Metamorphosis

2012 annual report

letter

FROM

THE

PRESIDENT

LETTER

evo-lu•tion \,ev-e’lu-shen. n (1622) 1 a: a process of change in certain direction :

unfolding b: the action or an instance of forming and giving something off:

emission c (1) a process of continuous change from a lower, simpler to a higher,

more complex, or better state: growth (2): a process of gradual economic advance

d: something evolved 2: the process of developing

Dear Friends,

In business, as in life, those who are able to adapt to their environment are the ones who survive

and thrive. I’m happy to tell you that while our economy, our country and our world were in upheaval,

Companion Life continued to grow and prosper. This is not mere happenstance. We foster a

culture of adaptability that enables us to seize opportunity when it appears.

When health care reform first appeared on the horizon as a viable possibility, Companion Life

prepared for it as an eventuality. Leaders kept abreast of the changing marketplace, including the

plan for health exchanges. Our company began in a position of strength because our life insurance

and ancillary products were already available directly through brokers. With the Affordable Care

Act now a reality, health plan partners have a renewed interest in ancillary products. Having seen

this coming, we prepared by expanding our voluntary programs. And we continue to do so.

The past year saw us introduce our Voluntary Life 5-year premium rate lock. We added non-standard

industries to our Voluntary Short Term Disabilities plans and improved our enrollment package.

Our Web-based, small group enrollment with product-specific videos will follow shortly. And we’re

now able to work with most online enrollment vendors. As always, communication with brokers,

group administrators and our individual clients is critical. This is an area of focus for us.

It was another prosperous year in 2012 as we continued to build upon our successes through

planned, controlled growth and expansion – always looking to the future and the opportunities

that lay ahead. In 2012, our gross premiums totaled $543 million. This surpassed our 2011

record high by $33 million. Additionally, our 2012 pretax income is up 35 percent from

2011 to $18.5 million. And for the 12th consecutive year, Companion Life has earned an A+ superior

rating from A.M. Best.

With your help, we are ready for a future that includes health care reform. We seized opportunity

whenever it appeared. And we were able to thrive amid the changing business and political

landscape. It is due to the strength of our business partners, like you, that Companion Life continues

to evolve and succeed. Thank you.

Sincerely,

Trescott N. Hinton Jr.

President, Companion Life

letter

from

the

president

products

LIFE

DISABILITY INCOME

DENTAL

VISION

SPECIALTY MARKETS

PRODUCTS

growth \’groth\ n (1557) 1 a (1): a stage in the process of growing: size

(2) : full growth b: the process of growing c: progressive development:

evolution d: increase, expansion 2 a: something that grows or has

grown b: outgrowth d: the result of growth: product 3: a producing

esp. by growing

m Group Term Life Insurance and Accidental Death and Dismemberment (AD&D) A variety of plans that

work for groups of all sizes. This program is flexible in design, with competitive rates and guaranteed issue

amounts.

m Voluntary Group Term Life Companion Choice Plus A freestanding program for groups with as few as five

enrollees. It provides broad coverage for families — depending on the level of employee participation and

group size — and also has an AD&D option. Five-year premium rate lock available.

m Short Term Disability (STD) Flexible STD plans for when employees become sick or injured and aren’t able

to earn income. Plans are available as a freestanding product or as a part of a larger benefits package. Partial

disability included. Maternity covered as any other illness.

m Voluntary Short Term Disability Available to most employee groups, this voluntary plan offers high benefit

levels with a wide choice of elimination periods and durations. Maternity covered as any other illness. Under

this plan, Companion Life pays benefits when an employee is disabled because of injury or illness. Voluntary

STD plans include partial disability and age entry freeze in most states.

m Long Term Disability (LTD) Available to groups of all sizes; can be offered as a freestanding product or part

of a benefits package. The True Group LTD plan features competitive rates, a variety of designs, and options

such as cost-of-living increases, “own occupation to age 65,” residual benefits and benefit indexing. All LTD

plans also include DisabilityGuidance, an employee assistance program that helps members cope with job

pressures, financial or legal difficulties and stress in the home.

m Voluntary Long Term Disability Comprehensive voluntary LTD coverage funded through payroll deduction

with our Companion Cornerstone Plan. All LTD plans include DisabilityGuidance.

m Dental by Design® An innovative portfolio of dental insurance products that lets employers with groups of

10 or more create their own plans. Includes three standard base plan options — all allow members to use

their dentists of choice. Employers can also customize any plan for their employees by modifying many core

policy provisions. Retiree dental option allows retiring employees to continue their dental coverage.

m Dental “Cents” Small Group Dental Plan A comprehensive dental benefits plan for groups of two to nine

employees. It offers freedom of choice when it comes to dentist preference and plan choice. Employers

choose between three plans for their active, full-time employees working at least 30 hours a week.

m Companion Global Dental® An option for dental care that offers services at accredited international medical

facilities. Patients enjoy significant savings, and Companion Global Dental works with agents, employers,

individuals and third party administrators to make the process easy. Companion Global Dental comes with

all Companion Life Dental plans.

m Voluntary Dental Insurance Groups of three employees or more, or 20 percent of the eligible group

participating, whichever amount is greater, are eligible to choose between two affordable plan options.

The Advantage Plan pays 100 percent of allowable charges for preventive services such as routine cleanings,

80 percent of allowable charges for basic services such as fillings, and 50 percent of allowable charges for

covered major services such as root canals, after a combined $100 lifetime deductible (for all covered services).

The Premier Plan offers all Basic Plan coverage plus comprehensive coverage of major services, has a lifetime

deductible of $100 and can include takeover benefits from other plans.

lIFe

Insurance

dIsaBIlItY

IncoMe

plans

dental

plans

m Vision Discount Plan This EyeMed Vision Care® plan is provided at no additional cost with all Companion

Life dental plans as a value-added benefit, even if dental groups don’t purchase a funded vision plan.

m Vision by Design® Created in collaboration with EyeMed, whose network includes more than 26,000 private

practice and major optical retail locations in the U.S. Groups can offer Vision by Design products on a voluntary

basis or on an employer-paid basis. Options are flexible and fit nearly any size budget.

m Hearing Services Plan This plan is provided at no additional cost to employees enrolled in any Companion Life

dental plan. It combines unlimited choice with quality and value, and may be extended to any family member.

m Specific and Aggregate Medical Stop Loss Flexible coverage for self-insured companies wanting to assume

part of the risk for their employees’ health care claims. Includes extensive choices with specific plan limits.

Aggregate stop loss is available to cover the employer’s risk once all employee claims accumulate and reach

a selected amount.

m Major Medical Flexible, comprehensive health plan options for small and large employers.

m Limited Benefit Health Plan Indemnity structured plans for small employers seeking a more affordable

health plan, larger employers seeking an affordable way to insure part-time and temporary employees, or

professional associations looking to provide additional benefits to members.

m Student Accident and Sickness Flexible health plan options offered to colleges and universities to provide

health insurance benefits for their students. The benefits are offered for both domestic and international

students and are available on a mandatory, hard waiver or voluntary basis.

m Aggregate Only A transitional stop loss product. It helps a small employer transition from fully insured

benefits to a self funded plan.

m Occupational Accident insurance provides workplace injury coverage for an employer that has non-subscribed

or “opted-out” of the Texas Workers’ Compensation system. Standard coverage includes accident medical

expense, AD&D and accident disability.

m Short Term Medical Designed to provide individuals with comprehensive medical coverage on a short-

term basis. Coverage could be for days or up to several months. It provides affordable insurance options for

individuals who are unemployed or recently graduated, or as an alternative to COBRA.

m Critical Illness Created to complement the mini-med plans and offer employers additional flexibility by

providing coverage for catastrophic illness.

m RX Carve Out A fully insured prescription drug program which provides stand-alone prescription coverage.

VIsIon

plans

HearInG

specIaltY

MarKets

products

FInancIals

meta•mor•pho•sis \,met-e-’mor-fe-ses\ n, (1533) 1 a: change of

physical form, structure, or substance esp by supernatural means

b: a striking alteration in appearance, character, or circumstances

2: marked and more or less abrupt developmental change in the form

or structure of an animal (as a butterfly or a frog) occurring subsequent

to birth or hatching

statement

of

admitted

assests,

liabilities

and

surplus

Statutory Basis (in thousands)

December 31,

2012 2011

ADMITTED ASSETS

Bonds $ 83,549 $ 81,603

Common stocks 44,098 43,759

Cash 41,275 49,071

Short-term investments 15,630 1,632

Receivable for securities 565 –

Reinsurance receivables and reinsurance funds held 704 788

Net deferred tax recoverable 549 1,427

Premiums due, deferred and uncollected 1,154 609

Investment income due and accrued 964 1,000

Other assets 15,290 6,907

Total admitted assets $ 203,778 $ 186,796

LIABILITIES

Aggregate reserves for future policy benefits:

Life, annuity and supplementary contracts $ 7,878 $ 7,932

Accident and health 277 16

Policy claim reserves:

Life 3,422 3,291

Accident and health 22,052 19,163

Premiums received in advance 388 747

Commissions to agents due or accrued 2,208 1,947

Experience rating refunds 2,760 1,382

Taxes (excluding federal income), licenses and fees 8,398 10,283

Asset valuation reserve 6,335 4,175

Interest maintenance reserve 257 112

Federal income taxes 2,217 2,347

Funds held under coinsurance 13,108 15,570

Other liabilities 13,794 9,869

Total liabilities $ 83,094 $ 76,834

STOCkHOLDER’S EquITy

Common capital stock 2,500 2,500

Contributed capital 20,452 20,452

Unassigned surplus 97,732 87,010

Total stockholder’s equity 120,684 109,962

Total liabilities and stockholder’s equity $ 203,778 $ 186,796

Statutory Basis (in thousands)

Year Ended December 31,

2012 2011

REVEnuES

Premiums $ 181,820 $ 177,776

Net investment income 3,773 4,371

Net realized capital gains (losses) 672 (459)

Other revenues 13,680 12,891

Total revenues $ 199,945 $ 194,579

BEnEfITS AnD EXPEnSES

Death, annuity and accident and health benefits $ 121,712 $ 120,092

Increase in aggregate reserves for future policy benefits 197 560

Commissions 33,804 31,591

Salaries and general insurance expenses 22,806 24,172

Taxes (excluding federal income), licenses and fees 3,343 4,380

Increase in loading 74 2

Total benefits and expenses $ 181,936 $ 180,797

Income before federal income taxes $ 18,009 $ 13,782

Provision for federal income tax $ 5,551 $ 5,085

net income $ 12,458 $ 8,697

statement

of

operations

fred Wise, Director of MarketingLebanon, Ohio888-470-4212Fax: 888-470-4715

Charles Gragg, Director of MarketingHendersonville, Tennessee888-472-7150Fax: 888-472-7118

Jim Walter, Director of MarketingOverland Park, Kansas800-276-1249Fax: 800-315-1793

Jack Trook, Director of MarketingScottsdale, Arizona800-705-5964Fax: 866-618-7879

Al Curnow, Director of MarketingEast Greenwich, Rhode Island877-803-5799Fax: 401-886-7475

Larry Wood, Director of MarketingPeoria, Illinois309-338-9365Fax: 803-735-0736

Everett “Skip” Eynon III, Director of MarketingColumbia, South Carolina800-753-0404, ext. 45012Fax: 803-735-0736

J.C. Preas Jr., VP of Field SalesBrad Wells, Director of MarketingRoanoke, Virginia800-556-2541Fax: 800-447-6483

Phil Gardham, VP of Specialty MarketsAustin Scott, Director of MarketingColumbia, South Carolina800-753-0404Fax: 803-264-8232

regional

offices

specialy

markets

companion life insurance company

p.o. box 100102 columbia, sc 29202-3102

phone: 800-753-0404 fax: 803-735-0736

email: c.life@companiongroup.comwebsite: www.companionlife.com