October 31, 2014
To The Shareholders of Pekin Life Insurance Company:
The third quarter of 2014 generated positive operating results and the first nine months of the year
reflect net income and surplus growth that exceeds the same period in 2013. The operating results for
the first nine months are summarized below.
Net income increased to $5.5 million, or $0.32 per share in the first nine months of the year
compared to net income of $2.9 million, or $0.17 per share in the first nine months of 2013. The net
income before net realized capital gains was $4.4 million, or $0.26 per share in the first nine months,
compared to net income before net realized capital gains of $687,000, or $0.04 per share last year.
Premium is down in several lines during the first nine months largely attributable to the lingering
effects of a low interest rate environment and partially attributable to unusually harsh winter conditions
early in the year. Pre-need life premium has been directly impacted by low interest rates resulting in
thinning margins and we anticipated the decrease in new sales. The pre-need premium is down in the
first nine months of 2014 by $3.1 million to $28.3 million, a change of 9.9 percent from last year. New
term rates offered this year have been well received and have spurred sales. Term and whole life
premium is up $1.7 million to $29.0 million, an increase of 6.3 percent from the first three quarters of
last year. Our exit from the optionally renewable individual health line has now been completed and
premium has declined from $6.0 million in the first nine months of 2013 to zero in 2014. Premiums in
the guaranteed renewable individual health line increased by $1.9 million, or 11.9 percent, to $17.7
million. Premium rates and underwriting guidelines for the group health line continue to be closely
monitored in order to maintain the productivity of this line. Group health premium decreased by $3.5
million, or 9.3%, to $34.0 million through September 30, 2014. Decreases in life and health premiums
lower our acquisition and policy expenses thus benefiting the bottom line net income as cited above. We
plan for premium growth in several of our non-core states including Kansas, Louisiana, Michigan,
Mississippi, Missouri, and Virginia.
The fixed income investment markets played a significant role in generating realized capital gains
for the first nine months. There were net realized capital gains of $1.1 million or $0.06 per share,
compared to net realized capital gains of $2.2 million, or $0.13 per share, in 2013.
Investment income excluding capital gains increased to $41.1 million in the first three quarters of
2014, or 3.8 percent from last year. This increase reflects premium dollars that have been invested in
the growing bond portfolio at rates that are moderately flat from previous years. Additionally, our bond
portfolio is comprised of high quality holdings, all of which are investment grade.
As of September 30, 2014, assets were $1.3 billion, an increase of $21.6 million or 1.7 percent
over December 31, 2013. Book value increased during the first nine months by $3.2 million, or 2.6
percent from year end 2013. Book value per share was up to $7.38 at September 30, 2014.
Further information regarding the results of the first nine months of 2014 can be found on our
Internet website at www.pekininsurance.com.
The Board of Directors of Pekin Life Insurance Company has declared a quarterly dividend of $0.01
per share payable December 1, 2014, to shareholders of record October 31, 2014. Pekin Life Insurance
Company has paid dividends each year since June 1, 1976.
We appreciate the continued support of our shareholders, agents, and employees.
Gordon M. Walker, CPCU
Chairman of the Board
Scott A. Martin, FLMI
President and Chief Executive Officer
CONDENSED STATEMENTS OF INCOME
FOR THE
NINE MONTHS ENDED
SEPTEMBER 30,
2014
2013
Premium Income
Investment Income
Total Income
$
Benefits to Policyholders
Additions to Policy Reserves
Commissions and Service Fees
Expenses and Insurance Taxes
Total Deductions
155,520,527
41,087,359
196,607,886
$
171,921,798
39,568,061
211,489,859
104,420,557
42,706,104
16,371,953
26,286,107
189,784,721
115,401,257
52,964,852
17,667,159
24,453,997
210,487,265
Income Before Income Taxes and Realized Capital Gains
Income Taxes
6,823,165
2,456,825
1,002,593
315,225
Income Before Realized Capital Gains
Realized Capital Gains, Net of Tax
4,366,340
1,102,211
687,368
2,207,898
Net Income
$
5,468,551
$
2,895,266
Net Income Before Net Realized Capital Gains Per Share
Net Realized Capital Gains Per Share
Net Income Per Share
Book Value Per Share
Weighted Average Shares Outstanding
$
.26
.06
.32
7.38
17,068,023
$
.04
.13
.17
6.97
17,068,023
$
$
$
$
OTHER FINANCIAL INFORMATION
Premium Income by Product Line:
Ordinary Life
Pre-Need Life & Annuity
Annuity
Group Annuity
Group Life & Health
Individual Health
Credit Life & Health
Total
$
$
46,349,646
29,996,866
10,934,134
1,135,897
35,494,225
17,672,289
13,937,469
155,520,527
$
$
45,126,522
32,941,279
12,040,536
7,279,405
39,098,538
21,895,366
13,540,152
171,921,798
AS OF
September 30,
2014
Assets
Capital and Surplus
Insurance In Force
NOTE:
$
$
$
1,323,193,328
125,918,555
15,030,856,000
December 31,
2013
$
$
$
1,301,555,080
122,693,292
14,542,828,903
Information for the nine months ended September 30, 2014 and 2013 is unaudited. The above is prepared on the basis of accounting
practices prescribed by the Illinois Department of Insurance.
Pekin Life Insurance Company, headquartered in Pekin, Illinois, became an integral member
of the Pekin Insurance® group of companies in April 1965. Joining together with our
property/casualty companies, The Farmers Automobile Insurance Association, Pekin
Insurance Company, and PAC, Inc., we are committed to providing quality insurance
services to our policyholders spanning a nineteen-state marketing area.
Our
property/casualty products deliver coverage to protect homes, autos, and businesses and to
meet a wide range of other insurance needs. The Company’s life and health products offer
a diverse portfolio of coverages to help families and businesses achieve secure financial
futures. Whether for property/casualty, life, annuity, or group health insurance, we are
committed to going the extra mile to provide the products and services necessary for your
peace of mind. Now, more than ever, it is important that policyholders have complete trust
in their insurance company. Pekin Insurance ... going Beyond the expected® to meet your
insurance needs.
Universal Life
Preferred Whole Life
Term Life
Transitional Life
Flexible & Single Premium Annuities
Medicare Supplement
Disability Income
Credit Life
Debt Protection
Group Insurance
Qualified Retirement Programs for Individual & Business Needs
Funeral Preplanning
Self-Funded Employee Benefit Plan Administration