forethought 2012 midyear report - all channels
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7/30/2019 Forethought 2012 Midyear Report - All Channels
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2012 Midyear Report
Forethought Financial Group, Inc.
LETTER FROM THE CHAIRMAN, PRESIDENT and CEO
To: All FFG Shareholders and Stakeholders
The rst hal o 2012 has been a very active time or Forethought as we continue
to expand our capabilities and market reach. I have written in prior letters about
Forethoughts agile approach to the market as we pursue protable, diversied lie and
annuity business. This responsiveness to the market yielded signicant dividends as we
announced the acquisition o the individual annuity new business capabilities rom The
Hartord on April 26. This transaction provides Forethought the opportunity to enter the
variable annuity market, one o the largest product categories in nancial services, with
a proven product, marketing, and sales organization. The acquisition will also expand
Forethoughts distribution reach into the important broker-dealer channel. From a
nancial perspective, the addition o variable annuity products provides Forethought with a source o ee
income and high return products as well as excellent diversication benets to our existing products.
We anticipate closing the transaction in the ourth quarter and expect to be operational in 2013.
In addition, our existing businesses continue to expand in 2012. In act, each o our businessespreneed lie,
annuities, and nal expense liehave achieved signicant sales increases in the rst hal o 2012 compared
to the same period a year ago. Our preneed lie insurance achieved sales gains over prior year as a result o
developing new accounts and improving results with top tier producers, a solid perormance in this relatively
mature market. We continued to expand Forethoughts ootprint in the bank annuity channel ollowing our
2011 launch o SecureFore 7SM and ForecareSM Fixed Annuities. We are currently distributing products through
a network o high quality banks including Huntington, U.S. Bank, BBVA Compass, Regions, and KeyBank. Look
or this list to expand as we move through the balance o the year. For 2012, we project annuities to produce
over $1 billion o new premium, with over $600 million o that coming through the bank annuity channel, an
outstanding result by any measure.
Our senior market-ocused products, unique distribution platorms, and exible in-orce book o business
have enabled us to perorm at a high level despite historically low interest rates and market volatility.
Statutory premium increased 65% to $697 million or the six months ended June 30 and adjusted capital and
surplus totaled $486 million. GAAP operating income per ully diluted share increased 67% to $16.67 or the
six month period and GAAP book value per share ex AOCI, our most relevant measure o shareholder value
as a private company, increased 12% over the last year to $338 per share at June 30.
Outside constituents continue to recognize our success and accomplishments. Moodys and Standard &
Poors ratings services afrmed our investment grade ratings and stable outlook during the rst hal o the
year. In addition, Forethought was once again recognized or the third consecutive year by Wards as one o
the top 50 highest perorming lie-health companies in the nation. We also subscribe to the ALIRT Insurance
Research, which serves a valuable role in providing independent research to the bank and broker-dealer
distribution channels.
We enter the second hal o 2012 with solid momentum generated rom a strong rst hal perormance.
Our management team is energized by the prospects or our existing businesses and the new opportunities
created by our recently announced acquisition. We are building a company that has the ability to generate
solid new business growth and protability gains in all market conditions and through changing customer
preerences. I have never been more enthusiastic about the prospects or Forethought.
Thank you or your continued support as we build a company in which we can all be proud.Sincerely,
John A. GraChairman, President and CEO
2012 Forethough0812
A9535-02
INVESTMENT
OVERVIEW
RESERVES BYPRODUCT TYPE
As o 6/30/2012
High Yield and other 5
Commercial Mortgages
Annuity $2,227,20
Life and Health $3,091,294
As o 6/30/2012 (dollars in 000s)
Forethoughts reserves are well
diversied by line o business,
with approximately $3.1 billion
associated with lie and health
insurance obligations, and over
$2.2 billion supporting our line
o deerred annuities.
Forethoughts investment strategy is
predicated upon principal protection
and providing stable, predictable
income or our policyholders and
shareholders. Thereore, Forethought
maintains a diversied, high quality
portolio with approximately 89.0%
invested in investment grade bonds,
5.3% in commercial mortgages, and
the remaining 5.7% in high yield
bonds, hedge unds, equities, real
estate and policy loans.
* As determined by the NAIC.
Investment GradeBonds* 89.0%
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7/30/2019 Forethought 2012 Midyear Report - All Channels
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2012 Forethough0812
A9535-02
2012 Midyear ReportAs o 6/30/2012
FINANCIAL STRENGTH RATINGS
A.M. BEST RATINGForethought Lie Insurance Company(The ourth highest o sixteen ratings.)
STANDARD & POORS RATINGForethought Lie Insurance Company(The seventh highest o twenty-one ratings.)
Inormation on the most current rating is availableat www.standardandpoors.com or rom Standard& Poors at (212) 438-2400. Ratings are not aguarantee o an insurers nancial strength nora recommendation as to the insurer.
MOODYS RATINGForethought Lie Insurance Company(The seventh highest o twenty-one ratings.)
ALIRT SERVICE RANKINGForethought Lie Insurance Company
Forethought proudly subscribes to the ALIRTService, which reports on trends impactingthe nancial perormance o insurance companies.Inormation is available at www.alirtresearch.comor rom ALIRT Insurance Research at (860) 683-2070.
WARDS 50 RANKINGForethought Lie Insurance Company
A- (Strong)
A- (Excellent)
A3
20102012
Named as one o the nations top 50 highest-perorming lie-health insurance companiesin the prestigious Wards 50 annual list orthree consecutive years, 20102012. Rankinganalyzes ve-year nancial perormanceo more than 800 US-based lie-healthinsurance companies.
2012 2011 % Chg
Premium income $697,208 $423,739 65%
Total assets $5,932,106 $5,140,015 15%
Policyholder reserves $5,318,498 $4,586,312 16%
Capital and surplus $457,380 $447,541 2%
Statutory RiskBased Capital 496%*
*Forethought Life Insurance Company only.
KEY METRICSFINANCIAL HIGHLIGHTS
INCOME STATEMENT
Revenues Midyear 2012
Premium income $697,208
Net investment income and IMR amortization 157,168
Other 3,524
Total revenues $857,900
Benefts and expenses
Policyholder benets $699,366
Commissions 64,769
Insurance taxes, licenses and ees 3,533
General insurance expenses 32,227Other 5,360
Total benefts and expenses $805,255
Pretax operating income $52,645
Income tax expense (15,599)
Net gain rom operations 37,046
Net realized capital gains/(losses) (5,134)
Net income $31,912
BALANCE SHEET
Assets 6/30/2012
Cash and invested assets $5,806,044Premiums due and deerred 23,449
Accrued investment income 69,521
Current and deerred income taxes 31,876
Other assets 1,216
Total assets $5,932,106
Liabilities
Policyholder benets $5,318,498
Interest maintenance reserve 75,238
Asset valuation reserve 28,818
Other liabilities 52,172
Total liabilities $5,474,726
Capital and surplus 457,380
Total liabilities and surplus $5,932,106
Unaudited Combined Statutory Results(dollars in 000s) Midyear Midyear
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