Strong. V a l u e. Innovator S t a b l e. F l e x i b l e High Quality Confidence Performance. B e n e f i t s. Commitment

Transcription

1 Strong Innovator S t a b l e V a l u e F l e x i b l e High Quality Confidence Performance P a r t n e r B e n e f i t s L e a d e r Commitment T r u s t F i n a n c i a l R e p o r t 2004

2 P R E S I D E N T S L E T T E R I am happy to report 2004 was another strong year for Reliance Standard Life Insurance Company, a year in which we increased our sales and market share in the face of pervasive industry upheaval. We also made crucial steps forward in refining our market presence as a group employee benefits leader and innovator. Reliance Standard finished the year ranked #8 in sales among group disability carriers and 12th in sales among group life carriers (LIMRA International, 2004). In addition, in October our Moody s Investor Services financial strength rating was upgraded to A3 from Baa1, with a stable outlook. This occurred not long after A.M. Best upgraded our outlook from Stable to Positive. In 2004, our core group employee benefit premiums rose 14 percent to $594 million, a new high water mark. This was achieved by strengthening our leadership position in our core niche market, which is small and mid-sized companies with employees. We bracketed this performance with introduction of our new SmartChoice lines of small group coverage, redesigned to better meet the needs of the 2 to 19 life employer market; and a respectable showing by our best-in-class integrated employee benefits (IEB) product for larger companies, which we deliver in conjunction with sister company Matrix Absence Management, Inc. Strong finish We have long believed, and analysis has confirmed, that the small case market aligns well with Reliance Standard: We know the market; we are known by the independent brokers and agents who serve the market; and we excel at delivering value to entrepreneurs and middle market companies through flexible, high quality group benefits. In addition, we have determined that this market niche delivers higher profitability, which is critical to our success both short and long term. Our case count, an indicator of performance in this segment, was up 22 percent over 2003, and our average premium per case declined to $22,000 from $26,000. This move was planned, engineered, and thanks to our expanding sales force, which grew almost 10% in 2004 delivered with skill and confidence. Of particular note was the field s performance in the fourth quarter: When the stops were pulled out, we looked at a record yearend fully 37 percent over the prior year. In November and December alone, we sold more than $57 million in new group benefits premium; and almost $9 million in IEB premium and fee income. It was a solid finish to an ambitious year. In 2005, we plan additional field resources. In first quarter 2005, our core group representatives grew to a force of 113 sales professionals, and we anticipate adding up to five more this year. We will add our 26th regional sales office Memphis, Tennessee in second quarter In addition, we have another strategic enhancement to the sales force. Read on. New products, new strength The year was a building year for new and growing products. The most dramatic development in 2004 will not impact our bottom line until 2005 the introduction of RSL Basic Care, our innovative voluntary minimedical benefit product for seasonal, temporary and part-time workers. This new product is noteworthy for several reasons, among them: Market Demand: It is estimated more than 36 million American workers have no access to medical insurance. Some estimates go much higher. This is truly a societal agenda; for example, in late 2004, several Fortune 100 employers came together to form a coalition to find affordable health premium solutions for their pools of workers with no access to paid benefits. Alignment: The addition of RSL Basic Care acknowledges our commitment to helping our broker partners open up new revenue opportunities while increasing the value they bring to their clients. It also demonstrates our dedication to becoming a leading national provider in the voluntary benefits segment. Distribution: This is such a timely and dramatic opportunity, we elected in 2004 to build a dedicated field force of 10

3 individuals to drive mini-medical production. Under the leadership of William Kramer, this field force now comprises a fifth region of sorts, interspersed throughout the country, housed in our regional sales offices, and acting both independent of and in concert with our core group representatives. Recognizing that high quality, flexible and affordable voluntary benefits are going to continue to grow in importance, we also took stock in our RSVP suite of voluntary products particularly our VIP integrated short and long term disability product. VIP production began its ramp up in 2004, providing considerable momentum for our efforts coming into In 2004, we also built a Home Office-based product development and support team to assure appropriate infrastructure behind our aggressive 2005 voluntary production goals. Asset accumulation Operating profits in Reliance Standard s asset accumulation business rose 19 percent in 2004, reaching $19.7 million. Fixed annuity sales were up an impressive 32 percent over year prior, to $133 million, in a still-thready interest rate environment. And assets under management grew 6.7 percent to $993 million. Technology leads the charge As in recent years, technology continued to grow in importance to our current and prospective interests. Highlights included: Quantum improvements to our RSLInsite system, which allows online enrollment and administration of our voluntary products. The build-up to release of PACS 2, our claim system, set for deployment in the second quarter of We are excited at the additional processing and reporting capabilities this will provide our enterprise and our clients. Introduction of a claims data mart that allows managers to access claim information online, dramatically reducing costly printed reports and turnaround time, and allowing for faster, more robust claims analysis. Development for 2005 release of secure electronic billing and premium payment. As of first quarter 2005, all new customers enjoy this option, and in-force business is being phased in over several months. Several web-enabled tools deployed from Marketing to the field to increase speed and access to vital company and industry information. These include live and archived webcasts, the use of HTML-based distribution and analysis, electronic survey capabilities and, early in 2005, access to robust broker and prospect data bases for both new sales development and account management. Robust reporting from our sister company, Matrix Absence Management, which allows us to quantify for IEB customers the explicit return on investment delivered by outsourcing FMLA and leave management to Reliance Standard. We look forward to more highly evolved and functional technology gains in the current year. The next level If 2004 was a solid year of predictable growth and valuable enhancements company-wide, we expect 2005 will be a breakout year for Reliance Standard. I thank the literally hundreds of our associates who labor each day to execute on the promises we make to customers and partners, and I invite you to partner with us and enjoy the benefits of associating with a true benefits leader. Sincerely, Lawrence E. Daurelle President & CEO

4 G R O U P T E R M L I F E / A D & D Group Term Life/Accidental Death & Dismemberment (AD&D) Insurance provides death benefits for employees covered under basic employee benefit plans. We offer: accelerated death benefit rider; waiver of premium with Critical Illness benefit; family and medical leave (FMLA) coverage; counseling services; dependent coverage; and supplemental life coverage. A discount is available for employers who maintain a smoke-free workplace and provide wellness programs. G R O U P D I S A B I L I T Y I N C O M E Group Disability Income Insurance not only provides valuable income protection to employees, but also does it at an affordable cost. It can serve as a valuable benefit to help employers retain staff. Our Group Disability Income product has competitive rates and plan design flexibility. Companies can choose from many specially designed benefit packages to offer to their employees. We also offer a competitive managed disability program. G R O U P D E N T A L Group Dental Insurance provides benefits for periodic preventive dentistry, extractions, periodontics, endodontics and orthodontia. Plan options vary according to selected coverage. May be sold as standalone or with other group coverage. Managed care programs available. G R O U P V I S I O N Group Vision Insurance provides coverage for annual vision exams and benefits for lenses, frames and contacts. Plan options vary according to selected coverage. May be sold as stand-alone or with other group coverage. R E L I A N C E S T A N D A R D V O L U N T A R Y P L A N S ( R S V P ) Voluntary benefits are 100% employee-paid insurance plans offered at affordable group rates and paid through convenient payroll deduction. Employers can offer voluntary term life, accidental death and dismemberment and integrated short and long term disability insurance in any combination to their employees. The employer chooses and designs a plan that s right for their employees. Voluntary Term Life Insurance offers term life insurance to employees and dependents. Tobacco user/nontobacco user rates are available. Voluntary Group Disability Income Insurance offers integrated short term and long term disability, and features flexible elimination periods and maximums. Voluntary Accidental Death & Dismemberment Insurance offers employees an opportunity to purchase valuable Accidental Death and Dismemberment insurance for themselves and their dependents on a payroll deduction basis. Seat belt/air bag benefit is available up to $100,000 maximum. Voluntary Dental and Vision Plans, called Flex Plans, may be designed for use with Section 125 of the Internal Revenue Service code and allow employees to pay for benefits with pre-tax dollars. F I N A R E P

5 R S L B A S I C C A R E RSL Basic Care is available for hourly, part-time, seasonal, temporary, or irregularly scheduled employees in certain occupations. RSL Basic Care is a portfolio of limited, voluntary group health plans that offer affordable coverage to employees with no access to employer-paid health benefits. Flexible medical plans, including hospitalization and prescription benefits, are complemented by ancillary coverages such as Basic Care Dental, Basic Care Term Life and Basic Care STD. R S L S M A R T C H O I C E RSL SmartChoice, our Small Group product offers flexible LTD, Life/AD&D, STD, Dental and Vision plans with competitive rates and flexible plan designs. For groups with 2 to 19 lives (except dental/vision). Coverages include: SmartChoice LTD SmartChoice STD SmartChoice Term Life SmartChoice AD&D SmartChoice Dental and Vision (3-19 lives) B U S I N E S S T R A V E L A C C I D E N T Business Travel Accident can be written for groups of five or more. If the state minimum requirement is greater than five, the group must meet the state s minimum requirements. The amount and kind of business travel done by key employees influences the kind of plan needed. Tailored plans are available upon request. A B S E N C E S O L U T I O N S Absence Solutions is the integrated employee benefits platform marketed exclusively by Reliance Standard and sister company Matrix Absence Management, based in San Jose, CA. Absence Solutions integrates short and/or long term disability coverage with sophisticated leave management, clinical case management, administrative and reporting features, and is an industry leader in helping companies manage FMLA leave, and quantify their return on investment. Effective absence management requires skill sets that most companies simply don t have in-house. That s why so many leading-edge companies choose to outsource this vital business process to an integrated employee benefit company whose core competencies are disability insurance, workers compensation insurance and comprehensive absence management: Delphi Financial Group. A S S E T A C C U M U L A T I O N V E H I C L E S RSL offers a complete portfolio of fixed rate annuity products that provide both long term guaranteed returns and preservation of capital. RSL s innovative products are specifically designed to help individuals accumulate assets and when the time comes, those assets can be converted into retirement income. RSL s annuities can be issued on a non-qualified basis or taxqualified as an IRA or Roth IRA. We offer Single and Flexible Premium Deferred Annuities with guaranteed interest rate periods of 1, 3, 5, 6, and 7 years. Our consumer-friendly features allow for penalty-free withdrawals and waiver of surrender charges in the event of nursing home confinement or terminal illness under certain conditions. Single Premium Immediate Annuities are well suited for individuals seeking a periodic payout from a lump-sum amount. We offer period certain immediate annuities for payment periods of three through ten years. N C I A L O R T

6 M A T R I X A B S E N C E M A N A G E M E N T A member of the Delphi Financial Group family of companies, Matrix Absence Management, Inc. (Matrix) delivers an array of services that proactively manages employee absence and related payments. Matrix integrates workers compensation, short and long term disability, return-to-work services, and personal/family and medical leave (FMLA) programs into a seamless system. Matrix is also the administrator and claims processing platform for Reliance Standard National Accounts. Matrix focuses on reducing the lost productivity companies suffer when valuable employees are out of work. It streamlines benefit delivery, simplifies administration, and reduces benefit costs. Matrix emphasizes early reporting and intervention along with consistent medical management with a focus on healthy return-to-work. This produces a quantifiable payoff for employers through increased productivity, reduced benefit costs and happier employees. S A F E T Y N A T I O N A L C A S U A L T Y C O R P O R A T I O N A member of the Delphi Financial Group family of companies, Safety National Casualty Corporation (SNCC) offers a range of alternative risk funding products for workers compensation through independent insurance agents and brokers. Since 1942, SNCC has been a leading provider of Excess Workers Compensation coverage to self-insured employers and groups nationwide. Today, with additional risk financing services and large deductible programs, SNCC is a versatile alternative market provider. Excess Workers Compensation Self-Insurance Bonds Large Deductible Workers Compensation Alternative Risk Services F I N A R E P

7 F I N A N C I A L H I G H L I G H T S C O N S O L I D A T E D B A L A N C E S H E E T S (Dollars in Millions) (GAAP Basis) D E C E M B E R 31, Assets: Invested Assets $ 2,353 $ 2,200 Other Assets Total Assets $ 3,243 $ 2,865 Liabilities: Policy Liabilities and Accruals $ 2,040 $ 1,882 Liabilities Related to Investing Activities Other Liabilities Total Liabilities 2,667 2,364 Equity Total Liabilities and Equity $ 3,243 $ 2, G R O U P P R E M I U M S (Dollars in Millions) Core Non-Core Core P R E M I U M & F E E I N C O M E (Dollars in Millions) Non-Core E Q U I T Y (Dollars in Millions) N C I A L O R T

8 2004 RELIANCE STANDARD LIFE SENIOR OFFICERS The senior officers of Reliance Standard Life Insurance Company are from left to right: Christopher A. Fazzini Senior Vice President, Sales and Marketing; Debra G. Staples Vice President, Claims Administration; Frank W. Newdeck Vice President, Information Services; Lawrence E. Daurelle President and Chief Executive Officer; Thomas W. Burghart Vice President and Treasurer; Dan R. Green Vice President, Underwriting; Warren Cohen Vice President, Actuarial. S A L E S O F F I C E S Atlanta (800) Boston (800) Charlotte (800) Chicago (800) Cincinnati (800) Dallas (800) Denver (800) Ft. Lauderdale (877) Houston (800) Kansas City (888) Los Angeles (877) Memphis Opens 2005 Michigan (800) New York, First Reliance Standard Life Insurance Company (800) Northern California (800) Orange County (800) Orlando (800) Philadelphia (800) Phoenix (800) Pittsburgh (800) Rochester, First Reliance Standard Life Insurance Company (800) Seattle (800) St. Louis (800) Twin Cities (800) Washington, D.C. (800) Wisconsin (877) Home Office: Chicago, IL Administrative Office: 2001 Market Street, Suite 1500 Philadelphia, PA (800) Matrix Absence Management, Inc Hellyer Avenue, Suite 210 San Jose, CA (800) Safety National Casualty Corporation 2043 Woodland Parkway St. Louis, MO (888) W W W. R S L I. C O M RS2128