Charting Your Future: THE RIGHT CHOICE Annual Report

Transcription

1 Charting Your Future: THE RIGHT CHOICE 2009 Annual Report

2 No matter where you want to go in life... No matter how you choose to do it... WE will help you get there.

3 4 From the President & CEO Mutual Trust Financial Group 6 The Right Choice Charting Your Future: THE RIGHT CHOICE Consolidated Balance Sheets Financial Achievements 17 The Three-Company Advantage Audit Information Board of Directors Senior Officers & Officers Regional Sales Offices 22 Product Portfolio

4 FROM THE PRESIDENT & CEO Dear Policyholder, As a Mutual Trust Financial Group policyholder, you have taken an important step in providing for your family s financial security. Owning a life insurance and/ or annuity policy issued by our flagship organization, MTL Insurance Company, means that you have taken a long-term view of you and your family s financial needs. Mutual Trust is a mutual organization with obligations that can extend for several decades, and we have been thinking long-term for the past 105 years. By maintaining a long-term focus, we re able to remain true to the fundamental principles that have been the foundation of our development into a financially strong organization. By employing comprehensive risk management principles, we maintain a strong awareness of the risks we assume as an insurance company, and we support our obligations with a high quality investment portfolio that provides competitive yields and substantial liquidity that enables us to safely meet our cash flow needs Results With all the challenges faced by the financial services industry in 2009, I am pleased to report that we ended the year with a stronger balance sheet than when we started. Our Statutory Total Adjusted Capital & Surplus, which is how our regulators determine financial strength, increased 4.5% from $104.1 million to $108.8 million, which is over 4.7 times the amount regulators deem to be sufficient. This increase was due solely to our normal business operations as we neither requested nor received Federal government support. This achievement is significant, as it demonstrates the resilience of our product and investment strategies during difficult economic times. We were not immune, however, to the economic environment that existed during Mutual Trust, along with the rest of the life insurance industry, felt the effects of the recession and high unemployment in two ways. First, sales were down as consumers held back on new purchases in response to the uncertain economy our first year sales for all products were down 11% from 2008, from $50.0 million in new premium to $44.7 million. Second, benefits to policyholders from our life insurance contracts increased by 14% ($13 million) in 2009, as policyholders took advantage of their cash values in order to meet more immediate financial needs. Of the approximately $107 million in cash disbursements to life insurance policyholders and their beneficiaries in 2009, death benefits accounted for only about 16% of the total. The remainder was in the form of policy loans, cash value withdrawals, policyholder dividends, and other liv- 4 Mutual Trust Financial Group Annual Report 2009

5 ing benefits. Through effective cash management, we were able to respond promptly to our customers requests while maintaining a strong net positive cash flow throughout the year. Despite the reduction in sales and the increase in cash disbursements, Mutual Trust continued to grow. Our total amount of life insurance in force increased by almost 4% to $10.6 billion; total premiums increased 5% on the growth in renewal premiums; total revenue (excluding capital gains) increased 7%; and general expenses increased by less than 2% Outlook Our strategy for future growth remains unchanged. We proudly identify MTL as The Whole Life Company, and the unique characteristics and flexibility of whole life products will continue to form the basic core of our product portfolio. We approach the remainder of 2010 with guarded optimism. An improving economy is certainly a positive sign, but we remain vigilant to possible setbacks as the financial issues of the past two years continue to unwind. As a policyholder, you have shown the resolve and discipline to protect your family and enhance your overall financial security. It is with this same resolve and discipline that we strive to maintain a financially strong mutual organization for the benefit of our policyholders an organization that stresses the portance of long-term viabilimity an organization whose products include guarantees that provide steady growth in value an organization, in short, that is the right choice to provide you with some financial stability in an increasingly volatile world. As always, I extend my thanks to our Board of Directors for their guidance and support, our distribution partners for their dedication and professionalism, our employees for their focus on meeting the needs of our customers, and to you, our policyholders, for giving us the opportunity to serve your needs and earn your trust. Stephen M. Batza FSA, MAAA, CLU, ChFC President & Chief Executive Officer Charting Your Future The Right Choice 5

6 Mutual Trust Financial Group is THE RIGHT CHOICE Choices are the hinges of destiny, proclaimed Greek philosopher Pythagoras in the 6th century B.C. While these words still ring true, making decisions that affect the future can be challenging, especially in today s economic environment. For more than 100 years, Mutual Trust Financial Group, and its flagship company MTL Insurance Company, have been the right choice for anyone who wants to build a financially secure future. 6 Mutual Trust Financial Group Annual Report 2009

7 HERE ARE REASONS WHY THIS IS TRUE... Policyholders Come First As a mutual company, our first priority is fiscal responsibility to you, our policyholders. We are not publicly held and do not have shareholders, so instead of making financial decisions that produce short-term gains to satisfy them, we can make decisions that position us for long-term growth and financial stability so we can keep the promises we make to you, our policyholders. The financial achievements detailed in this annual report are testament to Mutual Trust s financial strength and ongoing stability, even during very difficult economic times. As a mutual company, owners of MTL s participating, whole life products also enjoy a portion of MTL s earnings through dividend distributions. A policy dividend is a share of our earnings after we have set aside the funds required to cover our contractual obligations and operating, contingency and business expenses. Although dividends are not guaranteed or required by law, paying dividends is a way for us to share a part of our favorable results with you. MTL has a distinguished record of paying dividends, too more than 102 consecutive years and counting. In November 2009, MTL s Board of Directors approved paying policyholders a projected total of $17.3 million in dividends in This is the second highest dividend payout in the company s history. Products to Fit your Needs People have different needs and goals. Some may want to save for retirement, or pass on a legacy to their children or grandchildren. Others may have more immediate needs, like paying for college, or having money available for emergencies. Some may need coverage for a finite period, while others need it indefinitely. MTL addresses these differences by designing a variety of products, riders and benefits. By working with one of our knowledgeable insurance advisors, you can customize MTL products with riders and benefits to create polices that satisfy your specific needs whether they re short-term, like college funding, or long-term, like saving for retirement. Charting Your Future The Right Choice 7

8 Participating Whole Life Insurance While MTL Insurance Company offers term and universal life insurance and annuities, it is best known as: The Whole Life Company because of its long history and expertise in developing participating whole life insurance products. Covenant II, our premier participating whole life policy, provides guaranteed fast-growing cash values, as well as a guaranteed death benefit, guaranteed level premiums, and nonguaranteed dividends. When the cash values in your Covenant II policy reach sufficient levels, you can access this money through loans and withdrawals of dividends, often without incurring current taxation. Whole life s ability to provide available cash, as you need it, is one of the greatest attributes of a permanent life insurance plan. Because Covenant II s cash values grow quickly, the policy is appropriate for a variety of applications. You can maximize the cash value accumulation in your Covenant II policy while maintaining its tax-favored status by adding MTL s unique Maximum Accumulation Dividend option and its Annual Premium Paid-Up Additional Insurance Rider. If lower premiums are more important than cash values, then MTL s Excalibur participating whole life policy may be a good choice for you. Blended Insurance Products, A Cost-Effective Alternative to Whole Life Blended insurance products combine the asset protection benefits of whole life insurance with the lower cost advantages of term insurance. MTL s Economax, which is 70% term and 30% whole life insurance, offers cost-effective level premiums. It s a useful alternative for anyone who currently owns term insurance and wants to begin to build cash values with whole life insurance. Single Premium Whole Life: Retaining Control While Establishing a Legacy MTL s Legacy One is a single premium whole life policy that can help you increase the amount of money you leave your heirs while enabling you to maintain control of your money during your lifetime. With a single, one-time premium, you 8 Mutual Trust Financial Group Annual Report 2009

9 can accumulate cash on a tax-deferred basis, as well as give your family the protection of a guaranteed, income tax free death benefit. With ongoing uncertainty in the financial markets, more and more people are looking for products with guarantees, liquidity, access and control. MTL products can provide you with this and more. By selecting Mutual Trust, you have chosen a path that can help lead you to financial security. We take pride in being: The Right Choice. For more information on how MTL products can help you continue to satisfy your changing needs and goals, please contact your MTL insurance advisor or call the home office at (800) He who chooses the beginning of a road, also chooses its destination. John Altgeld Charting Your Future The Right Choice 9

10 MUTUAL TRUST HOLDING COMPANIES & SUBSIDIARIES Consolidated Balance Sheets as of December 31 (in thousands) Assets Bonds and Short Term Investments $761,000 $882,113 Common Stocks 11,805 15,715 Mortgage Loans on Real Estate 254, ,972 Policy Loans 140, ,464 Other Invested Assets 2,439 2,655 Total Invested Assets $1,169,842 $1,326,919 Deferred Policy Acquisition Costs 176, ,091 Reinsurance Recoverables 38,373 36,539 Other Assets 41,120 43,117 Total Assets $1,425,782 $1,551,666 Liabilities & Policyholder Surplus Future Policy Benefits and Claims $1,173,494 $1,238,284 Other General Account Liabilities 89, ,763 Total Liabilities $1,262,788 $1,340,047 Policyholder Surplus Unassigned Policyholder Surplus $199,978 $213,648 Accumulated Other Comprehensive Income (36,984) (2,029) Total Policyholder Surplus $162,994 $211,619 Total Liabilities and Policyholder Surplus $1,425,782 $1,551, Mutual Trust Financial Group Annual Report 2009

11 Consolidated Statements of Income for the Year Ended December 31 (in thousands) Revenues Premiums $131,445 $138,244 Net Investment Income 71,083 73,928 Net Realized Gains on Investments (10,823) 5,164 Other Income 5,519 10,520 Total Revenues $197,224 $227,856 Benefits & Expenses Policyholder Benefits $144,210 $145,388 Commissions and Expenses 42,439 51,309 Total Benefits and Expenses $186,649 $196,697 Gain Before Dividends & Taxes $10,575 $31,159 Policyholder Dividends 16,703 17,030 Gain Before Taxes $(6,128) $14,129 Federal Income Tax Expense 1, Net Income $(7,205) $13,670 GAAP Accounting: These summary financial statements are prepared in accordance with Generally Accepted Accounting Principles (GAAP). For audit information, see p. 18. Charting Your Future The Right Choice 11

12 FINANCIAL ACHIEVEMENTS Life Insurance Sales (in thousands) Although most insurance companies experienced lower sales in 2009, Mutual Trust s life insurance sales have remained relatively consistent during the last three years, even amidst a recession and increasing unemployment. According to LIMRA International, in 2009, total life sales, as measured by annualized premium, decreased by 16% for the industry. Single Premiums Annual Premiums 12 Mutual Trust Financial Group Annual Report 2009

13 Life Insurance Persistency Rate for Whole and Universal Life Products An important goal for us is customer satisfaction. High persistency rates, we believe, indicate high customer satisfaction. In 2009, the organization experienced a persistency rate of 93.7%. 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 2009 Life Insurers Fact Book, and Mutual Trust s rates of return. Paying competitive policyholder dividends is important to us. Industry Average (Not available for 2009) Mutual Trust Charting Your Future The Right Choice 13

14 Net Income (in thousands) Mutual Trust s very strong financial base provides stability, even during challenging economic conditions. In 2009, net income grew substantially, continuing to augment this strength. 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 Premiums (in thousands) In 2009, total life insurance premiums were up 5% from 2008, despite the economic recession. 14 Mutual Trust Financial Group Annual Report 2009

15 Maybe remove text from inside circle and place outside to reduce size Invested Assets by Categories (Statutory Value Basis) Bond Portfolio Quality Distribution Mutual Trust applies a conservative investment philosophy, reflected in its asset diversification and prudence in individual investment selection, emphasizing credit analysis. Investment Grade Below Investment Grade Mutual Trust invests primarily in investment-grade fixed income securities (bonds). The organization has also 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. Industry average: 91% investment grade Source: American Council of Life Insurance Charting Your Future The Right Choice 15

16 No matter where you are heading in life... Building financial security for your family Funding your children s college education Planning for retirement Leaving a legacy to your loved ones... Mutual Trust can help you get there. 16 Mutual Trust Financial Group Annual Report 2009

17 THE THREE-COMPANY ADVANTAGE Mutual Trust Financial Group is made up of three member companies that work together to provide a full spectrum of quality insurance and investment products. MTL Insurance Company, founded in 1904 and the flagship of the organization, develops, underwrites and services individual life insurance and annuities. Based on the principles of mutuality and policyholder participation, for more than a century it has provided premier life insurance products designed to maintain integrity over time and to give policyholders protection and wealth management while maintaining excellent financial strength. Known as The Whole Life Company, MTL Insurance Company is a leader in participating whole life insurance. MTL Agency, Inc. enables us to offer an extended range of specialty products that are not offered through MTL Insurance Company, such as long-term care and disability income. Established in 1983, MTL Agency, Inc. also serves as a source for hard-to-place, highly rated and impaired risk cases, all offered by carefully selected strategic partners. MTL Equity Products, Inc. is a full-service registered brokerdealer firm. As part of the Mutual Trust Financial Group, it offers a full range of investment products, including stocks, bonds, mutual funds and variable products. MTL Equity Products, Inc. is a member of FINRA and SIPC. Charting Your Future The Right Choice 17

18 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: February 17, 2011 Location: Home office in Oak Brook, Illinois 18 Mutual Trust Financial Group Annual Report 2009

19 BOARD OF DIRECTORS Gary L. Eisenbarth Chairman of the Board Stephen M. Batza, President and Chief Executive Officer Mutual Trust Financial Group Barbara D. Colwell Managing Director The Colwell Group Martha O. Hesse Private Investor, Retired President Hesse Gas Company Matthew A. Howard Retired Senior Vice President Sears Roebuck & Company Daniel P. Kearney Retired President Aetna Life Insurance and Annuity Company Peter I. Mason Partner Freeborn & Peters, LLP. Attorneys at Law Bruce W. Taylor Chairman and Director Cole Taylor Bank John T. Weaver Retired President Howe-Weaver, Inc. Charting Your Future The Right Choice 19

20 SENIOR OFFICERS Stephen M. Batza, FSA, MAAA, CLU, ChFC President and Chief Executive Officer Geri Gaughan, JD Senior Vice President, General Counsel and Secretary G. Edward Hughes, CLU Senior Vice President, Chief Sales & Marketing Officer Alfreda A. Jacob, SPHR Senior Vice President, Organization Development & Human Resources John Rosenkranz, CPA, FLMI Senior Vice President and Chief Financial Officer Narayan Shankar, FSA, MAAA, CFA Senior Vice President and Chief Actuary COMPANY OFFICERS Roger L. Barth, FSA, MAAA Vice President, Product Development Delores J. Biegun, FLMI Vice President, Information Services Margaret M. Culkeen, CFA Vice President and Treasurer Lori Pajeau, CFS, CFE Vice President, MTL Insurance Company and President, MTL Equity Products, Inc. Janis D. Potter, CPA, MBA Vice President, Internal Audit Greg Thompson, CPA, FLMI, CLU Vice President, Financial Reporting 20 Mutual Trust Financial Group Annual Report 2009

21 REGIONAL SALES OFFICES Gene Stewart, CLU Regional Sales Director Southwest Region Carrollton, TX (888) Home Office Mutual Trust Financial Group 1200 Jorie Boulevard Oak Brook, IL (800) = Regional Office Tom O Haver, CLU Regional Sales Director Midwest Region Overland Park, KS (877) Lew Merrow MBA, CLU, ChFC Regional Sales Director Northeast Region Vernon, CT (800) Larry Quinn, CLU, ChFC Regional Sales Director North Central Region Oak Brook, IL (800) , ext John Uttz, CLU, ChFC, FLMI Regional Sales Director Western Region Santa Ana, CA (866) Terry Cook, CLU, ChFC Regional Sales Director Southeast Region Charlotte, NC (800) Charting Your Future The Right Choice 21

22 PRODUCT PORTFOLIO Whole Life (WL) Insurance Covenant II our premier product, which offers a world of flexibility and options to help you attain your financial goals Economax a cost-saving, blended insurance product composed of WL and term Excalibur a participating WL insurance product that leverages existing assets and maximizes the transfer of personal and business wealth Legacy One a single premium WL insurance product that maximizes the amount of money you leave your heirs while maintaining control of your money during your lifetime Annuities IntegrityPlus Series While earning a guaranteed rate of interest for a specific period of time, other advantages of these fixed annuities include tax-deferred growth, guarantees on both interest and principal, and the option of a stream of income payments that you cannot outlive IntegrityPlus Flex I & II IntegrityPlus Single III & IV Single Premium Immediate Annuity A safe, guaranteed income stream that cannot be outlived when you choose one of the life income options Universal Life (UL) Insurance Vanguard Silver a unique UL product that offers innovative design, ongoing flexibility and built-in safeguards Term Insurance SelecTerm ( Year) products that are designed to provide value today, as well as in the future, with level premium guarantees, flexible benefit options and conversion options 22 Mutual Trust Financial Group Annual Report 2009

23 Life is full of choices and with them come compromises, sacrifices and joy. And we will be with you EVERY STEP of the way......all the way.

24 Mutual Trust Financial Group provides a full spectrum of quality insurance and investment products through its member companies: MTL Insurance Company MTL Equity Products, Inc. MTL Agency, Inc. Established in 1904 and the flagship of the group, MTL Insurance Company is known as The Whole Life Company because of its leadership in participating whole life. Form No (5/10)