In late 2012, the company completed the largest financial transaction in its 54 year history: A reinsurance transaction involving almost a half billion dollars of in-force annuities. The net effects of this important transaction are that: (1) Capital and Surplus increased to more than $160 million, up almost 300% during the past 5 years; (2) Net Income (after taxes and realized capital gains or losses) was over $15 million; and (3) Total Assets adjusted to $957 million.
Sales Growth - Company sales continue to be exceptionally strong. In 2012, new annuity premium exceeded $250 million and life premiums grew to more than $16 million. The Company now has almost $1 billion in traditional life insurance business in force. The additional capital and surplus as a result of the reinsurance transaction provides the valuable resources needed to continue our planned growth.
Risk Reduction – Our enterprise risk management focuses effort on reducing potential financial risks. Reinsurance is a tool commonly used to effectively spread risks to other insurance carriers.
Strong Financial Performance – Increased capital and surplus and significant net income from operations and investments both lead to increased company value. For 2012, our diversified investment portfolio yielded an overall net return of 5.58% on total assets, a noteworthy achievement in the industry. Shareholders, employees, agents, policyholders, regulators and rating agencies are all pleased to see solid financial results for the Company.
We forecast continued growth in the years ahead because our life and annuity products offer safety, competitive yields and tax advantages . . . all important benefits that consumers seek, particularly in today’s volatile and challenging economic climate.
Liberty Bankers Life and its wholly owned subsidiaries, The Capitol Life and American Benefit Life, operate in 46 states. Following the reinsurance transaction discussed above, total assets of the LBL group of insurance companies now exceed $1.3 billion. With over 9,000 independent producing agents and marketing organizations representing us, we look forward to continued growth and success.
As of December 31, 2012, Liberty Bankers Life alone achieved the following statutory results:
| Total Assets: |
$ 957,440,106 |
| Capital & Surplus: |
$ 160,470,237 |
| Net Gain from Operations: |
$ 15,151,143 |
Our investment portfolio is comprised of the following major asset classes:
Marketable Securities – 44%. This asset class is made up primarily of high-quality fixed income securities and preferred stock (average S&P rating A) with a focus on matching our asset maturities with policy holder benefits. In today’s stubbornly low interest rate environment, we continue to pay special attention to the portfolio’s asset/liability matching. Further, we have worked diligently to reduce our exposure to “below investment grade” holdings, and it is currently at its lowest levels since the financial crisis. Throughout 2012 we continued to diversify our risk exposures by varying industry groups and adding other international securities.
Commercial and Real Estate Mortgage Loans – 25%. One of our competitive advantages is our ability to generate high-quality commercial loans. Although this asset class comprises only a small portion of our total portfolio, it significantly enhances total investment return for policyholders and shareholders. These loans generally have maturities of less than two years and provide risk adjusted returns that are far superior to investments with comparable safety. LBL’s staff of knowledgeable mortgage loan underwriters uses rigorous guidelines to evaluate commercial lending opportunities.
Real Estate – 10%. LBL purchases real estate in select markets where we are able to identify an economic advantage. These properties are actively managed, leased and marketed for sale. The expertise of our staff enables us to efficiently acquire and sell properties, resulting in excellent returns for policyholders and shareholders.
Common Stocks – 11%. This class consists of equity investments in our subsidiary life companies and American Reserve Service Corporation, which holds as its principal asset a 412,205 sq. ft. Class A office building in Dallas, Texas with tenants such as Coca-Cola, Coca-Cola Enterprises, Remington Hotel Corporation, Town North Bank, Copart and Charles Schwab. Our exposure to publicly traded equities is minimal.
Other Short Term and Cash Equivalents – 10%. The majority of this asset class is liquid funds, but also includes contract loans and other short term investments. We also hold certificates of deposit, reinsurance income due and other miscellaneous assets. Given the extreme volatility of today’s financial markets, we are holding enough cash to meet unexpected needs.
