Security Mutual Life is accelerating growth

BINGHAMTON — The year was 1886. Grover Cleveland resided in the White House; the Apache leader Geronimo surrendered, ending the last major U.S.-Indian war; The Big Apple celebrated its first confetti parade with the dedication of the Statue of Liberty; and Jacob’s Pharmacy in Atlanta sold the first Coca-Cola. 

 

Overseas, Karl Benz patented the first gasoline-driven auto.

 

On Nov. 13, 1886, Charles M. Turner founded the Security Mutual Life Association with eight local businessmen. Unlike a stock company, a mutual insurance institution is owned by the insured persons who become company members and are entitled to indemnification in the event of loss. On Jan. 3 of the following year, 

Security Mutual opened for business at 86 Court St. in downtown Binghamton.

 

The first customer was Charles E. Tichener, the founder of Tichener Iron Works in Binghamton. Tichener bought a one-year, renewable-term policy naming his wife as the beneficiary, which in the event of his death paid the widow $1,000. Security Mutual pocketed $38.06 in premiums on its first day of business. Within six months, the company had collected nearly $5,000 in premiums with $650,000 of insurance in force. By the end of that year, revenue hit the $15,000 mark with more than $1 million of life insurance in force.

 

Since the founding, “We have seen steady growth,” says Bruce W. Boyea, chairman, president, and CEO of Security Mutual Life Insurance Co. of NY. “By 1900, the company had grown to over $800,000 in revenue and sold nearly $30 million of insurance. [Almost a century later,] … when I became the president and CEO [in 1997], Security Mutual’s life insurance in force was approaching $20 billion and our assets were $1.4 billion. Last year, assets topped the $2.6 billion mark and [gross] revenue was $321.4 million … Just in the past 15 years, the number of policyholders has grown from 124,000 to 408,000. We expect to end this year with 473,000 policyholders … At the end of 2012, the company ranked 24th out of 800-plus life insurers in terms of the number of permanent life-insurance policies issued.

 

Accelerating growth is also reflected in other statistics as well. “In 1962, the average size of a life-insurance policy was $5,534. Today, the average ‘workplace’ policy is $30,000 and in the ‘advanced markets/traditional ordinary’ category, the average policy is $450,000,” says Frederick L. Wortman, executive vice president, administration and chief compliance officer at Security Mutual. “Depending on the category, our policyholders range between 40 percent and 60 percent men versus women.”

 

Boyea adds that “… the company’s capital has risen from $110 million to over $132 million in just five years [ending in 2012]. We have accomplished this growth while maintaining the company’s financial strength and stability. Protecting our policyholders for the long-term is our number-one priority … When many were buying up subprime mortgages, we opted not to participate, because they were new and there was limited information on their past performance, specifically, how they might perform during periods of economic stress … At the close of last year, 99.9 percent of the company’s bond portfolio was investment-grade, and our commercial mortgage portfolio hasn’t had a foreclosure in 15 years.”

 

Security Mutual offers a range of products including whole life, term, and universal life. The company also offers annuities; worksite products, such as payroll-deducted whole life, universal life, and accident insurance; and group products including life, short- and long-term disability, New York State Disability Benefits (DBL), and New Jersey State Temporary Disability Benefits (TDB). DBL and TDB are both mandatory benefits. In addition, the company offers products to voluntary emergency-service organizations and specializes in supporting financial-services institutions like credit unions. To round out its product offerings, Security Mutual in-sources products, such as long-term-care insurance and individual disability income. The company is licensed in all 50 states and in the Virgin Islands.

 

The keys to growth

How does a 127-year-old company accelerate its growth while investing conservatively? “Security Mutual stays focused on its core values,” says Boyea. “While many mutual companies rushed to convert to stock corporations in order to raise additional capital, we considered it best to keep our members as the owners … This company is also innovative in responding to a changing marketplace. Just two years after Security Mutual opened, we offered the first disability-income policy. Later on, we offered the first non-cancellable disability-income coverage up to age 65. We pioneered the idea of taking benefits in monthly installments, rather than in a lump sum. This was the [forerunner] … of the annuity concept. After World War II, the company created new pension coverage by bundling life, accident, and health insurance in one package. We were the first company to create ‘Jumping Juvenile’ policies, where the face amount was $1,000 until a child turned 21; then the amount jumped to $5,000.”

 

Just in the last few years, “Security Mutual has created an array of new products designed to meet the demands of the marketplace,” avers Wortman. “Our UL4U (universal life insurance policy) offers a death-benefit product that is both flexible and has no-lapse guarantees. The product allows the policyholder to accumulate cash that can be accessed and provides a benefit rider for chronic illness, a unique way to address some of the costs associated with the care of someone who is chronically ill. The company rewards the policyholder who makes regular, recurring premium payments by ‘enhancing’ the interest rates.”

 

“We also created a policy for those concerned with outliving their income,” continues Boyea. “This is an annuity product, commonly referred to as an immediate annuity, which can provide a guaranteed income for life without the loss of liquidity. You’re not locked in: You can access cash beyond the scheduled payments to cover emergencies or other issues. For those who need to know that their monthly expenses are covered in the event of death, we produced a monthly, income-term insurance policy designed to replace a beneficiary’s monthly income needs. We have shifted the policyholder’s mindset by responding to their concerns and by constructing the payments so that a portion of each monthly payment is income-tax free to the beneficiary.”

 

Security Mutual’s growth is also attributable to its investment in technology. “A major reason we are able to create new policies is because technology has changed the fundamentals,” notes Boyea. “The growth of our policy sales is only possible, because we have a world-class system. We do end-to-end processing, and we do it smoothly. Most things are done electronically to make it easy [both] for our agents and for the policyholders to access their information. To date, we have three patents pending to protect our intellectual property.”

 

“Our success is also due to our relationship with 320 general insurance agencies and their 5,000 licensed brokers,” adds Wortman. “We differentiate ourselves by creating a special relationship based on personal service. For example, qualified-retirement plans are very complicated. We offer consulting with our attorneys specializing in retirement planning, so that the clients and agents are comfortable with the process. We also communicate regularly on changes to the law and compliance issues. Educating our clients and agents is a major focus of Security Mutual, as is training. The company utilizes multiple forms of communications from the traditional printed newsletter to videos on succession planning, saving for college, key-person protection, retirement, chronic illness, and succession planning … We also encourage participation by our agents in regional meetings that we sponsor to explain the latest products and changes in the marketplace.”

 

Boyea reserves his ultimate explanation for the company’s success to its 343 employees. The chairman started in the insurance industry in 1975 and joined Security Mutual in 1995 as the vice president of the agency. He assumed the chairmanship in 1999. Wortman joined the company in 1990 and assumed his current position in 2007. The remainder of the executive team includes James J. Kerwin, executive vice-president and chief marketing officer; Marc. D. Novotney, executive vice president middle market and assistant to the president; Paul B. Pheffer, executive vice president, chief financial officer; F. David Mistretta, executive vice president, general counsel, and secretary; Dane C. Mitchell, president and chief operating officer of Security Administrators, Inc.; Gary W. Scofield, executive vice president, corporate actuary; and Scott A. Sylvester, senior vice president, chief information officer.

 

Security Mutual reincorporated back in 1898 when it changed its registered name to Security Mutual Life Insurance Company. In 1960, it added “of New York” to the moniker to distinguish itself from a company in Nebraska. Security Mutual has also created three subsidiary companies: Security Administrators, Inc. (SAI); SML Agency Services, Inc.; and Archway Technology Services, Inc. SAI monitors 700 corporate retirement plans, acting as a third-party administrator. SML Agency handles all of the in-sourced products, and Archway handles not only the technology for Security Mutual but also offers its services to other parties. Security Mutual maintains four offices: headquarters remains in downtown Binghamton at 100 Court St.; SAI has two locations, Spencer St. in Syracuse and Court St. in Binghamton; and the company has an office at 55 Broadway in New York City.

 

“This is a very, special company,” says Boyea. “We care about our policyholders, but we also care about our community. A company that has paid dividends for 122 consecutive years has also consistently supported dozens of area charitable organizations, including Achieve, the Boy Scouts, Habitat for Humanity, the Jim and Juli Boeheim Foundation, and our hospitals, to name a few. We are big supporters of the educational ‘Say Yes’ program, and we run an annual golf tournament that alone raises $33,000 for the Urban League, Catholic Charities, CHOW, and the Boys and Girls Clubs of Broome County. When ‘Super Storm Sandy’ struck, our employees not only made a contribution to the Red Cross but they also donated needed supplies and arranged for a truck, driver, and gasoline to transport the supplies to a relief center.”

 

Boyea is optimistic about the company’s future and its ability to continue to grow prudently despite the vagaries and challenges of the economy. He is also convinced that the best path for future growth is to follow the course that has guided Security Mutual for the past 127 years.        

 

Contact Poltenson at npoltenton@cnybj.com