# EDGAR Filing Document

**Accession Number:** 0000928880
**File Stem:** 0001193125-26-159282
**Filing Date:** 2026-4
**Character Count:** 399821
**Document Hash:** 421873f51495c5d7f510abd5b57a78a3
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001193125-26-159282.hdr.sgml**: 20260416

**ACCESSION NUMBER**: 0001193125-26-159282

**CONFORMED SUBMISSION TYPE**: N-VPFS

**PUBLIC DOCUMENT COUNT**: 16

**CONFORMED PERIOD OF REPORT**: 20251231

**FILED AS OF DATE**: 20260416

**DATE AS OF CHANGE**: 20260416

**EFFECTIVENESS DATE**: 20260416

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** PIA VARIABLE ANNUITY ACCOUNT I
- **CENTRAL INDEX KEY:** 0000928880

**ORGANIZATION NAME:**
- **EIN:** 232142731
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** N-VPFS
- **SEC ACT:** 1940 Act
- **SEC FILE NUMBER:** 811-08720
- **FILM NUMBER:** 26868408

**BUSINESS ADDRESS:**
- **STREET 1:** 161 WASHINGTON STREET, SUITE 1111
- **CITY:** CONSHOCKEN
- **STATE:** PA
- **ZIP:** 19428
- **BUSINESS PHONE:** 2159568000

**MAIL ADDRESS:**
- **STREET 1:** 161 WASHINGTON STREET, SUITE 1111
- **CITY:** CONSHOCKEN
- **STATE:** PA
- **ZIP:** 19428

## Series and Classes Contracts Data

### PIA VARIABLE ANNUITY ACCOUNT I (Series ID: S000010959)

| Class ID   | Class Name                | Ticker Symbol   |
|:---|:---|:---|
| C000030316 | Pennant                   |  |
| C000245971 | Deferred Variable Annuity |  |

##### [**Table of Contents**](#toc)
![LOGO](g50845g68g22.jpg)

## The Penn Insurance and Annuity Company

## Variable Annuity Account I
Audited Financial Statements

as of December 31, 2025

and for the periods presented

------

##### [**Table of Contents**](#toc)
![LOGO](g50845g74r95.jpg)

**PricewaterhouseCoopers LLP,**<br> 2001 Market Street, Suite 1800,<br>Philadelphia, PA 19103<br>+1 (267) 330 3000<br> www.pwc.com<br>

**Report of Independent Registered Public Accounting Firm** 

To the Board of Directors of The Penn Insurance and Annuity Company

and the Contract Owners of Penn Insurance and Annuity Variable Annuity Account I

***Opinions on the Financial Statements***

We have audited the accompanying statements of assets and liabilities of Money Market Fund, Limited Maturity Bond Fund, Quality Bond Fund, High Yield Bond Fund, Flexibly Managed Fund, Balanced Fund, Large Growth Stock Fund, Large Cap Growth Fund, Large Core Growth Fund, Large Cap Value Fund, Large Core Value Fund, Index 500 Fund, Mid Cap Growth Fund, Mid Cap Value Fund, Mid Core Value Fund, SMID Cap Growth Fund, SMID Cap Value Fund, Small Cap Growth Fund, Small Cap Value Fund, Small Cap Index Fund, Developed International Index Fund, International Equity Fund, Emerging Markets Equity Fund, Real Estate Securities Fund, Aggressive Allocation Fund, Moderately Aggressive Allocation Fund, Moderate Allocation Fund, Moderately Conservative Allocation Fund, Conservative Allocation Fund, Vanguard VIF – Equity Index Portfolio, Vanguard VIF – Total Stock Market Index Portfolio, Vanguard VIF – Global Bond Index Portfolio, Vanguard VIF – Mid-Cap Index Portfolio, Vanguard VIF – Moderate Allocation Portfolio, Vanguard VIF – Total Bond Market Index Portfolio, Vanguard VIF – Total International Stock Market Index Portfolio, Vanguard VIF – Conservative Allocation Portfolio, Vanguard VIF – Balanced Portfolio, Vanguard VIF – Capital Growth Portfolio, Vanguard VIF – Diversified Value Portfolio, Vanguard VIF – Equity Income Portfolio, Vanguard VIF – Growth Portfolio, Vanguard VIF – High Yield Bond Portfolio, Vanguard VIF – International Portfolio, Vanguard VIF – Real Estate Index Portfolio, and Vanguard VIF – Small Company Growth Portfolio (hereafter collectively referred to as the "subaccounts") of Penn Insurance and Annuity Variable Annuity Account I as of December 31, 2025, the related statements of operations for the year then ended, and the statements of changes in net assets for each of the two years in the period ended December 31, 2025, including the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the subaccounts of Penn Insurance and Annuity Variable Annuity Account I as of December 31, 2025, the results of each of their operations for the year then ended, and the changes in each of their net assets for each of the two years in the period ended December 31, 2025 in conformity with accounting principles generally accepted in the United States of America.

***Basis for Opinions***

These financial statements are the responsibility of The Penn Insurance and Annuity Company's management. Our responsibility is to express an opinion on the financial statements of each of the subaccounts of Penn Insurance and Annuity Variable Annuity Account I based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to each of the subaccounts of Penn Insurance and Annuity Variable Annuity Account I in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

------

##### [**Table of Contents**](#toc)
![LOGO](g50845g74r95.jpg)

We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of investments owned as of December 31, 2025 by correspondence with the custodians and the transfer agents of the investee mutual funds. We believe that our audits provide a reasonable basis for our opinions.

![LOGO](g50845g99a01.jpg)

Philadelphia, PA

April 15, 2026

We have served as the auditor of one or more of the subaccounts of Penn Insurance and Annuity Variable Annuity Account I since 2004.

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF ASSETS AND LIABILITIES — DECEMBER 31, 2025** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Money<br>Market Fund** | **Limited<br>Maturity Bond<br>Fund** | **Quality<br>Bond Fund** | **High Yield<br>Bond Fund** | **Flexibly<br>Managed<br>Fund** |
|  **Assets:** | | | | |  |
|  Investments at fair value | $1196412 | $39778 | $554180 | $461533 | $15746984 |
|  Dividends receivable |  |  |  |  |  |
|  Receivable for securities sold | 46 |  |  | 751 | 1653 |
|  **Liabilities:** |  |  |  |  |  |
|  Due to The Penn Insurance and Annuity Company | $— | $— | $— | $— | $— |
|  Payable for securities purchased |  | 36 | 63 |  |  |
|  **Total Net Assets** | $**1196458** | $**39742** | $**554117** | $**462284** | $**15748637** |
|  **TOTAL NET ASSETS REPRESENTED BY:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net Assets of Contract owners: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | 1196458 | 39742 | 554117 | 462284 | 15748637 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total Net Assets** | $**1196458** | $**39742** | $**554117** | $**462284** | $**15748637** |
|  **Accumulation of Unit Values:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $12.73 | $18.21 | $26.78 | $54.78 | $168.86 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $— | $— | $— | $— | $— |
|  Number of Shares | 1196458 | 2592 | 31646 | 22430 | 131601 |
|  Cost of Investments | $1196458 | $34525 | $505797 | $307203 | $4983462 |
|  | **Balanced<br>Fund** | **Large**<br>**Growth Stock<br>Fund** | **Large Cap<br>Growth<br>Fund** | **Large Core<br>Growth<br>Fund** | **Large Cap<br>Value**<br>**Fund** |
|  **Assets:** |  |  |  |  |  |
|  Investments at fair value | $754642 | $1334801 | $475261 | $3243570 | $2524567 |
|  Dividends receivable |  |  |  |  |  |
|  Receivable for securities sold | 156 |  | 144 |  | 5687 |
|  **Liabilities:** |  |  |  |  |  |
|  Due to The Penn Insurance and Annuity Company | $— | $— | $— | $— | $— |
|  Payable for securities purchased |  | 660 |  | 7241 |  |
|  **Total Net Assets** | $**754798** | $**1334141** | $**475405** | $**3236329** | $**2530254** |
|  **TOTAL NET ASSETS REPRESENTED BY:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net Assets of Contract owners: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | 754798 | 1334141 | 475405 | 3236329 | 2530254 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total Net Assets** | $**754798** | $**1334141** | $**475405** | $**3236329** | $**2530254** |
|  **Accumulation of Unit Values:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $33.10 | $91.19 | $41.60 | $31.81 | $79.28 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $— | $— | $— | $— | $— |
|  Number of Shares | 18619 | 12101 | 9690 | 80028 | 45095 |
|  Cost of Investments | $362527 | $432081 | $336053 | $1585607 | $1050824 |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF ASSETS AND LIABILITIES — DECEMBER 31, 2025** 

**(continued)** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Large Core<br>Value<br>Fund** | **Index 500<br>Fund** | **Mid Cap<br>Growth<br>Fund** | **Mid Cap<br>Value<br>Fund** | **Mid Core<br>Value<br>Fund** |
|  **Assets:** | | | | |  |
|  Investments at fair value | $2170873 | $2477829 | $446531 | $569128 | $95274 |
|  Dividends receivable |  |  |  |  |  |
|  Receivable for securities sold | 17888 | 1096 |  | 483 |  |
|  **Liabilities:** |  |  |  |  |  |
|  Due to The Penn Insurance and Annuity Company | $— | $— | $— | $— | $— |
|  Payable for securities purchased |  |  | 2314 |  | 135 |
|  **Total Net Assets** | $**2188761** | $**2478925** | $**444217** | $**569611** | $**95139** |
|  **TOTAL NET ASSETS REPRESENTED BY:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net Assets of Contract owners: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | 2188761 | 2478925 | 444217 | 569611 | 95139 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total Net Assets** | $**2188761** | $**2478925** | $**444217** | $**569611** | $**95139** |
|  **Accumulation of Unit Values:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $29.98 | $89.97 | $53.07 | $59.64 | $43.65 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $— | $— | $— | $— | $— |
|  Number of Shares | 57843 | 39726 | 11335 | 16187 | 2296 |
|  Cost of Investments | $894454 | $1133623 | $170537 | $339927 | $81999 |
|  | **SMID Cap<br>Growth<br>Fund** | **SMID Cap<br>Value<br>Fund** | **Small Cap<br>Growth**<br>**Fund** | **Small Cap<br>Value**<br>**Fund** | **Small Cap<br>Index<br>Fund** |
|  **Assets:** |  |  |  |  |  |
|  Investments at fair value | $17225 | $13185 | $896647 | $1995700 | $40146 |
|  Dividends receivable |  |  |  |  |  |
|  Receivable for securities sold | 1 |  | 2746 | 3162 | 2 |
|  **Liabilities:** |  |  |  |  |  |
|  Due to The Penn Insurance and Annuity Company | $— | $— | $— | $— | $— |
|  Payable for securities purchased |  |  |  |  |  |
|  **Total Net Assets** | $**17226** | $**13185** | $**899393** | $**1998862** | $**40148** |
|  **TOTAL NET ASSETS REPRESENTED BY:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net Assets of Contract owners: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $17226 | $13185 | $899393 | $1998862 | $40148 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total Net Assets** | $**17226** | $**13185** | $**899393** | $**1998862** | $**40148** |
|  **Accumulation of Unit Values:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $41.28 | $33.89 | $79.55 | $104.37 | $30.92 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $— | $— | $— | $— | $— |
|  Number of Shares | 327 | 307 | 11979 | 34558 | 1025 |
|  Cost of Investments | $10214 | $7306 | $373061 | $715471 | $39103 |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF ASSETS AND LIABILITIES — DECEMBER 31, 2025** 

**(continued)** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Developed<br>International<br>Index Fund** | **International<br>Equity Fund** | **Emerging<br>Markets Equity<br>Fund** | **Real Estate<br>Securities<br>Fund** | **Aggressive<br>Allocation<br>Fund** |
|  **Assets:** |  |  |  |  |  |
|  Investments at fair value | $74436 | $2136405 | $185809 | $125702 | $21395 |
|  Dividends receivable |  |  |  |  |  |
|  Receivable for securities sold | 3 |  | 974 |  | 1 |
|  **Liabilities:** |  |  |  |  |  |
|  Due to The Penn Insurance and Annuity Company | $— | $— | $— | $— | $— |
|  Payable for securities purchased |  | 22604 |  | 289 |  |
|  **Total Net Assets** | $**74439** | $**2113801** | $**186783** | $**125413** | $**21396** |
|  **TOTAL NET ASSETS REPRESENTED BY:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net Assets of Contract owners: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $74439 | $2113801 | $186783 | $125413 | $21396 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total Net Assets** | $**74439** | $**2113801** | $**186783** | $**125413** | $**21396** |
|  **Accumulation of Unit Values:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $18.45 | $59.56 | $10.67 | $45.48 | $26.68 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $— | $— | $— | $— | $— |
|  Number of Shares | 3177 | 46518 | 13785 | 3669 | 639 |
|  Cost of Investments | $72501 | $1329493 | $161082 | $81264 | $12663 |
|  | **Moderately<br>Aggressive<br>Allocation Fund** | **Moderate<br>Allocation<br>Fund†** | **Moderately<br>Conservative<br>Allocation Fund** | **Conservative<br>Allocation<br>Fund†** | **Vanguard VIF -<br>Equity Index<br>Portfolio** |
|  **Assets:** |  |  |  |  |  |
|  Investments at fair value | $10396 | $— | $515190 | $— | $48802053 |
|  Dividends receivable |  |  |  |  |  |
|  Receivable for securities sold |  |  | 20 |  |  |
|  **Liabilities:** |  |  |  |  |  |
|  Due to The Penn Insurance and Annuity Company | $— | $— | $— | $— | $— |
|  Payable for securities purchased |  |  |  |  | 183828 |
|  **Total Net Assets** | $**10396** | $**—** | $**515210** | $**—** | $**48618225** |
|  **TOTAL NET ASSETS REPRESENTED BY:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net Assets of Contract owners: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $10396 | $— | $515210 | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $— | $— | $— | $— | $48618225 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total Net Assets** | $**10396** | $**—** | $**515210** | $**—** | $**48618225** |
|  **Accumulation of Unit Values:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $27.12 | $22.63 | $19.24 | $15.84 | $14.95 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $— | $— | $— | $— | $14.95 |
|  Number of Shares | 307 |  | 21629 |  | 593195 |
|  Cost of Investments | $4939 | $— | $412619 | $— | $42893175 |

---

*†* *The Fund held no assets at December 31, 2025 in Account I. However, the fund is an investment option.* 

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF ASSETS AND LIABILITIES — DECEMBER 31, 2025** 

**(continued)** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Vanguard VIF -<br>Total Stock Market<br>Index Portfolio** | **Vanguard VIF -<br>Global Bond<br>Index Portfolio** | **Vanguard VIF -<br>Mid-Cap<br>Index Portfolio** | **Vanguard VIF -<br>Moderate Allocation<br>Portfolio** | **Vanguard VIF -<br>Total Bond Market<br>Index Portfolio** |
|  **Assets:** |  |  |  |  |  |
|  Investments at fair value | $67436039 | $723867 | $14494602 | $9599731 | $12011063 |
|  Dividends receivable |  |  |  |  |  |
|  Receivable for securities sold |  |  |  |  |  |
|  **Liabilities:** |  |  |  |  |  |
|  Due to The Penn Insurance and Annuity Company | $— | $— | $— | $— | $— |
|  Payable for securities purchased | 49501 | 600 | 144608 | 86688 | 114865 |
|  **Total Net Assets** | $**67386538** | $**723267** | $**14349994** | $**9513043** | $**11896198** |
|  **TOTAL NET ASSETS REPRESENTED BY:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net Assets of Contract owners: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | 67386538 | 723267 | 14349994 | 9513043 | 11896198 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total Net Assets** | $**67386538** | $**723267** | $**14349994** | $**9513043** | $**11896198** |
|  **Accumulation of Unit Values:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $14.85 | $10.96 | $13.46 | $13.10 | $11.03 |
|  Number of Shares | 1105966 | 38410 | 513233 | 285849 | 1101500 |
|  Cost of Investments | $60737358 | $707699 | $13583408 | $8815160 | $11665766 |
|  | **Vanguard VIF -<br>Total International<br>Stock Market<br>Index Portfolio** | **Vanguard VIF -<br>Conservative<br>Allocation<br>Portfolio** | **Vanguard VIF -<br>Balanced<br>Portfolio** | **Vanguard VIF -<br>Capital Growth<br>Portfolio** | **Vanguard VIF -<br>Diversified Value<br>Portfolio** |
|  **Assets:** |  |  |  |  |  |
|  Investments at fair value | $12082207 | $2023455 | $52871463 | $71500320 | $9600098 |
|  Dividends receivable |  |  |  |  |  |
|  Receivable for securities sold |  |  |  |  |  |
|  **Liabilities:** |  |  |  |  |  |
|  Due to The Penn Insurance and Annuity Company | $— | $— | $— | $— | $— |
|  Payable for securities purchased | 38467 | 1370 | 268535 | 11970 | 63023 |
|  **Total Net Assets** | $**12043740** | $**2022085** | $**52602928** | $**71488350** | $**9537075** |
|  **TOTAL NET ASSETS REPRESENTED BY:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net Assets of Contract owners: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $12043740 | $2022085 | $52602928 | $71488350 | $9537075 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total Net Assets** | $**12043740** | $**2022085** | $**52602928** | $**71488350** | $**9537075** |
|  **Accumulation of Unit Values:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $14.18 | $12.36 | $13.52 | $14.86 | $13.81 |
|  Number of Shares | 448389 | 76420 | 2070166 | 1156395 | 545912 |
|  Cost of Investments | $10503735 | $1934938 | $49278294 | $60677265 | $8741227 |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF ASSETS AND LIABILITIES — DECEMBER 31, 2025** 

**(continued)** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Vanguard VIF -<br>Equity Income<br>Portfolio** | **Vanguard VIF -<br>Growth Portfolio** | **Vanguard VIF -<br>High Yield<br>Bond Portfolio** | **Vanguard VIF -<br>International<br>Portfolio** | **Vanguard VIF -<br>Real Estate<br>Index Portfolio** |
|  **Assets:** |  |  |  |  |  |
|  Investments at fair value | $18621560 | $36225601 | $6839659 | $1484991 | $2410548 |
|  Dividends receivable |  |  |  |  |  |
|  Receivable for securities sold |  |  |  |  |  |
|  **Liabilities:** |  |  |  |  |  |
|  Due to The Penn Insurance and Annuity Company | $— | $— | $— | $— | $— |
|  Payable for securities purchased | 13326 | 157783 | 85163 | 1084 | 43121 |
|  **Total Net Assets** | $**18608234** | $**36067818** | $**6754496** | $**1483907** | $**2367427** |
|  **TOTAL NET ASSETS REPRESENTED BY:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net Assets of Contract owners: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | 18608234 | 36067818 | 6754496 | 1483907 | 2367427 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total Net Assets** | $**18608234** | $**36067818** | $**6754496** | $**1483907** | $**2367427** |
|  **Accumulation of Unit Values:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $— | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $13.86 | $15.80 | $11.76 | $13.33 | $11.74 |
|  Number of Shares | 709696 | 983310 | 894635 | 51903 | 204618 |
|  Cost of Investments | $17392087 | $31923005 | $6569789 | $1403358 | $2391045 |
|  | **Vanguard VIF -<br>Small Company<br>Growth Portfolio** |  |  |  |  |
|  **Assets:** |  |  |  |  |  |
|  Investments at fair value | $10237843 |  |  |  |  |
|  Dividends receivable |  |  |  |  |  |
|  Receivable for securities sold |  |  |  |  |  |
|  **Liabilities:** |  |  |  |  |  |
|  Due to The Penn Insurance and Annuity Company | $— |  |  |  |  |
|  Payable for securities purchased | 49613 |  |  |  |  |
|  **Total Net Assets** | $**10188230** |  |  |  |  |
|  **TOTAL NET ASSETS REPRESENTED BY:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net Assets of Contract owners: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | 10188230 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Total Net Assets** | $**10188230** |  |  |  |  |
|  **Accumulation of Unit Values:** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Pennant | $— |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred Variable Annuity | $12.81 |  |  |  |  |
|  Number of Shares | 534254 |  |  |  |  |
|  Cost of Investments | $9662080 |  |  |  |  |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF OPERATIONS — FOR THE YEAR ENDED DECEMBER 31, 2025** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Money<br>Market Fund** | **Limited<br>Maturity Bond<br>Fund** | **Quality<br>Bond Fund** | **High Yield<br>Bond Fund** | **Flexibly<br>Managed<br>Fund** |
|  **Net Investment Income (Loss):** |  |  |  |  |  |
|  Dividends | $25119 | $— | $— | $— | $— |
|  **Expense:** |  |  |  |  |  |
|  Mortality and expense risk charges | 8772 | 1028 | 7075 | 6778 | 214387 |
|  Contract administration charges | 1053 | 123 | 849 | 814 | 25728 |
|  Net investment income (loss) | 15294 | (1151) | (7924) | (7592) | (240115) |
|  **Net Realized and Unrealized Gains (Losses) on Investments:** |  |  |  |  |  |
|  Realized gain (loss) from redemption of fund shares |  | 13069 | 13299 | 106033 | 3310655 |
|  Realized gains distributions |  |  |  |  |  |
|  Net realized gain (loss) from investment transactions |  | 13069 | 13299 | 106033 | 3310655 |
|  Net change in unrealized gain (loss) of investments |  | (8236) | 28397 | (61713) | (1377040) |
|  Net realized and unrealized gain (loss) on investments |  | 4833 | 41696 | 44320 | 1933615 |
|  **Net increase (decrease) in net assets resulting from operations** | $**15294** | $**3682** | $**33772** | $**36728** | $**1693500** |
|  | **Balanced<br>Fund** | **Large<br>Growth Stock<br>Fund** | **Large Cap<br>Growth<br>Fund** | **Large Core<br>Growth<br>Fund** | **Large Cap<br>Value<br>Fund** |
|  **Net Investment Income (Loss):** |  |  |  |  |  |
|  Dividends | $— | $— | $— | $— | $— |
|  **Expense:** |  |  |  |  |  |
|  Mortality and expense risk charges | 9061 | 16825 | 5997 | 41150 | 32669 |
|  Contract administration charges | 1087 | 2019 | 720 | 4938 | 3921 |
|  Net investment income (loss) | (10148) | (18844) | (6717) | (46088) | (36590) |
|  **Net Realized and Unrealized Gains (Losses) on Investments:** |  |  |  |  |  |
|  Realized gain (loss) from redemption of fund shares | 25336 | 218466 | 50762 | 443190 | 312899 |
|  Realized gains distributions |  |  |  |  |  |
|  Net realized gain (loss) from investment transactions | 25336 | 218466 | 50762 | 443190 | 312899 |
|  Net change in unrealized gain (loss) of investments | 65536 | (25556) | (4818) | (169179) | (65633) |
|  Net realized and unrealized gain (loss) on investments | 90872 | 192910 | 45944 | 274011 | 247266 |
|  **Net increase (decrease) in net assets resulting from operations** | $**80724** | $**174066** | $**39227** | $**227923** | $**210676** |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF OPERATIONS — FOR THE YEAR ENDED DECEMBER 31, 2025** 

**(continued)** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Large Core<br>Value<br>Fund** | **Index 500<br>Fund** | **Mid Cap<br>Growth<br>Fund** | **Mid Cap<br>Value<br>Fund** | **Mid Core<br>Value<br>Fund** |
|  **Net Investment Income (Loss):** |  |  |  |  |  |
|  Dividends | $— | $— | $— | $— | $— |
|  **Expense:** |  |  |  |  |  |
|  Mortality and expense risk charges | 28876 | 27053 | 5915 | 8242 | 1230 |
|  Contract administration charges | 3465 | 3246 | 710 | 989 | 148 |
|  Net investment income (loss) | (32341) | (30299) | (6625) | (9231) | (1378) |
|  **Net Realized and Unrealized Gains (Losses) on Investments:** |  |  |  |  |  |
|  Realized gain (loss) from redemption of fund shares | 428115 | 224635 | 41521 | 121011 | 14282 |
|  Realized gains distributions |  |  |  |  |  |
|  Net realized gain (loss) from investment transactions | 428115 | 224635 | 41521 | 121011 | 14282 |
|  Net change in unrealized gain (loss) of investments | (166058) | 129753 | (36040) | (77561) | (6018) |
|  Net realized and unrealized gain (loss) on investments | 262057 | 354388 | 5481 | 43450 | 8264 |
|  **Net increase (decrease) in net assets resulting from operations** | $**229716** | $**324089** | $**(1144)** | $**34219** | $**6886** |
|  | **SMID Cap<br>Growth<br>Fund** | **SMID Cap<br>Value<br>Fund** | **Small Cap<br>Growth<br>Fund** | **Small Cap<br>Value<br>Fund** | **Small Cap<br>Index<br>Fund** |
|  **Net Investment Income (Loss):** |  |  |  |  |  |
|  Dividends | $— | $— | $— | $— | $— |
|  **Expense:** |  |  |  |  |  |
|  Mortality and expense risk charges | 205 | 161 | 12063 | 24789 | 83 |
|  Contract administration charges | 25 | 19 | 1448 | 2975 | 9 |
|  Net investment income (loss) | (230) | (180) | (13511) | (27764) | (92) |
|  **Net Realized and Unrealized Gains (Losses) on Investments:** |  |  |  |  |  |
|  Realized gain (loss) from redemption of fund shares | 95 | 127 | 176946 | 226334 | 524 |
|  Realized gains distributions |  |  |  |  |  |
|  Net realized gain (loss) from investment transactions | 95 | 127 | 176946 | 226334 | 524 |
|  Net change in unrealized gain (loss) of investments | 232 | 192 | (97023) | (15169) | 80 |
|  Net realized and unrealized gain (loss) on investments | 327 | 319 | 79923 | 211165 | 604 |
|  **Net increase (decrease) in net assets resulting from operations** | $**97** | $**139** | $**66412** | $**183401** | $**512** |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF OPERATIONS — FOR THE YEAR ENDED DECEMBER 31, 2025** 

**(continued)** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Developed<br>International<br>Index Fund** | **International<br>Equity Fund** | **Emerging<br>Markets Equity<br>Fund** | **Real Estate<br>Securities<br>Fund** | **Aggressive<br>Allocation<br>Fund** |
|  **Net Investment Income (Loss):** |  |  |  |  |  |
|  Dividends | $— | $— | $— | $— | $— |
|  **Expense:** |  |  |  |  |  |
|  Mortality and expense risk charges | 73 | 29094 | 2722 | 1440 | 252 |
|  Contract administration charges | 9 | 3491 | 327 | 173 | 30 |
|  Net investment income (loss) | (82) | (32585) | (3049) | (1613) | (282) |
|  **Net Realized and Unrealized Gains (Losses) on Investments:** |  |  |  |  |  |
|  Realized gain (loss) from redemption of fund shares | 2 | 283560 | 9292 | 9601 | 116 |
|  Realized gains distributions |  |  |  |  |  |
|  Net realized gain (loss) from investment transactions | 2 | 283560 | 9292 | 9601 | 116 |
|  Net change in unrealized gain (loss) of investments | 1938 | (77959) | 45220 | (7096) | 2277 |
|  Net realized and unrealized gain (loss) on investments | 1940 | 205601 | 54512 | 2505 | 2393 |
|  **Net increase (decrease) in net assets resulting from operations** | $**1858** | $**173016** | $**51463** | $**892** | $**2111** |
|  | **Moderately<br>Aggressive<br>Allocation Fund** | **Moderate<br>Allocation<br>Fund†** | **Moderately<br>Conservative<br>Allocation Fund** | **Conservative<br>Allocation<br>Fund** | **Vanguard VIF -<br>Equity Index<br>Portfolio** |
|  **Net Investment Income (Loss):** |  |  |  |  |  |
|  Dividends | $— | $— | $— | $— | $200525 |
|  **Expense:** |  |  |  |  |  |
|  Mortality and expense risk charges | 433 |  | 6309 | 15 | 361152 |
|  Contract administration charges | 52 |  | 757 | 2 | 43340 |
|  Net investment income (loss) | (485) |  | (7066) | (17) | (203967) |
|  **Net Realized and Unrealized Gains (Losses) on Investments:** |  |  |  |  |  |
|  Realized gain (loss) from redemption of fund shares | 42376 |  | 13432 | 618 | 186674 |
|  Realized gains distributions |  |  |  |  | 372899 |
|  Net realized gain (loss) from investment transactions | 42376 |  | 13432 | 618 | 559573 |
|  Net change in unrealized gain (loss) of investments | (37538) |  | 32577 | (552) | 4928853 |
|  Net realized and unrealized gain (loss) on investments | 4838 |  | 46009 | 66 | 5488426 |
|  **Net increase (decrease) in net assets resulting from operations** | $**4353** | $**—** | $**38943** | $**49** | $**5284459** |

---

*†* *The Fund held no assets at December 31, 2025 in Account I. However, the fund is an investment option.* 

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF OPERATIONS — FOR THE YEAR ENDED DECEMBER 31, 2025** 

**(continued)** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Vanguard VIF -<br>Total Stock Market<br>Index Portfolio** | **Vanguard VIF -<br>Global Bond<br>Index Portfolio** | **Vanguard VIF -<br>Mid-Cap<br>Index Portfolio** | **Vanguard VIF -<br>Moderate Allocation<br>Portfolio** | **Vanguard VIF -<br>Total Bond Market<br>Index Portfolio** |
|  **Net Investment Income (Loss):** |  |  |  |  |  |
|  Dividends | $354945 | $15813 | $127941 | $62683 | $138340 |
|  **Expense:** |  |  |  |  |  |
|  Mortality and expense risk charges | 524704 | 6935 | 118151 | 66859 | 80239 |
|  Contract administration charges | 62967 | 832 | 14179 | 8023 | 9629 |
|  Net investment income (loss) | (232726) | 8046 | (4389) | (12199) | 48472 |
|  **Net Realized and Unrealized Gains (Losses) on Investments:** |  |  |  |  |  |
|  Realized gain (loss) from redemption of fund shares | 89310 | (44) | 26080 | 8122 | 13091 |
|  Realized gains distributions | 1656965 | 38 | 276699 | 100583 |  |
|  Net realized gain (loss) from investment transactions | 1746275 | (6) | 302779 | 108705 | 13091 |
|  Net change in unrealized gain (loss) of investments | 6189774 | 14940 | 669661 | 699210 | 253948 |
|  Net realized and unrealized gain (loss) on investments | 7936049 | 14934 | 972440 | 807915 | 267039 |
|  **Net increase (decrease) in net assets resulting from operations** | $**7703323** | $**22980** | $**968051** | $**795716** | $**315511** |
|  | **Vanguard VIF -<br>Total International<br>Stock Market<br>Index Portfolio** | **Vanguard VIF -<br>Conservative<br>Allocation<br>Portfolio** | **Vanguard VIF -<br>Balanced<br>Portfolio** | **Vanguard VIF -<br>Capital Growth<br>Portfolio** | **Vanguard VIF -<br>Diversified Value<br>Portfolio** |
|  **Net Investment Income (Loss):** |  |  |  |  |  |
|  Dividends | $116845 | $28337 | $607739 | $286802 | $128131 |
|  **Expense:** |  |  |  |  |  |
|  Mortality and expense risk charges | 84661 | 15293 | 391864 | 499629 | 76486 |
|  Contract administration charges | 10160 | 1835 | 47026 | 59958 | 9179 |
|  Net investment income (loss) | 22024 | 11209 | 168849 | (272785) | 42466 |
|  **Net Realized and Unrealized Gains (Losses) on Investments:** |  |  |  |  |  |
|  Realized gain (loss) from redemption of fund shares | 26603 | 2907 | 22375 | 156961 | (5236) |
|  Realized gains distributions | 54317 | 31980 | 1828329 | 1197316 | 296810 |
|  Net realized gain (loss) from investment transactions | 80920 | 34887 | 1850704 | 1354277 | 291574 |
|  Net change in unrealized gain (loss) of investments | 1590900 | 84433 | 3069445 | 10880926 | 742484 |
|  Net realized and unrealized gain (loss) on investments | 1671820 | 119320 | 4920149 | 12235203 | 1034058 |
|  **Net increase (decrease) in net assets resulting from operations** | $**1693844** | $**130529** | $**5088998** | $**11962418** | $**1076524** |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF OPERATIONS — FOR THE YEAR ENDED DECEMBER 31, 2025** 

**(continued)** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Vanguard VIF -<br>Equity Income<br>Portfolio** | **Vanguard VIF -<br>Growth Portfolio** | **Vanguard VIF -<br>High Yield<br>Bond Portfolio** | **Vanguard VIF -<br>International<br>Portfolio** | **Vanguard VIF -<br>Real Estate<br>Index Portfolio** |
|  **Net Investment Income (Loss):** |  |  |  |  |  |
|  Dividends | $270233 | $130434 | $246874 | $7901 | $33396 |
|  **Expense:** |  |  |  |  |  |
|  Mortality and expense risk charges | 133845 | 287755 | 60083 | 10480 | 21034 |
|  Contract administration charges | 16062 | 34532 | 7210 | 1258 | 2524 |
|  Net investment income (loss) | 120326 | (191853) | 179581 | (3837) | 9838 |
|  **Net Realized and Unrealized Gains (Losses) on Investments:** |  |  |  |  |  |
|  Realized gain (loss) from redemption of fund shares | 2995 | 161658 | 21655 | 2313 | 4179 |
|  Realized gains distributions | 349914 | 765995 |  | 26597 | 20168 |
|  Net realized gain (loss) from investment transactions | 352909 | 927653 | 21655 | 28910 | 24347 |
|  Net change in unrealized gain (loss) of investments | 1178525 | 3538812 | 158132 | 80661 | (15319) |
|  Net realized and unrealized gain (loss) on investments | 1531434 | 4466465 | 179787 | 109571 | 9028 |
|  **Net increase (decrease) in net assets resulting from operations** | $**1651760** | $**4274612** | $**359368** | $**105734** | $**18866** |
|  | **Vanguard VIF -<br>Small Company<br>Growth Portfolio** |  |  |  |  |
|  **Net Investment Income (Loss):** |  |  |  |  |  |
|  Dividends | $126349 |  |  |  |  |
|  **Expense:** |  |  |  |  |  |
|  Mortality and expense risk charges | 86763 |  |  |  |  |
|  Contract administration charges | 10412 |  |  |  |  |
|  Net investment income (loss) | 29174 |  |  |  |  |
|  **Net Realized and Unrealized Gains (Losses) on Investments:** |  |  |  |  |  |
|  Realized gain (loss) from redemption of fund shares | (11877) |  |  |  |  |
|  Realized gains distributions | 225470 |  |  |  |  |
|  Net realized gain (loss) from investment transactions | 213593 |  |  |  |  |
|  Net change in unrealized gain (loss) of investments | 465943 |  |  |  |  |
|  Net realized and unrealized gain (loss) on investments | 679536 |  |  |  |  |
|  **Net increase (decrease) in net assets resulting from operations** | $**708710** |  |  |  |  |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF CHANGES IN NET ASSETS — FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Money Market Fund** | **Money Market Fund** | **Limited Maturity<br>Bond Fund** | **Limited Maturity<br>Bond Fund** | **Quality Bond Fund** | **Quality Bond Fund** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $15294 | $18857 | $(1151) | $(1565) | $(7924) | $(8764) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions |  |  | 13069 | 2088 | 13299 | 12707 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments |  |  | (8236) | 4020 | 28397 | 1718 |
|  Net increase (decrease) in net assets resulting from operations | 15294 | 18857 | 3682 | 4543 | 33772 | 5661 |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (48843) | (13259) | (65457) | (10154) | (41962) | (75228) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | 650293 | (14) | (7667) | 2636 | 29354 | (25016) |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (384) | (416) | (17) | (17) | (178) | (203) |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits | (18253) |  |  | (214) | (32696) | (8778) |
|  Net increase (decrease) in net assets resulting from variable annuity activities | 582813 | (13689) | (73141) | (7749) | (45482) | (109225) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | 598107 | 5168 | (69459) | (3206) | (11710) | (103564) |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 598351 | 593183 | 109201 | 112407 | 565827 | 669391 |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**1196458** | $**598351** | $**39742** | $**109201** | $**554117** | $**565827** |
|  | **High Yield Bond Fund** | **High Yield Bond Fund** | **Flexibly Managed Fund** | **Flexibly Managed Fund** | **Balanced Fund** | **Balanced Fund** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $(7592) | $(9016) | $(240115) | $(254444) | $(10148) | $(10817) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 106033 | 52864 | 3310655 | 2796226 | 25336 | 79886 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | (61713) | (3901) | (1377040) | (668846) | 65536 | 31984 |
|  Net increase (decrease) in net assets resulting from operations | 36728 | 39947 | 1693500 | 1872936 | 80724 | 101053 |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments |  |  |  | 8829 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (42281) | (56103) | (2594050) | (2824074) | (38117) | (117916) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | (39629) | 13245 | (610495) | (23128) | (2698) | (2474) |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (84) | (104) | (2391) | (2754) | (165) | (198) |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits | (108817) | (30997) | (526391) | (169065) | (258) | (42175) |
|  Net increase (decrease) in net assets resulting from variable annuity activities | (190811) | (73959) | (3733327) | (3010192) | (41238) | (162763) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | (154083) | (34012) | (2039827) | (1137256) | 39486 | (61710) |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 616367 | 650379 | 17788464 | 18925720 | 715312 | 777022 |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**462284** | $**616367** | $**15748637** | $**17788464** | $**754798** | $**715312** |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF CHANGES IN NET ASSETS — FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024** 

**(continued)** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Large Growth<br>Stock Fund** | **Large Growth<br>Stock Fund** | **Large Cap Growth Fund** | **Large Cap Growth Fund** | **Large Core Growth Fund** | **Large Core Growth Fund** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $(18844) | $(18295) | $(6717) | $(4487) | $(46088) | $(47239) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 218466 | 95225 | 50762 | 37163 | 443190 | 359487 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | (25556) | 233167 | (4818) | 3867 | (169179) | 330337 |
|  Net increase (decrease) in net assets resulting from operations | 174066 | 310097 | 39227 | 36543 | 227923 | 642585 |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments |  | 1621 |  |  |  | 7208 |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (113778) | (72566) | (59102) | (38548) | (283023) | (219692) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | (5422) | (18018) | 30 | 258753 | (11390) | (144915) |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (408) | (445) | (25) | (37) | (659) | (743) |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits | (111294) | (1791) |  |  | (140450) | (20241) |
|  Net increase (decrease) in net assets resulting from variable annuity activities | (230902) | (91199) | (59097) | 220168 | (435522) | (378383) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | (56836) | 218898 | (19870) | 256711 | (207599) | 264202 |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 1390977 | 1172079 | 495275 | 238564 | 3443928 | 3179726 |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**1334141** | $**1390977** | $**475405** | $**495275** | $**3236329** | $**3443928** |
|  | **Large Cap Value Fund** | **Large Cap Value Fund** | **Large Core Value Fund** | **Large Core Value Fund** | **Index 500 Fund** | **Index 500 Fund** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $(36590) | $(38300) | $(32341) | $(34890) | $(30299) | $(28882) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 312899 | 240737 | 428115 | 271070 | 224635 | 213747 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | (65633) | 83525 | (166058) | 1846 | 129753 | 235067 |
|  Net increase (decrease) in net assets resulting from operations | 210676 | 285962 | 229716 | 238026 | 324089 | 419932 |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments |  | 4052 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (192746) | (191884) | (390995) | (251258) | (148831) | (164771) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | (36148) | (53306) | (46654) | (22784) | 274043 | 34037 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (451) | (513) | (371) | (436) | (692) | (763) |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits | (119223) | (5188) | (22130) | (25643) | (96931) | (42391) |
|  Net increase (decrease) in net assets resulting from variable annuity activities | (348568) | (246839) | (460150) | (300121) | 27589 | (173888) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | (137892) | 39123 | (230434) | (62095) | 351678 | 246044 |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 2668146 | 2629023 | 2419195 | 2481290 | 2127247 | 1881203 |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**2530254** | $**2668146** | $**2188761** | $**2419195** | $**2478925** | $**2127247** |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF CHANGES IN NET ASSETS — FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024** 

**(continued)** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Mid Cap<br>Growth Fund** | **Mid Cap<br>Growth Fund** | **Mid Cap Value Fund** | **Mid Cap Value Fund** | **Mid Core Value Fund** | **Mid Core Value Fund** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $(6625) | $(7259) | $(9231) | $(10060) | $(1378) | $(1512) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 41521 | 55917 | 121011 | 53988 | 14282 | 13840 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | (36040) | (43288) | (77561) | 35575 | (6018) | (4549) |
|  Net increase (decrease) in net assets resulting from operations | (1144) | 5370 | 34219 | 79503 | 6886 | 7779 |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (46502) | (66924) | (135362) | (54550) | (29759) | (15612) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | 4071 | 2731 | (22660) | (7909) | 18383 | (104) |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (119) | (132) | (175) | (195) | (23) | (23) |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits |  | (87) | (20334) | (2596) |  |  |
|  Net increase (decrease) in net assets resulting from variable annuity activities | (42550) | (64412) | (178531) | (65250) | (11399) | (15739) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | (43694) | (59042) | (144312) | 14253 | (4513) | (7960) |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 487911 | 546953 | 713923 | 699670 | 99652 | 107612 |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**444217** | $**487911** | $**569611** | $**713923** | $**95139** | $**99652** |
|  | **SMID Cap<br>Growth Fund** | **SMID Cap<br>Growth Fund** | **SMID Cap Value Fund** | **SMID Cap Value Fund** | **Small Cap Growth Fund** | **Small Cap Growth Fund** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $(230) | $(237) | $(180) | $(180) | $(13511) | $(14393) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 95 | 100 | 127 | 131 | 176946 | 51713 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | 232 | 1783 | 192 | 1041 | (97023) | 73168 |
|  Net increase (decrease) in net assets resulting from operations | 97 | 1646 | 139 | 992 | 66412 | 110488 |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits |  |  | (190) | (194) | (157810) | (47666) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | 3 | 2 | 2 | (2) | (36573) | 336 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (11) | (12) | (9) | (10) | (395) | (449) |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits |  |  |  |  | (11434) |  |
|  Net increase (decrease) in net assets resulting from variable annuity activities | (8) | (10) | (197) | (206) | (206212) | (47779) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | 89 | 1636 | (58) | 786 | (139800) | 62709 |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 17137 | 15501 | 13243 | 12457 | 1039193 | 976484 |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**17226** | $**17137** | $**13185** | $**13243** | $**899393** | $**1039193** |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF CHANGES IN NET ASSETS — FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024** 

**(continued)** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Small Cap**<br>**Value Fund** | **Small Cap**<br>**Value Fund** | **Small Cap<br>Index Fund** | **Small Cap<br>Index Fund** | **Developed<br>International<br>Index Fund** | **Developed<br>International<br>Index Fund** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $(27764) | $(28734) | $(92) | $(60) | $(82) | $— |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 226334 | 178380 | 524 | 1411 | 2 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | (15169) | (19744) | 80 | (1010) | 1938 |  |
|  Net increase (decrease) in net assets resulting from operations | 183401 | 129902 | 512 | 341 | 1858 |  |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (195290) | (78084) | (2198) | (4304) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | (1342) | (35799) | 36289 | 1951 | 72581 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (247) | (268) | (4) | (5) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits | (6918) | (72171) |  |  |  |  |
|  Net increase (decrease) in net assets resulting from variable annuity activities | (203797) | (186322) | 34087 | (2358) | 72581 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | (20396) | (56420) | 34599 | (2017) | 74439 |  |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 2019258 | 2075678 | 5549 | 7566 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**1998862** | $**2019258** | $**40148** | $**5549** | $**74439** | $**—** |
|  | **International<br>Equity Fund** | **International<br>Equity Fund** | **Emerging Markets<br>Equity Fund** | **Emerging Markets<br>Equity Fund** | **Real Estate<br>Securities Fund** | **Real Estate<br>Securities Fund** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $(32585) | $(33635) | $(3049) | $(3120) | $(1613) | $(1700) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 283560 | 160353 | 9292 | 1319 | 9601 | 6524 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | (77959) | (22167) | 45220 | (9965) | (7096) | 1338 |
|  Net increase (decrease) in net assets resulting from operations | 173016 | 104551 | 51463 | (11766) | 892 | 6162 |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments |  | 2431 |  | 1621 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (224804) | (156948) | (26879) | (20241) | (6816) | (7238) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | (34447) | (12281) | (44464) | 11806 | 17907 | (668) |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (303) | (351) | (83) | (87) | (31) | (41) |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits | (92762) | (2232) | (2857) | (7777) | (5028) |  |
|  Net increase (decrease) in net assets resulting from variable annuity activities | (352316) | (169381) | (74283) | (14678) | 6032 | (7947) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | (179300) | (64830) | (22820) | (26444) | 6924 | (1785) |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 2293101 | 2357931 | 209603 | 236047 | 118489 | 120274 |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**2113801** | $**2293101** | $**186783** | $**209603** | $**125413** | $**118489** |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF CHANGES IN NET ASSETS — FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024** 

**(continued)** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Aggressive<br>Allocation Fund** | **Aggressive<br>Allocation Fund** | **Moderately<br>Aggressive<br>Allocation Fund** | **Moderately<br>Aggressive<br>Allocation Fund** | **Moderate Allocation Fund** | **Moderate Allocation Fund** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $(282) | $(262) | $(485) | $(1053) | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 116 | 90 | 42376 | 799 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | 2277 | 2013 | (37538) | 6977 |  |  |
|  Net increase (decrease) in net assets resulting from operations | 2111 | 1841 | 4353 | 6723 |  |  |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits |  |  | (42526) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers |  |  | (28801) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (30) | (30) | (43) | (103) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits |  |  |  |  |  |  |
|  Net increase (decrease) in net assets resulting from variable annuity activities | (30) | (30) | (71370) | (103) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | 2081 | 1811 | (67017) | 6620 |  |  |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 19315 | 17504 | 77413 | 70793 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**21396** | $**19315** | $**10396** | $**77413** | $**—** | $**—** |
|  | **Moderately<br>Conservative<br>Allocation Fund** | **Moderately<br>Conservative<br>Allocation Fund** | **Conservative<br>Allocation Fund** | **Conservative<br>Allocation Fund** | **Vanguard VIF - Equity<br>Index Portfolio** | **Vanguard VIF - Equity<br>Index Portfolio** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $(7066) | $(6850) | $(17) | $(51) | $(203967) | $(59373) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 13432 | 7182 | 618 | 598 | 559573 | 42698 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | 32577 | 27320 | (552) | (447) | 4928853 | 796196 |
|  Net increase (decrease) in net assets resulting from operations | 38943 | 27652 | 49 | 100 | 5284459 | 779521 |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments |  |  |  |  | 28543904 | 9525618 |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (19394) | (7942) |  | (3990) | (1043536) | (13837) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | (4) | 13 | (9) | 11 | 3894784 | 2170219 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (8) | (27) | (14) | (14) | (290950) | (49277) |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits | (1644) |  | (2954) |  | (182680) |  |
|  Net increase (decrease) in net assets resulting from variable annuity activities | (21050) | (7956) | (2977) | (3993) | 30921522 | 11632723 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | 17893 | 19696 | (2928) | (3893) | 36205981 | 12412244 |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 497317 | 477621 | 2928 | 6821 | 12412244 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**515210** | $**497317** | $**—** | $**2928** | $**48618225** | $**12412244** |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF CHANGES IN NET ASSETS — FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024** 

**(continued)** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Vanguard VIF - Total Stock<br>Market Index Portfolio** | **Vanguard VIF - Total Stock<br>Market Index Portfolio** | **Vanguard VIF - Global Bond<br>Index Portfolio** | **Vanguard VIF - Global Bond<br>Index Portfolio** | **Vanguard VIF - Mid Cap<br>Index Portfolio** | **Vanguard VIF - Mid Cap<br>Index Portfolio** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $(232726) | $(54182) | $8046 | $179 | $(4389) | $(17812) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 1746275 | 52691 | (6) | 263 | 302779 | 5174 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | 6189774 | 459407 | 14940 | 628 | 669661 | 96924 |
|  Net increase (decrease) in net assets resulting from operations | 7703323 | 457916 | 22980 | 1070 | 968051 | 84286 |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments | 29844908 | 7561080 | 308322 | 496860 | 6436129 | 1960761 |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (398521) | (14930) | (26037) | (3725) | (103877) | (6632) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | 15208560 | 7770234 | (57727) | (11393) | 3010332 | 2158712 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (497550) | (65576) | (6534) | (549) | (99592) | (16292) |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits | (182906) |  |  |  | (41884) |  |
|  Net increase (decrease) in net assets resulting from variable annuity activities | 43974491 | 15250808 | 218024 | 481193 | 9201108 | 4096549 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | 51677814 | 15708724 | 241004 | 482263 | 10169159 | 4180835 |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 15708724 |  | 482263 |  | 4180835 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**67386538** | $**15708724** | $**723267** | $**482263** | $**14349994** | $**4180835** |
|  | **Vanguard VIF - Moderate<br>Allocation Portfolio** | **Vanguard VIF - Moderate<br>Allocation Portfolio** | **Vanguard VIF - Total Bond<br>Market Index Portfolio** | **Vanguard VIF - Total Bond<br>Market Index Portfolio** | **Vanguard VIF - Total<br>International Stock Market<br>Index Portfolio** | **Vanguard VIF - Total<br>International Stock Market<br>Index Portfolio** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $(12199) | $(3126) | $48472 | $(6032) | $22024 | $(8143) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 108705 | 1462 | 13091 | 675 | 80920 | 830 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | 699210 | (1327) | 253948 | (23517) | 1590900 | (50895) |
|  Net increase (decrease) in net assets resulting from operations | 795716 | (2991) | 315511 | (28874) | 1693844 | (58208) |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments | 6592340 | 526710 | 6459607 | 1979510 | 4775413 | 1106135 |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (12574) | (604) | (74510) | (536) | (87107) | (509) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | 1174820 | 499044 | 2756160 | 664944 | 3694098 | 1026785 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (55177) | (4241) | (70400) | (10024) | (74619) | (7992) |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits |  |  | (95190) |  | (24100) |  |
|  Net increase (decrease) in net assets resulting from variable annuity activities | 7699409 | 1020909 | 8975667 | 2633894 | 8283685 | 2124419 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | 8495125 | 1017918 | 9291178 | 2605020 | 9977529 | 2066211 |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 1017918 |  | 2605020 |  | 2066211 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**9513043** | $**1017918** | $**11896198** | $**2605020** | $**12043740** | $**2066211** |

---

*The accompanying notes are an integral part of these financial statements.* 

------

##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF CHANGES IN NET ASSETS — FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024** 

**(continued)** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Vanguard VIF -**<br>**Conservative Allocation<br>Portfolio** | **Vanguard VIF -**<br>**Conservative Allocation<br>Portfolio** | **Vanguard VIF - Balanced<br>Portfolio** | **Vanguard VIF - Balanced<br>Portfolio** | **Vanguard VIF - Capital<br>Growth Portfolio** | **Vanguard VIF - Capital<br>Growth Portfolio** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $11209 | $(600) | $168849 | $(50855) | $(272785) | $(82741) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 34887 | 583 | 1850704 | 18466 | 1354277 | (16895) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | 84433 | 2715 | 3069445 | 255189 | 10880926 | (69842) |
|  Net increase (decrease) in net assets resulting from operations | 130529 | 2698 | 5088998 | 222800 | 11962418 | (169478) |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments | 1240162 | 348949 | 22427415 | 7000419 | 33884068 | 13116700 |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (8981) | (132) | (696464) | (8952) | (785332) | (30131) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | 291883 | 29489 | 13635356 | 5548375 | 9352137 | 5130505 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (11440) | (1072) | (369025) | (50144) | (452335) | (76717) |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits |  |  | (195850) |  | (443485) |  |
|  Net increase (decrease) in net assets resulting from variable annuity activities | 1511624 | 377234 | 34801432 | 12489698 | 41555053 | 18140357 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | 1642153 | 379932 | 39890430 | 12712498 | 53517471 | 17970879 |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 379932 |  | 12712498 |  | 17970879 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**2022085** | $**379932** | $**52602928** | $**12712498** | $**71488350** | $**17970879** |
|  | **Vanguard VIF - Diversified<br>Value Portfolio** | **Vanguard VIF - Diversified<br>Value Portfolio** | **Vanguard VIF - Equity<br>Income Portfolio** | **Vanguard VIF - Equity<br>Income Portfolio** | **Vanguard VIF - Growth<br>Portfolio** | **Vanguard VIF - Growth<br>Portfolio** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $42466 | $(13686) | $120326 | $(5357) | $(191853) | $(44489) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 291574 | 7606 | 352909 | 17475 | 927653 | 28131 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | 742484 | 53363 | 1178525 | 37622 | 3538812 | 606002 |
|  Net increase (decrease) in net assets resulting from operations | 1076524 | 47283 | 1651760 | 49740 | 4274612 | 589644 |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments | 3057777 | 1291669 | 8705969 | 3109228 | 11202287 | 3705521 |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (60692) | (1039) | (102823) |  | (298685) | (11932) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | 2670056 | 1542671 | 4757744 | 608069 | 11215212 | 5735997 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (69430) | (13653) | (125237) | (12543) | (268906) | (51940) |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits | (4091) |  | (33673) |  | (23992) |  |
|  Net increase (decrease) in net assets resulting from variable annuity activities | 5593620 | 2819648 | 13201980 | 3704754 | 21825916 | 9377646 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | 6670144 | 2866931 | 14853740 | 3754494 | 26100528 | 9967290 |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 2866931 |  | 3754494 |  | 9967290 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**9537075** | $**2866931** | $**18608234** | $**3754494** | $**36067818** | $**9967290** |

---

*The accompanying notes are an integral part of these financial statements.* 

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##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**STATEMENTS OF CHANGES IN NET ASSETS — FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024** 

**(continued)** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Vanguard VIF -**<br>**High Yield Bond Portfolio** | **Vanguard VIF -**<br>**High Yield Bond Portfolio** | **Vanguard VIF -<br>International Portfolio** | **Vanguard VIF -<br>International Portfolio** | **Vanguard VIF - Real<br>Estate Index Portfolio** | **Vanguard VIF - Real<br>Estate Index Portfolio** |
|  | **2025** | **2024** | **2025** | **2024** | **2025** | **2024** |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $179581 | $(8511) | $(3837) | $(2418) | $9838 | $(3428) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 21655 | 2627 | 28910 | 188 | 24347 | 494 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | 158132 | 26575 | 80661 | (112) | (15319) | (8299) |
|  Net increase (decrease) in net assets resulting from operations | 359368 | 20691 | 105734 | (2342) | 18866 | (11233) |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments | 2858143 | 1296146 | 685306 | 311687 | 948058 | 360672 |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (104904) | (132) | (5956) |  | (7520) | (64) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | 991174 | 1402300 | 316666 | 85518 | 629624 | 455756 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (55206) | (13084) | (10733) | (1973) | (19599) | (3214) |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits |  |  |  |  | (3919) |  |
|  Net increase (decrease) in net assets resulting from variable annuity activities | 3689207 | 2685230 | 985283 | 395232 | 1546644 | 813150 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | 4048575 | 2705921 | 1091017 | 392890 | 1565510 | 801917 |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 2705921 |  | 392890 |  | 801917 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**6754496** | $**2705921** | $**1483907** | $**392890** | $**2367427** | $**801917** |
|  | **Vanguard VIF - Small<br>Company Growth Portfolio** | **Vanguard VIF - Small<br>Company Growth Portfolio** |  |  |  |  |
|  | **2025** | **2024** |  |  |  |  |
|  **Operations:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net investment income (loss) | $29174 | $(15404) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net realized gain (loss) from investment transactions | 213593 | 3321 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net change in unrealized gain (loss) of investments | 465943 | 60207 |  |  |  |  |
|  Net increase (decrease) in net assets resulting from operations | 708710 | 48124 |  |  |  |  |
|  **Variable Annuity Activities:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase payments | 4089863 | 1818478 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Surrender benefits | (44010) | (4577) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Net transfers | 2114942 | 1575057 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract administration charges | (75682) | (12860) |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuity benefits | (29815) |  |  |  |  |  |
|  Net increase (decrease) in net assets resulting from variable annuity activities | 6055298 | 3376098 |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Total increase (decrease) in net assets | 6764008 | 3424222 |  |  |  |  |
|  **Net Assets:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 3424222 |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; **End of year** | $**10188230** | $**3424222** |  |  |  |  |

---

*The accompanying notes are an integral part of these financial statements.* 

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##### [**Table of Contents**](#toc)
**PENN INSURANCE AND ANNUITY VARIABLE ANNUITY ACCOUNT I** 

**Notes to Financial Statements —** December 31, 2025

**Note 1. Organization** 

Penn Insurance and Annuity Variable Annuity Account I ("Account I") was established by The Penn Insurance and Annuity Company ("PIA") under the provisions of the Delaware Insurance Law. Account I is registered under the Investment Company Act of 1940, as amended, as a unit investment trust. Account I contains contracts of the Pennant and Deferred Variable Annuity products. Under applicable insurance law, the assets and liabilities of Account I are legally segregated from PIA's other assets and liabilities. Account I offers units to variable annuity contract owners to provide for the accumulation of value and for the payment of annuities.

**Note 2. Significant Accounting Policies** 

The preparation of the accompanying financial statements and notes are in accordance with accounting principles generally accepted in the United States of America, which requires management to make estimates and assumptions that affect the reported values of assets and liabilities and the reported amounts from operations and annuity activities during the reporting period. Actual results could differ significantly with those estimates. The significant accounting policies of Account I are as follows:

**Investments** — Assets of Account I are invested into subaccounts which are invested in shares of Penn Series Funds, Inc. ("Penn Series"), an affiliate of PIA: Money Market, Limited Maturity Bond, Quality Bond, High Yield Bond, Flexibly Managed, Balanced, Large Growth Stock, Large Cap Growth, Large Core Growth, Large Cap Value, Large Core Value, Index 500, Mid Cap Growth, Mid Cap Value, Mid Core Value, SMID Cap Growth, SMID Cap Value, Small Cap Growth, Small Cap Value, Small Cap Index, Developed International Index, International Equity, Emerging Markets Equity, Real Estate Securities, Aggressive Allocation, Moderately Aggressive Allocation, Moderate Allocation, Moderately Conservative Allocation and Conservative Allocation.

Penn Series is an open-end diversified management investment company.

The subaccounts in Account I also invest in the shares of Vanguard<sup>®</sup> Variable Insurance Fund ("Vanguard VIF') portfolios: Equity Index, Total Stock Market Index, Global Bond Index, Mid-Cap Index, Moderate Allocation, Total Bond Market Index, Total International Stock Market Index, Conservative Allocation, Balanced, Capital Growth, Diversified Value, Equity Income, Growth, High Yield Bond, International, Real Estate Index and Small Company Growth.

Vanguard VIF is an open-end diversified management investment company

The investment in shares of these funds or portfolios are carried at fair market value as determined by the underlying net asset value of the respective funds or portfolios. Investment transactions are accounted for on a trade date basis. The resulting net unrealized gains/(losses) are reflected in the Statements of Operations. Realized gains/(losses) from securities transactions are determined for federal income tax and for financial reporting purposes on the FIFO cost basis.

The amounts shown as receivable for securities sold and payable for securities purchased on the Statements of Assets and Liabilities reflect transactions that occurred on the last business day of the reporting period. These amounts will be deposited to or withdrawn from the separate account in accordance with the contract owners' instructions on the first business day subsequent to the close of the period presented.

All dividend distributions received from the underlying Penn Series Funds are reinvested in additional shares of these Funds and are recorded by Account I on the ex-dividend date. The Penn Series Funds have utilized consent dividends to effectively distribute income for income tax purposes. Account I consents to treat these amounts as dividend income for tax purposes although they are not paid by the underlying Penn Series Funds. Therefore, no dividend income is recorded in the statements of operations related to such consent dividends.

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##### [**Table of Contents**](#toc)
**Note 2. Significant Accounting Policies (continued)** 

For the year ended December 31, 2025, consent dividends in Account I were:

---

| | |
|:---|:---|
|  | **Consent Dividends** |
|  Money Market Fund | $— |
|  Limited Maturity Bond Fund | 1679 |
|  Quality Bond Fund | 23661 |
|  High Yield Bond Fund | 27883 |
|  Flexibly Managed Fund | 2371974 |
|  Balanced Fund | 115104 |
|  Large Growth Stock Fund | 181005 |
|  Large Cap Growth Fund | 23096 |
|  Large Core Growth Fund |  |
|  Large Cap Value Fund | 176625 |
|  Large Core Value Fund | 72830 |
|  Index 500 Fund | 200938 |
|  Mid Cap Growth Fund | 3375 |
|  Mid Cap Value Fund | 26328 |
|  Mid Core Value Fund | 7622 |
|  SMID Cap Growth Fund | 259 |
|  SMID Cap Value Fund | 600 |
|  Small Cap Growth Fund | 93060 |
|  Small Cap Value Fund | 168194 |
|  Small Cap Index Fund | 2562 |
|  Developed International Index Fund | 5194 |
|  International Equity Fund | 240253 |
|  Emerging Markets Equity Fund | 1851 |
|  Real Estate Securities Fund | 6502 |
|  Aggressive Allocation Fund | 3550 |
|  Moderately Aggressive Allocation Fund | 1616 |
|  Moderate Allocation Fund |  |
|  Moderately Conservative Allocation Fund | 56472 |
|  Conservative Allocation Fund |  |

---

All dividend distributions received from the underlying Vanguard VIF portfolios are reinvested in additional shares of these Funds and are recorded by Account I on the ex-dividend date.

**Federal Income Taxes** — The operations of Account I are included in the federal income tax return of PIA, which is taxed as a life insurance company under the provisions of the Internal Revenue Code ("IRC"). Under the current provisions of the IRC, PIA does not expect to incur federal income taxes on the earnings of Account I to the extent the earnings are credited under the contracts. Based on this, there is no charge to Account I for federal income taxes. PIA will review, as needed, the status of this policy in the event of changes in the tax law. A charge may be made in future years for any federal income taxes that would be attributable to the contracts.

Under the provisions of Section 817(h) of the IRC, a variable annuity contract will not be treated as an annuity contract for federal tax purposes for any period unless the investments of the segregated asset account on which the contract is based are adequately diversified. The IRC provides that the "adequately diversified" requirement may be met if the underlying investments satisfy either a statutory safe harbor test or diversification requirements set forth in regulations issued by the Secretary of Treasury. Account I satisfies the current requirements of the regulations, and PIA intends that Account I will continue to meet such requirements.

***Fair Value Measurement*** — Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement is based on assumptions market participants would make in pricing an asset or liability. The inputs to valuation techniques used to measure fair value are prioritized by establishing a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to prices derived from unobservable inputs. An asset or liability's classification within the fair value hierarchy is based on the lowest level of significant input to its fair value

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##### [**Table of Contents**](#toc)
**Note 2. Significant Accounting Policies (continued)** 

measurement. Account I has categorized its assets and liabilities into the three-level fair value hierarchy based upon the priority of the inputs. The following summarizes the types of assets and liabilities included within the three-level hierarchy:

Level 1 — Fair value is based on unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. These generally provide the most reliable evidence and are used to measure fair value whenever available. Active markets are defined as having the following for the measured asset/liability: i) many transactions, ii) current prices, iii) price quotes not varying substantially among market makers, iv) narrow bid/ask spreads and v) most information publicly available. Prices are obtained from readily available sources for market transactions involving identical assets or liabilities.

Level 2 — Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. In circumstances where prices from pricing services are reviewed for reasonability but cannot be validated to observable market data as noted above, these security values are recorded in Level 3 in our fair value hierarchy.

Level 3 — Fair value is based on significant inputs that are unobservable for the asset or liability. These are typically less liquid fixed maturity securities with very limited trading activity. Prices are determined using valuation methodologies such as option pricing models, discounted cash flow models and other similar techniques. Prices may also be based upon non-binding quotes from brokers or other market makers that are reviewed for reasonableness, based on PIA's understanding of the market.

The fair value of all the investments in the respective fund portfolios are at net asset values and the investments are considered actively traded and fall within Level 1.

**Note 3. Purchases and Sales of Investments** 

The following table shows aggregate cost of shares purchased and proceeds of shares sold for each fund or portfolio for the period ended December 31, 2025:

---

| | | |
|:---|:---|:---|
|  | **Purchases** | **Sales** |
|  Money Market Fund | $650943 | $77955 |
|  Limited Maturity Bond Fund | 1508 | 75800 |
|  Quality Bond Fund | 39446 | 92852 |
|  High Yield Bond Fund | 8148 | 206551 |
|  Flexibly Managed Fund | 74066 | 4047508 |
|  Balanced Fund |  | 51386 |
|  Large Growth Stock Fund | 9739 | 259485 |
|  Large Cap Growth Fund | 1506 | 67320 |
|  Large Core Growth Fund | 45952 | 527561 |
|  Large Cap Value Fund | 19489 | 404647 |
|  Large Core Value Fund | 28201 | 520692 |
|  Index 500 Fund | 283273 | 285983 |
|  Mid Cap Growth Fund | 5837 | 55012 |
|  Mid Cap Value Fund | 8345 | 196106 |
|  Mid Core Value Fund | 19498 | 32275 |
|  SMID Cap Growth Fund |  | 239 |
|  SMID Cap Value Fund |  | 378 |
|  Small Cap Growth Fund | 10579 | 230302 |
|  Small Cap Value Fund | 47454 | 279015 |
|  Small Cap Index Fund | 36291 | 2295 |
|  Developed International Index Fund | 72581 | 82 |
|  International Equity Fund | 75611 | 460512 |
|  Emerging Markets Equity Fund | 1431 | 78763 |
|  Real Estate Securities Fund | 20601 | 16182 |
|  Aggressive Allocation Fund |  | 312 |

---

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##### [**Table of Contents**](#toc)
**Note 3. Purchases and Sales of Investments (continued)** 

---

| | | |
|:---|:---|:---|
|  | **Purchases** | **Sales** |
|  Moderately Aggressive Allocation Fund | $— | $71855 |
|  Moderate Allocation Fund |  |  |
|  Moderately Conservative Allocation Fund |  | 28117 |
|  Conservative Allocation Fund |  | 2994 |
|  Vanguard VIF - Equity Index Portfolio | 31884030 | 1367000 |
|  Vanguard VIF - Total Stock Market Index Portfolio | 44329221 | 942400 |
|  Vanguard VIF - Global Bond Index Portfolio | 311618 | 101360 |
|  Vanguard VIF - Mid-Cap Index Portfolio | 9348476 | 279700 |
|  Vanguard VIF - Moderate Allocation Portfolio | 7966885 | 342358 |
|  Vanguard VIF - Total Bond Market Index Portfolio | 10144135 | 1258337 |
|  Vanguard VIF - Total International Stock Market Index Portfolio | 8443313 | 254448 |
|  Vanguard VIF - Conservative Allocation Portfolio | 1703955 | 209459 |
|  Vanguard VIF - Balanced Portfolio | 35252056 | 889514 |
|  Vanguard VIF - Capital Growth Portfolio | 42361153 | 1365688 |
|  Vanguard VIF - Diversified Value Portfolio | 5750232 | 242276 |
|  Vanguard VIF - Equity Income Portfolio | 13526659 | 474587 |
|  Vanguard VIF - Growth Portfolio | 22568726 | 1065097 |
|  Vanguard VIF - High Yield Bond Portfolio | 4090567 | 468653 |
|  Vanguard VIF - International Portfolio | 995306 | 21761 |
|  Vanguard VIF - Real Estate Index Portfolio | 1581239 | 58153 |
|  Vanguard VIF - Small Company Growth Portfolio | 6203862 | 245740 |

---

**Note 4. Related Party Transactions and Contract Charges** 

PIA received $6,276,617 and $1,397,052 from Account I for mortality and risk expenses, contract administration and certain other charges for the years ended December 31, 2025 and 2024, respectively. These amounts charged include those assessed through a reduction in unit values as well as those assessed through the redemption of units. Additionally, Penn Series pays The Penn Mutual Life Insurance Company and its affiliates fees for investment advisory and administrative services.

Certain product charges are reflected as a reduction in the unit values. These are stated as a percentage of the account value as follows:

---

| | | |
|:---|:---|:---|
| **Products** | **Mortality &<br>Risk Expense** | **Contract<br>Administration** |
|  Pennant | 1.25% | 0.15% |
|  Deferred Variable Annuity | 1.25% | 0.15% |

---

Certain product charges are reflected as a redemption of units held by the contract owner. These are as follows:

---

| | | |
|:---|:---|:---|
| **Products** | **Annual Contract Charge** | **Surrender Charge** |
|  Pennant | If Variable Account Value is < $50,000, the lesser of $30 or 2% of the Variable Account Value | Maximum charge of 6% of purchase payments received. Charges do not apply after 7 years since the purchase payment. |
|  Deferred Variable Annuity | If Variable Account Value is < $50,000, the lesser of $40 or 2% of the Variable Account Value | Maximum charge of 8% of purchase payments received. Charges do not apply after 7 years since the purchase payment. |

---

Premium taxes on purchase payments are withdrawn from payments prior to the purchase of units. Currently, state premium taxes on purchase payments range from 0.00% to 4.265%.

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##### [**Table of Contents**](#toc)
**Note 5. Accumulation Units** 

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| **Subaccount** | **Units<br>Issued** | **Units<br>Redeemed** | **Ending<br>Unit<br>Balance** | **Units<br>Issued** | **Units<br>Redeemed** | **Ending**<br>**Unit<br>Balance** |
|  Money Market Fund | 51321 | (5403) | 93962 |  | (1115) | 48044 |
|  Limited Maturity Bond Fund | 85 | (4181) | 2183 | 204 | (658) | 6279 |
|  Quality Bond Fund | 1518 | (3236) | 20694 | 1136 | (5494) | 22412 |
|  High Yield Bond Fund | 155 | (3796) | 8439 | 353 | (1831) | 12080 |
|  Flexibly Managed Fund | 499 | (23545) | 93263 | 400 | (21304) | 116309 |
|  Balanced Fund | 2 | (1357) | 22804 | 47 | (5702) | 24159 |
|  Large Growth Stock Fund | 136 | (2846) | 14630 | 108 | (1377) | 17340 |
|  Large Cap Growth Fund | 43 | (1506) | 11427 | 6872 | (1089) | 12890 |
|  Large Core Growth Fund | 1648 | (15907) | 101755 | 792 | (14655) | 116014 |
|  Large Cap Value Fund | 262 | (4851) | 31914 | 262 | (3680) | 36503 |
|  Large Core Value Fund | 1016 | (17276) | 72999 | 749 | (12186) | 89259 |
|  Index 500 Fund | 3289 | (3124) | 27553 | 779 | (3152) | 27388 |
|  Mid Cap Growth Fund | 117 | (889) | 8371 | 112 | (1300) | 9143 |
|  Mid Cap Value Fund | 149 | (3205) | 9551 | 196 | (1394) | 12607 |
|  Mid Core Value Fund | 450 | (717) | 2179 | 81 | (459) | 2446 |
|  SMID Cap Growth Fund |  | (1) | 417 |  |  | 418 |
|  SMID Cap Value Fund |  | (6) | 389 |  | (7) | 395 |
|  Small Cap Growth Fund | 156 | (2847) | 11306 | 87 | (729) | 13997 |
|  Small Cap Value Fund | 522 | (2506) | 19151 | 300 | (2265) | 21135 |
|  Small Cap Index Fund | 1181 | (81) | 1298 | 75 | (172) | 198 |
|  Developed International Index Fund | 4034 |  | 4034 |  |  |  |
|  International Equity Fund | 1254 | (7095) | 35492 | 918 | (3917) | 41333 |
|  Emerging Markets Equity Fund | 141 | (7491) | 17505 | 1517 | (3232) | 24855 |
|  Real Estate Securities Fund | 449 | (319) | 2758 | 37 | (208) | 2628 |
|  Aggressive Allocation Fund |  | (1) | 802 |  | (1) | 803 |
|  Moderately Aggressive Allocation Fund |  | (2769) | 383 |  | (5) | 3152 |
|  Moderate Allocation Fund |  |  |  |  |  |  |
|  Moderately Conservative Allocation Fund |  | (1137) | 26774 |  | (466) | 27911 |
|  Conservative Allocation Fund |  | (198) |  |  | (283) | 198 |
|  Vanguard VIF - Equity Index Portfolio | 2380087 | (91783) | 3251889 | 972887 | (9302) | 963585 |
|  Vanguard VIF - Total Stock Market Index Portfolio | 3371173 | (52864) | 4538169 | 1233294 | (13434) | 1219860 |
|  Vanguard VIF - Global Bond Index Portfolio | 28907 | (8776) | 65988 | 47299 | (1442) | 45857 |
|  Vanguard VIF - Mid-Cap Index Portfolio | 742028 | (17505) | 1066188 | 345937 | (4272) | 341665 |
|  Vanguard VIF - Moderate Allocation Portfolio | 661971 | (24762) | 726242 | 90250 | (1217) | 89033 |
|  Vanguard VIF - Total Bond Market Index Portfolio | 942942 | (113591) | 1078361 | 256911 | (7901) | 249010 |
|  Vanguard VIF - Total International Stock Market Index Portfolio | 674991 | (15509) | 849175 | 192452 | (2759) | 189693 |
|  Vanguard VIF - Conservative Allocation Portfolio | 146244 | (16848) | 163557 | 34281 | (120) | 34161 |
|  Vanguard VIF - Balanced Portfolio | 2866131 | (54570) | 3891676 | 1121266 | (41151) | 1080115 |
|  Vanguard VIF - Capital Growth Portfolio | 3362839 | (90340) | 4810556 | 1615690 | (77633) | 1538057 |
|  Vanguard VIF - Diversified Value Portfolio | 466758 | (15348) | 690560 | 246064 | (6914) | 239150 |
|  Vanguard VIF - Equity Income Portfolio | 1061348 | (30459) | 1342973 | 319168 | (7084) | 312084 |
|  Vanguard VIF - Growth Portfolio | 1618636 | (63272) | 2282344 | 752571 | (25591) | 726980 |
|  Vanguard VIF - High Yield Bond Portfolio | 362938 | (36435) | 574143 | 253444 | (5804) | 247640 |
|  Vanguard VIF - International Portfolio | 77413 | (950) | 111336 | 35017 | (144) | 34873 |
|  Vanguard VIF - Real Estate Index Portfolio | 135711 | (3481) | 201696 | 69706 | (240) | 69466 |
|  Vanguard VIF - Small Company Growth Portfolio | 532487 | (17043) | 795032 | 283760 | (4172) | 279588 |

---

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##### [**Table of Contents**](#toc)
**Note 6. Financial Highlights** 

Account I is a funding vehicle for a number of variable annuity products, which have unique combinations of features and fees that are charged against the contract owner's account balance. Differences in the fee structures result in a variety of unit values, expense ratios and total returns. The Net Assets calculation in the table below excludes the accrual balance related to the "Due to The Penn Mutual Life Insurance Company" line in the Statement of Assets and Liabilities.

The following table was developed by determining which products offered within Account I have the lowest and highest total return. Only product designs within each subaccount that has units outstanding during the respective periods were considered when determining the lowest and highest total return. The summary may not reflect the minimum and maximum contract charges offered within Account I as contract owners may not have selected all available and applicable contract options.

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **January 1, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **For the Year ended December 31, 2025** | **For the Year ended December 31, 2025** | **For the Year ended December 31, 2025** |
| **Subaccount** | **Unit Value** | **Units** | **Unit Value** | **Net Assets** | **Investment<br>Income<br>Ratio\* (%)** | **Expense<br>Ratio\*\* (%)** | **Total<br>Return\*\*\* (%)** |
|  Money Market Fund | 12.45 | 93962 | 12.73 | 1196458 | 3.56 | 1.40 | 2.24 |
|  Limited Maturity Bond Fund | 17.39 | 2183 | 18.21 | 39742 |  | 1.40 | 4.69 |
|  Quality Bond Fund | 25.25 | 20694 | 26.78 | 554117 |  | 1.40 | 6.06 |
|  High Yield Bond Fund | 51.02 | 8439 | 54.78 | 462284 |  | 1.40 | 7.36 |
|  Flexibly Managed Fund | 152.94 | 93263 | 168.86 | 15748637 |  | 1.40 | 10.41 |
|  Balanced Fund | 29.61 | 22804 | 33.10 | 754798 |  | 1.40 | 11.79 |
|  Large Growth Stock Fund | 80.22 | 14630 | 91.19 | 1334141 |  | 1.40 | 13.67 |
|  Large Cap Growth Fund | 38.42 | 11427 | 41.60 | 475405 |  | 1.40 | 8.28 |
|  Large Core Growth Fund | 29.69 | 101755 | 31.81 | 3236329 |  | 1.40 | 7.14 |
|  Large Cap Value Fund | 73.09 | 31914 | 79.28 | 2530254 |  | 1.40 | 8.47 |
|  Large Core Value Fund | 27.10 | 72999 | 29.98 | 2188761 |  | 1.40 | 10.63 |
|  Index 500 Fund | 77.67 | 27553 | 89.97 | 2478925 |  | 1.40 | 15.84 |
|  Mid Cap Growth Fund | 53.36 | 8371 | 53.07 | 444217 |  | 1.40 | -0.55 |
|  Mid Cap Value Fund | 56.63 | 9551 | 59.64 | 569611 |  | 1.40 | 5.31 |
|  Mid Core Value Fund | 40.73 | 2179 | 43.65 | 95139 |  | 1.40 | 7.17 |
|  SMID Cap Growth Fund | 41.05 | 417 | 41.28 | 17226 |  | 1.40 | 0.58 |
|  SMID Cap Value Fund | 33.50 | 389 | 33.89 | 13185 |  | 1.40 | 1.17 |
|  Small Cap Growth Fund | 74.25 | 11306 | 79.55 | 899393 |  | 1.40 | 7.14 |
|  Small Cap Value Fund | 95.54 | 19151 | 104.37 | 1998862 |  | 1.40 | 9.24 |
|  Small Cap Index Fund | 27.99 | 1298 | 30.92 | 40148 |  | 1.40 | 10.45 |
|  Developed International Index Fund | 14.33 | 4034 | 18.45 | 74439 |  | 1.40 | 28.79 |
|  International Equity Fund | 55.48 | 35492 | 59.56 | 2113801 |  | 1.40 | 7.35 |
|  Emerging Markets Equity Fund | 8.43 | 17505 | 10.67 | 186783 |  | 1.40 | 26.53 |
|  Real Estate Securities Fund | 45.08 | 2758 | 45.48 | 125413 |  | 1.40 | 0.88 |
|  Aggressive Allocation Fund | 24.05 | 802 | 26.68 | 21396 |  | 1.40 | 10.94 |
|  Moderately Aggressive Allocation Fund | 24.56 | 383 | 27.12 | 10396 |  | 1.40 | 10.44 |
|  Moderate Allocation Fund | 20.65 |  | 22.63 |  |  | 1.40 | 9.62 |
|  Moderately Conservative Allocation Fund | 17.82 | 26774 | 19.24 | 515210 |  | 1.40 | 8.00 |
|  Conservative Allocation Fund | 14.80 |  | 15.84 |  |  | 1.40 | 6.98 |
|  Vanguard VIF - Equity Index Portfolio | 12.88 | 3251889 | 14.95 | 48618225 | 0.67 | 1.40 | 16.07 |
|  Vanguard VIF - Total Stock Market Index Portfolio | 12.88 | 4538169 | 14.85 | 67386538 | 0.84 | 1.40 | 15.31 |
|  Vanguard VIF - Global Bond Index Portfolio | 10.52 | 65988 | 10.96 | 723267 | 2.68 | 1.40 | 4.22 |
|  Vanguard VIF - Mid- Cap Index Portfolio | 12.24 | 1066188 | 13.46 | 14349994 | 0.85 | 1.40 | 9.99 |
|  Vanguard VIF - Moderate Allocation Portfolio | 11.43 | 726242 | 13.10 | 9513043 | 1.12 | 1.40 | 14.57 |
|  Vanguard VIF - Total Bond Market Index Portfolio | 10.46 | 1078361 | 11.03 | 11896198 | 2.13 | 1.40 | 5.45 |
|  Vanguard VIF - Total International Stock Market Index Portfolio | 10.89 | 849175 | 14.18 | 12043740 | 1.55 | 1.40 | 30.21 |
|  Vanguard VIF - Conservative Allocation Portfolio | 11.12 | 163557 | 12.36 | 2022085 | 2.25 | 1.40 | 11.16 |
|  Vanguard VIF - Balanced Portfolio | 11.77 | 3891676 | 13.52 | 52602928 | 1.46 | 1.40 | 14.85 |
|  Vanguard VIF - Capital Growth Portfolio | 11.68 | 4810556 | 14.86 | 71488350 | 0.69 | 1.40 | 27.19 |
|  Vanguard VIF - Diversified Value Portfolio | 11.99 | 690560 | 13.81 | 9537075 | 1.10 | 1.40 | 15.20 |
|  Vanguard VIF - Equity Income Portfolio | 12.03 | 1342973 | 13.86 | 18608234 | 1.42 | 1.40 | 15.17 |
|  Vanguard VIF - Growth Portfolio | 13.71 | 2282344 | 15.80 | 36067818 | 0.14 | 1.40 | 15.26 |
|  Vanguard VIF - High Yield Bond Portfolio | 10.93 | 574143 | 11.76 | 6754496 | 5.10 | 1.40 | 7.67 |
|  Vanguard VIF - International Portfolio | 11.27 | 111336 | 13.33 | 1483907 | 0.53 | 1.40 | 18.30 |
|  Vanguard VIF - Real Estate Index Portfolio | 11.54 | 201696 | 11.74 | 2367427 | 1.92 | 1.40 | 1.68 |
|  Vanguard VIF - Small Company Growth Portfolio | 12.25 | 795032 | 12.81 | 10188230 | 0.33 | 1.40 | 4.63 |

---

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##### [**Table of Contents**](#toc)
**Note 6. Financial Highlights (continued)** 

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **January 1, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **For the Year ended December 31, 2024** | **For the Year ended December 31, 2024** | **For the Year ended December 31, 2024** |
| **Subaccount** | **Unit Value** | **Units** | **Unit Value** | **Net Assets** | **Investment<br>Income<br>Ratio\* (%)** | **Expense<br>Ratio\*\* (%)** | **Total<br>Return\*\*\* (%)** |
|  Money Market Fund | 12.07 | 48044 | 12.45 | 598351 | 4.57 | 1.40 | 3.20 |
|  Limited Maturity Bond Fund | 16.70 | 6279 | 17.39 | 109201 |  | 1.40 | 4.16 |
|  Quality Bond Fund | 25.01 | 22412 | 25.25 | 565827 |  | 1.40 | 0.96 |
|  High Yield Bond Fund | 47.98 | 12080 | 51.02 | 616367 |  | 1.40 | 6.36 |
|  Flexibly Managed Fund | 137.94 | 116309 | 152.94 | 17788464 |  | 1.40 | 10.87 |
|  Balanced Fund | 26.06 | 24159 | 29.61 | 715312 |  | 1.40 | 13.60 |
|  Large Growth Stock Fund | 62.99 | 17340 | 80.22 | 1390977 |  | 1.40 | 27.35 |
|  Large Cap Growth Fund | 33.57 | 12890 | 38.42 | 495275 |  | 1.40 | 14.46 |
|  Large Core Growth Fund | 24.48 | 116014 | 29.69 | 3443928 |  | 1.40 | 21.24 |
|  Large Cap Value Fund | 65.86 | 36503 | 73.09 | 2668146 |  | 1.40 | 10.98 |
|  Large Core Value Fund | 24.64 | 89259 | 27.10 | 2419195 |  | 1.40 | 9.98 |
|  Index 500 Fund | 63.21 | 27388 | 77.67 | 2127247 |  | 1.40 | 22.87 |
|  Mid Cap Growth Fund | 52.95 | 9143 | 53.36 | 487911 |  | 1.40 | 0.78 |
|  Mid Cap Value Fund | 50.69 | 12607 | 56.63 | 713923 |  | 1.40 | 11.72 |
|  Mid Core Value Fund | 38.12 | 2446 | 40.73 | 99652 |  | 1.40 | 6.87 |
|  SMID Cap Growth Fund | 37.10 | 418 | 41.05 | 17137 |  | 1.40 | 10.63 |
|  SMID Cap Value Fund | 31.02 | 395 | 33.50 | 13243 |  | 1.40 | 7.98 |
|  Small Cap Growth Fund | 66.71 | 13997 | 74.25 | 1039193 |  | 1.40 | 11.29 |
|  Small Cap Value Fund | 89.86 | 21135 | 95.54 | 2019258 |  | 1.40 | 6.32 |
|  Small Cap Index Fund | 25.63 | 198 | 27.99 | 5549 |  | 1.40 | 9.22 |
|  Developed International Index Fund | 14.17 |  | 14.33 |  |  | 1.40 | 1.14 |
|  International Equity Fund | 53.19 | 41333 | 55.48 | 2293101 |  | 1.40 | 4.30 |
|  Emerging Markets Equity Fund | 8.88 | 24855 | 8.43 | 209603 |  | 1.40 | -5.08 |
|  Real Estate Securities Fund | 42.97 | 2628 | 45.08 | 118489 |  | 1.40 | 4.91 |
|  Aggressive Allocation Fund | 21.76 | 803 | 24.05 | 19315 |  | 1.40 | 10.52 |
|  Moderately Aggressive Allocation Fund | 22.43 | 3152 | 24.56 | 77413 |  | 1.40 | 9.49 |
|  Moderate Allocation Fund | 19.19 |  | 20.65 |  |  | 1.40 | 7.60 |
|  Moderately Conservative Allocation Fund | 16.83 | 27911 | 17.82 | 497317 |  | 1.40 | 5.85 |
|  Conservative Allocation Fund | 14.20 | 198 | 14.80 | 2928 |  | 1.40 | 4.27 |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **2024**<br>**Inception<br>of**<br>**Subaccount** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **For the Year ended December 31, 2024** | **For the Year ended December 31, 2024** | **For the Year ended December 31, 2024** |
| **Subaccount** | **Unit Value** | **Units** | **Unit Value** | **Net Assets** | **Investment<br>Income<br>Ratio\* (%)** | **Expense<br>Ratio\*\* (%)** | **Total<br>Return\*\*\* (%)** |
|  Vanguard VIF - Equity Index Portfolio | 11.16 | 963585 | 12.88 | 12412244 | 0.20 | 1.40 | 15.45 |
|  Vanguard VIF - Total Stock Market Index Portfolio | 11.09 | 1219860 | 12.88 | 15708724 | 0.15 | 1.40 | 16.08 |
|  Vanguard VIF - Global Bond Index Portfolio | 10.28 | 45857 | 10.52 | 482263 | 1.30 | 1.40 | 2.28 |
|  Vanguard VIF - Mid- Cap Index Portfolio | 10.96 | 341665 | 12.24 | 4180835 | 0.03 | 1.40 | 11.62 |
|  Vanguard VIF - Moderate Allocation Portfolio | 10.62 | 89033 | 11.43 | 1017918 | 0.04 | 1.40 | 7.65 |
|  Vanguard VIF - Total Bond Market Index Portfolio | 10.28 | 249010 | 10.46 | 2605020 | 0.53 | 1.40 | 1.75 |
|  Vanguard VIF - Total International Stock Market Index Portfolio | 10.48 | 189693 | 10.89 | 2066211 | 0.09 | 1.40 | 3.93 |
|  Vanguard VIF - Conservative Allocation Portfolio | 10.68 | 34161 | 11.12 | 379932 | 0.60 | 1.40 | 4.16 |
|  Vanguard VIF - Balanced Portfolio | 10.57 | 1080115 | 11.77 | 12712498 | 0.02 | 1.40 | 11.33 |
|  Vanguard VIF - Capital Growth Portfolio | 10.83 | 1538057 | 11.68 | 17970879 | 0.03 | 1.40 | 7.87 |
|  Vanguard VIF - Diversified Value Portfolio | 11.32 | 239150 | 11.99 | 2866931 | 0.02 | 1.40 | 5.91 |
|  Vanguard VIF - Equity Income Portfolio | 10.69 | 312084 | 12.03 | 3754494 | 0.62 | 1.40 | 12.54 |
|  Vanguard VIF - Growth Portfolio | 11.42 | 726980 | 13.71 | 9967290 | 0.03 | 1.40 | 20.01 |
|  Vanguard VIF - High Yield Bond Portfolio | 10.38 | 247640 | 10.93 | 2705921 | 0.22 | 1.40 | 5.30 |
|  Vanguard VIF - International Portfolio | 11.02 | 34873 | 11.27 | 392890 |  | 1.40 | 2.21 |
|  Vanguard VIF - Real Estate Index Portfolio | 10.77 | 69466 | 11.54 | 801917 | 0.07 | 1.40 | 7.15 |
|  Vanguard VIF - Small Company Growth Portfolio | 11.52 | 279588 | 12.25 | 3424222 | 0.01 | 1.40 | 6.28 |

---

------

##### [**Table of Contents**](#toc)
**Note 6. Financial Highlights (continued)** 

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **January 1, 2023** | **December 31, 2023** | **December 31, 2023** | **December 31, 2023** | **For the Year ended December 31, 2023** | **For the Year ended December 31, 2023** | **For the Year ended December 31, 2023** |
| **Subaccount** | **Unit Value** | **Units** | **Unit Value** | **Net Assets** | **Investment<br>Income<br>Ratio\* (%)** | **Expense<br>Ratio\*\* (%)** | **Total<br>Return\*\*\* (%)** |
|  Money Market Fund | 11.71 | 49159 | 12.07 | 593228 | 4.50 | 1.40 | 3.04 |
|  Limited Maturity Bond Fund | 15.83 | 6733 | 16.70 | 112416 |  | 1.40 | 5.48 |
|  Quality Bond Fund | 23.75 | 26770 | 25.01 | 669442 |  | 1.40 | 5.30 |
|  High Yield Bond Fund | 43.74 | 13558 | 47.98 | 650429 |  | 1.40 | 9.68 |
|  Flexibly Managed Fund | 117.97 | 137213 | 137.94 | 18927168 |  | 1.40 | 16.93 |
|  Balanced Fund | 22.43 | 29814 | 26.06 | 777081 |  | 1.40 | 16.21 |
|  Large Growth Stock Fund | 43.36 | 18609 | 62.99 | 1172169 |  | 1.40 | 45.27 |
|  Large Cap Growth Fund | 27.49 | 7107 | 33.57 | 238582 |  | 1.40 | 22.13 |
|  Large Core Growth Fund | 18.34 | 129877 | 24.48 | 3179969 |  | 1.40 | 33.50 |
|  Large Cap Value Fund | 59.80 | 39921 | 65.86 | 2629224 |  | 1.40 | 10.13 |
|  Large Core Value Fund | 23.07 | 100696 | 24.64 | 2481480 |  | 1.40 | 6.81 |
|  Index 500 Fund | 50.93 | 29761 | 63.21 | 1881347 |  | 1.40 | 24.12 |
|  Mid Cap Growth Fund | 44.78 | 10331 | 52.95 | 546995 |  | 1.40 | 18.24 |
|  Mid Cap Value Fund | 46.15 | 13805 | 50.69 | 699724 |  | 1.40 | 9.83 |
|  Mid Core Value Fund | 36.49 | 2824 | 38.12 | 107620 |  | 1.40 | 4.46 |
|  SMID Cap Growth Fund | 33.01 | 418 | 37.10 | 15502 |  | 1.40 | 12.39 |
|  SMID Cap Value Fund | 26.96 | 402 | 31.02 | 12458 |  | 1.40 | 15.06 |
|  Small Cap Growth Fund | 57.02 | 14639 | 66.71 | 976559 |  | 1.40 | 17.00 |
|  Small Cap Value Fund | 81.79 | 23100 | 89.86 | 2075837 |  | 1.40 | 9.87 |
|  Small Cap Index Fund | 22.36 | 295 | 25.63 | 7567 |  | 1.40 | 14.62 |
|  Developed International Index Fund | 12.26 |  | 14.17 |  |  | 1.40 | 15.60 |
|  International Equity Fund | 46.80 | 44332 | 53.19 | 2358111 |  | 1.40 | 13.65 |
|  Emerging Markets Equity Fund | 8.86 | 26570 | 8.88 | 236065 |  | 1.40 | 0.26 |
|  Real Estate Securities Fund | 38.98 | 2799 | 42.97 | 120283 |  | 1.40 | 10.23 |
|  Aggressive Allocation Fund | 19.12 | 804 | 21.76 | 17505 |  | 1.40 | 13.79 |
|  Moderately Aggressive Allocation Fund | 19.87 | 3157 | 22.43 | 70798 |  | 1.40 | 12.86 |
|  Moderate Allocation Fund | 17.25 |  | 19.19 |  |  | 1.40 | 11.21 |
|  Moderately Conservative Allocation Fund | 15.42 | 28377 | 16.83 | 477658 |  | 1.40 | 9.18 |
|  Conservative Allocation Fund | 13.21 | 481 | 14.20 | 6822 |  | 1.40 | 7.50 |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **January 1, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **For the Year ended December 31, 2022** | **For the Year ended December 31, 2022** | **For the Year ended December 31, 2022** |
| **Subaccount** | **Unit Value** | **Units** | **Unit Value** | **Net Assets** | **Investment<br>Income<br>Ratio\* (%)** | **Expense<br>Ratio\*\* (%)** | **Total<br>Return\*\*\* (%)** |
|  Money Market Fund | 11.84 | 19001 | 11.71 | 222536 | 0.17 | 1.40 | -1.12 |
|  Limited Maturity Bond Fund | 16.80 | 7189 | 15.83 | 113785 |  | 1.40 | -5.81 |
|  Quality Bond Fund | 27.88 | 27361 | 23.75 | 649775 |  | 1.40 | -14.83 |
|  High Yield Bond Fund | 47.34 | 14706 | 43.74 | 643303 |  | 1.40 | -7.59 |
|  Flexibly Managed Fund | 136.13 | 153821 | 117.97 | 18145635 |  | 1.40 | -13.34 |
|  Balanced Fund | 27.26 | 32051 | 22.43 | 718868 |  | 1.40 | -17.72 |
|  Large Growth Stock Fund | 72.70 | 21591 | 43.36 | 936218 |  | 1.40 | -40.35 |
|  Large Cap Growth Fund | 34.49 | 6377 | 27.49 | 175289 |  | 1.40 | -20.31 |
|  Large Core Growth Fund | 39.99 | 139966 | 18.34 | 2567018 |  | 1.40 | -54.14 |
|  Large Cap Value Fund | 63.33 | 44423 | 59.80 | 2656561 |  | 1.40 | -5.58 |
|  Large Core Value Fund | 24.18 | 109947 | 23.07 | 2536753 |  | 1.40 | -4.57 |
|  Index 500 Fund | 63.21 | 34786 | 50.93 | 1771659 |  | 1.40 | -19.42 |
|  Mid Cap Growth Fund | 65.51 | 10460 | 44.78 | 468436 |  | 1.40 | -31.64 |
|  Mid Cap Value Fund | 49.59 | 15956 | 46.15 | 736372 |  | 1.40 | -6.95 |
|  Mid Core Value Fund | 37.56 | 3362 | 36.49 | 122674 |  | 1.40 | -2.85 |
|  SMID Cap Growth Fund | 46.80 | 408 | 33.01 | 13460 |  | 1.40 | -29.47 |
|  SMID Cap Value Fund | 32.53 | 401 | 26.96 | 10814 |  | 1.40 | -17.13 |
|  Small Cap Growth Fund | 76.32 | 15938 | 57.02 | 908761 |  | 1.40 | -25.29 |
|  Small Cap Value Fund | 97.28 | 24101 | 81.79 | 1971273 |  | 1.40 | -15.92 |
|  Small Cap Index Fund | 28.73 | 724 | 22.36 | 16201 |  | 1.40 | -22.16 |
|  Developed International Index Fund | 14.68 |  | 12.26 |  |  | 1.40 | -16.50 |
|  International Equity Fund | 60.70 | 49579 | 46.80 | 2320534 |  | 1.40 | -22.89 |
|  Emerging Markets Equity Fund | 11.73 | 27701 | 8.86 | 245478 |  | 1.40 | -24.48 |
|  Real Estate Securities Fund | 52.96 | 2729 | 38.98 | 106360 |  | 1.40 | -26.39 |
|  Aggressive Allocation Fund | 22.95 | 806 | 19.12 | 15413 |  | 1.40 | -16.67 |
|  Moderately Aggressive Allocation Fund | 23.56 | 3162 | 19.87 | 62827 |  | 1.40 | -15.66 |

---

------

##### [**Table of Contents**](#toc)
**Note 6. Financial Highlights (continued)** 

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **January 1, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **For the Year ended December 31, 2022** | **For the Year ended December 31, 2022** | **For the Year ended December 31, 2022** |
| **Subaccount** | **Unit Value** | **Units** | **Unit Value** | **Net Assets** | **Investment<br>Income<br>Ratio\* (%)** | **Expense<br>Ratio\*\* (%)** | **Total<br>Return\*\*\* (%)** |
|  Moderate Allocation Fund | 20.30 |  | 17.25 |  |  | 1.40 | -15.01 |
|  Moderately Conservative Allocation Fund | 17.63 | 28876 | 15.42 | 445211 |  | 1.40 | -12.53 |
|  Conservative Allocation Fund | 14.86 | 1215 | 13.21 | 16044 |  | 1.40 | -11.11 |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **January 1, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **For the Year ended December 31, 2021** | **For the Year ended December 31, 2021** | **For the Year ended December 31, 2021** |
| **Subaccount** | **Unit Value** | **Units** | **Unit Value** | **Net Assets** | **Investment<br>Income<br>Ratio\* (%)** | **Expense<br>Ratio\*\* (%)** | **Total<br>Return\*\*\* (%)** |
|  Money Market Fund | 12.01 | 30446 | $11.84 | 360615 | 0.01 | 1.40 | -1.38 |
|  Limited Maturity Bond Fund | 16.98 | 8020 | 16.80 | 134768 |  | 1.40 | -1.02 |
|  Quality Bond Fund | 28.47 | 35075 | 27.88 | 978004 |  | 1.40 | -2.07 |
|  High Yield Bond Fund | 45.67 | 17676 | 47.34 | 836772 |  | 1.40 | 3.66 |
|  Flexibly Managed Fund | 116.71 | 179594 | 136.13 | 24448503 |  | 1.40 | 16.64 |
|  Balanced Fund | 23.88 | 38292 | 27.26 | 1043860 |  | 1.40 | 14.16 |
|  Large Growth Stock Fund | 63.32 | 23039 | 72.70 | 1674981 |  | 1.40 | 14.81 |
|  Large Cap Growth Fund | 27.80 | 6777 | 34.49 | 233765 |  | 1.40 | 24.10 |
|  Large Core Growth Fund | 42.22 | 143045 | 39.99 | 5720862 |  | 1.40 | -5.27 |
|  Large Cap Value Fund | 50.22 | 50061 | 63.33 | 3170480 |  | 1.40 | 26.11 |
|  Large Core Value Fund | 19.70 | 126217 | 24.18 | 3051470 |  | 1.40 | 22.73 |
|  Index 500 Fund | 49.96 | 51918 | 63.21 | 3281490 |  | 1.40 | 26.51 |
|  Mid Cap Growth Fund | 56.95 | 10613 | 65.51 | 695230 |  | 1.40 | 15.03 |
|  Mid Cap Value Fund | 42.17 | 22162 | 49.59 | 1099134 |  | 1.40 | 17.61 |
|  Mid Core Value Fund | 30.92 | 2338 | 37.56 | 87793 |  | 1.40 | 21.45 |
|  SMID Cap Growth Fund | 44.06 | 374 | 46.80 | 17513 |  | 1.40 | 6.23 |
|  SMID Cap Value Fund | 24.33 | 394 | 32.53 | 12815 |  | 1.40 | 33.70 |
|  Small Cap Growth Fund | 71.22 | 18841 | 76.32 | 1438007 |  | 1.40 | 7.17 |
|  Small Cap Value Fund | 77.88 | 25820 | 97.28 | 2511652 |  | 1.40 | 24.91 |
|  Small Cap Index Fund | 25.48 | 791 | 28.73 | 22711 |  | 1.40 | 12.76 |
|  Developed International Index Fund | 13.47 |  | 14.68 |  |  | 1.40 | 9.00 |
|  International Equity Fund | 54.85 | 53032 | 60.70 | 3219125 |  | 1.40 | 10.66 |
|  Emerging Markets Equity Fund | 12.61 | 28376 | 11.73 | 332992 |  | 1.40 | -6.94 |
|  Real Estate Securities Fund | 37.63 | 2709 | 52.96 | 143477 |  | 1.40 | 40.72 |
|  Aggressive Allocation Fund | 19.99 | 807 | 22.95 | 18528 |  | 1.40 | 14.80 |
|  Moderately Aggressive Allocation Fund | 20.72 | 3166 | 23.56 | 74608 |  | 1.40 | 13.72 |
|  Moderate Allocation Fund | 18.49 |  | 20.30 |  |  | 1.40 | 9.78 |
|  Moderately Conservative Allocation Fund | 16.45 | 29480 | 17.63 | 519600 |  | 1.40 | 7.13 |
|  Conservative Allocation Fund | 14.41 | 1699 | 14.86 | 25249 |  | 1.40 | 3.07 |

---

\* These ratios represent the dividends, excluding distributions of capital gains, received by the subaccounts within Account I from the underlying mutual fund, net of management fees and expenses assessed by the fund manager, divided by the average net assets of the respective subaccounts. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reduction in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying funds in which the subaccount invests and, to the extent the underlying fund utilizes consent dividend rather than paying dividends in cash or reinvested shares, Account I does not record investment income. 

\*\* These ratios represent the annualized contract expenses of the subaccount, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying subaccount are excluded. 

\*\*\* These ratios represent the total return for the periods indicated, including changes in the value of the underlying subaccount, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. The total return is calculated for the period indicated or from the effective date through the end of the reporting period. 

**Note 7. Subsequent Events** 

Management has evaluated events subsequent to December 31, 2025 and through the Account I Financial Statement date of issuance of April 15, 2026.

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##### [**Table of Contents**](#toc)
**PM8676 05/26** 

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##### [**Table of Contents**](#toc)
![LOGO](g54133g29z89.jpg)

## The Penn

## Insurance and

## Annuity Company
![LOGO](g54133g25s05.jpg) 2025 Statutory Financial Statements

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![LOGO](g54133g74r95.jpg)

**PricewaterhouseCoopers LLP,**<br> 2001 Market Street, Suite 1800,<br> Philadelphia, PA 19103<br> www.pwc.com<br> +1 (267) 330 3000<br>

**Report of Independent Auditors** 

To the Board of Directors of

The Penn Insurance and Annuity Company

***Opinions***

We have audited the accompanying statutory financial statements of The Penn Insurance and Annuity Company (the "Company"), which comprise the statutory statements of admitted assets, liabilities and capital and surplus as of December 31, 2025 and 2024, and the related statutory statements of operations, of changes in capital and surplus, and of cash flows for the years then ended, including the related notes (collectively referred to as the "financial statements").

***Unmodified Opinion on Statutory Basis of Accounting***

In our opinion, the accompanying financial statements present fairly, in all material respects, the admitted assets, liabilities and capital and surplus of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for the years then ended, in accordance with the accounting practices prescribed or permitted by the Delaware Department of Insurance described in Note 1.

***Adverse Opinion on U.S. Generally Accepted Accounting Principles***

In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles section of our report, the accompanying financial statements do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2025 and 2024, or the results of its operations or its cash flows for the years then ended.

***Basis for Opinions***

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

***Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles***

As described in Note 1 to the financial statements, the financial statements are prepared by the Company on the basis of the accounting practices prescribed or permitted by the Delaware Department of Insurance, which is a basis of accounting other than accounting principles generally accepted in the United States of America.

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The effects on the financial statements of the variances between the statutory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.

***Responsibilities of Management for the Financial Statements***

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting practices prescribed or permitted by the Delaware Department of Insurance. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date the financial statements are available to be issued.

***Auditors' Responsibilities for the Audit of the Financial Statements***

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with US GAAS, we:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Exercise professional judgment and maintain professional skepticism throughout the audit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and
design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluate the overall presentation of the financial statements.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial
doubt about the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

![LOGO](g54133g99a01.jpg)

Philadelphia, Pennsylvania

February 18, 2026

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***Table of Contents***

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| | |
|:---|:---|
|  | ***Page*** |
|  [Statements of Admitted Assets, Liabilities and Capital and Surplus](#toc54133_1) | 1 |
|  [Statements of Operations](#toc54133_2) | 2 |
|  [Statements of Changes in Capital and Surplus](#toc54133_3) | 3 |
|  [Statements of Cash Flows](#toc54133_4) | 4 |
|  ***Notes to Financial Statements*** |  |
|  [Note 1. Nature of Operations and Basis of Presentation](#toc54133_5) | 5 |
|  [Note 2. Summary of Significant Accounting Policies](#toc54133_6) | 6 |
|  [Note 3. Investments](#toc54133_7) | 13 |
|  [Note 4. Separate Accounts](#toc54133_8) | 21 |
|  [Note 5. Derivatives](#toc54133_9) | 21 |
|  [Note 6. Fair Value of Financial Instruments and Off-Balance Sheet Risk](#toc54133_10) | 23 |
|  [Note 7. Life Reserves by Withdrawal Characteristics](#toc54133_11) | 29 |
|  [Note 8. Reserves and Funds for Payment of Annuity Benefits](#toc54133_12) | 30 |
|  [Note 9. Federal Income Taxes](#toc54133_13) | 32 |
|  [Note 10. Reinsurance](#toc54133_14) | 37 |
|  [Note 11. Related Parties](#toc54133_15) | 38 |
|  [Note 12. Commitments, Contingencies and Uncertainties](#toc54133_16) | 39 |
|  [Note 13. Subsequent Events](#toc54133_17) | 40 |

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*($ in Thousands)* 

Statements of Admitted Assets, Liabilities and Capital and Surplus

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| | | |
|:---|:---|:---|
| **As of December 31,** | **2025** | **2024** |
|  **ADMITTED ASSETS** |  |  |
|  Bonds | $10598231 | $9189871 |
|  Stocks: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Preferred stock | 59614 | 64552 |
| &nbsp;&nbsp;&nbsp;&nbsp; Common stock — affiliated | 202509 | 214123 |
| &nbsp;&nbsp;&nbsp;&nbsp; Common stock — unaffiliated | 11124 | 9455 |
|  Policy loans | 878525 | 745187 |
|  Cash, cash equivalents and short-term investments | 251534 | 227917 |
|  Alternative assets | 348981 | 338948 |
|  Derivatives | 1509223 | 1348699 |
|  Other invested assets | 241308 | 126270 |
|  TOTAL INVESTMENTS | 14101049 | 12265022 |
|  Investment income due and accrued | 125054 | 114939 |
|  Deferred tax asset | 77229 | 82598 |
|  Amounts recoverable from reinsurers | 4068 | 14986 |
|  Funds held by ceding company | 1706887 | 1643193 |
|  Federal income taxes recoverable |  | 26946 |
|  Other assets | 155616 | 155699 |
|  Separate account assets | 959981 | 382884 |
|  **TOTAL ASSETS** | $**17129884** | $**14686267** |
|  **LIABILITIES** |  |  |
|  Reserves and funds for payment of insurance and annuity benefits | $10073147 | $8816724 |
|  Policy claims in process | 18345 | 25760 |
|  Asset valuation reserve | 110966 | 98101 |
|  Funds held under coinsurance | 2421312 | 2312934 |
|  Federal income taxes payable | 751 |  |
|  Other liabilities | 1301374 | 1075542 |
|  Derivatives | 1044579 | 1009698 |
|  Separate account liabilities | 959981 | 382884 |
|  TOTAL LIABILITIES | **15930455** | **13721643** |
|  **CAPITAL AND SURPLUS** |  |  |
|  Common stock, $2.50 par value, 1,000 shares authorized, issued and outstanding | 2500 | 2500 |
|  Capital contributed in excess of par value | 779662 | 629662 |
|  Accumulated surplus | 417267 | 332462 |
|  TOTAL CAPITAL AND SURPLUS | **1199429** | **964624** |
|  **TOTAL LIABILITIES, CAPITAL AND SURPLUS** | $**17129884** | $**14686267** |

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*The accompanying notes are an integral part of these financial statements.* 

*2025 Statutory Financial Statements* *Page 1* 

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Statements of Operations

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| | | |
|:---|:---|:---|
| **For the Years Ended December 31,** | **2025** | **2024** |
|  **REVENUE** |  |  |
|  Premium and annuity considerations | $1776221 | $1370581 |
|  Net investment income | 570492 | 496043 |
|  Other revenue | 125213 | 79008 |
|  TOTAL REVENUE | 2471926 | 1945632 |
|  **BENEFITS AND EXPENSES** |  |  |
|  Benefits paid to policyholders and beneficiaries | 409741 | 400978 |
|  Increase in reserves for payment of future insurance and annuity benefits | 1259776 | 1101925 |
|  Commissions | 135499 | 120614 |
|  Operating expenses | 213167 | 138634 |
|  Other expenses | 166038 | 134924 |
|  Net transfers to separate accounts | 439497 | 208378 |
|  TOTAL BENEFITS AND EXPENSES | 2623718 | 2105453 |
|  LOSS FROM OPERATIONS BEFORE FEDERAL INCOME TAXES | (151792) | (159821) |
|  Federal income tax expense | 44785 | 13810 |
|  LOSS FROM OPERATIONS | (196577) | (173631) |
|  Net realized capital gains, net of tax | 220991 | 191731 |
|  **NET INCOME** | $**24414** | $**18100** |

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*The accompanying notes are an integral part of these financial statements.* 

*Page 2* *The Penn Insurance and Annuity Company*

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Statements of Changes in Capital and Surplus

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| | | |
|:---|:---|:---|
| **For the Years Ended December 31,** | **2025** | **2024** |
|  **COMMON STOCK** |  |  |
|  Beginning of year | $2500 | $2500 |
|  End of year | 2500 | 2500 |
|  **CAPITAL CONTRIBUTED IN EXCESS OF PAR VALUE** |  |  |
|  Beginning of year | 629662 | 559662 |
|  Capital contribution from parent | 150000 | 70000 |
|  End of year | 779662 | 629662 |
|  **ACCUMULATED SURPLUS** |  |  |
|  End of prior year | 332462 | 297589 |
|  SSAP 3 adjustment | (18272) |  |
|  Beginning of year | 314190 | 297589 |
|  Net income | 24414 | 18100 |
|  Change in: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Nonadmitted assets | (5223) | (13146) |
| &nbsp;&nbsp;&nbsp;&nbsp; Asset valuation reserve | (12865) | (12338) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net deferred income tax | 34061 | 8476 |
| &nbsp;&nbsp;&nbsp;&nbsp; Net unrealized capital gains, net of tax | 62690 | 33781 |
|  End of year | 417267 | 332462 |
|  **TOTAL CAPITAL AND SURPLUS** | $**1199429** | $**964624** |

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*The accompanying notes are an integral part of these financial statements.* 

*2025 Statutory Financial Statements* *Page 3* 

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Statements of Cash Flows

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| | | |
|:---|:---|:---|
| **For the Years Ended December 31,** | **2025** | **2024** |
|  **OPERATIONS** |  |  |
|  Premium and annuity considerations | $1973440 | $1165348 |
|  Net investment income | 578470 | 523307 |
|  Other revenue | 125278 | 79116 |
|  CASH PROVIDED BY OPERATIONS | 2677188 | 1767771 |
|  Benefits paid | 409883 | 456241 |
|  Commissions and operating expenses | 510148 | 391370 |
|  Net transfers from separate accounts | 490518 | 228825 |
|  Taxes paid on operating income and realized investment losses | 22420 | 16482 |
|  CASH USED IN OPERATIONS | 1432969 | 1092918 |
|  **NET CASH PROVIDED BY OPERATIONS** | **1244219** | **674853** |
|  **INVESTMENT ACTIVITIES** |  |  |
|  Investments sold, matured or repaid: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Bonds | 2183068 | 1736542 |
| &nbsp;&nbsp;&nbsp;&nbsp; Preferred and common stocks | 36609 | 44388 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other invested assets | 104301 | 14626 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other |  | 40000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Derivatives | 539133 | 223553 |
| &nbsp;&nbsp;&nbsp;&nbsp; Miscellaneous proceeds | 212584 | 156103 |
|  NET PROCEEDS FROM INVESTMENTS SOLD, MATURED OR REPAID | 3075695 | 2215212 |
|  Cost of investments acquired: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Bonds | 3594608 | 3313982 |
| &nbsp;&nbsp;&nbsp;&nbsp; Preferred and common stocks | 12852 | 85866 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other invested assets | 155686 | 27647 |
| &nbsp;&nbsp;&nbsp;&nbsp; Derivatives | 351126 | 449595 |
| &nbsp;&nbsp;&nbsp;&nbsp; Miscellaneous applications | 267208 | (226042) |
|  TOTAL COST OF INVESTMENTS ACQUIRED | **4381480** | **3651048** |
|  Net increase in policy loans | (133331) | (139360) |
|  **NET CASH USED IN INVESTMENT ACTIVITIES** | **(1439116)** | **(1575196)** |
|  **FINANCING AND MISCELLANEOUS** |  |  |
|  Net deposits on deposit-type funds | (3511) | 204502 |
|  Capital and paid in surplus | 50000 | 70000 |
|  Other cash provided, net | 172025 | 641350 |
|  **NET CASH PROVIDED BY FINANCING AND MISCELLANEOUS** | **218514** | **915852** |
|  NET CHANGE IN CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS | 23617 | 15510 |
|  **Cash, cash equivalents and short-term investments:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 227917 | 212407 |
|  **End of year** | $**251534** | $**227917** |
|  **Supplemental Disclosure of Cash Flow Information for Non-Cash Transactions:** |  |  |
|  Premiums paid from benefits | $54 | $285 |
|  Premiums paid by waivers | $791 | $1084 |
|  Non-cash acquisitions | $5831 | $1241 |
|  Other | $7 | $6 |

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*The accompanying notes are an integral part of these financial statements.* 

*Page 4* *The Penn Insurance and Annuity Company*

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Notes to Financial Statements

***Note 1.* NATURE OF OPERATIONS AND BASIS OF PRESENTATION** 

**NATURE OF OPERATIONS** The Penn Insurance and Annuity Company (the "Company") is a wholly-owned life insurance subsidiary of The Penn Mutual Life Insurance Company ("Penn Mutual") domiciled in Delaware. The Company's business activities are primarily concentrated in the sale of indexed universal life ("IUL"), variable universal life ("VUL"), fixed universal life and indexed annuity products. The Company markets and sells its products through a network of closely affiliated and independent financial professions, and has its in-force business serviced by Penn Mutual. Additionally, it has closed blocks of deferred and payout annuities. The Company is licensed to write business in forty-nine states and the District of Columbia.

**BASIS OF PRESENTATION** The accompanying financial statements of the Company have been prepared in conformity with the National Association of Insurance Commissioner's ("NAIC") Practices and Procedures manual and with statutory accounting practices prescribed or permitted by the Delaware Department of Insurance (collectively "SAP" or "statutory accounting principles"). Prescribed statutory accounting practices include publications of the NAIC, state laws, regulations and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. The Company currently has no permitted practices.

Pursuant to a permitted practice received from the Delaware Department of Insurance ("Captive Bureau"), PIA Reinsurance Company of Delaware I ("PIAre I"), a wholly-owned subsidiary of the Company, admits as an asset and a form of statutory surplus, the value of a credit linked variable funding note ("LLC Note") provided by an unaffiliated company in conjunction with a reinsurance agreement with the Company. Based on the "look-through" provisions of the Statement of Statutory Accounting Principles No.97, *Investments in Subsidiary, Controlled and Affiliated ("SCA") Entities,* the Company includes the value of the LLC Note and related form of surplus in the financial statements of its Insurance SCA, PIAre I, in the carrying value of PIAre I.

In accordance with the permitted practice, the Company recorded $202,509 and $214,123 as of December 31, 2025 and 2024, respectively, in Common stock-affiliated, with a corresponding $202,509 and $214,123 in surplus, which represents the statutory reporting value of PIAre I. If PIAre I had completed their statutory financial statements in accordance with NAIC statutory accounting practices and procedures, the Company's reporting value of PIAre I would have been $0 as of December 31, 2025 and 2024. There was no impact to net income as a result of the permitted practice.

Had the Company not included the asset and statutory surplus noted above in either 2025 or 2024, the resulting RBC of the Company would not have triggered a regulatory event. Had PIAre I not received a permitted practice to include the asset and statutory surplus above noted, the resulting RBC of PIAre I would have triggered a regulatory event.

Statutory accounting principles are different in some respects from U.S. Generally Accepted Accounting Principles ("GAAP"). The more significant differences between statutory accounting principles and GAAP are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) under SAP, policy acquisition costs, such as commissions, and other costs incurred in connection with acquiring new
insurance contracts, are expensed when incurred; under GAAP, such costs are generally deferred and amortized over the expected life of the underlying insurance contracts on a constant-level basis at a grouped contract level that approximates
straight-line amortization on an individual contract basis;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) statutory policy reserves are based upon the methods prescribed in the Valuation Manual, whereas GAAP reserves would
generally be based upon the net level premium method, with estimates of future mortality, morbidity and interest assumptions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) bonds are generally carried at amortized cost, whereas GAAP would generally report bonds at fair value recorded through
other comprehensive income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) undistributed earnings from alternative assets are included in unrealized gains and losses, whereas GAAP would reflect
these changes as net investment income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) deferred income taxes, which provide for book versus tax temporary differences, are subject to limitation and are charged
to surplus, whereas GAAP would generally include the change in deferred taxes in net income;

*2025 Statutory Financial Statements* *Page 5* 

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) payments received for universal and variable life insurance products and variable annuities are reported as premium
income and changes in reserves, whereas GAAP would treat these payments as deposits to policyholders' account balances;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) assets are reported at "admitted asset" value and "nonadmitted assets" are excluded through a
charge against surplus, whereas GAAP would record these assets net of any valuation allowance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) majority-owned subsidiaries are accounted for using the equity method. PIAre I is an admitted asset. Under GAAP, this
majority-owned subsidiary would be consolidated;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) reinsurance reserve credits are reported as a reduction of policyholders' reserves and liabilities for deposit-type
contracts, whereas GAAP would report these balances as an asset;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) an asset valuation reserve ("AVR") is reported as a contingency reserve to stabilize surplus against
fluctuations in the carrying value of stocks, real estate investments, partnerships, limited liability companies ("LLCs") and low income housing tax credit ("LIHTC") investments as well as credit-related declines in the value
of bonds, whereas under U.S. GAAP, a separate reserve like the AVR is not established; instead, credit-related declines are recognized through impairment charges or fair value adjustments that directly affect earnings or other comprehensive income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) changes in the fair value of unaffiliated common stock are recorded as changes in unrealized gains/(losses) in surplus,
whereas GAAP recognizes the changes through realized capital gains/(losses);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) changes in the fair value of perpetual preferred stock are recorded as changes in unrealized gains/(losses) in surplus,
whereas GAAP recognizes the changes through realized capital gains/(losses);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) after-tax realized capital gains and losses that result from changes in the
overall level of interest rates for all types of fixed-income investments and interest-related hedging activities are deferred into the interest maintenance reserve ("IMR") and amortized into investment income over the remaining life of
the investment sold, whereas GAAP would report these gains and losses in income as a component of revenue when the related securities are sold or called;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) changes in the fair value of derivative financial instruments are recorded as changes in surplus, unless deemed an
effective hedge when it is carried at amortized cost with no resulting changes in fair value. Changes in fair value for GAAP would be reported as income for ineffective cash flow hedges and fair value hedges; changes in fair value for GAAP would be
reported as other comprehensive income for effective cash flow hedges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) comprehensive income is not presented, whereas GAAP would present changes in unrealized capital gains and losses and
foreign currency translations as other comprehensive income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) embedded derivatives are recorded as part of the underlying contract, whereas GAAP would identify and bifurcate certain
embedded derivatives from the underlying contract or security and account for them separately;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) investments in Federal Home Loan Bank stock are reported as an investment in common stock, unaffiliated, whereas GAAP
would report these within other invested assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r) identification of other-than-temporary impairment ("OTTI") uses an "intent and ability to hold"
criteria whereas GAAP would use an "ability and intent not to sell" criteria.

**CORRECTION OF ERRORS** The Company identified an overstatement in prior years' deferred tax asset related to its reinsurance transactions. The correction of the error was recorded in accordance with SSAP No. 3 – *Accounting Changes and Corrections of Error* and is reflected as a decrease in unassigned funds of $18,272 on the Statements of Changes in Capital and Surplus*.*

**RECLASSIFICATIONS** Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications had no impact on capital and surplus or net income in the prior year.

***Note 2.* SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** 

**USE OF ESTIMATES** The preparation of financial statements requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Those estimates are inherently subject to change and actual results could differ from those estimates. Included among the material reported amounts and disclosures that require extensive use of estimates are:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◇ Carrying value of certain invested assets and derivatives

*Page 6* *The Penn Insurance and Annuity Company*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◇ Liabilities for reserves and funds for the payment of insurance and annuity benefits

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◇ Accounting for income taxes and valuation of deferred income tax assets and liabilities and unrecognized tax benefits

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◇ Litigation and other contingencies

**INVESTMENTS** *Bonds* with an NAIC designation of 1 to 5 are valued at amortized cost. All other bonds are valued at the lower of cost or fair value. Fair value is determined using an external pricing service or management's pricing models.

For fixed income securities that do not have a fixed schedule of payments, including asset-backed and mortgage-backed securities, the effect on amortization or accretion is revalued three times a year based on the current estimated cash flows. Prepayment assumptions are based on borrower constraints and economic incentives such as original term, age and coupon of the loan as affected by the interest rate environment. Cash flow assumptions for structured securities are obtained from broker dealer survey values or internal estimates. These assumptions are consistent with the current interest rate and economic environment.

The Company has adopted a principles-based definition of a bond for the classification and reporting of its investments. A security is classified as a bond if it represents a creditor relationship, contains a fixed schedule for future payments and is either an issuer credit obligation or an asset-backed security. To determine whether a security meets the principles-based definition of a bond, management performs a qualitative assessment focusing on the security's underlying economic characteristics including but not limited to creditor relationship, fixed payments and source of repayment. The adoption of this guidance did not have a significant impact on the Company's financial statements.

*Preferred Stock* Highest-quality, high-quality or medium quality redeemable preferred stock (NAIC designations 1 to 3) shall be valued at amortized cost. All other redeemable preferred stocks (NAIC designations 4 to 6) shall be reported at the lower of amortized cost or fair value. Perpetual preferred stock shall be valued at fair value, not to exceed any currently effective call price. Fair value is determined using an external pricing service or management's pricing model.

*Common Stock* of the Company's insurance affiliate, PIAre I, is carried at its underlying audited statutory surplus on the Statements of Admitted Assets, Liabilities, and Capital and Surplus.

*Unaffiliated common stock* is carried at fair value. The investment in capital stock of the Federal Home Loan Bank of Pittsburgh ("FHLB-PGH") is carried at par, which approximates fair value.

Dividends are recognized in net investment income on the ex-dividend date. Other changes in carrying value are recognized as changes in unrealized gains or losses in surplus.

*Policy Loans* are carried at the aggregate balance of unpaid principal and capitalized interest.

*Cash, Cash Equivalents and Short-Term Investments* Cash equivalents include investments purchased with maturities of three months or less and money market mutual funds. Short-term investments, which are carried at amortized cost and approximate fair value, consist of investments purchased with maturities greater than three months, and less than or equal to 12 months.

*Alternative Assets* consist primarily of limited partnerships. The Company accounts for the value of its investments at their underlying GAAP equity. Dividends and income distributions from limited partnerships are recorded as investment income. Undistributed earnings are included in the unrealized gains and losses balance and are reflected in surplus, net of deferred taxes. Distributions that are recorded as a return of capital reduce the carrying value of the limited partnership investment. Due to the timing of the valuation data received from the partnership, these investments are reported in accordance with the most recent valuations received, which are primarily on a one quarter lag.

*Derivatives* The Company may utilize derivative financial instruments in the normal course of business to manage risk, in conjunction with its management of assets and liabilities and interest rate risk. The accounting treatment of

*2025 Statutory Financial Statements* *Page 7* 

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specific derivatives depends on whether the financial instrument is designated and qualifies as a highly effective hedge. Derivatives used in hedging transactions that meet the criteria of a highly effective hedge are reported and valued in a manner that is consistent with the instrument being hedged. These derivatives are carried at amortized cost with no resulting changes in fair value. Derivatives used in risk management transactions that do not meet the criteria of an effective hedge are accounted for at fair value, with changes in fair value recorded in unrealized capital gains/(losses). Derivatives with a positive fair value or carrying value are reported as admitted assets. Derivatives with a negative fair value or carrying value are reported as liabilities. Realized gains and losses that are recognized upon termination or maturity of the derivatives used in economic hedges of interest rate and currency risk of the fixed income portfolio, regardless of accounting treatment, are transferred, net of taxes, to the IMR. All other realized gains and losses are recognized in net income upon maturity or termination of the derivative contracts.

The Company entered into equity options in the form of call spreads that are carried at fair value. The Company has not designated these as hedging instruments.

The Company entered into interest rate swaps, that are carried at fair value. The Company may use payer swaps, a type of interest rate swap, to manage risk associated with rising interest rates. Receiver swaps, a type of interest rate swap, protect the Company from credit risk in the fixed income portfolio. These do not meet the criteria of an effective hedge.

Investment income is recorded on an accrual basis. Amounts payable or receivable under interest rate swap agreements are recognized as investment income or expense when incurred.

The Company does not engage in derivative financial instrument transactions for speculative purposes.

*Other Invested Assets* The Company invests in LIHTC investments, which generate tax credits for investing in affordable housing projects. Investments in LIHTC are included in other invested assets and are accounted for under the proportional amortized cost method. The delayed equity contributions for these investments are unconditional and legally binding and therefore, have been recognized as a liability. LIHTC investments are reviewed for OTTI, which is accounted for as a realized loss.

Other invested assets also include an investment in an unaffiliated mortgage fund, an investment in Penn Mutual AM Strategic Income Fund ("PMAM's PMUBX"), debt securities that do not meet the definition of a bond valued at the lower of cost or fair value and receivables for unsettled investment transactions.

**OTTI EVALUATION** *Bonds, mortgage-backed and asset-backed securities The Company considers an impairment to be OTTI if: (a) the Company's intent is to sell, (b) the Company will more likely than not be required to sell, (c) the Company does not have the intent and ability to hold the security for a period of time sufficient to recover the amortized cost basis or (d) the Company does not expect to recover the entire amortized cost basis. The Company conducts a periodic management review of all bonds including those in default, not-in-good standing or otherwise designated by management. The Company also considers other qualitative and quantitative factors in determining the existence of OTTI including, but not limited to, unrealized loss trend analysis and significant short-term changes in value, default rates, delinquency rates, percentage of nonperforming loans, prepayments and severities. If the impairment is other-than-temporary, the non-interest loss portion of the impairment is recorded through realized losses and the interest related portion of the loss is disclosed in the notes to the financial statements.* 

The non-interest portion is determined based on the Company's "best estimate" of future cash flows discounted to a present value using the appropriate yield. The difference between the present value of the best estimate of cash flows and the amortized cost is the non-interest loss. The remaining difference between the amortized cost and the fair value is the interest loss.

*Equity Securities OTTI —* Equity securities with market value to book value ratio below 80% are further evaluated; while *t*he Company will impair any lot of equity securities in an unrealized loss position for more than 12 consecutive months by more than 10% without further evaluation. Any such impairments are accounted for as a realized loss.

*Page 8* *The Penn Insurance and Annuity Company*

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*Alternative Assets OTTI* — The Company's evaluation for OTTI takes into consideration the remaining life of a partnership and the performance of the underlying assets when evaluating the facts and circumstances surrounding the recovery of the cost for a partnership. Any such impairments are accounted for as a realized loss.

*LIHTC OTTI* — For LIHTC investments, OTTI is determined by comparing the book value of the investment with the present value of future tax benefits. The investment is written down if the book value is higher than the present value and the impairment is accounted for as a realized loss.

**INVESTMENT INCOME DUE AND ACCRUED** Investment income due and accrued consists primarily of interest and dividends. Interest is recognized on an accrual basis and dividends are recorded as earned on the ex-dividend date. Due and accrued income is not recorded on: (a) bonds in default; (b) bonds delinquent more than 90 days or where collection of interest is improbable; and (c) policy loan interest due and accrued in excess of the cash surrender value of the underlying contract.

**FEDERAL INCOME TAX** The Company files a consolidated federal income tax return with its parent, Penn Mutual, and Penn Mutual's insurance and non-insurance subsidiaries. Each subsidiary's tax liability or refund is accrued on a benefits for loss basis. Penn Mutual reimburses subsidiaries for losses utilized in the consolidated return based on inter-company tax allocation agreements. The provision for federal income taxes is computed in accordance with the section of the Internal Revenue Code applicable to life insurance companies and is based on income that is currently taxable.

Uncertain tax positions ("UTPs") are established when the merits of a tax position are evaluated against certain measurement and recognition tests. UTP changes are reflected as a component of income taxes. The Company currently has no UTPs.

Deferred income tax assets and liabilities are established to reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. These deferred tax assets or liabilities are measured by using the enacted tax rates expected to apply to taxable income in the period in which the deferred tax liabilities or assets are expected to be settled or realized. Changes in the deferred tax balances are reported as adjustments to surplus. Deferred tax assets, after the consideration of any necessary valuation allowance, in excess of statutory limits are treated as nonadmitted assets and charged to surplus.

**REINSURANCE** In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance enterprises or reinsurers under excess coverage and coinsurance contracts. The Company has set its retention limit for acceptance of risk on life insurance policies at various levels up to $10,000 for single life and $20,000 for joint lives effective March 1, 2024. Prior to March 1, 2024, these limits were $7,500 for single life and $10,000 for joint lives.

In addition to excess coverage and coinsurance contracts, the Company also utilizes other forms of reinsurance such as coinsurance funds withheld.

Reinsurance does not relieve the Company of its primary liability and, as such, failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the risk transfer of its reinsurance contracts as well as the financial strength of potential reinsurers. The Company regularly monitors the financial condition and ratings of its existing reinsurers to ensure that amounts due from reinsurers are collectible.

Insurance liabilities are reported net of the effects of reinsurance. Estimated reinsurance recoverables are recognized in a manner consistent with the liabilities related to the underlying reinsured contracts.

**OTHER ASSETS** Other assets primarily include receivables for collateral remitted to counterparties.

As of December 31, 2025 and 2024, the Company had $30,984and $58,129 of negative (disallowed) IMR in aggregate and in the general account, respectively.

As of December 31, 2025 and 2024, the Company had $30,984 and $58,129 of negative (disallowed) IMR admitted in the general account, respectively.

*2025 Statutory Financial Statements* *Page 9* 

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As of December 31, 2025 and 2024, the Company's calculated adjusted capital and surplus was $968,017 and $823,899, respectively.

As of December 31, 2025 and 2024, the percentage of adjusted general capital and surplus for which the admitted disallowed IMR represents was 3% and 7%, respectively.

The following represents allocated gains/(losses) previously deferred to the IMR from derivatives:

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| | | |
|:---|:---|:---|
| | **December 31, 2025** | **December 31, 2024** |
|  Realized capital gains | $— | $— |
|  Realized capital (losses) | (11282) | (10727) |
|  **Total allocated (losses) to IMR from derivatives** | $**(11282)** | $**(10727)** |

---

**SEPARATE ACCOUNT ASSETS AND LIABILITIES** The Company has separate account assets and liabilities representing segregated funds administered and invested by the Company primarily for the benefit of variable life insurance policyholders and variable annuity contractholders. The assets of each account are legally segregated and are generally not subject to claims that arise out of any other business of the Company. The separate accounts have varying investment objectives.

Separate account assets are stated at the fair value of the underlying assets, which are shares of mutual funds. The value of the assets in the separate accounts reflects the actual investment performance of the respective accounts and is not guaranteed by the Company. The liability is reported at contract value and represents the policyholders' interest in the account and includes accumulated net investment income and realized and unrealized capital gains/(losses) on the assets. The investment income and realized capital gains/(losses) from separate account assets accrue to the policyholders and are not included in the Statements of Operations. Mortality, policy administration, surrender charges assessed and asset management fees charged against the accounts are included in Other revenue in the accompanying Statements of Operations.

The Company has variable annuity contracts in the separate accounts in which the Company provides various forms of guarantees to benefit the related contract holders called Guaranteed Minimum Death Benefits ("GMDB"). In accordance with guarantees provided, if the investment proceeds in the separate accounts are insufficient to cover the guarantees for the product, the policyholder proceeds will be remitted by the general account.

**NONADMITTED ASSETS** Assets designated as nonadmitted by the NAIC include the amount of the deferred tax asset that is in excess of limits prescribed by SAP, certain other receivables, advances and prepayments and related party amounts outstanding greater than 90 days from the due date. Such amounts are excluded from the Statements of Admitted Assets, Liabilities and Capital and Surplus.

**RESERVES AND FUNDS FOR THE PAYMENT OF INSURANCE AND ANNUITY BENEFITS** Policyholders' reserves provide amounts adequate to discharge estimated future obligations in excess of estimated future premium on policies in-force. Any adjustments that are made to the reserve balances are reflected in the Statements of Operations in the year in which such adjustments are made, with the exception of changes in valuation bases that are accounted for as charges or credits to surplus.

Reserves and funds for the payment of future life and annuity benefits are developed using actuarial methods based on statutory mortality and interest requirements. Reserves for life insurance contracts are developed using accepted actuarial methods computed principally on the net level, modified preliminary term or CRVM methods using the 1958, 1980, 2001, and 2017 Commissioners' Standard Ordinary ("CSO") Mortality and American Experience Tables and assumed interest rates ranging from 3.50% to 5.50%. Reserves for substandard policies are computed using multiples of the respective underlying mortality tables. The Company has universal life contracts with secondary guarantee features. The Company establishes reserves according to Actuarial Guideline XXXVIII, unless otherwise noted.

*Page 10* *The Penn Insurance and Annuity Company*

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Reserves for Single Life UL with secondary guarantee features are based on the methodology specified by the Life Principle-Based Reserve approach ("VM-20"), starting with 2017 policy issue years. Reserves for Single and Joint Life IUL are based on the same VM-20 methodology starting with 2018 policy issue years. Reserves for all other life insurance products are based on the same VM-20 methodology starting with 2020 policy issue years. VM-20 specifies the final reserve as the greater of the Net Premium Reserve ("NPR"), Deterministic Reserve ("DR") and Stochastic Reserve ("SR"). The NPR is a formulaic reserve with prescribed assumptions, including the 2017 CSO Mortality Tables. The DR is based on a single path, deterministic projection with prudent estimate assumptions, including margins for uncertainty. The SR is based on the Conditional Tail Expectation 70 ("CTE70") of 1,000 stochastically generated interest rate return scenarios with prudent estimate assumptions, including margins for uncertainty.

Reserves for fixed indexed annuities are developed using accepted actuarial methods computed principally under the Commissioners' Annuity Reserve Valuation Method ("CARVM") method using the 2012 Individual Annuity Mortality Basis and assumed interest rates ranging from 3.00% to 4.50%. Reserves for substandard policies are computed using multiples of the respective underlying reserving tables. The Company establishes reserves according to Actuarial Guideline XXXV.

Reserves for deferred fixed individual annuity contracts are developed using accepted actuarial methods computed principally under the Commissioners' Annuity Reserve Valuation Method using applicable interest rates and mortality tables, primarily on the 1971, 1983, 2000, and 2012 Individual Annuity Mortality Table and rates ranging from 1.50% to 7.75%.

The Company waives deduction of deferred fractional premium at death and returns any portion of the final premium beyond the date of death. Reserves are computed using continuous functions to reflect these practices. Surrender values are not promised in excess of the legally computed reserves.

The Company also has deferred variable annuity contracts containing GMDB, Guaranteed Minimum Accumulation Benefit ("GMAB") and Guaranteed Minimum Withdrawal Benefit ("GMWB") features. The Company establishes reserves according to the methodology specified by Principle-Based Reserves for Variable Annuities ("VM-21").

Reserves for group annuity contracts are developed using accepted actuarial methods computed principally on the 1971 Group Annuity Mortality Tables with an assumed interest rate of 11.25%.

The Company had $42,011 and $27,274 as of December 31, 2025 and 2024, respectively, of insurance in force for which the gross premiums are less than the net premiums according to the standards of valuation set by the Delaware Department of Insurance.

The tabular interest has been determined from the basic data for the calculation of policy reserves. The tabular less actual reserve released has been determined by formula.

**LIABILITIES FOR DEPOSIT-TYPE CONTRACTS** Reserves for funding agreements, investment-type contracts such as supplementary contracts not involving life contingencies and certain structured settlement annuities are based on account value or accepted actuarial methods using applicable interest rates. Fair value is estimated by discounting future cash flows using current market rates.

The tabular interest for funds not involving life contingencies is determined as the change in reserves less funds added during the year less other increases plus funds withdrawn during the year.

**POLICY CLAIMS IN PROCESS** Policy claims in process include provisions for payments to be made on reported claims and claims incurred but not reported.

**INTEREST MAINTENANCE RESERVE** The IMR captures the realized capital gains/(losses) that result from changes in the overall level of interest rates and amortizes them into income over the calendar years to expected maturity. As of December 31, 2025 and 2024, the Company maintained a negative IMR of $30,984 and $58,128, respectively, an admitted asset in accordance with the NAIC's INT 23-01T guidance, which provides limited-time exception guidance to SSAP No. 7.

*2025 Statutory Financial Statements* *Page 11* 

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**ASSET VALUATION RESERVE** The AVR is a contingency reserve to stabilize surplus against fluctuations in the statement value of common stocks, partnerships, LIHTC investments and LLCs as well as non interest-related declines in the value of bonds. The AVR is reported in the Statements of Admitted Assets, Liabilities and Capital and Surplus and the change in AVR is reported in the Statements of Changes in Capital and Surplus.

**DRAFTS OUTSTANDING** Drafts outstanding that have not been presented for payment are recorded as a liability.

**OTHER LIABILITIES** Other liabilities primarily include life insurance premiums received in advance, drafts outstanding, amounts payable on unaffiliated reinsurance agreements and amounts payable to the Company's affiliates under reinsurance agreements and other service agreements.

**CONTINGENCIES** Amounts related to contingencies are accrued if it is probable that a liability has been incurred and an amount is reasonably estimable. Regarding litigation, management evaluates whether there are incremental legal or other costs directly associated with the ultimate resolution of the matter that are reasonably estimable and, if so, includes these costs in the accrual.

**RISK-BASED CAPITAL** Life insurance companies are subject to certain risk-based capital ("RBC") requirements as specified by the NAIC. Under those requirements, minimum amounts of statutory surplus are required to be maintained based on various risk factors related to it. At December 31, 2025, the Company's surplus exceeds these minimum levels.

**PREMIUM AND RELATED EXPENSE RECOGNITION** Life insurance premium revenue is generally recognized as revenue on the gross basis when due from policyholders under the terms of the insurance contract. Annuity premium on policies with life contingencies is recognized as revenue when received. Both premium and annuity considerations are recorded net of reinsurance premiums. Commissions and other costs related to issuance of new policies, and policy maintenance and settlement costs are charged to current operations when incurred. Surrender fee charges on certain life and annuity products are recorded as a reduction of benefits. Benefits payments are reported net of the amounts received from reinsurers.

The Company accounts for deposit-type contracts (those that do not subject the Company to mortality or morbidity risk) under the deposit method. Amounts received from and payments to policyholders related to these contracts are recorded directly against the related policy reserves. Interest credited to policyholder accounts is reflected in Benefits paid to policyholders and beneficiaries. Fees charged to policyholder accounts are reflected in Other revenue.

**OTHER REVENUE AND OTHER EXPENSES** Other revenue includes assumed interest income earned on the funds withheld assets held by Penn Mutual pursuant to the terms of the 100% coinsurance with funds withheld agreement with Penn Mutual. The Company subsequently remits this interest income earned to PIAre I, the ultimate assuming company, which is recognized in Other expenses.

Other revenue also includes benefits received by the Company under reinsurance agreements with Penn Mutual relating to index credits on certain universal life policies issued by the Company.

**REALIZED AND UNREALIZED CAPITAL GAINS AND LOSSES** Realized capital gains and losses, net of taxes, exclude gains and losses transferred to the IMR. Realized capital gains and losses are recognized in net income and are determined using the specific identification method.

All after-tax realized capital gains and losses that result from changes in the overall level of interest rates for all types of fixed-income investments and interest-related derivative activities for derivatives backing assets are transferred to the IMR and amortized into net investment income using the grouped method over the remaining life of the investment sold or, in the case of derivative financial instruments, over the remaining life of the underlying asset.

Unrealized capital gains and losses, net of deferred federal income taxes, are recorded as a change in surplus.

*Page 12* *The Penn Insurance and Annuity Company*

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**FEDERAL HOME LOAN BANK BORROWINGS** The Company is a member of the FHLB-PGH, which provides access to collateralized advances, collateralized funding agreements and other FHLB-PGH products. Collateralized advances from the FHLB-PGH are classified as borrowed money. Collateralized funding agreements issued to the FHLB-PGH are classified as liabilities for deposit-type funds and are recorded within Reserves and funds for payment of insurance and annuity benefits. FHLB-PGH is a first-priority secured creditor.

The Company's membership in FHLB-PGH requires the ownership of member stock, and borrowings from FHLB-PGH require the purchase of FHLB-PGH activity based stock in an amount equal to 4% of the outstanding borrowings. All FHLB-PGH stock purchased by the Company is classified as restricted general account investments within Common stock — unaffiliated. The Company's borrowing capacity is determined by the lesser of the assets available to be pledged as collateral to FHLB-PGH or 10% of the Company's prior period admitted general account assets. The fair value of the qualifying assets pledged as collateral by the Company must be maintained at certain specified levels of the borrowed amount, which can vary, depending on the nature of the assets pledged. The Company's agreement allows for the substitution of assets and the advances are pre-payable. Current borrowings are subject to prepayment penalties.

Borrowings from the FHLB-PGH are classified as funding agreements. As of December 31, 2025, there was $200,000 in outstanding borrowings and the maximum borrowed during the year was $500,000. As of December 31, 2024, there were $200,000 in outstanding borrowings and the maximum borrowed during the year was $500,000.

**NEW ACCOUNTING STANDARDS** 

In August 2023, the NAIC adopted INT 23-01T, *Disallowed IMR* ("INT 23-01T"). INT 23-01T provides optional, limited-term guidance for the assessment of disallowed IMR for up to 10% of adjusted general account capital and surplus. An insurer's capital and surplus must first be adjusted to exclude certain "soft assets" including net positive goodwill, electronic data processing equipment and operating system software, net deferred tax assets and admitted disallowed IMR. An insurer will only be able to admit the negative IMR if the insurer's risk-based capital is over 300% authorized control level after adjusting to remove the assets described above.

As adopted, negative IMR may be admitted first in the insurer's general account and then, if all disallowed IMR in the general account is admitted and the percentage limit is not reached, to the separate account proportionately between insulated and noninsulated accounts. If the insurer can demonstrate historical practice in which acquired gains from derivatives were also revered to IMR (as liabilities) and amortized, there is no exclusion for derivative losses. To the extent the Company's IMR balance is a net negative, the effects of INT 23-01T will be reflected in the Company's financial position, results of operations and financial statement disclosures. The Company has adopted this guidance, and the adoption resulted in an admitted disallowed IMR of $30,984 and $58,129 as of December 31, 2025 and 2024, respectively.

The Company has adopted SSAP No. 94, *State and Federal Tax Credits*. This guidance, effective as of January 1, 2025, expanded the scope of SSAP No. 94R to include all state and federal tax credits and provides new guidance on the accounting, recognition, and reporting for state and federal tax credits. The adoption of this guidance did not have a significant impact on the Company's financial statements.

The Company has adopted the updated SSAP No. 26R, *Bonds*, which introduces a principles-based definition for what constitutes a bond for statutory accounting purposes. Under the revised guidance, a bond is defined as any security that: (1) represents a creditor relationship, and (2) has a fixed schedule for one or more future payments. These securities are further categorized as either an issuer credit obligation or an asset-backed security. The adoption of this guidance did not have a significant impact on the Company's financial statements.

***Note 3.* INVESTMENTS** 

The Company maintains a diversified investment portfolio. Investment policies limit concentration in any asset class (except for U.S. Treasury and U.S. Government guaranteed securities), geographic region, industry group, economic characteristic, investment quality or individual investment.

*2025 Statutory Financial Statements* *Page 13* 

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**BONDS AND PREFERRED STOCK** The following summarizes the admitted value and estimated fair value of the Company's investment in bonds and redeemable preferred stock as of December 31:

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| | | | | |
|:---|:---|:---|:---|:---|
| | | **Gross Unrealized<br>Capital** | **Gross Unrealized<br>Capital** | |
| <br>**DECEMBER 31, 2025** |<br>**Admitted<br>Value** | **Gains** | **Losses** |<br>**Estimated<br>Fair Value** |
|  Issuer Credit Obligation (ICO): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; U.S. Governments | $3491 | $24 | $47 | $3468 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other U.S. Governments | 7863 | 34 | 33 | 7864 |
| &nbsp;&nbsp;&nbsp;&nbsp; Foreign Sovereign | 55623 | 1327 | 1641 | 55309 |
| &nbsp;&nbsp;&nbsp;&nbsp; Municipal — General | 156058 | 1426 | 16758 | 140726 |
| &nbsp;&nbsp;&nbsp;&nbsp; Municipal — Special Revenue | 777991 | 6057 | 81515 | 702533 |
| &nbsp;&nbsp;&nbsp;&nbsp; Project Finance | 44903 | 315 | 4271 | 40947 |
| &nbsp;&nbsp;&nbsp;&nbsp; Industrial and Miscellaneous | 5018590 | 63351 | 376851 | 4705090 |
| &nbsp;&nbsp;&nbsp;&nbsp; Single Entity-Backed | 106765 | 1319 | 5752 | 102332 |
| &nbsp;&nbsp;&nbsp;&nbsp; SVO-Identified Bond ETFs | 56873 | 161 | 161 | 56873 |
| &nbsp;&nbsp;&nbsp;&nbsp; BDCs, Closed-End Funds & REITs | 130612 | 760 | 12826 | 118546 |
| &nbsp;&nbsp;&nbsp;&nbsp; Bank Loans | 14167 |  | 315 | 13852 |
|  **Total ICO** | **6372936** | **74774** | **500170** | **5947540** |
| &nbsp;&nbsp;&nbsp;&nbsp; Asset-backed Securities (ABS): |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Residential Mortgage-Backed Securities | 1516765 | 25016 | 38682 | 1503099 |
| &nbsp;&nbsp;&nbsp;&nbsp; Commercial Mortgage-Backed Securities | 1309775 | 18960 | 29338 | 1299397 |
| &nbsp;&nbsp;&nbsp;&nbsp; CLOs, CBOs, and CDOs | 431927 | 893 | 1381 | 431439 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other Financial Asset-Backed Securities | 939895 | 4929 | 22909 | 921915 |
| &nbsp;&nbsp;&nbsp;&nbsp; Lease-Backed Securities | 26933 | 91 | 1017 | 26007 |
|  Total ABS | 4225295 | 49889 | 93327 | 4181857 |
|  Preferred Stock | 59614 | 6642 | 9093 | 57163 |
|  **Total Bonds and Preferred Stocks** | $**10657845** | $**131305** | $**602590** | $**10186560** |

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| | | | | |
|:---|:---|:---|:---|:---|
|  | | **Gross Unrealized<br>Capital** | **Gross Unrealized<br>Capital** | |
| **2024** |<br>**Admitted<br>Value** | **Gains** | **Losses** |<br>**Estimated<br>Fair Value** |
|  US Governments | $233270 | $1422 | $7638 | $227054 |
|  Other Governments | 31157 |  | 2363 | 28794 |
|  States, Territories and | 33131 | 194 | 2657 | 30668 |
|  Political Subdivisions | 186983 | 370 | 28970 | 158383 |
|  Special Revenue | 675735 | 2847 | 86086 | 592496 |
|  Industrial and Miscellaneous | 4203022 | 20585 | 452931 | 3770676 |
|  Residential Mortgage-Backed |  |  |  |  |
|  Securities | 834436 | 3527 | 52984 | 784979 |
|  Commercial Mortgage-Backed |  |  |  |  |
|  Securities | 1155340 | 7133 | 45816 | 1116657 |
|  Asset-Backed Securities | 1581240 | 7489 | 61346 | 1527383 |
|  Hybrid Securities | 250969 | 5045 | 3083 | 252931 |
|  SVO Identified Funds | 4588 | 2 |  | 4590 |
|  Total Bonds | 9189871 | 48614 | 743874 | 8494611 |
|  Preferred Stock | 64552 | 5944 | 8542 | 61954 |
|  **Total Bonds and Preferred Stock** | $**9254423** | $**54558** | $**752416** | $**8556565** |

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*Page 14* *The Penn Insurance and Annuity Company*

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The December 31, 2025 and 2024 amounts above in admitted value and estimated fair value for Residential Mortgage-Backed securities reflect no subprime mortgage exposure.

The following table summarizes the admitted value and estimated fair value of debt securities as of December 31, 2025 by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties. Securities that are not due on a single maturity are included as of the final maturity.

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| | | |
|:---|:---|:---|
| | **Admitted<br>Value** | **Fair Value** |
|  Due in one year or less | $80867 | $80700 |
|  Due after one year through five years | 386810 | 393318 |
|  Due after five years through ten years | 832510 | 840414 |
|  Due after ten years | 5072749 | 4633108 |
|  Asset-backed Securities (ABS): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Residential Mortgage-Backed Securities<sup>(1)</sup> | 1516765 | 1503099 |
| &nbsp;&nbsp;&nbsp;&nbsp; Commercial Mortgage-Backed Securities<sup>(1)</sup> | 1309775 | 1299397 |
| &nbsp;&nbsp;&nbsp;&nbsp; CLOs, CBOs, and CDOs<sup>(1)</sup> | 431927 | 431439 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other Financial Asset-Backed Securities<sup>(1)</sup> | 939895 | 921915 |
| &nbsp;&nbsp;&nbsp;&nbsp; Lease-Backed Securities<sup>(1)</sup> | 26933 | 26007 |
|  Total bonds | 10598231 | 10129397 |
|  Preferred stock | 59614 | 57163 |
|  **Total Bonds and Preferred Stock** | $**10657845** | $**10186560** |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Includes U.S. Agency structured securities

Asset-backed securities consist of commercial and residential mortgage pass-through holdings and securities backed by various forms of collateral, with the largest being collateralized loan obligations. These securities follow a structured principal repayment schedule and are rated investment grade, other than $523,015 primarily in asset-backed securities that do not follow a structured principal repayment schedule. The mortgage and other asset-backed securities portfolios are presented separately in the maturity schedule due to the potential for prepayment. The weighted average life of this portfolio is 12.4 years.

At December 31, 2025, the largest industry concentration of the Company's portfolio was investments in the Electric-Integrated sector of $533,477, representing 5% of the total debt securities portfolio.

**UNREALIZED LOSSES ON INVESTMENTS** Management has determined that the unrealized losses on the Company's investments in equity and fixed maturity securities at December 31, 2025 are temporary in nature.

*2025 Statutory Financial Statements* *Page 15* 

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The following tables are an analysis of the fair values and gross unrealized losses aggregated by bond category and length of time that the securities were in a continuous unrealized loss position as of December 31:

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Less than 12 months** | **Less than 12 months** | **Greater than 12 months** | **Greater than 12 months** | **Total** | **Total** | **Total** |
| | **Fair Value** | **Gross<br>Unrealized<br>Capital<br>Loss** | **Fair Value** | **Gross<br>Unrealized<br>Capital<br>Loss** | **Fair Value** | **Gross<br>Unrealized<br>Capital<br>Loss** | **Number<br>of<br>Securities** |
| **DECEMBER 31, 2025** |  |  |  |  |  |  |  |
|  Issuer Credit Obligation (ICO): |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; U.S. Governments | $526 | $47 | $— | $— | $526 | $47 | 6 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other U.S. Governments | 3967 | 33 |  |  | 3967 | 33 | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp; Foreign Sovereign | 12487 | 155 | 10928 | 1486 | 23415 | 1641 | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp; Municipal — General | 4952 | 48 | 80777 | 16710 | 85729 | 16758 | 28 |
| &nbsp;&nbsp;&nbsp;&nbsp; Municipal — Special Revenue | 62386 | 355 | 339797 | 81160 | 402183 | 81515 | 140 |
| &nbsp;&nbsp;&nbsp;&nbsp; Project Finance | 8006 | 83 | 25024 | 4188 | 33030 | 4271 | 19 |
| &nbsp;&nbsp;&nbsp;&nbsp; Industrial and Miscellaneous | 710329 | 18423 | 1857308 | 358428 | 2567637 | 376851 | 1030 |
| &nbsp;&nbsp;&nbsp;&nbsp; Single Entity-Backed | 6288 | 43 | 52349 | 5709 | 58637 | 5752 | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp; SVO-Identified Bond ETFs | 56873 | 161 |  |  | 56873 | 161 | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp; BDCs, Closed-End Funds & REITs | 2991 | 1 | 72045 | 12825 | 75036 | 12826 | 29 |
| &nbsp;&nbsp;&nbsp;&nbsp; Bank Loans | 4084 | 315 |  |  | 4084 | 315 | 3 |
|  Total ICO | 872889 | 19664 | 2438228 | 480506 | 3311117 | 500170 | 1289 |
| &nbsp;&nbsp;&nbsp;&nbsp; Asset-backed Securities |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; (ABS): |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Residential Mortgage- |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Backed Securities | 222464 | 2569 | 348808 | 36113 | 571272 | 38682 | 115 |
| &nbsp;&nbsp;&nbsp;&nbsp; Commercial Mortgage- |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Backed Securities | 190168 | 2277 | 391963 | 27061 | 582131 | 29338 | 229 |
| &nbsp;&nbsp;&nbsp;&nbsp; CLOs, CBOs, and CDOs |  | 717 | 57671 | 664 | 57671 | 1381 | 34 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other Financial Asset-Backed |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Securities | 486350 | 5455 | 161787 | 17454 | 648137 | 22909 | 69 |
| &nbsp;&nbsp;&nbsp;&nbsp; Lease-Backed Securities |  |  | 17889 | 1017 | 17889 | 1017 | 6 |
|  Total ABS | 898982 | 11018 | 978118 | 82309 | 1877100 | 93327 | 453 |
|  Preferred Stock | 8951 | 147 | 42888 | 8946 | 51839 | 9093 | 22 |
|  **Total Bonds and Preferred Stocks** | $**1780822** | $**30829** | $**3459234** | $**571761** | $**5240056** | $**602590** | **1764** |

---

*Page 16* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Less than 12 months** | **Less than 12 months** | **Less than 12 months** | **Greater than 12 months** | **Greater than 12 months** | **Greater than 12 months** | **Total** |
| | **Fair Value** | **Gross<br>Unrealized<br>Capital<br>Loss** | **Fair Value** | **Gross<br>Unrealized<br>Capital<br>Loss** | **Fair Value** | **Gross<br>Unrealized<br>Capital<br>Loss** | **Number<br>of<br>Securities** |
| **2024** |  |  |  |  |  |  |  |
|  US Governments | $118400 | $4071 | $19823 | $3567 | $138223 | $7638 | 48 |
|  Other Governments | 27381 | 1776 | 1413 | 587 | 28794 | 2363 | 9 |
|  States, Territories and Possessions | 9101 | 170 | 13132 | 2487 | 22233 | 2657 | 9 |
|  Political Subdivisions | 21732 | 669 | 107463 | 28301 | 129195 | 28970 | 52 |
|  Special Revenue | 196745 | 5117 | 282647 | 80969 | 479392 | 86086 | 199 |
|  Industrial and Miscellaneous | 1270840 | 41298 | 1711756 | 411633 | 2982596 | 452931 | 1666 |
|  Residential Mortgage-backed Securities | 322571 | 5740 | 288688 | 47244 | 611259 | 52984 | 163 |
|  Commercial Mortgage-backed Securities | 291391 | 3945 | 459044 | 41871 | 750435 | 45816 | 427 |
|  Asset-backed Securities | 223984 | 4130 | 517790 | 57216 | 741774 | 61346 | 350 |
|  Hybrid Securities | 48307 | 701 | 60428 | 2382 | 108735 | 3083 | 107 |
|  SVO Identified Funds |  |  |  |  |  |  |  |
|  **Total Bonds** | $**2530452** | $**67617** | $**3462184** | $**676257** | $**5992636** | $**743874** | **3030** |
|  Preferred Stock | 17079 | 828 | 36582 | 7714 | 53661 | 8542 | 26 |
|  **Total Bonds and Preferred Stock** | $**2547531** | $**68445** | $**3498766** | $**683971** | $**6046297** | $**<br>752416** | **3056** |

---

Included in the December 31, 2025 and 2024 amounts above is the interest portion of impairments which were taken during the year, on securities of $242 and $2, respectively.

**COMMON STOCK — UNAFFILIATED** The following summarizes the cost and estimated fair value of the Company's investment in unaffiliated common stock:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | | **Gross Unrealized**<br>**Capital** | **Gross Unrealized**<br>**Capital** | |
| |<br>**Cost** | **Gains** | **Losses** |<br>**Estimated<br>Fair Value** |
|  December 31, 2025 | $11148 | $60 | $84 | $11124 |
|  December 31, 2024 | $9501 | $— | $46 | $9455 |

---

The following presents the gross unrealized capital losses and fair values for unaffiliated common stock with unrealized capital losses.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Less than 12 months** | **Less than 12 months** | **Greater than 12 Months** | **Greater than 12 Months** | **Total** | **Total** |
| | **Fair Value** | **Gross<br>Unrealized<br>Capital<br>Losses** | **Fair Value** | **Gross<br>Unrealized<br>Capital<br>Losses** | **Fair Value** | **Gross<br>Unrealized<br>Capital<br>Losses** |
|  December 31, 2025 | $1111 | $84 | $— | $— | $1111 | $84 |
|  December 31, 2024 | $102 | $46 | $— | $— | $102 | $46 |

---

The amount of unrealized capital losses on the Company's investment in unaffiliated common stock is attributable to 4 individual securities. As of December 31, 2025, there was no unaffiliated common stock security impairments.

*2025 Statutory Financial Statements* *Page 17* 

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*($ in Thousands)* 

*Federal Home Loan Bank* The Company's investment in FHLB-PGH Class B Membership Capital Stock as of December 31, 2025 and December 31, 2024 was $1,805 and $1,353, respectively. The Company also invested $8,000 and $8,000 in FHLB-PGH Activity Stock as of December 31, 2025 and December 31, 2024, respectively. The Class B Membership Capital Stock held by the Company is subject to written notices of requests for redemption followed by a five year waiting period.

The Company's borrowing capacity with the FHLB-PGH was $1,430,338 and $1,059,416 as of December 31, 2025 and December 31, 2024, respectively.

The following represents the amount of collateral required to be pledged to the FHLB-PGH and the maximum amount of collateral pledged as of:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31<br>2025** | **Maximum<br>during 2025** | **December 31<br>2024** | **Maximum<br>during 2024** |
|  Carrying value | $1025434 | $1105652 | $427165 | $715752 |
|  Fair value | 1023467 | 1094370 | 408770 | 687465 |

---

The amount of interest expense on borrowings classified as funding agreements for the years ended December 31, 2025 and December 31, 2024 was $9,469 and $12,853, respectively.

**RESTRICTED ASSETS AND SPECIAL DEPOSITS** The Company maintains assets on deposit with governmental authorities or trustees as required by certain state insurance laws. The Company also receives and pledges collateral for derivative contracts and FHLB in the form of cash and securities. Capital stock was purchased as a requirement to participate in the FHLB lending program.

---

| | | | |
|:---|:---|:---|:---|
| **Balance Sheet Classification** | **Type** | **2025** | **2024** |
|  Bonds | Collateral — FHLB | $1025434 | $427165 |
|  Bonds | Reinsurance Funds Withheld | 670320 | 645801 |
|  Bonds | New York 109 trust |  | 1545 |
|  Bonds | State deposit | 1572 |  |
|  Preferred stocks | Reinsurance Funds Withheld | 4982 |  |
|  Common stocks unaffiliated | FHLB Stock | 9805 | 9353 |
|  Cash, cash equivalents and short-term investments | Reinsurance Funds Withheld | 30658 |  |
|  Cash, cash equivalents and short-term investments | Collateral — Derivatives | 341703 | 331390 |
|  Cash, cash equivalents and short-term investments | State deposit | 2886 | 2936 |
|  **Total Restricted Assets** |  | $**2087360** | $**1418189** |

---

**OTHER THAN TEMPORARY IMPAIRMENTS** For the years ended December 31, 2025 and December 31, 2024, other than temporary investment losses amounted to $5,053 and $0, respectively.

**ALTERNATIVE ASSETS** The investment values of alternative assets are provided per the partnerships' capital account statements. The Company's interest cannot be redeemed; instead, the Company distributions from each fund result from the liquidation of the underlying assets. The period over which unredeemable investments are expected to be liquidated ranges from 5 to 10 years.

As of December 31, 2025, none of these investments exceed 10% of the Company's admitted assets. The Company recognized realized losses of $10,004 and $2,430 for the years ended December 31, 2025 and December 31, 2024, respectively, associated with other-than-temporary impairments of certain alternative assets.

*Page 18* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

Unfunded commitments for alternative assets were $261,652 and $179,374 for the years ended December 31, 2025 and 2024, respectively.

The Company recognized $(28) and $0 realized gains (losses) for the years ended December 31, 2025 and 2024, respectively, associated with liquidations of the Company's interest in alternative assets.

**OTHER INVESTED ASSETS** The components of other invested assets as of December 31, 2025 and 2024 were as follows:

---

| | | |
|:---|:---|:---|
| **December 31,** | **2025** | **2024** |
|  LIHTC | $38761 | $42036 |
|  Receivable for securities | 99711 | 20511 |
|  PMUBX |  | 63723 |
|  Investment in unaffiliated mortgage fund | 102836 |  |
|  **Total other invested assets** | $**241308** | $**126270** |

---

Unfunded commitments for unaffiliated mortgage fund were $75,000 and $0 for the years ended December 31, 2025 and 2024, respectively.

*Low Income Housing Tax Credits T*he Company has no LIHTC properties under regulatory review at December 31, 2025 and 2024. There were no write-downs due to forfeiture of eligibility and there were no impairments for 2025 or 2024.

Commitments of $16,022 and $27,346 for the years ended December 31, 2025 and 2024, respectively, have been recorded in Other liabilities related to unconditional and legally binding delayed equity contributions associated with investments in LIHTC.

The Company's LIHTC activity for the years ended December 31, 2025 and 2024 is as follows:

---

| | | |
|:---|:---|:---|
| **December 31,** | **2025** | **2024** |
|  LIHTC Tax Credits | $4429 | $3213 |
|  LIHTC Investments Balance | 61564 | 66926 |
|  LIHTC Amortization | (22803) | -24890 |
|  LIHTC Other Returns |  |  |

---

The aggregate schedule of tax credits expected to be generated in each of the subsequent five years and thereafter is as follows:

---

| | | | |
|:---|:---|:---|:---|
| **December 31,** | | **Transferable<br>Tax Credits** | **Non-<br>transferable<br>Tax Credits** |
|  | 2026 | $— | $5445 |
|  | 2027 |  | 5762 |
|  | 2028 |  | 5909 |
|  | 2029 |  | 5494 |
|  | 2030 |  | 5519 |
|  | Thereafter |  | 22184 |
|  **Total** |  | $**—** | $**50313** |

---

*2025 Statutory Financial Statements* *Page 19* 

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*($ in Thousands)* 

**NET INVESTMENT INCOME AND REALIZED CAPITAL GAINS/(LOSSES)** The following table summarizes the major categories of net investment income for the years ended:

---

| | | |
|:---|:---|:---|
| **December 31,** | **2025** | **2024** |
|  Income: |  |  |
|  Bonds and preferred stock | $538172 | $455147 |
|  Common stock — unaffiliated | 979 | 1267 |
|  Policy loans | 42625 | 38571 |
|  Cash and short term investments | 8029 | 8392 |
|  Alternative assets | 37009 | 36075 |
|  Derivatives | (29097) | (19194) |
|  Other invested assets | 2182 | 4200 |
|  IMR amortization | (4512) | (3667) |
|  Total investment income | 595387 | 520791 |
| &nbsp;&nbsp;&nbsp;&nbsp; Less investment expenses | 24895 | 24748 |
|  **Net Investment Income** | $**570492** | $**496043** |

---

There was no nonadmitted accrued investment income at December 31, 2025 and 2024.

Included in the table above (Bonds and preferred stocks) for 2025 is $1,428 of investment income attributable to securities disposed of as a result of a callable feature, spread over 19 securities.

Proceeds from the sale of bonds, preferred stock and common stock, and related gross realized gains and losses on those sales were as follows for the years ended December 31:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **2025** | **2025** | **2025** | **2024** | **2024** | **2024** |
| | **Proceeds<br>From Sales** | **Gross<br>Realized<br>Gains** | **Gross<br>Realized<br>Losses** | **Proceeds<br>From Sales** | **Gross<br>Realized<br>Gains** | **Gross<br>Realized<br>Losses** |
|  Bonds | $1372 | $45 | $14 | $843126 | $5110 | $93953 |
|  Preferred stock | 4 |  |  | 1659 |  | 81 |
|  Common stock | 5 |  |  | 27107 | 537 | 2235 |

---

Realized capital gains/(losses) are reported net of federal income taxes and amounts transferred to the IMR as follows for the years ended:

---

| | | |
|:---|:---|:---|
| **December 31,** | **2025** | **2024** |
|  Realized capital gains/(losses) | $248955 | $103823 |
|  Less amount transferred to IMR | 28648 | (85604) |
|  Less Taxes: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Transferred to IMR | (6017) | 17976 |
| &nbsp;&nbsp;&nbsp;&nbsp; Capital gains/(losses) | 5333 | (20280) |
|  **Net Realized Capital Gains** | $**220991** | $**191731** |

---

Portions of realized capital gains and losses that were determined to be interest related were transferred to the IMR.

There were no NAIC designation 3 or below, or unrated securities sold during the year ended December 31, 2025 and reacquired within 30 days of the sale date.

*Page 20* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

***Note 4.* SEPARATE ACCOUNTS** 

**SEPARATE ACCOUNTS REGISTERED WITH THE SEC** The Company maintains separate accounts that are registered with the Securities and Exchange Commission ("SEC") for its individual variable life and annuity products with assets of $959,981 and $382,884 at December 31, 2025 and 2024, respectively. The assets for these separate accounts, which are carried at fair value, represent investments in shares of the Company's Penn Series Funds and other non-proprietary funds.

Information regarding the Separate Accounts of the Company, all of which are nonguaranteed, is as follows:

---

| | | |
|:---|:---|:---|
| **YEARS ENDED DECEMBER 31,** | **2025** | **2024** |
|  Premiums, considerations and deposits | $301926 | $152285 |
|  Reserves at December 31, at market value | 882300 | 356224 |
|  Subject to discretionary withdrawal at market value | 882300 | 356224 |

---

The following table reconciles the amounts transferred to and from the separate accounts as reported in the financial statements of the separate accounts to the amount reported in the Statements of Operations:

---

| | | |
|:---|:---|:---|
| **YEARS ENDED DECEMBER 31,** | **2025** | **2024** |
|  Transfers as reported in the financial statements of the separate accounts: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Transfers to separate accounts | $301926 | $152285 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Transfers to/(from) separate accounts | 137571 | 56093 |
|  **Transfers as reported in the Statements of Operations** | $**439497** | $**208378** |

---

The Company utilizes separate accounts to record and account for assets and liabilities for particular lines of business and transactions. The Company reports assets and liabilities from variable life and annuities product lines into a separate account.

The assets of the separate accounts, which are legally insulated from the general account, are comprised of the following product mix as of December 31:

---

| | | |
|:---|:---|:---|
| **Product Description** | **2025** | **2024** |
|  Individual Annuity | $413780 | $134002 |
|  Single Life Variable Universal Life | 546201 | 248882 |
|  **Total** | $**959981** | $**382884** |

---

Certain separate account liabilities are guaranteed by the general account. To compensate the general account for the risk taken on a direct basis, the separate account paid risk charges to the general account totaling $2,550 and $393 for the years ended December 31, 2025 and 2024, respectively and $2,943 for the five-year period between 2021 and 2025.

For the years ended December 31, 2025 and 2024, the general account of the Company has paid $675 and $15, respectively, towards separate account guarantees on a direct basis, and $728 cumulatively over the last five years.

***Note 5*. DERIVATIVES** 

The Company utilizes derivatives to achieve its risk management goals. Exposure to risk is monitored and analyzed as part of the Company's asset/liability management process, which focuses on risks that impact liquidity, capital and income. The Company may enter into derivative transactions to hedge exposure to interest rate, credit, liability, currency and cash flow risks.

*2025 Statutory Financial Statements* *Page 21* 

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The Company offers IUL products which have embedded options with guaranteed returns. The Company uses equity options in the form of call spread options for protection from rising equity levels and rising volatility.

The Company uses interest rate swaps to reduce market risks from changes in interest rates.

When entering into a derivative transaction, there are several risks, including but not limited to basis risk, credit risk and market risk. Basis risk is the exposure to loss from imperfectly matched positions, and is monitored and minimized by modifying or terminating the transaction. Credit risk is the exposure to loss as a result of default or a decline in credit rating of a counterparty. Credit risk is addressed by establishing and monitoring guidelines on the amount of exposure to any particular counterparty. Market risk is the adverse effect that a change in interest rates, currency rates, implied volatility rates or a change in certain equity indexes or instruments has on the value of a financial instrument. The Company manages the market risk by establishing and monitoring limits as to the types and degree of risk that may be undertaken. Also, the Company requires that an International Swaps and Derivatives Association Master agreement govern all Over-the-Counter ("OTC") derivative contracts. In addition, certain swaps are traded through a central clearing house to effectively manage counterparty risk.

The Company does not enter into financing-type derivative premium arrangements; premiums are paid or received upfront.

**Derivative Instruments Designated and Qualifying as Hedging Instruments** 

The Company does not maintain any derivative instruments designated and qualifying as hedging instruments.

***Derivative Instruments Not Designated and Not Qualifying as Hedging Instruments***

The following table presents the notional and fair values of derivative financial instruments not designated and not qualifying as hedging instruments. Derivative instruments with carrying values showing a gain are reported as admitted assets and Derivative instruments with carrying values showing a loss are reported as liabilities. For the derivative instruments shown below, fair values equal carrying values.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **DECEMBER 31,** | **2025** | **2025** | **2025** | **2024** | **2024** | **2024** |
|  | **Notional**<br> **Value** | **Fair Value** | **Fair Value** | **Notional**<br> **Value** | **Fair Value** | **Fair Value** |
|  | **Notional**<br> **Value** |  |  | **Notional**<br> **Value** |  |  |
|  |  | **Gain** | **(Loss)** |  | **Gain** | **(Loss)** |
|  Equity options | $8511146 | $1098561 | $(611312) | $7459440 | $876824 | $(468060) |
|  Interest rate swaps | 5254800 | 410662 | (433267) | 5806100 | 471875 | (541638) |
|  **Total** | $**13765946** | $**1509223** | $**(1044579)** | $**13265540** | $**1348699** | $**(1009698)** |

---

The impact of these derivative instruments reported on the Statements of Operations for the years ended December 31, 2025 and 2024 is reported in the table below

---

| | | | | |
|:---|:---|:---|:---|:---|
| **YEARS ENDED DECEMBER 31,** | **2025** | **2025** | **2024** | **2024** |
|  | **Net Investment<br>Income** | **Realized Capital<br>Gains/(Losses)(1)** | **Net<br>Investment<br>Income** | **Realized Capital<br>Gains/(Losses)<sup>(1)</sup>** |
|  Equity options | $— | $235190 | $— | $197922 |
|  Interest rate swaps | (29097) |  | (19194) |  |
|  **Total** | $**(29097)** | $**235190** | $**(19194)** | $**197922** |

---

1 No realized capital gains/(losses) were transferred to the IMR for the years ended December 31, 2025 and 2024.

*Page 22* *The Penn Insurance and Annuity Company*

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The change in unrealized capital gains/(losses) for derivative instruments are as follows for the years ended December 31:

---

| | | |
|:---|:---|:---|
| | **2025** | **2024** |
|  Equity options | $31302 | $(3022) |
|  Interest rate swaps | 47157 | (4554) |
|  **Total** | $**78459** | $**(7576)** |

---

**CREDIT RISK** The Company is exposed to credit related losses in the event of non-performance by counterparties to derivative financial instruments. In order to minimize credit risk, the Company and its derivative counterparties require collateral to be posted in the amount owed under each transaction, subject to minimum transfer amounts that are functions of the counterparties credit rating. As of December 31, 2025 and 2024, the Company was fully collateralized thereby eliminating the potential for an accounting loss. Additionally, certain agreements with counterparties allow for contracts in a positive position to be offset by contracts in a negative position. This right of offset also reduces the Company's exposure. As of December 31, 2025 and 2024, the Company held net collateral of $455,527 and pledged net collateral of $242,838, respectively, in the form of securities and cash. The cash received from held collateral that is not invested in an interest bearing money market fund is invested mainly in fixed income securities.

***Note 6.* FAIR VALUE OF FINANCIAL INSTRUMENTS** 

**FAIR VALUE MEASUREMENT** Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement is based on assumptions market participants would make in pricing an asset or liability. Inputs to valuation techniques to measure fair value are prioritized by establishing a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to prices derived from unobservable inputs. An asset or liability's classification within the fair value hierarchy is based on the lowest level of significant input to its fair value measurement.

The Company has categorized its assets and liabilities into the three-level fair value hierarchy based upon the priority of the inputs. The following summarizes the types of assets and liabilities included within the three-level hierarchy:

---

| | |
|:---|:---|
| Level 1  | Fair value is based on unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. These generally provide the most reliable evidence and are used to measure fair value whenever available. Active markets are defined as having the following for the measured asset/liability: i) many transactions, ii) current prices, iii) price quotes not varying substantially among market makers, iv) narrow bid/ask spreads and v) most information publicly available. Prices are obtained from readily available sources for market transactions involving identical assets and liabilities. |

---

---

| | |
|:---|:---|
| Level 2  | Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. Prices for assets classified as Level 2 are primarily provided by an independent pricing service or are internally priced using observable inputs. In circumstances where prices from pricing services are reviewed for reasonability but cannot be corroborated to observable market data as noted above, these security values are recorded in Level 3 in the fair value hierarchy. |

---

---

| | |
|:---|:---|
| Level 3  | Fair value is based on significant inputs that are unobservable for the asset or liability. These inputs reflect the Company's assumptions about the assumptions market participants would use in pricing the asset or liability. These are typically less liquid fixed maturity securities with very limited trading activity. Prices are determined using valuation methodologies such as option pricing models, discounted cash flow models, market approach and other similar techniques. Prices may be based upon non-binding quotes from brokers or other market makers that are reviewed for reasonableness, based on the Company's understanding of the market but are not further corroborated with other additional observable market information. |

---

*2025 Statutory Financial Statements* *Page 23* 

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The determination of fair value, which for certain assets and liabilities is dependent on the application of estimates and assumptions, can have a significant impact on the Company's results of operations. The following sections describe the valuation methodologies used to determine fair values as well as key estimates and assumptions surrounding certain assets and liabilities, measured at fair value on a recurring basis that could have a significant impact on the Company's results of operations or involve the use of significant unobservable inputs.

The fair value process is monitored on a monthly basis by financial and investment professionals who utilize additional subject matter experts as applicable. The purpose is to monitor the Company's asset valuation policies and procedures by ensuring objective and reliable valuation practices and pricing of financial instruments, as well as addressing fair valuation issues, changes to valuation methodologies and pricing sources. To assess the continuing appropriateness of third party pricing service security valuations, the Company regularly monitors the prices and reviews price variance reports. In addition, the Company performs an initial and ongoing review of the third party pricing services methodologies and reviews inputs and assumptions used for a sample of securities on a periodic basis. Pricing challenges are raised on valuations considered not reflective of market and are monitored by the Company.

**BONDS** The fair values of the Company's debt securities are generally based on quoted market prices or prices obtained from independent pricing services or internally developed pricing.

Consistent with the fair value hierarchy described above, securities with quoted market prices or corroborated valuations from pricing services are generally reflected within Level 2. Inputs considered to be standard for valuations by the independent pricing service include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data and industry and economic events.

In order to validate reasonability of valuations received from independent pricing services, prices are reviewed by investment professionals through comparison with directly observed recent market trades or color or by comparison of significant inputs used by the pricing service to the Company's observations of those inputs in the market. In circumstances where prices from independent pricing services are reviewed for reasonability but cannot be corroborated to observable market data as noted above, these security values are recorded in Level 3 in the Company's fair value hierarchy. Under certain conditions, the Company may conclude pricing information received from third party pricing services is not reflective of market activity and may over-ride that information with a valuation that utilizes market information and activity. These securities are recorded in Level 2 in the Company's fair value hierarchy. As of December 31, 2025, there was 1 debt security priced in this manner, which are carried at amortized cost of $3,161 and have a fair value of 3,511. As of December 31, 2024, there were no debt securities priced in this manner.

In circumstances where market data such as quoted market prices or vendor pricing is not available, estimated fair value is calculated using internal estimates based on significant observable inputs are used to determine fair value. Inputs considered in developing internal pricing vary by type of security; however generally include: public debt, industrial comparables, underlying assets, credit ratings, yield curves, type of deal structure, collateral performance, loan characteristics and various indices, as applicable. Internally priced securities using significant observable inputs are classified within Level 2 of the fair value hierarchy which generally include the Company's investments in privately-placed corporate securities and investments in certain structured securities that are priced using observable market data. Inputs considered for these securities generally include: public corporate bond spreads, industry sectors, average life, internal ratings, security structure, liquidity spreads, credit spreads and yield curves, as applicable. If the discounted cash flow model incorporates significant unobservable inputs, these securities would be reflected within Level 3 in the Company's fair value hierarchy.

In circumstances where significant observable inputs are not available, estimated fair value is calculated by using unobservable inputs. These inputs reflect the Company's assumptions about the inputs market participants would use in pricing the asset, and are therefore included in Level 3 in the Company's fair value hierarchy. Circumstances where observable market data is not available may include events such as market illiquidity and credit events related to the security.

*Page 24* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

**EQUITY SECURITIES** Equity securities consist principally of investments in common and preferred stock of publicly traded companies, exchange traded funds, closed-end funds and FHLB-PGH capital stock.

*Common Stock* The fair values of most publicly traded common stock are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the Company's fair value hierarchy. Fair value for the FHLB capital stock approximates par value and is classified within Level 3 of the Company's fair value hierarchy.

*Preferred Stock* The fair values of publicly traded preferred stock are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the Company's fair value hierarchy. The fair values of non-exchange traded preferred equity securities are based on prices obtained from independent pricing services. Accordingly, these securities are classified within Level 2 of the Company's fair value hierarchy. Preferred stock that is priced using less observable inputs are generally classified within Level 3 of the fair value hierarchy.

**CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS** Short-term investments and cash equivalents carried at Level 1 consist of money market funds and investments purchased with maturities less than or equal to 12 months. These are carried at amortized cost and approximate fair value.

**DERIVATIVE INSTRUMENTS** The fair values of derivative contracts are determined based on quoted prices in active exchanges or prices provided by counterparties, exchanges or clearing members as applicable, utilizing valuation models. The fair values of derivative contracts can be affected by changes in interest rates, foreign exchange rates, commodity prices, credit spreads, market volatility, expected returns and liquidity as well as other factors.

Derivative positions traded in the OTC and cleared OTC derivative markets, where fair value is determined by third party independent services, are classified within Level 2. These investments include: interest rate swaps, currency swaps, Treasury swaps, interest rate caps, total return swaps, swaptions, equity options, inflation swaps, forward contracts and credit default swaps. OTC derivatives classified within Level 2 are valued using models generally accepted in the financial services industry that use actively quoted or observable market input values from external market data providers, broker-dealer quotations, third-party pricing vendors, discounted cash flow models and/or recent trading activity. Prices are reviewed by investment professionals through comparison with directly observed recent market trades, comparison with valuations estimated through use of valuation models maintained on an industry standard analytical and valuation platform or comparison of all significant inputs used by the pricing service to observations of those inputs in the market.

**SEPARATE ACCOUNT ASSETS** Separate account assets primarily consist of mutual funds. The fair value of mutual funds is based upon quoted prices in an active market, resulting in classification within Level 1 of the Company's fair value hierarchy.

The following table presents the financial instruments carried at fair value by caption on the Statements of Admitted Assets, Liabilities and Capital and Surplus and by valuation hierarchy (as described above):

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2025** | **FV**<br> **Level 1** | **FV**<br> **Level 2** | **FV<br>Level 3** | **Total** |
|  Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Bonds | $56873 | $5934 | $— | $62807 |
| &nbsp;&nbsp;&nbsp;&nbsp; Preferred stock | 24575 |  | 2871 | 27446 |
| &nbsp;&nbsp;&nbsp;&nbsp; Common stock — unaffiliated | 1319 |  | 9805 | 11124 |
| &nbsp;&nbsp;&nbsp;&nbsp; Derivatives |  | 1509223 |  | 1509223 |
| &nbsp;&nbsp;&nbsp;&nbsp; Separate account assets<sup>(1)</sup> | 959981 |  |  | 959981 |
| &nbsp;&nbsp;&nbsp;&nbsp; **Total assets** | $**1042748** | $**1515157** | $**12676** | $**2570581** |
|  Liabilities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Derivatives | $— | $(1044579) | $— | $(1044579) |
| &nbsp;&nbsp;&nbsp;&nbsp; **Total liabilities** | $**—** | $**(1044579)** | $**—** | $**(1044579)** |

---

*2025 Statutory Financial Statements* *Page 25* 

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*($ in Thousands)* 

(1) Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated
with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract
value and not fair value in the Company's Statements of Admitted Assets, Liabilities and Capital and Surplus.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2024** | **FV<br>Level 1** | **FV**<br> **Level 2** | **FV<br>Level 3** | **Total** |
|  Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Bonds | $— | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp; Preferred stock | 29456 |  | 2928 | 32384 |
| &nbsp;&nbsp;&nbsp;&nbsp; Common stock — unaffiliated | 102 |  | 9353 | 9455 |
| &nbsp;&nbsp;&nbsp;&nbsp; Derivatives |  | 1348699 |  | 1348699 |
| &nbsp;&nbsp;&nbsp;&nbsp; Separate account assets<sup>(1)</sup> | 382884 |  |  | 382884 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets | $412442 | $1348699 | $12281 | $1773422 |
|  Liabilities: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Derivatives | $— | $(1009698) | $— | $(1009698) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | $— | $(1009698) | $— | $(1009698) |

---

(1) Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated
with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract
value and not fair value in the Company's Statements of Admitted Assets, Liabilities and Capital and Surplus.

**CHANGES IN LEVEL 3 RECURRING FAIR VALUE MEASUREMENTS** When a determination is made to classify a financial instrument within Level 3, the determination is based upon the significance of the unobservable parameters to the overall fair value measurement. However, Level 3 financial instruments typically include, in addition to the unobservable or Level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources); accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.

The Company recognizes transfers into Level 3 as of the end of the period in which the circumstances leading to the transfer occurred. The Company recognizes transfers out of Level 3 at the beginning of a period in which the circumstances leading to the transfer occurred.

There were no assets transferred into or out of Level 3 in 2025 or 2024.

*Page 26* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

The tables below include a rollforward of the Statements of Admitted Assets, Liabilities and Capital and Surplus amounts for the years ended December 31, 2025 and 2024 (including the change in fair value) for financial instruments classified by the Company within Level 3 of the valuation hierarchy.

---

| | | | |
|:---|:---|:---|:---|
| | **Preferred<br>Stock** | **Common<br>Stock** | **Total** |
|  Balance January 1, 2025 | $2928 | $9353 | $12281 |
| &nbsp;&nbsp;&nbsp;&nbsp; Transfers in |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Transfers out |  |  |  |
|  Total gains or losses (realized/unrealized) included in: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Income/(loss) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Surplus |  |  |  |
|  Amortization/accretion |  |  |  |
|  Purchases/(sales): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchases |  | 12852 | 12852 |
| &nbsp;&nbsp;&nbsp;&nbsp;(Sales) | (57) | (12400) | (12457) |
|  **Balance December 31, 2025** | $**2871** | $**9805** | $**12676** |

---

---

| | | | |
|:---|:---|:---|:---|
| | **Preferred<br>Stock** | **Common<br>Stock** | **Total** |
|  Balance January 1, 2024 | $— | $1270 | $1270 |
| &nbsp;&nbsp;&nbsp;&nbsp; Transfers in | 2928 |  | 2928 |
| &nbsp;&nbsp;&nbsp;&nbsp; Transfers out |  |  |  |
|  Total gains or losses (realized/unrealized) included in: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Income/(loss) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Surplus |  |  |  |
|  Amortization/accretion |  |  |  |
|  Purchases/(sales): |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchases |  | 8083 | 8083 |
| &nbsp;&nbsp;&nbsp;&nbsp;(Sales) |  |  |  |
|  **Balance December 31, 2024** | $**2928** | $**9353** | $**12281** |

---

The following summarizes the fair value, valuation techniques and significant unobservable inputs of the Level 3 fair value measurements that were developed as of December 31, 2025:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Fair<br>Value** | **Valuation Technique** | **Significant<br>Unobservable<br>Inputs** | **Rate/Range<br>or /Weighted<br>Avg.** |
|  Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Investments |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Preferred stock | $2871 | Independent pricing source | Not available | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock: FHLB Stock | $9805 | Set by issuer — FHLB-PGH<sup>(1)</sup> | Not available | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp; Total investments | $12676 |  |  |  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Fair Value approximates carrying value. The par value of the FHLB capital stock is $100 and set by the FHLB. The capital
stock is issued, redeemed and repurchased at par.

*2025 Statutory Financial Statements* *Page 27* 

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*($ in Thousands)* 

The following table summarizes the aggregate fair value for all financial instruments and the level within the fair value hierarchy in which the fair value measurements in their entirety fall, for which it is practicable to estimate fair value, at December 31:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **2025** | **Aggregate<br>Fair Value** | **Admitted<br>Value** | **Level 1** | **Level 2** | **Level 3** |
|  Financial Assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Bonds | $10129397 | $10598231 | $58334 | $9643794 | $427269 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Preferred stock | 57163 | 59614 | 49354 | 4938 | 2871 |
| &nbsp;&nbsp;&nbsp;&nbsp; Common stock — unaffiliated | 11124 | 11124 | 1319 |  | 9805 |
| &nbsp;&nbsp;&nbsp;&nbsp; Cash, cash equivalents and short-term investments | 251534 | 251534 | 251534 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Derivatives | 1509223 | 1509223 |  | 1509223 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Separate account assets | 959981 | 959981 | 959981 |  |  |
|  Financial Liabilities: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Investment-type contracts: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Individual annuities | $355265 | $341999 | $— | $— | $355265 |
| &nbsp;&nbsp;&nbsp;&nbsp; Derivatives | 1044579 | 1044579 |  | 1044579 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Separate account liabilities | 959981 | 959981 | 959981 |  |  |
| **2024** | **Aggregate<br>Fair Value** | **Admitted<br>Value** | **Level 1** | **Level 2** | **Level 3** |
|  Financial Assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Bonds | $8494611 | $9189871 | $1336 | $8194872 | $298403 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Preferred stock | 61954 | 64552 | 54185 | 4841 | 2928 |
| &nbsp;&nbsp;&nbsp;&nbsp; Common stock — unaffiliated | 9455 | 9455 | 102 |  | 9353 |
| &nbsp;&nbsp;&nbsp;&nbsp; Cash and short-term investments | 227917 | 227917 | 227917 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Derivatives | 1348699 | 1348699 |  | 1348699 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Separate account assets | 382884 | 382884 | 382884 |  |  |
|  Financial Liabilities: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Investment-type contracts: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Individual annuities | $348339 | $343037 | $— | $— | $348339 |
| &nbsp;&nbsp;&nbsp;&nbsp; Derivatives | 1009698 | 1009698 |  | 1009698 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Separate account liabilities | 382884 | 382884 | 382884 |  |  |

---

During 2025, there were no securities with transfers from Level 3 to Level 2.

*Page 28* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

***Note 7.* LIFE RESERVES BY WITHDRAWAL CHARACTERISTICS** 

The withdrawal characteristics of the Company's life reserves are illustrated below as of December 31:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **General Account** | **General Account** | **General Account** | **Separate Account** | **Separate Account** | **Separate Account** |
| **2025** | **Account<br>Value** | **Cash Value** | **Reserve** | **Account<br>Value** | **Cash Value** | **Reserve** |
|  Subject to Discretionary Withdrawal, Surrender Values, or Policy Loans: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Universal Life | $327222 | $327162 | $332765 | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp; Universal Life with Secondary Guarantees | 1456968 | 1141635 | 3313982 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Indexed Universal Life |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Indexed Universal Life with Secondary Guarantees | 8529063 | 8110498 | 9206483 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Variable Universal Life | 147224 | 121282 | 183462 | 546201 | 493567 | 493567 |
| &nbsp;&nbsp;&nbsp;&nbsp; Miscellaneous Reserves |  |  | 688 |  |  |  |
|  Not Subject to Discretionary Withdrawal or No Cash Values: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Accidental Death Benefits |  |  | 51 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Disability — Active Lives |  |  | 316 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Disability — Disabled Lives |  |  | 2719 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Miscellaneous Reserves |  |  |  |  |  |  |
|  Total | 10460477 | 9700577 | 13040466 | 546201 | 493567 | 493567 |
| &nbsp;&nbsp;&nbsp;&nbsp; Less: Reinsurance ceded | 1398902 | 1194340 | 3511198 |  |  |  |
|  **Net** | $**9061575** | $**8506237** | $**9529268** | $**546201** | $**493567** | $**493567** |

---

Life reserves of $52,161 with a surrender charge of 5% or more as of December 31, 2025 will have less than a 5% surrender charge in 2026.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **General Account** | **General Account** | **General Account** | **Separate Account** | **Separate Account** | **Separate Account** |
| **2024** | **Account<br>Value** | **Cash Value** | **Reserve** | **Account<br>Value** | **Cash Value** | **Reserve** |
|  Withdrawal, Surrender Values, or Policy Loans: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Universal Life | $351050 | $350979 | $357088 | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp; Universal Life with Secondary Guarantees | 1413155 | 1094502 | 3122058 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Indexed Universal Life |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Indexed Universal Life with Secondary Guarantees | 7424838 | 7046782 | 8065402 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Variable Universal Life | 65788 | 51112 | 104043 | 248882 | 229607 | 229607 |
| &nbsp;&nbsp;&nbsp;&nbsp; Miscellaneous Reserves |  |  | 711 |  |  |  |
|  Not Subject to Discretionary Withdrawal or No Cash Values: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Accidental Death Benefits |  |  | 53 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Disability — Active Lives |  |  | 306 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Disability — Disabled Lives |  |  | 2778 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Miscellaneous Reserves |  |  |  |  |  |  |
|  Total | 9254831 | 8543375 | 11652439 | 248882 | 229607 | 229607 |
| &nbsp;&nbsp;&nbsp;&nbsp; Less: Reinsurance ceded | 1377110 | 1161822 | 3380696 |  |  |  |
|  **Net** | $**7877721** | $**7381553** | $**8271743** | $**248882** | $**229607** | $**229607** |

---

*2025 Statutory Financial Statements* *Page 29* 

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*($ in Thousands)* 

Life reserves on corporate owned life insurance policies issued by the Company to Penn Mutual as of December 31, 2025 and 2024 were $36,676 and $39,694, respectively.

***Note 8.* RESERVES AND FUNDS FOR THE PAYMENT OF ANNUITY BENEFITS** 

The Company's separate accounts are non-guaranteed. The withdrawal characteristics of the Company's annuity actuarial reserves and deposit-type contracts are illustrated below as of December 31:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **2025** | **General<br>Account** | **Separate<br>Account** | **Total** | **% of Total** |
|  Subject to discretionary withdrawal-with adjustments: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; With market value adjustment | $— | $— | $— | —% |
| &nbsp;&nbsp;&nbsp;&nbsp; At book value less surrender charges | 259151 |  | 259151 | 28% |
| &nbsp;&nbsp;&nbsp;&nbsp; At market value |  | 388733 | 388733 | 42% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subtotal | 259151 | 388733 | 647884 | 69% |
|  At book value — without adjustment | 271217 |  | 271217 | 29% |
|  Not subject to discretionary withdrawal | 13510 |  | 13510 | 1% |
|  Total annuity reserves and deposit liabilities, gross | 543878 | 388733 | 932611 | 100% |
|  Less: Reinsurance ceded |  |  |  | —% |
|  **Total Annuity Reserves and Deposit Liabilities, Net** | $**543878** | $**388733** | $**932611** | **100%** |

---

Annuity and deposit-type contract reserves of $6,123 with surrender charges of 5% or more as of December 31, 2025 will have less than a 5% surrender charge in 2026.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **2024** | **General<br>Account** | **Separate<br>Account** | **Total** | **% of Total** |
|  Subject to discretionary withdrawal-with adjustments: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; With market value adjustment | $— | $— | $— | —% |
| &nbsp;&nbsp;&nbsp;&nbsp; At book value less surrender charges | 262504 |  | 262504 | 39% |
| &nbsp;&nbsp;&nbsp;&nbsp; At market value |  | 126617 | 126617 | 19% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subtotal | 262504 | 126617 | 389121 | 58% |
|  At book value — without adjustment | 267774 |  | 267774 | 40% |
|  Not subject to discretionary withdrawal | 14703 |  | 14703 | 2% |
|  Total annuity reserves and deposit liabilities, gross | 544981 | 126617 | 671598 | 100% |
|  Less: Reinsurance ceded |  |  |  | —% |
|  **Total Annuity Reserves and Deposit Liabilities, Net** | $**544981** | $**126617** | $**671598** | **100%** |

---

*Page 30* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

The following summarizes the total annuity actuarial reserves and liabilities for deposit-type contracts as of December 31:

---

| | | |
|:---|:---|:---|
| | **2025** | **2024** |
|  Statutory Statements of Admitted Assets, Liabilities and Capital and Surplus: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Policyholders' reserves — group annuities | $119 | $133 |
| &nbsp;&nbsp;&nbsp;&nbsp; Policyholders' reserves — individual annuities | 329307 | 330597 |
| &nbsp;&nbsp;&nbsp;&nbsp; Liabilities for deposit-type contracts | 209102 | 212613 |
| &nbsp;&nbsp;&nbsp;&nbsp; VM-21 reserves | 5350 | 1638 |
|  Subtotal | $543878 | $544981 |
|  Separate Account Annual Statement: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Annuities | $388733 | $126617 |
|  Subtotal | 388733 | 126617 |
|  **Total Reserves** | $**932611** | $**671598** |

---

As of December 31, 2025 and 2024, the Company has recorded reserves of $201,760 and $201,811, respectively, related to outstanding borrowings from the FHLB-PGH classified as funding agreements.

The Company has variable annuity contracts containing GMDB provisions that provide a specified minimum return upon death as follows:

**RETURN OF PREMIUM** provides the greater of the account value or total deposits made to the contract less any partial withdrawals and assessments, which is referred to as "net purchase payments". This guarantee is a standard death benefit on all individual variable annuity products.

**STEP UP** provides a variable death benefit equal to the greater of the account value and the highest variable account value adjusted for withdrawals and transfers from any prior contract anniversary date.

**RISING FLOOR** provides a variable death benefit equal to the greater of the current account value and the variable purchase payments accumulated at a set rate and adjusted for withdrawals and transfers.

The following table summarizes the account values and net amount at risk (death benefit in excess of account value), net of reinsurance for variable annuity contracts with guarantees invested in the separate accounts as of December 31:

---

| | | |
|:---|:---|:---|
| | **2025** | **2024** |
|  Account value | $428663 | $164770 |
|  Net amount at risk | 1749 | 1948 |

---

The Company has variable annuity contracts that have GMAB and GMWB Rider options. The Company also has fixed indexed annuity contracts that have GMWB Rider options. The GMAB provides for a return of principal at the end of a specified period. The GMWB rider allows for guaranteed withdrawals from a benefit base after a selected waiting period. The GMWB riders are also available with inflation or death benefit protection. The benefit base is calculated as the maximum of principal increase at a roll up rate less any partial withdrawals during the accumulation phase, the current account value and the highest anniversary value over the first ten years. The withdrawal amount is stated as a percentage of the benefit base and varies based on whether the annuitant selects lifetime withdrawals or a specified period. One version of this rider has an inflation adjustment applied to the Guaranteed Withdrawal Amount.

*2025 Statutory Financial Statements* *Page 31* 

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*($ in Thousands)* 

The following table summarizes the account values for the different benefit types as of December 31, 2025:

---

| | | | |
|:---|:---|:---|:---|
| **Rider Type** | **Contracts** | **Fund Value** | **Cash Value** |
|  GMAB | 202 | $41924 | $39193 |
|  GMWB | 1449 | 436122 | 410097 |
|  GMWB w/ death benefit | 29 | 8842 | 8264 |
|  GMWB w/ inflation | 64 | 11797 | 11191 |
|  **Total** | **1744** | $**498685** | $**468745** |

---

The following table summarizes the account values for the different benefit types as of December 31, 2024:

---

| | | | |
|:---|:---|:---|:---|
| **Rider Type** | **Contracts** | **Fund Value** | **Cash Value** |
|  GMWB | 98 | $18076 | $16664 |
|  GMWB w/ inflation | 919 | 216516 | 202757 |
|  GMWB w/ death benefit | 14 | 3165 | 2917 |
|  GMWB w/ inflation | 63 | 10816 | 10273 |
|  **Total** | **1094** | $**248573** | $**232611** |

---

Variable annuity reserves for living and death benefits are based on the methodology specified in Valuation Manual — 21: *Requirements for Principle-Based Reserves for Variable Annuities* ("VM-21"), which specifies the reserve as the Company Stochastic Reserve plus the Additional Standard Projection Amount. The individual policy reserve is floored at cash surrender value. The Company Stochastic Reserve is based on the Conditional Tail Expectation ("CTE") 70% of 1,000 stochastically generated interest rate and equity return scenarios. Prudent estimate assumptions including margins for uncertainty are used to calculate the Company Stochastic Reserve. Key assumptions needed in valuing the liability include full withdrawals, partial withdrawals, mortality, the Consumer Price Index, investment management fees and revenue sharing, expenses, fund allocations and other policyholder behavior. The Additional Standard Projection Amount requires prescribed assumptions to be used in place of Company assumptions for most key assumptions. The reserve also requires the projection of in-force general account assets and assets from reinvested cash flows. The key assumptions needed in valuing the assets, including the maximum reinvestment earned rate spreads and default rates, are prescribed. In addition, the method for projecting interest rates and equity returns is prescribed for both the Company Stochastic Reserve calculation and the Additional Standard Projection Amount calculation. The final reserve balance for policies that fall within the scope of VM-21, which covers both Living and Death Benefit guarantees, is $407,786 and $156,558 as of December 31, 2025 and 2024, respectively.

Fixed indexed annuity reserves for living benefits are based on the methodology specified in Actuarial Guideline XXXV, which specifies the reserve as the sum of the nonelective benefit reserve and the elective benefit reserve. The elective benefit reserve is calculated using the elective benefit path that results in the highest present value of future benefits.

The final reserve balance for policies that fall within the scope of Actuarial Guideline XXXV is $287,167 and $271,038, as of December 31, 2025 and 2024, respectively.

***Note 9.* FEDERAL INCOME TAXES** 

The Company follows SSAP No. 101 — *Income Taxes, A Replacement of SSAP No. 10R and SSAP No. 10* ("SSAP 101"). SSAP 101 includes a calculation for the limitation of gross deferred tax assets for insurers that maintain a minimum of 300% of their authorized control level RBC computed without net deferred tax assets. The Company exceeded the 300% minimum RBC requirement at December 31, 2025 and 2024.

The Company is required to evaluate the recoverability of deferred tax assets and to establish a valuation allowance if necessary to reduce the deferred tax asset to an amount which is more likely than not to be realized.

*Page 32* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance, the Company considers many factors, including: (1) the nature of the deferred tax assets and liabilities; (2) whether they are ordinary or capital; (3) the timing of their reversal; (4) taxable income in prior carryback years as well as projected taxable income exclusive of reversing temporary differences and carryforwards; (5) the length of time that carryovers can be utilized; (6) unique tax rules that would impact the utilization of the deferred tax assets; and (7) any tax planning strategies that the Company would employ to avoid a tax benefit from expiring unused; although the realization is not assured, management believes it is more likely than not that the deferred tax assets, will be realized. The Company has not recorded a valuation allowance as of December 31, 2025 and 2024.

The components of deferred tax asset ("DTAs") and deferred tax liabilities ("DTLs") recognized by the Company are as follows as of December 31:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Description** | **2025** | **2025** | **2025** | **2024** | **2024** | **2024** |
|  | **Ordinary** | **Capital** | **Total** | **Ordinary** | **Capital** | **Total** |
|  Gross DTAs | $189445 | $3551 | $192996 | $172333 | $1426 | $173759 |
|  Statutory valuation allowance |  |  |  |  |  |  |
|  Adjusted gross DTAs | 189445 | 3551 | 192996 | 172333 | 1426 | 173759 |
|  DTAs nonadmitted | (52627) |  | (52627) | (47233) |  | (47233) |
|  Subtotal admitted adjusted DTA | 136818 | 3551 | 140369 | 125100 | 1426 | 126526 |
|  Gross DTLs | (9573) | (53567) | (63140) | (8537) | (35391) | (43928) |
|  **Net admitted DTA/(DTL)** | $**127245** | $**(50016)** | $**77229** | $**116563** | $**(33965)** | $**82598** |

---

The changes in components of DTAs and DTLs recognized by the Company are as follows:

---

| | | | |
|:---|:---|:---|:---|
| **Description** | **Changes During 2025** | **Changes During 2025** | **Changes During 2025** |
| | **Ordinary** | **Capital** | **Total** |
|  Gross DTAs | $17112 | $2125 | $19237 |
|  Statutory valuation allowance |  |  |  |
|  Adjusted gross DTAs | 17112 | 2125 | 19237 |
|  DTAs nonadmitted | (5394) |  | (5394) |
|  Subtotal admitted adjusted DTA | 11718 | 2125 | 13843 |
|  Gross DTLs | (1036) | (18176) | (19212) |
|  **Net admitted DTA/(DTL)** | $**10682** | $**(16051)** | $**(5369)** |

---

*2025 Statutory Financial Statements* *Page 33* 

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*($ in Thousands)* 

Admitted DTA's are comprised of the following admission components based on paragraph 11 SSAP No. 101 as of December 31:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Description** | **2025** | **2025** | **2025** | **2024** | **2024** | **2024** |
|  | **Ordinary** | **Capital** | **Total** | **Ordinary** | **Capital** | **Total** |
|  Admitted DTA 3 years: |  |  |  |  |  |  |
|  Federal income taxes paid that can be recovered: |  |  |  |  |  |  |
|  Remaining adjusted gross DTAs expected to be realized in 3 years (lesser of 1 or 2): | $73678 | $3551 | $77229 | $81172 | $1426 | $82598 |
| &nbsp;&nbsp;&nbsp;&nbsp;1. Adjusted gross DTA expected to be realized | 73678 | 3551 | 77229 | 81172 | 1426 | 82598 |
| &nbsp;&nbsp;&nbsp;&nbsp;2. Adjusted gross DTA allowed per limitation threshold |  |  | 168330 |  |  | 132304 |
|  Adjusted gross DTA offset by existing DTLs | 63140 |  | 63140 | 43928 |  | 43928 |
|  **Total admitted DTA realized within 3 years** | $**136818** | $**3551** | $**140369** | $**125100** | $**1426** | $**126526** |

---

---

| | | | |
|:---|:---|:---|:---|
| **Description** | **Changes during 2025** | **Changes during 2025** | **Changes during 2025** |
| | **Ordinary** | **Capital** | **Total** |
|  Admitted DTA 3 years: |  |  |  |
|  Federal income taxes paid that can be recovered: |  |  |  |
|  Remaining adjusted gross DTAs expected to be realized within 3 years (lesser of 1 or 2): | $(7494) | $2125 | $(5369) |
| &nbsp;&nbsp;&nbsp;&nbsp;1. Adjusted gross DTA expected to be realized | (7494) | 2125 | (5369) |
| &nbsp;&nbsp;&nbsp;&nbsp;2. Adjusted gross DTA allowed per limitation threshold |  |  | 36026 |
|  Adjusted gross DTA offset by existing DTLs | 19212 |  | 19212 |
|  **Total admitted DTA realized within 3 years** | $**11718** | $**2125** | $**13843** |

---

The authorized control level RBC and total adjusted capital computed without net deferred tax assets utilized when determining the amount of admissible net deferred tax assets was as follows:

---

| | | |
|:---|:---|:---|
| **December 31:** | **2025** | **2024** |
|  Ratio percentage used to determine recovery period and threshold limitation amount | 443% | 401% |
|  Amount of adjusted capital and surplus used to determine recovery period and threshold limitation | 1235895 | 982531 |

---

The impact of Tax planning strategies on the determination of adjusted gross DTA's and net admitted DTA's is as follows:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **Change** | **Change** | **Change** |
| | **Ordinary** | **Capital** | **Total** | **Ordinary** | **Capital** | **Total** | **Ordinary** | **Capital** | **Total** |
|  Adjusted gross DTAs | —% | 100% | 90% | 71% | 100% | 71% | (71)% | —% | 19% |
|  Net admitted DTAs | —% | 100% | 93% | 73% | 100% | 73% | (73)% | —% | 20% |

---

*Page 34* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

The Company's tax planning strategies do not include the use of reinsurance. There are no temporary differences for which a DTL has not been established.

**Significant components of income taxes incurred** 

Current income taxes incurred consist of the following major components for the years ended December 31:

---

| | | |
|:---|:---|:---|
| **Description** | **2025** | **2024** |
|  Current federal income tax expense/(benefit) | $44785 | $13810 |
|  Income tax effect on realized capital gains/(losses) | 5333 | (20280) |
|  **Federal and foreign income taxes incurred** | $**50118** | $**(6470)** |

---

As reported on the Capital gains and losses, net of tax within the Statements of Operations, the Company's accounting policy is to record tax expense or benefit as calculated pursuant to the Internal Revenue Code, adjusted for taxes transferred to the IMR reserve.

The tax effects of temporary differences that give rise to significant portions of the DTA's and DTL's are as follows as of December 31:

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **Change** |
|  **DTAs resulting in book/tax difference in:** |  |  |  |
|  Ordinary: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Future policy benefits | $41724 | $36460 | $5264 |
| &nbsp;&nbsp;&nbsp;&nbsp; DAC | 119093 | 95464 | 23629 |
| &nbsp;&nbsp;&nbsp;&nbsp; Investments — ordinary | 28586 | 22012 | 6574 |
| &nbsp;&nbsp;&nbsp;&nbsp; Deferred gain on reinsurance |  | 18272 | (18272) |
| &nbsp;&nbsp;&nbsp;&nbsp; Nonadmitted assets |  | 36 | (36) |
| &nbsp;&nbsp;&nbsp;&nbsp; Other — ordinary | 42 | 89 | (47) |
|  Subtotal — Gross ordinary DTAs | 189445 | 172333 | 17112 |
|  Statutory valuation allowance |  |  |  |
|  Nonadmitted ordinary DTAs | (52627) | (47233) | (5394) |
|  Admitted ordinary DTAs | 136818 | 125100 | 11718 |
|  Capital: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; OTTI on investments | 3551 | 1426 | 2125 |
|  Subtotal — Gross capital DTAs | 3551 | 1426 | 2125 |
|  Statutory valuation allowance |  |  |  |
|  Nonadmitted capital DTAs |  |  |  |
|  Admitted capital DTAs | 3551 | 1426 | 2125 |
|  Admitted DTAs | 140369 | 126526 | 13843 |
|  **DTLs resulting in book/tax differences in:** |  |  |  |
|  Ordinary: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Investments — ordinary | (9573) | (7163) | (2410) |
| &nbsp;&nbsp;&nbsp;&nbsp; Future policy benefits — 8 year spread |  | (1374) | 1374 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ordinary DTLs | (9573) | (8537) | (1036) |
|  Capital: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Alternative asset investments | (18459) | (15846) | (2613) |
| &nbsp;&nbsp;&nbsp;&nbsp; Net unrealized investment gains | (35108) | (19545) | (15563) |
| &nbsp;&nbsp;&nbsp;&nbsp; Capital DTLs | (53567) | (35391) | (18176) |
|  DTLs | (63140) | (43928) | (19212) |
|  **Net deferred tax asset** | $**77229** | $**82598** | $**(5369)** |

---

*2025 Statutory Financial Statements* *Page 35* 

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*($ in Thousands)* 

The change in deferred income taxes is comprised of the following (this analysis is exclusive of nonadmitted assets), as the Change in nonadmitted assets is reported separately from the Change in net deferred income taxes within the Statements of Changes in Capital and Surplus:

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **Change** |
|  Total deferred tax assets | $192996 | $173759 | $19237 |
|  Total deferred tax liabilities | (63140) | (43928) | (19212) |
|  Statutory valuation allowance |  |  |  |
|  **Net deferred tax asset** | **129856** | **129831** | **25** |
|  Tax effect on unrealized (gains)/losses |  |  | 15764 |
|  SSAP 3 Adjustment |  |  | 18272 |
|  **Change in net deferred income tax** |  |  | $**34061** |

---

The provision for federal income taxes incurred is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The significant items causing the differences as of December 31, 2025 are as follows:

---

| | | | |
|:---|:---|:---|:---|
| <br>**Description** |<br>**Amount** |<br>**Tax Effect** | **Effective**<br>**Tax Rate** |
|  Income before Taxes | $97163 | $20404 | 21.00% |
|  Dividends Received Deduction | (1717) | (361) | -0.37% |
|  Separate Account Dividend Received Deduction | (502) | (105) | -0.11% |
|  IMR Amortization | 4512 | 948 | 0.98% |
|  LIHTC |  | (3411) | -3.51% |
|  Other | (1701) | (1418) | -1.46% |
|  **Total** | $**97755** | $**16057** | **16.52%** |
|  Federal Income Tax Expense Incurred |  | $44785 | 46.09% |
|  FIT Expense/(Benefit) on Realized Capital Gains/Losses | FIT Expense/(Benefit) on Realized Capital Gains/Losses | (684) | -0.70% |
|  FIT in IMR Gains/Losses |  | 6017 | 6.19% |
|  Change in Net Deferred Income Tax |  | (34061) | -35.06% |
|  **Total statutory taxes** |  | $**16057** | **16.52%** |

---

The effective tax rate is primarily driven by the following components: (1) low income housing tax credits.

The Company utilized $3,411 of the total credits available at December 31, 2025. The Company has no LIHTC credits available as of December 31, 2025.

There was no income tax expense for 2025, 2024 and 2023 that is available for recoupment in the event of future net losses.

The Company has not made any deposits regarding the suspension of running interest (protective deposits) pursuant to Internal Revenue Code Section 6603.

The Company's federal income tax return is consolidated with its parent, Penn Mutual, and Penn Mutual's subsidiaries. The method of tax allocation among the companies is subject to a written agreement, whereby the tax allocation is made on a benefits for loss basis. In addition, the Company is party to a tax agreement with PIAre I whereby PIAre I will pay its federal income tax liability or receive a refund for its net operating losses from the Company determined on a separate return basis.

*Page 36* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

A listing of the companies included in the consolidated return is as follows:

Penn Mutual Life Insurance Company (Parent)

Penn Insurance & Annuity Company

PIA Reinsurance Company of Delaware I

Vantis Life Insurance Company

Penn Insurance and Annuity Company of New York

For the year ended December 31, 2025, PIA Re I had a taxable net gain of $6,985 generating an amount payable from PIA Re I to PIA of $627.

For the year ended December 31, 2024, PIA Re I had a taxable net loss of $145,773 generating an amount payable from PIA to PIA Re I of $31,970, which was paid in 2025.

Tax years 2022 and subsequent are still subject to audit by the Internal Revenue Service.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits, as a component of tax expense. During the years ended December 31, 2025 and 2024, the Company did not recognize or accrue penalties or interest.

The Company has no tax loss contingencies for which it is reasonably possible that the total liability will significantly increase within the next twelve months of the reporting date.

On August 16, 2022, the Inflation Reduction Act of 2022 ("Act") was passed by the US Congress and signed into law by President Biden. The Act includes a new corporate alternative minimum tax ("CAMT") for tax years beginning after December 31, 2022. The Company has determined that they are a non-applicable reporting entity in 2025.

As detailed in Note 2, the Company has early adopted SSAP94. These revisions, effective December 31, 2024, expanded the scope of SSAP No. 94R to include all state and federal tax credits and provide new guidance on the accounting, recognition and reporting for state and federal tax credits.

On July 4, 2025, the One Big Beautiful Bill Act ("2025 Act") was enacted into law for tax years beginning in 2025. There was no material impact on the Company's financial statements as a result of this new act.

***Note 10.* REINSURANCE** 

The Company has assumed and ceded reinsurance on certain life and annuity contracts under various agreements. Reinsurance ceded permits recovery of a portion of losses from reinsurers.

The table below highlights the reinsurance amounts shown in the accompanying financial statements.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Direct** | **Assumed** | **Ceded** | **Net Amount** |
|  December 31, 2025: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Premium and annuity considerations | $1736511 | $130691 | $90981 | $1776221 |
| &nbsp;&nbsp;&nbsp;&nbsp; Reserves and funds for payment of insurance and annuity benefits | 9087562 | 4496783 | 3511198 | 10073147 |
|  December 31, 2024: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Premium and annuity considerations | $1327672 | $825996 | $783087 | $1370581 |
| &nbsp;&nbsp;&nbsp;&nbsp; Reserves and funds for payment of insurance and annuity benefits | 7878144 | 4319276 | 3380696 | 8816724 |

---

*2025 Statutory Financial Statements* *Page 37* 

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*($ in Thousands)* 

**INTERCOMPANY REINSURANCE** The Company maintains various reinsurance agreements with affiliates. The following table summarizes premium and reserves balances associated with such agreements as of and for the years ended December 31:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | | **Assumed/(Ceded)** | **Assumed/(Ceded)** | **Assumed/(Ceded)** | **Assumed/(Ceded)** |
|  | | **2025** | **2025** | **2024** | **2024** |
| |<br>**Affiliate** | **Premium** | **Reserves** | **Premium** | **Reserves** |
|  Coinsurance funds withheld | Penn Mutual | $39040 | $2417361 | $731255 | $2347132 |
|  Coinsurance funds withheld | PIAre I | (44042) | (3501055) | (737043) | (3371201) |
|  Coinsurance — Inforce | Penn Mutual | 11927 | 643251 | 17959 | 617324 |
|  Coinsurance | Penn Mutual | 57926 | 1425272 | 56769 | 1344815 |
|  YRT — Index credits | PIAre I | 21799 | 10899 | 20013 | 10006 |
|  YRT — Over retention | Penn Mutual | (6436) | (864) | (5626) | (790) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total |  | $80214 | $994864 | $83327 | $947286 |

---

*Coinsurance funds withheld* Effective December 31, 2013, the Company ceded a closed block of business to PIAre I on a 100% coinsurance funds withheld basis. At inception, the agreement generated an after-tax gain of $87,008, which was a direct increase to surplus and is amortized into income over the life of the agreement.

Effective December 31, 2014, the Company into a contract with Penn Mutual to assume reserves pursuant to transactions subject to the requirements of Section 7 of the NAIC XXX and AXXX Reinsurance Model Regulation. The Company then contemporaneously reinsured the policies to PIAre I. Effective October 1, 2024, this agreement was amended and restated to increase the ceded reserves for the existing in-force block of policies. The Company contemporaneously reinsured the increased ceded reserves to PIAre I.

*Coinsurance — Inforce* Effective January 1, 2015, the Company assumed from Penn Mutual an inforce block of single life index universal life policies issued by Penn Mutual between 2012 and 2014. The Company assumed 100% of the risk, net of inuring reinsurance.

*Coinsurance* The Company assumes certain risks under reinsurance agreements with Penn Mutual relating to various fixed and indexed universal life business.

*YRT — Index credits* Effective January 1, 2017, the Company assumes the equity risk associated with PIAre I's indexed UL products on a YRT basis.

*YRT — Over retention* The Company ceded to Penn Mutual policies issued after October 1, 2006 and before October 1, 2014 that resulted in retention greater than $1,000 per life.

***Note 11.* RELATED PARTIES** 

The Company entered into a revolving loan agreement with Penn Mutual Asset Management ("PMAM"), a wholly-owned subsidiary of Penn Mutual, on November 4, 2024, to provide funding to PMAM in an amount not to exceed $200,000. Terms of the loan specify that quarterly interest be paid on the outstanding balances based on market rates determined at the dates of the loans. The principal balances are not due until maturity in November 2043. There were no draws on the loan agreement in 2025 and 2024.

The Company made capital contributions of $0 and $40,000 to PIAre in 2025 and 2024, respectively. In 2025 and 2024, the company received a return of capital from PIARe of $15,000, and $0, respectively. In 2025 and 2024, the Company received $150,000 and $70,000, respectively, in capital contributions from its parent, Penn Mutual. Capital contributions made and received were in the form of cash.

*Page 38* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

The Company's unconsolidated subsidiary had assets of $3,697,367 and $3,579,120 and liabilities of $3,494,858 and $3,364,996 as of December 31, 2025 and 2024, respectively. There was no goodwill or other intangible assets in the admitted value of the Company's subsidiary at December 31, 2025 and 2024, respectively.

Under the terms of an expense allocation agreement, the Company reimbursed Penn Mutual for services and facilities provided on behalf of the Company, including direct and allocated expenses. For December 31, 2025 and 2024, the total expenses incurred under this agreement were $104,648 and $86,800, respectively. The amount due was $28,664 and $22,684 at December 31, 2025 and 2024, respectively.

The Company entered into Selling and Sales Support Agreements with 1847 Financial LLC ("1847FIN"), a wholly-owned subsidiary of Penn Mutual, in 2025 for the distribution of annuity and life insurance contracts. During 2025, the Company recorded $54,612 in expense associated with this agreement. At December 31, 2025 the Company reported $2,451 as amount due to 1847FIN.

Under the terms of investment management and administrative services agreements, the Company paid PMAM for investment management and accounting services provided on behalf of the Company. For December 31, 2025 and 2024, the total expenses incurred under these agreements were $13,450 and $11,543, respectively. The amount due was $1,220 and $1,004 at December 31, 2025 and 2024 , respectively.

The Company agreed to provide certain accounting and administrative services, at cost, to PIAre I. The administrative costs for the years ended December 31, 2025 and 2024 were $480 and $490, respectively.

***Note 12.* COMMITMENTS, CONTINGENCIES AND UNCERTAINTIES** 

**LITIGATION** The Company and its subsidiaries are involved in litigation arising in and out of the normal course of business that seek both compensatory and punitive damages. In addition, the regulators within the insurance and brokerage industries continue to focus on market conduct and compliance issues. While the Company is not aware of any actions or allegations that should reasonably give rise to a material adverse impact to the Company's financial position or liquidity, the outcome of litigation cannot be foreseen with certainty.

For some matters, the Company is able to estimate a possible range of loss. For such matters in which a loss is probable, an accrual has been made. For matters where the Company, however, believes a loss is reasonably possible, but not probable, no accrual is required. For matters for which an accrual has been made, but there remains a reasonably possible range of loss in excess of the amounts accrued or for matters where no accrual is required, the Company develops an estimate of the unaccrued amounts of the reasonably possible range of losses.

**GUARANTY FUNDS** The Company is subject to insurance guaranty fund laws in the states in which it does business. These laws assess insurance companies amounts to be used to pay benefits to policyholders and policy claimants of insolvent insurance companies. Many states allow these assessments to be credited against future premium taxes. The liability for estimated guaranty fund assessments net of applicable premium tax credits as of December 31, 2025 and 2024 was $60 and $60, respectively. The Company monitors sales materials and compliance procedures and makes extensive efforts to minimize any potential liabilities in this area. The Company believes such assessments in excess of amounts accrued will not materially impact its financial statement position, results of operation or liquidity.

**COMMITMENTS** In the normal course of business, the Company extends commitments relating to its investment activities. As of December 31, 2025 the Company had outstanding commitments totaling $261,652 relating to these investment activities. The fair value of these commitments approximates their face amount.

PIAre I has an adjustable 20 year, non-interest bearing financial instrument with a current face amount of $812,362 to support a modified coinsurance arrangement with an unaffiliated reinsurer. The Company is obligated to pay a financing fee on the reserve amount being financed. The Company may be subject to an early termination fee upon the occurrence of certain events through December 31, 2030. The modified coinsurance arrangement was effective December 31, 2013. Fees incurred during the years ended December 31, 2025 and December 31, 2024 were $958 and $2,885, respectively, which are included in Other expenses in the Statements of Operations.

*2025 Statutory Financial Statements* *Page 39* 

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*($ in Thousands)* 

**DIVIDEND RESTRICTIONS** The payment of dividends by the Company to Penn Mutual is subject to restrictions set forth in the State of Delaware insurance laws. These laws require that the maximum amount of ordinary dividends that can be paid by the Company to Penn Mutual without restriction cannot exceed the greater of the net gain from operations of the previous year or 10% of surplus as of the previous year end. Generally, these restrictions pose no short-term liquidity concerns for the Company. Based on these restrictions and 2025 statutory results, the Company could pay $119,943 in dividends in 2026 to Penn Mutual without prior approval from the Delaware Department of Insurance, subject to the notification requirement.

***Note 13.* SUBSEQUENT EVENTS** 

The Company has evaluated events subsequent to December 31, 2025 and through the financial statement issuance date of February 18, 2026 and has determined that there were no other significant events requiring recognition in the financial statements and no additional events requiring disclosure in the financial statements.

*Page 40* *The Penn Insurance and Annuity Company*

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| | |
|:---|:---|
| ![LOGO](g54133g26a02.jpg) | **About The Penn Insurance and Annuity Company**<br>The Penn Insurance and Annuity Company (PIA) is a wholly-owned life insurance subsidiary of The Penn Mutual Life Insurance Company (Penn Mutual). Domiciled in Delaware, PIA is licensed to do business in 49 states and the District of Columbia. It markets its products with a focus on universal life insurance through Penn Mutual's distribution systems and has its in-force business serviced by the parent company.<br>![LOGO](g54133g01f42.jpg)  |

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<sup>©</sup> 2026 The Penn Insurance and Annuity Company, Philadelphia, PA 19172 \| pennmutual.com

PM9144 01/26

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![LOGO](g93208g29z89.jpg)

## The Penn Insurance and Annuity Company
![LOGO](g93208g25s05.jpg) 2023 Statutory Financial Statements

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![LOGO](g93208g74r95.jpg)

**PricewaterhouseCoopers LLP,**<br> Two Commerce Square,<br> 2001 Market Street, Suite 1800,<br> Philadelphia, Pennsylvania 19103-7042<br> T: (267) 330 3000,<br> www.pwc.com/us<br>

**Report of Independent Auditors** 

To the Board of Directors of

The Penn Insurance and Annuity Company

***Opinions***

We have audited the accompanying statutory financial statements of The Penn Insurance and Annuity Company (the "Company"), which comprise the statements of admitted assets, liabilities and capital and surplus as of December 31, 2023 and 2022, and the related statements of operations, changes in capital and surplus and cash flows for the years then ended, including the related notes (collectively referred to as the "financial statements").

***Unmodified Opinion on Statutory Basis of Accounting***

In our opinion, the accompanying financial statements present fairly, in all material respects, the admitted assets, liabilities and capital and surplus of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in accordance with the accounting practices prescribed or permitted by the Delaware Department of Insurance described in Note 1.

***Adverse Opinion on U.S. Generally Accepted Accounting Principles***

In our opinion, because of the significance of the matter discussed in the Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles section of our report, the accompanying financial statements do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2023 and 2022, or the results of its operations or its cash flows for the years then ended.

***Basis for Opinions***

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (US GAAS). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

***Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles***

As described in Note 1 to the financial statements, the financial statements are prepared by the Company on the basis of the accounting practices prescribed or permitted by the Delaware Department of Insurance, which is a basis of accounting other than accounting principles generally accepted in the United States of America.

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![LOGO](g93208g74r95.jpg)

The effects on the financial statements of the variances between the statutory basis of accounting described in Note 1 and accounting principles generally accepted in the United States of America, although not reasonably determinable, are presumed to be material.

***Responsibilities of Management for the Financial Statements***

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting practices prescribed or permitted by the Delaware Department of Insurance. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company's ability to continue as a going concern for one year after the date the financial statements are available to be issued.

***Auditors' Responsibilities for the Audit of the Financial Statements***

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with US GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with US GAAS, we:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Exercise professional judgment and maintain professional skepticism throughout the audit.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and
design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, no such opinion is expressed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluate the overall presentation of the financial statements.

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![LOGO](g93208g74r95.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial
doubt about the Company's ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

![LOGO](g93208g44h78.jpg)

Philadelphia, Pennsylvania <br> February 16, 2024

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***Table of Contents***

---

| | |
|:---|:---|
|  | ***Page*** |
|  [Statements of Admitted Assets, Liabilities and Capital and Surplus](#fin93208_1) | 1 |
|  [Statements of Operations](#fin93208_2) | 2 |
|  [Statements of Changes in Capital and Surplus](#fin93208_3) | 3 |
|  [Statements of Cash Flows](#fin93208_4) | 4 |
|  ***Notes to Financial Statements*** |  |
|  [Note 1. Nature of Operations and Basis of Presentation](#fin93208_5) | 5 |
|  [Note 2. Summary of Significant Accounting Policies](#fin93208_6) | 6 |
|  [Note 3. Investments](#fin93208_7) | 13 |
|  [Note 4. Separate Accounts](#fin93208_8) | 19 |
|  [Note 5. Derivatives](#fin93208_9) | 20 |
|  [Note 6. Fair Value of Financial Instruments](#fin93208_10) | 22 |
|  [Note 7. Life Reserves by Withdrawal Characteristics](#fin93208_11) | 27 |
|  [Note 8. Reserves and Funds for the Payment of Annuity Benefits](#fin93208_12) | 28 |
|  [Note 9. Federal Income Taxes](#fin93208_13) | 30 |
|  [Note 10. Reinsurance](#fin93208_14) | 35 |
|  [Note 11. Related Parties](#fin93208_15) | 36 |
|  [Note 12. Commitments and Contingencies](#fin93208_16) | 36 |
|  [Note 13. Subsequent Events](#fin93208_17) | 37 |

---

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*($ in Thousands)* 

Statements of Admitted Assets, Liabilities and Capital and Surplus

---

| | | |
|:---|:---|:---|
| **AS OF DECEMBER 31,** | **2023** | **2022** |
|  **ADMITTED ASSETS** |  |  |
|  Bonds | $7748725 | $7015519 |
|  Preferred stock | 54589 | 54340 |
|  Common stock – affiliated | 122856 | 130655 |
|  Common stock – unaffiliated | 27372 | 33467 |
|  Policy loans | 605820 | 589233 |
|  Cash and short-term investments | 212407 | 128400 |
|  Alternative assets | 344415 | 366264 |
|  Derivatives | 1336593 | 990389 |
|  Other invested assets | 166608 | 125118 |
|  TOTAL INVESTMENTS | 10619385 | 9433385 |
|  Investment income due and accrued | 94145 | 85926 |
|  Deferred tax asset | 82446 | 68112 |
|  Amounts recoverable from reinsurers | 102642 | 49912 |
|  Funds held by reinsured company | 1103153 | 1049203 |
|  Federal income taxes recoverable | 3995 | 22071 |
|  Other assets | 171374 | 134281 |
|  Separate account assets | 133688 | 76939 |
|  **TOTAL ASSETS** | $**12310828** | $**10919829** |
|  **LIABILITIES** |  |  |
|  Reserves and funds for payment of future insurance and annuity benefits | $7512936 | $7037940 |
|  Policy claims in process | 15568 | 24077 |
|  Asset valuation reserve | 85763 | 107178 |
|  Interest maintenance reserve | 5831 | 2993 |
|  Funds held under coinsurance | 1726120 | 1630788 |
|  Other liabilities | 928885 | 402683 |
|  Derivatives | 1042286 | 888119 |
|  Separate account liabilities | 133688 | 76939 |
|  TOTAL LIABILITIES | 11451077 | 10170717 |
|  **CAPITAL AND SURPLUS** |  |  |
|  Common stock, $2.50 par value, 1,000 shares authorized, issued and outstanding | 2500 | 2500 |
|  Capital contributed in excess of par value | 559662 | 529662 |
|  Accumulated surplus | 297589 | 216950 |
|  TOTAL CAPITAL AND SURPLUS | 859751 | 749112 |
|  **TOTAL LIABILITIES, CAPITAL AND SURPLUS** | $**12310828** | $**10919829** |

---

*The accompanying notes are an integral part of these financial statements.* 

*2023 Statutory Financial Statements* *Page 1*

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*($ in Thousands)* 

Statements of Operations

---

| | | |
|:---|:---|:---|
| **FOR THE YEARS ENDED DECEMBER 31,** | **2023** | **2022** |
|  **REVENUES** |  |  |
|  Premium and annuity considerations | $1054948 | $942507 |
|  Net investment income | 381267 | 341231 |
|  Other revenue | 56659 | 48165 |
|  TOTAL REVENUE | 1492874 | 1331903 |
|  **BENEFITS AND EXPENSES** |  |  |
|  Benefits paid to policyholders and beneficiaries | 429623 | 298409 |
|  Increase in reserves and funds for payment of future insurance and annuity benefits | 704234 | 594866 |
|  Commissions | 78292 | 71649 |
|  Operating expenses | 123063 | 108015 |
|  Other expenses | 99621 | 76380 |
|  Net transfer from separate accounts | 41064 | 23080 |
|  TOTAL BENEFITS AND EXPENSES | 1475897 | 1172399 |
|  GAIN FROM OPERATIONS BEFORE FEDERAL INCOME TAXES | 16977 | 159504 |
|  Federal income tax expense/(benefit) | 42997 | (9157) |
|  (LOSS)/GAIN FROM OPERATIONS | (26020) | 168661 |
|  Net realized capital (losses)/gains, net of tax | (24449) | (24614) |
|  **NET (LOSS)/GAIN** | $**(50469)** | $**144047** |

---

*The accompanying notes are an integral part of these financial statements.* 

*Page 2* *The Penn Insurance and Annuity Company*

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Statements of Changes in Capital and Surplus

---

| | | |
|:---|:---|:---|
| **FOR THE YEARS ENDED DECEMBER 31,** | **2023** | **2022** |
|  **COMMON STOCK** |  |  |
|  Beginning of year | $2500 | $2500 |
|  End of year | 2500 | 2500 |
|  **CAPITAL CONTRIBUTED IN EXCESS OF PAR VALUE** |  |  |
|  Beginning of year | 529662 | 469662 |
|  Capital contribution from parent | 30000 | 60000 |
|  End of year | 559662 | 529662 |
|  **ACCUMULATED SURPLUS** |  |  |
|  Opening surplus adjustment |  | (1357) |
|  Beginning of year | 216950 | 195477 |
|  Net (loss)/gain | (50469) | 144047 |
|  Dividend to parent |  | (8202) |
| &nbsp;&nbsp;&nbsp;&nbsp; Change in: |  |  |
|  Nonadmitted assets | (6973) | 6962 |
|  Asset valuation reserve | 21415 | 50547 |
|  Net deferred income tax | 45116 | (36779) |
|  Net unrealized capital gains/(losses), net of tax | 71550 | (135102) |
|  End of year | 297589 | 216950 |
|  **TOTAL CAPITAL AND SURPLUS** | $**859751** | $**749112** |

---

*The accompanying notes are an integral part of these financial statements.* 

*2023 Statutory Financial Statements* *Page 3*

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Statements of Cash Flows

---

| | | |
|:---|:---|:---|
| **FOR THE YEARS ENDED DECEMBER 31,** | **2023** | **2022** |
|  **OPERATIONS** |  |  |
|  Premium and annuity considerations | $1173278 | $985242 |
|  Net investment income | 429681 | 403358 |
|  Other revenue | 59850 | 48967 |
|  CASH PROVIDED BY OPERATIONS | 1662809 | 1437567 |
|  Benefits paid | 437230 | 304369 |
|  Commissions, operating expenses and other | 286039 | 268974 |
|  Net transfers from separate accounts | 43358 | 26815 |
|  Taxes paid on operating income and realized investment losses | 24015 | 3416 |
|  CASH USED IN OPERATIONS | 790642 | 603574 |
|  **NET CASH PROVIDED BY OPERATIONS** | **872167** | **833993** |
|  **INVESTMENT ACTIVITIES** |  |  |
|  Investments sold, matured or repaid: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Bonds | 399463 | 546613 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stocks | 29311 | 20479 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other invested assets | 11893 | 11733 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Derivatives | 223553 | 96984 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Miscellaneous proceeds | 11163 |  |
|  NET PROCEEDS FROM INVESTMENTS SOLD, MATURED OR REPAID | 675383 | 675809 |
|  Cost of investments acquired: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Bonds | 1191442 | 1463246 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stocks | 39653 | 66410 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other invested assets | 46759 | 24364 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Derivatives | 251673 | 201523 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Miscellaneous applications | 16588 | 39 |
|  TOTAL COST OF INVESTMENTS ACQUIRED | **1546115** | **1755582** |
|  Net decrease in policy loans | (16580) | (22000) |
|  **NET CASH USED IN INVESTMENT ACTIVITIES** | **(887312)** | **(1101773)** |
|  **FINANCING AND MISCELLANEOUS** |  |  |
|  Net (deposits)/withdrawals on deposit-type funds | (228354) | 225598 |
|  Capital and paid in surplus | 30000 | 60000 |
|  Other cash provided by/(used in), net | 297508 | (57790) |
|  **NET CASH PROVIDED BY FINANCING AND MISCELLANEOUS** | **99154** | **227808** |
|  NET INCREASE/(DECREASE) IN CASH AND SHORT-TERM INVESTMENTS | 84007 | (39971) |
|  **Cash and short-term investments:** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Beginning of year | 128400 | 168371 |
|  **End of year** | $**212407** | $**128400** |
|  **Supplemental Disclosure of Cash Flow Information for Non-Cash Transactions:** |  |  |
|  Premium Paid by Benefit | $355 | $881 |
|  Premium Paid by Waiver | $1057 | $663 |
|  Non-Cash Acquisitions | $1893 | $1570 |
|  Other | $9842 | $12376 |

---

*The accompanying notes are an integral part of these financial statements.* 

*Page 4* *The Penn Insurance and Annuity Company*

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Notes to Financial Statements

***Note 1.* NATURE OF OPERATIONS AND BASIS OF PRESENTATION** 

**NATURE OF OPERATIONS** The Penn Insurance and Annuity Company (the "Company" or "PIA") is a wholly-owned life insurance subsidiary of The Penn Mutual Life Insurance Company ("Penn Mutual" or "PML"). The Company's business activities are primarily concentrated in the sale of indexed universal life ("IUL"), variable universal life ("VUL"), fixed universal life and indexed annuity products. The Company markets and sells its products through Penn Mutual's distribution systems, which consist of a network of career and independent financial professionals, and has its in-force business serviced by PML. Additionally, it has closed blocks of deferred and payout annuities. Domiciled in Delaware, PIA is licensed to write business in forty-nine states and the District of Columbia.

**BASIS OF PRESENTATION** The accompanying financial statements of the Company have been prepared in conformity with the National Association of Insurance Commissioner's ("NAIC") Practices and Procedures manual and with statutory accounting practices prescribed or permitted by the Delaware Department of Insurance (collectively "SAP" or "statutory accounting principles"). The Company currently has no permitted practices.

Pursuant to a permitted practice received from the Delaware Department of Insurance (Captive Bureau), PIA Reinsurance Company of Delaware I ("PIAre I"), a wholly-owned subsidiary of the Company, admits as an asset and a form of statutory surplus, the value of a credit linked variable funding note (LLC Note) provided by an unaffiliated company in conjunction with a reinsurance agreement with the Company. Based on the "look-through" provisions of the Statement of Statutory Accounting Principles No.97, *Investments in Subsidiary, Controlled and Affiliated Entitie*s, the Company includes the value of the LLC Note and related form of surplus in the financial statements of its Insurance SCA, PIAre I, in the carrying value of PIAre I.

In accordance with the permitted practice, the Company recorded $122,856 and $130,655 as of December 31, 2023 and 2022, respectively, in Common stock-affiliated, with a corresponding $122,856 and $130,655 in surplus, which represents the statutory reporting value of PIAre I. If PIAre I had completed their statutory financial statements in accordance with NAIC statutory accounting practices and procedures, the Company's reporting value of PIAre I would have been $0 as of December 31, 2023 and 2022. There was no impact to net income as a result of the permitted practice.

Had the Company not been permitted to include the asset and statutory surplus noted above in either 2023 or 2022, the resulting RBC of PIA would not have triggered a regulatory event. Had PIAre I not received a permitted or prescribed practice to include the asset and statutory surplus above noted, the resulting RBC of PIAre I would have triggered a regulatory event.

Statutory accounting practices are different in some respects from financial statements prepared in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). The more significant differences between statutory accounting principles and GAAP are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) certain acquisition costs, such as commissions and other variable costs, that are directly related to the successful
acquisition of new business, are charged to current operations as incurred, whereas GAAP generally capitalizes these expenses and amortizes them based on profit emergence over the expected life of the policies or over premium payment period;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) statutory policy reserves are based upon the methods prescribed in the Valuation Manual, whereas GAAP reserves would
generally be based upon the net level premium method or the estimated gross margin method, with estimates of future mortality, morbidity and interest assumptions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) bonds are generally carried at amortized cost, whereas GAAP generally reports bonds at fair value;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) undistributed earnings from alternative assets are included in unrealized gains and losses, whereas GAAP would reflect
these changes as net investment income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) deferred income taxes, which provide for book versus tax temporary differences, are subject to limitation and are charged
to surplus, whereas GAAP would generally include the change in deferred taxes in net income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) payments received for universal and variable life insurance products and variable annuities are reported as premium
income and changes in reserves, whereas GAAP would treat these payments as deposits to policyholders' account balances;

*2023 Statutory Financial Statements* *Page 5*

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) assets are reported at "admitted asset" value, and "nonadmitted assets" are excluded through a
charge against surplus, whereas GAAP would record these assets net of any valuation allowance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) investments in subsidiaries are accounted for using the equity method. The Company's investment in PIAre I, to the
extent of the audited surplus/equity, are admitted assets. GAAP would consolidate this entity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) reinsurance reserve credits are reported as a reduction of policyholders' reserves and liabilities for deposit-type
contracts, whereas GAAP would report these balances as an asset;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) an asset valuation reserve ("AVR") is reported as a contingency reserve to stabilize surplus against
fluctuations in the carrying value of stocks, real estate investments, partnerships and limited liability companies ("LLCs"), investments in low income housing tax credits ("LIHTC"), as well as non interest-related declines
in the value of bonds, whereas GAAP would not record this reserve;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) after-tax realized capital gains and losses which result from changes in the
overall level of interest rates for all types of fixed-income investments and interest-related hedging activities are deferred into the interest maintenance reserve ("IMR") and amortized into investment income over the remaining life of
the investment sold, whereas GAAP would report these gains and losses as revenue at time of sale;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) changes in the fair value of the derivative financial instruments are recorded as changes in surplus, unless deemed an
effective hedge when it is carried at amortized cost with no resulting changes in fair value. Changes in fair value for GAAP would be reported as income for ineffective cash flow hedges and effective fair value hedges; changes in fair value for GAAP
would be reported as other comprehensive income for effective cash flow hedges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) changes in the fair value of unaffiliated common stock are recorded as changes in surplus, whereas GAAP, records the
change in fair value through realized capital gains/losses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) comprehensive income is not presented whereas GAAP would present changes in unrealized capital gains and losses and
foreign currency translations as other comprehensive income;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) changes in the value of perpetual preferred stock are recorded as changes in surplus, whereas GAAP recognizes the changes
through realized capital gains/losses;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) embedded derivatives are recorded as part of the underlying contract, whereas GAAP would identify and bifurcate certain
embedded derivatives from the underlying contract or security and account for them separately;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) identification of other-than-temporary impairment ("OTTI") uses an "intent and ability to hold"
criteria whereas GAAP would use an "ability and intent not to sell" criteria;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r) investments in Federal Home Loan Bank stock are reported as an investment in common stock, unaffiliated, whereas GAAP
would report these within other invested assets.

**RECLASSIFICATIONS** Certain prior year amounts have been reclassified to conform to current year presentation. These reclassifications had no impact on capital and surplus or net income in the prior year.

***Note 2.* SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** 

**USE OF ESTIMATES** The preparation of financial statements requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Those estimates are inherently subject to change and actual results could differ from those estimates. Included among the material reported amounts and disclosures that requires extensive use of estimates are:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◇ Carrying value of certain invested assets

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◇ Liabilities for reserves and funds for the payment of insurance and annuity benefits

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◇ Accounting for income taxes and valuation of deferred income tax assets and liabilities and unrecognized tax benefits

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◇ Litigation and other contingencies

**INVESTMENTS** *Bonds* with an NAIC designation of 1 to 5 are valued at amortized cost. All other bonds are valued at the lower of cost or fair value. Fair value is determined using an external pricing service or management's pricing models.

For fixed income securities that do not have a fixed schedule of payments, including asset-backed and mortgage-backed securities, the effect on amortization or accretion is revalued periodically based on the current estimated cash flows. Prepayment assumptions are based on borrower constraints and economic incentives such as original

*Page 6* *The Penn Insurance and Annuity Company*

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term, age, and coupon of the loan as affected by the interest rate environment. Cash flow assumptions for structured securities are obtained from broker dealer survey values or internal estimates. These assumptions are consistent with the current interest rate and economic environment.

*Preferred Stock* Highest-quality, high-quality or medium quality redeemable preferred stock (NAIC designations 1 to 3) shall be valued at amortized cost. All other redeemable preferred stocks (NAIC designations 4 to 6) shall be reported at the lower of amortized cost or fair value. Perpetual preferred stock shall be valued at fair value, not to exceed any currently effective call price. Fair value is determined using an external pricing service or management's pricing model.

*Common Stock* Common Stock of the Company's insurance affiliate, PIAre I, is carried at its underlying audited statutory surplus on the Statement of Admitted Assets, Liabilities, and Surplus. Common stock, unaffiliated is valued at fair value. Dividends are recognized in net investment income on the ex-dividend date. Changes in the carrying value are recognized in unrealized gains or losses in surplus. The investment in capital stock of the Federal Home Loan Bank of Pittsburgh ("FHLB-PGH") is carried at par, which approximates fair value.

*Policy Loans* Policy Loans are carried at the aggregate balance of unpaid principal and interest.

*Cash, Cash Equivalents and Short-term investments* Cash Equivalents include investments purchased with maturities of three months or less and money market mutual funds. Short-term investments, which are carried at amortized cost and approximate fair value, consist of investments purchased with maturities greater than three months and less than or equal to 12 months.

*Alternative Assets* Alternative Assets consists primarily of limited partnerships. The Company accounts for the value of its investments at their underlying GAAP equity. Dividends and income distributions from limited partnerships are recorded as investment income. Undistributed earnings are included in the unrealized gains and losses balance and are reflected in surplus, net of deferred taxes. Distributions that are recorded as a return of capital reduce the carrying value of the limited partnership investment. Due to the timing of the valuation data received from the partnership, these investments are reported in accordance with the most recent valuations received, which are primarily on a one quarter lag.

*Derivatives* The Company may utilize derivative financial instruments in the normal course of business to manage risk, in conjunction with its management of assets and liabilities and interest rate risk. The accounting treatment of specific derivatives depends on whether the financial instrument is designated and qualifies as a highly effective hedge. Derivatives used in hedging transactions that meet the criteria of a highly effective hedge are reported and valued in a manner that is consistent with the instrument hedged. The change in fair value of these derivatives is recognized as an unrealized capital gain/(loss) until they are closed, at which time they are recognized within benefits paid to policyholders and beneficiaries. Derivatives used in risk management transactions that do not meet the criteria of an effective hedge are accounted for at fair value, with changes in fair value recorded in unrealized capital gains/ (losses). Derivatives with a positive fair value or carrying value are reported as admitted assets and Derivatives with a negative fair value or carrying value are reported as liabilities. Realized gains and losses that are recognized upon termination or maturity of the derivatives used in economic hedges of interest rate and currency risk of the fixed income portfolio, regardless of accounting treatment, are transferred, net of taxes, to the IMR. All other realized gains and losses are recognized in net income upon maturity or termination of the derivative contracts.

The Company entered into equity options in the form of call spreads during 2023 and 2022. During 2022, these equity options were designated to qualify as cash flow hedges of cash flows associated with indexed credits related to the annual return of the S&P 500 IUL policies. In 2023, the Company discontinued hedge accounting and these equity options are now carried at fair value.

The Company entered into interest rate swaps, that are carried at fair value. The Company may use payer swaps, a type of interest rate swap, to manage risk associated with rising interest rates. Receiver swaps, a type of interest rate swap, protect the Company from credit risk in the fixed income portfolio. The Company has not designated these as hedging instruments.

The Company does not engage in derivative financial instrument transactions for speculative purposes.

*2023 Statutory Financial Statements* *Page 7*

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*Other Invested Assets* The Company invests in LIHTC investments, that generate tax credits for investing in affordable housing projects. Investments in LIHTC are included in other invested assets and are accounted for under the proportional amortized cost method. The delayed equity contributions for these investments are unconditional and legally binding and therefore, have been recognized as a liability. LIHTC investments are reviewed for OTTI, which is accounted for as a realized loss.

Other invested assets also include notes receivable carried at book value from Janney Montgomery Scott LLC ("JMS"), an affiliate, and Penn Mutual AM Strategic Income Fund ("PMAM's PMUBX") and receivables for unsettled investment transactions.

**OTTI EVALUATION** 

*Bonds, mortgage-backed and asset-backed securities* The Company considers an impairment to be OTTI if: (a) the Company's intent is to sell, (b) the Company will more likely than not be required to sell, (c) the Company does not have the intent and ability to hold the security for a period of time sufficient to recover the amortized cost basis, or (d) the Company does not expect to recover the entire amortized cost basis. The Company conducts a periodic management review of all bonds including those in default, not-in-good standing, or otherwise designated by management. The Company also considers other qualitative and quantitative factors in determining the existence of OTTI including, but not limited to, unrealized loss trend analysis and significant short-term changes in value, default rates, delinquency rates, percentage of nonperforming loans, prepayments, and severities. If the impairment is other-than-temporary, the non-interest loss portion of the impairment is recorded through realized losses, and the interest related portion of the loss is disclosed in the notes to the financial statements.

The non-interest portion is determined based on the Company's "best estimate" of future cash flows discounted to a present value using the appropriate yield. The difference between the present value of the best estimate of cash flows and the amortized cost is the non-interest loss. The remaining difference between the amortized cost and the fair value is the interest loss.

*Equity Securities* OTTI The Company will impair any lot of equity securities in an unrealized loss position for more than 12 consecutive months by more than 10%. Any such impairments are accounted for as a realized loss.

*Alternative Assets OTTI* The Company's evaluation for OTTI takes into consideration the remaining life of a partnership and the performance of the underlying assets when evaluating the facts and circumstances surrounding the recovery of the cost for a partnership. Any such impairments are accounted for as a realized loss.

*LIHTC OTTI* The Company's evaluation for OTTI is determined by comparing the book value of the investment with the present value of future tax benefits. The investment is written down if the book value is higher than the present value and the impairment is accounted for as a realized loss.

**INVESTMENT INCOME DUE AND ACCRUED** Investment income due and accrued consists primarily of interest and dividends. Interest is recognized on an accrual basis and dividends are recorded as earned on the ex-dividend date. Due and accrued income is not recorded on: (a) bonds in default; (b) bonds delinquent more than 90 days or where collection of interest is improbable; and (c) policy loan interest due and accrued in excess of the cash surrender value of the underlying contract.

**OTHER ASSETS** Other assets primarily includes receivables for collateral remitted to counterparties.

**FEDERAL INCOME TAX** The Company files a consolidated federal income tax return with its parent, Penn Mutual, and Penn Mutual's subsidiaries. Each subsidiary's tax liability or refund is accrued on a benefits for loss basis. Penn Mutual reimburses subsidiaries for losses utilized in the consolidated return based on inter-company tax allocation agreements. The provision for federal income taxes is computed in accordance with the section of the Internal Revenue Code applicable to life insurance companies and is based on income that is currently taxable.

Uncertain tax positions ("UTP") are established when the merits of a tax position are evaluated against certain measurement and recognition tests. UTP changes are reflected as a component of income taxes. The Company currently has no UTPs.

*Page 8* *The Penn Insurance and Annuity Company*

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Deferred income tax assets and liabilities are established to reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes. These deferred tax assets or liabilities are measured by using the enacted tax rates expected to apply to taxable income in the period in which the deferred tax liabilities or assets are expected to be settled or realized. Changes in the deferred tax balances are reported as adjustments to surplus. Deferred tax assets, after the consideration of any necessary valuation allowance, in excess of statutory limits are treated as nonadmitted assets and charged to surplus.

**REINSURANCE** In the normal course of business, the Company seeks to limit its exposure to loss on any single insured and to recover a portion of benefits paid by ceding reinsurance to other insurance enterprises or reinsurers under excess coverage and coinsurance contracts. The Company has set its retention limit for acceptance of risk on life insurance policies at various levels up to $7,500 for single life and $10,000 for joint lives.

In addition to excess coverage and coinsurance contracts, the Company also utilizes other forms of reinsurance such as coinsurance funds withheld.

Reinsurance does not relieve the Company of its primary liability and, as such, failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the risk transfer of its reinsurance contracts as well as the financial strength of potential reinsurers. The Company regularly monitors the financial condition and ratings of its existing reinsurers to ensure that amounts due from reinsurers are collectible.

Insurance liabilities are reported net of the effects of reinsurance. Estimated reinsurance recoverables are recognized in a manner consistent with the liabilities related to the underlying reinsured contracts.

**SEPARATE ACCOUNT ASSETS AND LIABILITIES** The Company has separate account assets and liabilities representing segregated funds administered and invested by the Company primarily for the benefit of variable life insurance policyholders and variable annuity contractholders. The assets of each account are legally segregated and are generally not subject to claims that arise out of any other business of the Company. The separate accounts have varying investment objectives.

Separate account assets are stated at the fair value of the underlying assets, which are shares of mutual funds. The value of the assets in the Separate Accounts reflects the actual investment performance of the respective accounts and is not guaranteed by the Company. The liability is reported at contract value and represents the policyholders' interest in the account and includes accumulated net investment income and realized and unrealized capital gains/(losses) on the assets. The investment income and realized capital gains/(losses) from separate account assets accrue to the policyholders and are not included in the Statements of Operations. Mortality, policy administration, surrender charges assessed and asset management fees charged against the accounts are included in other revenue in the accompanying Statements of Operations.

The Company has traditional variable annuity contracts in the separate accounts in which the Company provides various forms of guarantees to benefit the related contract holders called Guaranteed Minimum Death Benefits ("GMDB"). In accordance with guarantees provided, if the investment proceeds in the separate accounts are insufficient to cover the guarantees for the product, the policyholder proceeds will be remitted by the general account.

**NONADMITTED ASSETS** Assets designated as nonadmitted by the NAIC include the amount of the deferred tax asset that will not be realized within the next three year period or in excess of statutory limitations, certain negative IMR balances, certain other receivables, advances and prepayments, and related party amounts outstanding greater than 90 days from the due date and the investment in certain subsidiaries. Such amounts are excluded from the Statements of Admitted Assets, Liabilities and Capital and Surplus.

**RESERVES AND FUNDS FOR THE PAYMENT OF FUTURE INSURANCE AND ANNUITY BENEFITS** Policyholders' reserves provide amounts adequate to discharge estimated future obligations in excess of estimated future premium on policies in-force. Any adjustments that are made to the reserve balances are reflected in the Statements of Operations in the year in which such adjustments are made, with the exception of changes in valuation bases that are accounted for as charges or credits to surplus.

*2023 Statutory Financial Statements* *Page 9*

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Reserves and funds for the payment of future life and annuity benefits are developed using actuarial methods based on statutory mortality and interest requirements. Reserves for life insurance contracts are developed using accepted actuarial methods computed principally on the Commissioners' Reserve Valuation Method ("CRVM") method using the 1958, 1980, 2001, and 2017 Commissioners' Standard Ordinary Mortality Tables and assumed interest rates ranging from 3.50% to 9.00%. Reserves for substandard policies are computed using multiples of the respective underlying mortality tables. The Company has universal life contracts with secondary guarantee features. The Company establishes reserves according to Actuarial Guideline XXXVIII.

Reserves for Single Life UL with secondary guarantee features are based on the methodology specified by the Life Principle-Based Reserve approach ("VM-20"), starting with 2017 policy issue years. Reserves for Single and Joint Life IUL are based on the same VM-20 methodology starting with 2018 policy issue years. Reserves for all other life insurance products are based on the same VM-20 methodology starting with 2020 policy issue years. VM-20 specifies the final reserve as the greater of the Net Premium Reserve ("NPR"), Deterministic Reserve ("DR") and Stochastic Reserve ("SR"). The NPR is a formulaic reserve with prescribed assumptions, including the 2017 CSO Mortality Tables. The DR is based on a single path, deterministic projection with prudent estimate assumptions, including margins for uncertainty. The SR is based on the Conditional Tail Expectation 70 ("CTE70") of 1,000 stochastically generated interest rate return scenarios with prudent estimate assumptions, including margins for uncertainty.

Reserves for fixed indexed annuities are developed using accepted actuarial methods computed principally on the Commissioners' Annuity Reserve Valuation Method ("CARVM") method using the 2012 Individual Annuity Mortality Basis and assumed interest rates ranging from 3.00% to 4.25%. Reserves for substandard policies are computed using multiples of the respective underlying reserving tables. The Company establishes reserves according to Actuarial Guideline XXXV.

The Company waives deduction of deferred fractional premium at death and returns any portion of the final premium beyond the date of death. Reserves are computed using continuous functions to reflect these practices. Surrender values are not promised in excess of the legally computed reserves.

Reserves for deferred fixed individual annuity contracts are developed using accepted actuarial methods computed principally under the Commissioners' Annuity Reserve Valuation Method using applicable interest rates and mortality tables, primarily on the 1971, 1983, 2000, and 2012 Individual Annuity Mortality Table and rates ranging from 1.00% to 7.75%.

The Company also has deferred variable annuity contracts and establishes reserves according to the methodology specified by Principle-Based Reserves for Variable Annuities ("VM-21").

Reserves for group annuity contracts are developed using accepted actuarial methods computed principally on the 1971 Group Annuity Mortality Tables with an assumed interest rate of 11.25%.

The Company had $30,077 and $205 as of December 31, 2023 and December 31, 2022, respectively, of insurance in force for which the gross premiums are less than the net premiums according to the standards of valuation set by the Delaware Department of Insurance.

The tabular interest has been determined from the basic data for the calculation of policy reserves. The tabular less actual reserve released has been determined by formula.

**LIABILITIES FOR DEPOSIT-TYPE CONTRACTS** Reserves for funding agreements, investment-type contracts such as supplementary contracts not involving life contingencies, and certain structured settlement annuities are based on account value or accepted actuarial methods using applicable interest rates. Fair value is estimated by discounting future cash flows using current market rates.

The tabular interest for funds not involving life contingencies is determined as the change in reserves less funds added during the year less other increases, plus funds withdrawn during the year.

**POLICY CLAIMS IN PROCESS** Policy claims in process include provisions for payments to be made on reported claims and claims incurred but not reported.

*Page 10* *The Penn Insurance and Annuity Company*

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**INTEREST MAINTENANCE RESERVE** The IMR captures the realized capital gains/(losses) that result from changes in the overall level of interest rates and amortizes them into income over the calendar years to expected maturity.

**ASSET VALUATION RESERVE** The AVR is a contingency reserve to stabilize surplus against fluctuations in the statement value of common stocks, partnerships, LIHTC investments, and LLCs, as well as non interest-related declines in the value of bonds. The AVR is reported in the Statement of Admitted Assets, Liabilities and Capital and Surplus, and the change in AVR is reported in the Statements of Changes in Capital and Surplus.

**DRAFTS OUTSTANDING** Drafts outstanding that have not been presented for payment are recorded as a liability.

**OTHER LIABILITIES** Other liabilities consists primarily of premiums received in advance, drafts outstanding, amounts payable on unaffiliated reinsurance agreements and amounts payable to the Company's affiliates under reinsurance agreements and other service agreements.

**CONTINGENCIES** Amounts related to contingencies are accrued if it is probable that a liability has been incurred and an amount is reasonably estimable. Regarding litigation, management evaluates whether there are incremental legal or other costs directly associated with the ultimate resolution of the matter that are reasonably estimable and, if so, includes these costs in the accrual.

**RISK-BASED CAPITAL** Life insurance companies are subject to certain risk-based capital ("RBC") requirements as specified by the NAIC. Under those requirements, minimum amounts of statutory surplus are required to be maintained based on various risk factors related to it. At December 31, 2023, the Company's surplus exceeds these minimum levels.

**PREMIUM AND RELATED EXPENSE RECOGNITION** Life insurance premium revenue is generally recognized as revenue on the gross basis when due from policyholders under the terms of the insurance contract. Annuity premium on policies with life contingencies is recognized as revenue when received. Both premium and annuity considerations are recorded net of reinsurance premiums. Commissions and other costs related to issuance of new policies, and policy maintenance and settlement costs are charged to current operations when incurred. Surrender fee charges on certain life and annuity products are recorded as a reduction of benefits and expenses. Benefits payments are reported net of the amounts received from reinsurers.

The Company accounts for deposit-type contracts (those that do not subject the Company to mortality or morbidity risk) under the deposit method. Amounts received from and payments to policyholders related to these contracts are recorded directly against the related policy reserves. Interest credited to policyholder accounts is reflected in Benefits paid to policyholders and beneficiaries. Fees charged to policyholder accounts are reflected in Other revenue.

**OTHER REVENUE AND OTHER EXPENSES** Other revenue includes interest income earned on the funds withheld assets in PML pursuant to the terms of the 70% coinsurance with funds withheld agreement with PML. The Company subsequently remits this interest income earned to PIAre I, the ultimate assuming company, which is recognized in Other expenses.

Other revenue also includes benefits received by the Company under reinsurance agreements with PML relating to index credits on certain universal life policies issued by the Company.

**REALIZED AND UNREALIZED CAPITAL GAINS AND LOSSES** Realized capital gains and losses, net of taxes, exclude gains and losses transferred to the IMR. Realized capital gains and losses are recognized in net income and are determined using the specific identification method.

All after-tax realized capital gains and losses that result from changes in the overall level of interest rates for all types of fixed-income investments and interest-related derivative activities for derivatives backing assets are transferred to the IMR and amortized into net investment income using the grouped method over the remaining life of the investment sold or, in the case of derivative financial instruments, over the remaining life of the underlying asset.

Unrealized capital gains and losses, net of deferred federal income taxes, are recorded as a change in surplus.

*2023 Statutory Financial Statements* *Page 11*

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**FEDERAL HOME LOAN BANK BORROWINGS** The Company is a member of the FHLB-PGH, which provides access to collateralized advances, collateralized funding agreements, and other FHLB-PGH products. Collateralized advances from the FHLB-PGH are classified in Borrowed money. Collateralized funding agreements issued to the FHLB-PGH are classified as liabilities for deposit-type funds and are recorded within Reserves and funds for payment of insurance and annuity benefits. FHLB-PGH is a first-priority secured creditor.

The Company's membership in FHLB-PGH requires the ownership of member stock, and borrowings from FHLB-PGH require the purchase of FHLB-PGH activity based stock in an amount equal to 4% of the outstanding borrowings. All FHLB-PGH stock purchased by the Company is classified as restricted general account investments within Common stock - unaffiliated. The Company's borrowing capacity is determined by the lesser of the assets available to be pledged as collateral to FHLB-PGH or 10% of the Company's prior period admitted general account assets. The fair value of the qualifying assets pledged as collateral by the Company must be maintained at certain specified levels of the borrowed amount, which can vary, depending on the nature of the assets pledged. The Company's agreement allows for the substitution of assets and the advances are pre-payable. Current borrowings are subject to prepayment penalties.

Borrowings from the FHLB-PGH are classified as funding agreements. As of December 31, 2023, there was $0 in outstanding borrowings and the maximum borrowed during the year was $225,000. As of December 31, 2022, there were $225,000 in outstanding borrowings and the maximum borrowed during the year was $325,000.

**NEW ACCOUNTING STANDARDS** 

The NAIC adopted INT 23-01T, which is an interpretation that prescribes limited-time, optional, statutory accounting guidance as an exception to the existing guidance detailed in SSAP No. 7 "Asset Valuation Reserve and Interest Maintenance Reserve". Under the INT, reporting entities are allowed to admit negative IMR if certain criteria are met. The Company did not admit any negative IMR at December 31, 2023 in its Statement of Admitted Assets, Liabilities and Capital and Surplus.

*Page 12* *The Penn Insurance and Annuity Company*

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***Note 3.* INVESTMENTS** 

The Company maintains a diversified investment portfolio. Investment policies limit concentration in any asset class (except for U.S. Treasury and U.S. Government guaranteed securities), geographic region, industry group, economic characteristic, investment quality, or individual investment.

**BONDS AND PREFERRED STOCK** The following summarizes the admitted value and estimated fair value of the Company's investment in bonds and redeemable preferred stock.

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| | | | | |
|:---|:---|:---|:---|:---|
| | | **Gross Unrealized<br>Capital** | **Gross Unrealized<br>Capital** | |
| <br>**DECEMBER 31, 2023** |<br>**Admitted<br>Value** | **Gains** | **Losses** |<br>**Estimated<br>Fair Value** |
|  US Governments | $61192 | $799 | $4658 | $57333 |
|  Other Governments | 6996 |  | 496 | 6500 |
|  States, Territories and Possessions | 49893 | 1437 | 1731 | 49599 |
|  Political Subdivisions | 207219 | 1487 | 28091 | 180615 |
|  Special Revenue | 720639 | 9810 | 91227 | 639222 |
|  Industrial and Miscellaneous | 3447170 | 33539 | 395772 | 3084937 |
|  Residential Mortgage-backed Securities | 588598 | 4746 | 53340 | 540004 |
|  Commercial Mortgage-backed Securities | 1023518 | 4533 | 72871 | 955180 |
|  Asset-backed Securities | 1495969 | 3939 | 67765 | 1432143 |
|  Hybrid Securities | 147152 | 1387 | 8253 | 140286 |
|  SVO Identified Funds | 379 | 116 | 116 | 379 |
|  Total Bonds | 7748725 | 61793 | 724320 | 7086198 |
|  Preferred Stock | 54589 | 6352 | 8632 | 52309 |
|  **Total Bonds and Preferred Stock** | $**7803314** | $**68145** | $**732952** | $**7138507** |
|  |  | **Gross Unrealized<br>Capital** | **Gross Unrealized<br>Capital** |  |
| **DECEMBER 31, 2022** | **Admitted<br>Value** | **Gains** | **Losses** | **Estimated<br>Fair Value** |
|  US Governments | $34228 | $1 | $5192 | $29037 |
|  Other Governments | 6994 |  | 440 | 6554 |
|  States, Territories and Possessions | 49967 | 996 | 2773 | 48189 |
|  Political Subdivisions | 202832 | 1167 | $35027.05 | 168972 |
|  Special Revenue | 661518 | 5988 | 113933 | 553573 |
|  Industrial and Miscellaneous | 3315611 | 13376 | 509704 | 2819283 |
|  Residential Mortgage-backed Securities | 462000 | 744 | 59587 | 403157 |
|  Commercial Mortgage-backed Securities | 1080983 | 1621 | 99552 | 983052 |
|  Asset-backed Securities | 1052337 | 995 | 88593 | 964739 |
|  Hybrid Securities | 148687 | 647 | 13539 | 135795 |
|  SVO Identified Funds | 362 |  |  | 362 |
|  Total Bonds | 7015519 | 25535 | 928341 | 6112713 |
|  Preferred Stock | 54340 | 6601 | 9663 | 51278 |
|  **Total Bonds and Preferred Stock** | $**7069859** | $**32136** | $**938004** | $**6163991** |

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*2023 Statutory Financial Statements* *Page 13*

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**RESTRICTED ASSETS AND SPECIAL DEPOSITS** The Company maintains assets on deposit with governmental authorities or trustees as required by certain state insurance laws. The Company also receives and pledges collateral for derivative contracts and FHLB in the form of cash and securities. Capital stock was purchased as a requirement to participate in the FHLB lending program.

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| | | | |
|:---|:---|:---|:---|
| **Balance Sheet Classification** | **Type** | **2023** | **2022** |
|  Debt securities — Available for sale | Collateral — FHLB | $— | $502019 |
|  Debt securities — Available for sale | Reinsurance agreements | 597866 | 581315 |
|  Debt securities — Available for sale | State deposit | 1528 | 1512 |
|  Equity securities — Common stock unaffiliated | FHLB Stock | 1270 | 10103 |
|  Equity securities — Common stock unaffiliated | Reinsurance agreements | 4352 | 723 |
|  Cash | Collateral — Derivatives | 200159 |  |
|  Cash | State deposit | 2936 | 2936 |
|  **Total Restricted Assets** |  | $**808111** | $**1098608** |

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The following table summarizes the admitted value and estimated fair value of debt securities as of December 31, 2023 by contractual maturity. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties. Securities that are not due on a single maturity are included as of the final maturity.

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| | | |
|:---|:---|:---|
| **Years to maturity:** | **Admitted<br>Value** | **Fair Value** |
|  Due in one year or less | $24928 | $24870 |
|  Due after one year through five years | 414305 | 408295 |
|  Due after five years through ten years | 609675 | 592220 |
|  Due after ten years | 3591731 | 3133485 |
|  Residential Mortgage-backed Securities <sup>(1)</sup> | 588599 | 540005 |
|  Commercial Mortgage-backed Securities <sup>(1)</sup> | 1023518 | 955180 |
|  Asset-backed Securities <sup>(1)</sup> | 1495969 | 1432143 |
|  Total Bonds | 7748725 | 7086198 |
|  Preferred Stock | 54589 | 52309 |
|  **TOTAL BONDS AND PREFERRED STOCK** | $**7803314** | $**7138507** |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Includes U.S. Agency structured securities

Mortgage and other asset-backed securities consist of commercial and residential mortgage pass-through holdings and securities backed by various forms of collateral, with the largest being collateralized loan obligations. These securities follow a structured principal repayment schedule and are rated investment grade, other than $67,724 primarily in asset-backed securities that do not follow a structured principal repayment schedule. The mortgage and other asset-backed securities portfolio are presented separately in the maturity schedule due to the potential for prepayment. The weighted average life of this portfolio is 5.4 years.

At December 31, 2023, the largest industry concentration of the Company's portfolio was investments in the Electric-Integrated sector of $419,897, representing 6% of the total debt securities portfolio.

*Page 14* *The Penn Insurance and Annuity Company*

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**CREDIT LOSS ROLLFORWARD** The following represents a rollforward of the cumulative credit loss component of OTTI loss recognized in earnings on fixed maturity securities still held for which a portion of the OTTI loss was not recognized in earnings.

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| | | |
|:---|:---|:---|
| **AS OF DECEMBER 31,** | **2023** | **2022** |
|  Balance, beginning of period | $2214 | $684 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Credit loss impairments previously recognized on securities which matured, paid down, prepaid or were sold during the period | (38) | (46) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Credit loss impairments previously recognized on securities impaired to fair value during the period |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Credit loss impairment recognized in the current period on securities not previously impaired |  | 1576 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Additional credit loss impairments recognized in the current period on securities previously impaired |  |  |
|  **Balance, end of period** | $**2176** | $**2214** |

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**UNREALIZED LOSSES ON INVESTMENTS** Management has determined that the unrealized losses on the Company's investments in equity and fixed maturity securities at December 31, 2023 are temporary in nature.

The following tables are an analysis of the fair values and gross unrealized losses aggregated by bond category and length of time that the securities were in a continuous unrealized loss position.

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Less than 12 months** | **Less than 12 months** | **12 months or greater** | **12 months or greater** | **Total** | **Total** | **Total** |
| | **Fair Value** | **Gross**<br> **Unrealized**<br> **Capital**<br> **Loss** | **Fair Value** | **Gross**<br> **Unrealized**<br> **Capital**<br> **Loss** | **Fair Value** | **Gross**<br> **Unrealized**<br> **Capital**<br> **Loss** | **Number**<br> **of**<br> **Securities** |
|  **DECEMBER 31, 2023** |  |  |  |  |  |  |  |
|  US Governments | $4317 | $123 | $26645 | $4535 | $30962 | $4658 | 17 |
|  Other Governments |  |  | 6500 | 496 | 6500 | 496 | 2 |
|  States, Territories and Possessions |  |  | 15652 | 1731 | 15652 | 1731 | 13 |
|  Political Subdivisions |  |  | 136923 | 28091 | 136923 | 28091 | 57 |
|  Special Revenue | 19127 | 428 | 419513 | 90799 | 438640 | 91227 | 220 |
|  Industrial and Miscellaneous | 36010 | 2535 | 2310187 | 393237 | 2346197 | 395772 | 1324 |
|  Residential Mortgage-backed Securities | 52522 | 2243 | 382567 | 51097 | 435089 | 53340 | 130 |
|  Commercial Mortgage-backed Securities | 60665 | 1225 | 724116 | 71646 | 784781 | 72871 | 363 |
|  Asset-backed Securities | 246685 | 4914 | 835631 | 62851 | 1082316 | 67765 | 328 |
|  Hybrid Securities |  |  | 112224 | 8253 | 112224 | 8253 | 62 |
|  SVO Identified Funds |  |  | 379 | 116 | 379 | 116 | 2 |
|  Total Bonds | $419326 | $11468 | $4970337 | $712852 | $5389663 | $724320 | 2518 |
|  Preferred Stock |  |  | 52310 | 8632 | 52310 | 8632 | 25 |
|  **Total Bonds and Preferred** | $**419326** | $**11468** | $**5022647** | $**721484** | $**5441973** | $**732952** | **2543** |

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*2023 Statutory Financial Statements* *Page 15*

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Less than 12 months** | **Less than 12 months** | **12 months or greater** | **12 months or greater** | **Total** | **Total** | **Total** |
| | **Fair Value** | **Gross**<br> **Unrealized**<br> **Capital**<br> **Loss** | **Fair Value** | **Gross**<br> **Unrealized**<br> **Capital**<br> **Loss** | **Fair Value** | **Gross**<br> **Unrealized**<br> **Capital**<br> **Loss** | **Number**<br> **of**<br> **Securities** |
|  **DECEMBER 31, 2022** |  |  |  |  |  |  |  |
|  US Governments | $17572 | $430 | $50336 | $4762 | $67908 | $5192 | 15 |
|  Other Governments | 6554 | 440 |  |  | 6554 | 440 |  |
|  States, Territories and | 25066 | 2773 |  |  | 25066 | 2774 |  |
|  Political Subdivisions | 95216 | 21928 | 30540 | 13100 | 125756 | 35027 | 57 |
|  Special Revenue | 271045 | 45416 | 157233 | 68517 | 428278 | 113933 | 207 |
|  Industrial and Miscellaneous | 1911997 | 271073 | 583573 | 238631 | 2495570 | 509704 | 1273 |
|  Residential Mortgage-backed | 263919 | 27965 | 126074 | 31622 | 389993 | 59587 | 113 |
|  Commercial Mortgage-backed | 683201 | 54145 | 258985 | 45407 | 942186 | 99552 | 346 |
|  Asset-backed Securities | 485508 | 31897 | 436888 | 56696 | 922396 | 88593 | 242 |
|  Hybrid Securities | 113780 | 10959 | 13147 | 2580 | 126927 | 13539 | 63 |
|  SVO Identified Funds |  |  |  |  |  |  |  |
|  Total Bonds | $3873858 | $467026 | $1656776 | $461315 | $5530634 | $928341 | 2316 |
|  Preferred Stock | 41255 | 6955 | 10023 | 2708 | 51278 | 9663 | 25 |
|  **Total Bonds and Preferred** | $**3915113** | $**473981** | $**1666799** | $**464023** | $**5581912** | $**938004** | **2341** |

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Included in the December 31, 2023 and 2022 amounts above is the interest portion of other-than-temporary impairments on securities of $498 and $412, respectively.

**COMMON STOCK — UNAFFILIATED** The following summarizes the cost and estimated fair value of the Company's investment in unaffiliated common stock:

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| | | | | |
|:---|:---|:---|:---|:---|
|  | | **Gross Unrealized**<br>**Capital** | **Gross Unrealized**<br>**Capital** | |
| |<br>**Cost** | **Gains** | **Losses** |<br>**Estimated**<br> **Fair Value** |
|  December 31, 2023 | $27705 | $727 | $1060 | $27372 |
|  December 31, 2022 | $37132 | $859 | $4524 | $33467 |

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The following presents the gross unrealized capital losses and fair values for unaffiliated common stock with unrealized capital losses.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Less than 12 months** | **Less than 12 months** | **Greater than 12 Months** | **Greater than 12 Months** | **Total** | **Total** |
| | **Fair Value** | **Gross**<br> **Unrealized**<br> **Capital**<br> **Losses** | **Fair Value** | **Gross**<br> **Unrealized**<br> **Capital**<br> **Losses** | **Fair Value** | **Gross**<br> **Unrealized**<br> **Capital**<br> **Losses** |
|  December 31, 2023 | $3448 | $273 | $7280 | $787 | $10728 | $1060 |
|  December 31, 2022 | $4797 | $561 | $10516 | $3963 | $15313 | $4524 |

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*Page 16* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

The amount of unrealized capital losses on the Company's investment in unaffiliated common stock is spread over 14 individual securities. As of December 31, 2023, there was 1 unaffiliated common stock security that was priced below 80% of the security's cost. Of these securities, 1 was impaired totaling $490.

*Federal Home Loan Bank* The Company's investment in FHLB-PGH Class B Membership Capital Stock as of December 31, 2023 and December 31, 2022 was $1,270 and $1,103, respectively. The Company also invested $— and $9,000 in FHLB-PGH Activity Stock as of December 31, 2023 and December 31, 2022, respectively. The Class B Membership Capital Stock held by the Company is subject to written notices of requests for redemption followed by a five year waiting period.

The Company's borrowing capacity with the FHLB-PGH was $859,580 and $630,406 as of December 31, 2023 and December 31, 2022, respectively.

The following represents the amount of collateral required to be pledged to the FHLB-PGH and the maximum amount of collateral pledged as of:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31<br>2023** | **Maximum<br>during 2023** | **December 31<br>2022** | **Maximum<br>during 2022** |
|  Carrying value | $433637 | $491903 | $502019 | $522911 |
|  Fair value | 391971 | 447788 | 448129 | 495858 |

---

The amount of interest on borrowings classified as funding agreements for the years ended December 31, 2023 and December 31, 2022 was $2,466 and $4,330, respectively.

**OTHER THAN TEMPORARY IMPAIRMENTS ON LOAN-BACKED SECURITIES** There were no other-than-temporary impairments recognized on loan-backed securities for the years ended December 31, 2023 and December 31, 2022.

**ALTERNATIVE ASSETS** The investment values of alternative assets are provided per the partnerships' capital account statements. The Company's interest cannot be redeemed, without exception. Instead, distributions from each fund result from the liquidation of the underlying assets. The period over which unredeemable investments are expected to be liquidated ranges from 5 to 10 years.

As of December 31, 2023, none of these investments exceed 10% of the Company's admitted assets. The Company recognized realized losses of $179 and $169 for the years ended December 31, 2023 and December 31, 2022, respectively, associated with other-than-temporary impairments of certain alternative assets.

Unfunded commitments for alternative assets were $91,212 and $106,885 for the years ended December 31, 2023 and December 31, 2022.

The Company did not recognize any realized gains (losses) for the years ended December 31, 2023 and December 31, 2022 associated with liquidations of the company's interest in alternative assets.

**OTHER INVESTED ASSETS** The components of other invested assets as of December 31, 2023 and 2022 were as follows:

---

| | | |
|:---|:---|:---|
| **DECEMBER 31,** | **2023** | **2022** |
|  LIHTC | $44779 | $25179 |
|  Receivable for securities | 22017 | 5428 |
|  Notes receivable — JMS | 40000 | 40000 |
|  PMUBX | 59812 | 54511 |
|  **Total other invested assets** | $**166608** | $**125118** |

---

*Low Income Housing Tax Credits T*he Company has no LIHTC properties under regulatory review at December 31, 2023 and 2022. There were no write-downs due to forfeiture of eligibility and there were no impairments for 2023 or 2022.

*2023 Statutory Financial Statements* *Page 17*

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*($ in Thousands)* 

Commitments of $40,503 and $22,907 for the years ended December 31, 2023 and December 31, 2022, respectively, have been recorded in Other liabilities related to unconditional and legally binding delayed equity contributions associated with investments in LIHTC. The Company has unexpired tax credits with remaining lives ranging between 1 and 14 years and required holding periods for its LIHTC investments between 4 and 19 years.

**NET INVESTMENT INCOME AND REALIZED CAPITAL GAINS AND LOSSES** The following table summarizes the major categories of net investment income for the years ended:

---

| | | |
|:---|:---|:---|
| **DECEMBER 31,** | **2023** | **2022** |
|  Bonds and preferred stock | $355492 | $285043 |
|  Common Stock — unaffiliated | 2424 | 2286 |
|  Policy loans | 33557 | 28604 |
|  Cash and short term investments | 6250 | 955 |
|  Alternative assets | 22032 | 34799 |
|  Derivatives | (20653) | (10090) |
|  Other invested assets | 5127 | 8903 |
|  IMR amortization | (5309) | (4255) |
|  Gross investment income | 398920 | 346245 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less investment expenses | 17653 | 5014 |
|  **Net investment income** | $**381267** | $**341231** |

---

There was no nonadmitted accrued investment income at December 31, 2023 and December 31, 2022.

Included in the table above (Bonds and preferred stocks) is $344 of investment income attributable to securities disposed of as a result of a callable feature, spread over 2 securities in 2023.

The following table represents proceeds from sales of bonds, preferred stock, and unaffiliated common stocks, and related gross realized gains and losses on those sales for the years ended December 31:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **2023** | **2023** | **2023** | **2022** | **2022** | **2022** |
| | **Proceeds<br>From Sales** | **Gross<br>Realized<br>Gains** | **Gross<br>Realized<br>Losses** | **Proceeds<br>From Sales** | **Gross<br>Realized<br>Gains** | **Gross<br>Realized<br>Losses** |
|  Bonds | $48020 | $376 | $2720 | $290295 | $498 | $30880 |
|  Preferred stock |  |  |  |  |  |  |
|  Common stock-unaffiliated | 14364 | 2545 | 595 | 16025 | 103 | 8404 |

---

As of December 31, 2023, there were no preferred stock impairments.

Realized capital gains/(losses) are reported net of federal income taxes and amounts transferred to the IMR are as follows for the years ended:

---

| | | |
|:---|:---|:---|
| **DECEMBER 31,** | **2023** | **2022** |
|  Realized capital losses | $(27828) | $(61686) |
|  Less amount transferred to IMR | (3129) | (36938) |
|  Less Taxes: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Transferred to IMR | 656 | 7757 |
| &nbsp;&nbsp;&nbsp;&nbsp; Capital losses | (906) | (7891) |
|  **Net Realized Capital Losses** | $**(24449)** | $**(24614)** |

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*Page 18* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

Portions of realized capital gains and losses that were determined to be interest related were transferred to the IMR.

There were no NAIC designation 3 or below, or unrated securities sold during the year ended December 31, 2023 and reacquired within 30 days of the sale date.

***Note 4.* SEPARATE ACCOUNTS** 

**SEPARATE ACCOUNTS REGISTERED WITH THE SEC** The Company maintains separate accounts that are registered with the Securities Exchange Commission ("SEC") for its individual variable life and annuity products with assets of $133,688 and $76,939 at December 31, 2023 and December 31, 2022, respectively. The assets for these separate accounts, which are carried at fair value, represent investments in shares of the Company's Penn Series Funds and other non-proprietary funds.

Information regarding the Separate Accounts of the Company, all of which are nonguaranteed, is as follows:

---

| | | |
|:---|:---|:---|
| | **2023** | **2022** |
|  Premiums, considerations and deposits for the year ended December 31 | $38819 | $29362 |
|  Reserves at December 31, at market value | 127473 | 73019 |
|  Subject to discretionary withdrawal at market value | 127473 | 73019 |

---

The following table reconciles the amounts transferred to and from the separate accounts as reported in the financial statements of the separate accounts to the amount reported in the Statements of Operations:

---

| | | |
|:---|:---|:---|
| **YEARS ENDED DECEMBER 31,** | **2023** | **2022** |
|  Transfers as reported in the financial statements of the separate accounts: |  |  |
|  Transfers to separate accounts | $38819 | $29362 |
|  Transfers from separate accounts | 2245 | (6282) |
|  **Transfers as reported in the Statements of Operations** | $**41064** | $**23080** |

---

The Company utilizes separate accounts to record and account for assets and liabilities for particular lines of business and transactions. For the current reporting year, the Company reported assets and liabilities from variable life and annuities product lines into a separate account.

The assets of the separate accounts, which are legally insulated from the general account, are comprised of the following as of December 31:

---

| | | |
|:---|:---|:---|
| **Product Description** | **2023** | **2022** |
|  Individual Annuity | $41042 | $38597 |
|  Single Life Variable Universal Life | 92646 | 38342 |
|  **Total** | $**133688** | $**76939** |

---

In accordance with the products recorded within the separate account, some separate account liabilities are guaranteed by the general account.

There were no risk charges paid to compensate the general account for the risk taken as of December 31, 2023 and December 31, 2022.

*2023 Statutory Financial Statements* *Page 19*

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*($ in Thousands)* 

For the years ended December 31, 2023 and December 31, 2022, the general account of the Company has paid $30 and $5, respectively, and $60 cumulatively over the last five years towards separate account guarantees.

***Note 5.* DERIVATIVES** 

The Company utilizes derivatives to achieve its risk management goals. Exposure to risk is monitored and analyzed as part of the Company's asset/liability management process, which focuses on risks that impact liquidity, capital, and income. The Company may enter into derivative transactions to hedge exposure to interest rate, credit, liability, currency, and cash flow risks.

The Company offers IUL products which have embedded options with guaranteed returns. The Company uses equity options in the form of call spread options for protection from rising equity levels and rising volatility.

The Company uses interest rate swaps to reduce market risks from changes in interest rates.

When entering into a derivative transaction, there are several risks, including but not limited to basis risk, credit risk, and market risk. Basis risk is the exposure to loss from imperfectly matched positions, and is monitored and minimized by modifying or terminating the transaction. Credit risk is the exposure to loss as a result of default or a decline in credit rating of a counterparty. Credit risk is addressed by establishing and monitoring guidelines on the amount of exposure to any particular counterparty. Market risk is the adverse effect that a change in interest rates, currency rates, implied volatility rates, or a change in certain equity indexes or instruments has on the value of a financial instrument. The Company manages the market risk by establishing and monitoring limits as to the types and degree of risk that may be undertaken. Also, the Company requires that an International Swaps and Derivatives Association Master agreement govern all Over-the-Counter ("OTC") derivative contracts.

**Derivative Instruments Designated and Qualifying as Hedging Instruments** 

The Company discontinued hedge accounting in 2023.

In 2022, the Company has purchased equity options in the form of call spreads that qualify for hedge accounting. These have been designated as cash flow hedges of cash flows related to the annual return of the S&P 500 Index. These call spreads are used to hedge the increase in liability associated with indexed credits on IUL policies. As these are derivatives in a highly effective hedge, they are carried at cost in a manner consistent with the firm commitment being hedged. At termination, a realized gain amount, net of the cost basis, is recognized within benefits paid to policyholders and beneficiaries on the Statements of Income and Changes in Surplus, consistent with the change in liability associated with the account value. In the event that the hedge fails to qualify as being highly effective at any of the accounting measurement points, the hedge will be considered ineffective and the derivative will be marked to market and the associated change will be recognized as unrealized gain/(loss). At the time of exercise or expiration of the derivative, the associated realized gain or loss will flow through net investment gain/(loss) on the income statement.

The following table presents the notional values, fair values and carrying values of derivative instruments designated and qualifying as hedging instruments. Derivative instruments with carrying values showing a gain are reported as admitted assets and Derivative instruments with carrying values showing a loss are reported in Other liabilities.

Derivative Instruments Designated and Qualifying as Hedging Instruments are as follows:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **DECEMBER 31,** | **2022** | **2022** | **2022** | **2022** | **2022** |
|  | **Notional** | **Fair Value** | **Fair Value** | **Carrying Value** | **Carrying Value** |
|  | **Value** | **Gain** | **(Loss)** | **Gain** | **(Loss)** |
|  Cash flow hedges: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity options | $5427572 | $261526 | $(145960) | $498370 | $(308406) |
|  **Total designated and qualifying as hedges** | $**5427572** | $**261526** | $**(145960)** | $**498370** | $**(308406)** |

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*Page 20* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

The following table presents the notional and fair values of derivative financial instruments not designated and not qualifying as hedging instruments. Derivative instruments with carrying values showing a gain are reported as admitted assets and Derivative instruments with carrying values showing a loss are reported in Other liabilities. For the derivative instruments shown below, fair values equal carrying values.

Derivative Instruments Not Designated and Not Qualifying as Hedging Instruments are as follows:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **DECEMBER 31,** | **2023** | **2023** | **2023** | **2022** | **2022** | **2022** |
|  | **Notional**<br> **Value** | **Fair Value** | **Fair Value** | **Notional**<br> **Value** | **Fair Value** | **Fair Value** |
|  | **Notional**<br> **Value** | **Gain** | **(Loss)** | **Notional**<br> **Value** | **Gain** | **(Loss)** |
|  Equity options | $6406003 | $891779 | $(532263) | $341704 | $523 | $(4) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Interest rate swaps | 4860900 | 444814 | (510023) | 4860900 | 491496 | (579709) |
|  **Total not designated and not qualifying as hedges** | $**11266903** | $**1336593** | $**(1042286)** | $**5202604** | $**492018** | $**(579713)** |

---

The impact of derivatives instruments reported on the Statements of Operations for the years ended December 31, 2023 and 2022, segregated by derivatives designated and qualifying as hedging instruments and derivatives not designated and not qualifying as hedging instruments, is reported in the tables below:

Derivative Instruments Designated and Qualifying as Hedging Instruments are as follows:

---

| | | |
|:---|:---|:---|
| **YEAR ENDED DECEMBER 31,** | **2023** | **2022** |
|  | **Benefits paid to policyholders<br>and beneficiaries** | **Benefits paid to policyholders<br>and beneficiaries** |
|  Cash flow hedges: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Equity options | $44598 | $(56417) |
|  **Total qualifying hedges** | $**44598** | $**(56417)** |

---

Derivative Instruments Not Designated and Not Qualifying as Hedging Instruments are as follows:

---

| | | |
|:---|:---|:---|
| **YEAR ENDED DECEMBER 31,** | **2023** | **2022** |
|  | **Net Investment**<br> **Gains/ (Losses)** | **Net Investment**<br> **Gains/ (Losses)** |
|  Equity options | $(22570) | $(13197) |
|  Interest rate swaps | 2 | (8262) |
|  **Total nonqualifying hedges** | $**(22568)** | $**(21459)** |

---

The change in unrealized capital gains/(losses) for derivative instruments not designated and not qualifying as hedging instruments are as follows for the years ended December 31:

---

| | | |
|:---|:---|:---|
| | **2023** | **2022** |
|  Equity options | $118884 | $(30646) |
|  Interest rate swaps | 23004 | (68168) |
|  **Total** | $**141888** | $**(98814)** |

---

*2023 Statutory Financial Statements* *Page 21*

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*($ in Thousands)* 

**CREDIT RISK** The Company is exposed to credit related losses in the event of non-performance by counterparties to derivative financial instruments. In order to minimize credit risk, the Company and its derivative counterparties require collateral to be posted in the amount owed under each transaction, subject to minimum transfer amounts that are functions of the counterparties credit rating. As of December 31, 2023 and 2022, the Company was fully collateralized thereby eliminating the potential for an accounting loss. Additionally, certain agreements with counterparties allow for contracts in a positive position to be offset by contracts in a negative position. This right of offset also reduces the Company's exposure. As of December 31, 2023 and 2022, the Company has received net (posted)/collateral of $200,159 and $(13,434), respectively, in the form of cash. The cash received from held collateral that is not invested in an interest bearing money market fund is invested mainly in fixed income securities.

***Note 6.* FAIR VALUE OF FINANCIAL INSTRUMENTS** 

**FAIR VALUE MEASUREMENT** Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement is based on assumptions market participants would make in pricing an asset or liability. Inputs to valuation techniques to measure fair value are prioritized by establishing a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to prices derived from unobservable inputs. An asset or liability's classification within the fair value hierarchy is based on the lowest level of significant input to its fair value measurement.

The Company has categorized its assets and liabilities into the three-level fair value hierarchy based upon the priority of the inputs. The following summarizes the types of assets and liabilities included within the three-level hierarchy:

---

| | |
|:---|:---|
| Level 1  | Fair value is based on unadjusted quoted market prices in active markets for identical assets or liabilities that are accessible at the measurement date. These generally provide the most reliable evidence and are used to measure fair value whenever available. Active markets are defined as having the following for the measured asset/liability: i) many transactions, ii) current prices, iii) price quotes not varying substantially among market makers, iv) narrow bid/ask spreads and v) most information publicly available. Prices are obtained from readily available sources for market transactions involving identical assets and liabilities. |

---

---

| | |
|:---|:---|
| Level 2  | Fair value is based on significant inputs, other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability through corroboration with observable market data. Prices for assets classified as Level 2 are primarily provided by an independent pricing service or are internally priced using observable inputs. In circumstances where prices from pricing services are reviewed for reasonability but cannot be corroborated to observable market data as noted above, these security values are recorded in Level 3 in the fair value hierarchy. |

---

---

| | |
|:---|:---|
| Level 3  | Fair value is based on significant inputs that are unobservable for the asset or liability. These inputs reflect the Company's assumptions about the assumptions market participants would use in pricing the asset or liability. These are typically less liquid fixed maturity securities with very limited trading activity. Prices are determined using valuation methodologies such as option pricing models, discounted cash flow models, market approach and other similar techniques. Prices may be based upon non-binding quotes from brokers or other market makers that are reviewed for reasonableness, based on the Company's understanding of the market but are not further corroborated with other additional observable market information. |

---

The determination of fair value, which for certain assets and liabilities is dependent on the application of estimates and assumptions, can have a significant impact on the Company's results of operations. The following sections describe the valuation methodologies used to determine fair values as well as key estimates and assumptions surrounding certain assets and liabilities, measured at fair value on a recurring basis, that could have a significant impact on the Company's results of operations or involve the use of significant unobservable inputs.

*Page 22* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

The fair value process is monitored on a monthly basis by financial and investment professionals who utilize additional subject matter experts as applicable. The purpose is to monitor the Company's asset valuation policies and procedures by ensuring objective and reliable valuation practices and pricing of financial instruments, as well as addressing fair valuation issues, changes to valuation methodologies and pricing sources. To assess the continuing appropriateness of third party pricing service security valuations, the Company regularly monitors the prices and reviews price variance reports. In addition, the Company performs an initial and ongoing review of the third party pricing services methodologies, reviews inputs and assumptions used for a sample of securities on a periodic basis. Pricing challenges are raised on valuations considered not reflective of market and are monitored by the Company.

**BONDS** The fair values of the Company's debt securities are generally based on quoted market prices or prices obtained from independent pricing services. In order to validate reasonability, prices are reviewed by investment professionals through comparison with directly observed recent market trades or color or by comparison of significant inputs used by the pricing service to the Company's observations of those inputs in the market. Consistent with the fair value hierarchy described above, securities with quoted market prices or corroborated valuations from pricing services are generally reflected within Level 2. Inputs considered to be standard for valuations by the independent pricing service include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data and industry and economic events. In circumstances where prices from pricing services are reviewed for reasonability but cannot be corroborated to observable market data as noted above, these security values are recorded in Level 3 in the Company's fair value hierarchy. Under certain conditions, the Company may conclude pricing information received from third party pricing services is not reflective of market activity and may over-ride that information with a valuation that utilizes market information and activity. As of December 31, 2023, there were no debt securities carried at a fair value. As of December 31, 2022, there were 2 debt securities carried at a fair value of $2,392 that were valued in this manner.

In circumstances where market data such as quoted market prices or vendor pricing is not available, internal estimates based on significant observable inputs are used to determine fair value. This category also includes fixed income securities priced internally. Inputs considered include: public debt, industrial comparables, underlying assets, credit ratings, yield curves, type of deal structure, collateral performance, loan characteristics and various indices, as applicable. Also included in Level 2 are private placement securities. Inputs considered are: public corporate bond spreads, industry sectors, average life, internal ratings, security structure, liquidity spreads, credit spreads and yield curves, as applicable. If the discounted cash flow model incorporates significant unobservable inputs, these securities would be reflected within Level 3 in the Company's fair value hierarchy.

In circumstances where significant observable inputs are not available, estimated fair value is calculated by using unobservable inputs. These inputs reflect the Company's assumptions about the inputs market participants would use in pricing the asset, and are therefore included in Level 3 in the Company's fair value hierarchy. Circumstances where observable market data is not available may include events such as market illiquidity and credit events related to the security.

**EQUITY SECURITIES** Equity securities consist principally of investments in common and preferred stock of publicly traded companies. The fair values of most publicly traded equity securities are based on quoted market prices in active markets for identical assets and are classified within Level 1 in the Company's fair value hierarchy.

**CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS** Short-term investments and cash equivalents carried at Level 1 consist of money market funds and investments purchased with maturities less than or equal to 12 months. These are carried at amortized cost and approximate fair value.

**DERIVATIVE INSTRUMENTS** The fair values of derivative contracts are determined based on quoted prices in active exchanges or prices provided by counterparties, exchanges or clearing members as applicable, utilizing valuation models. The fair values of derivative contracts can be affected by changes in interest rates, foreign exchange rates, commodity prices, credit spreads, market volatility, expected returns and liquidity as well as other factors.

The Company's exchange traded futures are valued using quoted prices in active markets and are classified within Level 1 in our fair value hierarchy.

*2023 Statutory Financial Statements* *Page 23*

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*($ in Thousands)* 

Derivative positions traded in the OTC and cleared OTC derivative markets where fair value is determined by third party independent sources are classified within Level 2. These investments included: interest rate swaps, interest rate caps, total return swaps, swaptions, equity options, inflation swaps, forward contracts, and credit default swaps. OTC derivatives classified within Level 2 are valued using models generally accepted in the financial services industry that use actively quoted or observable market input values from external market data providers, broker dealer quotations, third-party pricing vendors and/or recent trading activity. Prices are reviewed by investment professionals through comparison with directly observed recent market trades, comparison with valuations estimated through use of valuation models maintained on an industry standard analytical and valuation platform, or comparison of all significant inputs used by the pricing service to observations of those inputs in the market.

**SEPARATE ACCOUNT ASSETS** Separate account assets primarily consist of mutual funds. The fair value of mutual funds is based upon quoted prices in an active market, resulting in classification in Level 1.

The following table presents the financial instruments carried at fair value by caption on the Statements of Admitted Assets, Liabilities and Capital and Surplus and by valuation hierarchy (as described above):

---

| | | | | |
|:---|:---|:---|:---|:---|
| **DECEMBER 31, 2023** | **FV<br>Level 1** | **FV**<br> **Level 2** | **FV<br>Level 3** | **Total** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Bonds | $379 | $— | $— | $379 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Preferred stock | 26158 | 3264 |  | 29422 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock — unaffiliated | 26102 |  | 1270 | 27372 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Derivatives |  | 1336593 |  | 1336593 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Separate account assets <sup>(1)</sup> | 133688 |  |  | 133688 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets | $186327 | $1339857 | $1270 | $1527454 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Derivatives |  | (1042286) |  | (1042286) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | $— | $(1042286) | $— | $(1042286) |

---

(1) Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated
with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract
value and not fair value in the Company's Statements of Admitted Assets, Liabilities and Capital and Surplus.

The following table presents the financial instruments carried at fair value by caption on the Statements of Admitted Assets, Liabilities and Capital and Surplus and by valuation hierarchy (as described above):

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2022** | **FV**<br> **Level 1** | **FV**<br> **Level 2** | **FV**<br> **Level 3** | **Total** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Bonds | $362 | $504 | $— | $866 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Preferred stock | 26113 |  |  | 26113 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock — unaffiliated | 23364 |  | 10103 | 33467 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Derivatives |  | 492018 |  | 492018 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Separate account assets <sup>(1)</sup> | 76939 |  |  | 76939 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total assets | $126778 | $492522 | $10103 | $629403 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Derivatives |  | (579713) |  | (579713) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | $— | $(579713) | $— | $(579713) |

---

(1) Separate account assets represent segregated funds that are invested for certain customers. Investment risks associated
with market value changes are borne by the customers, except to the extent of minimum guarantees made by the Company with respect to certain accounts. Separate account liabilities are not included in the above table as they are reported at contract
value and not fair value in the Company's Statements of Admitted Assets, Liabilities and Capital and Surplus.

*Page 24* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

**CHANGES IN LEVEL 3 RECURRING FAIR VALUE MEASUREMENTS** When a determination is made to classify a financial instrument within level 3, the determination is based upon the significance of the unobservable parameters to the overall fair value measurement. However, level 3 financial instruments typically include, in addition to the unobservable or level 3 components, observable components (that is, components that are actively quoted and can be validated to external sources); accordingly, the gains and losses in the table below include changes in fair value due in part to observable factors that are part of the valuation methodology.

The Company recognizes transfers into Level 3 as of the end of the period in which the circumstances leading to the transfer occurred. The Company recognizes transfers out of Level 3 at the beginning of a period in which the circumstances leading to the transfer occurred.

There were no assets transferred into Level 3 and there were no assets transferred out of Level 3 for the year ended December 31, 2023. There were no assets transferred into Level 3 and 2 assets transferred out of Level 3 due to change in fair value for the year ended December 31, 2022.

The tables below include a rollforward of the Statements of Admitted Assets, Liabilities and Surplus amounts for the years ended December 31, 2023 and December 31, 2022 (including the change in fair value) for financial instruments classified by the Company within Level 3 of the valuation hierarchy.

---

| | | |
|:---|:---|:---|
|  | **2023** | **2022** |
| | **Unaffiliated**<br> **Common**<br> **Stock** | **Unaffiliated**<br> **Common**<br> **Stock** |
|  Balance January 1 | $10103 | $1081 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Transfers in |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Transfers out |  |  |
|  Total gains or losses (realized/unrealized) included in: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income/(loss) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Surplus |  |  |
|  Amortization/Accretion |  |  |
|  Purchases/(Sales): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchases |  | 9022 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(Sales) | (8833) |  |
|  **Balance December 31** | $**1270** | $**10103** |

---

The following summarizes the fair value, valuation techniques and significant unobservable inputs of the Level 3 fair value measurements that were developed as of December 31, 2023:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Fair**<br> **Value** | **Valuation Technique** | **Significant**<br> **Unobservable**<br> **Inputs** | **Rate/Range<br>or /weighted<br>avg.** |
|  Assets: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Investments |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock, unaffiliated | $1270 | Set by issuer — FHLB-PGH <sup>(1)</sup> | Not available | N/A |
|  Total investments | $1270 |  |  |  |

---

(1) Fair Value approximates carrying value. The par value of the FHLB capital stock is $100 and set by the FHLB. The capital
stock is issued, redeemed and repurchased at par.

*2023 Statutory Financial Statements* *Page 25*

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*($ in Thousands)* 

The following table summarizes the aggregate fair value for all financial instruments and the level within the fair value hierarchy in which the fair value measurements in their entirety fall, for which it is practicable to estimate fair value, at December 31:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **2023** | **Aggregate<br>Fair Value** | **Admitted<br>Value** | **Level 1** | **Level 2** | **Level 3** |
|  Financial Assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Bonds | $7086198 | $7748725 | $1734 | $6862759 | $221705 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Preferred stock | 52309 | 54589 | 44197 | 8112 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock — unaffiliated | 27372 | 27372 | 26102 |  | 1270 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash, Cash Equivalents and short-term investments | 212407 | 212407 | 212407 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Derivatives | 1336593 | 1336593 |  | 1336593 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Separate account assets | 133688 | 133688 | 133688 |  |  |
|  Financial Liabilities: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Investment-type contracts: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Individual annuities | $292214 | $291469 | $— | $— | $292214 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Derivatives | 1042286 | 1042286 |  | 1042286 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Separate account liabilities | 133688 | 133688 | 133688 |  |  |
| **2022** | **Aggregate<br>Fair Value** | **Admitted<br>Value** | **Level 1** | **Level 2** | **Level 3** |
|  Financial Assets: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Bonds | $6112713 | $7015519 | $1691 | $5981565 | $129458 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Preferred stock | 51278 | 54340 | 43218 | 8060 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Common stock — unaffiliated | 33467 | 33467 | 23364 |  | 10103 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Cash and short-term investments | 128400 | 128400 | 128400 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Derivatives | 961784 | 990389 |  | 961784 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Separate account assets | 76939 | 76939 | 76939 |  |  |
|  Financial Liabilities: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Investment-type contracts: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Individual annuities | $240894 | $240908 | $— | $— | $240894 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Derivatives | 862744 | 888119 |  | 862744 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Separate account liabilities | 76939 | 76939 | 76939 |  |  |

---

During 2023, there were no securities with transfers from Level 3 to Level 2.

*Page 26* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

***Note 7.* LIFE RESERVES BY WITHDRAWAL CHARACTERISTICS** 

The withdrawal characteristics of the Company's life reserves are illustrated below as of December 31:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **General Account** | **General Account** | **General Account** | **Separate Account** | **Separate Account** | **Separate Account** |
| <br>**DECEMBER 31, 2023** | **Account<br>Value** | **Cash Value** | **Reserve** | **Account<br>Value** | **Cash Value** | **Reserve** |
|  Subject to Discretionary Withdrawal,<br> Surrender Values, or Policy Loans: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Universal Life | $374086 | $374006 | $380441 | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Universal Life with Secondary Guarantees | 1114168 | 856008 | 2241768 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Indexed Universal Life |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Indexed Universal Life with Secondary Guarantees | 6525247 | 6180264 | 7123188 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Variable Universal Life | 9591 | 7273 | 28523 | 92055 | 86457 | 86457 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Miscellaneous Reserves |  |  | 75 |  |  |  |
|  Not Subject to Discretionary<br> Withdrawal or No Cash Values: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accidental Death Benefits |  |  | 13 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Disability — Active Lives |  |  | 315 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Disability — Disabled Lives |  |  | 2839 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Miscellaneous Reserves |  |  |  |  |  |  |
|  Total | 8023092 | 7417551 | 9777162 | 92055 | 86457 | 86457 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: Reinsurance ceded | 1090758 | 927951 | 2555847 |  |  |  |
|  **Net** | $**6932334** | $**6489600** | $**7221315** | $**92055** | $**86457** | $**86457** |

---

Life reserves of $46,621 with a surrender charge of 5% or more as of December 31, 2023 will have less than a 5% surrender charge in 2024.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **General Account** | **General Account** | **General Account** | **Separate Account** | **Separate Account** | **Separate Account** |
| <br>**DECEMBER 31, 2022** | **Account<br>Value** | **Cash<br>Value** | **Reserve** | **Account<br>Value** | **Cash<br>Value** | **Reserve** |
|  Withdrawal, Surrender Values, or Policy Loans: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Universal Life | $457072 | $456988 | $462709 | $— | $— | $— |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Universal Life with Secondary Guarantees | 1057910 | 811709 | 2072673 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Indexed Universal Life |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Indexed Universal Life with Secondary Guarantees | 5922820 | 5609947 | 6441117 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Variable Universal Life | 9584 | 7026 | 21070 | 38349 | 34437 | 34435 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Miscellaneous Reserves |  |  | 10 |  |  |  |
|  Not Subject to Discretionary<br> Withdrawal or No Cash Values: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Accidental Death Benefits |  |  | 14 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Disability — Active Lives |  |  | 308 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Disability — Disabled Lives |  |  | 2971 |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Miscellaneous Reserves |  |  |  |  |  |  |
|  Total | 7447386 | 6885670 | 9000872 | 38349 | 34437 | 34435 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less: Reinsurance ceded | 1066363 | 904007 | 2429583 |  |  |  |
|  **Net** | $**6381023** | $**5981663** | $**6571289** | $**38349** | $**34437** | $**34435** |

---

*2023 Statutory Financial Statements* *Page 27*

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*($ in Thousands)* 

Life reserves on corporate owned life insurance policies issued by the Company to PML as of December 31, 2023 and 2022 were $42,108 and $43,812, respectively.

***Note 8.* RESERVES AND FUNDS FOR THE PAYMENT OF ANNUITY BENEFITS** 

The withdrawal characteristics of the Company's annuity actuarial reserves and deposit-type contracts are illustrated below:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **DECEMBER 31, 2023** | **General**<br> **Account** | **Separate**<br> **Account** | **Total** | **% of Total** |
|  Subject to discretionary withdrawal-with adjustments: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; With market value adjustment | $— | $— | $— | —% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; At book value less surrender charges | 178907 |  | 178907 | 54% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; At market value |  | 41042 | 41042 | 12% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subtotal | 178907 | 41042 | 219949 | 66% |
|  At book value — without adjustment | 96532 |  | 96532 | 29% |
|  Not subject to discretionary withdrawal | 16182 |  | 16182 | 5% |
|  Total annuity reserves and deposit liabilities, gross | 291621 | 41042 | 332663 | 100% |
|  Less: Reinsurance ceded |  |  |  | —% |
|  **Total annuity reserves and deposit liabilities, net** | $**291621** | $**41042** | $**332663** | **100%** |

---

Annuity and deposit-type contract reserves of $26,137 with surrender charges of 5% or more as of December 31, 2023 will have less than a 5% surrender charge in 2024.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2022** | **General<br>Account** | **Separate<br>Account** | **Total** | **% of Total** |
|  Subject to discretionary withdrawal-with adjustments: |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; With market value adjustment | $— | $— | $— | —% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; At book value less surrender charges | 159425 |  | 159425 | 57% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; At market value |  | 55127 | 55127 | 20% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subtotal | 159425 | 55127 | 214552 | 77% |
|  At book value — without adjustment | 43107 |  | 43107 | 15% |
|  Not subject to discretionary withdrawal | 20525 |  | 20525 | 7% |
|  Total annuity reserves and deposit liabilities, gross | 223057 | 55127 | 278184 | 100% |
|  Less: Reinsurance ceded |  |  |  | —% |
|  **Total annuity reserves and deposit liabilities, net** | $**223057** | $**55127** | $**278184** | **100%** |

---

*Page 28* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

The following summarizes the total annuity actuarial reserves and liabilities for deposit-type contracts as of December 31:

---

| | | |
|:---|:---|:---|
| | **2023** | **2022** |
|  Statutory Statements of Admitted Assets, Liabilities and Capital and Surplus: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Policyholders' reserves — group annuities | $152 | $270 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Policyholders' reserves — individual annuities | 283358 | 229914 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Liabilities for deposit-type contracts | 8111 | 236467 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; VM-21 reserves |  |  |
|  Subtotal | $291621 | $466651 |
|  Separate Account Annual Statement: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Annuities | $41042 | $38583 |
|  Subtotal | 41042 | 38583 |
|  **TOTAL RESERVES** | $**332663** | $**505234** |

---

The Company has variable annuity contracts containing GMDB provisions that provide a specified minimum return upon death as follows:

**RETURN OF PREMIUM** provides the greater of the account value or total deposits made to the contract less any partial withdrawals and assessments, which is referred to as "net purchase payments". This guarantee is a standard death benefit on all individual variable annuity products.

**RISING FLOOR** provides a variable death benefit equal to the greater of the current account value and the variable purchase payments accumulated at a set rate and adjusted for withdrawals and transfers.

The following table summarizes the account values and net amount at risk (death benefit in excess of account value), net of reinsurance, for variable annuity contracts with guarantees invested in the separate accounts as of December 31:

---

| | | |
|:---|:---|:---|
| | **2023** | **2022** |
|  Account value | $41042 | $38597 |
|  Net amount at risk | 2285 | 2970 |

---

The Company has fixed indexed annuity contracts that have GMWB Rider options. The GMWB rider allows for guaranteed withdrawals from a benefit base after a selected waiting period. The GMWB riders are also available with inflation protection. The benefit base is calculated as the maximum of principal increase at a roll up rate less any partial withdrawals during the accumulation phase, the current account value, and the highest anniversary value over the first ten years. The withdrawal amount is stated as a percentage of the benefit base and varies based on whether the annuitant selects lifetime withdrawals or a specified period. One version of this rider has an inflation adjustment applied to the Guaranteed Withdrawal Amount.

The following table summarizes the account values for the different benefit types as of December 31, 2023:

---

| | | | |
|:---|:---|:---|:---|
| **Rider Type** | **Contracts** | **Fund Value** | **Cash Value** |
|  GMWB | 553 | $114344 | $108881 |
|  GMWB w/ inflation | 62 | 10030 | 9483 |
|  **Total** | **615** | $**124374** | $**118364** |

---

*2023 Statutory Financial Statements* *Page 29*

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*($ in Thousands)* 

The following table summarizes the account values for the different benefit types as of December 31, 2022:

---

| | | | |
|:---|:---|:---|:---|
| **Rider Type** | **Contracts** | **Fund Value** | **Cash Value** |
|  GMWB | 505 | $102195 | $97068 |
|  GMWB w/ inflation | 49 | 8130 | 7779 |
|  **Total** | **554** | $**110325** | $**104847** |

---

Variable annuity reserves for living and death benefits are based on the methodology specified in Valuation Manual – 21: Requirements for Principle-Based Reserves for Variable Annuities ("VM-21"), which specifies the reserve as the Company Stochastic Reserve plus the Additional Standard Projection Amount. The individual policy reserve is floored at cash surrender value. The Company Stochastic Reserve is based on the Conditional Tail Expectation ("CTE") 70% of 1,000 stochastically generated interest rate and equity return scenarios. Prudent estimate assumptions including margins for uncertainty are used to calculate the Company Stochastic Reserve. Key assumptions needed in valuing the liability include full withdrawals, partial withdrawals, mortality, the Consumer Price Index, investment management fees and revenue sharing, expenses, fund allocations and other policyholder behavior. The Additional Standard Projection Amount requires prescribed assumptions to be used in place of company assumptions for most key assumptions. The reserve also requires the projection of in-force general account assets and assets from reinvested cash flows. The key assumptions needed in valuing the assets, including the maximum reinvestment earned rate spreads and default rates, are prescribed. In addition, the method for projecting interest rates and equity returns is prescribed for both the Company Stochastic Reserve calculation and the Additional Standard Projection Amount calculation. The final reserve balance for policies that fall within the scope of VM-21, which covers both Living and Death Benefit guarantees, is $41,020 and $38,585 as of December 31, 2023 and December 31, 2022, respectively.

Fixed indexed annuity reserves for living benefits are based on the methodology specified in Actuarial Guideline XXXV, which specifies the reserve as the sum of the nonelective benefit reserve and the elective benefit reserve. The elective benefit reserve is calculated using the elective benefit path that results in the highest present value of future benefits. The final reserve balance for policies that fall within the scope of Actuarial Guideline XXXV is $249,806 and $193,426, as of December 31, 2023 and December 31, 2022, respectively.

***Note 9.* FEDERAL INCOME TAXES** 

The Company follows Statement of Statutory Accounting Principles No. 101 – *Income Taxes, A Replacement of SSAP No. 10R and SSAP No. 10* ("SSAP 101"). SSAP 101 includes a calculation for the limitation of gross deferred tax assets for insurers that maintain a minimum of 300% of their authorized control level RBC computed without net deferred tax assets. The Company exceeded the 300% minimum RBC requirement at December 31, 2023 and 2022.

The Company is required to evaluate the recoverability of deferred tax assets and to establish a valuation allowance if necessary to reduce the deferred tax asset to an amount which is more likely than not to be realized. Considerable judgment is required in determining whether a valuation allowance is necessary, and if so, the amount of such valuation allowance. In evaluating the need for a valuation allowance, the Company considers many factors, including: (1) the nature of the deferred tax assets and liabilities; (2) whether they are ordinary or capital; (3) the timing of their reversal; (4) taxable income in prior carryback years as well as projected taxable income exclusive of reversing temporary differences and carryforwards; (5) the length of time that carryovers can be utilized; (6) unique tax rules that would impact the utilization of the deferred tax assets; and (7) any tax planning strategies that the Company would employ to avoid a tax benefit from expiring unused; although the realization is not assured, management believes it is more likely than not that the deferred tax assets, will be realized. The Company has not recorded a valuation allowance as of December 31, 2023 and 2022.

*Page 30* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

The components of deferred tax asset ("DTAs") and deferred tax liabilities ("DTLs") recognized by the Company are as follows as of December 31:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Description** | **2023** | **2023** | **2023** | **2022** | **2022** | **2022** |
|  | **Ordinary** | **Capital** | **Total** | **Ordinary** | **Capital** | **Total** |
|  Gross DTAs | $157883 | $2189 | $160072 | $130590 | $2027 | $132617 |
|  Adjusted gross DTAs | 157883 | 2189 | 160072 | 130590 | 2027 | 132617 |
|  Adjusted gross DTAs nonadmitted | (34261) |  | (34261) | (27034) | (196) | (27230) |
|  Subtotal admitted adjusted DTA | 123622 | 2189 | 125811 | 103556 | 1831 | 105387 |
|  Gross DTL | (5756) | (37609) | (43365) | (25794) | (11481) | (37275) |
|  **Net admitted DTA/(DTL)** | $**117866** | $**(35420)** | $**82446** | $**77762** | $**(9650)** | $**68112** |

---

The changes in components of deferred tax asset ("DTAs") and deferred tax liabilities ("DTLs") recognized by the Company are as follows:

---

| | | | |
|:---|:---|:---|:---|
| **Description** | **Changes During 2023** | **Changes During 2023** | **Changes During 2023** |
| | **Ordinary** | **Capital** | **Total** |
|  Gross DTAs | $27293 | $162 | $27455 |
|  Adjusted gross DTAs | 27293 | 162 | 27455 |
|  Adjusted gross DTAs nonadmitted | (7227) | 196 | (7031) |
|  Subtotal admitted adjusted DTA | 20066 | 358 | 20424 |
|  Gross DTA/(DTL) | 20038 | (26128) | (6090) |
|  **Net admitted DTA/(DTL)** | $**40104** | $**(25770)** | $**14334** |

---

Admitted DTA's are comprised of the following admission components based on paragraph 11 SSAP No. 101 as of December 31:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **Description** | **2023** | **2023** | **2023** | **2022** | **2022** | **2022** |
|  | **Ordinary** | **Capital** | **Total** | **Ordinary** | **Capital** | **Total** |
|  Admitted DTA 3 years: |  |  |  |  |  |  |
|  Federal income taxes paid that can be recovered: |  |  |  |  |  |  |
|  Remaining adjusted gross DTAs expected to be realized in 3 years (lesser of 1 or 2): | $80257 | $2189 | $82446 | $66281 | $1831 | $68112 |
| &nbsp;&nbsp;&nbsp;&nbsp;1. Adjusted gross DTA expected to be realized | 80257 | 2189 | 82446 | 66281 | 1831 | 68112 |
| &nbsp;&nbsp;&nbsp;&nbsp;2. Adjusted gross DTA allowed per limitation threshold |  |  | 116596 |  |  | 102150 |
|  Adjusted gross DTA offset by existing DTLs | 43366 |  | 43366 | 37275 |  | 37275 |
|  **Total admitted DTA realized within 3 years** | $**123623** | $**2189** | $**125812** | $**103556** | $**1831** | $**105387** |

---

*2023 Statutory Financial Statements* *Page 31*

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*($ in Thousands)* 

---

| | | | |
|:---|:---|:---|:---|
| **Description** | **Changes During 2023** | **Changes During 2023** | **Changes During 2023** |
| | **Ordinary** | **Capital** | **Total** |
|  Admitted DTA 3 years: |  |  |  |
|  Federal income taxes paid that can be recovered: |  |  |  |
|  Remaining adjusted gross DTAs expected to be realized within 3 years (lesser of 1 or 2): | $13976 | $358 | $14334 |
| &nbsp;&nbsp;&nbsp;&nbsp;1. Adjusted gross DTA expected to be realized | 13976 | 358 | 14334 |
| &nbsp;&nbsp;&nbsp;&nbsp;2. Adjusted gross DTA allowed per limitation threshold |  |  | 14446 |
|  Adjusted gross DTA offset by existing DTLs | 6091 |  | 6091 |
|  **Total admitted DTA realized within 3 years** | $**20067** | $**358** | $**20425** |

---

The authorized control level RBC and total adjusted capital computed without net deferred tax assets utilized when determining the amount of net deferred tax was as follows:

---

| | | |
|:---|:---|:---|
| **December 31:** | **2023** | **2022** |
|  Ratio percentage used to determine recovery period and threshold limitation amount | 482% | 416% |
|  Amount of adjusted capital and surplus used to determine recovery period and threshold limitation | $947702 | $790327 |

---

The impact of Tax planning strategies on the determination of adjusted gross DTA's and net admitted DTA's is as follows:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **December 31, 2023** | **December 31, 2023** | **December 31, 2023** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **Change** | **Change** | **Change** |
| | **Ordinary** | **Capital** | **Total** | **Ordinary** | **Capital** | **Total** | **Ordinary** | **Capital** | **Total** |
|  Adjusted gross DTAs | 87% | 100% | 67% | —% | 100% | 2% | 87% | —% | 65% |
|  Net admitted DTAs | 91% | 100% | 69% | —% | 100% | 3% | 91% | —% | 66% |

---

The Company's tax planning strategies do not include the use of internal and external reinsurance during 2023 to support DTA realization.

There are no temporary differences for which a DTL has not been established.

Current income taxes incurred consist of the following major components for the years ended December 31:

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| | | |
|:---|:---|:---|
| **Description** | **2023** | **2022** |
|  Current federal income tax (benefit)/expense | $42997 | $(9157) |
|  Income tax effect on realized capital losses | (906) | (7891) |
|  **Federal and foreign income taxes incurred** | $**42091** | $**(17048)** |

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As reported on the capital gains and losses, net of tax as disclosed within the income statement, the Company's accounting policy is to record tax expense or benefit as calculated pursuant to the Internal Revenue Code, adjusted for taxes transferred to the IMR reserve.

*Page 32* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

The tax effects of temporary differences that give rise to significant portions of the DTA's and DTL's are as follows as of December 31:

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| | | | |
|:---|:---|:---|:---|
| | **2023** | **2022** | **Change** |
|  **DTA resulting in book/tax difference in:** |  |  |  |
|  Ordinary: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Future policy benefits | $31543 | $24853 | $6690 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; DAC | 80771 | 69420 | 11351 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Investments — ordinary | 22793 | 146 | 22647 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Deferred gain on reinsurance | 18272 | 18272 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Nonadmitted assets |  | 12 | (12) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; LIHTC | 4453 | 17843 | (13390) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other- ordinary | 51 | 44 | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Subtotal — gross ordinary DTAs | 157883 | 130590 | 27293 |
|  Nonadmitted ordinary DTAs | (34261) | (27034) | (7227) |
|  Admitted ordinary DTAs | 123622 | 103556 | 20066 |
|  Capital: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; OTTI on investments | 2189 | 2027 | 162 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Capital gross DTAs | 2189 | 2027 | 162 |
|  Nonadmitted capital DTAs |  | (196) | 196 |
|  Admitted capital DTAs | 2189 | 1831 | 358 |
|  Admitted DTAs | 125811 | 105387 | 20424 |
|  **DTLs resulting in book/tax differences in:** |  |  |  |
|  Ordinary: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Investments — ordinary | (3006) | (21669) | 18663 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Future policy benefits — 8 year spread | (2750) | (4125) | 1375 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Ordinary DTLs | (5756) | (25794) | 20038 |
|  Capital: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Alternative asset investments | (13618) | (11241) | (2377) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net unrealized investment gains | (23991) | (240) | (23751) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Capital DTLs | (37609) | (11481) | (26128) |
|  DTLs | (43365) | (37275) | (6090) |
|  **Net deferred tax asset** | $**82446** | $**68112** | $**14334** |

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The change in deferred income taxes is comprised of the following (this analysis is exclusive of nonadmitted assets as the Change in nonadmitted assets is reported separately from the Change in net deferred income taxes in the surplus section of the Annual Statement):

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| | | | |
|:---|:---|:---|:---|
| | **2023** | **2022** | **Change** |
|  Total deferred tax assets | $160072 | $132617 | $27455 |
|  Total deferred tax liabilities | (43365) | (37275) | (6090) |
|  Net deferred tax asset/liabilities | 116707 | 95342 | 21365 |
|  Tax effect on unrealized (gains)/losses |  |  | 23751 |
|  **Change in net deferred income taxes** |  |  | $**45116** |

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*2023 Statutory Financial Statements* *Page 33*

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*($ in Thousands)* 

The provision for federal income taxes incurred is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes including realized capital gains/(losses). The significant items causing the differences as of December 31, 2023 are as follows:

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| | | | |
|:---|:---|:---|:---|
| **Description** | **Amount** | **Tax<br>Effect** | **Effective<br>Tax Rate** |
|  Income before taxes | $(10850) | $(2278) | 21.00% |
|  Dividends received deduction | (1491) | (313) | 2.89% |
|  Separate Account DRD | (88) | (18) | 0.17% |
|  IMR amortization | 5309 | 1115 | -10.28% |
|  LIHTC | (3788) | (795) | 7.33% |
|  Other | (3496) | (736) | 6.77% |
|  **Total** | $**(14404)** | $**(3025)** | **27.88%** |
|  Federal income tax expense incurred |  | $42997 | -396.31% |
|  FIT expense/(benefit) on Realized Capital Gains/Losses | FIT expense/(benefit) on Realized Capital Gains/Losses | (250) | 2.30% |
|  FIT in IMR Gains/Losses |  | (656) | 6.05% |
|  Change in net deferred income taxes |  | (45116) | 415.83% |
|  **Total statutory taxes** |  | $**(3025)** | **27.88%** |

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The Company has $4,453 LIHTC available of as of December 31, 2023 that will begin to expire in 2040.

The Company has not made any deposits regarding the suspension of running interest (protective deposits) pursuant to Internal Revenue Code Section 6603.

The Company's federal income tax return is consolidated with its parent, Penn Mutual, and Penn Mutual's subsidiaries. The method of tax allocation among the companies is subject to a written agreement, whereby the tax allocation is made on a benefits for loss basis. In addition, the Company is party to a tax agreement with PIAre I whereby PIAre I will pay its federal income tax liability or receive a refund for its net operating losses from the Company determined on a separate return basis. There was no income tax expense for 2023, 2022 and 2021 that is available for recoupment in the event of future net losses.

A listing of the companies included in the consolidated return is as follows:

Penn Mutual Life Insurance Company (Parent)

Penn Insurance & Annuity Company

PIA Reinsurance Company of Delaware I

Vantis Life Insurance Company

Penn Insurance and Annuity Company of New York

For the year ended December 31, 2023, PIA Re had a taxable net loss of $30,659 generating an amount payable from PIA to PIAre I of $6,438.

For the year ended December 31, 2022, PIA Re had a taxable net loss of $46,639 generating an amount payable from PIA to PIAre I of $9,794, which was paid in 2023.

Tax years 2020 and subsequent are still subject to audit by the Internal Revenue Service.

The Company recognizes interest and penalties, if any, related to unrecognized tax benefits, as a component of tax expense. During the years ended December 31, 2023 and December 31, 2022, the Company did not recognize or accrue penalties or interest.

*Page 34* *The Penn Insurance and Annuity Company*

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The Company has no tax loss contingencies for which it is reasonably possible that the total liability will significantly increase within the next twelve months of the reporting date.

On August 16, 2022, the Inflation Reduction Act of 2022 (Act) was passed by the US Congress and signed into law by President Biden. The Act includes a new corporate alternative minimum tax (CAMT) for tax years beginning after December 31, 2022. The Company has determined that they are a non-applicable reporting entity in 2023.

***Note 10.* REINSURANCE** 

The Company has assumed and ceded reinsurance on certain life and annuity contracts under various agreements. Reinsurance ceded permits recovery of a portion of losses from reinsurers.

The table below highlights the reinsurance amounts shown in the accompanying financial statements.

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| | | | | |
|:---|:---|:---|:---|:---|
| | **Direct** | **Assumed** | **Ceded** | **Net Amount** |
|  **December 31, 2023** |  |  |  |  |
|  Premium and annuity considerations | $954496 | $179253 | $78801 | $1054948 |
|  Reserves and funds for payment of future insurance and annuity benefits | 6620524 | 3448259 | 2555847 | 7512936 |
|  **December 31, 2022** |  |  |  |  |
|  Premium and annuity considerations | $843274 | $181732 | $82499 | $942507 |
|  Reserves and funds for payment of future insurance and annuity benefits | 6082244 | 3385279 | 2429583 | 7037940 |

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**INTERCOMPANY REINSURANCE** The Company maintains various reinsurance agreements with affiliates. The following table summarizes premium and reserves balances associated with such agreements as of and for the years ended December 31:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | | **Assumed/(Ceded)** | **Assumed/(Ceded)** | **Assumed/(Ceded)** | **Assumed/(Ceded)** |
|  | | **2023** | **2023** | **2022** | **2022** |
| |<br>**Affiliate** | **Premium** | **Reserves** | **Premium** | **Reserves** |
|  Coinsurance funds withheld | PML | $30972 | $1585521 | $33895 | $1518169 |
|  Coinsurance funds withheld | PIAre I | (38232) | (2547882) | (42937) | (2422872) |
|  Coinsurance — Inforce | PML | 33543 | 579871 | 37929 | 565410 |
|  Coinsurance | PML | 95936 | 1273466 | 92718 | 1293105 |
|  YRT — Index credits | PIAre I | 18802 | 9401 | 17190 | 8595 |
|  YRT — Over retention | PML | (4932) | (668) | (4239) | (584) |
| &nbsp;&nbsp;&nbsp;&nbsp; Total |  | $136089 | $899709 | $134556 | $961823 |

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*Coinsurance funds withheld* Effective December 31, 2013, the Company ceded a closed block of business to PIAre I on a 100% coinsurance funds withheld basis. Effective December 31, 2014, the Company entered into a contract with PML to assume reserves pursuant to transactions subject to the requirements of Section 7 of the NAIC XXX and AXXX Reinsurance Model Regulation. The Company then contemporaneously reinsured the policies to PIAre I. At inception, the agreement generated an after-tax gain of $87,008, which was a direct increase to surplus and is amortized into income over the life of the agreement.

*Coinsurance — Inforce* Effective January 1, 2015, the Company assumed from PML an inforce block of single life index universal life policies issued by PML between 2012 and 2014. The Company assumed 100% of the risk, net of inuring reinsurance.

*2023 Statutory Financial Statements* *Page 35*

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*($ in Thousands)* 

*Coinsurance* The Company assumes certain risks under reinsurance agreements with Penn Mutual relating to various fixed and indexed universal life business.

*YRT — Index credits* Effective January 1, 2017, the Company assumes the equity risk associated with PIAre I's indexed UL products on a YRT basis.

*YRT — Over retention* The Company ceded to PML policies issued after October 1, 2006 and before October 1, 2014 that resulted in retention greater than $1,000 per life.

***Note 11.* RELATED PARTIES** 

The Company entered into a revolving loan agreement with JMS on August 19, 2011, to provide funding to JMS in an amount not to exceed $40,000. Terms of the loan specify that semi-annual interest be paid on the outstanding balances based on market rates determined at the dates of the loans. The principal balances are not due until maturity in August 2030. The Company recorded $3,650 and $3,650 in interest income on this note for the years ended December 31, 2023 and December 31, 2022, respectively. At December 31, 2023 and December 31, 2022, the Company had an outstanding principal receivable from JMS of $40,000 and outstanding interest receivables of $920 and $920, relating to this agreement.

The Company has received a rating equivalent to an NAIC 1 for the note receivable from JMS.

The Company declared a $10,000 and $40,000 capital contribution to PIAre in 2023 and 2022. In 2023 and 2022, the Company received $30,000 and $60,000, respectively, in capital contributions from its parent, Penn Mutual.

In 2022, the Company declared their ownership of Independence Square Properties LLC ("ISP LLC") as a dividend to their parent company, Penn Mutual, in the amount of $8,202.

The Company's unconsolidated subsidiaries had combined assets of $2,691,255 and $2,564,862 and combined liabilities of $2,568,399 and $2,434,206 as of December 31, 2023 and 2022, respectively. There was no goodwill or other intangible assets in the admitted value of the Company's subsidiaries at December 31, 2023 and 2022, respectively.

Under the terms of an expense allocation agreement, the Company reimbursed Penn Mutual for services and facilities provided on behalf of the Company, including direct and allocated expenses. For December 31, 2023 and December 31, 2022, the total expenses incurred under this agreement were $58,660 and $47,733, respectively. The amount due was $14,261 and $13,581 at December 31, 2023 and December 31, 2022, respectively.

Under the terms of investment management and administrative services agreements, the Company paid PMAM for investment management and accounting services provided on behalf of the Company. For December 31, 2023 and December 31, 2022, the total expenses incurred under these agreements were $9,433 and $6,088, respectively. The amount due was $845 and $481 at December 31, 2023 and December 31, 2022, respectively.

The Company agreed to provide certain accounting and administrative services, at cost, to PIAre I. The administrative costs for the years ended December 31, 2023 and December 31, 2022 were $450 and $435, respectively.

***Note 12.* COMMITMENTS AND CONTINGENCIES** 

**LITIGATION** The Company and its subsidiaries are involved in litigation arising in and out of the normal course of business that seek both compensatory and punitive damages. In addition, the regulators within the insurance and brokerage industries continue to focus on market conduct and compliance issues. While the Company is not aware of any actions or allegations that should reasonably give rise to a material adverse impact to the Company's financial position or liquidity, the outcome of litigation cannot be foreseen with certainty.

*Page 36* *The Penn Insurance and Annuity Company*

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*($ in Thousands)* 

**GUARANTY FUNDS** The Company is subject to insurance guaranty fund laws in the states in which it does business. These laws assess insurance companies amounts to be used to pay benefits to policyholders and policy claimants of insolvent insurance companies. Many states allow these assessments to be credited against future premium taxes. The liability for estimated guaranty fund assessments net of applicable premium tax credits as of December 31, 2023 and December 31, 2022 was $60 and $60. The Company monitors sales materials and compliance procedures and makes extensive efforts to minimize any potential liabilities in this area. The Company believes such assessments in excess of amounts accrued will not materially impact its financial statement position, results of operation, or liquidity.

**COMMITMENTS** In the normal course of business, the Company extends commitments relating to its investment activities. As of December 31, 2023 the Company had outstanding commitments totaling $91,212 relating to these investment activities. The fair value of these commitments approximates their face amount.

PIAre I has an adjustable 20 year, non-interest bearing financial instrument with a current face amount of $812,362 to support a modified coinsurance arrangement with an unaffiliated reinsurer. The Company is obligated to pay a financing fee on the reserve amount being financed. The Company may be subject to an early termination fee upon the occurrence of certain events through December 31, 2030. The modified coinsurance arrangement was effective December 31, 2013. Fees incurred during the years ended December 31, 2023 and December 31, 2022 were $2,759 and $2,539, respectively, which are included in Other expenses in the Statements of Operations.

**DIVIDEND RESTRICTIONS** The payment of dividends by the Company to Penn Mutual is subject to restrictions set forth in the State of Delaware insurance laws. These laws require that the maximum amount of ordinary dividends that can be paid by the Company to Penn Mutual without restriction cannot exceed the greater of the net gain from operations of the previous year or 10% of surplus as of the previous year end. Generally, these restrictions pose no short-term liquidity concerns for the Company. Based on these restrictions and 2023 statutory results, the Company could pay $85,975 in dividends in 2024 to Penn Mutual without prior approval from the Delaware Department of Insurance, subject to the notification requirement. In 2022, the Company recorded a dividend to Penn Mutual in the form of the Company's ownership of ISP, valued at $8,202.

***Note 13.* SUBSEQUENT EVENTS** 

The Company has evaluated events subsequent to December 31, 2023 and through the financial statement issuance date of February 16, 2024 and has determined that there were no other significant events requiring disclosure in the financial statements.

*2023 Statutory Financial Statements* *Page 37*

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| ![LOGO](g93208g26a02.jpg) | **About The Penn Insurance and Annuity Company**<br>The Penn Insurance and Annuity Company (PIA) is a wholly owned life insurance subsidiary of The Penn Mutual Life Insurance Company (Penn Mutual), Domiciled in Delaware, PIA maintains its operations in Horsham, Pa., and is licensed to do business in 49 states and the District of Columbia. It markets its products with a focus on universal life insurance through Penn Mutual's distribution systems and has its in-force business serviced by the parent company.<br>**Visit Penn Mutual at www.pennmutual.com.**<br>![LOGO](g93208g62e73.jpg)  |

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<sup>©</sup> 2024 The Penn Insurance and Annuity Company, Philadelphia, PA 19172, www.pennmutual.com

PM9142 01/24