2017 Annual Report 20 A N N U A L R E P O R T 17

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1 2017 Annual Report ANNUAL REPORT

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3 2017 Annual Report Founded in 1913 $2.2 billion in assets Rated A- (Excellent) by A.M. Best KEY FACTS: 4,150 full and regular part-time associates 25+ local offices nationwide 2+ million members or plan participants EXPERTISE IN: Voluntary Benefits Self-funded Health Plan Design & Administration Population Health & Fitness Management The Modern Mutual Trustmark is a different kind of benefits company. One that listens first, then works with brokers and clients to help them keep their promise to employees. In fact, we ve been helping companies do just that for more than 100 years. Much has changed over that time. What hasn t is our responsibility to support employers and employees in times of crisis, to give them peace of mind so they can enjoy times of ease, and to help them thrive together. Now and into the future. That s why we ve grown into a new kind of company a modern mutual benefits company that supports the future success of companies and their employees by continually evolving our benefits portfolio. As a mutual company, we serve our clients, not Wall Street. That means we can look forward and plan for the future not just tomorrow or next quarter, but years ahead. As a modern company, we help clients stay ahead of trends in the industry by integrating technology and new approaches into our products, while also strengthening them with long-term perspective, experience and deep expertise in our areas of benefit specialty. We help employers provide smarter benefits that attract new employees, keep existing ones, improve productivity and lower costs. We help employees achieve greater physical, emotional and financial wellbeing. We help brokers and consultants provide a broader range of creative solutions to their clients and back them up with high-touch service that takes care of their clients, and their employees and families, every step of the way. And we do it all while offering capabilities usually reserved for large employers combined with the personal service you d expect from a mid-size firm. The result is a flexible, personalized approach a coherent benefit strategy for each of our clients that fits their company culture, protects and improves the wellbeing of employees, advances the employment brand and achieves business goals. We help people and businesses thrive. 3

4 Trustmark Last year was one of growing momentum. Overall operating results were outstanding and showed improvement throughout the second half of Trustmark Voluntary Benefit Solutions (VBS) and CoreSource continued their upward trajectory of recent years, and Starmark rebounded from a down year in HealthFitness remained steady as work continued on a new, customerfacing technology platform. This is not to say that everything went as planned in I ll cover that below. However, strength across the enterprise enabled us to fortify an already sound balance sheet, continue to reinvest in our businesses to improve the customer experience and support long-term growth, and increase investment in information security to further protect the privacy of policyholders. Beyond these business investments, we also renewed our commitment in 2017 to a long history of community service engagement in the cities and towns across the country where Trustmark associates live and work Financial Results * Letter from our CEO As noted, VBS generated excellent results, including record sales and revenue of $83.8 million and $338.1 million, respectively. Revenue grew by $23.2 million, or more than 7 percent, over the $314.9 million generated in High persistency among existing clients helped drive revenue. Sales growth reflects the overall health of the voluntary benefits market. Trustmark was founded on the premise of providing financial peace of mind to working families more than 100 years ago, and that need has not diminished. Recent surveys from numerous outlets confirm that the majority of Americans do not have the savings to cover a $1,000 emergency **. With rising deductibles and other gaps in medical insurance coverage, more and more consumers are taking advantage of the financial safety net afforded by voluntary benefits. While sales were flat year over year in CoreSource, which designs and administers comprehensive benefit plans for midsize and larger organizations that self-fund, revenue set a new record, at $137.8 million, up $6.1 million from $131.7 million in This was driven by growth in covered lives of our existing clients and income earned from lowering their out-of-network claim costs. CoreSource also introduced a variety of new plan designs that utilized reference-based claim reimbursement based on a multiple of Medicare s reimbursement rate. This, along with an expansion of our thirdparty PPO networks, enabled clients in more parts of the country than ever to offer their employees an affordable health plan paired with a wide choice of healthcare providers. Revenue in Starmark, which provides small-group self-funded health plan administration and stoploss coverage through Trustmark Life Insurance Company, declined by $40 million in 2017, from $221.3 million to $181.3 million, as expected. Volatility in the small-group medical market has increased due to growing ACA instability and increased competition. While sales were slow to start the year, they picked up each quarter, ending 2017 at just above full-year expectations. Like CoreSource, Starmark introduced a referencebased pricing product, Healthy Choices SM, to help small employers control plan costs. In HealthFitness, which offers population health and fitness management services, revenue fell by $7.9 million to $106 million. Fitness center design and management sales to employers, universities and municipalities increased significantly, with sales jumping from $1.1 million the prior year to $4.3 million in Health management sales, however, remained slow as prospective clients elected to await implementation of our new technology platform, which we expected to go live in September of That has been delayed to the fall of We ve invested greater resources into 4

5 2017 Annual Report the project, and we are confident both in the quality of the customer experience it will enable and the current velocity of the milestones we re achieving toward completion. On a consolidated basis, reported pretax earnings of $32.3 million in 2017 are up $10.9 million from $21.4 million reported in The increase is largely due to higher earnings in VBS, CoreSource and Starmark. Earnings were consistent with the prior year in VBS, as the strong sales and persistency noted above more than offset higher technology project expenses. Trustmark generated $773.5 million in consolidated operating revenue, a decrease of $19.7 million from $793.2 million reported in 2016, due primarily to lower revenue in Starmark. The combination of excellent operating results and strong investment income enabled us to continue reinvesting in our businesses and add substantially to Trustmark s capital and surplus. At year-end 2017, capital and surplus totaled $730.7 million, an increase of $43.7 million, or more than 6 percent, from $687.0 million in Strategic Investments and Key Events As we shared with you last year, work has continued to progress on a multi-year technology project in Voluntary Benefit Solutions. We implemented a portion of the first phase in 2017, and the remainder is targeted and on track for implementation this year. As capabilities are added in 2018, we will be able to develop and service new, consumer-focused products faster and more efficiently. Our goal is to provide valuable and innovative life insurance, accident, critical illness and disability coverage options that can be tailored to fit the specific life-stage needs of employees and their families. While we made significant progress on the new, consumer-facing wellness platform being developed for HealthFitness through our strategic alliance with Welltok, Inc., that project was delayed. As I stated above, we are confident the project is on track to deliver, in the fall of 2018, market-leading solutions that combine our science-based behavior change model and people-based program strategy and delivery with an enhanced platform that enables a personalized, seamlessly integrated customer experience. In addition, HealthFitness has recently hired a number of sales executives with experience in the wellness industry as we prepare for expected demand once the new platform goes live. CoreSource launched mycoresourcewire, a new digital communication service that, combined with the CoreSource mobile app and the mycoresource.com site, provides a full suite of digital tools to help members understand their health benefits and use them more effectively. These tools help them avoid gaps in care, get recommended preventive screenings and save money by comparing cost and quality data when utilizing healthcare services. The goal is to help members be more informed, confident, healthcare consumers. A topic increasingly in the news is cyber security. At Trustmark, earning and maintaining the trust of our policyholders and business partners is paramount. That s why we are continually improving our information security capabilities. Trustmark has adopted the National Institute of Standards and Technology (NIST) Cyber Security Framework and is investing in people, processes and technology to protect the private information of our customers and ensure compliance with current and emerging regulations. Three directors were re-elected to the Trustmark board at the Annual Policyholders Meeting in June 2017: David McDonough, former Trustmark President and Chief Executive Officer, and board member since 2004; David Weick, retired Chief Information Officer and Senior Vice President, Shared Services, McDonald s Corporation, and board member since 1999; and Peter Zeigler, Former Chairman, President and CEO of The Ziegler Companies, and a Trustmark director since We had one new addition to Trustmark s board of directors in Through a resolution approved at the September 2017 meeting, Carlos Minetti, 5

6 Trustmark President of Consumer Banking at Discover Financial Services, was nominated and elected to Trustmark s board. Mr. Minetti has 30 years of proven leadership experience at Discover Financial Services and American Express launching and building new lines of business, creating differentiated customer experiences and analyzing and managing risk. He will stand for election to a regular three-year term at the Annual Policyholders Meeting. Current board members standing for re-election in March include: John Clymer, recently retired from the Office of Strategy Management, The Marvin Companies, and a board member since 2007; Peter Drake, Ph.D., Managing Director, Mayflower Partners, and a board member since 1997; and Joseph Pray, CLU, ChFC, President and Chief Executive Officer, Trustmark, and a board member since I want to close with a note about Trustmark s commitment to our communities. Each year, Trustmark pledges a percentage of pretax earnings to support worthy community service programs across the country. In accordance with our mission to help people increase wellbeing, our focus is primarily on organizations working to improve health and safety in underserved communities. In all, the Trustmark Foundation donated nearly $1 million to charities across the country in I know I speak for all Trustmark associates when I say we are committed to betterment: the continuous improvement of how we serve our policyholders and our communities throughout Sincerely, Joseph L. Pray President and Chief Executive Officer *For a detailed overview of the company s 2017 financial results, please see the Consolidated Financial Results section of this report, on page 12. **Huddleston, Cameron; More Than Half of Americans Have Less Than $1,000 in Savings in 2017 ; GOBankingRates.com; Sept. 12, Tepper, Taylor; Most Americans don t have enough savings to cover a $1K emergency ; Bankrate.com; Jan. 18,

7 2017 Annual Report Corporate Structure Trustmark converted to a mutual holding company structure on January 1, Under that structure, the operating units of the enterprise are separated into insurance and noninsurance operations, as shown below. Trustmark Mutual Holding Company Trustmark Group, Inc. Trustmark Insurance Group, Inc. TRUSTCO Holdings, Inc. Trustmark Services Co. Trustmark Insurance Company CoreSource, Inc. Health Fitness Corporation Trustmark Life Insurance Company Trustmark Life Insurance Company of New York PFT Employee Benefit Solutions Star Marketing & Administration, Inc. MultiBenefit Services, Inc. Trustmark Voluntary Benefit Solutions, Inc. 7

8 Trustmark Trustmark Voluntary Benefit Solutions $338M Working with our partners, revenue totaled more than $338 million in Trustmark Voluntary Benefit Solutions listens to what employers care about most and then delivers innovative insurance solutions backed by exemplary service. With more than a century of building trusted relationships, Trustmark helps employers reduce administrative burdens, simplify enrollment and effectively communicate key company messages to educate and inform employees about health, wellness and other important business initiatives. Trustmark offers its insurance products and services on a voluntary, individual basis at the worksite through national and regional brokers and professional benefit communication firms. Trustmark s Innovative Solutions As brokers and employers continue to navigate ongoing changes in healthcare and the overall benefits landscape, Trustmark provides costeffective yet robust solutions to attract and retain employees. Trustmark s voluntary solutions help working consumers and their families achieve peace of mind with coverage designed to fit changing needs based on life stage or financial priorities. This includes coverage that offsets the increasing financial risk and out-of-pocket costs associated with many of today s medical benefit plans. A complete customer-focused approach to product innovation has resulted in unique products and a continual push for new and better in customer protection. Delivering what customers say they want and need has driven the development of products such as: An award-winning critical illness product, Trustmark Critical HealthEvents SM, including a caregiver benefit, healthy living benefit and more. One-of-a-kind Universal LifeEvents, the top selling universal life product in the U.S. *, is tailored to the varying protection needs employees face throughout their life, including long-term care options. An enhanced accident benefit plan that pays higher benefits for the ten accidents consumers most often suffer. Disability income protection with the flexibility to conform to each policyholder s needs. Providing Exemplary Service Trustmark s caring and listening approach helps educate employees along the way all at no charge to the employer. We provide the resources to engage with employees one-on-one to help make sure they understand the value of their benefits while also communicating any important company initiatives the employer may want to address. Held as the standard in the industry, Trustmark s exceptional personal service makes benefit administration simple and easy. The end result: higher levels of employee participation and satisfaction with benefits, better informed consumers, greater financial security and customers who continue to choose Trustmark year after year. Your Trusted Partner Our relationships with our clients are based on listening. As a proven, industry leader in the voluntary benefits space, the foundation of our success hinges on understanding what our partners need and earning your trust by providing the solutions that match those needs. You care. We listen. *2017 U.S. Worksite Sales Survey, LIMRA. 8

9 2017 Annual Report CoreSource $138M In 2017, revenue totaled nearly $138 million. Every business is unique. So why should every self-funded employee health benefits plan be the same? For more than four decades CoreSource has crafted integrated, flexible, and tailored employer health benefit plan designs that seamlessly meet specific business needs and delight members. We treat clients as long-term partners that s why our average client relationship lasts more than ten years. Our responsive and empathetic service teams provide the highest level of support for employers and members. CoreSource is more than an administrator; we re a total health benefits solution. We meet the unique needs of self-funded employers, trusts, hospitals and health systems and insurance carriers. We reduce cost and complexity, and our personal approach to healthy wellbeing solutions drives member engagement and empowers smart, confident and healthy healthcare consumers. With ten locally managed service and support offices around the country, CoreSource is backed by the resources, innovation and technology of Trustmark. This enables CoreSource to deliver: Comprehensive employer-sponsored benefits administration for medical, dental, vision, HSA/HRA, flexible spending accounts, COBRA and shortterm disability. Integrated personal health management systems designed to educate employees about their own health and empower them to improve it. Freedom of choice in healthcare providers nationwide through tier-1 networks such as Aetna Signature Administrators (ASA) PPO Network, Cigna PPO Network, Anthem Blue Cross PPO and approximately 50 other regional and local networks. Online self-service tools and electronic communication options, including targeted member SMS messaging with mycoresourcewire. Cost and quality transparency and telemedicine solutions. Simplified billing and automated funding to ease benefit administration. Detailed reporting and insights on plan performance and clinical analytics. Access to medical network and pharmacy benefit management, including a specialty pharmacy program. Preferred stop-loss carriers to provide costeffective risk management. Award-winning health and wellness programs driven by cutting-edge data analytics to deliver employee engagement and bottom-line results. URAC-accredited utilization management. Advocacy solutions that offer health and medical guidance for members around the clock. Consumer-directed and other flexible plan designs and administration. Out-of-network and reference-based claim re-pricing. Subrogation, hospital bill audits and fraud protection services. Dependent eligibility audits identifying dependents ineligible for benefits under the self-funded plan that generate significant savings for employers. Retiree benefit administration. Expect more. Benefit more. 9

10 Trustmark Strength in numbers* 92% of clients satisfied with programs and services 95% participant satisfaction with programs and services 93% participant satisfaction with health coach 91% of clients likely to recommend HealthFitness 90% of coaching participants reach their goals 98% of screening participants planning significant health changes $106M HealthFitness generated revenue of nearly $106 million in HealthFitness HealthFitness provides a complete and integrated personalized wellness solution that includes the best of fitness, on-site wellness, occupational health and a powerful engagement platform. With more than 40 years of experience, HealthFitness is a proven leader and partner for improving the health and wellbeing of the people we serve. HealthFitness provides a single source for complete wellness solutions, including: Engagement Education professionals Assessments Screenings Occupational health Coaching Wellness challenges On-site and Benefits advocacy virtual fitness Technology platform Engagement platform streamlines and connects participants to health and wellness program Mobile first: Participants can access platform via mobile app, mobile browser, tablet, PC and Mac Social community and blogs Video coaching Device and app integrations More than 160 devices and apps supported, including activity trackers, weight scales, blood pressure monitors and glucose monitors Health assessment configurability Challenges Rewards marketplace Targeted health messaging Personal health itinerary Resources include articles, calculators, tracking dashboard, health and wellbeing library, ondemand seminars, events and registration Digital benefits hub Connects HealthFitness programs and services as well as client s health and benefits partners for a seamless participant experience Fitness and Recreation HealthFitness award-winning on-site fitness services bring the right people, plans and programs to make clients fitness centers a more valuable asset for their business or community. HealthFitness on-site program managers make an authentic connection at the individual level by leveraging extensive product offerings, including personal training, health management services, physical therapy, massage, virtual fitness, as well as seminars, contests and incentives. On-site solutions: Corporate fitness Colleges and universities Aquatics Recreation and Community centers Driven by the passion of our people *Source: HealthFitness Client Satisfaction Survey,

11 2017 Annual Report Starmark and Trustmark Life Insurance Company $181M In 2017, revenue totaled more than $181 million. Starmark is the leader in self-funding for small groups. Employers enjoy seamless integration of self-funded health plan administration and claim payments through Starmark, with stop-loss insurance provided by Trustmark Life Insurance Company. With Starmark, employers nationwide choose from extensive plan designs to create a self-funded health plan to meet their unique needs and budget. If there is a surplus in the group s prefunded account at the end of the agreement, there is an opportunity for the employer to receive a refund. Starmark and Trustmark Life provide true personal service, and offer innovative, customizable products that help provide cost stability in a changing marketplace. Key products and services: A broad portfolio of self-funded plan designs, including comprehensive medical, preventive-only and dental coverage. Freedom of choice in healthcare providers nationwide for plans with and without a PPO network. PPO plans enable access through Aetna Signature Administrators (ASA) PPO Network, Cigna PPO Network and other networks. Exceptional personal service to ensure satisfaction, with personal welcome calls for new employers and follow-up calls throughout the year. Offerings like Healthcare Bluebook TM, Grand Rounds, Teladoc, CareChampion 24/7, YourCare, MyNurse 24/7 SM, MaternaLink, and Oncology Management help employees navigate the complex healthcare system while providing advisory support and cost-savings services. HRA, HSA and ancillary products for a complete benefits package. Efficient and secure employee enrollment online or via telephone. Employer online tools to simplify plan administration, including a tailored administration kit and utilization reports to better manage healthcare costs. Employee health and wellness education and management tools. Tailored online plan resource kit to help members make informed healthcare decisions. The leader in self-funding for small groups. 11

12 Trustmark Overview of 2017 Consolidated Results* Strategic Technology Investments Trustmark continues to invest in multiyear technology projects to support long-term growth in two of its strategically important businesses, Voluntary Benefit Solutions and HealthFitness. Both of these projects have experienced delays, which have increased expenses and pushed back the timeline for realizing significant efficiency and growth benefits. However, strong overall operating results in 2017 more than offset the negative impact, leading to a substantial increase in earnings in The technology project in VBS will simplify and enhance processes across all areas of the organization, from Agency Support to New Business and Underwriting to Customer Promise. The project will enable VBS to maintain and even strengthen its excellent customer service reputation as rapid growth continues. In addition, it will support that growth by increasing operational efficiencies and facilitating faster product development and fostering innovation. The majority of Phase 1 functionality went live in 2017 and the remainder is expected to be complete by the end of the second quarter of At that time, the project will begin creating value for customers and for Trustmark. Late in 2015, HealthFitness entered a strategic technology alliance with Welltok, Inc. This collaboration is building an industry-leading population health management solution that combines HealthFitness science-based behavior change model and people-based expertise in onsite program strategy and delivery with Welltok s intuitive, engaging health optimization platform, CaféWell. That project was targeted for completion by the end of 2017 but has been delayed until the third quarter of Both Trustmark and Welltok have added resources to the project and it is tracking well, with milestones being achieved on or ahead of the revised schedule Consolidated Results The company generated $773.5 million in consolidated revenue, a decrease of $19.7 million reported in 2016, largely due to lower revenue in Starmark, which provides small-group self-funded health plan administration services and stop-loss coverage through Trustmark Life Insurance Company. Revenue increased by $23.2 million, to a record $338.1 million, in Voluntary Benefit Solutions. This was due to record sales of $83.8 million and strong persistency among existing clients. CoreSource revenue, at $137.8 million, up $6.1 million from 2016, also represents a new benchmark. The chief drivers of CoreSource revenue included strong growth among existing clients and income earned as a percentage of claim savings passed on to clients. Operating Revenue In Millions Assets In Millions $ $2.2B Trustmark generated $773.5 million in consolidated revenue, a decrease of $19.7 million, from $793.2 million reported in Total assets increased by $93.0 million, to $2.2 billion. 12

13 2017 Annual Report HealthFitness revenue dropped by $7.9 million to $106.0 million, due to slow health management sales as potential clients postpone purchase decisions until the new CaféWell platform is in place. Fitness and community center sales increased substantially in 2017, as HealthFitness continued to expand beyond corporate fitness centers into providing programming, staffing and management services for university and municipality community and aquatic centers. Revenue fell by $40 million in Starmark, from $221.3 million to $181.3 million, as expected, as cyclical pricing pressures lowered persistency and led to slow sales at the beginning of the year. However, sales picked up throughout 2017, and that momentum, along with improving loss ratios and income earned as a percentage of claim savings passed on to clients (as in CoreSource), helped drive year-over-year earnings growth. Trustmark reported pretax earnings of $32.3 million in 2017, and increase of $10.9 million from $21.4 million reported in 2016, due primarily to strong earnings in VBS, CoreSource and Starmark, higher investment income and proactive expense management across the enterprise. This more than offset the negative impact of additional expenses tied to long-term technology investments and the accounting impact of record sales in Voluntary Benefit Solutions, where insurance company statutory accounting rules require that Trustmark deduct all sales acquisition costs in the year the policy is written. To provide capital for Trustmark s long-term enterprise technology projects and other investments, Trustmark Life Insurance Company paid a dividend in 2017 of $16.6 million to Trustmark Insurance Group, Inc. This transaction received approval from the Director of Insurance of the State of Illinois. Trustmark s capital and surplus, a key measure of financial strength, increased by $43.7 million, or more than 6 percent, in 2017, from $687.0 million to $730.7 million, due to excellent overall operating results and investment returns that were positive across all asset classes, led by greater than 20- percent returns on equities. The company maintains a conservative debt-to-capital ratio of 10.9 percent, and, as of year-end 2017, a NAIC Risk-based Capital level of approximately 1,200 percent, six times the regulatory minimum. On March 1, 2017, independent rating agency A.M. Best affirmed Trustmark s A- (Excellent) financial strength rating and stable outlook, noting Trustmark s more-than-adequate risk-adjusted capitalization, good operating profitability and diverse business profile Pretax Operating Gain In Millions $32.3 Consolidated Capital & Surplus In Millions $ Reported pretax earnings of $32.3 million increased by $10.9 million from 2016 due to strong operating results in VBS, CoreSource and Starmark. Capital and surplus increased by $43.7 million, from $687.0 million to $730.7 million due to overall operating results and positive investment performance. *Represents the consolidation of financial results of Trustmark Mutual Holding Company for the 2017 calendar year. 13

14 Trustmark Results from Operations Trustmark Voluntary Benefit Solutions, CoreSource and Starmark all produced excellent operating results in In VBS, full-year sales of $83.8 million and revenue of $338.1 million were both record highs. CoreSource delivered new records in revenue, at $137.8 million and pretax earnings, at $21.6 million. Starmark rebounded from a challenging year in 2016, returning to margins appropriate for the risk level of that market. This strong operating performance helped offset a loss in HealthFitness due to the expense of maintaining the current technology platform while developing the new CaféWell platform that is expected to launch in the fall of Consolidated Income Statement Revenue Premiums Life and Annuity 207,451, ,358,812 Disability 58,659,591 55,499,037 Health 209,383, ,084,548 Net Investment Income 69,320,244 70,096,762 Other Revenue 297,962, ,235,523 Total Revenue 842,777, ,274,682 Expenses Policy Reserve and Incurred Claim Increases 279,083, ,593,070 Agent Commissions 106,016, ,364,754 Operating and Other Expenses 423,875, ,161,430 Interest Expense 1,975,605 1,788,882 Total Expenses 810,951, ,908,136 Net Gain from Operations before FIT 32,325,925 21,366,545 FIT (benefit) 15,843,933 3,547,569 Net Gain from Operations before Realized Investment Gains/Losses 16,481,992 17,818,976 Realized Investment Gains (losses) 8,319,426 1,147,543 Net Income 24,801,418 18,966,519 On a consolidated basis, reported pretax earnings totaled $32.3 million on operating revenue of $773.5 million. Earnings increased by $10.9 million, from $21.4 million reported in 2016, largely due to the operating results noted above, which more than offset the negative impact of delayed benefits and increased costs associated with the technology projects in VBS and HealthFitness, and the accounting impact of record sales in VBS, where insurance company statutory accounting rules require that Trustmark deduct all sales acquisition costs in the year the policy is written. Total revenue, including net investment income, declined by $20.5 million, to $842.8 million, due to slow sales and lower persistencey in Starmark in early

15 2017 Annual Report Consolidated Balance Sheet Assets Bonds 1,544,673,273 1,483,868,296 Equities 184,974, ,999,608 Mortgage Loans 58,793,827 43,123,707 Real Estate 22,132,086 22,939,203 Policy Loans 19,748,433 18,968,645 Cash and Cash Equivalents 186,858, ,148,053 Investment Receivable 729,469 1,192,591 Total Invested Assets 2,017,910,550 1,910,240,103 Electronic Data Processing Equipment 16,615,907 17,436,971 Intangible Assets 84,935,171 87,793,727 Investment Income Due and Accrued 12,925,283 12,622,523 Premium Due and Deferred, Net 11,721,665 9,576,367 Reinsurance and Other Receivables 50,822,786 56,975,969 Federal Income Taxes - 7,337,446 Total Assets 2,194,931,362 2,101,983,106 Consolidated Balance Sheet* As of December 31, 2017, the company s consolidated assets totaled $2.2 billion, and consolidated capital and surplus was $730.7 million. Trustmark maintains a conservative debtto-capital ratio of 10.9 percent and an NAIC Risk-based Capital level of approximately 1,200 percent, six times the regulatory minimum. Liabilities Policy, Premium, and Claim Reserves Life 789,729, ,543,323 Health 346,199, ,974,756 Dividend Accumulations & Premium Deposit Funds 43,237,401 43,320,218 Reinsurance Payable 325, ,447 Commissions, Taxes, and Other Accrued Expenses 95,786, ,851,300 Amounts Retained by Company as Trustee 53,460,490 46,677,782 Remittances and Items Not Allocated 19,496,166 15,317,968 Interest Maintenance Reserve 24,616,188 25,286,947 Debt 89,615,538 89,537,330 Other Liabilities 52,786 11,974 Federal Income Taxes Deferred and Payable 1,725,564 - Total Liabilities 1,464,244,458 1,414,944,045 Surplus Asset Valuation Reserve 44,225,929 40,476,739 Unassigned Surplus 686,460, ,562,322 Total Surplus 730,686, ,039,061 Total Liabilities and Surplus 2,194,931,362 2,101,983,106 *Represents Trustmark Insurance, Trustmark Life, Trustmark Life Insurance of New York, and Trustmark Group. 15

16 Trustmark Investment Portfolio Analysis Trustmark s portfolio had a total return for the year ended December 31, 2017 of 7.3 percent. All asset classes experienced strong returns led by greater than 20-percent returns on common stocks. At year-end, 86 percent of Trustmark s $2.0 billion investment portfolio was in fixed income and preferred securities. Trustmark s well diversified portfolio should help to protect our assets as the U.S. experiences higher interest rates and market volatility. Taxable Bonds 42.5% AAA 32.5% Real Estate Equity 1.6% Convertibles Sector Allocation 23.2% MBS / ABS Below BBB 10.1% Bond Quality Distribution 14.3% AA 2.4% 4% Commercial Mtg. 1.9% Preferred Stock 8.6% Common Stock 6.6% Tax-exempt Bonds 9.2% Cash & Equivalents BBB 19.5% 23.6% A 16

17 2017 Annual Report Building Stronger Communities: Trustmark Associates and the Trustmark Foundation Giving back to our communities is an integral part of Trustmark s culture. In 1913, two railroad workers enlisted two insurance professionals and formed a small fraternal organization to help provide for the families of injured or disabled colleagues. Since that modest beginning, Trustmark has been uniquely tied to the communities it serves. It is a two-level commitment in which associates work as individuals and together as one company to give back to the community and improve the quality of life for all. The Trustmark Foundation, established in 1984, ensures the continuation of this important commitment. Each year, Trustmark contributes a percentage of pretax earnings to charity. The Trustmark Foundation coordinates and administers the giving program. In 2017, the foundation distributed approximately $950,000 in cash and gifts in kind. The foundation also encourages employee volunteerism by making gifts to eligible organizations to which associates contribute significant time. In addition, each year, Trustmark organizes an associate campaign to support the United Way. In 2017, Trustmark associates from across the country pledged a total of more than $325,000. Regional Offices Support Local Charities Through Employees Choice Giving Program CoreSource Charlotte Office Walks the Talk in Giving Back to Kids Trustmark Earns Outstanding Corporate Partner Award from United Way ELT s Day of Caring Brightens Preschoolers Learning Environment TRUSTMARK ASSOCIATES GIVE BACK TO OUR COMMUNITIES HealthFitness Minneapolis Stuffs the Bus with School Supplies for Area Children Lake Forest Associates Show They Care with Two Days of Service CoreSource Pie in the Face Fun Raises Money for American Heart Association CoreSource Operations Leaders Volunteer to Fight Weekend Hunger CoreSource Lancaster Associates Pull Plane for Charity HealthFitness Dallas Associates Wrap Up a Festive Holiday for Children in Need 17

18 Trustmark The Enterprise Leadership Team Joseph L. Pray, CLU, ChFC President and Chief Executive Officer John Anderson, FSA, MAAA Executive Vice President, Self-funded Health Benefits, Managed Care and Strategic Growth Ventures Steve Auburn Senior Vice President, General Counsel and Corporate Secretary James L. Coleman Senior Vice President and Chief Enterprise Marketing Officer Nancy Eckrich, FLMI, HIA, ALHC Senior Vice President President CoreSource Phil Goss, CPA Senior Vice President, Chief Financial Officer and Treasurer Jerry Hitpas, CFA, FLMI Senior Vice President, Investments and Risk Management Paul Lotharius Senior Vice President President HealthFitness Sean McManamy Vice President Starmark Alex Moral, FSA, MAAA, FLMA, CEBS Senior Vice President Voluntary Benefit Solutions Kristin Zelkowitz Senior Vice President Human Resources 18

19 2017 Annual Report Directors David D. Weick, Chairman Retired Chief Information Officer Senior Vice President, Shared Services McDonald s Corporation John A. Clymer Retired, Office of Strategy Management Marvin Companies Peter F. Drake, Ph.D. Managing Director Mayflower Partners Kristine K. Malkoski Former President, Global Business and Chief Commercial Officer World Kitchen, LLC. David M. McDonough Retired Chief Executive Officer The Trustmark Companies Carlos M. Minetti President, Consumer Banking Discover Financial Services Joseph L. Pray, CLU, ChFC President and Chief Executive Officer The Trustmark Companies Kevin R. Slawin CPA, Managing Director Black Diamond Advisory Services Lynn Shapiro Snyder Senior Member of the Health Care and Life Sciences Practice Epstein, Becker & Green, P.C. Peter D. Ziegler Former Chairman, President and CEO The Ziegler Companies, Inc. 19

20 Our Mission: Helping people increase wellbeing through better health and greater financial security. B (2-18)