upholding your trust - mutualtrust.com interest rate environment. ... reflects the value consumers...
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U P H O L D I N G Y O U R T R U S T • 2 0 1 4 A N N U A L R E P O R T
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 invest-ment portfolio that helps us meet that challenge during this prolonged low interest rate environment. You trust us to keep the long-term finan-cial 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 responsi-bility is to our policyholders who have placed their trust in us.
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
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 2015.
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.
MESSAGE FROM THE PRESIDENT & CEO
Stephen M. BatzaFSA, MAAA, CLU, ChFCPresident & Chief Executive Officer
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U P H O L D I N G Y O U R T R U S T • 2 0 1 4 A N N U A L R E P O R T
Revenues 2013 2014 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.
Consolidated Statements of Income for the Year Ended December 31, 2014 (in thousands)
MUTUAL TRUST HOLDING COMPANIES & SUBSIDIARIES:Consolidated Balance Sheets as of December 31, 2014 (in thousands)
Assets 2013 2014 Bonds and Short Term Investments $1,380,973 $1,509,808 Common Stocks 8,424 9,802 Mortgage Loans on Real Estate 158,423 127,265 Policy Loans 252,623 263,255 Other Invested Assets 25,501 24,694
Total Invested Assets $1,825,944 $1,934,824 Deferred Policy Acquisition Costs 157,735 120,570 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 143,286 154,926
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
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U P H O L D I N G Y O U R T R U S T • 2 0 1 4 A N N U A L R E P O R T
FINANCIAL ACHIEVEMENTS
Life Insurance Sales (in thousands) Mutual Trust’s life insurance sales have remained strong during the last three years.
Life Insurance Persistency Rate for Life ProductsAn 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%.
Average Gross Rate of Return: Life Insurance Industry vs. Mutual TrustA 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.
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(Page 1 of 2)
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U P H O L D I N G Y O U R T R U S T • 2 0 1 4 A N N U A L R E P O R T
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.
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.
Mutual Trust invests primarily in 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 PortfolioQuality Distribution
Investment Grade
Below Investment Grade
Industry average: 94% investment gradeSource: American Council of Life Insurance
Cash/Short-Term Investments
1.2%
3%
Other2.2%Policy Loans
14.3%
CommercialMortgage Loans
7.0%
FINANCIAL ACHIEVEMENTS (Page 2 of 2)
(Back to page 1 of Financials)
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Bonds 75.3%
97%
U P H O L D I N G Y O U R T R U S T • 2 0 1 4 A N N U A L R E P O R T
Audit InformationMutual 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’ MeetingThe next Policyholders’ Meeting will be held on February 16, 2016, in our home office in Oak Brook, Illinois.
Board of Directors
Stephen M. BatzaPresident & Chief Executive OfficerMutual Trust Financial Group
Barbara D. ColwellManaging DirectorThe Colwell Group
Gary L. EisenbarthChairman of the Board
Martha O. HessePrivate Investor, Retired PresidentHesse Gas Company
Peter I. MasonPartnerFreeborn & Peters, LLP,Attorneys at Law
Daniel P. MulheranRetired PresidentIndividual Life Distribution, ING U.S., LLC
Thomas J. SkellyRetired Managing PartnerAccenture
Bruce W. TaylorChairman and DirectorCole Taylor Bank
Gary A. ThalhuberRetired PartnerPricewaterhouse-Coopers, LLP
Senior Officers
Stephen M. Batza,FSA, MAAA, CLU, ChFCPresident & Chief Executive Officer
Geri Gaughan, JDSenior Vice President, General Counseland Secretary
G. Edward Hughes, CLUSenior Vice President, Chief Sales &Marketing Officer
Alfreda A. Jacob, SPHR, HCSSenior Vice President, Organization Development & Human Resources
John Rosenkranz, CPA, FLMISenior Vice President, Chief Financial Officer and Treasurer
Narayan Shankar, FSA, MAAA, CFASenior Vice President, Investments,and Chief Actuary
Company Officers
Roger L. Barth, FSA, MAAAVice President, Product Development
Delores J. Biegun, FLMIVice President, Information Services
Luke CosmeVice President, Distribution
Margaret M. Culkeen, CFAVice President, Investment Operations
Timothy P. Diggs, CPA, CTPVice President, Controller
Rod Gross, CPA, CISAVice President, Internal Audit
Everett Kunzelman, FLMI, ACSVice President,New Business and Executive Underwriter
David McCaugheyVice President, Technical Services
Stacy McWhorterVice President, Customer Service
John Seneczko, JDAssistant Secretary
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U P H O L D I N G Y O U R T R U S T • 2 0 1 4 A N N U A L R E P O R T
Lew Merrow, MBA, CLU, ChFCRegional Vice President Northeast RegionVernon, CT800-486-8887
REGIONAL SALES OFFICES
Larry Quinn, CLU, ChFCRegional Vice President Midwest RegionPalatine, IL 800-323-7320, ext. 5316
Terry Cook, CLU, ChFCRegional Vice PresidentSouth RegionFort Mill, SC 800-846-0234
Home OfficeMutual Trust Financial Group1200 Jorie Boulevard Oak Brook, IL 60523-2269 800 323-7320
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Janice GehrmanRegional Vice President West Region Oak Brook, IL 800-323-7320, ext. 5308