primarily due to increased earnings in 2015 partially offset by a smaller increase in unrealized gains in 2015.

Statutory Capital and Surplus and Risk-based Capital

Statutory capital and surplus is the capital of our insurance companies reported in accordance with accounting practices prescribed or permitted by the applicable state insurance departments. RBC is calculated using formulas applied to certain financial balances and activities that consider, among other things, risks related to the type and quality of the invested assets, insurance risks associated with an insurer’s products and liabilities, interest rate risks and general business risks. Insurance companies that do not maintain capital and surplus at a level of at least 200% of the authorized control level RBC are required to take certain actions. At March 31, 2015 and December 31, 2014, American National Insurance Company’s statutory capital and surplus was $2,934,396,000 and $2,879,154,000, respectively. American National Insurance Company and each of its insurance subsidiaries had statutory capital and surplus at March 31, 2015 and December 31, 2014, substantially above their authorized control level RBC.

The achievement of long-term growth will require growth in American National Insurance Company’s and our insurance subsidiaries’ statutory capital and surplus. Our subsidiaries may obtain additional statutory capital through various sources, such as retained statutory earnings or equity contributions from us.

Contractual Obligations

Our future cash payments associated with claims and claims adjustment expenses, life, annuity and disability obligations, contractual obligations pursuant to operating leases for office space and equipment, and notes payable have not materially changed since December 31, 2014. We expect to have the capacity to pay our obligations as they come due.

Off-Balance Sheet Arrangements

We have off-balance sheet arrangements relating to third-party marketing operation bank loans as discussed in Note 19, Commitments and Contingencies, of the Notes to the Consolidated Financial Statements. We could be exposed to a liability for these loans, which are supported by the cash value of the underlying insurance contracts. The cash value of the life insurance policies is designed to always equal or exceed the balance of the loans. Accordingly, management does not foresee any loss related to these arrangements.

Related-Party Transactions

We have various agency, consulting and service arrangements with individuals and entities considered to be related parties. Each of these arrangements has been reviewed and approved by our Audit Committee, which retains final decision-making authority for these transactions. The amounts involved, both individually and in the aggregate, with these arrangements are not material to any segment or to our overall operations. For additional details see Note 17, Related Party Transactions, of the Notes to the Consolidated Financial Statements.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risks have not changed materially from those disclosed in our 2014 Annual Report on Form 10-K filed with the SEC on February 27, 2015.

ITEM 4.

CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Corporate Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. The Company’s management, with the participation of the Company’s Chief Executive Officer and Corporate Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of March 31, 2015. Based upon that evaluation and subject to the foregoing, the Company’s Chief Executive Officer and Corporate Chief Financial Officer concluded that, as of March 31, 2015, the design and operation of the Company’s disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Management has monitored the internal controls over financial reporting, including any material changes to the internal control over financial reporting. There were no changes in the Company’s internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

Information required for Item 1 is incorporated by reference to the discussion under the heading “Litigation” in Note 16, Commitments and Contingencies, of the Notes to the Unaudited Consolidated Financial Statements.

ITEM 1A.

RISK FACTORS

There have been no material changes with respect to the risk factors as previously disclosed in our 2014 Annual Report on Form 10-K filed with the SEC on February 27, 2015.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5.

OTHER INFORMATION

None.

ITEM 6.

EXHIBITS


Exhibit Number		Basic Documents

3.1		Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit No. 3.1 to the registrant’s Registration Statement on Form 10-12B filed April 10, 2009).

3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit No. 3.2 to the registrant’s Current Report on Form 8-K filed April 27, 2015).

10.15*		Amendments One and Two to the American National Family of Companies Executive Supplemental Savings plan

10.16*		Form of Restricted Stock Unit Agreement for Executive Officers under the American National Insurance Company Amended and Restated 1999 Stock and Incentive Plan (grants on or after March 1, 2015)

10.17*		Form of Restricted Stock Unit Agreement for Directors under the American National Insurance Company Amended and Restated 1999 Stock and Incentive Plan (grants on or after March 1, 2015)

31.1		Certification of the principal executive officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of the principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1		Certification of the principal executive officer and principal financial officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101		The following unaudited financial information from American National Insurance Company’s Quarterly Report on Form 10-Q for three months ended March 31, 2015 formatted in eXtensible Business Reporting Language (“XBRL”): (i) Consolidated Statements of Financial Position, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income (Loss), (iv) Consolidated Statements of Changes in Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to the Unaudited Consolidated Financial Statements.

*	Management contract or compensatory plan or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


By:		/s/ James E. Pozzi
		Name: James E. Pozzi
		Title: President and
		Chief Executive Officer


By:		/s/ John J. Dunn, Jr.
		Name: John J. Dunn, Jr.,
		Title: Executive Vice President,
		Corporate Chief Financial Officer

Date: May 08, 2015