NATIONAL WESTERN LIFE GROUP, INC. – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information contained herein or in other
written or oral statements made by or on behalf of National Western Life Group,
Inc. and its subsidiaries (the "Company") are or may be viewed as
forward-looking. Although the Company has taken appropriate care in developing
any such information, forward-looking information involves risks and
uncertainties that could significantly impact actual results. These risks and
uncertainties include, but are not limited to, matters described in the
Company's Securities and Exchange Commission (SEC) filings such as exposure to
market risks, anticipated cash flows or operating performance, future capital
needs, and statutory or regulatory related issues. However, as a matter of
policy, the Company does not make any specific projections as to future
earnings, nor does it endorse any projections regarding future performance that
may be made by others. Whether or not actual results differ materially from
forward-looking statements may depend on numerous foreseeable and unforeseeable
events or developments. Also, the Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future developments, or otherwise.

Management's discussion and analysis of the financial condition and results of
operations ("MD&A") of National Western Life Group, Inc. ("NWLGI") for the three
and nine months ended September 30, 2022 follows. Where appropriate, discussion
specific to the insurance operations of National Western Life Insurance Company
is denoted by "National Western" or "NWLIC". This discussion should be read in
conjunction with the Company's Condensed Consolidated Financial Statements and
related notes beginning on page 3 of this report and with the 2021 Annual Report
filed on Form 10-K with the SEC.

Overview

National Western provides life insurance products for the savings and protection
needs of policyholders and annuity contracts for the asset accumulation and
retirement needs of contract holders. The Company accepts funds from
policyholders or contract holders and establishes a liability representing
future obligations to pay the policy or contract holders and their
beneficiaries. To ensure the Company will be able to pay these future
commitments, the funds received as premium payments and deposits are invested in
high quality investments, primarily fixed income securities. National Western
maintains its home office in Austin, Texas where substantially all of its 266
employees at September 30, 2022 are located.

Due to the business of accepting funds to pay future obligations in later years
and the underlying economics, the relevant factors affecting the Company's
overall business and profitability include the following:

? the level of sales and premium revenues collected

? the volume of life insurance and annuity business in force

? persistency of policies and contracts

the ability to price products to earn acceptable margins over benefit costs and

? expenses

return on investments sufficient to produce acceptable spread margins over interest

? crediting rates

? investment credit quality which minimizes the risk of default or impairment

? levels of policy benefits and costs to acquire business

? the ability to manage the level of operating expenses

effect of interest rate changes on revenues and investments including asset and

? liability matching

? maintaining adequate levels of capital and surplus

corporate tax rates and the treatment of financial statement items under tax rules

? and accounting

? actual levels of surrenders, withdrawals, claims and interest spreads

? changes in assumptions for amortization of deferred policy acquisition expenses and

deferred sales inducements

? changes in the fair value of derivative index options and embedded derivatives

pertaining to fixed-index life and annuity products

pricing and availability of adequate counterparties for reinsurance and index option

? contracts

       litigation subject to unfavorable judicial development, including the time and
   ?   expense of litigation



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The Company monitors these factors continually as key business indicators. The
discussion that follows in this Item 2 includes these indicators and presents
information useful to an overall understanding of the Company's business
performance for the nine months ended September 30, 2022, incorporating required
disclosures in accordance with the rules and regulations of the SEC.

Insurance Operations - Domestic

National Western is currently licensed to do business in all states, except New
York, and the District of Columbia. Products marketed are annuities, universal
life insurance, fixed-index universal life, and traditional life insurance,
which include both term and whole life products. Domestic sales in terms of
premium levels have historically been more heavily weighted toward annuities.
Most of these annuities can be sold either as tax qualified or non-qualified
products. More recently, a greater proportion of sales activity has been derived
from single premium life insurance products, predominantly those with an
equity-index crediting mechanism. Presently, nearly all of National Western's
domestic life premium sales come from single premium life products. At
September 30, 2022, National Western maintained approximately 101,250 annuity
contracts in force and 45,100 domestic life insurance policies in force
representing $3.7 billion in face amount of coverage.

National Western markets and distributes its domestic products primarily through
independent national marketing organizations ("NMOs"). These NMOs assist the
Company in recruiting, contracting, and managing independent agents. National
Western's agents are independent contractors who are compensated on a commission
basis. It currently has approximately 31,630 domestic independent agent
contracts.

Effective January 31, 2019, the Company acquired Ozark National Life Insurance
Company ("Ozark National") and N.I.S. Financial Services, Inc. ("NIS"). All of
the outstanding stock of Ozark National is owned by National Western while NIS
is wholly owned by NWLGI. Although reported separately for segment disclosure
purposes, domestic insurance operations include the activities of Ozark
National. Ozark National is a Missouri domiciled, stock life insurance company
currently licensed to conduct business in thirty states. Organized and
incorporated in 1964, its largest markets by state are Missouri, Iowa,
Minnesota, Nebraska, and Kansas. Ozark National utilizes a unique distribution
system to market its flagship Balanced Program which consists of a coordinated
sale of a non-participating whole life insurance product with a mutual fund
investment product offered through NIS, its affiliated broker-dealer. Due to
Ozark National's coordinated sale, their agents hold a securities license in
addition to an insurance license. At September 30, 2022, Ozark National
maintained 172,736 life insurance policies in force representing nearly $5.8
billion in face amount of coverage. It maintains its home office facility in
Kansas City, Missouri along with NIS where most of their combined employees are
located.

Insurance Operations - International

National Western's international operations consists of a closed block of in
force policies. The Company had progressively discontinued accepting
applications from various countries ultimately ceasing applications for new
policies from all remaining countries in 2018. At September 30, 2022, National
Western had approximately 38,380 international life insurance policies in force
representing $10.6 billion in face amount of coverage. The Company did not
conduct business or maintain offices or employees in any other country, but
historically did accept applications at its home office in Austin, Texas, and
issued policies from there to foreign nationals in upper socioeconomic classes
of other countries. Insurance products, issued primarily to residents of
countries in South America, consisted almost entirely of universal life and
traditional life insurance products not available in the local markets.

Issuing universal life and traditional life insurance policies to residents of
countries in different regions provided diversification that helped to minimize
large fluctuations that could arise due to various economic, political, and
competitive pressures occurring from one country to another. These policies also
provided diversification of earnings relative to the Company's domestic life
insurance segment. Although there were some inherent risks of accepting
international applications not present within the domestic market, they were
reduced substantially by the Company in several ways. Most notably National
Western's customer profile consisted of foreign nationals of other countries in
upper socioeconomic classes who had substantial financial resources. This,
coupled with National Western's conservative underwriting practices, has
historically resulted in claims experience, due to natural causes, similar to
that in the United States. Foreign currency risks were minimized by requiring
payment of premiums and claims in United States dollars. In addition, the
Company adopted an extensive anti-money laundering compliance program in order
to fully comply with all applicable U.S. monitoring and reporting requirements
pertaining to money laundering and other illegal activities. All of the above
served to minimize risks.

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SALES

Life Insurance

The following table sets forth information regarding life insurance sales
activity as measured by total premium for single premium life insurance products
and annualized first year premiums for all other universal life and traditional
life insurance products. While the figures shown below are in accordance with
industry practice and represent the amount of new business sold during the
periods indicated, they are considered a non-GAAP financial measure. The Company
believes sales are a measure of distribution productivity and are an indicator
of future revenue trends. However, revenues are driven by sales in prior periods
as well as in the current period and therefore, a reconciliation of sales to
revenues is not meaningful or determinable.

                              Three Months Ended                     Nine Months Ended
                                 September 30,                         September 30,
                              2022                2021           2022                  2021

                                                   (In thousands)

Single premium life   $            29,279        52,578       104,498               157,024
Traditional life                      782           922         2,723                 2,855
Universal life                          -             -             1                     -

Totals                $            30,061        53,500       107,222               159,879



Life insurance sales, as measured by total and annualized first year premiums,
decreased (44)% in the third quarter of 2022 as compared to the third quarter of
2021 reflecting a pullback in consumer spending in the current period. Sales for
the three months ended September 30, 2022, included $0.8 million from Ozark
National, slightly below the $0.9 million reported in the third quarter of 2021,
representing their traditional life sales activity. Ozark National's business
model, which is heavily dependent upon in person contact for agent recruiting
and obtaining applications for coverage from prospective policyholders, has been
attempting to recover from the disruption of the pandemic effects upon its
business. For the nine months ended September 30, 2022, total life insurance
sales decreased (33)% from the level in 2021. Included in these nine month
amounts were $2.7 million in sales from Ozark National in 2022 and $2.9 million
in 2021.

National Western's life insurance product portfolio includes single premium
universal life ("SPUL") and equity-index universal life ("EIUL") products as
well as hybrids of the EIUL and SPUL products, combining features of these core
products. Equity-index universal life products have been the predominant product
sold in the domestic life market for a number of years. Most of these sales are
single premium mode products (one year, five year, or ten year) designed for
transferring accumulated wealth tax efficiently into life insurance policies
with limited underwriting due to lesser net insurance amounts at risk (face
amount of the insurance policy less cash premium contributed). These products
were designed targeting the accumulated savings of the segment of the population
entering their retirement years. The wealth transfer life products have been
valuable offerings for the Company's distributors as evidenced by their
comprising over 97% of total life sales in the first nine months of 2022.
The average new policy face amounts, excluding insurance riders, since 2018 are
as shown in the following table.

                                                                                   Average New Policy Face Amount
                                                        NWLIC Domestic                   Ozark National                  NWLIC International

Year ended December 31, 2018                                162,600                                 -                          290,900
Year ended December 31, 2019                                179,900                            45,200                                -
Year ended December 31, 2020                                209,900                            46,230                                -
Year ended December 31, 2021                                221,300                            47,620                                -
Nine Months Ended September 30, 2022                        221,000                            46,680                                -



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Contracts issued to international residents historically had larger face amounts
of life insurance coverage per policy compared to those issued to domestic
policyholders as National Western's efforts were directed toward accepting
applications from upper socioeconomic residents of international countries. The
average face amount of insurance coverage per policy for domestic life insurance
contracts reflects the sales of single premium life products, primarily
fixed-index, as part of its wealth transfer strategy for domestic life sales.

The table below sets forth information regarding life insurance in force for
each date presented.

                                                      Insurance In Force as of
                                                 September 30,             December 31,
                                                      2022                     2021

                                                          ($ in thousands)

 National Western

 Universal life:
 Number of policies                                          26,920           28,640
 Face amounts                              $              3,701,800        3,966,160

 Traditional life:
 Number of policies                                          23,190           24,500
 Face amounts                              $              2,146,000        2,257,490

 Fixed-index life:
 Number of policies                                          33,370           34,200
 Face amounts                              $              8,426,330        8,772,280

 Total life insurance:
 Number of policies                                          83,480           87,340
 Face amounts                              $             14,274,130       14,995,930

 Ozark National

Total life insurance (all traditional):

 Number of policies                                         172,740          175,610
 Face amounts                              $              5,763,650        5,892,500



At September 30, 2022, National Western's face amount of life insurance in force
was comprised of $10.6 billion from the international line of business and $3.7
billion from the domestic line of business. At December 31, 2021, these amounts
were $11.3 billion and $3.7 billion for the international and domestic lines of
business, respectively.

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Annuities

The following table sets forth information regarding the Company's annuity sales
activity as measured by single and annualized first year premiums. Similar to
life insurance sales, these figures are considered a non-GAAP financial measure
but are shown in accordance with industry practice and depict the Company's
sales productivity.

                                              Three Months Ended September 30,                       Nine Months Ended September 30,
                                                2022                    2021                      2022                                2021

                                                                                      (In thousands)

Fixed-index annuities                     $       35,863                102,322                   191,828                              333,146
Other deferred annuities                             346                  1,008                     1,699                                2,965
Immediate annuities                                  328                  5,380                     2,726                               19,460

Totals                                    $       36,537                108,710                   196,253                              355,571



Annuity sales decreased (66)% in the third quarter of 2022 compared to 2021 and
were (45)% lower in the nine months ended September 30, 2022 relative to the
comparable period of 2021. Sales activity in the first nine months of 2022 was
dampened by current economic conditions, including increasing inflation and
expectations for rising interest rates. In recent years, the Company's annuity
product portfolio consisted principally of offerings that emphasize income
features. The 2022 environment switched consumer preference toward products
which emphasized accumulation of value. This change in consumer sentiment, in
combination with competitor product pricing adjustments which were more
attractive than the Company's product offerings, resulted in decreased sales
activity. In addition, the 2021 sales levels reflect an expansion in sales in
conjunction with an overall increase in market demand as the economy emerged
from the COVID-19 constraints present in 2020. The Company has endeavored to
introduce new annuity products which include accumulation features which have
become available for sale in the fourth quarter of 2022.

The Company's mix of annuity sales has historically shifted with interest rate
levels and the relative performance of the equity market. Since the decline in
secular interest rates subsequent to the subprime crisis, the Company's
fixed-index products have comprised the majority of annuity sales, generally
accounting for 90% or more of all annuity sales. During the first nine months of
2022, this percentage approximated 98% reflecting the ongoing narrative of
historically low levels in interest rates relative to the returns from equity
investments. For all fixed-index products, the Company purchases over the
counter call options to hedge the equity return feature. The options are
purchased relative to the issuance of the annuity contracts in such a manner to
minimize timing risk. Generally, the index return during the indexing period (if
the underlying index increases) becomes a component in a formula (set forth in
the annuity), the result of which is credited as interest to contract holders
electing the index formula crediting method at the beginning of the indexing
period. The formula result can never be less than zero with these products. The
Company does not deliberately mismatch or under hedge for the equity feature of
the products. Fixed-index products also provide the contract holder the
alternative to elect a fixed interest rate crediting option.

While National Western does not subsidize its interest crediting rates on new
policies in order to obtain market share, similar to some other annuity product
providers, until this year, the Company has faced a scenario of declining yields
on its investment portfolio as securities backing annuity policies and their
credited rates have been subsequently reinvested at substantially lower yields.
The resulting compression on interest rate margins caused decrements to fixed
interest rate renewal rates provided to annuity contractholders often to the
minimum interest rate guarantee levels prescribed by state insurance regulators
under non-forfeiture laws.

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As a result of the foregoing, the Company entered into a coinsurance funds
withheld reinsurance arrangement at December 31, 2020 with Prosperity Life
Assurance Limited ("Prosperity") under which 100% of the policyholder
obligations associated with its fixed interest rate and payout annuity block of
policies at that time, approximating $1.7 billion, were reinsured with
Prosperity. Having transferred the risk of these policies and the exposure to
further compression on interest rate margins, the Company redirected its
attention on rebuilding annuity sales momentum by developing products, targeting
new channels of distribution to supplement its current partnerships with
national marketing organizations, and focusing its offerings away from fixed
interest rate products. Effective July 27, 2022, the Company entered into a
second funds withheld coinsurance agreement with Aspida Life Re Ltd. ("Aspida"),
a separate third party reinsurer. At the inception of this agreement, annuity
policy obligations approximating $250 million were reinsured with Aspida. In
addition, for specified new annuity product sales, the Company is reinsuring an
agreed upon quota share of this business in a flow reinsurance structure. The
objective is to be able to more competitively price these annuity products
utilizing the investment expertise of Aspida and their ability to obtain higher
investment yields.

The following table sets forth information regarding annuities in force for each
date presented. These amounts include the policies and reserves associated with
the funds withheld reinsurance transactions discussed above.

                                               Annuities In Force as of
                                           September 30,             December 31,
                                               2022                      2021

                                                   ($ in thousands)

        Fixed-index annuities:
        Number of policies                             62,530          64,860
        GAAP annuity reserves       $               4,923,115      

5,151,890

Other deferred annuities:

        Number of policies                             28,330          30,260
        GAAP annuity reserves       $               1,069,409       1,119,207

        Immediate annuities:
        Number of policies                             10,390          10,930
        GAAP annuity reserves       $                 360,821         376,667

        Total annuities:
        Number of policies                            101,250         106,050
        GAAP annuity reserves       $               6,353,345       6,647,764

Impact of Recent Business Environment

The Company's business is generally aided by an economic environment
experiencing growth, whether moderate or vibrant, characterized by improving
employment data and increases in personal income. Important metrics indicating
sustained economic growth over the longer term principally revolve around
employment and confidence, both consumer and business sentiment. Rising interest
rates in 2022 overall have been a welcomed development for insurers from a
spread margin standpoint. However, the rapid rise in interest rates has
significantly flipped fair market values of investments in debt securities from
unrealized gain positions to unrealized loss positions.

The recent jobs reports have disclosed both headline job and wage growth above
expectations. Contrary to market hopes, these reports do not provide the Federal
Reserve with a rationale to pursue a less aggressive stance on inflation fueling
the expectation for future rate increases higher than previously expected. With
unemployment remaining below 4%, an argument can be made that the economy can
withstand further increases. The Federal Reserve Chairman's comments seem to
indicate more of a focus on a strong labor market than on a housing market that
has been weakening. Market watchers are concerned with the ability of the
Federal Reserve to effectively control inflation without precipitating a
recessionary environment. This concern is evident by the inversion of the yield
curve with two-year Treasury note yields remaining above ten-year Treasury notes
yields since early July. This phenomenon is a a frequent harbinger of imminent
contractions in economic activity. Should the U.S. economy enter a recession,
demand for financial vehicles such as life insurance could be significantly
curtailed.
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While the recent interest rate level increases have been a welcomed relief,
industry analysts and observers generally agree that a sudden and sizable jump
in interest rate levels would be harmful to life insurers with
interest-sensitive products as it could provide an impetus for abnormal levels
of product surrenders and withdrawals at the same time fixed debt securities
held by insurers declined in market value. While an ultra low interest
environment is not desirable for insurance carriers, the company has managed to
adjust over time to the environment by incorporating lower minimum guaranteed
interest rates. These products may become uncompetitive or undesirable by
current policyholders if there is a rapid shift to higher interest rate levels
and newer products priced for these higher rates. A slow and steady upward
movement in rates would provide insurers with the ability to adjust over time.
Ultimately, a mix of monetary policy adjustments, fiscal policy, and economic
fundamentals will determine the future direction of interest rate movements and
the speed of such shifts. It is uncertain at what pace interest rate movements
may occur in the future and what impact, if any, such movements would have on
the Company's business, results of operations, cash flows, or financial
condition.

In an environment such as this, the need for a strong capital position that can
cushion against unexpected bumps is critical for stability and ongoing business
activity. The Company's operating strategy continues to be focused on
maintaining capital levels substantially above regulatory requirements and
rating agency standards. In addition, its business model is predicated upon
steady growth in invested assets while managing the block of business within
profitability objectives. A key premise of the Company's financial management is
maintaining a high quality investment portfolio, well matched in terms of
duration with policyholder obligations, that continues to outperform the
industry with respect to adverse impairment experience. This discipline helps
provide the Company with resources to fund future growth and cushion the Company
in periods of abnormal cash outflows.

RESULTS OF OPERATIONS

The Company's Condensed Consolidated Financial Statements are prepared in
accordance with U.S. generally accepted accounting principles ("GAAP"). In
addition, the Company regularly evaluates operating performance using non-GAAP
financial measures which exclude or segregate derivative and realized investment
gains and losses from operating revenues. Similar measures are commonly used in
the insurance industry in order to assess profitability and results from ongoing
operations. The Company believes that the presentation of these non-GAAP
financial measures enhances the understanding of the Company's results of
operations by highlighting the results from ongoing operations and the
underlying profitability factors of the Company's business. The Company excludes
or segregates derivative and realized investment gains and losses because such
items are often the result of events which may or may not be at the Company's
discretion and the fluctuating effects of these items could distort trends in
the underlying profitability of the Company's business. Therefore, in the
following sections discussing condensed consolidated operations and segment
operations, appropriate reconciliations have been included to report information
management considers useful in enhancing an understanding of the Company's
operations to reportable GAAP balances reflected in the Condensed Consolidated
Financial Statements.