Executive Summary

Q3 2023 delivered a sharp EPS inflection to $18.30, driven by a $25.7M realized gain on sale of a long-term investment and a $19.4M positive actuarial assumption adjustment on fixed-index annuity liabilities; pretax earnings rose to $98.9M while total revenues were $156.7M .
Market Risk Benefits (MRB) accounting under LDTI provided a $29.4M pretax earnings benefit in Q3 (vs $33.6M in Q3 2022), adding quarter-specific volatility tied to prevailing interest rates .
Sequentially, revenues fell vs Q2 as index option losses turned negative (-$19.7M in Q3 vs +$22.0M in Q2), but net earnings and EPS surged from Q2’s $29.6M and $8.38 .
Strategic catalyst: the company signed a definitive agreement on October 8 to be acquired by Prosperity Life Group, targeting close in 1H 2024, which underpins investor focus on regulatory milestones and closing certainty .

What Went Well and What Went Wrong

What Went Well

Strong net earnings growth year over year and sequentially: Q3 net earnings of $64.7M vs $35.2M in Q3 2022, with diluted EPS of $18.30 vs $9.95, supported by realized gains and actuarial assumption updates .
MRB liability decline added $29.4M pretax benefit in Q3, reflecting favorable interest rate movements at the reporting date per LDTI mechanics .
Management executed a strategic transaction: “we look forward to the merger being finalized in the first half of 2024 and combining resources with Prosperity Life Group’s existing strong platform,” signaling potential strategic and operational upside post-close .

What Went Wrong

Sequential revenue pressure: total revenues fell to $156.7M in Q3 from $186.2M in Q2 as realized/unrealized gains on index options swung to a loss (-$19.7M in Q3 vs +$22.0M in Q2) .
LDTI/MRB earnings variability remains a headwind for reported results consistency; management noted this new accounting introduces volatility tied to interest rates across quarters .
Prior quarter highlighted elevated share-based compensation expense due to stock price appreciation, increasing Q2 “Other operating expenses” to $62.4M (including $34.6M tied to equity awards), underscoring sensitivity of expense line to market movements .

Financial Results

Metric	Q3 2022	Q1 2023	Q2 2023	Q3 2023
Total Revenues ($USD Millions)	$142.2	$152.6	$186.2	$156.7
Net Earnings ($USD Millions)	$35.2	$12.3	$29.6	$64.7
Diluted EPS ($USD)	$9.95	$3.48	$8.38	$18.30
Pretax Earnings ($USD Millions)	$44.9	$15.3	$36.9	$98.9
Net Earnings Margin (%)	24.7% (35.2/142.2)	8.1% (12.3/152.6)	15.9% (29.6/186.2)	41.3% (64.7/156.7)

Revenue composition drivers:

Realized and unrealized gains (losses) on index options: Q3 2023 (-$19.7M) vs Q2 2023 (+$22.0M) vs Q3 2022 (-$12.6M) .
Realized gains on investments: Q3 2023 $25.9M vs Q2 2023 ~$0.0M vs Q3 2022 $0.7M .
Positive earnings adjustment to fixed-index annuity liabilities from annual actuarial assumption review: $19.4M in Q3 2023 .

KPIs and Balance Sheet

KPI	Q1 2023	Q2 2023	Q3 2023
Book Value Per Share ($)	$634.27	$626.57	$617.16
Book Value Per Share ex-AOCI ($)	$737.46 (non-GAAP)	$745.62 (non-GAAP)	$763.39 (non-GAAP)
Total Assets ($USD Billions)	$12.8	$12.5	$12.1
Stockholders’ Equity ($USD Billions)	$2.3	$2.3	$2.2
Life Insurance In Force ($USD Billions)	$19.3	$18.9	$18.5

Note: “Book value per share excluding AOCI” is non-GAAP, disclosed with rationale regarding interest rate-driven AOCI volatility .

Segment breakdown: Not disclosed in the reviewed press releases .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Company guidance	Q3 2023 and FY 2023	Not provided	Not provided in press release materials	Maintained: no formal guidance provided

No explicit guidance ranges (revenue, margins, OpEx, OI&E, tax rate, or segment guidance) were provided in the reviewed Q3 2023 materials .

Earnings Call Themes & Trends

No Q3 2023 earnings call transcript was available in the document set; themes below reflect press release commentary across quarters.

Topic	Previous Mentions (Q1 2023, Q2 2023)	Current Period (Q3 2023)	Trend
LDTI/MRB earnings volatility	LDTI adoption; MRB drove a $37.0M expense in Q1 with management highlighting volatility tied to interest rates	MRB liability decrease provided $29.4M benefit; volatility persists	Continuing accounting-driven variability
Investment gains and index options	Q2 benefited from positive index option gains (+$22.0M); negligible realized gains on investments	Realized investment gain $25.9M; index option losses (-$19.7M)	Mixed markets: realized gains, option-driven headwinds
Expenses and equity award sensitivity	Q2 “Other operating expenses” elevated by $34.6M share-based awards due to stock price appreciation	Other operating expenses moderated to $42.4M in Q3	Easing vs Q2 spike
Strategic actions	Board exploring strategic alternatives (announced May 16); stock appreciated materially by quarter-end Q2	Merger agreement to join Prosperity Life Group; close targeted 1H 2024	Progressing to definitive transaction

Management Commentary

“In addition to reporting our financial results, it has been a very active and productive period for the Company as evidenced by our October 8th agreement to join Prosperity Life Group’s organization through acquisition… we look forward to the merger being finalized in the first half of 2024” — Ross R. Moody, Chairman, President & CEO .
“Unfortunately, these accounting conventions masked the hard work and progress we have made so far in 2023. We have released competitive new products into distribution channels that we have not previously been in, and we have managed to do this while decreasing our administrative cash expenditures compared to last year.” .
“The Market Risk Benefits reporting requirement introduces a new degree of volatility… As fair value is predominantly dictated by interest rate levels… an increase in interest rates creates a benefit… while a decrease… causes a charge against earnings” — on LDTI/MRB impacts .

Q&A Highlights

No public Q3 2023 earnings call transcript was available in the reviewed sources; therefore, Q&A details and any guidance clarifications were not accessible within our document set.

Estimates Context

Wall Street consensus estimates via S&P Global were unavailable for NWLI due to missing CIQ mapping, preventing EPS and revenue comparisons to consensus. As a result, estimate-based beat/miss analysis cannot be provided for Q3 2023 at this time.
If/when S&P mapping is established, we will anchor comparisons to consensus means and highlight statistically significant deviations.

Key Takeaways for Investors

EPS surge was event-driven: the combination of a $25.7M realized investment gain and a $19.4M actuarial assumption adjustment on fixed-index annuity liabilities materially boosted Q3 results; investors should normalize for these items in ongoing run-rate assessments .
Accounting-driven volatility will remain a feature under LDTI/MRB; quarter-to-quarter earnings will be sensitive to rate levels and market inputs impacting fair value liabilities and index option marks .
Sequential revenue softness vs Q2 stems from index option losses in Q3; watch derivative performance and hedging effectiveness as a key driver of reported revenue volatility .
Operating expense normalization in Q3 vs Q2’s equity award spike suggests less expense pressure absent extraordinary stock price moves; monitor share-based liability sensitivity given past Q2 impact .
Strategic overhang transitions to a merger execution story with Prosperity Life Group; near-term stock drivers include regulatory approvals and closing certainty in 1H 2024 .
Balance sheet remains solid with book value per share ex-AOCI rising through the year ($737.46 → $745.62 → $763.39), reflecting resilience despite AOCI swings; this non-GAAP KPI helps compare intrinsic value across interest rate cycles .
Without accessible consensus estimates, trading reaction may hinge more on disclosed one-time items and progress on the transaction; catalysts include deal milestones and any subsequent disclosures on product momentum or expense discipline .

National Western Life Group, Inc. (NWLI)·Q3 2023 Earnings Summary