N.C. Mutual reports third consecutive year of profitability

Mar. 27, 2013 @ 08:11 PM

N.C. Mutual Life Insurance Co.’s profits were down about 75 percent to $158,861 last year in its third consecutive year of profitability.

The company saw a decline in life, accident and health insurance contract premiums and annuity revenues, but company President and CEO James H. Speed Jr. said that was offset by an approximately $5.3 million boost to the bottom line drawn from company reserves.

In an interview after the company’s annual policy holders’ meeting on Wednesday, Speed said the decline in premium revenues and the boost from reserves in 2012 were tied to a reinsurance transaction in October.

In the transaction, another company took on part of the risk for some of its policies. N.C. Mutual lost premium revenues that would have come from those policies, but he said it did get additional fees.

In total for the year, the company reported revenues from life, accident and health contract premiums and annuities of $14.09 million. The total was down about $5.4 million, or 27 percent, from the prior year.

Speed said factors in the decline in net income in the year included increases in some benefit costs, including matured endowments. The company also saw an increase in death payments and a decline in investment income.

In 2011, the company saw a net income of $626,533, which was down from the $789,560 in earnings the company saw in 2010. That was the first year the company had reported a profit since 2006, when the company sold its headquarters building to Greenfire Development.

In July 2012, A.M. Best Co. revised its issuer credit rating outlook for N.C. Mutual to “positive” from “stable.” It also affirmed the financial strength rating of C++ and issuer credit rating of B.

The rating company said the positive outlook reflected a belief that N.C. Mutual would be able to reverse declines in its surplus in the near to medium term. It also cited the company’s fee-based initiatives that were expected to add to reported income in 2012 and this year.

For 2012, N.C. Mutual reported a surplus of $6.4 million, down from $7.4 million in the prior year.

In addition to information on the company’s policies, Speed also gave an overview of the company’s business strategy - the Vision 2015 plan. The company is targeting reaching $5 million in net income by 2015.

It’s looking to ramp up product distribution, leverage the company’s existing administrative staff by pursuing potential acquisitions of additional blocks of policies, and to expand its financial service offerings.

“Executing this model will put N.C. Mutual in the position to sustain profitability, balance risk, have greater fee income, and increase (the) diversity of our products, and provide multiple channels of distribution,” Speed said.

As part of a plan, Speed said the company formed partnerships with Atlanta-based Capital City Bank and Durham-based Mechanics and Farmers Bank to allow for the marketing of N.C. Mutual products at bank branches.

The company has also shifted to an independent sales force. In the move that took place late in 2011, about 20 sales staff became independent agents, Speed said. The agents sell N.C. Mutual products as well as the products of other companies.

Speed said the independent agency is economical, and the agents are also able to offer clients a wider range of products. While the company doesn’t get premiums by selling products for other companies, it does get commission revenue from those sales.

Speed did say the preference of the sales staff in the agency would to have been to remain employees of the company. Many employees are dedicated, he said.

 “Working here is not just a job for some of us; it’s like our life because of what the company stands for,” he said.

Two former employees of the company at Wednesday’s meeting were concerned about the shift to an independent sales force, as well as other changes in the business.

“I could be an independent agent and sell for State Farm,” said Kenneth Hopper, who said he is a former N.C. Mutual employee. He also said he wanted Wednesday’s meeting to include a question and answer section. “When you say ‘independent,’ you say, ‘not fully connected to the company.’ ”

Eileen Welch, the great-granddaughter of two of the founders of N.C. Mutual who was present at the meeting with two other members of her family, said N.C. Mutual was a source of jobs for African Americans at a time when servitude and farming were choices. The company was incorporated in 1899.

Welch said the company continues to provide opportunities for employment and upward mobility.

“Certainly, the company has impacted the economic stability of the African American community in Durham,” she said.