N.C. Mutual Reports $4.45M Loss In 2015
March 24--DURHAM -- N.C. Mutual Life Insurance Company's net loss of $4.45 million in 2015 is a result of the company's positioning to ready itself for the future, newly appointed company president and CEO Michael Lawrence told policyholders at NC Mutual's annual meeting Wednesday.
The company posted the loss after returning to profitability in 2014 from a loss of nearly $2.36 million in 2013.
N.C. Mutual entered into a reinsurance treaty last year to cede the majority of its life insurance policies to another organization, which Lawrence said allows for the company leverage some of its strengths, such as its existing relationships with customers and its technology, without assuming the policy risk.
"When we were writing and manufacturing our own products, that started to create a significant strain on the company and surplus," he said. "One of the things we've decided to do... (is) take the risk that we've already put on the books from all the insurance we've written over the many years, we've partnered with a third party to take the risk for us."
Compared to 2014, N.C. Mutual's premiums decreased by $9 million and benefits decreased by $13 million.
"When we've had claims that were presented, the third party took that extra liability," he said. "What that translated into, under the commission and expense allowance, is really them paying us to help administer and stay in contact with our customers, who we've developed relationships with over the years. That's a good position for us to stay connected to the community and we feel good about that decision."
N.C. Mutual's expenses also increased by about $2 million, and Lawrence said that the company has plans that "will take that number down significantly" in the future.
"The loss that you're seeing has to do with positioning," he said. "Trying to get ourselves ready for the next move."
The company also terminated a segment of its group business, which contributed to 2015's loss.
Lawrence said that the the company expects that the impact from that termination will be minimized going forward.
Reporting 2014's $358,000 profit last March, former president James Speed told policyholders the company was back on track to remain profitable after its 2013 loss. N.C. Mutual has posted a profit in four of the last six years.
In May, rating agency A.M. Best upgraded the financial strength rating to B (Fair) from C+ (Marginal) for N.C. Mutual and revised the outlook rating to stable from negative, largely due to the reinsurance agreement with Southland National.
"On a risk-adjusted capital basis, the company's capitalization ratios had declined sharply prior to 2014, but following the reported boost in capital, and the potential for a more predictable earnings stream from fee-based business, A.M. Best expects capitalization ratios to stabilize," A.M. Best officials wrote in a statement. " In addition to the reinsurance transaction, the company has implemented expense-reducing initiatives over the past several years that should benefit earnings going forward."
Lawrence said N.C. Mutual plans to roll out its personal property and casualty line in the second quarter of this year, first in Durham and then throughout the state.
"As we perfect our process, if you will, and make sure we are able to deliver the quality our customers deserve, then we'll start to branch out and create other opportunities," he said.
Lawrence assumed the role president of the 117-year-old company in January, after Speed announced he would be retiring after leading the company since 2003.
"117 years," Lawrence said at the meeting. "No pressure, right?"
___
(c)2016 The Herald-Sun (Durham, N.C.)
Visit The Herald-Sun (Durham, N.C.) at www.heraldsun.com
Distributed by Tribune Content Agency, LLC.
Advisor News
Annuity News
Health/Employee Benefits News
Life Insurance News