focused. forward. - securian financial · forward thinking. that’s why we are forming new...
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Focused.Forward. 2017 ANNUAL REPORT
2 SECURIAN FINANCIAL
At Securian Financial, we believe that if you’re not going forward, you’re not going anywhere. And we’re going places. Propelling our business ahead. That means achieving our goals matters. A lot. And in 2017, we not only accomplished them, we also made significant progress toward building our future — making last year a success on many accounts. It also set the stage for exciting efforts in 2018.
Today, we’re launching a new brand that demonstrates our long-held values and articulates who we are in a bigger, brighter way. Opening doors and creating new opportunities to serve our customers. Our focus is sharper than ever. Our path is clear. And we are clearly going forward.
We’re creating unstoppable momentum
2017 AT-A-GLANCE
2017 ANNUAL REPORT 1
RATINGS
$5.3BDomestic statutory benefits paid
$78.6BAssets under management
Nearly $1.2TLife insurance in force
$6.1BTotal revenue
$5.1BEquity
5,300Employees and representatives worldwide
19MNearly
Securian Financial’s insurance company affiliates, Minnesota Life Insurance Company and Securian Life Insurance Company, a New York authorized insurer, receive high ratings from independent rating agencies that analyze the financial soundness and claims-paying ability of insurance companies.
These ratings reflect our stability, integrity, long-term focus and commitment to maintaining a strong balance sheet.
All ratings information is current as of May 2018 and is subject to change. A.M. Best Company rating (second highest of 16 ratings); Fitch rating (third highest of 19 ratings); Moody’s rating (fourth highest of 21 ratings); Standard & Poor’s rating (fourth highest of 23 ratings).
For more information about the rating agencies and to see where our ratings rank compared to other ratings, visit securian.com/ratings.
Aa3EXCELLENT
Moody’s Investors Service
AA-VERY STRONG
Standard and Poor’s
AAVERY STRONG
Fitch
A+SUPERIOR
A.M. Best
ENTERPRISE HIGHLIGHTS
customers served
2017 ANNUAL REPORT 1
2 SECURIAN FINANCIAL
2017MESSAGE FROM THE CEO
“Our focus is clear: to give our customers confidence in tomorrow, so they can enjoy today.”
2017 was a year of tremendous progress for Securian Financial. We achieved strong financial results, expanded into new markets and advanced major strategic initiatives to prepare for the future. And I’m proud to share our 2017 annual report with you in our newly launched brand identity, representing who we are, what we stand for and where we’re going.
Strong financial performance While our brand is new, our financial strength is certainly not. Maintaining financial strength is central to fulfilling our purpose of helping our customers protect their loved ones and prepare for the future. We ended the year with $78.6 billion in assets under management and nearly $1.2 trillion of life insurance in force, representing our pledge to help secure the futures of the individuals, families and businesses who rely on us for peace of mind. We also paid over $5.3 billion in domestic statutory benefits. Providing these benefits is the reason we come to work each day and the most tangible way we help people build and protect their financial futures.
CHRISTOPHER M. HILGER, CHAIRMAN, PRESIDENT AND CEO
2017 ANNUAL REPORT 3
Christopher M. Hilger Chairman, President and Chief Executive Officer
18In addition to financial strength, Securian Financial delivered on the other characteristics that have defined us for generations: smart growth, high capital levels, excellent investment quality and thoughtful risk management. Attention to these fundamentals allowed Securian Financial to remain among the most highly rated insurance companies in the country and helped drive impressive revenue and earnings growth.
While our 2017 financial results reflect strong performance across our businesses and positive market performance, they also indicate our customers appreciate how we do business. Our customer satisfaction and retention levels remain high in the industry because of our high ethical standards and the personal, responsive approach we bring to each customer interaction.
Growth and expansion One of the highlights of the year was welcoming Canadian Premier Life and affiliates into the Securian family. This acquisition, the largest and first international transaction in company history, allows us to expand our leadership position in the financial institution market while providing potential growth opportunities for our other businesses. It also means we’re now serving nearly 19 million customers throughout North America.
In addition to our geographic expansion, we concentrated on the growth and distribution of our core insurance, investment and retirement businesses, all of which maintained or gained market share in 2017 within a highly competitive and rapidly changing industry.
Preparation for the future To continue to grow in our markets, we know our future success depends on innovation and our ability to stay forward thinking. That’s why we are forming new strategic partnerships and bringing together our people, processes and technology from across the organization to expand engagement with our stakeholders. From improved call center capabilities to enhanced marketing efforts to user-driven digital tools, we took major steps in 2017 to meet the changing expectations of our customers, distribution partners and employees.
Focused. Forward. Securian Financial is strong. We’re growing. We’re preparing for the future. Throughout these pages, you will see how our new brand helps us share why it’s such an exciting time at Securian Financial and how our extraordinary employees and distribution partners are helping protect and secure the future for millions of people across the United States and Canada.
Guided by our values and purpose, our focus is clear: to give our customers confidence in tomorrow, so they can enjoy today.
$6.1
$2.6$3.0
$3.6
$4.4
$2.4
$4.2$4.8
$2.2
$3.6
2013 20132014 20142015 20152016 20162017 2017
4 SECURIAN FINANCIAL
24% Operating earnings increased 24 percent to $309 million, driven by strong revenue growth and prudent expense management.
15% Equity increased 15 percent to $5.1 billion, driven by net income and increased net unrealized gains on investments. Our solid financial position protects benefit payments in case of adverse results.
Revenue increased 27 percent to $6.1 billion, demonstrating continued excellent retention and business growth across all of the key markets we serve.
Sales were very good in an increasingly competitive marketplace and complex regulatory environment. Insurance and annuity sales exceeded $1.0 billion and $2.6 billion, respectively, reflecting a diverse array of product, distribution and administration capabilities.
REVENUE ($ BILLION)
Securian Financial achieved steady performance in 2017 to deliver another year of solid results with increases in several key measures. Our financial position is strong, reflecting our ongoing operational and risk management discipline.
FINANCIAL AND INVESTMENT RESULTS
OPERATING EARNINGS3EQUITY2ASSETS UNDER MANAGEMENT
11% Assets under management increased 11 percent to $78.6 billion, due to strong sales, retention and market performance.
Annuity
Insurance
1 Sales generally represent annualized premiums, fund deposits and new asset deposits as applicable to specific products.2 Equity represents total Securian Financial Group, Inc. and subsidiaries equity.3 Operating earnings equal net income attributable to Securian Financial Group, Inc. and subsidiaries, less net realized investment gains, net of taxes.
SALES1 ($ BILLION)
2017 ANNUAL REPORT 5
Investments The quality of Securian Financial’s investments remains high, allowing us to serve the long-term interests of our customers.
Our investment approach is consistent with our risk management goals and philosophy. We combine a long-term market perspective with a balance between risk and reward. We focus on quality, diversification and competitive return.
Securian Financial’s investment portfolio is predominantly fixed income assets, which are primarily investment grade
FIXED MATURITY SECURITIES (% OF FIXED MATURITY SECURITIES)
INVESTED ASSETS (% OF INVESTED ASSETS4)
The quality of Securian Financial’s investments remains high, allowing us to serve the long-term interests of our customers.
4 Excludes separate accounts. 5 National Association of Insurance Commissioners.
59.7% NAIC5 1 A- to AAA
37.3% NAIC 2 BBB- to BBB+
2.5% NAIC 3 BB- to BB+
0.4% NAIC 4 B- to B+
0.1% NAIC 5 & 6 D to CCC+
74.1% Fixed maturity securities
13.5% Mortgage loans
9.9% Other invested assets
2.5% Equity securities
fixed maturity securities and mortgage loans. Our disciplined guidelines limit exposure to any single asset class, sector and issuer, while continuing to hold ample liquidity in our investment portfolio.
The size of our investment portfolio allows us to access and select from all asset classes, which provide a broad universe of attractive opportunities. We invest in asset classes that provide higher return potential in the long term while limiting overall credit, market and interest rate risk.
6 SECURIAN FINANCIAL
NEARLY
800,000CUSTOMERS SERVED
2017 ANNUAL REPORT 7
SERVICE EXCELLENCE
$669MIndividual life insurance domestic statutory benefits paid
87%Individual life insurance customer satisfaction
95%Individual annuity customer satisfaction
BUSINESS RESULTS
$173MIndividual life insurance direct premiums
$8.6BIndividual annuity assets under management
$35.5BSecurian Financial Network assets under administration
Putting familyfirst
INDIVIDUALS | FAMILIES | BUSINESS OWNERS
From the everyday moments to major milestones, we understand that our customers’ most valuable asset is family — however they define it. That’s why we provide life insurance, annuities and wealth management solutions that help them continue putting family first. Because when family is cared for, our customers can thrive.
2017
2018AND BEYOND.. .
Expanded offerings of hybrid insurance products, annuities, executive benefits and financial wellness solutions will continue to help customers put family first.
NEARLY
800,000CUSTOMERS SERVED
8 SECURIAN FINANCIAL
Making the workplace work for employeesWorkplace benefits are the foundation of many families’ financial futures — allowing them to focus on the moments that matter today. We provide employers group insurance, retirement plans and longevity solutions paired with decades of expertise in the creation of specialized benefits programs — helping employees love where they work and prioritize those they love.
6 As of December 31, 2017, based on direct group life insurance in force on a consolidated basis. Source: S&P Global Market Intelligence. This statistic reflects the insurance affiliates of Securian Financial Group, Inc., Minnesota Life Insurance Company and Securian Life Insurance Company.
BUSINESS RESULTS
$992BGroup insurance in force
$2.3BGroup insurance direct premiums
$20.1BRetirement plan assets under management
3rd largestDirect writer of group life insurance in the United States6
SERVICE EXCELLENCE
97%Retirement plan customer satisfaction
99%Group insurance customer satisfaction
2017
2018AND BEYOND.. .
New and engaging enrollment and financial wellness solutions will help employees take greater advantage of their workplace benefits.
EMPLOYERS | EMPLOYEES AND THEIR FAMILIES
2017 ANNUAL REPORT 9
NEARLY
9 millionCUSTOMERS SERVED
10 SECURIAN FINANCIAL
MORE THAN
9 millionCUSTOMERS SERVED
FINANCIAL INSTITUTIONS AND THEIR CUSTOMERS
2017 ANNUAL REPORT 11
BUSINESS RESULTS
$619MDomestic direct insurance premiums
$138MCanadian direct insurance premiums
More than
4,000Financial institutions offer our products and solutions
SERVICE EXCELLENCE
$248MDomestic statutory benefits paid
100%Domestic customer satisfaction
Helping customers be present in the here and nowMany people rely on their financial institutions to protect what matters to them. And those financial institutions look to us to provide sound solutions in a market that’s constantly on the move. Our insurance, credit and debt protection products help customers spend less time worrying about their finances and more time being present in the here and now.
2017
2018AND BEYOND.. .
Customers will have more opportunities to engage with us digitally. We'll bring these capabilities — along with expanded products — to more customers through expansion into adjacent markets. Financial institutions and affinity groups can expect a consultative approach to addressing customer needs.
INSTITUTIONAL INVESTORS
12 SECURIAN FINANCIAL
BUSINESS RESULTS
$40.9BSecurian Asset Management assets under management
$19.7BAAM assets under management
SERVICE EXCELLENCE
100%Of customers would recommend working with Securian Asset Management
98%Of customers would recommend working with AAM Insurance Investment Management
Institutional investors look to Securian Asset Management and AAM Insurance Investment Management to help them achieve their investment objectives. We take a long-term, collaborative and research-driven approach to help achieve steady growth, bringing decades of experience and providing tailored solutions to corporations, nonprofits, insurance companies, public funds and retirement plans nationwide.
Providing customized strategies
2017
2018AND BEYOND.. .
Customers will have access to broader pension solution capabilities, as well as our expertise in public and private fixed income, commercial real estate, alternatives and specialized insurance investments.
2017 ANNUAL REPORT 13
14 SECURIAN FINANCIAL
ENTERPRISE OVERVIEW
• Alternative investments• Commercial mortgage loans• Commercial real estate
debt and equity• Convertible bonds• High yield/bank loans• Investment grade
fixed income
• Securian Asset Management
• AAM Insurance Investment Management
Group insurance• Term, universal and
variable universal life• Critical illness, accident
and hospital indemnity• Accidental death and
dismemberment• Business travel accident Retirement solutionsRecordkeeping solutions• Defined contribution and
defined benefit plans• Fully bundled and
TPA-serviced plans
• Minnesota Life Insurance Company
• Securian Life Insurance Company
Individual life insurance• Universal: fixed, fixed
indexed, variable and survivorship
• Term• Whole• Hybrid life/long-term care
• Minnesota Life Insurance Company
• Securian Life Insurance Company
• Securian Financial Services• Securian Trust Company
Individual annuities• Variable, fixed, fixed
indexed and immediate Wealth management
• Investment advisory• Asset management• Brokerage accounts• Mutual funds• Trust services• Estate planning
COMPANIESPRODUCTS AND SERVICESMARKETS
• Non-registered group variable annuities and custodial accounts
Longevity solutions• Pension risk transfer• Defined contribution
income solutions Institutional solutions• Guaranteed investment
contracts• Fixed group annuity
contracts
• Pension solutions and liability-driven investing
• Private placements• Public and private
fixed income• Public equities
For financial institutions• Collateral protection• Consumer loan forms• Direct response, digital,
point-of-sale and call center services
• Vendor single interest
For their customers• Accident and sickness
insurance• Accidental death and
dismemberment insurance
• Minnesota Life Insurance Company
• Securian Life Insurance Company
• Securian Casualty Company• Allied Solutions• American Modern Life
Insurance Company• Southern Pioneer Life
Insurance Company• Canadian Premier Life
Insurance Company• Legacy General
Insurance Company
• Credit life, disability and involuntary unemployment insurance
• Credit property insurance• Debt protection• Guaranteed asset
protection• Mortgage accidental
death, disability and life insurance
• Term life insurance
Employers and employeesSERVINGPrivate and public employers, employees and their families
Individuals and familiesSERVINGIndividuals, families, executives and business owners
InstitutionalinvestorsSERVINGCorporations, endowments and foundations, insurance companies, mutual fund companies, pension plans, variable insurance providers, 401(k) and related separate account platforms
Financial institutions and their customersSERVINGBanks, credit unions, finance companies, mortgage lenders, other affinity groups and customers of financial institutions
2017 ANNUAL REPORT 15
CONDENSED CONSOLIDATED BALANCE SHEETSDecember 31, 2017 and 2016 in millions 2017 2016Assets
Total investments7 $ 22,472 $ 19,430
Total other assets 3,836 3,487
Separate account assets 24,924 21,350
Total assets $ 51,232 $ 44,267
Liabilities and Equity
Liabilities:
Policyholder benefits and funds8 $ 18,798 $ 15,944
Other liabilities 2,397 2,513
Separate account liabilities 24,924 21,350
Total liabilities 46,119 39,807Equity:
Total Securian Financial Group, Inc. and subsidiaries equity 5,087 4,434
Noncontrolling interests 26 26
Total equity 5,113 4,460
Total liabilities and equity $ 51,232 $ 44,267
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Years ended December 31, 2017, 2016 and 2015 in millions 2017 2016 2015RevenuesPremiums and policy and contract fees $ 4,588 $ 3,373 $ 3,074
Net investment income 832 763 724
Net realized investment gains 10 1 9
Other income 636 640 626
Total revenues 6,066 4,777 4,433
Benefits and expenses
Policyholder benefits 3,609 2,508 2,191
Dividends to policyholders and interest credited 481 446 407
Other operating costs and expenses 1,535 1,498 1,441
Total benefits and expenses 5,625 4,452 4,039
Income from operations before taxes 441 325 394
Income tax expense 19 75 111
Net income 422 250 283
Less: Net income attributable to noncontrolling interests 3 2 2
Net Income attributable to Securian Financial Group, Inc. and subsidiaries $ 419 $ 248 $ 281
7 Total investments includes cash, cash equivalents and invested assets.
8 Policyholder benefits and funds includes policyholder and contract holder benefits, funds, claims and dividends.
These condensed consolidated financial statements are derived from the company’s audited consolidated financial statements, which are prepared in accordance with generally accepted accounting principles (GAAP).
16 SECURIAN FINANCIAL
BOARD OF DIRECTORS
Wilson G. Bradshaw Retired President Florida Gulf Coast University Fort Myers, Florida
Committees: Corporate Governance and Public Affairs; Human Resources and Compensation; Non-Overlapping Directors
Mary K. Brainerd Retired President and Chief Executive Officer HealthPartners Minneapolis, Minnesota
Committees: Audit (Chair); Investment; Executive
John W. Castro Retired Chief Executive Officer Merrill Corporation St. Paul, Minnesota
Committees: Corporate Governance and Public Affairs (Chair); Human Resources and Compensation; Executive
Sara H. Gavin President, North America Weber Shandwick Minneapolis, Minnesota
Committees: Corporate Governance and Public Affairs; Human Resources and Compensation
Eric B. Goodman Retired Chief Investment Officer AEGON USA Cedar Rapids, Iowa
Committees: Audit; Investment
Christopher M. Hilger Chairman, President and Chief Executive Officer Securian Financial Group, Inc. St. Paul, Minnesota
Committees: Corporate Governance and Public Affairs; Investment; Executive
John H. Hooley Retired Executive Vice President/President SUPERVALU Retail Companies Eden Prairie, Minnesota
Committees: Human Resources and Compensation (Chair); Audit; Executive
Ronald J. Peltier Chairman and Chief Executive Officer HomeServices of America, Inc. Minneapolis, Minnesota
Committees: Human Resources and Compensation; Investment; Non-Overlapping Directors
Trudy A. Rautio Retired President and Chief Executive Officer Carlson Minnetonka, Minnesota
Committees: Audit; Investment (Chair); Executive
Robert L. Senkler Former Chairman and Retired Chief Executive Officer Securian Financial Group, Inc. St. Paul, Minnesota
Committees: Corporate Governance and Public Affairs; Audit; Investment
Paul L. Snyder Former Managing Partner KPMG LLP Minneapolis, Minnesota
Committees: Audit; Investment; Non-Overlapping Directors
2017 ANNUAL REPORT 17
SENIOR OFFICERS
Christopher M. Hilger Chairman, President and Chief Executive Officer
Bruce P. Shay Executive Vice President
Warren J. Zaccaro Executive Vice President Chief Financial Officer and Chief Compliance Officer
Gary R. Christensen Senior Vice President General Counsel and Secretary
George I. Connolly Senior Vice President Wealth Management Group
Robert J. Ehren Senior Vice President Individual Market
David M. Kuplic Senior Vice President Chief Investment Officer
David J. LePlavy Senior Vice President Treasurer and Controller
Kathleen L. Pinkett Senior Vice President Human Resources and Corporate Services
Rick L. Ayers Vice President Retirement Plans
Mark A. Baltes Vice President Technology Services
Barbara A. Baumann Vice President Service and Operations
Peter G. Berlute Vice President Enterprise Technology
Laurence G. Cochrane Vice President Retail Product Distribution
Susan L. Ebertz Vice President Enterprise Benefit Distribution
Kristi L. Fox Vice President Talent Solutions and Chief Diversity Officer
Craig J. Frisvold Vice President Individual Life and Annuity Operations
Siddharth S. Gandhi Vice President Chief Strategy and Enterprise Technology Officer
Mark J. Geldernick Vice President Law
William M. Gould Vice President Financial Institution Market
Suzette L. Huovinen Vice President Chief Actuary and Chief Risk Officer
Daniel H. Kruse Vice President and Actuary Individual Life and Annuity
Anthony J. Martins Vice President Career Distribution
Paul E. Rudeen Vice President and Actuary Group Insurance
David A. Seidel President Canadian Premier Life Insurance Company and Legacy General Insurance Company
Erica A. Bergsland Second Vice President Asset Management Research and Trading
Richard A. Binger Second Vice President Chief Architect and Technology Infrastructure
Michael P. Boyle Second Vice President Law
Kimberly K. Carpenter Second Vice President Wealth Management
Julio A. Fesser Second Vice President Facilities Services
Christopher R. Greene Second Vice President Financial Institution Group President, Securian Casualty Company
Gary M. Kleist Second Vice President Investment Operations
Karen A. Leighton Second Vice President Corporate Services
Andrea L. Mack Second Vice President Individual Product Solutions Group
Ann P. McGarry Second Vice President Enterprise Marketing
Susan M. Munson-Regala Second Vice President and Actuary Group Insurance
Kristi J. Nelson Second Vice President and Actuary Credit Protection
Ted J. Nistler Second Vice President Corporate Tax
Sean M. O’Connell Second Vice President and Portfolio Manager
Kent O. Peterson Second Vice President and Actuary Retirement
Daniel P. Preiner Second Vice President Corporate Compliance Officer and Chief Information Security Officer
Mark W. Sievers Second Vice President Chief Audit Executive
Mary Anne Smith Second Vice President Career Distribution
Craig M. Stapleton-Corcoran Second Vice President and Portfolio Manager
Mary L. Streed Second Vice President Human Resources Planning
Robert J. Subjects Second Vice President Career Distribution Recruitment
Stephen R. Thor Second Vice President Retail Market Technology
Michael J. Webster Second Vice President Technology Customer Experience and Insights
John A. Yaggy Second Vice President Assistant Controller
securian.com
400 Robert Street North, St. Paul, MN 55101-2098 ©2018 Securian Financial Group, Inc. All rights reserved.
F27027 Rev 5-2018 DOFU 5-2018 465049
INSURANCEINVESTMENTSRETIREMENT
At Securian Financial, we’re here for family. And we’re here because of it.
Family doesn’t have to branch from your tree, but it always shares your roots. Roots woven by common understanding, shared values and mutual respect. Like you, we believe a rewarding life is really about being present in the here and now, and that money isn’t the only thing when family is your everything.
Since 1880, we’ve been here for those who see family as their most valuable asset. Our longevity is a testament to the strength of our company. We’ve weathered economic ups and downs while staying true to our customers. We’re not publicly traded, so we can focus on you and what you care most about.
We believe your financial picture should support the everyday moments as much as the major milestones. That’s why our insurance, investment and retirement solutions give you the confidence to focus on what’s truly valuable: banking memories with those who matter most.
For information about the rating agencies, visit securian.com/ratings.
For information on our financial strength, visit securian.com/financials.
Customer satisfaction results are based on our customer surveys conducted in 2016-2017.
The Securian Financial Network, the marketing name for the sales and distribution arm of Securian Financial Group, Inc., its subsidiaries and affiliates, is a nationwide network of financial services firms. Products and services are offered and sold only by appropriately licensed entities and financial representatives.
Securian Financial is the marketing name for Securian Financial Group, Inc., and its affiliates.
Securian Financial Group, Inc. is the holding company parent of a group of companies that provide a broad range of financial services, including: • Allied Solutions, LLC• American Modern Life Insurance Company• Asset Allocation & Management
Company, LLC• Minnesota Life Insurance Company• Securian Asset Management, Inc.• Securian Casualty Company • Securian Financial Services, Inc.• Securian Life Insurance Company• Securian Trust Company, N.A. • Southern Pioneer Life Insurance Company