President s Letter 2014 Annual Report

Transcription

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2 President s Letter 2014 Annual Report Dear Policyholders & Friends: On August 11, 1890 Dr. A. O. Faulkner founded Woodmen Accident and Life Company in York, Nebraska, the oldest original company of what has become Assurity Life Insurance Company. Dr. Faulkner saw how illness and accidents ravaged his patients, not only physically but also financially. By recognizing that people could come together to protect themselves from the devastation of disease and accidents, he created an early foundation of what we have become today. In honor of Dr. Faulkner and the rest of our founders, this year we celebrate 125 years! We came up with the somewhat presumptuous tagline for this celebration 125 Years of Amazing. Why 125 Years of Amazing? First, it is amazing for any business to thrive for 125 years. This puts us in very rarefied company. Our corporate headquarters, The Assurity Center, located in the heart of Lincoln, Neb., is the definition of amazing. It s an award-winning LEED Gold certified building whose beautifully designed architecture complements the Lincoln skyline in an amazing way. Learn more by visiting Our company s culture is amazing. We think we have developed one of the best corporate attitudes around. This past fall we again received independent verification when a Gallup Associate Engagement survey ranked our company in the 90th percentile of all companies Gallup surveys worldwide. We also were again named one of Lincoln s Best Places to Work in the large employer category. 2

3 Our industry, like most, is changing very rapidly. To adjust to the new world, I m pleased to report our company is focused on amazing innovation. Our financial strength allows us to continue on our amazing pathway of success. We have some of the strongest capital ratios in our industry, a pristine investment portfolio and consistent operating performance. More information on our financials is provided in the following pages. Our distributors, many of whom have been affiliated with Assurity for years, have been key in building our company s success. We are thankful for their amazing dedication to their clients financial well-being. Our insurance professionals in the home office have been performing in an amazing way for years. We continue to improve the talent we recruit and are building a strong cadre of intellectual capital. Over the past 125 years, there have been an extraordinary number of changes and challenges in the life/health insurance industry. Assurity Life and its predecessor companies have grown and prospered through all these changes. This coming year, we will reflect and celebrate our amazing journey as an organization dedicated to helping people through difficult times. Although we are very proud of our past, we are firmly focused on the future. We are building a forever company which we believe will thrive for another 125 years. I want to thank our distinguished board of directors for their guidance throughout the years. They perpetuate the legacy of great advice and counsel extending back to our founding. I also want to thank the remarkable colleagues I work with every day for their support, hard work, expertise and dedication to our amazing company. Happy CXXV to all, Tom Henning 3

4 Financial Highlights & Strength 2014 Annual Report 2014 STATUTORY FINANCIALS (dollars in thousands) INCOME Net Premiums and Deposit Administration Considerations Net Investment Income Miscellaneous Income Total Income BENEFITS TO POLICYHOLDERS Death Benefits Living Benefits (Except Dividends) Dividends Total Benefits NET GAIN FROM OPERATIONS After Capital Gains and Losses, FIT and Dividends OTHER FINANCIAL HIGHLIGHTS Net Investment Yield Surplus and Asset Valuation Reserve (AVR) Surplus and AVR as Percent of Assets Risk-based Capital (Company Action Level) ASSETS Bonds Stocks Commercial Mortgage Loans Real Estate $192, ,588 22, ,400 56, ,251 17, ,906 19, % 330, % 635% 1,739,015 71, ,113 59,996 $194, ,308 21, ,308 59, ,794 17, ,660 14, % 336, % 742% 1,775,076 55, ,920 67,025 4

5 ASSETS (CONTINUED) Policy Loans Cash Other Total Assets LIABILITIES Insurance Reserves Annuity Reserves Dividends Payable in Next Year Liability for Deposit Funds Other Total Liabilities Surplus Accounts 2014 $113,827 19, ,049 2,463,613 1,493, ,579 17, , ,268 2,163, , $111,175 7, ,857 2,449,282 1,467, ,360 17, , ,799 2,142, ,426 FINANCIAL SUMMARY (dollars in thousands) Total Assets Surplus and Asset Valuation Reserve Net Gain after Capital Gains and Losses, FIT and Dividends Total Premium and Deposits Net Investment Income Benefits and Reserve Increases Dividend Payments Total Liabilities $2,463, ,772 19, , , ,436 17,456 2,163,066 $2,449, ,799 14, , , ,114 17,153 2,142,856 5

6 Outstanding Results Assurity achieved outstanding financial results in 2014 as a springboard to our 125th year of amazing! We ended the year with statutory net income of $19.2 million. This was $4.5 million higher than 2013, a 31% increase. Total revenues in 2014 were $332.4 million. Contributing to revenues were $215.8 million of net premiums and other income and $116.6 million of net investment income on a record level of assets of $2.46 billion. Assurity s face amount of life insurance in force grew by $894 million in 2014 to end the year at just over $15.2 billion. Financial Strength Our record level of total assets of $2.46 billion was a $14.3 million increase over year-end Total surplus, including the asset valuation reserve (AVR), stood at $330.8 million at year-end. Our ratio of surplus and AVR to assets stands at 13.4%, a very strong capital position representing a high margin of safety for our policyholders. The risk-based capital (RBC) ratio is a key benchmark of an insurer s financial strength. Assurity s RBC ratio of 635% significantly exceeds the industry average. In 2014, Assurity repaid a $10 million surplus note. Surplus notes are a form of debt for mutual insurance organizations. However, on statutory financial statements, this debt is included in the capital structure of the company. As a result of this accounting treatment, the repayment of the surplus note lowered our capital and surplus by $10 million. With the repayment of this surplus note, Assurity has no outstanding debt obligation. Commitment to Our Policyholders For 125 years, Assurity has been dedicated to protecting the financial security of our policyholders. We have been able to keep our promises because of our strong financial position and the commitment of our associates to our mission of helping people through difficult times. In 2014, Assurity paid $134.7 million in living benefits to our policyholders including $17.5 million in dividends. In addition, we paid $56.2 million in death benefits to beneficiaries. Assurity is committed to honoring our obligations to policyholders now and for the next 125 years. A.M. Best A- (Excellent) Based on Assurity s financial strength, A.M. Best Company, the insurance industry s leading independent evaluator, has rated our company A- (Excellent)* with a stable outlook. This rating is given to companies that, in the opinion of A.M. Best, have an excellent ability to meet their ongoing insurance obligations. 6 *A.M. Best ratings range from A++(Superior) to F (in Liquidation).

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8 Bonds % Mortgage Loans % Policy Loans - 4.8% Equities - 3.0% Real Estate - 2.5% Other Assets - 2.3% Cash & Short-Term Investments - 1.0% DISTRIBUTION OF INVESTED ASSETS ( ) To ensure that the company will be able to meet its financial obligations over the long term, Assurity has remained steadfast in its commitment to a conservative, disciplined investment strategy emphasizing quality at every turn. This approach has resulted in a diversified portfolio of carefully selected investments offering attractive risk-adjusted returns. Assurity maintains its policy of avoiding speculative investments. The majority of our portfolio is comprised of corporate bonds (73.2%), while the other major asset class, commercial mortgage loans, accounts for 13.1%. The remaining 13.7% includes policy loans, equities, real estate, cash and miscellaneous investments. 8

9 Our large bond portfolio reflects our emphasis on high-quality investments. At year-end 2014, investment-grade bonds accounted for 98.5% of our total bond holdings, while below-investment-grade holdings represented only 1.5%, compared to the September 30, 2014 industry average of 6.0%. Assurity s bond and mortgage loan portfolios have provided strong and stable income, while our losses have been minimal. Our search for quality investments influences which countries we invest in, as well as which industries and property types we choose and which individual credits we hold. We maintain strict limits on industry exposures, property types and geographic locations, as well as individual credits, loan-to-value ratios and borrower quality. NAIC % NAIC % NAIC-3-1.3% NAIC-4, 5 & 6-0.2% BOND PORTFOLIO RATINGS ( ) 9

10 BOARD OF DIRECTORS 2014 Annual Report Thomas E. Henning, CLU, ChFC, CFA Chairman, President, CEO Assurity Life Insurance Company Marc E. LeBaron Chairman, CEO Lincoln Industries William R. Cintani President, CEO Mapes Industries James E. McClurg, PhD President Technical Development Resources Company Steven D. Erwin President, Nebraska/Western Iowa U.S. Bank National Association Angela L. Muhleisen President, CEO Union Bank & Trust Company Kathleen A. Farrell, PhD Chair of the Finance Department College of Business Administration University of Nebraska Paul M. Schudel Partner Woods & Aitken LLP Caren L. Hamilton Auto Dealership Executive Bellevue and Kearney, Nebraska Lyn Wallin Ziegenbein Former Executive Director Peter Kiewit Foundation Omaha, Nebraska Frank H. Hilsabeck Retired Executive Vice President Windstream Communications 10

11 MANAGEMENT TEAM 2014 Annual Report Chief Executive Officer Thomas E. Henning, CLU, ChFC, CFA Chairman, President and CEO Senior Vice Presidents Susan L. Keisler-Munro, FSA, MAAA Senior Vice President, Chief of Operations Todd W. Reimers, CLU, LLIF Senior Vice President, Chief Marketing Officer David T. Wallman, FSA, MAAA, CLU, FLMI Senior Vice President, Chief Actuary Vice Presidents Chad M. Bodner, RHU Vice President, Worksite Sales Marvin P. Ehly, FSA, MAAA Vice President, Chief Financial Officer and Treasurer Patrick J. Kenney, CLU, ChFC Vice President, Regional Sales Manager William R. Schmeeckle Vice President, Chief Investment Officer Nick Jasa Vice President, Individual Sales Carol S. Watson, J.D., CLU, FLMI Vice President, General Counsel and Secretary Senior Directors Kevin G. Faltin, CPA Senior Director and Controller Kevin W. Hammond, CLU, FLMI Senior Director, Investments Steven H. Hill Senior Director, Real Estate Lending and Investments Eric L. Otterstein Senior Director, Information Technology Keith K. Spilker, FSA, MAAA, CLU, ChFC Senior Director, Corporate Actuarial Victor D. Weber, CFA, ChFC Senior Director, Investments Directors Susan Becker, PHR, FLMI Director, Human Resources Tara D. Benson, FSA, MAAA Associate Actuary Eunice J. Cramer, FLMI, ACS Director, Client Services Patricia J. Criger, ACS, UND Director, New Business Services Jason L. Damme, FSA, MAAA Associate Actuary Michael J. Harshman, ASA Director, Product Development and Reporting Timothy S. Janousek Director, Network Operations Ann E. Johnson, UND Director, Employer-Sponsored Services Samuel E. Kruse, ALHC, FLMI, ACS Chief Investigator, Claims Management Mitch K. Lee, CPA, CIA Director, Internal Audit Mary L. Lenners, FLMI Director, Claims Management Susan M. Otterstein, FLMI Director, Project Management Bruce K. Scheiber, FLMI, ACS Director, Underwriting Services John A. Sharp, J.D. Director, Deputy General Counsel Kenneth J. Smith, CLU Director, Health Product Sales Kirk J. Spellman, FLMI, ACS Director, Marketing Services 11

12 THE ASSURITY CENTER - LINCOLN, NE