Upholding Your TRUST

Transcription

1 Upholding Your TRUST Annual Report 2014

2 MESSAGE FROM THE PRESIDENT & CEO 2014 was another excellent year for the Mutual Trust Financial Group, highlighted by increased policyholder surplus and continued growth in assets. Throughout my tenure, I have tended to focus on surplus and assets as our key financial statistics. With so many financial measures from which to choose, you might be asking why I view these as the most important. The short answer to that question is trust. As policyholders, you have entrusted us with an important part of your overall financial security needs, and we take that trust very seriously. You trust us to invest in assets that balance prudent investment risks with higher returns, and a growing base of assets allows us to pursue a more diversified investment portfolio that helps us meet that challenge during this prolonged low interest rate environment. You trust us to keep the long-term financial promises your policies provide, and a strong level of policyholder surplus helps ensure that we can meet those obligations, regardless of the economic environment that might exist at the time. At Mutual Trust, we have a 110-year history of maintaining a strong mutual company philosophy a philosophy that understands that our primary responsibility is to our policyholders who have placed their trust in us. further enhance our financial strength and provide our policyholders with membership in a larger mutual organization. The benefits provided by our policies will not change, and our Home Office and existing personnel will remain intact in Oak Brook, Illinois. We are currently going through the approval process, and we expect the merger to be complete in the fourth quarter of As we look forward to what promises to be an exciting 2015, I extend my thanks to our Board of Directors for their counsel and guidance, to our employees for their dedication to our customers, to our agents for their partnerships and support, and once again, to our policyholders for giving Mutual Trust the opportunity to meet your financial needs. Stephen M. Batza FSA, MAAA, CLU, ChFC President & Chief Executive Officer While we have been successful in organically growing assets and surplus over the past several years, we have been presented with an outstanding opportunity that will allow us to accelerate that process. Early in 2015 we announced our plan to merge with the Pan American Life Insurance Group. The combination of the two organizations will 2

3 MUTUAL TRUST HOLDING COMPANIES & SUBSIDIARIES: Consolidated Balance Sheets as of December 31, 2014 (in thousands) Assets Bonds and Short Term Investments $1,380,973 $1,509,808 Common Stocks 8,424 9,802 Mortgage Loans on Real Estate 158, ,265 Policy Loans 252, ,255 Other Invested Assets 25,501 24,694 Total Invested Assets $1,825,944 $1,934,824 Deferred Policy Acquisition Costs 157, ,570 Reinsurance Recoverables 63,476 77,428 Other Assets 57,032 52,939 Total Assets $2,104,187 $2,185,761 Liabilities Future Policy Benefits and Claims $1,703,267 $1,742,410 Other General Account Liabilities 143, ,926 Total Liabilities $1,846,553 $1,897,336 Policyholder Surplus Unassigned Policyholder Surplus $246,639 $257,687 Accumulated Other Comprehensive Income 10,995 30,738 Total Policyholder Surplus $257,634 $288,425 Total Liabilities and Policyholder Surplus $2,104,187 $2,185,761 Consolidated Statements of Income for the Year Ended December 31, 2014 (in thousands) Revenues Premiums $190,650 $166,242 Net Investment Income 82,297 83,248 Net Realized Gains on Investments 3,198 2,895 Other Income 9,014 9,093 Total Revenues $285,159 $261,478 Benefits & Expenses Policyholder Benefits $204,693 $181,515 Commissions and Expenses 55,607 56,295 Total Benefits and Expenses $260,300 $237,810 Gain Before Dividends & Taxes $24,859 $23,668 Policyholder Dividends 9,720 7,113 Gain Before Taxes $15,139 $16,555 Federal Income Tax Expense 5,600 5,507 Net Income $9,539 $11,048 GAAP Accounting: These summary financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP). For audit information, see p. 6. 3

4 FINANCIAL ACHIEVEMENTS (Page 1 of 2) Life Insurance Sales (in thousands) Mutual Trust s life insurance sales have remained strong during the last three years. Average Gross Rate of Return: Life Insurance Industry vs. Mutual Trust A major component in setting dividend scales is the interest rate environment. This chart compares the average rates of return for the life insurance industry, as tabulated and published in the 2014 Life Insurers Fact Book, and Mutual Trust s rates of return. Paying competitive policyholder dividends is important to us. Net Income (in thousands) Mutual Trust s very strong financial base provides stability, even during challenging economic conditions. Life Insurance Persistency Rate for Life Products An important goal for us is customer satisfaction. High persistency rates, we believe, indicate high customer satisfaction. In 2014, the organization experienced a persistency rate of 91.6%. (Continued on next page) 4

5 FINANCIAL ACHIEVEMENTS (Page 2 of 2) Unassigned Policyholder Surplus (in thousands) Mutual Trust s growing unassigned policyholder surplus, measured according to Generally Accepted Accounting Principles (GAAP), indicates the organization s strong and stable financial position. Total Life Insurance Premium (in thousands) In 2014, total life insurance premiums remained strong. This reflects the value consumers place on the security life insurance provides. (Back to page 1 of Financials) Invested Assets by Category (Statutory Value Basis) Mutual Trust applies a conservative investment philosophy, reflected in its asset diversification and prudence in individual investment selection, emphasizing credit analysis. Commercial Mortgage Loans Mutual Trust invests primarily in 7.0% investment-grade fixed income securities (bonds). The organization also has traditionally invested in commercial mortgage loans. Commercial mortgages have provided excellent returns for the organization and are a good investment to back its core traditional life products. Bond Portfolio Quality Distribution Investment Grade Below Investment Grade Industry average: 94% investment grade Source: American Council of Life Insurance Policy Loans 14.3% Cash/Short-Term Investments 1.2% 3% Other 2.2% Bonds 75.3% 97% 5

6 Board of Directors Stephen M. Batza President & Chief Executive Officer Mutual Trust Financial Group Barbara D. Colwell Managing Director The Colwell Group Gary L. Eisenbarth Chairman of the Board Martha O. Hesse Private Investor, Retired President Hesse Gas Company Peter I. Mason Partner Freeborn & Peters, LLP, Attorneys at Law Daniel P. Mulheran Retired President Individual Life Distribution, ING U.S., LLC Bruce W. Taylor Chairman and Director Cole Taylor Bank Gary A. Thalhuber Retired Partner Pricewaterhouse- Coopers, LLP Senior Officers Stephen M. Batza, FSA, MAAA, CLU, ChFC President & Chief Executive Officer Geri Gaughan, JD Senior General Counsel and Secretary G. Edward Hughes, CLU Senior Chief Sales & Marketing Officer Alfreda A. Jacob, SPHR, HCS Senior Organization Development & Human Resources John Rosenkranz, CPA, FLMI Senior Chief Financial Officer and Treasurer Narayan Shankar, FSA, MAAA, CFA Senior Investments, and Chief Actuary Company Officers Roger L. Barth, FSA, MAAA Product Development Delores J. Biegun, FLMI Information Services Margaret M. Culkeen, CFA Investment Operations Timothy P. Diggs, CPA, CTP Controller Rod Gross, CPA, CISA Internal Audit Everett Kunzelman, FLMI, ACS New Business and Executive Underwriter David McCaughey Technical Services Stacy McWhorter Customer Service John Seneczko, JD Assistant Secretary Audit Information Mutual Trust Financial Group s independent auditors are Ernst & Young LLP. The financial information contained in this report is excerpted from financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) in the United States. Policyholders Meeting The next Policyholders Meeting will be held on February 16, 2016, in our home office in Oak Brook, Illinois. Thomas J. Skelly Retired Managing Partner Accenture Luke Cosme Distribution 6

7 MESSAGE FROM OUR CEO STATEMENTS FINANCIAL ACHIEVEMENTS BOARD OF DIRECTORS Lew Merrow, MBA, CLU, ChFC Northeast Region Vernon, CT REGIONAL SALES OFFICES Home Office Mutual Trust Financial Group 1200 Jorie Boulevard Oak Brook, IL Janice Gehrman West Region Oak Brook, IL , ext REGIONAL OFFICES Larry Quinn, CLU, ChFC Midwest Region Palatine, IL , ext Terry Cook, CLU, ChFC South Region Fort Mill, SC U P H O L D I N G Y O U R T R U S T A N N U A L R E P O R T 7