Mutual of Omaha 2014 Financial Review. Laura Fender Senior Vice President, Enterprise Reporting and Analysis

Transcription

1 Mutual of Omaha 2014 Financial Review Laura Fender Senior Vice President, Enterprise Reporting and Analysis April 10, 2015

2 Forward-Looking Statements This document contains certain forward-looking statements about Mutual of Omaha Insurance Company and certain of its subsidiaries (collectively, the Company ). Forward-looking statements include, but are not limited to, statements that represent the Company s beliefs concerning future operations, strategies, financial results or other developments with respect to the Company, and contain words and phrases such as may, expects, should or similar expressions in this document. Forward-looking statements are not guarantees of future performance, involve risks and uncertainties, and actual results may differ materially from those in any forwardlooking statement as a result of various factors. The following uncertainties, among others, may have such an effect: continued difficult conditions in the global capital markets and the economy; sustained periods of low interest rates or a sudden spike in interest rates; declining or volatile residential mortgage-backed securities values due to prepayment risks; adverse regulatory developments, including those resulting from the Dodd-Frank Wall Street Reform and Consumer Protection Act, limitations on premium levels, mandated benefits, increases in minimum capital and reserves, and other financial viability requirements; adverse credit market conditions; significant market valuation fluctuations of certain of the Company s investments that are relatively illiquid; difficulties as to valuation of securities in the Company s investment portfolio; exposure to below investment grade bonds; defaults on mortgage loans held by the Company; exposure to certain specific asset classes, including commercial and residential mortgage-backed securities, real estate and alternative investments; declines in the performance or valuation of real estate properties owned by the Company; heightened competition in the insurance or banking business, including, specifically, the intensification of price competition, the entry of new competitors and the development of new products by new and existing competitors; downgrades or potential downgrades in the Company s ratings; the sensitivity of the amount of statutory capital the Company must hold to factors outside the Company s control; subjectivity in determining the amount of allowances and impairments taken on certain of the Company s investments; changes in the federal Medicare program and other adverse regulatory developments, including those resulting from the recently enacted Patient Protection and Affordable Care Act, that could adversely affect the demand for the Company s Medicare supplement insurance policies or the Company s competitive position in the Medicare supplement marketplace; impact on the Company s reported statutory surplus or net income that could result from the adoption of certain accounting standards issued by the National Association of Insurance Commissioners or pursuant to applicable laws and regulations; impact on the Company s reported GAAP equity or net income that could result from the adoption of the requirements of certain accounting pronouncements issued by authoritative bodies; tax law changes impacting the tax treatment of insurance and investment products; repeal of the federal estate tax; uncertainty as to the price and availability of reinsurance on business the Company currently writes or intends to write in the future; adequacy and recoverability of reinsurance that the Company has purchased; the failure of the Company s distribution channels to obtain new customers or retain existing customers; deviations from assumptions regarding persistency, mortality, or morbidity; losses due to the financial impairment of, or defaults by, others, including bank borrowers, issuers of investment securities or reinsurance and derivative instrument counterparties; deviations from assumptions regarding future mortality, morbidity and interest rates used in calculating reserve amounts and pricing our products; requirements to post collateral or make payments related to declines in market value of specified assets, and possible declines in the value of securities available for posting as collateral; unanticipated losses resulting from the Company s stable value wrap program; accelerated amortization of deferred acquisition costs; adverse results relating to the mixed-use real estate development adjacent to the Company s home office property; regulatory restrictions, financial viability and other risks in connection with the Company s ownership of Mutual of Omaha Bank; liquidity and other risks in connection with the Company s securities lending program; impact of international tension between the United States and other nations, terrorist attacks, and ongoing military and other actions, or a large scale pandemic; changes in tax laws and the interpretation thereof; litigation and regulatory investigations; and a computer system failure or security breach. Consequently, such forward-looking statements should be regarded solely as the Company s current plans, estimates and beliefs. The Company does not intend to undertake, and does not undertake, any obligation to update any forward-looking statements to reflect future events or circumstances after the date of such statements. All subsequent written and oral forward-looking information attributable to the Company or any person acting on its behalf is expressly qualified in its entirety by the cautionary statements contained or referred to in this section. The information contained in this document is accurate only as of the date of this document regardless of the time of delivery. 2

3 Organization and Ratings Mutual of Omaha Insurance Company (Parent) United of Omaha Life Insurance Company Companion Life Insurance Company United World Life Insurance Company Omaha Financial i Other Small Holdings, Inc. Affiliates Financial Strength Ratings A.M. Best A+ (Superior) Moody s A1 (Good) Standard & Poor s A+ (Strong) Short-term Ratings Moody s P-1 (Prime-1, Superior) Standard & Poor s A-1+ (Extremely Strong) Three Primary Pi Strategic t Business Units (SBUs) Individual Financial Services (IFS) Group Benefit Services (GBS) Bank 3

4 GAAP Consolidated Assets and Equity For the Years Ended December 31, In Millions of Dollars 35,000 30,000 25,000 26,907 Assets 30,908 29,198 32,234 34,481 5,000 4,000 4,273 4,359 Equity 4,602 4,734 5,140 20,000 3,000 15,000 2,000 10,000 5,000 1,000 4

5 GAAP Results For the Years Ended December 31, In Millions of Dollars Operating Income 400 Net Income Operating income excludes $28.6 million and $4.0 million income from the stop loss sale in 2010 and 2011, respectively has not been restated to reflect the impact of adopting EITF 09G. 5

6 Consolidated GAAP Revenue For the Year Ended December 31, 2014 GBS Bank Corporate Retirement 4% 1% Plans GBS Benefit 8% Solutions 14% IFS Med supp 40% IFS Other 4% IFS Annuity 3% IFS Life 21% IFS LTC 5% 2014 Revenues $6.8 Billion 6

7 Statutory Operating Results For the Years Ended December 31, In Millions of Dollars (50) (100) (150) (22) (138) 7

8 Statutory Surplus and Consolidated Risk-Based Capital For the Years Ended December 31, , % (In Million ns of Dollars s) 2,900 2,700 2,500 2,300 2,100 1,900 1,700 2, % 2,315 2, % 450% 2,796 2, % 484% 900% 800% 700% 600% 500% 400% 300% 200% 100% ercent) (P 1,500 0% Surplus Consolidated RBC 8

9 United of Omaha Statutory Results 9

10 United of Omaha Statutory Operating Results For the Years Ended d December 31, (In Millions of Dollars) Premiums and Annuity Considerations $2,713 $3,428 $3,466 $3,167 Net Investment Income and IMR Amortization Other Income Total Income 3,574 4,236 4,242 3,924 Commissions, Operating Expenses and Insurance Taxes 3,389 4,149 4,266 4,121 Net Gain (Loss) Before Federal Income Taxes (24) (197) Federal Income Tax (Benefit) 2 1 (3) (1) Net Gain (Loss) From Operations (21) (196) Net Realized Capital Losses (19) (16) (10) (11) Net Gain (Loss) $ 164 $ 70 $ (31) $ (207) 10

11 United of Omaha Statutory Operating Results For the Years Ended December 31, (In Millions of Dollars) Health $ 115 $ 61 $ (57) $ (197) Life (16) (44) (12) (27) Annuity Other 24 (5) (22) (39) Net income (loss) before federal income taxes $ 185 $ 87 $ (24) $ (197) 11

12 United of Omaha Statutory Premium For the Years Ended d of December 31, ,000 3,500 3,167 3,466 3,428 (In Millio ons of Dollars) 3,000 2,500 2,000 2,448 2,713 Medicare supplement sales began in 2008, new business is reinsured with Mutual beginning in 2013 In 2014 premiums of $840M were 1,500 ceded to a captive reinsurance subsidiary under a 3X/A3X reserve 1,000 financing i transactionti

13 United of Omaha Statutory Operating Results For the Years Ended December 31, (In Millions of Dollars) 20,000 Assets 1,500 Surplus 17,500 15,000 12,500 15,120 15,738 16, ,122 18,787 1,250 1,000 1,210 1,036 1,027 1,227 1,423 10, , ,000 2,

14 United of Omaha Statutory Surplus and Risk-Based Capital For the Years Ended December 31, ons of Dolla ars) (In Milli 1,600 1,400 1,200 1, , % 1,036 1, % 333% 1, % 1, % 700% 600% 500% 400% 300% 200% % - 0% Surplus RBC 14

15 A3X 3X Financing Overview 2014 Deal April 1, 2014 Agreement amended to cede additional Term life insurance business and Universal Life business. Increased United s surplus $117M. Increased United s RBC Ratio by 34 bps to 420% and increased the Consolidated RBC Ratio by 19 bps to 509% at 4/1/2014 Impact / Result Inception to date surplus impact is $275M 15

16 Companion 16

17 Companion Statutory Operating Results, Surplus & RBC For the Years Ending December 31, (In Millions of Dollars) Operating Results Surplus and Risk Based Capital $10 $5 $0 ($5) (3) $100 $90 $80 $70 $60 $50 $40 $30 $20 $10 $0 522% 485% 367% 301% 244% % 500% 400% 300% 200% 100% 0% Surplus RBC 17