The last five years have been as challenging as perhaps any such period in recent memory. For LBL, it has also represented the company’s greatest period of growth and prosperity.  During this period, our Assets grew from $400 million to $1.1 billion. At the same time, our Capital & Surplus almost tripled from $31 million to $86 million.

LBL’s careful and conservative investment strategies have resulted in steady growth and outstanding returns for policyholders and shareholders.  For 2010, our diversified investment portfolio yielded an overall net return of 5.10%, a noteworthy achievement in the industry.

As of December 31, 2010, we achieved the following statutory results:

Our investment portfolio is comprised of the following major asset classes:

Marketable Securities – 64%.  This class is primarily high quality bonds (average rating A) and properly matched to our liabilities (average life 7.5 years).  The company’s fixed income portfolio has almost no exposure to sub-prime mortgages and collateralized debt obligations (CDO’s), two problem investment classes for other financial institutions.  Throughout 2010 we continued to reduce and diversify investment risks as we further limited our stake in financial holdings and increased our positions in more stable industries such as utilities.  Through the Build America Program we also increased our holdings in highly rated municipal obligations which now represent approximately 13% of our fixed income portfolio.  A chart of our marketable securities asset classes is shown below:

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 use rigorous guidelines to evaluate commercial lending opportunities.

Real Estate – 6%.  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 – 4%.  LBL has traditionally maintained a very small exposure to publically traded common stocks.  This is primarily our equity investments in subsidiary life companies – The Capitol Life and American Benefit Life.

Other Short Term and Cash Equivalents – 1%.  We also have certificates of deposit, commercial paper, 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.