2018 Annual Report DOH

2018 Financial and Fraternal Report

in the Making years

President’s Message

I am pleased to share with you our 2018 Financial and Fraternal Report.

For over 150 years, sound financial stewardship has inspired our mission and guided our decisions. We make promises to our members – to be there when you need us most – which requires prudent, fiscally conservative financial management.

2018 was a year of exceptional financial growth and outreach including:

• Increased net income 19 percent to $14.3 million resulting in over $99 million in surplus, the largest in our history. • Raised, matched and donated nearly $1.7 million to benefit parishes, schools and local charities. • Awarded more than $283,000 in educational scholarships and sponsored nearly 2,600 member activities. Our mission … serving God through serving others, providing financial security, and enhancing quality of life … has never been more relevant nor more needed. For it is through the combination of stewardship and service, working with members and through members, that we impact tens of thousands of lives. Thank you for your continued membership and for being part of something greater than yourself. May God continue to bless you and those we serve for generations to come.

2018 was a year of exceptional financial growth and outreach…

Fraternally,

William R. O’Toole President & CEO

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Financial Report We made history in 2018, as net income and surplus grew to record levels. In addition, total adjusted capital and the risk-based capital ratio reached all-time highs. These results affirm our tradition of financial strength and sustainability to better serve our Society and its members. • Net income rose 19 percent to $14.3 million in 2018, up from $12.05 million in 2017 • Surplus increased 13 percent from $88 million to more than $99 million, the highest in the Society’s history • Total adjusted capital was more than $110 million in 2018, up from $99 million in 2017 • Risk-based capital (RBC) ratio increased to 949 percent from 930 percent in 2017 • Our persistency, a reflection of our members’ loyalty and recognition of the value they receive, remains high at 96.5 percent • Kroll Bond Rating Agency reaffirmed our A- financial strength rating and stable outlook

Net Income (in millions)

15.0

14.3

12.05

12.0

11.6

9.0

6.0

$ in Millions

3.0

0.0

2016 2017 2018

Total Adjusted Capital (in millions)

120

110.0

100

99.0

80

79.9

60

40

$ in Millions

20

0

2016 2017 2018

[3] THANK YOU FOR BEING A PART OF SOMETHING GREATER THAN YOURSELF.

Statement of Operations As of December 31

Revenues

2018

Life insurance premiums

$39,678,176 30,608,428 9,292,044 $79,578,648

Annuity deposits

Other premiums and deposits

Total Premiums Earned

Investment revenue

$75,020,240

Other revenues Total Revenues

188,488

$154,787,376

Benefits and Expenses Insurance benefits paid to members and beneficiaries $113,161,284 Additions (reductions) of insurance policy (22,629,373) reserves net of interest paid to members Field sales support costs 6,626,035 Fraternal benefits and expenses 2,575,315 Operating expenses 13,681,135 Total Benefits and Expenses $113,414,396

Gain from operations before dividends and interest

$41,372,980

paid to members Dividends and interest

27,348,048 14,024,932

Gain from operations before investment results

Net realized capital gains

282,594

Net Income

$14,307,526

Financial Statements

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Statement of Financial Position As of December 31

Assets Bonds

2018

$1,523,462,478

Mortgage loans

20,489,453 28,175,361 1,278,425 9,754,747 17,281,825 27,564,096

Policy loans

Preferred stocks Common stocks

Other long-term investments Cash and short-term investments Total Cash and Investments

$1,628,006,385

Home office, at cost net of depreciation Investment income due and accrued

$5,471,087 17,490,590 2,348,337

Other assets Total Assets

$1,653,316,399

Liabilities Policy reserves

$1,456,703,224

Interest maintenance reserve

10,186,279 12,397,333 55,397,651 8,205,753

Premiums received in advance and on deposit Members’ and beneficiaries’ funds on deposit

Other liabilities

Total Liabilities and Reserves

$1,542,890,240

Surplus

$99,357,420 11,068,739 $110,426,159

Asset valuation and other reserves

Total Adjusted Capital

Total Liabilities and Surplus

$1,653,316,399

[5] THANK YOU FOR BEING A PART OF SOMETHING GREATER THAN YOURSELF.

The Society has raised, matched and donated close to $1.7 million for parishes, schools and local organizations.

[6]

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Fraternal Report

As a member-owned life insurance company, we are different… different by design. Making a positive impact in the community, through inspiring service, is at the heart of our mission. We fulfill this mission by:

Volunteering to make a positive impact in communities is something we have encouraged for 150 years. In fact, it’s part of our mission – serving God through serving others and enhancing quality of life. In 2018, we lived that mission by providing members with value-added benefits, such as scholarships totaling more than $283,000, and financial support to schools of more than $572,000. Members also volunteered to help raise more than $883,000 for parishes and other nonprofits that serve the community. Through the commitment of our nearly 140,000 members and network of 223 all-volunteer lodges/service clubs across the country, the Society: • Raised, matched and donated close to $1.7 million for churches, schools and local organizations ; and, • Volunteered nearly 96,000 hours with an economic impact of almost $2.4 million Outreach – ur Commitment to Communities • Sponsored nearly 2,600 lodge/service club activities ;

S U P P O R T I N G E D U C A T I O N H E L P I N G T H O S E W I T H S P E C I A L N E E D S S E R V I N G T H E P O O R

$2.3 million in 2018

28% 25% 20% 14% 13%

INDIVIDUALS & COMMUNITY CAUSES SCHOOLS PARISHES AND FAITH-BASED CAUSES LOCAL MEMBERSHIP ACTIVITIES SCHOLARSHIPS

[7] THANK YOU FOR BEING A PART OF SOMETHING GREATER THAN YOURSELF.

Your Guide to Using RMDs for Qualified Charitable Distributions

With all the recent tax changes, financial planning can be daunting. Developing a sound strategy for determining where your distributions go can help you take control, especially when it comes to your retirement accounts. Individuals with retirement accounts, such as 401(k)s or traditional IRAs, are required to withdraw a certain amount every year once they reach age 70 ½. This amount – called a Required Minimum Distribution, or RMD – is taxed by the IRS as ordinary income, which means it’s added to your total taxable income for the year. However, you may be able to reduce the effect of the RMDs on your income by making Qualified Charitable Distributions. This allows you to exclude the amount payable to the charity from your income. Qualified Charitable Distributions are especially compelling considering recent tax changes that raised the

standard deduction and placed limitations on what you can deduct. Tax Benefit Option: When planning your IRS Required Minimum Distributions with your tax advisor, consider having the withdrawal check of up to $100,000 made payable to a qualified charitable organization. That way you can avoid it being counted as income. For instance, we can send the RMD directly to your favorite 501(c)(3) charity or the Catholic Financial Life Foundation. (The foundation provides financial support for Catholic schools, parishes, seminarians, and helps the poor.) Simply contact us to request the Qualified Charitable Distribution form. Non-deductible Option: There are a couple options you can take when spending your RMD that would be taxed as ordinary income. You may use RMDs toward

OUR ADVISORS DON’T WEAR CAPES… ...BUT THEY DO PROTECT FAMILIES EV ERY DAY!

Do you know a superhero who wants an opportunity to do well financially, do good for their community and live their faith simultaneously? If so, introduce us and… You’ll receive $100 for each referral that has an in-person interview for the Advisor role. You’ll receive an additional $1,000 for each referral who gets contracted as an Advisor.

WE’RE HIRING WE’RE GROWING

Contact Human Resources at hr@catholicfinanciallife.org

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the purchase of life insurance through Degree of Honor to leverage the impact of your gift. Or, you may transfer your RMDs to fund a tax-deferred annuity, making your favorite charity or the Degree of Honor Fund within the Catholic Financial Life Foundation the beneficiary. Whatever you decide, leverage your RMD to make a positive impact in your community. PLEASE NOTE: This information is not intended to be legal and/or tax advice. Check with your tax professional to determine your Required Minimum Distribution strategy. For more information regarding Required Minimum Distributions and Qualified Charitable Distributions, visit irs.gov. 15-0079-6/19 Degree of Honor is a division of Catholic Financial Life. Catholic Financial Life is headquartered in Milwaukee, Wis. Products and Services not available in all states. Contact us to learn more.

When planning your IRS Required Minimum Distributions with your tax advisor, consider having the withdrawal check of up to $100,000 made payable to a qualified charitable organization.

[9] THANK YOU FOR BEING A PART OF SOMETHING GREATER THAN YOURSELF.

Add these fun family events to your calendar!

Mexican Fiesta Friday, August 23 – Sunday, August 25 Milwaukee, Wis. $8.50 ticket (10 per household) A 50% savings! Deadline fast approaching! Registration deadline: July 29 Lincoln Park Zoo – New! Saturday, September 7 Chicago, Ill. $8 ticket Registration deadline: August 23

Basse’s Taste of Country Saturday, October 5 Colgate, Wis. $8 Children 2 and under are free Up to 33% savings! Registration deadline: September 30

Pilgrimage to the Shrine of Our Lady of Guadalupe – New! Thursday, December 12 Des Plaines, Ill. Free

REGISTER TODAY @ degreeofhonor.com/ member-events or call (800) 947-5812 See you there!

Have an idea for an event near you? Let us know! Please submit your ideas to Vicki Vlach at vickivlach@degreeofhonor.com or 414-278-6573.

Mail completed form to: Vicki Vlach, Degree of Honor, P.O. Box 3211, Milwaukee, Wis. 53201-3211. To register online, please visit degreeofhonor.com/member-events. Tickets are available on a first-come, first-served basis. Please return this form with your payment before the registration deadline date. Mexican Fiesta Milwaukee, Wis.

Lincoln Park Zoo Chicago, Ill. Saturday, September 7 ___ tickets* @$8 each = $ _______

Basse’s Taste of Country Colgate, Wis. Saturday, October 5 ___ tickets* @$8 each = $ _______

Friday, August 23 – Sunday, August 25 ___ tickets*

[10] VISIT US AT DEGREEOFHONOR.COM REGISTRATION FORM (limit 10 per household) @$8.50 each = $ _______

Total Amount Enclosed $______________________ Cash payments not accepted.

Mail one check payable to “Degree of Honor” *Membership will be verified prior to fulfilling ticket orders.

All members and their families are welcome!

[11] THANK YOU FOR BEING A PART OF SOMETHING GREATER THAN YOURSELF.

Non-Profit Org. U.S Postage PAID Ripon, WI Permit No. 100

1100 West Wells Street Milwaukee, WI 53233

Our Impact Teams have made a significant difference through volunteer work in the community.

Visit degreeofhonor.com/impact-teams for more information.