A statement by John F. Barrett, Chairman, President and Chief Executive Officer of Western & Southern Financial is given below. The statement has been taken from the company’s 2006 annual report.
For the year ended Dec. 31, 2006, we achieved record GAAP financial results with net income of $306.1 million on revenues of $2.69 billion compared to net income of $267.8 million on revenues of $2.44 billion for 2005. This represents a 14 percent increase in net income. Pretax operating earnings of $280.5 million (also a record) were up $50.9 million, or 22 percent, over pretax operating earnings of $229.6 million in 2005.
Full-year combined life insurance premium, annuity and mutual fund sales of $5.4 billion also reached record proportions, as life insurance premium and annuity sales increased 6.6 percent to $2.8 billion while mutual fund sales reached $2.6 billion, up from $1.1 billion the year before.Total assets owned, managed and under our care reached $47 billion (corporate-owned assets totaled $32.2 billion) and GAAP net worth was $5.2 billion – all record year-end highs.
A number of strategic initiatives fueled our strong performance in 2006:
- The Lafayette Life Insurance Company completed its first full year as a member of the Western & Southern family;
- We successfully moved Integrity Life Insurance Company from Louisville, Kentucky and integrated it into our Cincinnati operations (Integrity did not miss a beat, enjoying its best year ever);
- We acquired and consolidated the Constellation Funds Group into Touchstone Funds, pushing total mutual fund assets to $8 billion;
- Eagle Realty Group opened downtown Cincinnati’s first new office building in 14 years (now substantially rented); and,
- We commenced negotiations for the sale of Integrated Investment Services, our mutual fund servicing subsidiary, to JPMorgan Chase. The sale was completed during the first part of 2007.
Despite these initiatives, we continued to carefully manage expenses, keeping our five-year compound annual expense growth rate to 3 percent.
From a historical perspective, we have come a long way. From 1888 to 1982, we built a good business in the moderate- and middle-income markets, selling primarily smaller life insurance policies. But, the times changed and so did we.The key transition year for us was 1982 when we radically changed our business model.We stopped selling weekly premium policies and started selling larger universal life policies. Also in that same year, we purchased what is now Columbus Life Insurance Company. These changes were momentous and expanded our already solid customer base to include greater penetration in the middle market and gave us entrée into the upper middle-income and affluent markets.
The incredible changes brought about by technology improvements and lifestyle changes have impacted the markets we serve. In response, we have greatly diversified our product mix, adding investment, income and retirement solutions to our individual portfolio, and we also entered the institutional investment business. We have worked hard to develop a unique culture that permeates all facets of our corporate headquarters. It is defined by hard work; disciplined, sensible decision making; teamwork; top-notch service; and, the continuous upgrading of our businesses. We favor the long-term outlook over the short term, and we are energized by our ever-improving financial and market performance. However, there is little room for ego, politics or complacency. Simply put, we are trying to create outstanding value for our policyholders and clients as well as the ideal place for a long-term career for our associates, who are the key to our success.
In the traditional life insurance world, innovation too often only means new products. We believe innovation means much more, and we will continue to push ourselves to find new and better ways to do more business with more and more clients.
We entered 2007 with a sharpened focus on our core businesses in order to take full advantage of market opportunities, particularly the burgeoning retirement market. As part of this focus, we made several executive management changes effective March 2007. Among those, Lawrence L. Grypp, who has served as president and chief executive officer of Columbus Life and Lafayette Life, is focusing his chief executive officer responsibilities on Lafayette Life while continuing to have responsibility for our affiliate, Capital Analysts Incorporated, in Radnor, Pa. J. J. Miller, CLU, ChFC, FSA, senior vice president who has held several senior positions at Western & Southern since joining us in 1970, has assumed the leadership of Columbus Life as president and chief executive officer.
Western & Southern has grown substantially through a combination of organic growth and acquisitions, the cultivation of small ideas into highly successful businesses, diversification, solid investment performance and strong expense management. We closed 2006 in the best financial condition in our history, positioning us well to weather any economic challenges which we may encounter.
Our impressive financial performance continues to make us one of the 10 highest rated life insurance groups in the world based on our Standard & Poor’s rating. Our forward-thinking perspective positions us well for continued growth as we build this outstanding organization into an even more robust financial services powerhouse.