Mississippi Insurance Department
Report of Examination
of
SOUTHERN FARM BUREAU LIFE INSURANCE
COMPANY
as of
December 31, 2018
TABLE OF CONTENTS
Examiner Affidavit ..................................................................................................................... 1
Salutation .................................................................................................................................... 2
Scope of Examination ................................................................................................................. 3
Comments and Recommendations of Previous Examination ..................................................... 3
History of the Company .............................................................................................................. 3
Corporate Records ...................................................................................................................... 5
Management and Control ............................................................................................................ 5
Stockholders ................................................................................................................... 5
Board of Directors .......................................................................................................... 5
Committees ..................................................................................................................... 6
Officers ........................................................................................................................... 8
Conflict of Interest .......................................................................................................... 9
Holding Company Structure ....................................................................................................... 9
Related Party and Other Transactions ............................................................................ 9
Fidelity Bond and Other Insurance ........................................................................................... 10
Pensions, Stock Ownership and Insurance Plans ...................................................................... 11
Territory and Plan of Operation ................................................................................................ 11
Growth of Company ................................................................................................................. 11
Mortality and Loss Experience ................................................................................................. 12
Reinsurance ............................................................................................................................... 12
Accounts and Records............................................................................................................... 14
Statutory Deposits ..................................................................................................................... 15
Financial Statements ................................................................................................................. 16
Introduction .................................................................................................................. 16
Statement of Admitted Assets, Liabilities, Surplus And Other Funds – Statutory ...... 17
Summary of Operations – Statutory ............................................................................. 18
Reconciliation of Capital and Surplus – Statutory ....................................................... 19
Reconciliation of Examination Adjustments to Surplus – Statutory ............................ 20
Market Conduct Activities ........................................................................................................ 21
Privacy ......................................................................................................................... 21
Complaints ................................................................................................................... 21
Producer Licensing ...................................................................................................... 21
Underwriting & Rating ................................................................................................ 21
Commitments and Contingent Liabilities ................................................................................. 22
Subsequent Events .................................................................................................................... 22
Comments and Recommendations ............................................................................................ 23
Acknowledgment ...................................................................................................................... 24
EXAMINER'S AFFIDAVIT AS
TO
ST AND ARDS AND
PROCEDURES USED IN
AN
EXAMINATION
State
of
Mississippi,
County
of
Madison,
R.
Dale Miller, being duly sworn, states as follows:
1.
I have authority to represent the Mississippi Insurance Department in the examination
of
Southern Farm Bureau Life Insurance Company as
of
December 31, 2018.
2. The Mississippi Insurance Department is accredited under the National Association
of
Insurance Commissioners Financial Regulation Standards and Accreditation.
3.
I have reviewed the examination work papers and examination report, and the examination
of
Southern Farm Bureau Life Insurance Comapny was performed in a manner consistent
with the standards and procedures required by the National Association
of
Insurance
Commissioners and the Mississippi Insurance Department.
The affiant says nothing further.
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R.
Dale Miller, CPA, CFE, CFF
Examiner-in-charge
Subscribed and sworn before me by
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Southern Farm Bureau Life Insurance Company
MID Examination as
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December
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Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 2
June 11, 2020
Honorable Mike Chaney
Commissioner of Insurance
Mississippi Insurance Department
1001 Woolfolk Building
501 North West Street
Jackson, Mississippi 39201
Dear Commissioner Chaney:
Pursuant to your instructions and authorization and in compliance with statutory provisions, an
examination has been conducted, as of December 31, 2018, of the affairs and financial condition of:
SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY
1401 Livingston Lane
Jackson, MS 39213
License #
NAIC #
FEETS#
MATS#
7700438
68896
68896-MS-2018-2
MS-MS099-22
This examination was commenced in accordance with Miss. Code Ann. § 83-5-201 et seq. and
was performed in Jackson, Mississippi, at the statutory home office of the Company. The report
of examination is herewith submitted.
MIKE CHANEY
Commissioner of Insurance
State Fire Marshal
MARK HAIRE
Deputy Commissioner of
Insurance
MAILING ADDRESS
Post Office Box 79
Jackson, MS 39205-0079
TELEPHONE: (601) 359-3569
FAX: (601) 576-2568
MISSISSIPPI INSURANCE DEPARTMENT
501 N. WEST STREET, SUITE 1001
WOOLFOLK BUILDING
JACKSON, MISSISSIPPI 39201
www.mid.ms.gov
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 3
SCOPE OF EXAMINATION
We have performed our multi-state examination of Southern Farm Bureau Life Insurance
Company (“Company” or “SFBLIC”). The last examination covered the period of January 1, 2010
through December 31, 2013. This examination covers the period January 1, 2014 through
December 31, 2018.
We conducted our examination in accordance with the NAIC Financial Condition Examiners
Handbook (“Handbook”). The Handbook requires that we plan and perform the examination to
evaluate the financial condition, assess corporate governance, identify current and prospective
risks of the Company and evaluate system controls and procedures used to mitigate those risks.
An examination also includes identifying and evaluating significant risks that could cause an
insurer’s surplus to be materially misstated both currently and prospectively.
All accounts and activities of the Company were considered in accordance with the risk-focused
examination process. This may include assessing significant estimates made by management and
evaluating management’s compliance with Statutory Accounting Principles. The examination
does not attest to the fair presentation of the financial statements included herein. If, during the
course of the examination an adjustment is identified, the impact of such adjustment will be
documented separately following the Company’s financial statements.
This examination report includes significant findings of fact, as mentioned in the Miss. Code Ann.
§83-5-201, and general information about the insurer and its financial condition. There may be
other items identified during the examination that, due to their nature (e.g., subjective conclusions,
proprietary information, etc.), are not included within the examination report but separately
communicated to other regulators and/or the Company.
COMMENTS AND RECOMMENDATIONS OF PREVIOUS
EXAMINATION
There were no comments and/or recommendations deemed necessary for inclusion in the previous
examination report.
HISTORY OF THE COMPANY
In 1946, the State Farm Bureau Federations in the states of Alabama, Arkansas, Kentucky,
Mississippi, and Texas organized individual investment corporations for the sole purpose of
organizing the Company. On October 31, 1946, and with authorized capital of $200,000, SFBLIC
was incorporated under the laws of the State of Mississippi as a life insurance company, with
business officially commencing on December 18, 1946. On July 15, 1947, those five State Farm
Bureau Federations and their investment corporations entered into an Agreement and Declaration
of Trust (the “Charter Treaty”), which, among other provisions, contained certain restrictions on
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 4
transfer of the capital stock of the Company.
In 1972, the articles of association were amended, increasing the Company’s authorized capital to
$1,000,000; divided into 10,000 shares of $100 par value common capital stock. Also, the Alabama
Farm Bureau withdrew from the American Farm Bureau Federation and, during this same year,
the Company reacquired and later cancelled the stock issued to Alabama Farm Bureau Investment
Corporation, and the Charter Treaty was amended to reflect this change. In addition, during 1973,
the Company issued shares of its capital common stock to companies controlled by State Farm
Bureau Federations in the states of Georgia, Louisiana, North Carolina, South Carolina, and
Virginia, and the Charter Treaty was again amended to reflect this change.
Pursuant to a stockholder vote on February 21, 1983, the articles of association were further
amended, increasing the Company’s authorized capital to $2,000,000; divided into 20,000 shares
of $100 par value common stock.
On October 29, 1984, Florida Farm Bureau Holding Company purchased 400 shares of the
Company’s common stock and, as a stock dividend, the Company issued 960 shares of its common
stock to same. The Charter Treaty was again amended to reflect this change. Florida Farm Bureau
Life Insurance Company merged into SFBLIC effective January 1, 1985.
On March 17, 1994, and October 7, 1997, the Company disclaimed control by and affiliation with
its shareholders and their parent companies pursuant to Miss. Code Ann. §83-6-17, which was
approved by the Commissioner of Insurance for the State of Mississippi. On October 19, 2004, the
Charter Treaty was amended and its stated term was extended to perpetuity. On February 1, 2017,
the Charter Treaty was amended to incorporate additional recitals and agreements related to the
payment of dividends on the common capital stock of the Company and the obligation of the
parties relating thereto.
On November 25, 2002, the Company’s wholly owned subsidiary, Southern Capital Brokerage
Company, LLC, (“Southern Capital Brokerage”) was incorporated for the purpose of selling of
insurance products not directly offered by the Company, such as long term care, disability
insurance, and cancer and survivor life insurance.
On October 16, 2007, the articles of association and the bylaws of the Company were amended
and restated, and were approved by the Commissioner of Insurance for the State of Mississippi on
January 7, 2008. Such approval did not include or extend to an approval, either in whole or in part,
of the Charter Treaty or the terms and conditions thereof.
SFBLIC reached an agreement in principle with the Colorado Farm Bureau Mutual Insurance
Company to sell its products in Colorado under the Farm Bureau name through the Colorado Farm
Bureau agency force. SFBLIC received a Certificate of Authority and was licensed by the State of
Colorado on February 11, 2010.
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 5
CORPORATE RECORDS
The minutes of the meetings of the stockholders and Board of Directors (“Board”), regarding the
Company’s business affairs as recorded during the period covered by the examination, were
reviewed and appeared to be complete and in order with regard to recording action on matters
brought up at the meetings for deliberation, which included the approval and support of the
Company’s transactions and events, as well as the review of its audit and examination report.
MANAGEMENT AND CONTROL
Stockholders
As of December 31, 2018, the Company had 15,000 outstanding shares of common capital stock
with a par value of $100 per share. The Company was owned by the Farm Bureau Investment
Corporations in Arkansas, Kentucky, Mississippi, Texas, Louisiana, South Carolina, and North
Carolina, and holding corporations in Virginia, Florida, and Georgia, which are controlled by the
Farm Bureau Federation in each state respectively. Each shareholder owns 10% (1,500 shares).
The Company paid dividends to its stockholders during the examination period of $20,000,000,
$45,000,000, $90,000, $92,550 and $95,850 for 2018, 2017, 2016, 2015 and 2014, respectively.
Board of Directors
The Articles of Incorporation and Bylaws vest the management and control of the Company’s
business affairs with the Board of Directors (“Board”). The members of the duly elected Board,
along with their place of residence, year elected/appointed, and principal occupation, at December
31, 2018, were as follows:
Name and Residence
Year
Elected/Appointed
Principal Occupation
Ronald Ray Anderson
Baton Rouge, Louisiana
1990
Farmer and President of Louisiana
Farm Bureau Federation
Russell Wayne Boening
Floresville, Texas
2015
Farmer and President of Texas Farm
Bureau
Mark Randall Chamblee
Tyler, Texas
2018 Farmer
William Keistler Coleman
Blair, South Carolina
2016 Farmer
Robert Quincy Fountain, Jr.
Adrian, Georgia
2016 Farmer
Mark Edwin Haney
Nancy, Kentucky
2006
Farmer and President of Kentucky
Farm Bureau Federation
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 6
Jim Toney Harper
Cheneyville, Louisiana
2009 Farmer
Richard Edward Hillman
Carlisle, Arkansas
2009 Farmer
John Lawrence Hoblick, Sr.
DeLeon Springs, Florida
2007
Farmer and President of Florida
Farm Bureau Federation
Gerald Wilton Long
Bainbridge, Georgia
2009
Farmer and President of Georgia
Farm Bureau Federation
Billy Regionald Magee
Mount Olive, Mississippi
2007 Farmer
David Michael McCormick
Union Church, Mississippi
2015
Farmer and President of Mississippi
Farm Bureau Federation
Eddie Alan Melton
Sebree, Kentucky
2011 Farmer
Harry Legare Ott, Jr.
Columbia, South Carolina
2016
Farmer and President of South
Carolina Farm Bureau Federation
Wayne Franklin Pryor
Goochland, VA
1999
Farmer and President of Virginia
Farm Bureau Federation
Joseph Brantley Schirard, Jr.
Fort Pierce, Florida
2011 Farmer
Scott Everett Sink
Blacksburg, Virginia
2017 Farmer
Harry Randal Veach
Manila, Arkansas
2004
Farmer and President of Arkansas
Farm Bureau Federation
Malcolm Scott Whitford
Grantsboro, North Carolina
2013 Farmer
Larry Bernard Wooten
Raleigh, North Carolina
2000
Farmer and President of North
Carolina Farm Bureau Federation
Committees
During the period covered by this examination, the following Board committees were utilized by
the Company to carry out certain specified duties: Audit Committee, Executive Committee,
Compensation Committee, and Investment Committee. The committee minutes were reviewed and
appeared to be in order, and the committees appeared to be provided appropriate oversight by the
Board.
Audit Committee:
The Audit Committee’s purpose is to review the report of the independent auditors, approve the
independent auditors’ report, pre-approve non-audit services from the Company’s auditors, and
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 7
approve auditors for the following years.
Compensation Committee:
The Compensation Committee’s purpose is to review and recommend changes to the
compensation program and the retirement program. They also provide recommendations to the
Board for increases in officers’ salaries.
Executive Committee:
The Executive Committee’s purpose is to review, receive, and file the reports of the Executive
Vice President & Chief Executive Officer, Marketing, Investment Committee, Policy
Administration, and the review of the financial statements.
Investment Committee:
The Investment Committee is authorized by Section 2, Article V of the by-laws to buy and sell
certain investments for and on behalf of the Company.
The following officers and directors served on the aforementioned committees at December 31,
2018.
Audit
Compensation
Wayne Franklin Pryor, Chairman
Harry Randall Veach, Chairman
Russell Wayne Boening
Ronald Ray Anderson
Mark Edwin Haney
John Lawrence Hoblick, Sr.
Harry Legare Ott, Jr.
Gerald Wilton Long
Larry Bernard Wooten
David Michael McCormick
Executive
Investment
Harry Randall Veach, Chairman
Randy Mitchael Johns, Chairman
Wayne Franklin Pryor
Harry Randall Veach, Ex Officio
Ronald Ray Anderson
Horace Lusby Brown
Russell Wayne Boening
Charles Stanley Dickens
Mark Edwin Haney
David Brannan Hurt
John Lawrence Hoblick, Sr.
William Perry McGaugh, Jr.
Gerald Wilton Long
Billy Earl Sims
David Michael McCormick
Robert Elgin Ward, Jr.
Harry Legare Ott, Jr.
Larry Bernard Wooten
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 8
Officers
Name
Number of
Years with
Company
Title
Harry Randall Veach*
14
Chairman of the Board & President
Wayne Franklin Pryor*
19
First Vice President
Randy Mitchael Johns
38
Executive Vice President & CEO
Horace Lusby Brown
12
Senior Vice President, Chief Investment
Officer
Charles Stanley Dickens
26
Senior Vice President, Chief Actuary
David Brannan Hurt
18
Senior Vice President, Marketing
William Perry McGaugh, Jr.
32
Senior Vice President, General Counsel &
Secretary
Billy Earl Sims
41
Senior Vice President, Policy
Administration
Robert Elgin Ward, Jr.
36
Senior Vice President, Chief Financial
Officer
Charles Reed Allen
34
Vice President, Chief Technology Officer
Nancy Case Baker
32
Vice President, Claims
Patricia Diane McConnell-
Boyette
12
Vice President, Chief Compliance Officer
David Newell Duddleston, MD
31
Vice President, Medical Director
Luther Bernard Goff, III
7
Vice President, Agency
Shelia Renee Hudson
29
Vice President, Internal Auditing
Laura Moore Humphries
17
Vice President, Policy Services
William Harper Keeler
28
Vice President, Realty Investments
Catherine Prevost Martin
18
Vice President, Group Admin &
Appointed Actuary
Richard Pernell McKissack
17
Vice President, Marketing Data & E-
Services
Joyce McEwen Plunkett
38
Vice President, Human Resources
Douglas Edward Redman
22
Vice President, Pension Admin & Chief
Risk Officer
David Mark Simmonds
29
Vice President, Controller
Jeremiah Ridley Wesson
14
Vice President, Underwriting & New
Business Admin
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 9
* These two members also serve on the Company’s Board. They are not part of Company
management and are not compensated for their roles as officers. Their roles are strictly titular
and are not engaged in the day-to-day operations of the Company.
Conflict of Interest
The Company had formal procedures whereby disclosure was made to the Board of any material
interest or affiliation on the part of any officer or director that was, or would likely be, a conflict
with their official duties. These procedures were reviewed, and no conflicts or exceptions to the
Company’s policies were noted.
HOLDING COMPANY STRUCTURE
During the time period covered by this examination, SFBLIC was owned by entities controlled by
the Farm Bureau Federations in the States of Arkansas, Florida, Georgia, Kentucky, Louisiana,
Mississippi, North Carolina, South Carolina, Texas, and Virginia. Each shareholder owns 10% of
SFBLIC’s outstanding stock. As previously mentioned, the Company has disclaimed control by
and affiliation with its shareholders and their parent companies pursuant to Miss. Code Ann. §83-
6-17, which was filed by the Commissioner of Insurance for the State of Mississippi.
The Company’s wholly owned subsidiary, Southern Capital Brokerage, was incorporated for the
purpose of selling of insurance products not directly offered by the Company, such as long term
care, disability insurance, and cancer and survivor life insurance.
Related Party and Other Transactions
The Company had various agreements with the Farm Bureau Federations and Farm Bureaus
located in counties of the states in which business was conducted. Substantially all of these
transactions represented agency-related costs of operations. According to management, these
agreements provided the Company with greater operating efficiency and prompt service to its
policyholders. These agreements provided reimbursement for the cost of office space and clerical
assistance, as well as the use of the Farm Bureau name and logo within the related territory. Such
fees were included in general insurance expenses in the statutory statements of earnings. The
amounts paid in regard to these agreements were $28,026,703, $27,858,284, $27,458,200,
$26,897,009 and $26,239,268 in 2018, 2017, 2016, 2015 and 2014, respectively.
The Company entered into Sponsorship Agreements with each of the State Farm Bureaus of
Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina,
Texas, and Virginia. The agreements are renewed annually and call for annual payments of
$100,000 to each State Farm Bureau. The agreements provided the Company with the right to
sponsor one or more mutually agreeable Farm Bureau events or programs. The amount paid in
regard to these agreements was $1,000,000 for each year under examination.
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 10
On July 15, 2009, the Company executed a promissory note with Southern Capital Brokerage in
the principal sum of $3,000,000, with an annual interest rate of 4%. On January 1, 2010, the
Company executed an additional promissory note in the principal sum of $3,500,000, with an
annual interest rate of 4%. On January 1, 2013, the Company consolidated the two aforementioned
promissory notes for the remaining principal balance of $5,500,000, with an initial interest rate of
2.25% adjusted January 1
st
of each year to reflect the then current Fed Funds rate plus 200 basis
points. The promissory note was paid in full during the examination period and at December 31,
2018, the Company’s liability for borrowed money payable to Southern Capital Brokerage was $0.
On April 19, 2006, the Company purchased a surplus note in the amount of $25,000,000 from
Mississippi Farm Bureau Casualty Insurance Company. The stated interest rate on the note was
equal to the interest rate payable on a 20 year U.S. Treasury Bond as of the surplus note date. The
rate readjusted every second anniversary date equal to the current interest rate payable on the
aforementioned bond. The Company received $25,000,000 in principal payments during the
examination period reducing the balance to $0 at December 31, 2018.
On June 21, 2010, the Company purchased a surplus note in the amount of $2,349,637 from
Oklahoma Farm Bureau Mutual Insurance Company. The stated interest rate on the note was 9.5%.
The note contained a credit of 2% simple interest per annum for any and all principal paid to the
payee on or before July 1, 2020. The note has a maturity date of July 1, 2040. The Company
received $1,854,993 in principal payments during the examination period reducing the balance to
$494,644 at December 31, 2018.
On December 27, 2011, the Company purchased a surplus note in the amount of $30,000,000 from
Virginia Farm Bureau Mutual Insurance Company. The stated interest rate on the note was 7.5%,
with the possibility of a reduction to 5.5% if certain future criteria were met. The Company
received $30,000,000 in principal payments during the examination period reducing the balance
to $0 at December 31, 2018.
During the examination period, the aforementioned surplus notes were carried on the Company’s
Schedule BA, “Other Long Term Invested Assets”, as unaffiliated capital notes.
FIDELITY BOND AND OTHER INSURANCE
The Company maintained a comprehensive corporate insurance program. This program included
commercial general liability and commercial property, as well as other policies, as deemed
appropriate by the Company’s management. The Company also maintained directors and officers
coverage, professional liability coverage, cyber liability coverage, and fidelity coverage that, with its
$10 million single loss limit of liability, exceeded the NAIC’s suggested minimum amount for fidelity
coverage of $3,500,000 - $4,000,000.
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 11
PENSIONS, STOCK OWNERSHIP AND INSURANCE PLANS
The Company provided a non-contributory defined benefit pension plan, a contributory defined
contribution plan, a post-retirement benefit plan, and various other deferred compensation plans
for its directors, officers, and employees. Obligations under such plans were recognized within the
financial statements.
TERRITORY AND PLAN OF OPERATION
The Company is authorized to conduct ordinary life insurance business in the states of Alabama,
Arkansas, Colorado, Commonwealth of Puerto Rico, Florida, Georgia, Kentucky, Louisiana,
Mississippi, North Carolina, South Carolina, Tennessee, Texas, and Virginia. The Company
markets a portfolio of traditional and interest-sensitive life insurance products and single and
flexible premium deferred annuity contracts through joint operations with the ten property and
casualty insurance companies that represent the Farm Bureau Federations throughout its territorial
region, as well as in the state of Colorado. Through this captive distribution system, sales and
services for a full line of insurance products were offered by approximately 3,700 career multi-
line agents who worked through offices located in counties within the territorial regions.
GROWTH OF COMPANY
2018 2017 2016 2015 2014
Balance Sheet
Total admitted assets, less separate accounts
14,269,723$ 14,173,511$ 13,909,155$ 13,291,891$ 12,977,838$
Total liabilities, less separate accounts
11,675,573$ 11,614,809$ 11,371,805$ 10,835,046$ 10,541,399$
Total capital and surplus
2,594,151$ 2,558,702$ 2,537,350$ 2,456,845$ 2,436,439$
Cash Flow
Net cash from operations
325,113$ 390,062$ 455,034$ 445,884$ 289,833$
Risk-Based Capital Analysis
Total adjusted capital
2,747,358$
2,759,158$ 2,726,475$ 2,607,482$ 2,650,026$
Authorized control level risk-based capital
168,703$ 149,286$ 150,547$ 169,957$ 193,707$
Income Statement
Net earned premium income
865,338$ 882,312$ 964,820$ 904,697$ 799,768$
Net Investment income
571,768$ 582,350$ 576,280$ 552,856$ 550,854$
Capital gains & losses
6,742$ 21,522$ (4,175)$ (6,710)$ 65,309$
Net income
118,137$
115,608$ 73,744$ 76,973$ 167,861$
Net income/capital and surplus (ROE)
4.6% 4.5% 2.9%
3.1% 6.9%
Net premium & deps/capital and surplus
33.4% 34.5%
38.0% 36.8% 32.8%
Total benefits & exp/premium & deps
150.5% 148.8% 147.1% 146.0% 149.3%
Investment yield
4.2% 4.3% 4.4% 4.4% 4.5%
Non-inv grade bonds/total bonds
2.6% 3.4% 4.3% 3.2% 2.6%
In thousands
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 12
MORTALITY AND LOSS EXPERIENCE
The MID contracted with Marc Altschull, CFA, FSA, MAA of Merlinos & Associates, Inc., to
review the actuarial analysis supporting the Company’s carried aggregate reserves for life
contracts, aggregate reserve for accident and health contracts, uncollected premiums and agent
balances, deferred premiums, liability for deposit type contracts, contract claims, and advance
premiums. No adjustments to the financial statements were made. The actuarial examination
indicated that the Company generally followed accurate and appropriate procedures in determining
its actuarial assets, reserves and liabilities.
REINSURANCE
In accordance with the Risk Surveillance Approach contained within the Handbook, the
reinsurance program of the Company was considered and no material concerns were noted.
Further, no treaties were noted that contained unusual provisions, transfer of risk issues or other
relevant concerns. A general description and listing of the reinsurance agreements are presented
below.
At December 31, 2018, reinsurance for newly issued business was with Hannover Life
Reassurance Company of America (“Hannover”), SCOR Global Life USA Reinsurance Company
(“SCOR”), and RGA Reinsurance Company (“RGA”). Hannover reinsured base term policies with
surnames beginning with A-K and permanent policies (and associated term riders) with surnames
beginning E-Z. SCOR reinsured permanent policies (and associated term riders) with surnames
beginning A-D. RGA reinsured base term policies with surnames beginning with L-Z. At
December 31, 2018, the maximum ordinary life retention for new sales was $750,000.
The retention levels effective as of December 31, 2018, were as follows:
Issue Ages
Table A Standard
Tables B - F
Tables G and Above
0
200,000
100,000
75,000
1 to 65
750,000
600,000
300,000
Over 65
375,000
200,000
100,000
Minimum Cession $100,000
At December 31, 2018, the reinsurers were automatically bound for 100% of the excess over the
Company’s retention, up to the maximum amounts shown below:
Issue Ages
Table A Standard
Tables B - F
Tables G - P
Over Table P
0
600,000
300,000
225,000
Facultative
1 to 65
2,250,000
1,800,000
900,000
Facultative
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 13
66 to 70
1,125,000
600,000
300,000
Facultative
71 to 80
Facultative
Facultative
Facultative
Facultative
Heading Definitions:
• Ages – This represents the age of the insured
• Table – This represents the specific table used by the underwriting department of the
Company when determining the appropriate premium. Table A represents standard risk
factors, while tables B through P represent progressively higher risk factors.
Example – If the insured is between the ages of 1-65 and qualifies for a Table A rating, the
Company will retain $750,000 and any excess up to $2,250,000 can be automatically reinsured.
However, if the amount of excess is greater than $2,250,000, underwriting papers must be
submitted for facultative review and accepted by the reinsurance company to be binding.
The jumbo limit for SFBLIC’s reinsurers was $30,000,000 at December 31, 2018. If SFBLIC had
a policy that was over this amount or anywhere close to it, the Company’s policy is to contact the
reinsurance company to be sure that they could handle the capacity. It would be up to the reinsurer
to find a retrocessionaire to reinsure any excess. A reinsurer will accept more than $30,000,000 at
higher rates because they in turn have to retrocede the business.
A list of reinsurers with which SFBLIC has entered reinsurance agreements is as follows:
Federal ID # Effective Date
Name of Company Specifics
Accident & Health
AA-9995056 1/1/1996
AMERICAN LTC REINSURANCE GROUP 80% Reinsured
48-0921045 1/1/2003
WESTPORT INS CORP 80% Reinsured
13-3126819 1/1/1986
SCOR 50% Reinsured
13-3126819 1/1/1995
SCOR 50% Reinsured
Catastrophe
59-2859797 7/1/2007
HANNOVER CAT/I
Life & Annuity
13-3126819 1/1/1994
SCOR Excess of Retention
13-3126819 1/1/2001
SCOR Excess of Retention
13-3126819 1/1/2007
SCOR Excess of Retention
13-3126819 5/1/2011
SCOR Excess of Retention
59-2859797 11/1/2009
HANNOVER Excess of Retention
59-2859797 5/1/2011
HANNOVER Excess of Retention
59-2859797 1/1/2018
HANNOVER Excess of Retention
23-2038295 1/1/1991
SCOTTISH RE (U.S.) INC Excess of Retention
23-2038295 6/1/1985
SCOTTISH RE (U.S.) INC Excess of Retention
42-0175020 6/7/1996
ATHENE ANNUITY & LIFE COMPANY SWL 100% Reinsured
84-0499703 10/22/1982
SECURITY LIFE OF DENVER INS CO Coinsurance
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 14
84-0499703 6/1/1985
SECURITY LIFE OF DENVER INS CO Excess of Retention
84-0499703 9/1/1987
SECURITY LIFE OF DENVER INS CO Excess of Retention
84-0499703 3/1/2004
SECURITY LIFE OF DENVER INS CO Excess of Retention
35-0472300 12/17/1946
LINCOLN NATL LIFE INS CO Excess of Retention
35-0472300 6/1/1985
LINCOLN NATL LIFE INS CO Excess of Retention
35-0472300 1/1/1988
LINCOLN NATL LIFE INS CO Excess of Retention
35-0472300 1/1/1992
LINCOLN NATL LIFE INS CO Excess of Retention
35-0472300 1/1/2001
LINCOLN NATL LIFE INS CO Excess of Retention
58-0828824 1/1/2002
MUNICH AMER REASSUR CO Excess of Retention
58-0828824 1/1/2002
MUNICH AMER REASSUR CO
Excess of Retention
150,000 for Group
58-0828824 9/1/2004
MUNICH AMER REASSUR CO Excess of Retention
58-0828824 1/1/2007
MUNICH AMER REASSUR CO Excess of Retention
13-5582869 1/1/2003
NEW YORK LIFE INS CO Coinsurance
43-1235868 1/1/1991
RGA Coinsurance
43-1235868 1/1/1992
RGA Excess of Retention
43-1235868 1/1/2001
RGA Excess of Retention
43-1235868 1/1/2018
RGA Excess of Retention
06-0839705 8/1/1951
SWISS RE LIFE & HEALTH AMERICA Excess of Retention
06-0839705 6/1/1985
SWISS RE LIFE & HEALTH AMERICA Excess of Retention
06-0839705 9/1/1987
SWISS RE LIFE & HEALTH AMERICA Coinsurance
06-0839705 7/1/1987
SWISS RE LIFE & HEALTH AMERICA Excess of Retention
06-0839705 10/22/1982
SWISS RE LIFE & HEALTH AMERICA Coinsurance
06-0839705 6/1/1985
SWISS RE LIFE & HEALTH AMERICA Excess of Retention
06-0839705 7/1/1980
SWISS RE LIFE & HEALTH AMERICA Excess of Retention
06-0839705 1/1/2012
SWISS RE LIFE & HEALTH AMERICA
Excess of Retention
150,000 for Group
06-0839705 1/1/2012
SWISS RE LIFE & HEALTH AMERICA Excess of Retention
75-6020048 1/1/1988
SCOR Excess of Retention
ACCOUNTS AND RECORDS
The 2018 trial balance of the Company’s accounts was traced to the balance sheet of the
Company’s statutory annual statement filed with the MID, with no exceptions noted. SFBLIC was
audited annually by an independent CPA firm.
SFBLIC utilizes Microsoft Windows Server 2008, 2012, 2016, 2019 as well as IBM z/OS
operating systems to achieve its goals. Windows Active Directory (AD) is utilized for network
access security as well as to restrict access to certain folders through AD security group
configuration. IBM z/OS access is maintained via RACF. External network defenses include a
Checkpoint firewall appliance and Cylance Protect End-Point Anti-Virus/Security software. The
Company’s significant applications include Ingenium and other internally developed applications.
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 15
STATUTORY DEPOSITS
The Company’s statutory deposits with the state of Mississippi complied with Miss. Code Ann.
§83-19-31(2) and §83-7-21. The following chart displays the Company’s total statutory deposits
held by the various states at December 31, 2018.
State
Par
Carrying
Fair
Description
Deposited
Value
Value
Value
U.S. Treasury Strip
Mississippi
$ 7,686,408
$ 6,925,530
$ 7,376,162
Total held in Mississippi
7,686,408
6,925,530
7,376,162
U.S. Treasury Strip
Arkansas
160,000
132,934
148,997
Treasury Money Market
Georgia
50,000
50,000
50,000
U. S. Treasury Strip
North Carolina
1,200,000
1,081,212
1,151,568
Total Held in all Other States
1,410,000
1,264,146
1,350,565
Total Held
$ 9,096,408
$ 8,189,676
$ 8,726,727
SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY
FINANCIAL STATEMENTS
EXAMINATION AS OF DECEMBER 31, 2018
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 16
Introduction
The following financial statements reflect the same amounts reported by the Company and consist
of a Statement of Admitted Assets, Liabilities, Surplus and Other Funds - Statutory at December
31, 2018, a Summary of Operations - Statutory for the year ended December 31, 2018, and a
Reconciliation of Capital and Surplus - Statutory for the examination period ended December 31,
2018, and a Reconciliation of Examination Changes to Surplus - Statutory at December 31, 2018.
Statement of Admitted Assets, Liabilities, Surplus And Other Funds – Statutory
December 31, 2018
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 17
Admitted Assets
Bonds 9,911,056,463$
Preferred stocks 32,094,049
Common stocks 605,975,077
Mortgage loans on real estate 1,868,290,517
Real estate occupied by the company 15,218,954
Real estate held for production of income 1,088,764
Cash, cash equivalents, and short term investments 87,226,082
Contract loans 551,135,072
Other invested assets 662,871,352
Receivables for securities 1,647,360
Investment income due and accrued 116,234,533
Uncollected premiums 8,002,063
Deferred premiums 285,791,857
Amounts recoverable from reinsurers 1,802,377
Current federal income taxes recoverable 2,929,512
Net deferred tax asset 68,350,129
Guaranty funds receivable or on deposit 1,685,983
Electronic data processing equipment and software 5,721,707
Receivables from parents, subsidiaries and affiliates
436,996
Company owned life insurance 42,164,355
Separate account assets
16,115,751
Total admitted assets
14,285,838,953$
Liabilities, Capital and Surplus
Aggregate reserve for life contracts 10,060,138,707$
Aggregate reserve for accident and health contracts 152,695,113
Liability for deposit-type contracts 898,710,056
Life contract claims 37,054,835
Accident and health contract claims
2,515,097
Policyholders' dividends 10,831
Dividends apportioned for payment
43,436,299
Premiums received in advance
276,240
Provision for experience rating refunds 6,319,393
Commissions to agents due or accrued 13,274,656
General expenses due and accrued 17,819,163
Transfers to Separate Accounts due and accrued (4,955)
Taxes, licenses and fees due or accrued 7,184,846
Amounts withheld or retained by company 544,634
Remittances and items not allocated 13,198,952
Liability for benefits for employees and agents 2,567,589
Borrowed money 142,838,083
Asset valuation reserve 197,425,779
Payable to parent, subsidiaries and affiliates 1,383,856
Pension and postretirement benefits payable 62,950,498
Accounts payable and other liabilities 14,731,873
Uncashed checks pending escheatment 501,025
Separate account liabilities 16,115,751
Total liabilities
11,691,688,321
Common capital stock 1,500,000
Gross paid in and contributed surplus 400,000
Unassigned funds 2,592,250,632
Total capital and surplus
2,594,150,632
Total liabilities, capital and surplus
14,285,838,953
$
Summary of Operations – Statutory
December 31, 2018
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 18
Income
Life premiums
772,347,390$
Annuity premiums and other fund deposits
83,056,751
Accident and health premiums
9,934,061
Supplementary contracts with life contingencies 21,997,382
Investment income, net of expenses 571,767,664
Amortization of interest maintenance reserve
(1,386,251)
Commissions and expense allowances on reinsurance ceded
3,574,365
Separate account fees and other
3,420,153
Total income, net of amortization of interest maintenance reserve
1,464,711,515
Benefits and reserve changes
Death benefits 268,041,846
Matured endowments 893,784
Accident and health benefits 13,766,274
Annuity benefits
135,218,473
Surrender benefits and withdrawals for life contracts 376,929,567
Interest and adjustments on contract or deposit-type contract funds 35,611,136
Payments on supplementary contracts with life contingencies 22,109,520
Increase in aggregate reserves for life and accident and health contracts. 167,757,991
Total benefits and reserve changes, including interest on contract funds 1,020,328,591
Other operating expenses and transfers
Commissions 79,946,671
General insurance expenses 172,380,828
Taxes, licenses and fees, excluding federal income taxes 26,266,616
Increase (decrease) in loading on deferred and uncollected premiums 3,509,171
Net transfers to or (from) separate accounts, net of reinsurance (702,995)
Other expenses
952,245
Total other operating expenses and transfers 282,352,536
Net gain from operations before dividends to policyholders and
federal income taxes
162,030,388
Policyholders' dividends 41,935,460
Net gain from operations after dividends to policyholders and before 120,094,928
federal income taxes
Federal income taxes incurred 8,700,000
Net gain from operations after dividends to policyholders and
federal income taxes and before realized capital gains
111,394,928
Net realized capital gains (losses), excluding transfers to
interest maintenance reserve 6,742,182
Net income
118,137,110$
Reconciliation of Capital and Surplus – Statutory
For the Examination Period Ended December 31, 2018
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 19
2018 2017 2016 2015 2014
Capital and surplus, beginning of
the year 2,558,702,454$ 2,537,350,315$ 2,456,844,990$ 2,436,439,383$ 2,327,194,289$
Net income 118,137,110 115,608,339 73,744,186 76,972,657 167,861,151
Change in net unrealized capital gains
(losses) (73,460,672) 26,537,163 40,885,215 (88,958,784) (34,353,441)
Change in net deferred income tax 7,631,830 (115,387,748) 29,972,496 15,869,818 12,152,835
Change in nonadmitted assets (33,178,830) 58,549,231 (4,358,116) (47,985,112) (22,804,721)
Change in asset valuation reserve 43,531,636 (7,475,429) (53,707,589) 67,041,937 (9,944,467)
Dividends to stockholders (20,000,000) (45,000,000) (90,000) (92,550) (95,850)
Change in net actuarial gain on pensions
and postretirement benefits (7,212,896) (7,726,100) (5,940,867) (2,442,359) (5,749,696)
Adjustment for prior year claim refunds 2,179,283
Prior year adjustment to liability for
for agent finance plan (1,021,601)
Prior year adjustment to liability for
compensated absences (2,731,716)
Capital and surplus, end of the year 2,594,150,632$ 2,558,702,454$ 2,537,350,315$ 2,456,844,990$ 2,436,439,383$
Reconciliation of Examination Adjustments to Surplus - Statutory
For the year ended December 31, 2018
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 20
There were no changes made to the assets, liabilities or surplus balances reported by the Company
for the year ended December 31, 2018. The capital and surplus reported by the Company of
$2,594,150,632 is accepted as reasonably stated for purposes of the balance sheet per the
examination and in compliance with Miss. Code Ann. §83-19-31.
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 21
MARKET CONDUCT ACTIVITIES
A full scope market conduct examination was not performed; however, limited procedures were
performed on certain areas of the Company’s market conduct. The specific areas reviewed
included those items as indicated below.
Privacy
The Company had a privacy policy in place for the protection of its policyholders. No exceptions
were noted during the course of our testing regarding the Company’s privacy policy.
Complaints
The Company maintained a complaint log during the period under examination, and the complaints
reviewed during our testing were resolved amicably and no policyholder abuse or undesirable
patterns were noted.
Producer Licensing
The Company appeared to have the appropriate licensure to issue its products and agents appeared
to be properly licensed and appointed.
Underwriting and Rating
The Company appeared to be appropriately applying premium rates for insured policies based on
application data. It appeared that all applicable policy forms and rates had been appropriately
approved by the MID.
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 22
COMMITMENTS AND CONTINGENT LIABILITIES
At December 31, 2018, the Company was involved as a defendant in various litigation matters.
Although the outcome of such legal actions cannot be predicted, in the opinion of management,
the resolution of any currently pending or threatened actions should not have a material adverse
effect on the surplus position of the Company.
SUBSEQUENT EVENTS
On March 11, 2020, the World Health Organization declared the spreading coronavirus (COVID-
19) outbreak a pandemic. On March 13, 2020, U.S. President Donald J. Trump declared the
coronavirus pandemic a national emergency in the United States. The epidemiological threat posed
by COVID-19 is having disruptive effects on the economy, including disruption of the global
supply of goods, reduction in the demand for labor, and reduction in the demand for U.S. products
and services, resulting in a sharp increase in unemployment. The economic disruptions caused by
COVID-19 and the increased uncertainty about the magnitude of the economic slowdown has also
caused extreme volatility in the financial markets.
The full effect of COVID-19 on the U.S. and global insurance and reinsurance industry is still
unknown at the time of releasing this report. The Mississippi Insurance Department is expecting
the COVID-19 outbreak to impact a wide range of insurance products resulting in coverage
disputes, reduced liquidity of insurers, and other areas of operations of insurers. The Mississippi
Insurance Department and all insurance regulators, with the assistance of the NAIC, are monitoring
the situation through a coordinated effort and will continue to assess the impacts of the pandemic
on U.S. insurers. The Mississippi Insurance Department has been in communication with the
Company regarding the impact of COVID-19 on its business operations and financial position.
On October 31, 2019, Billy Earl Sims, Senior Vice President – Policy Administration, retired and
was replaced by Jeremiah Ridley Wesson. The replacement for Mr. Wesson’s previous position,
Vice President – Underwriting & New Business Admin, has not been named at this time. Shelia
Renee Hudson, Vice President – Internal Auditing, and David Newell Duddleston, MD, Vice
President – Medical Director, retired in 2020 but Vice President replacements have not been named
at this time.
The following Directors were added to the Board due to the election of new Presidents or Vice
Presidents of the State Farm Bureau Federations:
• Thomas Michael Freeze replaced Harry Randal Veach
• Daniel Lee Johnson replaced Robert Quincy Fountain, Jr.
• William Shawn Harding replaced Larry Bernard Wooten
• Zachary Xavier Yanta replaced Mark Randall Chamblee
Additionally, in February 2020, Harry Randal Veach’s term as Chairman of the Board and
President expired, and Wayne Franklin Pryor was elected to fill the position. Upon Mr. Pryor’s
Southern Farm Bureau Life Insurance Company
MID Examination as of December 31, 2018 Page 23
election, Russell Wayne Boening was named the new First Vice President.
COMMENTS AND RECOMMENDATIONS
The examination did not identify any material comments and/or recommendations deemed
appropriate for inclusion in the examination report.
ACKNOWLEDGMENT
The examiners representing the Mississippi Insurance Department and participating in this
examination were:
Supervising Examiner
Examiner-in-Charge
Lead IT Specialist
Examination Actuary
Examiner
Examiner
Examiner
Examiner
Examiner
Joseph R. May, CPA, CFE, CFF, CIE
R. Dale Miller, CPA, CFE, CFF
David Mills, CISA, CRISC, CGEIT, MCSE
Marc Altschull, FSA,
MAAA
Larry Knight, CFE
Andrea Harbison, CPA
Taylor Phillips, CPA, CFE
Landon Weaver,
CPA
Sophia Tran
The courteous cooperation
of
the officers and employees responsible for assisting in the
examination is hereby acknowledged and appreciated.
Respectfully submitted,
R.
Dale Miller, CPA, CFE, CFF
Examiner-in-Charge
Mark Cooley, CFE
MS Insurance Department Designee
Southern Farm Bureau Life Insurance Company
MID Examination as
of
December 31, 2018
Page 24
