Pension Risk Transfer

In 2024, the Department of Labor reviewed the ‘safest available annuity’ standards from its decades-old bulletin to help plan sponsors, fiduciaries and independent experts like you.

At Western & Southern, we believe we’re well positioned to meet the DOL standards -- past and proposed. You see, we help companies address their pension situation, by providing them the pension risk transfer solutions they need … the personalized service they want … and the onboarding experience they deserve. It’s all part of our commitment to quality for you and the people who count on you. Take a closer look to learn more.

ENDURING HERITAGE
Our heritage is our pride. Founded in 1888 as the Western and Southern Life Insurance Company – our company is built on the bedrock of 7 strong insurers. Two proudly support our PRT solutions. Our organization encompasses thousands of associates … serving millions of customers. And our PRT business is a robust part of that equation.

RATINGS POWER
Our strength checks many boxes. From being on the Fortune 500 to strong independent rankings by credit rating agencies that rate our insurance companies and are registered as NRSROs with the SEC. In fact, we’ve been rated A or higher by A.M. Best for almost 100 years.

CAPITAL STRENGTH
Our capital is our cornerstone. The strength in our numbers buttresses our ability to pay on our promises. Including billions in assets and more than triple the capital-to-asset ratio of our competitors. All this makes us one of the strongest life insurers in the world.

MUTUAL ADVANTAGE
Beyond the numbers, we believe in the added advantages of being a mutually held life insurance group. Our primary obligation is to policyowners – not stockholders. With no market pressures for quarterly earnings that may prioritize short-term results. Just a long-term outlook that consultants, companies, and clients can count on.

At Western & Southern, we help our customers achieve their financial goals, and we do so by establishing trust. Western & Southern is built on a rock-solid foundation, with a formidable balance sheet. We have a team you can count on to help ensure the promises made to your employees hold true – today and in the future. It’s part of our culture of doing business – the right way. So when it comes to meeting pension promises, let our strengths be yours.

As a professional in this business, you’re following the issues raised by the 2023 Advisory on Employee Welfare and Pension Benefits Plans. You understand that Secure Act 2.0 has spurred ongoing discussion, specifically by its directing the DOL to determine whether amendments to IB 95-1 may be warranted.

As that process continues to unfold, we’re looking ahead. We know certain capabilities have emerged as ones that merit consideration. And we’re proud to share where we “check the boxes.”

OWNERSHIP STRUCTURE
Ownership structure is one consideration. Organized as a mutual insurance holding company, we’re neither publicly traded nor private equity owned. That means we operate free of pressures that may emphasize short-term results. Instead, we choose to be strategically conservative – managing our enterprise in a manner favoring sustained performance that prioritizes protecting policyholders.

Considered in context of other common forms of ownership, our mutual holding company structure generally translates to:

• Being better capitalized
• Valuing a longer-term, “policyholder-centric” orientation toward sustainable growth

• Advancing business practices and pursuits guided by the creation of value for the benefit of policyholders and contract owners

What won’t you find with a mutual holding company? Dividends to public investors. Distributions to private equity owners. Loyalties that may be divided. Interests that may lack alignment. In considering the selection of a guarantor, it’s fair to ask … “who comes first?”

INVESTMENT PRACTICES
Use of non-traditional investments is another consideration. Care … prudence … rigor … accountability … all are the hallmarks of our orientation to the evaluation and ownership of any asset, non-traditional or otherwise. We uphold standards both demanding and discriminating as we seek highly competitive investment performance paired with capital preservation and efficiency.

A well-defined risk management framework provides the foundation for our investment success. The ability to generate strong investment performance in a capital efficient manner is critical because it translates into the ability to support competitive pricing.

Astute investment management is reflected in our return on assets. Outperformance relative to select higher-rated mutual company peers stands out.

BUSINESS MIX
Business mix and related implications for liability portfolio is yet another consideration. Our broad business diversification – across products, distribution channels, markets, and brands – continues to provide balance and strength through all market cycles.

The composition of our liability portfolio is intentionally diverse and conservative. Our steady dual emphasis on lower-risk traditional types of life insurance and annuities is designed to balance cash flow requirements, supported by an extensive proprietary framework of asset liability management and analysis. Blocks of life policies can serve as a counterweight to annuities for managing mortality, longevity and interest rate risks.

Further, our best-in-class risk management practices overlay market dynamics with a consolidated view of liabilities in establishing strategic asset allocation. Key indicators for aggregate risks are monitored and managed to realize synergies between liability offerings. Exposure is spread over contracts, products and customers.

We manage for balance. We believe product diversification builds business strength.

REINSURANCE PRACTICES
Use of reinsurance – particularly offshore arrangements – is still another consideration. 100 percent U.S. owned and operated, we have no captive or affiliated reinsurers. Our reinsurance partners comprise established providers.

We carefully limit our use of reinsurance transactions to solutions designed to manage and mitigate specific risks – rather than seek to take advantage of less stringent offshore reserve and capital requirements. Doing so enables us to maintain a conservative, desirable risk profile.

Moreover, reinsurance of PRT liabilities to date is simply not our practice.

Our reinsurance boundaries – defined in part by what we don’t do – demonstrates our discipline. Practices from which we refrain help keep our risk exposure “in check."

With a heritage extending back more than 136 years, Western & Southern demonstrates its abiding belief in long-term commitments. Mindful of such, we approach our obligations to the well-being of our customers with the utmost diligence, prudence and perseverance.

Our broad business diversification across products, distribution channels, markets and brands, continues to offer balance and strength through all market cycles. And our best-in-class risk management and astute investment management is embedded in everything we do, ensuring we will be there for our customers.

When making promises that extend for decades, sound judgment, sensible practices and demonstrated financial wherewithal are paramount. What matters most to fiduciaries matters most to us. We’re proud of that our business practices and operating performance check essential boxes.

As a professional in this business, you understand that “risk management” is at the core of pension risk transfer. And “risk management” is at the core of Western & Southern and all it does. Let’s explore various aspects of how Western & Southern checks the boxes for risk management.

SUPPORTING OUR PRODUCT PROMISES
Supporting our product promises is strong and sophisticated asset-liability management. Hallmarks of our approach and the essentials by which we implement it include:

• Managing balance sheet exposures through a proprietary risk management framework integrated with internal capital modeling
• Focusing on downside protection of key risks
• Incorporating rigorous stress testing and liability crediting rate management
• Practicing careful liquidity planning and ensuring ample sources of contingent capital
• Employing cash flow testing to monitor for positive, stable margins across all economic scenarios

SETTING OUR PRACTICES APART
Planning for the unexpected is essential. Disciplined enterprise risk management underpins our strategy development and decision-making. That orientation is evidenced in practices centered on:

• Risk measurement and monitoring
• Capital management
• Risk ownership and accountability
• Incident and crisis response

Stringent liability diversification and robust asset-liability management help reduce our exposure to enterprise risk. Consistent growth in capital and embedded profits solidifies our rock-solid claims-paying ability. A fortress-like level of capital helps offset risk associated with our liability profile and investments.

Defining characteristics of our risk management program include:

• Extremely low product risk in the context of capital levels
• Diversification across product lines, distribution channels and risk categories to further mitigate risk
• Product margin discipline is maintained and the product portfolio is continuously rationalized
• Minimal exposure to high risk, long-term product guarantees
• Robust and defensively focused asset-liability management
• A long-established practice of accumulating more capital than peers in order to better protect clients and secure future options
• A long-term focus with a measured tolerance for periodic market volatility
• Access to multiple sources of additional capital ensures financial flexibility

CYBERSECURITY: UNDERPINNING CONFIDENCE AND SUCCESS
The information technology we employ to safeguard confidential information is critical to the confidence of our customers and to the success of our enterprise. Striving to help achieve and maintain the highest level of security, our associates are responsible for adhering with our cybersecurity policies, processes and procedures.

All associates regularly complete Information Security Awareness Training. Areas of concentration for Information Security defenses are wide ranging in scope and depth.

Our organization is built on a bedrock culture of creating value for stakeholders and executing with proficiency. As such, checking all the boxes for policyholder safety and security must always be at the forefront of our decisions and efforts.

That’s the only way Western & Southern knows how to do business. And that’s why our strong enterprise risk management framework is embedded in everything we do.