The Trustmark Companies
Overview of 2015 Consolidated Results and Capitalization*
- More than 100 years in business
- 4,100 associates
- $2.1 billion in assets
- 2+ million covered lives or plan participants
- Rated A- (Excellent) by A.M. Best
Trustmark continued to make long-term strategic investments in 2015. For the past several years, Trustmark has deliberately exited the fully insured group medical market to focus on greater opportunities in expanding and emerging segments of the broader employee benefits market. These segments include self-funded health plan design and administration services for employers ranging in size from 10 to thousands of employees, payroll deducted voluntary benefits that protect financial well-being, and population health and corporate fitness management services.
Trustmark is also operating less as a holding company of separate businesses and more as an integrated enterprise providing a wide range of benefits to help businesses thrive and individuals enjoy greater well-being. As part of this transformation, the company has and continues to invest in technology infrastructure and enhanced information security, as well as multi-year technology projects to support future growth in two businesses, Voluntary Benefit Solutions
These investments, as well as unusually high loss ratios on the reinsurance portion of small-group self-funded plans, were among the factors that impacted overall financial results in 2015.
Trustmark generated $815.1 million in consolidated revenue, a decrease of $33.6 million from 2014. In Voluntary Benefit Solutions, a second consecutive year of sales over $70 million drove strong revenue ($294.7 million, down $5.0 million from the prior year). This year-over-year decrease was due to the disposition of a non-strategic block of policies sold through credit unions and a higher-than-expected rate of case terminations. CoreSource revenue increased by $4.4 million, to $129.5 million, due to strong sales of ancillary services. HealthFitness revenue dropped by $2.0 million, to $125.4 million. Despite slow health management sales, HealthFitness achieved its highest fitness management sales since 2010 and expanded health management service offerings with existing clients. The largest impact to consolidated revenue was in Starmark®
, where revenue fell by $28.8 million, to $256.2 million, following an exceptionally strong sales year for small-group self-funded plan administration services in 2014.
Reported pretax earnings of $41.1 million in 2015 were up $10.5 million from $30.6 million reported in 2014. The previously noted sale of a block of VBS policies resulted in a pretax gain of $11.4 million, which, along with expense management, offset the earnings impact of technology investments to support long-term business growth and value creation in Voluntary Benefit Solutions and HealthFitness.
The largest negative impact to earnings was in HealthFitness. During 2015, HealthFitness reassessed its technology strategy, taking into consideration the relative immaturity of the wellness market and the quickly evolving technology requirements. HealthFitness made the decision to wind down its internal project to develop new, customer-facing technology and instead establish a strategic technology alliance with Welltok, the leading consumer health enterprise platform company. This partnership includes Trustmark’s participation in Welltok’s most recent round of funding.
While this collaboration is expected to create an industry-leading solution by combining Welltok’s health optimization platform, CaféWell, with HealthFitness’ expertise in delivering face-to-face programs, health management and corporate fitness services, this strategic pivot requires that Trustmark write down the value of the internal technology investment by $32.0 million.
Including the asset write down and other, smaller tax and realized investment losses, net income for 2015 was $8.6 million, down $3.1 million from $11.7 million in 2014.
To provide capital for Trustmark’s long-term enterprise technology projects and other investments, Trustmark Insurance Company and Trustmark Life Insurance Company paid dividends in 2015 of $22.5 million and $15 million, respectively, to Trustmark Group, Inc., to be used by its non-insurance subsidiary, Trustco Holdings, Inc., and its affiliates. In addition, Trustmark Group, Inc. made a capital contribution of $1 million to Trustmark Life Insurance Company of New York.
Where required, these transactions received approval from the Director of Insurance of the State of Illinois.
Trustmark’s capital and surplus, a key measure of financial strength, increased by $6.0 million in 2015, from $666.3 million to $672.3 million. The company maintains a conservative debt-to-capital ratio of 11.7 percent, and an NAIC Risk-based Capital level of over 1,000 percent, more than five times the regulatory minimum.
On April 1, 2016, independent rating agency A.M. Best affirmed Trustmark’s A- (Excellent) financial strength rating and stable outlook, noting the company’s “trend of operating profitability, robust risk-adjusted capitalization and diverse business profile.”
*Represents the consolidated financial results of Trustmark Mutual Holding Company for the 2015 calendar year.