2013Financial and Fraternal Report

Member Magazine

“Start by doing what is necessary; then do what’s possible; and suddenly

you are doing the impossible.” — St. Francis of Assisi

In the Franciscan tradition of preaching the Gospel through actions, not just words, Society members surpassed goals that only a few years ago might have seemed impossible. In 2013 Catholic Financial Life undertook expanded disaster relief efforts, increased local chapter activity, enhanced involvement with the Society of Saint Vincent de Paul, and witnessed one of our own members earning honors as the nation’s top fraternalist.

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Pilgrimages gain in popularity A sure sign of our members’ continuing commitment to the Catholic faith, the number of pilgrimages enjoyed by members expanded in 2013. Chapters sponsored pilgrimages to such popular Wisconsin religious sites as the National Shrine of Mary, Help of Christians at Holy Hill in Hubertus; Our Lady of Guadalupe in La Crosse; and Our Lady of Good Help, in Champion, the only officially acknowledged Marian apparition in the United States. In New England, the Society’s oldest continuous pilgrimage, to the National Shrine of Our Lady of LaSalette, Attleboro, Massachusetts, celebrated its 58th year in 2013. All told, thousands of members and their families attended special religious events sponsored by the Society and local chapters. In fact, 493 faith-based events were sponsored by chapters in 2013 compared with 77 the year before!

Society helps Catholic education take a giant step forward Always committed to promoting Catholic education, the Society became one of the major sponsors of the inaugural “Soles for Catholic Education” walk held at Milwaukee’s Mount Mary University, November 2. Some 7,000 walkers hit the pavement in support of Catholic education in the Archdiocese of Milwaukee.

With home office and chapter members lending a hand – and a foot or two – the event raised an amazing $350,000 generated by hard work and giving proof to the theme of “One Step, One Soul at a Time”.

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Chapter engagement expands When Catholic Financial Life embarked on a new system for chapter funding to help encourage greater membership activity, it was hoped that the activity level would increase. However, the final figures for 2013 far exceeded expectations. Chapter-sponsored activities jumped 22% over the previous year from 2,114 to 2,574. Leading the change were marked increases in both educational and religious programs.

The result was a great variety of chapter events for members, as well as increased Match Fund events benefiting more charities. The number of charitable activities increased 14% from 605 to 678. Through the outreach efforts of local chapters and the home office, nearly $1.5 million was raised and donated in support of local communities, Catholic parishes and schools.

Common cause partnership continues to growIn 2013, the Society’s common cause partner, the Society of Saint Vincent de Paul, received even greater support from members and enjoyed a new record of 108 chapters becoming involved in the program. In the fifth year of the partnership Catholic Financial Life chapters donated $150,000 in cash to Saint Vincent de Paul thanks to funds raised and matched. Thousands of non-perishable food items were also collected and more than 20,500 hours were volunteered with a monetary value of $460,000.

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Member is one in 9 millionThe year 2013 certainly highlighted the excellence of Catholic Financial Life fraternal leaders. Lisa Mick, president of the Fond du Lac Chapter, was selected by the national trade association, American Fraternal Alliance, as the top fraternalist in both the United States and Canada. The Alliance, representing fraternal benefit societies with a combined membership of 9 million, chose Lisa as the best example of commitment to faith, family, and community that the association aims to promote. Whether inspiring and mobilizing youth, raising funds for the Society of Saint Vincent de Paul, running marathons to help fight muscular dystrophy, or helping children fight autism, Lisa was the hands-down favorite.

Disaster relief efforts go global Neighbor–helping–neighbor has always been a part of fraternal outreach. In 2013 member generosity reached our neighbors in the flooded towns of southwestern Wisconsin, the tornado-ravaged communities of Oklahoma, and the typhoon-devastated villages of the Philippines.

Thanks to the Match Funds program, our members’ generosity was maximized. Last year’s spring rains overwhelmed residents of Wisconsin’s Grant County and $1,808 was donated to the American Red Cross to help those residents rebuild. A total of $17,313 was donated to Catholic Charities of Oklahoma City following the tornado that ripped through that community on May 20, 2013. Finally, following Typhoon Haiyan in November, more than $11,410 was donated to Catholic Relief Services to help with rebuilding efforts half-way across the globe in the Philippines.

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Regional activities offer family-friendly fun for all agesCatholic Financial Life members packed a lifetime of memories into the summer of 2013. They cheered on their favorite professional baseball teams, came face-to-face with wild animals at the zoo, camped out with family and friends in a “land down under,” screamed aboard Elvis Presley’s favorite rollercoaster, and devoured cream puffs at the Wisconsin State Fair. 9,286 members and guests took advantage of the wholesome, family fun provided at reasonable prices from May through September.

Thousands take advantage of member benefits One of the major advantages of Catholic Financial Life membership is that it includes value-added benefits available exclusively for members. Grouped into four categories, spiritual, educational, financial and wellness, usage of these benefits increased by 20% in 2013.

In addition to the popular scholarship program that provides aid to those studying at Catholic grade schools and high schools as well as to college-bound members, 700 members received a total of $70,000 in Catholic summer camp and retreat benefits. In total, 3,147 members enjoyed the Society’s unique selection of benefits.

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The role of the Audit Committee is to assist the Board of Directors in its duties regarding the integrity of the Society’s financial reporting and auditing processes and the maintenance of a sound internal control and risk management system. The Committee has a written charter which outlines its duties and responsibilities and all of the Committee’s work is summarized in meeting minutes which are circulated to all Directors.

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On April 22, the Audit Committee reviewed the Society’s year-end 2013 financial results with the independent audit firm of Ernst & Young. Consistent with prior years, the Committee also met without management in attendance. As the independent audit opinion states, management is responsible for the Society’s financial statements and those financial statements reflect management’s responsibilities to operate the Society’s business on a day-to-day basis. The auditors have again provided a “clean opinion” on the Society’s 2013 financial statements indicating they are in conformity with generally accepted statutory accounting principles.

In addition to its annual audit meeting, the Committee meets quarterly and reviews:

1) Management’s financial reports 2) Reports from Wellington Management (the Society’s investment manager)3) Actuarial analysis reports 4) An annual enterprise risk management report 5) Examination reports (5-year cycle) completed by the Wisconsin Office of

the Commissioner of Insurance

The Board of Directors has also engaged Milliman (actuarial consultants) to conduct a business and financial review. On May 27, the Board reviewed this private consulting report and on May 30, the Committee held additional discussions with the Milliman consultants, including private discussions without management present.

The Board of Directors in its oversight role relies on management, the independent audit, the Society’s quarterly and annual regulatory financial statement filings with the Wisconsin Office of the Commissioner of Insurance, Wellington’s investment management and Milliman actuarial consultants to assure the Society’s financial results are accurately presented. These resources enable the Board of Directors to be more effective in its oversight responsibility and maintain focus on the long-term financial best interests of our members.

Fraternally,

Catholic Financial Life Board of Directors Audit Committee

Art Wigchers Retired Real Estate Executive and CPA

Carla Breunig President & CEO, Layton State Bank

William C. Dreyer President, G.J. Dreyer, Inc.

Patrick J. Murphy, Ph.D. Management Consultant

Donald W. Layden, Jr., JDOperating Partner, Baird Venture Partners

Jay MackPresident & CEO, Town Bank

Thomas W. VanHimbergenRetired Corporate CFO and CPA

Audit Committee Report

Our Mission:

Catholic Financial Life, a faith-based membership organization, puts Catholic values in action by:

• Serving God through serving others;• Providing financial security; and • Enhancing quality of life.

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The Society bolstered its financial strength again in 2013. “By just about every metric, Catholic Financial Life experienced one of the most successful years in the organization’s history,” President and Chief Executive Officer Bill O’Toole said. “In 2013, the financial strength of the organization continued to increase as we realized the benefits of our conservative, long-term approach to investments and disciplined expense management.”

We achieved an increase in net gain from operations, added over $13 million to our total capital while assets surpassed $1.3 billion. Life insurance issued and in force and the number of new members all grew again in 2013. We remain committed to long-term growth and to maintaining the financial integrity of our Society for its current and future members.

Strong operational results - Catholic Financial Life’s net operating income increased nearly 9% in 2013 to $8.3 million. Total revenues exceeded $128 million as our members continued to entrust their hard-earned dollars to the Society.

Financial strength and stability - Total assets grew $32 million and ended 2013 at over $1.3 billion. Surplus is one part of an insurance organization’s total capital with asset valuation and other reserves also adding to total capital as defined by insurance regulators. Total capital increased to over $50 million in 2013 which resulted in a significant increase in the capital adequacy ratio.

OTHER1%

HIGHQUALITY

HIGHESTQUALITY

RETURN TO MEMBERS(Bene�ts, Dividends and

Interest Paid orSet Aside for Members)

NET OPERATINGGAIN TO SURPLUS

MEMBER &INSURANCESERVICE

SALESSUPPORT

BONDS RETURN to MEMBE

RS

21%

78% 80%

550

650

750

850

950

1050

1150

1250

1350

4500

4600

4700

4800

4900

5000

20092009 2010 2011 2012 2013 2009 2010 2011 2012 2013

GROWTH in ASSETS

$ in

Mill

ions

$ in

Mill

ions

LIFE INSURANCE in FORCE

4,89

5

4,89

8

4,88

5 4,92

2 4,97

7

1,32

0

1,28

8

1,24

3

1,197

1,160

5%9%

6%

“In 2013, the financial strength of the organization continued to increase as we realized the benefits of our conservative, long-term approach to investments and disciplined expense management.”– President and CEO Bill O’Toole

One of the most successful years on record

OTHER1%

HIGHQUALITY

HIGHESTQUALITY

RETURN TO MEMBERS(Bene�ts, Dividends and

Interest Paid orSet Aside for Members)

NET OPERATINGGAIN TO SURPLUS

MEMBER &INSURANCESERVICE

SALESSUPPORT

BONDS RETURN to MEMBE

RS

21%

78% 80%

550

650

750

850

950

1050

1150

1250

1350

4500

4600

4700

4800

4900

5000

2009

GROWTH in ASSETS

$ in

Mill

ions

$ in

Mill

ions

LIFE INSURANCE in FORCE

4,89

5

4,89

8

4,88

5 4,92

2 4,97

7

1,32

0

1,28

8

1,24

3

1,19

7

1,16

0

5%9%

6%

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

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Find the Radiant CrossWe have hidden black and white versions of our “Radiant Cross” icon somewhere in this publication. Send us the location of at least one of the six hidden Radiant Crosses by August 15, 2014 and be eligible for a $25 prize drawing.

Visit our website and click on the Member Magazine link, or mail

your entry to: Member Magazine, Catholic Financial Life, 1100 W. Wells St., Milwaukee, WI 53233. Include your name, address, phone number and the location of the Radiant Cross.

The winner of our spring issue Radiant Cross activity was Paul Rozek.

According to a comparative analysis by Standard Analytical Service, Inc. Insurance Reports, the Society’s financial results achieved in the year ended 2013 are favorable when compared to the aggregate averages of 25 of the leading life insurance companies.

Growth in life insurance issued and new members – New life insurance issued in 2013 increased to nearly $300 million. Life insurance in force, the total amount of life insurance owned by members to protect their families, increased $55 million to just under $5 billion. The Society also added 2,810 new members in 2013 compared to 2,647 in 2012.

Protecting your financial security - Catholic Financial Life is independently reviewed by:• Ernst & Young: a global leader in financial assurance, conducts an annual audit.• Milliman: one of the world’s largest independent actuarial and consulting

firms will conduct an annual review during 2014.• The State of Wisconsin Office of the Commissioner of Insurance: conducts

routine periodic examinations and annually reviews a detailed report completed and filed by Catholic Financial Life.

Investments - The Society, with the help of our investment advisors at the nationally-recognized Wellington Management organization, maintains a conservative and diversified investment strategy in accordance with our Catholic social teachings investment guidelines. The portfolio is substantially invested in high-quality fixed income securities and first mortgage loans on churches and schools in our members’ parishes. Nearly 99% of our bond portfolio is invested in high-quality bonds carrying the top two ratings from the National Association of Insurance Commissioners.

OTHER1%

HIGHQUALITY

HIGHESTQUALITY

RETURN TO MEMBERS(Bene�ts, Dividends and

Interest Paid orSet Aside for Members)

NET OPERATINGGAIN TO SURPLUS

MEMBER &INSURANCESERVICE

SALESSUPPORT

BONDS RETURN to MEMBE

RS

21%

78% 80%

550

650

750

850

950

1050

1150

1250

1350

4500

4600

4700

4800

4900

5000

2009

GROWTH in ASSETS

$ in

Mill

ions

$ in

Mill

ions

LIFE INSURANCE in FORCE

4,89

5

4,89

8

4,88

5 4,92

2 4,97

7

1,32

0

1,28

8

1,24

3

1,19

7

1,16

0

5%9%

6%

2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Return to members - The most important outcome of 2013 is that Catholic Financial Life continued to fulfill its promises to you, our members, as over 80% of the Society’s revenues in 2013 were returned or set aside for members. This includes helping over 1,200 families by paying out $16 million in life insurance death benefits, nearly another $16 million in annuity benefits to members, over $22 million set aside for members as policy reserves, and nearly $3 million to support the fraternal outreach of the Society in 2013. As a result, more than 96% of our life insurance and annuity business continued in force, exceeding industry averages and demonstrating our members’ loyalty and recognition of the outstanding value they receive.

Fraternal & charitable outreach – Catholic Financial Life’s fraternal outreach also remained strong in 2013. Members raised nearly $1 million to support local schools, parishes and communities. Catholic Financial Life provided matching funds and charitable donations of more than $550,000. In addition, almost $500,000 was provided to members in the form of benefits such as educational scholarships and summer camp subsidies.

Together we strengthened our financial position while continuing our commitment to provide financial assistance to our members and to support your volunteer efforts in making your communities, schools and parishes better places to live, learn and worship. We remain committed to fiscal responsibility in serving our members and preserving and enhancing the organization’s long-standing tradition of financial strength and stability.

The most important outcome of 2013 is that CatholicFinancial Life continued to fulfill its promises to you, our members, as over 80% of the Society’s revenues in 2013 were returned or set aside for members.

OTHER1%

HIGHQUALITY

HIGHESTQUALITY

RETURN TO MEMBERS(Bene�ts, Dividends and

Interest Paid orSet Aside for Members)

NET OPERATINGGAIN TO SURPLUS

MEMBER &INSURANCESERVICE

SALESSUPPORT

BONDS RETURN to MEMBE

RS

21%

78% 80%

550

650

750

850

950

1050

1150

1250

1350

4500

4600

4700

4800

4900

5000

20092009 2010 2011 2012 2013 2009 2010 2011 2012 2013

GROWTH in ASSETS

$ in

Mill

ions

$ in

Mill

ions

LIFE INSURANCE in FORCE

4,89

5

4,89

8

4,88

5 4,92

2 4,97

7

1,32

0

1,28

8

1,24

3

1,197

1,160

5%9%

6%

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Jeffrey B. Tilley, CPAVice President and Chief Financial Officer

William R. O’Toole, Jr.President and CEO

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Statement of Financial Position As of December 31

Assets2013 2012

Bonds $1,192,311,808 1,164,507,230

Mortgage loans 44,529,787 49,907,928

Policy loans 24,719,184 25,001,640

Preferred stocks 1,932,802 1,586,232

Common stocks 8,142,285 6,404,495

Other long-term investments 1,830,309 1,998,038

Cash and short-term investments 26,741,662 19,331,591

Total Cash and Investments 1,300,207,837 1,268,737,154

Home office, at cost net of depreciation 5,541,590 5,743,466

Investment income due and accrued 13,799,182 13,016,962

Other assets 897,136 706,592

Total Assets $1,320,445,745 $1,288,204,174

Liabilities

Policy reserves $1,211,759,000 $1,189,106,386

Interest maintenance reserve 3,086,067 3,372,990

Premiums received in advance and on deposit 12,236,530 12,024,124

Policyholders’ and beneficiaries’ funds on deposit 35,973,907 33,865,786

Other liabilities 7,093,010 13,053,374

Total Liabilities and Reserves 1,270,148,514 1,251,422,660

Surplus 43,152,224 30,819,724

Asset valuation and other reserves 7,145,007 5,961,790

Total Adjusted Capital 50,297,231 36,781,514

Total Liabilities and Surplus $1,320,445,745 $1,288,204,174

Statement of Operations As of December 31

Revenues 2013 2012

Life insurance premiums $31,221,617 $34,056,702 Annuity deposits 32,912,137 45,461,394 Other premiums and deposits 1,268,502 3,040,292

Total Premiums Earned 65,402,256 82,558,388 Investment revenue (Net of investment expenses) 62,954,374 63,395,782

Other revenues 190,402 154,663

Total Revenues

$128,547,032 $146,108,833

Benefits & ExpensesInsurance and policy surrender benefits paid to members and beneficiaries $73,823,171 $73,432,852

Additions (reductions) of insurance policy reserves net of interest paid to members (571,850) 15,392,652

Field sales support costs 6,197,000 7,696,000 Fraternal benefits and expenses 2,951,382 2,548,642 Operating expenses 11,309,274 11,008,255

Total Benefits and Expenses 93,708,977 110,078,401

Gain from operations before dividends and interest paid to members

34,838,055

36,030,432

Dividends and interest paid to members 26,514,210 28,386,045

Gain from Operations before Investment Results

$8,323,845

$7,644,387

Catholic Financial Life has been recognized as one of the “Top Work Places” by the Milwaukee Journal Sentinel. The award recognizes businesses and organizations whose employees find their jobs to be the most rewarding and meaningful.

Dedication to our mission and putting Catholic values in action every day is reflected in this recognition. This is what sets us apart.

We salute our associates, advisors, chapter leaders and our members for bringing our mission to life — serving God through serving others, providing financial security, and enhancing quality of life.

Catholic Financial Life Recognized as a Top Work Place

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1 Eligibility Requirements:

Only current Catholic Financial Life members are eligible for this campaign. Recommendations of financial members for which you will be the owner or payer are not eligible for prizes, due to legal restrictions. Maximum awards are 10 per member per year. This program can be discontinued at any time without notice. Recommendations must reside in a state where Catholic Financial Life is licensed to conduct business (AR, AZ, CT, IA, IL, IN, LA, MA, MD, ME, MI, MN, MO, NE, NH, NM, ND, OH, PA, RI, SD, TX, VT, WV and WI.) For full participation guidelines, please visit www.catholicfinanciallife.org/m2m Headquartered in Milwaukee, WI. Void where prohibited by law.

As a member, you made the right choice choosing a financially strong organization. You know how important it is to plan for the future and protect the ones you love.

Now you can help your Catholic friends and relatives experience the same peace of mind, benefits, service and security — while you earn cash and prizes!

It’s Easy!• Discuss the benefits and value you receive as a member with your

Catholic neighbors, relatives and friends, and invite them to learn more.

• Recommend those interested in membership by visiting www.catholicfinanciallife.org/m2m, or complete and return the card on the back cover of this publication, and you’ll receive a $10 gift card.1

• For each one who enrolls as a financial member, you will receive another $10 gift card and be entered in a drawing for an iPad!

Member-to-MemberMembership Campaign

Earn cash and prizes, and help your organization grow!

I, _____________________________________________________________________________

of ____________________________________________________________________

recommend the following person, whom I have personally contacted, for membership in Catholic Financial Life. He or she is one of the following:

(a) Catholic; (b) spouse, child, or grandchild of a Catholic; (c) an employee of a Catholic institution.

Name ________________________________________ Relationship _____________________

Address _______________________________________________________________________

Telephone Number ( _____) _____________________ Person’s Approximate Age ________

Email Address _________________________________________________________________

Sales advisor requested, if known: ________________________________________________

Additional forms may be requested from the Home Office at 1-800-927-2547, or make your recommendations at www.catholicfinanciallife.org/m2m.

(Street Address, City, State, Zip)

Reco

mm

ende

r’s F

orm

(Name)

(Street Address, City, State, Zip)

Member-to-MemberMembership Campaign

Spread the good news about Catholic Financial Life. Earn cash and prizes. It’s easy!See inside back cover for details.