By Ed DePersis
Investment Manager, ISDA
Editor’s note: The following investment highlights and financial observations were compiled from the required 2021 financial statement. The financial statement is filed with insurance departments in ISDA-licensed states.
The year 2021 saw a continuation of generally low interest rates and limited supply of bonds with high interest rates. However, despite less-than-ideal conditions, ISDA Financial Life enjoyed robust success throughout last year.
Bonds remain the primary investment vehicle of life insurers because of their long-term nature and income stability in relation to other investments. ISDA Financial Life’s investment income, plus premium income earned from in force life insurance and the annuity premium, are used to fund activities and to strengthen overall financial growth. At the end of 2021, ISDA Financial Life assets exceeded $277,800,000, which represents a 41% increase when compared to 2020’s assets. (For reference, in 2012, assets were only at $61,074,033.)
Moderate amounts of preferred and common stocks are included in ISDA Financial Life’s investment portfolio to provide diversification. ISDA Financial Life’s strong investment portfolio produced a Net Investment Rate of Return of 4.95%, which will again be among the top interest rate returns for Fraternal Benefit Societies.
A portion of ISDA Financial Life’s investment income contributes to the profits, growth and stability of the fraternal association. Investment profits were realized from selected trading during 2020 and 2021, which bolstered overall income.
Insurance regulations require that much of the bond gains/losses must be annually amortized to the original maturity date of the security sold. While this prevents utilizing the gain in the sale year, it has built a large profit base that will provide an investment income base for years to come. At the end of 2021, the funds in this account totaled $16,079,821, an increase of $2,665,337.
ISDA Financial Life enjoyed a highly successful marketing year despite the lingering effects of the pandemic. A record annuity premium of $71,911,644 plus life premium income of over $404,000 was produced. Benefits paid to ISDA Financial Life members on Annuities, Life Insurance and Dividends amounted to $15,259,936. The total income from premium and investments less the benefits and operating expenses allowed ISDA Financial Life to increase assets owned by over $81,000,000. These gains represent continued and unprecedented growth for ISDA Financial Life.
During 2022, ISDA Financial Life assets will likely pass $300,000,000. (Note: It took 56 years to reach $100,000,000 in assets, but the second and third $100,000,000 took only 5+ years).
ISDA Financial Life primarily invests conservatively and safely in bonds, but for diversification, preferred stocks are $1,005,739; and common stocks are $3,933,714. The total combination of common and preferred stock is only 1.78% of ISDA Financial Life assets.
The net investment rate of return was 4.954%. Bond income produced was $10,933,691, an increase of $2,752,771 (33.6%) over 2020. ISDA Financial Life attempts to keep available funds fully invested, but due to market conditions, had $7,045,207 in cash at 12/31/2021. The Interest Maintenance Reserve account, representing security profits previously earned, now stands at $16,079,821. Portions of this amount will be annually released to income in future years. The fund also will act as a safety net if interest rates start to rise and bond sales are utilized to maintain interest income.
Like 2020, 2021 was a very unusual year. Work schedules and marketing had to adapt to the pandemic restrictions. Despite this, ISDA Financial Life persevered and continued to produce outstanding results during this relatively brief tenure.
ISDA members can have full confidence in the continued financial stability of the fraternal association.