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AMERICAN NATIONAL INSURANCE CO /TX/ - 10-Q - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

August 8, 2014

Set forth on the following pages is management's discussion and analysis ("MD&A") of financial condition and results of operations for the six months ended June 30, 2014 and 2013 of American National Insurance Company and its subsidiaries (referred to in this document as "we", "our", "us", or the "Company"). This information should be read in conjunction with our consolidated financial statements included in Item 1, Financial Statements (unaudited), of this Form 10-Q.

Forward-Looking Statements

This document contains forward-looking statements that reflect our estimates and assumptions related to business, economic, competitive and legislative developments. Forward-looking statements generally are indicated by words such as "expects," "intends," "anticipates," "plans," "believes," "estimates," "will" or words of similar meaning and include, without limitation, statements regarding the outlook of our business and expected financial performance. Forward-looking statements are not guarantees of future performance and involve various risks and uncertainties. Moreover, forward-looking statements speak only as of the date made, and we undertake no obligation to update them. Certain important factors could cause our actual results to differ, possibly materially, from our expectations or estimates. These factors are described in greater detail in Item IA, Risk Factors, in our 2013 Annual Report on Form 10-K filed with the SEC on February 28th, 2014, and they include among others:

Economic Risk Factors difficult conditions in the economy, which may not improve in the near future, and risks related to persistently low or unpredictable interest rates; Operational Risk Factors differences between actual experience regarding mortality, morbidity, persistency, expense, surrenders and investment returns, and our assumptions for establishing liabilities and reserves or for other purposes; potential ineffectiveness of our risk management policies and procedures; changes in our experience related to deferred policy acquisition costs; failures or limitations of our computer, data security and administration systems; potential employee error or misconduct, which may result in fraud or adversely affect the execution and administration of our policies and claims; Investment and Financial Market Risk Factors fluctuations in the markets for fixed maturity securities, equity securities, and commercial real estate, which could adversely affect the valuation of our investment portfolio, our net investment income, our retirement expense, and sales of or fees from certain of our products; lack of liquidity for certain of our investments; risk of investment losses and defaults; Catastrophic Event Risk Factors natural or man-made catastrophes, pandemic disease, or other events resulting in increased claims activity from catastrophic loss of life or property; the effects of unanticipated events on our disaster recovery and business continuity planning; Marketplace Risk Factors the highly competitive nature of the insurance and annuity business; potential difficulty in attraction and retention of qualified employees and agents; the introduction of alternative healthcare solutions or changes in federal healthcare policy, both of which could impact our Medicare Supplement business; Litigation and Regulation Risk Factors adverse determinations in litigation or regulatory proceedings which may result in significant financial losses and harm our reputation; the effects of extensive government regulation; changes in tax law; changes in statutory or U.S. generally accepted accounting principles ("GAAP"), practices or policies; 32



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Table of Contents Reinsurance and Counterparty Risk Factors potential changes in the availability, affordability and adequacy of reinsurance protection; potential default or failure to perform by the counterparties to our reinsurance arrangements and derivative instruments; Other Risk Factors potentially adverse rating agency actions; and control of our company by a small number of stockholders.



Overview

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

General Trends

American National had no material changes to the general trends, as discussed in the MD&A included in our 2013 Annual Report on Form 10-K filed with the SEC on February 28, 2014.

Critical Accounting Estimates

The unaudited interim consolidated financial statements have been prepared in conformity with GAAP. In addition to GAAP, insurance companies apply specific SEC regulations when preparing the consolidated financial statements. The preparation of the consolidated financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and notes. Actual results could differ from results reported using those estimates and assumptions.

Our accounting policies inherently require the use of judgments relating to a variety of assumptions and estimates, particularly expectations of current and future mortality, morbidity, persistency, expenses, interest rates, and property and casualty loss frequency, severity, claim reporting and settlement patterns. Due to the inherent uncertainty when using the assumptions and estimates, the effect of certain accounting policies under different conditions or assumptions could vary from those reported in the consolidated financial statements.

For a discussion of our critical accounting estimates, see the MD&A in our 2013 Annual Report on Form 10-K filed with the SEC on February 28, 2014. There have been no material changes in accounting policies since December 31, 2013.

Recently Issued Accounting Pronouncements

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

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