tomorrow. - life insurance, annuities, investments ......• group employee benefits • group...

TODAY. TOMORROW. TOGETHER.

Modern Woodmen of America

BOARD OF DIRECTORS

How did you learn to ride a bike? Maybe you tagged along with a sibling who showed you the ropes. Perhaps a parent or a grandparent ran alongside. Each day, you worked together until you gained confidence and were able to go where you wanted.

It’s like that with Modern Woodmen of America. We move forward by working together to help you, our members, move toward your goals.

On Jan. 5, 2018, this organization turned 135 years old. Modern Woodmen is here today and will be here tomorrow because we invest in our people, our products, and our processes to stay relevant for you and your family. As Modern Woodmen members, field representatives, fraternal volunteers and employees, we’ll continue to serve our communities … together.

This annual report shares a look at what we were able to accomplish together in 2017.

W. Kenny Massey / President and CEO

OUR MISSION To improve the quality of life for our members.

OUR VISION Modern Woodmen of America will grow nationwide through members helping members create a better tomorrow for themselves, their families and others.

OUR CREED There is a destiny that makes us brothers; None goes his way alone; All that we send into the lives of others Comes back into our own. - Edwin Markham circa 1939

From left:

Director Lori A. Newberg / Lenexa, Kansas

Director David B. Emrick / Davenport, Iowa

Director Robert C. Pollex / Perrysburg, Ohio

President and CEO W. Kenny Massey / LeClaire, Iowa

Director James E. Temperley / Bonita Springs, Florida

National Secretary Jerald J. Lyphout / East Moline, Illinois

Director Joseph A. Sztapka / Sioux Falls, South Dakota

Director William D. Keltner / Jackson, Tennessee

Director Darcy G. Callas / Moline, Illinois

Director Lester L. Bohnert East Moline, Illinois

appointed 2018

32017 Annual Report2 Today. Tomorrow. Together. / Modern Woodmen of America

2017 ANNUAL REPORT // President’s Message Board of Directors // 2017 ANNUAL REPORT

Natural disaster relief

Make An Impact

Matching Fund Program amplifies members’ impact

Chapter members participated in:Dollars and hands-on assistance when needed most

Volunteer, socialize and learn!

natural disaster-related fundraisers matched by Modern Woodmen

service projects to support disaster victims

When nature strikes, Modern Woodmen members strike back. Throughout 2017, members provided comfort, dollars and an extra pair of hands to those affected by hurricanes, wildfires, floods and other disasters. Members in Texas tied blankets for their neighbors. Members in Georgia collected medical supplies for kids with special needs. Members in Kentucky drove 22 hours to help feed displaced families. Chapter members participated in 23 natural disaster-related fundraisers matched by Modern Woodmen, 28 service projects to support disaster victims, and numerous individual volunteer efforts.

Volunteer, socialize and learn. Modern Woodmen chapters, Summit chapters and youth service clubs make it easy – and fun! Activities provide a wide variety of meaningful, hands-on experiences throughout the year. Get involved to make an impact in your own life and in your community. Ask your Modern Woodmen representative how you can get involved as a leader, serve on your local chapter board, or simply volunteer for an upcoming service project.

$43.7 million* support local fundraisers in 2017

Our members love making an impact in their communities – and we love supporting the causes that are important to them.

Through the Matching Fund Program, Modern Woodmen’s home office matches dollars raised through qualifying fundraisers, up to $2,500 annually for each chapter and up to $500 annually for each youth service club.

The result? Chapters, Summit chapters and youth service clubs make an even more meaningful impact on community needs. Now that’s fraternalism.

MEMBER ACTIVITIESSocial, educational and volunteer events in 2017

2328

*Includes total dollars raised by member chapter and youth clubs partnering with community groups.

to community projects and individuals in need.

MATCHING FUND PROGRAM

3,881 fundraising events

$43.7 million* contributed

Courses on financial literacy, exercise & nutrition, & more reached

YOUTH EDUCATIONAL PROGRAMS

796,295 children

831 active clubs nationwide

YOUTH SERVICE CLUBS

83,663 participants

287 active

chapters

SUMMIT CHAPTERS

age 55+ participated48,703 members

2,528 active

chapters

CHAPTERS669,026 attendees

at social, educational & volunteer events for member families

SERVICE PROJECTS/VOLUNTEER ACTIVITIES

10,228 hands-on events

534,423 volunteer hours

$2.27 million reimbursed for projects in members’ communities

52017 Annual ReportToday. Tomorrow. Together. / Modern Woodmen of America4

2017 ANNUAL REPORT // Member Activities

End-of-life decisions can be difficult, but documenting and sharing your plans can be simple.

Final Wishes is an online tool that gives members free access to a wealth of information and resources.

• Documents for end-of-life financial and funeral planning.• Information on choosing an executor and the executor’s role.• Advice on talking about final wishes and sharing plans with others.• Tools to help loved ones make notifications and financial decisions after your death.

To access Final Wishes, go to “Member Login” at modernwoodmen.org and select “Benefits.”

It’s never been easier to save money on prescriptions. Upgraded in 2017, Modern Woodmen’s ScriptSave WellRx member benefit offers a mobile app to make your prescriptions more affordable and easier to manage.

ScriptSave WellRx is accepted at more than 62,000 pharmacies nationwide. Just show your savings card to receive discounts for the whole family, including pets. You’ll also find discounts on vision and hearing care, dia-betic supplies, lab testing, gym memberships and much more.

To register, go to “Member Login” at modernwoodmen.org and select “Benefits.” Then download the free app from the App Store or Google Play and start saving!

Life insurance products • Whole life insurance • Universal life insurance • Term life insurance

Annuity products • Fixed annuities • Immediate annuities • Variable annuities1

Investment products1

• Mutual funds • Retirement plans – Traditional IRA, Roth IRA, SEP-IRA, SIMPLE IRA, 401(k), 403(b) TSA • College savings plans – 529 college savings plans,

Coverdell education savings accounts, UGMA/UTMA accounts

• Brokerage services – stocks, bonds, ETFs, UITs • Investment advisory services – Adviser-managed and

third-party managed accounts, financial planning services

Insurance products2

• Dental and vision insurance • Disability income insurance • Group employee benefits • Group voluntary benefits • Impaired risk life insurance • International life and health insurance • Long-term care insurance • Health insurance • Medicare supplement insurance • Medicare Advantage and prescription drug plans

Banking products3

• Checking accounts • Savings accounts • Certificates of deposit • First mortgage home loans (new purchases and refinancing included) • Home equity loans • Visa® credit cards and gift cards • Health savings accounts (HSAs)

1 Securities offered through MWA Financial Services, Inc., a wholly owned subsidiary of Modern Woodmen of America. Member: FINRA, SIPC. Investment Advisory Services offered through MWA Financial Services, Inc., a Registered Investment Adviser.

Individual agents may not be licensed to sell all products. 2 Not issued by Modern Woodmen of America. Brokered insurance products

available through MWAGIA, Inc., a Modern Woodmen subsidiary. Product availability varies by state.

3 Modern Woodmen Bank is a marketing name for MWABank, a wholly owned subsidiary of Modern Woodmen of America. Annuities, insurance, retirement plans, mutual funds and other securities are not insured by the FDIC or any other federal government agency, are not obligations or deposits for MWABank, and are not guaranteed by MWABank. These products involve risk, including the possible loss of principal invested. MWABank is an Equal Housing Lender.

MEMBER BENEFITSFor all life stages

Final Wishes benefit

ScriptSave WellRx

Children and adolescents

Single adults

Families

50 and older

Member benefits for all life stages – learn more at modernwoodmen.org.

ProductsModern Woodmen offers financial products to help you meet a wide range of needs.

NEWBORN BENEFIT$10,000 of life insurance

issued for infants in poor health

ORPHAN BENEFIT$61,990 in financial support

for 19 orphans

100 PERCENT MODERN WOODMEN FAMILY BENEFIT

14,071 childrenreceived books for birthdays

MAKE AN IMPACT SCHOLARSHIPS$456,175 awardedto 174 member students

ACCELERATED BENEFITS$20,111 in premiums

& interest paidfor terminally ill members

FINAL WISHES1,416 members

accessed website and planned their final wishes (see Page 6)

MEMBER DISCOUNTSExclusive savingson health screenings, gym memberships, park passes, event tickets and more

FRATERNAL AID FUND$221,334 total in premiums paid

for members who were victims of medical, fire or natural disasters – $114,515 specifically

for victims of natural disasters


2017 ANNUAL REPORT // Member Benefits

- National membership: 760,000 members

- Part of: 2,528 adult chapters, 287 Summit chapters (for members age 55+), 831 youth service clubs

- Total fraternal expenditures: $20.6 million

Our fraternal expenditures fund

family-oriented member benefits

and programs, such as:

• Disaster-relief assistance.

• College scholarships.

• Social, educational and

volunteer service events.

• Educational programs for

schools and youth groups

… and more.

- Fraternal Aid Fund contributions for natural disasters: $114,515

– W. Kenny Massey, Modern Woodmen of America president and CEO

DISASTER RELIEFThrough the Fraternal Aid Fund, Modern Woodmen covers the cost of premiums for members affected by natural disasters like Hurricanes Harvey and Irma. Members also supported disaster relief efforts with fundraising and service events.

Fraternal expenditures for the year reflect strong usage of benefits and

programs by members.

Life insurance in force shows consistent growth and increased

protection for members.

Modern Woodmen’s increasing asset base is a strength.

AT MODERN WOODMEN, MEMBERS ALWAYS COME FIRST. Here’s what we accomplished together in 2017.

Bonds

Certificate loans, cash and other

Mortgage loans and real estate

Common stocks

FINANCIAL SUMMARY FRATERNAL SUMMARY

STRONG FOR MEMBERS, THEIR FAMILIES AND THEIR COMMUNITIES

Keeping promises for 135 years

2017 FINANCIAL HIGHLIGHTS

- Total life insurance owned by members: $40 billion

- Total assets: $16.2 billion

- Life insurance, annuity and other certificate reserves: $12.6 billion

- Payments and benefits made to members (includes death benefits, annuity

payments and surrender benefits): $1.03 billion

- Dividends paid on life insurance and annuity certificates: $7.4 million

- Surplus and special reserves: $1.82 billion

- Solvency ratio: 112.69 percent For every $100 of liabilities (promises

made to members), Modern Woodmen

has $112.69 of assets. The industry

average solvency ratio is 106.19

percent. (Source: Standard

Analytical Service, Inc., 2017)

All six members of the Breidenbach family are protected with Modern Woodmen life insurance. “By insuring not only ourselves but also our children, we’re actually planning for the future,” says Tim. “We feel like we can live our life and not have to worry.”

Travis Camp drove 22 hours to help his friend in the aftermath of Hurricane Harvey. “Being down there made so much of a difference in those people’s lives at that moment,” says Travis. He and his father gave bottled water to electrical workers restoring power, and they helped feed displaced families.

“We stand strong for our members and their families. Through careful planning now, we’re making sure we’re there for them when they need it.”

Even in retirement, Larry and Joanne Terrill know the value of protection. “Neither one of us has thought of giving up our life insurance,” says Joanne. “Our kids will have money to do what needs to be done when we pass away – and we can still leave something for them.”

Member story

Member storyMember story

Fraternal Expenditures

Quality Investments

Growth in Assets Life Insurance in ForceDollars in millions

As of 12/31/2017, approximately 99.6 percent of bonds were of high or medium quality.

Dollars in billions Dollars in billions

83%

6%

4%

7%

2017 Annual Report 98 Today. Tomorrow. Together. / Modern Woodmen of America

2017 ANNUAL REPORT // Financial Message Financial Highlights // 2017 ANNUAL REPORT

FINANCIAL STATEMENTSModern Woodmen of America – Year end Dec. 31, 2017 (dollars in thousands) unaudited

2017 2016

Operating activities

Premium and annuity considerations $1,001,543 $1,042,874

Net investment income 565,136 566,911

Misc income 8,031 7,901

Total cash provided by operations 1,574,710 1,617,686

Benefit- and loss-related payments 997,902 865,939

Commissions and other expenses paid 208,073 223,095

Net transfers to separate accounts 94,117 48,524

Dividends paid 7,380 9,028

Total cash used in operations 1,307,472 1,146,586

Net cash provided by operating activities 267,238 471,100

Investing activities

Proceeds from investments sold:

Bonds 1,304,276 1,213,997

Stocks 218,285 102,667

Mortgage loans 49,297 61,950

Real estate 0 50

Other invested assets 80,912 47,440

Miscellaneous proceeds 84,170 71,145

Total investment proceeds 1,736,940 1,497,249

Cash applied, cost of investments acquired:

Bonds 1,638,508 1,682,510

Stocks 154,778 91,183


Real estate 763 403


Miscellaneous applications 9,782 0

Total investment applications 1,980,633 1,936,501

Net decrease in certificateholders’ loans (7,278) (7,084)

Net cash used in investing activities (236,415) (432,168)

Other cash provided by financing activities and other miscellaneous sources 83,912 16,263

Increase in cash and short-term investments 114,735 55,195

Cash and short-term investments at beginning of year 181,581 126,386

Cash and short-term investments at end of year $296,316 $181,581

2017 2016

Assets

Bonds $12,789,706 $12,422,902

Stocks 873,635 788,086


Real estate 23,111 24,407

Cash 296,316 181,581

Certificateholders’ loans 157,102 164,478

Securities lending reinvested collateral 320,360 394,530


Total cash and invested assets 15,417,173 14,831,446

Investment income due and accrued 130,574 128,614

Electronic data processing equipment 2,951 2,178

Other assets 2,402 2,795

Separate account assets 613,164 436,268

Total admitted assets $16,166,264 $15,401,301

2017 2016

Income

Premiums:

Life and annuity $999,607 $1,041,105

Other 2,036 1,965

Investment income, net of expenses 568,378 570,158

Amortization of interest maintenance reserve 16,186 12,566

Other income 8,031 7,901

Total income 1,594,238 1,633,695

Benefits and expenses

Benefits:

Life and annuity 1,016,383 860,789

Other 12,079 10,327

Increase in aggregate reserves 231,496 473,037

Employees’ and fieldworkers’ benefit plans 6,150 5,572

Commissions 65,461 62,979

General insurance expenses 116,574 134,216

Insurance, taxes, licenses and fees 7,129 7,013

Fraternal, charitable and benevolent expenses 20,610 21,673

Net transfers to separate accounts 87,492 45,585

Total benefits and expenses 1,563,374 1,621,191

Net gain from operations before dividends/net realized capital gains 30,864 12,504

Dividends to certificateholders 7,380 7,228

Net gain from operations before net realized capital gains 23,484 5,276

Net realized capital gains 65,409 22,969

Net income $88,893 $28,245

2017 2016

Appropriated

Balance at beginning of year $278,233 $278,776

Transfer from unassigned funds 1,038 (543)

Balance at end of year 279,271 278,233

Unassigned

Balance at beginning of year 1,354,549 1,312,475

Net income 88,893 28,245

Net unrealized capital gains 136,578 33,263

Change in asset valuation reserve (26,177) (10,408)

Change in nonadmitted assets (2,980) 4,412

Transfer to appropriated surplus (1,038) 543

Other changes, net (8,808) (13,981)

Balance at end of year 1,541,017 1,354,549

Total surplus $1,820,288 $1,632,782

Statements of Cash Flows

Balance Sheets

Statements of Operations

Statements of Surplus

2017 2016

Liabilities and surplus

Aggregate reserves:

Life and annuity $12,557,261 $12,297,018

Accident and health 2,118 2,275

Certificate and contract claims 45,784 32,952

Other certificateholders’ funds 3,312 3,373

Dividends payable to certificateholders 7,300 7,300

Accrued commissions, general expenses and taxes 15,952 15,768

Payable for securities lending 320,360 394,530

Other liabilities 390,854 224,355

Liability for benefits for employees 59,243 56,066

Interest maintenance reserve 54,457 48,593

Asset valuation reserve 276,171 249,994

Separate account liabilities 613,164 436,268

Total liabilities 14,345,976 13,768,519

Appropriated surplus 279,271 278,233

Unappropriated surplus 1,541,017 1,354,549

Total surplus 1,820,288 1,632,782

Total liabilities and surplus $16,166,264 $15,401,301


2017 ANNUAL REPORT // Financial Statements